[Federal Register Volume 85, Number 156 (Wednesday, August 12, 2020)]
[Proposed Rules]
[Pages 48772-49082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17086]



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Vol. 85

Wednesday,

No. 156

August 12, 2020

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 410, 411 et al.





Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; New Categories for Hospital Outpatient Department Prior 
Authorization Process; Clinical Laboratory Fee Schedule: Laboratory 
Date of Service Policy; Overall Hospital Quality Star Rating 
Methodology; and Physician-Owned Hospitals; Proposed Rule

  Federal Register / Vol. 85 , No. 156 / Wednesday, August 12, 2020 / 
Proposed Rules  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 412, 414, 416, and 419

[CMS-1736-P]
RIN 0938-AU12


Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; New Categories for Hospital Outpatient Department Prior 
Authorization Process; Clinical Laboratory Fee Schedule: Laboratory 
Date of Service Policy; Overall Hospital Quality Star Rating 
Methodology; and Physician-Owned Hospitals

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for Calendar Year (CY) 
2021 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. Also, 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, this proposed rule would 
establish and update the Overall Hospital Quality Star Rating beginning 
with the CY 2021; remove certain restrictions on the expansion of 
physician-owned hospitals that qualify as ``high Medicaid facilities,'' 
and clarify that certain beds are counted toward a hospital's baseline 
number of operating rooms, procedure rooms, and beds; and add two new 
service categories to the OPD Prior Authorization Process.

DATES: To be assured consideration, comments on all sections of this 
proposed rule must be received at one of the addresses provided in the 
ADDRESSES section no later than 5 p.m. EST on October 5, 2020.

ADDRESSES: In commenting, please refer to file code CMS-1736-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-1736-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-1736-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: 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 Mitali Dayal via email 
[email protected].
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Administration, Validation, and Reconsideration Issues, contact Anita 
Bhatia via email at [email protected].
    Ambulatory Surgical Center Quality Reporting (ASCQR) Program 
Measures, contact Nicole Hewitt via email [email protected].
    Blood and Blood Products, contact Josh McFeeters via email 
[email protected].
    Cancer Hospital Payments, contact Scott Talaga via email 
[email protected].
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver via email [email protected].
    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), 
contact Au'Sha Washington via email [email protected].
    Comprehensive APCs (C-APCs), contact Lela Strong-Holloway via email 
[email protected], or Mitali Dayal via email 
[email protected].
    Hospital Outpatient Quality Reporting (OQR) Program Administration, 
Validation, and Reconsideration Issues, contact Anita Bhatia via email 
[email protected].
    Hospital Outpatient Quality Reporting (OQR) Program Measures, 
contact Nicole Hewitt via email [email protected].
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Elise Barringer via email 
[email protected].
    Hospital Quality Star Rating Methodology, contact Annese Abdullah-
Mclaughlin via email [email protected].
    Inpatient Only (IPO) Procedures List, contact Au'Sha Washington via 
email [email protected], or Allison Bramlett via email 
[email protected], or Lela Strong-Holloway via email 
[email protected].
    Medical Review of Certain Inpatient Hospital Admissions under 
Medicare Part A for CY 2021 and Subsequent Years (2-Midnight Rule), 
contact Lela Strong-Holloway via email [email protected], or 
Elise Barringer via email [email protected].
    New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga 
via email [email protected].
    No Cost/Full Credit and Partial Credit Devices, contact Scott 
Talaga via email [email protected].
    OPPS Brachytherapy, contact Scott Talaga via email 
[email protected].
    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 Scott Talaga via email 
[email protected], or Josh McFeeters via email at 
[email protected].
    OPPS Drugs, Radiopharmaceuticals, Biologicals, and Biosimilar 
Products, contact Josh McFeeters via email at 
[email protected], or Gil Ngan via email at 
[email protected] or, or Cory Duke via email at 
[email protected].
    OPPS New Technology Procedures/Services, contact the New Technology

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APC mailbox at [email protected].
    OPPS Packaged Items/Services, contact Lela Strong-Holloway via 
email [email protected], or Mitali Dayal via email at 
[email protected].
    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].
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at 
[email protected].
    Prior Authorization Process and Requirements for Certain Covered 
Outpatient Department Services, contact Thomas Kessler via email at 
[email protected].
    Rural Hospital Payments, contact Josh McFeeters via email at 
[email protected].
    Skin Substitutes, contact Josh McFeeters via email 
[email protected].
    Supervision of Outpatient Therapeutic Services in Hospitals and 
CAHs, contact Josh McFeeters via email [email protected].
    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/Hospital-Outpatient-Regulations-and-Notices. The Addenda relating to the ASC payment system are available 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.

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 2019 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 2020 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 2021
    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. 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 OPPS APC-Specific Policies
IV. OPPS Payment for Devices
    A. Proposed 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
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Payment Status
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Proposed Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2021
    C. Proposed Outlier Policy for CMHCs
IX. Services That Will Be Paid Only as Inpatient Services
    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. Proposed Medical Review of Certain Inpatient Hospital 
Admissions Under Medicare Part A for CY 2021 and Subsequent Years
    C. Comment Solicitation on OPPS Payment for Specimen Collection 
for COVID-19 Tests
XI. Proposed CY 2021 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2021 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2021 Comment Indicator Definitions
XII. MedPAC Recommendations
    A. Proposed OPPS Payment Rates Update
    B. Proposed ASC Conversion Factor Update
    C. Proposed ASC Cost Data
XIII. 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. Proposed 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

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    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. Proposed Payment Reduction for ASCs That Fail To Meet the 
ASCQR Program Requirements
XVI. Proposed Overall Hospital Quality Star Rating Methodology for 
Public Release in CY 2021 and Subsequent Years
    A. Background
    B. Critical Access Hospitals in the Overall Star Rating
    C. Veterans Health Administration Hospitals in Overall Star 
Rating
    D. History of the Overall Hospital Quality Star Rating
    E. Current and Proposed Overall Star Rating Methodology
    F. Preview Period
    G. Overall Star Rating Suppressions
XVII. Addition of New Service Categories for Hospital Outpatient 
Department (OPD) Prior Authorization Process
    A. Background
    B. Controlling Unnecessary Increases in the Volume of Covered 
OPD Services
XVIII. 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. Proposed Revision to the Laboratory DOS Policy for Cancer-
Related Protein-Based MAAAs
XIX. Physician-Owned Hospitals
    A. Background
    B. Prohibition on Facility Expansion
    C. Deference to State Law for Purposes of Determining the Number 
of Beds for Which a Hospital Is Licensed
XX. Files Available to the Public via the internet
XXI. Collection of Information Requirements
    A. Statutory Requirement for Solicitation of Comments
    B. ICRs for the Hospital OQR Program
    C. ICRs for the ASCQR Program
    D. ICRs for Addition of New Service Categories for Hospital 
Outpatient Department (OPD) Prior Authorization Process
    E. ICRs for the Overall Hospital Quality Star Ratings
    F. ICRs for Physician-Owned Hospitals
XXII. Waiver of the 60-Day Delayed Effective Date for the Final Rule
XXIII. Response to Comments
XXIV. Economic Analyses
    A. Statement of Need
    B. Overall Impact for the Provisions of This Proposed Rule
    C. Detailed Economic Analyses
    D. Regulatory Review Costs
    E. Regulatory Flexibility Act (RFA) Analysis
    F. Unfunded Mandates Reform Act Analysis
    G. Reducing Regulation and Controlling Regulatory Costs
    H. Conclusion
XXV. Federalism Analysis
Regulations Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this proposed rule, we propose 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, 2021. Section 1833(t) of the Social 
Security Act (the Act) requires us to annually review and update the 
payment rates for services payable under the Hospital Outpatient 
Prospective Payment System (OPPS). Specifically, section 1833(t)(9)(A) 
of the Act requires the Secretary to review certain components of the 
OPPS not less often than annually, and to revise the groups, 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. This proposed rule 
also includes additional policy changes made in accordance with our 
experience with the OPPS and the ASC payment system and recent changes 
in our statutory authority. 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.
2. Summary of the Major Provisions
     OPPS Update: For CY 2021, we propose to increase the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 2.6 percent. This increase factor is based 
on the proposed hospital inpatient market basket percentage increase of 
3.0 percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment required by the Affordable Care Act of 0.4 percentage 
point. Based on this update, we estimate that total payments to OPPS 
providers (including beneficiary cost-sharing and estimated changes in 
enrollment, utilization, and case-mix) for calendar year (CY) 2021 
would be approximately $83.9 billion, an increase of approximately $7.5 
billion compared to estimated CY 2020 OPPS payments.
    We propose 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 0.9805 to the OPPS payments and copayments for all applicable 
services.
     Partial Hospitalization Update: For CY 2021 OPPS/ASC 
proposed rule, CMS is proposing to maintain the unified rate structure 
established in CY 2017, with a single PHP APC for each provider type 
for days with three or more services per day. CMS is proposing to use 
the CMHC and hospital-based PHP (HB PHP) geometric mean per diem costs, 
consistent with existing policy, using updated data for each provider 
type and a cost floor equal to the CY 2019 final geometric mean per 
diem cost for each provider type. Accordingly, CMS is proposing to 
calculate the CY 2021 PHP APC per diem rate for HB PHPs based on 
updated cost data and to calculate the rate for CMHCs based on the 
proposed cost floor.
     Changes to the Inpatient Only (IPO) List: For CY 2021, we 
propose to eliminate the IPO list over the course of three calendar 
years beginning with the removal of approximately 300 musculoskeletal-
related services. We are also soliciting comments on whether three 
years is an appropriate time frame for transitioning to eliminate the 
IPO list; other services that are candidates for removal from the IPO 
list for CY 2021; and the sequence in which to remove additional 
clinical families and/or specific services from the IPO list in future 
rulemaking.
     Medical Review of Certain Inpatient Hospital Admissions 
under Medicare Part A for CY 2021 and Subsequent Years (2-Midnight 
Rule): For CY 2021, we propose to continue a 2-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

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January 1, 2021. We are also seeking comments on whether the 2-year 
exemption period continues to be appropriate, or if a longer or shorter 
period may be more warranted.
     340B-Acquired Drugs: We propose for CY 2021 and subsequent 
years to pay for drugs acquired under the 340B program at ASP minus 
34.7 percent, plus an add-on of 6 percent of the product's ASP, for a 
net payment rate of ASP minus 28.7 percent based on the results of the 
Hospital Acquisition Cost Survey for 340B-Acquired Specified Covered 
Drugs. Similar to the 340B drug payment policy implemented in CY 2018, 
we are also proposing that Rural SCHs, PPS-exempt cancer hospitals and 
children's hospitals would be exempted from the 340B payment policy for 
CY 2021 and subsequent years. Finally, we note that we propose in the 
alternative to continue our current policy of paying ASP minus 22.5 
percent for 340B-acquired drugs.
     Comprehensive APCs: For CY 2021, we propose to create two 
new comprehensive APCs (C-APCs). These new C-APCs include the 
following: C-APC 5378 (Level 8 Urology and Related Services) and C-APC 
5465 (Level 5 Neurostimulator and Related Procedures). Adding these C-
APCs would increase the total number of C-APCs to 69.
     Device Pass-Through Payment Applications: For CY 2021, we 
have received five applications for device pass-through payments that 
we discuss in this proposed rule. Two of these applications 
(CUSTOMFLEX[supreg] ARTIFICIALIRIS and EXALTTM Model D 
Single-Use Duodenoscope) have received preliminary approval for pass-
through payment status through our quarterly review process. CMS is 
soliciting public comments on these five applications and will make a 
final determination on these applications in the CY 2021 OPPS/ASC final 
rule.
     Changes to the Level of Supervision of Outpatient 
Therapeutic Services in Hospitals and Critical Access Hospitals: For CY 
2021 and subsequent years, we propose to change the minimum default 
level of supervision for non-surgical extended duration therapeutic 
services (NSEDTS) to general supervision for the entire service, 
including the initiation portion of the service, for which we had 
previously required direct supervision. This would be consistent with 
the minimum required level of general supervision that currently 
applies for most outpatient hospital therapeutic services. We also 
propose that, for CY 2021 and subsequent years, direct supervision for 
pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services would include virtual presence of the physician 
through audio/video real-time communications technology subject to the 
clinical judgment of the supervising physician.
     Cancer Hospital Payment Adjustment: For CY 2021, we 
propose 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, we 
propose that a target PCR of 0.89 would be used to determine the CY 
2021 cancer hospital payment adjustment to be paid at cost report 
settlement. That is, the payment adjustments will be the additional 
payments needed to result in a PCR equal to 0.89 for each cancer 
hospital.
     ASC Payment Update: For CYs 2019 through 2023, we adopted 
a policy to update the ASC payment system using the hospital market 
basket update. Using the hospital market basket methodology, for CY 
2021, we propose to increase payment rates under the ASC payment system 
by 2.6 percent for ASCs that meet the quality reporting requirements 
under the ASCQR Program. This proposed increase is based on a hospital 
market basket percentage increase of 3.0 percent minus a proposed 
multifactor productivity adjustment required by the Affordable Care Act 
of 0.4 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 2021 
would be approximately 5.45 billion, an increase of approximately 160 
million compared to estimated CY 2020 Medicare payments.
     Changes to the List of ASC Covered Surgical Procedures: 
For CY 2021, we propose to add eleven procedures to the ASC covered 
procedures list (CPL), including total hip arthroplasty (CPT 27130). 
Additionally, we propose two alternatives for changing the way 
procedures are added to the ASC CPL. Under the first alternative, we 
propose to establish a nomination process beginning in CY 2021 for 
procedures that would be added beginning in CY 2022 under which 
external stakeholders, such as professional specialty societies, would 
use suggested parameters to nominate procedures that can be safely 
performed in the ASC setting and meet all other regulatory standards. 
CMS would review nominated procedures and propose and finalize 
procedures to be added to the ASC CPL through annual rulemaking.
    Under the second alternative proposal, we would revise the criteria 
for covered surgical procedures for the ASC payment system under 42 CFR 
416.166, by keeping the general standards and eliminating five of the 
general exclusions. The revised criteria would result in the addition 
of approximately 270 surgery or surgery-like codes to the CPL that are 
not on the CY 2020 IPO list. Finally, we solicit comment on whether the 
conditions for coverage for ASCs should be revised if we adopt the 
second alternative proposal described above.
     Hospital Outpatient Quality Reporting (OQR) and Ambulatory 
Surgical Center Quality Reporting (ASCQR) Programs: For the Hospital 
OQR and ASCQR Programs, we propose to update and refine requirements to 
further meaningful measurement and reporting for quality of care 
provided in these outpatient settings while limiting compliance burden. 
We propose to revise and codify previously finalized administrative 
procedures and to propose and codify an expanded review and corrections 
process to further the programs' alignment while clarifying program 
requirements. We are not proposing any measure additions or removals 
for either program.
     Overall Hospital Quality Star Ratings: We propose to 
establish and update the methodology that would be used to calculate 
the Overall Hospital Quality Star Ratings beginning with 2021 and for 
subsequent years. CMS is proposing to, among other proposals, update 
and simplify how the ratings are calculated, reduce the total number of 
measure groups, and stratify the Readmission measure group based on the 
proportion of dual-eligible patients. These changes will simplify the 
methodology, and therefore, reduce provider burden, improve the 
predictability of the star ratings, and increase the comparability 
between hospital star ratings.
     Addition of New Service Categories for Hospital Outpatient 
Department Prior Authorization Process: We propose the addition of the 
following two categories of services to the prior authorization process 
beginning for dates of service on or after July 1, 2021: (1) Cervical 
fusion with disc removal and (2) implanted spinal neurostimulators.
     Clinical Laboratory Date of Service (DOS) Policy: We 
propose to exclude

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cancer-related protein-based MAAAs, which are not generally performed 
in the HOPD setting, from the OPPS packaging policy and add them to the 
laboratory DOS provisions at Sec.  414.510(b)(5).
     Physician-Owned Hospitals: We propose the (1) removal of 
unnecessary regulatory restrictions on high Medicaid facilities and (2) 
including beds in a physician-owned hospital's baseline consistent with 
state law.
3. Summary of Costs and Benefit
    In sections XIX. and XX. of this proposed rule, we set forth a 
detailed analysis of the regulatory and federalism impacts that the 
changes would have on affected entities and beneficiaries. Key 
estimated impacts are described below.
a. Impacts of All OPPS Changes
    Table 55 in section XIX.B of this proposed rule displays the 
distributional impact of all the OPPS changes on various groups of 
hospitals and CMHCs for CY 2021 compared to all estimated OPPS payments 
in CY 2020. We estimate that the policies in this proposed rule would 
result in a 2.5 percent overall increase in OPPS payments to providers. 
We estimate that total OPPS payments for CY 2021, including beneficiary 
cost-sharing, to the approximately 3,628 facilities paid under the OPPS 
(including general acute care hospitals, children's hospitals, cancer 
hospitals, and CMHCs) would increase by approximately 1.6 billion 
compared to CY 2020 payments, excluding our estimated changes in 
enrollment, utilization, and case-mix.
    We estimated the isolated impact of our OPPS policies on CMHCs 
because CMHCs are only paid for partial hospitalization services under 
the OPPS. Continuing the provider-specific structure we adopted 
beginning in CY 2011, and basing payment fully on the type of provider 
furnishing the service, we estimate a 1.3 percent increase in CY 2021 
payments to CMHCs relative to their CY 2020 payments.
b. Impacts of the Proposed Updated Wage Indexes
    We estimate that our proposed update of the wage indexes based on 
the FY 2021 IPPS proposed rule wage indexes would result in an 
estimated increase of 0.2 percent for urban hospitals under the OPPS 
and an estimated increase of 0.4 percent for rural hospitals. These 
wage indexes include the continued implementation of the OMB labor 
market area delineations based on 2010 Decennial Census data, with 
updates, as discussed in section II.C. of this proposed rule.
c. Impacts of the Proposed Rural Adjustment and the Cancer Hospital 
Payment Adjustment
    There are no significant impacts of our CY 2021 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 propose to implement the required reduction to 
the cancer hospital payment adjustment required by section 16002 of the 
21st Century Cures Act for CY 2021, the target payment-to-cost ratio 
(PCR) for CY 2021 is 0.89, equivalent to the 0.89 target PCR for CY 
2020, and therefore has no budget neutrality adjustment.
d. Impacts of the Proposed OPD Fee Schedule Increase Factor
    For the CY 2021 OPPS/ASC, we propose to establish an OPD fee 
schedule increase factor of 2.6 percent and apply that increase factor 
to the conversion factor for CY 2021. As a result of the 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 3.6 percent. Classifying hospitals by teaching status, we 
estimate nonteaching hospitals would experience an increase of 3.5 
percent, minor teaching hospitals would experience an increase of 3.2 
percent, and major teaching hospitals would experience an increase of 
1.6 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 a decrease of 0.3 percent in payments. We 
estimate that hospitals with proprietary ownership would experience an 
increase of 4.4 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 CY 2021 payment 
rates, compared to estimated CY 2020 payment rates, generally ranges 
between an increase of 2 and 5 percent, depending on the service, with 
some exceptions. We estimate the proposed impact of applying the 
hospital market basket update to ASC payment rates would increase 
payments by $160 million under the ASC payment system in CY 2021.

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of 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

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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 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 Maryland's 
All-Payer or Total Cost of Care 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.

[[Page 48778]]

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;
     May advise on OPPS APC rates for covered ASC procedures;
     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 
(84 FR 26117).
    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 19, 2019. Prior to each meeting, we publish a notice in 
the Federal Register to announce the meeting, announce new members, and 
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). In CY 
2018, we published a Federal Register notice requesting nominations to 
fill vacancies on the Panel (83 FR 3715). As published in this notice, 
CMS is accepting nominations on a continuous basis.
    In addition, the Panel has established an administrative structure 
that, in part, currently includes the use of three subcommittee 
workgroups to provide preparatory meeting and subject support to the 
larger panel. The three current subcommittees include the following:
     APC Groups and Status Indicator Assignments Subcommittee, 
which advises and provides recommendations to the Panel on the 
appropriate status indicators to be assigned to HCPCS codes, including 
but not limited to whether a HCPCS code or a category of codes should 
be packaged or separately paid, as well as the appropriate APC 
assignment of HCPCS codes regarding services for which separate payment 
is made;
     Data Subcommittee, which is responsible for studying the 
data issues confronting the Panel and for recommending options for 
resolving them; and
     Visits and Observation Subcommittee, which reviews and 
makes recommendations to the Panel on all technical issues pertaining 
to observation services and hospital outpatient visits paid under the 
OPPS.
    Each of these workgroup subcommittees was established by a majority 
vote from the full Panel during a scheduled Panel meeting, and the 
Panel recommended at the August 19, 2019, meeting that the 
subcommittees continue. We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
August 19, 2019 Panel meeting, namely APC assignments for certain CPT 
codes, a comprehensive APC for skin substitute products, a 
comprehensive APC for autologous hematopoietic stem cell 
transplantation, and packaging policies, were discussed in the CY 2020 
OPPS/ASC final rule with comment period (84 FR 61148). 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 2020 OPPS/ASC Final Rule With 
Comment Period
    We received approximately 22 timely pieces of correspondence on the 
CY 2020 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 12, 2019 (84 FR 61142), most of which were 
outside of the scope of the final rule. In-scope comments related to 
the interim APC assignments and/or status indicators of new or 
replacement Level II HCPCS codes (identified with comment indicator 
``NI'' in OPPS Addendum B, ASC Addendum AA, and ASC Addendum BB to that 
final rule). Summaries of the public comments on topics that were open 
to comment and our responses to them will be set forth in various 
sections of the final rule with comment period under the appropriate 
subject-matter headings.

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not

[[Page 48779]]

less often than annually and revise the relative payment weights for 
APCs. In the April 7, 2000 OPPS final rule with comment period (65 FR 
18482), we explained in detail how we calculated the relative payment 
weights that were implemented on August 1, 2000 for each APC group.
    For the CY 2021 OPPS, we propose to recalibrate the APC relative 
payment weights for services furnished on or after January 1, 2021, and 
before January 1, 2022 (CY 2021), using the same basic methodology that 
we described in the CY 2020 OPPS/ASC final rule with comment period (84 
FR 61149), using updated CY 2019 claims data. That is, we propose 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 proposed APC relative payment 
weights for CY 2021, we began with approximately 167 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, 2019, and before January 1, 2020, before applying our 
exclusionary criteria and other methodological adjustments. After the 
application of those data processing changes, we used approximately 87 
million final action claims to develop the proposed CY 2021 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 
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 2021. The proposed list of bypass codes contains codes that are 
reported on claims for services in CY 2019 and, therefore, includes 
codes that were in effect in CY 2019 and used for billing, but were 
deleted for CY 2020. We propose to retain these deleted bypass codes on 
the proposed CY 2021 bypass list because these codes existed in CY 2019 
and were covered OPD services in that period, and CY 2019 claims data 
were used to calculate proposed CY 2021 payment rates. Keeping these 
deleted bypass codes on the bypass list potentially allows us to create 
more ``pseudo'' single procedure claims for ratesetting purposes. 
``Overlap bypass codes'' that are members of the proposed multiple 
imaging composite APCs were identified by asterisks (*) in the third 
column of Addendum N to the proposed rule. HCPCS codes that we propose 
to add for CY 2021 are identified by asterisks (*) in the fourth column 
of Addendum N.
b. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2021, we propose to continue to use the hospital-specific 
overall ancillary and departmental cost-to-charge ratios (CCRs) to 
convert charges to estimated costs through application of a revenue 
code-to-cost center crosswalk. To calculate the APC costs on which the 
CY 2021 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 2019 claims data by comparing these claims 
data to the most recently available hospital cost reports, which, in 
most cases, are from CY 2018. For the proposed CY 2021 OPPS payment 
rates, we used the set of claims processed during CY 2019. 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. To ensure the completeness of the 
revenue code-to-cost center crosswalk, we reviewed changes to the list 
of revenue codes for CY 2019 (the year of claims data we used to 
calculate the proposed CY 2021 OPPS payment rates) and updates to the 
NUBC 2019 Data Specifications Manual. 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.
    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 used a less precise ``square feet'' 
allocation methodology for the costs of large moveable equipment like 
CT scan and MRI machines. They indicated that while we 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/ASC final rule with comment 
period (78 FR 74847) 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. 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 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 in 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) and in the CY 2019 
OPPS/ASC final rule with comment period (83 FR 58831), we finalized a 
policy to extend the transition policy for 1 additional year and we 
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 and the CY 2019 OPPS.
    As we discussed in the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59228), some stakeholders have raised concerns regarding 
using claims from all providers to calculate CT and MRI CCRs, 
regardless of the cost allocations statistic employed (78 FR

[[Page 48780]]

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 1 demonstrates the relative effect on imaging APC payments 
after removing cost data for providers that report CT and MRI standard 
cost centers using ``square feet'' as the cost allocation method by 
extracting HCRIS data on Worksheet B-1. Table 2 provides statistical 
values based on the CT and MRI standard cost center CCRs using the 
different cost allocation methods.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP12AU20.002

[GRAPHIC] [TIFF OMITTED] TP12AU20.003

BILLING CODE 4120-01-C
    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 18.5 percent to 2,195 providers and the number of valid CT 
CCRs has increased by 16.3 percent to 2,275 providers. Table 1 displays 
the impact on proposed OPPS payment rates for CY 2021 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 1.
    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 had extended 
the transition an additional 2 years to offer providers flexibility in 
applying cost allocation methodologies for CT and MRI cost centers 
other than ``square feet.'' In the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61152), we finalized a 2-year phased-in approach, 
as suggested by some commenters, that applied 50 percent of the payment 
impact from ending the transition in CY 2020 and 100 percent of the 
payment impact from ending the transition in CY 2021.
    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 and many providers continue to use the 
``square feet'' cost allocation methodology, which we

[[Page 48781]]

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, as finalized in the CY 2020 OPPS/ASC final rule with comment 
period (84 FR 61152), in the CY 2021 OPPS we are using 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 1.
    As noted earlier, the Deficit Reduction Act (DRA) of 2005 requires 
Medicare to limit Medicare payment for certain imaging services covered 
by the Physician Fee Schedule (PFS) to not exceed what Medicare pays 
for these services under the OPPS. As required by law, for certain 
imaging series paid for under the PFS, we cap the technical component 
of the PFS payment amount for the applicable year at the OPPS payment 
amount (71 FR 69659 through 69661). 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 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 OPPS payment rates for CY 2021. 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, later 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 2020 claims that 
were used to calculate the proposed payment rates for this CY 2021 
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. 
For CY 2021, we propose to continue to use geometric mean costs to 
calculate the relative weights on which the proposed 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 
OPPS payment rates for CY 2021 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 
the claims data used for setting payment rates (CY 2017 data) contained 
lines with the modifier ``PN'', which indicates 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 2021 OPPS, we will continue 
to remove these claim lines with modifier ``PN'' from the ratesetting 
process.
    For details of the claims accounting process used in this proposed 
rule, we refer readers to the claims accounting narrative under 
supporting documentation for this CY 2021 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.
    We propose 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, to address the differences in CCRs and to 
better reflect hospitals' costs, we propose 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 propose to apply this mean ratio to the 
overall CCRs of hospitals not reporting costs and charges for blood 
cost centers on their cost reports to simulate blood-specific CCRs for 
those hospitals. We propose to calculate the costs upon which the 
proposed CY 2021 payment rates for blood and blood products are based 
using the actual blood-specific CCR for hospitals that

[[Page 48782]]

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 believe that this methodology in CY 2021 
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 we defined a comprehensive APC (C-APC) as a 
classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Under this policy, we include the costs of blood and blood 
products when calculating the overall costs of these C-APCs. We propose 
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 propose not to 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 refer readers to Addendum B of this proposed rule (which is 
available via the internet on the CMS website) for the proposed CY 2021 
payment rates for blood and blood products (which are generally 
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).
    For CY 2021, we propose to continue to establish payment rates for 
blood and blood products using our blood-specific CCR methodology.
(b) Payment for Blood Not Otherwise Classified (NOC) Code
    Recently, providers and stakeholders in the blood products field 
have reported that product development for new blood products has 
accelerated. There may be several additional new blood products 
entering the market by the end of CY 2021, compared to only one or two 
new products entering the market over the previous 15 to 20 years. To 
encourage providers to use these new products, providers and 
stakeholders requested that we establish a new HCPCS code to allow for 
payment for unclassified blood products prior to these products 
receiving their own HCPCS code. Under the OPPS, unclassified procedures 
are generally assigned to the lowest APC payment level of an APC 
family. However, since blood products are each assigned to their own 
unique APC, the concept of a lowest APC payment level does not apply in 
this context.
    Starting January 1, 2020, we established a new HCPCS code, P9099 
(Blood component or product not otherwise classified) which allows 
providers to report unclassified blood products. We assigned HCPCS code 
P9099 to status indicator ``E2'' (Not payable by Medicare when 
submitted on an outpatient claim) for CY 2020. We took this action 
because HCPCS code P9099 potentially could be reported for multiple 
products with different costs during the same period of time. 
Therefore, we could not identify an individual blood product HCPCS code 
that would have a similar cost to HCPCS code P9099, and were not able 
to crosswalk a payment rate from an established blood product HCPCS 
code to HCPCS code P9099. Some stakeholders expressed concerns that 
assigning HCPCS code P9099 to a non-payable status in the OPPS meant 
that hospitals would receive no payment when they used unclassified 
blood products. Also, claim lines billed with P9099 are rejected by 
Medicare, which prevents providers from tracking the utilization of 
unclassified blood products.
    Because of the challenges of determining an appropriate payment 
rate for unclassified blood products, we are considering packaging the 
cost of unclassified blood products into their affiliated primary 
medical procedure. Although we typically do not package blood products 
under the OPPS, for unclassified blood products, we do not believe it 
is possible to accurately determine an appropriate rate that would 
apply for all of the products (potentially several, with varying costs) 
that may be reported using HCPCS code P9099. Packaging the cost of 
unclassified blood products into the payment for the primary medical 
service by assigning HCPCS code P9099 a status indicator of ``N'' would 
allow providers to report the cost of unclassified blood products to 
Medicare. Over time, the costs of unspecified blood products would be 
reflected in the payment rate for the primary medical service if the 
blood product remains unclassified. However, we expect that most blood 
products would seek and be granted more specific coding such that the 
unclassified HCPCS code P9099 would no longer be applicable. We believe 
that packaging the costs of unclassified blood products would be an 
improvement over the current non-payable status for HCPCS code P9099 as 
it would allow for tracking of the costs and utilization of 
unclassified blood products.
    Another option we considered, but ultimately rejected is similar to 
our policy under the OPPS to assign NOC codes to the lowest APC within 
the appropriate clinical family. We could crosswalk and assign the same 
payment rate for HCPCS code P9099 as HCPCS code P9043 (Infusion, plasma 
protein fraction (human), 5 percent, 50 ml), which is the lowest cost 
blood product with a proposed CY 2021 payment rate of $8.02 per unit. 
This option would provide a small, separate payment for each 
unclassified blood product service, and, similar to our proposal to 
package the costs of HCPCS code P9099 into their primary procedure, 
would allow for tracking of the cost utilization of unclassified blood 
products. However, given that the cross-walked payment rate is 
potentially significantly lower than the cost of the product, providers 
may find that packaging the cost of unclassified blood products into 
another medical service may generate more payment for the products over 
time.

[[Page 48783]]

    Thus, for CY 2021, we propose to package the cost of unclassified 
blood products reported by HCPCS code P9099 into the cost of the 
associated primary procedure. We propose to change the status indicator 
for HCPCS code P9099 from ``E2'' (not payable by Medicare in the OPPS) 
to ``N'' (payment is packaged into other services in the OPPS). In 
addition, we also seek comment on the alternative proposal to make 
HCPCS code P9099 separately payable with a payment rate equivalent to 
the payment rate for the lowest cost blood product, HCPCS code P9043 
(Infusion, plasma protein fraction (human), 5 percent, 50 ml), with a 
proposed CY 2021 payment rate of $8.02 per unit. If we were to adopt 
this option as our final policy, we would also change the status 
indicator for HCPCS code P9099 from ``E2'' (not payable by Medicare in 
the OPPS) to ``R'' (blood and blood products, paid under OPPS).
(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.
    For CY 2021, except where otherwise indicated, we propose to use 
the costs derived from CY 2019 claims data to set the proposed CY 2021 
payment rates for brachytherapy sources because CY 2019 is the year of 
data we propose to use to set the proposed payment rates for most other 
items and services that would be paid under the CY 2021 OPPS. With the 
exception of the proposed payment rate for brachytherapy source C2645 
(Brachytherapy planar source, palladium-103, per square millimeter), we 
propose to base the payment rates for brachytherapy sources on the 
geometric mean unit costs for each source, consistent with the 
methodology that we propose for other items and services paid under the 
OPPS, as discussed in section II.A.2. of this proposed rule. We also 
propose 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 propose 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 propose 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 2021 
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 identified with status indicator ``U''.
    For CY 2018, we assigned status indicator ``U'' (Brachytherapy 
Sources, Paid under OPPS; separate APC payment) to HCPCS code C2645 
(Brachytherapy planar source, palladium-103, per square millimeter) in 
the absence of claims data and established a payment rate using 
external data (invoice price) at $4.69 per mm\2\. For CY 2019, in the 
absence of sufficient claims data, we continued to establish a payment 
rate for C2645 at $4.69 per mm\2\. Our CY 2018 claims data available 
for the final CY2020 OPPS/ASC final rule with comment period, included 
two claims with a geometric mean cost of HCPCS code C2645 of $1.02 per 
mm\2\. In response to comments from stakeholders, we agreed with 
commenters that given the limited claims data available and a new 
outpatient indication for C2645, a payment rate for HCPCS code C2645 
based on the geometric mean cost of 1.02 per mm\2\ may not adequately 
reflect the cost of HCPCS code C2645. In the CY 2020 OPPS/ASC final 
rule with comment period, we finalized our policy to use our equitable 
adjustment authority under section 1833(t)(2)(E) of the Act, which 
states that the Secretary shall establish, in a budget neutral manner, 
other adjustments as determined to be necessary to ensure equitable 
payments, to maintain the CY 2019 payment rate of $4.69 per mm\2\ for 
HCPCS code C2645 for CY 2020.
    For CY 2021, we propose to continue to assign status indicator 
``U'' to HCPCS code C2645 (Brachytherapy planar source, palladium-103, 
per square millimeter). For CY 2020, in the absence of sufficient 
claims data, we continued to establish a payment rate for C2645 at 
$4.69 per mm\2\. Our CY 2019 claims data available for the proposed CY 
2021 rule, included one claim with over 4,000 units of HCPCS code 
C2645. The geometric mean cost of HCPCS code C2645 from this one claim 
is $1.07 per mm\2\ for CY 2019. We do not believe that this one claim 
is adequate to establish an APC payment rate for HCPCS code C2645 and 
to discontinue our use of external data for this brachytherapy source. 
Therefore, for CY 2021, we propose to continue assigning the 
brachytherapy source described by HCPCS code C2645 a payment rate of 
$4.69 mm\2\ for CY 2021 through use of our equitable adjustment 
authority.
    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 & Medicaid 
Services, 7500

[[Page 48784]]

Security Boulevard, Baltimore, MD 21244. We will continue to add new 
brachytherapy source codes and descriptors to our systems for payment 
on a quarterly basis.
b. Comprehensive APCs (C-APCs) for CY 2021
(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;''
     Contains 8 or more units of services described by HCPCS 
code G0378 (Hospital observation services, per hour);
     Contains services provided on the same date of service or 
1 day before the date of service for HCPCS code G0378 that are 
described by one of the following codes: HCPCS code G0379 (Direct 
admission of patient for hospital observation care) on the same date of 
service as HCPCS code G0378; CPT code 99281 (Emergency department visit 
for the evaluation and management of a patient (Level 1)); CPT code 
99282 (Emergency department visit for the evaluation and management of 
a patient (Level 2)); CPT code 99283 (Emergency department visit for 
the evaluation and management of a patient (Level 3)); CPT code 99284 
(Emergency department visit for the evaluation and management of a 
patient (Level 4)); CPT code 99285 (Emergency department visit for the 
evaluation and management of a patient (Level 5)) or HCPCS code G0380 
(Type B emergency department visit (Level 1)); HCPCS code G0381 (Type B 
emergency department visit (Level 2)); HCPCS code G0382 (Type B 
emergency department visit (Level 3)); HCPCS code G0383 (Type B 
emergency department visit (Level 4)); HCPCS code G0384 (Type B 
emergency department visit (Level 5)); CPT code 99291 (Critical care, 
evaluation and management of the critically ill or critically injured 
patient; first 30-74 minutes); or HCPCS code G0463 (Hospital outpatient 
clinic visit for assessment and management of a patient); and
     Does not contain services described by a HCPCS code to 
which we have assigned status indicator ``J1''.
    The assignment of status indicator ``J2'' to a specific combination 
of services performed in combination with each other allows for all 
other OPPS payable services and items reported on the claim (excluding 
services that are not covered OPD services or that cannot by statute be 
paid for under the OPPS) to be deemed adjunctive services representing 
components of a

[[Page 48785]]

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
     Violation of the 2 times rule, as stated in section 
1833(t)(2) of the Act and section III.B.2. of this proposed 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

[[Page 48786]]

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 2021, we propose 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 complexity adjustments for 
``J1'' and add-on code combinations for CY 2021, along with all of the 
other proposed complexity adjustments, in Addendum J to this CY 2021 
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) 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.
    To address this issue and 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 finalized 
excluding 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. In the CY 2020 OPPS/ASC final rule with comment period, we 
finalized that payment for services assigned to a New Technology APC 
procedures would be excluded from being packaged into the payment for 
comprehensive observation services assigned status indicator ``J2'' 
when they are included on a claim with a ``J2'' service starting in CY 
2020 (84 FR 61167).
(3) Additional C-APCs for CY 2021
    For CY 2021 and subsequent years, we propose 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, we are not proposing 
to convert any conventional

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APCs to C-APCs in CY 2021. However, as discussed in section III.D.7, we 
propose to create an additional level for Urology and Related Services 
C-APCs and, as discussed in section III.D.1, we propose to create an 
additional level for Neurostimulator and Related Procedures C-APCs 
Table 3 lists the proposed C-APCs for CY 2021, all of which were 
established in past rules. 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 complexity adjustments and other information.
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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
    We propose 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.
    We propose 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 2021. In addition, we propose to set the proposed payment 
rate for composite APC 8010 at the same payment rate that we proposed 
for APC 5863, which is the maximum partial hospitalization per diem 
payment rate for a hospital, and that the hospital continue to be paid 
the proposed payment rate for composite APC 8010.
    We propose 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 2021.
(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, 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 
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resonance angiography (MRA). The HCPCS codes subject to the multiple 
imaging composite policy and their respective families are listed in 
Table 12 of the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74920 through 74924).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement under section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included under the policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be provided either with or without contrast. 
The five multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs as having at least one or more imaging procedures from 
the same family performed with contrast on the same date of service. 
For example, if the hospital performs an MRI without contrast during 
the same session as at least one other MRI with contrast, the hospital 
will receive payment based on the payment rate for APC 8008, the ``with 
contrast'' composite APC.
    We make a single payment for those imaging procedures that qualify 
for payment based on the composite APC payment rate, which includes any 
packaged services furnished on the same date of service. The standard 
(noncomposite) APC assignments continue to apply for single imaging 
procedures and multiple imaging procedures performed across families. 
For a full discussion of the development of the multiple imaging 
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68559 through 68569).
    For CY 2021, we propose 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 2021 payment rates for the five multiple imaging 
composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) were based on 
proposed geometric mean costs calculated from CY 2019 claims available 
for this CY 2021 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 2021 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 2021 OPPS/ASC proposed rule.
    For this CY 2021 OPPS/ASC proposed rule, we were able to identify 
approximately 964,000 ``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 2021 geometric mean 
costs for the multiple imaging composite APCs. Table 4 of this CY 2021 
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 2021.
    Table 4 lists the HCPCS codes that we propose would be subject to 
the multiple imaging composite APC policy and their respective families 
and approximate composite APC final geometric mean costs for CY 2021.
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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 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 may occur if separate payment is provided 
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    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), the CY 2019 OPPS/ASC 
final rule with comment period (83 FR 58854), and the CY 2020 OPPS/ASC 
final rule with comment period (84 FR 61173). 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 2021, 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 CY 2021, we propose no changes to this policy. 
We will continue to conditionally package the costs of selected newly 
identified ancillary services into payment for 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 in CY 2021.
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. The public comments ranged from requests to 
unpackage most items and services that are unconditionally packaged 
under the OPPS, including drugs and devices, to specific requests for 
separate payment for a specific drug or device.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
52485), we reiterated our position with regard to payment for 
Exparel[supreg], a non-opioid analgesic that functions as a surgical 
supply, 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 we 
would continue to explore and evaluate packaging policies under the 
OPPS and consider these policies in future rulemaking.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 58855 
through 58860), 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 they are furnished in the ASC 
setting for CY 2019 due to decreased utilization in the ASC setting.
    For the CY 2020 OPPS/ASC proposed rule (84 FR 39423 through 39427), 
as required by section 1833(t)(22)(A)(i) of the Act, as added by 
section 6082(a) of the SUPPORT Act, we reviewed 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 ensuring that there are 
not financial incentives to use opioids instead of non-opioid 
alternatives. 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. For the CY 
2020 OPPS/ASC proposed rule (84 FR 39423 through 39427), we proposed 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 to 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. In the CY 2020 OPPS/ASC final rule with comment period (84 
FR 61173 through 61180), after reviewing data from stakeholders and 
Medicare claims data, we did not find compelling

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evidence to suggest that revisions to our OPPS payment policies for 
non-opioid pain management alternatives were necessary for CY 2020. We 
finalized our proposal to continue 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 for CY 
2020. Under this policy, the only drug that meets these criteria is 
Exparel.
(2) Evaluation and CY 2021 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 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.
    As noted in the background section above, we conducted an 
evaluation to determine whether there are payment incentives for using 
opioids instead of non-opioid alternatives in the CY 2020 OPPS/ASC 
final rule with comment period (84 FR 61176 through 61180). The results 
of our review and evaluation of our claims data did not provide 
evidence to indicate that the OPPS packaging policy had the unintended 
consequence of discouraging the use of non-opioid treatments for 
postsurgical pain management in the hospital outpatient department. 
Higher utilization may be a potential indicator that the packaged 
payment is not causing an access to care issue and that the payment 
rate for the primary procedure adequately reflects the cost of the 
drug. Our updated review of claims data showed a continued decline in 
the utilization of Exparel[supreg] in the ASC setting, which supported 
our proposal to continue paying separately for Exparel[supreg] in the 
ASC setting. Decreased utilization could potentially indicate that the 
packaging policy is discouraging use of that treatment and that 
providers are choosing less expensive treatments. However, it is 
difficult to attribute causality of changes in utilization to Medicare 
packaging payment policy only. We believe that unpackaging and paying 
separately for Exparel addresses decreased utilization because it 
eliminates any potential Medicare payment disincentive for the use of 
this non-opioid alternative, rather than prescription opioids.
    We believe we fulfilled the statutory requirement to review 
payments for opioids and evidence-based non-opioid alternatives to 
ensure that there are not financial incentives to use opioids instead 
of non-opioid alternatives in CY 2020 OPPS/ASC rulemaking. We are 
committed to evaluating our current policies to adjust payment 
methodologies, if necessary, in order to ensure appropriate access for 
beneficiaries amid the current opioid epidemic. However, we do not 
believe conducting a similar CY 2021 review would yield significantly 
different outcomes or new evidence that would prompt us to change our 
payment policies under the OPPS or ASC payment system.
    Therefore, for CY 2021, we propose 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 to 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 2021.
c. Clinical Diagnostic Laboratory Tests Packaging Policy
(1) Background
    Prior to CY 2014, clinical diagnostic laboratory tests were 
excluded from payment under the hospital OPPS because they were paid 
separately under the Clinical Laboratory Fee Schedule (CLFS). Section 
1833(t)(1)(B)(i) of the Act authorizes the Secretary to designate the 
hospital outpatient services that are paid under the OPPS. Under this 
authority, the Secretary excluded from the OPPS those services that are 
paid under fee schedules or other payment systems. Because laboratory 
services are paid separately under the CLFS, laboratory tests were 
excluded from separate payment under the OPPS. We codified this policy 
at 42 CFR 419.22(l).
    However, in CY 2014, we revised the categories of packaged items 
and services under the OPPS to include certain laboratory tests. We 
stated that certain laboratory tests, similar to other covered 
outpatient services that are packaged under the OPPS, are typically 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
hospital outpatient service and should be packaged under the hospital 
OPPS. We stated that laboratory tests and their results support 
clinical decision making for a broad spectrum of primary services 
provided in the hospital outpatient setting, including surgery and 
diagnostic evaluations (78 FR 74939). Consequently, we finalized the 
policy to package payment for most laboratory tests in the OPPS when 
they are integral, ancillary, supportive, dependent, or adjunctive to a 
primary service or services provided in the hospital outpatient setting 
(78 FR 74939 through 74942 and 42 CFR 419.2(b)(17)). In the same final 
rule, we clarified that certain laboratory tests would be excluded from 
packaging. Specifically, we stated that laboratory tests would be paid 
separately under the CLFS when the laboratory test is the only service 
provided to a beneficiary or when a laboratory test is conducted on the 
same date of service as the primary service but is ordered for a 
different purpose than the primary service by a practitioner different 
than the practitioner who ordered the primary service or when the 
laboratory test is a molecular pathology test (78 FR 74942). As 
explained in the CY 2014 OPPS/ASC final rule, we excluded molecular 
pathology tests from packaging because we believe these tests are 
relatively new and may have a different pattern of clinical use, which 
may make them generally less tied to a primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that we package (78 FR 74939). Based on these changes, we revised the 
regulation text at Sec.  [thinsp]419.2(b)

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and Sec.  [thinsp]419.22(l) to reflect this laboratory test packaging 
policy.
    In CY 2016, we made some modifications to this policy (80 FR 70348 
through 70350). First, we clarified that all molecular pathology tests 
would be excluded from our packaging policy, including any new codes 
that also describe molecular pathology tests. In the CY 2014 OPPS/ASC 
final rule, we stated that only those molecular pathology codes 
described by CPT codes in the ranges of 81200 through 81383, 81400 
through 81408, and 81479 were excluded from OPPS packaging (78 FR 74939 
through 74942). However, in 2016, we expanded this policy to include 
not only the original code range but also all new molecular pathology 
test codes (80 FR 70348). Secondly, we excluded preventive laboratory 
tests from OPPS packaging and provided that they would be paid 
separately under the CLFS. Laboratory tests that are considered 
preventive are listed in Section 1.2, Chapter 18 of the Medicare Claims 
Processing Manual (Pub. 100-04). As stated in the CY 2016 OPPS/ASC 
final rule, we make an exception to conditional packaging of ancillary 
services for ancillary services that are also preventive services (80 
FR 70348). For consistency, we excluded from OPPS packaging those 
laboratory tests that are classified as preventive services. In 
addition, we modified our conditional packaging policy so that 
laboratory tests provided during the same outpatient stay (rather than 
specifically provided on a same date of service as the primary service) 
are considered as integral, ancillary, supportive, dependent, or 
adjunctive to a primary service or services, except when a laboratory 
test is ordered for a different diagnosis and by a different 
practitioner than the practitioner who ordered the other hospital 
outpatient services. We explained in the CY 2016 OPPS/ASC final rule 
that this modification did not affect our policy to provide separate 
payment for laboratory tests: (1) If they are the only services 
furnished to an outpatient and are the only services on a claim and 
have a payment rate on the CLFS; or (2) if they are ordered for a 
different diagnosis than another hospital outpatient service by a 
practitioner different than the practitioner who ordered the other 
hospital outpatient service (80 FR 70349 through 70350).
    In CY 2017, we modified the policy to remove the ``unrelated'' 
laboratory test exclusion and to expand the laboratory test packaging 
exclusion to apply to laboratory tests designated as advanced 
diagnostic laboratory tests (ADLTs) under the CLFS. We clarified that 
the exception would only apply to those ADLTs that meet the criteria of 
section 1834A(d)(5)(A) of the Act, which are defined as tests that 
provide an analysis of multiple biomarkers of DNA, RNA, or proteins 
combined with a unique algorithm to yield a single patient-specific 
result (81 FR 79592-79594).
(2) Current Categories of Clinical Diagnostic Laboratory Tests Excluded 
From OPPS Packaging
    Under our current policy, certain clinical diagnostic laboratory 
tests (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. While we package 
most CDLTs under the OPPS, when a CDLT is listed on the CLFS and meets 
one of the following four criteria, we do not pay for the test under 
the OPPS, but rather, we pay for it under the CLFS 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. Generally, when laboratory tests are not 
packaged under the OPPS and are listed on the CLFS, they are paid under 
the CLFS instead of the OPPS.
(3) Proposed New Category of Laboratory Tests Excluded From OPPS 
Packaging
(a) Background on Protein-Based MAAAs
    As part of recent rulemaking cycles, stakeholders have suggested 
that some protein-based Multianalyte Assays with Algorithmic Analyses 
(MAAAs) may have a pattern of clinical use that makes them relatively 
unconnected to the primary hospital outpatient service (84 FR 61439). 
In the CY 2018 OPPS/ASC final rule (82 FR 59299), we stated that 
stakeholders indicated that certain protein-based MAAAs, specifically 
those described by CPT codes 81490, 81503, 81535, 81536, 81538, and 
81539, are generally not performed in the HOPD setting and have similar 
clinical patterns of use as the DNA and RNA-based MAAA tests that are 
assigned to status indicator ``A'' under the OPPS and are paid 
separately under the CLFS. Notably, all of the tests described by these 
CPT codes (with the exception of CPT code 81490, which we discuss 
below) are cancer-related protein-based MAAAs. In the same final rule, 
stakeholders suggested that, based on the June 23, 2016 CLFS final rule 
entitled ``Medicare Program; Medicare Clinical Diagnostic Laboratory 
Tests Payment System,'' in which CMS defined an ADLT under section 
1834A(d)(5)(A) of the Act to include DNA, RNA, and protein-based tests, 
they believe that the reference to ``protein-based tests'' in the 
definition applies equally to the tests they identified, that is, 
protein-based MAAAs. Consequently, the stakeholders believed that 
protein-based MAAAs should be excluded from OPPS packaging and paid 
separately under the CLFS. We note that one of the protein-based MAAAs 
previously requested by stakeholders to be excluded from OPPS packaging 
policy is CPT code 81538 (Oncology (lung), mass spectrometric 8-protein 
signature, including amyloid a, utilizing serum, prognostic and 
predictive algorithm reported as good versus poor overall survival), 
which has been designated as an ADLT under section 1834A(d)(5)(A) of 
the Act as of December 21, 2018. Therefore, CPT code 81538 is currently 
excluded from the OPPS packaging policy and paid under the CLFS instead 
of the OPPS when it also meets the laboratory DOS requirements.
(b) CY 2021 Proposal for Cancer-Related Protein-Based MAAAs
    Since publishing the CY 2020 OPPS/ASC final rule, we have continued 
to consider previous stakeholder requests to exclude some protein-based 
MAAAs from the OPPS packaging policy. After further review of this 
issue, we believe that cancer-related protein-based MAAAs, in 
particular, may be relatively unconnected to the primary hospital 
outpatient service during which the specimen was collected from the 
patient. Similar to molecular pathology tests, which are currently 
excluded from the OPPS packaging policy, cancer-related protein-based 
MAAAs appear to have a different pattern of clinical use, which may 
make them generally less tied to the primary service in the hospital 
outpatient setting than the more common and routine laboratory tests 
that are packaged.
    As we noted above, commenters to the CY 2018 OPPS/ASC final rule 
identified specific cancer-related protein-based MAAAs as tests that 
are generally not performed in the HOPD setting (82 FR 59299). In fact, 
those tests identified by commenters are used to guide future surgical 
procedures and chemotherapeutic interventions. Treatments that are 
based on the results of cancer-related protein-based MAAAs are 
typically furnished after the patient is no longer in the hospital, in 
which

[[Page 48799]]

case they are not tied to the same hospital outpatient encounter during 
which the specimen was collected.
    For these reasons, we propose to exclude cancer-related protein-
based MAAAs from the OPPS packaging policy and pay for them separately 
under the CLFS.
    The AMA CPT 2020 manual currently describes MAAAs, in part, as 
``procedures that utilize multiple results derived from panels of 
analyses of various types, including molecular pathology assays, 
fluorescent in situ hybridization assays, and non-nucleic acid based 
assays (for example, proteins, polypeptides, lipids, carbohydrates).'' 
\1\ The code descriptors of MAAAs include several specifics, including 
but not limited to disease type (for example, oncology, autoimmune, 
tissue rejection), and material(s) analyzed (for example, DNA, RNA, 
protein, antibody). As the AMA CPT 2020 manual describes a MAAA, and 
the code descriptor of each MAAA distinguishes MAAAs that are cancer-
related assays from those that test for other disease types, the AMA 
CPT manual is a useful tool to identify cancer-related MAAAs that are 
``protein-based''. Accordingly, using the AMA CPT 2020 manual criteria 
to identify a MAAA that is cancer-related, and, of those tests, 
identifying the ones whose analytes test proteins, we have determined 
there are currently six cancer-related protein-based MAAAs: CPT codes 
81500, 81503, 81535, 81536, 81538 and 81539. As discussed previously in 
this section, CPT code 81538 has been designated as an ADLT under 
section 1834A(d)(5)(A) of the Act as of December 21, 2018 and 
therefore, is already paid under the CLFS instead of the OPPS when it 
meets the laboratory DOS requirements. As such, we propose to assign 
status indicator ``A'' (``Not paid under OPPS. Paid by MACs under a fee 
schedule or payment system other than OPPS'') to cancer-related 
protein-based MAAAs as described by CPT codes 81500, 81503, 81535, 
81536, and 81539. We would apply this policy to cancer-related protein-
based MAAAs that do not currently exist, but that are developed in the 
future.
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    \1\ Current Procedure Terminology (CPT[supreg]) page 586, 
copyright 2020 American Medical Association. All Rights Reserved.
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    We note that commenters to the CY 2018 OPPS/ASC final rule also 
identified CPT code 81490 as a protein-based MAAA that should be 
excluded from the OPPS packaging policy and paid outside of the OPPS. 
However, the results for the test described by CPT code 81490 are used 
to determine disease activity in rheumatoid arthritis patients, guide 
current therapy to reduce further joint damage, and may be tied to the 
primary hospital outpatient service, that is, the hospital outpatient 
encounter during which the specimen was collected. Therefore, we 
believe that payment for CPT code 81490 remains appropriately packaged 
under the OPPS.
    We refer readers to section XVIII. of this proposed rule regarding 
our proposed revision to the laboratory date of service policy for 
cancer-related protein-based MAAAs.
4. Calculation of OPPS Scaled Payment Weights
    We established a policy in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68283) of using geometric mean-based APC costs to 
calculate relative payment weights under the OPPS. In the CY 2020 OPPS/
ASC final rule with comment period (84 FR 61180 through 61182), we 
applied this policy and calculated the relative payment weights for 
each APC for CY 2020 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 2021, as we did 
for CY 2020, we propose to continue to apply the policy established in 
CY 2013 and calculate relative payment weights for each APC for CY 2021 
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 2021, as we did for CY 2020, we 
propose 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 
2021, as we did for CY 2020, we propose 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) and the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61365 through 61369), we discuss 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 is no change to the 
relativity of the OPPS payment weights because the adjustment is made 
at the payment level rather than in the cost modeling. Further, under 
this policy, the savings that result from the change in payments for 
these clinic visits are not budget neutral. Therefore, the impact of 
this policy will generally not be reflected in the budget neutrality 
adjustments, whether the adjustment is to the OPPS relative weights or 
to the OPPS conversion factor. We note that the volume control method 
for clinic visit services furnished by non-excepted off-campus PBDs is 
subject to litigation. For a full discussion of this policy and the 
litigation, we refer readers to the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61142).
    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

[[Page 48800]]

2021 is neither greater than nor less than the estimated aggregate 
weight that would have been calculated without the changes. To comply 
with this requirement concerning the APC changes, we propose to compare 
the estimated aggregate weight using the CY 2020 scaled relative 
payment weights to the estimated aggregate weight using the proposed CY 
2021 unscaled relative payment weights.
    For CY 2020, we multiplied the CY 2020 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2019 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 2021, we 
propose to apply the same process using the estimated CY 2021 unscaled 
relative payment weights rather than scaled relative payment weights. 
We propose to calculate the weight scalar by dividing the CY 2020 
estimated aggregate weight by the unscaled CY 2021 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 2021 OPPS 
proposed rule link and open the claims accounting document link at the 
bottom of the page.
    We propose to compare the estimated unscaled relative payment 
weights in CY 2021 to the estimated total relative payment weights in 
CY 2020 using CY 2019 claims data, holding all other components of the 
payment system constant to isolate changes in total weight. Based on 
this comparison, we propose to adjust the calculated CY 2021 unscaled 
relative payment weights for purposes of budget neutrality. We propose 
to adjust the estimated CY 2021 unscaled relative payment weights by 
multiplying them by a proposed weight scalar of 1.4443 to ensure that 
the proposed CY 2021 relative payment weights are scaled to be budget 
neutral. The proposed CY 2021 relative payment weights listed in 
Addenda A and B to this proposed rule (which are available via the 
internet on the CMS website) are scaled and incorporate the 
recalibration adjustments discussed in sections II.A.1. and II.A.2. of 
this proposed rule.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act provides that 
additional expenditures resulting from this paragraph shall not be 
taken into account in establishing the conversion factor, weighting, 
and other adjustment factors for 2004 and 2005 under paragraph (9), but 
shall be taken into account for subsequent years. Therefore, the cost 
of those SCODs (as discussed in section V.B.2. of proposed rule) is 
included in the budget neutrality calculations for the CY 2021 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 2021 IPPS/LTCH PPS 
proposed rule (85 FR 32738), consistent with current law, based on IHS 
Global, Inc.'s fourth quarter 2019 forecast of the FY 2021 market 
basket increase, the proposed FY 2021 IPPS market basket update was 3.0 
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 
2021.
    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 2021 IPPS/LTCH PPS proposed rule (85 FR 32739), the 
proposed MFP adjustment for FY 2021 was 0.4 percentage point.
    Therefore, we propose that the MFP adjustment for the CY 2021 OPPS 
is 0.4 percentage point. We also propose 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/or the MFP adjustment), we will use such updated data, if 
appropriate, to determine the CY 2021 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 the CY 2021 OPPS/ASC final 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 propose for CY 2021 an OPD fee schedule increase factor of 
2.6 percent for the CY 2021 OPPS (which is the proposed estimate of the 
hospital inpatient market basket percentage increase of 3.0 percent, 
less the proposed 0.4 percentage point MFP adjustment).
    We propose that hospitals that fail to meet the Hospital OQR 
Program reporting requirements would be 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 the proposed rule.
    The adjustment described in section 1833(t)(3)(F)(ii) was required 
only through 2019. The requirement in section 1833(t)(3)(F)(i) of the 
Act that we reduce the OPD fee schedule increase factor by the 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II), 
however, applies for 2012 and subsequent years, and thus, continues to 
apply. In the CY 2020 OPPS/ASC final rule with comment period, we 
inadvertently did not amend the regulation at 42 CFR 
419.32(b)(1)(iv)(B) to reflect that the adjustment required by section 
1833(t)(3)(F)(i) of the Act is the only adjustment under section 
1833(t)(3)(F) that applies in CY 2020 and subsequent years. 
Accordingly, we propose to

[[Page 48801]]

amend our regulation at 42 CFR 419.32(b)(1)(iv)(B) by adding a new 
paragraph (b)(1)(iv)(B)(11) to provide that, for CY 2020 and subsequent 
years, we reduce the OPD fee schedule increase factor by the MFP 
adjustment as determined by CMS.
    To set the OPPS conversion factor for CY 2021, we propose to 
increase the CY 2020 conversion factor of $80.793 by 2.6 percent. In 
accordance with section 1833(t)(9)(B) of the Act, we propose further to 
adjust the conversion factor for CY 2021 to ensure that any revisions 
made to the wage index and rural adjustment were made on a budget 
neutral basis. We propose to calculate an overall budget neutrality 
factor of 1.0017 for wage index changes. This adjustment was comprised 
of a 1.0027 proposed budget neutrality adjustment, using our standard 
calculation, of comparing proposed total estimated payments from our 
simulation model using the proposed FY 2021 IPPS wage indexes to those 
payments using the FY 2020 IPPS wage indexes, as adopted on a calendar 
year basis for the OPPS as well as a 0.9990 proposed budget neutrality 
adjustment for the proposed CY 2021 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 2021 IPPS wage 
index policy (85 FR 32706). We believe it is appropriate to ensure that 
this proposed wage index transition policy (that is, the proposed CY 
2021 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 propose to calculate this 
budget neutrality adjustment by comparing total estimated OPPS payments 
using the FY 2021 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 2021 
OPPS wage index (which, as we discuss in section II.C of the proposed 
rule, would use the FY 2021 IPPS post-reclassified wage index and any 
adjustments, including without limitation any adjustments finalized 
under the IPPS related to the proposed adoption of the revised OMB 
delineations).
    For the CY 2021 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.
    We propose 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 propose to calculate a CY 2021 budget neutrality 
adjustment factor for the cancer hospital payment adjustment by 
comparing estimated total CY 2021 payments under section 1833(t) of the 
Act, including the proposed CY 2021 cancer hospital payment adjustment, 
to estimated CY 2021 total payments using the CY 2020 final cancer 
hospital payment adjustment, as required under section 1833(t)(18)(B) 
of the Act. The proposed CY 2021 estimated payments applying the 
proposed CY 2021 cancer hospital payment adjustment were the same as 
estimated payments applying the CY 2020 final cancer hospital payment 
adjustment. Therefore, we propose to apply a budget neutrality 
adjustment factor of 1.0000 to the conversion factor for the cancer 
hospital payment adjustment. In accordance with section 16002(b) of the 
21st Century Cures Act, we are applying a budget neutrality factor 
calculated as if the proposed cancer hospital adjustment target 
payment-to-cost ratio was 0.90, not the 0.89 target payment-to-cost 
ratio we applied as stated in section II.F. of the proposed rule.
    For this CY 2021 OPPS/ASC proposed rule, we estimated that proposed 
pass-through spending for drugs, biologicals, and devices for CY 2021 
would equal approximately $783.2 million, which represented 0.93 
percent of total projected CY 2021 OPPS spending. Therefore, the 
proposed conversion factor would be adjusted by the difference between 
the 0.88 percent estimate of pass-through spending for CY 2020 and the 
0.93 percent estimate of proposed pass-through spending for CY 2021, 
resulting in a proposed decrease to the conversion factor for CY 2021 
of 0.05 percent.
    We also estimate a 0.85 percent upward adjustment to nondrug OPPS 
payment rates as a result of our payment proposal for separately 
payable nonpass-through drugs purchased under the 340B Program. 
Applying the proposed payment policy for drugs purchased under the 340B 
Program, as described in section V.B.6. of this proposed rule, results 
in an estimated reduction of approximately $427 million in separately 
paid OPPS drug payments. To ensure budget neutrality under the OPPS 
after applying this proposed payment methodology for drugs purchased 
under the 340B Program, we propose to apply an offset of approximately 
$427 million to the OPPS conversion factor, which would result in an 
adjustment of 1.0085 to the OPPS conversion factor.
    Proposed estimated payments for outliers would remain at 1.0 
percent of total OPPS payments for CY 2021. We estimate for the 
proposed rule that outlier payments would be 1.01 percent of total OPPS 
payments in CY 2020; the 1.00 percent for proposed outlier payments in 
CY 2021 would constitute a 0.01 percent decrease in payment in CY 2021 
relative to CY 2020.
    For this CY 2021 OPPS/ASC proposed rule, we also propose 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 propose to make all other adjustments discussed above, but 
use a reduced OPD fee schedule update factor of 0.6 percent (that is, 
the proposed OPD fee schedule increase factor of 2.6 percent further 
reduced by 2.0 percentage points). This would result in a proposed 
reduced conversion factor for CY 2021 of $82.065 for hospitals that 
fail to meet the Hospital OQR Program requirements (a difference of -
1.632 in the conversion factor relative to hospitals that met the 
requirements).
    In summary, for CY 2021, we propose 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, CY 2021, 
and subsequent years to satisfy the statutory requirements of section 
1833(t)(3)(F) of the Act. We propose to use a reduced conversion factor 
of $82.065 in the calculation of payments for hospitals that fail to 
meet the Hospital OQR Program requirements (a difference of -1.632 in 
the conversion factor relative to hospitals that met the requirements).
    For CY 2021, we propose to use a conversion factor of $83.697 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 2.6 percent for CY 2021, the required proposed wage index 
budget neutrality adjustment of approximately 1.0017, the proposed 
cancer hospital payment adjustment of 1.0000, and the proposed 
adjustment of 0.05 percentage point of projected OPPS spending for the 
difference in pass-through spending that resulted in a

[[Page 48802]]

proposed conversion factor for CY 2021 of $83.697.

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). We propose to continue this policy for 
the CY 2021 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 2021 pre-reclassified wage index that 
we would 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 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 CY 
2021, we propose 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, we stated that 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 2020 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; for FY 2019, 83 FR 41380; and for FY 2020, 84 
FR 42312.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2021 IPPS wage indexes continue to reflect a 
number of adjustments implemented in past years, including, but not 
limited to, reclassification of hospitals to different geographic 
areas, the rural floor provisions, an adjustment for occupational mix, 
an adjustment to the wage index based on commuting patterns of 
employees (the out-migration adjustment), and an adjustment to the wage 
index for certain low wage index hospitals to help address wage index 
disparities between low and high wage index hospitals. We refer readers 
to the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32695 through 32734) 
for a detailed discussion of all proposed changes to the FY 2021 IPPS 
wage indexes.
    Furthermore, 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 2020 IPPS/LTCH PPS final rule (84 FR 42300), 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

[[Page 48803]]

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.
    On April 10, 2018 OMB issued OMB Bulletin No. 18-03 which 
superseded the August 15, 2017 OMB Bulletin No. 17-01. On September 14, 
2018, OMB issued OMB Bulletin No. 18-04 which superseded the April 10, 
2018 OMB Bulletin No. 18-03. Typically, interim OMB bulletins (those 
issued between decennial censuses) have only contained minor 
modifications to labor market delineations. However, as we stated in 
the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32696 through 32697), 
the April 10, 2018 OMB Bulletin No. 18-03 and the September 14, 2018 
OMB Bulletin No. 18-04 included more modifications to the labor market 
areas than are typical for OMB bulletins issued between decennial 
censuses, including some material modifications that have a number of 
downstream effects, such as IPPS hospital reclassification changes. 
These bulletins established revised delineations for Metropolitan 
Statistical Areas, Micropolitan Statistical Areas, and Combined 
Statistical Areas, and provided guidance on the use of the delineations 
of these statistical areas. A copy of OMB Bulletin No. 18-04 may be 
obtained at https://www.whitehouse.gov/wpcontent/uploads/2018/09/Bulletin-18-04.pdf. According to OMB, ``[t]his bulletin 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 (75 FR 37246), 
and Census Bureau data.''
    As noted previously, while OMB Bulletin No. 18-04 is not based on 
new census data, it includes some material changes to the OMB 
statistical area delineations. Specifically, under the revised OMB 
delineations, there would be some new CBSAs, urban counties that would 
become rural, rural counties that would become urban, and some existing 
CBSAs would be split apart. In addition, we stated in the FY 2021 IPPS/
LTCH PPS proposed rule that the revised OMB delineations would affect 
various hospital reclassifications, the outmigration adjustment 
(established by section 505 of Pub. L. 108-173), and treatment of 
hospitals located in certain rural counties (that is, ``Lugar'' 
hospitals) under section 1886(d)(8)(B) of the Act. We refer readers to 
the FY 2021 IPPS/LTCH PPS proposed rule for a complete discussion of 
the revised OMB delineations we propose to adopt under the IPPS and the 
effects of these revisions on the FY 2021 IPPS wage indexes (85 FR 
32696 through 32707, 32717 through 32728). We stated in the FY 2021 
IPPS/LTCH PPS proposed rule that we believe using the revised 
delineations based on OMB Bulletin No. 18-04 would increase the 
integrity of the IPPS wage index system by creating a more accurate 
representation of geographic variations in wage levels. Therefore, in 
the FY 2021 IPPS/LTCH PPS proposed rule, we proposed to implement the 
revised OMB delineations as described in the September 14, 2018 OMB 
Bulletin No. 18-04, effective October 1, 2020 beginning with the FY 
2021 IPPS wage index. In addition, in the FY 2021 IPPS/LTCH PPS 
proposed rule, we proposed to apply a 5 percent cap for FY 2021 on any 
decrease in a hospital's final wage index from the hospital's final 
wage index for FY 2020 as a proposed transition wage index to help 
mitigate any significant negative impacts of adopting the revised OMB 
delineations (85 FR 32706 through 32707).
    As further discussed below, in this CY 2021 OPPS proposed rule, we 
propose to adopt these updated OMB delineations and related IPPS wage 
index adjustments to calculate the CY 2021 OPPS wage indexes. Similar 
to our discussion in the FY 2021 IPPS/LTCH PPS proposed rule, we 
believe using the revised delineations based on OMB Bulletin No. 18-04 
would increase the integrity of the OPPS wage index system by creating 
a more accurate representation of geographic variations in wage levels.
    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 CY 2021, under the OPPS, we are continuing to use 
only the FIPS county codes for purposes of crosswalking counties to 
CBSAs.
    We propose to use the FY 2021 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 2021. Therefore, any adjustments for the FY 
2021 IPPS post-reclassified wage index, including, but not limited to, 
any adjustments that we may finalize related to the proposed adoption 
of the revised OMB delineations (such as a cap on wage index decreases 
and revisions to hospital reclassifications), would be reflected in the 
final CY 2021 OPPS wage index beginning on January 1, 2021. (We refer 
readers to the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32695 through 
32734) and the proposed FY 2021 hospital wage index files posted on the 
CMS website.) With regard to budget neutrality for the CY 2021 OPPS 
wage index, we refer readers to section II.B. of this CY 2021 OPPS/ASC 
proposed rule. We continue to believe that using the IPPS post-
reclassified 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 was 
paid under the IPPS, based on its geographic location and any 
applicable wage index adjustments. In this CY 2021 OPPS/ASC proposed 
rule, we propose to continue this policy for CY 2021, and are including 
a brief summary of the major proposed FY

[[Page 48804]]

2021 IPPS wage index policies and adjustments that we propose to apply 
to these hospitals under the OPPS for CY 2021, which we have summarized 
below. We refer readers to the FY 2021 IPPS/LTCH PPS proposed rule (85 
FR 32695 through 32734) for a detailed discussion of the proposed 
changes to the FY 2021 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 2021, we propose to continue our policy of 
allowing non-IPPS hospitals paid under the OPPS to qualify for the 
outmigration adjustment if they are located in a section 505 out-
migration county (section 505 of the MMA). Furthermore, the wage index 
that would apply for CY 2021 to non-IPPS hospitals paid under the OPPS 
would continue to include the rural floor adjustment and adjustments to 
the wage index finalized in the FY 2020 IPPS/LTCH PPS final rule to 
address wage index disparities (84 FR 42325 through 42336). In 
addition, we propose that the wage index that would apply to non-IPPS 
hospitals paid under the OPPS would include any adjustments we may 
finalize for the FY 2021 IPPS post-reclassified wage index related to 
the adoption of the revised OMB delineations, as discussed earlier in 
this proposed rule.
    For CMHCs, for CY 2021, we propose 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 propose that the wage index 
that would apply to CMHCs would include any adjustments we may finalize 
for the FY 2021 IPPS post-reclassified wage index related to the 
adoption of the revised OMB delineations, as discussed earlier in this 
proposed rule. In addition, we propose that the wage index that would 
apply to CMHCs for CY 2021 would continue to include the rural floor 
adjustment and adjustments to the wage index finalized in the FY 2020 
IPPS/LTCH PPS final rule to address wage index disparities. Also, we 
propose that the wage index that would apply to CMHCs would not include 
the outmigration adjustment because that adjustment only applies to 
hospitals.
    Table 4 associated with the FY 2021 IPPS/LTCH PPS proposed rule 
(available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) 
identifies counties that would be eligible for the out-migration 
adjustment. Table 2 associated with the FY 2021 IPPS/LTCH PPS proposed 
rule (available for download via the website above) identifies IPPS 
hospitals that would receive the out-migration adjustment for FY 2021. 
We are including the outmigration adjustment information from Table 2 
associated with the FY 2021 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 outmigration adjustment under this CY 
2021 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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index. At this link, readers will find a link to 
the proposed FY 2021 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, we use 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), we use 
the statewide average default CCRs to determine the payments mentioned 
earlier if it is not possible 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. We also use 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 2021 
OPPS proposed rule Claims Accounting Narrative that is posted on our 
website. We propose to update the default ratios for CY 2021 using the 
most recent cost report data. We will update these ratios in the final 
rule with comment period if more recent cost report data are available.
    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 with comment period. These CCRs with the upper limit 
will be available for download with each OPPS CY proposed rule and 
final rule on the CMS website. We refer readers to our 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 2021

    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

[[Page 48805]]

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 
our regulations at Sec.  419.43(g) to clarify that essential access 
community hospitals (EACHs) are also 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 CY 2021, we propose 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 2021

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), the Congress 
established section 1833(t)(7) of the Act, ``Transitional Adjustment to 
Limit Decline in Payment,'' to determine OPPS payments to cancer and 
children's hospitals based on their pre-BBA payment amount (often 
referred to as ``held harmless'').
    As required under section 1833(t)(7)(D)(ii) of the Act, a cancer 
hospital receives the full amount of the difference between payments 
for covered outpatient services under the OPPS and a ``pre-BBA 
amount.'' That is, cancer hospitals are permanently held harmless to 
their ``pre-BBA amount,'' and they receive transitional outpatient 
payments (TOPs) or hold harmless payments to ensure that they do not 
receive a payment that is lower in amount under the OPPS than the 
payment amount they would have received before implementation of the 
OPPS, as set forth in section 1833(t)(7)(F) of the Act. The ``pre-BBA 
amount'' is the product of the hospital's reasonable costs for covered 
outpatient services occurring in the current year and the base payment-
to-cost ratio (PCR) for the hospital defined in section 
1833(t)(7)(F)(ii) of the Act. The ``pre-BBA amount'' and the 
determination of the base PCR are defined at 42 CFR 419.70(f). TOPs are 
calculated on Worksheet E, Part B, of the Hospital Cost Report or the 
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, respectively), as applicable each year. Section 1833(t)(7)(I) 
of the Act exempts TOPs from budget neutrality calculations.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Act by adding a new paragraph (18), which instructs the Secretary 
to conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to APC groups exceed outpatient costs incurred by 
other hospitals furnishing services under section 1833(t) of the Act, 
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of 
the Act requires the Secretary to take into consideration the cost of 
drugs and biologicals incurred by cancer hospitals and other hospitals. 
Section 1833(t)(18)(B) of the Act provides that, if the Secretary 
determines that cancer hospitals' costs are 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). For CY 2020, the 
target PCR was 0.89, as discussed in the CY 2020 OPPS/ASC final rule 
with comment period (83 FR 61190 through 61192).

[[Page 48806]]

2. Proposed Policy for CY 2021
    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 Sec.  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.
    We propose to provide additional payments to the 11 specified 
cancer hospitals so that each cancer hospital's final PCR is equal to 
the weighted average PCR (or ``target PCR'') for the other OPPS 
hospitals, using the most recent submitted or settled cost report data 
that were available at the time of the development of the proposed 
rule, reduced by 1.0 percentage point, to comply with section 16002(b) 
of the 21st Century Cures Act.
    We are not proposing an additional reduction beyond the 1.0 
percentage point reduction required by section 16002(b) for CY 2021. To 
calculate the proposed CY 2021 target PCR, we are using the same 
extract of cost report data from HCRIS, as discussed in section II.A. 
of this CY 2021 OPPS/ASC proposed rule and proposed rule, used to 
estimate costs for the CY 2021 OPPS. Using these cost report data, we 
included data from Worksheet E, Part B, for each hospital, using data 
from each hospital's most recent cost report, whether as submitted or 
settled.
    We then limited the dataset to the hospitals with CY 2019 claims 
data that we used to model the impact of the proposed CY 2021 APC 
relative payment weights (3,527 hospitals) because it is appropriate to 
use the same set of hospitals that are being used to calibrate the 
modeled CY 2021 OPPS. The cost report data for the hospitals in this 
dataset were from cost report periods with fiscal year ends ranging 
from 2014 to 2019. 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 14 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 3,464 
hospitals with cost report data.
    Using this smaller dataset of cost report data, we estimate 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 propose that the payment amount associated with 
the cancer hospital payment adjustment to be determined at cost report 
settlement would be the additional payment needed to result in a 
proposed target PCR equal to 0.89 for each cancer hospital.
    Table 5 shows the estimated percentage increase in OPPS payments to 
each cancer hospital for CY 2021, due to the cancer hospital payment 
adjustment policy. The actual amount of the CY 2021 cancer hospital 
payment adjustment for each cancer hospital will be determined at cost 
report settlement and will depend on each hospital's CY 2021 payments 
and costs. We note that the requirements contained in section 
1833(t)(18) of the Act do not affect the existing statutory provisions 
that provide for TOPs for cancer hospitals. The TOPs will be assessed, 
as usual, after all payments, including the cancer hospital payment 
adjustment, have been made for a cost reporting period.

[[Page 48807]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.011

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 2020, 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 $5,075 (the fixed-dollar 
amount threshold) (84 FR 61192 through 61194). 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 2019 OPPS payments, using CY 2019 claims available for this CY 
2021 OPPS/ASC proposed rule is approximately 1.0 percent of the total 
aggregated OPPS payments. Therefore, for CY 2019, 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 2021 OPPS/ASC 
proposed rule, we estimate that we paid approximately 1.01 percent of 
the total aggregated OPPS payments in outliers for CY 2019.
    For this CY 2021 OPPS/ASC proposed rule, using CY 2019 claims data 
and CY 2020 payment rates, we estimated that the aggregate outlier 
payments for CY 2020 would be approximately 1.01 percent of the total 
CY 2020 OPPS payments. We provided estimated CY 2021 outlier payments 
for hospitals and CMHCs with claims included in the claims data that we 
used to model impacts in the Hospital-Specific Impacts--Provider-
Specific Data file on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Outlier Calculation for CY 2021
    For CY 2021, we propose to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS. We propose 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

[[Page 48808]]

proposed CMHC outlier threshold as a proportion of total estimated OPPS 
outlier payments. As discussed in section VIII.C. of this CY 2021 OPPS/
ASC proposed rule, we proposed to continue our longstanding policy that 
if a CMHC's cost for partial hospitalization services, paid under APC 
5853 (Partial Hospitalization for CMHCs), exceeds 3.40 times the 
payment rate for proposed APC 5853, the outlier payment would be 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the proposed APC 5853 payment rate.
    For further discussion of CMHC outlier payments, we refer readers 
to section VIII.C. of this CY 2021 OPPS/ASC proposed rule and proposed 
rule.
    To ensure that the estimated CY 2021 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed that the hospital outlier threshold be set so that 
outlier payments would be triggered when a hospital's cost of 
furnishing a service exceeds 1.75 times the APC payment amount and 
exceeds the APC payment amount plus $5,300.
    We calculated the proposed fixed-dollar threshold of $5,300 using 
the standard methodology most recently used for CY 2020 (84 FR 61192 
through 61194). For purposes of estimating outlier payments for the 
proposed rule, we used 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 2021 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2019 claims using the 
same inflation factor of 1.131096 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32098). We used an inflation factor of 1.06353 to estimate 
CY 2020 charges from the CY 2019 charges reported on CY 2019 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2020 IPPS/LTCH PPS final rule (84 FR 42044 through 
42701). As we stated in the CY 2005 OPPS final rule with comment period 
(69 FR 65845), we believe that the use of these charge inflation 
factors is appropriate for the OPPS because, with the exception of the 
inpatient routine service cost centers, hospitals use the same 
ancillary and outpatient cost centers to capture costs and charges for 
inpatient and outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we propose to apply the same CCR 
inflation adjustment factor that we propose to apply for the FY 2021 
IPPS outlier calculation to the CCRs used to simulate the proposed CY 
2021 OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2021, we propose to apply an adjustment factor of 
0.975271 to the CCRs that were in the April 2020 OPSF to trend them 
forward from CY 2020 to CY 2021. The methodology for calculating the 
proposed adjustment is discussed in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32098).
    To model hospital outlier payments for the proposed rule, we 
applied the overall CCRs from the April 2020 OPSF after adjustment 
(using the proposed CCR inflation adjustment factor of 0.976271 to 
approximate CY 2021 CCRs) to charges on CY 2019 claims that were 
adjusted (using the proposed charge inflation factor of 1.131096 to 
approximate CY 2021 charges). We simulated aggregated CY 2021 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 2021 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $5,300, combined 
with the proposed multiplier threshold of 1.75 times the APC payment 
rate, would allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. For CMHCs, we proposed that, if a CMHC's cost for 
partial hospitalization services, paid under APC 5853, exceeds 3.40 
times the payment rate for APC 5853, the outlier payment would be 
calculated as 50 percent of the amount by which the cost exceeds 3.40 
times the APC 5853 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals, as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor; that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that will apply to certain outpatient items and services 
furnished by hospitals that are required to report outpatient quality 
data and that fail to meet the Hospital OQR Program requirements. For 
hospitals that fail to meet the Hospital OQR Program requirements, as 
we proposed, we are continuing the policy that we implemented in CY 
2010 that the hospitals' costs will be compared to the reduced payments 
for purposes of outlier eligibility and payment calculation. For more 
information on the Hospital OQR Program, we refer 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 2021 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 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 2021 scaled 
weight for the APC by the CY 2021 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

[[Page 48809]]

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 CY under the OPPS to a hospital that fulfills 
the Hospital OQR Program requirements and to a hospital that fails to 
meet the Hospital OQR Program requirements for a service that has any 
of the following status indicator assignments: ``J1'', ``J2'', ``P'', 
``Q1'', ``Q2'', ``Q3'', ``Q4'', ``R'', ``S'', ``T'', ``U'', or ``V'' 
(as defined in Addendum D1 to the proposed rule, which is available via 
the internet on the CMS website), in a circumstance in which the 
multiple procedure discount does not apply, the procedure is not 
bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We noted that, 
although blood and blood products with status indicator ``R'' and 
brachytherapy sources with status indicator ``U'' are not subject to 
wage adjustment, they are subject to reduced payments when a hospital 
fails to meet the Hospital OQR Program requirements.
    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 the 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 0.9805 
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 to receive the full CY 2021 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, for the CY 2021 OPPS wage index, we propose to 
adopt the updated OMB delineations based on OMB Bulletin No. 18-04 and 
any related IPPS wage index adjustments that may be finalized in the FY 
2021 IPPS/LTCH PPS final rule, as discussed in section II.C. of this 
proposed rule. The wage index values assigned to each area would 
reflect the geographic statistical areas (which are based upon OMB 
standards) to which hospitals are assigned for FY 2021 under the IPPS, 
reclassifications through the Medicare Geographic Classification Review 
Board (MGCRB), section 1886(d)(8)(B) ``Lugar'' hospitals, and 
reclassifications under section 1886(d)(8)(E) of the Act, as 
implemented in Sec.  412.103 of the regulations. We also propose to 
continue to apply for the CY 2021 OPPS wage index any other adjustments 
for the FY 2021 IPPS post-reclassified wage index, including, but not 
limited to, the rural floor adjustment, a wage index floor of 1.00 in 
frontier states, in accordance with section 10324 of the Affordable 
Care Act of 2010, and an adjustment to the wage index for certain low 
wage index hospitals. For further discussion of the wage index we 
propose to apply for the CY 2021 OPPS, we refer readers to section 
II.C. of this proposed rule.
    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 2021 IPPS, 
which are listed in Table 2 associated with the FY 2021 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 2021 IPPS Proposed Rule Home Page'' and select 
``FY 2021 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).
    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.


[[Page 48810]]


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 previously. 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 2021 
full national unadjusted payment rate for APC 5071 is $634.92. The 
proposed reduced national unadjusted payment rate for APC 5071 for a 
hospital that fails to meet the Hospital OQR Program requirements is 
$622.54. This reduced rate is calculated by multiplying the reporting 
ratio of 0.9805 by the full unadjusted payment rate for APC 5071.
    The proposed FY 2021 wage index for a provider located in CBSA 
35614 in New York, which includes the proposed adoption of IPPS 2021 
wage index policies, is 1.3376. The labor-related portion of the 
proposed full national unadjusted payment is approximately $509.56 (.60 
* $634.92 * 1.3376). The labor-related portion of the proposed reduced 
national unadjusted payment is approximately $499.62 (.60 * $622.54 * 
1.3376). The nonlabor-related portion of the proposed full national 
unadjusted payment is approximately $253.97 (.40 * $634.92). The 
nonlabor-related portion of the proposed reduced national unadjusted 
payment is approximately $249.02 (.40 * $622.54). The sum of the labor-
related and nonlabor-related portions of the proposed full national 
adjusted payment is approximately $763.53 ($509.56 + $253.97). The sum 
of the portions of the proposed reduced national adjusted payment is 
approximately $748.64 ($499.62 + $249.02).

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 CYs 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 2021, we propose 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 propose to use the 
same standard rounding principles that we have historically used in 
instances where the application of our standard copayment methodology 
would result in a copayment amount that is less than 20 percent and 
cannot be rounded, under standard rounding principles, to 20 percent. 
(We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66687) in which we discuss our rationale for applying 
these rounding principles.) The proposed national unadjusted copayment 
amounts for services payable under the OPPS that would be effective 
January 1, 2021 are included in Addenda A and B to the proposed rule 
(which are available via the internet on the CMS website).
    As discussed in section XIV.E. of this proposed rule, for CY 2021, 
the Medicare beneficiary's minimum unadjusted copayment and national 
unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.
    We note that OPPS copayments may increase or decrease each year 
based on changes in the calculated APC payment rates, due to updated 
cost report and claims data, and any changes to the OPPS cost modeling 
process. However, as described in the CY 2004 OPPS final rule with 
comment period, the development of the copayment methodology generally 
moves beneficiary copayments closer to 20 percent of OPPS APC payments 
(68 FR 63458 through 63459).
    In the CY 2004 OPPS final rule with comment period (68 FR 63459), 
we adopted a new methodology to calculate unadjusted copayment amounts 
in situations including reorganizing APCs, and we finalized the 
following rules to determine copayment amounts in CY 2004 and 
subsequent years.
     When an APC group consists solely of HCPCS codes that were 
not paid under the OPPS the prior year because they were packaged or 
excluded or are new codes, the unadjusted copayment amount would be 20 
percent of the APC payment rate.
     If a new APC that did not exist during the prior year is 
created and consists of HCPCS codes previously assigned to other APCs, 
the copayment amount is calculated as the product of the APC payment 
rate and the lowest coinsurance percentage of the codes comprising the 
new APC.
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
equal to or greater than the prior year's rate, the copayment amount 
remains constant (unless the resulting coinsurance percentage is less 
than 20 percent).
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
less than the prior year's rate, the copayment amount is calculated as 
the product of the new payment rate and the prior year's coinsurance 
percentage.
     If HCPCS codes are added to or deleted from an APC and, 
after recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in a

[[Page 48811]]

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, $126.99 is approximately 20 percent of the 
full national unadjusted payment rate of $634.92. For APCs with only a 
minimum unadjusted copayment in Addenda A and B to 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 proposed rule. Calculate the rural adjustment 
for eligible providers, as indicated in Step 6 under section II.H. of 
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 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 0.9805.
    The proposed unadjusted copayments for services payable under the 
OPPS that will be effective January 1, 2021, are shown in Addenda A and 
B to 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 CY 2021 OPD fee schedule increase factor discussed in 
section II.B. of 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. OPPS Ambulatory Payment Classification (APC) Group Policies

A. Proposed OPPS Treatment of New and Revised HCPCS Codes

    Payments 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) codes, a numeric 
and alphanumeric coding system maintained by the American Medical 
Association (AMA), and consists 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
     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

[[Page 48812]]

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 
2021 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 2021 OPPS/ASC proposed rule.
1. April 2020 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Proposed Rule
    For the April 2020 update, 13 new HCPCS codes were established and 
made effective on April 1, 2020. These codes and their long descriptors 
are listed in Table 6. Through the April 2020 OPPS quarterly update CR 
(Transmittal 10013, Change Request 11691, dated March 25, 2020), we 
recognized several new HCPCS codes for separate payment under the OPPS. 
In this CY 2021 OPPS/ASC proposed rule, we are soliciting public 
comments on the proposed APC and status indicator assignments for the 
codes listed Table 6. 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, 2020 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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2. July 2020 HCPCS Codes for Which We Are Soliciting Public Comments in 
This Proposed Rule
    For the July 2020 update, over 100 new codes were established and 
made effective July 1, 2020. The codes and long descriptors are listed 
in Table 7. Through the July 2020 OPPS quarterly update CR 
(Transmittal10207, Change Request 11814, dated July 2, 2020), we 
recognized several new codes for separate payment and assigned them to 
appropriate interim OPPS status indicators and APCs. In this CY 2021 
OPPS/ASC proposed rule, we are soliciting public comments on the 
proposed APC and status indicator assignments for the codes implemented 
on July 1, 2020, all of which are listed in 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 July 1, 2020 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 
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3. October 2020 HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2021 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, 
2020 in the CY 2021 OPPS/ASC final rule with comment period, thereby 
allowing us to finalize the status indicators and APC assignments for 
the codes in the CY 2022 OPPS/ASC final rule with comment period. The 
HCPCS codes will be released to the public through the October 2020 
OPPS Update CR and the CMS HCPCS website while the CPT codes will be 
released to the public through the AMA website.
    For CY 2021, we propose 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, 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 2021 OPPS/ASC final rule with 
comment period on the status indicator and APC assignments, which would 
then be finalized in the CY 2022 OPPS/ASC final rule with comment 
period.
4. January 2021 HCPCS Codes
a. New Level II HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2021 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, 2021 in the CY 
2021 OPPS/ASC final rule with comment period, thereby allowing us to 
finalize the status indicators and APC assignments for the codes in the 
CY 2022 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 HCPCS C-codes and 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 2021 OPPS/ASC final rule 
with comment period, January 2021 OPPS Update CR, and the CMS HCPCS 
website.
    For CY 2021, we propose 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 Level II HCPCS codes that will be 
effective January 1, 2021 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 2021 OPPS/ASC final rule with 
comment period on the status indicator and APC assignments, which would 
then be finalized in the CY 2022 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

[[Page 48824]]

current APC and status indicator assignments for a year until we can 
propose APC and status indicator assignments in the following year's 
rulemaking cycle. We note that even if we find that we need to create 
HCPCS G-codes in place of certain CPT codes for the PFS proposed rule, 
we do not anticipate that these HCPCS G-codes will always be necessary 
for OPPS purposes. We will make every effort to include proposed APC 
and status indicator assignments for all new and revised CPT codes that 
the AMA makes publicly available in time for us to include them in the 
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 2021 OPPS update, we received the CPT codes that will be 
effective January 1, 2021 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 2021 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 2021 
OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code''. The final CPT 
code numbers will be included in the CY 2021 OPPS/ASC final rule with 
comment period.
    In summary, we are soliciting public comments on the proposed CY 
2021 status indicators and APC assignments for the new and revised CPT 
codes that will be effective January 1, 2021. 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 propose to finalize the status indicator and APC 
assignments for these codes (with their final CPT code numbers) in the 
CY 2021 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 8, 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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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 devices, drugs, biologicals, 
therapeutic radiopharmaceuticals, and brachytherapy devices that are 
not packaged into the payment for the service.
    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 2021, we propose 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 
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[[Page 48826]]

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 2021 OPPS update will be discussed in the 
relevant specific sections throughout the CY 2021 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 2021, we propose 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 2021 OPPS update, we have identified the APCs with 
violations of the 2 times rule. Therefore, we propose 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 2021 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 
propose 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 2021 included 
in this proposed rule are related to changes in costs of services that 
were observed in the CY 2019 claims data newly available for CY 2021 
ratesetting. Addendum B to this CY 2021 OPPS/ASC proposed rule 
identifies with a comment indicator ``CH'' those procedure codes for 
which we propose a change to the APC assignment or status indicator, or 
both, that were initially assigned in the July 1, 2020 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 propose to make for CY 
2021, we reviewed all of the APCs to determine which APCs would not 
meet the requirements of the 2 times rule. We used the following 
criteria to evaluate whether to propose exceptions to the 2 times rule 
for affected APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting utilization;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    Based on the CY 2019 claims data available for this CY 2021 
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 propose to make exceptions under the 2 times rule for CY 2021, 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 2019 claims data 
available for this proposed rule. We note that 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 similar geometric mean costs and do not 
create a 2 times 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 9 of this proposed rule lists the 18 APCs for which we 
propose to make an exception under the 2 times rule for CY 2021 based 
on the criteria cited above and claims data submitted between January 
1, 2019, and December 31, 2019, and processed on or before December 31, 
2019. For the final rule with comment period, we intend to use claims 
data for dates of service between January 1, 2019, and December 31, 
2019, that were processed on or before June 30, 2020, 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 
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 2020, 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 reflect the costs that are associated 
with providing care to Medicare beneficiaries and 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 
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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 2021, 
we included the proposed payment rates for New Technology APCs 1491 to 
1599 and 1901 through 1908 in Addendum A to this CY 2021 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website).
2. Establishing Payment Rates for Low-Volume New Technology Services
    Services that are assigned to New Technology APCs are typically new 
services that do not have sufficient claims history to establish an 
accurate payment for the services. One of the objectives of 
establishing New Technology APCs is to generate sufficient claims data 
for a new service so that it can be assigned to an appropriate clinical 
APC. Some services that are assigned to New Technology APCs have very 
low annual volume, which we consider to be fewer than 100 claims. We 
consider services with fewer than 100 claims annually to be low-volume 
services because there is a higher probability that the payment data 
for a service 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 service 
under the OPPS by calculating the geometric mean for all separately 
paid claims for a HCPCS service code from the most recent available 
year of claims data may not generate an accurate estimate of the actual 
cost of the service for these low-volume services.
    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 
service to a new technology APC allows us to gather claims data to 
price the service 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 services in 
the past (82 FR 59281). Although we 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 services with fewer 
than 100 claims annually as low-volume services because there is a 
higher probability that the payment data for a service 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 service 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 
service. 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

[[Page 48829]]

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 2021, we propose to continue 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 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 2021
    As we described 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 2021, we propose 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 propose to continue to assign to standard 
APCs, and one that we propose to continue to assign to a New Technology 
APC for CY 2021. 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.
    For the procedure described by CPT code 0398T, we have identified 
149 paid claims for CY 2019 with a geometric mean of $12,798.38. The 
number of claims for the service means that the procedure is no longer 
a low-volume new technology service, and we will use the geometric mean 
of the CY 2019 claims data to determine the cost of the service for its 
APC assignment. We reviewed the OPPS to determine whether CPT code 
0398T could be assigned to a clinical APC. The most appropriate 
clinical APC family for the service would be the Neurostimulator and 
Related Procedures APC series (APC 5461-5464). However, there is large 
payment rate difference between Level 2 Neurostimulator and Related 
Procedures (APC 5462) with a payment rate of $6,169.27 and Level 3 
Neurostimulator and Related Procedures (APC 5463) with a payment rate 
of $19,737.37. Based on the geometric mean cost of CPT code 0398T 
available for this proposed rule, we believe the payment rate for APC 
5462 would be too low for CPT code 0398T since it is more than $6,000 
less than the geometric mean cost for CPT code 0398T, and we believe 
the payment rate for APC 5463 would be too high since it is around 
$6,800 more than the geometric mean cost for CPT code 0398T.
    In addition, given the significant difference in the payment rate 
between APC 5462 and 5463, we believe a restructuring of this APC 
family would be appropriate. We believe creating an additional payment 
level between the two existing APC levels would allow for a smoother 
distribution of the costs between the different levels based on their 
resource costs and clinical characteristics. Please refer to section 
III.D.1 for detailed explanation of our proposal to reorganize the 
Neurostimulator and Related Procedures APCs (APCs 5461-5464). 
Reorganizing the Neurostimulator and Related Procedures APCs would 
create a proposed Level 3 APC to be referred to as ``Proposed APC 
5463'' with a payment rate of approximately $12,286 that is close to 
the geometric mean of CPT code 0398T which is approximately $12,798. 
The payment rate of proposed APC 5463 is representative of the cost of 
the service described by CPT code 0398T. Therefore, we propose to 
reassign the service described by CPT code 0398T to the proposed new 
Level 3 APC for Neurostimulator and Related Procedures (Proposed APC 
5463) for CY 2021. The current and proposed APC assignments, status 
indicators, and payment rates for CPT code 0398T are found in Table 10. 
We refer readers to Addendum B of the proposed rule for the proposed 
payment rates for all codes reportable under the OPPS. Addendum B is 
available via the internet on the CMS website.

[[Page 48830]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.025

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

[[Page 48831]]

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 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.
    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 payment 
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, 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 fell within the same New Technology APC cost 
band ($145,001- $160,000), where the Argus[supreg] II procedure was 
assigned for CY 2019. Consistent with our policy stated in section 
III.C.2, we presented the result of each statistical methodology in the 
proposed rule, and we sought 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 fell within the 
cost band for New Technology APC 1908, with the estimated cost being 
between $145,001 and $160,000. Accordingly, we assigned CPT code 0100T 
in APC 1908 (New Technology-- Level 52 ($145,001-$160,000)), with a 
payment rate of $152,500.50 for CY 2020.
    For CY 2021, 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. As previously 
mentioned, 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 2021, we propose 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.
    For CY 2021, we identified 35 claims reporting the procedure 
described by CPT code 0100T for the 4-year period of CY 2016 through CY 
2019. We found the geometric mean cost for the procedure described by 
CPT code 0100T to be approximately $148,807, the arithmetic mean cost 
to be approximately $154,504, and the median cost to be approximately 
$151,974. 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

[[Page 48832]]

1908, with the estimated cost being between $145,001 and $160,000.
    Accordingly, we propose 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 2021. 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 the 
proposed rule for the proposed payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website.
c. Administration of Subretinal Therapies Requiring Vitrectomy
    CPT code J3398 (Injection, voretigene neparvovec-rzyl, 1 billion 
vector genomes) is a gene therapy for a rare mutation-associated 
retinal dystrophy. Voretigene neparvovec-rzyl (Luxturna[supreg]), was 
approved by the FDA in December of 2017, and is indicated as an adeno-
associated virus vector-based gene therapy indicated for the treatment 
of patients with confirmed biallelic RPE65 mutation-associated retinal 
dystrophy.\2\ This therapy is administered through a subretinal 
injection, which stakeholders describe as an extremely delicate and 
sensitive surgical procedure. The FDA package insert describes one of 
the steps for administering Luxturna as, ``after completing a 
vitrectomy, identify the intended site of administration. The 
subretinal injection can be introduced via pars plana.'' \1\
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    \2\ Luxturna. FDA Package Insert. Available: https://www.fda.gov/media/109906/download.
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    Stakeholders, including the manufacturer of Luxturna[supreg], 
recommend HCPCS code 67036 (Vitrectomy, mechanical, pars plana 
approach) for the administration of the gene therapy.\3\ However, the 
manufacturer contends the administration is not currently described by 
any existing codes as HCPCS code 67036 (Vitrectomy, mechanical, pars 
plana approach) does not account for the administration itself. For 
J3398, a typical patient would receive a standard dose of 150 billion 
vector genomes, with an approximate payment rate of $436,575 (we refer 
readers to Addendum B of this proposed rule for the proposed payment 
rate associated with J3398).
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    \3\ LUXTURNA REIMBURSEMENT GUIDE FOR TREATMENT CENTERS. https://mysparkgeneration.com/pdf/Reimbursement_Guide_for_Treatment_Centers_Interactive_010418_FINAL.pdf.
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    It is important to note that CPT code J3398 was granted drug pass-
through status under the OPPS as of July 1, 2018 and is assigned to 
status indicator ``G''. (We refer readers to Addendum D of this 
proposed rule for the list of proposed status indicator definitions for 
CY2021). J3398 is scheduled to have its drug pass-through status expire 
June 30, 2021, at which point J3398 would be packaged into the payment 
for any primary service with which it is billed when that primary 
service is assigned to a comprehensive APC (C-APC). A C-APC packages 
payment for adjunctive and secondary items, services, and procedures 
into the most costly primary procedure (For a full discussion and 
background on C-APCs, see section II.A.2.b). Based on information from 
the manufacturer of Luxturna, we believe that CPT code J3398 
(Injection, voretigene neparvovec-rzyl, 1 billion vector genomes) would 
commonly be billed with the service described by HCPCS code 67036 
(Vitrectomy, mechanical, pars plana approach), which describes the 
administration of the gene therapy, and which is assigned to a 
comprehensive APC, (APC 5492--Level 2 Intraocular Procedures). Thus, 
when its pass-through status expires, payment for CPT code J3398, the 
primary therapy, would be inappropriately packaged into payment for 
HCPCS code 67036, its administration procedure.
    CMS recognizes the necessity to accurately describe the unique 
administration procedure that is required to administer the therapy 
described by CPT J3398. We propose to establish a new HCPCS code, C97X1 
(Vitrectomy, mechanical, pars plana approach, with subretinal injection 
of pharmacologic/biologic agent) to describe this process. We believe 
that this new HCPCS code accurately describes the service associated 
with intraocular administration of HCPCS code J3398. CMS recognizes 
that HCPCS code 67036 represents a similar procedure and process that 
approximates similar resource utilization that is associated with 
C97X1. CMS also recognizes that it is not prudent for the code that 
describes the administration of this gene therapy, C97X1, to be 
assigned to the same C-APC that is assigned to HCPCS code 67036, as 
this would inappropriately package the primary therapy, J3398, into the 
code that represents the process to administer the gene therapy.
    For CY 2021, we propose to assign the services described by C97X1 
to a new technology payment band based on the geometric mean cost for 
HCPCS code 67036. For CY 2021, HCPCS code 67036 has a geometric mean 
cost of $3407.84. Therefore, for CY 2021 we propose to assign C97X1 to 
APC 1561--New Technology--Level 24 ($3001-$3500). Please see Table 11 
for proposed descriptors and APC assignment.
[GRAPHIC] [TIFF OMITTED] TP12AU20.026


[[Page 48833]]


d. 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 (for example, 
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.
    In claims data available for CY 2019 for this proposed rule, there 
were 4 claims reported for bronchoscopy with transbronchial ablation of 
lesions by microwave energy. Given the low volume of claims for the 
service, we propose for CY 2021 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 to calculate an appropriate payment 
rate for purposes of assigning bronchoscopy with transbronchial 
ablation of lesions by microwave energy to a New Technology APC. We 
found the geometric mean cost for the service to be approximately 
$4,051, the arithmetic mean cost to be approximately $4,067, and the 
median cost to be approximately $4,067. All three potential statistical 
methodologies used to estimate the cost of the service procedure fall 
within the cost band for New Technology APC 1563, with the estimated 
cost being between $4,001 and $4,500. Accordingly, we propose to change 
the assignment of the HCPCS code C9751 to APC 1563 (New Technology--
Level 26 ($4001-$4500)), with a proposed payment rate of $4,250.50 for 
CY 2021. Details regarding HCPCS code C9751 are shown in Table 12.
[GRAPHIC] [TIFF OMITTED] TP12AU20.027

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 services paid under the OPPS, payment for analytics that 
are performed after the main diagnostic/image procedure are packaged 
into the payment for the primary service. However, in CY 2018, we 
determined that HeartFlow should receive a separate payment because the 
service 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. We 
did not have Medicare claims data in CY 2019 for CPT code 0503T, and we 
continued to assign the service to New Technology APC 1516 (New 
Technology--Level 16 ($1,401-$1,500)), with a payment rate of 
$1,450.50.
    CY 2020 was the first year we had Medicare claims data to calculate 
the cost of HCPCS code 0503T. For the CY 2020 OPPS/ASC final rule, 
there were 957 claims with CPT code 0503T of which 101 of the claims 
were single frequency claims that were used to calculate the geometric 
mean of the procedure. We planned to use the geometric mean to report 
the cost of HeartFlow. However, the number of single frequency claims 
for CPT code 0503T was below the low-volume payment policy threshold 
for the proposed rule, and the number of single frequency claims was 
only two claims above the threshold for the new technology APC low-
volume policy for the final rule. Therefore, we decided to use our 
equitable adjustment authority under section 1833(t)(2)(E) of the Act 
to

[[Page 48834]]

calculate the geometric mean, arithmetic mean, and median using the CY 
2018 claims data to determine an appropriate payment rate for HeartFlow 
using our new technology APC low-volume payment policy. While the 
number of single frequency claims was just above our threshold to use 
the low-volume payment policy, we still had concerns about the normal 
cost distribution of the claims used to calculate the payment rate for 
Heartflow, and we decided the low-volume payment policy would be the 
best approach to address those concerns.
    Our analysis found that the geometric mean cost for CPT code 0503T 
was $768.26, the arithmetic mean cost for CPT code 0503T was $960.12 
and that the median cost for CPT code 0503T was $900.28. Of the three 
cost methods, the highest amount was for the arithmetic mean. The 
arithmetic mean fell within the cost band for New Technology APC 1511 
(New Technology--Level 11 ($901-$1,000)) with a payment rate of 
$950.50. The arithmetic mean helped to account for some of the higher 
costs of CPT code 0503T identified by the developer and other 
stakeholders that may not have been reflected by either the median or 
the geometric mean.
    For CY 2021, we observed a significant increase in the number of 
claims billed with CPT code 0503T that are available for this proposed 
rule. Specifically, using the most recently available data for this 
proposed rule (that is, CY 2019), we identified 2,820 claims billed 
with CPT code 0503T including 415 single frequency claims. These totals 
are well above the threshold of 100 claims for a procedure to be 
evaluated using the new technology APC low-volume policy. Therefore, we 
propose to use our standard methodology rather than the low-volume 
methodology we previously used to determine the cost of CPT code 0503T.
    Our analysis found the geometric mean cost for CPT code 0503T is 
approximately $851. Therefore, we propose to reassign the service 
described by CPT code 0503T in order to adjust the payment rate to 
better reflect the cost for the service. While we considered proposing 
to reassign CPT code 0503T to APC 5724 (Level 4--Diagnostic Tests and 
Related Services), which has a payment rate of around $903 based on the 
clinical and resource similarity to other services within that APC, we 
did not propose such reassignment because the payment rate for the new 
technology APC is closer to the geometric mean costs of CPT code 0503T. 
Nonetheless, we welcome comments on whether reassignment to the 
clinical APC would be more appropriate. Therefore, we propose to 
reassign the service described by CPT code 0503T to New Technology APC 
1510 (New Technology--Level 10 ($801-$900)), with a proposed payment 
rate of $850.50 for CY 2021.
f. Cardiac Positron Emission Tomography (PET)/Computed Tomography (CT) 
Studies
    Effective January 1, 2020, we assigned three CPT codes (78431, 
78432, and 78433) that describe the services associated with cardiac 
PET/CT studies to New Technology APCs. Table 13 reports code 
descriptors, status indicators, and APC assignments for these CPT 
codes. CPT code 78431 was assigned to APC 1522 (New Technology--Level 
22 ($2,001-$2,500)) with a payment rate of $2,250.50. CPT codes 78432 
and 78433 were assigned to APC 1523 (New Technology--Level 23 ($2,501-
$3,000)) with a payment rate of $ 2,750.50.
    We have not received any claims that have been billed with CPT 
codes 78431, 78432, or 78433. Therefore, we propose to continue to 
assign these CPT codes to the same new technology APCs as they were in 
CY 2020. The proposed CY 2021 payment rate for the codes can be found 
in Addendum B to this proposed rule (which is available via the 
internet on the CMS website).
BILLING CODE 4120-01-P

[[Page 48835]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.028

BILLING CODE 4120-01-C
g. Pathogen Test for Platelets/Rapid Bacterial Testing
    For the July 2017 update, the HCPCS Workgroup established HCPCS 
code Q9987 (Pathogen(s) test for platelets) effective July 1, 2017. 
This new code and the OPPS APC assignment was announced in the July 
2017 OPPS quarterly update CR (Transmittal 3783, Change Request 10122, 
dated May 26, 2017). Because HCPCS code Q9987 represented a test to 
identify bacterial or other pathogen contamination in blood platelets, 
we assigned the code to a new technology APC, specifically, New 
Technology APC 1493 (New Technology-Level 1C ($21-$30)) with a status 
indicator ``S'' and a payment rate of $25.50. We note that temporary 
HCPCS code Q9987 was subsequently deleted on December 31, 2017, and 
replaced with permanent HCPCS code P9100 (Pathogen(s) test for 
platelets) effective January 1, 2018. For the January 2018 update, we 
continued to assign the new code to the same APC and status indicator 
as its predecessor code. Specifically, we assigned HCPCS code P9100 to 
New Technology APC 1493 and status indicator ``S''. For the CY 2019 
update, we made no change to the APC or status indicator assignment for 
P9100, however, for the CY 2020 update, we revised the APC assignment 
from New Technology APC 1493 to 1494 (New Technology--Level 1D ($31-
$40) based on the latest claims data

[[Page 48836]]

used to set the payment rates for CY 2020. We discussed the revision in 
the CY 2020 OPPS/ASC final rule (84 FR 61219) and indicated that the 
reassignment to APC 1494 appropriately reflected the cost of the 
service.
    For the CY 2021 update, we believe that we have sufficient claims 
data to reassign the code from a New Technology APC to a clinical APC 
and note that HCPCS code P9100 has been assigned to a New Technology 
APC for over 3 years. As stated in section III.D. (New Technology 
APCs), a service is paid under a New Technology APC until sufficient 
claims data have been collected to allow CMS to assign the procedure to 
a clinical APC group that is appropriate in clinical and resource 
terms. We expect this to occur within two to three years from the time 
a new HCPCS code becomes effective. However, if we are able to collect 
sufficient claims data in less than 2 years, we would consider 
reassigning the service to an appropriate clinical APC. Since HCPCS 
code P9100 has been assigned to a new technology APC since July 2017, 
we believe that we should reassign the code to a clinical APC. 
Specifically, our claims data for this proposed rule shows a geometric 
mean cost of approximately $30 for HCPCS code P9100 based on 70 single 
claims (out of 1,835 total claims). Based on resource cost and clinical 
homogeneity to the other services assigned to APC 5732 (Level 2 Minor 
Procedures), we believe that HCPCS code P9100 should be reassigned to 
clinical APC 5732 whose geometric mean cost is approximately $33.
    As we have stated several times since the implementation of the 
OPPS on August 1, 2000, we review, on an annual basis, the APC 
assignments for all services and items paid under the OPPS based on our 
analysis of the latest claims data. For the CY 2021 OPPS update, based 
on claims submitted between January 1, 2019, and December 30, 2019, our 
analysis of the latest claims data for this proposed rule supports 
reassigning HCPCS code P9100 to APC 5732 based on its clinical and 
resource homogeneity to the procedures and services in the APC. 
Therefore, we propose to reassign HCPCS code P9100 from New Technology 
APC 1494 to clinical APC 5732 for CY 2021. The proposed CY 2021 payment 
rate for HCPCS code P9100 can be found in Addendum B to this proposed 
rule with comment period. In addition, we refer readers to Addendum D1 
of this proposed rule with comment period for the status indicator (SI) 
meanings for all codes reported under the OPPS. Both Addendum B and D1 
are available via the internet on the CMS website.
h. V-Wave Interatrial Shunt Procedure (HCPCS Code C9758; APC 1589)
    A randomized, double-blinded control IDE study is currently in 
progress for the V-Wave interatrial shunt. The V-Wave interatrial shunt 
is for patients with severe symptomatic heart failure and is designed 
to regulate left atrial pressure in the heart. All participants who 
passed initial screening for the study receive a right heart 
catheterization procedure described by CPT code 93451 (Right heart 
catheterization including measurement(s) of oxygen saturation and 
cardiac output, when performed). Participants assigned to the 
experimental group also receive the V-Wave interatrial shunt procedure 
while participants assigned to the control group only receive right 
heart catheterization. The developer of V-Wave was concerned that the 
current coding of these services by Medicare would reveal to the study 
participants whether they have received the interatrial shunt because 
an additional procedure code, CPT code 93799 (Unlisted cardiovascular 
service or procedure), would be included on the claims for participants 
receiving the interatrial shunt. Therefore, we created a temporary 
HCPCS code to describe the V-wave interatrial shunt procedure for both 
the experimental group and the control group in the study. 
Specifically, we established HCPCS code C9758 (Blinded procedure for 
NYHA class III/IV heart failure; transcatheter implantation of 
interatrial shunt or placebo control, including right heart 
catheterization, trans-esophageal echocardiography (TEE)/intracardiac 
echocardiography (ICE), and all imaging with or without guidance (for 
example, ultrasound, fluoroscopy), performed in an approved 
investigational device exemption (IDE) study) to describe the service, 
and we assigned the service to New Technology APC 1589 (New 
Technology--Level 38 ($10,001-$15,000)).
    No claims have been reported for HCPCS code C9758. Therefore, we 
propose to continue to assign the service to New Technology APC 1589 
for CY 2021. Details about the HCPCS code and its APC assignment are 
shown in Table 14. The proposed CY 2021 payment rate for V-Wave 
interatrial shunt procedure can be found in Addendum B to proposed rule 
(which is available via the internet on the CMS website).
[GRAPHIC] [TIFF OMITTED] TP12AU20.029


[[Page 48837]]


i. Supervised Visits for Esketamine Self-Administration (HCPCS Codes 
G2082 and G2083 APCs 1508 and 1511)
    On March 5, 2019, the U.S. Food and Drug Administration (FDA) 
approved Spravato\TM\ (esketamine) nasal spray, used in conjunction 
with an oral antidepressant, for treatment of depression in adults who 
have tried other antidepressant medicines but have not benefited from 
them (treatment-resistant depression (TRD)). Because of the risk of 
serious adverse outcomes resulting from sedation and dissociation 
caused by Spravato administration, and the potential for abuse and 
misuse of the product, it is only available through a restricted 
distribution system under a Risk Evaluation and Mitigation Strategy 
(REMS). A REMS is a drug safety program that the FDA can require for 
certain medications with serious safety concerns to help ensure the 
benefits of the medication outweigh its risks.
    A treatment session of esketamine consists of instructed nasal 
self-administration by the patient, followed by a period of post-
administration observation of the patient under direct supervision of a 
health care professional. Esketamine is a noncompetitive N-methyl D-
aspartate (NMDA) receptor antagonist. It is a nasal spray supplied as 
an aqueous solution of esketamine hydrochloride in a vial with a nasal 
spray device. This is the first FDA approval of esketamine for any use. 
Each device delivers two sprays containing a total of 28 mg of 
esketamine. Patients would require either two (2) devices (for a 56mg 
dose) or three (3) devices (for an 84 mg dose) per treatment.
    Because of the risk of serious adverse outcomes resulting from 
sedation and dissociation caused by Spravato administration, and the 
potential for abuse and misuse of the product, Spravato is only 
available through a restricted distribution system under a REMS; 
patients must be monitored by a health care provider for at least 2 
hours after receiving their Spravato dose; the prescriber and patient 
must both sign a Patient Enrollment Form; and the product will only be 
administered in a certified medical office where the health care 
provider can monitor the patient. Please refer to the CY 2020 PFS final 
rule and interim final rule for more information about supervised 
visits for esketamine self-administration (84 FR 63102 through 63105).
    To facilitate prompt beneficiary access to the new, potentially 
life-saving treatment for TRD using esketamine, we created two new 
HCPCS G codes, G2082 and G2083, effective January 1, 2020. HCPCS code 
G2082 is for an outpatient visit for the evaluation and management of 
an established patient that requires the supervision of a physician or 
other qualified health care professional and provision of up to 56 mg 
of esketamine nasal self-administration and includes 2 hours post-
administration observation. HCPCS code G2082 was assigned to New 
Technology APC 1508 (New Technology--Level 8 ($601-$700)) with a 
payment rate of $650.50. HCPCS code G2083 describes a similar service 
to HCPCS code G2082, but involves the administration of more than 56 mg 
of esketamine. HCPCS code G2083 was assigned to New Technology APC 1511 
(New Technology--Level 11 ($901-$1,000)) with a payment rate of 
$950.50.
    No Medicare OPPS claims have been reported for either HCPCS code 
G2082 or G2083. Therefore, we propose to continue to assign HCPCS code 
G2082 to New Technology APC 1508 and to assign HCPCS code G2083 to New 
Technology APC 1511. Details about the HCPCS codes and their APC 
assignments are shown in Table G15 below. The proposed CY 2021 payment 
rate for esketamine self-administration can be found in Addendum B to 
proposed rule (which is available via the internet on the CMS website).
BILLING CODE 4120-01-P

[[Page 48838]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.030

D. Proposed OPPS APC-Specific Policies

1. Neurostimulator and Related Procedures (APCs 5461 Through 5465)
    In the CY 2015 OPPS/ASC final rule (79 FR 66807 through 66808), we 
finalized a restructuring of what were previously several 
neurostimulator procedure-related APCs into a four-level series. Since 
CY 2015, the four-level APC structure for the series has remained 
unchanged. In addition to that restructuring, in the CY 2015 OPPS/ASC 
final rule, we also made the Level 2 through 4 APCs comprehensive APCs 
(79 FR 66807 through 66808). Later, in the CY 2020 OPPS final rule, we 
also established the Level 1 Neurostimulator and Related Procedure APC 
(APC 5461) as a comprehensive APC (84 FR 61162 through 61166).
    In reviewing the claims data available for CY 2021 OPPS proposed 
rule, we believe that it is appropriate to create an additional 
Neurostimulator and Related Procedures level, between the current Level 
2 and 3 APCs. Creating this APC allows for a smoother distribution of 
the costs between the different levels based on their resource costs 
and clinical characteristics. Therefore, for the CY 2021 OPPS, we 
propose to establish a five-level APC structure for the Neurostimulator 
and Related Procedures series. We note that in addition to creating 
this new level, we also propose to assign CPT 0398T (Magnetic resonance 
image guided high intensity focused ultrasound (mrgfus), stereotactic 
ablation lesion, intracranial for movement disorder including 
stereotactic navigation and frame placement when performed) to this new 
Level 3 APC, as discussed in further detail in section III.C.3.A of 
this proposed rule with comment period.
    Table 16 displays the proposed CY 2021 Neurostimulator and Related 
Procedures APC series' structure and APC geometric mean costs

[[Page 48839]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.031

BILLING CODE 4120-01-C
2. IDx-DR: Artificial Intelligence System To Detect Diabetic 
Retinopathy (APC 5732)
    As stated in a press release issued by the FDA on April 11, 2018, 
the IDx-DR is the ``first medical device to use artificial intelligence 
to detect greater than a mild level of the eye disease diabetic 
retinopathy in adults who have diabetes'' (https://www.fda.gov/news-events/press-announcements/fda-permits-marketing-artificial-intelligence-based-device-detect-certain-diabetes-related-eye). 
Approved for marketing by the FDA in April 2018, the artificial 
intelligence algorithm provides a clinical decision without the need 
for a clinician to also interpret the image. A provider uploads the 
digital images of the patient's retinas to a cloud server on which the 
IDx-DR software is installed, and once analysis is completed, the 
provider is given one of the following two results:
     More than mild diabetic retinopathy detected: Refer to an 
eye care professional; or
     negative for more than mild diabetic retinopathy; rescreen 
in 12 months.
    The test itself generally takes about 5 minutes to complete and 
does not need to be performed by a clinician. The test associated with 
the IDx-DR technology will receive a new CPT code effective January 1, 
2021, and with the establishment of the new code, the CPT Editorial 
Panel is also revising the descriptors associated with existing CPT 
codes 92227 and 92228 to appropriately differentiate them from the IDx-
DR test.
    Based on our evaluation of the service, we believe that IDx-DR is a 
diagnostic test that should be payable under the hospital OPPS, similar 
to existing CPT codes 92227 and 92228, which are assigned to APC 5732 
(Level 2 Minor Procedures) and status indicator ``Q1.'' Based on its 
clinical similarity to CPT codes 92227 (Remote imaging for detection of 
retinal disease (for example, retinopathy in a patient with diabetes) 
with analysis and report under physician supervision, unilateral or 
bilateral) and 92228 (Remote imaging for monitoring and management of 
active retinal disease (eg, diabetic retinopathy) with physician 
review, interpretation and report, unilateral or bilateral), we believe 
that the IDx-DR test should also be assigned to APC 5732 (Level 2 Minor 
Procedures) and status indicator ``Q1.'' Consequently, we propose to 
assign the new IDx-DR CPT code to APC 5732 with a proposed payment rate 
of $33.16 for CY 2021. We note that we propose to assign the code to 
status indicator ``Q1'' to indicate that the code is conditionally 
packaged when performed with another service on the same day. Because 
the IDx-DR test will most often be performed as part of a visit, we 
believe that packaging the cost into the primary service is 
appropriate. We note that under the OPPS, the current E&M visit code 
(G0463) is paid separately when not billed with a C-APC, and we believe 
this payment includes the cost of providing the IDx-DR test. Generally, 
our process for tests with minimal costs is to package the cost into 
the primary service. Because the IDx-DR test will generally be part of 
another service provided on the same day, and involve minimal cost, we 
believe that conditionally packaging the payment for the 5-minute IDx-
DR test is appropriate for this test in the hospital outpatient 
setting.
    In summary, we propose to assign the new CPT code associated with 
IDx-DR to APC 5732 and status indicator ``Q1''. Table 17 lists the 
proposed APC and SI for placeholder CPT code 9225X, which is associated 
with the IDx-DR test. The final CPT code number for placeholder code 
9225X will be included in the CY 2021 OPPS/ASC final rule with comment 
period. The proposed CY 2021 payment rate for CPT code 9225X can be 
found in Addendum B to this proposed rule with comment period. In 
addition, we refer readers to Addendum D1 of this proposed rule with 
comment period for the status indicator (SI) meanings for all codes 
reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website. Furthermore, for discussion on the 
proposed PFS payment for placeholder CPT code 9225X, refer to the CY 
2021 PFS Proposed Rule.

[[Page 48840]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.032

3. Intraocular Procedures (APCs 5491 Through 5495)
    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 the proposed rule.
    In the CY 2019 OPPS, we assigned 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 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 
significantly lower than the OPPS payments for the same service because 
of the difference in 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 CY 2020 OPPS rulemaking, we reestablished APC 5495 (Level 5 
Intraocular Procedures) because we believed that the procedure 
described by CPT code 0308T would be most appropriately placed in the 
APC based on its estimated cost (84 FR 61249 through 61250). Assignment 
of the procedure to the Level 5 Intraocular Procedures APC was 
consistent with its historical placement and would also address the 
large discrepancy in payment for the procedure between the OPPS and the 
ASC payment system. We note that we also implemented a policy where the 
payment for a service when performed in an ASC (84 FR 61399 through 
61400), would be no higher than the OPPS payment rate for the service 
when performed in the hospital outpatient setting.
    In reviewing the claims data available for CY 2021 ratesetting, 
there was a single claim containing the code 0308T that was unable to 
be used for the ratesetting process. In addition, this code and its APC 
have historically had relatively low claims volume for ratesetting 
purposes. While there are no claims usable for ratesetting in the CY 
2021 OPPS proposed data under our standard process, we still need to 
determine a payment weight for the APC. We believe that the most 
recently available data that we used to set payment for this service in 
the CY 2020 OPPS final rule is an appropriate proxy for both the 
procedure's estimated cost and its relative payment weight. We note 
that this proposed policy to use prior year claims data in ratesetting 
is similar to the application of a geometric mean cost floor to the 
Partial Hospitalization APCs, as initially established in the CY 2020 
OPPS/ASC final rule (84 FR 61339 through 61347). Therefore, we believe 
it is appropriate to propose to use the median cost of $20,229.78 for 
CPT 0308T, calculated from claims data used in the CY 2020 OPPS final 
rule, to establish the payment weight for the CY 2021 OPPS for CPT code 
0308T. We will continue to monitor the claims available for ratesetting 
as they are available for the CY 2021 OPPS final rule.
    To summarize, for CY 2021, we propose to assign 0308T a payment 
weight based on the most recently available data, from the CY 2020 OPPS 
final rule, and therefore propose to assign CPT code 0308T to APC 5495 
(Level 5 Intraocular Procedures). Under this proposal, the proposed CY 
2021 OPPS payment rate for the service would be established based on 
the median cost, as discussed in section V.A.5. of the proposed rule, 
because it is a device intensive procedure assigned to an APC with 
fewer than 100 total annual claims within the APC. Therefore, the 
proposed APC assignment for CPT 0308T would be based on the CY 2019 
OPPS final rule median cost of $20,229.78.
4. 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

[[Page 48841]]

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 
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 2021 OPPS/ASC 
proposed rule, we continue to believe that the six-level APC structure 
for the Musculoskeletal Procedures APC series is appropriate. 
Therefore, we propose to maintain the APC structure for the CY 2021 
OPPS update.
    In the CY 2020 OPPS/ASC final rule, we discussed issues related to 
the APC assignment of CPT code 22869 (Insertion of interlaminar/
interspinous process stabilization/distraction device, without open 
decompression or fusion, including image guidance when performed, 
lumbar; single level) to APC 5115 (84 FR 61253 through 61254). 
Specifically, commenters believed that the code was inappropriately 
assigned to APC 5115 due to one hospital inaccurately reporting its 
costs and charges. While we recognized the concerns that the commenters 
described, we noted that it is generally not our policy to judge the 
accuracy of hospital coding and charging for purposes of ratesetting. 
For the CY 2021 OPPS, the geometric mean cost of CPT code 22869 has 
increased slightly relative to the prior year, from $11,023.45 to 
$12,788.56. However, the geometric mean costs of the Level 5 and Level 
6 Musculoskeletal Procedures APCs are $12,102.02 and $15,975.08, 
respectively, and so, based on the data that is available, we continue 
to believe that it is appropriate to assign CPT code 22869 to APC 5115 
(Level 5 Musculoskeletal Procedures APC).
    For the CY 2021 OPPS, we also propose to remove codes that were 
previously on the Inpatient Only List and assign them to clinical APCs. 
Many of these codes are being proposed for APC assignment to the 
Musculoskeletal Procedures APC series, and so there may be effects on 
the geometric means as the limited claims data for those codes is 
included in OPPS ratesetting. For a more detailed discussion of the 
proposal to remove certain codes from the inpatient only list, please 
see section IX.B. of this proposed rule,
    Table 18 displays the proposed CY 2021 Musculoskeletal Procedures 
APC series' structure and APC geometric mean costs.
[GRAPHIC] [TIFF OMITTED] TP12AU20.033

5. Noncontact Real-Time Fluorescence Wound Imaging/MolecuLight (APC 
5722)
    For the July 2020 update, the CPT Editorial Panel established two 
new codes, specifically, CPT codes 0598T and 0599T, to report 
noncontact real-time fluorescence wound imaging for bacterial presence 
in chronic and acute wounds. The codes and their long descriptors are 
listed in Table 7 (New HCPCS Codes Effective July 1, 2020) above. We 
note that CMS recently received a new technology application for the 
MolecuLight i: X procedure, which is described by CPT codes 0598T and 
0599T. In determining the appropriate payment for CPT code 0598T, we 
considered whether there should be separate or conditionally packaged 
payment for the procedure since the use of the MolecuLight imaging 
device will most often involve another procedure or service during the 
same session (for example, debridement of the wound, laboratory 
service, or another skin-related procedure). In addition, we considered 
whether the code should be placed in either the Diagnostic Procedures 
or Minor Procedures APC group. Based on our review of the application 
and input from our physicians, we assigned CPT code 0598T to APC 5722 
((Level 2 Diagnostic Tests and Related Services)

[[Page 48842]]

and status indicator ``T'' with a payment rate of $253.10 effective 
July 1, 2020. In addition, because CPT code 0599T is an add-on code, we 
assigned the code to status indicator ``N'' to indicate that the 
payment is included in the primary procedure. We note that the new 
technology application indicated a higher projected cost involving care 
in an operating room (OR), however, based on our review of the 
MolecuLight service, we removed all OR-associated costs because it is 
not clear to us that the test would routinely be performed in the OR 
setting. However, we are soliciting public comments from hospital-based 
providers that have used MolecuLight on the appropriate OPPS payment, 
particularly with respect to the cost of providing the service in the 
hospital outpatient setting as well as the performance of the 
procedure. We note, as indicated in Table 8 (Comment Timeframe for New 
and Revised HCPCS Codes), that we are seeking comments on CPT codes 
that are effective July 1, 2020 in this proposed rule, particularly 
with respect to the APC and SI assignments, and will finalize them in 
the CY 2021 OPPS/ASC final rule with comment period.
    In summary, we propose to assign CPT code 0598T to APC 5722 
(Diagnostic Tests and Related Services) with status indicator ``T'' and 
CPT code 0599T to status indicator ``N'' for CY 2021. The proposed CY 
2021 payment rate for CPT code 0598T can be found in Addendum B to this 
proposed rule with comment period. In addition, we refer readers to 
Addendum D1 of this proposed rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
6. Pathogen Test for Platelets/Rapid Bacterial Testing (APC 5732)
    For CY 2020, the HCPCS code associated with pathogen test for 
platelets or rapid bacterial testing was assigned to a new technology 
APC 1494 (New Technology--Level 1D ($31-$40). For the CY 2021 update, 
we propose to revise the APC assignment for this HCPCS code from New 
Technology APC 1494 to clinical APC 5732 (level 2 Minor Procedures). 
Refer to section III.C. of this proposed rule for the full discussion 
on the proposal.
7. Urology and Related Services (APCs 5371 Through 5378)
    For the CY 2020 OPPS/ASC final rule with comment period (84 FR 
61268), we received a public comment suggesting we revise the 
assignments for the services assigned to the Urology & Related Services 
APCs. The commenter specifically noted that a reorganization for APCs 
5374 through 5376 would be appropriate but added that there are other 
inconsistencies across services within the urology APCs. We stated in 
that same final rule that we would consider revisions to the urology 
APCs in future rulemaking.
    Currently, for CY 2020, there are seven levels of APCs for urology 
services. We have reviewed the CY 2020 geometric mean cost for APCs 
5371 through 5377 and, after our analysis of the claims data for this 
proposed rule, we believe that a modification to the urology APCs is 
appropriate.
    For the CY 2021 OPPS/ASC proposed rule, we evaluated the claims 
data and noted the large geometric mean cost differential between APC 
5376 (level 6) and APC 5377 (level 7) has continued to grow. This 
differential in the geometric mean cost from APC 5376 to APC 5377 would 
have been about $9,700, with the geometric mean cost for APC 5377 being 
about 220 percent of the geometric mean cost of APC 5376. With claims 
data available for this CY 2021 OPPS proposed rule with comment period 
showing an unusually large difference between the geometric mean costs 
of the Level 6 Urology APC and the Level 7 Urology APC on both a dollar 
and percentage basis, we believe that creating an additional APC in the 
urology and related series will provide an appropriate structure 
distinguishing between clinical and cost similarity for the procedures 
in the different levels. Therefore, for CY 2021, we propose to create 
an additional urology and related services APC 5378 (level 8) and re-
organize the current APC 5376 (level 6) and 5377 (level 7). As a 
result, we propose a total of eight levels in the urology and related 
services series. We believe this re-organization would address the lack 
of an appropriate level for procedures with geometric mean costs that 
fall between current APC 5376 and current APC 5377.
    We note that the proposed re-organization re-assigns CPT 53440 
(Male sling procedure) and CPT 0548T (Transperineal periurethral 
balloon continence device; bilateral placement, including cystoscopy 
and fluoroscopy) from the current APC 5376 to APC 5377.
    In addition, this proposed revision reassigns the following 
services from APC 5377 to APC 5378:
     CPT 54416 (Removal and replacement of non-inflatable 
(semi-rigid) or inflatable (self-contained) penile prosthesis at the 
same operative session).
     CPT 53444 (Insert tandem cuff).
     CPT 54410 (Removal and replacement of all component(s) of 
a multi-component, inflatable penile prosthesis at the same operative 
session).
     CPT 54411 (Removal and replacement of all components of a 
multi-component inflatable penile prosthesis through an infected field 
at the same operative session, including irrigation and debridement of 
infected tissue).
     CPT 54401 (Insertion of penile prosthesis; inflatable 
(self-contained)).
     CPT 54405 (Insertion of multi-component, inflatable penile 
prosthesis, including placement of pump, cylinders, and reservoir).
     CPT 53447 (Removal and replacement of inflatable urethral/
bladder neck sphincter including pump, reservoir, and cuff at the same 
operative session).
     CPT 53445 (Insertion of inflatable urethral/bladder neck 
sphincter, including placement of pump, reservoir, and cuff).
    We note that the APC reassignment for these 10 codes results in 
geometric mean costs for Levels 6, 7, and 8 of the urology APCs that we 
believe more appropriately align with the geometric mean costs for 
services in these APCs than the current structure. Specifically, as 
listed in Table 19, the geometric mean cost of $8,089.78 for APC 5376, 
$11,275.15 for APC 5377, and $18,015.54 for APC 5378 reduces the 
unusually large gaps on both a dollar and percentage basis in geometric 
mean costs between each APC level.

[[Page 48843]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.034

    In summary, to lessen the large payment gaps on both a dollar and 
percentage basis between APCs 5376 and 5377, we propose to establish 
APC 5378 (Level 8 Urology and Related Services) with status indicator 
``J1'' for CY 2021. The proposed CY 2021 payment rates for all the 
urology APCs, specifically APCs 5371 through 5378, can be found in 
Addendum A to this proposed rule with comment period. In addition, we 
refer readers to Addendum D1 of this proposed rule with comment period 
for the status indicator (SI) meanings for all codes reported under the 
OPPS. Both Addendum A and D1 are available via the internet on the CMS 
website.

IV. OPPS Payment for Devices

A. Proposed Pass-Through Payment for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
a. Background
    The intent of transitional device pass-through payment, as 
implemented at 42 CFR 419.66, is to facilitate access for beneficiaries 
to the advantages of new and truly innovative devices by allowing for 
adequate payment for these new devices while the necessary cost data is 
collected to incorporate the costs for these devices into the procedure 
APC rate (66 FR 55861). 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 current 
device pass-through payment policy.
    We also have an established policy to package the costs of the 
devices that are no longer eligible for pass-through payments into the 
costs of the procedures with which the devices are reported in the 
claims data used to set the payment rates (67 FR 66763).
b. Expiration of Transitional Pass-Through Payments for Certain Devices
    As stated earlier, section 1833(t)(6)(B)(iii) of the Act requires 
that, under the OPPS, a category of devices be eligible for 
transitional pass-through payments for at least 2 years, but not more 
than 3 years. There currently are 7 device categories eligible for 
pass-through payment: C1823-Generator, neurostimulator (implantable), 
nonrechargeable, with transvenous sensing and stimulation leads); 
C1824-Generator, cardiac contractility modulation (implantable); C1982-
Catheter, pressure-generating, one-way valve, intermittently occlusive; 
C1839-Iris prosthesis; C1734-Orthopedic/device/drug matrix for opposing 
bone-to-bone or soft tissue-to bone (implantable); C2596-Probe, image-
guided, robotic, waterjet ablation; and C1748-Endoscope, single-use 
(that is disposable), Upper GI, imaging/illumination device 
(insertable).
    The pass-through payment status of the device category for HCPCS 
code C1823 will end on December 31, 2021; the pass-through payment 
status of the device category for HCPCS code C1748 will end on June 30, 
2022; and the pass-through payment status of the device categories for 
HCPCS codes C1824, C1982, C1839, C1734, and C2596 will end on December 
31, 2022. Table 20 shows the expiration of transitional

[[Page 48844]]

pass-through payments for these devices. All of these HCPCS codes will 
have pass-through payment status and will continue to receive pass-
through payments in CY 2021.
[GRAPHIC] [TIFF OMITTED] TP12AU20.035

2. New Device Pass-Through Applications
a. Background
    Section 1833(t)(6) of the Act provides for pass-through payments 
for devices, and section 1833(t)(6)(B) of the Act requires CMS to use 
categories in determining the eligibility of devices for pass-through 
payments. As part of implementing the statute through regulations, we 
have continued to believe that it is important for hospitals to receive 
pass-through payments for devices that offer substantial clinical 
improvement in the treatment of Medicare beneficiaries to facilitate 
access by beneficiaries to the advantages of the new technology. 
Conversely, we have noted that the need for additional payments for 
devices that offer little or no clinical improvement over previously 
existing devices is less apparent. In such cases, these devices can 
still be used by hospitals, and hospitals will be paid for them through 
appropriate APC payment. Moreover, a goal is to target pass-through 
payments for those devices where cost considerations might be most 
likely to interfere with patient access (66 FR 55852; 67 FR 66782; and 
70 FR 68629). We note that, as discussed in section IV.A.4. of this CY 
2021 OPPS/ASC proposed rule, we created an alternative pathway in the 
CY 2020 OPPS/ASC final rule that granted 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 readers to section 
IV.A.4. of this CY 2021 OPPS/ASC proposed rule for a complete 
discussion of this pathway.
    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 
marketing authorization (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 marketing 
authorization, if required, unless there is a documented, verifiable 
delay in U.S. market availability after FDA marketing authorization 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

[[Page 48845]]

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 cost 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).
    In the CY 2020 annual rulemaking process, we finalized an 
alternative pathway for devices that receive Food and Drug 
Administration (FDA) marketing authorization and are granted a 
Breakthrough Device designation (84 FR 61295). Under this alternative 
pathway, devices that are granted a FDA Breakthrough Device designation 
are not 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 do need to meet the 
other requirements for pass-through payment status in our regulation at 
Sec.  419.66. Devices that have received FDA marketing authorization, 
are part of the Breakthrough Devices Program, and meet the other 
criteria in regulation can be approved through the quarterly process 
and announced through that process (81 FR 79655). Proposals regarding 
these devices and whether pass-through payment status should continue 
to apply are included in the next applicable OPPS rulemaking cycle. 
This process promotes timely pass-through payment status for innovative 
devices, while also recognizing that such devices may not have a 
sufficient evidence base to demonstrate substantial clinical 
improvement at the time of FDA marketing authorization.
    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 2021
    We received five complete applications by the March 1, 2020 
quarterly deadline, which was the last quarterly deadline for 
applications to be received in time to be included in this CY 2021 
OPPS/ASC proposed rule. We received one of the applications in the 
second quarter of 2019, two of the applications in the fourth quarter 
of 2019, and two of the applications in the first quarter of 2020. Two 
of the applications were approved for device pass-through payment 
during the quarterly review process: CUSTOMFLEX[supreg] ARTIFICIALIRIS 
and EXALTTM Model D Single-Use Duodenoscope. 
CUSTOMFLEX[supreg] ARTIFICIALIRIS received fast-track approval under 
the alternative pathway effective January 1, 2020. EXALTTM 
Model D Single-Use Duodenoscope received fast-track approval under the 
alternative pathway effective July 1, 2020. As previously stated, all 
applications that are preliminarily approved upon quarterly review will 
automatically be included in the next applicable OPPS annual rulemaking 
cycle. Therefore, CUSTOMFLEX[supreg] ARTIFICIALIRIS and 
EXALTTM Model D Single-Use Duodenoscope are discussed below 
in section IV.2.b.1.
    Applications received for the later deadlines for the remaining 
2020 quarters (June 1, September 1, and December 1), if any, will be 
presented in the CY 2022 OPPS/ASC proposed rule. We note that the 
quarterly application process and requirements have not changed in 
light of the addition of rulemaking review. Detailed instructions on 
submission of a quarterly device pass-through payment application are 
included on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf.
    A discussion of the applications received by the March 1, 2020 
deadline is presented below.
1. Alternative Pathway Device Pass-Through Applications
    We received three device pass-through applications by the March 
2020 quarterly application deadline for devices that have received FDA 
marketing authorization and a Breakthrough Device designation from FDA, 
and therefore are eligible to apply under the alternative pathway. As 
stated

[[Page 48846]]

above in section IV.2.a, under this alternative pathway, devices that 
are granted a FDA Breakthrough Device designation are not evaluated in 
terms of the current substantial clinical improvement criterion at 
Sec.  419.66(c)(2)(i) for purposes of determining device pass-through 
payment status, but will need to meet the other requirements for pass-
through payment status in our regulation at Sec.  419.66.
(1) CUSTOMFLEX[supreg] ARTIFICIALIRIS
    VEO Ophthalmics submitted an application for a new device category 
for transitional pass-through payment status for the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS by the June 2019 quarterly deadline. The 
CUSTOMFLEX[supreg] ARTIFICIALIRIS device is described as a foldable 
iris prosthesis that is custom-made for each individual patient who 
requires one. The applicant states that the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS comes in two models--With Fiber or Fiber Free. The two 
models are identical in every respect except that the With Fiber model 
has a polyester meshwork layer embedded in it to provide adequate tear 
strength to withstand suturing.
    The applicant provides that the CUSTOMFLEX[supreg] ARTIFICIALIRIS 
is intended to serve as an artificial iris prosthesis, inserted at the 
time of cataract surgery or during a subsequent stand-alone procedure. 
The CustomFlexTM Artificial Iris is indicated for use in children and 
adults for the treatment of full or partial aniridia resulting from 
congenital aniridia, acquired defects, or other conditions associated 
with full or partial aniridia. The conditions that the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS treats are rare; congenital aniridia 
is present in approximately 1.8 in 100,000 live births (1 in 40,000 to 
1 in 100,000),4-2 congenital IridoCorneal Endothelial 
Syndrome (ICE) syndrome is even less common (incidence not available). 
Iris defects such as iatrogenic iridodialysis as a complication of 
cataract surgery has variable prevalence, ranging from 0-0.84 percent 
of surgeries,3 4 5 6 7 8 and may occur in approximately 0.2 
percent of blunt orbital trauma.\9\ Although rare, these conditions are 
cosmetically and functionally limiting. The applicant provides that in 
addition to a noticeably absent or irregular iris/pupil, affected 
patients frequently experience photophobia (light sensitivity) and 
glare as well as symptoms such as dry eye.10 11
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    \4\ Berlin HS, Ritch R. The treatment of glaucoma secondary to 
aniridia. Mt Sinai J Med. 1981;48:11;
    \2\ Nelson LB, Spaeth GL, Nowinski TS, et al. Aniridia. A 
review. Surv Ophthalmol. 1984; 28:621-642.
    \3\ Greenberg PB, Tseng VL, Wu WC, et al. Prevalence and 
predictors of ocular complications associated with cataract surgery 
in United States veterans. Ophthalmology. 2011 Mar;118(3):507-14.
    \4\ Jaycock P, Johnston RL, Taylor H, et al., UK EPR User Group. 
The Cataract National Dataset electronic multi-centre audit of 
55,567 operations: Updating benchmark standards of care in the 
United Kingdom and internationally. Eye (Lond). 2009;23:38-49.
    \5\ Lum F, Schein O, Schachat AP, et al. Initial two years of 
experience with the AAO National Eyecare Outcomes Network (NEON) 
cataract surgery database. Ophthalmology. 2000;107:691-697.
    \6\ Steinberg EP, Tielsch JM, Schein OD, et al. National study 
of cataract surgery outcomes: Variation in 4-month postoperative 
outcomes as reflected in multiple outcomes measures Ophthalmology. 
1994;101:1131-1140.
    \7\ Schein OD, Steinberg EP, Javitt JC, et al. Variation in 
cataract surgery practice and clinical outcomes. Ophthalmology. 
1994;101:1142-1152.
    \8\ Powe NR, Schein OD, Gieser SC, et al. Cataract Patient 
Outcome Research Team Synthesis of the literature on visual acuity 
and complications following cataract extraction with intraocular 
lens implantation. Arch Ophthalmol, 1994;112:239-252.
    \9\ Kreidl KO, Kim DY, Mansour SE. Prevalence of significant 
intraocular sequelae in blunt orbital trauma. Am J Emerg Med. 2003 
Nov;21(7):525-8.
    \10\ Weissbart SB, Ayres BD. Management of aniridia and iris 
defects: an update on iris prosthesis options. Curr Opin Ophthalmol. 
2016 May;27(3):244-9.
    \11\ Lee HJ, Colby KA. A review of the clinical and genetic 
aspects of aniridia. Semin Ophthalmol. 2013 Sep-Nov;28(5-6):306-12.
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    According to the applicant, currently available treatments for 
symptomatic glare, photophobia, and cosmesis are limited, and an FDA-
approved, commercially available iris prosthesis fills a needed gap. 
Alternatives include tinted spectacles or contact lenses, iris 
reconstruction (for example, pupilloplasty or iridodialysis repair), 
and corneal tattooing.\10\ Among these, tinted spectacles can provide 
some symptomatic relief, but the applicant states that they do not 
address the underlying problem and cannot be used in all settings. Iris 
reconstruction requires that sufficient iris tissue be present. Tinted 
contact lenses and corneal tattooing are cosmetically not ideal and 
have an associated risk of corneal infection (corneal ulcer and 
infectious keratitis). According to the applicant, in addition, corneal 
tattooing has risk of surface toxicity, anterior segment inflammation, 
and/or corneal epithelial defect. The only other artificial iris 
devices in the U.S. were previously available under FDA compassionate 
use exemption (Morcher 50F, 96F; Ophtec 311 aniridia lens).\10\ 
However, these devices are no longer available following FDA approval 
of the CUSTOMFLEX[supreg] ARTIFICIALIRIS.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA granted the CUSTOMFLEX[supreg] ARTIFICIALIRIS premarket approval 
(PMA) (P170039) on May 30, 2018 for use in the treatment of full or 
partial aniridia resulting from congenital or acquired defects and was 
designated a Breakthrough Device by FDA on December 21, 2017. The 
applicant provided that there was a roughly 3-month market delay after 
receipt of PMA approval while final labeling in its printed form was 
submitted to FDA and FDA completed its review and approval process. The 
applicant notes that commercial availability of the device commenced on 
September 12, 2018 after it received FDA approval for the final 
labeling. We received the application for a new device category for 
transitional pass-through payment status for the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS on May 31, 2019, which is within 3 years of the date of 
the initial FDA marketing authorization. We are inviting public comment 
on whether the CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the newness 
criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
the applicant states that the device is implanted via injection through 
a 2.75-4 mm clear corneal incision. Depending on the site of 
implantation (capsular bag, ciliary sulcus, sutured to sclera), the 
device is cut (trephined) to the correct diameter. The device can also 
be sutured to an intraocular lens if an intraocular lens is also 
implanted at the time of surgery. The applicant further provides that 
the CUSTOMFLEX[supreg] ARTIFICIALIRIS is integral to the service 
provided, is used for one patient only, comes in contact with human 
tissue, and is surgically implanted. The applicant also claimed that 
the CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the device eligibility 
requirements of Sec.  419.66(b)(4) because it is not an instrument, 
apparatus, implement, or item for which depreciation and financing 
expenses are recovered, and it is not a supply or material furnished 
incident to a service. We are inviting public comment on whether the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS 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. Upon review, 
it does not appear that there are any other existing pass-through 
payment categories that might

[[Page 48847]]

apply to the CUSTOMFLEX[supreg] ARTIFICIALIRIS and 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 either of the following: (i) 
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; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device has received FDA marketing authorization and is part of the 
FDA's Breakthrough Devices Program. As stated in section IV.2.a above, 
devices that apply under the alternative pathway for devices with a FDA 
marketing authorization and that have a Breakthrough Device designation 
are not subject to evaluation for substantial clinical improvement (84 
FR 61295). The CUSTOMFLEX[supreg] ARTIFICIALIRIS received FDA marketing 
authorization and a Breakthrough Devices designation from FDA on 
December 21, 2017.
    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 
CUSTOMFLEX[supreg] ARTIFICIALIRIS would be reported with CPT code 
66999--Unlisted procedure, anterior segment of eye, which was assigned 
to APC 5491 (Level 1 Intraocular Procedures) for Calendar Year (CY) 
2020. 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 5491, which had a CY 
2019 payment rate of $1,917. 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 66999 had a device offset amount of 
$149.80 at the time the application was received. According to the 
applicant, the cost of the CUSTOMFLEX[supreg] ARTIFICIALIRIS is $7,700, 
for both the Fiber Free and with Fiber models.
    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 $7,700 for the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS is 402 percent of the applicable APC payment amount for 
the service related to the category of devices of $1,917 (($7,700/
$1,917) x 100 = 402 percent). Therefore, we believe the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS 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 $7,700 for the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS is 5,140 percent of the cost of the 
device-related portion of the APC payment amount for the related 
service of $150 (($7,700/$150) x 100 = 5,140 percent).
    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 $7,700 for the CUSTOMFLEX[supreg] ARTIFICIALIRIS and 
the portion of the APC payment amount for the device of $1,917 is 394 
percent of the APC payment amount for the related service of $150 
(($7,700-$150)/$1,917) x 100 = 394 percent). Therefore, we believe that 
the CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the third cost significance 
requirement.
    We are inviting public comment on whether the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the device pass-through payment criteria discussed 
in this section, including the cost criterion.
    As stated above, we received the application for the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS application by the June 1, 2019 
quarterly deadline and preliminarily approved for transitional pass-
through payment under the alternative pathway for CY 2020, effective 
January 1, 2020. We are inviting public comment on whether the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS should continue to receive 
transitional pass-through payment under the alternative pathway for 
devices that are FDA market authorized and that have a FDA Breakthrough 
Device designation.
(2) EXALTTM Model D Single-Use Duodenoscope
    Boston Scientific Corporation submitted an application before the 
March 2020 quarterly deadline for a new device category for 
transitional pass-through payment status for the EXALTTM 
Model D Single-Use Duodenoscope. The EXALTTM Model D Single-
Use Duodenoscope is described as a sterile, single-use, flexible 
duodenoscope used to examine the duodenum and perform endoscopic 
retrograde cholangiopancreatography (ERCP) procedures by facilitating 
access to the pancreaticobiliary system. The applicant stated that it 
has designed the technology of the EXALTTM Model D Single-
Use Duodenoscope to eliminate the risk of nosocomial infections due to 
improper reprocessing of a reusable duodenoscope. As stated above, the 
EXALTTM Model D Single-Use Duodenoscope is used during ERCP 
procedures that are performed to examine bile and pancreatic ducts. 
According to the applicant, the EXALTTM Model D Single-Use 
Duodenoscope enables passage and manipulation of accessory devices in 
the pancreaticobiliary system for diagnostic and therapeutic purposes, 
as necessary. During the ERCP procedure, the physician inserts the 
duodenscope through the patient's mouth, down the esophagus, into the 
stomach, and then into the first part of the small intestine 
(duodenum). The applicant stated that during ERCP a cannula is passed 
through the duodenoscope via a working channel and used to cannulate a 
small opening on the duodenal wall. Once that step is complete, the 
physician injects contrast while x-rays are taken to study the bile 
and/or pancreatic ducts. If the physician identifies an area that 
warrants further investigation, accessory devices can be inserted 
through the working channel of the scope and into the 
pancreaticobiliary system for diagnosis or treatment. According to the 
applicant, after the conclusion of the procedure, the single-use 
EXALTTM Model D Single-Use Duodenoscope device has no 
further medical use and is fully disposable.
    With respect to the newness criterion at Sec.  419.66(b)(1), FDA 
granted 510(k) premarket clearance (K193202) as of December 13, 2019. 
Prior to 510(k) clearance, the applicant received Breakthrough Device 
designation from FDA on November 19, 2019. We received the application 
for a new device category for transitional pass-

[[Page 48848]]

through payment status for the EXALTTM Model D Single-Use 
Duodenoscope on January 17, 2020, which is within 3 years of the date 
of the initial FDA marketing authorization. We are inviting public 
comment on whether the EXALTTM Model D Single-Use 
Duodenoscope meets the newness criterion.
    With regard to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the EXALTTM Model D Single-Use 
Duodenoscope is integral to the ERCP service provided, is used for one 
patient only, and is surgically inserted as it is inserted through the 
patient's mouth, down the esophagus, into the stomach, and then into 
the first part of the small intestine. The applicant also stated that 
the EXALTTM Model D Single-Use Duodenoscope meets the device 
eligibility requirements of Sec.  419.66(b)(4) because it is not an 
instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered, and it is not a supply or material 
furnished incident to a service.
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. With respect 
to the existence of a previous pass-through device category that 
describes EXALTTM Model D Single-Use Duodenoscope, the 
applicant suggested a category descriptor of ``Duodenoscope, single-
use.'' The applicant also provided an existing device category ``C1749, 
Endoscope, retrograde imaging/illumination colonoscope device 
(implantable),'' for pass-through payment for another endoscope and 
explained why they believe the category descriptor is not applicable to 
EXALTTM Model D Single-Use Duodenoscope. The applicant 
stated that HCPCS C1749 does not appropriately describe the EXALT Model 
D, as C1749 is intended to describe endoscopic imaging devices that are 
inserted through a colonoscope and into the colon. The applicant argues 
that EXALT Model D is the first and only single-use duodenoscope 
through which devices can be passed, and it is utilized in ERCP 
procedures. The applicant further states that the scope that is the 
subject of this request provides access to a different part of the 
anatomy, specifically, the pancreaticobiliary system and facilitates 
access for diagnostic and therapeutic purposes, as opposed to the 
devices described by C1749, which are endoscopic imaging devices that 
are inserted through a colonscope and into the colon, providing access 
to a different part of the anatomy. Upon review, we agree with the 
applicant that it does not appear that there are any other existing 
pass-through payment categories that might apply and we are inviting 
public comment on this issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
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; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device has received FDA marketing authorization and is part of the 
FDA's Breakthrough Devices Program. As previously discussed in section 
2.a above, we finalized the alternative pathway for devices that 
receive FDA marketing authorization and are granted a Breakthrough 
Device designation in the CY 2020 OPPS/ASC final rule (84 FR 61295). 
The EXALTTM Model D Single-Use Duodenoscope has marketing 
authorization and a Breakthrough Device designation from the FDA and 
therefore is not evaluated based on substantial clinical improvement.
    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 
EXALTTM Model D Single-Use Duodenoscope would be reported 
with CPT code 43274 which is associated with APC 5331 (Complex GI 
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. We used APC 5331 for our calculations, which had a CY 
2020 payment rate of $4,780.30 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 43274 had a device offset amount of $1,287.81 at the time the 
application was received. According to the applicant, the cost of the 
EXALTTM Model D Single-Use Duodenoscope is $2,930.
    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 $2,930 for the EXALTTM Model D 
Single-Use Duodenoscope is 61 percent of the applicable APC payment 
amount for the service related to the category of devices of $4,780.30 
($2,930/$4,780.30 x 100 = 61.3 percent). Therefore, we believe the 
EXALTTM Model D Single-Use Duodenoscope 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 $2,930 for the 
EXALTTM Model D Single-Use Duodenoscope is 228 percent of 
the cost of the device-related portion of the APC payment amount for 
the related service of $1,287.81 ($2,930/$1,287.81) x 100 = 227.5 
percent. Therefore, we believe that the EXALTTM Model D 
Single-Use Duodenoscope 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 $2,930 for the EXALTTM Model D Single-Use 
Duodenoscope and the portion of the APC payment amount for the device 
of $1,287.81 is 34 percent of the APC payment amount for the related 
service of $4,780.30 (($2,930-$1,287.81)/$4,780.30) x 100 = 34.4 
percent). Therefore, we believe that the EXALTTM Model D 
Single-Use Duodenoscope meets the third cost significance requirement. 
We are inviting public comment on whether the EXALTTM Model 
D Single-Use Duodenoscope meets the device pass-

[[Page 48849]]

through payment criteria discussed in this section, including the cost 
criterion.
    As specified above, the EXALTTM Model D Single-Use 
Duodenoscope application was preliminarily approved for transitional 
pass-through payment under the alternative pathway effective July 1, 
2020. We are inviting public comment on whether the EXALTTM 
Model D Single-Use Duodenoscope should continue to receive transitional 
pass-through payment under the alternative pathway for devices that are 
FDA market authorized and that have a FDA Breakthrough Device 
designation.
(3) BAROSTIM NEOTM System
    CVRx, Inc. submitted an application for the BAROSTIM 
NEOTM System by the December 2019 quarterly deadline. The 
applicant provides that the BAROSTIM NEOTM is indicated for 
the treatment of symptoms of patients with advanced heart failure. The 
applicant asserts that the BAROSTIM therapy triggers the body's main 
cardiovascular reflex to regulate blood pressure and address the 
underlying causes of the progression of heart failure. According to the 
applicant, increased sympathetic and decreased parasympathetic activity 
contribute to heart failure (HF) symptoms and disease progression. 
Barostim's mechanism of action is stimulating the carotid baroreceptor 
which results in centrally mediated reduction of sympathetic and 
increase in parasympathetic activity. A single 2mm coated electrode 
with a 7mm silicone backer is sutured to the carotid artery to activate 
the baroreceptors. It is connected to an implantable pulse generator in 
the chest which provides control of baroreflex activation energy. The 
BAROSTIM NEOTM System uses CVRx patented BAROSTIM 
THERAPYTM technology to trigger the body's own natural 
systems (baroreflex) by electrically activating the carotid 
baroreceptors, the body's natural cardiovascular regulation sensors.
    According to the applicant, in conditions such as hypertension and 
heart failure, it is believed the baroreceptors, the body's natural 
sensors, are not functioning properly and are not sending sufficient 
signals to the brain. This results in the brain sending signals to 
other parts of the body (heart, blood vessels, kidneys) to constrict 
the blood vessels, retain water and salt by the kidneys and increase 
stress-related hormones. The applicant provides that when the 
baroreceptors are activated by the BAROSTIM NEOTM system, 
signals are sent through neural pathways to the brain. In response, the 
brain works to counteract this stimulation by sending signals to other 
parts of the body (heart, blood vessels, and kidneys) that relax the 
blood vessels and inhibit the production of stress-related hormones. 
These changes act to reduce cardiac after-load and enable the heart to 
increase blood output, while maintaining or reducing its workload. 
Parameters are programmed into the Implantable Pulse Generator (IPG) 
using telemetry via a wireless external programming system. The 
applicant states that the BAROSTIM NEOTM System is fully 
programmable to adjust the therapy to each patient's need.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA granted the BAROSTIM NEOTM System a premarket approval 
(P180050) and a Breakthrough Device designation on August 16, 2019 for 
the improvement of symptoms of heart failure--quality of life, six-
minute hall walk, and functional status--for patients who remain 
symptomatic despite treatment with guideline-directed medical therapy, 
are New York Heart Association (NYHA) Class III or Class II (who had a 
recent history of Class III), have a left ventricular ejection fraction 
<= 35 percent, a NT-proBNP < 1600 pg/ml and excluding patients 
indicated for Cardiac Resynchronization Therapy (CRT) according to AHA/
ACC/ESC guidelines. We received the application for a new device 
category for transitional pass-through payment status for the BAROSTIM 
NEOTM on November 27, 2019, which is within 3 years of the 
date of the initial FDA marketing authorization. We are inviting public 
comment on whether the BAROSTIM NEOTM meets the newness 
criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the use of BAROSTIM NEOTM is 
integral to the service of providing baroflex therapyTM, is 
used for one patient only, comes in contact with human skin and is 
surgically implanted or inserted. The applicant also claimed the 
BAROSTIM NEOTM meets the device eligibility requirements of 
Sec.  419.66(b)(4) because it is not an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, and it is not a supply or material furnished incident to a 
service. We are inviting public comments on whether the BAROSTIM 
NEOTM 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 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 
BAROSTIM NEOTM, the applicant suggested a category 
descriptor of ``Generator, neurostimulator (implantable), non-
rechargeable with carotid sinus stimulation lead.'' The applicant also 
provided a list of current and expired device categories for pass-
through payment for other neurostimulation systems and their rationale 
for why they believe the category descriptors are not applicable to 
BAROSTIM NEOTM.
    The applicant stated that BAROSTIM NEOTM is not 
described by existing device category C1767, Generator, neurostimulator 
(implantable), non-rechargeable. The applicant stated that similar to 
the traditional spinal cord stimulation (SCS) systems included in this 
category, the BAROSTIM NEOTM System is not rechargeable; 
however, it is the only system that works to deliver CVRx's proprietary 
baroreflex activation therapy (BAT). The applicant provided that BAT 
uses afferent signaling to the brain by stimulating the carotid artery 
to reduce the sympathetic signal and increase the parasympathetic 
signal. The applicant stated that this unique therapy works to 
rebalance the autonomic input to the heart to improve heart failure 
symptoms.
    Additionally, the applicant stated that traditional devices provide 
pain relief by disrupting the pain signals traveling between the spinal 
cord's nervous system and the brain, but the BAROSTIM NEO System uses 
the generator to stimulate the baroreceptors in the carotid artery to 
treat the symptoms of patients with advanced heart failure. The 
applicant stated that the BAROSTIM NEO generator is unique in its 
capability to drive electricity up to 20 mA/100 Hz with sufficient 
battery capacity to provide the required therapy through the BAROSTIM 
NEOTM carotid sinus lead. The applicant described that the 
BAROSTIM NEOTM carotid sinus lead is sutured to the carotid 
wall, where the baroreceptors (stretch fibers) are located. Electrical 
current radiating from the carotid sinus lead activates the 
baroreceptors. When activated, the baroreceptors send efferent signals 
through the Carotid Sinus Nerve to the brain. The brain interprets 
these afferent signals and reacts by reducing the sympathetic tone and 
increasing the parasympathetic tone. The applicant states that the 
BAROSTIM NEOTM System is the only device currently approved 
by FDA that leverages this mechanism of action to treat the

[[Page 48850]]

symptoms of patients with advanced heart failure.
    The applicant stated that BAROSTIM NEOTM is not 
described by existing device category C1823, Generator, neurostimulator 
(implantable), non-rechargeable, with transvenous sensing and 
stimulation leads. The applicant states that existing device category 
C1823 is exclusively used to describe a complete system comprised of a 
generator implanted in the chest, a stimulation lead attached to the 
phrenic nerve and a sensing lead to control the function of the 
diaphragm for the treatment of moderate to severe central sleep apnea. 
The applicant states that the BAROSTIM NEOTM System utilizes 
a single stimulation lead positioned on the carotid artery to stimulate 
baroreceptors. The stimulation of the baroreceptors creates afferent 
nerve traffic through the Carotid Sinus Nerve, and results in the 
activation of the baroreflex. The applicant again states that the 
BAROSTIM NEOTM System is the only device currently approved 
by FDA that leverages this mechanism of action to improve quality of 
life and functional status in heart failure.
    The applicant also provided that BAROSTIM NEOTM is not 
described by existing device category C1778, Lead, neurostimulator 
(implantable). The applicant stated that leads used in traditional 
neurostimulation are implanted on nerves (for example, spinal cord, 
peripheral nerves). The applicant stated that in contrast, the BAROSTIM 
NEO carotid sinus lead is sutured onto the carotid artery and is the 
only lead that is designed to be secured on an arterial wall to 
stimulate sensors located inside the arterial wall (baroreceptors). The 
applicant provided that stimulation is delivered to the arterial wall, 
where the baroreceptors (stretch fibers) are located. The applicant 
stated that the BAROSTIM NEOTM generator is uniquely 
designed to send electric current via the BAROSTIM NEOTM 
carotid sinus lead and that the BAROSTIM NEOTM carotid sinus 
lead is uniquely designed to only interface with the BAROSTIM NEO 
generator. Again, the applicant provided that the BAROSTIM 
NEOTM System is the only device currently approved by FDA 
that leverages this mechanism of action to treat the symptoms of 
patients with advanced heart failure.
    We are concerned that the BAROSTIM NEOTM System may be 
appropriately described by existing pass-through payment categories. 
Specifically, we believe that Barostim may be appropriately described 
by C1767 as the Barostim device consists of a generator, a 
neurostimulator, and a lead. We are inviting public comment on this 
issue.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
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; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device has received FDA marketing authorization and is part of the 
FDA's Breakthrough Devices Program. As stated in section 2.a above, 
devices that apply under the alternative pathway for devices with a FDA 
marketing authorization and that have a Breakthrough Device designation 
are not subject to evaluation for substantial clinical improvement (84 
FR 61295). Barostim has FDA marketing authorization and a Breakthrough 
Device designation.
    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 BAROSTIM 
NEOTM would be reported with CPT code 0266T, which they 
consider to be a total system code. CPT code 0266T is assigned to APC 
5464 (Level 4 Neurostimulator and Related 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 5464, which has a CY 2020 payment rate of 
$29,115.50. 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 0266T had a device offset amount of $24,253 at the 
time the application was received. According to the applicant, the cost 
of the BAROSTIM NEOTM is $35,000.
    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 estimated 
average reasonable cost of $35,000 for the BAROSTIM NEOTM is 
120 percent of the applicable APC payment amount for the service 
related to the category of devices of $29,116 (($35,000/29,116) x 100 = 
120.2 percent). Therefore, we believe the BAROSTIM NEOTM 
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 $35,000 for the 
BAROSTIM NEOTM is 144 percent of the cost of the device-
related portion of the APC payment amount for the related service of 
$24,253 (($35,000/$24,253) x 100 = 144.3 percent). Therefore, we 
believe that the BAROSTIM NEOTM 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 $35,000 for BAROSTIM NEOTM and the 
portion of the APC payment amount for the device of $24,253 is 37 
percent of the APC payment amount for the related service of $29,116 
(($35,000-$24,253)/$29,116) x 100 = 36.9 percent). Therefore, we 
believe that the BAROSTIM NEOTM System meets the third cost 
significance requirement.
    We are inviting public comment on whether the BAROSTIM 
NEOTM System meets the device pass-through payment criteria 
discussed in this section, including the cost criterion.
2. Traditional Device Pass-Through Applications
(1) Hemospray[supreg] Endoscopic Hemostat
    Cook Medical submitted an application for a new device category for 
transitional pass-through payment status for the Hemospray[supreg] 
Endoscopic Hemostat (Hemospray) for CY 2021. Hemospray[supreg] 
Endoscopic Hemostat is a prescription use device consisting of a 
hemostatic agent and a delivery system. The hemostatic agent is an 
inert, bentonite powder, naturally sourced from aluminum phyllosilicate 
clay, developed for endoscopic hemostasis.

[[Page 48851]]

According to the applicant, Hemospray[supreg] is indicated by the FDA 
for hemostasis of nonvariceal gastrointestinal bleeding. Using an 
endoscope to access the gastrointestinal tract, the Hemospray delivery 
system is passed through the accessory channel of the endoscope and 
positioned just above the bleeding site without making contact with the 
GI tract wall. The Hemospray[supreg] powder is propelled through the 
application catheter, either a 7 or 10 French polyethylene catheter, by 
release of CO2 from the cartridge located in the device 
handle and sprayed onto the bleeding site. Bentonite can absorb five to 
ten times its weight in water and swell up to 15 times its dry volume. 
Bentonite rapidly absorbs water and becomes cohesive to itself and 
adhesive to tissue, forming a physical barrier to aqueous fluid (for 
example, blood). Hemospray[supreg] is not absorbed by the body and does 
not require removal as it passes through the GI tract within 72 hours. 
Hemospray[supreg] is single-use and disposable.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA granted a de novo request classifying the Hemospray[supreg] 
Endoscopic Hemostat (Hemospray[supreg]) as a Class II device under 
section 513(f)(2) of the Federal Food, Drug, and Cosmetic Act on May 7, 
2018. We received the application for a new device category for 
transitional pass-through payment status for the Hemospray[supreg] 
Endoscopic Hemostat on December 2, 2019, which is within 3 years of the 
date of the initial FDA marketing authorization. We are inviting public 
comments on whether Hemospray[supreg] meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, Hemospray[supreg] 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 Hemospray[supreg] meets the device 
eligibility requirements of Sec.  419.66(b)(4) because it is not an 
instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered, and it is not a supply or material 
furnished incident to a service. We are inviting public comments on 
whether Hemospray[supreg] meets the eligibility criteria at Sec.  
[thinsp]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 
yet identified an existing pass-through payment category that describes 
Hemospray[supreg]. We are inviting public comment on whether 
Hemospray[supreg] meets the device category criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
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; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device has received FDA marketing authorization and is part of the 
FDA's Breakthrough Devices Program. The applicant stated that 
Hemospray[supreg] represents a substantial clinical improvement over 
existing technologies. With respect to this criterion, the applicant 
submitted studies that examined the impact of Hemospray[supreg] on 
endoscopic hemostasis outcomes, rebleeding occurrence, and mortality.
    According to the applicant, Hemospray[supreg] is a topically 
applied mineral powder that offers a novel primary treatment option for 
endoscopic bleeding management, serves as an option for patients who 
fail conventional endoscopic treatments, and serves as an alternative 
to interventional radiology hemostasis (IRH) and surgery. Broadly, the 
applicant outlined two treatment areas in which it stated 
Hemospray[supreg] would provide a substantial clinical improvement: (1) 
As a primary treatment or a rescue treatment after the failure of a 
conventional method, and (2) in use for the treatment of malignant 
lesions. The applicant provided seven articles specifically for the 
purpose of addressing the substantial clinical improvement criterion.
    The first article provided by the applicant was a prospective 
single armed multicenter phase two safety and efficacy study performed 
in France.\15\ From March 2013 to January 2015, 64 endoscopists in 20 
centers enrolled 202 patients in the study in which Hemospray[supreg] 
was used as either a first line treatment (46.5 percent) or salvage 
therapy (53.5 percent) following unsuccessful treatment with another 
method. The indication for Hemospray[supreg] as a first-line therapy or 
salvage therapy was at the discretion of the endoscopist. Of the 202 
patients, the mean age was 68.9, 69.3 percent were male, and all 
patients were classified into four primary etiologic groups: Ulcers 
(37.1 percent), malignant lesions (30.2 percent), post-endoscopic 
bleeding (17.3 percent), and other (15.3 percent). Patients were 
further classified by the American Society of Anesthesiologist (ASA) 
physical status scores with 4.5 percent as a normal healthy patient, 
24.3 percent as a patient with mild systemic disease, 46 percent as a 
patient with severe systemic disease, 22.8 percent as a patient with 
severe systemic disease that is a constant threat to life, and 2.5 
percent as a moribund patient who is not expected to survive without an 
operation.6 7 Immediate hemostasis was achieved in 96.5 
percent across all patients; among treatment subtypes immediate 
hemostasis was achieved in 96.8 percent of first-line treated patients 
and 96.3 percent of salvage therapy patients. At day 30 the overall 
rebleeding was 33.5 percent of 185 patients with cumulative incidences 
of 41.4 percent for ulcers, 37.7 percent for malignant lesions, 17.6 
percent for post-endoscopic bleedings, and 25 percent for others. When 
Hemospray[supreg] was used as a first-line treatment, rebleeding at day 
30 occurred in 26.5 percent (22/83) of overall lesions, 30.8 percent of 
ulcers, 33.3 percent of malignant lesions, 13.6 percent of post-
endoscopic bleedings, and 22.2 percent of other. When Hemospray[supreg] 
was used as a salvage therapy, rebleeding at day 30 occurred in 39.2 
percent (40/102) of overall lesions, 43.9 percent of ulcers, 50.0 
percent of malignant lesions, 25.0 percent of post-endoscopic 
bleedings, and 26.3 percent for others. According to the article, the 
favorable hemostatic results seen from Hemospray[supreg] are due to its 
threefold mechanism of action: formation of a mechanical barrier; 
concentration of clotting factors at the bleeding site; and enhancement 
of clot formation.\8\ No severe adverse events

[[Page 48852]]

were noted, however the authors note the potential for pain exists due 
to the use of carbon dioxide. Lastly, the authors stated that while 
Hemospray[supreg] was found to reduce the need for radiological 
embolization and surgery as salvage therapies, it was not found to be 
better than other hemostatic methods in terms of preventing rebleeding 
of ulcers.
---------------------------------------------------------------------------

    \5\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: a multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
    \6\ Ibid.
    \7\ ASA House of Delegates/Executive Committee. (2014, October 
15). ASA Physical Status Classification System. Retrieved from 
American Society of Anesthesiologists: https://www.asahq.org/standards-and-guidelines/asa-physical-status-classification-system
    \8\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: a multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    The applicant provided a second article consisting of an abstract 
from another systematic review article.\9\ The abstract purports to 
cover a review of prospective, retrospective, and randomized control 
trials evaluating Hemospray[supreg] as a rescue therapy. Eighty-five 
articles were initially identified and 23 were selected for review. Of 
those, 5 studies were selected which met the inclusion criteria of the 
analysis. The median age of patients was 69; 68 percent were male. The 
abstract concludes that when used as a rescue therapy after the failure 
of conventional endoscopic modalities, in nonvariceal gastrointestinal 
bleeding, Hemospray[supreg] seems to have significantly higher rates of 
immediate hemostasis.
---------------------------------------------------------------------------

    \9\ Moole, V., Chatterjee, T., Saca, D., Uppu, A., Poosala, A., 
& Duvvuri, A. A Systematic review and meta-analysis: analyzing the 
efficacy of hemostatic nanopowder (TC-325) as rescue therapy in 
patients with nonvariceal upper gastrointestinal bleeding. 
Gastroenterology 2019; 156(6), S-741.
---------------------------------------------------------------------------

    A third article provided by the applicant described a single-arm 
retrospective analytical study of 261 enrolled patients conducted at 21 
hospitals in Spain.\10\ The mean age was 67 years old, 69 percent of 
patients were male, and the overall technical success, defined as 
correct assembled and delivery of Hemospray[supreg] to a bleeding 
lesion, was 97.7 percent (95.1 percent-99.2 percent). The most common 
causes of bleeding in patients were peptic ulcer (28 percent), 
malignancy (18.4 percent), therapeutic endoscopy-related (17.6 
percent), and surgical anastomosis (8.8 percent). Overall, 93.5 percent 
(89.5 percent to 96 percent) of procedures achieved hemostasis. 
Recurrent bleeding, defined as (1) a new episode of bleeding symptoms, 
(2) a decrease in hemoglobin of >2 g/dL within 48 hours of an index 
endoscopy or >3g/dL in 24 hours, or (3) direct visualization of active 
bleeding at the previously treated lesion on repeat endoscopy, had a 
cumulative incidence at 3 and 30 days of 16.1 percent (11.9 percent-21 
percent) and 22.9 percent (17.8 percent-28.3 percent) respectively. The 
overall risk of Hemospray[supreg] failure at 3 and 30 days was 21.1 
percent (16.4 percent-26.2 percent) and 27.4 percent (22.1 percent-32.9 
percent) respectively with no statistically significant differences (p 
= 0.07) between causes at 30 days (for example, peptic ulcer, 
malignancy, anastomosis, therapeutic endoscopy-related, and other 
causes). With the use of multivariate analysis spurting bleeding vs. 
nonspurting bleeding (subdistribution hazard ratio [sHR] 1.97 (1.24-
3.13)), hypotension vs. normotensive (sHR 2.14 (1.22-3.75)), and the 
use of vasoactive drugs (sHR 1.80 (1.10-2.95)) were independently 
associated with Hemospray[supreg] failure. The overall 30-day survival 
was 81.9 percent (76.5 percent-86.1 percent) with 46 patients dying 
during follow-up and 22 experiencing bleeding related deaths; twenty 
patients (7.6 percent) with intraprocedural hemostasis died before day 
30. The authors indicated the majority of Hemospray[supreg] failures 
occurred within the first 3 days and the rate of immediate hemostasis 
was similar to literature reports of intraprocedural success rates of 
over 90 percent. The authors stated that the hemostatic powder of 
Hemospray[supreg] is eliminated from the GI tract as early as 24 hours 
after use, which could explain the wide ranging recurrent bleeding 
percentage. The authors reported that importantly, adverse events are 
rare, but cases of abdominal distension, visceral perforation, 
transient biliary obstruction, and splenic infarct have been reported; 
one patient involved in this study experienced an esophageal 
perforation without a definitive causal relationship.
---------------------------------------------------------------------------

    \10\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et. al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: Survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

    A fourth article provided by the applicant described a single-arm 
multicenter prospective registry involving 314 patients in Europe which 
collected data on days 0, 1, 3, 7, 14, and 30 after endotherapy with 
Hemospray[supreg].\11\ The outcomes of interest in this study were 
immediate endoscopic hemostasis (observed cessation of bleeding within 
5 minutes post Hemospray[supreg] application) with secondary outcomes 
of rebleeding immediately following treatment and during follow-up, 7 
and 30 day all-cause mortality, and adverse events. The sample was 74 
percent male with a median age of 71 with the most common pathologies 
of peptic ulcer (53 percent), malignancy (16 percent), post-endoscopic 
bleeding (16 percent), bleeding from severe inflammation (11 percent), 
esophageal variceal bleeding (2.5 percent), and cases with no obvious 
cause (1.6 percent). The median baseline Blatchford score (BS) and RS 
were 11 and 7 respectively. The BS ranges from 0 to 23 with higher 
scores indicating increasing risk for required endoscopic intervention 
and is based upon the blood urea nitrogen, hemoglobin, systolic blood 
pressure, pulse, presence of melena, syncope, hepatic disease, and/or 
cardiac failure.\12\ The RS ranges from 0 to 11 with higher scores 
indicating worse potential outcomes and is based upon age, presence of 
shock, comorbidity, diagnosis, and endoscopic stigmata of recent 
hemorrhage.\13\ Immediate hemostasis was achieved in 89.5 percent of 
patients following the use of Hemospray[supreg]; only the BS was found 
to have a positive correlation with treatment failure in multivariate 
analysis (OR 1.21 (1.10-1.34)). Rebleeding occurred in 10.3 percent of 
patients who achieved immediate hemostasis again with only the BS 
having a positive correlation with rebleeding (OR: 1.13 (1.03-1.25)). 
At 30 days the all-cause mortality was 20.1 percent with 78 percent of 
these patients having achieved immediate endoscopic hemostasis and a 
cause of death resulting from the progression of other comorbidities. A 
subgroup analysis of treatment type (monotherapy, combination therapy, 
and rescue therapy groups) was performed showing no statistically 
significant difference in immediate hemostasis across groups (92.4 
percent, 88.7 percent, and 85.5 percent respectively). Higher all-cause 
mortality rates at 30 days were highest in the monotherapy group (25.4 
percent, p = 0.04) as compared to all other groups. According to the 
authors, in comparison to major recent studies they were able to show 
lower rebleeding rates overall and in all subgroups despite the high-
risk population.\14\ The authors further note limitations in that the 
inclusion of patients was nonconsecutive and at the discretion of the 
endoscopist, at the time of the endoscopy, which allows for the 
potential introduction of selection bias, which may have affected these 
study results.
---------------------------------------------------------------------------

    \11\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \12\ Saltzman, J. (2019, October). Approach to acute upper 
gastrointestinal bleeding in adults. (M. Feldman, Editor) Retrieved 
from UpToDate: https://www.uptodate.com/contents/approach-to-acute-upper-gastrointestinal-bleeding-in-adults.
    \13\ Ibid.
    \14\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.

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

[[Page 48853]]

    The fourth article also described the utility of Hemospray[supreg] 
in the treatment of malignant lesions. According to the applicant, 
malignant lesions pose a significant clinical challenge as successful 
hemostasis rates are as low as 40 percent with high recurrent bleeding 
over 50 percent within 1 month following standard 
treatments.15 16 The applicant added that bleeding from 
tumors is often diffuse and consists of friable mucosa decreasing the 
utility of traditional treatments (for example, ligation, cautery). 
From the fourth article, the applicant noted that 50 patients were 
treated for malignant bleeding with an overall immediate hemostasis in 
94 percent of patients.\17\ Of the 50 patients, 33 were treated with 
Hemospray[supreg] alone, 11 were treated with Hemospray[supreg] as the 
final treatment, and 4 were treated with Hemospray[supreg] as a rescue 
therapy of which 100 percent, 84.6 percent and 75 percent experienced 
immediate hemostasis respectively.\18\ Similarly, from the first 
discussed article, the applicant noted that among malignant bleeding 
patients, 95.1 percent achieved immediate hemostasis with lower 
rebleeding rates at 8 days when Hemospray[supreg] was used as a primary 
treatment as compared to when used as a rescue therapy (17.1 percent 
vs. 46.7 percent respectively).\19\ The applicant concluded that 
Hemospray[supreg] may provide an advantage as a primary treatment to 
patients with malignant bleeding.
---------------------------------------------------------------------------

    \15\ Kim YI, Choi IJ, Cho SJ, et al. Outcome of endoscopic 
therapy for cancer bleeding in patients with unresectable gastric 
cancer. J Gastroenterol Hepatol 2013;28:1489-95.
    \16\ Roberts SE, Button LA, Williams JG. Prognosis following 
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
    \17\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \18\ Alzoubaidi D, Hussein M, Rusu R, et al. Outcomes from an 
international multicenter registry of patients with acute 
gastrointestinal bleeding undergoing endoscopic treatment with 
Hemospray. Digestive Endoscopy 2019.
    \19\ Haddara S, Jacques J, Lecleire S et al. A novel hemostatic 
powder for upper gastrointestinal bleeding: a multicenter study (the 
GRAPHE registry). Endoscopy 2016; 48: 1084-95.
---------------------------------------------------------------------------

    The applicant provided a fifth article, which consisted of a 
journal pre-proof article detailing a 1:1 randomized control trial of 
20 patients treated with Hemospray[supreg] versus the standard of care 
(for example, thermal and injection therapies) in the treatment of 
malignant gastrointestinal bleeding.\20\ The goals of this pilot study 
were to determine the feasibility of a definitive trial. The primary 
outcome of the study was immediate hemostasis (absence of bleeding 
after 3 minutes) with secondary outcomes of recurrent bleeding at days 
1, 3, 30, 90, and 180 and adverse events at days 1, 30, and 180. The 
mean age of patients was 67.2, 75 percent were male, and on average 
patients presented with 2.9  1.7 comorbidities. All 
patients had active bleeding at endoscopy and the majority of patients 
had an ASA score of 2 (45 percent) or 3 (40 percent). Immediate 
hemostasis was achieved in 90 percent of Hemospray[supreg] patients and 
40 percent of standard of care patients (5 injection alone, 3 thermal, 
1 injection with clips, and 1 unknown). Of those patients in the 
control group, 83.3 percent crossed over to the Hemospray[supreg] 
treatment. One patient died while being treated with Hemospray[supreg] 
from exsanguination; post-mortem examination demonstrated that bleeding 
was caused by rupture of a malignant inferior mesenteric artery 
aneurysm. Overall, 86.7 percent of patients treated with 
Hemospray[supreg] initially or as crossover treatment achieved 
hemostasis. Recurrent bleeding was lower in the Hemospray[supreg] group 
(20 percent) as compared to the control group (60 percent) at 180 days. 
Forty percent of the treated group received blood transfusions as 
compared to 70 percent of the control group. The overall length of stay 
was 14.6 days among treated patients as compared to 9.4 in the control 
group. Mortality at 180 days was 80 percent in both the treated and 
control groups. The authors noted the potential for operator bias in 
the use of Hemospray[supreg] prior to switching to another method when 
persistent bleeding exists. Lastly, the authors noted that while they 
did not occur during this study, there are concerns around the risks of 
perforation, obstruction, and systemic embolization with the use of 
Hemospray[supreg].
---------------------------------------------------------------------------

    \20\ Chen Y-I, Wyse J, Lu Y, Martel M, Barkun AN, TC-325 
hemostatic powder versus current standard of care in managing 
malignant GI bleeding: a pilot randomized clinical trial. 
Gastrointestinal Endoscopy (2019), doi: https://doi.org/10.1016/j.gie.2019.08.005.
---------------------------------------------------------------------------

    A sixth article provided by the applicant was a case-controlled 
study with 10 patients with active upper gastrointestinal bleeding from 
tumor compared with 10 conventional therapy patients selected as 
historical controls, matched by type of tumor.\21\ The study evaluated 
efficacy for tumor-related bleeding and compared Hemospray[supreg] to 
conventional therapies, specifically examining 14-day rebleeding rates, 
lengths of hospital stay (LOS), and mortality rate at 30-day follow up. 
Historical controls were selected from patient medical records from 
2010 to 2014. Among the patients who received Hemospray[supreg], the 
14-day rebleeding rate (10 percent vs. 30 percent; P = 0.60). and the 
30-day mortality rates (10 percent vs. 30 percent, P = 0.7) were three 
times lower compared to the control group; neither rate was 
statistically significant. There was no difference in LOS between the 
Hemospray[supreg] and conventional therapy patients.
---------------------------------------------------------------------------

    \21\ Pittayanon, R., Prueksapanich, P., & Rerknimitr, R. (2016). 
The efficacy of Hemospray in patients with upper gastrointestinal 
bleeding from tumor. Endoscopy international open, 4(09), E933-E936.
---------------------------------------------------------------------------

    A seventh article provided by the applicant described a single-arm 
multicenter retrospective study from 2011 to 2016 involving 88 patients 
who bled as a result of either a primary GI tumor or metastases to the 
GI tract.\22\ In this study the authors define immediate hemostasis as 
no further bleeding at least one minute after treatment with 
Hemospray[supreg] and recurrent bleeding was suspected if one of seven 
criteria were met: (1) Hematemesis or bloody nasogastric tube >6 hours 
after endoscopy; (2) melena after normalization of stool color; (3) 
hematochezia after normalization of stool color or melena; (4) 
development of tachycardia or hypotension after >1 hour of vital sign 
stability without other cause; (5) decrease in hemoglobin level greater 
than or equal to 3 hours apart; (6) tachycardia or hypotension that 
does not resolve within 8 hours after index endoscopy; or (7) 
persistent decreasing hemoglobin of >3 g/dL in 24 hours associated with 
melena or hematochezia). The sample for this study consisted of 88 
patients (with a mean age of 65 years old and 70.5 percent male) of 
which 33.3 percent possessed no co-morbid illness, and 25 percent were 
on current antiplatelet/anticoagulant medication. The mean BS was 8.7 
plus or minus 3.7 with a range from 0 to 18. Overall, 72.7 percent of 
patients had a stage 4 adenocarcinoma, squamous cell carcinoma, or 
lymphoma. Immediate hemostasis was achieved in 97.7 percent of 
patients. Recurrent bleeding occurred among 13 of 86 (15 percent) and 1 
of 53 (1.9 percent) at 3 and 30 days, respectively. A total of 25 
patients (28.4 percent) died during the 30-day follow up period. 
Overall, 27.3 percent of patients re-bled within 30 days after 
treatment of which half were within 3 days. Using multivariate 
analysis, the authors found patients with good performance status, no 
end-

[[Page 48854]]

stage cancer, or receiving any combination of definitive hemostasis 
treatment modalities had significantly greater survival. The authors 
acknowledged the recurrent bleeding rate post Hemospray[supreg] 
treatment at 30 days of 38 percent is comparable with that seen in sole 
conventional hemostatic techniques and state this implies that 
Hemospray[supreg] does not differ from conventional techniques and 
remains unsatisfactory.
---------------------------------------------------------------------------

    \22\ Pittayanon R, Rerknimitr R, Barkun A. Prognostic factors 
affecting outcomes in patients with malignant GI bleeding treated 
with a novel endoscopically delivered hemostatic powder. 
Gastrointest Endosc 2018; 87:991-1002.
---------------------------------------------------------------------------

    Ultimately, the applicant concluded nonvariceal gastrointestinal 
bleeding is associated with significant morbidity and mortality in 
older patients with multiple co-morbid conditions. Inability to achieve 
hemostasis and early rebleeding are associated with increased cost and 
greater resource utilization. According to the applicant, patients with 
bleeding from malignant lesions have few options that can provide 
immediate hemostasis without further disrupting fragile mucosal tissue 
and worsening the active bleed. The applicant stated Hemospray[supreg] 
is an effective agent that provides immediate hemostasis in patients 
with GI bleeding as part of multimodality treatment, as well as when 
used to rescue patients who have failed more conventional endoscopic 
modalities. Furthermore, the applicant stated that in patients with 
malignant bleeding in the GI tract, Hemospray[supreg] provides a high 
rate of immediate hemostasis and fewer recurrent bleeding episodes, 
which, in combination with definitive cancer treatment, may lead to 
improvements in long term survival. Lastly, the applicant stated 
Hemospray[supreg] is an important new technology that permits immediate 
and long-term hemostasis in GI bleeding cases where standard of care 
treatment with clip ligation or cautery are not effective.
    We note that the majority of studies provided lack a comparator 
when assessing the effectiveness of Hemospray[supreg]. Three of the 
articles provided are systematic reviews of the literature. While we 
find these articles helpful in establishing a background for the use of 
Hemospray[supreg], we are concerned that they may not provide strong 
evidence of substantial clinical improvement. Four studies appear to be 
single-armed studies assessing the efficacy of Hemospray[supreg] in the 
patient setting. In all of these articles, comparisons are made between 
Hemospray[supreg] and standard of care treatments; however, without the 
ability to control for factors such as study design, patient 
characteristics, etc., it is difficult to determine if any differences 
seen result from Hemospray[supreg] or confounding variables. 
Furthermore, within the retrospective and prospective studies lacking a 
control subset, some level of selection bias appears to potentially be 
introduced in that providers may be allowed to select the manner and 
order in which patients are treated, thereby potentially influencing 
outcomes seen in these studies.
    Additionally, one randomized control trial provided by the 
applicant appears to be in the process of peer-review and is not yet 
published. Furthermore, this article is written as a feasibility study 
for a potentially larger randomized control trial and contains a sample 
of only 20 patients. This small sample size leaves us concerned that 
the results are not representative of the larger Medicare population. 
Lastly, as described we are concerned the control group can receive one 
of multiple treatments which lack a clear designation methodology 
beyond physician choice. For instance, 50 percent of the control 
patients received injection therapy alone, which according to the 
literature provided by the applicant is not an acceptable treatment for 
endoscopic bleeding. Accordingly, it is not clear whether performance 
seen in the treated group as compared to the control group is due to 
Hemospray[supreg] itself or due to confounding factors.
    Third, we are concerned with the samples chosen in many of the 
studies presented. Firstly, the Medicare population is approximately 54 
percent female and 46 percent male.\23\ Many of the samples provided by 
the applicant are overwhelmingly male. Secondly, many of the studies 
provided were performed in European and other settings outside of the 
United States. We are therefore concerned that the samples chosen 
within the literature provided may not represent the Medicare 
population.
---------------------------------------------------------------------------

    \23\ https://www.cms.gov/files/document/2018-mdcr-enroll-ab-5.pdf.
---------------------------------------------------------------------------

    Lastly, we are concerned about the potential for adverse events 
resulting from Hemospray[supreg]. It is unclear from the literature 
provided by the applicant what the likelihood of these events is and 
whether or not an evaluation for the safety of Hemospray[supreg] was 
performed. About one-third of the articles submitted specifically 
addressed adverse events with Hemospray[supreg]. However, the 
evaluation of adverse events was limited and most of the patients in 
the studies died of disease progression. A few of the provided articles 
mention the potential for severe adverse reactions (for example, 
abdominal distension, visceral perforation, biliary obstruction, 
splenic infarct). Specifically, one article \24\ recorded adverse 
events related to Hemospray[supreg], including abdominal distention and 
esophageal perforation.
---------------------------------------------------------------------------

    \24\ Rodriguez de Santiago E, Burgos-Santamaria D, Perez-Carazo 
L, et. al. Hemostatic spray TC-325 for GI bleeding in a nationwide 
study: survival analysis and predictors of failure via competing 
risks analysis. Gastrointest Endosc 2019; 90(4), 581-590.
---------------------------------------------------------------------------

    According to information submitted by the applicant, Cook Medical 
is voluntarily recalling Hemospray[supreg] Endoscopic Hemostat due to 
complaints received that the handle and/or activation knob on the 
device in some cases has cracked or broken when the device is activated 
and in some cases has caused the carbon dioxide cartridge to exit the 
handle. The applicant stated that Cook Medical has received 1 report of 
a superficial laceration to the user's hand that required basic first 
aid; however, there have been no reports of laceration, infection, or 
permanent impairment of a body structure to users or to patients due to 
the carbon dioxide cartridge exiting the handle. The applicant stated 
that Cook Medical has initiated an investigation and will determine the 
appropriate corrective action(s) to prevent recurrence of this issue. 
According to the applicant, although the recall does restrict 
availability of the device, they wish to continue their application as 
they believe the use of Hemospray[supreg] significantly improves 
clinical outcomes for certain patient populations compared to currently 
available treatments.
    Based upon the evidence presented, we are inviting public comments 
on whether the Hemospray[supreg] Endoscopic Hemostat 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 Hemospray[supreg] 
would be reported with HCPCS codes 43227, 43255, 44366, 44378, 44391, 
45334, and 45382. 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 5312, 
which had a CY 2020 payment rate of $1,004.10 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

[[Page 48855]]

79657). HCPCS code 45382 had a device offset amount of $33.54 at the 
time the application was received. According to the applicant, the cost 
of the Hemospray[supreg] Endoscopic Hemostat 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 Hemospray[supreg] is 249 percent 
of the applicable APC payment amount for the service related to the 
category of devices of $1004.10 (($2,500/$1,004.10) x 100 = 249 
percent). Therefore, we believe Hemospray[supreg] 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 
Hemospray[supreg] is 7,454 percent of the cost of the device-related 
portion of the APC payment amount for the related service of $33.54 
(($2,500/$33.54) x 100 = 7,453.8 percent). Therefore, we believe that 
Hemospray[supreg] 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 Hemospray[supreg] and the portion of the 
APC payment amount for the device of $33.54 is 246 percent of the APC 
payment amount for the related service of $1004.10 t ((($2,500-$33.54)/
$ 1,004.10) x 100 = 245.6 percent). Therefore, we believe that 
Hemospray[supreg] meets the third cost significance requirement.
    We are inviting public comment on whether the Hemospray[supreg] 
Endoscopic Hemostat meets the device pass-through payment criteria 
discussed in this section, including the cost criterion for device 
pass-through payment status.
(2) The SpineJack[supreg] Expansion Kit
    Stryker, Inc., submitted an application for a new device category 
for transitional pass-through payment status for the SpineJack[supreg] 
Expansion Kit (hereinafter referred to as the SpineJack[supreg] system) 
by the March 2020 quarterly deadline. The applicant described the 
SpineJack[supreg] system as an implantable fracture reduction system, 
which is indicated for use in the reduction of painful osteoporotic 
vertebral compression fractures (VCFs) and is intended to be used in 
combination with Stryker VertaPlex and VertaPlex High Viscosity (HV) 
bone cement.
    The applicant described the SpineJack[supreg] system as including 
two cylindrical implants constructed from Titanium-6-Aluminum-4-
Vanadium (Ti6Al4V) with availability in three sizes: 4.2 mm (12.5 mm 
expanded), 5.0 mm (17 mm expanded) and 5.8 mm (20 mm expanded). The 
applicant explained implant size selection is based upon the internal 
cortical diameter of the pedicle. According to the SpineJack[supreg] 
system Instructions for Use, the use of two implants is recommended to 
treat a fractured VB. According to the applicant, multiple VBs can also 
be treated in the same operative procedure as required. Additionally, 
the applicant explained that titanium alloy allows for plastic 
deformation when it encounters the hard cortical bone of the endplate 
yet still provides the lift force required to restore midline VB height 
in the fractured vertebra. The applicant stated that the 
SpineJack[supreg] system notably contains a self-locking security 
mechanism that restricts further expansion of the device when extreme 
load forces are concentrated on the implant. As a result, the applicant 
stated that this feature significantly reduces the risk of vertebral 
endplate breakage while it further allows functional recovery of the 
injured disc.\25\
---------------------------------------------------------------------------

    \25\ Vanni D et al. ``Third-generation percutaneous vertebral 
augmentation systems.'' Journal of Spine Surgery. 2016, vol 2(1), 
pp. 13-20.
---------------------------------------------------------------------------

    The applicant stated that the implants are then progressively 
expanded though actuation of an implant tube that pulls the two ends of 
the implant towards each other in situ to mechanically restore VB 
height. The applicant explained that the mechanical working system of 
the implant allows for a progressive and controlled reduction of the 
vertebral fracture.\26\ The applicant stated that when expanded, each 
SpineJack[supreg] implant exerts a lifting pressure on the fracture 
through a mechanism that may be likened to the action of a scissor car 
jack, and that the longitudinal compression on the implant causes it to 
open in a craniocaudal direction. The applicant explained that the 
implant is locked into the desired expanded position as determined and 
controlled by the treating physician.\27\
---------------------------------------------------------------------------

    \26\ Vanni D., et al., ``Third-generation percutaneous vertebral 
augmentation systems,'' J. Spine Surg., 2016, vol. 2(1) pp. 13-20.
    \27\ Noriega D. et al., ``Clinical Performance and Safety of 108 
SpineJack Implantations: 1-Year Results of a Prospective Multicentre 
Single-Arm Registry Study,'' BioMed Res. Int., 2015, vol. 173872.
---------------------------------------------------------------------------

    The applicant further explained that the expansion of the 
SpineJack[supreg] implants creates a preferential direction of flow for 
the bone cement and once the desired expansion has been obtained, 
polymethylmethacrylate (PMMA) bone cement is deployed from the center 
of the implant into the VB. The applicant stated that when two implants 
are symmetrically positioned in the VB, this allows for a more 
homogenous spread of PMMA bone cement. The applicant stated that the 
interdigitation of bone cement creates a broad supporting ring under 
the endplate, which is essential to confer stability to the VB.
    According to the applicant, osteoporosis is one of the most common 
bone diseases worldwide that disproportionately affects aging 
individuals. The applicant explained that in 2010, approximately 54 
million Americans aged 50 years or older had osteoporosis or low bone 
mass,\28\ which resulted in more than 2 million osteoporotic fragility 
fractures in that year alone.\29\ The applicant stated it has been 
estimated that more than 700,000 VCFs occur each year in the United 
States (U.S.),\30\ and of these VCFs, about 70,000 result in hospital 
admissions with an average length of stay of 8 days per patient.\31\ 
Furthermore, the applicant noted that in the first year after a painful 
vertebral fracture, patients have been found to require primary care 
services at a rate 14 times

[[Page 48856]]

greater than the general population.\32\ The applicant explained that 
medical costs attributed to VCFs in the U.S. exceeded $1 billion in 
2005 and are predicted to surpass $1.6 billion by 2025.\33\
---------------------------------------------------------------------------

    \28\ National Osteoporosis Foundation. (2019). What is 
osteoporosis and what causes it? Available from: https://www.nof.org/patients/what-is-osteoporosis/.
    \29\ King A and Fiorentino D. ``Medicare payment cuts for 
osteoporosis testing reduced use despite tests' benefit in reducing 
fractures.'' Health Affairs (Millwood), 2011, vol. 30(12), pp. 2362-
2370.
    \30\ Riggs B and Melton L. ``The worldwide problem of 
osteoporosis: Insights afforded by epidemiology.'' Bone, 1995, vol. 
17(Suppl 5), pp. 505-511.
    \31\ Siemionow K and Lieberman I. ``Vertebral augmentation in 
osteoporotic and osteolytic fractures: Current Opinion in Supportive 
and Palliative Care.'' 2009, vol. 3(3), pp. 219-225.
    \32\ Wong C and McGirt M. ``Vertebral compression fractures: A 
review of current management and multimodal therapy.'' Journal of 
Multidisciplinary Healthcare, 2013, vol 6, pp. 205-214.
    \33\ Burge R et al. ``Incidence and economic burden of 
osteoporosis-related fractures in the United States: 2005-2025.'' 
Journal of Bone and Mineral Research. 2007, vol 22(3), pp. 465-475.
---------------------------------------------------------------------------

    The applicant explained that osteoporotic VCFs occur when the 
vertebral body (VB) of the spine collapses and can result in chronic 
disabling pain, excessive kyphosis, loss of functional capability, 
decreased physical activity, and reduced quality of life. The applicant 
stated that as the spinal deformity progresses, it reduces the volume 
of the thoracic and abdominal cavities, which may lead to crowding of 
internal organs. The applicant noted that the crowding of internal 
organs may cause impaired pulmonary function, abdominal protuberance, 
early satiety and weight loss. The applicant indicated that other 
complications may include bloating, distention, constipation, bowel 
obstruction, and respiratory disturbances such as pneumonia, 
atelectasis, reduced forced vital capacity and reduced forced 
expiratory volume in 1 second.
    The applicant explained that the SpineJack[supreg] implants provide 
symmetric, broad load support for osteoporotic vertebral collapse, 
which is based upon precise placement of bilateral ``struts'' that are 
encased in PMMA bone cement, whereas BKP and vertebroplasty (VP) do not 
provide structural support via an implanted device. The applicant 
explained that the inflatable balloon tamps utilized in BKP are not 
made from titanium and are not a permanent implant. According to the 
applicant, the balloon tamps are constructed from thermoplastic 
polyurethane, which have limited load bearing capacity. The applicant 
noted that although the balloon tamps are expanded within the VB to 
create a cavity for bone cement, they do not remain in place and are 
removed before the procedure is completed. The applicant explained that 
partial lift to the VB is obtained during inflation, resulting in 
kyphotic deformity correction and partial gains in anterior VB height 
restoration, but inflatable balloon tamps are deflated prior to removal 
so some of the VB height restoration obtained is lost upon removal of 
the bone tamps. According to the applicant, BKP utilizes the placement 
of PMMA bone cement to stabilize the fracture and does not include an 
implant that remains within the VB to maintain fracture reduction and 
midline VB height restoration.
    The applicant stated that if VB collapse is >50 percent of the 
initial height, segmental instability will ensue. As a result, the 
applicant explained that adjacent levels of the VB must support the 
additional load and this increased strain on the adjacent levels may 
lead to additional VCFs. Furthermore, the applicant summarized that 
VCFs also lead to significant increases in morbidity and mortality risk 
among elderly patients, as evidenced by a 2015 study by Edidin et al., 
in which researchers investigated the morbidity and mortality of 
patients with a newly diagnosed VCF (n = 1,038,956) between 2005 to 
2009 in the U.S. Medicare population. For the osteoporotic VCF 
subgroup, the adjusted 4-year mortality was 70 percent higher in the 
conservatively managed group than in the balloon kyphoplasty procedures 
(BKP)-treated group, and 17 percent lower in the BKP group than in the 
vertebroplasty (VP) group. According to the applicant, when evaluating 
treatment options for osteoporotic VCFs, one of the main goals of 
treatment is to restore the load bearing bone fracture to its normal 
height and stabilize the mechanics of the spine by transferring the 
adjacent level pressure loads across the entire fractured vertebra and 
in this way, the intraspinal disc pressure is restored and the risk of 
adjacent level fractures (ALFs) is reduced.
    The applicant explained that treatment of osteoporotic VCFs in 
older adults most often begins with conservative care, which includes 
bed rest, back bracing, physical therapy and/or analgesic medications 
for pain control. According to the applicant, for those patients that 
do not respond to conservative treatment and continue to have 
inadequate pain relief or pain that substantially impacts quality of 
life, vertebral augmentation (VA) procedures may be indicated. The 
applicant explained that VP and BKP are two minimally invasive 
percutaneous VA procedures that are most often used in the treatment of 
osteoporotic VCFs and another VA treatment option includes the use of a 
spiral coiled implant made from polyetheretherketone (PEEK), which is 
part of the Kiva[supreg] system.
    According to the applicant, among the treatment options available, 
BKP is the most commonly performed procedure and the current gold 
standard of care for VA treatment. The applicant stated that it is 
estimated that approximately 73 percent of all vertebral augmentation 
procedures performed in the United States between 2005 and 2010 were 
BKP.\34\ According to the applicant, the utilization of the 
Kiva[supreg] system is relatively low in the U.S. and volume 
information was not available in current market research data.\35\
---------------------------------------------------------------------------

    \34\ Goz V et al. ``Vertebroplasty and kyphoplasty: National 
outcomes and trends in utilization from 2005 through 2010.'' The 
Spine Journal. 2015, vol. 15(5), pp. 959-965.
    \35\ Lin M. ``Minimally invasive vertebral compression fracture 
treatments. Medtech 360, Market Insights, Millennium Research Group. 
2019.
---------------------------------------------------------------------------

    The applicant stated that VA treatment with VP may alleviate pain, 
but it cannot restore VB height or correct spinal deformity. The 
applicant stated that BKP attempts to restore VB height, but the 
temporary correction obtained cannot be sustained over the long term. 
The applicant stated that the Kiva[supreg] implant attempts to 
mechanically restore VB height, but it has not demonstrated superiority 
to BKP for this clinical outcome.\36\
---------------------------------------------------------------------------

    \36\ Ibid.
---------------------------------------------------------------------------

    The applicant provided additional detail comparing the construction 
and mechanism of action for other VA treatments, provided below. 
According to the applicant the Kiva[supreg] system is constructed of a 
nitinol coil and PEEK-OPTIMA sheath, with sizes including a 4-loop 
implant (12 mm expanded) and a 5-loop implant (15 mm expanded) and 
unlike the SpineJack[supreg] system, is not made of titanium and does 
not include a locking scissor jack design. The applicant stated that 
the specific mechanism of action for the Kiva[supreg] system is 
different from the SpineJack[supreg] system. The applicant explained 
that during the procedure that involves implanting the Kiva[supreg] 
system, nitinol coils are inserted into the VB to form a cylindrical 
columnar cavity. The applicant stated that the PEEK-OPTIMA is then 
placed over the nitinol coil. The applicant explained that the nitinol 
coil is removed from the VB and the PEEK material is filled with PMMA 
bone cement. The applicant stated that the deployment of 5 coils 
equates to a maximum height of 15 mm. The applicant stated that the 
lifting direction of the Kiva implant is caudate and unidirectional. 
According to the applicant, in the KAST (Kiva Safety and Effectiveness 
Trial) pivotal study, it was reported that osteoporotic VCF patients 
treated with the Kiva[supreg] system had an average of 2.6 coils 
deployed.\37\

[[Page 48857]]

Additionally, in a biomechanical comparison conducted for the 
Kiva[supreg] system and BKP using a loading cycle of 200-500 Newtons in 
osteoporotic human cadaver spine segments filled with bone cement, 
there were no statistically significant differences observed between 
the two procedures for VB height restoration, stiffness at high or low 
loads, or displacement under compression.\38\
---------------------------------------------------------------------------

    \37\ Tutton S et al. KAST Study: The Kiva system as a vertebral 
augmentation treatment--a safety and effectiveness trial: A 
randomized, noninferiority trial comparing the Kiva system with 
balloon kyphoplasty in treatment of osteoporotic vertebral 
compression fractures. Spine. 2015; 40(12):865-875.
    \38\ Wilson D et al. An ex vivo biomechanical comparison of a 
novel vertebral compression fracture treatment system to 
kyphoplasty. Clinical Biomechanics. 2012; 27(4):346-353.
---------------------------------------------------------------------------

    The applicant summarized the differences and similarities of the 
SpineJack[supreg], BKP, and PEEK coiled implant as follows: (1) With 
respect to construction, SpineJack[supreg] is made of Titanium-6-
Aluminum-4-Vanadium compared to thermoplastic polyurethanes for BKP and 
nitinol and PEEK for the PEEK coiled implant; (2) with respect to 
mechanism of action, the SpineJack[supreg] uses a locking scissor jack 
encapsulated in PMMA bone cement compared to hydrodynamic cavity 
creation and PMMA cavity filler for BKP and coil cavity creation and 
PEEK implant filled with PMMA bone cement for the PEEK coiled implant; 
(3) with respect to plastic deformation, SpineJack[supreg] and BKP 
allow for plastic deformation while the PEEK coiled implant does not; 
(4) with respect to craniocaudal expansion, SpineJack[supreg] allows 
for craniocaudal expansion, whereas BKP and the PEEK coiled implant do 
not; (5) with respect to bilateral load support, SpineJack[supreg] 
provides bilateral load support whereas BKP and the PEEK coiled implant 
do not; and (6) with respect to lift pressure of >500 N, 
SpineJack[supreg] provides lift pressure of >500 N whereas BKP and the 
PEEK coiled implant do not. The applicant summarized that the 
SpineJack[supreg] system is uniquely constructed and utilizes a 
different mechanism of action than BKP, which is the gold standard of 
treatment for osteoporotic VCFs, and that the construction and 
mechanism of action of the SpineJack[supreg] system is further 
differentiated when compared with the PEEK coiled implant.
    With respect to the newness criterion, the SpineJack[supreg] 
Expansion Kit received FDA 510(k) clearance on August 30, 2018, based 
on a determination of substantial equivalence to a legally marketed 
predicate device. The applicant explained that although the 
SpineJack[supreg] Expansion Kit received FDA 510(k) clearance on August 
30, 2018, due to the time required to prepare for supply and 
distribution channels, it was not available on the U.S. market until 
October 2018. As we discussed previously, the SpineJack[supreg] 
Expansion Kit is indicated for use in the reduction of painful 
osteoporotic VCFs and is intended to be used in combination with 
Stryker VertaPlex and VertaPlex High Viscosity (HV) bone cements. We 
received the application for a new device category for transitional 
pass-through payment status for the SpineJack[supreg] Expansion Kit on 
February 4, 2020, which is within 3 years of the date of the initial 
FDA marketing authorization. We are inviting public comments on whether 
the SpineJack[supreg] Expansion Kit meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the use of the SpineJack[supreg] Expansion 
Kit is integral to the service of reducing painful osteoporotic 
vertebral compression fractures (VCFs), is used for one patient only, 
comes in contact with human skin, and is surgically implanted or 
inserted into the patient. Specifically, the applicant explained that 
the SpineJack[supreg] system is designed to be implanted into a 
collapsed vertebral body (VB) via a percutaneous transpedicular 
approach under fluoroscopic guidance. According to the applicant, the 
implants remain within the VB with the delivered bone cement. The 
applicant also claimed the SpineJack[supreg] Expansion Kit meets the 
device eligibility requirements of Sec.  419.66(b)(4) because it is not 
an instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered, and it is not a supply or material 
furnished incident to a service. We are inviting public comments on 
whether the SpineJack[supreg] Expansion Kit 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. The 
applicant describes the SpineJack[supreg] Expansion Kit as an 
implantable fracture reduction system used to treat vertebral 
compression fractures (VCFs). The applicant reported that it does not 
believe that the SpineJack[supreg] Expansion Kit is described by an 
existing category and requested category descriptor ``Vertebral body 
height restoration device, scissor jack (implantable).'' We have 
identified one existing pass-through payment categories that may be 
applicable to SpineJack[supreg] Expansion Kit. The SpineJack[supreg] 
Expansion Kit may be described by HCPCS code C1821 (interspinous 
process distraction device (implantable)). 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 either of the following: (i) 
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; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device has received FDA marketing authorization and is part of the 
FDA's Breakthrough Devices Program. With respect to the substantial 
clinical improvement criterion, the applicant submitted 8 studies and 
19 other references to support assertions that the treatment of 
osteoporotic vertebral compression fracture (VCF) patients with the 
SpineJack[supreg] system represents a substantial clinical improvement 
over existing technologies because clinical research supports that it 
reduces future interventions, hospitalizations, and physician visits 
through a decrease in adjacent level fractures (ALFs), which the 
applicant stated are clinically significant adverse events associated 
with osteoporotic VCF. The applicant also stated that treatment with 
the SpineJack[supreg] system greatly reduces pain scores and pain 
medication use when compared to BKP, which the applicant stated is the 
current gold standard in vertebral augmentation (VA) treatment.
    The applicant explained that the SpineJack[supreg] system has been 
available for the treatment of patients with osteoporotic VCFs for over 
10 years in Europe. The applicant explained that, as a result, the 
SpineJack[supreg] implant has been extensively studied, and claims from 
smaller studies are supported by the results from a recent, larger 
prospective, randomized study known as the SAKOS (SpineJack[supreg] 
versus Kyphoplasty in Osteoporotic Patients) study. The applicant cited 
the SAKOS study \39\ in support of multiple

[[Page 48858]]

substantial clinical improvement claims: Reduction in adjacent level 
fractures, superiority in mid-vertebral body height restoration, and 
pain relief. The applicant explained that the SAKOS study was the 
pivotal trial conducted in support of the FDA 510(k) clearance for the 
SpineJack[supreg] system and that the intent of the study was to 
compare the safety and effectiveness of the SpineJack[supreg] system 
with the KyphX Xpander Inflatable Bone Tamp (BKP) for treatment of 
patients with painful osteoporotic VCFs in order to establish a non-
inferiority finding for use of the SpineJack[supreg] system versus 
balloon kyphoplasty procedure (BKP).
---------------------------------------------------------------------------

    \39\ Noriega, D., et al., ``A prospective, international, 
randomized, noninferiority study comparing an implantable titanium 
vertebral augmentation device versus balloon kyphoplasty in the 
reduction of vertebral compression fractures (SAKOS study),'' The 
Spine Journal, 2019, vol. 19(11), pp. 1782-1795.
---------------------------------------------------------------------------

    The SAKOS study is a prospective, international, randomized, non-
inferiority study comparing a titanium implantable vertebral 
augmentation device (TIVAD), the SpineJack[supreg] system, versus BKP 
in the reduction of vertebral compression fractures with a 12-month 
follow-up. The primary endpoint was a 12-month responder rate based on 
a composite of three components: (1) Reduction in VCF fracture-related 
pain at 12 months from baseline by >20 mm as measured by a 100-mm 
Visual Analog Scale (VAS) measure; (2) maintenance or functional 
improvement of the Oswestry Disability Index (ODI) score at 12 months 
from baseline; and (3) absence of device-related adverse events or 
symptomatic cement extravasation requiring surgical reintervention or 
retreatment at the index level. If the primary composite endpoint was 
successful, a fourth component (absence of ALF) was added to the three 
primary components for further analysis. If the analysis of this 
additional composite endpoint was successful, then midline target 
height restoration at 6 and 12 months was assessed. According to the 
applicant, freedom from ALFs and midline VB height restoration were two 
additional superiority measures that were tested. According to the 
SAKOS study, secondary clinical outcomes included changes from baseline 
in back pain intensity, ODI score, EuroQol 5-domain (EQ-5D) index score 
(to evaluate quality of life), EQ-VAS score, ambulatory status, 
analgesic consumption, and length of hospital stay. Radiographic 
endpoints included restoration of vertebral body height (mm), and Cobb 
angle at each follow-up visit. Adverse events (AEs) were recorded 
throughout the study period. The applicant explained that researchers 
did not blind the treating physicians or patients, so each group was 
aware of the treatment allocation prior to the procedure; however, the 
three independent radiologists that performed the radiographic reviews 
were blinded to the personal data of the patients, study timepoints, 
and results of the study.
    The SAKOS study recruited patients from 13 hospitals across 5 
European countries and randomized 152 patients with osteoporotic 
vertebral compression fractures (OVCFs) (1:1) to either 
SpineJack[supreg] or BKP procedures. Specifically, patients were 
considered eligible for inclusion if they met a number of criteria, 
including: (1) At least 50 years of age; (2) had radiographic evidence 
of one or two painful VCF between T7 and L4, aged less than 3 months, 
due to osteoporosis; (3) fracture(s) that showed loss of height in the 
anterior, middle, or posterior third of the VB >=15 percent but <=40 
percent; and (4) patient failed conservative medical therapy, defined 
as either having a VAS back pain score of >=50 mm at 6 weeks after 
initiation of fracture care or a VAS pain score of >=70 percent mm at 2 
weeks after initiation of fracture care. Eleven of the originally 
recruited patients were subsequently excluded from surgery (9 
randomized to SpineJack[supreg] and 2 to BKP). A total of 141 patients 
underwent surgery, and 126 patients completed the 12-month follow-up 
period (61 TIVAD and 65 BKP). The applicant contended that despite the 
SAKOS study being completed outside the U.S., results are applicable to 
the Medicare patient population, noting that 82 percent (116 of 141) of 
the patients in the SAKOS trial that received treatment 
(SpineJack[supreg] system or BKP) were age 65 or older. The applicant 
explained further that the FDA evaluated the applicability of the SAKOS 
clinical data to the U.S. population and FDA concluded that although 
the SAKOS study was performed in Europe, the final study demographics 
were very similar to what has been reported in the literature for U.S.-
based studies of BKP. The applicant also explained that FDA determined 
that the data was acceptable for the SpineJack[supreg] system 510(k) 
clearance, including two clinical superiority claims versus BKP.
    The SAKOS study reported that analysis on the intent to treat 
population using the observed case method resulted in a 12-month 
responder rate of 89.8 percent and 87.3 percent, for SpineJack[supreg] 
and BKP respectively (p = 0.0016). The additional composite endpoint 
analyzed in observed cases resulted in a higher responder rate for 
SpineJack[supreg] compared to BKP at both 6 months (88.1 percent vs. 
60.9 percent; p < 0.0001) and 12 months (79.7 percent vs. 59.3 percent; 
p < 0.0001). Midline VB height restoration, tested for superiority 
using a t test with one-sided 2.5 percent alpha in the ITT population, 
was greater with SpineJack[supreg] than BKP at 6 months (1.14  2.61 mm vs 0.31  2.22 mm; p = 0.0246) and at 12 
months (1.31  2.58 mm vs. 0.10  2.23 mm; p = 
0.0035), with similar results in the per protocol (PP) population.
    Also, according to the SAKOS study, decrease in pain intensity 
versus baseline was more pronounced in the SpineJack[supreg] group 
compared to the BKP group at 1 month (p = 0.029) and 6 months (p = 
0.021). At 12 months, the difference in pain intensity was no longer 
statistically significant between the groups, and pain intensity at 5 
days post-surgery was not statistically different between the groups. 
The SAKOS study publication also reported that at each timepoint, the 
percentage of patients with reduction in pain intensity >20 mm was >=90 
percent in the SpineJack[supreg] group and >=80 percent in the BKP 
group, with a statistically significant difference in favor of 
SpineJack[supreg] at 1-month post-procedure (93.8 percent vs 81.4 
percent; p = 0.03). The study also reported: (1) No statistically 
significant difference in disability (ODI score) between groups during 
the follow-up period, although there was a numerically greater 
improvement in the SpineJack[supreg] group at most time points; (2) at 
each time point, the percentage of patients with maintenance or 
improvement in functional capacity was at or close to 100 percent; and 
(3) in both groups, a clear and progressive improvement in quality of 
life was observed throughout the 1-year follow-up period without any 
statistically significant between-group differences.
    In the SAKOS study, both groups had similar proportions of VCFs 
with cement extravasation outside the treated VB (47.3 percent for 
TIVAD, 41.0 percent for BKP; p = 0.436). No symptoms of cement leakage 
were reported. The SAKOS study also reported that the BKP group had a 
rate of adjacent fractures more than double the SpineJack[supreg] group 
(27.3 percent vs. 12.9 percent; p = 0.043). The SAKOS study also 
reported that the BKP group had a rate of non-adjacent subsequent 
thoracic fractures nearly 3 times higher than the SpineJack[supreg] 
group (21.9 percent vs. 7.4 percent) (a p-value was not reported for 
this result). The most common AEs reported over the study period were 
backpain (11.8 percent with SpineJack[supreg], 9.6 percent with BKP), 
new lumbar vertebral fractures (11.8 percent with SpineJack[supreg], 
12.3 percent with

[[Page 48859]]

BKP), and new thoracic vertebral fractures (7.4 percent with 
SpineJack[supreg], 21.9 percent with BKP). The most frequent SAEs were 
lumbar vertebral fractures (8.8 percent with SpineJack[supreg]; 6.8 
percent with BKP) and thoracic vertebral fractures (5.9 percent with 
SpineJack[supreg], 9.6 percent with BKP). We also note that the length 
of hospital stay (in days) for osteoporotic VCF patients treated in the 
SAKOS trial was 3.8  3.6 days for the SpineJack[supreg] 
group and 3.3  2.4 days for the BKP group (p = 0.926, 
Wilcoxon test).
    The applicant also submitted additional studies, which are 
described in more detail in this section, related to the applicant's 
specific assertions regarding substantial clinical improvement.
    As stated previously, the applicant stated that the 
SpineJack[supreg] system represents a substantial clinical improvement 
over existing technologies because it will reduce future interventions, 
hospitalizations, and physician visits through a decrease in ALFs. The 
applicant explained that ALFs are considered clinically significant 
adverse events associated with osteoporotic VCFs, citing studies by 
Lindsay et al.\40\ and Ross et al.\41\ The applicant explained that 
these studies reported, respectively, that having one or more VCFs 
(irrespective of bone density) led to a 5-fold increase in the 
patient's risk of developing another vertebral fracture, and the 
presence of two or more VCFs at baseline increased the risk of ALF by 
12-fold. The applicant stated that analysis of the additional composite 
endpoint in the SAKOS study demonstrated statistical superiority of the 
SpineJack[supreg] system over BKP (p < 0.0001) for freedom from ALFs at 
both 6 months (88.1 percent vs. 60.9 percent) and 12 months (79.7 
percent vs. 59.3 percent) post-procedure. The applicant noted that the 
results were similar on both the intent to treat and PP patient 
populations. In addition, the applicant stated the SpineJack[supreg] 
system represents a substantial clinical improvement because in the 
SAKOS study, compared to patients treated with the SpineJack[supreg] 
system, BKP-treated patients had more than double the rate of ALFs 
(27.3 percent vs. 12.9 percent; p = 0.043) and almost triple the rate 
of non-adjacent thoracic VCFs (21.9 percent vs. 7.4 percent).
---------------------------------------------------------------------------

    \40\ Lindsay R. et al., ``Risk of new vertebral fracture in the 
year following a fracture,'' Journal of the American Medical 
Association, 2001, vol. 285(3), pp. 320-323.
    \41\ Ross P. et al., Pre-existing fractures and bone mass 
predict vertebral fracture incidence in women. Annals of Internal 
Medicine. 1991, vol. 114(11), pp. 919-923.
---------------------------------------------------------------------------

    The applicant also stated superiority with respect to mid-vertebral 
body height restoration with the SpineJack[supreg] system. The 
applicant explained that historical treatments of osteoporotic VCFs 
have focused on anterior VB height restoration and kyphotic Cobb angle 
correction; however, research indicates that the restoration of middle 
VB height may be as important as Cobb angle correction in the 
prevention of ALFs.\42\ According to the applicant, the depression of 
the mid-vertebral endplate leads to decreased mechanics of the spinal 
column by transferring the person's weight to the anterior wall of the 
level adjacent to the fracture, and as a result the anterior wall is 
the most common location for ALFs. The applicant further stated that by 
restoring the entire fracture, including mid-VB height, the vertebral 
disc above the superior vertebral endplate is re-pressurized and 
transfers the load evenly, preventing ALFs.\43\ The applicant stated 
that the SpineJack[supreg] system showed superiority over BKP with 
regard to midline VB height restoration at both 6 and 12 months, 
pointing to the SAKOS study results in the intent to treat population 
at 6 months (1.14  2.61 mm vs 0.31  2.22 mm; p 
= 0.0246) and 12 months (1.31  2.58 mm vs. 0.10  2.23 mm; p = 0.0035) post-procedure. The applicant noted that 
similar results were also observed in the PP population (134 patients 
in the intent-to-treat population without any major protocol 
deviations).
---------------------------------------------------------------------------

    \42\ Lin J et al. Better height restoration, greater kyphosis 
correction, and fewer refractures of cemented vertebrae by using an 
intravertebral reduction device: A 1-year follow-up study. World 
Neurosurgery. 2016; 90:391-396.
    \43\ Tzermiadianos M., et al., ``Altered disc pressure profile 
after an osteoporotic vertebral fracture is a risk factor for 
adjacent vertebral body fracture,'' European Spine Journal, 2008, 
vol. 17(11), pp. 1522-1530.
---------------------------------------------------------------------------

    The applicant also provided two prospective studies, a 
retrospective study, and two cadaveric studies in support of its 
assertions regarding superior VB height restoration. The applicant 
stated that in a prospective comparative study by Noriega D., et 
al.,\44\ VB height restoration outcomes utilizing the SpineJack[supreg] 
system were durable out to 3 years. This study was a safety and 
clinical performance pilot that randomized 30 patients with painful 
osteoporotic vertebral compression fractures to SpineJack[supreg] (n = 
15) or BKP (n = 15).\45\ Twenty-eight patients completed the 3-year 
study (14 in each group). The clinical endpoints of analgesic 
consumption, back pain intensity, ODI, and quality of life were 
recorded preoperatively and through 36-months post-surgery.\46\ Spine 
X-rays were also taken 48 hours prior to the procedure and at 5 days, 
6, 12, and 36 months post-surgery.\47\ The applicant explained that 
over the 3-year follow-up period, VB height restoration and kyphosis 
correction was better compared to BKP, specifically that VB height 
restoration and kyphotic correction was still evident at 36 months with 
a greater mean correction of anterior VB height (10  13 
percent vs 2  8 percent for BKP, p = 0.007) and midline VB 
height (10  11 percent vs 3  7 percent for BKP, 
p = 0.034), while there was a larger correction of the VB angle (- 
4.97[deg]  5.06[deg] vs 0.42[deg]  3.43[deg]; p 
= 0.003) for the SpineJack[supreg] group. The applicant stated that 
this study shows superiority with regards to VB height restoration.
---------------------------------------------------------------------------

    \44\ Noriega D., et al., ``Long-term safety and clinical 
performance of kyphoplasty and SpineJack procedures in the treatment 
of osteoporotic vertebral compression fractures: a pilot, 
monocentric, investigator-initiated study,'' Osteoporosis 
International, 2019, vol. 30, pp. 637-645.
    \45\ Ibid.
    \46\ Ibid.
    \47\ Ibid.
---------------------------------------------------------------------------

    The applicant stated that Arabmotlagh M., et al., also supported 
superiority with regard to VB height restoration. Arabmotlagh M., et 
al. reported an observational case series (with no comparison group) of 
SpineJack[supreg]. They enrolled 42 patients with osteoporotic 
vertebral compression fracture of the thoracolumbar, who were 
considered for kyphoplasty, 31 of whom completed the clinical and 
radiological evaluations up to 12 months after the procedure.\48\ 
According to materials provided by the applicant, the purpose of the 
study was to evaluate the efficacy of kyphoplasty with the 
SpineJack[supreg] system to correct the kyphotic deformity and to 
analyze parameters affecting the restoration and maintenance of spinal 
alignment. The applicant explained that the mean VB height calculated 
prior to fracture was 2.8 cm (standard deviation (SD) of 0.47), which 
decreased to 1.5 cm (SD of 0.59) after the fracture. According to the 
applicant, following the procedure performed with the SpineJack[supreg] 
device, the VB height significantly increased to 1.9 cm (SD of 0.64; p 
< 0.01), but was reduced to 1.8 cm (SD of 0.61; p < 0.01) at 12 months 
post-procedure. We note that according to Arabmotlagh M., et al., these 
results were specifically for mean anterior VB height. The study does 
not

[[Page 48860]]

appear to report results for midline VB height.\49\ The applicant also 
stated that the mean kyphotic angle (KA) calculated prior to fracture 
was -1[deg] (SD of 5.8), which increased to 13.4[deg] (SD of 8.1) after 
the fracture. The applicant also stated that following the procedure 
performed with the SpineJack[supreg] device, KA significantly decreased 
to 10.8[deg] (SD of 9.1; p < 0.01); however, KA correction was lost at 
12 months post-procedure with an increase to 13.3[deg] (SD of 9.5; p < 
0.01).
---------------------------------------------------------------------------

    \48\ Arabmotlagh M., et al., ``Radiological Evaluation of 
Kyphoplasty With an Intravertebral Expander After Osteoporotic 
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi: 
10.1002.jor.24180.
    \49\ Arabmotlagh M., et al., ``Radiological Evaluation of 
Kyphoplasty With an Intravertebral Expander After Osteoporotic 
Vertebral Fracture,'' Journal of Orthopaedic Research, 2018. Doi: 
10.1002.jor.24180.
---------------------------------------------------------------------------

    The applicant provided a Lin et al., retrospective study of 75 
patients that compared radiologic and clinical outcomes of kyphoplasty 
with the SpineJack[supreg] system to vertebroplasty (VP) in treating 
osteoporotic vertebral compression fractures to support its assertions 
regarding superiority with regard to midline VB height restoration.\50\ 
The applicant stated that the radiologic outcomes from this study were: 
(1) The mean KA and mean KA restoration were more efficient after 
SpineJack[supreg] than VP at all time points (up to 1 year), except for 
mean KA observed postoperatively at 1 week; and (2) the mean middle VB 
heights and mean VB height restoration were more favorable after 
SpineJack[supreg] than VP.\51\ We note that this study did not compare 
the SpineJack[supreg] system to BKP, which the applicant stated is the 
gold-standard in vertebral augmentation.
---------------------------------------------------------------------------

    \50\ Lin J., et al., ``Better Height Restoration, Greater 
Kyphosis Correction, and Fewer Refractures of Cemented Vertebrae by 
Using an Intravertebral Reduction Device: a 1-Year Follow-up 
Study,'' World Neurosurg. 2016, vol. 60, pp. 391-396.
    \51\ Ibid.
---------------------------------------------------------------------------

    In the two cadaveric studies, Kruger A., et al. (2013) and Kruger 
A., et al. (2015), wedge compression fractures were created in human 
cadaveric vertebrae by a material testing machine and the axial load 
was increased until the height of the anterior edge of the VB was 
reduced by 40 percent.\52\ The VBs were fixed in a clamp and loaded 
with 100 N in a custom made device. In Kruger A., et al. (2013), 
vertebral heights were measured at the anterior wall as well as in the 
center of the vertebral bodies in the medial sagittal plane in 36 human 
cadaveric vertebrae pre- and post-fracture as well as after treatment 
and loading in (twenty-seven vertebrae were treated with 
SpineJack[supreg] with different cement volumes (maximum, intermediate, 
and no cement), and 9 vertebrae were treated with BKP). In Kruger A., 
et al. (2015), anterior, central, and posterior height as well as the 
Beck index were measured in 24 vertebral bodies pre-fracture and post-
fracture as well as after treatment (twelve treated with 
SpineJack[supreg] and twelve treated with BKP). The applicant stated 
that Kruger A., et al. (2013) showed superiority on VB height 
restoration and height maintenance, and summarized that: (1) Height 
restoration was significantly better for the SpineJack[supreg] group 
compared to BKP; (2) height maintenance was dependent on the cement 
volume used; and (3) the group with the SpineJack[supreg] without 
cement nevertheless showed better results in height maintenance, yet 
the statistical significance could not be demonstrated.\53\ The 
applicant stated that Kruger A., et al. (2015) showed superiority on VB 
height restoration, because the height restoration was significantly 
better in the SpineJack[supreg] group compared with the BKP group. The 
applicant explained that the clinical implications include a better 
restoration of the sagittal balance of the spine and a reduction of the 
kyphotic deformity, which may relate to clinical outcome and the 
biological healing process.\54\
---------------------------------------------------------------------------

    \52\ Kruger A., et al., ``Height restoration and maintenance 
after treating unstable osteoporotic vertebral compression fractures 
by cement augmentation is dependent on the cement volume used,'' 
Clinical Biomechanics, 2013, vol. 28, pp. 725-730; and Kruger A., et 
al., ``Height restoration of osteoporotic vertebral compression 
fractures using different intervertebral reduction devices: a 
cadaveric study,'' The Spine Journal, 2015, vol. 15, pp. 1092-1098.
    \53\ Ibid.
    \54\ Ibid.
---------------------------------------------------------------------------

    The applicant also stated that use of the SpineJack[supreg] system 
represents a substantial clinical improvement with respect to pain 
relief. According to the applicant, pain is the first and most 
prominent symptom associated with osteoporotic VCFs, which drives many 
elderly patients to seek hospital treatment and negatively impacts on 
their quality of life. The applicant provided the SAKOS randomized 
controlled study, a prospective consecutive observational study, and a 
retrospective case series to support its assertions regarding pain 
relief with the SpineJack[supreg] system. The applicant cited the SAKOS 
trial for statistically significant greater pain relief achieved at 1 
month and 6 months after surgery with the SpineJack[supreg] system. The 
applicant summarized that in the SAKOS trial: (1) Progressive 
improvement in pain relief was observed over the follow-up period in 
the SpineJack[supreg] system group only; (2) the decrease in pain 
intensity versus baseline was more pronounced in the SpineJack[supreg] 
system group compared to the BKP group at 1 month (p = 0.029) and 6 
months (p = 0.021); and (3) at each time point, the percentage of 
patients with reduced pain intensity >20 mm was >=90 percent in the 
SpineJack[supreg] system group and >=80 percent in the BKP group, with 
a statistically significant difference in favor of the 
SpineJack[supreg] system at 1 month post-procedure (93.8 percent vs 
81.5 percent; p = 0.030). The applicant also noted that although 
continued pain score improvements were seen out to 1 year for patients 
treated with the SpineJack[supreg] system, the difference between the 
treatment groups did not meet statistical significance (p = 0.061). The 
applicant also explained that in the SAKOS study, at 5 days after 
surgery, there were significantly fewer patients taking central 
analgesic agent medications in the SpineJack[supreg] implant-treated 
group as compared to those in the BKP-treated group (SJ 7.4 percent vs. 
BKP 21.9 percent, p = 0.015). According to the applicant, central 
analgesic agents included medications such as non-steroidal anti-
inflammatory drugs (NSAIDS), salicylates, or opioid analgesics.
    The applicant also cited a prospective consecutive observational 
study by Noriega D., et al. for statistically significant pain relief 
immediately after surgery and at both 6 and 12 months. Noriega D., et 
al. was a European multicenter, single-arm registry study that aimed to 
confirm the safety and clinical performance of the SpineJack[supreg] 
system for the treatment of vertebral compression fractures of 
traumatic origin (no comparison procedure).\55\ The study enrolled 103 
patients (median age: 61.6 years) with 108 VCFs due to trauma (n = 81), 
or traumatic VCF with associated osteoporosis (n = 22) who had a 
SpineJack[supreg] procedure. Twenty-three patients withdrew from the 
study before the 12-month visit. The study reported a significant 
improvement in back pain at 48 hours after SpineJack[supreg] procedure, 
with the mean VAS pain score decreasing from 6.6  2.6 cm at 
baseline to 1.4  1.3 cm (mean change: -5.2  2.7 
cm; p < 0.001) (median relative decrease in pain intensity of 81.5 
percent) for the total study population. Noriega D., et al. also 
reported that the improvement was maintained over the 12-month follow-
up period and similar results were observed with both pure traumatic 
VCF

[[Page 48861]]

and traumatic VCF in patients with osteoporosis. The traumatic VCF with 
osteoporosis sub-group had a mean change of -5.5 (SD = 1.9) (median 
relative change of 81.0 percent) (p < 0.001) at 48 hours post-surgery 
(n = 22), and -5.7 (SD = 2.3) mean change (90.3 percent median relative 
change) (p < 0.001) at 12 months (n = 16). The applicant stated that 
this study supported a claim of statistically significant pain relief 
immediately after surgery and at both 6 and 12 months. The applicant 
summarized that (1) Pain relief and improvements in pain scores were 
statistically significant immediately after treatment (48-72 hours) and 
at 6 and 12 months following surgery (p < 0.001); and (2) the mean 
improvement between baseline and at 48-72 hours after the procedure (n 
= 31) was-4.6 (2.6) (p < 0.001), while the mean improvement between 
baseline and at the 12-month follow-up (n = 22) was-6.0 (3.4) (p < 
0.001). We note that Noriega D., et al. did not report results for 6 
months (although it does include results for 3 months versus baseline) 
and does not include the results of mean improvement stated by the 
applicant.\56\ It is also unclear if the applicant intended to rely on 
the overall results of the study or the subgroup of traumatic VCF with 
osteoporosis.
---------------------------------------------------------------------------

    \55\ Noriega D., et al., ``Clinical performance and safety of 
108 SpineJack implantations: 1-year results of a prospective 
multicentre single arm registry study.'' BioMed Research 
International. 2015, 173872.
    \56\ Ibid.
---------------------------------------------------------------------------

    The applicant also cited a retrospective case series, Renaud C., et 
al., for statistically significant pain relief after surgery with the 
SpineJack[supreg] system. Renaud C., et al., included 77 patients with 
a mean age of 60.9 years and 83 VCFs (51 due to trauma and 32 to 
osteoporosis) treated with 164 SpineJack[supreg] devices (no comparison 
procedure).\57\ The applicant summarized that: (1) Pain relief was 
statistically significant (p < 0.001), with a pain score decrease from 
7.9 pre-operatively to 1.8 at 1 month after the procedure; (2) the pain 
score improvement was 77 percent at hospital discharge and gradually 
increased to 86 percent after 1 year following surgery; and (3) the 
study outcomes demonstrated that the SpineJack[supreg] system provided 
both immediate and long-lasting pain relief.
---------------------------------------------------------------------------

    \57\ Renaud C., ``Treatment of vertebral compression fractures 
with the cranio-caudal expandable implant SpineJack: Technical note 
and outcomes in 77 consecutive patients.'' Orthopaedics & 
Traumatology: Surgery & Research, 2015, vol. 101, pp. 857-859.
---------------------------------------------------------------------------

    We note that the results of the SAKOS trial do not appear to have 
been corroborated in any other randomized controlled study. 
Additionally, although the applicant stated that BKP is the gold 
standard in VA, there appears to be a lack of data comparing the 
SpineJack[supreg] system to other existing technology, such as the PEEK 
coiled implant (Kiva[supreg] system), particularly since the PEEK 
coiled system was considered the predicate device for the SpineJack 
510(k). Furthermore, there appears to be a lack of data comparing the 
SpineJack[supreg] system to conservative medical therapy. We note there 
is an active study posted on clinicaltrials.gov comparing 
SpineJack[supreg] system to conservative orthopedic management 
consisting of brace and pain medication in acute stable traumatic 
vertebral fractures in subjects aged 18 to 60 years old. The 
clinicaltrials.gov entry indicates that findings should be forthcoming 
in 2020. Additionally, we note that the recent systematic reviews of 
the management of vertebral compression fracture (Buchbinder et al. for 
Cochrane (2018), Ebeling et al. (2019) for the American Society for 
Bone and Mineral Research (ASBMR)), do not support vertebral 
augmentation procedures due to lack of evidence compared to 
conservative medical management.\58\ The ASBMR recommended more 
rigorous study of treatment options including ``larger sample sizes, 
inclusion of a placebo control and more data on serious AEs (adverse 
events).''
---------------------------------------------------------------------------

    \58\ Buchbinder R., Johnston R.V., Rischin K.J., Homik J., Jones 
C.A., Golmohammadi K., Kallmes D.F., ``Percutaneous vertebroplasty 
for osteoporotic vertebral compression fracture,'' Cochrane Database 
Syst Rev. 2018 Apr 4 and Nov 6. PMID: 29618171; Ebeling P.R., 
Akesson K., Bauer D.C., Buchbinder R., Eastell R., Fink H.A., 
Giangregorio L., Guanabens N., Kado D., Kallmes D., Katzman W., 
Rodriguez A., Wermers R., Wilson H.A., Bouxsein M.L., ``The Efficacy 
and Safety of Vertebral Augmentation: A Second ASBMR Task Force 
Report.'' J Bone Miner Res., 2019, vol. 34(1), pp. 3-21.
---------------------------------------------------------------------------

    We are inviting public comment on whether the SpineJack[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 
SpineJack[supreg] system would be reported with CPT code 22513, which 
is assigned to APC 5114 (Level 4 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 5114, which has a CY 2019 payment 
rate of $5,891.95. 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 22513 had a device offset amount of $1,127 at the 
time the application was received. According to the applicant, the cost 
of the SpineJack[supreg] system is $5,623.\59\
---------------------------------------------------------------------------

    \59\
---------------------------------------------------------------------------

    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 $5,622.64 for the SpineJack[supreg] system 
is 94 percent of the applicable APC payment amount for the service 
related to the category of devices of SpineJack[supreg] system 
(($5,622.64/$5,981.28) x 100 = 94 percent). Therefore, we believe the 
SpineJack[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 $5,622.64 for 
the SpineJack[supreg] system is 499 percent of the cost of the device-
related portion of the APC payment amount for the related service of 
$1,126.87(($5,622.64/$1,126.87) x 100 = 499 percent). Therefore, we 
believe that the SpineJack[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 $5,622.64 for the SpineJack[supreg] system and the 
portion of the APC payment amount for the device of $1,126.87 is 75 
percent of the APC payment amount for the related service of $5,987.28 
(($5,622.64-$1,126.87)/$5,981.28) = 75.2 percent). Therefore, we 
believe that the SpineJack[supreg] Expansion Kit meets the third cost 
significance requirement.
    We are inviting public comment on whether the SpineJack[supreg] 
Expansion Kit meets the device pass-through payment

[[Page 48862]]

criteria discussed in this section, including the cost criterion.
3. Technical Clarification to the Alternative Pathway to the OPPS 
Device Pass-Through Substantial Clinical Improvement Criterion for 
Certain Transformative New Devices
    As described previously, in the CY 2020 annual rulemaking process, 
we finalized an alternative pathway for devices that receive Food and 
Drug Administration (FDA) marketing authorization and are granted a 
Breakthrough Device designation (84 FR 61295 through 61297). Under this 
alternative pathway, devices that are granted an FDA Breakthrough 
Device designation are not evaluated in terms of the current 
substantial clinical improvement criterion at Sec.  419.66(c)(2) for 
purposes of determining device pass-through payment status, but will 
need to meet the other requirements for pass-through payment status in 
our regulation at Sec.  419.66. Similarly, in the FY 2020 IPPS/LTCH PPS 
final rule, we finalized an alternative pathway for new technology add-
on payments for certain transformative new devices. Under the existing 
regulations at Sec.  412.87(c), to be eligible for approval for IPPS 
new technology add-on payments under this alternative pathway, the 
device must be part of the FDA's Breakthrough Devices Program and have 
received FDA marketing authorization.
    We have received questions from the public regarding CMS's intent 
with respect to the ``marketing authorization'' required for purposes 
of approval under the alternative pathway for certain transformative 
new devices at Sec.  412.87(c). Some of the public appear to assert 
that so long as a technology has received marketing authorization for 
any indication, even if that indication differs from the indication for 
which the technology was designated by FDA as part of the Breakthrough 
Devices Program, the technology would meet the marketing authorization 
requirement at Sec.  412.87(c). Because of this potential confusion, we 
clarified in the FY 2021 IPPS/LTCH PPS proposed rule that an applicant 
cannot combine a marketing authorization for an indication that differs 
from the technology's indication under the Breakthrough Device Program, 
and for which the applicant is seeking to qualify for the new 
technology add-on payment, for purposes of approval under the 
alternative pathway for certain transformative devices (85 FR 32692).
    We are clarifying in this proposed rule that the same policy 
applies for purposes of the OPPS alternative pathway policy. 
Specifically, we are clarifying that under the OPPS, in order to be 
eligible for the alternative pathway, the device must receive marketing 
authorization for the indication covered by the Breakthrough Devices 
Program designation and we are making a conforming change to the 
regulations at 419.66(c)(2). We also note that the transitional pass-
through payment application for the device must be received within 2 to 
3 years of the initial FDA marketing authorization (or a verifiable 
market delay) for the device for the indication covered by the 
Breakthrough Devices Program designation.
    In summary, in this CY 2021 OPPS/ASC proposed rule, we propose to 
amend the regulations in Sec.  419.66(c)(2)(ii) to state that ``A new 
medical device is part of the FDA's Breakthrough Devices Program and 
has received marketing authorization for the indication covered by the 
Breakthrough Device designation.''
4. Comment Solicitation on Continuing To Provide Separate Payment in 
CYs 2022 and Future Years for Devices With OPPS Device Pass-Through 
Payment Status During the COVID-19 Public Health Emergency (PHE)
    In this proposed rule, we are soliciting comments on whether we 
should adjust future payments for devices currently eligible to receive 
transitional pass-through payments that may have been impacted by the 
PHE, and if so, how we should implement that adjustment and for how 
long the adjustment should apply. On January 31, 2020, HHS Secretary 
Azar determined that a PHE exists retroactive to January 27, 2020 \60\ 
under section 319 of the Public Health Service Act (42 U.S.C. 247d) in 
response to COVID-19, and on April 21, 2020 Secretary Azar renewed, 
effective April 26, 2020 and again effective July 25, 2020, the 
determination that a PHE exists.\61\ On March 13, 2020, the President 
of the United States declared that the COVID-19 outbreak in the United 
States constitutes a national emergency,\62\ retroactive to March 1, 
2020. Due to the PHE, we received multiple inquiries from stakeholders 
regarding potential adjustments to the pass-through payment for devices 
with OPPS transitional pass-through payment status that may be impacted 
by the PHE. According to stakeholders, healthcare resources have been 
triaged to assist in the COVID-19 pandemic response effort, which has 
reduced utilization for devices receiving transitional pass-through 
payment, particularly for devices used in services that could be 
considered elective. Stakeholders cited the CMS recommendations issued 
on March 18, 2020 to postpone elective surgeries due to the COVID-19 
PHE.\63\ Stakeholders claim that devices on pass-through status are 
frequently used during such elective procedures, and that CMS's ability 
to calculate appropriate payment for services that include these 
devices once the devices transition off of pass-through status could be 
hindered by a reduction in claims being submitted with these devices 
during the PHE.
---------------------------------------------------------------------------

    \60\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
    \61\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-21apr2020.aspx.
    \62\ https://www.whitehouse.gov/presidentialactions/proclamation-declaring-nationalemergency-concerning-novel-coronavirus-diseasecovid-19-outbreak/.
    \63\ https://www.cms.gov/newsroom/press-releases/cms-releases-recommendations-adult-elective-surgeries-non-essential-medical-surgical-and-dental.
---------------------------------------------------------------------------

    Transitional pass-through payment for devices is described in 
section 1833(t)(6) of the Act. It is intended as an interim measure to 
allow for adequate payment of new innovative technology while we 
collect the necessary data to incorporate the costs for these items 
into the procedure APC rate (66 FR 55861). As previously stated, 
transitional pass-through payments for devices can be made for a period 
of at least 2 years, but not more than 3 years, beginning on the first 
date on which pass-through payment was made for the device.
    In response to stakeholder concerns regarding reduced utilization 
of procedures that include pass-through devices during the PHE, we are 
specifically requesting public comment on utilizing our equitable 
adjustment authority under section 1833(t)(2)(E) of the Act to provide 
separate payment for some period of time after pass-through status ends 
for these devices in order to account for the period of time that 
utilization for the devices was reduced due to the PHE. Any rulemaking 
on this issue in response to this comment solicitation would be 
included in the CY 2022 OPPS/ASC proposed rule and would consider the 
impact of the PHE on devices with OPPS device pass-through payment 
status during the PHE. Note that OPPS device pass-through payment 
status generally lasts three years, and none of the devices with less 
than three years of pass-through payment status at the start of the PHE 
have pass-through payment status set to end before December 31st, 2021.

[[Page 48863]]

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 CY 2021 OPPS/ASC 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 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 CY 2021 OPPS/ASC 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 the CY 2021 OPPS/ASC 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 previously--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 previously described 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 our 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 
allowed 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 a 
procedure's 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

[[Page 48864]]

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 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 the 
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 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 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 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 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 previously 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 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 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 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 &

[[Page 48865]]

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.
    In response to stakeholder requests for additional detail on our 
device-intensive methodology, we have updated our claims accounting 
narrative with a description of our device offset percentage 
calculation. Our claims accounting narrative for this proposed rule can 
be found under supporting documentation for the CY 2021 OPPS/ASC 
proposed rule on our website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    For CY 2021, we are not proposing any changes to our device-
intensive policy.
    The full listing of the proposed CY 2021 device-intensive 
procedures can be found in Addendum P to this CY 2021 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 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 2021.
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 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.

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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 a policy 
to reduce OPPS payment for device-intensive procedures, by the full or 
partial credit a provider receives for a replaced device, when a 
hospital furnishes a specified device without cost or with a full or 
partial credit. Under our current policy, hospitals continue to be 
required to report on the claim the amount of the credit in the amount 
portion for value code ``FD'' when the hospital receives a credit for a 
replaced device that is 50 percent or greater than the cost of the 
device.
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 
through 75007), we adopted a policy of reducing OPPS payment for 
specified APCs when a hospital furnishes a specified device without 
cost or with a full or partial credit by the lesser of the device 
offset amount for the APC or the amount of the credit. Although we 
adopted this change in policy in the preamble of the CY 2014 OPPS/ASC 
final rule with comment period and discussed it in subregulatory 
guidance, including Chapter 4, Section 61.3.6 of the Medicare Claims 
Processing Manual, we inadvertently did not make conforming changes to 
the regulation text. In particular, we did not change our regulation at 
42 CFR 419.45(b)(1) and (2), which describes the amount of the 
reduction in the APC payment in situations where the beneficiary 
receives an implanted device that is replaced without cost to the 
provider or the beneficiary or where the provider receives a full or 
partial credit for the cost of a replaced device and which continues to 
state that the amount of the reduction is the device offset amount. 
Therefore, in this CY 2021 OPPS/ASC proposed rule, we are changing our 
regulation at Sec.  419.45(b)(1) and (2) to conform with the policy we 
adopted in CY 2014. In particular, we are revising our regulations at 
Sec.  419.45(b)(1) to state that, for situations in which a beneficiary 
has received an implanted device that is replaced without cost to the 
provider or the beneficiary, or where the provider receives full credit 
for the cost of a replaced device, the amount of reduction to the APC 
payment is calculated by reducing the APC payment amount by the lesser 
of the amount of the credit or the device offset amount that would 
otherwise apply if the procedure assigned to the APC had transitional 
pass-through status under Sec.  419.66. Additionally, we are revising 
our regulation at Sec.  419.45(b)(2) to state that, for situations in 
which the provider receives partial credit for the cost of a replaced 
device, but only where the amount of the device credit is greater than 
or equal to 50 percent of the cost of the replacement device being 
implanted, the amount of the reduction to the APC payment is calculated 
by reducing the APC payment amount by the lesser of the amount of the 
credit or the device offset amount that would otherwise apply if the 
procedure assigned to the APC had transitional-pass through status 
under Sec.  419.66. The revisions to Sec.  419.45(b)(1) and (2) appear 
in section XXVII. of this proposed rule.
5. Payment Policy for Low-Volume Device-Intensive Procedures
    In CY 2016, we used our equitable adjustment authority under 
section 1833(t)(2)(E) of the Act and used the median cost (instead of 
the geometric mean cost per our standard methodology) to calculate the 
payment rate for the implantable miniature telescope procedure 
described by CPT code 0308T (Insertion of ocular telescope prosthesis 
including removal of crystalline lens or intraocular lens prosthesis), 
which is the only code assigned to APC 5494 (Level 4 Intraocular 
Procedures) (80 FR 70388). We 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 previously for the policy applied to the procedure 
described by CPT code 0308T in CY 2016. The CY 2018 final rule 
geometric mean cost for the procedure described by CPT code 0308T 
(based on 19 claims containing the device HCPCS C-code, in accordance 
with the device-intensive edit policy) was $21,302, and the median cost 
was $19,521. The final CY 2018 payment rate (calculated using the 
median cost) was $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 finalized our policy to continue 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. In CY 
2020, this policy applied to CPT code 0308T which we assigned to APC 
5495 (Level 5 Intraocular Procedures) in the CY 2020 OPPS/ASC final 
rule with comment period (84 FR 61301).
    For CY 2021, we propose 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 2021, this policy would not apply to any procedure. 
As discussed in section, III.D.3., we received no claims data with CPT 
code 0308T for this OPPS/ASC proposed rule, which we previously 
assigned as a low-volume device-intensive procedure for CY 2017 through 
CY 2020. As such, we propose to assign 0308T a payment weight based on 
the most recently

[[Page 48867]]

available data, from the CY 2020 OPPS final rule, and therefore propose 
to assign CPT code 0308T to APC 5495 (Level 5 Intraocular Procedures). 
Additionally, in the absence of CY 2019 claims data for this CY 2021 
OPPS/ASC proposed rule, we propose to use the most recently available 
data, from the CY 2020 OPPS final rule, to establish the device offset 
percentage for 0308T. Therefore, the proposed CY 2021 device offset 
percentage for CPT code 0308T is based on the CY 2020 OPPS final rule 
device offset percentage of 82.21 percent for CPT code 0308T. For more 
discussion on the APC assignment and payment rate for CPT code 0308T, 
see section III.D.3. of this proposed rule.

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 the 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 the 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 diseases 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 2021 pass-through drugs and 
biologicals and their designated APCs are assigned status indicator 
``G'' in Addenda A and B to the 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 the 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 
our 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 our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Three-Year Transitional Pass-Through Payment Period for All Pass-
Through Drugs, Biologicals, and Radiopharmaceuticals and Quarterly 
Expiration of Pass-Through Status
    As required by statute, transitional pass-through payments for a 
drug or biological described in section 1833(t)(6)(C)(i)(II) of the Act 
can be made for a period of at least 2 years, but not more than 3 
years, after the payment was first made for the product as a hospital 
outpatient service under Medicare Part B. Our current policy is to 
accept pass-through applications on a quarterly basis and to begin 
pass-through payments for newly approved pass-through drugs and 
biologicals on a quarterly basis through the next available OPPS 
quarterly update after the approval of a product's pass-through status. 
However, prior to CY 2017, we expired pass-through status for drugs and 
biologicals on an annual basis through notice-and-comment rulemaking 
(74 FR 60480). In the CY 2017 OPPS/ASC final rule with comment period 
(81 FR 79662), we finalized a policy change, beginning with pass-
through drugs and biologicals newly approved in CY 2017 and subsequent 
calendar years, to allow for a quarterly expiration of pass-through 
payment status for drugs, biologicals, and radiopharmaceuticals to 
afford a pass-through payment period that is as close to a full 3 years 
as possible for all pass-through drugs, biologicals, and 
radiopharmaceuticals.
    This change eliminated the variability of the pass-through payment 
eligibility period, which previously varied based on when a particular 
application was initially received. We adopted this change for pass-
through approvals beginning on or after CY 2017, to allow, on a 
prospective basis, for the maximum pass-through payment period for each 
pass-through drug without exceeding the statutory limit of 3 years. 
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. Drugs and Biologicals With Expiring Pass-Through Payment Status in 
CY 2020
    There are 28 drugs and biologicals whose pass-through payment 
status will expire during CY 2020 as listed in Table 21. Most of these 
drugs and biologicals will have received OPPS pass-through payment for 
3 years during the period of April 1, 2017 through December 31, 2020. 
However, there are two groups of drugs and biologicals included in 
Table

[[Page 48868]]

21 whose current period of OPPS pass-through payment is less than 3 
years. The first group are five drugs and biologicals that have already 
had 3 years of pass-through payment status but for which pass-through 
payment status was extended for an additional 2 years from October 1, 
2018 until September 30, 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 (Pub. L. 115-141). The drugs covered by this provision 
include: HCPCS code A9586 (Florbetapir f18, diagnostic, per study dose, 
up to 10 millicuries); HCPCS code J1097 (Phenylephrine 10.16 mg/ml and 
ketorolac 2.88 mg/ml ophthalmic irrigation solution, 1 ml); HCPCS code 
Q4195 (Puraply, per square centimeter); HCPCS code Q4196 (Puraply am, 
per square centimeter); and HCPCS code Q9950 (Injection, sulfur 
hexafluoride lipid microspheres, per ml). The second group are two 
diagnostic radiopharmaceuticals, HCPCS code Q9982 (Flutemetamol F18, 
diagnostic, per study dose, up to 5 millicuries) and HCPCS code Q9983 
(Florbetaben F18, diagnostic, per study dose, up to 8.1 millicuries) 
whose pass-through payment status was extended for an additional 9 
months from January 1, 2020 to September 30, 2020 under Division N, 
Title I, Subtitle A, Section 107(a) of the Further Consolidated 
Appropriations Act of 2020, which amended section 1833(t)(6) of the 
Social Security Act and added a new section 1833(t)(6)(J) to the Act.
    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 2021), as discussed 
further in section V.B.2. of this proposed rule. We proposed that if 
the estimated per day cost for the drug or biological is less than or 
equal to the applicable OPPS drug packaging threshold, we would package 
payment for the drug or biological into the payment for the associated 
procedure in the upcoming calendar year. If the estimated per day cost 
of the drug or biological is greater than the OPPS drug packaging 
threshold, we proposed to provide separate payment at the applicable 
relative ASP-based payment amount (which is proposed at ASP+6 percent 
for non-340B drugs for CY 2021, as discussed further in section V.B.3. 
of this proposed rule).
    The packaged or separately payable status of each of these drugs or 
biologicals is listed in Addendum B of this proposed rule (which is 
available via the internet on the CMS website).
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4. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through 
Payment Status Expiring in CY 2021
    We propose to end pass-through payment status in CY 2021 for 26 
drugs and biologicals. These drugs and biologicals, which were approved 
for pass-through payment status between April 1, 2018 and January 1, 
2019, are listed in Table 22. The APCs and HCPCS codes for these drugs 
and biologicals, which have pass-through payment status that will end 
by December 31, 2021, 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 sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. For CY 2021, we propose 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 2021. We propose that a $0 pass-
through payment amount would be paid for pass-through drugs and 
biologicals under the CY 2021 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 proposed that their pass-through payment 
amount would be equal to ASP+6 percent for CY 2021 minus a payment 
offset for the portion of the otherwise applicable OPD fee schedule 
that the Secretary determines is associated with the drug or biological 
as described in section V.A.6. of this proposed rule. We propose this 
policy 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 propose to continue to update pass-through payment rates on a 
quarterly basis on the CMS website during CY 2021 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 2021, consistent with our CY 2020 policy for diagnostic and 
therapeutic radiopharmaceuticals, we propose 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 2021, we propose 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 
proposed to provide pass-through payment at WAC+3 percent (consistent 
with our proposed policy in section V.B.2.b. of the proposed rule), the 
equivalent payment provided to pass-through payment drugs and 
biologicals without ASP information. Additional detail on the WAC+3 
percent payment policy can be found in section V.B.2.b. of the proposed 
rule. If WAC information also is not available, we propose to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    The drugs and biologicals that we propose to have pass-through 
payment status expire between March 31, 2021 and December 31, 2021 are 
shown in Table 22.
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5. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through 
Payment Status Continuing in CY 2021
    We propose to continue pass-through payment status in CY 2021 for 
46 drugs and biologicals. These drugs and biologicals, which were 
approved for pass-through payment status beginning between April 1, 
2019 and April 1, 2020 are listed in Table 23. The APCs and HCPCS codes 
for these drugs and biologicals, which have pass-through payment status 
that will continue after December 31, 2021, 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 sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount authorized under 
section 1842(o) of the Act and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is associated with the 
drug or biological. For CY 2021, we propose 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 2021. We propose that a $0 pass-
through payment amount would be paid for pass-through drugs and 
biologicals under the CY 2021 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

[[Page 48873]]

supplies when used in a diagnostic test or procedure (including 
contrast agents, diagnostic radiopharmaceuticals, and stress agents); 
and drugs and biologicals that function as supplies when used in a 
surgical procedure), we proposed that their pass-through payment amount 
would be equal to ASP+6 percent for CY 2021 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 propose this 
policy 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 propose to continue to update pass-through payment rates on a 
quarterly basis on our website during CY 2021 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 2021, consistent with our CY 2020 policy for diagnostic and 
therapeutic radiopharmaceuticals, we propose 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 2021, we propose 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 
proposed to provide pass-through payment at WAC+3 percent (consistent 
with our proposed policy in section V.B.2.b. of the proposed rule), the 
equivalent payment provided to pass-through payment drugs and 
biologicals without ASP information. Additional detail on the WAC+3 
percent payment policy can be found in section V.B.2.b. of the proposed 
rule. If WAC information also is not available, we propose to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    The drugs and biologicals that we propose to have pass-through 
payment status expire after December 31, 2021 are shown in Table 23.
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BILLING CODE 4120-01-C
6. Provisions for Reducing Transitional Pass-Through Payments for 
Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To Offset 
Costs Packaged Into APC Groups
    Under the regulations at 42 CFR 419.2(b), nonpass-through drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure are packaged in the OPPS. This 
category includes diagnostic radiopharmaceuticals, contrast agents, 
stress agents, and other diagnostic drugs. Also under 42 CFR 419.2(b), 
nonpass-through drugs and biologicals that function as supplies in a 
surgical procedure are packaged in the OPPS. This category includes 
skin substitutes and other surgical-supply drugs and biologicals. As 
described earlier, section 1833(t)(6)(D)(i) of the Act specifies that 
the transitional pass-through payment amount for pass-through drugs and 
biologicals is the difference between the amount paid under section 
1842(o) of the Act and the otherwise applicable OPD fee schedule 
amount. Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we deduct from

[[Page 48876]]

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 2021, as we did in CY 2020, 
we propose 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 24.
[GRAPHIC] [TIFF OMITTED] TP12AU20.042

    We propose to continue to post annually on our 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 $130 for CY 
2020 (84 FR 61312 through 61313).
    Following the CY 2007 methodology, for this CY 2021 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 2021 and rounded the 
resulting dollar amount ($130.95) 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 2021 OPPS/ASC proposed rule, based on these calculations using 
the CY 2007 OPPS methodology, we propose a packaging threshold for CY 
2021 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 2021 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

[[Page 48877]]

radiopharmaceuticals (collectively called ``threshold-packaged'' drugs) 
that had a HCPCS code in CY 2019 and were paid (via packaged or 
separate payment) under the OPPS. We used data from CY 2019 claims 
processed before January 1, 2020 for this calculation. However, we did 
not perform this calculation for those drugs and biologicals with 
multiple HCPCS codes that include different dosages, as described in 
section V.B.1.d. of the proposed rule, or for the following policy-
packaged items that we propose to continue to package in CY 2021: 
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 2021, we use the methodology that was described in detail 
in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and 
finalized in the CY 2006 OPPS final rule with comment period (70 FR 
68636 through 68638). For each drug and biological HCPCS code, we used 
an estimated payment rate of ASP+6 percent (which is the payment rate 
we propose for separately payable drugs and biologicals (other than 
340B drugs) for CY 2021, as discussed in more detail in section 
V.B.2.b. of the proposed rule) to calculate the CY 2021 proposed rule 
per day costs. We used the manufacturer-submitted ASP data from the 
fourth quarter of CY 2019 (data that were used for payment purposes in 
the physician's office setting, effective April 1, 2020) to determine 
the proposed rule per day cost.
    As is our standard methodology, for CY 2021, we propose to use 
payment rates based on the ASP data from the fourth quarter of CY 2019 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
are available via the internet on the CMS website) because these are 
the most recent data available for use at the time of development of 
the proposed rule. These data also were the basis for drug payments in 
the physician's office setting, effective April 1, 2020. 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 
2019 hospital claims data to determine their per day cost.
    We propose 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 
2019 HCPCS codes that were reported to the CY 2020 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 2021.
    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 2021 OPPS/ASC 
proposed rule, we proposed to use ASP data from the fourth quarter of 
CY 2019, 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, 2020, along with updated hospital 
claims data from CY 2019. We note that we also propose to use these 
data for budget neutrality estimates and impact analyses for this CY 
2021 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 second quarter of CY 2020. 
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, 2020. These payment rates would then 
be updated in the January 2021 OPPS update, based on the most recent 
ASP data to be used for physicians' office and OPPS payment as of 
January 1, 2021. For items that do not currently have an ASP-based 
payment rate, we proposed to recalculate their mean unit cost from all 
of the CY 2019 claims data and update cost report information available 
for the CY 2021 final rule with comment period to determine their final 
per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in the 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 proposed to continue to follow the 
established policies initially adopted for the CY 2005 OPPS (69 FR 
65780) in order to more equitably pay for those drugs whose costs 
fluctuate relative to the proposed CY 2021 OPPS drug packaging 
threshold and the drug's payment status (packaged or separately 
payable) in CY 2020. 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 2021, 
consistent with our historical practice, we proposed to apply the 
following policies to these HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2020 and that are proposed for separate payment in CY 
2021, and that then have per day costs equal to or less than the CY 
2021 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2021 final rule, would continue to 
receive separate payment in CY 2021.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2020 and that are proposed for separate payment in CY 2021, and 
that then have per day costs equal to or less than the CY 2021 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2021 final rule, would remain packaged in 
CY 2021.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2021 but that then have per-day costs 
greater than the CY 2021 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2021 final 
rule, would receive separate payment in CY 2021.
c. Policy Packaged Drugs, Biologicals, and Radiopharmaceuticals
    As mentioned earlier in this section, under the OPPS, we package 
several categories of nonpass-through 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

[[Page 48878]]

radiopharmaceuticals as ``policy-packaged'' drugs, biologicals, and 
radiopharmaceuticals. These policies are either longstanding or based 
on longstanding principles and inherent to the OPPS and are as follows:
     Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies and equipment; surgical 
dressings; and devices used for external reduction of fractures and 
dislocations (Sec.  419.2(b)(4));
     Intraoperative items and services (Sec.  419.2(b)(14));
     Drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure (including, but 
not limited to, diagnostic radiopharmaceuticals, contrast agents, and 
pharmacologic stress agents) (Sec.  419.2(b)(15)); and
     Drugs and biologicals that function as supplies when used 
in a surgical procedure (including, but not limited to, skin 
substitutes and similar products that aid wound healing and implantable 
biologicals) (Sec.  419.2(b)(16)).
    The policy at Sec.  419.2(b)(16) is broader than that at Sec.  
419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with 
comment period: ``We consider all items related to the surgical outcome 
and provided during the hospital stay in which the surgery is 
performed, including postsurgical pain management drugs, to be part of 
the surgery for purposes of our drug and biological surgical supply 
packaging policy'' (79 FR 66875). The category described by Sec.  
419.2(b)(15) is large and includes diagnostic radiopharmaceuticals, 
contrast agents, stress agents, and some other products. The category 
described by Sec.  419.2(b)(16) includes skin substitutes and some 
other products. We believe it is important to reiterate that cost 
consideration is not a factor when determining whether an item is a 
surgical supply (79 FR 66875).
d. 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 
believe 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 proposed to 
continue our policy to make packaging determinations on a drug-specific 
basis, rather than a HCPCS code-specific basis, for those HCPCS codes 
that describe the same drug or biological but different dosages in CY 
2021.
    For CY 2021, 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 2019 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 2021 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 2019 claims data to make the proposed 
packaging determinations for these drugs: HCPCS code C9257 (Injection, 
bevacizumab, 0.25 mg); 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 1000 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 2021 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 2021 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 2021 
is displayed in Table 25.
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BILLING CODE 4120-01-C
    2. Payment for Drugs and Biologicals Without Pass-Through Status 
That Are Not Packaged
a. Payment for Specified Covered Outpatient Drugs (SCODs) and Other 
Separately Payable Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (known as a SCOD) is defined as a 
covered outpatient drug, as defined in section 1927(k)(2) of the Act, 
for which a separate APC has been established and that either is a 
radiopharmaceutical agent or is a drug or biological for which payment 
was made on a pass-through basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of SCODs. These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug

[[Page 48880]]

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.\64\
---------------------------------------------------------------------------

    \64\ 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 2021 
OPPS/ASC proposed rule, we proposed to apply section 
1833(t)(14)(A)(iii)(II) of the Act to all separately payable drugs and 
biologicals, including SCODs. Although we do not distinguish SCODs in 
this discussion, we note that we are required to apply section 
1833(t)(14)(A)(iii)(II) of the Act to SCODs, but we also are applying 
this provision to other separately payable drugs and biologicals, 
consistent with our history of using the same payment methodology for 
all separately payable drugs and biologicals.
    For a detailed discussion of our OPPS drug payment policies from CY 
2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68383 through 68385). In the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68386 through 68389), we 
first adopted the statutory default policy to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act. We have continued this policy of 
paying for separately payable drugs and biologicals at the statutory 
default for CYs 2014 through 2020.
b. Proposed CY 2021 Payment Policy
    For CY 2021, we propose to continue our payment policy that has 
been in effect since CY 2013 to pay for separately payable drugs and 
biologicals, with the exception of 340B-acquired drugs, at ASP+6 
percent in accordance with section 1833(t)(14)(A)(iii)(II) of the Act 
(the statutory default). We propose to pay for separately payable 
nonpass-through drugs acquired with a 340B discount at a net rate of 
ASP minus 28.7 percent (as described in section V.B.6). We refer 
readers to the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59353 through 59371), the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58979 through 58981), and the CY 2020 OPPS/ASC final rule 
with comment period (84 FR 61321 through 61327) for more information 
about our current payment policy for drugs and biologicals acquired 
with a 340B discount.
    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) of the Act, 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) of the Act, 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). In the CY 2020 OPPS/ASC final rule with comment 
period, we adopted a policy to utilize a 3-percent add-on instead of a 
6-percent add-on for drugs that are paid based on WAC under section 
1847A(c)(4) of the Act pursuant to our authority under section 
1833(t)(14)(A)(iii)(II) (84 FR 61318). For CY 2021, we propose 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 propose to 
apply this provision to non-SCOD separately payable drugs. Because we 
propose 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 propose 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 under 1847A(c)(4). For drugs and biologicals that 
would otherwise be subject to a payment reduction because they were 
acquired under the 340B Program, the payment amount for these drugs 
(proposed as a net rate of WAC minus 28.7 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 policy.
    We propose that payments for separately payable drugs and 
biologicals would be included in the budget neutrality adjustments, 
under the requirements in section 1833(t)(9)(B) of the Act. We also 
propose that the budget neutral weight scalar would not be applied in 
determining payments for these separately payable drugs and 
biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this proposed rule

[[Page 48881]]

(available via the internet on the CMS website), which illustrate the 
proposed CY 2021 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, 2020, or WAC, AWP, or 
mean unit cost from CY 2019 claims data and updated cost report 
information available for the proposed rule. In general, these 
published payment rates are not the same as the actual January 2021 
payment rates. This is because payment rates for drugs and biologicals 
with ASP information for January 2021 will be determined through the 
standard quarterly process where ASP data submitted by manufacturers 
for the third quarter of CY 2020 (July 1, 2020 through September 30, 
2020) will be used to set the payment rates that are released for the 
quarter beginning in January 2021 near the end of December 2020. In 
addition, payment rates for drugs and biologicals in Addenda A and B to 
the proposed rule for which there was no ASP information available for 
April 2020 are based on mean unit cost in the available CY 2019 claims 
data. If ASP information becomes available for payment for the quarter 
beginning in January 2021, 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 the proposed rule (reflecting April 2020 ASP data) that do not have 
ASP information available for the quarter beginning in January 2021. 
These drugs and biologicals would then be paid based on mean unit cost 
data derived from CY 2019 hospital claims. Therefore, the proposed 
payment rates listed in Addenda A and B to the proposed rule are not 
for January 2021 payment purposes and are only illustrative of the CY 
2021 OPPS payment methodology using the most recently available 
information at the time of issuance of the 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 the 
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 plus 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 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 noted 
that we believed that these changes would better reflect the resources 
and production costs that biosimilar manufacturers incur. We also 
stated that we believe 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 explained that 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), 
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 2021, we propose 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 propose to continue our current policy for paying for 
nonpass-through biosimilars acquired under the 340B program, except 
that we propose to pay for these biosimilars at the biosimilar's ASP 
minus 28.7 percent of the biosimilar's ASP instead of the biosimilar's 
ASP minus 28.7 percent of the reference

[[Page 48882]]

product's ASP, in accordance with section 1833(t)(14)(A)(iii)(II) of 
the Act. ASP minus 28.7 percent reflects the proposed net payment rate.
3. Payment Policy for Therapeutic Radiopharmaceuticals
    For CY 2021, we propose 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 2021. Therefore, we propose for CY 2021 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 propose to rely on CY 2019 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 2021 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. Payment for Blood Clotting Factors
    For CY 2020, 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 2020, 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 2020 updated furnishing fee was $0.226 per unit.
    For CY 2021, we propose 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 propose 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 
our website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    We propose to provide payment for blood clotting factors under the 
same methodology as other separately payable drugs and biologicals 
under the OPPS and to continue payment of an updated furnishing fee. We 
will announce the actual figure of the percent change in the applicable 
CPI and the updated furnishing fee calculation based on that figure 
through the applicable program instructions and posting on the CMS 
website.
5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    For CY 2021, we propose to continue to use the same payment policy 
as in CY 2020 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 2021 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 2021 OPPS Payment Methodology for 340B Purchased Drugs
a. Overview and Background
Section Overview
    Under the OPPS, payment rates for drugs are typically based on 
their average acquisition cost. This payment is governed by section 
1847A of the Act, which generally sets a default rate of average sales 
price (ASP) plus 6 percent for certain drugs; however, the Secretary 
has statutory authority to adjust that rate under the OPPS. As 
described below, beginning in CY 2018, the Secretary adjusted the 340B 
drug payment rate to ASP minus 22.5 percent to approximate a minimum 
average discount for 340B drugs, which was based on findings of the GAO 
and MedPAC that hospitals were acquiring drugs at a significant 
discount under HRSA's 340B Drug Pricing Program. As described in the 
following sections, the United States District Court for the District 
of Columbia (the district court) concluded that the Secretary lacks the 
authority to bring the default rate in line with average acquisition 
cost unless the Secretary obtains survey data from hospitals on their 
acquisition costs. Although HHS disagrees with that ruling and appealed 
the decision, HHS meanwhile gathered the relevant survey data from 340B 
hospitals. As described in detail below, those survey data confirm that 
the ASP minus 22.5 percent rate is generous to 340B hospitals, and the 
survey data supports

[[Page 48883]]

an even lower payment rate. The following sections expand upon the 
points discussed in this overview.
Background
    In the CY 2018 OPPS/ASC proposed rule (82 FR 33558 through 33724), 
we proposed changes to the OPPS payment methodology for drugs and 
biologicals (hereinafter referred to collectively as ``drugs'') 
acquired under the 340B Program. We proposed these changes to better, 
and more accurately, reflect the resources and acquisition costs that 
these hospitals incur. We stated our belief 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 with pass-through payment status and 
vaccines) acquired under the 340B Program from average sales price 
(ASP) plus 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 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 
paid under the OPPS and therefore, are not subject to the OPPS payment 
policy for 340B-acquired drugs. 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 with 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 non-
excepted off-campus PBDs paid under the PFS. We adopted this payment 
policy effective for CY 2019 and subsequent years.
    We clarified in the CY 2019 OPPS/ASC proposed rule (83 FR 37125) 
that the 340B payment adjustment applies to drugs that are priced using 
either WAC or AWP, and that 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. 340B-
acquired drugs that are priced using AWP are paid an adjusted amount of 
69.46 percent of AWP. 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.
    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, we 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, were 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 were excepted from 
the 340B payment adjustment. These hospitals were 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 modifiers 
``JG'' and ``TB''.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
58981), we continued the Medicare 340B payment policies that were 
implemented in CY 2018 for CY 2019 and adopted a policy 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. In 
the CY 2020 OPPS/ASC final rule with comment period (84 FR 61321) we 
continued the 340B policies that were implemented in CY 2018 and CY 
2019.
    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 
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.\65\ 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.\66\ 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.\67\ 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,'' \68\ 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.'' \69\ Id. at 19. ``And 
because

[[Page 48884]]

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.'' \70\
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    \65\ American Hosp. Ass'n, et al. v. Azar, et al., No. 1:18-cv-
2084 (D.D.C. Dec. 27, 2018).
    \66\ Id. at 35 (quoting Amgen, Inc. v. Smith, 357 F.3d 103, 112 
(D.C. Cir. 2004) (citations omitted)).
    \67\ 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.
    \68\ Id. at 13.
    \69\ Id. at 19.
    \70\ Id. (citing Declaration of Elizabeth Richter).
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    We respectfully disagreed with the district court's understanding 
of the scope of the Secretary's adjustment authority. On July 10, 2019, 
the district court entered final judgment. The agency appealed to the 
D.C. Circuit, and on July 31, 2020 the court entered an opinion 
reversing the district court's judgement in this matter. Nonetheless, 
we stated in the CY 2020 OPPS/ASC final rule with comment period that 
we were taking the steps necessary to craft an appropriate remedy in 
the event of an unfavorable decision on appeal. Notably, after the CY 
2020 OPPS/ASC proposed rule was issued, we announced in the Federal 
Register (84 FR 51590) our intent to conduct a 340B hospital survey to 
collect drug acquisition cost data for certain quarters within CY 2018 
and 2019. We stated that such survey data may be used in setting the 
Medicare payment amount for drugs acquired by 340B hospitals for cost 
years going forward, and also may be used to devise a remedy for prior 
years if the district court's ruling is upheld on appeal. The district 
court itself acknowledged that CMS may base the Medicare payment amount 
on average acquisition cost when survey data are available.\71\ No 340B 
hospital disputed in the rulemakings for CY 2018 and 2019 that the ASP 
minus 22.5 percent formula was a conservative adjustment that 
represented the minimum discount that hospitals receive for drugs 
acquired through the 340B program, which is significant because 340B 
hospitals have internal data regarding their own drug acquisition 
costs. We stated in the CY 2020 OPPS/ASC final rule with comment period 
that we thus anticipated that survey data collected for CY 2018 and 
2019 would confirm that the ASP minus 22.5 percent rate is a 
conservative amount that overcompensates covered entity hospitals for 
drugs acquired under the 340B program. We also explained that a remedy 
that relies on such survey data could avoid the complexities referenced 
in the district court's opinion.
---------------------------------------------------------------------------

    \71\ See American Hosp. Assoc. v. Azar, 348 F. Supp. 3d 62, 82 
(D.D.C. 2018).
---------------------------------------------------------------------------

    We noted that under current law, any changes to the OPPS must be 
budget neutral, and reversal of the payment adjustment for 340B drugs, 
which raised rates for non-drug items and services by an estimated $1.6 
billion for 2018 alone, could have a significant economic impact on the 
approximately 3,900 facilities that are paid for outpatient items and 
services covered under the OPPS. In addition, we stated that any remedy 
that increases payments to 340B hospitals could significantly affect 
beneficiary cost-sharing. The items and services that could be affected 
by the remedy were provided to millions of Medicare beneficiaries, who, 
by law, are required to pay cost-sharing for most items and services, 
which is usually 20 percent of the total Medicare payment rate. 
Accordingly, we solicited comments on how to formulate an appropriate 
remedy in the event of an unfavorable decision on appeal. Those 
comments are summarized in the CY 2020 OPPS/ASC final rule with comment 
period (84 FR 61323 through 61327).
b. Hospital Acquisition Cost Survey for 340B-Acquired Specified Covered 
Outpatient Drugs (SCODs)
    As discussed in the CY 2020 OPPS/ASC final rule with comment period 
(84 FR 61326), we announced in the Federal Register (84 FR 51590) our 
intent to conduct a 340B hospital survey to collect drug acquisition 
cost data for the fourth quarter of CY 2018 and the first quarter of CY 
2019. We noted that the survey data may be used in setting the Medicare 
payment amount for drugs acquired by 340B hospitals for cost years 
going forward, and also may be used to devise a remedy for prior years 
in the event of an adverse decision on appeal in the pending 
litigation. We explained that our current policy to adjust payment for 
drugs acquired under the 340B program was the subject of litigation and 
while we believed we would prevail on appeal, we also believed it was 
prudent to use the Secretary's existing authority to collect survey 
data to set OPPS payment rates for drugs acquired under the 340B 
Program at rates based on hospitals' costs to acquire such drugs. We 
believe it is appropriate for the Medicare program to pay for SCODs 
purchased under the 340B program at a rate that approximates what 
hospitals actually pay to acquire the drugs, and we believe it is 
inappropriate for Medicare to subsidize other programs through Medicare 
payments for separately payable drugs. We stated that this approach 
will ensure that the Medicare program uses Medicare trust fund dollars 
prudently, while maintaining beneficiary access to these drugs and 
allowing beneficiary cost-sharing to be based on the amounts hospitals 
actually pay to acquire the drugs.
    Section 1833(t)(14)(D)(i)(I) of the Act required the Comptroller 
General of the United States to conduct a survey in each of 2004 and 
2005 to determine the hospital acquisition cost for each SCOD and, not 
later than April 1, 2005, to furnish data from such surveys to the 
Secretary for purposes of setting payment rates under the OPPS for 
SCODs for 2006. The Comptroller General was then required to make 
recommendations to the Secretary under section 1833(t)(14)(D)(i)(II) of 
the Act regarding the frequency and methodology of subsequent surveys 
to be conducted by the Secretary under clause (ii). Clause (ii) of 
section 1833(t)(14)(D) of the Act provides that the Secretary, taking 
into account such recommendations, shall conduct periodic subsequent 
surveys to determine the hospital acquisition cost for SCODs for use in 
setting payment rates under subparagraph (A) of section 1833(t)(14).
    In response to the requirements at section 1833(t)(14)(D)(i)(I) and 
(II) of the Act, the Government Accountability Office (GAO) surveyed 
hospitals and prepared a report that included its recommendations for 
the Secretary regarding the frequency and methodology for subsequent 
surveys.\72\ While GAO recognized that collecting accurate and current 
drug price data was important to ensure the agency does not pay too 
much or too little for drugs, GAO's 2006 report recommended that CMS 
conduct a streamlined hospital survey once or twice per decade because 
of the significant operational difficulties and burden that such a 
survey would place on hospitals and CMS.\73\ In response to questions 
about whether the data undercounted rebates, GAO acknowledged that 
their data did not include drug rebates or 340B rebates as part of its 
calculation.\74\ In the CY 2006 OPPS final rule, we explained that the 
data collected by the GAO was ultimately not used to set payment rates, 
in part because the data did not fully account for rebates from 
manufacturers or other price concessions or payments from group 
purchasing organizations made to hospitals (70 FR 68640). Instead, we 
adopted a policy to pay hospitals at ASP+6 percent because we believed 
ASP+6 percent was a reasonable level of payment for both the hospital 
acquisition and pharmacy overhead cost of drugs and biologicals (70 FR 
68642).
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    \72\ https://www.gao.gov/new.items/d06372.pdf.
    \73\ Id. at 18.
    \74\ https://www.gao.gov/new.items/d06372.pdf (Appendix I: 
Purchase Price for Drug SCODs).

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[[Page 48885]]

    Between 2006 and 2017, we have generally paid for separately 
payable drugs for which ASP data is available at ASP plus 6 percent. 
Beginning in 2018, we adopted the current policy to pay for 340B-
acquired drugs at ASP-22.5 percent to better align Medicare payment 
with acquisition costs for 340B-acquired drugs. The Medicare Payment 
Advisory Commission (MedPAC) has consistently stated that Medicare 
should institute policies that improve the program's value to 
beneficiaries and taxpayers. For example, in its March 2019 Report to 
the Congress, MedPAC noted that outpatient payments increased in part 
due to rapid growth in Part B drug spending. MedPAC stated this rapid 
growth in OPPS specifically, was ``largely driven by the substantial 
margins for drugs obtained through the 340B Drug Pricing Program.'' 
\75\ While we continue to believe that ASP+6 percent represents a 
reasonable proxy for Part B drug acquisition costs for most hospitals, 
we do not believe the same is true for hospitals that acquire Part B 
drugs under the 340B program since such hospitals are able to purchase 
drugs at deeply discounted 340B ceiling prices or at even lower ``sub-
ceiling'' prices. For this reason, we concluded that it was appropriate 
to survey 340B hospitals to gather drug acquisition cost data for drugs 
acquired under the 340B program to allow us to pay hospitals for these 
drugs at amounts that approximate the hospitals' acquisition costs.
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    \75\ http://www.medpac.gov/docs/default-source/reports/mar19_medpac_entirereport_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

Population of Surveyed Hospitals
    Because of our longstanding belief that ASP plus 6 percent is a 
reasonable proxy for hospital acquisition costs and overhead for 
separately payable drugs, we did not believe it was necessary or 
appropriate to burden hospitals that are not eligible to acquire drugs 
under the 340B program with a drug acquisition cost survey where we 
have a proxy for hospital acquisition costs for those drugs. ASP data 
does not, however, include 340B drug prices. (CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71800, 71960)). When GAO surveyed 
hospitals in 2005, it found that the survey ``created a considerable 
burden for hospitals as the data suppliers and considerable costs for 
GAO as the data collector,'' and recommended that CMS survey hospitals 
only once or twice per decade to ``occasionally validat[e] CMS's proxy 
for SCODs' average acquisition costs--the [ASP] data that manufacturers 
report.'' GAO Report to Congress: Survey Shows Price Variation and 
Highlights Data Collection Lessons and Outpatient Rate-Setting 
Challenges for CMS, 4 (April 2006). Section 1833(t)(14)(D)(ii) requires 
the Secretary, in conducting periodic subsequent surveys, to take into 
account GAO's recommendations on the frequency and methodology of 
subsequent surveys. We considered GAO's conclusion that the 2005 survey 
created ``considerable burden'' for hospitals and, thus, only surveyed 
340B hospitals given our belief that the current payment rate for non-
340B hospitals continues to be an appropriate rate. For the same 
reason, we also limited the data we requested from 340B hospitals to 
acquisition costs for 340B-acquired drugs, rather than for drugs 
purchased outside the 340B program for 340B participating hospitals. We 
note that section 1833(t)(14)(D)(ii) refers to use of surveys conducted 
by the Secretary to determine the hospital acquisition costs for SCODs 
in setting payment rates under subparagraph (A). Therefore, we believe 
it is appropriate to read the two provisions together that permit the 
Secretary to survey 340B hospitals only and formulate a 340B payment 
policy for this hospital group that is distinct from the payment policy 
for non-340B hospitals.
Survey Methodology
    Under the authority at section 1833(t)(14)(D)(ii) to conduct 
periodic subsequent surveys to determine hospital acquisition costs, we 
administered the survey to 1,422 340B entities between April 24 and May 
15, 2020. We requested that all hospitals that participated in the 340B 
program, including rural sole community hospitals (SCHs), children's 
hospitals, and PPS-exempt cancer hospitals (which are currently exempt 
from the Medicare 340B payment rate adjustment), supply their average 
acquisition cost for each SCOD purchased under the 340B program during 
in the last quarter of CY 2018 (October 1, 2018 through December 31, 
2018) and/or first quarter of 2019 (January 1, 2019 through March 31, 
2019), which could be the 340B ceiling price, a 340B sub-ceiling price, 
or another amount, depending on the discounts the hospital received 
when it acquired a particular drug. The ceiling price is the maximum 
amount covered entities may permissibly be required to pay for a drug 
under section 340B(a)(1) of the Public Health Service Act, so we would 
not expect any 340B hospital to have acquisition costs for any acquired 
drug that are greater than the ceiling price. For this reason, where 
the acquisition price for a particular drug was not available or 
submitted in response to the survey, we stated that we would use the 
340B ceiling price for that drug as a proxy for the hospitals' 
acquisition cost in order to produce the most conservative drug 
discount for when data was missing or not submitted.
    We incorporated valuable input from stakeholders on the development 
and construction of the 340B acquisition cost survey. We collected the 
stakeholders' input in two rounds of public comment through the survey 
Paperwork Reduction Act (PRA) submission process. We published the 
initial 340B drug hospital acquisition cost survey proposal in the 
Federal Register (84 FR 51590) for a 60-day public comment period that 
began September 30, 2019 and ended November 29, 2019. After 
incorporating comments from the 60-day public comment period, we 
released a revised 340B acquisition cost survey proposal in the Federal 
Register (85 FR 7306) for a 30-day public comment period from February 
7, 2020 to March 9, 2020.
    After incorporating the stakeholders' comments and suggestions from 
the second public comment period, OMB approved CMS' survey design (OMB 
control number 0938-1374, expires 10/31/2021), and CMS released the 
340B acquisition cost survey to the relevant 340B hospitals under the 
OPPS. As mentioned earlier in this section, the survey was open from 
April 24, 2020, to May 15, 2020. The survey sample was 100 percent of 
the potential respondent universe, or all hospitals that acquired drugs 
under the 340B Program and were paid for those drugs under OPPS in the 
fourth quarter of 2018 and/or the first quarter of 2019. We provided 
respondents with two options to complete the survey: the Detailed 
Survey and the Quick Survey.
    Respondents that selected the Detailed Survey provided acquisition 
costs for each individual SCOD. We requested that these respondents 
report the net acquisition cost for each SCOD that they acquired under 
the 340B program (that is, the sub-ceiling price after all applicable 
discounts). We stated that if the acquisition cost for the SCOD was 
unknown, the respondent may leave the field blank and we would use the 
340B ceiling price as a proxy for the acquisition cost for that drug. 
In the survey instructions, we stated that acquisition cost for 
purposes of the survey meant the price that the hospitals paid upon 
receiving the product, including, but not limited to,

[[Page 48886]]

prices paid for 340B drugs purchased via a replenishment model under 
the 340B program, or under penny pricing. We explained that applicable 
discounts are any discounts below the discounted ceiling price. We also 
made clear that for purposes of the survey the 340B drug acquisition 
cost should be reported regardless of whether the drug was dispensed at 
all, or whether the drug was dispensed in multiple settings. We only 
requested the acquisition cost of the drugs acquired under the 340B 
program during the specified timeframes: the fourth quarter of 2018 
and/or the first quarter of 2019. We also stated that acquisition costs 
for drugs acquired by 340B hospitals outside of the 340B program should 
not be submitted in response to the survey.
    The Quick Survey option allowed the hospital to indicate that it 
preferred that CMS utilize the 340B ceiling prices obtained from (HRSA) 
as reflective of their hospital acquisition costs. Additionally, we 
stated that in instances where the acquisition price for a particular 
drug is not available or submitted in response to the survey, we would 
use the 340B ceiling price for that drug as a proxy for the hospitals' 
acquisition cost because the price for a drug acquired under the 340B 
program cannot be higher than the 340B ceiling price by statute. 
Finally, we noted that where a hospital did not affirmatively respond 
to the Detailed or Quick Survey within the open period of response, we 
would use the 340B ceiling prices in lieu of their responses because 
the ceiling price represents the highest possible price that a 340B 
hospital could permissibly be required to pay for a 340B-acquired drug.
c. Analysis of Hospital Acquisition Cost Survey Data for 340B Drugs
    The results of the survey, which closed on May 15, 2020 are as 
follows: Seven percent (n=100) of surveyed hospitals affirmatively 
responded via the Detailed Survey option; 55 percent (n=780) of 
surveyed hospitals affirmatively responded via the Quick Survey option; 
and the remaining 38 percent (n=542) of surveyed hospitals did not 
respond affirmatively to either survey option. As previously noted, we 
applied 340B ceiling prices for hospitals that did not affirmatively 
respond to the survey; such action may skew the survey results towards 
the minimum average discount (that is, the ceiling price) that a 340B 
hospital would receive on a drug.
    We also examined the hospital characteristics of those hospitals 
that submitted either a Detailed or Quick Survey to the general 340B 
survey population. The characteristics we analyzed included hospital 
bed count, teaching hospital status, hospital type, and geographic 
classification as a rural or urban hospital. Our findings showed that 
the survey respondent hospitals were generally similar to the general 
340B survey population.
d. Proposed Payment Policy for Drugs Acquired Under the 340B Program 
for CY 2021 and Subsequent Years
(1) Grouping Hospitals by 340B Covered Entity Status
    Section 1833(t)(14)(A)(iii)(I) authorizes the Secretary to set the 
amount of payment for SCODs at an amount equal to the average 
acquisition cost for the drug for that year (which, at the option of 
the Secretary, may vary by hospital group (as defined by the Secretary 
based on volume of covered OPD services or other relevant 
characteristics)), as determined by the Secretary taking into account 
the hospital acquisition cost survey data under subparagraph (D). In 
this proposed rule, we are exercising the authority to vary the amount 
of payment for the group of hospitals that is enrolled in the 340B 
program because their drug acquisition costs vary significantly from 
those not enrolled in that program. Section 1833(t)(14)(A)(iii) of the 
Act allows the Secretary to exercise discretion to vary payment by 
hospital group, ``as defined by the Secretary based on the volume of 
covered OPD services or other relevant characteristics.'' We believe 
that is it within the Secretary's authority to distinguish between 
hospital groups based on whether or not they are covered entities under 
section 340B(a)(4) of the PHSA that are eligible to receive drugs and 
biologicals at discounted rates under the 340B program. We believe that 
the significant drug acquisition cost discounts that 340B covered 
entity hospitals receive enable these hospitals to acquire drugs at 
much lower costs than non-340B hospitals incur for the same drugs. 
Accordingly, we propose to use 340B covered entity status as a relevant 
characteristic to group hospitals for purposes of payment based on 
average acquisition cost under section 1833(t)(14)(A)(iii)(I).
(2) Applying a Single Reduction Amount to ASP for 340B-Acquired Drugs
    Section 1833(t)(14)(A)(iii)(I) provides that the payment amount for 
a SCOD for a year is equal to the average acquisition cost for the drug 
``as determined by the Secretary taking into account'' the survey data 
collected under subparagraph (D). We interpret the reference to 
acquisition costs being ``determined'' by the Secretary, ``taking into 
account'' survey data, to give us discretion to determine the 
appropriate payment rate based on data collected from the hospital 
acquisition cost survey for 340B drugs. We propose to apply a single 
discount factor to ASP for drugs acquired by 340B hospitals in lieu of 
calculating individual acquisition cost amounts for 340B-acquired 
drugs. We note that 340B ceiling prices are protected from disclosure 
both because the prices themselves are sensitive, and because they 
could potentially be used to reverse-engineer average manufacturer 
prices, which are protected under section 1927(b)(3)(D). We also 
pledged confidentiality of individual responses regarding acquisition 
prices for each SCOD to the extent required by law. Given that the 
survey data is heavily weighted towards 340B ceiling prices (because 
340B ceiling prices were used for any SCODs within the Detailed Survey 
for which a hospital did not provide responses, for hospitals that 
selected the Quick Survey option, and for hospitals that did not 
affirmatively respond) and since ceiling prices are protected by law 
from public disclosure, we are instead proposing to establish one 
aggregate discount amount relative to ASP for SCODs acquired under the 
340B program rather than proposing drug-specific prices, which could 
reveal sensitive or protected pricing information.
(3) Methodology To Calculate ASP Reduction Amount Based on Survey Data
    As described in detail in the following sections, we analyzed the 
survey results and applied various statistical methodologies to 
determine an appropriate average or typical amount by which to reduce 
ASP that would approximate hospital acquisition costs for 340B drugs 
and biologicals. In fairness to hospitals, we generally chose 
methodologies that yield the most conservative reduction to ASP when 
establishing the payment rate, and thus would be most generous to 
hospitals. This includes the use of 340B ceiling prices, which must be 
kept confidential, where applicable in the survey results. Based on our 
analysis of the available information, we estimate that the typical 
acquisition cost for 340B drugs for hospitals paid under the OPPS is 
ASP minus 34.7 percent.
    We determined the average discount of 34.7 percent by assessing a 
number of factors including: Multiple measures of central tendencies 
(arithmetic mean,

[[Page 48887]]

median, geometric mean); the effect of including penny priced drugs; 
mapping of multi-source NDCs to a single HCPCS code; weighting values 
by volume/utilization; and applying trimming methodologies to remove 
anomalous or outlier data. The analysis of each of these variables is 
discussed in the next section.
(a) Selecting an Averaging Methodology
    When determining the appropriate average reduction amount relative 
to ASP for 340B drugs, we assessed multiple measures of central 
tendencies, including the arithmetic mean, median, and geometric mean, 
on the typical 340B discount based on drug acquisition cost survey 
data. Based upon the cumulative data from the Detailed Survey option, 
the Quick Survey option, and imputed responses for hospitals that did 
not affirmatively respond, we analyzed the effects of each averaging 
method, combining the data from all three sources in both survey 
quarters (fourth quarter 2018 and first quarter 2019). Using the raw 
data without accounting for outliers, we determined that the arithmetic 
mean would result in an average discount from ASP of approximately 66.3 
percent; the median would result in an average discount from ASP of 
approximately 70.4 percent, and the geometric mean would result in an 
average discount from ASP of approximately 58.3 percent.
    Under the OPPS, we generally calculate resource costs for a given 
service using the geometric mean. The geometric mean minimizes the 
effects of the outliers without ignoring them. Minimizing outliers is 
consistent with our methodology to estimate an average or typical 340B 
discount that is representative across all 340B SCODs. Therefore, we 
propose to utilize the geometric mean discount to ASP from both survey 
quarters--2018 Q4 and 2019 Q1--as a component of our overall analysis 
of the survey data. Without any further adjustments, applying the 
geometric mean to the survey results would result in an average drug 
acquisition cost estimate of ASP minus 58.3 percent for 340B acquired 
drugs.
(b) Volume Weighting Survey Data
    While we realize the geometric mean minimizes the effects of some 
outliers, it does not take into consideration several other important 
factors. Notably, we believe that in calculating the average discount 
that 340B drugs receive relative to ASP, we should take into account 
how often those drugs were billed by all hospitals under the OPPS for 
2018 and 2019, to give a better reflection of each drug's overall 
utilization under the OPPS. Therefore, we volume-weighted the drug 
discounts determined from the survey to mirror the drug utilization in 
the OPPS. That is, drugs that were commonly used were assigned a higher 
weight while those less commonly used were assigned a lower weight. We 
incorporated volume weighting into our analysis by assessing the 
utilization rate of each individual drug (using its HCPCS code) under 
the OPPS for CY 2018 and CY 2019. Specifically, we calculated the 
average discount by taking the utilization of each drug under the OPPS 
into account to arrive at a case-weighted average for each HCPCS code. 
For example, a highly utilized HCPCS code for an oncology drug would be 
weighted higher than that of a drug for snake anti-venom that has a 
relative low utilization in the OPPS. The data for CY 2018 Q4 was 
volume weighted based upon OPPS utilization during CY 2018 as 
determined using OPPS claims data. The data for CY 2019 Q1 was volume 
weighted based upon OPPS utilization during CY 2019 as determined using 
OPPS claims data. This resulted in a change in the geometric mean to an 
average discount of 58.0 percent from 58.3 percent non-weighted.
(c) Addressing HCPCS Code With Multiple NDCs
    In addition, a small portion of the SCODs that were subject to the 
340B drug acquisition cost survey contain multiple NDCs that map to a 
single HCPCS code. This is because these drugs are multiple source 
drugs, meaning that they were manufactured by different entities and 
have varying package sizes or strengths, and thus, multiple different 
NDCs for the same drug. For payment purposes under the OPPS, we pay for 
drug products based on the drug's HCPCS code, regardless of which NDC 
is used. Hospitals that completed the Detailed Survey option were 
instructed to report their average acquisition costs for each drug 
during the surveyed quarters per HCPCS code. However, for those 
hospitals that opted for the Quick Survey option or that did not 
affirmatively respond, we were unable to determine which combination of 
NDCs mapped to the HCPCS codes these entities would have used during 
the given quarters. Therefore, we analyzed the effects of averaging all 
of the NDCs' acquisition costs for a given HCPCS when determining the 
average discount, as well as selecting the NDC with the highest 
acquisition cost for a given HCPCS code and using that NDC's 
acquisition cost amount to determine the average discount. When we 
calculate the average discount using an average of the acquisition 
costs for all of the NDCs assigned to the HCPCS code, the average 
volume weighted geometric mean discount off of ASP is 58.0 percent. The 
58.0 percent was calculated by taking all of the various NDCs (across 
various manufacturers, package sizes, and strengths) for the same drug 
and averaging the unit costs together in order to arrive at a single 
amount for each HCPCS code for a drug. When we calculated the average 
discount using the highest acquisition cost NDC for each HCPCS code for 
a drug, the average volume weighted geometric mean discount from ASP is 
47.0 percent. This was achieved by analyzing all of the various NDCs 
(across various manufacturers, package sizes, and strengths) assigned 
to the HCPCS code for the same drug and selecting the NDC that has the 
highest unit cost in order to arrive at a single cost for each HCPCS 
code. Consistent with the general principle of choosing the 
methodological approach that is most generous to hospitals, we propose 
to use the highest acquisition cost NDC for each HCPCS code for a drug 
to determine the average 340B discount.
(d) Addressing Penny Pricing in the Survey Data
    As part of our analysis of the survey data, we examined the effect 
of including ``penny priced'' drugs on the average discount off of ASP. 
The 340B ceiling price is statutorily defined as the Average 
Manufacturer Price (AMP) reduced by the rebate percentage, which is 
commonly referred to as the Unit Rebate Amount (URA).\76\ The 
calculation of the 340B ceiling price is defined in section 340B(a)(1) 
of the PHSA. Penny pricing occurs when, under section 1927(c)(2)(A) of 
the Social Security Act, the AMP increases at a rate faster than 
inflation, in which case the manufacturer is required to pay an 
additional rebate amount, which is reflected in an increased URA and 
could result in a 340B ceiling price of zero. We propose to exclude 
penny priced drugs to remove outliers that may distort the average 
discount in order to provide the most conservative estimate of the 
average 340B discount from ASP. HRSA noted in the 340B Drug Pricing 
Program Ceiling Price and Manufacturer Civil Monetary Penalties 
Regulation Final Rule (82 FR 1210) that although infrequent, that there 
are instances when the 340B ceiling price is zero. HRSA did not believe 
that it is consistent with the statutory scheme to

[[Page 48888]]

set the price at zero. In this circumstance, HRSA required that 
manufacturers charge a $0.01 for the drug, which they believed best 
effectuates the statutory scheme by requiring a payment.\77\
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    We acknowledge that penny pricing of drugs is not intended to be 
permanent and, by its very nature, is dynamic, meaning the select group 
of drugs to which penny pricing applies could vary from quarter to 
quarter. We analyzed the inclusion and exclusion of penny pricing on 
the overall average discount of 340B drugs compared to ASP. As 
expected, we found that the excluding penny pricing provides a much 
more conservative estimate of the average 340B discount from ASP 
relative to including penny pricing. When we excluded penny pricing, 
the geometric mean volume weighted average discount, using the highest 
NDC for a drug's HCPCS code, decreased to 40.9 percent from 47.0 
percent. We observed penny pricing in less than 10 percent of the drugs 
surveyed. Because penny pricing is dynamic and the drugs to which it 
applies may vary from quarter to quarter, we believe it is appropriate 
to propose to exclude penny pricing from our survey analysis, although 
we acknowledge that penny pricing, when it does apply, represents the 
acquisition cost for the drug to which it applies.
    We are concerned that including a discount of a penny priced drug 
from the two quarters surveyed may inappropriately increase the average 
discount, where the drug may not have been priced based on penny 
pricing in following or preceding quarters. However, it also is the 
case that a drug could have penny pricing for any given quarter and it 
could be appropriate to include penny priced drugs in the calculation 
of the average acquisition cost because in such cases, penny prices do 
represent the maximum (ceiling) price the 340B hospital would pay for 
that drug. Nonetheless, in order to provide for a more conservative 
discount estimate, we propose to exclude penny priced drugs at this 
time from our analysis, but we welcome public comment on whether such 
policy accurately represents 340B-drug acquisition costs.
(e) Addressing Outliers
    In response to the Detailed Survey, hospitals provided some drug 
acquisition cost data that exceeded 340B ceiling prices, and in some 
cases even exceeded the ASP or ASP+6 percent payment rate for certain 
drugs. As previously noted, covered entities cannot be required to pay 
more than the ceiling price to acquire a drug under the 340B program. 
Therefore, we attributed any Detailed Survey acquisition cost data 
greater than the ceiling price to potential data entry error, for 
instance, miscalculation or incorrect decimal point placement. However, 
because hospitals may have been overcharged for their drug acquisition 
costs and could have accurately reported acquisition costs greater than 
the HRSA ceiling price, we did not eliminate these data from our 
calculations. Instead, consistent with our standard methodology for 
processing extreme outliers under the OPPS, we excluded responses for 
any SCODs that were three standard deviations from the geometric mean. 
We believe applying a three standard deviation limit to the reported 
acquisition data is appropriate because it removes outliers from both 
the high and low reported values. In addition, applying a three 
standard deviations limit may be more representative of the 
respondents' acquisition cost, even though it may not eliminate some 
data values that are above the ceiling price. While this approach means 
that some values above the ceiling price will be included in our data 
analysis, we are not proposing to trim them because we propose to apply 
a standard trimming methodology. The cumulative application of this 
trimming methodology, along with other methodologies applied to the 
survey data described above, results in an average acquisition cost for 
drugs that hospitals acquire under the 340B program of ASP minus 34.7 
percent. For the reasons previously discussed, we propose to exclude 
survey data from the Detailed Survey that is more than three standard 
deviations from the mean. We note that we also explored capping any 
survey submissions received at the 340B ceiling price, as no covered 
entity can be required to pay more than the ceiling price. This 
approach, holding all other methodological approaches constant, would 
have resulted in an average acquisition cost of ASP minus 41.5 percent 
for drugs acquired under the 340B program.
    Table 26, Aggregate 340B Drug Program Cost Savings Percentage 
Relative to ASP, shows the aggregate 340B drug program discount 
percentage relative to ASP using several different statistical 
measures. In this table, we outlined some additional figures following 
a similar path as described above. For example, we arrived at the 33.8 
percent figure in the table under median, and penny pricing excluded, 
by initially choosing the median as the averaging methodology, and then 
performing trimming methodologies as described above, which include 
volume weighting by HCPCS, using the highest NDC per HCPCS, and using 
only data within three standard deviations of the median. This would 
have resulted in a final proposed discount of 33.8 percent. While this 
final discount appears more generous to hospitals than our proposal, we 
do not believe it is appropriate. Specifically, we believe using the 
geometric mean as outlined in the methodology above is the most 
generous methodology for establishing a final discount amount that also 
maintains accuracy and consistency with past OPPS practices. As 
described previously, under the OPPS, we generally calculate resource 
costs for a given service using the geometric mean. The geometric mean 
minimizes the effects of the outliers without ignoring them. As an 
additional example, under the arithmetic mean methodology with penny 
pricing included in table 26, the final determined discount was 
determined to be 23.1 percent. We arrived at this figure of 23.1 
percent by initially choosing the arithmetic mean as the averaging 
methodology, and then performing trimming methodologies as described 
above, with the exception of including penny prices in this figure. 
Similar to the discussion above regarding the use of the median, we do 
not think utilizing the arithmetic mean is appropriate or consistent 
with the averaging methodologies historically used under the OPPS. The 
arithmetic mean could easily skew towards outlier data and anomalous 
data not captured by previously described trimming methodologies. 
Additionally, with this 23.1 percent figure, while penny pricing is a 
valid maximum (i.e., ceiling) price for drugs to which it applies, as 
noted above we believe it would be appropriate to exclude penny priced 
drugs for purposes of our proposal.
    We believe the manner in which we arrived at the proposed payment 
amount of ASP minus 34.7 percent for 340B-acquired drugs is the most 
appropriate and accurate method of determining the average discount or 
typical discount. We believe it is reflective of stakeholder's actual 
acquisition costs, and is as generous as possible without compromising 
accuracy. We also believe the geometric mean is the most appropriate 
averaging methodology as it mitigates the effects of outliers relative 
to the arithmetic mean and median and is consistent with OPPS payment 
methodologies. Although ceiling prices are protected by

[[Page 48889]]

statute and the respondents to the survey were given a pledge of 
confidentiality, we are exploring and seek comment on the possibility 
of providing microdata to qualified researchers through their 
restricted access infrastructure, in accordance with best practices for 
transparency.
[GRAPHIC] [TIFF OMITTED] TP12AU20.044

(4) Determining an Add-on Payment for 340B Drugs
    Under the OPPS, Medicare pays separately payable drugs at rates 
that approximate their acquisition costs, such as at ASP or WAC. These 
drugs typically also receive an add-on payment. Under the OPPS, section 
1833(t)(14)(E) authorizes, but does not require, the Secretary to make 
an adjustment to payment rates for SCODs to take into account overhead 
and related expenses, such as pharmacy services and handling costs.
    In the MedPAC report from 2005,\78\ MedPAC recommended that the 
Secretary:
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     Establish separate, budget neutral payments to cover the 
costs that hospitals incur for handling separately paid drugs, 
biologicals, and radiopharmaceuticals;
     define a set of handling fee APCs that group drugs, 
biologicals, and radiopharmaceuticals based on attributes of the 
products that affect handling costs;
     instruct hospitals to submit charges for those APCs; and
     base payment rates for the handling fee APCs on submitted 
charges, reduced to costs.
    Because we took a conservative approach in estimating the average 
acquisition costs for 340B-acquired drugs, we do not believe that it is 
imperative to establish an add-on for overhead and handling as we 
believe that such a conservative estimate may already account for the 
costs of overhead and handling. In addition, our current 340B drug 
payment policy under the OPPS pays separately payable drugs at ASP 
minus 22.5 percent with no add-on payment because this payment rate 
represents the minimum average discount that a 340B entity would 
receive on a drug. We believe hospitals receive a significant margin on 
340B drugs under our current policy, so an additional add-on payment is 
not necessary. Nonetheless, under the methodology in section 1847A, the 
Part B payments for separately payable drugs and biologicals furnished 
by practitioners and certain suppliers generally include an add-on set 
at 6 percent of the ASP for the specific drug. As discussed in the CY 
2019 Physician Fee Schedule final rule with comment period (83 FR 
59661-59662) the 6 percent add-on is widely believed to include 
services associated with drug acquisition that are not separately paid 
for, such as handling, storage, and other overhead. We realize that the 
acquisition costs for drugs acquired under the 340B program are 
significantly lower than for those drugs purchased outside of the 340B 
program, so we did not find it appropriate to base the add-on for 340B 
drugs on the 340B acquisition cost as previously discussed. However, we 
believe that it is reasonable to assume that a given drug will have 
similar overhead and other administrative costs regardless of whether 
the drug was purchased under the 340B Program or a by non-340B entity. 
Additionally, utilizing a drug add-on will ensure a level of payment 
parity with the add-on that applies to Part B drugs outside of the 340B 
program.
    Therefore, for CY 2021 and subsequent years, we propose to pay for 
drugs acquired under the 340B program at ASP minus 34.7 percent, plus 
an add-on of 6 percent of the product's ASP, for a net payment rate of 
ASP minus 28.7 percent. Under this payment methodology, each drug would 
receive the same add-on payment regardless of whether it is paid at the 
340B rate or at the traditional ASP rate for drugs not purchased under 
the 340B program. We note that this add-on percentage would be more 
generous to hospitals than adding 6 percent of the reduced 340B rate. 
As an example, assuming a non-340B drug is paid its ASP of $1,000 and 
$60 for the 6 percent add-on, the 340B rate would be $653 ($1,000-$347) 
plus $60 or $713 total, instead of $653 plus $39.18 (6 percent of the 
reduced rate of $653) which would equal $39.18 or $692.18 total. We 
propose that this payment methodology would be our Medicare payment 
policy for 340B-acquired drugs going forward for CY 2021 and subsequent 
years.
(5) 340B Payment Policy for Drugs for Which ASP Is Unavailable
    As we clarified in the CY 2019 OPPS/ASC proposed rule, 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. We propose the 340B payment adjustment for 
WAC-priced drugs mirror that of ASP payment with

[[Page 48890]]

payment being WAC minus 34.7 percent plus 6 percent of the drug's WAC, 
except for when WAC plus 3 percent policy applies under 1847A(c)(4) and 
as discussed in V.B.2.b., for which we would propose a payment rate of 
WAC minus 34.7 percent plus 3 percent of the drug's WAC. Previously, 
AWP-priced drugs have had a payment rate of 69.46 percent of AWP when 
the 340B payment adjustment is applied. The 69.46 percent of AWP was 
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 applied 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. 
Similarly, for CY 2021, we propose to pay for drugs paid at AWP under 
the 340B program at 95 percent AWP first reduced by 6 percent to 
generate a value that is similar to ASP or WAC with no percentage mark 
up. Then we propose to apply the net 28.7 percent reduction resulting 
in a payment rate of 63.90 percent of AWP.
 (6) 340B Payment Policy Exemptions
    In the CY 2018 OPPS/ASC proposed rule, we sought public comment on 
whether, due to access to care issues, certain groups of hospitals, 
such as those with special adjustments under the OPPS (for example, 
children's hospital or PPS-exempt cancer hospitals) should be excepted 
from a policy to adjust OPPS payments for drugs acquired under the 340B 
program. Specifically, in accordance with section 1833(t)(7)(D)(ii) of 
the Act, we make transitional outpatient payments (TOPs) to both 
children's and PPS-exempt cancer hospitals. This means that these 
hospitals are permanently held harmless to their ``pre-BBA amount,'' 
and they receive hold harmless payments to ensure that they do not 
receive a payment that is lower in amount under the OPPS than the 
payment amount they would have received before implementation of the 
OPPS. Accordingly, if we were to reduce drug payments to these 
hospitals on a per claim basis, it is very likely that the reduction in 
payment would be paid back to these hospitals at cost report 
settlement, given the TOPs structure. Taking into consideration the 
comments regarding rural hospitals, we believed further study on the 
effect of the 340B drug payment policy was warranted for classes of 
hospitals that receive statutory payment adjustments under the OPPS. 
Accordingly, we believed and continue to believe it is appropriate to 
exempt children's and PPS-exempt cancer hospitals from the alternative 
340B drug payment methodology.
    In addition to the children's and PPS-exempt cancer hospitals, 
Medicare has long recognized the particularly unique needs of rural 
communities and the financial challenges rural hospital providers face. 
Across the various Medicare payment systems, CMS has established a 
number of special payment provisions for rural providers to maintain 
access to care and to deliver high quality care to beneficiaries in 
rural areas. With respect to the OPPS, section 1833(t)(13) of the Act 
provided the Secretary the authority to make an adjustment to OPPS 
payments for rural hospitals, effective January 1, 2006, if justified 
by a study of the difference in costs by APC between hospitals in rural 
areas and hospitals in urban areas. Our analysis showed a difference in 
costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a 
payment adjustment for rural SCHs of 7.1 percent for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, brachytherapy sources, and devices paid under the pass-
through payment policy, in accordance with section 1833(t)(13)(B) of 
the Act. We have continued this 7.1 percent payment adjustment since 
2006.
    For CY 2021 and subsequent years, similar to previous years, we 
propose that rural sole community hospitals (as described under the 
regulations at 42 CFR 412.92 and designated as rural for Medicare 
purposes), children's hospitals, and PPS-exempt cancer hospitals would 
be excepted from the 340B payment adjustment and that these hospitals 
continue to report informational modifier ``TB'' for 340B-acquired 
drugs, and continue to be paid ASP+6 percent. We may revisit our policy 
to exempt rural SCHs, as well as other hospital designations for 
exemption from the 340B drug payment reduction, in future rulemaking.
    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. Similarly, for CY 2021, we propose to pay nonpass-
through biosimilars acquired under the 340B Program at the biosimlar's 
ASP minus the net payment discount reduction, 34.7 percent plus an add 
on of 6 percent, of the biosimilar's ASP, for a net payment rate of the 
biosimilar's ASP minus 28.7 percent of the biosimilar's ASP.
e. Alternative Proposal To Continue Policy To Pay ASP-22.5 Percent
    Previously, we adopted the OPPS 340B payment policy based on the 
average minimum discount for 340B-acquired drugs being approximately 
ASP minus 22.5 percent. The estimated discount was based on a MedPAC 
analysis identifying 22.5 percent as a conservative minimum discount 
that 340B entities receive when they purchased drugs under the 340B 
program, which we discussed in the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 52496). We continue to believe that ASP minus 
22.5 percent is an appropriate payment rate for 340B-acquired drugs 
under the authority of 1833(t)(14)(A)(iii)(II) for the reasons we 
stated when we adopted this policy in CY 2018 (82 FR 59216). On July 
31, 2020, the D.C. Circuit reversed the decision of the district court, 
holding that this interpretation of the statute was reasonable. 
Therefore, we also propose in the alternative that the agency could 
continue the current Medicare payment policy for CY 2021. If adopted, 
this proposed policy would continue the current Medicare payment policy 
for CY 2021 and subsequent years.
Summary
    In summary, we propose for CY 2021 and subsequent years to pay for 
drugs acquired under the 340B program at ASP minus 34.7 percent, plus 
an add-on of 6 percent of the product's ASP, for a net payment rate of 
ASP minus 28.7 percent using the authority under section 
1833(t)(14)(A)(iii)(I) of the Act. This proposal includes our 
previously discussed methodology used to arrive at the 34.7 percent 
average discount that we propose to apply to all drugs acquired under 
the 340B program. This methodology includes using the geometric mean of 
the survey data, volume weighting the average based upon utilization of 
the drug in the OPPS, using the highest priced NDC when multiple NDCs 
are available for a single HCPCS code, eliminating penny pricing from 
the average, and eliminating any data outside of 3 standard deviations 
from the mean when calculating the average discount of 34.7 percent. 
Our intent is that, if finalized, this payment methodology would apply 
begin January 1, 2021 and any changes to this permanent payment policy 
would be required to be adopted through notice and comment rulemaking. 
We are also proposing that Rural SCHs, PPS-exempt cancer hospitals and 
children's hospitals would be exempted from the 340B

[[Page 48891]]

payment policy for CY 2021 and subsequent years. Finally, we note that 
we propose in the alternative to continue our current policy of paying 
ASP minus 22.5 percent for 340B-acquired drugs as we prevailed on 
appeal to the D.C. Circuit in the litigation.
7. Proposed High Cost/Low Cost Threshold for Packaged Skin Substitutes
a. Background
    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 package 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 earlier 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 2020, the payment rate for APC 
5053 (Level 3 Skin Procedures) was $497.02, the payment rate for APC 
5054 (Level 4 Skin Procedures) was $1,622.74, 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 2020 OPPS/ASC final rule with 
comment period, correction notice (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 propose to continue it for CY 2021. 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). Beginning in CY 2016 and in subsequent years, we 
adopted a policy where we determined 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. We assigned each skin substitute that exceeded 
either the MUC threshold or the PDC threshold to the high cost group. 
In addition, we assigned 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 (84 FR 61327 through 61328).
    However, some skin substitute manufacturers have raised concerns 
about significant fluctuation in both the MUC threshold and the PDC 
threshold from year to year using the methodology developed in CY 2016. 
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 are 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 request for 
comments in the CY 2018 OPPS/ASC proposed rule about possible 
refinements to the

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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.
    For CY 2020, we sought more extensive comments on the two policy 
ideas that generated the most comment from the CY 2019 comment 
solicitation. One of the ideas was to establish a payment episode 
between 4 to 12 weeks where a lump-sum payment would be made to cover 
all of the care services needed to treat the wound. There would be 
options for either a complexity adjustment or outlier payments for 
wounds that require a large amount of resources to treat. The other 
policy idea 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.
b. Discussion of CY 2019 and CY 2020 Comment Solicitations for Episode-
Based Payment for Graft Skin Substitute Procedures
    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 
have 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 believe 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 encouraged us to continue to study the 
issues with episode-based payment. Therefore, we sought 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 sought comments on was 
whether 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.
    Several commenters were in favor of establishing a comprehensive 
APC with either an option for a complexity adjustment or outlier 
payments to pay for higher cost skin substitute application procedures. 
The commenters supported the idea of having a traditional comprehensive 
APC payment for standard wound care cases with a complexity adjustment 
or outlier payment to handle complicated or costly cases. However, they 
also expressed concerns about how many payment levels would be 
available in the skin substitute procedures APC group since a 
complexity adjustment can only be used if there is an existing higher-
paying APC to which the service receiving the complexity adjustment may 
be assigned. A couple of commenters wanted more opportunities for 
services to receive a complexity adjustment through using clusters of 
procedure codes that reflect the full range of wound care services a 
beneficiary receives instead of using code pairs to determine if a 
complexity adjustment should apply. Other commenters suggested that 
episodic payments be risk-adjusted to account for clinical conditions 
and co-morbidities of beneficiaries with outlier payments and that 
complexity adjustments be linked to beneficiaries with more 
comorbidities.
    Some commenters opposed the idea of a complexity adjustment for 
skin

[[Page 48893]]

substitute application procedures. The commenters stated there was not 
enough detail in the comment solicitation to understand how a 
complexity adjustment would work with an episodic payment arrangement. 
Commenters also expressed concerns that payment rates for comprehensive 
APCs may not be representative of the wound care services that would be 
paid within those APCs. One commenter stated that payment policy is not 
the right way to resolve issues with the over-utilization and 
inappropriate use of skin substitutes because they are concerned that 
major changes in payment methodology, such as episodic payment, could 
lead to serious issues with the care beneficiaries receive. In recent 
meetings, stakeholders have expressed concerns that establishing a 
comprehensive APC for graft skin substitute procedures could lead to 
other unrelated wound care services such as hyperbaric oxygen 
treatments being bundled into those procedures. Some stakeholders have 
provided suggestions to provide additional payment for the treatment of 
complicated wounds, similar to a complexity adjustment, without 
bundling unrelated wound care services.
    The additional comments we received in CY 2020 related to including 
a complexity adjustment with an episode-based payment, along with the 
comments we received on episode-based payment in general from the CY 
2019 comment solicitation show, that there are many issues that 
continue to require study for this payment methodology. In addition, we 
also need more time to assess the benefits and drawbacks of episode-
based payment as compared to other possible options to change the 
payment methodology for graft skin substitute procedures. Therefore in 
CY 2021, we will continue our review of the feasibility of using 
episode-based payment for graft skin substitute procedures, and we will 
not propose any episode-based payment for these procedures.
c. Discussion of CY 2019 and CY 2020 Comment Solicitations To Have a 
Single Payment Category for Graft Skin Substitute Procedures
    Another policy option on which we solicited comments in CY 2019 and 
CY 2020 was 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. Under 
this option, the only available procedure codes to bill for graft skin 
substitute 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 substitute procedures for a given 
CPT 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''.
    Commenters and stakeholders who support this option believed it 
would remove the incentives for manufacturers to develop and providers 
to use high cost skin substitute products and would lead to the use of 
lower cost, quality products. Commenters and stakeholders note that 
lower Medicare payments for graft skin substitute procedures would lead 
to lower copayments for beneficiaries. In addition, commenters and 
stakeholders believe a single payment category would reduce incentives 
to apply skin substitute products in excessive amounts. Commenters and 
stakeholders also believe a single payment category is clinically 
justified because they stated that many studies have shown that no one 
skin substitute product is superior to another. Supporters of a single 
payment category believed it would simplify coding for providers and 
reduce administrative burden. Finally, some stakeholders believe that a 
single payment category policy could serve as a transitional payment 
policy for graft skin substitute products while we continue to study 
the feasibility of establishing an episode-based payment for skin 
substitutes.
    Most commenters and stakeholders were opposed to a single payment 
category for skin substitute products. Commenters and stakeholders 
stated that the large difference in resource costs between higher cost 
and lower cost skin substitute products would provide an incentive for 
hospitals to use the most inexpensive products, which would hurt both 
product innovation and the quality of care beneficiaries receive. 
Commenters and stakeholders were concerned that a single payment 
category would encourage providers to choose financial benefit over 
clinical efficacy when determining which skin substitute products to 
use.
    These commenters and stakeholders also stated that a single payment 
category would increase incentives for providers to use cheaper 
products that require more applications to generate more revenue and 
emphasize volume over value. A couple of commenters believed that 
overall Medicare spending on skin substitutes would be higher with a 
single payment category than under the current payment methodology, 
which has separate payment for higher cost and lower cost skin 
substitutes. The reason spending would go up according to the 
commenters is the overpayment for low cost skin substitutes by Medicare 
would exceed the savings Medicare would receive on reduced payments for 
higher cost skin substitutes.
    Further, commenters and stakeholders stated that a single payment 
rate would lead to too much heterogeneity in the products receiving 
payment through the skin substitute application procedures. That is, 
the same payment rate would apply to skin substitute products whether 
they cost less than $10 per cm\2\ or over $200 per cm\2\ and regardless 
of the type of wound they treat. Commenters and stakeholders would 
prefer to have multiple payment categories where the payment rate is 
more reflective of the cost of the product. Commenters and stakeholders 
believe that a single payment category would discourage providers from 
treating more complicated wounds and wounds larger than 100 cm\2\.
    The responses to the comment solicitation demonstrated 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 some of the concerns commenters who oppose a single

[[Page 48894]]

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. Accordingly in CY 2020, we 
solicited 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 included--
     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.
    Those commenters in favor of a single payment category did not see 
a need for a transition period or wanted only a one-year transition 
period. Conversely, those commenters opposed to a single payment 
category either who did mention the idea of a transition period or 
wanted it to last multiple years, with one commenter suggesting a 
transition period of four years. In the end, having a transition period 
before establishing a single payment category did not affect the views 
of commenters who were initially opposed to establishing a single 
payment category as they continued to be against the policy option.
    Based on the comments received regarding establishing a single 
payment category for graft skin substitute procedures, we need more 
time to consider the trade-offs between potential benefits of a single 
category against the potential substantial drawbacks. We also need to 
consider the merits of this policy option compared to episode-based 
payment for graft skin substitute procedures. Therefore, we are not 
proposing a single payment category for graft skin substitute 
procedures for CY 2021.
d. Proposals for Packaged Skin Substitutes for CY 2021
    For CY 2021, consistent with our policy since CY 2016, we propose 
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. Consistent with the methodology as established in the CY 
2014 through CY 2018 final rules with comment period, we analyzed CY 
2019 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 2021 MUC threshold is 
$47 per cm\2\ (rounded to the nearest $1) and the proposed CY 2021 PDC 
threshold is $936 (rounded to the nearest $1). We also propose to 
clarify that our definition of skin substitutes includes synthetic skin 
substitute products in addition to biological skin substitute products 
as described in section V.B.7.d. of this proposed rule. We also want to 
clarify that the availability of an HCPCS code for a particular human 
cell, tissue, or cellular or tissue-based product (HCT/P) does not mean 
that that product is appropriately regulated solely under section 361 
of the PHS Act and the FDA regulations in 21 CFR part 1271. 
Manufacturers of HCT/Ps should consult with the FDA Tissue Reference 
Group (TRG) or obtain a determination through a Request for Designation 
(RFD) on whether their HCT/Ps are appropriately regulated solely under 
section 361 of the PHS Act and the regulations in 21 CFR part 1271.
    For CY 2021, as we did for CY 2020, we propose to assign each skin 
substitute that exceeds either the MUC threshold or the PDC threshold 
to the high cost group. In addition, we propose 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 2021, we 
propose that any skin substitute product that was assigned to the high 
cost group in CY 2020 would be assigned to the high cost group for CY 
2021, regardless of whether it exceeds or falls below the CY 2021 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 CY 2021, we propose to continue to assign skin substitutes with 
pass-through payment status to the high cost category. We propose 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 propose 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 propose 
to use 95 percent of AWP to assign a skin substitute to either the high 
cost or low cost category. We propose 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 2021 MUC and PDC 
thresholds. 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). 
Table 27 displays the final CY 2021 cost category assignment for each 
skin substitute product.
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BILLING CODE 4120-01-C
e. Proposal To Allow Synthetic Skin Graft Sheet Products To Be Reported 
With Graft Skin Substitute Procedure Codes
    The CY 2014 OPPS/ASC final rule with comment period describes skin 
substitute products as ``. . . a category of products that are most 
commonly used in outpatient settings for the treatment of diabetic foot 
ulcers and venous leg ulcers . . . [T]hese products do not actually 
function like human skin that is grafted onto a wound; they are not a 
substitute for a skin graft. Instead, these products are applied to 
wounds to aid wound healing and through various mechanisms of action 
they stimulate the host to regenerate lost tissue.'' (78 FR 74930 
through 74931) The CY 2014 final rule also described skin substitutes 
as ``. . . a class of products that we treat as biologicals . . .'' and 
mentioned that prior to CY 2014, skin substitutes were separately paid 
in the OPPS as if they were biologicals according to the ASP 
methodology (78 FR 74930 through 74931).
    The 2014 rule did not specifically mention whether synthetic 
products could be considered to be skin substitute products in the same 
manner as biological products, because there were no synthetic products 
at that time that were identified as skin substitute products. Then in 
2018, a manufacturer made a request that an entirely synthetic product 
that it claimed is used in the same manner as biological skin 
substitutes receive a HCPCS code that would allow the product to be 
billed with graft skin substitute procedure codes, including CPT codes 
15271 through 15278 and C5271 through C5278 starting in 2019. 
Initially, the synthetic product was not described as a graft skin 
substitute product. However, we now believe that both biological and 
synthetic products could be considered to be skin substitutes for 
Medicare payment purposes.
    This view is supported by a paper referenced in a report we cited 
in the CY 2014 OPPS/ASC final rule with comment period titled ``Skin 
Substitutes for Treating Chronic Wounds Technology Assessment Report at 
ES-2'', which is available on the AHRQ website at: https://www.ahrq.gov/sites/default/files/wysiwyg/research/findings/ta/skinsubs/HCPR0610_skinsubst-final.pdf. That paper, titled ``Regenerative 
medicine in dermatology: Biomaterials, tissue engineering, stem cells, 
gene transfer and beyond'' by Dieckmann et al.,\79\ states that skin 
substitutes should be divided into two broad categories: Biomaterial 
and cellular. The paper explains that ``. . . biomaterial skin 
substitutes do not contain cells (acellular) and are derived from 
natural or synthetic sources . . .'' \80\ The paper continues by 
describing biomaterial skin substitutes further: ``Synthetic sources 
include various degradable polymers such as polylactide and 
polyglycolide. Whether natural or synthetic, the biomaterial provides 
an extracellular matrix that allows for infiltration of surrounding

[[Page 48898]]

cells.'' \81\ The paper by Dieckmann et al. confirms that skin 
substitute products may be synthetic products as well as biological 
products.
---------------------------------------------------------------------------

    \79\ Dieckmann C, Renner R, Milkova L, et al. Regenerative 
medicine in dermatology: biomaterials, tissue engineering, stem 
cells, gene transfer and beyond. Exp Dermatol 2010 Aug;19(8):697-
706.
    \80\ Ibid, Dieckmann C, Renner R, Milkova L, et al.
    \81\ Ibid, Dieckmann C, Renner R, Milkova L, et al.
---------------------------------------------------------------------------

    Therefore, for CY 2021 we propose to include synthetic products in 
addition to biological products in our description of skin substitutes. 
Our new description would define skin substitutes as a category of 
biological and synthetic products that are most commonly used in 
outpatient settings for the treatment of diabetic foot ulcers and 
venous leg ulcers. We also propose to retain the additional description 
of skin substitute products from the CY 2014 OPPS final rule which 
states ``. . . that skin substitute products do not actually function 
like human skin that is grafted onto a wound; they are not a substitute 
for a skin graft. Instead, these products are applied to wounds to aid 
wound healing and through various mechanisms of action they stimulate 
the host to regenerate lost tissue . . .'' (78 FR 74930 through 74931).

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate prorata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing a proposed estimate of pass-through 
spending in CY 2021 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 2021. 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 2020 or beginning in CY 
2021. The sum of the proposed CY 2021 pass-through spending estimates 
for these two groups of device categories equaled the proposed total CY 
2021 pass-through spending estimate for device categories with pass-
through payment status. We based 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 the 
proposed rule, we proposed to include an estimate of any implantable 
biologicals eligible for pass-through payment in our estimate of pass-
through spending for devices. Similarly, we finalized a policy in CY 
2015 that applications for pass-through payment for skin substitutes 
and similar products be evaluated using the medical device pass-through 
process and payment methodology (76 FR 66885 through 66888). Therefore, 
as we did beginning in CY 2015, for CY 2021, we also proposed to 
include an estimate of any skin substitutes and similar products in our 
estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. Our estimate of drug and biological pass-through payment 
for CY 2021 for this group of items is $473.4 million, as discussed 
below, because we propose that most nonpass-through separately payable 
drugs and biologicals would be paid under the CY 2021 OPPS at ASP+6 
percent with the exception of 340B-acquired separately payable drugs, 
which are currently generally paid at ASP minus 22.5 percent, but for 
which we propose to pay a net rate of ASP minus 28.7 percent, and 
because we proposed to pay for CY 2021 pass-through payment drugs and 
biologicals at ASP+6 percent, as we discuss in section V.A. of this CY 
2021 OPPS/ASC proposed rule.
    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 
V.B.1.c. of this CY 2021 OPPS/ASC proposed rule. We propose 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 estimate of pass-through 
payment for policy-packaged drugs and biologicals with pass-through 
payment status approved prior to CY 2021 was not $0, as discussed 
below. In section V.A.6. of this CY 2021 OPPS/ASC proposed rule, we 
discuss our policy to determine if the costs of certain policy-packaged 
drugs or biologicals are already packaged into the existing APC 
structure. If we determine that a policy-packaged drug or biological 
approved for pass-through payment resembles predecessor drugs or 
biologicals already included in the costs of the APCs that are 
associated with the drug receiving pass-through payment, we propose to 
offset the amount of pass-through

[[Page 48899]]

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 
propose 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 2021. 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 2020 or beginning in CY 2021. 
The sum of the CY 2021 pass-through spending estimates for these two 
groups of drugs and biologicals equals the total CY 2021 pass-through 
spending estimate for drugs and biologicals with pass-through payment 
status.

B. Proposed Estimate of Pass-Through Spending

    For CY 2021, we propose to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2021, consistent with section 1833(t)(6)(E)(ii)(II) of the Act 
and our OPPS policy from CY 2004 through CY 2020 (83 FR 61336 through 
61337).
    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 2021, there are four active 
categories for CY 2021. The active categories are described by HCPCS 
codes C1734, C1824, C1982, and C2596. Based on the information from the 
device manufacturer, we estimate that C1824 will cost $46 million in 
pass-through expenditures in CY 2021, C1982 will cost $116.3 million in 
pass-through expenditures in CY 2021, C2596 will cost $11.3 million in 
pass-through expenditures in CY 2021, and C1734 will cost $37.2 million 
in pass-through expenditures in CY 2021. Therefore, we propose an 
estimate for the first group of devices of $210.8 million.
    In estimating our proposed CY 2021 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 2021; additional device 
categories that we estimated could be approved for pass-through status 
after the development of the proposed rule and before January 1, 2021; 
and contingent projections for new device categories established in the 
second through fourth quarters of CY 2021. For CY 2021, we propose 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. 
The proposed estimate of CY 2021 pass-through spending for this second 
group of device categories is $99 million.
    There are 5 devices we are evaluating for potential pass-through 
payment status in the CY 2021 rulemaking cycle: Barostim NEO[supreg] 
System, Hemospray[supreg] Endoscopic Hemostat, EXALTTM Model 
D Single-Use Duodenoscope, The SpineJack[supreg] Expansion Kit, and 
Customflex[supreg] Artificial Iris. The manufacturers of these systems 
provided utilization and cost data that indicate the spending for the 
devices would be approximately $4 million for Barostim NEO[supreg] 
System, $40 million for Hemospray[supreg] Endoscopic Hemostat, $40 
million for EXALTTM Model D Single-Use Duodenoscope, $14 
million for SpineJack[supreg] Expansion Kit, and $600 thousand for 
Customflex[supreg] Artificial Iris. Therefore, we are finalizing an 
estimate of $99 million for this second group of devices for CY 2021.
    To estimate proposed CY 2021 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 2021, we propose 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 2021 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 2021, we estimate the pass-through 
payment amount as the difference between ASP+6 percent and the payment 
rate for nonpass-through drugs and biologicals that will be separately 
paid. Separately payable drugs are paid at a rate of ASP+6 percent with 
the exception of 340B-acquired drugs, for which we generally currently 
pay ASP minus 22.5 percent but for which we propose to pay a net rate 
of ASP minus 28.7 percent. Therefore, the payment rate difference 
between the pass-through payment amount and the nonpass-through payment 
amount is $463.4 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 proposed 
to include in the CY 2021 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 2021 for the 
first group of policy-packaged drugs to be $0 since there are currently 
no policy-packaged drugs that will be on pass-through in CY 2021.
    To estimate proposed CY 2021 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 2021, additional drugs and 
biologicals that we estimated could be approved for pass-through status 
subsequent to the development of the proposed rule and before January 
1, 2021 and projections for new drugs and biologicals that could be 
initially eligible for pass-through payment in the second through 
fourth quarters of CY 2021), we propose 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 2021 pass-through payment estimate. We also 
propose to consider the most recent OPPS experience in approving new 
pass-through drugs and biologicals. Using our proposed methodology for 
estimating CY 2021 pass-through

[[Page 48900]]

payments for this second group of drugs, we calculate a proposed 
spending estimate for this second group of drugs and biologicals of 
approximately $10 million.
    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 2021 and those device categories, drugs, and 
biologicals that first become eligible for pass-through payment during 
CY 2021 would be approximately $783.2 million (approximately $309.8 
million for device categories and approximately $473.4 million for 
drugs and biologicals) which represents 0.934 percent of total 
projected OPPS payments for CY 2021 (approximately $84 billion). 
Therefore, we estimate that pass-through spending in CY 2021 will not 
amount to 2.0 percent of total projected OPPS CY 2021 program spending.

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

    For CY 2021, we propose 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 propose 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 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 that 
proposed rule and the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 58818 through 59179), CY 2020 was the second year of the 2-year 
transition of this policy, and beginning in CY 2020, these departments 
are paid the site-specific PFS rate for the clinic visit service. We 
note that on September 1, 2019, the United States District Court for 
the District of Columbia (the district court) entered an order vacating 
the portion of the CY 2019 OPPS/ASC final rule with comment period that 
adopted the volume control method for clinic visit services furnished 
by nonexcepted off-campus PBDs and remanded the matter to the Secretary 
for further proceedings consistent with the district court's 
opinion.\82\ In the CY 2020 OPPS/ASC final rule with comment period, we 
acknowledged that the district court vacated the volume control policy 
for CY 2019 and we stated that we were working to ensure affected 2019 
claims for clinic visits are paid consistent with the court's order. We 
also stated that we did not believe it was appropriate at that time to 
make a change to the second year of the 2-year phase-in of the clinic 
visit policy. We explained that we still had appeal rights, and were 
evaluating the rulings and considering whether to appeal from the final 
judgment. On July 17, 2020, the United States Court of Appeals for the 
District of Columbia Circuit ruled in favor of CMS, holding that our 
regulation was a reasonable interpretation of the statutory authority 
to adopt a method to control for unnecessary increases in the volume of 
the relevant service. For a full discussion of this policy, we refer 
readers to the CY 2020 OPPS/ASC final rule with comment period (84 FR 
61142).
---------------------------------------------------------------------------

    \82\ American Hospital Ass'n, et al. v. Azar, No. 1:18-cv-02841-
RMC (D.D.C. Sept. 17, 2019).
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VIII. Payment for Partial Hospitalization Services

A. Background

    A partial hospitalization program (PHP) is an intensive outpatient 
program of psychiatric services provided as an alternative to inpatient 
psychiatric care for individuals who have an acute mental illness, 
which includes, but is not limited to, conditions such as depression, 
schizophrenia, and substance use disorders. Section 1861(ff)(1) of the 
Act defines partial hospitalization services as the items and services 
described in paragraph (2) prescribed by a physician and provided under 
a program described in paragraph (3) under the supervision of a 
physician pursuant to an individualized, written plan of treatment 
established and periodically reviewed by a physician (in consultation 
with appropriate staff participating in such program), which sets forth 
the physician's diagnosis, the type, amount, frequency, and duration of 
the items and services provided under the plan, and the goals for 
treatment under the plan. Section 1861(ff)(2) of the Act describes the 
items and services included in partial hospitalization services. 
Section 1861(ff)(3)(A) of the Act specifies that a PHP is a program 
furnished by a hospital to its outpatients or by a community mental 
health center (CMHC), as a distinct and organized 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. We refer readers to sections 1833(t)(1)(B)(i), 1833(t)(2)(B), 
1833(t)(2)(C), and 1833(t)(9)(A) of the Act and 42 CFR 419.21, for 
additional guidance regarding PHP.
    In CY 2008, we began efforts to strengthen the PHP benefit through 
extensive data analysis, along with policy and payment changes by 
implementing two refinements to the methodology for computing the PHP 
median. For a detailed discussion on these policies, we refer readers 
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 
through 66676). In CY 2009, we implemented several regulatory, policy, 
and payment changes. For a detailed discussion on these policies, we 
refer readers to the CY 2009 OPPS/ASC final rule (73 FR 68688 through 
68697). In 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 (74 FR 60556 through 60559). In CY 2011, (75 FR 
71994), we established four separate PHP APC per diem payment rates: 
Two for CMHCs (APC 0172 and APC 0173) and two for hospital-based PHPs 
(APC 0175 and APC 0176) and instituted a 2-year transition period for 
CMHCs to the CMHC APC per diem payment rates. For a detailed 
discussion, we refer readers to section X.B. of the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71991 through 71994). In CY 2012, 
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

[[Page 48901]]

on hospital data (76 FR 74348 through 74352). 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. 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) 
and 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 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 2016, we described our extensive analysis of the 
claims and cost data and ratesetting methodology, corrected a cost 
inversion that occurred in the final rule data with respect to 
hospital-based PHP providers and renumbered the PHP APCs. In 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 and 
finalized a policy to combine the Level 1 and Level 2 PHP APCs for 
CMHCs and for hospital-based PHPs. We also implemented an eight-percent 
outlier cap for CMHCs to mitigate potential outlier billing 
vulnerabilities. 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, designated a portion of the estimated 1.0 percent 
hospital outpatient outlier threshold specifically for CMHCs, and 
proposed updates to the PHP allowable HCPCS codes. We finalized these 
proposals in the CY 2020 OPPS/ASC final rule with comment period (84 FR 
61352). We refer readers to section VIII.D. of this proposed rule for a 
discussion of the proposed updates and the applicability for CY 2021.
    In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61339 
through 61350), we finalized our proposal 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, 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. Also, we continued to 
designate a portion of the estimated 1.0 percent hospital outpatient 
outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under the OPPS, excluding 
outlier payments.
    In the April 30th, 2020 interim final rule with comment (85 FR 
27562-27566), effective as of March 1, 2020 and for the duration of the 
COVID-19 Public Health Emergency (PHE), hospital and CMHC staff are 
permitted to furnish certain outpatient therapy, counseling, and 
educational services (including certain PHP services), incident to a 
physician's services, to beneficiaries in temporary expansion 
locations, including the beneficiary's home, so long as the location 
meets all conditions of participation to the extent not waived. A 
hospital or CMHC can furnish such services using telecommunications 
technology to a beneficiary in a temporary expansion location if that 
beneficiary is registered as an outpatient. These provisions apply only 
for the duration of the COVID-19 PHE.

B. Proposed PHP APC Update for CY 2021

1. Proposed PHP APC Geometric Mean Per Diem Costs
    In summary, for CY 2021 and subsequent years, we propose to use the 
CY 2021 CMHC geometric mean per diem cost calculated in accordance with 
our existing methodology, but with a cost floor equal to the per diem 
cost for CMHCs of $121.62 calculated last year for CY 2020 ratesetting 
(84 FR 61339 through 61344), as the basis for developing the CY 2021 
CMHC APC per diem rate. For CY 2021 and subsequent years, we also 
propose to use the CY 2021 hospital-based geometric mean per diem cost 
calculated in accordance with our existing methodology, but with a cost 
floor equal to the per diem cost for hospital-based providers of 
$222.76 calculated last year for CY 2020 ratesetting (84 FR 61344 
through 61345). Following this methodology, we propose to use the cost 
floor value of $121.62 for CMHCs as the basis for developing the CY 
2021 CMHC APC per diem rate. We propose to use the CY 2021 hospital-
based PHP geometric mean per diem cost of $243.94, calculated in 
accordance with our existing methodology for hospital-based PHPs, as 
the basis for developing the CY 2021 hospital-based APC per diem rate. 
We propose to use the most recent updated claims and cost data to 
determine CY 2021 geometric mean per diem costs in this proposed rule. 
The rationale behind this proposal is discussed in greater detail 
below.
    Also, we propose to continue to use CMHC APC 5853 (Partial 
Hospitalization (three or More Services Per Day)) and hospital-based 
PHP APC 5863 (Partial Hospitalization (three 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 2021, 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 geometric mean per diem cost for hospital-
based PHP APC 5863 is based upon actual hospital-based PHP claims and 
costs for PHP service days providing three or more services. Similarly, 
the geometric mean per diem cost for CMHC APC 5853 is based upon actual 
CMHC claims and costs for CMHC service days providing three 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.
a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments
    For this CY 2021 proposed rule, prior to calculating the proposed 
geometric mean per diem cost for CMHC APC 5853, we are preparing the 
data by first

[[Page 48902]]

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 
38 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 2021 ratesetting, no CMHCs 
had geometric mean costs per day below the trim's lower limit of $18.89 
or had geometric mean costs per day above the trim's upper limit of 
$572.65. Therefore, we do 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 this CY 
2021 proposed rule ratesetting, 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 one to the statewide hospital CCR (80 FR 70457). For this 
CY 2021 OPPS/ASC proposed rule ratesetting, there are no CMHCs that 
showed CCRs greater than one. Therefore, it is 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 with a CCR greater than one during our ratesetting process. 
We also do not exclude any CMHCs for other missing data or for failing 
the 2 standard deviation trim, resulting in the inclusion 
of 38 CMHCs. There are 212 CMHC claims removed during data preparation 
steps because they either had no PHP-allowable codes or had zero 
payment days, leaving 9,369 CMHC claims in our CY 2021 proposed rule 
ratesetting modeling. After applying all of the previously listed 
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.\83\ The calculated CY 2021 
geometric mean per diem cost for all CMHCs for providing three or more 
services per day (CMHC APC 5853) is $104.00, a decrease from $121.62 
calculated last year for CY 2020 ratesetting (84 FR 61347).
---------------------------------------------------------------------------

    \83\ 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 three or more 
services provided to be assigned to CMHC APC 5853. The final 
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 
three 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 final geometric mean per 
diem cost for each PHP APC by taking the nth root of the product of 
n numbers for days where three or more services were provided.
---------------------------------------------------------------------------

    We investigated why the CY 2021 calculated CMHC APC geometric mean 
per diem cost had fallen below the cost floor established in the prior 
year (84 FR 61339 through 61344). We found that six providers, 
collectively representing 39.7 percent of all CMHC days, reported lower 
costs per day than those reported for the CY 2020 final rule 
ratesetting. These six providers heavily influenced the calculated 
geometric mean per diem cost for CY 2021. Because these providers had a 
high number of paid PHP days, and because the CMHC data set is so small 
(n=38), these providers had a significant influence on the calculated 
CY 2021 CMHC APC geometric mean per diem cost. In the case of PHPs 
provided by CMHCs, we have a low number of PHP providers in our 
ratesetting dataset (38 CMHCs compared to 363 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 2019 CMHC payments are estimated to be approximately 0.01 
percent of all OPPS payments).
    We are concerned that a CMHC APC geometric mean per diem cost of 
$104.00 would not support ongoing access to PHPs in CMHCs. This cost is 
roughly a 14.5 percent decrease from the final CY 2020 CMHC geometric 
mean per diem cost floor of $121.62. 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 three or more partial 
hospitalization services per day (81 FR 79680), 85 percent of CMHC paid 
days in CY 2020 were for providing four 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 four or more services per day (we 
refer readers to Table 30--Percentage of PHP Days by Service Unit 
Frequency of the proposed rule). Therefore, the CMHC APC 5853 is 
actually heavily weighted to the cost of providing four 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 several high-utilization 
providers with low costs.
    Therefore, rather than simply proposing the calculated CY 2021 CMHC 
APC geometric mean per diem cost of $104.00 for CY 2021 ratesetting, we 
are instead proposing to extend to CY 2021 and subsequent years the 
policy initially finalized only for CY 2020 (84 FR 61340 through 
61341), to use the current year's CMHC APC geometric mean per diem cost 
(in this case, the CY 2021 CMHC APC geometric mean per diem cost), 
calculated in accordance with our existing methodology, but with a cost 
floor equal to $121.62 as established in the CY 2020 OPPS/ASC final 
rule with comment period (84 FR 61345), as the basis for developing the 
proposed CY 2021 CMHC APC per diem rate. We believe using the CY 2020 
CMHC geometric mean per diem cost floor as the floor for CY 2021 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. In this proposed 
rule, we used the most recent updated claims and cost data to calculate 
CY 2021 CMHC geometric mean per diem cost, which was $104.00. Because 
the CY 2021 CMHC calculated geometric mean per diem cost of $104.00 is 
less than the proposed cost floor (which equals the final CY 2020 CMHC 
APC geometric

[[Page 48903]]

mean per diem cost of $121.62), the proposed CY 2021 CMHC geometric 
mean per diem cost is $121.62. Implementing the cost floor for CY 2021 
would protect CMHCs since the CY 2021 calculated per diem cost of 
$104.00 results in an amount that is less than $121.62. We further 
propose that the established CMHC geometric mean per diem cost floor of 
$121.62 be extended to subsequent years and that if the calculated 
geometric mean per diem cost for a given year is below the floor, then 
the geometric mean per diem cost that would be used for ratesetting in 
that year would be equal to the geometric mean per diem cost floor of 
$121.62. We believe proposing the CMHC cost floor amount of $121.62 as 
the proposed CMHC APC geometric mean per diem cost for CY 2021 and 
subsequent years allows us to use the most recent or very recent CMHC 
claims and cost reporting data while still protecting provider access.
    We estimate the aggregate difference in the (prescaled) CMHC 
geometric mean per diem costs for CY 2021 from proposing the CMHC cost 
floor amount of $121.62 rather than the calculated CMHC geometric mean 
per diem cost of $104.00 to be $1.3 million. We refer readers to 
section XX of this proposed rule for payment impacts, which are budget 
neutral.
    Because the proposed CY 2021 calculated CMHC geometric mean per 
diem cost of $104.00 is less than the cost floor amount of $121.62, the 
proposed CY 2021 CMHC geometric mean per diem cost is $121.62.
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For this CY 2021 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 2019 PHP 
claims included data for 436 hospital-based PHP providers for our 
calculations in this CY 2021 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 two hospital-based PHP providers from our proposed ratesetting. 
However, 100 percent of the service days for these two hospital-based 
PHP provider had at least one service associated with a CCR greater 
than 5, so the trim removed these providers entirely from our proposed 
ratesetting. In addition, 68 hospital-based PHPs were removed for 
having 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, and a 
single hospital-based PHP was 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-1717-P-2020-OPPS-Claims-Accounting.pdf.
    Overall, we removed 73 hospital-based PHP providers [(2 with all 
service days having a CCR greater than 5) + (68 with no PHP payment) + 
(2 with no PHP-allowable HCPCS codes) + (1 provider with geometric mean 
costs per day outside the 3 SD limits)], resulting in 363 
(436 total-73 excluded) hospital-based PHP providers in the data used 
for calculating ratesetting.
    After completing these data preparation steps, we calculated the 
proposed CY 2021 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).\84\ The calculated CY 2021 hospital-based PHP APC geometric 
mean per diem cost for hospital-based PHP providers that provide three 
or more services per service day (hospital-based PHP APC 5863) is 
$243.94, which is an increase of 4.5 percent from $233.52 calculated 
last year for CY 2020 ratesetting (84 FR 61344 through 61348). We 
believe that a hospital-based PHP APC geometric mean per diem cost of 
$243.94 best supports ongoing access to hospital-based PHPs. This cost 
is nearly a 5 percent increase from the final CY 2020 hospital-based 
PHP geometric mean per diem cost.
---------------------------------------------------------------------------

    \84\ 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 
three or more services provided to be assigned to hospital-based PHP 
APC 5863. The final 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 three 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 final geometric mean per diem cost 
for hospital-based PHP APC 5863.
---------------------------------------------------------------------------

    We stated that 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 three or more services per day (81 FR 79680), 89.3 
percent of hospital-based PHP paid service days in CY 2019 were for 
providing four 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 four or 
more services (we refer readers to Table 30.--Percentage of PHP Days by 
Service Unit Frequency in the proposed rule). Therefore, the hospital-
based PHP APC 5863 is actually heavily weighted to the cost of 
providing four 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.
    As we noted for CMHCs above, we likewise do not believe that it is 
likely that the cost of providing hospital-based PHP services would 
suddenly decline when costs generally increase over time. In order to 
address concerns about potential fluctuations, which we believe could 
be influenced by data from a small number of providers with low service 
costs per day, we propose to use the CY 2021 hospital-based PHP APC 
geometric mean per diem cost, calculated in accordance with our 
existing methodology, but with a cost floor equal to the floor for 
hospital-based providers of $222.76 calculated last year for CY 2020 
ratesetting (84 FR 61344 through 61345), as the basis for developing 
the CY 2021 hospital-based PHP APC per diem rate. As part of this 
proposal, we propose that we would use the most recent updated claims 
and cost data to calculate CY 2021 geometric mean per diem costs, just 
as we did for CMHCs. We further propose that the established hospital-
based geometric

[[Page 48904]]

mean per diem cost floor of $222.76 be extended to CY 2021 and 
subsequent years and that if the calculated geometric mean per diem 
cost for a given year is below the floor, then the geometric mean per 
diem cost that would be used for ratesetting in that year would be 
equal to the geometric mean per diem cost floor of $222.76. We believe 
using the CY 2020 hospital-based PHP per diem cost floor as the floor 
for CY 2021 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.
    While the cost floor would protect hospital-based PHPs if the CY 
2021 calculated hospital-based PHP APC geometric mean per diem cost 
were less than $222.76, the calculated hospital-based PHP geometric 
mean per diem cost of $243.94 is greater than the floor, and therefore, 
we propose this calculated CY 2021 cost for hospital-based PHPs. As 
stated above, we believe this proposal allows us to use the most recent 
or very recent hospital-based PHP claims and cost reporting data while 
still protecting provider access.
    Because the CY 2021 calculated hospital-based PHP geometric mean 
per diem cost of $243.94 is greater than the cost floor amount of 
$222.76, the proposed CY 2021 hospital-based PHP geometric mean per 
diem cost is $243.94. We refer readers to section XX. of this proposed 
rule for a discussion of payment impacts and the budget neutrality 
adjustment for OPPS rates.
c. Alternative Methodologies Considered
    For this CY 2021 discussion of the proposed cost, we also 
considered proposing a 3-year collective PHP geometric mean per diem 
cost for each provider type calculated using the cost data from the 
three most recent years, that is the final cost data from CY 2017 and 
CY 2018, along with the latest available cost data from CY 2019. The 
resulting 3-year collective PHP geometric mean per diem cost for CMHCs 
was $110.73, and the value was $243.31 for hospital-based PHP 
providers. While we believe that this option would support access to 
CMHCs better than the calculated geometric mean per diem cost of 
$104.00, it is significantly lower than the final CY 2020 CMHC 
geometric mean per diem cost of $121.62. As we discussed previously, 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 several high-
utilization providers with aberrantly low costs. We are further 
concerned that such an impact, though not observed for the CY 2021 
proposed ratesetting, could affect hospital-based providers in the same 
way. Because each year's geometric mean per diem cost would be 
calculated from the prior 3 years, any similar fluctuations would 
therefore be reflected in the average for at least 3 years.
    We also considered proposing a 4-year collective PHP geometric mean 
per diem cost for each provider type calculated using the cost data 
from the four most recent years, which is the final cost data from CY 
2016, CY 2017, and CY 2018, along with the latest available cost data 
from CY 2019. The resulting 4-year collective PHP geometric mean per 
diem cost for CMHCs was $119.68, and the value was $232.15 for 
hospital-based PHP providers. For CMHCs as well as hospital-based 
providers, these calculated 4-year geometric mean per diem cost values 
are slightly lower than the previous year's final geometric mean per 
diem costs ($121.62 and $233.52 respectively (84 FR 61347)). However, 
the value for hospital-based providers would be substantially lower 
than the calculated CY 2021 geometric mean per diem cost of $243.94. 
Fundamentally, our concern with the 3-year collective geometric mean is 
applicable to the 4-year collective as well, as any fluctuations 
observed would be reflected in the average for at least 4 years.
    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 82 percent of all paid PHP 
service days. Therefore, we believe that it is most appropriate to 
propose to use the calculated CY 2021 CMHC geometric mean per diem cost 
and the calculated CY 2021 hospital-based PHP geometric mean per diem 
cost, each calculated in accordance with our existing methodology, but 
with a cost floor for each provider type equal to the cost floor 
established in the CY 2020 final rule (84 FR 61339 through 61347). 
Because the floors established for CY 2020 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 final 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 propose to extend these two floors to CY 2021 and 
subsequent years.
    In summary, for CY 2021, we propose to use the calculated CY 2021 
CMHC geometric mean per diem cost and the calculated CY 2021 hospital-
based PHP geometric mean per diem cost, each calculated in accordance 
with our existing methodology, but with a cost floor for each provider 
type equal to the cost floor established in the CY 2020 final rule (84 
FR 61339 through 61347), that is $121.62 for CMHCs and $222.76 for 
hospital-based providers, as the basis for developing the CY 2021 PHP 
APC per diem rates. Because the CY 2021 calculated geometric mean per 
diem cost for CMHCs is less than the cost floor amount of $121.62, we 
propose a CY 2021 geometric mean per diem cost for CMHCs of $121.62. In 
addition, because the CY 2021 calculated hospital-based PHP geometric 
mean per diem cost is greater than the hospital-based PHP cost floor 
amount of $222.76, we propose a CY 2021 hospital-based PHP geometric 
mean per diem cost of $243.94. In this proposed rule, we used the most 
recent updated claims and cost data to calculate CY 2021 geometric mean 
per diem costs. The inclusion of a cost floor, which is based on very 
recent data, would protect CMHCs as their calculated per diem cost is 
less than the cost floor amount, but would not be relied upon for 
hospital-based PHPs for CY 2021.
    These proposed CY 2021 PHP geometric mean per diem costs are shown 
in Table 28 and are used to derive the proposed CY 2021 PHP APC per 
diem rates for CMHCs and hospital-based PHPs. The proposed CY 2021 PHP 
APC per diem rates are included in Addendum A to this proposed rule 
(which is available on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).\85\
---------------------------------------------------------------------------

    \85\ As discussed in section II.A. of this CY 2021 OPPS/ASC 
proposed rule, OPPS APC geometric mean per diem costs (including PHP 
APC geometric mean per diem costs) are divided by the geometric mean 
per diem costs for APC 5012 (Clinic Visits and Related Services) to 
calculate each PHP APC's unscaled relative payment weight. An 
unscaled relative payment weight is one that is not yet adjusted for 
budget neutrality. Budget neutrality is required under section 
1833(t)(9)(B) of the Act, and ensures that the estimated aggregate 
weight under the OPPS for a calendar year is neither greater than 
nor less than the estimated aggregate weight that would have been 
made without the changes. To adjust for budget neutrality (that is, 
to scale the weights), we compare the estimated aggregated weight 
using the scaled relative payment weights from the previous calendar 
year at issue. We refer readers to the ratesetting procedures 
described in Part 2 of the OPPS Claims Accounting narrative and in 
section II. of this proposed rule for more information on scaling 
the weights, and for details on the final steps of the process that 
leads to final PHP APC per diem payment rates. The OPPS Claims 
Accounting narrative is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

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[[Page 48905]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.048

3. PHP Service Utilization Updates
a. Provision of Individual Therapy
    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 2019 claims data 
used for this CY 2021 proposed rule revealed some changes in the 
provision of individual therapy compared to CY 2015, CY 2016, CY 2017, 
and CY 2018 claims data as shown in the Table 29.
[GRAPHIC] [TIFF OMITTED] TP12AU20.049

    As shown in Table 29, the CY 2019 claims show that CMHCs have 
slightly increased the provision of individual therapy on days with 
four or more services, compared to CY 2018 claims. However, on CMHC 
days with three services, the provision of individual therapy decreased 
sharply from the prior year CY 2018. This appears to follow a downward 
trend which started in CY 2016 and has continued through CY 2019. In 
comparing CY 2018 to CY 2019, we see that for CMHCs the provision of 3-
service days also sharply increased (this increase is shown in Table 30 
in subsection b below). The net effect of these two changes is that for 
all CMHC days with three or more services, the provision of individual 
therapy decreased from 4.4 percent in CY 2018 to 4.0 percent in CY 
2019. We are concerned by this decrease in the provision of individual 
therapy among CMHCs from CY 2018, and will continue to monitor this 
trend. As we stated in the CY 2017 final rule with comment period (81 
FR 79684 through 79685), the PHP is intensive in nature, and we believe 
that appropriate treatment for PHP patients includes individual 
therapy. We continue to encourage providers to examine their provision 
of individual therapy to PHP patients to ensure that patients are 
receiving all of the services that they may need.
    For Hospital-based providers, the CY 2019 claims show that the 
provision of individual therapy has slightly decreased on days with 
only 3 services as well as days with four or more services. These very 
small decreases correspond with an overall decrease of less than one 
tenth of one percent in the provision of individual therapy on all days 
with three or more services, comparable with fluctuations in prior 
years.

[[Page 48906]]

b. Provision of 3-Service Days
    In the CY 2018 OPPS/ASC final rule with comment period (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 
four 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 2021 OPPS/ASC proposed rule, we used the CY 2019 claims 
data. Table 30 shows the utilization findings based on the 2019 claims 
data.
[GRAPHIC] [TIFF OMITTED] TP12AU20.050

    As shown in Table 30, the CY 2019 claims data used for proposed 
rule show that for CMHCs, utilization of 3 service days is increasing 
compared to the 3 prior claim years, whereas it is decreasing for 
hospital-based providers. Compared to CY 2018, in CY 2019 hospital-
based PHPs provided fewer days with three services only, more days with 
four services only, and fewer days with five or more services. Compared 
to CY 2018, in CY 2019 CMHCs provided substantially more days with 
three services, fewer days with four services, and more days with five 
or more services.
    The CY 2017 data were the first year of claims data to reflect the 
change to the single-tier PHP APCs. Since that time, we have observed a 
steady increase in the percentage of CMHC days with three services 
only. We are concerned by this increase, because as noted below, the 
intent of the PHP is for three-service days to be the exception, rather 
than the norm. 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 three services, particularly now that the single-tier 
PHP APCs 5853 and 5863 are established for providing three or more 
services per day for CMHCs and hospital-based PHPs, respectively.
    It is important to reiterate our expectation that days with only 
three 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 three 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 three 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 three 
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

    For CY 2021, we propose 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. We refer readers to section II.G. of this CY 
2021 OPPS/ASC proposed rule for our general policies for hospital 
outpatient outlier payments.

[[Page 48907]]

1. Background
    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), we noted a significant difference in the 
amount of outlier payments made to hospitals and CMHCs for PHP 
services. Given the difference in PHP charges between hospitals and 
CMHCs, we did not believe it was appropriate to make outlier payments 
to CMHCs using the outlier percentage target amount and threshold 
established for hospitals. Therefore, beginning in CY 2004, we created 
a separate outlier policy specific to the estimated costs and OPPS 
payments provided to CMHCs. We designated a portion of the estimated 
OPPS outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under the OPPS each year, 
excluding outlier payments, and established a separate outlier 
threshold for CMHCs. This separate outlier threshold for CMHCs resulted 
in $1.8 million in outlier payments to CMHCs in CY 2004 and $0.5 
million in outlier payments to CMHCs in CY 2005 (82 FR 59381). In 
contrast, in CY 2003, more than $30 million was paid to CMHCs in 
outlier payments (82 FR 59381).
2. CMHC Outlier Percentage
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 
through 59268), we described the current outlier policy for hospital 
outpatient payments and CMHCs. We note that we also discussed our 
outlier policy for CMHCs in more detail in section VIII.C. of that same 
final rule (82 FR 59381). We set our projected target for all OPPS 
aggregate outlier payments at 1.0 percent of the estimated aggregate 
total payments under the OPPS (82 FR 59267). This same policy was also 
reiterated in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 58996). 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. We propose to continue to calculate the CMHC outlier 
percentage according to previously established policies, and we do not 
propose any changes to our current methodology for calculating the CMHC 
outlier percentage for CY 2021. To calculate the CMHC outlier 
percentage, we followed three steps:
     Step 1: We multiplied the OPPS outlier threshold, which is 
1.0 percent, by the total estimated OPPS Medicare payments (before 
outliers) for the prospective year to calculate the estimated total 
OPPS outlier payments:
    (0.01 x Estimated Total OPPS Payments) = Estimated Total OPPS 
Outlier Payments.
     Step 2: We estimated CMHC outlier payments by taking each 
provider's estimated costs (based on their allowable charges multiplied 
by the provider's CCR) minus each provider's estimated CMHC outlier 
multiplier threshold (we refer readers to section VIII.C.3. of this 
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 exceeded the threshold, we multiplied 
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 
will have its payments adjusted downward. After accounting for the CMHC 
outlier cap, we summed all of the estimated outlier payments to 
determine the estimated total CMHC outlier payments.
    (Each Provider's Estimated Costs-Each Provider's Estimated 
Multiplier Threshold) = A. If A is greater than 0, then (A x 0.50) = 
Estimated CMHC Outlier Payment (before cap) = B. If B is greater than 
(0.08 x Provider's Total Estimated Per Diem Payments), then cap-
adjusted B = (0.08 x Provider's Total Estimated Per Diem Payments); 
otherwise, B = B. Sum (B or cap-adjusted B) for Each Provider = Total 
CMHC Outlier Payments.
     Step 3: We determined the percentage of all OPPS outlier 
payments that CMHCs represent by dividing the estimated CMHC outlier 
payments from Step 2 by the total OPPS outlier payments from Step 1:
    (Estimated CMHC Outlier Payments/Total OPPS Outlier Payments).
    In CY 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. For CY 2021, we propose to 
continue to use the same methodology as CY 2020. Therefore, based on 
our CY 2021 payment estimates, CMHCs are projected to receive 0.01 
percent of total hospital outpatient payments in CY 2021, excluding 
outlier payments. We propose 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.
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))]. This same policy was also 
reiterated in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 58996 through 58997) and the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61351). For CY 2021, we propose 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 
2021, if a CMHC's cost for partial hospitalization services paid under 
CMHC PHP APC 5853 exceeds 3.4 times the payment rate for CMHC APC 5853, 
the outlier payment will be calculated as [0.50 x (CMHC Cost-(3.4 x APC 
5853 rate))].

[[Page 48908]]

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. We 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).
    We propose to continue these policies for partial hospitalization 
services provided through PHPs for CY 2021. The current outlier 
reconciliation policy requires that providers whose outlier payments 
meet a specified threshold (currently $500,000 for hospitals and any 
outlier payments for CMHCs) and whose overall ancillary CCRs change by 
plus or minus 10 percentage points or more, are subject to outlier 
reconciliation, pending approval of the CMS Central Office and Regional 
Office (73 FR 68596 through 68599). The policy also includes provisions 
related to CCRs and to calculating the time value of money for 
reconciled outlier payments due to or due from Medicare, as detailed in 
the CY 2009 OPPS/ASC final rule with comment period and in the Medicare 
Claims Processing Manual (73 FR 68595 through 68599 and Medicare Claims 
Processing Internet Only Manual, Chapter 4, Section 10.7.2 and its 
subsections, available online at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf).
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. In the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61351), we 
finalized a proposal to continue this policy in CY 2020 and subsequent 
years.
    For CY 2021, we propose 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). This 
same policy was also reiterated in the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61351). We propose to continue this policy for CY 
2021.

IX. Services That Will Be Paid Only as Inpatient Services

A. Background

    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74352 through 74353) for a full discussion of our 
longstanding policies for identifying services that are typically 
provided only in an inpatient setting (referred to as the inpatient 
only (IPO) list) and, therefore, that will not be paid by Medicare 
under the OPPS, as well as the criteria we use to review the IPO list 
each year to determine whether or not any services should be removed 
from the list. The complete list of codes that describe services that 
will be paid by Medicare in CY 2021 as inpatient only services is 
included as Addendum E to this CY 2021 OPPS/ASC proposed rule, which is 
available via the internet on the CMS website.\86\
---------------------------------------------------------------------------

    \86\ Note, the IPO list is proposed to be eliminated beginning 
in CY 2021, with all services being removed from the list over the 
course of a three-year transition period. The CY 2020 IPO List can 
be found here: Hospital Outpatient PPS, https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.
---------------------------------------------------------------------------

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

1. Methodology for Identifying Appropriate Changes to IPO List
    Currently, there are approximately 1,740 services on the IPO list. 
Under our current policy, we annually review the IPO list to identify 
any services that should be removed from or added to the list based on 
the most recent data and medical evidence available. We have 
established five criteria to determine whether a procedure should be 
removed from the IPO list (65 FR 18455). As noted in the CY 2012 OPPS/
ASC final rule with comment period (76 FR 74353), we utilize these 
criteria when reviewing services 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:
     Most outpatient departments are equipped to provide the 
services to the Medicare population.
     The simplest procedure described by the code may be 
furnished in most outpatient departments.
     The procedure is related to codes that we have already 
removed from the IPO list.
     A determination is made that the procedure is being 
furnished in numerous hospitals on an outpatient basis.
     A determination is made that the procedure can be 
appropriately and safely furnished in an ASC and is on the list of 
approved ASC services or has been proposed by us for addition to the 
ASC list.
2. CY 2021 Proposal To Eliminate the IPO List
    The IPO List was established with the implementation of the OPPS in 
the CY 2000 OPPS/ASC final rule with comment period (65 FR 18455). 
Using the authority under section 1833(t)(1)(B)(i) of the Act, the IPO 
List was created to identify services that require inpatient care 
because of the invasive nature of the procedure, the need for at least 
24 hours of postoperative recovery time, or the

[[Page 48909]]

underlying physical condition of the patient who would require the 
surgery and, therefore, the service would not be paid by Medicare under 
the OPPS. For example, the list includes certain surgically invasive 
services on the brain, heart, and abdomen, such as craniotomies, 
coronary-artery bypass grafting, and laparotomies.
    Since the IPO list was established in 2000, we have stated that 
regardless of how a procedure is classified for purposes of payment, we 
expect that in every case the surgeon and the hospital will assess the 
risk of a procedure or service to the individual patient, taking site 
of service into account, and will act in that patient's best interests 
(65 FR 18456). We have reiterated this sentiment in rulemaking several 
times over the years, including in our discussion of the removal of 
total knee arthroplasty (TKA) from the IPO list in the CY 2018 OPPS/ASC 
final rule with comment period (82 FR 59383) and most recently when we 
discussed removing total hip arthroplasty (THA) from the IPO List in 
the CY 2020 OPPS/ASC final rule with comment period, where we stated 
that the decision regarding the most appropriate care setting for a 
given surgical procedure is a complex medical judgment made by the 
physician based on the beneficiary's individual clinical needs and 
preferences and on the general coverage rules requiring that any 
procedure be reasonable and necessary (84 FR 61354).
    In previous years, we received several comments from stakeholders 
who believe that we should eliminate the IPO list entirely and instead 
defer to the clinical judgment of physicians for decisions regarding 
site of service. For example, in the CY 2000 final rule with comment 
period, in response to the establishment of the IPO list, commenters 
stated that they believed CMS was making decisions, such as the 
appropriate site of service for a particular medical procedure, that 
should be left to the discretion of surgeons and their patients (65 FR 
18455, 18442). In the CY 2012 OPPS/ASC final rule with comment period, 
a number of commenters suggested that regulations should not supersede 
the physician's level of knowledge and assessment of the patient's 
condition, and that the physician can appropriately determine whether a 
procedure can be performed in a hospital outpatient setting (76 FR 
74354). In the CY 2014 rulemaking, we again noted that some commenters 
requested that the IPO list be eliminated in its entirety (78 FR 
75055). Stakeholders have also commented that the exclusion of services 
from payment under the OPPS is unnecessary and could have an adverse 
effect on advances in surgical care (65 FR 18442). Furthermore, some 
stakeholders have suggested that when a service is removed from the IPO 
list, it creates an expectation among hospitals that the service must 
be furnished in the outpatient setting, regardless of the clinical 
judgment of the physician or needs of the patient.
    Other stakeholders have supported maintaining the IPO list and 
consider it an important tool to indicate which services are 
appropriate to furnish in the outpatient setting and to ensure that 
Medicare beneficiaries receive quality care. They have agreed that many 
of the procedures that we designated as ``inpatient only'' are 
currently performed appropriately and safely only in the inpatient 
setting (65 FR 18442). Commenters have expressed concerns that without 
the IPO list, patient safety and care quality could decline, and have 
noted the potential for surgical complications in response to allowing 
specific procedures to be paid under the OPPS when performed in the 
outpatient setting for the Medicare population, such as TKA and THA.
    Stakeholders have also supported the use of the IPO list because 
services included on the IPO list are an exception to the 2-midnight 
rule and as such are considered appropriate for inpatient hospital 
admission and payment under Medicare Part A regardless of the expected 
length of stay and therefore are not subject to medical review by 
Beneficiary and Family- Centered Care -Quality Improvement 
Organizations (BFCC-QIOs) for ``patient status'' (that is, site-of-
service). We note that in the CY 2020 OPPS/ASC final rule with comment 
period we finalized a policy to exempt procedures that have been 
removed from the IPO list from certain medical review activities for 2 
calendar years following their removal from the IPO list. For CY 2021 
and subsequent years, we propose to continue this 2-year exemption from 
site-of-service claim denials, BFCC-QIO referrals to Recovery Audit 
Contractors (RACs), and RAC reviews for ``patient status'' for 
procedures that are removed from the IPO list under the OPPS beginning 
on January 1, 2021. We are also seeking comment on whether a 2-year 
exemption continues to be appropriate, or if a longer or shorter period 
may be more warranted. For more information on these policies please 
refer to section X.B of this proposed rule.
    While we agreed with commenters in previous rulemakings that the 
IPO list was necessary, we stated there are many surgical procedures 
that cannot be safely performed on a typical Medicare beneficiary in 
the hospital outpatient setting, and that it would be inappropriate for 
us to establish payment rates for those services under the OPPS (78 FR 
75055), recently we have reconsidered the various stakeholder comments 
requesting that we eliminate the IPO list and reevaluated the need for 
CMS to restrict payment for certain procedures in the hospital 
outpatient setting. We have concluded that we no longer believe there 
is a need for the IPO list in order to identify services that require 
inpatient care. Instead, we agree with past commenters that the 
physician should use his or her clinical knowledge and judgment, 
together with consideration of the beneficiary's specific needs, to 
determine whether a procedure can be performed appropriately in a 
hospital outpatient setting or whether inpatient care is required for 
the beneficiary, subject to the general coverage rules requiring that 
any procedure be reasonable and necessary. We believe that this change 
will ensure maximum availability of services to beneficiaries in the 
outpatient setting.
    We also believe that since the IPO list was established, there have 
been significant developments in the practice of medicine that have 
allowed numerous services to be provided safely and effectively in the 
outpatient setting. We acknowledged in the CY 2000 OPPS/ASC final rule 
with comment period that we believed that emerging new technologies and 
innovative medical practice were blurring the difference between the 
need for inpatient care and the sufficiency of outpatient care for many 
services (65 FR 18456). We also stated in the CY 2001 OPPS/ASC interim 
final rule with comment period that, over time, given advances in 
technology and surgical technique, many of the procedures that were on 
the IPO list at the time may eventually be performed safely in a 
hospital outpatient setting and that we would continue to evaluate 
services to determine whether they should be removed from the IPO list 
(65 FR 67826). Specifically, we stated that insofar as advances in 
medical practice mitigate concerns about these services being furnished 
on an outpatient basis, we would be prepared to remove them from the 
IPO list and provide for payment under the OPPS (65 FR 67826). Since 
that time, there have been many new technologies and advances in 
surgical techniques and surgical care protocols, including the use of 
minimally invasive surgical procedures

[[Page 48910]]

such as laparoscopy, improved perioperative anesthesia, expedited 
rehabilitation protocols, as well as significant enhancements to 
postoperative processes, such as improvements in pain management, that 
have reduced the inpatient length of stay and as well as the need for 
postoperative care following a surgical service. In consideration of 
these advancements, we have removed services from the IPO list that 
were previously considered to require inpatient care, including TKA in 
CY 2018 (82 FR 59385) and THA in CY 2020 (84 FR 61355). As medical 
practice continues to develop, we believe that the difference between 
the need for inpatient care and the appropriateness of outpatient care 
has become less distinct for many services. Therefore, we believe that 
the IPO list is no longer necessary to identify services that require 
inpatient care.
    We acknowledge the seriousness of the concerns regarding patient 
safety and quality of care that various stakeholders have expressed 
regarding removing procedures from the IPO list or eliminating the IPO 
list altogether. However, we believe that the evolving nature in of the 
practice of medicine, which has allowed more procedures to be performed 
on an outpatient basis with a shorter recovery time, in addition to 
physician judgment, state and local licensure requirements, 
accreditation requirements, hospital conditions of participation 
(CoPs), medical malpractice laws, and CMS quality and monitoring 
initiatives and programs will continue to ensure the safety of 
beneficiaries in both the inpatient and outpatient settings, even in 
the absence of the IPO list. In the past, we stated that although 
hospitals must meet minimum safety standards through accreditation or 
state survey and certification of compliance with the CoPs that ensure 
a hospital is generally safe and an appropriate environment for 
providing care, we were concerned that those measures did not determine 
whether a particular service could be safely provided in the outpatient 
setting to beneficiaries (76 FR 74355). However, the CoPs are 
regulations that are focused on protecting the health and safety of all 
patients receiving services from Medicare enrolled providers. The CoPs 
are the baseline health and safety requirements for Medicare 
certification. Accrediting organizations and states and localities, 
through their licensure authorities, may have more specific and 
stringent requirements. Often professional organizations or other 
nonprofit organizations give additional guidance to health care 
providers to improve patient safety and quality of care. We note that 
the CoPs already require hospitals to be in compliance with applicable 
Federal laws related to the health and safety of patients (42 CFR 
482.11) Additionally, there are numerous provisions in the hospital 
CoPs at 42 CFR part 482 that provide extensive patient safeguards and 
that provide enough room and flexibility to ensure that hospitals can 
follow nationally recognized standards of practice and of care where 
they are applicable and can adapt if those standards change over time 
through innovative new practices. For example, the hospital CoPs 
require that hospitals must have in effect a utilization review (UR) 
plan that provides for review of services furnished by the institution 
and by members of the medical staff to patients entitled to benefits 
under the Medicare and Medicaid programs (42 CFR 482.30). More 
specifically, the utilization review includes a review of the length of 
stay, medical necessity of admission and services rendered, and also 
looks to promote the most efficient use of available health facilities 
and services.
    Additionally, as indicated in the 2020 Quality Strategy,\87\ CMS 
has also continued to develop safety measures and tools, like the 
Outpatient and Ambulatory Surgery Consumer Assessment of Healthcare 
Providers and Systems Survey and the CMS' case management system, to 
help determine the safety and quality of the performance of procedures 
in the outpatient setting, to address concerns about the safety and 
quality of more varied, complex procedures performed in the outpatient 
setting. We believe that the aforementioned federally established CoPs, 
the CMS Quality Strategy and state and local safety requirements help 
ensure important patient safeguards for all patients, including 
Medicare beneficiaries. Further, although we believe it is important to 
pause certain medical contractor reviews for patient status to allow 
providers time to adjust to the proposed changes to the IPO, we note 
that the BFCC-QIO program's beneficiary case review contractors 
routinely address, and will continue to address any beneficiary quality 
of care complaints that include concerns about treatment as a hospital 
inpatient or outpatient, not receiving expected services, early 
discharge, and discharge planning. CMS' case management system 
currently allows QIOs and CMS to monitor the frequency and status of 
beneficiary quality of care complaints and other beneficiary appeals by 
topic, provider type, and geographic area. These numbers are compiled 
by the BFCC-QIO national coordinating and oversight review contractor 
and reported to the QIOs and CMS leadership on a weekly basis for 
monitoring purposes. As previously noted, although we propose to 
continue a 2-year exemption from site-of-service claim denials, BFCC-
QIO referrals to Recovery Audit Contractors (RACs), and RAC reviews for 
``patient status'' for procedures that are removed from the IPO list 
under the OPPS beginning on January 1, 2021, BFCC-QIOs will continue to 
conduct initial medical reviews for both the medical necessity of the 
services, the medical necessity of the site of service, and will also 
continue to be permitted and expected to deny claims if the service 
itself is determined not to be reasonable and medically necessary as 
noted in the CY 2020 OPPS/ASC final rule (84 FR 61365). Therefore, 
given CMS' increasing ability to measure the safety of procedures 
performed in the outpatient setting and to monitor the quality of care, 
in addition to the other safeguards detailed above, we now believe that 
quality of care is unlikely to be negatively affected by the 
elimination of the IPO list. However, we are also requesting that 
commenters submit evidence on what effect, if any, they believe 
eliminating the IPO list may have on the quality of care.
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    \87\ Speech: Remarks by CMS Administrator Seema Verma at the 
2020 CMS Quality Conference, https://www.cms.gov/newsroom/press-releases/speech-remarks-cms-administrator-seema-verma-2020-cms-quality-conference.
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    Furthermore, some stakeholders have shared concerns with us that 
removing procedures from the IPO list and allowing them to be paid 
under the OPPS when performed in the outpatient setting may result in 
an increased financial burden for beneficiaries for certain complex 
services. Under current law, the OPPS cost-sharing for a service is 
capped at the applicable Part A hospital inpatient deductible amount 
for that year for each service. However, this cap applies to individual 
services, so if a Medicare beneficiary receives multiple separately 
payable OPPS services, it is possible that the aggregate cost-sharing 
for a beneficiary may be higher for services provided in the outpatient 
setting than it would be had the services been furnished during an 
inpatient stay. We emphasize that services included on the IPO list 
tend to be surgical procedures that would typically be the focus of the 
hospital outpatient stay and would likely be assigned to a

[[Page 48911]]

comprehensive APC (C-APC) when they are removed from the IPO list. As 
such, these services would likely be considered to be a single episode 
of care with one payment rate and one copayment amount instead of 
multiple copayments for each individual service. In most instances, we 
expect that beneficiaries will not be responsible for multiple 
copayments for individual ancillary services associated with services 
removed from the IPO list, since because of their assignment to C-APCs, 
the inpatient deductible cap will apply to the entire hospital claim 
which is paid as a comprehensive service or procedure. In the event 
there are separately payable OPPS services included on a claim with a 
service assigned to a C-APC, our previously mentioned policy remains 
applicable, that is the OPPS cost-sharing for an individual service is 
capped at the applicable Part A hospital inpatient deductible amount 
for that year for each service. For further information regarding 
beneficiary copayments, please refer to section II.I.1. of this 
proposed rule.
    After careful consideration of the need for the IPO list and taking 
into account the feedback that we have received since the OPPS was 
implemented, we believe that instead of maintaining a list of services 
that typically require inpatient care and are not paid under the OPPS, 
physicians should continue to use their clinical knowledge and judgment 
to appropriately determine whether a procedure can be performed in a 
hospital outpatient setting or whether inpatient care is required for 
the beneficiary based on the beneficiary's specific needs and 
preferences, subject to the general coverage rules requiring that any 
procedure be reasonable and necessary, and that payment should be made 
pursuant to the otherwise applicable payment policies. We also believe 
that developments in surgical technique and technological advances in 
the delivery of services may obviate the need for the IPO list. 
Finally, we believe physician judgment, state and local regulations, 
accreditation requirements, hospital conditions of participation 
(CoPs), medical malpractice laws, and other CMS quality and monitoring 
initiatives will continue to ensure the safety of beneficiaries in both 
the inpatient and outpatient settings in the absence of the IPO list. 
Therefore, we propose to eliminate the IPO list over a transitional 
period beginning in CY 2021. While we believe that the list could be 
eliminated in its entirety at this point, as explained in further 
detail below, we propose a transitional period.
    Given the significant number of services on the list and that they 
will be newly priced under the OPPS, we recognize that stakeholders may 
need time to adjust to the removal of procedures from the list. 
Providers may need time to prepare, update their billing systems, and 
gain experience with newly removed procedures eligible to be paid under 
either the inpatient prospective payment system or outpatient 
prospective payment system. Therefore, we propose to transition 
services off of the IPO list over a 3-year period, with the list 
completely eliminated by 2024. In accordance with this proposal, we 
propose to amend 42 CFR 419.22(n) to state that effective beginning on 
January 1, 2021, the Secretary shall eliminate the list of services and 
procedures designated as requiring inpatient care through a 3-year 
transition, with the full list eliminated in its entirety by January 1, 
2024.
    For CY 2021, we propose that musculoskeletal services would be the 
first group of services that would be removed from the IPO list. We 
believe it is appropriate to remove this group of services first for 
several reasons. In recent years, due to new technologies and advances 
in surgical care protocols, expedited rehabilitation protocols, and 
significant enhancements to postoperative processes we have removed TKA 
and THA, which are both musculoskeletal services, from the IPO list. 
During the process of proposing and finalizing removing TKA and THA 
from the IPO list, stakeholders have continuously requested that CMS 
remove other musculoskeletal services from the IPO list as well, citing 
shortened length of stay times, advancements in technologies and 
surgical techniques, and improved postoperative processes. 
Additionally, we note that, more often than not, stakeholders' 
historical requests for removals were for musculoskeletal services. We 
also recognize that there is already a set of comprehensive APCs for 
musculoskeletal services for payment in the outpatient setting, which 
facilitates the removal of these types of services for CY 2021. 
Specifically, because we have previously removed codes from the IPO 
list that are similar clinically and in terms of resource cost and 
assigned them to these comprehensive APCs, these APCs generally 
describe appropriate ranges and placements for these musculoskeletal 
codes being proposed for removal in CY 2021, which will allow for 
appropriate payment. We have identified 266 musculoskeletal services 
that we propose to remove from the IPO list for CY 2021.
3. Comment Solicitation on Order of Removal of Additional Clinical 
Families From the IPO List During the Transition To Complete 
Elimination of the IPO List
    As stated above, we propose to eliminate the current IPO list of 
1,740 services, starting with the 266 musculoskeletal-related services 
as provided in Table 31. We are requesting comments from the public on 
whether 3 years is an appropriate time frame for the transition, 
whether there are other services that would be ideal candidates for 
removal from the IPO list in the near term given known technological 
and other advances in care, and the order of removal of additional 
clinical families and/or specific services for each of the CY 2022 and 
CY 2023 rulemakings, until the IPO list is completely eliminated. 
Additionally, we seek comment on whether we should restructure or 
create any new APCs to allow for OPPS payment for services that are 
removed from the IPO list. We are also soliciting public comments on 
whether any of the musculoskeletal codes proposed for removal from the 
IPO list for CY 2021 may meet the criteria to be added to the ASC 
Covered Procedures List. We refer readers to section XIII.C.1.c. of 
this proposed rule for a complete discussion of the ASC Covered 
Procedures List.
    The 266 services that we propose to remove from the IPO list for CY 
2021 and subsequent years, including the CPT/HCPCS code, long 
descriptor, and the proposed CY 2021 payment indicators, are included 
in Table 31 of this proposed rule.
    In summary, given the developments in surgical technique and 
technological advances in the practice of medicine as well as the 
various safeguards discussed above, we propose to eliminate the IPO 
list over the course of the next 3 years, starting with the removal of 
266 musculoskeletal-related services as provided in Table 31 in CY 
2021. We propose to amend 42 CFR 419.22(n) to state that effective 
beginning on January 1, 2021, the Secretary shall eliminate the list of 
services and procedures designated as requiring inpatient care through 
a 3-year transition, with the full list eliminated in its entirety by 
January 1, 2024. We believe that several safety mechanisms that will 
remain in place will ensure the safety of our beneficiaries and the 
quality of care, including, but not limited to, physician judgment, 
state and local regulations, accreditation requirements, medical 
malpractice laws, hospital conditions of participation, and other CMS 
initiatives.

[[Page 48912]]

    Table 31 lists the procedures we propose to remove from the IPO 
list for CY 2021. These services and their proposed status indicators 
and APC assignments (if applicable) are included in Addendum B to this 
proposed rule as well.
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BILLING CODE 4120-01-C

[[Page 48935]]

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 2020 OPPS/ASC final rule with comment period (84 FR 61359 
through 61363), we implemented a policy for CY 2020 and subsequent 
years to change the generally applicable minimum required level of 
supervision for most hospital outpatient therapeutic services from 
direct supervision to general supervision for services furnished by all 
hospitals and CAHs. However, some groups of services were not subject 
to the change in the required supervision level and those services 
continue to have a minimum default level of supervision that is higher 
than general supervision.
    On January 31, 2020, Health and Human Services Secretary Alex M. 
Azar II determined that a PHE exists retroactive to January 27, 2020 
\88\ under section 319 of the Public Health Service Act (42 U.S.C. 
247d), in response to COVID-19), and on April 21, 2020, Secretary Azar 
renewed, effective April 26, 2020, and again effective July 25, 2020, 
the determination that a PHE exists.\89\ On March 13, 2020, the 
President of the United States declared the COVID-19 outbreak in the 
United States constitutes a national emergency,\90\ beginning March 1, 
2020. On March 31, 2020, we issued an interim final rule with comment 
period (IFC) to give individuals and entities that provide services to 
Medicare beneficiaries needed flexibilities to respond effectively to 
the serious public health threats posed by the spread of the COVID-19. 
The goal of the IFC issued on March 31, 2020, was to provide the 
necessary flexibility for Medicare beneficiaries to be able to receive 
medically necessary services without jeopardizing their health or the 
health of those who are providing those services, while minimizing the 
overall risk to public health (85 FR 19232).
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    \88\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
    \89\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-21apr2020.aspx.
    \90\ https://www.whitehouse.gov/presidentialactions/proclamation-declaring-nationalemergency-concerning-novel-coronavirus-diseasecovid-19-outbreak/.
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    In the IFC issued March 31, 2020, we adopted a policy to reduce, on 
an interim basis for the duration of the PHE, the minimum default level 
of supervision for non-surgical extended duration therapeutic services 
(NSEDTS) to general supervision for the entire service, including the 
initiation portion of the service, for which we had previously required 
direct supervision. We also specified in the IFC issued March 31, 2020, 
that, for the duration of the PHE for the COVID-19 pandemic, the 
requirement for direct physician supervision of pulmonary 
rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services includes virtual presence of the physician 
through audio/video real-time communications technology when use of 
such technology is indicated to reduce exposure risks for the 
beneficiary or health care provider.
    These policies were adopted on an interim final basis for the 
duration of the PHE. However, we believe that these policies are 
appropriate outside of the PHE and should apply permanently. Therefore, 
we propose to adopt these policies for CY 2021 and beyond as described 
in more detail below.
1. Proposal To Allow General Supervision of Outpatient Hospital 
Therapeutic Services Currently Assigned to the Non-Surgical Extended 
Duration Therapeutic Services (NSEDTS) Level of Supervision
    NSEDTS describe services that have a significant monitoring 
component that can extend for a lengthy period of time, that are not 
surgical, and that typically have a low risk of complications after the 
assessment at the beginning of the service. The minimum default 
supervision level of NSEDTS was established in the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 72003 through 72013) as being 
direct supervision during the initiation of the service, which may be 
followed by general supervision at the discretion of the supervising 
physician or the appropriate nonphysician practitioner (Sec.  
410.27(a)(1)(iv)(E)). In this case, initiation means the beginning 
portion of the NSEDTS which ends when the patient is stable and the 
supervising physician or the appropriate nonphysician practitioner 
determines that the remainder of the service can be delivered safely 
under general supervision. We originally established general 
supervision as the appropriate level of supervision after the 
initiation of the service because it is challenging for hospitals to 
ensure direct supervision for services with an extended duration and a 
significant monitoring component, particularly for CAHs and small rural 
hospitals.
    In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61359 
through 61363), we changed the generally applicable minimum required 
level of supervision for most hospital outpatient therapeutic services 
from direct supervision to general supervision for hospitals and CAHs. 
We made this change because we believe it is critical that hospitals 
have the most flexibility possible to provide the services Medicare 
beneficiaries need while minimizing provider burden. In the IFC issued 
March 31, 2020 (85 FR 19266), we assigned, on an interim basis, a 
minimum required supervision level of general supervision for NSEDTS 
services, including during the initiation portion of the service, 
during the PHE. Changing the minimum level of supervision to general 
supervision during the PHE gives providers additional flexibility to 
handle the burdens created by the PHE for the COVID-19 pandemic.
    We believe changing the level of supervision for NSEDTS permanently 
for the duration of the service would be beneficial to patients and 
outpatient hospital providers as it would allow greater flexibility in 
providing these services and reduce provider burden, and thus, improve 
access to these services in cases where the direct supervision 
requirement may have otherwise prevented some services from being 
furnished due to lack of availability of the supervising physician or 
nonphysician practitioner. In addition, as we explained in the CY 2020 
OPPS/ASC final rule with comment period (84 FR 61360), our experience 
indicates that Medicare providers will provide a similar quality of 
hospital outpatient therapeutic services, including NSEDTS, regardless 
of whether the minimum level of supervision required under the Medicare 
program is direct or general. It is important to remember that the 
requirement for general supervision for an entire NSEDTS does not 
preclude these hospitals from providing direct supervision for any part 
of a NSEDTS when the practitioners administering the medical procedures 
decide that it is appropriate to do so. Many outpatient therapeutic 
services including NSEDTS may 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, 
including NSEDTS, to ensure that the medical services Medicare patients 
receive are properly supervised. CoPs for hospitals require Medicare 
patients to be under the care of a physician (42 CFR

[[Page 48936]]

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.
    Therefore, we propose to establish general supervision as the 
minimum required supervision level for all NSEDTS that are furnished on 
or after January 1, 2021. This would be consistent with the minimum 
required level of general supervision that currently applies for most 
outpatient hospital therapeutic services. General supervision, as 
defined in our regulation at Sec.  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; and as provided under Sec.  
410.27(a)(1)(iv)(C), certain non-physician practitioners can provide 
the required supervision of services that they can personally furnish 
in accordance with state law and all other applicable requirements. 
Because we propose a minimum required level of general supervision for 
NSEDTS, including during the initiation of the service, we propose to 
delete subparagraph (E) from the regulations at Sec.  410.27(a)(1)(iv). 
We are seeking public comments on this proposal.
2. Proposal To Allow Direct Supervision of Pulmonary Rehabilitation 
Services, Cardiac Rehabilitation Services, and Intensive Cardiac 
Rehabilitation Services Using Interactive Telecommunications Technology
    Direct physician supervision was the standard set forth in the 
April 7, 2000 OPPS final rule with comment period (68 FR 18524 through 
18526) for supervision of hospital outpatient therapeutic services 
covered and paid by Medicare in hospitals and provider-based 
departments of hospitals, including for cardiac rehabilitation, 
intensive cardiac rehabilitation, and pulmonary rehabilitation services 
provided to hospital outpatients. As we explained in the CY 2011 OPPS/
ASC final rule with comment period, the statutory language of sections 
1861(eee)(2)(B) and (eee)(4)(A) and section 1861(fff)(1) of the Act (as 
added by section 144(a)(1) of Pub. L. 110-275) defines cardiac 
rehabilitation, intensive cardiac rehabilitation, and pulmonary 
rehabilitation programs as ``physician supervised.'' More specifically, 
section 1861(eee)(2)(B) of the Act establishes that, for cardiac 
rehabilitation, intensive cardiac rehabilitation, and pulmonary 
rehabilitation programs, ``a physician is immediately available and 
accessible for consultation and medical emergencies at all times items 
and services are being furnished under the program, except that, in the 
case of items and services furnished under such a program in a 
hospital, such availability shall be presumed.'' As we explained 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, referencing the 
April 7, 2000 OPPS final rule (65 FR 18525)), the ``presumption'' or 
``assumption'' of direct supervision means that direct physician 
supervision is the standard for all hospital outpatient therapeutic 
services. We have assumed this requirement is met on hospital premises 
because staff physicians would always be nearby in the hospital. In 
other words, the requirement is not negated by a presumption that the 
requirement is being met. Recently, some stakeholders suggested to us 
that we have the authority to change the default minimum level of 
supervision for pulmonary rehabilitation services, cardiac 
rehabilitation services, and intensive cardiac rehabilitation services 
to general supervision because of the policy we adopted in CY 2020 to 
change the generally applicable minimum required level of supervision 
for most other hospital outpatient therapeutic services from direct 
supervision to general supervision (84 FR 61359 through 61363). For the 
reasons explained above, we disagree that we can change the default 
level of supervision for these services to general supervision under 
current law.
    In the IFC issued March 31, 2020 (85 FR 19246), we implemented a 
policy for the duration of the PHE that allows the direct supervision 
requirement for cardiac rehabilitation, intensive cardiac 
rehabilitation, and pulmonary rehabilitation services to be met by the 
virtual presence of the supervising physician through audio/video real-
time communications technology when use of such technology is indicated 
to reduce exposure risks to COVID-19 for the beneficiary or health care 
provider. While we adopted this policy to help improve the availability 
of rehabilitation services during the PHE and reduce the burden for 
providers, we also believe the policy to allow direct supervision 
provided by the virtual presence of the physician could continue to 
improve access for patients and reduce burden for providers after the 
end of the PHE. In some cases, depending upon the circumstances of 
individual patients and supervising physicians, we believe that 
telecommunications technology could be used in a manner that would 
facilitate the physician's immediate availability to furnish assistance 
and direction without necessarily requiring the physician's physical 
presence in the location where the service is being furnished. For 
example, use of real-time audio and video telecommunications technology 
could allow a supervising physician to observe the patient during 
treatment as they interact with or respond to the in-person clinical 
staff. Thus, the supervising physician's immediate availability to 
furnish assistance and direction during the service could be met 
virtually without requiring the physician's physical presence in that 
location.
    Therefore for pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services, we propose to change our 
regulation at Sec.  410.27(a)(1)(iv)(D) to specify that, beginning on 
or after January 1, 2021, direct supervision for these services 
includes virtual presence of the physician through audio/video real-
time communications technology subject to the clinical judgment of the 
supervising physician. We clarify that the virtual presence required 
for direct supervision using audio/video real-time communications 
technology would not be limited to mere availability, but rather real-
time presence via interactive audio and video technology throughout the 
performance of the procedure. We are seeking public comments on this 
proposal.

B. Proposed Medical Review of Certain Inpatient Hospital Admissions 
Under Medicare Part A for CY 2021 and Subsequent Years

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

[[Page 48937]]

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 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.
    In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50913 through 
50954), we also finalized the 2-midnight presumption, which is related 
to the 2-midnight benchmark but is a separate medical review policy. 
The 2-midnight benchmark represents guidance to reviewers to identify 
when an inpatient admission is generally reasonable and necessary for 
purposes of Medicare Part A payment, while the 2-midnight presumption 
relates to instructions to medical reviewers regarding the selection of 
claims for medical review. Specifically, under the 2-midnight 
presumption, inpatient hospital claims with lengths of stay greater 
than 2 midnights after the formal admission following the order are 
presumed to be appropriate for Medicare Part A payment and are not the 
focus of medical review efforts, absent evidence of systematic gaming, 
abuse, or delays in the provision of care in an attempt to qualify for 
the 2-midnight presumption. Thus, for purposes of the 2-midnight 
presumption, the ``clock'' starts at the point of admission as an 
inpatient.
    With respect to the 2-midnight benchmark, however, the starting 
point is when the beneficiary begins receiving hospital care either as 
a registered outpatient or after inpatient admission. That is, for 
purposes of determining whether the 2-midnight benchmark is met and, 
therefore, whether an inpatient admission is appropriate for Medicare 
Part A payment, we consider the physician's expectation including the 
total time spent receiving hospital care--not only the expected 
duration of care after inpatient admission, but also any time the 
beneficiary has spent (before inpatient admission) receiving outpatient 
services, such as observation services, treatments in the emergency 
department, and procedures provided in the operating room or other 
treatment area. From the medical review perspective, while the time the 
beneficiary spent as an outpatient before the admission order is 
written is not considered inpatient time, it is considered during the 
medical review process for purposes of determining whether the 2-
midnight benchmark was met and, therefore, whether payment is 
appropriate under Medicare Part A. For beneficiaries who do not arrive 
through the emergency department or are directly receiving inpatient 
services (for example, inpatient admission order written prior to 
admission for an elective admission), the starting point for medical 
review purposes is when the beneficiary starts receiving medically 
responsive services following arrival at the hospital. For Medicare 
payment purposes, both the decision to keep the patient at the hospital 
and the expectation of needed duration of the stay must be supported by 
documentation in the medical record based on factors such as 
beneficiary medical history and comorbidities, the severity of signs 
and symptoms, current medical needs, and the risk of an adverse event 
during hospitalization.
    With respect to inpatient stays spanning less than 2 midnights 
after admission, we instructed contractors that, although such claims 
would not be subject to the presumption, the admission may still be 
appropriate for Medicare Part A payment because time spent as an 
outpatient should be considered in determining whether there was a 
reasonable expectation that the hospital care would span 2 or more 
midnights. In other words, even if an inpatient admission was for only 
1 Medicare utilization day, medical reviewers are instructed to 
consider the total duration of hospital care, both pre- and post-
inpatient admission, when making the determination of whether the 
inpatient stay was reasonable and necessary for purposes of Medicare 
Part A payment.
    We continue to believe that use of the 2-midnight benchmark gives 
appropriate consideration to the medical judgment of physicians and 
also furthers the goal of clearly identifying when an inpatient 
admission is appropriate for payment under Medicare Part A. More 
specifically, as we described in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50943 through 50954), factors such as the procedures being 
performed and the beneficiary's condition and comorbidities apply when 
the physician formulates his or her expectation regarding the need for 
hospital care, while the determination of whether an admission is 
appropriately billed and paid under Medicare Part A or Part B is 
generally based upon the physician's medical judgment regarding the 
beneficiary's expected length of stay. We have not identified any 
circumstances where the 2-midnight benchmark restricts the physician to 
a specific pattern of care, because the 2-midnight benchmark does not 
prevent the physician from ordering or providing any service at any 
hospital, regardless of the expected duration of the service. Rather, 
this policy provides guidance on when the hospitalized beneficiary's 
care is appropriate for coverage and payment under Medicare Part A as 
an inpatient, and when the beneficiary's care is reasonable and 
necessary for payment under Medicare Part B as an outpatient.
    We also acknowledge that certain procedures may have intrinsic 
risks, recovery impacts, or complexities that would cause them to be 
appropriate for inpatient coverage under Medicare Part A regardless of 
the length of hospital time the admitting physician expects a 
particular patient to require.
2. Current Policy for Medical Review of Inpatient Hospital Admissions 
Under Medicare Part A
    As mentioned previously, in the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50943 through 50954), we provided guidance for payment purposes 
that specified that, generally, a hospital inpatient admission is 
considered reasonable and necessary if a physician or other qualified 
practitioner (collectively, ``physician'') orders such admission based 
on the expectation that the beneficiary's length of stay will exceed 2 
midnights or if the beneficiary requires a procedure specified as 
inpatient-only under Sec.  419.22 of the regulations. We finalized at 
Sec.  412.3(d)(1) of the regulations that services designated under the 
OPPS as inpatient only procedures would continue to be appropriate for 
inpatient hospital admission and payment under Medicare Part A. In 
addition, we finalized a benchmark providing that surgical procedures, 
diagnostic tests, and other treatments would be generally considered 
appropriate for inpatient hospital admission and payment under

[[Page 48938]]

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.
    In the CY 2016 OPPS/ASC final rule with comment period (80 FR 70538 
through 70549), we revisited 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 previously 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.
    In the CY 2020 OPPS/ASC final rule with comment period we finalized 
a policy to exempt procedures that have been removed from the IPO list 
from eligibility for referral to Recovery Audit Contractors (RACs) for 
noncompliance with the 2-midnight rule within the 2-calendar years 
following their removal from the IPO list. We stated that these 
procedures will not be considered by the Beneficiary and Family-
Centered Care Quality Improvement Organizations (BFCC-QIOs) in 
determining whether a provider exhibits persistent noncompliance with 
the 2-midnight rule for purposes of referral to the RAC nor will these 
procedures be reviewed by RACs for ``patient status.'' We explained 
that during this 2-year period, BFCC-QIOs will 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 will not be denied with respect to the site-
of-service under Medicare Part A.
3. Medical Review of Certain Inpatient Hospital Admissions Under 
Medicare Part A for CY 2021 and Subsequent Years
    As stated earlier in this section, services on the IPO list are not 
subject to the 2-midnight rule for purposes of determining whether 
payment is appropriate under Medicare Part A. However, the 2-midnight 
rule is applicable once services have been removed from the IPO list. 
Services that are removed from the IPO list are subject to initial 
medical reviews of claims for short-stay inpatient admissions conducted 
by BFCC-QIOs.
    BFCC-QIOs may also refer providers to the 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.
    However, as finalized in the CY 2020 OPPS/ASC final rule with 
comment period, procedures that have been removed from the IPO list are 
exempt from eligibility for referral to RACs for noncompliance with the 
2-midnight rule within the 2-calendar years following their removal 
from the IPO list.
    As stated in section IX., we propose to eliminate the IPO list in 
CY 2021 with a transitional period of 3 years. For CY 2021, we propose 
to remove all musculoskeletal procedures from the IPO list. The 
elimination of the IPO list would mean that procedures currently on the 
IPO list would be subject to the 2-midnight rule (both the 2-midnight 
benchmark and 2-midnight presumption).
    We believe that with the proposed elimination of the IPO list, the 
2-midnight benchmark would remain an important metric to help guide 
when Part A payment for inpatient hospital admissions is appropriate. 
With more services available to be paid in the hospital outpatient 
setting, it would be increasingly important for physicians to exercise 
their clinical judgment in determining the generally appropriate 
clinical setting for their patient to receive a procedure, whether that 
be as an inpatient or on an outpatient basis. Importantly, removal of a 
service from the IPO list has never meant that a beneficiary cannot 
receive the service as a hospital inpatient--as always, the physician 
should use his or her complex medical judgment to determine the 
generally appropriate setting.

[[Page 48939]]

    As stated previously, our current policy regarding IPO list 
procedures is that they are appropriate for inpatient hospital 
admission and payment under Medicare Part A regardless of the expected 
length of stay. With the proposed elimination of the IPO list, this 
policy would no longer be applicable. Instead, just as for services 
removed from the IPO list, the elimination of the IPO list would mean 
that any service that was once on the IPO list would be subject to the 
2-midnight benchmark and 2-midnight presumption. This means that for 
services removed from the IPO list, under the 2-midnight presumption, 
inpatient hospital claims with lengths of stay greater than 2 midnights 
after admission would be presumed to be appropriate for Medicare Part A 
payment and would not be the focus of medical review efforts, absent 
evidence of systematic gaming, abuse, or delays in the provision of 
care in an attempt to qualify for the 2-midnight presumption. 
Additionally, under the 2-midnight benchmark, services formerly on the 
IPO list 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.
    As finalized in the CY 2020 OPPS/ASC final rule with comment 
period, procedures that have been removed from the IPO list are not 
eligible for referral to RACs for noncompliance with the 2-midnight 
rule within the first 2 calendar years of their removal from the IPO 
list. These procedures are not 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 are these 
procedures be reviewed by RACs for ``patient status.'' During the 2-
year period, BFCC-QIOs 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 are not denied with respect to the site-of-service under 
Medicare Part A. Again, information gathered by the BFCC-QIO when 
reviewing procedures as they are newly removed from the IPO list can be 
used for educational purposes and does not result in a claim denial 
during the 2-year exemption period.
    We continue to believe that in order to facilitate compliance with 
our payment policy for inpatient admissions, the 2-year exemption from 
certain medical review activities by the BFCC-QIOs for services removed 
from the IPO list under the OPPS in CY 2021 and subsequent years is 
appropriate. Accordingly, we propose to retain the existing 2-year 
exemption even in the event that we finalize the proposal to eliminate 
the IPO list. However, given that many more services would be removed 
from the IPO list during the proposed transition to elimination of the 
list, we seek comment on whether this 2-year period is appropriate or 
whether a longer or shorter period may be more appropriate in order for 
providers to gain experience with applying the 2-midnight rule to these 
services.
    We also continue to believe that a 2-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 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, it 
is our belief that the 2-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 solicit public comments regarding the 
appropriate period of time for this exemption. Commenters may indicate 
whether and why they believe the 2-year period is appropriate, or 
whether they believe a longer or shorter exemption period would be more 
appropriate.
    In summary, for CY 2021 and subsequent years, we propose to 
continue the 2-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, 2021. 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. Finally, while we propose to retain the current 2-year 
exemption period, given that many more services will be removed from 
the IPO as part of the transition towards the elimination of the list, 
we are seeking comment on whether that time period continues to be 
appropriate, or if a longer or shorter period may be more warranted.

C. Comment Solicitation on OPPS Payment for Specimen Collection for 
COVID-19 Tests

    In the interim final with comment period (IFC) (85 FR 27604 through 
27605) entitled, ``Additional Policy and Regulatory Revisions in 
Response to the COVID-19 Public Health Emergency and Delay of Certain 
Reporting Requirements for the Skilled Nursing Facility Quality 
Reporting Program'', published on May 8, 2020, we created HCPCS code 
C9803 (Hospital outpatient clinic visit specimen collection for severe 
acute respiratory syndrome coronavirus 2 (sars-cov-2) (coronavirus 
disease [covid-19]), and specimen source). This code was established in 
response to the significant increase in specimen collection and testing 
for COVID-19 in Hospital Outpatient Departments (HOPDs) during the 
COVID-19 Public Health Emergency (PHE). On January 31, 2020,\91\ HHS 
Secretary Alex M. Azar II determined that a PHE exists for the United 
States retroactive to January 27, 2020. On April 21, 2020 Secretary 
Azar renewed, effective April 26, 2020, the determination that a COVID-
19 PHE exists.\92\ On July 23, 2020, Secretary Azar again renewed the 
determination that a COVID-19 PHE exists, effective July 25, 2020.\93\
---------------------------------------------------------------------------

    \91\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
    \92\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-21apr2020.aspx.
    \93\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-23June2020.aspx.
---------------------------------------------------------------------------

    In our prior review of HCPCS codes for the May 8, 2020 IFC, we did 
not identify a code that described the standalone services of symptom 
assessment and specimen collection that HOPDs were undertaking to 
facilitate widespread testing for COVID-19. As stated in that IFC, we 
believed that HCPCS code C9803 was necessary to meet the resource 
requirements for HOPDs to provide extensive testing for the duration of 
the COVID-19 PHE. This code was created only to meet the need of the 
COVID-19 PHE and we stated that we expected to retire this code at

[[Page 48940]]

the conclusion of the COVID-19 PHE (85 FR 27605).
    As stated in the aforementioned IFC (85 FR 27604 through 27605), we 
assigned HCPCS code C9803 to APC 5731--Level 1 Minor Procedures 
effective March 1, 2020 for the duration of the COVID-19 PHE. In 
accordance with Section 1833(t)(2)(B) of the Act, APC 5731--Level 1 
Minor Procedures contains services similar to HCPCS code C9803. APC 
5731--Level 1 Minor Procedures has a payment rate of $22.98 for CY 
2020. HCPCS code C9803 was also assigned a status indicator of ``Q1.'' 
The Q1 status indicator indicates that the OPPS will package services 
billed under HCPCS code C9803 when billed with a separately payable 
primary service in the same encounter. When HCPCS code C9803 is billed 
without another separately payable primary service, we will make 
separate payment for the service under the OPPS. The OPPS also makes 
separate payment for HCPCS code C9803 when it is billed with a clinical 
diagnostic laboratory test with a status indicator of ``A'' on Addendum 
B of the OPPS.
    As noted previously, the current determination of the existence of 
a COVID-19 PHE was recently renewed for another 90 day period, 
effective July 25, 2020. Given that the COVID-19 PHE is still active at 
this time and the possibility that it may need to be extended into 
2021, for CY 2021 we propose to continue to assign HCPCS code C9803 to 
APC 5731 with a status indicator of ``Q1'', should the COVID-19 PHE 
continue to exist during CY 2021, with the presumption, as stated in 
the IFC that this code will be deleted when COVID-19 PHE ends. In this 
proposed rule, we are accepting public comments on the proposed APC and 
status indicator assignment for HCPCS code C9803 for CY 2021 (and 
remind commenters that the code is only active for the duration of the 
COVID-19 PHE under the IFC).
    We are also soliciting public comments on whether we should keep 
HCPCS code C9803 active beyond the COVID-19 PHE and whether we should 
extend or make permanent the OPPS payment associated with specimen 
collection for COVID-19 tests after the COVID-19 PHE ends, including 
the reasoning for continuing to provide OPPS payment for this service 
as well as the timeframe for extending payment for this code. In the 
event we keep HCPCS code C9803 active after the COVID-19 PHE concludes, 
we are seeking public input on whether we should continue to assign 
HCPCS code C9803 to APC 5731--Level 1 Minor Procedures with a proposed 
status indicator of ``Q1''. In summary, we are requesting public 
comments on whether this code should continue to be payable under the 
OPPS to support COVID-19 testing beyond the conclusion of the COVID-19 
PHE.

XI. Proposed CY 2021 OPPS Payment Status and Comment Indicators

A. Proposed CY 2021 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 2021, we are not proposing to make any changes to the 
existing definitions of status indicators that were listed in Addendum 
D1 to the CY 2020 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_OutpatientRegulations-
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 2021.
    The complete list of the proposed payment status indicators and 
their definitions that would apply for CY 2021 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 2021 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.

B. Proposed CY 2021 Comment Indicator Definitions

    In this proposed rule, we propose to use four comment indicators 
for the CY 2021 OPPS. These comment indicators, ``CH'', ``NC'', ``NI'', 
and ``NP'', are in effect for CY 2020 and we propose to continue their 
use in CY 2021. The proposed CY 2021 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 2021 
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.
    We believe that the existing CY 2020 definitions of the OPPS 
comment indicators continue to be appropriate for CY 2021. Therefore, 
we propose to use those definitions without modification for CY 2021.

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 to make stakeholders aware of certain MedPAC 
recommendations for the OPPS and ASC payment systems as discussed in 
its March 2020 report.

A. Proposed OPPS Payment Rates Update

    The March 2020 MedPAC ``Report to the Congress: Medicare Payment 
Policy,'' recommended that Congress

[[Page 48941]]

update Medicare OPPS payment rates by 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 2020 report for a complete discussion on these 
recommendations.\94\ We appreciate MedPAC's recommendations, but as 
MedPAC acknowledged in its March 2020 report, the Congress would need 
to change current law to enable us to implement its recommendations.
---------------------------------------------------------------------------

    \94\ Medicare Payment Advisory Committee. March 2020 Report to 
the Congress. Chapter 5: Ambulatory surgical center services, pp.94-
95. Available at: http://www.medpac.gov/docs/default-source/reports/mar20_entirereport_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

B. Proposed ASC Conversion Factor Update

    In the March 2020 MedPAC ``Report to the Congress: Medicare Payment 
Policy,'' MedPAC found that, based on its analysis of indicators of 
payment adequacy, the number of ASCs had increased, beneficiaries' use 
of ASCs had increased, and ASC access to capital has been adequate.\95\ 
As a result, for CY 2021, MedPAC stated that payments to ASCs are 
adequate and recommended that in the absence of cost report data no 
payment update should be given for CY 2021 (that is, the update factor 
would be zero percent).
---------------------------------------------------------------------------

    \95\ Medicare Payment Advisory Committee. March 2020 Report to 
the Congress. Chapter 5: Ambulatory surgical center services, p.147. 
Available at: http://www.medpac.gov/docs/default-source/reports/mar20_entirereport_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 MFP-adjusted hospital market basket update to ASC payment 
system rates for an interim period of 5 years. We refer readers to the 
CY 2019 OPPS/ASC final rule with comment period for complete details 
regarding our policy to use the MFP-adjusted hospital market basket 
update for the ASC payment system for CY 2019 through CY 2023. 
Therefore, consistent with our policy for the ASC payment system, as 
discussed in section XIII.G. of this proposed rule, we propose to apply 
a 2.6 percent MFP-adjusted hospital market basket update factor to the 
CY 2020 ASC conversion factor for ASCs meeting the quality reporting 
requirements to determine the CY 2021 ASC payment amounts.

C. Proposed ASC Cost Data

    In the March 2020 MedPAC ``Report to the Congress: Medicare Payment 
Policy,'' 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.\96\
---------------------------------------------------------------------------

    \96\ Medicare Payment Advisory Committee. March 2020 Report to 
the Congress. Chapter 5: Ambulatory surgical center services. 
Available at: http://www.medpac.gov/docs/default-source/reports/mar20_entirereport_sec.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    We recognize that the submission of cost data could place 
additional administrative burden on most 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 2021 OPPS/ASC proposed rule.
    The full March 2020 MedPAC Report to Congress can be downloaded 
from MedPAC's website at: http://www.medpac.gov.

XIII. 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, 
2019 and 2020 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; 83 FR 59028 through 59080, and 84 FR 
61370 through 61410, respectively).
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 Current Procedural Terminology (CPT) codes for 
which separate payment is allowed under the OPPS when they are

[[Page 48942]]

provided integral to an ASC covered surgical procedure. Covered 
ancillary services are specified in 42 CFR 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 (42 CFR 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 American Medical Association (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 
is used to update HCPCS and CPT codes, which we finalized in the CY 
2012 OPPS/ASC final rule with comment period (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, 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 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 August 7, 2007 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.
    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 OPPS/ASC proposed rule and earlier 
OPPS/ASC rulemaking cycles, we revised our definition of a surgical 
procedure under the ASC payment system. We now 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 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 alpha-numeric 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

[[Page 48943]]

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 2021 OPPS/ASC proposed rule.
    We have separated our discussion below based on when the codes are 
released and whether we propose to solicit public comments in this 
proposed rule (and respond to those comments in the CY 2021 OPPS/ASC 
final rule with comment period) or whether we will be soliciting public 
comments in the CY 2021 OPPS/ASC final rule with comment period (and 
responding to those comments in the CY 2022 OPPS/ASC final rule with 
comment period).
2. April 2020 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Proposed Rule
    For the April 2020 update, there were no new CPT codes, however, 
there were several new Level II HCPCS codes. In the April 2020 ASC 
quarterly update (Transmittal 10046, dated April 13, 2020, CR 11694), 
we added four new Level II HCPCS codes to the list of covered ancillary 
services. Table 32 lists the new Level II HCPCS codes that were 
implemented April 1, 2020, along with their proposed payment indicators 
for CY 2021. 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, 2020 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. The list of comment indicators and definitions used under 
the ASC payment system can be found in Addendum DD2 to this proposed 
rule. We note that ASC Addenda AA, BB, DD1, and DD2 are available via 
the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP12AU20.074

    We are inviting public comments on these proposed payment 
indicators for the new HCPCS codes that were recognized as ASC covered 
ancillary services in April 2020 through the quarterly update CRs, as 
listed in Table 32. We propose to finalize their payment indicators in 
the CY 2021 OPPS/ASC final rule with comment period.
3. July 2020 HCPCS Codes for Which We Are Soliciting Public Comments in 
This Proposed Rule
    In the July 2020 ASC quarterly update (Transmittal 10188, Change 
Request 11842, dated June 19, 2020), we added several separately 
payable CPT and Level II HCPCS codes to the list of covered surgical 
procedures and ancillary services. Table 33 lists the new HCPCS codes 
that are effective July 1, 2020. The proposed comment indicators, 
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, 2020 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

[[Page 48944]]

assignments. The list of comment indicators and definitions used under 
the ASC payment system can be found in Addendum DD2 to this proposed 
rule. We note that ASC Addenda AA, BB, DD1, and DD2 are available via 
the internet on the CMS website.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP12AU20.075


[[Page 48945]]


[GRAPHIC] [TIFF OMITTED] TP12AU20.076


[[Page 48946]]


[GRAPHIC] [TIFF OMITTED] TP12AU20.077


[[Page 48947]]


[GRAPHIC] [TIFF OMITTED] TP12AU20.078

BILLING CODE 4120-01-C
    In addition, through the July 2020 quarterly update CR, we are 
establishing ASC payment for two new Category III CPT codes as ASC 
covered ancillary services, effective July 1, 2020. These codes are 
listed in Table 34, along with the proposed comment indicator and 
payment indicator. The CY 2021 proposed payment rate for these new 
Category III CPT codes 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 Addenda AA, BB, DD1, and DD2 are available via 
the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TP12AU20.079

    We are inviting public comments on the proposed payment indicators 
for the new CPT and Level II HCPCS codes newly recognized as ASC 
covered surgical procedures or covered ancillary services in July 2020 
through the quarterly update CRs, as listed in Tables 32, 33, and 34. 
We propose to finalize the payment indicators in the CY 2021 OPPS/ASC 
final rule with comment period.
4. October 2020 HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2021 OPPS/ASC Final Rule With Comment Period
    For CY 2021, consistent with our established policy, we propose 
that the Level II HCPCS codes that will be effective October 1, 2020, 
would be flagged with comment indicator ``NI'' in Addendum BB to the CY 
2021 OPPS/ASC final rule with comment period to indicate that we have 
assigned the codes an interim OPPS payment status for CY 2021. We will 
invite public comments in the CY 2021 OPPS/ASC final rule with comment 
period on the interim payment indicators, which would then be finalized 
in the CY 2022 OPPS/ASC final rule with comment period.
5. January 2021 HCPCS Codes
a. Level II HCPCS Codes for Which We Will Be Soliciting Public Comments 
in the CY 2021 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

[[Page 48948]]

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 2021 OPPS/ASC final rule with comment 
period, January 2021 ASC Update CR, and the CMS HCPCS website.
    In addition, for CY 2021, 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, 2021 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 2021 OPPS/ASC final rule with comment period on the payment 
indicator assignments, which would then be finalized in the CY 2022 
OPPS/ASC final rule with comment period.
b. CPT Codes for Which We Are Soliciting Public Comments in This 
Proposed Rule
    For new and revised CPT codes effective January 1, 2021 that were 
received in time to be included in this proposed rule, we propose the 
appropriate payment indicator assignments, and soliciting public 
comments on the ASC payment indicators. We will accept comments and 
finalize the payment indicators in the CY 2021 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 2021 ASC update, the new and revised Category I and III 
CPT codes that will be effective on January 1, 2021 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 
2021 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 2021 OPPS/ASC Proposed Rule 5-Digit 
Placeholder Code.'' We intend to include the final CPT code numbers the 
CY 2021 OPPS/ASC final rule with comment period.
    In summary, we are soliciting public comments on the proposed CY 
2021 payment indicators for the new and revised Category I and III CPT 
codes that will be effective January 1, 2021. 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 also 
propose to finalize the payment indicator for these codes (with their 
final CPT code numbers) in the CY 2021 OPPS/ASC final rule with comment 
period. The proposed payment indicator and comment indicator for these 
codes can be found in Addendum AA and 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 CPT codes that 
will be effective January 1, 2021 are assigned to comment indicator 
``NP'' in Addendum AA and 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. 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 Addenda AA, BB, 
DD1, and DD2 are available via the internet on the CMS website.
    Finally, in Table 35, 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 48949]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.080

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 furnished 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 non office-based, after taking into account updated 
volume and utilization data.
(2) Proposed Changes for CY 2021 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this CY 2021 OPPS/ASC proposed rule, we followed our 
policy to annually review and update the covered surgical procedures 
for which ASC payment is made and to identify new procedures that may 
be appropriate for ASC payment (described in detail in section 
XIII.C.1.d), including their potential designation as office-based. We 
reviewed the most recent claims volume and utilization data (CY 2019 
claims) and the clinical characteristics for all covered surgical 
procedures that are currently assigned a payment indicator in CY 2020 
of ``G2'' (Non office-based surgical procedure added in CY 2008 or 
later; payment based on OPPS relative payment weight), as well as for 
those procedures assigned one of the temporary office-based payment 
indicators, specifically ``P2'', ``P3'', or ``R2'' in the CY 2020 OPPS/
ASC final rule with comment period (84 FR 61376 through 61380).
    Our review of the CY 2019 volume and utilization data of covered 
surgical procedures currently assigned a payment indicator of ``G2'' 
(Non office-based surgical procedure added in CY 2008 or later; payment 
based on OPPS relative payment weight.) resulted in our identification 
of seven covered

[[Page 48950]]

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 propose to permanently designate as 
office-based for CY 2021 are listed as Table 36.
[GRAPHIC] [TIFF OMITTED] TP12AU20.081

    We also reviewed CY 2019 volume and utilization data and other 
information for 18 procedures designated as temporarily office-based 
and temporarily assigned one of the office-based payment indicators, 
specifically ``P2,'' ``P3'' or ``R2,'' as shown in Table 56 and Table 
57 in the CY 2020 OPPS/ASC final rule with comment period (84 FR 61380 
through 61383). These procedures were surgical procedures that were 
designated as temporarily office-based in the CY 2019 OPPS/ASC final 
rule with comment period or were new CPT codes for CY 2020 that were 
designated as temporarily office-based. Of these 18 procedures, for 
each procedure, there were fewer than 50 claims in our data and no 
claims data for 11 of the 18 procedures described by CPT codes 64454, 
64624, 65785, 67229, 0402T, 0512T, 0551T, 0566T, 0588T, 93985 and 
93986. Therefore, we propose to continue to designate these procedures, 
shown in Table 37, as temporarily office-based for CY 2021. The 
procedures for which the proposed office-based designation for CY 2021 
is temporary are indicated by an asterisk in Addendum AA to this 
proposed rule with comment period (which is available via the internet 
on the CMS website).

[[Page 48951]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.082

    For the remaining seven procedures of the 18 procedures designated 
as temporarily office-based as shown in Table 56 and Table 57 in the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61380 through 
61383), we propose to permanently assign an office-based designation 
for five of the procedures, represented by CPT codes

[[Page 48952]]

10007, 10011, 11102, 11104, and 11106. After reviewing CY 2019 volume 
and utilization data for these five procedures, the claims data are 
sufficient to indicate that these covered surgical procedures are 
performed predominantly in physicians' offices (greater than 50 percent 
of the time) and, therefore, we propose to permanently assign one of 
the office-based payment indicators, specifically ``P2,'' ``P3'' or 
``R2,''--to these codes for CY 2021 as shown in Table 38. For the two 
remaining procedures that had temporary office-based designations for 
CY 2020, described by CPT codes 10005 (Fine needle aspiration biopsy, 
including ultrasound guidance; first lesion) and 10009 (Fine needle 
aspiration biopsy, including ct guidance; first lesion), utilization 
data are sufficient to indicate that these covered surgical procedures 
are not performed predominantly in physician's offices (performed in 
physician's offices less than 50 percent of the time) and, therefore, 
we propose to assign a non office-based payment indicator--``G2''--to 
these codes for CY 2021 as shown in Table 38.
[GRAPHIC] [TIFF OMITTED] TP12AU20.083

    As discussed in the August 2, 2007 revised ASC payment system final 
rule (72 FR 42533 through 42535), we finalized our policy to designate 
certain new surgical procedures temporarily as office-based until 
adequate claims data to assess their predominant sites of services, 
whereupon if we confirm their office-based nature, the procedures would 
be permanently assigned to the list of office-based procedures. In the 
absence of claims data, we stated we would use other available 
information, including our clinical advisors' judgment, predecessor CPT 
and Level II HCPCS codes, information submitted by representatives of 
specialty societies and professional associations, and information 
submitted by commenters during the public comment period.
    For CY 2021 we propose to designate 2 new CY 2021 CPT codes for ASC 
covered surgical procedures as temporarily office-based. After 
reviewing the clinical characteristics, utilization, and volume of 
related procedure codes, we determined that the procedures in Table 39 
would be predominantly performed in physicians' offices. We believe the 
procedures described by CPT codes 0596T (Temporary female intraurethral 
valve-pump (that is, voiding prosthesis); initial insertion, including 
urethral measurement) and 0597T (Temporary female intraurethral valve-
pump (that is, voiding prosthesis); replacement) are similar to CPT 
code 55285 (Cystourethroscopy for treatment of the female urethral 
syndrome with any or all of the following: Urethral meatotomy, urethral 
dilation, internal urethrotomy, lysis of urethrovaginal septal 
fibrosis, lateral incisions of the bladder neck, and fulguration of 
polyp(s) of urethra, bladder neck, and/or trigone) which is currently 
on the list of covered surgical procedures and assigned a proposed 
payment indicator ``A2''--Surgical procedure on ASC list in CY 2007; 
payment based on OPPS relative payment weight.--for CY 2021. While CPT 
code 52285 is not subject to office-based determinations as it is 
assigned an ``A2'' payment indicator, we note that this procedure is 
predominantly performed in a physician office setting (52 percent based 
on CY 2019 claims). As such, we propose to add CPT codes 0596T and 
0597T in Table 39 to the list of temporarily office-based covered 
surgical procedures.

[[Page 48953]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.084

(3) Comment Solicitation on Office-Based Exemption for Dialysis 
Vascular Access Procedures
    As we stated in the CY 2019 OPPS/ASC final rule with comment period 
(83 FR 59036), the office-based utilization for CPT codes 36902 and 
36905 (dialysis vascular 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.
    As we stated in the CY 2020 OPPS/ASC final rule with comment period 
(84 FR 61378), volume and utilization data for CPT code 36902 for CY 
2018 showed the procedure was performed more than 50 percent of the 
time in physicians' offices. However, the office-based utilization for 
CPT code 36902 had 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. 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 believed it may have been premature to assign 
office-based payment status to CPT code 36902 for CY 2020. Therefore, 
for CY 2020, we finalized our proposal to not designate CPT code 36902 
as an office-based procedure, but to continue to assign CPT code 36902 
a payment indicator of ``G2''--non office-based surgical procedure paid 
based on OPPS relative weights. Additionally, CY 2018 volume and 
utilization data for CPT code 36905 showed the procedure was not 
performed more than 50 percent of the time in physicians' offices and 
we finalized our proposal to retain its payment indicator of ``G2''--
non office-based surgical procedure based on OPPS relative weights for 
CY 2020.
    For this CY 2021 OPPS/ASC proposed rule, we reviewed CY 2019 volume 
and utilization data for CPT code 36902 and determined that this 
procedure was performed less than 50 percent of the time in physicians' 
offices. We note that the office-based utilization for CPT code 36902 
has fallen from 52 percent in 2018 to 41 percent in 2019. Similarly, CY 
2019 volume and utilization data for CPT code 36905 continues to show 
that this procedure was performed less than 50 percent of the time in 
physician's offices. Therefore, we are not proposing to designate CPT 
codes 36902 and 36905 as office-based procedures for CY 2021.
    In past rulemaking, commenters have requested we permanently exempt 
dialysis vascular access procedures from office-based designations 
similar to our exemption for radiology services that involve certain 
nuclear medicine procedures and radiology services that involve 
contrast agents (42 CFR 416.171(d)(1) and (2)) (83 FR 59036). 
Commenters contended that an office-based designation for dialysis 
vascular access procedures (in particular CPT codes 36902 and 36905) 
would result in a lower ASC payment rate if frequently used additional 
services, which are often packaged under the ASC payment system but 
separately payable under the Physician Fee Schedule, are factored in to 
the analysis. Therefore, an office-based designation and payment at 
Physician Fee Schedule amounts under the ASC payment system may provide 
an inappropriate and lower global payment, after factoring in 
additional surgical procedures and/or ancillary items and services, 
when compared to the Physician Fee Schedule. Further, commenters have 
noted that ASCs are generally able to provide a wider array of dialysis 
vascular access procedures than a physician's office setting and at a 
lower Medicare payment rate than the hospital outpatient department 
setting. Providing an office-based ASC payment rate using PFS non 
facility PE RVUs for dialysis vascular access procedures may reduce the 
number of ASCs willing to perform such services and, subsequently, 
reduce beneficiary access for dialysis vascular access procedures in an 
ASC setting. Such an outcome may inadvertently encourage migration of 
dialysis vascular access procedures related services to the more 
expensive hospital outpatient department setting.
    While current volume and utilization data shows that dialysis 
vascular access procedures are not predominantly performed in a 
physician's office setting, future data for office-based designations 
may illustrate a different result. ASC rates established at PFS non

[[Page 48954]]

facility PE RVU values may reduce the number of ASCs performing these 
procedures and inadvertently encourage greater utilization in the 
hospital outpatient department setting. While we are not currently 
proposing an exemption from payment at Physician Fee Schedule non 
facility PE RVU amounts, characterized by payment indicator ``P3'' for 
CY 2021, for dialysis vascular access procedures, we are contemplating 
implementing such an exemption in the future if necessary and are 
seeking comment on whether we might be justified in establishing a 
permanent exemption from Physician Fee Schedule non facility PE RVU 
amounts for dialysis vascular access procedures under Sec.  416.171(d) 
in future rulemaking.
b. 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) Changes to List of ASC Covered Surgical Procedures Designated as 
Device-Intensive for CY 2021
    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.
    In addition, as also adopted in section IV.B.2. of CY 2019 OPPS/ASC 
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 Food and Drug Administration (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:
    ++ 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
    ++ 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 2021, we 
propose 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 the CY 2020 OPP/ASC proposed rule.
    The ASC covered surgical procedures that we propose to designate as 
device-intensive, and therefore subject to the device-intensive 
procedure payment methodology for CY 2021, 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 2021 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 are also included in 
Addendum AA to the proposed rule (which is available via the internet 
on the CMS website).
    Under current policy, the payment rate under the ASC payment system 
for device-intensive procedures furnished with an implantable or 
inserted medical device are calculated by applying the device offset 
percentage based on the standard OPPS APC ratesetting methodology to 
the OPPS national unadjusted payment based on the standard ratesetting 
methodology to determine the device cost included in the OPPS payment 
rate for a device-intensive ASC covered surgical procedure, which we 
then set as equal to the device portion of the national unadjusted ASC 
payment rate for the procedure. We calculate the service portion of the 
ASC payment for device intensive procedures by applying the uniform ASC 
conversion factor to the service (non-device) portion of the OPPS 
relative payment weight for the device-intensive procedure. Finally, we 
sum the ASC device portion and ASC service portion to establish the 
full payment for the device-intensive procedure under the ASC payment 
system. 82 FR 59409.
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC payment policy for costly devices implanted or inserted in 
ASCs at no cost/full credit or partial credit, is set forth in Sec.  
416.179 of our regulations, and is consistent with the OPPS policy that 
was in effect until CY 2014. We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66845 through 66848) for a full 
discussion of the ASC payment adjustment policy for no cost/full credit 
and partial credit devices.) Established ASC policy provides a 
reduction in ASC 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.

[[Page 48955]]

    Effective CY 2014, under the OPPS, we finalized our proposal to 
reduce OPPS payment for applicable APCs by the full or partial credit a 
provider receives for a 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 the CY 2014 OPPS/ASC 
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.
    Under current ASC policy, 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 or insert 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 or insert 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 
believe that the reduction of ASC payment in these circumstances is 
necessary to pay appropriately for the covered surgical procedure 
furnished by the ASC.
    Effective in CY 2019 (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-intensive 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 or insertion 
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 
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 the CY 2019 OPPS/ASC final rule with comment period (83 FR 59043 
through 59044) we stated we would 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 device. 
In the CY 2020 OPPS/ASC final rule with comment period, we finalized 
continuing our existing policies for CY 2020. We note that we 
inadvertently omitted language that this policy would apply not just in 
CY 2019 but also in subsequent calendar years. We intended to apply 
this policy in CY2019 and subsequent calendar years. Therefore, we 
propose to apply our policy for partial credits specified in the CY 
2019 OPPS/ASC final rule with comment period (83 FR 59043 through 
59044) in CY 2021 and subsequent calendar years. Specifically, for CY 
2021 and subsequent calendar years, we would 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 
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 device, ASCs have 
the option of either: (1) Submitting the claim for the device intensive 
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 or insertion 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 device. 
Beneficiary coinsurance would be based on the reduced payment amount. 
We are not proposing any other changes to our policies related to no/
cost full credit or partial credit devices.
d. Additions to the List of ASC Covered Surgical Procedures
    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 that can be safely performed in an ASC, a CAH, or an HOPD 
and to review and update the list of ASC procedures at least every 2 
years. We evaluate the ASC covered procedures list (ASC-CPL) each year 
to determine whether procedures should be added to or removed from the 
list, and changes to the list are often made in response to specific 
concerns raised by stakeholders
    Under our current regulations at 42 CFR 416.2 and 416.166, covered 
surgical procedures furnished on or after January 1, 2008 are surgical 
procedures that meet the general standards specified in 42 CFR 
416.166(b) and are not excluded under the general exclusion criteria 
specified in 42 CFR 416.166(c). Specifically, under 42 CFR 416.166(b), 
the general standards provide that covered surgical procedures are 
surgical procedures specified by the Secretary and published in the 
Federal Register and/or via the internet on the CMS website that are 
separately paid under the OPPS, that would not be expected to pose a 
significant safety risk to a Medicare beneficiary when performed in an 
ASC, and for which standard medical practice dictates that the 
beneficiary would not typically be expected to require active medical

[[Page 48956]]

monitoring and care at midnight following the procedure. 42 CFR 
416.166(c) sets out the general exclusion criteria used under the ASC 
payment system to evaluate the safety of procedures for performance in 
an ASC. The general exclusion criteria provide that covered surgical 
procedures do not include those surgical procedures that: (1) Generally 
result in extensive blood loss; (2) require major or prolonged invasion 
of body cavities; (3) directly involve major blood vessels; (4) are 
generally emergent or life threatening in nature; (5) commonly require 
systemic thrombolytic therapy; (6) are designated as requiring 
inpatient care under 42 CFR 419.22(n); (7) can only be reported using a 
CPT unlisted surgical procedure code; or (8) are otherwise excluded 
under 42 CFR 411.15.
    For purposes of identifying procedures eligible to be added to the 
covered surgical procedure list, we define surgical procedures as those 
procedures described by Category I CPT codes in the surgical range from 
10000 through 69999 as well as those Category I and III CPT codes and 
Level II HCPCS codes that directly crosswalk or are clinically similar 
to procedures in the CPT surgical range (83 FR 59044-59045), 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 propose to continue to apply the 
revised definition of ``surgery'' we adopted in the CY 2019 OPPS/ASC 
final rule with comment period (83 FR 59029 through 59030), which 
includes certain ``surgery-like'' procedures that are assigned codes 
outside the CPT surgical range, for CY 2021 and subsequent years.
    As discussed above, section 1833(i)(1) of the Act requires the 
Secretary to specify, in consultation with appropriate medical 
organizations, surgical procedures that are appropriately performed on 
an inpatient basis in a hospital but that can be safely performed on an 
ambulatory basis in an ASC, a CAH, or an HOPD and to review and update 
the list of ASC procedures at least every 2 years. The report 
accompanying the legislation establishing section 1833(i)(1) of the Act 
explained that Congress intended procedures routinely performed on an 
ambulatory basis in a physician's office that do not generally require 
the more elaborate facilities of an ASC not to be included in the list 
of ASC covered procedures (H.R. Rep. No. 96-1167, at 390-91, reprinted 
in 1980 U.S.C.C.A.N. 5526, 5753-54).
    In consideration of the statutory requirements and legislative 
history, in the implementing regulations of the current ASC system 
(effective in 2008), which we adopted in the August 2, 2007 final ASC 
rule (72 FR 42487), we excluded procedures that would otherwise pose a 
significant safety risk to the typical Medicare beneficiary if 
performed in the ASC setting. However, we agreed with stakeholders who 
have noted that ASCs are increasingly able to safely provide a greater 
range of services as medical practice continues to evolve and advance. 
We also believe that physicians play an important role and should be 
able to exercise their clinical judgment in making site-of-service 
determinations. Accordingly, CMS has continued to reexamine the process 
of how we determine which procedures are payable under Medicare when 
furnished in the ASC setting, keeping in mind the statutory requirement 
in section 1833(i)(1)(A) of the Act that the Secretary must specify 
those surgical procedures that are appropriately performed on an 
inpatient basis in a hospital but which also can be performed safely on 
an ambulatory basis in an ASC, CAH or HOPD as part of reviewing and 
updating the list of procedures.
    In the CY 2020 OPPS/ASC final rule with comment period, we added 
total knee arthroplasty and several coronary intervention procedures to 
the ASC-CPL (84 FR 61386 to 61397). Although the coronary intervention 
procedures involved blood vessels that could be considered major, based 
on our policy to consider the involvement of major blood vessels in the 
context of the clinical characteristics of the individual procedures 
and to maintain logical and clinical consistency in excluding 
procedures from the ASC-CPL (72 FR 42481), as well as our review of the 
clinical characteristics of the procedures and their similarity to 
other procedures that were included on the ASC-CPL, we believed these 
procedures could be safely performed in the ASC setting for appropriate 
beneficiaries. In the CY 2019 OPPS/ASC final rule with comment period, 
we also noted that in light of our conditions of coverage for ASCs, 
including 42 CFR 416.42, which require surgical procedures to be 
performed in a safe manner by qualified physicians who have been 
granted clinical privileges by the governing body of the ASC in 
accordance with approved policies and procedures of the ASC, we believe 
that the CfCs provide further assurance that services furnished in the 
ASC setting are held to a high standard of safety. While we 
acknowledged in the CY 2019 OPPS/ASC final rule with comment period 
that it could be more appropriate for certain beneficiaries to receive 
the coronary intervention procedures we were adding to the ASC CPL in a 
hospital-level setting, which typically has a higher level of emergency 
staff and equipment available, including onsite cardiac surgery backup, 
when compared to an ASC setting, we also noted that many beneficiaries 
could be ideal candidates to receive these services in an ASC setting 
and that beneficiaries and their physicians should be able to choose an 
appropriate site of service for surgeries based on the clinical 
characteristics of the patient and other factors (83 FR 59046). We 
continue to believe that relatively healthy and less complex patients 
would benefit from the shorter length of stay and reduced cost-sharing 
that would be expected in an ASC setting.
    In the August 2, 2007 final rule with comment period establishing 
the revised ASC payment system, we discussed criteria for excluding 
procedures from the ASC-CPL (72 FR 42478 to 42484). In that same final 
rule, we adopted the current general standards and general exclusion 
criteria described above. One of the general exclusion criteria we 
established for the revised ASC payment system, at Sec.  416.166(c)(6), 
excludes any procedure on the OPPS Inpatient Only (IPO) list, which is 
a list of procedures for which we do not make payment under the OPPS 
and that are typically performed in the hospital inpatient setting 
because of the nature of the procedure, the need for at least 24 hours 
of postoperative recovery time or monitoring before the patient can be 
safely discharged, and the underlying physical condition of the patient 
(65 FR 18456). We also stated that we believed that any procedures for 
which we did not allow payment in the hospital outpatient setting due 
to safety concerns would not be safe to perform in an ASC (72 FR 
42478). We stated that we were committed to revising the ASC-CPL so 
that it excludes only those surgical procedures that pose significant 
safety risks to beneficiaries or that are expected to require an 
overnight stay (72 FR 42479).
    Also in the August 2, 2007 final rule with comment period, we 
discussed the exclusion of procedures involving major blood vessels, 
but we noted that it was important to maintain flexibility in our 
review of procedures for safe performance in the ASC setting, 
consistent with our past practice regarding this criterion (72 FR 
42481). We discussed that there were some procedures already on the ASC 
list

[[Page 48957]]

being safely performed in ASCs that involve blood vessels that would 
generally be defined as major. We did not agree with commenters that it 
would be logical or clinically consistent for us to adopt a specific 
definition of major blood vessels to evaluate procedures for exclusion 
from ASC payment (72 FR 42481). We noted the involvement of major blood 
vessels is best considered in the context of the clinical 
characteristics of individual procedures.
    We noted that we proposed to exclude surgical procedures that were 
expected to involve major blood vessels, major or prolonged invasion of 
body cavities, extensive blood loss, or that are emergent or life-
threatening in nature from ASC payment, based on evaluation by our 
medical advisors (72 FR 42478-42479). We also noted that most of the 
procedures that our medical advisors identified as involving any of the 
characteristics listed in 42 CFR 416.65(b)(3) also require overnight or 
inpatient stays, reinforcing our belief that they should be excluded 
from ASC payment (72 FR 42478-42479). We also disagreed, at that time, 
that all procedures performed in HOPDs were appropriate for performance 
in ASCs. This was due in part to the fact that we believed that HOPDs 
were able to provide much higher acuity care, and because hospitals 
were subject to more stringent infection prevention, documentation, and 
patient assessment requirements than ASCs. As discussed in the August 
2, 2007 final rule with comment period, ASCs were not required to meet 
patient safety standards consistent with those in place for hospitals 
(that is, hospital conditions of participation), and ASCs were not 
required, and are not currently required, to have the trained staff and 
equipment needed to provide the breadth and intensity of care that 
hospitals are required to maintain (72 FR 42479).
    Many of these concerns have been addressed with the passage of 
time. We believe that our approach needs to evolve away from the 
criteria we established in 2008, in order to reflect the significant 
advances in medical practice and ASC capabilities over the last 12 
years. In particular, we believe that significant advancements in 
medical practice, surgical techniques, medical technology, and other 
factors have allowed certain ASCs to safely perform procedures that 
were once too complex, including those involving major blood vessels 
and other general exclusion criteria. We acknowledge that ASCs and 
hospitals have different health and safety requirements. Despite this 
fact, ASCs often undergo accreditation as a condition of state 
licensure and share some similar licensure and compliance requirements 
with hospitals as well as meet Medicare conditions for coverage (see 42 
CFR 416.40 through 416.54).
    As mentioned above, in recent years, we have added procedures to 
the ASC-CPL that were largely considered hospital inpatient procedures 
in the past, such as TKA and certain coronary intervention procedures. 
As the practice of medicine has evolved, hospital lengths of stay have 
become shorter for many surgical procedures. Many services that used to 
be predominantly performed in the hospital inpatient setting are now 
routinely performed in the hospital outpatient setting on an ambulatory 
basis. Further, many procedures that are currently only payable as 
hospital outpatient services under Medicare fee-for-service are safely 
performed in the ASC setting for other payors. While we recognize that 
non-Medicare patients tend to be younger and have fewer comorbidities 
than the Medicare population, we note that careful patient selection 
can identify Medicare beneficiaries who are suitable candidates for 
these services in the ASC setting. Further, Medicare Advantage plans 
are not obligated to adopt the ASC-CPL as it exists in Medicare fee-
for-service and, based on Medicare Advantage encounter data, many MA 
enrollees have had services performed in the ASC setting that are not 
currently payable under Medicare fee-for-service.
    In addition, the COVID-19 pandemic has highlighted the need for 
more healthcare access points throughout the country. Many ASCs 
temporarily closed or significantly scaled back their operations based 
on state and federal recommendations to delay elective procedures 
during the public health emergency associated with COVID-19; while, 
some ASCs opted to temporarily enroll as hospitals. Looking ahead to 
after the pandemic, it will be more important than ever to ensure that 
the health care system has as many access points and patient choices 
for all Medicare beneficiaries as possible. Because the pandemic has 
forced many ASCs to close, thereby decreasing Medicare beneficiary 
access to care in that setting, we believe allowing greater flexibility 
for physicians and patients to choose ASCs as the site of care, 
particularly during the pandemic, would help to alleviate both access 
to care concerns for elective procedures as well as access to emergency 
care concerns for hospital outpatient departments.
(1) Proposed Changes to the List of ASC Covered Surgical Procedures for 
CY 2021
    Historically, we have reviewed the clinical characteristics of 
procedures and consulted with stakeholders and our clinical advisors to 
determine if those procedures would meet our existing regulatory 
criteria under 42 CFR 416.2 and 42 CFR 416.166. Our regulation at 
416.166(b) specifies the general standard criteria for covered surgical 
procedures, and requires that covered surgical procedures be surgical 
procedures: (1) That are separately paid under OPPS, (2) that would not 
be expected to pose a significant safety risk to a Medicare beneficiary 
when performed in an ASC, and (3) 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. Additionally, 42 CFR 416.166(b) requires that a procedure 
not meet our exclusion criteria set forth in 42 CFR 416.166(c).
    For CY 2021, we propose to continue to apply our current policies 
and criteria set forth in 42 CFR 416.2 and 42 CFR 416.166 for updating 
the ASC-CPL. In addition, we propose two alternative options for 
modifying our approach to adding surgical procedures to the ASC-CPL--
(1) a nomination process for adding new procedures to the ASC-CPL, and 
(2) a broader approach under which we would revise our regulatory 
criteria at 42 CFR 416.166 to evaluate potential additions to the ASC-
CPL. Under our first alternative proposal, a proposed nomination 
process along with modifications to certain regulatory criteria (as 
described later in this proposed rule), the effective date would be CY 
2021 to accept and consider nominations and nominated procedures could 
be proposed to be added to the ASC-CPL beginning in the CY 2022 
rulemaking. Under our second alternative proposal, we propose to revise 
our regulatory criteria by removing certain general exclusion criteria 
at 42 CFR 416.166(c) and under the revised criteria, we propose to add 
certain surgical procedures to the ASC-CPL beginning in CY 2021. We 
expect either of these options would have the effect of expanding the 
ASC-CPL, while maintaining the balance between safety and access for 
Medicare beneficiaries.
A. Standard ASC-CPL Review Process for CY 2021
    For CY 2021, consistent with our current policy for reviewing the 
ASC-CPL, we conducted a review of HCPCS codes that currently are paid 
under the

[[Page 48958]]

OPPS, but not included on the ASC-CPL, and that meet the 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, and as explained in more detail below, 
we propose to update the list of ASC covered surgical procedures by 
adding eleven procedures to the list for CY 2021 as shown in Table 40 
of this proposed rule. Procedures that we propose to add to the ASC-CPL 
for CY 2021 include total hip arthroplasty (THA), vaginal colpopexy, 
transcervical uterine fibroid ablation, and intravascular lithotripsy 
procedures, among others. After reviewing the clinical characteristics 
of these eleven procedures and consulting with our clinical advisors, 
we determined that these 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. We have assessed each of the proposed procedures against 
the regulatory safety criteria in the regulation at 42 CFR 416.166(c) 
and believe that none of the procedures meet the general exclusion 
criteria.
    Of the eleven procedures we propose to add, we believe that the THA 
procedure merits additional discussion in this proposed rule, given 
prior discussion of this procedure in past rulemaking, to explain our 
belief that the procedure meets existing safety criteria for purposes 
of adding this procedure to the ASC-CPL. In the CY 2018 OPPS/ASC 
proposed rule, we solicited public comments on whether the THA 
procedure, CPT code 27130 (Arthroplasty, acetabular and proximal 
femoral prosthetic replacement (total hip arthroplasty), with or 
without autograft or allograft), met the criteria to be added to the 
ASC-CPL. In the CY 2018 OPPS/ASC final rule with comment period, we 
noted that some commenters argued many ASCs are equipped to perform 
this procedure and orthopedic surgeons in ASCs are increasingly 
performing this procedure safely and effectively on non-Medicare 
patients and appropriate Medicare patients (82 FR 59412). Commenters 
also stated that adding THA to the ASC-CPLwould allow for greater 
choices in care settings for Medicare patients, would provide a more 
patient-centered approach to joint arthroplasty procedures, and that it 
may be safer in some cases to have joint arthroplasty procedures 
performed in an outpatient setting to prevent certain hospital-acquired 
infections (82 FR 59412).
    However, other commenters recommended that ASCs obtain enhanced 
certification from a national accrediting organization that certifies 
an ASC meets higher quality standards and can safely perform joint 
arthroplasty procedures (82 FR 59412). Some commenters opposed adding 
THA to the ASC-CPL as they believed the vast majority of ASCs are not 
equipped to safely perform these procedures on patients and the vast 
majority of Medicare patients are not suitable candidates to receive 
``overnight'' joint arthroplasty procedures in an ASC setting (82 FR 
59412). For CY 2018, we did not finalize adding THA to the ASC-CPL, but 
noted that we would take commenters' suggestions and recommendations 
into consideration for future rulemaking.
    In this CY 2021 OPPS/ASC proposed rule, we are seeking to continue 
to promote site neutrality, where possible, between the hospital 
outpatient department and ASC settings, and expanding the ASC-CPL to 
include as many procedures that can be performed in the HOPD as 
reasonably possible will advance that goal. Further, we believe that 
there are at least a subset of Medicare beneficiaries who may be 
suitable candidates to receive THA procedures in an ASC setting based 
on the beneficiaries' clinical characteristics. We believe physicians 
should continue to play an important role in exercising their clinical 
judgment when making site-of-service determinations, including for THA. 
We believe THA would meet our existing regulatory requirements 
established under 42 CFR 416.2 and 416.166(b) and (c) for covered 
surgical procedures in the ASC setting. In light of this information 
and the public comments submitted in support of adding THA to the ASC-
CPL in response to our CY 2018 public comment solicitation, we propose 
to add THA to the ASC-CPL in CY 2021, as shown in Table 40.
    We propose to add a total of eleven procedures, displayed in Table 
40 with their HCPCS code long descriptors, to the list of ASC covered 
surgical procedures for CY 2021. We seek public comment on our 
proposal, including any medical evidence or literature to support the 
commenters' views on whether or not we should add any of these 
procedures to the ASC-CPL for CY 2021. In addition, we also seek 
comment on the two alternative proposals described below. Note that 
under both alternative proposals, we still propose to add the eleven 
procedures proposed under this section for CY 2021.
(1) Proposed Changes to General Exclusion Criterion for Procedures 
Requiring Inpatient Care To Conform to Proposed Changes to the 
Underlying Requirements Under the OPPS
    As described in section IX.B. of this proposed rule, CMS is 
proposing to eliminate the OPPS IPO list and amend 42 CFR 419.22(n) to 
state that effective beginning on January 1, 2021, the Secretary shall 
eliminate the list of services and procedures designated as requiring 
inpatient care through a 3-year transition, with the full list 
eliminated in its entirety by January 1, 2024. We believe that 
retaining Sec.  416.166(c)(6) will ensure that procedures that are 
largely performed on an inpatient basis and cannot be safely performed 
on an ambulatory basis will not be added to the CPL prematurely. As a 
result, we propose to revise the regulatory language and modify this 
standard to exclude procedures designated as requiring inpatient care 
under 419.22(n) as of December 31, 2020.
(2) Alternative Proposals Under Consideration for CY 2021
    For CY 2021, we are continuing to build on our efforts to maximize 
patient and physician choice and access to care by exploring broader 
approaches to adding procedures to the ASC-CPL in order to further 
increase the availability of ASCs as an alternative site of care for 
Medicare beneficiaries, often at a lower cost than other options. In 
light of the current national Public Health Emergency related to COVID-
19 and its anticipated lasting effects on the health care system, we 
also believe a broader approach for adding procedures to the ASC-CPL 
would allow for a more efficient use of healthcare resources and 
infrastructure. An expansion of the ASC-CPL would maximize the ability 
of ASCs to divert patients that can be safely treated in an ASC setting 
away from the hospital setting, which would preserve the capacity of 
hospitals to treat more acute patients. Expanding the procedures placed 
on the ASC-CPL would also build on the policy changes we have made in 
recent years to further site neutrality between the HOPD and ASC 
settings. In light of these objectives, we propose two alternatives to 
our existing policy of adding procedures to the ASC-CPL, each of which 
would further support these goals.
a. Alternative Proposal One
    Under the first approach, we propose and may finalize in the final 
rule a policy to adopt a nomination process for

[[Page 48959]]

adding new procedures to the ASC-CPL. This process would involve 
soliciting recommendations from external stakeholders, like medical 
specialty societies and other members of the public, for procedures 
that may be suitable candidates to add to the ASC-CPL. As discussed in 
greater detail below, under this approach, we would provide parameters 
as guidelines that we would strongly encourage stakeholders to consider 
in nominating procedures for the ASC-CPL. CMS anticipates that 
stakeholders, such as specialty societies who specialize in and have a 
deep understanding of the complexities involved in providing certain 
procedures, would be able to provide valuable suggestions on which 
additional procedures may reasonably and safely be provided in an ASC 
context.
    While members of the public may already suggest procedures to be 
added to the CPL through meetings with CMS or through public comments 
to the proposed rule, we believe it may be beneficial to adopt a 
streamlined process under which the public, particularly specialty 
societies who are very familiar with procedures in their specialty, can 
to nominate procedures based on the latest evidence available as well 
as input from their memberships. We believe that this revised process 
could increase transparency in how we are assessing procedures to add 
to the ASC list and also help ensure that we are assessing the list in 
a more streamlined fashion.
    We propose that the nomination process would be conducted through 
annual notice and comment rulemaking and the final determinations 
regarding nominated procedures would be decided in the final rule. 
Specifically, for the OPPS/ASC rulemaking for a calendar year, we would 
request stakeholder nominations by March 1 of the previous calendar 
year, with all nominations received by that date considered in the next 
applicable rulemaking cycle, likely the rulemaking for the following 
calendar year. Any nominations received after that date, including 
those received through comments as part of the rulemaking cycle, would 
generally be addressed in rulemaking the following year. CMS would 
evaluate procedures nominated by stakeholders based on the applicable 
statutory and regulatory requirements for ASC covered surgical 
procedures and the additional parameters specified in detail below. We 
propose to establish the nomination process in the CY 2021 final rule 
to begin in CY 2021, for surgical procedures that could be added to the 
ASC-CPL beginning in CY 2022. We propose a process under which 
nominated procedures would be included in the proposed rule for that 
calendar year, along with a summary of the policy and factual 
justification for adding or not adding each procedure, which would 
allow members of the public to assess and provide comment on nominated 
procedures during the public comment period. After reviewing comments 
provided during the public comment period, CMS would finalize adding 
the procedures that meet the requisite criteria to the ASC-CPL in the 
final rule. In the event that CMS disagrees with any procedures 
nominated, we would provide a specific rationale in the final rule. In 
certain cases, CMS may need to defer a final determination regarding a 
nominated procedure to future rulemaking, in order to provide 
sufficient time to evaluate and make the most appropriate decision 
about the nominated procedure.
    Under this alternative proposal, we would update the ASC-CPL by 
considering whether nominated procedures meet the requirements for 
covered surgical procedures under 42 CFR 416.166, as we propose to 
amend them. This would include 42 CFR 416.166(b), which sets out the 
general standards for covered surgical procedures, requiring that 
surgical procedures be separately paid under the OPPS, not be expected 
to pose a significant safety risk to a Medicare beneficiary 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. We 
also propose to eliminate the general exclusion criteria in 42 CFR 
416.166(c)(1) through (c)(5) such that nominated procedures would not 
have to meet those criteria. Further, we propose to modify Sec.  
416.166(c)(6) to align the regulatory text with the proposed 
elimination of the IPO list. Finally, we propose that nominated 
procedures would need to meet the general exclusions at 42 CFR 
416.166(c)(7) and (c)(8).
    With respect to the existing general exclusion at 42 CFR 
416.166(c)(6), which excludes procedures designated as requiring 
inpatient care under 42 CFR 419.22(n) from classification as covered 
surgical procedures, this alternative proposal would modify this 
standard since the IPO list is being proposed to be eliminated 
beginning in CY 2021, as described in section IX.B of this proposed 
rule. Therefore, we would propose to modify this criterion to exclude 
procedures designated as requiring inpatient care under 419.22(n) as of 
December 31, 2020. In other words, we would not accept any nominations 
for procedures to add to the ASC-CPL if the procedure is on the CY 2020 
IPO list. We are retaining the criteria Sec. Sec.  416.166(c)(6) 
through (8) and eliminating the five criteria currently at Sec. Sec.  
416.166(c)(1) through (5) because we believe that the general standards 
at 416.166(b) provide sufficient guardrails to ensure, along with 
appropriate patient selection and the complex medical judgment of the 
physician, that procedures can be performed safely on an ambulatory 
basis, including certain procedures that may involve these five 
characteristics. We believe that this alternative proposal could 
balance the goals of increasing physician and patient choice and 
expanding site neutral options with patient safety considerations.
    As noted above, under this alternative proposal, stakeholders would 
nominate procedures to be added to the ASC-CPL by March 1 of a year to 
be considered for addition to the ASC-CPL for the next calendar year. 
As stated above, and similar to the second alternative described in the 
next section, we propose that nominated procedures must meet the 
general standards for covered surgical procedures under 42 CFR 
416.166(b) and the general exclusions under 42 CFR 416.166(c)(6) 
through (8), subject to the modifications we propose for 42 CFR 
416.166(c)(6), to reflect the proposed phase out of the IPO list under 
the OPPS, as discussed in section IX.B of this proposed rule. 
Specifically with respect to the existing general exclusion at 42 CFR 
416.166(c)(6), which excludes procedures designated as requiring 
inpatient care under 42 CFR 419.22(n) from classification as covered 
surgical procedures, the alternative proposal would modify this 
standard because the IPO list is being proposed to be eliminated 
beginning in CY 2021, as described in section IX.B of this proposed 
rule. Therefore, we would propose to modify this criterion to exclude 
procedures designated as requiring inpatient care under 419.22(n) as of 
December 31, 2020. Under this alternative proposal, a nomination 
process would be added at 42 CFR 416.166(d), explaining the process 
that would be used to review and update the list of ASC procedures each 
year. We propose to remove the general exclusions under 42 CFR 
416.166(c)(1) through (c)(5), as discussed above.
    Additionally, we are also proposing to adopt the following 
parameters for stakeholders to consider and specifically address in 
nominating procedures to add to the ASC-CPL.

[[Page 48960]]

These parameters are meant as general guidelines, not requirements, and 
we seek public comment on these suggested parameters including language 
changes, recommendations for additional parameters, potential 
unintended implications of the parameters we propose, and whether we 
should finalize these parameters if this alternative proposal is 
finalized in the CY 2021 final rule:
     Does the procedure involve a risk of life-threatening 
complications?
    Example: Does the procedure involve high or low risk of life-
threatening complications?
    [cir] If the procedure involves lower risk for life-threatening 
complications, it may be a reasonable candidate for consideration.
    [cir] If the procedure involves a higher risk, consider the next 
question.
     Is there a need for specialized resources, not generally 
available in an ASC, to mitigate the risk of one or more life-
threatening complications?
    Example: Are specialized resources, not generally available in an 
ASC, needed to mitigate the risk of one or more life-threatening 
complications from the procedure?
    [cir] If specialized resources are not needed for this procedure, 
it may be a reasonable candidate for consideration.
    [cir] If specialized resources are needed to reduce the patient's 
risk of life-threatening complications, consider the next question.
     What is the average length of time for patients to be 
stabilized for transport to another facility?
    Example: If a complication occurs, can the patient generally be 
stabilized in transport for at least 90 minutes?
    [cir] If a patient undergoing the procedure cannot be stabilized 
for 90 minutes, this would be a serious consideration regarding the 
appropriateness of performing the procedure for Medicare beneficiaries 
in the ASC setting.
    [cir] If a patient undergoing this procedure can be stabilized for 
90 minutes, please consider the next question.
     Are resources and providers required for intervention 
generally available at nearby facilities for intervention?
    Example: If a patient is transferred to another institution, can a 
team be mobilized and prepared to intervene within a relatively short 
period from complication onset, inclusive of transport? Although the 
length of this time period may vary, it should be enough time to ensure 
the patient has a viable chance of rescue from the other facility.
    [cir] If a team cannot be mobilized and prepared to intervene 
within this period, then this procedure should not be considered for 
the ASC-CPL.
    [cir] If a team can be mobilized and prepared to intervene within 
this period, then this procedure could be a reasonable candidate for 
consideration.
    We believe a nomination process will take time to develop and 
stakeholders will need time to consider and evaluate potential 
nominations. We propose to implement this process for CY 2021 in order 
to accept nominations for procedures to be added to the ASC CPL 
beginning in CY 2022.
b. Alternative Proposal Two
    We also considered another alternative approach that would allow 
for more immediate changes to the ASC-CPL for CY 2021 and beyond. 
Specifically, under this alternative proposal, we propose, and may 
finalize in the CY 2021 final rule, to keep the existing general 
standards under 42 CFR 416.166(b) that currently require covered 
surgical procedures to be surgical procedures specified by the 
Secretary and published in the Federal Register and/or via the internet 
on the CMS website, separately paid under the OPPS, not be expected to 
pose a significant safety risk to a Medicare beneficiary 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. However, under 
this alternative proposal, we would eliminate five of the current 
general exclusion criteria at 42 CFR 416.166(c)(1) through (c)(5). We 
considered whether these five exclusionary criteria may no longer be 
necessary to determine what procedures can be safely added to the ASC-
CPL because many ASCs are currently able to safely provide services 
with these characteristics based on prior stakeholder feedback and 
public comments we have received.
    We explored whether it is appropriate to remove the general 
exclusion criteria. This would allow physicians practicing in the ASC 
setting, who have the greatest familiarity and insight into the needs 
of individual beneficiaries, to use their complex medical judgment to 
determine whether they can safely perform a procedure in the ASC, given 
the entirety of the circumstances, including the clinical profile of 
the patient, the surgical back-up available at the ASC, and the ability 
to safely and timely respond to unexpected complications. Under this 
alternative proposal, we would keep the remaining three general 
exclusion criteria at 42 CFR 416.166(c)(6) through (c)(8), as the 
original reasons we adopted them in CY 2008 continue to exist, subject 
to the proposed modifications to 416.166(c)(6). These criteria would 
continue to prohibit the addition of certain procedures to the ASC CPL, 
namely those that are either designated as requiring inpatient care 
under 42 CFR 419.22(n) as of December 31, 2020, which can only be 
reported using a CPT unlisted surgical procedure code, and any 
procedures that are otherwise excluded under 42 CFR 411.15. We propose 
to retain these criteria and eliminate the previous five criteria 
because we believe that the general standards alone are sufficient 
guardrails to ensure, along with appropriate patient selection and 
complex medical judgment of the physician, that the procedure can be 
performed safely on an ambulatory basis, including procedures that 
involve these five characteristics.
    With respect to the existing general exclusion at 42 CFR 
416.166(c)(6), which excludes procedures designated as requiring 
inpatient care under 42 CFR 419.22(n) from classification as covered 
surgical procedures, the alternative proposal would modify this 
standard since the IPO list is being proposed to be eliminated 
beginning in CY 2021, as described in section IX.B of this proposed 
rule. Therefore, we would propose to modify this criterion to exclude 
procedures designated as requiring inpatient care under 419.22(n) as of 
December 31, 2020. In other words, not all procedures on the current 
(that is, CY 2020) IPO list would necessarily meet the remaining 
revised criteria to be added to the ASC-CPL. However, because any 
procedure not on the IPO can be performed safely on an ambulatory basis 
in the hospital outpatient setting, we believe that the remaining 
criteria in 42 CFR 416.166, most notably the exclusion of services that 
are on the current IPO list, could sufficiently limit the expansion of 
the ASC-CPL to those services that can be safely performed on an 
ambulatory basis. As previously mentioned, we are proposing to retain 
the criteria in Sec. Sec.  416.166(c)(6) through (8) and eliminate the 
five criteria currently at Sec. Sec.  416.166(c)(1) through (5) because 
we believe that the general standards at 416.166(b) provide sufficient 
guardrails to ensure, along with appropriate patient selection and the 
complex medical judgment of the physician, that procedures can be 
performed safely on an ambulatory basis, including certain procedures 
that may involve these five

[[Page 48961]]

characteristics. We believe that this alternative proposal could 
balance the goals of increasing physician and patient choice and 
expanding site neutral options with patient safety considerations.
    We identified approximately 270 potential surgery or surgery-like 
codes that we believe would meet the proposed revised criteria for 
being added to the ASC-CPL under 42 CFR 416.166. That is, we reviewed 
these procedures and found that they would meet the proposed revised 
regulatory requirements that would be in effect if we were to adopt 
this alternative proposal. Specifically, the identified procedures 
under this alternative proposal were surgical procedures that are 
separately paid under the OPPS, that would not be expected to pose a 
significant safety risk to a Medicare beneficiary 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 of the beneficiary at midnight following the 
procedure, that have not been designated as requiring inpatient care 
under 419.22(n) as of December 31, 2020, that can be reported without 
using a CPT unlisted surgical procedure code, and are not otherwise 
excluded under 42 CFR 411.15.
    Additionally, while several of the identified procedures may 
typically require hospital care that lasts beyond midnight, we expect 
that appropriately selected patient population in the ASC setting would 
be healthier and less complex and would likely not require active 
monitoring or medical care past midnight beyond the procedure. We 
believe that these procedures are safe to perform in an ASC setting 
because all procedures identified are already payable in the HOPD 
setting and, therefore, are already safely performed on an ambulatory 
basis, consistent with the statutory requirement under section 
1833(i)(1) of the Act. We would retain the general standard criteria, 
as we believe these criteria are sufficient to ensure that procedures 
meet the statutory requirements and can be safely performed in ASCs. We 
seek public comment on whether any of these procedures would typically 
require care after midnight, and, therefore, should not be added to the 
ASC-CPL.
    We believe that this alternative proposal could have beneficial 
effects for Medicare beneficiaries and healthcare professionals. For 
beneficiaries, expansion of the ASC-CPL would increase access to 
procedures in ambulatory surgery settings, often at a lower cost. ASCs 
and healthcare professionals would also benefit from this proposal as 
this expansion would better utilize the potential of existing 
healthcare resources and expand the capacity of the healthcare system. 
Further, under this alternative, physicians would have greater 
flexibility to divert patients who can be safely treated in the ASC 
setting away from hospitals and preserve hospital capacity for more 
acute patients.
    We acknowledge that this approach is a departure from the existing 
criteria that we established effective beginning in 2008. However, we 
believe that this approach would expand and build upon our 2008 policy 
intent. In the August 2, 2007 final rule with comment period, we 
discussed criteria for procedures excluded from the ASC-CPL under the 
revised ASC payment system (72 FR 42478 to 42484). However, although 
there are differences, much of the underlying rationale we used to 
develop the August 2, 2007 final rule revised criteria remains true 
under the broader CY 2021 proposal. For example, in the August 2, 2007 
final rule with comment period, we indicated that we believed that any 
procedure for which we did not allow payment in the hospital outpatient 
setting due to safety concerns would not be safe to perform in an ASC 
(72 FR 42478). Much like we are considering now, we excluded from the 
ASC list any procedure on the IPO list, and committed to excluding 
surgical procedures that pose significant safety risks to beneficiaries 
or that are expected to require an overnight stay (72 FR 42478 to 
42479). Although there are some differences when comparing our CY 2008 
criteria and the proposed CY 2021 criteria, such as removing several of 
the original general exclusion criteria, permitting the addition of 
procedures to the ASC-CPL that would have been prohibited by those 
criteria, and the different accreditation requirements and conditions 
of participation requirements between HOPDS and ASCs, these concerns 
have largely been addressed by the progress in medical practice and ASC 
capabilities in the twelve years since the criteria were developed as 
previously noted. In particular, given advances in the practice of 
medicine and the evolving nature of ASCs, we believe ASCs are now 
better equipped to safely perform procedures that were once too complex 
or risky to be performed safely on Medicare beneficiaries in the ASC 
setting. As previously mentioned, although ASCs and hospitals have 
different health and safety requirements, many ASCs often undergo 
accreditation as a condition of state licensure and share some similar 
licensure and compliance requirements with hospitals. Each of these 
requirements provides additional safeguards for the health and safety 
of Medicare beneficiaries receiving surgical procedures in an ASC.
(c) Comment Solicitation on Potential Revisions to the ASC Conditions 
of Coverage if Alternative 2 Is Adopted
    Providers and suppliers participating in Medicare must comply with 
our regulations (variously called Conditions of Participation (CoPs), 
Conditions for Coverage (CfCs), Conditions of Certification, or 
Requirements) in order to begin and continue participating in the 
Medicare program. These health and safety standards are the foundation 
for improving quality and protecting the health and safety of 
beneficiaries. For ambulatory surgical centers (ASCs), the CfCs are 
located at 42 CFR part 416.
    Section 416.2 of our regulations defines an ambulatory surgical 
center (ASC) as any distinct entity that operates exclusively for the 
purpose of providing surgical services to patients not requiring 
hospitalization, in which the expected duration of services would not 
exceed 24 hours following an admission. The surgical services performed 
at ASCs are scheduled, primarily elective, non-life-threatening 
procedures that can be safely performed in an ambulatory setting.
    The ASC CfCs were first published on August 5, 1982 (47 FR 34082), 
and have since been amended several times. The ASC CfCs currently 
contain 14 separate conditions that include requirements regarding 
compliance with State licensure law; governing body; surgical services; 
quality assessment and performance improvement; environment; medical 
staff; nursing services; medical records; pharmaceutical services; 
laboratory and radiologic services; patient rights; infection control; 
patient admission, assessment and discharge; and emergency 
preparedness.
    As noted previously, CMS agrees with stakeholders that as medical 
practice continues to evolve and advance, ASCs are increasingly able to 
safely provide a greater range of services. The proposed expansion of 
the ASC-CPL would allow physicians to exercise their clinical judgment 
in making site-of-service determinations that are appropriate and also 
beneficial to the patient. In recent years, more complex surgical 
procedures that have been identified to be appropriate for certain 
Medicare patients have been added to the ASC-CPL. For example, 
effective CY 2020,

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the total knee arthroplasty (TKA) procedure was added to the ASC-CPL as 
part of the rulemaking process (84 FR 61385). CMS agreed with public 
commenters that there is a small subset of Medicare beneficiaries who 
may be suitable candidates to receive TKA in an ASC setting based on 
their clinical characteristics. In addition, certain coronary 
intervention procedures were added even though these procedures involve 
blood vessels that could be considered major; it was appropriate to add 
these procedures in our view based upon our belief that the procedures 
should be considered in the context of proper patient selection and 
clinical characteristics.
    The current ASC CfCs provide the baseline health and safety 
standards that accommodate the oversight of a broad spectrum of ASC 
facility types that include services such as orthopedics, 
ophthalmology, endoscopy, dental and other specialty practices. We 
believe the current ASC CfCs provide sufficient flexibility and 
protection to patients such that they would not need to be revised even 
if we were to adopt a significant expansion of the ASC-CPL as outlined 
under the second alternative proposal described in the above section. 
The current ASC CfCs require the ASC, governing body and the medical 
staff to be responsible for the policies and procedures that are 
reflective of the patients that are served in the ASC. The ASC is 
directly responsible for ensuring the ASC and medical staff evaluate 
their patient base and ensure appropriate precautions and services are 
in place for all surgical procedures performed in their facility.
    The CfCs are one part of our coordinated requirements and 
expectations for ASCs, which also include reporting of quality measures 
under the ASCQR program. Both the CfCs and quality reporting program 
would remain in place to ensure patient safety during and after any 
changes to the ASC-CPL, but we request comments on whether the CfCs or 
quality metrics should also change in response to an expanded range of 
services that may be paid under Medicare in the ASC setting. We refer 
readers to section XV.B. of this proposed rule regarding ASCQR Program 
quality measures.
    In the event that CMS were to finalize a proposal to allow more 
invasive and lengthy surgical procedures in ASCs, we are requesting 
comment on whether or not the ASC CfCs should be revised in the CY 2021 
final rule to ensure that our health and safety standards are 
sufficiently updated to reflect the additional range of complex 
services that would be added to the ASC-CPL, and, if so, the 
recommended revisions. For example, the current surgical services CfC 
regulations under 42 CFR 416.42(a)(1)(I) require that a physician must 
examine the patient to evaluate the risk of the procedure to be 
performed while the regulations at 42 CFR 416.42(a)(1)(II) require a 
physician or anesthetist as defined at Sec.  410.69(b) to examine the 
patient to evaluate the risk of anesthesia. We seek public comment on 
whether or not these risk evaluations should be expanded to be more 
prescriptive and require additional elements such as requiring the 
referring doctor to submit pertinent health information and attest that 
an individual patient can safely undergo the specified procedure(s) in 
an ASC and, if appropriate, may adopt such changes in the CY 2021 final 
rule.
    In addition, current standards at 42 CFR 416.46(a) require a 
registered nurse be available for emergency treatment whenever there is 
a patient in the ASC. We are soliciting comment on whether we should 
add an additional CfC at Sec.  416.46 to require that an adequate 
number of nurses be on duty in the ASC at all times that the ASC has 
patient(s), consistent with the standard required of hospitals under 
Sec.  482.23(b) and the associated guidance in the Medicare State 
Operations Manual A-0392 (https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/downloads/som107ap_a_hospitals.pdf). Similar to the 
hospital requirements, we anticipate that ASCs must take into account 
the specific types of services being furnished and the acuity of the 
patients in ensuring that there is adequate nursing staff available.
    Further, standards under 42 CFR 416.44(e) also currently require 
personnel trained in the use of emergency equipment and cardiopulmonary 
resuscitation be available whenever there is a patient in the ASC. 
Despite ASCs having access to local emergency services to transfer 
patients to the nearest appropriate hospital for continued care, we 
request comment on whether, in the final rule for CY 2021, we should 
change the requirements to increase the mandatory level of 
certification for personnel. For example, with respect to the current 
regulations at 42 CFR 416.44(e), we are interested in whether or not 
CMS should require the presence of staff certified to provide Advance 
Cardiac Life Support (ACLS) in the ASC to respond to any life 
threatening emergencies, and be capable of providing a full and 
complete medical resuscitation response in the ASC, to stabilize the 
patient before an emergency transfer to the closest hospital.
    We also request comment on whether we should make specific 
requirements in the CfC regulations at 42 CFR 416.52(a) for particular 
patient conditions or more complex and invasive surgical procedures 
ASCs would need to meet and for any evidence that would support such 
recommendations. As mentioned previously, we also request comments on 
possible additions or revisions to the quality measures under ASCQR if 
additional procedures are added to the ASC-CPL.
    We note the most useful comments are those that include data or 
evidence to support the position, offer suggestions to amend specific 
sections of the existing regulations, or offer particular additions.
    In summary, in light of the possibility of significantly expanding 
the ASC-CPL for CY 2021, we are considering whether changes to the ASC 
CfCs may be appropriate. As noted above, the current ASC CfCs provide 
the baseline health and safety standards that accommodate the oversight 
of a broad spectrum of ASC facility types that include a variety of 
services. We believe the current ASC CfCs provide sufficient 
flexibility and protection to patients such that they would not need to 
be revised even if we were to adopt a significant expansion of the 
covered ASC-CPL, however, we seek comment on whether certain revisions 
may be necessary and may adopt such revisions as final in the CY 2021 
final rule.
(4) Summary of Proposals
    For CY 2021, we propose to add eleven procedures using the standard 
ASC-CPL review process under our current regulations. In addition, we 
include two alternative proposals that we may finalize for CY 2021. One 
alternative is to establish a nomination process for CY 2021, which 
would allow us to propose to add nominated procedures beginning in CY 
2022. Under this proposal, external stakeholders, such as professional 
specialty societies, would nominate procedures that can be safely 
performed in the ASC setting based on the requirements in the ASC 
regulations, revised as described in this proposed rule (that is, 
retaining the general standard criteria and eliminating five of the 
general exclusion criteria), along with suggested parameters and all 
other regulatory standards. CMS would review and finalize procedures 
through annual rulemaking.
    Alternatively, we propose to revise the ASC-CPL criteria under 42 
CFR

[[Page 48963]]

416.166, retaining the general standard criteria and eliminating five 
of the general exclusion criteria. Using these revised criteria, we 
propose to add approximately 270 potential surgery or surgery-like 
codes to the CPL that are not on the CY 2020 IPO list. We propose to 
finalize only one of these alternative proposals, and we welcome public 
comment as to which policy should be adopted in the final rule.
    After consideration of priorities discussed above, we believe that 
these proposed policies strike an appropriate balance of between 
flexibility for physicians to exercise their complex medical judgment 
in factoring in patient safety considerations and flexibility for 
patients to choose from more settings of care in which to receive 
surgical procedures.
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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 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 
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 2021
    We propose to update ASC payment rates for CY 2021 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 CY 2021 OPPS/ASC proposed rule. 
Because the proposed OPPS relative payment weights are generally based 
on geometric mean costs, the ASC system would generally use the 
geometric mean to determine proposed relative payment weights under the 
ASC standard methodology. We propose to continue to use the amount 
calculated under the ASC standard ratesetting methodology for 
procedures assigned payment indicators ``A2'' and ``G2''.
    We propose 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 CY 2021 OPPS/ASC proposed rule. Therefore, we 
propose 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 2021 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 
2021 MPFS nonfacility PE RVU-based amount or the proposed CY 2021 ASC 
payment amount calculated according to the ASC standard ratesetting 
methodology.
    As we did for CYs 2014 through 2020, for CY 2021 we propose 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 those 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 CY 2021 OPPS/ASC 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 CY 2021 OPPS/ASC proposed rule.
    In the CY 2020 OPPS/ASC final rule with comment period (84 FR 
61400), we finalized our policy to limit the ASC payment rate for low-
volume device-intensive procedures to a payment rate equal to the OPPS 
payment rate for that procedure. Under our new policy,

[[Page 48977]]

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 establish an ASC 
payment rate for such procedures equal to the OPPS payment rate for the 
same procedure. For CY 2020, this policy only affected HCPCS code 
0308T, which had very low claims volume (7 claims from CY 2018 used for 
CY 2020 ratesetting in the OPPS). Additionally, we amended Sec.  
416.171(b) of the regulations to reflect the new limit on ASC payment 
rates for low-volume device-intensive procedures. CMS' existing 
regulation at Sec.  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 added 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 equivalent 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.
    Based on our review of CY 2019 claims using our standard 
ratesetting methodology, there are no low volume device-intensive 
procedures that would exceed the rate paid under the OPPS for the same 
procedure. However, there was a single claim containing CPT code 0308T 
that was unable to be used for the CY 2021 OPPS/ASC proposed rule 
ratesetting process as it was packaged into a comprehensive APC. 
Because our claims accounting logic does not assign the costs of 
individual procedures provided as part of a comprehensive APC to the 
APC that would otherwise apply the costs for CPT code 0308T were not 
assigned to the APC for that procedure, APC 5495 (Level 5 Intraocular 
Procedures). As a result, there was no available cost data from CY 2019 
claims data to construct relative payment weights for CPT code 0308T. 
As discussed in section III.D.2., under the OPPS, we propose to 
establish the payment weight for the CY 2021 OPPS for CPT code 0308T 
using the CY 2020 OPPS final rule median cost of $20,229.78 and 
relative payment weight as reflecting the most recent claims and cost 
data. Similarly, as there are no usable claims with CPT code 0308T from 
CY 2019, which we would normally use for this CY 2021 proposed rule 
under our standard ratesetting methodology, to establish an appropriate 
payment rate in CY 2021 for CPT code 0308T using the most recent claims 
and cost data, we propose to establish the payment rate under the ASC 
payment system for CY 2021 using CY 2020 final rule OPPS median cost of 
$20,229.78 and relative payment weight as reflecting the most recent 
available claims and cost data.
    However, CPT code 0308T was designated as a low volume device-
intensive procedure in CY 2020. For CY 2020, under the low-volume 
procedure payment policies in effect through CY 2019, the available 
claims data would have resulted in a payment rate of approximately 
$111,019.30 for CPT code 0308T when performed in the ASC setting, which 
would have been several times greater than the OPPS payment rate. 
Therefore, for CY 2020 we finalized our policy to limit the ASC payment 
rate for low-volume device intensive procedures to a payment rate equal 
to the OPPS payment rate for the procedures. This policy had the effect 
of limiting the ASC payment rate for CPT code 0308T to the applicable 
payment rate under the OPPS (which was $20,675.62 in CY 2020). 
Therefore, for this CY 2021 proposed rule, we propose to apply a 
payment rate under the ASC payment system equal to the OPPS payment 
rate for CPT code 0308T, which is $20, 994.57 in this proposed rule. 
Further, in the absence of claims data for this proposed rule, we also 
propose in this CY 2021 OPPS/ASC proposed rule to continue the CY 2020 
final rule device offset percentage of 90.18 percent for CPT code 
0308T. We will continue to monitor the claims available for ratesetting 
as they become available in preparation for the CY 2021 OPPS/ASC final 
rule.
    The proposed payment rate for covered surgical procedures for CY 
2021, including CPT code 0308T, are listed in Addendum AA of this CY 
2021 OPPS/ASC 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 CY 2021 OPPS/ASC 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 CY 2021 OPPS/ASC proposed rule, 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

[[Page 48978]]

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 
(Sec.  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 (Sec.  
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; Sec.  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 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 2021
    We propose 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 2021 OPPS and ASC 
payment rates and subsequent year payment rates. We also propose 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 2021 and 
subsequent year payment rates.
    Based on our quarterly updates for April and July 2020, we propose 
to add CPT 0598T (Noncontact real-time fluorescence wound imaging, for 
bacterial presence, location, and load, per session; first anatomic 
site (for example, lower extremity)), CPT 0599T (Noncontact real-time 
fluorescence wound imaging, for bacterial presence, location, and load, 
per session; each additional anatomic site (for example, upper 
extremity) (List separately in addition to code for primary 
procedure)), C9762 (Cardiac magnetic resonance imaging for morphology 
and function, quantification of segmental dysfunction; with strain 
imaging), and C7963 (Cardiac magnetic resonance imaging for morphology 
and function, quantification of segmental dysfunction; with stress 
imaging) as covered ancillary services.
    Covered ancillary services and their proposed payment indicators 
for CY 2021 are listed in Addendum BB of this CY 2021 OPPS/ASC 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 final rates, the proposed payment indicators and rates set 
forth in the proposed rule are based on a comparison using the proposed 
PFS rates effective January 1, 2021. For a discussion of the PFS rates, 
we refer readers to the CY 2021 PFS proposed rule, which is available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
3. CY 2021 ASC Packaging Policy for Non-Opioid Pain Management 
Treatments
    Section 6082 of the ``Substance Use-Disorder Prevention that 
Promotes Opioid Recovery and Treatment for Patients and Communities 
Act,'' also referred to as the ``SUPPORT for Patients and Communities 
Act'' (SUPPORT Act) (Pub. L. 115-271) was enacted on October 24, 2018. 
Section 6082(a) of the SUPPORT Act requires in part that the Secretary: 
``(i) shall, as soon as practicable, conduct a review (part of which 
may include a request for information) of payments 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 ensuring that there are not financial 
incentives to use opioids instead of non-opioid alternatives; (ii) may, 
as the Secretary determines appropriate, conduct subsequent reviews of 
such payments; and (iii) shall consider the

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extent to which revisions under this subsection to such payments (such 
as the creation of additional groups of covered OPD services to 
classify separately those procedures that utilize opioids and non-
opioid alternatives for pain management) would reduce payment 
incentives to use opioids instead of non-opioid alternatives for pain 
management.'' Section 6082(b) of the SUPPORT Act requires that the 
Secretary conduct a similar type of review in ambulatory surgical 
centers.
    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 Sec.  
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 Sec.  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 Sec.  
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.
    For the CY 2020 OPPS/ASC proposed rule (84 FR 39424 through 39427), 
we reviewed payments under the ASC 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 
ensuring that there are not financial incentives to use opioids instead 
of non-opioid alternatives. We used available data to analyze the 
payment and utilization patterns associated with specific non-opioid 
alternatives to determine whether our packaging policies reduced the 
use of non-opioid alternatives. For the CY 2020 OPPS/ASC proposed rule 
(84 FR 39426), we proposed 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 for CY 2020. In the CY 2020 
OPPS/ASC final rule with comment period (84 FR 61177), after reviewing 
data from stakeholders and Medicare claims data, we did not find 
compelling evidence to suggest that revisions to our OPPS payment 
policies for non-opioid pain management alternatives were necessary for 
CY 2020. We finalized our proposal to continue 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 for CY 2020. Under this policy, the only FDA-approved drug that 
meets these criteria is Exparel.
    We conducted an evaluation to determine whether there are payment 
incentives for using opioids instead of non-opioid alternatives in the 
CY 2020 OPPS/ASC final rule with comment period (84 FR 61176 to 61180). 
The results of our review and evaluation of our claims data did not 
provide evidence to indicate that the OPPS packaging policy had the 
unintended consequence of discouraging the use of non-opioid treatments 
for postsurgical pain management in the hospital outpatient department. 
Our updated review of claims data for the CY 2020 proposed rule showed 
a continued decline in the utilization of Exparel[supreg] in the ASC 
setting, which supported our proposal to continue paying separately for 
Exparel[supreg] in the ASC setting.
(4) Evaluation and CY 2021 Proposal for Payment for Non-Opioid 
Alternatives
    Over the last 2 years, we have conducted detailed evaluations of 
our payment policies regarding the use of opioids and non-opioid 
alternatives. We have reviewed multiple years of Medicare claims data, 
all public comments received on this topic, and studies and data from 
external stakeholders. Each of these reviews have led to the consistent 
conclusion that CMS's packaging policies are not discouraging the use 
of non-opioid alternatives or impeding access to these products, with 
the exception of Exparel, the only non-opioid pain management drug that 
functions as a surgical supply when furnished in the ASC setting.
    Section 6082(a) of the SUPPORT Act also provides that after an 
initial review, the Secretary can conduct subsequent reviews of covered 
payments as the Secretary deems appropriate. In light of the fact that 
CMS has conducted a thorough review of payments for opioids and 
evidence-based non-opioid alternatives for pain management to ensure 
that there are not financial incentives to use opioids instead of non-
opioid alternatives, we do not believe that conducting a similar review 
for CY2021 would be a fruitful effort. After careful consideration, we 
believe we have fulfilled the statutory requirement to review payments 
for opioids and evidence-based non-opioid alternatives for pain 
management to ensure that there are not financial incentives to use 
opioids instead of non-opioid alternatives, as described in the CY 2020 
OPPS/ASC rulemaking. We are committed to evaluating our current 
policies to adjust payment methodologies, if necessary, in order to 
ensure appropriate access for beneficiaries amid the current opioid 
epidemic. However, we do not believe conducting a similar CY 2021 
review would yield significantly different outcomes or new evidence 
that would prompt us to change our payment policies under the OPPS or 
ASC payment system.
    Current claims data suggest that CMS' current policies are having a 
positive impact on the utilization of non-opioid alternatives, 
including Exparel. A preliminary claims analysis showed that the total 
units of Exparel have increased over the last year. From CY 2015 to CY 
2018, we saw an annual decline in the total units of Exparel furnished 
in the ASC setting, with 244,756 total units provided in CY 2015 
dropping to 60,125 total units provided in CY 2018. In CY 2019, ASCs 
furnished a total of 1,379,286 units of Exparel. Due to this positive 
trend that reflects the increased use of non-opioid treatment for pain, 
we do not believe that further changes are necessary under the ASC 
payment system for non-opioid pain management drugs that function as a 
surgical supply in the ASC setting. Therefore, for CY 2021, we propose 
to continue 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 in the performance of surgical procedures furnished 
in the ASC setting and to 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 2021.

E. Proposed 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 Sec.  416.195.

[[Page 48980]]

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 
Sec.  416.185(b), the deadline for receipt of public comments is 30 
days following publication of the list of requests in the proposed 
rule.
     In the final rule updating the ASC and OPPS payment rates 
for the following calendar year, we--
    ++ 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 2021
    We did not receive any requests for review to establish a new NTIOL 
class for CY 2021.3. 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 
2021.

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 CY 2010 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 the 
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. ASC Payment and Comment Indicators for CY 2021
    For CY 2021, we propose 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 
2021 and any new and existing Level II HCPCS codes with substantial 
revisions to the code descriptors for CY 202a compared to the CY 2020 
descriptors are included in ASC Addenda AA and BB to this proposed rule 
were labeled with proposed comment indicator ``NP'' to indicate that 
these CPT and Level II HCPCS codes were open for comment as part of the 
proposed rule. Proposed comment indicator ``NP'' meant 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 denoted that comments would be accepted on the 
proposed ASC payment indicator for the new code.
    For the CY 2021 update, we propose to add ASC payment indicator 
``K5''--Items, Codes, and Services for which pricing information and 
claims data are not available. No payment made.--) to ASC Addendum DD1 
to this proposed rule (which is available via the internet on the CMS 
website). New drug HCPCS codes that do not have claims data or payment 
rate information are currently assigned to OPPS status indicator 
``E2''--Not paid by Medicare when submitted on outpatient claims (any 
outpatient bill type). These codes are

[[Page 48981]]

categorized and included in the ASC payment system as nonpayable codes 
and are currently assigned an ASC payment indicator ``Y5''--Non-
surgical procedure/item not valid for Medicare purposes because of 
coverage, regulation and/or statute; no payment made--because that is 
the ASC payment indicator that currently best describes the status of 
these HCPCS codes. However, ``Y5'' assignments include both those drug 
codes that would not be integral to the performance of a surgical 
procedure and are therefore not payable in the ASC payment system and 
those codes that may become separately payable in the ASC payment 
system. Since there is not a separate payment indicator that describes 
the subset of drug codes that will become payable when claims data or 
payment information is available the existing ASC payment indicators 
cannot currently communicate the distinction between these two classes 
of drugs. Therefore, for CY2021 and subsequent calendar years, we 
propose to add ASC payment indicator ``K5''--Items, Codes, and Services 
for which pricing information and claims data are not available. No 
payment made.--to ASC Addendum DD1 to this proposed rule (which is 
available via the internet on the CMS website) to indicate those 
services and procedures that CMS anticipates will become payable when 
claims data or payment information becomes available.
    We will respond to public comments on ASC payment and comment 
indicators and finalize their ASC assignment in the CY 2021 OPPS/ASC 
final rule with comment period. We refer readers to Addenda DD1 and DD2 
of 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. Addenda DD1 and DD2 to this proposed 
rule (which are available via the internet on the CMS website) contain 
the complete list of ASC payment and comment indicators for CY 2021.

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 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; Sec.  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 CY 2021 OPPS/ASC 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

[[Page 48982]]

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 2021, the proposed CY 2021 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 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. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2021 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). The OPPS relative payment weights 
are scaled to maintain budget neutrality for the OPPS. We then scale 
the OPPS relative payment weights again to establish the ASC relative 
payment weights. To accomplish this we hold estimated total ASC payment 
levels constant between calendar years for purposes of maintaining 
budget neutrality in the ASC payment system. That is, we apply the 
weight scalar to ensure that projected expenditures from the updated 
ASC payment weights in the ASC payment system equal to what would be 
the current expenditures based on the scaled ASC payment weights. In 
this way we ensure budget neutrality and that the only changes to total 
payments to ASCs result from increases or decreases in the ASC payment 
update factor.
    Where the estimated ASC expenditures for an upcoming year are 
higher than the estimated ASC expenditures for the current year, the 
ASC weight scalar is reduced, in order to bring the estimated ASC 
expenditures in line with the expenditures for the baseline year. This 
frequently results in ASC relative payment weights for surgical 
procedures that are lower than the OPPS relative payment weights for 
the same procedures for the upcoming year. Therefore, over time, even 
if procedures performed in the HOPD and ASC receive the same update 
factor under the OPPS and ASC payment system, payment rates under the 
ASC payment system would increase at a lower rate than payment for the 
same procedures performed in the HOPD as a result of applying the ASC 
weight scalar to ensure budget neutrality.
    Consistent with our established policy, we propose to scale the CY 
2021 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 2019, we propose to compare the total 
payment using the CY 2020 ASC relative payment weights with the total 
payment using the CY 2021 ASC relative payment weights to take into 
account the changes in the OPPS relative payment weights between CY 
2020 and CY 2021. We propose to use the ratio of CY 2020 to CY 2021 
total payments (the weight scalar) to scale the ASC relative payment 
weights for CY 2021. The proposed CY 2021 ASC weight scalar is 0.8494. 
Consistent with historical practice, we would scale the ASC relative 
payment weights of 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 have

[[Page 48983]]

available 90 percent of CY 2019 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 2019 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2019 claims data. We used the 
supplier zip code reported on the claim to associate State, county, and 
CBSA with each ASC. This file is available to the public as a 
supporting data file for this proposed rule and is posted on the CMS 
website at: http://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 2021, we calculated the proposed adjustment for the ASC payment 
system by using the most recent CY 2019 claims data available and 
estimating the difference in total payment that would be created by 
introducing the proposed CY 2021 ASC wage indexes. Specifically, 
holding CY 2019 ASC utilization, service-mix, and the proposed CY 2021 
national payment rates after application of the weight scalar constant, 
we calculated the total adjusted payment using the CY 2020 ASC wage 
indexes and the total adjusted payment using the proposed CY 2021 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 2020 ASC wage indexes to the total 
adjusted payment calculated with the proposed CY 2021 ASC wage indexes 
and applied the resulting ratio of 0.9999 (the proposed CY 2021 ASC 
wage index budget neutrality adjustment) to the CY 2020 ASC conversion 
factor to calculate the proposed CY 2021 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 
Sec.  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 MFP-adjusted 
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 MFP-adjusted 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 Sec.  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.
    The proposed hospital market basket update for CY 2021 is projected 
to be 3.0 percent, as published in the FY 2021 IPPS/LTCH PPS proposed 
rule (85 FR 32738), based on IHS Global Inc.'s (IGI's) 2019 fourth 
quarter forecast with historical data through the third quarter of 
2019.
    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). The proposed MFP adjustment 
for CY 2021 is projected to be 0.4 percentage point, as published in 
the FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32739) based on IGI's 
2019 fourth quarter forecast.
    For CY 2021, we propose to utilize the hospital market basket 
update of 3.0 percent minus the MFP adjustment of 0.4 percentage point, 
resulting in an MFP-adjusted hospital market basket update factor of 
2.6 percent for ASCs meeting the quality reporting requirements. 
Therefore, we propose to apply a 2.6 percent MFP-adjusted hospital 
market basket update factor to the CY 2020 ASC conversion factor for 
ASCs meeting the quality reporting requirements to determine the CY 
2021 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 CY 2021 OPPS/ASC proposed rule for a 
detailed discussion of our policies regarding payment reduction for 
ASCs that fail to meet ASCQR Program requirements. We propose to 
utilize the hospital market basket update of 3.0 percent reduced by 2.0 
percentage points for ASCs that do not meet the quality reporting 
requirements and then subtract the 0.4 percentage point MFP adjustment. 
Therefore, we propose to apply a 0.6 percent MFP-adjusted hospital 
market basket update factor to the CY 2020 ASC conversion factor for 
ASCs not meeting the quality reporting requirements. We also propose 
that if more recent data are subsequently available (for example, a 
more recent estimate of the hospital market basket update or MFP 
adjustment), we would use such data, if appropriate, to determine the 
CY 2021 ASC update for the CY 2021 OPPS/ASC final rule with comment 
period.
    For CY 2021, we propose to adjust the CY 2020 ASC conversion factor 
($47.747) by the proposed wage index budget neutrality factor of 0.9999 
in addition to the MFP-adjusted hospital market basket update of 2.6 
percent discussed above, which results in a proposed CY 2021 ASC 
conversion factor of $48.984 for ASCs meeting the quality reporting 
requirements. For ASCs not meeting the quality reporting requirements, 
we propose to adjust the CY 2020 ASC conversion factor ($47.747) by the 
proposed wage index budget neutrality factor of 0.9999 in

[[Page 48984]]

addition to the quality reporting/MFP-adjusted hospital market basket 
update of 0.6 percent discussed above, which results in a proposed CY 
2021 ASC conversion factor of $48.029.
3. Display of Proposed CY 2021 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available on the 
CMS website) display the proposed ASC payment rates for CY 2021 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 PFS rates that 
would be effective January 1, 2021. For a discussion of the PFS rates, 
we refer readers to the CY 2021 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 addenda AA and BB to this 
proposed rule 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 2021 
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 2021. 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.
    For CY 2021, we propose to add a new column to ASC Addendum BB 
titled ``Drug Pass-Through Expiration during Calendar Year'' where we 
would flag through the use of an asterisk each drug for which pass-
through payment is expiring during the calendar year (that is, on a 
date other than December 31st).
    The values displayed in the column titled ``Proposed CY 2021 
Payment Weight'' are the proposed relative payment weights for each of 
the listed services for CY 2021. 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 2021 payment rate displayed in the 
``Proposed CY 2021 Payment Rate'' column, each ASC payment weight in 
the ``Proposed CY 2021 Payment Weight'' column was multiplied by the 
proposed CY 2021 conversion factor of $48.984. The conversion factor 
includes a budget neutrality adjustment for changes in the wage index 
values and the annual update factor as reduced by the productivity 
adjustment. The proposed CY 2021 ASC conversion factor uses the CY 2021 
MFP-adjusted hospital market basket update factor of 2.6 percent (which 
is equal to the projected hospital market basket update of 3.0 percent 
minus a projected MFP adjustment of 0.4 percentage point).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Proposed CY 2021 Payment Weight'' column for items and services 
with predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Proposed CY 2021 Payment'' column displays 
the proposed CY 2021 national unadjusted ASC payment rates for all 
items and services. The proposed CY 2021 ASC payment rates listed in 
Addendum BB for separately payable drugs and biologicals are based on 
ASP data used for payment in physicians' offices in 2020.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are proposed to be excluded from payment in 
ASCs for CY 2021.

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.
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; 83 FR 59080 through 
59110; and 84 FR 61410 through 61420) for the regulatory history of the 
Hospital OQR Program. We have codified certain requirements under the 
Hospital OQR Program at 42 CFR 419.46.
4. Proposal To Codify Statutory Authority for Hospital OQR Program
    The Hospital OQR Program regulations are codified at 42 CFR

[[Page 48985]]

419.46. We propose to update the regulations to include a reference to 
the statutory authority for the Hospital OQR Program. Section 
1833(t)(17)(A) of the Social Security Act (the Act) states that 
subsection (d) hospitals (as defined under section 1886(d)(1)(B) of the 
Act) that do not submit data required to be submitted on measures 
selected with respect to such a year, in the form and manner required 
by the Secretary, will incur a 2.0 percentage point reduction to their 
annual OPD fee schedule increase factor. We propose to redesignate the 
existing paragraphs (a) through (h) as paragraphs (b) through (i) and 
codify the Hospital OQR Program's statutory authority at new paragraph 
Sec.  419.46(a). Because of the proposed redesignations, the cross-
references throughout Sec.  419.46 are also proposed to be updated.
    Table 42 shows the correlation between the cross-references 
proposed to be removed and added if the proposed redesignations are 
finalized.
[GRAPHIC] [TIFF OMITTED] TP12AU20.098

    We request public comment on this proposal.
    We refer readers to section XIV.E. of the preamble of this proposed 
rule for a detailed discussion of the payment reduction for hospitals 
that fail to meet Hospital OQR Program requirements for the CY 2023 
payment determination.

B. Hospital OQR Program Quality Measures

1. Considerations in Selecting 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). 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). We are not proposing any changes to these policies in this 
proposed rule.
3. Removal of Quality Measures From the Hospital OQR Program Measure 
Set
a. Immediate Removal
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60634 
through 60635), we finalized a process for removal of Hospital OQR 
Program measures, based on evidence that the continued use of the 
measure as specified raises patient safety concerns.\97\ 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). In the case of suspension or removal 
due to patient safety concerns, action would need to be taken quickly 
and may not coincide with rulemaking cycles (77 FR 68472). In this 
case, we would promptly remove the measure and notify hospitals of its 
removal, and confirm the removal of the measure in the next rulemaking 
cycle. We are not proposing any changes to these policies in this 
proposed rule.
---------------------------------------------------------------------------

    \97\ 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.
---------------------------------------------------------------------------

b. Consideration Factors for Removing Measures
    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.\98\ 
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). 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)(3) an updated 
set of factors \99\ 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 factors. We are not proposing any changes to 
these policies in this proposed rule.
---------------------------------------------------------------------------

    \98\ 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.
    \99\ 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.
---------------------------------------------------------------------------

4. Summary of Hospital OQR Program Measure Set for the CY 2023 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2020 OPPS/ASC final rule with comment 
period (84 FR 61410 through 61420) for a summary of the previously 
finalized Hospital OQR Program measure set for the CY 2022 payment 
determination and subsequent years.
    We are not proposing any changes to the previously finalized 
measure set.

[[Page 48986]]

Table 43 summarizes the previously finalized Hospital OQR Program 
measure set for the CY 2023 payment determination and subsequent years.
[GRAPHIC] [TIFF OMITTED] TP12AU20.099

5. 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.
6. Public Display of Quality Measures
    We refer readers to the CY 2009, CY 2014, and CY 2017 OPPS/ASC 
final rules with comment period (73 FR 68777 through 68779, 78 FR 
75092, and 81 FR 79791, respectively) for our previously finalized 
policies regarding public display of quality measures.
a. Codification
    In the 2009 OPPS/ASC final rule with comment period (73 FR 68778), 
we finalized that hospitals sharing the same

[[Page 48987]]

CCN must combine data collection and submission across their multiple 
campuses for all clinical measures for public reporting purposes. While 
we previously finalized this policy, it was not codified. In this 
proposed rule, we propose to codify this policy by adding language at 
the redesignated paragraph (d)(1). If finalized, the newly redesignated 
paragraph (d)(1) would specify that ``Hospitals sharing the same CCN 
must combine data collection and submission across their multiple 
campuses for all clinical measures for public reporting purposes.'' We 
are soliciting public comment on our proposal.
b. Overall Hospital Quality Star Rating
    In this proposed rule, we propose a methodology to calculate the 
Overall Hospital Quality Star Rating (Overall Star Rating). The Overall 
Star Rating would utilize data collected on hospital inpatient and 
outpatient measures that are publicly reported on a CMS website, 
including data from the Hospital OQR Program. We refer readers to 
section XVI. Proposed Overall Hospital Quality Star Rating Methodology 
for Public Release in CY 2021 and Subsequent Years of this proposed 
rule for details.

C. Administrative Requirements

1. QualityNet Account and Security Administrator/Security Official
    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.
    In this proposed rule, we propose to use the term ``security 
official'' instead of ``security administrator'' to denote the exercise 
of authority invested in the role. The term ``security official'' would 
refer to ``the individual(s)'' who have responsibilities for security 
and account management requirements for a hospital's QualityNet 
account. To be clear, this proposed update in terminology would not 
change the individual's responsibilities or add burden. We propose to 
revise existing Sec.  419.46(a)(2), proposed redesignated Sec.  
419.46(b)(2), by replacing the term ``security administrator'' with the 
term ``security official.'' If finalized, the newly redesignated 
paragraph (b)(2) would read: ``Identify and register a QualityNet 
security official as part of the registration process under paragraph 
(b)(1) of this section.'' We invite public comment on our proposal to 
replace the term ``security administrator'' with ``security official'' 
and codify this change.
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).
    In this proposed rule, we propose to revise existing Sec.  
419.46(b) (proposed redesignated Sec.  419.46(c)) by removing the 
phrase ``submit a new participation form'' to align with previously 
finalized policy; submission of this form was removed as a program 
requirement in the CY 2019 OPPS/ASC final rule (83 FR 59103 to 59104). 
We also propose to update internal cross-references as a result of the 
redesignations discussed under section XIV.A.4. of this proposed rule. 
If finalized as proposed, the newly redesignated Sec.  419.46(c) would 
specify that ``A withdrawn hospital will not be able to later sign up 
to participate in that payment update, is subject to a reduced annual 
payment update as specified under Sec.  419.46(i), and is required to 
renew participation as specified in Sec.  419.46(b) in order to 
participate in any future year of the Hospital OQR Program.'' Our 
proposal also includes updated cross-referenced provisions in the newly 
redesignated Sec.  419.46(c). We are soliciting public comment on our 
proposal.

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

1. Hospital OQR Program Annual Submission Deadlines
    We refer readers to the CYs 2014, 2016, and 2018 OPPS/ASC final 
rules with comment period (78 FR 75110 through 75111; 80 FR 70519 
through 70520; and 82 FR 59439) where we finalized our policies for 
data submission deadlines. We codified these submission requirements at 
42 CFR 419.46(c). The submission deadlines for the CY 2023 payment 
determination and subsequent years are illustrated in Table 44.
[GRAPHIC] [TIFF OMITTED] TP12AU20.100

    To align with statute, in this proposed rule, we propose one change 
to our submission deadlines. We propose that all deadlines falling on a 
nonwork day be moved forward consistent with section 216(j) of the Act, 
42 U.S.C. 416(j), ``Periods of Limitation Ending on Nonwork Days,'' 
beginning with the effective date of this rule. Section 1872 of the 
Act, incorporates section 216(j) of the Act, to apply to Title XVIII, 
the Medicare program to which the Hospital OQR Program is administered. 
Under this proposal, all deadlines occurring on a Saturday, Sunday, or 
legal holiday, or on any other day all or part of which is declared to 
be a nonwork day for federal employees by statute or Executive order 
would be extended to the first day thereafter which is not a Saturday, 
Sunday or legal holiday or any other day all or part of which is 
declared to be a nonwork day for federal employees by statute or 
Executive order.

[[Page 48988]]

    We propose to revise our policy regarding submission deadlines at 
existing Sec.  419.46(c)(2), proposed redesignated Sec.  419.46(d)(2). 
If finalized, the newly redesignated paragraph (d)(2) would specify 
that ``All deadlines occurring on a Saturday, Sunday, or legal holiday, 
or on any other day all or part of which is declared to be a nonwork 
day for Federal employees by statute or Executive order are extended to 
the first day thereafter which is not a Saturday, Sunday or legal 
holiday or any other day all or part of which is declared to be a 
nonwork day for Federal employees by statute or Executive order.'' We 
invite public comment on our proposal.
2. Requirements for Chart-Abstracted Measures Where Patient-Level Data 
Are Submitted Directly to CMS for the CY 2023 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. We 
are not proposing any changes to these policies in this proposed rule.
    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 2023 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 3-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. We are not proposing any changes to 
these policies in this proposed rule.
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 2023 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. We are not proposing any changes to the previously 
finalized requirements related to survey administration and vendors for 
the OAS CAHPS Survey-based measures in this proposed rule.
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), the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70521), and the CMS QualityNet website 
(www.qualitynet.org for a discussion of the requirements for measure 
data submitted via the CMS QualityNet Secure Portal (also referred to 
as the Hospital Quality Reporting (HQR) system secure portal) 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. We are not proposing 
any changes to these policies in this proposed rule.
    The following previously finalized quality measures will require 
data to be submitted via a CMS web-based tool for the CY 2023 payment 
determination and subsequent years with the exception of OP-31: 
Cataracts: Improvement in Patient's Visual Function within 90 Days 
Following Cataract Surgery (NQF #1536) for which data submission 
remains voluntary:
     OP-22: Left Without Being Seen (NQF #0499);
     OP-29: Endoscopy/Polyp Surveillance: Appropriate Follow-up 
Interval for Normal Colonoscopy in Average Risk Patients (NQF #0658); 
and
     OP-31: Cataracts: Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery (NQF #1536).
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 these policies in this proposed rule.
7. Review and Corrections Period for Measure Data Submitted to the 
Hospital OQR Program
a. Chart-Abstracted Measures
    We refer readers to the CY 2015 OPPS/ASC final rule with comment 
period (79 FR 66964 and 67014) where we formalized a review and 
corrections period for chart-abstracted measures in the Hospital OQR 
Program. Per the previously finalized policy, the Hospital OQR Program 
implemented a 4-month review and corrections period for chart-
abstracted measure data, which runs concurrently with the data 
submission period. During the review and corrections period for chart-
abstracted data, hospitals can enter, review, and correct data 
submitted directly to CMS for the chart-abstracted measures.

[[Page 48989]]

b. Web-Based Measures
    In this proposed rule, we propose to expand our review and 
corrections policy to apply to measure data submitted via the CMS web-
based tool beginning with data submitted for the CY 2023 payment 
determination and subsequent years. Hospitals would have a review and 
corrections period for web-based measures, which would run concurrently 
with the data submission period. The review and corrections period for 
web-based measures is from the time the submission period opens to the 
submission deadline. During this review and corrections period, 
hospitals can enter, review, and correct data submitted directly to 
CMS. However, after the submission deadline, hospitals would not be 
allowed to change these data. The expansion of the existing policy for 
chart-abstracted measures to data submitted via the CMS web-based tool 
would accommodate a growing diversity of measure types in the Hospital 
OQR Program. We are soliciting public comment on our proposal.
c. Codification of the Review and Corrections Periods for Measure Data 
Submitted to the Hospital OQR Program
    We note that the previously finalized policy relating to the review 
and corrections period for chart-abstracted measures has not yet been 
codified. Therefore, in this proposed rule, we propose to codify at 42 
CFR 419.46 the review and corrections period policy for measure data 
submitted to the Hospital OQR Program for chart-abstracted measure 
data, as well as for the proposed policy for measure data submitted 
directly to CMS via the CMS web-based tool. Specifically, we propose to 
add a new paragraph (4) at existing Sec.  419.46(c), proposed 
redesignated Sec.  419.46(d). If finalized, the new paragraph (d)(4) 
would read: ``Review and Corrections Period. For both chart-abstracted 
and web-based measures, hospitals have a review and corrections period, 
which runs concurrently with the data submission period. During this 
timeframe, hospitals can enter, review, and correct data submitted. 
However, after the submission deadline, this data cannot be changed.'' 
We are soliciting public comment on our proposal.
8. Hospital OQR Program Validation Requirements
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72105 through 72106), 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. In this 
proposed rule, while we are not proposing changes to our validation 
policies, we propose to codify certain previously finalized policies; 
these are discussed in more detail in section XIV.D.8.b.
a. Educational Review Process and Score Review and Correction Period 
for Chart-Abstracted Measures
(1) Background
    In the CY 2018 final rule (82 FR 59441 through 59443), we finalized 
a policy to formalize the Educational Review Process for Chart-
Abstracted Measures, including Validation Score Review and Correction. 
Under the informal process, hospitals that were selected and received a 
score for validation may request an educational review to better 
understand the results. A hospital has 30 calendar days from the date 
the validation results are made available via the QualityNet Secure 
Portal (also referred to as the Hospital Quality Reporting (HQR) 
System) to contact the CMS designated contractor, currently known as 
the Validation Support Contractor (VSC), to request an educational 
review (82 FR 59442). In response to a request, the VSC obtains and 
reviews medical records directly from the Clinical Data Abstraction 
Center (CDAC) and provides feedback (82 FR 59442). CMS, or its 
contractor, generally provides educational review results and responses 
via a secure file transfer to the hospital (82 FR 59442). In the CY 
2018 final rule (82 FR 59441 through 59443), we (1) formalized this 
process; and (2) specified that if the results of an educational review 
indicate that we incorrectly scored a hospital's medical records 
selected for validation, the corrected quarterly validation score would 
be used to compute the hospital's final validation score at the end of 
the calendar year. We are not proposing any changes to this finalized 
policy in this proposed rule.
(2) Proposed Codification of Educational Review Process and Score 
Review and Correction Period for Chart-Abstracted Measures
    The previously finalized policy to formalize the Educational Review 
Process for Chart-Abstracted Measures, including Validation Score 
Review and Correction finalized in the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59441 through 59442), has not yet been codified 
at 42 CFR 419.46. In this proposed rule, we propose to codify those 
policies by adding a new paragraph (4) to existing Sec.  419.46(e), 
proposed redesignated Sec.  419.46(f). If finalized, the new paragraph 
(f)(4) would specify that ``Hospitals that are selected and receive a 
score for validation of chart-abstracted measures may request an 
educational review in order to better understand the results within 30 
calendar days from the date the validation results are made available. 
If the results of an educational review indicate that a hospital's 
medical records selected for validation for chart-abstracted measures 
was incorrectly scored, the corrected quarterly validation score will 
be used to compute the hospital's final validation score at the end of 
the calendar year.'' We invite public comment on this proposal.
9. 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 
these policies in this proposed rule.
10. 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.
    In alignment with our proposal to change submission deadlines in 
section XIV.D.1. of this proposed rule, we propose one change to our 
reconsideration deadlines. We propose

[[Page 48990]]

that all deadlines falling on a nonwork day be moved forward consistent 
with section 216(j) of the Act, 42 U.S.C. 416(j), ``Periods of 
Limitation Ending on Nonwork Days,'' beginning with the effective date 
of this rule. Section 1872 of the Act, incorporates section 216(j) of 
the Act, to apply to Title XVIII, the Medicare program to which the 
Hospital OQR Program is administered. Under this proposal, all 
deadlines occurring on a Saturday, Sunday, or legal holiday, or on any 
other day all or part of which is declared to be a nonwork day for 
federal employees by statute or Executive order would be extended to 
the first day thereafter which is not a Saturday, Sunday or legal 
holiday or any other day all or part of which is declared to be a 
nonwork day for federal employees by statute or Executive order. 
Specifically, we propose to remove ``the first business day on or 
after'' from existing Sec.  419.46(f)(1), proposed redesignated Sec.  
419.46(g)(1), to ensure the language of the regulatory text regarding 
deadlines for reconsideration requests is consistent with 42 U.S.C. 
416(j). If finalized, the newly redesignated paragraph (g)(1) would 
read: ``A hospital may request reconsideration of a decision by CMS 
that the hospital has not met the requirements of the Hospital OQR 
Program for a particular calendar year. Except as provided in paragraph 
(e) of this section, a hospital must submit a reconsideration request 
to CMS via the QualityNet website, no later than March 17, or if March 
17 falls on a nonwork day, on the first day after March 17 which is not 
a nonwork day as defined in Sec.  419.46(d)(2), of the affected payment 
year as determined using the date the request was mailed or submitted 
to CMS.'' We invite public comment on our proposal.

E. Proposed Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2021 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 the service is assigned. 
The OPPS conversion factor, which is updated annually by the OPD fee 
schedule increase factor, is used to calculate the OPPS payment rate 
for services with the following status indicators (listed in Addendum B 
to the proposed rule, which is available via the internet on the CMS 
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).
    We note that the only difference in the calculation for the full 
conversion factor and the calculation for the reduced conversion factor 
is that the full conversion factor uses the full OPD update and the 
reduced conversion factor uses the reduced OPD update. The baseline 
OPPS conversion factor calculation is the same since all other 
adjustments would be applied to both conversion factor calculations. 
Therefore, our standard approach of calculating the reporting ratio as 
described earlier in this section is equivalent to dividing the reduced 
OPD update factor by that of the full OPD update factor. In other 
words:

Full Conversion Factor = Baseline OPPS conversion factor * (1 + OPD 
update factor)
Reduced Conversion Factor = Baseline OPPS conversion factor * (1 + OPD 
update factor-0.02)
Reporting Ratio = Reduced Conversion Factor / Full Conversion Factor

    Which is equivalent to:

Reporting Ratio = (1 + OPD Update factor-0.02) / (1 + OPD update 
factor)

    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. Under this policy, we apply the

[[Page 48991]]

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 the proposed rule.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2021
    We propose 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 2021 annual payment update factor. 
For this CY 2021 OPPS/ASC proposed rule, the proposed reporting ratio 
is 0.9805, which when multiplied by the proposed full conversion factor 
of $83.697 equals a proposed conversion factor for hospitals that fail 
to meet the requirements of the Hospital OQR Program (that is, the 
reduced conversion factor) of $82.016. We propose to continue to apply 
the reporting ratio to all services calculated using the OPPS 
conversion factor. For this CY 2021 OPPS/ASC proposed rule, we propose 
to continue 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 propose to continue to 
exclude services paid under New Technology APCs. We propose to continue 
to apply the reporting ratio to the national unadjusted payment rates 
and the minimum unadjusted and national unadjusted copayment rates of 
all applicable services for those hospitals that fail to meet the 
Hospital OQR Program reporting requirements. We also propose 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 propose 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. In addition to our proposal to 
implement the policy through the use of a reporting ratio, we also 
propose to calculate the reporting ratio to four decimals (rather than 
the previously used three decimals) to more precisely calculate the 
reduced adjusted payment and copayment rates.
    For CY 2021, the proposed reporting ratio is 0.9805, which when 
multiplied by the final full conversion factor of 83.697 equals a 
proposed conversion factor for hospitals that fail to meet the 
requirements of the Hospital OQR Program (that is, the reduced 
conversion factor) of 82.065. We note that the proposed reporting ratio 
can be applied to the full national unadjusted payment rates to 
determine reduced national unadjusted payment rates.

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

A. Background

1. Overview
    We refer readers to section XIV.A.1. of the CY 2020 final rule (84 
FR 61410) 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) where we previously discussed our Meaningful Measures 
Initiative and our approach in evaluating quality program measures.
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 refer readers to the CYs 2014 through 2020 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; 83 FR 59110 through 59139; and 84 FR 61420 through 61434, 
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). In this 
proposed rule, we propose to update certain currently codified program 
policies and propose a review and corrections period as well as other 
administrative changes. We discuss these proposals in more detail below 
in sections XV.C. and XV.D.

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 the 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 such measures 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.

[[Page 48992]]

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 \100\ and the process for removing measures 
from the ASCQR 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. We are not 
proposing any changes to the measure removal factors in this proposed 
rule.
---------------------------------------------------------------------------

    \100\ 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.
---------------------------------------------------------------------------

3. Summary of ASCQR Program Quality Measure Set Previously Finalized 
for the CY 2024 Payment Determination and for Subsequent Years
    We are not proposing to remove any existing measures or to adopt 
any new measures for the CY 2023 payment determination. Table 45 
summarizes the previously finalized ASCQR Program measure set for the 
CY 2024 payment determination and subsequent years.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP12AU20.101

BILLING CODE 4120-01-C
4. Maintenance of Technical Specifications for Quality Measures
    We refer readers to the CYs 2012 through 2016 OPPS/ASC final rules 
with comment period (76 FR 74513 through 74514; 77 FR 68496 through 
68497; 78 FR 75131; 79 FR 66981; and 80 FR 70531, respectively) for 
detailed discussion of our policies regarding the maintenance of 
technical specifications for the ASCQR Program, which are codified at 
42 CFR 416.325. We are not proposing any changes to these policies.
5. Public Reporting of ASCQR Program Data
    We refer readers to the CYs 2012, 2016, 2017 and 2018 OPPS/ASC 
final rules with comment period (76 FR 74514 through 74515; 80 FR 70531 
through 70533; 81 FR 79819 through

[[Page 48993]]

79820; and 82 FR 59455 through 59470, respectively) for detailed 
discussion of our policies regarding the public reporting of ASCQR 
Program data, which are codified at 42 CFR 416.315 (80 FR 70533). We 
are not proposing any changes to these policies.
6. ASCQR Program Measures and Topics for Future Considerations
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the ASC setting. We also seek measures that would 
facilitate meaningful comparisons between ASCs and hospitals. 
Therefore, we invite public comment on new measures for our 
consideration that address care quality in the ASC settings as well as 
on additional measures that could facilitate comparison of care 
provided in ASCs and hospitals.

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 the maintenance of a QualityNet account and 
security administrator for the ASCQR Program at Sec.  416.310(c)(1)(i).
    In this proposed rule, we propose to use the term ``security 
official'' instead of ``security administrator'' to denote the exercise 
of authority invested in the role. The term ``security official'' 
refers to ``the individual(s)'' who have responsibilities for security 
and account management requirements for a facility's QualityNet 
account. To be clear, this proposed update in terminology would not 
change the individual's responsibilities or add burden. We also propose 
to revise Sec.  416.310(c)(1)(i) by replacing the term ``security 
administrator'' with the term ``security official''. The new sentence 
would read: ``A QualityNet security official is necessary to set up 
such an account for the purpose of submitting this information.'' We 
invite public comment on our proposals.
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.

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

1. Data Collection and Submission
a. Update of Language Generally
    We previously codified our existing policies regarding data 
collection and submission under the ASCQR Program at 42 CFR 416.310. We 
currently use the phrases ``data collection period'' and ``data 
collection time period'' interchangeably in Sec.  416.310(a) through 
(c). We believe that using one, consistent phrase will streamline and 
simplify the section and our policies to help avoid potential 
confusion. As such, we propose to remove the phrase ``data collection 
time period'' in all instances where it appears in Sec.  416.310, and 
replace it with the phrase ``data collection period''--specifically at 
Sec.  416.310(a)(2), (b), (c)(1)(ii), and (c)(2), as well as replacing 
the phrase ``time period'' with ``period'' in Sec.  416.310(c)(1)(ii) 
for language consistency. We invite comment on our proposal.
b. 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. 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 and 83 FR 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.
    Furthermore, we note that the previously finalized data processing 
and collection period requirements will apply to any future claims-
based -measures using QDCs adopted in the ASCQR Program.
c. 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. We are not proposing any changes to 
these policies.
    As noted above, while data submission for certain claims-based 
measures using QDCs was suspended, our policies for minimum threshold, 
minimum case volume, and data completeness requirements will apply to 
any future claims-based measures using QDCs adopted in the ASCQR 
Program.
d. Requirements Regarding Data Processing and Collection Periods for 
Non-QDC Based, Claims-Based Measure Data
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59136 through 59138), for a complete summary of the data 
processing and collection requirements for the non-QDC based, claims-
based measures. We codified the requirements regarding data processing 
and collection periods for non-QDC, claims-based measures for the ASCQR 
Program at 42 CFR 416.310(b). We note that these requirements for non-
QDC based, claims-based measures apply to the following previously 
finalized measures:
     ASC-12: Facility 7-Day Risk-Standardized Hospital Visit 
Rate after Outpatient Colonoscopy.
     ASC-19: Facility-Level 7-Day Hospital Visits after General 
Surgery Procedures Performed at Ambulatory Surgical Centers (NQF 
#3357).
    We are not proposing any changes to the requirements for non-QDC 
based, claims-based measures.

[[Page 48994]]

e. Requirements for Data Submitted via an Online Data Submission Tool
(1) 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 CMS 
QualityNet Secure Portal (also referred to as the Hospital Quality 
Reporting (HQR) secure portal) 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 at 42 CFR 416.310(c)(1)(i).
    The following previously finalized measures 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

    We are not proposing any changes to these policies for data 
submitted via a CMS online data submission tool.
(2) 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 periods for measures involving online 
data submission and the deadline for data submission via a non-CMS 
online data submission tool at 42 CFR 416.310(c)(2).
    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.
f. 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 ASC15a-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. We are not proposing any 
changes to this policy.
g. ASCQR Program Data Submission Deadlines
    While the ASCQR Program has established submission deadlines (42 
CFR 416.310), there is no specified policy for deadlines falling on 
nonwork days. Therefore, we propose that all program deadlines falling 
on a nonwork day be moved forward consistent with section 216(j) of the 
Social Security Act (the Act), 42 U.S.C. 416(j), ``Periods of 
Limitation Ending on Nonwork Days.'' Specifically, the Act indicates 
that all deadlines occurring on a Saturday, Sunday, or legal holiday, 
or on any other day, all or part of which is declared to be a nonwork 
day for federal employees by statute or Executive order, shall be 
extended to the first day thereafter which is not a Saturday, Sunday or 
legal holiday or any other day all or part of which is declared to be a 
nonwork day for federal employees by statute or Executive order (42 
U.S.C. 416(j)). Section 1872 of the Act, incorporates section 216(j) of 
the Act, to apply to Title XVIII, the Medicare program to which the 
ASCQR Program is administered. As such, we propose to add this policy 
for the submission deadlines associated with the ASCQR Program 
beginning with the effective date of this rule. We also propose to 
codify this policy by adding a new paragraph (f) at Sec.  416.310, 
which would read ``All deadlines occurring on a Saturday, Sunday, or 
legal holiday, or on any other day all or part of which is declared to 
be a nonwork day for Federal employees by statute or Executive order 
are extended to the first day thereafter which is not a Saturday, 
Sunday or legal holiday or any other day all or part of which is 
declared to be a nonwork day for Federal employees by statute or 
Executive order.'' We invite public comment on our proposals.
2. Proposed Review and Corrections Period for Data Submitted via a CMS 
Online Data Submission Tool in the ASCQR Program
    Under the ASCQR Program, for measures submitted via a CMS online 
data submission tool, ASCs submit measure data to CMS from January 1 
through May 15 during the calendar year subsequent to the current data 
collection period (84 FR 61432).\101\ For example, ASCs collect measure 
data from January 1, 2019 through December 31, 2019 and submit these 
data to CMS from January 1, 2020 through May 15, 2020. ASCs may begin 
submitting data to CMS as early as January 1. ASCs are encouraged, but 
not required, to submit data early in the submission period so that 
they can identify errors and resubmit data before the established 
submission deadline.
---------------------------------------------------------------------------

    \101\ ASCQR Program Data Submission Deadlines. Available at: 
https://www.qualitynet.org/asc/data-submission#tab2.
---------------------------------------------------------------------------

    In this proposed rule, we propose to formalize that process and 
create a review and corrections period similar to that being proposed 
for the Hospital OQR Program in section XIV.D.7 of this proposed rule. 
For the ASCQR Program, we propose to implement a review and corrections 
period which would run concurrently with the data submission period 
beginning with the effective date of this rule. During this review and 
corrections period, ASCs could enter, review, and correct data 
submitted directly to CMS. However, after the submission deadline, ASCs 
would not be allowed to change these data. We also propose to codify 
this review and corrections period at new paragraph (c)(1)(iii) in 
Sec.  416.310, which would read ``For measures submitted to CMS via a 
CMS online tool, ASCs have a review and corrections period, which runs 
concurrently with the data submission period. During this timeframe, 
ASCs can enter, review, and correct data submitted. After the 
submission deadline, this data cannot be changed.'' We invite public 
comment

[[Page 48995]]

on our proposals, including on the burden and benefits of such a review 
and corrections period.
3. 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. We are 
not proposing any changes to this policy.
4. 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 will strive to complete our review of each request 
within 90 days of receipt. We are not proposing any changes to these 
policies.

E. Proposed 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 2021, the 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 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

[[Page 48996]]

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 through CY 2020 OPPS/ASC final rules with comment 
period we did not make any other changes to these policies. We propose 
the continuation of these policies for CY 2021.

XVI. Proposed Overall Hospital Quality Star Rating Methodology for 
Public Release in CY 2021 and Subsequent Years

A. Background

    The Overall Star Rating provides a summary of certain existing 
hospital quality information based on publicly available quality 
measure results reported through CMS programs, in a way that is simple 
and easy for patients to understand, by assigning hospitals between one 
and five stars. The Overall Star Rating was first introduced and 
reported on Hospital Compare in July 2016 \102\ and has been refreshed 
six times,103 104 105 106 two of which included minor 
methodology updates,107 108 over the past years. Hospital 
Compare, and any successor site, is a public website hosted by CMS with 
transparent information and data on over 100 quality measure for over 
4,000 hospitals, nationwide in the United States, for consumers and 
researchers. In this rule, for the Overall Star Ratings, the term 
``publish'' refers to the public posting of the Overall Star Rating and 
``refresh'' refers to the public posting quality measure and program 
data on Hospital Compare or its successor website.
---------------------------------------------------------------------------

    \102\ Centers for Medicare & Medicaid Services. (2016, July 27). 
First Release of the Overall Hospital Quality Star Rating on 
Hospital Compare. Retrieved from www.cms.gov/newsroom: https://www.cms.gov/newsroom/fact-sheets/first-release-overall-hospital-quality-star-rating-hospital-compare.
    \103\ Centers for Medicare & Medicaid Services. (2016, May). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2016 
Updates and Specifications Report.
    \104\ Centers for Medicare & Medicaid Services. (2016, October). 
Overall Hospital Quality Star Rating on Hospital Compare: December 
2016 Updates and Specifications Report.
    \105\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2017 
Updates and Specifications Report.
    \106\ Centers for Medicare & Medicaid Services. (2019, November 
4). Overall Hospital Quality Star Rating on Hospital Compare: 
January 2020 Updates and Specifications Report. Retrieved from 
qualitynet.org: https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
    \107\ Centers for Medicare & Medicaid Services. (2018, November 
30). Overall Hospital Quality Star Rating on Hospital Compare: 
February 2019 Updates and Specifications Report. Retrieved from 
qualitynet.org: https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
    \108\ Centers for Medicare & Medicaid Services. (2017, 
November). Star Methodology Enhancement for December 2017 Public 
Release. Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources.
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    During development of the Overall Star Rating, we established 
guiding principles to use methods that were scientifically valid, 
inclusive of hospitals and measure information, accounted for the 
heterogeneity of available measures and hospital reporting, and 
accommodated changes in the underlying measures.\109\ In addition, we 
aimed to provide alignment with the information displayed on Hospital 
Compare and the measures and methods used within CMS programs, 
transparency of Overall Star Rating methods, and responsiveness to 
stakeholder input. After the launch of the Overall Star Rating in July 
2016 and as the Overall Star Rating gained broader use by multiple 
stakeholders, we added new guiding principles to guide reevaluation of 
the methodology.\110\
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    \109\ Centers for Medicare & Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
    \110\ Ibid.
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    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose a methodology which includes 
elements of the current methodology as well as updates (we refer 
readers to section E. Current and Proposed Overall Star Rating 
Methodology) that aim to increase simplicity of the methodology, 
predictability of measure emphasis within the methodology over time, 
and comparability of ratings among hospitals. We are also proposing to 
include Veterans Health Administration (VHA) hospitals (we refer 
readers to section C. Veterans Health Administration Hospitals in 
Overall Star Rating) and Critical Access Hospitals (CAHs) (we refer 
readers to B. Critical Access Hospitals in the Overall Star Rating) in 
the Overall Star Rating. In addition, we propose to establish the 
Overall Hospital Quality Star Rating and methodology at subpart J of 
part 412 (proposed Sec.  412.190).
    Because of our production timeline to calculate and distribute 
Overall Star Rating results in time for hospitals to preview the 
ratings in advance of public release, we are using this CY 2021 OPPS/
ASC proposed rule to propose the methodology for the Overall Star 
Rating even though it includes not only hospital outpatient measures, 
but also hospital inpatient measures, which are generally discussed in 
the Inpatient Prospective Payment System (IPPS) rule. We plan to 
reference policies for the Overall Star Rating in the FY 2022 IPPS 
rule.
1. Purpose, Authority, and Applicable Hospital Quality Data
a. Purpose
    In 2014, to inform the initial methodology for the Overall Star 
Rating, we conducted a review of the literature as well as a review of 
prior and current star rating efforts. This review supported the notion 
that patients care about information on hospital quality, but that 
patient use of this information is limited by low understanding of 
quality information. Additionally, we heard feedback that hospital 
quality information is often intimidating as displayed and is not user-
friendly in comparison to other consumer ratings. The key findings of 
the review were consistent with consumer priorities to bring a wide 
variety of measures together into a single overall star rating. 
Therefore, we sought to help consumers understand hospital quality 
information through development of a summary measure, which combines 
publicly reported quality information in an easy-to-understand rating 
that is familiar to consumers.
    The primary objective of the Overall Star Rating was to use an 
established, evidence-based statistical approach to summarize hospital 
quality measure

[[Page 48997]]

results reported on Hospital Compare with the goal of assigning acute 
care hospitals and facilities that provide acute inpatient and 
outpatient care in the U.S. to an overall rating between one and five 
whole stars.\111\ The Overall Star Rating is meant to complement other 
hospital quality information publicly posted on Hospital Compare or its 
successor website, including the individual measure scores and the 
Hospital Consumer Assessment of Healthcare Providers and Systems 
(HCAHPS) Star Rating.\112\ The original guiding principles of the 
Overall Star Rating was to use scientifically valid methods that are 
inclusive of hospitals and measure information, able to account for 
different hospitals reporting on different measures, and able to 
accommodate changes in the underlying measures over time.\113\ We also 
aimed to create alignment with Hospital Compare and CMS programs, 
transparency of the methods for calculating the Overall Star Rating, 
and responsiveness to stakeholder input through various and ongoing 
engagement activities.
---------------------------------------------------------------------------

    \111\ Centers for Medicare and& Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
    \112\ Centers for Medicare and& Medicaid Services. (2017, 
November). Star Methodology Enhancement for December 2017 Public 
Release. Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources.
    \113\ Centers for Medicare and& Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
---------------------------------------------------------------------------

    The goal of the Overall Star Rating is to summarize hospital 
quality information in a way that is simple and easy for patients to 
understand, by assigning hospitals between one and five stars, to 
increase transparency and empower stakeholders to make more informed 
decisions about their healthcare. To this end, we propose that (1) the 
Overall Star Rating is a summary of certain publicly reported hospital 
measure data for the benefit of stakeholders, such as patients, 
consumers, and hospitals, (2) the guiding principles of the Overall 
Star Rating are to use scientifically valid methods, inclusive of 
hospitals and measure information and able to accommodate measure 
changes; alignment with Hospital Compare or its successor website and 
CMS programs; provide transparency of the methods for calculating the 
Overall Star Ratings; and be responsive to stakeholder input; and (3) 
and to codify this at Sec.  412.190.
b. Subsection (d) Hospitals
    The Overall Star Rating includes measures that (1) capture quality 
of care at hospitals and facilities providing acute inpatient and 
outpatient care and (2) are publicly reported on Hospital Compare or 
its successor websites. CMS currently publicly reports information 
regarding the performance of individual hospitals in the following CMS 
quality programs: Hospital Inpatient Quality Reporting (IQR) Program, 
Hospital Readmission Reduction Program (HRRP), Hospital-Acquired 
Condition (HAC) Reduction Program, Hospital Value-Based Purchasing 
(VBP) Program, and Hospital Outpatient Quality Reporting (OQR) Program. 
Such authority is granted under applicable sections 1833 and 1886 of 
the Act.\114\
---------------------------------------------------------------------------

    \114\ U.S. Congress. (1934) United States Code: Social Security 
Act, 18 U.S.C. 1833 and 1886.
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    Specifically, under sections 1886(b)(3)(B)(viii)(VII) and 
1833(t)(17)(E) of the Act for the Hospital IQR and OQR Programs 
respectively, the Secretary is required to make quality information 
available to the public. Section 1886(b)(3)(B)(viii)(VII) of the Act 
states that ``The Secretary shall establish procedures for making 
information regarding measures submitted under this clause available to 
the public. Such procedures shall ensure that a hospital has the 
opportunity to review the data that are to be made public with respect 
to the hospital prior to such data being made public. The Secretary 
shall report quality measures of process, structure, outcome, patients' 
perspectives on care, efficiency, and costs of care that relate to 
furnished in inpatient settings in on the internet website of the 
Centers for Medicare & Medicaid Services.'' Section 1833(t)(17)(E) of 
the Act states that ``The Secretary shall establish procedures for 
making data submitted under this paragraph available to the public. 
Such procedures shall ensure that a hospital has the opportunity to 
review the data that are to be made public with respect to the hospital 
prior to such data being made public. The Secretary shall report 
quality measures of process, structure, outcome, patients' perspectives 
on care, efficiency, and costs of care that relate to services 
furnished in outpatient settings in hospitals on the internet website 
of the Centers for Medicare and Medicaid Services.'' We believe that 
these requirements allow the agency to create the Overall Star Rating 
as a means to summarize existing publicly reported quality measure data 
from the Hospital IQR and OQR Programs, along with quality measure data 
from other hospitals, in a form and manner that improves accessibility 
of hospital quality information for the benefit of patients and 
consumers.
    In addition, the HRRP (under section 1886(q)(6)(A) of the Act) and 
the HAC Reduction Program (under section 1886(p)(6)(A) of the Act) 
require that the Secretary must make information regarding readmission 
and hospital acquired condition rates for hospitals available to the 
public. Specifically, section 1886(q)(6)(A) of the Act states that 
``The Secretary shall make information available to the public 
regarding readmission rates of each subsection (d) hospital under the 
program'' and section 1886(p)(6)(A) of the Act states that ``The 
Secretary shall make information available to the public regarding 
hospital acquired conditions of each applicable hospital.'' Similar to 
Hospital IQR and OQR Programs, we believe that these requirements allow 
the agency to create and publicly release the Overall Star Rating as a 
means to summarize existing publicly reported quality measure data from 
the HRRP and HAC Reduction Program, along with quality measure data 
from other hospitals, in a form and manner that improves accessibility 
of hospital quality information for the benefit of patients and 
consumers.
    Our use of data reported by hospitals under the Hospital VBP 
Program in the Overall Star Ratings is supported by section 
1886(o)(10)(A)(i) of the Act. Specifically, section 1886(o)(10)(A) of 
the Act states that ``The Secretary shall make information available to 
the public regarding the performance of individual hospitals under the 
Program, including (i) the performance of the hospital with respect to 
each measure that applies to the hospital; (ii) the performance of the 
hospital with respect to each condition or procedure; and (iii) the 
hospital performance score assessing the total performance of the 
hospital.'' Hospitals that participate in the Hospital VBP Program 
report data on each Hospital VBP measure for a specified performance 
period that applies to the program year. Under our proposed star rating 
methodology, which we describe in detail below, we would use these 
Hospital VBP measure rates, in combination with measure rates reported 
by various hospitals under the Hospital IQR Program, Hospital OQR 
Program, HRRP, and HAC Reduction Program to calculate and make public a 
star rating that applies to the hospital for a corresponding star 
rating period, making that star reflective of the hospital's measured 
level of quality in all of these programs.

[[Page 48998]]

    The Overall Star Ratings does not use data reported by hospitals 
under the Prospective Payment System-Exempt Cancer Hospitals Quality 
Reporting (PCHQR) Program, the Inpatient Psychiatric Facilities (IPF) 
Quality Reporting Program, or the Ambulatory Surgical Centers (ASC) 
Quality Reporting Program.
    Beginning with publication of Overall Star Rating in CY 2021 and 
subsequent years, we propose to: (1) Continue to use data publicly 
reported on a CMS website from the programs described above as a basis 
to calculate the Overall Star Ratings, and (2) codify this at Sec.  
412.190. We invite public comment on our proposals.

B. Critical Access Hospitals in the Overall Star Rating

1. Current Critical Access Hospitals in the Overall Star Rating
    The current Overall Star Rating is calculated based on certain data 
that is publicly reported on a CMS website and includes data from 
hospitals and facilitates that provide acute inpatient and outpatient 
care, including critical access hospitals (CAHs). Many CAHs currently 
voluntarily submit measure data consistent with certain CMS quality 
programs and elect to have their quality measure data publicly reported 
through their QualityNet account by selecting Optional Public Reporting 
Notice of Participation. We note, however, that the Hospital OQR 
Program no longer uses a Notice of Participation form (83 FR 59103 
through 59104). Submission of data through the Hospital OQR Program is 
considered participation specifically in that program. If a CAH elects 
to voluntarily submit data and have their quality measure data publicly 
reported, they are subsequently eligible to receive a star rating so 
long as they meet the specified reporting thresholds, discussed in 
detail in section E.6. Step 5: Application of Minimum Thresholds for 
Receiving a Star Rating.
    We note that many CAHs do not meet the minimum threshold to receive 
a star rating due to serving too few patients to report some of the 
underlying measures. To date, typically anywhere from 48 to 55 percent 
of CAHs report enough measures to receive a star rating.
2. Proposal To Continue To Include Critical Access Hospitals in the 
Overall Star Rating
    In this proposed rule, the Overall Star Rating beginning in CY 2021 
and subsequent years, we propose to continue to include voluntary 
measure data from CAHs for the purpose of calculating Overall Star 
Rating through authority in section 1704 of the Public Health Service 
Act (PHSA).\115\ Section 1704 of the PHSA states that ``The Secretary 
is authorized to conduct and support by grant or contract (and 
encourage others to support) such activities as may be required to make 
information respecting health information and health promotion, 
preventive health services, and education in the appropriate use of 
health care available to the consumers of medical care, providers of 
such care, schools, and others who are or should be informed respecting 
such matters.'' We believe that this authority allows the agency to 
include CAHs in Overall Star Rating because the purpose of the Overall 
Star Rating is to summarize hospital quality information in a way that 
is simple and easy for patients to understand, by assigning hospitals 
between one and five stars, to increase transparency and empower 
stakeholders to make informed decisions about their healthcare. We have 
an existing contract mechanism through our current Healthcare Quality 
Analytics and Reports (HCQAR) contract, which would continue under a 
future similar contract vehicle as appropriate, for the calculation of 
the Overall Star Rating for all hospitals that provide acute inpatient 
and outpatient care, including CAHs, and for the dissemination of 
reports to these hospitals prior to public release. Any hospital or 
facility providing acute inpatient and outpatient care, including CAHs, 
with measure or measure group scores reported on Hospital Compare or 
its successor website are given a confidential hospital-specific report 
(HSR) during the Overall Star Rating preview where they may review 
their measure, measure group, and star rating results prior to public 
release. The Overall Star Rating preview period and confidential 
hospital-specific reports are discussed in more detail in section F. 
Preview Period.
---------------------------------------------------------------------------

    \115\ Public Health Service Act of 2019, Public Law 116-69, Page 
133 STAT. 1134, codified as amended at 42 U.S.C. 201.
---------------------------------------------------------------------------

    In addition, section 1851(d) of the Act allows the Secretary to 
disseminate information to Medicare beneficiaries to promote informed 
choice among coverage options.\116\ Many CAHs are located in remote 
areas that face unique challenges in resources and are often one of the 
only options for patients to seek care.\117\ We believe it is important 
to include CAH data when available because it aligns with CMS goals of 
healthcare transparency, consumer choice, and the guiding principle of 
the Overall Star Rating, which is to include as much information as 
possible about hospital quality. The inclusion of CAHs in the Overall 
Star Rating has been supported by the Health Resources and Services 
Administration (HRSA) through their ongoing work with rural hospitals 
and facilities that provide acute inpatient and outpatient care, 
including CAHs. HRSA encourages CAHs to report quality measure data as 
part of quality improvement and public reporting and supports the 
inclusion of publicly reported measure scores for CAHs within the 
Overall Star Rating. Additionally, as part of ongoing stakeholder 
engagement activities, we have heard from some CAHs that they are 
interested in receiving a star rating and that voluntary measure 
reporting places no additional burden on CAHs.
---------------------------------------------------------------------------

    \116\ U.S. Congress. (1934) United States Code: Social Security 
Act, 42 U.S.C. 1851.
    \117\ Centers for Medicare & Medicaid Services. (2013, April 9). 
Critical Access Hospitals. Retrieved from www.cms.gov: https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/CAHs.
---------------------------------------------------------------------------

    Therefore, we propose that CAHs that wish to be voluntarily 
included in the Overall Star Rating must have elected to both (a.) 
voluntarily submit quality measures included in and as specified by CMS 
hospital programs and (b.) publicly report their quality measure data 
on one of CMS' public websites. We propose to codify this at Sec.  
412.190. CAHs that do not elect to participate or that elect to 
withhold their data from public reporting will not be included in the 
Overall Star Rating calculation. Since CAHs voluntarily report 
measures, CAHs may have their Overall Star Rating withheld from public 
release provided they submit a timely request, as described in more 
detail under section G. Overall Star Rating Suppressions.
    Of note, the proposal to peer group hospitals by the number of 
measure groups, as outlined in section E.7. Proposed Approach to Peer 
Grouping Hospitals, is dependent on CAH participation in the Overall 
Star Rating since CAHs make up approximately half of the hospitals 
within the three measure peer group and excluding CAHs from the Overall 
Star Rating would not provide a sufficient amount of hospitals to make 
peer group comparisons.
    We invite public comment on our proposals to include CAHs in the 
Overall Star Rating, the processes for CAHs to (a.) voluntarily submit 
quality measures included in CMS hospital programs and (b.) publicly 
report their quality measure data on one of CMS' public websites, and 
to codify this at

[[Page 48999]]

Sec.  412.190. We note that for the purposes of the rest of this 
discussion, we will refer to both subsection (d) hospitals and CAHs as 
``hospitals.''

C. Veterans Health Administration Hospitals in the Overall Star Rating

    In this proposed rule, we propose to include quality measure data 
from Veterans Health Administration hospitals (VHA hospitals) for the 
purpose of calculating Overall Star Rating beginning with the CY 2023. 
CMS has an existing contract mechanism with the Veterans Health 
Administration (VHA) through an Interagency Agreement to publish their 
hospitals' quality measure data on Hospital Compare \118\ in accordance 
with section 206(c) of the Veterans Access, Choice, and Accountability 
Act (Choice Act) of 2014 (Pub. L. 113-146).\119\
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    \118\ Centers for Medicare & Medicaid Services. (2016, October 
19). Veterans Health Administration Hospital Performance Data. 
Retrieved July 6, 2020, from www.cms.gov; https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/VA-Data.
    \119\ Veterans Access, Choice, and Accountability Act of 2014, 
Public Law 113-146, Page 128 STAT. 1754, codified as amended at 38 
U.S.C. 1703C(b)(1).
---------------------------------------------------------------------------

    Furthermore, section 1704 of the PHSA \120\ allows the Secretary to 
make health information available to consumers of medical care through 
grant or contract mechanism including, but not limited to, the 
publication of health information. In addition, section 1851(d) of the 
Act allows the Secretary to disseminate information to Medicare 
beneficiaries to promote informed choice among coverage options.\121\ 
We believe this includes the publication of quality measure data and 
Overall Star Rating for VHA hospitals.
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    \120\ Public Health Service Act of 2019, Public Law 116-69, Page 
133 STAT. 1134, codified as amended at 42 U.S.C. 201.
    \121\ U.S. Congress. (1934) United States Code: Social Security 
Act, 42 U.S.C. 1851.
---------------------------------------------------------------------------

    Therefore, in this proposed rule, we propose to include VHA 
hospitals in the Overall Star Rating beginning in CY 2023. Including 
VHA hospitals in the Overall Star Rating beginning in CY 2023 allows 
CMS to establish the methodology through this proposed rule and host 
confidential reporting of the Overall Star Rating for VHA hospitals 
prior to public release of VHA star ratings. In order to be eligible to 
receive a star rating, VHA data would be subject to the same reporting 
threshold as subsection (d) hospitals and CAHs included in the Overall 
Star Rating (proposed as three measure groups, one of which must be 
Mortality or Safety of Care, with at least three measures in each 
measure group as discussed in section E.6. Step 5: Application of 
Minimum Thresholds for Receiving a Star Rating).
    We anticipate that adding VHA hospital data to the Overall Star 
Rating calculation would influence national results due to several 
steps in the Overall Star Rating methodology that inherently assess 
quality measure performance in a relative manner, or by comparing 
hospitals to other hospitals. This influence is present in three places 
of the Overall Star Rating methodology: In the standardization of 
individual measure scores, in the standardization of measure group 
scores, and in the calculation of star ratings using k-means 
clustering. The addition of VHA hospitals has no direct influence on 
CMS-administered programs, however. CMS program impacts, including 
payment and burden, are assessed based on hospitals participating in 
CMS' programs and do not include VHA hospitals in those determinations. 
CMS intends to provide more information about the statistical impact of 
adding VHA hospitals to the Overall Star Rating and discuss procedural 
aspects in a future rule.
    We invite public comment on our proposal to include VHA hospitals 
in the Overall Star Rating beginning with CY 2023.

D. History of the Overall Hospital Quality Star Rating

    Prior to introduction of the Overall Star Rating on the Hospital 
Compare website in July 2016, we engaged stakeholders throughout 
development of the methodology. CMS' Overall Star Rating development 
contractor convened both a Technical Expert Panel (TEP), consisting of 
national statistical experts, providers, purchasers, and patient 
advocates, and a Patient & Advocate Work Group, as well as hosted two 
public input periods 122 123 to gain stakeholder feedback on 
aspects of the methodology. Specifically, feedback was solicited on 
topics such as measure inclusion and groupings, statistical and non-
statistical approaches to summarizing measures, weightings for 
individual measures and measure groups, and approaches to classifying 
hospitals to star ratings. In 2015, we hosted a confidential hospital 
dry run to provide all hospitals and facilities that provide acute 
inpatient and outpatient care with a private report on their measure 
performance, measure group scores, and star ratings results, which 
allowed hospitals to preview their preliminary results without public 
posting and to familiarize themselves with the methodology.\124\ 
Concurrent with the July 2016 preview period, we also hosted a national 
provider call to present the final methodology and answer stakeholder 
questions.\125\
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    \122\ Centers for Medicare & Medicaid Services. (2015, January). 
Hospital Compare Star Ratings Public Comment Report 1: Measure 
Selection for Hospital Star Ratings.
    \123\ Centers for Medicare & Medicaid Services. (2015, June). 
Hospital Quality Star Ratings on Hospital Compare Public Comment 
Report #2: Methodology of Overall Hospital Quality Star Ratings.
    \124\ Centers for Medicare & Medicaid Services. (2018, September 
18). Hospital Compare Overall Star Ratings Dry Run Q&A. Retrieved 
from www.qualitynet.org: https://www.qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab4.
    \125\ Centers for Medicare & Medicaid Services. (2015, August 
13). Centers for Medicare & Medicaid Services Hospital Compare 
Overall Star Ratings Methodology MLN Connects National Provider 
Call. Retrieved from www.cms.gov: https://www.cms.gov/Outreach-and-Education/Outreach/NPC/National-Provider-Calls-and-Events-Items/2015-08-13-Star-Ratings.
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    For the initial July 2016 and each subsequent release of the 
Overall Star Rating, including October 2016, December 2016, December 
2017, February 2019, and January 2020, we have continuously provided 
resources to maintain transparency and facilitate understanding of the 
methods, including three National Provider Calls 126 127 128 
as well as methodology reports,\129\ hospital-specific reports,\130\ 
and open access datasets with quality measure data used to calculate 
the Overall Star Rating (referred to as the public input file), and SAS 
programing code used to calculate the Overall Star Rating along with 
supporting documents to allow stakeholders to understand and replicate 
the Overall Star Rating results.
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    \126\ Ibid.
    \127\ Centers for Medicare & Medicaid Services. (2016, May 12). 
Centers for Medicare & Medicaid Services Overall Hospital Quality 
Star Ratings on Hospital Compare National Provider Call. Retrieved 
from: https://www.qualityreportingcenter.com/en/inpatient-quality-reporting-programs/hospital-inpatient-quality-reporting-iqr-program/archived-events/hiqr-event134/.
    \128\ Centers for Medicare & Medicaid Services. (2017, November 
30). Centers for Medicare & Medicaid Services Hospital Quality Star 
Ratings on Hospital Compare December 2017 Methodology Enhancements 
National Provider Call. Retrieved from: https://www.qualityreportingcenter.com/en/inpatient-quality-reporting-programs/hospital-inpatient-quality-reporting-iqr-program/archived-events/hiqr-event107/.
    \129\ Centers for Medicare & Medicaid Services. (2018, January). 
Overall Hospital Quality Star Rating on Hospital Compare Methodology 
Report (v3.0). Retrieved from: https://www.qualitynet.org/files/5d0d3a1b764be766b0103ec1?filename=Star_Rtngs_CompMthdlgy_010518.pdf.
    \130\ Centers for Medicare & Medicaid Services. Hospital-
Specific Reports. Retrieved from: https://www.qualitynet.org/inpatient/public-reporting/overall-ratings/reports.
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    Since the introduction of the Overall Star Rating on the Hospital 
Compare

[[Page 49000]]

website in July 2016, the Overall Star Rating development contractor 
has continued to engage stakeholders by convening two additional TEPs, 
maintaining the Patient & Advocate Work Group, convening a new Provider 
Leadership Work Group, consisting of hospital quality and medical 
staff, and hosting two additional public input 
periods.131 132 As a result of ongoing reevaluation and 
stakeholder engagement, we updated the methodology in December 2017 and 
February 2019. CMS also hosted a National Provider Call \133\ to 
facilitate the December 2017 methodology enhancements and nine 
listening sessions to facilitate the February 2019 methodology 
enhancements. The current methodology includes enhancements made in 
December 2017 \134\ and February 2019.\135\
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    \131\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \132\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \133\ Centers for Medicare & Medicaid Services. Overall Hosptial 
Quality Star Ratings on Hospital Compare. (2016, 12 May). Retrieved 
from www.qualityreportingcenter.com: https://www.qualityreportingcenter.com/globalassets/migrated-pdf/iqr_20160512_npc-overall-star-rating_vfinal5.9.16.508.pdf.
    \134\ Centers for Medicare & Medicaid Services. (2017, 
November). Star Methodology Enhancement for December 2017 Public 
Release. Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources.
    \135\ Centers for Medicare & Medicaid Services. (2018, November 
30). Quarterly Updates and Specifications Report (February 2019). 
Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources#tab2.
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1. Reevaluation of the Overall Hospital Quality Star Rating Methodology
    The Overall Star Rating is a summary of certain existing hospital 
quality information, which is collected and reported as part of several 
CMS programs to improve and make transparent the quality of care 
provided at hospitals that provide acute inpatient and outpatient care. 
As the underlying measures reported on Hospital Compare have been 
added, updated, and removed, and as stakeholders have begun using the 
methodology for purposes beyond consumer transparency, including 
provider quality improvement efforts, we propose refinements to the 
methodology of the Overall Star Rating. Since the first reporting of 
the Overall Star Rating in July 2016, we have maintained an active 
monitoring and re-evaluation process for the methodology, as well as 
engaged stakeholders for continuous feedback. Based on this ongoing 
reevaluation work, we have released multiple, iterative updates to the 
methodology in December 2017 \136\ and February 2019 \137\ that 
addressed stakeholder concerns revealed through previous stakeholder 
engagement by the TEP 138 139 and during public input. We 
refer readers to section E.4.a.(2) Latent Variable Modeling Measure 
Loadings for an overview of the February 2019 methodology updates.
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    \136\ Centers for Medicare & Medicaid Services. (2017, 
November). Star Methodology Enhancement for December 2017 Public 
Release. Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources.
    \137\ Centers for Medicare & Medicaid Services. (2018, November 
30). Quarterly Updates and Specifications Report (February 2019). 
Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources#tab2.
    \138\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
    \139\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
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    Between 2018 and 2019, CMS' Overall Star Rating development 
contractor received input on several potential methodology updates 
through two TEP meetings,\140\ three Patient & Advocate Work Group 
meetings, two Provider Leadership Work Group meetings, nine public 
listening sessions,\141\ and one public input period.\142\ Through 
these reevaluation analyses and stakeholder engagement, we identified 
three aforementioned overarching areas of improvement for the Overall 
Star Rating methodology--simplicity of the methodology, predictability 
of measure emphasis within the methodology over time, and comparability 
of ratings among hospitals that provide acute inpatient and outpatient 
care.143 144 Simplicity of the methodology means we aim to 
reduce the statistical complexity of the methodology, while maintaining 
a representative summary of hospital quality data, so that stakeholders 
can better understand how the Overall Star Rating is calculated. 
Predictability of measure emphasis within the methodology over time 
means we aim to create a methodology that assigns similar measure 
weight, or emphasis, to each measure to calculate measure group scores 
and Overall Star Rating over time (each Overall Star Rating 
publication). Comparability of ratings among hospitals means we aim to 
create a methodology that compares hospitals that are more similar to 
each other, such as the measures they report or services they provide, 
when calculating the Overall Star Rating.
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    \140\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
    \141\ Centers for Medicare & Medicaid Services. (2019, 
November). Overall Hospital Quality Star Rating Listening Session 
Meeting Summary Report. Retrieved from https://www.cms.gov/files/document/overall-hospital-quality-star-ratings-listening-session-summary-report.
    \142\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \143\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \144\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
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    Since the original introduction of the Overall Star Rating, 
stakeholders have requested a less complex, or simplified, methodology 
so that providers can better understand the methodology, interpret 
their star rating, and use the Overall Star Rating to identify areas 
for quality improvement.\145\ We developed the current methodology 
under the original principles of the Overall Star Rating, which was to 
use a statistical approach to summarize quality measures for 
patients.\146\ The current methodology aims to prioritize patient 
usability and employs data-driven statistical modeling approaches, 
including latent variable modeling \147\ and k-means clustering,\148\ 
to calculate measure group scores and to assign hospital summary scores 
to star ratings. In summary, the current methodology is designed to 
rely on data for several

[[Page 49001]]

critical steps in the star ratings calculation. A couple of the 
proposed methodology updates aim to increase the simplicity of the 
methodology for health care providers seeking to replicate, better 
understand, or communicate an interpretation of the Overall Star 
Rating,--including (1) regrouping measures into five measure groups, 
rather than seven, due to measure removals as a result of the 
Meaningful Measure Initiative discussed below in section E.3.b.(2) 
Proposed New Measure Group: Timely and Effective Care and (2) using a 
simple average of measure scores to calculate measure group scores 
discussed below in section E.4. Step 3: Calculation of Measure Group 
Scores.
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    \145\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \146\ Centers for Medicare & Medicaid Services. (2018, January). 
Overall Hospital Quality Star Rating on Hospital Compare Methodology 
Report (v3.0). Retrieved from: https://www.qualitynet.org/files/5d0d3a1b764be766b0103ec1?filename=Star_Rtngs_CompMthdlgy_010518.pdf.
    \147\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
    \148\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
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    Several proposed refinements aim to address the predictability of 
measure emphasis within the methodology over time. Between the December 
2017 and the intended July 2018 publication of the Overall Star Rating, 
there were no Overall Star Rating methodology updates; however, there 
were several measure-level updates, including the introduction of two 
new measures (Severe Sepsis and Septic Shock: Early Management Bundle 
and Pneumonia Excess Days in Acute Care), the removal of one measure 
(Pneumonia 30-day Readmission), and updated specifications for the CMS 
Patient Safety Indicator Composite (CMS PSI-90) measure.\149\ The 
updates to the underlying measures for the July 2018 confidential 
preview period resulted in differences in the emphasis of measure 
contributions to the star rating calculation from previous 
releases.\150\ These observed changes in star ratings were similar to 
star rating shifts observed between reporting periods for other CMS 
star rating programs, however greater than the shifts observed in prior 
Overall Star Rating publications. While some shifts in star ratings are 
expected as hospital performance worsens or improves relative to other 
hospitals in the nation and as measures are added, updated, and removed 
from the Overall Star Rating calculation, results from the July 2018 
confidential preview period illuminated the extent of the sensitivity 
of a data-driven statistical model to underlying measure updates. As a 
result of this unexpected change in measure emphasis, we did not move 
forward with public release of the July 2018 Overall Star Rating and 
instead focused on potential improvements to the methodology and 
stakeholder engagement. Several of the proposed methodology updates, 
including (1) regrouping measures into five measure groups, rather than 
seven, due to measure removals as a result of the Meaningful Measure 
Initiative, discussed below in section E.3. Step 2: Assignment of 
Measures to Groups; (2) use of a simple average of measure scores to 
calculate measure group scores, discussed below in section E.4.b. 
Proposal to Use a Simple Average of Measure Scores to Calculate Measure 
Group Scores; and (3) requiring at least three measures in three 
measure groups, one of which must be Mortality or Safety of Care, to 
receive a star rating discussed below in section E.6. Step 5: 
Application of Minimum Thresholds for Receiving a Star Rating, aim to 
address concerns around the predictability of measure emphasis, and in 
turn star ratings, over time.
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    \149\ Centers for Medicare & Medicaid Services. Hospital-
Specific Reports. Retrieved from: https://www.qualitynet.org/inpatient/public-reporting/overall-ratings/reports.
    \150\ Centers for Medicare & Medicaid Services. (2018, May). 
Quarterly Updates and Specifications Report: July 2018. Retrieved 
from: https://www.qualitynet.org/files/5d0d3abf764be766b0104a21?filename=StarRatingsJul18_UpdtSpecsRpt.pdf.
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    Comparability of the Overall Star Rating is a commonly expressed 
priority by stakeholders.151 152 Hospitals that provide 
acute inpatient and outpatient care differ in size or patient volume, 
geographical location, urban or rural location, patient populations 
treated, and services offered. In turn, hospitals differ in the number 
and type of quality measures reported. All hospitals providing acute 
inpatient and outpatient care, regardless of differences in any of 
these characteristics, are included within the Overall Star Rating 
calculation and are eligible to receive a star rating. Stakeholders, 
primarily providers on the TEP, Provider Leadership Work Group, and 
during a public input period, have highly recommended that the Overall 
Star Rating account for differences in hospital case-mix or type to 
increase comparability of hospital star ratings.153 154 
Several of the proposed methodology updates, including (1) stratifying 
the Readmission measure group according to proportion of dual-eligible 
patients at each hospital; (2) requiring at least three measures in 
three measure groups, one of which must be Mortality or Safety of Care, 
to receive a star rating discussed below in section E.6. Step 5: 
Application of Minimum Thresholds for Receiving a Star Rating; and (3) 
peer grouping hospitals by number of measure groups, discussed below in 
section E.7. Proposed Approach to Peer Grouping Hospitals, aim to 
increase the comparability of hospitals for patients and providers.
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    \151\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
    \152\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \153\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \154\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
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    In 2019, we conducted extensive analyses and engaged multiple 
stakeholder groups to evaluate each of the proposed methodology updates 
outlined below. Most notably, CMS' Overall Star Rating development 
contractor recruited and convened a third TEP to provide technical 
input,\155\ a second Provider Leadership Work Group to provide policy 
input, and a second Patient & Advocate Work Group to provide input on 
usability, and we hosted a public listening session,\156\ all to gain a 
range of new perspectives on the current methodology and potential 
methodology updates.
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    \155\ Ibid.
    \156\ Centers for Medicare & Medicaid Services. (2019, 
November). Overall Hospital Quality Star Rating Listening Session 
Meeting Summary Report. Retrieved from https://www.cms.gov/files/document/overall-hospital-quality-star-ratings-listening-session-summary-report.
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E. Current and Proposed Overall Star Rating Methodology

1. Overview
    The current Overall Star Rating methodology can be outlined within 
six steps briefly described here and in more detail further below. In 
the first step, the measures are selected from among those reported on 
Hospital Compare to include as much information as possible while 
considering whether the measures are suitable for combination within 
the Overall Star Rating. In the first step, the measure scores are also 
standardized to be consistent in terms of direction (that is, higher 
scores are better) and numerical magnitude. In the second step, the 
measures are grouped into one of seven measure groups. Third, for each 
group, a statistical model, called a latent

[[Page 49002]]

variable model (LVM), is used to determine a group score for each 
hospital reporting on measures in that group. In the fourth step, a 
weight is applied to each measure group score and all available measure 
groups are averaged to calculate the hospital summary score. In the 
fifth step, hospitals that provide acute inpatient and outpatient care 
reporting too few measures and measure groups are excluded. Finally, 
hospital summary scores are organized into five categories, 
representing the five star ratings, using an algorithm process called 
k-means clustering. K-means clustering is a method to cluster data so 
that observations within one cluster are more similar to each other 
than observations in another cluster.\157\
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    \157\ Huang, Z. Extensions to the k-Means Algorithm for 
Clustering Large Data Sets with Categorical Values. Data Mining and 
Knowledge Discovery 2, 283-304 (1998) doi:10.1023/A:1009769707641.
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    In this proposed rule, for public release of the Overall Star 
Rating beginning in CY 2021 and subsequent years, we propose to both 
retain and update certain aspects of the current Overall Star Rating 
methodology, as outlined below within each of the six steps of the 
current methodology. Generally, we propose to retain the following 
aspects of the current Overall Star Rating methodology:
     An annual publication cycle using data posted on Hospital 
Compare or its successor site from data publicly reported within the 
prior year; for example, the Overall Star Ratings published in January 
2020 used data publicly reported from the October 2019 refresh;
     Suppression policy for subsection (d) hospitals;
     Inclusion of measures publicly reported on Hospital 
Compare or its successor sites that meet specific inclusion and 
exclusion criteria and standardization of measure score within Step 1: 
Selection and Standardization of Measures for Inclusion in the Overall 
Star Rating;
     Publicly displaying measure group level information for 
measure groups for which a hospital has at least three measures, use of 
weighted average of measure group scores to calculate summary scores 
and measure group reweighting to account for measure group scores which 
are not reported within Step 4: Calculation of Hospital Summary Scores 
as a Weighted Average of Group Scores; and
     Use of k-means clustering to assign hospitals that provide 
acute inpatient and outpatient care to one of five star ratings within 
Step 6: Application of Clustering Algorithm to Obtain a Star Rating.
    We propose to make the following methodology updates:
     Regroup measures as a result of the Meaningful Measure 
Initiative (83 FR 41147 through 41148) by combining the three process 
measure groups into one group, Timely and Effective Care, within Step 
2: Assignment of Measures to Groups;
     Update the calculation of measure group scores to include 
standardization of measure group scores and to use a simple average of 
measure scores, rather than latent variable modeling;
     Stratify the Readmission measure group scores using the 
proportion of dual-eligible patients at each hospital within Step 3: 
Calculation of Measure Group Scores;
     Change the reporting thresholds to receive a star rating 
to three measures within three measure groups, one of which must be 
Mortality or Safety of Care, within Step 5: Application of Minimum 
Thresholds for Receiving a Star Rating; and
     Apply peer grouping of hospitals that provide acute 
inpatient and outpatient care based on number of measure groups between 
Step 5: Application of Minimum Thresholds for Receiving a Star Rating 
and Step 6: Application of Clustering Algorithm to Obtain a Star 
Rating. These are discussed in more detail in section E.7. Proposed 
Approach to Peer Grouping Hospitals.
2. Step 1: Selection and Standardization of Measures for Inclusion in 
the Overall Star Rating
a. Timeframe
(1) Current Timeframe
    Generally, for CMS quality programs, we update measure data results 
on the Hospital Compare or its successor website quarterly in January, 
April, July, and October of each year. In the past, the Overall Star 
Rating was published on Hospital Compare both quarterly and biannually. 
Beginning in February 2019, the Overall Star Rating was published 
annually. In January 2020, the Overall Star Rating continued the annual 
publication cycle with the additional approach of using data publicly 
posted on Hospital Compare in a quarter prior to the update to 
calculate star ratings. For example, we used October 2019 publicly 
reported measure data on Hospital Compare to calculate Overall Star 
Rating results for the January 2020 publication.\158\ Note that the 
data collection period for each measure varies depending on measure 
specifications that set minimum case requirements to ensure individual 
measure reliability and meet the requirements of CMS quality programs, 
as detailed in each program's respective rules as well as on Hospital 
Compare or its successor website.
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    \158\ Centers for Medicare & Medicaid Services. (2019, November 
4). Overall Hospital Quality Star Rating on Hospital Compare: 
January 2020 Updates and Specifications Report. Retrieved from 
qualitynet.org: https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
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(2) Proposal To Retain Current Timeframe With Modification
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to retain the current timeframe 
with modification, such that the Overall Star Rating would continue to 
be published once annually; however, instead of using data from the 
same quarter as or the quarter prior to the publication of the Overall 
Star Rating, we would use publicly available measure results on 
Hospital Compare or successor website from a quarter within the prior 
year. As mentioned above, for CMS quality programs, we generally update 
measure data results on the Hospital Compare or its successor website 
quarterly in January, April, July, and October of each year. Therefore, 
we would use publically reported data from one of those four Hospital 
Compare refreshes to calculate the Overall Star Rating. For example, 
for a January 2021 Overall Star Rating release, we could use data 
refreshed on Hospital Compare in, July or October of 2020. We propose 
to codify this timeframe at Sec.  412.190.
    We believe publishing the Overall Star Rating once a year is 
appropriate because it may minimize period to period changes in 
hospital star ratings that may result from small changes in individual 
hospital and national performance for the underlying measures. 
Furthermore, publishing the Overall Star Ratings once a year would 
allow time for the star ratings to reflect improvements or updates in 
hospital performance on the underlying measures. It also is aligned 
with the current cycle of many underlying measures, particularly highly 
weighted outcome measures that are also refreshed annually. Also, using 
data publicly reported on Hospital Compare or its successor website 
within the prior year, rather than data publicly reported concurrent 
with the Overall Star Rating, would allow providers more time, beyond 
the standard 30 days, to review their star rating as well as the 
measure and measure group results that

[[Page 49003]]

contribute to their star rating during the confidential preview period 
(we refer readers to section F. Preview Period). Hospitals that provide 
acute inpatient and outpatient care may use this additional time to 
more thoroughly anticipate and understand their results as well as 
generate communication or improvement strategies.
    We invite public comment on our proposals to: (1) Publish the 
Overall Star Rating once annually using data publicly reported on 
Hospital Compare or its successor website from a quarter within the 
prior year, and (2) codify this at Sec.  412.190.
b. Measure Inclusion
(1) Current Measure Inclusion
    Generally, measures publicly reported on Hospital Compare or its 
successor site through CMS quality programs, specifically the Hospital 
IQR Program, Hospital OQR Program, HRRP, HAC Reduction Program, and 
Hospital VBP Program, were used to calculate Overall Star Rating. We 
did not include publicly reported measures from any CMS programs not 
measuring acute inpatient or outpatient care or pertaining to specialty 
hospitals, such as cancer hospitals, and ambulatory surgical centers, 
such as the PPS-Exempt Cancer Hospitals Quality Reporting (PCHQR) 
Program, Inpatient Psychiatric Facilities Quality Reporting (IPFQR) 
Program, or Ambulatory Surgical Centers Quality Reporting (ASCQR). The 
goal of Overall Star Rating is to summarize quality of care at 
hospitals providing acute inpatient and outpatient care and thus, only 
include measure scores representing quality of acute inpatient and 
outpatient care.
    Any measures that were removed or suspended from one of the listed 
quality programs and not displayed on Hospital Compare or successor 
website were not included.
(2) Proposal To Retain Current Measure Inclusion
    In this proposed rule, we propose to continue the same practice by 
incorporating measures summarizing quality of care at inpatient and 
outpatient care hospitals in the Overall Star Rating. Specifically, for 
the Overall Star Rating beginning in CY 2021 and subsequent years, we 
propose to use certain measures publicly reported on the Hospital 
Compare or successor website through certain CMS quality programs, 
specifically the Hospital IQR Program, Hospital OQR Program, HRRP, HAC 
Reduction Program, and Hospital VBP Program, to calculate the Overall 
Star Rating. We also propose to codify this policy at Sec.  412.190.
    We believe hospital inpatient and outpatient measures publicly 
reported on Hospital Compare or its successor website are appropriate 
for the Overall Star Rating because they capture the quality of care at 
hospitals providing acute inpatient and outpatient care and provide a 
snapshot of quality when combined together. We recognize that measures 
reported on Hospital Compare or its successor website undergo a 
rigorous development process which includes extensive measure testing, 
vetting by stakeholders, evaluation by the National Quality Forum, and 
undergo rulemaking for inclusion in CMS programs and public reporting. 
We have not and do not intend to make any changes to the underlying 
measures or measure scores specifically for the calculation of the 
Overall Star Rating. As such, the Overall Star Rating methodology uses 
the measures as specified under the CMS programs, and measure scores as 
reported on Hospital Compare or its successor website at the time of 
the Overall Star Rating calculation. As noted above, any measures that 
are removed or suspended from one of the listed quality programs and 
not displayed on Hospital Compare or successor website are not 
included. Additional measure exclusions are discussed in the next 
section. Also, we refer readers to sections B. Critical Access 
Hospitals in the Overall Star Rating and C. Veterans Health 
Administration Hospitals in Overall Star Rating for our discussions 
about CAHs and VHA hospitals.
    We invite public comment on our proposals: (1) Use measures 
publicly reported on Hospital Compare or its successor websites through 
certain CMS quality programs, specifically the Hospital IQR Program, 
Hospital OQR Program, HRRP, HAC Reduction Program, and Hospital VBP 
Programs, for the Overall Star Rating in CY 2021 and subsequent years, 
and (2) codify this policy at Sec.  412.190.
c. Measure Exclusions
(1) Current Measure Exclusions
    Of the measures publicly reported on the Hospital Compare website 
through the CMS quality programs listed in a previous section, in the 
past, we have excluded some measures from the Overall Star Rating 
methodology for various reasons. The measures excluded fall into the 
following categories:
    1. Measures with no more than 100 hospitals reporting performance 
publicly, as these measures would not produce reliable measure group 
scores based on so few hospitals;
    2. Structural measures not amenable to inclusion in a summary 
scoring calculation alongside process and outcome measures, as these 
measures cannot be as easily combined with other measures captured on a 
continuous scale with more granular data;
    3. Non-directional measures (for which it is unclear whether a 
higher or lower score is better, such as payment measures), as these 
measures cannot be standardized to form an aggregate measure group 
score;
    4. Measures not required for reporting on Hospital Compare or its 
successor websites through CMS programs, that is the Hospital IQR 
Program, Hospital OQR Program, HRRP, HAC Reduction Program and Hospital 
VBP Program, due to the purpose of Overall Star Rating being a summary 
of measure information as displayed on Hospital Compare or its 
successor websites;
    5. Overlapping measures (for example, measures that are identical 
to another measure, measures with substantial overlap in cohort and/or 
outcome, and measures that are part of an already-included composite 
measure), in order to avoid duplicative measure results within the 
methodology; and
    6. Measures with statistically significant negative loadings 
estimated by the LVM as described further in section E.4.a.(2) Latent 
Variable Model Measure Loadings.
    In February 2019, we excluded measures for which the LVM estimates 
as statistically significant negative loading, which indicated the 
measure had an inverse relationship with other measures in the 
group.\159\ LVM is the a statistical method for combining information 
that represents a latent trait, in this case measures within a measure 
group that represent an aspect of hospital quality, to estimate a 
numerical score, in this case measure group scores.\160\ Measure 
loadings are the contribution, or emphasis, of each measure as assigned 
by the LVM.\161\ Latent variable modeling and measure loadings are 
described in more detail under section E.4. Step 3: Calculation of 
Measure Group Scores below.
---------------------------------------------------------------------------

    \159\ Centers for Medicare & Medicaid Services. (2018, November 
30). Quarterly Updates and Specifications Report (February 2019). 
Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources#tab2.
    \160\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
    \161\ Ibid.

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

[[Page 49004]]

(2) Proposal To Retain and Update Select Measure Exclusions
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we intend to continue to exclude certain 
measures used to calculate the Overall Star Rating. We believe these 
measure exclusions remain appropriate moving forward because the 
Overall Star Rating is a summary of the existing publicly reported 
measures of hospital quality of care but not all measure scores can be 
reliably or appropriately combined with other measure scores. These are 
discussed in more detail below.
    1. We propose to continue to exclude measures that only 100 
hospitals or less publicly report. These measures would not produce 
reliable measure group scores based on too few hospitals.;
    2. We propose to continue to exclude measures that are not able to 
be standardized and otherwise not amenable to inclusion in a summary 
score calculation alongside process and outcome measures or measures 
that cannot be combined in a meaningful way. This includes measures 
that cannot be as easily combined with other measures captured on a 
continuous scale with more granular data.;
    3. We propose to continue to exclude non-directional measures for 
which it is unclear whether a high or lower score is better. Without 
directional scores these measures cannot be standardized to be combined 
with other measures and form an aggregate measure group score as 
detailed in section E.2.d Measure Score Standardization.;
    4. We propose to continue to exclude measures not required for 
reporting on Hospital Compare or its successor websites through CMS 
programs.; and
    5. We propose to continue to exclude measures that overlap with 
another measure in terms of cohort or outcome; this includes component 
measures that are part of an already-included composite measure. This 
exclusion criterion avoids duplicative measure results within the 
Overall Star Rating methodology. In general, we would determine which 
measures to include or exclude based on the level of information 
provided by the measure. For example, we would include a composite 
measure, such as PSI-90, over the component measures, such as PSI-03. 
As another example, we would include the excess days in acute care 
(EDAC) measures over the readmission measures, because while both 
measure sets have the same cohort, the EDAC measures capture a broader 
outcome inclusive of emergency department visits and observation stays 
in addition to the unplanned readmissions captured by both measures.
    We also propose to codify these exclusions at Sec.  412.190. We 
note that we are not proposing to continue to exclude measures with 
statistically significant negative loadings estimated by the LVM. 
(Measure loadings are the contribution, or emphasis, of each measure as 
assigned by the LVM.\162\ and are further discussed in section 
E.4.a.(2) Latent Variable Model Measure Loadings). This is because, in 
section E.4.b. of this proposed rule, we propose to calculate measure 
group scores using a simple average of measure scores, instead of 
latent variable modeling. Should that proposal be finalized, measure 
loadings would no longer be produced as a product of latent variable 
modeling and, therefore, the exclusion criteria of measures with 
statistically significant negative loadings would no longer be 
necessary. However, should that proposal not be finalized, we would 
continue using LVM to calculate measure group scores and exclude 
measures with statistically significant negative loadings as discussed 
in section E.4.a.(2) Latent Variable Modeling Measure Loadings. We 
invite public comment on our measure exclusion proposals.
---------------------------------------------------------------------------

    \162\ Ibid.
---------------------------------------------------------------------------

d. Measure Score Standardization
(1) Current Measure Score Standardization
    In the past, once the relevant measures were excluded, the 
remaining measures are standardized to a single, common scale to 
account for differences in measure score units, such as ratios or 
rates, and direction, specifically whether a higher or lower score 
indicates better quality.\163\ It is necessary to standardize all 
measure scores to the same scale (that is, units and direction) for 
combination into and calculation of measure group scores. To 
standardize, we used a statistical technique to calculate Z-scores for 
each measure.\164\ A Z-score is a standard deviation score, which 
relays the amount of variation in a dataset, or in this case, the 
variation in hospital measure scores. In the Overall Star Rating, Z-
scores were produced by subtracting the national mean measure score 
from each hospital's measure score and dividing by the standard 
deviation \165\ across hospitals. Standard deviation is a number that 
measures how far data values are from their average.\166\ See the 
measure score standardization example and table 46. In addition, we 
changed the direction of all measures that indicate better performance 
with a lower score so that they were reversed to uniformly indicate 
that a higher score indicates better performance for all the measures 
prior to combination with other measures to calculate measure group 
scores.
---------------------------------------------------------------------------

    \163\ Centers for Medicare & Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
    \164\ DeVore, G.R. (2017, January 17). ``Computing the Z score 
and centiles for cross[hyphen]sectional analysis: a practical 
approach.'' Journal of Ultrasound in Medicine 36.3: 459-473.
    \165\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \166\ Ibid.
---------------------------------------------------------------------------

(2) Proposal To Retain Current Measure Score Standardization
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to continue to standardize 
measure scores as it allows for measures, which are different in units 
and direction, to be combined into aggregate measure group scores. 
Specifically, we propose that once applicable measures are excluded, we 
would standardize the remaining measures by calculating Z-scores for 
each measure prior to being combined in an aggregate measure group 
score so that all measures are on a single, common scale. That is, we 
would subtract the national mean measure score from each hospital's 
measure score and divide the difference by the measure standard 
deviation in order to standardize measures. We also propose to codify 
this at Sec.  412.190.
Example of Standardization of Measure Score
Standardized measures score (HAI-6) =-(0.470-0.694)/0.49 = 0.46

[[Page 49005]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.102

    We invite public comment on our proposal to standardize measure 
scores and codify this policy at Sec.  412.190.
e. Measure Score Winsorization
(1) Current Measure Score Winsorization
    In the past, to avoid extreme outlier performance that may be 
potentially inaccurate or pose technical challenges to statistical 
estimations, the standardized measure scores were Winsorized \167\ at 
the 0.125th and 99.875th percentiles of a standard normal distribution 
so that all measure scores range from negative 3 to positive 3 (-3 to 
3). Winsorization \168\ is a common strategy used to set extreme 
outliers to a specified percentile of the data. This step was necessary 
in order to minimize the impact of extreme measure score outliers on 
the performance of the latent variable modeling (LVM) (we refer readers 
to section E.4.a.(1) Latent Variable Modeling Overview for details). We 
chose to Winsorize the 0.125th and 99.875th percentiles to minimize the 
number of scores requiring Winsorization, while also allowing the 
models to perform properly and produce results. This approach to 
measure inclusion and standardization within the Overall Star Rating 
has been vetted previously through the TEP,169 170 Patient & 
Advocate Work Group, and a public input period.\171\
---------------------------------------------------------------------------

    \167\ Kwak, S.K., & Kim, J.H. (2017, July 27).''Statistical data 
preparation: management of missing values and outliers.'' Korean 
journal of anesthesiology 70.4: 407.
    \168\ Ibid.
    \169\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \170\ Centers for Medicare & Medicaid Services. (2014, 
December). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \171\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
---------------------------------------------------------------------------

(2) Elimination of Measure Score Winsorization Moving Forward
    We refer readers to section E.4.b. Proposal to Use a Simple Average 
of Measure Scores to Calculate Measure Group Scores of this discussion 
in this proposed rule, where moving forward, we propose to calculate 
measure group scores using a simple average of measure scores for the 
Overall Star Rating beginning in CY 2021 and subsequent years, instead 
of latent variable modeling, as was used in the past. Because 
Winsorization was only necessary to minimize the impact of extreme 
outliers prior to statistical modeling to ensure model stability, the 
absence of LVM would eliminate the need for Winsorization. Eliminating 
Winsorization would be consistent with the proposal to replace the LVM 
with a simple average of measure scores, would support the goal of 
refinements to simplify the methodology, and would retain the original, 
observed performance of outlier hospitals within

[[Page 49006]]

the calculations. However, should we not finalize our proposal to adopt 
the simple average of measure scores and retain LVM to calculate 
measure group scores, as discussed in section E.4.a. Current Approach 
to Calculating Measure Group Scores Using Latent Variable Modeling, we 
would continue to Winsorize measure scores to minimize the impact of 
extreme outliers.
3. Step 2: Assignment of Measures to Groups
a. Past Assignment of Measures to Groups
    In the past, we have grouped measures into one of seven measure 
groups: Mortality, Safety of Care, Readmission, Patient Experience, 
Effectiveness of Care, Timeliness of Care, and Efficient Use of Medical 
Imaging. Measures were grouped this way to align with the Hospital VBP 
Program \172\ and the previous display of Hospital Compare,\173\ to 
clinically reflect shared components of hospital quality, allow for 
measures to be added or removed as they are added or removed from 
public reporting, and to be useful to patients in making healthcare 
decisions as communicated by the Patient & Advocate Work Group. 
Grouping measures is also consistent with other CMS star rating 
initiatives, including Nursing Home Compare Star Ratings,\174\ Medicare 
Plan Finder Star Ratings,\175\ and Dialysis Facility Compare.\176\
---------------------------------------------------------------------------

    \172\ Centers for Medicare & Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
    \173\ Centers for Medicare & Medicaid Services. (2019) Hospital 
Compare. Retrieved from: www.medicare.gov/hospitalcompare: https://www.medicare.gov/hospitalcompare/search.html?
    \174\ Centers for Medicare and Medicaid Services (2019, 
October). Design for Nursing Home Compare. Retrieved from 
www.cms.gov: https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/CertificationandComplianc/Downloads/usersguide.pdf.
    \175\ Centers for Medicare and Medicaid Services (2019, October 
1). Medicare 2020 Part C & D Star Ratings Technical Notes. Retrieved 
from www.cms.gov: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/PrescriptionDrugCovGenIn/Downloads/Star-Ratings-Technical-Notes-Oct-10-2019.pdf.
    \176\ Centers for Medicare and Medicaid Services (2016, June). 
Technical Notes on the Updated Dialysis Facility. Retrieved from 
dialysisdata.org: https://dialysisdata.org/sites/default/files/content/Methodology/UpdatedDFCStarRatingMethodology.pdf.
---------------------------------------------------------------------------

b. Proposed New Measure Group and Continuation of Certain Groups
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to consolidate the three process 
measure groups--Effectiveness of Care, Timeliness of Care, and 
Efficient Use of Medical Imaging--into one process measure group: 
Timely and Effective Care. We also propose to retain the current 
structure of the Mortality, Safety of Care, and Readmission, and the 
Patient Experience measure groups. These are discussed in more detail 
below.
(1) Continuation of the Mortality, Safety of Care, Readmission, and 
Patient Experience Measure Groups.
    The Mortality, Safety of Care, Readmission, and Patient Experience 
measure groups were used in the past as noted above. The Mortality, 
Safety of Care, Readmission, and Patient Experience measure groups 
contain an adequate number of publicly reported measures to produce 
robust measure group scores, reflective of differences in hospital 
quality. These measure groups were not as affected as the process of 
care measure groups, discussed in the next section, by the Meaningful 
Measure Initiative (83 FR 41147 through 41148).\177\ In this proposed 
rule, for the Overall Star Rating beginning CY 2021 and subsequent 
years, we propose to continue to use these measure groups. We also 
propose to codify these measure groups at Sec.  412.190.
---------------------------------------------------------------------------

    \177\ Ibid.
---------------------------------------------------------------------------

(2) Proposed New Measure Group: Timely and Effective Care
    Since the first release of the Overall Star Rating, measures have 
been: (1) Developed and adopted in CMS programs to address measurement 
gaps, and also (2) removed as a result of the Meaningful Measures 
Initiative (83 FR 41147 through 41148).\178\ However, there has been a 
steady overall reduction in both the number of measures in CMS quality 
programs, as well as the number of measures publicly reported and 
available for inclusion in the Overall Star Rating--from 64 measures in 
the first publication of Overall Star Rating in 2016, to 51 measures 
for the most recent January 2020 publication.
---------------------------------------------------------------------------

    \178\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 83 FR 41147 (Aug 17, 2018) (to be 
codified at 42 CFR parts 412, 413, 424 and 495).
---------------------------------------------------------------------------

    More specifically, as finalized in the CY 2018 \179\ and CY 2019 
OPPS/ASC \180\ final rules, and the FY 2019 IPPS/LTCH PPS final 
rule,\181\ resulting from the Meaningful Measure Initiative (83 FR 
41147 through 41148),\182\ the following 12 process measures have been 
removed from the Hospital IQR and Hospital OQR Programs, and therefore, 
also from public reporting and the Overall Star Rating process measure 
groups between CY 2019 and CY 2021.
---------------------------------------------------------------------------

    \179\ Hospital Outpatient Prospective Payment and Ambulatory 
Surgical Center Payment Systems and Quality Reporting Programs 
(OPPS/ASC), 83 FR 59216 (Dec 14, 2017) (to be codified at 42 CFR 
parts 414, 416, and 419).
    \180\ Hospital Outpatient Prospective Payment and Ambulatory 
Surgical Center Payment Systems and Quality Reporting Programs 
(OPPS/ASC), 83 FR 58818 (Nov 21, 2018) (to be codified at 42 CFR 
parts 416 and 419).
    \181\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 83 FR 41151 (Aug 17, 2018) (to be 
codified at 42 CFR parts 412, 413, 424 and 495).
    \182\ Ibid.
---------------------------------------------------------------------------

    From the Effectiveness of Care measure group:
     Influenza Immunization (IMM-2) (83 FR 41151),
     Influenza Vaccination Coverage Among Healthcare Personnel 
(OP-27) (83 FR 37179 through 37186),
     Aspirin at Arrival (OP-4) (82 FR 59430),
     Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps (OP-30) (83 FR 37179 through 37186), and
     Incidence of potentially preventable VTE (VTE-6) (83 FR 
41151).
    From the Timeliness of Care measure group:
     Median Time from ED Arrival to ED Departure for Admitted 
ED Patients (ED-1b) (83 FR 41151),
     Median Time to ECG (OP-5) (83 FR 37179 through 37186),
     Door to Diagnosis Evaluation by a Qualified Medical 
Professional (OP-20) (82 FR 59430),
     Median Time to Pain Management for Long Bone Fracture (OP-
21) (82 FR 59428), and
     Median Time to Fibrinolysis (OP-1) (83 FR 37179 through 
37186).
    From the Efficient Use of Medical Imaging group:
     Thorax CT--Use of Contrast Material (OP-11) (83 FR 37179 
through 37186), and
     Simultaneous Use of Brain Computed Tomography (CT) and 
Sinus Computed Tomography (CT) (OP-14) (83 FR 37179 through 37186).
    The aforementioned measure removals from CMS quality programs and 
public reporting ultimately result in two of the previously used 
measure groups, Timeliness of Care and Efficient Use of Medical 
Imaging, being comprised each of only three measures, which would not 
produce robust or predictable measure group scores.
    Therefore, in this proposed rule, for the Overall Star Rating 
beginning in CY 2021 and subsequent years, we propose

[[Page 49007]]

combining three previously used measure groups--Effectiveness of Care, 
Timeliness of Care, and Efficient Use of Medical Imaging--into one 
group entitled Timely and Effective Care. We also propose to codify 
this new group at Sec.  412.190. This new consolidated group would 
reflect the principles of measure reduction under the Meaningful 
Measures Initiative and align with the current display of measures on 
Hospital Compare.\183\ This consolidation would be necessary to ensure 
that a sufficient number of measures exist in this 
group.184 185 186 In general, the TEP supported regrouping 
of measures into five measure groups with one process measure group 
(Timely and Effective Care) given the available measures and scheduled 
removal of measures in the upcoming years.\187\
---------------------------------------------------------------------------

    \183\ Centers for Medicare & Medicaid Services. Hospital 
Compare. (2019). Retrieved from www.medicare.gov/hospitalcompare: 
https://www.medicare.gov/hospitalcompare/search.html?
    \184\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 83 FR 41151 (Aug 17, 2018) (to be 
codified at 42 CFR parts 412, 413, 424 and 495).
    \185\ Hospital Outpatient Prospective Payment and Ambulatory 
Surgical Center Payment Systems and Quality Reporting Programs 
(OPPS/ASC), 83 FR 59216 (Dec 14, 2017) (to be codified at 42 CFR 
parts 414, 416, and 419).
    \186\ Hospital Outpatient Prospective Payment and Ambulatory 
Surgical Center Payment Systems and Quality Reporting Programs 
(OPPS/ASC), 83 FR 58818 (Nov 21, 2018) (to be codified at 42 CFR 
parts 416 and 419).
    \187\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
---------------------------------------------------------------------------

    In order to simulate the potential effects of these proposals, we 
used October 2019 publicly reported measure data on Hospital Compare to 
test the January 2020 Overall Star Rating to determine how many 
hospitals would be eligible to receive a star under the proposed 
measure grouping. Of the 4,576 hospitals that provide acute inpatient 
care, including CAHs, and reported measures on Hospital Compare in 
October 2019, 180 more hospitals (3,780 hospitals total) would have met 
the current reporting thresholds (that is, at least three measures in 
at least three measure groups, one of which must be an outcome group) 
to receive a star rating with the proposed five measure groups as 
compared to the original seven measure groups (3,600 hospitals). 
Additionally, the proposed new grouping would allow approximately 157 
additional CAHs, beyond the 1,149 CAHs already receiving a star rating 
with the current methodology, to receive a star rating. To note, with 
the current methodology of seven measure groups, these 157 CAHs usually 
do not meet the minimum threshold to receive a star rating due to 
serving too few patients to report the underlying measures in each of 
the individual process groups. The minimum reporting threshold 
requirements are discussed in section E.6.b. Proposals to Update the 
Minimum Reporting Thresholds for Receiving a Star Rating of this 
proposed rule.
    The above estimations of how many hospitals would receive a star 
rating are based on the measure regrouping methodology proposed in this 
rule; we note that other proposals may also influence hospitals meeting 
or not meeting reporting thresholds for star ratings. This measure 
regrouping proposal aligns with the guiding principles of the Overall 
Star Rating,\188\ which include being inclusive of hospitals and 
measure information, accommodating changes in the underlying measures, 
and accounting for the heterogeneity of available measures. We invite 
public comment on our proposed measure groupings and codification of 
those groupings.
---------------------------------------------------------------------------

    \188\ Centers for Medicare & Medicaid Services. (2018, January). 
Overall Hospital Quality Star Rating on Hospital Compare Methodology 
Report (v3.0). Retrieved from: https://www.qualitynet.org/files/5d0d3a1b764be766b0103ec1?filename=Star_Rtngs_CompMthdlgy_010518.pdf.
---------------------------------------------------------------------------

4. Step 3: Calculation of Measure Group Scores
    In the past, we have used latent variable modeling (LVM) to 
calculate measure group scores. In this proposed rule, we propose to 
replace LVM with a simple average of measure group scores to increase 
the simplicity of the methodology and predictability of measure weights 
within the methodology. LVM and the proposal to utilize a simple 
average of measure group scores is discussed in detail below.
a. Current Approach To Calculating Measure Group Scores Using Latent 
Variable Modeling
    Latent Variable Modeling \189\ (LVM) is a statistical approach used 
to combine or summarize multiple pieces of information, such as 
hospital quality measures, into a single number, such as measure group 
scores. LVM is described further within section E.4.a.(1) Latent 
Variable Modeling Overview below. Notably, LVM estimates loadings, or 
the contribution of each measure within each of the measure groups, 
using the data from hospitals that provide acute inpatient and 
outpatient care, as described in section E.4.a.(2) Latent Variable 
Modeling Measure Loadings. LVM also produces point estimates and 
standard errors for each hospitals' measure group score, allowing for 
the calculation of confidence intervals to assign hospitals with at 
least three measures in a measure group to ``above,'' ``same as,'' or 
``below the national average,'' as described in section E.4.a.(3) 
Measure Group Performance Categories.
---------------------------------------------------------------------------

    \189\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
---------------------------------------------------------------------------

(1) Latent Variable Modeling Overview
    Latent Variable Modeling \190\ (LVM) is a statistical approach used 
to combine or summarize multiple pieces of information and has been 
used to summarize information in a variety of settings ranging from 
education to healthcare.191 192 193 The purpose for using 
LVM is to quantify the underlying quality trait, or an aspect of 
quality, as a number which best explains the correlation and variation 
of measures in a given group.
---------------------------------------------------------------------------

    \190\ Ibid.
    \191\ Henderson CR. Best Linear Unbiased Estimation and 
Prediction under a Selection Model. Biometrics 1975;31:423-47.
    \192\ Shwartz M, Ren J, Pekoz EA, Wang X, Cohen AB, Restuccia 
JD. Estimating a composite measure of hospital quality from the 
Hospital Compare database: differences when using a Bayesian 
hierarchical latent variable model versus denominator-based weights. 
Med Care 2008;46:778-85.
    \193\ Landrum M, Bronskill S, Normand S-L. Analytic Methods for 
Constructing Cross-Sectional Profiles of Health Care Providers. 
Health Services and Outcomes Research Methodology 2000;1:23-47.
---------------------------------------------------------------------------

    In the past, we have employed LVM to estimate measure group scores 
for each of the seven measure groups. In this context, LVM accounted 
for the relationship, or correlation, between measures for a given 
hospital so that measures that are more consistent with each other have 
a greater influence on the underlying aspect of quality calculated as a 
measure group score.\194\ In addition, the LVM also accounted for 
differences in the size of each hospital's measure denominator so that 
measures with larger denominators also have more influence on the 
measure group score.\195\
---------------------------------------------------------------------------

    \194\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
    \195\ Ibid.
---------------------------------------------------------------------------

    When we developed the initial methodology for Overall Star Rating, 
we investigated multiple approaches to calculating measure group 
scores, including simple or weighted averages of measures, as well as 
more complex approaches such as LVM and factor

[[Page 49008]]

analyses.\196\ Both the simple and weighted average approaches take the 
sum of measures, either with equal (that is, simple) or varying weights 
(that is, weighted), and divide by the number of measures a hospital 
reports in the measure group. Both LVM \197\ and factor analysis \198\ 
attempt to identify underlying traits, in this case quality of acute 
inpatient and outpatient care, within large datasets, such as hospital 
measure scores. Each approach was reviewed by the TEP and presented for 
public input prior to the launch of Overall Star Rating in 2016. We 
ultimately chose LVM to calculate measure group scores based on support 
from the TEP,\199\ which favored the ability of LVM to utilize data to 
account for the relationship between measures, measures which are not 
reported, and sampling variation.\200\
---------------------------------------------------------------------------

    \196\ Oh, J.H., et al. (2016, October 17). ``A factor analysis 
approach for clustering patient reported outcomes.'' Methods of 
information in medicine 55.05: 431-439.
    \197\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
    \198\ Oh, J.H., et al. (2016, October 17). ``A factor analysis 
approach for clustering patient reported outcomes.'' Methods of 
information in medicine 55.05: 431-439.
    \199\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \200\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
---------------------------------------------------------------------------

    Each LVM assumes that each measure in a measure group reflects 
information about an underlying aspect or domain of hospital quality as 
represented by each of the measure groups. For example, safety, 
mortality, or readmission are each aspects of quality represented by a 
distinct set of individual measures. Previously, we constructed a 
separate LVM for each of the seven measure groups. Each LVM estimated a 
quantitative value, or measure group score, for the group's underlying 
aspect of quality for each hospital that reports enough measures in 
each group.
    LVM accounts for the correlation between measures by allowing 
measures that are more consistent with each other to have a greater 
influence on the measure group scores.\201\ The LVM also accounts for 
differences in the size of each hospital's measure denominator so that 
measures with larger denominators have more influence on the measure 
group score, since their measure scores are considered more 
precise.\202\ A measure's influence on the measure group score, or 
loading, is derived by the LVM, ultimately by using the national 
performance of each measure, as well as the correlation between 
measures to find the best combination of measure emphasis for each 
measure group.\203\ Measure loadings are further discussed below in 
section E.4.a.(2) Latent Variable Model Measure Loadings. The loading 
represents the measure's relationship to the underlying aspect of 
quality and therefore, the measure's contribution to the measure group 
score.\204\ Measure loadings were re-estimated for each publication of 
the Overall Star Rating and were the same value for all hospitals that 
provide acute inpatient and outpatient care. In other words, LVM 
accounts for measures which are not reported by estimating and 
assigning the same measure loading values to all hospitals, regardless 
of differences in the number of measures hospitals report.
---------------------------------------------------------------------------

    \201\ Ibid.
    \202\ Ibid.
    \203\ Ibid
    \204\ Ibid.
---------------------------------------------------------------------------

    The LVM for each measure group can be explained using the below 
path diagram presented in Figure 1. In the sample path diagram, the 
ovals represent the measure group scores, calculated using LVM, and 
hospital summary scores, calculated by a weighted average of measure 
group scores. The measure group score is not directly observed but 
estimated from the LVM using the individual measures. The arrows 
between the measure group scores and each individual measure represent 
the relationship of that measure to the aspect of quality reflected by 
each measure with respect to the other measures in that group; each 
arrow has a different degree of association, also known as a 
``loading'' or coefficient, which is explained in detail within section 
E.4.a.(2) Latent Variable Modeling Measure Loadings. The small circles 
on the left represent the residual error within each hospital for each 
of the measures included in the Overall Star Rating. The residual error 
([epsi]) is the variation which could not be explained by the measure 
group score (random effect).

[[Page 49009]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.103

    The LVM equation used to derive a hospital's measure group score is 
as follows:

Ykhd = [mu]kd + 
Ykd[alpha]hd + [epsi]khd, 
k=1,...,Nd
[alpha]hd ~ N(0,1) and [epsi]khd ~ 
N(0,[sigma]2kd)

    Let Ykhd denote the standardized score for hospital h 
and measure k in measure group d. [alpha]hd is the hospital-
specific group-level latent trait (random effect) for hospital h and 
measure group d and follows a normal distribution \205\ with mean 0 and 
variance 1. The estimated value of [alpha]hd will be used as 
a measure group score. [gamma]kd is the loading (regression 
coefficient of the latent variable) for measure k, which shows the 
relationship with the measure group score of measure group d. 
Nd is the total number of measures in measure group d. The 
assumption of unit variance here is an innocuous choice of units 
required to identify the parameter [mu]kd and 
[gamma]kd. For detailed descriptions of the LVM model 
parameters and equation, please see the Overall Hospital Quality Star 
Rating on Hospital Compare Methodology Report (v3.0).\206\
---------------------------------------------------------------------------

    \205\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \206\ Centers for Medicare & Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
---------------------------------------------------------------------------

(2) Latent Variable Modeling Measure Loadings
    In the past, the LVMs within the Overall Star Rating methodology 
estimate loadings for each measure within each of the measure groups. A 
measure's loading indicates its relative contribution to a hospital's 
measure group score, with higher loadings indicating measures with more 
influence.\207\ A measure's loading is specific to the measure and the 
same for all hospitals reporting that measure.
---------------------------------------------------------------------------

    \207\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
---------------------------------------------------------------------------

    A measure loading is a regression coefficient,\208\ which is 
estimated through the LVM by using a statistical approach called 
maximum likelihood. Maximum likelihood \209\ uses the observed data for 
each measure in a group, including the national performance on the 
measure and the measure's relationship to other measures in the group, 
to find the best combination of measure emphasis for the aspect of 
quality represented by the measure group. In other words, measure score 
variation nationally and the correlation between measures in a measure 
group influence measure loadings. Measures with more variation 
nationally and higher correlations with other measures in a measure 
group have higher measure loadings because such measures are assumed to 
convey more information about a given aspect of acute inpatient and 
outpatient quality of care than measures with limited variation or less 
correlation with other measures in the same group.
---------------------------------------------------------------------------

    \208\ Ibid.
    \209\ Cole, S.R., Chu, H., & Greenland, S. (2014, January 15) 
``Maximum likelihood, profile likelihood, and penalized likelihood: 
a primer.'' American journal of epidemiology 179.2: 252-260.
---------------------------------------------------------------------------

    The LVM also accounts for sampling variation, or differences in the 
amount of information available for different hospitals to estimate 
loadings. For example, for each measure, some hospitals may report a 
score based on data from fewer cases while other hospitals report 
scores based on more cases, resulting in differing precision for each 
hospital's individual measure score. We accounted for these differences 
in case size by giving more weight to measures with larger 
denominators. Measure scores based on larger denominators are assumed 
to have more precise measure scores and therefore contribute more when 
estimating measure loadings. The weighted likelihood equation for 
accounting for sampling variation within each measure group is as 
follows:

[[Page 49010]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.104

    L is the likelihood function. Nkd is the total number of 
hospitals for measure k in measure group d and nkhd is the 
denominator for hospital h and measure k in measure group d. A hospital 
with a larger denominator will be weighted more in the LVM. The 
specified weighted likelihood is maximized with respect to all the 
parameters in the first LVM equation.
    Measures with higher loadings have a greater association and impact 
on the measure group score than measures with lower loadings. Measures 
highly correlated with other measures in the measure group and the 
measure group score, measures with large denominators, and measures 
more commonly reported are likely to have higher loadings because they 
are generally expected to provide more information about a hospital's 
quality profile than other measures.
    In February 2019, we made an update to remove measures with 
statistically significant negative loadings from the LVM 
calculations.\210\ Measure loadings can be positive or negative. 
Measures with statistically significant negative loadings have an 
inverse relationship with other measures in the group. Although 
negative loadings rarely occur and are almost always statistically 
insignificant, some stakeholders, including those on the TEP, and 
during a public input period, expressed concern that measures with 
negative loadings could be perceived to promote lower quality with 
respect to measure group scores.211 212 213 214 215 While 
internal analyses have not identified any substantial effect of 
measures with negative loadings on hospital star ratings, CMS 
understood the theoretical concern and decided to remove measures with 
statistically significant negative loadings, beginning in February 
2019.\216\
---------------------------------------------------------------------------

    \210\ Centers for Medicare & Medicaid Services. (2018, November 
30). Quarterly Updates and Specifications Report (February 2019). 
Retrieved from www.qualitynet.org: https://qualitynet.org/outpatient/public-reporting/overall-ratings/resources#tab2.
    \211\ Centers for Medicare & Medicaid Services. (2015, June 8). 
Summary of Technical Expert Panel (TEP) Evaluation of Hospital 
Quality Star Ratings on Hospital Compare.
    \212\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \213\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \214\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
    \215\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \216\ Centers for Medicare & Medicaid Services. (2018, November 
30). Overall Hospital Quality Star Rating on Hospital Compare: 
February 2019 Updates and Specifications Report. Retrieved from 
qualitynet.org: https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
---------------------------------------------------------------------------

    Measure loadings were re-estimated for each publication of the 
Overall Star Rating and could change dynamically as the measure 
methodologies, hospitals' performance, and the relationship between 
measures evolved.
(3) Measure Group Performance Categories
    We reported Overall Star Rating measure group performance 
categories to individual hospitals that provide acute inpatient and 
outpatient care and on Hospital Compare in order to provide context for 
measure group scores in comparison to all other hospitals in the 
nation. Performance categories were not calculated by the LVM, nor did 
they have influence on star ratings. Rather, they were assigned 
categories of ``above'', ``same as'', or ``below the national average'' 
as additional public information on each of the measure groups a 
hospital reports by comparing a hospital's measure group score to the 
national average measure group score.
    These measure group performance categories were assigned using 
information from the LVM, separate from measure loadings. For each 
measure group, LVM produced a point estimate \217\ and standard error 
\218\ for each hospital's measure group score that we used to construct 
a 95 percent confidence interval.\219\ A point estimate is a statistic 
close to the exact value in a dataset, whereas the standard error is a 
measure of the variability, or how spread out individual points are 
around the average in the dataset, and both are used to construct a 
confidence interval, or a range of reasonable values in which we expect 
a value to fall.\220\ We compared this 95 percent confidence interval 
to the national mean measure group score. Measure group scores with 
confidence intervals that fall entirely above the national average were 
considered ``above the national average'', confidence intervals that 
include the national average were considered ``same as the national 
average'', and confidence intervals that fall entirely below the 
national average were considered ``below the national average''.
---------------------------------------------------------------------------

    \217\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \218\ Ibid.
    \219\ Ibid.
    \220\ Ibid.
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b. Proposal To Use a Simple Average of Measure Scores To Calculate 
Measure Group Scores
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to eliminate use of the LVM and 
instead use a simple average of measure scores to calculate measure 
group scores beginning with the Overall Star Rating in CY 2021 and 
subsequent years.
    We recognize that LVM may be challenging for stakeholders to 
understand and explain to others. Stakeholders, specifically providers, 
serving on the Provider Leadership Work Group and during a public input 
period,\221\ have requested a less complex methodology that can be 
easily understood by their organization, explained to their patients, 
and used to identify areas for quality improvement. In addition, LVM is 
a data-driven statistical approach that relies on underlying measure 
data to re-estimate measure loadings \222\ for each release of the 
Overall Star Rating. Since the underlying measure data is refreshed 
variably based on the measure and CMS quality program requirements--
either quarterly, biannually, or annually--the estimated measure 
loadings based on the underlying data for each annual publication of 
the Overall Star Ratings were unpredictable, further complicating 
understanding of the methodology and efforts to allocate resources for 
quality improvement.
---------------------------------------------------------------------------

    \221\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \222\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
---------------------------------------------------------------------------

    Therefore, in this proposed rule, for the Overall Star Rating 
beginning in CY 2021 and subsequent years, we propose to discontinue 
the use of the LVM, and instead, propose to adopt a simple

[[Page 49011]]

average of measure scores to calculate measure group scores. This 
method would average the measure scores a hospital reports within a 
given measure group, which have been standardized, to calculate the 
measure group scores. In other words, we would take 100 percent divided 
by the number of measures reported to give us the percentage each 
measure would weigh; this measure weight would then be multiplied by 
the standardized measure score to calculate the measure's weighted 
score. Then, all of the individual measure weighted scores within a 
group would be added together to calculate the measure group score. We 
also propose to codify this policy at Sec.  412.190.
    For example, if a hospital reports all eight measures in the Safety 
of Care measure group, the measure weights would be determined by 
calculating 100 percent divided by eight measures reported (100 percent 
/ 8 reported measures = 12.5 percent) and each measure would be 
weighted 12.5 percent within the group. The standardized measure scores 
for each of the eight measures would then be multiplied by the weight 
of 12.5 percent and summed to determine the Safety of Care measure 
group score. See Table 47 for an example of measure weights in which a 
hospital reports all eight measures within Safety of Care. For the 
Readmission measure group for example, a hospital's score on the 
Hospital-Wide, All-Cause Unplanned Readmission measure, which includes 
most patient admissions at a hospital, would have the same influence as 
their score on the condition specific Chronic Obstructive Pulmonary 
Disease (COPD) Readmission measures, which includes significantly fewer 
patients.
Example of Simple Average of Measure Scores To Calculate Measure Group 
Scores
Measure group score = [(-1.13*0.125) + (-0.75*0.125) + (0.09*0.125) + 
(1.21*0.125) + (0.97*0.125) + (0.98*0.125) + (0.46*0.125) + 
(0.02*0.125)] = 0.23
BILLING CODE 4120-01-P

[[Page 49012]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.105

    Under certain circumstances, hospitals may not report all measures 
within a measure group. However, we note that the proposed minimum 
threshold is three measures within three measure groups, one of which 
must be Mortality or Safety of Care. Once this threshold is met, any 
additional measures or groups may contribute to a hospital's star 
rating. We refer readers to section E.6. Step 5 Application of Minimum 
Thresholds for Receiving a Star Rating where the proposed minimum 
threshold is discussed. As an example, if a hospital reports three 
measures in the Safety of Care measure group, the measure weights would 
be determined by calculating 100 percent divided by three measures 
reported (100 percent 3 reported measures = 33.3 percent) and each 
measure would be weighted 33.3 percent within the group. The 
standardized measure scores for each of the three measures would then 
be multiplied by the weight of 33.3 percent and summed to determine the 
Safety of Care measure group score. See Table 48 for an example of 
measure weights in which a hospital reports three measures within 
Safety of Care.
Example of Simple Average of Measures Scores To Calculate Measure Group 
Scores When Measures Are Not Reported
Measure group score = [(-1.13*0.333) + (0.46*0.333) + (0.02*0.333)] = -
0.22

[[Page 49013]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.106

BILLING CODE 4120-01-C
    As previously noted, LVM accounted for measures which are not 
reported by uniformly assigning the same loading for a measure to 
hospitals that provide acute inpatient and outpatient care,\223\ 
whereas use of a simple average of measure scores would result in 
hospitals having varying measure weights depending on differences in 
the number of measures reported. For example, if a hospital reports 
three of the eight measures in the Safety of Care measure group, each 
measure would be weighted at 33 percent within that group. On the other 
hand, a hospital that reports all eight measures in the Safety of Care 
measure group would have a different weighting of 12.5 percent for each 
measure within the measure group. We simulated the possible range of 
measure weights using the data used for January 2020 Overall Star 
Rating (October 2019 public reporting data), which included 51 
measures. We simulated the results using the measure group weights 
proposed in section E.5.a.(2) Proposal to Continue Current Calculation 
of Hospital Summary Scores Through a Weighted Average of Measure Group 
Scores; outcome and patient experience measure groups were weighted 22 
percent and the process group was weighted 12 percent. Taking into 
account the measure group weights applied later in the methodology, the 
minimum effective measure weight, or the percentage of the hospital 
summary score based on a single measure, would be 3 percent for a 
hospital reporting all 51 measures and the maximum effective measure 
weight would be 33 percent for another hospital reporting the minimum

[[Page 49014]]

threshold number of nine measures (at least three measures in at least 
three groups). Hospitals with more measures will have lower measure 
weights for each measure, whereas hospitals with fewer measures will 
have higher measure weights for each measure. The number of measures 
included in the Overall Star Rating varies for each publication 
depending on measure removals from and additions for public reporting.
---------------------------------------------------------------------------

    \223\ Cai, L. (2012, March 31). Latent variable modeling. 
Shanghai archives of psychiatry, 24(2), 118-120. doi:10.3969/
j.issn.1002-0829.2012.02.010.
---------------------------------------------------------------------------

    Using a simple average of measure scores to calculate measure group 
scores would be responsive to stakeholder feedback that requested CMS 
increase the simplicity of the methods and the predictability of 
measure emphasis between publications.224 225 226 227 Using 
a simple average of measure scores would increase the predictability of 
measure emphasis by allowing hospitals to anticipate equal measure 
weights across the measures they report within a given group. While 
there may be differences in measure emphasis between hospitals that 
provide acute inpatient and outpatient care based on differences in 
measure reporting, a simple average of measure scores will be 
responsive to stakeholder feedback and make the methodology easier for 
stakeholders to understand, interpret, and explain to patients.
---------------------------------------------------------------------------

    \224\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \225\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \226\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \227\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
---------------------------------------------------------------------------

    Since measure loadings are an artifact of the LVM approach, they 
would no longer be calculated under the proposed new method using a 
simple average of measure scores. In addition, since the point 
estimates and standard errors used to calculate 95 percent confidence 
intervals and assign hospital measure group performance to ``above,'' 
``same as,'' or ``below the national average'' were products of the LVM 
approach, measure group performance categories will no longer be 
available under the proposed new method using a simple average of 
measure scores. However, we intend to continue to publicly display 
alternative summaries of hospital performance within measure groups for 
transparency and patient usability. Should the proposal to use a simple 
average of measure scores to calculate measure group scores not be 
finalized, measure group performance categories would still be 
available in the same manner described above.
    In crafting this proposal, we also considered continuing to utilize 
LVM as we have in the past and as discussed in the section above. 
Ultimately, we chose to propose to discontinue the use LVM because of 
the complexity associated with understanding how measure loadings are 
empirically assigned with the LVM and contribute to the measure group 
scores. We invite public comment on our proposals to use a simple 
average of measure scores to calculate measure group scores and to 
codify this policy at Sec.  412.190 as discussed.
c. Proposal to Standardize Measure Group Scores
    Standardizing \228\ scores is a way to make varying scores directly 
comparable by putting them on a common scale. While standardization is 
used in other parts of the methodology, particularly to standardize 
measure scores within the first step of methodology, it was previously 
not necessary to standardize measure group scores when using 
statistical modeling, such as LVM. In the absence of statistical 
modeling, under the use of the proposed simple average of measure 
scores as discussed in section E.4.b. Proposal to Use a Simple Average 
of Measure Scores to Calculate Measure Group Scores, the distributions 
and interpretations of measure group scores may differ. For example, a 
0.5 measure group score in Safety of Care may not conceptually be 
similar to a 0.5 measure group score in Patient Experience, 
exaggerating the influence of some measure groups when calculating a 
weighted average of measure group scores.
---------------------------------------------------------------------------

    \228\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
---------------------------------------------------------------------------

    Therefore, for the Overall Star Rating beginning with CY 2021 and 
subsequent years, we propose to standardize measure group scores. More 
specifically, we propose to standardize measure group scores by 
calculating Z-scores for each measure group. As mentioned in section 
E.2.d. Measure Score Standardization, a Z-score \229\ is a standard 
deviation \230\ score which relays the amount of variation in a 
dataset, or in this case, the variation in hospital measure scores. Z-
scores would be calculated by subtracting the national average measure 
group scores from each hospital's measure group score and dividing by 
the standard deviation across hospitals. Standardization of measure 
group scores would occur prior to combining measure group scores 
through a weighted average to calculate summary scores, and would 
result in all measure group scores centered near zero with a standard 
deviation \231\ of one. We also propose to codify this policy at Sec.  
412.190.
---------------------------------------------------------------------------

    \229\ DeVore, G.R. (2017, January 17). ``Computing the Z score 
and centiles for cross[hyphen]sectional analysis: a practical 
approach.'' Journal of Ultrasound in Medicine 36.3: 459-473.
    \230\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \231\ Ibid.
---------------------------------------------------------------------------

    See Table 49 for an example of how measures would be combined 
through a simple average of measure scores to calculate measure group 
scores and then how the measure group scores would be standardized. The 
standardization of measure group scores would not impact hospital 
performance within the measure group or the natural distribution of 
scores. As a result of standardization,\232\ mean group scores and 
standard deviations would become more similar across measure groups. We 
simulated the potential effects of standardization using data from the 
January 2020 publication of Overall Star Rating and found that hospital 
summary scores with and without standardization of measure group scores 
are highly correlated with a Pearson correlation of 0.975, indicating 
that standardizing measure group scores does not substantially alter 
hospital performance assessment. We note that, should the proposal to 
use a simple average of measure scores to calculate measure group 
scores not be finalized, we would not need to standardize measure group 
scores.
---------------------------------------------------------------------------

    \232\ Ibid.
---------------------------------------------------------------------------

    We invite public comment on our proposal to standardize measure 
group scores and codify this policy at Sec.  412.190.
d. Proposal To Stratify Readmission Measure Group Scores
(1) Current Measure Group Scores Without Stratification
    In the past, we have not stratified or adjusted any of the 
measures, measure groups, summary scores, or star ratings by social 
risk factor variables within the Overall Star Rating methodology, 
primarily based on the original guiding principles of the Overall Star 
Rating.

[[Page 49015]]

The Overall Star Rating is meant to summarize the existing quality 
measure information that is publicly reported through CMS programs, 
including Hospital IQR Program, Hospital OQR Program, HRRP, HAC 
Reduction Program, and Hospital VBP Program, on Hospital Compare or its 
successor websites. Individual measures undergo rigorous development 
and reevaluation processes under each program that include extensive 
analytic testing and stakeholder engagement. As such, individual 
measure methodologies as specified under each program, including 
approaches to risk adjustment, are included within the Overall Star 
Rating. As measure data and methodologies are updated under each of the 
programs, they are subsequently reflected within the Overall Star 
Rating methodology. CMS' Overall Star Rating development contractor has 
engaged stakeholders in discussion regarding the comparability of 
hospital star ratings for over five years throughout the development 
and reevaluation of the Overall Star Rating. Throughout that 
engagement, some stakeholders, primarily providers, requested 
incorporation of social risk factor adjustment within the Overall Star 
Rating, while other stakeholders expressed concerns regarding 
adjustment in general or the specific variables available for 
adjustment.\233\ Specifically, some stakeholders have requested social 
risk factor adjustment of the readmission measures or the Readmission 
measure group.234 235 Recently a HHS Report to Congress has 
set forth a broad range of recommendations regarding social risk 
factors and Medicare's value-based purchasing programs, which do not 
recommend adjusting quality measures for social risk for public 
reporting.\236\ We seek comment on our proposal to stratify the 
Readmission measure group based on the proportion of dual-eligible 
patients, and an alternative not to stratify the Readmission measure 
group based on the proportion of dual-eligible patients.
---------------------------------------------------------------------------

    \233\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \234\ National Quality Forum. (2019, November 6). National 
Quality Forum Hosptial Quality Star Ratings Summit. Retrieved from 
www.qualityforum.org: http://www.qualityforum.org/NQF_Hospital_Quality_Star_Rating_Summit.aspx.
    \235\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
    \236\ Department of Health and Human Services, Office of the 
Assistant Secretary of Planning and Evaluation (ASPE). (2020) Second 
Report to Congress: Social Risk Factors and Performance in 
Medicare's Value-based Purchasing Programs. Retrieved from: https://aspe.hhs.gov/system/files/pdf/263676/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report.pdf. Accessed July 2, 2020.
---------------------------------------------------------------------------

(2) Proposal To Stratify Only the Readmission Measure Group Scores
    In this proposed rule, for Overall Star Rating beginning in CY 2021 
and subsequent years, we propose to stratify only the Readmission 
measure group score by hospitals' proportion of dual-eligible patients 
and codify this at Sec.  412.190. We propose to specifically stratify 
only the Readmission measure group, and not other measure groups, based 
on hospitals' proportion of dual-eligible hospital discharges, to be 
responsive to select stakeholder concerns that some hospitals providing 
acute inpatient and outpatient care face unique challenges preventing 
readmissions among patients with complex social risk factors,\237\ and 
to align with the payment adjustment recently implemented for HRRP 
payment determination (82 FR 38231 through 38237). We propose to 
utilize and repurpose the same peer group quintiles assigned by the 
HRRP annually. We propose to assign hospitals that do not participate 
in the HRRP, but have their proportion of dual-eligible patients 
available, to HRRP designated peer groups, as they would not have 
already been assigned to a peer group through the HRRP. We also propose 
that in the event a hospital's proportion of dual-eligible patient data 
is missing, CMS would not adjust that hospital's Readmission measure 
group score and that hospital would retain its original, unadjusted 
Readmission measure group score, as calculated through a simple average 
of their measure scores.
---------------------------------------------------------------------------

    \237\ National Quality Forum. (2014, August). Risk Adjustment 
for Socioeconomic Status or Other Sociodemographic Factors. 
Retrieved from: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=77474.
---------------------------------------------------------------------------

    The proposed stratification of the Overall Star Rating Readmission 
measure group score would use the same dual-eligible variable and a 
similar peer grouping approach as is used in the HRRP for payment 
determinations (82 FR 38231 through 38237). To be clear, the Overall 
Star Rating is not used to determine hospital payments. Dual-eligible 
\238\ patients are those that are dually eligible for Medicare and 
full-benefit Medicaid among a hospital's total Medicare Fee-for-Service 
(FFS) and Medicare Advantage patient discharges (42 U.S. Code Sec.  
1315b(f)). Dual-eligible status is consistently captured for patients 
and available through enrollment files, which are updated annually, and 
does not require extrapolation from area of residence variables, such 
as census or community surveys.
---------------------------------------------------------------------------

    \238\ Centers for Medicare & Medicaid Services. (2018, May). 
Dual Eligible Beneficiaries Under Medicare and Medicaid. Retrieved 
from www.cms.gov: https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Medicare_Beneficiaries_Dual_Eligibles_At_a_Glance.pdf.
---------------------------------------------------------------------------

    In 2016, the 21st Century Cures Act mandated that CMS determine 
hospital penalties for readmissions that account for social risk 
factors through a transitional methodology that calculates excess 
readmissions ratios within hospital peer groups defined by the 
percentage of dual-eligible patients served by the hospital within the 
HRRP (Pub. L. 114-255). Section 15002 of the 21st Century Cures Act, 
adding a new section 1886(q)(3)(D) and (E) to the Act, also indicated 
this methodology could be characterized as a ``transitional 
adjustment'' and that the Secretary of Health and Human Services may 
revise the stratification methodology, taking into account 
recommendations made on risk-adjustment methodologies for HRRP based on 
the studies conducted under the IMPACT Act by the Office of the 
Assistant Secretary for Planning and Evaluation (ASPE) on the role of 
socioeconomic status in Medicare's value-based purchasing program.
    In the FY 2018 IPPS/LTCH PPS rule, we finalized our HRRP proposal 
to implement a methodology that categorizes participating hospitals 
that provide acute inpatient care into five peer groups by quintiles, 
based on the proportion of dual-eligible patients to total patients 
served by the hospital. The methodology uses the median excess 
readmission ratio of hospitals within each of the five peer groups as 
the threshold to assess hospital performance on each measure (82 FR 
38231 through 38237). The excess readmission ratio measures a 
hospital's relative performance and is the ratio of predicted-to-
expected readmissions.\239\ This methodology was implemented within 
HRRP in FY 2019 as announced in the associated correction notice (82 FR 
49837). The individual readmission measures included within HRRP and 
publicly reported on Hospital Compare

[[Page 49016]]

or its successor website are not adjusted for social risk factors.
---------------------------------------------------------------------------

    \239\ Centers for Medicare & Medicaid Services. (2019, Novemebr 
19). Hospital Readmissions Reduction Program (HRRP). Retrieved from 
www.cms.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/HRRP/Hospital-Readmission-Reduction-Program.
---------------------------------------------------------------------------

    The proposal to stratify the Readmission measure group based on the 
proportion of dual-eligible patients is intended to provide consistency 
between the current stratification method used for the HRRP and the 
Overall Star Rating methodology. It is not in any way intended to 
suggest a new policy direction for the more general question of whether 
CMS programs should employ social risk factor adjustment methods of any 
kind. The rationale for this proposal is based on alignment between the 
two CMS efforts. If changes are made in the future to the HRRP 
stratification approach, CMS may consider similar changes to the 
Overall Star Rating methodology through future rulemaking. Recently a 
HHS Report to Congress has set forth a broad range of recommendations 
regarding social risk factors and Medicare's value-based purchasing 
programs, which do not recommend adjusting quality measures for social 
risk for public reporting.\240\ The stratification approach in the HRRP 
has been recommended for removal based on HHS recommendations in a 
second Report to Congress, mandated by the IMPACT Act of 2014, titled 
``Social Risk Factors and Performance in Medicare's Value-Based 
Purchasing Programs'' submitted by ASPE on June 29, 2020.\241\ The 
report recommends not adjusting outcome measures for social risk 
factors in CMS programs and recommends that, eventually, stratification 
of hospitals by the proportion dual-eligible patients should be removed 
from the HRRP. CMS is currently reviewing the report recommendations 
and considering how to incorporate these recommendations within CMS 
programs.
---------------------------------------------------------------------------

    \240\ Department of Health and Human Services, Office of the 
Assistant Secretary of Planning and Evaluation (ASPE). (2020) Second 
Report to Congress: Social Risk Factors and Performance in 
Medicare's Value-based Purchasing Programs. Retrieved from: https://aspe.hhs.gov/system/files/pdf/263676/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report.pdf. Accessed July 2, 2020.
    \241\ Department of Health and Human Services, Office of the 
Assistant Secretary of Planning and Evaluation (ASPE). (2020) Second 
Report to Congress: Social Risk Factors and Performance in 
Medicare's Value-based Purchasing Programs. Retrieved from: https://aspe.hhs.gov/system/files/pdf/263676/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report.pdf. Accessed July 2, 2020.
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    The Overall Star Rating uses individual measure scores, as 
calculated under the quality programs and reported on Hospital Compare 
or its successor website, to calculate measure group scores. Individual 
measure methodologies, including current and future approaches to risk 
adjustment for each measure, as specified in the measures, are 
inherently included within the Overall Star Rating. Since the Overall 
Star Rating utilizes the individual measure scores as publicly 
reported, it is not appropriate to apply social risk factor adjustment 
to the individual measure scores for the purpose of the Overall Star 
Rating. In addition, stakeholders have agreed that social risk factor 
adjustment is not appropriate for all measure types, such as measures 
capturing healthcare-associated infections where the onset of adverse 
events occur in the hospital setting should not be influenced by a 
patient's socioeconomic status.242 243 The proposed 
stratification approach would stratify only the Readmission measure 
group scores based on a comparison to other hospitals with similar 
proportions of dual-eligible patients, as opposed to in comparison to 
all hospitals.
---------------------------------------------------------------------------

    \242\ National Quality Forum. (2019, November 6). National 
Quality Forum Hosptial Quality Star Ratings Summit. Retrieved from 
www.qualityforum.org: http://www.qualityforum.org/NQF_Hospital_Quality_Star_Rating_Summit.aspx.
    \243\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
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    Since the Overall Star Rating is not used to determine hospital 
payment, we propose calculating the readmission measure group score 
within each dual-eligible peer group. In the formula below, ah is the 
readmission group score for hospital h, a is the national average of 
readmission group score, apeer group j is the average readmission group 
score for dual-eligible peer group j (j = 1, 2, . . . , 5).
[GRAPHIC] [TIFF OMITTED] TP12AU20.107

    During public input periods,\244\ CMS' contractor received feedback 
from stakeholders, specifically providers, encouraging alignment 
between Overall Star Rating and CMS programs, with specific mention of 
alignment with HRRP's approach to peer grouping by dual-eligibility. In 
response to stakeholder feedback to promote alignment between programs 
and provide consistent measurement standards for providers, we propose 
to utilize the same dual-eligible quintiles as HRRP for the Readmission 
measure group. Applying stratification to the Readmission measure group 
scores based on proportion of dual-eligible patients would align with 
HRRP (82 FR 38231 through 38237). Consistent with HRRP, stratifying the 
Overall Star Rating Readmission measure group would assign hospitals to 
one of five peer groups based on the proportion of dual-eligible 
patients. For FY 2019, the range of proportion of dual-eligible 
patients within each of the hospital peer group quintiles for HRRP are 
as follows: 0 to 13.69 percent, 13.70 to 18.40 percent, 18.41 to 23.23 
percent, 23.24 to 30.98 percent, 30.99 to 100 percent for peer groups 
one, two, three, four, five, respectively. We propose to utilize and 
repurpose the same peer group quintiles assigned by the HRRP, annually. 
Peer groups for the Overall Star Rating would not be exact quintiles, 
as a greater number of hospitals are included in Overall Star Rating 
than those participating in HRPP. The Overall Star Rating includes 
hospitals providing acute inpatient and outpatient care, including both 
subsection (d) hospitals and CAHs, whereas HRRP only includes 
subsection (d) hospitals. We refer readers to section A.1.b. Subsection 
(d) Hospitals and B. Critical Access Hospitals in the Overall Star 
Rating for more information on the hospitals

[[Page 49017]]

included within the Overall Star Rating. For the 2020 Overall Star 
Rating release, 4,384 hospitals received a Readmission group score, 
while 3,077 hospitals participated in HRRP received a readmission 
score. Since the hospitals within the Overall Star Rating that do not 
participate in HRRP would not already be assigned to a peer group by 
the HRRP methodology, we propose to calculate their proportion of dual-
eligible patients and assign them to one of the five peer groups based 
on the HRRP designated peer groups.
---------------------------------------------------------------------------

    \244\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
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    As stated above, we propose to assign hospitals that do not 
participate in the HRRP, but have their proportion of dual-eligible 
patients available, to HRRP designated peer groups, as they would not 
have already been assigned to a peer group through the HRRP. This is 
necessary to maintain alignment with HRRP so that hospitals in HRRP are 
assigned to the same peer group within both HRRP and the Overall Star 
Ratings. As also stated above, we propose to not adjust a hospital's 
Readmission measure group score if that hospital has missing dual-
eligible patient data. This is necessary because we would not have the 
dual-eligible data necessary to produce an adjusted score.
(i) Other Methods Considered
    In developing our proposal, we also considered recalculating the 
peer group quintiles based on all hospitals in the Overall Star Rating 
dataset, and not solely based on those participating in HRRP. Using all 
hospitals to calculate peer group quintiles would be more consistent 
with other aspects of the methodology that use all hospital data, such 
as the calculation of measure group scores and weighted average of 
measure groups scores to calculate summary scores. However, calculating 
quintiles based on all hospitals would create potential misalignment 
between quintiles, and therefore peer group assignment, for HRRP and 
the Overall Star Rating Readmission measure group. More specifically, 
if dual-eligible quintiles were recalculated based on all hospitals 
within the Overall Star Rating, some hospitals that are within both 
HRRP and the Overall Star Rating would be assigned to different peer 
groups in each of the two methodologies based on the different dual-
eligible quintile cutoffs.
    Using January 2020 Overall Star Rating release data (from October 
2019 publicly reported measure data on Hospital Compare), we simulated 
calculation of quintiles based on all hospitals, 155 (5.04 percent) of 
the 3,174 HRRP hospitals would move down a peer group quintile; that 
is, they would move to a quintile with a lower proportion of patients 
that are dual-eligible, indicating their patient case mix has lower 
social risk. Under this simulation, specifically, 23 (3.67 percent) 
hospitals assigned dual-eligible quintiles in HRRP would move from peer 
group two to peer group one, with the lowest proportion of dual-
eligible patients, 40 (6.46 percent) hospitals would move from peer 
group three to peer group two, 48 (7.74 percent) hospitals would move 
from peer group four to peer group three, and 44 (7.28 percent) 
hospitals would move from peer group five, with the highest proportion 
of dual-eligible patients, to peer group four.
    For the January 2020 Overall Star Rating release, 4,384 hospitals 
received a Readmission group score, while 1,307 hospitals did not 
participate in HRRP. Similarly, using the same simulated calculation of 
quintiles based on all hospitals, 90 (6.89 percent) of the 1,307 non-
HRRP hospitals would move down a peer group quintile if calculating 
based on all hospitals than they would have if using only HRRP 
hospitals. Specifically, 9 (0.69 percent) hospitals would move from 
peer group two to peer group one, with the lowest proportion of dual-
eligible patients, 31 (2.37 percent) hospitals would move from peer 
group three to peer group two, 27 (2.07 percent) hospitals would move 
from peer group four to peer group three, and 23 (1.76 percent) 
hospitals would move from peer group five, with the highest proportion 
of dual-eligible patients, to peer group four.
    After calculation, mean Readmission measure group scores would be 
the same for each hospital peer group, resulting in more similar 
measure group scores across hospital peer groups. While stratifying 
results in more comparable measure group scores across peer groups of 
proportions of dual-eligible patients, the effect on the Overall Star 
Rating Readmission measure group is modest; our simulations showed a 
0.967 correlation between unadjusted and adjusted Readmission measure 
group scores using January 2020 Overall Star Rating release data (from 
October 2019 publicly reported measure data on Hospital Compare).
    In developing our proposal, as discussed in section a. Alternatives 
Considered, we also considered not stratifying the Readmission measure 
group and retaining the current measure group without stratification 
based on proportion of dual-eligible patients within the calculation of 
the Overall Star Ratings. CMS' Overall Star Rating development 
contractor engaged stakeholders in discussion regarding the 
comparability of hospital star ratings for over five years throughout 
the development and reevaluation of the methodology. Throughout that 
engagement, some stakeholders expressed concerns regarding adjustment 
for social risk factors in general, adjustment for social risk factors 
within the Overall Star Rating methodology, or use of specific social 
risk factor variables that are currently available for adjustment.\245\ 
Most stakeholders agreed that social risk factor adjustment is not 
appropriate for all measure types, such as measures capturing 
healthcare-associated infections, and therefore, not appropriate to be 
applied at aggregated levels, such as the Overall Star 
Rating.246 247 Some stakeholders, including patients and 
patient advocates, expressed concern that stratifying the Readmission 
measure group by the proportion of dual-eligible patients would result 
in a misrepresentation of quality of care at hospitals, particularly 
for dual-eligible patients, and would be confusing to patients as 
consumers of the Overall Star Rating.248 249 250 
Furthermore, the effect of stratifying the Overall Star Rating 
Readmission measure group score is negligible, as shown through a 0.967 
correlation between unadjusted and adjusted Readmission measure group 
scores using January 2020 Overall Star Rating release data (from 
October

[[Page 49018]]

2019 publicly reported measure data on Hospital Compare).
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    \245\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \246\ National Quality Forum. (2019, November 6). National 
Quality Forum Hosptial Quality Star Ratings Summit. Retrieved from 
www.qualityforum.org: http://www.qualityforum.org/NQF_Hospital_Quality_Star_Rating_Summit.aspx.
    \247\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
    \248\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \249\ Centers for Medicare & Medicaid Services. (2019, October 
24) Patient and Patient Advocate Work Group Minutes--October 2019.
    \250\ National Quality Forum. (2019, November 6). National 
Quality Forum Hospital Quality Star Ratings Summit. Retrieved from 
www.qualityforum.org: http://www.qualityforum.org/NQF_Hospital_Quality_Star_Rating_Summit.aspx.
---------------------------------------------------------------------------

    CMS is also considering recommendations on risk-adjustment recently 
submitted to Congress. On behalf of the Secretary for Health and Human 
Services (HHS), ASPE recently submitted a HHS Report to Congress on 
Social Risk Factors and Performance in Medicare's Value-Based 
Purchasing Programs that includes recommendations on risk-adjustment 
for CMS programs and quality efforts, including the Overall Star 
Rating. For publicly reported quality measures, recommendations are 
that ``Quality measures, resource use measures, and composite scores 
should not be adjusted for social risk factors for public reporting.'' 
Instead, recommendations are for quality and resource use measures to 
be reported separately for dual-eligible beneficiaries and other 
beneficiaries in order to monitor disparities and improvements over 
time. The report indicates for public reporting, it is also important 
to hold providers accountable for outcomes, regardless of social risk. 
Overall, the report lays out a comprehensive approach for CMS programs 
to move towards incentivizing providers and initiatives to improve 
health outcomes by rewarding and supporting better outcomes for 
beneficiaries with social risk factors. The report indicates proposed 
solutions that address only the measures or programs, without 
considering the broader delivery system and policy context, are 
unlikely to mitigate the full implications of the relationship between 
social risk factors and outcomes.
    However, we are ultimately proposing to stratify the Readmission 
measure group based on the proportion of dual-eligible patients to 
align with HRRP and be responsive to stakeholder feedback, particularly 
form health care providers. However, considering inconsistent feedback 
received from stakeholders and HHS recommendations for CMS programs, we 
also seek comment on an alternative to retain the Readmission measure 
group calculation without stratification based on the proportion of 
dual-eligible patients.
    We invite public comment on our proposals to: (1) Stratify only the 
Readmission measure group score based on the proportion of dual-
eligible patients by using peer groups annually designated by the HRRP, 
(2) assign hospitals that do not participate in the HRRP, but have 
their proportion of dual-eligible patients available, to HRRP 
designated peer groups, as they would not have already been assigned to 
a peer group through the HRRP, (3) not adjust a hospital's Readmission 
measure group score if that hospital has missing dual-eligible patient 
data, and (4) codify this policy at Sec.  412.190. We refer readers to 
section a. Alternatives Considered where we seek comment on the 
alternative to not stratify the Readmission measure group score based 
on the proportion of dual-eligible patients.
5. Step 4: Calculation of Hospital Summary Scores as a Weighted Average 
of Group Scores
a. Calculation of Hospital Summary Scores Through a Weighted Average of 
Measure Group Scores
(1) Current Calculation of Hospital Summary Scores Through a Weighted 
Average of Measure Group Scores
    In the past, we have calculated hospital summary scores as a 
weighted average of measure group scores. That is, each measure group 
score is multiplied by the assigned weight for that group, and then the 
weighted measure group scores are summed to calculate the hospital 
summary score. The measure group weights were determined based on CMS 
policy, stakeholder feedback, and similarities to that of the Hospital 
VBP Program \251\ in that outcome measures are given more weight than 
process measures. Specifically, the Mortality, Safety of Care, 
Readmission, and Patient Experience measure groups are each weighted 22 
percent and the Effectiveness of Care, Timeliness of Care, and 
Efficient Use of Medical Imaging measure groups are each weighted 4 
percent. In 2015, CMS' contracted development team engaged stakeholders 
for input on the measure group weights through the TEP,\252\ the 
Patient & Advocate Work Group, and a public input period.\253\ In 
general, stakeholders supported the current measure group weights and 
agreed that outcome measures should have more weight since they 
represent strong indicators of quality and are most important to 
patients in making healthcare decisions. The development contractor 
included this topic in several past public input 
periods,254 255 wherein some stakeholders suggested 
different measure group weightings; however, little consensus has been 
reached on an appropriate alternative weighting scheme.
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    \251\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 80 FR 49567 (Aug 17, 2015) (to be 
codified at 42 CFR parts 412).
    \252\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \253\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \254\ Centers for Medicare & Medicaid Services. (2015, June). 
Hospital Quality Star Ratings on Hospital Compare Public Comment 
Report #2: Methodology of Overall Hospital Quality Star Ratings.
    \255\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
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(2) Proposal To Continue Current Calculation of Hospital Summary Scores 
Through a Weighted Average of Measure Group Scores
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to continue to calculate hospital 
summary scores through a weighted average of measure group scores with 
a similar weighting scheme that continues to assign more weight to the 
outcome and patient experience measure groups and less weight to the 
process measure group. Specifically, for Overall Star Rating beginning 
in CY 2021 and subsequent years, we propose to weight each of the 
outcome and patient experience measure groups--Mortality, Safety of 
Care, Readmission, and Patient Experience--at 22 percent, and the 
proposed combined process measure group, Timely and Effective Care (we 
refer readers to section E.3.b. Proposed New Measure Group and 
Continuation of Certain Groups of this proposed rule), at 12 percent. 
We also propose that hospital summary scores would then be calculated 
by multiplying the standardized measure group scores by the assigned 
measure group weight and then summed. We refer readers to an example 
equation and Table 49. We also propose to codify the measure group 
weightings at Sec.  412.190 and summary score calculations at Sec.  
412.190.
Example of Weighted Average of Measure Group Scores to Calculate 
Summary Scores
Summary score = [(-0.70*0.22) + (0.23*0.22) + (-0.76*0.22) + (-
1.13*0.22) + (-0.25*0.12)] = -0.55

[[Page 49019]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.108

    In developing our proposal, we also considered equal measure 
weights across all the measure groups, such that each measure group 
would be weighted 20 percent. We ultimately chose to propose to weight 
outcome measures more, because this was vetted and supported by 
stakeholders and is consistent with past and current stakeholder 
feedback that outcome measures capture important aspects of quality and 
are more important to patients.256 257
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    \256\ Centers for Medicare & Medicaid Services. (2015, June). 
Hospital Quality Star Ratings on Hospital Compare Public Comment 
Report #2: Methodology of Overall Hospital Quality Star Ratings.
    \257\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
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    We invite public comment on our proposals to: (1) Continue to 
calculate hospital summary scores by multiplying the standardized 
measure group scores by the assigned measure group weights and then 
summing the weighted measure group scores; (2) continue to weight 
outcome and patient experience measure groups, (that is, Mortality, 
Safety of Care, Readmission, and Patient Experience groups) at 22 
percent; (3) weight the proposed Timely and Effective Care process 
measure group at 12 percent; and (4) codify these policies at Sec.  
412.190.
b. Reweighting Measure Group Scores To Calculate Summary Scores
(1) Current Reweighting Measure Group Scores To Calculate Summary 
Scores
    In the past, if a hospital did not report or have sufficient 
measures for a given measure group under the Overall Star Rating 
methodology, the weights of those measure groups would be redistributed 
proportionally across the measure groups for which the hospital did 
report sufficient measures. Generally, the four outcome measure groups 
were weighted at 22 percent each, and the three process measure groups 
were weighted at 4 percent each. The approach to proportioning weights 
when a hospital did not report enough measures for one or more measure 
groups was similar to the Hospital VBP Program where the weighting of 
groups is redistributed where one or more groups are not reported,\258\ 
and was vetted by stakeholders for the Overall Star Rating through TEP 
\259\ engagement and a public input period.\260\
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    \258\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 77 FR 53606 (August 31, 2012) (to 
be codified at 42 CFR parts 412, 413, 424 and 476).
    \259\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \260\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
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(2) Proposal to Reweight Measure Group Scores To Calculate Summary 
Scores
    Moving forward, we propose to continue to reweight measure group 
scores. Taking into consideration the proposed new measure grouping (we 
refer readers to section 5 E.3.b. Proposed New Measure Group and 
Continuation of Certain Groups) and the proposed Timely and Effective 
Care process measure group weighting of 12 percent (we refer readers to 
section E.5.a. Calculation of Hospital Summary Scores Through a 
Weighted Average of Measure Group Scores), for the Overall Star Rating 
beginning in CY 2021 and subsequent years, we propose to re-distribute 
measure group weights for measure groups which a hospital does not have 
sufficient measures within the Overall Star Rating methodology. Once a 
hospital meets the reporting threshold to receive a star rating, which 
is having at least three measure groups each with at least three 
measures, any additional measures and measure groups contribute to 
their star rating (we refer readers to section E.6.b. Proposals to 
Update the Minimum Reporting Thresholds for Receiving a Star Rating). 
In other words, once the reporting thresholds are met, a hospital would 
need to report at least one measure in each group and the weight of any 
measure group that does not have at least one measure will be re-
distributed amongst the other measure groups. Specifically, we propose 
to re-distribute the weights for measure groups which are not reported 
proportionally across the remaining measure groups, to ensure the 
relative weight between groups is preserved. We would calculate this by 
subtracting the standard weight percentage of the group that does not 
meet the minimum threshold from 100 percent; the standard weight 
percentage of each of the remaining groups would then be divided by the 
resulting percentage giving new re-proportioned weights. If a hospital 
does not meet the threshold for two groups, then those two groups' 
standard weight percentages are added together before subtracting from 
100 percent; the standard weight percentage of each of the remaining 
groups would then be divided by the resulting percentage giving new re-
proportioned weights. We also propose to codify this at Sec.  412.190. 
These calculations are illustrated in the three examples below.
    For example, if a hospital does not report at least one measure 
within the Timely and Effective Care measure group, the group's 12 
percent weight would be subtracted from the total of

[[Page 49020]]

100 (100-12 = 88) and then each of the measure group weights for that 
hospital would be determined using the new total of 88 (Mortality 
weight: 22/88 = 25 percent, Safety of Care weight: 22/88 = 25 percent, 
Readmission weight: 22/88 = 25 percent, and Patient Experience weight: 
22/88 = 25 percent). This example is illustrated in Table 50.
[GRAPHIC] [TIFF OMITTED] TP12AU20.109

    As another example, if a hospital does not report at least one 
measure within the Readmission measure group, the group's 22 percent 
weight would be subtracted from the total of 100 (100-22 = 78) and then 
each of the measure group weights for that hospital would be determined 
using the new total of 78 (Mortality weight: 22/78 = 28.2 percent, 
Safety of Care weight: 22/78 = 28.2 percent, Patient Experience weight: 
22/78 = 28.2 percent, and Timely and Effective Care weight: 12/78 = 
15.4 percent). This example is illustrated in Table 51.
[GRAPHIC] [TIFF OMITTED] TP12AU20.110

    This same principle would apply if a hospital did not have at least 
one measure reported in two measure groups. We propose that a hospital 
must report at least three measure groups, each with at least three 
measures, one of which must be Mortality of Safety of Care, in order to 
receive a star rating; once both the minimum measure and measure group 
thresholds are met, any additional measures a hospital reports would be 
included in the Overall Star Rating calculation, including measures 
groups with as few as one measure (we refer readers to section E.6.b. 
Proposals to Update the Minimum Reporting Thresholds for Receiving a 
Star Rating). If a hospital does not report at least one measure within 
both the Safety of Care and Timely and Effective Care measure groups, 
the groups' 22 and 12 percent weights would be subtracted from the 
total of 100 (100-22-12 = 66) and then each of the measure group 
weights would be determined using the new total of 66 (Mortality 
weight: 22/66 = 33.3 percent, Readmission weight: 22/66 = 33.3, and 
Patient Experience weight: 22/66 = 33.3 percent). This example is 
illustrated in Table 52.

[[Page 49021]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.111

    We invite public comment on our proposals to reweight measure group 
scores and codify at Sec.  412.190.
6. Step 5: Application of Minimum Thresholds for Receiving a Star 
Rating
a. Current Minimum Measure and Group Thresholds for Receiving a Star 
Rating
    In the past, in order to receive a star rating, hospitals that 
provide acute inpatient and outpatient care had to publicly report 
sufficient measures to receive a star rating. Specifically, a minimum 
threshold was set to require at least three measure groups (one being 
an outcome group--that is, Mortality, Safety of Care, or Readmission), 
with at least three measures in each of the three groups. Additionally, 
in the past, once a hospital met the minimum measure and measure group 
thresholds, any additional measures and groups, including groups with 
as few as one measure, the hospital reported were included in the 
calculation of their star rating. These reporting thresholds were 
applied based on the guiding principle of information inclusivity, in 
that it allowed as many hospitals as possible to receive a star rating 
while also maintaining face validity and reliability of the Overall 
Star Rating methodology, and were vetted through TEP and public comment 
stakeholder engagement.261 262
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    \261\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
    \262\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
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    In 2017, the CMS' Overall Star Rating development contractor vetted 
the minimum reporting thresholds through the TEP and public input.\263\ 
In December 2017,\264\ we updated the order of steps in the methodology 
for which minimum thresholds are applied; instead of applying minimum 
thresholds in step 6, after the assignment of hospitals to star 
ratings, we applied them in step 5, prior to the assignment of 
hospitals to star ratings so only hospitals meeting the threshold were 
included in the relative k-means clustering algorithm.\265\ K-means 
clustering \266\ is the algorithm used to assign hospital summary 
scores to one of five star ratings. An overview of k-means clustering 
is provided in section E.8. Step 6: Application of Clustering Algorithm 
to Obtain a Star Rating below.
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    \263\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \264\ Centers for Medicare & Medicaid Services. (2017, December 
20). Quarterly Updates and Specifications Report (v2.3). Retrieved 
from qualitynet.org: https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
    \265\ Huang, Z. Extensions to the k-Means Algorithm for 
Clustering Large Data Sets with Categorical Values. Data Mining and 
Knowledge Discovery 2, 283-304 (1998) doi:10.1023/A:1009769707641.
    \266\ Ibid.
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b. Proposals To Update the Minimum Reporting Thresholds for Receiving a 
Star Rating
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to continue a similar threshold 
as previously used, but with modification. We propose that hospitals 
must report at least three measures for three measures groups, however, 
one of the groups must specifically be the Mortality or Safety of Care 
outcome groups. We believe this would increase the comparability of 
hospitals through the requirement of specific measure groups to receive 
a star rating. We also believe that this would ensure that, in order to 
receive a star rating, hospitals have information available on 
important indicators of acute inpatient and outpatient quality of 
care--mortality and safety of care--that reflect survival and 
preventable complications or infections following care and are, 
therefore, important to patients in making healthcare decisions, as 
indicated by the Patient & Patient Advocate Work Group. We are also 
proposing to codify this minimum measure group threshold at Sec.  
412.190.
    However, we are aware that a requirement for at least three 
measures within the Mortality or Safety of Care groups would 
simultaneously limit the number of hospitals eligible to receive a star 
rating, particularly reducing the number of small, low volume hospitals 
with too few cases to report the individual measures. Furthermore, 
certain entities, such as CAHs, are not required to report safety 
measures (for example, healthcare-associated infections and PSI-90) as 
part of HAC Reduction Program (78 FR 50725 to 50728).\267\ In January 
2020, 125 hospitals did not report at least three measures in either 
the Mortality or Safety of Care groups. Of those 125 hospitals without 
at least three measures in either the Mortality or Safety of Care 
groups, 48 were safety-net hospitals, 68 were CAHs, and 16 were 
specialty hospitals. However, the TEP still recommended this change 
because Mortality and Safety of Care are aspects of quality that are 
most important to patients and reflective of performance

[[Page 49022]]

under a hospital's control.\268\ Once both the minimum measure and 
measure group thresholds are met, any additional measures a hospital 
reports would be included in the star rating calculation.
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    \267\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 83 FR 50496 (Aug 19, 2013) (to be 
codified at 42 CFR parts 412, 413, 414, 419, 424, 482, 485, and 
489).
    \268\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
---------------------------------------------------------------------------

    We invite public comment on our proposals to require that hospitals 
must report at least three measures groups, one of which must 
specifically be the Mortality or Safety of Care outcome group, each 
with at least three measures. Once this reported threshold is met, any 
additional measures and measure groups would contribute to hospital 
star ratings. We also propose to codify these policies at Sec.  
412.190.
7. Proposed Approach to Peer Grouping Hospitals
a. Background
    We have not previously grouped hospitals by peers within the 
Overall Star Rating methodology. However, as part of our discussion 
with stakeholders about the comparability of the Overall Star Rating, 
peer grouping and potential peer grouping variables were discussed in 
two TEP meetings (March 2018,\269\ and November 2019 \270\), two 
Provider Leadership Work Group meetings (February and November 2019), 
two Patient & Advocate Work Group meetings (December 2017 and October 
2019), and presented during two public comment periods (August 2017 
\271\ and March 2019 \272\). Through stakeholder engagement activities, 
we presented data on peer grouping variables including number of 
measures or measure groups a hospital reports, teaching designation, 
specialty designation, critical access designation, and number of beds 
at a hospital, among others. While there was no consensus among 
stakeholders regarding which hospital characteristic variable would be 
most appropriate for peer grouping,\273\ CMS focused on the number of 
measure groups reported as a peer grouping variable based on analyses 
for many possible variables that assessed similarities among hospitals 
within peer groups and predictability of hospitals assignments to peer 
groups over time. Larger hospitals, for example, generally submit the 
most measures and smaller hospitals submit the fewest. Peer grouping by 
number of measure groups provides alignment with hospital size.
---------------------------------------------------------------------------

    \269\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \270\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
    \271\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \272\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \273\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
---------------------------------------------------------------------------

b. Proposed Peer Grouping
    In this proposed rule, for Overall Star Rating beginning with CY 
2021 and subsequent years, we propose to group hospitals that provide 
acute inpatient and outpatient care by the number of measure groups for 
which they have at least three measures as shown in Figure 2. 
Specifically, after the minimum reporting thresholds are applied, 
hospitals would be grouped into one of three peer groups based on the 
number of measure groups for which they report at least three 
measures--three measure groups, four measure groups, and five measure 
groups. Once grouped, k-means clustering would be applied within each 
peer group to assign hospital summary scores to star ratings. We also 
propose to codify this policy at Sec.  412.190.

[[Page 49023]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.112

    Peer grouping hospitals based on the number of measure groups for 
which they report at least three measures is responsive to stakeholder 
concerns about the comparability of hospital star ratings and allows 
hospitals to be assigned to star ratings relative only to other similar 
hospitals in the same peer group.

[[Page 49024]]

    We propose to group hospitals by measure group reporting to capture 
key differences that are important to stakeholders, such as differences 
in size, patient volume, case mix,\274\ and services provided (service 
mix \275\). For example, larger hospitals with more diverse case mix 
and service mix, such as large urban teaching hospitals, report a 
greater number of measures, and therefore measure groups, and would be 
grouped separately from smaller hospitals with less diverse patient 
cases and service mix, which tend to report fewer measures and measure 
groups.
---------------------------------------------------------------------------

    \274\ Centers for Medicare & Medicaid Services. (2019). 
Frequently Asked Questions for the Risk-Standardized Outcome and 
Payment Measures. Retrieved from qualitynet.org: https://www.qualitynet.org/files/5d0d374c764be766b010136d?filename=2019_IQR_CBMsrs_FAQs.pdf.
    \275\ Ibid.
---------------------------------------------------------------------------

    Hospital summary scores would be placed into three peer groups 
after calculation of the weighted average of measure group scores and 
before the assignment of hospitals to star ratings using k-means 
clustering.\276\ This proposal is dependent on a sufficient number of 
hospitals that provide acute inpatient and outpatient care reporting 
three, four, and five measure groups to form the three peer groups. We 
simulated effects of this policy based on January 2020 Overall Star 
Rating release data (from October 2019 publicly reported measure data 
on Hospital Compare): 348 (10 percent) hospitals reported at least 3 
measures in 3 groups, 583 (17 percent) reported 4 groups, and 2,509 (73 
percent) reported all 5 groups. These group sizes were vetted with the 
TEP \277\ and workgroups and considered adequately sized for clustering 
into peer grouped star ratings.
---------------------------------------------------------------------------

    \276\ Huang, Z. Extensions to the k-Means Algorithm for 
Clustering Large Data Sets with Categorical Values. Data Mining and 
Knowledge Discovery 2, 283-304 (1998) doi:10.1023/A:1009769707641.
    \277\ Centers for Medicare & Medicaid Services. (2019, 
November). Summary of Technical Expert Panel (TEP): Overall Hospital 
Quality Star Rating on Hospital Compare. Retrieved from: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/TEP-Current-Panel#p6.
---------------------------------------------------------------------------

    Of note, this proposal is contingent on the participation of CAHs, 
as outlined in section B.2. Proposal to Continue to Include Critical 
Access Hospitals in the Overall Star Rating, since CAHs make up 
approximately half of the hospitals in the three measure group peer 
group and their exclusion from the Overall Star Rating would not 
produce peer groups with a sufficient amount of hospitals for 
comparison. Because many CAHs currently report the minimum three 
measure groups required by the reporting threshold, as discussed in 
section E.6. Step 5: Application of Minimum Thresholds for Receiving a 
Star Rating, and make up approximately half of the hospitals within the 
three measure group peer group, there would likely be an insufficient 
number of hospitals in the three measure group peer group to produce 
adequate variation through k-means clustering \278\ if CAHs were not 
included in the calculation. If CAHs were not included, the difference 
in summary score between a two-star and three-star hospital may be 
modest and not truly reflective of differences in hospital quality.
---------------------------------------------------------------------------

    \278\ Huang, Z. Extensions to the k-Means Algorithm for 
Clustering Large Data Sets with Categorical Values. Data Mining and 
Knowledge Discovery 2, 283-304 (1998) doi:10.1023/A:1009769707641.
---------------------------------------------------------------------------

    After peer grouping, we would then assign star ratings using k-
means clustering \279\ (discussed in section E.8. Step 6: Application 
of Clustering Algorithm to Obtain a Star Rating of this proposed rule) 
among hospitals within a single group, that is, relative only to 
hospitals in the same group. Specifically, hospitals would be grouped 
based on whether they have at least three measures for three measure 
groups, four measure groups, or five measure groups. The approach to 
peer grouping would retain the method used for assigning star ratings. 
Currently, the Overall Star Rating methodology uses a k-means 
clustering algorithm to assign hospitals to one of five star rating 
categories based on the distribution of hospital summary scores. This 
method aims to make hospital summary scores more similar within one 
star rating category and more different than hospital summary scores in 
other star rating categories. The proposed approach to peer grouping 
would be to also apply k-means clustering \280\ to assign hospitals to 
one of five star ratings based only on hospitals in that peer group. 
For example, hospitals with three measure groups would be assigned to 
star ratings based on their summary score relative to other hospital 
summary scores with three measures groups, but not with respect to 
hospital summary scores among hospitals with four or five measure 
groups. Since hospitals in a peer group are being compared only to each 
other and k-means clustering is a comparative approach to assigning 
star ratings,\281\ hospitals with the same summary score but different 
peer groups could receive different star ratings. In other words, a 
hospital with three measure groups could have the same summary score as 
a hospital with four measure groups; however, that summary score could 
fall within the four-star cluster for the three measure group peer 
group and the five-star cluster for the four measure group peer group. 
In addition, peer grouping hospitals would increase the comparability 
of star ratings within peer groups but decrease the comparability of 
star ratings across peer groups for patients. For example, once summary 
scores are calculated through the weighted average of measure group 
scores, a hospital within the three measure group peer group would not 
be assigned to a star rating relative to hospitals within the four or 
five measure group peer groups in the same geography or service line to 
whom that hospital is being compared by patients and consumers.
---------------------------------------------------------------------------

    \279\ Ibid.
    \280\ Huang, Z. Extensions to the k-Means Algorithm for 
Clustering Large Data Sets with Categorical Values. Data Mining and 
Knowledge Discovery 2, 283-304 (1998) doi:10.1023/A:1009769707641.
    \281\ Ibid.
---------------------------------------------------------------------------

    Applying peer grouping after the calculation of summary scores and 
before the assignment of hospitals to star ratings, allows: (1) 
Hospital summary scores to be equivalent and comparable among all 
hospitals, regardless of peer grouping; (2) transparency and the 
ability for stakeholders to review measure group and summary score 
results comparable to all other hospitals in the nation for quality 
improvement efforts within their confidential hospital-specific reports 
during the 30-day confidential preview period or the Hospital Compare 
or its successor websites' downloadable database upon public release; 
(3) minimal sensitivity of measure-level differences between peer 
groups on star ratings; and (4) hospitals' final star ratings to only 
be in comparison to ``like'' hospitals that have a similar number of 
measure groups.
    We have conducted several analyses to inform decision making 
regarding peer grouping. To determine whether peer grouping not only 
supports CMS efforts to improve the comparability of star ratings, but 
also the predictability of hospital assignments to peer groups, we 
simulated potential effects of this proposal and assessed the stability 
of peer groups over time. Hospitals tend to report the same number of 
measure groups over time and therefore are often assigned to the same 
peer group each reporting period. Using historical data over five 
previous years, hospitals would have been assigned to the same peer 
groups of three, four, or five measure groups 96 to 98 percent of the

[[Page 49025]]

time, indicating a high level of consistency over time. Furthermore, 
peer grouping hospitals based on the number of measure groups for which 
they report at least three measures creates similar within peer group 
hospital reporting profiles. Using January 2020 reporting data (from 
October 2019 publicly reported measure data on Hospital Compare), 
hospitals with three measure groups tend to almost always report at 
least three measures in the Mortality (86 percent), Readmission (86 
percent), and Timely and Effective Care (96 percent) measure groups but 
tend to seldom report at least three measures in the Safety of Care (15 
percent) and Patient Experience (17 percent) measures groups. Hospitals 
with four measure groups tend to always report at least three measures 
in the Readmission (100 percent) measure group, tend to almost always 
report at least three measures in the Mortality (92 percent), Patient 
Experience (98 percent), and Timely and Effective Care (99 percent) 
measure groups, and tend to seldom report at least three measures in 
the Safety of Care (11 percent) measure group. Hospitals with five 
measure groups report at least three measures in all five measure 
groups. Hospitals with three and four measure groups are more likely to 
be critical access hospitals (58 percent in the peer group with three 
measure groups and 52 percent in the peer group with four measure 
groups) while hospitals in the peer group with five measure groups tend 
to be safety-net (19 percent of the peer group) and teaching (56 
percent of the peer group) hospitals. These results confirm that peer 
grouping results in the grouping of hospitals with similar reporting 
profiles and characteristics and may address stakeholder concerns about 
the comparability of hospital star ratings.
    Peer grouping hospitals by the number of measure groups for which 
they report at least three measures for the assignment of hospital 
summary scores to star ratings addresses stakeholder concerns about the 
comparability of hospitals with fundamental differences, such as 
measure reporting, hospital size or volume, patient case mix, and 
service mix. However, we note that peer grouping hospitals would 
decrease the comparability of all hospitals for patients and change the 
historical, conceptual comparative nature of the Overall Star Rating.
    In developing our proposal, we also considered not peer grouping 
and continuing to apply k-means clustering amongst all hospitals 
meeting the minimum reporting thresholds to assign hospitals to star 
ratings. However, we ultimately decided to propose to peer group 
hospitals based on the number of measure groups to be responsive to 
stakeholder feedback and increase comparability of hospital star 
ratings. Should we not finalize our proposal to include CAHs, we will 
not peer group the Overall Star Rating by number of measure groups.
    We invite public comment on our proposal to peer group hospitals by 
number of measure groups and to codify this policy at Sec.  412.190.
8. Step 6: Application of Clustering Algorithm To Assign Star Rating
a. K-Means Clustering
(1) Current Application of K-Means Clustering
    In the past, in order to assign hospitals to star ratings, we used 
an approach called k-means clustering to categorize hospitals' summary 
scores. K-means clustering is a clustering algorithm that groups 
entities, in this case hospitals, into a specified number of 
categories,\282\ in this case five star rating categories in which one 
star is the lowest and five stars is the highest, by grouping values, 
in this case hospital summary scores, so that they are more similar 
within groups and more different between groups. In other words, for 
each publication of the Overall Star Rating, k-means clustering 
establishes cutoffs, or a range of summary scores, for each of the star 
rating categories so that summary scores in one star rating category 
would be more similar to each other and less similar to summary scores 
in other star rating categories.
---------------------------------------------------------------------------

    \282\ Ibid.
---------------------------------------------------------------------------

    We considered multiple approaches to assigning hospitals to star 
ratings, including percentiles, statistically significant cutoffs, and 
clustering algorithms. Each option was presented to the TEP 
283 284 and during a public input period \285\ by the 
Overall Star Rating development contractor. While any approach to 
assigning hospitals to star ratings will result in some hospitals with 
summary scores near the cutoffs of two star rating categories, at that 
time, we chose to use k-means clustering because it applied a data-
driven approach to specification of five categories, minimized the 
within-category differences and maximized the between-category 
differences in summary scores, and was similar to the clustering 
algorithm used to calculate the HCAHPS Star Rating.\286\ Stakeholders 
have generally supported the use of k-means clustering to assign star 
ratings over arbitrary percentiles and statistically significant 
cutoffs.287 288 289
---------------------------------------------------------------------------

    \283\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \284\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
    \285\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \286\ Centers for Medicare and Medicaid Services (2019, April). 
Technical Notes for HCAHPS Star Ratings . Retrieved from 
www.hcahpsonline.org: https://www.hcahpsonline.org/globalassets/hcahps/star-ratings/tech-notes/april_2019_star-ratings_tech-notes.pdf.
    \287\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \288\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \289\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
---------------------------------------------------------------------------

    In December 2017, we applied a minor update to the application of 
k-means clustering by running the summary scores through the clustering 
algorithm multiple times, a statistical method called complete 
convergence,\290\ to provide more reliable and stable star rating 
assignments. Prior to December 2017, we performed Winsorization \291\ 
of hospital summary scores to limit the influence of extreme outliers. 
Winsorization is a common strategy used to set extreme outliers to a 
specified percentile of the data.\292\ While k-means clustering has 
been used within the methodology since implementation in July 2016, the 
update to run k-means clustering to complete convergence results in a 
broader distribution of star ratings and negates the need for 
Winsorization of hospital summary scores.\293\
---------------------------------------------------------------------------

    \290\ Hsu, P.L., & Robbins, H. (1947). Complete Convergence and 
the Law of Large Numbers. Proceedings of the National Academy of 
Sciences of the United States of America, 33(2), 25-31. doi:10.1073/
pnas.33.2.25.
    \291\ Kwak, S.K., & Kim, J.H. (2017, July 27). ``Statistical 
data preparation: management of missing values and outliers.'' 
Korean journal of anesthesiology 70.4: 407.
    \292\ Ibid.
    \293\ Centers for Medicare & Medicaid Services. (2017, 
December). Overall Hospital Quality Star Rating on Hospital Compare 
Methodology Report (v3.0). Retrieved from www.qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab1.
---------------------------------------------------------------------------

(2) Proposal To Continue K-Means Clustering
    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose to continue use k-means 
clustering with

[[Page 49026]]

complete convergence without Winsorization of hospital summary scores, 
to group hospitals into five clusters to assign star ratings so that 
one star is the lowest and five stars is the highest. We also propose 
to codify this policy at Sec.  412.190. We believe use of k-means 
clustering is most appropriate because it aligns with the clustering 
algorithm used for the HCAHPS Star Rating \294\ and maximizes the 
within star rating category similarities and between star rating 
category differences. We seek public comment on our proposal to 
continue to use k-means clustering to complete convergence to assign 
hospitals to star ratings, where one star is the lowest and five stars 
is the highest, and to codify this policy at Sec.  412.190
---------------------------------------------------------------------------

    \294\ Centers for Medicare and Medicaid Services (2019, April). 
Technical Notes for HCAHPS Star Ratings. Retrieved from 
www.hcahpsonline.org: https://www.hcahpsonline.org/globalassets/hcahps/star-ratings/tech-notes/april_2019_star-ratings_tech-notes.pdf.
---------------------------------------------------------------------------

F. Preview Period

1. Background
    In the past, similar to the process in place for multiple CMS 
quality programs prior to public reporting of measure scores, hospitals 
providing acute inpatient and outpatient care that are included in the 
Overall Star Rating had the opportunity to confidentially review their 
star rating as well as the measures and measure group scores that 
contribute to their star rating during the confidential preview period 
a few months prior to the public release of the Overall Star Rating. We 
provided hospitals with a confidential report and at least 30 days to 
preview their results prior to releasing the Overall Star Rating. 
During the confidential preview period, hospitals received a 
confidential hospital-specific report (HSR), which detailed their 
measure performance and measure group scores with comparisons to the 
national average, as well as their summary score and star rating. The 
HSRs also provided information about how the measures' scores 
contribute to measure group scores, how measure group scores are 
weighted to calculate summary scores, and the range of summary scores 
for each star rating category. The Overall Star Rating preview period 
allowed hospitals to review, understand, and ask CMS questions about 
how the star rating was calculated.
2. Proposed Preview Period
    In this proposed rule, for Overall Star Rating beginning with the 
CY 2021 and subsequent years, we propose to continue our current 
process regarding the preview period. Specifically, a few months prior 
to public release of the Overall Star Rating, we would issue a 
confidential HSR, which would detail measure and measure group scores 
as well as their summary score and star rating. The HSRs would also 
provide information about how the measures' scores contribute to 
measure group scores, how measure group scores are weighted to 
calculate summary scores, and the range of summary scores for each star 
rating category. During this preview period, hospitals would have at 
least 30 days to preview their results, and if necessary, reach out to 
CMS via the QualityNet Question and Answer tool, or additional contact 
information provided within preview period resources with questions 
about the methodology and their star ratings results. We also propose 
to codify this policy at Sec.  412.190. This proposal as well as the 
proposal to report Overall Star Rating annually using data publicly 
reported on Hospital Compare or its successor website from a quarter 
within the prior year would allow hospitals more time to review and 
understand the methodology and their results, as well as reach out with 
questions.
    We invite public comment on our proposals to: (1) Establish a 30-
day confidential preview period, and (2) codify the confidential 
preview period at Sec.  412.190.

G. Overall Star Rating Suppressions

    In this proposed rule, for the Overall Star Rating beginning in CY 
2021 and subsequent years, we propose separate suppression policies for 
subsection (d) hospitals and CAHs given that subsection (d) hospitals 
are subject to CMS quality programs and CAHs voluntarily submit measure 
data.
1. Subsection (d) Hospitals
a. Background
    In the past, we would have only suppressed Overall Star Rating for 
subsection (d) hospitals when there were errors within the Overall Star 
Ratings calculation or the calculation for individual measures, which 
would first need to be addressed through CMS programs prior to 
recalculating Star Ratings. Furthermore, there is currently no specific 
corrections process for the Overall Star Rating.
b. Proposed Suppression
    In this proposed rule, we propose to continue to allow for 
suppression, but only in limited circumstances. Specifically, for the 
Overall Star Rating beginning with the CY 2021 and subsequent years, we 
propose to consider suppressing Overall Star Rating only under 
extenuating circumstances that affect numerous hospitals (as in, not an 
individualized or localized issue) as determined by CMS or when CMS is 
at fault, including but not limited to when:
     There is an Overall Star Rating calculation error by CMS;
     There is a systemic error at the CMS quality program level 
that substantively affects the Overall Star Rating calculation. For 
example, there is a CMS quality program level error for one or more 
measures included within the Overall Star Rating due to incorrect data 
processing or measure calcualtions that affects a substantial number of 
hospitals reporting those measures. We note that we would strive to 
first correct systemic errors at the program level per program policies 
and then recalculate the Overall Star Rating, if possible; or
     A Public Health Emergency substantially affects the 
underlying measure data.
    We also propose to codify this policy at Sec.  412.190.
    As mentioned above, consistent with past practices, we propose that 
we would not suppress an individual hospital's Overall Star Rating 
because the hospital or one of its agents (for example, authorized 
vendors, representatives, or contractors) submitted inaccurate data to 
CMS, including inaccurate underlying measure data and claims records. 
We note that the Overall Star Rating is calculated using individual 
measures publicly reported on Hospital Compare or its successor site 
via CMS quality programs. Hospitals can utilize established processes 
under each program in order to review and correct individual measure 
scores. As policies are specific to each program, we refer readers to 
the respective hospital program's policies. We also refer readers to 
the QualityNet website: https://qualitynet.org/ for additional program-
related information. We invite public comment on our proposals as 
discussed above.
(1) CAHs
(a) Background
    As discussed in section B. Critical Access Hospitals in the Overall 
Star Rating of this proposed rule, CAHs voluntarily submit measure data 
consistent with certain CMS programs. These measure results are then 
publicly reported on Hospital Compare or its successor websites. In the 
past, since the Overall Star Rating summarizes available measure 
information on Hospital Compare or its successor

[[Page 49027]]

website, CAHs with publicly reported measures results on Hospital 
Compare that also met the reporting thresholds to receive a star rating 
were assigned a star rating.
    CAHs that did not want their voluntarily submitted measure data 
publicly reported on Hospital Compare could submit a form (``Request 
Form for Withholding/Footnoting Data for Public Reporting'' available 
on QualityNet) per the forms' instructions during the CMS quality 
program-level 30-day confidential preview period for the Hospital 
Compare refresh used to calculate the Overall Star Ratings. We note 
that this preview period is distinct from the Overall Star Rating 
preview period. If the measure data itself was withheld on Hospital 
Compare, it subsequently could not be included in the Overall Star 
Rating. Generally, upon public release of the Overall Star Rating, we 
also provide a public input file containing aggregate hospital measure 
scores, measure group scores, and summary scores along with the Overall 
Star Rating SAS pack for transparency and to allow stakeholders the 
opportunity to replicate the calculation of star ratings. If a CAH 
withheld its data from Hospital Compare at this stage, that data was 
excluded from both the Overall Star Rating calculation and the public 
input file.
    Furthermore, because CAHs voluntarily reported measures, CAHs that 
would otherwise receive an Overall Star Rating could request to 
withhold their star rating during the Overall Star Rating preview 
period. However, at this stage, individual measure scores were still 
included in the public input file due to time and process constraints.
(b) Proposed Withholding
    In this proposed rule, for Overall Star Rating beginning in CY 2021 
and subsequent years, we propose to (1) continue to allow CAHs to 
withhold their Overall Star Rating; and (2) to codify this at Sec.  
412.190. These proposals, discussed in more detail below, align with 
the guiding principles of transparency and inclusivity of hospitals, as 
outlined within section A. Background, while allowing CAHs to 
voluntarily withhold their Overall Star Rating.
i. Withholding Star Ratings
    Beginning with CY 2021 and for subsequent years, we propose that 
CAHs may request to withhold their Overall Star Rating from public 
release on Hospital Compare or its successor website so long as the 
request for withholding is made, at the latest, during the Overall Star 
Rating preview period as proposed in section F.2. Proposed Preview 
Period of this proposed rule. We also propose to codify this policy at 
Sec.  412.190. CAHs may make this request by submitting the ``Request 
Form for Withholding/Footnoting Data for Public Reporting'' form \295\ 
available on QualityNet by midnight of the last day of the Overall Star 
Rating preview period. This is the same form used for withholding data 
from CMS programs. If CAHs request withholding of any of the measures 
included within the Overall Star Rating from public reporting on 
Hospital Compare or its successor website through completion of this 
form, all of their measures scores will be withheld from the Overall 
Star Rating calculation. However, individual measure scores would still 
be included in the public input file. By the time the Overall Star 
Rating preview period begins, there would not be sufficient time for 
CMS to remove a CAH's data from the public input file and then 
recalculate the Overall Star Rating for all affected hospitals. As an 
example, for a January 2021 Overall Star Rating publication based on 
data publicly reported on Hospital Compare or its successor website 
using October 2020 data, CAHs would need to submit their withholding 
request during the Overall Star Rating preview period, which would 
occur a few months prior to the January 2021 publication, in order to 
withhold their Overall Star Rating (but their data would still remain 
in the Public Input File).
---------------------------------------------------------------------------

    \295\ The ``Request Form for Withholding/Footnoting Data for 
Public Reporting'' form is in the process of being updated for use 
in CY21.
---------------------------------------------------------------------------

ii. Withholding Star Ratings and Public Input File Data
    In addition, we propose that CAHs may request to have their Overall 
Star Rating withheld from public release on Hospital Compare or its 
successor website, as well as their data from the public input file, 
which is posted upon the public release of the Overall Star Rating and 
used by stakeholders to replicate the calculation of star ratings, so 
long as the request is made during the CMS quality program-level 30-day 
confidential preview period for the Hospital Compare refresh used to 
calculate the Overall Star Ratings. We also propose to codify this 
policy at Sec.  412.190. As an example, we refer readers to our 
discussion in the Hospital IQR Program in the FY 2012 IPPS/LTCH PPS 
final rule (76 FR 51608) for more information about this preview period 
in one of CMS' quality programs. CAHs may request that CMS withhold 
their measure and star rating results from public posting on Hospital 
Compare or its successor website and the Overall Star Rating public 
input file by submitting a form (``Request Form for Withholding/
Footnoting Data for Public Reporting'' \296\ available on QualityNet) 
per the forms' instructions. This is the same form used for withholding 
from CMS programs. If CAHs request withholding of any of the measures 
included within the Overall Star Rating from public reporting on 
Hospital Compare or its successor website through completion of this 
form during this stated timeframe, all of their measures scores would 
be withheld from the Overall Star Rating calculation and public input 
file.
---------------------------------------------------------------------------

    \296\ The ``Request Form for Withholding/Footnoting Data for 
Public Reporting'' form is in the process of being updated for use 
in CY21.
---------------------------------------------------------------------------

    As an example, for a January 2021 Overall Star Rating publication 
based on data publicly reported on Hospital Compare or its successor 
website using October 2020 data, CAHs would need to submit their 
withholding request during the CMS quality program-level 30-day 
confidential preview period, which would generally occur a few months 
prior to the October 2020 Hospital Compare refresh in order to withhold 
both their Overall Star Rating and data from the public input file.
    We invite public comment on our proposals.

XVII. Addition of New Service Categories for Hospital Outpatient 
Department (OPD) Prior Authorization Process

A. Background

    In the CY 2020 OPPS/ASC final rule with comment period, we 
established a prior authorization process for certain hospital OPD 
services using our authority under section 1833(t)(2)(F) of the Social 
Security Act (the Act), which allows the Secretary to develop ``a 
method for controlling unnecessary increases in the volume of covered 
OPD services'' (84 FR 61142, November 12, 2019).\297\ The regulations 
governing the prior authorization process are located in subpart I of 
42 CFR part 419, specifically at Sec. Sec.  419.80 through 419.89.
---------------------------------------------------------------------------

    \297\ See also Correction Notice issued January 3, 2020 (85 FR 
224).
---------------------------------------------------------------------------

    In addition to codifying the basis and scope of subpart I, Prior 
Authorization for Outpatient Department Services, the regulations 
include definitions associated with the prior authorization process, 
provide that prior authorization must be obtained as a condition of 
payment for the listed service categories, and include the process by

[[Page 49028]]

which hospitals must obtain prior authorization. Paragraph (a)(1) of 
Sec.  419.83 lists the specific service categories for which prior 
authorization must be obtained, which are: (i) Blepharoplasty, (ii) 
Botulinum toxin injections, (iii) Panniculectomy, (iv) Rhinoplasty, and 
(v) Vein ablation. Paragraph (b) states that CMS will update this list 
through formal notice-and-comment rulemaking, paragraph (c) describes 
the circumstances under which CMS may elect to exempt a provider from 
the prior authorization process, and paragraph (d) states that CMS may 
suspend the prior authorization process requirements generally or for a 
particular service at any time by issuing a notification on the CMS 
website.

B. Controlling Unnecessary Increases in the Volume of Covered OPD 
Services

1. Proposed Addition of Two New Service Categories
    In accordance with Sec.  419.83(b), we propose to require prior 
authorization for two new service categories: Cervical Fusion with Disc 
Removal and Implanted Spinal Neurostimulators. We also propose to add 
those service categories to Sec.  419.83(a). We propose that the prior 
authorization process for these two additional service categories will 
be effective for dates of services on or after July 1, 2021. As 
explained more fully below, the proposed addition of these service 
categories is consistent with our authority under section 1833(t)(2)(F) 
and is based upon our determination that there has been an unnecessary 
increase in the volume of these services. Based on the different 
implementation dates for the original five service categories and the 
two proposed service categories, we propose to add a reference to the 
July 1, 2020 implementation date to the end of paragraph (a)(1) to 
reflect the implementation date for the original five service 
categories. Specifically, we propose that paragraph (a)(1) would read, 
``[t]he following service categories comprise the list of hospital 
outpatient department services requiring prior authorization beginning 
for service dates on or after July 1, 2020.'' We also propose to add a 
new paragraph (a)(2), which would read: ``[t]he following service 
categories comprise the list of hospital outpatient department services 
requiring prior authorization beginning for service dates on or after 
July 1, 2021.'' We propose that the two proposed service categories 
would be added as new subparagraphs to new paragraph (a)(2) as follows: 
(i) Cervical Fusion with Disc Removal and (ii) Implanted Spinal 
Neurostimulators. We also propose that existing paragraph (a)(2) would 
be renumbered as paragraph (a)(3).
    We propose that the list of covered OPD services that would require 
prior authorization are those identified by the CPT codes in Table 53. 
For ease of review, we are only including in Table 53 the CPT codes 
that fall into the two proposed service categories in proposed new 
Sec.  419.83(a)(2)(i) and (ii). Note that this is the same approach we 
took in establishing the initial five service categories in Sec.  
419.83(a)(1). For ease of reference, we have included the Final List of 
Outpatient Services that Require Prior Authorization for the five 
initial service categories in Table 54.\298\ Again, the prior 
authorization process for the two proposed additional service 
categories would be effective for dates of service on or after July 1, 
2021.
---------------------------------------------------------------------------

    \298\ The table appears on pages 61456 and 61457 of the Final 
Rule but contains certain technical errors. The table printed here 
is consistent with our January 3, 2020 correction notice. See 85 FR 
at 225.
---------------------------------------------------------------------------

2. Basis for Proposing To Add Two New Service Categories

    As part of our responsibility to protect the Medicare Trust Funds, 
we are continuing our routine analysis of 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 OPD setting.
    As we noted in the CY 2020 OPPS/ASC proposed rule,\299\ we 
recognize 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 and the average annual rate-of-
increase in the Medicare allowed amounts. For this proposed rule, we 
updated the analyses undertaken for the CY 2020 OPPS/ASC proposed 
rule.\300\ In proposing the addition of these two service categories, 
we reviewed over 1.2 billion claims related to OPD services during the 
12-year period from 2007 through 2018.\301\ We determined that the 
overall rate of OPD claims submitted for payment to the Medicare 
program increased each year by an average rate of 2.8 percent. This 
equated to an increase from approximately 90 million OPD claims 
submitted for payment in 2007 to approximately 117 million claims 
submitted for payment in 2018. The 2.8 percent rate reflects a slight 
decrease when compared to the 3.2 percent rate identified in the CY 
2020 OPPS proposed rule. 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 7.8 
percent. Again, this is a slight decrease when compared to the 8.2 
percent rate identified in the CY 2020 OPPS/ASC proposed rule. We found 
that the total Medicare allowed amount for the OPD services claims 
processed in 2007 was approximately $31 billion and increased to $68 
billion in 2018, while during this same 12-year period, the average 
annual increase in the number of Medicare beneficiaries per year was 
only 0.9 percent.
---------------------------------------------------------------------------

    \299\ See Hospital Outpatient Prospective System/Ambulatory 
Surgical Center Payment System Proposed Rule, 84 FR 39398 at 39603 
(August 9, 2019).
    \300\ 84 FR 39604.
    \301\ 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.
---------------------------------------------------------------------------

    Below we describe what we believe are the unnecessary increases in 
volume for each of the categories of services for which we propose to 
require prior authorization.
     Implanted Spinal Neurostimulators: Our analysis of IDR 
data showed that, with regard to Implanted Spinal Neurostimulators, 
claims volume for insertion or replacement of spinal neurostimulator 
pulse generator or receiver, 63685, increased by 174.6 percent between 
2007 and 2018, reflecting a 10.2 percent average annual increase, a 
significantly greater annual increase than the 2.8 percent average 
annual increase for all OPD services. From 2016 through 2018, the 
average annual increase in volume was 17 percent. For 63688, revision 
or removal of implanted spinal neurostimulator pulse generator or 
receiver, we observed an increase of 149.7 percent between 2007 and 
2018, reflecting a 8.8 percent average annual increase, and for 63650, 
implantation of spinal neurostimulator electrodes, accessed through the 
skin, we observed an increase in volume of 77.9 percent between 2007 
and 2018,

[[Page 49029]]

which was an average annual increase of 6.5 percent, these average 
annual increases for both codes are higher than the 2.8 percent average 
annual increase for all OPD services over the same period. When 
analyzing these data, we fully accounted for changes that occurred in 
2014 related to electrodes being incorporated into the 63650 code, 
which did not show a corresponding claims volume change that would 
explain the large increases noted over time when compared to the rates 
of change for all OPD services.
     Cervical Fusion with Disc Removal: When reviewing CMS data 
available through the Integrated Data Repository (IDR), we determined 
that claims volume for the initial level of spinal fusion of the 
cervical spine with removal of the corresponding intervertebral disc, 
CPT[supreg] \302\ code 22551, had increased by 1,538.9 percent between 
2012 and 2018, reflecting a 124.9 percent average annual increase, a 
substantially greater increase than the 2.8 percent average annual 
increase for all OPD services over the same period and the 2.1 percent 
average annual increase for all OPD services from 2007 through 2018. In 
fact, the increase between 2016 and 2018 for this code was 736 percent. 
The add-on code, 22552 (for additional levels), reflected claims volume 
increases of 3,779.6 percent between 2012 and 2018, reflecting a 174.9 
percent average annual increase, again, far eclipsing the 2.8 percent 
average annual increase for all OPD services. Between 2016 and 2018 
alone, the claims volume for this code increased 1,020 percent. These 
codes were first used in 2011 to better reflect the combination of the 
cervical fusion and the disc removal procedures. Accordingly, we use 
data from 2012 forward to allow for the start-up statistics to 
normalize. Nonetheless, the dramatic increases in volume that we have 
identified persisted well after the initial use of these codes.
---------------------------------------------------------------------------

    \302\ The Current Procedural Technology (CPT) coding system is a 
registered trademark of the American Medical Association.
---------------------------------------------------------------------------

    A rate of increase higher than the expected rate is not always 
improper; however, when we considered the data, we believe the 
increases in the utilization rate for this service are unnecessary. CPT 
22551 began being used in 2011. The use of the code almost tripled in 
2012 and significantly increased each year thereafter. The increases 
became even more dramatic beginning in 2016, when the ambulatory 
payment classification (APC) for CPT 22551 was changed to a higher 
level. Effective January 1, 2016, the CY 2016 OPPS/ASC final rule \303\ 
moved the APC for CPT 22551 from APC 0208 (Laminectomies and 
Laminotomies) to APC 0425 (Level II Arthroplasty or Implantation with 
Prosthesis). APC 0425 has a higher payment than APC 0280, the group to 
which they were originally assigned. APC 0208 had a geometric mean cost 
of $4,267, but APC 0425 had a geometric mean cost of $10,606. This 
represents a 149 percent increase in allowed amount as a result of the 
move to APC 0425, which may have contributed to the unnecessary 
increase in volume. Again, this represents a 736 percent increase in 
claims volume between 2016 and 2018 when all outpatient department 
services demonstrated an 0.4 percent increase overall for the same time 
period. We believe that the change in the payment rate likely prompted 
the unnecessary volume increases and may have created a financial 
motivation to utilize these codes more than may be considered medically 
necessary. We believe prior authorization is an appropriate control 
method for the unnecessary increase in volume for this service.
---------------------------------------------------------------------------

    \303\ 79 FR 66769 and 80 FR 70297.
---------------------------------------------------------------------------

    Our conclusion that the increases in volume for both Cervical 
Fusion with Disc Removal and Implanted Spinal Neurostimulators are 
unnecessary is based not only on the data specific to each service 
category, but also on a comparison of the rate of increase for the 
service categories to the overall trends for all OPD services. We 
believe that comparing the utilization rate to the baseline growth rate 
is an appropriate method for identifying unnecessary increases in 
volume, particularly where there are no legitimate clinical or coding 
reasons for the changes. For both services categories, we researched 
possible causes for the increases in volume that would indicate the 
services are increasingly necessary, but we did not find any 
explanations that would cause us to believe the increases were 
necessary. Moreover, other than the recent changes in the CPT code and 
APC assignments described above, CMS has not taken any action that 
would explain the significant increases identified. We also conducted 
reviews of clinical and industry-related literature and found no 
indication of changes that would justify the increases observed. After 
reviewing all available data, we found no evidence suggesting other 
plausible reasons for the increases, which we believe means financial 
motivation is the most likely cause. We believe utilizing codes because 
of financial motivations, as opposed to medical necessity reasons, has 
resulted in an unnecessary increase in volume. Therefore, comparing the 
utilization rate to the baseline growth rate is an appropriate method 
for identifying unnecessary increases in volume, and prior 
authorization is an appropriate method to control these volume 
increases.
    We continue to believe prior authorization is an effective 
mechanism to ensure Medicare beneficiaries receive medically necessary 
care while protecting the Medicare Trust Funds from unnecessary 
increases in volume by virtue of improper payments, without adding 
onerous new documentation requirements. A broad program integrity 
strategy must use a variety of tools to best account for potential 
fraud, waste and abuse, including unnecessary increases in volume. We 
believe prior authorization for these services will be an effective 
method for controlling unnecessary increases in the volume of these 
services and expect that it will reduce the instances in which Medicare 
pays for services that are determined not to be medically necessary. We 
request comments on the addition of these two service categories.
BILLING CODE 4120-01-P

[[Page 49030]]

[GRAPHIC] [TIFF OMITTED] TP12AU20.113


[[Page 49031]]


[GRAPHIC] [TIFF OMITTED] TP12AU20.114


[[Page 49032]]


[GRAPHIC] [TIFF OMITTED] TP12AU20.115

BILLING CODE 4120-01-C
---------------------------------------------------------------------------

    \304\ Code 21235, ``Obtaining ear cartilage for grafting'' was 
removed on June 10, 2020 in accordance with Sec.  419.83(d). See CMS 
http://go.cms.gov/OPD_PA.
---------------------------------------------------------------------------

XVIII. Clinical Laboratory Fee Schedule: Proposed 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.

[[Page 49033]]

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

C. Billing and Payment for Laboratory Services Under the OPPS

    As noted previously, 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), 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 previous 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 and 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 package most CDLTs under the OPPS. However, 
when a CDLT is listed on the CLFS and meets one of the following four 
criteria, we do not pay for the test under the OPPS, but rather, we pay 
for it under the CLFS 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 
(80 FR 70348 through 70350), we excluded all molecular pathology 
laboratory tests from packaging because we believed

[[Page 49034]]

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. 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 meet one of the four criteria above and that are listed on the 
CLFS are paid under the CLFS, rather than being packaged and paid for 
under 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), required significant changes to how Medicare pays for CDLTs 
under the CLFS. Section 216(a) of PAMA also established 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) 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;
     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

[[Page 49035]]

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.
    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 
would apply 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 that there were 
still many entities needing additional time to come into compliance. 
The final 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. The enforcement 
discretion period ended on January 2, 2020.
    During the period of enforcement discretion, we continued to gage 
the industry's readiness to implement the laboratory DOS exception at 
Sec.  414.510(b)(5). In particular, we heard from stakeholders 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. In the CY 2020 OPPS/ASC proposed 
rule (84 FR 39603), we sought comments on excluding blood banks and 
blood centers from the laboratory DOS exception at Sec.  414.510(b)(5). 
Based on concerns raised by stakeholders, we stated that we believe 
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. Given the different purpose of 
molecular pathology testing performed by the blood banks and centers, 
that is, blood compatibility testing, we questioned 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 
stated that we were concerned that our current policy may unbundle 
molecular testing performed by a blood bank or center for a hospital 
patient.
    For these reasons, and based on the support received from 
commenters, in the CY 2020 OPPS/ASC final rule (84 FR 61444), we 
finalized a revision to the laboratory DOS policy to exclude molecular 
pathology tests when performed by laboratories that are blood banks or 
centers from the laboratory DOS exception at 42 CFR 414.510(b)(5). We 
also finalized a definition for ``blood bank or center'' at Sec.  
414.502 as an entity whose primary function is the performance or 
responsibility for the performance of, the collection, processing, 
testing, storage and/or distribution of blood or blood components 
intended for transfusion and transplantation.
    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.

F. Proposed Revision to the Laboratory DOS Policy for Cancer-Related 
Protein-Based MAAAs

    In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61438 
through 61439), we explained that protein-based Multianalyte Assays 
with Algorithmic Analyses (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 packaged under the OPPS at 
this time. Though they do not currently qualify for the DOS exception 
at Sec.  414.510(b)(5) solely because they are MAAAs, we noted that 
several stakeholders have suggested that they believe the pattern of 
clinical use of some of these protein-based MAAAs make them relatively 
unconnected to the primary hospital outpatient service.
    In particular, stakeholders have suggested that certain protein-
based MAAAs, specifically, those described by CPT codes 81490, 81503, 
81535, 81536, 81538, and 81539, are generally not performed in the HOPD 
setting and have similar clinical patterns of use as other tests that 
are not paid under the OPPS and are paid separately under the CLFS, and 
so should be treated similarly (82 FR 59299). Consequently, the 
stakeholders believed that protein-based MAAAs should be excluded from 
OPPS packaging and paid separately under the CLFS. Notably, with one 
exception (CPT code 81490), each of those tests described by the CPT 
codes identified by stakeholders is a cancer-related protein-based 
MAAA. We did not establish an exception to the laboratory DOS policy 
for protein-based MAAAs in the CY 2020 OPPS/ASC final rule with comment 
period, but we did 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). We indicated in that rule that we intended to consider 
policies regarding the application of the DOS policy to MAAAs for 
future rulemaking (84 FR 61439).
    After further consideration of this issue, we now believe certain 
MAAAs, specifically, cancer-related protein-based MAAAs, which 
stakeholders identified, as discussed above, have a pattern of clinical 
use that make them relatively unconnected to the primary hospital 
outpatient service during which the specimen was collected because the 
results of these tests are typically used to determine posthospital 
care. As we explain below, we believe these tests are distinguishable 
from the care the patient receives in the hospital,

[[Page 49036]]

similar to molecular pathology tests and tests designated as ADLTs 
under paragraph (1) of the definition of ADLT in Sec.  414.502, which 
are currently excluded from the OPPS packaging policy and subject to 
the laboratory DOS exception at Sec.  414.510(b)(5). Therefore, we 
propose to exclude cancer-related protein-based MAAAs from the OPPS 
packaging policy, as discussed in section II.a.3. of this proposed 
rule, and create an exception to the laboratory DOS rule for them. 
These proposals, if finalized, would mean that Medicare would pay for 
cancer-related protein-based MAAAs under the CLFS instead of the OPPS 
and the performing laboratory would bill Medicare directly for the test 
if the test meets all the laboratory DOS requirements specified in 
Sec.  414.510(b)(5).
    We understand that, similar to molecular pathology tests and ADLTs 
under paragraph (1) of the definition of an ADLT in Sec.  414.502, 
cancer-related protein-based MAAAs are typically used to guide and 
manage the patient's care after the patient is discharged from the 
hospital outpatient department because the test results are used to 
determine potential future oncologic surgical and chemotherapeutic 
interventions; they would almost never affect the treatment regimen 
during the same hospital outpatient service in which the specimen was 
collected, even if the results were available immediately. In other 
words, decisions as to particular therapies and/or surgical procedures, 
as guided by the results of the test, are not made during the same 
hospital outpatient encounter during which the specimen was collected.
    For these reasons, we propose to add cancer-related protein-based 
MAAAs to our current laboratory DOS exception rule at Sec.  
414.510(b)(5). Under this proposed revision, the DOS for a cancer-
related protein-based MAAA would be the date the test was performed if: 
(1) The test was performed following a hospital outpatient's discharge 
from the hospital outpatient department; (2) the specimen was collected 
from a hospital outpatient during an encounter (as both are defined in 
Sec.  410.2); (3) it was medically appropriate to have collected the 
sample from the hospital outpatient during the hospital outpatient 
encounter; (4) the results of the test do not guide treatment provided 
during the hospital outpatient encounter; and (5) the test was 
reasonable and medically necessary for the treatment of an illness.
    This proposed revision to our laboratory DOS policy would require 
laboratories performing cancer-related protein-based MAAAs, that are 
excluded from the OPPS packaging policy and meet the DOS requirements 
at Sec.  414.510(b)(5), to bill Medicare directly for those tests 
instead of seeking payment from the hospital. Similar to molecular 
pathology tests and ADLTs under paragraph (1) of the definition of ADLT 
in Sec.  414.502, we believe that cancer-related protein-based MAAAs 
are distinguishable from the care the patient receives during the 
primary hospital outpatient encounter because, as noted above, the 
results of the test would almost never affect the treatment regimen 
during the same hospital outpatient encounter in which the specimen was 
collected. Therefore, were we to finalize our proposal, we believe we 
would not be unbundling laboratory tests that are appropriately 
associated with the primary hospital outpatient service.
    As discussed in section II.a.3. of this proposed rule, the AMA CPT 
2020 manual describes a MAAA, in part, as ``procedures that utilize 
multiple results derived from panels of analyses of various types, 
including molecular pathology assays, fluorescent in situ hybridization 
assays, and non-nucleic acid based assays (for example, proteins, 
polypeptides, lipids, carbohydrates).'' Further, the code descriptors 
of MAAAs include several specifics, including but not limited to 
disease type (for example, oncology, autoimmune, tissue rejection), and 
material(s) analyzed (for example, DNA, RNA, protein, antibody). As the 
AMA CPT 2020 manual describes a MAAA, and the code descriptor of each 
MAAA distinguishes MAAAs that are cancer-related assays from those that 
test for other disease types and provides information regarding the 
material(s) analyzed, the AMA CPT manual is a useful tool to identify 
cancer-related MAAAs that are ``protein-based''. Accordingly, using the 
AMA CPT 2020 manual criteria to identify a MAAA that is cancer-related, 
and, of those tests, identifying the ones whose analytes test proteins, 
we have determined there are currently six cancer-related protein-based 
MAAAs: CPT codes 81500, 81503, 81535, 81536, 81538 and 81539. We note 
that CPT code 81538 has been designated as an ADLT under section 
1834A(d)(5)(A) of the Act as of December 21, 2018, and therefore, is 
currently already subject to the laboratory DOS exception in Sec.  
414.510(b)(5). Therefore, the cancer-related protein-based MAAAs that 
would be excluded from the OPPS packaging policy and subject to an 
exception from the laboratory DOS policy under our proposals are CPT 
codes 81500, 81503, 81535, 81536 and 81539. These tests have not been 
designated by CMS as ADLTs under paragraph (1) of the definition of 
ADLT in Sec.  414.502 and so are not currently subject to the 
laboratory DOS exception in Sec.  414.510(b)(5). We would apply this 
policy to cancer-related protein-based MAAAs that do not currently 
exist, but that are developed in the future.

XIX. Physician-Owned Hospitals

A. Background

    Section 1877 of the Social Security Act (the Act), also known as 
the physician self-referral law: (1) Prohibits a physician from making 
referrals for certain designated health services payable by Medicare to 
an entity with which he or she (or an immediate family member) has a 
financial relationship, unless an exception applies; and (2) prohibits 
the entity from filing claims with Medicare (or billing another 
individual, entity, or third party payer) for those referred services. 
A financial relationship is an ownership or investment interest in the 
entity or a compensation arrangement with the entity. The statute 
establishes a number of specific exceptions and grants the Secretary of 
the Department of Health and Human Services (the Secretary) the 
authority to create regulatory exceptions for financial relationships 
that do not pose a risk of program or patient abuse. Section 1903(s) of 
the Act extends aspects of the physician self-referral prohibitions to 
Medicaid. For additional information about section 1903(s) of the Act, 
see 66 FR 857 through 858.
    Section 1877(d) of the Act sets forth exceptions related to 
ownership or investment interests held by a physician (or an immediate 
family member of a physician) in an entity that furnishes designated 
health services. Section 1877(d)(2) of the Act provides an exception 
for ownership or investment interests in rural providers (the ``rural 
provider exception''). In order to qualify for the rural provider 
exception, the designated health services must be furnished in a rural 
area (as defined in section 1886(d)(2) of the Act), substantially all 
of the designated health services furnished by the entity must be 
furnished to individuals residing in a rural area, and, in the case 
where the entity is a hospital, the hospital meets the requirements of 
section 1877(i)(1) of the Act no later than September 23, 2011. Section 
1877(d)(3) of the Act provides an exception for ownership or investment 
interests in a hospital located outside of Puerto Rico (the ``whole 
hospital exception''). In order to qualify for the whole hospital 
exception, the referring physician must be authorized to perform 
services at the

[[Page 49037]]

hospital, the ownership or investment interest must be in the hospital 
itself (and not merely in a subdivision of the hospital), and the 
hospital meets the requirements of section 1877(i)(1) of the Act no 
later than September 23, 2011.

B. Prohibition on Facility Expansion

    Section 6001(a)(3) of the Affordable Care Act amended the rural 
provider and whole hospital exceptions to provide that a hospital may 
not increase the number of operating rooms, procedure rooms, and beds 
beyond that for which the hospital was licensed on March 23, 2010 (or, 
in the case of a hospital that did not have a provider agreement in 
effect as of this date, but did have a provider agreement in effect on 
December 31, 2010, the effective date of such provider agreement). 
Section 6001(a)(3) of the Affordable Care Act added new section 
1877(i)(3)(A)(i) of the Act, which required the Secretary to establish 
and implement an exception process to the prohibition on expansion of 
facility capacity for hospitals that qualify as an ``applicable 
hospital.'' Section 1106 of the Health Care and Education 
Reconciliation Act of 2010 (HCERA) amended section 1877(i)(3)(A)(i) of 
the Act to require the Secretary to establish and implement an 
exception process to the prohibition on expansion of facility capacity 
for hospitals that qualify as either an ``applicable hospital'' or a 
``high Medicaid facility.'' These terms are defined at sections 
1877(i)(3)(E) and 1877(i)(3)(F) of the Act. The requirements for 
qualifying as an applicable hospital are set forth at Sec.  
411.362(c)(2) and the requirements for qualifying as a high Medicaid 
facility are set forth at Sec.  411.362(c)(3). An applicable hospital 
means a hospital: (1) That is located in a county in which the 
percentage increase in the population during the most recent 5-year 
period (as of the date that the hospital submits its request for an 
exception to the prohibition on expansion of facility capacity) is at 
least 150 percent of the percentage increase in the population growth 
of the State in which the hospital is located during that period, as 
estimated by the Bureau of the Census; (2) whose annual percent of 
total inpatient admissions under Medicaid is equal to or greater than 
the average percent with respect to such admissions for all hospitals 
in the county in hospital is located during the most recent 12-month 
period for which data are available (as of the date that the hospital 
submits its request for an exception to the prohibition on expansion of 
facility capacity); (3) that does not discriminate against 
beneficiaries of Federal health care programs and does not permit 
physicians practicing at the hospital to discriminate against such 
beneficiaries; (4) that is located in a State in which the average bed 
capacity in the State is less than the national average bed capacity; 
and (v) that has an average bed occupancy rate that is greater than the 
average bed occupancy rate in the State in which the hospital is 
located. CMS has identified in regulation at Sec.  411.362(c)(2)(ii), 
(iv), and (v) acceptable data sources for determining whether a 
hospital qualifies as an applicable hospital. A ``high Medicaid 
facility'' means a hospital that: (1) Is not the sole hospital in a 
county; (2) with respect to each of the 3 most recent 12-month periods 
for which data are available, has an annual percent of total inpatient 
admissions under Medicaid that is estimated to be greater than such 
percent with respect to such admissions for any other hospital located 
in the county in which the hospital is located; and (3) does not 
discriminate against beneficiaries of Federal health care programs and 
does not permit physicians practicing at the hospital to discriminate 
against such beneficiaries. CMS has identified in regulation at Sec.  
411.362(c)(3)(ii) acceptable data sources for determining whether a 
hospital qualifies as a high Medicaid facility. In the CY 2012 OPPS/ASC 
final rule, we issued regulations setting forth the process for a 
hospital to request an exception from the prohibition on facility 
expansion (the exception process) and related definitions at Sec.  
411.362(c) and Sec.  411.362(a), respectively (76 FR 74122).
    Section 1877(i)(3)(B) of the Act provides that the exception 
process shall permit an applicable hospital to apply for an exception 
to the prohibition on expansion of facility capacity up to once every 2 
years. In the CY 2012 OPPS/ASC final rule, we extended this provision 
to high Medicaid facilities using our authority under sections 1871 and 
1877(i)(3)(A)(1) of the Act (76 FR 74525). We stated that, although the 
statute provides that an applicable hospital may request an exception 
up to once every 2 years, we believe that providing a high Medicaid 
facility the opportunity to request an exception once every 2 years 
(while also limiting its total growth) balances the Congress' intent to 
prohibit expansion of physician-owned hospitals with the purpose of the 
exception to the prohibition on expansion of facility capacity (76 FR 
74524). We did not receive any public comments regarding the frequency 
of exception requests. Under current Sec.  411.362(c)(1), both 
applicable hospitals and high Medicaid facilities may request an 
exception to the prohibition on expansion of facility capacity up to 
once every 2 years from the date of a CMS decision on the hospital's 
most recent request.
    Section 1877(i)(3)(C)(ii) of the Act provides that the Secretary 
shall not permit an increase in the number of operating rooms, 
procedure rooms, and beds for which an applicable hospital is licensed 
to the extent such increase would result in the number of operating 
rooms, procedure rooms, and beds for which the applicable hospital is 
licensed exceeding 200 percent of the baseline number of operating 
rooms, procedure rooms, and beds of the applicable hospital. In the CY 
2012 OPPS/ASC final rule, using our rulemaking authority under sections 
1871 and 1877(i)(3)(A)(i) of the Act, we adopted a parallel limit in 
the increase in the number of operating rooms, procedure rooms, and 
beds for which a high Medicaid facility may request an exception to the 
prohibition on expansion of facility capacity (76 FR 74524). There, we 
noted that, in response to our request for comment on whether the 200 
percent limit would be sufficient to balance the intent of the general 
prohibition on facility expansion with the purpose of the exception 
process, which is to provide the opportunity to expand in areas where a 
sufficient need for access to high Medicaid facilities is demonstrated, 
commenters supported our proposal regarding the amount of permitted 
increase and at least one commenter specifically supported the parallel 
treatment of high Medicaid facilities (76 FR 74524). Under current 
Sec.  411.362(c)(6)(i), a 200 percent limitation applies to both 
applicable hospitals and high Medicaid facilities.
    Section 1877(i)(3)(D) of the Act provides that any increase in the 
number of operating rooms, procedure rooms, and beds for which an 
applicable hospital is licensed may occur only in facilities on the 
main campus of the applicable hospital. In the CY 2012 OPPS/ASC final 
rule, using our rulemaking authority under sections 1871 and 
1877(i)(3)(A)(i) of the Act, we extended this limitation on the 
location of expanded facility capacity to high Medicaid facilities, 
explaining that we believe that applying the same limitation to 
applicable hospitals and high Medicaid facilities will result in an 
efficient and consistent process (76 FR 74524). We did not receive any 
public comments regarding the location of the permitted increase. Under 
current Sec.  411.362(c)(6)(ii), expanded facility

[[Page 49038]]

capacity may occur only in facilities on the hospital's main campus.
    In 2017, CMS launched the Patients over Paperwork initiative, a 
cross-cutting, collaborative process that evaluates and streamlines 
regulations with a goal to reduce unnecessary burden, increase 
efficiencies, and improve the beneficiary experience. This effort 
emphasizes a commitment to removing regulatory obstacles to providers 
spending time with patients. As part of this initiative, we reviewed 
the regulations at Sec.  411.362(c) as they apply to high Medicaid 
facilities. Certain of the statutory provisions regarding expansion of 
facility capacity apply only to applicable hospitals and their 
extension to high Medicaid facilities was effectuated using the 
Secretary's authority under sections 1871 and 1877(i)(3)(A)(i) of the 
Act. We continue to believe that our current regulations, for which the 
Secretary appropriately used his authority and which treat high 
Medicaid facilities the same as applicable hospitals, are consistent 
with the Congress' intent to prohibit expansion of physician-owned 
hospitals generally. Nevertheless, the Congress did not mandate this 
treatment of high Medicaid facilities and, in light of the Patients 
over Paperwork initiative, we have reconsidered our policies. We 
believe that our current regulations impose unnecessary burden on high 
Medicaid facilities which, by definition, serve significant numbers of 
Medicaid patients relative to other hospitals in the counties in which 
they are located. Because the statute does not apply to high Medicaid 
facilities those requirements related to the frequency of permitted 
requests for exceptions to the prohibition on expansion of facility 
capacity, the total amount of permitted expansion of facility capacity, 
or the location of permitted expanded facility capacity, using the 
Secretary's authority under sections 1871 and 1877(i)(3)(A)(i) of the 
Act, we propose to remove certain regulatory requirements for high 
Medicaid facilities that are not included in the statute.
    We propose to revise Sec.  411.362(c)(1) to permit a high Medicaid 
facility to request an exception to the prohibition on expansion of 
facility capacity more frequently than once every 2 years. To preserve 
CMS resources and to continue to maintain an orderly and efficient 
exception process, we propose that a high Medicaid facility may submit 
only one exception request at a time. Under proposed Sec.  
411.362(c)(1), a high Medicaid facility could request an exception to 
the prohibition on expansion of facility capacity at any time, provided 
that it has not submitted another request for an exception to the 
prohibition on facility expansion for which CMS has not issued a 
decision. We also propose to revise Sec.  411.362(c)(6) with respect to 
high Medicaid facilities only to remove the restriction that permitted 
expansion of facility capacity may not result in the number of 
operating rooms, procedure rooms, and beds for which the hospital is 
licensed exceeding 200 percent of the hospital's baseline number of 
operating rooms, procedure rooms, and beds and the restriction that 
permitted expanded facility capacity must occur only in facilities on 
the hospital's main campus. Under proposed Sec.  411.362(c)(6), these 
restrictions would apply only to applicable hospitals. We seek comment 
regarding our proposals.
    Section 1877(i)(3)(A)(ii) requires CMS to provide an opportunity 
for community input when an applicable hospital applies for an 
exception to the prohibition on expansion of facility capacity. Through 
regulation, we made the community input opportunity applicable to 
facility expansion requests submitted by high Medicaid facilities (76 
FR 74523). However, the statute does not expressly require CMS to 
furnish an opportunity for community input when a high Medicaid 
facility has applied for such an exception. Therefore, we are 
considering whether we should eliminate the opportunity for community 
input in the review process with respect to high Medicaid facilities. 
We are specifically interested in comments regarding the importance of 
community input, which allows for confirmation of (or disagreement 
with) the data provided by a high Medicaid facility seeking an 
exception to the prohibition on expansion of facility capacity. We are 
interested in comments regarding how CMS could obtain independent 
confirmation of the data provided by a high Medicaid facility in the 
absence of the community input opportunity (see 76 FR 74523). We note 
that obtaining independent confirmation of the data furnished by a high 
Medicaid facility could delay or add complexity to the review process. 
We solicit comments regarding whether the additional delay and 
complexity caused by the elimination of the community input opportunity 
for requests by high Medicaid facilities would result in greater burden 
or cause greater harm to high Medicaid facilities than continuing to 
permit community input on the expansion exception requests submitted by 
these hospitals.

C. Deference to State Law for Purposes of Determining the Number of 
Beds for Which a Hospital Is Licensed

    In order to qualify for the rural provider or whole hospital 
exception to the physician self-referral law, a hospital may not 
increase the aggregate number of operating rooms, procedure rooms, and 
beds above that for which the hospital was licensed on March 23, 2010 
(or, in the case of a hospital that did not have a provider agreement 
in effect as of March 23, 2010, but did have a provider agreement in 
effect on December 31, 2010, the effective date of such agreement), 
unless the Secretary has granted an exception to the prohibition on 
expansion of facility capacity under section 1877(i)(3) of the Act and 
Sec.  411.362(c). The statute and our regulations refer to this number 
as the hospital's ``baseline number of operating rooms, procedure 
rooms, and beds.'' Thus, at the time a hospital wishes to qualify for 
the rural provider or whole hospital exception, it may not have an 
aggregate number of operating rooms, procedure rooms, and beds that 
exceeds its baseline number of operating rooms, procedure rooms, and 
beds (unless the Secretary has granted an exception).
    Because the availability of the rural provider and whole hospital 
exceptions turns on whether a hospital has exceeded its baseline number 
of operating rooms, procedure rooms, and beds at the time of a 
physician's referral, a clear understanding of how to calculate the 
hospital's baseline number of operating rooms, procedure rooms, and 
beds is critical. Stakeholders have asked what CMS would consider the 
number of operating rooms, procedure rooms, and beds for which the 
hospital was licensed on March 23, 2010 (or, in the case of a hospital 
that did not have a provider agreement in effect as of this date, but 
does have a provider agreement in effect on December 31, 2010, the 
effective date of such agreement) under various State licensure 
schemes. We responded to formal advisory opinion requests in August 
2019 (https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/CMS-AO-2019-01-Redacted.pdf) and March 
2020 (https://www.cms.gov/files/document/cms-ao-2020-01.pdf) regarding 
the inclusion of certain operating rooms, procedure rooms, and beds in 
a hospital's baseline number of operating rooms, procedure rooms, and 
beds. In March 2020, we also published a Frequently Asked Question 
addressing stakeholder inquiries regarding the determination of the 
number of beds for

[[Page 49039]]

which a hospital was licensed on March 23, 2010 (https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/FAQs-Physician-Self-Referral-Law.pdf). The March 2020 Frequently Asked 
Question states:
    Q: If a state's hospital licensure laws and regulations provide 
that a hospital may increase its licensed bed complement by a certain 
amount without prior approval of the state's licensing agency, what 
would CMS consider the number of beds for which the hospital was 
licensed on March 23, 2010 for purposes of section 1877(i)(1)(B) of the 
Social Security Act (the ``Act'') and 42 CFR 411.362(b)(2)?
    A: As a general matter, neither section 1877 of the Act nor the 
physician self-referral regulations (42 CFR 411.350 through 411.389) 
preempt state licensure laws and regulations. In interpreting and 
applying the physician self-referral law, CMS defers to state law with 
respect to the determination of whether a bed is licensed as of a 
certain date. If the state would consider a bed to be ``licensed'' or 
within a hospital's ``bed complement'' on March 23, 2010, CMS would 
also consider the bed to be ``licensed'' or within a hospital's ``bed 
complement'' as of that date, regardless of the exact number printed on 
the hospital's physical license. To illustrate, assume that a state 
does not require prior approval from its licensing agency for a 
hospital to increase its bed complement by not more than ten beds or 10 
percent of the total bed capacity, whichever is less, during a period 
of a license. However, the state requires notification of the change 
and that the hospital must at all times meet the physical plant, 
staffing, and all other requirements set forth in state law and 
regulations if additional beds are added. The license issued to the 
hospital on January 1, 2009 indicated that the hospital's bed 
complement was 100 beds. If the hospital increased its bed complement 
by 9 beds (to 109 beds) on January 1, 2010 and made no further changes 
to its bed complement prior to March 23, 2010, its baseline number of 
licensed beds on March 23, 2010 would be 109 for purposes of section 
1877(i)(1)(B) of the Act and 42 CFR 411.362(b)(2), provided that the 
hospital made the appropriate notification to the state and the 
hospital at all times met the physical plant, staffing, and all other 
requirements set forth in state law and regulations after increasing 
its bed complement. The same would apply to any beds that a state 
considered to be licensed under its specific licensure scheme on March 
23, 2010. Section 1877(i)(1)(B) of the Act limits the expansion of 
facility capacity of a hospital that wishes to qualify for the rural 
provider or hospital exceptions to the law's ownership or investment 
prohibition. (See section 1877(d)(2) and (3); 42 CFR 411.356(c)(1) and 
(3).) Specifically, section 1877(i)(1)(B) of the Act states that, among 
other things, to qualify for the rural provider or hospital exceptions, 
the number of operating rooms, procedure rooms, and beds for which the 
hospital is licensed at any time on or after March 23, 2010 is no 
greater than the number of operating rooms, procedure rooms, and beds 
for which the hospital was licensed on March 23, 2010. For purposes of 
applying this provision of the physician self-referral law, we refer to 
the number of operating rooms, procedure rooms, and beds for which the 
hospital was licensed on March 23, 2010 as the hospital's ``baseline.'' 
As stated above, CMS defers to state law with respect to the 
determination of whether a bed is licensed as of a certain date. 
However, in extraordinary circumstances, CMS may include additional 
beds when determining a hospital's ``baseline'' for purposes of section 
1877 of the Act. See, for example, CMS-AO-2020-01 (https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/advisory_opinions). In 
order to ensure stakeholders' awareness of our interpretation regarding 
the determination of the number of beds for which a hospital was 
licensed on March 23, 2010 (or, in the case of a hospital that did not 
have a provider agreement in effect as of this date, but does have a 
provider agreement in effect on December 31, 2010, the effective date 
of such agreement), we propose to revise the definition of ``baseline 
number of operating rooms, procedure rooms, and beds'' at Sec.  
411.362(a) to include a statement that, for purposes of determining the 
number of beds in a hospital's baseline number of operating rooms, 
procedure rooms, and beds, a bed is included if the bed is considered 
licensed for purposes of State licensure, regardless of the specific 
number of beds identified on the physical license issued to the 
hospital by the State. We seek comment on our proposal to include this 
language in regulation text at Sec.  411.362(a) generally, and 
specifically whether the inclusion of this language is necessary or 
could be perceived as inadvertently limiting the definition of 
``baseline number of operating rooms, procedure rooms, and beds.''

XX. 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 2021, we are retaining these 
columns, updated to reflect the amount of the 2021 inpatient 
deductible. For CY 2021, we propose to add a new column to the OPPS 
Addenda, A, B, and C, entitled ``Drug Pass-Through Expiration during 
Calendar Year'' where we would flag through the use of an asterisk, 
each drug for which pass-through payment is expiring during the 
calendar year (that is, on a date other than December 31).
    To view the Addenda to this proposed rule pertaining to proposed CY 
2021 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 ``CMS-1736-P'' from the list of regulations. All OPPS Addenda to 
this proposed rule are contained in the zipped folder entitled ``2021 
NPRM OPPS Addenda'' at the bottom of the page. To view the Addenda to 
this proposed rule pertaining to CY 2021 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 ``CMS-1736-P'' from the list of regulations. 
The ASC Addenda to this proposed rule are contained in a zipped folder 
entitled ``Addendum AA, BB, DD1, DD2, and EE.''

XXI. 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

[[Page 49040]]

collection of information requirement is submitted to the Office of 
Management and Budget (OMB) for review and approval. In order to fairly 
evaluate whether an information collection should be approved by OMB, 
section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 requires 
that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public 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 2020 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; 83 FR 59155 through 
59156; and 84 FR 61468 through 61469, respectively) for detailed 
discussions of the 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, 
2023.
    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 
for Medical Records and Health Information Technicians, 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 to the Hospital OQR Program. 
The latest data (May 2019) from the BLS reflects a median hourly wage 
of $19.40 per hour for a Medical Records and Health Information 
Technician professional.\305\ 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 can 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 the total cost 
is a reasonably accurate estimation method and allows for a 
conservative estimate of hourly costs.
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    \305\ Occupational Employment and Wages, May 2019. Available at: 
https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm. Accessed March 30, 2020.
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2. Summary
    In this proposed rule, we propose to: (1) Codify the statutory 
authority for the Hospital OQR Program; (2) revise and codify the 
previously finalized public display of measure data policy that 
hospitals sharing the same CCN must combine data collection and 
submission across their multiple campuses for all clinical measures for 
public reporting purposes; (3) revise existing Sec.  419.46(a)(2) by 
replacing the term ``security administrator'' with the term ``security 
official'' and codify this language; (4) move all deadlines falling on 
nonwork days forward consistent with section 216(j) of the Social 
Security Act (the Act), 42 U.S.C. 416(j), ``Periods of Limitation 
Ending on Nonwork Days,'' beginning with the effective date of this 
rule; (5) revise our policy regarding submission deadlines at existing 
Sec.  419.46(c)(2) to reflect the proposed deadlines policy consistent 
with section 216(j) of the Act, 42 U.S.C. 416(j); (6) expand the 
existing review and corrections policy for chart-abstracted data to 
apply to measure data submitted via the CMS web-based tool beginning 
with data submitted for the CY 2023 payment determination and 
subsequent years; (7) codify at 42 CFR 419.46 the review and 
corrections period policy for measure data submitted to the Hospital 
OQR Program for chart-abstracted measure data, as well as for the 
proposed policy for measure data submitted directly to CMS via the CMS 
web-based tool; (8) codify the previously finalized Educational Review 
Process and Score Review and Correction Period for Chart-Abstracted 
Measures; (9) revise existing Sec.  419.46(b) (proposed redesignated 
Sec.  419.46(c)) by removing the phrase ``submit a new participation 
form'' to align with previously finalized policy; and (10) update 
internal cross-references as a result of the redesignations discussed 
in the proposed rule.
    We note that if finalized as proposed, our proposals for the CY 
2021 OPPS/ASC proposed rule will not yield a change in burden for the 
hospitals participating in the Hospital OQR Program as our proposals 
seek only to refine existing regulatory text for current processes or 
to codify existing processes. As such, we note that the burden hours 
for the CY 2023 payment determination will be consistent with the 
previously finalized burden for the CY 2022 payment determination. We 
refer readers to the information collection request that has been 
approved by OMB 0938-1109 (Expiration date March 31, 2023).\306\
---------------------------------------------------------------------------

    \306\ CY 2020 Final Rule Hospital OQR Program ``Supporting 
Statement-A''. Available at: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201911-0938-015.
---------------------------------------------------------------------------

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, 
CY 2019, and CY 2020 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; 83 FR 59156 through 59157; and 84 FR 61469, 
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 December 
31, 2022.
2. Summary
    In this proposed rule, we propose to: (1) Use the term ``security 
official'' instead of ``security administrator'' and revise Sec.  
416.310(c)(1)(i) by replacing the term ``security administrator'' with 
the term ``security official;'' (2) remove the phrase ``data collection 
time period'' in all instances where it appears in Sec.  416.310, 
replace it with the phrase ``data collection period''; (3) move forward 
all program deadlines falling on a nonwork day consistent with section

[[Page 49041]]

216(j) of the Act, 42 U.S.C. 416(j) and codify this policy; and (4) 
formalize the process by which ASCs identify errors and resubmit data 
before the established submission deadline by creating a review and 
corrections period in alignment with the Hospital OQR Program as 
proposed in section XIV.D.7. that runs concurrent with the existing 
data submission period and codify this policy. We note that if 
finalized as proposed, our proposals for the CY 2021 OPPS/ASC proposed 
rule will not yield a change in burden for the facilities participating 
in the ASCQR Program as our proposals seek only to refine existing 
regulatory text for current processes or to codify existing processes. 
As such, we note that the burden hours for the CY 2023 payment 
determination will be consistent with the previously finalized burden 
for the CY 2022 payment determination. We refer readers to the 
currently approved information collection request.\307\
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    \307\ CY 2020 Final Rule Hospital OQR Program ``Supporting 
Statement-A''. Available at: https://www.reginfo.gov/public/do/PRAViewDocument?ref_nbr=201911-0938-016.
---------------------------------------------------------------------------

D. ICRs for Addition of New Service Categories for Hospital Outpatient 
Department (OPD) Prior Authorization Process

    In the CY 2020 OPPS/ASC final rule, we established a prior 
authorization process for certain hospital OPD services using our 
authority under section 1833(t)(2)(F) of the Act, which allows the 
Secretary to develop a method for controlling unnecessary increases in 
the volume of covered OPD services. See 84 FR 61142 (November 12, 
2019).\308\ The regulations governing the prior authorization process 
are located in subpart I of 42 CFR part 419, specifically at Sec. Sec.  
419.80 through 419.89.
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    \308\ See also Correction Notice issued January 3, 2020 (85 FR 
224).
---------------------------------------------------------------------------

    In accordance with paragraph (b) of 42 CFR 419.83, we propose to 
add two new service categories to Sec.  419.83(a): Cervical Fusion with 
Disc Removal and Implanted Spinal Neurostimulators. The ICR associated 
with prior authorization requests for these covered outpatient 
department services is the required documentation submitted by 
providers. The prior authorization request must include all relevant 
documentation necessary to show that the service meets applicable 
Medicare coverage, coding, and payment rules and the request must be 
submitted before the service is provided to the beneficiary and before 
the claim is submitted for processing.
    The burden associated with the prior authorization process for the 
two new proposed categories, Cervical Fusion with Disc Removal and 
Implanted Spinal Neurostimulators, would be 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 would 
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 would be 30 minutes, which is equivalent to 
that for normal prepayment or post payment 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 the proposed July 1, 2021 start 
date, the first year of the prior authorization for the two new service 
categories would only include 6 months. Based on CY 2018 data, we 
estimate that for those first 6 months at a minimum there would be 
6,808 initial requests mailed during the year. In addition, we estimate 
there would be 2,234 resubmissions of a request mailed following a non-
affirmed decision. Therefore, the total mailing cost is estimated to be 
$45,210 (9,042 mailed requests x $5). Based on CY 2018 data for the two 
new proposed service categories, we estimate that annually at a minimum 
there would be 13,615 initial requests mailed during a year. In 
addition, we estimate there would be 4,468 resubmissions of a request 
mailed following a non-affirmed decision. Therefore, the total mailing 
cost is estimated to be $90,415 (18,083 mailed requests x $5). We also 
estimate that an additional 3 hours would be required for attending 
educational meetings and reviewing training documents.
    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 (BLS). Based on the BLS information, we 
estimate an average clerical hourly rate of $16.63 with a loaded rate 
of $33.26. The proposed prior authorization program for these two 
service categories would not create any new documentation or 
administrative requirements. Instead, it would just require the 
currently needed documents to be submitted earlier in the claim 
process. Therefore, the estimate uses the clerical rate since we do not 
believe that clinical staff would need to spend more time on completing 
the documentation than would be needed in the absence of the proposed 
prior authorization policy. The hourly rate reflects the time needed 
for the additional clerical work of submitting the prior authorization 
request itself. We estimate that the total number of submissions for 
the first year (6 months) would be 30,140 (21,098 submissions through 
fax or electronic means + 9,042 mailed submissions). Therefore, we 
estimate that the total burden for the first year (6 months) for the 
two new service categories, allotted across all providers, would be 
24,820 hours (.5 hours x 30,140 submissions plus 3 hours x 3,250 
providers for education). The burden cost for the first year (6 months) 
is $870,723 (24,820 hours x $33.26 plus $45,210 for mailing costs). In 
addition, we estimate that the total annual number of submissions would 
be 60,277 (42,194 submissions through fax or electronic means + 18,083 
mailed submissions). The annual burden hours for the two new service 
categories, allotted across all providers, would be 39,889 hours (.5 
hours x 60,277 submissions plus 3 hours x 3,250 providers for 
education). The annual burden cost would be $1,417,107 (39,889 hours x 
$33.26 plus $90,416 for mailing costs). For the total burden and 
associated costs for the two new service categories, we estimate the 
annualized burden to be 34,866 hours and $1,234,979 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 ICR approved 
under OMB control number 0938-XXXX will be revised and submitted to OMB 
for approval.

E. ICRs for the Overall Hospital Quality Star Rating

    The Overall Star Rating uses measures that are publicly reported on 
Hospital Compare or its successor websites under the public reporting 
authority of each individual hospital program furnishing measure data. 
We believe the burden associated with measures included in the Overall 
Star Rating, including requesting withholding of measures from public 
reporting, is already captured in the respective hospital programs' 
ICRs and represents no increased information collection burden to 
hospitals.

F. ICRs for Physician-Owned Hospitals

    As discussed in section XIX. of this proposed rule, we propose to 
modify the physician-owned hospital expansion exception process under 
the rural provider and hospital ownership

[[Page 49042]]

exceptions to the physician self-referral law. Specifically, we 
proposed to modify the frequency of submission such that a high 
Medicaid facility could request an exception to the prohibition on 
expansion of facility capacity at any time, provided that it has not 
submitted another request for an exception to the prohibition on 
facility expansion to CMS for which CMS has not issued a decision. We 
do not believe this proposal would result in any changes in burden 
under the PRA. First, we do not anticipate any changes in the annual 
number of respondents. Although a high Medicaid facility would be 
permitted to request an expansion exception more frequently than under 
current regulations, we believe that removing the cap on the size of an 
expansion would make more frequent expansion exception requests 
unlikely. Also, we are not changing the information being collected.
    Based on our experience with the expansion exception process to 
date, we estimate that approximately one physician-owned hospital per 
year will request an expansion exception on the grounds that it is a 
high Medicaid facility. We estimate that it takes approximately 6 hours 
and 45 minutes to prepare an expansion exception request and that a 
request is prepared by a lawyer. To estimate the cost to prepare a 
request, we use a 2019 wage rate of $69.86 for lawyers from the Bureau 
of Labor Statistics,\309\ and we double that wage to account for 
overhead and benefits. The total estimated annual cost is $943.11. We 
seek comments on these estimates.
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    \309\ U.S. Department of Labor, Bureau of Labor Statistics, May 
2019 National Occupational Employment and Wage Estimates United 
States, https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------

Summary of All Burden in This Final Rule
    Below is a chart reflecting the total burden and associated costs 
for the provisions included in this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP12AU20.116

    If you comment on these information collection requirements, that 
is, reporting, recordkeeping or third-party disclosure requirements, 
please submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule.
    Comments must be received on/by October 13, 2020.

XXII. Waiver of the 60-Day Delayed Effective Date for the Final Rule

    We are committed to ensuring that we fulfill our statutory 
obligation to update the OPPS as required by law and are working 
diligently in that regard. We ordinarily provide a 60-day delay in the 
effective date of final rules after the date they are issued in accord 
with the Congressional Review Act (CRA) (5 U.S.C. 801(a)(3)). However, 
section 808(2) of the CRA provides that, if an agency finds good cause 
that notice and public procedure are impracticable, unnecessary, or 
contrary to the public interest, the rule shall take effect at such 
time as the agency determines.
    The United States is responding to an outbreak of respiratory 
disease caused by a novel (new) coronavirus that has now been detected 
in more than 190 locations internationally, including in all 50 States 
and the District of Columbia. The virus has been named ``SARS-CoV-2'' 
and the disease it causes has been named ``coronavirus disease 2019'' 
(abbreviated ``COVID-19'').
    On January 30, 2020, the International Health Regulations Emergency 
Committee of the World Health Organization (WHO) declared the outbreak 
a ``Public Health Emergency of international concern'' (PHEIC). On 
January 31, 2020, Health and Human Services Secretary, Alex M. Azar II, 
declared a PHE for the United States to aid the nation's healthcare 
community in responding to COVID-19. On March 11, 2020, the WHO 
publicly characterized COVID-19 as a pandemic. On March 13, 2020 the 
President of the United States declared the COVID-19 outbreak a 
national emergency.
    Due to CMS prioritizing efforts in support of containing and 
combatting the COVID-19 PHE, and devoting significant resources to that 
end, the work needed on the OPPS payment rule will not be completed in 
accordance with our usual schedule for this rulemaking, which aims for 
a publication date of at least 60 days before the start of the fiscal 
year to which it applies. Up to an additional 30 days may be needed to 
complete the

[[Page 49043]]

work needed on this payment rule. The OPPS payment rule is necessary to 
annually review and update the payment systems, and it is critical to 
ensure that the payment policies for these systems are effective on the 
first day of the fiscal year to which they are intended to apply. 
Therefore, due to CMS prioritizing efforts in support of containing and 
combatting the COVID-19 PHE, and devoting significant resources to that 
end, we are hereby waiving the 60-day delay in the effective date of 
the OPPS final rule; it would be contrary to the public interest for 
CMS to do otherwise. However, we do expect to provide a 30-day delay in 
the effective date of the final rule in accord with section 5 U.S.C. 
553(d) of the Administrative Procedure Act, which ordinarily requires a 
30-day delay in the effective date of a final rule from the date of its 
public availability in the Federal Register, and section 
1871(e)(1)(B)(i) of the Act, which generally prohibits a substantive 
rule from taking effect before the end of the 30-day period beginning 
on the date of its public availability.

XXIII. 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.

XXIV. 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 2021. 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 propose to revise the APC relative payment 
weights using claims data for services furnished on and after January 
1, 2019, through and including December 31, 2019, and processed through 
December 31, 2019, and updated cost report information.
    This proposed rule also is necessary to make updates to the ASC 
payment rates for CY 2021, 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 2021. 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 propose for CY 2021.
    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 the proposed rule, and we address any public 
comments we received in this proposed rule, as appropriate.
    We estimate that the total increase in Federal Government 
expenditures under the OPPS for CY 2021, compared to CY 2020, due only 
to the changes to the OPPS in this proposed rule, would be 
approximately $1.61 billion. Taking into account our estimated changes 
in enrollment, utilization, and case-mix for CY 2021, we estimate that 
the OPPS expenditures, including beneficiary cost-sharing, for CY 2021 
would be approximately $83.9 billion, which is approximately $7.5 
billion higher than estimated OPPS expenditures in CY 2020. Because the 
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 55 of this proposed rule displays the distributional 
impact of the CY 2021 changes in OPPS payment to various groups of 
hospitals and for CMHCs.
    Under our CY 2021 policy, drugs and biologicals that are acquired 
under the 340B Program are proposed to be paid at ASP minus 28.7 
percent, WAC minus 28.7 percent, or WAC minus 31.7 percent based on our 
policy described in V.B.2.b., or 63.90 percent of AWP, as applicable. 
We note that in the impact table 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 2021 under the OPPS at ASP 
minus 28.7 percent. We also propose in the alternative that the agency 
could continue the current Medicare payment policy for CY 2021.
    We estimate that the proposed update to the conversion factor, the 
CY 2021

[[Page 49044]]

frontier wage index adjustment, and other adjustments (not including 
the effects of outlier payments, the pass-through payment estimates) 
would increase total OPPS payments by 2.8 percent in CY 2021. The 
proposed changes to the APC relative payment weights, the changes to 
the wage indexes, the continuation of a payment adjustment for rural 
SCHs, including EACHs, the proposed changes to separately payable drugs 
acquired under the 340B program, and the payment adjustment for cancer 
hospitals would not increase OPPS payments because these changes to the 
OPPS are budget neutral. However, these updates will change the 
distribution of payments within the budget neutral system. We estimate 
that the total change in payments between CY 2020 and CY 2021, 
considering all proposed budget neutral payment adjustments, changes in 
estimated total outlier payments, pass-through payments, and the 
application of the frontier State wage adjustment, in addition to the 
application of the OPD fee schedule increase factor after all 
adjustments required by sections 1833(t)(3)(F), 1833(t)(3)(G), and 
1833(t)(17) of the Act, would increase total estimated OPPS payments by 
2.5 percent.
    We estimate the total increase (from 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 2021 compared to CY 
2020, to be approximately $130 million. Because the 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 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 56 and 57 of 
this proposed rule display the redistributive impact of the CY 2021 
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 OPPS Changes in This Proposed Rule
a. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the CY 2021 policy changes on various hospital groups. We post on 
the CMS website our hospital-specific estimated payments for CY 2021 
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-
1736-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 57. 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 individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes in 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 Proposal To Update the 340B Program Payment 
Policy
    In section X.C. of this proposed rule with comment period, we 
discuss our proposal to update the payment percentage for nonpass-
through, separately payable drugs acquired by certain 340B 
participating hospitals through the 340B Program. We propose that rural 
SCHs, children's hospitals, and PPS-exempt cancer hospitals continue to 
be excepted from this payment policy in CY 2021. Specifically, in this 
proposed rule for CY 2021, for hospitals paid under the OPPS (other 
than those that are excepted for CY 2021), we propose to pay for 
separately payable drugs and biologicals that are obtained with a 340B 
discount, excluding those on pass-through payment status and vaccines, 
at ASP minus 28.7 percent. The difference in total OPPS Part B drug 
payment for 340B Program drugs at ASP minus 28.7 percent, relative to 
our current policy of paying ASP minus 22.5 percent, is a decrease of 
$427 million, which we propose to redistribute through a budget neutral 
adjustment to the OPPS conversion factor. We also propose in the 
alternative that the agency could continue the current Medicare payment 
policy for CY 2021, in which case the 340B policy would not require a 
change to the budget neutrality adjustment.
    To develop an estimated impact of this proposal, we began with CY 
2019 outpatient claims data used in ratesetting for the CY 2021 OPPS. 
We then flagged all claim lines that contained modifier ``JG'' because 
the presence of this modifier indicates that such claims were subject 
to the payment adjustment for separately payable non-pass through drugs 
acquired through the 340B Program in the claims year. We also flagged 
pass-through drug claim lines with modifier ``TB'' for drugs with pass-
through status that will expire by CY 2021. We further subset this 
population by separating all providers that would be excepted from the 
policy and then identifying the payment differential between payment at 
ASP minus 22.5 percent and payment at ASP minus 28.7 percent, which 
results in a $427 million redistribution, or 0.85 percent increase, to 
the OPPS conversion factor. This estimate does not include adjustments 
for beneficiary enrollment, case-mix, or potential offsetting 
behaviors. We note that the estimated effect of the proposed policy 
could change in this final rule with comment period based on a number 
of factors such as the availability of updated data, changes in the 
final payment policy, and/or the method of assessing the payment impact 
in the final rule.
c. Estimated Effects of OPPS Changes on Hospitals
    Table 55 shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the change in payments to all facilities, has always included 
cancer and children's hospitals, which are held harmless to their pre-
BBA amount. We also include CMHCs in the first line that includes all 
providers. We include a second line for all hospitals, excluding 
permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 55, and we discuss 
them separately below, because CMHCs are paid only for partial 
hospitalization services under the OPPS and are a different provider 
type from hospitals. In CY 2021, we propose to continue to pay CMHCs 
for partial hospitalization services under APC 5853 (Partial 
Hospitalization for CMHCs) and to pay hospitals for partial 
hospitalization services under APC 5863 (Partial

[[Page 49045]]

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 IPPS 
market basket percentage increase for FY 2021 is 3.0 percent. Section 
1833(t)(3)(F)(i) of the Act reduces that 3.0 percent by the multifactor 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act, which is 0.4 percentage point for FY 2021 (which is also the 
MFP adjustment for FY 2021 in the FY 2021 IPPS/LTCH PPS final rule (85 
FR 32739)), resulting in the OPD fee schedule increase factor of 2.6 
percent. We are using the OPD fee schedule increase factor of 2.6 
percent in the calculation of the CY 2021 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 55 of 
this proposed rule.
    To illustrate the impact of the CY 2021 changes, our analysis 
begins with a baseline simulation model that uses the CY 2020 relative 
payment weights, the FY 2020 final IPPS wage indexes that include 
reclassifications, and the final CY 2020 conversion factor. Table 55 
shows the estimated redistribution of the increase or decrease in 
payments for CY 2021 over CY 2020 payments to hospitals and CMHCs as a 
result of the following factors: The impact of the APC reconfiguration 
and recalibration changes between CY 2020 and CY 2021 (Column 2); the 
wage indexes and the provider adjustments (Column 3); the combined 
impact of all of the changes described in the preceding columns plus 
the 2.6 percent OPD fee schedule increase factor update to the 
conversion factor (Column 5); the estimated impact taking into account 
all payments for CY 2021 relative to all payments for CY 2020, 
including the impact of changes in estimated outlier payments, and 
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 maintaining the current 
adjustment percentage for CY 2021. Because the updates to the 
conversion factor (including the update of the OPD fee schedule 
increase factor), the estimated cost of the rural adjustment, and the 
estimated cost of projected pass-through payment for CY 2021 are 
applied uniformly across services, observed redistributions of payments 
in the impact table for hospitals largely depend on the mix of services 
furnished by a hospital (for example, how the APCs for the hospital's 
most frequently furnished services will change), and the impact of the 
wage index changes on the hospital. However, total payments made under 
this system and the extent to which this proposed rule will 
redistribute money during implementation also will depend on changes in 
volume, practice patterns, and the mix of services billed between CY 
2020 and CY 2021 by various groups of hospitals, which CMS cannot 
forecast.
    Overall, we estimate that the rates for CY 2021 will increase 
Medicare OPPS payments by an estimated 2.5 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 2.6 percent increase in 
Medicare payments to all other hospitals. These estimated payments will 
not significantly impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 55 shows the total number of 
facilities (3,628), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2019 hospital 
outpatient and CMHC claims data to model CY 2020 and CY 2021 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 2020 or CY 2021 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 (3,523), 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 38 CMHCs at the bottom of the impact 
table (Table 55) and discuss that impact separately below.
Column 2: APC Recalibration--All Changes
    Column 2 shows the estimated effect of APC recalibration. Column 2 
also reflects any changes in multiple procedure discount patterns or 
conditional packaging that occur as a result of the changes in the 
relative magnitude of payment weights. As a result of APC 
recalibration, we estimate that urban hospitals will experience no 
change, with the impact ranging from a decrease of 0.3 percent to an 
increase of 0.3 depending on the number of beds. Rural hospitals will 
increase 0.1 percent overall. Major teaching hospitals will see an 
expected decrease of 0.4 percent.
Column 3: Wage Indexes and the Effect of the Provider Adjustments
    Column 3 demonstrates the combined budget neutral impact of the APC 
recalibration; the updates for the wage indexes with the FY 2021 IPPS 
post-reclassification wage indexes; the rural adjustment; the frontier 
adjustment, and the cancer hospital payment adjustment. We modeled the 
independent effect of the budget neutrality adjustments and the OPD fee 
schedule increase factor by using the relative payment weights and wage 
indexes for each year, and using a CY 2020 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 2021 
proposed changes in wage index policy discussed in section II.C. of 
this CY 2021 OPPS/ASC proposed rule.

[[Page 49046]]

We did not model a budget neutrality adjustment for the rural 
adjustment for SCHs because we propose to continue the rural payment 
adjustment of 7.1 percent to rural SCHs for CY 2021, as described in 
section II.E. of this proposed rule. We also did not model a budget 
neutrality adjustment for the proposed cancer hospital payment 
adjustment because the payment-to-cost ratio target for the cancer 
hospital payment adjustment in CY 2021 is 0.89, the same as the ratio 
that was reported for the CY 2020 OPPS/ASC final rule with comment 
period (84 FR 61191). We note that, in accordance with section 16002 of 
the 21st Century Cures Act, we are applying 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 propose to 
apply 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 CY 2021 
scaled weights and a CY 2020 conversion factor that included a budget 
neutrality adjustment for the effect of the changes to the wage indexes 
between CY 2020 and CY 2021.
Column 4: Effect of the Reduced Payment for 340B Drugs
    Column 4 demonstrates the total payment effect of the proposed 
reduction in payment for drugs purchased under the 340B Program from 
ASP minus 22.5 percent to ASP minus 28.7 percent. This column includes 
both the reduced payment for 340B-acquired drugs and the increase to 
the conversion factor for budget neutrality purposes, which would 
increase payment for all non-drug items and services. For rural sole 
community hospitals, this column shows a 0.7 percent increase, 
reflecting a 0.0 percent decrease for drugs (because we propose that 
these providers would continue to be exempt from these reductions) and 
a 0.85 percent increase for non-drug services.
Column 5: All Budget Neutrality Changes Combined With the Market Basket 
Update
    Column 5 demonstrates the combined impact of all of the changes 
previously described and the update to the conversion factor of 2.6 
percent. Overall, these changes will increase payments to urban 
hospitals by 2.8 percent and to rural hospitals by 3.6 percent. The 
increase for classes of rural hospitals will vary with sole community 
hospitals receiving a 4.0 percent increase and other rural hospitals 
receiving an increase of 2.9 percent.
Column 6: All Proposed Changes for CY 2021
    Column 6 depicts the full impact of the proposed CY 2021 policies 
on each hospital group by including the effect of all changes for CY 
2021 and comparing them to all estimated payments in CY 2020. Column 6 
shows the combined budget neutral effects of Columns 2 through 4; the 
OPD fee schedule increase; the impact of estimated OPPS outlier 
payments, as discussed in section II.G. of this proposed rule; the 
change in the Hospital OQR Program payment reduction for the small 
number of hospitals in our impact model that failed to meet the 
reporting requirements (discussed in section XIV. of this proposed 
rule); and the difference in total OPPS payments dedicated to 
transitional pass-through payments.
    Of those hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2020 update (and assumed, for 
modeling purposes, to be the same number for CY 2021), we included 21 
hospitals in our model because they had both CY 2019 claims data and 
recent cost report data. We estimate that the cumulative effect of all 
proposed changes for CY 2021 will increase payments to all facilities 
by 2.5 percent for CY 2021. We modeled the independent effect of all 
changes in Column 6 using the final relative payment weights for CY 
2020 and the proposed relative payment weights for CY 2021. We used the 
final conversion factor for CY 2020 of $80.793 and the proposed CY 2021 
conversion factor of $83.697 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 FY 2021 IPPS/LTCH PPS 
proposed rule (84 FR 42629) of 6.3 percent (1.06353) to increase 
individual costs on the CY 2019 claims, and we used the most recent 
overall CCR in the April 2020 Outpatient Provider-Specific File (OPSF) 
to estimate outlier payments for CY 2020. Using the CY 2019 claims and 
a 6.3 percent charge inflation factor, we currently estimate that 
outlier payments for CY 2020, using a multiple threshold of 1.75 and a 
fixed-dollar threshold of $5,075, will be approximately 1.01 percent of 
total payments. The estimated current outlier payments of 1.01 percent 
are incorporated in the comparison in Column 6. We used the same set of 
claims and a charge inflation factor of 13.1 percent (1.131096) and the 
CCRs in the April 2020 OPSF, with an adjustment of 0.97527, to reflect 
relative changes in cost and charge inflation between CY 2019 and CY 
2021, to model the final CY 2020 outliers at 1.0 percent of estimated 
total payments using a multiple threshold of 1.75 and a fixed-dollar 
threshold of $5,300. The charge inflation and CCR inflation factors are 
discussed in detail in the FY 2021 IPPS/LTCH PPS proposed rule (84 FR 
42629).
    Overall, we estimate that facilities will experience an increase of 
2.5 percent under this proposed rule in CY 2021 relative to total 
spending in CY 2020. This projected increase (shown in Column 6) of 
Table 55 reflects the 2.6 percent OPD fee schedule increase factor, 
minus 0.05 percent for the change in the pass-through payment estimate 
between CY 2020 and CY 2021, minus the difference in estimated outlier 
payments between CY 2020 (1.01 percent) and CY 2021 (1.00 percent). We 
estimate that the combined effect of all proposed changes for CY 2021 
will increase payments to urban hospitals by 2.5 percent. Overall, we 
estimate that rural hospitals will experience a 3.2 percent increase as 
a result of the combined effects of all the proposed changes for CY 
2021.
    Among hospitals, by teaching status, we estimate that the impacts 
resulting from the combined effects of all changes will include an 
increase of 1.4 percent for major teaching hospitals and an increase of 
3.2 percent for nonteaching hospitals. Minor teaching hospitals will 
experience an estimated increase of 2.8 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
will experience an increase of 2.4 percent, proprietary hospitals will 
experience an increase of 4.1 percent, and governmental hospitals will 
experience an increase of 2.2 percent.
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d. Estimated Effects of OPPS Changes on CMHCs
    The last line of Table 55 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization services under the 
OPPS. In CY 2020, 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 2019 claims used for 
ratesetting in the 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 will experience an overall 1.3 
percent increase in payments from CY 2020 (shown in Column 6). We note 
that this includes the trimming methodology as well as the proposed CY 
2021 floor on geometric mean costs used for developing the PHP payment 
rates described in section VIII.B. of this proposed rule. The CY 2021 
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 scalar and the conversion 
factor applicable.
    Column 3 shows that the estimated impact of adopting the proposed 
FY 2021 wage index values will result in an increase of 0.1 percent to 
CMHCs. Column 5 shows that combining this proposed OPD fee schedule 
increase factor, along with proposed changes in APC policy for CY 2021 
and the proposed FY 2021 wage index updates, will result in an 
estimated increase of 1.5 percent. Column 6 shows that adding the 
proposed changes in outlier and pass-through payments will result in a 
total 1.3 percent increase in payment for CMHCs. This reflects all 
proposed changes for CMHCs for CY 2021.
e. Estimated Effect of OPPS Changes on Beneficiaries
    For services for which the beneficiary pays a copayment of 20 
percent of the payment rate, the beneficiary's payment would increase 
for services for which the OPPS payments will rise and will decrease 
for services for which the OPPS payments will fall. For further 
discussion on the calculation of the national unadjusted copayments and 
minimum unadjusted copayments, we refer readers to section II.I. of 
this CY 2021 OPPS/ASC 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 18.1 percent for all services paid under the OPPS in CY 2020. 
The estimated aggregate beneficiary coinsurance reflects general system 
adjustments, including the final CY 2020 comprehensive APC payment 
policy discussed in section II.A.2.b. of this final rule.
f. Estimated Effects of OPPS Changes on Other Providers
    The relative payment weights and payment amounts established under 
the OPPS affect the payments made to ASCs, as discussed in section XIII 
of the final rule. No types of providers or suppliers other than 
hospitals, CMHCs, and ASCs will be affected by the final changes in the 
final rule.
g. Estimated Effects of OPPS Changes on the Medicare and Medicaid 
Programs
    The effect on the Medicare program is expected to be an increase of 
$1.61 billion in program payments for OPPS services furnished in CY 
2021. 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 the proposed changes 
in the proposed rule would increase these Medicaid beneficiary payments 
by approximately $115 million in CY 2021. Currently, there are 
approximately 10 million dual-eligible beneficiaries, which represent 
approximately thirty percent of Medicare Part B fee-for-service 
beneficiaries. The impact on Medicaid was determined by taking thirty 
percent 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 $115 million 
Medicaid increase, approximately $65 million will be from the Federal 
Government and $50 million would be from State government.
h. Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we proposed and the reasons for 
our selected alternatives are discussed throughout the final rule.
     Alternatives Considered for the Payment Adjustment for 
Separately Paid Drugs Acquired through the 340B Program
    We refer readers to section V.B.6. of this CY 2021 OPPS/ASC 
proposed rule for a discussion of our proposed policy to apply a 
payment adjustment of ASP minus 28.7 percent for separately paid non-
pass through drugs acquired the 340B Program. We also propose in the

[[Page 49050]]

alternative to maintain the same payment adjustment percentage of ASP 
minus 22.5 percent as initially established under the CY 2018 OPPS 
policy (82 FR 59350 through 59369). We note that effects of the 
proposal and its corresponding budget neutrality adjustment compared to 
the alternative considered are provided in Column 4 of table 55.
2. Estimated Effects of CY 2021 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 setting the CY 
2021 ASC relative payment weights by scaling the proposed CY 2021 OPPS 
relative payment weights by the proposed ASC scalar of 0.8494. 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 56 and 57 below.
    Beginning in CY 2011, section 3401 of the Affordable Care Act 
requires that the annual update to the ASC payment system (which, in CY 
2019, we adopted a policy to be the hospital market basket for CY 2019 
through CY 2023) 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, we propose that the CY 2021 
payment determinations would be based on the application of a 2.0 
percentage point reduction to the annual update factor, which we 
propose would be the hospital market basket for CY 2021. We calculated 
the CY 2021 ASC conversion factor by adjusting the CY 2020 ASC 
conversion factor by 0.9999 to account for changes in the pre-floor and 
pre-reclassified hospital wage indexes between CY 2020 and CY 2021 and 
by applying the CY 2021 MFP-adjusted hospital market basket update 
factor of 2.6 percent (which is equal to the projected hospital market 
basket update of 3.0 percent minus an MFP adjustment of 0.4 percentage 
point). The proposed CY 2021 ASC conversion factor is $48.984 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 2021 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2019 and CY 2021 with precision. We believe the net effect on 
Medicare expenditures resulting from the proposed CY 2021 changes will 
be small in the aggregate for all ASCs. However, such changes may have 
differential effects across surgical specialty groups, as ASCs continue 
to adjust to the payment rates based on the policies of the revised ASC 
payment system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs will experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
b. Estimated Effects of ASC Payment System Policies on ASCs
    Some ASCs are multispecialty facilities that perform a wide range 
of surgical procedures from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the proposed update to the CY 2021 payments will depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the proposed CY 2021 updates to the ASC payment system on 
Medicare payments to ASCs, assuming the same mix of services, as 
reflected in our CY 2019 claims data. Table 57 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2020 payments to 
estimated proposed CY 2021 payments, and Table 56 shows a comparison of 
estimated CY 2020 payments to estimated proposed CY 2021 payments for 
procedures that we estimate will receive the most Medicare payment in 
CY 2020.
    In Table 57, 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 57.
     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 2020 ASC Payments were calculated 
using CY 2019 ASC utilization data (the most recent full year of ASC 
utilization) and CY 2020 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2020 ASC payments.
     Column 3--Estimated CY 2021 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 2021 compared to CY 2020.
    As shown in Table 56, 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 2021 will result in a 3-percent 
increase in aggregate payment amounts for eye and ocular adnexa 
procedures, a 2-percent increase in aggregate payment amounts for 
nervous system procedures, 4-percent increase in aggregate payment 
amounts for digestive system procedures, a 4-percent increase in 
aggregate payment amounts for musculoskeletal system procedures, a 3-
percent increase in aggregate payment amounts for cardiovascular system 
procedures, and a 5-percent increase in aggregate payment amounts for 
genitourinary 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 2.6 percent 
proposed payment rate update. After the payment rate update is 
accounted for, aggregate payment increases or decreases for a category 
of

[[Page 49051]]

services can be higher or lower than a 2.6-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 4-percent increase in 
proposed aggregate gastrointestinal procedure payments due to an 
increase in hospital reported costs for Level 1 and Level 2 upper and 
lower gastrointestinal payment categories under the OPPS. The increases 
in payment weights for gastrointestinal procedure payments is further 
increased by the proposed 2.6 percent ASC rate update for these 
procedures. For estimated changes for selected procedures, we refer 
readers to Table 57 provided later in this section.
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    Table 57 shows the estimated impact of the updates to the revised 
ASC payment system on aggregate ASC payments for selected surgical 
procedures during CY 2021. The table displays 30 of the procedures 
receiving the greatest estimated CY 2020 aggregate Medicare payments to 
ASCs. The HCPCS codes are sorted in descending order by estimated CY 
2020 program payment.
---------------------------------------------------------------------------

    \310\ Projected impacts are the same under all proposals for the 
ASC Covered Procedures List, given the lack of prior ASC utilization 
data for the procedures being added.
---------------------------------------------------------------------------

     Column 1--CPT/HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2020 ASC Payments were calculated 
using CY 2019 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2020 ASC payment rates. The estimated CY 2020 
payments are expressed in millions of dollars.
     Column 4--Estimated CY 2021 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2020 and 
the estimated payment for CY 2021 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 2021 update to the ASC payment 
system will be generally positive (that is, result in lower cost-
sharing) for beneficiaries with respect to the new procedures we 
propose to add to the ASC list of covered surgical procedures and for 
those we propose to designate as office-based for CY 2021. For example, 
using 2019 utilization data and proposed CY 2021 OPPS and ASC payment 
rates, we estimate that if 10 percent of colpopexy procedures migrate 
from the hospital outpatient setting to the ASC setting as a result of 
this proposed policy, Medicare payments will be reduced by 
approximately $6 million in CY 2021 and total beneficiary copayments 
will decline by approximately $1.2 million in CY 2021. First, other 
than certain preventive services where coinsurance and the Part B 
deductible is waived to comply with sections 1833(a)(1) and (b) of the 
Act, the ASC coinsurance rate for all procedures is 20 percent. This 
contrasts with procedures performed in HOPDs 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 will be if the ASC 
coinsurance amount exceeds the hospital inpatient deductible since the 
statute requires that OPPS copayment amounts not exceed the hospital

[[Page 49053]]

inpatient deductible. Therefore, in limited circumstances, the ASC 
coinsurance amount may exceed the hospital inpatient deductible and, 
therefore, the OPPS copayment amount for similar services.) 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 propose to designate as office-
based in CY 2021, the beneficiary coinsurance amount under the ASC 
payment system generally will 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 OPPS 
and ASC changes in this proposed rule. The first accounting statement, 
Table 58, illustrates the classification of expenditures for the CY 
2021 estimated hospital OPPS incurred benefit impacts associated with 
the proposed CY 2021 OPD fee schedule increase. The second accounting 
statement, Table 59, illustrates the classification of expenditures 
associated with the 2.6 percent CY 2021 update to the ASC payment 
system, based on the provisions of the final rule with comment period 
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 60.
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4. Effects of 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 3,144 hospitals that 
met eligibility requirements for the CY 2020 payment determination, we 
determined that 78 hospitals did not meet the requirements to receive 
the full OPD fee schedule increase factor. We do not propose to add any 
quality measures to the Hospital OQR Program measure set for the CY 
2022 or CY 2023 payment determinations.
b. Impact of CY 2021 Proposals
    We do not anticipate that any of the CY 2021 Hospital OQR program 
proposals will impact the number of facilities that will receive 
payment reductions. In this proposed rule, we propose to: (1) Codify 
the statutory authority for the Hospital OQR Program; (2) revise and 
codify the previously finalized public display of measure data policy 
that hospitals sharing the same CCN must combine data collection and 
submission across their multiple campuses for all clinical measures for 
public reporting purposes; (3) revise existing Sec.  419.46(a)(2) by 
replacing the term ``security administrator'' with the term ``security 
official'' and codify this language; (4) move all deadlines falling on 
nonwork days forward consistent with section 216(j) of the Social 
Security Act (the Act), 42 U.S.C. 416(j) ``Periods of Limitation Ending 
on Nonwork Days,'' beginning with the effective date of this rule; (5) 
revise our policy regarding submission deadlines at existing Sec.  
419.46(c)(2) to reflect the proposed deadlines policy consistent with 
section 216(j) of the Act, 42 U.S.C. 416(j); (6) expand the existing 
review and corrections policy for chart-abstracted data to apply to 
measure data submitted via the CMS web-based tool beginning with data 
submitted for the CY 2023 payment determination and subsequent years; 
(7) codify at 42 CFR 419.46 the review and corrections period policy 
for measure data submitted to the Hospital OQR Program for chart-
abstracted measure data, as well as for the proposed policy for measure 
data submitted directly to CMS via the CMS web-based tool; (8) codify 
the previously finalized Educational Review Process and Score Review 
and Correction Period for Chart-Abstracted Measures; (9) revise 
existing Sec.  419.46(b) (proposed redesignated Sec.  419.46(c)) by 
removing the phrase ``submit a new participation form'' to align with 
previously finalized policy''; and (10) update internal cross-
references as a result of the redesignations discussed in the proposed 
rule.''
    We do not anticipate that the proposals affecting the Hospital OQR 
program in this proposed rule will impact the number of hospitals that 
will receive payment reductions.
5. Effects of Requirements for the ASCQR Program
a. Background
    In section XV.B. of this proposed rule, we discuss our finalized 
policies affecting the ASCQR Program. For the CY 2020 payment 
determination, of the 6,651 ASCs that met eligibility requirements for 
the ASCQR Program, 195 ASCs did not meet the requirements to receive 
the full annual payment update. We do not propose to add or remove any 
quality measures to the ASCQR Program measure set for future calendar 
year payment determinations.
b. Impact of CY 2021 Proposals
    In sections XV.C. and XV.D. of this proposed rule, we propose to: 
(1) Use the term ``security official'' instead of ``security 
administrator'' and revise Sec.  416.310(c)(1)(i) by replacing the term 
``security administrator'' with the term ``security official;'' (2) 
remove the phrase ``data collection time period'' in all instances 
where it appears in Sec.  416.310, replace it with the phrase ``data 
collection period,'' and use the phrase ``data collection period'' 
wherever the phrase ``data collection time period'' is found in the 
preamble of this proposed rule; (3) move forward all program deadlines 
falling on a nonwork day consistent with the section 216(j) of the Act, 
42 U.S.C. 416(j) and codify this policy; and (4) formalize the process 
by which ASCs identify errors and resubmit data before the established 
submission deadline by creating a review and corrections period similar 
to that in the Hospital OQR Program in section XIV.D.7. that runs 
concurrent with the existing data submission period from January 1 
through May 15 and codify this policy.
    We do not anticipate that the proposals affecting the ASCQR program 
in this proposed rule will impact the number of ASCs that will receive 
payment reductions.
6. Effects of Addition of New Service Categories for Hospital 
Outpatient Department (OPD) Prior Authorization Process
a. Overall Impact
    In the CY 2020 OPPS/ASC final rule with comment period, we 
established a prior authorization process for certain hospital OPD 
services using our authority under section 1833(t)(2)(F) of the Act, 
which allows the Secretary to develop ``a method for controlling 
unnecessary increases in the volume of covered OPD services'' (84 FR 
61142, November 12, 2019).\311\ The regulations governing the prior 
authorization process are located in subpart I of 42 CFR part 419, 
specifically at Sec. Sec.  419.80 through 419.89.
---------------------------------------------------------------------------

    \311\ See also Correction Notice issued January 3, 2020 (85 FR 
224).
---------------------------------------------------------------------------

    In accordance with Sec.  419.83(b), we propose to require prior 
authorization for two new service categories: Cervical Fusion with Disc 
Removal and Implanted Spinal Neurostimulators. We also propose to add 
those service categories to Sec.  419.83(a). We propose that the prior 
authorization process for these two additional service categories will 
be effective for dates of services on or after July 1, 2021. The 
proposed addition of these service categories is consistent with our 
authority under section 1833(t)(2)(F) of the Act and is based upon our 
determination that there has been an unnecessary increase in the volume 
of these services.
    The overall economic impact on the health care sector of this 
proposal to require prior authorization for two additional service 
categories is dependent on the number of claims affected. Table 61, 
Overall Economic Impact to the Health Sector, lists an estimate for the 
overall economic impact to the health sector for the two new service 
categories combined. The values populating this table were obtained 
from the cost reflected in Table 62, Annual Private Sector Costs, and 
Table 63, Estimated Annual Administrative Costs to CMS. Together, 
Tables 62 and 63 combine to convey the overall economic impact to the 
health sector for the two new service categories, which is illustrated 
in Table 61. It should be noted that due to the proposed July start 
date for prior authorization for these two new service categories, year 
one would include only 6 months of prior authorization requests.
    Based on the estimate, the overall economic cost impact of this 
proposal is approximately $2.9 million in the first year based on 6 
months for the two new

[[Page 49055]]

service categories. The 5-year impact is approximately $22.9 million, 
and the 10-year impact is approximately $47.9 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 Medicare savings. 
Annually, we estimate an overall Medicare savings of $31,844,388. We 
believe there are likely to be other benefits that result from the 
proposed prior authorization requirement for the two new service 
categories, though 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 for the two new service categories.
[GRAPHIC] [TIFF OMITTED] TP12AU20.124

    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 of having 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 compliant with Medicare program coverage and 
utilization rules and regulations will 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 providers not in compliance with 
Medicare coverage, coding, and payment rules and regulations could be 
significant; if finalized, the proposal will change the billing 
practices of those 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 the two 
additional OPD services categories subject to unnecessary utilization 
by providers to be a condition that we must mitigate. We believe that 
the effect will be minimal on providers who are compliant with Medicare 
coverage, coding, and payment rules and requirements. This proposal 
will offer an additional protection to a provider's cash flow as the 
provider will know in advance if the Medicare requirements are met.
b. Anticipated Specific Cost Effects
(1) Private Sector Costs
    We do not believe that this proposal will significantly affect the 
number of legitimate claims submitted for these new service categories. 
However, we do expect a decrease in the overall amount paid for the 
services resulting from a reduction in unnecessary utilization of the 
services requiring prior authorization.
    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 for the two 
proposed additional service categories 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.
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(2) Administrative Costs to CMS
    CMS will incur additional costs associated with processing the 
proposed prior authorization requests for the two new service 
categories. We use the range of potentially affected cases (submissions 
and resubmissions) and multiply it by $50, the estimated cost to review 
each request. The combined cost also includes other elements such as 
appeals, education and outreach, and system changes.
[GRAPHIC] [TIFF OMITTED] TP12AU20.126

(3) Estimated Beneficiary Costs
    We expect a reduction in the utilization of the two new Medicare 
OPD service categories 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.
c. Estimated Benefits
    There will be quantifiable benefits for this proposal because we 
expect a reduction in the unnecessary utilization of those two new 
Medicare OPD service categories subject to prior authorization. It is 
difficult to project the exact decrease in unnecessary utilization; 
however, based on other prior authorization programs, we estimate our 
savings based on a 50 percent reduction in improper payments, using a 
10 percent improper payment rate. We estimate that for the first six 
months, there would be savings of $15,922,194 overall. Annually, we 
estimate an overall gross savings of $31,844,388. This savings 
represents a Medicare benefit from a more efficient use of health care 
resources while still maintaining the same health outcomes for 
necessary services. We will closely monitor utilization and billing 
practices. The expected benefits would also

[[Page 49057]]

include changed billing practices that would also enhance the 
coordination of care for the beneficiary. For example, requiring prior 
authorization for the two proposed additional OPD services categories 
would ensure 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 would evaluate the beneficiary to 
determine his or her condition and what services are needed and 
medically necessary. This would require the facility to collaborate 
closely with the practitioner early on in the process to ensure the 
services are truly necessary and meet 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 as 
part of its prior authorization request.
7. Effects of Proposed Revision to the Laboratory Date of Service 
Policy
    In section XVIII. of this proposed rule, we discuss our proposal to 
add cancer-related protein-based MAAAs to the laboratory date of 
service (DOS) provisions at Sec.  414.510(b)(5). We also propose to 
exclude these tests from the OPPS packaging policy, which is discussed 
in section II.a.3 of this proposed rule. These proposals, if finalized, 
would mean that Medicare would pay for cancer-related protein-based 
MAAAs under the CLFS instead of the OPPS and the performing laboratory 
would bill Medicare directly for the test if the test meets all the 
laboratory DOS requirements specified in Sec.  414.510(b)(5). While 
there may be some impact under the hospital OPPS resulting from 
additional testing being excluded from OPPS packaging policy and paid 
at the CLFS rate instead of the OPPS bundled rate, we expect this 
change to be budget neutral for scoring purposes. Accordingly, the 
discussion in sections II.a.3. and XVIII. of this proposed rule is not 
reflected in Table 55 in the regulatory impact analysis under section 
XXIV of this proposed rule.
8. Effects of Requirements for the Overall Hospital Quality Star 
Ratings
    In section E. Current and Proposed Overall Star Rating Methodology 
of the preamble of this proposed rule, we discuss our proposal as it 
relates to the Overall Star Rating methodology. The Overall Star Rating 
uses measures that are publicly reported on Hospital Compare or its 
successor websites under the public reporting authority of each 
individual hospital program furnishing measure data. The burden 
associated with measures included in the Overall Star Rating, including 
forms used to request withholding of publicly reported measure data and 
the Overall Star Rating (for CAHs), is already captured in the 
respective hospital programs' burden estimates and represents no 
increased information collection burden to hospitals.
    In this proposed rule, however, we propose that hospitals have the 
opportunity to review confidential reports containing their measure, 
measure group, and Overall Star Rating results for at least 30 days 
prior to publication of the Overall Star Rating. We believe that 
reviewing the Overall Star Rating in confidential reports prior to 
public reporting represents additional burden to hospitals.
    In this CY 2021 OPPS/ASC proposed rule, we are using the most 
recent data from the Bureau of Labor Statistics, which reflects a 
median hourly wage of $19.40 \312\ per hour for a Medical Records and 
Health Information Technician professional. We calculate the cost of 
overhead, including fringe benefits, at 100 percent of the hourly wage 
estimate, consistent with the previous year. 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. 
Accordingly, we calculate cost burden to hospitals using a wage plus 
benefits estimate of $38.80 per hour.
---------------------------------------------------------------------------

    \312\ Bureau of Labor Statistics. (2019, September 4). 
Occupational Outlook Handbook: Medical Records and Health 
Information Technicians. Retrieved from www.bls.gov: https://www.bls.gov/ooh/healthcare/medical-records-and-health-information-technicians.htm.
---------------------------------------------------------------------------

    We estimate that the non-information collection burden associated 
with all non-VHA hospitals reviewing their Overall Star Rating preview 
report prior to public reporting to be 2 hours per hospital, which 
includes time to review the report and ask any questions about the 
calculation necessary to increase comprehension. Estimating that 4,500 
hospitals that will receive an Overall Star Rating hospital specific 
report (HSR), regardless if they meet the reporting thresholds to be 
assigned a star rating, we estimate the overall non-information 
collection burden to be $397,710 annually [$38.80 x 2 hours per preview 
report x once per year x 4,500 hospitals]. For CAHs specifically, which 
are included in the estimate above, we estimate that half of CAHs will 
be eligible for an Overall Star Rating (using an estimate of 1,300 
total CAHs in the United States), which represents a burden of $100,890 
annually [650 CAHs x 2 hours per preview report x once per year x 
$38.80].
    To simulate the impact of the combined methodology updates, we used 
January 2020 Overall Star Rating publication data (using October 2019 
publicly reported measure data on Hospital Compare) to conduct analyses 
that describe the overall distribution of star ratings, 
reclassification of star ratings, and distribution of star ratings 
across different types of hospitals. We conducted these analyses 
following three proposals (referred to as combined methodology 
proposals): (1) Grouping measures into five, rather than seven, measure 
groups; (2) using a simple average of measure scores to calculate 
measure group scores; and (3) updating the reporting thresholds to 
require at least three measure groups, one of which must be Mortality 
or Safety of Care, with at least three measures in each group to 
receive a star rating. We also conducted these analyses separately with 
the combined methodology proposals and the additional proposal of peer 
grouping hospitals by number of measure groups for which the hospital 
reports at least three measures, with the combined methodology proposal 
and the additional proposal of Readmission measure group stratification 
by dual-eligible peer groups, and with the combined methodology 
proposals and the additional proposals of both peer grouping by number 
of measure groups and Readmission measure group stratification by dual-
eligible peer groups to specifically solicit further comment on these 
proposals. Please note that the ultimate star ratings distribution and 
reclassification with the proposed methodology updates in CY 2021 will 
differ depending on measure additions and removals from CMS quality 
programs, and therefore public reporting, and changes in hospital 
measure performance.
    The combined methodology proposals of (1) grouping measures into 
five measure groups, (2) using a simple average of measure scores to 
calculate measure group scores, and (3) updating the reporting 
thresholds to require at least three measure groups, one of which must 
be Mortality or Safety of Care, with at least three measures in

[[Page 49058]]

each group to receive a star rating, would result in a similar percent 
of hospitals that would and would not receive a star rating, regardless 
of peer grouping by number of measure groups or Readmission measure 
group stratification by dual-eligibility groups. However, slightly 
fewer safety-net and critical access hospitals (CAHs), would receive a 
star rating with the new methodology due to the proposal to update the 
reporting thresholds to require at least three measure groups, one of 
which must be Mortality or Safety of Care, with at least three measures 
in each group. Specifically, approximately 30 percent of specialty, 90 
percent of teaching, 60 percent of safety-net, and 40 percent of CAHs 
meet the proposed reporting thresholds of three measure groups, one of 
which must be Mortality or Safety of Care, with at least three measures 
in each group.
    The combined methodology proposals of grouping measures into five, 
rather than seven, measure groups, using a simple average of measure 
scores to calculate measure group scores, and updating the reporting 
thresholds to require at least three measure groups, one of which must 
be Mortality or Safety of Care, with at least three measures in each 
group to receive a star rating results in the below distribution of 
star ratings, reclassification of star ratings, and distribution of 
star ratings across hospital characteristics:
     With the combined methodology proposals, there would be a 
similar distribution of star ratings with more three (23 percent) and 
four (23 percent) star ratings and fewer one (4 percent), two (13 
percent), and five (13 percent) star ratings (Table 64).
     Given the substantial change in the proposed methods, 
particularly using a simple average of measure scores to calculate 
measure groups scores, we would expect there to be considerable changes 
in hospital star ratings from the current methodology to the proposed 
methodology. With the combined proposed methodology, 1,796 (53 percent) 
hospitals would receive the same star rating, 1,468 (43 percent) 
hospitals would shift up or down one star, 135 (4 percent) hospitals 
would shift up or down two stars, 9 (0.3 percent) hospitals would shift 
up or down three stars, and 1 (0.03 percent) hospital would shift up or 
down four stars (Table 65).
     With the combined methodology proposals, most hospital 
characteristics have a similar distribution of star ratings to that of 
all hospitals. A few notable differences in the distribution of star 
ratings across hospital characteristics compared to all hospitals are 
listed in Table 72.
    [cir] More specialty hospitals with three (4 percent), four (7 
percent), and five (19 percent) stars than one (0 percent) or two (0 
percent) stars.
    [cir] More DSH hospitals with one (6 percent), two (19 percent), 
and three (31 percent) stars and fewer DSH hospitals with five stars 
(11 percent). Also, there would be more DSH hospitals with one (3 
percent for DSH quintiles 1 and 2 to 17 percent for DSH quintile 5) and 
two stars (14 percent for DSH quintile 1 to 25 percent for DSH quintile 
5) and fewer DSH hospitals with four (36 percent for DSH quintile 1 to 
16 percent for DSH quintile 5) and five (18 percent for DSH quintile 1 
to 5 percent for DSH quintile 5) stars with increasing DSH quintile.
    [cir] More CAHs with five (13 percent) and four (14 percent) stars 
than one (1 percent), two (3 percent), and three (8 percent) stars.
    [cir] More hospitals with one (2 percent for hospitals with 1-99 
beds to 9 percent for hospitals with 400 or more beds) and two stars (9 
percent for hospitals with 1-99 beds to 26 percent for hospitals with 
300-399 beds and 24 percent for hospitals with 400 or more beds) with 
increasing bed size.
    [cir] Slightly larger urban hospitals with one (8 percent) and two 
(19 percent) stars than other urban hospitals with one (4 percent) and 
two (17 percent) stars or rural hospitals with one (3 percent) and two 
(15 percent) stars. There would also be slightly fewer large urban 
hospitals with four (24 percent) stars than other urban hospitals with 
four (27 percent) stars or rural hospitals with four (30 percent) 
stars.
    The combined methodology proposals with the additional proposal of 
peer grouping by number of measure groups would result in the below 
distribution of star ratings, reclassification of star ratings, and 
distribution of star ratings across hospital characteristics. With the 
combined methodology proposals and the additional proposal of peer 
grouping:
     There would be a similar distribution of star ratings with 
more three (22 percent) and four (23 percent) star ratings and fewer 
one (4 percent), two (14 percent), and five (12 percent) star ratings 
(Table 64).
     Approximately 2,676 (78 percent), 1,692 (50 percent) 
hospitals would receive the same star rating, 1,482 (43 percent) 
hospitals would shift up or down one star, 184 (5 percent) hospitals 
would shift up or down two stars, 10 (0.3 percent) hospitals would 
shift up or down three stars, and one (0.03 percent) hospital would 
shift up or down four stars (Table 66).
     Most hospital characteristics have a similar distribution 
of star ratings to that of all hospitals. A few notable differences in 
the distribution of star ratings across hospital characteristics 
compared to all hospitals are listed below (Table 73).
    [cir] More specialty hospitals with three (5 percent), four (7 
percent), and five (17 percent) stars than one (0 percent) and two (1 
percent) stars.
    [cir] More DSH hospitals with two stars (13 percent for DSH 
quintile 1 to 25 percent for DSH quintile 5) and fewer DSH hospitals 
with four (34 percent for DSH quintile 1 to 18 percent for DSH quintile 
5) and five (23 percent for DSH quintile 1 to 5 percent for DSH 
quintile 5) stars with increased DSH quintiles.
    [cir] Slightly larger urban hospitals with one star (8 percent) 
than other urban hospitals with one star (4 percent) or rural hospitals 
with one star (3 percent). There would also be slightly fewer large 
urban hospitals with four stars (24 percent) than other urban hospitals 
with four stars (29 percent) or rural hospitals with four stars (29 
percent).
    The combined methodology proposal with the addition of stratifying 
Readmission measure group scores by dual-eligibility peer groups, using 
peer group quintiles assigned by the HRRP annually, would result in the 
below distribution of star ratings, reclassification of star ratings, 
and distribution of star ratings across hospital characteristics. With 
the combined methodology proposals and the additional proposal of 
Readmission stratification by dual-eligibility groups:
     There is a similar distribution of star ratings with more 
three (24 percent) and four (24 percent) star ratings and fewer one (3 
percent), two (12 percent), and five (13 percent) star ratings (Table 
64).
     Approximately 1,715 (50 percent) hospitals would receive 
the same star rating, 1,523 (45 percent) hospitals would shift up or 
down one star, 163 (5 percent) hospitals would shift up or down two 
stars, 7 (0.2 percent) hospitals would shift up or down three stars, 
and 1 (0.03 percent) hospitals would shift up or down four stars (Table 
67).
     Most hospital characteristics have a similar distribution 
of star rating to that of the all hospitals. A few notable differences 
in the distribution of star ratings across hospital characteristics 
compared to all hospitals are listed in Table 74.
    [cir] More specialty hospitals with four (7 percent) and five (20 
percent) stars compared to one (0 percent) or two (1 percent) stars.
    [cir] Similar star rating distribution for safety-net and non-
safety-net hospitals,

[[Page 49059]]

with more three (18 percent safety-net; 26 percent non-safety-net) and 
four (18 percent safety-net; 27 percent non-safety-net) stars and fewer 
one (4 percent safety-net; 2 percent non-safety-net), two (12 percent 
safety-net; 13 percent non-safety-net), or five (9 percent safety-net; 
14 percent non-safety-net) stars.
    [cir] More DSH Quintile 5 hospitals with one (10 percent) and two 
(24 percent) stars than DSH Quintile 1 hospitals with one (2 percent) 
and two (13 percent) stars. Also, there would be fewer hospitals with 
four (37 percent for DSH quintile 1 to 20 percent for DSH quintile 5) 
and five stars (17 percent for DSH quintile 1 to 7 percent for DSH 
quintile 5) with increasing DSH quintiles.
    [cir] More CAHs receiving a star rating with four (14 percent) and 
five (14 percent) stars than one (1 percent) or two (3 percent) stars.
    [cir] More hospitals with one (1 percent for hospitals with 1 to 99 
beds to 7 percent for hospitals with 300-399 beds and 5 percent for 
hospitals with 400 or more beds) and two stars (7 percent for hospitals 
with 1 to 99 beds to 26 percent for hospitals with 300-399 beds and 23 
percent for hospitals with 400 or more beds) with increasing bed size.
    In further support of our additional proposals to peer group 
hospitals by the number of measure groups and stratify the Readmission 
measure group by dual-eligibility groups, we also conducted analyses 
examining the distribution of star ratings, reclassification of star 
ratings, and distribution of star ratings across hospital 
characteristic analyses on the combined methodology proposals with the 
additional proposals of peer grouping and Readmission stratification. 
With the combined methodology proposals and the additional proposals of 
both peer grouping by number of measure groups and Readmission 
stratification by dual-eligibility groups:
     There would be a similar distribution of star ratings with 
more three (24 percent) and four (24 percent) star ratings and fewer 
one (3 percent), two (12 percent), and five (12 percent) star ratings 
(Table 64).
     Approximately 1,743 (51 percent) hospitals would receive 
the same star rating, 1,477 (43 percent) hospitals would shift up or 
down one star, 180 (5 percent) hospitals would shift up or down two 
stars, 8 (0.2 percent) hospitals would shift up or down three stars, 
and 1 (0.03 percent) hospitals would shift up or down four stars (Table 
68).
     Most hospital characteristics have a similar distribution 
of star rating to that of the all hospitals. A few notable differences 
in the distribution of star ratings across hospital characteristics 
compared to all hospitals are listed in Table 75.
    [cir] More specialty hospitals with four (10 percent) and five (15 
percent) stars compared to one (0 percent) or two (1 percent) stars.
    [cir] More DSH hospitals with one (5 percent), two (17 percent), 
and three (30 percent) stars and fewer DSH hospitals with five stars 
(14 percent). Also, there would be more hospitals with one (3 percent 
for quintile 1 to 11 percent for quintile 5) and two (13 percent for 
quintile 1 to 24 percent for quintile 5) stars and fewer hospitals five 
stars (21 percent for quintile 1 to 7 percent for quintile 5) with 
increasing DSH quintiles.
    [cir] More CAHs with four (15 percent) and five (6 percent) stars 
than one (1 percent) or two (5 percent) stars.
    [cir] More hospitals with one (1 percent for hospitals with 1 to 99 
beds to 8 percent for hospitals with 300 to 399 beds and 6 percent for 
hospitals with 400 or more beds) and two stars with increasing bed 
size.
    To isolate the effects of our additional proposals to peer group 
hospitals by the number of measure groups and stratify the Readmission 
measure group by dual-eligibility groups, we also conducted 
reclassification analyses comparing the two additional proposals.
     When comparing the combined methodology proposals with the 
additional proposals of peer grouping by the number of measure groups 
and stratifying the Readmission measure group by dual-eligibility peer 
groups to the combined methodology proposals with the additional 
proposal to stratify the Readmission measure group by dual-eligibility 
peer groups but without the proposal to peer group by number of measure 
groups, 2,676 (78 percent) hospitals would receive the same star 
rating, and 764 (22 percent) hospitals would shift up or down one star. 
No hospitals would move more than one star (Table 69).
     When comparing the combined methodology proposals with the 
additional proposals to peer group hospitals by the number of measure 
groups and stratifying the Readmission measure group by dual-
eligibility peer groups to the combined methodology proposals with our 
proposal to peer group by the number of measure groups but without the 
proposal to stratify the Readmission measure group by dual-eligibility 
peer groups, 3,093 (90 percent) hospitals would receive the same star 
rating, and 347 (10 percent) hospitals would shift up or down one star. 
No hospitals would move more than one star (Table 70).
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BILLING CODE 4120-01-C
a. Alternatives Considered
Overall Hospital Quality Star Rating
    We considered a number of alternatives to our proposals discussed 
in section XVI. Proposed Overall Hospital Quality Star Rating 
Methodology for Public Release in CY 2021 and Subsequent Years of the 
preamble of this proposed rule. As described more fully in section E. 
Current and Proposed Overall Star Rating Methodology, we considered 
alternatives to measure group weighting, calculation of measure group 
scores, stratifying the Readmission group based on proportion of dual-
eligible patients, and peer grouping by number of measures.
    We considered an alternative to equally weight the five measure 
groups instead of the proposal to weight the four outcome and patient 
experience measure groups at 22 percent (Morality, Safety of Care, 
Readmission, and Patient Experience) and the newly proposed Timely and 
Effective Care process group at 12 percent. Because past stakeholder 
comments have recommended that outcome groups receive the most weight, 
we are recommending our proposal but are seeking comment on the 
alternative presented.
    We considered keeping the Latent Variable Model (LVM) as an 
alternative to the proposed simple average of measure group scores 
since it is a data driven model where the measure loadings, or measure 
contribution to the measure group score, are empirically derived and is 
able to account for sampling variation and missing data. Because past 
stakeholder comments have indicated that the use of LVM is difficult to 
understand and the weights of measures and their subsequent impact on 
the group score changes depending on the underlying data, we proposed 
to use a simple average of measure group scores but are seeking comment 
on the alternative presented.
    We also considered not stratifying the Readmission measure group 
based on dual-eligibility peer groups and retaining the current 
approach, without stratification. This consideration was based on the 
premise that, although select stakeholders have requested social risk 
factor adjustment of the

[[Page 49077]]

Readmission measure group in alignment with HRRP,\313\ other 
stakeholder groups expressed concern that social risk factor adjustment 
would be confusing to patients and consumers, resulting in 
misrepresentation of quality of care at hospitals providing acute 
inpatient and outpatient care, specifically for dual-eligible patients, 
while others were concerned that the dual-eligibility variable would 
not adequately account for social risk in the Overall Star Rating. 
314 315 316 Furthermore, this consideration was in response 
to a HHS report titled ``Social Risk Factors and Performance in 
Medicare's Value-Based Purchasing Programs,'' submitted to Congress by 
ASPE, that sets forth new recommendations regarding social risk 
factors, wherein ASPE does not recommend adjusting quality measure for 
social risk in public reporting. \317\ Due to these considerations, CMS 
is seeking comment on the alternative to not stratify the Readmission 
measure group by proportion of dual-eligible patients.
---------------------------------------------------------------------------

    \313\ Centers for Medicare & Medicaid Services. (2019, June). 
Public Comment Summary Report. Retrieved from www.CMS.gov.: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/MMS/PC-Updates-on-Previous-Comment-Periods#a0815.
    \314\ Ibid.
    \315\ Centers for Medicare & Medicaid Services. (2019, October 
24) Patient and Patient Advocate Work Group Minutes--October 2019.
    \316\ National Quality Forum. (2019, November 6). National 
Quality Forum Hosptial Quality Star Ratings Summit. Retrieved from 
www.qualityforum.org: http://www.qualityforum.org/NQF_Hospital_Quality_Star_Rating_Summit.aspx.
    \317\ Department of Health and Human Services, Office of the 
Assistant Secretary of Planning and Evaluation (ASPE). (2020) Second 
Report to Congress: Social Risk Factors and Performance in 
Medicare's Value-based Purchasing Programs. Retrieved from: https://aspe.hhs.gov/system/files/pdf/263676/Social-Risk-in-Medicare%E2%80%99s-VBP-2nd-Report.pdf. Accessed July 2, 2020.
---------------------------------------------------------------------------

    Within the proposal to stratify the Readmission measure group 
scores based on dual-eligibility peer groups, we also considered 
recalculating the peer group quintiles based on all hospitals in the 
Overall Star Rating, and not solely based on those participating in 
HRRP. However, calculating quintiles based on all hospitals would 
create potential misalignment between HRRP quintiles and Overall Star 
Rating quintiles, and therefore peer group assignment. Because of this 
potential misalignment, we propose to recalculate peer group quintiles 
based on those in the HRRP but we are seeking public comment on our 
proposal and alternative to recalculate the quintiles based on all 
hospitals included in the Overall Star Rating.
    Finally, we considered not peer grouping by number of measures. 
Because past stakeholder feedback suggested that CMS consider some type 
of peer grouping to enable more similar comparisons among hospital 
types, we proposed to peer group by number of measure groups to achieve 
this aim. This would enable more similar comparisons among hospitals 
where smaller hospitals that submit the fewest number of measures are 
more likely to be in the three measure group peer group and larger 
hospitals that submit the most measures are more likely to be in the 
five measure group peer group. We also stated that if we do not 
finalize our proposal to include CAHs in the Overall Star Ratings, we 
would not be able to peer group since CAHs make up the majority of the 
three measure group peer group. Ultimately, we decided to propose peer 
grouping but are seeking public comment on our proposal as well as the 
alterative considered to not peer group. We are seeking comment on our 
alternative considered to not peer group even if we finalize our 
proposal to include CAHs.
9. Effects of Requirements for the Physician-Owned Hospitals
    The physician-owned hospital provisions are discussed in section 
XIX. of this proposed rule. We propose regulatory updates to the 
process under which a physician-owned hospital that qualifies as a high 
Medicaid facility can request an exception to the prohibition on 
facility expansion. Specifically, we would permit a high Medicaid 
facility to request an exception to the prohibition on expansion of 
facility capacity more frequently than once every 2 years. We would 
also remove the restriction that permitted expansion of facility 
capacity may not result in the number of operating rooms, procedure 
rooms, and beds for which the hospital is licensed exceeding 200 
percent of the hospital's baseline number of operating rooms, procedure 
rooms, and beds and the restriction that permitted expanded facility 
capacity must occur only in facilities on the hospital's main campus. 
We expect these proposals would reduce burden on high Medicaid 
facilities and give them additional flexibility to expand. Finally, we 
propose to codify in regulations the policy in an existing frequently 
asked question that explains CMS' deference to State law for purposes 
of determining the number of beds for which a hospital is licensed. 
This proposal reflects current policy, so we do not anticipate that it 
would have an impact.

D. 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 assumed that the number of commenters on 
this CY 2020 OPPS/ASC proposed rule (3,400) will be the number of 
reviewers of this proposed rule. We acknowledge that this assumption 
may understate or overstate the costs of reviewing proposed rule. It is 
possible that not all commenters will review proposed rule in detail, 
and it is also possible that some reviewers will choose not to comment 
on proposed rule. Nonetheless, we believed that the number of 
commenters on the CY 2020 OPPS/ASC proposed rule would be a fair 
estimate of the number of reviewers of proposed rule. We welcome any 
comments on the approach in estimating the number of entities that will 
review the proposed rule. We also recognize that different types of 
entities are, in many cases, affected by mutually exclusive sections of 
the proposed rule and the final rule with comment period, and, 
therefore, for the purposes of our estimate, we assumed that each 
reviewer reads approximately 50 percent of the rule.
    Using the wage information from the 2019 BLS for medical and health 
service managers (Code 11-9111), we estimated that the cost of 
reviewing this rule is $110.74 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 proposed rule. For each facility 
that reviewed proposed rule, the estimated cost is $885.92 (8 hours x 
$110.74). Therefore, we estimated that the total cost of reviewing 
proposed rule is $3,413,450 ($885.92 x 3,853 reviewers on the CY 2020 
proposed rule).

E. 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, many hospitals are 
considered small businesses either by the Small Business 
Administration's size standards with total revenues of $41.5 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

[[Page 49078]]

with total revenues of $16.5 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. As its measure of significant economic impact 
on a substantial number of small entities, HHS uses a change in revenue 
of more than 3 to 5 percent. We do not believe that this threshold will 
be reached by the requirements in this proposed rule. As a result, the 
Secretary has determined that this proposed rule will not have a 
significant impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this 
proposed rule will increase payments to small rural hospitals by 
approximately 3 percent; therefore, it should not have a significant 
impact on approximately 586 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.
    The analysis above, together with the remainder of this preamble, 
provides a regulatory flexibility analysis and a regulatory impact 
analysis.

F. 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 $156 million. This proposed rule does 
not mandate any requirements for State, local, or tribal governments, 
or for the private sector.

G. 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, will be a regulatory action for the 
purposes of Executive Order 13771. We estimate that this proposed rule 
will generate $2.5 million in annualized cost at a 7-percent discount 
rate, discounted relative to 2016, over a perpetual time horizon.

H. Conclusion

    The changes we are making in this proposed rule will affect all 
classes of hospitals paid under the OPPS and will affect both CMHCs and 
ASCs. We estimate that most classes of hospitals paid under the OPPS 
will experience a modest increase or a minimal decrease in payment for 
services furnished under the OPPS in CY 2021. Table 67 demonstrates the 
estimated distributional impact of the OPPS budget neutrality 
requirements that will result in a 2.5 percent increase in payments for 
all services paid under the OPPS in CY 2021, after considering all of 
the changes to APC reconfiguration and recalibration, as well as the 
OPD fee schedule increase factor, wage index changes, including the 
frontier State wage index adjustment, estimated payment for outliers, 
the finalized off-campus provider-based department clinic visits 
payment policy, and changes to the pass-through payment estimate. 
However, some classes of providers that are paid under the OPPS will 
experience more significant gains or losses in OPPS payments in CY 
2021.
    The updates we propose 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 68 demonstrates 
the estimated distributional impact among ASC surgical specialties of 
the MFP-adjusted hospital market basket update factor of 2.6 percent 
for CY 2020.

XXV. 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 67 of 
this proposed rule, we estimate that OPPS payments to governmental 
hospitals (including State and local governmental hospitals) will 
increase by 2.2 percent under this proposed rule. While we do not know 
the number of ASCs or CMHCs with government ownership, we anticipate 
that it is small. The analyses we have provided in this section of this 
proposed rule, in conjunction with the remainder of this document, 
demonstrate that this proposed rule is consistent with the regulatory 
philosophy and principles identified in Executive Order 12866, the RFA, 
and section 1102(b) of the Act.
    This proposed rule will affect payments to a substantial number of 
small rural hospitals and a small number of rural ASCs, as well as 
other classes of hospitals, CMHCs, and ASCs, and some effects may be 
significant.

Congressional Review Act

    This proposed regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.

List of Subjects

42 CFR Part 410

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

42 CFR Part 411

    Diseases, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 412

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

42 CFR Part 414

    Administrative practice and procedure, Biologics, Drugs, Health 
facilities, Health professions, Diseases, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 416

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

[[Page 49079]]

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.
    For reasons stated in the preamble of this document, the Centers 
for Medicare & Medicaid Services is proposing to amend 42 CFR chapter 
IV as set forth below:

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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

0
2. Section 410.27 is amended by revising paragraph (a)(1)(iv)(D) and 
removing paragraph (a)(1)(iv)(E).
    The revision reads 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) * * *
    (D) 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. 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 may be 
provided by the physician remotely using audio/video real-time 
communications technology.
* * * * *

PART 411--EXCLUSIONS FROM MEDICARE AND LIMITATIONS ON MEDICARE 
PAYMENT

0
3. The authority citation for part 411 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395w-101 through 1395w-152, 1395hh, 
and 1395nn.

0
4. Section 411.362 is amended--
0
a. In paragraph (a), by revising the definition of ``Baseline number of 
operating rooms, procedure rooms, and beds'';
0
b. By revising paragraphs (c)(1) and (c)(6) introductory text.
    The revisions read as follows:


Sec.  411.362  Additional requirements concerning physician ownership 
and investment in hospitals.

    (a) * * *
    Baseline number of operating rooms, procedure rooms, and beds means 
the number of operating rooms, procedure rooms, and beds for which the 
applicable hospital or high Medicaid facility is licensed as of March 
23, 2010 (or, in the case of a hospital that did not have a provider 
agreement in effect as of such date, but does have a provider agreement 
in effect on December 31, 2010, the date of effect of such agreement). 
For purposes of determining the number of beds in a hospital's baseline 
number of operating rooms, procedure rooms, and beds, a bed is included 
if the bed is considered licensed for purposes of State licensure, 
regardless of the specific number of beds identified on the physical 
license issued to the hospital by the State.
* * * * *
    (c) * * *
    (1) General. An applicable hospital may request an exception from 
the prohibition on facility expansion up to once every 2 years from the 
date of a CMS decision on the hospital's most recent request. A high 
Medicaid facility may request an exception from the prohibition on 
facility expansion at any time, provided that it has not submitted 
another request for an exception to the prohibition on facility 
expansion for which CMS has not issued a decision.
* * * * *
    (6) Permitted increase in facility capacity. With respect to an 
applicable hospital only, a permitted increase under this section--
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

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

0
6. Section 412.190 is added to subpart I to read as follows:


Sec.  412.190  Overall Hospital Quality Star Rating.

    (a) Purpose. (1) The Overall Hospital Quality Star Rating (Overall 
Star Rating) is a summary of certain publicly reported hospital measure 
data for the benefit of stakeholders, such as patients, consumers, and 
hospitals.
    (2) The guiding principles of the Overall Star Rating are as 
follows. In developing and maintaining the Overall Star Ratings, we 
strive to:
    (i) Use scientifically valid methods that are inclusive of 
hospitals and measure information and able to accommodate underlying 
measure changes;
    (ii) Align with Hospital Compare or its successor website and CMS 
programs;
    (iii) Provide transparency of the methods for calculating the 
Overall Star Rating; and
    (iv) be responsive to stakeholder input.
    (b) Data included in Overall Star Rating--(1) Source of data. The 
Overall Star Rating is calculated based on measure data collected and 
publicly reported on Hospital Compare or its successor site under the 
following CMS hospital inpatient and outpatient programs:
    (i) Hospital Inpatient Quality Reporting (IQR) Program--section 
1886(b)(3)(B)(viii)(VII) of the Act.
    (ii) Hospital-Acquired Condition Reduction Program--section 
1886(p)(6)(A) of the Act.
    (iii) Hospital Value-based Purchasing Program--section 
1886(o)(10)(A) of the Act.
    (iv) Hospital Readmissions Reduction Program--section 1886(q)(6)(A) 
of the Act.
    (v) Hospital Outpatient Quality Reporting (OQR) Program--section 
1833(t)(17)(e) of the Act.
    (2) Hospitals included in Overall Star Rating. Subsection (d) 
hospitals subject to the CMS quality programs specified in paragraph 
(b)(1) of this section that also have their data publicly reported on 
one of CMS' websites are included in the Overall Star Rating.
    (3) Critical Access Hospitals. Critical Access Hospitals (CAHs) 
that wish to be voluntarily included in the Overall Star Rating must 
have elected to--
    (i) Voluntarily submit quality measures included in and as 
specified under CMS hospital programs; and
    (ii) Publicly report their quality measure data on Hospital Compare 
or its successor site.
    (c) Frequency of publication and data used. The Overall Star Rating 
are published once annually using data publicly reported on Hospital 
Compare or its successor website from a quarter within the prior year.
    (d) Methodology--(1) Selection of measures. Measures are selected 
from those publicly reported on Hospital Compare or its successor 
website through certain CMS quality programs under paragraph (b)(1) of 
this section.
    (i) From this group of measures, measures falling into one or more 
of the below listed exclusions will be removed from consideration:
    (A) Measures that 100 hospitals or less publicly report. These 
measures

[[Page 49080]]

would not produce reliable measure group scores based on too few 
hospitals.
    (B) Measures that cannot be standardized (as defined in section 
E.2.d. Measure Score Standardization) and otherwise not amenable to 
inclusion in a summary score calculation alongside process and outcome 
measures or measures that cannot be combined in a meaningful way. This 
includes measures that cannot be as easily combined with other measures 
captured on a continuous scale with more granular data.
    (C) Non-directional measures for which it is unclear whether a high 
or lower score is better. These measures cannot be standardized to be 
combined with other measures and form an aggregate measure group score.
    (D) Measures not required for reporting on Hospital Compare or its 
successor websites through CMS programs; or
    (E) Measures that overlap with another measure in terms of cohort 
or outcome, including component measures that are part of an already-
included composite measure.
    (ii) [Reserved]
    (2) Measure Score Standardization. All measure scores are 
standardized by calculating Z-scores so that all measures are on a 
single, common scale to be consistent in terms of direction (that is, 
higher scores are better) and numerical magnitude. This is calculated 
by subtracting the national mean measure score from each hospital's 
measure score and dividing the difference by the measure standard 
deviation in order to standardize measures.
    (3) Grouping measures. Measures are grouped into one of the five 
clinical groups as follows:
    (i) Mortality.
    (ii) Safety of Care.
    (iii) Readmission.
    (iv) Patient Experience.
    (v) Timely and Effective Care.
    (4) Calculate measure group scores. A score is calculated for each 
measure group for which a hospital has measure data using a simple 
average of measure scores, as follows:
    (i) Each measure group score is standardized by calculating Z-
scores for each measure group so that all measure group scores are 
centered near zero with a standard deviation of one.
    (ii) We then take 100 percent divided by the number of measures 
reported in a measure group to determine the percentage of each 
measure's weight;
    (iii) The measure weight is then multiplied by the standardized 
measure score to calculate the measure's weighted score;
    (iv) Then, all of the individual measure weighted scores within a 
measure group are added together to calculate the standardized measure 
group score.
    (v) Applicable to the Readmission group only, CMS will stratify 
hospitals into peer groups based on the proportion of dual-eligible 
patients at each hospital, using peer groups annually designated by the 
Hospital Readmissions Reduction Program (HRRP), to calculate the 
hospitals' Readmission measure group score. Hospitals that do not 
participate in HRRP would be assigned to one of the peer groups based 
on their proportion of dual-eligible patients, as they would not have 
already been assigned to a peer group through the HRRP. If the 
proportion of dual-eligible patients at each hospital is missing or 
unavailable, CMS will not assign the hospital to a peer group or adjust 
their measure group score.
    (5) Reporting thresholds. In order to receive an Overall Star 
Rating, a hospital must report at least three measures within at least 
three measure groups, one of which must specifically be the Mortality 
or Safety of Care outcome group.
    (6) Hospital Summary Score. A summary score is calculated by 
multiplying the standardized measure group scores by the assigned 
measure group weights and then summing the weighted measure group 
scores.
    (i) Standard Measure Group Weighting. (A) Each of the Mortality, 
Safety of Care, Readmission, and Patient Experience groups are weighted 
22 percent; and
    (B) The Timely and Effective Care group is weighted 12 percent.
    (ii) Reweighting. (A) Hospitals may have too few cases to report 
particular measures and, in those cases, may not report enough measures 
in one or more measure groups.
    (B) When a hospital does not have enough measures in one or more 
measure groups due to too few cases CMS may re-distribute one or more 
of the missing measure group's weight proportionally across the 
remaining measure groups by subtracting the standard weight percentage 
of the group or groups with insufficient measures from 100 percent; and 
then dividing the resulting percentage across the remaining measure 
groups, giving new re-proportioned weights.
    (7) Peer grouping. Hospitals are assigned to one of three peer 
groups based on the number of measure groups for which they report at 
least three measures: Three, four, or five measure groups.
    (8) Star ratings assignment. Hospitals in each peer group are then 
assigned between one and five stars where one star is the lowest and 
five stars is the highest using k-means clustering to complete 
convergence.
    (e) Preview period prior to publication. CMS provides hospitals the 
opportunity to preview their Overall Star Rating prior to publication. 
Hospitals have at least 30 days to preview their results, and if 
necessary, can reach out to CMS with questions.
    (f) Suppression of Overall Star Rating--(1) Subsection (d) 
hospitals. CMS may consider suppressing Overall Star Rating for 
subsection (d) hospitals only under extenuating circumstances that 
affect numerous hospitals (as in, not an individualized or localized 
issue) as determined by CMS, or when CMS is at fault, including but not 
limited to when:
    (i) There is an Overall Star Rating calculation error by CMS;
    (ii) There is a systemic error at the CMS quality program level 
that substantively affects the Overall Star Rating calculation; or
    (iii) If a Public Health Emergency substantially affects the 
underlying measure data.
    (2) CAHs. (i) CAHs may request to withhold their Overall Star 
Rating from publication on Hospital Compare or its successor website so 
long as the request for withholding is made, at the latest, during the 
Overall Star Rating preview period.
    (ii) CAHs may request to have their Overall Star Rating withheld 
from publication on Hospital Compare or its successor website, as well 
as their data from the public input file, so long as the request is 
made during the CMS quality program-level 30-day confidential preview 
period for the Hospital Compare refresh data used to calculate the 
Overall Star Ratings.

PART 414--PAYMENT FOR PART B MEDICAL AND OTHER HEALTH SERVICES

0
7. The authority citation for part 414 continues to read as follows:

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

0
8. Section 414.510 is amended by revising paragraph (b)(5) introductory 
text to read as follows:


Sec.  414.510   Laboratory date of service for clinical laboratory and 
pathology specimens.

* * * * *
    (b) * * *
    (5) In the case of a molecular pathology test performed by a 
laboratory other than a blood bank or center, a test designated by CMS 
as an ADLT under

[[Page 49081]]

paragraph (1) of the definition of an advanced diagnostic laboratory 
test in Sec.  414.502, or a test that is a cancer-related protein-based 
Multianalyte Assays with Algorithmic Analyses, the date of service of 
the test must be the date the test was performed only if--
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

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

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

0
10. Section 416.166 is amended by revising paragraph (c)(6) to read as 
follows:


Sec.  416.166  Covered surgical procedures.

* * * * *
    (c) * * *
    (6) Are designated as requiring inpatient care under Sec.  
419.22(n) of this chapter as of December 31, 2020;
* * * * *
0
11. Section 416.310 is amended--
0
a. In paragraphs (a)(2) and (b), by removing the phrase ``data 
collection time period'' and adding in its place ``data collection 
period'';
0
b. By revising paragraph (c)(1)(i);
0
c. In paragraph (c)(1)(ii), by removing the phrase ``data collection 
time period'' and adding in its place ``data collection period'' and 
removing the phrase ``time period'' and adding in its place ``period'';
0
d. By adding paragraph (c)(1)(iii);
0
e. In paragraph (c)(2), by removing the phrase ``data collection time 
period'' and adding in its place ``data collection period''; and
0
f. By adding paragraph (f).
    The revision and additions read as follows:


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

* * * * *
    (c) * * *
    (1) * * *
    (i) QualityNet account for web-based measures. ASCs, and any agents 
submitting data on an ASC's behalf, must maintain a QualityNet account 
in order to submit quality measure data to the QualityNet website for 
all web-based measures submitted via a CMS online data submission tool. 
A QualityNet security official is necessary to set up such an account 
for the purpose of submitting this information.
* * * * *
    (iii) Review and corrections period. For measures submitted to CMS 
via a CMS online tool, ASCs have a review and corrections period, which 
runs concurrently with the data submission period. During this 
timeframe, ASCs can enter, review, and correct data submitted. After 
the submission deadline, this data cannot be changed.
* * * * *
    (f) Data submission deadlines. All deadlines occurring on a 
Saturday, Sunday, or legal holiday, or on any other day all or part of 
which is declared to be a nonwork day for Federal employees by statute 
or Executive order are extended to the first day thereafter which is 
not a Saturday, Sunday, or legal holiday or any other day all or part 
of which is declared to be a nonwork day for Federal employees by 
statute or Executive order.

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

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

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

0
13. Section 419.22 is amended by revising paragraph (n) to read as 
follows:


Sec.  419.22   Hospital services excluded from payment under the 
hospital outpatient prospective payment system.

* * * * *
    (n) Services and procedures that the Secretary designates as 
requiring inpatient care. Effective beginning on January 1, 2021, the 
Secretary shall eliminate the list of services and procedures 
designated as requiring inpatient care through a 3-year transition, 
with the full list eliminated in its entirety by January 1, 2024.
* * * * *
0
14. 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 and subsequent years, a multifactor 
productivity adjustment (as determined by CMS).
* * * * *
0
15. Section 419.45 is amended by revising paragraphs (b)(1) and (2) to 
read as follows:


Sec.  419.45  Payment and copayment reduction for devices replaced 
without cost or when full or partial credit is received.

* * * * *
    (b) * * *
    (1) The amount of the reduction to the APC payment made under 
paragraphs (a)(1) and (2) of this section is calculated as the lesser 
of the device offset amount that would be applied if the device 
implanted during a procedure assigned to the APC had transitional pass-
through status under Sec.  419.66 or the amount of the credit described 
in paragraph (a)(2) of this section.
    (2) The amount of the reduction to the APC payment made under 
paragraph (a)(3) of this section is calculated as the lesser of the 
device offset amount that would be applied if the device implanted 
during a procedure assigned to the APC had transitional pass-through 
status under Sec.  419.66 or the amount of the credit described in 
paragraph (a)(3) of this section.
* * * * *
0
16. Section 419.46 is amended--
0
a. By redesignating paragraphs (a) through (h) as paragraphs (b) 
through (i), respectively;
0
b. By adding a new paragraph (a);
0
c. By revising newly redesignated paragraphs (b)(2), (c), and (d)(1) 
and (2);
0
d. In newly redesignated paragraphs (d)(3)(ii) and (iii), by removing 
the cross-reference to ``paragraph (c)(2)'' and adding in its place 
``paragraph (d)(2)'';
0
e. By adding paragraphs (d)(4) and (f)(4);
0
f. By revising newly redesignated paragraph (g)(1);
0
g. In newly redesignated paragraph (g)(2)(viii), by removing the cross-
reference to ``paragraph (e)(1)'' and adding in its place ``paragraph 
(f)(1)'';
0
h. In newly redesignated paragraph (i)(1), by removing the cross-
reference ``paragraphs (h)(2) and (3)'' and adding in its place 
``paragraphs (i)(2) and (3)'';
0
i. In newly redesignated paragraph (i)(3), by removing the cross-
reference ``paragraph (h)(2)'' and adding in its place ``paragraph 
(i)(2)''; and
0
j. In newly redesignated paragraph (i)(3)(ii) introductory text, by 
removing the cross-reference ``paragraph (h)(3)(i)(A)'' and adding in 
its place ``paragraph (i)(3)(i)(A)''.
    The additions and revisions read as follows:


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

    (a) Statutory authority. Section 1833(t)(17) of the Act authorizes 
the Secretary to implement a quality reporting program in a manner so 
as to provide for a 2.0 percentage point reduction in the OPD fee 
schedule increase factor for a subsection (d)

[[Page 49082]]

hospital (as defined in section 1886(d)(1)(B)) that does not submit 
data required to be submitted on measures in accordance with the 
Secretary's requirements.
    (b) * * *
    (2) Identify and register a QualityNet security official as part of 
the registration process under paragraph (b)(1) of this section; and
* * * * *
    (c) Withdrawal from the Hospital OQR Program. A participating 
hospital may withdraw from the Hospital OQR Program by submitting to 
CMS a withdrawal form that can be found in the secure portion of the 
QualityNet website. The hospital may withdraw any time up to and 
including August 31 of the year prior to the affected annual payment 
updates. A withdrawn hospital will not be able to later sign up to 
participate in that payment update, is subject to a reduced annual 
payment update as specified under Sec.  419.46(i), and is required to 
renew participation as specified in paragraph (b) of this section in 
order to participate in any future year of the Hospital OQR Program.
    (d) * * *
    (1) General rule. Except as provided in paragraph (e) of this 
section, hospitals that participate in the Hospital OQR Program must 
submit to CMS data on measures selected under section 1833(t)(17)(C) of 
the Act in a form and manner, and at a time, specified by CMS. 
Hospitals sharing the same CCN must combine data collection and 
submission across their multiple campuses for all clinical measures for 
public reporting purposes.
    (2) Submission deadlines. Submission deadlines by measure and by 
data type are posted on the QualityNet website. All deadlines occurring 
on a Saturday, Sunday, or legal holiday, or on any other day all or 
part of which is declared to be a nonwork day for Federal employees by 
statute or Executive order are extended to the first day thereafter 
which is not a Saturday, Sunday, or legal holiday or any other day all 
or part of which is declared to be a nonwork day for Federal employees 
by statute or Executive order.
* * * * *
    (4) Review and corrections period. For both chart-abstracted and 
web-based measures, hospitals have a review and corrections period, 
which runs concurrently with the data submission period. During this 
timeframe, hospitals can enter, review, and correct data submitted. 
However, after the submission deadline, this data cannot be changed.
* * * * *
    (f) * * *
    (4) Hospitals that are selected and receive a score for validation 
of chart-abstracted measures may request an educational review in order 
to better understand the results within 30 calendar days from the date 
the validation results are made available. If the results of an 
educational review indicate that a hospital's medical records selected 
for validation for chart-abstracted measures was incorrectly scored, 
the corrected quarterly validation score will be used to compute the 
hospital's final validation score at the end of the calendar year.
    (g) * * *
    (1) A hospital may request reconsideration of a decision by CMS 
that the hospital has not met the requirements of the Hospital OQR 
Program for a particular calendar year. Except as provided in paragraph 
(e) of this section, a hospital must submit a reconsideration request 
to CMS via the QualityNet website, no later than March 17, or if March 
17 falls on a nonwork day, on the first day after March 17 which is not 
a nonwork day as defined in Sec.  419.46(d)(2), of the affected payment 
year as determined using the date the request was mailed or submitted 
to CMS.
* * * * *
0
17. Section 419.66 is amended by revising paragraph (c)(2)(i) and (ii) 
to read as follows:


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

* * * * *
    (c) * * *
    (2) * * *
    (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 devices for which pass-through payment status will begin 
on or after January 1, 2020, as an alternative pathway to paragraph 
(c)(2)(i) of this section, a new medical device is part of the Food and 
Drug Administration's (FDA's) Breakthrough Devices Program and has 
received marketing authorization for the indication covered by the 
Breakthrough Device designation.
* * * * *
0
18. Section 419.83 is amended by revising paragraph (a) to read as 
follows:


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 beginning for service dates on 
or after July 1, 2020:
    (i) Blepharoplasty.
    (ii) Botulinum toxin injections.
    (iii) Panniculectomy.
    (iv) Rhinoplasty.
    (v) Vein ablation.
    (2) The following service categories comprise the list of hospital 
outpatient department services requiring prior authorization beginning 
for service dates on or after July 1, 2021:
    (i) Cervical Fusion with Disc Removal.
    (ii) Implanted Spinal Neurostimulators.
    (3) 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.
* * * * *

    Dated: July 23, 2020.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.

    Dated: July 31, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-17086 Filed 8-4-20; 8:45 am]
 BILLING CODE 4120-01-P