[Federal Register Volume 85, Number 249 (Tuesday, December 29, 2020)]
[Rules and Regulations]
[Pages 85866-86305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26819]



[[Page 85865]]

Vol. 85

Tuesday,

No. 249

December 29, 2020

Part II

Book 2 of 2 Books

Pages 85865-86456





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Parts 410, 411, 412, 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; Physician-Owned Hospitals; Notice of Closure of Two 
Teaching Hospitals and Opportunity To Apply for Available Slots, 
Radiation Oncology Model; and Reporting Requirements for Hospitals and 
Critical Access Hospitals (CAHs) To Report COVID-19 Therapeutic 
Inventory and Usage and To Report Acute Respiratory Illness During the 
Public Health Emergency (PHE) for Coronavirus Disease 2019 (COVID-19); 
Final Rule

  Federal Register / Vol. 85 , No. 249 / Tuesday, December 29, 2020 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 410, 411, 412, 414, 416, 419, 482, 485, 512

[CMS-1736-FC, 1736-IFC]
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; Physician-Owned Hospitals; Notice of Closure of Two 
Teaching Hospitals and Opportunity To Apply for Available Slots, 
Radiation Oncology Model; and Reporting Requirements for Hospitals and 
Critical Access Hospitals (CAHs) To Report COVID-19 Therapeutic 
Inventory and Usage and To Report Acute Respiratory Illness During the 
Public Health Emergency (PHE) for Coronavirus Disease 2019 (COVID-19)

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

ACTION: Final rule with comment period and interim final rule with 
comment period.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for Calendar Year (CY) 
2021 based on our continuing experience with these systems. In this 
final rule with comment period, we describe the changes to the amounts 
and factors used to determine the payment rates for Medicare services 
paid under the OPPS and those paid under the ASC payment system. Also, 
this final rule with comment period updates and refines the 
requirements for the Hospital Outpatient Quality Reporting (OQR) 
Program and the ASC Quality Reporting (ASCQR) Program. In addition, 
this final rule with comment period establishes and updates the Overall 
Hospital Quality Star Rating beginning with the CY 2021; removes 
certain restrictions on the expansion of physician-owned hospitals that 
qualify as ``high Medicaid facilities,'' and clarifies that certain 
beds are counted toward a hospital's baseline number of operating 
rooms, procedure rooms, and beds; adds two new service categories to 
the Hospital Outpatient Department (OPD) Prior Authorization Process; 
provides notice of the closure of two teaching hospitals and the 
opportunity to apply for available slots for purposes of indirect 
medical education (IME) and direct graduate medical education (DGME) 
payments; and revises the Clinical Laboratory Date of Service (DOS) 
policy. This interim final rule with comment period modifies the 
Radiation Oncology Model (RO Model) Model performance period for CY 
2021, and establishes new requirements in the hospital and critical 
access hospital (CAH) Conditions of Participation (CoPs) for tracking 
of COVID-19 therapeutic inventory and usage and for tracking of the 
incidence and impact of Acute Respiratory Illness (including, but not 
limited to, Seasonal Influenza Virus, Influenza-like Illness, and 
Severe Acute Respiratory Infection) during the ongoing COVID-19 public 
health emergency (PHE).

DATES: 
    Effective date: This rule is effective January 1, 2021, with the 
exceptions of amendatory instructions 21 and 23 (amending 42 CFR 482.42 
and 485.640) and 25 through 31 (amending 42 CFR 512.205, 512.210, 
512.217, 512.220, 512.245, 512.255, and 512.285), which are effective 
on December 4, 2021.
    Comment period: To be assured consideration, comments on the 
payment classifications assigned to the interim APC assignments and/or 
status indicators of new or replacement Level II HCPCS codes in this 
final rule with comment period (CMS-1736-FC) must be received at one of 
the addresses provided in the ADDRESSES section no later than 5 p.m. 
EST on January 4, 2021.
    To be assured consideration, comments on the Reporting Requirements 
for Hospitals and CAHs to Report Acute Respiratory Illness During the 
PHE for COVID-19, instructions 21 and 23 amending Sec. Sec.  482.42 and 
485.640, and the Radiation Oncology (RO) Model, instructions 25 through 
31 amending 42 CFR 512.205, 512.210, 512.217, 512.220, 512.245, 
512.255, and 512.285 in this interim final rule with comment period 
(CMS-1736-IFC) must be received at one of the addresses provided below, 
no later than 5 p.m. on February 2, 2021.
    Applicability dates: The provisions related to the Radiation 
Oncology (RO) Model contained in section XXI of this interim final rule 
with comment period are applicable beginning July 1, 2021.

ADDRESSES: In commenting, please refer to file code CMS-1736-FC or CMS-
1736-IFC as appropriate, when commenting on the issues in this final 
rule with comment period and interim final rule with comment period. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1736-FC or CMS-1736-IFC, P.O. 
Box 8010, 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-FC or CMS-1736-IFC, 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 Cyra Duncan via email [email protected].
    Blood and Blood Products, contact Josh McFeeters via email 
[email protected]. Cancer

[[Page 85867]]

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 Shaili Patel via email 
[email protected].
    Hospital Outpatient Quality Reporting (OQR) Program Measures, 
contact Nicole P. Crenshaw 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 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 
APC mailbox at [email protected].gov.
    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.
    RO Model, contact [email protected] or at 844-711-2664, 
Option 5.
    CAPT Scott Cooper, USPHS, (410) 786-9465, for the hospital and CAH 
COVID-19 Therapeutic Inventory and Usage reporting requirements and for 
the Acute Respiratory Illness (including, but not limited to, Seasonal 
Influenza Virus, Influenza-like Illness, and Severe Acute Respiratory 
Infection) reporting requirements.

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. CMS will not post on Regulations.gov public 
comments that make threats to individuals or institutions or suggest 
that the individual will take actions to harm the individual. CMS 
continues to encourage individuals not to submit duplicative comments. 
We will post acceptable comments from multiple unique commenters even 
if the content is identical or nearly identical to other 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 final rule with comment period, we use CPT codes 
and descriptions to refer to a variety of services. We note that CPT 
codes and descriptions are copyright 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 in Response to the CY 2021 OPPS/ASC 
Proposed Rule

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    G. Public Comments Received on the CY 2020 OPPS/ASC Final Rule 
With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default Cost-to-Charge Ratios (CCRs)
    E. Adjustment for Rural Sole Community Hospitals (SCHs) and 
Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2021
    F. Payment Adjustment for Certain Cancer Hospitals for CY 2021
    G. Hospital Outpatient Outlier Payments
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New and Revised HCPCS Codes
    B. OPPS Changes--Variations Within APCs
    C. New Technology APCs
    D. OPPS APC-Specific Policies
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    B. Device-Intensive Procedures
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Payment Status
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2021
    C. Outlier Policy for CMHCs
IX. Services That Will Be Paid Only as Inpatient Services
    A. Background
    B. Changes to the Inpatient Only (IPO) List
X. Nonrecurring Policy Changes
    A. Changes in the Level of Supervision of Outpatient Therapeutic 
Services in Hospitals and Critical Access Hospitals (CAHs)
    B. Medical Review of Certain Inpatient Hospital Admissions Under 
Medicare Part A for CY 2021 and Subsequent Years
XI. CY 2021 OPPS Payment Status and Comment Indicators
    A. CY 2021 OPPS Payment Status Indicator Definitions
    B. CY 2021 Comment Indicator Definitions
XII. MedPAC Recommendations
    A. OPPS Payment Rates Update
    B. ASC Conversion Factor Update
    C. ASC Cost Data
XIII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    B. ASC Treatment of New and Revised Codes
    C. Update to the List of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    D. Update and Payment for ASC Covered Surgical Procedures and 
Covered Ancillary Services
    E. New Technology Intraocular Lenses (NTIOLs)
    F. ASC Payment and Comment Indicators
    G. Calculation of the ASC Payment Rates and the ASC Conversion 
Factor
XIV. Requirements for the Hospital Outpatient Quality Reporting 
(OQR) Program
    A. Background
    B. Hospital OQR Program Quality Measures
    C. Administrative Requirements
    D. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    E. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2021 Payment 
Determination
XV. Requirements for the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program
    A. Background
    B. ASCQR Program Quality Measures
    C. Administrative Requirements
    D. Form, Manner, and Timing of Data Submitted for the ASCQR 
Program
    E. Payment Reduction for ASCs That Fail To Meet the ASCQR 
Program Requirements
XVI. 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 the 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: 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. 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. Notice of Closure of Two Teaching Hospitals and Opportunity To 
Apply for Available Slots
    A. Background Section
    B. Notice of Closure of Westlake Community Hospital, Located in 
Melrose Park, IL, and the Application Process--Round 18
    C. Notice of Closure of Astria Regional Medical Center, Located 
in Yakima, WA, and the Application Process--Round 19
    D. Application Process for Available Resident Slots
XXI. Radiation Oncology (RO) Model
    A. Model Performance Period for the Radiation Oncology Model
    B. Waiver of Proposed Rulemaking
XXII. Reporting Requirements for Hospitals and Critical Access 
Hospitals (CAHs) to Report COVID-19 Therapeutic Inventory and Usage 
and To Report Acute Respiratory Illness During the Public Health 
Emergency (PHE) for Coronavirus Disease 2019 (COVID-19)
XXIII. Files Available to the Public via the Internet
XXIV. Collection of Information Requirements
    A. Statutory Requirement for Solicitation of Comments
    B. ICRs for the Hospital OQR Program
    C. ICRs for the ASCQR Program
    D. 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
XXV. Waiver of the 30-Day and 60-Day Delayed Effective Dates for the 
Final Rule With Comment Period and Waiver of Proposed Rulemaking for 
Reporting Requirements for Hospitals and Critical Access Hospitals 
(CAHs) To Report COVID-19 Therapeutic Inventory and Usage and to 
Report Acute Respiratory Illness During the PHE for COVID-19 Interim 
Final Rule With Comment Period (IFC)
    A. Waiver of the 30-Day and 60-Day Delayed Effective Dates for 
the Final Rule With Comment Period
    B. Waiver of Proposed Rulemaking for Reporting Requirements for 
Hospitals and Critical Access Hospitals (CAHs) To Report Acute 
Respiratory Illness During the PHE for COVID-19 Interim Final Rule 
With Comment Period (IFC)
XXVI. Response to Comments
XXVII. Economic Analyses
    A. Statement of Need
    B. Overall Impact for the Provisions of This Final Rule With 
Comment Period
    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

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    H. Conclusion
XXVIII. Federalism Analysis

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this final rule with comment period and interim final rule with 
comment period, we are updating the payment policies and payment rates 
for services furnished to Medicare beneficiaries in hospital outpatient 
departments (HOPDs) and ambulatory surgical centers (ASCs), beginning 
January 1, 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 technology, and the addition of new 
services, new cost data, and other relevant information and factors. In 
addition, under section 1833(i)(D)(v) of the Act, we annually review 
and update the ASC payment rates. This final rule with comment period 
also includes additional policy changes made in accordance with our 
experience with the OPPS and the ASC payment system and recent changes 
in our statutory authority. We describe these and various other 
statutory authorities in the relevant sections of this final rule with 
comment period. In addition, this final rule with comment period 
updates and refines the requirements for the Hospital Outpatient 
Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) 
Program.
2. Summary of the Major Provisions
     OPPS Update: For CY 2021, we are increasing the payment 
rates under the OPPS by an Outpatient Department (OPD) fee schedule 
increase factor of 2.4 percent. This increase factor is based on the 
final hospital inpatient market basket percentage increase of 2.4 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS). 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 $83.888 billion, an 
increase of approximately $7.541 billion compared to estimated CY 2020 
OPPS payments.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals that fail 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 final 
rule with comment period, CMS is maintaining the unified rate structure 
established in CY 2017, with a single PHP APC for each provider type 
for days with 3 or more services per day. We are using the CMHC and 
hospital-based PHP (HB PHP) geometric mean per diem costs, consistent 
with existing policy, using updated data for each provider type. 
Accordingly, we are calculating the CY 2021 PHP APC per diem rates for 
HB PHPs and CMHC PHPs based on updated cost and claims data. Given that 
the final calculated geometric mean per diem costs are much higher than 
the proposed cost floors, we are not extending the cost floors to CY 
2021 and subsequent years.
     Changes to the Inpatient Only (IPO) List: For CY 2021, we 
are eliminating the IPO list over the course of 3 calendar years 
beginning with the removal of 266 musculoskeletal-related services. We 
are also removing 32 additional HCPCS codes from the IPO list for CY 
2021 based on public comments.
     Medical Review of Certain Inpatient Hospital Admissions 
under Medicare Part A for CY 2021 and Subsequent Years (2-Midnight 
Rule): For CY 2021, we are finalizing a policy to exempt procedures 
that are removed from the inpatient only (IPO) list under the OPPS 
beginning on January 1, 2021 from site-of-service claim denials, 
Beneficiary and Family-Centered Care Quality Improvement Organization 
(BFCC-QIO) referrals to Recovery Audit Contractor (RAC) for persistent 
noncompliance with the 2-midnight rule, and RAC reviews for ``patient 
status'' (that is, site-of-service) until such procedures are more 
commonly billed in the outpatient setting.
     340B--Acquired Drugs: We are continuing our current policy 
of paying an adjusted amount of ASP minus 22.5 percent for drugs and 
biologicals acquired under the 340B program. We are continuing to 
exempt Rural SCHs, PPS-exempt cancer hospitals and children's hospitals 
from our 340B payment policy.
     Comprehensive APCs: For CY 2021, we are creating two new 
comprehensive APCs (C-APCs): C-APC 5378 (Level 8 Urology and Related 
Services) and C-APC 5465 (Level 5 Neurostimulator and Related 
Procedures). Adding these C-APCs increases the total number of C-APCs 
to 69.
     Device Pass-Through Payment Applications: For CY 2021, we 
evaluated five applications for device pass-through payments. Two of 
these applications (CUSTOMFLEX[supreg] ARTIFICIALIRIS and EXALT\TM\ 
Model D Single-Use Duodenoscope) received preliminary approval for 
pass-through payment status through our quarterly review process. Based 
on our review and public comments received, we are continuing the pass-
through payment status for CUSTOMFLEX[supreg] ARTIFICIALIRIS and 
EXALT\TM\ Model D Single-Use Duodenoscope and approving the remaining 
three applications for device pass-through payment status.
     Changes to the Level of Supervision of Outpatient 
Therapeutic Services in Hospitals and Critical Access Hospitals: For CY 
2021 and subsequent years, we are changing 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 is consistent with the minimum required level 
of general supervision that currently applies for most outpatient 
hospital therapeutic services. We are finalizing our proposed policy to 
permit direct supervision of pulmonary rehabilitation, cardiac 
rehabilitation, and intensive cardiac rehabilitation services using 
virtual presence of the physician through audio/video real-time 
communications technology subject to the clinical judgment of the 
supervising physician until the later of the end of the calendar year 
in which the PHE ends or December 31, 2021.
     Cancer Hospital Payment Adjustment: For CY 2021, we are 
continuing to provide additional payments to cancer hospitals so that a 
cancer hospital's payment-to-cost ratio (PCR) after the additional 
payments is equal to the weighted average PCR for the other OPPS 
hospitals using the most recently submitted or settled cost report 
data. However, section 16002(b) of the 21st Century Cures Act requires 
that this weighted average PCR be reduced by 1.0 percentage point. 
Based on the data and the required 1.0 percentage point reduction, a 
target PCR of 0.89 will 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

[[Page 85870]]

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 are increasing payment rates under the ASC payment system by 
2.4 percent for ASCs that meet the quality reporting requirements under 
the ASCQR Program. This increase is based on a hospital market basket 
percentage increase of 2.4 percent minus a multifactor productivity 
adjustment of 0.0 percentage point. Based on this update, we estimate 
that total payments to ASCs (including beneficiary cost-sharing and 
estimated changes in enrollment, utilization, and case-mix) for CY 2021 
would be approximately 5.42 billion, an increase of approximately 120 
million compared to estimated CY 2020 Medicare payments.
     Changes to the List of ASC Covered Surgical Procedures: 
For CY 2021, we are adding eleven procedures to the ASC covered 
procedures list (CPL), including total hip arthroplasty (CPT 27130). 
Additionally, we are revising the criteria we use to add covered 
surgical procedures to the ASC CPL, providing that certain criteria we 
used to add covered surgical procedures to the ASC CPL in the past will 
now be factors for physicians to consider in deciding whether a 
specific beneficiary should receive a covered surgical procedure in an 
ASC, and adopting a notification process for surgical procedures the 
public believes can be added to the ASC CPL under the criteria we are 
retaining. Using our revised criteria, we are adding an additional 267 
surgical procedures to the ASC CPL beginning in CY 2021.
     Hospital Outpatient Quality Reporting (OQR) and Ambulatory 
Surgical Center Quality Reporting (ASCQR) Programs: For the Hospital 
OQR and ASCQR Programs, we are updating and refining requirements to 
further meaningful measurement and reporting for quality of care 
provided in these outpatient settings while limiting compliance burden. 
We are revising and codifying previously finalized administrative 
procedures and are codifying an expanded review and corrections process 
to further the programs' alignment while clarifying program 
requirements. We are not making any measure additions or removals for 
either program.
     Overall Hospital Quality Star Ratings: We are establishing 
and updating the methodology that will be used to calculate the Overall 
Hospital Quality Star Ratings beginning with 2021 and for subsequent 
years. We are updating and simplifying how the ratings are calculated, 
with policies such as adopting a simple average of measure scores 
instead of the latent variable model and reducing the total number of 
measure groups from seven to five measure groups due to the removal of 
measures through the Meaningful Measure Initiative. Additionally, we 
are increasing the comparability of star ratings by peer grouping 
hospitals by the number of measure groups. 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. We did not finalize our proposals 
related to stratification of the Readmissions group by dual-eligible 
patients.
     Addition of New Service Categories for Hospital Outpatient 
Department Prior Authorization Process: We are adding the following two 
categories of services to the prior authorization process for hospital 
outpatient departments 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 are 
excluding certain protein-based Multianalyte Assays with Algorithmic 
Analyses (MAAAs), which are not generally performed in the HOPD 
setting, from the OPPS packaging policy and adding them to the 
laboratory DOS exception at 42 CFR 414.510(b)(5).
     Physician-Owned Hospitals: We are removing unnecessary 
regulatory restrictions on high Medicaid facilities and including beds 
in a physician-owned hospital's baseline consistent with state law.
     Radiation Oncology Model (RO Model): On September 29, 
2020, we published a final rule in the Federal Register (85 FR 61114) 
entitled ``Specialty Care Models to Improve Quality of Care and Reduce 
Expenditures'' that finalized the Radiation Oncology Model (RO Model). 
To ensure that participation in the RO Model during the public health 
emergency (PHE) for the Coronavirus disease 2019 (COVID-19) pandemic 
does not further strain RO participants' capacity, we are revising the 
RO Model's Model performance period to begin on July 1, 2021 and end 
December 31, 2025 in this interim final rule with comment period. We 
are requesting comments on this change.
     Reporting Requirements for Hospitals and Critical Access 
Hospitals (CAHs) to Report COVID-19 Therapeutic Inventory and Usage and 
to Report Acute Respiratory Illness During the Public Health Emergency 
(PHE) for Coronavirus Disease 2019 (COVID-19): This interim final rule 
with comment period establishes new requirements in the hospital and 
critical access hospital (CAH) Conditions of Participation (CoPs) for 
tracking COVID-19 therapeutic inventory and usage and for tracking the 
incidence and impact of Acute Respiratory Illness (including, but not 
limited to, Seasonal Influenza Virus, Influenza-like Illness, and 
Severe Acute Respiratory Infection) during the ongoing COVID-19 PHE; 
and for providing this information and data to the Secretary of Health 
and Human Services (Secretary) in such form and manner, and at such 
timing and frequency, as the Secretary may prescribe during the Public 
Health Emergency (PHE).
3. Summary of Costs and Benefit
    In section XXVII and XXVIII of this final rule with comment period 
and interim final rule with comment period, we set forth a detailed 
analysis of the regulatory and federalism impacts that the changes will 
have on affected entities and beneficiaries. Key estimated impacts are 
described below.
a. Impacts of All OPPS Changes
    Table 79 in section XXVII.C of the CY 2021 OPPS/ASC final rule with 
comment period 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 the CY 2021 OPPS/ASC final rule with comment period will 
result in a 2.4 percent overall increase in OPPS payments to providers. 
We estimate that total OPPS payments for CY 2021, including beneficiary 
cost-sharing, to the approximately 3,665 facilities paid under the OPPS 
(including general acute care hospitals, children's hospitals, cancer 
hospitals, and CMHCs) will increase by approximately $1.61 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 an 11.9 percent increase in CY 2021 
payments to CMHCs relative to their CY 2020 payments.

[[Page 85871]]

b. Impacts of the Updated Wage Indexes
    We estimate that our update of the wage indexes based on the FY 
2021 IPPS final rule wage indexes will result in an estimated increase 
in payments of 0.2 percent for urban hospitals under the OPPS and an 
estimated increase in payments 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 final rule with 
comment period.
c. Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2021 payment policies 
for hospitals that are eligible for the rural adjustment or for the 
cancer hospital payment adjustment. We are not making any change in 
policies for determining the rural hospital payment adjustments. While 
we are implementing the reduction to the cancer hospital payment 
adjustment for CY 2021 required by section 1833(t)(18)(C) of the Act, 
as added by section 16002(b) of the 21st Century Cures Act, 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 OPD Fee Schedule Increase Factor
    For the CY 2021 OPPS/ASC, we are establishing an OPD fee schedule 
increase factor of 2.4 percent and applying 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 will experience an increase in payments of 
approximately 2.6 percent and that rural hospitals would experience an 
increase in payments of 2.9 percent. Classifying hospitals by teaching 
status, we estimate nonteaching hospitals will experience an increase 
in payments of 2.9 percent, minor teaching hospitals will experience an 
increase in payments of 3.0 percent, and major teaching hospitals will 
experience an increase in payments of 2.0 percent. We also classified 
hospitals by the type of ownership. We estimate that hospitals with 
voluntary ownership will experience an increase of 2.6 percent in 
payments, while hospitals with government ownership will experience an 
increase of 2.2 percent in payments. We estimate that hospitals with 
proprietary ownership will experience an increase of 3.5 percent in 
payments.
e. Impacts of the ASC Payment Update
    For impact purposes, the surgical procedures on the ASC covered 
surgical procedure list 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 impact of applying the hospital market 
basket update to ASC payment rates will be an increase in payments of 
$120 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 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 the CY 2021 OPPS/ASC final 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

[[Page 85872]]

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 are:
     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, the relative payment weights, and the wage and other 
adjustments to take into account changes in medical practices, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors.
    Since initially implementing the OPPS, we have published final 
rules in the Federal Register annually to implement statutory 
requirements and changes arising from our continuing experience with 
this system. These rules can be viewed on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the 
Panel)

1. Authority of the Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Public Law 106-113, and redesignated by section 202(a)(2) of Public Law 
106-113, requires that we consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
annually review (and advise the Secretary concerning) 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

[[Page 85873]]

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 ASC covered surgical 
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 20, 2020, for a 2-year period.
    The current Panel membership and other information pertaining to 
the Panel, including its charter, Federal Register notices, membership, 
meeting dates, agenda topics, and meeting reports, can be viewed on the 
CMS website at: https://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
    The Panel has held many meetings, with the last meeting taking 
place on August 31, 2020. Prior to each meeting, we publish a notice in 
the Federal Register to announce the meeting, 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 31, 2020, meeting that the 
subcommittees continue. We accepted this recommendation.
    For discussions of earlier Panel meetings and recommendations, we 
refer readers to previously published OPPS/ASC proposed and final 
rules, the CMS website mentioned earlier in this section, and the FACA 
database at http://facadatabase.gov.

F. Public Comments Received in Response to the CY 2021 OPPS/ASC 
Proposed Rule

    We received approximately 1,350 timely pieces of correspondence on 
the CY 2021 OPPS/ASC proposed rule that appeared in the Federal 
Register on August 12, 2020 (85 FR 48772). We note that we received 
some public comments that were outside the scope of the CY 2021 OPPS/
ASC proposed rule. Out-of-scope-public comments are not addressed in 
this CY 2021 OPPS/ASC final rule with comment period. Summaries of 
those public comments that are within the scope of the proposed rule 
and our responses are set forth in the various sections of this final 
rule with comment period under the appropriate headings.

G. Public Comments Received on the CY 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 are set forth in various sections 
of this final rule with comment period under the appropriate subject-
matter headings. Summaries of the public comments on new or replacement 
Level II HCPCS codes are set forth in the CY 2021 OPPS/ASC proposed 
rule and this final rule with comment period under the appropriate 
subject matter headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    For the CY 2021 OPPS/ASC proposed rule (85 FR 48779), we proposed 
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, as we proposed, we recalibrate the relative 
payment weights for each APC based on claims and cost report data for 
hospital outpatient department (HOPD) services, using the most recent 
available data to construct a database for calculating APC group 
weights.
    For the purpose of recalibrating the 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

[[Page 85874]]

claims accounting process, we refer readers to the claims accounting 
narrative under supporting documentation for the CY 2021 OPPS/ASC 
proposed rule on the CMS website at: http://www.cms.gov/Medicare/
Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Addendum N to the CY 2021 OPPS/ASC proposed rule (which is 
available via the internet on the CMS website) included the proposed 
list of bypass codes for CY 2021. The proposed list of bypass codes 
contained codes that were reported on claims for services in CY 2019 
and, therefore, included codes that were in effect in CY 2019 and used 
for billing, but were deleted for CY 2020. We retained 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 proposed to add for CY 2021 were identified by asterisks (*) in 
the fourth column of Addendum N.
b. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2021, in the CY 2020 OPPS/ASC proposed rule (85 FR 48779), 
we proposed to continue to use the hospital-specific overall ancillary 
and departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the CY 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 the proposed rule and this final rule with 
comment period.
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 74840 
through 74847), we finalized our policy of creating new cost centers 
and distinct CCRs for implantable devices, magnetic resonance imaging 
(MRIs), computed tomography (CT) scans, and cardiac catheterization. 
However, in response to the CY 2014 OPPS/ASC proposed rule, commenters 
reported that some hospitals 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 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.

[[Page 85875]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.000

[GRAPHIC] [TIFF OMITTED] TR29DE20.001

    Our analysis shows that since the CY 2014 OPPS in which we 
established the transition policy, the number of valid MRI CCRs has 
increased by 18.7 percent to 2,199 providers and the number of valid CT 
CCRs has increased by 16.5 percent to 2,280 providers. Table 1 displays 
the impact on 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 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.
    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 services 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

[[Page 85876]]

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 amount. We will continue to 
monitor OPPS imaging payments in the future and consider potential 
impacts of payment changes on the PFS and the ASC payment system.
    Comment: Several commenters requested that CMS not use the CT and 
MRI-specific cost centers and instead estimate cost using the single 
diagnostic radiology cost center, believing that this will solve the 
inaccurate reporting of costs for CT and MR services. Commenters stated 
that many hospitals have ``near zero'' CT and MRI CCRs and the existing 
cost centers are inaccurate, too low, and depressing the valuation of 
APCs that include CT and MRI services. One commenter recommended that 
CMS establish detailed instructions for nonstandard cost centers to 
improve the accuracy of the cost center data used to calculate CT and 
MRI CCRs. Commenters also noted that the impact of our proposal may 
diminish beneficiary access to medical imaging services for 
beneficiaries, specifically noting low OPPS payments for cardiac 
computed tomography angiography (CCTA). Several commenters noted that 
the use of separate CT and MRI CCRs creates unintended consequences on 
the technical component of CT and MRI codes in the Medicare Physician 
Fee Schedule and on the payment rate under the ASC payment system for 
these codes.
    Response: We appreciate the thoughtful comments and analysis 
regarding the use of the CT and MRI cost center CCRs. However, as 
discussed in the CY 2020 OPPS/ASC final rule (84 FR 61152), we 
finalized a policy to end the transition policy and use all data 
submitted (including all providers, regardless of cost allocation 
method) in the CY 2021 OPPS. We did not propose to make any changes in 
the CY 2021 OPPS and are not modifying the policy at this time.
2. Final Data Development and Calculation of Costs Used for Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the OPPS payment rates for CY 2021. The 
Hospital OPPS page on the CMS website on which this final rule with 
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/HospitalOutpatientPPS/index.html) provides an 
accounting of claims used in the development of the final 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 2019 
claims that were used to calculate the final payment rates for this CY 
2021 OPPS/ASC final rule with comment period.
    Previously, the OPPS established the scaled relative weights, on 
which payments are based using APC median costs, a process described in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). 
However, as discussed in more detail in section II.A.2.f. of the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68259 through 
68271), we finalized the use of geometric mean costs to calculate the 
relative weights on which the CY 2013 OPPS payment rates were based. 
While this policy changed the cost metric on which the relative 
payments are based, the data process in general remained the same, 
under the methodologies that we used to obtain appropriate claims data 
and accurate cost information in determining estimated service cost. 
For CY 2021, we are finalizing our proposal to continue to use 
geometric mean costs to calculate the relative weights on which the 
final CY 2021 OPPS payment rates are based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.c. of the CY 2021 OPPS/ASC final rule with comment period to 
calculate the costs we used to establish the relative payment weights 
used in calculating the OPPS payment rates for CY 2021 shown in Addenda 
A and B to the CY 2021 OPPS/ASC final rule with comment period (which 
are available via the internet on the CMS website). We referred readers 
to section II.A.4. of the CY 2021 OPPS/ASC final rule with comment 
period 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 the CY 2021 
OPPS/ASC final rule with comment period, we refer readers to the claims 
accounting narrative under supporting documentation for this CY 2021 
OPPS/ASC final rule with comment period on the CMS website at: http://www.cms .gov/Medicare/Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
a. Calculation of Single Procedure APC Criteria-Based Costs
(1) Blood and Blood Products
(a) Methodology
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    We proposed to continue to establish payment rates for blood and 
blood products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past public comments indicating that the former OPPS 
policy of defaulting to the overall hospital CCR for hospitals not 
reporting a blood-

[[Page 85877]]

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 
proposed to continue to simulate blood CCRs for each hospital that does 
not report a blood cost center by calculating the ratio of the blood-
specific CCRs to hospitals' overall CCRs for those hospitals that do 
report costs and charges for blood cost centers. We also proposed to 
apply this mean ratio to the overall CCRs of hospitals not reporting 
costs and charges for blood cost centers on their cost reports to 
simulate blood-specific CCRs for those hospitals. We proposed 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 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 
will result in costs for blood and blood products that appropriately 
reflect the relative estimated costs of these products for hospitals 
without blood cost centers and, therefore, for these blood products in 
general.
    We 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 
proposed to continue to apply the blood-specific CCR methodology 
described in this section when calculating the costs of the blood and 
blood products that appear on claims with services assigned to the C-
APCs. Because the costs of blood and blood products will be reflected 
in the overall costs of the C-APCs (and, as a result, in the proposed 
payment rates of the C-APCs), we proposed 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 the CY 2021 OPPS/ASC 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 proposed to continue to establish payment rates for 
blood and blood products using our blood-specific CCR methodology. We 
did not receive any comments on our proposal to establish payment rates 
for blood and blood products using our blood-specific CCR methodology 
and we are finalizing this policy as proposed.
(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 stated in the CY 2021 OPPS/ASC 
proposed rule that we were 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 stated that 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 stated that 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 also explained that 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 for the CY 2021 OPPS/ASC proposed 
rule, but ultimately rejected was similar to our policy under the OPPS 
to assign NOC codes to the lowest APC within the appropriate clinical 
family. We stated that we could have cross-walked and assigned 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

[[Page 85878]]

proposed CY 2021 payment rate of $8.02 per unit. This option would have 
provided 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 have allowed for 
tracking of the cost and utilization for unclassified blood products. 
However, given that the cross-walked payment rate is potentially 
significantly lower than the cost of the product, we concluded that 
providers may find that packaging the cost of unclassified blood 
products into another medical service may generate more payment for the 
products over time.
    Thus, for CY 2021, we proposed to package the cost of unclassified 
blood products reported by HCPCS code P9099 into the cost of the 
associated primary procedure. We proposed 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 sought 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. We stated 
that 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).
    Comment: Multiple commenters opposed our proposal to reassign HCPCS 
code P9099 to status indicator ``N'' and package the payment for 
unclassified blood products into the associated primary procedure. 
Commenters were concerned that because blood products are usually 
separately paid in the OPPS, APC payment rates for the associated 
procedures would not reflect the cost of the unclassified blood 
products, and that it would take a long time before providers would see 
any changes in payments that would include the cost of unclassified 
blood products. One commenter was also concerned that packaging the 
cost of unclassified blood products would make providers less likely to 
report HCPCS code P9099, making it harder to track the utilization of 
unclassified blood products, and reluctant to use blood products that 
would not receive separate payment.
    Response: We agree with the concerns expressed by the commenters, 
and we have considered these concerns in determining the payment policy 
for the blood NOC code.
    Comment: One commenter supported our proposal to reassign HCPCS 
code P9099 to status indicator ``N'' and package the payment for 
unclassified blood products into the associated primary procedure. The 
commenter also encouraged us to work with manufacturers and blood 
product stakeholders to move quickly to establish individual HCPCS 
codes for these new blood products.
    Response: We appreciate the commenter's support for our proposal 
and we also support the request that codes be established in a timely 
manner for unclassified blood products.
    Comment: Multiple commenters opposed our alternative proposal to 
pay services billed with HCPCS code P9099 at the lowest payment rate 
for a blood product in the OPPS, which is $7.79 per unit. The 
commenters believe the payment rate will be too low for new, 
unclassified blood products and may discourage manufacturers from 
pursuing new innovations in the blood products field.
    Response: We understand the concerns of the commenters who believe 
paying for unclassified blood products at the lowest payment rate for a 
separately payable blood product in the OPPS does not provide adequate 
payment for new, unclassified blood products. However, our goal is to 
limit the time it is necessary for providers to report HCPCS code P9099 
until a new blood product has an individual HCPCS code established for 
the product. Once a new blood product has an individual HCPCS code, it 
will allow for a payment for the new service that is better aligned 
with its costs and make it easier to track utilization for the service. 
Establishing a payment rate for the blood NOC code that is equal to the 
payment rate for the lowest payment rate for a separately payable blood 
product is consistent with OPPS policy for other major categories of 
medical care where the payment rate for the unclassified service is 
equal to the lowest-paying APC in an APC series for that category of 
service.
    Comment: The CMS HOP Panel and multiple commenters requested that 
unclassified blood products be separately paid using a weighted average 
of the payment rates of all separately payable blood products in the 
OPPS. The average payment rate would be weighted by the number of units 
billed for each service in the OPPS. Commenters believe a weighted 
average would be consistent with OPPS policy to provide separate 
payment for all blood products and would encourage the use of HCPCS 
code P9099 to track the utilization of unclassified blood products 
until the new products could receive individual HCPCS codes. The 
weighted average also would provide a higher payment for services 
billed with HCPCS code P9099 than the alternative proposal of assigning 
the lowest payment rate for a separately payable blood product as 
payment for unclassified blood products. Other commenters suggested 
that unclassified blood products be paid either at charges reduced to 
cost or at reasonable cost to appropriately compensate providers 
billing unclassified blood products.
    Response: Providing payment for HCPCS code P9099 through a weighted 
average payment, charges reduced to cost, or reasonable cost could 
provide incentives to discourage manufacturers of new blood products 
from seeking individual HCPCS codes for their products. A weighted 
average payment would encourage manufacturers of relatively inexpensive 
unclassified blood products not to seek a HCPCS code for their products 
because the payment using P9099 for the products would be substantially 
higher than payment the products would receive once an individual code 
is established for the blood products. In addition, the level of 
payment from a weighted average payment may reduce the urgency of 
manufacturers to seek an individual HCPCS cost even for higher-cost 
products, which would delay our ability to track payment for individual 
blood products. We have similar concerns about paying unclassified 
blood products using either charges reduced to cost or reasonable cost. 
Although these payment methods would accurately reflect the cost of 
unclassified blood products to providers, there would be no incentive 
for providers to manage their costs when using unclassified blood 
products, and no incentives for the manufacturers to seek individual 
HCPCS codes for the unclassified blood products. The OPPS is a 
prospective payment system, and we want to limit rather than expand the 
types of services within the OPPS that do not receive prospective 
payment.
    After reviewing the public comments, we are not finalizing our 
original proposal to package HCPCS code P9099 into the associated 
primary procedure. Instead, we are finalizing our alternative proposal 
to make HCPCS code P9099 separately payable, assign it a status 
indicator of ``R'', and pay the code at a rate equal to the lowest paid 
separately payable blood product in the OPPS, which is P9043 (Infusion, 
plasma protein fraction (human), 5 percent, 50 ml) with a payment rate 
of $7.79 per unit. Our alternative proposal aligns

[[Page 85879]]

with our general policy in the OPPS to pay NOC codes at the lowest 
available APC rate for a service category, while providing a payment 
for unclassified blood products when a service is reported on the 
claim. We believe our alternative proposal is superior to our original 
proposal, which would not have provided any separate payment for blood 
products reported using HCPCS code P9099. Our alternative proposal also 
provides incentives for manufacturers to seek individual HCPCS codes 
for new blood products, which helps us to track the utilization of 
these new blood products and establish a payment rate for these new 
products that better reflects their cost.
    We decided to finalize our alternative proposal, as it gives 
providers some payment for unclassified blood products, is consistent 
with OPPS policy for other major categories of medical care where the 
payment rate for the unclassified service is based on the lowest-paying 
APC in an APC series for that category of service, while maintaining 
incentives for manufacturers to establish individual HCPCS codes for 
their new blood products in a timely manner.
(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 proposed 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 proposed 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 proposed to base the payment rates for brachytherapy 
sources on the geometric mean unit costs for each source, consistent 
with the methodology that we proposed for other items and services paid 
under the OPPS, as discussed in section II.A.2. of the CY 2021 OPPS/ASC 
proposed rule. We also proposed to continue the other payment policies 
for brachytherapy sources that we finalized and first implemented in 
the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We 
proposed to pay for the stranded and nonstranded not otherwise 
specified (NOS) codes, HCPCS codes C2698 (Brachytherapy source, 
stranded, not otherwise specified, per source) and C2699 (Brachytherapy 
source, non-stranded, not otherwise specified, per source), at a rate 
equal to the lowest stranded or nonstranded prospective payment rate 
for such sources, respectively, on a per source basis (as opposed to, 
for example, a per mCi), which is based on the policy we established in 
the CY 2008 OPPS/ASC final rule with comment period (72 FR 66785). We 
also proposed to continue the policy we first implemented in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60537) regarding 
payment for new brachytherapy sources for which we have no claims data, 
based on the same reasons we discussed in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66786; which was delayed until January 
1, 2010 by section 142 of Pub. L. 110-275). Specifically, this policy 
is intended to enable us to assign new HCPCS codes for new 
brachytherapy sources to their own APCs, with prospective payment rates 
set based on our consideration of external data and other relevant 
information regarding the expected costs of the sources to hospitals. 
The proposed CY 2021 payment rates for brachytherapy sources are 
included in Addendum B to the CY 2021 OPPS/ASC 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 CY 2020 OPPS/ASC final rule with comment period, included 
two claims with a geometric mean cost for 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 proposed 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 proposed to continue assigning the 
brachytherapy source described by HCPCS code C2645 a payment rate of 
$4.69 mm\2\ for CY 2021

[[Page 85880]]

through use of our equitable adjustment authority.
    Comment: One commenter recommended that we should review outpatient 
claims data for low-volume brachytherapy sources and consider removing 
outliers to ensure appropriate and stable brachytherapy source 
reimbursement in future years. The commenter contends that 
brachytherapy source payments have fluctuated significantly since 2013 
and may create barriers to access for individual cancer patients.
    Response: We thank the commenter for their recommendation. As we 
have stated in past rulemaking, the OPPS relies on the concept of 
averaging, where the payment may be more or less than the estimated 
cost of providing a service for a particular patient; however, with the 
exception of outlier cases, we believe that such a prospective payment 
is adequate to ensure access to appropriate care. We acknowledge that 
payment for brachytherapy sources based on geometric mean costs from a 
small set of claims may be more variable on a year-to-year basis when 
compared to the geometric mean costs for brachytherapy sources from a 
larger claims set. We will take the commenter's recommendation into 
consideration in future rulemaking.
    Comment: One commenter recommended that we exclude erroneous claims 
data for C2642 (Brachytherapy source, stranded, cesium-131, per source) 
from a particular hospital. The commenter stated the hospital reported 
costs per source of $42.59 for C2642. Further, the commenter argued the 
proposed payment rate for C2642 as a result of including the hospital's 
claims information would threaten access to cancer therapy and would be 
less than the actual amount paid by any hospital for this source over 
the past decade.
    Response: In our review of CY 2019 brachytherapy claims used for CY 
2021 OPPS ratesetting, we did not find any erroneous billing of C2642 
with respect to the particular hospital mentioned by the commenter. 
OPPS relative payment weights based on geometric mean costs capture the 
range of costs associated with services that are introduced slowly into 
the system on a case-by-case or hospital-by-hospital basis. For these 
reasons we believe it would be inappropriate to remove any outliers 
when determining brachytherapy geometric mean costs and payment rates 
for C2642.
    After consideration of the public comments we received, we are 
finalizing our proposal to assign the brachytherapy source described by 
HCPCS code C2645 a payment rate of $4.69 per 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 direction via email to 
[email protected] or by mail to the Division of Outpatient 
Care, Mail Stop C4-01-26, Centers for Medicare and Medicaid Services, 
7500 Security Boulevard, Baltimore, MD 21244. We will continue to add 
new brachytherapy source codes and descriptors to our systems for 
payment on a quarterly basis.
b. Comprehensive APCs (C-APCs) for CY 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). Most recently in the CY 
2020 OPPS/ASC final rule with comment period, we created two new C-
APCs, increasing the total number to 67 C-APCs (84 FR 61158 through 
61166).
    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 the CY 2021 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website).
    In the interim final with request for comments (IFC) entitled, 
``Additional Policy and Regulatory Revisions in Response to the COVID-
19 Public Health Emergency'', published on November 6, 2020, we stated 
that effective for services furnished on or

[[Page 85881]]

after the effective date of the IFC and until the end of the PHE for 
COVID-19, there is an exception to the OPPS C-APC policy to ensure 
separate payment for new COVID-19 treatments that meet certain criteria 
(85 FR 71158 through 71160). Under this exception, any new COVID-19 
treatment that meets the two following criteria will, for the remainder 
of the PHE for COVID-19, always be separately paid and will not be 
packaged into a C-APC when it is provided on the same claim as the 
primary C-APC service. First, the treatment must be a drug or 
biological product (which could include a blood product) authorized to 
treat COVID-19, as indicated in section ``I. Criteria for Issuance of 
Authorization'' of the letter of authorization for the drug or 
biological product, or the drug or biological product must be approved 
by the FDA for treating COVID-19. Second, the emergency use 
authorization (EUA) for the drug or biological product (which could 
include a blood product) must authorize the use of the product in the 
outpatient setting or not limit its use to the inpatient setting, or 
the product must be approved by the FDA to treat COVID-19 disease and 
not limit its use to the inpatient setting. For further information 
regarding the exception to the C-APC policy for COVID-19 treatments, 
please refer to the IFC (85 FR 71158 through 71160).
    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 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

[[Page 85882]]

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 the CY 2021 OPPS/ASC 
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 
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 proposed to apply the frequency and cost 
criteria thresholds discussed above, testing claims reporting one unit 
of a single primary service assigned to status indicator ``J1'' and any 
number of units of a single add-on code for the primary ``J1'' service. 
If the frequency and cost criteria thresholds for a complexity 
adjustment are met and reassignment to the next higher cost APC in the 
clinical family is appropriate (based on meeting the criteria outlined 
above), we make a complexity adjustment for the code combination; that 
is, we reassign the primary service code reported in conjunction with 
the add-on code to the next higher cost C-APC within the same clinical 
family of C-APCs. As previously stated, we package payment for add-on 
codes into the C-APC payment rate. If any add-on code reported in 
conjunction with the ``J1'' primary service code does not qualify for a 
complexity adjustment, payment for the add-on service continues to be 
packaged into the payment for the

[[Page 85883]]

primary service and is not reassigned to the next higher cost C-APC. We 
listed 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 the CY 2021 OPPS/ASC proposed 
rule (which is available via the internet on the CMS website).
    Addendum J to the CY 2021 OPPS/ASC 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 the CY 2021 OPPS/ASC 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 the CY 2021 OPPS/
ASC 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.
    Comment: A commenter stated that CMS should not use claims data 
from complexity adjustment code pairs in calculating the geometric mean 
cost for the next higher paying APC to which the complexity adjusted 
code pair is assigned and that doing so can decrease the geometric mean 
cost of APCs with a low number of claims, specifically C-APC 5493--
Level 3 Intraocular Procedures. The commenter stated that CMS did not 
intend to include the costs of complexity-adjusted code pairs in 
calculating the geometric mean cost for the higher-paying APCs to which 
the complexity-adjustment code pair is assigned when the C-APC 
complexity adjustment policy was initially established and that 
complexity adjustments were intended as payment adjustments for complex 
versions of the comprehensive service only. To further support their 
claim that CMS intended for complexity adjustments to only provide 
higher payment for claims including complex comprehensive services, the 
commenter noted that, unlike other HCPCS codes with a significant 
number of claims assigned to an APC, complexity adjusted code pairs are 
not evaluated for a 2 times rule violation in the higher-paying APC to 
which they are promoted.
    Response: We disagree with the commenter's assertion regarding the 
policy of including the costs of a complexity adjusted code pair in the 
calculation of the geometric mean costs of the next higher paying C-APC 
to which the code pair is assigned. The current C-APC complexity 
adjustment policy, including the calculation of the geometric mean cost 
of APCs that include complexity-adjusted code pairs, was initially 
described in the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74887). In that rule, we stated the following: ``We then considered 
reassigning complex subsets of claims for each primary service HCPCS 
code. All claims reporting more than one procedure described by HCPCS 
codes assigned to status indicator ``J1'' are evaluated for the 
existence of commonly occurring combinations of procedure codes 
reported on claims that exhibit a materially greater comprehensive 
geometric mean cost relative to the geometric mean cost of the claims 
reporting that primary HCPCS code. This indicates that the subset of 
procedures identified by the secondary HCPCS code has increased 
resource requirements relative to less complex subsets of that 
procedure. If a combination of procedure codes reported on claims is 
identified that meets these requirements, that is, commonly occurring 
and exhibiting materially greater resource requirements, it is further 
evaluated to confirm clinical validity as a complex subset of the 
primary procedure and the combination of procedure codes is then 
identified as complex, and primary service claims with that combination 
of procedure codes are subsequently reassigned as appropriate. If a 
combination of procedure codes does not meet the requirement for a 
materially different cost or does not occur commonly, it is not 
considered to be a complex, and primary service claims with that 
combination of procedure codes are not reassigned. All combinations of 
procedures described by HCPCS codes assigned to status indicator ``J1'' 
for each primary HCPCS code are similarly evaluated.
    Once all combinations of procedures described by HCPCS codes 
assigned to status indicator ``J1'' have been evaluated, all claims 
identified for reassignment for each primary service are combined and 
the group is assigned to a higher level comprehensive APC within a 
clinical family of comprehensive APCs, that is, an APC with greater 
estimated resource requirements than the initially assigned 
comprehensive APC and with appropriate clinical homogeneity. We 
assessed resource variation for reassigned claims within the receiving 
APC using the geometric mean cost for all reassigned claims for the 
primary service relative to other services assigned to that APC using 
the 2 times rule criteria. For new HCPCS codes and codes without data, 
we will use the best data available to us to identify combinations of 
procedures that represent a more complex form of the primary procedure 
and warrant reassignment to a higher level APC. We will reevaluate our 
APC assignments, and identification and APC placement of complex claims 
once claims data become available. We then recalculate all APC 
comprehensive geometric mean costs and ensure clinical and resource 
homogeneity.''
    We believe that the final statement clearly communicates our policy 
of including the costs of the complexity-adjusted codes pairs in 
calculating the geometric mean cost for the higher-paying APCs to which 
the complexity-adjustment code pairs are assigned. While the commenter 
is correct that we no longer require that a code combination (that 
qualifies for a complexity adjustment by satisfying the frequency and 
cost criteria thresholds described above) not create a 2 times rule 
violation in the higher level or receiving APC, this change was based 
on our belief that the requirement was not useful because most code 
combinations fall below our established frequency threshold for 
considering 2 times rule violations (81 FR 79582). In summary, we do 
not believe it is necessary to change the current policy that includes 
the costs of the paired code combinations in the next higher-paying APC 
at this time.
    Comment: Several commenters requested that CMS alter the 
established C-APC complexity adjustment eligibility criteria to allow 
additional code combinations to qualify for complexity adjustments. We 
also received several comments requesting that CMS modify its 
complexity adjustment criteria by eliminating the claims frequency 
requirement to determine eligibility for the complexity adjustment and 
expanding the eligibility for a complexity adjustment to other APCs 
besides C-APCs to apply the

[[Page 85884]]

complexity adjustment to all blue light cystoscopy with Cysview 
procedures in the HOPD, even those assigned to clinical APCs.
    Response: We appreciate these comments. However, at this time, we 
do not believe changes to the C-APC complexity adjustment criteria are 
necessary or that we should make exceptions to the criteria to allow 
claims with the code combinations suggested by the commenters to 
receive complexity adjustments. As stated previously (81 FR 79582), we 
continue to believe that the complexity adjustment criteria, which 
require a frequency of 25 or more claims reporting a code combination 
and a violation of the 2 times rule in the originating C-APC in order 
to receive payment in the next higher cost C-APC within the clinical 
family, are adequate to determine if a combination of procedures 
represents a complex, costly subset of the primary service. If a code 
combination meets these criteria, the combination receives payment at 
the next higher cost C-APC. Code combinations that do not meet these 
criteria receive the C-APC payment rate associated with the primary 
``J1'' service. A minimum of 25 claims is already a very low threshold 
for a national payment system. Lowering the minimum of 25 claims 
further could lead to unnecessary complexity adjustments for service 
combinations that are rarely performed.
    With regard to the requests for complexity adjustments for blue 
light cystoscopy procedures involving the use of Cysview, in CY 2018 we 
created a HCPCS C-code (C9738--Adjunctive blue light cystoscopy with 
fluorescent imaging agent (list separately in addition to code for 
primary procedure)) to describe blue light cystoscopy with fluorescent 
imaging agent and allowed this code to be eligible for complexity 
adjustments when billed with procedure codes used to describe white 
light cystoscopy of the bladder, although this code is not a ``J1'' 
service or an add-on code for the primary ``J1'' service. For CY 2021, 
there is one code combination, of the six total available combinations 
involving C9738 and procedure codes used to describe white light 
cystoscopy, that qualifies for a complexity adjustment (HCPCS code 
52204 Cystourethroscopy, with biopsy(s) + C9738 Adjunctive blue light 
cystoscopy with fluorescent imaging agent (list separately in addition 
to code for primary procedure)). The remaining five code combinations 
do not meet the cost and frequency criteria to qualify for a complexity 
adjustment. At this time, we do not believe that further modifications 
to the C-APC complexity adjustment policy, including allowing services 
assigned to clinical APCs to qualify for complexity adjustments, are 
necessary to allow for complexity adjustments for these procedures.
    After consideration of the public comments we received on the 
proposed complexity adjustment policy, we are finalizing the C-APC 
complexity adjustment policy for CY 2021, as proposed, without 
modification.
(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 
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 proposed 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 did not propose to 
convert any conventional APCs to C-APCs in CY 2021. However, as 
discussed in section III.D.7, we proposed to create an additional level 
in the ``Urology and Related Services'' APC series and, as discussed in 
section III.D.1, we proposed to create an additional level in the 
``Neurostimulator and Related Procedures'' APC series. Table 3 lists 
the proposed C-APCs for CY 2021, all of which were established in past 
rules.
    Comment: Commenters supported the creation of the two new proposed 
C-APCs, based on resource cost and clinical characteristics.
    Response: We appreciate the commenters' support.
    Comment: Several commenters expressed concern that the C-APC 
payment rates may not adequately reflect the costs associated with 
services. These comments stated that the C-APC methodology does not 
account for the complexity of certain care processes, fails to capture 
the necessary claims, and the resulting data may lead to inaccurate 
payment rates that will negatively impact access to services.
    Commenters also had concerns around the claims data used for 
ratesetting, due to variations in clinical practice and billing 
patterns across the hospitals that submit these claims, and urged CMS 
to consider alternatives to the current methodology. Some commenters 
were concerned that hospitals are not correctly charging for procedures 
assigned to C-APCs and urged CMS to invest in policies and education 
for hospitals regarding correct

[[Page 85885]]

billing patterns. These commenters also requested that CMS provide an 
analysis of the impact of the C-APC policy on affected procedures and 
patient access to services. One commenter requested that CMS review and 
use Part B claims data in order to estimate costs for the appropriate 
C-APCs for CY 2021 ratesetting.
    Response: We appreciate the comments. We continue to believe that 
the current C-APC methodology is appropriate. We also note that, in the 
CY 2018 OPPS/ASC final rule with comment period (82 FR 59246), we 
conducted an analysis of the effects of the C-APC policy. The analysis 
used claims data for the CY 2016 OPPS/ASC final rule with comment 
period, the CY 2017 OPPS/ASC final rule with comment period, and the CY 
2018 OPPS/ASC proposed rule, which were for the period from CY 2014 
(before C-APCs became effective) to CY 2016. We looked at separately 
payable codes that were then assigned to C-APCs and, overall, we 
observed an increase in claim line frequency, units billed, and 
Medicare payment for those procedures, which suggest that the C-APC 
payment policy did not adversely affect access to care or reduce 
payments to hospitals and is working as intended.
    Comment: Several commenters requested that CMS discontinue the C-
APC payment policy for all surgical insertion codes required for 
brachytherapy treatment. The commenters stated concerns about how the 
C-APC methodology impacts radiation oncology, particularly the delivery 
of brachytherapy for the treatment of cervical cancer. They also stated 
that they oppose C-APC payment for cancer care given the complexity of 
coding, serial billing for cancer care, and potentially different sites 
of service for the initial surgical device insertion and subsequent 
treatment delivery or other supportive services. These commenters 
suggested that CMS allow brachytherapy to be reported through the 
traditional APC methodology, move procedures to a higher C-APC, or 
separately pay for preparation and planning services to fully account 
for accurate reflection of the costs associated with these procedures.
    Response: While we continue to believe that the C-APC policy is 
appropriately applied to these surgical procedures, we will continue to 
examine these concerns and will determine if any modifications to this 
policy are warranted in future rulemaking.
    Comment: One commenter urged CMS to eliminate the C-APC policy for 
single-session stereotactic radiosurgery codes (77371 and 77372). The 
commenter requested that CMS continue to make separate payments for the 
10 planning and preparation codes related to SRS and include the HCPCS 
code for IMRT planning (77301) on the list of planning and preparation 
codes, stating that the service has become more common in single 
fraction radiosurgery treatment planning.
    Response: At this time, we do not believe that it is necessary to 
discontinue the C-APCs that include single session SRS procedures. We 
continue to believe that the C-APC policy is appropriately applied to 
these surgical procedures for the reasons cited when this policy was 
first adopted and note that the commenters did not provide any 
empirical evidence to support their claims that the existing C-APC 
policy does not adequately pay for these procedures. Also, we will 
continue in CY 2021 to pay separately for the 10 planning and 
preparation services (HCPCS codes 70551, 70552, 70553, 77011, 77014, 
77280, 77285, 77290, 77295, and 77336) adjunctive to the delivery of 
the SRS treatment using either the Cobalt-60-based or LINAC-based 
technology when furnished to a beneficiary within 1 month of the SRS 
treatment for CY 2021.
    Comment: We received one comment requesting that CMS carefully 
consider the proper location of care before establishing a C-APC for 
autologous hematopoietic stem cell transplant.
    Response: We thank the commenter for this comment. This comment 
relates to a recommendation from last year's Advisory Panel on Hospital 
Outpatient Payment (HOP Panel), which recommended that CMS consider 
creating a C-APC for autologous stem cell transplantation and that CMS 
provide a rationale if it decides not to create such an APC. In the CY 
2020 OPPS/ASC final rule with comment period, we evaluated the 
possibility of creating this C-APC and found that it was not 
appropriate to create a C-APC for autologous hematopoietic stem cell 
transplant at that time for the reasons discussed in that rule (84 FR 
61162).
    After consideration of the public comments we received, we are 
finalizing the proposed C-APCs for CY 2021. Table 3 below lists the 
final C-APCs for CY 2021. All C-APCs are displayed in Addendum J to 
this final rule with comment period (which is available via the 
internet on the CMS website). Addendum J to this final rule with 
comment period also contains all of the data related to the C-APC 
payment policy methodology, including the list of complexity 
adjustments and other information for CY 2021.
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c. Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service.

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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 proposed to continue our longstanding policy of limiting the 
aggregate payment for specified less resource-intensive mental health 
services furnished on the same date to the payment for a day of partial 
hospitalization services provided by a hospital, which we consider to 
be the most resource-intensive of all outpatient mental health 
services. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 through 18455) for the initial discussion 
of this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79588 
through 79589), we finalized a policy to combine the existing Level 1 
and Level 2 hospital-based PHP APCs into a single hospital-based PHP 
APC, and thereby discontinue APCs 5861 (Level 1--Partial 
Hospitalization (3 services) for Hospital-Based PHPs) and 5862 (Level--
2 Partial Hospitalization (4 or more services) for Hospital-Based PHPs) 
and replace them with APC 5863 (Partial Hospitalization (3 or more 
services per day)).
    In the CY 2018 OPPS/ASC proposed rule and final rule with comment 
period (82 FR 33580 through 33581 and 59246 through 59247, 
respectively), we proposed and finalized the policy for CY 2018 and 
subsequent years that, when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on a 
single date of service, based on the payment rates associated with the 
APCs for the individual services, exceeds the maximum per diem payment 
rate for partial hospitalization services provided by a hospital, those 
specified mental health services will be paid through composite APC 
8010 (Mental Health Services Composite). In addition, we set the 
payment rate for composite APC 8010 for CY 2018 at the same payment 
rate that will be paid for APC 5863, which is the maximum partial 
hospitalization per diem payment rate for a hospital, and finalized a 
policy that the hospital will continue to be paid the payment rate for 
composite APC 8010. Under this policy, the I/OCE will continue to 
determine whether to pay for these specified mental health services 
individually, or to make a single payment at the same payment rate 
established for APC 5863 for all of the specified mental health 
services furnished by the hospital on that single date of service. We 
continue to believe that the costs associated with administering a 
partial hospitalization program at a hospital represent the most 
resource intensive of all outpatient mental health services. Therefore, 
we do not believe that we should pay more for mental health services 
under the OPPS than the highest partial hospitalization per diem 
payment rate for hospitals.
    We proposed that when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on a 
single date of service, based on the payment rates associated with the 
APCs for the individual services, exceeds the maximum per diem payment 
rate for partial hospitalization services provided by a hospital, those 
specified mental health services would be paid through composite APC 
8010 for CY 2021. In addition, we proposed to set the proposed payment 
rate for composite APC 8010 at the same payment rate that we proposed 
for APC 5863, which is the maximum partial hospitalization per diem 
payment rate for a hospital, and that the hospital continue to be paid 
the proposed payment rate for composite APC 8010.
    We did not receive any public comment on these proposals. 
Therefore, we are finalizing our proposal, without modification, that 
when the aggregate payment for specified mental health services 
provided by one hospital to a single beneficiary on a single date of 
service, based on the payment rates associated with the APCs for the 
individual services, exceeds the maximum per diem payment rate for 
partial hospitalization services provided by a hospital, those 
specified mental health services would be paid through composite APC 
8010 for CY 2021. In addition, we are finalizing our proposal to set 
the payment rate for composite APC 8010 for CY 2021 at the same payment 
rate that we set for APC 5863, which is the maximum partial 
hospitalization per diem payment rate for a hospital.
(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 
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes 
subject to the multiple imaging composite policy and their respective 
families are listed in Table 12 of the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74920 through 74924).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement under section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included under the policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be provided either with or without contrast. 
The five multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs

[[Page 85889]]

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 proposed to continue to pay for all multiple 
imaging procedures within an imaging family performed on the same date 
of service using the multiple imaging composite APC payment 
methodology. We 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 the 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 the 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 the 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.
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal to continue the use of multiple imaging 
composite APCs to pay for services providing more than one imaging 
procedure from the same family on the same date, without modification. 
Table 4 lists the HCPCS codes that will be subject to the multiple 
imaging composite APC policy and their respective families and 
approximate composite APC final geometric mean costs for CY 2021.
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3. Changes to Packaged Items and Services
a. Background and Rationale for Packaging in the OPPS
    Like other prospective payment systems, the OPPS relies on the 
concept of averaging to establish a payment rate for services. The 
payment may be more or less than the estimated cost of providing a 
specific service or a bundle of specific services for a particular 
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 
for the item.
    Packaging also encourages hospitals to effectively negotiate with 
manufacturers and suppliers to reduce the purchase price of items and 
services or to explore alternative group purchasing arrangements, 
thereby encouraging the most economical health care delivery. 
Similarly, packaging encourages hospitals to establish protocols that 
ensure that necessary services are furnished, while scrutinizing the 
services ordered by practitioners to maximize the efficient use of 
hospital resources. Packaging payments into larger payment bundles 
promotes the predictability and accuracy of payment for services over 
time. Finally, packaging may reduce the importance of refining service-
specific payment because packaged payments include costs associated 
with higher cost cases requiring many ancillary items and services and 
lower cost cases requiring fewer ancillary items and services. Because 
packaging encourages efficiency and is an essential component of a 
prospective payment system, packaging payments for items and services 
that are typically integral, ancillary, supportive, dependent, or 
adjunctive to a primary service has been a fundamental part of the OPPS 
since its implementation in August 2000. For an extensive discussion of 
the history and background of the OPPS packaging policy, we refer 
readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66580), the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 74925), the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66817), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70343), the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79592), the CY 2018 OPPS/ASC 
final rule with comment period (82 FR 59250), 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 proposed 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.
    Comment: We received one comment asking CMS for an update regarding 
a comment solicitation from the CY 2018 OPPS/ASC Proposed Rule 
regarding the ``Comment Solicitation on Packaging of

[[Page 85895]]

Items and Services Under the OPPS'' (82 FR 33588).
    Response: We thank the commenter for their inquiry. As noted in our 
response in the CY 2018 OPPS/ASC final rule with comment period, we 
appreciated the comments we received in response to this comment 
solicitation and will take them into consideration as we continue to 
explore and evaluate packaging policies that apply under the OPPS (82 
FR 59254).
    Comment: We received a comment on balancing packaging policy with 
market access concerns after pass-through status expires. The commenter 
noted that some packaging policies create incentives that could limit 
patient access to certain items, services, and care. They requested 
that CMS reconsider packaging policies, especially in the ASC and HOPD 
setting, and review packaging decisions on a case-by-case basis upon 
pass-through status expiration and not via the ``integral to'' policy, 
applying a holistic separate payment policy for innovations. 
Specifically, this commenter asked CMS to evaluate drugs and devices on 
a case-by-case basis in order to determine the item's packaging status 
after pass-through expires. This commenter also stated CMS should take 
into consideration the drug or device's clinical value when determining 
packaging status.
    Response: We thank the commenter for their input. We continue to 
believe our packaging policies support our strategic goal of using 
larger payment bundles to maximize incentives to provide care in the 
most efficient manner. However, we will take this comment into 
consideration for future rulemaking.
    Comment: We received several comments from patient advocates, 
physicians, drug manufacturers, and professional medical societies 
regarding payment for blue light cystoscopy procedures involving 
Cysview[supreg] (hexaminolevulinate HCl) (described by HCPCS code 
C9275). Cysview[supreg] is a drug that functions as a supply in a 
diagnostic test or procedure and therefore payment for this product is 
packaged with payment for the primary procedure in the OPPS and ASC 
settings. Commenters stated that utilization of Cysview[supreg] is low 
in the HOPD and ASC settings, which they attributed to the fact that 
Cysview is packaged as a drug that functions as a supply in a 
diagnostic test or procedure. Commenters indicated that packaged 
payment does not adequately pay for the blue light cystoscopy 
procedures, particularly in the ASC setting where payment is generally 
approximately 55 percent of the HOPD payment. Commenters believe that 
providers have been deterred from the use of this technology, 
especially in the ASC setting, and as a result, a significant 
percentage of beneficiaries are not able to access the procedure.
    Commenters also stated that there has been literature published 
showing that Blue Light Cystoscopy with Cysview[supreg] is more 
effective than white light cystoscopy alone at detecting and 
eliminating nonmuscle invasive bladder cancer tumors, leading to a 
reduction in bladder cancer recurrence.
    Commenters made various recommendations for payment for blue light 
cystoscopy procedures involving Cysview[supreg], including to pay 
separately for Cysview[supreg] when it is used with blue light 
cystoscopy in the HOPD and ASC settings, similar to the policy 
finalized for Exparel[supreg] in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58860), or to utilize our equitable adjustment 
authority at section 1833(t)(2)(E) of the Act to provide an ``add-on'' 
or ``drug intensive'' payment to ASCs when using Cysview[supreg] in 
blue light cystoscopy procedures. Other commenters requested separate 
payment for all diagnostic imaging drugs (radiopharmaceuticals and 
contrast agents).
    Response: We acknowledge the concerns of the numerous stakeholders 
who commented on this issue and understand the importance of blue light 
cystoscopy procedures involving Cysview[supreg]. Cysview has been 
packaged as a drug, biological, or radiopharmaceutical that functions 
as a supply in a diagnostic test or procedure since CY 2014 (78 FR 
74930). As we stated in the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59244), we recognize that blue light cystoscopy 
represents an additional elective but distinguishable service as 
compared to white light cystoscopy that, in some cases, may allow 
greater detection of bladder tumors in beneficiaries relative to white 
light cystoscopy alone. Given the additional equipment, supplies, 
operating room time, and other resources required to perform blue light 
cystoscopy in addition to white light cystoscopy, in CY 2018, we 
created a new HCPCS C-code to describe blue light cystoscopy and since 
CY 2018 have allowed for complexity adjustments to higher paying C-APCs 
for qualifying white light and blue light cystoscopy code combinations. 
At this time, we continue to believe that Cysview[supreg] is a drug 
that functions as a supply in a diagnostic test or procedure, and 
therefore, payment for this drug should be packaged with payment for 
the diagnostic procedure. Therefore, we do not believe it is necessary 
to pay separately for Cysview[supreg] when it is used with blue light 
cystoscopy in either the HOPD or ASC setting. We also do not believe 
that it would be appropriate to utilize our equitable adjustment 
authority at section 1833(t)(2)(E) of the Act to provide an ``add-on'' 
or ``drug intensive'' payment to ASCs when using Cysview[supreg] in 
blue light cystoscopy procedures, as our equitable adjustment authority 
at section (t)(2)(E) only authorizes adjustments under the OPPS, not 
the ASC payment system. We do not have any evidence to show that 
separate payment for blue light cystoscopy procedures involving Cysview 
is required, based on commenter concerns regarding utilization and 
access issues for Cysview. However, we will continue to examine payment 
for blue light cystoscopy procedures involving Cysview to determine if 
any changes to this policy would be appropriate in future rulemaking.
    Comment: Some commenters requested that we eliminate the packaging 
policy for drugs that function as a supply when used in a diagnostic 
test or procedure.
    Response: In the CY 2014 OPPS/ASC final rule with comment period, 
we established a policy to package drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. In particular, we referred to drugs, 
biologicals, and radiopharmaceuticals that function as supplies as a 
part of a larger, more encompassing service or procedure, namely, the 
diagnostic test or procedure in which the drug, biological, or 
radiopharmaceutical is employed (78 FR 74927). At this time, we do not 
believe it is necessary to eliminate this policy. As previously noted, 
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.
    Comment: One commenter requested separate payment for add-on codes 
for Fractional Flow Reserve Studies (FFR/iFR) and Intravascular 
Ultrasound (IVUS). The commenter stated that they believe the packaging 
of these codes will disincentivize physicians to perform these adjunct 
procedures because of cost. The codes are:

[[Page 85896]]

     93571--Intravascular doppler velocity and/or pressure 
derived coronary flow reserve measurement (coronary vessel or graft) 
during coronary angiography including pharmacologically induced stress; 
initial vessel (list separately in addition to code for primary 
procedure);
     93572--Intravascular doppler velocity and/or pressure 
derived coronary flow reserve measurement (coronary vessel or graft) 
during coronary angiography including pharmacologically induced stress; 
each additional vessel (list separately in addition to code for primary 
procedure));
     92978--Endoluminal imaging of coronary vessel or graft 
using intravascular ultrasound (ivus) or optical coherence tomography 
(oct) during diagnostic evaluation and/or therapeutic intervention 
including imaging supervision, interpretation and report; initial 
vessel (list separately in addition to code for primary procedure); and
     92979--Endoluminal imaging of coronary vessel or graft 
using intravascular ultrasound (ivus) or optical coherence tomography 
(oct) during diagnostic evaluation and/or therapeutic intervention 
including imaging supervision, interpretation and report; each 
additional vessel (list separately in addition to code for primary 
procedure)).
    Response: As stated in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66630), we continue to believe that IVUS and FFR are 
dependent services that are always provided in association with a 
primary service. Add-on codes represent services that are integral, 
ancillary, supportive, dependent, or adjunctive items and services for 
which we believe payment is appropriately packaged into payment for the 
primary service that they support. As we have noted in past rules, add-
on codes do not represent standalone procedures and are inclusive to 
other procedures performed at the same time (79 FR 66818). We continue 
to believe it is unnecessary to provide separate payment for the 
previously mentioned add-on codes at this time.
b. Packaging Policy for Non-Opioid Pain Management Therapies
(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 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 met these criteria in CY 2020 was 
Exparel.
(2) Evaluation and CY 2021 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

[[Page 85897]]

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 did 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 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 2021.
    Comment: Multiple commenters, including medical specialty societies 
and drug manufacturers, requested that we pay separately for Exparel 
and other drugs that may function as surgical supplies in the hospital 
outpatient setting. Some of these commenters noted that Exparel is more 
frequently used in this setting and the use of non-opioid pain 
management treatments should also be encouraged in the hospital 
outpatient department. Commenters believed that separate payment in the 
hospital outpatient department would significantly increase 
utilization, which would be beneficial in reducing opioid use.
    Response: As we stated in the CY 2019 and CY 2020 OPPS/ASC final 
rules with comment period (83 FR 58856 and 84 FR 61177, respectively), 
we do not believe that there is sufficient evidence that non-opioid 
pain management drugs should be paid separately in the hospital 
outpatient setting at this time. The commenters did not provide 
convincing evidence that the OPPS packaging policy for Exparel (or 
other non-opioid drugs) creates a barrier to use of Exparel in the 
hospital setting. Further, while we received some public comments 
suggesting that, as a result of using Exparel in the OPPS setting, 
providers may prescribe fewer opioids for Medicare beneficiaries, we do 
not believe that the OPPS payment policy presents a barrier to use of 
Exparel or affects the likelihood that providers will prescribe fewer 
opioids in the HOPD setting. Several drugs are packaged under the OPPS 
and payment for such drugs is included in the payment for the 
associated primary procedure. We were not persuaded by the information 
supplied by commenters suggesting that some providers avoid use of non-
opioid alternatives in the outpatient hospital setting (including 
Exparel) solely because of the OPPS packaged payment policy, as there 
was no evidence in our review and evaluation of claims data in the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61176 through 
61180) 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. As 
noted above, 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 policy. Based on previously conducted 
analysis, we observed increasing Exparel utilization in the HOPD 
setting with the total units increasing from 14.8 million in 2018 to 
19.5 million in 2019, despite the drug payment being packaged into the 
procedure payment in the OPPS setting. This upward trend has been 
consistent since 2015, as the data shows approximately 6.5 million 
total units in 2015 and 8.1 million total units in 2016. Therefore, we 
do not believe that the current OPPS payment methodology for Exparel or 
other non-opioid pain management drugs presents a widespread barrier to 
their use.
    In addition, increased use in the hospital outpatient setting not 
only supports the notion that the packaged payment for Exparel is not 
causing an access to care issue, but also that the payment rate for 
primary procedures in the HOPD using Exparel adequately reflects the 
cost of the drug. That is, because Exparel is commonly used and billed 
under the OPPS, the APC rates for the primary procedures reflect such 
utilization. Therefore, the increased utilization in the OPPS setting 
seems to indicate that the payment amount is sufficient for hospitals 
to furnish the drug. We remind readers that the OPPS is a prospective 
payment system, not a cost-based system and, by design, is based on a 
system of averages under which payment for certain cases may exceed the 
costs incurred, while for others, it may not. The OPPS packages 
payments for multiple interrelated items and services into a single 
payment to create incentives for hospitals to furnish services most 
efficiently and to manage their resources with maximum flexibility. Our 
packaging policies support our strategic goal of using larger payment 
bundles in the OPPS to maximize hospitals' incentives to provide care 
in the most efficient manner. We continue to invite stakeholders to 
share evidence, such as published peer-reviewed literature, on these 
non-opioid alternatives. We also intend to continue to analyze the 
evidence and monitor utilization of non-opioid alternatives in the HOPD 
setting for potential future rulemaking.
    Comment: Some commenters encouraged CMS to establish permanent 
separate payment for drugs that are currently on drug pass-through 
status in

[[Page 85898]]

the OPPS and ASC settings, such as Dexycu (HCPCS code J1095). Regarding 
Dexycu specifically, the commenters stated they were conducting a new, 
comprehensive study of a longitudinal claim dataset that will provide 
deeper insights into the association between cataract surgery and 
opioid utilization, as well as the role of Dexycu in reducing the 
prescribing of opioids.
    Response: We refer readers to section V.A., ``OPPS Transitional 
Pass-Through Payment for Additional Costs of Drugs, Biologicals, and 
Radiopharmaceuticals'' of this final rule with comment period regarding 
pass-through payments under the OPPS. Dexycu will receive separate 
payment due to its drug pass-through status through CY 2021. We will 
determine whether separate payment for this drug should be applied 
under the policy to pay separately for non-opioid pain management drugs 
that function as a surgical supply when furnished in the ASC setting 
when Dexycu's pass-through status expires. We thank commenters for 
conducting studies regarding their specific products and look forward 
to reviewing the results.
    Comment: Several commenters requested that the drug Omidria, CPT 
J1097, (phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml ophthalmic 
irrigation solution, 1 ml), be excluded from the OPPS policy to package 
drugs that function as surgical supplies once its pass-through status 
expires on September 30, 2020. Omidria is indicated for maintaining 
pupil size by preventing intraoperative miosis and reducing 
postoperative ocular pain in cataract or intraocular surgeries. The 
commenters stated that there is extensive clinical evidence and medical 
literature which supports their claims that Omidria reduces dependence 
on opioids for patients undergoing cataract surgery and postoperative 
prescription opioids. The commenters asserted that Omidria meets all of 
the requirements in regulation to qualify for separate payment in the 
ASC setting, as Omidria is FDA-approved for intraocular use in cataract 
procedures, a pain management drug, a non-opioid, and functions as a 
surgical supply during cataract surgery according to CMS' definition of 
a surgical supply. Commenters asserted that the use of Omidria 
decreases patients' need for fentanyl during surgeries and provided a 
manuscript stating that Omidria reduces opioid use based on pill counts 
after surgery.
    Response: We thank commenters for their feedback on Omidria. 
Omidria received pass-through status for a 3-year period from 2015 to 
2017. After expiration of its pass-through status, payment for Omidria 
was packaged under both the OPPS and the ASC payment system. 
Subsequently, Omidria's pass-through status under the OPPS was 
reinstated beginning on October 1, 2018 through September 30, 2020, as 
required by 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), which means that Omidria continued to be paid separately 
under the ASC payment system through September 30, 2020.
    Our previous review of the clinical evidence submitted indicated 
that the studies the commenter supplied were not sufficient to 
demonstrate that Omidria reduces opioid use. Moreover, the results of a 
CMS analysis of cataract procedures performed on Medicare beneficiaries 
in HOPDs and ASCs between January 2015 and July 2019, which compared 
procedures performed with Omidria to procedures performed without 
Omidria, did not demonstrate a significant decrease in fentanyl 
utilization during the cataract surgeries in the HOPDs and ASCs when 
Omidria was used. Our findings also did not suggest any decrease in 
opioid utilization post-surgery for procedures involving Omidria.
    However, we will continue to apply separate payment for non-opioid 
pain management drugs that function as surgical supplies when furnished 
in the ASC setting for CY 2021, as discussed in section XIII.D.3, and 
as we have described in regulation at 42 CFR 416.164 and 416.171(b)(1). 
After careful consideration of the commenters' assertion that Omidria 
meets this definition, we believe that Omidria does qualify as a non-
opioid pain management drug that functions as a surgical supply and are 
excluding Omidria from packaging under the ASC payment system beginning 
October 1, 2020 and in CY 2021, in accordance with this policy.
    Comment: Two commenters briefly mentioned the drug IV acetaminophen 
(CPT code J0131), which they believe may reduce opioid usage if CMS 
paid separately for the drug. These commenters believed IV 
acetaminophen decreases use of post-operative opioids.
    Response: We thank commenters for their comments. We do not find it 
appropriate to pay separately for IV acetaminophen as suggested by the 
commenters due to our drug packaging threshold policies. We remind 
stakeholders of our drug packaging threshold policies, as described in 
section V.B.1.a to this final rule with comment period. In accordance 
with section 1833(t)(16)(B) of the Act, we finalized our proposal to 
set the drug packaging threshold for CY 2021 to $130. To the extent 
that the items and services mentioned by the commenters are effective 
alternatives to opioid prescriptions, we encourage providers to use 
them when medically necessary. Additionally, please see section 
XIII.D.3 for a full discussion on our policies in the ASC setting.
    Comment: Commenters suggested modified payment for ``pain block'' 
CPT codes 64415, 64416, 64417, 64445, 64446, 64447, 64448, and 64450. 
Two commenters stated that providers use these pain blocks to mitigate 
the post-operative pain that is otherwise typically addressed with 
short-term opioid use. Additionally, a few commenters stated that CPT 
code J1096 (Dexamethasone, lacrimal ophthalmic insert, 0.1 mg) used for 
treatment of ocular inflammation and pain following ophthalmic surgery 
is administered through CPT code 0356T (Insertion of drug-eluting 
implant (including punctal dilation and implant removal when performed) 
into lacrimal canaliculus, each). These commenters felt CPT code 0356T, 
which describes the administration of the drug, should also receive 
separate or additional payment due to the purported clinical benefits 
of the drug, including treatment of pain.
    Response: We thank the commenters for their suggestions. At this 
time, we have not found compelling evidence for the non-opioid pain 
management alternatives described above to warrant separate or modified 
payment under the OPPS or ASC payment systems for CY 2021. 
Additionally, we do not believe that the ``pain blocks'' described by 
stakeholders qualify as non-opioid pain management drugs that function 
as a surgical supply as the codes provided by stakeholders are used to 
describe procedures under the OPPS and not drugs. To the extent that 
the items and services mentioned by the commenters are effective 
alternatives to opioid prescriptions, we encourage providers to use 
them when medically necessary. For a greater discussion of CPT code 
0356T, please see section III. D. (Administration of Lacrimal 
Ophthalmic Insert Into Lacrimal Canaliculus (APC 5692)) of this final 
rule with comment period.
    Comment: Commenters also requested separate payments for various 
non-opioid pain management treatments, such as ERAS[supreg] protocols 
or spinal cord stimulators (SCS), that they believe decrease the number 
of opioid prescriptions beneficiaries receive during and following an 
outpatient visit or procedure. For SCS, several commenters noted that 
this therapy may lead to a reduction in the use of opioids

[[Page 85899]]

for chronic pain patients. They noted that neurostimulation is a key 
alternative to opioid prescription for pain management and recommended 
that CMS increase access to SCS.
    Response: We appreciate the commenters' information on this topic. 
At this time, we have not found compelling evidence for the non-opioid 
pain management alternatives described above to warrant separate 
payment under the OPPS or ASC payment systems for CY 2021. However, we 
plan to take these comments and suggestions into consideration for 
future rulemaking. We agree that providing incentives to avoid or 
reduce opioid prescriptions may be one of several strategies for 
addressing the opioid epidemic. To the extent that the items and 
services mentioned by the commenters are effective alternatives to 
opioid drugs, we encourage providers to use them when medically 
appropriate.
    We look forward to working with stakeholders as we further consider 
suggested refinements to the OPPS and the ASC payment system that will 
encourage use of medically necessary items and services that have 
demonstrated efficacy in decreasing opioid prescriptions and/or opioid 
abuse or misuse during or after an outpatient visit or procedure.
    After consideration of the public comments we received, we are 
finalizing the proposed policy, without modification, to unpackage and 
pay separately at ASP+6 percent for the cost of non-opioid pain 
management drugs that function as surgical supplies when they are 
furnished in the ASC setting for CY 2021. We will continue to analyze 
the issue of access to non-opioid pain management alternatives in the 
OPPS and the ASC settings as part of any subsequent reviews we conduct 
under section 1833(t)(22)(A)(ii). We are continuing to examine whether 
there are other non-opioid pain management alternatives for which our 
payment policy should be revised to allow separate payment. We will be 
reviewing evidence-based support, such as published peer-reviewed 
literature, that we could use to determine whether these products help 
to deter or avoid prescription opioid use and addiction as well as 
evidence that the current packaged payment for such non-opioid 
alternatives presents a barrier to access to care and therefore 
warrants revised, including possibly separate, payment under the OPPS. 
This policy is also discussed in section XIII.D.3 of this final rule 
with comment period.
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 (DOS) 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. Sec.  [thinsp]419.2(b) and 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. L. 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 the same DOS 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

[[Page 85900]]

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 through 79594).
(2) Current Categories of Clinical Diagnostic Laboratory Tests Excluded 
From OPPS Packaging
    As we discussed in the CY 2021 OPPS/ASC proposed rule (85 FR 
48798), 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 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) 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 
tests (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. As we noted in the CY 2021 OPPS/ASC 
proposed rule, 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 Cancer-Related Protein-Based MAAAs
    As discussed in the CY 2021 OPPS/ASC proposed rule (85 FR 49032), 
we have continued to consider previous stakeholder requests to exclude 
some protein-based MAAAs from the OPPS packaging policy. We stated 
that, 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 previously in the CY 2021 OPPS/ASC proposed rule and in 
this section of the final rule, 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 case they are not tied to the same hospital 
outpatient encounter during which the specimen was collected.
    For these reasons, we proposed to exclude cancer-related protein-
based MAAAs from the OPPS packaging policy and pay for them separately 
under the CLFS.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48799), we explained 
that 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\ Additionally, the AMA CPT 2020 manual provides a MAAA code 
descriptor format which includes several specific characteristics, 
including but not limited to disease type (for example, oncology, 
autoimmune, tissue rejection), and material(s) analyzed (for example, 
DNA, RNA, protein, antibody). We noted that 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 potentially instructive tool to 
identify cancer-related MAAA tests that are ``protein-based''. 
Accordingly, in following the AMA CPT 2020 manual intent to identify 
MAAA tests that are cancer-related, and, of those tests, identifying 
the ones whose test analytes are 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 the CY 
2021 OPPS/ASC proposed rule and in this section of the final rule, 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. As such, we proposed to assign status 
indicator ``A'' (``Not paid under OPPS. Paid by MACs under a fee 
schedule or payment system other than

[[Page 85901]]

OPPS'') to cancer-related protein-based MAAAs as described by CPT codes 
81500, 81503, 81535, 81536, and 81539. We also proposed that we would 
apply this policy to cancer-related protein-based MAAAs that do not 
currently exist, but that are developed in the future. Additionally, we 
stated that we intend to continue to study the list of laboratory tests 
excluded from the OPPS packaging policy and determine whether any 
additional changes are warranted and may consider proposing future 
changes to the laboratory DOS policy through notice-and-comment 
rulemaking.
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    In the CY 2021 OPPS/ASC proposed rule (85 FR 49032), we noted that 
commenters to the CY 2018 OPPS/ASC proposed 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, we stated 
that we believed that 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 stated that we believed that payment for CPT code 81490 
remains appropriately packaged under the OPPS.
    We refer readers to section XVIII. of the CY 2021 OPPS/ASC proposed 
rule and section XVIII. of this final rule with comment period, which 
describe the related proposal to revise the laboratory DOS policy for 
cancer-related protein-based MAAAs.
    We received public comments on the proposal to exclude cancer-
related protein-based MAAAs from the OPPS packaging policy and pay for 
them separately under the CLFS. The following is a summary of the 
comments we received and our responses.
    Comment: Generally, commenters supported the proposal to exclude 
cancer-related protein-based MAAAs from the OPPS packaging policy and 
add them to the list of test codes subject to the laboratory DOS 
exception for the hospital outpatient setting, leading to the test 
being paid at the CLFS rate and requiring that the laboratory bill 
Medicare for the test instead of seeking payment from the hospital. 
Commenters stated that changes to this policy will lead to improved 
beneficiary access to diagnostic tests while also reducing hospital 
administrative burden.
    Response: We appreciate the support from commenters for our 
proposed revisions to the OPPS packaging policy for CDLTs. We agree 
that the revisions to the laboratory DOS policy that we proposed in the 
CY 2021 OPPS/ASC proposed rule and finalized in section XVIII of this 
final rule with comment period may potentially serve to reduce delay in 
access to laboratory tests by minimizing the likelihood that a hospital 
will postpone ordering a test until at least 14 days after the patient 
is discharged from the hospital outpatient department, or even cancel 
the order in order to avoid having to bill Medicare for the test under 
the laboratory DOS policy.
    Comment: In addition to excluding the cancer-related protein-based 
MAAAs from OPPS packaging, several commenters suggested a similar 
change for pathology tests. Specifically, they recommended revising the 
existing laboratory test packaging policy to allow separate payment 
under the CLFS for the technical component of pathology tests.
    Response: We appreciate the feedback and will consider the issue 
for future rulemaking.
    Comment: Some commenters recommended further expansion of the list 
of test codes excluded from OPPS packaging to include various other 
CDLTs, including all protein-based MAAAs, AMA CPT Proprietary 
Laboratory Analyses (PLA) test codes that may have similar 
characteristics to AMA CPT MAAA tests but are not currently categorized 
as AMA CPT MAAA test codes, and several specific CPT test codes, 
including the OVERA test from Aspira Labs (CPT 0003U), EPI assay by 
Bio-Techne (CPT 0005U), TissueCypher assay from Cernostics (CPT 0108U), 
and KidneyIntelX (CPT 0105U).
    Commenters also noted that while PLA test codes are not 
automatically included in the outpatient laboratory test packaging 
exclusion, some tests described by PLA codes are included under these 
policies if they qualify as a molecular pathology test or Criterion A 
ADLT. Therefore, the commenters asserted that CMS should continue its 
historical practice of applying the laboratory test packaging exclusion 
to PLA test codes as occurs with molecular pathology tests and ADLTs 
that have been assigned PLA codes.
    Response: We believe that the commenters' suggested modifications 
to the list of codes excluded from OPPS packaging to include various 
CDLTs, including all protein-based MAAAs, AMA CPT PLA test codes that 
may have similar characteristics to AMA CPT MAAA tests but are not 
currently categorized as AMA CPT MAAA codes, and several specific AMA 
CPT test codes, are inconsistent with the current OPPS packaging policy 
and would result in allowing the laboratory to bill Medicare directly 
for a test that should be incorporated into the hospital OPPS bundled 
rate. CMS does not believe that all AMA CPT PLA test codes demonstrate 
a different pattern of clinical use that makes them less tied to the 
primary service in the hospital outpatient setting such that they 
should be included in the list of codes excepted from the OPPS 
packaging policy. Commenters asserted that these tests, as a group, 
should be excluded from OPPS packaging policy because the results of 
these tests may inform future interventions beyond the hospital 
outpatient encounter during which the specimen was collected and may be 
used by other health care providers to developed long-term plans for 
treatment. However, we are not convinced based on the commenters' 
descriptions of these tests that they are generally unconnected to the 
hospital encounter, the chief requirement for exclusion from OPPS 
packaging. Although commenters noted that the recommended tests may be 
utilized for the development of longer-term treatment plans, it is not 
clear that the clinical usage of these tests reaches the threshold of 
being ``generally unconnected'' to the hospital encounter.
    Any addition to the list of test codes excluded from OPPS packaging 
requires careful evaluation as to whether a different pattern of 
clinical use makes a test generally less tied to a primary service in 
the hospital outpatient setting than the more common and routine 
laboratory tests that we package. For instance, as noted in the CY 2021 
OPPS/ASC proposed rule (85 FR 49035), in response to the changes in the 
laboratory DOS policy outlined in the CY 2018 OPPS/ASC final rule with 
comment period, stakeholders stated that some entities performing 
molecular pathology testing included on the list of codes excluded from 
OPPS packaging and subject to the laboratory DOS exception, such as 
blood banks and blood centers, may perform molecular pathology testing 
to enable hospitals to prevent adverse conditions associated with blood 
transfusions, rather than perform molecular pathology testing for 
diagnostic purposes. This led us to consider whether the molecular 
pathology testing performed by blood banks and centers is appropriately 
separable from the hospital stay.
    We do not believe all protein-based MAAAs would meet this standard 
for exclusion from OPPS packaging. CMS has considered expanding the 
list of codes excluded from OPPS packaging to

[[Page 85902]]

include various additional categories of codes, including protein-based 
MAAAs. However, we note that some protein-based MAAAs include simple 
and commonly used protein analytes that may also be commonly performed 
to assist in managing patient care during a hospital outpatient 
encounter. Therefore, we believe that we cannot conclude that this 
category of tests is generally less tied to a primary service in the 
hospital outpatient setting, as some protein-based MAAA tests use 
common routine protein analytes that are appropriately packaged into 
OPPS payment. For these reasons, CMS does not believe that all protein-
based MAAAs should be included in the list of codes excluded from the 
OPPS packaging policy.
    However, we note that a protein-based MAAA that is designated by 
CMS as an ADLT under paragraph (1) of the definition of an ADLT in 
Sec.  414.502 would be added to the list of codes excluded from OPPS 
packaging, in accordance with our established policy.
    Comment: Commenters also recommended that we exclude a particular 
protein-based MAAA test described by CPT code 81490 from the OPPS 
packaging policy. Commenters asserted that the use of the test 
described by CPT code 81490 is unconnected to the hospital outpatient 
encounter during which the specimen is collected and that the results 
of the test are used to determine potential future interventions 
outside of the hospital outpatient encounter. Commenters stated that 
this test appears to be generally less tied to a primary service in the 
hospital outpatient setting and does not appear to be a common or 
routine laboratory test that would otherwise be packaged into OPPS 
payment.
    Response: In the CY 2021 OPPS/ASC proposed rule (85 FR 48799), we 
stated that we believed 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 stated that we believed that payment for CPT code 81490 
remains appropriately packaged under the OPPS.
    However, given commenter feedback, we are convinced that the 
pattern of clinical use for CPT code 81490 is generally unconnected to 
the hospital outpatient encounter during which the specimen is 
collected as it is typically used to determine potential interventions 
outside of the hospital outpatient encounter and is generally used by 
the rheumatologist to make longer-term changes in RA treatment. 
Commenters informed us that physicians and patients utilize the 
objective information provided by the results of the test to make 
longer-term modifications in treatment, to monitor disease activity, 
and to prevent joint damage progression, and the results generally 
would not be utilized for purposes of the hospital outpatient 
encounter. The commenters further stated that the output of the test is 
used to assess disease activity, including evaluating response to 
therapy, directing choice of second-line treatment in patients with 
inadequate response to the current first line therapy, and identifying 
patients in stable remission for therapy reduction. The test results 
appear to guide longer-term therapies and treatments; therefore, we 
believe that this test, identified by CPT code 81490, is generally less 
tied to the primary service the patient receives in the hospital 
outpatient setting and does not appear to be a common or routine 
laboratory test that would otherwise be packaged into OPPS payment. 
Consequently, we believe that CPT code 81490 should be excluded from 
OPPS packaging policy.
    As stated previously, we intend to continue to study the list of 
laboratory tests excluded from the OPPS packaging policy to determine 
whether any additional changes are warranted and may consider proposing 
future changes to this policy and the laboratory DOS policy through 
notice-and-comment rulemaking.
    In conclusion, we continue to believe that cancer-related protein-
based MAAAs, that is, those represented by CPT codes 81500, 81503, 
81535, 81536 and 81539, appear to have a different pattern of clinical 
use that 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. We also believe that, given the similarity in 
its clinical pattern of use to the cancer-related protein-based MAAAs, 
CPT code 81490 should also be added to the list of codes excluded from 
the OPPS packaging and subject to the laboratory DOS exception at Sec.  
414.510(b)(5), which is discussed in section III.XX in this final rule. 
For the reasons discussed, we are revising the list of test codes 
excluded from the OPPS packaging policy to include CPT codes 81500, 
81503, 81535, 81536, 81539, and 81490. We are also finalizing that we 
will exclude cancer-related protein-based MAAAs that do not currently 
exist, but that are developed in the future, from the OPPS packaging 
policy.
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 proposed 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 
proposed to continue to standardize all of the relative payment weights 
to APC 5012. We believe that standardizing relative payment weights to 
the geometric mean of the APC to which HCPCS code G0463 is assigned 
maintains consistency in calculating unscaled weights that represent 
the cost of some of the most frequently provided OPPS services. For

[[Page 85903]]

CY 2021, as we did for CY 2020, we proposed to assign APC 5012 a 
relative payment weight of 1.00 and to divide the geometric mean cost 
of each APC by the geometric mean cost for APC 5012 to derive the 
unscaled relative payment weight for each APC. The choice of the APC on 
which to standardize the relative payment weights does not affect 
payments made under the OPPS because we scale the weights for budget 
neutrality.
    We 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 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 proposed 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 
proposed to apply the same process using the estimated CY 2021 unscaled 
relative payment weights rather than scaled relative payment weights. 
We proposed 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 proposed 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 proposed to adjust the calculated CY 2021 unscaled 
relative payment weights for purposes of budget neutrality. We proposed 
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 the CY 2021 OPPS/ASC 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 the CY 2021 OPPS/ASC 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.
    We did not receive any public comments on the proposed weight 
scalar calculation. Therefore, we are finalizing our proposal to use 
the calculation process described in the proposed rule, without 
modification, for CY 2021. Using updated final rule claims data, we are 
updating the estimated CY 2021 unscaled relative payment weights by 
multiplying them by a weight scalar of 1.4341 to ensure that the final 
CY 2021 relative payment weights are scaled to be budget neutral. The 
final CY 2021 relative payments weights listed in Addenda A and B to 
this final rule with comment period (which are available via the 
internet on the CMS website) were scaled and incorporate the 
recalibration adjustments discussed in sections II.A.1. and II.A.2. of 
this final rule with comment period.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. 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. Accordingly, we proposed a CY 2021 OPD fee schedule increase 
factor of 3.0 percent.
    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

[[Page 85904]]

applying the MFP adjustment, and then revised this methodology, as 
discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). In the 
FY 2021 IPPS/LTCH PPS proposed rule (85 FR 32739), the proposed MFP 
adjustment for FY 2021 was 0.4 percentage point.
    Therefore, we proposed that the MFP adjustment for the CY 2021 OPPS 
would be 0.4 percentage point. We also proposed that if more recent 
data become subsequently available after the publication of the CY 2021 
OPPS/ASC proposed rule (for example, a more recent estimate of the 
market basket increase and/or the MFP adjustment), we would 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 proposed 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 proposed 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 proposed to 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 proposed 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 proposed 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 proposed 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 stated in the proposed 
rule that we believed it was appropriate to ensure that the proposed 
wage index transition policy (that is, the proposed CY 2021 5 percent 
cap on wage index decreases) did not increase estimated aggregate 
payments under the OPPS beyond the payments that would be made without 
this transition policy. We proposed 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. We stated in the proposed rule that 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).
    We did not receive any public comments on our proposed methodology 
for calculating the wage index budget neutrality adjustment as 
discussed above. Therefore, for the reasons discussed above and in the 
CY 2021 OPPS/ASC proposed rule (85 FR 48801), we are finalizing our 
methodology for calculating the wage index budget neutrality adjustment 
as proposed, without modification. For CY 2021, based on updated data 
for this final rule with comment period, we are finalizing an overall 
budget neutrality factor of 1.0012 for wage index changes. This 
adjustment is comprised of a 1.0020 budget neutrality adjustment using 
our standard calculation of comparing total estimated payments from our 
simulation model using the final 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 0.9992 budget neutrality 
adjustment for the CY 2021 5 percent cap on wage index decreases to 
ensure that this transition wage index is implemented in a budget 
neutral manner.
    For the CY 2021 OPPS, we proposed to maintain the current rural 
adjustment policy, as discussed in section II.E. of the CY 2021 OPPS/
ASC proposed rule. Therefore, the proposed budget neutrality factor for 
the rural adjustment was 1.0000.
    We proposed to continue previously established policies for 
implementing the cancer hospital payment adjustment described in 
section 1833(t)(18) of the Act, as discussed in section II.F. of the CY 
2021 OPPS/ASC proposed rule. We proposed 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 proposed to apply a budget 
neutrality adjustment factor of 1.0000 to the conversion factor for the 
cancer hospital payment adjustment. In accordance with section 
1833(t)(18)(C), as added by section 16002(b) of the 21st Century Cures 
Act (Pub. L. 114-255), we

[[Page 85905]]

proposed to apply 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 the 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, we stated 
that 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 estimated 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 at a net 
rate of ASP minus 28.7 percent. Applying the proposed payment policy 
for drugs purchased under the 340B Program, as described in section 
V.B.6. of the CY 2021 OPPS/ASC proposed rule, would have resulted 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 proposed 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 estimated 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 the CY 2021 OPPS/ASC proposed rule, we also proposed that 
hospitals that fail to meet the reporting requirements of the Hospital 
OQR Program would continue to be subject to a further reduction of 2.0 
percentage points to the OPD fee schedule increase factor. For 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we proposed to make all other adjustments discussed above, but 
use a reduced OPD fee schedule update factor of 0.6 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 proposed 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 proposed 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 proposed 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, the proposed budget 
neutrality adjustment of 1.0085 applying the proposed payment 
methodology of ASP minus 28.7 percent for CY 2021 for drugs purchased 
under the 340B Program, and the proposed adjustment of 0.05 percentage 
point of projected OPPS spending for the difference in pass-through 
spending that resulted in a proposed conversion factor for CY 2021 of 
$83.697.
    Comment: One commenter suggested that we eliminate the MFP 
adjustment because of economic uncertainty as a result of the COVID-19 
pandemic. The commenter stated that CMS rules for fiscal year 2021 had 
a 0.0 percent multifactor productivity adjustment.
    Response: We note that under section 1886(b)(3)(B)(xi)(I) of the 
Act, the Secretary is required to reduce the hospital market basket 
percentage increase by the 10-year moving average of changes in annual 
economy-wide, private nonfarm business MFP.
    Comment: Multiple commenters supported our proposed CY 2021 OPD fee 
schedule increase factor percentage increase of 2.6 percent.
    Response: We appreciate the support of the commenters.
    After reviewing the public comments we received, we are finalizing 
these proposals with modification. For CY 2021, we proposed to continue 
previously established policies for implementing the cancer hospital 
payment adjustment described in section 1833(t)(18) of the Act 
(discussed in section II.F. of this final rule with comment period). 
Based on the final rule updated data used in calculating the cancer 
hospital payment adjustment in section II.F. of this final rule with 
comment period, the target payment-to-cost ratio for the cancer 
hospital payment adjustment, which was 0.89 for CY 2020, is also 0.89 
for CY 2021. As a result, we are applying a budget neutrality 
adjustment factor of 1.0000 to the conversion factor for the cancer 
hospital payment adjustment. We are implementing our alternative 
proposal for CY 2021 for the payment of drugs acquired through the 340B 
program. Drugs obtained through the 340B program will be paid at a net 
rate of ASP minus 22.5 percent. This has been the payment rate for 
drugs acquired through the 340B program in the OPPS since the policy 
was initially established in CY 2018. Since there is no change in the 
net payment rate, the final budget neutral adjustment factor regarding 
the payment of drugs acquired through the 340B program is 1.0000.
    For this CY 2021 OPPS/ASC final rule with comment period, as 
published in the FY 2021 IPPS/LTCH PPS final rule, based on IGI's 2020 
second quarter forecast with historical data through the first quarter 
of 2020, the hospital market basket update for CY 2021 is 2.4 percent.
    As described in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58797), 
it has typically been our practice to base the projection of the market 
basket price proxies and MFP for the IPPS/LTCH final rule on the second 
quarter IGI forecast. At the time of the FY 2021 IPPS/LTCH final rule, 
the 10-year moving average growth of MFP for FY 2021 based on IGI's 
second quarter 2020 forecast was 0.7 percentage point. However, for the 
FY 2021 IPPS/LTCH final rule, we finalized the use of the IGI June 2020 
macroeconomic forecast for MFP because it represented a more recent 
forecast, and we believed it was important to use more recent data 
during this period when economic trends, particularly employment and 
labor productivity, are notably uncertain because of the COVID-19 
pandemic. Based on these more recent data available for the FY 2021 
IPPS/LTCH final rule, the current estimate of the 10-year moving 
average growth of MFP for FY 2021 was -0.1 percentage point (85 FR 
58797).

[[Page 85906]]

    Mechanically subtracting the negative 10-year moving average growth 
of MFP from the hospital market basket percentage increase using the 
data from the IGI June 2020 macroeconomic forecast would have resulted 
in a 0.1 percentage point increase in the FY 2021 market basket update. 
However, we explained that under section 1886(b)(3)(B)(xi)(I) of the 
Act, the Secretary is required to reduce (not increase) the hospital 
market basket percentage increase by changes in economy-wide 
productivity. Accordingly, we applied a 0.0 percent MFP adjustment to 
the FY 2021 IPPS market basket percentage increase.
    Section 1833(t)(3)(F)(i) of the Act also requires us to reduce (not 
increase) the OPD fee schedule increase factor by the MFP adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. Accordingly, we 
are applying a 0.0 percentage point MFP adjustment to the CY 2021 OPD 
fee schedule increase factor for the OPPS.
    As a result of these finalized policies, the OPD fee schedule 
increase factor for the CY 2021 OPPS is 2.4 percent (which reflects the 
2.4 percent final estimate of the hospital inpatient market basket 
percentage increase with a 0.0 percentage point MFP adjustment since 
the 10-year moving average growth in MFP was estimated to be less than 
0.0 percent). For CY 2021, we are using a conversion factor of $82.797 
in the calculation of the national unadjusted payment rates for those 
items and services for which payment rates are calculated using 
geometric mean costs; that is, the OPD fee schedule increase factor of 
2.4 percent for CY 2021, the required wage index budget neutrality 
adjustment of 1.0012, the budget neutrality adjustment of 1.0000 
applying the final payment methodology for drugs purchased under the 
340B Program for CY 2021 of ASP minus 22.5 percent, and the adjustment 
of 0.04 percentage point of projected OPPS spending for the difference 
in pass-through spending that results in a conversion factor for CY 
2021 of $82.797.
    We also are finalizing our proposal to amend the 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.

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust the portion of payment and 
coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion 
of the OPPS payment rate is called the OPPS labor-related share. Budget 
neutrality is discussed in section II.B. of the CY 2021 OPPS/ASC 
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 proposed to continue this policy for 
the CY 2021 OPPS (85 FR 48802). We referred readers to section II.H. of 
the CY 2021 OPPS/ASC 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. We did not receive any public comments on 
this proposal. Accordingly, for the reasons discussed above and in the 
CY 2021 OPPS/ASC proposed rule, we are finalizing our proposal, without 
modification, to continue this policy for the CY 2021 OPPS.
    As discussed in the claims accounting narrative included with the 
supporting documentation for this final rule with comment period (which 
is available via the internet on the CMS website), for estimating APC 
costs, we are standardizing 60 percent of estimated claims costs for 
geographic area wage variation using the same FY 2021 pre-reclassified 
wage index that we 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 proposed to implement this provision in the same manner as we 
have since CY 2011 (85 FR 48802). 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 referred 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. We did not receive any public 
comments on this proposal. Accordingly, for the reasons discussed above 
and in the CY 2021 OPPS/ASC proposed rule, we are finalizing our 
proposal, without modification, to continue to implement the frontier 
State floor under the OPPS in the same manner as we have since CY 2011.
    In addition to the changes required by the Affordable Care Act, we 
noted in the CY 2021 OPPS/ASC proposed rule (85

[[Page 85907]]

FR 48802) that the 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 referred 
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 2021 IPPS/LTCH PPS final rule (85 FR 58743), the 
Office of Management and Budget (OMB) issued revisions to the labor 
market area delineations on February 28, 2013 (based on 2010 Decennial 
Census data), that included a number of significant changes, such as 
new Core Based Statistical Areas (CBSAs), urban counties that became 
rural, rural counties that became urban, and existing CBSAs that were 
split apart (OMB Bulletin 13-01). This bulletin can be found at: 
https://obamawhitehouse.archives.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. In the FY 2015 IPPS/LTCH PPS final rule (79 FR 49950 
through 49985), for purposes of the IPPS, we adopted the use of the OMB 
statistical area delineations contained in OMB Bulletin No. 13-01, 
effective October 1, 2014. For purposes of the OPPS, in the CY 2015 
OPPS/ASC final rule with comment period (79 FR 66826 through 66828), we 
adopted the use of the OMB statistical area delineations contained in 
OMB Bulletin No. 13-01, effective January 1, 2015, beginning with the 
CY 2015 OPPS wage indexes. In the FY 2017 IPPS/LTCH PPS final rule (81 
FR 56913), we adopted revisions to statistical areas contained in OMB 
Bulletin No. 15-01, issued on July 15, 2015, which provided updates to 
and superseded OMB Bulletin No. 13-01 that was issued on February 28, 
2013. For purposes of the OPPS, in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79598), we adopted the revisions to the OMB 
statistical area delineations contained in OMB Bulletin No. 15-01, 
effective January 1, 2017, beginning with the CY 2017 OPPS wage 
indexes.
    On August 15, 2017, OMB issued OMB Bulletin No. 17-01, which 
provided updates to and superseded OMB Bulletin No. 15-01 that was 
issued on July 15, 2015. The attachments to OMB Bulletin No. 17-01 
provided detailed information on the update to the statistical areas 
since July 15, 2015, and were based on the application of the 2010 
Standards for Delineating Metropolitan and Micropolitan Statistical 
Areas to Census Bureau population estimates for July 1, 2014 and July 
1, 2015. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
58863 through 58865), we adopted the updates set forth in OMB Bulletin 
No. 17-01, effective January 1, 2019, beginning with the CY 2019 wage 
index.
    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 and final rules (85 FR 32696 through 
32697 and 58743), 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, as we stated in the CY 
2021 OPPS/ASC proposed rule (85 FR 48803), 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 that 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. In the CY 2021 OPPS/
ASC proposed rule, we referred readers to the FY 2021 IPPS/LTCH PPS 
proposed rule for a complete discussion of the revised OMB delineations 
we proposed 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 discussed in 
the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742 through 58755), as we 
proposed, we adopted 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 and 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 further discussed below, in the CY 2021 OPPS/ASC proposed rule 
(85 FR 48803), we proposed to use the FY 2021 IPPS post-reclassified 
wage index including the 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 stated 
in the CY

[[Page 85908]]

2021 OPPS/ASC proposed rule that 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.
    A summary of the comments we received regarding the updated OMB 
delineations and our responses to those comments appear below:
    Comment: One commenter supported our proposed adoption of the 
revised OMB delineations, but several commenters opposed our proposed 
implementation of the revised OMB delineations. These commenters stated 
that CMS is not bound to adopt the revised delineations, and suggested 
that CMS delay adoption of the revised delineations until the 
completion of the 2020 decennial census. Several comments specifically 
cited the lack of advance notice and the significant negative financial 
impacts to hospitals in several counties in the New York-Newark-Jersey 
City MSA resulting from the adoption of the revised delineations. 
Additional commenters recommended that CMS engage further with 
stakeholders to develop more comprehensive wage index reform to address 
the disparities that exist within the current wage index system.
    Response: We appreciate these comments. We refer readers to the FY 
2021 IPPS/LTCH PPS final rule (85 FR 58744 through 58753) for a 
detailed discussion of the implementation of the revised OMB 
delineations and for responses to these and other comments relating to 
the revised delineations.
    Consistent with our longstanding policy, we proposed in the CY 2021 
OPPS/ASC proposed rule (85 FR 48803) to use the FY 2021 IPPS post-
reclassified wage index, which is based on the updated statistical area 
delineations set forth in OMB Bulletin No. 18-04, in determining the 
wage adjustments for both the OPPS payment and copayment rates for CY 
2021. Thus, as discussed in the CY 2021 OPPS/ASC proposed rule (85 FR 
48803), any adjustments for the FY 2021 IPPS post-reclassified wage 
index, including without limitation a one year 5 percent cap on any 
wage index decrease, would be reflected in the final CY 2021 OPPS wage 
index beginning on January 1, 2021. As we explained in the 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. For this reason, as 
discussed later in this section, we are finalizing our proposal to use 
the FY 2021 IPPS post-reclassified wage index and applicable IPPS wage 
index adjustments in determining the wage adjustments for both the OPPS 
payment rate and the copayment rates for CY 2021. As noted above, in 
the FY 2021 IPPS/LTCH PPS final rule (85 FR 58742 through 58755), for 
purposes of calculating the IPPS wage index, we adopted the revised OMB 
delineations as described in OMB Bulletin No. 18-04 effective October 
1, 2020. Thus, effective January 1, 2021, the OPPS wage index also will 
be based on these updated OMB delineations. As we explained in the CY 
2021 OPPS/ASC proposed rule, we believe using the revised delineations 
based on OMB Bulletin No. 18-04 will increase the integrity of the wage 
index system by creating a more accurate representation of geographic 
variations in wage levels.
    We concur with commenters that CMS is not bound by statute to use 
the OMB definitions in calculating the OPPS wage index. However, we 
believe we have broad authority under section 1833(t)(2)(D) of the Act 
to determine the methodology for calculating the OPPS wage index, 
including the labor market areas used for the OPPS wage index. As 
discussed above, we believe using the IPPS post-reclassified wage 
index, which is based on the revised OMB delineations, in determining 
the wage adjustments for both the OPPS payment rate and the copayment 
rate for CY 2021 is reasonable and logical given the inseparable, 
subordinate status of the HOPD within the hospital overall. In 
addition, consistent with our discussion in the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58745), we believe it is important to use the updated 
labor market area delineations in order to maintain a more accurate and 
up-to-date payment system that reflects the reality of current labor 
market conditions. In response to comments citing a lack of advance 
notice provided to hospitals regarding the proposed adoption of the 
revised delineations, as we stated in the FY 2021 IPPS/LTCH PPS final 
rule (85 FR 58746), the delineation files produced by OMB have been 
public for nearly 2 years, and OMB definitions and criteria are subject 
to separate notice and comment rulemaking. Finally, we note that to 
help mitigate significant negative impacts of the revised OMB 
delineations, consistent with the FY 2021 IPPS wage index, the CY 2021 
OPPS wage index will reflect a 5 percent cap on any wage index decrease 
compared to a hospital's final CY 2020 wage index. For these reasons, 
we do not believe it is necessary or appropriate to delay or alter 
implementation of the revised delineations.
    In response to commenters who recommended that CMS engage further 
with stakeholders to develop a more comprehensive wage index reform to 
address wage index disparities, we appreciate the continued interest in 
wage index reform. As we noted in the FY 2021 IPPS/LTCH PPS final rule 
(85 FR 58745), as a first step toward comprehensive wage index reform, 
the FY 2021 President's Budget proposes the Secretary conduct and 
report on a demonstration to improve the Medicare inpatient hospital 
wage index.
    After consideration of the public comments we received, for the 
reasons discussed above and in the CY 2021 OPPS/ASC proposed rule, we 
are finalizing, without modification, our proposal to adopt the revised 
OMB delineations as described in the September 14, 2018 OMB Bulletin 
No. 18-04, and related IPPS wage index adjustments to calculate the CY 
2021 OPPS wage index effective beginning January 1, 2021.
    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

[[Page 85909]]

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.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48803), we proposed 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 rate for CY 2021. 
Therefore, we stated that 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. (In the proposed rule, we 
referred 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, in the proposed rule, we referred readers to 
section II.B. of the CY 2021 OPPS/ASC proposed rule. We stated that 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.
    We received comments regarding certain adjustments included in the 
FY 2021 IPPS post-reclassified wage index (which would be reflected in 
the CY 2021 OPPS wage index). A summary of those comments and our 
responses appear below:
    Comment: Some commenters, while opposing the proposed adoption of 
revised OMB delineations, generally supported the concept of the 5 
percent cap on any wage index decrease for FY 2021 (if the delineations 
are finalized). Some commenters requested that CMS reduce the amount of 
potential reduction in FY 2021, and extend transition adjustments to 
affected hospitals in future years. Other commenters suggested a 
multiple year transition period. One commenter requested that we apply 
the 5 percent cap policy to wage index increases as well.
    Response: We thank the commenters for their suggestions. We refer 
readers to the FY 2021 IPPS/LTCH PPS final rule (85 FR 85753 through 
58755) for a detailed discussion of our rationale for adopting a one 
year 5 percent cap on any wage index decrease and for responses to 
these and other comments regarding this transition wage index.
    As discussed previously, in the CY 2021 OPPS/ASC proposed rule (85 
FR 48803), we proposed to use the FY 2021 IPPS post-reclassified wage 
index, including any adjustments such as the one year 5 percent cap on 
wage index decreases, as the wage index for the OPPS to determine the 
wage adjustments for both the OPPS payment rate and the copayment rate 
for CY 2021. We continue to believe that using the IPPS post-
reclassified wage index, including any adjustments, 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, and thus, as discussed below, we are finalizing this proposal 
without modification.
    In response to the commenter that requested we also apply the 5 
percent cap to wage index increases, we note that as we explained in 
the FY 2021 IPPS/LTCH PPS final rule (85 FR 58753 through 58755), the 
purpose of the 5 percent cap is to mitigate significant wage index 
decreases and provide wage index stability for affected hospitals in 
light of our adoption of the revised OMB delineations. The purpose of 
the 5 percent cap is not to curtail the positive impact of such 
revisions. Thus, we do not think it would be appropriate to apply the 
cap to wage index increases as well.
    Comments: Many commenters thanked CMS for implementing the IPPS low 
wage index hospital policy (pursuant to which CMS increases the IPPS 
wage index for certain low wage index hospitals) beginning in FY 2020 
in response to rural and other health care stakeholders' requests that 
CMS address ``circularity'' in the wage index (the cyclical effect of 
hospitals with relatively high wages receiving higher reimbursement due 
to relatively high wage indexes, which allows them to afford paying 
higher wages) and halt the ``death spiral'' perpetuating wage index 
disparities where relatively low wage index hospitals are forced to 
keep wages low due to low Medicare reimbursements that lag behind areas 
with higher wage indexes.
    Other commenters opposed continuing the low wage index hospital 
policy in FY 2021. The commenters stated that the policy fails to 
recognize the legitimate differences in geographic labor markets. 
Commenters also noted that there is no requirement for hospitals to use 
the increased reimbursement to boost employee compensation, and 
suggested CMS begin evaluating the cost report data filed by hospitals 
in the lowest quartile to ascertain whether the increased funds are 
being used to raise employee compensation in deciding whether to 
continue this policy for FY 2022. Some commenters stated that the data 
lag CMS described in its rationale applies equally to all hospitals, 
not only those in the lowest quartile. Commenters questioned CMS's 
statutory authority to promulgate this IPPS policy under 42 U.S.C. 
1395ww(d)(3)(E), which requires the agency to adjust payments to 
reflect area differences in wages, because it artificially inflates 
wage index values and creates a wage index system not based on actual 
data. These commenters stated that CMS is using the wage index as a 
policy vehicle, not as a technical correction, and needs Congressional 
authority to provide additional funding to low-wage hospitals.
    Response: We appreciate the many comments we received regarding our 
policy to provide an increase in the IPPS wage index beginning in FY 
2020 for hospitals with wage index values below the 25th percentile 
wage index value for a year (referred to as the low wage index hospital 
policy). We note that we did not propose or finalize any changes to 
this policy in the FY 2021 IPPS/LTCH PPS proposed and final rules. We 
refer readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42326 
through 42332) and FY 2021 IPPS/LTCH PPS final rule (85 FR 58765 
through 58768) for a detailed discussion of the IPPS low wage index 
hospital policy and for responses to these and other comments regarding 
this policy. In the CY 2021 OPPS/ASC proposed rule (85 FR 48803), we 
proposed to use the FY 2021 IPPS post-reclassified wage index including 
any adjustments, such as the IPPS low wage index hospital policy, as 
the wage index for the OPPS to determine the wage adjustments for both 
the OPPS payment rate and the copayment rate for CY 2021. We continue 
to believe that using the IPPS post-reclassified wage index, including 
any adjustments, 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, and thus, as discussed below, we are 
finalizing this proposal without modification.
    Comment: Many commenters supported increasing the wage index values 
of low-wage hospitals, but suggested that CMS do so in a non-budget-
neutral manner. Commenters stated that this redistribution is 
counterproductive to CMS's larger goals

[[Page 85910]]

of high quality care and healthcare access because it forces high-wage, 
mostly urban hospitals to bear the cost of supporting lower-wage 
hospitals. Commenters stated that the budget neutrality adjustment 
penalizes many hospitals, including rural hospitals. Other commenters 
requested that CMS ensure that the budget neutrality adjustment factor 
not apply to hospitals falling below the 25th percentile.
    Response: We refer readers to the FY 2020 IPPS/LTCH PPS final rule 
(84 FR 42328 through 42332) and FY 2021 IPPS/LTCH PPS final rule (85 FR 
58765 through 58768) for a detailed discussion of the budget neutrality 
adjustment for the IPPS low wage index hospital policy and for 
responses to these and other comments regarding this adjustment.
    We refer readers to section II.B. of this final rule with comment 
period for a discussion of the OPPS wage index budget neutrality 
adjustment.
    Comment: Many commenters recommended that CMS develop a 
comprehensive, long-term approach to wage index reform in place of the 
low wage index hospital policy finalized in the FY 2020 IPPS/LTCH PPS 
final rule. Two commenters suggested alternative solutions to address 
wage index disparities, including a national wage index floor for all 
hospitals. Other commenters recommended that CMS proactively address 
the effects of COVID-19, which the commenters believed would exacerbate 
wage index disparities, by excluding wage data collected during the 
public health emergency from future wage index calculations.
    Response: We appreciate the commenters' suggested alternatives. We 
received similar comments in response to the FY 2021 IPPS/LTCH PPS 
proposed rule (85 FR 58767 through 58768). In the FY 2021 IPPS/LTCH PPS 
final rule (85 FR 58768), we stated that we considered these comments 
to be outside the scope of the FY 2021 IPPS/LTCH PPS proposed rule, and 
thus we did not address them in that final rule but stated that we may 
consider them in future rulemaking. Similarly, we consider these 
comments to be outside the scope of the CY 2021 OPPS/ASC proposed rule 
and thus are not addressing them in this final rule with comment 
period.
    Comment: Multiple commenters specifically supported CMS's 
continuation of the policy, adopted in the FY 2020 IPPS/LTCH PPS final 
rule (84 FR 42332 through 42336), to exclude the wage data of urban 
hospitals that reclassify to rural when calculating each state's rural 
floor. Commenters stated that the change to the calculation of the 
rural floor limits the ability of hospitals to game the system and 
supports the overall goal of making the wage index reflective of 
variances in labor markets.
    Response: We appreciate the commenters' support of our policy to 
exclude the wage data of hospitals reclassified under Sec.  412.103 
from the IPPS rural floor calculation. As stated in the FY 2020 IPPS/
LTCH PPS final rule, we believe this policy is necessary and 
appropriate to address the unanticipated effects of rural 
reclassifications on the rural floor and the resulting wage index 
disparities, including the effects of the manipulation of the rural 
floor by certain hospitals (84 FR 42333 through 42336). We refer 
readers to the FY 2020 IPPS/LTCH PPS final rule (84 FR 42332 through 
42336) and the FY 2021 IPPS/LTCH PPS final rule (85 FR 58768) for a 
detailed discussion of this policy and for responses to these and other 
comments regarding this policy.
    Comment: One commenter supported our proposals regarding the wage 
index and requested that we carry over policies from the IPPS to the 
OPPS to ensure consistency in hospital payments.
    Response: We appreciate the commenter's support of our proposals 
regarding the wage index. As we discuss below, we are finalizing our 
proposal to use the FY 2021 IPPS post-reclassified wage index for urban 
and rural areas (including any applicable adjustments for the FY 2021 
IPPS post-reclassified wage index), as the wage index for the OPPS to 
determine the wage adjustments for both the OPPS payment rate and the 
copayment rate for CY 2021.
    After consideration of the comments received, for the reasons 
discussed in this final rule with comment period and in the CY 2021 
OPPS/ASC proposed rule, we are finalizing, without modification, our 
proposal to use the FY 2021 IPPS post-reclassified wage index for urban 
and rural areas, based on the revised OMB delineations set forth in OMB 
Bulletin No. 18-04, as the wage index for the OPPS to determine the 
wage adjustments for both the OPPS payment rate and the copayment rate 
for CY 2021. Therefore, any applicable adjustments for the FY 2021 IPPS 
post-reclassified wage index (including, but not limited to, the low 
wage index hospital policy, the one year 5 percent cap on wage index 
decreases, the rural floor, and the frontier State floor) will be 
reflected in the final CY 2021 OPPS wage index beginning on January 1, 
2021. 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 the CY 2021 OPPS/ASC proposed 
rule, we proposed to continue this policy for CY 2021, and included a 
brief summary of the major FY 2021 IPPS wage index policies and 
adjustments that we proposed to apply to these hospitals under the OPPS 
for CY 2021, which we have summarized below. We referred 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 proposed 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, we stated in 
the proposed rule that 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 42337). In addition, we proposed 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 in the CY 2021 OPPS/ASC proposed rule. We 
did not receive any public comments on these proposals. Accordingly, 
for the

[[Page 85911]]

reasons discussed above and in the CY 2021 OPPS/ASC proposed rule, we 
are finalizing these proposals, without modification.
    For CMHCs, for CY 2021, we proposed to continue to calculate the 
wage index by using the post-reclassification IPPS wage index based on 
the CBSA where the CMHC is located. We also proposed 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 in the CY 
2021 OPPS/ASC proposed rule. In addition, we proposed 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 proposed that the wage index that would apply to 
CMHCs would not include the outmigration adjustment because that 
adjustment only applies to hospitals. We did not receive any public 
comments on these proposals. Therefore, for the reasons discussed above 
and in the CY 2021 OPPS/ASC proposed rule, we are finalizing these 
proposals without modification.
    Table 4A associated with the FY 2021 IPPS/LTCH PPS final rule 
(available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index) 
identifies counties eligible for the out-migration adjustment. Table 2 
associated with the FY 2021 IPPS/LTCH PPS final rule (available for 
download via the website above) identifies IPPS hospitals that 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 final rule as Addendum L to this CY 2021 OPPS/ASC 
final rule with comment period with the addition of non-IPPS hospitals 
that will receive the section 505 outmigration adjustment under this CY 
2021 OPPS/ASC final rule with comment period. 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 final FY 2021 IPPS wage index tables and Addendum L.

D. Statewide Average Default Cost-To-Charge Ratios (CCRs)

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, 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 proposed to update the default ratios for CY 2021 using the 
most recent cost report data. We stated that we would update these 
ratios in this 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.
    We did not receive any public comments on our proposal to use 
statewide average default CCRs if a MAC cannot calculate a CCR for a 
hospital and to use these CCRs to adjust charges to costs on claims 
data for setting the final CY 2021 OPPS relative payment weights. 
Therefore, we are finalizing our proposal without modification.

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

[[Page 85912]]

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 2020. 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 proposed to continue the current policy of a 7.1 
percent payment adjustment that is done in a budget neutral manner for 
rural SCHs, including EACHs, for all services and procedures paid under 
the OPPS, excluding separately payable drugs and biologicals, 
brachytherapy sources, items paid at charges reduced to costs, and 
devices paid under the pass-through payment policy.
    Comment: Multiple commenters supported the proposal to continue the 
7.1 percent payment adjustment.
    Response: We appreciate the commenters' support.
    Comment: Multiple commenters requested that CMS make the 7.1 
percent rural adjustment permanent. The commenters appreciated the 
policy that CMS adopted in CY 2019 and reaffirmed in CY 2020 where we 
stated that the 7.1 percent rural adjustment would continue to be in 
place until our data support establishing a different rural adjustment 
percentage. However, the commenters believed that this policy still 
does not provide enough certainty for rural SCHs and EACHs to know 
whether they should take into account the rural SCH adjustment when 
attempting to calculate expected revenues for their hospital budgets.
    Response: We thank the commenters for their input. We believe that 
our current policy, which states that the 7.1 percent payment 
adjustment for rural SCHs and EACHs will remain in effect until our 
data show that a different percentage for the rural payment adjustment 
is necessary, provides sufficient budget predictability for rural SCHs 
and EACHs. Providers would receive notice in a proposed rule and have 
the opportunity to provide comments before any changes to the rural 
adjustment percentage would be implemented.
    Comment: One commenter requested that CMS expand the payment 
adjustment for rural SCHs and EACHs to additional types of hospitals. 
The commenter requested that the payment adjustment apply to include 
urban SCHs because, according to the commenter, urban SCHs care for 
patient populations similar to rural SCHs and EACHs, face similar 
financial challenges to rural SCHs and EACHs, and act as safety net 
providers for rural areas despite their designation as urban providers. 
The same commenter requested that the payment adjustment also apply to 
Medicare-dependent hospitals (MDHs) because, according to the 
commenter, these hospitals face similar financial challenges to rural 
SCHs and EACHs, and MDHs play a similar safety net role to rural SCHs 
and EACHs, especially for Medicare. The commenter asked that CMS study 
whether it would be appropriate to provide a payment adjustment to MDHs 
that is similar to the current adjustment for rural SCHs.
    Response: We thank the commenters for their comments. The analysis 
we did to compare costs of urban providers to those of rural providers 
did not support an add-on adjustment for providers other than rural 
SCHs and EACHs. In addition, section 1833(t)(13)(B) of the Act 
authorizes an adjustment for rural hospitals only. Accordingly, we do 
not believe we have a basis to expand the payment adjustment to any 
providers other than rural SCHs and EACHs under our authority at 
section 1833(t)(13)(B) of the Act.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue the current 
policy of a 7.1 percent payment adjustment that is done in a budget 
neutral manner for rural SCHs, including EACHs, for all services and 
procedures paid under the OPPS, excluding separately payable drugs and 
biologicals, devices paid under the pass-through payment policy, and 
items paid at charges reduced to costs.

F. 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

[[Page 85913]]

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).
2. 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 proposed to provide additional payments to the 11 specified 
cancer hospitals so that each cancer hospital's final PCR is equal to 
the weighted average PCR (or ``target PCR'') for the other OPPS 
hospitals, using the most recent submitted or settled cost report data 
that were available at the time of the development of the proposed 
rule, reduced by 1.0 percentage point, to comply with section 16002(b) 
of the 21st Century Cures Act.
    We did not propose 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 used the same extract of 
cost report data from HCRIS, as discussed in section II.A. of this CY 
2021 OPPS/ASC 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 proposed that the payment amount associated with 
the cancer hospital payment adjustment to be determined at cost report 
settlement would be the additional payment needed to result in a 
proposed target PCR equal to 0.89 for each cancer hospital.
    We did not receive any public comments on our proposals. Therefore, 
we are finalizing our proposed cancer hospital payment adjustment 
methodology without modification. For this final rule with comment 
period, we are using the most recent cost report data through June 30, 
2020 to update the adjustment. This update yields a target PCR of 0.90. 
We limited the dataset to the hospitals with CY 2019 claims data that 
we used to model the impact of the CY 2021 APC relative payment weights 
(3,555 hospitals) because it is appropriate to use the same set of 
hospitals that we are using to calibrate the modeled CY 2021 OPPS. The 
cost report data for the hospitals in the dataset were from cost report 
periods with fiscal year ends ranging from 2014 to 2019. We then 
removed the cost report data of the 47 hospitals located in Puerto Rico 
from our dataset because we do not believe their cost structure 
reflects the cost 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 report in the study would have both the 
payment and cost data necessary to calculate a PCR for each hospital, 
leading to an analytic file of 3,494 hospitals with cost report data.
    Using this smaller dataset of cost report data, we estimated a 
target PCR of 0.90. Therefore, after applying the 1.0 percentage point 
reduction as required by section 1602(b) of the 21st Century

[[Page 85914]]

Cures Act, we are finalizing that the payment amount associated with 
the cancer hospital adjustment to be determined at cost report 
settlement will be the additional payment needed to result in a 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.
[GRAPHIC] [TIFF OMITTED] TR29DE20.009

G. Hospital Outpatient Outlier Payments

1. Background
    The OPPS provides outlier payments to hospitals to help mitigate 
the financial risk associated with high-cost and complex procedures, 
where a very costly service could present a hospital with significant 
financial loss. As explained in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66832 through 66834), we set our projected target 
for aggregate outlier payments at 1.0 percent of the estimated 
aggregate total payments under the OPPS for the prospective year. 
Outlier payments are provided on a service-by-service basis when the 
cost of a service exceeds the APC payment amount multiplier threshold 
(the APC payment amount multiplied by a certain amount) as well as the 
APC payment amount plus a fixed-dollar amount threshold (the APC 
payment plus a certain amount of dollars). In CY 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 the CY 
2021 OPPS/ASC proposed rule, was 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 
final rule, we estimate that we paid approximately 0.97 percent of the 
total aggregated OPPS payments in outliers for CY 2019.
    For the CY 2021 OPPS/ASC proposed rule, using CY 2019 claims data 
and CY

[[Page 85915]]

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
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48807 through 48808), 
for CY 2021, we proposed to continue our policy of estimating outlier 
payments to be 1.0 percent of the estimated aggregate total payments 
under the OPPS. We proposed that a portion of that 1.0 percent, an 
amount equal to less than 0.01 percent of outlier payments (or 0.0001 
percent of total OPPS payments), would be allocated to CMHCs for PHP 
outlier payments. This is the amount of estimated outlier payments that 
would result from the proposed CMHC outlier threshold as a proportion 
of total estimated OPPS outlier payments. As discussed in section 
VIII.C. of the CY 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 the CY 2021 OPPS/ASC proposed rule and this final 
rule with comment period.
    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 2020 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 32908). 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 42626 through 
42630). As we stated in the CY 2005 OPPS final rule with comment period 
(69 FR 65845), we believe that the use of these charge inflation 
factors is appropriate for the OPPS because, with the exception of the 
inpatient routine service cost centers, hospitals use the same 
ancillary and outpatient cost centers to capture costs and charges for 
inpatient and outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we proposed to apply the same CCR 
inflation adjustment factor that we proposed to apply for the FY 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 proposed 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 32908 through 32909).
    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 0.97571 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 CY 2021 OPPS/ASC final rule with comment period.
    We received no public comments on our proposal. Therefore, we are 
finalizing our proposal, without modification, to continue our policy 
of estimating outlier payments to be 1.0 percent of the estimated 
aggregate total payments under the OPPS and to use our established 
methodology to set the OPPS outlier fixed-dollar loss threshold for CY 
2021.
3. Final Outlier Calculation
    Consistent with historical practice, we used updated data for this 
final rule with comment period for outlier calculations. For CY 2021, 
we are

[[Page 85916]]

applying the overall CCRs from the October 2020 OPSF file after 
adjustment (using the CCR inflation adjustment factor of 0.974495 to 
approximate CY 2021 CCRs) to charges on CY 2019 claims that were 
adjusted using a charge inflation factor of 1.13218 to approximate CY 
2021 charges. These are the same CCR adjustment and charge inflation 
factors that were used to set the IPPS fixed-dollar threshold for the 
FY 2021 IPPS/LTCH PPS final rule (85 FR 59039 through 59040). We 
simulated aggregated CY 2021 hospital outlier payments using these 
costs for several different fixed-dollar thresholds, holding the 1.75 
multiple-threshold constant and assuming that outlier payments will 
continue to be made at 50 percent of the amount by which the cost of 
furnishing the service would exceed 1.75 times the APC payment amount, 
until the total outlier payment equaled 1.0 percent of aggregated 
estimated total CY 2021 OPPS payments. We estimated that a fixed-dollar 
threshold of $5,300 combined with the multiple-threshold of 1.75 times 
the APC payment rate, will allocate the 1.0 percent of aggregated total 
OPPS payments to outlier payments.
    For CMHCs, if a CMHC's cost for partial hospitalization services, 
paid under APC 5853, exceeds 3.40 times the payment rate the outlier 
payment will be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times APC 5853.
H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR part 419, subparts C and D. For this CY 2021 OPPS/ASC final rule 
with comment period, the payment rate for most services and procedures 
for which payment is made under the OPPS is the product of the 
conversion factor calculated in accordance with section II.B. of this 
final rule with comment period and the relative payment weight 
determined under section II.A. of this final rule with comment period. 
Therefore, the national unadjusted payment rate for most APCs contained 
in Addendum A to this final rule with comment period (which is 
available via the internet on the CMS website) and for most HCPCS codes 
to which separate payment under the OPPS has been assigned in Addendum 
B to this final rule with comment period (which is available via the 
internet on the CMS website) was calculated by multiplying the final 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 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 final rule with 
comment period.
    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 final 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 this final 
rule with comment period (which are available via the internet on the 
CMS website) should follow the formulas presented in the following 
steps. For purposes of the payment calculations below, we refer to the 
national unadjusted payment rate for hospitals that meet the 
requirements of the Hospital OQR Program as the ``full'' national 
unadjusted payment rate. We refer to the national unadjusted payment 
rate for hospitals that fail to meet the requirements of the Hospital 
OQR Program as the ``reduced'' national unadjusted payment rate. The 
reduced national unadjusted payment rate is calculated by multiplying 
the reporting ratio of 0.9805 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 are 
adopting the updated OMB delineations based on OMB Bulletin No. 18-04 
and any related IPPS wage index adjustments that were finalized in the 
FY 2021 IPPS/LTCH PPS final rule, as discussed in section II.C. of this 
final rule with comment period. The wage index values assigned to each 
area reflect the geographic statistical areas (which are based upon OMB 
standards) to which hospitals are assigned for FY 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 are continuing 
to apply for the CY 2021

[[Page 85917]]

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 are applying for the CY 
2021 OPPS, we refer readers to section II.C. of this final rule with 
comment period.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this final rule with comment period (which is 
available via the internet on the CMS website) contains the qualifying 
counties and the associated wage index increase developed for the final 
FY 2021 IPPS wage index, which are listed in Table 2 associated with 
the FY 2021 IPPS/LTCH PPS final 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 Final Rule Home Page'' 
and select ``FY 2021 Final Rule Tables.'') This step is to be followed 
only if the hospital is not reclassified or redesignated under section 
1886(d)(8) or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national unadjusted payment 
rate for the specific service by the wage index.
    Xa is the labor-related portion of the national unadjusted payment 
rate (wage adjusted).
    Xa = .60 * (national unadjusted payment rate) * 
applicable wage index.
    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted payment rate 
for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.
    Y is the nonlabor-related portion of the national unadjusted 
payment rate.
    Y = .40 * (national unadjusted payment rate).
    Adjusted Medicare Payment = Y + Xa.
    Step 6. If a provider is an SCH, as set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be an SCH under 
section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural 
area, as defined in Sec.  412.64(b), or is treated as being located in 
a rural area under Sec.  412.103, multiply the wage index adjusted 
payment rate by 1.071 to calculate the total payment.
    The formula below is a mathematical representation of Step 6 and 
applies the rural adjustment for rural SCHs.
    Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment 
* 1.071.
    We are providing examples below of the calculation of both the full 
and reduced national unadjusted payment rates that will apply to 
certain outpatient items and services performed by hospitals that meet 
and that fail to meet the Hospital OQR Program requirements, using the 
steps outlined 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 final CY 2021 full 
national unadjusted payment rate for APC 5071 is $621.97. The reduced 
national unadjusted payment rate for APC 5071 for a hospital that fails 
to meet the Hospital OQR Program requirements is $609.84. This reduced 
rate is calculated by multiplying the reporting ratio of 0.9805 by the 
full unadjusted payment rate for APC 5071.
    The final FY 2021 wage index for a provider located in CBSA 35614 
in New York, which includes the adoption of IPPS 2021 wage index 
policies, is 1.3468. The labor-related portion of the final full 
national unadjusted payment is approximately $502.60 (.60 * $621.97 * 
1.3468). The labor-related portion of the reduced national unadjusted 
payment is approximately $492.80 (.60 * $609.84 * 1.3468). The 
nonlabor-related portion of the full national unadjusted payment is 
approximately $248.79 (.40 * $621.97). The nonlabor-related portion of 
the reduced national unadjusted payment is approximately $243.94 (.40 * 
$609.84). The sum of the labor-related and nonlabor-related portions of 
the full national adjusted payment is approximately $751.39 ($502.60 + 
$248.79). The sum of the portions of the reduced national adjusted 
payment is approximately $736.74 ($492.80 + $243.94).
    We did not receive any public comments on these steps under the 
methodology that we included in the proposed rule to determine the APC 
payments for CY 2021. Therefore, we are using the steps in the 
methodology specified above, to demonstrate the calculation of the 
final CY 2021 OPPS payments using the same parameters.

I. Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in 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. OPPS Copayment Policy
    For CY 2021, we proposed to determine copayment amounts for new

[[Page 85918]]

and revised APCs using the same methodology that we implemented 
beginning in CY 2004. (We refer readers to the November 7, 2003 OPPS 
final rule with comment period (68 FR 63458).) In addition, we proposed 
to use the same standard rounding principles that we have historically 
used in instances where the application of our standard copayment 
methodology would result in a copayment amount that is less than 20 
percent and cannot be rounded, under standard rounding principles, to 
20 percent. (We refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66687) in which we discuss our rationale for 
applying these rounding principles.) The proposed national unadjusted 
copayment amounts for services payable under the OPPS that would be 
effective January 1, 2021 are included in Addenda A and B to the 
proposed rule with comment period (which are available via the internet 
on the CMS website).
    We did not receive any public comments on the proposed copayment 
amounts for new and revised APCs using the same methodology we 
implemented beginning in CY 2004 or the standard rounding principles we 
apply to our copayment amounts. Therefore, we are finalizing our 
proposed copayment policies, without modification.
    As discussed in section XIV.E. of the CY 2021 OPPS/ASC proposed 
rule and this final rule with comment period, 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 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. 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, $124.40 is approximately 20 percent of the 
full national unadjusted payment rate of $621.97. For APCs with only a 
minimum unadjusted copayment in Addenda A and B to this final rule 
(which are available via the internet on the CMS website), the 
beneficiary payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.
    B is the beneficiary payment percentage.
    B = National unadjusted copayment for APC/national unadjusted 
payment rate for APC.
    Step 2. Calculate the appropriate wage-adjusted payment rate for 
the APC for the provider in question, as indicated in Steps 2 through 4 
under section II.H. of this final rule with comment period. Calculate 
the rural adjustment for eligible providers, as indicated in Step 6 
under section II.H. of this final rule with comment period.
    Step 3. Multiply the percentage calculated in Step 1 by the payment 
rate calculated in Step 2. The result is the wage-adjusted copayment 
amount for the APC.
    The formula below is a mathematical representation of Step 3 and 
applies the beneficiary payment percentage to the adjusted payment rate 
for a service calculated under section II.H. of this final rule with 
comment period, with and without the rural adjustment, to

[[Page 85919]]

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 finalized unadjusted copayments for services payable under the 
OPPS that will be effective January 1, 2021, are shown in Addenda A and 
B to this final rule with comment period (which are available via the 
internet on the CMS website). We note that the finalized national 
unadjusted payment rates and copayment rates shown in Addenda A and B 
to this final rule with comment period reflect the CY 2021 OPD fee 
schedule increase factor discussed in section II.B. of this final rule 
with comment period.
    In addition, as noted earlier, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New and Revised HCPCS Codes

    Payments for OPPS procedures, services, and items are generally 
based on medical billing codes, specifically, Healthcare Common 
Procedure Coding System (HCPCS) codes, that are reported on hospital 
outpatient department (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 Current Procedural Terminology (CPT), 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 Centers for Medicare & Medicaid 
Services (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 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 via their website while 
Level II HCPCS code changes are released to the public via the CMS 
HCPCS website. CMS recognizes the release of new CPT and Level II HCPCS 
codes and makes the codes effective (that is, the codes can be reported 
on Medicare claims) outside of the formal rulemaking process via OPPS 
quarterly update CRs. Based on our review, we assign the new codes to 
interim status indicators (SIs) and APCs. These interim assignments are 
finalized in the OPPS/ASC final rules with comment period. 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 policies for these codes through our annual 
rulemaking process.
    We note that, under the OPPS, the APC assignment determines the 
payment rate for an item, procedure, or service. Those items, 
procedures, or services not paid separately under the hospital OPPS are 
assigned to appropriate SIs. Certain payment SIs provide separate 
payment while other payment SIs do not. In section XI. (CY 2021 OPPS 
Payment Status and Comment Indicators) of this final rule with comment 
period, we discuss the various SIs used under the OPPS. We also provide 
a complete list of the SIs and their definitions in Addendum D1 to this 
CY 2021 OPPS/ASC final rule with comment period.
1. HCPCS Codes That Were Effective April 1, 2020 for Which We Solicited 
Public Comments in the CY 2021 OPPS/ASC Proposed Rule
    For the April 2020 update, there were no new CPT codes. However, 
thirteen new Level II HCPCS codes were established and made effective 
on April 1, 2020. These codes and their long descriptors were included 
in Table 6 of the proposed rule and are now listed in Table 6 of this 
final rule with comment period. Through the April 2020 OPPS quarterly 
update CR (Transmittal 10013, Change Request 11691, dated March 25, 
2020), we recognized several new Level II HCPCS codes for separate 
payment under the OPPS. In the CY 2021 OPPS/ASC proposed rule (85 FR 
48812 through 48813), we solicited public comments on the proposed APC 
and status indicator (SI) assignments for these Level II HCPCS codes, 
which were listed in Table 6 of the proposed rule.
    We did not receive any public comments on the proposed OPPS APC and 
SI assignments for the new Level II HCPCS codes implemented in April 
2020. Therefore, we are finalizing the proposed APC and SI assignments 
for these codes, as indicated in Table 6. We note that several of the 
HCPCS C-codes have been replaced with HCPCS J-codes, effective January 
1, 2021. Their replacement codes are listed in Table 6. The final 
payment rates for these codes can be found in Addendum B to this final 
rule with comment period. In addition, the SI definitions can be found 
in Addendum D1 to this final rule with comment period. Both Addendum B 
and Addendum D1 are available via the internet on the CMS website.
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3. October 2020 HCPCS Codes for Which We Are Soliciting Public Comments 
in This CY 2021 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
HCPCS codes that are effective October 1 in the final rule with comment 
period, thereby updating the OPPS for the following calendar year, as 
displayed in Table 8 of the proposed rule and reprinted as Table 8 of 
this final rule with comment period. These codes are released to the 
public through the October OPPS

[[Page 85930]]

quarterly update CRs and via the CMS HCPCS website (for Level II HCPCS 
codes). For CY 2021, these codes are flagged with comment indicator 
``NI'' in Addendum B to this OPPS/ASC final rule with comment period to 
indicate that we are assigning them an interim payment status which is 
subject to public comment. Specifically, the interim SI and APC 
assignments for codes flagged with comment indicator ``NI'' are open to 
public comment in this final rule with comment period, and we will 
respond to these public comments in the OPPS/ASC final rule with 
comment period for the next year's OPPS/ASC update.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48823), we proposed to 
continue this process for CY 2021. Specifically, for CY 2021, we 
proposed to include in Addendum B to the CY 2021 OPPS/ASC final rule 
with comment period the new HCPCS codes effective October 1, 2020 that 
would be incorporated in the October 2020 OPPS quarterly update CR. 
Also, as stated above, the October 1, 2020 codes are flagged with 
comment indicator ``NI'' in Addendum B to this 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 are inviting public 
comments on the interim SI and APC assignments for these codes, if 
applicable, that will be finalized in the CY 2021 OPPS/ASC final rule 
with comment period.
    We note that we received a comment related to HCPCS codes C9757 
(Laminotomy (hemilaminectomy), with decompression of nerve root(s), 
including partial facetectomy, foraminotomy and excision of herniated 
intervertebral disc, and repair of annular defect with implantation of 
bone anchored annular closure device, including annular defect 
measurement, alignment and sizing assessment, and image guidance; 1 
interspace, lumbar) and P9099 (Blood component or product not otherwise 
classified), which were assigned to comment indicator ``NI'' (new code; 
comments will be accepted on the interim APC assignment) in Addendum B 
of the CY 2020 OPPS/ASC final rule with comment period. The comments 
and our responses can be found in section II.A.2(a)(1) (Blood Products) 
and III.D. (APC-Specific Policies) of this CY 2021 OPPS/ASC final rule 
with comment period.
4. January 2021 HCPCS Codes
a. New Level II HCPCS Codes for Which We Are Soliciting Public Comments 
in this CY 2021 OPPS/ASC Final Rule With Comment Period
    As shown in Table 8, and as stated in the CY 2021 OPPS/ASC proposed 
rule (85 FR 48823 through 48825), consistent with past practice, we 
solicit comments on the new Level II HCPCS codes that will be effective 
January 1 in the OPPS/ASC final rule with comment period, thereby 
allowing us to finalize the SIs and APC assignments for the codes in 
the next 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, 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. Consequently, for CY 2021, we proposed to include in 
Addendum B to the CY 2021 OPPS/ASC final rule with comment period the 
new Level II HCPCS codes effective January 1, 2021, that would be 
incorporated in the January 2021 OPPS quarterly update CR. These codes 
will be released to the public through the January OPPS quarterly 
update CRs and via the CMS HCPCS website (for Level II HCPCS codes). 
For CY 2021, the Level II HCPCS codes effective January 1, 2021 are 
flagged with comment indicator ``NI'' in Addendum B to this 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 are 
inviting public comments on the interim SI and APC assignments for 
these codes, if applicable, that will be finalized in the CY 2021 OPPS/
ASC final rule with comment period.
b. CPT Codes For Which We Solicited Public Comments in the CY 2021 
OPPS/ASC Proposed Rule
    For CY 2021, we received the CY 2021 CPT code updates that would be 
effective January 1, 2021, from AMA in time for inclusion in the CY 
2021 OPPS/ASC proposed rule. We note that 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 SIs 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 SI assignments for them, and to finalize 
the APC and SI assignments in the OPPS/ASC final rules beginning with 
the CY 2016 OPPS update. For those new/revised CPT codes that were 
received too late for inclusion in the OPPS/ASC proposed rule, we 
finalized our proposal to establish and use HCPCS G-codes that mirror 
the predecessor CPT codes and retain the current APC and SI assignments 
for a year until we can propose APC and SI 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 SI assignments for all new and revised CPT codes that 
the AMA makes publicly available in time for us to include them in the 
annual proposed rule, and to avoid the resort to HCPCS G-codes and the 
resulting delay in utilization of the most current CPT codes. Also, we 
finalized our proposal to make interim APC and SI 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 
SI assignments for those codes in the following year's final rule.
    As stated above, for the CY 2021 OPPS update, we received the CY 
2021 CPT codes from AMA in time for inclusion in the CY 2021 OPPS/ASC 
proposed rule. The new, revised, and deleted CY 2021 Category I and III 
CPT codes were included in Addendum B to the proposed rule (which is 
available via the internet on the CMS website). We noted in the 
proposed rule that the new and revised codes are assigned to new 
comment indicator ``NP'' to indicate that the code is new for the next 
calendar year or the code is an existing code with substantial revision 
to its code descriptor in the next calendar year as compared to current 
calendar year with a proposed APC assignment, and that comments will be 
accepted on the proposed APC and SI assignments.
    Further, we reminded readers that the CPT code descriptors that 
appear in Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item described by the CPT 
code. Therefore, we included the 5-digit placeholder codes and their 
long descriptors for the new and revised CY 2021 CPT codes in Addendum 
O to

[[Page 85931]]

the proposed rule (which is available via the internet on the CMS 
website) so that the public could adequately comment on the proposed 
APCs and SI assignments. The 5-digit placeholder codes were included in 
Addendum O, specifically under the column labeled ``CY 2021 OPPS/ASC 
Proposed Rule 5-Digit AMA Placeholder Code,'' to the proposed rule. We 
noted that the final CPT code numbers would be included in this CY 2021 
OPPS/ASC final rule with comment period. We also noted that not every 
code listed in Addendum O is subject to public comment. For the new and 
revised Category I and III CPT codes, we requested public comments on 
only those codes that are assigned comment indicator ``NP''.
    In summary, in the CY 2021 OPPS/ASC proposed rule, we solicited 
public comments on the proposed CY 2021 SI and APC assignments for the 
new and revised Category I and III CPT codes that will be effective 
January 1, 2021. The CPT codes were listed in Addendum B to the 
proposed rule with short descriptors only. We listed them again in 
Addendum O to the proposed rule with long descriptors. We also proposed 
to finalize the SI 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 SI and APC assignments for these codes were 
included in Addendum B to the proposed rule (which is available via the 
internet on the CMS website).
    Commenters addressed several of the new CPT codes that were 
assigned to comment indicator ``NP'' in Addendum B to the CY 2021 OPPS/
ASC proposed rule. We have responded to those public comments in 
sections III.C. (New Technology APCs), III.D. (OPPS APC-Specific 
Policies), and IV. (OPPS Payment for Devices) of this CY 2021 OPPS/ASC 
final rule with comment period.
    The final SIs, APC assignments, and payment rates for the new CPT 
codes that are effective January 1, 2021 can be found in Addendum B to 
this final rule with comment period. In addition, the SI meanings can 
be found in Addendum D1 (OPPS Payment Status Indicators for CY 2021) to 
this final rule with comment period. Both Addendum B and D1 are 
available via the internet on the CMS website.
    Finally, Table 8, which is a reprint of Table 8 from the CY 2021 
OPPS/ASC proposed rule, shows the comment timeframe for new and revised 
HCPCS codes. The table provides information on 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. 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

[[Page 85932]]

group the services within each APC. The APCs are organized such that 
each group is homogeneous both clinically and in terms of resource use. 
Using this classification system, we have established distinct groups 
of similar services. We also have developed separate APC groups for 
certain medical devices, drugs, biologicals, therapeutic 
radiopharmaceuticals, and brachytherapy devices that are not packaged 
into the payment for the procedure.
    We have packaged into the payment for each procedure or service 
within an APC group the costs associated with those items and services 
that are typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and, in those cases, are an integral part of the 
primary service they support. Therefore, we do not make separate 
payment for these packaged items or services. In general, packaged 
items and services include, but are not limited to, the items and 
services listed in regulations at 42 CFR 419.2(b). A further discussion 
of packaged services is included in section II.A.3. of this final rule 
with comment period.
    Under the OPPS, we generally pay for covered hospital outpatient 
services on a rate-per-service basis, where the service may be reported 
with one or more HCPCS codes. Payment varies according to the APC group 
to which the independent service or combination of services is 
assigned. In the CY 2021 OPPS/ASC proposed rule (85 FR 48799), for CY 
2021, we proposed that each APC relative payment weight represents the 
hospital cost of the services included in that APC, relative to the 
hospital cost of the services included in APC 5012 (Clinic Visits and 
Related Services). The APC relative payment weights are scaled to APC 
5012 because it is the hospital clinic visit APC and clinic visits are 
among the most frequently furnished services in the hospital outpatient 
setting.
2. Application of the 2 Times Rule
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
not less often than annually, and revise the APC groups, the relative 
payment weights, and the wage and other adjustments described in 
paragraph (2) to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review (and advise the Secretary concerning) the clinical integrity of 
the APC groups and the relative payment weights. We note that the 
Hospital Outpatient Payment (HOP) Panel recommendations for specific 
services for the CY 2021 OPPS update are discussed in the relevant 
specific sections throughout this 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 the CY 2021 OPPS/
ASC proposed rule (85 FR 48826 through 48827), for CY 2021, we proposed 
to make exceptions to this limit on the variation of costs within each 
APC group in unusual cases, such as for certain low-volume items and 
services.
    In the CY 2021 OPPS/ASC proposed rule, we identified the APCs with 
violations of the 2 times rule. Therefore, we proposed changes to the 
procedure codes assigned to these APCs in Addendum B to the proposed 
rule. We noted that Addendum B does not appear in the printed version 
of the Federal Register as part of the CY 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 
proposed to reassign these procedure codes to new APCs that contain 
services that are similar with regard to both their clinical and 
resource characteristics. In many cases, the proposed procedure code 
reassignments and associated APC reconfigurations for CY 2021 included 
in the proposed rule were 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 the CY 2021 OPPS/ASC proposed rule 
identified with a comment indicator ``CH'' those procedure codes for 
which we proposed a change to the APC assignment or SI, 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), which was the latest payment 
rate file for 2019 prior to issuance of the proposed rule.
3. APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we proposed to make for CY 
2021 in the CY 2021 OPPS/ASC proposed rule, we reviewed all of the APCs 
to determine which APCs would not meet the requirements of the 2 times 
rule. We used the following criteria to evaluate whether to propose 
exceptions to the 2 times rule for affected APCs:
     Resource homogeneity;
     Clinical homogeneity;
     Hospital outpatient setting utilization;
     Frequency of service (volume); and
     Opportunity for upcoding and code fragments.
    Based on the CY 2019 claims data available for the 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 
proposed to make exceptions under the 2 times rule for CY 2021, and 
found that all of the 18 APCs we identified met the criteria for an 
exception to the 2 times rule based on the CY 2019 claims data 
available for the proposed rule. We did not include in that 
determination those APCs where

[[Page 85933]]

a 2 times rule violation was not a relevant concept, such as APC 5401 
(Dialysis), which only has two HCPCS codes assigned to it that have a 
similar geometric mean costs and do not create a 2 time rule violation. 
Therefore, we only identified those APCs, including those with 
criteria-based costs, 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 the proposed rule listed the 18 APCs for which we 
proposed to make an exception for 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. In the proposed rule, we stated that for the final 
rule with comment period, we intended 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. 
We stated that the proposed geometric mean costs for covered hospital 
outpatient services for these and all other APCs that were used in the 
development of the proposed rule could be found on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
    Based on the updated final rule CY 2019 claims data used for this 
CY 2021 final rule with comment period, we found a total of 23 APCs 
with violations of the 2 times rule. Of these 23 total APCs, 18 were 
identified in the proposed rule and five are newly identified APCs. The 
five newly identified APCs with violations of the 2 times rule include 
the following:

     APC 5101 (Level 1 Strapping and Cast Application)
     APC 5161 (Level 1 ENT Procedures)
     APC 5593 (Level 3 Nuclear Medicine and Related Services)
     APC 5673 (Level 3 Pathology)
 APC 5734 (Level 4 Minor Procedures)

    Although we did not receive any comments on Table 9 of the proposed 
rule, we did receive comments on APC assignments for specific HCPCS 
codes. The comments, and our responses, can be found in section III.D. 
(OPPS APC-Specific Policies) of this final rule with comment period.
    After considering the public comments we received on APC 
assignments and our analysis of the CY 2019 costs from hospital claims 
and cost report data available for this CY 2021 final rule with comment 
period, we are finalizing our proposals with some modifications. 
Specifically, we are finalizing our proposal to except 18 of the 18 
proposed APCs from the 2 times rule for CY 2021 and also excepting five 
additional APCs (APCs 5101, 5161, 5593, 5673, and 5734) for a total of 
23 APCs.
    In summary, Table 9 lists the 23 APCs that we are excepting from 
the 2 times rule for CY 2021 based on the criteria described earlier 
and a review of updated 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. We note that, for cases 
in which a recommendation by the HOP Panel appears to result in or 
allow a violation of the 2 times rule, we generally accept the HOP 
Panel's recommendation because those recommendations are based on 
explicit consideration of resource use, clinical homogeneity, site of 
service, and the quality of the claims data used to determine the APC 
payment rates. The geometric mean costs for hospital outpatient 
services for these and all other APCs that were used in the development 
of this final rule with comment period can be found on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
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C. 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

[[Page 85935]]

utility. Quite often, parties request that Medicare make higher payment 
amounts under the New Technology APCs for new procedures in that 
transitional phase. These requests, and their accompanying estimates 
for expected total patient utilization, often reflect very low rates of 
patient use of expensive equipment, resulting in high per-use costs for 
which requesters believe Medicare should make full payment. Medicare 
does not, and we believe should not, assume responsibility for more 
than its share of the costs of procedures based on projected 
utilization for Medicare beneficiaries and does not set its payment 
rates based on initial projections of low utilization for services that 
require expensive capital equipment. For the OPPS, we rely on hospitals 
to make informed business decisions regarding the acquisition of high-
cost capital equipment, taking into consideration their knowledge about 
their entire patient base (Medicare beneficiaries included) and an 
understanding of Medicare's and other payers' payment policies. We 
refer readers to the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68314) for further discussion regarding this payment policy.
    We note that, in a budget neutral system, payments may not fully 
cover hospitals' costs in a particular circumstance, including those 
for the purchase and maintenance of capital equipment. We rely on 
hospitals to make their decisions regarding the acquisition of high-
cost equipment with the understanding that the Medicare program must be 
careful to establish its initial payment rates, including those made 
through New Technology APCs, for new services that lack hospital claims 
data based on realistic utilization projections for all such services 
delivered in cost-efficient hospital outpatient settings. As the OPPS 
acquires claims data regarding hospital costs associated with new 
procedures, we regularly examine the claims data and any available new 
information regarding the clinical aspects of new procedures to confirm 
that our OPPS payments remain appropriate for procedures as they 
transition into mainstream medical practice (77 FR 68314). For CY 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

[[Page 85936]]

rate as compared to the average claim, which would have a substantial 
impact on any statistical methodology used to estimate the most 
appropriate payment rate for a service. We also explained that we 
believe having the flexibility to utilize an alternative statistical 
methodology to calculate the payment rate in the case of low-volume new 
technology services would help to create a more stable payment rate. 
Therefore, in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 58893), we established that, in each of our annual rulemakings, we 
will seek public comments on which statistical methodology should be 
used for each low-volume service assigned to a New Technology APC. In 
the preamble of each annual rulemaking, we stated that we would present 
the result of each statistical methodology and solicit public comment 
on which methodology should be used to establish the payment rate for a 
low-volume new technology service. In addition, we will use our 
assessment of the resources used to perform a service and guidance from 
the developer or manufacturer of the service, as well as other 
stakeholders, to determine the most appropriate payment rate. Once we 
identify the most appropriate payment rate for a service, we will 
assign the service to the New Technology APC with the cost band that 
includes its payment rate.
    Accordingly, for CY 2021, we proposed 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).
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing our proposal without modification.
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 proposed to 
retain services within New Technology APC groups until we obtain 
sufficient claims data to justify reassignment of the service to a 
clinically appropriate APC. The flexibility associated with this policy 
allows us to reassign a service from a New Technology APC in less than 
2 years if sufficient claims data are available. It also allows us to 
retain a service in a New Technology APC for more than 2 years if 
sufficient claims data upon which to base a decision for reassignment 
have not been obtained (66 FR 59902). We received no public comments on 
our proposal. Therefore, we will implement our proposal without 
modification.
a. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS)
    Currently, there are four CPT/HCPCS codes that describe magnetic 
resonance image-guided, high-intensity focused ultrasound (MRgFUS) 
procedures, three of which we proposed to continue to assign to 
standard APCs, and one that we proposed to 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 
169 paid claims for CY 2019 with a geometric mean of $12,027.76. 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 (APCs 5461 through 5464). However, there 
was a 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 the CY 2021 OPPS/ASC 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 believed a restructuring of the APC 
family would be appropriate. We believed that 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 proposed 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.
    Comment: Multiple commenters supported our proposal to reassign CPT 
code 0398T to proposed new APC 5463 (Level 3 Neurostimulator and 
Related Procedures).
    Response: We appreciate the support of the commenters for our 
proposal.
    The final rule data shows the payment rate for the new APC 5463 
(Level 3 Neurostimulator and Related Procedures) is $11,236.21. While 
this payment rate is lower than what was calculated for the proposed 
rule, we continue to believe APC 5463 is an appropriate placement for 
CPT code 0398T. After our review of the public comments, we have 
decided to

[[Page 85937]]

implement our proposal to assign CPT code 0398T to APC 5463 for CY 
2021. The final APC assignment, status indicator, and payment rate for 
CPT code 0398T are found in Table 10. We refer readers to Addendum B of 
the final rule for the final payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website.
[GRAPHIC] [TIFF OMITTED] TR29DE20.022

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 FDA in 2013 for adult patients diagnosed 
with severe to profound retinitis pigmentosa. Pass-through payment 
status was granted for the Argus[supreg] II device under HCPCS code 
C1841 (Retinal prosthesis, includes all internal and external 
components) beginning October 1, 2013, and this status expired on 
December 31, 2015. We note that after pass-through payment status 
expires for a medical device, the payment for the device is packaged 
into the payment for the associated surgical procedure. Consequently, 
for CY 2016, the device described by HCPCS code C1841 was assigned to 
OPPS status indicator ``N'' to indicate that payment for the device is 
packaged and included in the payment rate for the surgical procedure 
described by CPT code 0100T. For CY 2016, the procedure described by 
CPT code 0100T was assigned to New Technology APC 1599, with a payment 
rate of $95,000, which was the highest paying New Technology APC for 
that year. This payment included both the surgical procedure (CPT code 
0100T) and the use of the Argus[supreg] II device (HCPCS code C1841). 
However, stakeholders (including the device manufacturer and hospitals) 
believed that the CY 2016 payment rate for the procedure involving the 
Argus[supreg] II System was insufficient to cover the hospital cost of 
performing the procedure, which includes the cost of the retinal 
prosthesis at the retail price of approximately $145,000.
    For CY 2017, analysis of the CY 2015 OPPS claims data used for the 
CY 2017 OPPS/ASC final rule with comment period showed 9 single claims 
(out of 13 total claims) for the procedure described by CPT code 0100T, 
with a geometric mean cost of approximately $142,003 based on claims 
submitted between January 1, 2015, through December 31, 2015, and 
processed through June 30, 2016. Based on the CY 2015 OPPS claims data 
available for the final rule with comment period and our understanding 
of the Argus[supreg] II procedure, we reassigned the procedure 
described by CPT code 0100T from New Technology APC 1599 to New 
Technology APC 1906, with a final payment rate of $150,000.50 for CY 
2017. We noted that this payment rate included the cost of both the 
surgical procedure (CPT code 0100T) and the retinal prosthesis device 
(HCPCS code C1841).
    For CY 2018, the reported cost of the Argus[supreg] II procedure 
based on CY 2016 hospital outpatient claims data for 6 claims used for 
the CY 2018 OPPS/ASC final rule with comment period was approximately 
$94,455, which was more than $55,000 less than the payment rate for the 
procedure in CY 2017, but closer to the CY 2016 payment rate for the 
procedure. We noted that the costs of the Argus[supreg] II procedure 
are extraordinarily high compared to many other procedures paid under 
the OPPS. In addition, the number of claims submitted has been very low 
and has not exceeded 10 claims within a single year. We believed that 
it is important to mitigate significant payment differences, especially 
shifts of several tens of thousands of dollars, while also basing 
payment rates on available cost information and claims data. In CY 
2016, the payment rate for the Argus[supreg] II procedure was 
$95,000.50. The payment rate increased to $150,000.50 in CY 2017. For 
CY 2018, if we had established the payment rate based on updated final 
rule claims data, the

[[Page 85938]]

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 proposed 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 1908, with the estimated cost being 
between $145,001 and $160,000.
    Accordingly, we proposed to maintain the assignment of the 
procedure

[[Page 85939]]

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.
    For our analysis for the CY 2021 final rule, 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 
$148,148, the arithmetic mean cost to be approximately $153,682, and 
the median cost to be approximately $151,974. The slight differences 
from the calculations using the proposed rule data are caused by 
changes to the wage indexes of a few providers. All three potential 
statistical methodologies used to estimate the cost of the 
Argus[supreg] II procedure fall within the cost band for New Technology 
APC 1908, with the estimated cost being between $145,001 and $160,000.
    We received no public comments on our proposal. Therefore, we are 
finalizing our proposal without modification. We will maintain the 
assignment of the procedure described by CPT code 0100T in APC 1908 
(New Technology--Level 52 ($145,001-$160,000)), with a payment rate of 
$152,500.50 for CY 2021. We note that the final 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 final rule for the final 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 (APC 
1561)
    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 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], 
recommended 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 
HCPCS code J3398, a typical patient would receive a standard dose of 
150 billion vector genomes, with an approximate payment rate of 
$432,480 (we refer readers to Addendum B of the CY 2021 OPPS/ASC Final 
Rule with comment period rule for the payment rate associated with 
HCPCS code 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 HCPCS code J3398 was granted drug 
pass-through status under the OPPS as of July 1, 2018 and is assigned 
status indicator ``G''. (We refer readers to Addendum D of the CY 2021 
OPPS/ASC Final rule for the list of status indicator definitions for 
CY2021). HCPCS code J3398 is scheduled to have its drug pass-through 
status expire June 30, 2021, at which point the code 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 HCPCS 
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 HCPCS code 
J3398, the primary therapy, would be packaged into payment for HCPCS 
code 67036, its administration procedure.
    CMS recognizes the need to accurately describe the unique 
administration procedure that is required to administer the therapy 
described by HCPCS code J3398. We proposed 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 recognized that HCPCS code 67036 represents a similar procedure and 
process that approximates similar resource utilization that is 
associated with C97X1. CMS also recognized 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 to which HCPCS code 67036 is assigned, 
as this would package the primary therapy, HCPCS code J3398, into the 
code that represents the process to administer the gene therapy.
    For CY 2021, we proposed to assign the services described by C97X1 
to a new technology payment band based on the geometric mean cost for 
HCPCS code 67036. For the CY 2021 OPPS/ASC Proposed Rule, HCPCS code 
67036 had a geometric mean cost of $3,407.84. Therefore, for the 
proposed rule we proposed to assign C97X1 to APC 1561--New Technology--
Level 24 ($3001-$3500). See Table 11 for proposed descriptors and APC 
assignment.

[[Page 85940]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.023

    Comment: Commenters were largely supportive of our proposal to 
create a ``C'' code to describe the administration of J3398 and assign 
this newly created ``C'' code to New Technology APC 1561. Commenters 
largely advised CMS to finalize our proposal as proposed.
    Response: We thank the commenters for their support on our 
proposal.
    Comment: A small minority of commenters supported our approach to 
create a ``C'' code to describe the administration of J3398 and assign 
the newly created ``C'' code to a New Technology APC, but suggested 
alternate APC placements. The commenters' suggested alternate APC 
placements included APC 1562, based on a crosswalk of HCPCS code 67042, 
as well as APC 1564. Additionally, one commenter expressed uncertainty 
about when it would be appropriate to bill this code.
    Response: We thank commenters for their feedback. Based on our 
review, we believe assigning C9770 to APC 1561 based on the geometric 
mean costs of HCPCS code 67036 is the most appropriate APC placement 
for this code. Our clinical review along with an overwhelming number of 
stakeholders have found that HCPCS code 67036 represents a similar 
procedure and process that approximates similar resource utilization 
that is associated with C9770. Additionally, regarding when C9770 may 
be billed, we remind stakeholders that HOPDs and ASCs may bill C9770 
under Medicare in the HOPD and ASC settings when reasonable and 
necessary services are furnished. HCPCS C-codes are reportable only on 
Medicare OPPS and ASC claims. HOPDs and ASCs are expected to make 
appropriate coding decisions based on instructions and other 
information available to them (for example, federal regulations, CMS 
instructions, MAC instructions, etc.).
    Based on the above discussion, for CY 2021 we are finalizing our 
proposal without modification to establish C9770 and assign the code to 
a New Technology APC based on the geometric mean cost of HCPCS code 
67036. For CY 2021, HCPCS code 67036 has a geometric mean cost of 
$3,435.61. Therefore, as shown in Table 12, for CY 2021 we are 
finalizing our proposal to create C9770 (Vitrectomy, mechanical, pars 
plana approach, with subretinal injection of pharmacologic/biologic 
agent) and assign this code to APC 1561 (New Technology--Level 24 
($3001-$3500)).
[GRAPHIC] [TIFF OMITTED] TR29DE20.024

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 the CY 2021 OPPS/ASC 
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 proposed 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

[[Page 85941]]

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 proposed 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.
    Comment: Two commenters did not support our proposal to assign 
HCPCS code C9751 to APC 1563 (New Technology--Level 26 ($4001-$4500)), 
with a proposed payment rate of $4,250.50 for CY 2021. The commenters 
stated that there was not enough claims data to change the APC 
assignment for HCPCS code C9751, and that HCPCS code C9751 should 
continue to be assigned to APC 1571 (New Technology--Level 34 ($8001-
$8500)) with a proposed payment rate of $8,250.50.
    Response: Because of the low number of claims for HCPCS C9751, we 
utilized our equitable adjustment authority under section 1833(t)(2)(E) 
of the Act for our final rule analysis to calculate the geometric mean, 
arithmetic mean, and median costs to calculate a payment rate to assign 
bronchoscopy with transbronchial ablation of lesions by microwave 
energy to a New Technology APC. Even though the number of claims are 
small, it is the best data available to determine the cost of the 
procedure. The assignment of HCPCS code C9751 to APC 1571 was based on 
guidance from the developer of the procedure and our best estimates of 
the cost of the procedure. The claims data, however limited, provide 
evidence of the cost of the procedure based on service utilization 
rather than having to forecast the cost of procedure.
    Therefore, we decided to use our low-volume methodology for new 
technology services to determine the payment rate for the service 
described by HCPCS code C9751. We found for our final rule analysis 
that the geometric mean cost for the service to be approximately 
$2,693, the arithmetic mean cost to be approximately $3,086, and the 
median cost to be approximately $3,708. The median was the statistical 
methodology that estimated the highest cost for the service and 
provides a reasonable estimate of the midpoint cost of the three claims 
that have been paid for this service. The payment rate calculated using 
this methodology falls within the cost band for New Technology APC 1562 
(New Technology--Level 25 ($3501-$4000)). Based on our updated analysis 
of the data, we have decided to implement our original proposal with 
modifications. For CY 2021, we will change the assignment of HCPCS code 
C9751 to APC 1562 (New Technology--Level 25 ($3501-$4000)) using our 
equitable adjustment authority under section 1833(t)(2)(E) of the Act 
and our low-volume new technology service methodology. The payment rate 
for C9751 will be based on the median cost of claims reported for the 
service since CY 2019 as the median cost is the highest estimated cost 
for the service, and the median provides a reasonable estimate of the 
midpoint cost of the three claims that have been paid for this service. 
Details regarding HCPCS code C9751 are shown in Table 13. We refer 
readers to Addendum B of the final rule for the final payment rates for 
all codes reportable under the OPPS. Addendum B is available via the 
internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TR29DE20.025

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/

[[Page 85942]]

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 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-$1000)) 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 were available for the CY 2021 
OPPS/ASC proposed rule. Specifically, using the most recently available 
data for the CY 2021 OPPS/ASC proposed rule (that is, CY 2019), we 
identified 2,820 claims billed with CPT code 0503T including 415 single 
frequency claims. These totals were well above the threshold of 100 
claims for a procedure to be evaluated using the new technology APC 
low-volume policy. Therefore, we proposed to use our standard 
methodology rather than the low-volume methodology we previously used 
to determine the cost of CPT code 0503T.
    Our analysis of the available claims data for the proposed rule 
found the geometric mean cost for CPT code 0503T was approximately 
$851. Therefore, we proposed 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 had a proposed 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 was closer to the geometric mean costs of CPT code 
0503T. Nonetheless, we welcomed comments on whether reassignment to the 
clinical APC would be more appropriate. Therefore, we proposed 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.
    Comment: The developer of HeartFlow and multiple other commenters 
stated that the CPT code 0503T should not be assigned to New Technology 
APC 1510. Instead, they suggested that the HeartFlow procedure be 
assigned to APC 5593 (Level 3 Nuclear Medicine and Related Services) 
with a payment rate of around $1,270. The developer asserted that even 
though the payment for APC 5593 is substantially higher than the 
estimated cost of CPT code 0503T, the cost of the service fits 
reasonably well with the cost of other procedures assigned to APC 5593. 
The developer and other commenters also assert that the HeartFlow 
procedure has enough clinical similarity to other procedures currently 
assigned to the nuclear medicine and related services family. According 
to the developer and the other commenters, HeartFlow is comparable to 
other nuclear medicine procedures that are image analysis tests 
characterizing organ-specific function. The developer and the other 
commenters also note that cardiac CT procedures, which are used to 
identify coronary artery disease, are assigned to the nuclear medicine 
APC family. Finally, the developer cited two examples of procedures in 
the OPPS that are assigned to APCs where the procedure in question does 
not have clinical similarity to the other procedures in the APC.
    Response: We disagree with the suggestion that CPT code 0503T 
should be assigned to APC 5593. The nuclear medicine and related 
procedures APC family describes diagnostic and therapeutic procedures, 
many of them involving imaging, where radiopharmaceuticals and other 
nuclear materials are critical supplies for the performance of the 
procedure. In comparison, HeartFlow is a computer algorithm that does 
not directly take images nor is it used on its own to generate a 
diagnosis for a patient. Instead, HeartFlow analyzes diagnostic images 
obtained through other medical procedures and assists with the 
interpretation of those diagnostic images to determine if a patient has 
coronary artery disease. There is little clinical similarity between 
the HeartFlow procedure and the procedures currently assigned to the 
nuclear medicine and related procedures, and we cannot support 
assigning CPT code 0503T to APC 5593.
    Comment: Several commenters asserted the proposed payment rate for 
CPT code 0503T is too low and does not reflect their individual 
hospital's cost to use HeartFlow. Commenters mentioned cost issues, 
including the $1,100 list price for each individual HeartFlow service 
and the staff resources involved to transmit data to the HeartFlow 
analysis facility and review the results of the analyses performed by 
HeartFlow. Commenters suggested a range of potential payments for a 
HeartFlow procedure from $1,051 up to $1,451, and they encouraged CMS 
to use our equitable adjustment authority at section 1833(t)(2)(E) of 
the Act to establish a payment rate that would more closely reflect the 
costs the

[[Page 85943]]

commenters believe they are incurring to perform the HeartFlow 
procedure.
    Response: For this CY 2021 OPPS/ASC final rule, we identified 3,188 
claims billed with CPT code 0503T including 465 single frequency claims 
for CPT code 0503T. Our analysis has found that the geometric mean for 
CPT code 0503T is $804.35, and the geometric mean cost falls within the 
cost band for New Technology APC 1510 (New Technology--Level 10 ($801-
$900)), which is similar to our results for the proposed rule. However, 
multiple commenters have noted that the FFRCT service costs $1,100 and 
that there are additional staff costs related to the submission of 
coronary CT image data for processing by HeartFlow.
    HeartFlow is one of the first procedures utilizing artificial 
intelligence to be separately payable in the OPPS, and providers are 
still learning how to accurately report their charges to Medicare when 
billing for artificial intelligence services. This is especially the 
case for allocating the cost of staff resources between the HeartFlow 
procedure and the coronary CT imaging services. Therefore, we feel it 
would be appropriate to use our equitable adjustment authority under 
section 1833(t)(2)(E) of the Act to assign CPT code 0503T to the same 
New Technology APC in CY 2021 as in CY 2020 in order to provide payment 
stability and equitable payment for providers as they continue to 
become more familiar with the proper cost reporting for HeartFlow and 
other artificial intelligence services. As mentioned earlier in this 
section, CPT code 0503T was assigned to New Technology APC 1511 (New 
Technology--Level 11 ($901-$1000)) with a payment rate of $950.50 for 
CY 2020, and we will continue to assign CPT code 0503T to New 
Technology APC 1511 for CY 2021.
    After reviewing all of the public comments, we have decided to 
finalize our proposal with modification by using our equitable 
adjustment authority under section 1833(t)(2)(E) of the Act to continue 
to assign CPT code 0503T to New Technology APC 1511 (New Technology--
Level 11 ($901-$1000)) for CY 2021. We refer readers to Addendum B of 
the final rule for the final payment rates for all codes reportable 
under the OPPS. Addendum B is available via the internet on the CMS 
website.
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. CPT code 78431 was assigned to 
APC 1522 (New Technology--Level 22 ($2001-$2500)) with a payment rate 
of $2,250.50. CPT codes 78432 and 78433 were assigned to APC 1523 (New 
Technology--Level 23 ($2501-$3000)) with a payment rate of $2,750.50.
    We had not received any claims billed with CPT codes 78431, 78432, 
or 78433 prior to the proposed rule. Therefore, we proposed 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 the CY 2021 OPPS/ASC proposed rule (which is 
available via the internet on the CMS website).
    Comment: Several commenters expressed their support for our 
proposal to assign CPT code 78431 to APC 1522 (New Technology--Level 22 
($2001-$2500)) with a payment rate of $2,250.50, and to assign CPT 
codes 78432 and 78433 to APC 1523 (New Technology--Level 23 ($2501-
$3000)) with a payment rate of $2,750.50.
    Response: We appreciate the support of the commenters for our 
proposal.
    We have not received any claims for these services prior to this 
final rule. After our review of the public comments, we have decided to 
implement our proposal without modification. Table 14 reports code 
descriptors, status indicators, and APC assignments for these CPT 
codes.

[[Page 85944]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.026

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 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 OPPS/ASC proposed rule, we stated that we believed 
we had sufficient claims data to reassign the code from a New 
Technology APC to a clinical APC, and noted 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 the CY 
2021 OPPS/ASC proposed rule showed a geometric mean cost of 
approximately $30 for HCPCS code P9100 based on 70 single claims (out 
of 1,835 total claims).

[[Page 85945]]

Based on resource cost and clinical homogeneity to the other services 
assigned to APC 5732 (Level 2 Minor Procedures), we believed that HCPCS 
code P9100 should be reassigned to clinical APC 5732, which had a 
geometric mean cost of 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 the CY 2021 OPPS/ASC 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 proposed 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 
the CY 2021 OPPS/ASC proposed rule with comment period. In addition, we 
refer readers to Addendum D1 of the CY 2021 OPPS/ASC 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.
    Comment: Two commenters expressed their support for our proposal.
    Response: We appreciate the support of the commenters.
    After reviewing the public comments for this proposal, we have 
decided to finalize our proposal without modification to reassign HCPCS 
code P9100 from New Technology APC 1494 to clinical APC 5732 for CY 
2021. The final rule data supports our decision. The data show a 
geometric mean cost of approximately $31 for HCPCS code P9100 based on 
75 single claims (out of 2,038 total claims), which is close to the 
payment rate of around $33 for APC 5732. The final CY 2021 payment rate 
for HCPCS code P9100 can be found in Addendum B to this CY 2021 OPPS/
ASC final rule with comment period. In addition, we refer readers to 
Addendum D1 of this CY 2021 OPPS/ASC final 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 Medical Interatrial Shunt Procedure
    A randomized, double-blinded, controlled 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 
proposed to continue to assign the service to New Technology APC 1589 
for CY 2021. The proposed CY 2021 payment rate for V-Wave interatrial 
shunt procedure can be found in Addendum B to the proposed rule (which 
is available via the internet on the CMS website).
    Comment: Three commenters including the developer of the V-Wave 
interatrial shunt procedure and the developer of the Corvia Medical 
interatrial shunt procedure requested that we delete HCPCS code C9758 
because V-Wave has decided to no longer seek Medicare payment for its 
interatrial shunt procedure trial. The commenters believe that deleting 
HCPCS code C9758 will help prevent provider confusion with billing 
procedures describing the implementation of interatrial shunts.
    Response: We do not intend to delete HCPCS code C9758 and believe 
that HCPCS code C9758 is sufficiently distinct from HCPCS code C9760 
(Non-randomized, non-blinded procedure for nyha class ii, iii, iv heart 
failure; transcatheter implantation of interatrial shunt or placebo 
control, including right and left heart catheterization, transeptal 
puncture, 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) that providers will not 
be confused about the appropriate service code to report.
    Comment: Two commenters, including the developer of the V-Wave 
interatrial shunt procedure and the developer of the Corvia Medical 
interatrial shunt procedure, provided information about procedures that 
had comparable non-device service costs similar to the interatrial 
shunt procedures. One commenter suggested using the non-device cost of 
CPT code 93580 (Percutaneous transcatheter closure of congenital 
interatrial communication (that is, fontan fenestration, atrial septal 
defect) with implant) to approximate non-device costs for this 
procedure. The other commenter suggested that interatrial septal shunt 
procedures and percutaneous intracardiac closure procedures (CPTs 
93580-93591) assigned to APC 5194 (Level 4--Endovascular Procedures) 
would describe the non-device costs of the interatrial shunt 
procedures.
    Response: Based on the suggestions of the commenters, we averaged 
the non-device costs of the interatrial septal shunt procedures and 
percutaneous intracardiac closure procedures to estimate the non-device 
costs of the interatrial shunt procedures. Our estimate of the non-
device costs of both the V-Wave interatrial shunt and Corvia Medical 
interatrial shunt procedures was around $6,500.
    Comment: One commenter requested that we assign the V-Wave 
interatrial shunt procedure to a New Technology APC that reflects the 
cost of the procedure.
    Response: We will assign the V-Wave interatrial shunt procedure to 
an APC that reasonably reflects the cost of the

[[Page 85946]]

procedure both when the device is implanted and when a placebo 
treatment occurs.
    After reviewing the public comments and analyzing the cost of both 
the V-Wave interatrial shunt procedure and the Corvia Medical 
interatrial shunt procedure, we will finalize our proposal with 
modifications. We believe that similar resources and device costs are 
involved with the V-Wave interatrial shunt procedure and the Corvia 
Medical interatrial shunt procedure. Therefore, the difference in the 
payment for HCPCS codes C9758 and C9760 is based on how often the 
interatrial shunt is implanted when each code is billed. An interatrial 
shunt is implanted one-half of the time HCPCS code C9758 is billed. 
Therefore, we will reassign HCPCS code C9758 to New Technology APC 
1590, which reflects the cost of having surgery every time and 
receiving the interatrial shunt one-half of the time when the procedure 
is performed. Details about the HCPCS code and its APC assignment are 
shown in Table 15. The final CY 2021 payment rate for the V-Wave 
interatrial shunt procedure can be found in Addendum B to the final 
rule.
[GRAPHIC] [TIFF OMITTED] TR29DE20.027

i. Corvia Medical Interatrial Shunt Procedure
    Corvia Medical is currently conducting their pivotal trial for 
their interatrial shunt procedure. The trial started in Quarter 1 of CY 
2017 and is scheduled to continue through CY 2021. On July 1, 2020, we 
established HCPCS code C9760 (Non-randomized, non-blinded procedure for 
nyha class ii, iii, iv heart failure; transcatheter implantation of 
interatrial shunt or placebo control, including right and left heart 
catheterization, transeptal puncture, 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 facilitate 
the implantation of the Corvia Medical interatrial shunt.
    In the CY 2021 OPPS/ASC proposed rule, we proposed to assign HCPCS 
code C9760 to New Technology APC 1589. The proposed CY 2021 payment 
rate for Corvia Medical interatrial shunt procedure was found in 
Addendum B to the proposed rule (which is available via the internet on 
the CMS website).
    Comment: Several commenters recommended revising the code 
descriptor for HCPCS code C9760 since the current descriptor 
inaccurately suggests that the code may include placebo control 
subjects who would not receive a shunt implant. The commenters 
specifically requested deleting the phrase ``or placebo control'' to 
eliminate any confusion on how this code should be reported.
    Response: We agree with the commenters and have revised the long 
descriptor effective January 1, 2021 to read ``Non-randomized, non-
blinded procedure for NYHA Class II, III, IV heart failure; 
transcatheter implantation of interatrial shunt, including right and 
left heart catheterization, transeptal puncture, 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.'' The revised long descriptor for HCPCS code C9760 can 
also be found in the 2021 Alpha Numeric HCPCS File that is posted on 
the CMS HCPCS website, specifically, at https://www.cms.gov/Medicare/Coding/HCPCSReleaseCodeSets/Alpha-Numeric-HCPCS.
    Comment: Two commenters, including the developer of the Corvia 
Medical interatrial shunt procedure and the developer of the V-Wave 
interatrial shunt procedure, provided information about procedures that 
had comparable non-device service costs similar to the interatrial 
shunt procedures. One commenter suggested using the non-device cost of 
CPT code 93580 (Percutaneous transcatheter closure of congenital 
interatrial communication (that is, fontan fenestration, atrial septal 
defect) with implant). The other commenter suggested that interatrial 
septal shunt procedures and percutaneous intracardiac closure 
procedures (CPTs 93580-93591) assigned to APC 5194 (Level 4--
Endovascular Procedures) would describe the non-device costs of the 
interatrial shunt procedures.
    Response: Based on the suggestions of the commenters, we averaged 
the non-device costs of the interatrial septal shunt procedures and 
percutaneous intracardiac closure procedures to estimate the non-device 
costs of the interatrial shunt procedures. Our estimated cost of the 
non-device costs of the both the Corvia Medical interatrial shunt and 
V-Wave interatrial shunt procedures was around $6,500.
    Comment: Multiple commenters, including the developer of the Corvia 
Medical interatrial shunt procedure and the developer of the V-Wave 
interatrial shunt procedure, requested a higher payment rate for the 
procedure. Several commenters were concerned that the payment rate 
established for HCPCS

[[Page 85947]]

code C9760 would discourage providers from participating in the 
clinical trial, and the developer of the Corvia Medical interatrial 
shunt procedure stated that they had to assume all costs for the trial 
because of inadequate payment for the Corvia Medical interatrial shunt 
procedure. The developer of the V-Wave interatrial shunt procedure 
mentioned that HCPCS code C9760 is the service code they will use to 
report interatrial shunt procedures for their continuing study.
    Response: As mentioned earlier, we decided to estimate the non-
device costs of both the Corvia Medical interatrial shunt procedure and 
the V-Wave interatrial shunt procedure. We also plan to combine the 
non-device costs of the procedures with the costs of the interatrial 
shunt device to create a new estimate of the payment rate for HCPCS 
code C9760. HCPCS code C9760 can be used to report any non-randomized, 
non-blinded study related to the implantation of interatrial shunts 
where the device is implanted for every procedure reported.
    After our review of the public comments, we intend to finalize our 
proposal with modifications. We believe that similar resources and 
device costs are involved with the Corvia Medical interatrial shunt 
procedure and the V-Wave interatrial shunt procedure. Therefore, the 
difference in the payment for HCPCS codes C9760 and C9758 is based on 
how often the interatrial shunt is implanted when each code is billed. 
The Corvia Medical interatrial shunt is implanted every time HCPCS code 
C9760 is billed. Therefore, we will reassign HCPCS code C9760 to New 
Technology APC 1592. We also will implement the commenters' suggestion 
to modify the code descriptor for HCPCS code C9760 to remove the phrase 
``or placebo control,'' from the descriptor. Details about the HCPCS 
code and its APC assignment are shown in Table 16. The final CY 2021 
payment rate for the Corvia Medical interatrial shunt procedure can be 
found in Addendum B to the final rule.
[GRAPHIC] [TIFF OMITTED] TR29DE20.028

j. Supervised Visits for Esketamine Self-Administration (HCPCS Codes 
G2082 and G2083 APCs 1508 and 1511)
    On March 5, 2019, 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 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

[[Page 85948]]

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-$1000)) with a payment rate of $950.50.
    No Medicare OPPS claims had been reported for either HCPCS code 
G2082 or G2083 prior to the CY 2021 OPPS/ASC proposed rule. Therefore, 
we proposed to continue to assign HCPCS code G2082 to New Technology 
APC 1508 and to assign HCPCS code G2083 to New Technology APC 1511. 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).
    Comment: Two commenters supported our proposal.
    Response: We appreciate the support of the commenters.
    We have not received any OPPS claims for this code prior to this 
final rule. After reviewing the public comments for this proposal, we 
have decided to implement our proposal without modification 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 17. The final CY 2021 payment 
rate for esketamine self-administration can be found in Addendum B to 
the proposed rule (which is available via the internet on the CMS 
website).
[GRAPHIC] [TIFF OMITTED] TR29DE20.029

D. APC-Specific Policies

1. Administration of Lacrimal Ophthalmic Insert Into Lacrimal 
Canaliculus (APC 5692)
    HCPCS code J1096 (Dexamethasone, lacrimal ophthalmic insert, 0.1 
mg) is a drug indicated ``for the treatment of ocular inflammation and 
pain following ophthalmic surgery.''\4\ Stakeholders assert that this 
drug is administered through CPT code 0356T (Insertion of drug-eluting 
implant (including punctal dilation and implant removal when performed) 
into lacrimal canaliculus, each). Stakeholders also state the drug is 
inserted in a natural opening in the eyelid (called the punctum) and 
that the drug is designed to deliver a tapered dose of dexamethasone to 
the ocular surface for up to 30 days.
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    HCPCS code J1096 is currently on pass-through status and assigned 
to APC 9308 (Dexametha opth insert 0.1 mg) with status indicator ``G''. 
Please see section V.A.5. of this final rule with comment period for 
further information

[[Page 85949]]

regarding the pass-through status of J1096. CPT code 0356T is currently 
assigned to status indicator ``Q1,'' indicating conditionally packaged 
payment under the OPPS. Packaged payment applies if a code assigned 
status indicator ``Q1'' is billed on the same claim as a HCPCS code 
assigned status indicator ``S'', ``T'', or ``V''. Accordingly, based on 
the OPPS assigned status indicator, CPT code 0356T is assigned to 
payment indicator ``N1'' in the ASC setting, meaning a packaged 
service/item.
    We refer readers to Addendum D1 of this final rule for a list of 
OPPS status indicators and their definitions, available via the 
internet on the CMS website. We also refer readers to Addendum AA for 
ASC payment indicator assignments and to Addendum DD1 for payment 
indicator definitions, available via the internet on the CMS website.
    CPT code 0356T is assigned to APC 5692 (Level 2 Drug 
Administration). With regards to APCs 5691 (Level 1 Drug 
Administration) and APC 5692 (Level 2 Drug Administration), and as 
stated in the CY 2018 OPPS/ASC final rule with comment period, our 
overarching goal is to make OPPS payments for all services paid under 
the OPPS more consistent with those of a prospective payment system and 
less like those of a per-service fee schedule. To achieve this goal, it 
is important that we are consistent in our approach to packaging items 
and services under the established packaging categories. Therefore, in 
the CY 2018 OPPS/ASC final rule with comment period, after 
consideration of the public comments we received, we finalized, without 
modification, the proposed policy to conditionally package low-cost 
drug administration services assigned to APC 5691 and APC 5692 (82 FR 
52391 through 52393). Additionally, conditional packaging for Levels 1 
and 2 Drug Administration services is consistent with the ancillary 
packaging policy that was adopted in the 2015 OPPS/ASC Final Rule with 
comment period (79 FR 66819 through 66822). Accordingly, in the CY 2021 
OPPS/ASC Proposed Rule, we did not propose to change the OPPS status 
indicator assignment and APC placement, or ASC payment indicator 
assignment for CPT code 0356T.
    Comment: Several commenters had concerns with continuing the same 
APC placement of APC 5692 for CPT code 0356T for CY 2021. Commenters 
generally advocated for separate payment for this CPT code through a 
change in status indicator. A few commenters suggested alternative APC 
placements, such as APC 5501 (Level 1 Extraocular, Repair, and Plastic 
Eye Procedures), APC 5693 (Level 3 Drug Administration), or APC 1504 
(New Technology--Level 4), whereas other commenters requested a larger 
payment in general without a specific APC placement suggestion. Several 
stakeholders commented that the clinical importance of providing HCPCS 
code J1096 to patients is that it reduces ocular pain, inflammation, 
and reduces the burden of topical eyedrop application.
    Additionally, providers stated that they usually perform CPT code 
0356T to administer HCPCS code J1096 after the conclusion of ophthalmic 
surgeries. Most commonly, providers cited using CPT code 0356T to 
administer HCPCS code J1096 after surgeries such as cataract, glaucoma, 
and corneal surgeries. Commenters believe the procedure is a distinct 
surgical procedure that requires additional operating room time and 
resources. Commenters were concerned that the lack of increased or 
separate payment may reduce access to HCPCS J1096, particularly in the 
ASC setting.
    Response: We thank commenters for their feedback. After careful 
consideration of the statements from commenters, we continue to believe 
that assignment of CPT code 0356T to APC 5692, with an OPPS status 
indicator ``Q1'' and an associated ASC payment indicator of ``N1'', is 
appropriate based on its clinical and resource use similarity to other 
services assigned to that APC. Commenters have stated that CPT code 
0356T is performed during ophthalmic surgeries such as cataract 
surgeries. We do not find it appropriate to compare CPT code 0356T to 
that of an independent procedure when performed during these other 
ophthalmic surgeries. We continue to believe that conditionally 
packaging the payment for CPT code 0356T into the payment for these 
primary procedures is appropriate. This is consistent with our policy 
to conditionally package low-cost drug administration services assigned 
to APC 5691 (Level 1 Drug Administration) and APC 5692 (Level 2 Drug 
Administration). We note the policy established in the CY 2018 OPPS to 
conditionally package low-cost drug administration services assigned to 
APC 5691 and APC 5692 (82 FR 52391 through 52393). Also, we note that 
the conditional packaging of drug administration supports our 
overarching goal to make payments for all services paid under the OPPS 
and ASC payment system more consistent with those of a prospective 
payment system and less like those of a per-service fee schedule. We 
believe that packaging encourages efficiency and is an essential 
component of a prospective payment system, and that packaging payments 
for items and services that are typically integral, ancillary, 
supportive, dependent, or adjunctive to a primary service is a 
fundamental part of the OPPS.
    After consideration of the public comments, we are finalizing our 
proposed policy without modification to assign CPT code 0356T to APC 
5692 (Level 2 Drug Administration) with OPPS status indicator ``Q1'' in 
the CY 2021 OPPS. Based on those assignments, we are also finalizing an 
ASC payment indicator for CPT code 0356T of ``N1'' under the CY 2021 
ASC payment system.
2. Chimeric Antigen Receptor T-Cell (CAR T-Cell) Therapy (APCs 5694, 
9035, 9194, and 9391)
    Chimeric Antigen Receptor T-Cell (CAR T-cell) therapy is a cell-
based gene therapy in which T-cells are collected and genetically 
engineered to express a chimeric antigen receptor that will bind to a 
certain protein on a patient's cancerous cells. The CAR T-cells are 
then administered to the patient to attack certain cancerous cells and 
the individual is observed for potential serious side effects that 
would require medical intervention. We refer readers to previous 
discussions in the OPPS/ASC final rules with comment period for 
background regarding the specific CAR T-cell products, in both the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61231 through 
61234) and the CY 2019 OPPS/ASC final rule with comment period (83 FR 
58904 through 58908). In addition, for discussion about CY 2021 OPPS 
payment policies for separately paid drugs with pass-through status 
expiring or continuing in CY 2021, please see sections V.A.4. and 
V.A.5. of this final rule with comment period.
    The AMA created four Category III CPT codes that are related to CAR 
T-cell therapy, effective January 1, 2019. As discussed in the CY 2019 
OPPS/ASC final rule with comment period (83 FR 58904 through 58908) and 
the CY 2020 OPPS/ASC final rule with comment period (84 FR 61231 
through 61234), we finalized our proposal to assign procedures 
described by CPT codes 0537T, 0538T, and 0539T to status indicator 
``B'' (Codes that are not recognized by OPPS when submitted on an 
outpatient hospital Part B bill type (12x and 13x)) to indicate that 
the services are not paid under the OPPS. The procedures described by 
CPT codes 0537T, 0538T, and 0539T describe the various steps required 
to collect and

[[Page 85950]]

prepare the genetically modified T-cells, and Medicare does not 
generally pay separately for each step used to manufacture a drug or 
biological. We also finalized that the procedures described by CPT code 
0540T would be assigned status indicator ``S'' (Procedure or Service, 
Not Discounted when Multiple) and APC 5694 (Level 4 Drug 
Administration) for CY 2019 and CY 2020, and made no proposal to change 
the assignment for CY 2021. Additionally, the National Uniform Billing 
Committee (NUBC) established CAR T-cell-related revenue codes and a 
value code to be reportable on Hospital Outpatient Department (HOPD) 
claims effective for claims received on or after April 1, 2019.
    We made no specific proposal related to the CAR T-cell preparation 
codes, as described by CPT codes 0537T, 0538T, 0539T. As listed in 
Addendum B of the CY 2021 OPPS/ASC proposed rule, we proposed to 
continue to assign procedures described by these CPT codes, 0537T, 
0538T, and 0539T, to status indicator ``B'' (Codes that are not 
recognized by OPPS when submitted on an outpatient hospital Part B bill 
type (12x and 13x)) to indicate that the services are not paid under 
the OPPS. We proposed to continue to assign CPT code 0540T to status 
indicator ``S'' (Procedure or Service, Not Discounted when Multiple) 
and APC 5694 (Level IV Drug Administration).
    Comment: Several commenters opposed our proposal to continue to 
assign status indicator ``B'' to CPT codes 0537T, 0538T, and 0539T for 
CY 2021. Commenters stated that a change in status indicator would be 
appropriate, with a preference for assigning CPT codes 0537T, 0538T, 
and 0539T to status indicator ``Q1''. Commenters believed that the 
procedures these CPT codes describe did not represent the steps 
required to manufacture the CAR T-cell product, as CMS has stated. 
Generally, those advocating for a change in status indicator contend 
this change is necessary to allow services furnished to the patient to 
be eligible for payment and for hospitals to be paid appropriately for 
the services they provide during each step of the CAR T-cell process. 
Commenters asked CMS to release new cost centers and to revise the 
instructions in MLN Matters Article SE19009 accordingly.
    Response: We thank the commenters for their feedback. CMS does not 
believe that separate or packaged payment under the OPPS is necessary 
for the procedures described by CPT codes 0537T, 0538T, and 0539T for 
CY 2021. The procedures described by CPT codes 0537T, 0538T, and 0539T 
describe the various steps required to collect and prepare the 
genetically modified T-cells and Medicare does not generally pay 
separately for each step used to manufacture a drug or biological 
product. Additionally, we note that CAR T-cell therapy is a unique 
therapy approved as a biologic, with unique preparation procedures, 
that cannot be directly compared to other therapies or existing CPT 
codes. We note that the current HCPCS coding for the currently approved 
CAR T-cell therapies include leukapheresis and dose preparation 
procedures, as these services are included in the manufacturing of 
these biologicals. Therefore, payment for these services is 
incorporated into the drug codes. Please see Table 18 for HCPCS coding 
for CAR T-cell therapies.
[GRAPHIC] [TIFF OMITTED] TR29DE20.030

    We note that although there is no payment associated with CPT codes 
0537T, 0538T, and 0539T for reasons stated previously, these codes can 
still be reported to CMS for tracking purposes. We thank commenters for 
their feedback related to cost centers and our guidance contained in 
MLN Matters Article SE19009.\5\ We are not revising this document at 
this time, but appreciate the feedback from stakeholders. Also, we 
would like to note that HOPDs can bill Medicare for reasonable and 
necessary services that are otherwise payable under the OPPS, and we 
believe that the comments in reference to payment for services in 
settings not payable under the OPPS are outside the scope of this 
proposed rule. Accordingly, we are not revising the existing codes for 
CAR T-cell therapies to remove leukapheresis and dose preparation 
procedures, and we are not accepting the recommendations at this time 
to revise the status indicators for procedures described by CPT codes 
0537T, 0538T, and 0539T. We will continue to evaluate and monitor 
payment for CAR T-cell therapies.
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    In summary, after consideration of the public comments we received, 
we are finalizing our proposal to assign status indicator ``B'' to CPT 
codes 0537T, 0538T, and 0539T for CY 2021. Additionally, we are 
continuing our policy from CY 2019 to assign status indicator ``S'' to 
CPT code 0540T for CY 2021. Table 19 below shows the final SI

[[Page 85951]]

and APC assignments for HCPCS codes 0537T, 0538T, 0539T, and 0540T for 
CY 2021. For more information on CY 2021 OPPS final status indicators, 
APC assignments, and payment rates for HCPCS codes, including the CAR 
T-cell drug codes, we refer readers to Addendum B to this final rule 
with comment period. In addition, the status indicator definitions can 
be found in Addendum D1 (OPPS Payment Status Indicators for CY 2021) to 
this final rule with comment period. Both Addendum B and D1 are 
available via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TR29DE20.031

3. Eustachian Tube Balloon Dilation Procedure (APC 5165)
    For the CY 2021 update, the CPT Editorial Panel established CPT 
codes 69705 and 69706 to describe the eustachian tube balloon dilation 
(ETBD) surgical procedure effective January 1, 2021. Prior to CY 2021, 
this surgical procedure was described by HCPCS code C9745.
    In 2017, CMS received a new technology application for the 
transnasal flexible balloon catheter eustachian tube dilation surgical 
procedure, which is associated with the Acclarent Aera Eustachian Tube 
Balloon Dilation System, and established a new code, specifically, 
HCPCS code C9745. Based on the estimated cost for the bilateral 
placement of the eustachian tube balloon dilation devices, we assigned 
the code to APC 5165 (Level 5 ENT Procedures) with a payment rate of 
$4,130.94 effective July 1, 2017. We announced the new code, interim SI 
and APC assignments, and payment rate in the July 2017 quarterly update 
to the OPPS (Transmittal 3783, Change Request 10122, dated May 26, 
2017).
    For the CY 2018 update, we made no change to the APC assignment and 
continued to assign HCPCS code C9745 to APC 5165 with a payment rate of 
$4,338.79. We note that OPPS payment rates for the CY 2018 update were 
based on claims submitted between January 1, 2016 through December 30, 
2016, that were processed on or before June 30, 2017. Because HCPCS 
code C9745 was established on July 1, 2017, we had no claims data for 
the procedure for use in CY 2018 ratesetting.
    For the CY 2019 update, based on our analysis of the claims data, 
we made no change to the payment assignment and continued to assign 
HCPCS code C9745 to APC 5165. Specifically, our claims data showed a 
geometric mean cost of approximately $4,385 for HCPCS code C9745 based 
on 217 single claims (out of 218 total claims), which was consistent 
with the geometric mean cost of about $4,462 for APC 5165. 
Consequently, we retained HCPCS code C9745 in APC 5165.
    Similarly, for CY 2020, we made no change to the APC assignment for 
HCPCS code C9745, consistent with our claims data. Based on claims 
submitted between January 1, 2018 through December 30, 2018, that were 
processed on or before June 30, 2019, the geometric mean cost for HCPCS 
code C9745 was approximately $4,547 based on 577 single claims (out of 
582 total claims), which is in line with the geometric mean cost of 
$4,746 for APC 5165. Therefore, we maintained HCPCS code C9745 in APC 
5165.
    For CY 2021, we proposed to delete HCPCS code C9745 and assign CPT 
code 69705 to APC 5164 (Level 4 ENT Procedures) with a proposed OPPS 
payment of $2,776.63 and assign CPT code 69706 to APC 5165 (Level 5 ENT 
Procedures) with a proposed OPPS payment of $5,150.60. Because HCPCS 
code C9745 was on the ASC Covered Surgical Procedures list, we also 
proposed to assign CPT code 69705 to ASC payment indicator ``J8'' 
(device-intensive) with a proposed ASC payment of $1,564.17. Similarly, 
we proposed to assign CPT code 69706 to ASC payment indicator ``J8'' 
(device-intensive) with a proposed ASC payment of $3,453.23. We note 
that CPT codes 69705 and 69706 were listed as placeholder codes 697XX 
and 697X1, respectively, in OPPS Addendum B and ASC Addendum AA to the 
CY 2021 OPPS/ASC proposed rule.
    Comment: Some commenters expressed concern with the proposed 
assignment to APC 5164 for CPT code 69705 (unilateral procedure) and 
stated that the proposed assignment will negatively affect the 
reimbursement of the procedure in the ASC setting, and ultimately 
decrease access to the procedure. They stated that the major portion of 
the procedure cost is the device used in the procedure, and reported 
the device cost is about $2,180, which is used for each procedure, 
regardless of whether it is a unilateral or bilateral procedure. In 
addition, they stated that in the CY 2021 Physician Fee Schedule (PFS) 
proposed rule, the

[[Page 85952]]

estimate for the non-facility payment for CPT codes 69705 and 69706 
includes the full cost of the device kit, specifically, $3,092.81 for 
CPT code 69705 (unilateral) and $3,183.14 for CPT code 69706 
(bilateral). To ensure fair reimbursement for unilateral procedures, 
they recommended that CMS assign both codes to APC 5165. However, in 
the event the recommendation is not accepted, they urged CMS to 
reconsider the device-intensive calculation for CPT code 69705 to 
reflect the cost of the device kit for unilateral procedures in the ASC 
setting; otherwise, commenters contended the ASC payment will be 
reduced below the actual cost of the device kit.
    Response: Our medical advisors advised that the procedure described 
by CPT code 69705, while performed in the hospital outpatient setting, 
will primarily be performed in either the physician office or ASC 
setting. To ensure that Medicare beneficiaries have access to the 
procedure, we believe that it is appropriate to reassign CPT code 69705 
(unilateral) to the same APC as CPT code 69706 (bilateral). That is, we 
believe that reassigning CPT code 69705 to APC 5165 will better reflect 
the device cost to perform this procedure either unilaterally or 
bilaterally when furnished in either the hospital outpatient or the ASC 
setting.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, to assign CPT code 69706 
to APC 5165. However, we are finalizing our proposal, with 
modification, to assign CPT code 69705 to APC 5165 for CY 2021. We note 
that we are deleting HCPCS code C9745 on December 31, 2020, since it 
has been replaced with CPT codes 69705 and 69706 effective January 1, 
2021. Table 20 lists the final SI and APC assignments for the two 
codes. The final CY 2021 OPPS payment rate for the codes can be found 
in Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final 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.
[GRAPHIC] [TIFF OMITTED] TR29DE20.032

4. Eye-Movement Analysis Without Spatial Calibration (APC 5734)
    For July 2020, the CPT Editorial Panel established a new CPT code 
0615T, effective July 1, 2020, to describe eye-movement analysis 
without spatial calibration that involves the use of the EyeBOX system 
as an aid in the diagnosis of concussion, also known as mild traumatic 
brain injury (mTBI). The EyeBOX is intended to measure and analyze eye 
movements as an aid in the diagnosis of concussion within one week of 
head injury in patients 5 through 67 years of age in conjunction with a 
standard neurological assessment of concussion. A negative EyeBOX 
classification may correspond to eye movement that is consistent with a 
lack of concussion. A positive EyeBOX classification corresponds to eye 
movement that may be present in both patients with or without a 
concussion.
    We included this new code in the July quarterly OPPS update CR 
(Transmittal 10224, Change Request 11814, dated July 15, 2020). 
Effective July 1, 2020, we assigned CPT code 0615T to APC 5734 (Level 4 
Minor Procedures) with status indicator ``Q1'' (conditionally packaged) 
and a CY 2020 OPPS payment rate of $109.03 as reflected in the Addendum 
B to the July 2020 quarterly OPPS update.
    As displayed in the Addendum B to the 2021 ASC/OPPS Proposed Rule, 
we proposed to assign 0615T to APC 5734 with status indicator ``Q1'' 
and a proposed OPPS payment rate of $113.23 for CY 2021. We also 
assigned this code to comment indicator ``NP'' in Addendum B to 
indicate that this code is new effective July 1, 2020, and that public 
comments would be accepted on its proposed status indicator assignment.
    Comment: A commenter was concerned that what they believed was a 
lack of adequate, separate payment would strongly discourage hospitals 
from providing this important new technology to their patients. The 
commenter urged CMS to: (1) Change the APC assignment of CPT code 0615T 
to APC 5722 (Level 2 Diagnostic Tests and Related Services) with a 
proposed OPPS payment rate of $269.85 and (2) change the status 
indicator for the service to ``S'' to allow for a separate payment 
under the OPPS.
    The commenter asked that CMS assign CPT code 0615T to APC 5722 for 
two reasons: (1) The current and proposed reimbursement rates for 
services in APC 5734 are inadequate to pay hospitals appropriately for 
the costs

[[Page 85953]]

of furnishing the EyeBOX test; and (2) the clinical characteristics and 
resources associated with 0615T are more similar to codes in APC 5722 
than services in APC 5734.
    Response: We note that OPPS payment rates for the CY 2021 final 
rule are based on claims submitted between January 1, 2019 through 
December 31, 2019, that were processed on or before June 30, 2020. 
Because HCPCS code 0615T was established on July 1, 2020, we did not 
have claims data for CY 2021 OPPS ratesetting.
    In terms of the resource similarity of CPT code 0615T to other eye-
related diagnostic tests that are assigned to APC 5722, such as CPT 
code 92240 (Indocyanine-green angiography (includes multiframe imaging) 
with interpretation and report, unilateral or bilateral) and CPT code 
92242 (Fluorescein angiography and indocyanine-green angiography 
(includes multiframe imaging) performed at the same patient encounter 
with interpretation and report, unilateral or bilateral), the EyeBOX 
test does not involve an injection. Therefore, we do not believe that 
the resource costs for CPT code 0615T are comparable to other eye-
related diagnostic tests in APC 5722. Updated claims data for this 
final rule with comment period indicate that the geometric mean cost of 
APC 5722 is $257.61, while the geometric mean cost of APC 5734 is 
$109.05. However, because there were no claims for CPT code 0615T in 
the CY 2021 updated data set, we have decided not to make any changes 
to the proposed CY 2021 APC assignment and to assign the code to the 
APC with the lower geometric mean cost. Based on these findings, we 
believe that maintaining assignment of APC 5734 for CPT code 0615T for 
CY 2021 is appropriate.
    In response to the comment related to status indicator ``Q1'', we 
note that status indicator ``Q1'' listed in the OPPS Addendum D1 to 
this 2021 OPPS/ASC final rule with comment period allows for up to 
three potential payment assignments:
     Packaged APC payment if billed on the same claim as a 
HCPCS code assigned status indicator ``S'', ``T'', or ``V''; or
     Composite APC payment if billed with specific combinations 
of services based on OPPS composite-specific payment criteria. Payment 
is packaged into a single payment for specific combinations of 
services; or
     In other circumstances, payment is made through a separate 
APC payment.
    Depending on the procedures submitted on the claim and whether the 
procedure described by CPT code 0615T is performed with any other 
services on the same day, the procedure described by CPT code 0615T may 
be paid separately through an APC (in this case APC 5734) or receive 
packaged payment when accompanying a more significant procedure that is 
reported on the claim. Based on the nature of this procedure, which may 
be performed by itself or with other procedures on the same claim, we 
believe that the continued assignment of status indicator ``Q1'' is 
appropriate for the procedure described by CPT code 0615T.
    As we do every year, we will reevaluate the APC assignment for CPT 
code 0615T for the next rulemaking cycle. We note that we review, on an 
annual basis, the APC assignments for all services and items paid under 
the OPPS.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to assign CPT code 0615T 
to status indicator ``Q1'' and APC 5734 for CY 2021. The final CY 2021 
payment rate for the CPT code can be found in Addendum B to this final 
rule with comment period (which is available via the internet on the 
CMS website).
5. Gynecologic Procedures and Services (APC 5416)
    For CY 2021, we proposed to continue to assign CPT code 0404T 
(Transcervical uterine fibroid(s) ablation with ultrasound guidance, 
radiofrequency) to APC 5416 (Level 6 Gynecologic Procedures) with a 
proposed payment of $6,929.92. CPT code 0404T describes the procedure 
associated with the Sonata System, which is used for the treatment of 
symptomatic uterine fibroids. We note that CPT code 0404T was effective 
on January 1, 2016.
    Comment: Several commenters stated that the proposed APC payment 
rate is insufficient to compensate hospital outpatient departments for 
the resources needed to perform the procedure. They indicated that the 
combined cost of the single-use handpiece, capital equipment, supplies, 
screening labs, anesthesia, medication, and facility and personnel 
overhead are higher than the OPPS payment rate. The commenters asserted 
that the proposed payment will significantly limit patient access to 
the procedure because it does not cover the total cost of the surgery. 
One commenter acknowledged that the proposed payment appropriately 
reimburses for hospital outpatient costs, but believed the ASC proposed 
payment of $2,763.68 significantly underpays for the procedure in the 
ASC setting. The same commenter explained that CMS has no claims data 
for the code because the procedure is rarely performed on Medicare 
patients, and also due to the device's commercial availability. 
Although the CPT code was effective January 2016, because of 
manufacturing issues, the company was unable to submit their FDA 
application until a couple of years later. The company eventually 
received market approval from the FDA in August 2018 and the device was 
commercially available in late summer/early Fall 2019. To ensure access 
to the procedure, the commenters suggested reassigning CPT code 0404T 
to either:
     APC 5362 (Level 2 Laparoscopy and Related Services) with a 
proposed payment rate of $9,041.94 because the procedure cost is 
similar to these procedures:
    [cir] CPT code 43210 (Esophagogastroduodenoscopy, flexible, 
transoral; with esophagogastric fundoplasty, partial or complete, 
includes duodenoscopy when performed);
    [cir] CPT code 50593 (Ablation, renal tumor(s), unilateral, 
percutaneous, cryotherapy);
    [cir] CPT code 58546 (Laparoscopy, surgical, myomectomy, excision; 
5 or more intramural myomas and/or intramural myomas with total weight 
greater than 250 g); and
    [cir] CPT code 58674 (Laparoscopy, surgical, ablation of uterine 
fibroid(s) including intraoperative ultrasound guidance and monitoring, 
radiofrequency), or
     APC 5376 (Level 6 Urology and Related Services) with a 
proposed payment of $8,395.62 because the procedure cost is similar to 
these procedures:
    [cir] CPT code 55873 (Cryosurgical ablation of the prostate 
(includes ultrasonic guidance and monitoring); and
    [cir] CPT code 0421T (Transurethral waterjet ablation of prostate, 
including control of post-operative bleeding, including ultrasound 
guidance, complete (vasectomy, meatotomy, cystourethroscopy, urethral 
calibration and/or dilation, and internal urethrotomy are included when 
performed)).
    Response: For CY 2021, OPPS payments are developed based on claims 
submitted between January 1, 2019 through December 31, 2019, and 
processed through June 30, 2020. For this final rule with comment 
period, we have no claims data for this code. As explained by a 
commenter, CPT code 0404T is a procedure not commonly performed on 
Medicare beneficiaries. In addition, we disagree with the commenters' 
assessment that CPT code

[[Page 85954]]

0404T is similar to the codes they have referenced. CPT code 0404T is 
not a urology, kidney, or esophagogastroduodenum-related procedure, nor 
is it a laparoscopy procedure. We believe that the code is 
appropriately placed in APC 5416 based on its clinical homogeneity and 
resource costs to the other gynecology-related procedures in the APC. 
We agree with the commenter who believed that the proposed OPPS payment 
for the service is adequate to cover the cost of providing the 
procedure in the hospital outpatient setting.
    For a discussion on the ASC payment for CPT code 0404T, we refer 
readers to the ASC payment section of this CY 2021 OPPS/ASC final rule 
with comment period, specifically, section XIII. (Updates to the 
Ambulatory Surgical Center (ASC) Payment System).
    Comment: Some commenters suggested designating CPT code 0404T as 
device-intensive under the OPPS so that facilities can be paid 
appropriately for furnishing the procedure in the ASC setting. They 
also recommended establishing an offset percentage that is higher than 
the default 31 percent based on invoice pricing data provided to CMS by 
the device manufacturer so that payment for the procedure in the ASC 
setting includes the cost of the device.
    Response: We refer readers to section IV. B. (Device-Intensive 
Procedures) for the discussion related to the OPPS device offset for 
the code. For a discussion of the ASC procedures designed as device 
intensive, please see section XIII.C.1. of this final rule with comment 
period.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, and assigning CPT code 
0404T to APC 5416 for CY 2021. The final CY 2021 OPPS payment rate for 
the code can be found in Addendum B to this final rule with comment 
period. In addition, we refer readers to Addendum D1 of this final rule 
with comment period for the status indicator (SI) assignments for all 
codes reported under the OPPS. Both Addendum B and D1 are available via 
the internet on the CMS website.
6. Hemodialysis Arteriovenous Fistula (AVF) Procedures (APC 5194)
    For CY 2019, based on two new technology applications received by 
CMS for hemodialysis arteriovenous fistula creation, CMS established 
two new HCPCS codes to describe the surgical procedure associated with 
the two technologies since no specific CPT codes exist. Specifically, 
CMS established HCPCS code C9754 for the Ellipsys System and C9755 for 
the WavelinQ System effective January 1, 2019. The complete descriptors 
for both codes are as follows:
     C9754 (Creation of arteriovenous fistula, percutaneous; 
direct, any site, including all imaging and radiologic supervision and 
interpretation, when performed and secondary procedures to redirect 
blood flow (e.g., transluminal balloon angioplasty, coil embolization, 
when performed))
     C9755 (Creation of arteriovenous fistula, percutaneous 
using magnetic-guided arterial and venous catheters and radiofrequency 
energy, including flow-directing procedures (e.g., vascular coil 
embolization with radiologic supervision and interpretation, when 
performed) and fistulogram(s), angiography, venography, and/or 
ultrasound, with radiologic supervision and interpretation, when 
performed)
    Both HCPCS codes were assigned to APC 5193 (Level 3 Endovascular 
Procedures) with a payment rate of $9,669.04 for CY 2019. For CY 2020, 
as discussed in the CY 2020 OPPS/ASC final rule with comment period (84 
FR 61246), we revised the assignment for both codes to APC 5194 (Level 
4 Endovascular Procedures) with a payment rate of $15,939.97.
    For the July 2020 update, we deleted HCPCS codes C9754 and C9755 on 
June 30, 2020, and replaced them with G-codes effective July 1, 2020 to 
enable physicians to report the procedures when performed in the 
physician office setting. Specifically, we deleted HCPCS code C9754 on 
June 30, 2020 because it was replaced with HCPCS code G2170 effective 
July 1, 2020. Similarly, we deleted HCPCS code C9755 on June 30, 2020 
because it was replaced with HCPCS code G2171 effective July 1, 2020. 
Below are the complete descriptors for HCPCS codes G2170 and G2171:
     G2170 (Percutaneous arteriovenous fistula creation (AVF), 
direct, any site, by tissue approximation using thermal resistance 
energy, and secondary procedures to redirect blood flow (e.g., 
transluminal balloon angioplasty, coil embolization) when performed, 
and includes all imaging and radiologic guidance, supervision and 
interpretation, when performed)
     G2171 (Percutaneous arteriovenous fistula creation (AVF), 
direct, any site, using magnetic-guided arterial and venous catheters 
and radiofrequency energy, including flow-directing procedures (e.g., 
vascular coil embolization with radiologic supervision and 
interpretation, when performed) and fistulogram(s), angiography, 
enography, and/or ultrasound, with radiologic supervision and 
interpretation, when performed)
    We deleted the C-codes based on concerns from stakeholders that 
physicians are reluctant to perform the Ellipsys procedure in the 
physician office setting without a specific HCPCS code. With the 
deletion of the C-codes, we crosswalked the APC assignment and payment 
rate for the C-codes to the new G-codes. We note that C-codes are not 
reportable on Medicare physician office claims, whereas G-codes are 
reportable on physician office, hospital outpatient, and ambulatory 
surgical center claims.
    For CY 2021, we proposed to reassign HCPCS code G2170 (Ellipsys 
System) from APC 5194 to APC 5193 (Level 3 Endovascular Procedures) 
with a proposed payment rate of $10,222.32, based on the latest claims 
data. Specifically, based on the predecessor HCPCS code C9754, our 
claims data for the proposed rule showed a HCPCS geometric mean cost of 
approximately $10,068 based on 57 single claims (out of 57 total 
claims), which is comparable to the geometric mean cost of about $9,850 
for APC 5193 rather than the geometric mean cost of approximately 
$15,753 for APC 5194. In addition, we proposed to maintain the 
assignment to APC 5194 for G2171 (WavelinQ System) because our claims 
data for the proposed rule, based on predecessor HCPCS code C9755, 
showed a geometric mean cost of about $13,519 based on 182 single 
claims (out of 186 total claims), which is consistent with the 
geometric mean cost of about $15,753 for APC 5194.
    At the August 31, 2020 HOP Panel Meeting, a presenter requested 
that we maintain the assignment for the WavelinQ procedure (HCPCS code 
G2170) to APC 5194. The presenter stated that the number of single 
claims is too small to support a reassignment to APC 5193. Based on the 
discussion during the meeting, the HOP Panel recommended that CMS 
maintain the assignment of HCPCS code G2170 in APC 5194 for CY 2021.
    Comment: Most commenters opposed the reassignment to APC 5193 for 
G2170 and suggested that we continue to assign the code to APC 5194 
based on the HOP Panel recommendation at the August 31, 2020 meeting. 
They argued that the number of single claims on which to base the 
reassignment is too low, and recommended that CMS maintain the current 
assignment to APC 5194 until more claims data can be gathered for 
appropriate APC assignment. However, one commenter suggested that we 
reassign HCPCS code G2170 to APC 5193 based on the 1-year

[[Page 85955]]

claims data, and stated that the HOP Panel recommendation to maintain 
the assignment to APC 5194 is not supported by the hospital claims 
data. This same commenter suggested that the 1-year hospital claims 
data does support maintaining HCPCS code G2171 in APC 5194. One 
commenter reported that reassigning the code to APC 5193 would be 
insufficient to cover the cost of the procedure in the ASC setting. 
According to the commenter, the proposed CY 2021 ASC payment for HCPCS 
code G2170 is $5,887.63, which does not cover the cost of the $6,000 
device used in the procedure.
    Response: As noted above, HCPCS codes G2170 and G2171 are two 
technologies used for hemodialysis arteriovenous fistula creation. We 
note that these procedures are furnished to dialysis patients with 
chronic kidney disease, which affects thousands of Medicare 
beneficiaries. To ensure Medicare access to these dialysis-related 
procedures in both the hospital outpatient and ASC settings, which is 
in line with various HHS initiatives, including the HHS Initiative on 
``Advancing American Kidney Health'', we believe that we should 
maintain both codes in APC 5194 for CY 2021. In addition, maintaining 
the assignment to APC 5194 for both codes is consistent with the HOP 
Panel's recommendation at the August 31, 2020 meeting. Moreover, given 
the low frequency of claims for HCPCS code G2170 (predecessor HCPCS 
code C9754), we also reviewed the arithmetic mean and median costs for 
the code, as we would do for New Technology APC services with fewer 
than 100 claims. We noted that HCPCS code G2170 and HCPCS code G2171 
(predecessor HCPCS code C9755) have very similar median costs, and 
combined with the low claims data for HCPCS code G2170, the fact that 
this is the first year of claims data available for these services, as 
well as the public comments and the HOP Panel recommendation, we 
believe that it would be inappropriate to assign these two services to 
different APCs. As a result, we are using 1833(t)(2)(E) to assign HCPCS 
code G2170 (predecessor HCPCS code C9754) to APC 5194 because its cost 
is similar to HCPCS code G2171 and both procedures are performed for 
ESRD patients that need dialysis. Therefore, we are using our equitable 
adjustment authority under section 1833(t)(2)(E) of the Act, which 
states that the Secretary shall establish, in a budget neutral manner, 
other adjustments as determined to be necessary to ensure equitable 
payments, to assign G2170 to APC 5194. We note that we review, on an 
annual basis, the APC assignments for all services and items paid under 
the OPPS, and continue to monitor the updated claims data for these 
codes as they become available.
    In summary, after consideration of the public comments, we are 
finalizing our proposal with modification. Specifically, we are 
finalizing our APC proposal to assign HCPCS code G2171 to APC 5194, and 
assigning HCPCS code G2170 to APC 5194 for CY 2021 using our equitable 
adjustment authority. The final CY 2021 OPPS payment rates for the 
codes can be found in Addendum B to this final rule with comment 
period. In addition, we refer readers to Addendum D1 of this final 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.
7. Health and Behavior Services (APC 5822)
    For CY 2021, we proposed to revise the payment rate associated with 
APC 5822 (Level 2 Health and Behavior Services) from $78.54 to $75.26 
based on the latest OPPS claims data.
    Comment: Some commenters expressed concern with the proposed 
payment decrease for APC 5822. Several commenters noted that the APC 
includes a number of needed behavioral health services. Those services 
include group therapy as well as outpatient programs that are less 
intensive than PHPs but are still important for those who may not need 
a full day of treatment all week, but who still require substantial 
support. The commenters noted that the proposed payment rate decrease 
of $3.10 per group per patient equates to a reduction of approximately 
$9.30 per patient per day and that group psychotherapy makes up well 
over 95 percent of the services provided by programs under Hospital 
Partial Hospitalization Services. The commenters urged CMS to reexamine 
the data used in developing the payment for APC 5822. Other commenters 
requested we reconsider the proposed 4.2 percent payment rate decrease 
for APC 5822.
    Response: The CY 2021 OPPS payment rates are based on claims 
submitted January 1, 2019 through December 31, 2019, processed through 
June 30, 2020. Based on our evaluation of the claims data for this 
final rule with comment period, the geometric mean cost of APC 5822 is 
approximately $72.94 based on 1,069,622 single claims (out of 1,085,044 
total claims).
    Based on our review, we have no reason to believe that the services 
are miscoded. In addition, based on our analysis of the CY 2021 claims 
data used for this final rule with comment period, we are unable to 
determine whether facilities are misreporting the services. It is 
generally not our policy to judge the accuracy of provider coding and 
charging for purposes of ratesetting. We rely on providers to 
accurately report the use of HCPCS codes in accordance with their code 
descriptors and CPT and CMS instructions, and to report services on 
claims and charges and costs for the services on their Medicare 
hospital cost report appropriately. Also, we generally do not specify 
the methodologies that providers use to set charges for this or any 
other service. Furthermore, we state in Chapter 4 of the Medicare 
Claims Processing Manual that it is extremely important that facilities 
report all HCPCS codes consistent with their descriptors; CPT and/or 
CMS instructions; and correct coding principles, and that all charges 
for services they furnish, whether payment for the services is made 
separately paid or is packaged, are reported to enable CMS to establish 
future ratesetting for OPPS services. Therefore, we are finalizing our 
proposal, without modification, for APC 5822.
8. High-Density Lipoprotein (HDL) Therapy (APC 5243)
    For CY 2021, we proposed to continue to assign CPT code 0342T 
(Therapeutic apheresis with selective hdl delipidation and plasma 
reinfusion) to APC 5243 (Level 3 Blood Product Exchange and Related 
Services) with a proposed payment of $4,074.81.
    Comment: One commenter reported that their company expects FDA 
Humanitarian Device Exemption approval in Q4 of 2020 for its ``PDS-2 
System,'' an HDL Therapy system that is designed to reduce plaque in 
coronary arteries and increase HDL levels in patients diagnosed with 
homozygous familial hypercholesterolemia (HoFH). The commenter 
indicated that the code associated with their device is CPT code 0342T. 
The commenter stated that they intend to apply to CMS for a new 
technology APC in early 2021. According to the commenter, the cost of 
the therapy described by CPT code 0342T is $77,100. The commenter 
suggested that the proposed payment of $4,074.81 for APC 5243 (Level 3 
Blood Product Exchange and Related Services) and $37,470.54 for APC 
5244 (Level 4 Blood Product Exchange and Related Services) does not 
capture the cost of providing the therapy, and

[[Page 85956]]

consequently, the company intends to submit an application for a new 
technology APC in 2021.
    Response: We thank the commenter for making us aware of their 
intent to submit a new technology APC application. Once we receive the 
application, we will review it and make the appropriate determination.
9. Imaging With and Without Contrast (APCs 5523, 5524, 5571, 5572, and 
5573)
a. Cardiac Computed Tomography (CT) (APC 5571)
    For CY 2021, we proposed to continue to assign the following 
cardiac CT exam codes to APC 5571 (Level 1 Imaging with Contrast) with 
a proposed payment rate of $181.41.
     75572 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology (including 3d image 
postprocessing, assessment of cardiac function, and evaluation of 
venous structures, if performed))
     75573 (Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3d image postprocessing, assessment 
of lv cardiac function, rv structure and function and evaluation of 
venous structures, if performed))
     75574 (Computed tomographic angiography, heart, coronary 
arteries and bypass grafts (when present), with contrast material, 
including 3d image postprocessing (including evaluation of cardiac 
structure and morphology, assessment of cardiac function, and 
evaluation of venous structures, if performed))
    We received many comments related to our proposed payment for the 
cardiac CT codes. Below is a summary of the public comments and our 
responses to the comments.
    Comment: Many commenters opposed the assignment of CPT codes 75572, 
75573, and 75574, which are the codes that describe cardiac CT exams, 
to APC 5571. They stated that the proposed CY 2021 OPPS payment rate of 
$181.41 for APC 5571 is inadequate to cover the total cost of providing 
the service. They also indicated that the proposed payment will result 
in decreased reimbursement for cardiac CT for the fourth consecutive 
year. Commenters were particularly concerned with the proposed payment 
for CPT code 75574, for which, according to the commenters, the payment 
rate has decreased by 30 percent over the past 3 years. They reported 
that the cardiac CT exam is a complex exam and more time-consuming to 
perform and interpret than any other type of contrast CT scan. They 
also believe that the resource costs required to perform cardiac CT 
scans are similar to the tests that are assigned to APC 5573 rather 
than APC 5571. They noted that the low payment for the test limits 
patient access, and requested that CMS take action to increase 
reimbursement to levels in line with the actual testing costs. The 
commenters requested an APC reassignment for all three codes. 
Specifically, the commenters suggested reassigning CPT codes 75572 and 
75573 to APC 5572 and CPT code 75574 to APC 5573. Most of the 
commenters reported that cardiac CT scans are more resource intensive 
than other CT and x-ray scans and are similar to other cardiac stress 
imaging modalities like nuclear stress testing; therefore, cardiac CT 
scans should be reimbursed accordingly.
    Another commenter reported that the test described by CPT code 
75574 generally takes about four times longer to perform than a CT scan 
of the thorax with contrast that is described by CPT code 71260 
(Computed tomography, thorax; with contrast material(s)) and also 
assigned to APC 5571. The commenters noted that based on clinical 
indications and performance/interpretation, CPT code 75574 is very much 
like a SPECT nuclear scan, which is described by CPT code 78452 
(Myocardial perfusion imaging, tomographic (spect) (including 
attenuation correction, qualitative or quantitative wall motion, 
ejection fraction by first pass or gated technique, additional 
quantification, when performed); multiple studies, at rest and/or 
stress (exercise or pharmacologic) and/or redistribution and/or rest 
reinjection) and assigned to APC 5593 (Level 3 Nuclear Medicine and 
Related Services) with a proposed payment rate of $1,336.28, rather 
than a CT scan of the thorax. The commenters further asserted that 
cardiac CT scans prior to invasive angiography lead to lower 
utilization of cardiac catheterization, PCI, and costs.
    Response: Payments under the OPPS are based on our analysis of the 
latest available claims and cost report data submitted to Medicare. We 
have many years of claims data for CPT codes 75572, 75573, and 75574. 
The AMA established specific CPT codes for cardiac CT services 
beginning in 2006 when they were first described by Category III codes. 
The Category III CPT codes were subsequently deleted on December 31, 
2009, and replaced with Category I CPT codes 75572, 75573, and 75574, 
which were effective on January 1, 2010. Because OPPS payments are 
updated every year based on our analysis of the latest claims data, the 
payment rates have varied each year based on that data.
    For CY 2021, OPPS payments are based on claims submitted between 
January 1, 2019 through December 31, 2019, that were processed on or 
before June 30, 2020. Based on our evaluation of the claims data for 
this final rule, the geometric mean costs for the cardiac CT scan codes 
range between $157 and $196. Specifically, as shown in Table 21, our 
analysis show a geometric mean cost of approximately $157 for CPT code 
75572 based on 14,262 single claims, approximately $194 for CPT code 
75573 based on 317 single claims, and approximately $196 for CPT code 
75574 based on 32,556 single claims. Based on the geometric mean costs 
for these codes, we do not believe that CPT codes 75572, 75573, and 
75574 utilize similar resources as the exams assigned to APC 5572 or 
APC 5573. The geometric mean costs for the tests placed in APC 5571 
range between $157 and $196, while the tests in APC 5572 range between 
$265 and $510, and for APC 5573, between $534 and $961.
    In addition, our data shows that the resources associated with 
cardiac CT exams are unlike those of single photon emission CT (SPECT) 
nuclear scans (CPT code 78452). As listed in Table 21, our data shows 
that SPECT nuclear scans are more often performed on Medicare patients 
than cardiac CT exams. Specifically, CPT code 78452 shows a geometric 
mean cost of approximately $1,288 based on 591,344 single claims 
compared to 47,135 single claims for cardiac CT (CPT codes 75572, 
75573, and 75574). Although the commenters have indicated that the 
resource costs associated with cardiac CT exams are similar to SPECT 
nuclear scans, our analysis of the latest OPPS claims data reveal 
otherwise. Similarly, we found the same results for nuclear stress 
tests (CPT codes 93350 and 93351). That is, that the estimated resource 
costs to perform nuclear stress tests are higher than for cardiac CT. 
As noted in Table 21, the geometric mean costs for nuclear stress test 
range between $529 and $671 based on 92,670 single claims for CPT codes 
93350 and 93351, while the geometric mean costs for the cardiac CT 
codes range between $157 and $196.

[[Page 85957]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.033

    We believe our claims data accurately reflects the resources 
associated with providing cardiac CT exams in the HOPD setting. Because 
CPT codes 75572, 75573, and 5574 have been active for some time now, we 
have no reason to believe that HOPDs have issues with coding or 
reporting these exams correctly. We believe that HOPDs have had 
sufficient time to learn how to code and report these services 
accurately using the Category I CPT codes that were established in 
2010.
    Moreover, we believe that we have substantial claims data for the 
cardiac CT services upon which to base the CY 2021 final OPPS payment 
rates. As noted in Table 22, the total number of claims for these codes 
has increased each year. The historical OPPS payments for cardiac CT 
services does not appear to have affected Medicare beneficiaries' 
access to these services. Given that these services have been paid 
under the OPPS for many years, with payments based on the latest 
hospital claims and Medicare cost report data, we believe we are 
providing a stable and consistent payment methodology that 
appropriately reflects the hospital resources required for cardiac CT.
[GRAPHIC] [TIFF OMITTED] TR29DE20.034

    Further, reassigning CPT codes 75572 and 75573 from APC 5571 to APC 
5572, and CPT code 75574 from APC 5571 to APC 5573 would potentially 
significantly overpay for the exams. As noted in Table 23, which shows 
the percent change for each code, reassigning the codes to APC 5572 and 
APC 5573 would pay at a rate that is two and three times the estimated 
cost of the service as reflected in the hospital outpatient claims 
data, and we do not believe that overpaying for the exams is 
appropriate. We note that we monitor our claims data every year to 
assess the appropriateness of the APC assignments for all services 
under the hospital OPPS.

[[Page 85958]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.035

    Every year, since the implementation of the OPPS on August 1, 2000, 
we receive many requests from specialty associations, device 
manufacturers, drug manufacturers, and consultants to increase the 
payments for codes associated with specific drugs, devices, services, 
and surgical procedures. Under the OPPS, one of our goals is to make 
payments that are appropriate for the items and services that are 
necessary for the treatment of Medicare beneficiaries. The OPPS, like 
other Medicare payment systems, is budget neutral and increases are 
generally limited to the annual payment update factor. As a budget 
neutral payment system, the OPPS does not pay the full hospital costs 
of services, however, we believe that our payment rates generally 
reflect the costs that are associated with providing care to Medicare 
beneficiaries. Furthermore, we believe that our payment rates are 
adequate to ensure access to services.
    Comment: Commenters stated that the current methodology for 
determining OPPS payments disadvantages cardiac CT exams 
disproportionately and requested that CMS exercise its authority to 
create an exception to the current payment methodology for the three 
cardiac CT codes. As an alternative to the current methodology for 
establishing OPPS payment rates, the commenters suggested using the 
general cardiology revenue code to set the payment rates for CPT codes 
75572, 75573, and 75574. They stated that based on their study that 
used claims data from CY 2021 OPPS proposed rulemaking, the use of a 
general cardiology revenue code to set the payment rates matches the 
actual cost of cardiac exams. Specifically, their results reveal a 
geometric mean cost of about $400.55 for CPT code 75572, $479.74 for 
CPT code 75573, and $505.89 for CPT code 75574. Based on their 
analysis, the commenters contended that the geometric mean costs for 
CPT codes 75572 and 75573 justify their assignment to APC 5572, and CPT 
code 75574 to APC 5573.
    Response: It is our standard ratesetting methodology to rely on 
hospital cost and charge information as it is reported to us through 
the claims and cost report data. We believe that the assignment to APC 
5571 for the cardiac CT codes is fully consistent with our standard 
ratesetting methodology, which provides appropriate incentives for 
efficiency. The OPPS is a prospective payment system that relies on 
hospital charges on the claims and cost report data from the hospitals 
that furnish the services in order to determine relative costs for OPPS 
ratesetting. We believe that the prospective payment rates for CPT 
codes 75572, 75573, and 75574, calculated based on the costs of those 
providers that furnished the services in CY 2019, provide appropriate 
payment to the providers who will furnish the services in CY 2021. We 
continue to believe that this standard ratesetting methodology 
accurately provides payment for cardiac CT exams furnished to hospital 
outpatients.
    Comment: One commenter recommended that we decrease the payment for 
CPT code 78452 because the commenter believes SPECT is an outdated test 
for chest pain evaluation. The commenter also stated that the test is 
overutilized with no evidence of improvement in patient outcomes.
    Response: As stated above, 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 CY 2021, OPPS payments are 
based on claims data submitted between January 1, 2019 through December 
30, 2019, that were processed on or before June 30, 2020. Based on our 
analysis, and as shown in Table 21 above, the claims data for CPT code 
78452 show a geometric mean cost of approximately $1,288 based on 
591,344 single claims, which is consistent with the geometric mean cost 
of about $1,272 for APC 5593 (Level 3 Nuclear Medicine and Related 
Services). We believe that CPT code 78452 is appropriately assigned to 
APC 5593. Therefore, based on the latest claims data, we have no basis 
to reassign the SPECT exam CPT code 78452 to another APC with a lower 
payment rate.
    Comment: Some commenters recommended that CMS allow facilities to 
submit charges for cardiac CT using revenue codes that they believe 
would more accurately estimate costs. They added that CMS should 
provide explicit permission via a line item to allow hospitals to 
submit charges for cardiac

[[Page 85959]]

CT tests under the cardiology stress testing revenue/cost centers. They 
noted that CMS guidance for all non-CT and MR CPT codes is for 
hospitals to submit claims utilizing revenue codes that most accurately 
reflect clinical and resource homogeneity. They believe that making an 
exception to the current policy and allowing HOPDs to submit charges 
for cardiac CT tests under the cardiology stress testing revenue/cost 
centers would provide better data in the future that reflects actual 
resource costs for cardiac CT.
    Response: Hospital outpatient facilities make the final 
determination for reporting the appropriate cost centers and revenue 
codes. As stated in section 20.5 in Chapter 4 (Part B Hospital) of the 
Medicare Claims Processing, CMS ``does not instruct hospitals on the 
assignment of HCPCS codes to revenue codes for services provided under 
OPPS since hospitals' assignment of cost vary. Where explicit 
instructions are not provided, providers should report their charges 
under the revenue code that will result in the charges being assigned 
to the same cost center to which the cost of those services are 
assigned in the cost report.'' Therefore, HOPDs must determine the most 
appropriate cost center and revenue code for the cardiac CT exams.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, to assign the cardiac CT 
exam codes, specifically, CPT codes 75572, 75573, and 75574 to APC 
5571. The final CY 2021 OPPS payment rates for the codes can be found 
in Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final 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.
b. Cardiac Magnetic Resonance (CMR) Imaging (APC 5523, 5524, 5572, and 
5573)
    For CY 2021, we proposed to continue to assign the following 
cardiac magnetic resonance imaging (MRI) CPT codes to APC 5523, 5524, 
5572, and 5573, respectively:
     CPT code 75557 (Cardiac magnetic resonance imaging for 
morphology and function without contrast material) to APC 5523 (Level 3 
Imaging without Contrast) with a proposed payment of $235.05;
     CPT code 75559 (Cardiac magnetic resonance imaging for 
morphology and function without contrast material; with stress imaging) 
to APC 5524 (Level 3 Imaging without Contrast) with a proposed payment 
of $490.52;
     CPT code 75561 (Cardiac magnetic resonance imaging for 
morphology and function without contrast material(s), followed by 
contrast material(s) and further sequences) to APC 5572 (Level 2 
Imaging with Contrast) with a proposed payment of $375.33; and
     CPT code 75563 (Cardiac magnetic resonance imaging for 
morphology and function without contrast material(s), followed by 
contrast material(s) and further sequences; with stress imaging) to APC 
5573 (Level 3 Imaging with Contrast) with a proposed payment of 
$722.74.
    Comment: Some commenters expressed concern with the lack of payment 
stability for cardiac MRI services, specifically, those described by 
CPT codes 75557, 75559, 75561, and 75563. They indicated that the 
payments for these codes have decreased in the last several years, and 
prior to CY 2017, the codes were placed in appropriate APCs. Of 
significant concern are the payment rates for CPT codes 75561 and 
75563, which, according to the commenters, are grouped with services 
that are not clinically similar. The commenters stated that CPT code 
75561 is unlike CT of the abdomen or pelvis or MRI of the neck and 
spine in APC 5572, and instead, the code should be placed in APC 5573 
with comparable services. The commenters further added that CPT code 
75563 is labor-intensive and should be assigned to APC 5593 (Level 3 
Nuclear Medicine and Related Services).
    Response: Payment changes from one year to the next are unavoidable 
in a relative weight payment system that depends on updated hospital 
charges and costs and in which reassignment of HCPCS codes from one APC 
to another is required by law in cases of 2 times rule violations. The 
statutory design of the OPPS and the evolution in the delivery of 
outpatient hospital services include elements that are responsible for 
some of the fluctuation in payment rates from year to year. The OPPS is 
based on HCPCS coding for which there are hundreds of changes each 
year. In addition, the entry of new technology into a budget neutral 
payment system results in a shift of funds away from previously 
existing services to provide payments for new services. These factors 
are reflections of the changes in services in the outpatient 
department, and shifts in payment mirror those changes.
    Moreover, 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 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. Consequently, 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 CY 2021, OPPS payments are 
based on claims data submitted between January 1, 2019 through December 
30, 2019, that were processed on or before June 30, 2020. Based on our 
analysis, and as shown in Table 24, the claims data for CPT code 75557 
show a geometric mean cost of approximately $250 based on 1,941 single 
claims, which is consistent with the geometric mean cost of about $224 
for APC 5523 (Level 3 Imaging Without Contrast). Similarly, the 
geometric mean cost for CPT code 75559 is approximately $403 based on 
57 single claims, which is in line with the geometric mean cost of 
about $470 for APC 5524. For CPT code 75561, the geometric mean cost is 
approximately $426 based on 17,216 single claims, which is in line with 
the geometric mean cost of approximately $359 for APC 5572. We note 
that the geometric mean cost of approximately $426 for CPT code 75561 
is within the range of the significant geometric mean cost for APC 
5572, which is between approximately $265 (for CPT code 74174) and 
about $510 (for CPT code 73525). For CPT code 75563, the geometric mean 
cost is about $761 based on 2,370 single claims, which is close to the 
geometric mean cost of approximately $697 for APC 5573. The geometric 
cost of approximately $761 for CPT code 75563 is within the range of 
the significant geometric mean cost for APC 5573, which is 
approximately between $534 (for CPT code C8923) and about $961 (for 
HCPCS code C8928). Based on the latest claims data, we believe that the 
cardiac MRI codes are appropriately assigned to APCs 5523, 5524, 5572, 
and 5573.

[[Page 85960]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.036

    In addition, based on the commenters' belief that the APC 
assignments for the cardiac MRI codes were appropriately placed prior 
to CY 2017 and not currently, we reviewed the OPPS payment rates from 
CY 2016 through CY 2021. Based on our evaluation, we believe that the 
payments for the cardiac MRI codes are appropriate. The OPPS, like 
other Medicare payment systems, is a prospective payment system based 
on averages. In some individual cases payment exceeds the average cost 
and in other cases payment is less than the average cost. Based on our 
review, we believe that the historical and current payment rates for 
CPT codes 75557, 75559, 75561, and 75563, reflect the geometric mean 
costs associated with the service that are consistent with providing 
cardiac MRI to Medicare beneficiaries in cost efficient settings.
    Comment: Some commenters expressed concern with the clinical 
homogeneity in the Imaging APCs and requested more transparency. They 
also questioned the criteria for assigning HCPCS codes to specific APCs 
and as well as why the Imaging APCs were reduced from 17 to 7 APCs.
    Response: Every year we publish an OPPS/ASC proposed rule that 
informs the public of our proposed policies, which include payment 
rates for specific HCPCS codes, for the upcoming year that will become 
effective on January 1. The proposed rules are subject to a 60-day 
public comment period, and comments received by the due dates are 
addressed in the final rules. In the April 7, 2000 OPPS final rule, we 
defined the term ``clinical homogeneity.'' As stated in the April 7, 
2000 final rule, ``The definition of each APC group should be 
`clinically meaningful,' that is, the procedures or services included 
within the APC group relate generally to a common organ system or 
etiology, have the same degree of extensiveness, and utilize the same 
method of treatment, for example, surgical, endoscopic, etc. The 
definition of clinical meaningfulness is, of course, dependent on the 
goal of the classification system. For APCs, the definition of clinical 
meaningfulness relates to the medical rationale for differences in 
resource use. If, on the other hand, classifying patient prognosis were 
the goal, the definition of patient characteristics that were 
clinically meaningful might be different.'' (68 FR 18457).
    In addition, we believe that the combined annual proposed and final 
rules with their accompanying addenda and cost statistics files, as 
well as the quarterly OPPS and ASC update change request documents that 
are issued by CMS provide substantial transparency on APCs and, 
overall, the OPPS payment system.
    With regard to the reduction from 17 to 7 APCs for the Imaging 
APCs, we discussed the issue in the CY 2017 OPPS/ASC final rule (81 FR 
79628 through 79631) and stated that the change was based on 
stakeholder recommendations. As a part of our CY 2016 (80 FR 70392 
through 70397) and CY 2017 (81 FR 79628 through 79631) comprehensive 
review of the structure of the imaging APCs and procedure code 
assignments, we examined the APCs that contained imaging services. For 
CY 2017, we proposed and updated the restructuring of the OPPS APC 
groupings for imaging services to more appropriately reflect the costs 
and clinical characteristics of the procedures within each APC grouping 
in the context of the OPPS. We believe that the updated restructuring 
and reconfiguration of the Imaging APCs appropriately reflect the 
similar resource costs and clinical characteristics of the procedures 
within each APC. We also believe that the current broader categories of 
Imaging APCs are appropriate for ratesetting under the OPPS because 
they support greater similarities in clinical characteristics and 
resource use of procedures assigned to the APCs, while improving the 
homogeneity of the APC structure.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, to assign CPT code 75557 
to APC 5523, CPT code 75559 to APC 5524, CPT code 75561 to APC 5572, 
and CPT code 75563 to APC 5573. The final CY 2021 payment rates for the 
codes can be found in Addendum B to this final rule with comment 
period. In addition, we refer readers to Addendum D1 of this final 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.
10. IDx-DR: Artificial Intelligence System To Detect Diabetic 
Retinopathy (APC 5733)
    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 
(AI) 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

[[Page 85961]]

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 received a new CPT code effective January 1, 
2021, specifically, CPT code 92229. With the establishment of the new 
code, the CPT Editorial Panel also revised the descriptors associated 
with existing CPT codes 92227 and 92228 to appropriately differentiate 
them from the IDx-DR test. Below are the complete descriptors for CPT 
codes 92227, 92228, and 92229 for CY 2021. We note that CPT code 92229 
was listed as placeholder 9225X in Addendum B of the CY 2021 OPPS/ASC 
proposed rule:
     92227 (Imaging of retina for detection or monitoring of 
disease; with remote clinical staff review and report, unilateral or 
bilateral);
     92228 (Imaging of retina for detection or monitoring of 
disease; with remote physician or other qualified health care 
professional interpretation and report, unilateral or bilateral); and
     92229 (Imaging of retina for detection or monitoring of 
disease; point-of-care automated analysis and report, unilateral or 
bilateral).
    As stated in the CY 2021 OPPS/ASC proposed rule (85 FR 48839), 
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 and 92228, we believe that the 
IDx-DR test should also be assigned to APC 5732. Consequently, for CY 
2021, we proposed to assign the new IDx-DR CPT code to APC 5732 with a 
proposed payment rate of $33.16. We also proposed 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 
believed that packaging the cost into the primary service is 
appropriate. We note that under the OPPS, the HOPD E&M visit code 
(G0463; CY 2021 OPPS proposed payment rate of $120.88) is paid 
separately when not billed with a C-APC, and we believed that payment 
would include the cost of providing the IDx-DR test. Generally, our 
policy for tests with minimal costs is to package the cost into the 
primary service.
    Comment: Some commenters disagreed with the proposed payment amount 
and requested a revision in the assignment from APC 5732 to APC 5734 
(Level 4 Minor Procedures) with a proposed payment rate of $113.23 and 
assignment to status indicator ``Q1''. The commenters reported that the 
service described by new CPT code 92229, which was listed as 
placeholder CPT code 9225X in Addendum B to the CY 2021 OPPS/ASC 
proposed rule), is similar to the technical components described by 
existing CPT code 92250 (Fundus photography with interpretation and 
report), which was proposed for assignment to APC 5734 and status 
indicator ``Q1''. They stated that providers are currently billing on 
an interim basis under CPT code 92250 for the same service. The 
commenters further disagreed with the comparison to CPT code 92227 and 
92228, which are assigned to APC 5732 with a status indicator ``Q1'' 
and stated that the tests described by these codes involve human 
readers while the service described by CPT code 92229 is artificial 
(AI) intelligence-related. The commenters indicated that APC 5734, 
which is the APC assigned to the predecessor CPT code 92250, is the 
more appropriate assignment for new CPT code 92229 until sufficient 
Medicare claims data can be collected by CMS to either retain that 
assignment or reassign to another APC.
    Response: We stated in the CY 2021 OPPS/ASC proposed rule with 
comment period (85 FR 48839) that the CPT Editorial Panel revised the 
descriptors associated with existing CPT codes 92227 and 92228 to 
appropriately differentiate them from the IDx-DR test, which is 
described by new CPT code 92229. We note that the descriptors for all 
three codes involve tests that use imaging of the retina for detection 
or monitoring of disease. Based on the revisions to CPT code 92227 and 
92228 and placement of the new code, we believe that the IDx-DR test is 
similar to CPT code 92227 and 92228. We do not believe that CPT code 
92250, which the commenters reported to be the predecessor code, is 
similar to the IDx-DR test; otherwise, the placement of the new IDx-DR 
code would have been close to CPT code 92250. However, after further 
review and consideration of the issue, we believe that CPT code 92229 
should be assigned to APC 5733 (Level 3 Minor Procedures) rather than 
APC 5732 (Level 2 Minor Procedures).
    We note that 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 a prospective payment system. The payment rates 
that are established reflect the geometric mean costs associated with 
items and services assigned to an APC and we believe that our payment 
rates generally reflect the costs that are associated with providing 
care to Medicare beneficiaries in cost efficient settings. Moreover, we 
strive to establish rates that are adequate to ensure access to 
medically necessary services for Medicare beneficiaries.
    For many emerging technologies there is a transitional period 
during which utilization may be low, often because providers are first 
learning about the techniques and their clinical utility. Quite often, 
the requests for higher payment amounts are for new procedures in that 
transitional phase. These requests, and their accompanying estimates 
for expected Medicare beneficiary or total patient utilization, often 
reflect very low rates of patient use, 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 Medicare 
beneficiary projected utilization and does not set its payment rates 
based on initial projections of low utilization for services that 
require expensive capital equipment.
    We note that in a budget neutral environment, payments may not 
fully cover hospitals' costs, 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 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 annually review the claims data and any available new 
information regarding the clinical aspects of new procedures to confirm 
that OPPS payments remain appropriate for procedures as they transition 
into mainstream medical practice.

[[Page 85962]]

    Comment: Several commenters requested a reassignment from proposed 
APC 5732 to APC 5733 (Level 3 Minor Procedures) consistent with the APC 
assignment for CPT codes 92285 (External ocular photography with 
interpretation and report for documentation of medical progress (e.g., 
close-up photography, slit lamp photography, goniophotography, stereo-
photography) and 92134 (Scanning computerized ophthalmic diagnostic 
imaging, posterior segment, with interpretation and report, unilateral 
or bilateral; retina).
    Response: The IDx-DR test generally takes about 5 minutes to 
complete and does not need to be performed by a clinician. Based on our 
evaluation of the service, we believe that IDx-DR is a diagnostic test 
that should be payable under the hospital OPPS. We do not believe that 
the services described by CPT code 92285 or 92134 are appropriate 
comparisons for the IDx-DR test because these tests generally involve 
physician work and require approximately 10 minutes to perform. 
However, after further review and deliberation of the issue, we believe 
that CPT code 92229 should be assigned to APC 5733 (Level 3 Minor 
Procedures) rather than APC 5732 (Level 2 Minor Procedures).
    Comment: Some commenters requested a change in the proposed status 
indicator assignment for CPT code 92229 from ``Q1'' to ``S'' to ensure 
that the test is separately reimbursed when provided with an outpatient 
clinic visit or other service. The commenters indicated that assigning 
the code to ``Q1'' will not support patient access in the outpatient 
setting and will encourage less efficient care. They suggested that 
HOPDs would likely schedule patients to receive only the IDx-DR test 
during an outpatient visit, instead of performing the test during a 
clinic visit, and could discourage hospitals from offering the test 
altogether. They further suggested that diabetic patients receiving 
diabetic care in the outpatient setting would likely be asked to make 
separate appointments as a result of the status indicator ``Q1'' 
assignment.
    Response: With regard to HOPDs potentially scheduling the IDx-DR 
test on a separate day from the clinic visit to receive separate 
payment, we have concerns about this kind of manipulation of patient 
scheduling because such a practice could create an undue burden for 
Medicare beneficiaries. We expect HOPDs to furnish services in the most 
efficient way that meets the needs of the patient. After further review 
and deliberation on the issue, we are revising the status indicator to 
``S'' to ensure patient access to the test.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, with modification. Specifically, we are 
assigning CPT code 92229 to APC 5733 with status indicator ``S.'' The 
final CY 2021 payment rate for the code can be found in Addendum B to 
this final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final 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.
11. Implantable Interstitial Glucose Sensor System (APC 5051 and 5054)
    For CY 2021, we proposed to assign CPT code 0447T to APC 5051 
(Level 1 Skin Procedures) with a proposed OPPS payment of $182.38. In 
addition, we proposed to assign CPT codes 0446T and 0448T to APC 5053 
(Level 3 Skin Procedures) with a proposed OPPS payment of $530.98. We 
note that the long descriptors for these codes can be found in Table 25 
below.
    Comment: A commenter agreed with the proposed APC assignment for 
CPT code 0447T to APC 5051 but opposed the proposed assignment for CPT 
codes 0446T and 0448T to APC 5053. The commenter stated that the 
payment for APC 5053 does not include the provision of the service 
associated with the Eversense Implantable Continuous Glucose System 
(CGS), which is a technology that provides real-time glucose 
monitoring. Specifically, the payment for APC 5053 does not account for 
providing the glucose sensor and wireless transmitter, as well as 
implanting, removing, and replacing the glucose sensor. In contrast, 
the commenter believed that CPT codes 0446T and 0448T include those 
costs, referring to the discussion in the CY 2020 PFS final rule (84 FR 
62627). The commenter added that assignment to APC 5053 is 
inappropriate based on clinical homogeneity and resource cost, and 
suggested reassigning CPT codes 0446T and 0448T to either APC 5054 
(Level 4 Skin Procedures) with a proposed OPPS payment of $1,733.06 or 
New Technology APC 1523 (New Technology--Level 23 ($2501-$3000)) with a 
proposed OPPS payment of $2,750.50.
    Response: Although CPT codes 0446T, 0447T, and 0448T were effective 
January 1, 2017, the Eversense CGM technology was only recently 
approved for marketing by the FDA on June 6, 2019. For CY 2021, OPPS 
payments are developed based on claims submitted between January 1, 
2019 through December 31, 2019, and processed through June 30, 2020. 
For this final rule with comment period, we have no claims data for CPT 
codes 0446T, 0447T, or 0448T for OPPS ratesetting purposes. However, 
based on our review of the issue, and feedback from our medical 
advisors, as well as the expected device costs associated with CPT 
codes 0446T and 0448T as discussed in the CY 2021 PFS proposed rule (85 
FR 50174), we believe that these codes should be reassigned to APC 5054 
(Level 4 Skin Procedures) rather than New Technology APC 1523 (New 
Technology--Level 23 ($2501-$3000)). Because we have neither claims 
data nor specific HOPD costs, including the cost to perform each exam 
(other than the supply cost discussed in the CY 2021 PFS proposed 
rule), we believe that APC 5054 is the most appropriate assignment at 
this time for CPT codes 0446T and 0448T.
    Therefore, after consideration of the public comment, we are 
finalizing our proposal, with modification. Specifically, we are 
finalizing our proposal for CPT code 0447T and assigning the code to 
APC 5051, however, we are reassigning CPT codes 0446T and 0448T to APC 
5054. Table 25 list the long descriptors and final SI and APC 
assignments for the codes. The final CY 2021 payment rate for the codes 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final 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.

[[Page 85963]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.037

12. Intervertebral Disc Allogeneic Cellular and/or Tissue-Based Product 
Percutaneous Injection (APC 5115)
    In the CY 2021 OPPS/ASC Proposed Rule, we proposed to assign the 
procedures described by CPT codes 0627T (Percutaneous injection of 
allogeneic cellular and/or tissue-based product, intervertebral disc, 
unilateral or bilateral injection, with fluoroscopic guidance, lumbar; 
first level) and 0629T (Percutaneous injection of allogeneic cellular 
and/or tissue-based product, intervertebral disc, unilateral or 
bilateral injection, with CT guidance, lumbar; first level) to status 
indicator ``T'', APC 5443 (Level 3 Nerve Injections) with a proposed 
OPPS payment rate of $836.26 based on the estimated costs of these 
procedures.
    We proposed to assign the procedures described by CPT codes 0628T 
(Percutaneous injection of allogeneic cellular and/or tissue-based 
product, intervertebral disc, unilateral or bilateral injection, with 
fluoroscopic guidance, lumbar; each additional level (List separately 
in addition to code for primary procedure) and 0630T (Percutaneous 
injection of allogeneic cellular and/or tissue-based product, 
intervertebral disc, unilateral or bilateral injection, with CT 
guidance, lumbar; each additional level (List separately in addition to 
code for primary procedure) to status indicator ``N'' to indicate that 
they are packaged under OPPS since they are add-on codes. These codes 
were listed as 0X32T, 0X33T, 0X34T, and 0X37T (the 5-digit CMS 
placeholder codes) in Addendum B with the short descriptor and also in 
Addendum O with the long descriptor, to the CY 2021 OPPS/ASC proposed 
rule.
    We also proposed to assign these codes to comment indicator ``NP'' 
in Addendum B to indicate that the codes are new for CY 2021 and that 
public comments would be accepted on the proposed status indicator 
assignment. We note that these codes will be effective January 1, 2021.
    Comment: Some commenters disagreed with the assignment of codes 
0627T and 0629T to APC 5443 based on what the commenters believed was a 
lack of clinical and resource coherence with other procedures in this 
APC. They stated that CPT codes 0627T and 0629T involve percutaneous 
placement of an allogeneic cellular and/or tissue-based biologics to 
supplement and support deteriorating vertebral discs in patients 
suffering from degenerative disc disease. They believe that these 
procedures are not comparable to a simple nerve injection.
    One commenter explained that the cost of these procedures is 
significantly higher than the proposed Level 3 Nerve Injection APC 
payment, which is $836.26. The cost of the VIA Disc Matrix Kit used for 
these procedures is $8,000 per kit. Therefore, they believed that a 
higher APC payment level more appropriately covers both the cost of the 
device and the non-device costs of the procedure.
    Another commenter noted that the non-device costs of procedures 
0627T and 0629T are most appropriately crosswalked to CPT code 22514 
(Percutaneous vertebral augmentation, including cavity creation 
(fracture reduction and bone biopsy included when performed) using 
mechanical device (e.g. kyphoplasty), 1 vertebral body, unilateral or 
bilateral cannulation, inclusive of all imaging guidance; lumbar) that 
is assigned to APC 5114 (Level 4 Musculoskeletal Procedures) with the 
payment rate of $6,368.58.
    A medical device company recently submitted a new technology APC 
application to CMS for VIA[supreg] Disc Allograft Supplementation 
described by codes 0627T and 0629T and requested that CMS assign CPT 
codes 0627T and 0629 to APC 1575 (New Technology APC Level 38 ($10,001-
$15,000)) for CY 2021 based on total estimated non-device-related cost 
of APC 5114 ($4,524) plus the device-related costs ($8,000) or $12,524 
which is closest to APC 1575 with a CY 2021 proposed payment rate of 
$12,500.50.
    The same device company recommended, because 0628T and 0630T are 
add-on codes used in conjunction with their primary procedural codes 
0627T and 0629T, that CMS uses the device-related cost for each 
additional VIA Disc mixing system kit of $8,000 plus an incremental 
thirty minute non-device cost to capture the additional operative time 
and costs in performing a separate intervertebral disc injection.
    The commenter requested that CMS assign CPT codes 0628T and 0630T 
to APC 1571 (New Technology APC Level 34 ($8001-$8500)) for CY 2021 
since the total estimated cost of these codes is closest to APC 1571 
with a CY 2021 proposed payment rate of $8,250.50.

[[Page 85964]]

    Response: Based on our review of the application and input from our 
clinical advisors, we agree that the codes would be appropriately 
placed in an alternative APC that might better reflect their resource 
costs. Our updated claims data for this final rule with comment period 
shows that the geometric mean cost of APC 5115 is about $11,996.45, 
which is more similar to the device and procedure costs associated with 
these codes. Therefore, we are assigning CPT codes 0627T and 0629T to 
comprehensive APC 5115 (Level 5 Musculoskeletal Procedures) with status 
indicator ``J1'' for the CY 2021 OPPS.
    CPT codes 0628T and 0630T would be assigned to status indicator 
``N'' under OPPS for CY 2021 because the cost of an add-on code is 
packaged into the primary procedure under OPPS packaging policy, as 
discussed in the CY 2014 OPPS/ASC final rule (78 FR 74942).
    In summary, after consideration of the public comments and our 
analysis of updated claims data for this final rule and other 
additional information, we are finalizing our proposal related to codes 
0627T and 0629T with modification. Specifically, we are revising the 
APC assignment for CPT codes 0627T and 0629T to APC 5115 and revising 
their status indicator to ``J1'' for the CY 2021 OPPS. For CPT codes 
0628T and 0630T, we are finalizing our proposal without modification 
and maintaining the assignment of status indicator ``N'' to these 
codes.
    The final CY 2021 OPPS payment rate for CPT codes 0627T and 0629T 
and final status indicator assignment for 0628T and 0630T can be found 
in Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final 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.
    The final CY 2021 APC and SI assignments for 0627T through 0630T 
can be found in Table 26.
[GRAPHIC] [TIFF OMITTED] TR29DE20.038

13. 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 was 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/ASC 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

[[Page 85965]]

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 were no claims usable for ratesetting in the CY 
2021 OPPS proposed data under our standard process, we still needed to 
determine a payment weight for the APC. We believed that the most 
recently available data that we used to set payment for this service in 
the CY 2020 OPPS final rule was an appropriate proxy for both the 
procedure's estimated cost and its relative payment weight. We note 
that the 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 believed 
it was 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 with comment period, to establish the payment weight for the CY 
2021 OPPS for CPT code 0308T. We will continue to monitor the claims 
available for the procedure for ratesetting purposes.
    To summarize, for CY 2021, we proposed to assign 0308T a payment 
weight based on the most recently available data, from the CY 2020 OPPS 
final rule, and therefore proposed to assign CPT code 0308T to APC 5495 
(Level 5 Intraocular Procedures). Under the 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 code 0308T would be based on the CY 
2020 OPPS final rule median cost of $20,229.78.
    Comment: We received one comment supporting our proposal to 
continue to assign the CPT code 0308T to APC 5495 (Level 5 Intraocular 
Procedures) and use the CY 2020 median cost as a proxy for use in 
developing the CY 2021 OPPS payment rate.
    Response: We appreciate the commenter's support. While the updated 
final rule claims data includes two claims containing the code 0308T, 
those claims are unusable for OPPS ratesetting purposes. Therefore, we 
are finalizing our proposed policy to assign CPT code 0308T to APC 5495 
and use the CY 2020 median cost in determining a CY 2021 OPPS payment 
rate.
    After consideration of the public comment we received, we are 
finalizing our proposal to continue to assign CPT code 0308T to APC 
5495 (Level 5 Intraocular Procedures) for the CY 2021 OPPS and, as a 
device intensive procedure assigned to an APC with fewer than 100 total 
claims, to establish the CY 2021 OPPS payment rate for the service 
using its CY 2020 median cost. Therefore, the CY 2021 OPPS payment rate 
for CPT 0308T will be based on the CY 2020 OPPS final rule median cost 
of $20,229.78.
14. Irreversible Electroporation Ablation of Tumors (NanoKnife[supreg] 
System) (APC 5362)
    Electroporation is a technique in which an electrical field is 
applied to cells in order to increase the permeability of the cell 
membranes through the formation of nanoscale defects in the lipid 
bilayer. The result is creation of nanopores in the cell membrane and 
disruption of intra-cellular homeostasis, ultimately causing cell 
death. After the NanoKnife[supreg] System delivers a sufficient number 
of high voltage pulses; the cells surrounded by the electrodes will be 
irreversibly damaged. This mechanism, which causes permanent cell 
damage, is referred to as Irreversible Electroporation (IRE). The 
NanoKnife[supreg] System with six outputs for the treatment of Stage 
III pancreatic cancer received FDA Breakthrough Device designation on 
January 18, 2018 and approval of an FDA investigational device 
exemption (IDE G180278) on March 28, 2019.
    The CPT Editorial Panel established two new codes; specifically CPT 
codes 0600T and 0601T, to describe NanoKnife[supreg] System procedures 
effective July 1, 2020. The manufacturer also submitted a new 
technology application requesting new technology APC assignments for 
CPT codes 0600T and 0601T. Based on our review of the new technology 
APC application for the NanoKnife[supreg] System, we provided temporary 
APC and status indicators assignments for 0600T and 0601T. The 
temporary APC and SI assignments were publicly released in the July 
2020 quarterly update to the OPPS (Transmittal 10224, Change Request 
11814, and dated July 15, 2020). In addition, in the CY 2021 OPPS/ASC 
proposed rule with comment period, we proposed to assign the codes to 
APC 5361 (Level 1 Laparoscopy and Related Procedures) with a payment 
rate of $5,148.34, and status indicator `J1'' (Hospital Part B services 
paid through a comprehensive APC) based on clinical and resource 
similarities between 0600T, 0601T and other procedures in the same APC. 
We also proposed to assign these codes to comment indicator (CI) ``NP'' 
in Addendum B to the proposed rule to indicate that the codes are new 
for CY 2020 and that public comments would be accepted on their 
proposed APC assignments.
    Comment: We received one comment from the applicant on the proposed 
assignment to APC 5361 (Level 1 Laparoscopy and Related Procedures). 
According to the applicant, new Category III CPT codes 0600T and 0601T 
should not be assigned to APC 5361 because the clinical characteristics 
and resource costs associated with the procedures are significantly 
different from existing procedures assigned to that APC. The applicant 
noted that under the IPPS, the NanoKnife[supreg] System was estimated 
to have a technology added cost of approximately $11,086, and that the 
procedures for which the system would apply generally were not 
significantly different in the inpatient and outpatient settings. They 
believe that the codes would be more appropriately placed in New 
Technology APC 1576 (New Technology--Level 39 ($15,001-$20,000)) with a 
payment rate of $17,500.50, based on the estimated costs and complexity 
of the procedures.
    Response: We thank the applicant for their comment and the 
additional information they have provided regarding the procedures and 
in particular their estimated costs. While we recognize that there are 
differences between the various ablation modalities, we believe that 
the APC levels 5361 and 5362 for ``Laparoscopy and Related Services'' 
appropriately describe the resource costs and clinical characteristics 
of these procedures. However, we agree with the commenter that an 
alternative APC might better reflect the resource costs of the 
procedures. Therefore, we are revising the CY 2021 APC assignments for 
these codes. Specifically, we are assigning CPT codes 0600T and 0601T 
to APC 5362 (Level 2 Laparoscopy and Related Procedures) with a status 
indicator of ``J1'' in the CY 2021 OPPS.
    After consideration of the public comment for the new irreversible 
electroporation codes, and based on our evaluation of the new 
technology application which provided the estimated costs for the 
services and described the components and characteristics of the new 
codes, we are finalizing our proposal with

[[Page 85966]]

modification, and reassigning CPT codes 0600T and 0601T to the final CY 
2021 OPPS APC 5362 (Level 2 Laparoscopy and Related Services). Table 27 
lists the four Category III CPT codes for the NanoKnife[supreg] System 
and their APC and SI assignments for CY 2021. The final CY 2021 OPPS 
payment rate for the codes can be found in Addendum B to this final 
rule with comment period (which is available via the internet on the 
CMS website).
[GRAPHIC] [TIFF OMITTED] TR29DE20.039

15. Medical Physics Dose Evaluation (APC 5611)
    For CY 2021, we proposed to assign CPT code 76145 (Medical physics 
dose evaluation for radiation exposure that exceeds institutional 
review threshold, including report (medical physicist/dosimetrist)) in 
APC 5611 (Level 1 Therapeutic Radiation Treatment Preparation) with a 
proposed payment rate of $129.86. We note this is a new code that will 
be effective on January 1, 2021. Because the code is new, we requested 
public comments on the APC assignment for CY 2021. We also note that 
CPT code 76145 was listed as placeholder code 7615X in Addendum B and 
Addendum O of the CY 2021 OPPS/ASC proposed rule.
    Comment: Several commenters disagreed with the assignment to APC 
5611 and requested a reassignment to APC 5724 (Level 4 Diagnostic Tests 
and Related Services) with a proposed payment rate of $936.70. The 
commenters indicated that CPT code 76145 is not a radiation oncology 
code, rather, it is a service that will be performed in interventional 
radiology or interventional cardiology. The commenters stated that the 
resource consumption in APC 5724 more closely aligns with the resources 
used to perform CPT code 76145. One commenter explained that CPT code 
76145 is used to describe the medical physicist's work in performing a 
patient-specific peak organ dose calculation subsequent to an 
interventional radiology or interventional cardiology procedure. The 
same commenter expressed concern that the new code will be included on 
the Deficit Reduction Act (DRA) cap designation list.
    Response: Section 5102(b) of the Deficit Reduction Act of 2005 
(DRA) added section 1848(b)(4) to the statute to place a payment cap on 
the technical component (TC) of certain diagnostic imaging procedures 
and the TC portions of the global diagnostic imaging services at the 
amount paid under the OPPS. To implement this provision, the physician 
fee schedule (PFS) amount is compared to the OPPS payment amount and 
the lower amount is used for payment under the PFS. However, we note 
that the OPPS cap is a policy that applies to the PFS payment and is 
not applicable under the OPPS; and the list of services that are 
subject to the OPPS cap is published as part of the annual PFS final 
rules. In addition, based on our review of the service associated with 
CPT code 76145 and input from our medical advisors, we believe that APC 
code 5611 is the most appropriate assignment for the code. The code is 
new for CY 2021 and therefore we have no claims data available for OPPS 
ratesetting. However, once we have claims data, we will review the APC 
assignment and determine whether a change is necessary. We note that we 
review, on an annual basis, the APC assignments for all items and 
services paid under the OPPS.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, and assigning CPT code 
76145 to APC 5611 for CY 2021. The final CY 2021 payment rate for the 
code can be found in Addendum B to this final rule with comment period. 
In addition, we refer readers to Addendum D1 of this final 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.
16. Musculoskeletal Procedures (APCs 5111 Through 5116)
    Prior to CY 2016, OPPS payment for musculoskeletal procedures was 
primarily divided according to anatomy and the type of musculoskeletal 
procedure. As part of the CY 2016 reorganization to better structure 
the OPPS payments towards prospective payment packages, we consolidated 
those individual APCs so that they became a general Musculoskeletal APC 
series (80 FR 70397 through 70398).
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59300), we continued to apply a six-level structure for the 
Musculoskeletal APCs because doing so provided an appropriate 
distinction for resource costs at each level and provided clinical 
homogeneity. However, we indicated that we would continue to review the 
structure of these APCs to determine whether additional granularity 
would be necessary.
    In the CY 2019 OPPS proposed rule (83 FR 37096), we recognized that 
commenters had previously expressed concerns regarding the granularity 
of the current APC levels and, therefore, requested comment on the 
establishment of additional levels. Specifically, we solicited comments 
on the creation of a new APC level between the current Level 5 and 
Level 6 within

[[Page 85967]]

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 the CY 2021 OPPS/ASC 
proposed rule, we stated that we continued to believe that the six-
level APC structure for the Musculoskeletal Procedures APC series is 
appropriate. Therefore, we proposed 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 proposed CY 2021 OPPS, the geometric mean cost of CPT code 
22869 increased slightly relative to the prior year, from $11,023.45 to 
$12,788.56. However, the proposed geometric mean costs of the Level 5 
and Level 6 Musculoskeletal Procedures APCs were $12,102.02 and 
$15,975.08, respectively, and so, based on the data that was available, 
we continued 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 proposed to eliminate the Inpatient 
Only (IPO) list over a three-year transition and to assign codes 
removed from the IPO list to clinical APCs. Many of the codes proposed 
to be removed from the IPO list are musculoskeletal procedures that we 
proposed to assign to APCs in 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 IPO list, please see section IX.B. of the CY 2021 OPPS/ASC 
proposed rule.
    Table 28 displays the final CY 2021 Musculoskeletal Procedures APC 
series' structure and APC geometric mean costs.
[GRAPHIC] [TIFF OMITTED] TR29DE20.040

    Comment: One commenter recommended that CMS create a seventh 
Musculoskeletal APC level above APC 5116 to account for complex 
procedures that were proposed to be removed from the IPO list. Another 
commenter requested that CMS consider the development of an additional 
Musculoskeletal APC between current APCs 5114 and 5115.
    Response: We appreciate the commenters' recommendation. We 
understand that the addition of codes removed from the IPO list may 
affect the geometric means of the Musculoskeletal Procedures APCs and 
we will continue to monitor the claims data as they become available. 
We also appreciate the goal of developing APC levels that appropriately 
reflect resource costs. At this time, we believe the six-level 
structure for the Musculoskeletal APCs continues to be appropriate. 
However, we will take these comments into consideration for future 
rulemaking
    Comment: We received one comment recommending that CMS reassign CPT 
codes 28297 (Correction, hallux valgus (bunionectomy), with 
sesamoidectomy, when performed; with first metatarsal and medial 
cuneiform joint arthrodesis, any method) and 28740 (Arthrodesis, 
midtarsal or tarsometatarsal, single joint) to APC 5115 (Level 5 
Musculoskeletal Procedures) to resolve any 2 times rule violations.
    Response: We appreciate the commenter's recommendation regarding 
the APC assignment of CPT 28297 and 28740. CPT codes 28297 and 28740 
are currently assigned to APC 5114 (Level 4 Musculoskeletal 
Procedures). Our review did not find that APC 5114 violates the 2 times 
rule. We also note that for purposes of identifying significant 
procedure codes for examination under the 2 times rule, we only 
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

[[Page 85968]]

contribute at least 2 percent of the single major claims used to 
establish the APC cost to be significant (75 FR 71832). Neither of 
these codes met this requirement and therefore were not considered 
significant procedure codes for 2 times rule purposes. Therefore, we 
are finalizing our proposal to continue to assign CPT codes 28297 and 
28740 to APC 5114 in the CY 2021 OPPS.
    Comment: Commenters supported our proposal to continue to assign 
CPT code 22869 to APC 5115 (Level 5 Musculoskeletal Procedures). One 
commenter requested that CMS continue to monitor the geometric mean 
cost for CPT code 22869 and reestablish the code with assignment to APC 
5116 (Level 6 Musculoskeletal Procedures) when appropriate.
    Response: We appreciate commenters' support. We will continue to 
review the most recent data and update the APC assignment for CPT code 
22869 as necessary.
    Comment: One commenter requested that we assign CPT code 23473 
(Revision of total shoulder arthroplasty, including allograft when 
performed; humeral or glenoid component) from APC 5115 to APC 5116, 
based on their belief that the claims data was inaccurate and that the 
time required to perform the procedure was not reflected in the 
resource costs of the proposed APC placement.
    Response: We note that CPT code 23473 has been established for some 
time, with an effective date of January 1, 2013 and that it was the 
initially established with a status indicator of ``T'' in the CY 2013 
OPPS. Therefore, some of the issues related to codes transitioning off 
the IPO list do not necessarily apply in this case and the actual data 
for the claims are more appropriate in ratesetting than alternative 
proxies. In the updated final rule claims data available for 
ratesetting, the estimated geometric mean cost of CPT 23473 is 
approximately $10,634 based on 287 claims, which is within the range of 
the significant procedure costs of APC 5115 from approximately $9,644 
to $12,902. As a result, we believe that the code is appropriately 
placed in APC 5115.
    Comment: For the CY 2020 OPPS/ASC final rule, HCPCS code C9757 
(Laminotomy (hemilaminectomy), with decompression of nerve root(s), 
including partial facetectomy, foraminotomy and excision of herniated 
intervertebral disc, and repair of annular defect with implantation of 
bone anchored annular closure device, including annular defect 
measurement, alignment and sizing assessment, and image guidance; 1 
interspace, lumbar) was assigned to comment indicator ``NI'' in the 
OPPS Addendum B to indicate that the code was new and that we would be 
accepting comments on the interim APC assignment. A commenter supported 
the assignment to APC 5115 (Level 5 Musculoskeletal Procedures) with a 
CY 2020 payment rate of $11,900.71.
    Response: As we stated in the CY 2020 OPPS/ASC final rule, we 
accepted comments on the interim OPPS payment assignment for new codes 
effective January 1, 2020 that are assigned to comment indicator ``NI'' 
in the OPPS Addendum B (84 FR 61207). We further stated that the 
comments would be addressed, and if applicable, the APC assignment 
would be finalized in the CY 2021 OPPS/ASC final rule comment period. 
We appreciate the feedback. We note that for CY 2021, we are finalizing 
the assignment to APC 5115 (Level 5 Musculoskeletal Procedures) for 
HCPCS code C9757. The final payment rate for the code can be found in 
Addendum B to this final rule with comment period. In addition, the 
status indicator definitions can be found in Addendum D1 to this final 
rule with comment period. Both Addendum B and Addendum D1 are available 
via the internet on the CMS website.
    After consideration of the comments, we are finalizing our proposal 
to maintain the six-level Musculoskeletal Procedures APC structure. We 
are also finalizing the proposed assignment of CPT codes 28297 and 
28740 to APC 5114, and the proposed assignment of CPT codes 22869 and 
23473 to APC 5115 for the CY 2021 OPPS.
17. Neurostimulator and Related Procedures (APCs 5461 Through 5465)
    In the CY 2015 OPPS/ASC final rule with comment period (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 the CY 2021 OPPS 
proposed rule, we believed that it was 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 proposed to establish a five-level APC structure for the 
Neurostimulator and Related Procedures series. We noted that in 
addition to creating the new level, we also proposed to assign CPT code 
0398T (Magnetic resonance image guided high intensity focused 
ultrasound (mrgfus), stereotactic ablation lesion, intracranial for 
movement disorder including stereotactic navigation and frame placement 
when performed) to the new Level 3 APC, as discussed in further detail 
in section III.C.3.A of the CY 2021 OPPS/ASC proposed rule with comment 
period.
    Comment: Multiple commenters requested that we add a Level 6 
Neurostimulator and Related Procedures APC. The commenters are 
concerned that the payment rate for the current Level 4 APC and the 
proposed Level 5 APC is dominated by CPT code 63685 (Insertion or 
replacement of spinal neurostimulator pulse generator or receiver, 
direct or inductive coupling) which has a geometric mean of $29,123.02. 
The commenter indicated this means that higher cost neurostimulator 
services that have relatively low utilization are substantially 
underpaid. The commenters believe the lack of payment for these 
services is discouraging their use, and they want a Level 6 APC to 
establish a payment rate that more closely reflects the cost of these 
expensive, low utilization services.
    Response: We appreciate the concerns of the commenters, but we 
reiterate that the OPPS is a prospective payment system. We group 
procedures with similar clinical characteristics and resource costs 
into APCs and establish a payment rate that reflects the geometric mean 
of all services in the group even though the cost of each service 
within the APC may be higher or lower than the APC's geometric mean. As 
a result, in the OPPS any individual procedure may potentially be 
overpaid or underpaid because the payment rate is based on the 
geometric mean of the entire group of services in the APC. However, the 
impact of these payment differences should be mitigated when 
distributed across a large number of APCs. If we were to establish a 
Level 6 APC for Neurostimulators and Related Procedures based on the 
commenters' request, we would find the payment rate for the APC would 
be closer to some of the services assigned to that APC but

[[Page 85969]]

other services would continue to receive payment that is substantially 
lower than those services' geometric mean cost. In the end, the only 
way to ensure each service receives payment equivalent to the cost of 
the service would be to establish separate APCs for each service the 
commenters believe is underpaid. That solution would be contrary to 
payment principles of the OPPS, which is based on prospective payment. 
Therefore, we believe it is appropriate to maintain the same five level 
structure as proposed in the CY 2021 OPPS.
    Comment: Most commenters supported our proposal to create an 
additional Neurostimulator and Related Procedures level, between the 
current Level 2 and 3 APCs, which is described as the Level 3 
Neurostimulator and Related Procedures APC in our proposal.
    Response: We appreciate the support of the commenters for our 
proposal.
    Comment: One commenter noted that our proposal to establish an 
additional APC level would lead to a decrease in payment for services 
described by CPT codes 63650 (Percutaneous implantation of 
neurostimulator electrode array, epidural), 63685 (Insertion or 
replacement of spinal neurostimulator pulse generator or receiver, 
direct or inductive coupling), and 63688 (Revision or removal of 
implanted spinal neurostimulator pulse generator or receiver).
    Response: We did not find that there would be a substantial 
decrease in the payment for the procedures described by CPT codes 
63650, 63685, and 63688 due to our proposal. Based on a review of our 
claims data, we found only a modest payment decrease for CPT code 63650 
and modest payment increases for CPT codes 63685 and 63688.
    In addition, for CY 2021, we proposed to continue to assign CPT 
code 0587T to APC 5442 (Level 2 Nerve Injections) with a proposed 
payment of $644.55. We also proposed to continue to assign CPT code 
0588T to APC 5441 (Level 1 Nerve Injections) with a proposed payment of 
$267.50. We note that because both codes were effective on January 1, 
2020, we have no claims data available for OPPS ratesetting, as the CY 
2021 OPPS payment rates are based on claims submitted between January 
1, 2019 through December 31, 2019, and processed through June 30, 2020. 
The long descriptors for both codes can be found in Table 29 below.
    Comment: A commenter explained that in May 2019 the AMA CPT 
Editorial Panel approved four (4) Category III CPT codes to describe 
the surgical procedures associated with the PROTECT PNS 
Neurostimulation System, specifically, CPT codes 0587T, 0588T, 0589T, 
and 0590T. The PROTECT PNS device is used for the treatment of 
overactive bladder (OAB) symptoms. The commenter added that on October 
19, 2016, CMS approved Medicare coverage for the Category B IDE study 
associated with the PROTECT PNS device. In addition, the commenter also 
stated that CMS incorrectly assigned CPT codes 0587T and 0588T to 
inappropriate APC assignments.
    For CPT code 0587T, the commenter clarified that CPT code 0587T is 
not an injection; rather, the code describes an implantation or 
replacement of an integrated single device neurostimulation system, 
similar to the procedures assigned to the Neurostimulator and Related 
Procedures (APCs 5461 through 5465) family. The commenter recommended 
reassigning CPT code 0587T to one of these APCs to adequately capture 
the correct clinical characteristics and resource costs of the 
technology similar to other neurostimulation devices in APCs 5461 
through 5465. The commenter specifically recommended the reassignment 
to APC 5464 (Level 4 Neurostimulator and Related Procedures) with a 
proposed payment rate of $20,789.82, since the procedure is very 
similar to CPT code 64590 (Insertion or replacement of peripheral or 
gastric neurostimulator pulse generator or receiver, direct or 
inductive coupling), which is assigned to APC 5464. According to the 
commenter, the cost of the PROTECT implantable device and transmitter 
kit that is used in the procedure is about $15,820. Based on the 
commenter's estimated cost of approximately $20,032, which includes the 
non-device cost of $2,737 and the PROTECT device cost of $15,820, the 
appropriate assignment for the code until OPPS claims are available is 
APC 5464.
    For CPT code 0588T, the commenter explained that the code is not an 
injection procedure, rather, the code describes the surgical removal of 
the device. The commenter suggested reassigning the code to APC 5461 
(Level 1 Neurostimulator and Related Procedures) with a proposed 
payment of $3,498.13 because it is comparable to CPT code 64595 
(Revision or removal of peripheral or gastric neurostimulator pulse 
generator or receiver) based on clinical similarity and resource costs.
    Response: We do not agree that CPT code 0587T is comparable to CPT 
code 64590. Based on our review of the clinical characteristics of the 
procedure and input from our medical advisors, we believe CPT code 
0587T is more similar to the procedures assigned to APC 5462 (Level 2 
Neurostimulator and Related Procedures). However, we agree that CPT 
code 0588T is similar to the procedures in APC 5461, and are therefore 
assigning the code to APC 5461 in the CY 2021 OPPS.
    In summary, after consideration of the public comment, we are 
finalizing our proposal with modification, and reassigning CPT code 
0587T to APC 5462 and CPT code 0588T to APC 5461. Table 29 below list 
the four Category III CPT codes for the PROTECT PNS System and their 
APC and SI assignments for CY 2021. The final CY 2021 OPPS payment 
rates for the codes can be found in Addendum B of this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the status indicator meanings for 
all codes reported under the OPPS for CY 2021. Both Addendum B and 
Addendum D1 are available via the internet on the CMS website.
BILLING CODE 4120-01-P

[[Page 85970]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.041

    Comment: Two commenters supported our proposal to change the APC 
assignment for CPT code 0398T (Magnetic resonance image guided high 
intensity focused ultrasound (mrgfus), stereotactic ablation lesion, 
intracranial for movement disorder including stereotactic navigation 
and frame placement when performed) to the proposed new Level 3 
Neurostimulator and Related Procedures APC.
    Response: We appreciate the support of the commenters for our 
proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to establish a five-
level APC structure for the Neurostimulator and Related Procedures 
series. In addition to creating this new level, we also finalizing our 
proposal 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. Table 30 
displays the proposed and final CY 2021 Neurostimulator and Related 
Procedures APC series' structure and APC geometric mean costs.

[[Page 85971]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.043

BILLING CODE 4120-01-C
18. 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 were 
listed in Table 7 (New HCPCS Codes Effective July 1, 2020) of the CY 
2021 OPPS/ASC final rule with comment period (85 FR 48815 through 
48823). 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) 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 OR-associated costs because it was not clear to us that the 
test would routinely be performed in the OR setting. However, in the CY 
2021 OPPS/ASC proposed rule we solicited 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.
    For CY 2021, we proposed to continue to assign CPT code 0598T to 
APC 5722 (Level 2 Diagnostic Tests and Related Services) with a 
proposed payment rate of $269.85. We proposed to maintain a status 
indicator of ``N'' for CPT code 0599T, which is an add-on code, to 
indicate that the payment is included in the primary procedure. The 
long descriptors and proposed SI and APC assignments for both codes can 
be found in Table 31 below.
    Comment: Some commenters agreed with the APC assignment to APC 5722 
for CPT code 0598T, however, they had concerns with the packaged status 
indicator assignment for CPT code 0599T, and suggested assigning the 
code to a different APC and revising the status indicator from ``N'' 
(packaged) to ``S'' (Procedure or Service, Not Discounted When 
Multiple). One commenter indicated that the payment is insufficient to 
cover the cost of the procedure and contended that the low 
reimbursement will dissuade hospitals from offering the service. The 
commenter reported that the procedure requires the use of a Dark Drape 
technology and also requires significant time because the second ulcer 
and subsequent ulcers typically involve different anatomical locations. 
Another commenter reported that hospital outpatient charges for CPT 
code 0598T are between $850 and $2,500 for the first wound and between 
$850 and $1,850 for subsequent anatomic sites. The same commenter 
suggested that OPPS payment is inadequate, especially in cases that 
involve additional wounds in different anatomic sites such as the 
sacrum, abdomen, toe, or leg, all of which require additional resource 
costs. Consequently, the commenter requested a revision in the APC 
assignment for both codes. Specifically, the commenter recommended 
reassigning CPT code 0598T from APC 5722 to APC 5723 (Level 3 
Diagnostic Tests and Related Services) with a proposed payment of 
$497.96, and to assign CPT code 0599T to APC 5722 with a proposed 
payment of $269.85. In addition, the commenter recommended assigning 
both codes status indicator ``S''.
    Response: With regard to CPT code 0598T, based on our evaluation of 
the new technology application submitted to CMS as well as input from 
our physicians, we believe that we should maintain the assignment to 
APC 5722 for CY 2021. In addition, because CPT code 0599T is an add-on 
code, we are maintaining its status indicator assignment of ``N'' 
(packaged). As specified in section Sec.  419.2(b)(18), add-on codes 
are generally packaged under

[[Page 85972]]

the hospital OPPS. As explained in the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74942 through 74945), we finalized a policy to 
unconditionally package procedures described by add-on codes. 
Procedures described by add-on codes represent an extension or 
continuation of a primary procedure, which means that they are 
typically supportive, dependent, or adjunctive to a primary service. 
The primary code defines the purpose and typical scope of the patient 
encounter and the add-on code describes incremental work, when the 
extent of the procedure encompasses a range rather than a single 
defined endpoint applicable to all patients. Given the dependent nature 
and adjunctive characteristics of procedures described by add-on codes 
and in light of longstanding OPPS packaging principles, we finalized a 
policy to unconditionally package add-on codes with the primary 
procedure.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, to assign CPT code 0598T 
to APC 5722 with status indicator ``T'' and to assign CPT code 0599T 
status indicator ``N'' for CY 2021. The final CY 2021 payment rate for 
CPT code 0598T can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final 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.
[GRAPHIC] [TIFF OMITTED] TR29DE20.044

19. Nuclear Medicine Services: Single-Photon Emission Computed 
Tomography (SPECT) Studies (APC 5593)
    For CY 2021, we proposed to reassign CPT code 78803 
(Radiopharmaceutical localization of tumor, inflammatory process or 
distribution of radiopharmaceutical agent(s) (includes vascular flow 
and blood pool imaging, when performed); tomographic (spect), single 
area (e.g., head, neck, chest, pelvis), single day imaging) from APC 
5593 (Level 3 Nuclear Medicine and Related Services) with a payment 
rate of $1,272.19 to APC 5592 (Level 2 Nuclear Medicine and Related 
Services) with a proposed payment rate of $501.45.
    Comment: Several commenters objected to the reassignment of CPT 
code 78803 to APC 5592 and requested that we not finalize our proposal 
but rather maintain the current placement in APC 5593. They stated that 
the significant payment decrease would limit patient access, affect 
patient care, and restrict hospitals from offering the test. One 
commenter reported that the Medicare payment for CPT code 78803 is 
insufficient, and as a result, many hospitals refuse to offer the 
service. This same commenter reported that lowering the payment for the 
test may force some hospitals that currently offer the test to stop 
providing it altogether. The commenter added that many patients travel 
hours to access a SPECT scan exam and lowering the payment for the test 
would not improve patient care. Some commenters reminded us that for CY 
2020, CPT code 78803 replaced seven codes that were deleted on December 
31, 2019. Most commenters stated that the more appropriate placement 
for CPT code 78803 is APC 5593, based on resource use and clinical 
similarity to the other procedures in the APC.
    Response: We discussed the issue related to the seven deleted codes 
in the CY 2020 OPPS/ASC final rule (84 FR 61257 through 61258) and 
noted that based on the geometric mean costs for CPT code 78803 and the 
deleted codes, we believe it was necessary for us to maintain the APC 
assignment for CPT code 78803 in APC 5593. Because the CY 2021 OPPS 
payments are based on claims submitted between January 1, 2019 through 
December 31, 2019, and processed through June 30, 2020, we again 
reviewed the claims data for the deleted codes to determine the 
appropriate placement for CPT code 78803. As listed in Table 32, the 
range of geometric mean costs for CPT code 78803 and the seven deleted 
codes is between $408 and $1,508. Similar to our CY 2020 findings, we 
note that several of the deleted codes were assigned to APC 5593, and 
based on our review of these codes, we believe it would be appropriate 
to maintain assignment of CPT code 78803 to APC 5593 for CY 2021.

[[Page 85973]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.045

    Comment: One commenter agreed with the proposal to maintain the 
four levels of nuclear medicine APCs for CY 2021 but requested that CMS 
consider establishing additional APCs as needed to ensure that the 
nuclear medicine APCs do not violate the 2-times rule when the cost of 
packaged diagnostic radiopharmaceuticals drugs are included.
    Response: We appreciate the feedback and will consider in future 
rulemaking whether establishing additional nuclear medicine APCs would 
be appropriate.
    In summary, after consideration of the public comments, and after 
our analysis of the updated claims data for this final rule with 
comment period, we are finalizing a modification to our proposal. 
Specifically, we are revising the APC assignment for CPT code 78803 to 
APC 5593 for CY 2021. The final CY 2021 payment rate for the code can 
be found in Addendum B to this final rule with comment period (which is 
available via the internet on the CMS website).
    As we do every year, we will reevaluate the APC assignment for CPT 
code 78803 for the next rulemaking cycle. We note that we review, on an 
annual basis, the APC assignments for all services and items paid under 
the OPPS.
20. Pathogen Test for Platelets/Rapid Bacterial Testing (APC 5732)
    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 were 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 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 proposed rule, we believed that we had sufficient 
claims data to reassign the code from a New Technology APC to a 
clinical APC, and noted that HCPCS code P9100 had 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 believed that we should reassign the code to a clinical APC. 
Specifically, our claims data for the proposed rule showed 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 believed that HCPCS code P9100 should be reassigned to 
clinical APC 5732, which had a geometric mean cost of 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

[[Page 85974]]

30, 2019, our analysis of the latest claims data for the proposed rule 
supported reassigning HCPCS code P9100 to APC 5732 based on its 
clinical and resource similarity to the procedures and services in the 
APC. Therefore, we proposed to reassign HCPCS code P9100 from New 
Technology APC 1494 to clinical APC 5732 for CY 2021.
    Comment: A commenter supported our proposal to revise the APC 
assignment for HCPCS code P9100 to APC 5732.
    Response: We appreciate the support for our proposal. Based on our 
review of the updated claims data for this final rule with comment 
period, which is based on claims submitted between January 1, 2019, and 
December 30, 2019, and processed through June 30, 2020, we continue to 
believe that reassigning HCPCS code P9100 to APC 5732 is appropriate. 
Specifically, our claims data show a geometric mean cost of 
approximately $30.86 for HCPCS P9100 based on 75 single claims (out of 
2,038 total claims), which is consistent with the geometric mean cost 
of about $32.97 for APC 5732.
    In summary, after consideration of the public comment, and after 
our analysis of the updated claims data for this final rule with 
comment period, we are finalizing our proposal, without modification, 
to assign HCPCS code P9100 to APC 5732 for CY 2021. The final CY 2021 
payment rate for the code can be found in Addendum B to this final rule 
with comment period. In addition, we refer readers to Addendum D1 of 
this final 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.
21. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium 
(Non-HEU) Sources (APC 1442)
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the Medicare 
population. Some of the Technetium-99 (Tc-99m), the radioisotope used 
in the majority of such diagnostic imaging services, is produced in 
legacy reactors outside of the United States using highly enriched 
uranium (HEU).
    The United States would like to eliminate domestic reliance on 
these reactors, and is promoting the conversion of all medical 
radioisotope production to non-HEU sources. Alternative methods for 
producing Tc-99m without HEU are technologically and economically 
viable, and conversion to such production has begun. We expect that 
this change in the supply source for the radioisotope used for modern 
medical imaging will introduce new costs into the payment system that 
are not accounted for in the historical claims data.
    Therefore, beginning in CY 2013, we finalized a policy to provide 
an additional payment of $10 for the marginal cost for radioisotopes 
produced by non-HEU sources (77 FR 68323). Under this policy, hospitals 
report HCPCS code Q9969 (Tc-99m from non-highly enriched uranium 
source, full cost recovery add-on per study dose) once per dose along 
with any diagnostic scan or scans furnished using Tc-99m as long as the 
Tc-99m doses used can be certified by the hospital to be at least 95 
percent derived from non-HEU sources (77 FR 68321).
    Comment: One commenter requested that we increase the payment rate 
for HCPCS add-on code Q9969 from $10. The commenter noted that we have 
not increased the payment rate for Q9969 since the code was established 
in CY 2013. The commenter suggested increasing the payment for Q9969 by 
the annual market basket increase for CY 2021 along with a one-time 
increase to reflect prior increases to the market basket between CY 
2013 and CY 2021. Alternatively, the commenter suggested the payment 
rate could be increased by the change in the drug cost threshold 
packaging amount between CY 2013 and CY 2021.
    Response: We appreciate the information we received from the 
commenter supporting an increase to the payment rate of $10 for HCPCS 
code Q9969. As discussed in the CY 2013 OPPS/ASC final rule with 
comment period, we did not finalize a policy to use the usual OPPS 
methodologies to update the non-HEU add-on payment (77 FR 68317). The 
purpose of the additional payment is limited to mitigating any adverse 
impact of transitioning to non-HEU sources and we believe the add-on is 
appropriate at this time.
    Comment: Multiple commenters supported the current payment amount 
for HCPCS code Q9969 and they requested that we finalize our proposed 
payment rate for the add-on.
    Response: We appreciate the support of the commenters for the 
proposed payment rate for HCPCS code Q9969.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue the policy 
of providing an additional $10 payment for radioisotopes produced by 
non-HEU sources for CY 2021 and subsequent years as represented by 
HCPCS code Q9969.
22. Percutaneous Transcatheter Ultrasound Nerve Ablation
    The Therapeutic Intra-Vascular Ultrasound System 
(TIVUSTM) is a high intensity, non-focused, ultrasound 
catheter system, which enables remote, localized, controlled and 
repeatable thermal modulation of nerves adjacent to arterial vessel 
wall for performing therapeutic pulmonary artery sympathetic 
denervation and is used for the treatment of pulmonary arterial 
hypertension (PAH). In 2020, the TIVUSTM system was approved 
by FDA for a Category B (Nonexperimental/investigational) 
Investigational Device Exemption (IDE) for the device to be used in a 
clinical study. The study sponsors have also requested Medicare 
coverage of the Category B IDE study to allow for coverage of the 
TIVUSTM system and the routine care items and services in 
the clinical trial. To date, CMS has not established approval of 
Medicare coverage for the Category B IDE study for the 
TIVUSTM system.
    The TIVUSTM system is used with CPT code 0632T 
(Percutaneous transcatheter ultrasound ablation, nerves innervating the 
pulmonary arteries, including right heart catheterization, radiological 
supervision and interpretation and pulmonary artery angiography), which 
will become effective January 1, 2021. In the CY 2021 OPPS/ASC proposed 
rule, CPT code 0632T was assigned status indicator ``E1'', which 
describes items, codes, and services not covered by any Medicare 
outpatient benefit category, statutorily excluded by Medicare, or not 
reasonable and necessary. These items, codes, and services are not paid 
by Medicare when submitted on outpatient claims.
    Comment: One commenter, the manufacturer of the TIVUSTM 
system, requested that, in anticipation of approval of Medicare 
coverage for the Category B IDE study for the TIVUSTM 
system, CMS assign CPT code 0632T status indicator ``J1'', which 
describes services paid through a comprehensive APC (C-APC) instead of 
status indicator ``E1'' for CY 2021. The commenter also requested that 
CMS assign CPT code 0632T to C-APC 5213 (Level 3 Electrophysiologic 
Procedures) for CY 2021, stating that the procedure is similar in 
clinical characteristics and resource costs to CPT code 93656 
(Comprehensive electrophysiologic evaluation including transseptal 
catheterizations, insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia 
including

[[Page 85975]]

left or right atrial pacing/recording, when necessary, right 
ventricular pacing/recording when necessary, and his bundle recording 
when necessary with intracardiac catheter ablation of atrial 
fibrillation by pulmonary vein isolation), which is assigned to C-APC 
5213 for CY 2021.
    Response: For approved Category B IDE studies, CMS allows for 
coverage of the Category B device and the routine care items and 
services in the clinical trial. To date, coverage for the Category B 
IDE clinical study for the TIVUSTM system has not been 
approved by CMS. We do not believe that it is appropriate to assign a 
payable status indicator under the OPPS to CPT code 0632T prior to the 
approval of the Category B IDE study. Therefore, for CY 2021, we are 
finalizing the assignment of status indicator ``E1'' to CPT code 0632T.
23. Peripheral Intravascular Lithotripsy (IVL) Procedure (APCs 5192, 
5193, and 5194)
    The IVL system has three components: A proprietary IVL Catheter, an 
IVL Generator, and an IVL Connector Cable. It is a lithotripsy-enhanced 
balloon catheter used to dilate lesions, including calcified lesions, 
in the peripheral vasculature, including the iliac, femoral, ilio-
femoral, popliteal, infra-popliteal, and renal arteries. The IVL 
catheter has integrated lithotripsy emitters and is designed to enhance 
percutaneous transluminal angioplasty by enabling delivery of the 
calcium disrupting capability of lithotripsy prior to full balloon 
dilatation at low pressures. The application of lithotripsy mechanical 
pulse waves alters the structure of an occlusive vascular deposit 
(stenosis) prior to low-pressure balloon dilation of the stenosis and 
facilitates the passage of blood and is used for the treatment of 
peripheral artery disease (PAD).
    In 2019, FDA cleared 510(k) submission based on a determination of 
substantial equivalence to a legally marketed predicate device. The 
manufacturer also submitted a new technology application requesting new 
technology APC assignment for IVL procedures. Based on our review of 
the New Technology APC application for this service and the service's 
clinical similarity to existing APCs in the OPPS, we created four new 
HCPCS codes for these services and assigned these codes to existing 
clinical APCs. Specifically, CMS proposed to add HCPCS code C9764 
(Revascularization, endovascular, open or percutaneous, any vessel(s); 
with intravascular lithotripsy, includes angioplasty within the same 
vessel(s), when performed), C9765 (Revascularization, endovascular, 
open or percutaneous, any vessel(s); with intravascular lithotripsy, 
and transluminal stent placement(s), includes angioplasty within the 
same vessel(s), when performed) C9766 (Revascularization, endovascular, 
open or percutaneous, any vessel(s); with intravascular lithotripsy and 
atherectomy, includes angioplasty within the same vessel(s), when 
performed), and C9767 (Revascularization, endovascular, open or 
percutaneous, any vessel(s); with intravascular lithotripsy and 
transluminal stent placement(s), and atherectomy, includes angioplasty 
within the same vessel(s), when performed), effective July 1, 2020. We 
assigned code C9764 to APC 5192 (Level 2 Endovascular Procedures) with 
a payment rate of $4,953.91; C9765 and C9766 to APC 5193 (Level 3 
Endovascular Procedures) with a payment rate of $9,908.48; and C9767 to 
APC 5194 (Level 4 Endovascular Procedures) with a payment rate of 
$15,939.97 for CY 2020. In the CY 2021 OPPS/ASC proposed rule, we 
proposed to maintain these APC assignments for these codes in CY 2021.
    At the August 31, 2020 HOP Panel Meeting, a presenter requested 
that we reassign IVL procedure C9764 to APC 5193 and procedures C9765 
and C9766 to APC 5194. The presenter indicated that the APC payment 
associated with HCPCS code(s) C9764, C9765 and C9766 is inadequate to 
cover the cost of the procedures. According to the presenter, the 
proposed CY 2021 geometric mean cost for the procedures range from 
$6,619.26 to $22,305.36, not including the additional cost of the IVL 
catheter. The presenter reported that the cost of one catheter is 
$2,800 but each procedure requires an average of 1.2 catheters, 
bringing the total cost of catheters to $3,360 per procedure. The 
presenter stated that the payment rate for the IVL procedures on tibial 
and peroneal vessels was lower than the payment rate for similar 
procedures without IVL. The presenter believed that hospitals will 
limit access to IVL, reducing patient access, because payment for the 
procedure is inadequate. They argued that limiting IVL access to 
patients suffering from critical limb ischemia in tibial and peroneal 
arteries could lead to higher complications associated with current 
treatment modalities. They believe that traditional treatments are 
associated with higher risk of distal embolization, perforation and 
possible amputation. Based on the information presented at the meeting, 
the HOP Panel recommended CMS reassign HCPCS code C9764 to APC 5193 and 
HCPCS codes C9765 and C9766 to APC 5194, as long as the cost of the IVL 
device is within 10 percent of other devices currently available. 
However, we are unable to identify devices that are similar to IVL and 
therefore cannot complete the data analysis recommended by the HOP 
Panel.
    Comment: Several commenters disagreed with CMS' proposed APC 
assignments for the peripheral intravascular lithotripsy service 
described by HCPCS codes C9764, C9765 and C9766. They reported that, 
based on the resource cost of the service described by HCPCS code 
C9764, APC 5192 does not provide adequate reimbursement for the 
service, and recommended reassignment to APC 5193 (Level 3 Endovascular 
Procedures) with a proposed payment rate of $10,222.32. Similarly, for 
HCPCS codes C9765 and C9766, the commenters indicated that APC 5193 
would not adequately cover the resource costs associated with these 
procedures, and recommended their reassignment to APC 5194 (Level 4 
Endovascular Procedures) with a proposed payment rate of $16,348.66.
    Response: APC assignment for a code is based on similarity to other 
codes within an APC in terms of clinical homogeneity and resource 
costs. As specified in 42 CFR 419.31(a)(1), CMS classifies outpatient 
services and procedures that are comparable clinically and in terms of 
resource use into APC groups. As we stated in the CY 2012 OPPS/ASC 
final rule (76 FR 74224), the OPPS is a prospective payment system that 
provides payment for groups of services that share clinical and 
resource use characteristics. For all new codes, our policy has been to 
assign the service or procedure to an APC informed by a variety of 
sources, including but not limited to, review of the clinical 
similarity of the service to existing procedures; advice from CMS 
medical advisors; information from interested specialty societies; and 
review of all other information available to us, including information 
provided to us by the public, whether through meetings with 
stakeholders or additional information that is mailed or otherwise 
communicated to us.
    Based on the comments we received, the HOP Panel recommendation, 
information provided in the new technology application, and advice from 
our medical advisors, we believe we should add new HCPCS codes to 
describe tibial and peroneal IVL procedures, for a total of eight IVL 
procedure codes, and revise the long

[[Page 85976]]

descriptors for HCPCS codes C9764, C9765, C9766, and C9767 by deleting 
the words ``any vessel(s)'' and replacing with ``lower extremity 
artery(ies), except tibial/peroneal'' effective January 1, 2021. We 
agree with commenters that the resources associated with tibial and 
peroneal IVL procedures are higher than iliac, femoral and popliteal 
procedures. Therefore, we are creating new HCPCS codes C9772, C9773, 
C9774, and C9775 to describe tibial and peroneal procedures and 
assigning these codes to APCs as listed in the Table 33 below.
    In summary, after consideration of public comments, we are 
finalizing our proposal with modification, to provide new HCPCS codes 
C9772, C9773, C9774 and C9775 and assign these codes to APCs listed in 
Table 33. Table 33 also lists revised long descriptors for HCPCS codes 
C9764, C9765, C9766, and C9767, and final SI and APC assignments for 
all eight codes. The final CY 2021 payment rate for these codes can be 
found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final 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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR29DE20.046


[[Page 85977]]


BILLING CODE 4120-01-C
24. Remote Physiological Monitoring (APC 5741)
a. Initial Remote Monitoring of Physiologic Parameters (APC 5741)
    For the CY 2019 update, the CPT Editorial Panel established a new 
code, specifically, CPT code 99454, to describe initial remote 
monitoring of physiological parameters effective January 1, 2019. In 
the CY 2019 update, we assigned this code to APC 5741 (Level 1 
Electronic Analysis of Devices) with status indicator ``Q1'' 
(conditionally packaged) and a payment rate of $37.16 effective January 
1, 2019, based on the clinical and resource similarity with CPT code 
93270 (External patient and, when performed, auto activated 
electrocardiographic rhythm derived event recording with symptom-
related memory loop with remote download capability up to 30 days, 24-
hour attended monitoring; recording (includes connection, recording, 
and disconnection)). The new code appeared in the OPPS Addendum B of 
the CY 2019 OPPS/ASC final rule.
    For CY 2020 OPPS/ASC final rule, we maintained the assignment of 
CPT code 99454 to APC 5741 with a payment rate of $36.25. We note that 
we had no claims data for CPT code 99454 for the CY 2020 final rule 
since the code was established on January 1, 2019. For the CY 2021 
OPPS/ASC proposed rule, we proposed to maintain the assignment of CPT 
code 99454 to APC 5741 with the proposed payment rate of $37.76.
    Comment: One commenter was concerned that the current reimbursement 
rate is too low, which the commenter believes discourages providers 
from using much-needed equipment and services. The commenter stated 
that CMS must ensure that life-saving RPM technology would be available 
to Medicare beneficiaries by updating the status indicator and 
increasing reimbursement rate for CPT code 99454. The commenter 
requested: (1) A change in the status indicator for CPT code 99454 from 
``Q1'' to ``S,'' so that it will be paid when used in conjunction with 
other services; and (2) reassignment of CPT code 99454 from APC 5741 
(Level 1 Electronic Analysis of Devices) to APC 5742 (Level 2 
Electronic Analysis of Devices).
    Response: As we have stated every year 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 CY 2021, based on claims 
submitted between January 1, 2019 through December 31, 2019, that were 
processed on or before June 30, 2020, our analysis of the latest claims 
data for this final rule with comment period supports continuing to 
assign CPT code 99454 to APC 5741. Specifically, our claims data shows 
a geometric mean cost of approximately $28.06 for CPT 99454 based on 
185 single claims (out of 275 total claims), which is comparable to the 
geometric mean cost of about $36.19 for APC 5741, rather than the 
geometric mean cost of approximately $97.72 for APC 5742.
    We proposed to assign code 99454 to status indicator ``Q1'' for CY 
2021 to indicate that the payment for CPT code 99454 is packaged when 
the code is billed on the same claim as a HCPCS code assigned to OPPS 
status indicator ``S'', ``T'', or ``V'', but is paid separately when it 
is the only major service on the claim. Because the service described 
by CPT code 99454 will most often be performed as part of another 
significant procedure, we believe that packaging the cost associated 
with CPT code 99454 into the primary service is appropriate. Therefore, 
assignment of status indicator ``Q1'' to CPT 99454 is appropriate.
    In summary, after consideration of the public comments and after 
evaluation of our claims data for this final rule with comment period, 
we are finalizing our proposal, without modification, for CPT code 
99454. The final CY 2021 payment rate for the CPT code 99454 can be 
found in Addendum B to this final rule with comment period (which is 
available via the internet on the CMS website).
    As we do every year, we will reevaluate the APC assignment for CPT 
code 99454 for the next rulemaking cycle. We remind hospitals that we 
review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS based on the latest claims data.
b. Remote Physiological Monitoring Services, Virtual Check-In, E-
Visits, Telephone E/M, and Medication Management Services
    For CY 2021, we proposed to continue to assign CPT code 99091 
(Collection and interpretation of physiologic data (e.g., ecg, blood 
pressure, glucose monitoring) digitally stored and/or transmitted by 
the patient and/or caregiver to the physician or other qualified health 
care professional, qualified by education, training, licensure/
regulation (when applicable) requiring a minimum of 30 minutes of time, 
each 30 days) to status indicator ``N'' (packaged) to indicate that the 
payment for the service is included in the primary service reported 
with the code. We also proposed to continue to assign CPT codes 99457 
(Remote physiologic monitoring treatment management services, clinical 
staff/physician/other qualified health care professional time in a 
calendar month requiring interactive communication with the patient/
caregiver during the month; first 20 minutes) and 99458 (Remote 
physiologic monitoring treatment management services, clinical staff/
physician/other qualified health care professional time in a calendar 
month requiring interactive communication with the patient/caregiver 
during the month; each additional 20 minutes (list separately in 
addition to code for primary procedure)) to status indicator ``B'' (not 
recognized under OPPS) to indicate that the codes are not paid under 
the hospital OPPS but may be paid under a different Medicare payment 
system other than the OPPS. However, if the services described by 
either CPT code 99457 or 99458 are performed in the hospital outpatient 
facility, the facility should report an alternate code. These codes are 
listed in Table 34 along with the descriptors and status indicator 
assignments. In addition, the definitions for all the OPPS status 
indicators can be found in Addendum D1.
    We note that for CY 2020, we revised the status indicator for CPT 
code 99457 from ``M'' (Items and Services Not Billable to the MAC. Not 
paid under OPPS) to ``B,'' and for CPT code 99458, which is an add-on 
code, from ``N'' (packaged) to ``B'' effective March 1, 2020. We made 
the changes to enable Critical Access Hospitals (CAHs) to bill under 
CAH's Method II for these waiver services so that claims with these 
codes would process appropriately in the Integrated Outpatient Code 
Editor (IOCE). We announced the revisions in the July 2020 OPPS 
Quarterly Update CR (Transmittal 10224, Change Request 11814, dated 
July 15, 2020).
    At the August 31, 2020 HOP Panel Meeting, a presenter requested 
that we revise the status indicators for these codes. Specifically, the 
presenter suggested that CPT codes 99091 and 99457 should be treated 
similar to HCPCS G0463 (Hospital outpatient clinic visit for assessment 
and management of a patient), which is assigned to status indicator 
``V'' (Clinic or Emergency Department Visit) and APC 5012 (Clinic 
Visits and Related Services) which has a CY 2021 proposed payment rate 
of $120.88. Based on the discussion at the Panel Meeting, the HOP Panel 
recommended that the status indicator for CPT codes 99091 and 99457 be 
revised to ``V'' and the status indicator for CPT code 99458 be revised

[[Page 85978]]

to ``N''. We note that we are not accepting the Panel's recommendation 
because we believe that we need further review to determine whether 
these type of services (i.e., remote physiologic monitoring) should be 
paid separately under the OPPS. We appreciate the HOP Panel's 
recommendations on the status indicator revisions for CPT codes 99091, 
99457, and 99458, and will consider them in future rulemaking.
    Comment: For CPT code 99091, one commenter disagreed with the 
status indicator assignment of ``N,'' and stated the code should not be 
packaged because the service may be the only OPPS service furnished 
during a month for a registered hospital outpatient. The commenter 
recommended assigning the code to either status indicator ``V'' or 
treating it similar to CPT code 99454 (Remote monitoring of physiologic 
parameter(s) (e.g., weight, blood pressure, pulse oximetry, respiratory 
flow rate), initial; device(s) supply with daily recording(s) or 
programmed alert(s) transmission, each 30 days), which has a payable 
status indicator of ``Q1'' (STV-Packaged Codes) and assigned to APC 
5741 (Level 1 Electronic Analysis of Devices) with a CY 2021 proposed 
payment of $37.76.
    Response: Although we are sensitive to the concern raised by the 
commenter, we do not believe that revising the status indicator for CPT 
code 99091 would be appropriate at this time. We believe we need 
further review of this code, along with all the remote physiological 
monitoring (PRM) service codes, to determine whether these types of 
services should be separately payable under the OPPS. Therefore, for CY 
2021, we are finalizing our proposal, without modification and will 
continue to assign CPT code 99091 to status indicator ``N,'' and 
consider the suggestion to revise the status indicator in future 
rulemaking. The final CY 2021 status indicator for CPT code 99091 can 
also be found in Table 34 below.
    Comment: For CPT code 99457, several commenters suggested 
reassigning the code to status indicator ``V,'' similar to CPT code 
99453 (Remote monitoring of physiologic parameter(s) (e.g., weight, 
blood pressure, pulse oximetry, respiratory flow rate), initial; set-up 
and patient education on use of equipment), which has a payable status 
indicator of ``V'' and assigned to APC 5012 with a CY 2021 proposed 
payment of $120.88. The commenters stated that in the CY 2020 Physician 
Fee Schedule (PFS), CMS clarified that ``CPT codes 99457 and 99458 can 
be furnished by clinical staff under the general supervision of the 
physician or NPP.'' Based on this statement, the commenters believe 
that CPT code 99457 should be paid separately under the OPPS. The 
commenters reported that because the code is currently assigned to 
status indicator ``B,'' hospital outpatient facilities do not receive 
any reimbursement when the service is provided by clinical staff in a 
hospital outpatient setting. One commenter stated that the status 
indicator should be revised to ``V'' to support the service being 
provided to Medicare beneficiaries under the order of a physician.
    Response: We appreciate the commenters' suggestions, however, we 
believe we need further evaluation of this code, along with the rest of 
the RPM service codes, to determine whether this type of service should 
be separately payable under the OPPS. Therefore, for CY 2021, we are 
finalizing our proposal, without modification, to assign CPT code 99457 
to status indicator ``B.'' We will consider the commenters' suggestion 
to revise the status indicator for future rulemaking. The final CY 2021 
status indicator for CPT code 99457 can also be found in Table 34 
below. Also, as noted above, we revised the status indicator for CPT 
code 99457 from ``M'' to ``B'' effective March 1, 2020, to enable 
Critical Access Hospitals (CAHs) to bill under CAH's Method II for 
these waiver services so that claims with this code would process 
appropriately in the Integrated Outpatient Code Editor (IOCE). We 
announced the revisions in the July 2020 OPPS Quarterly Update CR 
(Transmittal 10224, Change Request 11814, dated July 15, 2020).
    Comment: For CPT code 99458, the commenters suggested the 
reassignment to status indicator ``N'' because this is an add-on code.
    Response: As noted above, similar to CPT code 99457, we revised the 
status indicator for CPT code 99458 to ``B'' effective March 1, 2020, 
to enable Critical Access Hospitals (CAHs) to bill under CAH's Method 
II for the service so that claims with this code would process 
appropriately in the Integrated Outpatient Code Editor (IOCE). We 
announced the revisions in the July 2020 OPPS Quarterly Update CR 
(Transmittal 10224, Change Request 11814, dated July 15, 2020). We 
appreciate the commenters' suggestions, however, we believe we need 
further evaluation of this code, along with the rest of the RPM service 
codes, to determine whether this type of service should be separately 
payable under the OPPS. Therefore, for CY 2021, we are finalizing our 
proposal, without modification, to assign CPT code 99458 to status 
indicator ``B,'' and we will consider the suggestion to revise the 
status indicator in future rulemaking. The final CY 2021 status 
indicator for CPT code 99458 can be found in Table 34 below.
    Comment: One commenter indicated that CMS is currently paying 
separately for certain RPM services and have assigned the codes to 
separately payable status indicator ``V,'' ``S,'' or ``Q1,'' however, 
some other RPM codes are assigned to non-payable status indicators such 
as ``B'' and ``M''. The commenter added that the status indicator 
assignments for the RPM codes are inconsistent and confusing to 
providers. The same commenter suggested that CMS recognize each 
distinct RPM CPT code that require hospital resources and assign the 
codes consistently to payable status indicators. The commenter 
recommended reassigning CPT codes 93264, 93268, 93297, 93298 from 
status indicator ``M'' to ``S'' and assigning the code to either APC 
5741 (Level 1 Electronic Analysis of Devices) with a proposed CY 2021 
payment rate of $37.76, APC 5742 (Level 2 Electronic Analysis of 
Devices) with a proposed CY 2021 payment rate of $101.76, or APC 5743 
(Level 3 Electronic Analysis of Devices) with a proposed CY 2021 
payment rate of $272.91. The commenter stated that CPT codes 93264, 
93268, 93297, 93298 should be covered and payable, similar to CPT code 
93296 (Interrogation device evaluation(s) (remote), up to 90 days; 
single, dual, or multiple lead pacemaker system, leadless pacemaker 
system, or implantable defibrillator system, remote data 
acquisition(s), receipt of transmissions and technician review, 
technical support and distribution of results), which is assigned to 
APC 5741 with a proposed CY 2021 payment rate of $37.76. The same 
commenter suggested reassigning CPT code 99474 from status indicator 
``B'' to ``V'' and assigning it to APC 5012, similar to CPT code 99453 
(Remote monitoring of physiologic parameter(s) (e.g., weight, blood 
pressure, pulse oximetry, respiratory flow rate), initial; set-up and 
patient education on use of equipment).
    Response: We appreciate the commenter's suggestions, however, we 
believe that we need further evaluation of the codes to determine 
whether all RPM CPT codes should be paid separately under the OPPS. 
Therefore, for CY 2021, we are finalizing our proposal, without 
modification, to assign CPT codes 93264, 93268, 93297, and 93298 to 
status indicator ``M,'' and consider the suggestions to revise the 
status indicator and assign appropriate APCs to the codes in future 
rulemaking. Similarly, we are finalizing our

[[Page 85979]]

proposal, without modification, to assign CPT code 99474 to status 
indicator B'' for CY 2021. The final status indicators for CPT codes 
93264, 93268, 93297, 93298, and 99474 can be found in Table 34 below.
    Commenter: One commenter suggested revising the status indicator 
for 19 CPT codes that describe virtual check-ins, e-visits, and 
telephone evaluation and management services from non-payable to 
separately payable under the OPPS. The 19 codes, along with the 
proposed status indicator assignments and descriptors, can be found in 
Table 34 below. The commenter explained that when clinicians furnish 
virtual check-ins, e-visits, and telephone E/M services to hospital 
outpatients, hospital resources are used to support the clinician. The 
commenter stated that while the codes are separately payable under the 
PFS, the hospital resources are not paid separately under the OPPS. The 
commenter believes that under 42 CFR 419.22, virtual or remote services 
are not excluded from OPPS and, therefore, the facility expense should 
be paid separately under the OPPS.
    Response: We appreciate the commenter's suggestions, however, we 
believe that we need further evaluation of the 19 codes to determine 
whether the services should be paid separately under the OPPS. 
Therefore, for CY 2021, we are finalizing our proposal, without 
modification, to assign the codes to either status indicator ``A'' or 
``B'' for the 19 codes listed in Table 34 as virtual check-in, e-visit, 
and telephone E/M services.
    Comment: One commenter suggested revising the status indicator for 
two medication therapy management (MTM) codes from ``E1'' to ``B,'' and 
indicated that the codes should be assigned to the same status 
indicator as genetic counseling code CPT 96040 (Medical genetics and 
genetic counseling services, each 30 minutes face-to-face with patient/
family), which is assigned to status indicator ``B'' under the OPPS. 
Specifically, the commenter recommended reassigning CPT codes 99605 
(Medication therapy management service(s) provided by a pharmacist, 
individual, face-to-face with patient, with assessment and intervention 
if provided; initial 15 minutes, new patient) and 99606 (Medication 
therapy management service(s) provided by a pharmacist, individual, 
face-to-face with patient, with assessment and intervention if 
provided; initial 15 minutes, established patient) from ``E1'' to 
``B.'' The commenter explained that the CY 2021 PFS proposed rule 
clarified that genetic counseling and pharmacist services can be 
considered ``incident to'' a professional service in the office 
setting. Specifically, the commenter noted that the 2021 PFS proposed 
rule (85 FR 50146) states ``Medication management is covered under both 
Medicare Part B and Part D. We are reiterating the clarification we 
provided in the May 1st COVID-19 IFC (85 FR 27550 through 27629), that 
pharmacists fall within the regulatory definition of auxiliary 
personnel under our regulations at Sec.  410.26. As such, pharmacists 
may provide services incident to the services, and under the 
appropriate level of supervision, of the billing physician or NPP, if 
payment for the services is not made under the Medicare Part D 
benefit.'' In light of the statements, the commenter believes that when 
MTM services are furnished in the HOPD setting, the hospital outpatient 
facility is reporting for the pharmacists' services, which the 
commenter believes meet the definition of outpatient services at 42 CFR 
410.27 and the definition of OPPS services at 42 CFR 419.21. 
Consequently, the commenter believes that MTM services should be paid 
separately under the OPPS.
    Response: We appreciate the commenter's suggestions, however, we 
believe that we need further evaluation of the two MTM codes to 
determine whether the services should be paid separately under the 
OPPS. We note that policies discussed in the PFS proposed rules 
typically do not apply to OPPS policies; however, we will review the 
issue. Therefore, for CY 2021, we are finalizing our proposal, without 
modification, to assign the codes to status indicator ``E1'' for the 2 
MTM codes listed in Table 34.
    Comment: One commenter suggested that CMS treat all telehealth and 
communication technology-based services (CTBS) consistently with OPPS 
payable status indicators and ambulatory payment classification (APC) 
assignments. The commenter explained that these issues were discussed 
in the 2021 PFS proposed rule.
    Response: We appreciate the commenter's suggestion, however, we 
believe that we need further evaluation of the issue to determine 
whether all the codes that describe telehealth and communication 
technology-based services (CTBS) should be paid separately under the 
OPPS. In addition, we made no proposals regarding these issues in the 
CY 2021 OPPS/ASC proposed rule. As stated above, the proposed policies 
discussed in the PFS proposed rules typically do not apply to OPPS 
policies because they are two different Medicare payment systems. 
However, we will review the issue for potential future rulemaking.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, for the 29 codes listed 
in Table 34 for CY 2021. In addition, we refer readers to Addendum D1 
of this final 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.
BILLING CODE 4120-01-P

[[Page 85980]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.047


[[Page 85981]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.048


[[Page 85982]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.049

BILLING CODE 4120-01-C
25. Review of Electrocorticograms From an Implanted Brain 
Neurostimulator (APC 5741)
    For CY 2021, we proposed to continue to assign CPT code 95836 
(Electrocorticogram from an implanted brain neurostimulator pulse 
generator/transmitter, including recording, with interpretation and 
written report, up to 30 days) to APC 5741 (Level 1 Electronic Analysis 
of Devices) with a proposed payment of $37.76.
    Comment: A commenter urged CMS to reassign CPT code 95836 from APC 
5741 to APC 5742 (Level 2 Electronic Analysis of Devices) with a 
proposed payment rate of $101.76, and stated that the payment for APC 
5741 does not adequately reflect the resources used by HOPDs in 
performing this procedure.
    Response: Based on our analysis of the hospital outpatient claims 
data for this final rule, we disagree that the resource cost to perform 
the service is inappropriate. Our evaluation of the latest claims data 
show a geometric mean cost of about $14 based on 21 single claims (out 
of 213 total claims). We believe that reassigning the code to APC 5742, 
whose geometric mean cost is approximately $98, would significantly 
overpay for the service. Additionally, we believe that the payment for 
CPT code 95836 is sufficient to cover the hospital cost of performing 
the service.
    In summary, after consideration of the public comment, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 95836 to APC 5741 for CY 2021. The final CY 2021 payment rate 
for the code can be found in Addendum B to this final rule with comment 
period. In addition, we refer readers to Addendum D1 of this final 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.
    As we do every year, we will reevaluate the APC assignment for CPT 
code 95836 in the next rulemaking cycle. We remind hospitals that we 
review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS based on the latest claims data available to 
us.
26. Therapeutic Apheresis
    The LIXELLE[supreg] [beta]2-microglobulin Apheresis Column is 
indicated for use in the treatment of dialysis-related amyloidosis 
(DRA), a disease that affects people with end-stage renal disease 
(ESRD) who have been receiving dialysis for five or more years. The 
LIXELLE[supreg] device is used in an apheresis procedure that 
selectively removes [beta]2-microglobulin (``[beta]2m'') from the 
circulating blood of patients with DRA. LIXELLE[supreg] is used 
pursuant to a physician prescription in conjunction with hemodialysis 
and is intended to be used at each hemodialysis session (i.e., 
frequency of treatment is expected to be three times per week).
    In March 2015, FDA approved LIXELLE[supreg] as a Class III 
Humanitarian Use Device (HUD) with an approved Humanitarian Device 
Exemption (HDE). FDA regulations require the manufacturer to conduct a 
post-approval study (PAS) to evaluate the safety of the LIXELLE[supreg] 
Apheresis procedure in U.S. patients on chronic hemodialysis with 
clinically-diagnosed DRA, and assess the probable benefit of 
LIXELLE[supreg] Apheresis to increase the [beta]2m reduction rate in 
these patients in successive dialysis sessions (compared to dialysis 
without LIXELLE[supreg]). Currently, there is no payment under the OPPS 
for the apheresis procedure used with the LIXELLE[supreg] device.
    Comment: One commenter, the manufacturer of the LIXELLE[supreg] 
device,

[[Page 85983]]

requested that CMS provide payment for the apheresis procedure used 
with the device under the OPPS. The commenter stated that the 
LIXELLE[supreg] apheresis procedure may be administered in either a 
dialysis facility or the hospital outpatient department and that the 
HOPD was the more clinically appropriate setting. Specifically, the 
commenter requested that CMS provide payment through the OPPS via one 
of three potential pathways: (1) Allow payment for the apheresis 
procedure used with the LIXELLE[supreg] device through CPT code 36516 
(Therapeutic apheresis with extracorporeal immunoadsorption, selective 
adsorption or selective filtration and plasma reinfusion), which was 
proposed to be assigned to APC 5243 (Level 3 Blood Product Exchange and 
Related Services) for CY 2021, and require the use of a modifier or 
add-on code when the LIXELLE[supreg] apheresis procedure is billed to 
reduce the payment for the procedure to the payment rate for APC 5242 
(Level 2 Blood Product Exchange and Related Services); (2) allow 
payment for the dialysis performed as part of LIXELLE[supreg] apheresis 
procedure through HCPCS code G0257 (Unscheduled or emergency dialysis 
treatment for an ESRD patient in a hospital outpatient department that 
is not certified as an ESRD facility), which is assigned to APC 5401 
(Dialysis) for CY 2021, and require the use of a modifier or add-on 
code to provide additional payment beyond that provided by APC 5401; or 
(3) create a HCPCS C code or G code for the LIXELLE[supreg] apheresis 
procedure and assign the code to APC 5242 (Level 2 Blood Product 
Exchange and Related Services). Finally, the commenter also noted that 
they have been unable to complete the FDA-required post-approval study 
as a condition of the HDE, due to difficulty in securing patient 
enrollment because of lack of CMS payment for the LIXELLE[supreg] 
apheresis procedure.
    Response: We appreciate these comments and understand the various 
issues related to coverage and payment for the LIXELLE[supreg] 
apheresis procedure. We will consider these comments for future 
rulemaking.
27. Tympanostomy Using an Automated Tube Delivery System (APC 5163)
    As displayed in Addendum B to the CY 2021 OPPS/ASC proposed rule, 
we proposed to assign CPT code 0583T (Tympanostomy (requiring insertion 
of ventilating tube), using an automated tube delivery system, 
iontophoresis local anesthesia) to status indicator (SI) ``E1'' to 
indicate that the code is not payable by Medicare when submitted on 
outpatient claims (any outpatient bill type) because the services 
associated with these codes are either not covered by any Medicare 
outpatient benefit category, are statutorily excluded from Medicare 
payment, or are not reasonable and necessary.
    Comment: Some commenters reported that the device associated with 
CPT code 0583T received FDA approval in November 2019 and requested 
separate payment for the code. They specifically requested assignment 
to APC 5164 (Level 4 ENT Procedures), with a proposed payment of 
$2,776.63, and also requested assignment to either status indicator 
``S'' (Procedure or Service, Not Discounted When Multiple) or ``T'' 
(Procedure or Service, Multiple Procedure Reduction Applies). They 
reported that assignment to APC 5164 would match the resources 
furnished when providing this service. The manufacturer for the device 
associated with the code explained that while the surgical procedure 
described by CPT code 0583T is primarily performed on children, the 
device is approved for all ages above 6 months. The manufacturer also 
indicated that the procedure will be extremely important for the 
Medicaid population and Medicaid programs who often refer to Medicare 
to establish coverage and payment. One commenter reported that the 
total cost for the complete procedure is approximately $2,776, while 
the device manufacturer reported a cost of about $1,400 for the device.
    Response: Based on our review of the procedure and input from our 
medical advisors, we believe that the surgical procedure described by 
CPT code 0583T is most similar, in terms of clinical homogeneity and 
resource cost, to CPT code 69436 (Tympanostomy (requiring insertion of 
ventilating tube), local or topical anesthesia), which is assigned to 
APC 5163 (Level 3 ENT Procedures) with a proposed payment of about 
$1,395. Both procedures (as described by CPT codes 0583T and 69436) 
require ventilating tubes that require anesthesia. Therefore, we 
believe that the most appropriate APC assignment for CPT code 0583T is 
APC 5163, which is associated with status indicator ``J1'' (Hospital 
Part B services paid through a comprehensive APC).
    In summary, after consideration of the public comments, we are 
finalizing our proposal with modification, and assigning CPT code 0583T 
to APC 5163 with a status indicator of ``J1'' for CY 2021. The final CY 
2021 payment rate for the code can be found in Addendum B to this final 
rule with comment period. In addition, we refer readers to Addendum D1 
of this final 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.
28. Unlisted Dental Procedure (APC 5161)
    For CY 2021, we proposed to continue to assign CPT code 41899 
(Unlisted procedure, dentoalveolar structures) to APC 5161 (Level 1 ENT 
Procedures) with a payment rate of $213.59.
    Comment: Two dental specialty societies expressed concern with the 
payment rate for CPT code 41899. They explained that this is the only 
CPT code available for dental surgery and its low reimbursement is 
insufficient to cover the facility costs. The commenters added that the 
low payment rate has resulted in many dentists, especially pediatric 
dentists, experiencing difficulty in obtaining operating room (OR) time 
to perform surgical procedures under general anesthesia. They stated 
that the problem has been exacerbated by the COVID-19 pandemic, with 
further limited access to ORs to address patient dental needs.
    Response: CPT code 41899 is designated as an unlisted code. Some 
HCPCS codes are used to report items, services, and procedures that do 
not define the exact item, service, or surgical procedure furnished. 
They are commonly called ``unlisted'' codes. The code descriptors often 
contain phrases such as: ``unlisted procedure,'' ``not otherwise 
classified,'' or ``not otherwise specified.'' The unlisted codes 
typically fall within a clinical or procedural category, but they lack 
the specificity needed to describe the resources used. Until a more 
specific HCPCS code is established, as an interim, the unlisted code 
provides a way for providers to report items, services, and procedures 
furnished. In general, unlisted codes are reported when no other 
specific CPT or Level II HCPCS code accurately describes the item, 
procedure, or service. Because of the lack of specificity, unlisted 
codes are assigned to the lowest level, clinically appropriate APC 
group under the OPPS. The assignment of the unlisted codes to the 
lowest level APC in the clinical category specified in the code 
provides a reasonable means for interim payment until such time as 
there is a code that specifically describes what is being paid. It also 
encourages the creation of codes where appropriate and protects against 
overpayment of services that are not clearly identified on the claim. 
As a reminder, unlisted codes are not used in establishing the percent 
of claims contributing to the APC, nor are their

[[Page 85984]]

costs used in the calculation of the APC geometric mean (80 FR 70321), 
because, by the code's definition, we do not know what service or 
combination of services is reflected in the claims billed with the 
unlisted code. Currently, we have five levels of ENT Procedure APCs, 
Levels 1 through 5, with Level 1 assigned to the lowest paying of the 
five APCs. Because the code is designated as an unlisted code, we 
believe that CPT 41899 code is appropriately assigned to APC 5161, 
which is the lowest level ENT APC.
    In addition, because unlisted codes are non-specific, HOPDs are 
reminded that Medicare Administrative Contractors (MACs) may have 
additional documentation requirements for how the codes should be 
reported to receive payment. Refer to section 180.3 (Unlisted Service 
or Procedure) in Chapter 4 (Part B Hospital) of the Medicare Claims 
Processing Manual for information on how MACs review claims with 
unlisted codes.
    We note that AMA establishes new CPT codes, depending on the code 
type, quarterly and annually. Interested parties that desire more 
specific codes for unlisted codes should consult the AMA. Information 
on CPT codes and the process for requesting new codes can be found on 
the AMA website: https://www.ama-assn.org/about/cpt-editorial-panel/cpt-code-process.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, to assign CPT code 41899 
to APC 5161 for CY 2021. The final CY 2021 payment rate for the code 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final 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.
29. Urology and Related Services (APCs 5371 Through 5378)
    We received comments on the CY 2020 OPPS/ASC proposed rule 
suggesting we revise the APC 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 were other adjustments across services within the 
Urology APCs that could improve the structure of these APCs. In 
response to this comment, we stated in the CY 2020 OPPS/ASC final rule 
with comment period 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 reviewed the geometric mean cost for APCs 5371 through 
5377 and, after our analysis of the claims data for the CY 2021 OPPS/
ASC proposed rule, we believed that a modification to the urology APCs 
would be appropriate.
    For the CY 2021 OPPS/ASC proposed rule, we evaluated the claims 
data and noted the large difference in geometric mean cost between APC 
5376 (level 6) and APC 5377 (level 7) has continued to grow. This 
difference 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 at 
approximately 220 percent of the geometric mean cost of APC 5376. Based 
on the proposed rule claims data, which showed 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 
believed that creating an additional APC in the urology and related 
series would provide an appropriate structure, distinguishing between 
clinical and cost similarity for the procedures in the different 
levels. Therefore, for CY 2021, we proposed to establish an additional 
level for the urology and related services APCs, specifically, APC 5378 
(Level 8 Urology and Related Services) and to re-organize the current 
APCs 5376 (Level 6 Urology and Related Services) and 5377 (Level 7 
Urology and Related Services). We believed 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.
    As we stated in the proposed rule (85 FR 48842), the proposed 
reorganization would reassign 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, the proposed revision would reassign 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).
    As further stated in the proposed rule, the proposed 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 of 
the proposed rule, and reprinted below, 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 85985]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.050

    We received many comments on our proposal. Below are the comments 
and our responses.
    Comment: Several commenters supported our proposal to establish an 
additional Urology and Related Services APC, specifically, APC 5378 
(Level 8 Urology and Related Services), and re-organize the current 
APCs 5376 (Level 6 Urology and Related Services) and 5377 (Level 7 
Urology and Related Services). These commenters agreed that the 
addition of APC 5378 within the Urology APCs would better align 
procedures based on their resource cost and clinical homogeneity.
    Response: We appreciate the commenters' support for our proposal to 
establish new APC 5378 and to re-organize the procedures in the Urology 
APCs. We note that each year, under the OPPS, we revise and make 
changes to the APC groupings based on the latest hospital outpatient 
claims data to appropriately place procedures and services in APCs 
based on clinical characteristics and resource similarity. We note that 
based on our review of the claims data for the final rule, we are also 
finalizing our proposal without modification to reassign CPT codes 
53440 and 0548T to APC 5377. Similarly, we are finalizing our proposal 
without modification to reassign CPT codes 54416, 53444, 54410, 54411, 
54401, 54405, 53447, and 53445 to APC 5378.
    Comment: A commenter supported the continued assignment of HCPCS 
code C9739 (Cystourethroscopy, with insertion of transprostatic 
implant; 1 to 3 implants) to APC 5375 and HCPCS C9740 
(Cystourethroscopy, with insertion of transprostatic implant; 4 or more 
implants) to APC 5376.
    Response: We appreciate the commenter's support for our APC 
assignments, which are based on our review of the latest claims data. 
We are finalizing our proposal and assigning these codes to the 
proposed APCs in this final rule.
    Comment: Several commenters also recommended additional changes 
within APCs 5371 to APC 5376. Specifically, for APCs 5371 and 5372, the 
commenters recommended the following reassignments from APC 5371 to APC 
5372:
     CPT 51720 (Bladder instillation of anticarcinogenic agent 
(including retention time);
     CPT 43763 (lacement of gastrostomy tube, percutaneous, 
includes removal, when performed, without imaging or endoscopic 
guidance; requiring revision of gastrostomy tract);
     51725 Simple cystometrogram (cmg) (e.g., spinal 
manometer);
     51726 Complex cystometrogram (i.e., calibrated electronic 
equipment); and
     51040 Cystostomy, cystotomy with drainage.
    Also, the commenters suggested the reassignment of the following 
codes from APC 5373 to APC 5374:
     52287 Cystourethroscopy, with injection(s) for 
chemodenervation of the bladder
     52276 Cystourethroscopy with direct vision internal 
urethrotomy
     54840 Excision of spermatocele, with or without 
epididymectomy
     53854 Transurethral destruction of prostate tissue; by 
radiofrequency generated water vapor thermotherapy
    In addition, the commenters recommended reassigning the following 
codes from APC 5375 to APC 5376:
     53420 Urethroplasty, 2-stage reconstruction or repair of 
prostatic or membranous urethra; first stage;
     C9747 Ablation of prostate, transrectal, high intensity 
focused ultrasound (hifu), including imaging guidance;
     53410 Urethroplasty, 1-stage reconstruction of male 
anterior urethra;
     50553 Renal endoscopy through established nephrostomy or 
pyelostomy, with or without irrigation, instillation, or 
ureteropyelography, exclusive of radiologic service; with ureteral 
catheterization, with or without dilation of ureter;
     54111 Excision of penile plaque (peyronie disease); with 
graft to 5 cm in length;
     55875 Transperineal placement of needles or catheters into 
prostate for interstitial radioelement application, with or without 
cystoscopy;
     54660 Insertion of testicular prosthesis (separate 
procedure);
     50576 Renal endoscopy through nephrotomy or pyelotomy, 
with or without irrigation, instillation, or ureteropyelography, 
exclusive of radiologic service; with fulguration and/or incision, with 
or without biopsy; and
     0549T Transperineal periurethral balloon continence 
device; unilateral placement, including cystoscopy and fluoroscopy;
    Further, the commenters suggested revising the assignment for these 
codes from APC 5376 to APC 5377:

[[Page 85986]]

     55873 Cryosurgical ablation of the prostate (includes 
ultrasonic guidance and monitoring);
     50081 Percutaneous nephrostolithotomy or 
pyelostolithotomy, with or without dilation, endoscopy, lithotripsy, 
stenting, or basket extraction; over 2 cm; and
     50562 Renal endoscopy through established nephrostomy or 
pyelostomy, with or without irrigation, instillation, or 
ureteropyelography, exclusive of radiologic service; with resection of 
tumor.
    Response: Based on our review of the claims data for the final 
rule, we do not believe that reassigning these 21 urology procedures to 
the suggested APCs is appropriate. Our review of the claims data for 
this CY 2021 OPPS/ASC final rule with comment period show that the 
procedures are appropriately placed in the proposed APCs based on 
clinical homogeneity and resource costs. Consequently, we are 
finalizing our proposal without modification for the 21 urology 
procedures discussed above.
    In summary, after consideration of the public comments, and after 
our analysis of the updated claims data for this final rule with 
comment period, we are finalizing our proposal, without modification, 
to reorganize the Urology and Related Services APCs. The final CY 2021 
payment rate for the codes for all the codes discussed above can be 
found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final 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.
a. High-Intensity Focused Ultrasound of the Prostate (HIFU) Procedure 
(APC 5375)
    In 2017, CMS received a new technology application for the prostate 
HIFU procedure and established a new code, specifically, HCPCS code 
C9747 (Ablation of prostate, transrectal, high intensity focused 
ultrasound (hifu), including imaging guidance). Based on the estimated 
cost provided in the new technology application, we assigned the new 
code to APC 5376 (Level 6 Urology and Related Services) with a payment 
rate of $7,452.66 effective July 1, 2017. We announced the SI and APC 
assignment in the July 2017 OPPS quarterly update CR (Transmittal 3783, 
Change Request 10122, dated May 26, 2017).
    For the CY 2018 update, we maintained the assignment of HCPCS code 
C9747 to APC 5376 with a payment rate of $7,596.26. We note that the 
payment rates for the CY 2018 OPPS update were based on claims 
submitted between January 1, 2016 through December 30, 2016, that were 
processed on or before June 30, 2017. Since HCPCS code C9747 was 
established on July 1, 2017, we had no claims data for the procedure 
for use in ratesetting for CY 2018.
    However, for the CY 2019 update, based on the latest claims data 
for the final rule, we revised the APC assignment for HCPCS code C9747 
from APC 5376 to APC 5375 with a payment rate of $4,020.54. We note 
that the payment rates for CY 2019 were based on claims submitted 
between January 1, 2017 through December 30, 2017, that were processed 
on or before June 30, 2018. Our claims data showed a geometric mean 
cost of approximately $5,000 for HCPCS code C9747 based on 64 single 
claims (out of 64 total claims), which was significantly lower than the 
geometric mean cost of about $7,717 for APC 5376. We believed that the 
geometric mean cost for HCPCS code C9747 was more comparable to the 
geometric mean cost of approximately $4,055 for APC 5375. Consequently, 
we reassigned the code from APC 5376 to APC 5375 (Level 5 Urology and 
Related Services) for CY 2019 and C9747 remained in APC 5376 for CY 
2020.
    For CY 2021, we proposed to continue to assign HCPCS code C9747 to 
APC 5375 with a proposed payment rate $4,487.87. In addition, we noted 
that HCPCS C9747 will be replaced with CPT 55880 beginning January 
2021.
    Comment: Many commenters stated that the APC 5375 payment rate does 
not cover the hospital facility cost for this procedure, and thus, 
discourages hospitals from providing this procedure for Medicare 
patients. Some commenters argued that HIFU is a device-intensive 
procedure, believed that the average cost of the HIFU procedure is 
closer to the APC 5376 proposed payment rate of $8,395.87, and 
requested a reassignment to enable Medicare beneficiaries to receive 
the treatment. They projected that maintaining the assignment in APC 
5375 will deter HOPD facilities from offering the HIFU treatment to 
Medicare beneficiaries because the payment is insufficient to cover the 
cost of the procedure. Several commenters recommended we assign this 
procedure to APC 5376 because they believe the service is clinically 
similar and comparable in terms of resources to cryoablation of the 
prostate, which is described by CPT code 55873 (Cryosurgical ablation 
of the prostate (includes ultrasonic guidance and monitoring) and 
assigned to APC 5376 (Level 6 Urology and Related Services), with a 
proposed payment rate of $8,395.62.
    Response: As we have stated every year since the implementation of 
the OPPS on August 1, 2000, we review, on an annual basis, the APC 
assignments for all services and items (including devices) paid under 
the OPPS based on our analysis of the latest claims data. For CY 2021, 
based on claims submitted between January 1, 2019 through December 30, 
2019, that were processed on or before June 30, 2020, our analysis of 
the latest claims data for this final rule supports maintaining HCPCS 
code C9747 in APC 5375. Specifically, our claims data shows a geometric 
mean cost of approximately $5,744 for HCPCS code C9747 based on 279 
single claims, which is more comparable to the geometric mean cost of 
about $4,300 for APC 5375, rather than the geometric mean cost of 
approximately $8,045 for APC 5376. Furthermore, the claims data do not 
indicate that HCPCS code C9747 meets the device-intensive threshold of 
30 percent. Therefore, we are not designating HCPCS code C9747 as a 
device-intensive procedure.
    With regard to the issue of similarity to CPT code 55873, while we 
agree both procedures are intended to treat prostate cancer, we 
disagree that the resource costs associated with the prostate HIFU 
procedure are necessarily similar to those of cryoablation of the 
prostate. Specifically, our claims data for cryoablation of the 
prostate shows a geometric mean cost of about $8,423 based on 1,226 
single claims. The geometric mean cost for CPT code 55873 is reasonably 
consistent with APC 5376, which has a geometric mean cost of 
approximately $8,045.
    In summary, after careful consideration of the public comments and 
after our analysis of the updated claims data for this final rule with 
comment period, we are maintaining the APC assignment for HCPCS code 
C9747 in APC 5375. We note that for the CY 2021 update, the CPT 
Editorial Panel established CPT code 55880 (Ablation of malignant 
prostate tissue, transrectal, with high intensity--focused ultrasound 
(HIFU), including ultrasound guidance) to describe HIFU effective 
January 1, 2021. Therefore, we are deleting HCPCS code C9747 on 
December 31, 2020 because it will be replaced with CPT code 55880. The 
final CY 2021 payment rate for CPT code 55880 can be found in Addendum 
B to this final rule with comment period. In addition, we refer readers 
to Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes

[[Page 85987]]

reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website.
b. Optilume Procedure--Optilume Drug Coated Balloon Catheter System 
(APC 5375)
    For the July 2020 update, the CPT Editorial Panel established a new 
code, specifically, Category III CPT code 0619T (Cystourethroscopy with 
transurethral anterior prostate commissurotomy and drug delivery, 
including transrectal ultrasound and fluoroscopy, when performed), to 
describe the surgical procedure associated with the Optilume Drug 
Coated Balloon Catheter System used to treat benign prostate 
hyperplasia (BPH). We announced the APC assignment for CPT code 0619T 
in the July 2020 OPPS quarterly update CR (Transmittal 10207, Change 
Request 11814, dated July 2, 2020).
    Specifically, we assigned CPT code 0619T to APC 5375 (Level 5 
Urology and Related Services) with a payment rate of approximately 
$4,232 effective July 1, 2020 and also assigned the code a status 
indicator of ``J1'' (Hospital Part B services paid through a 
comprehensive APC). Based on input from our medical advisors and the 
nature of the procedure, we believed that the procedure described by 
CPT code 0619T was similar, based on clinical homogeneity and resource 
cost, to CPT code 52601 (Transurethral electrosurgical resection of 
prostate, including control of postoperative bleeding, complete 
(vasectomy, meatotomy, cystourethroscopy, urethral calibration and/or 
dilation, and internal urethrotomy are included)).
    Comment: A commenter asserted that CPT code 0619T should be 
reassigned to APC 5376 (Level 6 Urology and Related Services). The 
commenter reported that the CPT code 0619T is more clinically similar 
to HCPCS C9740 (Cystourethroscopy, with insertion of transprostatic 
implant; 4 or more implants) in terms of clinical characteristics, 
physician work/intraoperative intensity, and resource costs including 
both non-device related and device related costs. Furthermore, the 
commenter also indicated that CPT code 0619T has additional non-device 
costs, including transrectal ultrasound, fluoroscopy and use of a 
rectal steeper device. The commenter stated that CPT code 0619T has 
similar resource cost to HCPCS code C9740 in terms of its device and 
non-device cost.
    Response: We appreciate the commenter's input on this subject and 
we understand that this is a new procedure without a predecessor code. 
Based on our evaluation, we do not agree that CPT code 0619T is similar 
to HCPCS code C9740. Based on the nature of the procedure and input 
from our medical advisors, we believe CPT code 0619T is more comparable 
to HCPCS code C9739 (Cystourethroscopy, with insertion of 
transprostatic implant; 1 to 3 implants), and CPT 52601 (Transurethral 
electrosurgical resection of prostate, including control of 
postoperative bleeding, complete (vasectomy, meatotomy, 
cystourethroscopy, urethral calibration and/or dilation, and internal 
urethrotomy are included)), which are both currently assigned to APC 
5375 (Level 5 Urology and Related Services). We believe the assignment 
of CPT code 0619T to APC 5375 and its device-offset of 31 percent is 
appropriate until CMS receives more cost data to support a reassignment 
to another APC or a different device offset adjustment.
    In summary, after consideration of the comment, we are finalizing 
our proposal without modification to continue to assign CPT code 0619T 
to APC 5375 for CY 2021. The final CY 2021 payment rate for this code 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final 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.
30. Venous Mechanical Thrombectomy (APC 5193)
    For CY 2020, CPT code 37187 (Percutaneous transluminal mechanical 
thrombectomy, vein(s), including intraprocedural pharmacological 
thrombolytic injections and fluoroscopic guidance) is assigned to APC 
5192 (Level 2 Endovascular Procedures) with a payment of $4,953.91. For 
CY 2021, we proposed to reassign CPT code 37187 from APC 5192 to APC 
5193 (Level 3 Endovascular Procedures) with a proposed payment of 
$10,222.32.
    Comment: A commenter approved of our proposal to reassign CPT code 
37187 to APC 5193 and requested that CMS finalize the proposal. The 
commenter noted that the geometric mean cost of CPT code 37187 is well 
aligned with APC 5193, and stated that the cost of the venous 
mechanical thrombectomy procedure is comparable to other clinically 
similar procedures within the APC.
    Response: We appreciate the support for our proposal to reassign 
CPT code 37187 from APC 5192 to APC 5193. The claims data for the final 
rule, which is based on claims submitted between January 1, 2019, 
through December 31, 2019, processed through June 30, 2020, show that 
the geometric mean cost for CPT code 37187 is approximately $10,385, 
which is within the range of procedures of significant volume within 
APC 5193. Procedures with significant volume in APC 5193 range between 
$7,278 for CPT code 36905 and $13,492 for CPT code 37225. We believe 
that reassigning CPT code 37187 is appropriate based on its clinical 
homogeneity and similarity in resource costs to the other thrombectomy 
procedures (e.g., 36905, 37225) assigned to APC 5193.
    In summary, after consideration of the public comment, we are 
finalizing our proposal to assign CPT code 37187 to APC 5193 for CY 
2021. The final CY 2021 payment rate for this code can be found in 
Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final 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.

IV. OPPS Payment for Devices

A. Pass-Through Payment for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
a. Background
    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

[[Page 85988]]

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, 
2023; 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 35 shows the expiration of transitional 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] TR29DE20.051


[[Page 85989]]


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 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 are granted a Breakthrough Device 
designation (84 FR 61295) and receive Food and Drug Administration 
(FDA) marketing authorization. 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 are part of the Breakthrough Devices Program, have 
received FDA marketing authorization, 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

[[Page 85990]]

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.
    Comment: Some commenters requested that CMS waive the criteria for 
establishing new device categories specified at Sec.  419.66(c)(1), 
which states 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, for devices that are 
granted a FDA Breakthrough Device designation. The commenters stated 
that these devices should automatically be considered not to be 
described by any of the existing (either currently active or expired) 
categories established for transitional device pass-through payments 
because the FDA Breakthrough Device designation implies that the device 
is a first of kind. These commenters noted that under the IPPS New 
Technology Add-on Payment (NTAP), devices granted a Breakthrough Device 
designation that have received FDA marketing authorization are 
considered new and not substantially similar to an existing technology 
for purposes of the NTAP.
    Response: We continue to believe that it is necessary to evaluate 
whether a device that has been granted a FDA Breakthrough Device 
designation is already described by any of the current device pass-
through categories or by any category previously in effect to ensure 
that no device is described by more than one category. We also remind 
stakeholders that the criteria for establishing a new device category 
described in the regulation at 42 CFR 419.66(c)(1) are unique to the 
OPPS device pass-through policy.
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 the 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 
Breakthrough Device designation from FDA and FDA marketing 
authorization, and therefore are eligible to apply under the 
alternative pathway. As stated above in section IV.2.a of this final 
rule with comment, under this alternative pathway, devices that are 
granted a FDA Breakthrough Device designation are not evaluated in 
terms of the 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 stated 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 provided 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 CUSTOMFLEX[supreg] ARTIFICIALIRIS 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),6-2 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,3-8 and may

[[Page 85991]]

occur in approximately 0.2 percent of blunt orbital trauma.\9\ Although 
rare, these conditions are cosmetically and functionally limiting. The 
applicant provided 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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    \6\ 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 stated 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 a 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 designated the CUSTOMFLEX[supreg] ARTIFICIALIRIS as a Breakthrough 
Device on December 21, 2017, and approved the premarket approval 
application (PMA) for CUSTOMFLEX[supreg] ARTIFICIALIRIS (P170039) on 
May 30, 2018 for use in the treatment of full or partial aniridia 
resulting from congenital or acquired defects. 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 solicited public comment on whether the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the newness criterion.
    Comment: Commenters claimed that the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the newness criterion as described at Sec.  
419.66(b)(1).
    Response: After consideration of the public comments and our review 
of the application, we agree that the CUSTOMFLEX[supreg] ARTIFICIALIRIS 
meets the newness criterion as described at Sec.  419.66(b)(1).
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
the applicant stated 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 provided 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 solicited public comment on whether the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the eligibility criteria at 
Sec.  419.66(b).
    Comment: Commenters believed that the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the eligibility criteria as described at Sec.  
419.66(b).
    Response: After consideration of the public comments we received 
and our review of the application, we agree that the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the eligibility criteria as described 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 did not appear that there were any other existing pass-through 
payment categories that might apply to the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS and we solicited public comments on this issue.
    Comment: Commenters claimed that the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the criterion for establishing new device 
categories specified at Sec.  419.66(c)(1).
    Response: After consideration of the public comments we received, 
we have determined that there are no existing pass-through categories 
that appropriately describe the CUSTOMFLEX[supreg] ARTIFICIALIRIS and 
we have determined the CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the 
criterion for establishing new device categories specified at Sec.  
419.66(c)(1).
    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 is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization. As stated in section IV.2.a 
above, devices that apply under the alternative pathway for devices 
that have a Breakthrough Device designation with a FDA marketing 
authorization are not subject to evaluation for substantial clinical 
improvement (84 FR 61295). The CUSTOMFLEX[supreg] ARTIFICIALIRIS was 
designated as a Breakthrough Device by FDA on December 21, 2017.
    We did not receive comments on whether the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the second criterion for establishing a device 
category at Sec.  419.66(c)(2)(i). Based on its Breakthrough Device 
designation, we

[[Page 85992]]

have determined that CUSTOMFLEX[supreg] ARTIFICIALIRIS meets this 
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 
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 stated in the CY 2021 OPPS/
ASC proposed rule that 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). Therefore, we 
stated in the CY 2021 OPPS/ASC proposed rule that we believe that the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the second cost significance 
requirement.
    The third cost significance requirement, at Sec.  419.66(d)(3), 
provides that the difference between the estimated average reasonable 
cost of the devices in the category and the portion of the APC payment 
amount for the device must exceed 10 percent of the APC payment amount 
for the related service. The difference between the estimated average 
reasonable cost of $7,700 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 stated in 
the CY 2021 OPPS/ASC proposed rule that we believe that the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the third cost significance 
requirement.
    We solicited public comment on whether the CUSTOMFLEX[supreg] 
ARTIFICIALIRIS meets the device pass-through payment criteria discussed 
in this section, including the cost criterion.
    Comment: We received comments indicating that the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the device pass-through payment 
criteria, including the cost criterion.
    Response: After considering the public comments received and our 
review of the application, we have determined that the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the device pass-through payment 
criteria, 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 it for transitional pass-
through payment under the alternative pathway for CY 2020, effective 
January 1, 2020. We solicited public comment on whether the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS should continue to receive 
transitional pass-through payment under the alternative pathway for 
devices that have FDA's Breakthrough Device designation and marketing 
authorization.
    Comment: Commenters stated that CUSTOMFLEX[supreg] ARTIFICIALIRIS 
should continue to receive transitional pass-through payment.
    Response: After consideration of the public comments we received 
and our review of the device pass-through application, we have 
determined that the CUSTOMFLEX[supreg] ARTIFICIALIRIS meets the 
requirements for device pass-through payment status described at Sec.  
419.66. As stated previously, 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 must meet the other criteria for device pass-through 
status, which we believe CUSTOMFLEX[supreg] ARTIFICIALIRIS does. 
Therefore, we are finalizing approval for device pass-through payment 
status for CUSTOMFLEX[supreg] ARTIFICIALIRIS under the alternative 
pathway for devices that have a FDA Breakthrough Device designation and 
are FDA market authorized. For CY 2021, we will continue the device 
pass-through payment status for CUSTOMFLEX[supreg] ARTIFICIALIRIS.
(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 
duodenoscope through the patient's mouth, passes the duodenoscope 
through the esophagus and stomach and enters 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

[[Page 85993]]

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), the 
FDA designated the EXALTTM Model D Single-Use Duodenoscope 
as a Breakthrough Device on November 19, 2019, and approved the 
premarket approval application (K193202) for EXALTTM Model D 
Single-Use Duodenoscope on December 13, 2019. We received the 
application for a new device category for transitional pass-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 premarket approval. We solicited public comment on 
whether the EXALTTM Model D Single-Use Duodenoscope meets 
the newness criterion.
    Comment: The manufacturer of EXALTTM Model D Single-Use 
Duodenoscope believes the device meets the eligibility criteria for 
device pass-through payment under the regulation at Sec.  419.66, which 
includes the newness criterion, based on FDA Breakthrough Device 
designation it received on December 13, 2019 and the 510(k) premarket 
approval it received on November 19, 2019.
    Response: We appreciate the commenter's input. After consideration 
of the public comment we received and based on the fact that the 
EXALTTM Model D Single-Use Duodenoscope application was 
received January 17, 2020, within 3 years of FDA premarket approval, 
which was on November 19, 2019, and FDA Breakthrough Device designation 
on December 13, 2019, we believe that 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.
    Comment: The manufacturer of EXALTTM Model D Single-Use 
Duodenoscope believed that the EXALTTM Model D Single-Use 
Duodenoscope met the eligibility criteria at Sec.  419.66(b). They 
maintained that the EXALTTM Model D Single-Use Duodenoscope 
meets the criterion at Sec.  419.66(b)(3) because it is integral to the 
ERCP service provided, is used for one patient only, and is surgically 
inserted through the patient's mouth, down the esophagus, into the 
stomach, and then into the first part of the small intestine. The 
commenter believes the device meets eligibility requirements at 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.
    Response: We appreciate the commenter's feedback. Based on the 
information we have received from the commenter and our review of the 
application, we have determined that EXALTTM Model D Single-
Use Duodenoscope meets the eligibility criteria at Sec.  419.66(b)(3) 
and (b)(4) because, as previously discussed, the device is integral to 
the service furnished, is used for one patient only, and is inserted 
through the patient's mouth, down the esophagus, into the stomach, and 
finally into the first part of the small intestine. It also 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 argued 
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 stated 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 colonoscope and into the colon, providing access 
to a different part of the anatomy. Upon review, we agreed with the 
applicant that it does not appear that there are any other existing 
pass-through payment categories that might apply and we solicited 
public comment on this issue.
    Comment: Several commenters stated they did not believe there is an 
existing pass-through payment category that describes the 
EXALTTM Model D Single-Use Duodenoscope. They commented that 
the existing device category that CMS identified does not adequately 
describe critical aspects of the device. The commenters also noted that 
existing category, C1749 Endoscope, retrograde imaging/illumination 
colonoscope device (implantable), does not appropriately describe 
single-use endoscopes that provide access to a different part of the 
anatomy, specifically the upper gastrointestinal (GI) tract.
    Response: We appreciate the commenters' input. After consideration 
of the public comments we received, we agree there is no existing pass-
through payment category that appropriately describes the 
EXALTTM Model D Single-Use Duodenoscope because it is a 
single use endoscope with internal channel that provides access to the 
duodenum and the hepatopancreatic duct. Based on this information, we 
have determined that the EXALTTM Model D Single-Use 
Duodenoscope meets the eligibility criterion at Sec.  419.66(c)(1).
    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

[[Page 85994]]

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 is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization. As previously discussed in 
section IV.2.a above, we finalized the alternative pathway for devices 
that are granted a Breakthrough Device designation and receive FDA 
marketing authorization in the CY 2020 OPPS/ASC final rule (84 FR 
61295). The EXALTTM Model D Single-Use Duodenoscope has a 
Breakthrough Device designation and marketing authorization from the 
FDA and therefore is not evaluated based on substantial clinical 
improvement.
    We did not receive comments on whether EXALTTM Model D 
Single-Use Duodenoscope meets the second criterion for establishing a 
device category at Sec.  419.66(c)(2). We have determined that the 
EXALTTM Model D Single-Use Duodenoscope meets this 
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 
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 solicited public comment on whether the EXALTTM Model D 
Single-Use Duodenoscope meets the device pass-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 solicited 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 
have a FDA Breakthrough Device designation and are FDA market 
authorized.
    Comment: Several commenters, including the manufacturer of the 
EXALTTM Model D Single-Use Duodenoscope, believed that the 
device meets the cost criterion for device pass-through payment status. 
Some commenters recommended we not apply a device offset amount for 
EXALTTM Model D Single-Use Duodenoscope because they 
believed that single-use duodenscopes are not replacing devices that 
are packaged into the APC payment rate and thus, should not be subject 
to the device offset.
    Response: We appreciate the commenters input. Section 
1833(t)(6)(D)(ii) of the Act requires that the amount of payment for a 
pass-through device be the amount by which a hospital's charges, 
adjusted to cost, exceeds the portion of the otherwise applicable APC 
payment amount that the Secretary determines is associated with the 
device. The portion of the APC payment amount that we determine is 
associated with the cost of the pass-through device is referred to as 
the device offset. The device offset is used to reduce the otherwise 
applicable APC payment amount for the applicable pass-through device.
    After further review, we agree with the commenters. We have 
determined that the costs associated with the EXALTTM Model 
D Single-Use Duodenoscope are not already reflected in the device 
portions of APCs 5303 (Level 3 Upper GI Procedures) or 5331 (Complex GI 
Procedures) because there were no single-use duodenoscopes on the 
market previously so no operating cost data associated with such 
devices could be included historical OPPS claims data. Therefore, we 
are not applying a device offset for the EXALTTM Model D 
Single-Use Duodenoscope.
    After consideration of the public comments we received, we believe 
that EXALTTM Model D Single-Use Duodenoscope meets the cost 
criterion for device pass-through payment status.
    For CY 2021, we will continue the device pass-through payment 
status for EXALTTM Model D Single-Use Duodenoscope. As 
stated previously, devices that are designated as Breakthrough Devices 
by the FDA 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 must meet the other 
criteria for device pass-through status, which we believe 
EXALTTM Model D Single-Use Duodenoscope does. Therefore, we 
are finalizing approval for

[[Page 85995]]

device pass-through payment status for EXALTTM Model D 
Single-Use Duodenoscope under the alternative pathway for devices that 
have FDA Breakthrough Device designation and FDA market authorization 
beginning CY 2021.
(3) BAROSTIM NEOTM System
    CVRx, Inc. submitted an application for the BAROSTIM 
NEOTM System by the December 2019 quarterly deadline. The 
applicant provided that the BAROSTIM NEOTM is indicated for 
the treatment of symptoms of patients with advanced heart failure. The 
applicant asserted 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 2 mm coated electrode 
with a 7 mm 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 provided 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 stated that the BAROSTIM NEOTM System is fully 
programmable to adjust the therapy to each patient's needs.
    With respect to the newness criterion at Sec.  419.66(b)(1), the 
FDA designated the BAROSTIM NEOTM System as a Breakthrough 
Device and approved the premarket approval application (P180050) on 
August 16, 2019 based on 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 premarketing approval. We 
solicited public comment on whether the BAROSTIM NEOTM meets 
the newness criterion.
    Comment: The manufacturer stated that BAROSTIM NEOTM 
meets the newness criterion as described by Sec.  419.66(b) because the 
FDA designated the BAROSTIM NEOTM System as a Breakthrough 
Device and approved the premarket application (P180050) on August 16, 
2019 based on the improvement of symptoms of heart failure--quality of 
life, six-minute hall walk, and functional status--for patients who 
remain symptomatic despite treatment.
    Response: We appreciate the commenter's input. After consideration 
of the public comments we received and because the BAROSTIM 
NEOTM application was received November 27, 2019 and 
received FDA premarketing approval on August 16, 2019 which is within 3 
years, we agree that 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 baroreflex therapy, 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 
solicited public comments on whether the BAROSTIM NEOTM 
meets the eligibility criteria at Sec.  419.66(b).
    Comment: The manufacturer of BAROSTIM NEOTM felt that 
their device met the eligibility criteria at Sec.  419.66(b) because it 
is used for one patient only, comes in contact with human skin and is 
surgically implanted or inserted. The applicant 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.
    Response: Based on the information we have received and our review 
of the application, we agree with the commenter that the device is used 
for one patient only, comes in contact with human skin and is 
surgically implanted or inserted. We also agree with the commenter that 
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. Based on this assessment we have determined that BAROSTIM 
NEOTM meets the eligibility criterion at Sec.  419.66(b)(3) 
and (4).
    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 described 
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 believed 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-

[[Page 85996]]

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 afferent 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 stated 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.
    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. They contended 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 also stated 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 stated 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 contended 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 stated in the CY 2021 OPPS/ASC proposed rule that we were 
concerned that the BAROSTIM NEOTM System may be 
appropriately described by existing pass-through payment categories. 
For example, we believed that the BAROSTIM NEOTM System may 
be appropriately described by C1767 as the BAROSTIM NEOTM 
device consists of a generator, a neurostimulator, and a lead. We 
solicited public comment on this issue.
    Comment: The manufacturer of the device stated that it does not 
believe there is an existing pass-through payment category that 
describes the BAROSTIM NEOTM System, commenting that the 
existing device categories that CMS identified do not adequately 
describe critical aspects of the device. The manufacturer noted that 
existing categories, such as C1767, Generator, neurostimulator 
(implantable), non-rechargeable, C1823, Generator, neurostimulator 
(implantable), non-rechargeable, with transvenous sensing and 
stimulation leads, and C1778, Lead, neurostimulator (implantable), do 
not appropriately describe systems that activate special receptors in 
the carotid artery known as baroreceptors, which are in a different 
anatomical location than nerves. The manufacturer stated that 
baroreceptors are sensory cells that respond to mechanical pressure. 
They have ion channels that open to allow ions to pass through when 
they are stretched. Baroreceptors are mechanosensitive ion channels, 
which according to the manufacturer, are functionally very different 
from the voltage gate ion channels of nerves. In addition, the 
manufacturer continued, BAROSTIM NEO stimulates baroreceptors deep 
within the arterial wall of the carotid sinus, as opposed to direct 
activation of the carotid sinus nerve. The manufacturer explained that 
the carotid sinus nerve contains afferent nerve fibers leading from 
baroreceptors, but also contains afferent nerve fibers leading from the 
chemoreceptors, which can cause unwanted side effects. The manufacturer 
stated that BAROSTIM NEOTM uses electricity to activate the 
baroreceptors and stimulate the baroreflex and does not directly 
stimulate neurons and therefore, is not appropriately described by 
existing categories.
    Response: We appreciate the commenter's input. After consideration 
of the public comments we received, we agree that there is no existing 
pass-through payment category that appropriately describes BAROSTIM 
NEOTM because it is an implantable generator with surgically 
placed lead providing selective stimulation of carotid sinus 
baroreceptors and activation of baroreflex, which then stimulates the 
autonomic nervous system. Based on this information, we have determined 
that BAROSTIM NEOTM meets the eligibility criterion at Sec.  
419.66(c)(1).
    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

[[Page 85997]]

that apply under the alternative pathway for devices with FDA 
premarketing approval and a Breakthrough Device designation are not 
subject to evaluation for substantial clinical improvement (84 FR 
61295). The BAROSTIM NEOTM System has Breakthrough Device 
designation and FDA premarketing approval, and therefore is not 
evaluated based on substantial clinical improvement.
    We did not receive comments on whether BAROSTIM NEOTM 
meets the second criterion for establishing a device category at Sec.  
419.66(c)(2). We have determined that the BAROSTIM NEOTM 
meets this 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 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 solicited public comment on whether the BAROSTIM 
NEOTM System meets the device pass-through payment criteria 
discussed in this section, including the cost criterion.
    Comment: The manufacturer of the BAROSTIM NEOTM System 
believed that the device meets the cost criterion for device pass-
through payment status.
    Response: We appreciate the manufacturer's input. After 
consideration of the public comments we received and our cost threshold 
calculations, we agree that BAROSTIM NEOTM meets the cost 
criterion for device pass-through payment status.
    After consideration of the public comments we received and our 
review of the device pass-through application, we have determined that 
the BAROSTIM NEOTM qualifies for device pass-through 
payment. As stated previously, devices that receive 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 must 
meet the other criteria for device pass-through status, which we 
believe BAROSTIM NEOTM does. Therefore, we are finalizing 
approval for device pass-through payment status beginning CY 2021 for 
BAROSTIM NEOTM under the alternative pathway for devices 
that receive FDA Breakthrough Device designation and FDA premarket 
approval. Please refer to section IV.B.1.b of this final rule with 
comment for more information on the device offset for BAROSTIM 
NEOTM device.
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. 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 solicited public 
comments on whether Hemospray[supreg] meets the newness criterion.
    Comment: The manufacturer of Hemospray[supreg] believed this device 
meets

[[Page 85998]]

the newness eligibility criteria for device pass-through payment under 
the regulation at Sec.  419.66(b)(1) since Hemospray[supreg] was 
granted de novo marketing authorization and classified as a Class II 
device on May 7, 2018.
    Response: We appreciate the commenter's input. After consideration 
of the public comments we received and based on the fact that the 
Hemospray[supreg] application was received on May 7, 2018, within 3 
years of FDA approval, we agree that the Hemospray[supreg] System 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 solicited public comments on 
whether Hemospray[supreg] meets the eligibility criteria at Sec.  
419.66(b).
    Comment: Three commenters, including the manufacturer of 
Hemospray[supreg], believed that the Hemospray[supreg] meets the 
eligibility criteria at Sec.  419.66(b)(3) stating that 
Hemospray[supreg] is a prescription single use device consisting of a 
hemostatic agent and a delivery system that is integral to the service 
provided.
    Response: We appreciate the commenters' input. Based on the public 
comments we have received and our review of the application, we have 
determined that Hemospray[supreg] meets the eligibility criterion at 
Sec.  419.66(b)(3) and (4).
    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 stated in 
the CY 2021 OPPS/ASC proposed rule that we have not identified an 
existing pass-through payment category that describes 
Hemospray[supreg]. We solicited public comment on whether 
Hemospray[supreg] meets the device category criterion.
    Comment: Two commenters, including the manufacturer of the 
Hemospray[supreg], indicated that there is not an existing pass-through 
payment category that describes the device.
    Response: We appreciate the commenters' input. After consideration 
of the public comments we received, we continue to believe that there 
is not an existing pass-through payment category that describes 
Hemospray[supreg], and therefore, Hemospray[supreg] meets the device 
category eligibility criterion at Sec.  419.66(c)(1).
    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 is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization. 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 2 safety and efficacy study performed 
in France.\7\ 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.8 9 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.\10\ No severe adverse events

[[Page 85999]]

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

    \7\ 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.
    \8\ Ibid.
    \9\ 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.
    \10\ 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.\11\ 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.
---------------------------------------------------------------------------

    \11\ 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.\12\ 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.
---------------------------------------------------------------------------

    \12\ 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].\13\ 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.\14\ 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.\15\ 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; 78 percent of 
these patients had achieved immediate endoscopic hemostasis and had 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.\16\ 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,

[[Page 86000]]

which may have affected these study results.
---------------------------------------------------------------------------

    \13\ 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.
    \14\ 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.
    \15\ Ibid.
    \16\ 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.
---------------------------------------------------------------------------

    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.17 18 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.\19\ 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.\20\ 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 compared to when used as a rescue therapy (17.1 percent vs. 
46.7 percent respectively).\21\ The applicant concluded that 
Hemospray[supreg] may provide an advantage as a primary treatment to 
patients with malignant bleeding.
---------------------------------------------------------------------------

    \17\ 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.
    \18\ Roberts SE, Button LA, Williams JG. Prognosis following 
upper gastrointestinal bleeding. PLoS One 2012;7:e49507.
    \19\ 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.
    \20\ 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.
    \21\ 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.\22\ 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].
---------------------------------------------------------------------------

    \22\ 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.\23\ 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.
---------------------------------------------------------------------------

    \23\ 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.\24\ 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 in 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

[[Page 86001]]

with good performance status, no end-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.
---------------------------------------------------------------------------

    \24\ 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 as rescue therapy in 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.
    In the CY 2021 OPPS/ASC proposed rule, we noted that the majority 
of studies provided lacked a comparator when assessing the 
effectiveness of Hemospray[supreg]. Three of the articles provided were 
systematic reviews of the literature. While we found these articles 
helpful in establishing a background for the use of Hemospray[supreg], 
we were concerned that they may not provide strong evidence of 
substantial clinical improvement. Four studies appeared to be single-
armed studies assessing the efficacy of Hemospray[supreg] in the 
patient setting. In all of these articles, comparisons were 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 resulted from Hemospray[supreg] or confounding 
variables. Furthermore, within the retrospective and prospective 
studies lacking a control subset, some level of selection bias appeared 
to potentially be introduced in that providers may have been allowed to 
select the manner and order in which patients were treated, thereby 
potentially influencing outcomes seen in these studies.
    Additionally, one randomized control trial provided by the 
applicant appeared to be in the process of peer-review and was not yet 
published. Furthermore, this article was written as a feasibility study 
for a potentially larger randomized control trial and contained a 
sample of only 20 patients. This small sample size left us concerned 
that the results were not representative of the larger Medicare 
population. Lastly, as described, we were concerned the control group 
could receive one of multiple treatments which lacked 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 was not 
clear whether performance seen in the treated group as compared to the 
control group was due to Hemospray[supreg] itself or due to confounding 
factors.
    Third, we stated in the CY 2021 OPPS/ASC proposed rule that we were 
concerned with the samples chosen in many of the studies presented. 
Firstly, the Medicare population is approximately 54 percent female and 
46 percent male.\25\ Many of the samples provided by the applicant were 
overwhelmingly male. Secondly, many of the studies provided were 
performed in Europe and other settings outside of the U.S. We were 
therefore concerned that the samples chosen within the literature 
provided may not represent the Medicare population.
---------------------------------------------------------------------------

    \25\ https://www.cms.gov/files/document/2018-mdcr-enroll-ab-5.pdf.
---------------------------------------------------------------------------

    Lastly, we were concerned about the potential for adverse events 
resulting from Hemospray[supreg]. It was 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 
mentioned the potential for severe adverse reactions (for example, 
abdominal distension, visceral perforation, biliary obstruction, 
splenic infarct). Specifically, one article \26\ recorded adverse 
events related to Hemospray[supreg], including abdominal distention and 
esophageal perforation.
---------------------------------------------------------------------------

    \26\ 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 
had voluntarily recalled Hemospray[supreg] Endoscopic Hemostat due to 
complaints received that the handle and/or activation knob on the 
device in some cases had cracked or broken when the device was 
activated and in some cases had caused the carbon dioxide cartridge to 
exit the handle. The applicant stated that Cook Medical had received 
one report of a superficial laceration to the user's hand that had 
required basic first aid; however, there were 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 had initiated an investigation and 
would determine the appropriate corrective action(s) to prevent 
recurrence of this issue. According to the applicant, although the 
recall did restrict availability of the device, they wished to continue 
their application as they believed the use of Hemospray[supreg] 
significantly improves clinical outcomes for certain patient 
populations compared to currently available treatments.
    Based upon the evidence presented, we solicited public comments on 
whether the Hemospray[supreg] Endoscopic Hemostat meets the substantial 
clinical improvement criterion.
    Comment: The manufacturer responded to several statements regarding 
Hemospray[supreg] and substantial clinical improvement in the CY 2021 
OPPS/ASC proposed rule, and asserted that Hemospray[supreg] meets the 
substantial clinical improvement criterion. The manufacturer agreed the 
data presented is primarily from single arm and retrospective studies 
and may suffer from selection bias. However, the manufacturer suggested 
that CMS should consider that Hemospray[supreg] is commonly used when 
the conventional standard of care, such as injection plus clips or 
cautery, is inadequate to treat patients undergoing an urgent catheter-
based embolization or surgery. The manufacturer stated that the 
selection

[[Page 86002]]

bias is toward patients with the highest risk of morbidity or mortality 
and the high rate of successful treatment for those patients with 
Hemospray[supreg] represents substantial clinical improvement. They 
cited several studies that found that, after all other conventional 
treatments failed, there was overall treatment success in cases where 
Hemospray[supreg] was used.
    In response to CMS' concerns about the unpublished randomized 
controlled trial presented, the manufacturer stated that the study has 
been published with no changes and noted that, despite the small sample 
size, they believe the results are representative of the general 
population with malignant gastrointestinal bleeding and consistent with 
other published retrospective studies.
    The manufacturer stated that the research and studies for 
Hemospray[supreg] are largely international because Hemospray[supreg] 
was commercially available outside the U.S. for 5 to 7 years before the 
FDA awarded the product de Novo 510(k) status. They believed that this 
data is representative of the U.S. population, as the treatment 
strategy and patient outcomes are similar. The manufacturer 
acknowledged that study populations are predominantly male but noted 
that 60 percent of patients undergoing endoscopic control of bleeding 
are male, according to the 2016 Healthcare Cost and Utilization 
Project. The manufacturer mentioned that the mean age of study 
populations varied from 67-71 years, which is representative of the 
Medicare population.
    Regarding the potential for adverse events, the manufacturer stated 
that FDA has determined the product is safe and effective for its 
intended use, has an acceptable risk/benefit ratio, and cleared 
Hemospray[supreg] to return to the market as of July 2020 after the 
issue was addressed. The manufacturer also mentioned that they 
understand the potential risks associated with Hemospray[supreg] and 
have clearly labeled the product, conducted physician training, 
diligently monitor reported complaints or complications, and will take 
appropriate steps to correct any future issues that arise.
    Response: We appreciate the manufacturer's response to our 
questions regarding Hemospray[supreg]. After reviewing the information 
provided in the public comment, we agree with the applicant's 
statements that any potential bias introduced was toward the patients 
with the highest risk of negative outcomes and that this potential bias 
is no longer a concern. Regarding the applicant's comment on study 
samples, we agree with the applicant that these samples are adequately 
representative of the Medicare population. We also appreciate the 
comment response regarding the potential for adverse events and the 
update on the status of the Hemospray[supreg] voluntary recall. We will 
continue to monitor available data for Hemospray[supreg] in regard to 
any potential risk of adverse events.
    As we noted in the FY 2021 IPPS final rule (85 FR 58672), while we 
acknowledge some of the data limitations, we believe that 
Hemospray[supreg] represents a substantial clinical improvement for the 
treatment of gastrointestinal bleeding for the following reasons. We 
believe that, given the results from the RCT trials and the single-
armed studies, Hemospray[supreg] provides a treatment benefit for those 
with bleeding from gastrointestinal malignancies. We also see the 
clinical importance of Hemospray as an alternative to invasive 
treatments traditionally used as salvage therapy. Lastly, we note that 
Hemospray[supreg] provides treatment for bleeding, without requiring 
tissue trauma or precise targeting.
    After consideration of the public comments we received, we have 
determined that Hemospray[supreg] 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 in the CY 2021 
OPPS/ASC proposed rule, 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 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] was 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 stated in the CY 2021 OPPS/ASC proposed rule 
that 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] was 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 stated in the 
CY 2021 OPPS/ASC proposed rule that 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 was 246 percent of the APC 
payment amount for the related service of $1004.10 t ((($2,500-$33.54)/
$1004.10) x 100 = 245.6 percent). Therefore, we stated in the CY 2021 
OPPS/ASC proposed rule that we believe that Hemospray[supreg] meets the 
third cost significance requirement.
    We solicited 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.
    Comment: Three commenters, including the manufacturer of the 
Hemospray[supreg], believe that the device meets the cost criterion for 
device pass-through payment status.
    Response: We appreciate the manufacturer's input. After 
consideration of the public comments we received and consideration of 
the

[[Page 86003]]

cost criterion, we have determined that Hemospray[supreg] meets the 
cost criterion for device pass-through payment status.
    After consideration of the public comments we received, we are 
approving the Hemospray[supreg] for device pass-through payment status 
beginning in CY 2021.
(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.\27\
---------------------------------------------------------------------------

    \27\ 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 progressive and controlled reduction of the 
vertebral fracture.\28\ 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.\29\
---------------------------------------------------------------------------

    \28\ Vanni D., et al., ``Third-generation percutaneous vertebral 
augmentation systems,'' J. Spine Surg., 2016, vol. 2(1) pp. 13-20.
    \29\ 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,\30\ which resulted in more than 2 million osteoporotic fragility 
fractures in that year alone.\31\ The applicant stated it has been 
estimated that more than 700,000 VCFs occur each year in the United 
States (U.S.),\32\ and of these VCFs, about 70,000 result in hospital 
admissions with an average length of stay of 8 days per patient.\33\ 
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 greater than the general population.\34\ 
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.\35\
---------------------------------------------------------------------------

    \30\ National Osteoporosis Foundation. (2019). What is 
osteoporosis and what causes it? Available from: https://www.nof.org/patients/what-is-osteoporosis/.
    \31\ 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.
    \32\ Riggs B and Melton L. ``The worldwide problem of 
osteoporosis: Insights afforded by epidemiology.'' Bone, 1995, vol. 
17(Suppl 5), pp. 505-511.
    \33\ 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.
    \34\ 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.
    \35\ 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

[[Page 86004]]

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 U.S. between 2005 and 2010 were BKP.\36\ 
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.\37\
---------------------------------------------------------------------------

    \36\ 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.
    \37\ 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.\38\
---------------------------------------------------------------------------

    \38\ 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.\39\ 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.\40\
---------------------------------------------------------------------------

    \39\ 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.
    \40\ 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

[[Page 86005]]

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 solicited public comments on whether 
the SpineJack[supreg] Expansion Kit meets the newness criterion.
    Comment: The applicant reaffirmed that the SpineJack[supreg] system 
meets the newness criteria as it received FDA 510(k) clearance on 
August 30, 2018 and was commercially available in the United States on 
October 11, 2018.
    Response: We appreciate the commenter's input. After consideration 
of the public comments we received and based on the fact that the 
SpineJack[supreg] Expansion Kit application was received within 3 years 
of FDA approval, we have determined that 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 solicited public comments on 
whether the SpineJack[supreg] Expansion Kit meets the eligibility 
criteria at Sec.  419.66(b).
    Comment: The applicant stated that the SpineJack[supreg] system 
meets each of the device eligibility requirements at Sec.  419.66(b)(3) 
for transitional pass-through payment under the OPPS as it is integral 
to a service provided, and is not an instrument, apparatus, implement, 
or item for which depreciation and financing expenses are recovered nor 
is it a material or supply furnished incident to a service.
    Response: We appreciate the comment's input. Based on the 
information we have received and our review of the application, we have 
determined that the SpineJack[supreg] system meets the eligibility 
criteria at Sec.  419.66(b)(3) and (4).
    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 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 solicited public comments on this issue.
    Comment: In response to CMS' comment about whether 
SpineJack[supreg] is described by an existing category, the applicant 
stated that the SpineJack[supreg] system and implantable interspinous 
process distraction devices are vastly different medical devices that 
are distinguished by several attributes. According to the applicant, 
where the SpineJack[supreg] system involves the insertion of two 
bilateral expandable titanium implants into the vertebral body within 
the anterior portion of the spinal column, the interspinous spacer uses 
a single non-expandable device that is implanted between the spinous 
processes of two adjacent veterbral bodies in the posterior portion of 
the spinal column. The applicant further noted that the 
SpineJack[supreg] system differs from interspinous spacers in terms of 
the FDA submission type, the intended use, the mechanism of action, and 
whether bone cement is used as a method of fixation. The applicant 
reaffirmed their belief that the SpineJack[supreg] system meets the 
requirement at Sec.  419.66(c)(1) that the device is not appropriately 
described by any of the existing categories or by any category 
previously in effect.
    Response: We appreciate the additional information provided by the 
applicant. After consideration of the public comments we received, we 
believe there is no existing pass-through device category that 
appropriately describes the SpineJack[supreg] system, due to the many 
differences which exist between the predicate device and HCPCS code 
C1821--interspinous process distraction device (implantable). Based on 
this information, we believe that the SpineJack[supreg] system meets 
the eligibility criterion at Sec.  419.66(c)(1).
    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 is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization. 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

[[Page 86006]]

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 \41\ in support of multiple 
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).
---------------------------------------------------------------------------

    \41\ 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

[[Page 86007]]

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 back pain (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 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.\42\ and Ross et al.\43\ 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).
---------------------------------------------------------------------------

    \42\ 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.
    \43\ 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.\44\ 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.\45\ 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).
---------------------------------------------------------------------------

    \44\ 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.
    \45\ 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.,\46\ 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).\47\ 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.\48\ Spine 
X-rays were also taken 48 hours prior to the procedure and at 5 days, 
6, 12, and 36 months post-surgery.\49\ 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.
---------------------------------------------------------------------------

    \46\ 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.
    \47\ Ibid.
    \48\ Ibid.
    \49\ 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.\50\ 
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

[[Page 86008]]

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 appear to report results for midline VB height.\51\ 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).
---------------------------------------------------------------------------

    \50\ 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.
    \51\ 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.\52\ 
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.\53\ 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.
---------------------------------------------------------------------------

    \52\ 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.
    \53\ 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.\54\ 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 (27 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 (12 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.\55\ 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.\56\
---------------------------------------------------------------------------

    \54\ 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.
    \55\ Ibid.
    \56\ 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).\57\ 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

[[Page 86009]]

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 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.\58\ 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.
---------------------------------------------------------------------------

    \57\ 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.
    \58\ 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).\59\ 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.
---------------------------------------------------------------------------

    \59\ 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.
---------------------------------------------------------------------------

    As we stated in the CY 2021 OPPS/ASC proposed rule (85 FR 48861), 
the results of the SAKOS trial did 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 appeared 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 appeared 
to be a lack of data comparing the SpineJack[supreg] system to 
conservative medical therapy. We noted that there was 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 indicated that 
findings should be forthcoming in 2020. Additionally, we noted 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)), did 
not support vertebral augmentation procedures due to lack of evidence 
compared to conservative medical management.\60\ 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).''
---------------------------------------------------------------------------

    \60\ 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 solicited public comment on whether the SpineJack[supreg] system 
meets the substantial clinical improvement criterion.
    Comment: Many commenters expressed their support for approval of 
the SpineJack[supreg] system for device pass-through status. Many of 
these commenters shared their academic knowledge of and first-hand 
clinical experience with vertebral augmentation procedures, including 
claims of familiarity and expertise with the use of the Kiva[supreg] 
system, BKP and the SpineJack[supreg] system. According to many of 
these commenters, the SpineJack[supreg] system provides a significant 
benefit beyond that which is achieved by other vertebral augmentation 
technology. Many commenters also indicated that the price compared to 
the reimbursement rate has been an impediment to use of the 
SpineJack[supreg] system in some cases. Finally, several of these 
commenters expressed their belief that the SpineJack[supreg] system may 
reduce costs to hospitals and the U.S. health system overall by 
preventing the onset of additional adjacent fractures in patients.
    The applicant and multiple commenters disagreed with CMS' concern 
that recent systematic reviews of the management of vertebral 
compression fracture do not support vertebral augmentation procedures 
according to the ASBMR, which also suggested more rigorous study of 
treatment options. The applicant stated that the latest clinical 
evidence and a policy statement from the International Society for the 
Advancement of Spine Surgery (ISASS) provide robust support for the use 
of vertebral augmentation (VA) over non-surgical management (NSM) in 
the treatment of osteoporotic vertebral compression fractures. Another 
commenter disagreed with CMS' interpretation of the ASBMR report and 
emphasized that the study found kyphoplasty was associated with 
significantly more reduction in pain, more reduction in RMDQ scale, and 
improvement in quality of life as compared to nonsurgical management; 
the commenter concluded that it is not accurate to group kyphoplasty 
with vertebroplasty data.
    The applicant referenced a systematic review and meta-analysis of 
25 prospective studies, which found that patients treated with balloon 
kyphoplasty and vertebroplasty had greater pain reduction that those 
treated with non-surgical management. Further, the applicant stated 
that the most compelling evidence for the use of vertebral augmentation 
in the treatment of osteoporotic VCF patients comes from the recently 
published Local Coverage Determination (LCD) on Percutaneous Vertebral 
Augmentation (PVA) for Osteoporotic Vertebral Compression Fracture by 
the seven regional MACs, which currently appear in either a proposed or 
final state.
    The applicant and commenters also responded to CMS' concern that 
the

[[Page 86010]]

SAKOS trial results do not appear to be corroborated in any other 
randomized controlled study. Commenters stated it is unfair of CMS to 
require results from multiple randomized control trials (RCTs) because 
these studies take a large amount of time and resources to conduct, 
which is at odds with the characteristics inherent in applicants for 
device pass-through payment status given the newness criterion 
requiring FDA approval within three years of application. The applicant 
stated that multiple RCTs are often not conducted to corroborate level 
one evidence that has been published in journals. They added that there 
are a minimum of 16 journal articles that highlight the clinical 
benefit that the SpineJack[supreg] system provides to patients.
    In response to CMS' concern that SpineJack[supreg] was not compared 
to the PEEK coiled implant, the applicant and multiple commenters 
stated that the PEEK coiled system has not demonstrated clinical 
superiority to BKP, which is the gold standard treatment for 
osteoporotic VCFs. Commenters added that the PEEK coiled implants are 
not widely used in the United States because of the very limited scope 
of use, the high price, and the difficulty of use as compared to other 
procedures.
    In response to CMS' concern that the SpineJack[supreg] system was 
not compared to conservative medical therapy, many commenters and the 
applicant stated that this comparison would be inappropriate primarily 
because of the large body of research showing improvements for patients 
who receive treatment for VCFs with VA as opposed to NSM. One commenter 
stated that there is a subset of patients who suffer compression 
fractures for which no vertebral augmentation is advised but these 
patients would not currently receive balloon kyphoplasty nor would they 
likely receive treatment with the SpineJack[supreg] system. The 
applicant stated that there is clinical evidence showing improved 
outcomes for patients with VCFs treated with BKP as compared to NSM. 
The applicant concluded that based upon the body of evidence available, 
the use of NSM as a comparator treatment to the SpineJack[supreg] 
system for a new clinical study would not be in the best interest of 
osteoporotic VCF patients, primarily due to the increased risk of 
morbidity and mortality that has been reported in this patient 
population, particularly among the elderly. Lastly the applicant stated 
that the SpineJack[supreg] system is not indicated for use in the 
treatment of traumatic vertebral fractures in the United States.
    In regard to CMS' statement that a study by Lin et al. did not 
compare the SpineJack[supreg] system to BKP, the applicant agreed and 
added that the publication provides further support of the claim for 
superior mid-vertebral body height restoration with the 
SpineJack[supreg] system as compared to other treatment options such as 
vertebroplasty, which the applicant asserted continue to be widely 
performed in Medicare patients.
    In regard to CMS' statement that findings from the Arabmotlagh M. 
et al. study did not report results for midline VB height, the 
applicant stated that the publication shows that it is possible to 
achieve anterior VB height restoration with the SpineJack[supreg] 
system in addition to midline VB height restoration demonstrated in the 
SAKOS trial.
    In response to CMS' assertion that the Noriega et al. article did 
not report results for six months and does not include results of mean 
improvement as stated by the applicant, the applicant stated that they 
would like to correct an error in their application attachment for the 
2015 Noriega et al. publication. The data presented in their 
application reflects findings from another citation \61\ in which the 
overall improvements in visual analog scale back pain scores were 
statistically significant at multiple time points.
---------------------------------------------------------------------------

    \61\ 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; 
30:637-645.
---------------------------------------------------------------------------

    Lastly, the applicant supplied minor corrections regarding the 
SAKOS study results. Specifically the applicant stated that for the 
midline VB height restoration reported at 12 months post-procedure for 
the SpineJack[supreg] system compared to BKP in the SAKOS trial, an 
error in the standard deviation value for the BKP data is reported in 
the CY 2021 OPPS/ASC proposed rule. The applicant stated that this 
value should be revised to 2.34 mm rather than the 2.23 mm reported 
previously.
    One commenter, a manufacturer of BKP implants, criticized the 
evidence the applicant submitted to support its position that the 
SpineJack[supreg] system meets the substantial clinical improvement 
criterion. The commenter emphasized that although the applicant cited 
the SAKOS study as the basis for concluding that the SpineJack[supreg] 
system meets the substantial clinical improvement criterion, the SAKOS 
study compared the SpineJack[supreg] system to older BKP technology 
(KyphX), rather than to the most current BKP technology available at 
the time of the study (Xpander II and Express II). According to the 
commenter, these newer generation balloons have been available since 
2011, generate lift force in excess of 1200 Newtons, and are the only 
BKP products indicated for the cement resistance technique, whereby one 
bone tamp is left in place during cement injection and curing to 
maximize height restoration in a collapsed vertebral body. The 
commenter stated that BKP does offer craniocaudal expansion while 
creating a void for safer cement fill. Furthermore, with respect to 
bilateral load support, according to the commenter, BKP has been 
offered since 1998 as a bilateral procedure option to maximize lift 
potential and reduce stress exerted on endplates. The commenter went on 
to explain that BKP provides bilateral symmetric load support to 
fractured endplates by providing a larger surface area when restoring 
height. The commenter suggested that if the SAKOS study had compared 
the SpineJack[supreg] system to these second-generation BKP implants, 
then the SpineJack[supreg] system might not have demonstrated superior 
performance on secondary outcome measures.
    The commenter also offered several additional criticisms of the 
SAKOS study. The commenter pointed out that the SAKOS study design did 
not involve an even distribution of the spine levels treated across 
study arms, and that it is possible that a difference in the levels 
treated could have contributed to the reduction of ALFs in the 
SpineJack[supreg] system group. The commenter asserted that the 
vertebral levels T11-L1 are commonly known for higher number of 
fractures, and that these spinal segments had 14 more levels treated 
with BKP than with the SpineJack[supreg] system in the SAKOS study. 
According to the commenter, further analysis would be needed to 
determine if the location of fractures had an effect on the occurrence 
of ALFs between the two study arms in SAKOS. The commenter also pointed 
out that it was unclear whether there was any difference in the two 
treatment groups' bone density metrics, as this was not disclosed in 
the SAKOS study.
    The commenter went on to emphasize that the clinical comparison in 
the SAKOS study demonstrated the SpineJack[supreg] system was non-
inferior to BKP at the time of the primary endpoint (12 months); 
however, there was no significant difference between groups in pain 
intensity visual analog scale (VAS) score at the final time point, and 
no difference in Oswestry Disability Index (ODI) or the EQ-5D health 
status questionnaire at any time point during the study. The commenter 
acknowledged that SAKOS

[[Page 86011]]

demonstrated superiority for the SpineJack[supreg] system for mid-
vertebral height restoration, but emphasized that measures of anterior 
height, posterior height, and cobb angle showed no difference across 
the study arms, within the secondary endpoints. The commenter also 
observed that the SAKOS study showed a similar number of adverse events 
between study arms, with the SpineJack[supreg] system population seeing 
a higher percentage of serious adverse events.
    Finally, the commenter disputed the applicant's assertion that 
vertebral augmentation treatment with vertebroplasty may alleviate 
pain, but cannot restore vertebral body height or correct spinal 
deformity. The commenter likewise disputed the applicant's assertion 
that BKP attempts to restore vertebral body height, but the temporary 
correction obtained cannot be sustained over the long-term. In 
countering the applicant's assertions, the commenter referenced three 
published articles with empirical evidence regarding the impact of BKP 
on kyphotic angle and VB height restoration.62 63 64 Lastly 
the commenter stated that any mortality benefits have only been studies 
for BKP and vertebroplasty and not for SpineJack[supreg]. According to 
the commenter, it is therefore not appropriate to use this information 
to demonstrate the mortality benefits from using the SpineJack[supreg] 
technology.
---------------------------------------------------------------------------

    \62\ Van Meirhaeghe JV, et al. 2013; 38(12): 971-983.
    \63\ Dohm M, et al. 2014. (24 Months), Am J Neuroradiol. 
2014;35:2227-2236.
    \64\ Bozkurt M, et al. 2014. Asian Spine J. 2014; 8(1):27-34.
---------------------------------------------------------------------------

    Response: We appreciate all the comments we received related to the 
SpineJack[supreg] system, and we have taken them into consideration in 
making our determination, including the applicant's submission of 
additional information to address the concerns presented in the CY 2021 
OPPS/ASC proposed rule and the comments expressing concerns with the 
design and results of the SAKOS study.
    After consideration of the public comments received, we believe 
that commenters have addressed our concerns regarding whether the 
SpineJack[supreg] system meets the substantial clinical improvement 
criterion and that the SpineJack[supreg] system represents a 
substantial clinical improvement over existing technologies based on 
the data received from commenters. The data provided from the 
commenters with clinical experience with vertebral augmentation 
procedures and the SpineJack[supreg] system, which included improved 
pain, VB height restoration and ALF outcomes for patients with 
osteoporotic VCFs when compared with existing treatments, demonstrates 
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 
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.
    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 solicited public comment on whether the SpineJack[supreg] 
Expansion Kit meets the device pass-through payment criteria discussed 
in this section, including the cost criterion.
    Comment: The applicant agreed with CMS' conclusion that the 
SpineJack[supreg] system meets all three of the cost significance 
requirements for establishing a device pass-through category as 
described in Sec.  419.66(d).
    Response: We appreciate the applicant's input.
    After consideration of the public comments we received, we have 
determined that the SpineJack[supreg] Expansion Kit qualifies for 
device pass-through payment status and we are approving the application 
for device pass-through payment status for the SpineJack[supreg] 
Expansion Kit beginning in CY 2021.
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

[[Page 86012]]

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 clarified in the CY 2021 OPPS/ASC proposed rule that the same 
policy applies for purposes of the OPPS alternative pathway policy. 
Specifically, we clarified 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 Sec.  419.66(c)(2). We also noted 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 the CY 2021 OPPS/ASC proposed rule, we proposed 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.''
    We did not receive any comments regarding the technical 
clarification outlined in the CY 2021 OPPS/ASC proposed rule that in 
order to be eligible for the alternative pathway to the OPPS device 
pass-through substantial clinical improvement criterion, the device 
must receive marketing authorization for the indication covered by the 
Breakthrough Devices Program designation. Therefore we are finalizing 
our proposal to amend the regulations in Sec.  419.66(c)(2)(ii) to 
provide 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 the CY 2021 OPPS/ASC proposed rule, we solicited 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 \65\ 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.\66\ On March 13, 2020, the 
President of the United States declared that the COVID-19 outbreak in 
the U.S. constitutes a national emergency,\67\ 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.\68\ 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.
---------------------------------------------------------------------------

    \65\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
    \66\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-21apr2020.aspx.
    \67\ https://www.whitehouse.gov/presidentialactions/proclamation-declaring-nationalemergency-concerning-novel-coronavirus-diseasecovid-19-outbreak/.
    \68\ 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 
specifically requested 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 3 years, and none of the devices with less than 
3 years of pass-through payment status at the start of the PHE have 
pass-through payment status set to end before December 31, 2021.
    The following is summary of the comments we received and our 
responses to those comments.
    Comment: Several commenters submitted comments in support of CMS' 
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). All 
commenters who supported CMS' comment solicitation stated that the 
COVID-19 PHE has

[[Page 86013]]

negatively affected items currently receiving pass-through payment. Two 
commenters stated that CMS has the authority to make an equitable 
adjustment to provide additional time for items to receive pass-through 
payments to account for reduced utilization during the PHE. Multiple 
commenters stated that the pass-through payment extension should be 
equal to the duration of the PHE with one commenter adding that it 
should start immediately after the later of the expiration of the 
item's pass-through status or the expiration of the emergency period. 
One commenter stated that CMS should provide, specific to each pass-
through item, an adjustment to begin on January 1, 2021, and provide 
for a period of continued pass-through payment, rounded up to the 
nearest quarter, for which the item's pass-through period coincided 
with the PHE. Lastly, one commenter stated that CMS should allow pass-
through periods for devices, drugs or biologicals adversely impacted by 
the PHE to be extended, if any extension does not apply to devices, 
drugs or biologicals that already had 3 years or more of pass-through 
status when the PHE began. One applicant, as well as offering support 
for this proposal, added a request that CMS share the operational 
details of its policy by the end of CY 2020 rather than waiting for the 
CY 2022 rulemaking cycle to facilitate planning.
    Response: We appreciate the commenters' support and will take the 
information submitted into consideration for future rulemaking.
    Comment: Some commenters stated that CMS should not limit the 
extension of pass-through payments to devices, but should also extend 
pass-through payments for drugs. One commenter stated that drugs should 
be subject to this policy because, like pass-through devices, the 
commenter believed pass-through drugs likely had reduced utilization 
from the PHE. A second commenter stated that there is no principled 
reason to limit any COVID-19 related pass-through adjustment to devices 
only; adding that it is a basic principle of administrative law that 
agencies must treat ``similarly situated'' entities ``similarly'' and 
there is no logical basis for treating pass-through devices used in 
outpatient settings differently than pass-through drugs used in 
outpatient settings. Two commenters stated that CMS should extend the 
pass-through period to radiopharmaceuticals in addition to medical 
devices, stating that the COVID-19 PHE has negatively affected their 
utilization as it has for devices.
    One commenter, who supported an extension for pass-through devices, 
stated that most drugs, biologicals, and biosimilar biological products 
continue to be separately paid after their pass-through period expires 
such that prior year claims data do not impact their treatment under 
OPPS. For such products, the commenter stated that it would not be 
necessary or appropriate to use the equitable adjustment authority to 
adjust payment. A second commenter recommended that the products that 
received extended pass-through payments under section 1833(t)(6)(G) of 
the Act, as added by section 1301(a)(1)(C) of the Consolidated 
Appropriations Act of 2018, should not receive an additional extension 
of pass-through status due to the PHE as these products have already 
had more than the required 3 years of pass-through payments. The 
commenter added that extending pass-through payments for these products 
would needlessly increase cost to taxpayers and would be contradictory 
to the administration's efforts to reduce the cost of prescription 
drugs.
    Response: We did not solicit comments on extending pass-through 
payments for drugs, however, we will consider the commenters' points 
for potential future rulemaking.
    We thank the commenters for their submissions and will consider 
their input when determining whether a change is warranted in response 
to the PHE as we develop the 2022 OPPS/ASC proposed rule.

B. Device-Intensive Procedures

1. Background
    Under the OPPS, prior to CY 2017, device-intensive status for 
procedures was determined at the APC level for APCs with a device 
offset percentage greater than 40 percent (79 FR 66795). Beginning in 
CY 2017, CMS began determining device-intensive status at the HCPCS 
code level. In assigning device-intensive status to an APC prior to CY 
2017, the device costs of all the procedures within the APC were 
calculated and the geometric mean device offset of all of the 
procedures had to exceed 40 percent. Almost all of the procedures 
assigned to device-intensive APCs utilized devices, and the device 
costs for the associated HCPCS codes exceeded the 40-percent threshold. 
The no cost/full credit and partial credit device policy (79 FR 66872 
through 66873) applies to device-intensive APCs and is discussed in 
detail in section IV.B.4. of the 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 
in section IV.B.1.b. of the 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.

[[Page 86014]]

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 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

[[Page 86015]]

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 or insertion 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 & 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 the CY 2021 OPPS/ASC 
final rule can be found under supporting documentation on our website 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.
    For CY 2021, we did not propose any changes to our device-intensive 
policy.
    Comment: A number of commenters and the Advisory Panel on Hospital 
Outpatient Payment (HOP Panel) recommended that CMS consider lowering 
the device-intensive threshold from 30 percent to 25 percent to avoid 
excessive payment gaps when device costs do not reach the device-
intensive threshold and thereby do not ``carry over'' device costs from 
the hospital outpatient setting to the ASC setting.
    Response: We thank the commenters and the HOP Panel for their 
recommendation. While payment rates under the ASC payment system for a 
particular procedure may be subject to fluctuation if device-intensive 
status varies for the procedure on a year-to-year basis, we believe 
that the potential payment gaps that commenters note will exist for any 
threshold value. Further, as discussed in section XIII.G.2.a. of this 
final rule with comment, our established policy under the ASC payment 
system is to scale prospective ASC relative payment weights by 
comparing total payment using current year ASC scaled relative payment 
weights with the total payment using the prospective ASC relative 
payment weights, holding ASC utilization, the ASC conversion factor, 
and the mix of services constant from the claims year. Lowering the 
device-intensive threshold assigns a greater amount of device costs, 
which are held constant between the OPPS and ASC payment system, into 
the prospective year. This would put additional downward pressure on 
the ASC weight scalar and reduce the non-device portion of ASC payment 
rates for most surgical procedures. Additionally, a reduction in the 
device-intensive threshold to 25 percent would also be accompanied with 
a reduction in the default device offset percentage, from 31 percent to 
26 percent. A reduction in the default device offset percentage would 
reduce the device portion for covered surgical procedures with device 
offset amounts established at the existing default offset percentage of 
31 percent. In light of these concerns, we are not accepting the 
recommendation to lower the device-intensive threshold at this time.
    Comment: Some commenters recommended that the device offset 
percentage for 0424T (Insertion or replacement of neurostimulator 
system for treatment of central sleep apnea; complete system 
(transvenous placement of right or left stimulation lead, sensing lead, 
implantable pulse generator)) be reevaluated. Commenters contend that a 
99.99 percent device offset percentage appears to be erroneous and 
would eliminate transitional pass-through device payments for the 
associated device C1823 (Generator, neurostimulator (implantable), non-
rechargeable, with transvenous sensing and stimulation leads). 
Commenters recommended

[[Page 86016]]

device offset percentages of 37.76 percent which excludes the costs 
associated with C1823, or 74.96 percent which includes the costs 
associated with C1823.
    Response: In reviewing our device cost calculations, we discovered 
an oversight related to the cost of certain devices approved for 
transitional pass-through payment status. Currently, our ratesetting 
process excludes the cost of pass-through devices from being packaged 
into the major procedure until those devices no longer have pass-
through status. However, our device cost calculation process in 
developing the offsets incorporated the cost of some devices currently 
receiving pass-through payment status. Because the costs of these 
devices are not included in developing the geometric mean cost of the 
procedure and therefore the APC payment rate, the costs associated with 
these pass-through devices should not be included in a procedure's 
device offset percentage. For this CY 2021 OPPS/ASC final rule with 
comment period, we have removed the pass-through device costs at issue 
from the calculation of the device offsets. We have also included these 
changes in our claims accounting narrative for the CY 2021 OPPS/ASC 
final rule which can be found under supporting documentation on our 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-
Payment/HospitalOutpatientPPS/index.html.
    The change in device cost calculation from the proposed and final 
rule only impacted the device offset percentage associated with CPT 
code 0424T. Specifically, the updated calculations using final rule 
claims data show a device offset percentage of 27.10 percent after 
removing the cost of pass-through devices. Therefore, for CY 2021, we 
are finalizing a device offset percentage of 27.10 percent for CPT code 
0424T.
    Comment: Commenters contended that CPT codes 22857 (Total disc 
arthroplasty (artificial disc), anterior approach, including discectomy 
to prepare interspace (other than for decompression), single 
interspace, lumbar), 66174 (Transluminal dilation of aqueous outflow 
canal; without retention of device or stent), and 55880 (Ablation of 
malignant prostate tissue, transrectal, with high intensity--focused 
ultrasound (HIFU), including ultrasound guidance) should be designated 
as device-intensive under the OPPS and ASC payment systems.
    Response: Using the updated final rule claims data, we have 
determined that the device offset percentages for CPT codes 22857 and 
66174 are not above the 30-percent device-intensive threshold and, 
therefore, these procedures are not eligible to be assigned device-
intensive status. Additionally, while we do not have claims data for 
CPT code 55880, we have determined that the device offset percentage of 
C9747, the predecessor code to CPT code 55880, is also not above the 
30-percent threshold based on CY 2019 claims and, therefore, CPT code 
55880 is also not eligible to be assigned device-intensive status.
    Comment: Commenters requested that we designate CPT code 50590 
(Lithotripsy, extracorporeal shock wave) device-intensive status, or 
establish alternative device-intensive criteria so that the costs of 
capital equipment, specifically, the lithotripter, associated with CPT 
code 50590 would allow this procedure to receive a device-intensive 
designation. The commenter suggested alternative criteria that would 
include that: (1) The procedure cannot be performed without the 
equipment/device; (2) the equipment/device is typically obtained on an 
``as-needed'' basis rather than purchased or leased by the entity 
providing the care; (3) the fair-market lease or rental cost in an HOPD 
or ASC setting is not materially different for either site of service; 
(4) the fair-market lease or rental cost of the equipment precludes 
performing the service at an appropriate margin in an ASC setting; and 
(5) the procedure is most appropriately done on an ambulatory basis for 
the majority of patients.
    Response: Using the updated claims data for this CY 2021 OPPS/ASC 
final rule with comment period, we have determined that the device 
offset percentage for CPT code 50590 is not above the 30-percent 
threshold and, therefore, this procedure is not eligible to be assigned 
device-intensive status.
    We also do not believe changes to our device-intensive criteria are 
necessary. We believe the existing criteria are adequate to 
differentiate implantable and insertable device costs from non-invasive 
equipment costs and other procedure-related costs. We also note that 
the operating resource costs associated with CPT code 50590 are 
captured in the geometric mean cost of the procedure used to develop 
the ASC relative weights, as well as the ASC payment rate. While we 
acknowledge that the reliance on OPPS scaled relative weights to 
develop the ASC payment rate may not necessarily capture the geometric 
mean cost of procedures with significant capital equipment costs in the 
ASC setting, we are not finalizing any changes to our ASC ratesetting 
methodology at this time.
    Comment: One commenter requested that we finalize our device-
intensive designation for CPT code 0275T (Percutaneous laminotomy/
laminectomy (interlaminar approach) for decompression of neural 
elements, (with or without ligamentous resection, discectomy, 
facetectomy and/or foraminotomy), any method, under indirect image 
guidance (e.g., fluoroscopic, ct), single or multiple levels, 
unilateral or bilateral; lumbar) but only determine the device offset 
percentage based on claims with a reported device code.
    Response: We appreciate the commenter's recommendation; however, we 
do not believe it would be appropriate to exclude claims data that 
would otherwise be available from our ratesetting process for the 
purposes of modifying the final device offset percentage for 0275T in 
particular. We are finalizing our proposal to assign device-intensive 
status to CPT code 0275T with a device offset percentage of 34.16 
percent, as determined based on the final rule claims data.
    Comment: Some commenters recommended that we assign CPT code 0404T 
(Transcervical uterine fibroid(s) ablation with ultrasound guidance, 
radiofrequency) device-intensive status. Commenters argue that the 
device was not commercially available until late 2019, which they 
believed explains the lack of claims data and device cost information.
    Response: We agree with the commenters. While CPT code 0404T was 
established in 2016, which predates our policy of applying a default 
device offset percentage for new procedures, we have yet to receive 
claims information for this procedure that would allow us to determine 
any associated device costs. We also thank the commenters for their 
submission of device pricing information. After reviewing the pricing 
information provided by commenters, we believe a default device offset 
percentage of 31 percent appropriately reflects the device costs for 
these procedures for CY 2021.
    Comment: One commenter recommended that we assign 0632T 
(Percutaneous transcatheter ultrasound ablation of nerves innervating 
the pulmonary arteries, including right heart catheterization, 
pulmonary artery angiography, and all imaging guidance) device-
intensive status.
    Response: As discussed in section III.D of this CY 2021 OPPS/ASC 
final rule with comment period, we are finalizing our proposal to 
assign SI=E1 ``Not paid by Medicare when submitted on outpatient claims 
(any outpatient bill type)'' to CPT code 0632T. This

[[Page 86017]]

procedure is not payable under the OPPS beginning in CY 2021, and 
therefore we are not assigning device-intensive status to 0632T at this 
time.
    Comment: Some commenters suggested that CMS only adjust the non-
device portion of the payment by the wage index, consistent with the 
Agency's policy for separately payable drugs and biologicals.
    Response: While we did not make such a proposal in this year's 
proposed rule, we will take this comment into consideration for future 
rulemaking. We note that such a policy would increase payments to 
providers with a wage index value of less than 1 and be offset by a 
budget neutral decrease in payments to other providers.
    As discussed in section IV.A. of this final rule with comment 
period, we are approving the BAROSTIM NEOTM system for 
transitional pass-through device payment status. The applicant has 
stated that the BAROSTIM NEOTM would be reported with CPT 
code 0266T (Implantation or replacement of carotid sinus baroreflex 
activation device; total system (includes generator placement, 
unilateral or bilateral lead placement, intra-operative interrogation, 
programming, and repositioning, when performed)). There have been no 
device costs reported for CPT code 0266T in CY 2019 claims or in 
previous calendar years. Therefore, for purposes of applying a device 
offset percentage for transitional pass-through device payments for CPT 
code 0266T, we are assigning a device offset percentage to 0266T in CY 
2021 based on the clinically-similar procedure 0268T (Implantation or 
replacement of carotid sinus baroreflex activation device; pulse 
generator only (includes intra-operative interrogation, programming, 
and repositioning, when performed)). Based on our review of CY 2019 
claims data, CPT code 0268T has a device offset percentage of 95.74 
percent. Therefore, for CY 2021, we are assigning device-intensive 
status to CPT code 0266T with a device offset percentage of 95.74 
percent.
    The full listing of the final CY 2021 device-intensive procedures 
can be found in Addendum P to the CY 2021 OPPS/ASC final rule with 
comment period (which is available via the internet on the CMS 
website).
3. Device Edit Policy
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66795), we finalized a policy and implemented claims processing edits 
that require any of the device codes used in the previous device-to-
procedure edits to be present on the claim whenever a procedure code 
assigned to any of the APCs listed in Table 5 of the CY 2015 OPPS/ASC 
final rule with comment period (the CY 2015 device-dependent APCs) is 
reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70422), we modified our previously existing 
policy and applied the device coding requirements exclusively to 
procedures that require the implantation of a device that are assigned 
to a device-intensive APC. In the CY 2016 OPPS/ASC final rule with 
comment period, we also finalized our policy that the claims processing 
edits are such that any device code, when reported on a claim with a 
procedure assigned to a device-intensive APC (listed in Table 42 of the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)) will 
satisfy the edit.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658 
through 79659), we changed our policy for CY 2017 and subsequent years 
to apply the CY 2016 device coding requirements to the newly defined 
device-intensive procedures. For CY 2017 and subsequent years, we also 
specified that any device code, when reported on a claim with a device-
intensive procedure, will satisfy the edit. In addition, we created 
HCPCS code C1889 to recognize devices furnished during a device-
intensive procedure that are not described by a specific Level II HCPCS 
Category C-code. Reporting HCPCS code C1889 with a device-intensive 
procedure will satisfy the edit requiring a device code to be reported 
on a claim with a device-intensive procedure. 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 did not propose any changes to this policy for CY 2021.
    Comment: Some commenters requested that CMS restore the device-to-
procedure and procedure-to-device edits.
    Response: As we stated in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66794), we continue to believe that the 
elimination of device-to-procedure edits and procedure-to-device edits 
is appropriate due to the experience hospitals now have in coding and 
reporting these claims fully. More specifically, for the most costly 
devices, we believe the C-APCs reliably reflect the cost of the device 
if charges for the device are included anywhere on the claim. We note 
that, under our current policy, hospitals are still expected to adhere 
to the guidelines of correct coding and append the correct device code 
to the claim when applicable. We also note that, as with all other 
items and services recognized under the OPPS, we expect hospitals to 
code and report their costs appropriately, regardless of whether there 
are claims processing edits in place.
4. Adjustment to OPPS Payment for No Cost/Full Credit and Partial 
Credit Devices
a. Background
    To ensure equitable OPPS payment when a hospital receives a device 
without cost or with full credit, in CY 2007, we implemented a policy 
to reduce the payment for specified device-dependent APCs by the 
estimated portion of the APC payment attributable to device costs (that 
is, the device offset) when the hospital receives a specified device at 
no cost or with full credit (71 FR 68071 through 68077). Hospitals were 
instructed to report no cost/full credit device cases on the claim 
using the ``FB'' modifier on the line with the procedure code in which 
the no cost/full credit device is used. In cases in which the device is 
furnished without cost or with full credit, hospitals were instructed 
to report a token device charge of less than $1.01. In cases in which 
the device being inserted is an upgrade (either of the same type of 
device or to a different type of device) with a full credit for the 
device being replaced, hospitals were instructed to report as the 
device charge the difference between the hospital's usual charge for 
the device being implanted and the hospital's usual charge for the 
device for which it received full credit. In CY 2008, we expanded this 
payment adjustment policy to include cases in which hospitals receive 
partial credit of 50 percent or more of the cost of a specified device. 
Hospitals were instructed to append the ``FC'' modifier to the 
procedure code that reports the service provided to furnish the device 
when they receive a partial credit of 50 percent or more of the cost of 
the new device. We refer readers to the CY 2008 OPPS/ASC final rule 
with comment period for more background information on the ``FB'' and 
``FC'' modifiers payment adjustment policies (72 FR 66743 through 
66749).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 
through 75007), beginning in CY 2014, we modified our policy of 
reducing

[[Page 86018]]

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.
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 the CY 2021 OPPS/ASC proposed rule, we proposed to change 
our regulation at Sec.  419.45(b)(1) and (2) to conform with the policy 
we adopted in CY 2014. In particular, we proposed 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 proposed to revise 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 proposed 
revisions to Sec.  419.45(b)(1) and (2) appear in section XXVII. of the 
CY 2021 OPPS/ASC proposed rule.
    We did not receive any comments on our proposal and are finalizing, 
without modification, our revisions to Sec.  419.45(b)(1) and (2).
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

[[Page 86019]]

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 proposed 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. of the CY 2021 OPPS/ASC proposed rule, 
we received no claims data with CPT code 0308T, which we previously 
assigned as a low-volume device-intensive procedure for CY 2017 through 
CY 2020. As such, we proposed to assign 0308T a payment weight based on 
the most recently available data, from the CY 2020 OPPS final rule, and 
therefore proposed to assign CPT code 0308T to APC 5495 (Level 5 
Intraocular Procedures). Additionally, in the absence of CY 2019 claims 
data for the CY 2021 OPPS/ASC proposed rule, we proposed 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 was based 
on the CY 2020 OPPS final rule device offset percentage of 82.21 
percent for CPT code 0308T. For more discussion on the proposed APC 
assignment and proposed payment rate for CPT code 0308T, see CY 2021 
OPPS/ASC proposed rule (85 FR 48840).
    Comment: One commenter supported our proposed device offset 
percentage for CPT code 0308T.
    Response: We thank the commenter for their support.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, to use the CY 2020 
median cost in determining the OPPS and ASC relative payment weights 
for 0308T and to assign the CY 2020 OPPS final rule device offset 
percentage of 82.21 percent as the CY 2021 device offset for CPT code 
0308T. For more discussion on the APC assignment and payment rate for 
CPT code 0308T, please see section III.D of this CY 2021 OPPS/ASC final 
rule with comment period.

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout this final rule with comment period, we use 
the term ``biological'' because this is the term that appears in 
section 1861(t) of the Act. A ``biological'' as used in this final rule 
with comment period includes (but is not necessarily limited to) a 
``biological product'' or a ``biologic'' as defined 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 were 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

[[Page 86020]]

is described on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Transitional Pass-Through Payment Period for 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.
    Comment: One commenter commended CMS for continuing the policy to 
provide for quarterly expiration of pass-through payment status, which 
allows a pass-through period that is as close to a full three years as 
possible.
    Response: We thank the commenter for their input and support of 
this policy change, which was adopted in the CY 2017 OPPS/ASC final 
rule (81 FR 79654 through 79655).
3. Drugs and Biologicals With Expiring Pass-Through Payment Status in 
CY 2020
    There are 29 drugs and biologicals whose pass-through payment 
status will expire during CY 2020 as listed in Table 36. 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 36 whose total period of OPPS pass-through payment is greater 
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 was proposed to be $130 for CY 2021), as discussed 
further in section V.B.2. of the CY 2021 OPPS/ASC 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 was proposed 
at ASP+6 percent for non-340B drugs for CY 2021, as discussed further 
in section V.B.3. of the CY 2021 OPPS/ASC proposed rule).
    We did not receive any public comments regarding our proposals. 
Therefore, we are adopting these proposals as final for CY 2021 without 
modification. The packaged or separately payable status of each of 
these drugs or biologicals is listed in Addendum B of the CY 2021 OPPS/
ASC final 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 proposed to end pass-through payment status in CY 2021 for 25 
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 37. 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 the CY 2021 OPPS/ASC 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

[[Page 86023]]

proposed to continue to pay for pass-through drugs and biologicals at 
ASP+6 percent, equivalent to the payment rate these drugs and 
biologicals would receive in the physician's office setting in CY 2021. 
We proposed 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 was proposed at ASP+6 percent, and the portion of the 
otherwise applicable OPD fee schedule that the Secretary determines is 
appropriate, which was proposed at ASP+6 percent, is $0.
    In the case of policy-packaged drugs (which include the following: 
Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents, diagnostic radiopharmaceuticals, and stress 
agents); and drugs and biologicals that function as supplies when used 
in a surgical procedure), we proposed that their pass-through payment 
amount would be equal to ASP+6 percent for CY 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 the CY 2021 OPPS/ASC proposed rule. 
We proposed 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 proposed 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 proposed to provide payment for 
both diagnostic and therapeutic radiopharmaceuticals that are granted 
pass-through payment status based on the ASP methodology. As stated 
earlier, for purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
payment status during CY 2021, we proposed to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which was proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
proposed to provide pass-through payment at WAC+3 percent (consistent 
with our proposed policy in section V.B.2.b. of the proposed rule), the 
equivalent payment provided to pass-through payment drugs and 
biologicals without ASP information. Additional detail 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 proposed to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    We did not receive any public comments regarding our proposals. 
Therefore, we are adopting these proposals as final for CY 2021 without 
modification. The drugs and biologicals for which pass-through payment 
status will expire between March 31, 2021 and December 31, 2021 are 
shown in Table 37.
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5. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through 
Payment Status Continuing in CY 2021
    We proposed to continue pass-through payment status in CY 2021 for 
46 drugs and note that 22 additional drugs were granted pass-through 
status since publication of the proposed rule. Thus, for CY 2021, there 
are 68 drugs and biologicals with pass-through status. These drugs and 
biologicals, which were approved for pass-through payment status with 
effective dates beginning between April 1, 2019 and January 1, 2021, 
are listed in Table 38. The APCs and HCPCS codes for these drugs and 
biologicals, which have pass-through payment status that will continue 
after December 31, 2021, were assigned status indicator ``G'' in 
Addenda A and B to the CY 2021 OPPS/ASC 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 proposed to continue to pay for 
pass-through drugs and biologicals at ASP+6 percent, equivalent to the 
payment rate these drugs and biologicals would receive in the 
physician's office setting in CY 2021. We proposed 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 was proposed 
at ASP+6 percent, and the portion of the otherwise applicable OPD fee 
schedule that the Secretary determines is appropriate, which was 
proposed at ASP+6 percent, is $0.
    In the case of policy-packaged drugs (which include the following: 
Anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents, diagnostic radiopharmaceuticals, and stress 
agents); and drugs and biologicals that function as supplies when used 
in a surgical procedure), we proposed that their pass-through payment 
amount would be equal to ASP+6 percent for CY 2021 minus a payment 
offset for any predecessor drug products contributing to the pass-
through payment as described in section V.A.6. of the CY 2021 OPPS/ASC 
proposed rule. We proposed 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 proposed 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 proposed to provide payment for 
both diagnostic and therapeutic radiopharmaceuticals that are granted 
pass-through payment status based on the ASP methodology. As stated 
earlier, for purposes of pass-through payment, we consider 
radiopharmaceuticals to be drugs under the OPPS. Therefore, if a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
payment status during CY 2021, we proposed to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which was proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
proposed to provide pass-through payment at WAC+3 percent (consistent 
with our proposed policy in section V.B.2.b. of the proposed rule), the 
equivalent payment provided to pass-through payment drugs and 
biologicals without ASP information. Additional detail 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 proposed to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    We did not receive any public comments regarding our proposals. 
Therefore, we are adopting these proposals for CY 2021 without 
modification. The drugs and biologicals that have pass-through payment 
status expire after December 31, 2021 are shown in Table 38.

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6. Provisions for Reducing Transitional Pass-Through Payments for 
Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To Offset 
Costs Packaged into APC Groups
    Under the regulations at 42 CFR 419.2(b), nonpass-through drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure are packaged in the OPPS. This 
category includes diagnostic radiopharmaceuticals, contrast agents, 
stress agents, and other diagnostic drugs. Also under 42 CFR 419.2(b), 
nonpass-through drugs and biologicals that function as supplies in a 
surgical procedure are packaged in the OPPS. This category includes 
skin substitutes and other surgical-supply drugs and biologicals. As 
described earlier, section 1833(t)(6)(D)(i) of the Act specifies that 
the transitional pass-through payment amount for pass-through drugs and 
biologicals is the difference between the amount paid under section 
1842(o) of the Act and the otherwise applicable OPD fee schedule 
amount. Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we deduct from the pass-
through payment for policy-packaged drugs, biologicals, and 
radiopharmaceuticals an amount reflecting the portion of the APC 
payment associated with predecessor products in order to ensure no 
duplicate payment is made. This amount reflecting the portion of the 
APC payment associated with predecessor products is called the payment 
offset.
    The payment offset policy applies to all policy packaged drugs, 
biologicals, and radiopharmaceuticals. For a full description of the 
payment offset policy as applied to diagnostic radiopharmaceuticals, 
contrast agents, stress agents, and skin substitutes, we

[[Page 86031]]

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 proposed to continue to apply the same policy packaged 
offset policy to payment for pass-through diagnostic 
radiopharmaceuticals, pass-through contrast agents, pass-through stress 
agents, and pass-through skin substitutes. The proposed APCs to which a 
payment offset may be applicable for pass-through diagnostic 
radiopharmaceuticals, pass-through contrast agents, pass-through stress 
agents, and pass-through skin substitutes are identified in Table 39.
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BILLING CODE 4120-01-C
    We proposed 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.
    Comment: One commenter requested that CMS release a copy of the APC 
offset file with future OPPS/ASC proposed rules to enable the public to

[[Page 86032]]

calculate the percentage of APC payment associated with packaged drug 
costs using APC offset data for the upcoming calendar year.
    Response: We thank the commenter for their suggestion, and we will 
consider addressing this request in future rulemaking.

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

1. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Packaging Threshold
    In accordance with section 1833(t)(16)(B) of the Act, the threshold 
for establishing separate APCs for payment of drugs and biologicals was 
set to $50 per administration during CYs 2005 and 2006. In CY 2007, we 
used the four quarter moving average Producer Price Index (PPI) levels 
for Pharmaceutical Preparations (Prescription) to trend the $50 
threshold forward from the third quarter of CY 2005 (when the Pub. L. 
108-173 mandated threshold became effective) to the third quarter of CY 
2007. We then rounded the resulting dollar amount to the nearest $5 
increment in order to determine the CY 2007 threshold amount of $55. 
Using the same methodology as that used in CY 2007 (which is discussed 
in more detail in the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68085 through 68086)), we set the packaging threshold for 
establishing separate APCs for drugs and biologicals at $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 proposed a packaging threshold for CY 
2021 of $130.
    Comment: One commenter expressed their support for maintaining the 
drug packaging threshold for CY 2021 at $130. The commenter believes, 
however, that the drug packaging threshold has been increasing faster 
than payment increases under the OPPS. The commenter would like us to 
research if the drug packaging threshold should be lowered in future 
years.
    Response: We appreciate the commenter's support of the drug 
packaging threshold level of $130. We also thank the commenter for 
their suggestion to consider reducing the drug packaging threshold in 
future years and will consider it for future rulemaking.
    After consideration of the public comment, we are implementing our 
proposal without modification to have a drug packaging threshold for CY 
2021 of $130.
b. 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 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 proposed 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 proposed 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 proposed 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 were 
the most recent data available for use at the time of development of 
the proposed rule. These data also were the basis for drug payments in 
the physician's office setting, effective April 1, 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 proposed 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 the CY 2021 OPPS/ASC 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

[[Page 86033]]

proposed 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 this final rule with 
comment period will be based on ASP data from the third 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 updated 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.
    We did not receive any public comments on our proposal to 
recalculate the mean unit cost for items that do not currently have an 
ASP-based payment rate from all of the CY 2019 claims data and updated 
cost report information available for this CY 2021 final rule with 
comment period to determine their final per day cost. We also did not 
receive any public comments on our proposal to continue to follow the 
established policies, initially adopted for the CY 2005 OPPS (69 FR 
65780), when the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in the proposed rule 
may be different from the same drug HCPCS code's packaging status 
determined based on the data used for the final rule with comment 
period. Therefore, for CY 2021, we are finalizing these two proposals 
without modification.
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 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).
    Comment: One commenter requested that we develop a policy to 
provide separate payment for drugs that are administered at the time of 
ophthalmic surgery and have an FDA-approved indication to treat or 
prevent post-operative issues.
    Response: A surgical procedure episode consists of both pre-
operative and post-operative care in addition to the surgical procedure 
itself. If a drug used to address a post-operative concern, such as 
pain management, is billed together with a surgical procedure, we 
assume that the pain management drug was given as a part of the overall 
surgical procedure, and based on our policy, it is required to be 
packaged.
    Comment: One commenter recommended that CMS continue to apply 
radiolabeled product edits to the nuclear medicine procedures to ensure 
that all packaged costs are included on nuclear medicine claims in 
order to establish appropriate payment rates in the future. The 
commenter was concerned that many providers performing nuclear medicine 
procedures are not including the cost of diagnostic 
radiopharmaceuticals used

[[Page 86034]]

for the procedures in their claims submissions. The commenter believes 
this lack of drug cost reporting could be causing the cost of nuclear 
medicine procedures to be underreported and therefore request that the 
radiolabeled product edits be reinstated.
    Response: We appreciated the commenter's feedback; however, we do 
not plan to reinstate the radiolabeled product edits to nuclear 
medicine procedures, which required a diagnostic radiopharmaceutical to 
be present on the same claim as a nuclear medicine procedure for 
payment to be made under the OPPS. As previously discussed in the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61314), the edits 
were in place between CY 2008 and CY 2014 (78 FR 75033). We believe the 
period of time in which the edits were in place was sufficient for 
hospitals to gain experience reporting procedures involving 
radiolabeled products and to become accustomed to ensuring that they 
code and report charges so that their claims fully and appropriately 
reflect the costs of those radiolabeled products. As with all other 
items and services recognized under the OPPS, we expect hospitals to 
code and report their costs appropriately, regardless of whether there 
are claims processing edits in place.
    Comment: The HOP Panel and several commenters requested that 
diagnostic radiopharmaceuticals be paid separately in all cases, not 
just when the drugs have pass-through payment status. One commenter 
suggested payment based upon ASP, WAC, AWP, or mean unit cost data 
derived from hospital claims. Some commenters mentioned that pass-
through payment status helps the diffusion of new diagnostic 
radiopharmaceuticals into the market, but is not enough to make up for 
what the commenters believe is inadequate payment after pass-through 
status expires. Commenters opposed incorporating the cost of the drug 
into the associated APC, and provided evidence showing procedures in 
which diagnostic radiopharmaceuticals are considered to be a surgical 
supply, which the commenter believed are often paid at a lower rate 
than the payment rate for the diagnostic radiopharmaceutical itself 
when the drug had pass-through payment status. Additionally, commenters 
proposed alternative payment methodologies such as subjecting 
diagnostic radiopharmaceuticals to the drug packaging threshold, 
creating separate APC payments for diagnostic radiopharmaceuticals that 
cost more than $500, or using ASP, WAC, or AWP to account for packaged 
radiopharmaceutical costs.
    Response: We thank commenters for their suggestions. Commenters 
made many of these suggestions and we addressed them in previous rules, 
including the CY 2019 OPPS/ASC final rule (83 FR 58955 through 58966) 
and the CY 2020 OPPS/ASC final rule (84 FR 61314 through 61315). We 
continue to believe that diagnostic radiopharmaceuticals are an 
integral component of many nuclear medicine and imaging procedures and 
charges associated with them should be reported on hospital claims to 
the extent they are used. Therefore, the payment for the 
radiopharmaceuticals is reflected within the payment for the primary 
procedure. In response to the comment regarding the proposed cost of 
the packaged procedure in CY 2021 being substantially lower than the 
payment rate of the radiopharmaceutical when it was on pass-through 
payment status plus the payment rate of the procedure associated with 
the radiopharmaceutical, we note that rates are established in a manner 
that uses the geometric mean of reported costs to furnish the procedure 
based on data submitted to CMS from all hospitals paid under the OPPS 
to set the payment rate for the service. Accordingly, the costs that 
are calculated by Medicare reflect the average costs of items and 
services that are packaged into a primary procedure and will not 
necessarily equal the sum of the cost of the primary procedure and the 
average sales price of the specific items and services used in the 
procedure in each case. Furthermore, the costs will be based on the 
reported costs submitted to Medicare by the hospitals and not the list 
price established by the manufacturer. Claims data that include the 
radiopharmaceutical packaged with the associated procedure reflect the 
combined cost of the procedure and the radiopharmaceutical used in the 
procedure. Additionally, we do not believe it is appropriate to create 
a new packaging threshold specifically for diagnostic 
radiopharmaceuticals as such a threshold would not align with our 
overall packaging policy and commenters have submitted only limited 
data to support a specific threshold. With respect to the request that 
we create a new APC for each radiopharmaceutical product, we do not 
believe it is appropriate to create unique APCs for diagnostic 
radiopharmaceuticals. Diagnostic radiopharmaceuticals function as 
supplies during a diagnostic test or procedure and following our 
longstanding packaging policy, these items are packaged under the OPPS. 
Packaging supports our goal of making OPPS payments consistent with 
those of a prospective payment system, which packages costs into a 
single aggregate payment for a service, encounter, or episode of care. 
Furthermore, diagnostic radiopharmaceuticals function as supplies that 
enable the provision of an independent service, and are not themselves 
the primary therapeutic modality, and therefore, we do not believe they 
warrant separate payment through creation of a unique APC at this time. 
We welcome ongoing dialogue with stakeholders regarding suggestions for 
payment changes for consideration for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification regarding products that 
are packaged consistent with the policies in 42 CFR 419.2(b).
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

[[Page 86035]]

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 2018 
was displayed in Table 25 of the CY 2021 OPPS/ASC proposed rule (82 FR 
48879).
    We did not receive any public comments on this proposal. Therefore, 
for CY 2021, we are finalizing our proposal, without modification, to 
continue our policy to make packaging determinations on a drug-specific 
basis, rather than a HCPCS code-specific basis, for those HCPCS codes 
that describe the same drug or biological but different dosages. The 
packaging status of each drug and biological HCPCS code to which this 
methodology applies in CY 2021 is displayed in Table 40.
BILLING CODE 4120-01-P

[[Page 86036]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.061


[[Page 86037]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.062

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 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

[[Page 86038]]

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.\69\
---------------------------------------------------------------------------

    \69\ Medicare Payment Advisory Committee. June 2005 Report to 
the Congress. Chapter 6: Payment for pharmacy handling costs in 
hospital outpatient departments. Available at: http://www.medpac.gov/docs/default-source/reports/June05_ch6.pdf?sfvrsn=0.
---------------------------------------------------------------------------

    It has been our policy since CY 2006 to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, 
as required by statute, but we also apply it to separately payable 
drugs and biologicals that are not SCODs, which is a policy 
determination rather than a statutory requirement. In the CY 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 proposed 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 proposed 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 of 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 proposed 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 proposed to 
apply this provision to non-SCOD separately payable drugs. Because we 
proposed to establish the average price for a WAC-based drug under 
section 1847A of the Act as WAC+3 percent instead of WAC+6 percent, we 
believe it is appropriate to price separately payable WAC-based drugs 
at the same amount under the OPPS. We proposed that, if finalized, our 
proposal to pay for drugs or biologicals at WAC+3 percent, rather than 
WAC+6 percent, would apply whenever WAC-based pricing is used for a 
drug or biological 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 proposed 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 the CY 2021 OPPS/ASC proposed rule 
(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

[[Page 86039]]

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 were 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.
    Comment: Multiple commenters expressed their support for paying for 
separately payable drugs and biologicals at ASP plus 6 percent. The 
commenters believe this policy is consistent with statute and 
Congressional intent, and generates more predictable payment for 
providers than previous payment methodologies for drugs and 
biologicals. The commenters believe the ASP plus 6 percent payment 
policy ensures equivalent payment for drugs and biologicals between the 
outpatient hospital setting and the physician office, which encourages 
Medicare beneficiaries to receive care in the most clinically 
appropriate setting.
    Response: We appreciate the commenters' support for our policy.
    Comment: One commenter requested that an add-on percentage of 
greater than 6 percent of ASP be paid for separately payable 
radiopharmaceuticals to reflect higher overhead and handling costs for 
these products.
    Response: The add-on percentage of 6 percent is generally viewed as 
reflecting the overhead and handling cost of most drugs, 
radiopharmaceuticals, and biologicals that are separately payable in 
the OPPS even though the overhead and handling costs for individual 
products may be higher or lower than 6 percent of the ASP. It is not 
practical to calculate the overhead and handling costs for each drug 
and radiopharmaceutical. We believe that the add-on percentage of 6 
percent is appropriate for separately payable radiopharmaceuticals.
    After considering the public comments we received, we are 
finalizing our proposals related to payment for specified covered 
outpatient drugs (SCODs) and other separately payable drugs and 
biologicals without modification.
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

[[Page 86040]]

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 proposed 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 proposed to continue our current policy for paying for 
nonpass-through biosimilars acquired under the 340B program, except 
that we proposed 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 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. However, in this final rule, as 
discussed in section V.B.6, we are not adopting our proposal to pay for 
drugs acquired under the 340B program at ASP minus 28.7 percent but 
instead are continuing to pay for 340B drugs under the OPPS at ASP 
minus 22.5 percent in the OPPS. Accordingly, we are also continuing our 
policy to pay for biosimilars acquired through the 340B program at the 
biosimilar's ASP minus 22.5 percent of the biosimilar's ASP.
    Comment: Multiple commenters supported our proposal to continue our 
policy from CY 2018 to make biosimilar biological products eligible for 
pass-through payment and not just the first biosimilar biological 
product for a reference product.
    Response: We appreciate the commenters' support of this established 
policy.
    Comment: Multiple commenters supported our proposal to pay nonpass-
through biosimilars acquired under the 340B Program at ASP minus 28.7 
percent of the biosimilar's ASP in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act.
    Response: We appreciate the commenters' support. Please see section 
V.B.6 of this final rule with comment period for a discussion of 
payment for biosimilars acquired under the 340B program. As noted 
above, we are not finalizing our proposal to pay for 340B drugs or 
biologicals at a net rate of ASP minus 28.7 percent.
    Comment: One commenter did not support our proposal to continue our 
CY 2018 policy to make all biosimilar biological products eligible for 
pass-through payment and not just the first biosimilar biological 
product for a reference product. The commenter believes biosimilars are 
not new or innovative drugs or biologicals because they believe the 
reference product is the only new and innovative product. Therefore, 
the commenter stated that biosimilars should not be considered for 
pass-through payment status at all. Additionally, the commenter stated 
that there should be a ``level playing field'' between biosimilars and 
their reference products in order to increase competition and reduce 
costs for beneficiaries. The commenter does not believe it is fair for 
biosimilars of a reference product to be receiving pass-through payment 
of ASP+6 percent of the reference product's ASP. The commenter pointed 
out that when the reference product is no longer eligible for pass-
through payment, if it is acquired under the 340B program, hospitals 
would be paid for the product at ASP minus 22.5 percent. The commenter 
believes that this difference in the payment rates for biosimilars and 
their reference products could potentially lead to increased Medicare 
spending on biosimilars as providers utilize biosimilars instead of the 
biosimilars' reference products because of the higher payment rates for 
biosimilars in these circumstances.
    Response: As discussed in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58977), we continue to believe that eligibility 
for pass-through payment status reflects the unique, complex nature of 
biosimilars and is important as biosimilars become established in the 
market, just as it is for all other new drugs and biologicals. In terms 
of the potential increased payment for biosimilars under our policy to 
allow biosimilars to be eligible for pass-through status, overall 
increased competition due to the presence of more biosimilars on the 
market as a result of this policy is expected to drive payments down 
for both Medicare and for beneficiaries over time, even if there may be 
increased spending on biosimilars in the short term.
    Comment: Several commenters recommended that CMS provide additional 
support for biosimilars in the form of beneficial payment policies. 
Some of these recommendations included a delayed effective date for the 
340B payment reduction; a smaller reduction in payment for biosimilars 
acquired under the 340B program; an add-on based on the reference 
product's ASP when the biosimilar is subject to the 340B payment 
reduction; increased payment for biosimilars in general; and biosimilar 
value-based models.
    Response: We thank the commenters for their feedback. However, we 
maintain that our proposed payment policy for biosimilars adequately 
supports these products by permitting both reference products and their 
associated biosimilars to receive the same percentage add-on amount, 
which is calculated based on the ASP of the reference product, 
regardless of the biosimilar's ASP. Similarly, for products acquired 
under the 340B program, we note that CMS pays for nonpass-through 
biosimilars acquired under the 340B Program at ASP minus 22.5 percent 
of the biosimilar's ASP rather than ASP minus 22.5 percent of the 
reference product's ASP. If the payment reduction were based on the 
reference product's ASP, which would generally be expected to be priced 
higher than the biosimilar, it would result in a more significant 
payment decrease than if the 22.5 percent were calculated based on the 
biosimilar's ASP. Please see section V.B.6 for a discussion of payment 
for biosimilars acquired under 340B. Biosimilars will be treated the 
same as other separately payable drugs and cannot be excluded from the 
340B discount once their pass-through period has ended. We do not 
believe that additional add-on payments for biosimilars obtained under 
the 340B program are necessary to encourage their utilization. We note 
value-based models are outside of the scope of this rule.
    For CY 2021, after consideration of the public comments we 
received, we are finalizing our proposed payment policy for biosimilar 
products, without modification, to continue the policy established in 
CY 2018 to make all biosimilar biological products eligible for pass-
through payment and not just the first biosimilar biological product 
for a reference product. We are also finalizing our alternative 
proposal to pay nonpass-through biosimilars acquired under the 340B 
Program at the biosimilar's ASP minus 22.5 percent of the biosimilar's 
ASP, in accordance with section 1833(t)(14)(A)(iii)(II) of the Act. Our 
final policy regarding the payment rate for drugs and biologicals that 
are acquired under the 340B program is described in section V.B.6 of 
this final rule with comment period.
3. Payment Policy for Therapeutic Radiopharmaceuticals
    For CY 2021, we proposed to continue the payment policy for 
therapeutic radiopharmaceuticals that began in CY 2010. We pay for 
separately payable therapeutic radiopharmaceuticals under the ASP 
methodology adopted for separately payable drugs and

[[Page 86041]]

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 proposed 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 proposed 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 
were included in Addenda A and B to the CY 2021 OPPS/ASC proposed rule 
(which are available via the internet on the CMS website).
    Comment: One commenter supported the continuation of this policy to 
provide a predicable payment methodology and avoid the payment swings 
that occurred prior to adoption of the statutory default rate.
    Response: We thank the commenter for their support.
    We did not receive any additional public comments on this proposal. 
Therefore, we are finalizing our proposal, without modification, to 
continue to pay all nonpass-through, separately payable therapeutic 
radiopharmaceuticals at ASP+6 percent. We are also finalizing our 
proposal to continue 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. The CY 2021 
final payment rates for nonpass-through separately payable therapeutic 
radiopharmaceuticals are included in Addenda A and B to this final rule 
with comment period (which are available via the internet on the CMS 
website).
4. Payment 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 proposed to pay for blood clotting factors at ASP+6 
percent, consistent with our proposed payment policy for other nonpass-
through, separately payable drugs and biologicals, and to continue our 
policy for payment of the furnishing fee using an updated amount. Our 
policy to pay for a furnishing fee for blood clotting factors under the 
OPPS is consistent with the methodology applied in the physician's 
office and in the inpatient hospital setting. These methodologies were 
first articulated in the CY 2006 OPPS final rule with comment period 
(70 FR 68661) and later discussed in the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66765). The proposed furnishing fee update 
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 proposed to announce the actual figure for the percent 
change in the applicable CPI and the updated furnishing fee calculated 
based on that figure through applicable program instructions and 
posting on our website at: http://www.cms.gov/Medicare/Medicare-Fee-
for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    We proposed 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.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing our proposal, without modification, to provide 
payment for blood clotting factors under the same methodology as other 
separately payable drugs and biologicals under the OPPS and to continue 
payment of an updated furnishing fee. We will announce the actual 
figure of the percent change in the applicable CPI and the updated 
furnishing fee calculation based on that figure through the applicable 
program instructions and posting on the CMS website.
5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    For CY 2021, we proposed 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 
the CY 2021 OPPS/ASC proposed rule, which is available via the internet 
on the CMS website.
    We did not receive any comments on our proposal. Therefore, we are 
finalizing our CY 2021 proposal without modification, including our 
proposal to assign drug or biological products status indicator ``K'' 
and pay for them separately for the remainder of CY 2021 if pricing 
information becomes available. The CY 2021 payment status of each of 
the nonpass-through drugs, biologicals, and radiopharmaceuticals

[[Page 86042]]

with HCPCS codes but without OPPS hospital claims data is listed in 
Addendum B to this final rule with comment period, which is available 
via the internet on the CMS website.
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, in December 2018, the United States District Court 
for the District of Columbia (the district court) concluded that the 
Secretary lacked the authority to bring the default rate in line with 
average acquisition cost unless the Secretary obtained survey data from 
hospitals on their acquisition costs. HHS disagreed 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 confirmed that the ASP minus 22.5 percent rate does not underpay 
340B hospitals, and the survey data could support 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 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 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 
have been 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

[[Page 86043]]

for drugs acquired under the 340B Program to ASP minus 22.5 percent for 
that year.\70\ 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.\71\ 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.\72\ 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,'' \73\ 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.'' 
\74\ Id. at 19. ``And because HHS has already processed claims under 
the previous rates, the Secretary would potentially be required to 
recoup certain payments made to providers; an expensive and time-
consuming prospect.'' \75\
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    \70\ American Hosp. Ass'n, et al. v. Azar, et al., No. 1:18-cv-
2084 (D.D.C. Dec. 27, 2018).
    \71\ Id. at 35 (quoting Amgen, Inc. v. Smith, 357 F.3d 103, 112 
(D.C. Cir. 2004) (citations omitted)).
    \72\ 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.
    \73\ Id. at 13.
    \74\ Id. at 19.
    \75\ 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 
United States Court of Appeals for the District of Columbia Circuit, 
(hereinafter referred to as ``the D.C. Circuit''), and on July 31, 2020 
the court entered an opinion reversing the district court's judgement 
in this matter. Nonetheless, before the D.C. Circuit upheld our 
authority to pay ASP minus 22.5 percent, 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 in 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.\76\ 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.
---------------------------------------------------------------------------

    \76\  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 stated that we 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 also stated that 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 
would 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).

[[Page 86044]]

    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.\77\ 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.\78\ 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.\79\ 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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    \77\ https://www.gao.gov/new.items/d06372.pdf.
    \78\ Id. at 18.
    \79\ https://www.gao.gov/new.items/d06372.pdf (Appendix I: 
Purchase Price for Drug SCODs).
---------------------------------------------------------------------------

    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 minus 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.'' 
\80\ While we continue to believe that ASP plus 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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    \80\ 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 stated 
that we believed it is appropriate to read the two provisions together 
to 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 covered entity hospitals 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 the last quarter of CY 2018 
(October 1, 2018 through December 31, 2018) and/or the 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 340B-acquired drug that are greater 
than the ceiling price. For this reason, where the acquisition price 
for a particular drug was not available or not 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 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

[[Page 86045]]

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 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, 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 were 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 hospital survey respondents, including respondents to both the 
Quick and Detailed surveys, were generally similar to the hospital 
characteristics of the aggregate 340B survey population.
d. Proposed Payment Policy for Drugs Acquired Under the 340B Program 
for CY 2021
(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 
the CY 2021 OPPS/ASC proposed rule, we stated that we were 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 stated that we believe that it is 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 also stated that 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 explained that we believe it is appropriate 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). As we explained in the CY 2021 OPPS/
ASC proposed rule (85 FR 48886), 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 proposed 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) of the Act. 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

[[Page 86046]]

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 instead proposed 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 we explained in the CY 2021 OPPS/ASC proposed rule and 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 estimated that the typical acquisition cost 
for 340B drugs for hospitals paid under the OPPS is ASP minus 34.7 
percent.
    We explained in the proposed rule that we determined the average 
discount of 34.7 percent by assessing a number of factors including: 
Multiple measures of central tendencies (arithmetic mean, 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 explained in the proposed rule 
that 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 
proposed 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, we explained that 
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 explained in the proposed rule that 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 explained that 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 a drug for snake anti-venom that has relatively 
low utilization in the OPPS. In the proposed rule, we stated that 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. As we explained in the proposed 
rule, 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 Codes With Multiple NDCs
    In addition, we stated in the proposed rule that 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 code 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 calculated 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

[[Page 86047]]

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 proposed 
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).\81\ 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. However, as HRSA noted in 
the 340B Drug Pricing Program Ceiling Price and Manufacturer Civil 
Monetary Penalties Regulation Final Rule (82 FR 1210), although 
infrequent, there are instances when the 340B ceiling price is zero. 
HRSA did not believe that it is consistent with the statutory scheme to 
set the price at zero. In this circumstance, HRSA required that 
manufacturers charge $0.01 for the drug, which they believed best 
effectuates the statutory scheme by requiring a payment.\82\ We 
proposed 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.
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    In the proposed rule, we acknowledged 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 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 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 stated in the proposed rule that we were 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 proposed to exclude penny priced drugs from our analysis, 
but solicited public comment on whether such a 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 did not propose to trim them because we proposed 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 proposed 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 41, 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 Table 41 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 code, using the highest NDC per HCPCS code, 
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 would be appropriate. Specifically, we 
believe using the

[[Page 86048]]

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 41, the final 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 would be 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 (that is, ceiling) price for drugs to which it applies, 
as noted above we believed it was appropriate to exclude penny priced 
drugs for purposes of our proposal.
    We explained in the CY 2021 OPPS/ASC proposed rule that we believe 
the manner in which we arrived at the proposed payment amount of ASP 
minus 34.7 percent for 340B-acquired drugs is an appropriate and 
accurate method of determining the average discount or typical 
discount. We also noted that we believe it is reflective of 
stakeholder's actual acquisition costs, and is as generous as possible 
without compromising accuracy. We explained that we 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 statute and the respondents to the 
survey were given a pledge of confidentiality, we also emphasized that 
we were exploring and previously sought 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] TR29DE20.063

(4) Determining an Add-on Payment for 340B Drugs
    Under the OPPS, Medicare pays for 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,\83\ 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 stated in the proposed 
rule that we did not believe that it was 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 emphasized that 
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, we explained that 
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 noted

[[Page 86049]]

that 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 explained that 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, we stated that 
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 proposed 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, we explained 
that 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 noted 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 proposed 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 proposed the 340B payment adjustment for 
WAC-priced drugs would mirror that of ASP payment with 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 proposed 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 proposed 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 hospitals 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. 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 stated that we continued 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 
gave 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 
proposed 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 the hospital types that are 
exempt 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 proposed 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.
Summary of Proposed Policy
    In summary, we proposed 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.

[[Page 86050]]

This proposal included our previously discussed methodology used to 
arrive at the 34.7 percent average discount that we proposed to apply 
to all drugs acquired under the 340B program. This methodology included 
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. We explained in the proposed rule 
that our intent was that, if finalized, this payment methodology would 
apply beginning on January 1, 2021 and any changes to this permanent 
payment policy would be required to be adopted through notice and 
comment rulemaking. We also proposed 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 proposed 
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.
    For the reasons discussed below, we are finalizing our alternative 
proposal to continue our current policy of paying ASP minus 22.5 
percent for 340B-acquired drugs. However, we also summarize and respond 
below to the comments we received on our proposal to pay for 340B-
acquired drugs at a net rate of ASP minus 28.7 percent based on survey 
data.
Comments Regarding 340B Survey Methodology and Implementation
    Comment: Several commenters contended that CMS' plan to collect 
acquisition cost data from 340B hospitals only, and not from other 
providers that are paid under the OPPS, but that do not participate in 
the 340B program, violates section 1833(t)(14)(D)(iii) of the Act. 
Specifically, they stated that although the Medicare statute allows for 
a survey of hospitals based on drug acquisition costs, the statute does 
not allow the Secretary to use subclause (I) of section 
1833(t)(14)(A)(iii) to target a subset of hospitals for the survey and 
subclause (II) of section 1833(t)(14)(A)(iii) for other non-340B 
hospitals. While commenters agreed that the Secretary has authority 
under section 1833(t)(14)(A)(iii)(I) to set payment rates that vary by 
hospital group based on relevant hospital characteristics such as 
volume of outpatient services, they maintained that the Secretary is 
not permitted to survey only one group of hospitals for acquisition 
costs for purposes of setting the payment rates under the OPPS. 
Furthermore, commenters stated that section 1833(t)(14)(D)(iii) 
requires that surveys conducted by the Secretary ``shall have a large 
sample of hospitals that is sufficient to generate a statistically 
significant estimate of the average hospital acquisition cost for each 
specified covered outpatient drug (SCODs).'' Commenters continued to 
state that because the survey had what they contended was a low 
response rate, they believed CMS was unable to gain enough data to 
yield a statistically significant estimate of average hospital 
acquisition cost for each specified covered outpatient drug. 
Additionally, some of these commenters contended that the acquisition 
data collected in response to the survey only included data from the 
fourth quarter of 2018 and the first quarter of 2019, and that this was 
an inadequate sample due to yearly fluctuations in drug pricing.
    Response: We disagree with the commenters' assertion that the 
manner in which we collected drug and biological acquisition cost data 
from 340B hospitals is inconsistent with the statute, as well as the 
commenters' interpretation of section 1833(t)(14)(D)(iii) that the 
survey of hospital acquisition costs for SCODs must be administered to 
all hospitals or all hospital types. Section 1833(t)(14)(D)(iii) does 
not require the Secretary to survey all hospitals, it requires Medicare 
to have a large sample of hospitals that is sufficient to generate a 
statistically significant estimate of the average hospital acquisition 
cost for each SCOD. The statute does not prescribe how we develop the 
sampling methodology. Surveying 340B hospitals, for which average sales 
price (ASP) data does not serve as a reliable proxy for their 
acquisition costs, is necessary to accurately determine payment amounts 
for drugs acquired under the 340B program. However, we do not believe 
it is necessary to survey non-340B hospitals because our ASP data 
includes drug acquisition costs from these hospitals, which are an 
adequate proxy of the average drug acquisition costs of such providers. 
Surveying non-340B hospitals would unnecessarily burden such hospitals, 
for which we already have an adequate proxy for drug acquisition costs.
    Unlike the reasonable proxy that exists for average acquisition 
drug costs for non-340B enrolled hospitals (that is, ASP data), the 
significant drug acquisition cost discounts that 340B participating 
hospitals receive are much greater than those received by hospitals not 
participating in the 340B program; accordingly, 340B enrollment status 
is a relevant characteristic for drug acquisition costs. The statutory 
provision at issue--section 1833(t)(14)(A)(iii)(I)--explicitly states 
that the average acquisition cost for a drug for a year ``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).'' We believe it is within the Secretary's discretion 
under section 1833(t)(14)(A)(iii)(I) to choose to distinguish between 
hospital groups based on whether or not they are covered entities 
eligible to receive drugs and biologicals at discounted rates under the 
340B program. We also note that section 1833(t)(14)(D)(ii) refers to 
use of the hospital acquisition costs for SCODs in setting payment 
rates under subparagraph (A) of section 1833(t)(14), and therefore, we 
believe it is appropriate to read the two provisions together to permit 
the Secretary to survey 340B hospitals only. Conversely, no provision 
compels the Secretary to impose an unnecessary survey burden on non-
340B hospitals, for which we have an adequate proxy for average 
acquisition drug costs. As previously stated, we believe the sampling 
timeframe is appropriate due to the numerous factors taken into 
consideration to provide a conservative estimate as well as the 
proposed application of the ASP reduction, which was proposed as a 
single reduction amount applied to each drug's ASP.
    Comment: Some commenters had concerns with the survey response 
rate. Commenters stated that only providing approximately 3 weeks to 
complete the survey during the initial stages of the PHE was 
concerning. Commenters believed this was why CMS received what they 
contended was a low response rate of 62 percent (7 percent Detailed 
Surveys and 55 percent Quick Surveys). Several commenters who completed 
the Quick Survey noted in their comments that they chose this method 
due to it being the least burdensome option, and that ceiling prices 
were not necessarily reflective of their acquisition costs. For these 
reasons, commenters felt it would be inappropriate for CMS to base OPPS 
payment for 340B drugs on these survey results.
    Response: We thank commenters for their feedback. We respectfully 
disagree with commenters' assertion that CMS received an inadequate 
response rate on

[[Page 86051]]

which to base OPPS payment for 340B-acquired drugs. As commenters 
noted, a combined 62 percent of the 340B participating providers 
responded to the survey through a Detailed or Quick Survey submission. 
For the remaining 38 percent of non-affirmative responders, we noted in 
the survey instructions that we would utilize 340B ceiling prices as 
proxies for the hospitals' highest possible acquisition costs. We 
believe the 340B ceiling price is a fair proxy for the hospitals' 
acquisition costs because hospitals cannot be required to pay more than 
the 340B ceiling price (and, in fact, often pay much less) for a 340B 
drug. Therefore, we explained in the proposed rule that we believed 
using the 340B ceiling price was the most conservative, and yet 
appropriate, way to calculate the discount for the 38 percent of non-
affirmative responders.
    Comment: Commenters were generally supportive of CMS' application 
of a 6 percent add-on based upon the product's ASP as part of our 
proposal to pay for 340B-acquired drugs under the OPPS based on survey 
data. Commenters did not find it appropriate to base payment on ASP 
minus 34.7 percent, which would not include a 6 percent add-on, and 
instead supported a payment amount of ASP minus 28.7 percent, which 
includes the 6 percent add-on. Commenters believed this add-on was 
necessary, and they felt it would be appropriate for the same drug to 
receive the same add-on payment regardless of whether it was purchased 
through the 340B program or at the current policy of ASP minus 22.5 
percent.
    Response: We thank the commenters for their support on this 
proposal. We still do not believe that it is imperative to establish an 
add-on for overhead and handling, as we believe that our conservative 
estimate of average acquisition costs may already account for the costs 
of overhead and handling. However, as explained further below, we are 
not finalizing our proposal to pay for 340B-acquired drugs based on 
hospital survey data at ASP minus 28.7 percent, which we proposed would 
include a 6 percent add-on. Nonetheless, we will consider this 
information for potential future rulemaking.
    Comment: Commenters generally did not agree that our proposed 
methodology, including our use of 340B ceiling prices for Quick Survey 
respondents and as a proxy for non-affirmative responses, together with 
a 6 percent add-on, as well as the manner in which we calculated the 
proposed discount, yielded a conservative estimate of hospitals' costs 
to acquire 340B drugs. Commenters often stated that CMS should also 
take into consideration the costs that 340B entities incur to maintain 
their status and comply with 340B program requirements. Commenters 
contended that 340B program compliance costs are quite considerable and 
that CMS should consider these administrative costs in determining an 
OPPS payment rate for 340B-acquired drugs.
    Response: As outlined in the section above, Methodology to 
Calculate ASP Reduction Amount Based on Survey Data, CMS considered 
numerous factors in order to calculate what we believe was a 
conservative discount amount. 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, but the 
statute does not mention covering 340B program compliance cost. 
Accordingly, we do not believe it is necessary to provide additional 
payment for costs that commenters state they must pay in order to 
remain compliant with the 340B program. We reiterate that we do not 
believe CMS payment is required for these costs as Medicare payments 
for drugs are not intended to cross-subsidize other programs. 
Nonetheless, we believe that such a conservative estimate and the add-
on of 6 percent of the product's ASP would already allow for a 
significant margin to offset these costs.
    Comment: Commenters stated that not every entity is able to 
purchase all drugs at the 340B ceiling price and that some drugs must 
be purchased under WAC-based pricing. Furthermore, stakeholders 
contended that their systems are limited in determining which drugs 
were purchased at the 340B price and thus were limited in their ability 
to assign the ``JG'' modifier. Therefore, commenters stated they 
applied the ``JG'' modifier to all of their purchased drugs, even if 
the drug was purchased under WAC-based pricing. Commenters stated that 
WAC-based pricing is significantly higher than 340B pricing; 30 to 90 
percent greater according to one stakeholder. Additionally, commenters 
believed using ceiling prices as proxies was a flawed methodology as 
these data do not come directly from those being surveyed, even if they 
are the highest prices hospitals can pay to acquire these drugs.
    Response: 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 a 340B 
hospital to have acquisition costs for any drug that is acquired 
through the 340B program 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 
hospital's acquisition cost in order to produce a conservative drug 
discount estimate when data was missing or not submitted. We believed 
using ceiling prices as proxies was the most appropriate option when 
drug acquisition cost information was not available, because this price 
represents the most conservative discount that a 340B entity could have 
received. In addition, while some commenters expressed generalized 
disagreement with our proposed approach, we did not receive any 
comments demonstrating that 340B hospitals pay more than the ceiling 
price for a particular drug, or that 340B hospitals pay more than ASP 
minus 28.7 for a particular drug when acquired under the 340B program 
at their negotiated 340B price. Thus, similar to our policy of paying 
ASP minus 22.5 percent, this proposed approach of paying ASP minus 28.7 
percent appears to be in line with hospital acquisition costs for such 
drugs, which is reinforced by the fact that we did not receive public 
comments demonstrating that 340B hospitals pay more for particular 
drugs acquired under the 340B program. However, because we are not 
finalizing our proposal to pay for 340B drugs based on hospital survey 
data for CY 2021, we will take these comments into account for 
potential future rulemaking.
    Additionally, the payment rate of ASP minus 22.5 percent only 
applies to drugs acquired under the 340B program and therefore, the 
``JG'' modifier should only be appended to claim lines for these drugs. 
Hospitals should not append the ``JG'' modifier for drugs for which the 
hospital paid an amount based on WAC where the drug was not acquired 
under the 340B program.
    Comment: Commenters generally did not make specific recommendations 
about CMS' methodology for calculating the reduction that would be 
applied to ASP for 340B-acquired drugs. Rather, most commenters 
expressed opposition to the policy in general. However, several 
commenters expressed support for CMS' exclusion of penny pricing in our 
calculation of the proposed payment rate. Additionally, several 
commenters encouraged CMS to eliminate any drugs with inflationary 
penalties, as the commenters believed these penalties are unevenly 
distributed among drugs and

[[Page 86052]]

among hospitals and may skew our data if included. Additionally, some 
commenters were not supportive of CMS' volume weighting methodology. 
Commenters stated that taking into account how often those drugs were 
billed by all hospitals under the OPPS for 2018 and 2019 was 
inappropriate as 340B utilization may differ from all OPPS hospital 
utilization.
    Response: We thank commenters for their input on our proposal. We 
believe the methodology for developing the proposed payment adjustment 
appropriately provided for a conservative estimate for the ASP 
reduction. At this time, we do not believe it would be appropriate to 
eliminate all drugs with inflationary penalties; however, we will take 
this point into consideration for future potential rulemaking. 
Additionally, as outlined in our summary above, our volume weighting 
methodology took into account how often drugs were billed by all 
hospitals under the OPPS for 2018 and 2019, to better reflect each 
drug's overall utilization under the OPPS. 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. 
Therefore, we volume-weighted the drug discounts determined from the 
survey to mirror the drug utilization in the OPPS. We note that the 
340B hospitals drug utilization pattern did not vary significantly from 
the overall OPPS utilization. Therefore, drugs that were commonly used 
were assigned a higher weight while those less commonly used were 
assigned a lower weight. 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. 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. For the purposes of creating an 
average discount, we believe this is the most appropriate methodology. 
Nonetheless, we will consider these comments for potential future 
rulemaking.
    Comment: Several commenters asked for the release of data that CMS 
used in order to calculate the 340B payment reduction. Commenters 
expressed a desire to replicate CMS' calculations based on the data 
submitted in response to the 340B Drug Acquisition Cost Survey.
    Response: We do not intend to release an individual hospitals' SCOD 
acquisition cost data to the public. During the Paperwork Reduction Act 
process for the 340B survey, we pledged to maintain the confidentiality 
of individual responses that include acquisition prices for each SCOD 
to the extent required by law. However, we stated we would make average 
acquisition prices reported for SCODs across all hospitals surveyed 
public. We believe the confidentiality of drug prices applies to 
individual drugs purchased by individual hospitals, which we have no 
intent to make public. Additionally, this confidentiality extends to 
the ceiling prices used in the survey. Therefore, we are unable to 
publicly disclose the ceiling prices for the same reason. As we stated 
in the proposed rule, we are exploring the possibility of providing 
microdata to qualified researchers through their restricted access 
infrastructure, in accordance with best practices for transparency. We 
will continue to explore if there is an appropriate method in which to 
release microdata to qualified researchers.
e. Alternative Proposal To Continue Policy To Pay ASP Minus 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 purchase 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 proposed in the alternative that the agency could 
continue the current Medicare payment policy for CY 2021. If adopted, 
we stated that this proposed policy would continue the current Medicare 
payment policy for CY 2021.
    Based on feedback from stakeholders, we believe maintaining the 
current payment policy of paying ASP minus 22.5 percent for 340B drugs 
is appropriate in order to maintain consistent and reliable payment for 
these drugs both for the remainder of the PHE and after its conclusion 
to give hospitals some certainty as to payments for these drugs. 
Continuing our current policy also gives us more time to conduct 
further analysis of hospital survey data for potential future use for 
340B drug payment. We note that any changes to the current 340B payment 
policy would be adopted through public notice and comment rulemaking.
    While we believe our methods to conduct the 340B Drug Acquisition 
Cost Survey, as well as the methodology we used to calculate the 
proposed average or typical discount received by 340B entities on 340B 
drugs, are valid, we nonetheless recognize stakeholders' concerns. As 
described above, the utilization of the survey data is complex, and we 
wish to continue to evaluate how to balance and weigh the use of the 
survey data, the necessary adjustments to the data, and the weighting 
and incorporation of ceiling prices--all to determine how best to take 
the relevant factors into account for potentially using the survey to 
set Medicare OPPS drug payment policy. We appreciate the feedback from 
commenters and will continue to assess it as we explore whether survey 
data should be considered hospital acquisition cost data for purposes 
of paying for drugs acquired under section 1833(t)(14)(A)(iii)(I) in 
future years.
Comments on Maintaining Current 340B Payment Reduction of ASP Minus 
22.5 Percent
    Comment: A few commenters voiced their support for the current OPPS 
payment policy for 340B-acquired drugs. These commenters generally 
believed that approximating payment based on acquisition costs is 
appropriate; however, they also recommended reform to the 340B program 
itself.
    Response: We thank the commenters for their support of our 340B 
payment policies. We note that comments related to reform of the 340B 
program are out of scope for purposes of this final rule, and we also 
note that the 340B program is administered by the Health Resources and 
Services Administration, not CMS; however, we thank commenters for 
their input.
    Comment: Many commenters did not support CMS finalizing the 
proposal to pay a net payment rate of ASP minus 28.7 percent for 340B-
acquired drugs. These commenters stated that they opposed any reduction 
in payment for 340B drugs in general, but preferred the proposal to 
maintain ASP minus 22.5 percent if CMS continued to adjust payment for 
340B drugs. Commenters stated that the profits derived from 
participation in the 340B program allowed them to deliver charity or 
uncompensated care to their patients. Commenters detailed a wide 
variety of programs that they fund with profits

[[Page 86053]]

from the 340B program, and stated they may not be able to continue 
these programs without profits from Medicare payments for 340B-acquired 
drugs. Many commenters stated that the current 340B payment rate has 
hurt hospitals financially and undermined hospitals' ability to provide 
safety-net care to their low-income patients, thereby threatening the 
patients' access to care. They stated that any policy proposal to 
reduce payment for 340B-acquired drugs was contrary to the 
congressional intent for the 340B program. Commenters asserted that CMS 
should pay hospitals participating in the 340B program the statutory 
default payment amount of ASP plus 6 percent.
    Response: We note that we have not seen evidence that the current 
OPPS 340B drug payment policy has limited patient access to 340B drugs. 
Further, Medicare payments for drugs are not intended to cross-
subsidize other programs. As noted in the CY 2018 OPPS/ASC final rule 
with comment period, we continue to believe that ASP minus 22.5 percent 
for drugs acquired through the 340B Program represents the average 
minimum discount that 340B enrolled hospitals receive. Additionally, as 
discussed throughout this section, the proposed payment reduction based 
on the survey data was calculated in a conservative manner. We disagree 
with commenters that the OPPS 340B payment policy has had a negative 
impact on Medicare patients and are not aware of any access issues 
related to the implementation of this policy. Further, we note that 
under the current policy, Medicare patients who receive 340B drugs for 
which the Medicare program paid ASP minus 22.5 percent have much lower 
cost sharing than if these beneficiaries received 340B drugs for which 
the Medicare program paid ASP+6 percent. As a result, we continue to 
believe that ASP minus 22.5 percent is a reasonable payment rate for 
these drugs. We note that the 340B drug payment policy is consistent 
with our authority under the statute, as confirmed by the D.C. 
Circuit's decision. As explained further below, we are finalizing our 
proposal to continue our current policy of generally paying under the 
OPPS for 340B-acquired drugs at ASP minus 22.5 percent.
    Comment: We received several comments regarding OPPS payment for 
biosimilars acquired under the 340B program. Commenters suggested a 
variety of modified payment methodologies for biosimilars. Some 
commenters believed biosimilars should be excluded from the adjustment 
for 340B-acquired drugs altogether, and some commenters stated if CMS 
moves forward with the net reduction of ASP minus 28.7 percent, the 
agency should maintain the reduction for biosimilars at ASP minus 22.5 
percent. Additionally, several commenters suggested the add-on payment 
of 6 percent should be based on the reference product's ASP when 
calculating the net payment rate for biosimilars under the survey 
methodology. Finally, some commenters had concerns that new biosimilars 
on pass-through status would have a competitive advantage over its 
reference product.
    Response: We are finalizing our alternate proposal to continue 
paying for 340B-acquired drugs under the OPPS at a rate of ASP - 22.5 
percent, and thus we do not believe any changes to our biosimilar 
policy are necessary for CY 2021. We believe the continuation of our 
current biosimilar policy will allow for appropriate payment and access 
to these important treatments. Regarding comments related to 
biosimilars and the perceived competitive advantage, we do not believe 
that the temporary payments provided by pass-through status will create 
the substantial competitive advantage that commenters described. We 
also note we are continuing the policy from previous years regarding 
biosimilars and 340B payment, under which we will pay ASP minus 22.5 
percent of the biosimilar's ASP. We thank the commenters for the 
comments regarding biosimilar add-on payment under the survey 
methodology (ASP minus a net 28.7 percent), and we will take these 
comments into consideration for potential future rulemaking. Please see 
section V.B.2.C. for additional discussion regarding biosimilars and 
section V.A.1. for additional discussion on drug pass-through payments.
    Comment: Many commenters opposed both the CY 2021 proposal to pay 
for drugs acquired under the 340B program at the net payment rate of 
ASP minus 28.7 percent, as well as the alternative proposal of 
continuing the current 340B program payment reduction of ASP minus 22.5 
percent. These commenters urged CMS to withdraw its proposed policy and 
contended that the policy was an unlawful application of the CMS' 
authority.
    Commenters also stated that reducing payment for drugs acquired 
through the 340B Program does not help reduce high drug costs. Many 
commenters opposed the current 340B policy and argued that it takes 
away resources designated for safety net hospitals to subsidize non-
340B hospitals because the payment reduction is budget neutral. The 
commenters requested that CMS end its policy of paying for drugs 
obtained through the 340B program at ASP minus 22.5 percent and restore 
the statutory default payment rate of ASP plus 6 percent.
    Response: We respectfully disagree with the commenters' assertions 
that our 340B drug payment policy is illegal or an unlawful application 
of the law. It is also beyond the scope of the CY 2021 rulemaking, nor 
is it the intent of the 340B payment policy to address all aspects of a 
larger drug pricing issue. We disagree with commenters that the OPPS 
340B payment policy has taken away resources designated for safety net 
hospitals, and we are not aware of any access to care issues related to 
the implementation of this policy. As discussed in this section of the 
CY 2021 final rule with comment period, the D.C. Circuit has confirmed 
that our 340B drug payment policy is within our authority in section 
1833(t)(14) of the Act. Thus, we are finalizing our alternate proposal, 
without modification, to continue to pay ASP minus 22.5 percent for 
340B-acquired drugs, including when furnished in nonexcepted off-campus 
PBDs paid under the PFS. Our final policy continues the 340B Program 
policies that were implemented in CY 2018 with the exception of the way 
we are calculating payment for 340B-acquired biosimilars, which is 
discussed in section V.B.2.c. of the CY 2019 OPPS/ASC final rule with 
comment period, and continues the policy we finalized in CY 2019 to pay 
ASP minus 22.5 percent for 340B-acquired drugs and biologicals 
furnished in nonexcepted off-campus PBDs paid under the PFS.
    Furthermore, although we are finalizing our alternate proposal, 
without modification, to pay ASP minus 22.5 percent for 340B-acquired 
drugs, we believe our proposal to pay for 340B-acquired drugs at ASP 
minus 34.7 percent based on hospital survey data, plus an add-on of 6 
percent of the product's ASP, for a net payment rate of ASP minus 28.7 
percent could be within the Secretary's authority under section 
1833(t)(14). The 340B payment rate proposal of ASP minus 28.7 percent 
was based on drug acquisition cost data derived from the CMS 2020 
Hospital Acquisition Cost Survey for 340B-Acquired SCODs, authorized 
under subclause 1833(t)(14)(D). Specifically, we applied the statutory 
authority under section 1833(t)(14)(A)(iii)(I) to collect 340B drug 
acquisition cost data and limited our survey to the 340B hospital 
groups. A more detailed discussion of the CMS 2020 Hospital Acquisition 
Cost Survey methodology is included earlier in this section. Although 
we are continuing the current 340B payment

[[Page 86054]]

policy, we will continue to consider the 340B drug payment rate of 
under the 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 in 
potential future rulemaking.
    Comment: Several commenters stated that CMS has not provided 
sufficient analysis for the continuation of the 340B payment policy, 
believing that CMS has not considered changes in utilization and volume 
for hospitals that are actively participating in the 340B program since 
the policy was initially proposed in 2017. They further noted that CMS 
has not analyzed the impact of the prior year reimbursement changes for 
drugs acquired under the 340B program for the affected hospitals. They 
also contended that CMS has not provided evidence that the payment 
policy remains budget neutral by recalculating the policy's impact to 
make sure the conversion factor is properly adjusted.
    Response: In the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59369 through 59370), we implemented the 340B drug payment 
policy 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. This adjustment changed the 
payment rate from average sales price (ASP) plus 6 percent to ASP minus 
22.5 percent for drugs subject to this policy. In that rule, 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. We believe the current 340B drug payment policy reflects the 
average minimum discount that 340B participating hospitals receive for 
drugs acquired under the 340B Program and we believe it is 
inappropriate for Medicare to subsidize other programs through Medicare 
payments for separately payable drugs. While commenters remarked on the 
continuation of this policy since CY 2018, the commenters did not 
provide us with any evidence that ASP minus 22.5 percent is no longer a 
conservative estimate of their drug acquisition costs. Moreover, we 
note that the data collected in our 2020 Hospital Acquisition Cost 
Survey for 340B-acquired SCODs found the average 340B program drug 
discount to be 34.7 percent. Additionally, in the CY 2021 OPPS/ASC 
proposed rule (85 FR 48890), we proposed that we could continue the 
current Medicare 340B payment policy of ASP minus 22.5 percent as an 
alternative, as the D.C. Circuit concluded that this policy was a 
reasonable application of the Secretary's statutory authority under 
1833(t)(14)(A)(iii)(II) of the Act.
    With respect to OPPS budget neutrality and the conversion factor, 
OPPS budget neutrality is generally developed on a prospective basis by 
isolating the effect of any changes in payment policy or data under the 
prospective OPPS with all other factors held constant. We note that 
since the CY 2018 implementation of the 340B drug payment policy in 
which we developed a budget neutrality adjustment for the policy, the 
adjusted percentage payment has remained at ASP minus 22.5 percent. As 
a result, while some of the claims may change based on drug payment and 
billing, as indicated by the ``JG'' modifier, these drugs, including 
their utilization and expected payments, would be included as part of 
the broader budget neutrality adjustments, but collectively they would 
not have a separate budget neutrality adjustment specifically for the 
340B drug payment policy. We note that in rulemaking where we proposed 
to establish or modify the adjustment, we have included in the impact 
analysis the estimated effects on different categories of providers 
based on the policy. Finally, we note that we monitor the payment and 
utilization patterns associated with this adjustment and for drug 
spending more broadly, and will continue to do so.
    Comment: Several commenters expressed confusion as to whether our 
proposed policy would affect drugs purchased at their retail pharmacies 
or whether this payment reduction applied to Federally Qualified Health 
Centers (FQHCs).
    Response: The 340B payment policy originally adopted in the CY 2018 
OPPS/ASC final rule with comment period and continued in subsequent 
years applies to certain hospitals paid under the OPPS. 340B payment 
policy exceptions under the OPPS include rural sole community 
hospitals, children's hospitals, and PPS-exempt cancer hospitals. FQHCs 
and retail pharmacies are not paid under the OPPS, and therefore are 
not affected by this policy.
    Comment: As previously discussed, several commenters recommended 
CMS avoid any further action on a 340B payment reduction until the 
issue is settled in the courts. Commenters noted that although CMS 
prevailed in the D.C. Circuit, a petition for a rehearing was filed on 
September 14, 2020. Commenters believed CMS should wait until this 
decision has been finalized by the courts before moving forward with a 
continuation of the 340B payment reduction.
    Response: On October 16, 2020, the D.C. Circuit denied the 
appellees' petition for rehearing en banc. We believe our 340B drug 
payment policy is within the Secretary's statutory authority at 
1833(t)(14)(A)(iii)(II) of the Act, which was confirmed by the D.C. 
Circuit. Thus, we are finalizing our alternate proposal, without 
modification, to continue our current policy of paying ASP minus 22.5 
percent for 340B-acquired drugs.
    Comment: Several commenters requested that we make our 340B policy 
exemptions permanent. Additionally, commenters asked CMS to extend the 
exemption to urban SCHs, Medicare Dependent Hospitals, and Rural 
Referral Centers.
    Response: We thank commenters for their recommendations. At this 
time, we do not believe it is appropriate to revise our policy on 340B 
policy exemptions and we believe we should maintain our current policy. 
Nonetheless, we will take these comments into consideration for future 
rulemaking.
Summary of Finalized Policy
    We are finalizing our alternate proposal, without modification, to 
continue our current policy of paying ASP minus 22.5 percent for 340B-
acquired drugs and biologicals, including when furnished in nonexcepted 
off-campus PBDs paid under the PFS. Our finalized policy continues the 
340B Program policies that were implemented in CY 2018 with the 
exception of the way we are calculating payment for 340B-acquired 
biosimilars, which is discussed in section V.B.2.c. of the CY 2019 
OPPS/ASC final rule with comment period, and would continue the policy 
we finalized in CY 2019 to pay ASP minus 22.5 percent for 340B-acquired 
drugs and biologicals furnished in nonexcepted off-campus PBDs paid 
under the PFS. We are also continuing the 340B payment adjustment for 
WAC-priced drugs, which is WAC minus 22.5 percent. 340B-acquired drugs 
that are priced using AWP will continue to be paid an adjusted amount 
of 69.46 percent of AWP.
    Additionally, we are finalizing our proposal to continue to exempt 
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 from the 340B 
payment adjustment. These hospitals must continue to report 
informational modifier ``TB'' for 340B-acquired drugs, and will 
continue to be paid ASP plus 6 percent. We may revisit our policy to 
exempt rural SCHs, as well

[[Page 86055]]

as other hospital types, from the 340B drug payment reduction in future 
rulemaking. Finally, we are continuing to require hospitals to use of 
modifiers to identify 340B-acquired drugs. 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 
the requirements for use of modifiers ``JG'' and ``TB''. We note that 
any future changes to our policy regarding payment for 340B drugs will 
be adopted through notice and comment rulemaking.
7. 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 proposed 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 refinements 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

[[Page 86056]]

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 
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 that supported 
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 provider burden. Finally, these commenters had concerns about 
the impact 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 associated 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

[[Page 86057]]

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 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 compared to other possible options to change the payment 
methodology for graft skin substitute procedures. Therefore, in the CY 
2021 OPPS/ASC proposed rule, we stated that will continue our review of 
the feasibility of using episode-based payment for graft skin 
substitute procedures, and we did not propose any episode-based payment 
for these procedures.
    Comment: Several commenters expressed either their support for or 
their concerns about establishing episode-based payment for graft skin 
substitute procedures. Commenters made many suggestions about how a 
payment episode should be constructed and which services should be 
included or excluded from a payment episode.
    Response: We appreciate the feedback we received from the 
commenters. We will continue to study issues related to changing the 
methodology for paying for skin substitute products and procedures for 
possible future rulemaking.
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 (Skin sub grft f/n/hf/g child). The payment rate would be 
based on the geometric mean cost of all graft skin substitute 
procedures for a given CPT code that are paid 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 who supported 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 noted that lower Medicare payments for 
graft skin substitute procedures would lead to lower copayments for 
beneficiaries. In addition, commenters 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 believed 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 increase according to the 
commenters is that 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\.

[[Page 86058]]

    The responses to the comment solicitation indicated that a single 
payment category could potentially reduce the cost of wound care 
services for graft skin substitute procedures for both beneficiaries 
and Medicare. In addition, a single payment category may help reduce 
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 that commenters who oppose a single 
payment category for skin substitute products raised might be mitigated 
if stakeholders have a period of time to adjust to the changes inherent 
in establishing a single payment category. 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 mentioned 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 oppose this policy option.
    Based on the comments received regarding establishing a single 
payment category for graft skin substitute procedures, we stated that 
we need more time to consider the trade-offs between the 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 did not propose a single payment category for graft skin 
substitute procedures for CY 2021 in the CY 2021 OPPS/ASC proposed 
rule.
    Comment: Several commenters expressed either their support or their 
concerns about a single payment category for graft skin substitute 
procedures. Commenters provided their views on whether a single payment 
category encourages value and cost savings for graft skin substitute 
procedures, or if a single payment category would discourage providers 
from using higher-cost skin substitute products that may have better 
clinical results for patients.
    Response: We appreciate the feedback we received from the 
commenters. We will continue to study issues related to changing the 
methodology for paying for skin substitute products.
d. Packaged Skin Substitutes for CY 2021
    For CY 2021, consistent with our policy since CY 2016, we proposed 
to continue to determine the high cost/low cost status for each skin 
substitute product based on either a product's geometric mean unit cost 
(MUC) exceeding the geometric MUC threshold or the product's per day 
cost (PDC) (the total units of a skin substitute multiplied by the mean 
unit cost and divided by the total number of days) exceeding the PDC 
threshold. 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 final CY 2021 MUC threshold is $48 
per cm\2\ (rounded to the nearest $1) (proposed at $47 per cm\2\) and 
the final CY 2021 PDC threshold is $949 (rounded to the nearest $1) 
(proposed at $936). We also proposed 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 the CY 2021 OPPS/ASC proposed rule. We also want to 
clarify that the availability of a 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 proposed to assign each skin 
substitute that exceeds either the MUC threshold or the PDC threshold 
to the high cost group. In addition, we proposed to assign any skin 
substitute with a MUC or a PDC that does not exceed either the MUC 
threshold or the PDC threshold to the low cost group. For CY 2021, we 
proposed 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 proposed to continue to assign skin substitutes 
with pass-through payment status to the high cost category. We proposed 
to assign skin substitutes with pricing information but without claims 
data to calculate a geometric MUC or PDC to either the high cost or low 
cost category based on the product's ASP+6 percent payment rate as 
compared to the MUC threshold. If ASP is not available, we proposed to 
use WAC+3 percent to assign a product to either the high cost or low 
cost category. Finally, if neither ASP nor WAC is available, we 
proposed to use 95 percent of AWP to assign a skin substitute to either 
the high cost or low cost category. We proposed 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 the CY 2021 OPPS/ASC 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

[[Page 86059]]

is available, we refer readers to the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70436). Table 42 displays the final CY 2021 cost 
category assignment for each skin substitute product.
    Comment: One commenter did not support our proposal to assign graft 
skin substitute products to a high cost or a low cost group based on if 
the MUC or PDC of a product exceeds a weighted average of either the 
MUC or PDC of all graft skin substitute products. The commenter 
believes the current two-tier system provides incentives for providers 
to use higher-cost graft skin substitute products instead of lower-cost 
products that have similar efficacy to the higher-cost products.
    Response: As we explained in the CY 2014 OPPS/ASC final rule (78 FR 
74933), the graft skin substitute procedures described by CPT codes 
15271 through 15278 are clinically homogeneous, but there is a large 
amount of resource heterogeneity between different skin substitute 
products with the cost per cm\2\ ranging from under $10 per cm\2\ to 
over $200 per cm\2\. We believe establishing high cost and low cost 
groups for skin substitutes makes the payment for these products more 
homogeneous and reduces the risk of excessive overpayment or 
underpayment to a provider when a skin substitute product is used.
    Comment: Multiple commenters supported our proposal to continue to 
assign skin substitutes to the low cost or high cost group. Commenters 
also supported our proposal 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.
    Response: We appreciate the support of the commenters for our 
proposals.
    Comment: One commenter requested that CMS be more transparent when 
presenting the data regarding whether individual graft skin substitute 
products are assigned to either the high cost or low cost group. The 
commenter requested that we share more of the process details for 
determining high cost and low cost assignments and provide the 
calculation processes and formulas used to make the determinations.
    Response: We already provide the information that the commenter 
seeks. In the CY 2021 OPPS/ASC final rule (85 FR 48891) and in previous 
OPPS proposed and final rules, we discuss in detail how both the MUC 
and PDC thresholds are calculated and which pricing data are used to 
determine if a graft skin substitute product is assigned to the high 
cost or low cost group. We provide drug cost statistics data on our 
website, which include cost data for all the graft skin substitute 
products that are used to calculate the overall MUC and PDC cost group 
thresholds. Links to the drug cost statistics data may be found on the 
same web page that has links to the OPPS preamble, OPPS claims 
accounting narrative, OPPS addenda, and other data related to the OPPS/
ASC final rule.
    Comment: One commenter requested that HCPCS code Q4235 (Amniorepair 
or altiply, per square centimeter) be assigned to the high cost skin 
substitute group based on either WAC plus 3 percent or 95 percent of 
AWP pricing data, which the commenter believed would demonstrate that 
the cost of these products exceeds the MUC threshold.
    Response: The commenter did not provide the required information to 
make a determination on assignment to the high cost skin substitute 
group in time. Therefore, HCPCS code Q4235 will continue to be assigned 
to the low cost skin substitute group in this final rule.
    Comment: Individual commenters have requested that the HCPCS codes 
Q4205 (Membrane graft or membrane wrap, per square centimeter), Q4222 
(Progenamatrix, per square centimeter), Q4226 (MyOwn skin, includes 
harvesting and preparation procedures, per square centimeter), Q4227 
(Amniocore, per square centimeter), and Q4232 (Corplex, per square 
centimeter) be assigned to the high cost skin substitute group based on 
either WAC plus 3 percent or 95 percent of AWP pricing data, which the 
commenters believed would demonstrate that the cost of these products 
exceeds the MUC threshold.
    Response: HCPCS codes Q4205 and Q4226 were assigned to the high 
cost group starting in October 2020. We also note that we are assigning 
HCPCS codes Q4222, Q4227, and Q4232 to the high cost group starting on 
January 1, 2021.
    Comment: Individual commenters have requested that HCPCS codes 
Q4206 (Fluid flow or fluid gf, 1 cc) and Q4231 (Corplex p, per cc) be 
assigned to the high cost skin substitute group based on either WAC 
plus 3 percent or 95 percent of AWP pricing data, which the commenters 
believed would demonstrate that the cost of these products exceeds the 
MUC threshold.
    Response: HCPCS codes Q4206 and Q4231 are not graft skin substitute 
products. Therefore, these products cannot be assigned to either the 
high cost or low cost skin substitute group.
    Comment: One commenter, the manufacturer, has requested that HCPCS 
codes Q4122 (Dermacell, per square centimeter) and Q4150 (Allowrap ds 
or dry, per square centimeter) continue to be assigned to the high-cost 
skin substitute group.
    Response: HCPCS codes Q4122 and Q4150 were both assigned to the 
high-cost group in CY 2020 and also were proposed to be assigned to the 
high-cost group for CY 2021. Per our proposal, a skin substitute that 
has been proposed in the high-cost group in a proposed rule will remain 
in the high-cost group in the final rule. Also, any skin substitute 
assigned to the high-cost group in CY 2020 will continue to be assigned 
to the high-cost group in CY 2021 even if the MUC and PDC for the skin 
substitute product is below the overall MUC and PDC thresholds for all 
skin substitute products. Accordingly, we are finalizing our proposal 
to assign HCPCS codes Q4122 and Q4150 to the high-cost group in CY 
2021.
    After consideration of the public comments we received, we are 
finalizing our proposal to assign a skin substitute with a MUC or a PDC 
that does not exceed either the MUC threshold or the PDC threshold to 
the low cost group, unless the product was assigned to the high cost 
group in CY 2020, in which case we would assign the product to the high 
cost group for CY 2021, regardless of whether it exceeds the CY 2021 
MUC or PDC threshold. We are also finalizing our proposal to assign to 
the high cost group any skin substitute product that exceeds the CY 
2021 MUC or PDC thresholds and assign to the low cost group any skin 
substitute product that does not exceed the CY 2021 MUC or PDC 
thresholds and was not assigned to the high cost group in CY 2020. We 
are finalizing our proposal to continue to use payment methodologies, 
including ASP+6 percent and 95 percent of AWP, for skin substitute 
products that have pricing information but do not have claims data to 
determine if their costs exceed the CY 2021 MUC. In addition, we are 
finalizing our proposal to continue to use WAC+3 percent instead of 
WAC+6 percent for skin substitute products that do not have ASP pricing 
information or claims data to determine if those products' costs exceed 
the CY 2021 MUC. We also are finalizing our proposal to retain our 
established policy to assign new skin substitute products with pricing 
information to the low cost group. Table 42 below includes the final CY 
2021 cost category assignment for each skin substitute product.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
e. 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 
that 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

[[Page 86065]]

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.,\84\ 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 . . .'' \85\ 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 
cells.'' \86\ The paper by Dieckmann et al. indicates that skin 
substitute products may be synthetic products as well as biological 
products.
---------------------------------------------------------------------------

    \84\ 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.
    \85\ Ibid, Dieckmann C, Renner R, Milkova L, et al.
    \86\ Ibid, Dieckmann C, Renner R, Milkova L, et al.
---------------------------------------------------------------------------

    Therefore, for CY 2021 we proposed 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 proposed 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).
    Comment: Two commenters requested that CMS no longer use the term 
``skin substitutes'' to describe products that do not function like 
human skin that is grafted onto a wound and are not substitutes for 
skin grafts, but do aid in wound healing by stimulating the patient to 
regenerate lost tissue. Instead, the commenters request that we use the 
term ``cellular and/or tissue based products for skin wounds'' that is 
abbreviated ``CTPs''. The commenters believe the term ``skin 
substitute'' is a misleading and clinically incorrect term that does 
not accurately describe all of the products that are considered to be 
cellular and tissue based products to treat skin wounds. Also, one of 
the commenters notes that the FDA discourages the use of the term 
``skin substitute'' and that an international standards organization, 
the American Society for Testing and Materials (ASTM), has adopted the 
``CTPs'' terminology as well. Finally, the commenter claims the 
``CTPs'' terminology is used by physicians and clinicians throughout 
the wound care community.
    Response: We appreciate the suggestion by the commenters, but we do 
not believe it is appropriate at this time to end our use of the term 
``skin substitute.'' Notably, the CPT and HCPCS codes used to report 
graft procedures using cellular and tissue based products to heal skin 
wounds, CPT codes 15271 through 15278 and HCPCS codes C5271 through 
C5278, use the term ``skin substitute'' in the descriptor. We feel that 
we should use terminology that reflects the service descriptors that 
are reported in the OPPS. Also, the term ``skin substitute'' is well-
understood by providers and industry stakeholders, even if it is not 
the most precise terminology to describe cellular and tissue based 
products to heal skin wounds. Finally, we did not propose to change the 
terminology used to describe products that do not function like human 
skin that is grafted onto a wound and are not substitutes for skin 
grafts, but do aid in wound healing by stimulating the patient to 
regenerate lost tissue. While we are not changing the use of the term 
``skin substitute'', we appreciate the information from commenters.
    Comment: A commenter expressed concern about our proposed 
definition of synthetic skin substitutes. The commenter believes it is 
possible under our proposal that bandages and standard dressings could 
be defined as skin substitutes. The commenter does support Medicare 
coverage of synthetic skin substitutes, but would like us to modify our 
proposal to prevent products that would normally be described as 
medical supplies to be defined as skin substitutes.
    Response: The descriptor for HCPCS code C1849 (Skin substitute, 
synthetic, resorbable, per square centimeter) includes the term 
``resorbable'', which means the graft skin substitute product must be 
able to be absorbed by the body. Bandages and standard dressings are 
not resorbable products and are removed and replaced on a regular basis 
while treating a wound. We find it highly unlikely that a bandage or 
standard dressing would be used for a graft skin substitute procedure. 
However to make it clear, we will modify our definition of a synthetic 
graft skin substitute product to exclude bandages and standard 
dressings.
    Comment: Multiple commenters agreed with CMS that synthetic graft 
skin substitute products should receive payment under the OPPS, even if 
the commenters did not support our methodology for the payment of graft 
skin substitute products.
    Response: We appreciate commenters' support for our proposal to pay 
for synthetic graft skin substitute products under the OPPS.
    Comment: Several commenters requested that we establish product-
specific HCPCS codes for synthetic graft skin substitute products. Most 
of the same commenters also requested that we delete HCPCS code C1849, 
but there was one commenter who supported both product-specific HCPCS 
codes and continuing to have HCPCS code C1849 be packaged in the OPPS. 
The primary reason commenters want product-specific codes for synthetic 
graft skin substitute is they feel that synthetic products should be 
assigned to either the high cost or low cost skin substitute group 
based on the cost of each individual product in a similar manner to 
biological skin substitute products. Commenters feel that because 
multiple synthetic graft skin substitute products can be assigned to 
HCPCS code C1849, there may be some synthetic products that should be 
in the low cost skin substitute group that will receive payment in the 
high cost skin substitute group if HCPCS code C1849 is assigned to the 
high cost group. Commenters also are concerned about the opposite 
situation, in which high cost synthetic products would potentially be 
underpaid if HCPCS code C1849 is assigned to the low cost skin 
substitute group. Commenters believed the only resolution to these 
issues with HCPCS code C1849 is to delete the code so there are not 
cases of synthetic products being either overpaid or underpaid.

[[Page 86066]]

    Commenters also expressed concerns about using a C-code to report 
synthetic graft skin substitute codes in Medicare. One commenter noted 
that the use of a C-code meant that synthetic graft skin substitute 
products would only be in a payable status under the OPPS, and cannot 
be reported for graft skin substitute application services provided in 
the physician office setting. Two commenters thought that a C-code 
might confuse providers by unintentionally implying that HCPCS code 
C1849 has pass-through status under the OPPS, even though HCPCS code 
C1849 does not have pass-through status. Another commenter had concerns 
that there would be a less rigorous process to determine that a graft 
skin substitute product can be reported with HCPCS code C1849 than the 
process CMS uses to assign biological skin substitute products to 
product-specific HCPCS codes. Finally, two commenters asked for more 
transparency from CMS regarding the reasons for the creation of HCPCS 
code C1849.
    Response: HCPCS code C1849 was established in response to the need 
to pay for graft skin substitute application services performed with 
synthetic graft skin substitute products in the OPPS in a manner 
comparable to how we pay for graft skin substitute application services 
performed with biological graft skin substitute products. As mentioned 
earlier in this section, when we established our policy in the CY 2014 
OPPS final rule to package graft skin substitute products into their 
associated application procedures (78 FR 74930 through 74931), we did 
not specifically mention whether synthetic products could be considered 
skin substitute products in the same manner as biological products. The 
reason for this was that there were no synthetic products at that time 
that were identified as skin substitute products.
    We note that unless a graft skin substitute product has pass-
through status, graft skin substitute products are not paid separately 
under unique HCPCS or CPT codes in OPPS. However, in CY 2018, a 
manufacturer requested that CMS develop methodologies to allow 
synthetic graft skin substitute products to receive payment in the 
outpatient hospital setting and in the physician office setting. After 
extensive review, we decided against establishing a product-specific 
HCPCS code for the synthetic graft skin substitute product. Instead, 
CMS decided to assign the synthetic product in CY 2019 to HCPCS codes 
A6460 and A6461, which were newly created HCPCS codes to report 
synthetic, resorbable wound dressings. HCPCS codes A6460 and A6461 are 
packaged under the OPPS and cannot be assigned to either the high cost 
or low cost skin substitute group. This meant that graft skin 
substitute products could not be billed with CPT codes 15271 through 
15278 or HCPCS codes C5271 through C5278, even though synthetic graft 
skin substitute products and biological graft skin substitute products 
perform the same function and have similar efficacy.
    Because all skin substitutes, except those with pass-through 
status, are packaged under the OPPS, we explored solutions that would 
permit synthetic skin substitute products to be billed with either CPT 
codes 15271 through 15278 or HCPCS codes C5271 though C5278. We decided 
to create HCPCS code C1849 to describe any synthetic graft skin 
substitute product, and we revised the payment logic for the graft skin 
substitute application procedure codes to allow HCPCS code C1849 to be 
billed with those procedures. So far, we have identified one synthetic 
graft skin substitute product that is described by HCPCS code C1849. 
Even though there are no OPPS claims data for the synthetic product, 
the manufacturer of the product was able to produce pricing data for 
the product. Using our alternative methodology to assign products to 
the high cost skin substitute group through WAC or AWP pricing that 
exceeds the MUC threshold, the data showed that the synthetic product 
would be assigned to the high cost group. As more synthetic graft skin 
substitute products are identified as being described by HCPCS code 
C1849, we will average the pricing data from the various products to 
determine an amount for the products described by HCPCS code C1849 to 
compare against the MUC threshold. This comparison will determine if 
HCPCS code C1849 should be assigned to the high cost or low cost skin 
substitute category.
    Regarding other comments about HCPCS code C1849, it is correct that 
HCPCS C-codes are only payable under the OPPS and not under the PFS. We 
also note that while the process may be different to receive payment 
for synthetic graft skin substitute products reporting HCPCS code C1849 
than for a new product-specific HCPCS code for a biological skin 
substitute product, synthetic graft skin substitute products must be 
described by C1849 to be eligible for payment in the OPPS. Like any 
other claim paid in the OPPS, claims reporting C1849 also are subject 
to medical review to ensure that providers are appropriately billing 
for synthetic, resorbable graft skin substitute products. Finally, we 
disagree with the commenters who feel that assigning a HCPCS C-code to 
report synthetic graft skin substitute products may confuse providers 
who may think synthetic products are receiving pass-through payment. We 
note that for several years a biological graft skin substitute product, 
Integra meshed bilayer wound matrix, has been assigned to HCPCS code 
C9363, and providers are well aware the product is packaged under the 
OPPS and does not have pass-through status.
    Comment: Several commenters stated that if HCPCS code C1849 is not 
either modified or deleted, then the HCPCS code should be assigned to 
the low cost skin substitute group by default, similar to how we pay 
for HCPCS code Q4100 (Skin substitute, not otherwise specified), which 
is used to report multiple biological skin substitute products that do 
not have product-specific HCPCS codes. Commenters are concerned that 
synthetic graft skin substitute products that should receive payment 
through the low cost skin substitute group would instead receive 
payment in the high cost skin substitute group and increase overall 
graft skin substitute costs for Medicare. In addition, two commenters 
expressed concern about the assignment of HCPCS code C1849 to the high 
cost skin substitute group because the commenters believed it was an 
automatic assignment that was not based on OPPS claims data or product 
pricing data.
    Response: We are currently aware of one synthetic graft skin 
substitute product that is described by HCPCS code C1849. As we 
mentioned earlier, the manufacturer provided pricing data that showed 
the cost of the product is above the MUC threshold for graft skin 
substitute products and therefore HCPCS code C1849 should be assigned 
to the high cost skin substitute group. We note that we used pricing 
data to assign HCPCS code C1849 to the high cost group, and the 
assignment of HCPCS code C1849 to the high cost skin substitute group 
was not automatic. As more synthetic graft skin substitute products are 
identified, we will use their pricing data to calculate an average 
price for the products described by HCPCS code C1849 and compare that 
average price to the overall MUC threshold to determine whether HCPCS 
code C1849 should be assigned to the high cost or low cost skin 
substitute group. We are not in favor of a default assignment of HCPCS 
code C1849 to the low cost skin substitute group. Instead, we want to 
rely on pricing data and, when available, claims data to determine the 
appropriate skin

[[Page 86067]]

substitute cost group for HCPCS code C1849. If most of the products 
described by HCPCS code C1849 have pricing or cost that qualify the 
products to be assigned to the high cost group, then the HCPCS code 
should be assigned to the high cost skin substitute group as that group 
best reflects the costs of the products described by HCPCS code C1849.
    Comment: One commenter was concerned that the establishment of a 
single HCPCS code to describe all synthetic graft skin substitute 
products is a substantial step towards the establishment of a single 
category payment system for both synthetic and biological graft skin 
substitute products.
    Response: The creation of HCPCS code C1849 and the scope of its 
descriptor was not an attempt to promote one of the several payment 
methodologies discussed in the CY 2019 and CY 2020 comment 
solicitations regarding alternative payment methodologies for graft 
skin substitute products over the other payment methodologies. This is 
made clear by the fact that there are over 100 biological graft skin 
substitute products with their own product-specific HCPCS codes as 
compared to one identified synthetic graft skin substitute product. As 
explained previously, HCPCS code C1849 was created to provide a way for 
synthetic skin substitute products that have similar function and 
efficacy to biological skin substitute products to receive comparable 
payment under the OPPS.
    Comment: Multiple commenters expressed their support for our 
proposal without any suggested changes.
    Response: We appreciate the commenters' support for our proposal. 
After reviewing the public comments, we have decided to implement our 
proposal for CY 2021 with modification to include synthetic products, 
in addition to biological products, in our description of skin 
substitutes. Our new description defines 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 will 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). Finally, 
we note that our definition of skin substitutes does not include 
bandages or standard dressings and therefore, these items cannot be 
assigned to either the high cost or low cost skin substitute groups or 
be reported with either CPT codes 15271 through 15278 or HCPCS codes 
C5271 through C5278.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate pro rata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing 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 was $473.4 million, as discussed 
below, because we proposed that most non pass-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 paid at ASP minus 22.5

[[Page 86068]]

percent, but for which we proposed 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 discussed 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 non pass-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 proposed that all 
of these policy-packaged drugs and biologicals with pass-through 
payment status would be paid at ASP+6 percent, like other pass-through 
drugs and biologicals, for CY 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 the CY 2021 OPPS/ASC proposed 
rule, we discussed our policy to determine if the costs of certain 
policy-packaged drugs or biologicals are already packaged into the 
existing APC structure. If we determine that a policy-packaged drug or 
biological approved for pass-through payment resembles predecessor 
drugs or biologicals already included in the costs of the APCs that are 
associated with the drug receiving pass-through payment, we proposed to 
offset the amount of pass-through payment for the policy-packaged drug 
or biological. For these drugs or biologicals, the APC offset amount is 
the portion of the APC payment for the specific procedure performed 
with the pass-through drug or biological, which we refer to as the 
policy-packaged drug APC offset amount. If we determine that an offset 
is appropriate for a specific policy-packaged drug or biological 
receiving pass-through payment, we proposed to reduce our estimate of 
pass-through payments for these drugs or biologicals by this amount.
    Similar to pass-through spending estimates for devices, the first 
group of drugs and biologicals requiring a pass-through payment 
estimate consists of those products that were recently made eligible 
for pass-through payment and that will continue to be eligible for 
pass-through payment in CY 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. Estimate of Pass-Through Spending

    In the CY 2021 OPPS/ASC proposed rule, we proposed 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 (84 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 manufacturers, we proposed estimates 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 
proposed an estimate for the first group of devices of $210.8 million. 
We did not receive any public comments on the proposal. Therefore, we 
are finalizing the proposed estimate for the first group of devices of 
$210.8 million for CY 2021.
    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 proposed to 
use the general methodology described in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66778), while also taking into account 
recent OPPS experience in approving new pass-through device categories. 
The proposed estimate of CY 2021 pass-through spending for this second 
group of device categories is $99 million.
    We did not receive any public comments on this proposal. As stated 
earlier in this final rule with comment period, we are approving five 
devices for 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 proposed to use the most recent Medicare hospital 
outpatient claims data regarding their utilization, information 
provided in the respective pass-through applications, historical 
hospital claims data, pharmaceutical industry information, and clinical 
information regarding those drugs or biologicals to project the CY 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 non pass-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 currently pay ASP 
minus 22.5 percent but for which we proposed to pay a net rate of ASP 
minus 28.7 percent or in the alternative, to continue our current 
policy of paying ASP minus 22.5 percent. Therefore, the payment rate 
difference between the pass-through

[[Page 86069]]

payment amount and the non pass-through payment amount is $473.4 
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 for which we have cost data that will be on 
pass-through in CY 2021.
    We did not receive any public comments on our proposal. Using our 
methodology for this final rule with comment period, we calculated a CY 
2021 spending estimate for this first group of drugs and biologicals of 
approximately $449.5 million based on our decision to finalize our 
alternative proposal to maintain our current policy of paying ASP minus 
22.5 percent for 340B-acquired drugs.
    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 final 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 final 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 proposed to use utilization estimates from pass-through 
applicants, pharmaceutical industry data, clinical information, recent 
trends in the per unit ASPs of hospital outpatient drugs, and projected 
annual changes in service volume and intensity as our basis for making 
the CY 2021 pass-through payment estimate. We also proposed to consider 
the most recent OPPS experience in approving new pass-through drugs and 
biologicals. Using our proposed methodology for estimating CY 2021 
pass-through 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 did not receive any public comments on our proposal. Therefore, 
for CY 2021, we are continuing to use the general methodology described 
above. For this final rule with comment period, we calculated a CY 2021 
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 $769.3 million (approximately $309.8 
million for device categories and approximately $459.5 million for 
drugs and biologicals) which represents 0.92 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 proposed to continue with our current clinic and 
emergency department (ED) hospital outpatient visits payment policies. 
For a description of the current clinic and ED hospital outpatient 
visits policies, we refer readers to the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70448). We also proposed to continue 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 the CY 2021 OPPS/ASC proposed rule, we 
solicited public comment on any changes to these codes that we should 
consider for future rulemaking cycles. We encouraged commenters to 
provide the data and analysis necessary to justify any suggested 
changes.
    The following is a summary of the comments we received and our 
responses to those comments.
    Comment: We received comments suggesting that CMS develop a set of 
national guidelines for coding hospital emergency department (ED) 
visits. One commenter cited the June 2019 Medicare Payment Advisory 
Commission (MedPAC) ``Report to the Congress: Medicare and the Health 
Care Delivery System,'' which recommended that the Secretary develop 
and implement a set of national guidelines for coding hospital ED 
visits under the OPPS by 2022. In this report, MedPAC indicated that 
national guidelines are necessary in order to improve the accuracy of 
Medicare payments for ED visits and to regain a distribution of coding 
frequency that is approximately normal, meaning Level 3 ED visits being 
the most frequently coded level and Levels 1 and 5 the least frequently 
coded. MedPAC found that hospitals' coding of ED visits has steadily 
shifted from the lower levels to the higher levels, and they estimated 
that 20 to 25 percent of the growth in Medicare spending on ED visits 
was due to these visits being coded to higher levels. Commenters felt 
that ``standardized, national guidelines are necessary in order to 
ensure coding consistency and data comparability across hospitals and 
to improve payment accuracy.'' Another commenter stated that absent 
such standards, payers are creating their own criteria and are 
downgrading higher-level ED evaluation and management services, 
resulting in a loss of resources and increased administrative burden.
    Response: We thank the commenters for their suggestions. As we 
noted in the CY 2008 OPPS/ASC final rule (72 FR 66579) we understand 
the interest in promulgating national guidelines but we continue to 
believe that it is unlikely that national guidelines could apply to the 
reporting of all ED visits. We may revisit this topic in the future as 
necessary.
    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 for 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

[[Page 86070]]

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.\87\ 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 were 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 (D.C. 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).
---------------------------------------------------------------------------

    \87\ American Hospital Ass'n, et al. v. Azar, No. 1:18-cv-02841-
RMC (D.D.C. Sept. 17, 2019).
---------------------------------------------------------------------------

    As detailed later in this section, after consideration of public 
comments, we are continuing the clinic visit payment policy as adopted 
in CY 2019 rulemaking. We will continue to take information submitted 
by the commenters into consideration for future analysis.
    The following is a summary of the comments we received and our 
responses to those comments.
    Comment: We received comments supporting CMS' efforts to continue 
implementing its method to control for unnecessary increases in the 
volume of outpatient services. Commenters expressed their support for 
site-neutral payment policies in excepted and non-excepted off-campus 
PBDs that promote greater payment alignment between physicians and 
hospitals. One commenter noted, ``Over the last decade, our nation has 
seen a trend of formerly independent physician practices becoming 
affiliated with major hospital systems.\88\ This movement is part of a 
larger trend of consolidation among health systems and physicians where 
health systems are able to use their market power to leverage higher 
prices for all consumers.\89\ The purchasing of physician practices by 
hospital systems has resulted in costs shifting to outpatient 
facilities where the costs of care are substantially higher. The drive 
toward higher-cost hospital-based outpatient services has had a direct 
negative financial impact on Medicare beneficiaries and overall 
Medicare expenditures. Medicare beneficiaries pay higher copays at 
hospital outpatient departments (HOPDs) than they do in physician 
offices, and HOPDs are paid more than twice as much as physicians are 
paid under the Medicare physician fee schedule for the same service, 
thereby contributing to excess Medicare expenditures.'' One commenter 
recommended CMS continue implementing site-neutral payments not just 
for off-campus PBDs but also for on-campus PBDs, and freestanding and 
non-freestanding emergency departments.
---------------------------------------------------------------------------

    \88\ Jeff Lagasse, ``Hospitals acquired 5,000 physician 
practices in a single year,'' Healthcare Finance, March 15, 2018, 
https://www.healthcarefinancenews.com/news/hospitals-acquired-5000-physician-practices-single-year.
    \89\ Bela Gorman, Don Gorman, Jennifer Smagula, John D. 
Freedman, Gabriella Lockhart, Rik Ganguly, Alyssa Ursillo, Paul 
Crespi, and David Kadish, Why Are Hospital Prices Different? An 
Examination of New York Hospital Reimbursement, New York: New York 
State Health Foundation, December 2016, https://nyshealthfoundation.org/wp-content/uploads/2017/11/an-examination-of-new-york-hospital-reimbursement-dec-2016.pdf.
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    Response: We appreciate the commenters' support. As we noted in the 
CY 2019 OPPS/ASC proposed rule (83 FR 37138 through 37143), ``[a] large 
source of growth in spending on services furnished in hospital 
outpatient departments (HOPDs) appears to be the result of the shift of 
services from (lower cost) physician offices to (higher cost) HOPDs.'' 
We continue to believe that these shifts in the sites of service are 
unnecessary if the beneficiary can safely receive the same services in 
a lower cost setting but instead receives care in a higher cost setting 
due to payment incentives. In addition to the concern that the 
difference in payment is leading to unnecessary increases in the volume 
of covered outpatient department services, we remain concerned that 
this shift in care setting increases beneficiary cost-sharing liability 
because Medicare payment rates for the same or similar services are 
generally higher in hospital outpatient departments than in physician 
offices. We continue to believe that our method will address the 
concerns as described in the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59005).
    Comment: We received numerous comments outlining concerns we 
contemplated in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59005) and in the CY 2020 OPPS/ASC (84 FR 61142) final rule with 
comment period. Commenters' expressed that the payment cut for hospital 
outpatient clinic visits threatens access to care, especially in rural 
and other vulnerable communities, and that CMS has undermined the clear 
congressional intent of Section 603 of the Bipartisan Budget Act of 
2015 and exceeded its legal authority.
    Many commenters asserted that the clinic visit policy is an 
``adjustment'' subject to budget neutrality. Commenters expressed 
concern that we did not create sufficient data analytics to support our 
policy rationales. Commenters stated that there are several factors in 
the Medicare program (and outside of hospital control) that could 
influence more services moving to the hospital outpatient setting, 
including the hospital readmissions reduction program, hospital value-
based purchasing, and the 2-midnight rule. Commenters further stated 
that care provided at PBDs is held to higher quality standards and thus 
cannot be directly compared to care provided at physician offices.
    Commenters reiterated their comments from the CY 2019 OPPS/ASC 
final rule with comment period (83 FR 59005) that, relative to patients 
seen in physician offices, patients seen in HOPDs:
     Have more severe chronic conditions;
     Have higher prior utilization of hospitals and EDs;
     Are more likely to live in low-income areas;
     Are 1.8 times more likely to be dually eligible for 
Medicare and Medicaid;
     Are 1.4 times more likely to be nonwhite;
     Are 1.6 times more likely to be under age 65 and disabled; 
and
     Are 1.1 times more likely to be over 85 years old.
    Response: We continue to believe that section 1833(t)(2)(F) of the 
Act gives the Secretary authority to develop a method for controlling 
unnecessary increases in the volume of covered OPD services, including 
a method that controls unnecessary volume increases by removing a 
payment differential that is driving a site-of-service decision, and as 
a result, is unnecessarily increasing service volume.\90\ We also 
continue to believe shifts in the sites of service described in CY 2019 
OPPS/ASC final rule with comment period (83 FR

[[Page 86071]]

59011) are inherently unnecessary if the beneficiary can safely receive 
the same services in a lower cost setting but instead receives care in 
a higher cost setting due to the payment incentives created by the 
difference in payment amounts. While HOPDs may serve unique patient 
populations and provide services to medically complex beneficiaries, we 
have not received data from commenters that demonstrates the need for 
higher payment for clinic visits furnished in excepted off-campus PBDs. 
As we asserted in the 2019 OPPS/ASC final rule with comment period (83 
FR 59011), the fact that the commenters did not supply new or 
additional data supporting these assertions suggests that the payment 
differential is likely the main driver for unnecessary volume increases 
in outpatient department services, particularly clinic visits.
---------------------------------------------------------------------------

    \90\ Available at: https://www.ssa.gov/OP_Home/ssact/title18/1833.htm.
---------------------------------------------------------------------------

    As we noted in the CY 2019 OPPS/ASC final rule comment period (83 
FR 59013), we maintain that while section 1833(t)(9)(B) of the Act does 
require that certain changes made under the OPPS be made in a budget 
neutral manner, this provision does not apply to the volume control 
method under section 1833(t)(2)(F) of the Act. Further, as we stated in 
the CY 2019 OPPS/ASC proposed rule (83 FR 37138 through 37143), we 
believe that implementing a volume control method in a budget neutral 
manner would not appropriately reduce the overall unnecessary volume of 
covered OPD services, and instead would simply shift the volume within 
the OPPS system in the aggregate.
    On July 17, 2020, the D.C. 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.\91\ The D.C. Circuit concluded that CMS 
reasonably read subparagraph (2)(F) to allow a service-specific, non-
budget-neutral payment reduction in the circumstances presented in the 
CY 2019 OPPS/ASC final rule with comment period (83 FR 59013).\92\ On 
October 16, 2020, appellees' petition for panel rehearing and petition 
for rehearing en banc were denied.
---------------------------------------------------------------------------

    \91\ Am. Hosp. Ass'n v. Azar, 964 F.3d 1230, 1244-45 (D.C. Cir. 
July 17, 2020).
    \92\ Id.
---------------------------------------------------------------------------

    Comment: We received comments asserting that our site-neutral 
policies are based on the flawed assumption that Medicare PFS payment 
rates are sustainable rates for physicians.
    Response: As we noted in the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61142), Medicare payment rates under the PFS for 
services furnished by physicians and other suppliers are determined as 
required by the PFS statute, and the rates for individual services are 
determined based on the resources involved in furnishing these services 
relative to other services paid under the PFS. To the extent that 
commenters believe that the PFS rate for a particular service is 
misvalued relative to other PFS services, we encourage commenters to 
nominate the service for review as a potentially misvalued service 
under the PFS.
    Comment: Many commenters referenced the ongoing litigation 
(described earlier in this section). They noted that the American 
Hospital Association (AHA) is seeking a rehearing by the full D.C. 
Circuit of the recent decision overturning the district court's ruling 
in favor of AHA. Several commenters stated that while this issue 
remains under consideration by the D.C. Circuit, CMS should delay 
continuing the policy in CY 2021. Some commenters requested that CMS 
restore the higher payment rates for off-campus HOPDs. Commenters also 
requested that CMS make remedial payments to hospitals for 
underpayments in 2019 and 2020. One commenter stated that CMS should 
not seek recoupment of previously adjusted claims, given hospitals' 
current financial situations as a result of the ongoing COVID-19 
pandemic. They noted that CMS and HHS have sought opportunities to 
support hospitals throughout the pandemic and one simple way to do so 
would be to refrain from recouping prior repayments made to hospitals 
in response to the district court's decision.
    Response: As noted earlier in this section, on July 17, 2020, the 
D.C. 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. On October 16, 2020, the D.C. Circuit denied the appellees' 
petitions for a panel rehearing or a rehearing en banc. The appellees 
have 90 days from the date of the orders denying their petitions to ask 
the United States Supreme Court to review the case. We are still 
considering how we may address any over or underpayments for 2019 
claims.
    Comment: Many commenters characterized the reductions to hospital 
payments for clinic visits as excessive and harmful, especially during 
the COVID-19 PHE. One commenter noted that ``Continuing to impose a 60% 
cut on clinic visit services in 2021, on top of the dire financial 
impacts on U.S. hospitals and health systems due to COVID-19, would 
greatly endanger the critical role that HOPDs play in their 
communities, including providing convenient access to care for the most 
vulnerable and medically complex beneficiaries.'' Another commenter 
asked CMS to reconsider its current policy and exempt Medicare-
Dependent Hospitals, Small Rural Hospitals, Sole Community Hospitals 
(urban and rural) and Rural Referral Centers from all applications of 
the PFS relativity adjuster.
    Response: We share commenter's concerns about the financial 
difficulties brought on by the COVID-19 PHE. We have taken a variety of 
actions to support hospitals so they can more effectively respond to 
the COVID-19 PHE, including waiving the provider-based rules and 
permitting on-campus and excepted off-campus provider-based departments 
to temporarily relocate and continue to be paid under the OPPS if they 
submit a temporary extraordinary relocation exception request to their 
Regional Office. Additionally, we provided for a 2-year phase-in of 
this policy to help to mitigate the immediate financial impact on 
providers.
    We share the commenters' concerns about access to care, especially 
in rural areas where access issues may be more pronounced than in other 
areas of the country. Medicare has long recognized the unique needs of 
rural communities and the financial challenges rural providers face. 
Across the various Medicare payment systems, CMS has implemented a 
number of special payment provisions for rural providers to maintain 
access and ensure beneficiaries in rural areas receive high quality 
care. Under the OPPS, section 1833(t)(13) of the Act gives the 
Secretary 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 sole community hospitals. Therefore, for the CY 2006 OPPS, we 
finalized a payment adjustment for rural sole community hospitals 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. We will continue to 
monitor trends for any access to care issues and may consider 
exemptions from the clinic visit policy for future rulemaking.

[[Page 86072]]

    After consideration of public comments we received, we are 
continuing the clinic visit payment policy for CY 2021 and beyond. We 
will continue to utilize a PFS-equivalent payment rate for the hospital 
outpatient clinic visit service described by HCPCS code G0463 when it 
is furnished by excepted off-campus provider-based departments. The 
PFS-equivalent rate for CY 2021 is 40 percent of the proposed OPPS 
payment (that is, 60 percent less than the proposed OPPS rate). Under 
this policy, these departments will be paid approximately 40 percent of 
the OPPS rate (100 percent of the OPPS rate minus the 60-percent 
payment reduction that is applied in CY 2021) for the clinic visit 
service in CY 2021. Considering the effects of estimated changes in 
enrollment, utilization, and case-mix, this policy results in an 
estimated CY 2021 savings of approximately $430 million, with 
approximately $340 million of the savings accruing to Medicare, and 
approximately $90 million saved by Medicare beneficiaries in the form 
of reduced copayments, when compared to estimated expenditures if the 
policy were not applied. We will continue to monitor the effect of this 
change in Medicare payment policy, including the volume of these types 
of OPD services. We also will continue to evaluate this policy as 
necessary in response to the ongoing litigation.

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 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 the CY 2021 OPPS/ASC 
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-

[[Page 86073]]

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 30, 2020 interim final rule with comment (85 FR 27562 
through 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. PHP APC Update for CY 2021

1. PHP APC Geometric Mean Per Diem Costs
    In summary, for CY 2021, we are finalizing our proposal to use the 
CY 2021 CMHC geometric mean per diem cost calculated in accordance with 
our existing methodology, using the most recent updated claims and cost 
data, as the basis for developing the CY 2021 CMHC APC per diem rate. 
We are also finalizing our proposal for CY 2021 to use the CY 2021 
hospital-based geometric mean per diem cost calculated in accordance 
with our existing methodology, using the most recent updated claims and 
cost data.
    In the CY 2021 OPPS/ASC proposed rule, we proposed to use geometric 
mean per diem cost for CMHCs and hospital-based PHPs, calculated in 
accordance with our existing methodology as the basis for calculating 
the APC per diem rates for CMHCs and hospital-based PHPs respectively, 
but with a cost floor applicable for each APC. We proposed to use the 
cost floors calculated last year for CY 2020 ratesetting; that is, a 
cost floor of $121.62 for CMHCs and a cost floor of $222.76 for 
hospital-based PHPs. Following this methodology, we proposed to use a 
cost floor value of $121.62 for CMHCs as the basis for developing the 
CY 2021 CMHC APC per diem rate. We proposed 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.
    Using the most recent updated claims and cost data as proposed, the 
final CMHC geometric mean per diem cost is $136.14 and the final 
hospital-based PHP geometric mean per diem cost is $253.76. The final 
calculated geometric mean per diem costs for both CMHCs and hospital-
based PHPs are significantly higher than each proposed floor, therefore 
a floor is not necessary at this time and we are not finalizing the 
proposed cost floors in this CY 2021 OPPS/ASC final rule with comment 
period at this time.
    Lastly, we are finalizing our proposal 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 policies are discussed in more detail below.
2. Development of the 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 XX of this 
CY 2021 OPPS/ASC final rule with comment period.
a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments
    For this CY 2021 OPPS/ASC final rule, prior to calculating the 
proposed geometric mean per diem cost for CMHC APC 5853, we prepared 
the data by first applying trims and data exclusions, and assessing 
CCRs as described in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70463 through 70465), so that ratesetting was not skewed 
by providers with extreme data. Before any trims or exclusions were 
applied, there were 40 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, 2 CMHCs had geometric mean costs per day below the trim's 
lower limit of $33.81 or had geometric mean costs per day above the 
trim's upper limit of $519.84. Therefore, we excluded these 2 CMHCs 
from ratesetting because of the 2 standard deviation trim.
    In accordance with our PHP ratesetting methodology (80 FR 70465), 
we also removed service days with no wage index values, because we used 
the wage index data to remove the effects of geographic variation in 
costs prior to APC geometric mean per diem cost calculation. For this 
CY 2021 OPPS/ASC final rule ratesetting, no CMHC was missing wage index 
data for all of its service days and, therefore, no CMHC was excluded. 
We also excluded providers without any days containing 3 or more units 
of PHP-allowable services. One provider was excluded from ratesetting 
because it had no days containing 3 or more units of PHP-allowable 
services. 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 final rule ratesetting, there 
were no CMHCs that showed CCRs greater than one. Therefore, it was not 
necessary to default any CMHC to its statewide hospital CCR for 
ratesetting.
    In summary, these data preparation steps did not adjust the CCR for 
any CMHCs with a CCR greater than one during our ratesetting process. 
We excluded one CMHC because it had no

[[Page 86074]]

days containing 3 or more services and 2 CMHCs for failing the 2 standard deviation trim, resulting in the inclusion of 37 
CMHCs. We did not exclude any other CMHCs for any other trims or 
exclusions or for other missing data. There were 439 CMHC claims 
removed during data preparation steps due to the 2 standard 
deviation trim or because they either had no PHP-allowable codes or had 
zero payment days, leaving 10,495 CMHC claims in our CY 2021 final 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.\93\ The calculated CY 2021 
geometric mean per diem cost for all CMHCs for providing three or more 
services per day (CMHC APC 5853) is $136.14, an increase from $121.62 
calculated last year for CY 2020 ratesetting (84 FR 61347).
---------------------------------------------------------------------------

    \93\ 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.
---------------------------------------------------------------------------

    In the CY 2021 proposed rule (85 FR 48902) the CY 2021 calculated 
CMHC APC was $104.00, which we were concerned would not support ongoing 
access to PHPs in CMHCs. Therefore, we proposed to extend for CY 2021 
and subsequent years the cost floor established in the prior year (84 
FR 61339 through 61344). Because the final calculated CMHC geometric 
mean per diem cost for this final rule with comment period is 
substantially higher than the cost floor, we believe that the final 
calculated geometric mean per diem cost for CMHCs will effectively 
support access to partial hospitalization services and PHPs, and 
therefore the data no longer supports the need to finalize a cost floor 
at this time.
    The CMHC APC 5853 is described as providing three or more partial 
hospitalization services per day (81 FR 79680), and 85.7 percent of 
CMHC paid 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 
provider paid days are for providing four or more services per day (we 
refer readers to Table 45--Percentage of PHP Days by Service Unit 
Frequency of this final rule with comment period). Therefore, the 
higher calculated geometric mean per diem cost of $136.14 is in line 
with our expectations, since the CMHC APC 5853 is actually heavily 
weighted to the cost of providing four or more services. For context, 
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.
    In our analysis for the CY 2021 proposed rule, 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 was so 
small (n=38), these providers had a significant influence on the 
calculated CY 2021 CMHC APC geometric mean per diem cost. Based on 
updated cost and claims data for this final rule, the geometric mean 
costs for three of these six providers (collectively representing 15.7 
percent of all CMHC days) increased substantially along with the 
geometric mean costs of a fourth provider, such that the final 
calculated geometric mean per diem cost for all CMHCs increased to 
$136.14.
    For the CY 2021 OPPS/ASC proposed rule, in crafting our proposal, 
we also considered 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. We also 
considered 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. We did 
not ultimately propose either of these methodologies, and we did not 
receive any comments on these methodologies. Further discussion of 
these alternatives that we considered is found in the CY 2021 OPPS/ASC 
proposed rule (85 FR 48904).
    In summary, we are finalizing our proposal 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. Since the final calculated CMHC geometric 
mean per diem cost for this final rule with comment period is 
substantially higher than the cost floor, we believe that the final 
calculated geometric mean per diem cost for CMHCs will effectively 
support access to partial hospitalization services and PHPs, and 
therefore the data no longer supports the need to finalize a cost floor 
at this time. We refer readers to section XXIV. of this CY 2021 OPPS/
ASC final rule with comment period for payment impacts, which are 
budget neutral.
    We received 8 comments that addressed CMHC ratesetting, which are 
summarized as follows:
    Comment: Nearly all commenters supported our proposed increase to 
the CMHC payment rate and the efforts by CMS to mitigate fluctuations 
in CMHC payments and help protect beneficiary access to PHP services. 
However, several commenters expressed concern that despite the modest, 
occasional rate increases proposed and finalized in recent years, the 
results of the proposed PHP ratesetting methodology are contrary to 
CMS's efforts to protect access. One commenter suggested that CMS 
consider incorporating an annual adjustment to the cost floor in order 
to ensure that it reflects updated cost information and continues to 
help minimize the impact of significant changes in the median costs. 
Five commenters stated that the current payment methodology has 
resulted in reductions in provider access rather than protection of 
access. Several commenters expressed concern about the decline in the 
number of CMHCs and the effect that further declines would have on 
beneficiary access to care. These commenters suggested that declining 
PHP payment rates have been the cause of the decline in the number of 
CMHCs. One commenter stated that decreased access to CMHC PHP services 
could force beneficiaries to use more costly hospital-based PHPs, with 
higher beneficiary co-payments, or lead to increased use of inpatient 
psychiatric resources. This commenter stated that the data used for 
CMHC ratesetting are

[[Page 86075]]

skewed, the calculations are incorrect, and the proposed low payment 
rates would result in the remaining CMHCs closing. This commenter noted 
that setting CMHCs' payment rates based on a small number of CMHCs does 
not reflect the actual cost of providing these services and expressed 
concern that by using the mean or median costs, more CMHCs would close.
    Response: We thank the commenters for their support, and we also 
share the commenters' concerns about the decline in the number of PHPs, 
particularly at CMHCs, and the effect on access. However, it does not 
directly follow that declining per diem payment rates alone have caused 
the decline in the number of PHPs. As we have noted in prior rulemaking 
(76 FR 74350 and 79 FR 66906), the closure of PHPs may be due to a 
number of reasons, such as business management or marketing decisions, 
competition, oversaturation of certain geographic areas, and federal 
and state fraud and abuse efforts, among others. Our goal is to ensure 
accurate and reasonable payment rates for PHP services that protect 
access to both provider types, so beneficiaries have choices regarding 
where to receive treatment. We want to ensure that CMHCs remain a 
viable option as providers of mental health care in the beneficiary's 
own community. Also, beneficiaries receiving care at a CMHC instead of 
a hospital-based PHP may incur lower beneficiary copayments. However, 
we disagree with the assertion that the CMHC data are skewed and that 
the calculations are incorrect. In the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70456 to 70459), we implemented a 2 
standard deviation trim on CMHC costs per day to remove aberrant data 
that could skew costs up or down inappropriately. We recognize that 
with a small number of providers, such as the 37 CMHCs used for this 
final rule rate setting, the calculations can be influenced by large 
providers, however it is important to note that the influence these 
providers have is appropriate and proportional to their share of PHP 
days furnished. In this CY 2021 final rule ratesetting, as discussed 
previously in this section, updated data from three large providers 
reflected a significant increase in geometric mean per diem costs. Due 
to the large share of PHP days that these providers furnished, their 
increased per diem costs influenced the overall CMHC geometric mean per 
diem cost calculation.
    We also recognize that as the number of providers decreases, the 
ratesetting calculations can be more strongly influenced by the costs 
of large providers. We are regularly evaluating our rate setting 
methodology to ensure that it is as accurate as possible, and captures 
provider cost data fully. However, our rate setting methodology must 
comply with requirements at sections 1833(t)(2) and 1833(t)(9) of the 
Act, and depends heavily on provider-reported costs. We strongly 
encourage CMHCs to review cost reporting instructions to be sure they 
are reporting their costs correctly. These instructions are available 
in chapter 45 of the Provider Reimbursement Manual, Part 2, available 
on the CMS website at https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/PaperBased-Manuals.html. We want to reiterate that it 
is a requirement for CMHCs, unless they are approved as a low-
utilization or no-utilization provider in accordance with PRM-1, 
chapter 1, section 110 (42 CFR 413.24(g) and (h)), to file full cost 
reports, to help us capture accurate CMHC costs in rate setting. We 
furthermore encourage those CMHCs that do not file full cost reports to 
consider doing so.
    We are confident that the per diem costs we calculate follow the 
methodology discussed in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70462 to 70466) and in the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79691). Those costs are geometric mean per 
diem costs, rather than arithmetic mean or median per diem costs; in 
the CY 2013 OPPS final rule (77 FR 68409), we discussed the advantages 
of using geometric means rather than medians to calculate PHP costs, 
and noted that the geometric mean more accurately captures the full 
range of service costs (including outliers) than the median cost and 
promotes more stability in the payment system. In summary, we believe 
that providing payment that is based upon actual provider-reported 
costs supports access to PHP services and does not lead to provider 
closures; however, as we noted above, we rely on providers to 
accurately report their costs in a timely and complete manner.
    For CY 2021, after reviewing comments and updated cost and claims 
data, we are finalizing the CY 2021 CMHC geometric mean per diem cost 
as $136.14, which is above the proposed cost floor amount and based on 
updated cost and claims data. We believe this calculated geometric mean 
per diem cost will support access to PHP services. Therefore at this 
time, we are not finalizing our proposal to extend the cost floor for 
CY 2021 or subsequent years. Given the higher than expected calculated 
CMHC geometric mean per diem cost due to updated data, we do not 
believe our proposal for a cost floor is necessary for CY 2021 and do 
not believe it is appropriate to apply this cost floor for subsequent 
years; in response to the concerns raised by several commenters, we 
will continue to evaluate the effects of our policies and analyze the 
latest available cost and claims data to look for ways to further 
mitigate payment fluctuations and protect beneficiary access to PHP 
services. We appreciate the commenters' suggestions, and will take them 
into consideration as we explore future policies. We also refer readers 
to section VII.B.2.b of this final rule with comment period for a 
similar comment and response related to hospital-based PHPs.
    Comment: Three commenters highlighted the importance of PHP 
services in the current environment and noted that the need for mental 
health services in general has increased.
    Response: We appreciate the work PHPs do to care for a particularly 
vulnerable population with serious mental illnesses, and we recognize 
the particular importance of these programs in the current environment. 
We believe it is crucial to ensure that providers receive accurate 
payment in order to provide these necessary services to the PHP 
population. Based on the latest data, the geometric mean per diem cost 
for CMHCs is significantly higher than the cost floor that we proposed 
for CY 2021, and therefore the data does not support finalizing floor 
at this time in this CY 2021 OPPS/ASC final rule. As noted above, we 
will continue to look for ways to further mitigate payment fluctuations 
and protect beneficiary access to PHP services.
    Comment: One commenter requested that CMS take into account for 
future rulemaking the effects that the COVID-19 PHE and the subsequent 
conversion to virtual care may have on PHP services and the payment 
methodology for such services.
    Response: We appreciate the commenter's suggestion and will take 
this into consideration as we explore policy options for appropriately 
strengthening the PHP benefit and increasing access to the valuable 
services provided by CMHCs as well as by hospital-based PHPs. As part 
of that process, we regularly review our methodology to ensure that it 
is appropriately capturing the cost of care reported by providers and 
will give particular attention to effects of the ongoing COVID-19 PHE.
    Comment: One commenter stated that CMHCs incur extra costs to meet 
the CMHC conditions of participation (CoPs) and have experienced an 
increase in bad debt expense.

[[Page 86076]]

    Response: Most (if not all) of the costs associated with adhering 
to CoPs should be captured in the cost report data used in ratesetting 
and, therefore, are accounted for when computing the geometric mean per 
diem costs. Finally, the statutory reduction to bad debt reimbursement 
was a result of provisions of section 3201 of the Middle Class Tax 
Relief and Job Creation Act of 2012 (Pub. L. 112-96). The reduction to 
bad debt reimbursement impacted all providers eligible to receive bad 
debt reimbursement, as discussed in the CY 2013 End-Stage Renal Disease 
final rule (77 FR 67518). Medicare currently reimburses bad debt for 
eligible providers at 65 percent of such debt. Because this percentage 
was enacted by Congress, CMS does not have the authority to change the 
percentage. In contrast to the Medicare bad debt reimbursement policy, 
private sector insurers typically do not reimburse providers for any 
amounts of enrollees' unpaid deductibles or coinsurance. In light of 
budgetary constraints and the steady increase in bad debt claims over 
the years, a reduction in bad debt reimbursement is necessary to 
protect the Medicare Trust Fund and preserve beneficiary access to care 
without imposing an undue burden on hospitals.
    Comment: One commenter recommended that CMS pay CMHCs the same rate 
as hospital-based PHPs, since these two provider types provide the same 
services and have the same qualified clinical staff. This commenter 
objected to CMS' continuing use of the single-tier payment system for 
CMHCs, stating that it adversely affects the quality and intensity of 
PHP services.
    Response: The OPPS pays for outpatient services, including partial 
hospitalization services, based on the costs of providing services 
using provider data from claims and cost reports, in accordance with 
statute. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services, within a classification 
system developed by the Secretary for covered OPD services, so that 
services classified within each group are comparable clinically and 
with respect to the use of resources. In addition, by statute at 
Section 1833(t)(2)(C) of the Act, we are required to use data on claims 
and most recent available cost reports to establish relative payment 
weights for covered OPD services. Therefore, we calculate a CMHC APC 
rate based on costs, which providers supply on their cost reports. 
While CMHCs and hospital-based CMHCs provide the same clinical 
services, their resource use differs, because these two provider types 
have different cost structures. In this final rule and in prior 
rulemaking, commenters and CMS have noted that hospitals tend to have 
higher costs than CMHCs, particularly higher overhead (83 FR 58986, 82 
FR 59377, and 81 FR 79686 to 79687). We see this difference in cost 
structures reflected when we calculate the geometric mean cost per day 
for CMHCs versus for hospital-based PHPs, where CMHC costs per day are 
consistently lower than hospital-based PHP costs per day. For example, 
for this CY 2021 OPPS/ASC final rule with comment, the calculated 
geometric mean costs for providing PHP services were $136.14 per day 
for CMHCs, but were $253.76 per day for hospital-based PHPs. Therefore, 
we do not believe it is appropriate to pay CMHCs the same APC rate as 
hospital-based PHPs. We strongly encourage CMHCs to review cost 
reporting instructions to be sure they are reporting their costs 
correctly. These instructions are available in chapter 45 of the 
Provider Reimbursement Manual, Part 2, available on the CMS website at 
https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/PaperBased-Manuals.html.
    We believe our policy to replace the existing Level 1 and Level 2 
PHP APCs for both provider types with a single PHP APC, by provider 
type, is supported by the statute and regulations and will continue to 
pay for partial hospitalization services appropriately based upon 
actual provider costs (81 FR 79683). Regarding the commenter's concern 
about the small number of providers and the use of a single-tier 
payment system, we refer the commenter to the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79682 through 79685), where we 
discussed our rationale for implementing the single-tier payment system 
for CMHCs. A key reason behind implementing the single tier for CMHCs 
was to reduce cost fluctuations and bring more stability to CMHC APC 
rates, especially given the small number of providers (81 FR 79683). We 
also noted that the costs of providing a Level 1 CMHC day were nearly 
the same as the cost of providing a Level 2 CMHC day (81 FR 79684). In 
accordance with the regulations at 42 CFR 419.31, we could not justify 
continuing to separate these services into two APCs, but combined 
clinically similar services with similar resource use into a single APC 
(81 FR 79683 to 79684).
    We do not believe the intensity of PHP services provided in 
hospitals and in CMHCs has been affected by using a single-tier payment 
system. Based on the utilization data found in Table 45 of this final 
rule with comment period, the percentage of paid PHP days which have 
only three services has been relatively stable over time and has 
remained consistent for hospital-based PHPs. Even though we identified 
an increase in 3-service days for CMHCs in 2019, as we note in section 
VIII.B.3.b of this final rule with comment period, we also identified a 
noticeable increase in days with 5 or more services. We will continue 
to monitor the percentage of 3-service days and will also monitor the 
provision of 20 hours per week of PHP services, to ensure there are no 
unintended consequences of a single-tier payment system on PHP 
intensity. We are unable to determine the effects of the single-tier 
payment on CMHC quality, because there are no quality measures for 
CMHCs, nor is quality reporting required of CMHCs. However, we do not 
believe that a single-tier payment system would affect the quality of 
care provided in a CMHC.
    Comment: One commenter suggested that CMS use value-based 
purchasing for paying CMHCs instead of a cost-based system stating that 
rewarding providers for higher-quality care, as measured by selected 
standards is a better way to improve the quality of any service. Other 
commenters recommended that CMS reconsider its policy positions on PHP 
services and look for ways to rebuild these services, suggesting that 
CMS base PHP reimbursement on incentives determined by documented 
productivity results. These commenters suggested we consider 
Measurement-based Care and Patient Satisfaction.
    Response: We believe ``measurement-based care'' that the commenters 
cited refers to administering a standardized instrument to measure some 
aspect of patient symptoms when he or she begins and ends receiving PHP 
services. This type of measure could inform clinical decision-making 
and quality improvement activities at minimum, but results could 
theoretically be used to adjust payment. We also believe that the 
commenters are asking if CMS could administer patient satisfaction 
surveys and then reward high-performing PHPs. We responded to a similar 
public comment in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70462) and refer readers to a summary of that comment and our 
response. Currently, there is no statutory language authorizing 
incentive payment methodology based on productivity results, patient 
satisfaction, or value-based purchasing for CMHCs or for outpatient 
hospital-based PHPs. To reiterate, sections 1833(t)(2) and 1833(t)(9) 
of the Act set forth the

[[Page 86077]]

requirements for establishing and adjusting OPPS payment rates, which 
are based on costs, and which include PHP payment rates. We note that 
section 1833(t)(17) of the Act authorizes the Hospital Outpatient 
Quality Reporting (OQR) Program, which applies a payment reduction to 
subsection (d) hospitals that fail to meet program requirements. In the 
CY 2015 OPPS/ASC proposed rule (79 FR 41040), we considered future 
inclusion of, and requested comments on, the following quality measures 
addressing PHP issues that would apply in the hospital outpatient 
setting: (1) 30-Day Readmission; (2) Group Therapy; and (3) No 
Individual Therapy. We refer readers to the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66957 through 66958) for a more detailed 
discussion of PHP measures considered for inclusion in the Hospital OQR 
Program in future years, and of the comments received as a result of 
the solicitation. CMS also adopted the OAS CAHPS survey in the Hospital 
OQR Program, beginning with CY 2020 payment determination (2018 data 
collection) (82 FR 52572 through 52573); however, implementation was 
delayed until further action in future rulemaking to ensure that the 
survey measures appropriately account for patient response rates, both 
aggregate and by survey administration method; reaffirm the reliability 
of national implementation of OAS CAHPS Survey data; and appropriately 
account for the burden associated with administering the survey in the 
outpatient setting of care.
    However, the Hospital OQR Program does not apply to CMHCs, and 
there are no quality measures applied to CMHCs.
    After careful consideration of the comments and updated data, we 
are finalizing our proposal to use the CY 2021 CMHC APC geometric mean 
per diem cost calculated in accordance with our existing methodology. 
Because the final calculated CMHC geometric mean per diem cost for this 
final rule with comment period is substantially higher than the cost 
floor, we believe that the final calculated geometric mean per diem 
cost for CMHCs will effectively support access to partial 
hospitalization services and PHPs. Therefore, the data no longer 
supports the need to finalize a cost floor at this time. In response to 
the concerns raised by several commenters, we will continue to look for 
ways to further mitigate payment fluctuations and protect beneficiary 
access to PHP services. The final CY 2021 CMHC geometric mean per diem 
cost is $136.14.
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For this CY 2021 final 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 449 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 one hospital-based PHP provider from our final ratesetting. 
However, 100 percent of the service days for this hospital-based PHP 
provider had at least one service associated with a CCR greater than 5, 
so the trim removed this provider entirely from our final 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 72 hospital-based PHP providers [(1 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 377 
(449 total - 72 excluded) hospital-based PHP providers in the data used 
for calculating ratesetting. In addition, 6 hospital-based PHP 
providers were defaulted to their overall hospital ancillary CCRs due 
to outlier cost center CCR values.
    After completing these data preparation steps, we calculated the 
final 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).\94\ 
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 $253.76, 
which is an increase of 8.7 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 $253.76 best 
supports ongoing access to hospital-based PHPs.
---------------------------------------------------------------------------

    \94\ 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.
---------------------------------------------------------------------------

    In the proposed rule (85 FR 48902) 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), 89.1 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 
45--Percentage of PHP Days by Service Unit Frequency in this final 
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

[[Page 86078]]

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 believed could 
be influenced by data from a small number of providers with low service 
costs per day, we proposed 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 proposed 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 proposed that the established hospital-
based geometric 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 stated 
we believed 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 proposed 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 was greater than the floor, and 
therefore, we proposed this calculated CY 2021 cost for hospital-based 
PHPs.
    For the CY 2021 proposed rule, we also considered 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. We also considered 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. We did not ultimately 
propose either of these methodologies, and we did not receive any 
comments on these methodologies. Further discussion of these 
alternatives is found in the CY 2021 OPPS proposed rule (85 FR 48904).
    In summary, we are finalizing our proposal to use the most recent 
updated claims and cost data to calculate CY 2021 geometric mean per 
diem costs, just as we are for CMHCs in the section above. Because the 
final calculated CY 2021 hospital-based PHP APC geometric mean per diem 
cost is significantly higher than the proposed floor, we believe that 
the final calculated geometric mean per diem cost for hospital-based 
PHPs will effectively support access to partial hospitalization 
services. The data no longer supports the need to finalize a cost floor 
at this time, and therefore, we are not finalizing our proposal to 
extend the established hospital-based geometric mean per diem cost 
floor of $222.76 to CY 2021 and subsequent years. The final CY 2021 
hospital-based PHP geometric mean per diem cost is $253.76. We refer 
readers to section XXIV of this CY 2021 OPPS/ASC final rule with 
comment period for a discussion of payment impacts and the budget 
neutrality adjustment for OPPS rates.
    We received 8 comments that addressed hospital-based PHP 
ratesetting, which are summarized as follows:
    Comment: Nearly all commenters supported our proposed increase to 
the hospital-based PHP payment rate and the efforts by CMS to mitigate 
fluctuations in hospital-based PHP payments and help protect 
beneficiary access to PHP services. However, several commenters 
expressed concern that despite the modest, occasional rate increases 
proposed and finalized in recent years, the results of the proposed PHP 
ratesetting methodology are contrary to CMS's efforts to protect 
access. Several commenters expressed concern about the decline in the 
number of hospital-based PHPs and the effect that further declines 
would have on beneficiary access to care. Five of these commenters 
stated that the current payment methodology has resulted in reductions 
in provider access rather than protection of access. One commenter 
suggested that CMS consider incorporating an annual adjustment to the 
cost floor in order to ensure that it reflects updated cost information 
and continues to help minimize the impact of significant changes in the 
median costs.
    Response: We thank the commenters for their support, and we also 
share the commenters' concerns about the decline in the number of PHPs 
and the effect on access. However, as we stated above, it does not 
directly follow that declining per diem payment rates alone have caused 
the decline in the number of PHPs. As we have noted in prior rulemaking 
(76 FR 74350 and 79 FR 66906), the closure of PHPs may be due to a 
number of reasons, such as business management or marketing decisions, 
competition, oversaturation of certain geographic areas, and federal 
and state fraud and abuse efforts, among others. Our goal is to ensure 
accurate and reasonable payment rates for PHP services that protect 
access to both provider types, so beneficiaries have choices regarding 
where to receive treatment. After reviewing comments and updated costs, 
for CY 2021, we are finalizing the CY 2021 hospital-based PHP geometric 
mean per diem cost as $253.76, which is above the cost floor amount and 
based on updated cost and claims data. We believe this calculated 
geometric mean per diem cost will support access to hospital-based PHP 
services. At this time we are not finalizing our proposal to extend the 
cost floor for CY 2021 or subsequent years. Given the hospital-based 
PHP geometric mean per diem cost is $253.76, which is above the cost 
floor, we do not believe our proposal for a cost floor is necessary for 
CY 2021 and do not believe it is appropriate to apply this cost floor 
for subsequent years; in response to the concerns raised by several 
commenters, we will continue evaluate the effects of our policies and 
analyze the latest available cost and claims data to look for ways to 
further mitigate payment fluctuations and protect beneficiary access to 
PHP services. We appreciate the commenters' suggestions, and will take 
them into consideration as we explore future policies.
    We also recognize that as the number of providers decreases, the 
relative share of PHP days furnished by large providers can increase, 
such that large providers' costs more strongly influence the 
ratesetting calculations. We are regularly evaluating our rate setting 
methodology to ensure that it is as accurate as possible, that it 
captures provider cost data fully, and that it protects access to PHP 
services. However, our rate setting methodology must comply with 
requirements at sections 1833(t)(2) and 1833(t)(9) of the Act, and 
depends heavily on provider-

[[Page 86079]]

reported costs. We strongly encourage hospitals to review cost 
reporting instructions to be sure they are reporting their costs 
correctly. These instructions are available in chapter 40 of the 
Provider Reimbursement Manual, Part 2, available on the CMS website at 
https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/PaperBased-Manuals.html. We also refer readers to section VIII.B.2.a. 
for a similar comment and response related to CMHCs.
    Comment: Three commenters highlighted the importance of PHP 
services in the current environment and noted that the need for mental 
health services in general has increased.
    Response: We appreciate the work PHPs do to care for a particularly 
vulnerable population with serious mental illnesses and believe that 
having PHPs available to beneficiaries helps prevent patient recidivism 
and inpatient psychiatric admissions, and we recognize the particular 
importance of these programs in the current environment. We believe it 
is crucial to ensure that providers receive accurate payment in order 
to provide these necessary services to the PHP population. Based on the 
latest data, the geometric mean per diem cost for hospital-based PHPs 
is significantly higher than the cost floor that we proposed for CY 
2021, and therefore the data does not support finalizing floor at this 
time in this CY 2021 OPPS/ASC final rule.
    Comment: One commenter requested that CMS to take into account for 
future rulemaking the effects that the COVID-19 PHE and the subsequent 
conversion to virtual care may have on PHP services and the payment 
methodology for such services.
    Response: As mentioned earlier, we will continue to explore policy 
options for strengthening the PHP benefit and increasing access to the 
valuable services provided by CMHCs as well as by hospital-based PHPs 
with particular attention to effects of this PHE. As part of that 
process, we regularly review our methodology to ensure that it is 
appropriately capturing the cost of care reported by providers.
    Comment: One commenter suggested that CMS use value-based 
purchasing for paying hospital-based PHPs instead of a cost-based 
system stating that rewarding providers for higher-quality care, as 
measured by selected standards is a better way to improve the quality 
of any service. Other commenters recommended that CMS reconsider its 
policy positions on PHP services and look for ways to rebuild these 
services, suggesting that CMS base PHP reimbursement on incentives 
determined by documented productivity results. These commenters 
suggested we consider Measurement-based Care and Patient Satisfaction.
    Response: We believe ``measurement-based care'' that the commenters 
cited refers to administering a standardized instrument to measure some 
aspect of patient symptoms when he or she begins and ends receiving PHP 
services. This type of measure could inform clinical decision-making 
and quality improvement activities at minimum, but results could 
theoretically be used to adjust payment. We also believe that the 
commenters are asking if CMS could administer patient satisfaction 
surveys and then reward high-performing PHPs. We responded to a similar 
public comment in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70462) and refer readers to a summary of that comment and our 
response. Currently, there is no statutory language authorizing 
incentive payment methodology based on productivity results, patient 
satisfaction, or value-based purchasing for CMHCs or for outpatient 
hospital-based PHPs. To reiterate, sections 1833(t)(2) and 1833(t)(9) 
of the Act set forth the requirements for establishing and adjusting 
OPPS payment rates, which are based on costs, and which include PHP 
payment rates. We note that section 1833(t)(17) of the Act authorizes 
the Hospital OQR Program, which applies a payment reduction to 
subsection (d) hospitals that fail to meet program requirements. In the 
CY 2015 OPPS/ASC proposed rule (79 FR 41040), we considered future 
inclusion of, and requested comments on, the following quality measures 
addressing PHP issues that would apply in the hospital outpatient 
setting: (1) 30-Day Readmission; (2) Group Therapy; and (3) No 
Individual Therapy. We refer readers to the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66957 through 66958) for a more detailed 
discussion of PHP measures considered for inclusion in the Hospital OQR 
Program in future years, and of the comments received as a result of 
the solicitation. CMS also adopted the OAS CAHPS survey in the Hospital 
OQR Program, beginning with CY 2020 payment determination (2018 data 
collection) (82 FR 52572 through 52573); however, implementation was 
delayed until further action in future rulemaking to ensure that the 
survey measures appropriately account for patient response rates, both 
aggregate and by survey administration method; reaffirm the reliability 
of national implementation of OAS CAHPS Survey data; and appropriately 
account for the burden associated with administering the survey in the 
outpatient setting of care.
    After careful consideration of all the comments on the proposed 
rule and updated data, we used the most recent updated claims and cost 
data to calculate CY 2021 geometric mean per diem costs in this CY 2021 
OPPS/ASC final rule with comment period. The final calculated geometric 
mean per diem costs for CY 2021 are substantially higher than the 
proposed cost floors for both CMHCs and hospital-based PHPs. We believe 
that the final calculated geometric mean per diem costs for CMHCs and 
hospital-based PHPs will effectively protect access to partial 
hospitalization services. Therefore, the data no longer supports the 
need to finalize either the proposed CMHC or hospital-based PHP cost 
floor at this time. In response to the concerns raised by several 
commenters, we will continue to look for ways to further mitigate 
payment fluctuations and protect beneficiary access to PHP services. 
The final CY 2021 hospital-based PHP geometric mean per diem cost is 
$253.76.
    The final CY 2021 PHP geometric mean per diem costs are shown in 
Table 43 and are used to derive the final CY 2021 PHP APC per diem 
rates for CMHCs and hospital-based PHPs. The final CY 2021 PHP APC per 
diem rates are included in Addendum A to the CY 2021 OPPS/ASC 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).\95\
---------------------------------------------------------------------------

    \95\ As discussed in section XX. of this CY 2021 OPPS/ASC final 
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 the CY 2021 OPPS/ASC 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 86080]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.069

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 the CY 2021 OPPS/ASC 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 44.
[GRAPHIC] [TIFF OMITTED] TR29DE20.070

    As shown in Table 44, 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 45 
in subsection b). 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 4.2 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 and remained the same on days with four or more 
services. These very small decreases correspond with a modest increase 
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.
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

[[Page 86081]]

providing 3 or more PHP services per day, we are continuing to monitor 
utilization of days with only 3 PHP services.
    For the CY 2021 OPPS/ASC proposed rule, we used the CY 2019 claims 
data. Table 45 shows the utilization findings based on the 2019 claims 
data.
[GRAPHIC] [TIFF OMITTED] TR29DE20.071

    As shown in Table 45, 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).
    The following is summary of the comments we received and our 
responses to those comments.
    Comment: Four commenters noted that the data in Table 45 (Table 30 
of the CY 2021 OPPS/ASC proposed rule) demonstrate commitment by PHPs 
to comply with and exceed the 20-hour rule. These commenters noted that 
the vast majority of claim days for CMHCs and hospital-based PHPs have 
4 or more services provided. The commenters noted that PHPs are 
voluntary, and that they cannot force patients to attend every day. 
They also noted that the typical patient profile includes behaviors 
that work against attendance and full daily participation. In addition, 
the commenters wrote that there are other challenges to providing 20 
hours of services per week that are beyond providers' control, such as 
holidays, weather, and other medical appointments.
    Response: We appreciate that most PHP days include 4 or more 
services being provided. The updated data for this final rule with 
comment period showed an uptick in the percentage of 3-service days 
among CMHCs, but we also note that there is an increase in the 
percentage of days with 5 or more services. We will continue to monitor 
the data over time. The ``20-hour rule'' the commenters mentioned is 
from our regulations at 42 CFR 410.43(c) (discussed at 73 FR 68694 to 
68695), which require that eligible PHP patients need at least 20 hours 
of therapeutic services per week, as evidenced in their plan of care. 
PHPs are intended to be intensive programs that are provided in lieu of 
inpatient hospitalization. We appreciate the efforts providers have

[[Page 86082]]

made to increase beneficiary attendance, and also recognize the 
provider concerns about circumstances beyond their control which can 
affect the number of hours of services provided each week. We did not 
make any proposals related to the 20-hour requirement, and are 
continuing to monitor the claims data regarding the hours per week of 
services provided, sending providers informational messaging without 
affecting payment.

C. Outlier Policy for CMHCs

    For CY 2021, we proposed to continue to calculate the CMHC outlier 
percentage, cutoff point and percentage payment amount, outlier 
reconciliation, outlier payment cap, and fixed-dollar threshold 
according to previously established policies. These topics are 
discussed in more detail. We refer readers to section II.G.1 of this CY 
2021 OPPS/ASC final rule with comment period for our general policies 
for hospital outpatient outlier payments.
    We did not receive any public comments on our proposal, and are 
finalizing it as proposed.
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 proposed to continue to calculate the CMHC outlier 
percentage according to previously established policies, and we did not 
propose any changes to our current methodology for calculating the CMHC 
outlier percentage for CY 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 the CY 
2021 OPPS/ASC 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 the CY 2021 OPPS/ASC 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 the CY 2021 OPPS/ASC 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 proposed to 
continue to use the same methodology as CY 2020. Therefore, based on 
our CY 2021 payment estimates, CMHCs are projected to receive 0.02 
percent of total hospital outpatient payments in CY 2021, excluding 
outlier payments. We proposed to designate approximately less than 0.01 
percent of the estimated 1.0 percent hospital outpatient outlier 
threshold for CMHCs. This percentage is based upon the formula given in 
Step 3.
    We did not receive any public comments on this proposal, and are 
finalizing our proposal as proposed.
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

[[Page 86083]]

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 proposed to continue to pay for partial 
hospitalization services that exceed 3.4 times the proposed CMHC PHP 
APC payment rate at 50 percent of the CMHC PHP APC geometric mean per 
diem costs over the cutoff point. That is, for CY 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))].
    We did not receive any public comments on this proposal, and are 
finalizing our proposal as proposed.
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 proposed 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).
    We did not receive any public comments on this proposal, and are 
finalizing our proposal as proposed.
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 proposed to continue to apply the 8 percent CMHC 
outlier payment cap to the CMHC's total per diem payments. We did not 
receive any public comments on this proposal, and are finalizing our 
proposal as proposed.
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 proposed to continue this policy for 
CY 2021. We did not receive any public comments on this proposal, and 
are finalizing our proposal as proposed.

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.\96\
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    \96\ 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.
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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

[[Page 86084]]

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 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 proposed 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 also sought 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 
the CY 2021 OPPS/ASC 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). However, 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. For the proposed rule, we concluded that we no 
longer believed there was a need for the IPO list in order to identify 
services that require inpatient care. Instead, we agreed 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 believed

[[Page 86085]]

that this change would ensure maximum availability of services to 
beneficiaries in the outpatient setting.
    We also believed 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 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 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 believed that the difference between 
the need for inpatient care and the appropriateness of outpatient care 
has become less distinct for many services. Therefore, we believed that 
the IPO list was no longer necessary to identify services that require 
inpatient care.
    In the CY 2021 OPPS/ASC proposed rule, we acknowledged 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 stated that we believe that the evolving nature 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 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.
    Additionally, as indicated in the 2020 Quality Strategy,\97\ 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 and to address concerns about the safety and 
quality of more varied, complex procedures performed in the outpatient 
setting. We stated in the CY 2021 OPPS/ASC proposed rule that 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 was important to pause 
certain medical contractor reviews for patient status to allow 
providers time to adjust to the proposed changes to the IPO list, 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 proposed 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 stated that we 
believe that quality of care was unlikely to be negatively affected by 
the elimination of the IPO list. However, we also requested that 
commenters submit evidence on what effect, if any, they believe 
eliminating the IPO list would have on the quality of care.
---------------------------------------------------------------------------

    \97\ 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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[[Page 86086]]

    Furthermore, we explained that some stakeholders had previously 
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 might 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 emphasized in the CY 2021 
OPPS/ASC proposed rule 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 
comprehensive APC (C-APC) when they are removed from the IPO list. As 
such, these services would likely be considered 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, which is 
that 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 the CY 2021 OPPS/ASC 
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 stated in the CY 2021 OPPS/ASC proposed rule that 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 stated 
that we believe that developments in surgical technique and 
technological advances in the delivery of services may obviate the need 
for the IPO list. Finally, we also stated that 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 would continue to 
ensure the safety of beneficiaries in both the inpatient and outpatient 
settings in the absence of the IPO list. Therefore, we proposed to 
eliminate the IPO list over a transitional period beginning in CY 2021. 
We also stated that while we believe that the list could be eliminated 
in its entirety at this point, as explained in further detail below, we 
proposed a transitional period.
    Given the significant number of services on the list and that they 
would be newly priced under the OPPS, we recognized 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 proposed to transition 
services off the IPO list over a 3-year period, with the list 
completely eliminated by 2024. In accordance with this proposal, we 
proposed 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 proposed that musculoskeletal services would be the 
first group of services that would be removed from the IPO list. We 
stated that 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 noted that, more often than 
not, stakeholders' historical requests for removals were for 
musculoskeletal services. We also recognized 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 identified 266 musculoskeletal 
services that we proposed to remove from the IPO list for CY 2021.
    Comment: Numerous commenters, including some medical specialty 
societies, health systems, and individual physicians, supported our 
proposal to eliminate the IPO list and defer to physicians' judgment on 
site of service decisions. These commenters stated that CMS' efforts to 
remove regulatory barriers would provide patients with more choices for 
where to receive affordable care. The commenters also believed the 
proposed change could potentially decrease overall healthcare costs and 
improve clinical outcomes for patients. These commenters stated that 
there is no clinical difference between a surgery performed in an 
inpatient setting and an outpatient setting, and that eliminating the 
IPO list would create more flexibility for physicians and 
beneficiaries.
    Response: We thank the commenters for their support.
    Comment: Many commenters, including hospital associations, health 
systems, medical specialty societies and professional organizations, 
and advocacy groups opposed the elimination of the IPO list due to 
patient safety concerns, stating that the IPO list serves as an 
important programmatic safeguard and maintains a common standard in the 
Medicare program. These commenters stated that the high-risk, invasive 
procedures that require post-operative monitoring that are currently 
included on the IPO list

[[Page 86087]]

would not be safe to perform on Medicare beneficiaries in the 
outpatient setting. These commenters also stated that CMS should retain 
its current process for evaluating and removing procedures from the IPO 
list through rulemaking. Alternatively, several commenters requested 
that instead of eliminating the IPO list, CMS maintain the list 
specifically for a smaller number of procedures that are complex, 
surgically invasive, and should never be performed in the outpatient 
setting. Other commenters requested that specific CPT codes proposed to 
be removed from the IPO list for CY 2021 remain payable in the 
inpatient setting only, including CPT codes 27280 (Arthrodesis, open, 
sacroiliac joint, including obtaining bone graft, including 
instrumentation, when performed) and 22857 (Total disc arthroplasty 
(artificial disc), anterior approach, including discectomy to prepare 
interspace (other than for decompression), single interspace, lumbar).
    Response: We acknowledge the commenters' important concerns 
regarding the elimination of the IPO list and the potential for safety 
risks for Medicare beneficiaries. We continue to believe that 
physicians can and should 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 believe that 
patient safety and quality of care will be safeguarded by the 
physician's assessment of the risk of a procedure or service to the 
individual beneficiary and their selection of the most appropriate 
setting of care based on this risk in addition to state and local 
licensure requirements, accreditation requirements, hospital conditions 
of participation (CoPs), medical malpractice laws, and CMS quality and 
monitoring initiatives and programs. In addition, as we have stated in 
previous rulemaking, the removal of a service from the IPO list does 
not require the service to be performed only on an outpatient basis. 
Rather, it allows for payment under the OPPS when the service is 
performed on a registered hospital outpatient (82 FR 59384; 84 FR 
61354). Services that are removed from the IPO list can and are 
performed on individuals who are admitted as inpatients (as well as 
individuals who are registered hospital outpatients). We also continue 
to believe that there have been significant developments in the 
practice of medicine that have allowed numerous services to now be 
provided safely and effectively in the outpatient setting. Therefore, 
at this time, we do not believe it is necessary for CMS to maintain a 
list of services that typically require inpatient care and are not paid 
under the OPPS nor do we currently believe that it is necessary to 
require specific HCPCS codes to remain payable only when furnished in 
the inpatient setting.
    Comment: We received comments from physicians and medical specialty 
societies who stated that, while they agreed that physicians should be 
the primary arbiters regarding the clinically appropriate site of 
service for a procedure, a physician's medical judgment is not always 
paramount in this decision-making. These commenters noted that when 
procedures are removed from the IPO list, many hospitals and commercial 
payors make rules establishing outpatient status as the assumed 
baseline site of service for these procedures, regardless of patient 
characteristics or the physician's clinical assessment. Commenters 
noted various reasons for this action on the part of hospitals and 
commercial payors, including concerns regarding the application of the 
2-midnight benchmark to services that are removed from the IPO list and 
the potential for claim denials if this benchmark is not met and/or 
excessive administrative burden to support the case-by-case exception 
to the 2-midnight rule, misinterpretation of CMS' rulemaking guidance, 
or the desire to have the procedure performed in a lower cost setting. 
According to commenters, physicians must, at times, convince a hospital 
or payor that a particular patient should receive a given procedure in 
an inpatient setting due to patient safety concerns. Commenters 
requested that CMS issue clear guidance that encourages consideration 
of and deference to the judgment of the physician, professional 
societies, and hospital associations regarding the procedures that are 
appropriate to be performed in the HOPD.
    Response: CMS has repeatedly recognized 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 on the general coverage 
rules requiring that any procedure be reasonable and necessary. We 
continue to believe that deference should be given to physicians and 
medical professionals in these determinations. In accordance with 
section 1801 of the Act, CMS does not control or supervise the practice 
of medicine or the manner in which medical services are provided. We 
also reiterate that we do not require services that are no longer 
included on the IPO list to be performed solely in the outpatient 
setting and that following elimination of the IPO list, services that 
were previously identified as inpatient-only can continue to be 
performed in the inpatient setting. It is not CMS' policy to require 
services that are removed from the IPO list to only be performed in the 
outpatient setting. Instead, we aim to offer providers enhanced 
flexibility and choice in determining the safest, most efficient 
setting of care for Medicare beneficiaries, whether that is the 
inpatient or outpatient setting. It is a misinterpretation of CMS 
payment policy for providers to create policies or guidelines that 
establish the outpatient setting as the baseline or default site of 
service for a procedure based on its removal from the IPO list or the 
elimination of the IPO list. As stated in previous rulemaking, services 
that are no longer included on the IPO list are payable in either the 
inpatient or outpatient setting subject to the general coverage rules 
requiring that any procedure be reasonable and necessary, and payment 
should be made pursuant to the otherwise applicable payment policies 
(84 FR 61354; 82 FR 59384; 81 FR 79697).
    As discussed in detail in previous rulemaking (84 FR 61363 through 
61365) as well as in section X.B. of this final rule with comment 
period, the 2-midnight benchmark, which provides that an inpatient 
admission is considered reasonable and necessary for purposes of 
Medicare Part A payment when the physician expects the patient to 
require hospital care that crosses at least 2 midnights and admits the 
patient to the hospital based upon that expectation, is applicable to 
services that have been removed from the IPO list. Additionally, as we 
have detailed in previous rulemaking (80 FR 70538 through 70549), we 
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

[[Page 86088]]

determination that the patient nonetheless requires inpatient hospital 
care. We acknowledge commenters' concerns regarding the application of 
the 2-midnight benchmark to services that are removed from the IPO 
list. While services removed from the IPO list are no longer subject to 
the blanket IPO list exception from the 2-midnight rule at 42 CFR 
412.3(d)(2), such services may be payable under Part A pursuant to 
either the 2-midnight benchmark at Sec.  412.3(d)(1) or the case-by-
case exception at Sec.  412.3(d)(3). In addition, beginning in CY 2020, 
we have allowed an exemption from certain medical review activities 
related to the 2-midnight rule for procedures that have been recently 
removed from the IPO list. Specifically, while inpatient claims for 
procedures that have been removed from the IPO list may be reviewed by 
the BFCC-QIOs for purposes of providing education to practitioners and 
providers on compliance with the 2-midnight rule, those claims 
identified as noncompliant will not be denied for such noncompliance 
within the first 2 calendar years of their removal from the IPO list. 
Additionally, 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 reviewed by RACs for ``patient status.'' As discussed 
further in section X.B of this final rule, for CY 2021, we are 
finalizing a proposal to extend the medical review exemption period 
indefinitely for a service newly removed from the IPO list beginning in 
CY 2021, until there is data indicating that the procedure removed is 
more commonly performed in the outpatient setting than in the inpatient 
setting. We believe this exemption from certain medical review 
activities in combination with the fact that many inpatient admissions 
for procedures formerly on the IPO list are likely to meet either the 
2-midnight benchmark or the case-by-case exception to that benchmark 
mitigates the concerns regarding denial of payment under Medicare Part 
A for procedures no longer included on the IPO list. Lastly, with 
regard to the behavior of commercial insurance providers and site 
selection for outpatient services, while we believe that these comments 
are outside the scope of the proposed rule, we note that commercial 
providers establish their own rules regarding payment for services.
    Comment: Several commenters requested that if the proposal to 
eliminate the IPO list is finalized, CMS provide baseline criteria or 
guidance for providers to consider when determining which services 
would be appropriate to furnish in the outpatient setting based upon 
peer-reviewed evidence, patient factors including age, co-morbidities, 
social determinants, and other factors relevant to positive patient 
outcomes. Commenters urged CMS to develop national guidelines outlining 
beneficiaries who are appropriate candidates for the inpatient vs 
outpatient setting, particularly for services that generally have a 
short length of stay (i.e. do not meet the 2-midnight benchmark).
    Response: We again emphasize that the decision about the most 
appropriate care setting for a given surgical procedure is a complex 
medical judgment and we believe this decision should be based on the 
beneficiary's individual clinical needs and on the general coverage 
rules requiring that any procedure be reasonable and necessary. 
However, we understand that with over 1,700 services currently included 
on the IPO list, the elimination of the list over the three-year period 
will vastly increase the number of services that are newly payable in 
the outpatient setting. It will take time for clinical staff and 
providers to gain experience furnishing these services to the 
appropriate Medicare beneficiaries in the HOPD in order to develop 
comprehensive patient selection criteria and other protocols to 
identify whether a beneficiary can safely have these procedures 
performed in the outpatient setting. We agree with the commenters that, 
in the near term, in light of the elimination of the IPO list over a 
three-year period, physicians and providers could benefit from having 
access to general considerations for physicians regarding the types of 
services that may continue to be more appropriately performed in the 
inpatient setting for Medicare beneficiaries. Therefore, in the future, 
we plan to provide information on appropriate site of service selection 
to support physicians' decision-making. We note that these 
considerations will be for informational or educational purposes only 
and will not supersede physicians' medical judgment about whether a 
procedure should be performed in the inpatient or outpatient hospital 
setting.
    Comment: Some commenters also noted the potential for negative 
financial impacts for both providers and beneficiaries with the 
elimination of the IPO list. Commenters stated that beneficiaries who 
require more than one outpatient hospital procedure delivered in 
separate episodes of care could be subject to multiple co-payments that 
may, when combined, exceed the inpatient deductible. Other commenters, 
particularly hospital associations and health systems, stated that a 
shift in site of service from the inpatient setting to the outpatient 
setting for numerous procedures could be financially disadvantageous 
for providers because the patients who would continue to receive these 
services as inpatients would likely be the more complex cases and more 
costly to treat. These commenters stated that this financial impact 
would be particularly significant in light of the COVID-19 pandemic.
    Response: As stated in the CY 2021 OPPS/ASC proposed rule (85 FR 
48911), services included on the IPO list tend to be surgical 
procedures that, if performed on an outpatient basis, would typically 
be the focus of the hospital outpatient stay and would likely be 
assigned to a comprehensive APC (C-APC) when they are removed from the 
IPO list. As such, these services would likely be considered a single 
episode of care with one payment rate and one copayment amount. 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, because the primary service will be 
assigned to a C-APC and the inpatient deductible cap will apply to the 
entire hospital claim, which is paid as a comprehensive service. All 
298 services that are being removed from the IPO list beginning in CY 
2021 are assigned status indicator ``J1'' and will receive payment 
through C-APCs, except for 34 services that are assigned status 
indicator ``N'', which indicates that payment for the service is 
packaged into payment for other services and there is no separate APC 
payment, and two services assigned status indicator ``Q1'' which 
indicates conditionally packaged payment. CPT code 44314 (Revision of 
ileostomy; complicated (reconstruction in-depth) (separate procedure)), 
is the only code to be removed from the IPO list that is assigned 
status indicator ``T'', indicating that it is a separately paid 
procedure. The vast majority of the procedures being removed from the 
IPO list for CY 2021 are assigned to C-APCs or packaged into payment 
for other services, which will result in beneficiaries paying one 
copayment amount. Therefore, we do not believe that beneficiaries will 
be significantly impacted through increased cost sharing for services 
that were on the IPO list and are furnished in the hospital outpatient 
department setting.
    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

[[Page 86089]]

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 final rule.
    With regard to stakeholder concerns about providers experiencing 
negative financial effects because of services transitioning from the 
inpatient setting to the lower cost outpatient setting, we understand 
the numerous challenges that providers are facing due to the COVID-19 
public health emergency. We reiterate that providers retain the 
flexibility to provide services that are no longer included on the IPO 
list in the inpatient setting and that these services will remain 
payable under Medicare Part A when appropriate in accordance with the 
2-midnight rule and general coverage rules. We also refer readers to 
the discussion of exemption from certain medical review activities for 
services removed from the IPO list in section X.B. of this final rule 
with comment period. Similar to other services that have been removed 
from the IPO list in previous years, we expect that the volume of 
services currently being performed in the inpatient setting that can be 
appropriately performed in the outpatient setting will gradually shift 
as physicians and providers gain experience furnishing these services 
to the appropriate Medicare beneficiaries in the HOPD. Therefore, we do 
not expect that providers will experience a significant financial 
impact due to the elimination of the IPO list.
    Comment: Commenters expressed concerns regarding the proposed APC 
assignments for procedures proposed to be removed from the IPO list and 
stated that CMS did not provide sufficient detail as to how the 
proposed APC placements were determined. Some commenters also believed 
that the proposed APC payments did not adequately reflect the costs 
associated with providing the procedure in the outpatient setting and 
that there was a significant differential between MS-DRG payment and 
APC payment for some procedures. One commenter also disagreed with the 
proposed APC assignment of APC 5115 (Level 5 Musculoskeletal 
Procedures) for the following HCPCS codes: 27702 (Arthroplasty, ankle; 
with implant (total ankle)), 27703 (Arthroplasty; revision, total 
ankle), 23472 (Arthroplasty, glenohumeral joint; total shoulder 
(glenoid and proximal humeral replacement (e.g., total shoulder))) and 
23473 (Revision of total shoulder arthroplasty, including allograft 
when performed; humeral or glenoid component), stating that the 
geometric mean costs of these procedures is more similar to the 
geometric mean costs of procedures assigned to APC 5116 (Level 6 
Musculoskeletal Procedures). The commenter noted the assignment of 
HCPCS code 27702 to APC 5115 would have created a 2 times rule 
violation within this APC based on geometric mean costs; however, the 
procedure did not have enough claims volume to be considered a 
significant procedure and therefore was not considered in the 
evaluation of 2 times rule violations. The commenter requested that all 
these procedures be assigned to C-APC 5116 for CY 2021.
    Response: We assign services payable under the OPPS, including 
services removed from the IPO list, to APCs based on their similarity 
to other codes within the APC in terms of clinical characteristics and 
resource use. Based on the claims data currently available for 
procedures removed from the IPO list and the clinical characteristics 
of the procedures, we believe that the 266 musculoskeletal procedures 
being removed from the IPO list for CY 2021, including HCPCS codes 
27702, 27703, 23472, and 23473, are appropriately assigned to the C-
APCs identified in Table 48--Services Removed from the Inpatient Only 
(IPO) List for CY 2021. We will continue to monitor these procedures 
and claims data as they become available to determine if assignment to 
other APCs is appropriate. We refer readers to Section III.D.17 of this 
final rule with comment period for a discussion of the musculoskeletal 
procedure APC series (APCs 5111 through 5116).
    Comment: Commenters raised concerns about the effect of the 
elimination of the IPO list on the target pricing of payment models 
administered by the Center for Medicare and Medicaid Innovation (CMS 
Innovation Center), such as the Bundled Payments for Care Initiatives, 
the Bundled Payments for Care Initiatives (BPCI) Advanced Model, and 
the Comprehensive Care for Joint Replacement Model and requested that 
CMS ensure that any changes to the IPO list do not unfairly penalize 
model participants.
    Response: As we have stated in previous rulemaking (82 FR 59384 and 
84 FR 61355) when commenters raised similar concerns when total knee 
arthroplasty and total hip arthroplasty were removed from the IPO list, 
the CMS Innovation Center will monitor the overall volume and 
complexity of cases performed in hospital outpatient departments to 
determine whether any future refinements to the CJR, BPCI, and BPCI 
Advanced Models are warranted. The Innovation Center may consider 
making future changes to these models to address the elimination of the 
IPO list and subsequent performance of procedures previously identified 
as inpatient-only in the outpatient hospital setting.
    Comment: Commenters also raised concerns about the impact of this 
policy on the 3-day stay requirement for skilled nursing facility care. 
By statute, beneficiaries must have a prior inpatient hospital stay of 
no fewer than three consecutive days to be eligible for Medicare 
coverage of inpatient SNF care. Specifically, commenters stated that 
the elimination of the IPO list may have a significant impact on 
Medicare beneficiaries' ability to obtain a three day inpatient stay to 
qualify for SNF care.
    Response: We reiterate that removal of procedures from the IPO list 
does not require the procedures to be performed only on an outpatient 
basis. Removal of procedures from the IPO list allows for payment of 
the procedure in either the inpatient setting or the outpatient 
setting. A prior 3-day inpatient hospital stay remains a statutory 
requirement for SNF coverage. However, as stated in the CY 2018 final 
rule with comment period (82 FR 59384), in our discussion of the 
removal of TKA from the IPO list, we would expect that Medicare 
beneficiaries who are identified as appropriate candidates to receive a 
surgical procedure in the outpatient setting instead of being admitted 
as an inpatient, would not be expected to require SNF care following 
surgery. Instead, we expect that many of these beneficiaries would be 
appropriate for discharge to home (with outpatient therapy) or home 
health care.
    Comment: Commenters noted that there are anesthesia codes related 
to some of the musculoskeletal procedures proposed to be removed from 
the IPO list for CY 2021 that were not proposed to be removed from the 
list. These commenters requested that these related anesthesia services 
also be removed from the IPO list for CY 2021. In addition to these 
requests, at the August 31, 2020 meeting, the Advisory Panel on 
Hospital Outpatient Payment (HOP Panel) recommended that we remove the 
16 additional procedures in Table 47 from the IPO list and assign these 
procedures to C-APCs.
    Response: We appreciate the comments. We reviewed the IPO list for 
CPT codes describing anesthesia services that are related to the 
musculoskeletal procedures that we have proposed to remove from the IPO

[[Page 86090]]

list beginning in CY 2021. After our analysis, we agree with the 
commenters that the anesthesia codes that are billed with services that 
were proposed to be removed from the IPO list for CY 2021 should also 
be removed from the IPO list for CY 2021. Therefore, we are removing 
the 16 anesthesia codes from the IPO list for CY 2021.
    We also accept the HOP panel recommendation to remove 16 additional 
procedures from the IPO list. The anesthesia services are included in 
Table 46 below. The CPT codes recommended for removal from the IPO list 
by the HOP panel are included in Table 47 below. We refer readers to 
Table 48 for the final list of all procedures we are removing from the 
IPO list for CY 2021.
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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 proposed to eliminate the current IPO list of 
1,740 services, starting with the 266 musculoskeletal-related services, 
which were listed in Table 31 of the CY 2021 OPPS/ASC proposed rule (85 
FR 48912). We requested comments from the public on whether three years 
was 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 advancements 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 sought 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 also solicited 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 the CY 2021 OPPS/ASC 
proposed rule for a complete discussion of the ASC Covered Procedures 
List.
    Comment: Several commenters, including several hospital 
associations, medical specialty societies, and MedPAC requested we 
delay the elimination of the IPO list until a comprehensive evaluation 
of the procedures on the list has occurred. They felt a more thorough 
review of the services proposed for removal is appropriate due to the 
large number of services on the IPO list across a range of medical 
specialties. Commenters suggested various time frames for eliminating 
the IPO list that ranged from three years to seven years. Several 
hospital associations recommended we delay eliminating the list until 
we address patient safety concerns and provide national guidelines 
outlining patients who are appropriate candidates for care in the 
inpatient hospital versus outpatient hospital setting. One commenter 
suggested that we remove the proposed musculoskeletal services from the 
IPO list, and then monitor the transition of those services to the 
outpatient hospital setting and the effect on beneficiary outcomes for 
a period of time before removing any additional procedures. Some 
hospital systems also requested a delay, noting that the timing of the 
proposed change is particularly difficult in light of the COVID-19 
pandemic.
    Response: We thank commenters for their feedback. However, we do 
not believe it is necessary to delay eliminating the IPO list over the 
course of a three-year transition beginning in CY 2021. We are 
finalizing a three-year transition for removing procedures from the IPO 
list and enabling them to be paid under the OPPS, with the list 
eliminated in its entirety by 2024. In the CY 2021 OPPS/ASC proposed 
rule (85 FR 48911), we proposed to eliminate the IPO list over 3 years 
to provide a gradual transition that gives the public the opportunity 
to comment on the sequence in which services should be removed from the 
IPO list. In addition, as we previously discussed in the CY 2021 OPPS/
ASC proposed rule (85 FR 48911), we recognized that stakeholders would 
need time to adjust to the significant number of services removed from 
the IPO list and newly priced under the OPPS. We believe that longer 
transition periods would prevent providers who are ready to perform 
services in the outpatient department from doing so, and it is equally 
important to note that providers are not required to perform services 
in the outpatient department as services are eliminated from the IPO 
list if they are not ready. While we still believe that 3 years will 
offer providers an adequate time period to prepare, update their 
billing systems, and gain experience with newly removed procedures 
eligible to be paid when furnished in both the inpatient hospital and 
outpatient hospital settings, we also realize that providers will have 
varying time frames for completing the transition.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48909 through 48912) 
we discussed patient safety concerns stakeholders expressed regarding 
removing procedures from the IPO list or eliminating the IPO list. We 
continue to believe that the evolving nature 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 (85 FR 48910). In prior rulemaking, we have

[[Page 86093]]

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). As we transition procedures off of the 
IPO list, we will continue to actively monitor for impacts on patient 
safety and quality through analyzing claims and other relevant data; 
throughout this transition, CMS will take necessary steps to address 
any changes in patient safety or quality that may emerge.
    Comment: Two medical specialty societies recommended that 
cardiothoracic procedures and spine-related procedures be the last 
procedures removed from the IPO list due to clinical and resource 
intensity these procedures require.
    Response: We appreciate the commenter's feedback. We will consider 
these comments for future rulemaking.
    Comment: A few commenters suggested that procedures removed from 
the IPO list receive an interim assignment to a new technology APC to 
help collect claims data and subsequently assign the procedures to 
clinical APCs. These commenters suggested that we assign a default 31 
percent device offset for procedures removed from the IPO list that are 
low-volume and are assigned to a device-intensive APC. They felt that 
current APCs may need to be restructured due to the lack of appropriate 
comparison procedures to those procedures being removed from the IPO 
list. In addition, the commenter argued that we did not provide an 
analysis to support our proposal to assign a given HCPCS/CPT code to a 
proposed APC or C-APC from the perspective of clinical or resource use 
similarity. They stated that in Table 31 of the proposed rule, we 
referenced related services for the musculoskeletal services proposed 
for removal from the IPO list for 2021; however, we proposed to assign 
these codes to different APCs than the APCs to which the comparator 
services are assigned. The commenter also stated that we did not 
provide information on proposed device offset amounts or how complexity 
adjustments were considered for procedures proposed for IPO List 
removal.
    Response: As specified in our regulation at 42 CFR 419.31(a)(1), 
CMS classifies outpatient services and procedures that are comparable 
clinically and in terms of resource use into APC groups. As we stated 
in the CY 2012 OPPS/ASC final rule (76 FR 74224), the OPPS is a 
prospective payment system that provides payment for groups of services 
that share clinical and resource use characteristics. It should be 
noted that for all codes newly paid under the OPPS, including codes 
removed from the IPO list, our policy has been to assign the service or 
procedure to an APC based on feedback from a variety of sources, 
including but not limited to, review of the clinical similarity of the 
service to existing procedures; advice from CMS medical advisors; 
information from interested specialty societies; and review of all 
other information available to us, including information provided to us 
by the public, whether through meetings with stakeholders or additional 
information that is mailed or otherwise communicated to us (84 FR 
61229). Therefore, we believe assigning procedures removed from the IPO 
list to existing clinical APCs that are similar in clinical 
characteristics and resource costs is appropriate. We note that 
procedures assigned to new technology APCs do not fit into existing APC 
groups, unlike the procedures transitioning from the IPO list. For 
further information on new technology APCs, we refer readers to Section 
III.C. We note that we will reevaluate the APC assignments for 
procedures removed from the IPO list once we have hospital outpatient 
claims data and, if appropriate, reassign and/or restructure APC 
assignments. For procedures that we are removing from the IPO list in 
CY 2021, we will apply offset calculations and assessment in 
determining device intensive status at the HCPCS/CPT code level (81 FR 
79657). We refer readers to Section IV.B for more information on 
device-intensive assignments for procedures.
    In summary, after consideration of the public comments, we are 
finalizing our proposal with modification to eliminate the IPO list 
over the course of the next 3 years, starting with the proposed removal 
of 266 musculoskeletal-related services and 16 HOP Panel recommended 
services and related anesthesia codes, for a total of 298 services, as 
provided in Table 48 in CY 2021. We plan to provide considerations for 
physicians and other health care providers when determining whether a 
service may be more appropriately performed in the inpatient or 
outpatient setting for a beneficiary, but again we emphasize that 
decisions regarding appropriate care setting are complex medical 
judgments. We are also finalizing our proposal, without modification, 
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 the developments in surgical technique and 
technological advances in the practice of medicine, as well as the 
various safeguards discussed above, including, but not limited to, 
physician clinical judgment, state and local regulations, accreditation 
requirements, medical malpractice laws, hospital conditions of 
participation, and other CMS initiatives will ensure that procedures 
removed from the IPO list and provided in the outpatient setting will 
be done so safely.
    Table 48 lists the final procedures, including long descriptors and 
CPT/HCPCS codes and status indicators (if applicable) that are removed 
from the IPO list for CY 2021. These services are included in Addendum 
B to the CY 2021 OPPS/ASC final rule as well.
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BILLING CODE 4120-01-C

X. Nonrecurring Policy Changes

A. 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 
\98\ 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.\99\ On March 13, 2020, the 
President of the U.S. declared the COVID-19 outbreak in the U.S. 
constitutes a national emergency,\100\ 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 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).
---------------------------------------------------------------------------

    \98\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCo.V.aspx.
    \99\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-21apr2020.aspx.
    \100\ https://www.whitehouse.gov/presidential-actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/.
---------------------------------------------------------------------------

    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, in the CY 2021 OPPS/ASC proposed rule, we 
stated that we believed these policies are appropriate outside of the 
PHE and should apply permanently. Therefore, we proposed to adopt these 
policies for CY 2021 and beyond as described in more detail below.
1. 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 flexibility 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 COVID-19 PHE.
    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

[[Page 86111]]

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. We note 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 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 proposed 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 proposed a minimum required level of general supervision for 
NSEDTS, including during the initiation of the service, we proposed to 
delete paragraph (a)(1)(iv)(E) from the regulations at Sec.  410.27. We 
sought public comment on this proposal.
    Comment: All commenters supported our proposal to change the 
minimum required level of supervision to general supervision for all 
NSEDTS that are furnished on or after January 1, 2021. Several 
commenters appreciated the additional flexibility to deliver care while 
acknowledging that practitioners administering individual medical 
procedures continue to have the discretion to increase the level of 
supervision when necessary. Commenters similarly acknowledged that CoPs 
for hospitals and CAHs and state scope of practice requirements also 
might lead to higher level of supervision for a part or all of an 
NSEDTS. One commenter, MedPAC, supported our proposal, but encouraged 
CMS to be diligent in monitoring NSEDTS performed under general 
supervision, especially services that involve risk of serious 
complications.
    Response: We appreciate the support for our proposal from the 
commenters. We will monitor NSEDTS for safety or service quality issues 
that may arise from the change to general supervision as the minimum 
default level of supervision for the initiation period of these 
services.
    After reviewing the public comments we received, we are finalizing 
our proposal without modification to establish general supervision as 
the minimum required supervision level for all NSEDTS that are 
furnished on or after January 1, 2021. In addition, we are finalizing 
our proposal to delete paragraph (a)(1)(iv)(E) from the regulations at 
Sec.  410.27, which will reflect that, starting in CY 2021, the 
entirety of NSEDTS has a minimum required supervision level of general 
supervision.
2. 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 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

[[Page 86112]]

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 believed 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 believed 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 proposed 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 of the physician, 
but rather real-time presence via interactive audio and video 
technology throughout the performance of the procedure. We sought 
public comment on this proposal.
    Comment: Many commenters wanted more clarity on our proposal to 
meet the direct supervision requirement for pulmonary rehabilitation, 
cardiac rehabilitation, and intensive cardiac rehabilitation services 
through virtual presence. Commenters were unsure what the phrase 
``real-time presence via interactive audio and video technology 
throughout the performance of the procedure'' meant. Some commenters 
were concerned that our proposal would require the supervising 
practitioner to observe a rehabilitation service during the entire time 
the service is being administered, which would be comparable to 
personal supervision. That type of standard, according to the 
commenters, would actually be more burdensome than the current direct 
supervision requirement through physical presence.
    Other commenters stated that, while they were generally in favor of 
permitting direct physician supervision through virtual presence for 
pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services, they would prefer that we require the 
supervising practitioner simply be ``immediately available'' through 
audio/visual real-time communications technology, and not be required 
to provide real-time presence or observation of the service via 
interactive audio and video technology throughout the performance of 
the procedure. A few commenters also encouraged us to align our 
proposal on direct supervision through virtual presence with what had 
been proposed in the CY 2021 PFS proposed rule (85 FR 50115 through 
50116), which discussed requiring only immediate availability to engage 
using audio/visual technology to provide direct supervision.
    Response: We believe the commenters have made some important points 
about our proposal. CMS continues to work to reduce burden on providers 
under the Medicare program, and we want to ensure that while expanding 
access to medical care and promoting patient safety, we do not 
implement policies that increase provider burden. In this case, our 
proposal appears to have required a higher level of participation by 
the physician providing direct supervision of pulmonary rehabilitation, 
cardiac rehabilitation, and intensive cardiac rehabilitation services 
through virtual presence than would be required if they were providing 
direct supervision of the services in person. In addition, our proposal 
was not aligned with the proposal in the CY 2021 PFS proposed rule to 
permit direct supervision requirements to be met through virtual 
presence through the later of the end of the year in which the PHE ends 
or December 31, 2021; and to specify that the direct supervision 
requirement could be met by the supervising practitioner being 
immediately available to engage via interactive real-time audio/video 
communications technology, without requiring real-time presence or 
observation of the service via interactive audio/video technology 
throughout the performance of the procedure. This lack of alignment 
could lead to additional burden for providers having to accommodate 
different levels of virtual engagement depending on whether a 
rehabilitation service is furnished as an outpatient hospital service 
or a physicians' service.
    Comment: A few commenters either opposed the proposal or wanted to 
place substantial limits on when direct supervision through virtual 
presence could be used to furnish pulmonary rehabilitation, cardiac 
rehabilitation, and intensive cardiac rehabilitation services. One 
commenter, MedPAC, opposed the proposal because they believe it is 
unclear whether telehealth is beneficial or harmful to the quality of 
care received for pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services. MedPAC encouraged us to 
study the policy further before implementing our proposal. Another 
commenter expressed support for permitting the direct supervision of 
rehabilitation services through virtual presence, but only if the 
supervising practitioner has first seen both the patient and the site 
of service in person, initiated the treatment, and provides subsequent 
services that show active participation in, and management of, the 
course of treatment. A third commenter did not explicitly state that 
they were against allowing direct supervision of pulmonary 
rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services through virtual presence, and the commenter 
expressed support for permitting direct supervision through virtual 
presence during the current PHE to avoid the risks associated with 
COVID-19. However, the commenter believes that the policy to allow 
direct supervision through virtual presence should end for all medical 
services including pulmonary rehabilitation, cardiac rehabilitation, 
and intensive cardiac rehabilitation services at the end of the PHE. 
The commenter felt that practitioners cannot adequately

[[Page 86113]]

supervise procedures, especially complex and high-risk procedures, and 
meet all of a patient's clinical needs, unless they are physically 
available to participate in the administration of the medical service. 
Furthermore, the commenter suggested that we adopt limits on the number 
of clinical staff members a supervising practitioner may engage with 
simultaneously through audio and visual technology, and limits on a 
supervising practitioner's incident to relationships with outpatient 
hospital providers that are fulfilled primarily through the use of 
audio and visual technology before allowing direct supervision through 
virtual presence after the end of the PHE. This request was for all 
outpatient hospital services, and not just for pulmonary 
rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services.
    Response: We appreciate the concerns expressed by some commenters 
about the potential risks of allowing direct supervision using virtual 
presence. We note that, during the PHE, virtual presence of the 
supervising physician using interactive audio/video real-time 
communications technology is an available option for direct 
supervision, but it is not a requirement. Providers and physicians are 
free to use their own judgment to determine whether direct supervision 
through virtual presence is appropriate for the rehabilitation services 
being administered, or if the supervising physician should provide 
direct supervision in person. Also, providers will need to meet 
conditions of participation and state scope of work requirements in the 
location where the service is administered. Finally, we will monitor 
the use of interactive audio/video real-time communications technology 
to meet the direct supervision requirement to determine whether there 
is a negative impact on the quality of pulmonary rehabilitation, 
cardiac rehabilitation, and intensive cardiac rehabilitation services.
    Comment: Several commenters supported our proposal to allow the use 
of virtual presence to meet the direct physician supervision 
requirements for pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services as proposed and they did not 
request modifications to our proposal.
    Response: We thank the commenters for their support of our 
proposal.
    After consideration of the public comments received for our 
proposal, we have decided to modify the proposal in the CY 2021 OPPS/
ASC proposed rule. We believe we need to continue to explore the 
appropriateness of permitting direct supervision through virtual 
presence before extending this policy permanently beyond the end of the 
PHE. The public comments we received, along with feedback we have 
received since the implementation of the policy in IFC-1 allowing for 
direct supervision through virtual presence (85 FR 19246) have 
convinced us that we need more information on the issues involved with 
direct supervision through virtual presence before implementing this 
policy permanently. Therefore, we are finalizing our proposed policy to 
permit direct supervision of these services using virtual presence only 
until the later of the end of the calendar year in which the PHE ends 
or December 31, 2021. Specifically, the required direct physician 
supervision can be provided through virtual presence using audio/video 
real-time communications technology (excluding audio-only) subject to 
the clinical judgement of the supervising practitioner, as discussed in 
IFC-1 (85 FR 19246).
    When the policy to permit direct supervision through virtual 
presence ends, we will resume our current policy to require direct 
physician supervision of pulmonary rehabilitation, cardiac 
rehabilitation, and intensive cardiac rehabilitation services, and that 
the supervising practitioner must be present in the office suite and 
immediately available to furnish assistance and direction throughout 
the performance of the procedure. This does not mean that the 
supervising practitioner must be present in the room when the procedure 
is performed.
    In response to questions received since we issued our interim 
policy for the PHE, we are clarifying that, to the extent our policy 
allows direct supervision through virtual presence using audio/video 
real-time communications technology during the PHE, the requirement 
could be met by the supervising practitioner being immediately 
available to engage via audio/video technology (excluding audio-only), 
and would not require real-time presence or observation of the service 
via interactive audio and video technology throughout the performance 
of the procedure. We intend our policy to permit direct physician 
supervision of pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services to be consistent with the 
policy to permit direct supervision through virtual presence in section 
II.D.9. of the CY 2021 PFS final rule, which we cross reference here. 
We also are revising the regulatory text in 42 CFR 410.27(a)(1)(iv)(D) 
to reflect our revised policy, and to align the regulation with similar 
language describing direct supervision through virtual presence in the 
physician office setting in 42 CFR 410.32(b)(3)(ii).

B. 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 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

[[Page 86114]]

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, as well as the reasonable expectations of the 
admitting physician regarding duration of hospital care, 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 
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.
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 of the regulations that services designated under the OPPS 
as inpatient only procedures would continue to be appropriate for 
inpatient hospital admission and payment under Medicare Part A. In 
addition, we finalized a benchmark providing that surgical procedures, 
diagnostic tests, and other treatments would be generally considered 
appropriate for inpatient hospital admission and payment under Medicare 
Part A when the physician expects the patient to require a stay that 
crosses at least 2 midnights and admits the patient to the hospital 
based upon that expectation.
    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

[[Page 86115]]

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 certain medical review activities to assess compliance 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. 
Outside of the exemption period discussed above, services that have 
been 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 claim denial by the BFCC-QIOs based on site-of-service and 
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. of this final rule with comment period, we 
are finalizing our policy to eliminate the IPO list in CY 2021 with a 
transitional period of 3 years. For CY 2021, we are finalizing our 
proposal to remove all musculoskeletal procedures from the IPO list. 
The elimination of the IPO list will mean that procedures currently on 
the IPO list will be subject to the 2-Midnight rule (both the 2-
Midnight benchmark and 2-Midnight presumption).
    We believe that with the elimination of the IPO list, the 2-
Midnight benchmark will 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 will 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 appropriate 
setting on a case by case basis.
    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 elimination of the IPO list, this policy will 
no longer be applicable. Instead, just as for services removed from the 
IPO list, the elimination of the IPO list will mean that any service 
that was once on the IPO list will 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 will 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 will 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 exempt 
from certain medical review activities to assess compliance 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 will claims 
for these procedures be reviewed by RACs for ``patient status.'' During 
the 2-year period, BFCC-QIOs

[[Page 86116]]

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 explained in the CY 2021 OPPS/ASC proposed rule that, based on 
the information available to us as the time, we continued 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 was appropriate. 
Accordingly, we proposed to retain the existing 2-year exemption even 
in the event that we finalized the proposal to eliminate the IPO list. 
However, given that a large number of services would be removed from 
the IPO list at once during the proposed transition to eliminate the 
list, we sought comment on whether this 2-year period was appropriate 
or whether a longer or shorter period would be more appropriate in 
order for providers to gain experience with applying the 2-Midnight 
rule to these services.
    We also explained that we continued 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 was 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 solicited public comments regarding the appropriate period of time 
for this exemption. Commenters could indicate whether and why they 
believed the 2-year period was appropriate, or whether they believed a 
longer or shorter exemption period would be more appropriate.
    In summary, for CY 2021 and subsequent years, we proposed 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 encouraged 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 noted that we would monitor changes in site-of-service to 
determine whether changes may be necessary to certain CMS Innovation 
Center models. Finally, while we proposed to retain the current 2-year 
exemption period, given that a large number of services would be 
removed from the IPO as part of the transition towards the elimination 
of the list, we sought comment on whether that time period remained 
appropriate, or if a longer or shorter period may be more warranted.
    Many commenters offered suggestions on the appropriate length of 
time for exemptions 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. These comments are 
summarized below.
    Comment: Numerous stakeholders including medical professional 
societies, health systems, and hospital associations supported the 
proposal to continue the 2-year exemption from site-of-service claim 
denials under Medicare Part A, eligibility for BFCC-QIO referrals to 
RACs for noncompliance with the 2-Midnight rule, 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. 
While these commenters expressed their support for continuing the 2-
year exemption, they further stated that a longer exemption period 
would be more appropriate. Some commenters suggested that anywhere 
between 3 to 6 years or indefinitely would be appropriate. Commenters 
felt that increasing the length of the exemption would be necessary to 
allow hospitals and practitioners sufficient time to adjust their 
billing and clinical systems, as well as processes used to determine 
the appropriate setting of care. One commenter noted that because 
providers have no experience assessing procedures on the IPO list 
against the 2-Midnight benchmark, they will require time to update 
their processes to make appropriate decisions about whether to admit 
patients for the large numbers of procedures being removed from the IPO 
list. Commenters stressed that providers need time without the fear of 
audits to update their procedures so they can make appropriate 
decisions about admitting patients based on their specific conditions 
and recovery needs. They further noted that having an extension of the 
exemption period would provide stability to the healthcare systems and 
ensure that clinician judgment, shared decision-making with the 
patient, and a focus on high quality outcomes drive the selection of 
the appropriate site-of-service for care.
    Response: We thank these commenters for their support of our 
proposal to continue the 2-year exemption from site-of-service claim 
denials under Medicare Part A, eligibility for BFCC-QIO referrals to 
RACs for noncompliance with the 2-Midnight rule, 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 understand that the 2-year exemption might not be sufficient given 
the magnitude of the change for providers. We agree that additional 
time would be more appropriate for hospitals and practitioners to 
adjust their billing and clinical systems, as well as develop their own 
internal processes to determine the appropriate setting of care for 
their patients. We recognize that providers may not be experienced with 
assessing procedures on the IPO list against the 2-Midnight benchmark 
and that a longer exemption would allow them ample time to update their 
processes to make appropriate decisions about whether to admit patients 
for the large numbers of procedures being removed from the IPO list. We 
are mindful of the important role medical review plays in maintaining 
the integrity of the Medicare program but understand why providers 
might be anxious about balancing a new landscape for services with 
their concerns about claim denials or RAC referrals. Accordingly, as 
discussed more fully below, we are finalizing an indefinite exemption 
period rather than the 2-year period proposed.
    Comment: We heard from many commenters that the two-year

[[Page 86117]]

exemption was appropriate when CMS was removing a smaller volume of 
procedures from the IPO list. However, commenters felt that the 
unprecedented volume of procedures becoming subject to the 2-Midnight 
rule would necessitate a longer exemption period. Many commenters 
believe that the extra time would allow for the education of hospital 
staff and physician/non-physician practitioners and operational 
processes to be established and refined.
    Response: We agree that the two-year exemption was appropriate when 
CMS was removing a smaller, more targeted population of procedures from 
the IPO. We also agree that since the agency is changing the landscape 
in where procedures can be performed that a longer exemption would be 
more appropriate. Accordingly, as discussed more fully below, we are 
finalizing an indefinite exemption period for procedures removed from 
the IPO list due to the elimination of that list.
    Comment: A large contingent of commenters felt that CMS should 
extend the exemption indefinitely. Some expressed that 2 years is not 
enough time for adequate evidence and research to be conducted to 
demonstrate that procedures removed from the IPO list can be performed 
safely for Medicare beneficiaries in hospital outpatient settings. As 
such, they commented that CMS should extend the medical review 
exemption period until such evidence is widely available and there is 
data indicating that the procedure removed from the IPO list is more 
commonly performed on an outpatient basis. One commenter specified that 
procedures that have an average length of stay of 2 days or more or are 
performed on an inpatient basis more than a threshold percentage of the 
time (for example, 70 or more percent) should be exempted from the 
medical review activities outlined earlier in this section. Another 
commenter noted that procedures should be removed from exemption from 
medical review under the 2-Midnight rule as medical technology practice 
changes, inpatient length of stay declines, and procedures become more 
commonly performed on an outpatient basis. Another commenter suggested 
that CMS should use claims data from several payers (that is, Medicare, 
commercial payers, Veterans Affairs hospitals, etc.) in order to 
determine when procedures removed from the IPO list are routinely and 
safely performed in the outpatient setting and no longer require an 
indefinite exemption.
    Most commenters that suggested the indefinite exemption stressed it 
was appropriate because even with the elimination of the IPO list it 
will still be medically necessary for a large number of these 
procedures to be performed in the inpatient setting. A commenter stated 
that applying the 2-Midnight rule to some of these procedures was not 
practical, as they are either exclusively performed on an inpatient 
basis or have an average length of stay of two days or longer. Another 
commenter noted that complex medical decisions are not always 
straightforward, and while CMS claims its intent is to defer to 
physician judgement on the appropriate site-of-service, this deference 
is not always incentivized during medical reviews and thus reflected in 
the RAC's review practices. Many commenters were concerned about the 
compliance burden on hospitals and health care providers as they seek 
to navigate providing care in the appropriate setting while balancing 
2-Midnight enforcement.
    Response: We agree with the commenters' suggestions that an 
indefinite exemption period is appropriate. Further, we are convinced 
that the medical review exemption should apply until evidence is widely 
available and there is data indicating that the procedure removed from 
the IPO list is more commonly performed on an outpatient basis. 
Accordingly, we are finalizing an indefinite exemption from the 
specified medical review activities for procedures removed from the IPO 
list as a result of the elimination of that list. This exemption will 
apply to each procedure until such time as the procedure is more 
commonly performed on an outpatient basis. We will use Medicare claims 
data to determine when a procedure is more commonly performed on an 
outpatient basis. We will compare on a yearly basis the number of times 
a given procedure is performed inpatient versus outpatient. We will 
define ``more commonly performed'' as being done more than fifty 
percent of the time in the outpatient setting. As with the 2-Midnight 
presumption, we will still maintain the ability to conduct medical 
reviews where there is evidence of systemic fraud or abuse.
    We would like to emphasize that the 2-Midnight rule does not 
prohibit procedures from being performed or billed on an inpatient 
basis. Whether a procedure has an exemption or not, does not change 
what site-of-service is medically necessary or appropriate for an 
individual beneficiary. Providers are still expected to bill in 
compliance with the 2-Midnight rule. The exemption is not from the 2-
Midnight rule but from certain medical review procedures and certain 
site-of-service claim denials. We do not believe that there will be any 
significant additional burden in complying with the 2-Midnight rule. It 
is standard practice for providers to sufficiently document medically 
necessity in medical records. Providers are expected to do this whether 
the 2-Midnight rule or any associated exemption applies or not.
    Comment: Commenters suggested that CMS could reevaluate the 
exemption once there is sufficient data indicating that the procedure 
is being more commonly performed in the outpatient setting. One 
commenter recommended that CMS only remove the exemption once 
sufficient evidence exists that the procedure is being performed 
routinely and safely in the outpatient setting, which they believed is 
unlikely to develop within two years. They added that without an 
extension of the exemption period providers might not receive payment 
for care for inpatient settings even when it is the appropriate site of 
care. Many commenters stated that ending the exemption too early could 
create pressure on providers to perform a medical service in the 
outpatient setting despite medical judgement suggesting otherwise.
    Response: We agree with commenters and will be finalizing a policy 
that indefinitely extends the exemption for all procedures removed from 
the IPO list after January 1, 2021. We will consider removing the 
exemption for a procedure once we have claims data that indicates it is 
being performed more in the outpatient setting than the inpatient 
setting. We do not agree with commenters that the exemption, whether it 
be indefinite, shorter or longer would create any hindrance to 
providers receiving the appropriate payment for care in the inpatient 
setting when the documentation in the medical record supports the 
inpatient setting as the appropriate site of care. In such a scenario, 
the claim would generally be payable under Part A pursuant to either 
the 2-Midnight rule at 42 CFR. 412.3(d)(1) or the case-by-case 
exception at Sec.  412.3(d)(3). We also believe it is important for CMS 
to be able to continue to conduct medical reviews in situations in 
which there is evidence of systemic fraud or abuse.
    Comment: We received comments suggesting that CMS establish a list 
of procedures that would be exempt from medical review under the 2-
Midnight rule permanently. One commenter suggested that CMS provide an 
explicit exception to the 2-Midnight rule for procedures that are 
removed from the IPO list where the beneficiary is at higher risk as 
identified by factors such as age, dual-eligible status, presence of 
certain comorbidities, social factors,

[[Page 86118]]

environmental factors, and patient body mass index. Another commenter 
stated that certain procedures with high average length of stay, such 
as organ transplants, are likely to never be performed outpatient 
absent significant improvements in technology. They added that, based 
on criteria similar to that of the current IPO list, CMS could use 
average length of stay information and site-of-service patterns to 
determine whether the exemption would continue for a given procedure 
and deference provided to the physician.
    Response: We thank the commenters for their suggestions and will 
consider additional metrics for determining whether a procedure 
requires a 2-Midnight medical review exemption in the future.
    Comment: We received many comments suggesting that if the 
elimination of the IPO list is being driven by the belief that the 
physician should determine the correct level of care based upon 
individual patient needs and comorbidities and the physician certifies 
this need, these level of care audits should be discontinued. Many 
commenters felt that physicians should be able to select the 
appropriate site-of-service without having that decision questioned by 
subjecting the procedure to medical review for site-of-service under 
the 2-Midnight rule. Some commenters expressed that site-of-service 
claim denials, BFCC-QIO referrals to RACs, and RAC reviews for 
``patient status'' (that is, site-of-service) constituted a barrier to 
payment for procedures performed in the inpatient setting. Moreover, if 
site-of-service determinations are based on a physician's clinical 
judgment regarding the care setting that is best suited to meet a given 
patient's medical needs that decision should not be subject to any 
review.
    Response: As stated earlier in this section, we continue to believe 
that use of the 2-Midnight benchmark gives appropriate consideration to 
the medical judgment of physicians and 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. Further, as we stated in the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70545), section 
1154(a)(1) of the Act authorizes BFCC-QIOs to review whether services 
and items billed under Medicare are reasonable and medically necessary 
and whether services that are provided on an inpatient basis could be 
appropriately and effectively provided on an outpatient basis.
    BFCC-QIOs will continue to conduct initial medical reviews for both 
the medical necessity of the services, and the medical necessity of the 
site-of-service. BFCC-QIOs will continue to be permitted and expected 
to deny claims if the service itself is determined not to be reasonable 
and medically necessary. For procedures removed from the IPO list on or 
after January 1, 2021, BFCC-QIOs will not make referrals to RACs for 
noncompliance with the 2-Midnight rule for such procedures until the 
procedure is no longer subject to the medical review exemption because 
it is more commonly performed in the outpatient setting then the 
inpatient setting. RACs will not conduct reviews for ``patient status'' 
(that is, site-of-service) for procedures that are removed from the IPO 
list until they are no longer subject to the medical review exemption, 
and claims for procedures that are removed from the IPO list that are 
identified as noncompliant with the 2-Midnight rule will not be denied 
with respect to the site-of-service under Medicare Part A until they 
are no longer subject to the medical review exemption. Providers are 
still expected to bill in compliance with the 2-Midnight rule even if 
the procedure is exempt from medical review activities. The BFCC-QIOs 
will continue to review claims and provide education when providers 
submit noncompliant claims, despite the fact that they will not be 
denying such claims during the exemption period. CMS may also still 
conduct medical review where there is evidence of systemic fraud or 
abuse.
    We continue to believe that the 2-Midnight rule plays a useful role 
in providing clarity to hospitals and physicians while addressing the 
program integrity concerns surrounding appropriate inpatient 
admissions. We believe that extending the exemption while providing 
education to providers when they submit noncompliant claims will 
alleviate providers' concerns about adjusting to new procedures being 
subject to the 2-Midnight rule.
    Comment: Some commenters approached the policy concerns more 
broadly and implored CMS to reevaluate the meaningfulness of the 2-
Midnight rule considering the agency's shift toward site-neutrality. A 
few commenters went as far to suggest that CMS rescind the 2-Midnight 
rule in its entirety.
    Response: We thank the commenters for their suggestions, but note 
that they are outside the scope of the proposed rule. Moreover, we 
believe that with more choices in site-of-service the 2-Midnight rule 
continues to be meaningful and necessary. It continues to be important 
to determine whether an inpatient admission is appropriate for Medicare 
Part A payment. We refer readers to the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50913 through 50954), in which we clarified our policy 
regarding when an inpatient admission is considered reasonable and 
necessary for purposes of Medicare Part A payment. Eliminating the IPO 
list does not change the agency's stance on the 2-Midnight rule.
    Comment: Some commenters expressed concern that the elimination of 
the IPO list along with the continued application of the 2-Midnight 
rule would increase paperwork and administrative burden. Commenters 
were particularly concerned about the documentation required when a 
patient is admitted for a short stay to undergo a procedure that should 
only be performed on an inpatient basis. Many commenters were concerned 
that the burden will fall on physicians to provide appropriate 
documentation for Part A payment when the physician determines that it 
is medically reasonable and necessary to conduct these procedures on an 
inpatient basis. Commenters stressed that subjecting these procedures 
to the 2-Midnight rule would significantly increase provider 
documentation burden, which is counter to CMS' recent stated efforts to 
reduce physicians' administrative burden. Many commenters felt that 
subjecting additional procedures to the 2-Midnight rule would result in 
increased documentation and audit

[[Page 86119]]

burden, both of which would increase the administrative cost of 
procedures.
    Response: The decision to eliminate the IPO list is based upon 
CMS's determination that it is no longer appropriate to categorically 
specify that Medicare only pays for certain procedures when they are 
performed in an inpatient hospital setting. Instead, as with other 
procedures, the determination of the appropriate site-of-service is a 
complex medical decision to be made on a case-by-case basis. We 
continue to expect providers and physicians to document the medical 
necessity of any inpatient admission.
    We believe that exempting procedures that are removed from the IPO 
list from site-of-service claim denials under Medicare Part A, 
eligibility for BFCC-QIO referrals to RACs for noncompliance with the 
2-Midnight rule, and RAC reviews for ``patient status'' (that is, site-
of-service) until the procedure is more commonly performed in the 
outpatient setting then the inpatient setting will give providers the 
requisite time to adjust to any additional changes associated with the 
elimination of the IPO list. As we indicated in the CY 2016 OPPS/ASC 
Final Rule (80 FR 70543), we believe that the documentation 
requirements for admitting physicians are not overly burdensome because 
they are consistent with Medicare's longstanding documentation 
requirements, which predate the adoption of the 2-Midnight rule.
    Comment: We heard from many commenters that CMS has an essential 
role to play in the education of stakeholders on the 2-Midnight rule, 
its exceptions, and outpatient selection criteria. Some commenters felt 
that not enough providers are aware that CMS policy allows for case-by-
case exceptions to the 2-Midnight rule based on patient history, co-
morbidities and risk of adverse events. Many commenters requested that 
CMS provide additional education on the case-by-case exceptions to the 
2-Midnight rule. One commenter felt that such education would help 
ensure that concerns about audits are not unduly influencing the 
selection of an outpatient setting unless it is medically appropriate. 
One commenter specifically requested that CMS issue educational 
guidance to providers and Medicare contractors, similar to MLN Matters 
articles, reinforcing that surgeons determine whether a particular 
procedure should be performed on an inpatient or outpatient basis, and 
there is no presumption that procedures should be performed on an 
outpatient basis. Other commenters felt that providing hospitals and 
clinicians with clear and consistent standards against which they can 
perform will alleviate some of the administrative and financial burden 
otherwise associated with this kind of substantial policy overhaul.
    Response: We understand the importance of education and guidance 
when implementing policy changes. Therefore, in the future, we plan to 
provide considerations for the selection of site-of-service for a 
procedure to support physicians' decision-making. We note that these 
guidelines will be for informational or educational purposes only and 
will not be intended to prohibit payment of procedures that were 
previously included on the IPO list in the outpatient setting.
    CMS is finalizing a policy to exempt procedures removed from the 
IPO list as part of its elimination from certain medical review 
activities associated with the 2-Midnight rule. As noted previously, 
however, these procedures are not an exception to the 2-Midnight rule. 
Providers are still expected to comply with the 2-Midnight rule even if 
the procedure is exempt from medical review activities. The BFCC-QIOs 
will continue to review claims and provide education when providers 
submit noncompliant claims, despite the fact that they will not be 
denying such claims during the exemption period. This is different from 
the 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.
    Comment: Numerous commenters were concerned about how the 
Beneficiary and Family-Centered Care Quality Improvement Organizations 
(BFCC-QIOs) and Recovery Audit Contractors (RACs) would handle the 
rapid influx of procedures now subject to review. Many commenters felt 
that it was essential for CMS to begin outreach to the BFCC-QIOs to 
ensure that best practices for audits and education to providers 
regarding compliance with short-stay admission policies are universally 
adopted and communicated prior to the start of CY 2021. Commenters 
further asserted that this will help mitigate some of the 
administrative burden for outpatient hospitals and surgeons performing 
services previously flagged as inpatient-only procedures. One commenter 
noted that BFCC-QIOs contract awards are being delayed by vendor 
protests. They were concerned that few hospitals have actually had the 
opportunity to engage with the BFCC-QIOs to review cases recently 
removed from the IPO list, such as TKAs and THAs. They felt it will be 
important to ensure that these discussion sessions can occur so that 
the exemption can serve its intended purpose.
    Response: We understand commenters' concerns and will work with the 
BFCC-QIOs as appropriate to address any issues as they arise. The BFCC-
QIOs will continue to review claims even while procedures are exempt 
from denial based on site-of-service in order to provide education for 
practitioners and providers regarding compliance with the 2-Midnight 
rule.
    We appreciate the stakeholders' feedback regarding the appropriate 
period of time for this exemption. After considering the concerns, 
suggestions, and recommendations from commenters, we have decided to 
finalize our proposal with modifications. Instead of the 2-year 
exemption, procedures removed from the IPO list on or after January 1, 
2021 will be indefinitely exempted from site-of-service claim denials 
under Medicare Part A, eligibility for BFCC-QIO referrals to RACs for 
noncompliance with the 2-Midnight rule, and RAC reviews for ``patient 
status'' (that is, site-of-service) indefinitely, until the procedure 
is more commonly performed in the outpatient setting then the inpatient 
setting. As a result, in order for the exemption to end for a specific 
procedure, we will require claims data for the service indicating that 
the procedure is performed more commonly on an outpatient rather than 
inpatient basis in a given year. Thus, for the exemption to end for a 
specific procedure, in a single calendar year we would need to have 
Medicare claims data indicating that procedure was performed more than 
50 percent of the time in the outpatient setting. We will revisit in 
rulemaking whether and when an exemption for a procedure should be 
ended. Thus, for each procedure removed from the IPO list on or after 
January 1, 2021, the exemption will continue until terminated in future 
rulemaking. We may consider additional metrics in the future that could 
assist us in determining when the exemption period should end for a 
procedure. This will only apply to procedures removed from the IPO list 
beginning in CY 2021. We may revisit procedures that were removed from 
the IPO list prior to January 1, 2021 and extend their exemption if we 
deem it necessary. Conversely, we may shorten

[[Page 86120]]

the exemption period for a procedure if necessary. In the future, we 
may examine the exemption status of any procedure that was formerly on 
the IPO list and lengthen, shorten or end their exemption.
    As we stated earlier, procedures removed from the IPO list in prior 
years were targeted and selected in small numbers. In those cases, 2-
years was an appropriate time frame to allow providers to become more 
comfortable with how to comply with the 2-Midnight rule. Eliminating 
the IPO list is a larger scale change that creates brand new 
considerations in determining site-of-service for providers and 
beneficiaries. This is a significant change, and based upon feedback 
from commenters, we have reevaluated our stance on the exemption period 
for procedures removed from the IPO list. We now feel that the 
magnitude of this change calls for an indefinite exemption, with CMS 
reevaluating that exemption once procedures are more commonly performed 
in the outpatient setting.
    We agree with the commenters who suggested that an indefinite 
exemption period from certain medical review activities for procedures 
removed from the IPO list would be necessary to allow providers to 
become more familiar with how to comply with the 2-Midnight rule. The 
indefinite exemption will help hospitals and clinicians become used to 
the availability of payment under both the hospital inpatient and 
outpatient setting for procedures removed from the IPO list. Further, 
we are persuaded by the comments asserting that an indefinite exemption 
period will allow providers time to gather information on procedures 
newly removed from the IPO list to help inform education and guidance 
for the broader provider community, develop patient selection criteria 
to identify which patients are, and are not, appropriate candidates for 
outpatient procedures, and to develop related policy protocols. We also 
believe that an extended exemption period will further facilitate 
compliance with our payment policy for inpatient admissions.
    We believe that extending the exemption period until procedures are 
more commonly performed in the outpatient setting than the inpatient 
setting will let providers comfortably gain experience with the 
application of the 2-Midnight rule to these procedures. While these 
procedures will be exempt from certain medical review activities 
related to the 2-Midnight rule, providers are not excepted from 
compliance with the 2-Midnight rule. That is an important distinction. 
As we stated earlier, providers are still expected to bill in 
compliance with the 2-Midnight rule. It is standard practice that the 
factors supporting the determination that inpatient care is required 
will be documented in the medical records. The BFCC-QIOs will still 
have the opportunity to review claims for exempt procedures 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 
until the procedure is no longer subject to the exemption. We believe 
that the longer exemption from the medical review for procedures 
removed from the IPO list will give providers and BFCC-QIOs time to 
understand the documentation necessary to support Part A payment for 
those patients for which the admitting physician determines that the 
procedures should be furnished in an inpatient setting.
    Additionally, CMS may still conduct medical review in cases in 
which there is evidence of systemic fraud or abuse occurring. Finally, 
we are amending 42 CFR 412.3 to clarify when a procedure removed from 
the IPO is exempt from certain medical review activities. For those 
services and procedures removed between January 1 and December 31, 
2020, this exemption will last for 2 years from the date of such 
removal. For those services and procedures removed on or after January 
1, 2021, this exemption will last until the Secretary determines that 
the service or procedure is more commonly performed in the outpatient 
setting.

XI. CY 2021 OPPS Payment Status and Comment Indicators

A. 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 did not propose 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-Outpatient-Regulations-and-Notices.
    We did not receive any public comments on the proposed definitions 
of the OPPS status indicators for CY 2021. We believe that the existing 
definitions of the OPPS status indicators will continue to be 
appropriate for CY 2021. Therefore, we are finalizing our proposed 
policy without modifications.
    The complete list of the payment status indicators and their 
definitions that would apply for CY 2021 is displayed in Addendum D1 to 
the CY 2021 OPPS/ASC final rule with comment period, which is available 
on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    CY 2021 payment status indicator assignments for APCs and HCPCS 
codes are shown in Addendum A and Addendum B, respectively, to the CY 
2021 OPPS/ASC final rule with comment period, which are available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

B. CY 2021 OPPS Comment Indicator Definitions

    In the CY 2021 OPPS/ASC proposed rule, we proposed 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 
proposed to continue their use in CY 2021. The 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

[[Page 86121]]

will be accepted on the proposed APC assignment for the new code.
    The definitions of the OPPS comment indicators for CY 2021 are 
listed in Addendum D2 to the CY 2021 OPPS/ASC final rule with comment 
period, which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    We did not receive any public comments on the proposed definitions 
of the OPPS comment indicators for CY 2021.
    We believe that the existing CY 2020 definitions of the OPPS 
comment indicators continue to be appropriate for CY 2021. Therefore, 
we are using 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. OPPS Payment Rates Update

    The March 2020 MedPAC ``Report to the Congress: Medicare Payment 
Policy,'' recommended that Congress 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 of these recommendations.\101\ 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. Comments received from MedPAC for other 
OPPS policies are discussed in the applicable sections of this rule.
---------------------------------------------------------------------------

    \101\ 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. 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.\102\ 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).
---------------------------------------------------------------------------

    \102\ 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 the CY 2021 OPPS/ASC proposed rule, we 
proposed to apply the 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. 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.\103\
---------------------------------------------------------------------------

    \103\ 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 did not propose any cost reporting 
requirements for ASCs in the CY 2021 OPPS/ASC proposed rule.
    Comments received from MedPAC for other ASC payment system policies 
are discussed in the applicable sections of this 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

[[Page 86122]]

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. As discussed in 
detail in Section XIII.C.1.d of this final rule with comment period, we 
are finalizing changes to the way procedures are added to the CPL.
    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 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

[[Page 86123]]

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. 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 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 proposed to solicit public comments in the CY 
2021 OPPS/ASC proposed rule (and respond to those comments in this 
final rule with comment period) or whether we are soliciting public 
comments in this final rule with comment period (and responding to 
those comments in the CY 2022 OPPS/ASC final rule with comment period).
    We note that we sought public comments in the CY 2020 OPPS/ASC 
final rule with comment period (84 FR 62375) on the new and revised 
Level II HCPCS codes effective October 1, 2019 or January 1, 2020. 
These new and revised codes were flagged with comment indicator ``NI'' 
in Addenda AA and BB to the CY 2020 OPPS/ASC final rule with comment 
period to indicate that we were assigning them an interim payment 
status and payment rate, if applicable, which were subject to public 
comment following publication of the CY 2020 OPPS/ASC final rule with 
comment period. In the CY 2021 OPPS/ASC proposed rule, we stated that 
we will finalize the treatment of these codes under the ASC payment 
system in this CY 2021 OPPS/ASC final rule with comment period.
2. April 2020 HCPCS Codes for Which We Solicited Public Comments in the 
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, CR 11694, dated April 13, 2020), 
we added four new Level II HCPCS codes to the list of covered ancillary 
services. Table 32 of the CY 2021 OPPS/ASC proposed rule displayed the 
new Level II HCPCS codes that were implemented on April 1, 2020, along 
with their proposed payment indicators for CY 2021.
    We invited public comments on the proposed payment indicators and 
payment rates for the new HCPCS codes that were recognized as ASC 
ancillary services in April 2020 through the quarterly update CRs, as 
listed in Table 32 of the CY 2021 OPPS/ASC proposed rule. We proposed 
to finalize their payment indicators in this CY 2021 OPPS/ASC final 
rule with comment period.
    We did not receive any public comments on the proposed ASC payment 
indicator assignments for the new Level II HCPCS codes implemented in 
April 2020. Therefore, we are finalizing the proposed ASC payment 
indicator assignments for these codes, as indicated in Table 49 below. 
We note that several of the temporary drug HCPCS C-codes have been 
replaced with permanent drug HCPCS J-codes, effective January 1, 2021. 
Their replacement codes are also listed in Table 49. The final payment 
rates for these codes can be found in Addendum BB to this final rule 
with comment period (which is available via the internet on the CMS 
website). In addition, the status indicator meanings can be found in 
Addendum DD1 to this final rule with comment period (which is available 
via the internet on the CMS website).

[[Page 86124]]

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3. July 2020 HCPCS Codes for Which We Solicited Public Comments in the 
Proposed Rule
    In the July 2020 ASC quarterly update (Transmittal 10188, Change 
Request 11842, dated June 19, 2020), we added several separately 
payable Category III CPT and Level II HCPCS codes to the list of 
covered surgical procedures and ancillary services. Table 33 of the CY 
2020 OPPS/ASC proposed rule displayed the new HCPCS codes that were 
effective July 1, 2020.
    In addition, through the July 2020 quarterly update CR, we also 
implemented ASC payments for two new Category III CPT codes as ASC 
covered ancillary services, effective July 1, 2020. These codes were 
listed in Table 34 of the CY 2020 OPPS/ASC proposed rule, along with 
the proposed comment indicator and payment indicator.
    We invited public comments on these proposed payment indicators for 
the new Category III CPT code and Level II HCPCS codes newly recognized 
as ASC covered surgical procedures or covered ancillary services in 
July 2020 through the quarterly update CRs, as listed in Tables 32, 33, 
and 34 of the proposed rule.
    We did not receive any public comments on the proposed ASC payment 
indicator assignments for the new Category III CPT codes or Level II 
HCPCS codes implemented in July 2020. Therefore, we are finalizing the 
proposed ASC payment indicator assignments for these codes, as 
indicated in Table 50 and 51 below. We note that several of the HCPCS 
C-codes have been replaced with HCPCS J-codes, effective January 1, 
2021. Their replacement codes are listed in Table 50. The final payment 
rates for these codes can be found in Addendum AA and BB to this final 
rule with comment period (which is available via the internet on the 
CMS website). In addition, the status indicator meanings can be found 
in Addendum DD1 to this final rule with comment period (which is 
available via the internet on the CMS website).
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4. October 2020 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Final Rule With Comment Period
    In the past, we released new and revised HCPCS codes that are 
effective October 1 through the October OPPS quarterly update CRs and 
incorporated these new codes in the final rule with comment period.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48947), for CY 2021, 
consistent with our established policy, we proposed 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 ASC payment indicator for CY 2021. We did not receive 
any public comments on our proposal. As we stated in the CY 2021 OPPS/
ASC proposed rule, we are inviting public comments in this CY 2021 
OPPS/ASC final rule with comment period on the interim ASC payment 
indicator for these codes that we intend to finalize in the CY 2022 
OPPS/ASC final rule with comment period.
5. January 2021 HCPCS Codes
a. Level II HCPCS Codes for Which We Are Soliciting Public Comments in 
This Final Rule With Comment Period
    Consistent with past practice, we are soliciting comments on the 
new Level II HCPCS codes that are effective January 1, 2021 in the CY 
2021 OPPS/ASC final rule with comment period, thereby updating the ASC 
payment system for the calendar year. These codes are released to the 
public via the CMS HCPCS website, and also through the January OPPS 
quarterly update CRs. 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 the CY 2021 OPPS/ASC 
proposed rule, most Level II HCPCS codes are not released until 
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, we stated in the CY 2021 OPPS/ASC proposed 
rule with comment period that the Level II HCPCS codes that will be 
effective January 1, 2021 would be released to the public through this 
CY 2021 OPPS/ASC final rule with comment period, January 2021 ASC 
Update CR, and the CMS HCPCS website (85 FR 48948).
    In addition, for CY 2021, we proposed to continue our established 
policy of assigning comment indicator ``NI'' in Addendum AA and 
Addendum BB to the CY 2021 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 are inviting public comments in this 
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 Solicited Public Comments in the 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/ASC final rule. For those new/revised CPT codes 
that were received too late for inclusion in the OPPS/ASC proposed 
rule, we finalized our proposal to establish and use HCPCS G-codes that 
mirror the predecessor CPT codes and retain the current APC and status 
indicator assignments for a year until we can propose APC and status 
indicator assignments in the following year's rulemaking cycle. We note 
that even if we find that we need to create HCPCS G-codes in place of 
certain CPT codes for the PFS proposed rule, we do not anticipate that 
these HCPCS G-codes will always be necessary for OPPS purposes. We will 
make every effort to include proposed APC and status indicator 
assignments for all new and revised CPT codes that the AMA makes 
publicly available in time for us to include them in the 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.

[[Page 86130]]

    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 the 
proposed rule. The new, revised, and deleted CPT codes were listed in 
Addendum AA and Addendum BB to the CY 2021 OPPS/ASC proposed rule. The 
new and revised CPT codes were assigned to comment indicator ``NP'' in 
Addendum AA and Addendum BB of the CY 2021 OPPS/ASC 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 the current calendar year, along 
with a proposed ASC payment indicator assignment, and that comments 
would be accepted on the proposed ASC payment indicator.
    Further, we note that the CPT code descriptors that appeared in 
Addendum AA and BB to the CY 2021 OPPS/ASC proposed rule were short 
descriptors and did not fully describe the complete procedure, service, 
or item described by the CPT code. Therefore, we included the 5-digit 
placeholder codes and the long descriptors for the new and revised CY 
2021 CPT codes in Addendum O to the proposed rule so that the public 
could adequately comment on the proposed ASC payment indicator 
assignments. The 5-digit placeholder codes were listed in Addendum O, 
specifically under the column labeled ``CY 2021 OPPS/ASC Proposed Rule 
5-Digit AMA Placeholder Code''. The final CPT code numbers are included 
in this CY 2021 OPPS/ASC final rule with comment period, and can be 
found in Addendum AA, Addendum BB, and Addendum O.
    For new and revised CPT codes effective January 1, 2021 that were 
received in time to be included in the CY 2021 OPPS/ASC proposed rule, 
we proposed the appropriate payment indicator assignments, and 
solicited public comments on the payment assignments. We stated we 
would accept comments and finalize the payment indicators in this CY 
2021 OPPS/ASC final rule with comment period. We received comments on 
the ASC payment indicators for certain new CPT codes that will be 
effective January 1, 2021. These comments, and our responses, can be 
found in section XIII.C. (Update to the List of ASC Covered Surgical 
Procedures and Covered Ancillary Services) of this final rule with 
comment period.
    Also, we note that we inadvertently omitted four new HCPCS codes, 
specifically, CPT codes 0627T, 0628T, 0629T, and 0630T, effective 
January 1, 2021 from Addendum AA of the CY 2021 OPPS/ASC proposed rule. 
The procedures described by the four new HCPCS codes are displayed in 
Addendum AA of this CY 2021 OPPS/ASC final rule with comment period 
with comment indicator ``NI'' to indicate that we are assigning them an 
interim payment indicator, which is subject to public comment. We are 
inviting public comments on the ASC payment indicators for CPT codes 
0627T, 0628T, 0629T, and 0630T, which will be finalized in the CY 2022 
OPPS/ASC final rule with comment period.
    Finally, shown in Table 35 of the CY 2021 OPPS/ASC proposed rule 
(85 FR 48949) and reprinted in Table 52 below, 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 
payment system.

[[Page 86131]]

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

1. Covered Surgical Procedures
a. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC 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) Changes for CY 2021 to Covered Surgical Procedures Designated as 
Office-Based
    In developing the CY 2021 OPPS/ASC proposed rule (85 FR 48949 
through 48953), 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

[[Page 86132]]

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 six covered surgical procedures that we believe met the criteria for 
designation as permanently office-based. The data indicated that these 
procedures are performed more than 50 percent of the time in 
physicians' offices, and we believe that the services were of a level 
of complexity consistent with other procedures performed routinely in 
physicians' offices. The CPT codes that we proposed to permanently 
designate as office-based for CY 2021 are listed as Table 53.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR29DE20.099

    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 proposed to continue to designate these 
procedures, shown in Table 54, 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 the CY 
2021 OPPS/ASC proposed rule with comment period (which is available via 
the internet on the CMS website).

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[[Page 86134]]


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    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 proposed to permanently assign an office-based designation 
for five of the procedures, represented by CPT codes 10007, 10011, 
11102, 11104, and 11106. After reviewing CY 2019 volume and utilization 
data for these five procedures, the claims data were sufficient to 
indicate that these covered surgical procedures are performed 
predominantly in physicians' offices (greater than 50 percent of the 
time) and, therefore, we proposed 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 55. 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 proposed to assign a non office-based payment indicator--``G2''--to 
these codes for CY 2021 as shown in Table 55.

[[Page 86135]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.102

    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 are available to assess their predominant sites of 
service, 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 proposed to designate two 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 56 
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 proposed to add CPT codes 0596T and 
0597T in Table 56 to the list of temporarily office-based covered 
surgical procedures.

[[Page 86136]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.103

    Comment: Some commenters supported our proposed temporary office-
based designations as well as the removal of temporary office-based 
designations for CPT codes 10005 (Fine needle aspiration biopsy, 
including ultrasound guidance; first lesion) and 10009 (Fine needle 
aspiration biopsy, including ct guidance; first lesion). Many 
commenters did not support our proposed temporary office-based 
designation for CPT code 64624 (Destruction by neurolytic agent, 
genicular nerve branches including imaging guidance, when performed). 
Commenters argued that the office setting does not represent the 
predominant site of care where this procedure is furnished, noting that 
this procedure is more likely to be performed in a hospital outpatient 
department or ASC setting. Commenters note that CY 2020 claims and 
utilization data support this position.
    Response: We thank commenters for the support of our proposed 
temporary office-based designations. For the first two quarters of CY 
2020, we reviewed over 5,000 claims submitted for CPT code 64624. We 
observed that this procedure was performed 23.9 percent of the time in 
an office setting for the first two quarters of CY 2020, significantly 
less than the 50 percent threshold for a permanent office-based 
designation. Therefore, we agree with commenters that removing the 
temporary office-based designation for CPT code 64624 is appropriate. 
For CY 2021, we are finalizing a payment indicator of ``G2''--(Non 
office-based surgical procedure added in CY 2008 or later; payment 
based on OPPS relative payment weight)--for CPT code 64624.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modifications, to remove the temporary 
office-based designation for CPT codes 10005 and 10009. Additionally, 
we are finalizing our proposal, with modifications, to designate the 
procedures shown in Table 57 as temporarily office-based for CY 2021. 
Further, after consideration of the public comments we received, we are 
finalizing our proposal, without modifications, to designate the 
procedures shown in Table 58 as permanently office-based beginning CY 
2021.

[[Page 86137]]

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[[Page 86138]]


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[[Page 86139]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.106

BILLING CODE 4120-01-C
    (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 the 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,

[[Page 86140]]

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 did not propose 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 into 
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 are typically available in the 
physician 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 
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 did not propose an 
exemption from payment at physician fee schedule non-facility PE RVU 
amounts as characterized by payment indicator ``P3'' for CY 2021, we 
contemplated implementing such an exemption in the future if necessary 
and sought 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.
    Comment: Some commenters supported 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. 
However, other commenters, while supportive, did not believe an 
exemption was necessary as office utilization for such procedures was 
unlikely to rise above the 50 percent threshold.
    Response: We appreciate the commenters' feedback regarding a 
potential exemption from Physician Fee Schedule non facility PE RVU 
amounts for dialysis vascular access procedures under Sec.  416.171(d). 
We agree with commenters that such an exemption is not necessary at 
this time; however, we may consider such a proposal for 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 and involve 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 
proposed 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

[[Page 86141]]

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 proposed 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 the CY 2021 
OPPS/ASC 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).
    As discussed in section IV.A. of this final rule with comment 
period, we are approving the BAROSTIM NEOTM system for 
transitional pass-through device payment status. The applicant has 
stated that the BAROSTIM NEOTM would be reported with CPT 
code 0266T (Implantation or replacement of carotid sinus baroreflex 
activation device; total system (includes generator placement, 
unilateral or bilateral lead placement, intra-operative interrogation, 
programming, and repositioning, when performed)). There have been no 
device costs reported for CPT code 0266T in CY 2019 claims or in 
previous calendar years. Therefore, we are assigning a device offset 
percentage to 0266T in CY 2021 based on the clinically-similar 
procedure 0268T (Implantation or replacement of carotid sinus 
baroreflex activation device; pulse generator only (includes intra-
operative interrogation, programming, and repositioning, when 
performed)). Based on our review of CY 2019 claims data, CPT code 0268T 
has a device offset percentage of 96.04 percent. Therefore, for CY 
2021, we are assigning device-intensive status to CPT code 0266T with a 
device offset percentage of 96.04 percent.
    Comment: Some commenters requested that device-intensive 
designations for procedures under the ASC payment system be based 
solely on device-intensive designations under the OPPS.
    Response: We are not accepting the commenters' recommendation. As 
we have stated in past rulemaking (79 FR 66924), under 42 CFR 416.167 
and 416.171, most ASC payment rates are based on the OPPS relative 
payment weights, and our ASC policy with respect to device-intensive 
procedures is designed to be consistent with the OPPS. As such, a 
``device-intensive'' designation identifies those procedures with 
significant device costs and applies to services that are performed 
both in the hospital outpatient department and the ASC setting. We 
believe that the device-intensive methodology for ASCs should align 
with the device-intensive policies for OPPS, and, therefore, procedures 
should not be device intensive in the ASC setting if they are not 
device intensive in the hospital outpatient setting. Accordingly, to be 
assigned device-intensive status in the ASC setting, the procedure must 
be identified as device-intensive in the hospital outpatient setting 
and have a device offset percentage that exceeds the 30 percent 
threshold as calculated using our standard ratesetting methodology as 
stated in 42 CFR 416.171(b)(2).
    Comment: Several commenters requested that we restore the device-
intensive status for CPT code 0200T (Percutaneous sacral augmentation 
(sacroplasty), unilateral injection(s), including the use of a balloon 
or mechanical device, when used, 1 or more needles, includes imaging 
guidance and bone biopsy, when performed), noting that we proposed 
device-intensive status for this procedure under the OPPS.
    Response: Based on updated claims data for this final rule with 
comment period, CPT code 0200T has a device offset percentage of 20.39 
percent based on the standard ratesetting methodology. Therefore, CPT 
code 0200T is ineligible for device-intensive status under the ASC 
payment system and we are finalizing a payment indicator of ``G2'' CPT 
code 0200T for CY 2021.
    Comment: One commenter recommended that we assign device-intensive 
status to CPT code 66174 (Transluminal dilation of aqueous outflow 
canal; without retention of device or stent).
    Response: Based on updated claims data for this final rule with 
comment period, CPT code 66174 has a device offset percentage of 24.70 
percent. Therefore, CPT code 66174 is ineligible for device-intensive 
status under the ASC payment system. We are finalizing a payment 
indicator of ``A2''--Surgical procedure on ASC list in CY 2007; payment 
based on OPPS relative payment weight--for CPT code 66174 for CY 2021.
    Comment: Some commenters supported the Advisory Panel on Hospital 
Outpatient Payment (HOP Panel) recommendation that CMS consider 
lowering the ASC device-intensive threshold from 30 percent to 25 
percent to better capture device costs in the ASC setting.
    Response: Our established policy under the ASC payment system, as 
discussed at greater length in section XIII.G. of this final rule, is 
to scale prospective ASC relative payment weights by comparing total 
payment using current year ASC scaled relative payment weights with the 
total payment using the prospective ASC relative payment weights, 
holding ASC utilization, the ASC conversion factor, and the mix of 
services constant from the claims year. Lowering the device-intensive 
threshold would have the effect of assigning a greater amount of device 
costs, and increasing estimated ASC expenditures for the prospective 
year. The increase in prospective year expenditures can be attributable 
to portions of ASC non-device costs, which are otherwise calculated 
using an ASC conversion factor that is lower than the OPPS conversion 
factor, being replaced with device costs which are calculated using the 
higher OPPS conversion factor so that device costs are held constant 
between the OPPS and ASC payment system. The increase in estimated 
prospective year expenditures would put additional downward pressure on 
the ASC weight scalar and otherwise reduce ASC payment rates for most 
surgical procedures. Accordingly, we do not believe it would be 
appropriate to lower the ASC device-intensive threshold at this time.
    Comment: One commenter requested that we reevaluate our device cost 
calculations with respect to the device

[[Page 86142]]

offset percentage difference between CPT codes 64910 (Nerve repair; 
with synthetic conduit or vein allograft (e.g., nerve tube), each 
nerve) and 64912 (Nerve repair; with nerve allograft, each nerve, first 
strand (cable)). The commenter noted that the device offset percentage 
for CPT code 64912 has historically been greater than the device offset 
percentage for CPT code 64910.
    Response: We appreciate the commenters' recommendation. We note 
that CPT codes 64910 and 64912 each had less than 50 claims for this CY 
2021 OPPS/ASC final rule with comment period. For relatively lower 
volume procedures such as these, the limited sample sizes may cause 
greater fluctuation in device cost statistics for these procedures on a 
year-to-year basis. The amount of packaged costs submitted on a claim, 
the hospital charges reported on the claim, as well as the cost-to-
charge ratios for the hospitals that submitted these claims, can have a 
substantial impact on our device cost calculations for relatively lower 
volume procedures. However, we believe continuing to use our device-
intensive methodology results in the most accurate and reliable device 
cost statistics for capturing changes in device costs over time and for 
purposes of determining device-intensive status and device offset 
percentages.
    After consideration of the public comments we received, we are 
designating the ASC covered surgical procedures displayed in Addendum 
AA with payment indicator ``J8'' as device-intensive and subject to the 
device-intensive procedure payment methodology for CY 2021.
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.) ASC payment is reduced 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.
    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 device-intensive covered surgical 
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 CY 2019 and subsequent calendar years. Therefore, we 
proposed 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

[[Page 86143]]

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 did not propose any other changes to our policies related to no/cost 
full credit or partial credit devices.
    In the CY 2021 OPPS/ASC proposed rule, we did not propose any 
changes to these policies and we did not receive any comments on our 
policies related to no/cost full credit or partial credit devices. 
Therefore, we are finalizing continuing our existing policies for CY 
2021 and subsequent years.
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 
monitoring and care at midnight following the procedure. Section 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 through 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 proposed 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 through 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

[[Page 86144]]

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 through 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 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 through 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 through 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 total knee arthroplasty (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

[[Page 86145]]

concerns for hospital outpatient departments.
(1) 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 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 proposed to continue to apply our current policies 
and criteria set forth in 42 CFR 416.2 and 416.166 for updating the ASC 
CPL. In addition, we proposed 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, we would accept and 
consider nominations submitted by March 1st, 2021 in our rulemaking for 
CY 2022. Under our second alternative proposal, we proposed to revise 
our regulatory criteria by removing certain general exclusions at 42 
CFR 416.166(c) and under the revised criteria, we proposed to add 
certain surgical procedures to the ASC CPL beginning in CY 2021. We 
expected 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 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 proposed 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 the CY 2021 OPPS/ASC proposed rule. Procedures 
that we proposed 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 proposed to add, we believed that the 
THA procedure merited additional discussion in the CY 2021 OPPS/ASC 
proposed rule, given prior discussion of the 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 CPL would allow for greater 
choices in care settings for Medicare patients, would provide a more 
patient-centered approach to joint arthroplasty procedures, and would 
potentially be safer in some cases when 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 the CY 2021 OPPS/ASC proposed rule, we sought to continue to 
promote site neutrality, where possible, between the hospital 
outpatient department and ASC settings, and expand the ASC CPL to 
include as many procedures that can be performed in the HOPD as 
reasonably possible to advance that goal. Further, we believed 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 proposed 
to add THA to the ASC CPL in CY 2021, as shown in Table 40 of the CY 
2021 OPPS/ASC proposed rule.
    We proposed to add a total of eleven procedures, displayed in Table 
40 of the CY 2021 OPPS/ASC proposed rule, with their HCPCS code long 
descriptors, to the list of ASC covered surgical procedures for CY 
2021. We sought 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 sought comment on the two alternative proposals 
described below. Note that under both alternative proposals, we still 
proposed to add the eleven

[[Page 86146]]

procedures proposed under this section for CY 2021.
    Comment: Multiple commenters supported adding the eleven procedures 
we proposed to add to the ASC CPL under the established process for 
assessing procedures for inclusion on the ASC CPL. They noted that 
orthopedic surgeons in ASCs are increasingly performing these eleven 
procedures safely and effectively on non-Medicare-fee-for-service 
patients and appropriate Medicare patients. Two of these procedures, 
total hip arthroplasty (THA) and autologous chondrocyte knee 
implantation, received significant support from commenters. Commenters 
noted that due to advancements in clinical practice, less invasive 
techniques, patient selection, improved perioperative anesthesia, 
alternative postoperative pain management and expedited rehabilitation 
protocols, these procedures can be safely and effectively performed for 
Medicare beneficiaries in the ASC setting. These commenters observed 
that patients are typically not expected to require active medical 
monitoring and care at midnight following these procedures.
    Several commenters opposed the addition of THA to the CPL due to 
the risk of jeopardizing patient safety as well as expanded beneficiary 
coinsurance obligations. These commenters also recommended CMS ensure 
beneficiaries are informed in advance that, unlike under the OPPS, ASC 
cost-sharing is not capped at the inpatient deductible and could exceed 
cost sharing in the hospital outpatient setting for the same procedure. 
One commenter stated that CMS should delay adding THA to the ASC CPL 
until there is more robust outcomes data available.
    Response: We thank commenters for providing public comments on the 
appropriateness of adding THA and other procedures to the ASC CPL and 
recognize their concerns for ensuring patient health and quality care. 
As we have noted in the CY 2019 OPPS/ASC final rule (83 FR 59046) and 
the CY 2020 OPPS/ASC final rule (84 FR 61354), we continue to believe 
that the appropriate site of service for any surgical procedure, 
including THA, should be based on the physician's assessment of the 
patient and tailored to the individual patient's needs. We believe 
there are a number of less medically complex Medicare beneficiaries 
that could appropriately receive THA in an ASC setting. For these 
beneficiaries, physicians should continue to play an important role in 
exercising their clinical judgment when making site-of-service 
determinations.
    We are aware that beneficiaries may incur greater cost-sharing for 
THA procedures in an ASC setting under our proposal, but note that this 
is not an occurrence that is unique to THA. As we stated in the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59389), section 4011 of 
the 21st Century Cures Act (Pub. L. 114-255) amended section 1834 of 
the Act by adding a new subsection (t), which requires the Secretary to 
make available to the public via a searchable website, with respect to 
an appropriate number of items and services, the estimated payment 
amount for the item or service under the OPPS and ASC payment system 
and the estimated beneficiary liability applicable to the item or 
service. We implemented this provision by providing our Outpatient 
Procedure Price Lookup tool available via the internet at https://www.medicare.gov/procedure-price-lookup. This web page allows 
beneficiaries to compare their potential cost-sharing liability for 
procedures performed in the hospital outpatient setting versus the ASC 
setting. We believe this tool helps inform beneficiaries of potential 
cost-sharing amounts for receiving a service in the ASC setting 
compared to the outpatient setting, and note that this tool would 
include a comparison of cost-sharing liability for THA in the 
outpatient hospital and ASC settings in the future. Given these 
reasons, we do not believe a delay in the implementation of our 
proposed additions to the ASC CPL is warranted based on concerns 
relating to beneficiary safety or the potential for greater cost 
sharing expenses for beneficiaries.
    We assessed each of the eleven procedures we proposed to add to the 
ASC CPL using the existing regulatory safety criteria and determined 
that these procedures meet each of the criteria. Based on our review of 
the clinical characteristics of the procedures and their similarity to 
other procedures that are currently included on the ASC CPL, we believe 
the eleven procedures (CPT codes 0266T, 0268T, 0404T, 21365, 27130, 
27412, 57282, 57283, 57425, C9764, and C9766) can be safely performed 
in the ASC setting and note that the physician should determine whether 
a particular beneficiary would be a good candidate to undergo a 
procedure in the ASC setting rather than the hospital setting based on 
the clinical assessment of the patient. We agree with commenters who 
stated that advancements in clinical practice, less invasive 
techniques, patient selection, improved perioperative anesthesia, 
alternative postoperative pain management and expedited rehabilitation 
protocols have allowed these procedures to safely be performed in an 
ASC setting.
    Therefore, in this final rule with comment period, we are 
finalizing our proposal without modification to add these eleven 
procedures to the ASC CPL. These procedures, listed in Table 59 of this 
CY 2021 OPPS/ASC final rule, are:
     CPT code 0266T (Implantation or replacement of carotid 
sinus baroreflex activation device; total system (includes generator 
placement, unilateral or bilateral lead placement, intra-operative 
interrogation, programming, and repositioning, when performed)),
     CPT code 0268T (Implantation or replacement of carotid 
sinus baroreflex activation device; pulse generator only (includes 
intra-operative interrogation, programming, and repositioning, when 
performed),
     CPT code 0404T (Transcervical uterine fibroid(s) ablation 
with ultrasound guidance, radiofrequency),
     CPT code 21365 (Open treatment of complicated (eg, 
comminuted or involving cranial nerve foramina) fracture(s) of malar 
area, including zygomatic arch and malar tripod; with internal fixation 
and multiple surgical approaches,
     CPT code 27130 (Arthroplasty, acetabular and proximal 
femoral prosthetic replacement (total hip arthroplasty), with or 
without autograft or allograft
     CPT code 27412 (Autologous chondrocyte implantation, knee)
     CPT code 57282 (Colpopexy, vaginal; extra-peritoneal 
approach (sacrospinous, iliococcygeus))
     CPT code 57283 (Colpopexy, vaginal; intra-peritoneal 
approach (uterosacral, levator myorrhaphy)
     CPT code 57425 (Laparoscopy, surgical, colpopexy 
(suspension of vaginal apex))
     CPT code C9764 (Revascularization, endovascular, open or 
percutaneous, lower extremity artery (ies), except tibial/peroneal; 
with intravascular lithotripsy, includes angioplasty within the same 
vessel (s), when performed
     CPT code C9766 (Revascularization, endovascular, open or 
percutaneous, lower extremity artery (ies), except tibial/peroneal; 
with intravascular lithotripsy and atherectomy, includes angioplasty 
within the same vessel (s), when performed.

[[Page 86147]]

(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 the CY 2021 OPPS/ASC proposed 
rule, CMS proposed 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 
believed that retaining Sec.  416.166(c)(6) would 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 proposed to revise the regulatory language 
and modify this standard to exclude procedures designated as requiring 
inpatient care under Sec.  419.22(n) as of December 31, 2020.
    Comment: Commenters had concerns about modifying the general 
exclusion criteria at Sec.  416.166(c)(6) to exclude procedures 
designated as requiring inpatient care.
    Several commenters supported retaining the exclusion of procedures 
designated as requiring inpatient care, due to patient safety and 
quality of care concerns. These commenters urged caution in how CMS 
modifies criteria and adds procedures to the CPL, with one noting that 
they do not believe there is currently enough information to determine 
if these procedures would be clinically appropriate to perform in an 
outpatient or ASC setting.
    Other commenters opposed this modification and believed this 
exclusionary criterion should be removed. These commenters urged CMS 
not to finalize this proposal, as they believe it is counter to CMS' 
intention to expand physician and patient choice.
    Response: We thank commenters for their suggestions. As we discuss 
in more detail later in this section, we believe that retaining 
regulatory text similar to Sec.  416.166(c)(6) in CY 2021 will ensure 
that procedures that cannot be safely performed on an ambulatory basis 
will not be added to the CPL. As a result, we are modifying this 
standard for CY 2021 and future years to exclude procedures designated 
as requiring inpatient care under Sec.  419.22(n) as of December 31, 
2020. We are revising the regulatory language at Sec.  416.166(c)(6) to 
reflect this change at Sec.  416.166(b)(2)(i)(A).
(2) Alternative Proposals Under Consideration for CY 2021
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48958), we stated 
that, 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 noted that 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. 
We explained that 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 proposed two alternatives to our existing policy 
of adding procedures to the ASC CPL, each of which we believed would 
further support these goals.
a. Alternative Proposal To Create a Nomination Process
    Under the first approach, we proposed a nomination process for 
adding new procedures to the ASC CPL. We explained that 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 proposed to 
provide parameters as guidelines that we would strongly encourage 
stakeholders to consider in nominating procedures for the ASC CPL. We 
noted that we anticipated stakeholders, such as specialty societies 
that specialize in and have a deep understanding of the complexities 
involved in providing certain procedures, would be able to provide 
valuable suggestions as to which additional procedures may reasonably 
and safely be provided in an ASC.
    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 stated in the proposed rule that we believe it 
may be beneficial to adopt a streamlined process under which the 
public, particularly specialty societies that are very familiar with 
procedures in their specialty, can nominate procedures based on the 
latest evidence available as well as input from their memberships. We 
noted that we believe 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 proposed 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 
proposed 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 proposed 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. We indicated that, 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 disagreed with any 
procedures nominated, we would provide a specific rationale in the 
final rule. We stated that, 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

[[Page 86148]]

most appropriate decision about the nominated procedure.
    Under this alternative proposal, we proposed to update the ASC CPL 
by considering whether nominated procedures meet the requirements for 
covered surgical procedures under 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 proposed to eliminate the general exclusion criteria in 42 CFR 
416.166(c)(1) through (5) such that nominated procedures would not have 
to meet those criteria. Further, we proposed to modify Sec.  
416.166(c)(6) to align the regulatory text with the proposed 
elimination of the IPO list. Finally, we proposed that nominated 
procedures would need to meet the general exclusions at 42 CFR 
416.166(c)(7) and (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, we noted that 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 the CY 
2021 OPPS/ASC proposed rule. Therefore, we proposed to modify this 
criterion to exclude procedures designated as requiring inpatient care 
under Sec.  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 proposed to retain the 
criteria at Sec.  416.166(c)(6) through (8) and eliminate the five 
exclusions currently at Sec.  416.166(c)(1) through (5) because we 
believed that the general standards at Sec.  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 exclusions. We explained 
that we believed this alternative proposal could balance the goals of 
increasing physician and patient choice and expanding site neutral 
options with patient safety considerations.
    Additionally, we also proposed parameters for stakeholders to 
consider and specifically address in nominating procedures to add to 
the ASC CPL. These parameters would be general guidelines, not 
requirements, and we sought public comment on these suggested 
parameters including language changes, recommendations for additional 
parameters, potential unintended implications of the parameters we 
proposed, and whether we should finalize these parameters if this 
alternative proposal is finalized in the CY 2021 final rule.
    We stated that we believe a nomination process will take time to 
develop and stakeholders will need time to consider and evaluate 
potential nominations. We proposed 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 To Revise Criteria and Add Codes to the ASC-CPL
    In the CY 2021 OPPS/ASC proposed rule (85 FR 4896), 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 proposed 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 proposed to eliminate five of the current 
general exclusion criteria at 42 CFR 416.166(c)(1) through (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, which we explained 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 stated 
that we would keep the remaining three general exclusion criteria at 42 
CFR 416.166(c)(6) through (8), as the original reasons we adopted them 
in CY 2008 continue to exist, subject to the proposed modifications to 
Sec.  416.166(c)(6). These criteria would continue to prohibit the 
addition of certain procedures to the ASC CPL, namely those that are: 
designated as requiring inpatient care under 42 CFR 419.22(n) as of 
December 31, 2020; can only be reported using a CPT unlisted surgical 
procedure code; or otherwise excluded under 42 CFR 411.15. We proposed 
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.
    We noted that, 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 was proposed to be eliminated beginning in 
CY 2021, as described in section IX.B of the CY 2021 OPPS/ASC proposed 
rule. Therefore, we proposed 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 proposed to retain the 
criteria in Sec.  416.166(c)(6) through (8) and

[[Page 86149]]

eliminate the five criteria currently at Sec.  416.166(c)(1) through 
(5) because we believe that the general standards at Sec.  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 
explained that we believed 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 believed 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 Sec.  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, we noted that, while several of the identified 
procedures may typically require active medical monitoring and care at 
midnight following the procedure, we expect that an appropriately 
selected patient population in the ASC setting would be healthier and 
less complex and would likely not require active monitoring or medical 
care at midnight following the procedure. We believed 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 proposed 
to 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 sought 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 stated that we believed 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 acknowledged that this approach was a departure from the 
existing criteria that we established effective beginning in 2008. 
However, we believed 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 through 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 through 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. We noted that, 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. We recognized that each of these 
requirements provides additional safeguards for the health and safety 
of Medicare beneficiaries receiving surgical procedures in an ASC.
(3) Comment Solicitation on Potential Revisions to the ASC Conditions 
for Coverage if Alternative 2 Is Adopted
    In the proposed rule (85 FR 48962), we stated that we were 
considering allowing more invasive and lengthy surgical procedures to 
be performed in ASCs. We were seeking public input regarding what 
revisions to the ASC CfCs would be needed, if any, to ensure patient 
safety in response to the additional range of complex services that 
would be added to the ASC-CPL and noted that we might adopt such 
revisions as final in the CY 2021 final rule.
    We also solicited comments on specific examples contained within 
the current ASC CfCs. We noted that we were especially interested in 
public comments about some specific CfCs and whether they should be 
more prescriptive and require additional elements. Those items included 
expanded risk evaluations, additional nursing personnel, requiring 
staff be trained in Advanced Cardiac Life Support, and the requirement 
that ASCs identify certain patient conditions or more complex 
procedures that require a medical history and physical examination 
prior to surgery.
(3) Summary of Proposals
    For CY 2021, we proposed to add eleven procedures using the 
standard ASC CPL review process under our current regulations. In 
addition, we included two alternative proposals that we noted that we 
might finalize for CY 2021. One alternative was 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

[[Page 86150]]

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 the CY 2021 OPPS/ASC 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 proposed to revise the ASC CPL criteria under 42 
CFR 416.166, retaining the general standard criteria and eliminating 
five of the general exclusion criteria. Using these revised criteria, 
we proposed to add approximately 270 potential surgery or surgery-like 
codes to the CPL that are not on the CY 2020 IPO list. We proposed to 
finalize only one of these alternative proposals, and we welcomed 
public comment as to which policy should be adopted in the final rule.
    After consideration of the issues discussed earlier in this 
section, we noted that we believed that these proposed policies struck 
an appropriate balance 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.
    Comment: Many commenters were concerned that the alternative 
proposal to revise the general exclusion criteria at 42 CFR 416.166(c) 
and add 267 potential surgery or surgery-like procedures that are not 
on the current IPO list to the ASC-CPL list would not give adequate 
consideration to patient safety or stakeholder input. One commenter 
urged CMS not to finalize this alternative proposal, which the 
commenter believed would eliminate several safety ``guardrails.'' 
Another commenter stated that CMS should not remove the proposed 
exclusion criteria for the ASC CPL at 42 CFR 416.166(c) in light of 
what the commenter believed were oversight, quality, and safety 
concerns. Specifically, the commenter felt that procedures excluded by 
these safeguards were major and potentially life-threatening procedures 
that were appropriately excluded from ASCs, ASCs are not generally 
equipped to handle extensive blood loss or emergent and life-
threatening procedures, the time waiting for emergency transport to a 
hospital would potentially place beneficiary life in jeopardy, and that 
these risks may occur even if a physician believes that the individual 
beneficiary's clinical condition would allow these procedures to be 
performed in an ASC.
    Several commenters supported the alternative proposal to revise the 
general exclusion criteria at 42 CFR 416.166(c) and add 267 potential 
surgery or surgery-like procedures not on the current IPO list to the 
ASC CPL. They believed that medical research and technological advances 
have allowed for similar outcomes and a comparable quality of care for 
patients in both the outpatient hospital and ASC settings. One 
commenter supported this alternative proposal because they believed 
expanding the ASC CPL would increase the availability of ASCs as 
alternative care sites and preserve inpatient hospital capacity for 
higher acuity patients. The commenter agreed with CMS that significant 
advancements in medical practice, surgical techniques, and technology 
have allowed certain ASCs to perform procedures that were once too 
complex to be safely performed in an ASC.
    Some commenters urged CMS not to treat ASCs as the equivalent of 
hospital outpatient departments because, as the commenter explained, 
they are not regulated as hospitals and do not have the necessary 
resources on site to provide the higher level of care necessary to 
perform many of the surgical procedures we would add to the ASC CPL if 
our proposal is finalized.
    One commenter supported removing the five exclusionary criteria at 
42 CFR 416.166(c)(1) through (5), stating that physicians are best 
equipped to make decisions about site of service for their patients.
    Response: Under Sec.  416.166, covered surgical procedures are 
those surgical procedures that meet the general standards specified in 
Sec.  416.166(b) and are not excluded under the general exclusion 
criteria specified in Sec.  416.166(c). Both of our alternatives 
included a proposal to eliminate the exclusion criteria at Sec.  
416.166(c)(1) through (5), which currently require that covered 
surgical procedures do not include 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; or (5) commonly 
require systemic thrombolytic therapy. While these are important 
considerations in determining whether a surgical procedure may be 
safely performed in an ASC, we considered that it may no longer be 
necessary for CMS to apply these five exclusionary criteria because, as 
we have heard from many stakeholders, ASCs are currently and 
increasingly able to safely provide services with these 
characteristics.
    We have previously recognized the importance of increasing 
flexibility in our review of procedures for safe performance in the ASC 
setting, and we have been able to add surgical procedures to the ASC 
CPL that were once considered hospital inpatient procedures, including, 
for example, total knee arthroplasty and certain coronary intervention 
procedures involving major blood vessels. We believe it important that 
we adapt the ASC CPL in light of the significant advances in medical 
practice, surgical techniques, and ASC capabilities that have enabled 
some ASCs to safely perform procedures that were once too complex for 
the ASC setting, including those involving major blood vessels and 
other general exclusion criteria. Indeed, as we noted earlier, many 
procedures that are currently only payable as hospital outpatient 
services under Medicare are safely performed in the ASC setting for 
other payors. We acknowledge that non-Medicare patients tend to be 
younger and have fewer comorbidities than the Medicare population, but 
careful patient selection can identify Medicare beneficiaries who are 
suitable candidates to receive these services in the ASC setting. We 
have long recognized the importance of ensuring that the health care 
system has as many access points and patient choices for all Medicare 
beneficiaries as possible, and we believe it is important that we 
continue to support greater flexibility for physicians and patients to 
choose ASCs as the site of care in supporting those important goals.
    We agree with commenters who support our proposal to revise the 
general exclusion criteria at Sec.  416.166(c), to eliminate Sec.  
416.166(c)(1) through (5), because medical advances and careful patient 
selection have allowed procedures that were once too complex for the 
ASC setting to now be safely performed in ASCs. Importantly, physicians 
have always played a critically significant role in determining the 
appropriate site of care for their patients, and we believe it is 
appropriate that patient choice and physician judgement determine 
whether a surgical procedure may be safely performed in the ASC setting 
for each individual patient. Therefore, we are finalizing our proposal 
for CMS to no longer apply the exclusion criteria at Sec.  
416.166(c)(1) through (5) beginning on January 1, 2021. However, while 
CMS will no longer apply those five criteria in determining whether a 
procedure is a covered surgical procedure, we believe they are 
important safety factors that

[[Page 86151]]

physicians consider in making site-of-service determinations for their 
specific beneficiaries. Accordingly, general exclusions one through 
five will continue to be displayed under a new paragraph (d) titled 
``Physician considerations beginning January 1, 2021,'' at Sec.  
416.166(d) for physicians to consider in selecting the most appropriate 
site of service for their patients.
    Consistent with our recognition of the primary importance of the 
role physicians play in exercising their clinical judgment for each 
specific patient to assess whether a covered surgical procedure can be 
safely performed in the ASC setting, for all the same reasons we 
identify above, we are also recognizing that physicians are better-
positioned than CMS to determine that a surgical procedure is not 
expected to pose a significant safety risk for a specific beneficiary 
and is one for which standard medical practice for the specific 
beneficiary dictates the beneficiary would not typically be expected to 
require active medical monitoring and care at midnight following the 
procedure. While these two considerations, currently reflected in Sec.  
416.166(b), are ones that CMS has made to date in determining whether a 
surgical procedure is a covered surgical procedure, we are also 
shifting the responsibility for these two considerations from CMS to 
physicians, as now reflected in Sec.  416.166(d)(1) and (2).
    CMS will continue to designate procedures as covered surgical 
procedures. That is, we will continue to determine that surgical 
procedures can be covered surgical procedures if, under current Sec.  
416.166(b), they are separately paid under the OPPS, and, under current 
Sec.  416.166(c)(6) through (8), are not designated as requiring 
inpatient care under 42 CFR 419.22(n), are not only able to be reported 
using a CPT unlisted surgical procedure code, or are not otherwise 
excluded under 42 CFR 411.15. We are revising Sec.  416.166(b) to 
reflect these requirements for procedures to be designated by CMS as 
covered surgical procedures. With regard to the criterion at current 
Sec.  416.166(c)(6), that is, covered surgical procedures are those not 
designated as requiring inpatient care under 42 CFR 419.22(n), as 
described in section IX.B. of the CY 2021 OPPS/ASC proposed rule, CMS 
is eliminating the OPPS IPO list and amending 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 three-year transition, with the IPO list 
eliminated in its entirety by January 1, 2024. Therefore, we are 
specifying in revised Sec.  416.166(b) that covered surgical procedures 
may not include those surgical procedures that are designated as 
requiring inpatient care under 42 CFR 419.22(n) as of December 31, 
2020. If CMS determines that a surgical procedure meets the four 
requirements at revised Sec.  416.166(b), CMS will designate the 
procedure a covered surgical procedure and place it on the ASC CPL. 
Physicians then have the opportunity to assess whether their specific 
patients can or cannot safely receive such covered surgical procedure 
in the ASC setting based on the considerations now reflected in Sec.  
416.166(d).
    We disagree with the commenters who believe that expansion of the 
ASC CPL would negatively affect beneficiary safety or quality of care. 
We believe the policy we are finalizing to allow patients and 
physicians to determine the most appropriate site of care for an 
individual patient will continue to ensure patient safety. As we 
discuss above, physicians and patients are best-positioned to make 
patient-specific site-of-service determinations for their individual 
patients. Physicians have the greatest familiarity with and 
understanding of the needs of their individual patients and will use 
their complex medical judgment to determine whether a procedure can be 
safely performed in the ASC, given their patients' clinical profiles, 
available surgical back-up at the ASC, and the ability to safely and 
timely respond to unexpected complications, among other important 
considerations.
    We believe there are numerous other safety considerations that will 
affect a physician's decision to perform a particular service in the 
ASC setting, separate from the inclusion of the procedure on the ASC 
CPL and the physician's medical judgment. These include the Medicare 
Conditions for Coverage (CfCs), Medicare's ASC quality rating program 
(ASCQR), public and private accreditations and certifications, 
malpractice insurance premiums, and the pressures of market 
competition, all of which could be negatively impacted if an ASC does 
not appropriately take patient safety concerns into account when 
deciding to perform a particular procedure in the ASC setting. We are 
confident that all of these factors will help to ensure facilities and 
providers carefully assess each patient and determine the most 
appropriate site of service for procedures on the ASC CPL.
    In accordance with our final policy that CMS will apply the four 
criteria at new Sec.  416.166(b)(2), we are adding the 267 surgery and 
surgery-like codes to the ASC CPL we proposed to add under the second 
alternative because they meet the requirements at new Sec.  
416.166(b)(2). This policy is in keeping with our policy changes made 
in recent years to further site neutrality between the HOPD and ASC 
settings. With this addition of procedures to the ASC CPL, CMS is 
making available a broader range of surgical procedures that Medicare 
will pay for when performed in the ASC setting, which will further 
increase the availability of ASCs as an alternative site of care for 
Medicare beneficiaries, while also ensuring patient safety through 
CMS's and physicians' respective roles in determining that procedures 
can be safely performed in an ASC.
    Physicians are not required to maintain new documentation of their 
determination that procedures meet the revised CPL regulatory criteria, 
beyond what they are already required by Medicare. At this time, we 
believe that additional documentation and compliance activities 
associated with the revision of the CPL criteria are not necessary, as 
we noted earlier there remain many factors that encourage ASCs and 
physicians to appropriately consider patient safety in making site-of-
service determinations for individual beneficiaries.
    Comment: The majority of commenters supported the alternative 
proposal to establish a process for the public to nominate procedures 
for addition to the ASC CPL. These commenters generally supported this 
proposal because they believed it would better address beneficiary 
safety concerns than the alternative proposal to remove the general 
exclusion criteria at Sec.  416.166(c)(1) through (5). Several 
commenters noted that this alternative proposal would formalize the 
review process that occurs currently, provide transparency, and 
increase opportunity for engagement with providers and external 
stakeholders. One commenter believed that establishing a formal 
nomination process would streamline the process for specialty societies 
to suggest procedures that can be safely performed in ASCs. Several 
commenters believed a nomination process would avoid the potential 
patient safety risks associated with adding 267 procedures to the ASC 
CPL before stakeholders are able to review the procedures and analyze 
whether they are appropriate to furnish in an ASC. One commenter 
believed that CMS should formalize a stakeholder nomination process for 
future years with greater transparency and standardization. Another 
commenter recommended that CMS

[[Page 86152]]

give greater consideration to nominations from professional specialty 
societies, which include physicians who have clinical expertise 
regarding procedures that can be performed in an ASC.
    A number of commenters, largely hospitals and hospital 
associations, opposed both alternatives and raised safety concerns 
about expanding the ASC CPL. These commenters stated that both 
proposals would ``substantially weaken the agency's process'' and 
explained that Medicare beneficiary safety and quality of care could be 
negatively affected if Medicare pays for these higher risk surgical 
procedures when performed in an ASC. A few commenters believed we 
should finalize both alternative proposals, which they viewed as 
complementary and not mutually exclusive. Another commenter felt that 
finalizing both proposals would remove a barrier to physicians 
exercising their clinical judgment as to the appropriate setting of 
care for a particular patient.
    Response: In the CY 2021 OPPS/ASC proposed rule (85 FR 48959), we 
proposed a nomination process that would involve CMS updating the ASC 
CPL if we determined that a nominated procedure met the requirements 
for covered surgical procedures under the regulations at 42 CFR 
416.166, as we proposed to amend them. We proposed that the nomination 
process would be conducted through annual notice and comment rulemaking 
such that stakeholders would nominate surgical procedures they believed 
should be added to the ASC CPL by March 1, and CMS would propose and 
potentially finalize those nominated procedures for addition to the ASC 
CPL in the next applicable rulemaking cycle. We explained in the 
proposed rule that we believed a nomination process would provide 
external stakeholders, including specialty societies and physicians, a 
formalized process for notifying CMS of procedures that should be added 
to the ASC CPL. As with our other alternative proposal, we also 
proposed that we would revise the general exclusion criteria at Sec.  
416.166(c) by eliminating Sec.  416.166(c)(1) through (5).
    With regard to the proposal to eliminate the general exclusions at 
Sec.  416.166(c), which as we noted was a common feature of both 
alternative proposals, we discussed previously in this section that we 
are finalizing this proposal beginning January 1, 2021. We believe 
physicians may consider each of those five safety factors at current 
Sec.  416.166(c)(1) through (5) in making site-of-service 
determinations for their specific beneficiaries. In addition, we 
explained that physicians will now consider whether a surgical 
procedure is not expected to pose a significant safety risk for 
specific beneficiaries and is one for which standard medical practice 
dictates the beneficiary would not typically be expected to require 
active medical monitoring and care at midnight following the 
procedure--criteria at Sec.  416.166(b) that have until now been part 
of CMS's process for adding procedures to the ASC CPL. While CMS will 
still designate surgical procedures as covered surgical procedures and 
add them to the ASC CPL, we will apply only the following four 
criteria. The procedure is: (1) Separately paid under the OPPS; (2) not 
designated as requiring inpatient care under Sec.  419.22(n) as of 
December 31, 2020; (3) not only able to be reported using a CPT 
unlisted surgical procedure code; or (4) not otherwise excluded under 
Sec.  411.15.
    In light of the policies we are finalizing, we believe it is still 
appropriate for us to adopt a process whereby stakeholders notify CMS 
of procedures to be added to the ASC CPL, but a slightly different and 
simpler process than the nomination process alternative we proposed. We 
agree with commenters that a formalized process whereby the public 
notifies CMS of procedures to be added to the ASC CPL would provide 
more transparency and increase opportunities for CMS to engage with 
providers and external stakeholders in adding procedures to the ASC 
CPL. However, because CMS will now be applying only the four criteria 
listed in new Sec.  416.166(b)(2) to determine whether a surgical 
procedure is a covered surgical procedure, and given that CMS's role 
will be more limited than it was when it applied the more subjective 
safety criteria, CMS will be able to more expeditiously determine 
whether a surgical procedure meets the regulatory requirements for 
inclusion on the ASC CPL, and therefore, we do not believe a full 
nomination process is necessary.
    CMS will add surgical procedures to the ASC CPL as we become aware 
of new surgical procedures that meet the four requirements at new Sec.  
416.166(b)(2), but we expect the industry may become aware of other 
procedures that CMS may not know about, and has therefore not 
considered for inclusion on the ASC CPL. In that case, a member of the 
public may notify CMS of a surgical procedure any time they believe a 
surgical procedure meets the requirements at new Sec.  416.166(b)(2). 
CMS will confirm whether the procedure does in fact meet those 
requirements and will add it to the ASC CPL if it does. In accordance 
with the new regulations we are finalizing at new Sec.  416.166(d), 
physicians will then assess whether their specific patients can or 
cannot safely receive such covered surgical procedure in the ASC 
setting based on the patient-specific considerations reflected in new 
Sec.  416.166(d). The process we are finalizing is not a nominations 
process so much as a notification process, which we are adding at new 
Sec.  416.166(e), titled ``Additions to the list of ASC covered 
surgical procedures beginning January 1, 2021,'' to provide that we 
will add surgical procedures to the ASC CPL as follows: (1) CMS 
identifies a surgical procedure that meets the requirements at 
paragraph (b)(2) of this section. (2) CMS is notified of a surgical 
procedure that could meet the requirements at paragraph (b)(2) of this 
section and CMS confirms that such surgical procedure meets those 
requirements.
    Comment: In the CY 2021 OPPS/ASC proposed rule (85 FR 48959 through 
48960), we suggested parameters for stakeholders to use when evaluating 
procedures for nomination. Two commenters agreed that the parameters 
were appropriate and would be essential considerations during the 
proposed nomination process but recommended modifications, such as 
removing the fourth parameter on nearby facilities or adding an 
additional parameter evaluating whether data are available to inform 
the appropriate clinical support and monitoring for patients in an ASC 
setting. Another commenter noted that the parameters were a useful 
baseline for adding procedures and could be refined with exceptions or 
counterexamples in future years.
    Response: We thank the commenters for their feedback. We proposed 
that stakeholders would consider the parameters we described in the 
proposed rule and address them in a nomination process. As we have 
indicated, we are not adopting the nomination process described in the 
proposed rule. Rather, we are adopting a simpler approach whereby 
entities may notify CMS of procedures they believe meet the four 
requirements at new Sec.  416.166(b)(2). If CMS confirms a procedure 
does meet those four requirements, CMS will add it to the ASC CPL. At 
that point, it will be up to physicians to determine whether a 
procedure on the ASC CPL is safe for their specific patients to receive 
in an ASC. We are not adopting the parameters we discussed in the 
proposed rule because we are not adopting the more formal nomination 
process we described in that rule. However, in keeping with our final

[[Page 86153]]

policies, which emphasize the importance of physicians' safety 
determinations for their specific patients in deciding whether to 
perform a covered surgical procedure in an ASC, physicians should find 
the parameters useful in deciding whether to perform a covered surgical 
procedure on a particular ASC patient.
    Comment: We received a few comments that specifically addressed the 
requested information regarding the expansion of the existing ASC CfCs. 
Commenters that supported adopting the alternative proposal to revise 
the criteria and add additional procedures to the ASC CPL did not 
believe it would be necessary to change the ASC CfCs if the alternative 
proposal is finalized. Commenters that did not support the proposed 
changes to the ASC CPL process and criteria suggested that CMS expand 
the ASC CfCs if either of the alternative proposals is finalized. One 
commenter also suggested that CMS reinstate the CFCs that were removed 
in the 2019 Regulatory Provisions to Promote Program Efficiency, 
Transparency, and Burden Reduction final rule (84 FR 51732, 51737 
through 52739). Other commenters recommended we work with clinical 
experts and other stakeholders to make appropriate changes to the CfCs.
    Response: We thank the commenters for their helpful responses to 
the RFI. In keeping with our efforts to reduce provider burden and our 
stated objectives of prioritizing patient choice and physician 
judgement in determining the most appropriate site of service for a 
beneficiary, we are declining to modify the ASC CfCs at this time. We 
believe there are numerous considerations which effectively incentivize 
careful patient selection in ASCs, including accreditation 
requirements, insurer and provider privileges, state licensure 
requirements, and competitive market forces, to name only a few. 
Additionally, we will continue all measures described in our current 
CfCs and in Appendix L of the State Operations Manual. We may revisit 
modifying the ASC CfCs in the future should the need arise.
    After consideration of the public comments we received, we are 
finalizing our proposal to add eleven procedures using the standard ASC 
CPL review process under our current regulations. In addition, we are 
revising the definition of covered surgical procedures at Sec.  
416.166(a) to conform to the changes we are making to the requirements 
for covered surgical procedures at Sec.  416.166(b)(1) and (2) and (c), 
whereby CMS will determine whether the four specified criteria are met 
as the basis for adding surgical procedures to the ASC CPL. CMS will 
add 267 procedures to the ASC CPL, based upon these changes to the 
regulatory criteria. We also recognize that physicians may consider 
certain safety factors when determining the most appropriate site of 
care for a specific patient. We are adding a new Sec.  416.166(d) to 
reflect these considerations. Finally, we are adding new Sec.  
416.166(e), which describes how CMS will add a surgical procedure to 
the ASC CPL, either on its own initiative or based on a notification 
from the public that a procedure not currently on the ASC CPL meets the 
criteria for addition to the ASC CPL.
    New CPT and HCPCS codes for covered procedures and their final 
payment indicators for CY 2021 can be found in section XIII.B of this 
CY 2021 OPPS/ASC Final Rule. All ASC covered procedures and their final 
payment indicators for CY 2021 are also included in Addendum BB to this 
CY 2021 OPPS/ASC final rule (which is available via the internet on the 
CMS website).
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
2. Covered Ancillary Services
    This section was inadvertently omitted from the CY 2021 OPPS/ASC 
Proposed Rule. We are finalizing the continuation of our existing 
policies relating to covered ancillary services without change. In the 
CY 2019 OPPS/ASC final rule (83 FR 59062 through 59063), consistent 
with the established ASC payment system policy (72 FR 42497), we 
finalized the policy to update the ASC list of covered ancillary 
services to reflect the payment status for the services under the CY 
2019 OPPS final rule. As discussed in prior rulemaking, maintaining 
consistency with the OPPS may result in changes to ASC payment 
indicators for some covered ancillary services because of changes that 
are being finalized under the OPPS for CY 2021. For example, if a 
covered ancillary service was separately paid under the ASC payment 
system in CY 2020, but will be packaged under the CY 2021 OPPS, to 
maintain consistency with the OPPS, we would also package the ancillary 
service under the ASC payment system for CY 2021. In the CY 2019 OPPS/
ASC final rule, we finalized the policy to continue this reconciliation 
of packaged status for subsequent calendar years. Comment indicator 
``CH'', which is discussed in section XIII.F. of the CY 2021 OPPS/ASC 
proposed rule, is used in Addendum BB to this CY 2021 OPPS/ASC final 
rule (which is available via the internet on the CMS website) to 
indicate covered ancillary services for which we are finalizing a 
change in the ASC payment indicator to reflect a finalized change in 
the OPPS treatment of the service for CY 2021.
    Comment: One commenter requested that we add CPT code 91040 
(Esophageal balloon distension study, diagnostic, with provocation when 
performed) to our list of covered ancillary services. Commenter stated 
that esophageal balloon distension studies are often performed in 
conjunction with esophagogastroduodenoscopy procedures. The commenter 
noted that not adding this procedure sets a standard that an ancillary 
service must be performed 100 percent of the time with the surgical 
procedure in order for it to be considered integral, which results in a 
smaller subset of ancillary procedures being eligible for payment in 
the ASC setting.
    Response: Services included in our list of covered ancillary 
services must be integral to the performance of a covered surgical 
procedure. However, based on the description of the procedure, we do 
not believe this service is integral to the performance of the surgical 
procedures identified by the commenter, specifically CPT codes 43235 
(Esophagogastroduodenoscopy, flexible, transoral; diagnostic, including 
collection of specimen(s) by brushing or washing, when performed 
(separate procedure)), 43236 (Esophagogastroduodenoscopy, flexible, 
transoral; with directed submucosal injection(s), any substance), or 
43239 (Esophagogastroduodenoscopy, flexible, transoral; with biopsy, 
single or multiple), or other surgical procedures. Therefore, we are 
not adding CPT code 91040 to the list of ASC covered ancillary services 
for CY 2021.
    New CPT and HCPCS codes for covered ancillary services and their 
final payment indicators for CY 2021 can be found in section XIII.B of 
this CY 2021 OPPS/ASC Final Rule. All ASC covered ancillary services 
and their

[[Page 86167]]

final payment indicators for CY 2021 are also included in Addendum BB 
to this CY 2021 OPPS/ASC final rule (which is available via the 
internet on the CMS website).

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

1. ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are 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 conversion factor. In the CY 2020 OPPS/
ASC final rule with comment period (84 FR 61397 through 61400), we 
updated the CY 2019 ASC payment rates for ASC covered surgical 
procedures with payment indicators of ``A2'', ``G2'', and ``J8'' using 
CY 2018 data, consistent with the CY 2020 OPPS update. We also updated 
payment rates for device-intensive procedures to incorporate the CY 
2020 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 2020 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 2020 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 2020 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. Update to ASC Covered Surgical Procedure Payment Rates for CY 2021
    We proposed 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 proposed to continue to use the amount 
calculated under the ASC standard ratesetting methodology for 
procedures assigned payment indicators ``A2'' and ``G2''.
    We proposed 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 the CY 2021 OPPS/ASC proposed rule. Therefore, we 
proposed to update the payment amount for the service portion of the 
device-intensive procedures using the standard ASC rate setting 
methodology and the payment amount for the device portion based on the 
proposed CY 2021 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 proposed 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. A summary of the comments 
received and our responses to those comments are set forth below.
    Comment: One commenter disagreed with the proposed CY 2021 ASC 
payment rates for the surgical procedures described by the following 
CPT/HCPCS codes, requesting that CMS increase payment in the ASC 
setting for the following codes:

     CPT 22869 (Insertion of interlaminar/interspinous process 
stabilization/distraction device, without open decompression or fusion, 
including image guidance when performed, lumbar; single level)
     CPT 62287 (Decompression procedure, percutaneous, of 
nucleus pulposus of intervertebral disc, any method utilizing needle 
based technique to remove disc material under fluoroscopic imaging or 
other form of indirect visualization, with discography

[[Page 86168]]

and/or epidural injection(s) at the treated level(s), when performed, 
single or multiple levels, lumbar)
     CPT 64575 (Incision for implantation of neurostimulator 
electrode array; peripheral nerve (excludes sacral nerve))
     CPT 64454 (Injection(s), anesthetic agent(s) and/or 
steroid; genicular nerve branches, including imaging guidance, when 
performed)
     CPT 64624 (Destruction by neurolytic agent, genicular 
nerve branches including imaging guidance, when performed)

    Response: We update the data on which we establish payment rates 
each year through rulemaking and note that ASC rates are derived from 
OPPS payment rates, which are required to be reviewed and updated at 
least annually under section 1833(t)(9) of the Act. Based on our 
analysis of the latest hospital OPPS and ASC claims data used for this 
final rule with comment period, we are updating ASC payment rates for 
CY 2021 using the established rate calculation methodologies under 
Sec.  [thinsp]416.171 of the regulations and our definition of device-
intensive procedures, as discussed in section XII.C.1.b. of this CY 
2021 OPPS/ASC final rule with comment period. We do not generally make 
additional payment adjustments to specific procedures. Therefore, we 
are finalizing the payment indicators for the HCPCS codes 22869, 62287, 
64575, 64454, and 64624 as proposed.
    Comment: Two commenters recommended that CMS eliminate the 
prohibition against ASC billing for services using an unlisted CPT 
surgical procedure code.
    Response: Under Sec.  [thinsp]416.166(c)(7), covered surgical 
procedures do not include procedures that can only be reported using a 
CPT unlisted surgical procedure code. As discussed in the August 2, 
2007 final rule (72 FR 42485), it is not possible to know what specific 
procedure would be represented by an unlisted code, and therefore, it 
is not possible to evaluate procedures reported by unlisted CPT codes 
according to applicable regulatory criteria at Sec.  416.166. 
Therefore, we are not accepting this recommendation.
    After consideration of the public comments we received, we are 
finalizing our proposed policies without modification to calculate the 
CY 2021 payment rates for ASC covered surgical procedures according to 
our established rate calculation methodologies under Sec.  416.171 and 
using the modified definition of device-intensive procedures as 
discussed in section XIII.C.1.b. of this CY 2021 OPPS/ASC final rule. 
For covered office-based surgical procedures, the payment rate is the 
lower of the final CY 2021 MPFS nonfacility PE RVU-based amount or the 
final CY 2021 ASC payment amount calculated according to the ASC 
standard ratesetting methodology. The final payment indicators and 
rates set forth in this final rule with comment period are based on a 
comparison using the PFS PE RVUs and the conversion factor effective 
January 1, 2021. For a discussion of the PFS rates, we refer readers to 
the CY 2021 PFS final rule with comment period, which is available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
c. 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, 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 for the device portion of a device-intensive 
procedure to be set 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. 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 proposed 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 
were no usable claims with CPT code 0308T from CY 2019, which we would 
normally use for the CY 2021 OPPS/ASC 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 
proposed to establish the payment rate under the ASC payment system for 
CY 2021 using the CY 2020 final rule OPPS median cost 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

[[Page 86169]]

$20,675.62 in CY 2020). Therefore, for the CY 2021 OPPS/ASC proposed 
rule, we proposed 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 the CY 2021 OPPS/ASC proposed rule. Further, in the absence of 
claims data for the CY 2021 OPPS/ASC proposed rule, we also proposed 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.
    Comment: Commenters supported our proposal to apply a payment rate 
under the ASC payment system equal to the OPPS payment rate for CPT 
code 0308T and to continue the CY 2020 final rule device offset 
percentage of 90.18 percent for CPT code 0308T.
    Response: We thank the commenters for their support. After 
consideration of the public comments we received, for CY 2021, we are 
finalizing 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. Based on our review of CY 2019 claims using 
our standard ratesetting methodology for this final rule with comment 
period, there are no low volume device-intensive procedures that would 
exceed the rate paid under the OPPS for the same procedure. However, 
claims data show two claims containing CPT code 0308T that are unable 
to be used for this CY 2021 OPPS/ASC final rule with comment period 
ratesetting process. Under the low-volume device intensive procedure 
policy that we are adopting in this final rule with comment period, the 
ASC payment rate for CPT code 0308T is limited to the applicable 
payment rate under the OPPS (which is $20,766.56 in CY 2021). Further, 
in the absence of claims data for this final rule with comment period, 
we are finalizing our proposal to continue to use the CY 2020 final 
rule device offset percentage of 90.18 percent for CPT code 0308T in CY 
2021.
2. 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 the 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 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

[[Page 86170]]

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.
    Comment: One commenter recommended that CMS solicit comments from 
stakeholders regarding development of a more transparent and consistent 
policy regarding valuation of pass-through devices implanted in the ASC 
setting. The commenter further notes that CMS has published its method 
for valuing pass-through devices implanted in the hospital outpatient 
setting clearly in the Federal Register, and that, in the ASC setting, 
payment for a qualifying procedure and the associated pass-through 
device should be separate. However, the commenter disagreed with CMS's 
approach to valuation of pass-through devices implanted in the ASC 
setting as contractor-priced.
    Response: We thank the commenter for their recommendation. We will 
take the commenters' concerns into consideration in determining if 
additional instructions or future guidance for the MACs are warranted.
b. Payment for Covered Ancillary Services for CY 2021
    We proposed to update the ASC payment rates and to make changes to 
ASC payment indicators, as necessary, to maintain consistency between 
the OPPS and ASC payment system regarding the packaged or separately 
payable status of services and the proposed CY 2021 OPPS and ASC 
payment rates and subsequent year payment rates. We also proposed to 
continue to set the CY 2021 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.
    Covered ancillary services and their final payment indicators for 
CY 2021 are listed in Addendum BB of this CY 2021 OPPS/ASC final rule 
with comment period (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 final 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 final 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 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

[[Page 86171]]

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 met these criteria was 
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 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, which was 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 did not believe that conducting a similar 
review for CY2021 would be a fruitful effort. After careful 
consideration, we concluded we had 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 did 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 not 
providing a disincentive for the utilization of non-opioid 
alternatives, including Exparel, in the hospital outpatient department 
or ASC. A preliminary claims analysis showed that the total units of 
Exparel employed in the ASC setting has 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 did 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 proposed 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.
    The comments we received and our responses to those comments are 
set forth below.
    Comment: Multiple commenters, including individual stakeholders, 
hospital and physician groups, national medical associations, device 
manufacturers, and groups representing the pharmaceutical industry, 
supported the proposal to continue to unpackage and pay separately for 
the cost of non-opioid pain management drugs that function as surgical 
supplies when furnished in the ASC setting, such as Exparel, for CY 
2021. These commenters believed that packaged payment for non-opioid 
alternatives presents a barrier to access to non-opioid pain management 
drugs and that separate payment for non-opioid pain management drugs 
would be an appropriate response to the opioid drug abuse epidemic. 
Several commenters suggested that CMS expand this policy, including 
commenters who asked that CMS develop a policy that pays separately for 
drugs that are administered at the time of ophthalmic surgery and have 
an FDA-approved indication to treat or prevent postoperative pain.
    Response: We appreciate these comments. After reviewing the 
information provided by the commenters, we continue to believe that 
separate payment is appropriate for non-opioid pain management drugs 
that function as surgical supplies when furnished in the ASC setting 
for CY 2021. Therefore, as discussed in greater detail below, we are 
finalizing our proposal to continue to unpackage and pay separately for 
the cost of non-opioid pain management drugs that function as surgical 
supplies when they are furnished in the ASC setting without 
modification.
    Comment: Several commenters requested that the drug Omidria, CPT 
J1097, (phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml ophthalmic 
irrigation solution, 1 ml), be excluded from the ASC payment system 
packaging policy once its pass-through status expires on September 30, 
2020, because they believe it is a non-opioid pain management drug that 
functions as a surgical supply when furnished in the ASC setting. 
Omidria is indicated for maintaining pupil size by preventing 
intraoperative miosis and reducing postoperative ocular pain in 
cataract or intraocular surgeries. The commenters stated that extensive 
clinical evidence has been published in medical literature 
demonstrating that Omidria reduces dependence on opioids for patients 
undergoing cataract surgery and postoperative prescription opioids. The 
commenters noted that OMIDRIA is FDA-approved for intraocular use in 
cataract procedures, a pain management drug, a non-opioid, and 
functions, and was previously packaged, as a surgical supply during 
cataract surgery according to CMS' definition of a surgical supply. 
Commenters asserted that the use of Omidria decreases

[[Page 86172]]

patients' need for fentanyl during surgeries and provided an 
unpublished manuscript that has been submitted, but not approved, for 
publication in a peer-reviewed journal, which suggested that Omidria 
reduces opioid use after surgery based on pill counts.
    Response: We thank commenters for their feedback on Omidria. 
Omidria received pass-through status for a 3-year period from 2015 to 
2017. After expiration of its pass-through status, it was packaged 
under both the OPPS and the ASC payment system. Subsequently, Omidria's 
pass-through status under the OPPS was reinstated in October 1, 2018 
through September 30, 2020 as required by 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), which means that Omidria 
continued to be paid separately under the ASC payment system through 
September 30, 2020. We note that our previous review of the clinical 
evidence submitted by commenters during CY 2020 rulemaking concluded 
that the studies the commenter submitted were not sufficiently 
compelling to revise our payment policy for Omidria. Moreover, the 
results of a CMS analysis of cataract procedures performed on Medicare 
beneficiaries in the OPPS between January 2015 and July 2019 comparing 
procedures performed with Omidria to procedures performed without 
Omidria did not demonstrate a significant decrease in fentanyl 
utilization during the cataract surgeries in the OPPS when Omidria was 
used. Our findings also did not suggest any decrease in opioid 
utilization post-surgery for procedures involving Omidria.
    However, we continue to believe the separate payment is appropriate 
for non-opioid pain management drugs that function as surgical supplies 
when furnished in the ASC setting for CY 2021. After careful 
consideration of the commenters' assertion that Omidria meets this 
definition, we believe that Omidria qualifies as a non-opioid pain 
management drug that functions as a surgical supply when furnished in 
the ASC setting and will therefore exclude Omidria from packaging under 
the ASC payment system beginning October 1, 2020, and in CY 2021, in 
accordance with this policy.
    Comment: Two commenters briefly mentioned the drug IV 
acetaminophen, CPT code J0131, which they believe may reduce opioid 
usage if CMS paid separately for the drug. These commenters believed 
CPT code J0131 is a highly effective medication that also decreases use 
of post-operative opioids.
    Response: We thank commenters for their comments. We do not find it 
appropriate to pay separately for IV acetaminophen as suggested by 
these commenters due to our drug packaging threshold policies, which 
are discussed in section V.B.1.a to this final rule with comment 
period. In accordance with section 1833(t)(16)(B) of the Act, we 
finalized our proposal to set the drug packaging threshold for CY 2021 
to $130. To the extent that the items and services mentioned by the 
commenters are effective alternatives to opioid prescriptions, we 
encourage providers to use them when medically necessary.
    Comment: Commenters suggested modified payment for ``pain block'' 
CPT codes 64415, 64416, 64417, 64445, 64446, 64447, 64448, and 64450. 
Two commenters stated that providers use these pain blocks to mitigate 
the post-operative pain that is otherwise typically addressed with 
short-term opioid use. Additionally, a few commenters noted that CPT 
code J1096 (Dexamethasone, lacrimal ophthalmic insert, 0.1 mg) used for 
treatment of ocular inflammation and pain following ophthalmic surgery 
is administered through CPT code 0356T (Insertion of drug-eluting 
implant (including punctal dilation and implant removal when performed) 
into lacrimal canaliculus, each). These commenters felt CPT code 0356T, 
which commenters state describes the administration of CPT code J1096, 
should also receive separate or additional payment due to the alleged 
clinical benefits of the drug, including treatment of pain.
    Response: We thank the commenters for their suggestions. The ``pain 
block'' procedure codes and drug administration code discussed above do 
not qualify as non-opioid pain management drugs that function as 
surgical supplies, and therefore, do not qualify for separate payment 
when furnished in the ASC setting. At this time, we have not found 
compelling evidence to revise our policies to provide separate payment 
for the non-opioid pain management alternatives described above under 
the OPPS or ASC payment systems for CY 2021. To the extent that the 
items and services mentioned by the commenters are effective 
alternatives to opioid prescriptions, we encourage providers to use 
them when medically appropriate. For a greater discussion on CPT code 
0356T, please see section III. D. (Administration of Lacrimal 
Ophthalmic Insert Into Lacrimal Canaliculus (APC 5692)) of this final 
rule with comment period.
    Comment: Some commenters encouraged CMS to establish permanent 
separate payment for drugs that are currently on drug pass-through 
status in the OPPS and ASC settings, such as Dexycu (HCPCS code J1095). 
Regarding Dexycu specifically, one commenter stated that permanent 
separate payment for ophthalmic drugs is appropriate due to growing 
evidence that these drugs reduce reliance on opioids used in 
association with cataract surgeries. They noted that they were 
conducting a new, comprehensive study of a longitudinal claim dataset 
that will provide deeper insights into the association between cataract 
surgery and opioid utilization, as well as the role of Dexycu in 
reducing the prescribing of opioids.
    Response: We refer readers to section V.A., ``OPPS Transitional 
Pass-Through Payment for Additional Costs of Drugs, Biologicals, and 
Radiopharmaceuticals'' of this final rule with comment period regarding 
pass-through payments under the OPPS. Once a drug's pass-through status 
expires, we determine whether that drug is eligible for separate 
payment under our policy for non-opioid pain management drugs that 
function as surgical supplies when furnished in the ASC setting. We 
thank commenters for conducting studies regarding their specific 
products and look forward to reviewing the results.
    Comment: Commenters requested separate payment for various non-drug 
pain management treatments that they believe are viable alternatives to 
opioids, such as ERAS[supreg] protocols or spinal cord stimulators 
(SCS), that they believe decrease the number of opioid prescriptions 
beneficiaries receive during and following an outpatient visit or 
procedure. For SCS, several commenters noted that this therapy may lead 
to a reduction in the use of opioids for chronic pain patients. They 
noted that neurostimulation is a key alternative to opioid prescription 
for the management and recommended that CMS increase access to SCS.
    Response: We appreciate the responses from commenters on this 
topic. At this time, we have not found compelling evidence that our 
current payment policies discourage use of the various non-drug 
alternatives for non-opioid pain management commenters described, such 
that separate payment would be warranted under the OPPS or ASC payment 
systems for CY 2021. We do not find it appropriate to revise our 
policies at this time based on these comments; however, we plan to take 
these comments and suggestions into consideration for future 
rulemaking. We agree that providing incentives to avoid or reduce 
opioid prescriptions may be one of several strategies for addressing 
the opioid epidemic. To the extent that

[[Page 86173]]

the items and services mentioned by the commenters are effective 
alternatives to opioid drugs, we encourage providers to use them when 
medically appropriate. We look forward to working with stakeholders as 
we further consider suggested refinements to the OPPS and the ASC 
payment system to encourage use of non-opioid pain management 
treatments.
    After consideration of the public comments that we received, we are 
finalizing the policy to continue to unpackage and pay separately at 
ASP[thinsp]+[thinsp]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 2021 as proposed. We will continue 
to analyze the issue of access to other non-opioid alternatives for 
pain management in the OPPS and ASC settings. This policy is also 
discussed in section II.A.3.b. of this final rule with comment period.

E. New Technology Intraocular Lenses (NTIOLs)

    New Technology Intraocular Lenses (NTIOLs) are intraocular lenses 
that replace a patient's natural lens that has been removed in cataract 
surgery and that also meet the requirements listed in Sec.  416.195.
1. NTIOL Application Cycle
    Our process for reviewing applications to establish new classes of 
NTIOLs is as follows:
     Applicants submit their NTIOL requests for review to CMS 
by the annual deadline. For a request to be considered complete, we 
require submission of the information that is found in the guidance 
document entitled ``Application Process and Information Requirements 
for Requests for a New Class of New Technology Intraocular Lenses 
(NTIOLs) or Inclusion of an IOL in an Existing NTIOL Class'' posted on 
the CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-
Service-Payment/ASCPayment/NTIOLs.html.
     We announce annually, in the proposed rule updating the 
ASC and OPPS payment rates for the following calendar year, a list of 
all requests to establish new NTIOL classes accepted for review during 
the calendar year in which the proposal is published. In accordance 
with section 141(b)(3) of Public Law 103-432 and our regulations at 
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 did not propose to revise the payment adjustment amount for CY 2021.
    The comments and our responses to the comments are set forth below.
    Comment: One commenter requested that we re-evaluate our payment 
adjustment for new NTIOL class. Commenters noted that our $50 payment 
adjustment has not been adjusted since CY 1999 and that the stagnant 
payment adjustment has been a barrier to intraocular lens innovation. 
The commenter requested that the $50 be inflated to 2021 dollars and 
updated by inflation in subsequent years.
    Response: We thank the commenter for their recommendation. We did 
not propose revising the payment adjustment amount for CY 2021. 
However, we will take the commenter's recommendations into 
consideration in future rulemaking.
4. Announcement of CY 2022 Deadline for Submitting Requests for CMS 
Review of Applications for a New Class of NTIOLS
    In accordance with Sec.  416.185(a) of our regulations, CMS 
announces that in order to be considered for payment effective 
beginning in CY 2022, requests for review of applications for a new 
class of new technology IOLs must be received by 5:00 p.m. EST, on 
March 1, 2021. Send requests via email to [email protected] or 
by mail to ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, 
Centers for Medicare and Medicaid Services, 7500 Security Boulevard, 
Baltimore, MD 21244-1850. To be considered, requests for NTIOL reviews 
must include the information requested on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.

F. ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we 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

[[Page 86174]]

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 proposed new and revised Category I and III CPT 
codes as well as new and revised Level II HCPCS codes. Therefore, 
proposed Category I and III CPT codes that are new and revised for CY 
2021 and any new and existing Level II HCPCS codes with substantial 
revisions to the code descriptors for CY 2021 compared to the CY 2020 
descriptors are included in ASC Addenda AA and BB to the CY 2021 OPPS/
ASC 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 proposed 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 
the CY 2021 OPPS/ASC 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 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 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 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 CY 2021 and subsequent calendar years, we proposed 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 the CY 2021 OPPS/ASC 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.
    In the CY 2021 OPPS/ASC proposed rule, we stated we would 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 the CY 2021 OPPS/ASC 
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 2021 update.
    We did not receive any public comments on the proposed ASC payment 
and comment indicators. Therefore, we are finalizing their use as 
proposed without modification. Addenda DD1 and DD2 to this CY 2021 
OPPS/ASC final 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. 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

[[Page 86175]]

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 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

[[Page 86176]]

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 proposed 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 proposed 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 proposed 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 was 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 the CY 2021 OPPS/ASC proposed rule, we had 
90 percent of CY 2019 ASC claims data available.
    A summary of the comments we received and our responses to those 
comments are set forth below.
    Comment: Many commenters believe that CMS needs to reduce the 
disparity in payments between ASCs and HOPDs. Commenters stated that 
ASC payment rates are less than 50 percent of the HOPD payment rates 
for some high volume procedures. Many of these same commenters support 
the discontinuation of the ASC weight scalar, which they believe is the 
cause of the payment gap between ASCs and HOPDs. Commenters suggested 
that the ASC weight scalar as currently applied may make it 
economically infeasible for ASC facilities to continue to perform 
Medicare cases, hurting beneficiaries by limiting their access to high-
quality outpatient surgical care. One commenter highlighted this 
concern and suggested that while expansion of the ASC Covered 
Procedures List would allow more procedures to be performed in the ASC, 
these additional procedures will not be performed in the ASC if ASC 
payment rates are lowered to unsustainable levels over time. Multiple 
commenters suggested that eliminating the secondary rescaling of the 
ASC relative payment weights, and instead applying the OPPS relative 
payment weights to ASC services, would allow ASCs to continue to 
provide quality surgical care for Medicare patients. They provided 
that, while they understand the additional scaling factor that CMS 
applies to the ASC relative payment weights maintains budget neutrality 
within the ASC payment system, this scaling contributes to the large 
payment differentials for similar services between the ASC and HOPD 
systems.
    Response: We thank commenters for flagging this important issue. As 
we stated in the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59421) we share commenters' concerns about the effects of payment 
disparities between the OPPS and ASC payment systems. We note that 
applying the weight scalar in calculation of ASC payment rates, which 
is 0.8591 for this final rule with comment period, ensures that the ASC 
payment system remains budget neutral. We understand the commenters do 
not believe it is necessary to calculate a weight scalar under the ASC 
payment system. The commenters contend that application of the weight 
scalar to ASC payment rates has led to increasingly large differences 
in the amount of payment for similar services between the OPPS and the 
ASC payment system. We understand commenters' concerns, however, we are 
unable to calculate a single weight scalar for both the OPPS and the 
ASC payment system without rescaling OPPS payment weights in a non-
budget neutral manner. We will take the points that the commenters 
raised into consideration as part of our efforts to improve choice and 
competition in the Medicare program. However, as noted in previous 
rulemaking (83 FR 59076), we do not believe that the ASC cost structure 
is identical to the hospital cost structure. Further, we do not collect 
cost data from ASCs, and therefore we lack the necessary data to assess 
the actual differences in costs between the hospital outpatient 
department and ASC settings.
    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 the CY 2021 OPPS/ASC 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.
    Comment: One commenter noted that our CY 2021 NPRM ASC Supplier 
Specific file incorrectly assigned certain ASCs in the previous CBSA of 
16974 (Chicago-Naperville-Arlington Heights, IL) to the default CBSA 14 
(Illinois)

[[Page 86177]]

rather than the new CBSA of 16984 (Chicago-Naperville-Evanston, IL) 
applicable to their location.
    Response: We appreciate the commenter's observation and agree that 
ASCs in the previous CBSA of 16974 were erroneously assigned to default 
CBSA 14 rather than the new CBSA of 16984. We have corrected the CBSA 
assignment for these ASCs for this final rule with comment period.
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.
    As stated in the CY 2021 OPPS/ASC proposed rule, the hospital 
market basket update for CY 2021 was 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). As stated in the CY 2021 
OPPS/ASC proposed rule (85 FR 32739), the proposed MFP adjustment for 
CY 2021 was 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 proposed 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 proposed 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 proposed 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 proposed 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 proposed 
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 proposed 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 resulted 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 proposed 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 quality reporting/MFP-adjusted hospital market basket update of 
0.6 percent discussed above, which resulted in a proposed CY 2021 ASC 
conversion factor of $48.029.
    The comments we received on our proposals for updating the CY 2021 
ASC

[[Page 86178]]

conversion factor and our responses are set forth below.
    Comment: The majority of commenters supported continued use of the 
hospital market basket for updating ASC payments on an annual basis. 
Some commenters suggested that maintaining alignment in the update 
factor used in the OPPS and ASC payment system will encourage the 
migration of care to the lower cost ASC setting and ensure that ASCs 
remain a viable high quality and lower cost option for patients. Other 
commenters supported this approach as it would promote site-neutrality 
between the two settings of care through more comparable payment. Other 
commenters supported the continued use of the hospital market basket to 
update ASC payment rates, but believed that the migration of services 
to ASCs would be limited due to the ASC budget neutrality adjustments. 
Specifically, commenters stated that CMS' current approach to 
maintaining budget neutrality in the ASC payment system caused 
increasingly large differences in the amount of payment for similar 
services provided in the ASC and HOPD settings, and there was no 
evidence of corresponding changes in capital and operating costs 
between the ASC and HOPD settings to support this growing payment 
differential. Commenters suggested that widening the gap in payment 
amounts for similar services provided in the ASC and hospital 
outpatient department settings could make it economically infeasible 
for ASCs to perform certain procedures for Medicare beneficiaries, 
causing financial hardships for ASCs, discouraging them from furnishing 
those procedures, and thereby discouraging the migration of services 
from the HOPD to the ASC setting.
    Response: We appreciate the commenters' support. We believe using 
the same update factor to calculate payments to ASC and hospital 
outpatient departments encourages the migration of services from the 
hospital setting to the ASC setting, and could potentially increase the 
presence of ASCs in health care markets or geographic areas where 
previously there were none or few. The migration of services from the 
higher cost hospital outpatient setting to the ASC setting is likely to 
result in savings to beneficiaries and the Medicare program. This 
policy will also further our goal of giving both physicians and 
beneficiaries a greater choice in selecting the care setting that best 
suits their needs.
    Comment: Several commenters provided input on collecting cost data 
from ASCs. They suggested that if CMS chooses to collect cost data from 
ASCs, for instance to develop a market basket, the agency should 
consider establishing a market basket that can be applied to both the 
ASC and hospital outpatient setting. They believed this would ensure 
that payments using the same relative weights and update factor would 
remain aligned over time, noting that HOPDs and ASCs incur similar 
types of costs.
    These commenters offered to work with CMS in developing a survey or 
other low burden data collection activity. They suggested an initial 
effort to identify and calculate expense categories as a percentage of 
total expenses to help determine the appropriate weights and price 
proxies for the ASC setting. These commenters also urged CMS to 
recognize the variability among ASCs and recognize that cost experience 
can differ depending on factors such as specialties served, facility 
size, and geographic location. Commenters also requested that CMS keep 
in mind the administrative burdens placed on ASC staff in meeting 
current regulatory requirements and that requiring any formal cost 
reports from ASCs may run counter to the agency's desire to establish 
policies that allow ASCs to deliver services to Medicare beneficiaries 
efficiently.
    Response: We thank the commenters for their input and we will take 
these suggestions into consideration in future policy development. As 
discussed in the CY 2019 OPPS/ASC final rule with comment period, we 
will continue to assess the feasibility of collaborating with 
stakeholders to collect ASC cost data in a minimally burdensome manner 
and potentially propose a plan to collect such information during the 
5-year period in which CMS has updated the ASC payment methodology to 
rely upon the hospital market basket as the update factor (83 FR 
59077). We will continue to assess the feasibility of collaborating 
with stakeholders to collect ASC cost data in a minimally burdensome 
manner for future policy development.
    After consideration of the public comments we received, consistent 
with our proposal that if more recent data are subsequently available 
(for example, a more recent estimate of the hospital market basket 
update and MFP), we would use such data, if appropriate, to determine 
the CY 2021 ASC update for the CY 2021 OPPS/ASC final rule with comment 
period, we are incorporating more recent data to determine the final CY 
2021 ASC update.
    For this CY 2021 OPPS/ASC final rule with comment period, the 10-
year moving average growth of the MFP for FY 2021 is projected to be -
0.1 percentage point, based on IGI's June 2020 macroeconomic forecast, 
as published in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58797). 
However, under section 1833(i)(2)(D)(v) of the Act, the Secretary is 
required to reduce (not increase) the annual update factor by changes 
in economy-wide productivity. Accordingly, we are applying a final MFP 
adjustment of 0.0 percentage point for CY 2021.
    Therefore, for this CY 2021 OPPS/ASC final rule with comment 
period, the hospital market basket update for CY 2021 is 2.4 percent, 
as published in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58796-7), 
based on IGI's 2020 second quarter forecast with historical data 
through the first quarter of 2020. The MFP adjustment for this CY 2020 
OPPS/ASC final rule with comment period is 0.0 percentage point, as 
published in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58797).
    For CY 2021, we are finalizing the hospital market basket update of 
2.4 percent minus the MFP adjustment of 0.0 percentage point, resulting 
in an MFP-adjusted hospital market basket update factor of 2.4 percent 
for ASCs meeting the quality reporting requirements. Therefore, we 
apply a 2.4 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 rates. We 
are finalizing the hospital market basket update of 2.4 percent reduced 
by 2.0 percentage points for ASCs that do not meet the quality 
reporting requirements and then subtract the 0.0 percentage point MFP 
adjustment. Therefore, we apply a 0.4 percent MFP-adjusted hospital 
market basket update factor to the CY 2020 ASC conversion factor for 
ASCs not meeting the quality reporting requirements.
    For CY 2021, we are adjusting the CY 2020 ASC conversion factor 
($47.747) by a wage index budget neutrality factor of 1.0012 in 
addition to the MFP-adjusted hospital market basket update of 2.4 
percent, discussed above, which results in a final CY 2021 ASC 
conversion factor of $48.952 for ASCs meeting the quality reporting 
requirements. For ASCs not meeting the quality reporting requirements, 
we are adjusting the CY 2020 ASC conversion factor ($47.747) by the 
wage index budget neutrality factor of 1.0012 in addition to the 
quality reporting/MFP-adjusted hospital market basket update of 0.4 
percent discussed above, which results in a final CY 2021 ASC 
conversion factor of $47.996.

[[Page 86179]]

3. Display of Final CY 2021 ASC Payment Rates
    Addenda AA and BB to this CY 2021 OPPS/ASC final rule (which are 
available on the CMS website) display the final 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 final 
rates, the final payment indicators and rates set forth in this CY 2021 
OPPS/ASC final 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 final payment rates included in addenda AA and BB to this CY 
2021 OPPS/ASC final 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 final 
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 proposed 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 ``Final CY 2021 Payment 
Weight'' are the final relative payment weights for each of the listed 
services for CY 2021. The final 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 final CY 2021 payment rate displayed in the ``Final 
CY 2021 Payment Rate'' column, each ASC payment weight in the ``Final 
CY 2021 Payment Weight'' column was multiplied by final CY 2021 
conversion factor of $48.952. 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 
final CY 2021 ASC conversion factor uses the CY 2021 MFP-adjusted 
hospital market basket update factor of 2.4 percent (which is equal to 
the projected hospital market basket update of 2.4 percent minus a 
projected MFP adjustment of 0.0 percentage point).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Final CY 2021 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Final CY 2021 Payment'' column displays 
the final CY 2021 national unadjusted ASC payment rates for all items 
and services. The final 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 Sec.  419.46.
4. Codify Statutory Authority for Hospital OQR Program
    The Hospital OQR Program regulations are codified at Sec.  419.46. 
In the CY 2021 OPPS/ASC proposed rule (85 FR 48984), we proposed 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

[[Page 86180]]

under section 1886(d)(1)(B) of the Act) that do not submit data 
required for 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 Outpatient Department (OPD) fee schedule 
increase factor. We proposed to redesignate the existing paragraphs (a) 
through (h) as paragraphs (b) through (i) and codify the Hospital OQR 
Program's statutory authority at new Sec.  419.46(a). Because of the 
proposed redesignations, the cross-references throughout Sec.  419.46 
were also proposed to be updated. Table 61 shows the correlation 
between the proposed cross-references.
[GRAPHIC] [TIFF OMITTED] TR29DE20.120

    We requested public comment on this proposal.
    We refer readers to section XIV.E. of the CY 2021 OPPS/ASC 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 (85 FR 48772).
    The following is a summary of the comment we received and our 
response that comment.
    Comment: A commenter supported our proposal to codify the statutory 
authority for the Hospital OQR Program.
    Response: We thank the commenter for their support.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.

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 did not propose any changes to these policies.
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 Sec.  
419.46(h)(1) in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 59082). We did not propose any changes to these policies.
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.\104\ We codified 
this policy at Sec.  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 did not propose any changes to these policies.
---------------------------------------------------------------------------

    \104\ 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 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.\105\ We 
codified this policy at Sec.  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 Sec.  419.46(h)(3) an updated set 
of factors \106\ 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 did not propose any changes to 
these policies.
---------------------------------------------------------------------------

    \105\ 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.
    \106\ 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 
adopted Hospital OQR Program measure set for the CY 2022 payment 
determination and subsequent years.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48985), we did not 
propose any changes to the previously adopted measure set. Table 62 
summarizes the previously finalized Hospital OQR Program measure set 
for the CY 2023

[[Page 86181]]

payment determination and subsequent years.
[GRAPHIC] [TIFF OMITTED] TR29DE20.121

    The following is a summary of the comments we received and our 
response those comments.
    Comment: A few commenters supported retaining the current Hospital 
OQR Program measure set.
    Response: We thank commenters for their support.
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 subsequent years, such that we will release a manual once 
every 12 months and release addenda as necessary. We did not propose 
any changes to these policies.
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 CMS Certification Number 
(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 the CY 
2021 OPPS/ASC proposed rule (85 FR 48987, we proposed to codify this 
policy by adding language at the

[[Page 86182]]

redesignated paragraph (d)(1). 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 solicited public 
comment on our proposal. The following is a summary of the comment we 
received and our response that comment.
    Comment: One commenter expressed concern with the proposal to 
codify this previously finalized policy to combine Hospital OQR Program 
data for multiple hospitals under the same CCN. The commenter believes 
that CMS should publicly report data for individual facilities (that 
is, campuses and locations), not by CCN.
    Response: We disagree with the commenter; we believe data should be 
reported by CCN, because it is difficult to identify cases by 
facilities since billing is done under CCNs. Under our current policy, 
we publish quality data by the corresponding hospital CCN and indicate 
instances where data from two or more hospitals are combined to form 
the publicly reported measures on the Hospital Compare website and the 
successor Care Compare website. In the CY 2014 OPPS/ASC proposed rule 
(78 FR 43645), we noted that in a situation in which a larger hospital 
has taken over ownership of a smaller hospital, the smaller hospital's 
CCN is replaced by the larger hospital's CCN (the principal CCN). For 
data display purposes, we only display data received under the 
principal CCN. If both hospitals submit data, those data are not 
distinguishable in the warehouse \107\ and are calculated together as 
one hospital.
---------------------------------------------------------------------------

    \107\ 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-andSystems/Computer-Data-and-Systems/IDR/index.html.
---------------------------------------------------------------------------

    After consideration of the public comments received, we are 
finalizing our proposal as proposed.
b. Overall Hospital Quality Star Rating
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48987), we proposed 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. ``Overall Hospital 
Quality Star Rating Methodology for Public Release in CY 2021 and 
Subsequent Years'' of the CY 2021 OPPS/ASC final rule with comment 
period 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 Sec.  419.46(a) in that final rule with 
comment period.
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48772), we proposed 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 proposed to revise 
existing Sec.  419.46(a)(2) and redesignate Sec.  419.46(b)(2), by 
replacing the term ``security administrator'' with the term ``security 
official.'' The 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 invited public comment on our proposal. However, we did not 
receive any comments on this proposal. We are finalizing our proposal 
as proposed.
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 Sec.  
419.46(a) and (b).
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48772), we proposed to 
revise existing Sec.  419.46(b), redesignated Sec.  419.46(c), by 
removing the phrase ``submit a new participation form'' to align with 
previously finalized policy. In the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59103through 83 FR 59104), we removed submission 
of Notice of Participation (NoP) form as a program requirement. We also 
proposed to update internal cross-references as a result of the 
redesignations discussed under section XIV.A.4. of the CY 2021 OPPS/ASC 
proposed rule. The proposed 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 included updated cross-referenced provisions in the 
redesignated Sec.  419.46(c).
    We solicited public comment on our proposal. However, we did not 
receive any comments on this proposal. We are finalizing our proposal 
as proposed.

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 
Sec.  419.46(c). The submission deadlines for the CY 2023 payment 
determination and subsequent years are illustrated in Table 63.

[[Page 86183]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.122

    In the CY 2021 OPPS/ASC proposed rule (85 FR 48772), we proposed a 
change to our submission deadlines to align with statute. We proposed 
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. We proposed that all deadlines 
occurring on a Saturday, Sunday, 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, 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 proposed to revise our policy regarding submission deadlines at 
existing Sec.  419.46(c)(2), redesignated Sec.  419.46(d)(2). 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 invited public 
comment on our proposal. The following is a summary of the comments we 
received and our responses to those comments.
    Comment: A few commenters supported our proposal to codify in order 
to make it consistent with section 216(j) of the Act. One commenter 
also stated that it would reduce the need for employees to work on 
holidays or weekends in order to submit Hospital OQR Program measures.
    Response: We thank the commenters for their support. We agree with 
commenters that this policy change would lessen the need for employees 
to work on holidays or weekends.
    After consideration of public comments, we are finalizing our 
proposal as proposed.
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 
did not propose any changes to these policies.
    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 did not propose any changes to these 
policies.
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 did not propose any changes to the previously 
finalized requirements related to survey administration and vendors for 
the OAS CAHPS Survey-based measures.

[[Page 86184]]

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 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 did not propose any changes to these policies.
    The following previously adopted 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 did not propose any changes to 
these policies.
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.
b. Web-Based Measures
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48772), we proposed 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 solicited public comment on our 
proposal. The following is a summary of the comments we received and 
our responses to those comments.
    Comment: A few commenters supported our proposal to expand the 
review and corrections policy for chart-abstracted measures to apply to 
measure data submitted via the CMS web-based tool. The commenters 
stated that it is appropriate for hospitals to have an opportunity to 
review and correct data submitted on any existing and future measures 
using a web-based tool.
    Response: We thank the commenters for their support. As the 
diversity of measure types continues to increase, we agree that 
hospitals should have an opportunity to enter, review and correct data 
submitted to our web-based tool. This begins with data submitted during 
CY 2022 for the CY 2023 payment determination.
    After consideration of public comments, we are finalizing our 
proposal as proposed.
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 the CY 2021 OPPS/ASC proposed rule (85 FR 
48772), we proposed to codify 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 proposed to add a new paragraph (c)(4) to Sec.  
419.46, redesignated Sec.  419.46(d). The new paragraph (d)(4) would 
provide that 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 solicited public 
comment on our proposal. The following is a summary of the comment we 
received and our response to that comment.
    Comment: One commenter supported our proposed updates to codify the 
review and corrections period policy for chart-abstracted measure data 
submitted to the Hospital OQR Program, as well as the proposed policy 
for measure data submitted directly to CMS via the CMS web-based tool.
    Response: We thank the commenter for their support.
    After consideration of public comments, we are finalizing our 
proposal as proposed.
7. 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 Sec.  419.46(e) for our policies regarding validation. In the CY 
2021 OPPS/ASC proposed rule (85 FR 48772), while we did not propose 
changes to our validation policies, we proposed to codify certain 
previously finalized policies. These policies are discussed in detail 
in section XIV.D.8.b of the proposed rule.

[[Page 86185]]

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 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 
did not propose any changes to this finalized policy.
(2) 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 Sec.  419.46. In the CY 2021 OPPS/ASC proposed rule (85 FR 48772), 
we proposed to codify those policies by adding a new paragraph (e)(4) 
to Sec.  419.46, redesignated Sec.  419.46(f). 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 invited public comment on this proposal. We did not receive any 
comments on this proposal. We are finalizing our proposal as proposed.
8. Extraordinary Circumstances Exception (ECE) Process for the CY 2021 
Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75119 through 75120), the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66966), the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70524), the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79795), the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59444), and 42 CFR 419.46(d) for a complete 
discussion of our extraordinary circumstances exception (ECE) process 
under the Hospital OQR Program. We did not propose any changes to these 
policies.
9. Hospital OQR Program Reconsideration and Appeals Procedures for the 
CY 2021 Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487 through 68489), the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75118 through 75119), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70524), the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79795), and Sec.  419.46(f) for 
our reconsideration and appeals procedures.
    In alignment with our proposal to change submission deadlines, in 
section XIV.D.1. of the CY 2021 OPPS/ASC proposed rule (85 FR 48772), 
we proposed a change to our reconsideration deadlines. We proposed 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, 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, 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 proposed to 
remove ``the first business day on or after'' from existing Sec.  
419.46(f)(1), redesignated Sec.  419.46(g)(1), to ensure consistency 
with section 216(j) of the Act. The redesignated paragraph (g)(1) would 
provide that 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), 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 invited public comment on our proposal. However, we did not 
receive any comments on this proposal. We are finalizing our proposal 
as proposed.

E. 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

[[Page 86186]]

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 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 CY 2021 OPPS/ASC 
proposed rule.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2021
    We proposed to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2021 annual payment update factor. 
For the CY 2021 OPPS/ASC proposed rule, the proposed reporting ratio 
was 0.9805, which when multiplied by the proposed full conversion 
factor of $83.697 equaled 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 proposed to continue 
to apply the reporting ratio to all services calculated using the OPPS 
conversion factor. For the CY 2021 OPPS/ASC proposed rule, we proposed 
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

[[Page 86187]]

indicator assignment of ``S'' and ``T''). We proposed to continue to 
exclude services paid under New Technology APCs. We proposed to 
continue to apply the reporting ratio to the national unadjusted 
payment rates and the minimum unadjusted and national unadjusted 
copayment rates of all applicable services for those hospitals that 
fail to meet the Hospital OQR Program reporting requirements. We also 
proposed to continue to apply all other applicable standard adjustments 
to the OPPS national unadjusted payment rates for hospitals that fail 
to meet the requirements of the Hospital OQR Program. Similarly, we 
proposed to continue to calculate OPPS outlier eligibility and outlier 
payment based on the reduced payment rates for those hospitals that 
fail to meet the reporting requirements. In addition to our proposal to 
implement the policy through the use of a reporting ratio, we also 
proposed 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 the CY 2021 OPPS/ASC final rule with comment period, the final 
reporting ratio is 0.9805, which when multiplied by the final full 
conversion factor of 82.797 equals a final conversion factor for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program (that is, the reduced conversion factor) of 81.183. We are 
finalizing our proposal to continue to calculate OPPS outlier 
eligibility and outlier payment based on the reduced payment rates for 
those hospitals that fail to meet the reporting requirements. We are 
also finalizing our proposals to implement the policy through the use 
of a reporting ratio, and 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 hospitals that fail to meet the Hospital OQR Program requirements 
for CY 2021 payment.

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 with 
comment period (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 for 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 the 
CY 2021 OPPS/ASC proposed rule (85 FR 48993), we proposed to update 
certain currently codified program policies and propose a review and 
corrections period as well as other administrative changes. We discuss 
these proposals and applicable public comments 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 did not propose any changes to these policies.
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 did not 
propose any changes to this policy.
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 \108\ 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 did not propose 
any changes to this policy.
---------------------------------------------------------------------------

    \108\ We note that we previously referred to these factors as 
``criteria'' (for example, 79 FR 66967 through 66969); we now use 
the term ``factors'' to align the ASCQR Program terminology with the 
terminology used 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
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48992), we did not 
propose to remove any existing measures or to adopt any new measures 
for the CY 2023 payment determination. Table 64 summarizes the 
previously finalized ASCQR Program measure set for the CY 2024 payment 
determination and subsequent years.

[[Page 86188]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.123

    The following is a summary of the comment we received and our 
response that comment.
    Comment: A few commenters supported retaining the current measure 
set.
    Response: We thank commenters for their support; we agree that at 
this time no changes to the ASCQR Program measure set are necessary.
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 did not propose 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 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 did not propose 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 regarding 
care and quality improvement in the ASC setting. We also seek measures 
that would facilitate meaningful comparisons between ASCs and hospitals 
providing comparable services. Therefore, we invited 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.
    The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Several commenters provided recommendations regarding both 
new quality measures for CMS to consider as well as measures to 
facilitate the comparison of care provided in ASCs and hospitals. One 
commenter requested that we require measures for surgical procedures 
that occur in both the ASC and outpatient hospital settings be 
reflected in the measure sets of both programs. For example, currently 
the Hospital OQR Program contains measures of surgical procedures that

[[Page 86189]]

also occur in ASCs, but there is no comparable measure in the ASCQR 
Program. The commenter recommended that such measures be specified so 
that for in common surgical procedures analysis for both settings was 
possible.
    Response: We thank the commenters for their recommendations 
regarding measures to facilitate the comparison of care provided in 
ASCs and hospitals and the request for measures of surgical procedures 
that occur in both settings to be reflected in the measure sets of both 
programs. We understand the commenters concern that such measures be 
specified to allow for an analysis of both settings for common surgical 
procedures. We agree that there are surgical procedures that occur in 
both ASC and outpatient hospital settings that may not be currently 
reflected in both programs' measure sets. We will evaluate the 
feasibility of the commenters' recommendations and take them into 
consideration as we determine future updates to the ASCQR Program 
measure set.
    Comment: A few commenters recommended we adopt measures related to 
patient and caregiver engagement, experience, and safety. Commenters 
suggested these measures to ensure providers deliver equitable, 
patient-centered care and provide patients and their caregivers a 
standardized way to compare providers and organizations. A few 
commenters also suggested CMS broaden the focus on safety to include 
workforce safety measures as a way to examine workforce burnout and 
turnover. One of these commenters requested that CMS employ an annual 
web-based workforce engagement survey to allow quality performance to 
be factored into payment and performance-based incentives.
    Response: We thank the commenters for their recommendations 
regarding the adoption of measures related to patient and caregiver 
engagement, experience, and workforce safety. We refer readers to the 
CY 2017 OPPS/ASC final rule with comment period where we adopted ASC-
15a-e (81 FR 79803 through 79817), and finalized data collection and 
data submission timelines (81 FR 79822 through 79824). These measures 
assess patients' experience with care following a procedure or surgery 
in an ASC by rating patient experience as a means for empowering 
patients and improving the quality of their care. In the CY 2018 OPPS/
ASC final rule with comment period (82 FR 59450 through 59451), we 
finalized a delay in the implementation of the Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-based Measures (ASC-15a-e) beginning with 
the CY 2020 payment determination (CY 2018 data collection) until 
further action in future rulemaking. We will investigate the 
feasibility of the commenters' recommendation to focus on workforce 
safety measures for consideration toward future updates to the ASCQR 
Program measure set.
    Comment: Several commenters had specific suggestions of measures 
for future consideration. These measures include: Normothermia (ASC-
13), Unplanned Anterior Vitrectomy (ASC-14), Toxic Anterior Segment 
Syndrome (TASS) (ASC-16), Hospital-level Risk-standardized Complication 
Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) 
and/or Total Knee Arthroplasty (TKA) (NQF #1550), and Ambulatory Breast 
Procedure Surgical Site Infection (SSI) Outcome (NQF #3025).
    Response: We note that in the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79801 through 79803), the Normothermia (ASC-13) 
and Unplanned Anterior Vitrectomy (ASC-14) were adopted into the ASCQR 
Program for the CY 2020 payment determination and subsequent years; we 
thank the commenter for their support of these measures. While we 
proposed the adoption of Toxic Anterior Segment Syndrome (TASS) (ASC-
16) for the ASCQR Program (82 FR 52594), we did not finalize the 
adoption of this measure due to concerns that the burden of the measure 
would outweigh the benefits. We will consider the suggested measures 
not currently included in the ASCQR Program as well as reconsider the 
Toxic Anterior Segment Syndrome (TASS) (ASC-16) measure as we develop 
and refine the ASCQR Program measure set.

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 the CY 2021 OPPS/ASC proposed rule with comment period (85 FR 
48993), we proposed 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 proposed 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 invited public comment 
on our proposals.
    The following is a summary of the comment we received and our 
response that comment.
    Comment: One commenter expressed concern with the terminology 
change of ``security administrator'' to ``security official,'' despite 
no changes in responsibility of the individual(s). The commenter 
suggested that the current term is sufficient and any changes to the 
title may cause undue confusion.
    Response: We thank the commenter for their input and acknowledge 
the commenter's concern about potential confusion. However, we believe 
the term ``security official'' more clearly conveys the exercise of 
authority invested in the role and want to ensure adequate recognition. 
While an administrator is a person who performs official duties in a 
sphere, an official is a person having official duties, specifically as 
a representative of an organization. Thus, the term ``security 
official'' more aptly describes this role as a representative one.
    After consideration of the comment received, we are finalizing our 
proposal as proposed.
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 did not propose any changes to these policies.

[[Page 86190]]

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 proposed 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 invited comment on our proposal.
    The following is a summary of the comment we received and our 
response that comment.
    Comment: One commenter supported the proposal 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''. The commenter agreed that using one consistent phrase will 
help avoid potential confusion.
    Response: We thank the commenter for their support. We agree that 
the change will reduce confusion and believe that using one consistent 
phrase will streamline the language across policies.
    After consideration of the public comment received, we are 
finalizing our proposals as proposed.
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 did not propose any changes to these requirements. We note that 
data submission for the following claims-based measures using QDCs was 
suspended as finalized 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 noted 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 did not propose 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 
adopted 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 did not propose any changes to the requirements for non-QDC 
based, claims-based measures.
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 did not propose 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 
(specifically, 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).

[[Page 86191]]

    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 did not propose 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 did not propose 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 proposed 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 under which the 
ASCQR Program is administered. As such, in the CY 2021 OPPS/ASC 
proposed rule (85 FR 48994), we proposed to add this policy for the 
submission deadlines associated with the ASCQR Program beginning with 
the effective date of this rule. We also proposed to codify this policy 
by adding a new paragraph (f) at Sec.  416.310, which would provide 
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 
invited public comment on our proposals.
    The following is a summary of the comments we received and our 
responses to those comments.
    Comment: A few commenters supported the proposal to move forward 
all program deadlines falling on a nonwork day consistent with section 
216(j) of the Act, 42 U.S.C. 416(j), ``Periods of Limitation Ending on 
Nonwork Days.'' The commenters also supported the proposal to codify 
this policy by adding a new paragraph (f) at Sec.  416.310.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that CMS continue to publish the 
revised deadline when the routinely established deadline falls on a 
nonwork day.
    Response: We thank the commenter for this input. We will continue 
to publish revised reporting deadlines, which can be monitored and 
verified via the QualityNet website (https://www.qualitynet.org).
    After consideration of the public comments received, we are 
finalizing our proposal as proposed.
2. 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).\109\ 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.
---------------------------------------------------------------------------

    \109\ ASCQR Program Data Submission Deadlines. Available at: 
https://www.qualitynet.org/asc/data-submission#tab2.
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    In the CY 2021 OPPS/ASC proposed rule with comment period (85 FR 
48994), we proposed to formalize that process and establish a review 
and corrections period similar to that being proposed for the Hospital 
OQR Program in section XIV.D.7 of the CY 2021 OPPS/ASC proposed rule. 
For the ASCQR Program, we proposed 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 proposed to codify this review and corrections period at new 
paragraph (c)(1)(iii) in Sec.  416.310, which would provide that 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 invited public comment on our proposals, including on the burden and 
benefits of such a review and corrections period. The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: A few commenters supported our proposal to create and 
codify a review and corrections period for data submitted through a CMS 
online data submission tool. One commenter stated that this policy 
would give ASCs an opportunity to review their data and correct errors 
prior to a submission deadline.
    Response: We thank the commenters for their support of this 
proposed policy change. We agree that it will provide ASCs time to 
review their data and identify errors prior to submission deadlines. We 
continue to encourage providers to submit data as early as possible, 
leaving adequate time to make any necessary corrections.
    Comment: One commenter suggested that we extend the timeline for 
the review period. Specifically, the commenter recommended that we give 
ASCs one additional month following the data submission deadline to 
review and correct their data. The commenter

[[Page 86192]]

emphasized that recent natural disasters have caused practices to 
prioritize patient care and facility operations over data submission, 
such that data may not be submitted until late in the submission 
period. The commenter further explained that allowing a one-month 
review period after the submission deadline would help to mitigate the 
impact of natural disasters and facilitate the improved integrity of 
ASCQR Program data.
    Response: We thank the commenter for this policy recommendation and 
the insights about the impact of natural disasters on ASCs. As noted 
previously, the current data submission period for measures submitted 
via a CMS online data submission tool is from January 1 through May 15 
during the calendar year subsequent to the current data collection 
period (84 FR 61432). We believe that four and a half months should 
provide ample time to review, correct, and submit data from the prior 
year. However, we note that if an ASC is not able to submit data 
because it has experienced an extraordinary circumstance, such as a 
natural disaster, the ASC may request an exception under the ASCQR 
Program Extraordinary Circumstance Exceptions (ECE) policy. As 
described in section XV.D.4 of this final rule with comment period, 
ASCs must complete and submit the ECE form, along with any required 
information and supporting documentation, within 90 calendar days of 
the date of the extraordinary circumstance.\110\
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    \110\ For more information on the ECE policy, we refer 
stakeholders to the QualityNet website at https://www.qualitynet.org/asc/data-submission#tab2.
---------------------------------------------------------------------------

    After consideration of the comments received, we are finalizing our 
proposal as proposed.
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 did 
not propose 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 did not propose any changes to these 
policies.

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

1. Statutory Background
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68499) for a detailed discussion of the statutory 
background regarding payment reductions for ASCs that fail to meet the 
ASCQR Program requirements.
2. Policy Regarding Reduction to the ASC Payment Rates for ASCs That 
Fail To Meet the ASCQR Program Requirements for a Payment Determination 
Year
    The national unadjusted payment rates for many services paid under 
the ASC payment system are equal to the product of the ASC conversion 
factor and the scaled relative payment weight for the APC to which the 
service is assigned. For CY 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).

[[Page 86193]]

    Office-based surgical procedures (generally those performed more 
than 50 percent of the time in physicians' offices) and separately paid 
radiology services (excluding covered ancillary radiology services 
involving certain nuclear medicine procedures or involving the use of 
contrast agents) are paid at the lesser of the PFS nonfacility PE RVU-
based amounts or the amount calculated under the standard ASC 
ratesetting methodology. Similarly, in the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66933 through 66934), we finalized our 
proposal that payment for certain diagnostic test codes within the 
medical range of CPT codes for which separate payment is allowed under 
the OPPS will be at the lower of the PFS nonfacility PE RVU-based (or 
technical component) amount or the rate calculated according to the 
standard ASC ratesetting methodology when provided integral to covered 
ASC surgical procedures. In the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68500), we finalized our proposal that the 
standard ASC ratesetting methodology for this type of comparison would 
use the ASC conversion factor that has been calculated using the full 
ASC update adjusted for productivity. This is necessary so that the 
resulting ASC payment indicator, based on the comparison, assigned to 
these procedures or services is consistent for each HCPCS code, 
regardless of whether payment is based on the full update conversion 
factor or the reduced update conversion factor.
    For ASCs that receive the reduced ASC payment for failure to meet 
the ASCQR Program requirements, we believe that it is both equitable 
and appropriate that a reduction in the payment for a service should 
result in proportionately reduced coinsurance liability for 
beneficiaries (77 FR 68500). Therefore, in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68500), we finalized our proposal that 
the Medicare beneficiary's national unadjusted coinsurance for a 
service to which a reduced national unadjusted payment rate applies 
will be based on the reduced national unadjusted payment rate.
    In that final rule with comment period, we finalized our proposal 
that all other applicable adjustments to the ASC national unadjusted 
payment rates would apply in those cases when the annual update is 
reduced for ASCs that fail to meet the requirements of the ASCQR 
Program (77 FR 68500). For example, the following standard adjustments 
would apply to the reduced national unadjusted payment rates: The wage 
index adjustment; the multiple procedure adjustment; the interrupted 
procedure adjustment; and the adjustment for devices furnished with 
full or partial credit or without cost (77 FR 68500). We believe that 
these adjustments continue to be equally applicable to payment for ASCs 
that do not meet the ASCQR Program requirements (77 FR 68500).
    In the CY 2015 through CY 2020 OPPS/ASC final rules with comment 
period we did not make any other changes to these policies. We proposed 
the continuation of these policies for CY 2021 in the CY 2021 OPPS/ASC 
proposed rule (85 FR 48995 through 48996), did not receive any public 
comments on these policies, and are finalizing the continuation of 
these policies for CY 2021.

XVI. 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 \111\ and has been refreshed 
six times,112 113 114 115 two of which included minor 
methodology updates,116 117 over the past 3 years. Hospital 
Compare, and any successor site, is a public website hosted by CMS with 
transparent information and data on over 100 quality measures for over 
5,300 hospitals, nationwide in the United States (U.S.), for consumers 
and researchers. In this rule, for the Overall Star Rating, 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.
---------------------------------------------------------------------------

    \111\ 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.
    \112\ Centers for Medicare & Medicaid Services. (2016, May). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2016 
Updates and Specifications Report.
    \113\ Centers for Medicare & Medicaid Services. (2016, October). 
Overall Hospital Quality Star Rating on Hospital Compare: December 
2016 Updates and Specifications Report.
    \114\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2017 
Updates and Specifications Report.
    \115\ 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.
    \116\ 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.
    \117\ 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.\118\ 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.\119\
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    \118\ 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.
    \119\ Ibid.
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    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed 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 of the proposed rule) that 
aim to increase simplicity of the methodology, predictability of 
measure emphasis within the methodology over time, and comparability of 
ratings among hospitals. We also proposed to include Veterans Health 
Administration (VHA) hospitals (we refer readers to section C. Veterans 
Health Administration Hospitals in Overall Star Rating) and proposed to 
include Critical Access Hospitals (CAHs) (we refer readers to section 
B. Critical Access Hospitals in the Overall Star Rating) in

[[Page 86194]]

the Overall Star Rating. In addition, we proposed 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 publication, we used the 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 
the finalized policies for the Overall Star Rating from this CY 2021 
OPPS/ASC final rule in the coming FY 2022 IPPS/LTCH 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 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.\120\ 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.\121\ 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.\122\ 
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.
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    \120\ 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.
    \121\ 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.
    \122\ 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.
---------------------------------------------------------------------------

    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 proposed 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 websites and 
CMS programs; provide transparency of the methods for calculating the 
Overall Star Rating; be responsive to stakeholder input; and (3) to 
codify this at Sec.  412.190(a).
    We invited public comment on our proposals as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: One commenter supported the purpose of the Overall Star 
Rating and appreciated that the tool consolidates and streamlines the 
various hospital quality measures into a single metric.
    Response: We thank the commenter for their support and agree that 
the Overall Star Rating effectively combines multiple dimensions of 
hospital quality into an overall rating. Review of the literature and 
engagement with patients and patient advocates confirmed that patients 
care about hospital quality information but find it difficult to 
understand. Therefore, the Overall Star Rating is meant to provide a 
summary of hospital quality information based on publicly available 
quality measure results in a way that is simple and easy for patients 
to understand.
    Comment: Many commenters opposed the purpose of the Overall Star 
Rating, noting that a single composite rating oversimplifies the 
various complex factors that must be considered when assessing hospital 
quality of care. Commenters further stated that an overall composite 
rating obscures details about care and does not allow for an accurate 
comparison of hospitals.
    Several commenters questioned the usefulness of the Overall Star 
Rating for patients as a tool to make informed decisions about where to 
seek care. Specifically, some commenters noted the Overall Star Rating 
cannot be used by patients to compare hospitals based on their specific 
condition or treatment needs and alternatively suggested reported star 
ratings or information based on service lines. One commenter 
recommended that CMS focus on measures specific to clinical conditions 
or treatments and patient clinical or demographic characteristics, 
which may be more helpful to patients than an overall rating.
    Response: As stated in section A.1.a. Purpose of this final rule, 
review of the literature and consumer engagement supported the notion 
that patients care about information on hospital quality, but that 
quality measurement, often in the form of multiple measure scores as 
rates and ratios, is intimidating and difficult to understand. The 
primary purpose of the Overall Star Rating is to provide a summary of 
certain existing hospital quality information in a way that is 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. The Overall Star Ratings 
methodology is designed to summarize the underlying measures in a 
manner that maintains the validity of the underlying measures that have 
undergone rigorous development and reevaluation processes, including 
testing, stakeholder vetting, National Quality Forum (NQF) evaluation, 
and rulemaking. Furthermore, the Overall Star Rating is meant to 
complement, not replace, the existing individual

[[Page 86195]]

measures reported on Hospital Compare or its successor website and 
accommodate stakeholder needs to either or concurrently view an overall 
rating and individual measures, which may be more pertinent to a 
specific condition or hospital service of interest. We also provide 
performance summaries for the Overall Star Rating measure groups for 
patients and stakeholders wishing more granular information on hospital 
Overall Star Rating performance.
    We appreciate commenter suggestions for the development of star 
ratings by service lines, rather than overall. CMS and its development 
contractor had previously investigated the feasibility of star ratings 
for different measure groupings including by condition, procedure, or 
service line. CMS' development contractor brought the concept, options, 
and findings to the Technical Expert Panel (TEP), Patient & Patient 
Advocate Work Group, and a public comment period.\123\ While 
stakeholders, including providers and patients, were interested in the 
concept of creating star ratings for individual clinical domains, we 
ultimately found insufficient existing measures to group measures or 
calculate star ratings by conditions, procedures, or service lines. 
However, we will continue to explore the possibility of calculating 
star ratings based on clinical domains as the available measures within 
CMS hospital quality programs evolve.
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    \123\ 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.
---------------------------------------------------------------------------

    Comment: Commenters also suggested continued stakeholder engagement 
to gain a better understanding of how to make the Overall Star Rating 
useful to patients, with some commenters recommending user-customized 
star ratings for which patients can set measure or measure group 
weights based on their own values and needs.
    Response: We appreciate commenter suggestions for user-customized 
star ratings, which we also evaluated and brought in front of 
stakeholders during work group meetings, as well as a public comment 
period.\124\ Ultimately, a majority of stakeholders did not support the 
concept of user-customized star ratings. Prior comments suggested that 
user-customized star ratings would be too confusing for patients, 
difficult for hospitals to explain, require elaborate testing, and not 
allow hospitals to use the Overall Star Rating for quality improvement.
---------------------------------------------------------------------------

    \124\ 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.
---------------------------------------------------------------------------

    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
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.\125\
---------------------------------------------------------------------------

    \125\ 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 of the Department of Health and Human 
Services (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 Program measure for a specified performance 
period that applies to the program year. Under our proposed Overall 
Star Rating methodology, which we describe in detail below, we would 
use these Hospital VBP Program measure rates, in combination with 
measure rates reported by various hospitals under the Hospital IQR

[[Page 86196]]

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.
    The Overall Star Rating 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 Quality 
Reporting (ASCQR) Program.
    Beginning with publication of Overall Star Rating in CY 2021 and 
subsequent years, we proposed 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 Rating, and (2) codify this at Sec.  
412.190(b)(2).
    We invited public comment on our proposals. However, we did not 
receive any comment. We are finalizing our proposals as proposed.

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 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 
of this final rule.
    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. Inclusion of Critical Access Hospitals in the Overall Star Rating
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
the Overall Star Rating beginning in CY 2021 and subsequent years, we 
proposed 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).\126\ 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 publication. 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 websites 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 of this final 
rule.
---------------------------------------------------------------------------

    \126\ 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.\127\ 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.\128\ 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.
---------------------------------------------------------------------------

    \127\ U.S. Congress. (1934) United States Code: Social Security 
Act, 42 U.S.C. 1851.
    \128\ 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 proposed 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 proposed to codify this at Sec.  
412.190(b)(3). 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 this final 
rule.
    Of note, the proposal to peer group hospitals by the number of 
measure groups, as outlined in section E.7. Approach to Peer Grouping 
Hospitals of this final rule, was 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

[[Page 86197]]

of hospitals to make peer group comparisons.
    We invited public comment on our proposals to: (1) Include CAHs in 
the Overall Star Rating that wish to be voluntarily included in the 
Overall Star Rating and have elected to both (a) voluntarily submit 
quality measures included in and specified under CMS hospital programs 
and (b) publicly report their quality measure data on Hospital Compare 
or its successor site; and (2) to codify these at Sec.  412.190(b)(3). 
We note that for the purposes of the rest of this discussion, we will 
refer to both subsection (d) hospitals and CAHs as ``hospitals.'' The 
following is a summary of the comments we received and our responses to 
those comments.
    Comment: Many commenters expressed general support for the 
inclusion of CAHs in the Overall Star Rating. Commenters noted that 
inclusion of CAHs will improve transparency and increase usability for 
consumers while also incentivizing CAHs to participate in measure 
reporting.
    Response: We thank commenters for their support and agree that 
continuing to include CAHs within the Overall Star Rating improves the 
transparency and usability of the Overall Star Rating for patients. 
Most CAHs do participate in measure reporting but have too few cases to 
meet the minimum case counts to receive publicly reported scores for 
some narrowly focused quality measures, such as condition- and 
procedure-specific measures, and therefore do not meet the reporting 
thresholds to receive a star rating (section E.6.b. Minimum Reporting 
Thresholds for Receiving a Star Rating of this final rule).
    Comment: Some commenters particularly supported the inclusion of 
CAHs if it resulted in peer grouping and comparison of CAHs separately 
from other hospitals. However, several commenters expressed concerns 
about the inclusion of the CAHs in the Overall Star Rating, 
recommending that CMS refrain from comparing CAHs to other acute care 
hospitals. Some commenters requested separate measurement or ratings 
for CAHs, noting that any other risk adjustment would not appropriately 
capture differences in demographics and healthcare resources for CAHs 
and other acute care hospitals. Some commenters recommended improved 
consumer interpretability of the Overall Star Rating for CAHs versus 
other types of hospitals. Specifically, commenters suggested that CMS 
provide clear details on the services available for each hospital and 
the number of hospitals assigned to each star rating based on these 
services.
    Response: Feedback from stakeholders, including the Patient & 
Patient Advocate Work Group, stated that critical access status is not 
a meaningful approach to grouping hospitals to patients and it is 
important to be able to compare star ratings across hospital types. As 
discussed under section E.7.b. Peer Grouping of this final rule, we are 
finalizing our proposal to peer group hospitals by the number of 
measure groups in which at least 3 measures are reported. We had 
considered CAH status as a peer grouping variable, but found 
appreciable differences in summary score cutoffs for each star rating 
category between CAHs and non-CAHs, which would make differences in 
star rating assignments difficult for stakeholders, including 
providers, to understand and explain. Furthermore, feedback from the 
Patient & Patient Advocate Work Group consistently indicated that peer 
grouping by CAH status would be misleading and unhelpful to patients, 
particularly for patients with limited hospital options in their 
community. We also heard from stakeholders that it is important for 
patients to be able to compare star ratings across hospital types. We 
note that Hospital Compare or its successor websites does provide 
general information on the hospital type and services provided at each 
hospital alongside the Overall Star Rating, including for example, 
emergency care services. Historically, we have publicly posted the 
Overall Star Rating input file and SAS pack at the time of the Overall 
Star Rating publication so that stakeholders may review and replicate 
the methodology and thus, coupled with hospital characteristic data, 
have the ability to review the types of hospitals assigned to each star 
rating.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.

C. Veterans Health Administration Hospitals in the Overall Star Rating

    In the CY 2021 OPPS/ASC proposed rule, we proposed 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 
\129\ in accordance with section 206(c) of the Veterans Access, Choice, 
and Accountability Act (Choice Act) of 2014 (Pub. L. 113-146).\130\
---------------------------------------------------------------------------

    \129\ 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.
    \130\ 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 \131\ 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.\132\ 
We believe this includes the publication of quality measure data and 
Overall Star Rating for VHA hospitals.
---------------------------------------------------------------------------

    \131\ Public Health Service Act of 2019, Public Law 116-69, Page 
133 Stat. 1134, codified as amended at 42 U.S.C. 201.
    \132\ U.S Congress. (1934) United States Code: Social Security 
Act, 42 U.S.C. 1851.
---------------------------------------------------------------------------

    Therefore, in the CY 2021 OPPS/ASC proposed rule, we proposed 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 the CY 2021 OPPS/ASC 
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 (finalized 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 of 
this final rule).
    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

[[Page 86198]]

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 invited public comment on our proposal to include VHA hospitals 
in the Overall Star Rating beginning with CY 2023. The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: One commenter supported the inclusion of VHA hospitals 
within the Overall Star Rating since it will allow veterans to compare 
non-VHA and VHA hospitals when making healthcare decisions. Regardless 
of support, commenters requested impact analyses of the inclusion of 
VHA hospitals on the Overall Star Rating results.
    Response: We thank commenters for their feedback. We agree that 
including VHA hospitals within the Overall Star Rating promotes 
transparency and provides veterans with the ability to compare 
hospitals and make empowered decisions about their healthcare. Details 
of the inclusion of VHA hospitals within the Overall Star Rating as 
well as impact analyses will be addressed through future rulemaking.
    Comment: Most commenters opposed the inclusion of VHA hospitals 
within the Overall Star Rating because they treat patients with an 
inherently different case mix, demographics, and often for select 
clinical conditions.
    Response: We acknowledge that VHA hospitals treat a unique patient 
population. However, the Veterans' Access to care through Choice, 
Accountability, and Transparency Act (Choice Act) of 2014 (Pub. L. 113-
146) allows veterans to seek healthcare at non-VHA hospitals under 
certain circumstances,\133\ section 1704 of the PHSA allows the 
Secretary to make health information available to consumers of medical 
care,\134\ and section 1815 (d) of the Act allows the Secretary to 
disseminate information to Medicare beneficiaries to promote informed 
choice among coverage options.\135\ Including VHA hospitals within the 
Overall Star Rating executes these provisions by providing veterans and 
Medicare beneficiaries with star ratings for VHA hospitals, effectively 
allowing them to compare VHA and non-VHA hospitals when making 
decisions about where to seek care.
---------------------------------------------------------------------------

    \133\ 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).
    \134\ Public Health Service Act of 2019, Public Law 116-69, Page 
133 Stat. 1134, codified as amended at 42 U.S.C. 201.
    \135\ U.S Congress. (1934) United States Code: Social Security 
Act, 42 U.S.C. 1851.
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    After consideration of the public comments received, we are 
finalizing our proposal as proposed. As stated above, details of the 
inclusion of VHA hospitals within the Overall Star Rating, including 
impact analyses, will be addressed through future rulemaking.

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 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 
136 137 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.\138\ Concurrent with the 
July 2016 preview period, we also hosted a National Provider Call to 
present the final methodology and answer stakeholder questions.\139\
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    \136\ Centers for Medicare & Medicaid Services. (2015, January). 
Hospital Compare Star Ratings Public Comment Report 1: Measure 
Selection for Hospital Star Ratings.
    \137\ 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.
    \138\ 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.
    \139\ 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 140 141 142 
as well as methodology reports,\143\ hospital-specific reports,\144\ 
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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    \140\ Ibid.
    \141\ 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/.
    \142\ 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/.
    \143\ 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.
    \144\ 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 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.145 146 As a result of ongoing

[[Page 86199]]

reevaluation and stakeholder engagement, we updated the methodology in 
December 2017 and February 2019. CMS also hosted a National Provider 
Call \147\ 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 \148\ and February 2019.\149\
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    \145\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \146\ 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.
    \147\ 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.
    \148\ 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.
    \149\ 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 have refined 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 \150\ and February 2019 \151\ that 
addressed stakeholder concerns revealed through previous stakeholder 
engagement by the TEP 152 153 and during public input. We 
refer readers to section E.4.a.(2) Latent Variable Modeling Measure 
Loadings of this final rule for an overview of the February 2019 
methodology updates.
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    \150\ 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.
    \151\ 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.
    \152\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
    \153\ 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,\154\ three Patient & Advocate Work Group 
meetings, two Provider Leadership Work Group meetings, nine public 
listening sessions,\155\ and one public input period.\156\ 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.157 158 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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    \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.
    \155\ 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.
    \156\ 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.
    \157\ 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.
    \158\ 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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[[Page 86200]]

    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.\159\ 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.\160\The current methodology aims to prioritize patient 
usability and employs data-driven statistical modeling approaches, 
including latent variable modeling \161\ and k-means clustering,\162\ 
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 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) New Measure Group: Timely and Effective Care 
of this final rule 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 of this final rule.
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    \159\ 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.
    \160\ 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.
    \161\ 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.
    \162\ 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.\163\ 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.\164\ These observed changes in star ratings were similar to 
star rating increases and decreases observed between reporting periods 
for other CMS star rating programs, however greater than the increases 
and decreases observed in prior Overall Star Rating publications. While 
some increases and decreases 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.b.(2) New Measure Group: Timely and 
Effective Care of this final rule; (2) use of a simple average of 
measure scores to calculate measure group scores, discussed below in 
section E.4.b. Use of a Simple Average of Measure Scores to Calculate 
Measure Group Scores of this final rule; 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 of this final rule, aim to address concerns around the 
predictability of measure emphasis, and in turn star ratings, over 
time.
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    \163\ Centers for Medicare & Medicaid Services. Hospital-
Specific Reports. Retrieved from: https://www.qualitynet.org/inpatient/public-reporting/overall-ratings/reports.
    \164\ 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.165 166 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.167 168 
Several of the proposed methodology updates, including (1) stratifying 
the Readmission measure group according to proportion of dual-eligible 
patients at each hospital discussed below in section E.4.d.(2) Proposal 
to Stratify Only the Readmission Measure Group Scores of this final 
rule; (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 of this final rule; and (3) peer 
grouping hospitals by number of measure groups, discussed below in 
section E.7. Approach to Peer Grouping Hospitals of this final rule, 
aim to increase the comparability of hospitals for patients and 
providers.
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    \165\ 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.
    \166\ 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.
    \167\ 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.
    \168\ 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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[[Page 86201]]

    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,\169\ 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,\170\ all to gain a 
range of new perspectives on the current methodology and potential 
methodology updates.
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    \169\ Ibid.
    \170\ 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 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.\171\
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    \171\ 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 the CY 2021 OPPS/ASC proposed rule, for public release of the 
Overall Star Rating beginning in CY 2021 and subsequent years, we 
proposed 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 proposed 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 Rating 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 proposed 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. Approach to 
Peer Grouping Hospitals of this final rule.
    We received numerous comments on the overall concept of methodology 
updates. The comments were not specific to any individual update. The 
following is a summary of the comments we received and our responses to 
those comments.
    Comment: Some stakeholders provided broad comments on CMS' 
proposals in entirety. Most of those commenters supported CMS' 
proposals and the efforts to increase simplicity, predictability, and 
comparability of the Overall Star Rating methodology as a result of 
previous stakeholder input. Commenters stated that they believe a more 
simple and predictable methodology would result in more transparency, 
the ability for stakeholders to understand, predict, and replicate 
results, and reduced administrative burden for providers while 
increasing the accuracy and usability of the Overall Star Rating for 
patients. Commenters stated that the methodology proposals result in 
comparisons of more similar providers, such as large vs small 
hospitals.
    Response: We thank the commenters for their support. We agree that 
the proposals will increase simplicity and predictability of the 
Overall Star Rating methodology. We also agree that the proposals 
provide more transparency and understanding of the methodology for 
stakeholders, including both providers and patients, and will increase 
the comparability of hospital star ratings.
    Comment: One commenter requested that CMS conduct further 
reliability and validity testing before finalizing the proposed 
methodology.
    Response: We analyzed each methodology proposal both independently, 
as well as collectively. We presented findings within each section of 
the Overall Star Rating proposals, as well as overall impact analyses 
to facilitate public understanding and comments. Most

[[Page 86202]]

sections of the Overall Star Ratings proposals contained reliability 
and validity considerations, for example consistency of hospital 
assignments to peer groups over time (see section E.7. Approach to Peer 
Grouping Hospitals of this final rule). While there is currently no 
consensus standard for measuring reliability and validity for summary 
measures, such as the Overall Star Rating, we have historically 
conducted reliability and validity testing that has been shared in 
detail with TEPs and work groups as well as in public 
documentation.172 173 We will continue to provide updated 
reliability and validity testing within the methodology report, which 
will be posted for the preview period (see section F. Preview Period of 
this final rule). In addition, through ongoing reevaluation, we will 
continue to monitor the reliability and validity of the Overall Star 
Rating methodology.
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    \172\ 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.
    \173\ 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.
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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 websites 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.\174\ 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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    \174\ 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) Retain Current Timeframe With Modification
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027) 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed 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 its 
successor websites 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 websites quarterly in 
January, April, July, and October of each year. Therefore, we would use 
publicly 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 April, July or October of 2020. We proposed to 
codify this timeframe at Sec.  412.190(c).
    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 Rating 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.\175\ Also, 
using data publicly reported on Hospital Compare or its successor 
websites 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 contribute to their star 
rating during the confidential preview period (we refer readers to 
section F. Preview Period of this final rule). 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.
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    \175\ For the Hospital VBP Program, this includes: MORT30-AMI, 
MORT30-CABG, MORT30-COPD, MORT30-HF, MORT30-HF, MORT30-PN; HAI1 
through HAI6, and COMP-HIP-KNEE; For the Hospital IQR Program, this 
includes: MORT30-STK, PSI-4, READM30-HOSPWIDE, EDAC-AMI, EDAC-HF, 
EDAC-PN, and COMP-HIP-KNEE; For the Hospital OQR Program, this 
includes: OP-32, OP-35, OP-36; For the HRRP, this includes: READM30-
CABG, READM30-COPD, and READM30-Hip/Knee; and for the HAC Reduction 
Program, this includes: PSI-90 and HAI-1 through HAI-6.
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    We invited public comment on our proposals to: (1) Publish the 
Overall Star Rating once annually using data publicly reported on 
Hospital Compare or its successor websites from a quarter within the 
prior year, and (2) codify this at Sec.  412.190(c). The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: Several commenters supported CMS' proposal to continue an 
annual publication of the Overall Star Rating, with some commenters 
expressing appreciation for the codification of the annual publication 
within a rule to increase predictability of Overall Star Rating 
publications.
    Response: We appreciate commenters support for our proposal to 
continue an annual publication of the Overall Star Rating. Publishing 
the Overall Star Rating once a year allows for sufficient time between 
ratings to reflect improvements or updates in hospital performance on 
the underlying measures. Updating the Star Ratings annually also aligns 
with the current cycle of many underlying measures, particularly highly 
weighted outcomes measures, that are also refreshed annually, for 
example in July of each year.
    Comment: Some commenters recommended that CMS prioritize using the 
most recent available data over providing hospitals extra time to 
review their underlying measure performance and expressed concern that 
the data used to determine the Overall Star Rating does not reflect 
current quality of care. One commenter recommended CMS designate a 
specific prior quarter's data rather than ``any prior quarter'', unless 
there are extreme circumstances.
    Response: As requested by providers,\176\ publishing the Overall 
Star

[[Page 86203]]

Rating using data publicly reported on Hospital Compare or its 
successor websites within the prior year will allow providers more time 
to review their measure scores, measure group scores, and star rating 
results during the confidential preview period. We acknowledge that the 
measures included in CMS payment programs and the Overall Star Rating 
use a range of data measurement periods with data reflecting outcomes 
from up to three years ago in order to collect enough data to calculate 
reliable hospital scores, however each measure is updated as often as 
quarterly and as seldom as annually to incorporate more recent data. 
Furthermore, using data from any quarter within the prior year provides 
CMS with flexibility to calculate the Overall Star Rating and maintain 
transparency for patient healthcare decisions in the event of 
potentially compromised measure score calculation or CMS program-level 
data disruption due to a public health emergency, for example.
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    \176\ 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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    Comment: Several commenters requested CMS update the Overall Star 
Rating more frequently, either quarterly or biannually, to provide 
consumers with more recent and meaningful data. Another commenter 
recommended that the annual Overall Star Rating publication align with 
the July Hospital Compare data refresh.
    Response: We appreciate commenter requests for more frequency of 
the Overall Star Rating publications and acknowledge commenters' 
request to use more current data to calculate the Overall Star Ratings. 
We acknowledge that the measures included in CMS payment programs and 
the Overall Star Rating use a range of data measurement periods with 
data reflecting outcomes from up to three years ago. However, 
publishing the Overall Star Rating annually may minimize period to 
period shifts in hospital star ratings that may result in small changes 
in individual hospital and national performance on the underlying 
measures. We have received feedback from stakeholders \177\ that 
hospitals increasing or decreasing star rating categories on a 
quarterly or bi-annual basis may encounter difficulties explaining the 
increase or decrease in star rating to hospital leadership and 
patients. An annual refresh will allow adequate time to reflect 
improvements or updates in hospital performance on the underlying 
measures. While a publication of the Overall Star Ratings in July of 
every year would align in timing with the scheduled refresh of many 
highly weighted outcome measures, such as readmission and mortality 
measures, the underlying data used to calculate the Overall Star Rating 
would not align since we will use data from a quarter within the prior 
year (see section E.2.a.(2) Retain Current Timeframe With Modification 
of this final rule). A publication of the Overall Star Rating in 
October or January could reflect July Hospital Compare data refreshes.
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    \177\ 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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    Comment: One commenter requested CMS suspend the proposed 2021 
publication of the Overall Star Rating to finalize the methodology 
changes and include an independent audit of the methodology prior to 
publication in 2022.
    Response: The Overall Star Rating proposals were vetted through 
extensive reevaluation activities and stakeholder engagement, including 
TEP,178 179 Provider Leadership Work Group, and Patient & 
Patient Advocate Work Group meetings, a public input period,\180\ and 
CMS listening sessions.\181\ In addition, the NQF convened a separate, 
independent TEP \182\ that also reviewed and provided broad support for 
these proposals.
---------------------------------------------------------------------------

    \178\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \179\ 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.
    \180\ 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.
    \181\ 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.
    \182\ 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.
---------------------------------------------------------------------------

    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
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 PCHQR Program, IPFQR Program, or Ambulatory ASCQR Program. 
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 
websites were not included.
(2) Retain Current Measure Inclusion
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
we proposed 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 proposed to use certain 
measures publicly reported on the Hospital Compare or successor 
websites 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 proposed to codify this policy at Sec.  412.190(b)(1).
    We believe hospital inpatient and outpatient measures publicly 
reported on Hospital Compare or its successor websites 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 websites undergo a 
rigorous development process which includes extensive measure testing, 
vetting by stakeholders, evaluation by the NQF, and undergo rulemaking 
for inclusion in CMS programs and public reporting. 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 websites 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 websites are not

[[Page 86204]]

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 of this final rule for 
our discussions about CAHs and VHA hospitals.
    We invited 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(b)(1). The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: Several commenters expressed general support for the 
continued Overall Star Rating measure selection criteria, as proposed.
    Response: We thank commenters for their support and agree that the 
measure selection criteria ensures the inclusion of existing measures 
reported within CMS quality programs and on Hospital Compare or its 
successor website for hospitals that provide acute inpatient and 
outpatient care.
    Comment: Some commenters recommended changes to the measure 
selection criteria, specifically recommending removing measures with 
annual volatility and only including NQF-endorsed measures that are 
valid, reliable, and aligned with other existing measures. Several 
commenters provided further feedback on specific measures included 
within the Overall Star Rating with some commenters expressing concern 
with healthcare-associated infection (HAI) measure risk adjustment, 
recommending the removal of the PSI-90 measure, and one commenter 
supporting the inclusion of electronic clinical quality measures. Those 
that commented specifically on the PSI-90 measure expressed concern 
that the measure was developed as a tool for hospitals to identify 
potential safety events, rather than quality measurement within CMS 
programs, utilizes administrative claims, rather than chart-abstracted 
data, disadvantages hospitals that have high volume of surgeries, 
results in surveillance bias, and has inadequate risk adjustment and 
poor reliability. They requested that CMS implement better alternative 
safety quality measures or update, benchmark, and audit the PSI-90 
measure.
    Response: One of the guiding principles of the Overall Star Rating 
is to use methods that are inclusive of measure information publicly 
available on Hospital Compare or its successor websites through CMS 
quality programs. As measures are updated within, removed from, or 
added to CMS quality programs and Hospital Compare or its successor 
website, the measures are subsequently updated within, removed from, or 
added to the Overall Star Rating, unless the measures meet one of the 
specified measure exclusion criteria.
    While changes in results that reflect updates in individual and 
national hospital performance are expected, we agree that extreme 
volatility on the individual measures and Overall Star Rating poses 
challenges for hospitals and consumers interpreting results. To 
increase the predictability and reduce extreme volatility of the 
Overall Star Rating, in the CY 2021 OPPS/ASC proposed rule, we proposed 
to establish an annual publication of the Overall Star Rating, 
preventing shifts in star ratings within a given year, and to use a 
simple average of measure scores to calculate measure group scores, for 
more balanced and consistent measure emphasis within groups.
    Measures that are included within CMS quality programs and reported 
on Hospital Compare or its successor websites undergo a rigorous 
development process which include extensive measure testing, 
stakeholder vetting, evaluation by the NQF, and rulemaking. While most 
measures included within the Overall Star Rating are NQF-endorsed, NQF 
endorsement is not required.
    Existing measures within CMS quality programs were developed and 
implemented to fulfill important gaps in measurement and areas for 
quality improvement. We continuously monitor and reevaluate measures 
for evidence, opportunities for performance improvement, and potential 
methodology updates. For example, under the Hospital IQR Program, we 
adopted updates to the PSI-90 measure for the FY 2018 payment 
determination and subsequent years, which addressed stakeholder 
feedback on the component weighting within the composite measure (81 FR 
57128- 57133). We appreciate support for the inclusion of electronic 
measures within CMS quality programs and the Overall Star Rating. 
Although electronic measures are not currently required for public 
reporting and therefore are not included in the Overall Star Rating at 
this time, in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58437), CMS 
finalized proposal policy to begin public display of electronic quality 
measure data starting with data reported by hospitals for the CY 2021 
reporting period/FY 2023 payment determination and for subsequent 
years. As electronic measures become required within CMS quality 
programs, electronic measures will be subsequently included within the 
Overall Star Rating.
    Comment: One commenter recommended that CMS evaluate measures for 
validity and reliability if data from CY 2020 are excluded and the 
measurement periods are extended to enhance sample size as a result of 
COVID-19.
    Response: On March 27, 2020, we granted exceptions under certain 
Medicare quality reporting and value-based purchasing 
programs.183 184 In addition, the Medicare and Medicaid 
Programs, Clinical Laboratory Improvement Amendments (CLIA), and 
Patient Protection and Affordable Care Act; Additional Policy and 
Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency Interim Final Rule (IFC) (85 FR 54820) updated the 
extraordinary circumstances exceptions granted for the Hospital 
Acquired Condition (HAC) Reduction Program, Hospital Readmissions 
Reduction Program (HRRP), and Hospital VBP Program for the PHE for 
COVID-19 as a result of the PHE for COVID-19. This IFC also announced 
that with respect to the Hospital VBP Program, HRRP, HAC Reduction 
Program, if, as a result of a decision to grant a new nationwide ECE 
without request or a decision to grant a substantial number of 
individual ECE requests, we do not have enough data to reliably compare 
national performance on measures, we may propose to not score 
facilities, hospitals based on such limited data or make the associated 
payment adjustments for the affected program year.
---------------------------------------------------------------------------

    \183\ CMS Press Release, dated March 22, 2020, CMS Announces 
Relief for Clinicians, Providers, Hospitals and Facilities 
Participating in Quality Reporting Programs in Response to COVID-19. 
Located at https://www.cms.gov/newsroom/press-releases/cms-announces-relief-clinicians-providers-hospitals-and-facilities-participating-quality-reporting.
    \184\ CMS Guidance Memo, dated March 27, 2020, Exceptions and 
Extensions for Quality Reporting Requirements for Acute Care 
Hospitals, PPS-Exempt Cancer Hospitals, Inpatient Psychiatric 
Facilities, Skilled Nursing Facilities, Home Health Agencies, 
Hospices, Inpatient Rehabilitation Facilities, Long-Term Care 
Hospitals, Ambulatory Surgical Centers, Renal Dialysis Facilities, 
and MIPS Eligible Clinicians Affected by COVID-19. Located at 
https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf.
---------------------------------------------------------------------------

    We are currently analyzing how our exemptions granted and the 
COVID-19 pandemic impact the measures within

[[Page 86205]]

various CMS quality programs. We note that the Overall Star Rating is 
calculated using individual measures publicly reported through CMS 
quality programs and on Hospital Compare or its successor website. The 
Overall Star Rating uses data publicly reported through CMS quality 
programs and thus, data excluded from those CMS quality programs, will 
be subsequently excluded from the Overall Star Rating. Hospitals can 
also utilize established processes under each program in order to 
review and correct individual measure scores. We refer readers to the 
QualityNet website: https://qualitynet.org/ for additional program-
related information. We also refer readers to section G. of this final 
rule; we may also consider suppression of the Overall Star Rating if we 
determine that due to a public health emergency underlying measure data 
were substantially affected.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
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:
     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;
     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;
     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;
     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;
     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
     Measures with statistically significant negative loadings 
estimated by the LVM as described further in section E.4.a.(2) Latent 
Variable Model Measure Loadings of this final rule.
    In February 2019, we excluded measures for which the LVM estimates 
a statistically significant negative loading, which indicated the 
measure had an inverse relationship with other measures in the 
group.\185\ 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.\186\ Measure 
loadings are the contribution, or emphasis, of each measure as assigned 
by the LVM.\187\ Latent variable modeling and measure loadings are 
described in more detail under section E.4. Step 3: Calculation of 
Measure Group Scores of this final rule.
---------------------------------------------------------------------------

    \185\ 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.
    \186\ 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.
    \187\ Ibid.
---------------------------------------------------------------------------

(2) Retention and Update of Select Measure Exclusions
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we intended 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 proposed 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 proposed 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 proposed 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 of this final 
rule.
    4. We proposed to continue to exclude measures not required for 
reporting on Hospital Compare or its successor websites through CMS 
programs.
    5. We proposed 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 proposed to codify these exclusions at Sec.  
412.190(d)(1)(i). We noted that we did not propose 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.\188\ and are further 
discussed in section E.4.a.(2) Latent Variable Model Measure Loadings 
of this final rule). This is because, in section E.4.b. of the CY 2021 
OPPS/ASC proposed rule, we proposed 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

[[Page 86206]]

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 of this 
final rule.
---------------------------------------------------------------------------

    \188\ Ibid.
---------------------------------------------------------------------------

    We invited public comment on our proposal as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Several commenters expressed general support for the 
continued Overall Star Rating measure exclusion criteria, as proposed.
    Response: We thank commenters for their support and agree that the 
measure exclusion criteria ensures the measures included within the 
Overall Star Rating can be easily standardized and combined in a 
meaningful way with other measures to form aggregate measure group 
scores.
    We are finalizing our proposals as proposed.
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.\189\ 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.\190\ 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 \191\ across hospitals. Standard deviation is a number that 
measures how far data values are from their average.\192\ See the 
measure score standardization example and Table 65. 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.
---------------------------------------------------------------------------

    \189\ 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.
    \190\ 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.
    \191\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \192\ Ibid.
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(2) Retention of Current Measure Score Standardization
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed 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 proposed 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 proposed to codify this at Sec.  412.190(d)(2).
Example of Standardization of Measure Score
Standardized measures score (HAI-6) = - (0.470 - 0.694)/0.49 = 0.46

[[Page 86207]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.124

    We invited public comment on our proposals to standardize measure 
scores and codify this policy at Sec.  412.190(d)(2). However, we 
received no comments on these proposals.
    We are finalizing our proposals as proposed.
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 
estimates, the standardized measure scores were Winsorized \193\ 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 \194\ 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 of this final rule 
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,195 196 Patient & Advocate Work Group, and a public 
input period.\197\
---------------------------------------------------------------------------

    \193\ 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.
    \194\ Ibid.
    \195\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \196\ Centers for Medicare & Medicaid Services. (2014, 
December). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \197\ 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. Use of a Simple Average of 
Measure Scores to Calculate Measure Group Scores of this final rule, 
where we finalized 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

[[Page 86208]]

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 the calculations. However, in 
the proposed rule, we stated that 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 of this final rule, we would continue to Winsorize measure 
scores to minimize the impact of extreme outliers. We refer readers to 
section E.4.b. Use of a Simple Average of Measure Scores to Calculate 
Measure Group Scores of this final rule where we are finalizing the 
policy to use a simple average of measure scores.
    We invited public comment on our proposals as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Several commenters supported the removal of measure score 
Winsorization with the use of simple average of measure scores.
    Response: We thank commenters for their support and agree that 
measure score Winsorization is no longer necessary with a simple 
average of measure scores to calculate measure group scores.
    Comment: A few commenters suggested that CMS retain measure score 
Winsorization with the simple average of measure scores approach to 
reduce potential measurement error or effect of a single measure within 
the Overall Star Rating calculation.
    Response: We refer readers to section E.4.b. Use of a Simple 
Average of Measure Scores to Calculate Measure Group Scores of this 
final rule where we are adopting use of a simple average of measure 
scores to calculate measure group scores and disagree with commenters 
that measure score Winsorization should be retained with the use of a 
simple average of measure scores. Winsorization of measure scores was 
previously necessary with LVM in order to minimize the impact of 
extreme measure score outliers prior to statistical modeling to ensure 
model stability but it is no longer necessary with a simple average of 
measure scores. Removing Winsorization is consistent with our intent to 
simplify the Overall Star Rating methodology and use a simple average 
of measure scores to calculate measure group scores. In addition, 
removing measure score Winsorization allows CMS to retain the 
underlying measure scores, as calculated, to be used within the Overall 
Star Rating, better reflecting measure performance for outlier 
hospitals. The Overall Star Rating includes measure scores reported 
within CMS quality programs and reported on Hospital Compare or its 
successor websites, which underwent and continue to undergo rigorous 
development and reevaluation processes that include substantial 
validation testing to minimize measurement error. Furthermore, use of a 
simple average of measure scores to calculate measure group scores will 
create equal weighting within measure groups, therefore, diminishing 
the possibility of one or a few measures from having more effect on a 
hospital's star rating.
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 \198\ and the previous display of Hospital Compare,\199\ 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,\200\ Medicare 
Plan Finder Star Ratings,\201\ and Dialysis Facility Compare.\202\
---------------------------------------------------------------------------

    \198\ 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.
    \199\ Centers for Medicare & Medicaid Services. (2019) Hospital 
Compare. Retrieved from: www.medicare.gov/hospitalcompare: https://www.medicare.gov/hospitalcompare/search.html?.
    \200\ 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.
    \201\ 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.
    \202\ 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. New Measure Group and Continuation of Certain Groups
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed 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 proposed 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).\203\ In the CY 2021 
OPPS/ASC proposed rule, for the Overall Star Rating beginning CY 2021 
and subsequent years, we proposed to continue to use these measure 
groups. We also proposed to codify these measure groups at Sec.  
412.190(d)(3).
---------------------------------------------------------------------------

    \203\ Ibid.
---------------------------------------------------------------------------

    We invited public comment on our proposals as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Several commenters recommended that CMS continue to assess 
the various measure groups and group weights, now and in the future, to 
ensure measure groups and weights are balanced and reflect areas of 
importance to patients. One commenter noted that the composition of 
measures available on Hospital Compare or its successor websites will 
continue to evolve, and that CMS should consider longer-term solutions 
for measure groupings to prevent frequent regroupings and subsequent 
instability in scores. One commenter supported CMS' measure groups but 
also recommended that CMS review other existing metrics as an

[[Page 86209]]

example of aggregating quality, safety, and patient experience and 
engaging hospitals on improvement efforts on specific target areas and 
service lines. Another commenter specifically expressed concern with 
the Safety of Care measure group being comprised of HAI measures, the 
PSI-90 measure, and the Total Knee Arthroplasty/Total Hip Arthroplasty 
complication measure, which all have dissimilar risk adjustment 
approaches, making it difficult for consumers to understand and 
hospitals to target improvement within the Safety of Care measure 
group.
    Response: We appreciate the commenters' suggestions for ongoing 
reevaluation of measure groupings over time and as Hospital Compare or 
its successor websites evolve. We will continue to monitor the number 
and groupings of the underlying measures that comprise the Overall Star 
Rating. While measures within a group may differ in specifications, 
including risk adjustment, the measure regroupings were identified and 
implemented based on alignment with clinical components of hospital 
quality, the Hospital VBP Program, the previous display of Hospital 
Compare, and input received from stakeholders during TEP and Patient & 
Patient Advocate Work Group meetings and public input periods. The 
Overall Star Rating is meant to summarize and reflect the existing 
measures on Hospital Compare or its successor website. As part of 
ongoing reevaluation, we will continue to monitor the available 
measures reported within CMS quality programs for inclusion and 
grouping within the Overall Star Rating. The best way for hospitals to 
improve on the Overall Star Rating is to improve performance on the 
underlying measures. The adoption of a simple average of measure scores 
to calculate measure group scores would assign equal weights within 
measure groups, allow hospitals to better predict measure 
contributions, and target quality improvement efforts for improved 
measure group scores and star ratings (see section E.4.b. Use of a 
Simple Average of Measure Scores to Calculate Measure Group Scores of 
this final rule).
    After consideration of the public comments we received, we are 
finalizing our proposals as proposed.
(2) 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).\204\ 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.
---------------------------------------------------------------------------

    \204\ 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 \205\ and CY 2019 
OPPS/ASC \206\ final rules, and the FY 2019 IPPS/LTCH PPS final 
rule,\207\ resulting from the Meaningful Measure Initiative (83 FR 
41147 through 41148),\208\ 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.
---------------------------------------------------------------------------

    \205\ 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).
    \206\ 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).
    \207\ 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).
    \208\ 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 the CY 2021 OPPS/ASC proposed rule, for the Overall 
Star Rating beginning in CY 2021 and subsequent years, we proposed 
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 proposed to codify 
this new group at Sec.  412.190(d)(3). 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.\209\ This consolidation would be necessary to ensure 
that a sufficient number of measures exist in this 
group.210 211 212 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.\213\
---------------------------------------------------------------------------

    \209\ Centers for Medicare & Medicaid Services. Hospital 
Compare. (2019). Retrieved from www.medicare.gov/hospitalcompare: 
https://www.medicare.gov/hospitalcompare/search.html?.
    \210\ 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).
    \211\ 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).
    \212\ 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).
    \213\ 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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[[Page 86210]]

    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, of the 1,306 CAHs with measure scores included within 
the Overall Star Rating, 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. Minimum Reporting Thresholds for 
Receiving a Star Rating of this final 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,\214\ which include being inclusive of hospitals and 
measure information, accommodating changes in the underlying measures, 
and accounting for the heterogeneity of available measures. We invited 
public comment on our proposed measure groupings and codification of 
those groupings. The following is a summary of the comments we received 
and our responses to those comments.
---------------------------------------------------------------------------

    \214\ 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.
---------------------------------------------------------------------------

    Comment: Many commenters expressed support for grouping the 
Effectiveness of Care, Timelines of Care, and Efficient Use of Medical 
Imaging into one Timely and Effective Care measure group, especially 
considering the recent and future measure removals from public 
reporting as a result of the Meaningful Measures Initiative. Several 
commenters noted that combining these measure groups would allow more 
hospitals to qualify for scoring, particularly small hospitals and 
CAHs, and would align with CMS' goal of being inclusive of hospitals 
and measure information.
    Response: We appreciate the support for our proposal and agree that 
combining the Effectiveness of Care, Timeliness of Care, and Efficient 
Use of Medical Imaging measure groups into one measure group, Timely 
and Effective Care, aligns with the guiding principle for inclusivity 
of measure and hospital information within the Overall Star Rating (see 
section A.1.a. Purpose of this final rule) by allowing more hospitals 
to meet the reporting thresholds to receive a star rating (see section 
E.6. Step 5: Application of Minimum Thresholds for Receiving a Star 
Rating of this final rule). Using January 2020 Overall Star Rating data 
(October 2019 public reporting data), when isolated, regrouping process 
measures into one measure group, Timely and Effective Care, results in 
180 more hospitals meeting the reporting threshold to receive a star 
rating.
    After consideration of the public comments we received, we are 
finalizing our proposals as proposed.
4. Step 3: Calculation of Measure Group Scores
    In the past, we have used latent variable modeling (LVM) to 
calculate measure group scores. In the CY 2021 OPPS/ASC proposed rule, 
we proposed 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 \215\ (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 of this final rule. 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 of this final rule. 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.
---------------------------------------------------------------------------

    \215\ 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 \216\ (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.217 218 219 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.
---------------------------------------------------------------------------

    \216\ Ibid.
    \217\ Henderson CR. Best Linear Unbiased Estimation and 
Prediction under a Selection Model. Biometrics 1975;31:423-47.
    \218\ 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.
    \219\ 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.\220\ 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.\221\
---------------------------------------------------------------------------

    \220\ 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.
    \221\ Ibid.
---------------------------------------------------------------------------

    When we developed the initial methodology for Overall Star Rating, 
we investigated multiple approaches to calculating measure group 
scores,

[[Page 86211]]

including simple or weighted averages of measures, as well as more 
complex approaches such as LVM and factor analyses.\222\ 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 \223\ and factor analysis \224\ 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,\225\ which favored the ability of LVM to utilize data to account 
for the relationship between measures, measures which are not reported, 
and sampling variation.\226\
---------------------------------------------------------------------------

    \222\ 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.
    \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.
    \224\ 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.
    \225\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \226\ 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.\227\ 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.\228\ 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.\229\ Measure loadings are further discussed below in 
section E.4.a.(2) Latent Variable Model Measure Loadings of this final 
rule. The loading represents the measure's relationship to the 
underlying aspect of quality and therefore, the measure's contribution 
to the measure group score.\230\ 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.
---------------------------------------------------------------------------

    \227\ Ibid.
    \228\ Ibid.
    \229\ Ibid.
    \230\ 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 of this final rule. 
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 ([egr]) is the variation which could not be 
explained by the measure group score (random effect).
    Figure 1. Sample Path Diagram of Group Specific LVM
    The LVM equation used to derive a hospital's measure group score is 
as follows:
[GRAPHIC] [TIFF OMITTED] TR29DE20.408

    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 \231\ 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).\232\
---------------------------------------------------------------------------

    \231\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \232\ 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.\233\ A measure's loading is

[[Page 86212]]

specific to the measure and the same for all hospitals reporting that 
measure.
---------------------------------------------------------------------------

    \233\ 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,\234\ which is 
estimated through the LVM by using a statistical approach called 
maximum likelihood. Maximum likelihood \235\ 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.
---------------------------------------------------------------------------

    \234\ Ibid.
    \235\ 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:
[GRAPHIC] [TIFF OMITTED] TR29DE20.126

    L is the likelihood function. Nkd is the total number of hospitals 
for measure k in measure group d and Nkd 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.\236\ 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.237 238 239 240 241 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.\242\
---------------------------------------------------------------------------

    \236\ 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.
    \237\ Centers for Medicare & Medicaid Services. (2015, June 8). 
Summary of Technical Expert Panel (TEP) Evaluation of Hospital 
Quality Star Ratings on Hospital Compare.
    \238\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \239\ 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.
    \240\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
    \241\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \242\ 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 \243\ and standard error 
\244\ for each hospital's measure group score that we used to construct 
a 95 percent confidence interval.\245\ 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.\246\ We compared this 95 percent confidence interval 
to the national mean measure group score. Measure group scores with 
confidence intervals that fall entirely

[[Page 86213]]

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''.
---------------------------------------------------------------------------

    \243\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \244\ Ibid.
    \245\ Ibid.
    \246\ Ibid.
---------------------------------------------------------------------------

b. Use of a Simple Average of Measure Scores To Calculate Measure Group 
Scores
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed to eliminate use of the LVM and instead use a simple 
average of measure scores to calculate measure group scores.
    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,\247\ 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 \248\ 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 Rating were unpredictable, further complicating 
understanding of the methodology and efforts to allocate resources for 
quality improvement.
---------------------------------------------------------------------------

    \247\ 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.
    \248\ 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 the CY 2021 OPPS/ASC proposed rule, for the Overall 
Star Rating beginning in CY 2021 and subsequent years, we proposed to 
discontinue the use of the LVM, and instead, propose to adopt a simple 
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 proposed to codify this policy at Sec.  412.190(d)(4).
    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 66 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 86214]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.127

    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 of this final rule. 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 67 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 86215]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.129


[[Page 86216]]


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,\249\ 
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) Continue Current Calculation of Hospital 
Summary Scores Through a Weighted Average of Measure Group Scores of 
this final rule; 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 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.
---------------------------------------------------------------------------

    \249\ 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.250 251 252 253 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.
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    \250\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \251\ 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.
    \252\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \253\ 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 the 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 invited 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(d)(4) as discussed. The following 
is a summary of the comments we received and our responses to those 
comments.
    Comment: Many commenters supported the use of a simple average of 
measure scores to calculate measure group scores. They appreciated CMS' 
responsiveness to previous stakeholder input and emphasized advantages 
of a simple average of measure scores including transparency of 
methods, predictable and balanced measure emphasis within groups, 
reduced shifts in measure group scores and star ratings, and alignment 
with CMS programs. These advantages make the methodology easier for 
stakeholders to understand and for providers to react to and improve 
upon measurement and star ratings as well as explain to hospital 
leadership and patients.
    Response: We thank commenters for their support. Being responsive 
to stakeholder input has been and continues to be a guiding principle 
of the Overall Star Rating since original development. We agree that 
the proposals would increase simplicity and predictability of the 
Overall Star Rating methodology, hopefully providing more transparency 
and understanding of the methodology for stakeholders, including both 
providers and patients.
    Comment: A few commenters did not support CMS' proposal to use a 
simple average of measure scores advocated for the continued use of 
latent variable modeling (LVM) to calculate measure group scores 
because of the methodological advantages of LVM as a statistical model 
that accounts for important factors, including the relationship between 
measures and measure precision. They also pointed out that the original 
Overall Star Rating TEP favored LVM over other approaches for the same 
reasons.
    Response: We acknowledge the known advantages to the LVM approach 
that had been favored by the original TEP and have been used to 
calculate measure group scores, including the ability of the model to 
account for the relationship between measures, differences in sampling 
variation, or measure precision, and missing measure scores.\254\ 
However, subsequent application of the LVM approach has also revealed 
several challenges in implementation as measures and scores have 
evolved on Hospital Compare and its successor websites. Notably, 
several

[[Page 86217]]

stakeholders,\255\ particularly providers, indicated the use of LVM 
resulted in unpredictable measure loadings. This added greater 
uncertainty in anticipated changes in star ratings and was challenging 
for stakeholders to understand, explain to others, and use for quality 
improvement. A simple average of measure scores would assign equal 
weights within measure groups, allowing stakeholders to predict, 
interpret, and easily replicate measure group scores.
---------------------------------------------------------------------------

    \254\ 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.
    \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.
---------------------------------------------------------------------------

    Comment: One stakeholder requested that the simple average of 
measure scores approach be evaluated by a TEP.
    Response: The use of a simple average of measure scores was vetted 
through extensive stakeholder engagement, including TEP,\256\ Provider 
Leadership Work Group, Patient & Patient Advocate Work Group meetings, 
a public input period,\257\ and a CMS listening session.\258\ In 
general, stakeholders supported the use of a simple average of measure 
scores to calculate measure group scores for a less complex methodology 
with more predictable measure emphasis that can be easily understood, 
explained to others, and used to identify areas for quality 
improvement.
---------------------------------------------------------------------------

    \256\ 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.
    \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.
    \258\ 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.
---------------------------------------------------------------------------

    Comment: One commenter recommended that CMS continue to use device 
days, number of procedures, or patient days as the HAI measure 
denominators, rather than predicted infections.
    Response: One of advantages of LVM was its ability to account for 
sampling variation, or measure precision, through the use of measure 
denominator data. In February 2019,\259\ we had updated the Overall 
Star Rating methodology to use alternative HAI denominators of device 
days, number of procedures, or patient days, instead of predicted 
infections, to better represent case volume and sampling variation in 
order to account for measure precision within LVM. It is important to 
note that the Overall Star Rating has used and will continue to use the 
HAI Standardized Infection Ratio (SIR) measure scores, as calculated 
for the HAC Reduction Program, which utilizes predicted infections as 
the denominator, within the Overall Star Rating methodology. The 
Overall Star Rating used alternative HAI denominators only to account 
for measure precision within the LVM. However, the Overall Star Rating 
methodology will no longer account for measure precision with the use 
of a simple average of measure scores to calculate measure group 
scores, therefore negating the need for alternative HAI denominators.
---------------------------------------------------------------------------

    \259\ Centers for Medicare & Medicaid Services. (2018, November 
30). Overall Hospital Quality Star Rating on Hospital Compare: 
February 2019 Updates and Specifications Report. Retrieved from 
www.qualitynet.org: https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
---------------------------------------------------------------------------

    Comment: Some commenters noted disadvantages of a simple average of 
measure scores to calculate measure group scores and encouraged CMS to 
continue to consider alternative approaches, including template 
matching or relative measure weights based on measure volume, evidence, 
importance to or impact on patients, as the Agency for Health Research 
and Quality does with harm-based weights within the PSI-90 composite, 
or opportunity for provider improvement, which could be done through 
comparisons to the national average.
    Response: During development and recent reevaluation of the Overall 
Star Rating, we considered multiple approaches to the weighting of 
individual measure scores when calculating measure group scores, 
including template matching and relative measure weighting. However, 
given that the Overall Star Rating summarizes aggregate hospital-level 
measure scores reported through CMS quality programs without the use of 
underlying patient-level data, approaches such as template matching 
\260\ may be both infeasible as well as not align with the aim for a 
simple methodology that stakeholders can easily understand and explain 
to others. Also, relative measure weighting based on volume, in some 
cases, would result in measure group scores dominated by one measure, 
such as PSI-90 (81 FR 56761) \261\ within the Safety of Care measure 
group and Hospital-Wide Readmission within the Readmission measure 
group. During engagement efforts,\262\ stakeholders preferred more 
balanced measure emphasis within measure groups. In addition, relative 
weighting based on evidence or importance to patients may be subjective 
and resource intensive for CMS and stakeholders to monitor and 
maintain. Finally, TEP \263\ and work group input also acknowledged 
that relative measure weighting approaches may have the unintended 
consequence of creating an incentive for hospitals to focus quality 
improvement efforts on few measures.
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    \260\ Silber, J.H., Rosenbaum, P.R., Ross, R.N., Ludwig, J.M., 
Wang, W., Niknam, B.A., . . . & Fleisher, L.A. (2014). Template 
matching for auditing hospital cost and quality. Health services 
research, 49(5), 1446-1474.
    \261\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 81 FR 56761 (Aug 22, 2016) 
(codified at 42 CFR parts 405, 412, 413, and 489).
    \262\ 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.
    \263\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
---------------------------------------------------------------------------

    Comment: A few commenters requested impact analyses outlining the 
impact of the use of a simple average of measure scores on overall and 
individual hospital star rating results.
    Response: We appreciate the commenters' request for impact analyses 
on the use of a simple average of measure scores to calculate measure 
group scores. We provided analytic considerations specific to the 
proposal to use a simple average of measure scores within section 
E.4.b. Use of a Simple Average of Measure Scores to Calculate Measure 
Group Scores of this final rule and we also provided overall impact 
analyses on hospital star ratings within section 8. Effects of 
Requirements for the Overall Hospital Quality Star Ratings of the 
proposed rule (85 FR 49057 through 49077). We simulated impacts using 
January 2020 Overall Star Rating data (October 2019 public reporting 
data) and the combined methodology proposals: Regroup measures, use a 
simple average of measure scores to calculate measure group scores, and 
update reporting thresholds to require at least three measures in at 
least three measure groups, one of which must be Mortality of Safety of 
Care, but not include peer grouping to isolate proposals and allow for 
informed public comments. As stated in section 8 of 85 FR 49057 through 
49077), 1,796 (53 percent) hospitals would receive the same star

[[Page 86218]]

rating. The results showed that 1,468 (43 percent) hospitals would 
shift up or down one star rating, 135 (4 percent) hospitals would shift 
up or down two star ratings, 9 (0.3 percent) hospitals would shift up 
or down three star ratings, and 1 (0.03 percent) hospital would shift 
up or down four star ratings. Since regrouping measures and updating 
reporting thresholds primarily resulted in modest impacts to the number 
of hospitals meeting the reporting thresholds to receive a star rating, 
the shift in hospital star ratings was primarily due to the use of a 
simple average of measure scores to calculate measure groups scores. We 
refer reads to section 8. Effects of Requirements for the Overall 
Hospital Quality Star Ratings of this final rule for the impact 
analyses using October 2020 public reporting data for the final Overall 
Star Rating methodology for 2021 and subsequent years.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
c. Standardize Measure Group Scores
    Standardizing \264\ 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 a simple average of measure scores as 
discussed in section E.4.b. Use of a Simple Average of Measure Scores 
to Calculate Measure Group Scores of this final rule, 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.
---------------------------------------------------------------------------

    \264\ 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 (85 FR 48996 through 49027), we proposed to 
standardize measure group scores. More specifically, we proposed to 
standardize measure group scores by calculating Z-scores for each 
measure group. As mentioned in section E.2.d. Measure Score 
Standardization of this final rule, a Z-score \265\ is a standard 
deviation \266\ 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 \267\ of one. We also proposed to codify this policy at Sec.  
412.190(d)(4)(i).
---------------------------------------------------------------------------

    \265\ 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.
    \266\ Illowsky, B., & Dean, S. (2013). Introductary Statistics. 
Houston, TX: 12th Media Services. Retrieved from: https://openstax.org/details/books/introductory-statistics.
    \267\ Ibid.
---------------------------------------------------------------------------

    See Table 68 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,\268\ 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.
---------------------------------------------------------------------------

    \268\ Ibid.
---------------------------------------------------------------------------

    We invited public comment on our proposals to standardize measure 
group scores and codify this policy at Sec.  412.190(d)(4)(i). However, 
we did not receive any comments on these proposals. We are finalizing 
our proposals as proposed.
d. 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. 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.\269\ Specifically, some stakeholders have requested social 
risk factor adjustment of the readmission measures or the Readmission 
measure group.270 271 Recently a HHS Report to Congress has

[[Page 86219]]

set forth a broad range of recommendations regarding social risk 
factors and Medicare's value-based purchasing programs, and the report 
does not recommend adjusting quality measures for social risk for 
public reporting.\272\ We sought 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.
---------------------------------------------------------------------------

    \269\ 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.
    \270\ National Quality Forum. (2019, November 6). National 
Quality Forum Hosptial Quality Star Ratings Summit. Retrieved from 
www.qualityforum.orgs http://www.qualityforum.org/NQF_Hospital_Quality_Star_Rating_Summit.aspx.
    \271\ 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.
    \272\ 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 the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for Overall Star Rating beginning in CY 2021 and subsequent years, we 
proposed to stratify only the Readmission measure group score by 
hospitals' proportion of dual-eligible patients and codify this at 
Sec.  412.190(d)(4)(v). We proposed 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,\273\ and 
to align with the payment adjustment recently implemented for HRRP 
payment determination (82 FR 38231 through 38237). We proposed to 
utilize and repurpose the same peer group quintiles assigned by the 
HRRP annually. We proposed 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 
proposed 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.
---------------------------------------------------------------------------

    \273\ 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.
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    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 
\274\ patients are those that are dually eligible for Medicare and 
full-benefit Medicaid among a hospital's total Medicare Fee-for-Service 
and Medicare Advantage patient discharges (42 U.S. Code 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.
---------------------------------------------------------------------------

    \274\ 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 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.\275\ This methodology was implemented within 
HRRP in FY 2019 as announced in the associated correction notification 
(82 FR 46138). The individual readmission measures included within HRRP 
and publicly reported on Hospital Compare or its successor websites are 
not adjusted for social risk factors.
---------------------------------------------------------------------------

    \275\ 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.\276\ 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.\277\ The 
report recommends not adjusting outcome measures for social risk 
factors in CMS programs and recommends that,

[[Page 86220]]

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

    \276\ 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.
    \277\ 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.278 279 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.
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    \278\ 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.
    \279\ 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 proposed 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, [alpha] is the national average 
of readmission group score, [alpha]peer group j is the average 
readmission group score for dual-eligible peer group j (j = 1, 2, . . 
., 5).
[GRAPHIC] [TIFF OMITTED] TR29DE20.130

    During public input periods,\280\ 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 proposed 
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 proposed 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 of this final rule for more information on the hospitals 
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 proposed 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.
---------------------------------------------------------------------------

    \280\ 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.
---------------------------------------------------------------------------

    As stated above, we proposed 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 
Rating. As also stated above, we proposed 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

[[Page 86221]]

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 publication, 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 Rating. CMS' Overall Star Rating development 
contractor engaged stakeholders in discussion regarding the 
comparability of hospital star ratings for over 5 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.\281\ 
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.282 283 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.284 285 286 
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 2019 publicly reported measure data on Hospital Compare).
---------------------------------------------------------------------------

    \281\ 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.
    \282\ 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.
    \283\ 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.
    \284\ 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.
    \285\ Centers for Medicare & Medicaid Services. (2019, October 
24) Patient and Patient Advocate Work Group Minutes--October 2019.
    \286\ 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.
---------------------------------------------------------------------------

    CMS is also considering recommendations on risk-adjustment recently 
submitted to Congress. On behalf of the Secretary, 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 ultimately proposed to stratify the Readmission measure 
group based on the proportion of dual-eligible patients to align with 
HRRP and to be responsive to stakeholder feedback, particularly from 
healthcare providers. Considering inconsistent feedback received from 
stakeholders and HHS

[[Page 86222]]

recommendations for CMS programs, we also sought comment on an 
alternative to retain the Readmission measure group calculation without 
stratification based on the proportion of dual-eligible patients.
    We invited 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(d)(4)(v). We refer 
readers to section a. Alternatives Considered of this final rule where 
we sought comment on the alternative to not stratify the Readmission 
measure group score based on the proportion of dual-eligible patients.
    The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Many commenters opposed the proposal to stratify the 
Readmission measure group based on the proportion of dual-eligible 
patients, primarily noting concerns with the use of dual-eligibility 
for adjustment. Commenters expressed concern about Medicaid coverage 
varying by state and that Medicare Advantage might not be accurately 
captured in the adjustment. One commenter noted that the dual-eligible 
quintile used within HRRP are subjective and that hospitals with 
similar proportions of dual-eligible patients that are near a cut point 
of quintiles may end up in different peer groups.
    Response: We acknowledge commenters' concerns with stratifying the 
Readmission measure group based on the proportion of dual-eligible 
patients, which are patients that are dually eligible for Medicare and 
full-benefit Medicaid among a hospital's total Medicare Fee-for-Service 
and Medicare Advantage patient discharges.\287\ While we have heard 
from stakeholders that dual-eligibility doesn't fully address patient 
social risk factors at a hospital, few social risk variables are 
available and consistently captured.
---------------------------------------------------------------------------

    \287\ 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.
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    Most of the measures included within CMS hospital quality programs 
and subsequently, the Overall Star Rating, include data from 
beneficiaries 65 years of age and older. The Affordable Care Act 
Medicaid coverage expansion, adopted by most states, did not directly 
impact coverage for seniors since the newly created optional 
eligibility pathway extended Medicaid eligibility for those under 65 
years of age.\288\ Thus, we disagree with concerns about variability in 
Medicaid by state.
---------------------------------------------------------------------------

    \288\ Patient Protection and Affordable Care Act of 2010, Public 
Law 111-148, 124 Stat. 119 (2010). See: Section 2001.
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    However, we also acknowledge that stratifying the Readmission 
measure group based on the proportion of dual-eligible patients may be 
confusing and misleading to patients, especially dual-eligible 
patients. In addition, analyses reveal the stratification may not 
result in the intended effect, with a strong correlation of 0.967 
between the unadjusted and adjusted measure group scores (see section 
E.4.d.(2) Proposal to Stratify Only the Readmission Measure Group 
Scores of this final rule) and significantly more hospitals losing a 
star rating than gaining a star rating as a result of stratification 
(see section 8. Effects of Requirements for the Overall Hospital 
Quality Star Ratings of the proposed rule (85 FR 49057 through 49077)).
    Furthermore, we stated in the proposed rule that on behalf of the 
Secretary, ASPE recently submitted a HHS Report to Congress on Social 
Risk Factors and Performance in Medicare's Value-Based Purchasing 
Programs that includes recommendations not to adjust publicly reported 
quality measures and information, including composite scores such as 
the Overall Star Rating, for social risk.\289\ Specifically, the report 
recommends that the stratification of hospitals by the proportion of 
dual-eligible patients be removed from HRRP, which served as the 
precedent and inspiration for the Overall Star Rating Readmission 
stratification proposal. The report indicates it is important to hold 
providers accountable for outcomes, regardless of social risk, 
indicates proposed solutions that address only the measures or 
programs, without consideration of the broader delivery system and 
policy context, are unlikely to mitigate the full implications of the 
relationship between social risk factors and outcomes, and outlines a 
comprehensive approach to incentivize providers and initiatives to 
improve health outcomes by rewarding and supporting better outcomes for 
beneficiaries with social risk factors.
---------------------------------------------------------------------------

    \289\ 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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    As a result of analyses that indicate stratification of the 
Readmission measure group would not have the intended effect, ASPE's 
recent report to Congress, and continued stakeholder concerns with 
dual-eligibility as a variable and stratification potentially causing 
confusion for patients and caregivers, we are not finalizing our 
proposal to stratify the Readmission measure group score based on the 
proportion of dual-eligible patients. However, we will continue to 
evaluate approaches for increasing the comparability of hospital star 
ratings.
    Comment: Many commenters recommended improved risk adjustment for 
or incorporation of sociodemographic factors, such as housing, food 
insecurity, social support, transportation, patient behavior, or 
functional status within the underlying individual measures or Overall 
Star Rating methodology. Some commenters recommended CMS utilize 
alternative forms of accounting for social risk factors, such as 
inclusion of health disparity reductions measures, reporting of patient 
social and behavioral risk data, and social risk factor variables, 
including zip code, Area Deprivation Index, U.S. Census, or American 
Community Survey data.
    Response: We appreciate commenters' request for improved and 
alternative forms of social risk factor adjustment. The Overall Star 
Rating is a summary of certain existing quality measures reported as 
part of CMS quality programs, which undergo rigorous development and 
reevaluation processes, including but not limited extensive measure 
testing, stakeholder vetting, and evaluation by the NQF. When measure 
methodologies, including risk adjustment approaches, are updated within 
CMS quality programs, they are subsequently updated within the Overall 
Star Rating. Unfortunately, few patient social risk factors are 
available and consistently captured for use in quality measurement. As 
stated above, ASPE recently submitted a HHS Report to Congress on 
Social Risk Factors and Performance in Medicare's Value-Based 
Purchasing Programs that includes recommendations not to adjust 
publicly reported quality measures and

[[Page 86223]]

composite scores for social risk.\290\ The report indicates it is 
important to hold providers accountable for outcomes, regardless of 
social risk, indicates proposed solutions that address only the 
individual measures or programs, without consideration of the broader 
delivery system and policy context, are unlikely to mitigate the full 
implications of the relationship between social risk factors and 
outcomes, and outlines a comprehensive approach to incentivize 
providers and initiatives to improve health outcomes by rewarding and 
supporting better outcomes for beneficiaries with social risk factors. 
As stated above, we are not finalizing our proposal to stratify the 
Readmission measure group score based on the proportion of dual-
eligible patients. We are currently reviewing the report 
recommendations and considering how to incorporate these 
recommendations within our programs and initiatives. We will continue 
to evaluate approaches to increasing the comparability hospital star 
ratings.
---------------------------------------------------------------------------

    \290\ 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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    Comment: One commenter specifically requested social risk factor 
adjustment for the Overall Star Rating measure groups, including 
Mortality.
    Response: We acknowledge the commenter's request, but disagree that 
social risk factor adjustment should be applied to all of the Overall 
Star Rating measure groups, including the Mortality measure group. In 
general, stakeholders have agreed that social risk factor adjustment is 
not appropriate for all measure types, such as measures capturing 
healthcare-associated infections or surgical complications, including 
in-hospital death for example, where the outcome or adverse events 
occurs within the hospital setting without evidence-based rationale for 
differences in outcomes based on a patient's socioeconomic status. The 
proposal to stratify the Readmission measure group based on the 
proportion of dual-eligible patients would have only applied to the 
Readmission measure group, which measures returns to the hospital 
within 30 days of discharge and may be more likely to be influenced by 
factors outside of hospital control.
    Comment: Many stakeholders commented on the proposal to stratify 
the Readmission measure group based on the proportion of dual-eligible 
patients, most of whom supported the proposal and appreciated the 
attempt to increase comparability of hospital star ratings and adjust 
for social risk factors that may influence readmissions and may be 
outside of hospital control. Some commenters noted that the proposal 
would allow for the Overall Star Rating to more accurately reflect the 
quality of care provided by safety-net, teaching, and hospitals 
receiving the highest DSH support. Several commenters also stated that 
the proposal would align with CMS programs and supported the use of the 
same dual-eligible groupings used within HRRP. Several commenters 
stated that the proposal would allow dual-eligible patients to make 
more informed decisions about where to seek care and provide a more 
accurate portrayal of a hospital's patient population.
    Response: We acknowledge the support for our proposal to consider 
stratifying the Readmission measure group based on the proportion of 
dual-eligible patients. This proposal would not necessarily increase 
comparability as it would have improved alignment with the dual-
eligible stratification within HRRP. However, this proposal would also 
reduce alignment, and, in turn, comparability, with public reporting of 
the individual measures on Hospital Compare or its successor website 
since the HRRP applies dual-eligible adjustment on the program-level, 
for payment purposes only, and the underlying readmission measure 
scores reported on Hospital Compare or its successor websites are not 
stratified (82 FR 38231 through 38237). Furthermore, ASPE's recent HHS 
Report to Congress specifically recommends that the stratification of 
hospitals by the proportion of dual-eligible patients be removed from 
HRRP. The Overall Star Rating is intended to summarize and reflect 
existing measures scores reported through CMS quality programs and 
reporting on Hospital Compare or its successor websites, which undergo 
rigorous development and reevaluation processes, and while analyses 
have indicated modest differences in star ratings based on hospital 
types, such as those receiving highest DSH support (see section 8. 
Effects of Requirements for the Overall Hospital Quality Star Ratings 
of the proposed rule (85 FR 49057 through 49077)), these analyses have 
not indicated that the summary of measure scores in the Overall Star 
Rating is an inaccurate representation of quality. We disagree that the 
proposal would have facilitated care decisions for dual-eligible 
patients. If implemented, the proposal may have obscured hospital 
quality results specifically for dual-eligible beneficiaries, as stated 
by the TEP \291\ and work groups. As stated above, we are not 
finalizing our proposal to stratify the Readmission measure group score 
based on the proportion of dual-eligible patients. We will continue to 
evaluate approaches to increasing the comparability of hospital star 
ratings.
---------------------------------------------------------------------------

    \291\ 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.
---------------------------------------------------------------------------

    After consideration of the public comments received, we are not 
finalizing our proposals related to stratification of the readmission 
measure group scores.
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 based on CMS policy, 
stakeholder feedback, and similarities to that of the Hospital VBP 
Program \292\ 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,\293\ the 
Patient & Advocate Work Group, and a public input period.\294\ In 
general,

[[Page 86224]]

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,295 296 wherein 
some stakeholders suggested different measure group weightings; 
however, little consensus has been reached on an appropriate 
alternative weighting scheme.
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    \292\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 80 FR 49567 (Aug 17, 2015) (to be 
codified at 42 CFR part 412).
    \293\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \294\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \295\ 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.
    \296\ 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.
---------------------------------------------------------------------------

(2) Continue Current Calculation of Hospital Summary Scores Through a 
Weighted Average of Measure Group Scores
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed 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 proposed 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. New Measure Group and Continuation of Certain Groups of this 
final rule), at 12 percent. We also proposed 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 68. We also proposed to 
codify the measure group weightings at Sec.  412.190(d)(6)(i) and 
summary score calculations at Sec.  412.190(d)(6).
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
[GRAPHIC] [TIFF OMITTED] TR29DE20.131

    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.297 298
---------------------------------------------------------------------------

    \297\ 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.
    \298\ 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.
---------------------------------------------------------------------------

    We invited 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(d)(6) introductory text and (d)(6)(i). The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: Many commenters supported the proposed measure group 
weights to calculate summary scores through a weighted average of 
measure group scores. Some commenters expressed specific support that 
the outcome and patient experience measure groups be weighted more than 
process measure groups, given the importance of patient outcomes. Many 
commenters supported measure group reweighting, in which the new 
process measure group, Timely and Effective Care, is weighted 12 
percent.
    Response: We appreciate the commenters' support for our proposals 
to calculate summary scores through a weighted average of measure group 
scores with Mortality, Safety of Care, Readmission, and Patient 
Experience each weighted 22 percent and Timely and Effective Care 
weighted 12 percent. We agree and have consistently heard

[[Page 86225]]

from stakeholders299 300 that outcome and patient experience 
measures represent a strongly quality signal, are more important to 
patients, and therefore should be weighted more than process measures 
within the Overall Star Rating methodology.
---------------------------------------------------------------------------

    \299\ 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.
    \300\ 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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    Comment: Some commenters supported the notion of measure group 
weighting but recommended alternative weighting schemes with more 
weight on Mortality than Readmission, for example.
    Response: We thank commenters for their support for weighting in 
general. As discussed in our proposal, the measure group weighting 
scheme was determined based on CMS policy, stakeholder feedback, and 
similarities to that of the Hospital VBP Program.\301\ In 2015, CMS' 
development contractor engaged stakeholders for input on the measure 
group weights through the TEP,\302\ the Patient & Advocate Work Group, 
and a public input period.\303\ 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,304 305 wherein some stakeholders suggested 
different measure group weightings; however, little consensus has been 
reached on an appropriate alternative weighting scheme. We will 
continue to evaluate weighting as CMS quality programs evolve and 
measures are added or removed.
---------------------------------------------------------------------------

    \301\ Inpatient Prospective Payment System/Long-Term Care 
Hospital (IPPS/LTCH) Final Rule, 80 FR 49567 (Aug 17, 2015) (to be 
codified at 42 CFR part 412).
    \302\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \303\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \304\ 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.
    \305\ 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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    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
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,\306\ 
and was vetted by stakeholders for the Overall Star Rating through TEP 
\307\ engagement and a public input period.\308\
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    \306\ 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).
    \307\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \308\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
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(2) Reweight Measure Group Scores To Calculate Summary Scores Beginning 
in CY 2021 and Subsequent Years
    Moving forward, we proposed to continue to reweight measure group 
scores. Taking into consideration the new measure grouping (we refer 
readers to section 5 E.3.b. New Measure Group and Continuation of 
Certain Groups of this final rule) and the 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 of this final rule), for the 
Overall Star Rating beginning in CY 2021 and subsequent years, we 
proposed 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. Minimum Reporting Thresholds for Receiving a Star Rating of this 
final rule). 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 proposed 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 proposed to codify this at 
Sec.  412.190(d)(6)(ii). 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 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 69.

[[Page 86226]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.132

    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 70.
[GRAPHIC] [TIFF OMITTED] TR29DE20.133

    This same principle would apply if a hospital did not have at least 
one measure reported in two measure groups. We proposed 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. 
Minimum Reporting Thresholds for Receiving a Star Rating of this final 
rule). 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 71.

[[Page 86227]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.134

    We invited public comment on our proposals to reweight measure 
group scores and codify at Sec.  412.190(d)(6)(ii). The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: Many commenters supported the proposal to continue to 
proportionally reweight measure group scores when hospitals have too 
few measures with one or more measure groups.
    Response: We appreciate the commenters' support for our proposal to 
continue to proportionally reweight measure group scores when hospitals 
have too few measures within one or measure groups.
    Comment: One commenter expressed concern with measure group 
reweighting if the remaining measure groups are calculating using less 
than three measures, in which case a measure group scores could be 
calculated using as few as one measure.
    Response: In section E.6.b. Minimum Reporting Thresholds for 
Receiving a Star Rating of this final rule, we are finalizing that once 
the reporting thresholds are met, any additional measures or measure 
groups a hospital reports contribute to their star ratings. We 
acknowledge that this may result in occasional instances in which a 
hospital has only one or two measures in a group, and therefore the 
rare circumstance in which one measure contributes to a substantial 
portion of a hospital's summary score. However, incorporating all 
measures for which a hospital has scores aligns with one of the guiding 
principles of inclusivity of measure information (see section A.1.a. 
Purpose of this final rule). Using October 2020 public reporting data, 
of the 3,356 hospitals with an Overall Star Rating, 320 hospitals (10 
percent) reported on a single measure in at least one measure group. Of 
these hospitals, the very rare circumstance in which a hospital 
reported a single measure in two measure groups only occurred for 10 
hospitals (0.3 percent). The median contribution of a single measure 
score on hospitals' Overall Star Rating was below 5 percent for all 
measure groups. The maximum that a single measure score contributed to 
a hospital's Overall Star Rating was 28 percent for the Mortality, 
Safety or Care, or Readmission measure groups. This number was 5 
percent for the Patient Experience group and 15 percent for the Timely 
and Effective Care group. For 76 percent of hospitals, no individual 
measure accounted for more than 10 percent of their Overall Star 
Rating. Thus, only in rare circumstances would a hospital meeting the 
reporting thresholds to receive a star rating have only one measure in 
a measure group contributing a high weight towards their star rating.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
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 \309\ and reliability of the 
Overall Star Rating methodology, and were vetted through TEP and public 
comment stakeholder engagement.310 311
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    \309\ Face validity refers to the notion that an instrument 
measures what it intends to measure at face value.
    \310\ 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
    \311\ 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.\312\ 
In December 2017,\313\ 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

[[Page 86228]]

clustering algorithm.\314\ K-means clustering \315\ 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 of this 
final rule.
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    \312\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \313\ 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.
    \314\ 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.
    \315\ Ibid.
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b. Minimum Reporting Thresholds for Receiving a Star Rating
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed to continue a similar threshold as previously used, but 
with modification. We proposed 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 also proposed to codify this minimum measure group 
threshold at Sec.  412.190(d)(5).
    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).\316\ 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 under a 
hospital's control.\317\ 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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    \316\ 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).
    \317\ 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 invited 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 proposed to codify these policies at Sec.  
412.190(d)(5).
    We invited public comment on our proposals as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Many commenters supported CMS' proposal to require that 
hospitals report at least three measures in at least three measure 
groups, one of which must be Mortality or Safety of Care, to receive a 
star rating. Multiple commenters acknowledged the importance that 
hospital star ratings reflect performance on the Mortality and Safety 
of Care measure groups.
    Response: We appreciate the commenters' support for the proposal to 
require that hospitals report at least three measures in at least three 
measure groups, one of which must be Mortality or Safety of Care, to 
receive a star rating. We agree that requiring at least three measures 
in either Mortality or Safety of Care will ensure that hospital star 
ratings reflect important aspects of care for patients.
    Comment: Some commenters opposed the proposed reporting threshold 
based on concerns that it would dramatically limit the number of 
hospitals eligible to receive a star rating. Such commenters 
specifically opposed the removal of the Readmission measure group as an 
option for meeting the reporting requirement for a Star Rating. They 
suggested CMS conduct further analyses to understand how no longer 
requiring the measure group would affect hospital reporting. One 
commenter supported the proposed reporting threshold based on their own 
analysis which confirmed that a very small proportion of hospitals in 
the January 2020 Hospital Compare dataset would not receive a rating 
due to the proposed threshold. One commenter did not support the 
proposal because select hospital characteristics may be 
disproportionally ineligible to receive star ratings, therefore 
questioning the value of the Overall Star Rating as a comparison tool.
    Response: We disagree with commenters that this would dramatically 
limit the number of hospitals eligible to receive star ratings. As 
stated in the proposed rule, we simulated the proposed reported 
threshold in section 8. Effects of Requirements for the Overall 
Hospital Quality Star Ratings (85 FR 49057 through 49077). Using data 
from the January 2020 Overall Star Rating (October 2019 public 
reporting data), when requiring at least three measures in at least 
three measure groups, one of which must be Mortality or Safety of Care, 
and thus no longer specifying Readmission as a requirement option, only 
125 fewer hospitals would receive a star rating, consisting of 48 
safety-net hospitals, 68 CAHs, and 16 specialty hospitals. In addition, 
using data from January 2020 Overall Star Rating, the proposal to 
combine the three process measure groups into one measure group, Timely 
and Effective Care, resulted in 180 more hospitals, of which 157 were 
CAHs, receiving a star rating with the current reporting threshold of 
three measures in at least three measure groups, one of which must be 
an outcome measure group. As discussed in section 8. Effects of 
Requirements for the Overall Hospital Quality Star Ratings of this 
final rule using October 2020 public reporting data, the final 
methodology, combining both the effects of regrouping and updating the 
reporting thresholds, for CY 2021 and subsequent years actually results 
in slightly more hospitals receiving a star rating than the current 
methodology. While the proposed reporting threshold, when isolated, 
modestly limits the number of hospitals eligible to receive a star 
rating, the final combined methodology results in more hospitals 
receiving a star rating than previous. In addition, the proposed 
threshold increases the face validity of the Overall Star Rating as a 
representation of quality of care at a hospital since it is guaranteed 
to reflect mortality or safety outcomes, which are most meaningful to 
patients and consumers, as advised by

[[Page 86229]]

the TEP and Patient & Patient Advocate Work Group.
    We also disagree that the proposed threshold will result in changes 
to hospital reporting levels since the Overall Star Rating uses 
measures as required for reporting under CMS quality programs and 
reported on Hospital Compare or its successor websites.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
7. 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 \318\ and November 2019 \319\), 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 
\320\ and March 2019 \321\). 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,\322\ 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.
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    \318\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \319\ 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.
    \320\ Centers for Medicare & Medicaid Services. (2018, June). 
Summary of Technical Expert Panel (TEP): Hospital Quality Star 
Rating on Hospital Compare.
    \321\ 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.
    \322\ 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. Peer Grouping
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for Overall Star Rating beginning with CY 2021 and subsequent years, we 
proposed 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 proposed to codify this policy at Sec.  
412.190(d)(7).
[GRAPHIC] [TIFF OMITTED] TR29DE20.135

    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.
    We proposed 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,\323\ and services 
provided (service mix \324\). 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

[[Page 86230]]

hospitals with less diverse patient cases and service mix, which tend 
to report fewer measures and measure groups.
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    \323\ 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.
    \324\ Ibid.
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    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.\325\ 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 \326\ and work groups and considered adequately sized for 
clustering into peer grouped star ratings.
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    \325\ 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.
    \326\ 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 was contingent on the participation of CAHs, 
as outlined in section B.2. Inclusion of Critical Access Hospitals in 
the Overall Star Rating of this final rule, 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 of this final rule, 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 \327\ 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.
---------------------------------------------------------------------------

    \327\ 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 \328\ (discussed in section E.8. Step 6: Application 
of Clustering Algorithm to Obtain a Star Rating of this final 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 \329\ 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,\330\ 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.
---------------------------------------------------------------------------

    \328\ Ibid.
    \329\ 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.
    \330\ Ibid.
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    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 
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

[[Page 86231]]

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 invited public comment on our proposal to peer group hospitals 
by number of measure groups and to codify this policy at Sec.  
412.190(d)(7). The following is a summary of the comments we received 
and our responses to those comments.
    Comment: Many stakeholders commented on peer grouping, most of whom 
supported CMS' proposal to peer group hospitals by the number of 
measure groups reported because it provides more equitable comparisons 
among hospitals. They agreed that number of measure groups serves as a 
proxy for hospital size, patient volume, case mix, and services, 
especially considering the analyses that demonstrate hospitals tend to 
report the same number of measure groups over time. One commenter 
recommended that CMS finalize the proposal to peer group hospitals, 
regardless of the inclusion of CAHs.
    Response: We appreciate support for our proposal to peer group 
hospitals by the number of measure groups for which they have at least 
three measures. We refer readers to section B.2. Inclusion of Critical 
Access Hospitals in the Overall Star Rating of this final rule where we 
are finalizing our proposal to include CAHs resulting in a sufficient 
amount of hospitals in each peer group.
    Comment: Some commenters did not support the proposal to peer group 
hospitals by the number of measure groups, with many of the commenters 
expressing concerns that peer grouping, as proposed, does not address 
stakeholder concerns about comparing hospitals with different 
characteristics, such as safety-net, specialty, hospital size, and 
patient case mix, and encouraged CMS to continue to evaluate approaches 
of more direct adjustment within the Overall Star Rating methodology. 
Many commenters recommended that CMS continue to evaluate other 
approaches to and options for peer grouping hospitals. They suggested 
alternative peer grouping variables, including CAH designation, 
teaching status, hospital size, services provided, and other hospital 
characteristics.
    Response: One of the guiding principles of the Overall Star Rating 
is responsiveness to stakeholders, from whom we heard concerns that the 
Overall Star Rating attempts to compare all hospitals that are 
fundamentally different in terms of services provided, patients 
treated, and other characteristics. We have evaluated many variables, 
including but not limited to CAH designation, teaching status, bed 
size, and other hospital characteristics, and our development 
contractor solicited input from a TEP, Provider Leadership Work Group, 
Patient and Patient Advocate Work Group, and the general public through 
multiple public input periods. Stakeholder engagement consistently 
results in no consensus, particularly among providers, regarding which 
variable is most suitable for peer grouping hospitals within the 
Overall Star Rating methodology. In addition, few variables are 
available and consistently captured for all hospitals in the nation. 
While peer grouping hospitals by the number of measure groups may not 
directly address differences in hospital characteristics, we believe it 
does distribute hospitals in a way that indirectly accounts for 
differences in hospital size, case mix, and services provided, as 
demonstrated through the number and type of measures they report. For 
example, as stated in section E.7. Approach to Peer Grouping Hospitals 
of this final rule, hospitals with three or four measure groups report 
fewer measures and tend to be CAHs while hospitals with all five 
measure groups tend to be safety-net and teaching hospitals. The recent 
TEP and work groups supported peer grouping hospitals by the number of 
measure groups, acknowledging the availability and usability of other 
characteristics.
    We acknowledge that for many commenters this approach did not fully 
address interest in creating comparable groups of hospitals. However, 
we believe that peer grouping by the number of measure groups reported 
would distribute hospitals in a way that indirectly accounts for 
differences in hospital size, case mix, and services provided, as 
demonstrated through the number and type of measures they report. As 
stakeholder input evolves and data becomes available, we will continue 
to examine alternative approaches to peer grouping both for the 
calculation as well as display of the Overall Star Rating.
    Comment: Some commenters raised concerns that peer grouping would 
limit meaningfulness and usefulness to patients, such as the ability to 
compare hospitals based on their needs, result in inconsistent peer 
group assignments from year to year, create different star rating 
category cutoffs thereby preventing comparable scores and star ratings 
between peer groups, and prevent some measure groups important to 
patients, such as Safety of Care and Patient Experience, and rural and 
CAHs from being included within the Overall Star Rating.
    Response: The Overall Star Rating is intended to summarize and 
complement individual measure scores reported through CMS quality 
programs and on Hospital Compare or its successor website. The Overall 
Star Rating and individual measure scores can be viewed together for 
patients and stakeholders seeking hospital quality information specific 
to their clinical needs, values, or interests and peer grouping 
hospitals within the Overall Star Rating would not impede access to 
that information. Peer grouping hospitals based on the number of

[[Page 86232]]

measure groups for which they report at least three measures is 
intended to improve comparability of hospital star ratings by 
accounting for differences in measure information. Peer grouping is 
applied independent of the measure and measure group reporting 
threshold and would therefore not result in any reduction in the number 
or type of hospitals receiving star ratings or the number or type of 
measures or measure groups contributing to hospital scores.
    While peer grouping will result in slightly different summary score 
cutoffs for star rating assignments between groups, reevaluation 
analyses presented to the TEP \331\ and work groups reveal those 
differences are modest. As outlined in section E.7. Approach to Peer 
Grouping Hospitals of this final rule, analyses using historical data 
have confirmed that hospitals tend to report a similar number and type 
of measures over time, resulting in hospitals assigned to the same peer 
group 96 to 98 percent of the time over 5 years of data. We plan to 
make public the summary score cutoffs for each peer group along with 
each publication of the Overall Star Ratings.
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    \331\ 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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    To clarify, peer grouping itself would not prevent measures or 
measure groups from being included within hospital star ratings nor 
prevent any specific hospitals from receiving a star rating. In section 
E.6. of this final rule, we are finalizing a policy about the minimum 
reporting thresholds for receiving a star rating which details that to 
receive a star rating, hospitals must report at least three measures 
within at least three measure groups, one of which must be Mortality of 
Safety of Care. Once that reporting threshold is met, any additional 
measures and measure groups a hospital reports contribute to their star 
rating. Therefore, all measures for which a hospital meets the 
specified measure threshold will be included within their star rating. 
We do note that, using data from January 2020 Overall Star Ratings, the 
proposed reporting threshold does result in 125 fewer hospitals 
receiving a star rating, consisting of 48 safety-net hospitals, 68 
CAHs, and 16 specialty hospitals. These hospitals did not meet the 
minimum reporting threshold of at least three measures within at least 
three measure groups, one of which must be Mortality or Safety of Care.
    Comment: One commenter stated that the peer grouping proposal does 
not account for geographic characteristics, especially in light of 
variations in COVID-19 hospitalizations in certain regions.
    Response: The Overall Star Rating summarizes certain existing 
measure scores reported within CMS quality programs and on Hospital 
Compare or its successor website, which do not make geographical 
distinction within specifications. The impact of variation in COVID-19 
hospitalizations, and healthcare broadly, is under active surveillance 
by CMS and any updates to the individual measures as a result of COVID-
19 will subsequently be incorporated within the Overall Star Rating. We 
also refer readers to section G. Overall Star Rating Suppressions of 
this final rule where we are finalizing suppression of star ratings 
under certain circumstances, including when a Public Health Emergency 
substantially affects the underlying measure data.
    Comment: Regardless of support, several commenters recommended that 
CMS make transparent on Hospital Compare or its successor websites the 
details of and information regarding peer grouping, including the 
hospital characteristics within each peer group, to educate 
stakeholders, including patients.
    Response: Historically, we have publicly posted the Overall Star 
Rating comprehensive methodology report, input file, and SAS pack at 
the time of the Overall Star Rating publication so that stakeholders 
may review and replicate the methodology. Using the input file and SAS 
pack, coupled with hospital characteristic data, stakeholders would 
have the ability to review the types of hospitals assigned to each peer 
group. We plan to continue to publicly post, for each publication of 
the Overall Star Rating, the Overall Star Rating input file and SAS 
pack on QualityNet and Overall Star Rating results on data.cms.gov, 
which will include all specifications and results of the Overall Star 
Rating, including peer grouping.
    Comment: One commenter suggested that peer grouping be applied 
earlier in the methodology so that measure group scores and summary 
scores are also only calculated relative to hospital peers.
    Response: In early evaluation of peer grouping, application of peer 
grouping hospitals as early as measure group score calculation and as 
late as prior to clustering within the Overall Star Rating methodology 
were considered. Empirical analyses and stakeholder engagement efforts 
consistently favored the proposed approach of peer grouping hospitals 
after summary score calculation and before clustering, because it 
ensures the most valid comparisons of hospital measure and measure 
group scores prior to peer grouping. Also, given that peer grouping is 
based on an aggregate variable of measure group reporting, application 
of peer grouping at an earlier stage would be less impractical and 
transparent to stakeholders, potentially confusing stakeholders and 
patients.
    After consideration of the public comments we received, we are 
finalizing our proposals as proposed.
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,\332\ 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.
---------------------------------------------------------------------------

    \332\ 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 
TEP333 334 and during a public input period \335\ 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

[[Page 86233]]

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.\336\ 
Stakeholders have generally supported the use of k-means clustering to 
assign star ratings over arbitrary percentiles and statistically 
significant cutoffs.337 338 339
---------------------------------------------------------------------------

    \333\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \334\ Centers for Medicare & Medicaid Services. (2017, June). 
Hospital Quality Star Ratings on Hospital Compare Technical Expert 
Panel.
    \335\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \336\ 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.
    \337\ Centers for Medicare & Medicaid Services. (2015, 
February). Summary of Technical Expert Panel (TEP) Evaluation of 
Hospital Quality Star Ratings on Hospital Compare.
    \338\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare Public 
Input Summary Report.
    \339\ 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,\340\ to provide more reliable and stable star rating 
assignments. Prior to December 2017, we performed Winsorization \341\ 
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.\342\ 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.\343\
---------------------------------------------------------------------------

    \340\ 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.
    \341\ 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.
    \342\ Ibid.
    \343\ 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) Continuation of K-Means Clustering
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed to continue to use k-means clustering with 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 proposed to codify 
this policy at Sec.  412.190(d)(8). We believe use of k-means 
clustering is most appropriate because it aligns with the clustering 
algorithm used for the HCAHPS Star Rating \344\ and maximizes the 
within star rating category similarities and between star rating 
category differences.
---------------------------------------------------------------------------

    \344\ 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.
---------------------------------------------------------------------------

    We invited 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(d)(8). The following is a 
summary of the comments we received and our responses to those 
comments.
    Comment: Many commenters supported CMS' proposal to continue use of 
k-means clustering to assign hospitals to star ratings. Some commenters 
supported alignment with the clustering algorithm used within the 
HCAHPS Star Ratings.
    Response: We appreciate the commenters' support for our proposal to 
continue use of k-means clustering to assign hospitals to star ratings 
and agree that it aligns with the clustering algorithm used within the 
HCAHPS Star Ratings.\345\
---------------------------------------------------------------------------

    \345\ 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.
---------------------------------------------------------------------------

    Comment: Some commenters opposed CMS' approach to continue use of 
k-means clustering because it may not be transparent for or 
reproducible by stakeholders. Commenters specifically noted that the 
relative methodology of k-means clustering makes it difficult for 
hospitals on the border of star rating categories to evaluate and 
predict their performance from one publication to the next. Some 
commenters recommended that CMS assign hospital star ratings through 
fixed cutoffs, which could be initially determined by k-means 
clustering but remain static over time, in order to increase 
predictability of star rating assignments and help inform quality 
improvement efforts.
    Response: The use of k-means clustering was originally implemented 
as a result of testing and stakeholder engagement through a TEP and 
public input. While k-means clustering may not be as predictable as 
fixed cutoffs, it clusters hospitals so that summary scores in one star 
rating category are more similar to each other and more different than 
summary scores in other star rating categories, effectively minimizing 
within-category and maximizing between-category differences in summary 
scores. Historically, we have publicly posted the Overall Star Rating 
comprehensive methodology report, input file, and SAS pack at the time 
of the Overall Star Rating publication so that stakeholders may review 
and replicate the methodology. With any approach to assigning hospitals 
to star ratings, there will be some hospitals with summary scores at 
the border of star rating categories that have the potential to 
increase or decrease star ratings between publications. In addition, k-
means clustering aligns with the clustering approach used for the 
HCAHPS Star Ratings \346\ and, at the time of development, resulted in 
a broader distribution of star rating that alternative approaches. 
Furthermore, the primary goal of the Overall Star Rating is to 
summarize existing hospital quality information for patients. For 
targeted quality improvement efforts, we refer hospitals to their 
detailed measure rates under each individual CMS hospital quality 
program.
---------------------------------------------------------------------------

    \346\ 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.
---------------------------------------------------------------------------

    After consideration of the public comments received, we are 
finalizing our proposals as proposed.

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

[[Page 86234]]

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. Preview Period
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for Overall Star Rating beginning with the CY 2021 and subsequent 
years, we proposed 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 proposed to codify this policy at Sec.  
412.190(e). This proposal as well as the proposal to report Overall 
Star Rating annually using data publicly reported on Hospital Compare 
or its successor websites 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 invited 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(e). The following is a summary of the 
comments we received and our responses to those comments.
    Comment: Commenters supported the Overall Star Rating preview 
period and CMS' provision of Hospital-Specific Reports. One commenter 
suggested that the confidential preview period be 60 days, rather than 
30 days.
    Response: We appreciate the commenters' support for our proposal to 
continue providing a preview period during which providers have the 
opportunity to confidentially review their measure, measure group, 
summary score, and star rating results prior to publication. We believe 
a 30-day preview period is sufficient because it allows hospitals to 
preview their Overall Star Rating results while maintaining timely 
publication on Hospital Compare or its successor website. In addition, 
a 30-day preview period is consistent with the standard amount of time 
provided for hospitals to review their results for the individual 
measures reported on Hospital Compare or its successor website under 
various CMS hospital quality programs.\347\
---------------------------------------------------------------------------

    \347\ As one example, Section 1886(b)(3)(B)(viii)(VII) of the 
Act, as amended by section 3001(a)(2) of the Affordable Care Act, 
requires that the Secretary establish procedures for making 
information regarding measures submitted available to the public 
after ensuring that a hospital has the opportunity to review its 
data before they are made public. In the FY 2014 IPPS/LTCH PPS final 
rule (78 FR 50776 through 50778), we finalized our proposal, for the 
FY 2014 Hospital IQR Program and subsequent years, to continue our 
current policy of reporting data from the Hospital IQR Program as 
soon as it is feasible on CMS websites such as the Hospital Compare 
website, http://www.hospitalcompare.medicare.gov, and/or the 
interactive https://data.medicare.gov website, after a 30- day 
preview period.
---------------------------------------------------------------------------

    After consideration of the public comments received, we are 
finalizing our proposals as proposed.

G. Overall Star Rating Suppressions

    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for the Overall Star Rating beginning in CY 2021 and subsequent years, 
we proposed 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 
Rating 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. Suppression
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
we proposed 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 proposed 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 calculations 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 proposed to codify this policy at 
Sec.  412.190(f)(1).
    As mentioned above, consistent with past practices, we proposed 
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 invited public comment on our proposals as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Commenters supported CMS' suppression policy for 
subsection (d) hospital star ratings but requested that CMS add clear 
criteria for suppression in the event of data submission error on the 
part of the provider or calculation error on the part of CMS.
    Response: We appreciate the commenters' support for our proposal to

[[Page 86235]]

suppress star ratings for subsection (d) hospitals only under 
extenuating circumstances that affect numerous hospitals as determined 
by CMS or when CMS is at fault. These extenuating circumstances 
include: (1) A calculation error on the Overall Star Rating, (2) a 
systemic error at the CMS quality program level that substantively 
affects the Overall Star Rating calculation, or (3) a public health 
emergency that substantially affects the underlying measure data. We 
would not suppress an individual hospital's star rating because the 
hospital or one of its agents submitted inaccurate claims and 
underlying measure data to CMS.
    Comment: Several commenters expressed concern about the impact of 
COVID-19 on the Overall Star Rating and recommended CMS provide the 
option to suppress data and ratings possibly affected by COVID-19.
    Response: On March 27, 2020, we granted exceptions under certain 
Medicare quality reporting and value-based purchasing 
programs.348 349 In addition, the Medicare and Medicaid 
Programs, Clinical Laboratory Improvement Amendments (CLIA), and 
Patient Protection and Affordable Care Act; Additional Policy and 
Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency Interim Final Rule (IFC) (85 FR 54820) updated the 
extraordinary circumstances exceptions granted for the Hospital 
Acquired Condition (HAC) Reduction Program, Hospital Readmissions 
Reduction Program (HRRP), and Hospital VBP Program for the PHE for 
COVID-19 as a result of the PHE for COVID-19. This IFC also announced 
that with respect to the Hospital VBP Program, HRRP, and HAC Reduction 
Program, if, as a result of a decision to grant a new nationwide ECE 
without request or a decision to grant a substantial number of 
individual ECE requests, we do not have enough data to reliably compare 
national performance on measures, we may propose to not score 
facilities, hospitals based on such limited data or make the associated 
payment adjustments for the affected program year.
---------------------------------------------------------------------------

    \348\ CMS Press Release, dated March 22, 2020, CMS Announces 
Relief for Clinicians, Providers, Hospitals and Facilities 
Participating in Quality Reporting Programs in Response to COVID-19. 
Located at https://www.cms.gov/newsroom/press-releases/cms-announces-relief-clinicians-providers-hospitals-and-facilities-participating-quality-reporting.
    \349\ CMS Guidance Memo, dated March 27, 2020, Exceptions and 
Extensions for Quality Reporting Requirements for Acute Care 
Hospitals, PPS-Exempt Cancer Hospitals, Inpatient Psychiatric 
Facilities, Skilled Nursing Facilities, Home Health Agencies, 
Hospices, Inpatient Rehabilitation Facilities, Long-Term Care 
Hospitals, Ambulatory Surgical Centers, Renal Dialysis Facilities, 
and MIPS Eligible Clinicians Affected by COVID-19. Located at 
https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf.
---------------------------------------------------------------------------

    We are currently analyzing how our exemptions granted and the 
COVID-19 pandemic impact the measures within various CMS quality 
programs. We note that the Overall Star Rating is calculated using 
individual measures publicly reported through CMS quality programs and 
on Hospital Compare or its successor website. The Overall Star Rating 
uses data publicly reported through CMS quality programs and thus, data 
excluded from those CMS quality programs, will be subsequently excluded 
from the Overall Star Rating. Hospitals can also utilize established 
processes under each program in order to review and correct individual 
measure scores. We refer readers to the QualityNet website: https://qualitynet.org/ for additional program-related information. We may also 
consider suppression of the Overall Star Rating if we determine that 
due to a public health emergency underlying measure data were 
substantially affected.
    After consideration of the public comments received, we are 
finalizing our proposals as proposed.
(1) CAHs
(a) Background
    As discussed in section B. Critical Access Hospitals in the Overall 
Star Rating of this final 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 websites, 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 Rating. 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) Withholding
    In the CY 2021 OPPS/ASC proposed rule (85 FR 48996 through 49027), 
for Overall Star Rating beginning in CY 2021 and subsequent years, we 
proposed to (1) continue to allow CAHs to withhold their Overall Star 
Rating; and (2) to codify this at Sec.  412.190(f)(2). These proposals, 
discussed in more detail below, align with the guiding principles of 
transparency and inclusivity of hospitals, as outlined within section 
A. Background of this final rule, while allowing CAHs to voluntarily 
withhold their Overall Star Rating.
i. Withholding Star Ratings
    Beginning with CY 2021 and for subsequent years, we proposed that 
CAHs may request to withhold their Overall Star Rating from public 
release on Hospital Compare or its successor websites as long as the 
request for withholding is made, at the latest, during the Overall Star 
Rating preview period as finalized in section F.2. Proposed Preview 
Period of this final rule. We also proposed to codify this policy at 
Sec.  412.190(f)(2)(i). CAHs may make this request by submitting the 
``Request Form for Withholding/Footnoting Data for Public Reporting'' 
form \350\ 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

[[Page 86236]]

Compare or its successor websites through completion of this form, all 
of their measure 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 websites 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).
---------------------------------------------------------------------------

    \350\ The ``Request Form for Withholding/Footnoting Data for 
Public Reporting'' form is in the process of being updated for use 
in CY21.
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ii. Withholding Star Ratings and Public Input File Data
    We proposed 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 Rating. We also proposed to codify this 
policy at Sec.  412.190(f)(2)(ii). 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 websites and the Overall Star Rating public 
input file by submitting a form (``Request Form for Withholding/
Footnoting Data for Public Reporting'' \351\ 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 websites 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.
---------------------------------------------------------------------------

    \351\ The ``Request Form for Withholding/Footnoting Data for 
Public Reporting'' form is in the process of being updated for use 
in CY21.
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    As an example, for a January 2021 Overall Star Rating publication 
based on data publicly reported on Hospital Compare or its successor 
websites 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 invited public comment on our proposals as discussed previously. 
The following is a summary of the comments we received and our 
responses to those comments.
    Comment: Some commenters supported the ability for CAHs to choose 
to withhold their Overall Star Rating from publication.
    Response: We thank commenters for their support. We believe this 
proposal is consistent with the ability for CAHs to voluntarily report 
measures within CMS quality programs.\352\
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    \352\ Centers for Medicare & Medicaid Services. (2020, November 
15). Participation. Retrieved from www.qualitynet.org: https://www.qualitynet.org/inpatient/public-reporting/public-reporting/participation.
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    Comment: Some commenters did not support CAHs having the option to 
withhold their rating. These commenters expressed concerns that 
allowing CAHs to withhold their Overall Star Rating from publication 
after they have an opportunity to preview their data decreases 
transparency and allows CAHs to choose to share positive ratings and 
withhold negative ratings.
    Response: We disagree that this policy would actually decrease 
transparency. As discussed in section B. Critical Access Hospitals in 
the Overall Star Rating above in this final rule, 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.\353\ 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 be inclusive of 
measure and hospital information. 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. Furthermore, CMS 
historical data shows that as few as zero and as many as two CAHs 
actually exercise the ability to request withholding of their measure 
data and star rating for a given publication. Many CAHs voluntarily 
submit measure data for certain CMS quality programs, which are then 
subsequently displayed on Hospital Compare or its successor websites 
selecting Optional Public Reporting Notice of Participation through 
their QualityNet account. If CAHs elect to voluntarily submit measure 
data and report their measure scores on Hospital Compare or its 
successor website, they are subsequently eligible to receive a star 
rating, should they meet the Overall Star Rating reporting thresholds. 
The inclusion of CAHs within the Overall Star Rating provides patients 
with transparency on the hospital performance for hospitals that may be 
providing acute inpatient and outpatient care in their area.
---------------------------------------------------------------------------

    \353\ 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.
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    After consideration of the public comments received, we are 
finalizing our proposals as proposed.

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).\354\ 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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    \354\ See also Correction notification issued January 3, 2020 
(85 FR 224).

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[[Page 86237]]

    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 
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 proposed to require prior 
authorization for two new service categories: Cervical Fusion with Disc 
Removal and Implanted Spinal Neurostimulators. We also proposed to add 
those service categories to Sec.  419.83(a). We proposed 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 proposed 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 proposed 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 proposed 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 proposed that the two proposed service categories 
would be added as new paragraphs (a)(2)(i) through (ii) to new 
paragraph (a)(2) as follows: (i) Cervical Fusion with Disc Removal and 
(ii) Implanted Spinal Neurostimulators. We also proposed that existing 
paragraph (a)(2) would be renumbered as paragraph (a)(3).
    We proposed that the list of covered OPD services that would 
require prior authorization are those identified by the CPT codes in 
Table 72. For ease of review, we only included in Table 72 the CPT 
codes that fell 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 also included the Final List of 
Outpatient Services that Require Prior Authorization for the five 
initial service categories in Table 73.\355\
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    \355\ 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 notification. See 
85 FR at 225.
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2. Basis for Adding 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,\356\ 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 the CY 2021 OPPS/ASC 
proposed rule, we updated the analyses undertaken for the CY 2020 OPPS/
ASC proposed rule.\357\ 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.\358\ 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.
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    \356\ See Hospital Outpatient Prospective System/Ambulatory 
Surgical Center Payment System Proposed Rule, 84 FR 39398 at 39603 
(August 9, 2019).
    \357\ 84 FR 39604.
    \358\ 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.
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    In the proposed rule, we described what we believe are the 
unnecessary increases in volume for each of the categories of services 
for which we proposed to require prior authorization, which we have 
also included below.
     Implanted Spinal Neurostimulators: Our analysis of 
Integrated Data Repository (IDR) data showed that, with regard to 
Implanted Spinal Neurostimulators, claims volume for insertion or 
replacement of spinal neurostimulator pulse generator or receiver, 
CPT[supreg] \359\ code 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,

[[Page 86238]]

the average annual increase in volume was 17 percent. For CPT code 
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 CPT code 63650, implantation of spinal neurostimulator electrodes, 
accessed through the skin, we observed an increase in volume of 77.9 
percent between 2007 and 2018, 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 CPT code 63650, 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.
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    \359\ The Current Procedural Technology (CPT) coding system is a 
registered trademark of the American Medical Association.
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     Cervical Fusion with Disc Removal: When reviewing CMS data 
available through the 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 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, CPT 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 used data from 2012 
forward to allow for the start-up statistics to normalize. Nonetheless, 
the dramatic increases in volume that we identified persisted well 
after the initial use of these codes.
    A rate of increase higher than the expected rate is not always 
improper; however, when we considered the data, we believed the 
increases in the utilization rate for this service were unnecessary. 
CPT code 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 code 22551 was changed 
to a higher level. Effective January 1, 2016, the CY 2016 OPPS/ASC 
final rule \360\ moved the APC for CPT code 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 the codes 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 stated our belief 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 also noted our belief 
that prior authorization is an appropriate control method for the 
unnecessary increase in volume for this service.
---------------------------------------------------------------------------

    \360\ 79 FR 66769 and 80 FR 70297.
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    Our conclusion that the increases in volume for both Cervical 
Fusion with Disc Removal and Implanted Spinal Neurostimulators are 
unnecessary was 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 noted 
our belief 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 stated our belief that 
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 stated in the proposed rule that 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 stated that we believe prior 
authorization for these services will be an effective method for 
controlling unnecessary increases in the volume of these services and 
noted our expectation that it will reduce the instances in which 
Medicare pays for services that are determined not to be medically 
necessary. We requested comments on the addition of these two service 
categories.
BILLING CODE 4120-01-P

[[Page 86239]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.136


[[Page 86240]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.161


[[Page 86241]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.137

BILLING CODE 4120-01-C
1. Summary of the Public Comments and Responses to Comments on the 
Proposed Rule
---------------------------------------------------------------------------

    \361\ 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.
---------------------------------------------------------------------------

    We received over 100 comments on this proposal, including comments 
from healthcare providers, professional and trade organizations, and 
device manufacturers. The following is a summary of the comments we 
received and our responses.
    Comment: Several commenters reiterated concerns that we addressed 
in the CY 2020 OPPS/ASC final rule with comment period that prior 
authorization processes add burden and costs, can result in unnecessary 
delays in care, and interfere with the physician-patient care decision 
or otherwise negatively affect patient care. Other commenters

[[Page 86242]]

similarly expressed concerns with the prior authorization processes 
within Medicare Advantage Plans. Some commenters stated that prior 
authorization is contrary to CMS' Patients Over Paperwork initiative 
and referenced CMS Administrator Seema Verma's comments related to 
prior authorization. Other commenters stated that CMS has limited 
experience with prior authorization in Medicare Fee-For-Service and 
that there is a lack of administrative structure for implementing the 
proposed changes and a lack of guidelines about the process by which 
providers would obtain prior authorization. Commenters also noted that 
time is needed to develop and maintain the communication logistics 
between physicians and hospitals. Still other commenters requested 
information regarding how prior authorization will impact advance 
beneficiary notices (ABNs) and continued to express concern regarding 
the inability to appeal the outcome of prior authorization requests.
    Response: As we stated in the CY 2020 OPPS/ASC final rule with 
comment period, the process we are establishing specifically relates to 
Medicare Fee-For-Service, not Medicare Advantage, and we believe that 
we have structured the Medicare Fee-For-Service prior authorization 
processes to effectively account for concerns associated with 
processing timeframes, patient care, and other administrative concerns. 
We have implemented prior authorization processes while still 
preserving access to care and are building upon our already established 
prior authorization program for certain durable medical equipment, 
prosthetics, orthotics and supplies (DMEPOS) under 42 CFR 414.234. 
Similarly, we recently announced the nationwide expansion of the 
Medicare Prior Authorization Model for Repetitive, Scheduled Non-
Emergent Ambulance Transport (RSNAT) in light of its success in 
reducing spending while maintaining quality of care. We remain fully 
committed to the agency's ``Patients over Paperwork'' initiative to 
reduce unnecessary burden, and, as explained below, our proposals are 
not inconsistent with this initiative. Moreover, while we agree that 
Administrator Verma noted concerns about potential burden related to 
prior authorization, she also recognized that prior authorization ``is 
an important utilization management tool.'' \362\ More recently in 
discussing the resounding success of the RSNAT model, Administrator 
Verma stated that ``[w]hen deployed appropriately, prior authorization 
can help ensure Medicare requirements are met before a service is 
provided and the claim is paid, without creating any new documentation 
requirements for providers.'' \363\ We recognize apprehension resulting 
from problems with prior authorization in other settings related to 
burden, cost, and patient access, but as with our other Medicare Fee-
For-Service prior authorization processes, we believe that the Hospital 
OPD prior authorization process will not have these problems. We have 
established timeframes for contractors to render decisions on prior 
authorization requests, as well as an expedited review process when the 
regular review timeframe could seriously jeopardize the beneficiary's 
health, that we believe will enable hospitals to receive timely 
provisional affirmations. Additionally, we note that our prior 
authorization policy does not create any new documentation or 
administrative requirements. Instead, it just requires the same 
documents that are currently required to be submitted earlier in the 
process. Hospital OPDs should not need to divert resources from patient 
care. We note that prior authorization has the added benefit of giving 
hospitals some assurance of payment for services for which they 
received a provisional affirmation. In addition, beneficiaries will 
have information regarding coverage prior to receiving the service and 
will benefit by knowing in advance of receiving a service if they will 
incur financial liability for non-covered services.
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    \362\ See Administrator Seema Verma's speech at the American 
Medical Association National Advocacy Conference at https://www.cms.gov/newsroom/press-releases/speech-remarks-cms-administrator-seema-verma-american-medical-association-national-advocacy.
    \363\ See CMS Press Release, dated September 22, 2020, CMS to 
Expand Successful Ambulance Program Integrity Payment Model 
Nationwide located at https://www.cms.gov/newsroom/press-releases/cms-expand-successful-ambulance-program-integrity-payment-model-nationwide.
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    We also believe that some assurance of payment and some protection 
from future audits will ultimately reduce burdens associated with 
denied claims and appeals. We note that because the prior authorization 
process is not a final determination and a provider has the ability to 
resubmit a prior authorization request multiple times, it is not 
necessary to provide appeal rights. Appeal rights still exist once a 
claim is actually denied.
    We note that the prior authorization process does not change a 
provider's obligation with regard to ABNs. An ABN is used to advise a 
beneficiary in advance that the provider expects Medicare payment to be 
denied.
    Comment: We received comments in support of prior authorization and 
our goal of ensuring the appropriateness of payment for Medicare 
services.
    Response: We thank the commenters for their comments. We appreciate 
the positive responses to our proposed prior authorization process.
    Comment: Some commenters continue to question whether section 
1833(t)(2)(F) of the Act grants CMS the authority to establish a prior 
authorization process and again questioned the inclusion of botulinum 
toxin injections. Still other commenters suggested adding new 
procedures is arbitrary and capricious because the commenters believed 
that CMS has not demonstrated that increases in the volume of services 
for which we proposed to require prior authorization are unnecessary 
and that we did not demonstrate there are not other clinical reasons 
for the increases.
    Response: As we conveyed in the CY 2020 OPPS/ASC final rule with 
comment period, we believe section 1833(t)(2)(F) of the Act gives us 
discretion to determine the appropriate methods to control unnecessary 
increases in the volume of covered OPD services. We carefully 
considered all available options in choosing to propose the prior 
authorization process, which has already been shown to be an effective 
tool in Medicare Fee-for-Service, and which we believe will be 
effective at controlling unnecessary increases for both cervical fusion 
with disk removal and implanted spinal neurostimulators. Our decision 
to include botulinum toxin injections in the CY 2020 OPPS/ASC final 
rule is beyond the scope of this CY 2021 rule, but our reasoning is 
discussed in detail in last year's proposed and final rules. Our 
extensive data analysis included in this year's proposed rule 
demonstrates that there have been unnecessary increases for each of the 
two proposed service categories and that we did not identify other, 
legitimate reasons for the sustained increases.
    Comment: Several commenters again questioned why ambulatory 
surgical centers (ASCs) and physicians are exempt from this prior 
authorization process and believe the prior authorization process 
should cover ASCs and physicians. Commenters also stated that services 
may shift to ASCs, physicians' offices, or even inpatient hospitals to 
avoid the OPD prior authorization process.
    Response: This prior authorization process is being adopted under 
section 1833(t)(2)(F) of the Act, which is specific to the OPPS, which 
provides payment only to hospital outpatient

[[Page 86243]]

departments. As such, we cannot extend the process to ASCs or other 
healthcare provider types, including physicians outside of the hospital 
outpatient department setting. These other entities, such as ASCs, are 
paid under other payment systems. We thank the commenters for reminding 
us of the potential for these services to shift to other care settings. 
We will monitor the data and may consider additional program integrity 
oversight if such shifts are realized.
    Comment: Several commenters stated that CMS is not providing 
adequate time for training and education that providers will require in 
learning the new process in relation to the additional procedures. Some 
commenters suggested that CMS must evaluate the current process and 
assess the administrative burden, costs, impact on patient care, and 
effectiveness with regard to program integrity and managing 
inappropriate utilization prior to expanding the process to include 
cervical fusion with disk removal and implanted spinal 
neurostimulators. Other commenters stated that in light of the 
continuing public health emergency (PHE) resulting from the 2019 Novel 
Coronavirus (COVID-19) and the resulting serious financial impact, CMS 
should have delayed the implementation of the process and also delay 
the implementation date for the current proposal.
    Response: No new documentation requirements are created as a result 
of this process. Instead, currently required documents are submitted 
earlier in the process. We recognize the impact of the COVID-19 PHE, 
but because we initially focused this process on elective cosmetic 
procedures, we believed that the impact of the PHE would be minimal. 
Further, given the importance of prior authorization activities to CMS' 
program integrity efforts, we did not believe a delay of the 
implementation date was warranted. The proposed date for the expansion 
of the prior authorization process to include the two new service 
categories is July 1, 2021. We believe this provides CMS and the 
Medicare Administrative Contractors (MACs) more than adequate lead time 
to educate and train providers on the addition of the new service 
categories. While these service categories are not cosmetic procedures, 
they are still elective and non-emergent, thus we do not believe 
delaying the expansion beyond July 1, 2021 due to the impact of the 
COVID-19 PHE is warranted.
    Comment: Several commenters suggested that prior authorization is 
unnecessary and that CMS should focus on using already existing tools, 
such as National Coverage Decisions (NCDs) and Local Coverage 
Determinations (LCDs), prepayment and postpayment reviews, and provider 
outreach and education, since these are more effective methods to 
control unnecessary increases in volume. One commenter suggested CMS 
should use the Beneficiary and Family Centered Care Quality Improvement 
Organization contractor to retrospectively educate providers whose use 
of these procedures is statistically greater than their peers when 
adjusted for patient population characteristics. Other commenters 
referenced the trial period that must be completed with regard to 
spinal cord stimulation and asserted that this trial period served to 
prevent overutilization of the device. Still other commenters suggested 
that CMS should clarify already existing LCDs and NCDs to remedy the 
overutilization instead of using prior authorization.
    Response: We have a variety of tools that can be used in making 
reasonable and necessary determinations, including NCDs and LCDs. For 
procedures that do not have specific LCDs or NCDs, contractors may make 
individual claim determinations to assess whether or not the services 
are reasonable and necessary under section 1862(a)(1)(A) of the Act. 
This prior authorization process does not make any changes to current 
documentation or medical necessity requirements. While we recognize the 
utility of NCDs and LCDs, the existence of an NCD or an LCD does not, 
in and of itself, guarantee compliance with the policy. Thus, the need 
for medical record review. We also believe that 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, so we use prior authorization, prepayment review, and 
postpayment reviews to review medical records and ensure compliance 
with these policies. Prior authorization entails the review of the same 
documentation provided when submitting a claim to ensure compliance 
with coverage policy, for example, NCDs or LCDs. Prior authorization 
has already proven to be an effective method for controlling improper 
payments and decreasing the volume of potentially improperly billed 
services for certain DMEPOS items. Thus, we believe that the use of 
prior authorization in the OPD context will be an effective tool in 
controlling unnecessary increases in the volume of covered OPD services 
by ensuring that the correct payments are made for medically necessary 
OPD services, while also being consistent with our overall strategy of 
protecting the Medicare Trust Fund from improper payments, reducing the 
number of Medicare appeals, and improving provider compliance with 
Medicare program requirements. Merely clarifying existing NCDs and/or 
LCDs, if warranted, does not equate to a comprehensive strategy. We 
will continue to work toward enhancing our overall program integrity 
strategy in meaningful ways.
    Comment: Some commenters again suggested that MACs must have the 
clinical review capabilities to sufficiently handle prior authorization 
requests and suggested that CMS require specific credentials of the MAC 
medical reviewers to ensure the accuracy of MAC decisions. One 
commenter requested that we follow the principles noted in the 2018 
Consensus Statement on Improving the Prior Authorization Process \364\ 
developed in consensus with various national provider associations and 
insurer trade organizations, including application of prior 
authorization to only outliers; adjustment of prior authorization lists 
to remove low-value services; transparency of requirements; protections 
of patient continuity of care; and automation to improve process 
efficiency.
---------------------------------------------------------------------------

    \364\ See https://www.ama-assn.org/sites/ama-assn.org/files/corp/media-browser/public/arc-public/prior-authorization-consensus-statement.pdf.
---------------------------------------------------------------------------

    Response: In all Medicare Fee-for-Service medical review programs, 
we require that MACs utilize clinicians, specifically, registered 
nurses, when reviewing medical documentation. We also require the 
oversight of a Medical Director and additional clinician engagement if 
necessary. We are confident that MACs have the requisite expertise to 
effectively administer the prior authorization process, and we maintain 
a robust oversight process to ensure the accuracy and consistency of 
their review decisions. Further, we believe the prior authorization 
process we have adopted aligns with the principles outlined by the 
commenters. We have established review timeframes for both initial and 
resubmitted prior authorization requests, as well as an expedited 
process when the regular timeframe could impact the health of the 
beneficiary. Having established turnaround times allows providers and 
patients to plan accordingly and reduces provider burden. We have also 
established an exemption process with specific requirements for 
providers to demonstrate compliance with Medicare requirements for 
these services and be exempt from the prior authorization

[[Page 86244]]

process. We are also committed to incorporating automation into our 
prior authorization processes and recognize the value of automation in 
shortening the receipt of prior authorization requests and our response 
time frames. We recognize that not all providers have the same level of 
technology. With regard to the Hospital OPD prior authorization 
process, the majority of providers so far continue to submit requests 
and medical information to the MACs via facsimile. Other providers 
submit the requests through the United States (U.S.) postal service. We 
also support a variety of electronic mechanisms used by providers in 
submitting prior authorization requests. These providers use either the 
MAC-specific web portals, CMS's electronic submission of medical 
documentation (esMD) system, and may also send prior authorization 
requests using the X12 278 standard, though currently, relatively few 
providers submit prior authorization requests electronically. We 
continue to monitor other federal and industry initiatives in order to 
improve the efficiency of our prior authorization processes, increase 
provider willingness to submit requests electronically, reduce provider 
burden, decrease delays in patient care and promote high quality, 
affordable health care.
    Comment: We received comments that the growth in utilization of a 
procedure/product class exceeding the baseline growth rates in the 
Medicare population is not a sufficient basis for inferring that 
utilization is inappropriate or that utilization growth is unwarranted. 
Some commenters suggested that CMS must be more transparent in the 
analyses undertaken while other commenters suggested that the reduction 
of inappropriate or unnecessary care does not outweigh the increased 
burden on providers and the impact on patient care. Still other 
comments agreed that the rates had increased but suggested that CMS 
analyze readily available clinical information to explain the changes 
in utilization before the agency adopts broad-based interventions such 
as imposing prior authorization on outpatient hospitals. Some 
commenters stated that the increase in cervical fusion with disc 
removal can be attributed to its removal from the Inpatient Only List 
(IPO) list as of January 1, 2012. Some of these commenters questioned 
whether CMS analyzed only the volume of outpatient claims or if the 
total number of claims that involved cervical fusions were analyzed, 
specifically to determine if there was a decline in the volume of 
inpatient claims. Others suggested that we did not consider efforts to 
combat the opioid public health emergency as a reason for the increased 
utilization of implanted spinal neurostimulators, as an alternative to 
treat chronic pain, along with the comorbidity of the patient 
population. Several commenters suggested that the proposal to include 
implanted spinal neurostimulators is not in alignment with the 
Department of Health and Human Services (HHS) Pain Management Best 
Practices Inter-Agency Task Force Report, which encourages CMS and 
other payers to provide timely insurance coverage of such procedures in 
efforts to reduce opioid dependency for pain management. Some 
commenters stated that CMS changed its methodology because the initial 
process focused upon items that were cosmetic, while the new items are 
being added as a result of overutilization. One commenter indicated 
that in contrast to our findings, they had experienced a decrease in 
cervical fusion with disk removal procedures in their area of the 
country.
    Response: We thank the commenters for their input. We continue to 
believe that comparing the utilization rate to the baseline growth rate 
is an appropriate method for identifying potentially unnecessary 
increases in volume. Moreover, we clearly conveyed in the CY 2021 OPPS/
ASC proposed rule the precise data and time frames used in our analyses 
and our efforts to identify potential clinical reasons that would 
explain the increase. As we have noted, we have endeavored to minimize 
the burden associated with this prior authorization process and this 
burden is more than outweighed by the need to control unnecessary 
increases in the volume of these services. We believe that the 10-day 
timeframe for obtaining a decision on a prior authorization request is 
not significant considering that these are non-emergency procedures 
that require the beneficiary to undergo conservative treatment prior to 
the procedure. While we are aware that the cervical fusion codes were 
removed from the Inpatient Only List in 2012, the more significant 
increases in volume occurred years later, when the reimbursement 
changed for the procedure. This supports our conclusion that financial 
reasons may have factored into the utilization increases. In confirming 
our conclusion, we looked at data across both inpatient and outpatient 
settings for the total volume of cervical fusions, and considered the 
change in inpatient procedure coding from ICD-9 to ICD-10. The 
conversion from ICD-9 to ICD-10 makes an exact comparison difficult, 
but based on our assessment, we do not believe that the 1,538.9 percent 
increase between 2012 and 2018 for cervical fusion with disc removal is 
due to its removal from the IPO as of January 1, 2012.
    Similarly, we do not agree that the 174.6 percent increase between 
2007 and 2018 for implanted spinal neurostimulators is due solely to 
efforts to avoid opioids. As we noted in the proposed rule, the claims 
volume that formed the basis of our conclusions regarding implanted 
neural stimulators was based on data from the time period 2007 through 
2018. The opioid crisis affecting our Nation was not declared a PHE 
until October, 26, 2017. While the crisis certainly existed prior to 
the declaration of a PHE, most of the data forming the basis of our 
conclusion that implanted spinal neurostimulators demonstrated 
unnecessary increases in volume pre-dates the PHE and any federally 
coordinated efforts to reduce the use of opioids. Thus, most of the 
data forming the basis of our conclusion pre-dates that PHE and any 
substantial or coordinated efforts to reduce the use of opioids. We 
also believe the proposal is in alignment with the Department of Health 
and Human Services (HHS) Pain Management Best Practices Inter-Agency 
Task Force Report that encourage CMS and other payers to provide timely 
insurance coverage of such procedures. We believe that the 10-day 
timeframe for obtaining a decision on a prior authorization request is 
not significant considering that these are non-emergency procedures 
that require the beneficiary to undergo conservative treatment prior to 
the procedure. Additionally, providers may request an expedited review, 
and ultimately providers can be exempt from the prior authorization 
process should a provider demonstrate compliance with Medicare 
coverage, coding, and payment rules. With regard to our methodology, we 
again compared the utilization rate to the baseline growth rate and 
believe that this is an appropriate method for identifying potentially 
unnecessary increases in volume. We also looked at the overall rates 
from a national perspective and believe that this approach is 
warranted, despite the commenter's observation about its area of the 
country.
    Comment: One commenter disagreed with the average hourly rate used 
by CMS in calculating the average practice labor costs and noted that 
rather than using clerical employees, clinical staff, from nurses up to 
and including

[[Page 86245]]

physicians, are often involved in completing the documentation required 
for prior authorization. This same commenter also stated that there is 
a time burden associated with determining which services require prior 
authorization and the documentation required associated with a 
particular procedure code.
    Response: We thank the commenter for the comment. We typically use 
a clerical staff rate because the documentation being submitted is the 
same documentation that should be regularly maintained in support of 
claims submitted for payment. The prior authorization process does not 
require anything new with regard to documentation. The prior 
authorization process merely requires the documentation be provided 
earlier in the process. With regard to the time burden, we include 3 
hours of training in our burden estimate for each provider. During this 
time, the staff can be educated on the services that require prior 
authorization under this program and what documentation is needed as 
part of the prior authorization request. Moreover, we include the 3 
hours each year so that new staff can be trained and current staff can 
have a refresher course. Given that this process does not create any 
new documentation requirements and merely necessitates the submission 
of the documentation earlier in the claims process, we believe the 
amount estimated is more than sufficient.
    Comment: Some commenters indicated that implanted spinal 
neurostimulators are nothing like the devices CMS originally considered 
when drafting the NCD in light of advancements in technology. 
Commenters noted that the process should treat rechargeable and non-
rechargeable neurostimulators differently and only include non-
rechargeable neurostimulators in the prior authorization process 
because of the reduced product life of the non-rechargeable 
neurostimulators.
    Response: We thank the commenters for the information. While we 
recognize that there have been advancements in technology, the NCD does 
not distinguish the coverage between different types of implanted 
spinal neurostimulators. Additionally, although our initial review of 
the data looked solely at unnecessary increases in procedure codes and 
did not distinguish between the type of product, we have since reviewed 
our data for any distinctions based on the type of implanted spinal 
neurostimulators. Both types showed unnecessary increases in volume. As 
such, we have determined that segmenting the implanted spinal 
neurostimulators and only including the non-rechargeable 
neurostimulators in the prior authorization process is not warranted.
    Comment: We received several comments that the MACs have not 
demonstrated the ability to handle the volume of prior authorization 
requests since the OPD process begin July 1, 2020. These commenters 
stated that MACs have taken longer than the 10 days specified for 
communicating the results of prior authorization requests.
    Response: We thank the commenters for sharing this concern. While 
we require prior authorization decisions to be made within 10 days of 
the request, we acknowledge that there have been occasions when a few 
of the MACs were not able to issue decisions within this timeframe, as 
they adjusted to this new workload. When concerns with missed 
timeframes were brought to CMS' and the MAC's attention, we worked 
diligently to ensure that outstanding requests were resolved as soon as 
possible. As this prior authorization process as finalized in last 
years' rule has only recently been implemented for services furnished 
beginning July 1, 2020, we have minimal data to track this issue. 
However, experience with our other prior authorization programs has 
shown that the MACs are able to meet their established timeframes the 
vast majority of the time. In the prior authorization process for 
certain DMEPOS items, the MACs exceeded their required review timeframe 
only 16 times out of over 62,000 initial prior authorization requests 
submitted in FY 2020 (less than 0.01 percent). Response times for our 
Prior Authorization Model for Repetitive, Scheduled Non-emergent 
Ambulance Transports are similar. As this program continues, we will 
continue tracking MAC timeliness metrics and are confident that the 
MACs will be able to meet the required review and decisions timeframes 
so as not to cause additional burden for OPD providers or delay 
medically necessary services.
    In sum, 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 
will continue to monitor and report on the effect of this policy on 
beneficiary access to services.

[[Page 86246]]

    We are finalizing our proposal without modification to add these 
two new service categories to the list of hospital outpatient 
department services requiring prior authorization and finalizing the 
proposed changes to the regulation text at 42 CFR 419.83(a)(2)(i) and 
(ii) to add these categories. Table 74 includes the overall list of 
services with the effective dates for each.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR29DE20.138


[[Page 86247]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.139


[[Page 86248]]


[GRAPHIC] [TIFF OMITTED] TR29DE20.140

BILLING CODE 4120-01-C

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

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

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

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

    In the final rule with comment period entitled, in relevant part, 
``Revisions to Payment Policies, Five-Year Review of Work Relative 
Value Units, Changes to the Practice Expense Methodology Under the 
Physician Fee Schedule, and Other Changes to Payment Under Part B'' 
published in the Federal Register on December 1, 2006 (December 1, 2006 
MPFS final rule) (71 FR 69705 through 69706), we added a new Sec.  
414.510 in title 42 of the CFR regarding the clinical laboratory DOS 
requirements and revised our DOS policy for stored specimens. We 
explained in that MPFS final rule that the DOS of a test may affect 
payment for the test, especially in situations in which a specimen that 
is collected while the patient is being treated in a hospital setting 
(for example, during a surgical procedure) is later used for testing 
after the patient has been discharged from the hospital. We noted that 
payment for the test is usually bundled with payment for the hospital 
service, even when the results of the test did not guide treatment 
during the hospital stay. To address concerns raised for tests related 
to cancer recurrence and therapeutic interventions, we finalized 
modifications to the DOS policy in Sec.  414.510(b)(2)(i) for a test 
performed on a specimen stored less than or equal to 30 calendar days 
from the date it was collected (a non-archived specimen), so that the 
DOS is the date the test was

[[Page 86249]]

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) or (b)(3) or (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) or (b)(3) or (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 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

[[Page 86250]]

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 FDA.
    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 
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

[[Page 86251]]

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. Revisions 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 tests (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, were packaged 
under the OPPS at that time. Though they did not qualify for the DOS 
exception at Sec.  414.510(b)(5) solely because they were MAAAs, we 
noted that several stakeholders had suggested that 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 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 was 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).
    In the CY 2021 OPPS/ASC proposed rule (85 FR 49032 through 49036), 
we stated that 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. We stated that these tests are 
distinguishable from the care the patient receives in the hospital, 
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 
proposed to exclude cancer-related protein-based MAAAs from the OPPS 
packaging policy, as discussed in section II.a.3. of the CY 2021 OPPS/
ASC proposed rule, and create an exception to the laboratory DOS rule 
for them. We noted that 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 further explained in the CY 2021 OPPS/ASC proposed rule (85 FR 
49036) that 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

[[Page 86252]]

the test, are not made during the same hospital outpatient encounter 
during which the specimen was collected.
    For these reasons, we proposed 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.
    We noted that 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. We stated 
that, 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, we noted, if 
we were 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 the CY 2021 OPPS/ASC 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).'' 
Additionally, the AMA CPT 2020 manual provides a MAAA code descriptor 
format that includes several specific characteristics, including but 
not limited to disease type (for example, oncology, autoimmune, tissue 
rejection), and material(s) analyzed (for example, DNA, RNA, protein, 
antibody). We noted in the proposed rule that, because 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 potentially 
instructive tool to identify cancer-related MAAA tests that are 
``protein-based''. Accordingly, we stated that using the AMA CPT 2020 
manual criteria to identify MAAA tests that are cancer-related, and, of 
those tests, identifying the ones whose test analytes are proteins, we 
have determined there are currently six cancer-related protein-based 
MAAAs: CPT codes 81500, 81503, 81535, 81536, 81538 and 81539. We also 
noted 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 
we proposed to exclude 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. We stated that these tests 
have not been designated by CMS as ADLTs under paragraph (1) of the 
definition of ADLT in Sec.  414.502 and so were not currently subject 
to the laboratory DOS exception in Sec.  414.510(b)(5). We proposed to 
apply this policy to cancer-related protein-based MAAAs that do not 
currently exist, but that are developed in the future.
    We received approximately 40 public comments on the proposed 
modification to the laboratory DOS policy for cancer-related protein-
based MAAAs. The following is a summary of the comments we received and 
our responses.
    Comment: Generally, most commenters supported the proposed 
revisions to the laboratory DOS policy, expressing that changes to this 
policy will lead to improved beneficiary access to precision diagnostic 
tests and targeted treatment by removing barriers that once led to 
delayed and canceled laboratory test orders while also reducing 
hospital administrative burden. Commenters noted that excepting cancer-
related protein-based MAAAs from the DOS policy and allowing 
laboratories to bill Medicare for them directly, will minimize delays 
in testing and enable patient diagnosis, treatment decision-making, and 
initiation of care to proceed without interruption or unnecessary 
delay.
    Additionally, some commenters stated that cancer-related protein-
based MAAA test codes almost never impact the treatment regimen during 
the same hospital outpatient service in which the specimen is 
collected, and the commenters therefore believe it is appropriate to 
exclude these services from the OPPS packaging policy, as discussed in 
section II.A. of this final rule, and include these test codes on the 
list of codes subject to the laboratory DOS exception.
    Response: We appreciate the support from commenters for our 
proposed revisions to the laboratory DOS policy for cancer-related 
protein-based MAAAs. We agree that the expansion of the laboratory DOS 
policy exception at Sec.  414.510(b)(5) to include cancer-related 
protein-based MAAAs is beneficial and appropriate, as these tests have 
a pattern of clinical use that make them relatively unconnected to the 
primary hospital outpatient service during which the specimen was 
collected and the results of these tests are typically used to 
determine post-hospital care and generally reduces delay with respect 
to access to these tests and subsequent results.
    Comment: Some commenters suggested that CMS consider expanding the 
list of codes excluded from OPPS packaging and adding to the list of 
tests included in the laboratory DOS exception at Sec.  414.510(b)(5). 
Specifically, commenters recommended adding all AMA CPT Proprietary 
Laboratory Analysis (PLA) test codes that may have similar 
characteristics to AMA CPT MAAA test codes but are not currently 
categorized as AMA CPT MAAA test codes. Some commenters asserted that 
the AMA CPT Committee has clearly stated that MAAAs can be assigned PLA 
codes, and therefore the assignment of a PLA code by the AMA CPT, as 
opposed to a Category 1 CPT code under the MAAA section of the CPT 
Manual, should not dictate whether the code is included under the 
laboratory DOS exception at Sec.  414.510(b)(5). Additionally, 
commenters suggested that CMS identify the protein-based MAAAs in the 
PLA section of the AMA CPT manual by determining which codes' 
descriptors include both multiple proteins and reference to an 
algorithm.
    Commenters also noted that while PLA test codes are not 
automatically included under Sec.  414.510(b)(5) and the outpatient 
laboratory packaging exclusion, some tests described by PLA codes are 
often included under these policies if they qualify as a molecular 
pathology test or Criterion A ADLT. Therefore, the commenters stated 
that CMS should continue its historical practice in applying the 
laboratory DOS policy and OPPS laboratory packaging exclusion to PLA 
test codes as occurs

[[Page 86253]]

with molecular pathology tests and ADLTs that have been assigned PLA 
codes.
    One commenter also requested that CMS include in the laboratory DOS 
exception under Sec.  414.510(b)(5) MAAA cancer tests of proteins or 
metabolites. The commenter stated that metabolite biomarkers such as 
increased levels of metanephrines in the blood or urine are used to 
diagnose adrenal cancers, such aspheochromocytoma, and represent new 
and ``under development'' diagnostic MAAA tests. Another commenter 
requested that CMS evaluate tests for diseases other than cancer to 
determine if the tests have a distinct pattern of clinical use that 
make them relatively unconnected to a patient's hospital encounter and 
therefore should be considered for policy modifications in future 
rulemaking. Another commenter suggested that CMS modify the regulatory 
language for the laboratory DOS to include both cancer-related protein-
based or metabolite-based MAAA tests, stating that there is a continuum 
between proteins, amino acids, amino acid modifications or dimers, and 
metabolites, and drawing fine lines between these biochemical classes 
is not relevant for this policy.
    Response: We appreciate the commenters' suggestions about other 
test codes that CMS should consider including under the laboratory DOS 
exception policy at Sec.  414.510(b)(5). We note that our proposal in 
the CY 2021 OPPS/ASC proposed rule focused on certain protein-based 
MAAA tests identified by stakeholders. As we discuss previously, we 
started with the 6 MAAA tests brought to our attention and concluded 
that the subset of cancer-related protein-based MAAA tests are 
distinguishable from the care the patient receives during the primary 
hospital outpatient encounter because the results of the test would 
almost never affect the treatment regimen during the same hospital 
outpatient encounter in which the specimen was collected. Further, we 
explained that the AMA CPT manual easily identifies these tests, which 
made it straightforward to ensure we captured all cancer-related 
protein-based MAAA tests currently available.
    With regard to PLA tests, according to the AMA CPT Committee, PLA 
codes ``are alpha-numeric CPT codes with a corresponding descriptor for 
labs or manufacturers that want to more specifically identify their 
test. Tests with PLA codes must be performed on human specimens and 
must be requested by the clinical laboratory or the manufacturer that 
offers the test.'' \365\ We understand PLA codes were created by the 
AMA CPT Committee so laboratories and manufacturers could have 
corresponding descriptors to more specifically identify their test as 
required by PAMA. The PLA category as a whole does not address the 
clinical use of the test. Therefore, in order for CMS to consider 
certain PLA tests as potential additions to the DOS exception policy, 
CMS would need to establish that, like the molecular pathology tests 
and ADLTs currently excepted from the DOS policy under Sec.  
414.510(b)(5), the nature and function of all PLA tests are such that 
they are appropriately separable from the hospital outpatient encounter 
and therefore laboratory services for which the performing laboratory 
must bill Medicare. At this time, CMS cannot establish that every PLA 
test, MAAA test, or ``MAAA-like'' PLA test, including those that are 
protein-based, are generally used to guide treatment outside of the 
outpatient clinical encounter and have a distinct pattern of clinical 
use that make them relatively unconnected to a patient's hospital 
encounter. For example, there are currently over 240 codes in the PLA 
category. In contrast to non-PLA codes which are categorized into 
groups such as immunoassays, chemistry, molecular pathology tests, 
MAAAs, etc., PLAs are not separated in separate categories like 
Category 1 CPT codes. Additions to the PLA code list are frequent and 
the array of tests included in the PLA category is varied. As such, 
inclusion in the category of PLA codes alone does not provide 
sufficient basis for payment policy decisions categorically. However, 
we note that a protein-based MAAA test 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 laboratory DOS exception at Sec.  
414.510(b)(5).
---------------------------------------------------------------------------

    \365\ https://www.ama-assn.org/practice-management/cpt/cpt-pla-codes.
---------------------------------------------------------------------------

    Therefore, CMS does not believe that all PLA tests, MAAA tests, or 
``MAAA-like'' PLA test codes, as a group, should be considered for the 
laboratory DOS exception at Sec.  414.510(b)(5) at this time. However, 
we plan to continue to evaluate the laboratory DOS policy and consider 
whether any additional changes may be merited, and may consider 
proposing future changes to the laboratory DOS policy through notice-
and-comment rulemaking.
    Nevertheless, we continue to believe that cancer-related protein-
based MAAA tests 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 post-hospital care. In previous 
rulemakings, commenters have identified certain protein-based MAAAs and 
informed us that the cancer-related tests are typically used to guide 
and manage the patient's care after the patient is discharged from the 
hospital outpatient department and the test results generally are used 
to determine potential future oncologic surgical and chemotherapeutic 
interventions. We understand the results 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. Consequently, decisions as to particular therapies and/or 
surgical procedures, as guided by the results of the test, generally 
are not made during the same hospital outpatient encounter during which 
the specimen was collected.
    Consequently, we believe that cancer-related protein-based MAAA 
tests should be excluded from OPPS packaging and paid separately under 
the CLFS and included under the laboratory DOS exception policy at 
Sec.  414.510(b)(5).
    Comment: Commenters requested that we add several specific PLA 
codes to the laboratory DOS policy exception at Sec.  414.510(b)(5) 
because they believe these tests meet the AMA CPT description of MAAA 
tests, analyze proteins, and/or are cancer-related, while also meeting 
the DOS standard of having a pattern of clinical use that is unrelated 
to the primary outpatient service when the specimen is collected at an 
outpatient encounter. Specifically, commenters recommended adding the 
OVERA test from Aspira Labs (CPT 0003U), EPI assay by Bio-Techne (CPT 
0005U), TissueCypher assay from Cernostics (CPT 0108U), and 
KidneyIntelX (0105U).
    Commenters asserted that the results of these tests are used to 
determine a longer-term care treatment for the patient, and the results 
are typically discussed at a follow up appointment with the ordering 
physician. Additionally, the commenters noted that the clinical use of 
these tests is similar to the clinical use of the cancer-related 
protein-based MAAA tests. Commenters stated that it would be 
inconsistent for CMS to require hospitals to bill Medicare for the PLA 
tests that commenters believe meet the AMA CPT description of MAAA 
tests, analyze proteins, and/or are cancer-related, and also 
demonstrate a pattern of clinical use that is unrelated to the

[[Page 86254]]

primary outpatient service when the specimen is collected at an 
outpatient encounter, while requiring the performing laboratory to bill 
Medicare for the non-PLA cancer-related protein based MAAAs.
    Response: We appreciate the commenters' suggestion that we consider 
adding the OVERA test from Aspira Labs (CPT 0003U), TissueCypher assay 
from Cernostics (CPT 0108U), EPI assay by Bio-Techne (CPT 0005U), and 
KidneyIntelX (CPT 0105U), to the laboratory DOS exception at Sec.  
414.510(b)(5). These PLA tests are relatively new, with none to minimal 
Medicare utilization, and at this time we do not have a sufficient 
understanding regarding how these tests may be used to guide treatment 
outside of the outpatient encounter and whether they should be 
unpackaged under OPPS. The tests would need to demonstrate a pattern of 
clinical use that make them relatively unconnected to the primary 
hospital outpatient service during which the specimen was collected and 
the results of these tests are typically used to determine post-
hospital care. At this time, we cannot establish that these tests would 
generally be utilized for guiding treatment outside of the hospital 
encounter. Nevertheless, we intend to continue to study the laboratory 
DOS policy and determine whether any additional changes are warranted 
and may consider proposing changes to the laboratory DOS policy through 
notice-and-comment rulemaking in the future.
    Comment: Commenters also recommended the inclusion of a particular 
protein-based MAAA test, CPT code 81490, in the laboratory DOS 
exception at Sec.  414.510(b)(5). Commenters asserted that the use of 
this rheumatoid arthritis (RA) test is unconnected to the hospital 
outpatient encounter during which the specimen is collected and is 
instead used to determine potential future interventions outside of the 
hospital outpatient encounter; it is used by the rheumatologist to make 
longer-term changes in RA treatment. The commenters stated that this RA 
test appears to be generally less tied to a primary service in the 
hospital outpatient setting and does not appear to be a common or 
routine laboratory test that would otherwise be packaged into OPPS 
payment.
    Response: In the CY 2021 OPPS/ASC proposed rule (85 FR 48799), we 
stated that we believed 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 stated that we believed that payment for CPT code 81490 
remains appropriately packaged under the OPPS.
    However, given commenter feedback, we are convinced that the 
pattern of clinical use for CPT code 81490 is generally unconnected to 
the hospital outpatient encounter during which the specimen is 
collected, as it is typically used to determine potential interventions 
outside of the hospital outpatient encounter and is generally used by 
the rheumatologist to make longer-term changes in RA treatment. 
Commenters informed us that physicians and patients utilize the 
objective information provided by the results of the test to make 
longer-term modifications in treatment, to monitor disease activity, 
and to prevent joint damage progression, and the results would 
generally not be utilized for the purposes of the hospital outpatient 
encounter. The commenters further stated that the output of the test is 
used to assess disease activity, including evaluating response to 
therapy, directing choice of second-line treatment in patients with 
inadequate response to the current first line therapy, and identifying 
patients in stable remission for therapy reduction. The test results 
appear to guide longer-term therapies and treatments; therefore, we 
believe that this test, identified by CPT code 81490, is generally less 
tied to the primary service the patient receives in the hospital 
outpatient setting and does not appear to be a common or routine 
laboratory test that would otherwise be packaged into OPPS payment. 
Given the similarity in clinical pattern of use, we believe that we 
have sufficient information to add CPT code 81490 to the list of tests 
included in the laboratory DOS exception at Sec.  414.510(b)(5) at this 
time. In conclusion, for the reasons discussed previously in this 
section, we believe that cancer-related protein-based MAAAs, such as 
CPT codes 81500, 81503, 81535, 81536 and 81539, appear to 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. Given the 
similarity in clinical pattern of use, we believe that CPT code 81490 
should also be added to the list of tests in the laboratory DOS 
exception at Sec.  414.510(b)(5). We believe these tests should 
therefore be excluded from OPPS packaging policy and subject to the 
laboratory DOS exception at Sec.  414.510(b)(5) as described in section 
II.A. of this final rule. We intend to continue to study the list of 
laboratory tests included the laboratory DOS exception policy and to 
determine whether any additional changes are warranted and may consider 
proposing future changes to this policy through notice-and-comment 
rulemaking.
    For these reasons and in light of the commenters' suggestions, we 
are revising the current laboratory DOS exception at 42 CFR 
414.510(b)(5) to include cancer-related protein-based MAAAs, such as 
CPT codes 81500, 81503, 81535, 81536, 81539, as well as the test 
described by CPT code 81490. We are also finalizing that we will 
exclude cancer-related protein-based MAAAs that do not currently exist, 
but that are developed in the future, from the laboratory DOS policy.

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 all requirements of an applicable 
exception are satisfied; and (2) prohibits the entity from filing 
claims with Medicare (or billing another individual, entity, or third 
party payer) for any improperly referred designated health services. A 
financial relationship may be 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.
    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

[[Page 86255]]

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 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 (5) 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. The regulations at Sec.  411.362(c)(2)(ii), (iv), 
and (v) specify 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 three 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. Section 411.362(c)(3)(ii) 
specifies the 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) at Sec.  411.362(c) and related 
definitions at Sec.  411.362(a) (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). There, 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

[[Page 86256]]

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 capacity may occur only in facilities on the 
hospital's main campus.
    In 2017, CMS launched the Patients over Paperwork initiative, a 
crosscutting, 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 reconsidered our policies. As we stated 
in the proposed rule, 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 (85 FR 49038). 
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 
proposed to remove certain regulatory requirements for high Medicaid 
facilities that are not included in the statute. Specifically, we 
proposed 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 proposed 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 proposed 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, as well as 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.
    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. In the proposed rule, we 
stated that we are considering whether we should eliminate the 
opportunity for community input in the review process with respect to 
high Medicaid facilities (85 FR 49038). We noted specific interest 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, and 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 also noted that 
obtaining independent confirmation of the data furnished by a high 
Medicaid facility could delay or add complexity to the review process. 
We solicited 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.
    We are finalizing without modification our proposals to remove the 
limitations on high Medicaid facilities with respect to the frequency 
of exception requests, permitted amount of facility expansion, and 
location of expansion capacity. We are not revising our regulations 
regarding community input on the expansion requests submitted by 
hospitals that qualify as high Medicaid facilities.
    We received the following comments regarding our proposals and our 
responses follow:
    Comment: Many commenters supported our proposals to eliminate from 
regulation any limitations on the expansion of facility capacity for 
high Medicaid facilities not mandated in section 1877 of the Act. Some 
of the commenters stated that removing existing regulatory limitations 
would allow physician-owned hospitals to serve greater numbers of 
Medicaid patients. One commenter suggested that expanded capacity of 
physician-owned hospitals could increase competition and choice, as 
well as patient access to high-quality care. Another commenter stated 
that, if finalized, the removal of the restrictions on high Medicaid 
facilities that receive an exception to the prohibition on expansion of 
facility capacity would help increase access to vital health care 
services for the most vulnerable patients.
    In contrast, numerous commenters opposed our proposals to remove 
limitations on expansion of facility capacity imposed on high Medicaid 
facilities by regulation. Some commenters noted that certain physician-
owned hospitals that qualify as high Medicaid facilities have Medicaid 
discharge percentages that are extremely low and potentially 
significantly lower than that of hospitals in surrounding counties 
where they could locate the large facility expansion capacity permitted 
under our proposals. Another commenter stated that, if we finalize our 
proposals, physician-owned

[[Page 86257]]

hospitals could expand and move into markets without large Medicaid 
patient populations, creating additional campuses far away from the 
patients the expansion is intended by statute to serve. This commenter 
also asserted that removing the restrictions on high Medicaid 
facilities could incentivize physician-owned hospitals to ``game the 
limited exception'' by working to temporarily meet the high Medicaid 
facility threshold, then, once an exception from the prohibition on 
expansion of facility capacity is obtained, return to rejecting 
Medicaid patients because there is no requirement for a physician-owned 
hospital to maintain its status as a high Medicaid facility following 
the approval of an exception request.
    Response: The plain language of the statute does not impose the 
same limitations on the expansion of high Medicaid facilities as it 
does the expansion of applicable hospitals. Therefore, the Secretary is 
not required under section 1877(b)(4) of the Act to retain the 
limitations imposed on high Medicaid facilities by regulation. As we 
explained in the proposed rule, we believe that the existing 
regulations impose unnecessary burden on high Medicaid facilities. In 
alignment with our Patients over Paperwork initiative, we are 
finalizing our proposals to remove this unnecessary burden.
    To determine whether a hospital qualifies as a high Medicaid 
facility, the statute requires a relativity analysis based on the 
location of the existing hospital; that is, a hospital that has the 
highest Medicaid discharge percentage relative to the hospitals in the 
same county will qualify as a high Medicaid facility even if the 
overall number of Medicaid discharges in the county is low. Although we 
understand the commenters' concerns regarding actions that a hospital 
may take after the Secretary grants an exception to the prohibition on 
facility expansion, as one of the commenters noted, neither the statute 
nor our regulations require that a hospital maintain its qualification 
as a high Medicaid facility for any minimum period of time after it 
requests or receives an exception to the prohibition on expansion of 
facility capacity. Similarly, the statute does not require the 
Secretary to compare a high Medicaid facility to the hospitals in the 
county where it plans to locate the expansion capacity (if approved). 
However, we emphasize that any expansion of facility capacity must be 
part of the hospital for which the exception is approved. Medicare 
rules and regulations regarding the location of hospital facilities, 
including the expansion capacity, such as distance limitations related 
to the location of off campus facilities and provider-based departments 
remain applicable. (See section 1833(t)(B)(i) of the Act and Sec.  
413.65(e)(3)(v)(F).) With respect to the concern that a hospital 
granted an exception would ``return to rejecting Medicaid patients,'' 
we note that a hospital that rejects (or otherwise discriminates 
against Medicaid beneficiaries) does not qualify as an applicable 
hospital or a high Medicaid facility and, thus, would not qualify for 
an exception to the prohibition on expansion of facility capacity. 
Under Sec.  411.362(c)(2)(iii) and (c)(3)(iii), to qualify as an 
applicable hospital or a high Medicaid facility, respectively, which is 
the prerequisite to the approval of an exception to the prohibition on 
the expansion of facility capacity, a hospital may not discriminate 
against beneficiaries of federal health care programs and may not 
permit physicians practicing at the hospital to discriminate against 
such beneficiaries. Further, other federal and state laws and 
regulations, such as the Emergency Medical Treatment and Labor Act 
(EMTALA) and State Medicaid program rules and regulations, prohibit a 
hospital from refusing to care for or otherwise discriminate against 
Medicaid patients.
    Comment: Several commenters cited studies that they asserted 
indicate that physician-owned hospitals present a risk of program or 
patient abuse. Other commenters cited studies that they asserted show 
the benefits of physician ownership of hospitals. The commenters that 
opposed our proposals highlighted various studies, including studies by 
the Congressional Budget Office, Medicare Payment Advisory 
Commission.\366\ The aforementioned studies concluded that physician 
self-referral to facilities in which they have an ownership stake leads 
to greater per capita utilization of services and higher costs for the 
Medicare program. Two of these commenters also shared data from a 2017 
study that found physician-owned hospitals cherry-pick patients by 
avoiding Medicaid and uninsured patients, treat fewer medically complex 
patients and have margins nearly three times those of nonphysician-
owned hospitals.\367\ The commenters stated that finalizing the 
proposals could lead to these abuses of the Medicare program and its 
beneficiaries. Some of the commenters who supported our proposals cited 
to a British Medical Journal study that concluded that physician-owned 
hospitals have similar quality and costs of care when compared to 
nonphysician-owned hospitals \368\ and a study published by the Journal 
of the American College of Surgeons that concluded that physician-owned 
surgical hospitals outperform other hospitals in the Medicare value-
based purchasing program.\369\ One of these commenters quoted the 
December 2018 HHS report titled ``Reforming America's Healthcare System 
Through Choice and Competition'' in support of finalizing our 
proposals, noting HHS' statement that concerns about self-referral and 
cherry-picking ``may have been overstated, considering that many 
studies suggest physician-owned hospitals provide higher quality care 
and that patients benefit when traditional hospitals have greater 
competition.'' \370\
---------------------------------------------------------------------------

    \366\ https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/reports/kylltrsec651ofhr3162.pdf and http://www.medpac.gov/docs/default-source/reports/Mar05_SpecHospitals.pdf?sfvrsn=0.
    \367\ https://www.fah.org/blog/analysis-highlights-need-to-maintain-law-banning-self-referral-to-physician.
    \368\ Blumenthal, D., et al., ``Access, quality, and costs of 
care at physician owned hospitals in the United States: 
observational study'', British Medical Journal, 2015;351:h4466 
(September 2, 2015); available at http://www.bmj.com/content/bmj/351/bmj.h4466.full.pdf.
    \369\ Ramirez AG, Tracci MC, Stukenborg GJ, Turrentine FE, 
Kozower BD, Jones RS. Physician-owned surgical hospitals outperform 
other hospitals in Medicare value-based purchasing program. J Am 
Coll Surg. 2016 Oct; 223(4):559-567; available at https://www.journalacs.org/article/S1072-7515(16)30720-7/fulltext.
    \370\ https://www.hhs.gov/sites/default/files/Reforming-Americas-Healthcare-System-Through-Choice-and-Competition.pdf.
---------------------------------------------------------------------------

    Response: As we understand the research into the risks and benefits 
of physician ownership in hospitals that was cited by the commenters, 
the studies' authors have differed in their conclusions regarding 
whether physician ownership in hospitals poses a risk of program or 
patient abuse and, thus, whether further or less regulation of 
physician-owned hospitals is warranted. Although we appreciate the 
concerns discussed in the studies cited by the commenters in opposition 
to our proposals, as discussed in the response to the previous comment, 
the plain language of the statute does not impose the same limitations 
on the expansion of high Medicaid facilities as it does the expansion 
of applicable hospitals, and we believe that the existing regulations 
impose unnecessary burden on high Medicaid facilities. In alignment 
with our Patients over Paperwork initiative, we are finalizing our 
proposals to remove this unnecessary burden.
    Comment: Many commenters, including some that supported the 
proposals to eliminate other restrictions

[[Page 86258]]

on high Medicaid facilities, recommended that CMS maintain the 
requirement for community input related to the request of a high 
Medicaid facility for an exception to the prohibition on expansion of 
facility capacity. The comments stated that community input is a 
valuable part of the expansion exception process. One commenter 
supported eliminating the community input requirement for high Medicaid 
facilities, noting that, according to a study entitled ``Specialty 
Versus Community Hospitals: Referrals, Quality, And Community 
Benefits,'' physician-owned specialty hospitals exhibit higher levels 
of net community benefits.\371\ Neither this commenter, nor any other 
commenter, shared an alternative method for CMS to obtain independent 
confirmation of data provided by a high Medicaid facility in the 
absence of community input.
---------------------------------------------------------------------------

    \371\ https://www.healthaffairs.org/doi/pdf/10.1377/hlthaff.25.1.106.
---------------------------------------------------------------------------

    Response: We agree with the commenters that community input is 
vital to the expansion exception process and that it was the Congress' 
intent to include it. Moreover, we believe that it would significantly 
lengthen the expansion exception process to eliminate community input, 
as CMS would need to engage in additional independent verification 
activities, which is not in line with our burden reduction efforts and 
our Patients over Paperwork initiative. Therefore, we are not revising 
our regulations to eliminate the requirement for community input 
related to the request of a high Medicaid facility for an exception to 
the prohibition on expansion of facility capacity.

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 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

[[Page 86259]]

previously, we defer to state law with respect to the determination of 
whether a bed is licensed as of a certain date. However, in 
extraordinary circumstances, we 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 proposed 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 sought comments 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.'' We 
are finalizing our proposal to revise the definition of ``baseline 
number of operating rooms, procedure rooms, and beds.'' We received the 
following comment and our response follows.
    Comment: A few commenters supported our proposal to codify the 
policy articulated in our existing Frequently Asked Question into 
regulation at Sec.  411.362(a). We received no comments in opposition.
    Response: Based on the comments and to facilitate stakeholder 
awareness of our policy 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 are finalizing our proposal. Under revised Sec.  411.362(a), 
the definition of ``baseline number of operating rooms, procedure 
rooms, and beds'' states: 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.

XX. Notice of Closure of Two Teaching Hospitals and Opportunity To 
Apply for Available Slots

A. Background Section

    Section 5506 of the Affordable Care Act (Pub. L. 111-148) added 
subsection (vi) to section 1886(h)(4)(H) of the Social Security Act 
(the Act) and modified language at section 1886(d)(5)(B)(v) of the Act, 
to instruct the Secretary of the Department of Health and Human 
Services (the Secretary) to establish a process to redistribute 
residency slots after a hospital that trained residents in an approved 
medical residency program closes. Specifically, the Secretary is 
instructed to increase the full-time equivalent (FTE) resident caps for 
teaching hospitals based upon the FTE resident caps in teaching 
hospitals that closed ``on or after a date that is 2 years before the 
date of enactment'' (that is, March 23, 2008). In the CY 2011 OPPS 
final rule with comment period (75 FR 72212), we established 
regulations at 42 CFR 413.79(o) and an application process for 
qualifying hospitals to apply to CMS to receive direct graduate medical 
education (DGME) and indirect medical education (IME) FTE resident cap 
slots from the hospital that closed. We made certain modifications to 
those regulations in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53434), and we made changes to the section 5506 application process in 
the FY 2015 IPPS/LTCH PPS final rule (79 FR 50122 through 50134). The 
procedures we established apply both to teaching hospitals that closed 
on or after March 23, 2008, and on or before August 3, 2010, and to 
teaching hospitals that close after August 3, 2010.

B. Notice of Closure of Westlake Community Hospital, Located in Melrose 
Park, IL, and the Application Process--Round 18

    CMS has learned of the closure of Westlake Community Hospital, 
located in Melrose Park, IL (CCN 140240). Accordingly, this notice 
serves to notify the public of the closure of this teaching hospital 
and initiate another round of the section 5506 application and 
selection process. This round will be the 18th round (``Round 18'') of 
the application and selection process. Table 75 contains the 
identifying information and IME and DGME FTE resident caps for the 
closed teaching hospital, which are part of the Round 18 application 
process under section 5506 of the Affordable Care Act.

[[Page 86260]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.141

C. Notice of Closure of Astria Regional Medical Center, Located in 
Yakima, WA, and the Application Process-- Round 19

    CMS has learned of the closure of Astria Regional Medical Center, 
located in Yakima, WA (CCN 500012). Accordingly, this notice serves to 
notify the public of the closure of this teaching hospital and initiate 
another round of the section 5506 application and selection process. 
This round will be the 19th round (``Round 19'') of the application and 
selection process. Table 76 contains the identifying information and 
IME and DGME FTE resident caps for the closed teaching hospital, which 
are part of the Round 19 application process under section 5506 of the 
Affordable Care Act.
[GRAPHIC] [TIFF OMITTED] TR29DE20.142

D. Application Process for Available Resident Slots

    The application period for hospitals to apply for slots under 
section 5506 of the Affordable Care Act is 90 days following notice to 
the public of a hospital closure (77 FR 53436). Therefore, hospitals 
that wish to apply for and receive slots from the above hospitals' FTE 
resident caps, must submit applications (Section 5506 Application Form 
posted on DGME website as noted at the end of this section) directly to 
the CMS Central Office no later than March 29, 2021. The mailing 
address for the CMS Central Office is included on the application form. 
Applications must be received by the CMS Central Office by the March 
29, 2021 deadline date. It is not sufficient for applications to be 
postmarked by this date.
    After an applying hospital sends a hard copy of a section 5506 slot 
application to the CMS Central Office mailing address, the hospital is 
encouraged to notify the CMS Central Office of the mailed application 
by sending an email to: [email protected]. In the email, 
the hospital should state: ``On behalf of [insert hospital name and 
Medicare CCN#], I, [insert your name], am sending this email to notify 
CMS that I have mailed to CMS a hard copy of a section 5506 application 
under Round [18 or 19] due to the closure of [Westlake Community 
Hospital or Astria Regional Medical Center]. If you have any questions, 
please contact me at [insert phone number] or [insert your email 
address].'' An applying hospital should not attach an electronic copy 
of the application to the email. The email will only serve to notify 
the CMS Central Office to expect a hard copy

[[Page 86261]]

application that is being mailed to the CMS Central Office.
    We have not established a deadline by when CMS will issue the final 
determinations to hospitals that receive slots under section 5506 of 
the Affordable Care Act. However, we review all applications received 
by the deadline and notify applicants of our determinations as soon as 
possible. We refer readers to the CMS DGME website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/DGME to download a copy of the section 5506 
application form (Section 5506 Application Form) that hospitals must 
use to apply for slots under section 5506 of the Affordable Care Act. 
Hospitals should also access this same website for a list of additional 
section 5506 guidelines for the policy and procedures for applying for 
slots, and the redistribution of the slots under sections 
1886(h)(4)(H)(vi) and 1886(d)(5)(B)(v) of the Act.

XXI. Radiation Oncology (RO) Model

A. Revised Model Performance Period for the Radiation Oncology Model

    On September 29, 2020, we published a final rule in the Federal 
Register (85 FR 61114) entitled ``Specialty Care Models to Improve 
Quality of Care and Reduce Expenditures'' that finalized the Radiation 
Oncology Model (RO Model, the Model). Since the publication of that 
rule, we have received feedback from stakeholders requesting that the 
RO Model be delayed due to concerns around implementing the RO Model 
during the public health emergency (PHE) for the Coronavirus disease 
2019 (COVID-19) pandemic. These concerns included revenue losses for RO 
participants due to decreased patient volumes and lay-offs or staff 
reallocations due to the PHE. Specifically, RO participants have 
limited capacity to operationalize RO Model requirements this year 
because of the unprecedented PHE that continues to strain health care 
resources. To ensure that participation in the RO Model does not 
further strain RO participants' capacity, potentially hindering the 
delivery of safe and efficient health care to beneficiaries receiving 
radiotherapy (RT) services, we are finalizing the RO Model's Model 
performance period to begin on July 1, 2021. We believe that this will 
give RO participants an additional 6 months necessary to learn the RO 
billing requirements and train staff on new procedures for 2021, and as 
a consequence of the revised Model performance period, an additional 12 
months to prepare for required quality measure and clinical data 
element reporting beginning in 2022. Additionally, under this delay, RO 
participants will have more time to understand their participant-
specific case mix and historical experience adjustments and the payment 
they expect to receive under the RO Model.
    The September 29, 2020 final rule's effective date is November 30, 
2020 (85 FR 61114). This interim final rule with comment period revises 
the following regulations at 42 CFR part 512, which are to become 
effective on December 4, 2021: Number 25 amending definitions of Model 
performance period and Performance year (PY) at 42 CFR 512.205; number 
26 amending 42 CFR 512.210(a) and (c); number 27 amending 42 CFR 
512.217 (c); number 28 amending 42 CFR 512.220(b); number 29 amending 
42 CFR 512.245(a); number 30 amending 42 CFR 512.255(c)(10); and number 
31 amending 42 CFR 512.285(d).
    This interim final rule with comment period revises the following 
RO Model policies. The Model performance period will be 4.5 years, 
beginning on July 1, 2021, and ending December 31, 2025. PY1 will be 6 
months, beginning on July 1, 2021, and ending on December 31, 2021; 
each subsequent PY will be a full calendar year, beginning on January 1 
and ending on December 31. Revising the Model performance period 
requires revising other components of the RO Model including: How 
episodes and RO episodes are used to determine eligibility for the low 
volume opt-out for PY3 and RO episodes are used to determine 
eligibility for the low volume opt-out for PY4 through PY5; Certified 
Electronic Health Record Technology (CEHRT) requirements; submission of 
quality measures and clinical data elements; the quality withhold; 
quality reconciliation amount; and the status of the RO Model as an 
Advanced APM and MIPS APM.
    We finalized at Sec.  512.205 the RO Model's Model performance 
period to last five performance years, beginning January 1, 2021 and 
ending December 31, 2025 (with each performance year being the 12-month 
period beginning on January 1 and ending on December 31 of each year 
during the Model performance period. In this interim final rule with 
comment period, we are revising the Model performance period to be 4.5 
years beginning July 1, 2021 and ending December 31, 2025.
    A 4.5-year Model performance period will still be sufficient to 
test the proposed prospective payment approach, stimulate the 
development of new evidence-based knowledge, acquire additional 
knowledge related to patterns of inefficient utilization of health care 
services, and formulate methods to incentivize the improvement of high-
quality delivery of RT services. A Model performance period of 4.5 
years will provide RO participants an additional 6 months to address 
implementation issues prior to the start of the Model performance 
period. It will also provide sufficient time for the Model evaluation 
pursuant to section 1115A(b)(4) of the Social Security Act (the Act) to 
obtain sufficient data to compute a reliable impact estimate and to 
determine next steps regarding potential expansion or extension of the 
Model. Based upon the updated savings projection (see section 
XXVI.C.10) and accounting for the reduced number of cumulative episodes 
accrued in PY1 since the final rule was published (85 FR 61149), CMS 
determined that the Model savings will be able to reach the 3.75 
percent level that is the threshold indicated by the Model power 
analysis enabling the evaluation to detect with statistical 
significance that level of impact. Starting the Model performance 
period on July 1, 2021 will not require a re-randomization of 
participation and will not affect the list of participating ZIP Codes 
posted on the RO Model website. Notably, the RO Model's evaluation will 
analyze data on the impact of the RO Model on an ongoing basis. To the 
extent that evaluation results are definitive sooner than the end of 
the RO Model, we will consider next steps at that time rather than 
waiting until the RO Model ends.
    Because we are revising the Model performance period to begin July 
1, 2021, both episodes and RO episodes from 2021 will determine 
eligibility for the low volume opt-out for PY3. To clarify the type of 
episodes used to determine eligibility for the low volume opt-out in 
each performance year, episodes, as defined at Sec.  512.205, are used 
to determine eligibility in PY1 and PY2 and RO episodes, as defined at 
Sec.  512.205 and described at Sec.  512.245(a), are used to determine 
eligibility in PY4 and PY5, and both episodes and RO episodes are used 
to determine eligibility in PY3. Specifically, for PY3, eligibility for 
the low volume opt-out is determined by counting episodes from January 
1, 2021 through June 30, 2021 and RO episodes from July 1, 2021 through 
December 31, 2021. We are revising our regulations at Sec. Sec.  
512.210(c) and 512.245(a) to reflect this clarification.
    Because we finalized the specifications for the RO Model quality 
measure reporting to be based on a calendar year of data (85 FR 61220 
through 61223), the RO Model quality

[[Page 86262]]

measures requirements will be delayed to PY2 (January 1, 2022 through 
December 31, 2022). RO participants will submit quality measure data 
finalized in the 2020 Specialty Care Models to Improve Quality of Care 
and Reduce Expenditures final rule (85 FR 61215 through 61220), unless 
CMS specifies different individual measure specifications.
    The revised Model performance period requires modifications to the 
RO Model's form, manner, and timing policy for data reporting. We 
finalized that, beginning in PY1, RO participants must submit quality 
measure data annually by March 31 following the end of the previous PY 
to the RO Model secure data portal, with the first annual submission in 
March 2022 and continuing thereafter (85 FR 61220 through 61223). This 
interim final rule with comment period revises this policy so that RO 
participants must, beginning in PY2, submit in March 2023 quality 
measures data from January 1, 2022, through December 31, 2022.
    For PY2, three measures will be pay-for-performance: (1) Plan of 
Care for Pain; (2) Screening for Depression and Follow-Up Plan; and (3) 
Advance Care Plan. The fourth measure, Treatment Summary 
Communication--Radiation Oncology, will be a pay-for-reporting measure. 
Data collected for this measure will be used to propose a benchmark to 
re-specify it as a pay-for-performance measure, for PY4. All four 
measures will still be scored in accordance with our Aggregate Quality 
Scoring Methodology (85 FR 61226 through 61231).
    We also finalized to have a CMS-approved contractor administer the 
Consumer Assessment of Healthcare Providers and Systems (CAHPS[supreg]) 
Cancer Care Survey for Radiation Therapy, beginning in April 2021 (85 
FR 61220). This interim final rule with comment period revises this 
policy so that a CMS-approved contractor will administer the 
CAHPS[supreg] Cancer Care Survey for Radiation Therapy beginning in 
October 2021.
    We finalized under the Model's clinical data collection policy that 
RO participants must collect certain clinical information not available 
in claims or quality measures, with data collecting starting in PY1 (85 
FR 61223 through 61226). This interim final rule with comment period 
revises this policy so that the collection period for clinical data 
elements (CDEs) will begin on January 1, 2022. The first submission of 
the clinical data elements for January 1, 2022, through June 30, 2022, 
will be due in July 2022.
    We finalized at Sec.  512.255(c)(10) to apply a 2 percent quality 
withhold from each professional episode payment after applying the 
trend factor, geographic adjustment, case mix and historical experience 
adjustments, and discount factor to the national base rate. RO 
participants may earn back this withhold, in part or in full, based on 
their AQS. Since this interim final rule with comment period delays the 
reporting of quality measures (QM) and CDEs until PY2, there will be no 
quality withhold in PY1. Beginning in PY2, a 2 percent quality withhold 
for the PC will be applied to the applicable trended national base 
rates after the case mix and historical experience adjustments. 
Accordingly, Sec.  512.255(c)(10) is revised.
    Revising the quality reporting requirements and quality withhold 
requires revising the reconciliation payment and the repayment amounts 
calculations for PY1, as described at Sec.  512.285(d). Since 
submission of QMs and CDEs will begin in PY2, the AQS will be applied 
beginning in PY2, and Professional participants and Dual participants 
will not have a quality reconciliation amount for PY1. The 
reconciliation amount for PY1 will be based solely on the incorrect 
episode payment reconciliation amount and any stop-loss reconciliation 
amount, if applicable. Professional participants and Dual participants 
will have a quality reconciliation amount only for PY2 through PY5. 
Accordingly, Sec.  512.285(d) is revised.
    We have previously stated that we expect the RO Model will meet the 
criteria to be an Advanced Alternative Payment Model (APM) and a Merit-
based Incentive Payment System (MIPS) APM under the Quality Payment 
Program beginning in PY1 (85 FR 61231 through 61238). Because we are 
revising the quality measure policy so that quality measure data will 
not be collected in PY1, the RO Model will not meet the criteria to be 
either an Advanced APM or a MIPS APM under the Quality Payment Program 
in PY1. We anticipate that the RO Model will meet the criteria to be 
both an Advanced APM and a MIPS APM under the Quality Payment Program 
starting in PY2 (January 1, 2022). Effective January 1, 2022, at least 
one of the quality measures upon which the RO Model bases payment will 
meet at least one of the following criteria: (a) Finalized on the MIPS 
final list of measures, as described in 42 CFR 414.1330; (b) endorsed 
by a consensus-based entity; or (c) determined by CMS to be evidenced-
based, reliable, and valid. Final CMS determinations of Advanced APMs 
and MIPS APMs for the 2022 performance period will be announced via the 
Quality Payment Program website at https://qpp.cms.gov/.
    For PY1, all requirements concerning the review and certification 
of the individual practitioner list codified at Sec.  512.217 will 
remain in effect, but because the RO Model will not meet the criteria 
to be either an Advanced APM or a MIPS APM under the Quality Payment 
Program in PY1, the individual practitioner list will not be used for 
Qualifying APM Participant determinations or for determining 
participants in a MIPS APM for purposes of MIPS reporting and scoring 
rules in PY1. The individual practitioner list will only be used for 
the Quality Payment Program in PY1 to assign an automatic 50 percent 
score for the Improvement Activity performance category in MIPS for RO 
participants. Starting in PY2 (January 1, 2022), the individual 
practitioner list will be used to identify the relevant eligible 
clinicians for purposes of making Qualifying APM Participant (QP) 
determinations and for certain aspects of MIPS under the Quality 
Payment Program. Dual participants and Professional participants must 
review and certify the individual practitioner list within 30 days of 
receipt of the individual practitioner list that is created and 
provided by CMS. Accordingly, Sec.  512.217(c) is revised.
    We finalized at Sec.  512.220(b) that the requirement that RO 
participants must use CEHRT in a manner sufficient to meet the 
applicable requirements of the Advanced APM criteria before each PY. 
Due to the revised Model performance period, this requirement that RO 
participants must use CEHRT in a manner sufficient to meet the 
applicable requirements of the Advanced APM criteria will now begin in 
PY2, on January 1, 2022, and be required for PY2 through PY5. RO 
participants must annually certify their use of CEHRT for PY2 through 
PY5, and RO participants will be required to certify their use of CEHRT 
within 30 days of the start of PY2. Delaying the quality reporting and 
CEHRT use requirements until PY2 means that the RO Model will not meet 
the criteria to be considered an Advanced APM in PY1. Therefore, RO 
participants will not be eligible for the 5 percent APM Incentive 
Payment for QPs in PY1 based on their participation in the RO Model.
    We note that there is a 60-day public comment period following 
publication of this final rule for the public to comment on these final 
amendments to our regulations. We refer readers to the ADDRESSES 
section of the final rule for instructions on submitting public 
comments. Comments are due by the

[[Page 86263]]

``Comment date'' specified in the DATES section of this rule.

B. Waiver of Proposed Rulemaking

    Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), 
the agency is required to publish a notice of proposed rulemaking that 
includes a reference to the legal authority under which the rule is 
proposed, and the terms and substance of the proposed rule or a 
description of the subjects and issues involved in the Federal Register 
before the provisions of a rule take effect. Section 553(c) of the APA 
further requires the agency to give interested parties opportunity to 
participate in the rulemaking through public comments before the 
provisions of the rule take effect. Similarly, section 1871(b)(1) of 
the Social Security Act (the Act) requires the Secretary of the 
Department of Health and Human Services (Secretary) to provide for 
notice of the proposed rule in the Federal Register and provide a 
period of not less than 60 days for public comment. Section 553(b)(B) 
of the APA and section 1871(b)(2)(C) of the Act authorize the agency to 
waive these procedures if the agency finds good cause that notice and 
comment procedures are impracticable, unnecessary, or contrary to the 
public interest and incorporates a statement of the finding and its 
reasons in the rule issued.
    At the time of this publication, the U.S. continues to respond to a 
PHE of unprecedented magnitude. Specifically, the nation is responding 
to an outbreak of ``severe acute respiratory syndrome coronavirus 2'' 
(SARS-CoV-2), the disease it causes has been named ``coronavirus 
disease 2019'' (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''.\372\ On January 
31, 2020, pursuant to section 319 of the Public Health Services Act (42 
U.S.C. 247d), the Secretary declared a PHE for the U.S., retroactively 
effective from January 27, 2020, to aid the nation's health care 
community in responding to COVID-19.\373\ On March 11, 2020, the WHO 
publicly declared COVID-19 a pandemic.\374\ On March 13, 2020, 
President Donald J. Trump declared the COVD-19 pandemic a national 
emergency.\375\ Effective July 25, 2020, the Secretary renewed the 
January 31, 2020 determination that was previously renewed on April 21, 
2020, that a PHE for COVID-19 exists and has existed since January 27, 
2020.\376\ October 2, 2020, the Secretary renewed the January 31, 2020, 
PHE for COVID-19 determination effective October 23, 2020.\377\ As with 
each PHE declaration, this renewal of the PHE for COVID-19 
determination lasts until the Secretary declares that the PHE no longer 
exists or upon the expiration of the 90-day period beginning on the 
date the Secretary declared a PHE exists, whichever occurs first.
---------------------------------------------------------------------------

    \372\ https://www.who.int/news/item/30-01-2020-statement-on-the-second-meeting-of-the-international-health-regulations-(2005)-
emergency-committee-regarding-the-outbreak-of-novel-coronavirus-
(2019-ncov).
    \373\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/2019-nCoV.aspx.
    \374\ https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020.
    \375\ https://www.whitehouse.gov/presidential-actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/.
    \376\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-21apr2020.aspx; https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-23June2020.aspx.
    \377\ https://www.phe.gov/emergency/news/healthactions/phe/Pages/covid19-2Oct2020.aspx.
---------------------------------------------------------------------------

    On September 29, 2020, we published a final rule entitled 
``Specialty Care Models To Improve Quality of Care and Reduce 
Expenditures'' (Specialty Care Models Rule) in the Federal Register (85 
FR 61114). In the Specialty Care Models Rule, we adopted a Model 
performance period that begins on January 1, 2021. At the time of the 
Specialty Care Models Rule publication, had the Secretary's renewal of 
the PHE effective July 25, 2020 lasted 90 days, it would have ended 
prior to the beginning of the Model's performance period.
    The COVID-19 pandemic continues to strain health care resources, 
and CMS understands that those selected for participation in the RO 
Model may have limited capacity to continue normal operations while 
also preparing to meet the requirements set forth in the RO Model. We 
understand that many RO participants have had to furlough or cut staff. 
Revising the Model performance period to begin July 1, 2021, would 
provide RO participants with an additional 6 months prior to the start 
of the Model performance period to operationalize the RO Model while 
continuing to respond to the COVID-19 pandemic.
    We do not presume to know when the Secretary will declare that the 
PHE no longer exists, but we are erring on the side of caution that 
this most recent renewal of the PHE for COVID-19 will most likely 
extend for the entire 90-day period. By erring on the side of caution, 
this most recent renewal period by the Secretary will likely overlap 
with the beginning of the RO Model's Model performance period, January 
1, 2021. Because of the current state of the pandemic, this most recent 
renewal of the PHE for COVID-19, and the effect of the PHE on RO 
participants, we are revising the RO Model's Model performance period 
to begin on July 1, 2021 and to now be 4.5 years instead of 5 years. As 
we are still in the midst of the PHE, we find good cause to waive 
notice and comment rulemaking as we believe it would be impracticable 
and contrary to the public interest for us to undertake normal notice 
and comment rulemaking procedures, as that would delay giving RO 
participants adequate time to respond to the ongoing impacts of COVID-
19 while also preparing for participation in the RO Model.
    Revising the Model performance period to begin on July 1, 2021, 
will require modifying other RO Model requirements, including those 
related to the types of episodes used to determine eligibility for the 
low volume opt-out for PY3, CEHRT requirements, submission of quality 
measures and clinical data elements, the quality withhold, quality 
reconciliation amount, eligibility for the low volume opt-out, and the 
status of the RO Model as an Advanced APM and MIPS APM.
    We find that there is good cause to waive the notice and comment 
requirements under sections 553(b)(B) of the APA and section 
1871(b)(2)(C) of the Act. We find the notice and comment procedure 
impracticable and contrary to the public interest because, based on the 
Secretary's recent renewal of the PHE for the COVID-19, it is in the 
public's interest to revise the Model performance period in order to 
provide RO participants an additional 6 months prior to the start of 
the Model performance period to prepare for participation in the RO 
Model to ensure that the RO Model does not potentially hinder delivery 
of safe and efficient delivery of RT services to RO beneficiaries. 
Therefore, we find good cause to waive notice-and-comment procedures 
and to issue this interim final rule with comment period. We are 
providing a 60-day public comment period as specified in the DATES 
section of this document.

[[Page 86264]]

XXII. COVID-19 Therapeutic Inventory and Usage Data Reporting 
Requirements for Hospitals and Critical Access Hospitals (CAHs) and 
Reporting Requirements for Hospitals and CAHs To Report Acute 
Respiratory Illness During the PHE for COVID-19 Interim Final Rule With 
Comment Period (IFC)

A. Conditions of Participation (CoP) Requirements for Hospitals and 
CAHs To Report COVID-19 Therapeutic Inventory and Usage and To Report 
Acute Respiratory Illness Data As Specified by the Secretary During the 
PHE for COVID-19

    Under sections 1866 and 1902 of the Social Security Act (the Act), 
providers of services seeking to participate in the Medicare or 
Medicaid program, or both, must enter into an agreement with the 
Secretary or the state Medicaid agency, as appropriate. Hospitals (all 
hospitals to which the requirements of 42 CFR part 482 apply, including 
short-term acute care hospitals, long-term care hospitals (LTCHs), 
rehabilitation hospitals, psychiatric hospitals, cancer hospitals, and 
children's hospitals) and CAHs seeking to be Medicare and Medicaid 
providers of services must be certified as meeting federal 
participation requirements. Our conditions of participation (CoPs), 
conditions for coverage (CfCs), and requirements for long term care 
facilities set out the patient health and safety protections 
established by the Secretary for various types of providers and 
suppliers. The specific statutory authority for hospital CoPs is set 
forth in section 1861(e) of the Act; section 1820(e) of the Act 
provides similar authority for CAHs. The hospital provision authorizes 
the Secretary to issue any regulations he or she deems necessary to 
protect the health and safety of patients receiving services in those 
facilities; the CAH provision authorizes the Secretary to issue such 
other criteria as he or she may require. The CoPs are codified in the 
implementing regulations at part 482 for hospitals, and at 42 CFR part 
485, subpart F, for CAHs.
    Our CoPs at 42 CFR 482.42 for hospitals and Sec.  485.640 for CAHs, 
require that hospitals and CAHs, respectively, have active facility-
wide programs for the surveillance, prevention, and control of 
healthcare-associated infections (HAIs) and other infectious diseases 
and for the optimization of antibiotic use through stewardship. 
Additionally, the programs must demonstrate adherence to nationally 
recognized infection prevention and control guidelines, as well as to 
best practices for improving antibiotic use where applicable; and to 
best practices for reducing the development and transmission of HAIs 
and antibiotic-resistant organisms. Infection prevention and control 
problems and antibiotic use issues identified in the required hospital 
and CAH programs must also be addressed in coordination with facility-
wide quality assessment and performance improvement (QAPI) programs.
    Infection prevention and control is a primary goal of hospitals and 
CAHs in their normal day-to-day operations, and these programs have 
been at the center of initiatives in hospitals and CAHs during the PHE 
for COVID-19. Our regulations at Sec. Sec.  482.42(a)(3) and 
485.640(a)(3) require infection prevention and control program policies 
to address any infection control issues identified by public health 
authorities. On March 4, 2020, we issued guidance (https://www.cms.gov/files/document/qso-20-13-hospitalspdf.pdf-2) stating that hospitals 
should inform infection prevention and control services, local and 
state public health authorities, and other healthcare facility staff as 
appropriate about the presence of a person under investigation for 
COVID-19. We followed this guidance with an interim final rule with 
comment (IFC),\378\ published in the September 2, 2020 Federal Register 
(85 FR 54820), that requires hospitals and CAHs to report important 
data critical to support the fight against COVID-19. The CoP provisions 
require that hospitals and CAHs report this information in accordance 
with a frequency as specified by the Secretary on COVID-19, as well as 
in a standardized format specified by the Secretary. Examples of data 
elements that may be required to be reported include: The number of 
staffed beds in a hospital and the number of those that are occupied; 
information about its ventilator and personal protective equipment 
(PPE) supplies; and a count of patients currently hospitalized who have 
laboratory-confirmed COVID-19. This list is not exhaustive of those 
data items that we may require hospitals and CAHs to submit, as 
specified by the Secretary (see https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf for the current list of data items specified). In 
fact, as new therapeutics are issued Emergency Use Authorizations by 
the Food and Drug Administration, and because these new therapeutics 
are in very scarce supply in the United States, HHS is actively working 
with manufacturers to ensure that they are distributed efficiently and 
effectively. Effective distribution methods use a variety of 
indicators, tailored to the specific therapeutic, to estimate the 
geographic distribution that is recommended for that particular 
therapeutic. However, without a real-time and real-world understanding 
of the usage patterns specific to each new therapeutic and lacking 
accurate information on the current inventory on hand for that 
therapeutic, scarce therapeutic supplies might be sent to areas that 
already have adequate inventories on hand. An inefficient and 
uninformed distribution strategy for these therapeutics such as this 
negatively and severely impacts areas of the nation that already have 
inadequate supplies and creates an untenable situation as new 
therapeutics are introduced.
---------------------------------------------------------------------------

    \378\ https://www.govinfo.gov/content/pkg/FR-2020-09-02/pdf/2020-19150.pdf.
---------------------------------------------------------------------------

    Therefore, we are revising our current COVID-19 PHE hospital and 
CAH CoP reporting requirements at 42 CFR 482.42(e) for hospitals and at 
42 CFR 485.640(d) for CAHs, to now require hospitals and CAHs to report 
data elements that must include, but not be limited to, the following: 
(1) The hospital's (or the CAH's) current inventory supplies of any 
COVID-19-related therapeutics that have been distributed and delivered 
to the hospital (or CAH) under the authority and direction of the 
Secretary; and (2) the hospital's (or the CAH's) current usage rate for 
any COVID-19-related therapeutics that have been distributed and 
delivered to the CAH under the authority and direction of the 
Secretary.
    All participating hosptials and CAHs will now track their inventory 
supplies and usage rates in real time for those COVID-19-related 
therapeutics that have been distributed and delivered by HHS so that 
public health officials will have a more robust and accurate database 
in order to efficiently and effectively manage the distribution and 
delivery ofthese therapeutics, particularly to those regions of the 
country that might be experiencing shortages of these crucial supplies. 
The importance of this particular data reporting, along with the 
information provided, cannot be overestimated as we continue to make 
advances to more effectively address the continuing COVID-19 PHE and to 
greatly diminish its negative impact on the nation.
    In this IFC, we are also now requiring hospitals and CAHs to report 
information with a frequency, and in such standardized format as 
specified by the Secretary during the COVID-19 PHE, on Acute 
Respiratory Illness (including, but not limited to, Seasonal Influenza 
Virus, Influenza-like Illness,

[[Page 86265]]

and Severe Acute Respiratory Infection). Examples of data elements that 
we would ask to be reported include things such as diagnoses, 
admissions, and counts of patients currently hospitalized who have 
diagnoses of Acute Respiratory Illnesses (including, but not limited 
to, Seasonal Influenza Virus, Influenza-like Illness, and Severe Acute 
Respiratory Infection). In addition, as with the current COVID-19 
reporting requirements, we firmly believe these elements are essential 
for planning, monitoring, and resource allocation during the PHE for 
COVID-19, especially as the nation enters the seasonal influenza 
season, when hospitals and CAHs are likely to see an increase in the 
number of patients presenting with the signs and symptoms of a variety 
acute respiratory illnesses along with a continuing and unknown number 
of patients presenting with both suspected and confirmed COVID-19. The 
new rules make reporting a requirement of participation in the Medicare 
and Medicaid programs and the required reporting is needed to support 
broad surveillance of COVID-19 in conjunction with other acute 
respiratory illnesses that may further burden and strain hospital and 
CAH resources.
    We believe that universal acute respiratory illness reporting, in 
tandem with the current COVID-19 reporting, by all hospitals and CAHs, 
will be an important tool for supporting surveillance of COVID-19, as 
well as for future planning to prevent the spread of these respiratory 
viruses and infections, especially to those most vulnerable and at-
risk. As with the current COVID-19 reporting requirements, we are 
cognizant of the crucial need for acute respiratory illness data 
reporting options to reduce duplicative and competing reporting 
requests and associated burden on hospitals and CAHs whose resources 
are already stressed during this PHE for COVID-19.
    We expect that the new reporting data that will be requested by the 
Secretary would include reporting channel options similar to, if not 
the same as, those currently in place for COVID-19, to make submission 
of data as user-friendly as possible to reduce the potential strain and 
burden on hospitals and CAHs. The new standards will ask hospitals and 
CAHs to report information on Acute Respiratory Illness in a 
standardized format, frequency, and manner specified by the Secretary.
    We believe that a streamlined approach to reporting data will 
greatly assist the White House Coronavirus Task Force (COVID-19 Task 
Force) in tracking the movement of these respiratory viruses and 
infections, along with the continuing movement of COVID-19. Similarly, 
this data may help identify potential problems in the healthcare 
delivery system as we continue to deal with COVID-19 cases along with 
potentially concurrent cases of respiratory viruses and infections. The 
completeness, accuracy, and timeliness of the data will inform the 
COVID-19 Task Force decisions on capacity and resource needs to ensure 
a fully coordinated effort across the nation. Furthermore, we believe 
that consistent processes and streamlined methods for the reporting of 
acute respiratory illness data in conjunction with the reporting of 
COVID-19 information will possibly reduce future, urgent requests for 
such data.
    We note here that the new reporting requirements at Sec. Sec.  
482.42(f) and 485.640(e) do not relieve a hospital or a CAH, 
respectively, of its obligation to continue to comply with Sec.  
482.42(a)(3) or Sec.  485.640(a)(3), each of which requires a facility 
to address any infection prevention and control issues identified by 
public health authorities. We believe that the requirements, as 
described in this IFC, to collect and transmit these data, will also 
encourage greater awareness and promotion of best practices in 
infection prevention and control within these facilities.
    This reporting requirement supports our responsibility to protect 
and ensure the health and safety of hospital and CAH patients through, 
for example, ensuring that these facilities follow infection prevention 
and control protocols based on recognized standards of practice. We 
believe that these reporting requirements are necessary for CMS to 
monitor whether individual hospitals and CAHs are appropriately 
tracking, responding to, and mitigating the spread and impact of acute 
respiratory illnesses coupled with COVID-19 on patients, the staff who 
care for them, and the general public. We believe that this action 
reaffirms our commitment to protecting the health and safety of all 
patients who receive care at the approximately 6,200 Medicare- and 
Medicaid-participating hospitals and CAHs nationwide.
    As discussed in section XXV.B of this IFC, ``Waiver of Proposed 
Rulemaking for Reporting Requirements for Hospitals and Critical Access 
Hospitals (CAHs) to Report Acute Respiratory Illness During the PHE for 
COVID-19 Interim Final Rule with Comment Period (IFC),'' we believe the 
urgency of this PHE for COVID-19 and the impending and traditional 
seasonal influenza virus (and acute respiratory illness) season 
constitutes good cause to waive the normal notice-and-comment process 
under the Administrative Procedure Act (APA) and section 1871(b)(2)(C) 
of the Act. Waiving notice and comment is in the public interest 
because as it is necessary to expeditiously track the continuing 
incidence and impact of COVID-19 in conjunction with the impending 
incidence and impact of other acute respiratory illnesses in hospitals 
and CAHs; such information will assist public health officials in 
detecting outbreaks and responding appropriately in order to save 
lives.
    The applicability date for Sec.  482.42(e) and (f) for hospitals 
and for Sec.  485.640(d) and (e) for CAHs is the date of the 
publication of this rule as noted in the DATES section of this IFC.

B. Enforcement of Requirements for Hospitals and Critical Access 
Hospitals (CAHs) To Report Acute Respiratory Illness (Including, but 
Not Limited to, Seasonal Influenza Virus, Influenza-Like Illness, and 
Severe Acute Respiratory Infection) Data

    We believe reporting by hospitals and CAHs is an important tool for 
supporting surveillance of both COVID-19 and other acute respiratory 
illness cases that are likely to present simultaneously in hospitals 
and CAHs. We will enforce violations of reporting requirements to the 
extent permitted by law. Should a hospital or CAH consistently fail to 
report data related to patient diagnoses of Acute Respiratory Illness 
(including, but not limited to, Seasonal Influenza Virus, Influenza-
like Illness, and Severe Acute Respiratory Infection) throughout the 
duration of the PHE for COVID-19, it will be non-compliant with the 
hospital and the CAH CoPs set forth at Sec. Sec.  482.42(f) and 
485.640(e), respectively, and subject to termination as defined at 42 
CFR 489.53(a)(3). We have taken a position on the importance of COVID-
19 reporting in other provider areas, including use of civil money 
penalties (CMPs) for nursing homes that fail to report, and find it 
prudent to enact penalties for hospitals and CAHs that similarly fail 
to report Acute Respiratory Illness data. We currently lack the 
statutory authority to impose CMPs against hospitals and CAHs. However, 
we will continue to utilize all enforcement and payment authorities 
available to incentivize and promote compliance with all health and 
safety requirements, as allowed by statute and regulation.

[[Page 86266]]

XXIII. Files Available to the Public via the Internet

    The Addenda to the OPPS/ASC proposed rules and the final rules with 
comment period are published and available via the internet on the CMS 
website. In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59154), for CY 2019, we changed the format of the OPPS Addenda A, B, 
and C, by adding a column entitled ``Copayment Capped at the Inpatient 
Deductible of $1,364.00'' where we flag, through use of an asterisk, 
those items and services with a copayment that is equal to or greater 
than the inpatient hospital deductible amount for any given year (the 
copayment amount for a procedure performed in a year cannot exceed the 
amount of the inpatient hospital deductible established under section 
1813(b) of the Act for that year). For CY 2021, we are retaining these 
columns, updated to reflect the amount of the 2021 inpatient 
deductible. For CY 2021, we proposed 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 prior to December 
31 of the calendar year. We requested public comments on this proposed 
change to the OPPS Addenda A, B, and C for CY 2021.
    We did not receive any public comments regarding the proposed CY 
2021 format changes for the OPPS Addenda A, B, and C. Therefore, for CY 
2021, we are finalizing our proposal to add an additional column 
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 prior to December 31 of the calendar year.
    To view the Addenda to the CY 2021 OPPS/ASC final rule with comment 
period, pertaining to 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-FC'' from the list of regulations. 
All OPPS Addenda to the CY 2021 OPPS/ASC final rule with comment 
period, are contained in the zipped folder entitled ``2021 NFRM OPPS 
Addenda'' at the bottom of the page. To view the Addenda to the CY 2021 
OPPS/ASC final rule with comment period, 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-FC'' 
from the list of regulations. The ASC Addenda to the CY 2021 OPPS/ASC 
final rule with comment period, are contained in a zipped folder 
entitled ``Addendum AA, BB, DD1, DD2, and EE.'' in the related links 
section at the bottom of the page.

XXIV. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the final rule with comment period, we are soliciting comments 
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 Outpatient Quality Reporting (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 previously 
finalized Hospital OQR Program ICRs. The ICRs associated with the 
Hospital OQR Program are currently approved under OMB control number 
0938-1109, which expires on March 31, 2023. Below we discuss only the 
changes in burden that will result from the finalized policies in this 
final rule with comment period.
    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.\379\ 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.
---------------------------------------------------------------------------

    \379\ 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.
---------------------------------------------------------------------------

2. Summary

    We are finalizing our proposals 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 codifying 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

[[Page 86267]]

existing Sec.  419.46(c)(2) to reflect the finalized 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 newly 
finalized 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) (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.
    We note that our finalized policies for the CY 2021 OPPS/ASC final 
rule will not yield a change in burden for the hospitals participating 
in the Hospital OQR Program as our policies 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 control 
number 0938-1109 (expiration date March 31, 2023).\380\
---------------------------------------------------------------------------

    \380\ 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 Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program ICRs we have previously 
finalized. The ICRs associated with the ASCQR Program for the CY 2014 
through CY 2023 payment determinations are currently approved under OMB 
control number 0938-1270 which expires on December 31, 2022.
2. Summary
    We are finalizing our proposals 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 and 
replace it with the phrase ``data collection period''; (3) move forward 
all program deadlines falling on a nonwork day consistent with 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 that aligns with the Hospital OQR Program as 
finalized in section XIV.D.7. and that runs concurrent with the 
existing ASCQR data submission period, and codify this policy. We note 
that our finalized proposals for the CY 2021 OPPS/ASC final rule with 
comment period will not yield a change in burden for the facilities 
participating in the ASCQR Program as our policies 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 (OMB control number 
0938-1270).\381\
---------------------------------------------------------------------------

    \381\ CY 2020 Final Rule ASCQR 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 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).\382\ 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.
---------------------------------------------------------------------------

    \382\ See also Correction notification issued January 3, 2020 
(85 FR 224).
---------------------------------------------------------------------------

    In accordance with paragraph (b) of 42 CFR 419.83, we are 
finalizing our proposal 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 categories, Cervical Fusion with Disc Removal and Implanted 
Spinal Neurostimulators, will 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 will generally be maintained by providers within 
the normal course of business and that this information will be readily 
available. We estimate that the average time for office clerical 
activities associated with this task will be 30 minutes, which is 
equivalent to that for normal prepayment or post payment medical 
review. We anticipate that most prior authorization requests will be 
sent by means other than mail. However, we estimate a cost of $5 per 
request for mailing medical records. Due to the July 1, 2021 start 
date, the first year of prior authorization for the two new service 
categories will only include 6 months. Based on CY 2018 data, we 
estimate that for those first 6 months there will be 6,808 initial 
requests mailed during the year. In addition, we estimate there will 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 
service categories, we estimate that annually there will be 13,615 
initial requests mailed during a year. In addition, we estimate there 
will be 4,468 resubmissions of a request mailed following a non-
affirmed decision. Therefore, the total annual mailing cost is 
estimated to be $90,415 (18,083 mailed requests x $5). We also

[[Page 86268]]

estimate that an additional 3 hours will be required for attending 
educational meetings, training staff on what services require prior 
authorization, 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 prior authorization program for these two service 
categories will not create any new documentation or administrative 
requirements. Instead, it will just require the same documents needed 
to support claim payments to be submitted earlier in the claim process. 
The estimate uses the clerical rate since we do not believe that 
clinical staff will need to spend more time on completing the 
documentation than will be needed in the absence of the prior 
authorization policy. The hourly rate reflects the time needed for the 
additional clerical work of submitting the prior authorization request 
itself. CMS believes providers will have provided education to their 
staff on what services are included in the prior authorization process. 
Following this education, the staff will know which services will need 
prior authorization and will not need additional time or resources to 
determine if a service requires prior authorization. We estimate that 
the total number of submissions for the first year (6 months) will 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, will 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 will 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, will be 39,889 hours (.5 hours x 60,277 submissions plus 
3 hours x 3,250 providers for education). The annual burden cost will 
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. 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 0938-1368 will be 
revised and submitted to OMB for approval.
    Below is a chart reflecting the total burden and associated costs 
for the provisions included in the CY 2021 OPPS/ASC proposed rule.
[GRAPHIC] [TIFF OMITTED] TR29DE20.143

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 final rule with comment 
period, we are finalizing our proposal to modify the physician-owned 
hospital expansion exception process under the rural provider and 
hospital ownership exceptions to the physician self-referral law. 
Specifically, we are modifying 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 
continue to believe this modification will not 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

[[Page 86269]]

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. This estimate aligns with the total number of 
expansion exception requests received to date. 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,\383\ and we 
double that wage to account for overhead and benefits. The total 
estimated annual cost is $943.11. We received the following comments:
---------------------------------------------------------------------------

    \383\ 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.
---------------------------------------------------------------------------

    Comment: A few commenters stated that our estimate relating to the 
number of expansion exception requests we will receive on an annual 
basis is understated. The commenters stated that, based on their 
analysis, approximately 25 physician-owned hospitals either currently 
qualify as high Medicaid facilities or could soon qualify. A commenter 
recommended that CMS release the data upon which it based its estimate.
    Response: We continue to estimate that approximately one physician-
owned hospital per year will request an expansion exception on the 
grounds that it is a high Medicaid facility. The modifications in this 
rule do not change the definition of a high Medicaid facility and 
therefore would not change the number of high Medicaid facilities that 
could seek an expansion exception. We believe it is highly unlikely 
that every physician-owned hospital that could meet the definition of a 
high Medicaid facility would seek an expansion exception. Instead, only 
those physician-owned hospitals that meet the definition and that also 
have the desire to expand, the resources to expand, and are able to 
meet any applicable state or local requirements (such as certificate of 
need) would seek an expansion exception. We believe it is reasonable to 
use our experience with the expansion exception process to date to 
estimate the number of requests we may receive in the future. Since the 
enactment of section 6001 of the Affordable Care Act of 2010, we have 
received only a handful of expansion exception requests, and only four 
physician-owned hospitals have been granted expansion exceptions as 
high Medicaid facilities. All expansion exceptions issued to date have 
been posted on our website (https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Physician_Owned_Hospitals).

G. ICRs for COVID-19 Therapeutic Inventory and Usage Data Reporting and 
Acute Respiratory Illness (Including, but Not Limited to, Seasonal 
Influenza Virus, Influenza-Like Illness, and Severe Acute Respiratory 
Infection) Data Reporting in Hospitals and CAHs

    In this IFC, we are revising our current COVID-19 PHE hospital and 
CAH CoP reporting requirements at 42 CFR 482.42(e) for hospitals and at 
42 CFR 485.640(d) for CAHs, to now require hospitals and CAHs to report 
data elements that must include, but not be limited to, the following: 
(1) The hospital's (or the CAH's) current inventory supplies of any 
COVID-19-related therapeutics that have been distributed and delivered 
to the hospital (or CAH) under the authority and direction of the 
Secretary; and (2) the hospital's (or the CAH's) current usage rate for 
any COVID-19-related therapeutics that have been distributed and 
delivered to the CAH under the authority and direction of the 
Secretary.
    As part of the overall hospital and CAH COVID-19 reporting data, 
users will most likely report these data on a daily basis, as is 
currently recommended by the CDC, and that this new data will take 
users, on average, an additional 15 minutes to complete. As with the 
other hospital and CAH data elements associated with the PHE that are 
required through the guidance to be reported, and because OMB PRA 
approval is requested for 180 days, the total number of responses per 
respondent is 180 for a six-month period.
    We are also revising the regulations by adding provisions to the 
CoPs (Sec.  [thinsp]482.42 for hospitals and Sec.  [thinsp]485.640 for 
CAHs), and are now requiring hospitals and CAHs to report information 
in accordance with a frequency, and in a standardized format, as 
specified by the Secretary during the PHE for Acute Respiratory Illness 
(including, but not limited to, Seasonal Influenza Virus, Influenza-
like Illness, and Severe Acute Respiratory Infection). The burden 
associated with these reporting activities will be submitted under OMB 
control number 0938-NEW. For purposes of burden estimates, we do not 
differentiate among general acute care and CAHs, as they all complete 
the same data collection.
    We have estimated that the Acute Respiratory Illness (including, 
but not limited to, Seasonal Influenza Virus, Influenza-like Illness, 
and Severe Acute Respiratory Infection) forms will take an average of 
90 minutes to complete, with the acknowledgement that the reporting 
burden includes surveillance and data entry. We further estimate that 
users will most likely report these data on a daily basis, as is 
currently recommended by the CDC for COVID-19 data, and will most 
likely use a data collection channel and format similar, if not 
identical, to that currently being used for the hospital and CAH COVID-
19 reporting data, as recommended in the most current (as of October 6, 
2020) COVID-19 Guidance for Hospital Reporting document (https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf) and (https://healthdata.gov/covid-19_hospital_reporting). Because OMB PRA approval 
is requested for 180 days, the total number of responses per respondent 
is 180 for a six month period.
    This PRA package will then be merged with the HHS PRA package for 
Teletracking that is currently seeking OMB approval and was announced 
in the Federal Register on September 23, 2020 (85 FR 59809). Details of 
these burden estimates and the costs can be found in Tables 77 and 78.

[[Page 86270]]

[GRAPHIC] [TIFF OMITTED] TR29DE20.144

[GRAPHIC] [TIFF OMITTED] TR29DE20.162

XXV. Waiver of the 30-Day and 60-Day Delayed Effective Dates for the 
Final Rule With Comment Period and Waiver of Proposed Rulemaking for 
the COVID-19 Therapeutic Inventory and Usage Reporting Requirements and 
for the Reporting Requirements for Hospitals and Critical Access 
Hospitals (CAHs) To Report Acute Respiratory Illness During the PHE for 
COVID-19 Interim Final Rule With Comment Period (IFC)

A. Waiver of the 30-Day and 60-Day Delayed Effective Dates for the 
Final Rule With Comment Period

    We are committed to ensuring that we fulfill our statutory 
obligation to update the OPPS as required by law and have worked 
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 
accordance 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.
    In addition, the Administrative Procedure Act, (5 U.S.C. 553(d)), 
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. 
This 30-day delay in effective date can be waived, however, if an 
agency finds good cause to support an earlier effective date. Section 
1871(e)(1)(B)(ii) of the Act, also permits a substantive rule to take 
effect less than 30 days after its publication if the Secretary finds 
that waiver of the 30-day period is necessary to comply with statutory 
requirements or that the 30-day delay would be contrary to the public 
interest.
    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.
    The COVID-19 PHE has required the agency to divert energy and 
personnel resources that would otherwise have been used to complete 
this OPPS/ASC payment system final rule with comment period to other 
priority matters, including four interim final rules necessary because 
of the PHE. (See 85 FR 19230 (April 6, 2020); 85 FR 27550 (May 8, 
2020); 85 FR 54820 (September 2, 2020); 85 FR 71142 (November 6, 
2020)). Although we have devoted significant resources to completing 
the OPPS/ASC payment system final rule with comment period, it was 
impracticable for CMS to complete the work needed on the rule in 
accordance with our usual schedule for this rulemaking or in sufficient 
time to ensure a full 60-day period of public notice prior to the next 
calendar year that begins on January 1, 2021. The OPPS/ASC payment 
system final rule with comment period 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 calendar year to which they are intended to apply. Therefore, in

[[Page 86271]]

light of the COVID-19 PHE, and the resulting strain on CMS's resources, 
it was impracticable for CMS to publish this final rule either 30 or 60 
days prior to the beginning of the upcoming year, and CMS has 
determined that, for good cause, it would be contrary to the public 
interest to delay the effective date of this final rule with comment 
period beyond January 1, 2021, and we are waiving both the 30-day and 
60-day delayed effective date requirements for this final rule with 
comment period.

B. Waiver of Proposed Rulemaking for the COVID-19 Therapeutic Inventory 
and Usage Reporting Requirements for Hospitals and Critical Access 
Hospitals (CAHs) and for the Reporting Requirements for Hospitals and 
CAHs To Report Acute Respiratory Illness During the PHE for COVID-19 
Interim Final Rule With Comment Period (IFC)

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule before 
the provisions of the rule are finalized, either as proposed or as 
amended in response to public comments, and take effect, in accordance 
with the APA (Pub. L. 79-404), 5 U.S.C. 553, and, where applicable, 
section 1871 of the Act. Specifically, 5 U.S.C. 553 requires the agency 
to publish a notice of the proposed rule in the Federal Register that 
includes a reference to the legal authority under which the rule is 
proposed, and the terms and substance of the proposed rule or a 
description of the subjects and issues involved. Further, 5 U.S.C. 553 
requires the agency to give interested parties the opportunity to 
participate in the rulemaking through public comment before the 
provisions of the rule take effect. Similarly, section 1871(b)(1) of 
the Act requires the Secretary to provide for notice of the proposed 
rule in the Federal Register and a period of not less than 60 days for 
public comment for rulemaking carrying out the administration of the 
insurance programs under title XVIII of the Act. Section 1871(b)(2)(C) 
of the Act and 5 U.S.C. 553 authorize the agency to waive these 
procedures, however, if the agency for good cause finds that notice and 
comment procedures are impracticable, unnecessary, or contrary to the 
public interest and incorporates a statement of the finding and its 
reasons in the rule issued.
    Section 553(b)(B) of title 5 of the U.S. Code ordinarily requires a 
30-day delay in the effective date of a final rule from the date of its 
publication in the Federal Register. This 30-day delay in effective 
date can be waived, however, if an agency finds good cause to support 
an earlier effective date. Section 1871(e)(1)(B)(i) of the Act also 
prohibits a substantive rule from taking effect before the end of the 
30-day period beginning on the date the rule is issued or published. 
However, section 1871(e)(1)(B)(ii) of the Act permits a substantive 
rule to take effect before 30 days have passed, if the Secretary finds 
that a waiver of the 30-day period is necessary to comply with 
statutory requirements or that the 30-day delay would be contrary to 
the public interest. Furthermore, section 1871(e)(1)(A)(ii) of the Act 
permits a substantive change in regulations, manual instructions, 
interpretive rules, statements of policy, or guidelines of general 
applicability under Title XVIII of the Act to be applied retroactively 
to items and services furnished before the effective date of the change 
if the failure to apply the change retroactively would be contrary to 
the public interest. Finally, the Congressional Review Act (CRA) (Pub. 
L. 104-121, Title II) requires a delay in the effective date for major 
rules unless an agency finds good cause that notice and public 
procedure are impracticable, unnecessary, or contrary to the public 
interest, in which case the rule shall take effect at such time as the 
agency determines. 5 U.S.C. 801(a)(3), 808(2).
    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.'' On January 31, 
2020, pursuant to section 319 of the PHSA, the Secretary determined 
that a PHE exists for the United States to aid the nation's healthcare 
community in responding to COVID-19. On March 11, 2020, the WHO 
publicly declared COVID-19 a pandemic. On March 13, 2020, the President 
declared the COVID-19 pandemic a national emergency. Effective July 25, 
2020, the Secretary renewed the January 31, 2020 determination that was 
previously renewed on April 21, 2020, that a PHE exists and has existed 
since January 27, 2020. This declaration, along with the Secretary's 
January 30, 2020 declaration of a PHE, conferred on the Secretary 
certain waiver authorities under section 1135 of the Act. On March 13, 
2020, the Secretary authorized waivers under section 1135 of the Act, 
effective March 1, 2020.
    On March 4, 2020, we issued guidance[thinsp](https://www.cms.gov/files/document/qso-20-13-hospitalspdf.pdf-2) stating that hospitals 
should inform infection prevention and control services, local and 
state public health authorities, and other healthcare facility staff as 
appropriate about the presence of a person under investigation for 
COVID-19. CMS followed this guidance with an interim final rule with 
comment (IFC), published on September 2, 2020 (85 FR 54820), that now 
requires hospitals and CAHs to report important data critical to 
support the fight against COVID-19. The CoP provisions require that 
hospitals and CAHs report this information in accordance with a 
frequency as specified by the Secretary on COVID-19 as well as in a 
standardized format specified by the Secretary. Examples of data 
elements that may be required to be reported include things such as the 
number of staffed beds in a hospital and the number of those that are 
occupied, information about its supplies, and a count of patients 
currently hospitalized who have laboratory-confirmed COVID-19. This 
list is not exhaustive of those data items that we may require 
hospitals and CAHs to submit, as specified by the Secretary (see 
https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf for the 
current list of data items specified). These elements are essential for 
planning, monitoring, and resource allocation during the COVID-19 
Public Health Emergency (PHE). The new rules make reporting a 
requirement of participation in the Medicare and Medicaid programs. 
This reporting is needed to support broader surveillance of COVID-19.
    As we discussed in Section XXII., promising new COVID-19-related 
therapeutics are being issued Emergency Use Authorizations by the Food 
and Drug Administration. Because these new therapeutics are in very 
scarce supply in the United States, HHS is actively working with 
manufacturers to ensure that they are distributed efficiently and 
effectively. Effective distribution methods use a variety of 
indicators, tailored to the specific therapeutic, to estimate the 
geographic and regional distribution that is recommended for that 
particular therapeutic. However, as we previously noted, analysing and 
understanding the usage patterns specific to each new therapeutic 
requires real-world information in real time. Lacking accurate 
information on the usage rates and current inventory on hand for a 
particualr therapeutic, can possibly result in scarce therapeutic 
supplies being sent to areas that already have adequate inventories on 
hand. Such an inefficient and ill-informed distribution strategy for 
these therapeutics could

[[Page 86272]]

very quickly lead to a situation that could negatively impact areas of 
the nation that already have inadequate supplies and resources.
    In response to this situation and as a pre-emptive means of 
avoiding the disastrous consequences of inadequate planning, we are 
revising our current COVID-19 PHE hospital and CAH CoP reporting 
requirements at 42 CFR 482.42(e) for hospitals and at 42 CFR 485.640(d) 
for CAHs, to now require hospitals and CAHs to report data elements 
that must include, but not be limited to, the following: (1) The 
hospital's (or the CAH's) current inventory supplies of any COVID-19-
related therapeutics that have been distributed and delivered to the 
hospital (or CAH) under the authority and direction of the Secretary; 
and (2) the hospital's (or the CAH's) current usage rate for any COVID-
19-related therapeutics that have been distributed and delivered to the 
CAH under the authority and direction of the Secretary. The importance 
of this particular data reporting, along with the information provided, 
cannot be overestimated as we continue to make advances to more 
effectively address the continuing COVID-19 PHE and to greatly diminish 
its negative impact on the nation.
    Therefore, we believe that the lack of real data on hospital and 
CAH inventory supplies and usage rates of COVID-19-related 
therapeutics, coupled with the overarching and continuing urgency of 
the PHE for COVID-19, constitutes good cause to waive notice and 
comment rulemaking as we believe it would be impracticable and contrary 
to the public interest for us to undertake normal notice and comment 
rulemaking procedures. For the same reasons, because we cannot afford 
any delay in effectuating this IFC, we find good cause to waive the 30-
day delay in the effective date and, moreover, to establish these 
policies in this IFC applicable as of the date this rule is published.
    Ensuring the health and safety of all Americans, including Medicare 
beneficiaries, Medicaid recipients, and healthcare workers, is of 
primary importance. This IFC directly supports that goal by requiring, 
in addition to the current COVID-19 reporting by hospitals and CAHs as 
well as the new COVID-19-related therapeutic inventory and usage data 
reporting requirements discussed here, the additional reporting of 
Acute Respiratory Illness (including, but not limited to, Seasonal 
Influenza Virus, Influenza-like Illness, and Severe Acute Respiratory 
Infection) data. It is critically important that we implement the 
policies in this IFC as quickly as possible. As we are already in the 
midst of the PHE for the COVID-19 pandemic, we now find our nation also 
fully entering the seasonal influenza season for North America, which 
will include increased patient case presentations of a variety of 
respiratory infections and viral diseases, the most significant of 
which will be cases of seasonal influenza virus and influenza-like 
illness as well as cases of other acute respiratory illness as defined 
by the Centers for Disease Control and Prevention (CDC) (https://www.cdc.gov/flu/about/glossary.htm).
    According to Scientific American, (https://www.scientificamerican.com/article/coronavirus-and-the-flu-a-looming-double-threat/), the ``overlap of COVID-19 and influenza has 
epidemiologists and some policy makers concerned,'' and that, ``the 
U.S. may soon face two epidemics at the same time,'' precipitating ``a 
crisis unlike any other.'' The article further states that, ``the 
worst-case scenario is both [the coronavirus and the flu] are spreading 
fast and causing severe disease, complicating diagnoses and presenting 
a double burden on the health care system.'' The most recent data from 
the CDC regarding the 2017-2018 influenza season and hospitalizations 
show that, ``30,453 laboratory-confirmed influenza-related 
hospitalizations were reported through the Influenza Hospitalization 
Surveillance Network (FluSurv-NET), which covers approximately 9% of 
the U.S. population,'' and that, ``people 65 years and older accounted 
for approximately 58% of reported influenza-associated 
hospitalizations,'' and that ``overall hospitalization rates (all ages) 
during 2017-2018 were the highest ever recorded in this surveillance 
system, breaking the previously recorded high recorded during 2014-
2015'' (https://www.cdc.gov/flu/about/season/flu-season-2017-2018.htm#anchor_1534865852732). We believe that these reporting 
requirements are necessary for CMS to monitor whether individual 
hospitals and CAHs are appropriately tracking, responding to, and 
mitigating the spread and impact of acute respiratory illnesses coupled 
with COVID-19 on patients, the staff who care for them, and the general 
public. We believe that this action reaffirms our commitment to 
protecting the health and safety of all patients who receive care at 
the approximately 6,200 Medicare- and Medicaid-participating hospitals 
and CAHs nationwide.
    Therefore, we believe that the impending seasonal influenza virus 
(and acute respiratory illness) season with its potential for increased 
hospitalizations, coupled with the continuing urgency of the PHE for 
COVID-19, constitutes good cause to waive notice and comment rulemaking 
as we believe it would be impracticable and contrary to the public 
interest for us to undertake normal notice and comment rulemaking 
procedures. For the same reasons, because we cannot afford any delay in 
effectuating this IFC, we find good cause to waive the 30-day delay in 
the effective date and, moreover, to establish these policies in this 
IFC applicable as of the date this rule is published.

XXVI. Response to Comments

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

XXVII. Economic Analyses

A. Statement of Need

    This final rule with comment period is necessary to update the 
Medicare hospital OPPS rates and 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 are revising 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 June 30, 
2020, and updated cost report information.
    This final rule with comment period also is necessary to update the 
ASC payment rates for CY 2021 and make changes to payment policies and 
payment rates for covered surgical procedures and covered ancillary 
services that are performed in ASCs in CY 2021. Because ASC payment 
rates are based on the OPPS relative payment weights for most of the 
procedures

[[Page 86273]]

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 of Provisions of This Final Rule With Comment Period

    We have examined the impacts of this final rule with comment 
period, as required by Executive Order 12866 on Regulatory Planning and 
Review (September 30, 1993), Executive Order 13563 on Improving 
Regulation and Regulatory Review (January 18, 2011), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. L. 104-4), 
Executive Order 13132 on Federalism (August 4, 1999), 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 final rule with comment period contains the impact and 
other economic analyses for the provisions we are finalizing 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 final rule with comment period has been designated as 
an economically significant rule under section 3(f)(1) of Executive 
Order 12866 and a major rule under the Congressional Review Act. 
Accordingly, this final rule with comment period has been reviewed by 
the Office of Management and Budget. We have prepared a regulatory 
impact analysis that, to the best of our ability, presents the costs 
and benefits of the provisions of this final rule with comment period. 
We solicited public comments on the regulatory impact analysis in the 
proposed rule, and we address any public comments we received in this 
final 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 final rule with comment period, will 
be approximately $1.49 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 final 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 79 of this final rule with 
comment period displays the distributional impact of the CY 2021 
changes in OPPS payment to various groups of hospitals and for CMHCs.
    We note that under our CY 2021 policy, drugs and biologicals that 
are acquired under the 340B Program will continue to be paid at ASP 
minus 22.5 percent, WAC minus 22.5 percent, or 69.46 percent of AWP, as 
applicable. We also note that in the impact tables as displayed in this 
impact analysis, we have modeled current and prospective payments as if 
separately payable drugs acquired under the 340B program from hospitals 
not excepted from the policy are paid under the OPPS in CY 2021 at ASP 
minus 22.5 percent.
    We estimate that the final rule update to the conversion factor, 
the CY 2021 frontier wage index adjustment, and other adjustments (not 
including the effects of outlier payments or the pass-through payment 
estimates) will increase total OPPS payments by 0.2 percent in CY 2021. 
The changes to the APC relative payment weights, the changes to the 
wage indexes, the continuation of a payment adjustment for rural SCHs, 
including EACHs, and the payment adjustment for cancer hospitals will 
not increase OPPS payments because these changes to the OPPS are budget 
neutral. However, these updates will change the distribution of 
payments within the budget neutral system. We estimate that the total 
change in payments between CY 2020 and CY 2021, considering all final 
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, will increase 
total estimated OPPS payments by 2.4 percent.
    We estimate the total increase (from changes to the ASC provisions 
in this final rule with comment period as well as from enrollment, 
utilization, and case-mix changes) in Medicare expenditures (not 
including beneficiary cost-sharing) under the ASC payment system for CY 
2021 compared to CY 2020, to be approximately $120 million. Because the 
provisions for the ASC payment system are part of a final 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 final rule with comment period. Tables 
80 and 81 of this final rule with comment period 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 Final Rule With Comment 
Period
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 final rule with 
comment period. 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-FC'' from the list of regulations and 
notices. The hospital-specific file layout and the hospital-specific 
file are listed with the other supporting documentation for this

[[Page 86274]]

final rule with comment period. We show hospital-specific data only for 
hospitals whose claims were used for modeling the impacts shown in 
Table 79. We do not show hospital-specific impacts for hospitals whose 
claims we were unable to use. We refer readers to section II.A. of this 
final rule with comment period for a discussion of the hospitals whose 
claims we do not use for ratesetting or 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 the 340B Program Payment Policy
    In section V.B. of this final rule with comment period with comment 
period, we discuss our policy to adjust the payment amount for nonpass-
through, separately payable drugs acquired by certain 340B 
participating hospitals through the 340B Program. We are finalizing 
that rural SCHs, children's hospitals, and PPS-exempt cancer hospitals 
will continue to be excepted from this payment policy in CY 2021 and 
subsequent years. Specifically, in this final rule with comment period 
for CY 2021, for hospitals paid under the OPPS (other than those that 
are excepted for CY 2021), we are not finalizing our proposal 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. Instead, we are finalizing our 
alternative proposal that we will continue the current Medicare payment 
policy for CY 2021. Under our alternative proposal, we will pay for 
separately payable drugs and biologicals acquired under the 340B 
program, excluding those on pass-through payment status and vaccines, 
at ASP minus 22.5 percent. Because we are continuing current Medicare 
payment policy for CY 2021, there is no change to the budget neutrality 
adjustment as a result of the 340B drug payment policy.
c. Estimated Effects of OPPS Changes on Hospitals
    Table 79 shows the estimated impact of this final rule with comment 
period on hospitals. Historically, the first line of the impact table, 
which estimates the change in payments to all facilities, has always 
included cancer and children's hospitals, which are held harmless to 
their pre-BBA amount. We also include CMHCs in the first line that 
includes all providers. We include a second line for all hospitals, 
excluding permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 79, 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 are continuing 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 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 final rule with 
comment period.
    Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee 
schedule increase factor is equal to the market basket percentage 
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which 
we refer to as the IPPS market basket percentage increase. The IPPS 
market basket percentage increase for FY 2021 is 2.4 percent. Section 
1833(t)(3)(F)(i) of the Act reduces that 2.4 percent by the multifactor 
productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of 
the Act. However, the most recent MFP estimated from the IGI June 2020 
macroeconomic forecast for FY 2021 is estimated to be -0.1 percentage 
point. This MFP value would have led to an increase in the IPPS market 
basket. Section 1886(b)(3)(B)(xi)(I) of the Act requires the Secretary 
to reduce (not increase) the hospital market basket percentage increase 
by changes in economy-wide productivity. That means the MFP adjustment 
for the OPPS as described by section 1833(t)(3)(F)(i) of the Act is set 
to 0.0 percentage points (which is also the MFP adjustment for FY 2021 
in the FY 2021 IPPS/LTCH PPS final rule (85 FR 58797)). Accordingly, we 
are applying a 0.0 percentage point MFP adjustment to the CY 2021 
market basket percentage increase for the OPPS, which causes the OPD 
fee schedule increase factor to be 2.4 percent. We are using the OPD 
fee schedule increase factor of 2.4 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 79 of this final rule with comment period.
    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 79 
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 2.4 percent OPD fee schedule increase factor update to the 
conversion factor (Column 4); 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 5).
    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 final rule with comment period 
will redistribute money during implementation also will depend on 
changes in volume, practice patterns, and the mix of services billed 
between

[[Page 86275]]

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 2.4 percent. Removing payments 
to cancer and children's hospitals because their payments are held 
harmless to the pre-OPPS ratio between payment and cost and removing 
payments to CMHCs results in an estimated 2.4 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 79 shows the total number of 
facilities (3,665), 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 
final rule with comment period. 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 (3,558), 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 39 CMHCs at the 
bottom of the impact table (Table 79) 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 0.4 percent to an 
increase of 0.3, depending on the number of beds. Rural hospitals will 
experience no change overall. Major teaching hospitals will see an 
expected decrease of 0.5 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 final updated wage 
indexes, including the application of budget neutrality for the rural 
floor policy on a nationwide basis, as well as the CY 2021 final 
changes in wage index policy discussed in section II.C. of this CY 2021 
OPPS/ASC final rule with comment period. We did not model a budget 
neutrality adjustment for the rural adjustment for SCHs because we are 
continuing the rural payment adjustment of 7.1 percent to rural SCHs 
for CY 2021, as described in section II.E. of this final rule with 
comment period. We also did not model a budget neutrality adjustment 
for the final 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 are applying in section II.F. of this 
final rule with comment period.
    We modeled the independent effect of updating the wage indexes by 
varying only the wage indexes, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the CY 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: All Budget Neutrality Changes Combined With the Market Basket 
Update
    Column 4 demonstrates the combined impact of all of the changes 
previously described and the update to the conversion factor of 2.4 
percent. Overall, these changes will increase payments to urban 
hospitals by 2.6 percent and to rural hospitals by 2.9 percent. The 
increase for classes of rural hospitals will vary with sole community 
hospitals receiving a 3.0 percent increase and other rural hospitals 
receiving an increase of 2.7 percent.
Column 5: All Changes for CY 2021
    Column 5 depicts the full impact of the final 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 5 shows 
the combined budget neutral effects of Columns 2 and 3; the OPD fee 
schedule increase; the impact of estimated OPPS outlier payments, as 
discussed in section II.G. of this final rule with comment period; the 
change in the Hospital OQR Program payment reduction for the small 
number of hospitals in our impact model that failed to meet the 
reporting requirements (discussed in section XIV. of this final rule 
with comment period); and the difference in total OPPS payments 
dedicated to transitional pass-through payments.
    Of those hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2020 update (and assumed, for 
modeling purposes, to be the same number for CY 2021), we included 18 
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 
final changes for CY 2021 will increase payments to all facilities by 
2.4 percent for CY 2021. We modeled the independent effect of all 
changes in Column 5 using the final relative payment weights for CY 
2020 and the final relative payment weights for CY 2021. We used the 
final conversion factor for CY 2020 of $80.793 and the final CY 2021 
conversion factor of $82.797 discussed in section II.B. of this final 
rule with comment period.
    Column 5 contains simulated outlier payments for each year. We used 
the 1-year charge inflation factor used in the

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FY 2021 IPPS/LTCH PPS final rule (85 FR 59039) of 6.4 percent (1.06404) 
to increase individual costs on the CY 2019 claims, and we used the 
most recent overall CCR in the October 2020 Outpatient Provider-
Specific File (OPSF) to estimate outlier payments for CY 2020. Using 
the CY 2019 claims and a 6.4 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 0.97 percent of total payments. The estimated current 
outlier payments of 0.97 percent are incorporated in the comparison in 
Column 5. We used the same set of claims and a charge inflation factor 
of 13.2 percent (1.13218) and the CCRs in the October 2020 OPSF, with 
an adjustment of 0.974495, 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 final rule (85 FR 59039).
    Overall, we estimate that facilities will experience an increase of 
2.4 percent under this final rule with comment period in CY 2021 
relative to total spending in CY 2020. This projected increase (shown 
in Column 5) of Table 79 reflects the 2.4 percent OPD fee schedule 
increase factor, minus 0.04 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 (0.97 percent) and CY 2021 
(1.0 percent). We estimate that the combined effect of all final 
changes for CY 2021 will increase payments to urban hospitals by 2.4 
percent. Overall, we estimate that rural hospitals will experience a 
2.4 percent increase as a result of the combined effects of all the 
final 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 1.9 percent for major teaching hospitals and an increase of 
2.7 percent for nonteaching hospitals. Minor teaching hospitals will 
experience an estimated increase of 2.6 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 2.3 percent, proprietary hospitals will 
experience an increase of 3.2 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 79 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 final 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 11.9 
percent increase in payments from CY 2020 (shown in Column 5). We note 
that this includes the trimming methodology as well as the final CY 
2021 geometric mean costs used for developing the PHP payment rates 
described in section VIII.B. of this final rule with comment period.
    Column 3 shows that the estimated impact of adopting the final FY 
2021 wage index values will result in a decrease of 0.1 percent to 
CMHCs. Column 4 shows that combining this final OPD fee schedule 
increase factor, along with final changes in APC policy for CY 2021 and 
the final FY 2021 wage index updates, will result in an estimated 
increase of 12.2 percent. Column 5 shows that adding the final changes 
in outlier and pass-through payments will result in a total 11.9 
percent increase in payment for CMHCs. This reflects all finalized 
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 of the calculation of the national unadjusted copayments and 
minimum unadjusted copayments, we refer readers to section II.I. of 
this CY 2021 OPPS/ASC final rule with comment period. In all cases, 
section 1833(t)(8)(C)(i) of the Act limits beneficiary liability for 
copayment for a procedure performed in a year to the hospital inpatient 
deductible for the applicable year.
    We estimate that the aggregate beneficiary coinsurance percentage 
would be 18.3 percent for all services paid under the OPPS in CY 2021. 
The estimated aggregate beneficiary coinsurance reflects general system 
adjustments, including the final CY 2021 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 
$1.49 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 changes in this 
final rule would increase these Medicaid beneficiary payments by 
approximately $105 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 $105 million 
Medicaid increase, approximately $60 million will be from the federal 
government and $45 million would be from state government.
h. Alternative OPPS Policies Considered
     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 updates to ASC payment rates for CY 2021 
compared to CY 2020.
    As shown in Table 80, for the six specialty groups that account for 
the most ASC utilization and spending, we estimate that the 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 2-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 
changes in policy. In general, spending in each of these categories of 
services is increasing due to the 2.4 percent payment rate update. 
After the payment rate update is accounted for, aggregate payment 
increases or decreases for a category of services can be higher or 
lower than a 2.4-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 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 2.4 percent ASC rate 
update for these procedures. For estimated changes for selected 
procedures, we refer readers to Table 81 provided later in this 
section.
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    Table 81 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.
     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 update.

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c. Estimated Effects of ASC Payment System Policies on Beneficiaries
    We estimate that the 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 are adding to the 
ASC list of covered surgical procedures and for those we designate as 
office-based for CY 2021. For example, using 2019 utilization data and 
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 policy, Medicare payments will be 
reduced by approximately $7 million in CY 2021 and total beneficiary 
copayments will decline by approximately $1.4 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

[[Page 86282]]

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 
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 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).
    Alternatives to the OPPS changes we are finalizing and the reasons 
for our selected alternatives are discussed throughout this final rule 
with comment period.
     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 final rule with comment 
period for a discussion of our final policy to apply a payment 
adjustment of ASP minus 22.5 percent for separately paid non-pass 
through drugs acquired under the 340B Program, which was originally 
adopted in the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59350 through 59369). We also proposed but did not finalize a policy to 
pay ASP minus 28.7 percent for 340B drugs in CY 2021, based on hospital 
survey data. We note that the effects of this proposal, which was not 
finalized, and its corresponding budget neutrality adjustment compared 
to our finalized proposal were provided in Column 4 of Table 55 of the 
CY 2021 OPPS/ASC proposed rule (85 FR 49047 through 49049).
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 final rule with comment period, we are 
setting the CY 2021 ASC relative payment weights by scaling the CY 2021 
OPPS relative payment weights by the ASC scalar of 0.8591. The 
estimated effects of the updated relative payment weights on payment 
rates are varied and are reflected in the estimated payments displayed 
in Tables 80 and 81.
    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. Section 1886(b)(3)(B)(xi)(II) 
of the Act defines the productivity adjustment to be equal to the 10-
year moving average of changes in annual economy-wide private nonfarm 
business multifactor productivity (MFP) (as projected by the Secretary 
for the 10-year period, ending with the applicable fiscal year, year, 
cost reporting period, or other annual period). For ASCs that fail to 
meet their quality reporting requirements, we are requiring 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 is the 
hospital market basket for CY 2021. We calculated the CY 2021 ASC 
conversion factor by adjusting the CY 2020 ASC conversion factor by 
1.0012 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 2.4 
percent (which is equal to the projected hospital market basket update 
of 2.4 percent minus an MFP adjustment of 0.0 percentage point). The CY 
2021 ASC conversion factor is $48.952 for ASCs that successfully meet 
the quality reporting requirements.
a. Limitations of Our Analysis
    Presented here are the projected effects of the 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 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 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 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 80 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 CY 
2021 payments, and Table 81 shows a comparison of estimated CY 2020 
payments to estimated CY 2021 payments for procedures that we estimate 
will receive the most Medicare payment in CY 2020.
    In Table 80, 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 80.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped and

[[Page 86283]]

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.
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 final rule with comment period and the impact 
of the changes to the RO Model in this interim final rule with comment 
period. The first accounting statement, Table 82, illustrates the 
classification of expenditures for the CY 2021 estimated hospital OPPS 
incurred benefit impacts associated with the final CY 2021 OPD fee 
schedule increase. The second accounting statement, Table 83, 
illustrates the classification of expenditures associated with the 2.4 
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 third accounting statement, Table 84, shows 
the classification of expenditures, which represent savings associated 
with the RO Model, which are classified as transfers. The estimated 
costs of ICR Burden and Regulatory Familiarization are included in 
Table 84.
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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 Outpatient Quality Reporting (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 did not propose to add or remove any quality measures to the 
Hospital OQR Program measure set for the CY 2022 or CY 2023 payment 
determinations.
b. Impact of CY 2021 Finalized Policies
    We do not anticipate that any of the CY 2021 Hospital OQR Program 
finalized policies will impact the number of facilities that will 
receive payment reductions. In this final rule with comment period, we 
are finalizing our proposals 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 
Sec.  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) (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.
    We do not anticipate that the requirements affecting the Hospital 
OQR Program in this final rule with comment period 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 final rule with comment period, we discuss 
our finalized policies affecting the Ambulatory Surgical Centers 
Quality Reporting (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 did not propose any quality measure 
additions or removals for the ASCQR Program measure set for future 
calendar year payment determinations.
b. Impact of CY 2021 Finalized Policies
    In sections XV.C. and XV.D. of this final rule with comment period, 
we are finalizing our proposals 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 final rule with comment 
period; (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 
finalized for the Hospital OQR Program in section XIV.D.7. of this 
final rule with comment period 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 finalized policies affecting the 
ASCQR Program in this final rule with comment period 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

[[Page 86285]]

    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).\384\ 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.
---------------------------------------------------------------------------

    \384\ See also Correction notification issued January 3, 2020 
(85 FR 224).
---------------------------------------------------------------------------

    In accordance with Sec.  419.83(b), we are finalizing our proposal 
requiring prior authorization for two new service categories: Cervical 
Fusion with Disc Removal and Implanted Spinal Neurostimulators. We are 
adding those service categories to Sec.  419.83(a). We are requiring 
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 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 to require 
prior authorization for two additional service categories is dependent 
on the number of claims affected. Table 86, 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 87, Annual Private Sector Costs, and Table 88, Estimated Annual 
Administrative Costs to CMS. Together, Tables 87 and 88 combine to 
convey the overall economic impact to the health sector for the two new 
service categories, which is illustrated in Table 86. It should be 
noted that due to the July start date for prior authorization for these 
two new service categories, year one includes only 6 months of prior 
authorization requests.
    Based on the estimate, the overall economic cost impact is 
approximately $2.9 million in the first year based on 6 months for the 
two new 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 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 fraud, 
waste, and abuse, including a reduction in improper Medicare fee-for-
service payments (we note that not all improper payments are 
fraudulent). We solicited public comments on the potential increased 
costs and benefits associated with the proposed provision for the two 
new service categories. As part of a larger comment on a previous 
section of this rule, one commenter stated that our costs and hours 
were under-estimated. The response to this part of the comment is 
included in the overall response to the comment in the previous 
section.
[GRAPHIC] [TIFF OMITTED] TR29DE20.151

    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 
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, as the finalized rule will change the billing practices of 
those providers. We believe that the purpose of the statute and this 
rule is to avoid unnecessary increases in 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. Adding these two services 
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 rule 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 
additional service categories is equivalent to that of submitting

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documentation and clerical activities associated for prepayment review, 
which is 0.5 hours. We apply this time burden estimate to initial 
submissions and resubmissions.
[GRAPHIC] [TIFF OMITTED] TR29DE20.152

2. Administrative Costs to CMS
    CMS will incur additional costs associated with processing the 
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] TR29DE20.153

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 rule 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 rule 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

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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 6 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 
include changed billing practices that would also enhance the 
coordination of care for the beneficiary. For example, requiring prior 
authorization for the two 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 
what services are medically necessary based on the beneficiary's 
condition. 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 that their supporting 
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 Revision to the Laboratory Date of Service Policy
    In section XVIII. of this final rule with comment period, we 
discuss our policy to include cancer-related protein-based Multianalyte 
Assays with Algorithmic Analyses (MAAAs) and the test described by CPT 
code 81490 in the laboratory date of service (DOS) exception at Sec.  
414.510(b)(5). We are also excluding these tests from the OPPS 
packaging policy, which is discussed in section II.a.3 of this final 
rule with comment period. Under these policies, Medicare will pay for 
certain protein-based MAAAs under the CLFS instead of the OPPS and the 
performing laboratory will 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 tests 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 final 
rule with comment period is not reflected in Table 79 in the regulatory 
impact analysis under section XXVII of this final rule with comment 
period.
8. Effects of Requirements for the Overall Hospital Quality Star 
Ratings
    In section E. Current and Proposed Overall Star Rating Methodology 
of this final rule with comment period, we discussed 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 Critical Access Hospitals (CAHs)), is 
already captured in the respective hospital programs' burden estimates 
and represents no increased information collection burden to hospitals.
    In this CY 2021 OPPS/ASC final rule with comment period, however, 
we are finalizing 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 final rule with comment period, we are 
using the most recent data from the Bureau of Labor Statistics, which 
reflects a median hourly wage of $19.40 \385\ 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.
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    \385\ 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.
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    We estimate that the non-information collection burden associated 
with all non-Veterans Health Administration (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 U.S.), which 
represents a burden of $100,890 annually [650 CAHs x 2 hours per 
preview report x once per year x $38.80].
    Within this rule, for CY 2021 Overall Star Rating and subsequent 
years, we are finalizing the continuation of the Overall Star Rating 
methodology, as currently implemented, with the following 
modifications: (1) Elimination of measure score Winsorization; (2) 
grouping measures into five, rather than seven, measure groups, 
consisting of Mortality, Safety of Care, Readmission, Patient 
Experience, and Timely and Effective Care; (3) using a simple average 
of measure scores to calculate measure group scores; (4) 
standardization of measure group scores; (5) weighting measure groups 
so that Mortality, Safety of Care, Readmission, and Patient Experience 
each are weighted 22 percent and Timely and Effective Care is weighted 
12 percent with proportional reweighting when hospitals have too few 
measures in one or more measure groups; (6) requiring three measures in 
at least three measure groups, one of which must be Mortality or Safety 
of Care; and (7) peer grouping hospitals based on the number of measure 
groups for which hospitals reports at least three measures. As a result 
of continued stakeholder concerns with the dual-eligibility variable 
and that stratification may be confusing to patients, analyses that 
indicate stratification of the Readmission measure group would not

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have the intended effect, and ASPE's recent report to Congress, we are 
not finalizing our proposal to stratify the Readmission measure group 
score based on the proportion of dual-eligible patients.
    To simulate the impact of the final Overall Star Rating 
methodology, we used October 2020 Hospital Compare data to describe the 
overall distribution of star ratings, reclassification of star ratings, 
and distribution of star ratings across different types of hospitals
    The final Overall Star Rating methodology for CY 2021 and 
subsequent years results in a similar distribution of star ratings but 
with slightly more hospitals receiving a star rating, primarily due to 
combining the existing three process measure groups into one measure 
group, Timely and Effective Care. Specifically, using October 2020 
Hospital Compare data, the final Overall Star Rating methodology 
results in 3,350 (74 percent) hospitals receiving a star rating and 
more three (30 percent) and four (28 percent) star ratings and fewer 
one (7 percent), two (21 percent), and five (14 percent) star ratings 
(Table 89).
    Given the substantial change in methods, particularly using a 
simple average of measure scores to calculate measure group scores 
instead of the LVM, we expect considerable shifts in hospital star 
ratings from the current methodology to the final methodology for CY 
2021 and subsequent years. When comparing the current methodology to 
the final methodology for CY 2021 and subsequent years, 1,585 (50 
percent) hospitals would receive the same star rating, 1,423 (45 
percent) hospitals would increase or decrease one star rating, 150 (5 
percent) hospitals would increase or decrease two star ratings, 9 (0.3 
percent) hospitals would increase or decrease three star ratings, and 0 
(0 percent) hospitals would increase or decrease four star ratings 
(Table 90).
    With the final methodology for CY 2021 and subsequent years, most 
hospital characteristics have a similar distribution of star ratings to 
that of all hospitals with some variations (Tables 91 and 92). The 
variations in the distribution of star ratings across hospital 
characteristics compared to all hospitals are listed below.
     Specialty hospitals have a smaller proportion of one (1 
percent specialty, 5 percent non-specialty), two (0 percent specialty, 
16 percent non-specialty), three (6 percent specialty, 23 percent non-
specialty), and four (6 percent specialty, 22 percent non-specialty) 
star ratings and a higher proportion of five (15 percent specialty, 10 
percent specialty) star ratings than non-specialty hospitals.
     Teaching hospitals have a higher proportion of all star 
rating categories with a higher proportion of one (10 percent major 
teaching, 7 percent minor teaching, 3 percent non-teaching), two (21 
percent major teaching, 20 percent minor teaching, 12 percent non-
teaching), three (26 percent major teaching, 26 percent minor teaching, 
20 percent non-teaching), four (28 percent major teaching, 27 percent 
minor teaching,19 percent non-teaching), and five (14 percent major 
teaching, 13 percent minor teaching, 8 percent non-teaching) star 
ratings than non-teaching hospitals.
     Safety net hospitals have a slightly higher proportion of 
two (21 percent safety net, 18 percent non-safety net) and slightly 
smaller proportion of four (27 percent safety net, 31 percent non-
safety net) star ratings than non-safety net hospitals.
     DSH hospitals have a higher proportion of one (6 percent 
DSH, 2 percent non-DSH), two (21 percent DSH, 8 percent non-DSH), three 
(29 percent DSH, 14 percent non-DSH), and four (27 percent DSH, 23 
percent non-DSH) and a smaller proportion of five (11 percent DSH, 22 
percent non-DSH) star ratings than non-DSH; with increasing DSH 
quintiles, hospitals have a higher proportions of one (2 percent DSH 
quintile 1, 3 percent DSH quintile 2, 5 percent DSH quintile 3, 6 
percent DSH quintile 4, 15 percent DSH quintile 5), two (11 percent DSH 
quintile 1, 18 percent DSH quintile 2, 18 percent DSH quintile 3, 25 
percent DSH quintile 4, 30 percent DSH quintile 5), and a smaller 
proportions of four (34 percent DSH quintile 1, 31 percent DSH quintile 
2, 30 percent DSH quintile 3, 23 percent DSH quintile 4, 15 percent DSH 
quintile 5) and five (21 percent DSH quintile 1, 13 percent DSH 
quintile 2, 11 percent DSH quintile 3, 7 percent DSH quintile 4, 5 
percent DSH quintile 5) star ratings.
     CAHs have a smaller proportion of all star rating 
categories with a smaller proportion of one (2 percent CAHs, 6 percent 
non-CAHs), two (7 percent CAHs, 19 percent non-CAHs), and three (13 
percent CAHs, 27 percent non-CAHs), four (12 percent CAHs, 26 percent 
non-CAHs), and five (3 percent CAHs, 13 percent non-CAHs) star ratings 
than non-CAHs.
     Urban hospitals have a higher proportion of one (8 percent 
large urban, 5 percent other urban, 3 percent rural) and two (19 
percent large urban, 18 percent other urban, 20 percent rural) and a 
smaller proportion of three (25 percent large urban, 27 percent other 
urban, 29 percent rural) and four (25 percent large urban, 29 percent 
other urban, 25 percent rural) star ratings than rural hospitals.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
Alternatives Considered
Overall Hospital Quality Star Rating
    We considered a number of alternatives to our proposals discussed 
in section XVI of this final rule with comment period. Proposed Overall 
Hospital Quality Star Rating Methodology for Public Release in CY 2021 
and Subsequent Years of the preamble of the CY 2021 OPPS/ASC proposed 
rule. As described more fully in section E. Current and Proposed 
Overall Star Rating Methodology of this final rule with comment period, 
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 recommended our proposal but are sought 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 
are 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 Readmission measure group in alignment with 
Hospital Readmission Reduction Program (HRRP),\386\ 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. \387\ \388\ \389\ 
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.\390\ Due to these considerations, we sought comment on the 
alternative to not stratify the Readmission measure group by proportion 
of dual-eligible patients.
---------------------------------------------------------------------------

    \386\ 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.
    \387\ Ibid.
    \388\ Centers for Medicare & Medicaid Services. (2019, October 
24) Patient and Patient Advocate Work Group Minutes--October 2019.
    \389\ 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.
    \390\ 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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    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 proposed to recalculate peer group quintiles 
based on those in the HRRP but sought 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 did 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 solicited public comment on our proposal as well as the 
alterative considered to not peer group. We solicited comment on our 
alternative considered to not peer group even if we finalized 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 final rule with comment period. We proposed and are 
finalizing regulatory updates to the process under which a hospital 
that qualifies as a high Medicaid facility can request an exception to 
the prohibition on facility expansion. Specifically, we will permit a 
high Medicaid facility to request an exception to the prohibition on 
expansion of facility capacity more frequently than once every 2 years. 
With respect to a hospital that qualifies as a high Medicaid facility, 
we have

[[Page 86295]]

removed the restrictions that permitted expansion of facility capacity: 
(1) 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 (2) must occur only in facilities on the hospital's main 
campus. We expect these changes will reduce burden on high Medicaid 
facilities and give them additional flexibility to expand. As we 
explained in the proposed rule, we believe that the existing 
regulations impose unnecessary burden on high Medicaid facilities. In 
alignment with our Patients over Paperwork initiative, we are 
finalizing our proposals to remove this unnecessary burden. Finally, 
are we are codifying in regulations our longstanding policy, currently 
set forth in a frequently asked question on the CMS website, that 
explains CMS' deference to state law for purposes of determining the 
number of beds for which a hospital is licensed. As this final policy 
reflects current policy, we do not anticipate that it will have an 
impact.
    In the past decade, the Secretary has granted six expansion 
exception requests. Neither the statute nor our regulations require 
that a hospital report to the Secretary whether and when it expands its 
facility capacity. Based on our own review of the websites of the 
hospitals granted expansion exception requests, it does not appear that 
any of the hospitals have yet expanded to 200 percent of their baseline 
capacity (the current regulatory limit). We are unable to predict with 
certainty whether any hospital qualifying as a high Medicaid facility 
would request to, or utilize permitted expansion of facility capacity 
to, expand beyond 200 percent of its baseline facility capacity.
    As noted in the ICR section for physician-owned hospitals, we 
expect the final policies will impact one physician-owned hospital per 
year. We do not anticipate any impact on Medicare expenditures for 
several reasons. First, although an expansion of a physician-owned 
hospital's capacity may increase access to patients seeking care, it 
does not affect the type of services being received. Second, the 
regulations will not affect the payment for Medicare covered items and 
services. The regulations do not permit development of a new hospital, 
but rather expansion of an existing hospital. All services furnished by 
the hospital will be paid at the applicable Medicare payment rates for 
the existing hospital. Further, existing Medicare billing and claims 
submission requirements, including the requirement that the services 
are reasonable and necessary, will continue to apply. Although we 
believe these changes potentially increase access for patients seeking 
care, we do not believe there would be any impact to the type or range 
of services sought, or the amount paid for the services furnished.
    We received no comments concerning the burden associated with our 
proposal 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 reflects current policy, and we continue to believe that it will 
not have an impact. We received the following comments regarding the 
impact of our proposals to remove the regulatory limitations on high 
Medicaid facilities not imposed in section 1877(i) of the Act. Our 
response follows:
    Comment: We received many comments stating that removing existing 
regulatory limitations would allow physician-owned hospitals to serve 
greater numbers of Medicaid patients and allow physicians more options 
to care for patients in various and appropriate sites of service. 
Several commenters stated that the restrictions on hospitals that 
qualify as high Medicaid facilities have hampered economic growth in 
communities that rely upon them, contributed to inflated prices through 
reduced competition between providers, limited patient choice, and 
decreased the ability of specific hospitals to meet the needs of their 
communities. The commenters added that removal of the restrictions on 
high Medicaid facilities would help increase access to vital health 
care services for the most vulnerable patients.
    In contrast, some commenters noted that certain hospitals that 
qualify as high Medicaid facilities have Medicaid discharge percentages 
that are extremely low and potentially significantly lower than that of 
hospitals in surrounding counties where they could locate the large 
facility expansion capacity permitted under our proposals. Another 
commenter stated that, if we finalize our proposals, physician-owned 
hospitals could expand and move into markets without large Medicaid 
patient populations, creating additional campuses far away from the 
patients the expansion is intended by statute to serve.
    Response: As we explained in section XX of this final rule, to 
determine whether a hospital qualifies as a high Medicaid facility, the 
statute requires a relativity analysis based on the location of the 
existing hospital; that is, a hospital that has the highest Medicaid 
discharge percentage relative to the hospitals in the same county will 
qualify as a high Medicaid facility even if the overall number of 
Medicaid discharges in the county is low. The statute does not require 
the Secretary to compare a high Medicaid facility to the hospitals in 
the county where it plans to locate the expansion capacity (if 
approved). However, Medicare rules and regulations regarding the 
location of hospital facilities, including the expansion capacity, such 
as distance limitations related to the location of off campus 
facilities and provider-based departments remain applicable. (See 
section 1833(t)(B)(i) of the Act and Sec.  413.65(e)(3)(v)(F)).
    The physician self-referral law does not prohibit a hospital 
granted an exception to the prohibition on expansion of facility 
capacity from relocating operating rooms, procedure rooms, or beds that 
were licensed on March 23, 2010 (baseline facility capacity) from the 
hospital's main campus to a remote location in order to make room for 
the approved expansion facility capacity. (See https://www.cms.gov/Medicare/Fraud-and-Abuse/PhysicianSelfReferral/Downloads/FAQs-Physician-Self-Referral-Law.pdf.) Therefore, we believe that removing 
the requirement that permitted expansion of facility capacity must 
occur only in facilities on the hospital's main campus would have 
minimal, if any, impact, as developing the permitted expansion of 
facility capacity in a location other than the hospital's main campus 
derives generally the same result as relocating baseline facility 
capacity to a remote location of the hospital and locating expansion 
capacity on the hospital's main campus.
10. Effects of Requirements for the Radiation Oncology (RO) Model
    We have examined the impact of this interim final rule with comment 
period (IFC) as required by Executive Order 12866 and other laws and 
Executive Orders requiring economic analysis of the effects of final 
rules. We are revising the Model performance period that was finalized 
in the Medicare Program; Specialty Care Models to Improve Quality of 
Care and Reduce Expenditures final rule (Specialty Care Models final 
rule) (85 FR 61114) on September 29, 2020, and have updated our net 
estimate of the RO Model impact. Accordingly, we have prepared an RIA 
that, to the best of our ability, reflects the economic impact of the 
policies contained in this IFC.

[[Page 86296]]

a. Statement of Need for the Radiation Oncology (RO) Model
    The statement of need for the RO Model described in the Specialty 
Care Models final rule (85 FR 61114) remains unchanged with this IFC. 
However, as described in detail in section XXI.A of this IFC, RO 
participants will not be required to collect or submit quality measure 
data or clinical data in PY1 due to the revised Model performance 
period. Instead, submission of quality measure data and clinical data 
will begin in PY2 with the final data submission ending in early 2026 
(specifically January 2026 for the clinical data, and March 2026 for 
the quality measure data). Due to the change in the Model performance 
period, CMS's collection of patient experience surveys will start in 
October 2021 rather than April 2021 as finalized under 85 FR 61220.
b. Impact of RO Model
    Based on the finalized RO Model policies of the Specialty Care 
Models final rule (see 85 FR 61114), we expected a savings of $230 
million for Medicare. We now expect that revising the Model performance 
period to a July 1, 2021 start date, which shortens the Model 
performance period to 4.5 years, will reduce savings from $230 million 
to $220 million for Medicare.
c. Anticipated Effects
(1). Scale of the Radiation Oncology (RO) Model
    In the Specialty Care Models final rule (85 FR 61114), we finalized 
our policy to include 30 percent of radiation oncology episodes (Sec.  
512.210(d)) and a low volume opt-out policy (Sec.  512.210(c)). We 
performed a simulation based on our final rule policies. Based on this 
simulation, we expected to have approximately 500 physician group 
practices (PGPs) (of which 275 are freestanding radiation therapy 
centers) and 450 HOPDs furnishing RT services in those simulated 
selected CBSAs. We further expected the RO Model to include 
approximately 348,000 RO episodes, 309,000 beneficiaries, and $5.3 
billion in total episode spending of allowed charges over the Model 
performance period. Revising the Model performance period to begin on 
July 1, 2021, and end on December 31, 2025 does not affect the number 
of PGPs or HOPDs we expect to furnish RT services in the simulated 
selected CBSAs. However, we expect the duration of the revised Model 
performance period, which shortens the Model performance period to 4.5 
years, will reduce the number of RO episodes, the number of 
beneficiaries, and total spending. We expect the revised Model 
performance period will include approximately 315,000 RO episodes, 
279,000 beneficiaries, and $4.8 billion in total episode spending of 
allowed charges over the Model performance period.
(2). Effects of the RO Model on the Medicare Program
(a). Overview
    Under the current FFS payment system, RT services are paid on a per 
service basis to both PGPs (including freestanding radiation therapy 
centers) and HOPDs through the PFS and the OPPS, respectively. The RO 
Model will be a mandatory model designed to test a prospectively 
determined episode payment for RT services furnished to Medicare 
beneficiaries during RO episodes initiated between July 1, 2021 and 
December 31, 2025 (Sec.  512.245(a)).
(b). Data and Methods
    A stochastic simulation based on the policies in this IFC was 
created to estimate the financial impacts of the RO Model relative to 
baseline expenditures.
(c). Medicare Estimate
    Table 93 summarizes the estimated impact of the RO Model with a 
revised Model performance period that begins on July 1, 2021 and ends 
December 31, 2025. We estimate that on net the Medicare program will 
save $220 million over the Model performance period. This is the net 
Medicare Part B impact that includes both Part B premium and Medicare 
Advantage United States Per Capita Costs (MA USPCC) rate financing 
interaction effects. This estimate excludes changes in beneficiary cost 
sharing liability to the extent it is not a federal outlay under the 
policy.
    We project that 83 percent of physician participants (measured by 
unique NPI) will receive the APM incentive payment under the Quality 
Payment Program at some point (at least one QP Performance Period) 
during the Model performance period. This assumption is based on 
applying the 2020 Quality Payment Program final rule qualification 
criteria to simulated billing and treatment patterns for each Quality 
Payment Program performance year during the Model performance period. 
Episode-initiating physicians were assumed to form an APM entity with 
the TIN(s) under which they bill for RT services. For each APM entity, 
counts of total treated patients and spending for covered physician 
services under the RO Model were estimated and applied to Quality 
Payment Program qualification criteria based on CY 2018 physician 
billing patterns.
    The APM incentive payment will apply only to the professional 
episode payment amounts and not the technical episode payment amounts. 
Moreover, due to the 2-year lag in Quality Payment Program performance 
and payment periods and with quality data reporting starting in 2022, 
APM incentive payments will only be made during 2024.
    Complete information regarding the data sources and underlying 
methodology used to determine amounts for reconciliation were not 
available at the time of this forecast. In the case of the incomplete 
payment withhold, we assume CMS retains payment only in the event that 
offsetting payment errors were made elsewhere. Past CMS experience in 
other value-based payment initiatives that included a penalty for not 
reporting have shown high rates of reporting compliance. Given the 
limited spending being withheld, scoring criteria, and specified 
timeframes involved, we assume that quality and patient experience 
withholds, on net, have a negligible financial impact to CMS.
    A key assumption underlying of the impact estimate is that the 
volume and intensity (V&I) of the bundled services per episode remains 
unchanged between the period used for rate setting and when payments 
are made. If V&I were to decrease by 1.0 percent annually for the 
bundled services absent the RO Model, then we estimate the impact of 
the RO Model to Medicare spending to be approximately budget neutral 
between July 1, 2021 and December 31, 2025. Similarly if V&I increases 
by 1.0 percent annually then net outlays would be reduced by $440 
million for this projection period as opposed to $470 million for the 
Specialty Care Models final rule projection period of 5 full 
performance years between January 1, 2021 and December 31, 2025. 
Although V&I growth from 2014 through 2018 fell within this 1.0 percent 
range and did not exhibit a secular trend, actual experience may 
differ. Please also note that due to the current PHE caused by the 
COVID-19 virus, the forecasted impacts for the RO Model are subject to 
an additional level of uncertainty. The duration of the current COVID-
19 pandemic, its severity, and the policy measures taken as a response 
are variables that are significant but unknown at this time. This 
forecast assumes that Medicare Fee-for-Service billing and treatment 
patterns for beneficiaries observed during the 2016-2018 baseline 
period resume by the

[[Page 86297]]

middle of 2021. To the extent that this assumption does not hold, 
actual experience may vary significantly.
    This table summarizes our estimated impacts of this IFC:
    [GRAPHIC] [TIFF OMITTED] TR29DE20.159
    
(3). Effects on RO Participants
    We believe that the revised Model performance period will not 
affect the total cost of learning the billing system for the RO Model 
but will, however, affect the burden estimate for reporting quality 
measures and clinical data elements.
    We believe the burden estimate for quality measure and clinical 
data element reporting requirements that is provided for Small 
Businesses applies to RO participants that are not considered small 
entities. The burden estimate for collecting and reporting quality 
measures and clinical data for the RO Model may be less than or equal 
to that for small businesses, which we estimate to be approximately 
$1,845 per entity per year based on 2020 wages. Since we estimate 
approximately 950 RO participants, the total annual burden estimate for 
collecting and reporting quality measures and clinical data is 
approximately $1,752,750 for a total of $7,011,000 over the Model 
performance period of four and a half years. Since RO participants are 
not required to collect nor submit quality measure or clinical data in 
PY1 due to the change in start date, this reduces burden to RO 
participants by $1,752,750 as compared to a 5-year submission period of 
quality measure and clinical data finalized under 85 FR 61211 through 
61231.
11. Effects of CoP Requirements for Hospitals and CAHS To Report COVID-
19 Therapeutic Inventory and Usage and to Report Acute Respiratory 
Illness (Including, but not Limited to, Seasonal Influenza Virus, 
Influenza-Like Illness, and Severe Acute Respiratory Infection) as 
Specified by the Secretary During the PHE for COVID-19
    Section XXII. of this IFC revises the infection prevention and 
control requirements for hospitals and CAHs to add new COVID-19 PHE 
hospital and CAH CoP reporting provisions at 42 CFR 482.42(e)(1) and 
(2) for hospitals and at 42 CFR 485.640(d)(1) and (2) for CAHs, to now 
require hospitals and CAHs to report data elements that must include, 
but not be limited to, the following: (1) The hospital's (or the CAH's) 
current inventory supplies of any COVID-19-related therapeutics that 
have been distributed and delivered to the hospital (or CAH) under the 
authority and direction of the Secretary; and (2) the hospital's (or 
the CAH's) current usage rate for any COVID-19-related therapeutics 
that have been distributed and delivered to the CAH under the authority 
and direction of the Secretary. We currently estimate the cost of these 
new COVID-19 data elements to total $19,663,920.
    Additionally, we are revising the infection prevention and control 
requirements for hospitals and CAHs to more effectively respond to the 
specific challenges posed by the impending seasonal influenza virus 
season in the midst of the COVID-19 pandemic. Specifically, we are 
adding provisions to require facilities to electronically report 
information related to Acute Respiratory Illness (including, but not 
limited to, Seasonal Influenza Virus, Influenza-like Illness, and 
Severe Acute Respiratory Infection) cases in a standardized format 
specified by the Secretary. As detailed in section XXII. of this IFC, 
we currently estimate the cost of these reporting requirements to total 
$117,983,520.
    These estimates are likely overestimates of the costs associated 
with reporting because it assumes that all hospitals and CAHs will 
report manually. Efforts are underway to automate hospital and CAH 
reporting that have the potential to significantly decrease reporting 
burden and improve

[[Page 86298]]

reliability. We anticipate that the need for reporting will be 
temporary in direct relationship to the duration of the PHE. Existing 
guidance on reporting, which may be revised in the future, can be found 
at https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf and at 
https://healthdata.gov/covid-19_hospital_reporting. Data reported to 
the Secretary is used by federal agencies and states, to provide data 
for the unified hospital picture, as well as guidance on the 
distribution of resources.

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 2021 OPPS/ASC proposed rule (1,349) will be the number of 
reviewers of the CY 2021 OPPS/ASC final rule. We acknowledge that this 
assumption may understate or overstate the costs of reviewing the final 
rule. It is possible that not all commenters will review the final rule 
in detail, and it is also possible that some reviewers will choose not 
to comment on the final rule. Nonetheless, we believe that the number 
of commenters on the CY 2021 OPPS/ASC proposed rule would be a fair 
estimate of the number of reviewers of the final rule. We welcomed any 
comments on the approach in estimating the number of entities that will 
review the final rule. We also recognize that different types of 
entities are, in many cases, affected by mutually exclusive sections of 
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 the final rule. For each facility 
that reviewed the final rule, the estimated cost is $885.92 (8 hours x 
$110.74). Therefore, we estimated that the total cost of reviewing the 
final rule is $1,195,106 ($885.92 x 1,349 reviewers on the CY 2021 
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 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 final rule with comment period. As 
a result, the Secretary has determined that this final rule with 
comment period 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 final 
rule with comment period 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 final rule with 
comment period 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 final rule with comment period, will be a 
regulatory action for the purposes of Executive Order 13771. We 
estimate that this final rule with comment period will generate $7.01 
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 final rule with comment period 
will affect all classes of hospitals paid under the OPPS and will 
affect both CMHCs and ASCs. We estimate that most classes of hospitals 
paid under the OPPS will experience a modest increase or a minimal 
decrease in payment for services furnished under the OPPS in CY 2021. 
Table 79 demonstrates the estimated distributional impact of the OPPS 
budget neutrality requirements that will result in a 2.4 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, 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 are finalizing to the ASC payment system for CY 2021 
will 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.

[[Page 86299]]

Table 80 demonstrates the estimated distributional impact among ASC 
surgical specialties of the MFP-adjusted hospital market basket update 
factor of 2.4 percent for CY 2021.

XXVIII. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has federalism 
implications. We have examined the OPPS and ASC provisions included in 
this final rule with comment period in accordance with Executive Order 
13132, Federalism, and have determined that they will not have a 
substantial direct effect on State, local or tribal governments, 
preempt State law, or otherwise have a federalism implication. As 
reflected in Table 79 of this final rule with comment period, we 
estimate that OPPS payments to governmental hospitals (including State 
and local governmental hospitals) will increase by 2.2 percent under 
this final rule with comment period. While we do not know the number of 
ASCs or CMHCs with government ownership, we anticipate that it is 
small. The analyses we have provided in this section of this final rule 
with comment period, in conjunction with the remainder of this 
document, demonstrate that this final rule with comment period is 
consistent with the regulatory philosophy and principles identified in 
Executive Order 12866, the RFA, and section 1102(b) of the Act.
    This final rule with comment period 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 final 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, Diseases, Drugs, 
Health facilities, Health professions, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 482

    Grant programs-health, Hospitals, Medicaid, Medicare, Reporting and 
recordkeeping requirements.

42 CFR Part 485

    Grant programs-health, Health facilities, Medicaid, Privacy, 
Reporting and recordkeeping requirements.

42 CFR Part 512

    Administrative practice and procedure, Health facilities, Medicare 
reporting and recordkeeping requirements.

    For reasons stated in the preamble of this document, the Centers 
for Medicare & Medicaid Services amends 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--
0
a. Adding the word ``and'' at the end of paragraph (a)(1)(iv)(C);
0
b. Revising paragraph (a)(1)(iv)(D); and
0
 c. 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. Until the 
later of the end of the calendar year in which the PHE as defined in 
Sec.  400.200 of this chapter ends or December 31, 2021, the presence 
of the physician includes virtual presence through audio/video real-
time communications technology (excluding audio-only); and
* * * * *

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''; and
0
b. By revising paragraphs (c)(1) and (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

[[Page 86300]]

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 412.3 is amended by revising paragraph (d)(2) to read as 
follows:


Sec.  412.3   Admissions.

* * * * *
    (d) * * *
    (2) An inpatient admission for a surgical procedure specified by 
Medicare as inpatient only under Sec.  419.22(n) of this chapter is 
generally appropriate for payment under Medicare Part A regardless of 
the expected duration of care. Procedures no longer specified as 
inpatient only under Sec.  419.22(n) of this chapter are appropriate 
for payment under Medicare Part A in accordance with paragraph (d)(1) 
or (3) of this section. Claims for services and procedures removed from 
the inpatient only list under Sec.  419.22 of this chapter on or after 
January 1, 2020 are exempt from certain medical review activities.
    (i) For those services and procedures removed between January 1 and 
December 31, 2020, the exemption in this paragraph (d)(2) will last for 
2 years from the date of such removal.
    (ii) For those services and procedures removed on or after January 
1, 2021, the exemption in this paragraph (d)(2) will last until the 
Secretary determines that the service or procedure is more commonly 
performed in the outpatient setting.
* * * * *

0
 7. 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 exclusions in paragaphs (d)(1)(i)(A) through (E) of this section 
will be removed from consideration:
    (A) Measures that 100 hospitals or less publicly report. These 
measures would not produce reliable measure group scores based on too 
few hospitals;
    (B) Measures that cannot be standardized to a single, common scale 
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 
higher 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.

[[Page 86301]]

    (ii) We 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 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, as defined in Sec.  400.200 of 
this chapter, 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
 8. The authority citation for part 414 continues to read as follows:

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

0
 9. 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 paragraph (1) of the definition of an advanced 
diagnostic laboratory test in Sec.  414.502, a test that is a cancer-
related protein-based Multianalyte Assays with Algorithmic Analyses, or 
the test described by CPT code 81490, the date of service of the test 
must be the date the test was performed only if--
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

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

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


0
11. Section 416.166 is revised to read as follows:


Sec.  416.166  Covered surgical procedures.

    (a) Covered surgical procedures. (1) Effective for services 
furnished on or after January 1, 2008 through December 31, 2020, 
covered surgical procedures are those procedures that meet the general 
standards described in paragraph (b)(1) of this section (whether 
commonly furnished in an ASC or a physician's office) and are not 
excluded under paragraph (c) of this section; and
    (2) Effective for services furnished on or after January 1, 2021, 
covered surgical procedures are those procedures that meet the 
requirements described in paragraph (b)(2) of this section (whether 
commonly furnished in an ASC or a physician's office).
    (b) Requirements for covered surgical procedures--(1) General 
standards. Effective for services furnished on or after January 1, 2008 
through December 31, 2020, subject to the exclusions in paragraph (c) 
of this section, 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 monitoring and care at midnight 
following the procedure.
    (2) Effective for services furnished on or after January 1, 2021, 
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:
    (i) Are separately paid under the OPPS; and
    (ii) Are not:
    (A) Designated as requiring inpatient care under Sec.  419.22(n) of 
this subchapter as of December 31, 2020;
    (B) Only able to be reported using a CPT unlisted surgical 
procedure code; or
    (C) Otherwise excluded under Sec.  411.15 of this chapter.
    (c) General exclusions effective January 1, 2008 through December 
31, 2020. Notwithstanding paragraph (b)(1)

[[Page 86302]]

of this section, 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 Sec.  
419.22(n) of this subchapter;
    (7) Can only be reported using a CPT unlisted surgical procedure 
code; or
    (8) Are otherwise excluded under Sec.  411.15 of this chapter.
    (d) Physician considerations beginning January 1, 2021. Physicians 
consider the following safety factors as to a specific beneficiary when 
determining whether to perform a covered surgical procedure. The 
covered procedure--
    (1) Is not expected to pose a significant safety risk when 
performed in an ASC;
    (2) Is one for which standard medical practice dictates the 
beneficiary would not typically be expected to require active medical 
monitoring and care at midnight following the procedure;
    (3) Generally results in extensive blood loss;
    (4) Requires major or prolonged invasion of body cavities;
    (5) Directly involves major blood vessels;
    (6) Is generally emergent or life-threatening in nature; and
    (7) Commonly requires systemic thrombolytic therapy.
    (e) Additions to the list of ASC covered surgical procedures 
beginning January 1, 2021. On or after January 1, 2021, CMS adds 
surgical procedures to the list of ASC covered surgical procedures as 
follows.
    (1) CMS identifies a surgical procedure that meets the requirements 
at paragraph (b)(2) of this section.
    (2) CMS is notified of a surgical procedure that could meet the 
requirements at paragraph (b)(2) of this section and CMS confirms that 
such surgical procedure meets those requirements.

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

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

0
14. 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
15. 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
16. 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
17. 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)'';

[[Page 86303]]

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) introductory text 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) 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 
in this part.
    (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 paragraph (i) of this section, 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 in paragraph (b) of this section 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 paragraph (d)(2) of this section, of the affected payment year as 
determined using the date the request was mailed or submitted to CMS.
* * * * *

0
18. Section 419.66 is amended by revising paragraph (c)(2)(ii) to read 
as follows:


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

* * * * *
    (c) * * *
    (2) * * *
    (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 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
19. 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.
* * * * *

PART 482--CONDITIONS OF PARTICIPATION FOR HOSPITALS

0
20. The authority citation for part 482 continues to read as follows:

    Authority: 42 U.S.C. 1302, 1395hh, and 1395rr, unless otherwise 
noted.

0
21. Section 482.42 is amended, effective December 4, 2021, by revising 
paragraph (e) and adding paragraph (f) to read as follows:

[[Page 86304]]

Sec.  482.42  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

* * * * *
    (e) COVID-19 reporting. During the Public Health Emergency, as 
defined in Sec.  [thinsp]400.200 of this chapter, the hospital must 
report information in accordance with a frequency as specified by the 
Secretary on COVID-19 in a standardized format specified by the 
Secretary. This report must include, but not be limited to, the 
following data elements:
    (1) The hospital's current inventory supplies of any COVID-19-
related therapeutics that have been distributed and delivered to the 
hospital under the authority and direction of the Secretary; and
    (2) The hospital's current usage rate for any COVID-19-related 
therapeutics that have been distributed and delivered to the hospital 
under the authority and direction of the Secretary.
    (f) Standard: Reporting of Acute Respiratory Illness, including 
Seasonal Influenza Virus, Influenza-like Illness, and Severe Acute 
Respiratory Infection. During the Public Health Emergency, as defined 
in Sec.  400.200 of this chapter, the hospital must report information, 
in accordance with a frequency as specified by the Secretary, on Acute 
Respiratory Illness (including, but not limited to, Seasonal Influenza 
Virus, Influenza-like Illness, and Severe Acute Respiratory Infection) 
in a standardized format specified by the Secretary.

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

0
22. The authority citation for part 485 continues to read as follows:

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

0
23. Section 485.640 is amended, effective December 4, 2021, by revising 
paragraph (d) and adding paragraph (e) to read as follows:


Sec.  485.640  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

* * * * *
    (d) COVID-19 reporting. During the Public Health Emergency, as 
defined in Sec.  [thinsp]400.200 of this chapter, the CAH must report 
information in accordance with a frequency as specified by the 
Secretary on COVID-19 in a standardized format specified by the 
Secretary. This report must include, but not be limited to, the 
following data elements:
    (1) The CAH's current inventory supplies of any COVID-19-related 
therapeutics that have been distributed and delivered to the CAH under 
the authority and direction of the Secretary; and
    (2) The CAH's current usage rate for any COVID-19-related 
therapeutics that have been distributed and delivered to the CAH under 
the authority and direction of the Secretary.
    (e) Standard: Reporting of Acute Respiratory Illness, including 
Seasonal Influenza Virus, Influenza-like Illness, and Severe Acute 
Respiratory Infection. During the Public Health Emergency, as defined 
in Sec.  400.200 of this chapter, the CAH must report information, in 
accordance with a frequency as specified by the Secretary, on Acute 
Respiratory Illness (including, but not limited to, Seasonal Influenza 
Virus, Influenza-like Illness, and Severe Acute Respiratory Infection) 
in a standardized format specified by the Secretary.

PART 512--RADIATION ONCOLOGY MODEL AND END STAGE RENAL DISEASE 
TREATMENT CHOICES MODEL

0
24. The authority citation for part 512 continues to read as follows:

     Authority:  42 U.S.C. 1302, 1315a, and 1395hh.

0
25. Section 512.205 is amended, effective December 4, 2021, by revising 
the definitions ``Model performance period'' and ``Performance year 
(PY)'' to read as follows:


Sec.  512.205  Definitions.

* * * * *
    Model performance period means July 1, 2021, through December 31, 
2025, the last date on which an RO episode may end under the RO Model. 
No new RO episodes may begin after October 3, 2025, in order for all RO 
episodes to end by December 31, 2025.
* * * * *
    Performance year (PY) means the 6-month period beginning on July 1, 
2021, and ending on December 31, 2021, and the 12-month period 
beginning on January 1 and ending on December 31 of each subsequent 
year (2022 through 2025) during the Model performance period.
* * * * *

0
26. Section 512.210 is amended, effective December 4, 2021, by revising 
paragraphs (a) and (c) to read as follows:


Sec.  512.210  RO participants and geographic areas.

    (a) RO participants. Unless otherwise specified in paragraph (b) or 
(c) of this section, any RO participant that furnishes included RT 
services in a 5-digit ZIP Code linked to a CBSA selected for 
participation to an RO beneficiary for an RO episode that begins on or 
after July 1, 2021, and ends on or before December 31, 2025, must 
participate in the RO Model.
* * * * *
    (c) Low volume opt-out. A PGP, freestanding radiation therapy 
center, or HOPD, which would otherwise be required to participate in 
the RO Model may choose to opt-out of the RO Model for a given PY if it 
has fewer than 20 episodes of RT services across all CBSAs selected for 
participation in the most recent year with claims data available prior 
to the applicable PY. At least 30 days prior to the start of each PY, 
CMS notifies RO participants eligible for the low volume opt-out for 
the upcoming PY. The RO participant must attest to its intention of 
opting out of the RO Model prior to the start of the upcoming PY. Low 
volume opt-out eligibility is determined as follows:
    (1) PY1. Episodes from January 1, 2019 through December 31, 2019 
determine eligibility for the low volume opt-out for PY1.
    (2) PY2. Episodes from January 1, 2020 through December 31, 2020 
determine eligibility for the low volume opt-out for PY2.
    (3) PY3. Episodes from January 1, 2021 through June 30, 2021 and RO 
episodes from July 1, 2021 through December 31, 2021 determine 
eligibility for the low volume opt-out for PY3.
    (4) PY4. RO episodes from January 1, 2022 through December 31, 2022 
determine low volume opt-out eligibility for PY4.
    (5) PY5. RO episodes from January 1, 2023 through December 31, 2023 
determine low volume opt-out eligibility for PY5.
* * * * *

0
27. Section 512.217 is amended, effective December 4, 2021, by revising 
paragraph (c)(3) introductory text to read as follows:


Sec.  512.217  Identification of individual practitioners.

* * * * *
    (c) * * *
    (3) If the RO participant does not certify the individual 
practitioner list in PY2 through PY5:
* * * * *

0
28. Section 512.220 is amended, effective December 4, 2021, by revising 
paragraph (b) to read as follows:


Sec.  512.220  RO participant compliance with RO Model requirements.

* * * * *
    (b) CEHRT. Each RO participant must use CEHRT, and ensure that its 
individual practitioners use CEHRT, in a manner sufficient to meet the

[[Page 86305]]

applicable requirements of the Advanced APM criteria codified in Sec.  
414.1415(a)(1)(i) of this chapter. Within 30 days of the start of PY2 
and each subsequent PY, each RO participant must certify in the form 
and manner, and by a deadline specified by CMS, that it uses CEHRT 
throughout such PY in a manner sufficient to meet the requirements set 
forth in Sec.  414.1415(a)(1)(i) of this chapter.

0
29. Section 512.245 is amended, effective December 4, 2021, by revising 
paragraph (a) to read as follows:


Sec.  512.245  Included RO episodes.

    (a) General. Any RO episode that begins on or after July 1, 2021, 
and ends on or before December 31, 2025, is included in the Model 
performance period.
* * * * *

0
30. Section 512.255 is amended, effective December 4, 2021, by revising 
paragraph (c)(10) to read as follows:


Sec.  512.255  Determination of participant-specific professional 
episode payment and participant-specific technical episode payment 
amounts.

* * * * *
    (c) * * *
    (10) Quality withhold. In accordance with Sec.  414.1415(b)(1) of 
this chapter, CMS withholds 2 percent from each professional episode 
payment after applying the trend factor, geographic adjustment, case 
mix and historical experience adjustments, and discount factor to the 
national base rate starting in PY2. RO participants may earn back this 
withhold, in part or in full, based on their AQS.
* * * * *

0
31. Section 512.285 is amended, effective December 4, 2021, by revising 
paragraph (d) to read as follows:


Sec.  512.285  Reconciliation process.

* * * * *
    (d) Quality reconciliation payment amount. For Professional 
participants and Dual participants, CMS determines the quality 
reconciliation payment amount for PY2 through PY5 by multiplying the 
participant's AQS (as a percentage) by the total quality withhold 
amount for all RO episodes initiated during the PY. There is no quality 
reconciliation payment amount for PY1.
* * * * *

    Dated: November 19, 2020.
Seema Verma,
Administrator, Centers for Medicare and Medicaid Services.

    Dated: November 23, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-26819 Filed 12-4-20; 8:45 am]
 BILLING CODE 4120-01-P