[Federal Register Volume 87, Number 142 (Tuesday, July 26, 2022)]
[Proposed Rules]
[Pages 44502-44843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15372]



[[Page 44501]]

Vol. 87

Tuesday,

No. 142

July 26, 2022

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





42 CFR Part 405, 410, 411, et al.





Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Organ Acquisition; Rural Emergency Hospitals: Payment 
Policies, Conditions of Participation, Provider Enrollment, Physician 
Self-Referral; New Service Category for Hospital Outpatient Department 
Prior Authorization Process; Overall Hospital Quality Star Rating; 
Proposed Rule

  Federal Register / Vol. 87 , No. 142 / Tuesday, July 26, 2022 / 
Proposed Rules  

[[Page 44502]]



DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 411, 412, 413, 416, 419, and 424

[CMS-1772-P]
RIN 0938-AU82


Medicare Program: Hospital Outpatient Prospective Payment and 
Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Organ Acquisition; Rural Emergency Hospitals: Payment 
Policies, Conditions of Participation, Provider Enrollment, Physician 
Self-Referral; New Service Category for Hospital Outpatient Department 
Prior Authorization Process; Overall Hospital Quality Star Rating

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise the Medicare hospital 
outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for Calendar Year (CY) 
2023 based on our continuing experience with these systems. In this 
proposed rule, 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 proposed 
rule would update and refine the requirements for the Hospital 
Outpatient Quality Reporting (OQR) Program, the ASC Quality Reporting 
(ASCQR) Program, and the Rural Emergency Hospital Quality Reporting 
(REH) Program. We are also proposing updates to the requirements for 
Organ Acquisition, Rural Emergency Hospitals, Prior Authorization, and 
Overall Hospital Quality Star Rating. We are establishing a new 
provider type for rural emergency hospitals (REHs), and we have 
proposals regarding payment policy, quality measures, and enrollment 
policy for REHs. Finally, we are soliciting comments on the use of CMS 
data to drive competition in healthcare marketplaces, and an 
alternative methodology for counting organs.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by September 13, 2022.

ADDRESSES: In commenting, please refer to file code CMS-1772-P.
    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 submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    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-1772-P, P.O. Box 8010, 
Baltimore, MD 21244-1810.
    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 to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1772-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: 
    Elise Barringer, [email protected] or 410-786-9222.
    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 at [email protected] or Mitali Dayal via email 
at [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 at 
[email protected].
    Cancer Hospital Payments, contact Scott Talaga via email at 
[email protected].
    CMS Web Posting of the OPPS and ASC Payment Files, contact Chuck 
Braver via email at [email protected].
    Composite APCs (Low Dose Brachytherapy and Multiple Imaging), 
contact Au'Sha Washington via email at [email protected].
    Comprehensive APCs (C-APCs), contact Mitali Dayal via email at 
[email protected].
    Hospital Inpatient Quality Reporting Program--Administration 
Issues, contact Julia Venanzi at [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 Janis Grady via email [email protected].
    Hospital Outpatient Visits (Emergency Department Visits and 
Critical Care Visits), contact Emily Yoder via email at 
[email protected].
    Inpatient Only (IPO) Procedures List, contact Abigail Cesnik at 
[email protected].
    Mental Health Services Furnished Remotely by Hospital Staff To 
Beneficiaries in Their Homes, Emily Yoder at [email protected].
    New Technology Intraocular Lenses (NTIOLs), contact Scott Talaga 
via email at [email protected].
    No Cost/Full Credit and Partial Credit Devices, contact Scott 
Talaga via email at [email protected].
    OPPS Brachytherapy, contact Scott Talaga via email at 
[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 at 
[email protected], or Scott Talaga via email at 
[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 Cory Duke via email at [email protected], 
or Au'Sha Washington via email at [email protected].
    OPPS New Technology Procedures/Services, contact the New Technology 
APC mailbox at [email protected].
    OPPS Packaged Items/Services, contact Mitali Dayal via email at 
[email protected] or Cory Duke 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 at [email protected].

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    Organ Acquisition Payment Policies, contact Katie Lucas via email 
at [email protected], or Mandy Michael via email at 
[email protected], or Kellie Shannon via email at 
[email protected].
    Outpatient Department Prior Authorization Process, contact Yuliya 
Cook via email at [email protected].
    Overall Hospital Quality Star Rating, contact Tyson Nakashima via 
email at [email protected].
    Partial Hospitalization Program (PHP) and Community Mental Health 
Center (CMHC) Issues, contact the PHP Payment Policy Mailbox at 
[email protected].
    Request for Information on Use of CMS Data to Drive Competition in 
Healthcare Marketplaces, contact Terri Postma via email at 
[email protected].
    Rural Emergency Hospital Provider Enrollment, contact Frank Whelan 
via email at [email protected].
    Rural Emergency Hospital Quality Reporting (REHQR) Program Issues, 
contact Anita Bhatia via email at [email protected].
    Rural Emergency Hospitals (REH) Physician Self-Referral Law Update 
Issues, contact Lisa O. Wilson via email at [email protected] or 
Matthew Edgar via email at [email protected].
    Skin Substitutes, contact Josh McFeeters via email at 
[email protected].
    Use of the Medicare Outpatient Observation Notice by REHs, contact 
Nishamarie Sherry via email at [email protected] or Janet 
Miller via email at [email protected].
    All Other Issues Related to Hospital Outpatient Payments Not 
Previously Identified, contact the OPPS mailbox at 
[email protected].
    All Other Issues Related to the Ambulatory Surgical Center Payments 
Not Previously Identified, contact the ASC mailbox at 
[email protected].

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 proposed rule, we use CPT codes and descriptions to 
refer to a variety of services. We note that CPT codes and descriptions 
are copyright 2021 American Medical Association. All Rights Reserved. 
CPT is a registered trademark of the American Medical Association 
(AMA). Applicable Federal Acquisition Regulations (FAR and Defense 
Federal Acquisition Regulations (DFAR) apply.

Table of Contents

I. Summary and Background
    A. Executive Summary of This Document
    B. Legislative and Regulatory Authority for the Hospital OPPS
    C. Excluded OPPS Services and Hospitals
    D. Prior Rulemaking
    E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel 
or the Panel)
    F. Public Comments Received on the CY 2022 OPPS/ASC Final Rule 
With Comment Period
II. Proposed Updates Affecting OPPS Payments
    A. Proposed Recalibration of APC Relative Payment Weights
    B. Proposed Conversion Factor Update
    C. Proposed Wage Index Changes
    D. Proposed Statewide Average Default Cost-to-Charge Ratios 
(CCRs)
    E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) 
and Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2023
    F. Proposed Payment Adjustment for Certain Cancer Hospitals for 
CY 2023
    G. Proposed Hospital Outpatient Outlier Payments
    H. Proposed Calculation of an Adjusted Medicare Payment From the 
National Unadjusted Medicare Payment
    I. Proposed Beneficiary Copayments
III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies
    A. Proposed OPPS Treatment of New and Revised HCPCS Codes
    B. Proposed OPPS Changes--Variations Within APCs
    C. Proposed New Technology APCs
    D. Universal Low Volume APC Policy for Clinical and 
Brachytherapy APCs
    E. OPPS APC-Specific Policies
IV. Proposed OPPS Payment for Devices
    A. Proposed Pass-Through Payment for Devices
    B. Proposal to Publicly Post OPPS Device Pass-Through 
Applications
    C. Proposed Device-Intensive Procedures
V. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. Proposed OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals
    B. Proposed OPPS Payment for Drugs, Biologicals, and 
Radiopharmaceuticals Without Pass-Through Payment Status
    C. Proposal in Physician Fee Schedule Proposed Rule To Require 
HOPDs and ASCs to Report Discarded Amounts of Certain Single-Dose or 
Single-Use Package Drugs
VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for 
Drugs, Biologicals, Radiopharmaceuticals, and Devices
    A. Amount of Additional Payment and Limit on Aggregate Annual 
Adjustment
    B. Proposed Estimate of Pass-Through Spending for CY 2023
VII. Proposed OPPS Payment for Hospital Outpatient Visits and 
Critical Care Services
VIII. Proposed Payment for Partial Hospitalization Services
    A. Background
    B. Proposed PHP APC Update for CY 2023
    C. Outpatient Non-PHP Mental Health Services Furnished Remotely 
to Partial Hospitalization Patients After the COVID-19 PHE
    D. Outlier Policy for CMHCs
IX. Proposed Services That Will Be Paid Only as Inpatient Services
    A. Background
    B. Proposed Changes to the Inpatient Only (IPO) List
X. Nonrecurring Policy Changes
    A. Mental Health Services Furnished Remotely by Hospital Staff 
to Beneficiaries in Their Homes

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    B. Comment Solicitation on Intensive Outpatient Mental Health 
Treatment, Including Substance Use Disorder (SUD) Treatment 
Furnished by Intensive Outpatient Programs (IOPs)
    C. Direct Supervision of Certain Cardiac and Pulmonary 
Rehabilitation Services by Interactive Communications Technology
    D. Use of Claims Data for CY 2023 OPPS and ASC Payment System 
Ratesetting Due to the PHE
    E. Supervision by Nonphysician Practitioners of Hospital and CAH 
Diagnostic Services Furnished to Outpatients
    F. Coding and Payment for Category B Investigational Device 
Exemption Clinical Studies and Devices
    G. OPPS Payment for Software as a Service
    H. Proposed Payment Adjustments Under the IPPS and OPPS for 
Domestic NIOSH Approved Surgical N95 Respirators
    I. Proposal To Exempt Rural Sole Community Hospitals From the 
Method To Control Unnecessary Increases in the Volume of Clinic 
Visit Services Furnished in Excepted Off-Campus Provider-Based 
Departments (PBDs)
XI. Proposed CY 2023 OPPS Payment Status and Comment Indicators
    A. Proposed CY 2023 OPPS Payment Status Indicator Definitions
    B. Proposed CY 2023 Comment Indicator Definitions
XII. MedPAC Recommendations
    A. Proposed OPPS Payment Rates Update
    B. Proposed ASC Conversion Factor Update
    C. Proposed ASC Cost Data
XIII. Proposed Updates to the Ambulatory Surgical Center (ASC) 
Payment System
    A. Background
    B. Proposed ASC Treatment of New and Revised Codes
    C. Proposed Update to the List of ASC Covered Surgical 
Procedures and Covered Ancillary Services
    D. Proposed Update and Payment for ASC Covered Surgical 
Procedures and Covered Ancillary Services
    E. ASC Payment System Policy for Non-Opioid Pain Management 
Drugs and Biologicals That Function as Surgical Supplies
    F. Proposed New Technology Intraocular Lenses (NTIOLs)
    G. Proposed ASC Payment and Comment Indicators
    H. Proposed Calculation of the ASC Payment Rates and the ASC 
Conversion Factor
XIV. Requirements for the Hospital Outpatient Quality Reporting 
(OQR) Program
    A. Background
    B. Hospital OQR Program Quality Measures
    C. Administrative Requirements
    D. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    E. Payment Reduction for Hospitals That Fail To Meet the 
Hospital OQR Program Requirements for the CY 2023 Payment 
Determination
XV. Requirements for the Ambulatory Surgical Center Quality 
Reporting (ASCQR) Program
    A. Background
    B. ASCQR Program Quality Measures
    C. Administrative Requirements
    D. Form, Manner, and Timing of Data Submitted for the ASCQR 
Program
    E. Proposed Payment Reduction for ASCs That Fail To Meet the 
ASCQR Program Requirements
XVI. Requirements for the Rural Emergency Hospital Quality Reporting 
(REHQR) Program
    A. Background
    B. REHQR Program Quality Measures
    C. Quality Reporting Requirements Under the REH Quality 
Reporting (REHQR) Program
XVII. Organ Acquisition Payment Policy
    A. Background of Organ Acquisition Payment Policies
    B. Counting Research Organs To Calculate Medicare's Share of 
Organ Acquisition Costs
    C. Costs of Certain Services Furnished to Potential Deceased 
Donors
    D. Technical Corrections and Clarifications to 42 CFR 405.1801, 
412.100, 413.198, 413.402, 413.404, 413.420 and Nomenclature Changes 
to 42 CFR 412.100 and 42 CFR Part 413, Subpart L
    E. Clarification of Allocation of Administrative and General 
Costs
    F. Organ Payment Policy--Request for Information on Counting 
Organs for Medicare's Share of Organ Acquisition Costs, IOPO Kidney 
SACs, and Reconciliation of All Organs for IOPOs
XVIII. Rural Emergency Hospitals (REH): Payment Policies, Conditions 
of Participation, Provider Enrollment, Use of the Medicare 
Outpatient Observation Notice, and Physician Self-Referral Updates
    A. Rural Emergency Hospitals (REH) Payment Policies
    B. REH Conditions of Participation
    C. REH Provider Enrollment
    D. Use of the Medicare Outpatient Observation Notice by REHs
    E. Physician Self-Referral Updates
XIX. Request for Information on Use of CMS Data To Drive Competition 
in Healthcare Marketplaces
    A. Background
    B. Request for Public Comment
XX. Addition of a New Service Category for Hospital Outpatient 
Department (OPD) Prior Authorization Process
    A. Background
    B. Controlling Unnecessary Increases in the Volume of Covered 
OPD Services
XXI. Overall Hospital Quality Star Rating
    A. Background
    B. Veterans Health Administration Hospitals
    C. Frequency of Publication and Data Used
    D. Overall Hospital Quality Star Ratings Suppression
XXII. Files Available to the Public via the Internet
XXIII. 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 Rural Emergency Hospitals (REH) Physician Self-
Referral Law Update
    E. ICRs for Addition of a New Service Category for Hospital 
Outpatient Department (OPD) Prior Authorization Process
    F. ICRs for Proposed Payment Adjustments for NIOSH-Approved 
Domestic Surgical N95 Respirators
    G. ICRs for Proposed REH Provider Enrollment Requirements
XXIV. Response to Comments
XXV. Economic Analyses
    A. Statement of Need
    B. Overall Impact of Provisions of This Proposed Rule
    C. Detailed Economic Analyses
    D. Regulatory Review Costs
    E. Regulatory Flexibility Act (RFA) Analysis
    F. Unfunded Mandates Reform Act Analysis
    G. Conclusion
    H. Federalism Analysis
Regulations Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this proposed rule, we propose to update the payment policies 
and payment rates for services furnished to Medicare beneficiaries in 
hospital outpatient departments (HOPDs) and ambulatory surgical centers 
(ASCs), beginning January 1, 2023. 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 of the Department of Health and Human 
Services (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 practice, 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 proposed rule 
also includes additional policy changes made in accordance with our 
experience with the OPPS and the ASC payment system and recent changes 
in our statutory authority. We describe these and various other 
statutory authorities in the relevant sections of this proposed rule. 
In addition, this proposed rule would update and refine the 
requirements for the Hospital Outpatient Quality

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Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. 
We are also proposing updates to the requirements for Organ 
Acquisition, Prior Authorization, and Overall Hospital Quality Star 
Rating. We are also proposing new regulatory requirements to codify 
payment policy, quality measures, and enrollment policy for Rural 
Emergency Hospitals. Finally, we are soliciting comments on the use of 
CMS data to drive competition in healthcare marketplaces, and a Request 
for Information on an alternative methodology for counting organs.
2. Summary of the Major Provisions
     OPPS Update: For 2023, we propose to increase the payment 
rates under the OPPS by an Outpatient Department (OPD) fee schedule 
increase factor of 2.7 percent. This proposed increase factor is based 
on the proposed hospital inpatient market basket percentage increase of 
3.1 percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS) reduced by a proposed productivity 
adjustment of 0.4 percentage point. Based on this update, we estimate 
that total payments to OPPS providers (including beneficiary cost-
sharing and estimated changes in enrollment, utilization, and case-mix) 
for calendar year (CY) 2023 would be approximately $86.2 billion, an 
increase of approximately $6.2 billion compared to estimated CY 2022 
OPPS payments.
    We propose to continue 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.
     Data used in CY 2023 OPPS/ASC Ratesetting: To set CY 2023 
OPPS and ASC payment rates, we would normally use the most updated 
claims and cost report data available. The best available claims data 
is the most recent set of data which would be from 2 years prior to the 
calendar year that is the subject of rulemaking. Therefore, we are 
proposing to use the CY 2021 claims data to set CY 2023 OPPS and ASC 
rates. However, cost report data usually lags the claims data by a year 
and CMS believes that the CY 2020 cost report data are not the best 
overall approximation of expected outpatient hospital services as the 
majority of the cost reports we would typically use for CY 2023 rate 
setting have cost reporting periods that overlap with parts of the CY 
2020 Public Health Emergency (PHE). In order to mitigate the impact of 
some of the temporary changes in hospitals cost report data from CY 
2020, we propose to use cost report data from the June 2020 extract 
from Healthcare Cost Report Information System (HCRIS), which includes 
cost report data from prior to the PHE. This is the same cost report 
extract we used to set OPPS rates for CY 2022. We believe using the CY 
2021 claims data with cost reports data through CY 2019 (prior to the 
PHE) for CY 2023 OPPS ratesetting is the best approximation of expected 
costs for CY 2023 hospital outpatient services for ratesetting 
purposes. As a result, CMS is proposing to use CY 2021 claims data with 
cost reports with cost reporting periods prior to the PHE to set CY 
2023 OPPS and ASC payment system rates.
     Partial Hospitalization Update: For CY 2023, we propose to 
calculate the CMHC and hospital-based PHP (HB PHP) geometric mean per 
diem costs consistent with our existing methodology, except that while 
we propose to use the latest available CY 2021 claims data, we propose 
to continue to use the cost data that was available for the CY 2021 
rulemaking.
     Changes to the Inpatient Only (IPO) List: For 2023, we 
propose to remove ten services from the Inpatient Only list.
     340B-Acquired Drugs: For CY 2023, we formally propose at 
this time 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. This 
proposal is in accordance with the policy choices and calculations that 
CMS made in the months leading up to publication of this proposed rule 
before the Supreme Court issued its decision in American Hospital 
Association v. Becerra (Docket 20-1114). However, we note that, in 
light of the Supreme Court's recent decision in American Hospital 
Association v. Becerra, we fully anticipate applying a rate of ASP + 6 
percent to such drugs and biologicals in the final rule for CY 2023 and 
making a corresponding decrease to the conversion factor consistent 
with the OPPS statute and our longstanding policy that this adjustment 
is made in a budget neutral manner. We are still evaluating how to 
apply the Supreme Court's recent decision to prior calendar years. In 
that decision, the Court summarized the parties' arguments regarding 
budget neutrality and stated that, ``[a]t this stage, we need not 
address potential remedies.'' We are interested in public comments on 
the best way to craft any potential remedies affecting cost years 2018-
2022 given that the Court did not resolve that issue.
     Device Pass-Through Payment Applications: For CY 2023, we 
received 8 applications for device pass-through payments. We solicit 
public comment on these applications and will make final determinations 
on these applications in the CY 2023 OPPS/ASC final rule. Beginning for 
OPPS device pass-through applications received on or after January 1, 
2023, we propose to publicly post online the completed application 
forms and related materials that we receive from applicants, excluding 
certain copyrighted or other materials that applicants indicate cannot 
otherwise be released to the public.
     Cancer Hospital Payment Adjustment: For CY 2023, we 
propose to continue providing additional payments to cancer hospitals 
so that a cancer hospital's payment-to-cost ratio (PCR) after the 
additional payments is equal to the weighted average PCR for the other 
OPPS hospitals using the most recently submitted or settled cost report 
data. However, section 16002(b) of the 21st Century Cures Act requires 
that this weighted average PCR be reduced by 1.0 percentage point. 
Based on the data and the required 1.0 percentage point reduction, we 
proposed to use a target PCR of 0.89 to determine the CY 2023 cancer 
hospital payment adjustment to be paid at cost report settlement. That 
is, the payment adjustments would be the additional payments needed to 
result in a PCR equal to 0.89 for each cancer hospital.
     ASC Payment Update: For CYs 2019 through 2023, we propose 
to adopt a policy to update the ASC payment system using the hospital 
market basket update. Using the hospital market basket methodology, for 
CY 2023, we propose to increase payment rates under the ASC payment 
system by 2.7 percent for ASCs that meet the quality reporting 
requirements under the ASCQR Program. This proposed increase is based 
on a hospital market basket percentage increase of 3.1 percent reduced 
by a productivity adjustment of 0.4 percentage point. Based on this 
proposed update, we estimate that total payments to ASCs (including 
beneficiary cost-sharing and estimated changes in enrollment, 
utilization, and case-mix) for CY 2023 would be approximately 5.4 
billion, an increase of approximately 130 million compared to estimated 
CY 2022 Medicare payments.
     Changes to the List of ASC Covered Surgical Procedures: 
For CY 2023, we propose to add one procedure, a lymph node biopsy or 
excision, to the ASC CPL based upon existing criteria at Sec.  416.166.

[[Page 44506]]

     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program measure set, we are proposing to: (1) add a 
data validation targeting criterion to our existing four targeting 
criteria that reads: ``Any hospital with a two-tailed confidence 
interval that is less than 75 percent, and that had less than four 
quarters of data due to receiving an ECE for one or more quarters,'' 
beginning with the CY 2023 reporting period/CY 2025 payment 
determination; (2) align patient encounter quarters with the calendar 
year, beginning with the CY 2024 reporting period/CY 2026 payment 
determination; and (3) change the Cataracts: Improvement in Patient's 
Visual Function within 90 Days Following Cataract Surgery (OP-31) 
Measure from Mandatory to Voluntary Beginning with the CY 2027 Payment 
Determination. We are requesting comment on the future readoption of 
the Hospital Outpatient Volume on Selected Outpatient Surgical 
Procedures (OP-26) measure or another volume indicator in the Hospital 
OQR Program.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program measure set, we are proposing to change 
the Cataracts: Improvement in Patient's Visual Function within 90 Days 
Following Cataract Surgery (ASC-11) Measure from Mandatory to Voluntary 
Beginning with the CY 2027 Payment Determination. We are also 
requesting comment on: (1) the potential future implementation of a 
measures value pathways approach in the ASCQR Program; (2) the status 
and feasibility of interoperability initiatives in the ASCQR Program; 
and (3) the potential readoption of the ASC Facility Volume Data on 
Selected ASC Surgical Procedures (ASC-7) measure or another volume 
indicator in the ASCQR Program. We are also proposing to suspend 
mandatory implementation of the ASC-11 measure.
     Organ acquisition payment policy: We are issuing a Request 
for Information on counting Medicare organs for use in calculating 
Medicare's share of organ acquisition costs, rather than making a 
proposal, and will use the information to inform potential future 
rulemaking. Also, we propose to exclude research organs from the 
calculation of Medicare's share of organ acquisition costs and require 
a cost offset; these proposals would help ensure that Medicare does not 
share in the cost of research, and would lower the cost of procuring 
and providing research organs to the research community. Finally, we 
propose to cover as organ acquisition costs certain hospital costs 
typically incurred when donors die from cardiac death, to promote organ 
procurement and enhance equity.
     Rural Emergency Hospitals (REH): Provider Enrollment: We 
are outlining provider enrollment requirements for REHs. The most 
important of these is that REHs must comply with all applicable 
provider enrollment provisions in 42 CFR part 424, subpart P in order 
to enroll in Medicare.
     Rural Emergency Hospitals (REH) Physician Self-Referral 
Law Update: We propose (1) a new exception for ownership or investment 
interests in an REH; and (2) revisions to certain existing exceptions 
to make them applicable to compensation arrangements to which an REH is 
a party.
     Rural Emergency Hospital Quality Reporting (REHQR) 
Program: For the REHQR Program, we are proposing to require a 
QualityNet account and Security Official (SO) requirement in line with 
other quality programs for purposes of data submission and access of 
facility level reports. We are also requesting information on: (1) 
measures recommended by the National Advisory Committee on Rural Health 
and Human Services and additional suggested measures for the REHQR 
Program, and (2) and comments on rural telehealth, behavioral and 
mental health, and maternal health services.
     Overall Hospital Quality Star Ratings: For the Overall 
Hospital Quality Star Ratings, we are: (1) providing information on the 
previously finalized policy for inclusion of quality measure data from 
Veteran's Health Administration hospitals; (2) proposing to amend Sec.  
412.190(c) to state the use of publicly available measure results on 
Hospital Compare or its successor websites from a quarter within the 
prior 12 months (instead of the ``prior year''); and (3) conveying that 
although CMS intends to publish Overall Hospital Quality Star Ratings 
in 2023, we may apply the suppression policy discussed in the CY 2021 
OPPS/ASC proposed rule (85 FR 48996 through 49027) should data analysis 
demonstrate that the COVID-19 Public Health Emergency (PHE) 
substantially affects the underlying measure data.
     REH Payment Policy: Section 125 of the Consolidated 
Appropriations Act of 2021 (CAA) established a new provider type called 
Rural Emergency Hospitals (REHs), effective January 1, 2023.
    REHs are facilities that convert from either a critical access 
hospital (CAH) or a rural hospital (or one treated as such under 
section 1886(d)(8)(E) of the Social Security Act) with less than 50 
beds, and that do not provide acute care inpatient services with the 
exception of post-hospital extended care services furnished in a unit 
of the facility that is a distinct part licensed as a skilled nursing 
facility. By statute, REH services include emergency department 
services and observation care and, at the election of the REH, other 
outpatient medical and health services furnished on an outpatient 
basis, as specified by the Secretary through rulemaking.
    By statute, covered outpatient department services provided by REHs 
will receive an additional 5 percent payment for each service. 
Beneficiaries will not be charged a copayment on the additional 5 
percent payment.
    We are proposing to consider all covered outpatient department 
services, other than inpatient hospital services as described in 
section 1833(t)(1)(B)(ii), that would otherwise be paid under the OPPS 
as REH services. REHs would be paid for furnishing REH services at a 
rate that is equal to the OPPS payment rate for the equivalent covered 
outpatient department service increased by 5 percent. We are also 
proposing that REHs may provide outpatient services that are not 
otherwise paid under the OPPS (such as services paid under the Clinical 
Lab Fee Schedule) as well as post-hospital extended care services 
furnished in a unit of the facility that is a distinct part of the 
facility licensed as a skilled nursing facility; however, these 
services would not be considered REH services and therefore would be 
paid under the applicable fee schedule and would not receive the 
additional 5 percent payment increase that CMS proposes to apply to REH 
services.
    Finally, we are proposing that REHs would also receive a monthly 
facility payment. After the initial payment is established in CY 2023, 
the payment amount will increase in subsequent years by the hospital 
market basket percentage increase.
     Proposed Addition of a New Service Category for Hospital 
Outpatient Department Prior Authorization Process: We propose to add 
facet joint interventions as a category of services to the prior 
authorization process for hospital outpatient departments beginning for 
dates of service on or after March 1, 2023.
     Mental Health Services Furnished Remotely by Hospital 
Staff to Beneficiaries in Their Homes: For CY 2023, CMS is proposing to 
consider mental health services furnished remotely by hospital staff 
using communications technology to beneficiaries in their homes as 
covered outpatient department services payable under the OPPS and would 
create OPPS-specific coding for these services.

[[Page 44507]]

We are proposing to require an in-person service within 6 months prior 
to the initiation of the remote service and then every 12 months 
thereafter, that exceptions to the in-person visit requirement may be 
made based on beneficiary circumstances (with the reason documented in 
the patient's medical record), and that more frequent visits are also 
allowed under our policy, as driven by clinical needs on a case-by-case 
basis. We are also proposing that audio-only interactive 
telecommunications systems may be used to furnish these services in 
instances where the beneficiary is not capable of, or does not consent 
to, the use of two-way, audio/video technology.
     Supervision by Nonphysician Practitioners of Hospital and 
CAH Diagnostic Services Furnished to Outpatients: For CY 2023, to 
improve clarity, we propose to replace cross-references at Sec.  
410.27(a)(1)(iv)(A) and (B) and Sec.  410.28(e) to the definitions of 
general and personal supervision at Sec.  410.32(b)(3)(i) and (iii) 
with the text of those definitions. We also propose to revise Sec.  
410.28(e) to clarify that certain nonphysician practitioners (nurse 
practitioners, physician assistants, clinical nurse specialists and 
certified nurse midwifes) may supervise the performance of diagnostic 
tests to the extent they are authorized to do so under their scope of 
practice and applicable State law.
     Exemption of Rural Sole Community Hospitals (SCH) from the 
Method to Control Unnecessary Increases in the Volume of Clinic Visit 
Services Furnished in Excepted Off-Campus Provider-Based Departments 
(PBDs): We are proposing to exempt rural Sole Community Hospitals 
(rural SCHs) from the site-specific Medicare Physician Fee Schedule 
(PFS)-equivalent payment for the clinic visit service, as described by 
HCPCS code G0463, when provided at an off-campus PBD excepted from 
section 1833(t)(21) of the Act (departments that bill the modifier 
``PO'' on claim lines).
     Proposed Payment Adjustments under the IPPS and OPPS for 
Domestic NIOSH-Approved Surgical N95 Respirators: As discussed in 
section X.H of the preamble of this proposed rule, the Biden-Harris 
Administration has made it a priority to ensure America is prepared to 
continue to respond to COVID-19, and to combat future pandemics. To 
improve hospital preparedness and readiness for future threats, we are 
proposing to provide payment adjustments to hospitals under the IPPS 
and OPPS for the additional resource costs they incur to acquire 
domestic NIOSH-approved surgical N95 respirators. These surgical 
respirators, which faced severe shortage at the onset of the COVID-19 
pandemic, are essential for the protection of beneficiaries and 
hospital personnel that interface with patients. The Department of 
Health and Human Services (HHS) recognizes that procurement of domestic 
NIOSH-approved surgical N95 respirators, while critical to pandemic 
preparedness and protecting health care workers and patients, can 
result in additional resource costs for hospitals. The proposed payment 
adjustments would account for these additional resource costs.
    We believe the proposed payment adjustments would help achieve a 
strategic policy goal, namely, sustaining a level of supply resilience 
for surgical N95 respirators that is critical to protect the health and 
safety of personnel and patients in a public health emergency. We are 
proposing that the payment adjustments would commence for cost 
reporting periods beginning on or after January 1, 2023.
3. Summary of Costs and Benefits
    In section XXIII of this proposed rule, we set forth a detailed 
analysis of the regulatory and federalism impacts that the changes 
would have on affected entities and beneficiaries. Key estimated 
impacts are described below.
a. Impacts of All OPPS Changes
    Table 84 in section XXIII.C of this proposed rule displays the 
distributional impact of all the OPPS changes on various groups of 
hospitals and CMHCs for CY 2023 compared to all estimated OPPS payments 
in CY 2022. We estimate that the policies in this proposed rule would 
result in a 2.9 percent overall increase in OPPS payments to providers. 
We estimate that total OPPS payments for CY 2023, including beneficiary 
cost-sharing, to the approximately 3,502 facilities paid under the OPPS 
(including general acute care hospitals, children's hospitals, cancer 
hospitals, and CMHCs) will increase by approximately $1.8 billion 
compared to CY 2022 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 8.4 percent decrease in CY 2023 
payments to CMHCs relative to their CY 2022 payments.
b. Impacts of the Updated Wage Indexes
    We estimate that our update of the wage indexes based on the FY 
2023 IPPS proposed rule wage indexes would result in no change for 
urban hospitals under the OPPS and no change for rural hospitals. These 
wage indexes include the continued implementation of the OMB labor 
market area delineations based on 2010 Decennial Census data, with 
updates, as discussed in section II.C of this proposed rule.
c. Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2023 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 2023 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 2023 is 0.89, equivalent to the 0.89 
target PCR for CY 2022, and therefore has no budget neutrality 
adjustment.
d. Impacts of the OPD Fee Schedule Increase Factor
    For the CY 2023 OPPS/ASC, we are establishing an OPD fee schedule 
increase factor of 2.7 percent and applying that increase factor to the 
conversion factor for CY 2023. We note that the following estimated 
changes are based on the formal proposal discussed in V.B of this 
proposed rule. However, we are making available online alternative 
impact tables and other supporting data associated with the alternative 
policy for 340B-acquired drugs.
    As a result of the OPD fee schedule increase factor and other 
budget neutrality adjustments, we estimate that urban hospitals would 
experience an increase in payments of approximately 3.0 percent and 
that rural hospitals would experience an increase in payments of 2.6 
percent. Classifying hospitals by teaching status, we estimate 
nonteaching hospitals will experience an increase in payments of 3.2 
percent, minor teaching hospitals would experience an increase in 
payments of 3.0 percent, and major teaching hospitals would experience 
an increase in payments of 2.6 percent. We also classified hospitals by 
the type of ownership. We estimate that hospitals with voluntary 
ownership would

[[Page 44508]]

experience an increase of 2.8 percent in payments, while hospitals with 
government ownership would experience an increase of 2.8 percent in 
payments. We estimate that hospitals with proprietary ownership would 
experience an increase of 3.5 percent in payments.
e. Impacts of the Proposed 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 2023 payment 
rates, compared to estimated CY 2022 payment rates, generally ranges 
between an increase of 1 and 6 percent, depending on the service, with 
some exceptions. We estimate the impact of applying the hospital market 
basket update to ASC payment rates would increase payments by $130 
million under the ASC payment system in CY 2023.

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; 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; the Further Consolidated Appropriations Act, 2020 (Pub. L. 116-
94), enacted on December 20, 2019; the Coronavirus Aid, Relief, and 
Economic Security Act (Pub. L. 116-136), enacted on March 27, 2020; and 
the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), enacted on 
December 27, 2020.
    Under the OPPS, we generally pay for hospital Part B services on a 
rate-per-service basis that varies according to the APC group to which 
the service is assigned. We use the Healthcare Common Procedure Coding 
System (HCPCS) (which includes certain Current Procedural Terminology 
(CPT) codes) to identify and group the services within each APC. The 
OPPS includes payment for most hospital outpatient services, except 
those identified in section I.C of this proposed rule. Section 
1833(t)(1)(B) of the Act provides for payment under the OPPS for 
hospital outpatient services designated by the Secretary (which 
includes partial hospitalization services furnished by CMHCs), and 
certain inpatient hospital services that are paid under Medicare Part 
B.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use, as required by section 
1833(t)(2)(B) of the Act. In accordance with section 1833(t)(2)(B) of 
the Act, subject to certain exceptions, items and services within an 
APC group cannot be considered comparable with respect to the use of 
resources if the highest median cost (or mean cost, if elected by the 
Secretary) for an item or service in the APC group is more than 2 times 
greater than the lowest median cost (or mean cost, if elected by the 
Secretary) for an item or service within the same APC group (referred 
to as the ``2 times rule''). In implementing this provision, we 
generally use the cost of the item or service assigned to an APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
clinical information and cost data to appropriately assign them to a 
clinical APC group, we have established special APC groups based on 
costs, which we refer to as New Technology APCs. These New Technology 
APCs are designated by cost bands which allow us to provide appropriate 
and consistent payment for designated new procedures that are not yet 
reflected in our claims data. Similar to pass-through payments, an 
assignment to a New Technology APC is temporary; that is, we retain a 
service within a New Technology APC until we acquire sufficient data to 
assign it to a clinically appropriate APC group.

[[Page 44509]]

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 (the PHS Act), which gives 
discretionary authority to the Secretary to convene advisory councils 
and committees, the Secretary expanded the panel's scope to include the 
supervision of hospital outpatient therapeutic services in addition to 
the APC groups and weights. To reflect this new role of the panel, the 
Secretary changed the panel's name to the Advisory Panel on Hospital 
Outpatient Payment (the HOP Panel or the Panel). The HOP Panel is not 
restricted to using data compiled by CMS, and in conducting its review, 
it may use data collected or developed by organizations outside the 
Department.
2. Establishment of the Panel
    On November 21, 2000, the Secretary signed the initial charter 
establishing the Panel, and, at that time, named the APC Panel. This 
expert panel is composed of appropriate representatives of providers 
(currently employed full-time, not as consultants, in their respective 
areas of expertise) who review clinical data and advise CMS about the 
clinical integrity of the APC groups and their payment weights. Since 
CY 2012, the Panel also is charged with advising the Secretary on the 
appropriate level of supervision for individual hospital outpatient 
therapeutic services. The Panel is technical in nature, and it is 
governed by the provisions of the Federal Advisory Committee Act 
(FACA). The current charter specifies, among other requirements, that 
the Panel--
     May advise on the clinical integrity of Ambulatory Payment 
Classification (APC) groups and their associated weights;
     May advise on the appropriate supervision level for 
hospital outpatient services;
     May advise on OPPS APC rates for 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/AdvisorPanelAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
    The Panel has held many meetings, with the last meeting taking 
place on August 22, 2021. 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

[[Page 44510]]

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 23, 2021, 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 on the CY 2022 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 13 timely pieces of correspondence on the 
CY 2022 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 16, 2021 (86 FR 63458)

II. Proposed Updates Affecting OPPS Payments

A. Proposed Recalibration of APC Relative Payment Weights

1. Database Construction
a. Use of CY 2021 Data in the CY 2023 OPPS Ratesetting
    We primarily use two data sources in OPPS ratesetting: claims data 
and cost report data. Our goal is always to use the best available data 
overall for ratesetting. Ordinarily, the best available full year of 
claims data would be the data from the year 2 years prior to the 
calendar year that is the subject of the rulemaking. As discussed in 
further detail in section X.C of this proposed rule, unlike CY 2020 
claims data, we do not believe there are overwhelming concerns with CY 
2021 claims data as a result of the COVID-19 PHE. Therefore, as 
discussed in further detail in section X.C of this proposed rule, we 
propose to use CY 2021 claims data and the data components related to 
it in establishing the CY 2023 OPPS.
b. 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 2023 OPPS, we propose to recalibrate the APC relative 
payment weights for services furnished on or after January 1, 2023, and 
before January 1, 2024 (CY 2023), using the same basic methodology that 
we described in the CY 2022 OPPS/ASC final rule with comment period (86 
FR 63466), using CY 2021 claims data. That is, we propose to 
recalibrate the relative payment weights for each APC based on claims 
and cost report data for hospital outpatient department (HOPD) services 
to construct a database for calculating APC group weights.
    For the purpose of recalibrating the proposed APC relative payment 
weights for CY 2023, we began with approximately 180 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, 2021, and before January 1, 2022, before applying our 
exclusionary criteria and other methodological adjustments. After the 
application of those data processing changes, we used approximately 93 
million final action claims to develop the proposed CY 2023 OPPS 
payment weights. For exact numbers of claims used and additional 
details on the claims accounting process, we refer readers to the 
claims accounting narrative under supporting documentation for the CY 
2023 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 2023 OPPS/ASC proposed rule (which is 
available via the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html) includes the proposed 
list of bypass codes for CY 2023. The proposed list of bypass codes 
contains codes that are reported on claims for services in CY 2021 and, 
therefore, includes codes that were in effect in CY 2021 and used for 
billing. We propose to retain deleted bypass codes on the proposed CY 
2023 bypass list because these codes existed in CY 2021 and were 
covered OPD services in that period, and CY 2021 claims data were used 
to calculate proposed CY 2023 payment rates. Keeping these deleted 
bypass codes on the bypass list potentially allows us to create more 
``pseudo'' single procedure claims for ratesetting purposes. ``Overlap 
bypass codes'' that are members of the proposed multiple imaging 
composite APCs are identified by asterisks (*) in the third column of 
Addendum N to this proposed rule. HCPCS codes that we propose to add 
for CY 2023 are identified by asterisks (*) in the fourth column of 
Addendum N.
c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2023, we propose to continue to use the hospital-specific 
overall ancillary and departmental cost-to-charge ratios (CCRs) to 
convert charges to estimated costs through application of a revenue 
code-to-cost center crosswalk. However, roughly half of the cost 
reports we would typically use for CY 2023 ratesetting purposes are 
from cost reporting periods that overlap with parts of CY 2020. When 
utilizing this cost report data, more than half of the APC geometric 
mean costs increased by more than 10 percent relative to estimates 
based on prior ratesetting cycles. While some of this increase may be 
attributable to changes that will continue into CY 2023, other aspects 
of those changes may be more specific to the COVID-19 PHE. In the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63751 through 
63754), we

[[Page 44511]]

described how CY 2020 claims data were too influenced by the COVID-19 
PHE to be utilized for setting CY 2022 OPPS payment rates. After 
reviewing the cost report data from the December 2021 HCRIS data set, 
we believe cost report data that overlap with CY 2020 are also too 
influenced by the COVID-19 PHE for purposes of calculating the CY 2023 
OPPS payment rates. Therefore, in order to mitigate the impact on our 
ratesetting process from the COVID-19 PHE effects in the CY 2020 cost 
report data we would typically use for this CY 2023 OPPS/ASC proposed 
rule, we propose to use cost report data from the June 2020 HCRIS data 
set, which only includes cost report data through CY 2019 for CY 2023 
OPPS/ASC proposed rule and final rule ratesetting purposes. For 
additional discussion of the data we propose to use in CY 2023 OPPS 
ratesetting, please see section X.C of this proposed rule.
    To calculate the APC costs on which the CY 2023 APC payment rates 
are based, we propose to calculate hospital-specific overall ancillary 
CCRs and hospital-specific departmental CCRs for each hospital for 
which we had CY 2021 claims data by comparing these claims data to 
hospital cost reports available for the CY 2022 OPPS/ASC final rule 
with comment period ratesetting, which, in most cases, are from CY 
2019. For the proposed CY 2023 OPPS payment rates, we propose to use CY 
2021 claims processed through December 31, 2021. 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 2021 (the year of claims data we used to calculate the proposed 
CY 2023 OPPS payment rates) and updates to the National Uniform Billing 
Committee (NUBC) 2020 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 propose to 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. 
Additionally, we have historically not included cost report lines for 
certain nonstandard cost centers in the OPPS ratesetting database 
construction when hospitals have reported these nonstandard cost 
centers on cost report lines that do not correspond to the cost center 
number. We have determined that hospitals are routinely reporting a 
number of nonstandard cost centers in this way and that including this 
additional data could significantly reduce certain APC geometric mean 
costs. In particular, we estimate that the additional cost data from 
nonstandard cost centers would decrease the geometric mean cost of APC 
8004 (Ultrasound Composite) by 20 percent, APC 5863 (Partial 
Hospitalizations (3 or more services) for hospital-based PHPs) by 12 
percent and APC 5573 (Level 3 Imaging with Contrast) by 11 percent. In 
other instances, we note that there are also potential increases in the 
geometric mean costs of certain APCs, such as APC 5741 (Level 1 
Electronic Analysis of Devices), which would increase by 4 percent, APC 
5723 (Level 3 Diagnostic Tests and Related Services), which would 
increase by 2.6 percent, and APC 5694 (Level 4 Drug Administration), 
which would increase by 2.3 percent.
    While we generally view the use of additional cost data as 
improving our OPPS ratesetting process, we have historically not 
included cost report lines for certain nonstandard cost centers in the 
OPPS ratesetting database construction when hospitals have reported 
these nonstandard cost centers on cost report lines that do not 
correspond to the cost center number. Additionally, we are concerned 
about the significant changes in APC geometric mean costs that our 
analysis indicates would occur if we were to include such lines. We 
believe it is important to further investigate the accuracy of these 
cost report data before including such data in the ratesetting process. 
Further, we believe it is appropriate to gather additional information 
from the public as well before including them in OPPS ratesetting. For 
CY 2023, we propose not to include the nonstandard cost centers 
reported in this way in the OPPS ratesetting database construction. We 
are soliciting comment on whether there exist any specific concerns 
with regards to the accuracy of the data from these nonstandard cost 
center lines that we would need to consider before including them in 
future OPPS ratesetting.
    For a discussion of the hospital-specific overall ancillary CCR 
calculation, we refer readers to the CY 2007 OPPS/ASC final rule with 
comment period (71 FR 67983 through 67985). The calculation of blood 
costs is a longstanding exception (since the CY 2005 OPPS) to this 
general methodology for calculation of CCRs used for converting charges 
to costs on each claim. This exception is discussed in detail in the CY 
2007 OPPS/ASC final rule with comment period and discussed further in 
section II.A.2.a.(1) of this proposed rule.
2. Proposed Data Development and Calculation of Costs Used for 
Ratesetting
    In this section of this proposed rule, we discuss the use of claims 
to calculate the OPPS payment rates for CY 2023. The Hospital OPPS page 
on the CMS website on which the CY 2023 OPPS/ASC proposed rule is 
posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an accounting of claims used 
in the development of the proposed payment rates. That accounting 
provides additional detail regarding the number of claims derived at 
each stage of the process. In addition, later in this section we 
discuss the file of claims that comprises the data set that is 
available upon payment of an administrative fee under a CMS data use 
agreement. The CMS website, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes 
information about obtaining the ``OPPS Limited Data Set,'' which now 
includes the additional variables previously available only in the OPPS 
Identifiable Data Set, including ICD-10-CM diagnosis codes and revenue 
code payment amounts. This file is derived from the CY 2021 claims that 
are used to calculate the proposed payment rates for this CY 2023 
proposed rule.
    Previously, the OPPS established the scaled relative weights on 
which payments are based using APC median costs, a process described in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). 
However, as discussed in more detail in section II.A.2.f of the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we 
finalized the use of geometric mean costs to calculate the relative 
weights on which the CY 2013 OPPS payment rates were based. While this 
policy changed the cost metric on which the relative payments are 
based, the data process in general remained the same under the 
methodologies that we used to obtain appropriate claims data and 
accurate cost information in determining estimated service cost.
    We used the methodology described in sections II.A.2.a through 
II.A.2.c of this proposed rule to calculate the costs we used to 
establish the proposed

[[Page 44512]]

relative payment weights used in calculating the OPPS payment rates for 
CY 2023 shown in Addenda A and B to this proposed rule (which are 
available via the internet on the CMS website at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html). We refer readers to 
section II.A.4 of this proposed rule for a discussion of the conversion 
of APC costs to scaled payment weights.
    We note that under the OPPS, CY 2019 was the first year in which 
the claims data used for setting payment rates (CY 2017 data) contained 
lines with the modifier ``PN'', which indicates nonexcepted items and 
services furnished and billed by off-campus provider-based departments 
(PBDs) of hospitals. Because nonexcepted items and 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 2023 OPPS, we 
would continue to remove claim lines with modifier ``PN'' from the 
ratesetting process.
    For details of the claims accounting process used in the CY 2023 
OPPS/ASC proposed rule, we refer readers to the claims accounting 
narrative under supporting documentation for the CY 2023 OPPS/ASC 
proposed rule 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
    Since the implementation of the OPPS in August 2000, we have made 
separate payments for blood and blood products through APCs rather than 
packaging payment for them into payments for the procedures with which 
they are administered. Hospital payments for the costs of blood and 
blood products, as well as for the costs of collecting, processing, and 
storing blood and blood products, are made through the OPPS payments 
for specific blood product APCs.
    We propose to continue to establish payment rates for blood and 
blood products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past public comments indicating that the former OPPS 
policy of defaulting to the overall hospital CCR for hospitals not 
reporting a blood-specific cost center often resulted in an 
underestimation of the true hospital costs for blood and blood 
products. Specifically, to address the differences in CCRs and to 
better reflect hospitals' costs, we propose to continue to simulate 
blood CCRs for each hospital that does not report a blood cost center 
by calculating the ratio of the blood-specific CCRs to hospitals' 
overall CCRs for those hospitals that do report costs and charges for 
blood cost centers. We also propose to apply this mean ratio to the 
overall CCRs of hospitals not reporting costs and charges for blood 
cost centers on their cost reports to simulate blood-specific CCRs for 
those hospitals. We propose to calculate the costs upon which the 
proposed CY 2023 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 using this methodology in 
CY 2023 would result in costs for blood and blood products that 
appropriately reflect the relative estimated costs of these products 
for hospitals without blood cost centers and, therefore, for these 
blood products in general.
    We note that we defined a comprehensive APC (C-APC) as a 
classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Under this policy, we include the costs of blood and blood 
products when calculating the overall costs of these C-APCs. We propose 
to continue to apply the blood-specific CCR methodology described in 
this section when calculating the costs of the blood and blood products 
that appear on claims with services assigned to the C-APCs. Because the 
costs of blood and blood products would be reflected in the overall 
costs of the C-APCs (and, as a result, in the proposed payment rates of 
the C-APCs), we propose not to make separate payments for blood and 
blood products when they appear on the same claims as services assigned 
to the C-APCs (we refer readers to the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66795 through 66796) for more information about 
our policy not to make separate payments for blood and blood products 
when they appear on the same claims as services assigned to a C-APC).
    We refer readers to Addendum B to this proposed rule (which is 
available via the internet on the CMS website) for the proposed CY 2023 
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 2023, we propose to continue to establish payment rates for 
blood and blood products using our blood-specific CCR methodology.
(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,

[[Page 44513]]

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 2023, except where otherwise indicated, we propose to use 
the costs derived from CY 2021 claims data to set the proposed CY 2023 
payment rates for brachytherapy sources because CY 2021 is the year of 
data we propose to use to set the proposed payment rates for most other 
items and services that would be paid under the CY 2023 OPPS. With the 
exception of the proposed payment rate for brachytherapy source C2645 
(Brachytherapy planar source, palladium-103, per square millimeter) and 
the proposed payment rates for low-volume brachytherapy APCs discussed 
in section III.D of this proposed rule, we propose to base the payment 
rates for brachytherapy sources on the geometric mean unit costs for 
each source, consistent with the methodology that we propose for other 
items and services paid under the OPPS, as discussed in section II.A.2. 
of this proposed rule. We also propose to continue the other payment 
policies for brachytherapy sources that we finalized and first 
implemented in the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60537). We propose to pay for the stranded and nonstranded not 
otherwise specified (NOS) codes, HCPCS codes C2698 (Brachytherapy 
source, stranded, not otherwise specified, per source) and C2699 
(Brachytherapy source, non-stranded, not otherwise specified, per 
source), at a rate equal to the lowest stranded or nonstranded 
prospective payment rate for such sources, respectively, on a per-
source basis (as opposed to, for example, a per mCi), which is based on 
the policy we established in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66785). We also propose to continue the policy we 
first implemented in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60537) regarding payment for new brachytherapy sources 
for which we have no claims data, based on the same reasons we 
discussed in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66786; which was delayed until January 1, 2010, by section 142 of Pub. 
L. 110-275). Specifically, this policy is intended to enable us to 
assign new HCPCS codes for new brachytherapy sources to their own APCs, 
with prospective payment rates set based on our consideration of 
external data and other relevant information regarding the expected 
costs of the sources to hospitals. The proposed CY 2023 payment rates 
for brachytherapy sources are included on Addendum B to this proposed 
rule (which is available via the internet on the CMS website) and 
identified with status indicator ``U''.
    For CY 2018, we assigned status indicator ``U'' (Brachytherapy 
Sources, Paid under OPPS; separate APC payment) to HCPCS code C2645 
(Brachytherapy planar source, palladium-103, per square millimeter) in 
the absence of claims data and established a payment rate using 
external data (invoice price) at $4.69 per mm\2\. For CY 2019, in the 
absence of sufficient claims data, we continued to establish a payment 
rate for C2645 at $4.69 per mm\2\. Our CY 2018 claims data available 
for the 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 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. 
Similarly, in the absence of sufficient claims data to establish an APC 
payment rate, in the CY 2021 and CY 2022 OPPS/ASC final rules (85 FR 
85879 through 85880 and 86 FR 63469) with comment period, we finalized 
our policy to use our equitable adjustment authority under section 
1833(t)(2)(E) of the Act to maintain the CY 2019 payment rate of $4.69 
per mm\2\ for HCPCS code C2645 for CY 2021 and for CY 2022.
    We did not receive any CY 2021 claims data for HCPCS code C2645. 
Therefore, we propose to use our equitable adjustment authority under 
section 1833(t)(2)(E) of the Act to maintain the CY 2019 payment rate 
of $4.69 per mm\2\ for HCPCS code C2645 for CY 2023.
    Additionally, for CY 2022 and subsequent calendar years, we adopted 
a Universal Low Volume APC policy for clinical and brachytherapy APCs, 
discussed in further detail in section III.D of this proposed rule. For 
these Low Volume APCs, which have fewer than 100 CY 2021 single claims 
used for ratesetting purposes in this CY 2023 OPPS/ASC proposed rule, 
we use up to 4 years of claims data to establish a payment rate for 
each item or service as we historically have done for low volume 
services assigned to New Technology APCs. Further, we calculate the 
cost for Low Volume APCs based on the greatest of the arithmetic mean 
cost, median cost, or geometric mean cost using all claims for the APC 
for up to 4 years. For CY 2023, we propose to designate 4 brachytherapy 
APCs as Low Volume APCs for CY 2023 as these APCs meet our criteria to 
be designated as a Low Volume APC. For more information on the 
brachytherapy APCs we are designating as Low Volume APCs, see section 
III.D of this proposed rule.
    We invite stakeholders to submit recommendations for new codes to 
describe new brachytherapy sources. Such recommendations should be 
directed 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 2023
(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

[[Page 44514]]

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). We have gradually added new C-APCs since 
the policy was implemented beginning in CY 2015, with the number of C-
APCs now totaling 69 (80 FR 70332; 81 FR 79584 through 79585; 83 FR 
58844 through 58846; 84 FR 61158 through 61166; 85 FR 85885; and 86 FR 
63474).
    Under our C-APC policy, we designate a service described by a HCPCS 
code assigned to a C-APC as the primary service when the service is 
identified by OPPS status indicator ``J1''. When such a primary service 
is reported on a hospital outpatient claim, taking into consideration 
the few exceptions that are discussed below, we make payment for all 
other items and services reported on the hospital outpatient claim as 
being integral, ancillary, supportive, dependent, and adjunctive to the 
primary service (hereinafter collectively referred to as ``adjunctive 
services'') and representing components of a complete comprehensive 
service (78 FR 74865 and 79 FR 66799). Payments for adjunctive services 
are packaged into the payments for the primary services. This results 
in a single prospective payment for each of the primary, comprehensive 
services based on the costs of all reported services at the claim 
level.
    Services excluded from the C-APC policy under the OPPS include 
services that are not covered OPD services, services that cannot by 
statute be paid for under the OPPS, and services that are required by 
statute to be separately paid. This includes certain mammography and 
ambulance services that are not covered OPD services in accordance with 
section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also 
are required by statute to receive separate payment under section 
1833(t)(2)(H) of the Act; pass-through payment drugs and devices, which 
also require separate payment under section 1833(t)(6) of the Act; 
self-administered drugs (SADs) that are not otherwise packaged as 
supplies because they are not covered under Medicare Part B under 
section 1861(s)(2)(B) of the Act; and certain preventive services (78 
FR 74865 and 79 FR 66800 through 66801). A list of services excluded 
from the C-APC policy is included in Addendum J to this proposed rule 
(which is available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices). If 
a service does not appear on this list of excluded services, payment 
for it will be packaged into the payment for the primary C-APC service 
when it appears on an outpatient claim with a primary C-APC service.
    In the interim final rule with request for comments (IFC) titled, 
``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 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 
following two 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 FDA letter of 
authorization for the emergency use of the drug or biological product, 
or the drug or biological product must be approved by 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 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 November 6, 2020 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 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 
one 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

[[Page 44515]]

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 set of 
services performed in combination with each other allows for all other 
OPPS payable services and items reported on the claim (excluding 
services that are not covered OPD services or that cannot by statute be 
paid for under the OPPS) to be deemed adjunctive services representing 
components of a comprehensive service and resulting in a single 
prospective payment for the comprehensive service based on the costs of 
all reported services on the claim (80 FR 70333 through 70336).
    Services included under the C-APC payment packaging policy, that 
is, services that are typically adjunctive to the primary service and 
provided during the delivery of the comprehensive service, include 
diagnostic procedures, laboratory tests, and other diagnostic tests and 
treatments that assist in the delivery of the primary procedure; visits 
and evaluations performed in association with the procedure; uncoded 
services and supplies used during the service; durable medical 
equipment as well as prosthetic and orthotic items and supplies when 
provided as part of the outpatient service; and any other components 
reported by HCPCS codes that represent services that are provided 
during the complete comprehensive service (78 FR 74865 and 79 FR 
66800).
    In addition, payment for hospital outpatient department services 
that are similar to therapy services and delivered either by therapists 
or nontherapists is included as part of the payment for the packaged 
complete comprehensive service. These services that are provided during 
the perioperative period are adjunctive services and are deemed not to 
be therapy services as described in section 1834(k) of the Act, 
regardless of whether the services are delivered by therapists or other 
nontherapist health care workers. We have previously noted that therapy 
services are those provided by therapists under a plan of care in 
accordance with section 1835(a)(2)(C) and section 1835(a)(2)(D) of the 
Act and are paid for under section 1834(k) of the Act, subject to 
annual therapy caps as applicable (78 FR 74867 and 79 FR 66800). 
However, certain other services similar to therapy services are 
considered and paid for as hospital outpatient department services. 
Payment for these nontherapy outpatient department services that are 
reported with therapy codes and provided with a comprehensive service 
is included in the payment for the packaged complete comprehensive 
service. We note that these services, even though they are reported 
with therapy codes, are hospital outpatient department services and not 
therapy services. We refer readers to the July 2016 OPPS Change Request 
9658 (Transmittal 3523) for further instructions on reporting these 
services in the context of a C-APC service.
    Items included in the packaged payment provided in conjunction with 
the primary service also include all drugs, biologicals, and 
radiopharmaceuticals, regardless of cost, except those drugs with pass-
through payment status and SADs, unless they function as packaged 
supplies (78 FR 74868 through 74869 and 74909 and 79 FR 66800). We 
refer readers to Section 50.2M, Chapter 15, of the Medicare Benefit 
Policy Manual for a description of our policy on SADs treated as 
hospital outpatient supplies, including lists of SADs that function as 
supplies and those that do not function as supplies.
    We define each hospital outpatient claim reporting a single unit of 
a single primary service assigned to status indicator ``J1'' as a 
single ``J1'' unit procedure claim (78 FR 74871 and 79 FR 66801). Line 
item charges for services included on the C-APC claim are converted to 
line item costs, which are then summed to develop the estimated APC 
costs. These claims are then assigned one unit of the service with 
status indicator ``J1'' and later used to develop the geometric mean 
costs for the C-APC relative payment weights. (We note that we use the 
term ``comprehensive'' to describe the geometric mean cost of a claim 
reporting ``J1'' service(s) or the geometric mean cost of a C-APC, 
inclusive of all of the items and services included in the C-APC 
service payment bundle.) Charges for services that would otherwise be 
separately payable are added to the charges for the primary service. 
This process differs from our traditional cost accounting methodology 
only in that all such services on the claim are packaged (except 
certain services as described above). We apply our standard data trims, 
which exclude claims with extremely high primary units or extreme 
costs.
    The comprehensive geometric mean costs are used to establish 
resource similarity and, along with clinical similarity, dictate the 
assignment of the primary services to the C-APCs. We establish a 
ranking of each primary service (single unit only) to be assigned to 
status indicator ``J1'' according to its comprehensive geometric mean 
costs. For the minority of claims reporting more than one primary 
service assigned to status indicator ``J1'' or units thereof, we 
identify one ``J1'' service as the primary service for the claim based 
on our cost-based ranking of primary services. We then assign these 
multiple ``J1'' procedure claims to the C-APC to which the service 
designated as the primary service is assigned. If the reported ``J1'' 
services on a claim map to different C-APCs, we designate the ``J1'' 
service assigned to the C-APC with the highest comprehensive geometric 
mean cost as the primary service for that claim. If the reported 
multiple ``J1'' services on a claim map to the same C-APC, we designate 
the most costly service (at the HCPCS code level) as the primary 
service for that claim. This process results in initial assignments of 
claims for the primary services assigned to status indicator ``J1'' to 
the most appropriate C-APCs based on both single and multiple procedure 
claims reporting these services and clinical and resource homogeneity.
    Complexity Adjustments. We use complexity adjustments to provide 
increased payment for certain comprehensive services. We apply a 
complexity adjustment by promoting qualifying paired ``J1'' service 
code combinations or paired code combinations of ``J1'' services and 
certain add-on codes (as described further below) from the originating 
C-APC (the C-APC to which the designated primary service is first 
assigned) to the next higher paying C-APC in the same clinical family 
of C-APCs. We apply this type of complexity adjustment when the paired 
code combination represents a complex, costly form or version of the 
primary service according to the following criteria:
     Frequency of 25 or more claims reporting the code 
combination (frequency threshold); and
     Violation of the 2 times rule, as stated in section 
1833(t)(2) of the Act and section III.B.2. of this final rule with 
comment period, 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

[[Page 44516]]

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 2023, we propose to apply the frequency and cost 
criteria thresholds discussed above, testing claims reporting one unit 
of a single primary service assigned to status indicator ``J1'' and any 
number of units of a single add-on code for the primary ``J1'' service. 
If the frequency and cost criteria thresholds for a complexity 
adjustment are met and reassignment to the next higher cost APC in the 
clinical family is appropriate (based on meeting the criteria outlined 
above), we make a complexity adjustment for the code combination; that 
is, we reassign the primary service code reported in conjunction with 
the add-on code to the next higher cost C-APC within the same clinical 
family of C-APCs. As previously stated, we package payment for add-on 
codes into the C-APC payment rate. If any add-on code reported in 
conjunction with the ``J1'' primary service code does not qualify for a 
complexity adjustment, payment for the add-on service continues to be 
packaged into the payment for the primary service and is not reassigned 
to the next higher cost C-APC. We list the complexity adjustments for 
``J1'' and add-on code combinations for CY 2023, along with all of the 
other final complexity adjustments, in Addendum J to this proposed rule 
(which is available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices).
    Addendum J to this proposed rule includes the cost statistics for 
each code combination that would qualify for a complexity adjustment 
(including primary code and add-on code combinations). Addendum J to 
this proposed rule also contains summary cost statistics for each of 
the paired code combinations that describe a complex code combination 
that would qualify for a complexity adjustment and are proposed to be 
reassigned to the next higher cost C-APC within the clinical family. 
The combined statistics for all proposed reassigned complex code 
combinations are represented by an alphanumeric code with the first 
four digits of the designated primary service followed by a letter. For 
example, the proposed geometric mean cost listed in Addendum J for the 
code combination described by complexity adjustment assignment 3320R, 
which is assigned to C-APC 5224 (Level 4 Pacemaker and Similar 
Procedures), includes all paired code combinations that are proposed to 
be reassigned to C-APC 5224 when CPT code 33208 is the primary code. 
Providing the information contained in Addendum J to this proposed rule 
allows stakeholders the opportunity to better assess the impact 
associated with the proposed assignment of claims with each of the 
paired code combinations eligible for a complexity adjustment.
(2) Exclusion of Procedures Assigned to New Technology APCs From the C-
APC Policy
    Services that are assigned to New Technology APCs are typically new 
procedures that do not have sufficient claims history to establish an 
accurate payment for them. 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 are 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 beginning in CY 2020, payment for services assigned to a 
New Technology APC would be excluded from being packaged into the 
payment for comprehensive observation services assigned status 
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when they are included on a claim with a ``J2'' service (84 FR 61167). 
We propose to continue to exclude payment for any procedure that is 
assigned to a New Technology APC (APCs 1491 through 1599 and APCs 1901 
through 1908) from being packaged when included on a claim with a 
``J1'' or ``J2'' service assigned to a C-APC.
(3) Exclusion of Drugs and Biologicals Described by HCPCS Code C9399 
(Unclassified Drugs or Biologicals) From the C-APC Policy
    Section 1833(t)(15) of the Act, as added by section 621(a)(1) of 
the Medicare Prescription Drug, Improvement, and Modernization Act of 
2003 (Pub. L. 108-173), provides for payment under the OPPS for new 
drugs and biologicals until HCPCS codes are assigned. Under this 
provision, we are required to make payment for a covered outpatient 
drug or biological that is furnished as part of covered outpatient 
department services but for which a HCPCS code has not yet been 
assigned in an amount equal to 95 percent of average wholesale price 
(AWP) for the drug or biological.
    In the CY 2005 OPPS/ASC final rule with comment period (69 FR 
65805), we implemented section 1833(t)(15) of the Act by instructing 
hospitals to bill for a drug or biological that is newly approved by 
the FDA and that does not yet have a HCPCS code by reporting the 
National Drug Code (NDC) for the product along with the newly created 
HCPCS code C9399 (Unclassified drugs or biologicals). We explained that 
when HCPCS code C9399 appears on a claim, the Outpatient Code Editor 
(OCE) suspends the claim for manual pricing by the Medicare 
Administrative Contractor (MAC). The MAC prices the claim at 95 percent 
of the drug or biological's AWP, using Red Book or an equivalent 
recognized compendium, and processes the claim for payment. We 
emphasized that this approach enables hospitals to bill and receive 
payment for a new drug or biological concurrent with its approval by 
the FDA. The hospital does not have to wait for the next quarterly 
release or for approval of a product-specific HCPCS code to receive 
payment for a newly approved drug or biological or to resubmit claims 
for adjustment. We instructed that hospitals would discontinue billing 
HCPCS code C9399 and the NDC upon implementation of a product specific 
HCPCS code, status indicator, and appropriate payment amount with the 
next quarterly update. We also note that HCPCS code C9399 is paid in a 
similar manner in the ASC setting, as 42 CFR 416.171(b) outlines that 
certain drugs and biologicals for which separate payment is allowed 
under the OPPS are considered covered ancillary services for which the 
OPPS payment rate, which is 95 percent of AWP for HCPCS code C9399, 
applies. Since the implementation of the C-APC policy in 2015, payment 
for drugs and biologicals described by HCPCS code C9399 has been 
included in the C-APC payment when these products appear on a claim 
with a primary C-APC service. Packaging payment for these drugs and 
biologicals that appear on a hospital outpatient claim with a primary 
C-APC service is consistent with our C-APC packaging policy under which 
we make payment for all items and services, including all non-pass-
through drugs, reported on the hospital outpatient claim as being 
integral, ancillary, supportive, dependent, and adjunctive to the 
primary service and representing components of a complete comprehensive 
service, with certain limited exceptions (78 FR 74869). It has been our 
position that the total payment for the C-APC with which payment for a 
drug or biological described by HCPCS code C9399 is packaged includes 
payment for the drug or biological at 95 percent of its AWP.
    However, we have determined that in certain instances, drugs and 
biologicals described by HCPCS code C9399 are not being paid at 95 
percent of their AWPs when payment for them is packaged with payment 
for a primary C-APC service. In order to ensure payment for new drugs, 
biologicals, and radiopharmaceuticals described by HCPCS code C9399 at 
95 percent of their AWP, for CY 2023 and subsequent years, we propose 
to exclude any drug, biological, or radiopharmaceutical described by 
HCPCS code C9399 from packaging when the drug, biological, or 
radiopharmaceutical is included on a claim with a ``J1'' service, which 
is the status indicator assigned to a C-APC, and a claim with a ``J2'' 
service, which is the status indicator assigned to comprehensive 
observation services. Please see OPPS Addendum J for the proposed CY 
2023 comprehensive APC payment policy exclusions.
    We are also including a corresponding proposal in section XI 
``Proposed CY 2023 OPPS Payment Status and Comment Indicators'', to add 
a new definition to status indicator ``A'' to include unclassified 
drugs and biologicals that are reportable with HCPCS code C9399. The 
proposed definition, found in Addendum D1 to this proposed rule, would 
ensure the MAC prices claims for drugs, biologicals or 
radiopharmaceuticals billed with HCPCS code C9399 at 95 percent of the 
drug or biological's AWP and pays separately for the drug, biological, 
or radiopharmaceutical under the OPPS when it appears on the same claim 
as a primary C-APC service.
(4) Additional C-APCs for CY 2023
    For CY 2023, we propose to continue to apply the C-APC payment 
policy methodology. We refer readers to the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79583) for a discussion of the C-APC payment 
policy methodology and revisions.
    Each year, in accordance with section 1833(t)(9)(A) of the Act, we 
review and revise the services within each APC group and the APC 
assignments under the OPPS. As a result of our annual review of the 
services and the APC assignments under the OPPS, we propose to add one 
C-APC under the existing C-APC payment policy in CY 2023: Proposed C-
APC 5372 (Level 2 Urology and Related Services). This APC was selected 
to be included in this proposed rule because, similar to other C-APCs, 
this APC includes primary, comprehensive services, such as major 
surgical procedures, that are typically reported with other ancillary 
and adjunctive services. Also, similar to other clinical APCs that have 
been converted to C-APCs, there are higher APC levels (Levels 3-8 
Urology and Related Services) within the clinical family or related 
clinical family of this APC that have previously been converted to C-
APCs.
    Table 1 below lists the proposed C-APCs for CY 2023. All C-APCs are 
displayed in Addendum J to this proposed rule (which is available via 
the internet on the CMS website). Addendum J to this proposed rule also 
contains all of the data related to the C-APC payment policy 
methodology, including the list of complexity adjustments and other 
information.
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c. Calculation of Composite APC Criteria-Based Costs
    As discussed in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66613), we believe it is important that the OPPS enhance 
incentives for hospitals to provide necessary, high quality care as 
efficiently as possible. For CY 2008, we developed composite APCs to 
provide a single payment for groups of services that are typically 
performed together during a single clinical encounter and that result 
in the provision of a complete service. Combining payment for multiple, 
independent services into a single OPPS payment in this way enables 
hospitals to manage their resources with maximum flexibility by 
monitoring and adjusting the volume and efficiency of services 
themselves. An additional advantage to the composite APC model is that 
we can use data from correctly coded multiple procedure claims to 
calculate payment rates for the specified combinations of services, 
rather than relying upon single procedure claims which may be low in 
volume and/or incorrectly coded. Under the OPPS, we currently have 
composite policies for mental health services and multiple imaging 
services. We refer readers to the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66611 through 66614 and 66650 through 66652) for 
a full discussion of the development of the composite APC methodology, 
and the CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) 
and the CY 2018 OPPS/ASC final rule with comment period (82 FR 59241 
through 59242 and 59246 through 52950) for more recent background.
(1) Mental Health Services Composite APC
    We propose to continue our longstanding policy of limiting the 
aggregate payment for specified less resource-intensive mental health 
services furnished on the same date to the payment for a day of partial 
hospitalization services provided by a hospital, which we consider to 
be the most resource-intensive of all outpatient mental health 
services. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 through 18455) for the initial discussion 
of this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    In the CY 2018 OPPS/ASC proposed rule and final rule with comment 
period (82 FR 33580 through 33581 and 59246 through 59247, 
respectively), we proposed and finalized the policy for CY 2018 and 
subsequent years that, when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on a 
single date of service, based on the payment rates associated with the 
APCs for the individual services, exceeds the maximum per diem payment 
rate for partial hospitalization services provided by a hospital, those 
specified mental health services will be paid through composite APC 
8010 (Mental Health Services Composite). In addition, we set the 
payment rate for composite APC 8010 for CY 2018 at the same payment 
rate that will be paid for APC 5863, which is the maximum partial 
hospitalization per diem payment rate for a hospital, and finalized a 
policy that the hospital will continue to be paid the payment rate for 
composite APC 8010. Under this policy, the I/OCE will continue to 
determine whether to pay for these specified mental health services 
individually, or to make a single payment at the same payment rate 
established for APC 5863 for all of the specified mental health 
services furnished by the hospital on that single date of service. We 
continue to believe that the costs associated with administering a 
partial hospitalization program at a hospital represent the most 
resource intensive of all outpatient mental health services. Therefore, 
we do not believe that we should pay more for mental health services 
under the OPPS than the highest partial hospitalization per diem 
payment rate for hospitals.
    We propose that when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on a 
single date of service, based on the payment rates associated with the 
APCs for the individual services, exceeds the maximum per diem payment 
rate for partial hospitalization services provided by a hospital, those 
specified mental health services would be paid through composite APC 
8010 for CY 2023. In addition, we propose to set the payment rate for 
composite APC 8010 at the same payment rate that we propose for APC 
5863, which is the maximum partial hospitalization per diem payment 
rate for a hospital, and that the hospital continue to be paid the 
proposed payment rate for composite APC 8010.
(2) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Effective January 1, 2009, we provide a single payment each time a 
hospital submits a claim for more than one imaging procedure within an 
imaging family on the same date of service, 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 2 below.
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement under section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included under the policy do not involve contrast, both CT/
CTA and MRI/MRA scans can be provided either with or without contrast. 
The five multiple imaging composite APCs established in CY 2009 are:
     APC 8004 (Ultrasound Composite);
     APC 8005 (CT and CTA without Contrast Composite);
     APC 8006 (CT and CTA with Contrast Composite);
     APC 8007 (MRI and MRA without Contrast Composite); and
     APC 8008 (MRI and MRA with Contrast Composite).
    We define the single imaging session for the ``with contrast'' 
composite APCs as having at least one or more imaging procedures from 
the same family performed with contrast on the same date of service. 
For example, if the hospital performs an MRI without contrast during 
the same session as at least one other MRI with contrast, the hospital 
will receive payment based on the payment rate for APC 8008, the ``with 
contrast'' composite APC.
    We make a single payment for those imaging procedures that qualify 
for payment based on the composite APC payment rate, which includes any 
packaged services furnished on the same date of service. The standard 
(noncomposite) APC assignments continue to apply for single imaging 
procedures and multiple imaging procedures performed across families. 
For a full discussion of the development of the multiple imaging 
composite APC methodology, we refer readers to the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68559 through 68569).
    For CY 2023, we propose to continue to pay for all multiple imaging

[[Page 44521]]

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.
    For CY 2023, except where otherwise indicated, we propose to use 
the costs derived from CY 2021 claims data to set the proposed CY 2023 
payment rates. Therefore, for CY 2023, the payment rates for the five 
multiple imaging composite APCs (APCs 8004, 8005, 8006, 8007, and 8008) 
are based on proposed geometric mean costs calculated from CY 2021 
claims available for this proposed rule that qualify 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 use the same 
methodology that we use 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 
proposed rule (which is available via the internet on the CMS website 
\1\) and are discussed in more detail in section II.A.1.b of this 
proposed rule,
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    \1\ CY 2023 Medicare Hospital Outpatient Prospective Payment 
System and Ambulatory Surgical Center Payment System Proposed Rule 
(CMS-1772-P); Notice of Proposed Rulemaking. Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
---------------------------------------------------------------------------

    For CY 2023, we are able to identify approximately 0.95 million 
``single session'' claims out of an estimated 2.0 million potential 
claims for payment through composite APCs from our ratesetting claims 
data, which represents approximately 47.5 percent of all eligible 
claims, to calculate the proposed CY 2023 geometric mean costs for the 
multiple imaging composite APCs. Table 2 of this 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 2023.
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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. 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.
b. Proposal and Comment Solicitation on Packaged Items and Services
    For CY 2023, 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 hospital 
outpatient department 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.
    For CY 2023, we are not proposing any changes to the overall 
packaging policy previously discussed. We propose to 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.
    While we are not proposing any changes to the overall packaging 
policy above, we are soliciting comments on potential modifications to 
our packaging policy, as described in section XIII.E.5 of this proposed 
rule. Specifically, we are seeking comments and data regarding whether 
to expand the current ASC payment system policy for non-opioid pain 
management drugs and biologicals that function as surgical supplies to 
the HOPD setting. Details on the current ASC policy can be found in 
XIII.E.
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 2022 OPPS/
ASC final rule with comment period (85 FR 63497 through 63498), we 
applied this policy and calculated the relative payment weights for 
each APC for CY 2022 that were shown in Addenda A and B of the CY 2022 
OPPS/ASC 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 the CY 2022 OPPS/ASC final rule with 
comment period. For CY 2023, as we did for CY 2022, we propose to 
continue to apply the policy established in CY 2013 and calculate 
relative payment weights for each APC for CY 2023 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 2023, as we did for CY 2022, we 
proposed to continue to standardize all of the relative payment weights 
to APC 5012. We believe that standardizing relative payment weights to 
the geometric mean of the APC to which HCPCS code G0463 is assigned 
maintains consistency in calculating unscaled weights that represent 
the cost of some of the most frequently provided OPPS services. For CY 
2023, as we did for CY 2022, we

[[Page 44527]]

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 beginning 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 departments (PBDs) 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. For a full discussion of this policy, 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 2023 is neither 
greater than nor less than the estimated aggregate weight that would 
have been calculated without the changes. To comply with this 
requirement concerning the APC changes, we propose to compare the 
estimated aggregate weight using the CY 2022 scaled relative payment 
weights to the estimated aggregate weight using the proposed CY 2023 
unscaled relative payment weights.
    For CY 2022, we multiplied the CY 2022 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2021 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 2023, we 
propose to apply the same process using the estimated CY 2023 unscaled 
relative payment weights rather than scaled relative payment weights. 
We propose to calculate the weight scalar by dividing the CY 2022 
estimated aggregate weight by the unscaled CY 2023 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 link labeled 
``CY 2023 OPPS/ASC Notice of Proposed Rulemaking'', which can be found 
under the heading ``Hospital Outpatient Prospective Payment System 
Rulemaking'' and open the claims accounting document link at the bottom 
of the page, which is labeled ``2023 NPRM OPPS Claims Accounting 
(PDF)''.
    We propose to compare the estimated unscaled relative payment 
weights in CY 2023 to the estimated total relative payment weights in 
CY 2022 using CY 2021 claims data, holding all other components of the 
payment system constant to isolate changes in total weight. Based on 
this comparison, we propose to adjust the calculated CY 2023 unscaled 
relative payment weights for purposes of budget neutrality. We propose 
to adjust the estimated CY 2023 unscaled relative payment weights by 
multiplying them by a proposed weight scalar of 1.4152 to ensure that 
the proposed CY 2023 relative payment weights are scaled to be budget 
neutral. The proposed CY 2023 relative payment weights listed in 
Addenda A and B to this proposed rule (which are available via the 
internet on the CMS website) are scaled and incorporate the 
recalibration adjustments discussed in sections II.A.1 and II.A.2 of 
this proposed rule.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain specified covered outpatient drugs (SCODs). Section 
1833(t)(14)(H) of the Act provides that additional expenditures 
resulting from this paragraph shall not be taken into account in 
establishing the conversion factor, weighting, and other adjustment 
factors for 2004 and 2005 under paragraph (9), but shall be taken into 
account for subsequent years. Therefore, the cost of those SCODs (as 
discussed in section V.B.2 of this proposed rule) is included in the 
budget neutrality calculations for the CY 2023 OPPS.

B. Proposed Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD rate 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 rate 
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 2023 IPPS/LTCH PPS proposed 
rule (87 FR 28402), consistent with current law, based on IHS Global, 
Inc.'s fourth quarter 2021 forecast of the FY 2023 market basket 
increase, the proposed FY 2023 IPPS market basket update was 3.1 
percent. We note that under our regular process for the CY 2023 OPPS/
ASC final rule, we will use the market basket update for the FY 2023 
IPPS/LTCH PPS final rule, which would be based on IHS Global, Inc.'s 
second quarter 2022 forecast of the FY 2023 market basket increase. If 
that forecast is higher than the market basket used for this proposed 
rule, the CY 2023 OPPS/ASC final rule OPD rate increase factor will 
reflect that higher market basket estimate.
    Specifically, section 1833(t)(3)(F)(i) of the Act requires that, 
for 2012 and subsequent years, the OPD fee schedule increase factor 
under subparagraph (C)(iv) be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as 
equal to the 10-year moving average of changes in annual economy-wide, 
private nonfarm business multifactor productivity (MFP) (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year, year, cost reporting period, or other annual period) (the 
``MFP adjustment''). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51689 through 51692), we finalized our methodology for calculating and 
applying the MFP adjustment, and then revised this methodology, as 
discussed in the FY 2016 IPPS/LTCH PPS final rule (80 FR 49509). In the 
FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28402), the proposed MFP 
adjustment for FY 2023 was 0.4 percentage point.
    Therefore, we propose that the MFP adjustment for the CY 2023 OPPS 
will be 0.4 percentage point. We also propose that if more recent data 
become subsequently available after the publication of the CY 2023 
OPPS/ASC proposed rule (for example, a more

[[Page 44528]]

recent estimate of the market basket increase and/or the MFP 
adjustment), we would use such updated data, if appropriate, to 
determine the CY 2023 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 2023 OPPS/ASC final rule.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 percent for a year, and may result in OPPS payment rates being 
less than rates for the preceding year. As described in further detail 
below, we propose for CY 2023 an OPD fee schedule increase factor of 
2.7 percent for the CY 2023 OPPS (which is the proposed estimate of the 
hospital inpatient market basket percentage increase of 3.1 percent, 
less the proposed 0.4 percentage point MFP adjustment).
    We propose that hospitals that fail to meet the Hospital OQR 
Program reporting requirements would be subject to an additional 
reduction of 2.0 percentage points from the OPD fee schedule increase 
factor adjustment to the conversion factor that would be used to 
calculate the OPPS payment rates for their services, as required by 
section 1833(t)(17) of the Act. For further discussion of the Hospital 
OQR Program, we refer readers to section XIV of this proposed rule.
    To set the OPPS conversion factor for 2023, we propose to increase 
the CY 2022 conversion factor of $84.177 by 2.7 percent. In accordance 
with section 1833(t)(9)(B) of the Act, we proposed further to adjust 
the conversion factor for CY 2023 to ensure that any revisions made to 
the wage index and rural adjustment are made on a budget neutral basis. 
We propose to calculate an overall budget neutrality factor of 1.0010 
for wage index changes by comparing proposed total estimated payments 
from our simulation model using the proposed FY 2023 IPPS wage indexes 
to those payments using the FY 2022 IPPS wage indexes, as adopted on a 
calendar year basis for the OPPS. We further propose to calculate an 
additional budget neutrality factor of 0.9995 to account for our 
proposed policy to cap wage index reductions for hospitals at 5 percent 
on an annual basis.
    For the CY 2023 OPPS, we propose to maintain the current rural 
adjustment policy, as discussed in section II.E. of this proposed rule. 
Therefore, the proposed budget neutrality factor for the rural 
adjustment is 1.0000.
    We propose to continue previously established policies for 
implementing the cancer hospital payment adjustment described in 
section 1833(t)(18) of the Act, as discussed in section II.F of this 
proposed rule. We propose to calculate a CY 2023 budget neutrality 
adjustment factor for the cancer hospital payment adjustment by 
comparing estimated total CY 2023 payments under section 1833(t) of the 
Act, including the proposed CY 2023 cancer hospital payment adjustment, 
to estimated CY 2023 total payments using the CY 2022 final cancer 
hospital payment adjustment, as required under section 1833(t)(18)(B) 
of the Act. The proposed CY 2023 estimated payments applying the 
proposed CY 2023 cancer hospital payment adjustment were the same as 
estimated payments applying the CY 2022 final cancer hospital payment 
adjustment. Therefore, we propose to apply a budget neutrality 
adjustment factor of 1.0000 to the conversion factor for the cancer 
hospital payment adjustment. In accordance with section 1833(t)(18)(C), 
as added by section 16002(b) of the 21st Century Cures Act (Pub. L. 
114-255), we are applying a budget neutrality factor calculated as if 
the proposed cancer hospital adjustment target payment-to-cost ratio 
was 0.90, not the 0.89 target payment-to-cost ratio we applied as 
stated in section II.F. of this proposed rule.
    We estimate that proposed pass-through spending for drugs, 
biologicals, and devices for CY 2023 would equal approximately $772.0 
million, which represents 0.90 percent of total projected CY 2023 OPPS 
spending. Therefore, the proposed conversion factor would be adjusted 
by the difference between the 1.24 percent estimate of pass-through 
spending for CY 2022 and the 0.90 percent estimate of proposed pass-
through spending for CY 2023, resulting in a proposed increase to the 
conversion factor for CY 2023 of 0.34 percent.
    Proposed estimated payments for outliers would remain at 1.0 
percent of total OPPS payments for CY 2023. We estimate for the 
proposed rule that outlier payments would be approximately 1.29 percent 
of total OPPS payments in CY 2022; the 1.00 percent for proposed 
outlier payments in CY 2023 would constitute a 0.29 percent decrease in 
payment in CY 2023 relative to CY 2022.
    We also propose to make an OPPS budget neutrality adjustment of 
0.01 percent of the OPPS for the estimated spending of $8.3 million 
associated with the proposed payment adjustment under the CY 2023 OPPS 
for domestic NIOSH-approved surgical N95 respirators, as discussed in 
section X.H of this proposed rule.
    For CY 2023, we also propose that hospitals that fail to meet the 
reporting requirements of the Hospital OQR Program would continue to be 
subject to a further reduction of 2.0 percentage points to the OPD fee 
schedule increase factor. For hospitals that fail to meet the 
requirements of the Hospital OQR Program, we proposed to make all other 
adjustments discussed above, but use a reduced OPD fee schedule update 
factor of 0.7 percent (that is, the proposed OPD fee schedule increase 
factor of 2.7 percent further reduced by 2.0 percentage points). This 
would result in a proposed reduced conversion factor for CY 2023 of 
$85.093 for hospitals that fail to meet the Hospital OQR Program 
requirements (a difference of -1.692 in the conversion factor relative 
to hospitals that met the requirements).
    In summary, for 2023, we propose to use a reduced conversion factor 
of $85.093 in the calculation of payments for hospitals that fail to 
meet the Hospital OQR Program requirements (a difference of -1.692 in 
the conversion factor relative to hospitals that met the requirements).
    For 2023, we propose to use a conversion factor of $86.785 in the 
calculation of the national unadjusted payment rates for those items 
and services for which payment rates are calculated using geometric 
mean costs; that is, the proposed OPD fee schedule increase factor of 
2.7 percent for CY 2023, the required proposed wage index budget 
neutrality adjustment of approximately 1.0010, the proposed 5 percent 
annual cap for individual hospital wage index reductions adjustment of 
approximately 0.9995, the proposed cancer hospital payment adjustment 
of 1.0000, the proposed adjustment to account for the 0.01 percentage 
point of OPPS spending associated with the payment adjustment for 
domestic NIOSH-approved surgical N95 respirators, and the proposed 
adjustment of an increase of 0.34 percentage point of projected OPPS 
spending for the difference in pass-through spending, which that result 
in a proposed conversion factor for CY 2023 of $86.785.

C. Proposed Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust the portion of payment and 
coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions

[[Page 44529]]

in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion 
of the OPPS payment rate is called the OPPS labor-related share. Budget 
neutrality is discussed in section II.B of this proposed rule.
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). We propose to continue this policy for 
the CY 2023 OPPS. We refer readers to section II.H of this proposed 
rule for a description and an example of how the wage index for a 
particular hospital is used to determine payment for the hospital.
    As discussed in the claims accounting narrative included with the 
supporting documentation for this proposed rule (which is available via 
the internet on the CMS website), for estimating APC costs, we would 
standardize 60 percent of estimated claims costs for geographic area 
wage variation using the same FY 2023 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 
2023, we propose to implement this provision in the same manner as we 
have since CY 2011. Under this policy, the frontier State hospitals 
would receive a wage index of 1.00 if the otherwise applicable wage 
index (including reclassification, the rural floor, and rural floor 
budget neutrality) is less than 1.00. Because the HOPD receives a wage 
index based on the geographic location of the specific inpatient 
hospital with which it is associated, the frontier State wage index 
adjustment applicable for the inpatient hospital also would apply for 
any associated HOPD. We refer readers to the FY 2011 through FY 2022 
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; for FY 2020, 84 FR 
42312; for FY 2021, 85 FR 58765; and for FY 2022, 86 FR 45178.
    In addition to the changes required by the Affordable Care Act, we 
note that the proposed FY 2023 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, the imputed floor wage index 
adjustment in all-urban states, an adjustment for occupational mix, an 
adjustment to the wage index based on commuting patterns of employees 
(the out-migration adjustment), and an adjustment to the wage index for 
certain low wage index hospitals to help address wage index disparities 
between low and high wage index hospitals. We refer readers to the FY 
2023 IPPS/LTCH PPS proposed rule (87 FR 28357 through 28380) for a 
detailed discussion of all proposed changes to the FY 2023 IPPS wage 
indexes. We note in particular that in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28377 through 28380), we proposed a permanent 
approach to smooth year-to-year decreases in hospitals' wage indexes. 
Specifically, for FY 2023 and subsequent years, we proposed to apply a 
5-percent cap on any decrease to a hospital's wage index from its wage 
index in the prior FY, regardless of the circumstances causing the 
decline. That is, we proposed that a hospital's wage index for FY 2023 
would not be less than 95 percent of its final wage index for FY 2022, 
and that for subsequent years, a hospital's wage index would not be 
less than 95 percent of its final wage index for the prior FY. We 
stated that we believe this policy would increase the predictability of 
IPPS payments for hospitals and mitigate instability and significant 
negative impacts to hospitals resulting from changes to the wage index. 
It would also eliminate the need for temporary and potentially 
uncertain transition adjustments to the wage index in the future due to 
specific policy changes or circumstances outside hospitals' control.
    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

[[Page 44530]]

finalized our proposal to discontinue the use of SSA county codes and 
begin using only the FIPS county codes. For CY 2023, under the OPPS, we 
are continuing to use only the FIPS county codes for purposes of 
crosswalking counties to CBSAs.
    We propose to use the FY 2023 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 2023. Therefore, any policies and adjustments for the FY 2023 
IPPS post-reclassified wage index, including, but not limited to, the 
5-percent cap on any decrease to a hospital's wage index from its wage 
index in the prior FY described above, would be reflected in the final 
CY 2023 OPPS wage index beginning on January 1, 2023. We refer readers 
to the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28357 through 28380) 
and the proposed FY 2023 hospital wage index files posted on the CMS 
website at https://www.cms.gov/medicare/acute-inpatient-pps/fy-2023-ipps-proposed-rule-home-page. With regard to budget neutrality for the 
CY 2023 OPPS wage index, we refer readers to section II.B of this 
proposed rule. We continue to believe that using the IPPS post-
reclassified wage index as the source of an adjustment factor for the 
OPPS is reasonable and logical, given the inseparable, subordinate 
status of the HOPD within the hospital overall.
    Hospitals that are paid under the OPPS, but not under the IPPS, do 
not have an assigned hospital wage index under the IPPS. Therefore, for 
non-IPPS hospitals paid under the OPPS, it is our longstanding policy 
to assign the wage index that would be applicable if the hospital was 
paid under the IPPS, based on its geographic location and any 
applicable wage index policies and adjustments. We propose to continue 
this policy for CY 2023 and are including below a brief summary of the 
major proposed FY 2023 IPPS wage index policies and adjustments that we 
propose to apply to these hospitals under the OPPS for CY 2023. We 
refer readers to the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28357 
through 28380) for a detailed discussion of the proposed changes to the 
FY 2023 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 would apply if the hospital were paid 
under the IPPS. For CY 2023, we propose to continue our policy of 
allowing non-IPPS hospitals paid under the OPPS to qualify for the 
outmigration adjustment if they are located in a section 505 out-
migration county (section 505 of the MMA). Furthermore, we propose that 
the wage index that would apply for CY 2023 to non-IPPS hospitals paid 
under the OPPS would continue to include the rural floor adjustment and 
any policies and adjustments applied to the IPPS wage index to address 
wage index disparities. In addition, the wage index that would apply to 
non-IPPS hospitals paid under the OPPS would include the 5 percent cap 
on wage index decreases that we may finalize for the FY 2023 IPPS wage 
index as discussed previously.
    For CMHCs, for CY 2023, we propose to continue to calculate the 
wage index by using the post-reclassification IPPS wage index based on 
the CBSA where the CMHC is located. Furthermore, we propose that the 
wage index that would apply to a CMHC for CY 2023 would continue to 
include the rural floor adjustment and any policies and adjustments 
applied to the IPPS wage index to address wage index disparities. In 
addition, the wage index that would apply to CMHCs would include the 5 
percent cap on wage index decreases that we may finalize for the FY 
2023 IPPS wage index as discussed above. Also, we propose that the wage 
index that would apply to CMHCs would not include the outmigration 
adjustment because that adjustment only applies to hospitals.
    Table 4A associated with the FY 2023 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 2023 IPPS/LTCH PPS final rule (available for 
download via the website above) identifies IPPS hospitals that receive 
the out-migration adjustment for FY 2023. We are including the 
outmigration adjustment information from Table 2 associated with the FY 
2023 IPPS/LTCH PPS proposed rule as Addendum L to this proposed rule, 
with the addition of non-IPPS hospitals that would receive the section 
505 outmigration adjustment under this proposed rule. Addendum L is 
available via the internet on the CMS website. We refer readers to the 
CMS website for the OPPS at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index. At this link, readers 
will find a link to the proposed FY 2023 IPPS wage index tables and 
Addendum L.

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

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, we use overall hospital-specific CCRs calculated from 
the hospital's most recent cost report to determine outlier payments, 
payments for pass-through devices, and monthly interim transitional 
outpatient payments (TOPs) 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 2023 
OPPS proposed rule Claims Accounting document that is posted on our 
website. Due to concerns with cost report data as a result of the 
COVID-19 PHE, we propose to calculate the default ratios for CY 2023 
using the June 2020 HCRIS cost reports, consistent with the broader 
proposal regarding CY 2023 OPPS ratesetting discussed in section X of 
this proposed rule.
    We no longer publish 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

[[Page 44531]]

upper limit will be available for download with each OPPS CY proposed 
rule and final rule on the CMS website. We refer readers to our website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; 
click on the link on the left of the page titled ``Hospital Outpatient 
Regulations and Notices'' and then select the relevant regulation to 
download the statewide CCRs and upper limit in the Downloads section of 
the web page.

E. Proposed Adjustment for Rural Sole Community Hospitals (SCHs) and 
Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2023

    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 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 2022.
    For CY 2023, we propose to continue the current policy of a 7.1 
percent payment adjustment for rural SCHs, including EACHs, for all 
services and procedures paid under the OPPS, excluding separately 
payable drugs and biologicals, brachytherapy sources, items paid at 
charges reduced to costs, and devices paid under the pass-through 
payment policy, applied in a budget neutral manner.

F. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2023

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 added 
section 1833(t)(7), ``Transitional Adjustment to Limit Decline in 
Payment,'' to the Act, which requires the Secretary to determine OPPS 
payments to cancer and children's hospitals based on their pre-BBA 
payment amount (these hospitals are often referred to under this policy 
as ``held harmless'' and their payments are often referred to as ``hold 
harmless'' payments).
    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 Sec.  419.70(f). TOPs are 
calculated on Worksheet E, Part B, of the Hospital Cost Report or the 
Hospital Health Care Complex Cost Report (Form CMS-2552-96 or Form CMS-
2552-10, respectively), as applicable each year. Section 1833(t)(7)(I) 
of the Act exempts TOPs from budget neutrality calculations.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Act by adding a new paragraph (18), which instructs the Secretary 
to conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to APC groups exceed outpatient costs incurred by 
other hospitals furnishing services under section 1833(t) of the Act, 
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of 
the Act requires the Secretary to take into consideration the cost of 
drugs and biologicals incurred by cancer hospitals and other hospitals. 
Section 1833(t)(18)(B) of the Act provides that, if the Secretary 
determines that cancer hospitals' costs are higher than those of other 
hospitals, the Secretary shall provide an appropriate adjustment under 
section 1833(t)(2)(E) of the Act to reflect these higher costs. In 
2011, after conducting the study required by section 1833(t)(18)(A) of 
the Act, we determined that outpatient costs incurred by the 11 
specified cancer hospitals were greater than the costs incurred by 
other OPPS hospitals. For a complete discussion regarding the cancer 
hospital cost study, we refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74200 through 74201).
    Based on these findings, we finalized a policy to provide a payment 
adjustment to the 11 specified cancer hospitals that reflects their 
higher outpatient costs, as discussed in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74202 through 74206). Specifically, we 
adopted a policy to provide additional payments to the cancer hospitals 
so that each cancer hospital's final PCR for services provided in a 
given calendar year is equal to the weighted average PCR (which we 
refer to as the ``target PCR'') for other hospitals paid under the 
OPPS. The target PCR is set in advance of the

[[Page 44532]]

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. Table 3 displays the target PCR for purposes of 
the cancer hospital adjustment for CY 2012 through CY 2022.
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2. Proposed Policy for CY 2023
    Section 16002(b) of the 21st Century Cures Act (Pub. L. 114-255) 
amended section 1833(t)(18) of the Act by adding subparagraph (C), 
which requires that in applying Sec.  419.43(i) (that is, the payment 
adjustment for certain cancer hospitals) for services furnished on or 
after January 1, 2018, the target PCR adjustment be reduced by 1.0 
percentage point less than what would otherwise apply. Section 16002(b) 
also provides that, in addition to the percentage reduction, the 
Secretary may consider making an additional percentage point reduction 
to the target PCR that takes into account payment rates for applicable 
items and services described under section 1833(t)(21)(C) of the Act 
for hospitals that are not cancer hospitals described under section 
1886(d)(1)(B)(v) of the Act. Further, in making any budget neutrality 
adjustment under section 1833(t) of the Act, the Secretary shall not 
take into account the reduced expenditures that result from application 
of section 1833(t)(18)(C) of the Act.
    We propose to provide additional payments to the 11 specified 
cancer hospitals so that each cancer hospital's proposed PCR is equal 
to the weighted average PCR (or ``target PCR'') for the other OPPS 
hospitals, generally using the most recent submitted or settled cost 
report data that are available, reduced by 1.0 percentage point, to 
comply with section 16002(b) of the 21st Century Cures Act. We do not 
propose an additional reduction beyond the 1.0 percentage point 
reduction required by section 16002(b) of the 21st Century Cures Act 
for CY 2023.
    Under our established policy, to calculate the proposed CY 2023 
target PCR, we would use the same extract of cost report data from 
HCRIS used to estimate costs for the CY 2023 OPPS which, in most cases, 
would be the most recently available hospital cost reports. However, as 
discussed in section II.A.1.c and X.C of this proposed rule, we propose 
to use cost report data from the June 2020 HCRIS data set, which does 
not contain cost reports from CY 2020, given our concerns with CY 2020 
cost report data as a result of the COVID-19 PHE. We believe a target 
PCR based on the most recently available cost reports may provide a 
less accurate estimation of cancer hospital PCRs and non-cancer 
hospital PCRs than the data used for the CY 2022 rulemaking cycle, 
which pre-dated the COVID-19 PHE. Therefore, for CY 2023, we propose to 
continue to use the same target PCR we used for CY 2021 and CY 2022 of 
0.89. This proposed CY 2023 target PCR of 0.89 includes the 1.0-
percentage point reduction required by section 16002(b) of the 21st 
Century Cures Act for CY 2023. For a description of the CY 2021 target 
PCR calculation, on which the proposed CY 2023 target PCR is based, we 
refer readers to the CY 2021 OPPS/ASC final rule with comment period 
(84 FR 85912 through 85914).
    Table 4 shows the proposed estimated percentage increase in OPPS 
payments to each cancer hospital for CY 2023, due to the cancer 
hospital payment adjustment policy. The cost reporting periods for all 
cancer hospitals in Table 4 overlaps with CY 2020 and the costs and 
payments associated with each cancer hospital may be impacted by the 
effects of the COVID-19 PHE. Therefore, the estimates in Table 4 are 
likely to be less accurate than in other years and may overstate the 
percentage increase in cancer hospital payments for CY 2023. The 
actual, final amount of the CY 2023 cancer hospital payment adjustment 
for each cancer hospital would be determined at cost report settlement 
and would depend on each hospital's CY 2023 payments and costs from the 
settled CY 2023 cost report. We note that the requirements contained in 
section 1833(t)(18) of the Act do not affect the existing statutory 
provisions that provide for TOPs for cancer hospitals. The TOPs will be 
assessed, as usual, after all payments, including the cancer hospital 
payment adjustment, have been made for a cost reporting period.

[[Page 44533]]

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BILLING CODE 4120-01-C

G. Proposed Hospital Outpatient Outlier Payments

1. Background
    The OPPS provides outlier payments to hospitals to help mitigate 
the financial risk associated with high-cost and complex procedures, 
where a very costly service could present a hospital with significant 
financial loss. As explained in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66832 through 66834), we set our projected target 
for aggregate outlier payments at 1.0 percent of the estimated 
aggregate total payments under the OPPS for the prospective year. 
Outlier payments are provided on a service-by-service basis when the 
cost of a service exceeds the APC payment amount multiplier threshold 
(the APC payment amount multiplied by a certain amount) as well as the 
APC payment amount plus a fixed-dollar amount threshold (the APC 
payment plus a certain dollar amount). In CY 2022, 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 $6,175 (the fixed-dollar 
amount threshold) (86 FR 63508 through 63510). If the hospital's cost 
of furnishing 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 hospital's 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 2021 OPPS payments, using CY 2021 claims available for this CY 
2023 OPPS/ASC proposed rule, is approximately 1.0 percent. Therefore, 
for CY 2021, we estimated that we paid the outlier target of 1.0 
percent of total aggregated OPPS payments. Using an updated claims 
dataset for this proposed rule, we estimate that we paid approximately 
1.01 percent of the total aggregate OPPS payments in outliers for CY 
2021.
    For this proposed rule, using CY 2021 claims data and CY 2022 
payment rates, we estimate that the aggregate outlier payments for CY 
2022 would be approximately 1.07 percent of the total CY 2022 OPPS 
payments. We provide estimated CY 2023 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 2023
    For CY 2023, we propose to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS. We propose that a portion of that 1.0 percent, 
an amount equal to less than 0.01 percent of outlier payments (or 
0.0001 percent of total OPPS payments), would be allocated to CMHCs for 
PHP outlier payments. This is the amount of estimated outlier payments 
that would result from the proposed CMHC outlier threshold as a 
proportion of total estimated OPPS outlier payments. We propose to 
continue our longstanding policy that if a CMHC's cost for partial 
hospitalization services, paid under APC 5853 (Partial Hospitalization 
for CMHCs), exceeds

[[Page 44534]]

3.40 times the payment rate for proposed APC 5853, the outlier payment 
would be calculated as 50 percent of the amount by which the cost 
exceeds 3.40 times the proposed APC 5853 payment rate.
    For further discussion of CMHC outlier payments, we refer readers 
to section VIII.C of this proposed rule.
    To ensure that the estimated CY 2023 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we propose 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 $8,350.
    We calculate the proposed fixed-dollar threshold of $8,350 using 
the standard methodology most recently used for CY 2022 (86 FR 63508 
through 63510). For purposes of estimating outlier payments for CY 
2023, we use the hospital-specific overall ancillary CCRs available in 
the April 2022 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 generally use to model each OPPS update 
lag by 2 years.
    In order to estimate the CY 2023 hospital outlier payments, we 
inflate the charges on the CY 2021 claims using the same proposed 
charge inflation factor of 1.13218 that we used to estimate the IPPS 
fixed-loss cost threshold for the FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28667). We used an inflation factor of 1.06404 to estimate CY 
2022 charges from the CY 2021 charges reported on CY 2021 claims before 
applying CY 2022 CCRs to estimate the percent of outliers paid in CY 
2022. The proposed methodology for determining these charge inflation 
factors, as well as the solicitation of comments on an alternative 
approach, is discussed in the FY 2023 IPPS/LTCH PPS proposed rule (87 
FR 28667 through 28678). As we stated in the CY 2005 OPPS final rule 
with comment period (69 FR 65844 through 65846), we believe that the 
use of the same 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 cost centers to capture 
costs and charges for inpatient and outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, we propose to apply the same CCR 
adjustment factor that we proposed to apply for the FY 2023 IPPS 
outlier calculation to the CCRs used to simulate the proposed CY 2023 
OPPS outlier payments to determine the fixed-dollar threshold. 
Specifically, for CY 2023, we propose to apply an adjustment factor of 
0.974495 to the CCRs that were in the April 2022 OPSF to trend them 
forward from CY 2022 to CY 2023. The methodology for calculating the 
proposed CCR adjustment factor, as well as the solicitation of comments 
on an alternative approach, is discussed in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28668). We note that we propose to use the April 
2022 OPSF for purposes of estimating costs for the OPPS outlier 
threshold calculation whereas in section X of this proposed rule we 
discussed using June 2020 HCRIS data extract for modeling hospital 
outpatient costs in construction of our CY 2023 OPPS relative weights. 
For modeling estimated outlier payments, since the April 2022 OPSF 
contains cost data primarily from CY 2021 and CY 2022 and is the basis 
for current CY 2022 OPPS outlier payments, we believe the April 2022 
OPSF provides a more updated and accurate data source for determining 
the CCRs that will be applied to CY 2023 hospital outpatient claims. 
Therefore, we believe the April 2022 OPSF is a more accurate data 
source for determining the fixed-dollar threshold to ensure that the 
estimated CY 2023 aggregate outlier payments would equal 1.0 percent of 
estimated aggregate total payments under the OPPS.
    To model hospital outlier payments for this CY proposed rule, we 
apply the overall CCRs from the April 2022 OPSF after adjustment (using 
the proposed CCR inflation adjustment factor of 0.974495 to approximate 
CY 2023 CCRs) to charges on CY 2021 claims that were adjusted (using 
the proposed charge inflation factor of 1.13218 to approximate CY 2023 
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 2023 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $8,350, 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 propose 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 would apply to certain outpatient items and services 
furnished by hospitals that are required to report outpatient quality 
data and that fail to meet the Hospital OQR Program requirements. For 
hospitals that fail to meet the Hospital OQR Program requirements, we 
propose to continue the policy that we implemented in CY 2010 that the 
hospitals' costs would be compared to the reduced payments for purposes 
of outlier eligibility and payment calculation. For more information on 
the Hospital OQR Program, we refer readers to section XIV of this 
proposed rule.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR part 419, subparts C and D. For this CY 2023 proposed rule, the 
proposed payment rate for most services and procedures for which 
payment is made under the OPPS is the product of the conversion factor 
calculated in accordance with section II.B of this proposed rule and 
the relative payment weight described in section II.A. of this proposed 
rule. Therefore, the national unadjusted payment rate for most APCs 
contained in Addendum A to this proposed rule (which is available via 
the internet on the CMS website) and for most HCPCS codes to which 
separate payment under the OPPS has been assigned in Addendum B to this 
proposed rule (which is available via

[[Page 44535]]

the internet on the CMS website) is calculated by multiplying the 
proposed CY 2023 scaled weight for the APC by the CY 2023 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 requirements. For further 
discussion of the payment reduction for hospitals that fail to meet the 
requirements of the Hospital OQR Program, we refer readers to section 
XIV. of this proposed rule.
    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 this proposed rule, which is available via 
the internet on the CMS website), in a circumstance in which the 
multiple procedure discount does not apply, the procedure is not 
bilateral, and conditionally packaged services (status indicator of 
``Q1'' and ``Q2'') qualify for separate payment. We note that, although 
blood and blood products with status indicator ``R'' and brachytherapy 
sources with status indicator ``U'' are not subject to wage adjustment, 
they are subject to reduced payments when a hospital fails to meet the 
Hospital OQR Program requirements.
    Individual providers interested in calculating the payment amount 
that they will receive for a specific service from the national 
unadjusted payment rates presented in Addenda A and B to this proposed 
rule (which are available via the internet on the CMS website) should 
follow the formulas presented in the following steps. For purposes of 
the payment calculations below, we refer to the national unadjusted 
payment rate for hospitals that meet the requirements of the Hospital 
OQR Program as the ``full'' national unadjusted payment rate. We refer 
to the national unadjusted payment rate for hospitals that fail to meet 
the requirements of the Hospital OQR Program as the ``reduced'' 
national unadjusted payment rate. The reduced national unadjusted 
payment rate is calculated by multiplying the reporting ratio of 0.9805 
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 2023 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/ASC 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. The wage index values assigned to each area would reflect the 
geographic statistical areas (which are based upon OMB standards) to 
which hospitals are assigned for FY 2023 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 propose to continue 
to apply for the CY 2023 OPPS wage index any adjustments for the FY 
2023 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 2023 OPPS, we refer readers to section II.C of this proposed 
rule.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this proposed rule (which is available via the 
internet on the CMS website) contains the qualifying counties and the 
associated wage index increase developed for the proposed FY 2023 IPPS 
wage index, which are listed in Table 3 associated with the FY 2023 
IPPS proposed rule and available via the internet on the CMS website 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. (Click on the link on the left side of 
the screen titled ``FY 2023 IPPS Proposed Rule Home Page'' and select 
``FY 2023 Proposed Rule Tables.'') This step is to be followed only if 
the hospital is not reclassified or redesignated under section 
1886(d)(8) or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national unadjusted payment 
rate for the specific service by the wage index.

Xa is the labor-related portion of the national unadjusted payment rate 
(wage adjusted).
Xa = .60 * (national unadjusted payment rate) * applicable wage index.

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

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

    Step 6. If a provider is an SCH, as set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be an

[[Page 44536]]

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 CY 2023 full 
national unadjusted payment rate for APC 5071 is $659.86. The proposed 
reduced national adjusted payment rate for APC 5071 for a hospital that 
fails to meet the Hospital OQR Program requirements is $646.99. This 
proposed reduced rate is calculated by multiplying the reporting ratio 
of 0.9805 by the full unadjusted payment rate for APC 5071.
    The FY 2023 wage index for a provider located in CBSA 35614 in New 
York, which includes the proposed adoption of IPPS 2023 wage index 
policies, is 1.3296. The labor-related portion of the proposed full 
national unadjusted payment is approximately $526.42 (.60 * $659.86 * 
1.3296). The labor-related portion of the proposed reduced national 
adjusted payment is approximately $516.14 (.60 * $646.99 * 1.3296). The 
nonlabor-related portion of the proposed full national unadjusted 
payment is approximately $263.94 (.40 * $659.86). The nonlabor-related 
portion of the proposed reduced national adjusted payment is 
approximately $258.80 (.40 * $646.99). The sum of the labor-related and 
nonlabor-related portions of the proposed full national unadjusted 
payment is approximately $790.36 ($526.42 + $263.94). The sum of the 
portions of the proposed reduced national adjusted payment is 
approximately $774.94 ($516.14 + $258.80).

I. Proposed Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in CYs thereafter, shall not exceed 40 percent of the APC 
payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure (including items such as drugs and biologicals) 
performed in a year to the amount of the inpatient hospital deductible 
for that year.
    Section 4104 of the Affordable Care Act eliminated the Medicare 
Part B coinsurance for preventive services furnished on and after 
January 1, 2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. For a discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011 we refer readers to section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
    Section 122 of the Consolidated Appropriations Act (CAA) of 2021 
(Pub. L. 116-260), Waiving Medicare Coinsurance for Certain Colorectal 
Cancer Screening Tests, amends section 1833(a) of the Act to offer a 
special coinsurance rule for screening flexible sigmoidoscopies and 
screening colonoscopies, regardless of the code that is billed for the 
establishment of a diagnosis as a result of the test, or for the 
removal of tissue or other matter or other procedure, that is furnished 
in connection with, as a result of, and in the same clinical encounter 
as the colorectal cancer screening test. We refer readers to section 
X.B, ``Changes to Beneficiary Coinsurance for Certain Colorectal Cancer 
Screening Tests'' of the CY 2022 OPPS/ASC final rule with comment 
period for the full discussion of this policy (86 FR 63740 through 
63743). Under the regulation at 42 CFR 410.152(l)(5)(i)(B), the 
Medicare Part B payment percentage for colorectal cancer screening 
tests described in the regulation at Sec.  410.37(j) that are furnished 
in CY 2023 through 2026 (and the corresponding reduction in 
coinsurance) is 85 percent (with beneficiary coinsurance equal to 15 
percent).
2. Proposed OPPS Copayment Policy
    For CY 2023, we propose to determine copayment amounts for new and 
revised APCs using the same methodology that we implemented beginning 
in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule 
with comment period (68 FR 63458).) In addition, we propose to use the 
same standard rounding principles that we have historically used in 
instances where the application of our standard copayment methodology 
would result in a copayment amount that is less than 20 percent and 
cannot be rounded, under standard rounding principles, to 20 percent. 
(We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66687) in which we discuss our rationale for applying 
these rounding principles.) The proposed national unadjusted copayment 
amounts for services payable under the OPPS that would be effective 
January 1, 2023 are included in Addenda A and B to this proposed rule 
(which are available via the internet on the CMS website).
    As discussed in section XIV.E of this proposed rule, for CY 2023, 
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

[[Page 44537]]

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. Proposed Calculation of an Adjusted Copayment Amount for an APC 
Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 5071, $131.98 is approximately 20 percent of the 
full national unadjusted payment rate of $659.86. For APCs with only a 
minimum unadjusted copayment in Addenda A and B to this proposed rule 
(which are available via the internet on the CMS website), the 
beneficiary payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.

B is the beneficiary payment percentage.
B = National unadjusted copayment for APC/national unadjusted payment 
rate for APC.

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

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.9805.
    The unadjusted copayments for services payable under the OPPS that 
would be effective January 1, 2023 are shown in Addenda A and B to this 
proposed rule (which are available via the internet on the CMS 
website). We note that the proposed national unadjusted payment rates 
and copayment rates shown in Addenda A and B to this proposed rule 
reflect the proposed CY 2023 OPD increase factor discussed in section 
II.B of this proposed rule.
    In addition, as noted earlier, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

III. Proposed OPPS Ambulatory Payment Classification (APC) Group 
Policies

A. Proposed OPPS Treatment of New and Revised HCPCS Codes

    Payments for OPPS procedures, services, and items are generally 
based on medical billing codes, specifically, HCPCS codes, that are 
reported on HOPD claims. HCPCS codes are used to report surgical 
procedures, medical services, items, and supplies under the hospital 
OPPS. 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 that is established and maintained by the American 
Medical Association (AMA), and consists of Category I, II, III, MAAA, 
and PLAA CPT codes. Level II, which is established and maintained by 
CMS, is a standardized coding system that is used primarily to identify 
products,

[[Page 44538]]

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 OPPS payment system. Specifically, we recognize 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;
     MAAA CPT codes, which describe laboratory multianalyte 
assays with algorithmic analyses (MAA);
     PLA CPT codes, which describe proprietary laboratory 
analyses (PLA) services; 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.
    The 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 outside of the formal 
rulemaking process via OPPS quarterly update CRs. Based on our review, 
we assign the new codes to interim status indicators (SIs) and APCs. 
These interim assignments are finalized in the OPPS/ASC final rules. 
This quarterly process offers hospitals access to codes that more 
accurately describe the 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, status indicators, and APC 
assignments through our annual rulemaking process.
    We note that, under the OPPS, the APC assignment determines the 
payment rate for an item, procedure, or service. The items, procedures, 
or services not exclusively paid separately under the hospital OPPS are 
assigned to appropriate status indicators. Certain payment status 
indicators provide separate payment while other payment status 
indicators do not. In section XI of this proposed rule, specifically, 
the ``Proposed CY 2023 Payment Status and Comment Indicators'' section, 
we discuss the various status indicators used under the OPPS. We also 
provide a complete list of the proposed status indicators and their 
definitions in Addendum D1 to this proposed rule.
1. April 2022 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Proposed Rule
    For the April 2022 update, 48 new HCPCS codes were established and 
made effective on April 1, 2022. Through the April 2022 OPPS quarterly 
update CR (Transmittal 11305, Change Request 12666, dated March 24, 
2022), we recognized several new HCPCS codes for separate payment under 
the OPPS. In this proposed rule, we are soliciting public comments on 
the proposed APC and status indicator assignments for the codes listed 
in Table 5 (New HCPCS Codes Effective April 1, 2022). The proposed 
status indicator, APC assignment, and payment rate for each HCPCS code 
can be found in Addendum B to this proposed rule. We note that in prior 
years we included the proposed OPPS status indicators and APC 
assignments in the coding preamble tables, however, because the same 
information can be found in Addendum B, we are no longer including them 
in Table 5. Therefore, readers are advised to refer to the OPPS 
Addendum B for the OPPS status indicator, APC assignment, and payment 
rates for all codes reportable under the hospital OPPS. The new codes 
effective April 1, 2022 are assigned to comment indicator ``NP'' in 
Addendum B to this proposed rule to indicate that the codes are 
assigned to an interim APC assignment and comments will be accepted on 
their interim APC assignments. The complete list of proposed status 
indicators and definitions used under the OPPS can be found in Addendum 
D1 to this proposed rule, while the complete list of proposed comment 
indicators and definitions can be found in Addendum D2. We note that 
OPPS Addendum B (OPPS payment file by HCPCS code), Addendum D1 (OPPS 
Status Indicators), and Addendum D2 (OPPS Comment Indicators) are 
available via the internet on the CMS website.
BILLING CODE 4120-01-P

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2. July 2022 HCPCS Codes for Which We Are Soliciting Public Comments in 
This Proposed Rule
    For the July 2022 update, 63 new codes were established and made 
effective July 1, 2022. Through the July 2022 OPPS quarterly update CR 
(Transmittal 11457, Change Request 12761, dated June 15, 2022), we 
recognized several new codes for separate payment and assigned them to 
appropriate interim OPPS status indicators and APCs. In this CY 2023 
OPPS/ASC proposed rule, we are soliciting public comments on the 
proposed APC and status indicator assignments for the codes listed in 
Table 6 (New HCPCS Codes Effective July 1, 2022). The proposed status 
indicator, APC assignment, and payment rate for each HCPCS code can be 
found in Addendum B to this proposed rule. We note that in prior years 
we included the proposed OPPS status indicators and APC assignments in 
the coding preamble tables, however, because the same information can 
be found in Addendum B, we are no longer including them in Table 6. 
Therefore, readers are advised to refer to the OPPS Addendum B for the 
OPPS status indicator, APC assignment, and payment rates for all codes 
reportable under the hospital OPPS. The complete list of proposed 
status indicators and corresponding definitions used under the OPPS can 
be found in Addendum D1 to this proposed rule. In addition, the new 
codes are assigned to comment indicator ``NP'' in Addendum B to this 
proposed rule to indicate that the codes are assigned to an interim APC 
assignment and comments will be accepted on their interim APC 
assignments. The complete list of proposed comment indicators and 
definitions used under the OPPS can be found in Addendum D2 to this 
proposed rule. We note that OPPS Addendum B (OPPS payment file by HCPCS 
code), Addendum D1 (OPPS Status Indicators), and Addendum D2 (OPPS 
Comment Indicators) are available via the internet on the CMS website.

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3. October 2022 HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2023 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we will solicit comments on 
the new CPT and Level II HCPCS codes that will be effective October 1, 
2022, in the CY 2023 OPPS/ASC final rule with comment period, thereby 
allowing us to finalize the status indicators and APC assignments for 
the codes in the CY 2024 OPPS/ASC final rule with comment period. The 
HCPCS codes will be released to the public through the October 2022 
OPPS Update CR and the CMS HCPCS website while the CPT codes will be 
released to the public through the AMA website.
    For CY 2023, we propose to continue our established policy of 
assigning comment indicator ``NI'' in Addendum B to the CY 2023 OPPS/
ASC final rule with comment period to those new HCPCS codes that will 
be effective October 1, 2022, to indicate that we are assigning them an 
interim status indicator, which is subject to public comment. We will 
be inviting public comments in the CY 2023 OPPS/ASC final rule with 
comment period on the status indicator and APC assignments, which would 
then be finalized in the CY 2024 OPPS/ASC final rule with comment 
period.
4. January 2023 HCPCS Codes
a. New Level II HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2023 OPPS/ASC Final Rule With Comment Period
    Consistent with past practice, we will solicit comments on the new 
Level II HCPCS codes that will be effective January 1, 2023, in the CY 
2023 OPPS/ASC final rule with comment period, thereby allowing us to 
finalize the status indicators and APC assignments for the codes in the 
CY 2024 OPPS/ASC final rule with comment period. Unlike the CPT codes 
that are effective January 1 and are included in the OPPS/ASC proposed 
rules, and except for the proposed new C-codes and G-codes listed in 
Addendum O of this proposed rule, most Level II HCPCS codes are not 
released until sometime around November to be effective January 1. 
Because these codes are not available until November, we are unable to 
include them in the OPPS/ASC proposed rules. Consequently, for CY 2023, 
we propose to include in Addendum B to the CY 2023 OPPS/ASC final rule 
with comment period the new Level II HCPCS codes effective January 1, 
2023, that would be incorporated in the January 2023 OPPS quarterly 
update CR. Specifically, for CY 2023, we propose to continue our 
established policy of assigning comment indicator ``NI'' in Addendum B 
to the CY 2023 OPPS/ASC final rule with comment period to the new HCPCS 
codes that will be effective January 1, 2023, to indicate that we are 
assigning them an interim status indicator, which is subject to public 
comment. We will be inviting public comments in the CY 2023 OPPS/ASC 
final rule with comment period on the status indicator and APC 
assignments, which would then be finalized in the CY 2024 OPPS/ASC 
final rule with comment period.
b. CPT Codes for Which We Are Soliciting Public Comments in This 
Proposed Rule
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 
through 66844), we finalized a revised process of assigning APC and 
status indicators for new and revised Category I and III CPT codes that 
would be effective January 1. Specifically, for the new/revised CPT 
codes that we receive in a timely manner from the AMA's CPT Editorial 
Panel, we finalized our proposal to include the codes that would be 
effective January 1 in the OPPS/ASC proposed rules, along with proposed 
APC and status indicator assignments for them, and to finalize the APC 
and status indicator assignments in the OPPS/ASC final rules beginning 
with the CY 2016 OPPS update. For those new/revised CPT codes that were 
received too late for inclusion in the OPPS/ASC proposed rule, we 
finalized our proposal to establish and use HCPCS G-codes that mirror 
the predecessor CPT codes and retain the current APC and status 
indicator assignments for a year until we can propose APC and status 
indicator assignments in the following year's rulemaking cycle. We note 
that even if

[[Page 44547]]

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 resorting to 
use of 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), to solicit 
public comments in the final rule, and to finalize the specific APC and 
status indicator assignments for those codes in the following year's 
final rule.
    For the CY 2023 OPPS update, we received the CPT codes that will be 
effective January 1, 2023 from the AMA in time to be included in this 
proposed rule. The new, revised, and deleted CPT codes can be found in 
Addendum B to this proposed rule (which is available via the internet 
on the CMS website). We note that the new and revised CPT codes are 
assigned to comment indicator ``NP'' in Addendum B of this proposed 
rule to indicate that the code is new for the next calendar year or the 
code is an existing code with substantial revision to its code 
descriptor in the next calendar year as compared to the current 
calendar year with a proposed APC assignment, and that comments will be 
accepted on the proposed APC assignment and status indicator.
    Further, we note that the CPT code descriptors that appear in 
Addendum B are short descriptors and do not accurately describe the 
complete procedure, service, or item described by the CPT code. 
Therefore, we are including the 5-digit placeholder codes and the long 
descriptors for the new and revised CY 2023 CPT codes in Addendum O to 
this proposed rule (which is available via the internet on the CMS 
website) so that the public can adequately comment on our proposed APCs 
and status indicator assignments. The 5-digit placeholder codes can be 
found in Addendum O, specifically under the column labeled ``CY 2023 
OPPS/ASC Proposed Rule 5-Digit AMA Placeholder Code''. The final CPT 
code numbers will be included in the CY 2023 OPPS/ASC final rule with 
comment period.
    In summary, we are soliciting public comments on the proposed CY 
2023 status indicators and APC assignments for the new and revised CPT 
codes that will be effective January 1, 2023. Because the CPT codes 
listed in Addendum B appear with short descriptors only, we list them 
again in Addendum O to this proposed rule with long descriptors. In 
addition, we propose to finalize the status indicator and APC 
assignments for these codes (with their final CPT code numbers) in the 
CY 2023 OPPS/ASC final rule with comment period. The proposed status 
indicator and APC assignments for these codes can be found in Addendum 
B to this proposed rule. In addition, the complete list of proposed 
comment indicators and definitions used under the OPPS can be found in 
Addendum D2 to this proposed rule. We note that OPPS Addendum B (OPPS 
payment file by HCPCS code), Addendum D1 (OPPS Status Indicators), and 
Addendum D2 (OPPS Comment Indicators) are available via the internet on 
the CMS website.
    Finally, in Table 7 (Comment and Finalization Timeframes for New 
and Revised OPPS-Related HCPCS Codes) below, we summarize our current 
process for updating codes through our OPPS quarterly update CRs, 
seeking public comments, and finalizing the treatment of these codes 
under the OPPS.

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B. Proposed OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in regulations at 42 CFR 419.31. We use Level I (also known as CPT 
codes) and Level II HCPCS codes (also known as alphanumeric codes) to 
identify and group the services within each APC. The APCs are organized 
such that each group is homogeneous both clinically and in terms of 
resource use. Using this classification system, we have established 
distinct groups of similar services. We also have developed separate 
APC groups for certain medical devices, drugs, biologicals, therapeutic 
radiopharmaceuticals, and brachytherapy devices that are not packaged 
into the payment for the procedure.
    We have packaged into the payment for each procedure or service 
within an APC group the costs associated with those items and services 
that are typically ancillary and supportive to a primary diagnostic or 
therapeutic modality and, in those cases, are an integral part of the 
primary service they support. Therefore, we do not make separate 
payment for these packaged items or services. In general, packaged 
items and services include, but are not limited to, the items and 
services listed in regulations at 42 CFR 419.2(b). A further discussion 
of packaged services is included in section II.A.3 of this proposed 
rule.
    Under the OPPS, we generally pay for covered hospital outpatient 
services on a rate-per-service basis, where the service may be reported 
with one or more HCPCS codes. Payment varies according to the APC group 
to which the independent service or combination of services is 
assigned. For CY 2023, we propose that each APC relative payment weight 
represents the hospital cost of the services included in that APC, 
relative to the hospital cost of the services included in APC 5012 
(Clinic Visits and Related Services). The APC relative payment weights 
are scaled to APC 5012 because it is the hospital clinic visit APC and 
clinic visits are among the most frequently furnished services in the 
hospital outpatient setting.
2. Application of the 2 Times Rule
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
not less often than annually, and revise the APC groups, the relative 
payment weights, and the wage and other adjustments described in 
paragraph (2) to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review

[[Page 44549]]

(and advise the Secretary concerning) the clinical integrity of the APC 
groups and the relative payment weights. We note that the Advisory 
Panel on Hospital Outpatient Payment (also known as the HOP Panel or 
the Panel) recommendations for specific services for the CY 2023 OPPS 
update will be discussed in the relevant specific sections throughout 
the CY 2023 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 for low-volume items and services (but the 
Secretary may not make such an exception in the case of a drug or 
biological that has been designated as an orphan drug under section 526 
of the Federal Food, Drug, and Cosmetic Act). In determining the APCs 
with a 2 times rule violation, we consider only those HCPCS codes that 
are significant based on the number of claims. We note that, for 
purposes of identifying significant procedure codes for examination 
under the 2 times rule, we consider procedure codes that have more than 
1,000 single major claims or procedure codes that both have more than 
99 single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC cost to be significant (75 FR 
71832). This longstanding definition of when a procedure code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 or fewer claims is negligible within the 
set of approximately 100 million single procedure or single session 
claims we use for establishing costs. Similarly, a procedure code for 
which there are fewer than 99 single claims and that comprises less 
than 2 percent of the single major claims within an APC will have a 
negligible impact on the APC cost (75 FR 71832). In this section of 
this proposed rule, for CY 2023, we propose to make exceptions to this 
limit on the variation of costs within each APC group in unusual cases, 
such as for certain low-volume items and services.
    For the CY 2023 OPPS update, we identified the APCs with violations 
of the 2 times rule and we propose changes to the procedure codes 
assigned to these APCs (with the exception of those APCs for which we 
propose a 2 times rule exception) in Addendum B to this proposed rule. 
We note that Addendum B does not appear in the printed version of the 
Federal Register as part of this 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 in the APCs 
for which we are not proposing a 2 times rule exception, we propose to 
reassign these procedure codes to new APCs that contain services that 
are similar with regard to both their clinical and resource 
characteristics. In many cases, the proposed procedure code 
reassignments and associated APC reconfigurations for CY 2023 included 
in this proposed rule are related to changes in costs of services that 
were observed in the CY 2021 claims data available for CY 2023 
ratesetting. Addendum B to this CY 2023 OPPS/ASC proposed rule 
identifies with a comment indicator ``CH'' those procedure codes for 
which we propose a change to the APC assignment or status indicator, or 
both, that were initially assigned in the July 1, 2022 OPPS Addendum B 
Update (available via the internet on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Addendum-A-and-Addendum-B-Updates.html).
3. Proposed APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we propose to make for CY 
2023, we reviewed all of the APCs for which we identified 2 times rule 
violations to determine whether any of the APCs would qualify for an 
exception. 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.
    For a detailed discussion of these criteria, we refer readers to 
the April 7, 2000 final rule (65 FR 18457 through 18458).
    Based on the CY 2021 claims data available for this proposed rule, 
we found 23 APCs with violations of the 2 times rule. We applied the 
criteria as described above to identify the APCs for which we propose 
to make exceptions under the 2 times rule for CY 2023 and found that 
all of the 23 APCs we identified meet the criteria for an exception to 
the 2 times rule based on the CY 2021 claims data available for this 
proposed rule. We note that, on an annual basis, based on our analysis 
of the latest claims data, we identify violations to the 2 times rule 
and propose changes when appropriate. Those APCs that violate the 2 
times rule are identified and appear in Table 8 below. In addition, we 
did not include in that determination those APCs where a 2 times rule 
violation was not a relevant concept, such as APC 5401 (Dialysis), 
which only has two HCPCS codes assigned to it that have similar 
geometric mean costs and do not create a 2 times rule violation. 
Therefore, we have only identified those APCs, including those with 
criteria-based costs, such as device-dependent CPT/HCPCS codes, with 
violations of the 2 times rule, where a 2 times rule violation is a 
relevant concept.
    Table 8 of this proposed rule lists the 23 APCs for which we 
propose to make an exception under the 2 times rule for CY 2023 based 
on the criteria cited above and claims data submitted between January 
1, 2021 and December 31, 2021 and processed on or before December 31, 
2021, and CCRs, if available. The proposed geometric mean costs for 
covered hospital outpatient services for these and all other APCs that 
were used in the development of this proposed rule can be found on the 
CMS website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.

[[Page 44550]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.016

BILLING CODE 4120-01-C

C. Proposed New Technology APCs

1. Background
    In the CY 2002 OPPS final rule (66 FR 59903), we finalized changes 
to the time period in which a service can be eligible for payment under 
a New Technology APC. Beginning in CY 2002, we retain services within 
New Technology APC groups until we gather sufficient claims data to 
enable us to assign the service to an appropriate clinical APC. This 
policy allows us to move a service from a New Technology APC in less 
than 2 years if sufficient data are available. It also allows us to 
retain a service in a New Technology APC for more than 2 years if 
sufficient data upon which to base a decision for reassignment have not 
been collected.
    We also adopted in the CY 2002 OPPS final rule the following 
criteria for assigning a complete or comprehensive service to a New 
Technology APC: 1) the service must be truly new, meaning it cannot be 
appropriately reported by an existing HCPCS code assigned to a clinical 
APC and does not appropriately fit within an existing clinical APC; 2) 
the service is not eligible for transitional pass-through payment 
(however, a truly new, comprehensive service could qualify for 
assignment to a new technology APC even if it involves a device or drug 
that could, on its own, qualify for a pass-through payment); and 3) the 
service falls within the scope of Medicare benefits under section 
1832(a) of the Act and is reasonable and necessary in accordance with 
section 1862(a)(1)(A) of the Act (66 FR 59898 through 59903). For 
additional information about our New Technology APC policy, we refer 
readers to https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment on the CMS website 
and then follow the instructions to access the MEARIS\TM\ system for 
OPPS New Technology APC applications.
    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

[[Page 44551]]

services more appropriately and consistently.
    For CY 2022, there were 52 New Technology APC levels, ranging from 
the lowest cost band assigned to APC 1491 (New Technology--Level 1A 
($0-$10)) to 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 
market basket increase reduced by the productivity adjustment. We 
believe that our payment rates reflect the costs that are associated 
with providing care to Medicare beneficiaries and are adequate to 
ensure access to services (80 FR 70374). For many emerging 
technologies, there is a transitional period during which utilization 
may be low, often because providers are first learning about the 
technologies and their clinical utility. Quite often, parties request 
that Medicare make higher payments 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 2023, 
we include the proposed payment rates for New Technology APCs 1491 to 
1599 and 1901 through 1908 in Addendum A to this 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 significant 
contributors 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 58892), 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 adopted a 
policy in the CY 2019 OPPS/ASC final rule with comment period to 
utilize our equitable adjustment authority at section 1833(t)(2)(E) of 
the Act to adjust how we determine the costs for low-volume services 
assigned to New Technology APCs (83 FR 58892 through 58893).
    For purposes of this adjustment, we stated in the CY 2019 OPPS/ASC 
final rule with comment period that we believed that it was 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 an annual claims volume of fewer than 100 claims 
(83 FR 58893). 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 also stated that using the median or 
arithmetic mean rather than the geometric mean (which ``trims'' the 
costs of certain claims out) could be more appropriate in some 
circumstances, given the extremely low volume of claims. Low claim 
volumes increase the impact of ``outlier'' claims; that is, claims with 
either a very low or very high payment rate as compared to the average 
claim, which would have a substantial impact

[[Page 44552]]

on any statistical methodology used to estimate the most appropriate 
payment rate for a service. Also, having the flexibility to utilize an 
alternative statistical methodology to calculate the payment rate in 
the case of low-volume new technology services helps to create a more 
stable payment rate.
    In the CY 2019 OPPS/ASC final rule (83 FR 58893), we implemented a 
policy that we would seek public comments on which statistical 
methodology should be used to determine the payment rate 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 explained that we would 
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 interested parties, to determine the most appropriate payment 
rate. Once we identified the most appropriate payment rate for a 
service, we would assign the service to the New Technology APC with the 
cost band that includes its payment rate.
    In the CY 2022 OPPS/ASC final rule with comment period, we adopted 
a policy to continue to utilize our equitable adjustment authority 
under section 1833(t)(2)(E) of the Act to calculate the geometric mean, 
arithmetic mean, and median using up to four 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 (86 FR 
63529). However, we replaced our specific low-volume New Technology APC 
policy with the universal low volume APC policy that we adopted 
beginning in CY 2022. Our universal low volume APC policy is similar to 
our past New Technology APC low volume policy except that the universal 
low volume APC policy applies to clinical APCs and brachytherapy APCs 
as well as low volume procedures assigned to New Technology APCs, and 
uses the highest of the geometric mean, arithmetic mean, or median 
based on up to 4 years of claims data to assign a procedure with fewer 
than 100 claims per year to an appropriate New Technology APC. For this 
proposed rule, we propose to designate three procedures assigned to New 
Technology APCs as low volume procedures and use the highest of the 
geometric mean, arithmetic mean, or median based on up to 4 years of 
claims data to assign such procedures to the appropriate New Technology 
APCs.
3. Procedures Assigned to New Technology APC Groups for CY 2023
    As we described in the CY 2002 OPPS final rule (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 2023, we propose to 
retain services within New Technology APC groups until we obtain 
sufficient claims data to justify reassignment of the service to an 
appropriate clinical APC. The flexibility associated with this policy 
allows us to reassign a service from a New Technology APC in less than 
2 years if we have obtained sufficient claims data. It also allows us 
to retain a service in a New Technology APC for more than 2 years if we 
have not obtained sufficient claims data upon which to base a 
reassignment decision (66 FR 59902).
a. 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. For information on the 
utilization and payment history of the Argus[supreg] II procedure and 
the Argus[supreg] II device through CY 2022, please refer to the CY 
2022 OPPS final rule (86 FR 63529 through 63530).
    Early in 2022, we learned that the manufacturer of the 
Argus[supreg] II device discontinued manufacturing the device in 2020. 
We also contacted the consultant who represented the manufacturer in 
presentations with CMS, and he confirmed that the Argus[supreg] II 
device is no longer being implanted. A review of OPPS claims data found 
that there were no claims billed for CPT code 0100T in either CY 2020 
or CY 2021. Based on this information, we have determined that the 
Argus[supreg] II device is no longer available in the marketplace and 
that outpatient hospital providers are no longer performing the 
Argus[supreg] II implantation procedure. Therefore, we propose to make 
changes to the OPPS status indicators for HCPCS and CPT codes that are 
related to the Argus[supreg] II device and the Argus[supreg] II 
implantation procedure to indicate that Medicare payment is no longer 
available for the device and the implementation procedure as the 
Argus[supreg] II device is no longer on the market and therefore, is 
not being implanted. These coding changes would mean that providers 
could no longer receive payment for performing the Argus[supreg] II 
device or the device implantation procedure. These changes are 
described in Table 9.

[[Page 44553]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.017

b. Administration of Subretinal Therapies Requiring Vitrectomy (APC 
1562)
    Effective January 1, 2021, CMS established HCPCS code C9770 
(Vitrectomy, mechanical, pars plana approach, with subretinal injection 
of pharmacologic/biologic agent) and assigned it to a New Technology 
APC based on the geometric mean cost of HCPCS code 67036 (Vitrectomy, 
mechanical, pars plana approach) due to similar resource utilization. 
For CY 2021, HCPCS code C9770 was assigned to APC 1561 (New 
Technology--Level 24 ($3,001-$3,500)). This code may be used to 
describe the administration of CPT code J3398 (Injection, voretigene 
neparvovec-rzyl, 1 billion vector genomes). This procedure was 
previously discussed in depth in the CY 2021 OPPS/ASC final rule with 
comment period (85 FR 85939 through 85940). For CY 2022, we maintained 
the APC assignment of APC 1561 (New Technology--Level 24 ($3,001-
$3,500)) for HCPCS code C9770 (86 FR 63531 through 63532).
    CPT code J3398 (Injection, voretigene neparvovec-rzyl, 1 billion 
vector genomes) is for a gene therapy product indicated for a rare 
mutation-associated retinal dystrophy. Voretigene neparvovec-rzyl 
(Luxturna[supreg]) was approved by FDA in December of 2017 and is 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 interested parties 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.''
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    \2\ Luxturna. FDA Package Insert. Available: https://www.fda.gov/media/109906/download.
---------------------------------------------------------------------------

    Interested parties, 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 previously contended the administration was not accurately 
described by any existing codes as HCPCS code 67036 (Vitrectomy, 
mechanical, pars plana approach) does not account for the 
administration itself.
---------------------------------------------------------------------------

    \3\ LUXTURNA REIMBURSEMENT GUIDE FOR TREATMENT CENTERS. https://mysparkgeneration.com/pdf/Reimbursement_Guide_for_Treatment_Centers_Interactive_010418_FINAL.pdf.
---------------------------------------------------------------------------

    CMS recognized the need to accurately describe the unique procedure 
that is required to administer the therapy described by HCPCS code 
J3398. Therefore, in the CY 2021 OPPS/ASC proposed rule (85 FR 48832), 
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 stated that 
we believed that this new HCPCS code accurately described the unique 
service associated with intraocular administration of HCPCS code J3398. 
We recognized that HCPCS code 67036 represents a clinically similar 
procedure and process that approximates similar resource utilization to 
C97X1. However, we also recognized that it is not prudent for the code 
that describes the administration of this unique 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.
    Therefore, for CY 2021, we proposed to assign the services 
described by C97X1 to a New Technology APC with a cost band that 
contains the geometric mean cost for HCPCS code 67036. The placeholder 
code C97X1 was replaced by C9770. For CY 2021, we finalized our 
proposal to create C9770 (Vitrectomy, mechanical, pars plana approach, 
with subretinal injection of pharmacologic/biologic agent), and we 
assigned this code to APC 1561 (New Technology--Level 24 ($3,001-
$3,500)) using the geometric mean cost of HCPCS code 67036. For CY 
2022, we continued to assign HCPCS code C9770 to APC 1561 (New 
Technology--Level 24 ($3,001-$3,500)) using the geometric mean cost of 
HCPCS code 67036.
    For CY 2023, there are 11 single claims available for ratesetting 
for HCPCS code C9770. Because this is the first year we have claims 
data for HCPCS code C9770, we propose to base the payment rate of HCPCS 
code C9770 on claims data for that code rather than on the geometric 
mean cost of HCPCS code 67036. Given the low number of claims for this 
procedure, we propose to designate HCPCS C9770 as a low volume 
procedure under our universal low volume APC policy and use the greater 
of the geometric mean, arithmetic mean, or median cost calculated based 
on the available claims data to calculate an appropriate payment rate 
for purposes of assigning C9770 to a New Technology APC.
    Using CY 2021 claims, which are the only claims available in our 4-
year look back period, we found the geometric mean cost for the service 
to be

[[Page 44554]]

approximately $3,326, the arithmetic mean cost to be approximately 
$3,466, and the median cost to be approximately $3,775. The median was 
the statistical methodology that estimated the highest cost for the 
service. The payment rate calculated using this methodology falls 
within the cost band for New Technology APC 1562 (New Technology--Level 
25 ($3,501-$4,000)). Therefore, we propose to assign HCPCS code C9770 
to APC 1562 for CY 2023.
    Please refer to Table 10 below for the proposed OPPS New Technology 
APC and status indicator assignments for HCPCS code C9770 for CY 2023. 
The proposed CY 2023 payment rates can be found in Addendum B to this 
proposed rule.
[GRAPHIC] [TIFF OMITTED] TP26JY22.018

c. Bronchoscopy With Transbronchial Ablation of Lesion(s) by Microwave 
Energy (APC 1562)
    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 final 
rule with comment period, there were four 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 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 $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. The payment rate calculated 
using this methodology fell within the cost band for New Technology APC 
1562 (New Technology--Level 25 ($3,501-$4,000)). Therefore, we assigned 
HCPCS code C9751 to APC 1562 for CY 2021.
    In CY 2022, we used again the claims data from CY 2019 for HCPCS 
code C9751. Since the claims data was unchanged from when it was used 
in CY 2021, the values for the geometric mean cost ($2,693), the 
arithmetic mean cost ($3,086), and the median cost ($3,708) for the 
service described by HCPCS code C9751 remained the same. The highest 
cost metric using these methodologies was again the median and within 
the cost band for New Technology APC 1562 (New Technology--Level 25 
($3,501-$4,000)). Therefore, we continued to assign HCPCS code C9751 to 
APC 1562 (New Technology--Level 25 ($3,501- $4,000)), with a payment 
rate of $3,750.50 for CY 2022.
    There were no claims reported in CY 2020 or CY 2021 for HCPCS code 
C9751. Thus, for CY 2023, the only available claims for HCPCS code 
C9751 continue to be from CY 2019, and the reported claims are the same 
claims used to calculate the payment rate for the service in the CY 
2021 and CY 2022 OPPS/ASC final rules with comment period. Therefore, 
given the low number of claims for this procedure, we propose to 
designate this procedure as low volume under our universal low volume 
policy and use the highest of the geometric mean cost, arithmetic mean 
cost, or median cost based on up to 4 years of claims data to assign 
the procedure to the appropriate New Technology APCs. Because our 
proposal uses the same claims as we used for CY 2021 and CY 2022, we 
found the same values for the geometric mean cost, arithmetic mean 
cost, and the median cost for CY 2023. Once again, the median ($3,708) 
was the statistical methodology that estimated the highest cost for the 
service. The payment rate calculated using this methodology continues 
to fall within the cost band for New Technology APC 1562 (New 
Technology--Level 25 ($3,501-$4,000)). Therefore, we propose to 
continue to assign HCPCS code C9751 to APC 1562 (New Technology--Level 
25 ($3,501-$4,000)), with a proposed payment rate of $3,750.50 for CY 
2023. Details regarding HCPCS code C9751 are included in Table 11.

[[Page 44555]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.019

d. Cardiac Positron Emission Tomography (PET)/Computed Tomography (CT) 
Studies (APCs 1522 and 1523)
    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 ($2,001-$2,500)) with a payment rate 
of $2,250.50. CPT codes 78432 and 78433 were assigned to APC 1523 (New 
Technology--Level 23 ($2,501-$3,000)) with a payment rate of $2,750.50. 
We did not receive any claims data for these services for either of the 
CY 2021 or CY 2022 OPPS proposed or final rules. Therefore, we 
continued to assign CPT code 78431 to APC 1522 (New Technology--Level 
22 ($2,001-$2,500)) with a payment rate of $2,250.50 in CY 2021 and CY 
2022. Likewise, we continued to assign CPT codes 78432 and 78433 to APC 
1523 (New Technology--Level 23 ($2,501-$3,000)) with a payment rate of 
$2,750.50.
    For CY 2023, we propose to use CY 2021 claims data to determine the 
payment rates for CPT codes 78431, 78432, and 78433. CPT code 78431 had 
over 18,000 single frequency claims in CY 2021, which are used to 
calculate estimated costs for individual services. The geometric mean 
for CPT code 78431 was approximately $2,509, which is an amount that is 
above the cost band for APC 1522 (New Technology--Level 22 ($2,001-
$2,500)), where the procedure is currently assigned. We propose, for CY 
2023, that CPT code 78431 be reassigned to APC 1523 (New Technology--
Level 23 ($2,501-$3,000)) with a payment rate of $2,750.50. Please 
refer to Table 12 for the proposed New Technology APC and status 
indicator assignments for CPT code 78431.
    There were only 5 single frequency claims in CY 2021 for CPT code 
78432. As this is below the threshold of 100 claims for a service 
within a year, we propose to apply our universal low volume APC policy 
and use the highest of the geometric mean cost, arithmetic mean cost, 
or median cost based on up to 4 years of claims data to assign CPT code 
78432 to the appropriate New Technology APC. Although we use up to four 
years of claims data to calculate the appropriate New Technology APC 
assignment for low volume procedures, for CPT code 78432, the only 
available claims data are from CY 2021. Our analysis of the data found 
the geometric mean cost of the service is approximately $1,747, the 
arithmetic mean cost of the service is approximately $1,899, and the 
median cost of the service is approximately $1,481. The arithmetic mean 
was the statistical methodology that estimated the highest cost for the 
service. Therefore, we propose, for CY 2023, to assign CPT code 78432 
to APC 1520 (New Technology--Level 20 ($1,801-$1,900)) with a payment 
rate of $1,850.50. Please refer to Table 12 for the proposed on New 
Technology APC and status indicator assignments for CPT code 78432.
    There were 954 single frequency claims reporting CPT code 78433 in 
CY 2021. The geometric mean for CPT code 78433 was approximately 
$1,999, which is an amount that is below the cost band for APC 1523 
(New Technology--Level 23 ($2,501-$3,000)), where the procedure is 
currently assigned. We propose, for CY 2023, that CPT code 78433 be 
reassigned to APC 1521 (New Technology--Level 21 ($1,901-$2,000)) with 
a payment rate of $1,950.50. Please refer to Table 12 for the proposed 
New Technology APC and status indicator assignments for CPT code 78433.
BILLING CODE 4120-01-P

[[Page 44556]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.020

e. V-Wave Medical Interatrial Shunt Procedure (APC 1590)
    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 had 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, for CY 2020, 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)).
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 
85946), we stated that we believe similar resources and device costs 
are involved with the V-Wave interatrial shunt procedure and the Corvia 
Medical interatrial shunt procedure (HCPCS code C9760), except that 
payment for HCPCS codes C9758 and C9760 differs based on how often the 
interatrial shunt is implanted when

[[Page 44557]]

each code is billed. An interatrial shunt is implanted one-half of the 
time HCPCS code C9758 is billed, whereas an interatrial shunt is 
implanted every time HCPCS code C9760 is billed. Accordingly, for CY 
2021, we reassigned 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 the procedure is performed.
    For CY 2022, we used the same claims data from CY 2019 that we did 
for CY 2021 OPPS final rule. Because there were no claims reporting 
HCPCS code C9758, we continued to assign HCPCS code C9758 to New 
Technology APC 1590 with a payment rate of $17,500.50 for CY 2022.
    For CY 2023, there were no claims from CY 2021 billed with HCPCS 
code C9758. Because there are no claims reporting HCPCS code C9758, we 
propose to continue to assign HCPCS code C9758 to New Technology APC 
1590 with a payment rate of $17,500.50 for CY 2023. The proposed New 
Technology APC and status indicator assignments for HCPCS codes C9758 
are shown in Table 13.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP26JY22.021

f. Corvia Medical Interatrial Shunt Procedure (APC 1592)
    Corvia Medical is currently conducting its pivotal trial for its 
interatrial shunt procedure. The trial started in Quarter 1 of CY 2017 
and continued through Quarter 3 of CY 2021.\4\ 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.
---------------------------------------------------------------------------

    \4\ https://clinicaltrials.gov/ct2/show/NCT03088033?term=NCT03088033&rank=1.
---------------------------------------------------------------------------

    As we stated in the CY 2021 OPPS final rule with comment period (85 
FR 85947), we believe that similar resources and device costs are 
involved with the Corvia Medical interatrial shunt procedure and the V-
Wave interatrial shunt procedure. Unlike the V-Wave interatrial shunt, 
which is implanted half the time the associated interatrial shunt 
procedure described by HCPCS code C9758 is billed, the Corvia Medical 
interatrial shunt is implanted every time the associated interatrial

[[Page 44558]]

shunt procedure (HCPCS code C9760) is billed. Therefore, for CY 2021, 
we assigned HCPCS code C9760 to New Technology APC 1592 (New 
Technology--Level 41 ($25,001-$30,000)) with a payment rate of 
$27,500.50. We also modified the code descriptor for HCPCS code C9760 
to remove the phrase ``or placebo control,'' from the descriptor. In CY 
2022, we used the same claims data as was used in the CY 2021 OPPS 
final rule to determine the payment rate for HCPCS code C9760 because 
there were no claims for this service in CY 2019, the year used for 
ratesetting for CY 2022. Accordingly, we continued to assign HCPCS code 
C9760 to New Technology APC 1592 in CY 2022.
    For CY 2023, we propose to use the claims data from CY 2021 to 
establish payment rates for services. However, there are no claims with 
HCPCS code C9760 in the CY 2021 claims data available for ratesetting. 
Therefore, we propose to continue to assign HCPCS code C9760 to New 
Technology APC 1592. The proposed New Technology APC and status 
indicator assignments for HCPCS code C9760 are shown in Table 14.
[GRAPHIC] [TIFF OMITTED] TP26JY22.022

g. Supervised Visits for Esketamine Self-Administration (APCs 1512 and 
1516)
    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 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 devices (for a 56 mg 
dose) or three 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 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 two hours after 
receiving their Spravato dose, the prescriber and patient must both 
sign a Patient Enrollment Form, and the product must 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.

[[Page 44559]]

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 through nasal self-administration and 
includes two hours of post-administration observation. HCPCS code G2082 
was assigned to New Technology APC 1508 (New Technology--Level 8 ($601-
$700)) with a payment rate of $650.50. HCPCS code G2083 describes a 
similar service to HCPCS code G2082 but involves the administration of 
more than 56 mg of esketamine. HCPCS code G2083 was assigned to New 
Technology APC 1511 (New Technology--Level 11 ($901-$1000)) with a 
payment rate of $950.50.
    For CY 2023, we propose to use CY 2021 claims data to determine the 
payment rates for HCPCS codes G2082 and G2083. Therefore, for CY 2023, 
we propose to assign these two HCPCS codes to New Technology APCs based 
on the codes' geometric mean costs. Specifically, we propose to assign 
HCPCS code G2082 to New Technology APC 1511 (New Technology--Level 11 
($901-$1,000)) based on its geometric mean cost of $995.47. We also 
propose to assign HCPCS code G2083 to New Technology APC 1516 (New 
Technology--Level 16 ($1,401-$1,500)) based on its geometric mean cost 
of $1,489.93.
    Details about the proposed New Technology APC and status indicator 
assignments for these HCPCS codes are shown in Table 15. The proposed 
CY 2023 payment rates for these HCPCS codes can be found in Addendum B 
to this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP26JY22.023

h. DARI Motion Procedure (APC 1505)
    CPT code 0693T (Comprehensive full body computer-based markerless 
3D kinematic and kinetic motion analysis and report) was effective 
January 1, 2022. The technology consists of eight cameras that surround 
a patient. The cameras send live video to a computer workstation that 
analyzes the video to create a 3D reconstruction of the patient without 
the need for special clothing, markers, or devices attached to the 
patient's clothing or skin. The technology is intended to guide health 
care providers on pre- and post-operative surgical intervention and on 
the best course of physical therapy and rehabilitation for patients. In 
CY 2022, we assigned CPT code 0693T to New Technology APC 1505 (New 
Technology--Level 5 ($301-$400)), for CY 2022.
    This service became effective in the OPPS in CY 2022. Therefore, 
there are no claims for this service in the CY 2021 OPPS claims data. 
Accordingly, for CY 2023 we propose to continue assigning CPT code 
0693T to New Technology APC 1505. The proposed New Technology APC and 
status indicator assignments for CPT code 0693T are found in Table 16.

[[Page 44560]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.024

i. Histotripsy Service (APC 1575)
    CPT code 0686T (Histotripsy (i.e., non-thermal ablation via 
acoustic energy delivery) of malignant hepatocellular tissue, including 
image guidance) was effective July 1, 2021. Histotripsy is a non-
invasive, non-thermal, mechanical process that uses a focused beam of 
sonic energy to destroy cancerous liver tumors. We note that the device 
that is used in the histotripsy procedure is currently under a Category 
A IDE clinical study (NCT04573881). The clinical trial is a non-
randomized, prospective trial to evaluate the efficacy and safety of 
the device for the treatment of primary or metastatic tumors located in 
the liver.\5\ We note that devices from Category A IDE studies are 
excluded from Medicare payment. Therefore, payment for CPT code 0686T 
reflects only the service that is performed each time it is reported on 
a claim. For CY 2022, we assigned CPT code 0686T to New Technology APC 
1575 (New Technology--Level 38 ($10,000-$15,000) with a payment rate of 
$12,500.
---------------------------------------------------------------------------

    \5\ ClinicalTrials.gov. ``The HistoSonics System for Treatment 
of Primary and Metastatic Liver Tumors Using Histotripsy 
(#HOPE4LIVER) (#HOPE4LIVER).'' Accessed May 10, 2022. https://clinicaltrials.gov/ct2/show/study/NCT04573881.
---------------------------------------------------------------------------

    Since the service became effective in the OPPS in July 2021, there 
are no claims for this service in the CY 2021 OPPS claims data. 
Therefore, for CY 2023, we propose to continue assigning CPT code 0686T 
to New Technology APC 1575. The proposed New Technology APC and status 
indicator assignments for CPT code 0686T are found in Table17.
[GRAPHIC] [TIFF OMITTED] TP26JY22.025

j. Liver Multiscan Service (APC 1511)
    CPT code 0648T (Quantitative magnetic resonance for analysis of 
tissue composition (e.g., fat, iron, water content), including 
multiparametric data acquisition, data preparation and transmission, 
interpretation and report, obtained without diagnostic mri examination 
of the same anatomy (e.g., organ, gland, tissue, target structure) 
during the same session; single organ) was effective July 1, 2021. 
LiverMultiScan is a Software as a medical Service (SaaS) that is 
intended to aid the diagnosis and management of chronic liver disease, 
the most prevalent of which is Non-Alcoholic Fatty Liver Disease 
(NAFLD). It provides standardized, quantitative imaging biomarkers for 
the characterization and assessment of inflammation, hepatocyte 
ballooning, and fibrosis, as well as steatosis, and iron accumulation. 
The SaaS receives MR images acquired from

[[Page 44561]]

patients' providers and analyzes the images using their proprietary 
Artificial Intelligence (AI) algorithms. The SaaS then sends the 
providers a quantitative metric report of the patient's liver fibrosis 
and inflammation. For CY 2022, we assigned CPT code 0648T to New 
Technology APC 1511 (New Technology--Level 11 ($901-$1,000) with a 
payment rate of $950.50.
    Since HCPCS code 0648T became effective in the OPPS in July 2021, 
there has been only one claim from the CY 2021 claims data; but its 
payment rate appears to be an outlier based on the service invoice we 
received from the software developer. Accordingly, for CY 2023, we 
propose to continue assigning CPT code 0648T to New Technology APC 
1511. The proposed New Technology APC and status indicator assignment 
for CPT code 0648T are found in Table 18.
[GRAPHIC] [TIFF OMITTED] TP26JY22.026

k. Minimally Invasive Glaucoma Surgery (MIGS) (APC 1526)
    Prior to CY 2022, extracapsular cataract removal with insertion of 
intraocular lens was reported using CPT codes describing cataract 
removal alongside a CPT code for device insertion. Specifically, the 
procedure was described using CPT codes 66982 (Extracapsular cataract 
removal with insertion of intraocular lens prosthesis (1-stage 
procedure), manual or mechanical technique (for example, irrigation and 
aspiration or phacoemulsification), complex, requiring devices or 
techniques not generally used in routine cataract surgery (for example, 
iris expansion device, suture support for intraocular lens, or primary 
posterior capsulorrhexis) or performed on patients in the amblyogenic 
developmental stage; without endoscopic cyclophotocoagulation) or 66984 
(Extracapsular cataract removal with insertion of intraocular lens 
prosthesis (1-stage procedure), manual or mechanical technique (for 
example, irrigation and aspiration or phacoemulsification); without 
endoscopic cyclophotocoagulation) and 0191T (Insertion of anterior 
segment aqueous drainage device, without extraocular reservoir, 
internal approach, into the trabecular meshwork; initial insertion).
    For CY 2022, the AMA's CPT Editorial Panel created two new Category 
I CPT codes describing extracapsular cataract removal with insertion of 
intraocular lens prosthesis, specifically, CPT codes 66989 and 66991; 
deleted a Category III CPT code, specifically, CPT code 0191T, 
describing insertion of anterior segment aqueous drainage device; and 
created a new Category III CPT code, specifically, CPT code 0671T, 
describing interior segment aqueous drainage device without concomitant 
cataract removal.
    For CY 2022, we finalized the assignment of CPT codes 66989 and 
66991 to New Technology APC 1526 (New Technology--Level 26 ($4,001-
$4,500)). We stated that we believed that

[[Page 44562]]

the change in coding for MIGS is significant in that it changes 
longstanding billing for the service from reporting two separate CPT 
codes to reporting a single bundled code. Without claims data, and 
given the magnitude of the coding change, we explained that we did not 
believe we had the necessary information on the costs associated with 
CPT codes 66989 and 66991 to assign them to a clinical APC at that 
time.
    We note that for this proposed rule, the proposed payment rates are 
based on claims data submitted between January 1, 2021, and December 
31, 2021, and processed on or before December 31, 2021, and CCRs, if 
available. Because CPT codes 66989 and 66991 were effective January 1, 
2022, and we have no claims data for CY 2022, we propose to continue 
assigning CPT codes 66989 and 66991 to New Technology APC 1526 for CY 
2023. The proposed New Technology APC and status indicator assignments 
for CPT codes 66989 and 66991 are found in Table 19.

[[Page 44563]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.027


[[Page 44564]]


l. Scalp Cooling (APC 1520)
    CPT code 0662T (Scalp cooling, mechanical; initial measurement and 
calibration of cap) became effective on July 1, 2021 to describe 
initial measurement and calibration of a scalp cooling device for use 
during chemotherapy administration to prevent hair loss. According to 
Medicare's National Coverage Determination (NCD) policy, specifically, 
NCD 110.6 (Scalp Hypothermia During Chemotherapy to Prevent Hair Loss), 
the scalp cooling cap itself is classified as an incident to supply to 
a physician service, and would not be paid under the OPPS; however, 
interested parties have indicated that there are substantial resource 
costs of around $1,900 to $2,400 associated with calibration and 
fitting of the cap. CPT guidance states that CPT code 0662T should be 
billed once per chemotherapy session, which we interpret to mean once 
per course of chemotherapy. Therefore, if a course of chemotherapy 
involves 6 or 18 sessions, HOPDs should report CPT 0662T only once for 
that 6 or 18 therapy sessions. For CY 2022, we assigned CPT code 0662T 
to APC New Technology 1520 (New Technology--Level 20 ($1801-$1900)) 
with a payment rate of $1,850.50.
    This service became effective in the OPPS in CY 2022. Therefore, 
there are no claims for this service in the CY 2021 OPPS claims data. 
Accordingly, for CY 2023, we propose to continue assigning CPT code 
0662T to New Technology APC 1520. The proposed New Technology APC and 
status indicator assignments for CPT code 0662T are found in Table 20.
[GRAPHIC] [TIFF OMITTED] TP26JY22.028

m. Optellem Lung Cancer Prediction (LCP) (APC 1508)
    CPT code 0721T (Quantitative computed tomography (CT) tissue 
characterization, including interpretation and report, obtained without 
concurrent CT examination of any structure contained in previously 
acquired diagnostic imaging) became effective July 1, 2022. The 
Optellum LCP applies an algorithm to a patient's CT scan to produce a 
raw risk score for a patient's pulmonary nodule. The risk score is used 
by the physician to quantify the risk of lung cancer and to help 
determine whether to refer the patient to a pulmonologist. For CY 2022, 
we assigned CPT code 0721T to APC New Technology 1508 (New Technology--
Level 8 ($601-$700)).
    This service became effective in the OPPS in CY 2022. Therefore, 
there are no claims for this service in the CY 2021 OPPS claims data 
for use in CY 2023 ratesetting. Accordingly, for CY 2023, we propose to 
continue to assign CPT code 0721T to New Technology APC 1508 with a 
status indication of ``S''. The proposed New Technology APC and status 
indicator assignments for CPT code 0721T are found in Table 21.

[[Page 44565]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.029

n. Quantitative Magnetic Resonance Cholangiopancreatography (QMRCP) 
(APC 1511)
    CPT code 0723T (Quantitative magnetic resonance 
cholangiopancreatography (QMRCP) including data preparation and 
transmission, interpretation and report, obtained without diagnostic 
magnetic resonance imaging (MRI) examination of the same anatomy (e.g., 
organ, gland, tissue, target structure) during the same session) became 
effective July 1, 2022. The QMRCP is a Software as a medical Service 
(SaaS) that performs quantitative assessment of the biliary tree and 
gallbladder. It uses a proprietary algorithm that produces a three-
dimensional reconstruction of the biliary tree and pancreatic duct and 
also provides precise quantitative information of biliary tree volume 
and duct metrics. For CY 2022, we assigned CPT code 0723T to APC New 
Technology 1511 (New Technology--Level 11($900-$1,000)).
    This service became effective in the OPPS in CY 2022. Therefore, 
there are no claims for this service in the CY 2021 OPPS claims data. 
Accordingly, for CY 2023, we propose to continue to assign CPT code 
0723T to New Technology APC 1511 with a status indicator of ``S''. The 
proposed New Technology APC and status indicator assignments for CPT 
code 0723T are found in Table 22.

[[Page 44566]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.030

o. CardiAMP (APC 1574)
    The CardiAMP cell therapy IDE studies are two randomized, double-
blinded, controlled IDE studies: the CardiAMP Cell Therapy Chronic 
Myocardial Ischemia Trial \6\ and the CardiAMP Cell Therapy Heart 
Failure Trial.\7\ The two trials are designed to investigate the safety 
and efficacy of autologous bone marrow mononuclear cells treatment for 
the following: (1) patients with medically refractory and symptomatic 
ischemic cardiomyopathy; and (2) patients with refractory angina 
pectoris and chronic myocardial ischemia. On April 1, 2022, we 
established HCPCS code C9782 to describe the CardiAMP cell therapy IDE 
studies and assigned HCPCS code C9782 to APC 1574 (New Technology--
Level 37 ($9,501-$10,000)) with the status indicator ``T''. We 
subsequently revised the descriptor for HCPCS code C9782 to: (Blinded 
procedure for New York Heart Association (NYHA) Class II or III heart 
failure, or Canadian Cardiovascular Society (CCS) Class III or IV 
chronic refractory angina; transcatheter intramyocardial 
transplantation of autologous bone marrow cells (e.g., mononuclear) or 
placebo control, autologous bone marrow harvesting and preparation for 
transplantation, left heart catheterization including ventriculography, 
all laboratory services, and all imaging with or without guidance 
(e.g., transthoracic echocardiography, ultrasound, fluoroscopy), all 
device(s), performed in an approved Investigational Device Exemption 
(IDE) study) to clarify the inclusion of the Helix transendocardial 
injection catheter device in the descriptor. Additionally, we 
determined that APC 1590 (New Technology--Level 39 ($15,001-$20,000)) 
most accurately accounts for the resources associated with furnishing 
the procedure described by HCPCS code C9782. We note that a 
transitional device pass-through application was submitted for the 
Helix transendorcardial injection catheter device for CY 2023. We 
direct readers to section IV.A of this proposed rule for a more 
detailed discussion of the transitional device pass-through 
applications.
---------------------------------------------------------------------------

    \6\ ClinicalTrials.gov. ``Randomized Controlled Pivotal Trial of 
Autologous Bone Marrow Cells Using the CardiAMP Cell Therapy System 
in Patients With Refractory Angina Pectoris and Chronic Myocardial 
Ischemia.'' Accessed May 10, 2022. https://clinicaltrials.gov/ct2/show/NCT03455725?term=NCT03455725&rank=1.
    \7\ ClinicalTrials.gov. ``Randomized Controlled Pivotal Trial of 
Autologous Bone Marrow Mononuclear Cells Using the CardiAMP Cell 
Therapy System in Patients With Post Myocardial Infarction Heart 
Failure.'' Accessed May 10, 2022. https://clinicaltrials.gov/ct2/show/NCT02438306.
---------------------------------------------------------------------------

    This service became effective in the OPPS in CY 2022. Therefore, 
there are no claims for this service in the CY 2021 OPPS claims data 
for use in CY 2023 ratesetting. Accordingly, for CY 2023, we propose to 
assign HCPCS code C9782 to New Technology APC 1590 with a status 
indication of ``T''. The proposed New Technology APC and status 
indicator assignments for HCPCS code C9782 are found in Table 23.
BILLING CODE 4120-01-P

[[Page 44567]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.031


[[Page 44568]]


BILLING CODE 4120-01-C

D. Universal Low Volume APC Policy for Clinical and Brachytherapy APCs

    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63743 
through 63747) we finalized our proposal to designate clinical and 
brachytherapy APCs as low volume APCs if they have fewer than 100 
single claims that can be used for ratesetting purposes in the claims 
year used for ratesetting for the prospective year. For this proposed 
rule, CY 2021 claims are generally the claims used for ratesetting and 
clinical and brachytherapy APCs with fewer than 100 single claims from 
CY 2021 that can be used for ratesetting would be low volume APCs 
subject to our universal low volume APC policy. As we stated in the CY 
2022 OPPS/ASC final rule with comment period, we adopted this policy to 
reduce the volatility in the payment rate for those APCs with fewer 
than 100 single claims. Where a clinical or brachytherapy APC has fewer 
than 100 single claims that can be used for ratesetting, under our low 
volume APC payment adjustment policy we determine the APC cost as the 
greatest of the geometric mean cost, arithmetic mean cost, or median 
cost based on up to 4 years of claims data. We excluded APC 5853 
(Partial Hospitalization for CMHCs) and APC 5863 (Partial 
Hospitalization for Hospital-based PHPs) from our universal low volume 
APC policy given the different nature of policies that affect the 
partial hospitalization program. We also excluded APC 2698 (Brachytx, 
stranded, nos) and APC 2699 (Brachytx, non-stranded, nos) as our 
current methodology for determining payment rates for non-specified 
brachytherapy sources is appropriate.
    Based on claims data available for this proposed rule, we propose 
to designate four brachytherapy APCs and four clinical APCs as low 
volume APCs under the OPPS. The four brachytherapy APCs and 4 clinical 
APCs meet our criteria of having fewer than 100 single claims in the 
claims year used for ratesetting (CY 2021 for this CY 2023 OPPS/ASC 
proposed rule) and therefore, we propose that they would be subject to 
our low volume APC policy. These eight APCs were designated as low 
volume APCs in CY 2022; a ninth APC--APC 2647 (Brachytherapy, non-
stranded, Gold-198)--was designated as a low volume APC for CY 2022 but 
did not meet our claims threshold for this proposed rule.
    Table 24 includes the APC geometric mean cost without the low 
volume APC designation, that is, if we calculated the geometric mean 
cost based on CY 2021 claims data available for ratesetting; the 
median, arithmetic mean, and geometric mean cost using up to four years 
of claims data based on the APCs' designation as a low volume APC; and 
the statistical methodology we propose to use to determine the APC's 
cost for ratesetting purposes for CY 2023. As discussed in our CY 2022 
OPPS/ASC final rule with comment period (86 FR 63751 through 63754), 
given our concerns with CY 2020 claims data as a result of the PHE, the 
4 years of claims data we proposed to use to calculate the costs for 
these APCs are CYs 2017, 2018, 2019, and 2021.

[[Page 44569]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.032

BILLING CODE 4120-01-C

E. OPPS APC-Specific Policies

1. Fractional Flow Reserve Derived From Computed Tomography (FFRCT) 
(APC 5724)
    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 
patients should undergo further invasive testing (that is, a coronary 
angiogram).
    For many services paid under the OPPS, payment for analytics that 
are performed after the main diagnostic/image procedure are packaged 
into the payment for the primary service. However, in CY 2018, we 
determined

[[Page 44570]]

that we should pay separately for HeartFlow 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 for which we had Medicare claims data to 
calculate the cost of HCPCS code 0503T. For the CY 2020 OPPS/ASC final 
rule with comment period, there were 957 claims with CPT code 0503T, of 
which 101 were single frequency claims that were used to calculate the 
geometric mean of the procedure. We planned to use the geometric mean 
to determine the cost of HeartFlow for purposes of determining the 
appropriate APC assignment for the procedure. However, the number of 
single claims for CPT code 0503T was below the New Technology APC low-
volume payment policy threshold for the proposed rule, and this number 
of single claims was only two claims above the threshold for the New 
Technology APC low-volume policy for the final rule. Therefore, we used 
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 the median cost for CPT code 0503T was $900.28. Of the three cost 
methods, the highest amount was for the arithmetic mean, which 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 
also 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. Specifically, using CY 2019 data, we 
identified 3,188 claims billed with CPT code 0503T including 465 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 used our standard methodology rather 
than the low-volume methodology we previously used to determine the 
cost of CPT code 0503T. Our analysis found that the geometric mean for 
CPT code 0503T was $804.35, and the geometric mean cost for the service 
fell within the cost band for New Technology APC 1510 (New Technology--
Level 10 ($801-$900)). However, providers and other stakeholders 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.
    We noted that HeartFlow was one of the first procedures utilizing 
artificial intelligence to be separately payable in the OPPS, and 
providers were learning how to accurately report their charges to 
Medicare when billing for artificial intelligence services (85 FR 
85943). This especially appeared to be the case for allocating the cost 
of staff resources between the HeartFlow procedure and the coronary CT 
imaging services. Therefore, we decided 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 continued to become familiar with the 
proper cost reporting for HeartFlow and other artificial intelligence 
services. Accordingly, we assigned CPT code 0503T to New Technology APC 
1511 (New Technology--Level 11 ($901-$1000)) with a payment rate of 
$950.50 for CY 2020, and we continued to assign CPT code 0503T to New 
Technology APC 1511 for CY 2021.
    For CY 2022, we used claims data from CY 2019 to estimate the cost 
of the HeartFlow service. Because we were using the same claims data as 
in CY 2021, these data continued to reflect that providers were 
learning how to accurately report their charges to Medicare when 
billing for artificial intelligence services. Therefore, we continued 
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 2022 as in CY 2020 and CY 2021: New Technology APC 1511 (New 
Technology--Level 11 ($901-$1000)), with a payment rate of $950.50 for 
CY 2022, which was the same payment rate for the service as in CY 2020 
and CY 2021.
    For CY 2023, we have three years of claims data from CY 2018, CY 
2019, and CY 2021 for CPT code 0503T to review to determine whether 
there is an appropriate clinical APC to assign the HeartFlow service. 
First, we have sufficient single frequency claims from these three 
years to have a reliable estimate of the cost of the service. There 
were 101 single frequency claims in CY 2018, 465 single frequency 
claims in CY 2019, and 1,681 single frequency claims in CY 2021. The 
estimated cost of 0503T has been reasonably consistent over the same 
three years as well. The estimated cost of HeartFlow was around $768 in 
CY 2018, around $808 in CY 2019, and around $827 in CY 2021. Since the 
cost data have been stable for HeartFlow, we can assign it to a 
clinical APC using our regular process of using the most recent year of 
claims data for a procedure. HeartFlow is a diagnostic service, and the 
OPPS has a clinical APC series for diagnostic tests and related 
services, with the cost of 0503T based on claims data falling between 
Level 3, with a payment rate of around $498, and Level 4, with a 
payment rate of around $961. Since the geometric mean cost of HCPCS 
code 0503T is $827, and $827 is closer to $961 than $498, the best APC 
assignment for the HeartFlow procedure appears to be APC 5724 (Level 4 
Diagnostic Tests and Related Services).
    Therefore, we propose for CY 2023 to assign CPT code 0503T to 
clinical APC 5724 (Level 4 Diagnostic Tests and Related Services). 
Table 25 shows the current and proposed status indicator and APC 
assignment for 0503T. We refer readers to Addendum B of this proposed 
rule for the payment rates for all codes reportable under the OPPS. 
Addendum B is available via the internet on the CMS website.

[[Page 44571]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.033

2. 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 with comment period, we also made the Levels 2 
through 4 APCs comprehensive APCs (79 FR 66807 through 66808). Later, 
in the CY 2020 OPPS/ASC final rule with comment period, we also made 
the Level 1 Neurostimulator and Related Procedure APC (APC 5461) a 
comprehensive APC (84 FR 61162 through 61166).
    In reviewing the claims data available for the CY 2021 OPPS/ASC 
proposed rule, we believed that it was appropriate to create an 
additional Neurostimulator and Related Procedures level, between what 
were then the Levels 2 and 3 APCs. Creating this APC allowed 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 finalized a five-level APC structure for the 
Neurostimulator and Related Procedures series (85 FR 85968 through 
85970). In addition to creating the new level, we also assigned 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 (85 FR 85970).
    Some commenters have requested that we create a Level 6 
Neurostimulator and Related Procedures APC, due to their concerns 
around clinical and resource cost similarity in the Level 5 
Neurostimulator and Related Procedures APC. Based on our review of the 
data available for this CY 2023 OPPS/ASC proposed rule, we believe that 
the five-level structure for the Neurostimulator and Related Procedures 
APC series remains appropriate. The proposed geometric mean cost for 
the Level 5 Neurostimulator and Related Procedures is $30,198.36 with 
the geometric means of cost significant codes in Level 5 ranging from 
approximately $28,000 to $36,000, which is well within the range of the 
2 times rule. In addition, a review of the clinical characteristics of 
the services in the APC suggests that the current structure is 
appropriate. Finally, as discussed in the CY 2021 OPPS/ASC final rule 
with comment period, 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. (85 FR 
85968).
    While we are not proposing any changes in the CY 2023 OPPS to the 
5-level structure of the Neurostimulator and Related Procedures APC 
series in this proposed rule, we recognize the commenters' concerns 
regarding the granularity of the current APC levels and their request 
to create an additional level to address such concerns. Accordingly, we 
are soliciting comments on the potential creation of a new Level 6 APC 
from the current Level 5 within the Neurostimulator and Related 
Procedures APC series, which would include the following codes:
     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)
     0268T: Implantation or replacement of carotid sinus 
baroreflex activation device; pulse generator only (includes intra-
operative interrogation, programming, and repositioning, when 
performed)
     0424T: Insertion or replacement of neurostimulator system 
for treatment of central sleep apnea; complete system

[[Page 44572]]

(transvenous placement of right or left stimulation lead, sensing lead, 
implantable pulse generator)
     0431T: Removal and replacement of neurostimulator system 
for treatment of central sleep apnea, pulse generator only
     64568: Open implantation of cranial nerve (eg, vagus 
nerve) neurostimulator electrode array and pulse generator
    In summary, for the CY 2023, we propose to maintain the current 5-
level structure for the Neurostimulator and Related Procedure APC 
series. However, we are also soliciting comment from stakeholders on 
the creation of an additional Level 6 APC in the series from the 
current Level 5 APC. See Table 26 below for the proposed CY 2023 for 
the Neurostimulator and Related Procedures APCs.
[GRAPHIC] [TIFF OMITTED] TP26JY22.034

3. Urology and Related Services (APCs 5371 Through 5378)
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 85984 
through 85986), we finalized a reorganization of the Urology and 
Related Services APCs from what was previously a seven-level series of 
related APCs into an eight-level series. In addition to creating the 
Urology and Related Services APC 5378 (Level 8 Urology and Related 
Services), and finalizing the reassignment of several urology 
procedures, we also revised the APC assignment for CPT 53440 (Male 
sling procedure) and CPT 0548T (Transperineal periurethral balloon 
continence device; bilateral placement, including cystoscopy and 
fluoroscopy) from APC 5376 to APC 5377. We believed the CY 2021 
reorganization appropriately addressed the resource costs for the 
procedures whose geometric mean costs were between APC 5376 and APC 
5377. Since CY 2021, the eight-level APC structure for the series has 
remained unchanged.
    In our annual review of the CY 2021 claims submitted between 
January 1, 2021 through December 31, 2021 and processed on or before 
December 31, 2021, we examined the procedures assigned to the Urology 
Procedures APCs. In the CY 2022 final rule with comment period (86 FR 
63565), we received comments requesting that CPT code 55880 be 
reassigned from APC 5375 (Level 5 Urology and Related Services) to APC 
5376 (Level 6 Urology and Related Services). We remind readers that, 
for the CY 2022 ratesetting, we used the CY 2019 claims data due to the 
PHE. For CY 2022, we did not finalize any APC reassignment because our 
data analysis using the CY 2019 claims did not support the impact on 
the urology APCs' geometric means. For the CY 2023 ratesetting, we 
propose to use CY 2021 claims data. Using the CY 2021 claims data, we 
identified eight procedures (listed below) from APC 5375 whose 
geometric mean ranged between the geometric means for APC 5375 and APC 
5376. The geometric means of these services are closer to the geometric 
mean of APC 5376, which is $8,788.53, than the geometric mean of APC 
5375, which is $4,826.23. This reassignment to APC 5476 improves the 
resource cost and clinical homogeneity for the procedures within APC 
5375 and APC 5376. Below is a list of the procedures and their 
geometric mean costs that we propose to reassign from APC 5375 to APC 
5376 for CY 2023.
     CPT 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 (Geometric mean cost: 
$11,137.98)
     HCPCS C9769: Cystourethroscopy, with insertion of 
temporary prostatic implant/stent with fixation/anchor and incisional 
struts (Geometric mean cost: $7,742.45)
     CPT 51860: Cystorrhaphy, suture of bladder wound, injury 
or rupture; simple (Geometric mean cost: $7,548.83)
     CPT 0549T: Transperineal periurethral balloon continence 
device; unilateral placement, including cystoscopy and fluoroscopy 
(Geometric mean cost: $7,337.54)
     CPT 53449: Repair of inflatable urethral/bladder neck 
sphincter, including pump, reservoir, and cuff (Geometric mean cost: 
$7,109.79)
     CPT 54344: Repair of hypospadias complication(s) (ie, 
fistula, stricture, diverticula); requiring mobilization of skin flaps 
and urethroplasty with flap or

[[Page 44573]]

patch graft (Geometric mean cost: $7,005.64)
     CPT 54316: Urethroplasty for second stage hypospadias 
repair (including urinary diversion) with free skin graft obtained from 
site other than genitalia (Geometric mean cost: $7,069.06)
     CPT 55880: Ablation of malignant prostate tissue, 
transrectal, with high intensity-focused ultrasound (hifu), including 
ultrasound guidance (Geometric mean cost: $7,015.62)
    In summary, for the CY 2023, we propose to reassign eight 
procedures from APC 5375 to APC 5376 for the Urology and Related 
Procedure APC series. Table 27 below shows the proposed geometric mean 
cost for each APC with reassignment of the eight procedures.
[GRAPHIC] [TIFF OMITTED] TP26JY22.035

4. Unlisted Dental Procedure/Service (APC 5871)
    For CY 2022, CPT code 41899 (Unlisted procedure, dentoalveolar 
structures) is assigned to APC 5161 (Level 1 ENT Procedures). Unlisted 
codes, like CPT 41899, do not describe any specific procedure or 
service, so they lack the specificity needed to describe the resources 
used. As a reminder, the fact that a drug, device, procedure, or 
service is assigned a HCPCS code and a payment rate under the OPPS does 
not imply coverage by the Medicare program, but indicates only how the 
product, procedure, or service may be paid if covered by the program. 
Medicare Administrative Contractors (MACs) determine whether a drug, 
device, procedure, or other service meets all program requirements for 
coverage. For example, MACs determine that the drug, device, procedure, 
or service is reasonable and necessary to treat the beneficiary's 
condition and whether it is excluded from payment. Unlisted codes 
provide a way for providers to report services for which there is no 
HCPCS code that specifically describes the service furnished. Because 
of the lack of specificity, unlisted codes are generally assigned to 
the lowest level APC within the most appropriate clinically related APC 
group under the OPPS. However, we believe that APC 5161 (Level 1 ENT 
Procedures) is not the most clinically appropriate APC series for this 
code. While APC 5161 includes some dental services, we believe that CPT 
code 41899 is more closely aligned clinically to the dental services in 
APC 5871 (Dental Procedures), which is the sole APC where dental 
procedures described by the Current Dental Terminology (CDT) reside. 
Therefore, for CY 2023, we propose to reassign HCPCS code 41899 to 
clinical APC 5871, which is the only, and therefore lowest, APC group 
that specifically describes dental procedures.
    While we do not consider costs for services described by unlisted 
codes for rate setting purposes, based on both our established policy 
of generally assigning these codes to the lowest level APC within the 
most appropriate, clinically related APC group, and our inability to 
determine the specific services the unlisted code describes, we would 
note that the geometric mean cost for CPT code 41899 is more closely 
aligned with the geometric mean cost of other dental procedures in APC 
5871 than with its current APC assignment. Specifically, in our annual 
review of the CY 2021 claims submitted between January 1, 2021 through 
December 31, 2021 and processed on or before December 31, 2021, the 
geometric mean cost for CPT code 41899 was $2,310.47, while the 
geometric mean cost of the code's current APC assignment, APC 5161, was 
$203.64. In contrast, the geometric mean cost of APC 5871 (Dental 
Procedures) was $1,958.92.
    Table 28 below shows the current and proposed status indicator and 
APC assignment for CPT code 41899. We refer readers to Addendum B of 
this proposed rule for the payment rates for all codes reportable under 
the OPPS. Addendum B is available via the internet on the CMS website.

[[Page 44574]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.036

5. COVID-19 and Monoclonal Antibody Administration Services
a. Statutory and Regulatory Background
    Section 3713 of the Coronavirus Aid, Relief, and Economic Security 
Act (CARES Act) (Pub. L 116-136, March 27, 2020) provides for coverage 
of the COVID-19 vaccine under Part B of the Medicare program without 
any beneficiary cost sharing. Specifically, section 3713 added the 
COVID-19 vaccine and its administration to section 1861(s)(10)(A) of 
the Act in the same subparagraph as the influenza and pneumococcal 
vaccines and their administration. Additionally, section 3713(e) of the 
CARES Act authorizes CMS to implement the amendments made by section 
3713 ``through program instruction or otherwise.'' The changes to 
section 1861(s)(10)(A) of the Act were effective on the date of 
enactment, that is, March 27, 2020, and apply to a COVID-19 vaccine 
beginning on the date that such vaccine is licensed under section 351 
of the PHS Act (42 U.S.C. 262).
    We discussed our implementation of section 3713 in the interim 
final rule with comment period titled, ``Additional Policy and 
Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency,'' published in the November 6, 2020 Federal Register (85 FR 
71145 through 71150). In that rule, we stated that, while section 
3713(e) of the CARES Act authorizes us to implement the amendments made 
by that section through program instruction or otherwise, we believed 
it was important to clarify our interpretation of section 3713 and 
announce our plans to ensure timely Medicare Part B coverage and 
payment for the COVID-19 vaccine and its administration. We anticipated 
that payment rates for the administration of other Part B preventive 
vaccines and related services, such as the flu and pneumococcal 
vaccines, would inform the payment rates for administration of COVID-19 
vaccines. In the same interim final rule, we stated that, as soon as 
practicable after the authorization or licensure of each COVID-19 
vaccine product by FDA, we would announce the interim coding and a 
payment rate for its administration (or, in the case of the OPPS, an 
APC assignment for each vaccine product's administration code), taking 
into consideration any product-specific costs or considerations 
involved in furnishing the service. We further stated that the codes 
and payment rates would be announced through technical direction to the 
Medicare Administrative Contractors (MACs) and posted publicly on the 
CMS website.
    In December 2020, we publicly posted the applicable CPT codes for 
the Pfizer-BioNTech and Moderna COVID-19 vaccines and initial Medicare 
payment rates for administration of these vaccines upon FDA's 
authorization of them. We announced an initial Medicare payment rate 
for COVID-19 vaccine administration of $28.39 to administer single-dose 
vaccines. For a COVID-19 vaccine requiring a series of two or more 
doses--for example, for both the Pfizer-BioNTech and Moderna products--
we announced a payment rate for administration of the initial dose(s) 
of $16.94, which was based on the Medicare payment rate for 
administering the other preventive vaccines under section 1861(s)(10) 
of the Act. We also announced a payment rate for administering the 
second dose of $28.39.\8\ CMS continues to establish product-specific 
HCPCS codes for each COVID-19 vaccine product on a rolling basis as 
they are authorized by the FDA. On March 15, 2021, we announced an 
increase in the payment rate for administering a COVID-19 vaccine to 
$40 per dose, effective for doses administered on or after March 15, 
2021. For additional information, on timing and payment rates for 
COVID-19 vaccine administration, please see the CMS website: https://www.cms.gov/medicare/preventive-services/covid-19-services-billing-coverage/covid-19/medicare-covid-19-vaccine-shot-payment.
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    \8\ Medicare COVID-19 Vaccine Shot Payment. CMS website. https:/
/www.cms.gov/medicare/preventive-services/covid-19-services-billing-
coverage/covid-19/medicare-covid-19-vaccine-shot-
payment#:~:text=%2416.94%20for%20the%20initial%20dose,final%20dose%20
in%20the%20series.
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b. Payment for COVID-19 Vaccine Administration Services Under the OPPS
    Under the OPPS, separate payment is made for the COVID-19 vaccine 
product and its administration. Except when the provider receives the 
COVID-19 vaccine for free (as has been the case to date), providers are 
paid for COVID-19 vaccine products at reasonable cost, as is the case 
with influenza and pneumococcal vaccines.\9\ The HCPCS codes associated 
with the vaccine products are assigned OPPS status indicator ``L'' to 
indicate that they are paid at reasonable cost and are exempt from 
coinsurance and deductible payments under sections 1833(a)(3) and 
1833(b) of the Act.
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    \9\ COVID-19 Vaccines and Monoclonal Antibodies. CMS website. 
https://www.cms.gov/medicare/medicare-part-b-drug-average-sales-price/covid-19-vaccines-and-monoclonal-antibodies.
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    While COVID-19 and other preventive vaccine products are paid based 
on reasonable cost under the OPPS, the payment rates for the COVID-19 
vaccine administration HCPCS codes are based on the APCs to which the 
codes are assigned. Because COVID-19 vaccination can involve more than 
one dose, we established APCs 9397 (COVID-19 Vaccine Admin Dose 1 of 2) 
and 9398 (COVID-19 Vaccine Admin

[[Page 44575]]

Dose 2 of 2, Single Dose Product or Additional Dose) to appropriately 
identify and pay for the administration of the COVID-19 vaccines. In CY 
2021, we announced the establishment of APCs 9397 and 9398 for the 
COVID-19 vaccine administration codes through the April 2021 OPPS 
Update CR (Transmittal 10666, Change Request 12175 dated March 8, 
2021). Prior to March 15, 2021, APC 9397 for the first dose of the 
COVID-19 vaccine was assigned a payment rate of $16.94; and APC 9398 
for the second dose was assigned a payment rate of $28.39. As described 
above, we changed the payment rate to $40 per dose for the first, 
second, and booster dose(s) of the COVID-19 vaccine effective March 15, 
2021.
    For CYs 2021 and 2022, we maintained the payment rate of $40 for 
the APCs to which the COVID-19 vaccine administration services are 
assigned. For further information please see Addendum B on the CY 2021 
and 2022 OPPS websites.
    As of July 1, 2022, there are approximately 18 COVID-19 vaccine 
administration HCPCS codes. These codes are listed in Table 29 below. 
We note that the latest list of HCPCS codes for COVID-19 vaccine 
products and vaccine administration, along with their effective dates 
and payment rates, is available on the CMS COVID-19 Vaccines and 
Monoclonal Antibodies website at https://www.cms.gov/medicare/medicare-part-b-drug-average-sales-price/covid-19-vaccines-and-monoclonal-antibodies.
    Based on our review of CY 2021 claims data associated with the 
COVID-19 vaccine administration HCPCS codes, the geometric mean cost 
for APC 9397 is $25.86 and the geometric mean cost for APC 9398 is 
$36.80. We note that CY 2021 utilization of the COVID-19 vaccine 
administration codes in the outpatient hospital setting was very high, 
with nearly 7 million claims for these codes in that year and may not 
be reflective of future year utilization. Since we do not know if 
demand for COVID-19 vaccine administration in the outpatient hospital 
setting will be significantly different in CY 2023 than CY 2021 because 
CY 2021 was the first complete year for which we had COVID-19 vaccine 
administration claims data, and because we do not know if the PHE for 
COVID-19 will be in effect in CY 2023, we believe that we should 
maintain the $40 per dose payment rate for the COVID-19 administration 
HCPCS codes in CY 2023 until we have an additional year of claims data 
on which to base the payment rate. Therefore, for CY 2023 we propose to 
use the equitable adjustment authority at 1833(t)(2)(E) to maintain the 
payment rate of $40 for each of the COVID-19 vaccine administration 
APCs 9397 and 9398. We believe maintaining the current, site neutral, 
payment rate is necessary to ensure equitable payments during the 
continuing PHE and at least through the end of CY 2023. We refer 
readers to Table 29 below for the proposed payment rates for the COVID-
19 vaccine administration HCPCS codes.
    We also note that this policy does not pertain to OPPS payment for 
monoclonal antibody products used for COVID-19 and their 
administration. The OPPS payment rates for administration of COVID-19 
monoclonal antibody products under the Part B preventive vaccine 
benefit are set at the midpoint of the cost bands for the New 
Technology APCs to which the monoclonal antibody administration 
services are assigned under the OPPS. We assigned COVID-19 monoclonal 
antibody administration services to New Technology APCs based on 
estimated costs for these services.
c. Use of Alternative Site-Neutral Methodology To Update Payment Rates 
for COVID-19 Vaccine Administration Services for CY 2023
    Under current policy, the payment rates for COVID-19 vaccine 
administration services are site-neutral across most outpatient and 
ambulatory settings. We request comment on whether we should continue a 
site-neutral payment policy for COVID-19 vaccine administration for CY 
2023, and what alternative approaches (including under our equitable 
adjustment authority at 1833(t)(2)(E)) may be appropriate to update the 
OPPS payment rates for the COVID-19 vaccine administration HCPCS codes 
(including the in-home add-on HCPCS code M0201) while continuing to 
ensure site-neutral payment for these services. For example, in the CY 
2023 PFS proposed rule that will be included in the July 29, 2022 
Federal Register, we are proposing to update the payment rate for the 
administration of preventive vaccines (other than for COVID-19 and 
other than for services paid under other payment systems such as the 
OPPS) using the annual increase to the Medicare Economic Index (MEI). 
We request public comments on whether, as an alternative to our 
proposal to maintain current OPPS payment rates for COVID-19 vaccine 
administration using our equitable adjustment authority at section 
1833(t)(2)(E), we should instead use the rate finalized through PFS 
rulemaking that generally applies under the preventive vaccine benefit, 
or an alternative method commenters suggest, to determine the 
appropriate payment rates for preventive vaccine administration under 
the OPPS, which would likely also require use of our equitable 
adjustment authority.
    For more information on the payment rates for the administration of 
preventive vaccines, including the proposal to update the payment rate 
by the annual increase to the MEI, we refer readers to the CY 2023 PFS 
proposed rule that will be included in the July 29, 2022 Federal 
Register.
    We are also seeking comment on whether to use the rate finalized 
through PFS rulemaking generally as it applies under the preventive 
vaccine benefit, or an alternative method commenters suggest, to set 
the CY 2023 payment rate for HCPCS code M0201 (COVID-19 vaccine 
administration inside a patient's home; reported only once per 
individual home per date of service when only COVID-19 vaccine 
administration is performed at the patient's home).
    In summary, for CY 2023, we are proposing to continue to pay $40 
per dose for the administration of the COVID-19 vaccines provided in 
the HOPD setting, and an additional $35.50 for the administration of 
the COVID-19 vaccines when provided under certain circumstances in the 
patient's home, in CY 2023. Additionally, we request comments on 
whether, as an alternative to maintaining the CY 2022 OPPS payment 
rates for COVID-19 vaccine administration services in CY 2023, we 
should use a different approach, including relying on our equitable 
adjustment authority in section 1833(t)(2)(E) to base the payment rate 
for COVID-19 vaccine administration under the OPPS in CY 2023 on the 
payment rate for the COVID-19 vaccine administration under the 
preventive vaccine benefit under Part B as finalized in PFS rulemaking, 
or employing another alternate methodology to set CY 2023 payment rates 
for these services.
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[[Page 44577]]


BILLING CODE 4120-01-C
d. Comment Solicitation on the Appropriate Payment Methodology for 
Administration of Preventive Vaccines Post PHE
    Currently, under the OPPS, the codes describing the administration 
of the influenza, pneumococcal, and hepatitis b vaccines are assigned 
to APC 5691 (Level 1 Drug Administration), with a payment rate of about 
$40. However, given that the statutory benefit for Medicare Part B 
preventive vaccines and their administration is based on 1861(s)(10) of 
the Act, we are seeking comments on whether we should adopt a different 
methodology to make payment when these services are furnished by a HOPD 
other than the one for covered OPD services under section 1833(t) of 
the Act. Therefore, in this proposed rule, we are seeking comments on 
the appropriate payment methodology for the administration of Part B 
preventive vaccines, including the COVID-19 vaccine post PHE.
e. COVID-19 Monoclonal Antibody Products and Their Administration 
Services Under OPPS
    Subsequent to the November 6, 2020 IFC and as discussed in the CY 
2022 PFS final rule (86 FR 65190 through 65194), when monoclonal 
antibody products for COVID-19 treatment were granted EUAs during the 
PHE for COVID-19, we made the determination to cover and pay for them 
under the Part B vaccine benefit in section 1861(s)(10) of the Act
    Regarding availability of COVID-19 monoclonal antibody products, 
there are no monoclonal antibody products approved for the treatment or 
prevention of COVID-19. There are five authorized monoclonal antibody 
COVID-19 products; four are authorized for the treatment or post-
exposure prophylaxis for prevention of COVID-19 and one is authorized 
as pre-exposure prophylaxis for prevention of COVID-19.\10\ We note 
that none of the four monoclonal antibody products for treatment or 
post-exposure prevention of COVID-19 that have been granted an EUA are 
authorized for use in geographic regions where infection was likely 
caused by a non-susceptible variant. Due to data indicating decreased 
activity for three of these treatments against Omicron variants 
currently in wide circulation, only one of these treatments is 
currently authorized in any U.S. region until further notice by FDA.
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    \10\ Viewed 5/6/2022. https://www.fda.gov/emergency-preparedness-and-response/mcm-legal-regulatory-and-policy-framework/emergency-use-authorization.
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    Consistent with how we pay for COVID-19 vaccine products and their 
administration, under the OPPS, we pay separately for COVID-19 
monoclonal antibodies and their administration. Except when the 
provider receives the COVID-19 monoclonal antibody product for free, 
providers are paid for these products at reasonable cost.\11\ The HCPCS 
codes associated with the COVID-19 monoclonal antibody products are 
assigned OPPS status indicator ``L'' to indicate that they are paid at 
reasonable cost and are exempt from coinsurance and deductible payments 
under sections 1833(a)(3) and 1833(b) of the Act.
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    \11\ COVID-19 Vaccines and Monoclonal Antibodies. CMS Website 
http://www.cms.gov/medicare/medicare-part-b-drug-average-sales-price/covid-19-vaccines-and-monoclonal-antibodies.
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    While the COVID-19 monoclonal antibody products are paid based on 
reasonable cost under the OPPS, the payment rates for the COVID-19 
monoclonal antibody product administration depends on the route of 
administration and whether the product is furnished in a healthcare 
setting or in the beneficiary's home. As discussed in more detail in 
the CMS COVID-19 Monoclonal Toolkit,\12\ payment for administration of 
monoclonal antibodies can range from $150.50 to $750.00. The HCPCS 
codes associated with the COVID-19 monoclonal antibody product 
administration are assigned to New Technology APCs 1503, 1504, 1505, 
1506, 1507, and 1509 with an OPPS status indicator ``S'' (Procedure or 
Service, Not Discounted When Multiple, separate APC assignment) to 
indicate that the administration of monoclonal antibodies is paid 
separately under the OPPS.
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    \12\ https://www.cms.gov/monoclonal.
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    For CYs 2021 and 2022, we maintained the payment rates for the 
COVID-19 monoclonal antibody product administration services by 
maintaining their New Technology APCs assignments. For further 
information, please see Addendum B on the CY 2021 and 2022 OPPS 
websites. For CY 2023, we propose to use the equitable adjustment 
authority at 1833(t)(2)(E) to maintain the CY 2022 New Technology APC 
assignments (specifically, New Technology APCs 1503, 1504, 1505, 1506, 
1507, or 1509) and corresponding payment rates for each of the COVID-19 
monoclonal antibody product administration HCPCS codes for as long as 
these products are considered to be covered and paid under the Medicare 
Part B vaccine benefit so that, if the PHE ends, the benefit category 
and corresponding payment methodology under the OPPS will remain site 
neutral.
    We note that, once these products are no longer considered to be 
covered and paid under the Medicare Part B vaccine benefit, we would 
expect the COVID-19 monoclonal antibody product administration services 
to be paid similar to monoclonal antibody products used in the 
treatment of other health conditions--to be ``biologicals''. For more 
background on Medicare Part B payment for COVID-19 monoclonal antibody 
products and their administration, and for current proposals regarding 
such payment, we refer readers to the CY 2023 PFS proposed rule that 
will be included in the July 29, 2022 Federal Register. In particular, 
the CY 2023 PFS proposed rule proposes to clarify that the COVID-19 
monoclonal antibody products would be covered and paid for under the 
Medicare Part B vaccine benefit until the end of the calendar year in 
which the March 27, 2020 EUA declaration for drugs and biologics is 
terminated. Additionally, we are proposing to continue the existing 
policy to pay for monoclonal antibody COVID-19 pre-exposure prophylaxis 
products and their administration under the Part B vaccine benefit even 
after the EUA declaration for drugs and biological products is 
terminated, so long as after the EUA declaration is terminated, such 
products have market authorization.

IV. Proposed OPPS Payment for Devices

A. Proposed Pass-Through Payment for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
a. Background
    The intent of transitional device pass-through payment, as 
implemented at Sec.  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 Sec.  
419.66(g) provided that this pass-

[[Page 44578]]

through payment eligibility period began on the date CMS established a 
particular transitional pass-through category of devices, and we based 
the pass-through status expiration date for a device category on the 
date on which pass-through payment was effective for the category. In 
the CY 2017 OPPS/ASC final rule with comment period (81 FR 79654), in 
accordance with section 1833(t)(6)(B)(iii)(II) of the Act, we amended 
Sec.  419.66(g) to provide that the pass-through eligibility period for 
a device category begins on the first date on which pass-through 
payment is made under the OPPS for any medical device described by such 
category.
    In addition, prior to CY 2017, our policy was to propose and 
finalize the dates for expiration of pass-through status for device 
categories as part of the OPPS annual update. This means that device 
pass-through status would expire at the end of a calendar year when at 
least 2 years of pass-through payments had been made, regardless of the 
quarter in which the device was approved. In the CY 2017 OPPS/ASC final 
rule with comment period (81 FR 79655), we changed our policy to allow 
for quarterly expiration of pass-through payment status for devices, 
beginning with pass-through devices approved in CY 2017 and subsequent 
calendar years, to afford a pass-through payment period that is as 
close to a full 3 years as possible for all pass-through payment 
devices. We 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).
    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.\13\
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    \13\ To apply for OPPS transitional device pass-through status, 
applicants complete an application that is subject to the Paperwork 
Reduction Act (PRA). This collection (CMS-10052) has an OMB control 
number of 0938-0857 and an expiration date of 11/30/2022. The 
application is currently undergoing the PRA reapproval process, 
which has notice and comment periods separate from this proposed 
rule. The 60-day notice was published in the Federal Register on 
April 29, 2022 (87 FR 25488).
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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. Currently, there are 11 device categories eligible for 
pass-through payment. These devices are listed in Table 30 where we 
detail the expiration dates of pass-through payment status for each of 
the 11 devices currently receiving device pass-through payment.
    In the CY 2022 OPPS/ASC final rule with comment period we used CY 
2019 claims data, rather than CY 2020 claims data, to inform CY 2022 
ratesetting (86 FR 63755). As a result, we utilized our equitable 
adjustment authority at section 1833(t)(2)(E) of the Act to provide up 
to four quarters of separate payment for 27 drugs and biologicals and 
one device category whose pass-through payment status expired between 
December 31, 2021 and September 30, 2022 to mimic continued pass-
through payment, promote adequate access to innovative therapies for 
Medicare beneficiaries, and gather sufficient data for purposes of 
assigning these devices to clinical APCs (86 FR 63755). A full 
discussion of this finalized policy is included in section X.F of the 
CY 2022 OPPS/ASC final rule with comment (86 FR 63755). In section X.B 
of this proposed rule, we propose to resume the regular update process 
of using claims from the year 2 years prior to the year for which we 
are setting rates, specifically CY 2021 outpatient claims for CY 2023 
OPPS ratesetting. Based on CMS's policy proposal in section X.B we are 
not proposing to provide any additional quarters of separate payments 
for any device category whose pass-through payment status will expire 
between December 31, 2022 and September 30, 2023. We seek comment on 
how the circumstances for CY 2023 are similar to those in CY 2022, when 
we adopted the equitable adjustment to mimic continued pass-through 
status for drugs, biologicals, and a device category with pass-through 
status that expired between December 31, 2021, and September 30, 2023.
    We utilized our equitable adjustment authority at section 
1833(t)(2)(E) of the Act to provide separate payment for C1823 for four 
quarters in CY 2022 for C1823, as its pass-through payment status 
expired on December 31, 2021 (86 FR 63570). Separate payment for HCPCS 
code C1823 under our equitable adjustment authority will end on 
December 31, 2022. Table 30 includes this date for the device described 
by HCPCS code C1823 and includes the specific expiration dates for 
devices with pass-through status expiring at the end of the fourth 
quarter of 2022, in 2023, or in 2024.
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BILLING CODE 4120-01-C
2. New Device Pass-Through Applications for CY 2023
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 are most likely to 
interfere with patient access (66 FR 55852; 67 FR 66782; and 70 FR 
68629).
    As specified in regulations at Sec.  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 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

[[Page 44580]]

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, or, for devices for which pass-
through payment status will begin on or after January 1, 2020, as an 
alternative pathway to demonstrating substantial clinical improvement, 
a device is part of the FDA's Breakthrough Devices Program and has 
received marketing authorization for the indication covered by the 
Breakthrough Device designation.
    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 FDA marketing authorization. 
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 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 for the indication covered by the Breakthrough 
Devices designation, and meet the other criteria in the regulation can 
be approved through the quarterly process and announced through that 
process (81 FR 79655). Proposals regarding these devices and whether 
pass-through payment status should continue to apply are included in 
the next applicable OPPS rulemaking cycle. This process promotes timely 
pass-through payment status for innovative devices, while also 
recognizing that such devices may not have a sufficient evidence base 
to demonstrate substantial clinical improvement at the time of FDA 
marketing authorization.
    More details on the requirements for device pass-through payment 
applications are included on the CMS website in the application form 
itself at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html, in the 
``Downloads'' section. In addition, CMS is amenable to meeting with 
applicants or potential applicants to discuss research trial design in 
advance of any device pass-through application or to discuss 
application criteria, including the substantial clinical improvement 
criterion.
b. Applications Received for Device Pass-Through Status for CY 2023
    We received nine complete applications by the March 1, 2022 
quarterly deadline, which was the last quarterly deadline for 
applications to be received in time to be included in the CY 2023 OPPS/
ASC proposed rule. We received one of the applications in the second 
quarter of 2021, one of the applications in the third quarter of 2021, 
two of the applications in the fourth quarter of 2021, and five of the 
applications in the first quarter of 2022. One of the applications was 
approved for device pass-through status during the quarterly review 
process: the aprevo\TM\ Intervertebral Body Fusion, which received 
quarterly approval under the alternative pathway effective October 1, 
2021. 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, aprevo\TM\ 
Intervertebral Body Fusion is discussed in section IV.2.b.1 of this 
proposed rule.
    Applications received for the later deadlines for the remaining 
2022

[[Page 44581]]

quarters (the quarters beginning June 1, September 1, and December 1 of 
2022), if any, will be discussed in the CY 2024 OPPS/ASC proposed rule. 
We note that the quarterly application process and requirements have 
not changed because 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.
    Discussions of the applications we received by the March 1, 2022 
deadline are included below.
1. Alternative Pathway Device Pass-Through Applications
    We received two device pass-through applications by the March 2022 
quarterly application deadline for devices that have received 
Breakthrough Device designation from FDA and FDA marketing 
authorization for the indication for which they have a Breakthrough 
Device designation, and therefore are eligible to apply under the 
alternative pathway.
(1) Aprevo\TM\ Intervertebral Body Fusion Device
    Carlsmed, Inc. submitted an application for a new device category 
for transitional pass-through payment status for aprevo\TM\ 
Intervertebral Fusion Device (aprevo\TM\) for CY 2023. Per the 
applicant, the device is an interbody fusion implant that stabilizes 
the lumbar spinal column and facilitates fusion during lumbar fusion 
procedures indicated for the treatment of spinal deformity. The 
applicant stated that the implant device is custom made for patient-
specific features using patient computed tomography (CT) scans to 
create 3D virtual models of the deformity to be used during anterior 
lumbar interbody fusion, lateral lumbar interbody fusion, and 
transforaminal lumbar interbody fusion procedures. The aprevo\TM\ 
device is additively manufactured and made from Titanium Alloy (Ti-6Al-
4V) per ASTM F3001, and has a cavity intended for the packing of bone 
graft. In addition, the applicant explained that aprevo\TM\ is used 
with supplemental fixation devices and bone graft packing. Per the 
applicant, the device was formerly known as ``Corra\TM\.''
    According to the applicant, the surgical correction plan for adult 
patients with spinal deformity is significantly more complex than 
performing a spine fusion for a degenerative spinal condition. The 
applicant further described that these deformity correction plans 
require numerous complex measurements and calculations that consider a 
multitude of relationships between each area of the spine (cervical, 
thoracic, lumbar), the 33 individual levels of the spine, the pelvis, 
hips, and other reference points in relation to normal values based on 
the patient's age. The applicant stated that achieving the proper 
balance between these factors has been shown to directly contribute to 
improved clinical outcomes and increased patient satisfaction. Despite 
the use of sophisticated planning tools, surgeons are frequently unable 
to obtain the planned correction, and this is often because stock 
devices, which are not patient-specific, do not match the specific 
geometry that is required to realign each level of the individual 
patient's spine. The applicant claims that aprevo\TM\ devices provide 
the precise geometry to match the planned surgical correction for a 
spinal deformity patient, and they maintain this precise position while 
the bones fuse together in their new alignment.
    According to the applicant, aprevo\TM\ devices are surgically 
placed between two vertebral levels of the spine. The approach may be 
from the front, side, or back of the patient. The surgeon will gently 
clear away the disc material (which is often degenerated) before 
placing the device. Bone graft is placed inside a central opening of 
the interbody device. This allows the patient's bone to integrate with 
the graft material and form a bony bridge.
    The applicant asserted that there are no other devices in the 
market like aprevo\TM\. Per the applicant, other stock devices do not 
match the anatomy of each patient precisely. The applicant stated, in 
contrast, aprevo\TM\ utilizes 3D generated reconstructions of each 
level of the patient's lumbar spine that match the anatomy of the 
patient. Per the applicant, the device's upper and lower surfaces match 
the topography of the patient's bone as this is important because the 
surfaces of the vertebral endplates can be extremely bumpy or wavy and 
sometimes thin and fragile. Per the applicant, by having a fit that 
matches these contours, the high loads that result from body weight are 
more evenly distributed across the surface. The applicant stated that 
this contributes to faster healing of the bone and lessens the risk of 
having high stress points that could result in a stock interbody device 
breaking through the thin endplate.
    Aprevo\TM\ is indicated for use as an adjunct to fusion at one or 
more levels of the lumbar spine in patients having an ODI >40 and 
diagnosed with severe symptomatic adult spinal deformity (ASD) 
conditions. These patients should have had 6 months of non-operative 
treatment. The devices are intended to be used with autograft and/or 
allogenic bone graft comprised of cancellous and/or cortico-cancellous 
bone graft. These implants may be implanted via a variety of open or 
minimally invasive approaches. These approaches may include anterior 
lumbar interbody fusion or lateral lumbar interbody fusion.
    With respect to the newness criterion at Sec.  419.66(b)(1), 
aprevo\TM\ received FDA Breakthrough Device designation under the name 
``Corra'' on July 1, 2020 for the Corra Anterior, Corra Transforaminal, 
and Corra Lateral Lumbar Fusion System interbody device which is 
intended for use in anterior lumbar interbody fusion, lateral lumbar 
interbody fusion, and transforaminal lumbar interbody fusion under this 
designation. The applicant received 510(k) clearance from FDA for the 
Intervertebral Body Fusion Device (anterior lumbar interbody fusion and 
aprevo\TM\ lateral lumbar interbody fusion devices) on December 3, 
2020. The applicant also received 510(k) clearance from FDA for the 
Transforaminal Intervertebral Body Fusion (IBF) device on June 30, 
2021. We received the application for a new device category for 
transitional pass-through payment status for aprevo\TM\ on May 27, 
2021, which is within 3 years of the date of the initial FDA marketing 
authorization of both indications. We are inviting public comment on 
whether aprevo\TM\ meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, aprevo\TM\ is integral to the service 
provided, is used for one patient only, comes in contact with human 
tissue and is surgically inserted in a patient until the procedure is 
completed. The applicant also claimed that aprevo\TM\ meets the device 
eligibility requirements of Sec.  419.66(b)(4) because it is not an 
instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered, and it is not a supply or material 
furnished incident to a service. We are inviting public comments on 
whether aprevo\TM\ meets the eligibility criteria at Sec.  419.66(b).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as

[[Page 44582]]

an outpatient service as of December 31, 1996. The applicant describes 
aprevo \TM\ as an interbody fusion implant that stabilizes the lumbar 
spinal column and facilitates fusion during lumbar fusion procedures 
indicated for the treatment of spinal deformity. Per the applicant, no 
previous device categories for pass-through payment have encompassed 
the device. In addition, per the applicant, the possible existing pass-
through codes: C1821 (Interspinous process distraction device 
(implantable)), C1776 (Joint device (implantable)), C1734 (Orthopedic/
device/drug matrix for opposing bone-to-bone or soft tissue-to-bone), 
and C1062 (Intravertebral body fracture augmentation with implant 
(e.g., metal, polymer)) do not appropriately describe aprevo\TM\ 
because none of the existing codes pertain to a patient-specific spinal 
interbody fusion device and, therefore, do not encompass aprevo\TM\.
    We have not identified an existing pass-through payment category 
that describes aprevo\TM\. We are inviting public comment on whether 
aprevo \TM\ meets the device category criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
That a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization. for the indication covered by the 
Breakthrough Device designation. 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 for the indication covered by the Breakthrough Device 
designation in the CY 2020 OPPS/ASC final rule with comment period (84 
FR 61295). Aprevo \TM\ has a Breakthrough Device designation and 
marketing authorization from FDA for the indication covered by the 
Breakthrough Device designation (as explained in more detail in the 
discussion of the newness criterion) and therefore is not evaluated for 
substantial clinical improvement. We note that the applicant was 
granted new technology add-on payments under the Alternative Pathway 
for Breakthrough Devices in the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45132 through 45133).
    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 aprevo\TM\ would 
be reported with HCPCS codes in the following table.
[GRAPHIC] [TIFF OMITTED] TP26JY22.121

    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. As we explained in the CY 2005 OPPS final rule with comment 
period (69 FR 65775), we generally use the lowest APC payment rate 
applicable for use with the nominated device when we assess whether a 
device meets the cost significance criterion, thus increasing the 
probability the device will pass the cost significance test. For our 
calculations, we used APC 5115, which had a CY 2021 payment rate of 
$12,314.76 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 22633 had a device 
offset amount of $6,851.93 at the time the application was received. 
According to the applicant, the cost of aprevo\TM\ is $26,000.
    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 $26,000 for aprevo\TM\ is 211.13 percent of 
the applicable APC payment amount for the service related to the 
category of devices of $12,314.76 (($26,000/$12,314.76) x 100 = 211.13 
percent). Therefore, we believe aprevo\TM\ 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

[[Page 44583]]

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 
$26,000 for aprevo\TM\ is 379.46 percent of the cost of the device-
related portion of the APC payment amount for the related service of 
$6,851.93 (($26,000/$6,851.93) x 100 = 379.46 percent). Therefore, we 
believe aprevo\TM\ 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 $26,000 for aprevo\TM\ and the portion of the APC 
payment amount for the device of $6,851.93 is 155.49 percent of the APC 
payment amount for the related service of $12,314.76 ((($26,000-
$6,851.93)/$12,314.76) x 100 = 155.49 percent). Therefore, we believe 
that aprevo\TM\ meets the third cost significance requirement.
    We are inviting public comment on whether aprevo\TM\ meets the 
device pass-through payment criteria discussed in this section, 
including the cost criterion for device pass-through payment status.
(2) MicroTransponder[supreg] ViviStim[supreg] Paired Vagus Nerve 
Stimulation (VNS) System (Vivistim[supreg] System)
    MicroTransponder, Inc. submitted an application for a new device 
category for transitional pass-through payment status for the 
ViviStim[supreg] Paired VNS System (Vivistim[supreg] System) for CY 
2023. Per the applicant, the Vivistim[supreg] System is intended to be 
used to stimulate the vagus nerve during rehabilitation therapy in 
order to reduce upper extremity motor deficits and improve motor 
function in chronic ischemic stroke patients with moderate to severe 
arm impairment.
    According to the applicant, the Vivistim[supreg] System is an 
active implantable medical device that is comprised of four main 
components: (1) an Implantable Pulse Generator (IPG), (2) an 
implantable Lead, (3) Stroke Application & Programming Software (SAPS), 
and (4) a Wireless Transmitter (WT). The IPG and Lead comprise the 
implantable components; the SAPS and WT comprise the non-implantable 
components.
    The applicant asserts that the key feature of the biochemical 
process that underlies neural pathway development is called 
neuroplasticity. The applicant describes neuroplasticity as a complex 
biochemical process that is necessary for establishing new synaptic 
connections. The applicant further states it is widely understood that 
vagus nerve stimulation triggers the brain to release a burst of 
neuromodulators, such as acetylcholine and norepinephrine, which are 
enablers of neuroplasticity. In addition, the applicant further states 
it is understood that pairing neuromodulator bursts with events 
increases brain plasticity, which in turn increases the formation of 
new neural connections.\14\ Per the applicant, the use of the external 
paired stimulation controller to precisely pair VNS with rehabilitation 
movements is essential to creating neuroplasticity in patients who have 
upper limb deficits, and this ``event-pairing'' of movement with VNS 
that generates long-lasting plasticity in the motor and sensory cortex 
leads to the restored motor function observed in clinical studies.\15\
---------------------------------------------------------------------------

    \14\ Meyers EC, Solorzano BR, James J, Ganzer PD, Lai ES, 
Rennaker RL 2nd, Kilgard MP, Hays SA. Vagus Nerve Stimulation 
Enhances Stable Plasticity and Generalization of Stroke Recovery. 
Stroke. 2018 Mar;49(3):710-717.
    \15\ Hays SA, Rennaker RL, Kilgard MP. Targeting plasticity with 
vagus nerve stimulation to treat neurological disease. Prog Brain 
Res. 2013;207:275-299. doi:10.1016/B978-0-444-63327-9.00010-2.
---------------------------------------------------------------------------

    The applicant specifies the SAPS and WT are non-implantable and are 
collectively called the External Paired Stimulation Controller. The 
applicant specifies the IPG and implantable Lead are implantable 
components. Per the applicant, the External Paired Stimulation 
Controller allow the implanted components (the IPG and Lead) to 
stimulate the vagus nerve while rehabilitation movement occurs through 
the following process: (1) The implantable Lead electrodes are attached 
to the left vagus nerve in the neck; (2) The implantable Lead is 
tunneled from the neck to the chest where it is connected to the IPG; 
(3) The IPG is placed subcutaneously (or sub-muscularly) in the 
pectoral region; (4) Following implantation of the IPG and stimulation 
Lead, the External Paired Stimulation Controller enables real-time 
``event-pairing'' of vagus nerve stimulation and rehab movements; (5) 
The IPG and the implantable Lead stimulate the vagus nerve while 
rehabilitation movements occur; and (6) A therapist initiates the 
stimulation using a USB push-button or mouse click to synchronize the 
vagus nerve stimulation with rehabilitation movements to maximize the 
clinical effect. Patients undergo in-clinic rehabilitation, where vagus 
nerve stimulation is actively paired with rehabilitation by a 
therapist. Following in-clinic rehabilitation paired with vagus nerve 
stimulation, the patient can continue using the device at home. When 
directed by a physician, the patient can initiate at-home use by 
swiping a magnet over the IPG implant site which activates the IPG to 
deliver stimulation while rehabilitation movements are performed
    With respect to the newness criterion at Sec.  419.66(b)(1), 
Vivistim[supreg] System was granted FDA Breakthrough Device Designation 
effective February 10, 2021 for use in stimulating the vagus nerve 
during rehabilitation therapy in order to reduce upper extremity motor 
deficits and improve motor function in chronic ischemic stroke patients 
with moderate to severe arm impairment. The applicant states the 
Vivistim[supreg] System received FDA premarket approval (PMA) on August 
27, 2021 as a Class III implantable device for the same indication as 
the one covered by the Breakthrough Device designation. We received the 
application for a new device category for transitional pass-through 
payment status for the Vivistim[supreg] System on September 1, 2021, 
which is within 3 years of the date of the initial FDA marketing 
authorization. We are inviting public comment on whether the 
Vivistim[supreg] System meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, VNS System is integral to the service 
provided, is used for one patient only, comes in contact with human 
tissue, and is surgically implanted or inserted (either permanently or 
temporarily) into the patient. We note that the external components 
SAPS and WT are not implanted in a patient and do not come in contact 
with the human tissue as required by Sec.  419.66(b)(3). The applicant 
also claimed that VNS System meets the device eligibility requirements 
of Sec.  419.66(b)(4) because it is not an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, and it is not a supply or material furnished incident to a 
service. However, we note that the external non-implantable components 
SAPS and WT may be an instrument, apparatus, implement, or item for 
which depreciation and financing expenses are recovered and may be 
considered depreciable assets as described in Sec.  419.66(b)(4). We 
are inviting public comments on whether VNS System

[[Page 44584]]

meets the eligibility criteria at Sec.  419.66(b).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996.
    According to the applicant, there are several device categories 
that are similar to or related to the proposed device category. The 
applicant stated that there are five HCPCS device category codes 
describing neurostimulation devices that are similar to the 
Vivistim[supreg] System, listed in the following table below.
[GRAPHIC] [TIFF OMITTED] TP26JY22.122

    Per the applicant, the codes in the table above do not encompass 
the Vivistim[supreg] System because none of the codes feature an 
external paired stimulation controller to actively pair stimulation 
with rehabilitation by a clinician, which is integral to the function 
and clinical benefit of the device, and the ViviStim[supreg] System 
does not include a rechargeable battery or charging system. The 
following paragraphs include the applicant's description of each 
related device category, the distinguishing device features and/or 
accessories of devices included in each of these categories, and the 
applicant's rationale for why the Vivistim[supreg] System device is not 
encompassed by these existing device categories.
    Per the applicant, the Vivistim[supreg] System and similar device 
category codes that have preceded it (C1820, C1822, C1823, C1825) are 
distinct from the C1767 device category because of distinguishing 
device features and/or accessories not currently described by C1767.
    The applicant stated that the C1767 was created in 2000 and was the 
first category for non-rechargeable neurostimulator generators. Per the 
applicant, the C1767 code currently describes multiple non-rechargeable 
neurostimulator generator devices that are approved to treat a wide 
variety of conditions. The applicant stated it is aware of currently 
marketed implantable, non-rechargeable vagus nerve stimulation devices, 
such as the VNS Therapy[supreg] System (LivaNova, PLC) which are 
described by C1767. Further, the applicant stated it is aware that CMS 
does not acknowledge indication for use alone as a reasonable basis to 
establish a new device category. According to the applicant, the VNS 
Therapy[supreg] System (LivaNova, PLC) has different device components 
and therapy delivery than the Vivistim[supreg] System. Per the 
applicant, the LivaNova VNS Therapy[supreg] System implantable 
neurostimulators differ from the Vivistim[supreg] System in a number of 
ways. Specifically, according to the applicant, VNS Therapy[supreg] 
System neurostimulators are ``always on'' and send periodic pulses to 
deliver therapy over the life of the device, whereas the 
Vivistim[supreg] System is actively paired with rehabilitation 
movements by a clinician to deliver therapy. In addition, the applicant 
stated the VNS Therapy[supreg] System is used to treat neurological 
disorders such as epilepsy and treatment resistant depression, whereas 
the Vivistim[supreg] System is used to treat upper limb motor deficits 
in ischemic stroke survivors. The applicant concluded C1767 does not 
encompass the Vivistim[supreg] System.
    Per the applicant, C1820 describes an implantable neurostimulator 
that includes a rechargeable battery and charging system. The applicant 
stated it is aware of several marketed devices that are described by 
device category C1820 which was created in CY 2006. The applicant 
concluded C1820 does not encompass the Vivistim[supreg] System. Per the 
applicant, C1822 describes an implantable neurostimulator, which 
delivers ``high-frequency'' stimulation (10 kHz) and is provided with a 
rechargeable battery and charging system. The applicant stated it is 
aware of only one currently marketed device that is described by this 
device category, the HF10[supreg] Spinal Cord Stimulator (Nevro Corp.). 
The applicant stated the Vivistim[supreg] System is not a ``high-
frequency'' stimulator as described by C1822. The applicant stated the 
paired stimulation using the Vivistim[supreg] System is delivered at a 
maximum of 30 Hz, whereas spinal cord stimulation using the 
HF10[supreg] (Nevro Corp.) is delivered at 10 kHz. The applicant 
concluded C1822 does not encompass the Vivistim[supreg] System.

[[Page 44585]]

    According to the applicant, C1823 describes an implantable 
neurostimulator, which is nonrechargeable and includes transvenous 
sensing and stimulation leads. The applicant stated that it is aware of 
only one currently marketed device that is described by C1823, the 
remed[emacr] System[supreg] Phrenic Nerve Stimulator (Respicardia, 
Inc.). This device category code does not encompass the 
Vivistim[supreg] System. According to the applicant, the stimulation 
lead included in the Vivistim[supreg] System is placed onto the vagus 
nerve and is not transvenously placed to stimulate the phrenic nerve. 
In addition, the applicant asserted the Vivistim[supreg] System does 
not include a sensing lead. The applicant concluded C1823 does not 
encompass the Vivistim[supreg] System.
    Per the applicant, C1825 describes an implantable neurostimulator 
which is nonrechargeable and includes a carotid sinus baroreceptor 
lead. The applicant stated it is aware of only one currently marketed 
device that is described by C1825, the BaroStim Neo\TM\ (CVRx, Inc.). 
According to the applicant, the stimulation lead included in the 
ViviStim[supreg] System is placed onto the vagus nerve and is not 
placed on the carotid sinus. The applicant concluded C1825 does not 
encompass the Vivistim[supreg] System.
    The applicant has asserted that the Vivistim[supreg] System is 
distinct from HCPCS codes C1820, C1822, C1823 and C1825 due to 
distinguishing features unique to these codes. These unique features 
include rechargeable batteries, high frequency stimulation, transvenous 
sensors and stimulators and unique placement of stimulators. With 
respect to C1767, however, the applicant's argument is that the 
Vivistim[supreg] System is not ``always on'' and is paired to an 
external stimulation controller to allow for clinician-controlled 
stimulation during rehabilitation, and therefore is unlike the non-
rechargeable implantable neurostimulator of the VNS Therapy[supreg] 
System (LivaNova, PLC), which is described by C1767. It is our 
understanding, however, that implantable neurostimulators for epilepsy 
and depression are not ``always on'', but are programmed to turn on and 
off in specific cycles as determined by a clinician. Furthermore, in 
the case of treatment for epilepsy, a neurostimulator can be turned on 
by the patient with a hand held magnet if an impending seizure is 
sensed, and the neurostimulator can similarly be turned off by the 
patient during certain activities, such as speaking, exercising, or 
eating. As per the application, the IPG of the Vivistim[supreg] System 
can also be patient-engaged with a magnetic card, allowing the patient 
to continue therapy at home. In this context, we believe the 
Vivistim[supreg] System may be similar to the devices currently 
described by C1767, and therefore the Vivistim[supreg] System may also 
be appropriately described by C1767. We are inviting public comment on 
whether the Vivistim[supreg] System meets the device category 
criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
That a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization for the indication covered by the 
Breakthrough Device designation. 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 for the indication covered by the Breakthrough Device 
designation in the CY 2020 OPPS/ASC final rule with comment period (84 
FR 61295). The Vivistim[supreg] System has a Breakthrough Device 
designation and marketing authorization from FDA for the indication 
covered by the Breakthrough Device designation (as explained in more 
detail in the discussion of the newness criterion) and therefore is not 
evaluated for substantial clinical improvement. We note that the 
applicant has also submitted an application for IPPS New Technology 
Add-on payments for FY 2023 Payment under the Alternative Pathway for 
Breakthrough Devices (87 FR 28349 through 28350).
    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 insertion 
procedure for the Vivistim[supreg] System implantable pulse generator 
(IPG) and stimulation lead would be reported with the HCPCS Level I CPT 
code 64568 (Incision for implantation of cranial nerve (e.g., vagus 
nerve) neurostimulator electrode array and pulse generator).
    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. As we explained in the CY 2005 OPPS final rule (69 FR 65775), 
we generally use the lowest APC payment rate applicable for use with 
the nominated device when we assess whether a device meets the cost 
significance criterion, thus increasing the probability the device will 
pass the cost significance test. For our calculations, we used APC 5465 
Level 5 Neurostimulator and Related Procedures, which had a CY 2021 
payment rate of $29,444.52 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 
64568 had a device offset amount of $25,236.9 at the time the 
application was received. According to the applicant, the cost of the 
Vivistim[supreg] System is $36,000.00.
    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 $36,000.00 for Vivistim[supreg] System is 
122.26 percent of the applicable APC payment amount for the service 
related to the category of devices of $29,444.52 (($36,000.00/
$29,444.52) x 100 = 122.26 percent). Therefore, we believe 
Vivistim[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 $36,000.00 for 
Vivistim[supreg] System is 142.65 percent of the cost of the device-
related portion of the APC payment amount for the related service of 
$25,236.90 (($36,000.00/$25,236.90) x 100 = 142.65 percent). Therefore, 
we believe that Vivistim[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

[[Page 44586]]

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 $36,000.00 
for Vivistim[supreg] System and the portion of the APC payment amount 
for the device of $25,236.90 is 36.55 percent of the APC payment amount 
for the related service of $29,444.52 (($36,000.00-$25,236.90)/
$29,444.52) x 100 = 36.55 percent). Therefore, we believe that 
Vivistim[supreg] System meets the third cost significance requirement.
    We are inviting public comment on whether Vivistim[supreg] System 
meets the device pass-through payment criteria discussed in this 
section, including the cost criterion for device pass-through payment 
status.
2. Traditional Device Pass-Through Applications
(1) The BrainScope TBI (Model: Ahead 500)
    BrainScope Company Inc. submitted an application for a new device 
category for transitional pass-through payment status for the 
BrainScope Ahead 500 system (hereinafter referred to as the BrainScope 
TBI) for CY 2023. The BrainScope TBI is a handheld medical device and 
decision-support tool that uses artificial intelligence (AI) and 
machine learning technology to identify objective brain-activity based 
biomarkers of structural and functional brain injury in patients with 
suspected mild traumatic brain injury (mTBI). According to the 
applicant, the BrainScope TBI is an FDA-cleared, portable, non-
invasive, point-of-care device and disposable headset intended to 
provide results and measures to aid in the rapid, objective, and 
accurate diagnosis of mTBI. Per the applicant, the BrainScope TBI is 
intended to be used in emergency departments (ED), urgent care centers, 
clinics, and other environments where used by trained medical 
professionals under the direction of a physician.
    According to the applicant, the BrainScope TBI is comprised of two 
elements: (1) the Ahead 500, a disposable forehead-only 8-electrode 
headset temporarily applied to the patient's skin to assess brain 
injury (the wounded area) which records electroencephalogram (EEG) 
signals; and (2) a reusable handheld device (hereinafter ``Handheld 
Device''), which includes a standard commercial off-the-shelf handheld 
computer connected to a custom manufactured Data Acquisition Board 
(DAB) via a permanently attached cable. The applicant stated that the 
BrainScope software (including proprietary BrainScope algorithms) and a 
kiosk mode application running on Android are loaded onto an off-the-
shelf handheld computer configuration. The disposable headset is 
attached to the DAB, which collects the EEG signal and passes it as a 
digital signal to the Handheld Device to perform the data processing 
and analysis.
    According to the applicant, the BrainScope TBI device is intended 
to record, measure, analyze, and display brain electrical activity 
utilizing the calculation of standard quantitative EEG (qEEG) 
parameters from frontal locations on a patient's forehead. Patient 
information is transferred to electronic health records via USB 
connected to a computer. The BrainScope TBI calculates and displays raw 
measures for the following standard qEEG measures: Absolute and 
Relative Power, Asymmetry, Coherence and Fractal Dimension. The 
applicant asserts that these raw measures are intended to be used for 
post-hoc analysis of EEG signals for interpretation by a qualified 
user. Per the applicant, the device can be used as a screening tool and 
aid in determining the medical necessity of head computerized 
tomography (CT) scanning.
    With respect to the newness criterion at Sec.  419.66(b)(1), on 
September 11, 2019, the applicant received 510(k) clearance from FDA 
for the BrainScope TBI as a Class II device for use as an adjunct to 
standard clinical practice to aid in the evaluation of patients who 
have sustained a closed head injury, and have a Glasgow Coma Scale 
(GCS) score of 13-15 (including patients with concussion/mild traumatic 
brain injury (mTBI)). We received the application for a new device 
category for transitional pass-through payment status for the 
BrainScope TBI on February 23, 2022, which is within 3 years of the 
date of the initial FDA marketing authorization. We are inviting public 
comments on whether the BrainScope TBI meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the BrainScope TBI is integral to the 
service provided and is used for one patient only. Per the applicant, 
the Ahead 500 component records EEG signals via a disposable forehead-
only 8-electrode headset and is temporarily applied to the patient's 
skin to assess brain injury. We note that while the Ahead 500 component 
is used for one patient only and it is temporarily applied to the 
patient's skin, the device is not surgically implanted or inserted or 
applied in or on a wound or other skin lesion, as required by 42 CFR 
418.66(b)(3). We further note that the other component of the 
BrainScope TBI, the Handheld Device, does not come in contact with the 
patient's tissue, and the device is not surgically implanted or 
inserted or applied in or on a wound or other skin lesion, as required 
by Sec.  418.66(b)(3). Per the applicant, the Handheld Device is used 
by multiple patients. We further question whether this device may be an 
instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered in accordance with the device 
eligibility requirements of Sec.  419.66(b)(4). The applicant did not 
indicate if the BrainScope TBI is a supply or material furnished 
incident to a service. We are inviting public comments on whether the 
BrainScope TBI meets the eligibility criteria at Sec.  419.66(b).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. The 
applicant has not identified any existing pass-through payment category 
that describes the BrainScope TBI. Upon review, it does not appear that 
there are any existing pass-through payment categories that might apply 
to the BrainScope TBI. We are inviting public comment on whether the 
BrainScope TBI meets the device category criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of FDA's Breakthrough Devices Program and has received 
FDA marketing authorization for the indication covered by the 
Breakthrough Device designation. The applicant indicated that it is 
aware of a marketed medical device COGNISION, which fits the proposed 
additional device category in addition to the BrainScope TBI. According 
to the applicant, the

[[Page 44587]]

COGNISION[supreg] System (COGNISION[supreg]) is cleared by FDA for use 
by qualified clinical professionals in private practice offices or 
small clinical settings for the acquisition, display, analysis, 
storage, reporting and management of EEG and auditory evoked potentials 
(AEP) information. The applicant stated that the COGNISION[supreg] 
cloud-powered electrophysiologic testing system evaluates patients with 
neurological disorders, such as dementia and concussion. According to 
the applicant, by measuring the electrical activity in the brain that 
is responsible for information processing, COGNISION[supreg] assesses 
cognitive function. The applicant also pointed out that 
COGNISION[supreg] evaluates working memory, focal attention, executive 
function, and brain processing speed through Event Related Potential 
(ERP) and qEEG tests. The applicant acknowledged that COGNISION[supreg] 
also measures hearing deficits which can be co-morbid with cognitive 
disorders.
    The applicant stated that the BrainScope TBI represents a 
substantial clinical improvement over existing technology. With respect 
to this criterion, the applicant submitted studies that examined the 
impact of the BrainScope TBI as a brain injury adjunctive interpretive 
electroencephalograph assessment aid. Broadly, the applicant outlined 
the following areas in which it stated the BrainScope TBI would provide 
a substantial clinical improvement over existing technologies: (1) 
decreased rate of repeat/subsequent diagnostic or therapeutic 
interventions, (2) more rapid beneficial resolution of the disease 
process treated because of the use of the device, and (3) reduced 
recovery time when used for the treatment mild head injuries (mTBI).
    In support of its first claim that the BrainScope TBI decreases the 
rate of subsequent diagnostic or therapeutic interventions, the 
applicant provided five articles. The first was a multisite, 
prospective observational FDA validation trial performed in the 
U.S.\16\ A total of 720 patients (18-85 years) meeting inclusion/
exclusion criteria were enrolled at 11 U.S. EDs. Ninety-seven percent 
of study participants had a Glasgow Coma Scale (GCS) of 15, with the 
first and third quartiles being 15 (interquartile range = 0) at the 
time of the evaluation. Standard clinical evaluations were conducted, 
and 5 to 10 minutes of EEG was acquired from frontal and frontotemporal 
scalp locations. Using an a priori derived EEG-based classification 
algorithm developed on an independent population and applied to this 
validation population prospectively, the likelihood of each subject 
being CT+ was determined, and performance metrics were computed 
relative to adjudicated CT findings. The authors stated that by using 
an EEG-based biomarker, high accuracy of predicting the likelihood of 
being CT+ was obtained, with high normalized power variance (NPV) and 
sensitivity to any traumatic bleeding and to hematomas. Per the 
authors, specificity was significantly higher than standard CT decision 
rules and the short time to acquire results and the ease of use in the 
ED environment suggests that EEG-based classifier algorithms have 
potential to impact triage and clinical management of head-injured 
patients. Both the applicant and the authors indicated that the 
BrainScope TBI Structural Injury Classifier (SIC) \17\ biomarker 
demonstrated extremely high sensitivity in this validation study. 
Sensitivity for those who are CT+ with >=1mL blood was 98.6 percent 
(72/73, 95% CI = 92.6%-100.0 percent), with an area under the curve 
(AUC) of 0.82. It is noted that this study could not be run as a 
randomized controlled trial (RCT) as the individual site institutional 
review boards (IRBs) would not allow random assignment to determination 
to receive a CT, which was entirely at the discretion of the clinician. 
Results supported the potential to impact triage and clinical 
management and help in avoidance of unnecessary CT scans. High NPV 
supports confidence added to decisions not to perform a CT scan. In 
this validation study, the BrainScope TBI's SIC biomarker reported 2% 
false negatives (FNs), none of which were considered by clinical sites 
or FDA to be ``clinically important,'' and all of which were confirmed 
in follow-up as requiring no further care. In the same large FDA 
prospective validation study, the BrainScope's SIC biomarker had 
specificity of 51.60 percent (291/564, 95 percent CI = 48.05 percent-
55.13 percent). In the same population, SIC specificity outperformed 
that of the standard clinical CT decision rules, with the New Orleans 
Criteria (NOC) = 8.6 percent and Canadian CT Head Rule (CCHR) = 31 
percent. Higher specificity relative to standard practice supports 
reduced CT referrals. In the same large FDA prospective validation 
study specificity of the BrainScope TBI's SIC biomarker was shown to 
scale with severity of clinical functional impairment, with 
specificities of 76.7 percent, 58.8 percent, and 22.2 percent for none, 
mild, and moderate functional impairment, respectively.
---------------------------------------------------------------------------

    \16\ Hanley D, Prichep LS, Bazarian J, Huff JS, Naunheim R, 
Garrett J, Jones EB, Wright DW, O'Neill J, Badjatia N, Gandhi D. 
Emergency department triage of traumatic head injury using a brain 
electrical activity biomarker: a multisite prospective observational 
validation trial. Academic emergency medicine. 2017 May;24(5):617-
27.
    \17\ The SIC is an electrophysiological based biomarker derived 
from selected EEG features and a small set of clinical associated 
symptoms, using machine learning and advanced classification 
algorithms to identify those features which optimally characterize 
the pattern of changes in brain function that occur with head 
injury.
---------------------------------------------------------------------------

    The second article was a retrospective secondary study of the 
independent prospective FDA validation trial that demonstrated the 
efficacy of (1) an automatic SIC for the likelihood of injury visible 
on a CT (CT+) and (2) an EEG-based Brain Function Index (BFI) to assess 
functional impairment in minimally impaired, head-injured adults 
presenting within 3 days of injury.\18\ In this retrospective analysis, 
the impact on the biomarker performance in patients who presented with 
or without drug and alcohol (DA) was studied. DA-ED visits represent an 
increasing fraction of the head-injured population seen in the ED. Such 
patients present a challenge to the evaluation of head injury and 
determination of need for CT scan and further clinical pathways. This 
effort examined whether an EEG-based biomarker could aid in reducing 
unnecessary CT scans in the intoxicated ED population. SIC sensitivity 
was not significantly impacted by the presence of DA. Although 
specificity decreased, it remained several times higher than obtained 
using standard CT decision rules. Furthermore, according to the 
authors, the potential to reduce the number of unnecessary scans by 
approximately 30% was demonstrated when the BrainScope TBI SIC was 
integrated into CT clinical triage. According to the authors, the BFI 
was demonstrated to be independent of the presence of DA.
---------------------------------------------------------------------------

    \18\ Michelson, E., Huff, J.S., Garrett, J., & Naunheim, R. 
(2019). Triage of mild head-injured intoxicated patients could be 
aided by use of an electroencephalogram-based biomarker. Journal of 
neuroscience nursing, 51(2), 62-66.
---------------------------------------------------------------------------

    The third article was a retrospective clinical study conducted in 
the U.S.\19\ Two potential initial evaluation pathways were compared 
for CT referrals: a. Clinical Site Practice Referral, relying on 
clinical judgement of the ED physician according to site standard of 
care; and b. EEG-based

[[Page 44588]]

classification algorithm assessment, relying on the ternary output of 
the SIC (positive, negative, equivocal) to inform CT referral decision. 
The SIC is an electrophysiological based biomarker derived from 
selected EEG features and a small set of clinical associated symptoms, 
using machine learning and advanced classification algorithms to 
identify those features which optimally characterize the pattern of 
changes in brain function that occur with head injury. Of the 91 
patients referred to CT, 13 were read as positive and 78 as negative. 
These 91 CT referrals made using the clinical judgement decision 
pathway resulted in 78 patients who were found to be CT negative. Using 
the second pathway with input from the EEG based classification 
algorithm assessment (SIC) resulted in 63 patients who were positive 
for CT referral. Thus, the researchers stated that the use of the EEG-
based algorithm decision pathway to aid in referral for CT scanning 
would have resulted in 63 patients being referred for CT scans instead 
of 91 referrals made following standard clinical site practice. Per the 
researchers, this represents a reduction of 28 fewer head CT scans, a 
30.8 percent (= (91-63)/91) reduction. According to the researchers, 
while still early in the clinical use of this EEG based biomarker, this 
data demonstrates that the BrainScope TBI medical device can provide 
objective information to aid in the initial assessment of mTBI patients 
in the ED. The researchers suggested that integrating this data into 
the decision-making process for CT referrals would have led to a 
significant reduction of ~31 percent in CT scanning. The researchers 
concluded that this decrease in CT use and its associated radiation was 
achieved without incurring any false negative cases (100 percent 
sensitivity).
---------------------------------------------------------------------------

    \19\ Naunheim, R., Koscso, M. K., & Poirier, R. (2019). 
Reduction in unnecessary CT scans for head-injury in the emergency 
department using an FDA cleared device. The American journal of 
emergency medicine, 37(10), 1987-1988.
---------------------------------------------------------------------------

    The fourth article was a retrospective clinical study conducted in 
the U.S.\20\ The study authors found that heightened awareness of the 
potential short and long-term consequences of mild traumatic brain 
injury (mTBI or concussion) has resulted in an increase in ED visits 
for traumatic head injury, even as the volume of overall ED visits has 
remained stable over the same period of time.\21\ While the vast 
majority (~95%) of these head injured patients are mild, >80% receive 
CT scans of which ~91% are found to be negative.\22\ The rising number 
of negative CT findings, cost, radiation exposure, and ED resource 
utilization, has led to an increased need for reliable predictors of 
intracranial injury in the mild head injured population.\23\ Based on a 
retrospective analysis of data collected in the BrainScope's multisite 
independent FDA validation study, it was found that had the SIC been 
used in determination as an input for CT scan referral, there would 
have been a reduction of false positives of 33.3% (408272/408). In 
addition, according to the study, a significantly lower false discovery 
rate of 65% (= 272/416) was achieved compared to the clinical site 
practice (one-sided comparison, p = 0.01).
---------------------------------------------------------------------------

    \20\ Huff, J.S., Naunheim, R., Dastidar, S.G., Bazarian, J., & 
Michelson, E.A. (2017). Referrals for CT scans in mild TBI patients 
can be aided by the use of a brain electrical activity biomarker. 
The American Journal of Emergency Medicine, 35(11), 1777-1779.
    \21\ Marin, J.R., Weaver, M.D., Yealy, D.M., & Mannix, R.C. 
(2014). Trends in visits for traumatic brain injury to emergency 
departments in the United States. Jama, 311(18), 1917-1919.
    \22\ Korley, F.K., Kelen, G.D., Jones, C.M., & Diaz-Arrastia, R. 
(2016). Emergency department evaluation of traumatic brain injury in 
the United States, 2009-2010. The Journal of head trauma 
rehabilitation, 31(6), 379.
    \23\ American College of Emergency Physicians. (2015). ACEP 
Announces List of Tests as Part of Choosing Wisely Campaign.
---------------------------------------------------------------------------

    The fifth article was a retrospective clinical study conducted in 
the U.S.\24\ This study compares the predictive power using that 
algorithm (which includes loss of consciousness (LOC) and amnesia), to 
the predictive power of LOC alone or LOC plus traumatic amnesia. Study 
participants consisted of ED patients 18-85 years who presented within 
72 hours of closed head injury, with Glasgow Coma Scale (GCS) between 
12-15. 680 patients with known absence or presence of LOC were enrolled 
(145 CT + and 535 CT - patients). 5-10 min of eyes closed EEG was 
acquired using the Ahead 300 handheld device, from frontal and 
frontotemporal regions. The same classification algorithm methodology 
was used for both the EEG-based and the LOC-based algorithms. 
Predictive power was evaluated using area under the receiver operator 
characteristic (ROC) curve (AUC) and odds ratios. The Quantitative EEG-
based classification algorithm demonstrated significant improvement in 
predictive power compared with LOC alone, both in improved AUC (83% 
improvement) and odds ratio (increase from 4.65 to 16.22). Adding 
retrograde amnesia (RGA) and/or post-traumatic amnesia (PTA) to LOC was 
not improved over LOC alone. The AUC for LOC only predictive method was 
0.68, and for LOC +RGA/PTA was 0.69. The AUC for the BrainScope 
structural injury classifier is 0.83, which represents an 83% 
improvement over the standard clinical predictors (LOC and/or RGA). 
Rapid triage of TBI relies on strong initial predictors. The authors 
concluded that the addition of an electrophysiological based marker was 
shown to outperform report of LOC alone or LOC plus amnesia, in 
determining risk of an intracranial bleed. In addition, according to 
the authors, ease of use at point-of-care, non-invasive, and rapid 
result using such technology suggests significant value added to 
standard clinical prediction.
---------------------------------------------------------------------------

    \24\ Hack, D., Huff, J.S., Curley, K., Naunheim, R., Dastidar, 
S.G., & Prichep, L.S. (2017). Increased prognostic accuracy of TBI 
when a brain electrical activity biomarker is added to loss of 
consciousness (LOC). The American Journal of Emergency Medicine, 
35(7), 949-952.
---------------------------------------------------------------------------

    With respect to the claim that the BrainScope TBI provides for a 
more rapid, beneficial resolution of the disease process treated, the 
applicant provided a consensus modeling retrospective clinical study 
conducted in the U.S.\25\ The study researchers developed a care map 
that included each step of evaluation of mTBI (Glasgow Coma Scale Score 
13-15), from initial presentation to the ED to discharge. Time spent at 
each step was estimated by study-affiliated emergency physicians and 
nurses. The study subsequently validated time estimates using 
retrospectively collected, real-time data at two EDs. Length of stay 
(LOS) time differences between admission and discharged patients were 
calculated for patients being evaluated for mTBI. Evaluation of time 
from ED intake to discharge in a mTBI population was modeled by a 
medical consensus group and validated in retrospective review of real-
time data. Mean time was 6.6 hours. Time related to head CT comprised 
about one-half of the total LOS. The authors concluded that limiting 
use of head CT as part of the workup of mTBI to more serious cases may 
reduce time spent in the ED and potentially improve overall ED 
throughput.
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    \25\ Michelson, E.A., Huff, J.S., Loparo, M., Naunheim, R.S., 
Perron, A., Rahm, M., & Berger, A. (2018). Emergency department time 
course for mild traumatic brain injury workup. Western Journal of 
Emergency Medicine, 19(4), 635.
---------------------------------------------------------------------------

    To support the claim of a decreased rate of subsequent diagnostic 
or therapeutic interventions and reduced recovery time using the 
device, the applicant provided a retrospective clinical pilot study 
conducted in the U.S.\26\ that focused on the immediate use and 
implementation of the BrainScope TBI in the ED environment for the 
triage of 19 head-injured

[[Page 44589]]

patients: ages 18 to 85, GCS 13-15, within 72 hours of injury, from 
April 26th to May 1, 2021. According to this study, the results 
reinforced the clinical utility of the BrainScope technology to be a 
reliable tool for clinicians to proactively catch injuries that may not 
have been sent for CT and to reduce unnecessary CT's, thus reducing 
LOS. The author indicated that the BrainScope TBI was an effective 
decision-making aide in determining the appropriate use of imaging for 
closed head injuries. The author stated that within one rapid EEG test 
at the point of care, the BrainScope provided objective data on both 
brain bleeds and concussions to assist healthcare providers evaluate 
head injured patients. According to the author, this study was 
successful in determining utilization, staff assessment, and patient 
experience of the BrainScope technology in daily use. The author noted 
the results of the trial were positive and demonstrated the following: 
(1) 100 percent patient satisfaction with BrainScope; (2) Improved CT 
utilization in the mild TBI patient population: 60 percent reduction in 
head CT. Decreased radiation exposure. One patient was sent for CT 
after receiving a positive result from BrainScope TBI SIC that was 
found CT positive and who may not have been sent otherwise; and (3) 
Decreased LOS for patients who were BrainScope negative for structural 
injury. An average of 16-minute testing times had a positive impact on 
LOS for patients who were BrainScope negative.
---------------------------------------------------------------------------

    \26\ Clay, M.S. Clinical Utility of an EEG Based Biomarker for 
the Triage of Head Injured Patients in the ED: INOVA Pilot Study.
---------------------------------------------------------------------------

    In support of the claim that the BrainScope TBI reduces recovery 
time, the applicant submitted four articles. The first was a 
prospective clinical study conducted in the U.S.\27\ The potential 
clinical utility of a quantitative EEG-based BFI as a measure of the 
presence and severity of functional brain injury was studied as part of 
an independent prospective validation trial. The BFI was derived using 
qEEG features associated with functional brain impairment reflecting 
current consensus on the physiology of concussive injury. The applicant 
asserted that the results supported FDA clearance for the BFI as a 
quantitative marker of brain function impairment. Per the applicant, a 
multinomial logistic regression analysis demonstrated odds ratios 
(versus controls) of the mild and moderate functionally impaired groups 
were significantly different from the odds ratio of the severe group 
(CT+), (p=0.0009, p=0.0026, respectively). Per the applicant, 
regression slopes for likelihood of group membership demonstrated that 
BFI scaled with severity of impairment contributed to earlier 
identification and intervention of concussion, which is associated with 
better outcomes.
---------------------------------------------------------------------------

    \27\ Hanley D, Prichep LS, Badjatia N, Bazarian J, Chiacchierini 
R, Curley KC, Garrett J, Jones E, Naunheim R, O'Neil B, O'Neill J, 
Wright DW, Huff JS. A Brain Electrical Activity 
Electroencephalographic-Based Biomarker of Functional Impairment in 
Traumatic Brain Injury: A Multi-Site Validation Trial. J 
Neurotrauma. 2018 Jan 1;35(1):41-47. doi: 10.1089/neu.2017.5004. 
Epub 2017 Sep 21. PMID: 28599608.
---------------------------------------------------------------------------

    Another article provided by the applicant to support the claim of 
reduced recovery time associated with the use of the BrainScope TBI, 
was a multisite prospective observational validation trial conducted in 
the U.S.\28\ The study was to validate the classification accuracy of a 
previously derived, machine learning, multimodal, brain electrical 
activity-based Concussion Index (CI) in an independent cohort of 
athletes with concussion. This prospective diagnostic cohort study was 
conducted at 10 clinical sites (i.e., U.S. universities and high 
schools) between February 4, 2017 and March 20, 2019. A cohort 
comprised of a consecutive sample of 207 athletes aged 13 to 25 years 
with concussion and 373 matched athlete controls without concussion 
were assessed with electroencephalography, cognitive testing, and 
symptom inventories within 72 hours of injury, at return to play, and 
45 days after return to play. Variables from the multimodal assessment 
were used to generate a Concussion Index at each time point. Athletes 
with concussion had experienced a witnessed head impact, were removed 
from play for 5 days or more, and had an initial Glasgow Coma Scale 
score of 13 to 15. Participants were excluded for known neurologic 
disease or history within the last year of traumatic brain injury. 
Athlete controls were matched to athletes with concussion for age, sex, 
and type of sport played. Classification accuracy of the CI at time of 
injury using a prespecified cutoff of 70 or less (total range, 0-100, 
where <=70 indicates it is likely the individual has a concussion and 
>70 indicates it is likely the individual does not have a concussion). 
Results included 580 eligible participants with analyzable data, of 
whom 207 had concussion (124 male participants [59.9 percent]; mean 
[standard deviation (SD)] age, 19.4 [2.5] years), and 373 were athlete 
controls (187 male participants [50.1 percent]; mean [SD] age, 19.6 
[2.2] years). The CI had a sensitivity of 86.0 percent (95 percent CI, 
80.5 percent-90.4 percent), specificity of 70.8 percent (95 percent CI, 
65.9 percent-75.4 percent), negative predictive value of 90.1 percent 
(95 percent CI, 86.1 percent-93.3 percent), positive predictive value 
of 62.0 percent (95 percent CI, 56.1 percent-67.7 percent), and area 
under receiver operator characteristic (ROC) curve of 0.89. At day 0, 
the mean [SD] CI among athletes with concussion was significantly lower 
than among athletes without concussion (75.0 [14.0] vs 32.7 [27.2]; P 
<.001). The researchers noted that among athletes with concussion, 
there was a significant increase in the CI between day 0 and return to 
play, with a mean (SD) paired difference between these time points of -
41.2 (27.0) (P <.001). The researchers concluded that these results 
suggest that the multimodal brain activity-based CI has high 
classification accuracy for identification of the likelihood of 
concussion at time of injury and may be associated with the return to 
control values at the time of recovery. According to the researchers, 
the CI has the potential to aid in the clinical diagnosis of concussion 
and in the assessment of athletes' readiness to return to play.
---------------------------------------------------------------------------

    \28\ Bazarian, J.J., Elbin, R.J., Casa, D.J., Hotz, G.A., 
Neville, C., Lopez, R.M., . . . & Covassin, T. (2021). Validation of 
a machine learning brain electrical activity-based index to aid in 
diagnosing concussion among athletes. JAMA network open, 4(2), 
e2037349-e2037349.
---------------------------------------------------------------------------

    The final article provided by the applicant in support of the claim 
of reduced recovery time was a multisite prospective observational 
validation trial conducted in the U.S.\29\ This study was to derive an 
objective multimodal CI using EEG at its core, to identify concussion, 
and to assess change over time throughout recovery. Male and female 
concussed (n = 232) and control (n = 206) subjects 13-25 years were 
enrolled at 12 U.S. colleges and high schools. Evaluations occurred 
within 72 hours of injury, 5 days post-injury, at return-to-play (RTP), 
45 days after RTP (RTP + 45); and included EEG, neurocognitive 
performance, and standard concussion assessments. Concussed subjects 
had a witnessed head impact, were removed from play for >=5 days using 
site guidelines and were divided into those with RTP <14 or >=14 days. 
Part 1 of this paper described the derivation and efficacy of the 
machine learning derived classifier as a marker of concussion. Part 2 
of this paper described significance of

[[Page 44590]]

differences in CI between groups at each time point and within each 
group across time points. Per the researchers, the CI was shown to have 
high accuracy as a marker of likelihood of concussion and stability of 
CI in controls supports reliable interpretation of CI change in 
concussed subjects. The researchers concluded that the objective 
identification of the presence of concussion and assessment of 
readiness to return to normal activity can be aided by use of the CI, a 
rapidly obtained, point of care assessment tool. Sensitivity = 84.9 
percent, specificity = 76.0 percent, and AUC = 0.89 were obtained on a 
test Hold-Out group representing 20 percent of the total dataset. Per 
the study, EEG features reflecting connectivity between brain regions 
contributed most to the CI. CI was stable over time in controls. 
According to the researchers, significant differences in CI between 
controls and concussed subjects were found at time of injury, with no 
significant differences at RTP and RTP + 45. Within the concussed, the 
researchers were able to identify differences in rate of recovery.
---------------------------------------------------------------------------

    \29\ Jacquin AE, Bazarian JJ, Casa DJ, Elbin RJ, Hotz G, Schnyer 
DM, Yeargin S, Prichep LS, and Covassin T. Concussion assessment 
potentially aided by use of an objective multimodal concussion 
index. Journal of Concussion. January 2021. doi:10.1177/
20597002211004333.
---------------------------------------------------------------------------

    Based on the evidence submitted with the application, we note the 
following concerns. We note that most articles and citations provided 
by BrainScope are prospective observational studies or retrospective 
review articles, and most findings appear to be suggestive, rather than 
conclusive, of an association or significant benefit. Within the 
retrospective and prospective studies lacking a control subset, we note 
that some level of selection bias may potentially influence outcomes 
seen in these studies. Further, we note that confounding often occurs 
in both prospective and retrospective studies, which may result in 
misinterpretation of the observed relationships between the dependent 
and independent values. In most of the studies, the authors did not 
address potential confounding issues, which makes it difficult to 
determine whether the BrainScope TBI or the control was effective with 
its results.
    We further note that the applicant provided retrospective clinical 
validation studies,30 31 which describe findings for 
previous BrainScope technology, the BrainScope Ahead 300 handheld 
device, not the nominated BrainScope Ahead 500 handheld device. Per the 
applicant, the BrainScope Ahead 500 improves upon the prior versions of 
BrainScope's own previously FDA-cleared devices. The applicant does not 
provide comparative outcome data between the current and previous 
versions. Additional information regarding comparative outcomes data 
would help inform our assessment of whether the BrainScope TBI Ahead 
500 demonstrates a substantial clinical improvement over existing 
technologies, including the BrainScope Ahead 300. We note concern that 
even though the applicant states that it is a prospective trial the 
paper was noted to be a retrospective secondary study of an independent 
study by FDA.
---------------------------------------------------------------------------

    \30\ Hack, D., Huff, J.S., Curley, K., Naunheim, R., Dastidar, 
S.G., & Prichep, L.S. (2017). Increased prognostic accuracy of TBI 
when a brain electrical activity biomarker is added to loss of 
consciousness (LOC). The American Journal of Emergency Medicine, 
35(7), 949-952.
    \31\ Hanley D, Prichep LS, Bazarian J, Huff JS, Naunheim R, 
Garrett J, Jones EB, Wright DW, O'Neill J, Badjatia N, Gandhi D. 
Emergency department triage of traumatic head injury using a brain 
electrical activity biomarker: a multisite prospective observational 
validation trial. Academic emergency medicine. 2017 May;24(5):617-
27.
---------------------------------------------------------------------------

    Lastly, we note that the cited studies have a small sample size. In 
addition, conclusions in the application regarding the referenced 
observational and retrospective studies about substantial clinical 
improvement appear to be overly broad and imply statistical 
significance, when only a possible association may in fact be 
supported. We further note that the majority of the studies lacked a 
comparator to the existing technologies that the applicant identified 
when assessing the effectiveness of the BrainScope TBI. In addition, 
the applicant identified the COGNISION[supreg] System as an existing 
device, but we did not receive any citations or supporting references 
regarding comparability of these technologies. We also note that there 
are two additional FDA-cleared, potential alternate therapies 
32 33 that could be relevant, but the applicant did not 
provide citations or supporting references regarding comparability 
specifically in the application. Additional information regarding 
comparative outcomes data would help inform our assessment of whether 
the BrainScope TBI demonstrates a significant clinical improvement over 
existing technologies.
---------------------------------------------------------------------------

    \32\ https://abbott.mediaroom.com/2021-01-11-Abbott-Receives-FDA-510-k-Clearance-for-the-First-Rapid-Handheld-Blood-Test-for-Concussions.
    \33\ https://www.mobihealthnews.com/news/syncthink-scores-fda-clearance-ai-system-aid-concussion-diagnosis.
---------------------------------------------------------------------------

    We are inviting public comments on whether the BrainScope TBI 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 BrainScope TBI 
would be reported with HCPCS codes listed in the following table:

[[Page 44591]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.039

    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. As we explained in the CY 2005 OPPS final rule with comment 
period (69 FR 65775), we generally use the lowest APC payment rate 
applicable for use with the nominated device when we assess whether a 
device meets the cost significance criterion, thus increasing the 
probability the device will pass the cost significance test. For our 
calculations, we used APC 5731--Level 1 Minor Procedures, which had a 
CY 2021 payment rate of $24.67 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). 
However, we note that all the HCPCS codes identified by the applicant 
had a device offset amount of $0.00 at the time the application was 
received, including the HCPCS code 96146. Accordingly, we are 
evaluating the cost significance requirements consistent with how we 
previously have treated other items with a device offset amount of 
$0.00 (see 84 FR 61285). According to the applicant, the cost of 
BrainScope TBI (single use disposable electrode headset) is $225.00.
    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 $225.00 for BrainScope TBI is 912.04 percent 
of the applicable APC payment amount for the service related to the 
category of devices of $24.67 (($225/$24.67) x 100 = 912.04 percent). 
Therefore, we believe BrainScope TBI 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). Given that there are no device-related costs in the APC 
payment amount, and the BrainScope TBI has an estimated average 
reasonable cost of $225, we believe that the BrainScope TBI 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 $225 for BrainScope TBI and the portion of the APC 
payment amount for the device of $0.00 exceeds the APC payment amount 
for the related service of $225 by 912.04 percent ((($225-$0.00)/
$24.67) x 100 = 912.04 percent). Therefore, we believe that the 
BrainScope TBI meets the third cost significance requirement.
    We are inviting public comment on whether the BrainScope TBI meets 
the device pass-through payment criteria discussed in this section, 
including the cost criterion for device pass-through payment status.
(2) NavSlim\TM\ and NavPencil
    Elucent Medical, Inc. submitted an application for a new device 
category

[[Page 44592]]

for transitional pass-through payment status for CY 2023 for the 
NavSlim\TM\ and NavPencil (referred to collectively as ``the 
Navigators''). The applicant described the Navigators as single-use 
(disposable) devices for real-time, stereotactic, 3D navigation for the 
excision of pre-defined soft tissue specimens.
    According to the FDA 510(k) Summary (K183400) provided by the 
applicant,\34\ the Navigators are a component of the applicant's 
EnVisio\TM\ Navigation System \35\ which is intended only for the non-
imaging detection and localization (by navigation) of a SmartClip\TM\ 
Soft Tissue Marker (SmartClip\TM\) that has been implanted in a soft 
tissue biopsy site or a soft tissue site intended for surgical 
removal.\36\ We note that the applicant submitted a separate 
application for pass-through payment status for the SmartClip\TM\ for 
CY 2023, as discussed in a subsequent section. The applicant explained 
that the sterile, single-use Navigators affix to an electrocautery 
(surgical cutting) tool and, in combination with the other EnVisio\TM\ 
Navigation System components and the SmartClip\TM\, provide real-time 
intraoperative 3D navigation to the tumor and margin. The applicant 
explained that, at the time of surgical intervention, electromagnetic 
waves delivered by the EnVisio\TM\ Navigation System activate the 
implanted SmartClip\TM\ within a 50cm x 50cm x 35cm volume. The 
applicant further explained that the SmartClip\TM\ contains an 
application-specific integrated circuit (ASIC) which is activated at a 
specific frequency and communicates to the EnVisio\TM\ Navigation 
System the precise, real-time location of both the SmartClip\TM\ and 
the surgical margin, enabling the surgeon to plan the specimen (tumor 
and margin) for excision. The applicant asserted that this data is 
calibrated relative to the tip of the electrocautery device or other 
operating instrument and is displayed in 3D. According to the 
applicant, the Navigators enable intraoperative visualization by 
displaying real-time stereotactic 3D guidance from the tip of the 
surgical tool enabling minimally invasive removal of pre-defined tissue 
specimen (tumor and margin). The applicant stated that surgeons are 
able to visualize the directional distances to make excisional plane of 
each margin in-situ without using conventional imaging (e.g., 
ultrasound).
---------------------------------------------------------------------------

    \34\ As explained later in this section, the applicant received 
FDA 510(k) clearance for the EnVisio\TM\ Navigation System, which 
includes the Navigators.
    \35\ The FDA 510(k) Summary for the EnVisio\TM\ Navigation 
System states that the EnVisio\TM\ Navigation System ``equipment 
components'' are the Console, Heads Up Display, Patient Pad and Foot 
Pedal. The Navigator is listed as a separate, sterile, non-patient 
contacting, single-use system component. The applicant submitted an 
application for pass-through payment status only for the Navigator 
component of the EnVisio\TM\ Navigation System.
    \36\ The SmartClip\TM\ has a separate FDA 510(k) clearance. 
Based on the FDA 510(k) Summary for the EnVisio\TM\ Navigation 
System, the SmartClip\TM\ does not appear to be part of the 
EnVisio\TM\ Navigation System.
---------------------------------------------------------------------------

    The applicant stated that there are two types of Navigators: (1) 
the NavSlim\TM\ (which the applicant described as a lightweight model 
that allows integration with a broader range of electrosurgical tools, 
with or without smoke evacuation); and (2) the NavPencil (which, 
according to the applicant, incorporates a small screen in the surgical 
sightline that mimics the EnVisio\TM\ Navigation System operating room 
monitor). The applicant also asserted that the integration of the 
Navigators with the single use, sterile electrocautery tool enables a 
single, light weight tool that can be utilized in situ for a minimally 
invasive surgery without infection risk. According to the applicant, 
the Navigators reduce the risk of tumor microenvironment caused by 
tissue disruption of non-targeted tissue. The applicant stated that the 
patient populations that can benefit from this technology are those 
that have biopsy proven cancers in organs that lack anatomic landmarks 
like breast, abdomen, and head and neck.
    The applicant stated that the Navigators are the first devices to 
provide precise real-time navigation with a large patient volume of 
50cm x 50cm x 35cm (per the applicant, encompassing >99 percent of 
breast cancer patient habitus and >90 percent of lung cancer patient 
habitus). In addition, the applicant asserted several other clinically 
differentiating features from prior products. First, the applicant 
stated that the Navigators process 240 simultaneous data streams 
solving for location 16 times per second with millimeter level of 
accuracy, and display it to the surgeon based upon actual location of 
the defined lesion as it is manipulated in situ, not based on imaging 
that occurred days or weeks before. The applicant asserted that as the 
tissue is moved or manipulated during a surgical intervention, the 
location is instantaneously updated. According to the applicant, this 
allows for intelligent, real-time, intraoperative visualization and 
guidance for the surgeon, enabling precise removal of a defined tissue 
specimen (including tumor and margin). Furthermore, the applicant 
asserted that the accurate and real-time wireless location eliminates 
any potential registration errors that are typically found in devices 
that use pre-procedure imaging for guidance. The applicant explained 
that no static pre-procedure imaging is necessary eliminating the 
potential of mis-registration due to patient or tissue movement. In 
addition, the applicant stated that the Navigators provide 3D 
guidance--medial/lateral, inferior/superior and anterior/posterior, as 
well as the most direct path, and asserted that this is increasingly 
important in treating lobular and deep tumors. The applicant also 
claimed that because the guidance is from the tip of the cutting tool, 
exact measurements can be taken in situ at the exact cutting location. 
In addition, per the applicant, the Navigators allow for an oncoplastic 
\37\ approach--the applicant stated that because the location is not 
tethered or constrained in any way, the surgeon can choose the best 
cutting approach to achieve the optimal oncoplastic outcome. Finally, 
the applicant added that the Navigators provide the ability to 
distinctly identify and navigate up to three separate lesions in the 
same patient.
---------------------------------------------------------------------------

    \37\ According to Columbia University Irving Medical Center, 
oncoplastic breast surgery combines the techniques of traditional 
breast cancer surgery with the cosmetic advantages of plastic 
surgery. https://columbiasurgery.org/conditions-and-treatments/oncoplastic-breast-surgery.
---------------------------------------------------------------------------

    With respect to the newness criterion at Sec.  419.66(b)(1), on 
March 22, 2019, the applicant received 510(k) clearance from FDA to 
market the EnVisio\TM\ Navigation System (which, as explained 
previously, includes the Navigators) for the non-imaging detection and 
localization (by navigation) of a SmartClip\TM\ that has been implanted 
in a soft tissue biopsy site or a soft tissue site intended for 
surgical removal. The applicant submitted its application for 
consideration as a new device category for transitional pass-through 
payment status for the Navigators on February 28, 2022, which is within 
3 years of the date of the initial FDA marketing authorization. We are 
inviting public comments on whether the Navigators meet the newness 
criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the Navigators are an integral part of the 
service furnished and are used for one patient only. However, the 
applicant did not specifically indicate whether the Navigators come in 
contact with human tissue, and are surgically implanted or inserted or 
applied in or on a wound or other skin lesion, as

[[Page 44593]]

required at Sec.  419.66(b)(3).\38\ The FDA 510(k) Summary (K183400) 
states that the Navigator is a sterile, non-patient contacting, single-
use device. We would welcome comments on whether the Navigators meet 
the requirements of Sec.  419.66(b)(3). The applicant also did not 
indicate whether the Navigators meet the device eligibility 
requirements at Sec.  419.66(b)(4), which provide that the device may 
not be any of the following: (1) equipment, an instrument, apparatus, 
implement, or item of this type for which depreciation and financing 
expenses are recovered as depreciable assets; or (2) a material or 
supply furnished incident to a service (for example, a suture, 
customized surgical kit, or clip, other than radiological site marker). 
We are inviting public comments on whether the Navigators meet the 
eligibility criteria at Sec.  419.66(b).
---------------------------------------------------------------------------

    \38\ By contrast, the SmartClip\TM\, discussed in the next 
section of this preamble, is inserted into human tissue.
---------------------------------------------------------------------------

    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 stated that it was not aware of an existing pass-through 
payment category that describes the Navigators, and listed an existing 
device category that it considered for comparison to the Navigators--
specifically, HCPCS code C1748 (Endoscope, single-use (i.e., 
disposable), upper GI, imaging/illumination device (insertable)). The 
applicant stated that the Navigators are designed to meet the demands 
within the clinical environment for a single-use (i.e., disposable) 
device to decrease infection rate, similar to the recent advancements 
of ``disposable'' endoscopes to address clinical demands for single-use 
to eliminate risks of cross contamination and improper sterilization. 
HCPCS code C1748 is a current pass-through payment category, effective 
beginning July 1, 2020. The applicant did not specifically 
differentiate the Navigators from devices in HCPCS code C1748. Upon 
review, it does not appear that there are any existing pass-through 
payment categories that might apply to the Navigators. We are inviting 
public comments on whether the Navigators meet the device category 
criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization for the indication covered by the 
Breakthrough Device designation. The applicant claimed that the use of 
the Navigators results in substantial clinical improvement over 
existing technologies by (1) reducing positive margin and re-excision 
rates, thereby decreasing the rate of subsequent therapeutic 
interventions; (2) reducing the rate of device-related complications, 
including surgical site infections and wire migration and transection; 
and (3) improving the surgical approach (surgeons are not tethered to 
the best radiological approach, and the incision can be placed in the 
ideal location resulting in better oncoplastic results, less complex 
path to the lesion, and better visualization during surgery). The 
applicant provided articles and case reports for the purpose of 
addressing the substantial clinical improvement criterion.
    In support of the claim that use of the Navigators reduces positive 
margin and re-excision rates, the applicant submitted an abstract of a 
study performed to assess the impact of electromagnetic seed 
localization (ESL) using the EnVisio\TM\ Navigation System and 
SmartClip\TM\ compared to wire localization (WL) on operative times, 
specimen volumes, margin positivity, and margin re-excision rates.\39\ 
Between August 2020 and August 2021, 97 patients underwent excisional 
biopsy (n=20), or lumpectomy with (n=53) or without (n=24) sentinel 
lymph node biopsy (SLNB) using ESL guidance at a single institution by 
5 surgeons. The study authors matched these patients, one-to-one, with 
WL patients undergoing surgery between 2006 and 2021 based on surgeon, 
procedure type with stratification for those having and not having 
nodal procedures, and pathologic stage or benign pathology. When 
greater than one WL match was found, selection was randomized. The 
authors compared continuous variables (operative times, specimen 
volumes, excess volume excised) between patients undergoing ESL and WL 
using Wilcoxon rank sums tests. The authors compared categorical 
variables (positive margin rates, re-excision rates) using Fisher's 
exact tests. Median operative time for ESL versus WL for lumpectomy 
with SLNB was 66 versus 69 minutes (p=0.76) and without SLNB was 40 
versus 34.5 minutes (p=0.17). Median specimen volume was 55cm\3\ with 
WL versus 36cm\3\ with ESL (p=0.0012). In those with measurable tumor 
volume, excess tissue excised was larger with WL compared to ESL 
(median=73.2cm\3\ versus 52.5cm\3\, p=0.017). Main segment margins were 
positive in 18 of 97 (19 percent) WL patients compared to 10 of 97 (10 
percent) ESL patients (p=0.17). In the WL group, 13 of 97 (13 percent) 
had margin re-excision at a separate procedure, compared to 6 of 97 (6 
percent) in the ESL group, (p=0.15). The authors concluded that ESL is 
superior to WL because it provided more accurate localization, 
evidenced by smaller specimen volume with less excess tissue excised, 
despite similar operative times. In addition, the authors reported 
that, although not statistically significant, ESL resulted in lower 
positive margin rates and lower margin re-excision rates compared to 
WL. The authors further noted that ESL allows for preoperative 
localization, eliminating same day operative delays, and single tool 3D 
localization. The authors concluded that further studies comparing ESL 
to other non-wire localization techniques are required to refine which 
localization technology is most advantageous in breast conservation 
surgery.
---------------------------------------------------------------------------

    \39\ Jordan R, Rivera-Sanchez L, Kelley K, O'Brien M, et al. The 
Impact of an Electromagnetic Seed Localization Device as Versus Wire 
Localization on Breast Conserving Surgery: A Matched Pair Analysis. 
Abstract presented at: 23rd Annual Meeting of The American Society 
of Breast Surgeons; April 6-10, 2022. https://www.breastsurgeons.org/meeting/2022/docs/2022_Official_Proceedings_ASBrS.pdf.
---------------------------------------------------------------------------

    The applicant provided a second article consisting of a clinical 
paper from the Moffitt Cancer Center that, per the applicant, is 
pending publication.\40\ The paper presented three cases from the 
Moffitt Cancer Center, including radiographic and other images, 
employing three different methods of breast mass localization: (1) 
SmartClip\TM\, (2) SAVI SCOUT[supreg] radar reflector localizer, and 
(3) traditional wire localizer. The authors stated that the purpose of 
the paper was to educate

[[Page 44594]]

the audience about the technological advances regarding breast mass 
localization and to discuss the advantages and disadvantages of 
SmartClip\TM\ localizers, SAVI SCOUT[supreg] localizers, and wire 
localizers.
---------------------------------------------------------------------------

    \40\ Ibanez J, Wotherspoon T, Mooney B, Advances in Image Guided 
Breast Mass Localization Techniques (undated). Submitted by the 
applicant with its application on February 28, 2022.
---------------------------------------------------------------------------

    The authors first discussed wire localization, stating that wire 
localization involves image-guided insertion of a guidewire into a 
targeted mass and that the use of multiple wires allows for bracketing 
of multiple lesions or a large lesion. The authors asserted that, while 
effective in localization, this procedure has drawbacks such as wire 
breakage, patient discomfort, wire migration while moving or 
transporting the patient, and the need to surgically remove the wire 
the same day that it is placed due to this risk of migration.
    The authors also discussed radar reflector localizers such as SAVI 
SCOUT[supreg], which are small devices that can be placed into a 
targeted mass at any time prior to lumpectomy. The authors explained 
that once a surgeon gains a general idea of the mass' location by 
looking at the post localizer placement mammogram, this localizer is 
``hunted'' for intraoperatively using a special handheld device which 
provides auditory feedback, but does not provide location details until 
it is found via the auditory feedback. The authors cited a 
retrospective study at the Moffitt Cancer Center which, according to 
the authors, indicated that localization using SAVI SCOUT[supreg] was 
successful for 125 out of 129 patients (97 percent, 95 percent 
Confidence Interval 92-99 percent) and showed that in comparison to 
wire localization, SAVI SCOUT[supreg] provides improved patient comfort 
and eliminates the need to perform the surgery on the same day as the 
localization procedure.\41\
---------------------------------------------------------------------------

    \41\ Falcon S, Weinfurtner RJ, Mooney B, Niell BL. SAVI 
SCOUT[supreg] localization of breast lesions as a practical 
alternative to wires: Outcomes and suggestions for trouble-shooting. 
Clin Imaging. 2018 Nov-Dec;52:280-286. doi: 10.1016/
j.clinimag.2018.07.008. Epub 2018 Jul 24. PMID: 30193186.
---------------------------------------------------------------------------

    Finally, the authors discussed localization using the 
SmartClip\TM\. The authors noted that the SmartClip\TM\ is the first 
device to provide three-plane localization information. The authors 
stated that a monitor displays the approximate position of the 
SmartClip\TM\ allowing everyone in the operating room to assist with 
the localization of the SmartClip\TM\ and provide knowledge of its 
location prior to and throughout the surgery. They further noted that 
the SmartClip\TM\ localizer can be visualized on a small screen mounted 
on the electrocautery tool which, similar to the monitor, depicts the 
direction and depth to the SmartClip\TM\. According to the authors, 
this provides real-time visual feedback to surgeons as the 
electrocautery tool moves and allows them to find the clip without 
having to look up at the operating room monitor. The authors asserted 
that the three-axis visualization eliminated the need to search for the 
clip since the location is always known, and that the availability of 
the SmartClip\TM\ in three colors with different signals eases 
differentiation between localizers and allows for bracketing of masses.
    The authors concluded that wire localization has drawbacks such as 
wire breakage, patient discomfort, high chances of migration, and 
narrow placement timeframes, which have been mitigated over the past 
decade by various soft tissue localizers such as SAVI SCOUT[supreg] 
(radar reflector localizer). The authors concluded that the 
SmartClip\TM\, which they refer to as a new localizer, may potentially 
resolve other difficulties encountered with the soft tissue localizers 
that they currently use. Finally, the authors noted that a clinical 
study is currently underway at the Moffitt Cancer Center to evaluate 
the advantages of using the SmartClip\TM\ in clinical practice.
    In addition, the applicant provided two physician case reports, 
each describing the use of the EnVisio\TM\ Navigation System and 
SmartClip\TM\ in a single patient (62 and 59-year-old female breast 
cancer patients). Each case report described the patient's history, 
diagnostic tools utilized, pre-operative, peri-operative, and/or post-
operative course, pathology results, as well as the physician's 
perceptions of the SmartClip\TM\ or EnVisio\TM\ Navigation System. In 
the first surgical case report,\42\ the surgeon noted that the foot 
pedal activation of the EnVisio\TM\ Navigation System allowed toggling 
between two SmartClip\TM\ devices, allowing complete dissection around 
the periphery of the mass to obtain a precise margin. The surgeon 
asserted that with one marker, there would have been a higher risk of a 
positive margin. In the second surgical case report,\43\ the surgeon 
similarly noted that the EnVisio\TM\ Navigation System helped her to 
map out and be more precise in her incision location and lumpectomy 
dissection.
---------------------------------------------------------------------------

    \42\ Kruper, Laura, Bracketing Lobulated Breast Lesion with the 
EnVisio\TM\ Navigation System using Differentiated SmartClip.
    \43\ Henkel, Dana, Single SmartClip Case.
---------------------------------------------------------------------------

    The applicant also submitted several articles in general support of 
its application, which we summarize as follows. An article from the 
Mayo Clinic concluded that intraoperative pathologic assessment with 
frozen-section margin evaluation of all neoplastic breast specimens 
allows for immediate re-excision of positive or close margins during 
the initial operation and results in an extremely low reoperation rate 
of <2%.\44\ Another article addressed the relationship between post-
surgery infection and breast cancer recurrence and concluded that there 
is association between surgical site infection and adverse cancer 
outcomes, but the cellular link between them remains elusive.\45\ 
Furthermore, a study from the Mayo Clinic concluded there was no 
reduction in the surgical site infection rate among patients who 
received postoperative antibiotic prophylaxis after breast surgery.\46\ 
In addition, a study from Washington University School of Medicine 
concluded that surgical site infection (SSI) after breast cancer 
surgical procedures was more common than expected for clean surgery and 
more common than SSI after non-cancer-related breast surgical 
procedures.\47\ A review article from the Department of Radiation 
Oncology, Case Western Reserve University and University Hospitals in 
Cleveland surmised that precision medicine holds the promise of truly 
personalized treatment which provides every individual breast cancer 
patient with the most appropriate diagnostics and targeted therapies 
based on the specific cancer's genetic profile as determined by a panel 
of gene assays and other
---------------------------------------------------------------------------

    \44\ Racz JM, Glasgow AE, Keeney GL, Degnim AC, Hieken TJ, Jakub 
JW, Cheville JC, Habermann EB, Boughey JC. Intraoperative Pathologic 
Margin Analysis and Re-Excision to Minimize Reoperation for Patients 
Undergoing Breast-Conserving Surgery. Ann Surg Oncol. 2020 
Dec;27(13):5303-5311. doi: 10.1 245/s10434-020-08785-z. Epub 2020 
Jul 4. PMID: 32623609.
    \45\ O'Connor R[Iacute], Kiely PA, Dunne CP. The relationship 
between post-surgery infection and breast cancer recurrence. J Hosp 
Infect. 2020 Nov;106(3):522-535. doi: 10.1016/j.jhin.2020.08.004. 
Epub 2020 Aug 13. PMID: 32800825.
    \46\ Throckmorton AD, Boughey JC, Boostrom SY, Holifield AC, 
Stobbs MM, Hoskin T, Baddour LM, Degnim AC. Postoperative 
prophylactic antibiotics and surgical site infection rates in breast 
surgery patients. Ann Surg Oncol. 2009 Sep;16(9):2464-9. doi: 
10.1245/s10434-009-0542-1. Epub 2009 Jun 9. PMID: 19506959.
    \47\ Olsen MA, Chu-Ongsakul S, Brandt KE, Dietz JR, Mayfield J, 
Fraser VJ. Hospital-associated costs due to surgical site infection 
after breast surgery. Arch Surg. 2008 Jan;143(1):53-60; discussion 
61. doi: 10.1001/archsurg.2007.11. PMID: 18209153.

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

[[Page 44595]]

predictive and prognostic tests.\48\ An abstract on the subject of 
prognostic factors for surgical margin status and recurrence in partial 
nephrectomy concluded that (1) surgical margin positivity after partial 
nephrectomy is not significantly associated with tumor characteristics 
and anatomical scoring systems, (2) surgical indication for partial 
nephrectomy has a direct influence on positive surgical margin rates, 
and (3) tumor size and stage after partial nephrectomy are valuable 
parameters in evaluating the recurrence risk.\49\ Lastly, a study 
examining the significance of resection margin in hepatectomy for 
hepatocellular carcinoma concluded that the width of the resection 
margin did not influence the postoperative recurrence rates after 
hepatectomy for hepatocellular carcinoma.\50\
---------------------------------------------------------------------------

    \48\ Eleanor E. R. Harris, ``Precision Medicine for Breast 
Cancer: The Paths to Truly Individualized Diagnosis and Treatment'', 
International Journal of Breast Cancer, vol. 2018, Article ID 
4809183, 8 pages, 2018. https://doi.org/10.1155/2018/4809183.
    \49\ Demirel HC, [Ccedil]akmak S, Yavuzsan AH, Ye[scedil]ildal 
C, T[uuml]rk S, Dalk[inodot]l[inodot]n[ccedil] A, 
Kire[ccedil][ccedil]i SL, Toku[ccedil] E, Horasanl[inodot] K. 
Prognostic factors for surgical margin status and recurrence in 
partial nephrectomy. Int J Clin Pract. 2020 Oct;74(10):e13587. doi: 
10.1111/ijcp.13587. Epub 2020 Jul 14. PMID: 32558097.
    \50\ Poon, R.T., Fan, S.T., Ng, I O., & Wong, J. (2000). 
Significance of resection margin in hepatectomy for hepatocellular 
carcinoma: A critical reappraisal. Annals of surgery, 231(4), 544-
551. https://doi.org/10.1097/00000658-200004000-00014.
---------------------------------------------------------------------------

    Based on the evidence submitted with the application, we note the 
following concerns. The first study appears to be unpublished, and it 
is not clear whether it has been submitted for publication in a peer-
reviewed journal. In addition, the study involved a sample of 97 
patients from one institution and appears to be written as a 
feasibility study for a potentially larger randomized control trial. 
Notably, the authors of this study stated that further studies are 
required to compare ESL to other non-wire localization techniques to 
refine which localization technology is most advantageous in breast 
conservation surgery. Furthermore, the authors did not report the sex 
or age of the study participants. Additionally, the authors reported 
that the differences in positive margin and re-excision rates between 
ESL and WL groups were not statistically significant. We also note a 
potential concern regarding practice/selection effects bias inherent in 
the methodology presented.
    The second article is an undated,\51\ unpublished descriptive 
clinical paper comparing three different breast mass localization 
techniques in three cases from one institution. The applicant stated 
that this paper is pending publication, but provided no further details 
regarding the status of the paper. The paper did not systematically 
compare the techniques across any measurable variables, noting that a 
clinical study was underway at the institution to evaluate the 
SmartClip\TM\ in clinical practice. Similarly, we note that the 
physician case reports were solely descriptive in nature--they 
presented each physician's anecdotal experience using the EnVisio\TM\ 
Navigation System and SmartClip\TM\. Furthermore, the applicant 
provided several additional articles that, while informative, did not 
involve the Navigators and do not appear to directly support the 
applicant's claim of substantial clinical improvement. We would welcome 
additional information and evidence from larger, multi-center studies 
that provide comparative outcomes between the Navigators and existing 
technologies.
---------------------------------------------------------------------------

    \51\ Although the applicant reported the date of the study as 
January 2021, the copy of the study provided by the applicant was 
not dated.
---------------------------------------------------------------------------

    We further note that none of the articles and case reports provided 
conclusive evidence that the use of the Navigators reduces surgical 
site infection rates or the risk of tissue marker migration, as claimed 
by the applicant. In addition, the articles and case reports provided 
by the applicant described the use of the subject devices only in 
breast cancer surgery cases. As reported by the applicant, the 
Navigators can also be used for patients that have biopsy proven 
cancers in other organs that lack anatomic landmarks like the abdomen 
and head and neck. We would welcome additional evidence of substantial 
clinical improvement in cases related to non-breast cancer related 
procedures.
    We are inviting public comments on whether the Navigators meet the 
substantial clinical improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that the Navigators are 
used in surgical interventions described by the HCPCS codes listed in 
Table 34.

[[Page 44596]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.040

    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. As we explained in the CY 2005 OPPS final rule (69 FR 65775), 
we generally use the lowest APC payment rate applicable for use with 
the nominated device when we assess whether a device meets the cost 
significance criterion, thus increasing the probability the device will 
pass the cost significance test. For our calculations, we used APC 
5072--Level 2 Excision/Biopsy/Incision and Drainage, which had a CY 
2021 payment rate of $1,407 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 
22902 had a device offset amount of $1.13 at the time the application 
was received. According to the applicant, the cost of the Navigators is 
$499.
    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 $499 for the Navigators is 35.5 percent of 
the applicable APC payment amount for the service related to the 
category of devices of $1,407 (($499/$1,407) x 100 = 35.5 percent). 
Therefore, we believe the Navigators meet the first cost significance 
requirement.
    The second cost significance requirement, at Sec.  419.66(d)(2), 
provides that the estimated average reasonable cost of 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 $499 for the 
Navigators is 44,159.3 percent of the cost of the device-related 
portion of the APC payment amount for the related service of $1.13 
(($499/$1.13) x 100 = 44,159.3 percent). Therefore, we believe that the 
Navigators meet 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 $499 for the Navigators and the portion of the APC 
payment amount for the device of $1.13 is 35.4 percent of the APC 
payment amount for the related service of $1,407 ((($499-$1.13)/$1,407) 
x 100 = 35.4 percent). Therefore, we believe that the Navigators meet 
the third cost significance requirement.
    We are inviting public comment on whether the Navigators meet the 
device pass-through payment criteria discussed in this section, 
including the cost criterion for device pass-through payment status.
(3) SmartClip\TM\
    Elucent Medical, Inc. submitted an application for a new device 
category for transitional pass-through payment status for CY 2023 for 
the SmartClip\TM\ Soft Tissue Marker (SmartClip\TM\). The applicant 
described the SmartClip\TM\ as an electromagnetically activated, 
single-use, sterile soft tissue marker used for anatomical surgical 
guidance. According to the applicant, the SmartClip\TM\ is the only 
soft tissue marker that delivers independent coordinates of location 
when used in conjunction with the applicant's EnVisio\TM\ Navigation 
System (which includes the Navigators discussed

[[Page 44597]]

previously in this proposed rule). Per the applicant, at the time of 
surgical intervention, electromagnetic waves delivered by the 
EnVisio\TM\ Navigation System activate the implanted SmartClip\TM\ 
within a 50cm x 50cm x 35cm volume. The applicant further explained 
that the SmartClip\TM\ contains an application-specific integrated 
circuit (ASIC), customized for use with the EnVisio\TM\ Navigation 
System, which is activated at a specific frequency and communicates to 
the EnVisio\TM\ Navigation System the precise, real-time location of 
both the SmartClip\TM\ and the surgical margin, enabling the surgeon to 
plan the specimen (tumor and margin) for excision.\52\ The applicant 
asserted that this data is calibrated relative to the tip of the 
electrocautery device or other operating instrument and is displayed in 
3D.
---------------------------------------------------------------------------

    \52\ Based on the FDA 510(k) Summary for the EnVisio\TM\ 
Navigation System, the SmartClip\TM\ does not appear to be a 
component of the EnVisio\TM\ Navigation System; the SmartClip\TM\ 
has a separate FDA 510(k) clearance as discussed later in this 
section.
---------------------------------------------------------------------------

    The applicant stated that the SmartClip\TM\ is assembled into a 
hermetically sealed, Parylene C coated glass cylinder and provided pre-
loaded into a 15-gauge introducer needle available in various lengths 
(5cm, 7.5cm, 10cm). Per the applicant, using the introducer needle, the 
SmartClip\TM\ is implanted directly into a tumor at the time of biopsy 
or during a separate procedure in advance of surgery. According to the 
FDA 510(k) Summary (K180640), the SmartClip\TM\ can be implanted into 
various types of soft tissue, such as lung, gastrointestinal system, 
and breast, and can subsequently be detected using the EnVisio\TM\ 
Navigation System or by means of radiography (including mammographic 
imaging), ultrasound, and magnetic resonance imaging (MRI). Per the 
applicant, it is utilized frequently in breast conserving surgery, 
lymph nodes, and head/neck cancers.
    According to the applicant, up to three SmartClips\TM\, each with a 
unique electromagnetic signature, can be implanted in a patient to mark 
and provide continuous location of multiple targets (for example, 3 
lesions, or 2 lesions/1 lymph node) or to bracket either a large lesion 
or microcalcifications. The applicant claimed that the SmartClip\TM\ 
enables the surgeon to choose the safest, least disfiguring 
(oncoplastic) approach and path to the tumor before the surgery. 
According to the applicant, providing surgical planning and excision 
lessens the impact of the disruption of non-targeted tissue. In 
addition, the applicant stated that the SmartClip\TM\ enables the 
surgeon to measure and record specimen size post excision.
    The applicant further asserted that the SmartClip\TM\ is a 
significantly advanced version of an interstitial implant device, such 
as a gold fiducial marker, that is placed into a tumor directly to 
guide the surgeon to the location of a malignant lesion. The applicant 
claimed that the SmartClip\TM\ has characteristics that differentiate 
it from conventional fiducial markers. First, the applicant stated that 
the SmartClip\TM\ location is expressed relative to the patient's 
position--medial/lateral, inferior/superior, anterior/posterior with 
2mm precision. Second, according to the applicant, the SmartClip\TM\ 
location is instantaneous and updated 16 times per second reflecting 
any location change due to tissue manipulation and allowing alterations 
in the patient's position with no compromise in accuracy. Furthermore, 
the applicant asserted that the SmartClip\TM\ provides seamless, real-
time navigation, maintaining the 3D position of the lesion within the 
surgical space and relative to the surgical tools. The applicant added 
that the SmartClip\TM\ is not subject to registration errors often seen 
with navigation that utilizes pre-procedure imaging for guidance. 
Furthermore, the applicant asserted that the SmartClip\TM\ is ideal for 
minimally invasive procedures in that it does not require line of 
sight. The applicant also stated that the SmartClip\TM\ does not 
utilize any radioactive materials or contain any ionizing radiation. 
Per the applicant, the SmartClip\TM\ does not require a separate 
imaging modality, however, if another imaging modality is utilized, the 
SmartClip\TM\ is radiopaque. Finally, the applicant stated that the 
SmartClip\TM\ provides the following advantages compared to current 
localization methods (including preoperative wire localization): (1) no 
migration of the SmartClip\TM\; (2) no depth limitation, addressing 
broader patient population clinical needs; (3) no limitations on 
clinical approach for placement or surgical excision; (4) permanently 
implantable, should continuum of care change; (5) no risks for 
multifocal or extensive lesion markings for complex cases; (6) no 
required workflow changes for varied surgical tools; (7) can be placed 
remote from surgery (days or weeks) at the patient's convenience; (8) 
nothing protruding from the skin so there is no mechanical pathway for 
bacterial contamination; and (9) puncture is healed at the time of 
surgery.
    With respect to the newness criterion at Sec.  419.66(b)(1), on 
June 4, 2018, the applicant received 510(k) clearance from FDA to 
market the SmartClip\TM\ for radiographic marking of sites in soft 
tissue and in situations where the soft tissue site needs to be marked 
for future medical procedures. The applicant submitted its application 
for consideration as a new device category for transitional pass-
through payment status for the SmartClip\TM\ on February 28, 2022, 
which is more than 3 years from the date of the initial FDA marketing 
authorization. We note that in accordance with 42 CFR 419.66(b)(1), the 
pass-through payment application for a medical device must be submitted 
within 3 years from the date of the initial FDA approval or clearance, 
unless there is a documented, verifiable delay in U.S. market 
availability after FDA approval or clearance is granted, in which case 
we will consider the pass-through payment application if it is 
submitted within 3 years from the date of market availability. The 
applicant asserted that the SmartClip\TM\ could not be marketed until 
May 2019 because it is utilized in conjunction with the EnVisio\TM\ 
Navigation System and FDA clearance for the EnVisio\TM\ Navigation 
System was required prior to use of the SmartClip\TM\ (as mentioned 
previously, the applicant received FDA clearance for the EnVisio\TM\ 
Navigation System on March 22, 2019). We note that, according to the 
FDA 510(k) Summary and Indications for Use for the SmartClip\TM\ 
(K180640) and the EnVisio\TM\ Navigation System (K183400), the 
SmartClip\TM\ also can be located and surgically removed through the 
use of imaging guidance such as x-ray, mammography, ultrasound, and 
MRI. According to the applicant, the EnVisio\TM\ Navigation System 
enables the SmartClip\TM\ as an intelligent interstitial soft tissue 
marker utilizing electromagnetic waves to display precise coordinates 
in each of three planes. The applicant further asserted that the 
SmartClip\TM\ was designed to provide the surgeon the precise 
coordinates for target tissue removal and that this function requires 
the utilization of the electronic field generated by the EnVisio\TM\ 
Navigation System. The applicant noted that while the SmartClip\TM\ is 
visible and can be located using imaging guidance (such as ultrasound, 
MRI, or radiography), such imaging guidance would typically only be 
used in the removal of the targeted tissue should the SmartClip\TM\ 
ASIC fault, so as to ensure patient care is not compromised. The 
applicant further stated that it did not consider pursuing

[[Page 44598]]

marketability of the SmartClip\TM\ as an unintelligent interstitial 
marker as the applicant believed that the action would not have 
resulted in meeting the unmet healthcare need for substantial clinical 
improvements. In addition, the applicant claimed that due to the impact 
of the COVID-19 pandemic, ambulatory surgical centers and outpatient 
facilities were restricted in performing breast cancer surgery, 
resulting in a verifiable delay. The applicant requested that CMS 
utilize the FDA clearance date for the EnVisio\TM\ Navigation System 
(March 22, 2019) as the applicable date for the SmartClip\TM\'s initial 
marketability. We are inviting public comments on whether the 
SmartClip\TM\ meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the SmartClip\TM\ 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. The 
applicant did not indicate whether the SmartClip\TM\ meets the device 
eligibility requirements of Sec.  419.66(b)(4), which provide that the 
device may not be any of the following: (1) equipment, an instrument, 
apparatus, implement, or item of this type for which depreciation and 
financing expenses are recovered as depreciable assets; or (2) a 
material or supply furnished incident to a service (for example, a 
suture, customized surgical kit, or clip, other than radiological site 
marker). We are inviting public comments on whether the SmartClip\TM\ 
meets the eligibility criteria at Sec.  419.66(b).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. The 
applicant stated that it was not aware of an existing pass-through 
payment category that describes the SmartClip\TM\.
    The applicant identified three devices or device categories that it 
believes are most closely related to the SmartClip\TM\: (1) hook-wire 
systems (the applicant did not provide an associated code, but listed 
Kopans (Bard and McKesson) and Dualok (McKesson) as types of such 
systems); (2) HCPCS code A4648 (Tissue marker, implantable, any type, 
each); and (3) HCPCS code 91112 (Gastrointestinal transit and pressure 
measurement, stomach through colon, wireless capsule, with 
interpretation and report (Smartpill\TM\)).\53\
---------------------------------------------------------------------------

    \53\ HCPCS code 91112 is not a current or previous pass-through 
payment category. According to the applicant, the Smartpill\TM\ is 
an ingestible pill that is tracked using a wearable device for short 
term pH and pressure testing for intestinal tract diagnostics. By 
contrast, the applicant noted that the SmartClip\TM\ is permanently 
implantable within soft tissue to direct a surgeon for the purposes 
of removal of a lesion and margin.
---------------------------------------------------------------------------

    Although HCPCS code A4648 is not an existing pass-through payment 
category, we note that a previous equivalent code, HCPCS code C1879 
(Tissue marker (implantable)), was a pass-through payment category in 
effect between August 1, 2000 and December 31, 2002.\54\ Pursuant to 
Change Request 8338, CMS deleted temporary HCPCS code C1879 on June 30, 
2013, because this category of devices was described by permanent HCPCS 
code A4648. We stated in the Change Request that effective July 1, 
2013, when using implantable tissue markers with any services provided 
in the OPPS, providers should report the use and cost of the 
implantable tissue marker with HCPCS code A4648 only.\55\ According to 
the applicant, tissue markers described by HCPCS code A4648 are passive 
mechanical localization devices. The applicant explained that such 
tissue markers are generally made of gold or other radiographically 
opaque substances (usually metal). Per the applicant, compared to the 
SmartClip\TM\, such tissue markers do not provide margin or 3D 
information, do not update in real-time, and require advanced 
radiographic capability (computed tomography, fluoroscopy, ultrasound) 
in order to be detected and localized. According to the applicant, 
these markers are only useful because they are visible either 
radiographically or to the naked eye. The applicant identified two 
types of gold fiducial markers--generic gold fiducial marker (IZI 
Medical) and generic soft tissue gold marker (Civco). The applicant 
explained that the SmartClip\TM\ is an advanced interstitial implant 
that substantially improves upon both generic gold fiducial markers and 
common hook-wire localization systems. According to the applicant, 
passive mechanical tissue markers such as gold fiducial markers and 
hook-wire systems are related devices created for roughly the same 
purpose as the SmartClip\TM\, but neither can be considered an adequate 
comparator due to the highly advanced technology embedded in the 
SmartClip\TM\. In contrast to both generic gold fiducial markers and 
hook-wire systems, the applicant asserted that the SmartClip\TM\ 
contains an ASIC which is activated at a specific frequency and 
provides location information regarding both the SmartClip\TM\ and the 
surgical margins to the operating physician in near real-time. The 
applicant claimed that it is not aware of any other device that has 
this functionality. The applicant added that this data is calibrated 
relative to the tip of an electrocautery device or other operating 
instrument and is displayed in 3D so that the surgeon has an objective 
method of obtaining a negative concentric margin. According to the 
applicant, this is particularly useful for posterior and deep margins 
for which passive localization devices provide no information. The 
applicant asserted that it does not believe that the SmartClip\TM\ is 
described by HCPCS code A4648.
---------------------------------------------------------------------------

    \54\ Medicare Claims Processing Manual, Ch. 4, section 60.4.2.
    \55\ Change Request 8338, June 7, 2013. The Medicare Claims 
Processing Manual further defines the devices encompassed by HCPCS 
code C1879 as material that is placed in subcutaneous or parenchymal 
tissue (may also include bone) for radiopaque identification of an 
anatomic site and adds that these markers are distinct from topical 
skin markers, which are positioned on the surface of the skin to 
serve as anatomical landmarks. Medicare Claims Processing Manual, 
Ch. 4, section 60.4.3.
---------------------------------------------------------------------------

    We are inviting public comments on whether the SmartClip\TM\ meets 
the device category criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization for the indication covered by the 
Breakthrough Device designation.
    The applicant claimed that the use of the SmartClip\TM\ results in 
substantial clinical improvement over existing technologies by, (1) 
reducing positive margin and re-excision rates, thereby decreasing the 
rate of subsequent therapeutic interventions; (2) reducing the rate of 
device-related complications, including surgical site infections and 
wire migration and transection; and (3) improving the surgical approach 
(surgeons are not tethered to the best radiological approach, and the 
incision can be placed in the ideal location resulting in better 
oncoplastic results,

[[Page 44599]]

less complex path to the lesion, and better visualization during 
surgery). The applicant provided articles and case reports for the 
purpose of addressing the substantial clinical improvement criterion.
    In support of the claim that use of the SmartClip\TM\ reduces 
positive margin and re-excision rates, the applicant submitted an 
abstract of a study performed to assess the impact of electromagnetic 
seed localization (ESL) using the EnVisio\TM\ Navigation System and 
SmartClip\TM\ compared to wire localization (WL) on operative times, 
specimen volumes, margin positivity, and margin re-excision rates.\56\ 
Between August 2020 and August 2021, 97 patients underwent excisional 
biopsy (n=20), or lumpectomy with (n=53) or without (n=24) sentinel 
lymph node biopsy (SLNB) using ESL guidance at a single institution by 
5 surgeons. The study authors matched these patients, one-to-one, with 
WL patients undergoing surgery between 2006 and 2021 based on surgeon, 
procedure type with stratification for those having and not having 
nodal procedures, and pathologic stage or benign pathology. When 
greater than one WL match was found, selection was randomized. The 
authors compared continuous variables (operative times, specimen 
volumes, excess volume excised) between patients undergoing ESL and WL 
using Wilcoxon rank sums tests. The authors compared categorical 
variables (positive margin rates, re-excision rates) using Fisher's 
exact tests. Median operative time for ESL versus WL for lumpectomy 
with SLNB was 66 versus 69 minutes (p=0.76) and without SLNB was 40 
versus 34.5 minutes (p=0.17). Median specimen volume was 55cm\3\ with 
WL versus 36cm\3\ with ESL (p=0.0012). In those with measurable tumor 
volume, excess tissue excised was larger with WL compared to ESL 
(median=73.2cm\3\ versus 52.5cm\3\, p=0.017). Main segment margins were 
positive in 18 of 97 (19 percent) WL patients compared to 10 of 97 (10 
percent) ESL patients (p=0.17). In the WL group, 13 of 97 (13 percent) 
had margin re-excision at a separate procedure, compared to 6 of 97 (6 
percent) in the ESL group, (p=0.15). The authors concluded that ESL is 
superior to WL because it provided more accurate localization, 
evidenced by smaller specimen volume with less excess tissue excised, 
despite similar operative times. In addition, the authors reported 
that, although not statistically significant, ESL resulted in lower 
positive margin rates and lower margin re-excision rates compared to 
WL. The authors further noted that ESL allows for preoperative 
localization, eliminating same day operative delays, and single tool, 
3D localization. The authors concluded that further studies comparing 
ESL to other non-wire localization techniques are required to refine 
which localization technology is most advantageous in breast 
conservation surgery.
---------------------------------------------------------------------------

    \56\ Jordan R, Rivera-Sanchez L, Kelley K, O'Brien M, et al. The 
Impact of an Electromagnetic Seed Localization Device as Versus Wire 
Localization on Breast Conserving Surgery: A Matched Pair Analysis. 
Abstract presented at: 23rd Annual Meeting of The American Society 
of Breast Surgeons; April 6-10, 2022. https://www.breastsurgeons.org/meeting/2022/docs/2022_Official_Proceedings_ASBrS.pdf..
---------------------------------------------------------------------------

    The applicant provided a second article consisting of a clinical 
paper from the Moffitt Cancer Center that, per the applicant, is 
pending publication.\57\ The paper presented three cases from the 
Moffitt Cancer Center, including radiographic and other images, 
employing three different methods of breast mass localization: (1) 
SmartClip\TM\, (2) SAVI SCOUT[supreg] radar reflector localizer, and 
(3) traditional wire localizer. The authors stated that the purpose of 
the paper was to educate the audience about the technological advances 
regarding breast mass localization and to discuss the advantages and 
disadvantages of SmartClip\TM\ localizers, SAVI SCOUT[supreg] 
localizers, and wire localizers.
---------------------------------------------------------------------------

    \57\ Ibanez J, Wotherspoon T, Mooney B, Advances in Image Guided 
Breast Mass Localization Techniques (undated). Submitted by the 
applicant with its application on February 28, 2022.
---------------------------------------------------------------------------

    The authors first discussed wire localization, stating that wire 
localization involves image-guided insertion of a guidewire into a 
targeted mass and that the use of multiple wires allows for bracketing 
of multiple lesions or a large lesion. The authors asserted that, while 
effective in localization, this procedure has drawbacks such as wire 
breakage, patient discomfort, wire migration while moving or 
transporting the patient, and the need to surgically remove the wire 
the same day that it is placed due to this risk of migration.
    The authors also discussed radar reflector localizers such as SAVI 
SCOUT[supreg], which are small devices that can be placed into a 
targeted mass at any time prior to lumpectomy. The authors explained 
that once a surgeon gains a general idea of the mass' location by 
looking at the post localizer placement mammogram, this localizer is 
``hunted'' for intraoperatively using a special handheld device which 
provides auditory feedback, but does not provide location details until 
it is found via the auditory feedback. The authors cited a 
retrospective study at the Moffitt Cancer Center which, according to 
the authors, indicated that localization using SAVI SCOUT [supreg] was 
successful for 125 out of 129 patients (97 percent, 95 percent 
Confidence Interval 92-99 percent) and showed that in comparison to 
wire localization, SAVI SCOUT[supreg] provides improved patient comfort 
and eliminates the need to perform the surgery on the same day as the 
localization procedure.\58\
---------------------------------------------------------------------------

    \58\ Falcon S, Weinfurtner RJ, Mooney B, Niell BL. SAVI 
SCOUT[supreg] localization of breast lesions as a practical 
alternative to wires: Outcomes and suggestions for trouble-shooting. 
Clin Imaging. 2018 Nov-Dec;52:280-286. doi: 10.1016/
j.clinimag.2018.07.008. Epub 2018 Jul 24. PMID: 30193186.
---------------------------------------------------------------------------

    Finally, the authors discussed localization using the 
SmartClip\TM\. The authors noted that the SmartClip\TM\ is the first 
device to provide three-plane localization information. The authors 
stated that a monitor displays the approximate position of the 
SmartClip\TM\ allowing everyone in the operating room to assist with 
the localization of the SmartClip\TM\ and provide knowledge of its 
location prior to and throughout the surgery. They further noted that 
the SmartClip\TM\ localizer can be visualized on a small screen mounted 
on the electrocautery tool which, similar to the monitor, depicts the 
direction and depth to the SmartClip\TM\. According to the authors, 
this provides real-time visual feedback to surgeons as the 
electrocautery tool moves and allows them to find the clip without 
having to look up at the operating room monitor. The authors asserted 
that the three-axis visualization eliminated the need to search for the 
clip since the location is always known, and that the availability of 
the SmartClip\TM\ in three colors with different signals eases 
differentiation between localizers and allows for bracketing of masses.
    The authors concluded that wire localization has drawbacks such as 
wire breakage, patient discomfort, high chances of migration, and 
narrow placement timeframes, which have been mitigated over the past 
decade by various soft tissue localizers such as SAVI SCOUT[supreg] 
(radar reflector localizer). The authors concluded that the 
SmartClip\TM\, which they refer to as a new localizer, may potentially 
resolve other difficulties encountered with the soft tissue localizers 
that they currently use. Finally, the authors noted that a clinical 
study is currently underway at the Moffitt Cancer Center to evaluate 
the advantages of using the SmartClip\TM\ in clinical practice.

[[Page 44600]]

    In addition, the applicant provided three physician case reports 
(two by surgeons and one by radiologists), each describing the use of 
the SmartClip\TM\ in a single patient (62, 59, and 53-year-old female 
breast cancer patients). Each case report described the patient's 
history, diagnostic tools utilized, pre-operative, peri-operative, and/
or post-operative course, pathology results, as well as the physician's 
perceptions of the SmartClip\TM\ or EnVisio\TM\ Navigation System. In 
the first surgical case report,\59\ the surgeon noted that the foot 
pedal activation of the EnVisio\TM\ Navigation System allowed toggling 
between two SmartClip\TM\ devices, allowing complete dissection around 
the periphery of the mass to obtain a precise margin. The surgeon 
asserted that with one marker, there would have been a higher risk of a 
positive margin. In the second surgical case report,\60\ the surgeon 
similarly noted that the EnVisio\TM\ Navigation System helped her to 
map out and be more precise in her incision location and lumpectomy 
dissection. Finally, in the radiologists' case report,\61\ ultrasound 
guided SmartClip\TM\ localization was ordered for definitive surgical 
management. The radiologists noted the visibility of the SmartClip\TM\ 
relative to the coil clip, mass, and surrounding tissue, as well as the 
ease of the deployment.
---------------------------------------------------------------------------

    \59\ Kruper, Laura, Bracketing Lobulated Breast Lesion with the 
EnVisio\TM\ Navigation System using Differentiated SmartClip.
    \60\ Henkel, Dana, Single SmartClip Case.
    \61\ Lee, Marie C., Mooney, Blaise, Right Breast IDC/DCIS.
---------------------------------------------------------------------------

    The applicant also submitted several articles in general support of 
its application, which we summarize as follows. An article from the 
Mayo Clinic concluded that intraoperative pathologic assessment with 
frozen-section margin evaluation of all neoplastic breast specimens 
allows for immediate re-excision of positive or close margins during 
the initial operation and results in an extremely low reoperation rate 
of <2 percent.\62\ Another article addressed the relationship between 
post-surgery infection and breast cancer recurrence and concluded that 
there is association between surgical site infection and adverse cancer 
outcomes, but the cellular link between them remains elusive.\63\ 
Furthermore, a study from the Mayo Clinic concluded there was no 
reduction in the surgical site infection rate among patients who 
received postoperative antibiotic prophylaxis after breast surgery.\64\ 
In addition, a study from Washington University School of Medicine 
concluded that surgical site infection (SSI) after breast cancer 
surgical procedures was more common than expected for clean surgery and 
more common than SSI after non-cancer-related breast surgical 
procedures.\65\ A review article from the Department of Radiation 
Oncology, Case Western Reserve University and University Hospitals in 
Cleveland surmised that precision medicine holds the promise of truly 
personalized treatment which provides every individual breast cancer 
patient with the most appropriate diagnostics and targeted therapies 
based on the specific cancer's genetic profile as determined by a panel 
of gene assays and other predictive and prognostic tests.\66\ An 
abstract on the subject of prognostic factors for surgical margin 
status and recurrence in partial nephrectomy concluded that (i) 
surgical margin positivity after partial nephrectomy is not 
significantly associated with tumor characteristics and anatomical 
scoring systems, (ii) surgical indication for partial nephrectomy has a 
direct influence on positive surgical margin rates, and (iii) tumor 
size and stage after partial nephrectomy are valuable parameters in 
evaluating the recurrence risk.\67\ Lastly, a study examining the 
significance of resection margin in hepatectomy for hepatocellular 
carcinoma concluded that the width of the resection margin did not 
influence the postoperative recurrence rates after hepatectomy for 
hepatocellular carcinoma.\68\
---------------------------------------------------------------------------

    \62\ Racz JM, Glasgow AE, Keeney GL, Degnim AC, Hieken TJ, Jakub 
JW, Cheville JC, Habermann EB, Boughey JC. Intraoperative Pathologic 
Margin Analysis and Re-Excision to Minimize Reoperation for Patients 
Undergoing Breast-Conserving Surgery. Ann Surg Oncol. 2020 
Dec;27(13):5303-5311. doi: 10.1245/s10434-020-08785-z. Epub 2020 Jul 
4. PMID: 32623609.
    \63\ O'Connor R[Iacute], Kiely PA, Dunne CP. The relationship 
between post-surgery infection and breast cancer recurrence. J Hosp 
Infect. 2020 Nov;106(3):522-535. doi: 10.1016/j.jhin.2020.08.004. 
Epub 2020 Aug 13. PMID: 32800825.
    \64\ Throckmorton AD, Boughey JC, Boostrom SY, Holifield AC, 
Stobbs MM, Hoskin T, Baddour LM, Degnim AC. Postoperative 
prophylactic antibiotics and surgical site infection rates in breast 
surgery patients. Ann Surg Oncol. 2009 Sep;16(9):2464-9. doi: 
10.1245/s10434-009-0542-1. Epub 2009 Jun 9. PMID: 19506959.
    \65\ Olsen MA, Chu-Ongsakul S, Brandt KE, Dietz JR, Mayfield J, 
Fraser VJ. Hospital-associated costs due to surgical site infection 
after breast surgery. Arch Surg. 2008 Jan;143(1):53-60; discussion 
61. doi: 10.1001/archsurg.2007.11. PMID: 18209153.
    \66\ Eleanor E.R. Harris, ``Precision Medicine for Breast 
Cancer: The Paths to Truly Individualized Diagnosis and Treatment'', 
International Journal of Breast Cancer, vol. 2018, Article ID 
4809183, 8 pages, 2018. https://doi.org/10.1155/2018/4809183.
    \67\ Demirel HC, [Ccedil]akmak S, Yavuzsan AH, Ye[scedil]ildal 
C, T[uuml]rk S, Dalk[inodot]l[inodot]n[ccedil] A, 
Kire[ccedil][ccedil]i SL, Toku[ccedil] E, Horasanl[inodot] K. 
Prognostic factors for surgical margin status and recurrence in 
partial nephrectomy. Int J Clin Pract. 2020 Oct;74(10):e13587. doi: 
10.1111/ijcp.13587. Epub 2020 Jul 14. PMID: 32558097.
    \68\ Poon, R.T., Fan, S.T., Ng, I.O., & Wong, J. (2000). 
Significance of resection margin in hepatectomy for hepatocellular 
carcinoma: A critical reappraisal. Annals of surgery, 231(4), 544-
551. https://doi.org/10.1097/00000658-200004000-00014.
---------------------------------------------------------------------------

    Based on the evidence submitted with the application, we note the 
following concerns. The first study appears to be unpublished, and it 
is not clear whether it has been submitted for publication in a peer-
reviewed journal. In addition, the study involved a sample of 97 
patients from one institution and appears to be written as a 
feasibility study for a potentially larger randomized control trial. 
Notably, the authors of this study stated that further studies are 
required to compare ESL to other non-wire localization techniques to 
refine which localization technology is most advantageous in breast 
conservation surgery. Furthermore, the authors did not report the sex 
or age of the study participants. Additionally, the authors reported 
that the differences in positive margin and re-excision rates between 
ESL and WL groups were not statistically significant. We also note a 
potential concern regarding practice/selection effects bias inherent in 
the methodology presented.
    The second article is an undated,\69\ unpublished descriptive 
clinical paper comparing three different breast mass localization 
techniques in three cases from one institution. The applicant stated 
that this paper is pending publication, but provided no further details 
regarding the status of the paper. The paper did not systematically 
compare the techniques across any measurable variables, noting that a 
clinical study was underway at the institution to evaluate the 
SmartClip\TM\ in clinical practice. Similarly, we note that the 
physician case reports were solely descriptive in nature--they 
presented each physician's anecdotal experience using the EnVisio\TM\ 
Navigation System and/or SmartClip\TM\. Furthermore, the applicant 
provided several additional articles that, while informative, did not 
involve the SmartClip\TM\ and do not appear to directly support the 
applicant's claim of substantial clinical improvement. We would welcome 
additional information and evidence from larger, multi-center studies 
that provide comparative outcomes between the SmartClip\TM\ and 
existing technologies.
---------------------------------------------------------------------------

    \69\ Although the applicant reported the date of the study as 
January 2021, the copy of the study provided by the applicant was 
not dated.

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

[[Page 44601]]

    We further note that none of the articles and case reports provide 
conclusive evidence that the use of the SmartClip\TM\ reduces surgical 
site infection rates or the risk of tissue marker migration, as claimed 
by the applicant. In addition, the articles and case reports provided 
by the applicant described the use of the subject devices only in 
breast cancer surgery cases. As reported by the applicant, the 
SmartClip\TM\ is utilized frequently in breast conserving surgery, 
lymph nodes, and head/neck cancers. We would welcome additional 
evidence of substantial clinical improvement in cases related to non-
breast cancer related procedures. We are inviting public comments on 
whether the SmartClip\TM\ 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. We note that the applicant stated that up to 
three SmartClips\TM\ can be implanted in a patient to mark and provide 
continuous location of multiple targets, however, the applicant did not 
provide data on the average number of SmartClips\TM\ used per patient. 
The applicant stated that the SmartClip\TM\ is used in procedures 
described by the HCPCS codes in Table 35.
[GRAPHIC] [TIFF OMITTED] TP26JY22.041

    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. As we explained in the CY 2005 OPPS final rule (69 FR 65775), 
we generally use the lowest APC payment rate applicable for use with 
the nominated device when we assess whether a device meets the cost 
significance criterion, thus increasing the probability the device will 
pass the cost significance test. For our calculations related to the 
SmartClip\TM\, we used APC 5071--Level 1 Excision/Biopsy/Incision and 
Drainage, which had a CY 2021 payment rate of $621.97 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 19281 had a device offset amount of $219.87 at 
the time the application was received. According to the applicant, the 
cost of the SmartClip\TM\ is $375.
    Section 419.66(d)(1), the first cost significance requirement, 
provides that

[[Page 44602]]

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 $375 for the SmartClip\TM\ is 60.3 percent of the applicable 
APC payment amount for the service related to the category of devices 
of $621.97 (($375/$621.97) x 100 = 60.3 percent). Therefore, we believe 
the SmartClip\TM\ 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 $375 for the 
SmartClip\TM\ is 170.6 percent of the cost of the device-related 
portion of the APC payment amount for the related service of $219.87 
(($375/$219.87) x 100 = 170.6 percent). Therefore, we believe that the 
SmartClip\TM\ 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 $375 for the SmartClip\TM\ and the portion of the 
APC payment amount for the device of $219.87 is 24.9 percent of the APC 
payment amount for the related service of $621.97 ((($375-$219.87)/
$621.97) x 100 = 24.9 percent). Therefore, we believe that the 
SmartClip\TM\ meets the third cost significance requirement.
    We are inviting public comment on whether the SmartClip\TM\ meets 
the device pass-through payment criteria discussed in this section, 
including the cost criterion for device pass-through payment status.
(4) Evoke[supreg] Spinal Cord Stimulation (SCS) System
    Saluda Medical Inc. submitted an application for a new device 
category for transitional pass-through payment status for the 
Evoke[supreg] Spinal Cord Stimulation (SCS) System for CY 2023. The 
applicant described the Evoke[supreg] SCS System as a rechargeable, 
upgradeable, implantable spinal cord stimulation system that provides 
closed-loop stimulation controlled by measured evoked compound action 
potentials (ECAPs). According to the applicant, the Evoke[supreg] SCS 
System is used in the treatment of chronic intractable pain of the 
trunk and/or limbs, including unilateral or bilateral pain associated 
with the following: failed back surgery syndrome, intractable low back 
pain and leg pain. Per the applicant, the Evoke[supreg] SCS System's 
rechargeable battery is indicated for use up to 10 years.
    The applicant explained that SCS consists of applying an electrical 
stimulus to the spinal cord which causes the activated fibers (e.g., 
A[beta]-fibers) to generate action potentials. A[beta]-fibers are the 
low-threshold sensory fibers in the dorsal column that contribute to 
inhibition of pain signals in the dorsal horn. The action potentials 
summed together form the ECAP. Therefore, the applicant asserted that 
ECAPs are a direct measure of spinal cord fiber activation that 
generates pain inhibition for an individual.
    According to the applicant, the Evoke[supreg] SCS System is 
comprised of 5 implanted and 12 external components. The applicant 
identified the following five implanted components of the Evoke[supreg] 
SCS System: (1) Closed Loop Stimulator (CLS): a rechargeable, 25-
channel implantable pulse generator (IPG or stimulator) which generates 
an electrical stimulus and measures and records the nerve fibers' 
response to stimulus (i.e., ECAPs). Although named ``Closed Loop 
Stimulator,'' the applicant indicated that this stimulator delivers 
both open-loop and closed-loop stimulation modes; (2) Percutaneous 
Leads: Electrical current is delivered to the spinal cord via the 
electrodes on leads that are introduced into the epidural space through 
an epidural needle and connected to the stimulator. Per the applicant, 
ECAPs are measured using two non-stimulating contacts of the leads; (3) 
Lead Extension: Used to provide additional length if needed to connect 
the implanted lead to the CLS or external closed-loop stimulator 
(eCLS); (4) Suture Anchors and Active Anchors: Used to anchor the lead 
to the supraspinous ligament or deep fascia; and (5) CLS Port Plug: 
Used to block unused ports in the CLS header. Additionally, the 
applicant stated there are 12 external components of the Evoke[supreg] 
SCS System (e.g., surgical accessories, clinical interface, clinical 
system transceiver, pocket console and chargers).
    According to the applicant, the Evoke[supreg] SCS System is the 
first and only SCS system that provides closed-loop stimulation. In 
closed-loop stimulation, the system automatically measures the impact 
of the prior stimulation signal on the nerve and adjusts the next 
stimulation signal accordingly to maintain the prescribed physiologic 
response. Per the applicant, this closed feedback loop provides 
consistency in the stimulation received by the nerve as opposed to the 
stimulation emitted from the device.
    The applicant stated that the Evoke[supreg] SCS System measures 
ECAPs and adjusts the next stimulation accordingly as follows: (1) the 
Evoke[supreg] SCS System measures ECAPs following every stimulation 
pulse from two electrodes not involved in stimulation; (2) the recorded 
ECAP signal is sampled by the stimulator and provides a measurement of 
the ECAP amplitude; and (3) the Evoke[supreg] SCS System utilizes the 
ECAPs in a feedback mechanism to adjust the next stimulation pulse, 
thereby delivering closed-loop stimulation. The feedback mechanism 
minimizes the difference between the measured ECAP amplitude and the 
ECAP amplitude target by automatically adjusting the stimulation 
current for every stimulus. In doing so, the applicant asserted it 
maintains spinal cord activation near the target level. According to 
the applicant, this addresses the challenge all currently available SCS 
systems face regarding the ever-changing distance between the electrode 
and spinal cord that results in variable spinal cord activation, and 
thus, less effective therapy. Per the applicant, although there have 
been numerous technological advances in SCS therapy over the years, 
every other SCS system on the market provides open-loop stimulation, 
where parameters are set by the physician and the patient can only 
modulate those parameters within defined limits based upon how they 
feel. However, physiological functions such as breathing, heartbeat and 
posture changes alter the distance between the spinal cord target 
fibers and SCS electrodes. Therefore, the applicant asserted that the 
number of nerve fibers activated by open-loop stimulation continually 
changes, resulting in inconsistent therapy delivery (i.e., under- or 
over-stimulation) and that ECAP-controlled closed-loop therapy produces 
a significantly higher degree of spinal cord activation that is 
maintained within the therapeutic window which drives superior 
outcomes. The applicant asserted that a consistent neural response at 
the prescribed level may only be achieved with a closed-loop system 
that continually adjusts on every stimulation pulse.

[[Page 44603]]

    With respect to the newness criterion at Sec.  419.66(b)(1), on 
February 28, 2022, the Evoke[supreg] SCS System received PMA approval 
from FDA as an aid in the management of chronic intractable pain of the 
trunk and/or limbs including unilateral or bilateral pain associated 
with the following: failed back surgery syndrome, intractable low back 
pain and leg pain. The applicant submitted its application for 
consideration as a new device category for transitional pass-through 
payment status for the Evoke[supreg] SCS System on March 1, 2022, which 
is within 3 years of the date of the initial FDA marketing 
authorization. We are inviting public comment on whether the 
Evoke[supreg] SCS System meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the use of the Evoke[supreg] SCS System is 
integral to the service of treating and managing chronic intractable 
pain of the trunk and/or limbs using spinal cord stimulation. The 
applicant noted that some components of the system (described 
previously) are implanted in a patient and are in contact with human 
tissue. The applicant indicated that all components of the system are 
used for one patient only. We note that the external components of the 
Evoke[supreg] SCS System (referenced previously) are not implanted in a 
patient and do not come in contact with human tissue as required by 
Sec.  419.66(b)(3). The applicant did not indicate whether the 
Evoke[supreg] SCS System meets the device eligibility requirements of 
Sec.  419.66(b)(4) in regard to whether it is an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, or whether it is a supply or material furnished incident to 
a service. We note that some of the external components (e.g., surgical 
accessories, clinical interface, clinical system transceiver, pocket 
console and chargers) noted previously may be considered capital as 
specified under Sec.  419.66(b)(4). We are inviting public comments on 
whether the Evoke[supreg] SCS System meets the eligibility criteria at 
Sec.  419.66(b).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion for establishing a device 
category, 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 asserted that none of the existing categories 
appropriately describe the Evoke[supreg] SCS System. The applicant 
provided a list of current and prior device categories for pass-through 
payments for other spinal cord stimulation systems (described in Table 
36) and explained why each category does not describe the Evoke[supreg] 
SCS System. In summary, the applicant asserted that the existing codes 
do not adequately describe the Evoke[supreg] SCS System because the 
existing codes apply to devices that: provide stimulation to organs 
other than the spinal cord (e.g., heart, transvenous sensing and 
stimulation, baroreceptors in the carotid artery), only provide open-
loop stimulation, and are non-rechargeable. According to the applicant, 
the Evoke[supreg] SCS System is a rechargeable, closed-loop 
neurostimulator that provides stimulation to spinal nerves. Upon 
review, it does not appear that there are any existing pass-through 
payment categories that might apply to the Evoke[supreg] SCS System. We 
are inviting public comment on whether Evoke[supreg] SCS System meets 
the device category criterion.
BILLING CODE 4120-01-P

[[Page 44604]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.042

BILLING CODE 4120-01-C
    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 FDA's Breakthrough Devices Program and has received 
FDA marketing authorization for the indication covered by the 
Breakthrough Device designation. The applicant asserted that the 
Evoke[supreg] SCS System represents a substantial clinical improvement 
over existing technology because its use of closed-loop stimulation 
provides greater improvements in key clinical outcomes over the open-
loop stimulation that is currently used in existing technologies. 
Specifically, the applicant stated that the closed-loop stimulation of 
the Evoke[supreg] SCS System provides: (1) a greater responder rate in 
overall chronic leg and back pain with no increase in baseline pain 
medications in comparison to Open-Loop SCS at 3 and 12 months; (2) 
greater percentage change in back pain measured by Visual Analog Scale 
at 3 and 12 months; (3) greater incidence of 50 percent reduction in 
back pain at 3 and 12 months; (4) greater incidence of 50 percent 
reduction in leg pain at 12 months; (5) greater incidence of 80 percent 
reduction in overall back and leg pain at 12 months; (6) consistently 
greater visual improvement in remaining secondary endpoint measures at 
3 and 12 months; (7) a balanced safety profile between treatment 
groups; (8) a greater percentage of time in the therapeutic window for 
closed-loop patients compared to open-loop patients; (9) maintenance of 
clinical improvements in pain response and pain reduction at 24 months 
post-

[[Page 44605]]

implantation; and (10) the results for the pivotal trial treatment 
group have been replicated in another multi-center trial with 12-month 
follow-up. With respect to this criterion, the applicant submitted 
three articles that supported these ten claims regarding the impact of 
the Evoke[supreg] SCS System on the management of chronic intractable 
pain of the trunk and/or limbs, including unilateral or bilateral pain 
associated with the following: failed back surgery syndrome, 
intractable low back pain and leg pain.
    The first article provided by the applicant in support of claims 1-
8 was for the Evoke pivotal clinical study, a prospective, multicenter, 
double-blind, randomized controlled trial designed to compare the use 
of ECAP-controlled, closed-loop stimulation to open-loop stimulation 
for the treatment of back and leg pain.\70\ The trial was done at 13 
specialist clinics, academic centers, and hospitals in the USA. 
Patients with chronic, intractable pain of the back and legs (Visual 
Analog Scale [VAS] pain score >=60 mm; Oswestry Disability Index [ODI] 
score 41-80) who were refractory to conservative therapy, on stable 
pain medications, had no previous experience with spinal cord 
stimulation, and were appropriate candidates for a spinal cord 
stimulation trial were screened. Eligible patients were randomly 
assigned (1:1) to receive ECAP-controlled closed-loop spinal cord 
stimulation (investigational group) or fixed-output, open-loop spinal 
cord stimulation (control group). A total of 134 subjects (67 subjects 
in each treatment group) were randomized. Patients, investigators, and 
site staff were masked to the treatment assignment. The primary outcome 
was the proportion of patients with a reduction of 50 percent or more 
in overall back and leg pain with no increase in pain medications. Non-
inferiority ([delta]=10 percent) followed by superiority were tested in 
the intention-to-treat population at 3 months (primary analysis) and 12 
months (additional prespecified analysis) after the permanent implant. 
This study is registered with ClinicalTrials.gov, NCT02924129.
---------------------------------------------------------------------------

    \70\ Mekhail N, Levy RM, Deer TR, Kapural L, Li S, Amirdelfan K, 
Hunter CW, Rosen SM, Costandi SJ, Falowski SM, Burgher AH, Pope JE, 
Gilmore CA, Qureshi FA, Staats PS, Scowcroft J, Carlson J, Kim CK, 
Yang MI, Stauss T, Poree L; Evoke Study Group. Long-term safety and 
efficacy of closed-loop spinal cord stimulation to treat chronic 
back and leg pain (Evoke): a double-blind, randomised, controlled 
trial. Lancet Neurol. 2020 Feb;19(2):123-134. Epub 2019 Dec 20.
---------------------------------------------------------------------------

    The applicant stated that standard primary and secondary endpoints 
for spinal cord stimulation studies were employed. For the primary 
study endpoint, the study authors defined a responder as having at 
least 50 percent improvement in pain relative to baseline. The 
applicant explained that this level of improvement was found to 
represent a substantial improvement per the IMMPACT 
recommendations.\71\ The study authors stated that the secondary 
outcomes assessed the percentage change from baseline in leg pain VAS 
and back pain VAS, prevalence of high responders (>=80 percent 
reduction) for overall back and leg pain, and prevalence of responders 
(>=50 percent reduction) for back pain VAS, all at 3 months and 12 
months. A host of additional efficacy measures including quality of 
life, pain medication use, and functional outcomes were also employed 
as per the IMMPACT recommendations.\72\ An independent, blinded 
Clinical Events Committee (CEC) reviewed and adjudicated all adverse 
events occurring in the study. The authors reported that, between 
February 21, 2017 and February 20, 2018, 134 patients were enrolled and 
randomly assigned (67 to each treatment group), and that there were no 
between-group differences in the diagnoses, previous treatments, or 
other baseline demographics or characteristics.\73\ The intention-to-
treat analysis comprised 125 patients at 3 months (62 in the closed-
loop group and 63 in the open-loop group) and 118 patients at 12 months 
(59 in the closed-loop group and 59 in the open-loop group).
---------------------------------------------------------------------------

    \71\ Dworkin RH, Turk DC, Wyrwich KW, Beaton D, Cleeland CS, 
Farrar JT, Haythornthwaite JA, Jensen MP, Kerns RD, Ader DN, 
Brandenburg N, Burke LB, Cella D, Chandler J, Cowan P, Dimitrova R, 
Dionne R, Hertz S, Jadad AR, Katz NP, Kehlet H, Kramer LD, Manning 
DC, McCormick C, McDermott MP, McQuay HJ, Patel S, Porter L, Quessy 
S, Rappaport BA, Rauschkolb C, Revicki DA, Rothman M, Schmader KE, 
Stacey BR, Stauffer JW, von Stein T, White RE, Witter J, Zavisic S. 
Interpreting the clinical importance of treatment outcomes in 
chronic pain clinical trials: IMMPACT recommendations. J Pain. 2008 
Feb;9(2):105-21. Epub 2007 Dec 11.
    \72\ Dworkin RH, Turk DC, Farrar JT, Haythornthwaite JA, Jensen 
MP, Katz NP, et al. Core outcome measures for chronic pain clinical 
trials: IMMPACT recommendations. Pain. 2005 Jan;113(1-2):9-19.
    \73\ Mekhail N, Levy RM, Deer TR, Kapural L, Li S, Amirdelfan K, 
Hunter CW, Rosen SM, Costandi SJ, Falowski SM, Burgher AH, Pope JE, 
Gilmore CA, Qureshi FA, Staats PS, Scowcroft J, Carlson J, Kim CK, 
Yang MI, Stauss T, Poree L; Evoke Study Group. Long-term safety and 
efficacy of closed-loop spinal cord stimulation to treat chronic 
back and leg pain (Evoke): a double-blind, randomised, controlled 
trial. Lancet Neurol. 2020 Feb;19(2):123-134. Epub 2019 Dec 20.
---------------------------------------------------------------------------

    Regarding the applicant's first claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides a greater 
responder rate in overall chronic leg and back pain with no increase in 
baseline pain medications in comparison to open-loop stimulation at 3 
and 12 months, the applicant cited findings from this study that a 
greater responder rate in overall chronic leg and back pain with no 
increase in baseline pain medications was achieved in a greater 
proportion of patients in the closed-loop group than in the open-loop 
group at 3 months (82.3 percent vs 60.3 percent; difference 21.9 
percent; p=0[middot]0052) and at 12 months (83.1 percent vs 61.0 
percent; difference 22.0 percent; p=0[middot]0060). Non-inferiority was 
met at 3 months (p<0[middot]0001) and 12 months (p<0[middot]0001), as 
was superiority (3 months, p=0[middot]0052; 12 months, 
p=0[middot]0060).
    Regarding the applicant's second claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides a greater 
percentage change in back pain measured by Visual Analog Scale at 3 and 
12 months, the applicant cited Evoke pivotal clinical study findings 
that at 3 months, 72.1 percent (sd=29.4 percent) of patients in the 
closed-loop group reported improvements in back pain compared to 57.5 
percent in the open-loop group (superiority p=0.015). At 12 months, 
69.4 percent (sd=30.6 percent) of patients in the closed-loop group 
reported improvements in back pain compared versus 54 percent (sd=39.5 
percent) in the open-loop group (superiority p=0.020).
    Regarding the applicant's third claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides a greater 
incidence of 50 percent reduction in back pain at 3 and 12 months, the 
applicant cited Evoke pivotal clinical study findings that at 3 months, 
81 percent of patients in the closed-loop group reported a 50% or 
greater reduction in back pain compared to 57 percent in the open-loop 
group (superiority p=0.0033). Per the study, at 12 months, 80 percent 
of patients in the closed-loop group achieved this outcome compared to 
58 percent in the open-loop group (superiority p=0.0079).
    Regarding the applicant's fourth claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides a greater 
incidence of 50 percent reduction in leg pain at 12 months, the 
applicant cited Evoke pivotal clinical study findings that at 12 
months, this outcome was met by a statistically significantly greater 
proportion of patients in the closed-loop group (83 percent) than in 
the open-loop group (61 percent) (superiority p=0.0060).
    Regarding the applicant's fifth claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides a greater 
incidence of 80 percent reduction in overall back and leg pain at 12 
months,

[[Page 44606]]

the applicant cited findings from the Evoke pivotal clinical study that 
at 12 months, this outcome was met by a statistically significantly 
greater proportion of patients in the closed-loop group (56 percent) 
than in the open-loop group (37 percent) (superiority p=0.039).
    Regarding the applicant's sixth claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides consistently 
greater visual improvement in remaining secondary endpoint measures at 
3 and 12 months, the applicant noted the Evoke pivotal clinical study 
authors observations that significant and clinically important 
improvements in both treatment groups in all other patient-reported 
outcomes at 3 and 12 months, including Oswestry Disability Index (ODI), 
Profile of Mood states Total Mood Disturbance (POMS-TMD), Pittsburgh 
Sleep Quality Index (PSQI), EQ-5D-5L Index Score, and Short Form Health 
Survey (SF-12) Physical Component Summary (PCS) and Mental Component 
Summary (MCS).\74\ The authors noted that, in general, the improvement 
was greater in the closed-loop group than in the open-loop group at 
both 3 and 12 months, with significant differences seen in POMS-TMD 
scores (p=0.0037 at 3 months; p=0.0003 at 12 months) and SF-12 MCS 
scores (p=0.0005 at 3 months) and (p=0.0004 at 12 months).
---------------------------------------------------------------------------

    \74\ Ibid.
---------------------------------------------------------------------------

    Regarding the applicant's seventh claim that closed-loop patients 
spent a greater percentage of time in the therapeutic window compared 
to open-loop patients, the applicant cited Evoke pivotal clinical study 
findings that at 3 months, the time in therapeutic window averaged 91.1 
percent in the closed-loop group compared to 59.5 percent in the open-
loop group (superiority p<0.0001). At 12 months, the time in 
therapeutic window averaged 95.2 percent in the closed-loop group 
versus 47.9 percent in the open-loop group (superiority p<0.0001).
    Regarding the applicant's eighth claim that the closed-loop 
stimulation of the Evoke[supreg] SCS System provides a balanced safety 
profile between treatment groups, the applicant cited findings from the 
Evoke pivotal clinical study that the type, nature, and severity of 
adverse events were similar between treatment groups. The authors 
reported that, among the findings, 34 study-related adverse events 
occurred in 24 patients (23 adverse events in the closed-loop group, in 
13 [19 percent] patients [95 percent CI 10.8-30.9], and 11 adverse 
events in the open-loop group in 11 [16 percent] patients [95 percent 
CI 8.5-27.5]). The authors stated that the most frequently reported 
study-related adverse events in both treatment groups were lead 
migration (nine [7 percent] patients), implantable pulse generator 
pocket pain (five [4 percent]), and muscle spasm or cramp (three [2 
percent]).
    The second article provided by the applicant reported the results 
from the Evoke pivotal clinical study at 24 months follow-up.\75\ The 
applicant submitted this article in support of its claim that the 
Evoke[supreg] SCS System maintained statistical superiority in pain 
response and pain reduction at 24 months. The authors reported that 50 
closed-loop patients and 42 open-loop patients completed 24-month 
follow-up. The authors noted that the double-blind was maintained for 
the full study duration. The authors reported that, at 24 months, a 
significantly greater proportion of closed-loop patients (79.1 percent) 
were responders (>=50 percent reduction in overall back and leg pain) 
than open-loop patients (53.7 percent) (p=0.001). Similarly, the 
authors reported that there was a significantly greater proportion of 
high responders, (>=80 percent reduction in overall pain) in the 
closed-loop group (46.3 percent) compared to the open-loop (29.9 
percent) (p=0.047). The authors report that reduction in overall back 
and leg pain was significantly greater for closed-loop patients (mean 
score=26.4; point decrease=55.6) than open-loop patients (mean 
score=38.3; point decrease=43.9) (mean score difference=-11.9, p=0.02).
---------------------------------------------------------------------------

    \75\ Mekhail N, Levy RM, Deer TR, Kapural L, Li S, Amirdelfan K, 
Hunter CW, Rosen SM, Costandi SJ, Falowski SM, Burgher AH, Pope JE, 
Gilmore CA, Qureshi FA, Staats PS, Scowcroft J, McJunkin T, Carlson 
J, Kim CK, Yang MI, Stauss T, Pilitsis J, Poree L; Evoke Study 
Group, Brounstein D, Gilbert S, Gmel GE, Gorman R, Gould I, Hanson 
E, Karantonis DM, Khurram A, Leitner A, Mugan D, Obradovic M, Ouyang 
Z, Parker J, Single P, Soliday N. Durability of Clinical and 
Quality-of-Life Outcomes of Closed-Loop Spinal Cord Stimulation for 
Chronic Back and Leg Pain: A Secondary Analysis of the Evoke 
Randomized Clinical Trial. JAMA Neurol. 2022 Jan 8: e214998. doi: 
10.1001/jamaneurol.2021.4998. Epub ahead of print. PMID: 34998276; 
PMCID: PMC8742908.
---------------------------------------------------------------------------

    The third article provided by the applicant reported the results 
from the Avalon study, a prospective, multicenter, single-arm study of 
the Evoke[supreg] SCS System.\76\ While not a standalone claim of 
substantial clinical improvement, the applicant submitted this article 
in support of its other SCI claims to demonstrate that the relevant 
findings from the Evoke pivotal trial had been replicated in another 
multi-center trial with 12-month follow up. The authors of the third 
article stated that the purpose of the Avalon study was to determine 
whether maintaining stable SC activation has a beneficial outcome on 
pain relief by demonstrating the safety and performance of the new 
closed-loop Evoke[supreg] SCS System. The protocol was publicly 
registered at Australian New Zealand Clinical Trials Registry. Patients 
were consented at five clinical sites in Australia from August 2015 to 
April 2017 for the Avalon study.\77\ A total of 70 patients underwent a 
trial procedure. Of these, 68 (97.1 percent) completed the end-of-trial 
assessments and were evaluable. Of the 68 patients, 56 (82.4 percent) 
with assessment data had a reduction of 40 percent or more from 
baseline in their overall VAS rating; of those, 48 patients elected to 
proceed with a permanent implant. Two additional patients with a 
segmental VAS reduction of 40 percent or more proceeded with a 
permanent implant as per the protocol inclusion criterion. Fifty 
subjects were implanted (71.4 percent of those trialed).
---------------------------------------------------------------------------

    \76\ Russo M, Brooker C, Cousins MJ, Taylor N, Boesel T, 
Sullivan R, Holford L, Hanson E, Gmel GE, Shariati NH, Poree L, 
Parker J. Sustained Long-Term Outcomes with Closed-Loop Spinal Cord 
Stimulation: 12-Month Results of the Prospective, Multicenter, Open-
Label Avalon Study. Neurosurgery. 2020 Feb 5. [Epub ahead of print]
    \77\ Ibid.
---------------------------------------------------------------------------

    The authors of the Avalon study article stated that baseline 
assessments in this study included ratings of pain on the Visual Analog 
Scale (100-mm VAS), impact of pain (Brief Pain Inventory [BPI]), 
function (Oswestry Disability Index [ODI]), sleep (Pittsburgh Sleep 
Quality Index [PSQI]), quality of life (EuroQol instrument [EQ-5D-5L]), 
and medication usage. Adverse events were assessed throughout the 
study. Along with raw scores and percent change from baseline, VAS data 
were also analyzed as responders (>=50 percent pain relief) and high 
responders (>=80 percent pain relief). According to the article, the 
outcomes data were analyzed using paired t-tests with an alpha of 0.05 
and results were presented for the permanently implanted patients only.
    The authors reported favorable results for pain relief 
outcomes.\78\ At 12 months, 76.9 percent of patients were back pain 
responders (>=50 percent pain reduction), with 56.4 percent being 
classified as high responders (>=80 percent pain reduction). The 
proportion of patients who were leg pain responders at 12 months was 
79.3 percent (>=50 percent pain reduction), and 58.6 percent of 
patients were high responders (>=80 percent pain reduction). The 
proportion of patients who were overall pain responders at 12 months 
was 81.4 percent (>=50 percent pain reduction), and 53.5 percent of

[[Page 44607]]

patients were high responders (>=80 percent pain reduction).
---------------------------------------------------------------------------

    \78\ Ibid.
---------------------------------------------------------------------------

    Based upon the evidence presented by the applicant, we have the 
following concerns regarding whether the Evoke[supreg] SCS System meets 
the substantial clinical improvement criterion. First, we note that 
none of the sources provided by the applicant compared the 
Evoke[supreg] SCS System to other currently available technologies, 
such as other open-loop spinal cord stimulation products. However, in 
the Evoke pivotal clinical study, all patients were implanted with the 
Evoke[supreg] SCS System, with the difference between study groups 
being that the implanted devices in the treatment group were set to 
closed-loop stimulation as opposed to open-loop stimulation. While the 
study is testing outcomes between different aspects of the 
Evoke[supreg] SCS System itself, additional information comparing the 
Evoke[supreg] SCS System to existing spinal cord stimulators would help 
inform our assessment of substantial clinical improvement. While the 
applicant asserted that the Evoke[supreg] SCS System is the only 
available closed-loop SCS, we invite public comment on whether there 
are other existing technologies which may be appropriate comparators.
    Second, we have concern regarding the patient sample size cited in 
the studies. Furthermore, the applicant cites the Avalon study in 
Australia to support its claim that the pivotal clinical study's 
results were replicated internationally. We request additional details 
about how these two studies' results would be generalizable to the U.S. 
population.
    We are inviting public comments on whether the Evoke[supreg] SCS 
System meets the substantial clinical improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that the Evoke[supreg] 
SCS System would be reported with HCPCS code 63685. 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. As we 
explained in the CY 2005 OPPS final rule (69 FR 65775), we generally 
use the lowest APC payment rate applicable for use with the nominated 
device when we assess whether a device meets the cost significance 
criterion, thus increasing the probability the device will pass the 
cost significance test. For our calculations, we used APC 5465 Level 5 
Neurostimulator and Related Procedures, which had a CY 2021 payment 
rate of $29,444.52 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 63685 had a 
device offset amount of $24,209.28 at the time the application was 
received. According to the applicant, the estimated average cost of the 
Evoke[supreg] SCS system is $37,000. We note that the device cost 
provided by the applicant encompasses the entire Evoke[supreg] SCS. 
However, as previously discussed, the external components of the 
Evoke[supreg] SCS (the surgical accessories, clinical interface, 
clinical system transceiver, pocket console and chargers) may not meet 
the criteria required under Sec.  419.66(b)(3), i.e., the external 
components are not implantable and/or do not come in contact with human 
tissue. Therefore, the cost of only the eligible internal components 
may be less than the cost of the entire system and could affect the 
calculations in the following formulas.
    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 $37,000 for the Evoke[supreg] SCS System is 
125.7 percent of the applicable APC payment amount for the service 
related to the category of devices of $29,444.52 (($37,000/$29,444.52) 
x 100 = 125.7 percent). Therefore, we believe the Evoke[supreg] SCS 
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 $37,000 for the 
Evoke[supreg] SCS System is 152.8 percent of the cost of the device-
related portion of the APC payment amount for the related service of 
$24,209.28 (($37,000/$24,209.28) x 100 = 152.8 percent). Therefore, we 
believe that the Evoke[supreg] SCS 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 $37,000 for the Evoke[supreg] SCS System and the 
portion of the APC payment amount for the device of $24,209.28 is 43.4 
percent of the APC payment amount for the related service of $29,444.52 
((($37,000-$24,209.28)/$29,444.52) x 100 = 43.4 percent). Therefore, we 
believe that the Evoke[supreg] SCS System meets the third cost 
significance requirement.
    We have a concern regarding whether the Evoke[supreg] SCS System 
meets all of the cost criteria. Specifically, as previously discussed, 
the external components of the Evoke[supreg] SCS may not meet the 
criteria required under Sec.  419.66(b)(3), i.e., the external 
components (the surgical accessories, clinical interface, clinical 
system transceiver, pocket console and chargers) are not implantable 
and/or do not come in contact with human tissue. Therefore, the cost of 
only the eligible internal components may be less than the cost of the 
entire system. If the cost of the internal components is sufficiently 
lower than that of the whole system, then that could affect the 
calculations for the cost requirements to the point where some of those 
requirements are not met.
    We are inviting public comment on whether the Evoke[supreg] SCS 
System meets the device pass-through payment criteria discussed in this 
section, including the cost criterion for device pass-through payment 
status.
(5) Pathfinder[supreg] Endoscope Overtube
    Neptune Medical submitted an application for a new device category 
for transitional pass-through payment status for the Pathfinder[supreg] 
Endoscope Overtube (the Pathfinder[supreg]) for CY 2023. According to 
the applicant, the Pathfinder[supreg] is a flexible, single use, 
overtube with stiffening capabilities that is used to manage endoscope 
looping and improve tip control of the endoscope. Per the applicant, 
the Pathfinder[supreg] is indicated for use with an endoscope to 
facilitate intubation and treatment in the gastrointestinal (GI) tract 
in adult patients (22 years of age and older). The applicant indicated 
that the flexible overtube may be connected to vacuum for rigidization. 
Specifically, the handle includes a vacuum line which is connected to 
free space within the device that is completely contained, forming the 
vacuumable volume. The applicant stated that the handle rotator has two 
positions: the first connects the

[[Page 44608]]

vacuumable volume within the device to atmosphere (vent) to stay in the 
flexible position, and the second position connects the vacuumable 
volume to a source of vacuum to transition to the rigid condition. When 
transitioned to the rigid condition, the device maintains its shape at 
the time of rigidization, allowing the endoscope to advance or withdraw 
relative to the overtube with minimal disturbance to the surrounding 
anatomy. According to the applicant, when transitioned to the flexible 
condition, the device can move relative to the patient anatomy and 
endoscope for navigation through the GI tract.
    With respect to the newness criterion at Sec.  419.66(b)(1), on 
August 20, 2019, the applicant received 510(k) clearance from FDA for 
the Pathfinder[supreg] as a Class II device to be used with an 
endoscope to facilitate intubation, change of endoscopes, and treatment 
in the GI tract in adult patients (22 years of age and older). We 
received the application for a new device category for transitional 
pass-through payment status for the Pathfinder[supreg] on November 30, 
2021, which is within 3 years of the date of the initial FDA marketing 
authorization. We are inviting public comments on whether the 
Pathfinder[supreg] meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the Pathfinder[supreg] is integral to the 
service provided, is used for one patient only, comes in contact with 
human tissue, and is surgically implanted or inserted. The applicant 
also claimed that the Pathfinder[supreg] meets the device eligibility 
requirements of Sec.  419.66(b)(4) because it is not an instrument, 
apparatus, implement, or item for which depreciation and financing 
expenses are recovered, and it is not a supply or material furnished 
incident to a service. We are inviting public comments on whether the 
Pathfinder[supreg] meets the eligibility criteria at Sec.  419.66(b).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996.
    The applicant provided a list of all established device categories 
used presently or previously for pass-through payment that describe 
related or similar products. The applicant indicated that while there 
are other endoscope overtubes available, there are no known competitive 
devices on the market that can be toggled from being flexible to rigid 
instantly to prevent/manage endoscope looping. The applicant stated 
that the Pathfinder[supreg] is unique in its ability to do this using a 
proprietary technology called Dynamic Rigidization\TM\. For each 
established device category, the applicant provided explanations as to 
why that category does not encompass the nominated device: (1) C1748 
(endoscope, single-use (i.e., disposable) upper GI, imaging/
illumination device (insertable)), and (2) C1749 (endoscope, retrograde 
imaging/illumination colonoscope device (implantable)). According to 
the applicant, the Pathfinder[supreg] is not an imaging/illumination 
device. Furthermore, the Pathfinder[supreg] can be used in upper and 
lower GI endoscope/colonoscope procedures to eliminate device looping. 
As such, the applicant does not believe that the existing codes 
encompass the Pathfinder[supreg].
    Upon review, it does not appear that there are any existing pass-
through payment categories that might apply to the Pathfinder[supreg]. 
We are inviting public comment on whether the Pathfinder[supreg] meets 
the device category criterion.
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of FDA's Breakthrough Devices Program and has received 
FDA marketing authorization for the indication covered by the 
Breakthrough Device designation. The applicant states that the 
Pathfinder[supreg] represents a substantial clinical improvement over 
existing technologies. With respect to this criterion, the applicant 
submitted studies that examined the impact of the Pathfinder[supreg] 
when used with an endoscope to facilitate intubation, change of 
endoscopes, and treatment in the GI tract in adult patients (22 years 
of age and older).
    Broadly, the applicant asserts the following areas in which the 
Pathfinder[supreg] would provide a substantial clinical improvement: 
(1) minimize scope looping and complications from scope looping, (2) 
reduce endoscopist's workload during endoscope procedure, (3) provide 
endoscope tip stabilization, (4) enable endoscopic procedure in 
patients with altered anatomy, (5) enable crossing of anastamosis, and 
(6) enable antegrade and retrograde enteroscopy, in use for the 
prevention of endoscope looping. The applicant provided eleven articles 
specifically for the purpose of addressing the substantial clinical 
improvement criterion.
    In support of the claim that the Pathfinder[supreg] minimizes scope 
looping and complications from scope looping, the applicant submitted a 
prospective single center study performed over 11 months by two 
endoscopists in the United States.\79\ The study population consisted 
of 15 patients with a mean age of 63.2 years (range 23-88 y) and mean 
Body Mass Index (BMI) of 28.6 kg/m2 (range 16.8-46.2 kg/m2). Two of the 
patients were placed under moderate sedation, 11 had monitored 
anesthesia care (MAC) and two patients underwent general anesthesia. 
The mean (standard deviation) Boston bowel preparation scale (BBPS) 
score was 6.9 (1.8), with a range of 6-9. Indications for colonoscopy 
included surveillance (n=9), evaluation of Crohn's disease (n=2), polyp 
resection (n=3), and other diagnostic purpose (n=1). To complete the 
colonoscopy, the endoscopist resorted to the use of the rigidizing 
overtube in all 15 cases due to several technical difficulties 
encountered. The authors noted the reasons for overtube use included a 
history of difficult colonoscopy due to a long, tortuous colon (n=9), 
inability to reach the cecum (n=3) or the ileocolonic anastomosis 
(n=1), inability to completely visualize the ileocecal valve (n=1), and 
inability to advance colonoscope due to looping and bradycardia (n=1). 
The authors noted that colonoscopy was successfully completed in all 15 
cases using the overtube device.
---------------------------------------------------------------------------

    \79\ Park, N., Abadir, A., Chahine, A., Eng, D., Ji, S., Nguyen, 
P., Bernal, E., Simoni, R. & Samarasena, J. B. (2021). A Novel 
Dynamic Rigidizing Overtube Significantly Eases Difficult 
Colonoscopy. Techniques and Innovations in Gastrointestinal 
Endoscopy.
---------------------------------------------------------------------------

    The applicant provided a second article to support the claims that 
the Pathfinder[supreg] minimizes scope looping and complications from 
scope looping, provides endoscope tip stabilization, enables endoscopic 
procedure in patients with altered anatomy, and enables crossing of 
anastomosis. The article consists of an abstract from a set of case 
studies performed in two tertiary care endoscopy centers in the United

[[Page 44609]]

States.\80\ From May 2019 to February 2020, 29 patients were 
consecutively treated using the Pathfinder[supreg]. The patients were 
predominantly male with a median age of 66 years old. Of the 29 
patients scoped, one patient received an upper endoscopy, 24 received 
colonoscopy, and four received enteroscopy. The types of anesthesia 
provided to these patients included: general anesthesia for four 
patients, MAC for 15 patients, moderate monitored anesthesia for nine 
patients, and no sedation for one patient. The indication for using the 
Pathfinder[supreg] was incomplete colonoscopy in 12 patients, enhancing 
insertion depth not feasible with standard endoscopy in six patients 
and endoscope stabilization during endoscopic resection in 11 patients, 
according to the study researchers.
---------------------------------------------------------------------------

    \80\ Wei, M. T., Hwang, J. H., Watson, R. R., Park, W., & 
Friedland, S. (2021). Novel rigidizing overtube for colonoscope 
stabilization and loop prevention (with video). Gastrointestinal 
Endoscopy, 93(3), 740-749.
---------------------------------------------------------------------------

    The applicant submitted a third article,\81\ which described a 57-
year-old male being evaluated for high-risk colon cancer screening due 
to positive Cologuard, to support the claim that the Pathfinder[supreg] 
minimizes scope looping and complications from scope looping. The 
applicant pointed out that an initial colonoscopy on the patient was 
incomplete due to severely redundant colon, i.e., an abnormally long 
colon with additional loops or twists. The patient was referred to the 
study's tertiary care center for a repeat attempt with advanced 
endoscopy. A second colonoscopy was attempted, but significant looping 
occurred due to the large redundant colon, resulting in another 
incomplete colonoscopy. Maneuvers like changing to supine position, 
scope torsion, abdominal pressure, use of colonic overtube and Naviaid 
balloon-assisted colonoscopy were all unsuccessful, according to the 
study researchers. The study's tertiary care center performed a virtual 
computerized tomography (CT) colonography, which revealed a polyp in 
the ascending colon and markedly redundant colon. This prompted a third 
colonoscopy, which again showed significant looping of the colon and 
the colonoscopy was incomplete, per the study researchers. After three 
unsuccessful conventional colonoscopies, the patient had a colonoscopy 
with the rigidizing Pathfinder[supreg]. According to the study, the 
exam was technically challenging, requiring more than two hours of 
procedure time, but was successfully completed.
---------------------------------------------------------------------------

    \81\ Patel, P., & Khara, H. (2021). S2537 Successful Polypectomy 
with Novel Rigidizing Overtube with Failed Previous Colonoscopies. 
Official journal of the American College of Gastroenterology[verbar] 
ACG, 116, S1070.
---------------------------------------------------------------------------

    A fourth article \82\ was provided by the applicant to support the 
claim that the Pathfinder[supreg] minimizes scope looping and 
complications from scope looping. This article presented a challenging 
case of a laterally spreading tumor at the hepatic flexure in a 
difficult and unstable colon, which was removed by endoscopic 
submucosal dissection (ESD) using a novel injectable needle-type knife 
and with the assistance of the dynamic rigidizing Pathfinder[supreg]. 
The case involved a 66-year-old man with coronary artery disease, 
hypertension, hyperlipidemia, and diabetes mellitus who was found on 
screening colonoscopy to have a 35-mm laterally spreading tumor at the 
hepatic flexure (Paris IIa[thorn]Is). An attempted endoscopic mucosal 
resection was unsuccessful because of non-lifting of the lesion during 
submucosal injection; therefore, the patient was referred for ESD. 
Given the length of the procedure and the patient's medical 
comorbidities, the procedure was performed under general endotracheal 
anesthesia. A pediatric colonoscope (PCF-H190DL, Olympus America, 
Center Valley, Pa, USA) with a tapered-tip distal attachment cap (ST 
hood, Fujifilm Medical Systems, Stamford, Conn, USA) was initially 
advanced to the cecum and withdrawn to the hepatic flexure. However, 
because of a highly redundant left colon segment, the colonoscope could 
not be reduced into a stable, short position for ESD despite manual 
abdominal counterpressure and position changes. In the looped, long 
position at the hepatic flexure, the endoscope was noted to be in an 
extremely unstable position and therefore unsafe for ESD. The dynamic 
rigidizing Pathfinder[supreg] overtube allowed for a stable endoscopic 
position in a challenging ESD at the hepatic flexure per the applicant.
---------------------------------------------------------------------------

    \82\ Coronel, M., Coronel, E., Romero, L., & Phillip, S. G. 
(2021). Combination of a dynamic rigidizing overtube and a novel 
injectable needle-type knife to facilitate colorectal endoscopic 
submucosal dissection. VideoGIE, 6(7), 297-300.
---------------------------------------------------------------------------

    The applicant provided a fifth article \83\ to support the claims 
that the Pathfinder[supreg] minimizes scope looping and complications 
from scope looping and enables endoscopic procedure in patients with 
altered anatomy. This article presents two cases demonstrating the 
utility of the rigidizing overtube in accomplishing altered-anatomy 
endoscopic retrograde cholangiopancreatography (ERCP), which consisted 
of the overtube reducing looping and allowing for increased distances 
that shorter scopes (such as a side-viewing duodenoscope) are unable to 
achieve. According to the authors, success varies with intubation and 
cannulation in ERCP for patients with surgically altered anatomy. The 
authors concluded that this is particularly important in managing 
gastric loops and tight angulation at surgical anastomoses, including 
jejunojejunostomy anastomosis.
---------------------------------------------------------------------------

    \83\ Wei, M. T., Friedland, S., Watson, R. R., & Hwang, J. H. 
(2020). Use of a rigidizing overtube for altered-anatomy ERCP. 
VideoGIE, 5(12), 664-666.
---------------------------------------------------------------------------

    A sixth article \84\ the applicant provided in support of its claim 
that the Pathfinder[supreg] minimizes scope looping and complications 
from scope looping was a single site case study of a 64-year-old man 
with a history of C5 spinal cord injury due to a diving accident who 
presented for screening colonoscopy. A pediatric colonoscope was used 
initially, but given significant looping, the colonoscope could only 
reach the transverse colon. The colonoscope was withdrawn, and the 
Pathfinder[supreg] overtube was used. The applicant pointed out that 
with assistance from the overtube, the colonoscope reached the cecum 
easily in eight minutes. A 1-cm sessile polyp was found in the 
ascending colon and was removed by cold snare. An additional 3 polyps 
measuring less than one centimeter were identified and removed by cold 
snare, and the procedure was terminated. Three of the polyps (including 
the 1-cm polyp) were determined to be tubular adenoma. The fourth polyp 
was identified as a hyperplastic polyp.
---------------------------------------------------------------------------

    \84\ Wei, M. T., Hwang, J. H., Watson, R., & Friedland, S. 
(2020). Use of a rigidizing overtube to complete an incomplete 
colonoscopy. VideoGIE, 5(11), 583-585.
---------------------------------------------------------------------------

    A seventh article \85\ provided in support of the same claim 
described a 72-year-old male who presented for surveillance 
colonoscopy. The colonoscope was successfully advanced to the ascending 
colon, however, it could not be advanced further due to loop formation. 
Every time the scope was advanced through the loop the patient became 
bradycardic to a heart rate in the 40s, presumably from a vasovagal 
reflex. Repeated attempts at advancing the colonoscope were 
unsuccessful due to looping and bradycardia despite abdominal 
counterpressure and position change.

[[Page 44610]]

The scope was removed and the rigidizing overtube device was introduced 
onto the scope. The scope with overtube was advanced to the ascending 
colon in its flexible state. Once in the ascending colon, the overtube 
was rigidized which allowed for easy cecal intubation and successful 
completion of colonoscope without any loop formation, as the applicant 
noted.
---------------------------------------------------------------------------

    \85\ Abadir, A., Chehade, N. E. H., Park, N., Eng, D., & 
Samarasena, J. (2020). S1876 Use of a Novel Dynamic Rigidizing 
Overtube in Difficult Colonoscopy Due to Looping. Official journal 
of the American College of Gastroenterology[verbar] ACG, 115, S971.
---------------------------------------------------------------------------

    An eighth article \86\ provided by the applicant in support of the 
claim of a reduction in the endoscopist's workload during the endoscope 
procedure was a prospective, single center study performed over 6 
months. Difficult colonoscopy subjects were categorized based on 
looping that prevented reaching the cecum despite position change and 
abdominal counter pressure (LOOP group), or poor stabilization to 
perform therapeutic polypectomy (UNSTABLE group). Parameters assessed 
included successful/failed salvage of the procedure, and the in-
procedure National Aeronautics and Space Administration (NASA) Task 
Load Index (TLX) \87\ before and after use of the rigidizing overtube. 
The TLX raw and weighted scores were compared for each type of demand 
(mental, physical, effort, temporal, performance, and frustration). 
Over the study period, there were 14 difficult colonoscopy procedures: 
eight in the LOOP group and six in the UNSTABLE group. In the LOOP 
group, all eight cases were salvaged, and cecum was reached after the 
Pathfinder[supreg] overtube was used. The TLX weighted score decreased 
from 81.1 to 26.0 after use (P,0.01). In the UNSTABLE group, complete 
polypectomy was successful in all cases using the Pathfinder[supreg] 
overtube. The TLX weighted score decreased from 79.7 to 40.4 after use 
(P,0.01). In all procedures, the TLX raw scores for each type of demand 
was reduced. The applicant pointed out that all six dimensions of the 
NASA-TLX: mental demand, physical demand, temporal demand, effort, 
performance, and frustration level were significantly improved after 
using the overtube. All score changes were statistically significant 
per the study researchers. The overall weighted NASA-TLX score 
decreased from an average of 80.30 to 30.85 after using the device as 
the applicant identified. In this case series, the study showed that 
the novel rigidizing overtube decreases burden on the endoscopist by 
reducing the workload perceived during the procedure, according to the 
study researchers.
---------------------------------------------------------------------------

    \86\ Abadir, A., Park, N., Eng, D. J., Chehade, N. E. H., & 
Samarasena, J. (2020, October). A Novel Dynamic Rigidizing Overtube 
Significantly Eases Difficult Colonoscopy. American Journal of 
Gastroenterology (Vol. 115, pp. S83-S83). Two Commerce Square, 2001 
Market St., Philadelphia, PA 19103 USA: Lippincott Williams & 
Wilkins.
    \87\ TLX @ NASA Ames--Home.
---------------------------------------------------------------------------

    In support of the claims about a reduction in the endoscopist's 
workload during the endoscope procedure and enabling antegrade and 
retrograde enteroscopy, the applicant submitted a ninth article,\88\ 
which was a retrospective single site study over a 6-month period, in 
which two endoscopists performed retrograde and antegrade enteroscopies 
using a rigidizing overtube. Retrograde enteroscopy was performed via 
the anus by advancing the overtube to the cecum in its flexible state 
with the pediatric colonoscope, reducing the scope and overtube 
construct, and then rigidizing at the cecum. Following rigidization, 
the scope was pushed through the ileocecal valve and advanced 
maximally. Antegrade enteroscopy was performed by inserting the dynamic 
rigidizing overtube with use of the pediatric colonoscope via the 
mouth, rigidizing in the duodenum or jejunum, and then advancing 
maximally. A total of nine retrograde and three antegrade enteroscopies 
were performed. On retrograde enteroscopy, small bowel depth ranged 
from 15 cm to 70 cm from the ileocecal valve, with a mean of 48.9 cm. 
There were no complications associated with use of the dynamic 
rigidizing overtube, both in antegrade and retrograde evaluation. Of 
note, in one case, initial attempts at retrograde double-balloon 
enteroscopy failed due to looping and unfavorable angulation of the 
ileocecal valve. Multiple attempts at intubation including manual 
abdominal pressure and position changes were unsuccessful. The dynamic 
rigidizing overtube was then introduced with successful intubation and 
subsequent exploration of the ileum. Overall, both endoscopists 
reported significant ease of enteroscopy compared to traditional 
double-balloon methods, with lower perceived mental and physical 
demand, according to the study.
---------------------------------------------------------------------------

    \88\ Park, N., Abadir, A., Eng, D., Chehade, N. E. H., & 
Samarasena, J. (2020). S0972 Enteroscopy Enabled Using a Novel 
Dynamic Rigidizing Overtube: An Initial Single Center Experience. 
Official journal of the American College of Gastroenterology[verbar] 
ACG, 115, S495-S496.
---------------------------------------------------------------------------

    The applicant supplied a tenth article \89\ that described a single 
site case study in support of its claim that the Pathfinder[supreg] 
offers improved endoscope tip stabilization. The study described using 
a Pathfinder[supreg] overtube 85-centimeters long to accommodate a 
pediatric colonoscope, upper endoscope, or enteroscope. The study 
presented two contrasting cases demonstrating the rigidizing overtube 
in colorectal endoscopic submucosal dissection (ESD). In the first 
case, a 70-year-old man was referred for ESD of a 20mm polyp in the 
ascending colon. Following submucosal injection, partial 
circumferential incision was performed. According to the authors, the 
case was challenging due to poor tip control in the right colon. The 
cut made by the knife was irregular and of higher risk, requiring more 
time to make the incision. The polyp was identified as a tubular 
adenoma with clear margins. In the second case, a 44-year-old man 
presented following recent diagnosis of ulcerative colitis. Prior 
colonoscopy demonstrated a large 3-5cm tubulovillous adenoma in the 
ascending colon. A cap and rigidizing overtube was used during the 
colonoscopy. During ESD, there was severe fibrosis in the distal 
portion of the lesion. The rigidizing overtube offered improved scope 
stability and tip control, facilitating precise dissection of the 
narrowed fibrotic submucosal space, per the applicant. The lesion was 
removed en bloc and was identified as a tubular adenoma with low grade 
dysplasia, with clear margins.
---------------------------------------------------------------------------

    \89\ Wei, M. T., Hwang, J. H., & Friedland, S. (2021). S2027 Use 
of the Rigidizing Overtube in Assisting Endoscopic Submucosal 
Dissection Among Patients with Ulcerative Colitis. Official journal 
of the American College of Gastroenterology[verbar] ACG, 116, S880.
---------------------------------------------------------------------------

    In support of its claim that the Pathfinder[supreg] enables 
endoscopic procedure in patients with altered anatomy, the applicant 
submitted an eleventh article \90\ describing a single site case study 
about a 42-year-old female with a history of iatrogenic bile duct 
transection during cholecystectomy who underwent Roux-en-Y 
Hepaticojejunostomy (HJ). Her course was complicated by HJ stricture 
requiring double-balloon assisted enteroscopy with ERCP to place a 
fully covered metal stent. After three months the stent was removed, 
but restricturing occurred six months later and she developed left-
sided intrahepatic stone disease. Double-balloon assisted enteroscopy 
to reach the anastomosis became more difficult. As a result, multiple 
antegrade procedures via endoscopic ultrasound (EUS) guided 
hepaticogastrostomy with lithotripsy were used to treat accessible 
intrahepatic stones, but several more

[[Page 44611]]

stones remained. To facilitate further endoscopic procedures, a 
shortcut was made using laparoscopic revision to create a new entero-
enterostomy from the proximal jejunum to the pancreaticobiliary (PB) 
limb. Repeat enteroscopy with a slim colonoscope failed to enter the PB 
limb despite multiple attempts due to difficult angulation and looping 
in the stomach. A rigidizing overtube placed over the colonoscope 
allowed the scope to advance to the HJ without looping in the stomach 
and provided improved control up the ascending PB limb. The colonoscope 
then deployed a stone extraction balloon to remove biliary duct stones. 
According to the article, this case demonstrates the use of a 
rigidizing overtube to prevent looping and assist with complex stone 
removal via ERCP in altered anatomy.
---------------------------------------------------------------------------

    \90\ Abadir, A., Park, N., Eng, D. J., Lee, D., & Samarasena, J. 
(2020). S2330 Altered Anatomy ERCP Using a Novel Dynamic Rigidizing 
Overtube. Official journal of the American College of 
Gastroenterology[verbar] ACG, 115, S1235.
---------------------------------------------------------------------------

    While the applicant has provided articles that describe the 
clinical use of the Pathfinder[supreg] in challenging procedures, the 
majority of the articles are clinical case series which do not 
necessarily allow for a clear comparison with common mediation 
strategies.\91\ Additionally, the applicant identified specific 
procedures for using the Pathfinder[supreg] when the physician needs to 
control looping or enhance endoscope tip control to successfully 
complete the procedure.\92\ The applicant has not provided studies 
comparing the efficacy of the Pathfinder[supreg] with other 
rigidization devices although the applicant has noted the existence of 
such devices. Furthermore, all the clinical case study series presented 
in the applicant's articles were based on small sample sizes. There are 
other devices available which can help assist the Endoscopist in 
procedures which are difficult to perform. We have a concern that there 
has not been adequate comparison to other available devices used for 
similar indication. We ask for public comment on whether Pathfinder 
shows superiority over the existing devices/methods used in cases of 
endoscope looping and abnormal anatomy.
---------------------------------------------------------------------------

    \91\ For example, repeat colonoscopy with a different sedation 
method, different instruments and/or different physicians, double-
contrast barium enema, CT colonography, overtube-assisted 
colonoscopy, double-balloon enteroscopy and colonoscopy, single-
balloon enteroscopy, integrated inflated balloon, spiral overtubes, 
colon capsule endoscopy, C-scan Cap imaging system, and/or robotic 
colonoscopes). See Franco, D. L., Leighton, J. A., & Gurudu, S. R. 
(2017). Approach to Incomplete Colonoscopy: New Techniques and 
Technologies. Gastroenterology & hepatology, 13(8), 476-483.
    \92\ According to the applicant, the Pathfinder[supreg] is used 
for the following procedures: difficult colonoscopy, endoscopic 
mucosal resection (EMR)/endoscopic submucosal dissection (ESD) of 
colon, EMR/ESD of the stomach, enteroscopy (both antegrade and 
retrograde), altered anatomy ERCP, and endoscopic ultrasonography in 
the colon.
---------------------------------------------------------------------------

    Finally, with respect to the two articles 93 94 
presented to support the substantial clinical improvement claim in 
reducing endoscopists' workload during endoscopy procedures; in both 
articles, the authorships were identical for the same study center and 
time frame, and there were only two participating endoscopists. 
Therefore, it may be difficult to make comparisons due to the lack of a 
diverse pool of endoscopists. Additionally, we note that factors such 
as center and clinical staff characteristics in both studies are 
difficult to control, and it is difficult to determine if observed 
differences resulted from the Pathfinder[supreg] or from confounding 
variables. Furthermore, we note there is potential for some level of 
selection bias if providers are allowed to select the manner and order 
in which patients are treated, and thereby potentially influence 
outcomes seen in these studies.
---------------------------------------------------------------------------

    \93\ Abadir, A., Park, N., Eng, D. J., Chehade, N. E. H., & 
Samarasena, J. (2020, October). A Novel Dynamic Rigidizing Overtube 
Significantly Eases Difficult Colonoscopy. American Journal of 
Gastroenterology (Vol. 115, pp. S83-S83). Two Commerce Square, 2001 
Market St., Philadelphia, PA 19103 USA: Lippincott Williams & 
Wilkins.
    \94\ Park, N., Abadir, A., Eng, D., Chehade, N. E. H., & 
Samarasena, J. (2020). S0972 Enteroscopy Enabled Using a Novel 
Dynamic Rigidizing Overtube: An Initial Single Center Experience. 
Official journal of the American College of 
Gastroenterology[verbar]ACG, 115, S495-S496.
---------------------------------------------------------------------------

    We invite public comments on whether the Pathfinder[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 the 
Pathfinder[supreg] would be reported with the HCPCS codes listed in 
Table 37.
BILLING CODE 4120-01-P

[[Page 44612]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.044


[[Page 44613]]


[GRAPHIC] [TIFF OMITTED] TP26JY22.045


[[Page 44614]]


[GRAPHIC] [TIFF OMITTED] TP26JY22.046

BILLING CODE 4120-01-C

[[Page 44615]]

    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 $695 for Pathfinder[supreg] Endoscope 
Overtube is 87.57 percent of the applicable APC payment amount for the 
service related to the category of devices of $793.65 (($695/$793.65) x 
100 = 87.57 percent). Therefore, we believe the Pathfinder[supreg] 
Endoscope Overtube 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 $695 for the 
Pathfinder[supreg] Endoscope Overtube is 54,724.41 percent of the cost 
of the device-related portion of the APC payment amount for the related 
service of $1.27 (($695/$1.27) x 100 = 54,724.41 percent). Therefore, 
we believe that the Pathfinder[supreg] Endoscope Overtube 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 $695 for the Pathfinder[supreg] Endoscope Overtube 
and the portion of the APC payment amount for the device of $1.27 is 
87.41 percent of the APC payment amount for the related service of 
$793.65 ((($695-$1.27)/$793.65) x 100 = 87.41 percent). Therefore, we 
believe that the Pathfinder[supreg] meets the third cost significance 
requirement.
    We are inviting public comment on whether the Pathfinder[supreg] 
Endoscope Overtube meets the device pass-through payment criteria 
discussed in this section, including the cost criterion for device 
pass-through payment status.
(6) The Uretero1
    STERIS submitted an application for a new device category for 
transitional pass-through payment status for the Uretero1 for CY 2023. 
The applicant states that the Uretero1 is a sterile, single-use, 
disposable digital flexible ureteroscope. According to the applicant, 
the Uretero1\TM\ Ureteroscope System consists of the following 
components: (1) the Uretero1, a sterile, single-use flexible disposable 
digital flexible ureteroscope; and (2) Vision 1, a touch screen camera 
control unit, with a high-resolution HD imaging system.
    Per the applicant, the single use ureteroscope, the Uretero1, 
consists of: (1) handle, to hold scope (made of polycarbonate, and has 
no patient contact); (2) articulation lever, an angulated distal tip 
(polycarbonate 10 percent glass filled, and has no patient contact); 
(3) handle button, a button to take pictures, video, and zoom live 
image (made of silicone, and has no patient contact); (4) accessory 
Port with port cover to prevent backflow during procedures, pass 
instruments (Makrolon 2458, Indirect/limited patient contact); (5) 
irrigation port, for fluid access (Makrolon 2458, which has indirect or 
limited patient contact); (6) flexible shaft (Pebax, made of 
polyurethane, and has patient contact); (7) shaft strain relief 
(Santoprene and has contact with limited mucosal membrane); (8) 
bending/articulation section, which bends the tip of the scope to move 
the camera (made of stainless-steel compression coils and pull cables 
and has no patient contact); (9) distal tip, (ABS, and has patient 
contact); (10) instrument channel (PFA and has indirect and limited 
patient contact); (11) illumination fiber (made of polymethyl 
methacrylate (PMMA)/fluorinated polymer and has no patient contact); 
and (12) the camera (consists of glass and has limited mucosal membrane 
patient contact), and connector cables and plugs, which have no patient 
contact.
    The Uretero1\TM\ Ureteroscope System is a software-controlled 
system that consists of the Vision1 (Touch Screen Camera Control Unit 
(CCU)) and the sterile, single-use high-resolution flexible 
ureteroscope. Per the applicant, the Uretero1 is inserted to find the 
causes of problems in the ureters or kidney, and to visualize organs, 
cavities, and canals in the urinary tract by transurethral or 
percutaneous access routes. The applicant notes the Uretero1 can also 
be used with endoscopic accessories to perform various diagnostic and 
therapeutic procedures in the urinary tract, such as kidney stone 
management (treatment of nephrolithiasis).
    According to the applicant, the device is used by urologists during 
ureteroscopy, a minimally invasive outpatient procedure typically 
performed under general anesthesia. The applicant states that once the 
patient is prepped and anesthesia takes effect, the urologist inserts a 
rigid scope into the urethra, to the bladder to examine the ureteral 
orifices. Per the applicant, a guidewire is placed through the 
instrument channel of the rigid scope via fluoroscopic guidance through 
the orifice, up to the ureter. The applicant states that the rigid 
scope is removed, and the access sheath is advanced over the inserted 
guidewire. According to the applicant, the position of the access 
sheath is confirmed via fluoroscopy, and the obturator is removed from 
the access sheath, as well as the guidewire (if desired by the 
surgeon). The applicant states that the flexible ureteroscope is 
inserted through the access sheath up into the ureters and kidneys. 
During a procedure, an appropriate sterile solution is passed through 
the instrument channel of the ureteroscope to fill the bladder to allow 
greater visibility. If a kidney stone is located (depending on its 
size), the surgeon will perform laser lithotripsy to fragment the stone 
into smaller pieces, then remove the fragments.
    Per the applicant, the Uretero1 can be used for 4 hours (exceeding 
the average procedure time of 60 mins), and the device has a timer 
which notifies the user at three separate intervals of remaining use 
time: one at 60 minutes, the next at 30 minutes, and the last at 5 
minutes of remaining use time. According to the applicant, when the 4 
hours of usage time has elapsed, and if the scope is still plugged in, 
the user will be advised via a message on the screen that a new scope 
should be inserted and the current ureteroscope will no longer produce 
a live image. The applicant states that the scope timer only counts 
down while the device is powered on and plugged in; if it is unplugged, 
the time stops.
    With respect to the newness criterion at Sec.  419.66(b)(1), on 
November 23, 2021, the applicant received 510(k) clearance from FDA to 
market the Uretero1 to visualize organs, cavities, and canals in the 
urinary tract via transurethral or percutaneous access routes. The 
applicant submitted its application for consideration as a new device 
category for transitional pass-through payment status for the Uretero1 
on March 1, 2022, which is within 3 years of the date of the initial 
FDA marketing authorization. We are inviting public comments on whether 
the Uretero1 meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the Uretero1 is integral to the service 
provided, is used for one patient only and comes in contact with human

[[Page 44616]]

tissue when it is inserted to visualize organs, cavities, and canals in 
the urinary tract.\95\ Per the applicant, the Uretero1 is reasonable 
and necessary to diagnose problems in the ureters and kidneys via 
transurethral or percutaneous access routes. The applicant claims that 
the Uretero1 meets the device eligibility requirements of Sec.  
419.66(b)(4) because it is not an instrument, apparatus, implement, or 
item for which depreciation and financing expenses are recovered, and 
it is not a supply or material furnished incident to a service. We are 
inviting public comments on whether the Uretero1 meets the eligibility 
criteria at Sec.  419.66(b).
---------------------------------------------------------------------------

    \95\ Uretero1 Brochure_FINAL.pdf.
---------------------------------------------------------------------------

    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 the 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 Uretero1 as a single use, disposable, digital 
flexible ureteroscope that is used in urologic procedures 
(ureteroscopy) that diagnose and treat conditions of the urinary tract 
(e.g., kidney stones, blockage, polyps, abnormal growths, etc.). 
According to the applicant, a possible existing pass-through code is 
C1748 (Endoscope, single use (i.e., disposable), upper GI, imaging/
illumination device (insertable)), was made effective July 1, 2020.\96\ 
The applicant notes that while this category is for a single use 
device, it is only appropriate for GI imaging, and more specifically, 
for endoscopic retrograde cholangiopancreatography (ERCP) procedures. 
Therefore, the applicant asserts this category would not apply to a 
single use, disposable, ureteroscope for use in urological procedures. 
We are inviting public comment on whether the Uretero1 meets the device 
category criterion.
---------------------------------------------------------------------------

    \96\ Uretero1 Brochure_FINAL.pdf.
---------------------------------------------------------------------------

    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 FDA's Breakthrough Devices Program and has received 
FDA marketing authorization for the indication covered by the 
Breakthrough Device designation. The applicant stated that the Uretero1 
represents a substantial clinical improvement over existing technology. 
With respect to this criterion, the applicant submitted studies that 
examined the impact of the Uretero1 on various diagnostic and 
therapeutic procedures in the urinary tract.
    According to the applicant, the Uretero1 is a single use, 
disposable, digital flexible ureteroscope that is used in urologic 
procedures (ureteroscopy) to diagnose and treat conditions of the 
urinary tract, such as kidney stones, blockages, polyps, and abnormal 
growths. Broadly, the applicant outlined the following areas for which 
it claimed the Uretero1 would provide a substantial clinical 
improvement: (1) prevention of infection transmission, (2) reduced 
contamination risk, (3) improved deflection performance over reusable 
ureteroscopes, (4) reduced hospitalization rate and use of antibiotic 
therapy, (5) reduced complication rate, (6) reduced post-operative 
infection rate, (7) reduced procedure delay, (8) increased patient 
safety and education, and (9) improved patient outcome when the device 
is used to perform various diagnostic and therapeutic procedures and 
treatment in the urinary tract. The applicant provided five articles, 
an FDA advisory letter, and a set of manufacturer's instructions for 
cleaning and reprocessing flexible endoscopes specifically for the 
purpose of addressing the substantial clinical improvement criterion.
    The applicant provided a journal pre-proof and two articles to 
support its claim that the Uretero1 is effective at preventing the 
transmission of infection. Each of these sources examine the steps 
required in the complex and time-consuming process to clean and 
sterilize flexible reusable ureteroscopes so they are fully reprocessed 
for use. The sources also describe the negative sequelae that follow 
instances of inefficient and or incomplete device reprocessing. The 
journal pre-proof of a literature review by Cori Ofstead et al. 
outlines the steps used to reprocess reusable ureteroscopes.\97\ 
Studies summarized within this literature review described several 
instances of negative outcomes when ureteroscopes were processed 
incorrectly or inefficiently. As part of that literature review, 
Kumarage et al. described an outbreak of Pseudomonas aeruginosa later 
found to be due to an infected flexible reusable ureteroscope that had 
been used.\98\ Fourteen patients of the 40 who were exposed were 
infected (35 percent attack rate). The root cause of the infected 
ureteroscopes was attributed to substandard reprocessing of the 
devices, including processing that was delayed overnight. Kumarage et 
al. also noted a separate outbreak of a gram-positive cocci which was 
traced to the use of five ureteroscopes after five patients presented 
to the ED with urinary tract infections (UTIs) due to the same gram-
positive cocci after having each undergone ureteroscopy. Research into 
the underlying causes and possible sources of the device contamination 
found that there had been breakdowns in the reprocessing steps.
---------------------------------------------------------------------------

    \97\ Cori L. Ofstead MSPH, Krystina M. Hopkins MPH, Abigail G. 
Smart MPH, John E. Eiland RNMS, Harry P. Wetzler MD, MSPH, Seth K. 
Bechis MDMS. Reprocessing effectiveness for flexible ureteroscopes: 
A critical look at the evidence. Urology (2022), doi: https://doi.org/10.1016/j.urology.2022.01.033.
    \98\ Kumarage J. Khonyongwa K., Khan A., Desai, N., Hoffman P., 
Taori, SK. Transmission of multidrug resistant Pseudomonas 
aeruginosa between two flexible ureteroscopes and an outbreak of 
urinary tract infection: The fragility of endoscope decontamination. 
J Hosp Infect. 2019; 102(1):89-94.
---------------------------------------------------------------------------

    Another article included in the literature review by Ofstead et 
al.\99\ describes the risks associated with inefficient processing of 
reusable ureteroscopes using a time-driven activity-based costing 
(TDABC).\100\ This article, by Isaacson et al. (2017), notes the time 
and costs involved in the decontamination and sterilization processes 
of reusable flexible ureteroscopes.\101\ The authors also measured the 
time when reprocessing steps were performed inefficiently or were 
delayed as a result of repairs needed for any damaged ureteroscopes. 
After following ten ureteroscopes through the reprocessing steps 
required to fully clean them and determined, via process mapping, that 
the average reprocessing time was 229.0  74.4 minutes. 
According to the authors'

[[Page 44617]]

calculations, drying the ureteroscopes was the single most time-
consuming step and took 126.5  55.7 minutes, and was 
further dependent on the optimal location and position of the 
ureteroscopes. Ureteroscopes that needed repair required approximately 
143 minutes, causing further delays to availability of the devices.
---------------------------------------------------------------------------

    \99\ Ibid.
    \100\ TDABC is a process that uses process mapping in 
conjunction with activity-based costing to calculate and maximize 
efficiency of complex processes. It was developed by Kaplan and 
Anderson of the Department of Nephro-Urology, Nagoya City University 
Graduate School of Medical Sciences, Nagoya, Japan.
    \101\ Isaacson D, Ahmad T, Metzler I, Tzou DT, Taguchi K, 
Usawachintachit M, Zetumer S, Sherer B, Stoller M, Chi T. Defining 
the costs of reusable flexible ureteroscope reprocessing using time-
driven activity-based costing. J Endourol. 2017;31(10):1026-1031. 
doi: 10.1089/end.2017.0463. Epub 2017 Sep 20. PMID: 28830223; PMCID: 
PMC5652038.
---------------------------------------------------------------------------

    To further support its claim that the Uretero1 can prevent 
infection transmission, the applicant cited an April 1, 2021, advisory 
letter to providers from FDA that outlines concerns about the 
effectiveness of reprocessing reusable urologic endoscopes.\102\ In the 
letter, FDA confirms it has received over 450 Medical Device Reports 
(MDRs) describing patient infections associated with reprocessing of 
reusable devices, which include ureteroscopes. FDA is still 
investigating these episodes but notes the importance of following 
manufacturer's instructions for device reprocessing. The applicant also 
references a report by Grandview Research which notes the market for 
disposable endoscopes is expected to experience compound growth at a 
rate of 17 percent between 2022 and 2030, largely due to the growing 
cross-contamination issue associated with reusable endoscopes.\103\ Per 
the applicant, the projected market growth of disposable cystoscopes, 
endoscopes, and ureteroscopes is expected to continue to rise over the 
forecast period due to the advancement in the design of disposable 
devices and related to the risk of nosocomial infections following 
ureteroscopy procedures.\104\
---------------------------------------------------------------------------

    \102\ Food and Drug Administration. Infections associated with 
reprocessed urological endoscopes--Letter to health care providers. 
Published April 1, 2021. Available from: https://www.fda.gov/medical-devices/letters-health-care-providers/infections-associated-reprocessed-urological-endoscopes-letter-health-care-providers.
    \103\ Grand View Research. ``Disposable Endoscopes Market Size, 
Share & Trends Analysis Report by Application (Bronchoscopy, ENT 
Endoscopy), By End-use (Hospitals, Clinics) < By Region (Europe, 
North America, APAC), and Segment Forecasts, 2022-2030. Published 
February 2022.
    \104\ Ibid.
---------------------------------------------------------------------------

    To support its second claim that the Uretero1 reduces risk of 
contamination, the applicant again cited the literature review by 
Ofstead et al.\105\ Referencing the article by Lee et al., titled 
``Increasing potential risks of contamination from repetitive use of 
endoscope,'' \106\ Ofstead noted that wear and tear of the repeated-use 
devices contributes to the likelihood that infectious material will 
remain attached to the device even after reprocessing, as found during 
Lee et al.'s simulated-use study. Therefore, and per the applicant, the 
single use Uretero1 eliminates the risk of contamination.
---------------------------------------------------------------------------

    \105\ Cori L. Ofstead MSPH, Krystina M. Hopkins MPH, Abigail G. 
Smart MPH, John E. Eiland RNMS, Harry P. Wetzler MD, MSPH, Seth K. 
Bechis MDMS. Reprocessing effectiveness for flexible ureteroscopes: 
A critical look at the evidence. Urology (2022), doi: https://doi.org/10.1016/j.urology.2022.01.033.
    \106\ Lee DH, Kim DB, Kim HY, Baek HS, Kwon SY, Lee MH, Park JC. 
Increasing potential risks of contamination from repetitive use of 
endoscope. Am J Infect Control. 2015 May 1;43(5): e13-7. doi: 
10.1016/j.ajic.2015.01.017. Epub 2015 Feb 25. PMID: 25726130.
---------------------------------------------------------------------------

    The applicant's third claim with regard to the substantial clinical 
improvement offered by the Uretero1 is in relation to its improved 
deflection performance over that of reusable devices. When used in the 
context of describing ureteroscopes, ``deflection'' refers to the 
adjustability of the device, which enables the surgeon to see more of 
the urinary tract.\107\ Therefore, improved deflection supports the 
surgeon's ability to access the kidneys and ureters and perform various 
diagnostic and therapeutic procedures in the urinary tract. The 
applicant cited a literature review by Ventimiglia et al. to support 
its claim.\108\ Ventimiglia et al. conducted a literature review on 
available reusable flexible ureteroscopes and single-use flexible 
ureteroscopes with a focus on the related costs of each, in terms of 
performance, maintenance, and reprocessing. As part of its review, 
Ventimiglia et al. noted that the deflection capability of the Olympus 
URF-V and Karl Storz Flex-Xc, both single-use flexible ureteroscopes, 
was equivalent to the deflection capability of reusable flexible 
ureteroscopes. Ventimiglia et al. did not mention the Uretero1, nor its 
deflection capability, in the study. Of note, Ventimiglia's literature 
review referenced the original study by Hennessey et al., which 
compared the single-use flexible devices with the reusable flexible 
devices, and which found the performance of the single-use device was 
equivalent, if not better than the reusable flexible 
ureteroscopes.\109\ The Uretero1 device was not included as a 
comparison in this study either.
---------------------------------------------------------------------------

    \107\ Rajamahanty, S., & Grasso, M. (2008). Flexible 
ureteroscopy update: indications, instrumentation and technical 
advances. Indian journal of urology: IJU: journal of the Urological 
Society of India, 24(4), 532-537. https://doi.org/10.4103/0970-1591.44263.
    \108\ Ventimiglia E, God[iacute]nez AJ, Traxer O, Somani BK. 
Cost comparison of single use versus reusable flexible ureteroscope: 
A systematic review. Turk J Urol 2020; 46(Supp. 1): S40-S45.
    \109\ Hennessey DB, Fojecki GL, Papa NP, Lawrentschuk N, Bolton 
D. Single-use disposable digital flexible ureteroscopes: an ex vivo 
assessment and cost analysis. BJU Int. 2018 May;121 Suppl 3:55-61. 
doi: 10.1111/bju.14235. PMID: 29656467.
---------------------------------------------------------------------------

    The applicant referred to a study by Bozzini et al.\110\ to support 
its fourth, fifth, and sixth claims that the Uretero1 device 
demonstrates substantial clinical improvement over existing devices. 
These claims are that the Uretero1 enables, respectively: reduced 
hospitalization rate and antibiotic therapy, reduced complication rate, 
and reduced post-operative infection rate. Using a multicenter, 
randomized, clinical trial study format, Bozzini et al. enrolled 180 
patients who had a renal stone and were scheduled to receive Retrograde 
Intrarenal Surgery (RIRS) into two groups: Group A (90 patients) 
underwent treatment with a reusable flexible ureteroscope and Group B 
(90 patients) (underwent treatment with a disposable flexible 
ureteroscope). While the outcome of the surgical procedure was not 
significantly different across the two groups (stone free rates of 86.6 
percent for Group A and 90.0 percent for Group B, p=0.11), the number 
of hospitalization days and of antibiotic therapy were higher for Group 
A (p<=0.05), those subjects who had been in the reusable flexible 
ureteroscope trial group. In addition, Group A patients experienced 
more complications (8.8 percent) than Group B patients (3.3 percent, 
and with a p=value of <=0.05), and Group A patients had more major 
complications. Finally, the overall postoperative infection rate was 
16.6 percent for Group A patients compared with 3.3 percent for Group B 
patients (p<=0.05). It was noted that none of the Group B patients 
developed urosepsis, while three patients in Group A developed 
urosepsis (p<0.05).
---------------------------------------------------------------------------

    \110\ Bozzini G, Filippi B, Alriyalat S, Calori A, Besana U, 
Mueller A, Pushkar D, Romero-Otero J, Pastore A, Sighinolfi MC, 
Micali S, Buizza C, Rocco B. Disposable versus Reusable 
Ureteroscopes: A Prospective Multicenter Randomized Comparison. Res 
Rep Urol. 2021 Feb 10; 13:63-71. doi: 10.2147/RRU.S277049. PMID: 
33604311; PMCID: PMC7882796.
---------------------------------------------------------------------------

    The applicant referred to an article in OR Manager in support of 
its seventh and ninth claims that the Uretero1 single-use flexible 
ureteroscope reduces procedure delays and increases patient 
safety.\111\ In addition to the discussion about the introduction of 
contamination during reprocessing of reusable flexible ureteroscopes, 
the article notes the high frequency of failures during procedures, 
resulting in the need for repair. Mathias specifically references a 
prospective study by Ofstead et al. (2017) conducted at two large 
healthcare facilities in the Midwest, in which 16 ureteroscopes

[[Page 44618]]

were cultured and visually inspected after they had been cleaned and 
sterilized with hydrogen peroxide gas.\112\ In this study, 100 percent 
of the devices were found to have substantial protein contamination, 
and two had visible bacteria, while others had debris, oily deposits, 
and residual fluid discoloration.\113\ The Mathias article also 
describes the ``high frequency of damage and repairs'' for reusable 
flexible ureteroscopes, noting that they then need to be sent out for 
repairs, resulting in delayed procedures, interrupted workflow, and 
wasted resources. Per Ofstead, the annual cost per ureteroscope is 
between $4,000 and $11,000, and findings from the same study showed 
that the average number of uses between repairs was 19.\114\ The 
Mathias article summarizes the steps that can be taken to reduce risks 
related to ureteroscope contamination and to focus on patient safety. 
In addition to following manufacturer's steps for reprocessing the 
devices, Ofstead suggests the use of single-use endoscopes and 
accessories which are currently available in the list of 
recommendations.
---------------------------------------------------------------------------

    \111\ Mathias, JM. ``Greater vigilance needed to combat 
ureteroscope contamination''. OR Manager: December 2017;(33) 12:1-5.
    \112\ Ofstead CL, Heymann OL, Quick MR, Johnson EA, Eiland JE, 
Wetzler HP. The effectiveness of sterilization for flexible 
ureteroscopes: A real-world study. Am J Infect Control. 2017 Aug 
1;45(8):888-895. doi: 10.1016/j.ajic.2017.03.016. Epub 2017 Jun 15. 
PMID: 28625700.
    \113\ Ibid.
    \114\ Mathias, JM. ``Greater vigilance needed to combat 
ureteroscope contamination''. OR Manager: December 2017;(33) 12:1-5.
---------------------------------------------------------------------------

    Finally, the applicant referenced an FDA advisory letter to health 
care providers published April 1, 2021, which the applicant stated was 
released to raise awareness around the risk of infections associated 
with reprocessing urological endoscopes (e.g., ureteroscopes), although 
there is no mention of single use ureteroscopes. The applicant pointed 
to another FDA letter in support of single use duodenoscopes to reduce 
the risk of infection. The applicant cited these FDA letters in support 
of its eighth claim that the Uretero1 can be responsible for increased 
patient education, and patient safety.\115\
---------------------------------------------------------------------------

    \115\ Food and Drug Administration. Infections associated with 
reprocessed urological endoscopes--Letter to health care providers. 
Published April 1, 2021. Available from: https://www.fda.gov/medical-devices/letters-health-care-providers/infections-associated-reprocessed-urological-endoscopes-letter-health-care-providers. 
Accessed August 17, 2021.
---------------------------------------------------------------------------

    In summary, the applicant references these citations to support its 
assertions that the Utero1 single-use disposable digital flexible 
ureteroscope presents a substantial clinical improvement over existing 
devices. We note that many studies included provide details regarding 
the importance of following established reprocessing guidelines for 
reusable devices. The evidence provided in the clinical studies 
emphasizes the risks associated with reprocessing reusable devices. 
However, none of the studies the applicant includes reference another 
disposable device as a comparator against which to evaluate and assess 
the Uretero1. While we find that the source articles provide background 
about multiple risks associated with reprocessing reusable devices, we 
would welcome additional evidence demonstrating a comparison of the 
Uretero1's performance against other similarly disposable devices. We 
also note that the applicant cited an FDA news release \116\ in support 
of single use duodenoscopes to reduce risk of infection, but this is 
not the device in question. Additionally, the previously referenced FDA 
advisory letter \117\ regarding ureteroscopes does not mention single-
use devices, and it is not clear how the recommendations in the letter 
support the applicant's claims of substantial clinical improvement 
related to the use of the Uretero1.
---------------------------------------------------------------------------

    \116\ Food and Drug Administration. (2019, December 13). FDA 
clears first fully disposable duodenoscope, eliminating the 
potential for infections caused by ineffective reprocessing. [News 
release]. Retrieved from https://www.fda.gov/news-events/press-
announcements/fda-clears-first-fully-disposable-duodenoscope-
eliminating-potential-infections-caused-
ineffective#:~:text=The%20U.S.%20Food%20and%20Drug,and%20other%20uppe
r%20GI%20problems.
    \117\ Food and Drug Administration. Infections associated with 
reprocessed urological endoscopes--Letter to health care providers. 
Published April 1, 2021. Available from: https://www.fda.gov/medical-devices/letters-health-care-providers/infections-associated-reprocessed-urological-endoscopes-letter-health-care-providers. 
Accessed August 17, 2021.
---------------------------------------------------------------------------

    We are inviting public comments on whether the Uretero1 meets the 
substantial clinical improvement criterion.
    The third criterion for establishing a device category, at Sec.  
419.66(c)(3), requires us to determine that the cost of the device is 
not insignificant, as described in Sec.  419.66(d). Section 419.66(d) 
includes three cost significance criteria that must each be met. The 
applicant provided the following information in support of the cost 
significance requirements. The applicant stated that the Uretero1 would 
be reported with the following HCPCS codes listed in Table 38 below.
BILLING CODE 4120-01-P

[[Page 44619]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.047

BILLING CODE 4120-01-C
    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. As we explained in the CY 2005 OPPS final rule with comment 
period (69 FR 65775), we generally use the lowest APC payment rate 
applicable for use with the nominated device when we assess whether a 
device meets the cost significance criterion, thus increasing the 
probability the device will pass the cost significance test. For our 
calculations, we used APC 5374--Level 4 Urology and Related Services, 
which had a CY 2021 payment rate of $3,076.34 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 52344 had a device offset amount of $475.29 at 
the time the application was received. According to the applicant, the 
cost of the Uterero1 is $1,500.
    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 $1,500 for Uretero1 is 48.76 percent of the 
applicable APC payment amount for the service related to the category 
of devices of $3,076.34 (($1,500/$3,076.34) x 100 = 48.76 percent). 
Therefore, we believe the Uretero1 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

[[Page 44620]]

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 $1,500 for Uretero1 is 315.60 
percent of the cost of the device-related portion of the APC payment 
amount for the related service of $475.29 (($1,500/$475.29) x 100 = 
315.60 percent). Therefore, we believe that the Uretero1 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 $1,500 for the Uretero1 and the portion of the APC 
payment amount for the device of $475.29 is 33.31 percent of the APC 
payment amount for the related service of $3,076.34 ((($1,500-$475.29)/
$3,076.34) x 100 = 33.31 percent). Therefore, we believe that the 
Uretero1 meets the third cost significance requirement.
    We are inviting public comment on whether the Uretero1 meets the 
device pass-through payment criteria discussed in this section, 
including the cost criterion for device pass-through payment status.

B. Proposal to Publicly Post OPPS Device Pass-Through Applications

    As noted in section X of this proposed rule, applicants seeking 
OPPS transitional pass-through status for medical devices (``OPPS 
device pass-through'') must submit an application to CMS containing 
certain information.\118\ The application is currently undergoing the 
Paperwork Reduction Act reapproval process, which has notice and 
comment periods separate from this proposed rule. The 60-day notice was 
published in the Federal Register on April 29, 2022 (87 FR 25488). CMS 
accepts OPPS device pass-through applications on an ongoing basis 
throughout the year, but must receive complete applications 
sufficiently in advance of the first calendar quarter in which OPPS 
device pass-through status is sought to allow time for analysis, 
decision-making, and systems changes. In particular, CMS must receive a 
completed application and all additional information by the first 
business days in March, June, September, or December of a year for the 
earliest possible potential pass-through effective dates of July 1, 
October 1, January 1, or April 1, respectively, of that year. We post 
complete application information and the timeframes for submitting 
applications on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.
---------------------------------------------------------------------------

    \118\ The application form, titled ``Process and Information 
Required to Apply for Additional Device Categories for Transitional 
Pass-Through Payment Status Under the OPPS,'' describes the process 
and information required to apply for OPPS device-pass-through 
status for a medical device and is available on CMS's website at 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf. Applicants must submit 
such information as: proposed name or description of additional 
category; trade/brand names of any known devices fitting the 
proposed additional category; list of all established categories 
used presently or previously for pass-through payment that describe 
related or similar products, along with an explanation as to why the 
a category does not encompass the nominated device(s); detailed 
description of clinical uses of each nominated device; a complete 
description of the nominated devices, including, but not limited to, 
what it is, what it does, and how it is used; its clinical 
characteristics; the HCPCS codes for procedures with which it is 
used; substantial clinical improvement information; sales and 
marketing information; cost information; FDA approval information; 
contact information; and other information CMS may require.
---------------------------------------------------------------------------

    In the CY 2016 OPPS/ASC final rule with comment period, we adopted 
a policy that beginning in CY 2016, all OPPS device pass-through 
applications submitted through the quarterly subregulatory process 
would be subject to notice-and-comment rulemaking in the next 
applicable OPPS annual rulemaking cycle, including those that were 
approved upon quarterly review (80 FR 70418). All applications that are 
approved upon quarterly review are automatically included in the next 
applicable OPPS annual rulemaking cycle, while submitters of 
applications that are not approved upon quarterly review have the 
option of having their application discussed in the next applicable 
OPPS annual rulemaking cycle or withdrawing their application from 
consideration entirely. We explained that no special reconsideration 
process would be necessary, as no denial decision would be made except 
through the annual rulemaking process. Applicants are able to submit 
new data, such as clinical trial results published in a peer-reviewed 
journal, for consideration during the public comment process for the 
proposed rule. We explained that this process allows those applications 
that we are able to determine meet all the criteria for device pass-
through payment under the quarterly review process to receive timely 
pass-through payment status, while still allowing for a transparent, 
public review process for all applications.
    In the proposed rule, CMS summarizes the information contained in 
the application, including the applicant's explanation of what the 
device does, the cost of the device, information about device's FDA 
approval/clearance, and the applicant's assertions and supporting data 
on how the device meets the OPPS device pass-through payment criteria 
under Sec.  419.66. In summarizing this information for inclusion in 
the proposed rule, CMS restates or paraphrases information contained in 
the application and attempts to avoid misrepresenting or omitting any 
of an applicant's claims. CMS also tries to ensure that sufficient 
information is provided in the proposed rule to facilitate public 
comments on whether the medical device meets the OPPS device pass-
through criteria. Currently, however, CMS does not make the 
applications themselves, as submitted by the applicants, publicly 
available.
    In the past, CMS has received requests from the public to access 
and review the OPPS device pass-through applications to further 
facilitate comment on whether a medical device meets the OPPS device 
pass-through payment criteria. After considering this issue, we agree 
that review of the original source information from the applications 
for OPPS device pass-through status may help to inform public comment. 
Further, making this information publicly available may foster greater 
input from experts in the interested party community based on their 
review of the completed application forms and related materials. 
Accordingly, as we discuss further in this section, we believe that 
providing additional information to the public by posting the 
applications and related materials online may help to further engage 
the public and foster greater input and insights on the various new 
medical devices and technologies presented annually for consideration 
for OPPS device pass-through payment.
    We also believe that posting the applications online would reduce 
the risk that we may inadvertently omit or misrepresent relevant 
information submitted by applicants, or be perceived as misrepresenting 
such information, in our summaries in the rules. It also would 
streamline our evaluation process, including the identification of 
critical questions in the proposed rule, particularly as the number and 
complexity of the device pass-through

[[Page 44621]]

applications we receive have been increasing over time. That is, by 
making the applications available to the public online, we would afford 
more time for CMS to process and analyze the supporting data and 
evidence in the applications rather than devoting significant time and 
resources to summarizing information from the applications in the rule.
    Therefore, to increase transparency, enable increased interested 
party engagement, and further improve and streamline our evaluation 
process, we propose to publicly post future applications for OPPS 
device pass-through payment online.\119\ Specifically, beginning with 
applications submitted on or after January 1, 2023, we propose to post 
online the completed OPPS device pass-through application forms and 
related materials (e.g., attachments, supportive materials) we receive 
from applicants. Additionally, we propose to post online information 
acquired subsequent to the application submission (e.g., updated 
application information, additional clinical studies, etc.). We propose 
that we would publicly post all completed application forms and related 
materials at the same time that the proposed rule is issued, which 
would afford interested parties the full public comment period to 
review the information provided by the applicant in its application in 
conjunction with the proposed rule. We are not proposing to change our 
policy that applicants whose applications are not approved through the 
quarterly review process may elect to withdraw their application from 
consideration in the next applicable rulemaking cycle.
---------------------------------------------------------------------------

    \119\ CMS is not proposing to make drug and biological pass-
through applications public because the nature of the drug and 
biological application does not necessitate such an action.
---------------------------------------------------------------------------

    With respect to copyrighted materials, we propose that on the 
application form itself, the applicant would be asked to provide a 
representation that the applicant owns the copyright or otherwise has 
the appropriate license to make all the copyrighted material included 
with its application public. For any material included with the 
application that the applicant indicates is copyrighted and/or not 
otherwise releasable to the public, we propose that the applicant must 
either provide a link to where the material can be accessed or provide 
an abstract or summary of the material that CMS can make public, and 
CMS will then post that link or abstract or summary online, along with 
the other posted application materials. We invite comments on this 
proposal.
    We note that at times applicants furnish information marked as 
proprietary or trade secret information along with their applications 
for OPPS device pass-through payment. Currently, the OPPS device pass-
through application instructions specify that data provided in the 
application may be subject to disclosure and instructs the applicant to 
mark any proprietary or trade secret information so that CMS can 
attempt, to the extent allowed under Federal law, to keep the 
information protected from public view.\120\ Consistent with the 
current application instructions, should an applicant submit such 
information as part of its application, CMS will attempt, to the extent 
allowed by Federal Law, to keep this information protected from public 
view. We emphasize, however, that it is the applicant's responsibility 
to clearly identify data and information as such in its application.
---------------------------------------------------------------------------

    \120\ See Guidance and Instructions for OPPS Device Pass-Through 
Applications (Updated 2/1/2022), available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/catapp.pdf.
---------------------------------------------------------------------------

    Additionally, we note that in the past we have received 
applications in which all the data and information are marked as 
proprietary or confidential, or certain information, for example, 
information in support of a claim of substantial clinical improvement, 
is marked as such. In such cases, we reiterate that we generally would 
not be able to consider that data and information when determining 
whether a device meets the criteria for OPPS Device Pass-through 
payments. Our process provides for public input, so it is important 
that we provide the information needed for the public to meaningfully 
comment on the OPPS Device Pass-through payment applications, including 
the claims applicants make about meeting the OPPS Device Pass-through 
payment criteria. This proposal would not change the current timeline 
or evaluation process for OPPS device pass-through payments, the 
criteria used to assess applications, or the deadlines for various data 
submissions. Additionally, we do not expect our proposal would place 
additional burdens on future applicants because we are not proposing to 
change the information that must be submitted to apply for OPPS device 
pass-through status, including the supplemental information that could 
be furnished to support the application. As explained throughout this 
section, the aim of this proposed policy change is to increase 
accuracy, transparency, and efficiency for both CMS and interested 
parties, not to make the OPPS device pass-through process more onerous 
for applicants.
    In connection with our proposal to post the OPPS device pass-
through applications online, we expect we would also include less 
detail in the summaries of the device pass-through applications that we 
include in the annual OPPS proposed and final rules, given that the 
public would have access to the submitted applications themselves. We 
will, however, continue to provide sufficient information in the rules 
to facilitate public comments on whether a medical device meets the 
OPPS device pass-through payment criteria. Specifically, we do not 
anticipate summarizing in significant detail each OPPS device pass-
through application in the Federal Register as we have in the past, 
given that the public would have access to the applications under our 
proposal. In some instances, such as in the discussions of whether 
devices meet the substantial clinical improvement criterion, we expect 
to provide a more concise summary of the evidence or a more targeted 
discussion of the applicant's claims about how that criterion is met 
based on the evidence and supporting data (although this may vary 
depending on the application, the medical device, and the nature of the 
supporting materials provided). We expect that we would continue to 
generally include, at a high level, the following information in the 
proposed and final rules: the medical device and applicant name; a 
description of what the device does; the cost significance calculation; 
the FDA approval/clearance information; and a summary of the 
applicant's assertions or claims. We also expect to provide more 
succinct summaries in the proposed and final rules regarding the 
applicant's assertions as to how the medical device meets the various 
OPPS device pass-through criteria under Sec.  419.66. For example, we 
would include the applicant's assertions as to why the medical device 
meets the substantial clinical improvement criterion and a list of the 
sources of data submitted in support of those assertions, along with 
references to the application in support of this information. In the 
proposed rule, we would also continue to provide discussion of the 
concerns or issues we identified with respect to applications 
submitted. In the final rule, we would continue to provide an 
explanation of our determination of whether a medical device meets the 
applicable OPPS device pass-through payment criteria. As noted, we 
believe the proposal to

[[Page 44622]]

post online the completed application forms and other information 
described previously would afford greater transparency during the 
annual rulemaking for purposes of determining whether a medical device 
is eligible for OPPS device pass-through payment.
    We note that if we adopt this proposal in the final rule, we would 
begin utilizing referring to publicly posted applications in CY 2024 
rulemaking cycle, depending on when they are received. This would mean 
that there would be some OPPS device pass-through applications (those 
received as of December 31, 2022) that would follow the current process 
and be described fully in the proposed rule consistent with our 
historical practice, and other OPPS device pass-through applications 
(those received after the effective date of January 1, 2023) that would 
be summarized in the proposed rule with a cross-reference to the 
publicly posted application, consistent with our new policy. If our 
proposal is finalized effective January 1, 2023, we would allow 
applicants that submit an OPPS device pass-through application prior to 
December 31, 2022 to elect to have the application summarized and 
publicly posted in lieu of a full CMS write-up. Where applicants do not 
elect to have applications submitted prior to December 31, 2022 posted 
publicly and summarized in the proposed rule, we would discuss device 
pass-through applications in two different ways in the CY 2024 proposed 
and final rules (either with full write-ups or summaries and cross-
references to the publicly posted applications, depending on when the 
application was submitted). We believe our goals of increasing 
transparency and ensuring there are sufficient CMS resources to review 
the increasing numbers of applications are sufficiently important 
justify use of two approaches for one year if our proposal is 
finalized. Nonetheless, we also solicit comment on whether we should 
consider an alternative implementation date of March 1, 2023, which 
would mean that all OPPS device pass-through applications discussed in 
the CY 2024 OPPS proposed and final rules would follow the current 
process and would appear in the rule as a full write-up. Under this 
alternative approach, CMS would begin publicly posting all OPPS device 
pass-through applications and summarize and cross-reference the 
applications beginning in the CY 2025 proposed and final rules 
consistent with this policy.
    We note that for many of the same reasons, we included a similar 
proposal in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28355 
through 28357) that, beginning with applications for FY 2024, we would 
publicly post online new technology add-on payment applications and 
certain related materials, as discussed further in that proposed rule. 
Our goal in making these proposals under both the hospital OPPS and 
IPPS is not only to increase accuracy, transparency, and efficiency in 
the device pass-through and new technology add-on payment application 
review process for both CMS and interested parties, but also to further 
consistency, where possible, in our procedures and approach for 
addressing and engaging the public on new technologies in our annual 
rulemakings.
    We are seeking public comment on our proposal to publicly post 
online the completed OPPS device pass-through application forms and 
supporting materials and updated application information submitted 
subsequent to the initial application submission for OPPS device pass-
through payment, beginning January 1, 2023.

C. Proposed Device-Intensive Procedures

1. Background
    Under the OPPS, prior to CY 2017, device-intensive status for 
procedures was determined at the APC level for APCs with a device 
offset percentage greater than 40 percent (79 FR 66795). Beginning in 
CY 2017, CMS began determining device-intensive status at the HCPCS 
code level. In assigning device-intensive status to an APC prior to CY 
2017, the device costs of all the procedures within the APC were 
calculated and the geometric mean device offset of all of the 
procedures had to exceed 40 percent. Almost all of the procedures 
assigned to device-intensive APCs utilized devices, and the device 
costs for the associated HCPCS codes exceeded the 40-percent threshold. 
The no cost/full credit and partial credit device policy (79 FR 66872 
through 66873) applies to device-intensive procedures and is discussed 
in detail in section IV.B.4 of this proposed rule. A related device 
policy was the requirement that certain procedures assigned to device-
intensive APCs require the reporting of a device code on the claim (80 
FR 70422) and is discussed in detail in section IV.B.3 of this proposed 
rule. 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, under the device-intensive 
methodology we 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 APC designations 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 their APC assignment.
    Under our existing policy, procedures that meet the criteria listed 
in section IV.B.1.b of this proposed rule are identified as device-
intensive procedures and are subject to all the policies applicable to 
procedures assigned device-intensive status under our established 
methodology, including our policies on device edits and no cost/full 
credit and partial credit devices discussed in sections IV.B.3 and 
IV.B.4 of this proposed rule.
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

[[Page 44623]]

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 
interested parties that the criteria excluded some procedures that 
interested parties believed should qualify as device-intensive 
procedures. Specifically, we were persuaded by interested party 
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 Sec. Sec.  405.203 
through 405.207 and 405.211 through 405.215, or meets another 
appropriate FDA exemption from premarket review;
     Is an integral part of the service furnished;
     Is used for one patient only;
     Comes in contact with human tissue;
     Is surgically implanted or inserted (either permanently or 
temporarily); and
     Is not either of the following:
    (a) Equipment, an instrument, apparatus, implement, or item of the 
type for which depreciation and financing expenses are recovered as 
depreciable assets as defined in Chapter 1 of the Medicare Provider 
Reimbursement Manual (CMS Pub. 15-1); or
    (b) A material or supply furnished incident to a service (for 
example, a suture, customized surgical kit, scalpel, or clip, other 
than a radiological site marker) (83 FR 58945).
    In addition, for new HCPCS codes describing procedures requiring 
the implantation of devices that do not yet have associated claims 
data, in the CY 2017 OPPS/ASC final rule with comment period (81 FR 
79658), we finalized a policy for CY 2017 to apply device-intensive 
status with a default device offset set at 41 percent for new HCPCS 
codes describing procedures requiring the implantation or insertion of 
a device that did not yet have associated claims data until claims data 
are available to establish the HCPCS code-level device offset for the 
procedures. This default device offset amount of 41 percent was not 
calculated from claims data; instead, it was applied as a default until 
claims data were available upon which to calculate an actual device 
offset for the new code. The purpose of applying the 41-percent default 
device offset to new codes that describe procedures that implant or 
insert devices was to ensure ASC access for new procedures until claims 
data become available.
    As discussed in the CY 2019 OPPS/ASC proposed rule and final rule 
with comment period (83 FR 37108 through 37109 and 58945 through 58946, 
respectively), in accordance with our policy stated previously to lower 
the device offset percentage threshold for procedures to qualify as 
device-intensive from greater than 40 percent to greater than 30 
percent, for CY 2019 and subsequent years, we modified this policy to 
apply a 31-percent default device offset to new HCPCS codes describing 
procedures requiring the implantation of a device that do not yet have 
associated claims data until claims data are available to establish the 
HCPCS code-level device offset for the procedures. In conjunction with 
the policy to lower the default device offset from 41 percent to 31 
percent, we continued our current policy of, in certain rare instances 
(for example, in the case of a very expensive implantable

[[Page 44624]]

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 few 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.
    As discussed in section X.E of the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63751 through 63754), given our concerns 
regarding CY 2020 data as a result of the COVID-PHE, we adopted a 
policy to use CY 2019 claims data to establish CY 2022 prospective 
rates. While we believed CY 2019 represented the best full year of 
claims data for ratesetting for CY 2022, we stated that our policy of 
temporarily assigning a higher offset percentage if warranted by 
additional information would provide a more accurate device offset 
percentage for certain procedures. Specifically, for procedures that 
were assigned device-intensive status, but were assigned a default 
device offset percentage of 31 percent or a device offset percentage 
based on claims from a clinically-similar code in the absence of CY 
2019 claims data, we adopted a policy to assign device offset 
percentages for such procedures based on CY 2020 data if CY 2020 claims 
information is available.
    For CY 2023, consistent with our broader proposal to use CY 2021 
claims for CY 2023 OPPS and ASC ratesetting purposes and our historical 
practice, we propose to use CY 2021 claims information for determining 
device offset percentages and assigning device-intensive status.
    The full listing of the proposed CY 2023 device-intensive 
procedures can be found in Addendum P to this proposed rule (which is 
available via the internet on the CMS website).
3. Device Edit Policy
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66795), we finalized a policy and implemented claims processing edits 
that require any of the device codes used in the previous device-to-
procedure edits to be present on the claim whenever a procedure code 
assigned to any of the APCs listed in Table 5 of the CY 2015 OPPS/ASC 
final rule with comment period (the CY 2015 device-dependent APCs) is 
reported on the claim. In addition, in the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70422), we modified our previously existing 
policy and applied the device coding requirements exclusively to 
procedures that require the implantation of a device that are assigned 
to a device-intensive APC. In the CY 2016 OPPS/ASC final rule with 
comment period, we also finalized our policy that the claims processing 
edits are such that any device code, when reported on a claim with a 
procedure assigned to a device-intensive APC (listed in Table 42 of the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70422)) will 
satisfy the edit.
    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79658 
through 79659), we changed our policy for CY 2017 and subsequent years 
to apply the CY 2016 device coding requirements to the newly defined 
device-intensive procedures. For CY 2017 and subsequent years, we also 
specified that any device code, when reported on a claim with a device-
intensive procedure, will satisfy the edit. In addition, we created 
HCPCS code C1889 to recognize devices furnished during a device-
intensive procedure that are not described by a specific Level II HCPCS 
Category C-code. Reporting HCPCS code C1889 with a device-intensive 
procedure will satisfy the edit requiring a device code to be reported 
on a claim with a device-intensive procedure. In the CY 2019 OPPS/ASC 
final rule with comment period, we revised the description of HCPCS 
code C1889 to remove the specific applicability to device-intensive 
procedures (83 FR 58950). For CY 2019

[[Page 44625]]

and subsequent years, the description of HCPCS code C1889 is 
``Implantable/insertable device, not otherwise classified''.
    We are not proposing any changes to this policy for CY 2023.
4. Adjustment to OPPS Payment for No Cost/Full Credit and Partial 
Credit Devices
a. Background
    To ensure equitable OPPS payment when a hospital receives a device 
without cost or with full credit, in CY 2007, we implemented a policy 
to reduce the payment for specified device-dependent APCs by the 
estimated portion of the APC payment attributable to device costs (that 
is, the device offset) when the hospital receives a specified device at 
no cost or with full credit (71 FR 68071 through 68077). Hospitals were 
instructed to report no cost/full credit device cases on the claim 
using the ``FB'' modifier on the line with the procedure code in which 
the no cost/full credit device is used. In cases in which the device is 
furnished without cost or with full credit, hospitals were instructed 
to report a token device charge of less than $1.01. In cases in which 
the device being inserted is an upgrade (either of the same type of 
device or to a different type of device) with a full credit for the 
device being replaced, hospitals were instructed to report as the 
device charge the difference between the hospital's usual charge for 
the device being implanted and the hospital's usual charge for the 
device for which it received full credit. In CY 2008, we expanded this 
payment adjustment policy to include cases in which hospitals receive 
partial credit of 50 percent or more of the cost of a specified device. 
Hospitals were instructed to append the ``FC'' modifier to the 
procedure code that reports the service provided to furnish the device 
when they receive a partial credit of 50 percent or more of the cost of 
the new device. We refer readers to the CY 2008 OPPS/ASC final rule 
with comment period for more background information on the ``FB'' and 
``FC'' modifiers payment adjustment policies (72 FR 66743 through 
66749).
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75005 
through 75007), beginning in CY 2014, we modified our policy of 
reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. For CY 
2013 and prior years, our policy had been to reduce OPPS payment by 100 
percent of the device offset amount when a hospital furnishes a 
specified device without cost or with a full credit and by 50 percent 
of the device offset amount when the hospital receives partial credit 
in the amount of 50 percent or more of the cost for the specified 
device. For CY 2014, we reduced OPPS payment, for the applicable APCs, 
by the full or partial credit a hospital receives for a replaced 
device. Specifically, under this modified policy, hospitals are 
required to report on the claim the amount of the credit in the amount 
portion for value code ``FD'' (Credit Received from the Manufacturer 
for a Replaced Device) when the hospital receives a credit for a 
replaced device that is 50 percent or greater than the cost of the 
device. For CY 2014, we also limited the OPPS payment deduction for the 
applicable APCs to the total amount of the device offset when the 
``FD'' value code appears on a claim. For CY 2015, we continued our 
policy of reducing OPPS payment for specified APCs when a hospital 
furnishes a specified device without cost or with a full or partial 
credit and to use the three criteria established in the CY 2007 OPPS/
ASC final rule with comment period (71 FR 68072 through 68077) for 
determining the APCs to which our CY 2015 policy will apply (79 FR 
66872 through 66873). In the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70424), we finalized our policy to no longer specify a 
list of devices to which the OPPS payment adjustment for no cost/full 
credit and partial credit devices would apply and instead apply this 
APC payment adjustment to all replaced devices furnished in conjunction 
with a procedure assigned to a device-intensive APC when the hospital 
receives a credit for a replaced specified device that is 50 percent or 
greater than the cost of the device.
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. 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. Further, in the CY 2021 OPPS/ASC final rule with comment period 
(85 FR 86017 through 86018, 86302), we made conforming changes to our 
regulations at Sec.  419.45(b)(1) and (2) that codified this policy.
    We are not proposing any changes to our policies regarding payment 
for no cost/full credit and partial credit devices for CY 2023.

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout the proposed rule, the term ``biological'' 
is used because this is the term that appears in section 1861(t) of the 
Act. A ``biological'' as used in the proposed rule includes (but is not 
necessarily limited to) a ``biological product'' or a ``biologic'' as 
defined under section 351 of the PHS 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

[[Page 44626]]

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 drug as a hospital 
outpatient service under Medicare Part B. Proposed CY 2023 pass-through 
drugs and biologicals and their designated APCs are assigned status 
indicator ``G'' in Addenda A and B to this proposed rule (which are 
available via the internet on the CMS website).
    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. The methodology for determining the pass-
through payment amount is set forth in regulations at 42 CFR 419.64. 
These regulations specify that the pass-through payment equals the 
amount determined under section 1842(o) of the Act minus the portion of 
the APC payment that CMS determines is associated with the drug or 
biological.
    Section 1847A of the Act establishes the average sales price (ASP) 
methodology, which is used for payment for drugs and biologicals 
described in section 1842(o)(1)(C) of the Act furnished on or after 
January 1, 2005. The ASP methodology, as applied under the OPPS, uses 
several sources of data as a basis for payment, including the ASP, the 
wholesale acquisition cost (WAC), and the average wholesale price 
(AWP). In this proposed rule, the term ``ASP methodology'' and ``ASP-
based'' are inclusive of all data sources and methodologies described 
therein. Additional information on the ASP methodology can be found on 
our website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    The pass-through application and review process for drugs and 
biologicals is described on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. 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 drug or biological 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 approved pass-through drugs and 
biologicals on a quarterly basis through the next available OPPS 
quarterly update after the approval of a drug's or biological'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 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 for which pass-through payment status is ending during 
the calendar year is included in the quarterly OPPS Change Request 
transmittals.
3. Drugs and Biologicals With Expiring Pass-Through Payment Status in 
CY 2022
    There are 32 drugs and biologicals for which pass-through payment 
status expires on December 31, 2022 or for which the equitable 
adjustment to mimic continued pass-through payment will end on December 
31, 2022, as listed in Table 39. Most of these drugs and biologicals 
will have received OPPS pass-through payment for 3 years during the 
period of January 1, 2019 through December 31, 2022. In accordance with 
the policy finalized in CY 2017 and described earlier, pass-through 
payment status for drugs and biologicals 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.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63755 
through 63756), we also recognized the effects of the Public Health 
Emergency (PHE) on drugs and biologicals whose pass-through payment 
status expired or expires between December 31, 2021, and September 30, 
2022, by adopting a one-time equitable adjustment under section 
1833(t)(2)(E) of the Act to continue separate payment for the remainder 
of CY 2022 to mimic continued pass-through status for that year. 
Because pass-through payment status can expire at the end of a quarter, 
we finalized that the adjusted payment would be made for between one 
and four quarters, depending on when the pass-through period expires 
for the drug or biological. For a detailed discussion of the equitable 
adjustment for drugs with expiring pass-through status in CY 2022, we 
refer readers to the CY 2022 OPPS/ASC final rule with comment period 
(86 FR 63755 through 63756).
    With the exception of those groups of drugs and biologicals that 
are always packaged when they do not have pass-through payment status 
(specifically, anesthesia drugs; drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure (including diagnostic 
radiopharmaceuticals, contrast agents, and stress agents); and drugs 
and biologicals that function as supplies when used in a surgical 
procedure), our standard methodology for providing payment for drugs 
and biologicals with expiring pass-through payment status in an 
upcoming calendar year is to determine the product's estimated per day 
cost and compare it with the OPPS drug packaging threshold for that 
calendar year (which is proposed to be $135 for CY 2023), as discussed 
further in section V.B.1 of this proposed rule). 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 
propose to provide separate payment at the applicable ASP-based payment 
amount (which is proposed at ASP+6 percent for non-340B drugs for CY 
2023 and

[[Page 44627]]

subsequent years), as discussed further in section V.B.2 of this 
proposed rule.
    Refer to Table 39 for the list of drugs and biologicals for which 
pass-through payment will expire or for which separate payment to mimic 
pass-through payment status will end on December 31, 2022. The packaged 
or separately payable status of each of these drugs or biologicals is 
listed in Addendum B of this proposed rule (which is available via the 
internet on the CMS website).
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4. Proposed Drugs, Biologicals, and Radiopharmaceuticals With Pass-
Through Payment Status Expiring in CY 2023
    We propose to end pass-through payment status in CY 2023 for 43 
drugs and biologicals. These drugs and biologicals, which were 
initially approved for pass-through payment status between April 1, 
2020 and January 1, 2021, are listed in Table 40. The APCs and HCPCS 
codes for these drugs and biologicals, which have pass-through payment 
status that will end by December 31, 2023, are assigned status 
indicator ``G'' in Addenda A and B to this proposed rule (which are 
available via the internet on the CMS website). The APCs and HCPCS 
codes for these drugs and biologicals, which have pass-through payment 
status, are assigned status indicator ``G'' only for the duration of 
their pass-through status as shown in Table 40.
    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 2023, we propose to continue to pay for 
pass-through drugs and biologicals at ASP+6 percent, equivalent to the 
payment rate these drugs and biologicals would receive in the 
physician's office setting in CY 2023. We note that, under the OPD fee 
schedule, separately payable drugs assigned to an APC are generally 
payable at ASP+6 percent. Therefore, we propose that a $0 pass-through 
payment amount would be paid for pass-through drugs and biologicals 
under the CY 2023 OPPS because the difference between the amount 
authorized under section 1842(o) of the Act, which is proposed at ASP+6 
percent, and the portion of the otherwise applicable OPD fee schedule 
that the Secretary determines is appropriate, which is also 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 propose that their pass-through payment 
amount would be equal to ASP+6 percent for CY 2023 minus a payment 
offset for the portion of the otherwise applicable OPD fee schedule 
that the Secretary determines is associated with the drug or biological 
as described in section V.A.6 of this proposed rule. We propose this 
policy because, if not for the pass-through payment status of these 
policy-packaged products, payment for these products would be packaged 
into the associated procedure and therefore, there are associated OPD 
fee schedule amounts for them.
    We propose to continue to update pass-through payment rates on a 
quarterly basis on the CMS website during CY 2023 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 2023, consistent with our CY 2022 policy for diagnostic and 
therapeutic radiopharmaceuticals, we propose to continue to provide 
payment for both diagnostic and therapeutic radiopharmaceuticals that 
are granted pass-through payment status based on the ASP methodology. 
As stated earlier,

[[Page 44631]]

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 
2023, we propose to follow the standard ASP methodology to determine 
the pass-through payment rate that drugs receive under section 1842(o) 
of the Act, which is proposed at ASP+6 percent. If ASP data are not 
available for a radiopharmaceutical, we propose to provide pass-through 
payment at WAC+3 percent (consistent with our proposed policy in 
section V.B.2.b of this proposed rule), the equivalent payment provided 
for pass-through 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 this proposed rule. If WAC information also is not 
available, we propose to provide payment for the pass-through 
radiopharmaceutical at 95 percent of its most recent AWP. We refer 
readers to Table 40 below for the list of drugs and biologicals for 
which we propose to expire pass-through payment status during CY 2023.
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5. Proposed Drugs, Biologicals, and Radiopharmaceuticals With Pass-
Through Payment Status Continuing in CY 2023
    We propose to continue pass-through payment status in CY 2023 for 
32 drugs and biologicals. These drugs and biologicals, which were 
approved for pass-through payment status with effective dates beginning 
between April 1, 2021, and April 1, 2022, are listed in Table 41. The 
APCs and HCPCS codes for these drugs and biologicals, which have pass-
through payment status that will continue after December 31, 2022, are 
assigned status indicator ``G'' in Addenda A and B to this proposed 
rule (which are available via the internet on the CMS website).
    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the pass-through 
payment amount) as the difference between the amount

[[Page 44637]]

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 2023, we propose to 
continue to pay for pass-through drugs and biologicals at ASP+6 
percent, equivalent to the payment rate these drugs and biologicals 
would receive in the physician's office setting in CY 2023. We propose 
that a $0 pass-through payment amount would be paid for pass-through 
drugs and biologicals that are not policy-packaged as described in 
section V.B.1.c under the CY 2023 OPPS because the difference between 
the amount authorized under section 1842(o) of the Act, which is 
proposed at ASP+6 percent, and the portion of the otherwise applicable 
OPD fee schedule that the Secretary determines is appropriate, which is 
proposed at ASP+6 percent, is $0.
    In the case of policy-packaged drugs (which include the following: 
anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents, diagnostic radiopharmaceuticals, and stress 
agents); and drugs and biologicals that function as supplies when used 
in a surgical procedure), we propose that their pass-through payment 
amount would be equal to ASP+6 percent for CY 2023 minus a payment 
offset for any predecessor drug products contributing to the pass-
through payment as described in section V.A.6 of this proposed rule. We 
propose this policy because, if not for the pass-through payment status 
of these policy-packaged products, payment for these products would be 
packaged into the associated procedure and therefore, there are 
associated OPD fee schedule amounts for them.
    We propose to continue to update pass-through payment rates on a 
quarterly basis on our website during CY 2023 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 2023, consistent with our CY 2022 policy for diagnostic and 
therapeutic radiopharmaceuticals, we propose to continue 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 2023, we propose to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which is proposed at ASP+6 
percent. If ASP data are not available for a radiopharmaceutical, we 
propose to provide pass-through payment at WAC+3 percent (consistent 
with our proposed policy in section V.B.2.b of this proposed rule), the 
equivalent payment provided to pass-through 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 this proposed rule. If WAC 
information also is not available, we propose to provide payment for 
the pass-through radiopharmaceutical at 95 percent of its most recent 
AWP.
    The drugs and biologicals that we propose would have pass-through 
payment status expire after December 31, 2023, are shown in Table 41.
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6. Proposed Provisions for Reducing Transitional Pass-Through Payments 
for Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals To 
Offset Costs Packaged Into APC Groups
    Under the regulation at 42 CFR 419.2(b)(15), 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 the regulation 
at 42 CFR 419.2(b)(16), 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. Finally, under the regulation at 42 CFR 419.2(b)(4), 
anesthesia drugs are packaged in the OPPS. 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 policy-packaged drugs, which 
include diagnostic radiopharmaceuticals, contrast agents, stress 
agents, and skin substitutes, we refer readers to the discussion in the 
CY 2016 OPPS/ASC final rule with comment period (80 FR 70430 through 
70432). For CY 2023, as we did in CY 2022, we propose to continue to 
apply the same policy-packaged offset policy to payment for pass-
through diagnostic radiopharmaceuticals, pass-through contrast agents, 
pass-through stress agents, and pass-through skin substitutes. The 
proposed APCs to which a payment offset may be applicable for pass-
through diagnostic radiopharmaceuticals, pass-through contrast agents, 
pass-through stress agents, and pass-through skin substitutes are 
identified in Table 42.
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    We propose to continue to post annually on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.html a file that contains the 
APC offset amounts that will be used for that year for purposes of both 
evaluating cost significance for candidate pass-through payment device 
categories and drugs and biologicals and establishing any appropriate 
APC offset amounts. Specifically, the file will continue to provide the 
amounts and percentages of APC payment associated with packaged 
implantable devices, policy-packaged drugs, and threshold packaged 
drugs and biologicals for every OPPS clinical APC.

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

1. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Proposed Packaging Threshold
    In accordance with section 1833(t)(16)(B) of the Act, the threshold 
for establishing separate APCs for payment of drugs and biologicals was 
set to $50 per administration during CYs 2005 and 2006. In CY 2007, we 
used the four-quarter moving average Producer Price Index (PPI) levels 
for

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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 2022 (86 FR 
63635 through 63637).
    Following the CY 2007 methodology, for this proposed rule, we use 
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 2023 and rounded the resulting dollar amount 
($133.73) to the nearest $5 increment, which yielded a figure of $135. 
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's Office of the Actuary. Based on these calculations using the CY 
2007 OPPS methodology, we propose a packaging threshold for CY 2023 of 
$135. b. Proposed Packaging of Payment for HCPCS Codes that Describe 
Certain Drugs, Certain Biologicals, and Certain Therapeutic 
Radiopharmaceuticals Under the Cost Threshold (``Threshold-Packaged 
Drugs'')
    To determine the proposed CY 2023 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 that had a 
HCPCS code in CY 2021 and were paid (via packaged or separate payment) 
under the OPPS. We used data from CY 2021 claims processed through June 
30, 2021, for this calculation. However, we did not perform this 
calculation for those drugs and biologicals with multiple HCPCS codes 
that include different dosages, as described in section V.B.1.d of this 
proposed rule, or for the following policy-packaged items that we 
propose to continue to package in CY 2023: 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 2023, we use the methodology that was described in detail 
in the CY 2006 OPPS proposed rule (70 FR 42723 through 42724) and 
finalized in the CY 2006 OPPS final rule with comment period (70 FR 
68636 through 68638). For each drug and biological HCPCS code, we used 
an estimated payment rate of ASP+6 percent (which is the payment rate 
we propose for separately payable drugs and biologicals (other than 
340B drugs)) for CY 2023, as discussed in more detail in section 
V.B.2.b of this proposed rule) to calculate the CY 2023 proposed rule 
per day costs. We used the manufacturer-submitted ASP data from the 
fourth quarter of CY 2021 (data that were used for payment purposes in 
the physician's office setting, effective April 1, 2022) to determine 
the proposed rule per day cost.
    As is our standard methodology, for CY 2023, we propose to use 
payment rates based on the ASP data from the fourth quarter of CY 2021 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to this proposed rule 
(which are available via the internet on the CMS website) because these 
are the most recent data available for use at the time of development 
of this proposed rule. These data also were the basis for drug payments 
in the physician's office setting, effective April 1, 2022. 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 
2021 hospital claims data to determine their per day cost.
    We propose to package items with a per day cost less than or equal 
to $135 and identify items with a per day cost greater than $135 as 
separately payable unless they are policy-packaged. Consistent with our 
past practice, we cross-walked historical OPPS claims data from the CY 
2021 HCPCS codes that were reported to the CY 2022 HCPCS codes that we 
display in Addendum B to this proposed rule (which is available via the 
internet on the CMS website) for proposed payment in CY 2023.
    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 proposed rule, we 
propose to use ASP data from the fourth quarter of CY 2021, 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, 2022, along with updated hospital claims data from CY 2021. We 
note that we also propose to use these data for budget neutrality 
estimates and impact analyses for this proposed rule.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B of the final rule with comment 
period will be based on ASP data from the second quarter of CY 2022. 
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, 2022. These payment rates would then 
be updated in the January 2023 OPPS update, based on the most recent 
ASP data to be used for physicians' office and OPPS payment as of 
January 1, 2023. For items that do not currently have an ASP-based 
payment rate, we propose to recalculate their mean unit cost from all 
of the CY 2021 claims data and updated cost report information 
available for the CY 2023 OPPS/ASC final rule with comment period to 
determine their final per day cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in this proposed rule 
may be different from the same drugs' HCPCS codes' packaging status 
determined based on the data used for the final rule with comment 
period. Under such circumstances, we propose 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 2023 OPPS drug packaging 
threshold and the drug's payment status (packaged or separately 
payable) in CY 2022. 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 2023, 
consistent with our historical practice, we propose to apply the 
following policies to those HCPCS codes for drugs, biologicals, and 
therapeutic

[[Page 44643]]

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 2022 and that are proposed for separate payment in CY 
2023, and that then have per day costs equal to or less than the CY 
2023 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2023 final rule, would continue to 
receive separate payment in CY 2023.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2022 and that are proposed for separate payment in CY 2023, and 
that then have per day costs equal to or less than the CY 2023 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2023 final rule, would remain packaged in 
CY 2023.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2023 but that then have per-day costs 
greater than the CY 2023 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2023 final 
rule, would receive separate payment in CY 2023.
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).
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 propose 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 
2023.
    For CY 2023, 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 2021 claims data 
and our pricing information at ASP+6 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. The following drugs 
did not have pricing information available for the ASP methodology for 
this 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 2021 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 if the estimated per day cost of each drug or biological 
is less than or equal to the proposed CY 2023 drug packaging threshold 
of $135 (in which case all HCPCS codes for the same drug or biological 
would be packaged) or greater than the proposed CY 2023 drug packaging 
threshold of $135 (in which case 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 2023 is displayed in Table 43.
BILLING CODE 4120-01-P

[[Page 44644]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.059

BILLING CODE 4120-01-C
2. Proposed Payment for Drugs and Biologicals Without Pass-Through 
Status That Are Not Packaged
a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 
Other Separately Payable Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (known as a SCOD) is defined as a 
covered outpatient drug, as defined in section 1927(k)(2) of the Act, 
for which a separate APC has been established and that either is a 
radiopharmaceutical agent or is a drug or biological for which payment 
was made on a pass-through basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of SCODs. These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).

[[Page 44645]]

    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary for purposes of paragraph (14). We refer to this alternative 
methodology as the ``statutory default.'' Most physician Part B drugs 
are paid at ASP+6 percent in accordance with section 1842(o) and 
section 1847A of the Act.
    Section 1833(t)(14)(E)(ii) of the Act provides for an adjustment in 
OPPS payment rates for SCODs to take into account overhead and related 
expenses, such as pharmacy services and handling costs. Section 
1833(t)(14)(E)(i) of the Act required MedPAC to study pharmacy overhead 
and related expenses and to make recommendations to the Secretary 
regarding whether, and if so how, a payment adjustment should be made 
to compensate hospitals for overhead and related expenses. Section 
1833(t)(14)(E)(ii) of the Act authorizes the Secretary to adjust the 
weights for ambulatory procedure classifications for SCODs to take into 
account the findings of the MedPAC study.\121\
---------------------------------------------------------------------------

    \121\ 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. For CY 2023 and 
subsequent years, we propose 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 2022.
b. CY 2023 Proposed Payment Policy
    For CY 2023 and subsequent years, we propose to continue our 
payment policy that has been in effect since CY 2013 to pay for 
separately payable drugs and biologicals, with the exception of 340B-
acquired drugs, at ASP+6 percent in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We formally 
propose to pay for separately payable nonpass-through drugs acquired 
with a 340B discount at a rate of ASP minus 22.5 percent (as described 
in section V.B.6 of this proposed rule). We refer readers to section 
V.B.6. for a full discussion of our proposed CY 2023 payment policy for 
340B drugs.
    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 
are not available. Consistent with section 1847A(c)(4) of the Act, in 
the CY 2019 PFS final rule (83 FR 59661 to 59666), we finalized a 
policy that, effective January 1, 2019, WAC-based payments for Part B 
drugs made under section 1847A(c)(4) of the Act will utilize a 3-
percent add-on in place of the 6-percent add-on that was being used 
according to our policy in effect as of CY 2018. For the CY 2019 OPPS, 
we followed the same policy finalized in the CY 2019 PFS final rule (83 
FR 59661 to 59666). For CY 2020 and subsequent years, 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 and 85 FR 86039). For CY 2023 and subsequent years, we propose to 
continue to utilize a 3-percent add-on instead of a 6-percent add-on 
for drugs that are paid based on WAC pursuant to our authority under 
section 1833(t)(14)(A)(iii)(II) of the Act, which provides, in part, 
that the amount of payment for a SCOD is the average price of the drug 
in the year established under section 1847A of the Act. We also propose 
to apply this provision to non-SCOD separately payable drugs. Because 
we propose to establish the average price for a drug paid based on WAC 
under section 1847A of the Act as WAC+3 percent instead of WAC+6 
percent, we believe it is appropriate to price separately payable drugs 
paid based on WAC at the same amount under the OPPS. We propose, 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, we formally propose 
that the payment amount for these drugs (in this case, as a rate of WAC 
minus 22.5 percent) would continue to apply. We refer readers to the CY 
2019 PFS final rule (83 FR 59661 to 59666) for additional background on 
this policy. We also refer readers to section V.B.6. for a full 
discussion of our proposed CY 2023 payment policy for 340B drugs.
    Consistent with our current policy, we propose for CY 2023 and 
subsequent years 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

[[Page 44646]]

determining payments for these separately payable drugs and 
biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this proposed rule (available via the 
internet on the CMS website), which illustrate the proposed CY 2023 
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, 2022, or WAC, AWP, or mean unit cost 
from CY 2021 claims data and updated cost report information available 
for this proposed rule. In general, these published payment rates are 
not the same as the actual January 2023 payment rates. This is because 
payment rates for drugs and biologicals with ASP information for 
January 2023 will be determined through the standard quarterly process 
where ASP data submitted by manufacturers for the third quarter of CY 
2022 (July 1, 2022, through September 30, 2022) will be used to set the 
payment rates that are released for the quarter beginning in January 
2023 in December 2022. In addition, payment rates for drugs and 
biologicals in Addenda A and B to this proposed rule, for which there 
was no ASP information available for April 2022, are based on mean unit 
cost in the available CY 2021 claims data. If ASP information becomes 
available for payment for the quarter beginning in January 2023, we 
will price payment for these drugs and biologicals based on their newly 
available ASP information. Finally, there may be drugs and biologicals 
that have ASP information available for this proposed rule (reflecting 
April 2022 ASP data) that do not have ASP information available for the 
quarter beginning in January 2023. These drugs and biologicals would 
then be paid based on mean unit cost data derived from CY 2021 hospital 
claims. Therefore, the proposed payment rates listed in Addenda A and B 
to this proposed rule are not for January 2023 payment purposes and are 
only illustrative of the CY 2023 OPPS payment methodology using the 
most recently available information at the time of issuance of this 
proposed rule.
c. Biosimilar Biological Products
    For CY 2016 and CY 2017, we finalized a policy to pay for 
biosimilar biological products based on the payment allowance of the 
product as determined under section 1847A of the Act and to subject 
nonpass-through biosimilar biological products to our annual threshold-
packaged policy (for CY 2016, 80 FR 70445 through 70446; and for CY 
2017, 81 FR 79674). In the CY 2018 OPPS/ASC final rule with comment 
period (82 FR 59351), we finalized a policy to implement separate HCPCS 
codes for biosimilar biological products that was based on the policy 
established in the CY 2018 PFS final rule. The policy we established 
allowed all biosimilar biological products to be 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).
    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. Accordingly, in the CY 
2019 OPPS/ASC final rule (83 FR 58977), we implemented a policy that 
for CY 2019 and subsequent years, in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act, we pay nonpass-through biosimilars 
acquired under the 340B Program at ASP minus 22.5 percent of the 
biosimilar's ASP instead of the biosimilar's ASP minus 22.5 percent of 
the reference product's ASP.
    For CY 2023 and subsequent years, we propose to continue our policy 
to make all biosimilar biological products eligible for pass-through 
payment and not just the first biosimilar biological product for a 
reference product. We also formally propose to continue our current 
policy of paying for nonpass-through biosimilars acquired under the 
340B program at the biosimilar's ASP minus 22.5 percent of the 
biosimilar's ASP instead of the biosimilar's ASP minus 22.5 percent of 
the reference product's ASP, in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act. We refer readers to section V.B.6. 
for a full discussion of our proposed CY 2023 payment policy for 340B 
drugs.
3. Proposed Payment Policy for Therapeutic Radiopharmaceuticals
    For CY 2023 and subsequent years, we propose to continue the 
payment policy for therapeutic radiopharmaceuticals that began in CY 
2010. We pay for separately payable therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. If ASP information is unavailable for a therapeutic 
radiopharmaceutical, we base therapeutic radiopharmaceutical payment on 
mean unit cost data derived from hospital claims. We believe that the 
rationale outlined in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60524 through 60525) for applying the principles of 
separately payable drug pricing to therapeutic radiopharmaceuticals 
continues to be appropriate for nonpass-through, separately payable 
therapeutic radiopharmaceuticals in CY 2023. Therefore, we propose for 
CY 2023 and subsequent years 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). For CY 2023 and 
subsequent years, we also propose to rely on the most recently 
available 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 2023 payment rates for nonpass-through, separately 
payable therapeutic radiopharmaceuticals are included in Addenda A and 
B of this proposed rule (which are available via the internet on the 
CMS website).

[[Page 44647]]

4. Proposed Payment for Blood Clotting Factors
    For CY 2022, 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 (86 FR 63643). That is, for CY 2022, 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 2022 updated furnishing fee was $0.239 per unit.
    For CY 2023 and subsequent years, we propose to pay for blood 
clotting factors at ASP+6 percent, consistent with our proposed payment 
policy for other nonpass-through, separately payable drugs and 
biologicals, and to continue our policy for payment of the furnishing 
fee using an updated amount. Our policy to pay 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 propose to provide payment for blood clotting factors under the 
same methodology as other separately payable drugs and biologicals 
under the OPPS and to continue payment of an updated furnishing fee. We 
will announce the actual figure of the percent change in the applicable 
CPI and the updated furnishing fee calculation based on that figure 
through the applicable program instructions and posting on the CMS 
website.
5. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims 
Data
    For CY 2023 and subsequent years, we propose to continue to use the 
same payment policy as in CY 2022 for nonpass-through drugs, 
biologicals, and radiopharmaceuticals with HCPCS codes but without OPPS 
hospital claims data. 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 2023 
payment status of each of the nonpass-through drugs, biologicals, and 
radiopharmaceuticals with HCPCS codes but without OPPS hospital claims 
data is listed in Addendum B to this proposed rule, which is available 
via the internet on the CMS website.
6. OPPS Payment Methodology for 340B Purchased Drugs
a. Overview
    Under the OPPS, we generally set payment rates for separately 
payable drugs and biologicals under section 1833(t)(14)(A). Section 
1833(t)(14)(A)(iii)(II) provides that, if hospital acquisition cost 
data is not available, the payment amount is the average price for the 
drug in a year established under section 1842(o), which cross-
references section 1847A, which generally sets a default rate of ASP+6 
percent for certain drugs. The provision also provides that the average 
price for the drug in the year as established under section 1847A is 
calculated and adjusted by the Secretary as necessary for purposes of 
paragraph (14). 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.
    This policy has been the subject of significant litigation, 
recently culminating in the Supreme Court's decision in American 
Hospital Association v. Becerra, No. 20-1114, 2022 WL 2135490 (June 15, 
2022). Originally, in December 2018, the United States District Court 
for the District of Columbia (the ``District Court'') concluded that 
the Secretary lacks the authority to bring the default rate in line 
with average acquisition cost unless the Secretary obtains survey data 
from hospitals. The agency then 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 judgment in this matter. 
Plaintiffs then petitioned the United States Supreme Court for a writ 
of certiorari, which was granted on July 2, 2021.\122\
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    \122\ https://www.supremecourt.gov/orders/courtorders/070221zor_4gc5.pdf.
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    On June 15, 2022, the Supreme Court reversed the decision of the 
D.C. Circuit, holding that HHS may not vary payment rates for drugs and 
biologicals among groups of hospitals under section 
1833(t)(14)(A)(iii)(II) in the absence of having conducted a survey of 
hospitals' acquisition costs under subparagraph (t)(14)(A)(iii)(I). 
While the Supreme Court's decision concerned payment rates for CYs 2018 
and 2019, it obviously has implications for CY 2023 payment rates. 
However, given the timing of the Supreme Court's decision, we lacked 
the necessary time to incorporate the adjustments to the proposed 
payment rates and budget neutrality calculations to account for that 
decision before issuing this proposed rule, as explained further below. 
For that reason alone, the payment rates, tables, and addenda in this 
proposed rule reflect a payment rate of ASP minus 22.5 percent for 
drugs and biologicals acquired through the 340B program for CY 2023, 
consistent with our prior policy. However, we are also providing 340B 
Alternate supporting files, which provide information regarding the 
effects of removing the 340B program payment policy for CY 2023. We 
fully anticipate applying a rate of ASP+6 percent to such drugs and 
biologicals in the final rule for CY 2023, in light of the Supreme 
Court's recent decision. We are still evaluating how to apply the 
Supreme Court's recent decision to prior cost years.
    Each year since 2018, we have continued our policy of paying for 
drugs and biologicals acquired through the 340B Program at ASP minus 
22.5 percent. When we were developing this proposed rule, we intended 
to propose to continue our 340B policy, which was upheld by the D.C. 
Circuit Court of Appeals. That is, the rates that we previously 
developed, the tables, and the addenda that are part of this proposed 
rule build on the policy that had been in effect since 2018, which

[[Page 44648]]

paid for drugs and biologicals at one rate if they were acquired 
through the 340B program (ASP minus 22.5 percent), and at another rate 
if they were not acquired through the 340B program (ASP+6 percent).
    Development of the annual OPPS proposed rule begins several months 
before publication. This process includes formulating proposed policies 
and calculating proposed rates, which then must be adjusted to maintain 
budget neutrality. In particular, section 1833(t)(9)(B) requires that 
if the Secretary makes adjustments under subparagraph (A) of that 
section to the groups, the relative payment weights, or the wage or 
other adjustments, those adjustments for the year may not cause the 
estimated amount of expenditures under this part for the year to 
increase or decrease from the estimated amount of expenditures that 
would have been made absent those adjustments. When the Supreme Court's 
decision was issued on June 15, 2022, we had already developed the 
policies we intended to include in the proposed rule and calculated the 
payment rates, which included application of an adjustment to maintain 
budget neutrality. There was not sufficient time remaining in the 
proposed rule development process for us to change the policy and 
accompanying rates in response to the Supreme Court's decision. The 
OPPS is a calendar year payment system and to ensure OPPS payment rates 
and policies are effective on January 1, 2023, we must issue the final 
rule with comment period in early November to allow for the 60-day 
delayed effective date that the Congressional Review Act (CRA) (5 
U.S.C. 801(a)(3)) requires for major rules. We generally attempt to 
issue the annual OPPS/ASC proposed rule by early July to ensure that 
there is sufficient time to allow for the 60-day public comment period 
required by section 1871(b)(1) of the Act, followed by review of public 
comments and development of the final rule in time for the early 
November issuance date. If we were to change the policy and 
accompanying rates in response to the Supreme Court's decision, the 
proposed rule would be substantially delayed, which would jeopardize 
our ability to develop the final rule in time to meet the early 
November deadline required to adhere to the CRA's 60-day delayed 
effective date requirement. Therefore, the rates, tables, and addenda 
in this proposed rule reflect the proposal to pay for drugs differently 
if they were acquired through the 340B program, namely at ASP minus 
22.5 percent, with the anticipated savings redistributed to all other 
items and services in a budget neutral manner. If interested parties or 
members of the public wish to comment on the propriety of maintaining 
differential payment for 340B-acquired drugs in the future, or other 
aspects of these as-published rates, we will consider such comments, 
subject to the constraints of the Supreme Court's recent decision.
    That said, as we noted earlier, in light of the Supreme Court's 
decision in American Hospital Association, we fully anticipate 
reverting to our prior policy of paying ASP+6 percent, regardless of 
whether a drug was acquired through the 340B program. We advise readers 
that a reversion to that policy will have an effect on the payment 
rates for other items and services due to the budget neutral nature of 
the OPPS system. To maintain OPPS budget neutrality under our 
anticipated final policy where non-pass-through separately payable OPPS 
drugs purchased under the 340B program are paid at ASP+6 percent in CY 
2023, we would need to determine the change in estimated OPPS spending 
associated with the alternative policy. Based on separately paid line 
items with the ``JG'' modifier in the CY 2021 claims available for OPPS 
ratesetting, which represent all drug lines for which the 340B program 
payment policy applied, the estimated payment differential would be an 
increase of approximately $1.96 billion in OPPS drug payments. To 
ensure budget neutrality under the OPPS after applying this alternative 
payment methodology for drugs and biologicals purchased under the 340B 
Program, we would apply this offset of approximately $1.96 billion to 
decrease the OPPS conversion factor, which would result in a budget 
neutrality adjustment of 0.9596 to the OPPS conversion factor, for a 
revised conversion factor of $83.279. This is a similar application of 
OPPS budget neutrality as originally applied to the OPPS 340B program 
payment policy described in the CY 2018 OPPS final rule (82 FR 59258, 
82 FR 59482 through 59484). In the CY 2018 OPPS final rule, this budget 
neutrality adjustment increased the conversion factor to budget 
neutralize the decreased spending for drugs acquired through the 340B 
program in CY 2018. Under our anticipated final policy, we would apply 
that same calculation but we would decrease the conversion factor to 
budget neutralize the increased spending associated with payments for 
drugs acquired through the 340B program that would result from 
increasing the rate of ASP minus 22.5 percent to ASP+6 percent. We note 
that the amount of this adjustment would potentially change in the 
final rule due to updated data, potential modifications to the estimate 
methodology, and other factors. A table detailing the impact on 
hospital outpatient payment rates of removing the payment differential 
for 340B drugs and the corresponding budget neutrality adjustment for 
CY 2023 is included in the 340B Alternative supporting files.
b. Payment for 340B Drugs and Biologicals in CYs 2018 Through 2022
    For full descriptions of our OPPS payment policy for drugs and 
biologicals acquired under the 340B program, 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 
59015 through 59022); the CY 2021 OPPS/ASC final rule with comment 
period (85 FR 86042 through 86055); and the CY 2022 OPPS/ASC final rule 
with comment period (86 FR 63640 through 63649).
    Our policies for 340B-acquired drugs have been the subject of 
ongoing litigation, the procedural history of which is generally 
described above. On December 27, 2018, in the case of American Hospital 
Association, et al. v. Azar, et al., the district court concluded in 
the context of reimbursement requests for CY 2018 that the Secretary 
exceeded his statutory authority by adjusting the Medicare payment 
rates for drugs acquired under the 340B Program to ASP minus 22.5 
percent for that year.
    On July 10, 2019, the district court entered final judgment. The 
agency appealed to the D.C. Circuit, and on July 31, 2020, the court 
entered an opinion reversing the district court's judgment in this 
matter. In January of 2021, appellees petitioned the United States 
Supreme Court for a writ of certiorari. On July 2, 2021, the Supreme 
Court granted the petition and heard oral arguments in November 2021. 
And, as noted above, the Supreme Court reversed the decision of the 
D.C. Circuit.
    Before the D.C. Circuit upheld our authority to pay ASP minus 22.5 
percent for 340B drugs, 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.

[[Page 44649]]

We stated that such survey data may be used in setting the Medicare 
payment amount for drugs acquired by 340B hospitals for years going 
forward, and also may be used to devise a remedy for prior years if the 
district court's ruling was 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.\123\ 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. For a complete discussion of the Hospital Acquisition 
Cost Survey for 340B-Acquired Specified Covered Outpatient Drugs, we 
refer readers to the CY 2021 OPPS/ASC proposed rule (85 FR 48882 
through 48891) and the CY 2021 OPPS/ASC final rule with comment period 
(85 FR 86042 through 86055). We proposed a net payment rate for 340B 
drugs of ASP minus 28.7 percent (minus 34.7 percent plus 6 percent) 
based on survey data, and also proposed in the alternative that the 
agency could continue its current policy of paying ASP minus 22.5 
percent for CY 2021. On July 31, 2020, the D.C. Circuit reversed the 
decision of the district court, holding that this interpretation of the 
statute was reasonable.
---------------------------------------------------------------------------

    \123\  See American Hosp. Assoc. v. Azar, 348 F. Supp. 3d 62, 82 
(D.D.C. 2018).
---------------------------------------------------------------------------

    During CY 2021 rulemaking, based on feedback from interested 
parties, we stated that we believed maintaining the policy of paying 
ASP minus 22.5 percent for 340B drugs was appropriate to maintain 
consistent and reliable payment for these drugs to give hospitals 
increased certainty as to payments for these drugs. For CY 2022, we 
continued this 340B policy without modification as described in the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63648).
    We are still evaluating how to apply the Supreme Court's recent 
decision to cost years 2018-2022. In that decision, the Court 
summarized the parties' arguments regarding budget neutrality and 
stated that, ``[a]t this stage, we need not address potential 
remedies.'' We are additionally interested in public comments on the 
best way to craft any proposed, potential remedies affecting calendar 
years 2018-2022 given that the Court did not resolve that issue.
c. CY 2023 Proposed 340B Drug Payment Policy
    As discussed above, given the timing of the Supreme Court's 
decision in American Hospital Association v. Becerra, we lacked the 
necessary time to account for that decision before issuing this 
proposed rule. For that reason alone, for CY 2023, we formally propose 
at this time 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. But again, 
in light of the Supreme Court's decision, we fully anticipate adopting, 
in the final rule, a policy of paying ASP+6 percent for 340B-acquired 
drugs and biologicals. This formal proposal is in accordance with the 
policy choices and calculations that CMS made in the months leading up 
to publication of this proposed rule before the Supreme Court issued 
its decision in American Hospital Association v. Becerra, No. 20-1114, 
2022 WL 2135490 (June 15, 2022). We propose, in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act, to pay for separately payable 
Medicare Part B drugs and biologicals (assigned status indicator 
``K''), other than vaccines and drugs on pass-through status, that are 
acquired through the 340B Program at ASP minus 22.5 percent when billed 
by a hospital paid under the OPPS that is not excepted from the payment 
adjustment. We formally propose to continue our current policy for 
calculating payment for 340B-acquired biosimilars, which is discussed 
in section V.B.2.c. of the CY 2019 OPPS/ASC final rule with comment 
period, and would continue the policy we finalized in CY 2019 to pay 
ASP minus 22.5 percent for 340B-acquired drugs and biologicals 
furnished in nonexcepted off-campus PBDs paid under the PFS.
    We also formally propose to continue the 340B payment adjustment 
for WAC-priced drugs, which is WAC minus 22.5 percent. The 340B-
acquired drugs that are priced using AWP would continue to be paid an 
adjusted amount of 69.46 percent of AWP. Additionally, we propose to 
continue to exempt rural sole community hospitals (as described under 
the regulations at Sec.  412.92 and designated as rural for Medicare 
purposes), children's hospitals, and PPS-exempt cancer hospitals from 
the 340B payment adjustment.
    We also formally propose continuing to require hospitals to use 
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''.
    Again, we note that, in light of the Supreme Court's recent 
decision in American Hospital Association, we fully anticipate 
reverting to our prior policy of paying for drugs at ASP+6 percent, 
regardless of whether they were acquired through the 340B program for 
CY 2023. We also fully expect that when we revert to paying for drugs 
acquired through the 340B program at ASP+6 percent, we will budget 
neutralize that increase consistent with the OPPS statute and our 
longstanding policy by making a corresponding decrease to the 
conversion factor to account for the increase in the payment rates for 
these drugs. As set forth above, to ensure budget neutrality under the 
OPPS, after applying this alternative payment methodology for drugs and 
biologicals purchased under the 340B Program, we currently estimate 
that we would apply an offset of approximately $1.96 billion to 
decrease the OPPS conversion factor, which would result in a budget 
neutrality adjustment of 0.9596 to the OPPS conversion factor, for a 
revised conversion factor of $83.279.
    Public comments on the budget neutrality adjustment are welcome and 
will be carefully considered. For a more detailed discussion of the 
budget neutralizing effects of reverting to this prior policy of paying 
for all drugs (whether 340B-acquired or not) at ASP+6 percent, please 
see the 340B Alternative supporting files, which include an alternative 
impact table, the calculation of a 340B Alternative conversion factor, 
the budget neutrality factors associated with the 340B Alternative 
policy, and Addenda A, B, and C, all of which provide information 
regarding the effects of removing the 340B program payment policy for 
CY 2023.
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

[[Page 44650]]

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). In the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66886), we stated that skin substitutes are best 
characterized as either surgical supplies or devices because of their 
required surgical application and because they share significant 
clinical similarity with other surgical devices and supplies.
    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 2022, the payment rate for APC 
5053 (Level 3 Skin Procedures) was $596.39, the payment rate for APC 
5054 (Level 4 Skin Procedures) was $1,774.73, and the payment rate for 
APC 5055 (Level 5 Skin Procedures) was $3,326.39. This information is 
also available in Addenda A and B of the CY 2022 final rule with 
comment period, as issued with the final rule correction notice (87 FR 
2058) (the correction notice and corrected Addenda A and B are 
available via the internet on the CMS website).
    We have continued the high cost/low cost categories policy since CY 
2014, and we propose to continue it for CY 2023. Under the 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 (85 FR 86059).
    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 over $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 did 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). For 
more detailed information and discussion regarding the goals of this 
policy and the subsequent comment solicitations in CY 2019 and CY 2020 
regarding possible alternative payment methodologies for graft skin 
substitute products, please refer to the CY 2018 OPPS/ASC final rule 
with comment period (82 FR 59347); CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58967 to 58968); and the CY 2020 OPPS/ASC final 
rule with comment period (84 FR 61328 to 61331).
b. Proposals for Packaged Skin Substitutes for CY 2023
    For CY 2023, consistent with our policy since CY 2016, we propose 
to continue to determine the high cost/low cost status for each skin 
substitute product based on either a product's geometric MUC exceeding 
the geometric MUC threshold or the product's PDC (the total units of a 
skin substitute multiplied by the MUC and divided by the total number 
of days) exceeding the PDC threshold. Consistent with the methodology 
as established in the CY 2014 OPPS/ASC through CY 2018

[[Page 44651]]

OPPS/ASC final rules with comment period, we analyzed CY 2019 claims 
data to calculate the MUC threshold (a weighted average of all skin 
substitutes' MUCs) and the PDC threshold (a weighted average of all 
skin substitutes' PDCs). The proposed CY 2023 MUC threshold is $47 per 
cm\2\ (rounded to the nearest $1) and the proposed CY 2023 PDC 
threshold is $837 (rounded to the nearest $1). We want to clarify that 
the availability of an HCPCS code for a particular human cell, tissue, 
or cellular or tissue-based product (HCT/P) does not mean that that 
product is appropriately regulated solely under section 361 of the PHS 
Act and the FDA regulations in 21 CFR part 1271. Manufacturers of HCT/
Ps should consult with the FDA Tissue Reference Group (TRG) or obtain a 
determination through a Request for Designation (RFD) on whether their 
HCT/Ps are appropriately regulated solely under section 361 of the PHS 
Act and the regulations in 21 CFR part 1271.
    For CY 2023, as we did for CY 2022, we propose to assign each skin 
substitute that exceeds either the MUC threshold or the PDC threshold 
to the high cost group. In addition, we propose to assign any skin 
substitute with a MUC or a PDC that does not exceed either the MUC 
threshold or the PDC threshold to the low cost group except that we 
propose that any skin substitute product that was assigned to the high 
cost group in CY 2022 would be assigned to the high cost group for CY 
2023, regardless of whether it exceeds or falls below the CY 2023 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 2023, we propose to continue to assign skin substitutes with 
pass-through payment status to the high cost category. We propose to 
assign skin substitutes with pricing information but without claims 
data to calculate a geometric MUC or PDC to either the high cost or low 
cost category based on the product's ASP+6 percent payment rate as 
compared to the MUC threshold. If ASP is not available, we propose to 
use WAC+3 percent to assign a product to either the high cost or low 
cost category. Finally, if neither ASP nor WAC is available, we propose 
to use 95 percent of AWP to assign a skin substitute to either the high 
cost or low cost category. We propose to continue to use WAC+3 percent 
instead of WAC+6 percent to conform to our proposed policy described in 
section V.B.2.b of this proposed rule to establish a payment rate of 
WAC+3 percent for separately payable drugs and biologicals that do not 
have ASP data available. New skin substitutes without pricing 
information would be assigned to the low cost category until pricing 
information is available to compare to the CY 2023 MUC and PDC 
thresholds. For a discussion of our existing policy under which we 
assign skin substitutes without pricing information to the low cost 
category until pricing information is available, we refer readers to 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70436).
    In the CY 2023 PFS proposed rule, which will be included in the 
July 29, 2022 Federal Register, there is a proposal to treat all skin 
substitute products consistently across healthcare settings as 
incident-to supplies described under section 1861(s)(2) of the Act. If 
this proposed policy is finalized, manufacturers would not report ASPs 
for skin substitute products starting in CY 2023; and we would no 
longer be able to use ASP+6 percent pricing for a graft skin substitute 
product to determine whether the product should be assigned to the high 
cost group or the low cost group. However, manufacturers would continue 
to report WAC and AWP pricing information for skin substitute products 
through pricing compendia. Having WAC and AWP pricing will allow us to 
continue to use our alternative process to assign graft skin substitute 
products to the high cost group when cost data for a product is not 
available.
    Table 44 includes the final CY 2023 cost category assignment for 
each skin substitute product.
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BILLING CODE 4120-01-C
c. Proposed Retirement of HCPCS Code C1849 (Skin Substitute, Synthetic, 
Resorbable, by per Square Centimeter)
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86064 
to 86067), we revised our description of skin substitutes to include 
synthetic products, in addition to biological products. We also 
established HCPCS code C1849 to facilitate payment for synthetic graft 
skin substitute products in the outpatient hospital setting. 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, and was designed to describe 
any synthetic graft skin substitute product. We did not anticipate 
creating product specific HCPCS codes for synthetic graft skin 
substitute products.
    We assigned HCPCS code C1849 to the high cost skin substitute group 
based on our alternative methodology to assign products with WAC or AWP 
pricing that exceeds the MUC threshold to the high cost skin substitute 
group (85 FR 86066). When the CY 2021 OPPS/ASC final rule with comment 
period was issued, we were aware of one synthetic graft skin substitute 
product described by HCPCS code C1849. The manufacturer provided WAC 
pricing data that showed the cost of the product was above the MUC 
threshold for graft skin substitute products and therefore we 
determined that HCPCS code C1849 should be assigned to the high cost 
skin substitute group. We noted that, as more synthetic graft skin 
substitute products are identified as being described by HCPCS code 
C1849, we would use their pricing data to calculate an average price 
for the products described by HCPCS code C1849 to determine whether 
HCPCS code C1849 should be assigned to the high cost or low cost skin 
substitute group. In the CY 2022 OPPS/ASC final rule with comment 
period, we stated that we had identified multiple synthetic skin 
substitute products that could be described by HCPCS code C1849. The 
average of the WAC pricing data for these products exceeded the MUC 
threshold (86 FR 63563). Therefore, we assigned HCPCS code C1849 to the 
high cost skin substitute group in CY 2022 (86 FR 63652).
    While we created a single synthetic skin substitute HCPCS code for 
use under the OPPS beginning in CY 2021, for the physician office 
setting we established product-specific HCPCS codes for several graft 
skin substitute products that were described as synthetic skin 
substitute products in CY 2022 (86 FR 65119 through 65123). Because we 
anticipated that any graft skin substitute product assigned to the 
HCPCS A2XXX code series would be a synthetic product that also would be 
described by HCPCS code C1849 under the OPPS, we decided that graft 
skin substitute products assigned to the HCPCS A2XXX series would not 
be payable under the OPPS. Although we would pay for these products 
when identified by codes in the HCPCS A2XXX series in the physician 
office setting, it was not necessary to also make these codes payable 
under the OPPS because we had established HCPCS code C1849 to report 
the use of synthetic graft skin substitute products with graft skin 
substitute procedures for payment under the OPPS.
    Starting in January 2022, however, all new skin substitute products 
with an FDA 510(k) clearance received product-specific A-codes in the 
HCPCS A2XXX series. FDA 510(k)-cleared skin substitute products include 
both biological products that are not human cell, tissue, or cellular 
or tissue-based products (HCT/Ps) as well as synthetic products. The 
use of product-specific A-codes to identify all FDA 510(k) skin 
substitute products meant that several of the graft skin substitute 
products assigned product-specific codes in the A2XXX series starting 
January 1, 2022 were biological graft skin substitutes with an FDA 
510(k) clearance. While graft synthetic skin substitute products are 
described by HCPCS code C1849, FDA 510(k)-cleared biological products 
are not. However, for OPPS purposes, all graft skin substitute products 
with product-specific A-codes were assigned status indicator A under 
the OPPS (Not paid under the OPPS. Paid by [Medicare Administrative 
Contractors] under a fee schedule or payment system other than the 
OPPS). Previously, biological skin substitute products with an FDA 
510(k) clearance were assigned product-specific Q-codes, which are 
bundled into payment with the associated procedure under the OPPS. 
However, starting in January 2022, skin substitute products with a FDA 
510(k) clearance were no longer being assigned product-specific Q-
codes.
    Because some of the codes in the HCPCS A2XXX series identify 
biological skin substitute products that need to be payable under the 
OPPS, and because we cannot make only certain codes in the HCPCS A-code 
series payable and not others, we made the HCPCS A2XXX series payable 
under the OPPS earlier this year. Effective April 1, 2022, in the 
``April 2022 Update of the Hospital Outpatient Prospective Payment 
System (OPPS)--Change Request 12666'' (https://www.cms.gov/files/document/r11305cp.pdf), we changed the status indicator of all skin 
substitute products described in the HCPCS A2XXX series, including 
synthetic graft skin substitutes, to ``N'' (Paid under OPPS; payment is 
packaged into payment for other services). This change allowed packaged 
payment under the OPPS to be made for these products when furnished 
with skin substitute application procedures in the hospital outpatient 
department setting. We also assigned unclassified skin substitute 
products described by HCPCS code A4100 (Skin substitute, FDA cleared as 
a device, not otherwise specified) status indicator ``N'' in this 
Change Request and provided that payment for products identified with 
this code is packaged under the OPPS. HCPCS code A4100 is used to 
describe skin substitute products with FDA 510(k) clearance that

[[Page 44656]]

do not have a product-specific HCPCS code, which includes unclassified 
synthetic graft skin substitutes. Graft skin substitute products with 
product-specific codes in the HCPCS A2XXX series or that are described 
by HCPCS code A4100 are subject to the same policies as other graft 
skin substitute products as described by section V.B.7.b of the CY 2022 
OPPS/ASC final rule with comment (86 FR 63650 through 63658).
    Because we now make payment under the OPPS for product-specific 
HCPCS A-codes for synthetic graft skin substitute products and for 
unclassified synthetic graft skin substitute products and other 
unclassified FDA 510(k)-cleared products identified by HCPCS code 
A4100, HCPCS code C1849 is no longer necessary to bill for these 
products when they are used in the hospital outpatient department with 
graft skin substitute application procedures. In addition to being 
unnecessary, we are also concerned that the continued existence of 
HCPCS code C1849 may lead to confusion among providers regarding which 
HCPCS code to report on a claim if it is not retired, as there are 
currently two codes that can be reported in the hospital outpatient 
department setting when a synthetic graft skin substitute product is 
used: HCPCS code C1849, which can be used for any synthetic skin 
substitute, or the code in the HCPCS A2XXX series that describes the 
specific synthetic graft skin substitute product. For these reasons, we 
believe it is important to retire HCPCS code C1849.
    Nonetheless, we do not simply want to retire this code without 
making accompanying proposals to ensure that synthetic graft skin 
substitute products that either currently have a product-specific HCPCS 
code or may receive a product-specific HCPCS code in the future and are 
currently assigned to the high cost skin substitute group continue to 
be assigned to the high cost skin substitute group after the retirement 
of HCPCS code C1849. Most synthetic graft skin substitute products have 
less than 2 years of claims data and would not have cost data for us to 
review to determine if the products could be assigned to the high cost 
group. If the product manufacturers do not send WAC pricing data to us, 
the products would have to be assigned to the low cost group because of 
a lack of cost information. Submitting WAC pricing to have a skin 
substitute assigned to the high cost group is voluntary for 
manufacturers. Establishing a policy to continue to assign synthetic 
graft skin substitute products that are currently described by HCPCS 
code C1849 or would be described by HCPCS code C1849 to the high cost 
skin substitute group would allow manufacturers and providers to better 
forecast payment for synthetic graft skin substitute products, and 
protect them from unanticipated payment reductions. This proposal is 
consistent with our proposed policy in section V.B.7.b in this proposed 
rule that any skin substitute product that was assigned to the high 
cost group in CY 2022 would be continue to be assigned to the high cost 
group for CY 2023, regardless of whether it exceeds or falls below the 
CY 2023 MUC or PDC threshold, which has been our standard practice 
since CY 2018. Both of these proposals promote price stability for both 
manufacturers and providers and eliminate the risk that a skin 
substitute product that is currently assigned to the high cost skin 
substitute group would be reassigned to the low cost skin substitute 
group.
    In summary, for CY 2023, we propose to delete HCPCS code C1849 
(Skin substitute, synthetic, resorbable, by per square centimeter). We 
also propose that any graft skin substitute product that is currently 
assigned a product-specific code in the HCPCS A2XXX series and is 
appropriately described by HCPCS code C1849 or is assigned a product-
specific code in the HCPCS A2XXX series in the future and is 
appropriately described by HCPCS code C1849 be assigned to the high 
cost skin substitute group. We want to ensure synthetic graft skin 
substitute products continue to remain in the high cost skin substitute 
group throughout CY 2023 and do not risk reassignment to the low cost 
group during the transition from using HCPCS code C1849 to a product-
specific A-codes even if cost and pricing data are not available for 
these products. We believe this policy would promote payment stability 
for providers and other stakeholders when using synthetic graft skin 
substitute products consistent with our long-standing policy that keeps 
graft skin substitute products in the high cost group for subsequent 
years once a product is assigned to the high cost group for a given 
year.
    We also propose that HCPCS code A4100 (Skin substitute, fda cleared 
as a device, not otherwise specified) be assigned to the low cost skin 
substitute group, which is consistent with our existing payment policy 
that unclassified graft skin substitute products be assigned to the low 
cost skin substitute group. We look forward to comments on these 
proposals.
d. Key Objectives/Roadmap for Consistent Treatment of Skin Substitutes
    We believe outlining our HCPCS Level II coding and payment policy 
objectives in this proposed rule will be beneficial for interested 
parties, as we work to create a consistent approach for treatment of 
the suite of products we have referred to as skin substitutes. We have 
a number of objectives related to refining Medicare policies in this 
area, including: (1) ensuring a consistent payment approach for skin 
substitute products across the physician office and hospital outpatient 
department setting; (2) ensuring that all skin substitute products are 
assigned an appropriate HCPCS code; (3) using a uniform benefit 
category across products within the physician office setting, 
regardless of whether the product is synthetic or comprised of human or 
animal based material, so we can incorporate payment methodologies that 
are more consistent; and (4) maintaining clarity for interested parties 
on CMS skin substitutes policies and procedures. Interested parties 
have asked CMS to address what they have described as inconsistencies 
in our payment and coding policies, indicating that treating clinically 
similar products (for example, animal-based and synthetic skin 
products) differently for purposes of payment is confusing and 
problematic for healthcare providers and patients. These concerns exist 
specifically within the physician office setting; however, interested 
parties have also indicated that further alignment of our policies 
across the physician office and hospital outpatient department settings 
would reduce confusion.
    Interested parties have suggested that all skin substitutes, 
regardless of the inclusion of human, animal, or synthetic material in 
the product, should be treated as drugs and biological products. 
Furthermore, they believe all skin substitute products should receive 
product-specific ``Q'' codes and receive separate payment under the 
ASP+6 methodology. They have expressed confusion regarding our 
assignment of HCPCS Level II ``A'' codes to the 10 skin substitute 
products in accordance with the policy finalized in the CY 2022 PFS 
final rule, which we typically assign to identify ambulance services 
and medical supplies, instead of ``Q'' codes, which we typically assign 
to identify drugs, biologicals, and medical equipment or services not 
identified by national HCPCS Level II codes. They have indicated that 
the use of ``A'' HCPCS codes has caused confusion, not only for 
interested parties, but also for the A/B MACs, who

[[Page 44657]]

the interested parties assert, have inconsistently processed submitted 
claims, in part because they are assigned HCPCS ``A'' codes that are 
treated as supplies, which are subject to contractor pricing under the 
PFS. Additionally, interested parties have expressed concern that 
physicians and other practitioners are hesitant to use the products 
associated with ``A'' codes because they are unsure if they will be 
paid appropriately for using those products. When considering potential 
changes to policies involving skin substitutes, we believe it would be 
appropriate to take a phased approach over the next 1 to 5 years, that 
allows CMS sufficient time to consider input from interested parties on 
coding and policy changes primarily through our rulemaking process, and 
to account for FDA's regulation of these products, with the goal of 
avoiding unintended impacts on access to medically necessary care 
involving the use of these products.
    We welcome comment on our policy objectives for creating a 
consistent approach for treatment of the suite of products we have 
referred to as skin substitutes. Additionally, we welcome feedback on 
our phased approach and associated timeline. To achieve our objective 
of creating a consistent approach for paying for skin substitutes 
across the physician office and hospital outpatient department setting, 
we are including similar proposed changes in the CY 2023 PFS proposed 
rule, which will be issued near the time this proposed rule is issued.
e. Changing the Terminology of Skin Substitutes
    As we work to clarify our policies for these products, we believe 
that the existing terminology of ``skin substitutes'' is problematic as 
it is an overly broad misnomer. In the CY 2021 OPPS/ASC final rule with 
comment period, we revised our description of skin substitutes to refer 
to 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 (85 FR 80605). We noted that skin 
substitute products are not a substitute for a skin graft as they do 
not actually function like human skin that is grafted onto a wound. 
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. We also clarified that our definition of skin 
substitutes does not include bandages or standard dressings, and that 
within the hospital outpatient department, 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. (85 FR 86066).
    While this definition has been updated to provide clarity in that 
synthetic products are considered to be skin substitutes, there is 
still confusion with the usage of the term skin substitutes because, as 
noted above in the definition, these skin substitute products are 
technically not a substitute for skin, but rather, a wound covering 
that is used to promote healing. We have used the term ``skin 
substitutes'' to describe the suite of products that are currently 
referred to as skin substitutes. Additionally, the term ``skin 
substitutes'' is used within the Current Procedural Terminology 
(CPT[supreg]) code series 15271-8 as maintained by American Medical 
Association. Also, skin substitute products are generally regulated by 
the FDA as medical devices under section 510(k) of the Federal Food, 
Drug and Cosmetic (FD&C) Act and implementing regulations per 21 CFR 
part 807, or as HCT/Ps solely under section 361 of the PHS Act and the 
FDA regulations in 21 CFR part 1271.
    We believe that improving how we reference these products by using 
a more accurate and meaningful term will help address confusion among 
interested parties about how we describe these products, and further, 
how we pay for them. We propose to replace the term ``skin 
substitutes'' with the term ``wound care management'' or ``wound care 
management products.'' We believe this new term more accurately 
describes the suite of products that are currently referred to as skin 
substitutes while providing enough specificity to not include bandages 
or standard dressings, which, as noted above, are not considered skin 
substitutes. We understand that our proposed terms contain ``care 
management'' which could be construed to implicate the care management 
series of AMA CPT codes (e.g., 99424-99427, 99437, 99439, 99487, 99489, 
99490-99491) that are commonly used by healthcare professionals. We 
also understand that the use of our proposed terms with ``management'' 
in our proposed terms might be construed by some to implicate AMA CPT 
Evaluation or Assessment and Management (E/M) codes. We would like to 
clarify that the proposed terms ``wound care management'' and ``wound 
care management products'' would not implicate the care management 
series of AMA CPT codes (e.g., 99424-99427, 99437, 99439, 99487, 99489, 
99490-99491), or our own G-codes that describe care management 
services. Nor would our proposed terms relate to the AMA CPT E/M codes. 
Unlike ``care management'' or ``evaluation and management'' codes and 
services, the proposed terms would describe a category of items or 
products, not a type of services. Lastly, we also considered alternate 
terms such as wound coverings, wound dressings, wound care products, 
skin coverings and cellular and/or tissue-based products for skin 
wounds but believe the proposed terms are more technically accurate and 
descriptive for how these products are used than the alternative's 
considered.
    We solicit feedback on our proposal to change the terminology we 
use for the suite of products referred to as ``skin substitutes'' to 
instead use the term ``wound care management'' or ``wound care 
management products'' and on the alternative terms we considered, 
including wound coverings, wound dressings, wound care products, skin 
coverings and cellular and/or tissue-based products for skin wounds. We 
are particularly interested in how these products are referenced in 
current CPT coding and would appreciate feedback from the CPT Editorial 
Panel and other interested parties on how to address the challenges we 
discuss above. We also are interested in feedback on other possible 
terms that could be used to more meaningfully and accurately describe 
the suite of products currently referred to as skin substitutes.
8. Radioisotopes Derived From Non-Highly Enriched Uranium (Non-HEU) 
Sources
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the Medicare 
population. Some of the Technetium-99 (Tc-99m), the radioisotope used 
in the majority of such diagnostic imaging services, has been produced 
in legacy reactors outside of the United States using highly enriched 
uranium (HEU).
    The United States wanted to eliminate domestic reliance on these 
reactors, and has been 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, but it was expected that this change in the supply source for 
the radioisotope used for modern medical imaging would introduce new 
costs into the payment system that were not accounted for in the 
historical claims data.

[[Page 44658]]

    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 68323).
    We stated in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68321) that our expectation was that this additional payment 
would be needed for the duration of the industry's conversion to 
alternative methods to producing Tc-99m without HEU. We also stated 
that we would reassess, and propose if necessary, on an annual basis 
whether such an adjustment continued to be necessary and whether any 
changes to the adjustment were warranted (77 FR 68321). A 2016 report 
from the National Academies of Sciences, Engineering, and Medicine 
anticipated the conversion of Tc-99m production from non-HEU sources 
would be completed at the end of 2019.\124\ However, the Secretary of 
Energy issued a certification effective January 2, 2020, stating that 
there continued to be an insufficient global supply of molybdenum-99 
(Mo-99), which is the source of Tc-99m, produced without the use of HEU 
available to satisfy the domestic U.S. market (85 FR 3362). The January 
2, 2020, certification was to remain in effect for up to two years.
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    \124\ National Academies of Sciences, Engineering, and Medicine. 
2016. Molybdenum-99 for Medical Imaging. Washington, DC: The 
National Academies Press. Available at: https://doi.org/10.17226/23563.
---------------------------------------------------------------------------

    The Secretary of Energy issued a new certification regarding the 
supply of non-HEU-sourced Mo-99 effective January 2, 2022 (86 FR 
73270). This certification stated that there is a sufficient global 
supply of Mo-99 produced without the use of HEU available to meet the 
needs of patients in the United States. The Department of Energy also 
expects that the last HEU reactor that produces Mo-99 for medical 
providers in the United States will finish its conversion to a non-HEU 
reactor by December 31, 2022. In CY 2019, we stated that we would 
reassess the non-HEU incentive payment policy once conversion to non-
HEU sources is closer to completion or has been completed (83 FR 
58979). There is now a sufficient supply of non-HEU-sourced Mo-99 in 
the United States, and by CY 2023, there will be no available supply of 
HEU-sourced Mo-99 in the United States. Therefore, we believe that the 
conversion to non-HEU sources of Tc-99m has reached a point where a 
reassessment of the policy is necessary.
    In the OPPS, diagnostic radiopharmaceuticals are packaged into the 
cost of the associated diagnostic imaging procedure no matter the per 
day cost amount of the radiopharmaceutical. The cost of the 
radiopharmaceutical is included as a part of the cost of the diagnostic 
imaging procedure and is reported through Medicare claims data. 
Medicare claims data used to set payment rates under the OPPS generally 
is from two years prior to the payment year.
    That means that the likely claims data used to set payment rates 
for CY 2023 (CY 2021 claims data) and CY 2024 (CY 2022 claims data) 
would likely contain claims for diagnostic radiopharmaceuticals that 
would reflect both HEU-sourced Tc-99m and non-HEU-sourced Tc-99m, 
rather than radiopharmaceuticals sourced solely from non-HEU Tc-99m. 
The cost of HEU-sourced Tc-99m is substantially lower than the cost of 
non-HEU-sourced Tc-99m. Therefore, providers using radiopharmaceuticals 
that only contain non-HEU-sourced Tc-99m might not receive a payment 
that is reflective of the radiopharmaceutical's current cost without 
the add-on payment. We believe that extending the additional $10 add-on 
payment described by HCPCS code Q9969 for non-HEU-sourced Tc-99m 
through the end of CY 2024 would help to prevent any underpayment for 
non-HEU-sourced Tc-99m. Starting in CY 2025, the Medicare claims data 
utilized to set payment rates (likely CY 2023 claims data) will only 
include claims for diagnostic radiopharmaceuticals that utilized non-
HEU-sourced Tc-99m, which means the data will reflect the full cost of 
the Tc-99m diagnostic radiopharmaceuticals that will be used by 
providers in CY 2025. As a result, there will no longer be a need for 
the additional $10 add-on payment for CY 2025 or future years.
    For CY 2023 and CY 2024, we propose to continue the additional $10 
payment to ensure providers receive sufficient payment for diagnostic 
radiopharmaceuticals containing Tc-99m until such time as the full cost 
of non-HEU-sourced Tc-99m is reflected in the Medicare claims data. We 
also propose that the additional $10 payment will end after December 
31, 2024, since beginning with CY 2025, the Medicare claims data used 
to set payment rates will reflect the full cost of non-HEU-sourced Tc-
99m. We look forward to comments on our proposals.

C. Proposal in Physician Fee Schedule Proposed Rule To Require HOPDs 
and ASCs To Report Discarded Amounts of Certain Single-Dose or Single-
Use Package Drugs

    Section 90004 of the Infrastructure Investment and Jobs Act (Pub. 
L. 117-9, November 15, 2021) (``the Infrastructure Act'') amended 
section 1847A of the Act to re-designate subsection (h) as subsection 
(i) and insert a new subsection (h), which requires manufacturers to 
provide a refund to CMS for certain discarded amounts from a refundable 
single-dose container or single-use package drug. Section III.A. of the 
CY 2023 PFS proposed rule includes proposals to implement section 90004 
of the Infrastructure Act, including a proposal that hospital 
outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) 
would be required to report the JW modifier or any successor modifier 
to identify discarded amounts of refundable single-dose container or 
single-use package drugs that are separately payable under the OPPS or 
ASC payment system. Specifically, we propose in the CY 2023 PFS 
proposed rule that the JW modifier would be used to determine the total 
number of billing units of the HCPCS code (that is, the identifiable 
quantity associated with a HCPCS code, as established by CMS) of a 
refundable single-dose container or single-use package drug, if any, 
that were discarded for dates of service during a relevant quarter for 
the purpose of calculating the refund amount described in section 
1847A(h)(3) of the Act. The CY 2023 PFS proposed rule also proposes to 
require HOPDs and ASCs to use a separate modifier, JZ, in cases where 
no billing units of such drugs were discarded and for which the JW 
modifier would be required if there were discarded amounts.
    Because the CY 2023 PFS proposed rule proposes to codify certain 
billing requirements for HOPDs and ASCs, we want to ensure interested 
parties are aware of them and know to refer to that rule for a full 
description of the proposed policy. Interested parties should submit 
comments on this and any other proposals to implement Section 90004 of 
the Infrastructure Act in response to the CY 2023 PFS proposed rule. 
Public comments on these proposals will be addressed in the CY 2023 PFS 
final rule. We note that this same notice appears in section XIII.D.3 
of this proposed rule.

[[Page 44659]]

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

A. Amount of Additional Payment and Limit on Aggregate Annual 
Adjustment

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payment for drugs, biologicals, 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 2023 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 2023. 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 devices that we know 
are newly eligible, or project may be newly eligible, for device pass-
through payment in the remaining quarters of CY 2022 or beginning in CY 
2023. The sum of the proposed CY 2023 pass-through spending estimates 
for these two groups of device categories equals the proposed total CY 
2023 pass-through spending estimate for device categories with pass-
through payment status. We determined the device pass-through estimated 
payments for each device category based on the amount of payment as 
required by 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 2023, we also propose 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 2023 for this group of items is $622.6 million, as discussed 
below, because we propose that most non pass-through separately payable 
drugs and biologicals would be paid under the CY 2023 OPPS at ASP+6 
percent with the exception of 340B-acquired separately payable drugs, 
which we formally propose would be paid at ASP minus 22.5 percent, and 
because we propose to pay for CY 2023 pass-through payment drugs and 
biologicals at ASP+6 percent, as we discuss in section V.A of this 
proposed rule. However, in light of the Supreme Court's recent 
decision, we fully anticipate applying a rate of ASP+6 percent to 340B 
drugs and biologicals in the final rule for CY 2023, in which case our 
estimate of drug and biological pass-through payment for CY 2023 for 
this group of items is $29.9 million.
    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 are not 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, drugs 
and biologicals that function as supplies when used in a surgical 
procedure, drugs and biologicals used for anesthesia, and other 
categories of drugs and biologicals, as discussed in section V.B.1.c of 
this proposed rule. We propose that all of these policy-packaged drugs 
and biologicals with pass-through payment status will be paid at ASP+6 
percent, like other pass-through drugs and biologicals, for CY 2023, 
less the policy-packaged drug APC offset amount described below. Our 
estimate of pass-through payment for policy-packaged drugs and 
biologicals with pass-through payment status approved prior to CY 2023 
is not $0. This is because the pass-through payment amount and the fee 
schedule amount associated with the drug or biological will not be the 
same, unlike for separately payable drugs and biologicals. In section 
V.A.6 of this proposed rule, we discuss our policy to determine if the 
costs of certain policy-packaged drugs or biologicals are already 
packaged into the existing APC structure. If we determine that a 
policy-packaged drug or biological approved for pass-through payment 
resembles predecessor drugs or biologicals already included in the 
costs of the APCs that are associated with the drug receiving pass-
through payment, we propose to offset the amount of pass-through 
payment for the policy-packaged drug or biological. For these drugs or 
biologicals, the APC offset amount is the portion of the APC payment 
for the specific procedure performed with the pass-through drug or 
biological, which we refer to as the policy-packaged drug APC offset 
amount. If we determine that an offset is appropriate for a specific 
policy-packaged drug or biological receiving pass-through payment, we 
propose to reduce our estimate of pass-through payments for these drugs 
or biologicals by the APC offset amount.
    Similar to pass-through spending estimates for devices, the first 
group of drugs and biologicals requiring a pass-

[[Page 44660]]

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 2023. 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 2022 or beginning in 
CY 2023. The sum of the CY 2023 pass-through spending estimates for 
these two groups of drugs and biologicals equals the total CY 2023 
pass-through spending estimate for drugs and biologicals with pass-
through payment status.

B. Proposed Estimate of Pass-Through Spending for CY 2023

    For CY 2023, we propose to set the applicable pass-through payment 
percentage limit at 2.0 percent of the total projected OPPS payments 
for CY 2023, consistent with section 1833(t)(6)(E)(ii)(II) of the Act 
and our OPPS policy from CY 2004 through CY 2022 (86 FR 63659). The 
pass-through payment percentage limit is calculated using pass-through 
spending estimates for devices and for drugs and biologicals.
    For the first group of devices, consisting of device categories 
that are currently eligible for pass-through payment and will continue 
to be eligible for pass-through payment in CY 2023, there are 14 active 
categories for CY 2023. The active categories are described by HCPCS 
codes C1052, C1062, C1734, C1748, C1761, C1823, C1824, C1825, C1831, 
C1832, C1833, C1839, C1982 and C2596. Based on the information from the 
device manufacturers, we estimate that HCPCS code C1052 will cost 
$162,000 in pass-through expenditures in CY 2023, HCPCS C1062 will cost 
$1.9 million in pass-through expenditures in CY 2023, HCPCS code C1734 
will cost $2.2 million in pass-through expenditures in CY 2023, HCPCS 
code C1748 will cost $2.2 million in pass-through expenditures in CY 
2023, HCPCS code C1761 will cost $9.9 million in pass-through 
expenditures in CY 2023, HCPCS code C1823 will cost $1.5 million in 
pass-through expenditures in CY 2023, HCPCS code C1824 will cost $1.5 
million pass-through expenditures in CY 2023, HCPCS code C1825 will 
cost $749,000 in pass-through expenditures in CY 2023, HCPCS code C1831 
will cost $29,900 in pass-through expenditures in CY 2023, HCPCS code 
C1832 will cost $18.4 million in pass-through expenditures in CY 2023, 
HCPCS code C1833 will cost $5.1 million in pass-through expenditures in 
CY 2023, HCPCS code C1839 will cost $138,000 in pass-through 
expenditures in CY 2023, HCPCS code C1982 will cost $1.2 million in 
pass-through expenditures in CY 2023, HCPCS code C2596 will cost $2.8 
million in pass-through expenditures in CY 2023. Therefore, we propose 
an estimate for the first group of devices of $48 million.
    In estimating our proposed CY 2023 pass-through spending for device 
categories in the second group, we included: device categories that we 
assumed at the time of the development of the proposed rule will be 
newly eligible for pass-through payment in CY 2023; additional device 
categories that we estimated could be approved for pass-through status 
after the development of this proposed rule and before January 1, 2023; 
and contingent projections for new device categories established in the 
second through fourth quarters of CY 2023. For CY 2023, we propose to 
use the general methodology described in the CY 2008 OPPS/ASC final 
rule with comment period (72 FR 66778), while also taking into account 
recent OPPS experience in approving new pass-through device categories. 
For this proposed rule, the proposed estimate of CY 2023 pass-through 
spending for this second group of device categories is $101.4 million.
    To estimate proposed CY 2023 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 2023, we propose to use the CY 2021 Medicare hospital outpatient 
claims data regarding their utilization, information provided in the 
respective pass-through applications, other historical hospital claims 
data, pharmaceutical industry information, and clinical information 
regarding these drugs and biologicals to project the CY 2023 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 2023, 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, which we formally propose to pay 
at ASP minus 22.5 percent. Therefore, the proposed payment rate 
difference between the pass-through payment amount and the non pass-
through payment amount is $592.7 million for this group of drugs. 
However, in light of the Supreme Court's recent decision, we fully 
anticipate applying a rate of ASP+6 percent to 340B drugs and 
biologicals in the final rule for CY 2023, in which case, the proposed 
payment rate difference between the pass-through payment amount and the 
non pass-through payment amount is $0 for this group of drugs.
    Because payment for policy-packaged drugs and biologicals is 
packaged if the product is not paid separately due to its pass-through 
payment status, we propose to include in the CY 2023 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 2023 for the first group of policy-packaged drugs to be 
$19.9 million.
    To estimate proposed CY 2023 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 this proposed rule were newly 
eligible or recently became eligible for pass-through payment in CY 
2023, additional drugs and biologicals that we estimated could be 
approved for pass-through status subsequent to the development of this 
proposed rule and before January 1, 2023, and projections for new drugs 
and biologicals that could be initially eligible for pass-through 
payment in the second through fourth quarters of CY 2023), we propose 
to use utilization estimates from pass-through applicants, 
pharmaceutical industry data, clinical information, recent trends in 
the per unit ASPs of hospital outpatient drugs, and projected annual 
changes in service volume and intensity as our basis for making the CY 
2023 pass-through payment estimate. We also propose to consider the 
most recent OPPS experience in approving new pass-through drugs and 
biologicals. Using our proposed methodology for estimating CY 2023 
pass-through payments for this second group of drugs, we calculated a 
proposed

[[Page 44661]]

spending estimate for this second group of drugs and biologicals of 
approximately $10 million.
    We estimate for this proposed rule that the amount of pass-through 
spending for the device categories and the drugs and biologicals that 
are continuing to receive pass-through payment in CY 2023 and those 
device categories, drugs, and biologicals that first become eligible 
for pass-through payment during CY 2023 would be approximately $772.0 
million (approximately $149.4 million for device categories and 
approximately $622.6 million for drugs and biologicals) which 
represents 0.90 percent of total projected OPPS payments for CY 2023 
(approximately $86.2 billion). In light of the Supreme Court's recent 
decision, we fully anticipate applying a rate of ASP+6 percent to 340B 
drugs and biologicals in the final rule for CY 2023, in light of the 
Supreme Court's recent decision, in which case we would estimate for 
this proposed rule that the amount of pass-through spending for the 
device categories and the drugs and biologicals that are continuing to 
receive pass-through payment in CY 2023 and those device categories, 
drugs, and biologicals that first become eligible for pass-through 
payment during CY 2023 would be approximately $179.3 million 
(approximately $149.4 million for device categories and approximately 
$29.9 million for drugs and biologicals). This alternative would 
represent only 0.21 percent of total projected OPPS payments for CY 
2023. Therefore, we estimate that pass-through spending in CY 2023 will 
not amount to 2.0 percent of total projected OPPS CY 2023 program 
spending.

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

    For CY 2023, we propose to continue with our current clinic and 
emergency department (ED) hospital outpatient visits payment policies. 
For a description of these policies, we refer readers to the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70448). We also propose 
to continue our payment policy for critical care services for CY 2023. 
For a description of this policy, we refer readers to the CY 2016 OPPS/
ASC final rule with comment period (80 FR 70449), and for the history 
of this payment policy, we refer readers to the CY 2014 OPPS/ASC final 
rule with comment period (78 FR 75043).
    In this proposed rule, we are seeking public comments on any 
changes to these codes that we should consider for future rulemaking 
cycles. We continue to encourage commenters to provide the data and 
analysis necessary to justify any suggested changes.
    As we stated in the CY 2022 OPPS/ASC final rule with comment period 
(86 FR 63663), the clinic visit payment policy applies for CY 2023 and 
subsequent years. More specifically, we are continuing 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 
2023 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 2023) for the clinic visit service in CY 2023. Additionally, for CY 
2023 we propose that excepted off-campus provider-based departments 
(PBDs) (departments that bill the modifier ``PO'' on claim lines) of 
rural Sole Community Hospitals, as described under 42 CFR 412.92 and 
designated as rural for Medicare payment purposes, would be exempt from 
the clinic visit payment policy that applies a Physician Fee Schedule-
equivalent payment rate for the clinic visit service, as described by 
HCPCS code G0463, when provided at an off-campus PBD excepted from 
section 1833(t)(21) of the Act. For the full discussion of this 
proposal we refer readers to section X of this proposed rule. We will 
continue to monitor the effect of this change in Medicare payment 
policy, including on the volume of these types of OPD services.

VIII. Proposed Payment for Partial Hospitalization Services

A. Background

    A partial hospitalization program (PHP) is an intensive outpatient 
program of psychiatric services provided as an alternative to inpatient 
psychiatric care for individuals who have an acute mental illness, 
which includes, but is not limited to, conditions such as depression, 
schizophrenia, and substance use disorders. Section 1861(ff)(1) of the 
Act defines partial hospitalization services as the items and services 
described in paragraph (2) prescribed by a physician and provided under 
a program described in paragraph (3) under the supervision of a 
physician pursuant to an individualized, written plan of treatment 
established and periodically reviewed by a physician (in consultation 
with appropriate staff participating in such program), which sets forth 
the physician's diagnosis, the type, amount, frequency, and duration of 
the items and services provided under the plan, and the goals for 
treatment under the plan. Section 1861(ff)(2) of the Act describes the 
items and services included in partial hospitalization services. 
Section 1861(ff)(3)(A) of the Act specifies that a PHP is a program 
furnished by a hospital to its outpatients or by a community mental 
health center (CMHC), as a distinct and organized intensive ambulatory 
treatment service, offering less than 24-hour-daily care, in a location 
other than an individual's home or inpatient or residential setting. 
Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes of this 
benefit. 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 with comment period 
(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

[[Page 44662]]

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).
    In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61339 
through 61350), we finalized our proposal to use the calculated CY 2020 
CMHC geometric mean per diem cost and the calculated CY 2020 hospital-
based PHP geometric mean per diem cost, but with a cost floor equal to 
the CY 2019 final geometric mean per diem costs as the basis for 
developing the CY 2020 PHP APC per diem rates. Also, we continued to 
designate a portion of the estimated 1.0 percent hospital outpatient 
outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under the OPPS, excluding 
outlier payments.
    In the April 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.
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86073 
through 86080), we continued our current methodology to utilize cost 
floors, as needed. Since the final calculated geometric mean per diem 
costs for both CMHCs and hospital-based PHPs were significantly higher 
than each proposed cost floor, a floor was not necessary at the time, 
and we did not finalize the proposed cost floors in the CY 2021 OPPS/
ASC final rule with comment period.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63665 
through 63666), we explained that we observed a number of changes, 
likely as a result of the COVID-19 PHE, in the CY 2020 OPPS claims that 
we would have ordinarily used for CY 2022 ratesetting, and this 
included changes in the claims for partial hospitalization. We 
explained that significant decreases in utilization and in the number 
of hospital-based PHP providers who submitted CY 2020 claims led us to 
believe that CY 2020 data were not the best overall approximation of 
expected PHP services in CY 2022. Therefore, we finalized our proposal 
to calculate the PHP per diem costs using the year of claims consistent 
with the calculations that would be used for other OPPS services, by 
using the CY 2019 claims and the cost reports that were used for CY 
2021 final rulemaking to calculate the CY 2022 PHP per diem costs. In 
addition, for CY 2022 and subsequent years, we finalized our proposal 
to use cost and charge data from the Hospital Cost Report Information 
System (HCRIS) as the source for the CMHC cost-to-charge ratios (CCRs), 
instead of using the Outpatient Provider Specific File (OPSF) (86 FR 
63666).

B. Proposed PHP APC Update for CY 2023

1. Proposed PHP APC Geometric Mean Per Diem Costs
    For CY 2023 only, we propose to calculate the CMHC and hospital-
based PHP geometric mean per diem costs in accordance with our existing 
methodology, except that while we propose to use the latest available 
CY 2021 claims data, we propose to continue to use the cost data that 
was available for the CY 2021 rulemaking, which is the same cost data 
used for the CY 2022 rulemaking (86 FR 63665 through 63666). This 
proposal is consistent with the overall proposed use of cost data for 
the OPPS, which is discussed in section X.D of this proposed rule. 
Following this proposed methodology, we propose to use the geometric 
mean per diem cost of $131.71 for CMHCs as the basis for developing the 
CY 2023 CMHC APC per diem rate, and to use the geometric mean per diem 
cost of $264.06 as the basis for developing the CY 2023 hospital-based 
APC per diem rate. In addition, as discussed in the following sections, 
we propose not to include data from certain nonstandard cost center 
lines in the OPPS ratesetting database construction for CY 2023; 
however, we are requesting information from the public about these data 
for use in future ratesetting. Lastly, in accordance with our 
longstanding policy, we propose to continue to use CMHC APC 5853 
(Partial Hospitalization (three or More Services Per Day)) and 
hospital-based PHP APC 5863 (Partial Hospitalization (three or More 
Services Per Day)). These proposals are discussed in more detail in the 
following sections.
2. Development of the PHP APC Geometric Mean Per Diem Costs
    In preparation for CY 2023, 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

[[Page 44663]]

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 (81 FR 79680 through 79687) and the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63665 through 
63666). 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. As discussed in section 
VIII.B.1.a of the CY 2022 OPPS/ASC final rule with comment period (86 
FR 63666 through 63668), the costs for CMHC service days are calculated 
using cost report information from HCRIS.
    As mentioned earlier in this section of this proposed rule, we 
propose a change from our longstanding practice similar to what we 
finalized last year in light of the effects of the COVID-19 PHE. We 
discuss this proposal and our rationale in greater detail in the 
following paragraphs.
    First, we considered whether the latest available CY 2021 claims 
would be appropriate to use for CY 2023 ratesetting. Ordinarily, the 
best available claims data is the data from 2 years prior to the 
calendar year that is the subject of rulemaking. For the CY 2023 OPPS/
ASC proposed rule ratesetting, the best available claims data would 
typically be the 2021 calendar year outpatient claims data processed 
through December 31, 2021. As discussed in the CY 2022 OPPS/ASC final 
rule with comment period (86 FR 63665 through 63666), we noted 
significant decreases in the number of PHP days for both hospital-based 
PHPs and CMHCs. For this proposed rule, we continue to observe a 
decrease in the number of hospital-based PHP days in our trimmed CY 
2021 claims dataset, which has approximately 18 percent fewer days than 
the CY 2020 dataset. Likewise, for CMHCs, we continue to observe this 
decrease in our trimmed CY 2021 claims dataset, which has approximately 
32 percent fewer CMHC PHP days than the CY 2020 dataset did. Given the 
continued effects of COVID-19 observed on the Medicare claims and cost 
report data, coupled with the expectation for future variants, we 
believe that it is reasonable to assume that there will continue to be 
some limited influence of COVID-19 PHE effects on the data we use for 
ratesetting.
    Despite the continued effects of COVID-19 that we note in the PHP 
data, we also note that even though hospital operations do not appear 
to have returned to the same levels as 2019, the Medicare outpatient 
service volumes appear to be returning to more normal pre-pandemic 
levels. As discussed in section X.D of this proposed rule, based on our 
review of the CY 2021 outpatient claims available for ratesetting, we 
observed that the non-PHP outpatient service volumes are generally 
about halfway between those in the CY 2019 (pre-PHE) claims and CY 2020 
(beginning of the PHE) claims, however, we recognize that future COVID-
19 variants may have potentially varying effects and we believe it is 
reasonable to assume that there will continue to be some effects of 
COVID-19 PHE on the outpatient claims that we use for ratesetting. As a 
result, we believe that the more recently available CY 2021 claims data 
would better represent the volume and mix of claims for the CY 2023 
OPPS. Accordingly, we believe it is appropriate to use CY 2021 data for 
purposes of CY 2023 OPPS ratesetting. Consistent with the proposal 
discussed in section X.D of this proposed rule, we propose to use the 
latest available CY 2021 claims for CY 2023 PHP ratesetting.
    Next, we reviewed the cost report data from the December 2021 HCRIS 
data set, which we would ordinarily have used for this CY 2023 OPPS/ASC 
proposed ratesetting. As discussed in greater detail in section X.D of 
this proposed rule, we believe cost report data that overlap with CY 
2020 are too influenced by the COVID-19 PHE for purposes of calculating 
the CY 2023 PHP payment rates. In the case of PHP, we observed a 
negative impact of the cost report data from the December 2021 HCRIS 
data set on the calculated geometric mean per diem cost for CMHCs. 
Specifically, we observed that the CMHC geometric mean per diem costs 
calculated using the latest available cost report data from the 
December 2021 HCRIS data set would be $127.38, which would be a 
decrease from the cost floor of $136.14 used to calculate the CY 2022 
CMHC APC 5853 payment rate (86 FR 63668). Therefore, we believe that it 
is appropriate to continue to use the same set of cost reports that we 
used in developing the CY 2021 OPPS, to mitigate the impact of that 
2020-based data. We note that we will continue to review the updated 
cost report data as they are available.
    Based on the results of this analysis, we propose to use the cost 
information from prior to the COVID-19 PHE--in other words, cost 
information that was available for the CY 2021 OPPS/ASC rulemaking, 
which is the same as that used last year for the CY 2022 OPPS/ASC 
rulemaking (86 FR 63665 through 63669). We would specifically use cost 
report data from the June 2020 HCRIS data set, which only includes cost 
report data through CY 2019.
    Therefore, consistent with what we propose to do for other APCs 
under the OPPS as discussed in section X.D of this proposed rule, we 
propose to use the latest available CY 2021 claims, but use the cost 
information from prior to the COVID-19 PHE for calculating the CY 2023 
CMHC and hospital-based PHP APC per diem costs.
    Additionally, as mentioned above and discussed in greater detail in 
section II.A.1.c of this proposed rule, we have identified that we have 
historically not included cost report lines for certain nonstandard 
cost centers in the OPPS ratesetting database construction when 
hospitals have reported these nonstandard cost centers on cost report 
lines that do not correspond to the cost center number. We have found 
that hospitals are routinely reporting a number of nonstandard cost 
centers in this way. One such cost center is cost center 03550, which 
is used to report Psychiatric/Psychological Services.\125\ Based on the 
program logic to process HCRIS data used for OPPS ratesetting, we 
obtain the cost center number based on the line and subscript number on 
which the cost center is reported. Our internal analysis of hospital 
cost report information found that providers are routinely reporting 
this cost center on cost report lines other than 35.50 (that is, line 
35 subscript 50), and therefore, this nonstandard cost center and 
others reported this way have not been included in the OPPS ratesetting 
database construction. Our internal analysis shows that including this 
additional data could potentially decrease the geometric mean cost of 
APC 5863 (Partial Hospitalizations (3 or more services) for hospital-
based PHPs) by 12 percent.
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    While we generally view the use of additional cost data as 
improving our OPPS ratesetting process, we have historically not 
included cost report lines for certain nonstandard cost centers in the 
OPPS ratesetting database construction when hospitals have reported 
these nonstandard cost centers on cost report lines that do not

[[Page 44664]]

correspond to the cost center number. Additionally, we are concerned 
about the significant changes in APC geometric mean costs that our 
analysis indicates would occur if we were to include such lines. We 
believe it is important to further investigate the accuracy of these 
cost report data before including such data in the ratesetting process. 
Further, we believe it is appropriate to gather additional information 
from the public as well before including them in OPPS ratesetting. 
Therefore, consistent with the proposal at II.A.1.c of this proposed 
rule for other OPPS services, we propose to not include data from 
nonstandard cost centers reported on lines that do not correspond to 
the cost center number in our PHP ratesetting for CY 2023. We are 
soliciting comment on whether there exist any specific concerns with 
regards to the accuracy of the data from these nonstandard cost center 
lines that we would need to consider before including them in future 
OPPS ratesetting.
a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments
    For this proposed rule, we used HCRIS as the source for the CMHC 
cost information as discussed in the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63666) and prepared data consistent with our 
policies as described in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70463 through 70465). However, as discussed above, we 
propose to use CY 2021 claims data and the cost information from prior 
to the COVID-19 PHE, that is, the cost information that was available 
for the CY 2021 OPPS/ASC rulemaking, for calculating the CY 2023 CMHC 
PHP APC per diem cost.
    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 is not skewed by providers with extreme data. Before any 
trims or exclusions were applied, there were 27 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 2023 ratesetting, one CMHC had a geometric 
mean cost per day above the trim's upper limit of $466.01, and one CMHC 
had a geometric mean cost per day below the trim's lower limit of 
$37.29. Therefore, we are excluding data for ratesetting from these two 
CMHCs.
    In accordance with our PHP ratesetting methodology (80 FR 70465), 
we also remove service days with no wage index values, because we use 
the wage index data to remove the effects of geographic variation in 
costs prior to APC geometric mean per diem cost calculation (80 FR 
70465). For this CY 2023 proposed rule ratesetting, no CMHC was missing 
wage index data for all of its service days and, therefore, no CMHC was 
excluded. We also exclude providers without any days containing 3 or 
more units of PHP-allowable services. One provider is 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 that is not available or any CMHC CCR 
greater than one to the statewide hospital CCR associated with the 
provider's urban/rural designation and their State location (80 FR 
70463). For this proposed rule ratesetting, there was one CMHC with a 
CCR greater than one, and four CMHCs with missing CCR information. 
Therefore, we are defaulting the CCRs for these five CMHCs for 
ratesetting to the applicable statewide hospital CCR for each CMHC 
based on its urban/rural designation and its State location.
    In summary, the application of these data preparation steps 
resulted in an adjusted CCR during our ratesetting process for five 
CMHCs having either a CCR greater than one or having no CCR. We are 
also excluding one CMHC because it had no days containing three or more 
services, and two CMHCs for failing the 2 standard 
deviation trim resulting in the inclusion of 24 CMHCs. There were 330 
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 3,134 CMHC claims in 
our CY 2023 proposed 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), 
using the CMHC CCRs calculated based on the cost information from HCRIS 
as discussed in the CY 2022 OPPS/ASC final rule with comment period (86 
FR 63666), to calculate the CMHC APC geometric mean per diem cost.\126\ 
The calculated CY 2023 geometric mean per diem cost for all CMHCs for 
providing 3 or more services per day (CMHC APC 5853) is $131.71, an 
increase from $129.93 calculated last year for CY 2022 ratesetting (86 
FR 63667).
---------------------------------------------------------------------------

    \126\ Each revenue code on the CMHC claim must have a HCPCS code 
and charge associated with it. We multiply each claim service line's 
charges by the CMHC's overall CCR (or statewide CCR, where the 
overall CCR was greater than 1 or was missing) 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.
---------------------------------------------------------------------------

b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For this proposed rule, we prepared data consistent with our 
policies as described in the CY 2016 OPPS/ASC final rule with comment 
period (80 FR 70463 through 70465) for hospital-based PHP providers, 
which is similar to that used for CMHCs. However, as discussed above, 
we propose to use CY 2021 claims data and the cost information from 
prior to the COVID-19 PHE, that is, the cost information that was 
available for the CY 2021 OPPS/ASC rulemaking, for calculating the CY 
2023 hospital-based PHP APC per diem cost. The CY 2021 PHP claims 
included data for 334 hospital-based PHP providers for our calculations 
in this CY 2023 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. For 
this proposed rule ratesetting, no hospital-based PHP providers had a 
CCR greater than 5. Therefore, no hospital-based provider was excluded 
as

[[Page 44665]]

a result of this trim. In addition, six hospital-based PHPs were 
removed for having no days with PHP payment. One hospital-based PHP was 
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/index.html).\127\
---------------------------------------------------------------------------

    \127\ Click on the link labeled ``CY 2023 OPPS/ASC Notice of 
Proposed Rulemaking'', which can be found under the heading 
``Hospital Outpatient Prospective Payment System Rulemaking'' and 
open the claims accounting document link at the bottom of the page, 
which is labeled ``2023 NPRM OPPS Claims Accounting (PDF)''.
---------------------------------------------------------------------------

    Overall, we removed eight hospital-based PHP providers (6 with no 
PHP payment) + (1 with no PHP-allowable HCPCS codes) + (1 provider with 
geometric mean costs per day outside the 3 SD limits)], 
resulting in 326 (334 total-8 excluded) hospital-based PHP providers in 
the data used for calculating ratesetting.
    After completing these data preparation steps, we calculated the CY 
2023 geometric mean per diem cost for hospital-based PHP APC 5863 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).\128\ The calculated CY 2023 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 
$264.06, which is an increase from $253.02 calculated last year for CY 
2022 ratesetting (86 FR 63668).
---------------------------------------------------------------------------

    \128\ 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.
---------------------------------------------------------------------------

    The proposed CY 2023 PHP geometric mean per diem costs are shown in 
Table 45 and are used to derive the proposed CY 2023 PHP APC per diem 
rates for CMHCs and hospital-based PHPs. The proposed CY 2023 PHP APC 
per diem rates are included in Addendum A to this proposed rule (which 
is available on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).
[GRAPHIC] [TIFF OMITTED] TP26JY22.124

C. Outpatient Non-PHP Mental Health Services Furnished Remotely to 
Partial Hospitalization Patients After the COVID-19 PHE

1. Background
    As discussed in the April 30, 2020 interim final rule with comment 
entitled ``Additional Policy and Regulatory Revisions in Response to 
the COVID-19 Public Health Emergency'' (85 FR 27562 through 27566), 
effective as of March 1, 2020 and for the duration of the COVID-19 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 and 
provider-based rules 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. In that same interim final rule (85 FR 
27564), we also stated that although these services can be furnished 
remotely, all other PHP requirements are unchanged and still in effect, 
including that all services furnished under the PHP still require an 
order by a physician, must be supervised by a physician, must be 
certified by a physician, and must be furnished in accordance with 
coding requirements by a clinical staff member working within his or 
her scope of practice. We also stated that in accordance with the 
longstanding requirements that are detailed in the Medicare Benefit 
Policy Manual, Pub 100-02, chapter 6, section 70.3, documentation in 
the medical record of the reason for the visit and the substance of the 
visit is required.
    We received four comments in response to the April 30, 2020 interim 
final rule with comment regarding the interim final policy for PHP. One 
commenter, a national nonprofit organization, expressed support for 
this flexibility to ensure services are available safely to people with 
Medicare. Another commenter, a healthcare services company, encouraged 
CMS to ensure that temporary expansion location policies do not 
abruptly end at the end of the PHE, and supported a flexible transition 
policy to better ensure continuity of care as hospitals and communities 
continue

[[Page 44666]]

to fight the spread of COVID-19 and recover from the impacts of the 
virus. One national insurance company voiced support for the 
flexibilities and noted that a major beneficial component of PHP is the 
structured patient engagement, which can be achieved in the absence of 
face-to-face interactions. This commenter stated that they believe 
these flexibilities are necessary to ensure that PHP beneficiaries 
continue to have access to the level of care they require. They further 
noted that for PHP patients, requiring face-to-face only interactions 
would place both beneficiaries and providers at risk of contracting or 
spreading the coronavirus, but forgoing care could put beneficiaries at 
risk for relapse and overdose. This commenter also expressed concern 
about clerical staff lacking the qualifications to provide the services 
described, and request further language to clarify the scope of this 
allowance. Another national insurance company expressed support for the 
use of live-two-way video interactions via remote technology for the 
PHP level of care when the same level of care and clinical value as an 
in-person interaction can be achieved during the PHE. However, this 
commenter expressed concern about the use of only audio communication 
to provide PHP services. The commenter explained that audio-only 
delivery of services does not allow for therapeutic groups and ongoing 
assessments therefore impeding the ability to achieve the clinical 
benefits of the programs, and cautioned that if PHP services are 
delivered ineffectively via audio-only communication, the patient risks 
relapse and inpatient readmission. We noted in the interim final rule 
that due to the intensive nature of PHP we expected PHP services to be 
furnished using telecommunications technology involving both audio and 
video. However, we recognized that in some cases beneficiaries might 
not have access to video communication technology. In order to maintain 
beneficiary access to PHP services, only in the case that both audio 
and video are not possible could the service be furnished exclusively 
with audio (85 FR 27564).
    In the CY 2022 OPPS/ASC proposed rule (86 FR 42187), CMS solicited 
comments on whether there were changes commenters believed we should 
make to account for shifting patterns of practice that rely on 
communication technology to provide mental health services to 
beneficiaries in their homes. We acknowledged that the widespread use 
of communications technology to furnish services during the PHE has 
illustrated acceptance within the medical community and among Medicare 
beneficiaries of the possibility of furnishing and receiving care 
through the use of that technology, and that we were interested in 
information on the role of hospital staff in providing care to 
beneficiaries remotely in their homes.
    Although we did not solicit comments on extending the use of remote 
technology to provide partial hospitalization services to beneficiaries 
in their homes after the end of the COVID-19 PHE, we received several 
comments in response to the CY 2022 OPPS/ASC proposed rule expressing 
support for the flexibilities allowing PHP services to be furnished to 
beneficiaries in their homes via telecommunication technology during 
the COVID-19 PHE and encouraging CMS to maintain these flexibilities 
beyond the PHE or consider making these temporary policies permanent 
(86 FR 63750). Commenters expressed that these flexibilities, 
especially those allowing the use of audio-only telecommunication 
technology, increase access to vital mental health services amidst a 
persistent shortage of health care professionals and allow much greater 
and timelier access to mental health services, especially in rural 
areas and for vulnerable populations, while also helping drive 
reductions in the rates at which patients missed appointments. 
Commenters also shared research and analysis supporting the 
effectiveness of providing PHP services using telecommunication 
technology. One academic health center discussed outcomes analysis it 
conducted of its PHP services and noted that its analysis did not show 
a decrement in clinical care for patients who received only virtual PHP 
services. A national association of behavioral healthcare systems 
shared research showing that the main differences between patients who 
participated in PHPs via telecommunication technology and those who 
attended in-person was that those who participated via 
telecommunication technology had greater lengths of stay and were more 
likely to stay in treatment until completed.\129\ In response to these 
comments and others that we received pertaining to the comment 
solicitation, we noted that we would consider them for future 
rulemaking and that CMS would continue to explore how hospital payment 
for virtual services could support access to care in underserved and/or 
rural areas.
---------------------------------------------------------------------------

    \129\ https://www.psychiatrist.com/jcp/covid-19/telehealth-treatment-patients-intensive-acute-care-psychiatric-setting-during-covid-19/.
---------------------------------------------------------------------------

2. Outpatient Non-PHP Mental Health Services Furnished Remotely by 
Hospital Staff to Beneficiaries in Their Homes After the COVID-19 PHE
    As discussed in section X.A.5 of this proposed rule, we propose 
that payment under the OPPS for new HCPCS codes that designate non-PHP 
services provided for the purposes of diagnosis, evaluation, or 
treatment of a mental health disorder and are furnished to 
beneficiaries in their homes by clinical staff of the hospital. While 
we are not proposing to recognize these proposed OPPS remote services 
as PHP services. We are clarifying here that none of the PHP 
regulations would preclude a patient that is under a PHP plan of care 
from receiving other reasonable and medically necessary non-PHP 
services from a hospital if that proposal is finalized.
    Additionally, we are reminding readers that section 1835(a)(2)(F) 
of the Act requires that in the absence of partial hospitalization 
services, the individual would require inpatient psychiatric care; that 
is, partial hospitalization services are in lieu of inpatient 
hospitalization. This requirement is codified in the PHP regulations at 
Sec.  424.24(e)(1)(i), which requires that the PHP patient 
certification state that the individual would require inpatient 
psychiatric care if the partial hospitalization services were not 
provided. Furthermore, in accordance with Sec.  410.43(c)(7), all PHP 
patients should have the cognitive and emotional ability to participate 
in the active treatment process and should be able to tolerate the 
intensity of the partial hospitalization program.
    In addition, we reiterate that the physician certification and plan 
of care requirements at Sec.  424.24(e)(1) and (2) require that each 
PHP patient must be under an individualized written plan of treatment 
that is periodically reviewed by a physician in consultation with 
appropriate staff participating in the program. This plan of treatment 
must set forth the physician's diagnosis; the type, amount, duration, 
and frequency of the services; and the treatment goals under the plan. 
As discussed in the CY 2009 OPPS/ASC final rule (73 FR 68695), andSec.  
410.43(c), partial hospitalization programs are intended for patients 
who require a minimum of 20 hours per week of therapeutic services as 
evidenced in a patient's plan of care. We expect that PHP patients are 
receiving the amount and type of services identified in the plan of 
care for generally all weeks under the program

[[Page 44667]]

stated in the plan of care rather than in the actual hours of 
therapeutic services a patient receives.
    In accordance with these requirements, if the proposal at Section 
X.A.5 is finalized, we expect that a physician would update the 
patient's PHP plan of care to appropriately reflect any change to the 
type, amount, duration, or frequency of the therapeutic services 
planned for that patient in circumstances when a PHP patient receives 
non-PHP remote mental health services from a hospital outpatient 
department. The medical documentation should continue to support the 
patient's eligibility for participation in a PHP.
    Lastly, we note that section 1866(e)(2) of the Act includes CMHCs 
as a Medicare provider of services, but only with respect to the 
furnishing of partial hospitalization services. As noted earlier in 
this section, we are not proposing to recognize the proposed OPPS 
remote services as PHP services; therefore, CMHCs are not permitted to 
bill Medicare for any remote mental health services furnished by 
clinical staff of the CMHC in an individual's home. However, a PHP 
patient who typically receives PHP services at a CMHC could receive 
non-PHP remote mental health services from a hospital outpatient 
department if the proposal at section X.A.5 is finalized, or from a 
physician or other type of practitioner who is authorized to furnish 
and bill for Medicare telehealth services. As discussed in the 
following section of this proposed rule, we are requesting information 
on the need for remote mental health services by CMHC patients, as well 
as potential pathways CMS could consider to address this need within 
the current statutory framework.
3. Request for Information Regarding Remote PHP Services Furnished by 
Hospital Outpatient Departments and CMHCs During the COVID-19 PHE
    We are interested in better understanding the use of remote mental 
health services for PHP patients during the COVID-19 PHE and the 
potential need for such services in the future among PHP patients who 
receive care from CMHCs and HOPDs. Specifically, we are requesting 
public comments on the following questions:
     How have CMHCs and HOPDs used the flexibilities allowing 
the provision of remote PHP services and incorporated remote PHP 
services into their operations during the COVID-19 PHE?
     What are the needs and circumstances in which remote PHP 
services have most often been used? What situations and patient 
populations have these flexibilities best served? How have these needs, 
circumstances, and patient populations differed between HOPDs and 
CMHCs?
     What, if any, barriers would there be to access to remote 
mental health services for PHP patients of a CMHC? What if any possible 
pathways do commenters believe might exist to minimize these barriers, 
while taking into consideration section 1861(ff)(3)(A) of the Act?
    While we will not be responding to specific comments submitted in 
response to this RFI, we intend to use this input to inform future 
policy development. Please identify the question you are responding to, 
and include as much data as possible that supports your responses. We 
look forward to receiving feedback on these topics.

D. Outlier Policy for CMHCs

    For 2023, we propose to continue to calculate the CMHC outlier 
percentage, cutoff point and percentage payment amount, outlier 
reconciliation, outlier payment cap, and fixed dollar- threshold 
according to previously established policies. These topics are 
discussed in more detail. We refer readers to section II.G.1 of this 
proposed rule for our general policies for hospital outpatient outlier 
payments.
1. Background
    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), we noted a significant difference in the 
amount of outlier payments made to hospitals and CMHCs for PHP 
services. Given the difference in PHP charges between hospitals and 
CMHCs, we did not believe it was appropriate to make outlier payments 
to CMHCs using the outlier percentage target amount and threshold 
established for hospitals. Therefore, beginning in CY 2004, we created 
a separate outlier policy specific to the estimated costs and OPPS 
payments provided to CMHCs. We designated a portion of the estimated 
OPPS outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under the OPPS each year, 
excluding outlier payments, and established a separate outlier 
threshold for CMHCs. This separate outlier threshold for CMHCs resulted 
in $1.8 million in outlier payments to CMHCs in CY 2004 and $0.5 
million in outlier payments to CMHCs in CY 2005 (82 FR 59381). In 
contrast, in CY 2003, more than $30 million was paid to CMHCs in 
outlier payments (82 FR 59381).
2. CMHC Outlier Percentage
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 
through 59268), we described the current outlier policy for hospital 
outpatient payments and CMHCs. We 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), the CY 2020 OPPS/ASC final rule with comment period (84 FR 
61350), and the CY 2021 OPPS/ASC final rule with comment period (85 FR 
86082).
    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. To calculate the CMHC outlier percentage, we follow three 
steps:
     Step 1: We multiply the OPPS outlier threshold, which is 
1.0 percent, by the total estimated OPPS Medicare payments (before 
outliers) for the prospective year to calculate the estimated total 
OPPS outlier payments:

(0.01 x Estimated Total OPPS Payments) = Estimated Total OPPS Outlier 
Payments.

     Step 2: We estimate CMHC outlier payments by taking each 
provider's estimated costs (based on their allowable charges multiplied 
by the provider's CCR) minus each provider's estimated CMHC outlier 
multiplier threshold (we refer readers to section VIII.C.3 of the CY 
2022 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 exceed the threshold, we 
multiply that excess by 50 percent, as described in section VIII.D.3 of 
this proposed rule, to determine the estimated outlier payments for 
that provider. CMHC outlier payments are capped at 8 percent of the 
provider's estimated total per diem payments (including the 
beneficiary's copayment), as described in section VIII.D.5 of this 
proposed rule, so any provider's costs

[[Page 44668]]

that exceed the CMHC outlier cap will have its payments adjusted 
downward. After accounting for the CMHC outlier cap, we sum all of the 
estimated outlier payments to determine the estimated total CMHC 
outlier payments.

(Each Provider's Estimated Costs-Each Provider's Estimated Multiplier 
Threshold) = A. If A is greater than 0, then (A x 0.50) = Estimated 
CMHC Outlier Payment (before cap) = B. If B is greater than (0.08 x 
Provider's Total Estimated Per Diem Payments), then cap-adjusted B = 
(0.08 x Provider's Total Estimated Per Diem Payments); otherwise, B = 
B. Sum (B or cap-adjusted B) for Each Provider = Total CMHC Outlier 
Payments.

     Step 3: We determine the percentage of all OPPS outlier 
payments that CMHCs represent by dividing the estimated CMHC outlier 
payments from Step 2 by the total OPPS outlier payments from Step 1: 
(Estimated CMHC Outlier Payments/Total OPPS Outlier Payments).
    We propose 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 2023. Therefore, based on our CY 2023 payment 
estimates, CMHCs are projected to receive 0.02 percent of total 
hospital outpatient payments in CY 2023, 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.
3. Cutoff Point and Percentage Payment Amount
    As described in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59381), our policy has been to pay CMHCs for outliers if the 
estimated cost of the day exceeds a cutoff point. In CY 2006, we set 
the cutoff point for outlier payments at 3.4 times the highest CMHC PHP 
APC payment rate implemented for that calendar year (70 FR 68551). For 
CY 2018, the highest CMHC PHP APC payment rate is the payment rate for 
CMHC PHP APC 5853. In addition, in CY 2002, the final OPPS outlier 
payment percentage for costs above the multiplier threshold was set at 
50 percent (66 FR 59889). In CY 2018, we continued to apply the same 50 
percent outlier payment percentage that applies to hospitals to CMHCs 
and continued to use the existing cutoff point (82 FR 59381). 
Therefore, for CY 2018, we continued to pay for partial hospitalization 
services that exceeded 3.4 times the CMHC PHP APC payment rate at 50 
percent of the amount of CMHC PHP APC geometric mean per diem costs 
over the cutoff point. For example, for CY 2018, if a CMHC's cost for 
partial hospitalization services paid under CMHC PHP APC 5853 exceeds 
3.4 times the CY 2018 payment rate for CMHC PHP APC 5853, the outlier 
payment would be calculated as 50 percent of the amount by which the 
cost exceeds 3.4 times the CY 2018 payment rate for CMHC PHP APC 5853 
[0.50 x (CMHC Cost-(3.4 x APC 5853 rate))]. This same policy was also 
reiterated in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 58996 through 58997), CY 2020 OPPS/ASC final rule with comment 
period (84 FR 61351) and the CY 2021 OPPS/ASC final rule with comment 
period (85 FR 86082 through 86083). For CY 2023, we propose to continue 
to pay for partial hospitalization services that exceed 3.4 times the 
proposed CMHC PHP APC payment rate at 50 percent of the CMHC PHP APC 
geometric mean per diem costs over the cutoff point. That is, for CY 
2023, 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))].
4. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 
through 68599), we established an outlier reconciliation policy to 
address charging aberrations related to OPPS outlier payments. We 
addressed vulnerabilities in the OPPS outlier payment system that lead 
to differences between billed charges and charges included in the 
overall CCR, which are used to estimate cost and would apply to all 
hospitals and CMHCs paid under the OPPS. We initiated steps to ensure 
that outlier payments appropriately account for the financial risk when 
providing an extraordinarily costly and complex service, but are only 
being made for services that legitimately qualify for the additional 
payment.
    For a comprehensive description of outlier reconciliation, we refer 
readers to the CY 2019 OPPS/ASC final rules with comment period (83 FR 
58874 through 58875 and 81 FR 79678 through 79680).
    We propose to continue these policies for partial hospitalization 
services provided through PHPs for CY 2023. The current outlier 
reconciliation policy requires that providers whose outlier payments 
meet a specified threshold (currently $500,000 for hospitals and any 
outlier payments for CMHCs) and whose overall ancillary CCRs change by 
plus or minus 10 percentage points or more, are subject to outlier 
reconciliation, pending approval of the CMS Central Office and Regional 
Office (73 FR 68596 through 68599). The policy also includes provisions 
related to CCRs and to calculating the time value of money for 
reconciled outlier payments due to or due from Medicare, as detailed in 
the CY 2009 OPPS/ASC final rule with comment period and in the Medicare 
Claims Processing Manual (73 FR 68595 through 68599 and Medicare Claims 
Processing internet Only Manual, Chapter 4, Section 10.7.2 and its 
subsections, available online at: https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/clm104c04.pdf).
5. Outlier Payment Cap
    In the CY 2017 OPPS/ASC final rule with comment period, we 
implemented a CMHC outlier payment cap to be applied at the provider 
level, such that in any given year, an individual CMHC will receive no 
more than a set percentage of its CMHC total per diem payments in 
outlier payments (81 FR 79692 through 79695). We finalized the CMHC 
outlier payment cap to be set at 8 percent of the CMHC's total per diem 
payments (81 FR 79694 through 79695). This outlier payment cap only 
affects CMHCs, it does not affect other provider types (that is, 
hospital-based PHPs), and is in addition to and separate from the 
current outlier policy and reconciliation policy in effect. In the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61351), we 
finalized a proposal to continue this policy in CY 2020 and subsequent 
years. In the CY 2023 OPPS/ASC proposed rule, we do not propose any 
changes to this policy.
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

[[Page 44669]]

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), the CY 2021 OPPS/ASC final rule with comment period (85 
FR 86083), and the CY 2022 OPPS/ASC final rule with comment period (86 
FR 63508). We propose to continue this policy for CY 2023.

IX. Proposed Services That Will Be Paid Only as Inpatient Services

A. Background

    Established in rulemaking as part of the initial implementation of 
the OPPS, the inpatient only (IPO) list identifies services for which 
Medicare will only make payment when the services are furnished in the 
inpatient hospital setting because of the invasive nature of the 
procedure, the underlying physical condition of the patient, or the 
need for at least 24 hours of postoperative recovery time or monitoring 
before the patient can be safely discharged (70 FR 68695). The IPO list 
was created based on the premise (rooted in the practice of medicine at 
that time), that Medicare should not pay for procedures furnished as 
outpatient services that are performed on an inpatient basis virtually 
all of the time for the Medicare population, for the reasons described 
above, because performing these procedures on an outpatient basis would 
not be safe or appropriate, and therefore not reasonable and necessary 
under Medicare rules (63 FR 47571). Services included on the IPO list 
were those determined to require inpatient care, such as those that are 
highly invasive, result in major blood loss or temporary deficits of 
organ systems (such as neurological impairment or respiratory 
insufficiency), or otherwise require intensive or extensive 
postoperative care (65 FR 67826). There are some services designated as 
inpatient only that, given their clinical intensity, would not be 
expected to be performed in the hospital outpatient setting. For 
example, we have traditionally considered certain surgically invasive 
procedures on the brain, heart, and abdomen, such as craniotomies, 
coronary-artery bypass grafting, and laparotomies, to require inpatient 
care (65 FR 18456). Designation of a service as inpatient only does not 
preclude the service from being furnished in a hospital outpatient 
setting but means that Medicare will not make payment for the service 
if it is furnished to a Medicare beneficiary in the hospital outpatient 
setting (65 FR 18443). Conversely, the absence of a procedure from the 
list should not be interpreted as identifying that procedure as 
appropriately performed only in the hospital outpatient setting (70 FR 
68696).
    As part of the annual update process, we have historically worked 
with interested parties, including professional societies, hospitals, 
surgeons, hospital associations, and beneficiary advocacy groups, to 
evaluate the IPO list and to determine whether services should be added 
to or removed from the list. Interested parties are encouraged to 
request reviews for a particular code or group of codes; and we have 
asked that their requests include evidence that demonstrates that the 
procedure was performed on an outpatient basis in a safe and 
appropriate manner in a variety of different types of hospitals--
including but not limited to--operative reports of actual cases, peer-
reviewed medical literature, community medical standards and practice, 
physician comments, outcome data, and post-procedure care data (67 FR 
66740).
    We traditionally have used five longstanding criteria to determine 
whether a procedure should be removed from the IPO list. As noted in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74353), we 
assessed whether a procedure or service met these criteria to determine 
whether it 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 have explained that while we only require a 
service to meet one criterion to be considered for removal, satisfying 
only one criterion does not guarantee that the service will be removed, 
instead, the case for removal is strengthened with the more criteria 
the service meets. The criteria for assessing procedures for removal 
from the IPO list are the following:
    1. Most outpatient departments are equipped to provide the services 
to the Medicare population.
    2. The simplest procedure described by the code may be furnished in 
most outpatient departments.
    3. The procedure is related to codes that we have already removed 
from the IPO list.
    4. A determination is made that the procedure is being furnished in 
numerous hospitals on an outpatient basis.
    5. 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.
    In the past, we have requested that interested parties submit 
corresponding evidence in support of their claims that a code or group 
of codes met the longstanding criteria for removal from the IPO list 
and was safe to perform on the Medicare population in the hospital 
outpatient setting--including, but not limited to case reports, 
operative reports of actual cases, peer-reviewed medical literature, 
medical professional analysis, clinical criteria sets, and patient 
selection protocols. Our clinicians thoroughly reviewed all information 
submitted within the context of the established criteria and if, 
following this review, we determined that there was sufficient evidence 
to confirm that the code could be safely and appropriately performed on 
an outpatient basis, we assigned the service to an APC and included it 
as a payable procedure under the OPPS (67 FR 66740). We determine the 
APC assignment for services removed from the IPO list by evaluating the 
clinical similarity and resource costs of the service compared to other 
services paid under the OPPS and review the Medicare Severity Diagnosis 
Related Groups (MS-DRG) rate for the service under the IPPS, though we 
note we would generally expect the cost to provide a service in the 
outpatient setting to be less than the cost to provide the service in 
the inpatient setting.
    We stated in prior rulemaking that, over time, given advances in 
technology and surgical technique, we would continue to evaluate 
services to determine whether they should be removed from the IPO list. 
Our goal is to ensure that inpatient only designations are consistent 
with the current standards of practice. We have asserted in prior 
rulemaking that, insofar as advances in medical practice mitigate 
concerns about these procedures being performed on an outpatient basis, 
we would be prepared to remove procedures from the IPO list and provide 
for payment for them under the OPPS (65 FR 18443). Further, CMS has at 
times had to reclassify codes as inpatient only services with the 
emergence of new information.
    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 
historic policies for identifying services that are typically provided 
only in an inpatient setting and, therefore, that will not be paid by 
Medicare under the OPPS, as well as the criteria we have used to review 
the IPO

[[Page 44670]]

list to determine whether any services should be removed.
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86084 
through 86088) we finalized a policy to eliminate the IPO list over the 
course of 3 years (85 FR 86093). We revised our regulation at Sec.  
419.22(n) to state that, effective on January 1, 2021, the Secretary 
shall eliminate the list of services and procedures designated as 
requiring inpatient care through a 3-year transition. As part of the 
first phase of this elimination of the IPO list, we removed 298 codes, 
including 266 musculoskeletal-related services, from the list beginning 
in CY 2021.
    In the CY 2022 OPPS/ASC final rule with comment period, we halted 
the elimination of the IPO list and, after clinical review of the 
services removed from the IPO list in CY 2021 as part of the first 
phase of eliminating the IPO list using the above five criteria, we 
returned most services removed from the IPO list in CY 2021 back to the 
IPO list beginning in CY 2022 (86 FR 63671 through 63736). We also 
amended the regulation at Sec.  419.22(n) to remove the reference to 
the elimination of the list of services and procedures designated as 
requiring inpatient care through a 3-year transition. We also finalized 
our proposal to codify the five longstanding criteria for determining 
whether a service or procedure should be removed from the IPO list in 
the regulation in a new Sec.  419.23 (86 FR 63678).

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

    Using the five criteria listed above, for CY 2023, we have 
identified 10 services described by the following codes that we propose 
to remove from the IPO list for CY 2023: CPT code 16036 (Escharotomy; 
each additional incision (list separately in addition to code for 
primary procedure)); CPT code 22632 (Arthrodesis, posterior interbody 
technique, including laminectomy and/or discectomy to prepare 
interspace (other than for decompression), single interspace; each 
additional interspace (list separately in addition to code for primary 
procedure)); CPT code 21141 (Reconstruction midface, lefort i; single 
piece, segment movement in any direction (eg, for long face syndrome), 
without bone graft); CPT code 21142 (Reconstruction midface, lefort i; 
2 pieces, segment movement in any direction, without bone graft); CPT 
code 21143 (Reconstruction midface, lefort i; 3 or more pieces, segment 
movement in any direction, without bone graft); CPT code 21194 
(Reconstruction of mandibular rami, horizontal, vertical, c, or l 
osteotomy; with bone graft (includes obtaining graft)); CPT code 21196 
(Reconstruction of mandibular rami and/or body, sagittal split; with 
internal rigid fixation); CPT code 21347 (Open treatment of 
nasomaxillary complex fracture (lefort ii type); requiring multiple 
open approaches); CPT code 21366 (Open treatment of complicated (e.g., 
comminuted or involving cranial nerve foramina) fracture(s) of malar 
area, including zygomatic arch and malar tripod; with bone grafting 
(includes obtaining graft)); and CPT code 21422 (Open treatment of 
palatal or maxillary fracture (lefort i type);). The services that we 
propose to remove from the IPO list for CY 2023 and subsequent years, 
including the CPT codes, long descriptors, and the proposed CY 2023 
payment indicators and APC assignments are displayed in Table M1 of 
this proposed rule.
    As noted above, we propose to remove the service described by CPT 
code 16036 from the IPO list for CY 2023. After reviewing the clinical 
characteristics of the service described by CPT code 16036, we believe 
that this procedure meets criteria 2 and 3 in our regulation text at 
Sec.  419.23(b)(2) and (3) because the simplest procedure described by 
the code may be performed in most outpatient departments and the 
service or procedure is related to codes that CMS has already removed 
from the IPO list. CPT code 16036 is an add-on code that is typically 
billed with the primary procedure described by CPT code 16035 
(Escharotomy; initial incision), which was removed from the IPO list in 
CY 2007 OPPS/ASC final rule with comment period (71 FR 68156). For CY 
2023, we propose to assign CPT code 16036 to status indicator ``N''. We 
are seeking public comment on our conclusion that the service described 
by CPT code 16036 meets criteria 2 and 3 as well as our proposal to 
assign this service to status indicator ``N'' for CY 2023.
    Additionally, we propose to remove the service described by CPT 
code 22632 from the IPO list for CY 2023. CPT code 22632 is an add-on 
code that is typically billed with the primary procedure described by 
CPT code 22630 (Arthrodesis, posterior interbody technique, including 
laminectomy and/or discectomy to prepare interspace (other than for 
decompression), single interspace; lumbar), which was removed from the 
IPO list in CY 2021 (86 FR 63708). CPT code 22632 was previously 
removed from the IPO list in CY 2021 as part of the first stage of the 
elimination of the IPO list, but was then returned to the list for CY 
2022 when the elimination of the IPO list was halted. After further in-
depth clinical review of this procedure, we believe CPT code 22632 
meets criteria 2 and 3 in our regulation text at Sec.  419.23(b)(2) and 
(3) because the simplest procedure described by the code may be 
performed in most outpatient departments and it is related to CPT code 
22630, which CMS has already removed from the IPO list. For CY 2023, we 
propose to assign CPT code 22632 to status indicator ``N''. We are 
seeking public comment on our conclusion that the service described by 
CPT code 22632 meets criteria 2 and 3 as well as our proposal to assign 
this service to status indicator ``N'' for CY 2023.
    As stated above, we also propose to remove the following 
maxillofacial procedures from the IPO list: CPT codes 21141, 21142, 
21143, 21194, 21196, 21347, 21366, and 21422. These services were 
previously removed from the IPO list in CY 2021 as part of the first 
phase of the elimination of the IPO list and were added back to the IPO 
list when the elimination of the IPO list was halted for CY 2022. After 
further in-depth review of the clinical characteristics of these 
procedures, the claims data, and additional evidence provided by 
interested parties, we believe these services meet criteria 1, 2, and 3 
in the regulation text at Sec.  419.23(b)(1), (2), and (3) because most 
outpatient departments are equipped to provide the procedures; the 
simplest procedures described by the codes may be performed in most 
outpatient departments; and the procedures are related to codes that 
CMS has already removed from the IPO list and we propose to remove them 
from the IPO list. We propose to assign these eight services to APC 
5165--Level 5 ENT Procedures and status indictor ``J1''. We are seeking 
public comment on our conclusion that the services described by CPT 
codes 21141, 21142, 21143, 21194, 21196, 21347, 21366, and 21422 meet 
criteria 1, 2, and 3 and our proposal to assign these services to APC 
5165--Level 5 ENT Procedures and status indicator ``J1''.
    We propose to add eight services that were newly created by the AMA 
CPT Editorial Panel for CY 2023 to the IPO list. These services, which 
will be effective on January 1, 2023, are described by CPT codes 157X1, 
228XX, 49X06, 49X10, 49X11, 49X12, 49X13, and 49X14. After clinical 
review of these services, we found that they require a hospital 
inpatient admission or stay and we propose to assign these services to 
status indicator ``C'' for CY 2023. The CPT codes, long descriptors, 
and the proposed CY 2023 payment indicators are displayed in Table 46.

[[Page 44671]]

    Table 46 below contains the proposed changes to the IPO list for CY 
2023. The complete list of codes describing services that are proposed 
to be designated as inpatient only services beginning in CY 2023 is 
also included as Addendum E to this proposed rule, which is available 
via the internet on the CMS website.
BILLING CODE 4120-01-P

[[Page 44672]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.064


[[Page 44673]]


[GRAPHIC] [TIFF OMITTED] TP26JY22.065


[[Page 44674]]


[GRAPHIC] [TIFF OMITTED] TP26JY22.066

BILLING CODE 4120-01-C

X. Nonrecurring Policy Changes

A. Mental Health Services Furnished Remotely by Hospital Staff to 
Beneficiaries in Their Homes

1. Payment for Mental Health Services Furnished as Medicare Telehealth 
Services or by Rural Health Clinics and Federally Qualified Health 
Centers
    Under the Physician Fee Schedule (PFS), Medicare makes payment to 
professionals and other suppliers for physicians' services, including 
certain diagnostic tests and preventive services. Section 1834(m) of 
the Act specifies the payment amounts and circumstances under which 
Medicare makes payment for a discrete set of Medicare telehealth 
services, all of which must ordinarily be furnished in-person, when 
they are instead furnished using interactive, real-time 
telecommunications technology. Section 1834(m)(4)(D) and (E) of the Act 
specify the types of health care professionals that can furnish and be 
paid for Medicare telehealth services (referred to as distant site 
physicians and practitioners). Section 1834(m)(4)(C) also generally 
limits the types of settings and geographic locations where a 
beneficiary can receive telehealth services (referred to as originating 
sites) to medical care settings in rural areas.
    Due to the circumstances of the COVID-19 pandemic, particularly the 
need to maintain physical distance to avoid exposure to the virus, we 
anticipated that health care practitioners would develop new approaches 
to providing care using various forms of technology when they are not 
physically present with the patient. We established several 
flexibilities to accommodate these changes in the delivery of care. For 
Medicare telehealth services, using waiver authority under section 
1135(b)(8) of the Act in response to the PHE for the COVID-19 pandemic, 
we removed the geographic and site of service originating site 
restrictions in section 1834(m)(4)(C) of the Act, as well as the 
restrictions in section 1834(m)(4)(E) of the Act on the types of 
practitioners who may furnish telehealth services, for the duration of 
the PHE. We also used waiver authority to allow certain telehealth 
services to be furnished via audio-only telecommunications technology 
during the PHE.
    Division CC, section 123 of the Consolidated Appropriations Act, 
2021 (CAA, 2021), modified the circumstances under which payment is 
made under the PFS for mental health services furnished via telehealth 
technology following the PHE. Specifically, section 123 removed the 
geographic originating site restrictions and added the home of the 
individual as a permissible originating site for Medicare telehealth 
services when furnished for the purposes of diagnosis, evaluation, or 
treatment of a mental health disorder. These amendments were 
implemented in the CY 2022 PFS final rule (86 FR 65055 through 65059). 
In the CY 2022 PFS final rule we also implemented a similar policy for 
mental health visits furnished by staff of RHCs and FQHCs (86 FR 65207 
through 65211).
2. Hospital Payment for Mental Health Services Furnished Remotely 
During the PHE for COVID-19
    For services that are not paid under the PFS, there is no statutory 
provision similar to section 1834(m) that addresses payment for 
services furnished by hospitals or other institutional providers to 
beneficiaries who are not physically located in the hospital or 
facility. CMS does pay, however, for certain covered OPD services that 
do not require the beneficiary's physical presence in the hospital. In 
CY 2015, CMS began paying for CPT code 99490 (Chronic care management 
services, at least 20 minutes of clinical staff time directed by a 
physician or other qualified health care professional, per calendar 
month, with the following required elements: multiple (two or more) 
chronic

[[Page 44675]]

conditions expected to last at least 12 months, or until the death of 
the patient; chronic conditions place the patient at significant risk 
of death, acute exacerbation/decompensation, or functional decline; 
comprehensive care plan established, implemented, revised, or 
monitored), which describes non-face-to-face care management services 
furnished by clinical staff under the direction of a physician or other 
qualified health professional over the course of a calendar month to a 
beneficiary who is not physically in the hospital (see Addendum B at: 
www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1613-FC). In CY 2019, the OPPS began making payment for 
certain remote monitoring services, which similarly involve a 
beneficiary who is not physically in the hospital but who is using a 
monitoring device that transmits data to hospital staff (see Addendum B 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-
Items/CMS-1695-FC).
    In many cases, hospitals provide hospital outpatient mental and 
behavioral health services (collectively hereafter, mental health 
services) that are furnished by hospital-employed counselors or other 
licensed professionals. Examples of these services include 
psychoanalysis, psychotherapy, and other counseling services. For some 
of these types of professionals (for example, certain mental health 
counselors such as marriage and family therapists or licensed 
professional counselors), the Medicare statute does not have a benefit 
category that would allow them to bill independently for their 
services. These services can, in many cases, be covered when furnished 
by providers such as hospitals and paid under the OPPS.
    As we explained in the interim final rule with comment period 
published on May 8, 2020, in the Federal Register titled ``Additional 
Policy and Regulatory Revisions in Response to the COVID-19 Public 
Health Emergency and Delay of Certain Reporting Requirements for the 
Skilled Nursing Facility Quality Reporting Program'' (the May 8th 
COVID-19 IFC) (85 FR 27550, 27563), outpatient mental health services, 
education, and training services require communication and interaction 
between the patient and the clinical staff providing the service. We 
stated that facility staff can effectively furnish these services using 
telecommunications technology and, unlike many hospital services, the 
clinical staff and patient are not required to be in the same location 
to furnish them. We further explained that blanket waivers in effect 
during the COVID-19 PHE allow the hospital to consider the 
beneficiary's home, and any other temporary expansion location operated 
by the hospital during the PHE, to be a provider-based department (PBD) 
of the hospital, so long as the hospital can ensure the location meets 
all the conditions of participation, to the extent they are not waived. 
In light of the need for infection control and a desire for continuity 
of behavioral health care and treatment services, we recognized the 
ability of the hospital's clinical staff to continue to deliver these 
services even when the beneficiary is not physically located in the 
hospital. Therefore, in the May 8th COVID-19 IFC (85 FR 27564), we made 
clear that when a hospital's clinical staff are furnishing hospital 
outpatient mental health services, education, and training services to 
a patient in the hospital (which can include the patient's home so long 
as it is provider-based to the hospital), and the patient is registered 
as an outpatient of the hospital, we will consider the requirements of 
the regulations at Sec.  410.27(a)(1) to be met. We referred to this 
policy as Hospitals without Walls (HWW). We reminded readers that the 
physician supervision level for the vast majority of hospital 
outpatient therapeutic services is currently general supervision under 
Sec.  410.27. This means a service must be furnished under the 
physician's overall direction and control, but the physician's presence 
is not required during the performance of the service.
3. Comment Solicitation in the CY 2022 OPPS/ASC Rule
    In the CY 2022 OPPS/ASC proposed rule (86 FR 63748 through 63750) 
we sought comment on the extent to which hospitals have been relying on 
the HWW policy to bill for mental health services furnished to 
beneficiaries in their homes by clinical staff of the hospital. We 
stated that, given that the widespread use of communications technology 
to furnish services during the PHE has illustrated acceptance within 
the medical community and among Medicare beneficiaries of the 
possibility of furnishing and receiving care through use of that 
technology, we were interested in information on the role of hospital 
staff in providing care to beneficiaries remotely in their homes.
    We sought comment on the extent to which hospitals have been 
billing for mental health services provided to beneficiaries in their 
homes through communications technology during the PHE and whether they 
would anticipate continuing demand for this model of care following the 
conclusion of the PHE. We sought comment on whether, during the PHE, 
hospitals have experienced a similar increase in utilization of mental 
health services provided by hospital staff to beneficiaries in their 
homes through communications technology. We also sought comment on 
whether there are changes commenters believe CMS should make to account 
for shifting patterns of practice that rely on communications 
technology to provide mental health services to beneficiaries in their 
homes.
    In response to our comment solicitation, we received approximately 
60 comments that were predominantly in support of continuing OPPS 
payment for mental health services furnished to beneficiaries in their 
homes by clinical staff of the hospital through the use of 
communications technology as a permanent policy post-PHE. These 
comments stated that the expansion of virtual care broadly during the 
PHE has been instrumental in maintaining and expanding access to mental 
health services during the PHE.
4. Current Crisis in Mental Health and Substance Use Disorder
    During the COVID-19 pandemic, the number of adults reporting 
adverse behavioral health conditions has increased sharply, with higher 
rates of depression, substance use, and self-reported suicidal thoughts 
observed in racial and ethnic minority groups.\130\ According to CDC 
data ``[d]uring August 19, 2020-February 1, 2021, the percentage of 
adults with symptoms of an anxiety or a depressive disorder during the 
past 7 days increased significantly (from 36.4% to 41.5%), as did the 
percentage reporting that they needed but did not receive mental health 
counseling or therapy during the past 4 weeks (from 9.2% to 
11.7%)''.\131\
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    \130\ https://www.cdc.gov/mmwr/volumes/69/wr/mm6932a1.htm.
    \131\ https://www.cdc.gov/mmwr/volumes/70/wr/mm7013e2.htm.

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[[Page 44676]]

    In addition to the mental health crisis exacerbated by the COVID-19 
pandemic, the United States is currently in the midst of an ongoing 
opioid PHE, which was first declared on October 26, 2017 by former 
Acting Secretary Eric D. Hargan, and most recently renewed by Secretary 
Xavier Becerra on April 4, 2022, and is facing an overdose crisis as a 
result of rising polysubstance use, such as the co-use of opioids and 
psychostimulants (for example, methamphetamine, cocaine). Recent CDC 
estimates of overdose deaths now exceed 107,000 for the 12-month period 
ending in December 2021,\132\ with overdose death rates surging among 
Black and Latino Americans.\133\ While overdose deaths were already 
increasing in the months preceding the COVID-19 pandemic, the latest 
numbers suggest an acceleration of overdose deaths during the pandemic. 
Recent increases in overdose deaths have reached historic highs in this 
country.\134\ According to information provided to CMS by interested 
parties, these spikes in substance use and overdose deaths reflect a 
combination of increasingly deadly illicit drug supplies, as well as 
treatment disruptions, social isolation, and other hardships imposed by 
the COVID-19 pandemic; but they also reflect the longstanding 
inadequacy of our healthcare infrastructure when it comes to preventing 
and treating substance use disorders (SUD) (for example, alcohol, 
cannabis, stimulants and opioid SUDs). Even before the COVID-19 
pandemic began, in 2019, more than 21 million Americans aged 12 or over 
needed treatment for a SUD in the past year, but only about 4.2 million 
of them received any treatment or ancillary services for it.\135\
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    \132\ https://www.cdc.gov/nchs/nvss/vsrr/drug-overdose-data.htm.
    \133\ Drake, J., Charles, C., Bourgeois, J.W., Daniel, E.S., & 
Kwende, M. (January 2020). Exploring the impact of the opioid 
epidemic in Black and Hispanic communities in the United States. 
Drug Science, Policy and Law. doi:10.1177/2050324520940428.
    \134\ https://www.cdc.gov/nchs/nvss/vsrr/drug-overdose-data.htm.
    \135\ Substance Abuse and Mental Health Services Administration. 
(2020). Key substance use and mental health indicators in the United 
States: Results from the 2019 National Survey on Drug Use and Health 
(HHS Publication No. PEP20-07-01-001, NSDUH Series H-55). Rockville, 
MD: Center for Behavioral Health Statistics and Quality, Substance 
Abuse and Mental Health Services Administration. Retrieved from 
https://www.samhsa.gov/data/.
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    According to the Commonwealth Fund, the provision of behavioral 
health services via communications technology has a robust evidence 
base; and numerous studies have demonstrated its effectiveness across a 
range of modalities and mental health diagnoses (for example, 
depression, SUD). Clinicians furnishing tele-psychiatry services at 
Massachusetts General Hospital Department of Psychiatry during the PHE 
observed several advantages of the virtual format for furnishing 
psychiatric services, noting that patients with psychiatric pathologies 
that interfere with their ability to leave home (for example, 
immobilizing depression, anxiety, agoraphobia, and/or time consuming 
obsessive-compulsive rituals) were able to access care more 
consistently since eliminating the need to travel to a psychiatry 
clinic can increase privacy and therefore decrease stigma-related 
barriers to treatment. This flexibility could potentially bring care to 
many more patients in need, as well as enhance ease of scheduling, 
decrease rate of no shows, increase understanding of family and home 
dynamics, and protect patients and practitioners with underlying health 
conditions.\136\
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    \136\ https://www.commonwealthfund.org/blog/2020/using-telehealth-meet-mental-health-needsduring-covid-19-crisis.
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5. CY 2023 OPPS Proposal To Pay for Mental Health Services Furnished 
Remotely by Hospital Staff
a. Designation of Mental Health Services Furnished to Beneficiaries in 
Their Homes as Covered OPD Services
    During the PHE for COVID-19, many beneficiaries may be receiving 
mental health services in their homes from a clinical staff member of a 
hospital or CAH using communications technology under the flexibilities 
we adopted to permit hospitals to furnish these services. After the PHE 
ends, absent changes to our regulations, the beneficiary would need to 
physically travel to the hospital to continue receiving these 
outpatient hospital services from hospital clinical staff. We are 
concerned that this could have a negative impact on access to care in 
areas where beneficiaries may only be able to access mental health 
services provided remotely by hospital staff and, during the PHE, have 
become accustomed to receiving these services in their homes. We are 
also concerned about potential disruptions to continuity of care in 
instances where beneficiaries' inability to continue receiving these 
mental health services in their homes would lead to loss of access to a 
specific practitioner with whom they have established clinical 
relationships. We believe that, given the current mental health crisis, 
the consequences of loss of access could potentially be severe. We also 
note that beneficiaries' ability to receive mental health services in 
their homes may help expand access to care for beneficiaries who prefer 
additional privacy for the treatment of their condition. We also 
believe that, given the changes in payment policy for mental health 
services via telehealth by physicians and practitioners under the PFS 
and mental health visits furnished by staff of RHCs and FQHCs, using 
interactive, real-time telecommunications technology, it is important 
to maintain consistent payment policies across settings of care so as 
not to create payment incentives to furnish these services in a 
specific setting.
    Therefore, we propose to designate certain services provided for 
the purposes of diagnosis, evaluation, or treatment of a mental health 
disorder performed remotely by clinical staff of a hospital using 
communications technology to beneficiaries in their homes as hospital 
outpatient services that are among the ``covered OPD services'' 
designated by the Secretary as described in section 1833(t)(1)(B)(i) of 
the Act and for which payment is made under the OPPS. To effectuate 
payment for these services, we propose to create OPPS-specific coding 
to describe these services. The proposed code descriptors specify that 
the beneficiary must be in their home and that there is no associated 
professional service billed under the PFS. We note that, consistent 
with the conditions of participation for hospitals at 42 CFR 482.11(c), 
all hospital staff performing these services must be licensed to 
furnish these services consistent with all applicable State laws 
regarding scope of practice. We also propose that the hospital clinical 
staff be physically located in the hospital when furnishing services 
remotely using communications technology for purposes of satisfying the 
requirements at 42 CFR 410.27(a)(1)(iii) and Sec.  410.27(a)(1)(iv)(A), 
which refer to covered therapeutic outpatient hospital services 
incident to a physician's or nonphysician practitioner's service as 
being ``in'' a hospital outpatient department. We are seeking comment 
on whether requiring the hospital clinical staff to be located in the 
hospital when furnishing the mental health service remotely to the 
beneficiary in their home would be overly burdensome or disruptive to 
existing models of care delivery developed during the PHE, and whether 
we should revise the regulatory text in the provisions cited above to 
remove references to the practitioner being ``in'' the hospital 
outpatient department.

[[Page 44677]]

    Please see Table 47 for the proposed codes and their descriptors.
    [GRAPHIC] [TIFF OMITTED] TP26JY22.067
    
    When beneficiaries are in their homes and not physically within the 
hospital, we do not believe that the hospital is accruing all the costs 
associated with an in-person service and as such the full OPPS rate may 
not accurately reflect these costs. We believe that the costs 
associated with hospital clinical staff remotely furnishing a mental 
health service to a beneficiary who is in their home using 
communications technology more closely resembles the PFS payment amount 
for similar services when performed in a facility, which reflects the 
time and intensity of the professional work associated with performing 
the mental health service but does not reflect certain practice expense 
costs, such as clinical labor, equipment, or supplies.
    Therefore, we propose to assign HCPCS codes CXX78 and CXX79 to APCs 
based on the PFS facility payment rates for CPT codes 96159 (Health 
behavior intervention, individual, face-to-face; each additional 15 
minutes (List separately in addition to code for primary service)) and 
96158 (Health behavior intervention, individual, face-to-face; initial 
30 minutes), respectively. We believe that the APC series that is most 
clinically appropriate would be the Health and Behavior Services APC 
series. For CY 2022, CPT code 96159 has a PFS facility payment rate of 
around $20 while CPT code 96158 has a PFS facility payment rate of 
around $60. If we use these PFS payment rates to approximate the costs 
associated with furnishing CXX78 and CXX79, these codes should be 
placed in APC 5821 (Level 1 Health and Behavior Services) and APC 5822 
(Level 2 Health and Behavior Services), respectively. As CXX80 is an 
add-on code, payment would be packaged; and the code would not be 
assigned to an APC. See Table 48 for proposed SI and APC assignments 
and payment rates for HCPCS codes CXX78-CXX80.
[GRAPHIC] [TIFF OMITTED] TP26JY22.068


[[Page 44678]]


    We are seeking comment on the designation of mental health services 
furnished remotely to beneficiaries in their homes as covered OPD 
services payable under the OPPS, and on these proposed codes, their 
proposed descriptors, the proposed HCPCS codes and PFS facility rates 
as proxies for hospital costs, and the proposed APC assignments for the 
proposed codes. We recognize that, while mental health services have 
been paid under the OPPS when furnished by hospital staff in-person to 
beneficiaries physically located in the hospital, the ability to 
provide these services remotely via communications technology when the 
beneficiary is at home is a new model of care delivery and that we 
could benefit from additional information to assist us to appropriately 
code and pay for these services. We invite additional information from 
commenters on all aspects of this proposal. We will also monitor uptake 
of these services for any potential fraud and/or abuse. Finally, we 
note this proposal would also allow these services to be billed by 
CAHs, even though CAHs are not paid under the OPPS.
b. Periodic In-Person Visits
    Section 123(a) of the CAA, 2021 also added a new subparagraph (B) 
to section 1834(m)(7) of the Act to prohibit payment for a Medicare 
telehealth service furnished in the patient's home for purposes of 
diagnosis, evaluation, or treatment of a mental health disorder unless 
the physician or practitioner furnishes an item or service in-person, 
without the use of telehealth, within six months prior to the first 
time the physician or practitioner furnishes a telehealth service to 
the beneficiary, and thereafter, at such times as the Secretary 
determines appropriate. In the CY 2022 PFS final rule, we finalized 
that, after the first mental health telehealth service in the patient's 
home, there must be an in-person, non-telehealth service within 12 
months of each mental health telehealth service--but also finalized a 
policy to allow for limited exceptions to the requirement. 
Specifically, if the patient and practitioner agree that the benefits 
of an in-person, non-telehealth service within 12 months of the mental 
health telehealth service are outweighed by risks and burdens 
associated with an in-person service, and the basis for that decision 
is documented in the patient's medical record, the in-person visit 
requirement will not apply for that 12-month period (86 FR 65059). We 
finalized identical in-person visit requirements for mental health 
visits furnished through communications technology for RHCs and FQHCs.
    In the interest of maintaining similar requirements between mental 
health visits furnished by RHCs and FQHCs via communications 
technology, mental health telehealth services service under the PFS, 
and mental health services furnished remotely under the OPPS, we 
propose to require that payment for mental health services furnished 
remotely to beneficiaries in their homes using telecommunications 
technology may only be made if the beneficiary receives an in-person 
service within 6 months prior to the first time the hospital clinical 
staff provides the mental health services remotely; and that there must 
be an in-person service without the use of telecommunications 
technology within 12 months of each mental health service furnished 
remotely by the hospital clinical staff. We also propose the same 
exceptions policy as was finalized in the CY 2022 PFS final rule, 
specifically, that we would permit exceptions to the requirement that 
there be an in-person service without the use of communications 
technology within 12 months of each remotely furnished mental health 
service when the hospital clinical staff member and beneficiary agree 
that the risks and burdens of an in-person service outweigh the 
benefits of it. Exceptions to the in-person visit requirement should 
involve a clear justification documented in the beneficiary's medical 
record including the clinician's professional judgement that the 
patient is clinically stable and/or that an in-person visit has the 
risk of worsening the person's condition, creating undue hardship on 
the person or their family, or would otherwise result in disengaging 
with care that has been effective in managing the person's illness. 
Hospitals must also document that the patient has a regular source of 
general medical care and has the ability to obtain any needed point of 
care testing, including vital sign monitoring and laboratory studies.
    Section 304(a) of Division P, Title III, Subtitle A of the 
Consolidated Appropriations Act, 2022 (Pub. L. 117-103, March 15, 2022) 
amended section 1834(m)(7)(B)(i) of the Act to delay the requirement 
that there be an in-person visit with the physician or practitioner 
within 6 months prior to the initial mental health telehealth service, 
and at subsequent intervals as determined by the Secretary, until the 
152nd day after the emergency period described in section 1135(g)(1)(B) 
(the PHE for COVID-19) ends. In addition, Section 304 of the CAA, 2022, 
delayed until 152 days after the end of the PHE similar in-person visit 
requirements for remotely furnished mental health visits furnished by 
RHCs and FQHCs. In the interest of continuity across payment systems so 
as to not create incentives to furnish mental health services in a 
given setting due to a differential application of additional 
requirements, and to avoid any burden associated with immediate 
implementation of the proposed in-person visit requirements, we propose 
that the in-person visit requirements would not apply until the 152nd 
day after the PHE for COVID-19 ends.
c. Audio-Only Communication Technology
    Section 1834(m) of the Act outlines the requirements for PFS 
payment for Medicare telehealth services that are furnished via a 
``telecommunications system,'' and specifies that, only for purposes of 
Medicare telehealth services furnished through a Federal telemedicine 
demonstration program conducted in Alaska or Hawaii, the term 
``telecommunications system'' includes asynchronous, store-and-forward 
technologies. We further defined the term, ``telecommunications 
system,'' in the regulation at Sec.  410.78(a)(3) to mean an 
interactive telecommunications system, which is defined as multimedia 
communications equipment that includes, at a minimum, audio and video 
equipment permitting two-way, real-time interactive communications 
between the patient and distant site physician or practitioner.
    During the PHE for COVID-19, we used waiver authority under section 
1135(b)(8) of the Act to temporarily waive the requirement, for certain 
behavioral health and/or counseling services and for audio-only 
evaluation and management (E/M) visits, that telehealth services must 
be furnished using an interactive telecommunications system that 
includes video communications technology. Therefore, for certain 
services furnished during the PHE for COVID-19, we make payment for 
these telehealth services when they are furnished using audio-only 
communications technology. In the CY 2022 PFS final rule, we stated 
that, given the generalized shortage of mental health care 
professionals,\137\ and the existence of areas and populations where 
there is limited access to broadband due to geographic or socioeconomic 
challenges, that we believed beneficiaries may have come to rely upon 
the use of audio-only communications technology in order to receive 
mental health services, and that a sudden discontinuation of this

[[Page 44679]]

flexibility at the end of the PHE could have a negative impact on 
access to care (86 FR 65059). Due to these concerns, we modified the 
definition of interactive telecommunications system in Sec.  
410.78(a)(3) for services furnished for purposes of diagnosis, 
evaluation, or treatment of a mental health disorder to a patient in 
their home to include two-way, real-time audio-only communications 
technology in instances where the physician or practitioner furnishing 
the telehealth service is technically capable to use telecommunications 
technology that includes audio and video, but the beneficiary is not 
capable of, or did not consent to, use two-way, audio/video technology. 
We stated that we believed that this requirement will ensure that 
mental health services furnished via telehealth are only conducted 
using audio-only communications technology in instances where the use 
of audio-only technology is facilitating access to care that would be 
unlikely to occur otherwise, given the patient's technological 
limitations, abilities, or preferences (86 FR 65062). We also made a 
conforming change for purposes of furnishing mental health visits 
through telecommunications technology for RHCs and FQHCs. We limited 
payment for audio-only services to services furnished by physicians or 
practitioners who have the capacity to furnish two-way, audio/video 
telehealth services but are providing the mental health services via 
audio-only communications technology in instances where the beneficiary 
is not capable of, or does not wish to use, two-way, audio/video 
technology.
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    In order to maximize accessibility for mental health services, 
particularly for beneficiaries in areas with limited access to 
broadband infrastructure, and in the interest of policy continuity 
across payment systems so as to not create incentives to furnish mental 
health services in a given setting due to a differential application of 
additional requirements, we propose a similar policy for mental health 
services furnished remotely by hospital clinical staff to beneficiaries 
in their homes through communications technology. Specifically, we 
propose that hospital clinical staff must have the capability to 
furnish two-way, audio/video services but may use audio-only 
communications technology given an individual patient's technological 
limitations, abilities, or preferences.

B. Comment Solicitation on Intensive Outpatient Mental Health 
Treatment, Including Substance Use Disorder (SUD) Treatment Furnished 
by Intensive Outpatient Programs (IOPs)

    There are a range of services described by existing coding under 
the PFS and OPPS that can be billed for treatment of mental health 
conditions, including SUD, such as individual, group, and family 
psychotherapy. Over the past several years, in collaboration with 
interested parties and the public, we have provided additional coding 
and payment mechanisms for mental health care services paid under the 
PFS and OPPS. For example, in the CY 2020 PFS final rule (84 FR 62673), 
we finalized the creation of new coding and payment describing a 
bundled episode of care for the treatment of Opioid Use Disorder (OUD) 
(HCPCS codes G2086-G2088). In the CY 2021 PFS final rule, we finalized 
expanding the bundled payments described by HCPCS codes G2086-G2088 to 
be inclusive of all SUDs (85 FR 84642 through 84643). These services 
are also paid under the OPPS.
    Additionally, in the CY 2020 PFS final rule (84 FR 62630 through 
62677), we implemented coverage requirements and established new codes 
describing bundled payments for episodes of care for the treatment of 
OUD furnished by Opioid Treatment Programs (OTPs). Medicare also covers 
services furnished by inpatient psychiatric facilities and partial 
hospitalization programs (PHP). PHP services can be furnished by a 
hospital outpatient department or a Medicare-certified Community Mental 
Health Center (CMHC). PHPs are structured to provide intensive 
psychiatric care through active treatment that utilizes a combination 
of the clinically recognized items and services described in Sec.  
1861(ff) of the Social Security Act (the Act). According to the 
Medicare Benefit Policy Manual, Chapter 6, Section 70.3, the treatment 
program of a PHP closely resembles that of a highly structured, short-
term hospital inpatient program and is at a level more intense than 
outpatient day treatment or psychosocial rehabilitation. PHPs work best 
as part of a community continuum of mental health services, which range 
from the most restrictive inpatient hospital setting to less 
restrictive outpatient care and support.
    We understand that, in some cases, people who do not require a 
level of care for mental health needs that meets the standards for PHP 
services nonetheless require intensive services on an outpatient basis. 
For example, according to SAMHSA's Advisory on Clinical Issues in 
Intensive Outpatient Treatment for Substance Use Disorders, IOP 
programs for substance use disorders (SUDs) offer services to clients 
seeking primary treatment; step-down care from inpatient, residential, 
and withdrawal management settings; or step-up treatment from 
individual or group outpatient treatment. IOP treatment includes a 
prearranged schedule of core services (e.g., individual counseling, 
group therapy, family psychoeducation, and case management) for a 
minimum of nine hours per week for adults or six hours per week for 
adolescents. SAMSHA further states that the 2019 National Survey of 
Substance Abuse Treatment Services reports that 46 percent of SUD 
treatment facilities offer IOP treatment.\138\
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    We are seeking comment on whether these services are described by 
existing CPT codes paid under the OPPS, or whether there are any gaps 
in coding that may be limiting access to needed levels of care for 
treatment of mental health disorders or SUDs, for Medicare 
beneficiaries. We are also interested in additional, detailed 
information about IOP services, such as the settings of care in which 
these programs typically furnish services, the range of services 
typically offered, the range of practitioner types that typically 
furnish those services, and any other relevant information, especially 
to the extent it would inform our ability to ensure that Medicare 
beneficiaries have access to this care.

C. Direct Supervision of Certain Cardiac and Pulmonary Rehabilitation 
Services by Interactive Communications Technology

    In the interim final rule with comment period titled ``Policy and 
Regulatory Provisions in Response to the COVID-19 Public Health 
Emergency'' published on April 6, 2020 (the April 6th COVID-19 IFC) (85 
FR 19230, 19246, 19286), we changed the regulation at 42 CFR 
410.27(a)(1)(iv)(D) to provide that, during a Public Health Emergency 
as defined in Sec.  400.200, the presence of the physician for purposes 
of the direct supervision requirement for pulmonary rehabilitation 
(PR), cardiac rehabilitation (CR), and intensive cardiac rehabilitation 
(ICR) services includes virtual presence 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. 
Specifically, the required direct physician supervision can be provided

[[Page 44680]]

through virtual presence using audio/video real-time communications 
technology (excluding audio-only) subject to the clinical judgment of 
the supervising practitioner. We further amended Sec.  
410.27(a)(1)(iv)(D) in the CY 2021 OPPS/ASC final rule with comment 
period to provide that this flexibility continues until the later of 
the end of the calendar year in which the PHE as defined in Sec.  
400.200 ends or December 31, 2021 (85 FR 86113 and 86299). In the CY 
2021 OPPS/ASC final rule with comment period we also clarified that 
this flexibility excluded the presence of the supervising practitioner 
via audio-only telecommunications technology (85 FR 86113).
    In the CY 2022 PFS final rule, CMS added CPT codes 93797 (Physician 
or other qualified health care professional services for outpatient 
cardiac rehabilitation; without continuous ECG monitoring (per 
session)) and 93798 (Physician or other qualified health care 
professional services for outpatient cardiac rehabilitation; with 
continuous ECG monitoring (per session)) and HCPCS codes G0422 
(Intensive cardiac rehabilitation; with or without continuous ecg 
monitoring with exercise, per session) and G0423 (Intensive cardiac 
rehabilitation; with or without continuous ecg monitoring; without 
exercise, per session) to the Medicare Telehealth Services List on a 
Category 3 basis (86 FR 65055). These services will not be able to be 
furnished as Medicare telehealth services to beneficiaries in their 
homes after the PHE ends because of the statutory restrictions at 
section 1834(m)(4)(C)(ii) of the Act on eligible originating sites. 
However, the inclusion of these codes on the Medicare Telehealth 
Services List will enable payment for these services when furnished in 
full using two-way, audio/video communications technology when the 
beneficiary is in a medical setting that can serve as a telehealth 
originating site and meet the geographic requirements specified in 
section 1834(m)(4)(C). These services will remain on the Medicare 
Telehealth Services List through the end of CY 2023.
    In order to effectuate a similar policy under the OPPS, where PR, 
CR and ICR rehabilitation services currently may be furnished during 
the PHE to beneficiaries in hospitals under direct supervision of a 
physician where the supervising practitioner is immediately available 
to be present via two-way, audio/video communications technology, we 
are seeking comment on whether we should continue to allow direct 
physician supervision for these services to include presence of the 
supervising practitioner physician via two-way, audio/video 
communication technology through the end of CY 2023. We also are 
seeking comment on whether there are safety and/or quality of care 
concerns regarding adopting this policy beyond the PHE and what 
policies CMS could adopt to address those concerns if the policy were 
extended post-PHE.

D. Use of Claims Data for CY 2023 OPPS and ASC Payment System 
Ratesetting Due to the PHE

    As described in section I.A of this proposed rule, section 1833(t) 
of the Act requires the Secretary to annually review and update the 
payment rates for services payable under the Hospital OPPS. 
Specifically, section 1833(t)(9)(A) of the Act requires the Secretary 
to review not less often than annually and to revise the groups, the 
relative payment weights, and the wage and other adjustments described 
in paragraph (2) of the Act to take into account changes in medical 
practice, changes in technology, the addition of new services, new cost 
data, and other relevant information and factors.
    When updating the OPPS payment rates and system for each rulemaking 
cycle, we primarily use two sources of information: the outpatient 
Medicare claims data and Healthcare Cost Report Information System 
(HCRIS) cost report data. The claims data source is the Outpatient 
Standard Analytic File, which includes final action Medicare outpatient 
claims for services furnished in a given calendar year. For the OPPS 
ratesetting process, our goal is to use the best available data for 
ratesetting to accurately estimate the costs associated with furnishing 
outpatient services and set appropriate payment rates. Ordinarily, the 
best available claims data are the data from 2 years prior to the 
calendar year that is the subject of rulemaking. For the CY 2023 OPPS/
ASC proposed rule ratesetting, the best available claims data would 
typically be the CY 2021 calendar year outpatient claims data processed 
through December 31, 2021. The cost report data source is typically the 
Medicare hospital cost report data files from the most recently 
available quarterly HCRIS file as we begin the ratesetting process. The 
best available cost report data used in developing the OPPS relative 
weights would ordinarily be from cost reports beginning three fiscal 
years prior to the year that is the subject of the rulemaking. For 
example, under ordinary circumstances, for CY 2023 OPPS ratesetting, 
that would be cost report data from HCRIS extracted in December 2021, 
which would contain many cost reports ending in FY 2020 and 2021 based 
on each hospital's cost reporting period.
    As discussed in the CY 2022 OPPS final rule with comment period, 
the standard hospital data we would have otherwise used for purposes of 
CY 2022 ratesetting included significant effects from the COVID-19 PHE, 
which led to a number of concerns with using this data for CY 2022 
ratesetting (86 FR 63751 through 63754). In section X.E. of the CY 2022 
OPPS/ASC proposed rule (86 FR 42188 through 42190), we noted a number 
of changes in the CY 2020 OPPS claims data we would ordinarily use for 
ratesetting, likely as a result of the PHE. These changes included 
overall aggregate decreases in claims volume (particularly those 
associated with visits); significant increases in HCPCS code Q3014 
(Telehealth originating site facility fee) in the hospital outpatient 
claims; and increases in certain PHE-related services, such as HCPCS 
code C9803, which describes COVID-19 specimen collection and services 
assigned to APC 5801 (Ventilation Initiation and Management). As a 
result of the effects we observed from COVID-19 PHE-related factors in 
our claims and cost report data, as well as the increasing number of 
Medicare beneficiaries vaccinated against COVID-19, which we believed 
might make the CY 2022 outpatient experience closer to CY 2019 rather 
than CY 2020, we believed that CY 2020 data were not the best overall 
approximation of expected outpatient hospital services in CY 2022. 
Instead, we believed that CY 2019 data, as the most recent complete 
calendar year of data prior to the COVID-19 PHE, were a better 
approximation of expected CY 2022 hospital outpatient services. 
Therefore, in the CY 2022 OPPS/ASC final rule with comment period, we 
established a policy of using CY 2019 claims data and cost reports 
prior to the PHE in ratesetting for the CY 2022 OPPS with certain 
limited exceptions, such as where CY 2019 data were not available (86 
FR 63753 through 63754).
    Given the effects the virus that causes COVID-19 has had on 
Medicare claims and cost report data the last 2 years, coupled with the 
expectation for future variants, we believe that it is reasonable to 
assume that there will continue to be some limited influence of COVID-
19 PHE effects on the data we use for ratesetting. We reviewed the CY 
2021 claims data available for CY 2023 OPPS ratesetting, similar to the 
review we conducted for CY 2022 OPPS ratesetting, to determine the 
degree to which the effects of the COVID-19 PHE

[[Page 44681]]

had continued or subsided in our claims data as well as what claims and 
cost report data would be appropriate for CY 2023 OPPS ratesetting. In 
general, we continue to see limited effects of the PHE, with service 
volumes generally about halfway between those in the CY 2019 (pre-PHE) 
claims and CY 2020 (beginning of the PHE) claims. At the aggregate 
level, there continues to be a decrease in the overall volume of 
outpatient hospital claims during the PHE, with approximately 10 
percent fewer claims usable for ratesetting purposes when compared to 
the CY 2019 outpatient claims volume. This number compares to the 20 
percent reduction that we observed last year in the CY 2020 claims. 
Similarly, this moderate return to more normal volumes extends across 
claims volume and applies to a majority of the clinical APCs in the 
OPPS, suggesting that, while clinical and billing patterns have not 
quite returned to their pre-PHE levels, they are beginning to do so.
    Similar to what we observed in CY 2022 OPPS ratesetting, we 
continue to see broad changes as a result of the PHE, including in the 
APCs for hospital emergency department and clinic visits. Among those 
APCs, the decrease in volume was approximately 20 percent, some of 
which may be related to changing practice patterns during the PHE. For 
example, we saw a significant increase in the use of the HCPCS code 
Q3014 (Telehealth originating site facility fee) in the hospital 
outpatient claims during the first year of the PHE, with approximately 
35,000 services billed in the CY 2019 OPPS claims and 2.1 million 
services billed in the CY 2020 OPPS claims. However, in the CY 2021 
OPPS claims currently available for ratesetting, we see a slight 
decline in volume to about 1.6 million services, noting that we would 
expect slightly more claims in the final rule data. Our view is that a 
large part of the volume increase in CY 2020 was the result of site of 
service changes due to the PHE.
    In other cases, we saw claims data changes associated with specific 
services that were furnished more frequently during the PHE. For 
example, we identified two notable changes in the claims data for APC 
5731 (Level 1 Minor Procedures) and APC 5801 (Ventilation Initiation 
and Management). In the CY 2020 claims data reviewed last year, we 
noted a significant increase in the services provided under APC 5801, 
from 10,340 units provided in CY 2019 claims to 12,802 units in the CY 
2020 claims. However, in the CY 2021 claims available for NPRM 
ratesetting, there are only approximately 8,596 units of service 
provided through this APC, an amount even lower than the service volume 
we observed in CY 2019 claims.
    In the case of APC 5731, HCPCS code C9803 was made effective for 
services furnished on or after March 1, 2020, through the interim final 
rule with comment period titled ``Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency and Delay 
of Certain Reporting Requirements for the Skilled Nursing Facility 
Quality Reporting Program'' (85 FR 27602 through 27605) to describe 
COVID-19 specimen collection. In the CY 2021 claims data available for 
ratesetting for this proposed rule, there are approximately 1,367,531 
single claims available for ratesetting purposes for HCPCS code C9803, 
which, if this code were included in ratesetting, would make up 93 
percent of the claims used to set the payment rate for APC 5731 (Leve1 
1 Minor Procedures APC). Under current policy, HCPCS code C9803 is a 
temporary code that was created to support increased testing solely 
during the COVID-19 PHE. Given that this is a temporary code only in 
use for the duration of the PHE, that the PHE could conclude before CY 
2023, and that the large volume of services for this code in the CY 
2021 claims data would dictate the payment rate for APC 5731 if we 
included this code in ratesetting, we do not believe including the 
claims data for this code in establishing CY 2023 payment rates would 
be appropriate. Our CY 2022 final policies on data used in ratesetting 
were established due to our expectation that the CY 2022 outpatient 
experience would be more similar to the CY 2019 claims rather than CY 
2020 claims. Our proposed rule review of the data for CY 2023 OPPS 
ratesetting also is based on our belief of how well the claims and cost 
report data may relate to the CY 2023 outpatient experience. It is with 
similar considerations in mind and our belief that the volumes and 
costs associated with HCPCS code C9803 will not be reflective of the CY 
2023 outpatient experience that we believe it is appropriate to exclude 
claims that would typically be used to model the cost of HCPCS code 
C9803 from ratesetting.
    Based on our review of the CY 2021 outpatient claims available for 
ratesetting, we observed that many of the outpatient service volumes 
have partially returned to their pre-PHE levels. While the effects of 
the COVID-19 PHE remain at both the aggregate and service levels for 
certain services, as discussed earlier in this section and in section 
I.F of the FY 2023 IPPS proposed rule (87 FR 28123 through 28125), we 
recognize that future COVID-19 variants may have potentially varying 
effects. Therefore, we believe it is reasonable to assume that there 
will continue to be some effects of the COVID-19 PHE on the outpatient 
claims that we use for OPPS ratesetting, similar to the CY 2021 claims 
data. As a result, we propose to use the CY 2021 claims for CY 2023 
OPPS ratesetting.
    We propose to use cost report data for this proposed rule from the 
same set of cost reports we originally used in the CY 2021 OPPS/ASC 
final rule for ratesetting, which in most cases included cost reporting 
periods beginning in CY 2018. We ordinarily would have used the most 
updated available cost reports available in HCRIS in determining the 
proposed CY 2022 OPPS/APC relative weights (as discussed in greater 
detail in section II.E of the CY 2022 OPPS/ASC proposed rule (86 FR 
42053)). As previously discussed, if we were to proceed with the 
standard ratesetting process of using updated cost reports, we would 
have used approximately 1,000 cost reports with the fiscal year ending 
in CY 2020, based on each hospital's cost reporting period. Under our 
historical process of updating cost report data, for the CY 2023 OPPS, 
the majority of the cost reports in our data would have cost reporting 
periods that overlap parts of CY 2020. Noting that we observed 
significant impact at the service level when incorporating these cost 
reports into ratesetting and the effects on billing/clinical patterns, 
similar to what we observed in the CY 2020 claims when reviewing them 
for the CY 2022 OPPS/ASC rulemaking cycle, we believe that it is 
appropriate to continue to use the same set of cost reports that we 
used in developing the CY 2021 OPPS, so as to mitigate the impact of 
that 2020-based data. We note that we will continue to review the 
updated cost report data as they are available.
    We also note that, similar to the proposed IPPS outlier policy 
described in section II.A.4 of the addendum to the FY 2023 IPPS 
proposed rule (87 FR 28868), we propose to return to our historical 
process of using CCRs when determining the fixed-dollar amount 
threshold, and to adopt the charge and CCR inflation factors developed 
for the FY 2023 IPPS. For more detail regarding the proposed CY 2023 
OPPS outlier policy, see section II.G of this proposed rule.
    As a result of our expectation that the CY 2021 claims that we 
would typically use will be appropriate for establishing the CY 2023 
OPPS, we propose to use the CY 2021 claims for the CY 2023

[[Page 44682]]

OPPS/ASC ratesetting process. However, we propose to use the same set 
of cost reports from the June 2020 cost report extract, which contains 
only pre-PHE data, to remove the effect of the PHE cost report data on 
estimated service cost. In addition, we propose to exclude from 
ratesetting claims that would be used to model the estimated cost of 
HCPCS code C9803 in this proposed rule.
    We are also considering the alternative of continuing with our 
standard process of using the most updated claims and cost report data 
available. While the CY 2021 claims used in ratesetting would be the 
same as under our proposal, under this alternative our cost reports 
would also be updated for the most recent extract we typically would 
use: cost report data extracted from HCRIS in December 2021, which in 
most cases included cost reporting periods beginning in CY 2018. To 
facilitate comment on the alternative proposal for CY 2023, we are 
making available the cost statistics and addenda utilizing the CY 2021 
claims and updated cost report data we would ordinarily have provided 
in conjunction with the CY 2023 OPPS/ASC proposed rule. We have 
provided all relevant files that would have changes calculated under 
this alternative approach including: the OPPS Impact File, cost 
statistics files, and addenda. The files specific to this alternative 
configuration will be identified by the word ``Alternative'' in the 
filenames, similar to our approach in the CY 2022 OPPS/ASC proposed and 
final rules. We note that the primary change as a result of the 
alternative proposed methodology would be in the scaled weights, which 
are displayed in the addenda. We refer the reader to the CMS website 
for the CY 2023 OPPS/ASC proposed rule for more information on where 
these supplemental files may be found.

E. Supervision by Nonphysician Practitioners of Hospital and CAH 
Diagnostic Services Furnished to Outpatients

1. Background
    The regulation at 42 CFR 410.32 provides the conditions of Medicare 
Part B payment for diagnostic tests. Section 410.32(b) provides the 
supervision requirements for diagnostic x-ray tests, diagnostic 
laboratory tests, and other diagnostic tests paid under the PFS. Prior 
to 2020, the regulation allowed only physicians as defined under 
Medicare law to supervise the performance of these diagnostic tests.
    In the interim final rule with comment period published on May 8, 
2020, in the Federal Register titled ``Additional Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency and Delay 
of Certain Reporting Requirements for the Skilled Nursing Facility 
Quality Reporting Program'' (the May 8th COVID-19 IFC) (85 FR 27550, 
27555 through 27556, 27620), we revised Sec.  410.32(b)(1) to allow, 
for the duration of the PHE, certain nonphysician practitioners (nurse 
practitioners, physician assistants, clinical nurse specialists and 
certified nurse midwifes) to supervise the performance of diagnostic 
tests to the extent they were authorized to do so under their scope of 
practice and applicable State law.
    In the CY 2021 PFS final rule (85 FR 84590 through 84492, 85026), 
we further revised Sec.  410.32(b)(1) to make the revisions made by the 
May 8th COVID-19 IFC permanent and to add certified registered nurse 
anesthetists to the list of nonphysician practitioners permitted to 
provide supervision of diagnostic tests to the extent authorized to do 
so under their scope of practice and applicable State law.
    As we explained in those final rules, the basis for making these 
revisions was to both ensure that an adequate number of health care 
professionals were available to support critical COVID-19-related and 
other diagnostic testing needs and provide needed medical care during 
the PHE and to implement policy consistent with section 5(a) of the 
President's Executive Order 13890 on ``Protecting and Improving 
Medicare for Our Nation's Seniors'' (84 FR 53573, October 8, 2019, E.O. 
13890), which directed the Secretary to identify and modify Medicare 
regulations that contained more restrictive supervision requirements 
than existing scope of practice laws, or that limited healthcare 
professionals from practicing at the top of their license. We refer 
readers to the May 8th COVID-19 IFC (85 FR 27555 through 27556, 27620) 
and CY 2021 PFS final rule (85 FR 84590 through 84492, 85026) for a 
more detailed discussion of the reasoning behind our revisions to Sec.  
410.32.
    Section 410.32(b)(1), titled ``Basic rule,'' states that ``. . .all 
diagnostic x-ray and other diagnostic tests covered under section 
1861(s)(3) of the Act and payable under the physician fee schedule must 
be furnished under the appropriate level of supervision by a physician 
as defined in section 1861(r) of the Act or, to the extent that they 
are authorized to do so under their scope of practice and applicable 
State law, by a nurse practitioner, clinical nurse specialist, 
physician assistant, certified registered nurse anesthetist, or a 
certified nurse-midwife.'' Section 410.32(b)(2) provides a list of 
services that are excepted from the basic rule in Sec.  410.32(b)(1). 
Section 410.32(b)(3) defines the levels of supervision referenced in 
Sec.  410.32(b)(1): general supervision (Sec.  410.32(b)(3)(i)); direct 
supervision (Sec.  410.32(b)(3)(ii)); and personal supervision (Sec.  
410.32(b)(3)(iii)). Within these three definitions, only the definition 
for direct supervision indicates that a ``supervising practitioner'' 
other than a physician can provide the required supervision. The 
definitions for general and personal supervision continue to refer only 
to a physician providing the required level of supervision. Although 
the definitions of general and personal supervision do not specify that 
a ``supervising practitioner'' could furnish these levels of 
supervision, the above-described revisions to the ``basic rule'' 
governing supervision of diagnostic tests at Sec.  410.32(b)(1) allow 
certain nonphysician practitioners to provide general and personal 
supervision to the extent they are authorized to do so under their 
scope of practice and applicable State law.
    Section 410.28 provides conditions of payment for diagnostic 
services under Medicare Part B provided to outpatients by, or under 
arrangements by, hospitals and CAHs, including specific supervision 
requirements under Sec.  410.28(e) for diagnostic tests in those 
settings. Section 410.28(e) relies upon the definitions of general, 
direct (for nonhospital locations) and personal supervision at Sec.  
410.32(b)(3)(i) through (iii) by cross-referencing those definitions. 
As noted above, the term ``supervising practitioner'' is absent from 
those definitions, although the ``basic rule'' at Sec.  410.32(b)(1) 
allows certain nonphysician practitioners to provide general and 
personal supervision to the extent they are authorized to do so under 
their scope of practice and applicable State law. However, Sec.  
410.32(b) is explicitly limited to ``all diagnostic x-ray and other 
diagnostic tests covered under section 1861(s)(3) of the Act and 
payable under the physician fee schedule,'' and Sec.  410.28(e) does 
not contain any such ``basic rule'' to clarify that nonphysician 
practitioners can provide general and personal supervision.
2. Proposed Revisions to 42 CFR 410.28 and Sec.  410.27
    For purposes of clarity and consistency, we propose to revise Sec.  
410.28(e) to clarify that the same nonphysician practitioners that can 
provide general and personal

[[Page 44683]]

supervision of diagnostic testing services payable under the PFS under 
Sec.  410.32(b) can provide supervision of diagnostic testing services 
furnished to outpatients by hospitals or CAHs. Specifically, we propose 
to revise our existing supervision requirements at Sec.  410.28(e) to 
clarify that nurse practitioners, clinical nurse specialists, physician 
assistants, certified registered nurse anesthetists and certified nurse 
midwives may provide general, direct, and personal supervision of 
outpatient diagnostic services to the extent that they are authorized 
to do so under their scope of practice and applicable State law.
    We also propose to replace the cross-references at Sec.  410.28(e) 
to the definitions of general, direct (for outpatient services provided 
at a nonhospital location), and personal supervision at Sec.  
410.32(b)(3)(i) through (iii) with the text of those definitions as 
newly designated paragraphs (1), (2)(i), (2)(ii), (2)(iii), and (3) so 
that they are now contained within Sec.  410.28.
    Similarly, since Sec.  410.27, which provides the supervision 
requirements for therapeutic outpatient hospital and CAH services, also 
relies on the definitions of general and personal supervision at Sec.  
410.32(b)(3)(i) and (iii), we propose to replace the cross-references 
at Sec.  410.27(a)(1)(iv)(A) and (B) with the text of those definitions 
so that they are now contained within Sec.  410.27. Additionally, for 
clarity we propose to designate the existing definition of direct 
supervision and the proposed definition of personal supervision at 
Sec.  410.27(a)(1)(iv)(B) as Sec.  410.27(a)(1)(iv)(B)(1) and (2), 
respectively. Finally, since Sec.  410.27(a)(1)(iv)(B) and (D) contain 
duplicate definitions for direct supervision, we propose to remove 
Sec.  410.27(a)(1)(iv)(D) in its entirety and add its language 
regarding pulmonary rehabilitation, cardiac rehabilitation, and 
intensive cardiac rehabilitation services and the virtual presence of a 
physician through audio/video real-time communications technology 
during the PHE to the newly designated Sec.  410.27(a)(1)(iv)(B)(1).

F. Coding and Payment for Category B Investigational Device Exemption 
Clinical Devices and Studies

1. Medicare Coverage of Items and Services in FDA-Approved 
Investigational Device Exemption Clinical Studies
    Section 1862(m) of the Act (as added by section 731(b) of the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003 
(MMA) (Pub. L. 108-173, enacted on December 8, 2003) allows for 
Medicare payment of the routine costs of care furnished to Medicare 
beneficiaries in a Category A investigational device exemption (IDE) 
study. Under the general rulemaking authority under section 1871 of the 
Act, CMS finalized changes to the IDE regulations (42 CFR 405 Subpart 
B), effective January 1, 2015 (78 FR 74809). CMS added criteria for 
coverage of IDE studies and changed from local Medicare Administrative 
Contractor (MAC) review and approval of IDE studies to a centralized 
review and approval of IDE studies.
2. Background on Medicare Payment for FDA-Approved IDE Studies
    Medicare may make payment for routine care items and services 
furnished in an FDA-approved Category A (Experimental) study if CMS 
determines that the Medicare coverage IDE study criteria in 42 CFR 
405.212 are met. However, Medicare does not make payment for the 
Category A device, which is excluded from coverage by 1862(a) of the 
Act. A Category A (Experimental) device refers to a device for which 
``absolute risk'' of the device type has not been established (that is, 
initial questions of safety and effectiveness have not been resolved) 
and the FDA is unsure whether the device type can be safe and 
effective.
    As described in Sec.  405.211(b), with regard to a Category B 
(Nonexperimental/investigational) IDE study, Medicare may make payment 
for the Category B device and the routine care items and services in 
the study if CMS determines that the Medicare coverage IDE study 
criteria in Sec.  405.212 are met. A Category B (Non-experimental/
investigational) device refers to a device for which the incremental 
risk is the primary risk in question (that is, initial questions of 
safety and effectiveness of that device type have been resolved), or it 
is known that the device type can be safe and effective because, for 
example, other manufacturers have obtained FDA premarket approval or 
clearance for that device type (Sec.  405.201(b)).
3. Proposal for Coding and Payment for Category B IDE Devices and 
Studies
    In the CY 2020 OPPS/ASC final rule with comment period (84 FR 61223 
through 61224), we created a temporary HCPCS code to describe the V-
Wave Interatrial Shunt Procedure, including the cost of the device, for 
the experimental group and the control group of the study after hearing 
concerns from interested parties that current coding for the V-Wave 
procedure would compromise the scientific validity of the study. 
Specifically, for that randomized, double-blinded control Category B 
IDE study, all participants received 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 
received the V-Wave interatrial shunt procedure while participants 
assigned to the control group only received right heart 
catheterization. We stated that 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 Category B IDE 
device--the interatrial shunt--because an additional procedure code 
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 IDE study) to describe the 
service, including the cost of the device, and we assigned the service 
to New Technology APC 1589 (New Technology--Level 38 ($10,001- 
$15,000)).
    In addition to the previously described procedure and the creation 
of HCPCS code C9758, CMS has created similar codes and used similar 
payment methodologies for other similar IDE studies. For example, the 
following HCPCS codes were also created and described blinded 
procedures, including the cost of the device, in which both the active 
treatment and placebo groups are described by the same HCPCS code: 
HCPCS code C9782 (Blinded procedure for New York Heart Association 
(NYHA) Class II or III heart failure, or Canadian Cardiovascular 
Society (CCS) Class III or IV chronic refractory angina; transcatheter 
intramyocardial transplantation of autologous bone marrow cells (e.g., 
mononuclear) or placebo control, autologous bone marrow harvesting and 
preparation for transplantation, left heart catheterization including

[[Page 44684]]

ventriculography, all laboratory services, and all imaging with or 
without guidance (e.g., transthoracic echocardiography, ultrasound, 
fluoroscopy), all device(s), performed in an approved Investigational 
Device Exemption (IDE) study), and HCPCS code C9783 (Blinded procedure 
for transcatheter implantation of coronary sinus reduction device or 
placebo control, including vascular access and closure, right heart 
catherization, venous and coronary sinus angiography, imaging guidance 
and supervision and interpretation when performed in an approved 
Investigational Device Exemption (IDE) study).
    For CY 2023, we propose to make a single blended payment, and 
establish a new HCPCS code or revise an existing HCPCS code for devices 
and services in Category B IDE studies when the Medicare coverage IDE 
study criteria at Sec.  405.212 are met and where CMS determines, that 
a new or revised code and/or payment rate is necessary to preserve the 
scientific validity of such a study. We intend that this proposal would 
preserve the scientific validity of these studies by avoiding 
differences in Medicare payment methods that would otherwise reveal the 
group (treatment or control) to which a patient has been assigned. For 
example, it is expected that in a typical study, those receiving the 
placebo may have a lesser Medicare payment due to absence of the 
Category B device, and therefore, the payment amount may unblind the 
study and compromise its scientific validity. As has occurred 
previously, we anticipate interested parties will engage with us and 
notify us, for instance, if they have concerns that an existing HCPCS 
code may compromise the scientific validity of a Category B IDE study.
    Therefore, we propose to create a new HCPCS code or revise an 
existing HCPCS code to describe a Category B IDE device and study, 
which would include both the treatment and control arms and related 
device(s), as well as routine care items and services as specified 
under Sec.  405.201, if we determine it is necessary to do so to 
preserve the scientific validity of the study; we would assign the new 
or revised code a blended payment rate. We would do this where the 
coding would compromise the scientific validity of the study. The 
single blended payment rate would be dependent on the specific trial 
protocol and would account for the frequency with which the 
investigational device is used compared to placebo. For example, in a 
study, for which CMS determines the Medicare coverage IDE study 
criteria in Sec.  405.212 are met and where there is a 1:1 assignment 
of the device to placebo (no device), Medicare's payment rate would 
prospectively average the payment for the device with the zero payment 
for the placebo in a 1:1 ratio. Furthermore, costs for routine care 
items and services, as specified under Sec.  405.201 in the study would 
be included in the single blended payment.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review 
not less often than annually and revise the groups, the relative 
payment weights, and the wage and other adjustments to take into 
account changes in medical practice, changes in technology, the 
addition of new services, new cost data, and other information and 
factors. Consistent with this requirement, we propose this policy to 
ensure we pay appropriately under the OPPS for Category B IDE devices 
and studies in a manner that preserves the studies' scientific 
validity. This proposal is similar to our standard practice of setting 
payment rates based on the frequency of resources used. Our proposal to 
create new HCPCS codes or revise existing HCPCS codes to operationalize 
our proposal to make a single payment for the blended cost of the 
device depending on the frequency with which it is used in the study, 
together with the study costs, is consistent with our historical 
practice of creating new codes for OPPS and ASC programmatic needs. We 
note that, in addition to our general authority to review and revise 
the APC groups and the relative payment weights in section 
1833(t)(9)(A) of the Act, section 1833(w) of the Act is additional 
authority that would support our proposal. In particular, section 
1833(w) of the Act authorizes the Secretary to develop alternative 
methods of payment for items and services provided under clinical 
trials and comparative effectiveness studies sponsored or supported by 
an agency of the Department of Health and Human Services, as determined 
by the Secretary, to those that would otherwise apply under section 
1833, to the extent such alternative methods are necessary to preserve 
the scientific validity of such trials or studies. For example, 
Medicare may make an alternative method of payment for items and 
services provided under clinical trials where masking the identity of 
interventions from patients and investigators is necessary to comply 
with the particular trial or study design. We are inviting comments on 
our proposal.
4. Proposed Coding and Payment for Category B IDE Studies Regulation 
Text Changes
    We propose to codify our proposed process of utilizing a single 
packaged payment for Category B IDE studies, including the cost of the 
device and routine care items and services, in the regulation text for 
payment to hospitals in a new Sec.  419.47. In particular, we propose 
to provide in new Sec.  419.47(a) that CMS will create a new HCPCS 
code, or revise an existing HCPCS code, to describe a Category B IDE 
study, which would include both the treatment and control arms, related 
device(s) of the study, as well as routine care items and services, as 
specified under Sec.  405.201, when CMS determines that the Medicare 
coverage IDE study criteria at Sec.  405.212 are met, and a new or 
revised code is necessary to preserve the scientific validity of the 
IDE study. Additionally, in a new section, Sec.  419.47(b), we propose 
that when we create a new HCPCS code or revise an existing HCPCS code 
under proposed paragraph (a), we will make a single packaged payment 
for the HCPCS code that includes payment for the investigational 
device, placebo control, and routine care items and services of a 
Category B IDE study, as specified under Sec.  405.201. The payment 
would be based on the average resources utilized for each study 
participant. For example, the payment would account for the frequency 
with which the investigational device is used in the study population.

G. OPPS Payment for Software as a Service

1. Background on Clinical Software and OPPS Add-on Codes Policy
    Rapid advances in innovative technology are having a profound 
effect on every facet of health care delivery. Novel and evolving 
technologies are introducing advances in treatment options that have 
the potential to increase access to care for Medicare beneficiaries, 
improve outcomes, and reduce overall costs to the program. In some 
cases, these innovative technologies are substituting for more invasive 
care and/or augmenting the practice of medicine.
    New clinical software, which includes clinical decision support 
software, clinical risk modeling, and computer aided detection (CAD), 
are becoming increasingly available to providers. These technologies 
often perform data analysis of diagnostic images from patients. While 
many of these technologies are new, we note that clinical software, 
particularly CAD, has

[[Page 44685]]

been used to aid or augment clinical decision making for decades. These 
technologies rely on complex algorithms or statistical predictive 
modeling to aid in the diagnosis or treatment of a patient's condition. 
We refer to these algorithm-driven services that assist practitioners 
in making clinical assessments, and that providers pay for either on a 
subscription or per-use basis, as Software as a Service (SaaS).
    Starting in 2018, we began making payment for the SaaS procedure 
Fractional Flow Reserve Derived from Computed Tomography (FFRCT), also 
known by the trade name HeartFlow. 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 SaaS procedure is intended for clinically stable symptomatic 
patients with coronary artery disease, and, in many cases, its use may 
eliminate 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 patients should undergo further invasive 
testing (that is, a coronary angiogram).
    For many services paid under the OPPS, payment for analytics that 
are performed after the main diagnostic/image procedure are packaged 
into the payment for the main diagnostic/image procedure (i.e., the 
primary service). In the CY 2018 OPPS/ASC final rule, however, we 
determined that it was appropriate for HeartFlow to receive a separate 
payment because the analytics are performed by a separate entity (that 
is, a HeartFlow technician who conducts computer analysis offsite) 
rather than the provider performing the CT scan (82 FR 52422 through 
52425). 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 SaaS procedure that 
indicated the price of the procedure was approximately $1,500. In CY 
2020, we utilized our low-volume payment policy to calculate 
HeartFlow's arithmetic mean to assign it to New Technology APC 1511 
(New Technology --Level 11 ($901-$1000)) with a payment rate of $950.00 
(84 FR 61220 through 61221). We continued this APC assignment in CY 
2021 and CY 2022 using our equitable adjustment authority (84 FR 85941 
through 85943; 86 FR 63533 through 63535). For CY 2023, we propose to 
move HeartFlow (HCPCS 0503T) from New Technology APC 1511 to APC 5724 
(Level 4 Diagnostic Tests and Related Services), a clinical APC, as we 
believe we have enough data to make an appropriate clinical APC 
assignment for HeartFlow. We direct readers to section III.E of this 
proposed rule for a more detailed discussion of the proposed Heartflow 
clinical APC assignment.
    While HeartFlow was the first SaaS procedure for which we made 
separate payment under the OPPS, we have since begun paying for other 
SaaS procedures In CY 2021, we assigned CPT code 92229 (Imaging of 
retina for detection or monitoring of disease; point-of-care automated 
analysis and report, unilateral or bilateral), an artificial 
intelligence system to detect diabetic retinopathy known as IDx-DR to 
APC 5733 with the status indicator ``S'' (85 FR 85960 to 85961). IDx-DR 
uses an artificial intelligence algorithm to review images of a 
patient's retina to provide a clinical decision as to whether the 
patient needs to be referred to an eyecare professional for diabetic 
retinopathy or rescreened in twelve months (negative for mild diabetic 
retinopathy). Also, in CY 2021, we began paying for CPT code 0615T 
(Eye-movement analysis without spatial calibration, with interpretation 
and report), which involves the use of the EyeBOX system as an aid in 
the diagnosis of concussion. We assigned EyeBOX to APC 5734 with the 
status indicator ``Q1,'' to indicate that the code is conditionally 
packaged when performed with another service on the same day (85 FR 
85952 to 85953).
    Over the past several years, the AMA has established several codes 
that describe SaaS procedures. HeartFlow, IDx-DR, and the EyeBox System 
are each described by single CPT codes. But for a procedure known by 
the tradename LiverMultiScan, the CPT editorial panel created two CPT 
codes for CY 2022, a primary code and an add-on code:
     0648T: Quantitative magnetic resonance for analysis of 
tissue composition (e.g., fat, iron, water content), including 
multiparametric data acquisition, data preparation and transmission, 
interpretation and report, obtained without diagnostic MRI examination 
of the same anatomy (e.g., organ, gland, tissue, target structure) 
during the same session.
     0649T: Quantitative magnetic resonance for analysis of 
tissue composition (e.g., fat, iron, water content), including 
multiparametric data acquisition, data preparation and transmission, 
interpretation and report, obtained with diagnostic MRI examination of 
the same anatomy (e.g., organ, gland, tissue, target structure) (List 
separately in addition to code for primary procedure).
    LiverMultiScan uses clinical software to aid the diagnosis and 
management of chronic liver disease through analysis using proprietary 
algorithms of MR images acquired from patients' providers. As described 
above, the coding for LiverMultiScan is bifurcated into CPT code 0648T, 
billable when LiverMultiScan is used to analyze already existing 
images, and CPT add-on code 0649T, describing the LiverMultiScan 
software analysis, which is adjunctive to the acquisition of the MR 
images. In accordance with our OPPS policy, we review all new CPT codes 
and, for those that are payable under the OPPS, we assign them to 
appropriate APCs and make status indicator assignments for them. In the 
CY 2022 OPPS/ASC final rule with comment period, we assigned CPT code 
0648T to New Technology APC 1511 (86 FR 63542). Given the dependent 
nature and adjunctive characteristics of procedures described by add-on 
codes and in light of our longstanding OPPS packaging principles, 
payment for add-on codes is generally packaged into the primary 
procedure. In the CY 2014 OPPS/ASC final rule with comment period (78 
FR 74942 through 74945) and in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66817 through 66818), we stated that procedures 
described by add-on codes represent an extension or continuation of a 
primary procedure, which means they are ancillary, supportive, 
dependent, or adjunctive to a primary service. Add-on codes describe 
services that are always performed in addition to a primary procedure 
and are never reported as a stand-alone code. Because the second 
LiverMultiScan code--CPT code 0649T--is an add-on code, in accordance 
with our current OPPS policy, we packaged payment for it with the 
primary service with which it is furnished, rather than paying for it 
separately as we do for the primary LiverMultiScan code--CPT code 0648T 
(86 FR 63541 through 63543).
2. Recent CPT Codes for SaaS Procedures
    The AMA has continued to establish new CPT codes that describe SaaS 
procedures using two codes: a primary code that describes the 
standalone clinical software service and an add-on code that describes 
a clinical software service that is adjunctive to and billed concurrent 
with a diagnostic imaging service. The standalone code is billed

[[Page 44686]]

when no additional imaging is required because raw images from a prior 
scan are available for the software to analyze, while the add-on code 
is billed with an imaging service when a prior imaging scan is 
unavailable, or the prior images are insufficient. If a patient needs a 
SaaS procedure and has no existing diagnostic images, the patient would 
undergo the diagnostic imaging (i.e., CT or MRI), and the SaaS 
procedure. In this scenario, the provider would report the diagnostic 
imaging service code and the SaaS add-on code on the same day of 
service. In contrast, if a patient has pre-existing diagnostic images, 
the provider would only need to perform the SaaS procedure and would 
only report the standalone SaaS code.
    Please see Table 49 for recent CPT codes for SaaS procedures, 
including LiverMultiScan. For CY 2022, the CPT Editorial Panel also 
established CPT codes 0721T, 0722T, 0723T, and 0724T.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP26JY22.069


[[Page 44687]]


[GRAPHIC] [TIFF OMITTED] TP26JY22.070

BILLING CODE 4120-01-C
    The standalone codes associated with LiverMultiScan (CPT code 
0648T), Optellum LCP (CPT code 0721T), and QMRCP (CPT code 0723T) are 
paid separately under the OPPS and assigned to specific APCs as 
described in Table 49. However, according to our existing packaging 
policy, we would package payment for the add-on codes, specifically, 
CPT codes 0649T, 0722T, and 0724T, into the associated diagnostic 
imaging service.
3. CY 2023 Proposal for SaaS Add-on Codes
    From 2021 to 2022, we reviewed and approved New Technology 
applications for the LiverMultiScan, Optellum, and QMRCP SaaS 
procedures. LiverMultiScan was assigned to a New Technology APC 
effective January 1, 2022, and Optellum and QMRCP were assigned to New 
Technology APCs effective July 1, 2022. While the standalone codes for 
these services are assigned to New Technology APCs and are separately 
payable, applicants have informed us that the services described by the 
add-on codes, specifically, CPT codes 0649T, 0722T, and 0724T, should 
also be paid separately because the technologies are new and associated 
with significant costs.
    Although the CPT Editorial Panel has designated these codes as add-
on codes, the services described by CPT codes 0649T, 0722T, and 0724T 
are not consistent with our definition of add-on services. In many 
instances, the costs associated with the add-on codes exceed the costs 
of the imaging service with which they would be billed, and we believe 
these add-on codes describe separate and distinct services that should 
be paid separately, rather than as services that are ancillary, 
supportive, dependent, or adjunctive to a primary service into which 
their payment is packaged. Therefore, for CY 2023, we propose not to 
recognize the select CPT add-on codes that describe SaaS procedures 
under the OPPS and instead establish HCPCS codes, specifically, C-
codes, to describe the add-on codes as standalone services that would 
be billed with the associated imaging service. We believe the payment 
for the proposed C-codes describing the SaaS procedures with add-on CPT 
codes, when billed concurrent with the acquisition of the images, 
should be equal to the payment for the SaaS procedures when the 
services are furnished without imaging and described by the standalone 
CPT code because the SaaS procedure is the same regardless of whether 
it is furnished with or without the imaging service. Therefore, we 
propose the C-codes be assigned to identical APCs and have the same 
status indicator assignments as their standalone codes.
    For the LiverMultiScan service, we propose not to recognize CPT 
code 0649T under the OPPS and instead propose to establish C97X1 to 
describe the analysis of the quantitative magnetic resonance images 
that must be billed alongside the relevant CPT code describing the 
acquisition of the images.

[[Page 44688]]

Below is the proposed long descriptor for the service:
     C97X1: Quantitative magnetic resonance analysis of tissue 
composition (e.g., fat, iron, water content), includes multiparametric 
data acquisition, preparation, transmission, interpretation and report, 
performed in the same session and/or same date with diagnostic MRI 
examination of the same anatomy (e.g., organ, gland, tissue, target 
structure).
    For the Optellum LCP service, we propose not to recognize CPT code 
0722T and instead propose to establish C97X2 to describe the use of 
Optellum LCP that must be billed alongside a concurrent CT scan. Below 
is the proposed long descriptor for the service:
     C97X2: Quantitative computed tomography (CT) tissue 
characterization, includes data acquisition, preparation, transmission, 
interpretation and report, performed in the same session and/or same 
date with concurrent CT examination of any structure contained in the 
acquired diagnostic imaging dataset.
    For the QMRCP service, we propose not to recognize CPT code 0724T 
and instead propose to establish C97X3 to describe the use of QMRCP 
that must be billed alongside a concurrent CT scan. Below is the 
proposed long descriptor for the service:
     C97X3: Quantitative magnetic resonance 
cholangiopancreatography (QMRCP) includes data acquisition, 
preparation, transmission, interpretation and report, performed in the 
same session and/or same date with diagnostic magnetic resonance 
imaging (MRI) examination of the same anatomy (e.g., organ, gland, 
tissue, target structure).
    The proposed payment rates for C97X1, C97X2, and C97X3, as well as 
the standalone CPT codes that describe the same SaaS procedures, can be 
found in Addendum B to this proposed rule, which is available via the 
CMS website.
4. Comment Solicitation on Payment Policy for SaaS Procedures
    Consistent with our OPPS payment policies, we review new CPT codes 
and determine whether the items or services described by the codes are 
appropriate for payment under the OPPS. For codes that are appropriate 
for payment, we propose the appropriate payment indicator, known as the 
status indicator (SI) under the OPPS, and APC assignment, according to 
our OPPS policies. We note the new SaaS procedures have been assigned 
Category III CPT codes by the AMA. Because we generally do not have 
hospital claims data for new codes, the payment indicator and APC 
assignments are determined based on several factors, which include but 
are not limited to:
     Review of resource costs and clinical similarity of the 
service to existing procedures;
     Input from our medical advisors; and
     Other information available to us (75 FR 71909).
    Although we have begun paying separately for SaaS procedures under 
the OPPS relatively recently, with the HeartFlow procedure being the 
first separately payable SaaS procedure in CY 2018, we recognize that 
certain clinical decision support software, including machine learning 
or ``AI,'' has been available for many years. In the past ten years, 
clinical decision support software has been commonly used alongside 
electronic medical records by medical practitioners. Nonetheless, the 
number of FDA approved or cleared ``machine learning'' or ``AI'' 
clinical software programs has rapidly increased in the past few years. 
We note that the FDA has approved many SaaS procedures for similar 
functions: there are at least six software products that purport to 
detect findings in Computed Tomography studies of the chest.\139\ 
Additionally, we note some clinical software developers are now using 
alternative licensing that charges per use rather than using the 
traditional annual subscription or bulk use subscription. Empirical 
research has shown that pay-per-use may lead to overuse of ``AI'' 
technology.\140\ As a result of these variables and potentially others, 
there is significant price variation within the SaaS procedure space.
---------------------------------------------------------------------------

    \139\ https://www.fda.gov/medical-devices/software-medical-device-samd/artificial-intelligence-and-machine-learning-aiml-enabled-medical-devices.
    \140\ https://www.nature.com/articles/s41746-022-00609-6.pdf.
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    We recognize that, as described in the introduction to this 
section, SaaS procedures are a heterogenous group of services, which 
presents challenges when it comes to adopting payment policy for SaaS 
procedures as a whole. Due to the novel and evolving nature of these 
technologies, it has been challenging to compare some SaaS procedures 
to existing medical services for purposes of determining clinical and 
resource similarity.
    We are therefore soliciting public comment on a payment approach 
that would broadly apply to SaaS procedures, including:
     How to identify services that should be separately 
recognized as an analysis distinct from both the underlying imaging 
test or the professional service paid under the PFS;
     How to identify costs associated with these kinds of 
services;
     How these services might be available and paid for in 
other settings (physician offices, for example); and
     How we should consider payment strategies for these 
services across settings of care.
    We are also seeking comment on the specific payment approach we 
might use for these services under the OPPS as SaaS-type technology 
becomes more widespread across healthcare which are not limited to 
imaging services. For example, we could consider packaging payment for 
the diagnostic image and the SaaS procedure under new HCPCS codes, 
(i.e., G-codes), to efficiently and cost-effectively pay for SaaS 
procedures. These G-codes could broadly describe the diagnostic image 
service and any SaaS procedure performed. Under this approach, the OPPS 
would not recognize either the standalone or the add-on codes 
describing SaaS procedures. Instead, all associated imaging and the 
SaaS would be described by a single HCPCS code, which could be assigned 
to a relevant clinical APC. An example of this would be hypothetical 
code GXXX1 (Computed tomography, thorax, diagnostic; with or without 
contrast material and with concurrent or subsequent computed analysis 
of the original image for further interpretation and report using a 
standardized computing instrument.), which describes both diagnostic 
imaging and any associated SaaS for the thorax region of the body and 
could be assigned to APC 5573 (Level 3 Imaging with Contrast).
    Alternatively, we could expand composite APCs, which provide a 
single payment for groups of services that are performed together, 
including the diagnostic imaging and SaaS procedure, during a single 
clinical encounter to result in the provision of a complete service.
    A third approach could utilize HCPCS codes (i.e., G- or C- codes) 
to describe both the diagnostic imaging and the SaaS procedure, and 
then assign the code that describes the combined services to New 
Technology APCs that would pay for both services.
    We welcome input from interested parties on these payment 
approaches and any additional payment approaches that would enhance our 
ability to provide equitable payment for SaaS procedures while 
protecting the Medicare trust fund.
    Finally, we are aware that bias in software algorithms has the 
potential to disparately affect the health of certain

[[Page 44689]]

populations.\141\ Therefore, in addition to our comment solicitation on 
payment approaches, we are seeking comments on how we could encourage 
software developers and other vendors to prevent and mitigate bias in 
their algorithms and predictive modeling. We would also appreciate 
feedback on how we can accurately evaluate and ensure that the 
necessary steps have been taken to prevent and mitigate bias in 
software algorithms to the extent possible.
---------------------------------------------------------------------------

    \141\ https://www.science.org/doi/10.1126/science.aax2342.
---------------------------------------------------------------------------

H. Proposed Payment Adjustments under the IPPS and OPPS for Domestic 
NIOSH-Approved Surgical N95 Respirators

    In the FY 2023 IPPS/LTCH PPS proposed rule, we requested public 
comments on potential IPPS and OPPS payment adjustments for wholly 
domestically made National Institute for Occupational Safety & Health 
(NIOSH)-approved surgical N95 respirators (87 FR 28622 through 28625). 
Given the importance of NIOSH-approved surgical N95 respirators in 
protecting hospital personnel and beneficiaries from the SARS-CoV-2 
virus and future respiratory pandemic illnesses, we indicated we were 
considering whether it might be appropriate to provide payment 
adjustments to hospitals to recognize the additional resource costs 
they incur to acquire NIOSH-approved surgical N95 respirators that are 
wholly domestically made. We stated that NIOSH-approved surgical N95 
respirators, which faced severe shortage at the onset of the COVID-19 
pandemic, are essential for the protection of patients and hospital 
personnel that interface with patients. We indicated that procurement 
of NIOSH-approved surgical N95 respirators that are wholly domestically 
made, while critical to pandemic preparedness and protecting health 
care workers and patients, can result in additional resource costs for 
hospitals.
    We said we were interested in feedback and comments on the 
appropriateness of payment adjustments that would account for these 
additional resource costs. We stated that we believe such payment 
adjustments could help achieve a strategic policy goal, namely, 
sustaining a level of supply resilience for NIOSH-approved surgical N95 
respirators that is critical to protect the health and safety of 
personnel and patients in a public health emergency. We stated we were 
considering such payment adjustments for 2023 and potentially 
subsequent years.
    As described in more detail in the sections that follow, and for 
the reasons discussed, we propose to make a payment adjustment under 
the OPPS and IPPS for the additional resource costs of domestic NIOSH-
approved surgical N95 respirators for cost reporting periods beginning 
on or after January 1, 2023.
2. General Background and Overview of Proposal
    As discussed in the FY 2023 IPPS/LTCH PPS proposed rule, President 
Biden issued Executive Order (E.O.) 13987, titled ``Organizing and 
Mobilizing the United States Government To Provide a Unified and 
Effective Response To Combat COVID-19 and To Provide United States 
Leadership on Global Health and Security'' on January 20, 2021 (86 FR 
7019). This order launched a whole-of-government approach to combat the 
coronavirus disease 2019 (COVID-19) and prepare for future biological 
and pandemic threats. This response has continued over the past year. 
In March 2022, President Biden released the National COVID-19 
Preparedness Plan that builds on the progress of the prior 13 months 
and lays out a roadmap to fight COVID-19 in the future.\142\ Both the 
ongoing threat of COVID-19 and the potential for future pandemics 
necessitate significant investments in pandemic preparedness.
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    \142\ White House, National COVID-19 Preparedness Plan, March 
2022; https://www.whitehouse.gov/wpcontent/uploads/2022/03/NAT-COVID-19-PREPAREDNESS-PLAN.pdf.
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    Availability of personal protective equipment (PPE) in the health 
care sector is a critical component of this preparedness, and one that 
displayed significant weakness in the beginning of the COVID-19 
pandemic. In spring of 2020, supply chains for PPE faced severe 
disruption due to lockdowns that limited production, and unprecedented 
demand spikes across multiple industries. Supply of surgical N95 
respirators--a specific type of filtering facepiece respirator used in 
clinical settings--was one type of PPE that was strained in hospitals. 
So-called ``just-in-time'' supply chains that minimize stockpiling, in 
addition to reliance on overseas production, left U.S. hospitals unable 
to obtain enough surgical N95 respirators to protect health care 
workers. Prices for surgical N95s soared, from an estimated $0.25-$0.40 
range \143\ to $5.75 \144\ or even $12.00 in some cases.\145\ Unable to 
obtain surgical N95s regulated by NIOSH, hospitals had to turn to 
KN95s--a Chinese standard of respirator-- and other non-NIOSH-approved 
disposable respirators that were authorized under Emergency Use 
Authorization (EUA). Concerns were raised during the COVID-19 pandemic 
regarding counterfeit respirators. NIOSH evaluates and approves 
surgical N95s to meet efficacy standards for air filtration and 
protection from fluid hazards present during medical procedures. KN95 
respirators, on the other hand, are not regulated by NIOSH. KN95s have 
faced particular counterfeit and quality risks--with NIOSH finding that 
about 60 percent of KN95 respirators that it evaluated during the 
COVID-19 pandemic in 2020 and 2021 did not meet the particulate filter 
efficiency requirements that they intended to meet.\146\ Failure to 
meet these requirements compromises safety of health care personnel and 
patients.
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    \143\ Department of Health and Human Services, Office of the 
Assistant Secretary for Preparedness and Response, Supply Chain 
Control Tower analysis.
    \144\ Society for Healthcare Organization Procurement 
Professionals, COVID-19 PPD Cost Analysis, April 2020; http://cdn.cnn.com/cnn/2020/images/04/16/shopp.covid.ppd.costs.analysis_.pdf.
    \145\ Washington Post, ``U.S. sent millions of face masks to 
China early this year, ignoring pandemic warning signs,'' April 
2020; https://www.washingtonpost.com/health/us-sent-millions-of-face-masks-to-china-early-this-yearignoring-pandemic-warning-signs/2020/04/18/aaccf54a-7ff5-11ea-8013-1b6da0e4a2b7_story.html.
    \146\ U.S. Centers for Disease Control and Prevention ``Types of 
Masks and Respirators'';https://www.cdc.gov/coronavirus/2019-ncov/prevent-getting-sick/types-of-masks.html.
---------------------------------------------------------------------------

    Over the course of the pandemic, U.S. industry responded to the 
shortages and dramatically increased production of N95s. Today, the 
majority of surgical N95s purchased by hospitals are assembled in the 
U.S., and prices have returned to rates closer to $0.70 per 
respirator.\147\ However, risks remain to maintain preparedness for 
COVID-19 and future pandemics. It is important to maintain this level 
of domestic production for surgical N95s, which provide the highest 
level of protection from particles when worn consistently and properly, 
protecting both health care personnel and patients from the transfer of 
microorganisms, body fluids, and particulate material--including the 
virus that causes COVID-19. Additionally, it is important as a long-
term goal to ensure that a sufficient share of those surgical N95s are 
wholly made in the U.S.--that is, including raw materials and 
components. The COVID-

[[Page 44690]]

19 pandemic has illustrated how overseas production shutdowns, foreign 
export restrictions, or ocean shipping delays can jeopardize 
availability of raw materials and components needed to make critical 
public health supplies. In a future pandemic or COVID-19-driven surge, 
hospitals need to be able to count on PPE manufacturers to deliver the 
equipment they need on a timely basis in order to protect health care 
workers and their patients. Sustaining a level of wholly domestic 
production of surgical N95 respirators is integral to maintaining that 
assurance.
---------------------------------------------------------------------------

    \147\ Department of Health and Human Services, Office of the 
Assistant Secretary for Preparedness and Response, Supply Chain 
Control Tower analysis
---------------------------------------------------------------------------

    This policy goal--ensuring that quality PPE is available to health 
care personnel when needed by maintaining production levels of wholly 
domestically made PPE-- is emphasized in the National Strategy for a 
Resilient Public Health Supply Chain, published in July 2021 as a 
deliverable of President Biden's Executive Order 14001 on ``A 
Sustainable Public Health Supply Chain.'' To help achieve this goal, 
the U.S. Government is committing to purchase wholly domestically made 
PPE in line with new requirements in section 70953 of the 
Infrastructure Investment and Jobs Act (Pub. L. 117-58). These new 
contract requirements stipulate that PPE purchased by covered 
departments must be wholly domestically made--that is, the products as 
well as their materials and components must be grown, reprocessed, 
reused, or produced in the U.S.
    The Federal Government's procurement of wholly domestically made 
PPE will help achieve the stated policy goal. However, the U.S. 
Government alone cannot sustain the necessary level of production. As 
outlined in the previously mentioned National Strategy for a Resilient 
Public Health Supply Chain, the U.S. Government is only one small part 
of the market for PPE. Hospitals are the primary purchasers and users 
of medical PPE including surgical N95 respirators. Sustaining a strong 
domestic industrial base for PPE--in order to be prepared for future 
pandemics or COVID-19-driven surges and protect Americans' health 
during such times--therefore, requires hospitals' support.
    Surgical N95 respirators are a particularly critical type of PPE 
needed to protect personnel and beneficiaries from the SARS-CoV-2 virus 
and future respiratory pandemic illnesses. However, wholly domestically 
made NIOSH-approved surgical N95 respirators are generally more 
expensive than foreign-made ones. Therefore, we stated in the FY 2023 
IPPS/LTCH PPS proposed rule that we believe a payment adjustment that 
reflects, and offsets, the additional marginal costs that hospitals 
face in procuring wholly domestically made NIOSH-approved surgical N95 
respirators might be appropriate. These marginal costs are due to 
higher prices for wholly domestically made NIOSH-approved surgical 
N95s, which, in turn, primarily stem from higher costs of manufacturing 
labor in the U.S. compared to costs in countries such as China, where 
many N95 and other respirators are made. We stated that such a payment 
adjustment might provide sustained support over the long term to 
hospitals that purchase wholly domestically made NIOSH-approved 
surgical N95 respirators, and could help safeguard personnel and 
beneficiary safety over the long term by sustaining production and 
availability of these respirators.
    As previously noted, in the FY 2023 IPPS/LTCH PPS proposed rule, we 
requested public comments on potential IPPS and OPPS payment 
adjustments for wholly domestically made NIOSH-approved surgical N95 
respirators. We received many comments that were helpful in developing 
the proposed payment adjustment discussed later in this section. For 
instance, many commenters were supportive of a payment adjustment, 
acknowledging the importance of surgical N95 respirators in keeping 
health care workers and patients safe and attesting to the difficulties 
of procuring surgical N95 respirators during the height of the COVID-19 
pandemic. The majority of commenters supported an approach of CMS 
making biweekly interim lump-sum payments that would be reconciled at 
cost report settlement, although some commenters preferred a claims-
based approach. Many commenters urged CMS to minimize the 
administrative burden on hospitals in the development of any N95 
payment policy. We also acknowledge the comments of MedPAC and others 
stating that Medicare payment policy is not the most appropriate 
mechanism to support domestic manufacturing of medical supplies. As 
discussed, because hospitals are the primary purchasers and users of 
medical PPE, including surgical N95 respirators, we believe a payment 
adjustment that reflects the additional marginal costs that hospitals 
face in procuring wholly domestically made NIOSH-approved surgical N95 
respirators may help to sustain their domestic production and 
availability, and thereby help to safeguard personnel and beneficiary 
safety over the long term. We thank everyone who submitted comments for 
their feedback.
    We propose to make a payment adjustment under the OPPS and IPPS for 
the additional resource costs that hospitals face in procuring domestic 
NIOSH-approved surgical N95 respirators, as defined in Section X.H.3 of 
this proposed rule, for cost reporting periods beginning on or after 
January 1, 2023. For the IPPS, we propose to make this payment 
adjustment under section 1886(d)(5)(I) of the Act, which authorizes the 
Secretary to provide by regulation for such other exceptions and 
adjustments to the payment amounts under section 1886(d) of the Act as 
the Secretary deems appropriate. For the OPPS, we propose to make this 
payment adjustment under section 1833(t)(2)(E) of the Act, which 
authorizes the Secretary to establish, in a budget neutral manner, 
other adjustments as determined to be necessary to ensure equitable 
payments.
3. Proposed Definition of Domestic NIOSH-approved Surgical N95 
Respirators
    For purposes of this policy, we propose to categorize all NIOSH-
approved surgical N95 respirators purchased by hospitals into two 
categories: (1) Domestic NIOSH-approved surgical N95 respirators; and 
(2) Non-domestic NIOSH-approved surgical N95 respirators.
    As discussed, it is critically important to ensure that a 
sufficient share of surgical N95s are wholly made in the U.S.--that is, 
including raw materials and components. We believe that the most 
appropriate framework for determining if a NIOSH-approved surgical N95 
respirator is wholly made in the U.S. and therefore, considered 
domestic for purposes of the proposed adjustments, is the Berry 
Amendment. The Berry Amendment is a statutory requirement familiar to 
manufacturers that restricts the Department of Defense (DoD) from using 
funds appropriated or otherwise available to DoD for procurement of 
food, clothing, fabrics, fibers, yarns, other made-up textiles, and 
hand or measuring tools that are not grown, reprocessed, reused, or 
produced in the United States.\148\ Berry Amendment restrictions are 
implemented by the DoD Federal Acquisition Regulation Supplement 
(DFARS) 252.225-7002, and State DOD cannot acquire specified ``items, 
either as end products or components, unless the items have been grown, 
reprocessed, reused, or produced in the United States.'' \149\ Unless 
DOD grants a waiver

[[Page 44691]]

because domestic firms do not make the product or because other 
exceptions in the law are met, the entire production process of an 
affected product, from the production of raw materials to the 
manufacture of all components to final assembly, must be performed in 
the United States.\150\
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    \148\ https://www.trade.gov/berry-amendment.
    \149\ https://www.trade.gov/berry-amendment-implementation.
    \150\ https://sgp.fas.org/crs/misc/R44850.pdf.
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    The Berry Amendment has been critical to the viability of the 
textile and clothing production base in the United States and has been 
critical to maintaining the safety and security of our armed forces, by 
requiring covered items to be produced in the United States.\151\ We 
believe that using the Berry Amendment as the basis for defining 
domestic NIOSH-approved surgical N95 respirators will provide similar 
support to U.S. surgical N95 respirator manufacturers and help ensure 
that quality surgical N95 respirators are available to health care 
personnel when needed.
---------------------------------------------------------------------------

    \151\ https://www.trade.gov/berry-amendment.
---------------------------------------------------------------------------

    Therefore, based on the Berry Amendment, we propose to define a 
NIOSH-approved surgical N95 respirator as domestic if the respirator 
and all of its components are grown, reprocessed, reused, or produced 
in the United States. We propose that for purposes of this policy all 
other NIOSH-approved surgical N95 respirators would be non-domestic.
    We recognize that a hospital cannot fully independently determine 
if a NIOSH-approved surgical N95 respirator it purchases is domestic 
under our proposed definition. Therefore, we propose that a hospital 
may rely on a written statement from the manufacturer stating that the 
NIOSH-approved surgical N95 respirator the hospital purchased is 
domestic under our proposed definition. The written statement must have 
been certified by one of the following: (i) the manufacturer's Chief 
Executive Officer (CEO); (ii) the manufacturer's Chief Operating 
Officer (COO); or (iii) an individual who has delegated authority to 
sign for, and who reports directly to, the manufacturer's CEO or COO. 
The written statement, or a copy of such statement, could be obtained 
by the hospital directly from the manufacturer, obtained through the 
supplier or Group Purchasing Organization (GPO) for the hospital who 
obtained it from the manufacturer, or obtained by the hospital because 
it was included with or printed on the packaging by the manufacturer. 
This written statement may be required to substantiate the data 
included on the supplemental cost reporting form as discussed in 
section X.H.5 of this proposed rule. The recordkeeping requirements at 
current Sec.  413.20, require providers of services to maintain 
sufficient financial records and statistical data for proper 
determination of costs payable under Medicare.
4. Proposed Payment Adjustment Amount Under the IPPS and OPPS for 
Domestic NIOSH-approved Surgical N95 Respirators
    We expect that domestic NIOSH-approved surgical N95 respirators 
will continue to be generally more costly than non-domestic 
respirators. However, it is challenging to precisely predict and 
quantify the future cost differences given the dynamic nature of the 
current marketplace and data limitations. Therefore, we propose to 
initially base the payment adjustments on the IPPS and OPPS shares of 
the estimated difference in the reasonable costs \152\ of a hospital to 
purchase domestic NIOSH-approved surgical N95 respirators compared to 
non-domestic respirators. These payments would be provided biweekly as 
interim lump-sum payments to the hospital and would be reconciled at 
cost report settlement. Under this proposal the biweekly interim lump-
sum payments would be available for cost reporting periods beginning on 
or after January 1, 2023. Any provider could make a request for these 
biweekly interim lump sum payments for an applicable cost reporting 
period, as provided under 42 CFR 413.64 (Payments to providers: 
Specific rules) and 42 CFR 412.116(c) (Special interim payments for 
certain costs). These payment amounts would be determined by the MAC, 
consistent with existing policies and procedures. In general, interim 
payments are determined by estimating the reimbursable amount for the 
year using Medicare principles of cost reimbursement and dividing it 
into twenty-six equal biweekly payments. The estimated amount is based 
on the most current cost data available, which will be reviewed and, if 
necessary, adjusted at least twice during the reporting period. (See 
CMS Pub 15-1 2405.2 for additional information.) The MACs would 
determine the interim lump-sum payments based on the data the hospital 
may provide that reflects the information that will be included on the 
N95 supplemental cost reporting form as discussed in section X.H.5 of 
this proposed rule. In future years, if finalized, the MACs would 
determine the interim biweekly lump-sum payments utilizing information 
from the prior year's surgical N95 supplemental cost reporting form, 
which may be adjusted based on the most current data available. This 
would be consistent with the current policies for medical education 
costs, and bad debts for uncollectible deductibles and coinsurance paid 
on interim biweekly basis as noted in CMS Pub 15-1 2405.2. As described 
in more detail in section X.H.5 of this proposed rule, a hospital would 
separately report on its cost report the aggregate cost and total 
quantity of domestic NIOSH-approved surgical N95 respirators and non-
domestic respirators for cost reporting periods beginning on or after 
January 1, 2023. This information, along with existing information 
already collected on the cost report as shown in section X.H.5 of this 
proposed rule, would be used to calculate a Medicare payment for the 
estimated cost differential, specific to each hospital, incurred due to 
the purchase of domestic NIOSH-approved surgical N95 respirators 
compared to non-domestic respirators.
---------------------------------------------------------------------------

    \152\ In accordance with the principles of reasonable cost as 
set forth in section 1861(v)(1)(A) of the Act and in 42 CFR 413.1 
and 413.9.
---------------------------------------------------------------------------

    As previously discussed, for the IPPS, we propose to make this 
payment adjustment for the additional resource costs of domestic NIOSH-
approved surgical N95 respirators under section 1886(d)(5)(I) of the 
Act. To further support the strategic policy goal of sustaining a level 
of supply resilience for NIOSH-approved surgical N95 respirators that 
is critical to protect the health and safety of personnel and patients 
in a public health emergency, we are not proposing to make the IPPS 
payment adjustment budget neutral under the IPPS.
    As also previously discussed, for the OPPS, we propose to make the 
payment adjustment for these additional resource costs under section 
1833(t)(2)(E) of the Act. Section 1833(t)(2)(E) of the Act provides 
that the Secretary shall establish, in a budget neutral manner, other 
adjustments (in addition to outlier and transitional pass-through 
payments) necessary to ensure equitable payments, such as adjustments 
for certain classes of hospitals. Consistent with this authority, the 
proposed OPPS payment adjustment would be budget neutral.
    As we gain more experience with this payment policy, if finalized, 
its impact on the N95 marketplace, and the data collected, we may 
revisit the approach of payments based on the reasonable costs of each 
hospital. See the discussion in section X.H.8 of this proposed rule 
regarding potential future rulemaking to refine our proposed approach.

[[Page 44692]]

5. Proposed Calculation of the OPPS and IPPS Payment Adjustments on the 
Cost Report
    In order to calculate the N95 payment adjustment for each eligible 
cost reporting period, we propose to create a new supplemental cost 
reporting form that will collect from hospitals the additional 
information described in this section. This information would be used 
along with other information already collected on the hospital cost 
report to calculate IPPS and OPPS payment adjustment amounts. The 
information collection requirements for the proposed new supplemental 
cost reporting worksheet are discussed in section XXII.F of this 
proposed rule.
    In this section we describe the information we propose to collect 
on the new supplemental cost reporting form and the proposed steps for 
determining the IPPS and OPPS payment adjustment amounts.
    Step 1--Collect additional information on the new supplemental cost 
reporting form.
    To determine the IPPS and OPPS payment adjustments, we propose to 
collect the following information on a new supplemental cost reporting 
form:
    (1) Total quantity of domestic NIOSH-approved surgical N95 
respirators purchased by hospital.\153\
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    \153\ We note for this discussion, reference to the ``hospital'' 
refers to the ``hospital and hospital healthcare complex'' that 
completes the cost report form CMS-2552-10.
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    (2) Total aggregate cost of domestic NIOSH-approved surgical N95 
respirators purchased by hospital.
    (3) Total quantity of non-domestic NIOSH-approved surgical N95 
respirators purchased by hospital.
    (4) Total aggregate cost of non-domestic NIOSH-approved surgical 
N95 respirators purchased by hospital.
    Step 2--Calculate a hospital-specific unit cost differential 
between domestic and non-domestic NIOSH-approved surgical N95 
respirators.
    With the respirator information reported on the new supplemental 
cost reporting form we propose to calculate the following statistics on 
the new cost report form:
    (1) The average cost of domestic NIOSH-approved surgical N95 
respirators purchased. This would be calculated by dividing the 
reported total aggregate cost of the domestic NIOSH-approved surgical 
N95 respirators purchased by the reported total quantity of domestic 
NIOSH-approved surgical N95 respirators purchased. If the hospital 
purchased zero NIOSH-approved surgical N95 domestic respirators, this 
value would be set to 0.
    (2) The average cost of non-domestic NIOSH-approved surgical N95 
respirators purchased. This would be calculated by dividing the 
reported total aggregate cost of the non-domestic NIOSH-approved 
surgical N95 respirators purchased by the reported total quantity of 
non-domestic NIOSH-approved respirators purchased. If the hospital 
purchased zero non-domestic NIOSH-approved surgical N95 respirators, 
this value would be set to 0.
    (3) The hospital-specific unit cost differential between domestic 
and non-domestic NIOSH-approved surgical N95 respirators. This would be 
calculated by subtracting the average cost of non-domestic NIOSH-
approved surgical N95 respirators purchased from the average cost of 
domestic NIOSH-approved surgical N95 respirators purchased. If the 
average cost of non-domestic NIOSH-approved surgical N95 respirators 
purchased is greater than the average cost of domestic NIOSH-approved 
surgical N95 respirators purchased, this value would be set to 0. As 
discussed in section X.H.8, we may consider in future rulemaking 
establishing a national minimum average cost for non-domestic NIOSH-
approved surgical N95 respirators purchased that could be used in 
determining the hospital-specific unit cost differential for hospitals 
that only purchased domestic NIOSH-approved surgical N95 respirators or 
that have unusually low average costs for their non-domestic NIOSH-
approved surgical N95 respirators.
    Step 3--Calculate a total cost differential for the purchase of 
domestic NIOSH-approved surgical N95 respirators.
    The next step in the proposed payment adjustment calculation is 
determining the total cost differential for the purchase of domestic 
NIOSH-approved surgical N95 respirators. This amount represents the 
total additional costs the hospital incurred by purchasing domestic 
NIOSH-approved surgical N95 respirators over purchasing non-domestic 
NIOSH-approved surgical N95 respirators. We propose to calculate this 
amount by multiplying the hospital-specific unit cost differential 
calculated in Step 2 by the total quantity of domestic NIOSH-approved 
surgical N95 respirators purchased reported in Step 1.
    Step 4--Determine IPPS and OPPS share of total hospital costs.
    The total cost differential calculated in Step 3 is reflective of 
all domestic NIOSH-approved surgical N95 respirators used throughout 
the hospital while treating all patients. This total cost differential 
needs to be disaggregated to estimate the additional costs incurred by 
purchasing domestic NIOSH-approved surgical N95 respirators used in 
treating patients receiving services paid under IPPS and OPPS, 
specifically. To apportion the total cost differential to the IPPS and 
OPPS services, we propose to use cost data already reported on the 
hospital cost report. We specifically propose to use the following from 
the Form CMS-2552-10:
    (a) Total costs for all inpatient routine services, ancillary 
services, outpatient services, and other reimbursable services as 
reported in Worksheet C Part I line 202 column 5.
    (b) Total Medicare Part A hospital inpatient costs as reported in 
Worksheet D-1 Part II, line 49, column 5.
    (c) Total Medicare Part B hospital outpatient costs as reported in 
Worksheet D Part V, line 202, column 5 + column 6 + column 7.
    We propose to calculate the IPPS percent share of the total cost 
differential (calculated in Step 3) as total Medicare Part A hospital 
inpatient costs (Step 4b) divided by total costs for all inpatient 
routine services, ancillary services, outpatient services, and other 
reimbursable services (Step 4a). We propose to calculate the OPPS 
percent share of the total cost differential as total Medicare Part B 
hospital outpatient costs (Step 4c) divided by total costs for all 
inpatient routine services, ancillary services, outpatient services, 
and other reimbursable services (Step 4a).
    Step 5--Determine IPPS and OPPS Payment Adjustment for Domestic 
NIOSH-Approved Surgical N95 Respirators.
    To calculate the IPPS payment adjustment for domestic NIOSH-
approved surgical N95 respirators, we propose to multiply the IPPS cost 
share (determined in Step 4) by the total cost differential for the 
purchase of domestic respirators (Step 3). To calculate the OPPS 
payment adjustment for domestic NIOSH-approved surgical N95 
respirators, we propose to multiply the OPPS cost share (determined in 
Step 4) by the total cost differential for the purchase of domestic 
respirators (Step 3). As described previously, these calculated payment 
adjustments would be reconciled against interim lump-sum payments 
received by the hospital for this policy.
    To demonstrate these calculations, in table 50 we have provided an 
example for a mock hospital that purchased both domestic and non-
domestic NIOSH-approved surgical N95 respirators during its cost 
reporting period beginning on or after January 1, 2023. The example 
shows the additional data

[[Page 44693]]

the hospital would report on its supplemental cost reporting form, the 
cost data pulled from other hospital cost report worksheets, and the 
calculations performed to determine the hospital's IPPS and OPPS 
payment adjustment for domestic NIOSH-approved surgical N95 
respirators.
BILLING CODE 4120-01-P

[[Page 44694]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.071


[[Page 44695]]


BILLING CODE 4120-01-C
6. Proposed Establishment of the OPPS Payment Adjustment for Domestic 
NIOSH-Approved Surgical N95 Respirators in a Budget Neutral Manner
    As noted earlier, section 1833(t)(2)(E) of the Act provides that 
the Secretary shall establish adjustments necessary to ensure equitable 
payments in a budget neutral manner. In order to maintain OPPS budget 
neutrality, we propose to develop a spending estimate associated with 
this proposed policy. Specifically, this spending estimate would 
reflect the OPPS payment adjustment that would be made in CY 2023 for 
the additional resource costs of domestic NIOSH-approved surgical N95 
respirators used in the treatment of OPPS patients. The data currently 
available to calculate this spending estimate is limited. However, we 
believe the proposed methodology described next to calculate this 
spending estimate for CY 2023 is reasonable based on the information 
available.
    We propose to calculate the estimated total spending associated 
with this policy by multiplying together estimates of the following:
    (1) Estimate of the total number of NIOSH-approved surgical N95 
respirators used in the treatment of OPPS patients in CY 2023.
    (2) Estimate of the difference in the average unit cost of domestic 
and non-domestic NIOSH-approved surgical N95 respirators.
    (3) Estimate of the percentage of NIOSH-approved surgical N95 
respirators used in the treatment of OPPS patients in CY 2023 that are 
domestic.
    For purposes of this estimate, we believe it is reasonable to 
assume that one NIOSH-approved surgical N95 respirator is used per OPPS 
encounter. Based on the outpatient claims volume available for 
ratesetting in this CY 2023 OPPS proposed rule, we have approximately 
103.4 million OPPS claims. Therefore, for CY 2023, we are estimating 
that the total number of NIOSH-approved surgical N95 respirators (both 
domestic and non-domestic) used in the treatment of OPPS patients in CY 
2023 is 103.4 million. Based on available data, our best estimate of 
the difference in the average unit cost of domestic and non-domestic 
NIOSH-approved surgical N95 respirators is $0.20.
    It is particularly challenging to estimate the percentage of 
domestically manufactured NIOSH-approved surgical N95 respirators that 
will be used in the treatment of OPPS patients in CY 2023. The OMB's 
Made in America Office recently conducted a data call on capacity in 
which several entities attested to being able to supply 3.6 billion 
NIOSH-approved and Berry-compliant surgical N95 respirators annually in 
the future if there were sufficient demand. We recognize that it may 
take time for this capacity to be fully reflected in hospital 
purchases. Therefore, although this would be sufficient capacity to 
supply the entire hospital industry if it were to be available and 
focused on this segment of the marketplace in 2023, we believe it is 
reasonable to assume that this will not happen instantaneously and 
hospitals in aggregate may in fact be able to purchase less than half 
of their NIOSH-approved surgical N95 respirators as domestic in 2023. 
Therefore, for purposes of this OPPS budget neutrality estimate, we 
propose to set the percentage of NIOSH-approved surgical N95 
respirators used in the treatment of OPPS patients in CY 2023 that are 
domestic to 40 percent, or slightly less than half.
    We estimate that total CY 2023 OPPS payments associated with this 
policy will be $8.3 million (or 103.4 million claims x $0.20 x 40 
percent). This represents approximately 0.01 percent of the OPPS, which 
we propose to budget neutralize through an adjustment to the OPPS 
conversion factor. We note that the volume of claims data available for 
ratesetting typically increases between the proposed and final rules, 
so this spending estimate may change. However, we believe this proposed 
methodology will best approximate CY 2023 OPPS spending associated with 
the proposed policy.
    We recognize that this proposed approach to estimating budget 
neutrality under the OPPS is based on the limited data available. If 
finalized, we may consider refining this approach for future years, 
especially once data collected on cost reports for this policy is 
available.
7. Proposed Regulation Amendments
    For the IPPS, we propose to codify this payment adjustment in the 
regulations by adding new paragraph (f) to Sec.  412.113 to specify 
that, for cost reporting periods beginning on or after January 1, 2023, 
a payment adjustment is made to a hospital for the additional resource 
costs of domestic NIOSH-approved surgical N95 respirators. The payment 
adjustment is based on the estimated difference in the reasonable cost 
incurred by the hospital for domestic NIOSH-approved surgical N95 
respirators purchased during the cost reporting period as compared to 
other NIOSH-approved surgical N95 respirators purchased during the cost 
reporting period. We also propose to make conforming changes to Sec.  
412.1(a) and Sec.  412.2(f) to reflect the proposed payment adjustment 
for the additional resource costs of domestic NIOSH-approved surgical 
N95 respirators.
    For the OPPS, we propose to codify this payment adjustment in the 
regulations by adding a new paragraph (j) to Sec.  419.43 to specify at 
new paragraph (j)(1) that, for cost reporting periods beginning on or 
after January 1, 2023, CMS makes a payment adjustment for the 
additional resource costs of domestic NIOSH-approved surgical N95 
respirators. New paragraph (j)(2) would provide that the payment 
adjustment is based on the estimated difference in the reasonable cost 
incurred by the hospital for domestic NIOSH-approved surgical N95 
respirators purchased during the cost reporting period as compared to 
other NIOSH-approved surgical N95 respirators purchased during the cost 
reporting period. Finally, new paragraph (j)(3) would state that CMS 
establishes the payment adjustment under paragraph (j)(2) in a budget 
neutral manner.
8. Alternatives Considered
    As we gain more experience with this payment policy, if finalized, 
its impact on the N95 marketplace, and the data collected, we may 
revisit our proposed approach of payments based on the reasonable costs 
of each hospital as discussed in section X.H.4 and section X.H.5 of 
this proposed rule. As one example, we might base the payment 
adjustment on the national average cost differential between a domestic 
NIOSH-approved surgical N95 respirator and a non-domestic one as 
collected on the hospital cost reports, rather than use hospital 
specific differentials. A single national average cost differential 
could continue to be implemented as biweekly interim lump-sum payments 
reconciled at cost report settlement, or it could be implemented as a 
claims-based add-on payment under the IPPS and OPPS. As another example 
of a potential future refinement, even if we were to maintain hospital 
specific differentials, it may be appropriate to establish a national 
minimum average cost for non-domestic NIOSH-approved surgical N95 
respirators for use in calculating the payment differential for a 
hospital that only uses domestic NIOSH-approved surgical N95 
respirators or that has unusually low average costs for its non-
domestic NIOSH-approved surgical respirators. We could potentially 
establish such a national minimum average cost using an appropriate 
percentile of the average unit cost of

[[Page 44696]]

non-domestic NIOSH-approved surgical N95 respirators across hospitals, 
as calculated on the cost report.
    We might also revisit in future rulemaking our proposed budget 
neutrality approach for the OPPS payments discussed in section X.H.6 of 
this proposed rule, as we gain more experience with this payment 
policy, if finalized, and the data collected.
    We received several comments on the FY 2023 IPPS/LTCH PPS proposed 
rule requesting these payment adjustments be expanded to include other 
forms of PPE such as gowns and gloves. Therefore, as we gain more 
experience with this payment policy, if finalized, we might also 
consider in future rulemaking expanding this policy to include other 
forms of PPE that are critical for responding to a public health 
emergency, including but not limited to elastomeric respirators, 
surgical/procedural masks, gloves, and medical gowns.

I. Proposal To Exempt Rural Sole Community Hospitals From the Method To 
Control Unnecessary Increases in the Volume of Clinic Visit Services 
Furnished in Excepted Off-Campus Provider-Based Departments (PBDs)

    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59004 
through 59015), we adopted a method to control unnecessary increases in 
the volume of the clinic visit service furnished in excepted off-campus 
provider-based departments (PBDs) by removing the payment differential 
that drives the site-of-service decision and, as a result, 
unnecessarily increases service volume in this care setting as compared 
to the physician's office setting. We refer readers to the CY 2019 
OPPS/ASC final rule with comment period for a detailed discussion of 
the background, legislative provisions, and rationale for the volume 
control method we adopted beginning in CY 2019. Below we discuss the 
specific policy we finalized in the CY 2019 OPPS/ASC final rule with 
comment period and its full application under the OPPS beginning in CY 
2020.
1. Implementation of a Method To Control Unnecessary Increases in the 
Volume of Certain Clinic Visit Services
    For the CY 2019 OPPS, under our authority at section 1833(t)(2)(F) 
of the Act, we applied an amount equal to the site-specific Medicare 
Physician Fee Schedule (PFS) payment rate for nonexcepted items and 
services furnished by a nonexcepted off-campus PBD (the PFS-equivalent 
rate) for the clinic visit service, as described by HCPCS code G0463, 
when provided at an off-campus PBD excepted from section 1833(t)(21) of 
the Act (departments that bill the modifier ``PO'' on claim lines). The 
PFS-equivalent rate, however, was not immediately applied in full. 
Instead, we phased in the reduction in payment for the clinic visit 
service described by HCPCS code G0463 in the excepted off-campus PBD 
setting over two years. For CY 2019, the payment reduction was 
transitioned by applying 50 percent of the total reduction in payment 
that would have applied if these departments (departments that bill the 
modifier ``PO'' on claim lines) were paid the PFS-equivalent rate for 
the clinic visit service. The PFS-equivalent rate was 40 percent of the 
OPPS payment for CY 2019 (that is, 60 percent less than the OPPS rate). 
Consequently, these departments were paid approximately 70 percent of 
the OPPS rate (100 percent of the OPPS rate minus the 30-percent 
payment reduction that was applied in CY 2019) for the clinic visit 
service in CY 2019.
    For CY 2020, the second and final year of the 2-year phase-in, we 
stated that we would apply the total reduction in payment that would be 
applied if these departments (departments that bill the modifier ``PO'' 
on claim lines) were paid the site-specific PFS-equivalent rate for the 
clinic visit service described by HCPCS code G0463. The PFS-equivalent 
rate for CY 2020 was 40 percent of the proposed OPPS payment (that is, 
60 percent less than the proposed OPPS rate) for CY 2020. Under this 
policy, departments were paid approximately 40 percent of the OPPS rate 
(100 percent of the OPPS rate minus the 60-percent payment reduction 
that is applied in CY 2020) for the clinic visit service in CY 2020. 
The fully phased-in policy has been in effect since CY 2020.
    In addition, as we stated in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59013), for CY 2019 and subsequent years, this 
policy has been implemented in a non-budget neutral manner. To 
effectively establish a method for controlling the unnecessary growth 
in the volume of clinic visits furnished by excepted off-campus PBDs 
that does not simply increase other expenditures that are unnecessary 
within the OPPS, we explained that we believed the method must be 
adopted in a non-budget neutral manner in accordance with the OPPS 
statute. The impact of this policy is further described in section X of 
this proposed rule.
    We note that this policy was previously litigated. 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. The appellees petitioned the United States 
Supreme Court for a writ of certiorari. On June 29, 2021, the Supreme 
Court denied the petition.
    In the CY 2019 OPPS/ASC proposed rule (83 FR 37143), we sought 
public comment on whether there should be exceptions from this policy 
for rural providers, such as those providers that are at risk of 
hospital closure or those providers that are rural sole community 
hospitals (SCHs). Commenters to the CY 2019 OPPS/ASC proposed rule 
expressed concern that this policy proposal would disproportionately 
affect safety net hospitals and rural providers (83 FR 59013). Numerous 
commenters representing a rural SCH and beneficiaries in the State of 
Washington expressed concern about the impact the proposal would have 
on their rural SCH. Several commenters also requested that both urban 
and rural SCHs, rural referral centers (RRCs), and Medicare-dependent 
hospitals be exempted from this policy.
    At the time we responded that we shared 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. We stated that 
we believed that implementing our policy with a 2-year phase-in would 
help to mitigate the immediate impact on rural hospitals (83 FR 59013). 
We noted that we might revisit this policy to consider potential 
exemptions in the CY 2020 OPPS rulemaking.
    In CY 2020 OPPS/ASC final rule with comment period (84 FR 61367), 
we again discussed commenters' continued concerns about this policy's 
impact on rural providers and safety net health systems. While 
acknowledging the validity of these concerns, we emphasized our belief 
that a phased-in implementation would help mitigate the impact rural 
hospitals might otherwise face. We reiterated that we would continue to 
monitor trends for any access to care issues and would potentially 
revisit this policy in future rulemaking.
2. Proposed Exemption for Rural Sole Community Hospitals From the 
Method To Control Unnecessary Increases in the Volume of Clinic Visits 
Furnished Beginning in CY 2023
    Since the volume control method was fully phased in by the CY 2020 
OPPS/

[[Page 44697]]

ASC final rule with comment period (84 FR 61142), we have continued to 
assess how this policy has been implemented, as it affects both the 
Medicare program itself and the beneficiaries it serves. This policy 
was designed to address unnecessary increases in the volume of clinic 
visit services furnished in excepted off-campus PBDs. While we believe 
that the method we adopted to control this growth is appropriate, we 
are continuing to examine whether all excepted off-campus PBDs should 
be subject to the site-specific PFS-equivalent payment rate for the 
clinic visit service, as described by HCPCS code G0463. In the CY 2019 
OPPS/ASC proposed rule (83 FR 37142), we explained our position that 
shifts in the sites of service are unnecessary if the beneficiary can 
safely receive the same service in a lower cost setting but instead 
receives care in a higher cost setting due to payment incentives. We 
described this as beneficiaries moving from (lower cost) physician 
offices to (higher cost) HOPDs because of the higher payment rate 
available in the HOPD. In these cases, we maintain that to the extent 
similar services can be safely provided in more than one setting, we do 
not believe it is prudent for the Medicare program to pay more for 
these services in one setting than another as doing so results in 
service volume increases that we believe are unnecessary. We continue 
to believe the difference in payment for these services is a 
significant factor in the shift in services from the physician's office 
setting to the hospital outpatient department for many hospital types, 
which unnecessarily increases hospital outpatient department volume and 
Medicare program and beneficiary expenditures. Nonetheless, we 
recognize that the volume of clinic visits furnished in off-campus PBDs 
of certain hospital types may primarily be driven by factors other than 
higher payment, such as service shifts from the inpatient hospital to 
outpatient hospital setting and access issues. As explained further 
below, we propose to exempt excepted off-campus PBDs of rural SCHs from 
our volume control method policy because we believe the volume of the 
clinic visit service in PBDs of these hospitals is driven by factors 
other than the payment differential for this service. We propose to pay 
the full OPPS payment rate, rather than the PFS-equivalent rate under 
our volume control method, when the clinic visit is furnished in these 
departments.
a. Special Payment Treatment for Rural SCHs
    Across the various Medicare payment systems, CMS has established a 
number of special payment provisions for rural providers to ensure 
access to high quality care for beneficiaries in rural areas. CMS 
administers five rural hospital payment designations in which rural or 
isolated hospitals that meet specified eligibility criteria receive 
higher reimbursement for hospital services than they otherwise would 
receive under Medicare's standard payment methodologies. A rural 
hospital may qualify as a Critical Access Hospital,\154\ Sole Community 
Hospital (SCH),\155\ or Medicare Dependent Hospital \156\--each of 
which has different eligibility criteria and payment methodologies. 
With the exception of Critical Access Hospitals, rural hospitals may 
also qualify as Low Volume Hospitals \157\ and Rural Referral Centers 
(RRCs),\158\ which qualify eligible hospitals for additional payments 
or exemptions. Not all rural or isolated hospitals receive special 
payment treatment under the OPPS. For instance, CAHs are not paid under 
the OPPS and are reimbursed at 101 percent of reasonable costs for 
outpatient services. PBDs of CAHs are not subject to Section 603 of the 
Bipartisan Budget Act of 2015.
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    \154\ 42 CFR 485.601-647.
    \155\ 42 CFR 412.92.
    \156\ 42 CFR 412.108.
    \157\ 42 CFR 412.101.
    \158\ 42 CFR 412.96.
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    Rural SCHs are a hospital type that has received special payment 
treatment under the OPPS to account for their higher costs and the 
disproportionately harmful impact that payment reductions could have on 
them. In the CY 2006 OPPS final rule with comment period (70 FR 68556 
through 68561), we finalized a payment increase 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. This policy was adopted under section 
1833(t)(13)(B) of the Act, which required the Secretary by January 1, 
2006 to provide for an appropriate adjustment under paragraph (t)(2)(E) 
to reflect the higher costs of hospitals in rural areas if the 
Secretary determined, pursuant to a study required by section 
1833(t)(13)(A), that the costs to rural hospitals by APC exceeded those 
costs for hospitals in urban areas. Our analysis revealed that rural 
SCHs had significantly higher costs per unit than urban hospitals. We 
have continued to adjust payments for rural SCHs by 7.1 percent each 
year since 2006. As discussed in Section II.E of this proposed rule, 
for CY 2023 we propose to continue the current policy of utilizing a 
7.1 percent payment adjustment for rural SCHs.
    Rural SCHs have also been excluded from our policy to adjust 
payment for drugs and biologicals acquired under the 340B program. When 
we proposed to adjust payments for 340B drugs in the CY 2018 OPPS/ASC 
proposed rule (82 FR 33635), we sought public comment on whether, due 
to access to care issues, exceptions should be granted to certain 
groups of hospitals, such as those with special adjustments under the 
OPPS (for example, rural SCHs or PPS-exempt cancer hospitals). 
Commenters noted that rural 340B covered entity hospitals depend on the 
drug discounts they receive through the 340B Program to provide access 
to expensive, necessary care such as labor and delivery and oncology 
infusions (82 FR 59365).
    Commenters expressed that even with 340B discounts, rural hospitals 
like rural SCHs are financially threatened. They noted that rural 
hospitals are typically located in lower income economic areas and 
would not be able to absorb the proposed reduction in payment for 340B-
purchased drugs. Moreover, commenters suggested that the proposal would 
disproportionately affect rural hospitals compared to urban hospitals 
and requested that CMS exempt hospitals with an RRC or SCH designation 
from the 340B drug payment policy. The commenters asserted that RRCs 
and SCHs are rural safety-net hospitals that provide localized care for 
Medicare beneficiaries and also serve as ``economic engines'' for many 
rural communities. Taking into consideration these comments, for CY 
2018 we finalized a policy to exclude rural SCHs from our 340B drug 
payment policy and have continued to do so in CYs 2019 through 2022.
b. Utilization of the Clinic Visit Service in Off-Campus Provider-Based 
Departments of Rural SCHs
    In the CY 2019 OPPS/ASC final rule with comment period in which we 
adopted the volume control method policy for certain clinic visits, we 
said that to the extent there are lower-cost sites of service 
available, beneficiaries and the physicians treating them should be 
able to choose the appropriate care setting and not be encouraged to 
receive or provide care in settings for which payment rates are higher 
solely for financial reasons (83 FR 37139).

[[Page 44698]]

However, many rural providers, and rural SCHs in particular, are often 
the only source of care in their communities,\159\ which means 
beneficiaries and providers are not merely choosing between a higher 
paying off-campus PBD of a hospital and a lower paying physicians' 
office setting. The closure of inpatient departments of hospitals and 
the shortage of primary care providers in rural areas further drives 
utilization to off-campus PBDs in areas where rural SCHs are located.
---------------------------------------------------------------------------

    \159\ https://www.shepscenter.unc.edu/wp-content/uploads/dlm_uploads/2017/11/SCHs_Differences_in_Community_Characteristics.pdf.
---------------------------------------------------------------------------

    Rural areas often experience lower availability of health care 
professionals and hospitals than urban areas.\160\ Access to outpatient 
services, particularly in rural areas, is vital to keeping 
beneficiaries healthy and out of the hospital because beneficiaries in 
rural settings face unique challenges that impact their health. 
Compared to their urban counterparts, rural residents generally are 
older and poorer.\161\ Rural areas are also disproportionally affected 
by declining population rates and decreasing employment rates.\162\ We 
have targeted rural SCHs with their add-on payment and exemption from 
the 340B payment reductions in an effort to ensure that these providers 
with demonstrated additional resource costs remain open to serve the 
beneficiaries who rely on them for their care.
---------------------------------------------------------------------------

    \160\ https://www.gao.gov/assets/gao-21-93.pdf.
    \161\ https://www.gao.gov/assets/gao-21-93.pdf.
    \162\ https://www.gao.gov/assets/gao-21-93.pdf.
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    We believe that exempting rural Sole Community Hospitals (rural 
SCHs) from payment of the site-specific Medicare Physician Fee Schedule 
(PFS)-equivalent payment for the clinic visit service, as described by 
HCPCS code G0463, when furnished at an off-campus PBD excepted from 
section 1833(t)(21) of the Act (departments that bill the modifier 
``PO'' on claim lines) would help to maintain access to care in rural 
areas by ensuring rural providers are paid for clinic visit services 
provided at off-campus PBDs at rates comparable to those paid at on-
campus departments. Exempting rural SCHs would also target payment of 
the full OPPS rate for the clinic visit service to off-campus PBDs of 
these hospitals, the majority of which are located in Medically 
Underserved Areas (MUAs) as defined by the Health Resources and 
Services Administration. Our proposal also aligns with the special 
payment treatment rural SCHs receive under the OPPS.
    Accordingly, for CY 2023, we propose that excepted off-campus PBDs 
(departments that bill the modifier ``PO'' on claim lines) of rural 
SCHs, as described under 42 CFR 412.92 and designated as rural for 
Medicare payment purposes, would be exempt from our volume control 
method of paying the PFS-equivalent rate for the clinic visit service, 
as described by HCPCS code G0463. Additionally, we are soliciting 
comments on whether it would be appropriate to exempt other rural 
hospitals, such as those with under 100 beds, from our volume control 
method of paying the PFS-equivalent rate for the clinic visit service.
    In CY 2023, for a Medicare beneficiary who receives a clinic visit 
service in a non-excepted off-campus PBD of a rural SCH, the standard 
unadjusted Medicare OPPS proposed payment would be approximately $131, 
with an approximate average copayment of $26. The proposed PFS-
equivalent rate for a clinic visit would be approximately $52, with an 
approximate average copayment of $10. Under this proposal, an excepted 
off-campus PBD of a rural SCH would continue to bill HCPCS code G0463 
with the ``PO'' modifier in CY 2023, but the payment rate for services 
described by HCPCS code G0463 when billed with modifier ``PO'' would 
now be the full OPPS payment rate. This would cost beneficiaries an 
average of an additional $16 per visit.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59013), we implemented the volume control method in a non-budget 
neutral manner consistent with the OPPS statute. In order to 
effectively establish a method for controlling the unnecessary growth 
in the volume of clinic visits furnished by excepted off-campus PBDs 
that does not simply increase other expenditures that are unnecessary 
within the OPPS, we stated that the volume control method in general 
would be implemented in a non-budget neutral manner. Here, we propose 
to simply remove the effects of this volume control method for one type 
of provider (rural SCHs), which is only a subset of the providers 
currently affected by our policy, and thus propose this exception would 
not increase OPPS spending overall as compared to OPPS spending with no 
volume control method whatsoever. We estimate that this exemption would 
increase OPPS spending by approximately $75 million in CY 2023 compared 
to spending if we did not implement this exemption to the volume 
control method. The impact associated with this policy is further 
described in section XXVI of this proposed rule.

XI. Proposed CY 2023 OPPS Payment Status and Comment Indicators

A. Proposed CY 2023 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 whether 
particular OPPS policies apply to the code.
    For CY 2023, we propose to revise the definition of status 
indicator ``A'' to include unclassified drugs and biologicals that are 
reportable under HCPCS code C9399. When HCPCS code C9399 appears on a 
claim, the Outpatient Code Editor (OCE) suspends the claim for manual 
pricing by the Medicare Administrative Contractor (MAC). The MAC prices 
the claim at 95 percent of the drug or biological's average wholesale 
price (AWP) using the Red Book or an equivalent recognized compendium, 
and processes the claim for payment. The payment at 95 percent of AWP 
is made under the OPPS.
    In addition, we propose to revise the definition of status 
indicator ``F'' by removing hepatitis B vaccines. Hepatitis B vaccines 
should not be subject to deductible and coinsurance similar to other 
preventive vaccines, but services that are currently listed under the 
definition of status indicator ``F'' are subject to deductible and 
coinsurance. We also propose to revise the definition of status 
indicator ``L'' in order to add hepatitis B vaccines to the list of 
other preventive vaccines that are not subject to deductible and 
coinsurance.
    The complete list of proposed CY 2023 payment status indicators and 
their definitions is displayed in Addendum D1 to this proposed rule, 
which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
    We are requesting public comments on the proposed definitions of 
the OPPS payment status indicators for 2023.
    The proposed CY 2023 payment status indicator assignments for APCs 
and HCPCS codes are shown in Addendum A and Addendum B, respectively, 
to this proposed rule, which are available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

[[Page 44699]]

B. Proposed CY 2023 Comment Indicator Definitions

    In this proposed rule, we propose to use four comment indicators 
for the CY 2023 OPPS. These comment indicators, ``CH'', ``NC'', ``NI'', 
and ``NP'', are in effect for CY 2022 and we propose to continue their 
use in CY 2023. The proposed CY 2023 OPPS comment indicators are as 
follows:
     ``CH''--Active HCPCS code in current and next calendar 
year, status indicator and/or APC assignment has changed; or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``NC''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year, as compared to current calendar year for which we 
requested comments in the proposed rule, final APC assignment; comments 
will not be accepted on the final APC assignment for the new code.
     ``NI''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year, as compared to current calendar year, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code.
     ``NP''--New code for the next calendar year or existing 
code with substantial revision to its code descriptor in the next 
calendar year, as compared to current calendar year, proposed APC 
assignment; comments will be accepted on the proposed APC assignment 
for the new code.
    The definitions of the proposed OPPS comment indicators for CY 2023 
are listed in Addendum D2 to this proposed rule, which is available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    We believe that the existing CY 2022 definitions of the OPPS 
comment indicators continue to be appropriate for CY 2023. Therefore, 
we propose to use those definitions without modification for CY 2023.
    We are requesting public comments on our proposed definitions of 
the OPPS comment indicators for 2023.

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 2022 report.

A. Proposed OPPS Payment Rates Update

    The March 2022 MedPAC ``Report to the Congress: Medicare Payment 
Policy,'' recommended that Congress update Medicare OPPS payment rates 
by the amount specified in current law. We refer readers to the March 
2022 report for a complete discussion of this recommendation.\163\ We 
appreciate MedPAC's recommendation and, as discussed further in Section 
II.A.4 of this proposed rule, we propose to increase the OPPS payment 
rates by the amount specified in current law. Comments received from 
MedPAC for other OPPS policies are discussed in the applicable sections 
of this proposed rule.
---------------------------------------------------------------------------

    \163\ Medicare Payment Advisory Committee. March 2022 Report to 
the Congress. Chapter 3: Hospital inpatient and outpatient services, 
pp.65-66. Available at: http://www.medpac.gov.
---------------------------------------------------------------------------

B. Proposed ASC Conversion Factor Update

    In the March 2022 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 prior to the effects of COVID-19 PHE in CY 2020, 
and ASC access to capital has been adequate.\164\ As a result, MedPAC 
stated that payments to ASCs are adequate and recommended that, in the 
absence of cost report data, no payment update should be applied for CY 
2023 (that is, the update factor would be zero percent).
---------------------------------------------------------------------------

    \164\ Medicare Payment Advisory Committee. March 2020 Report to 
the Congress. Chapter 5: Ambulatory surgical center services, p.161-
162. Available at: https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar20_entirereport_sec.pdf.
---------------------------------------------------------------------------

    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 productivity-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 productivity-adjusted hospital 
market basket update for the ASC payment system for CY 2019 through CY 
2023. Therefore, consistent with our policy for the ASC payment system, 
as discussed in section XIII.G of this proposed rule, we propose to 
apply a 2.7 percent productivity-adjusted hospital market basket update 
factor to the CY 2022 ASC conversion factor for ASCs meeting the 
quality reporting requirements to determine the proposed CY 2023 ASC 
payment amounts. The proposed CY 2023 ASC conversion factor for ASCs 
meeting quality reporting requirements and the proposed hospital market 
basket update factor are discussed in section XIII of this proposed 
rule.

C. Proposed ASC Cost Data

    In the March 2022 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 
whether 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 but 
should make cost reporting a condition of ASC participation in the 
Medicare program.\165\
---------------------------------------------------------------------------

    \165\ Medicare Payment Advisory Committee. March 2022 Report to 
the Congress. Chapter 5: Ambulatory surgical center services, p.162. 
Available at: https://www.medpac.gov/wp-content/uploads/2022/03/Mar22_MedPAC_ReportToCongress_SEC.pdf.
---------------------------------------------------------------------------

    While we recognize that the submission of cost data could place 
additional administrative burden on most ASCs, and we are not proposing 
any cost reporting requirements for ASCs in this CY 2023 OPPS/ASC 
proposed rule, we continue to seek public comment on 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. Such cost data would be beneficial in establishing an ASC-
specific market basket index for updating payment rates under the ASC 
payment system.

[[Page 44700]]

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to payments to ASCs under Medicare, we refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377 
through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 
32292). For a discussion of prior rulemaking on the ASC payment system, 
we refer readers to the CYs 2012 to 2022 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; 84 FR 61370 through 61410, 85 FR 86121 through 
86179, and 86 FR 63761 through 63815 respectively).
2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    Under Sec. Sec.  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, are 
not designated as requiring inpatient care under Sec.  419.22(n) as of 
December 31, 2020, are not only able to be reported using a CPT 
unlisted surgical procedure code, and are not otherwise excluded under 
Sec.  411.15.
    Since the implementation of the ASC prospective payment system, we 
have historically defined a ``surgical'' procedure under the payment 
system as any procedure described within the range of Category I CPT 
codes that the CPT Editorial Panel of the American Medical Association 
(AMA) defines as ``surgery'' (CPT codes 10000 through 69999) (72 FR 
42478). We also have included as ``surgical'' procedures that are 
described by Level II HCPCS codes or by Category III CPT codes that 
directly crosswalk or are clinically similar to procedures in the CPT 
surgical range.
    As we noted in the August 7, 2007 ASC 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.
    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. In that final rule, we defined 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 determined met the general standards established 
in previous years for addition to the ASC CPL. These criteria included 
that a procedure is not expected to pose a significant risk to 
beneficiary safety when performed in an ASC, that standard medical 
practice dictates that the beneficiary would not typically be expected 
to require an overnight stay following the procedure, and that the 
procedure is separately paid under the OPPS.
    In CY 2021, we revised the definition of covered surgical 
procedures to only surgical procedures specified by the Secretary that 
are separately paid under the OPPS, are not designated as requiring 
inpatient care under Sec.  419.22(n) as of December 31, 2020, are not 
only able to be reported using a CPT unlisted surgical procedure code, 
and are not otherwise excluded under Sec.  411.15 (85 FR 86153). 
However, in the CY 2022 OPPS/ASC final rule with comment period, we 
finalized our proposal to reinstate the general standards and exclusion 
criteria in place prior to CY 2021 (86 FR 63779) and revised the 
language in the regulation text at Sec.  416.166 accordingly.
    Covered ancillary services are specified in Sec.  416.164(b) and, 
as stated previously, are eligible for separate ASC payment. As 
provided at Sec.  416.164(b), we 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; (5) certain radiology services for 
which separate payment is allowed under the OPPS; and (6) non-opioid 
pain management drugs that function as a supply when used in a surgical 
procedure. 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 and payment rates for covered surgical 
procedures and covered ancillary services in ASCs in conjunction with 
the annual proposed and final rulemaking process to update the OPPS and 
the ASC payment system (Sec.  416.173; 72 FR 42535). We base ASC 
payment and policies for most covered surgical procedures, drugs, 
biologicals, and certain other covered ancillary services on the OPPS 
payment policies, and we use quarterly change requests (CRs) to update 
services paid for under the OPPS. We also provide quarterly update CRs 
for ASC covered surgical procedures and covered ancillary services 
throughout the year (January, April, July, and October). We release new 
and revised Level II HCPCS codes and recognize the release of new and 
revised CPT codes by the AMA and make these codes effective (that is, 
the codes are recognized on Medicare claims) via these ASC quarterly 
update CRs. We recognize the release of new and revised Category III 
CPT codes in the July and January CRs. These updates implement newly 
created and revised Level II HCPCS and Category III CPT codes for ASC 
payments and update the payment rates for separately paid drugs and 
biologicals based on the most recently submitted ASP data. New and 
revised Category I CPT codes, except vaccine codes, are released only 
once a year, and are implemented only through the January quarterly CR 
update. New and revised Category I CPT vaccine codes are released twice 
a year and are implemented through the January and July quarterly CR 
updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed 
rule for an example of how this process is used to update HCPCS and CPT 
codes, which we finalized in the CY 2012 OPPS/ASC

[[Page 44701]]

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.

B. Proposed ASC Treatment of New and Revised Codes

1. Background on Current Process for Recognizing New and Revised HCPCS 
Codes
    Payment for ASC procedures, services, and items are generally based 
on medical billing codes, specifically, HCPCS codes, that are reported 
on ASC claims. The HCPCS is divided into two principal subsystems, 
referred to as Level I and Level II of the HCPCS. Level I is comprised 
of CPT (Current Procedural Terminology) codes, a numeric and 
alphanumeric coding system maintained by the AMA, and includes Category 
I, II, III, MAAA, and PLA 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 ASC 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 referred 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 proposed rule.
    We have separated our discussion below based on when the codes are 
released and whether we propose to solicit public comments in this 
proposed rule or whether we will be soliciting public comments in the 
CY 2023 OPPS/ASC final rule with comment period.
2. April 2022 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Proposed Rule
    For the April 2022 update, there were no new CPT codes; however, 
there were several new Level II HCPCS codes. In the April 2022 ASC 
quarterly update (Transmittal 11303, dated March 24, 2022, CR 12679), 
we added several new Level II HCPCS codes to the list of covered 
ancillary services. Table 51 (New Level II HCPCS Codes for Ancillary 
Services Effective April 1, 2022) lists the new Level II HCPCS codes 
that were implemented April 1, 2022. The proposed comment indicators 
(CI), payment indicators (PI), and payment rates for these April codes 
can be found in Addendum BB to this proposed rule. The list of proposed 
ASC PIs and corresponding definitions can be found in Addendum DD1 to 
this proposed rule. The new codes that are effective April 1, 2022, are 
assigned to comment indicator ``NP'' in Addendum BB to this proposed 
rule to indicate that the codes are assigned to an interim payment 
indicator assignment and that comments will be accepted on the interim 
assignments. The list of comment indicators and definitions used under 
the ASC payment system can be found in Addendum DD2 to this proposed 
rule. We note that the following ASC addenda are available via the 
internet on the CMS website:
     ASC Addendum AA: Proposed ASC Covered Surgical Procedures 
for CY 2023 (Including Surgical Procedures for Which Payment is 
Packaged)
     ASC Addendum BB: Proposed ASC Covered Ancillary Services 
Integral to Covered Surgical Procedures for CY 2023 (Including 
Ancillary Services for Which Payment is Packaged)
     ASC Addendum DD1: Proposed ASC Payment Indicators (PI) for 
CY 2023, and
     ASC Addendum DD2: Proposed ASC Comment Indicators (CI) for 
CY 2023
    We are inviting public comments on these proposed payment 
indicators for the new HCPCS codes that were recognized as ASC covered 
ancillary services in April 2022 through the quarterly update CRs, as 
listed in Table 51 (New Level II HCPCS Codes for Ancillary Services 
Effective April 1, 2022). We propose to finalize the payment indicators 
in the CY 2023 OPPS/ASC final rule with comment period.
BILLING CODE 4120-01-P

[[Page 44702]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.072

3. July 2022 HCPCS Codes for Which We Are Soliciting Public Comments in 
This Proposed Rule
    In the July 2022 ASC quarterly update (Transmittal 11472, Change 
Request 12773, dated June 23, 2022), we added several separately 
payable CPT and Level II HCPCS codes to the list of covered surgical 
procedures and ancillary services. Table 52 (New Level II HCPCS Codes 
for Ancillary Services Effective July 1, 2022) lists the new HCPCS 
codes that are effective July 1, 2022. The proposed comment indicators, 
payment indicators, and payment rates for the codes can be found in 
Addendum AA and Addendum BB to this proposed rule. The list of proposed 
ASC PIs and corresponding definitions can be found in Addendum DD1 to 
this proposed rule. In addition, these new codes that are effective 
July 1, 2022 are assigned to comment indicator ``NP'' in Addendum BB to 
this proposed rule to indicate that the codes are assigned to an 
interim payment indicator and that comments will be accepted on the 
interim assignments. The list of comment indicators and definitions 
used under the ASC payment system can be found in Addendum DD2 to this 
proposed rule. We note that ASC Addenda AA, BB, DD1, and DD2 are 
available via the internet on the CMS website.

[[Page 44703]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.073

BILLING CODE 4120-01-C
    Furthermore, through the July 2022 quarterly update CR, we added 
three new Category III CPT codes to the list of ASC covered ancillary 
services, effective July 1, 2022. These codes are listed in Table 53 
(New Category III CPT Codes for Covered Ancillary Services Effective 
July 1, 2022). The CY 2023 proposed payment indicators, proposed 
comment indicators, and proposed payment rates for these new Category 
III CPT codes can be found in Addendum BB to this proposed rule. As 
noted above, the list of payment indicators and comment indicators used 
under the ASC can be found in Addendum DD1 and DD2, respectively, of 
this proposed rule. We note that ASC Addenda AA, BB, DD1, and DD2 are 
available via the internet on the CMS website.

[[Page 44704]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.074

    We are inviting public comments on the proposed payment indicators 
for the new CPT and Level II HCPCS codes newly recognized as ASC 
covered surgical procedures for covered ancillary services effective 
April 1, 2022, and July 1, 2022, through the quarterly update CRs, as 
listed in Tables 51, 52, and 53. We propose to finalize the payment 
indicators in the CY 2023 OPPS/ASC final rule with comment period.
4. October 2022 HCPCS Codes for Which We Will Be Soliciting Public 
Comments in the CY 2023 OPPS/ASC Final Rule With Comment Period
    For CY 2023, consistent with our established policy, we propose 
that the Level II HCPCS codes that will be effective October 1, 2022, 
would be flagged with comment indicator ``NI'' in Addendum BB in the CY 
2023 OPPS/ASC final rule with comment period to indicate that we have 
assigned the codes interim ASC payment indicators for CY 2023. We will 
invite public comments in the CY 2023 OPPS/ASC final rule with comment 
period on the interim payment indicators, which would then be finalized 
in the CY 2024 OPPS/ASC final rule with comment period.
5. January 2023 HCPCS Codes
a. Level II HCPCS Codes for Which We Will Be Soliciting Public Comments 
in the CY 2023 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Level II HCPCS codes that are effective January 1 in the final rule 
with comment period, thereby updating the ASC payment system for the 
calendar year. We note that, unlike the CPT codes that are effective 
January 1 and are included in the OPPS/ASC proposed rules, and except 
for the C and G-codes listed in Addendum O to this proposed rule, most 
Level II HCPCS codes are not released until sometime around November to 
be effective January 1. Because these codes are not available until 
November, we are unable to include them in the OPPS/ASC proposed rules. 
Therefore, these Level II HCPCS codes will be released to the public 
through the CY 2023 OPPS/ASC final rule with comment period, January 
2023 ASC Update CR, and the CMS HCPCS website.
    In addition, for CY 2023, we will propose to continue our 
established policy of assigning comment indicator ``NI'' in Addendum AA 
and Addendum BB to the OPPS/ASC final rule with comment period to the 
new Level II HCPCS codes that will be effective January 1, 2023, to 
indicate that we are assigning them an interim payment indicator, which 
is subject to public comment. We will be inviting public comments in 
the CY 2023 OPPS/ASC final rule with comment period on the payment 
indicator assignments, which would then be finalized in the CY 2024 
OPPS/ASC final rule with comment period.
b. CPT Codes for Which We Are Soliciting Public Comments in This 
Proposed Rule
    For the CY 2023 ASC update, we received the CPT codes that will be 
effective January 1, 2023, from the AMA in time to be included in this 
proposed rule. The new, revised, and deleted CPT codes can be found in 
Addendum BB to this proposed rule (which is available via the internet 
on the CMS website). We note that the new and revised CPT codes are 
assigned to comment indicator ``NP'' in ASC Addendum AA and Addendum BB 
of this proposed rule to indicate that the code is new for the next 
calendar year or the code is an existing code with substantial revision 
to its code descriptor in the next calendar year as compared to the 
current calendar year with a proposed payment indicator assignment. We 
will accept comments and finalize the payment indicators in the CY 2023 
OPPS/ASC final rule with comment period. Further, we remind readers 
that the CPT code descriptors that appear in Addendum AA and Addendum 
BB are short descriptors and do not describe the complete procedure, 
service, or item described by the CPT code. Therefore, we include the 
5-digit placeholder codes and their long descriptors for the new CY 
2023 CPT codes in Addendum O to this proposed rule so that the public 
can comment on our proposed payment indicator assignments. The 5-digit 
placeholder codes can be found in Addendum O to this proposed rule, 
specifically under the column labeled ``CY 2023 OPPS/ASC Proposed Rule 
5-Digit Placeholder Code.'' We intend to include the final CPT code 
numbers the CY 2023 OPPS/ASC final rule with comment period.
    In summary, we are soliciting public comments on the proposed CY 
2023 payment indicators for the new Category I and III CPT codes that 
will be effective January 1, 2023. Because these codes are listed in 
Addendum AA and Addendum BB with short descriptors only, we are listing 
them again in Addendum O with the long descriptors. We also propose to 
finalize the payment indicator for these codes (with their final CPT 
code numbers) in the CY 2023 OPPS/ASC final rule with comment period. 
The codes, along with their proposed payment indicators, and proposed 
comment indicators, are listed in ASC Addendum AA and BB. The 
definitions for the proposed payment indicators and comment indicators 
can be found in ASC Addendum DD1 and DD2, respectively. All the ASC 
proposed rule payment files, including ASC Addenda

[[Page 44705]]

AA, BB, DD1, and DD2, are available via the internet on the CMS 
website.
    Finally, in Table 54, 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.
[GRAPHIC] [TIFF OMITTED] TP26JY22.075

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

1. Covered Surgical Procedures
a. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC Covered Procedures List (CPL) in CY 2008 or later years that we 
determine are furnished predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC CPL beginning in CY 2008 that we determined were 
office-based were identified in Addendum AA to that rule with 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 ASC standard ratesetting methodology based on its OPPS relative 
payment weight or at the MPFS nonfacility PE RVU-based amount.
    Consistent with our final policy to annually review and update the 
ASC CPL to include all covered surgical procedures eligible for payment 
in ASCs, each year we identify covered surgical procedures as either 
temporarily office-based (these are new procedure codes with little or 
no utilization data that we have determined are clinically similar to 
other procedures that are permanently office-based), permanently 
office-based, or nonoffice-based, after taking into account updated 
volume and utilization data.
(2) Proposed Changes for CY 2023 to Covered Surgical Procedures 
Designated as Office-Based
    In developing this CY 2023 OPPS/ASC proposed rule, we followed our 
policy to annually review and update the covered surgical procedures 
for which ASC payment is made and to identify new procedures that may 
be

[[Page 44706]]

appropriate for ASC payment (described in detail in section XIII.C.1.d. 
of this final rule with comment period), including their potential 
designation as office-based. Historically, we would also review the 
most recent claims volume and utilization data (CY 2021 claims) and the 
clinical characteristics for all covered surgical procedures that are 
currently assigned a payment indicator in CY 2022 of ``G2'' (Non 
office-based surgical procedure added in CY 2008 or later; payment 
based on OPPS relative payment weight) as well as for those procedures 
assigned one of the temporary office-based payment indicators, 
specifically ``P2'', ``P3'', or ``R2'' in the CY 2022 OPPS/ASC final 
rule with comment period (86 FR 63769 through 63773).
    In our CY 2022 OPPS/ASC final rule with comment period (86 FR 
63770), we discussed that we, historically, review the most recent 
claims volume and utilization data and clinical characteristics for all 
covered surgical procedures that were assigned a payment indicator of 
``G2'' for CY 2021. For the CY 2022 OPPS/ASC final rule with comment 
period, the most recent claims volume and utilization data was CY 2020 
claims. However, given our concerns with the use of CY 2020 claims data 
as a result of the COVID-19 PHE as further discussed in the CY 2022 
OPPS/ASC final rule with comment period (86 FR 63751 through 63754), we 
adopted a policy to not review CY 2020 claims data and did not assign 
permanent office-based designations to covered surgical procedures that 
were assigned a payment indicator of ``G2'' in CY 2021 (86 FR 63770 
through 63771).
    As discussed further in section X.B of this proposed rule, in our 
review of the CY 2021 outpatient claims available for ratesetting for 
this CY 2023 OPPS proposed rule, we observed that many outpatient 
service volumes have partially returned to their pre-PHE levels and it 
is reasonable to assume that there will continue to be some effects of 
the COVID-19 PHE on the outpatient claims that we use for OPPS 
ratesetting. As a result, we propose to use the CY 2021 claims for CY 
2023 OPPS ratesetting. Similarly, for this proposed rule, we propose to 
resume our historical practice and review the most recent claims and 
utilization data, in this case data from CY 2021 claims, for 
determining office-based assignments under the ASC payment system.
    Our review of the CY 2021 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 the identification 
of 6 surgical procedures that we believe meet the criteria for 
designation as permanently office-based. The data indicate that these 
procedures are performed more than 50 percent of the time in 
physicians' offices, and we believe that the services are of a level of 
complexity consistent with other procedures performed routinely in 
physicians' offices. The CPT codes that we propose to permanently 
designate as office-based for CY 2023 are listed in Table 55.
[GRAPHIC] [TIFF OMITTED] TP26JY22.076


[[Page 44707]]


    We also reviewed CY 2021 volume and utilization data for 8 surgical 
procedures designated as temporarily office-based in the CY 2022 OPPS/
ASC final rule with comment period and temporarily assigned one of the 
office-based payment indicators, specifically ``P2,'' ``P3'' or ``R2'' 
as shown in Table 56. For all 8 surgical procedures, there were fewer 
than 50 claims or no claims in our data. Therefore, we propose to 
continue to designate these procedures, shown in Table 56, as 
temporarily office-based for CY 2023. The procedures for which the 
proposed office-based designation for CY 2023 is temporary are 
indicated by an asterisk in Addendum AA to this proposed rule (which is 
available via the internet on the CMS website).
[GRAPHIC] [TIFF OMITTED] TP26JY22.077

BILLING CODE 4120-01-C
    As discussed in the August 2, 2007 ASC final rule (72 FR 42533 
through 42535), we finalized our policy to designate certain new 
surgical procedures as temporarily 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

[[Page 44708]]

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 2023, 
there are no new CY 2023 CPT codes for ASC covered surgical procedures 
that have been temporarily assigned office-based.
b. Device-Intensive ASC Covered Surgical Procedures
(1) Background
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59040 through 59041), for a summary of our existing 
policies regarding ASC covered surgical procedures that are designated 
as device-intensive.
(2) Proposed Changes to List of ASC Covered Surgical Procedures 
Designated as Device-Intensive for CY 2023
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59040 
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. The device offset percentage is the percentage 
of device costs within a procedure's total costs. 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 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 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).
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63773 
through 63775), we modified our approach to assigning device-intensive 
status to surgical procedures under the ASC payment system. First, we 
adopted a policy of assigning device-intensive status to procedures 
that involve surgically inserted or implanted, high-cost, single-use 
devices to qualify as device-intensive procedures if their device 
offset percentage exceeds 30 percent under the ASC standard ratesetting 
methodology, even if the procedure is not designated as device-
intensive under the OPPS. Second, we adopted a policy that if a 
procedure is assigned device-intensive status under the OPPS, but has a 
device offset percentage below the device-intensive threshold under the 
standard ASC ratesetting methodology, the procedure will be assigned 
device-intensive status under the ASC payment system with a default 
device offset percentage of 31 percent. The policies were adopted to 
provide consistency between the OPPS and ASC payment system and provide 
a more appropriate payment rate for surgical procedures with 
significant device costs under the ASC payment system.
    As discussed in more detail in section XIII.D.1.c of this proposed 
rule, we propose to create a special payment policy under the ASC 
payment system whereby we would add 52 new C codes to the ASC CPL to 
provide a special payment for code combinations eligible for complexity 
adjustments under the OPPS. These code combinations reflect separately 
payable primary procedures on the ASC CPL as well as add-on procedures 
that are packaged with an ASC payment indicator of ``N1'' (Packaged 
service/item; no separate payment made.). Under our proposal, the C 
code would retain the device-intensive status of the primary procedure 
as well as the device portion (or device offset amount) of the primary 
procedure and not the device offset percentage. The device offset 
percentage for a C code would be established by dividing the device 
portion of the primary procedure by the OPPS complexity-adjusted APC 
payment rate based on the ASC standard ratesetting methodology. 
Although this may yield results where the device offset percentage is 
not greater than 30 percent of the OPPS complexity-adjusted APC payment 
rate, we believe this is an appropriate methodology to apply where 
primary procedures assigned device-intensive status are a component of 
a C code.
    Based on our existing criteria as well as our proposal to add to 
the ASC CPL new C codes that reflect code combinations eligible for 
complexity adjustments under the OPPS, for CY 2023, we propose to 
update the ASC CPL to indicate procedures that are eligible for payment 
according to our device-intensive procedure payment methodology. For CY 
2023, where CY 2021 claims data are available, the device-intensive 
payment methodology relies on the proposed device-offset percentages of 
each device-intensive procedure using the CY 2021 OPPS claims and cost 
report data available for this proposed rule.
    The ASC covered surgical procedures that we propose to designate as 
device-intensive, and therefore subject to the device-intensive 
procedure payment methodology for CY 2023, are assigned

[[Page 44709]]

payment indicator ``J8'' and are included in ASC Addendum AA to this 
proposed rule (which is available via the internet on the CMS website). 
The CPT code, the CPT code short descriptor, the proposed CY 2023 ASC 
payment rate are also included in Addendum AA to this proposed rule 
(which is available via the internet on the CMS website). We are 
soliciting public comments on our proposal to assign device-intensive 
status to 11 of the new C codes that we propose to add to the ASC CPL 
as well as our methodology for determining the device portion for such 
procedures.
c. Proposed 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 amount of 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.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59043 
through 59044) 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 2022 and subsequent calendar years. Specifically, for CY 
2022 and subsequent calendar years, we would reduce the payment for a 
device-intensive procedure for which the ASC receives partial credit by 
one-half of the device offset amount that would be applied if a device 
was provided at no cost or with full credit, if the credit to the ASC 
is 50 percent or more (but less than 100 percent) of the cost of the 
device. To report that the ASC received a partial credit of 50 percent 
or more (but less than 100 percent) of the cost of a device, ASCs have 
the option of either: (1) submitting the claim for the device intensive 
procedure to their Medicare contractor after the procedure's 
performance, but prior to manufacturer acknowledgment of credit for the 
device, and subsequently contacting the contractor regarding a claim 
adjustment, once the credit determination is made; or (2) holding the 
claim for the device implantation or insertion procedure until a 
determination is made by the manufacturer on the partial credit and 
submitting the claim with the ``FC'' modifier appended to the 
implantation procedure HCPCS code if the partial credit is 50 percent 
or more (but less than 100 percent) of the cost of the device. 
Beneficiary coinsurance would be based on the reduced payment amount.
    We are not proposing any changes to our policies related to no/cost 
full credit or partial credit devices for CY 2023.

[[Page 44710]]

d. Proposed 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 also be safely performed in an ASC, a CAH, or an 
HOPD, and to review and update the list of ASC covered surgical 
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 regulations at Sec. Sec.  416.2 and 416.166, covered 
surgical procedures furnished on or after January 1, 2022, are 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). Specifically, under Sec.  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 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 Sec.  419.22(n); (7) can 
only be reported using a CPT unlisted surgical procedure code; or (8) 
are otherwise excluded under Sec.  411.15.
    For a detailed discussion of the history of our policies for adding 
surgical procedures to the ASC CPL, we refer readers to the CY 2021 and 
CY 2022 OPPS/ASC final rules with comment period (85 FR 86143 through 
86145; 86 FR 63777 through 63805).
1. Proposed Changes to the List of ASC Covered Surgical Procedures for 
CY 2023
    Our current policy, which includes consideration of the general 
standards and exclusion criteria we have historically used to determine 
whether a surgical procedure should be added to the ASC CPL, is 
intended to ensure that surgical procedures added to the ASC CPL can be 
performed safely in the ASC setting on the typical Medicare 
beneficiary. For CY 2023, we conducted a review of procedures that 
currently are paid under the OPPS and not included on the ASC CPL. We 
also assessed procedures against our regulatory safety criteria at 
Sec.  416.166. Based upon this review, we propose to update the ASC CPL 
by adding one lymphatic procedure to the list for CY 2023, as shown in 
Table 57 below.
    After reviewing the clinical characteristics of this procedure, as 
well as consulting with stakeholders and multiple clinical advisors, we 
determined that this procedure is 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. This procedure does not result in extensive blood loss, 
require major or prolonged invasion of body cavities, or directly 
involve major blood vessels. We believe this procedure may be 
appropriately performed in an ASC on a typical Medicare beneficiary. 
Therefore, we propose to include this procedure on the ASC CPL for CY 
2023.
[GRAPHIC] [TIFF OMITTED] TP26JY22.125

    We continue to focus on maximizing patient access to care by adding 
procedures to the ASC CPL when appropriate. While expanding the ASC CPL 
offers benefits, such as preserving the capacity of hospitals to treat 
more acute patients and promoting site neutrality, we also believe that 
any additions to the CPL should be added in a carefully calibrated 
fashion to ensure that the procedure is safe to be performed in the ASC 
setting for a typical Medicare beneficiary. We expect to continue to 
gradually expand the ASC CPL, as medical practice and technology 
continue to evolve and advance in future years. We encourage 
stakeholders to submit procedure recommendations to be added to the ASC 
CPL, particularly if there is evidence that these procedures meet our 
criteria and can be safely performed on the typical Medicare 
beneficiary in the ASC setting.
Proposed Name Change and Start Date of Nominations Process
    In the CY 2022 OPPS/ASC final rule with comment period, we 
finalized our proposal to add a nominations process for adding surgical 
procedures to the ASC CPL at Sec.  416.166(d), (86 FR 63782) which we 
titled ``Nominations.'' As we have discussed in previous rulemaking, 
this process is simply an opportunity outside of the existing public 
comment period process for interested parties to submit recommendations 
before the proposed rule period so CMS can consider the suggestions as 
we develop the proposed rule. We believe this process enhances 
transparency and allows interested parties an additional opportunity to 
provide input for the ASC CPL.
    However, the nominations process is not the only way for interested 
parties to make recommendations to CMS for adding surgical procedures 
to the ASC CPL. We emphasize that interested parties have been able, 
and may

[[Page 44711]]

continue, to suggest surgical procedures they believe should be added 
to the ASC CPL during the public comment period following the proposed 
rule. That process remains unchanged. When interested parties submit 
procedure recommendations for the ASC CPL through the public comment 
process, CMS will consider them for the final rule with comment period. 
We understand, however, that the terminology we used in the CY 2022 
OPPS/ASC final rule with comment period and codified at Sec.  
416.166(d)--``Nominations''--may have led to some confusion that this 
process is the primary or only pathway for interested parties to 
suggest procedures to be added to the ASC CPL. Therefore, we propose to 
change the name of the process finalized last year in the CY 2022 OPPS/
ASC final rule with comment period from ``Nominations'' to the ``Pre-
Proposed Rule CPL Recommendation Process.'' Where the current name of 
the process may suggest a formality or limitation that we did not 
intend--one that implies the nominations process is the preferred, 
primary, or only means by which interested parties may submit 
recommendations--we believe this proposed new name would not.
    In addition, we are currently working on developing the 
technological infrastructure and Paperwork Reduction Act (PRA) package 
for the recommendations process. Because we were unable to complete the 
infrastructure development and PRA processes (which have taken longer 
than we originally anticipated when we finalized the policy) in time 
for commenters to recommend procedures to be added to the ASC CPL prior 
to the CY 2023 proposed rule, we propose to revise the start date of 
the recommendation process in the regulatory text. We propose to change 
January 1, 2023, to January 1, 2024, so that the text at Sec.  
416.166(d) would specify that on or after January 1, 2024, an external 
party may recommend a surgical procedure by March 1 of a calendar year 
for the list of ASC covered surgical procedures for the following 
calendar year. We continue to welcome all procedure submissions through 
the public comment process, as we have in previous years.
2. Covered Ancillary Services
    In the CY 2019 OPPS/ASC final rule with comment period (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 OPPS and to continue this reconciliation of packaged 
status for subsequent calendar years. As discussed in prior rulemaking, 
maintaining consistency with the OPPS may result in changes to ASC 
payment indicators for some covered ancillary services. For example, if 
a covered ancillary service was separately paid under the ASC payment 
system in CY 2022, but will be packaged under the CY 2023 OPPS, we 
would also package the ancillary service under the ASC payment system 
for CY 2023 to maintain consistency with the OPPS. Comment indicator 
``CH'', which is discussed in section XIII.G of this proposed rule, is 
used in Addendum BB (which is available via the internet on the CMS 
website) to indicate covered ancillary services for which we propose a 
change in the ASC payment indicator to reflect a proposed change in the 
OPPS treatment of the service for CY 2023.
    In the CY 2022 OPPS/ASC final rule with comment period, we 
finalized our proposal to revise 42 CFR 416.164(b)(6) to include, as 
ancillary items that are integral to a covered surgical procedure and 
for which separate payment is allowed, non-opioid pain management drugs 
and biologicals that function as a supply when used in a surgical 
procedure as determined by CMS (86 FR 63490).
    New CPT and HCPCS codes for covered ancillary services for CY 2023 
can be found in section XIII.B of this proposed rule. All ASC covered 
ancillary services and their proposed payment indicators for CY 2023 
are also included in Addendum BB to this proposed rule (which is 
available via the internet on the CMS website).

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

1. Proposed ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are 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 have retained 
payment indicator ``A2'' because it is used to identify procedures that 
are exempted from the application of the office-based designation.
    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. As detailed in section 
XIII.C.1.a of this proposed rule, we update the payment amounts for 
office-based procedures (payment indicators ``P2'', ``P3'', and ``R2'') 
using the most recent available MPFS and OPPS data. We compare the 
estimated current year 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 current year payment rate for the 
procedure under our final policy for the revised ASC payment system 
(Sec.  416.171(d)).
    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. We update the payment 
rates for device-intensive procedures to incorporate the most recent 
device offset percentages calculated under the ASC standard ratesetting 
methodology, as discussed in section XIII.C.1.b of this proposed rule.
    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

[[Page 44712]]

removal procedures are conditionally packaged and, therefore, would be 
packaged under the ASC payment system. There is 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 have 
continued to provide separate payment since CY 2014 and assign the 
current ASC payment indicators associated with these procedures.
b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2023
    We propose to update ASC payment rates for CY 2023 and subsequent 
years using the established rate calculation methodologies under Sec.  
416.171 and using our definition of device-intensive procedures, as 
discussed in section XII.C.1.b of this proposed rule. As the proposed 
OPPS relative payment weights are generally based on geometric mean 
costs, we propose that the ASC payment system will generally use the 
geometric mean cost to determine proposed relative payment weights 
under the ASC standard methodology. We propose to continue to use the 
amount calculated under the ASC standard ratesetting methodology for 
procedures assigned payment indicators ``A2'' and ``G2''.
    We propose to calculate payment rates for office-based procedures 
(payment indicators ``P2'', ``P3'', and ``R2'') and device-intensive 
procedures (payment indicator ``J8'') according to our established 
policies and to identify device-intensive procedures, using the 
methodology discussed in section XII.C.1.b of this proposed rule. 
Therefore, we propose to update the payment amount for the service 
portion (the non-device portion) of the device-intensive procedures 
using the standard ASC ratesetting methodology and the payment amount 
for the device portion based on the proposed CY 2023 device offset 
percentages that have been calculated using the standard OPPS APC 
ratesetting methodology. We propose that payment for office-based 
procedures would be at the lesser of the proposed CY 2023 MPFS 
nonfacility PE RVU-based amount or the proposed CY 2023 ASC payment 
amount calculated according to the ASC standard ratesetting 
methodology.
    As we did for CYs 2014 through 2022, for CY 2023, we propose to 
continue our policy for device removal procedures, such that device 
removal procedures that are conditionally packaged in the OPPS (status 
indicators ``Q1'' and ``Q2'') will be assigned the current ASC payment 
indicators associated with those procedures and will continue to be 
paid separately under the ASC payment system.
c. Proposed ASC Payment for Combinations of Primary and Add-On 
Procedures Eligible for Complexity Adjustments Under the OPPS
    In this section we propose a policy to provide increased payment 
under the ASC payment system for combinations of certain ``J1'' service 
codes and add-on procedure codes that are eligible for a complexity 
adjustment under the OPPS.
OPPS C-APC Complexity Adjustment Policy
    Under the OPPS, complexity adjustments are utilized to provide 
increased payment for certain comprehensive services. As discussed in 
section II.b.1 of this proposed rule, we apply a complexity adjustment 
by promoting qualifying paired ``J1'' service code combinations or 
paired code combinations of ``J1'' services and add-on codes from the 
originating Comprehensive APC (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. A ``J1'' status indicator 
refers to a hospital outpatient service paid through a C-APC. We 
package payment for all add-on codes, which are codes that describe a 
procedure or service always performed in addition to a primary service 
or procedure, into the payment for the C-APC. However, certain 
combinations of primary service codes and add-on codes may qualify for 
a complexity adjustment.
    We apply complexity adjustments when the paired code combination 
represents a complex, costly form or version of the primary service 
when the frequency and cost thresholds are met. The frequency threshold 
is met when there are 25 or more claims reporting the code combination, 
and the cost threshold is met when there is a violation of the 2 times 
rule, as specified in section 1833(t)(2) of the Act and described in 
section III.A.2.b of this proposed rule, in the originating C-APC. 
These paired code combinations that meet the frequency and cost 
threshold criteria represent those that exhibit materially greater 
resource requirements than the primary service. 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 that are either assigned to status indicator ``J1'' or add-on 
codes to determine if there are paired code combinations that meet the 
complexity adjustment criteria. Once we have determined that a 
particular combination of ``J1'' services, or combinations of a ``J1'' 
service and add-on code, 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 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 
C-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).
    As previously stated, we package payment for add-on codes into the 
C-APC payment rate. If any add-on code reported in conjunction with the 
``J1'' primary service code does not qualify for a complexity 
adjustment, payment for the add-on service continues to be packaged 
into the payment for the primary service and the primary service code 
reported with the add-on code is not reassigned to the next higher cost 
C-APC. We list the complexity adjustments for ``J1'' and add-on code 
combinations for CY 2022, along with all of the other final complexity 
adjustments, in Addendum J to the CY 2022 OPPS/ASC final rule (which is 
available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices).
Proposed ASC Special Payment Policy for OPPS Complexity-Adjusted C-APCs
    Comprehensive APCs cannot be adopted in the ASC payment system due 
to limitations of the ASC claims processing systems. Thus, we do not 
use the OPPS comprehensive services ratesetting methodology in the ASC 
payment system. Under the standard ratesetting methodology used for the 
ASC payment system, comprehensive ``J1'' claims that exist under the 
OPPS

[[Page 44713]]

are treated the same as other claims that contain separately payable 
procedure codes. As comprehensive APCs do not exist under the ASC 
payment system, there is not a process similar to the OPPS complexity 
adjustment policy in the ASC payment system to provide higher payment 
for more complex code combinations. In the ASC payment system, when 
multiple procedures are performed together in a single operative 
session, most covered surgical procedures are subject to a 50-percent 
reduction for the lower-paying procedure (72 FR 66830). This multiple 
procedure reduction gives providers additional payment when they 
perform multiple procedures during the same session, while still 
encouraging providers to provide necessary services as efficiently as 
possible. Add-on procedure codes are not separately payable under the 
ASC payment system and are always packaged into the ASC payment rate 
for the procedure. Unlike the multiple procedure discounting process 
used for other surgical procedures in the ASC payment system, providers 
do not receive any additional payment when they perform a primary 
service with an add-on code in the ASC payment system.
    In previous rulemaking, we have received suggestions from 
commenters requesting that we explore ways to increase payment to ASCs 
when services corresponding to add-on codes are performed with 
procedures, as certain code combinations may represent increased 
procedure complexity or resource intensity when performed together. For 
example, in the CY 2022 OPPS/ASC final rule with comment period, one 
commenter suggested that we modify the device-intensive criteria to 
allow packaged procedures that trigger a complexity adjustment under 
the OPPS to be eligible for device-intensive status under the ASC 
payment system (86 FR 63775). Based on our internal data review and 
assessment at that time, our response to that comment noted that we did 
not believe any changes were warranted to our packaging policies under 
the ASC payment system but that we would consider it in future 
rulemaking.
    For this CY 2023 rulemaking, we evaluated the differences in 
payment in the OPPS and ASC settings for code pairs that included a 
primary procedure and add-on codes that were eligible for complexity 
adjustments under the OPPS and also performed in the ASC setting. Under 
the ASC payment system, we identified 26 packaged procedures (payment 
indicator = ``N1'') that combine with 42 primary procedures, which 
would be C-APCs (status indicator = ``J1'') under the OPPS, to produce 
52 different complexity adjustment code combinations. We generally 
estimate that ASC services were paid approximately 55 percent of the 
OPPS rate for similar services in CY 2021. When we compared the OPPS 
complexity-adjusted payment rate of these primary procedure and add-on 
code combinations to the ASC payment rate for the same code 
combinations, we found that the average rate of ASC payment as a 
percent of OPPS payment for these code combinations was 25 to 35 
percent, which is significantly lower than 55 percent.
    We recognize that this payment differential between the C-APC-
assigned code combinations eligible for complexity adjustments under 
the OPPS and the same code combinations under the ASC payment system 
could potentially create financial disincentives for providers to offer 
these services in the ASC setting, which could potentially result in 
Medicare beneficiaries encountering difficulties accessing these 
combinations of services in ASC settings. As noted above, our current 
policy does not include additional payment for services corresponding 
to add-on codes, unlike our payment policy for multiple surgical 
procedures performed together, for which we provide additional payment 
under the multiple procedure reduction. However, these primary 
procedure and add-on code combinations that would be eligible for a 
complexity adjustment under the OPPS still represent more complex and 
costly versions of the service, and we believe that providers not 
receiving additional payment under the ASC payment system to compensate 
for that increased complexity could lead to providers not being able to 
provide these services in the ASC setting which could result in 
barriers to beneficiary access.
    In order to address this issue, we propose a new ASC payment policy 
that would apply to certain code combinations in the ASC payment system 
where CMS would pay for those code combinations at a higher payment 
rate to reflect that the code combination is a more complex and 
costlier version of the procedure performed, similar to the way in 
which the OPPS APC complexity adjustment is applied to certain paired 
code combinations that exhibit materially greater resource requirements 
than the primary service. We propose to add new Sec.  416.172(h) to 
codify this policy.
    We propose that combinations of a primary procedure code and add-on 
codes that are eligible for a complexity adjustment under the OPPS (as 
listed in OPPS Addendum J) would be eligible for this proposed payment 
policy in the ASC setting. Specifically, we propose that the ASC 
payment system code combinations eligible for additional payment under 
this proposed policy would consist of a separately payable surgical 
procedure code and one or more packaged add-on codes from the ASC 
Covered Procedures List (CPL) and ancillary services list. Add-on codes 
are assigned payment indicator ``N1'' (Packaged service/item; no 
separate payment made), as listed in the ASC addenda.
    Regarding eligibility for this special payment policy, we propose 
that we would assign each eligible code combination a new C code that 
describes the primary and the add-on procedure(s) performed. C codes 
are unique temporary codes and are only valid for claims for HOPD and 
ASC services and procedures. Under our proposal, we would add these C 
codes to the ASC CPL and the ancillary services list, and when ASCs 
bill this C code, they would receive a higher payment rate that 
reflects that the code combination is a more complex and costlier 
version of the procedure performed. We anticipate that the C codes 
eligible for this proposed payment policy would change slightly each 
year, as the complexity adjustment assignments change under the OPPS 
and we expect we would add new C codes each year accordingly. We 
propose 52 such new C codes to add to the ASC CPL. These proposed C 
codes for CY 2023 can be found in the ASC addenda. We propose to add 
new Sec.  416.172(h)(1), titled Eligibility, to codify this policy.
    We propose the following payment methodology for this proposed 
policy, which we would reflect in new Sec.  416.172(h)(2), titled 
Calculation of Payment. We propose that the C codes would be subject to 
all ASC payment policies, including the standard ASC payment system 
ratesetting methodology, meaning, they would be treated the same way as 
other procedure codes in the ASC setting. For example, the multiple 
procedure discounting rules would apply to the primary procedure in 
cases where the services corresponding to the C code are performed with 
another separately payable covered surgical procedure in the ASC 
setting. We propose to use the OPPS complexity-adjusted C-APC rate to 
determine the ASC payment rate for qualifying code combinations, 
similar to how we use OPPS APC relative weights in the standard ASC 
payment system ratesetting methodology. Under the ASC

[[Page 44714]]

payment system, we use the OPPS APC relative payment weights to update 
the ASC relative payment weights for covered surgical procedures since 
ASCs do not submit cost reports. We then scale those ASC relative 
weights for the ASC payment system to ensure budget neutrality. To 
calculate the ASC payment rates for most ASC covered surgical 
procedures, we multiply the ASC conversion factor by the ASC relative 
payment weight. A more detailed discussion of this methodology is 
provided in the in the CY 2008 OPPS/ASC final rule with comment period 
(72 FR 66828 through 66831).
    For this proposal, we propose to use the OPPS complexity-adjusted 
C-APC rate for each corresponding code combination to calculate the 
OPPS relative weight for each corresponding ASC payment system C code, 
which we believe would appropriately reflect the complexity and 
resource intensity of these ASC procedures being performed together. 
For C codes that are not assigned device-intensive status (discussed 
below), we would multiply the OPPS relative weight by the ASC budget 
neutrality adjustment (or ASC weight scalar) to determine the ASC 
relative weight. We would then multiply the ASC relative weight by the 
ASC conversion factor to determine the ASC payment rate for each C 
code. In short, we would apply the standard ASC ratesetting process to 
the C codes. We propose to add new Sec.  416.172(h)(2)(i) to codify 
this policy.
    As discussed in section XIII.C.1.b of this proposed rule, certain C 
codes under our proposed policy may include a primary procedure that 
also qualifies for device-intensive status under the ASC payment 
system. For primary procedures assigned device-intensive status and 
that are a component of a C code created under this proposal, we 
believe it would be appropriate for the C code to retain the device-
intensive status of the primary procedure as well as the device portion 
(or device offset amount) of the primary procedure and not the device 
offset percentage. For example, if the primary procedure had a device 
offset percentage of 31 percent (a proposed device offset percentage of 
greater than 30 percent would be needed to qualify for device-intensive 
status) and a device portion (or device offset amount) of $3,000, C 
codes that included this primary procedure would be assigned device-
intensive status and a device portion of $3,000 to be held constant 
with the OPPS. We would apply our standard ASC payment system 
ratesetting methodology to the non-device portion of the OPPS 
complexity-adjusted APC rate of the C codes; that is, we would apply 
the ASC budget neutrality adjustment and ASC conversion factor. We 
believe assigning device-intensive status and transferring the device 
portion from the primary procedure's ASC payment rate to the C code's 
ASC payment rate calculation is consistent with our treatment of device 
costs and determining device-intensive status under the ASC payment 
system and is an appropriate methodology for determining the ASC 
payment rate. The non-device portion would be the difference between 
the device portion of the primary procedure and the OPPS complexity-
adjusted APC payment rate for the C code based on the ASC standard 
ratesetting methodology. Although this may yield results where the 
device offset percentage is not greater than 30 percent of the OPPS 
complexity-adjusted APC payment rate, we believe this is an appropriate 
methodology to apply where primary procedures assigned device-intensive 
status are a component of a C code. As is the case for all device-
intensive procedures, we would apply the ASC standard ratesetting 
methodology to the OPPS relative weights of the non-device portion for 
any C code eligible for payment under this proposal. That is, we would 
multiply the OPPS relative weight by the ASC budget neutrality 
adjustment and the ASC conversion factor and sum that amount with the 
device portion to calculate the ASC payment rate. We propose to add new 
Sec.  416.172(h)(2)(ii) to codify this policy.
    In order to include these C codes in the budget neutrality 
calculations for the ASC payment system, we propose to estimate the 
potential utilization for these C codes. We do not have claims data for 
packaged codes in the ASC setting because ASCs do not report packaged 
codes under the ASC payment system. Therefore, we propose to estimate 
CY 2023 ASC utilization based upon how often these combinations are 
performed in the HOPD setting. Specifically, we would use the ratio of 
the primary procedure volume to add-on procedure volume from CY 2021 
OPPS claims and apply that ratio against ASC primary procedure 
utilization to estimate the increased spending as a result of our 
proposal for budget neutrality purposes. We believe this method would 
provide a reasonable estimate of the utilization of these code 
combinations in the ASC setting, as it is based on the specific code 
combination utilization in the OPPS. We anticipate that we would 
continue this estimation process until we have sufficient claims data 
for the C codes that can be used to more accurately calculate code 
combination utilization in ASCs, likely for the CY 2025 rulemaking.
    We welcome comments on this proposal, including comments or 
suggestions regarding additional approaches that we should consider for 
this policy.
d. Proposed Low Volume APCs and Limit on ASC Payment Rates for 
Procedures Assigned to Low Volume APCs
    As stated in section XIII.D.1.b of this proposed rule, the ASC 
payment system generally uses OPPS geometric mean costs under the 
standard methodology to determine proposed relative payment weights 
under the standard ASC ratesetting methodology.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63743 
through 63747), we adopted a universal Low Volume APC policy for CY 
2022 and subsequent calendar years. Under our policy, we expanded the 
low volume adjustment policy that is applied to procedures assigned to 
New Technology APCs to also apply to clinical and brachytherapy APCs. 
Specifically, a clinical APC or brachytherapy APC with fewer than 100 
claims per year would be designated as a Low Volume APC. For items or 
services assigned to a Low Volume APC, we use up to 4 years of claims 
data to establish a payment rate for the APC as we currently do for low 
volume services assigned to New Technology APCs. The payment rate for a 
Low Volume APC or a low volume New Technology procedure would be based 
on the highest of the median cost, arithmetic mean cost, or geometric 
mean cost calculated using multiple years of claims data.
    Based on claims data available for this proposed rule, we propose 
to designate 4 brachytherapy APCs and 4 clinical APCs as Low Volume 
APCs under the ASC payment system. The 4 clinical APCs and 4 
brachytherapy APCs shown in Table 58 meet our criteria of having fewer 
than 100 single claims in the claims year (CY 2021 for this proposed 
rule) and therefore, we propose that they would be subject to our 
universal Low Volume APC policy and the APC cost metric would be based 
on the greater of the median cost, arithmetic mean cost, or geometric 
mean cost using up to 4 years of claims data. These 8 APCs were 
designated as Low Volume APCs in CY 2022; however, as we noted under 
the comprehensive ratesetting methodology section, APC 2647 
(Brachytherapy, non-stranded, Gold-198), which was previously 
designated as a Low Volume APC for CY 2022, did

[[Page 44715]]

not meet our claims threshold for this proposed rule.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP26JY22.078

BILLING CODE 4120-01-C
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 for 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 the CY 
2022 OPPS/ASC proposed rule (86 FR 42083)). Thus, our policy generally 
aligns ASC payment bundles with those under the OPPS (72 FR 42495). In 
all cases, in order for ancillary items and services also to be paid, 
the 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 the CY 
2022 OPPS/ASC final rule with comment period, for CY 2022, we finalized 
a policy to unpackage and pay separately at ASP plus 6 percent for the 
cost of non-opioid pain management drugs and biologicals that function 
as a supply when used in a surgical procedure as determined by CMS 
under Sec.  416.174 (86 FR 63483).

[[Page 44716]]

    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 provided 
for any portion of an implanted device with OPPS pass-through payment 
status.
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66933 
through 66934), we finalized that, beginning in CY 2015, certain 
diagnostic tests within the medicine range of CPT codes for which 
separate payment is allowed under the OPPS are covered ancillary 
services when they are integral to an ASC covered surgical procedure. 
We finalized that diagnostic tests within the medicine range of CPT 
codes include all Category I CPT codes in the medicine range 
established by CPT, from 90000 to 99999, and Category III CPT codes and 
Level II HCPCS codes that describe diagnostic tests that crosswalk or 
are clinically similar to procedures in the medicine range established 
by CPT. In the CY 2015 OPPS/ASC final rule with comment period, we also 
finalized our policy to pay for these tests at the lower of the PFS 
nonfacility PE RVU-based (or technical component) amount or the rate 
calculated according to the ASC standard ratesetting methodology (79 FR 
66933 through 66934). We finalized that the diagnostic tests for which 
the payment is based on the ASC standard ratesetting methodology be 
assigned to payment indicator ``Z2'' and revised the definition of 
payment indicator ``Z2'' to include a reference to diagnostic services 
and those for which the payment is based on the PFS nonfacility PE RVU-
based amount be assigned payment indicator ``Z3,'' and revised the 
definition of payment indicator ``Z3'' to include a reference to 
diagnostic services.
b. Proposed Payment for Covered Ancillary Services for CY 2023
    We propose to update the ASC payment rates and to make changes to 
ASC payment indicators, as necessary, to maintain consistency between 
the OPPS and ASC payment system regarding the packaged or separately 
payable status of services and the proposed CY 2023 OPPS and ASC 
payment rates and subsequent years' payment rates. We also propose to 
continue to set the CY 2023 ASC payment rates and subsequent years' 
payment rates for brachytherapy sources and separately payable drugs 
and biologicals equal to the OPPS payment rates for CY 2023 and 
subsequent years' payment rates.
    Covered ancillary services and their proposed payment indicators 
for CY 2023 are listed in Addendum BB of this proposed rule (which is 
available via the internet on the CMS website). For those covered 
ancillary services where the payment rate is the lower of the rate 
under the ASC standard rate setting methodology and the PFS proposed 
rates (similar to our office-based payment policy), the proposed 
payment indicators and rates set forth in this proposed rule are based 
on a comparison using the proposed PFS rates effective January 1, 2023. 
For a discussion of the PFS rates, we refer readers to the CY 2023 PFS 
proposed rule, which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
3. Proposal in Physician Fee Schedule Proposed Rule To Require HOPDs 
and ASCs To Report Discarded Amounts of Certain Single-Dose or Single-
Use Package Drugs
    Section 90004 of the Infrastructure Investment and Jobs Act (Pub. 
L. 117-9, November 15, 2021) (``the Infrastructure Act'') amended 
section 1847A of the Act to re-designate subsection (h) as subsection 
(i) and insert a new subsection (h), which requires manufacturers to 
provide a refund to CMS for certain discarded amounts from a refundable 
single-dose container or single-use package drug. Section III.A. of the 
CY 2023 Physician Fee Schedule (PFS) proposed rule includes proposals 
to implement section 90004 of the Infrastructure Act, including a 
proposal that HOPDs and ASCs would be required to report the JW 
modifier or any successor modifier to identify discarded amounts of 
refundable single-dose container or single-use package drugs that are 
separately payable under the OPPS or ASC payment system. Specifically, 
we propose in the CY 2023 PFS proposed rule that the JW modifier would 
be used to determine the total number of billing units of the HCPCS 
code (that is, the identifiable quantity associated with a HCPCS code, 
as established by CMS) of a refundable single-dose container or

[[Page 44717]]

single-use package drug, if any, that were discarded for dates of 
service during a relevant quarter for the purpose of calculating the 
refund amount described in section 1847A(h)(3) of the Act. The CY 2023 
PFS proposed rule also proposes to require HOPDs and ASCs to use a 
separate modifier, JZ, in cases where no billing units of such drugs 
were discarded and for which the JW modifier would be required if there 
were discarded amounts.
    Because the CY 2023 PFS proposed rule proposes to codify certain 
billing requirements for HOPDs and ASCs, we want to ensure interested 
parties are aware of them and know to refer to that rule for a full 
description of the proposed policy. Interested parties should submit 
comments on this and any other proposals to implement Section 90004 of 
the Infrastructure Act in response to the CY 2023 PFS proposed rule. 
Public comments on these proposals will be addressed in the CY 2023 PFS 
final rule. We note that this same notice appears in section V.A.C. of 
this proposed rule.

E. ASC Payment System Policy for Non-Opioid Pain Management Drugs and 
Biologicals That Function as Surgical Supplies

1. Background on OPPS/ASC Non-Opioid Pain Management Packaging Policies
    On October 24, 2018, the Substance Use-Disorder Prevention that 
Promotes Opioid Recovery and Treatment for Patients and Communities Act 
(SUPPORT) Act (Pub. L. 115-271) was enacted. 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 outpatient 
department (OPD) services to separately classify those procedures that 
utilize opioids and non-opioid alternatives for pain management) would 
reduce the payment incentives for using opioids instead of non-opioid 
alternatives for pain management. In conducting this review and 
considering any revisions, the Secretary must focus on covered OPD 
services (or groups of services) assigned to C-APCs, APCs that include 
surgical services, or services determined by the Secretary that 
generally involve treatment for pain management. If the Secretary 
identifies revisions to payments pursuant to section 
1833(t)(22)(A)(iii) of the Act, section 1833(t)(22)(C) of the Act 
requires the Secretary to, as determined appropriate, begin making 
revisions for services furnished on or after January 1, 2020. Revisions 
under this paragraph are required to be treated as adjustments for 
purposes of paragraph (9)(B) of the Act, which requires any adjustments 
to be made in a budget neutral manner. Section 1833(i)(8) of the Act, 
as added by section 6082(b) of the SUPPORT Act, requires the Secretary 
to conduct a similar type of review as required for the OPPS and to 
make revisions to the ASC payment system in an appropriate manner, as 
determined by the Secretary.
    For a detailed discussion of rulemaking on non-opioid alternatives 
prior to CY 2020, we refer readers to the CYs 2018 and 2019 OPPS/ASC 
final rules with comment period (82 FR 59345; 83 FR 58855 through 
58860).
    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, 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. For the CY 2020 OPPS/ASC proposed rule (84 
FR 39423 through 39427), we proposed to continue our policy to pay 
separately at ASP plus 6 percent for 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.
    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 plus 6 percent for non-
opioid pain management drugs that function as surgical supplies when 
furnished in the ASC setting for CY 2020. Under this policy, for CY 
2020, the only drug that qualified for separate payment in the ASC 
setting as a non-opioid pain management drug that functions as a 
surgical supply was Exparel.
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 85896 
to 85899), we continued the policy to pay separately at ASP plus 6 
percent for non-opioid pain management drugs that function as surgical 
supplies in the performance of surgical procedures when they were 
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. For CY 2021, only Exparel and Omidria 
met the criteria as non-opioid pain management drugs that function as 
surgical supplies in the ASC setting, and received separate payment 
under the ASC payment system.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63483), we finalized a policy to unpackage and pay separately at ASP 
plus 6 percent for non-opioid pain management drugs that function as 
surgical supplies when they are furnished in the ASC setting, are FDA-
approved, have an FDA-approved indication for pain management or as an 
analgesic, and have a per-day cost above the OPPS/ASC drug packaging 
threshold, and we finalized our proposed regulation text changes at 42 
CFR 416.164(a)(4) and (b)(6), Sec.  416.171(b)(1), and Sec.  416.174 as 
proposed. We determined that four products were eligible for separate 
payment in the ASC setting under our final policy for CY 2022. We noted 
that future products, or products not discussed in that rulemaking that 
may be eligible for separate payment under this policy would be 
evaluated in future rulemaking (86 FR 63496). Table 59 lists the four 
drugs that met our finalized criteria established in CY 2022 and 
received separate payment under the ASC payment system when furnished 
in the ASC setting for CY 2022 as described in the CY 2022 final rule 
with comment period (86 FR 63496).

[[Page 44718]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.079

2. Eligibility Criteria Technical Clarification and Proposed Regulation 
Text Changes Regarding Pass-Through Status and Separately Payable 
Status
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63489), we finalized a policy that non-opioid pain management drugs and 
biologicals that function as supplies in surgical procedures that are 
already paid separately, including through transitional drug pass-
through status under the OPPS, are not eligible for payment under Sec.  
416.174. As we previously noted in the CY 2022 OPPS/ASC final rule with 
comment period, once transitional pass-through payment status expires, 
a drug or biological may qualify for separate payment under the ASC 
payment system if it meets the eligibility criteria at Sec.  416.174 
(86 FR 63489). OPPS pass-through status expires on a quarterly basis. 
Therefore, for products for which pass-through status has expired that 
qualify for separate payment under the ASC payment system as non-opioid 
pain management drugs and biologicals that function as surgical 
supplies, separate payment may begin the first day of the next calendar 
year quarter following pass-through expiration. For example, a drug 
with expiring pass-through status on June 30, 2024, may begin to 
receive separate payment in the ASC setting on July 1, 2024, under this 
proposed policy, if it meets the other relevant criteria and such 
separate payment is finalized in the applicable year's OPPS/ASC 
rulemaking.
    Although we established this policy in the CY 2022 OPPS/ASC final 
rule with comment period (86 FR 63489), we did not reflect it in 
regulation text. We propose now to clarify our policy by codifying the 
two additional criteria for separate payment for non-opioid pain 
management drugs and biologicals that function as surgical supplies in 
the regulatory text at Sec.  416.174 as a technical change. First, we 
propose to provide at new Sec.  416.174(a)(3) that non-opioid pain 
management drugs or biologicals that function as a supply in a surgical 
procedure are eligible for separate payment if the drug or biological 
does not have transitional pass-through payment status under Sec.  
419.64. In the case where a drug or biological otherwise meets the 
requirements under Sec.  416.174 and has transitional pass-through 
payment status that will expire during the calendar year, the drug or 
biological would qualify for separate payment under Sec.  416.174 
during such calendar year on the first day of the next calendar year 
quarter after its pass-through status expires. Second, we propose that 
new Sec.  416.174(a)(4) would reflect that the drug or biological must 
not already be separately payable in the OPPS or ASC payment system 
under a policy other than the one specified in Sec.  416.174.
3. Proposed CY 2023 Qualification Evaluation for Separate Payment of 
Non-Opioid Pain Management Drugs and Biologicals That Function as a 
Surgical Supply
    As noted above, in the CY 2022 OPPS/ASC final rule with comment 
period, we finalized a policy to unpackage and pay separately at ASP 
plus 6 percent for non-opioid pain management drugs that function as 
surgical supplies when they are furnished in the ASC setting, are FDA-
approved, have an FDA-approved indication for pain management or as an 
analgesic, and have a per-day cost above the OPPS drug packaging 
threshold beginning on or after January 1, 2022. For CY 2023, the OPPS 
drug packaging threshold is proposed to be $135. For more information 
on the drug packaging threshold, see section V.B.1.a of this proposed 
rule.
    The following sections include the non-opioid alternatives of which 
we are aware and our evaluations of whether these non-opioid 
alternatives meet the criteria established at Sec.  416.174. We welcome 
stakeholder comment on these evaluations.
a. Proposed Annual Eligibility Re-Evaluations of Non-Opioid 
Alternatives That Were Separately Paid in the ASC Setting During CY 
2022
    In the CY 2022 final rule with comment period, we finalized that 
four drugs would receive separate payment in the ASC setting for CY 
2022 under

[[Page 44719]]

the policy for non-opioid pain management drugs and biologicals that 
function as surgical supplies (86 FR 63496). These drugs are described 
by HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg), HCPCS code 
J1097 (Phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml ophthalmic 
irrigation solution, 1 ml), HCPCS code C9088 (Instillation, bupivacaine 
and meloxicam, 1 mg/0.03 mg), and HCPCS code C9089 (Bupivacaine, 
collagen-matrix implant, 1 mg).
    We re-evaluated these products outlined in the previous paragraph 
against the criteria specified in Sec.  416.174, including the 
technical clarifications we propose to that section, to determine 
whether they continue to qualify for separate payment in CY 2023. Based 
on our evaluation, we propose that the drugs described by HCPCS codes 
C9290, J1097, and C9089 continue to meet the required criteria and 
should receive separate payment in the ASC setting. We propose that the 
drug described by HCPCS code C9088 would not receive separate payment 
in the ASC setting under this policy as this drug will be separately 
payable during CY 2023 under OPPS transitional pass-through status. 
Please see section V.A, ``OPPS Transitional Pass-Through Payment for 
Additional Costs of Drugs, Biologicals, and Radiopharmaceuticals'' of 
this proposed rule for additional details on the pass-through status of 
HCPCS code C9088.
    We welcome comment on our evaluations below.
(a) Proposed Eligibility Evaluation for the Separate Payment of Exparel
    Based on our internal review, we believe that Exparel, described by 
HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg), meets the 
criteria described at Sec.  416.174, including the technical 
clarifications we propose to that section, and we propose to continue 
making separate payment for it under the ASC payment system for CY 
2023. Exparel was approved by FDA with a New Drug Application (NDA 
#022496) under section 505(c) of the Federal Food, Drug, and Cosmetic 
Act on October 28, 2011.\166\ Exparel's FDA-approved indication is ``in 
patients 6 years of age and older for single-dose infiltration to 
produce postsurgical local analgesia'' and ``in adults as an 
interscalene brachial plexus nerve block to produce postsurgical 
regional analgesia''.\167\ No component of Exparel is opioid-based. 
Accordingly, we propose that Exparel meets the criterion described at 
Sec.  416.174(a)(1). Under the methodology described at V.B.1.a. of 
this proposed rule, the per-day cost of Exparel exceeds the proposed 
$135 per-day cost threshold. Therefore, we propose that Exparel meets 
the criterion described at Sec.  416.174(a)(2). Additionally, Exparel 
will not have transitional pass-through payment status under Sec.  
419.64 in CY 2023, nor will it be otherwise separately payable in the 
OPPS or ASC payment system in CY 2023 under a policy other than the one 
specified in Sec.  416.174. Therefore, we propose that Exparel meets 
the criteria we propose to add to the regulation text at Sec. Sec.  
416.174(a)(3) and (4).
---------------------------------------------------------------------------

    \166\ Exparel. FDA Letter. 28 October 2011. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2011/022496s000ltr.pdf.
    \167\ Exparel. FDA Package Insert. 22 March 2021. https://www.accessdata.fda.gov/drugsatfda_docs/label/2021/022496s035lbl.pdf.
---------------------------------------------------------------------------

    Based on the above discussion, we believe that Exparel meets the 
criteria described at Sec.  416.174 and we propose to continue making 
separate payment for it as a non-opioid pain management drug that 
functions as a supply in a surgical procedure under the ASC payment 
system for CY 2023.
(b) Proposed Eligibility Evaluation for the Separate Payment of Omidria
    Based on our internal review, we believe that Omidria, described by 
HCPCS code J1097 (Phenylephrine 10.16 mg/ml and ketorolac 2.88 mg/ml 
ophthalmic irrigation solution, 1 ml), meets the criteria described at 
Sec.  416.174(a), and we propose to continue making separate payment 
for it under the ASC payment system for CY 2023. Omidria was approved 
by FDA with a New Drug Application (NDA #205388) under section 505(c) 
of the Federal Food, Drug, and Cosmetic Act on May 30, 2014.\168\ 
Omidria's FDA-approved indication is as ``an alpha 1-adrenergic 
receptor agonist and nonselective cyclooxygenase inhibitor indicated 
for: Maintaining pupil size by preventing intraoperative miosis; 
Reducing postoperative pain''.\169\ No component of Omidria is opioid-
based. Accordingly, we propose that Omidria meets the criterion 
described at Sec.  416.174(a)(1). Under the methodology described at 
V.B.1.a of this proposed rule, the per-day cost of Omidria exceeds the 
proposed $135 per-day cost threshold. Therefore, we propose that 
Omidria meets the criterion described at Sec.  416.174(a)(2). 
Additionally, we believe that Omidria will not have transitional pass-
through payment status under Sec.  419.64 in CY 2023, nor will it be 
otherwise separately payable in the OPPS or ASC payment system in CY 
2023 under a policy other than the one specified in Sec.  416.174. 
Therefore, we propose that if Omidria meets the criteria we propose to 
add to the regulation text at Sec. Sec.  416.174(a)(3) and (4).
---------------------------------------------------------------------------

    \168\ Omidria. FDA Letter. 30 May 2014. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2014/205388Orig1s000ltr.pdf.
    \169\ Omidria. FDA Package Insert. December 2017. https://www.accessdata.fda.gov/drugsatfda_docs/label/2017/205388s006lbl.pdf.
---------------------------------------------------------------------------

    Based on the above discussion, we propose that Omidria meets the 
criteria described at Sec.  416.174 and should receive separate payment 
as a non-opioid pain management drug that functions as a supply in a 
surgical procedure under the ASC payment system for CY 2023.
(c) Proposed Eligibility Evaluation for the Separate Payment of 
Xaracoll
    Based on our internal review, we believe Xaracoll, described by 
C9089 (Bupivacaine, collagen-matrix implant, 1 mg), meets the criteria 
described at Sec.  416.174(a), and we propose to continue making 
separate payment for it under the ASC payment system for CY 2023. 
Xaracoll was approved by FDA with a New Drug Application (NDA # 209511) 
under section 505(c) of the Federal Food, Drug, and Cosmetic Act on 
August 28, 2020.\170\ Xaracoll is ``indicated in adults for placement 
into the surgical site to produce postsurgical analgesia for up to 24 
hours following open inguinal hernia repair''.\171\ No component of 
Xaracoll is opioid-based. Accordingly, we propose that Xaracoll meets 
the criterion described at Sec.  416.174(a)(1). Under the methodology 
described at V.B.1.a. of this proposed rule, the per-day cost of 
Xaracoll exceeds the proposed $135 per-day cost threshold. Therefore, 
we propose that Xaracoll meets the criterion described at Sec.  
416.174(a)(2). Additionally, at this time we do not believe that 
Xaracoll will have transitional pass-through payment status under Sec.  
419.64 in CY 2023, nor do we believe it will otherwise be separately 
payable in the OPPS or ASC payment system under a policy other than the 
one specified in Sec.  416.174. Therefore, we propose that if Xaracoll 
meets the criteria we propose to add to the regulation text at 
Sec. Sec.  416.174(a)(3) and (4).
---------------------------------------------------------------------------

    \170\ Xaracoll. FDA Letter. August 2020. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2020/209511Orig1s000ltr.pdf.
    \171\ Xaracoll. FDA Labeling. August 2020. https://www.accessdata.fda.gov/drugsatfda_docs/label/2020/209511s000lbl.pdf.
---------------------------------------------------------------------------

    Based on the above discussion, we propose that Xaracoll meets the 
criteria

[[Page 44720]]

described at Sec.  416.174 and should receive separate payment as a 
non-opioid pain management drug that functions as a supply in a 
surgical procedure under the ASC payment system for CY 2023.
(d) Proposed Eligibility Evaluation for the Separate Payment of 
Zynrelef
    Zynrelef, the drug described by HCPCS code C9088 (Instillation, 
bupivacaine and meloxicam, 1 mg/0.03 mg), received drug pass-through 
payment status as of April 1, 2022. As discussed above, our policy, as 
finalized in the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63489), states that non-opioid pain management drugs and biologicals 
that function as supplies in surgical procedures that are already paid 
separately, or have transitional drug pass-through status under the 
OPPS, would not be candidates for this policy as they are already paid 
separately under the OPPS and ASC payment systems. Also discussed 
above, we propose to include this requirement as a technical change in 
new regulation text at Sec.  416.174(a)(3). Zynrelef receives separate 
payment consistent with its drug pass-through approval and we have 
proposed in section V.A of this proposed rule that its pass-through 
status will not expire until after CY 2023. Accordingly, we propose 
that Zynrelef would not be eligible for separate payment under the ASC 
payment system policy for non-opioid pain management drugs and 
biologicals that function as surgical supplies in CY 2023. Please see 
section V.A, ``OPPS Transitional Pass-Through Payment for Additional 
Costs of Drugs, Biologicals, and Radiopharmaceuticals'' of this 
proposed rule for additional details on transitional drug pass-through 
payments.
b. Proposed Evaluations of Newly Eligible Non-Opioid Alternatives
    In this section, we evaluate drugs or biologicals, of which we are 
aware, that we believe may be newly eligible for separate payment in 
the ASC setting as a non-opioid pain management drug that functions as 
a surgical supply against the criteria described at Sec.  416.174(a). 
We evaluated whether Dextenza, described by HCPCS code J1096 
(Dexamethasone, lacrimal ophthalmic insert, 0.1 mg), a drug with pass-
through status expiring December 31, 2022, meets the criteria specified 
in Sec.  416.174, including the technical clarifications we propose to 
that section. We propose that Dextenza receive separate payment in the 
ASC setting as a non-opioid pain management drug that functions as a 
surgical supply for CY 2023. We welcome stakeholder comment on this 
evaluation.
(a) Proposed Eligibility Evaluation for the Separate Payment of 
Dextenza
    Based on our internal review, we believe Dextenza, described by 
HCPCS code J1096 (Dexamethasone, lacrimal ophthalmic insert, 0.1 mg), 
meets the criteria described at Sec.  416.174 and we propose to provide 
separate payment for it under the ASC payment system for CY 2023. 
Dextenza was approved by FDA with a New Drug Application (NDA # 208742) 
under section 505(c) of the Federal Food, Drug, and Cosmetic Act on 
November 30, 2018.\172\ Dextenza's FDA-approved indication is as ``a 
corticosteroid indicated for the treatment of ocular pain following 
ophthalmic surgery'' and ``the treatment of ocular itching associated 
with allergic conjunctivitis''.\173\ No component of Dextenza is 
opioid-based. Accordingly, we believe Dextenza meets the criterion 
described at Sec.  416.174(a)(1). Under the methodology described at 
V.B.1.a. of this proposed rule, the per-day cost of Dextenza exceeds 
the proposed $135 per-day OPPS drug packaging cost threshold, so 
Dextenza also meets the criterion described at Sec.  416.174(a)(2). 
Additionally, Dextenza's pass-through status expires on December 31, 
2022, and we do not believe that it will otherwise be separately 
payable in the OPPS or ASC payment system under a policy other than the 
one specified in Sec.  416.174. Therefore, we propose that if Dextenza 
meets the criteria we propose to add to the regulation text at 
Sec. Sec.  416.174(a)(3) and (4).
---------------------------------------------------------------------------

    \172\ * Dextenza. FDA Letter. November 2018. https://www.accessdata.fda.gov/drugsatfda_docs/nda/2018/208742Orig1s000Approv.pdf.
    \173\ Dextenza. FDA Labeling. October 2021. https://www.accessdata.fda.gov/drugsatfda_docs/label/2021/208742s007lbl.pdf.
---------------------------------------------------------------------------

    Based on the above discussion, we propose that Dextenza meets the 
criteria described at Sec.  416.174 and should receive separate payment 
as a non-opioid pain management drug that functions as a supply in a 
surgical procedure under the ASC payment system for CY 2023.
    Table 60 below lists the four drugs that we propose to meet the 
criteria described at Sec.  416.174 to receive separate payment as a 
non-opioid pain management drug that functions as a supply in a 
surgical procedure under the ASC payment system for CY 2023.

[[Page 44721]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.080

4. Comment Solicitation Payment Policies for Separate Payment for 
Additional Drugs and Biologicals and Other Products That Function as 
Supplies in Surgical Procedures for CY 2023
    We are soliciting comment on additional non-opioid pain management 
drugs and biologicals that function as surgical supplies that may meet 
the criteria specified in Sec.  416.174 and therefore qualify for 
separate payment under the ASC payment system. We encourage commenters 
to include an explanation of how the drug or biological meets the 
eligibility criteria in Sec.  416.174, including the technical 
clarifications we propose to that section. In the CY 2023 OPPS/ASC 
final rule with comment period, we will include a summary of comments 
we receive and our analysis of whether these products meet the 
eligibility criteria in Sec.  416.174. If we find these additional 
drugs or biologicals do satisfy the criteria established at Sec.  
416.174, we will finalize their separate payment status for CY 2023 in 
the ASC setting in the CY 2023 OPPS/ASC final rule with comment period.
    We are also seeking comment on potential policy modifications and 
additional criteria that may help further align the ASC payment system 
policy for non-opioid pain management drugs and biologicals that 
function as surgical supplies with the intent of sections 1833(t)(22) 
and 1833(i)(8) of the Act. We also seek comment on non-drug or non-
biological products that should qualify for separate, or modified, 
payment under this authority and any data regarding any such products. 
In addition, we solicit comments on barriers to access to non-opioid 
pain management products that may exist, and how our payment policies 
could be modified to address these barriers. We are also interested in 
comments and data regarding the need to expand the current ASC payment 
system policy for non-opioid pain management drugs and biologicals that 
function as surgical supplies to the OPPS, which is discussed in 
section XIII.E.3 of this proposed rule.
    We will take comments into consideration for potential future 
changes to this policy.
F. Proposed New Technology Intraocular Lenses (NTIOLs)
    New Technology Intraocular Lenses (NTIOLs) are intraocular lenses 
that replace a patient's natural lens that has been removed in cataract 
surgery and that also meet the requirements listed in Sec.  416.195.
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 requested in the guidance 
document titled ``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

[[Page 44722]]

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 2023
    We did not receive any requests for review to establish a new NTIOL 
class for CY 2023 by March 1, 2022, the due date published in the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63809).
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 do not propose to revise the payment adjustment amount for CY 2023.

G. Proposed ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 ASC 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 with comment period to indicate new codes for the next 
calendar year for which the interim payment indicator assigned is 
subject to comment. The comment indicator ``NI'' also is assigned to 
existing codes with substantial revisions to their descriptors such 
that we consider them to be describing new services, 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 (these addenda 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 this 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.
    In the CY 2021 OPPS/ASC final rule with comment period, we 
finalized the addition of 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 (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.
2. Proposed ASC Payment and Comment Indicators for CY 2023
    For CY 2023, we propose new and revised Category I and III CPT 
codes as well as new and revised Level II HCPCS codes. Proposed 
Category I and III CPT codes that are new and revised for CY 2023 and 
any new and existing Level II HCPCS codes with substantial revisions to 
the code descriptors for CY 2023, compared to the CY 2022 descriptors, 
are included in ASC Addenda AA and BB to this proposed rule and labeled 
with proposed comment indicator ``NP'' to indicate that these CPT and 
Level II HCPCS codes are open for comment as part of the CY 2023 OPPS/
ASC proposed rule.
    We refer readers to Addenda DD1 and DD2 of this proposed rule 
(these addenda are available via the internet on the CMS website) for 
the complete list of ASC payment and comment indicators proposed for 
the CY 2023 update.

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

1. Background
    In the August 2, 2007 ASC 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

[[Page 44723]]

budget neutral in subsequent calendar years (72 FR 42532 through 42533; 
Sec.  416.171(e)).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across the OPPS, ASC, and 
MPFS payment systems. However, because coinsurance is almost always 20 
percent for ASC services, this interpretation of expenditures has 
minimal impact for subsequent budget neutrality adjustments calculated 
within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 ASC 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 XIII.D.2 of this proposed rule), and certain diagnostic tests 
within the medicine range that are covered ancillary services, the 
established policy is to set the payment rate at the lower of the MPFS 
unadjusted nonfacility PE RVU-based amount or the amount calculated 
using the ASC standard ratesetting methodology. Further, as discussed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841 
through 66843), we also adopted alternative ratesetting methodologies 
for specific types of services (for example, device-intensive 
procedures).
    As discussed in the August 2, 2007 ASC 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).
    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 18-04 which superseded the April 10, 2018 
OMB Bulletin No. 18-03. A copy of OMB Bulletin No. 18-03 may be 
obtained at https://www.whitehouse.gov/wp-content/uploads/2018/04/OMB-BULLETIN-NO.-18-03-Final.pdf. A copy of OMB Bulletin No. 18-04 may be 
obtained at https://www.whitehouse.gov/wpcontent/uploads/2018/90/Bulletin-18-04.pdf.
    On March 6, 2020, OMB issued Bulletin No. 20-01, which provided 
updates to and superseded OMB Bulletin No. 18-04 that was issued on 
September 14, 2018. (For a copy of this bulletin, we refer readers to 
the following website: https://www.whitehouse.gov/wp-content/uploads/2020/03/Bulletin-20-01.pdf).
    The proposed CY 2023 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. 
13-01, 15-01, 17-01, 18-03, 18-04, and 20-01). 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 2023, we are applying

[[Page 44724]]

a proxy wage index based on this methodology to ASCs located in CBSA 
25980 (Hinesville-Fort Stewart, GA).
    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 apply 
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 2023 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and PFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42533). The OPPS relative payment weights 
are scaled to maintain budget neutrality for the OPPS. We then scale 
the OPPS relative payment weights again to establish the ASC relative 
payment weights. To accomplish this, we hold estimated total ASC 
payment levels constant between calendar years for purposes of 
maintaining budget neutrality in the ASC payment system. That is, we 
apply the weight scalar to ensure that projected expenditures from the 
updated ASC payment weights in the ASC payment system are 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.
    As discussed in section II.A.1.a of this proposed rule, we are 
using the CY 2021 claims data to be consistent with the OPPS claims 
data for this proposed rule. Consistent with our established policy, we 
propose to scale the CY 2023 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 2021, we 
propose to compare the total payment using the CY 2022 ASC relative 
payment weights with the total payment using the CY 2023 ASC relative 
payment weights to take into account the changes in the OPPS relative 
payment weights between CY 2022 and CY 2023. Additionally, in light of 
our proposal to provide a higher ASC payment rate through the use of 
new C codes for 52 primary procedures when performed with add-on 
packaged services, CY 2023 total payments will include spending and 
utilization related to these new C codes. For this proposed rule, we 
estimate the additional CY 2023 spending to be $5 million.
    We propose to use the ratio of CY 2022 to CY 2023 total payments 
(the weight scalar) to scale the ASC relative payment weights for CY 
2023. The proposed CY 2023 ASC weight scalar is 0.8474. 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. We propose to use the CY 2021 claims data to model our 
budget neutrality adjustment.
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 2023, we calculated the proposed adjustment for the ASC payment 
system by using the most recent CY 2021 claims data available and 
estimating the difference in total payment that would be created by 
introducing the proposed CY 2023 ASC wage indexes. Specifically, 
holding CY 2021 ASC utilization, service-mix, and the proposed CY 2023 
national payment rates after application of the weight scalar constant, 
we calculated the total adjusted payment using the CY 2022 ASC wage 
indexes and the total adjusted payment using the proposed CY 2023 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 2022 ASC wage indexes to the total 
adjusted payment calculated with the proposed CY 2023 ASC wage indexes 
and applied the resulting ratio of 1.0010 (the proposed CY 2023 ASC 
wage index budget neutrality adjustment) to the CY 2022 ASC conversion 
factor to calculate the proposed CY 2023 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

[[Page 44725]]

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 productivity-
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 
would 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 productivity-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 intended to assess the feasibility of collaborating 
with stakeholders to collect ASC cost data in a minimally burdensome 
manner and could propose a plan to collect such information. We refer 
readers to that final rule for a detailed discussion of the rationale 
for these policies.
    The proposed hospital market basket update for CY 2023 is projected 
to be 2.7 percent, as published in the FY 2023 IPPS/LTCH PPS proposed 
rule (86 FR 25435), based on IHS Global Inc.'s (IGI's) 2021 fourth 
quarter forecast with historical data through the third quarter of 
2021.
    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). We finalized the methodology for calculating the productivity 
adjustment in the CY 2011 PFS final rule with comment period (75 FR 
73394 through 73396) and revised it in the CY 2012 PFS final rule with 
comment period (76 FR 73300 through 73301) and the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70500 through 70501). The 
proposed productivity adjustment for CY 2023 was projected to be 0.4 
percentage point, as published in the FY 2023 IPPS/LTCH PPS proposed 
rule (86 FR 25435) based on IGI's 2021 fourth quarter forecast.
    For CY 2023, we propose to utilize the hospital market basket 
update of 3.1 percent reduced by the productivity adjustment of 0.4 
percentage point, resulting in a productivity-adjusted hospital market 
basket update factor of 2.7 percent for ASCs meeting the quality 
reporting requirements. Therefore, we propose to apply a 2.7 percent 
productivity-adjusted hospital market basket update factor to the CY 
2022 ASC conversion factor for ASCs meeting the quality reporting 
requirements to determine the CY 2023 ASC payment amounts. The ASCQR 
Program affected payment rates beginning in CY 2014 and, under this 
program, there is a 2.0 percentage point reduction to the update factor 
for ASCs that fail to meet the ASCQR Program requirements. We refer 
readers to section XIV.E. of the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 59138 through 59139) and section XIV.E of this 
proposed rule for a detailed discussion of our policies regarding 
payment reduction for ASCs that fail to meet ASCQR Program 
requirements. We propose to utilize the hospital market basket update 
of 3.1 percent reduced by 2.0 percentage points for ASCs that do not 
meet the quality reporting requirements and then reduced by the 0.4 
percentage point productivity adjustment. Therefore, we proposed to 
apply a 0.7 percent productivity-adjusted hospital market basket update 
factor to the CY 2022 ASC conversion factor for ASCs not meeting the 
quality reporting requirements. We also propose that if more recent 
data are subsequently available (for example, a more recent estimate of 
the hospital market basket update or productivity adjustment), we would 
use such data, if appropriate, to determine the CY 2023 ASC update for 
the final rule.
    For CY 2023, we propose to adjust the CY 2022 ASC conversion factor 
($49.916) by the proposed wage index budget neutrality factor of 1.0010 
in addition to the productivity-adjusted hospital market basket update 
of 2.7 percent discussed above, which results in a proposed CY 2023 ASC 
conversion factor of $51.315 for ASCs meeting the quality reporting 
requirements. For ASCs not meeting the quality reporting requirements, 
we propose to adjust the CY 2022 ASC conversion factor ($49.916) by the 
proposed wage index budget neutrality factor of 1.0010 in addition to 
the quality reporting/productivity-adjusted hospital market basket 
update of 0.7 percent discussed above, which results in a proposed CY 
2023 ASC conversion factor of $50.315.
    We request comments on our proposals for updating the CY 2023 ASC 
conversion factor.
3. Display of the Proposed CY 2023 ASC Payment Rates
    Addenda AA and BB to this proposed rule (which are available on the 
CMS website) display the proposed ASC payment rates for CY 2023 for 
covered surgical procedures and covered ancillary services, 
respectively. The proposed payment rates included in Addenda AA and BB 
to this proposed rule reflect the full ASC proposed payment update and 
not the reduced payment update used to calculate payment rates for ASCs 
not meeting the quality reporting requirements under the ASCQR Program.
    These Addenda contain several types of information related to the 
proposed CY 2023 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.
    For CY 2021, we finalized adding a new column to ASC Addendum BB 
titled ``Drug Pass-Through Expiration during Calendar Year'' where we 
flag through the use of an asterisk each drug for which pass-through 
payment is expiring during the calendar year (that is, on a date other 
than December 31st).
    The values displayed in the column titled ``Proposed CY 2023 
Payment Weight'' are the proposed relative payment weights for each of 
the listed services for CY 2023. The proposed relative payment weights 
for all covered surgical procedures and covered ancillary services 
where the ASC payment rates are based on OPPS relative payment weights 
were scaled for budget neutrality. Therefore, scaling was not applied 
to the device portion of the device-intensive procedures; services that 
are paid at the MPFS nonfacility PE RVU-based amount; separately 
payable covered ancillary services that have a predetermined national 
payment amount, such as drugs and biologicals and brachytherapy

[[Page 44726]]

sources that are separately paid under the OPPS; or services that are 
contractor-priced or paid at reasonable cost in ASCs. This includes 
separate payment for non-opioid pain management drugs.
    To derive the proposed CY 2023 payment rate displayed in the 
``Proposed CY 2023 Payment Rate'' column, each ASC payment weight in 
the ``Proposed CY 2023 Payment Weight'' column was multiplied by the 
proposed CY 2023 conversion factor. The conversion factor includes a 
budget neutrality adjustment for changes in the wage index values and 
the annual update factor as reduced by the productivity adjustment. The 
proposed CY 2023 ASC conversion factor uses the CY 2023 productivity-
adjusted hospital market basket update factor of 2.7 percent (which is 
equal to the projected hospital market basket update of 3.1 percent 
reduced by a projected productivity adjustment of 0.4 percentage 
point).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Proposed CY 2023 Payment Weight'' column for items and services 
with predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Proposed CY 2023 Payment'' column displays 
the proposed CY 2023 national unadjusted ASC payment rates for all 
items and services. The proposed CY 2023 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 2021.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are proposed to be excluded from payment in 
ASCs for CY 2023. Addendum FF displays the device offset percentages 
calculated under the standard ASC ratesetting methodology for covered 
surgical procedures in CY 2023.
    Addendum FF to this proposed rule displays the OPPS payment rate 
(based on the standard ratesetting methodology), the device offset 
percentage, and the device portion of the ASC payment rate for CY 2023 
for covered surgical procedures.

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

A. Background

1. Overview
    We seek to promote higher quality, more efficient, and equitable 
healthcare for Medicare beneficiaries. Consistent with these goals, we 
have 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.
2. Statutory History of the Hospital OQR Program
    We refer readers to the CY 2011 OPPS/ASC final rule (75 FR 72064 
through 72065) for a detailed discussion of the statutory history of 
the Hospital OQR Program. In the CY 2021 OPPS/ASC final rule (85 FR 
86179), we finalized updates to the regulations to include a reference 
to the statutory authority for the Hospital OQR Program. Section 
1833(t)(17)(A) of the Social Security Act (the Act) states that 
subsection (d) hospitals (as defined under section 1886(d)(1)(B) of the 
Act) that do not submit data required 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.
3. Regulatory History of the Hospital OQR Program
    We refer readers to the CYs 2008 through 2022 OPPS/ASC final rules 
for detailed discussions of the regulatory history of the Hospital OQR 
Program:
     The CY 2008 OPPS/ASC final rule (72 FR 66860 through 
66875);
     The CY 2009 OPPS/ASC final rule (73 FR 68758 through 
68779);
     The CY 2010 OPPS/ASC final rule (74 FR 60629 through 
60656);
     The CY 2011 OPPS/ASC final rule (75 FR 72064 through 
72110);
     The CY 2012 OPPS/ASC final rule (76 FR 74451 through 
74492);
     The CY 2013 OPPS/ASC final rule (77 FR 68467 through 
68492);
     The CY 2014 OPPS/ASC final rule (78 FR 75090 through 
75120);
     The CY 2015 OPPS/ASC final rule (79 FR 66940 through 
66966);
     The CY 2016 OPPS/ASC final rule (80 FR 70502 through 
70526);
     The CY 2017 OPPS/ASC final rule (81 FR 79753 through 
79797);
     The CY 2018 OPPS/ASC final rule (82 FR 59424 through 
59445);
     The CY 2019 OPPS/ASC final rule (83 FR 59080 through 
59110);
     The CY 2020 OPPS/ASC final rule (84 FR 61410 through 
61420);
     The CY 2021 OPPS/ASC final rule (85 FR 86179 through 
86187); and
     The CY 2022 OPPS/ASC final rule (86 FR 63822 through 
63875).
    We have codified certain requirements under the Hospital OQR 
Program at 42 CFR[thinsp]419.46. We refer readers to section XX.X of 
this proposed rule for a detailed discussion of the payment reduction 
for hospitals that fail to meet Hospital OQR Program requirements for 
the CY 2025 payment determination.

B. Hospital OQR Program Quality Measures

1. Considerations in Selecting Hospital OQR Program Quality Measures
    We refer readers to the CY 2012 OPPS/ASC final rule (76 FR 74458 
through 74460) for a detailed discussion of the priorities we consider 
for the Hospital OQR Program quality measure selection. We are not 
proposing any changes to these policies in this proposed rule.
2. Retention of Hospital OQR Program Measures Adopted in Previous 
Payment Determinations
    We previously finalized and codified at 42 CFR 419.46(h)(1) a 
policy to retain measures from the previous year's measure set for 
subsequent years, unless removed (77 FR 68471 and 83 FR 59082). We are 
not proposing any changes to these policies in this proposed rule.
3. Removal of Quality Measures From the Hospital OQR Program Measure 
Set
a. Immediate Removal or Suspension
    We previously finalized and codified at 42 CFR 419.46(i)(2) and (3) 
a process for removal or suspension of a Hospital OQR Program measure, 
based on evidence that the continued use of the measure as specified 
raises patient safety concerns (74 FR 60634 through 60635, 77 FR 68472, 
and 83 FR 59082).\174\ We are not proposing any changes to these 
policies in this proposed rule.
---------------------------------------------------------------------------

    \174\ We refer readers to the CY 2013 OPPS/ASC final rule (77 FR 
68472 and 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
    We previously finalized and codified at 42 CFR 419.46(i)(3) 
policies to use the regular rulemaking process to remove a measure for 
circumstances other than when CMS believes that continued use of a 
measure raises specific patient safety concerns (74 FR 60635 and 83 FR 
59082).\175\ We are not proposing any changes to these policies in this 
proposed rule.
---------------------------------------------------------------------------

    \175\ 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.

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

[[Page 44727]]

4. Modifications to Previously Adopted Measures
a. Proposal To Change the Cataracts: Improvement in Patient's Visual 
Function Within 90 Days Following Cataract Surgery (OP-31) Measure From 
Mandatory to Voluntary Beginning With the CY 2027 Payment Determination
(1) Background
    The OP-31 measure was adopted in the CY 2014 OPPS/ASC final rule 
(78 FR 75102 and 75103). During CY 2014 OPPS/ASC rulemaking, some 
commenters expressed concern about the burden of collecting pre-
operative and post-operative visual function surveys (78 FR 75103). In 
response to those comments, we modified our implementation strategy in 
a manner that we believed would significantly minimize collection and 
reporting burden by applying a sampling scheme and a low case threshold 
exemption to address commenters' concerns regarding burden (78 FR 75113 
through 75115). Shortly thereafter, we became concerned about the use 
of what we believed at the time were inconsistent surveys to assess 
visual function. The measure specifications allowed for the use of any 
validated survey, and we were unclear about the impact the use of 
varying surveys might have on accuracy, feasibility, or reporting 
burden. Therefore, we issued guidance \176\ stating that we would delay 
the implementation of OP-31, and we subsequently finalized in the CY 
2015 OPPS/ASC final rule (79 FR 66947) the exclusion of OP-31 from the 
measure set while allowing hospitals to voluntarily report measure data 
beginning with the CY 2015 reporting period.
---------------------------------------------------------------------------

    \176\ See Letter from Craig Bryant to Hospital OQR initiative 
discussions re: Outpatient Quality Reporting (OQR) Program--Delay of 
New Measures (Dec. 31, 2013), available at https://qualitynet.cms.gov/files/5d3792e74b6d1a256059d87d?filename=2013-40-OP.pdf; see also Letter from Craig Bryant to Hospital OQR initiative 
discussions re: Delayed Implementation of OP-31: Cataracts--
Improvement in Patient's Visual Function within 90 Days Following 
Cataract Surgery Measure (NQF #1536) to January 1, 2015; Data 
Collection Period for Two Endoscopy Measures OP-29 and OP-30 Begins 
(April 2, 2014), available at https://qualitynet.cms.gov/files/5d3793174b6d1a256059d8e3?filename=2014-14-OP,0.pdf.
---------------------------------------------------------------------------

(2) Considerations Concerning Previously Finalized OP-31 Measure 
Requirements Beginning With the CY 2025 Reporting Period/CY 2027 
Payment Determination
    In the CY 2022 OPPS/ASC proposed rule (86 FR 42247), we stated that 
it would be appropriate to require that hospitals report on OP-31 for 
the CY 2023 reporting period/CY 2025 payment determination as hospitals 
have had the opportunity for several years to familiarize themselves 
with OP-31, prepare to operationalize it, and opportunity to practice 
reporting the measure since the CY 2015 reporting period. Many 
commenters expressed concern about making this measure mandatory due to 
the burden of reporting the measure and the impact this additional 
burden would have during the COVID-19 pandemic, stating that OP-31 has 
not been mandatory and many facilities have not been practicing 
reporting it (86 FR 63845). In response to these comments, in the CY 
2022 OPPS/ASC final rule with comment period, we finalized a delay in 
the implementation of this measure with mandatory reporting beginning 
with the CY 2025 reporting period/CY 2027 payment determination (86 FR 
63845 through 63846).
    Since the publication of the CY 2022 OPPS/ASC final rule with 
comment period, interested parties have expressed concern about the 
reporting burden of this measure given the ongoing COVID-19 public 
health emergency (PHE). Interested parties have indicated that they are 
still recovering from the COVID-19 PHE and that the requirement to 
report OP-31 would be burdensome due to national staffing and medical 
supply shortages coupled with unprecedented changes in patient case 
volumes. Due to the continued impact of the COVID-19 PHE, such as 
national staffing and medical supply shortages, the 2-year delay of 
mandatory reporting for this measure is no longer sufficient. Based on 
these factors and the feedback we received from interested parties, we 
believe it is appropriate to change OP-31 from mandatory to voluntary 
beginning with the CY 2025 reporting period/CY 2027 payment 
determination. A hospital would not be subject to a payment reduction 
for failing to report this measure during the voluntary reporting 
period; however, we strongly encourage hospitals to gain experience 
with the measure. We plan to continue to evaluate this policy moving 
forward. To be clear, there are no changes to reporting for the CY 2023 
and CY 2024, during which the measure would remain voluntary.
    As the OP-31 measure uniquely requires cross-setting coordination 
among clinicians of different specialties (that is, surgeons and 
opthalmologists), we believe it appropriate to defer mandatory 
reporting at this time. We will consider mandatory reporting of OP-31 
after the national PHE declaration officially ends and we find it 
appropriate to do so given COVID-19 PHE impacts on national staffing 
and supply shortages. We intend to consider implementation of mandatory 
reporting of the OP-31 measure through future rulemaking because as we 
noted in the CY 2015 OPPS/ASC final rule, this measure addresses an 
area of care that is not adequately addressed in our current measure 
set and the measure serves to drive the coordination of care (79 FR 
66947). We subsequently stated in the CY 2022 OPPS/ASC final rule with 
comment period that while the measure has been voluntary and available 
for reporting since the CY 2015 reporting period, a number of 
facilities have reported data for this measure and those that have 
reported these data have done so consistently (86 FR 63845).
    We invite public comment on this proposal.
5. Previously Finalized and Proposed Hospital OQR Program Measure Sets
a. Previously Finalized Hospital OQR Program Measure Set for the CY 
2024 Payment Determination
    We refer readers to the CY 2022 OPPS/ASC final rule (85 FR 63846 
through 63850) for a summary of the previously adopted Hospital OQR 
Program measure set for the CY 2024 payment determination and 
subsequent years. Table 61 summarizes the previously finalized Hospital 
OQR Program measure set for the CY 2024 payment determination:
BILLING CODE 4120-01-P

[[Page 44728]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.081

b. Summary of Proposed Hospital OQR Program Measure Set for the CY 2025 
Payment Determination
    Table 62 summarizes the Hospital OQR Program measure set including 
our proposal in this proposed rule for the CY 2025 payment 
determination:

[[Page 44729]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.082

c. Summary of Proposed Hospital OQR Program Measure Set for the CY 2026 
Payment Determination and Subsequent Years
    Table 63 summarizes the proposed Hospital OQR Program measure set 
for the CY 2026 payment determination and subsequent years:

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BILLING CODE 4120-01-C
6. Hospital OQR Program Measures and Topics for Future Considerations
a. Request for Comment on Reimplementation of Hospital Outpatient 
Volume on Selected Outpatient Surgical Procedures (OP-26) Measure or 
Adoption of Another Volume Indicator
(1) Background
    Hospital care has been gradually shifting from inpatient to 
outpatient settings, and since 1983, inpatient stays per capita have 
fallen by 31 percent.\177\ In line with this trend, outpatient services 
increased by 0.7 percent in 2019 while inpatient services decreased by 
0.9 percent. \178\ Research indicates that volume in hospital 
outpatient departments will continue to grow, with some estimates 
projecting a 19 percent increase in patients between 2019 and 
2029.\179\
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    \177\ Medicare Payment Advisory Commission. March 2021 Report to 
the Congress: Medicare Payment Policy. Chapter 3. Available at: 
https://www.medpac.gov/wp-content/uploads/2021/10/mar21_medpac_report_ch3_sec.pdf.
    \178\ Medicare Payment Advisory Commission. March 2021 Report to 
the Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/document/march-2021-report-to-the-congress-medicare-payment-policy/.
    \179\ Sg2. Sg2 Impact of Change Forecast Predicts Enormous 
Disruption in Health Care Provider Landscape by 2029. June 4, 2021. 
Available at: https://www.sg2.com/media-center/press-releases/sg2-impact-forecast-predicts-disruption-health-care-provider-landscape-2029/.
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    Volume has a long history as a quality metric, however, quality 
measurement efforts moved away from procedure volume as it was 
considered simply a proxy for quality rather than directly measuring 
outcomes.\180\ While studies suggest that larger facility surgical 
procedure volume does not alone lead to better outcomes, it may be 
associated with better outcomes due to having characteristics that 
improve care (for example, high-volume facilities may have teams that 
work more effectively together, or have superior systems or programs 
for identifying and responding to complications), making volume an 
important component of quality.\181\ The

[[Page 44731]]

Hospital OQR Program does not currently include a quality measure for 
facility-level volume data, including surgical procedure volume data, 
but did so previously. We refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74466 through 74468) where we adopted 
the Hospital Outpatient Volume on Selected Outpatient Surgical 
Procedures measure (OP-26) beginning with the CY 2012 reporting period/
CY 2014 payment determination. This structural measure of facility 
capacity collected surgical procedure volume data on eight categories 
of procedures frequently performed in the hospital outpatient setting: 
Cardiovascular, Eye, Gastrointestinal, Genitourinary, Musculoskeletal, 
Nervous System, Respiratory, and Skin (76 FR 74466). We adopted OP-26 
based on evidence that the volume of surgical procedures, and 
particularly of high-risk surgical procedures, is related to better 
patient outcomes, including decreased medical errors and mortality (76 
FR 74466).182 183 184 This may be attributable to greater 
experience or surgical skill, greater comfort with and, hence, 
likelihood of application of standardized best practices, and increased 
experience in monitoring and management of surgical patients for the 
particular procedure. We further stated our belief that publicly 
reporting volume data would provide patients with beneficial 
information to use when selecting a care provider (76 FR 74467).
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    \180\ Jha AK. Back to the Future: Volume as a Quality Metric. 
JAMA Forum Archive. Published online June 10, 2015.
    \181\ Auerbach AD et al. The Relationship between Case-Volume, 
Care Quality, and Outcomes of Complex Cancer Surgery. Journal of the 
American College of Surgery. 2010;211(5):601-608. doi:10.1016/
j.jamcollsurg.2010.07.006.
    \182\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor 
of Surgical Outcomes''. Edward H. Livingston, Jing Cao JAMA. 
2010;304(1):95-97.
    \183\ David R. Flum, D.R.; Salem, L.; Elrod, J.B.; Dellinger, 
E.P.; Cheadle, A. Chan, L. ``Early Mortality Among Medicare 
Beneficiaries Undergoing Bariatric Surgical Procedures''. JAMA. 
2005;294(15):1903-1908.
    \184\ Schrag, D; Cramer, L.D.; Bach, P.B.; Cohen, A.M.; Warren, 
J.L.; Begg, C.B '' Influence of Hospital Procedure Volume on 
Outcomes Following Surgery for Colon Cancer'' JAMA. 2000; 284 (23): 
3028- 3035.
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    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59429), we removed OP-26, stating that there is a lack of evidence to 
support this specific measure's link to improved clinical quality. 
Although there is evidence of a link between patient volume and better 
patient outcomes, we stated that we believed that there was a lack of 
evidence that this link was reflected in the OP-26 measure 
specifically. Based on this belief, we removed the OP-26 measure under 
the following measure removal criterion: performance or improvement on 
a measure does not result in better patient outcomes. At the time, many 
commenters supported the proposal to remove the OP-26 measure (82 FR 
59429).
    We are considering reimplementing the OP-26 measure or another 
volume measure because the shift from the inpatient to outpatient 
setting has placed greater importance on tracking the volume of 
outpatient procedures.
    Over the past few decades, innovations in the health care system 
have driven the migration of procedures from the inpatient setting to 
the outpatient setting. Forty-five percent of percutaneous coronary 
intervention (PCI) procedures shifted from the inpatient to outpatient 
setting from 2004 to 2014, and more than 70 percent of patients who 
undergo thoracoscopic surgery can be discharged on the day of the 
surgery itself due to the use of innovative techniques and technologies 
available in the outpatient setting. 185 186 Given these 
developments, we believe that patients may benefit from the public 
reporting of facility-level volume measure data that reflect the 
procedures performed across hospitals and provide the ability to track 
volume changes by facility and procedure category. Volume is an 
indicator for patients of which facilities are experienced with certain 
outpatient procedures.
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    \185\ Abrams KD, Balan-Cohen A, Durbha P. Growth in Outpatient 
Care: The role of quality and value incentives. Deloitte Insights. 
2018. Available at: https://www2.deloitte.com/us/en/insights/industry/health-care/outpatient-hospital-services-medicare-incentives-value-quality.html.
    \186\ Chang AC, Yee J, Orringer MB, Iannettoni MD. Diagnostic 
thoracoscopic lung biopsy: an outpatient experience. The Annals of 
Thoracic Surgery. 2002;74:1942-7.
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    OP-26 was the only measure in the Hospital OQR Program measure set 
that captured facility-level volume within hospitals and volume for 
Medicare and non-Medicare patients. As a result of its removal, the 
Hospital OQR Program currently does not capture outpatient surgical 
procedure volume in hospitals.
    Furthermore, we are considering the reintroduction of a facility-
level volume measure to support potential future development of a pain 
management measure, as described in a request for comment in the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63902 through 
63904). When considering the need for a pain management measure, we 
analyzed volume data to determine the proportion of ASC procedures 
performed for pain management using the methodology established by ASC-
7: ASC Facility Volume Data on Selected ASC Surgical Procedures, the 
volume measure that was included in the ASCQR Program measure set (76 
FR 74507 through 74509). We found that pain management procedures were 
the third most common procedure in CY 2019 and 2020 and concluded that 
a pain management measure would provide consumers with important 
quality of care information. Thus, a volume measure in the Hospital OQR 
Program's measure set would provide information to Medicare 
beneficiaries and other interested parties on numbers and proportions 
of procedures by category performed by individual facilities, including 
for hospital outpatient procedures related to pain management.
    We note that the OP-26 measure was adopted in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 4466 through 74468) and was not 
reviewed or endorsed by the Measure Applications Partnership (MAP), 
which first began its pre-rulemaking review of quality measures across 
Federal programs in February 2012, after the publication of the CY 2012 
OPPS/ASC final rule with comment period in November 2011.\187\ 
Therefore, for OP-26 to be adopted in the Hospital OQR Program measure 
set, the measure would need to first undergo the pre-rulemaking process 
specified in section 1890A(a) of the Act.
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    \187\ Measures Application Partnership. Pre-Rulemaking Report: 
Input on Measures Under Consideration by HHS for 2012 Rulemaking 
Final Report. February 2012. Available at: https://www.qualityforum.org/Publications/2012/02/MAP_Pre-Rulemaking_Report__Input_on_Measures_Under_Consideration_by_HHS_for_2012_Rulemaking.aspx.
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Solicitation of Comments on the Readoption of the Hospital Outpatient 
Volume on Selected Outpatient Surgical Procedures (OP-26) Measure or 
Other Volume Indicator in the Hospital OQR Program
    We seek comment on the potential inclusion of a volume measure in 
the Hospital OQR Program, either by re-adopting the Hospital Outpatient 
Volume on Selected Outpatient Surgical Procedures (OP-26) measure or 
adopting another volume indicator. We also seek comment on what volume 
data hospitals currently collect and if it is feasible to submit this 
data to the Hospital OQR Program, to minimize the collection and 
reporting burden of an alternative, new volume measure. Additionally, 
we seek comment on an appropriate timeline for implementing and 
publicly reporting the measure data.
    Specifically, we invite comment on the following:
     The usefulness of including a volume indicator in the 
Hospital OQR Program measure set and publicly reporting volume data.

[[Page 44732]]

     Input on the mechanism of volume data collection and 
submission, including anticipated barriers and solutions to data 
collection and submission.
     Considerations for designing a volume indicator to reduce 
collection burden and improve data accuracy.
     Potential reporting of volume by procedure type, instead 
of total surgical procedure volume data for select categories, and 
which procedures would benefit from volume reporting.
     The usefulness of Medicare versus non-Medicare reporting 
versus other or additional categories for reporting.
b. Overarching Principles for Measuring Healthcare Quality Disparities 
Across CMS Quality Programs
    Significant and persistent inequities in healthcare outcomes exist 
in the United States. Belonging to a racial or ethnic minoritized 
group; being a member of a religious minority; living with a 
disability; being a member of lesbian, gay, bisexual, transgender, and 
queer (LGBTQ+) community; living in a rural area; or being near or 
below the poverty level is often associated with worse health outcomes. 
188 189 190 191 192 193 194 195 196
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    \188\ Joynt KE, Orav E, Jha AK. (2011). Thirty-day readmission 
rates for Medicare beneficiaries by race and site of care. JAMA, 
305(7):675-681.
    \189\ Milkie Vu et al. (2016). Predictors of Delayed Healthcare 
Seeking Among American Muslim Women. J Womens Health (Larchmt). 2016 
Jun;25(6):586-93. doi: 10.1089/jwh.2015.5517. Epub 2016 Feb 18. 
PMID: 26890129; PMCID: PMC5912720.
    \190\ Lindenauer PK, Lagu T, Rothberg MB, et al. (2013). Income 
inequality and 30-day outcomes after acute myocardial infarction, 
heart failure, and pneumonia: Retrospective cohort study. British 
Medical Journal, 346.
    \191\ Trivedi AN, Nsa W, Hausmann LRM, et al. (2014). Quality 
and equity of care in U.S. hospitals. New England Journal of 
Medicine, 371(24):2298- 2308.
    \192\ Polyakova, M., et al. (2021). Racial disparities in excess 
all-cause mortality during the early COVID-19 pandemic varied 
substantially across states. Health Affairs, 40(2): 307-316.
    \193\ Rural Health Research Gateway. (2018). Rural communities: 
age, income, and health status. Rural Health Research Recap. https://www.ruralhealthresearch.org/assets/2200-8536/rural-communities-age-income-health-status-recap.pdf.
    \194\ https://www.minorityhealth.hhs.gov/assets/PDF/Update_HHS_Disparities_Dept-FY2020.pdf.
    \195\ www.cdc.gov/mmwr/volumes/70/wr/mm7005a1.htm.
    \196\ Poteat TC, Reisner SL, Miller M, Wirtz AL. (2020). COVID-
19 vulnerability of transgender women with and without HIV infection 
in the Eastern and Southern U.S. preprint. medRxiv. 2020;2020.07.21. 
20159327. doi:10.1101/2020.07.21.20159327.
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    One approach being employed to reduce inequity across our programs 
is the expansion of efforts to report quality measure results 
stratified by patient social risk factors and demographic variables. 
The Request for Information (RFI) included in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28479), titled ``Overarching Principles for 
Measuring Healthcare Quality Disparities Across CMS Quality Programs'' 
describes key considerations that we might take into account across all 
CMS quality programs, including the Hospital OQR Program, when 
advancing the use of measure stratification to address healthcare 
disparities and advance health equity across our programs.
    We ask that readers review the full RFI in the FY 2023 IPPS/LTCH 
PPS proposed rule for full details on these considerations. For 
comments and feedback on the application of these principles to the 
Hospital OQR Program, please respond to this proposed rule.
7. 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://qualitynet.cms.gov/outpatient/specifications-manuals. We refer readers to the CY 2019 OPPS/ASC final 
rule with comment period (83 FR 59104 and 59105), where we changed the 
frequency of the Hospital OQR Program Specifications Manual release 
beginning with CY 2019, such that we will release a manual once every 
12 months and release addenda as necessary.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63861), we finalized the adoption of eCQMs into the Hospital OQR 
Program measure set beginning with the CY 2023 reporting period and 
finalized the manner to update the technical specifications for eCQMs. 
Technical specifications for eCQMs used in the Hospital OQR Program 
will be contained in the CMS Annual Update for the Hospital Quality 
Reporting Programs (Annual Update). The Annual Update and 
implementation guidance documents are available on the eCQI Resource 
Center website at: https://ecqi.healthit.gov/. For eCQMs, we will 
update the measure specifications on an annual basis through the Annual 
Update which includes code updates, logic corrections, alignment with 
current clinical guidelines, and additional guidance for hospitals and 
electronic health record (EHR) vendors to use in order to collect and 
submit data on eCQMs from hospital EHRs. We are not proposing any 
changes to these policies in this proposed rule.
8. Public Display of Quality Measures
    We refer readers to the CY 2009, CY 2014, and CY 2017 OPPS/ASC 
final rules (73 FR 68777 through 68779, 78 FR 75092, and 81 FR 79791, 
respectively) for our previously finalized policies regarding public 
display of quality measures. We are not proposing any changes to these 
policies in this proposed rule.

C. Administrative Requirements

1. QualityNet Account and Security Official
    We refer readers to the CYs 2011, 2012, 2014 and 2022 OPPS/ASC 
final rules (75 FR 72099; 76 FR 74479; 78 FR 75108 through 75109; and 
86 FR 639040, respectively) for the previously finalized QualityNet 
security official requirements, including those for setting up a 
QualityNet account and the associated timelines. These procedural 
requirements are codified at 42 CFR 419.46(b). Hospitals will be 
required to register and submit quality data through the Hospital 
Quality Reporting (HQR) System (formerly referred to as the QualityNet 
Secure Portal). The HQR System is safeguarded in accordance with the 
HIPAA Privacy and Security Rules to protect submitted patient 
information. See 45 CFR parts 160 and 164, subparts A, C, and E, for 
more information. We are not proposing any changes to these policies in 
this proposed rule.
2. Requirements Regarding Participation Status
    We refer readers to the CYs 2014, 2016, and 2019 OPPS/ASC final 
rules (78 FR 75108 through 75109; 80 FR 70519; and 83 FR 59103 through 
59104, respectively) for requirements for participation and withdrawal 
from the Hospital OQR Program. We codified these requirements at 42 CFR 
419.46(b) and (c). We are not proposing any changes to these policies 
in this proposed rule.

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 (78 FR 75110 through 75111; 80 FR 70519 through 70520; and 82 FR 
59439, respectively) where we finalized our policies for clinical data 
submission deadlines. We codified these

[[Page 44733]]

submission requirements at 42 CFR 419.46(d).
a. Proposal To Align Hospital OQR Program Patient Encounter Quarters 
for Chart-Abstracted Measures to the Calendar Year for Annual Payment 
Update (APU) Determinations
(1) Background
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 75110 
and 75111), we specified our data submission deadlines and codified our 
submission requirements at 42 CFR 419.46(d)(2).\197\ We refer readers 
to the CY 2016 OPPS/ASC final rule with comment period (80 FR 70519 and 
70520), where we shifted the quarters on which the Hospital OQR Program 
payment determinations are based, beginning with the CY 2018 payment 
determination. Prior to the adoption of this policy, the previous 
timeframe had extended from patient encounter quarter three of 2 years 
prior to the payment determination to patient encounter quarter two of 
the year prior to the payment determination. This timeframe provided 
less than two months between the time that the data was submitted for 
validation and the beginning of the payments that are affected by these 
data, creating compressed processing times for CMS and compressed 
timelines for hospitals to review their APU determination decisions. To 
address this issue, we changed the timeframe to begin with patient 
encounter quarter two of 2 years prior to the payment determination and 
end with patient encounter quarter one of the year prior to the payment 
determination.
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    \197\ The CY 2014 OPPS/ASC final rule codified this standard in 
Sec.  419.46(c)(2). This provision was moved to its current location 
in the CY 2021 OPPS/ASC final rule with comment period.
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    As finalized in the CY 2016 OPPS/ASC final rule with comment period 
(80 FR 70519 and 70520), the patient encounter quarters for chart-
abstracted measures data submitted to the Hospital OQR Program are not 
aligned with the January through December calendar year. Because these 
quarters are not aligned with the calendar year, as other CMS quality 
programs' quarters are such as the Hospital Inpatient Quality Reporting 
(IQR) Program,\198\ this misalignment has resulted in confusion among 
some hospitals regarding submission deadlines and data reporting 
quarters.
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    \198\ FY 2011 IPPS/LTCH PPS final rule (75 FR 50220 and 50221).
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(2) Proposal To Align Hospital OQR Program Patient Encounter Quarters 
for Chart-Abstracted Measures to the Calendar Year Beginning With the 
CY 2024 Reporting Period/CY 2026 Payment Determination
    Beginning with the CY 2024 reporting period/CY 2026 payment 
determination, we propose to align the patient encounter quarters for 
chart-abstracted measures with the calendar year. If this proposal is 
finalized as proposed, all four quarters of patient encounter data for 
chart-abstracted measures would be based on the calendar year two years 
prior to the payment determination year. We propose this change to 
align the patient encounter quarters for chart-abstracted measures with 
the calendar year schedule of the Hospital OQR Program and to further 
align these quarters with those of the Hospital IQR Program since some 
hospitals may be submitting data for both programs. The Hospital IQR 
Program's patient encounter quarters all occur on the calendar year 2 
years prior to the payment determination year as finalized in the FY 
2011 IPPS/LTCH PPS final rule (75 FR 50220 through 50221). We believe 
that the proposed alignment would also provide more time for APU 
determinations by increasing the length of time between the last 
clinical data submission deadline and APU determinations.
    As an example, the current and proposed patient encounter quarters 
and clinical data submission deadlines for the CY 2028 payment 
determination are illustrated in Tables 64 and 65, respectively.

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    To facilitate this process, we propose to transition to the newly 
proposed timeframe for the CY 2026 payment determination and subsequent 
years and use only three quarters of data for chart-abstracted measures 
in determining the CY 2025 payment determination as illustrated in the 
tables 66, 67, and 68 below. However, we note that data submission 
deadlines would not change.
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[[Page 44735]]


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    We seek public comment on our proposal.
2. Requirements for Chart-Abstracted Measures Where Patient-Level Data 
Are Submitted Directly to CMS
We refer readers to the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68481 through 68484) and the QualityNet website available at: 
https://qualitynet.cms.gov for a discussion of the requirements for 
chart-abstracted measure data submitted via the HQR System (formerly 
referred to as the QualityNet Secure Portal) for the CY 2014 payment 
determination and subsequent years. We are not proposing any changes to 
these policies in this proposed rule.
3. Claims-Based Measure Data Requirements
    We refer readers to the CY 2019 OPPS/ASC final rule (83 FR 59106 
through 59107), where we established a three-year reporting period for 
OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate after 
Outpatient Colonoscopy beginning with the CY 2020 payment 
determination. We refer readers to the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63863) where we finalized a three-year reporting 
period for the Breast Cancer Screening Recall Rates measure (OP-39). We 
are not proposing any changes to these policies in this proposed rule.
4. Data Submission Requirements for the OP-37a-e: Outpatient and 
Ambulatory Surgery Consumer Assessment of Healthcare Providers and 
Systems (OAS CAHPS) Survey-Based Measures
    We refer readers to the CYs 2017, 2018, and 2022 OPPS/ASC final 
rules (81 FR 79792 through 79794; 82 FR 59432 and 59433; and 86 FR 
63863 through 63866, respectively) for a discussion of the previously 
finalized requirements related to survey administration and vendors for 
the OAS CAHPS Survey-based measures.
    We refer readers to the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 63863 through 63866), where we reaffirmed our approach to 
the form, manner, and timing which OAS CAHPS information will be 
submitted with two additional data collection modes (web with mail 
follow-up of non-respondents and web with telephone follow-up of non-
respondents), beginning with voluntary data collection for the CY 2023 
reporting period/CY 2025 payment determination and continuing for 
mandatory reporting for subsequent years. For more information about 
the modes of administration, we refer readers to the OAS CAHPS Survey 
website: https://oascahps.org/. We are not proposing any changes to 
these policies in this proposed rule.
5. Data Submission Requirements for Measures Submitted via a Web Based 
Tool
a. Data Submission Requirements for Measures Submitted via a CMS Web-
Based Tool
    We refer readers to the CY 2014 OPPS/ASC final rule (78 FR 75112 
through 75115), the CY 2016 OPPS/ASC final rule (80 FR 70521), and the 
QualityNet website available at: https://qualitynet.cms.gov for a 
discussion of the requirements for measure data submitted via the HQR 
System (formerly referred to as the QualityNet Secure Portal) for the 
CY 2017 payment determination and subsequent years. We are not 
proposing any changes to these policies in this proposed rule.
b. Data Submission Requirements for Measures Submitted via the CDC NHSN 
Website
    We refer readers to the CY 2014 OPPS/ASC final rule (78 FR 75097 
through 75100) for a discussion of the previously finalized 
requirements for measure data submitted via the CDC NHSN website. In 
addition, we refer readers to the CY 2022 OPPS/ASC final rule (86 FR 
63866), where we finalized the adoption of the COVID-19

[[Page 44736]]

Vaccination Coverage Among Health Care Personnel measure (OP-38) 
beginning with the CY 2022 reporting period/CY 2024 payment 
determination. We are not proposing any changes to these policies in 
this proposed rule.
6. eCQM Reporting and Submission Requirements
a. Background
    We refer readers to the CY 2014 OPPS/ASC final rule (78 FR 75106 
and 75107), the CY 2015 OPPS/ASC final rule (79 FR 66956 through 
66961), the CY 2016 OPPS/ASC final rule with comment period (80 FR 
70516 through 70518), the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79785 through 79790), the CY 2018 OPPS/ASC final rule 
with comment period (82 FR 59435 through 59438), and the CY 2022 OPPS/
ASC final rule with comment period (82 FR 63867 through 63870) for more 
details on previous discussion regarding future measure concepts 
related to eCQMs and electronic reporting of data for the Hospital OQR 
Program, including support for the introduction of eCQMs into the 
Program. Measure stewards and developers have worked to advance eCQMs 
that would be reported in the outpatient setting.
b. eCQM Reporting and Data Submission Requirements
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63867), we finalized the adoption of the STEMI eCQM (OP-40). In the CY 
2022 OPPS/ASC final rule with comment period and a progressive increase 
in the number of quarters for which hospitals must report eCQM data (86 
FR 63867 and 63868). For the CY 2023 reporting period, we finalized 
that hospitals submit STEMI eCQM (OP-40) data during this reporting 
period voluntarily for any quarter (86 FR 63868). Hospitals that choose 
to submit data voluntarily must submit in compliance with the eCQM 
certification requirements in sections XV.D.6.c, XV.D.6.d, and XV.D.6.e 
of the CY 2022 OPPS/ASC final rule with comment period. We refer 
readers to the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63867 and 63868) for additional detail on the eCQM reporting and data 
submission requirements.
    We also refer readers to Table 69 for a summary of the previously 
finalized quarterly data increase in eCQM reporting beginning with the 
CY 2023 reporting period.
[GRAPHIC] [TIFF OMITTED] TP26JY22.089

c. Electronic Quality Measure Certification Requirements for eCQM 
Reporting
(1) Use of Cures Update
    In May 2020, the 21st Century Cures Act: Interoperability, 
Information Blocking, and the ONC Health IT Certification Program (ONC 
21st Century Cures) Act final rule (85 FR 25642 through 25961) 
finalized updates to the health IT certification criteria (herein after 
referred to as the ``Cures Update''). These updates included revisions 
to the clinical quality measurement certification criterion at 45 CFR 
170.315(c)(3) to refer to CMS Quality Reporting Data Architecture 
(QRDA) Implementation Guides and removal of the Health Level 7 
(HL7[supreg]) QRDA standard from the relevant health IT certification 
criteria (85 FR 25645). The ONC 21st Century Cures Act final rule 
provided health IT developers with up to 24 months from May 1, 2020 to 
make available to their customers technology certified to the updated 
and/or new criteria (85 FR 25670). In November 2020, ONC issued an 
interim final rule (85 FR 70064) which extended the compliance deadline 
for the clinical quality measures-report criterion at 45 CFR 
170.315(c)(3) until December 31, 2022 (85 FR 70075). These updates were 
finalized to reduce burden on health IT developers (85 FR 70075) and 
have no impact on providers' existing reporting practices for the 
Hospital OQR Program.
    We refer readers to the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 63868 and 63869), where we finalized the requirement for 
hospitals participating in the Hospital OQR Program to utilize 
certified technology updated consistent with the Cures Update for the 
CY 2023 reporting period/CY 2025 payment determination and for 
subsequent years. This period includes both the voluntary reporting 
period and mandatory reporting periods. We noted that this requirement 
is in alignment with the Hospital IQR Program, which requires use of 
technology updated consistent with the Cures Update beginning with the 
CY 2023 reporting period/FY 2025 payment determination (See 86 FR 
45418). We are not proposing any changes to these policies in this 
proposed rule.
d. File Format for EHR Data, Zero Denominator Declarations, and Case 
Threshold Exemptions
(1) File Format for EHR Data
    Data can be collected in EHRs and health information technology 
systems using standardized formats to promote consistent representation 
and interpretation, as well as to allow for systems to compute data 
without needing human interpretation. As described in the FY 2016 IPPS/
LTCH PPS final rule (80 FR 49701), these standards are referred to as 
content exchange standards because the standard details how data should 
be represented and the relationships between data elements.
    We refer reader to the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 42262), where we finalized, beginning with the CY 2023 
reporting period/CY 2025 payment determination, that hospitals: (1) 
Must submit eCQM data via the QRDA Category I (QRDA I) file format; 
\199\ (2) may use third parties

[[Page 44737]]

to submit QRDA I files on their behalf; and (3) may either use 
abstraction or pull the data from non-certified sources in order to 
then input these data into CEHRT for capture and reporting QRDA I 
files. We also refer readers to the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63869) for discussion on the maintenance of 
technical specifications including those for eCQMs. We are not 
proposing any changes to these policies in this proposed rule.
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    \199\ QRDA I is an individual patient-level quality report that 
contains quality data for one patient for one or more eCQMs. QRDA 
creates a standard method to report quality measure results in a 
structured, consistent format and can be used to exchange eCQM data 
between systems. For further detail on QRDA I, the most recently 
available QRDA I specifications and Implementation Guides (IGs) can 
be found at: https://ecqi.healthit.gov/qrda.
---------------------------------------------------------------------------

(2) Zero Denominator Declarations
    We understand there may be situations in which a hospital does not 
have data to report on a particular eCQM. We refer readers to the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63869), where we 
finalized that if the hospital's EHR is certified to an eCQM, but the 
hospital does not have patients that meet the denominator criteria of 
that eCQM, the hospital can submit a zero in the denominator for that 
eCQM. Submission of a zero in the denominator for an eCQM counts as a 
successful submission for that eCQM for the Hospital OQR Program (86 FR 
63869). We refer readers to the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63869) for additional detail on the zero 
denominator declarations policy. We are not proposing any changes to 
these policies in this proposed rule.
(3) Case Threshold Exemptions
    We understand that in some cases, a hospital may not meet the case 
threshold of discharges for a particular eCQM. In the CY 2022 OPPS/ASC 
final rule with comment period (86 FR 63869), we finalized a policy 
aligning the Hospital OQR Program case threshold exemption with the 
case threshold exemption from the Medicare Promoting Interoperability 
Program (77 FR 54080) and the Hospital IQR Program (79 FR 50324). 
Specifically, for the Hospital OQR Program we finalized that beginning 
with the CY 2023 reporting period/CY 2025 payment determination, if a 
hospital's EHR system is certified to report an eCQM and the hospital 
experiences five or fewer outpatient discharges per quarter or 20 or 
fewer outpatient discharges per year (Medicare and non-Medicare 
combined), as defined by an eCQM's denominator population, that 
hospital could be exempt from reporting on that eCQM (86 FR 63869). We 
also stated that the exemption would not have to be used; a hospital 
could report those individual cases if it would like to. We refer 
readers to the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63869) for additional detail on the case threshold exemption policy. We 
are not proposing any changes to these policies in this proposed rule.
e. Submission Deadlines for eCQM Data
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63870), we finalized the policy to require eCQM data submission by May 
15 of the following year for the applicable CY reporting period, 
beginning with the CY 2023 reporting period/CY 2025 payment 
determination. For example, CY 2023 eCQM data would need to be reported 
to us by May 15, 2024. We note the submission deadline may be moved to 
the next business day if it falls on a weekend or Federal holiday. We 
refer reads to the CY 2022 OPPS/ASC final rule with comment period (86 
FR 63870) for additional detail on submission deadlines for eCQM data. 
We are not proposing any changes to these policies in this proposed 
rule.
7. Population and Sampling Data Requirements for the CY 2023 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2011 OPPS/ASC final rule (75 FR 72100 
through 72103) and the CY 2012 OPPS/ASC final rule (76 FR 74482 through 
74483) for discussions of our population and sampling requirements. We 
are not proposing any changes to these policies in this proposed rule.
8. 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 (79 FR 66964 
and 67014) where we formalized a review and corrections period for 
chart-abstracted measures in the Hospital OQR Program. We are not 
proposing any changes to these policies in this proposed rule.
b. Web-Based Measures
    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 
86184), we finalized an expansion of our review and corrections policy 
to apply to measure data submitted via the CMS web-based tool beginning 
with data submitted for the CY 2021 reporting period/CY 2023 payment 
determination. We are not proposing any changes to these policies in 
this proposed rule.
c. Electronic Clinical Quality Measures (eCQMs)
    We refer readers to the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 63870) where we finalized that hospitals have a review 
and corrections period for eCQM data submitted to the Hospital OQR 
Program. We finalized a review and corrections period for eCQM data 
which would run concurrently with the data submission period. We refer 
readers to the QualityNet website (available at: https://qualitynet.cms.gov/outpatient/measures/eCQM) and the eCQI Resource 
Center (available at: https://ecqi.healthit.gov/) for more resources on 
eCQM reporting. We are not proposing any changes to these policies in 
this proposed rule.
d. OAS CAHPS Measures
    Each hospital administers (via its vendor) the survey for all 
eligible patients treated during the data collection period on a 
monthly basis according to the guidelines in the Protocols and 
Guidelines Manual (https://oascahps.org) and report the survey data to 
CMS on a quarterly basis by the deadlines posted on the OAS CAHPS 
Survey website as stated in the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63870). As finalized in the CY 2017 OPPS/ASC 
final rule with comment period, data cannot be altered after the data 
submission deadline but can be reviewed prior to the submission 
deadline (81 FR 79793). We are not proposing any changes to these 
policies in this proposed rule.
9. Hospital OQR Program Validation Requirements
a. Background
    We refer readers to the CY 2011 OPPS/ASC final rule (75 FR 72105 
through 72106), the CY 2013 OPPS/ASC final rule (77 FR 68484 through 
68487), the CY 2015 OPPS/ASC final rule (79 FR 66964 through 66965), 
the CY 2016 OPPS/ASC final rule (80 FR 70524), the CY 2018 OPPS/ASC 
final rule (82 FR 59441 through 59443), the CY 2022 OPPS/ASC final rule 
(86 FR 63870 through 63873), and 42 CFR[thinsp]419.46(f) for our 
policies regarding validation.
b. Use of Electronic File Submissions for Chart-Abstracted Measure 
Medical Records Requests
    In the CY 2022 OPPS/ASC final rule (86 FR 63870), we finalized 
discontinuing the option for hospitals to send paper copies of, or CDs, 
DVDs, or flash drives containing medical records for validation 
affecting the CY 2022

[[Page 44738]]

reporting period/CY 2024 payment determination. Hospitals must instead 
submit only electronic files when submitting copies of medical records 
for validation of chart-abstracted measures. Under this policy, 
hospitals are required to submit PDF copies of medical records using 
direct electronic file submission via a CMS-approved secure file 
transmission process as directed by the CMS Data Abstraction Center 
(CDAC). We would continue to reimburse hospitals at $3.00 per chart, 
consistent with the current reimbursement amount for electronic 
submissions of charts. We note that this process aligns with that for 
the Hospital IQR Program (See FY 2021 IPPS/LTCH PPS final rule, 85 FR 
58949). We refer readers to the CY 2022 OPPS/ASC final rule (86 FR 
63870) for additional information on the use of electronic file 
submissions for chart-abstracted measure medical records requests. We 
are not proposing any changes to these policies in this proposed rule.
c. Time Period for Chart-Abstracted Measure Data Validation
    We refer readers to the chart-abstracted validation requirements 
and methods we adopted in the CY 2014 OPPS/ASC final rule (78 FR 75117 
through 75118) and codified at 42 CFR 419.46(f)(1) for the CY 2025 
payment determination and subsequent years.
    We refer readers to the CY 2022 OPPS/ASC final rule (86 FR 63871) 
where we finalized the revision of 42 CFR 419.46(f)(1) to change the 
time period given to hospitals to submit medical records to the CDAC 
contractor from 45 calendar days to 30 calendar days, beginning with 
medical record submissions for encounters in Q1 of CY 2022 affecting 
the CY 2024 payment determination and for subsequent years. We are not 
proposing any changes to these policies in this proposed rule.
d. Targeting Criteria
(1) Background
    In the CY 2012 OPPS/ASC final rule (76 FR 74485), we finalized a 
validation selection process in which we select a random sample of 450 
hospitals for validation purposes and select an additional 50 hospitals 
based on specific criteria. We finalized a policy in the CY 2013 OPPS/
ASC final rule (77 FR 68485 and 68486), that for the CY 2014 payment 
determination and subsequent years, a hospital will be preliminarily 
selected for validation based on targeting criteria if it fails the 
validation requirement that applies to the previous year's payment 
determination. We also refer readers to the CY 2013 OPPS/ASC final rule 
(77 FR 68486 and 68487) for a discussion of finalized policies 
regarding our medical record validation procedure requirements. In the 
CY 2018 OPPS/ASC final rule (82 FR 59441), for the targeting criterion 
``the hospital has an outlier value for a measure based on the data it 
submits,'' we clarified that an ``outlier value'' for purposes of this 
criterion is defined as a measure value that appears to deviate 
markedly from the measure values for other hospitals. In the CY 2022 
OPPS/ASC final rule (86 FR 63872), we finalized the addition of two 
targeting criteria: any hospital that has not been randomly selected 
for validation in any of the previous three years or any hospital that 
passed validation in the previous year and had a two-tailed confidence 
interval that included 75 percent. We refer readers to the CY 2022 
OPPS/ASC final rule (86 FR 63872) for additional information on the 
Hospital OQR Program's previously finalized targeting criteria.
    We have codified at 42 CFR 419.46(f)(3) that we select a random 
sample of 450 hospitals for validation purposes, and select an 
additional 50 hospitals for validation purposes based on the following 
targeting criteria:
     The hospital fails the validation requirement that applies 
to the previous year's payment determination; or
     The hospital has an outlier value for a measure based on 
the data it submits. An ``outlier value'' is a measure value that is 
greater than five standard deviations from the mean of the measure 
values for other hospitals and indicates a poor score; or
     The hospital has not been randomly selected for validation 
in any of the previous three years; or
     The hospital passed validation in the previous year but 
had a two-tailed confidence interval that included 75 percent.
(2) Proposed Addition of Targeting Criterion
    Beginning with validations affecting the CY 2023 reporting period/
CY 2025 payment determination, we propose to add a new criterion to the 
four established targeting criteria at Sec.  419.46(f)(3) used to 
select the 50 additional hospitals. We propose that a hospital with 
less than four quarters of data subject to validation due to receiving 
an ECE for one or more quarters and with a two-tailed confidence 
interval that is less than 75 percent would be targeted for validation 
in the subsequent validation year. We propose this additional criterion 
because such a hospital would have less than four quarters of data 
available for validation and its validation results could be considered 
inconclusive for a payment determination. Hospitals that meet this 
criterion would be required to submit medical records to the CDAC 
contractor within 30 days of the date identified on the written request 
as finalized in the CY 2022 OPPS/ASC final rule (86 FR 63871) and 
codified at Sec.  419.46(f)(1).
    It is important to clarify that, consistent with our previously 
finalized policy, a hospital is subject to both payment reduction and 
targeting for validation in the subsequent year if it either: (a) has 
less than four quarters of data, but does not have an ECE for one more 
or more quarters and does not meet the 75 percent threshold; or (b) has 
four quarters of data subject to validation and does not meet the 75 
percent threshold.
    Specifically, we propose to revise 42 CFR 419.46(f)(3) to add the 
following criterion for targeting the additional 50 hospitals for 
validation:
     Any hospital with a two-tailed confidence interval that is 
less than 75 percent, and that had less than four quarters of data due 
to receiving an ECE for one or more quarters.
    Our proposal would allow us to appropriately address instances in 
which hospitals that submit fewer than four quarters of data due to 
receiving an ECE for one or more quarters might face payment reduction 
under the current validation policies. We invite public comment on our 
proposal.
e. Educational Review Process and Score Review and Correction Period 
for Chart-Abstracted Measures
    We refer readers to the CY 2018 OPPS/ASC final rule (82 FR 59441 
through 59443) and the CY 2021 OPPS/ASC final rule (85 FR 86185) where 
we finalized and codified a policy to formalize the Educational Review 
Process for Chart-Abstracted Measures, including Validation Score 
Review and Correction. We are not proposing any changes to these 
policies in this proposed rule.
9. Extraordinary Circumstances Exception (ECE) Process
    We refer readers to the CY 2013 OPPS/ASC final rule (77 FR 68489), 
the CY 2014 OPPS/ASC final rule (78 FR 75119 through 75120), the CY 
2015 OPPS/ASC final rule (79 FR 66966), the CY 2016 OPPS/ASC final rule 
(80 FR 70524), the CY 2017 OPPS/ASC final rule (81 FR 79795), the CY 
2018 OPPS/ASC final rule (82 FR 59444), the CY 2022 OPPS/ASC final rule 
(86 FR 63873), and 42 CFR 419.46(e) for a complete discussion of our

[[Page 44739]]

extraordinary circumstances exception (ECE) process under the Hospital 
OQR Program. We are not proposing any changes to these policies in this 
proposed rule.
10. Hospital OQR Program Reconsideration and Appeals Procedures
    We refer readers to the CY 2013 OPPS/ASC final rule (77 FR 68487 
through 68489), the CY 2014 OPPS/ASC final rule (78 FR 75118 through 
75119), the CY 2016 OPPS/ASC final rule (80 FR 70524), the CY 2017 
OPPS/ASC final rule (81 FR 79795), the CY 2021 OPPS/ASC final rule (85 
FR 68185), and 42 CFR 419.46(g) for our reconsideration and appeals 
procedures. We are not proposing any changes to these policies in this 
proposed rule.

E. Payment Reduction for Hospitals That Fail To Meet the Hospital OQR 
Program Requirements for the CY 2023 Payment Determination

1. Background
    Section 1833(t)(17) of the Act, which applies to subsection (d) 
hospitals (as defined under section 1886(d)(1)(B) of the Act), states 
that hospitals that fail to report data required to be submitted on 
measures selected by the Secretary, in the form and manner, and at a 
time, specified by the Secretary will incur a 2.0 percentage point 
reduction to their Outpatient Department (OPD) fee schedule increase 
factor; that is, the annual payment update factor. Section 
1833(t)(17)(A)(ii) of the Act specifies that any reduction applies only 
to the payment year involved and will not be taken into account in 
computing the applicable OPD fee schedule increase factor for a 
subsequent year.
    The application of a reduced OPD fee schedule increase factor 
results in reduced national unadjusted payment rates that apply to 
certain outpatient items and services provided by hospitals that are 
required to report outpatient quality data in order to receive the full 
payment update factor and that fail to meet the Hospital OQR Program 
requirements. Hospitals that meet the reporting requirements receive 
the full OPPS payment update without the reduction. For a more detailed 
discussion of how this payment reduction was initially implemented, we 
refer readers to the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68769 through 68772).
    The national unadjusted payment rates for many services paid under 
the OPPS equal the product of the OPPS conversion factor and the scaled 
relative payment weight for the APC to which the service is assigned. 
The OPPS conversion factor, which is updated annually by the OPD fee 
schedule increase factor, is used to calculate the OPPS payment rate 
for services with the following status indicators (listed in Addendum B 
to the proposed rule, which is available via the internet on the CMS 
website): ``J1'', ``J2'', ``P'', ``Q1'', ``Q2'', ``Q3'', ``R'', ``S'', 
``T'', ``V'', or ``U''. In the CY 2017 OPPS/ASC final rule with comment 
period (81 FR 79796), we clarified that the reporting ratio does not 
apply to codes with status indicator ``Q4'' because services and 
procedures coded with status indicator ``Q4'' are either packaged or 
paid through the Clinical Laboratory Fee Schedule and are never paid 
separately through the OPPS. Payment for all services assigned to these 
status indicators will be subject to the reduction of the national 
unadjusted payment rates for hospitals that fail to meet Hospital OQR 
Program requirements, with the exception of services assigned to New 
Technology APCs with assigned status indicator ``S'' or ``T''. We refer 
readers to the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68770 through 68771) for a discussion of this policy.
    The OPD fee schedule increase factor is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
reduce the OPD fee schedule increase factor for hospitals that fail to 
meet reporting requirements, we calculate two conversion factors--a 
full market basket conversion factor (that is, the full conversion 
factor), and a reduced market basket conversion factor (that is, the 
reduced conversion factor). We then calculate a reduction ratio by 
dividing the reduced conversion factor by the full conversion factor. 
We refer to this reduction ratio as the ``reporting ratio'' to indicate 
that it applies to payment for hospitals that fail to meet their 
reporting requirements. Applying this reporting ratio to the OPPS 
payment amounts results in reduced national unadjusted payment rates 
that are mathematically equivalent to the reduced national unadjusted 
payment rates that would result if we multiplied the scaled OPPS 
relative payment weights by the reduced conversion factor. For example, 
to determine the reduced national unadjusted payment rates that applied 
to hospitals that failed to meet their quality reporting requirements 
for the CY 2010 OPPS, we multiplied the final full national unadjusted 
payment rate found in Addendum B of the CY 2010 OPPS/ASC final rule 
with comment period by the CY 2010 OPPS final rule with comment period 
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

[[Page 44740]]

that fail to meet the requirements of the Hospital OQR Program. For 
example, the following standard adjustments apply to the reduced 
national unadjusted payment rates: the wage index adjustment, the 
multiple procedure adjustment, the interrupted procedure adjustment, 
the rural sole community hospital adjustment, and the adjustment for 
devices furnished with full or partial credit or without cost. 
Similarly, OPPS outlier payments made for high cost and complex 
procedures will continue to be made when outlier criteria are met. For 
hospitals that fail to meet the quality data reporting requirements, 
the hospitals' costs are compared to the reduced payments for purposes 
of outlier eligibility and payment calculation. We established this 
policy in the OPPS beginning in the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60642). For a complete discussion of the OPPS 
outlier calculation and eligibility criteria, we refer readers to 
section II.G of this proposed rule.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2023
    We propose to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 2023 annual payment update factor. 
For this CY 2023 OPPS/ASC proposed rule, the proposed reporting ratio 
is 0.9805, which, when multiplied by the proposed full conversion 
factor of $86.785, equals a proposed conversion factor for hospitals 
that fail to meet the requirements of the Hospital OQR Program (that 
is, the reduced conversion factor) of $85.093. We propose to continue 
to apply the reporting ratio to all services calculated using the OPPS 
conversion factor. We propose to continue to apply the reporting ratio, 
when applicable, to all HCPCS codes to which we have proposed status 
indicator assignments of ``J1'', ``J2'', ``P'', ``Q1'', ``Q2'', ``Q3'', 
``R'', ``S'', ``T'', ``V'', and ``U'' (other than New Technology APCs 
to which we have proposed status indicator assignments of ``S'' and 
``T''). We propose to continue to exclude services paid under New 
Technology APCs. We propose to continue to apply the reporting ratio to 
the national unadjusted payment rates and the minimum unadjusted and 
national unadjusted copayment rates of all applicable services for 
those hospitals that fail to meet the Hospital OQR Program reporting 
requirements. We also propose to continue to apply all other applicable 
standard adjustments to the OPPS national unadjusted payment rates for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program. Similarly, we propose to continue to calculate OPPS outlier 
eligibility and outlier payment based on the reduced payment rates for 
those hospitals that fail to meet the reporting requirements. In 
addition to our proposal to implement the policy through the use of a 
reporting ratio, we also propose to calculate the reporting ratio to 
four decimals (rather than the previously used three decimals) to more 
precisely calculate the reduced adjusted payment and copayment rates.
    For CY 2023, the proposed reporting ratio is 0.9805, which, when 
multiplied by the final full conversion factor of $86.785, equals a 
proposed conversion factor for hospitals that fail to meet the 
requirements of the Hospital OQR Program (that is, the reduced 
conversion factor) of $85.093.

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 OPPS/ASC final 
rule (84 FR 61410) for a general overview of our outpatient quality 
reporting programs.
2. Statutory History of the ASCQR Program
    We refer readers to the CY 2012 OPPS/ASC final rule (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 2022 OPPS/ASC final rules 
for an overview of the regulatory history of the ASCQR Program:
     CY 2014 OPPS/ASC final rule (78 FR 75122);
     CY 2015 OPPS/ASC final rule (79 FR 66966 through 66987);
     CY 2016 OPPS/ASC final rule (80 FR 70526 through 70538);
     CY 2017 OPPS/ASC final rule (81 FR 79797 through 79826);
     CY 2018 OPPS/ASC final rule (82 FR 59445 through 59476);
     CY 2019 OPPS/ASC final rule (83 FR 59110 through 59139);
     CY 2020 OPPS/ASC final rule (84 FR 61420 through 61434);
     CY 2021 OPPS/ASC final rule (85 FR 86187 through 86193); 
and
     CY 2022 OPPS/ASC final rule (86 FR 63875 through 63911).
    We have codified requirements under the ASCQR Program in 42 CFR, 
part 16, subpart H (42 CFR 416.300 through 416.330).

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
    We refer readers to the CY 2013 OPPS/ASC final rule (77 FR 68493 
and 68494) for a detailed discussion of the priorities we consider for 
the ASCQR Program quality measure selection. We are not proposing any 
changes to these policies in this proposed rule.
2. Retention and Removal of Quality Measures From the ASCQR Program
a. Retention of Previously Adopted ASCQR Program Measures
    We previously finalized a policy to retain measures from the 
previous year measure set for subsequent years, except when such 
measures are removed (76 FR 74494 and 74504; 77 FR 68494 and 68495; 78 
FR 75122; and 79 FR 66967 through 66969). We are not proposing any 
changes to this policy in this proposed rule.
b. Removal Factors for ASCQR Program Measures
    In the CY 2019 OPPS/ASC final rule (83 FR 59111 through 59115), we 
finalized and codified at 42 CFR 416.320 an updated set of factors and 
the process for removing measures from the ASCQR Program. We are not 
proposing any changes to these policies in this proposed rule.
3. Proposal To Change the Cataracts: Improvement in Patient's Visual 
Function Within 90 Days Following Cataract Surgery (ASC-11) Measure 
From Mandatory to Voluntary Beginning With the CY 2027 Payment 
Determination
a. Background
    The ASC-11 measure was adopted in the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75129). During CY 2014 OPPS/ASC rulemaking, 
some commenters expressed concern about the burden of collecting pre-
operative and post-operative visual function surveys (78 FR 75129). In 
response to those comments, we modified our implementation strategy in 
a manner that we believed would significantly minimize collection and 
reporting burden by applying a sampling scheme and a low case threshold 
exemption to address commenters' concerns regarding burden (78 FR 
75129). Shortly thereafter, we became concerned about the use of what 
we believed at the time were inconsistent surveys to assess

[[Page 44741]]

visual function. The measure specifications allowed for the use of any 
validated survey, and we were unclear about the impact the use of 
varying surveys might have on accuracy, feasibility, or reporting 
burden. Therefore, we issued guidance stating that we would delay the 
implementation of ASC-11, and we subsequently finalized in the CY 2015 
OPPS/ASC final rule (79 FR 66983 through 66985) the exclusion of ASC-11 
from the required measure set while allowing ASCs to voluntarily report 
measure data beginning with the CY 2015 reporting period.
b. Considerations Concerning Previously Finalized ASC-11 Measure 
Requirements Beginning With the CY 2025 Reporting Period/CY 2027 
Payment Determination
    In the CY 2022 OPPS/ASC proposed rule (86 FR 42272), we stated that 
it would be appropriate to require that ASCs report on ASC-11 for the 
CY 2023 reporting period/CY 2025 payment determination as ASCs have had 
the opportunity for several years to familiarize themselves with ASC-
11, prepare to operationalize it, and to practice reporting the measure 
since the CY 2015 reporting period/CY 2017 payment determination. Many 
commenters expressed concern about making this measure mandatory due to 
the burden of reporting the measure and the impact this additional 
burden would have during the COVID-19 pandemic, stating that ASC-11 has 
not been mandatory and many facilities have not been practicing 
reporting it (86 FR 63886). In response to these comments, in the CY 
2022 OPPS/ASC final rule with comment period, we finalized a delay in 
the implementation of this measure with mandatory reporting beginning 
with the CY 2025 reporting period/CY 2027 payment determination (86 FR 
63885 through 63887).
    We now believe it is appropriate to suspend implementation of 
mandatory reporting and retain continue voluntary reporting for the 
ASC-11 measure and not require reporting starting with the CY 2027 
payment determination. Since the publication of the CY 2022 OPPS/ASC 
final rule, interested parties have expressed concern about the 
reporting burden of this measure given the ongoing COVID-19 public 
health emergency (PHE). Interested parties have indicated that 
facilities remain impacted by the COVID-19 PHE and that the requirement 
to report ASC-11 would be burdensome due to national staffing and 
medical supply shortages coupled with unprecedented changes in patient 
case volumes. Due to the continued impact of the COVID-19 PHE, such as 
national staffing and medical supply shortages, we believe the two-year 
delay of mandatory reporting for this measure is no longer sufficient. 
Based on these factors and the feedback we received from interested 
parties, we believe it is appropriate to continue with voluntary 
reporting and delay mandatory reporting requirements for the ASC-11 
measure until future rulemaking. Therefore, we propose to delay 
mandatory reporting of the ASC-11 measure beginning with CY 2025 
reporting period/CY 2027 payment determination and maintain reporting 
for this measure as voluntary. ASCs would not be subject to a payment 
reduction for failing to report this measure during the voluntary 
reporting period; however, we strongly encourage ASCs to gain 
experience with the measure. We plan to continue to evaluate this 
policy moving forward. To be clear, there are no changes to reporting 
for the CY 2023 and CY 2024, during which the measure would remain 
voluntary.
    As the ASC-11 measure uniquely requires cross-setting coordination 
among clinicians of different specialties (that is, surgeons and 
opthalmologists), we believe it appropriate to defer mandatory 
reporting at this time. We will consider mandatory reporting of ASC-11 
after the national PHE declaration officially ends and we find it 
appropriate to do so given COVID-19 PHE impacts on national staffing 
and supply shortages. As we noted in the CY 2015 OPPS/ASC final rule, 
this measure addresses an area of care that is not adequately addressed 
in our current measure set and the measure serves to drive the 
coordination of care (79 FR 66984). We subsequently stated in the CY 
2022 OPPS/ASC final rule with comment period that while the measure has 
been voluntary and available for reporting since the CY 2015 reporting 
period, a number of facilities have reported data consistently for this 
measure and those that have reported these data have done so 
consistently (86 FR 63886).
    We invite public comment on this proposal.
4. ASCQR Program Quality Measure Set
a. Summary of Previously Finalized ASCQR Program Quality Measure Set 
for the CY 2023 Reporting Period/CY 2025 Payment Determination and the 
CY 2024 Reporting Period/CY 2026 Payment Determination
    We refer readers to the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 63875 through 63893) for the previously finalized ASCQR 
Program measure set for the CY 2023 program year and subsequent years.
    Table 70 summarizes the previously finalized ASCQR Program measure 
set for the CY 2023 reporting period/CY 2025 payment determination and 
the CY 2024 reporting period/CY 2026 payment determination.

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b. Summary of the Proposed ASCQR Program Quality Measure Set for the CY 
2025 Reporting Period/CY 2027 Payment Determination and Subsequent 
Years
    Table 71 summarizes the previously finalized ASCQR Program measure 
set for the CY 2025 reporting period/CY 2027 payment determination and 
subsequent years as would be modified by the proposal described 
previously in this section of this proposed rule.

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5. ASCQR Program Measures and Topics for Future Consideration
a. Request for Comment: A Potential Future Specialty Centered Approach 
for the ASCQR Program
    An overarching ASCQR Program goal is to have an up to date, 
comprehensive set of quality measures for widespread use to promote 
informed decision-making regarding clinical care and quality 
improvement efforts in the ASC setting. We recognize the clinician and 
clinician-group centered, specialized nature of care delivered in ASCs. 
We, therefore, seek comment on a potential future direction of quality 
reporting under the ASCQR Program that would allow quality-related data 
for ASCs to be reported on a customizable measure set that more 
accurately reflects the care delivered in this setting and accounts for 
the services provided by individual facilities. ASC services for 
Medicare beneficiaries are concentrated in a limited number of 
procedures. Because of this, there could be a set of measures related 
to different specialties, for example, ophthalmology, from which ASCs 
could choose a specified number, but individualized combination of 
measures. Another option could include the creation of specific 
specialized tracks which would standardize quality measures within a 
specialty area. Such a reporting structure could benefit ASCs by 
allowing them to focus on practice-specific measures on a specialty or 
multispecialty basis; patients and other interested parties could 
benefit through the provision of more relevant information on quality 
and safety within ASCs.
Specialty Centered Quality Reporting Under the Merit-Based Incentive 
Payment System (MIPS) \200\
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    \200\ Centers for Medicare & Medicaid Services. Quality Payment 
Program Overview. Available at: https://qpp.cms.gov/about/qpp-overview.
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    The Merit-Based Incentive Payment System adjusts Medicare Part B 
payment to a clinician based on the clinician's prior performance on 
four performance categories.\201\ The four performance categories on 
which clinicians are scored are quality, cost, improvement activities 
(IA), and Promoting Interoperability.\202\ Under MIPS, CMS has 
established measure and activity inventories from which clinicians may 
select measures and activities to report and complete, 
respectively.\203\ While the Traditional MIPS program is being phased 
out over time,204 205 we nonetheless believe that the 
quality performance category of the program provides an example of a 
specialty centered approach to quality reporting that is relevant to 
ASCs as clinically specialized facilities. We believe that quality 
reporting for ASCs would benefit from measures that:
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    \201\ See Social Security Act section 1848(q).
    \202\ See id. Section 1848(q)(2)(A)(i) and (iii).
    \203\ See id. Section 1848(q)(2)(D); see also 42 CFR 
414.1355(a).
    \204\ CY 2022 Physician Fee Schedule final rule (86 FR 65376).
    \205\ Centers for Medicare & Medicaid Services. MIPS Value 
Pathways. Available at: https://qpp.cms.gov/mips/mips-value-pathways.
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     Consist of limited, connected, and complementary sets of 
measures and related activities that are meaningful to clinicians;
     Include measures and activities resulting in comparative 
performance data that are valuable to patients and caregivers in 
evaluating clinician performance and making choices about their care;

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     Promote subgroup reporting that comprehensively reflects 
the services provided by multispecialty groups;
     Include measures selected using the Meaningful Measures 
\206\ approach and, wherever possible, include the patient voice;
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    \206\ Centers for Medicare & Medicaid Services. Meaningful 
Measures Hub. Available at: https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.
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    b. Solicitation of Comments on a Potential Future Specialty 
Centered Approach for the ASCQR Program
    We request comment on the following questions for the ASCQR 
Program:
     Is the general concept of quality reporting by specialty 
feasible and desirable for ASCs participating in the ASCQR Program?
     Were we to adopt a specialty centered approach to quality 
measure reporting for the ASCQR Program, should CMS require that ASCs 
report a subset of quality measures that apply broadly to all ASCs? An 
example of potential broadly applicable measures for ASCs based on CY 
2022 performance year MIPS quality measures \207\ can be found in Table 
73.
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    \207\ Centers for Medicare & Medicaid Services. Traditional 
MIPS: Explore Measures & Activities. Performance Year 2022. 
Available at: https://qpp.cms.gov/mips/explore-measures?tab=qualityMeasures&py=2022.
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     Were we to adopt a specialty centered approach for quality 
measure reporting for the ASCQR Program, what would be the appropriate 
number and type of measures that ASCs should be required to report? Are 
there minimum and maximum numbers of measures required for ASCs that 
provide meaningful information while not being overly burdensome? What 
is the preferred balance of required quality measures that apply 
broadly to all ASCs and quality measures that apply to a particular 
area of specialization?
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     Were we to adopt a specialty centered approach for quality 
measure reporting for the ASCQR Program, which area(s) of 
specialization would benefit from such an approach and which would not?
     Were we to adopt a specialty centered approach for quality 
measure reporting for the ASCQR Program, should CMS define a set of 
measures for particular areas of specialization (for example, 
ophthalmology) or should measures be self-selected for individual 
facilities from selected categories, especially given that an ASC may 
be multi-specialty?
    We have considered several potential measure sets for the ASC 
setting based on CY 2022 performance year MIPS quality measures.\208\ 
An example of an ophthalmology measure set using quality measures based 
on CY 2022 performance year MIPS quality measures \209\ can be found in 
Table 73. An example of a gastroenterology measure set can be found in 
Table 75. We welcome comment on these specific examples as well as 
comment on potential future measure sets for other specialization 
areas.
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    \208\ Centers for Medicare & Medicaid Services. Traditional 
MIPS: Explore Measures & Activities. Performance Year 2022. 
Available at: https://qpp.cms.gov/mips/explore-measures?tab=qualityMeasures&py=2022.
    \209\ Centers for Medicare & Medicaid Services. Traditional 
MIPS: Explore Measures & Activities. Performance Year 2022. 
Available at: https://qpp.cms.gov/mips/explore-measures?tab=qualityMeasures&py=2022.
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     Were we to adopt a specialty centered approach for quality 
measure reporting under the ASCQR Program, should ASCs be required to 
report all measures in such a measure set, or should they be permitted 
to select a minimum number of measures from their selected measure set?
     Were we to adopt a specialty centered approach for quality 
measure reporting system under the ASCQR Program, what measures, if 
any, from the current ASCQR Program measure set should be retained and 
incorporated in such an approach?

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c. Request for Comment: Potential Future Reimplementation of ASC 
Facility Volume Data on Selected ASC Surgical Procedures (ASC-7) 
Measure or Other Volume Indicator
(1) Background
    ASC services for Medicare beneficiaries are concentrated in a 
limited number of procedures. Medicare covers surgical procedures 
represented in about 3,500 Healthcare Common Procedure Coding System 
(HCPCS) codes under the ASC payment system; however, ASC volume for 
services covered under Medicare is concentrated in a relatively small 
number of HCPCS codes. In 2019, for example, 29 HCPCS codes accounted 
for 75 percent of the ASC volume for surgical services provided to 
Medicare beneficiaries.\210\
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    \210\ Medicare Payment Advisory Commission. March 2021 Report to 
the Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/document/march-2021-report-to-the-congress-medicare-payment-policy/.
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    Although ASCs perform procedures under a smaller and more 
specialized subset of HCPCS codes, the volume within these services 
continues to increase. Hospital care has been gradually shifting from 
inpatient to outpatient settings, and since 1983, inpatient stays per 
capita have fallen by 31 percent.\211\ From 2014 to 2018, the volume of 
ASC services delivered per Medicare Part B Fee-for-Service (FFS) 
beneficiary increased by 2.1 percent.\212\ During the same time period, 
the number of Part B FFS beneficiaries who received ASC services 
increased on average by 1.4 percent annually.\213\ Research indicates 
that volume in ASCs will continue to grow, with some estimates 
projecting a 25 percent increase in patients between 2019 and 
2029.\214\
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    \211\ Medicare Payment Advisory Commission. March 2021 Report to 
the Congress: Medicare Payment Policy. Chapter 3. Available at: 
https://www.medpac.gov/wp-content/uploads/2021/10/mar21_medpac_report_ch3_sec.pdf.
    \212\ Medicare Payment Advisory Commission. March 2021 Report to 
the Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/document/march-2021-report-to-the-congress-medicare-payment-policy/.
    \213\ Medicare Payment Advisory Commission. March 2021 Report to 
the Congress: Medicare Payment Policy. Available at: https://www.medpac.gov/document/march-2021-report-to-the-congress-medicare-payment-policy/.
    \214\ Sg2. Sg2 Impact of Change Forecast Predicts Enormous 
Disruption in Health Care Provider Landscape by 2029. June 4, 2021. 
Available at: https://www.sg2.com/media-center/press-releases/sg2-impact-forecast-predicts-disruption-health-care-provider-landscape-2029/.
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    Volume has a long history as a quality metric, however, quality 
measurement efforts had moved away from procedure volume as it was 
considered simply a proxy for quality rather than directly measuring 
outcomes.\215\ More recent studies suggest that while larger facility 
surgical procedure volume does not alone lead to better outcomes, it 
may be associated with better outcomes due to having characteristics 
that improve care (for example, high-volume facilities may have teams 
that work more effectively together, or have superior systems or 
programs for identifying and responding to complications), making 
volume an important component of quality.\216\ The

[[Page 44749]]

ASCQR Program does not currently include a quality measure for 
facility-level volume data, including surgical procedure volume data, 
but did so previously. We refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74507 through 74509) where we adopted 
the ASC Facility Volume Data on Selected Procedures measure (ASC-7) 
beginning with the CY 2013 reporting period/CY 2015 payment 
determination. This structural measure of facility capacity collected 
surgical procedure volume data on six categories of procedures 
frequently performed in the ASC setting: Gastrointestinal, Eye, Nervous 
System, Musculoskeletal, Skin, and Genitourinary (76 FR 74507). We 
adopted ASC-7 based on evidence that the volume of surgical procedures, 
and particularly of high-risk surgical procedures, is related to better 
patient outcomes, including decreased medical errors and mortality. We 
further stated our belief that publicly reporting volume data would 
provide patients with beneficial information to use when selecting a 
care provider (76 FR 74507).
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    \215\ Jha AK. Back to the Future: Volume as a Quality Metric. 
JAMA Forum Archive. Published online June 10, 2015.
    \216\ Auerbach AD et al. The Relationship between Case-Volume, 
Care Quality, and Outcomes of Complex Cancer Surgery. Journal of the 
American College of Surgery. 2010;211(5):601-608. doi:10.1016/
j.jamcollsurg.2010.07.006.
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    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59449 
and 59450), we removed ASC-7. We stated our belief at that time that 
measures on specific procedure types would provide patients with more 
valuable ASC quality of care information as these types of measures are 
more strongly associated with desired patient outcomes. Based on this 
belief, we removed the ASC-7 measure under our second criterion for 
removal from the program; specifically, that there are other measures 
available that are more strongly associated with desired patient 
outcomes for the particular topic. At the time, some commenters 
supported the proposal to remove the ASC-7 measure and agreed with 
CMS's rationale that the measure does not add value, however, some 
commenters opposed this proposal (82 FR 59449). Commenters that opposed 
removal of the ASC-7 measure emphasized the data's usefulness for 
comparative research, outcomes research, immediate consumer value, and 
strategic planning. Some of these commenters also expressed concerns 
that nonavailability of these data would interfere with the acceptance 
of ASC-based procedures also noting that the measure is not overly 
burdensome (82 FR 59449).
    We are considering reimplementing the ASC-7 measure or another 
volume measure because, in addition to being an important component of 
quality, the shift from the inpatient to outpatient setting has placed 
greater importance on tracking the volume of outpatient procedures.
    Over the past few decades, innovations in the health care system 
have driven the migration of procedures from the inpatient setting to 
the outpatient setting. Forty-five percent of percutaneous coronary 
intervention (PCI) procedures shifted from the inpatient to outpatient 
setting from 2004 to 2014, and more than 70 percent of patients who 
undergo thoracoscopic surgery can be discharged on the day of surgery 
itself due to the use of innovative techniques and technologies 
available in the outpatient setting.217 218 Given the small 
number of HCPCS codes utilized by most ASCs, we also believe that 
patients may benefit from the public reporting of facility-level volume 
measure data that illuminates which procedures are performed across 
ASCs and provides the ability to track volume changes by facility and 
procedure category. Volume is an indicator for patients of which 
facilities are experienced with certain outpatient procedures.
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    \217\ Abrams KD, Balan-Cohen A, Durbha P. Growth in Outpatient 
Care: The role of quality and value incentives. Deloitte Insights. 
2018. Available at: https://www2.deloitte.com/us/en/insights/industry/health-care/outpatient-hospital-services-medicare-incentives-value-quality.html.
    \218\ Chang AC, Yee J, Orringer MB, Iannettoni MD. Diagnostic 
thoracoscopic lung biopsy: an outpatient experience. The Annals of 
Thoracic Surgery. 2002;74:1942-7.
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    ASC-7 was the only measure in the ASCQR Program measure set that 
captured facility-level volume within ASCs and volume for Medicare and 
non-Medicare patients. As a result of its removal, the ASCQR Program 
currently does not capture outpatient surgical procedure volume in 
ASCs.
    Furthermore, we are considering the reintroduction of a facility-
level volume measure to support potential future development of a pain 
management measure, as described in a request for comment in the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63902 through 
63904). When considering the need for a pain management measure, we 
analyzed volume data using the methodology established by ASC-7 to 
determine the proportion of ASC procedures performed for pain 
management. We found that pain management procedures were the third 
most common procedure in CYs 2019 and 2020 and concluded that a pain 
management measure would provide consumers with important quality of 
care information. Thus, a volume measure would provide Medicare 
beneficiaries and other interested parties information on numbers and 
proportions of procedures by category performed by individual 
facilities, including for ASC procedures related to pain management.
    We note that the ASC-7 measure was adopted in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74507 through 74509) and was not 
reviewed or endorsed by the Measure Applications Partnership (MAP), 
which first began its pre-rulemaking review of quality measures across 
Federal programs in February 2012 after the publication of the CY 2012 
OPPS/ASC final rule with comment period in November 2011.\219\ 
Therefore, for ASC-7 to be adopted in the ASCQR Program measure set, 
the measure would need to first undergo the pre-rulemaking process 
specified in section 1890A(a) of the Act.
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    \219\ Measure Applications Partnership. Pre-Rulemaking Report: 
Input on Measures Under Consideration by HHS for 2012 Rulemaking 
Final Report. February 2012. Available at: https://www.qualityforum.org/Publications/2012/02/MAP_Pre-Rulemaking_Report__Input_on_Measures_Under_Consideration_by_HHS_for_2012_Rulemaking.aspx.
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    (2) Solicitation of Comments on the Reimplementation of the ASC 
Facility Volume Data on Selected ASC Surgical Procedures (ASC-7) 
Measure or Other Volume Indicator in the ASCQR Program
    We seek comment on the potential inclusion of a volume measure in 
the ASCQR Program, either by adopting the ASC Facility Volume Data on 
Selected ASC Surgical Procedures (ASC-7) measure or adopting another 
volume indicator. We also seek comment on what volume data ASCs 
currently collect and if it is feasible to submit this data to the 
ASCQR Program, to minimize the collection and reporting burden of an 
alternative, new volume measure. Additionally, we seek comment on an 
appropriate timeline for implementing and publicly reporting the 
measure data.
    Specifically, we invite comment on the following:
     The usefulness of including a volume indicator in the 
ASCQR Program measure set and publicly reporting volume data;
     Input on the mechanism of volume data collection and 
submission, including anticipated barriers and solutions to data 
collection and submission;
     Considerations for designing a volume indicator to reduce 
collection burden and improve data accuracy;
     Potential reporting of volume by procedure type, instead 
of total surgical procedure volume data for select

[[Page 44750]]

categories, and which procedures would benefit from volume reporting; 
and
     The usefulness of Medicare versus non-Medicare reporting 
versus other or additional categories for reporting.
(3) Request for Comment: Interoperability Initiatives in ASCs
(a) Background
    In 2009, under the Health Information Technology for Economic and 
Clinical Health Act (HITECH Act), financial incentives were authorized 
for hospitals and clinicians to adopt and meaningfully use certified 
electronic health record (EHR) technology.\220\ We implemented these 
financial incentives by establishing the Medicare and Medicaid EHR 
Incentive Program (now known as the Promoting Interoperability 
Program), to encourage health care providers to adopt and meaningfully 
use certified EHR technology (CEHRT) and improve health care quality, 
efficiency, and patient safety.\221\ The Promoting Interoperability 
Program also aims to improve care coordination, reduce costs, ensure 
privacy and security, improve population health, and engage patients 
and their caregivers in their own healthcare.
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    \220\ Social Security Act section 1848(o)(2), amended by HITECH 
Act of 2009 section 4101 (February 2009).
    \221\ Centers for Medicare & Medicaid Services. CMS Finalizes 
Definition Of Meaningful Use Of Certified Electronic Health Records 
(EHR) Technology. July 2010. Available at: https://www.cms.gov/newsroom/fact-sheets/cms-finalizes-definition-meaningful-use-certified-electronic-health-records-ehr-technology.
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    ASCs were not included in the HITECH Act and were ineligible for 
the financial incentives under the Promoting Interoperability Program. 
This differentiation may contribute to many ASCs continuing to utilize 
paper-based charts while other healthcare sectors have transitioned to 
digital records.\222\ According to an EHR utilization survey conducted 
by the Ambulatory Surgical Center Association (ASCA), 54.6 percent of 
ASCs use an EHR in their facility, indicating that ASCs have a lower 
adoption rate compared to the 85.9 percent of office-based physicians 
reported by ONC.\223\ Some EHR vendors have developed ASC-specific 
solutions; however, ASCs still face significant barriers to 
implementing EHRs as they can be expensive to implement and update, can 
require many staff hours for training, and may not offer ASCs a 
meaningful investment given the types of services provided and levels 
of patient follow-up required.\224\
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    \222\ Vail, T. Electronic Health Record Adoption is Essential 
for Outpatient Surgery. Managed Healthcare Executive. April 2021. 
Available at: https://www.managedhealthcareexecutive.com/view/electronic-health-record-adoption-is-essential-for-outpatient-surgery.
    \223\ Taira, A. ASCA Survey Shows Mixed Usage of EHR among ASCs. 
ASC Focus: The ASCA Journal. June 2021. Available at: https://www.ascfocus.org/content/articles-content/articles/2021/digital-debut/asca-survey-shows-mixed-usage-of-ehr-among-ascs.
    \224\ Nelson, H. EHR Usability, User Satisfaction High in 
Ambulatory Surgery Centers. September 2021. Available at: https://ehrintelligence.com/news/ehr-usability-user-satisfaction-high-in-ambulatory-surgery-centers.
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    We refer readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 
45460 through 45498) where we finalized changes to the Promoting 
Interoperability Program, and the FY 2023 IPPS/LTCH PPS proposed rule 
(87 FR 28576 through 28612) which proposes additional changes to the 
Promoting Interoperability Program. Currently, eligible hospitals and 
critical access hospitals (CAHs) are required to report on four scored 
objectives including electronic prescribing, health information 
exchange, provider to patient exchange, and public health and clinical 
data exchange, and must also attest to the following: \225\
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    \225\ Centers for Medicare & Medicaid Services. 2022 Medicare 
Promoting Interoperability Program Requirements. March 2022. 
Available at: https://www.cms.gov/regulations-guidance/promoting-interoperability/2022-medicare-promoting-interoperability-program-requirements.
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     Security Risk Analysis measure.
     Safety Assurance Factors for EHR Resilience (SAFER) Guides 
measure.
     Actions to limit or restrict the compatibility or 
interoperability of CEHRT attestation.
     Office of the National Coordinator for Health Information 
Technology (ONC) Direct Review Attestation.
(b) Solicitation of Comments on Interoperability in ASCs
    We seek comment to explore how ASCs are implementing tools in their 
facilities toward the goal of interoperability. We are considering a 
future shift in reporting from QualityNet to eCQMs to aid in delivering 
effective, safe, efficient, patient-centered, equitable, and timely 
care.\226\ Transitioning to eCQMs would increase alignment across 
quality reporting programs such as the Hospital OQR Program, which 
adopted the STEMI eCQM in the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 63822 through 63875). We are interested in learning more 
about capabilities for reporting such measures in the future for the 
ASCQR Program. Generally, we seek input on: (a) Barriers to 
interoperability in the ASC setting; (b) the impact of health IT, 
including health IT, certified under the ONC Health IT Certification 
Program, on the efficiency and quality of health care services 
furnished in ASCs; and (c) the ability of ASCs to participate in 
interoperability or EHR-based quality improvement activities, including 
the adoption of electronic clinical quality measures (eCQMs).
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    \226\ Centers for Medicare & Medicaid Services. 2022 Electronic 
Clinical Quality Measures Basics. March 2022. Available at: https://www.cms.gov/Regulations-and-Guidance/Legislation/EHRIncentivePrograms/ClinicalQualityMeasures.
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    Specifically, we invite comment on:
     What do ASCs perceive as the benefits or risks of 
implementing interoperability initiatives in their facilities?
     What improvements might be possible with the 
implementation of interoperability initiatives in ASCs, including EHR 
utilization (reduced delays, efficiencies, ability to benchmark, etc.)?
     Do ASCs see interoperability initiatives as non-essential 
or detrimental to their business practices?
    Some clinicians practicing in ASCs may voluntarily participate in 
the MIPS Promoting Interoperability performance category, though they 
are not required to do so at this time.\227\ We have considered several 
measures from the Promoting Interoperability Program and from the 
Traditional MIPS Promoting Interoperability measure set for the CY 2022 
performance year that may be applicable for the ASC 
setting.228 229 An example of Promoting Interoperability 
measures potentially applicable for the ASC setting can be found in 
Table 76. We welcome comment on these specific measure examples, 
including whether ASCs believe these measures would be appropriate and 
feasible for use in ASCs.
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    \227\ Centers for Medicare and Medicaid Services. Quality 
Payment Program Special Statuses. 2022. Available at: https://qpp.cms.gov/mips/special-statuses.
    \228\ Centers for Medicare and Medicaid Services. 2022 Medicare 
Promoting Interoperability Program Requirements. Available at: 
https://www.cms.gov/regulations-guidance/promoting-interoperability/2022-medicare-promoting-interoperability-program-requirements.
    \229\ Centers for Medicare and Medicaid Services. Traditional 
MIPS: Explore Measures & Activities. Performance Year 2022. 
Available at: https://qpp.cms.gov/mips/explore-measures?tab=qualityMeasures&py=2022.
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6. Maintenance of Technical Specifications for Quality Measures
    We maintain technical specifications for previously adopted ASCQR 
Program measures. These specifications are updated as we modify the 
ASCQR Program measure set. The manuals that contain specifications for 
the previously adopted measures can be found on the QualityNet website 
at: https://qualitynet.cms.gov/asc/specifications-manuals. The policy 
on maintenance of technical specifications for the ASCQR Program are 
codified at 42 CFR 416.325. We are not proposing any changes to these 
policies in this proposed rule.
7. Public Reporting of ASCQR Program Data
    We refer readers to the CYs 2012, 2016, 2017, and 2018 OPPS/ASC 
final rules (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 are not proposing any changes to these policies in this 
proposed rule.

C. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Official
    We refer readers to the CYs 2014, 2016, and 2021 OPPS/ASC final 
rules with comment period (78 FR 75132 through 75133; 80 FR 70533; and 
85 FR 86189, respectively) for the previously finalized QualityNet 
security official requirements, including requirements for setting up a 
QualityNet account and the associated timelines. These

[[Page 44753]]

procedural requirements are codified at 42 CFR 416.310(c)(1)(i). We are 
not proposing any changes to this policy in this proposed rule.
2. Requirements Regarding Participation Status
    We refer readers to the CY 2014 OPPS/ASC final rule (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 (80 FR 70533 through 70534), 
we codified these requirements regarding participation status for the 
ASCQR Program at 42 CFR 416.305. We are not proposing any changes to 
these policies in this proposed rule.

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

1. Data Collection and Submission
a. Background
    We previously codified our existing policies regarding data 
collection and submission under the ASCQR Program at 42 CFR 416.310.
b. Requirements for Claims-Based Measures
(1) Requirements Regarding Data Processing and Collection Periods for 
Claims-Based Measures Using Quality Data Codes (QDCs)
    We refer readers to the CY 2014 OPPS/ASC final rule (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 
(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 note that the 
previously finalized data processing and collection period requirements 
will apply to any future claims-based-measures using QDCs adopted in 
the ASCQR Program. We are not proposing any changes to these policies 
in this proposed rule.
(2) Minimum Threshold, Minimum Case Volume, and Data Completeness for 
Claims-Based Measures Using QDCs
    We refer readers to the CY 2018 OPPS/ASC final rule (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 also refer readers to section XVI.D.1.b. of the 
CY 2022 OPPS/ASC final rule with comment period (86 FR 63904 through 
63905), where we finalized that our policies for minimum threshold, 
minimum case volume, and data completeness requirements apply to any 
future claims-based-measures using QDCs adopted in the ASCQR Program. 
We are not proposing any changes to these policies in this proposed 
rule.
(3) 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; and
     ASC-19: Facility-Level 7-Day Hospital Visits after General 
Surgery Procedures Performed at Ambulatory Surgical Centers (NQF 
#3357).
    We are not proposing any changes to these policies in this proposed 
rule.
c. 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 (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 Hospital Quality Reporting 
(HQR) System (formerly referred to as the QualityNet Secure Portal) to 
host our CMS online data submission tool, available by securely logging 
in at: https://hqr.cms.gov/hqrng/login. 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). We are not proposing any changes to these policies in 
this proposed rule.
    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; and
     ASC-14: Unplanned Anterior Vitrectomy.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63883 
through 63885), we finalized our proposal to require and resume data 
collection beginning with the CY 2023 reporting period/CY 2025 payment 
determination for the following four measures:
     ASC-1: Patient Burn;
     ASC-2: Patient Fall;
     ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong 
Procedure, Wrong Implant; and
     ASC-4: All-Cause Hospital Transfer/Admission.
    Measure data for these measures would be submitted via the HQR 
System (formerly referred to as the QualityNet Secure Portal). We are 
not proposing any changes to these policies in this proposed rule.
(2) Requirements for Data Submitted via a Non-CMS Online Data 
Submission Tool
    We refer readers to the CY 2014 OPPS/ASC final rule (78 FR 75139 
through 75140) and the CY 2015 OPPS/ASC final rule (79 FR 66985 through 
66986) for our requirements regarding data submitted via a non-CMS- 
online data submission tool (specifically, the CDC's National 
Healthcare Safety Network (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). While we did 
not finalize any changes to those policies in the CY 2022 OPPS/ASC 
final rule (86 FR 63875 through 63883), we did finalize policies 
specific to the COVID-19 Vaccination Coverage Among Health Care 
Personnel measure (ASC-20), for which data will be submitted via the 
CDC NHSN website. We are not proposing any changes to these policies in 
this proposed rule.
e. ASCQR Program Data Submission Deadlines
    We refer readers to the CY 2021 OPPS/ASC final rule with comment

[[Page 44754]]

period (85 FR 86191) for a detailed discussion of our data submission 
deadlines policy, which we codified at 42 CFR 416.310(f). We are not 
proposing any changes to this policy in this proposed rule.
f. Review and Corrections Period for Measure Data Submitted to the 
ASCQR Program
Review and Corrections Period for Data Submitted via a CMS Online Data 
Submission Tool
    We refer readers to the CY 2021 OPPS/ASC final rule with comment 
period (85 FR 86191 through 86192) for a detailed discussion of our 
review and corrections period policy, which we codified at 42 CFR 
416.310(c)(1)(iii). We are not proposing any changes to this policy in 
this proposed rule.
g. ASCQR Program Reconsideration Procedures
    We refer readers to the CY 2016 OPPS/ASC final rule (82 FR 59475) 
(and the previous rulemakings cited therein) and 42 CFR 416.330 for the 
ASCQR Program's reconsideration policy. We are not proposing any 
changes to this policy in this proposed rule.
h. Extraordinary Circumstances Exception (ECE) Process
    We refer readers to the CY 2018 OPPS/ASC final rule (82 FR 59474 
through 59475) (and the previous rulemakings cited therein) and 42 CFR 
416.310(d) for the ASCQR Program's extraordinary circumstance 
exceptions (ECE) requests policy. We are not proposing any changes to 
this policy in this proposed rule.

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

1. Statutory Background
    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74492 through 74493) 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 2022, the ASC conversion factor is equal to 
the conversion factor calculated for the previous year updated by the 
productivity-adjusted hospital market basket update factor. The 
productivity adjustment is set forth in section 1833(i)(2)(D)(v) of the 
Act. The productivity-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 in certain 
payment rates under the ASC payment system 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 productivity 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, are not affected by reductions to the annual 
update (77 FR 68500).
    Office-based surgical procedures (generally those performed more 
than 50 percent of the time in physicians' offices) and separately paid 
radiology services (excluding covered ancillary radiology services 
involving certain nuclear medicine procedures or involving the use of 
contrast agents) are paid at the lesser of the PFS nonfacility PE RVU-
based amounts or the amount calculated under the standard ASC 
ratesetting methodology. Similarly, in the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66933 through 66934), we finalized our 
proposal that payment for certain diagnostic test codes within the 
medical range of CPT codes for which separate payment is allowed under 
the OPPS will be at the lower of the PFS nonfacility PE RVU-based (or 
technical component) amount or the rate calculated according to the 
standard ASC ratesetting methodology when provided integral to covered 
ASC surgical procedures. In the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68500), we finalized our proposal that the 
standard ASC ratesetting methodology for this type of comparison would 
use the ASC conversion factor that has been calculated using the full 
ASC update adjusted for productivity. This is necessary so that the 
resulting ASC payment indicator, based on the comparison, assigned to 
these procedures or services is consistent for each HCPCS code, 
regardless of whether

[[Page 44755]]

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 have noted our belief 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 2022 OPPS/ASC final rules with comment 
period we did not make any other changes to these policies. We propose 
the continuation of these policies for CY 2023.

XVI. Requirements for the Rural Emergency Hospital Quality Reporting 
(REHQR) Program

A. Background

1. Overview
    We refer readers to section XIV of the CY 2020 OPPS/ASC final rule 
with comment period (84 FR 61410) for a general overview of our 
Hospital Outpatient Quality Reporting (OQR) program and to the CY 2019 
OPPS/ASC final rule with comment period (83 FR 58820 through 58822) 
where we previously discussed our Meaningful Measures Framework.
    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 other quality programs for outpatient 
settings including the Hospital OQR and the Ambulatory Surgical Center 
Quality Reporting (ASCQR) Program.
2. Statutory History of Quality Reporting for REHs
    The Consolidated Appropriations Act (CAA), 2021, was signed into 
law in December 2020. In this legislation, Congress established a new 
Medicare provider type: Rural Emergency Hospitals (REHs). Section 125 
of Division CC of the CAA added section 1861(kkk) to the Social 
Security Act (the Act). This section defines an REH as a facility that, 
in relevant part, was as of December 27, 2020 a Critical Access 
Hospital (CAH) or a subsection (d) hospital with not more than 50 beds 
located in a county (or equivalent unit of local government) in a rural 
area (defined in section 1886(d)(2)(D) of the Act) or was a subsection 
(d) hospital with not more than 50 beds that was treated as being in a 
rural area pursuant to section 1886(d)(8)(E) of the Act. Among other 
requirements, an REH must apply for enrollment in the Medicare program, 
provide emergency department services and observation care, and, at the 
election of the REH, provide certain services furnished on an 
outpatient basis, and not provide any acute care inpatient services 
(other than post-hospital extended care services furnished in a 
distinct part unit licensed as a skilled nursing facility (SNF)). 
Payment with respect to REH services may be made on or after January 1, 
2023. Generally, a subsection (d) hospital is an acute care hospital--
particularly one that receives payments under Medicare's inpatient 
prospective payment system (IPPS) when providing covered inpatient 
services to eligible beneficiaries. Similarly, a CAH is (as defined in 
section 1820 of the Act) a facility with no more than 25 inpatient 
beds, unless operating a psychiatric and/or a rehabilitation distinct 
part unit which may have up to 10 beds each.
    We refer readers to section XIX of this proposed rule for our 
proposals with respect to payment policies, conditions of 
participation, and provider enrollment for REHs.
    Under section 1861(kkk)(7) of the Act, as added by section 125 of 
Division CC of the CAA also requires the Secretary to establish quality 
measurement reporting requirements for REHs, which may include the use 
of a small number of claims-based measures or patient experience 
surveys. An REH must submit quality measure data to the Secretary, and 
the Secretary shall establish procedures to make the data available to 
the public on a CMS website.
3. Scope
    The number of hospitals that convert to an REH and their 
characteristics may inform the selection of quality measures as we seek 
measures that are useable by REHs and that have sufficient numbers of 
REHs with sufficient volume of services to have meaningful measurement 
for individual facilities and, importantly, the public. REHs as defined 
by statute would be rural subsection (d) hospitals with not more than 
50 beds and CAHs that convert in status to REHs. To estimate the number 
of facilities that are likely to consider conversion to an REH, one 
study \230\ analyzed 1,673 rural hospitals on three criteria: (1) 3-
years negative total margin; (2) average daily census of acute and 
swing beds being less than three; and (3) net patient revenue less than 
$20 million.\231\ The analysis concluded that 68 would consider 
converting.\232\ In contrast, an industry analysis based on estimated 
REH reimbursement and several financial assumptions \233\ and four 
simulation methods, estimated that up to 600 CAHs would benefit from 
conversion to REH status.\234\ Regardless of the exact number of 
facilities which convert, there may be quality measure challenges due 
to the low numbers of hospitals and volume of services provided by 
these facilities. We discuss possible approaches for addressing these 
low volume concerns in section XV.B.2.d of this proposed rule.
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    \230\ Pink, G.H., et al., How Many Hospitals Might Convert to a 
Rural Emergency Hospital (REH) 8 (July 2021), available at https://www.shepscenter.unc.edu/download/23091/.
    \231\ Ibid. at 5.
    \232\ Ibid. at 1.
    \233\ Estimated average facility payment, estimated outpatient 
fee schedule payment, estimated average skilled nursing facility 
payment rates by State, presence or loss of swing bed payments, and 
continuance or cessation of 340B eligibility.
    \234\ https://www.claconnect.com/resources/articles/2022/a-path-
forward-clas-simulations-on-rural-emergency-
hospitaldesignation#:~:text=Depending%20on%20resolution%20of%20key,be
nefit%20from%20the%20new%20designation (Accessed April 8, 2022).
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B. REHQR Program Quality Measures

1. Considerations in the Selection of REHQR Program Quality Measures
    We seek to adopt a concise set of important, impactful, reliable, 
accurate, and clinically relevant measures for REHs that would inform 
consumer decision-making regarding care and further quality improvement 
efforts in the REH setting. In the CY 2022 OPPS/ASC proposed rule (86 
FR 42285 through 42289), we sought comment

[[Page 44756]]

through a Request for Information on various topics on REHs. 
Specifically, we sought input on the concerns of rural providers that 
should be taken into consideration by CMS in establishing quality 
measures and quality reporting requirements for REHs (86 FR 42288). We 
include issues raised and suggestions made from that Request for 
Information in this proposed rule as considerations for selecting 
measures for an REH quality reporting program.
a. Measure Endorsement
    Under section 1861(kkk)(7)(C)(i) of the Act, unless the exception 
of subclause (ii) applies, a measure selected for the REHQR Program 
must have been endorsed by the entity with a contract under section 
1890(a) of the Act. The National Quality Forum (NQF) currently holds 
this contract. Subclause (ii) provides that, in the case of a specified 
area or medical topic determined appropriate by the Secretary for which 
a measure has not been endorsed by the entity with contract under 
section 1890(a) of the Act, the Secretary may specify a measure that is 
not endorsed as long as due consideration is given to measures that 
have been endorsed or adopted by a consensus organization identified by 
the Secretary. In general, we prefer to adopt measures that have been 
endorsed by the NQF because it is a national multi-stakeholder 
organization with a well-documented and rigorous approach to consensus 
development. However, due to lack of an endorsed measure for a given 
facility setting, procedure, or other aspect of care, the requirement 
that measures reflect consensus among affected parties can be achieved 
in other ways, including through the measure development process, 
through broad acceptance, use of the measure(s), and through public 
comment.
b. Accountability and Quality
    The overarching goals of this program, in line with other quality 
programs, are to improve the quality of care provided to beneficiaries, 
facilitate public transparency, and ensure accountability. We note that 
many subsection (d) hospitals and CAHs established on or before 
December 27, 2020 that are eligible for REH conversion are currently 
reporting outpatient quality data under the Hospital OQR Program and 
have publicly available data. We note that while such reporting is 
required for subsection (d) hospitals in order to avoid a payment 
penalty under the Hospital OQR Program, data submission and public 
reporting is voluntary for CAHs. We intend to adopt measures for the 
REHQR Program that are useful for REHs for their quality improvement 
efforts, but it is vital that measure information be of sufficient 
volume to meet case thresholds for facility level public reporting. See 
Tables 76 and 77 of this proposed rule for the current number of 
facilities and their current public reporting of Hospital OQR Program 
measure data as of January 2022 as well as the most recent data 
available for certain measures that have been removed from the OQR 
Program, but that may have continued relevance for an REHQR Program. 
The Medicare Beneficiary Quality Improvement Project (MBQIP) under the 
Medicare Rural Hospital Flexibility (Flex) program of the Health 
Resources and Services Administration utilizes outpatient quality data 
voluntarily reported by CAHs through the Hospital OQR Program. We note 
that per the 2020 MBQIP Quality Measures annual report, 1,353 CAHs 
(that is 86.5 percent of those eligible) reported data for at least one 
OQR measure,\235\ which is greater than the number of facilities having 
data displayed Table 77 due to the low reporting volume exclusion 
limitation of Care Compare, indicating a greater capacity for these 
facilities to report on certain Hospital OQR measures.\236\ Table 76 
reflects data for reporting by rurally located subsection (d) hospitals 
with not more than 50 beds, and Table 77 reflects data for reporting by 
CAHs for the most recent Care Compare results available. These analyses 
present a starting place for assessing the extent of quality reporting 
by CAHs and small, rural hospitals for current or relatively recent 
measures with sufficient data for public reporting that could be 
considered for an REHQR Program.
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    \235\ https://www.flexmonitoring.org/sites/flexmonitoring.umn.edu/files/media/PA_Annual%20Report_2020.pdf 
(Accessed June 5, 2022).
    \236\ https://www.hrsa.gov/rural-health/grants/rural-hospitals/medicare-benificiary-quality-improvement (Accessed June 3, 2022).
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c. Burden
    We recognize REHs will be smaller hospitals that have limited 
resources compared with larger hospitals in metropolitan areas.\237\ 
Certain measures, particularly those that are chart-abstracted, may be 
more burdensome than other measures to report. Rural facilities often 
experience shortage of non-clinical staff to perform certain 
administrative duties, such as collecting and reporting quality 
measures.\238\ For the REHQR Program, we intend to seek balance between 
the costs associated with reporting data and the benefits of ensuring 
safety and quality of care through measurement and public reporting. We 
recognize these challenges faced by the hospitals eligible to convert 
to REH status may increase reporting burden and may necessitate 
limiting the number of quality measures in use for the REH quality 
reporting program to facilitate success. There are several avenues we 
can consider for limiting this burden (that is, reducing the costs 
associated with reporting the data required for quality measurement) 
including: (1) use of Medicare claims-based measures; and (2) use 
digital quality measures in place of chart-abstraction. In addition, we 
believe that, to the extent possible, existing quality measures should 
align across Medicare, Medicaid, and other payers to minimize reporting 
burden. The Hospital Promoting Interoperability Program, which includes 
a requirement to report certain eCQMs, shows that of 1,308 CAHs, 1,066 
(81.5 percent) met eCQM reporting requirements for the first quarter of 
2022. This indicates a relatively high level of reporting capability 
for eCQMs by a hospital type that tends to be smaller and more likely 
to be situated in more rural areas.
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    \237\ American Hospital Association, Rural Report 2019: 
Challenges Facing Rural Communities and the Roadmap to Ensure Local 
Access to High-quality, Affordable Care 3 (February 2019), available 
at https://www.aha.org/system/files/2019-02/rural-report-2019.pdf.
    \238\ Ibid at 6 & 7.
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d. Rural Relevance
    The measures included in an REH quality program should reflect the 
types of services and care delivered most frequently in that setting, 
along with areas of care where there may be inappropriate variation or 
potential quality of care challenges.\239\ For example, an REH may 
provide ambulatory and outpatient procedures with supporting diagnostic 
services such as laboratory tests and x-rays, and be considered a low-
volume emergency department (ED). Larger variation between these 
smaller providers due to lower case volumes could allow some topped out 
measures that are no longer meaningful for larger or urban hospitals to 
be utilized for rural hospital quality reporting. More specifically, 
topped-out measures could be re-purposed for reporting the quality of 
their rural counterparts, which have not achieved the level of success 
in these measures as often as a result of low-case volumes. In 
addition, we believe that it may be appropriate to include some 
measures that would apply to all REHs, for example, measures that are 
tailored to ED and observation services, while instituting additional 
applicable measures for REHs that choose to provide additional 
outpatient services.
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    \239\ National Quality Forum, Measure Application Partnership: A 
Core Set of Rural Relevant Measures and Measuring and Improving 
Access to Care, 2018 Recommendations from the MAP Rural Health 
Workgroup, Final Report 24 & 26 (August 2018), available at https://www.qualityforum.org/Publications/2018/08/MAP_Rural_Health_Final_Report_-_2018.aspx.
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e. Low Service and Patient Volume
    Section 1861(kkk)(7)(C)(iii) of the Act specifies that the 
Secretary shall, in the selection of measures, take into consideration 
ways to account for rural emergency hospitals that lack sufficient case 
volume to ensure that the performance rates for such measures are 
reliable. Effective quality measurement requires a sufficiently large 
patient number or services volume to account for level of measure 
variability. This ensures that the quality measure has the necessary 
reliability of an individual facility's information as well as to 
detect

[[Page 44760]]

meaningful distinctions between facilities. Possible approaches to 
quality measurement where low volume is expected are discussed in 
section XV.B.2.d of this proposed rule.
f. Health Equity
    We believe methods to examine disparities in health care delivery 
and quality measurement should include stratified results using, for 
example, patient dual eligibility and other social vulnerability 
factors as well as patient demographic information to capture the 
breadth of social determinants of health in rural areas.\240\ Other 
factors or indicators to consider for equity measurement include access 
to care, disability and functional status, veteran status, health 
literacy, language preference, race and ethnicity, tribal membership, 
sexual orientation and gender identity, and religious minority status. 
These demographic characteristics and social determinants of health can 
enable a more comprehensive assessment of health equity to further 
identify and develop actionable strategies, including the selection of 
quality measures and quality improvement, to promote health equity.
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    \240\ Agency for Healthcare Research and Quality, Chartbook on 
Rural Healthcare: National Healthcare Quality and Disparities Report 
8 &13-14 (November 2021) available at https://www.ahrq.gov/sites/default/files/wysiwyg/research/findings/nhqrdr/chartbooks/2019-qdr-rural-chartbook.pdf.
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    One approach being considered to measure equity across our programs 
is the expansion of efforts to report quality measure results 
stratified by patient social risk factors and demographic variables. 
The Request for Information (RFI) included in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 19415), titled ``Overarching Principles for 
Measuring Healthcare Quality Disparities Across CMS Quality Programs'' 
describes key considerations across all CMS quality programs, including 
the Hospital OQR Program, when advancing the use of measure 
stratification to address health care disparities and advance health 
equity across our programs.
    We refer readers to the full RFI in the FY 2023 IPPS/LTCH PPS 
proposed rule for details on these considerations (87 FR 19415); for 
comments and feedback on the application of these principles to a 
quality reporting program for REHs, please respond to this RFI.
    We discuss possible measures of equity for use in a REHQR Program 
in section XV.B.3 of this proposed rule.
2. Request for Comment on Potential Measures for an REHQR Program
a. Selected Hospital OQR Program Measures Recommended by the National 
Advisory Committee on Rural Health and Human Services for the REHQR 
Program
    The National Advisory Committee on Rural Health and Human Services 
for the REHQR Program's measure recommendations drew from measures that 
were currently being reported or were recently reported under CMS' 
Hospital OQR Program or HRSA's MBQIP.\241\ In this proposed rule, we 
request comment on a selection of measures from this report as we 
review measures for potential future inclusion in the REHQR Program. We 
seek to better understand how these measures may help achieve our goal 
of selecting measures for the REHQR Program that focus on REH areas of 
care, especially ED care. Measures with an OP designation represent 
current or past Hospital OQR measures; measure specifications are 
contained in program specifications manuals (current and past back to 
CY 2013) available on the QualityNet website.\242\
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    \241\ https://www.hrsa.gov/sites/default/files/hrsa/advisory-committees/rural/publications/2021-rural-emergency-hospital-policy-brief.pdf (Accessed April 8, 2022).
    \242\ https://qualitynet.cms.gov/outpatient/specifications-manuals (Accessed May 20, 2022).
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(1) OP-2: Fibrinolytic Therapy Received Within 30 Minutes of ED Arrival
    This chart-abstracted process measure calculates the percentage of 
ED acute myocardial AMI patients with ST-segment elevation on the 
electrocardiogram (ECG) closest to arrival time receiving fibrinolytic 
therapy during the ED stay and having a time from ED arrival to 
fibrinolysis of 30 minutes or less. The measure is calculated using 
chart-abstracted data, on a rolling, quarterly basis and is publicly 
reported, in aggregate, for one calendar year. We have publicly 
reported this measure under the Hospital OQR Program since 2012. In the 
CY 2022 OPP/ASC final rule (86 FR 63823 through 63824), OP-2 was 
finalized for removal from the Hospital OQR Program beginning with the 
CY 2023 reporting period/CY 2025 payment determination, with planned 
replacement with an electronic clinical quality measure (eCQM) that 
combines this measure with OP-3 Median Time to Transfer to Another 
Facility for Acute Coronary Intervention, the ST-Segment Elevation 
Myocardial Infarction (STEMI) eCQM (86 FR 63823 through 63824). The 
adoption of the STEMI eCQM and the measure calculation method for the 
Hospital OQR Program was finalized in this same final rule (86 FR 63837 
through 63840). The current level of rurally located subsection (d) 
hospitals with not more than 50 beds (4 total) and CAHs (5 total) with 
data publicly displayed on Care Compare for this measure is relatively 
low (see Table 77 and 77 of this proposed rule). However, the MBQIP 
(which utilizes data reported through the Hospital OQR Program) 
reported that about 71 percent of CAHs reported at least one case for 
the OP-2 measure.
(2) OP-3: Median Time To Transfer to Another Facility for Acute 
Coronary Intervention
    Time to transfer to receiving facilities delays time to reperfusion 
in patients with ST segment elevation myocardial infarction (STEMI). 
There are multiple, critical system practices that minimize transfer 
time to receiving centers; however, two characteristics of the sending 
facility have been noted as most important: performance of a 
prehospital electrocardiogram and having established transfer 
protocols.\243\ The use of time-to-transfer quality measures in rural 
areas may raise equity concerns as the geographic isolation of many 
rural facilities and the lack of uniformity in geographic isolation may 
be outside the control of the facilities measured.
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    \243\ Mumma, BE, Williamson, C, Diercks, DB. Minimizing transfer 
time to an ST segment elevation myocardial infarction receiving 
center: Modified Delphi Consensus. Crit Pathw Cardiol 2014, Mar; 
13(1):20-24.
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    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63458), OP-3 was finalized for removal from the Hospital OQR Program 
beginning with the CY 2023 reporting period/CY 2025 payment 
determination due to availability of a more broadly applicable measure 
that captures the OP-2 and OP-3 measure populations and expand beyond 
these populations to comprehensively measure the timeliness and 
appropriateness of STEMI care, with planned replacement of these 
measures by an eCQM. The current level of subsection (d) hospitals and 
CAHs with data publicly displayed on Care Compare for this chart-
abstracted measure is relatively low possibly due to case numbers below 
the threshold to allow the data to be publicly reported (see Tables 76 
and 77 of this proposed rule). About 70 percent of CAHs reported at 
least one case for this measure through the MBQIP program.
    We invite public comment on potential future adoption of OP-3 and

[[Page 44761]]

its replacement STEMI eCQM for the REHQR Quality Reporting Program.
(3) OP-4: Aspirin on Arrival
    This chart-abstracted process measure documents the percentage of 
ED acute myocardial infarction (AMI) patients or chest pain patients 
(with probable cardiac chest pain) without aspirin contraindications 
who received aspirin within 24 hours before ED arrival or prior to 
transfer at the facility level. The early use of aspirin in patients 
with AMI results in a significant reduction in adverse events and 
subsequent mortality. OP-4 was implemented into the Hospital OQR 
program in CY 2008 and removed for the CY 2020 payment determination 
and subsequent years due to performance being sufficiently high with 
little variation between providers (82 FR 52570).
    While being topped out at the national level and no longer useful 
for larger or urban providers, this measure could be useful for smaller 
providers, including those that may convert to REH status, due to 
sufficient variation between individual facilities to permit the 
measurement of differences. An analysis (Table 78) of the last publicly 
reported OP-4 data for small rurally located hospitals and CAHs shows 
such variation between facilities (both urban and rural) with the lower 
10th percentile. The analysis found providers with much lower 
percentages of proper aspirin administration across urban/rural areas 
for CAHs and subsection (d) hospital types and slightly higher 
variation as measured by standard deviation, indicating room for 
improvement. We note that some CAHs, while considered rural for 
Medicare payment purposes, are situated in areas that can be considered 
urban. The analysis in Table 78 is only to examine for variations by 
urban versus rural setting. This measure was retired and NQF 
endorsement removed from the Cardiovascular Project in 2013 with 
subsequent removal from the Hospital OQR Program for the CY 2018 
reporting period/CY 2020 payment determination. A similar measure, 
Emergency Medicine: Aspirin at Arrival for Acute Myocardial Infarction 
(AMI) was also retired and NQF endorsement removed in 2017 (82 FR 
59439).
[GRAPHIC] [TIFF OMITTED] TP26JY22.102

(4) OP-18: Median Time From ED Arrival to ED Departure for Discharged 
ED Patients
    Care provided in the ED will be a focus of REH services and we seek 
measures that assess the quality of care in this setting. OP-18 is a 
chart-abstracted measure that evaluates the time between the arrival to 
and departure from the ED or ED throughput time. Improving ED 
throughput times is important for alleviating overcrowding and reducing 
wait times; conditions which can lead to potential safety events and 
patient dissatisfaction.\244\ OP-18 is a current measure for the 
Hospital OQR Program and reporting for this measure by hospitals 
eligible to convert to REH status is relatively high (see Table 76 of 
this proposed rule). Note that the OP-18 measure is calculated for 
varying types of patients: the OP-18b measure excludes psychiatric/
mental health and transferred patients; alternatively, the OP-18c 
measure includes information only for psychiatric/mental health 
patients.
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    \244\ https://www.healthcatalyst.com/wp-content/uploads/2021/05/Data-Driven-Operations-Improve-ED-Efficiency.pdf.
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(5) OP-20: Door to Diagnostic Evaluation by a Qualified Medical 
Professional
    This chart-abstracted, ED measure measures the mean time between 
patient presentation to the ED and the first moment the patient is seen 
by a qualified medical person for patient evaluation and management. As 
REH's main area of care and associated services provided will be 
related to their ED, and emergency services can be time-sensitive, this 
measure provides tailored accountability for this setting type. OP-20 
was removed from the Hospital OQR Program in the CY 2018 OPPS/ASC final 
rule beginning with CY 2020 payment

[[Page 44762]]

determinations (82 FR 52570). During regular measure maintenance, 
specific concerns were raised by a Technical Expert Panel resulting in 
removal of this measure from the Hospital OQR Program due to measure 
performance or improvement not resulting in better patient outcome (82 
FR 59431)). However, while some commenters agreed with this reasoning, 
other commenters expressed concern that there are socioeconomic 
pressures that can vary by community that cause variation in 
performance on this measure, noted the value of this measure, and 
recommended that a refined version that stratifies by other factors 
related to measure performance, specifically mentioning hospital size 
which would be more effective in a specific setting (82 FR 59431). When 
required for the Hospital OQR Program, a significant number of 
hospitals eligible for REH conversion that had data publicly reported 
had sufficient case volumes to have publicly reported data for this 
measure; 70.69 percent (82) of hospitals and 51.93 percent (445) of 
CAHs that had any measure publicly reported indicating possible 
usefulness of this measure for REHs.
(6) OP-22: Left Without Being Seen
    This structural measure for the ED setting is focused on reflecting 
staffing expertise and availability. OP-22 measures the percentage of 
patients who left the ED before being evaluated by a physician, 
advanced practice nurse (APN), or physician assistant (PA) and uses 
all-payer, administrative data (not Medicare claims data) to determine 
the measure's numerator and denominator populations. This measure is in 
the current Hospital OQR Program measure set with significant numbers 
of both hospitals and CAHs eligible for REH conversion that have 
publicly reported data for this measure.
    We request comment on these selected Hospital OQR Program measures 
that were recommended by the National Advisory Committee on Rural 
Health and Human Services for their use in a REHQR Program.
b. Medicare Beneficiary Quality Improvement Project (MBQIP) Measure 
Recommended by the National Advisory Committee on Rural Health and 
Human Services for the REHQR Program
    The MBQIP is a quality improvement activity under the Medicare 
Rural Hospital Flexibility (Flex) program. The MBQIP supports more than 
1,350 CAHs in 45 states to improve quality of care. Measures included 
in the MBQIP that are also included in our selection of measures from 
those by the National Advisory Committee on Rural Health and Human 
Services for the REHQR Program (above) are OP-2: Fibrinolytic Therapy 
Received Within 30 Minutes of ED Arrival, OP-3: Median Time to Transfer 
to Another Facility for Acute Coronary Intervention, OP-18: Median Time 
from ED Arrival to ED departure for Discharged ED Patients, and OP-22: 
Left Without Being Seen.
    The Emergency Department Transfer Communications (EDTC) measure is 
a core measure in the MBQIP program for CAHs and was included in those 
measures recommended by the National Advisory Committee on Rural Health 
and Human Services for their use in a REHQR Program. The EDTC measure 
assesses how well key patient information is communicated from an ED to 
any health care facility. The measure is applicable to patients with a 
wide range of medical conditions (that is, acute myocardial infarction 
(AMI), heart failure, pneumonia, respiratory compromise, and trauma) 
and is relevant for both internal quality improvement purposes and 
external reporting to consumers and purchasers.\245\ As REHs are 
expected to focus on triage and transfer, the adequate and timely 
sharing of information with the receiving site would be an important 
quality metric.
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    \245\ https://www.ruralcenter.org/resource-library/edtc-measure-data-reporting-resources (Accessed May 12 2022).
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    We request comment on the EDTC measure for use in a REHQR Program.
c. Other Current, Claims-Based Hospital OQR Quality Measures
    Measures calculated using administrative data from Medicare claims 
and enrollment data limit provider burden and provide valuable 
information regarding Medicare beneficiary service utilization and care 
provision. The Hospital OQR Program has several established measures of 
this type that could be applicable to REHs. At this time, we are 
focusing on two current measures that have publicly reported data and 
that focus on services expected to be provided by hospitals eligible 
for REH conversion: OP-10 Abdomen Computed Tomography (CT)--Use of 
Contrast Material and OP-32: Facility 7-Day Risk-Standardized Hospital 
Visit Rate after Outpatient Colonoscopy.
(1) OP-10: Abdomen Computed Tomography (CT)--Use of Contrast Material
    This diagnostic imaging measure is based fully on Medicare fee-for-
service (FFS) claims and enrollment data. It calculates the percentage 
of CT abdomen studies performed with and without contrast out of all CT 
abdomen studies performed (those without contrast, those with contrast, 
and those with both). A CT study performed with and without contrast 
doubles the radiation dose to patients, exposing them to the potential 
harmful side effects of the contrast material itself.\246\ Davis et al. 
(2020) showed that while rural facilities account for 32.2 percent of 
all facilities, they account for 46.0 percent of the outliers for the 
OP-10 measure. This indicates considerable variation and possible areas 
for targeted improvement.
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    \246\ Davis M, McKiernan C, Lama, S, Parzynski C, Bruetman C, 
Venkatesh A. Trends in publicly reported quality measures of 
hospital imaging efficiency, 2011-2018. AJR: 215, July: 153-158), 
2020.
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(2) OP-32: Facility 7-Day Risk-Standardized Hospital Visit Rate After 
Outpatient Colonoscopy
    This outcome measure is calculated fully using Medicare FFS claims 
and enrollment data, estimating a facility-level rate of risk 
standardized, all-cause, unplanned hospital visits within 7 days of an 
outpatient colonoscopy among Medicare FFS patients aged 65 years and 
older. OP-32 captures and makes more visible to providers and patients 
all unplanned hospital visits following colonoscopy procedures. Under 
the Hospital OQR program, of the hospitals eligible for REH conversion 
that had sufficient case volumes to have publicly reported data for 
this measure, 65.43 percent (123) of hospitals and 46.16 percent (625) 
of CAHs had any publicly reported data. While the total numbers of 
hospitals with publicly reported OP-32 data is somewhat low, this could 
be an important measure for those REHs providing outpatient services 
and for patients seeking information regarding complications following 
this procedure. OP-32 was adopted in the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66963) for the CY 2018 payment determination 
and subsequent years using CY 2016 data for the initial year's measure 
calculation.
d. Request for Comment on Additional Measurement Topics and for 
Suggested Measures for REH Quality Reporting
    Our request for information in the CY 2022 OPPS/ASC proposed rule 
yielded suggested additional topics for quality measures appropriate to 
the REH setting. We request comment on the below additional topics and 
request suggestions for specific measures to assess the patient 
experience, outcome, and processes related to these topics. In

[[Page 44763]]

addition, we request comment on other potential topics not listed that 
would be applicable to an REH quality reporting program.
(1) Telehealth
    REHs can utilize telehealth and other remote service capacities in 
serving rural communities in their vicinity. Under the COVID-19 PHE, 
temporary measures to facilitate the provision and receipt of care 
through telehealth were federally implemented.\247\ Additionally, 
section 301 of Division P of the Consolidated Appropriations Act (CAA), 
2022 extended certain telehealth flexibilities for Medicare patients 
for 151 days after the official end of the Federal public health 
emergency (PHE).\248\ The PHE was most recently extended on April 12, 
2022, effective April 16, 2022, to July 15, 2022.\249\ Section 301 of 
the CAA, 2022 permits certain Medicare beneficiaries to receive 
telehealth services from their home. This and other flexibilities will 
facilitate the use of telehealth for 151 days after the expiration of 
the PHE in rural areas.\250\
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    \247\ http://telehealth.hhs.gov (Accessed April 8, 2022).
    \248\ Public Law 117-103.
    \249\ https://aspr.hhs.gov/legal/PHE/Pages/COVID19-12Apr2022.aspx (Accessed May 12, 2022).
    \250\ https://www.foley.com/en/insights/publications/2022/03/congress-extends-telehealth-flexibilities-7-things (Accessed April 
13, 2022).
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    In addition, rural emergency telehealth services present unique 
opportunities for access to quality care in these often time-sensitive 
and geographically isolated cases. For instance, utilizing provider-to-
provider telehealth or telemedicine support, such as in the case of e-
consultation or tele-emergency care services, in a rural emergency 
department could allow for critical specialist knowledge transfer and 
reduce patient transfers and wait times.\251\ This is particularly 
impactful in the face of rural facility or departmental closures which 
can leave gaps in healthcare service access and could contribute or 
lead to emergency service requirements, such as in the case of 
obstetric challenges.\252\
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    \251\ https://telehealth.hhs.gov/providers/telehealth-for-emergency-departments/ (Accessed May 31, 2022).
    \252\ Centers for Medicare & Medicaid Services (CMS), Advancing 
Rural Maternity Health Equity, 10 (May 2022), available at https://www.cms.gov/files/document/maternal-health-may-2022.pdf.
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    We seek public comment on potential future quality measures 
development to address quality of care using telehealth services in 
rural and rural emergency settings; as well as, on the ways in which 
REHs could utilize telehealth and telemedicine to bridge both gaps in 
expertise and distance to render quality care services.
(2) Maternal Health
    Nearly half of rural U.S. counties lack hospitals with basic 
capacity to provide emergency obstetric services. In New Mexico, for 
example, one-third of deaths during pregnancy and in the first year 
postpartum are from car accidents with increasing maternal mortality 
and morbidities in rural areas of the State.\253\ Similarly, the 
Illinois Morbidity and Mortality Report identified 175 pregnancy-
associated deaths that occurred during 2016-2017 and revealed that the 
number of pregnancy-associated deaths per 100,000 live births was 
higher in rural counties.\254\ This report identified the greatest (33 
percent) underlying cause of pregnancy-associated death in rural 
counties was attributed to ``other injuries'', most of which was the 
result of motor vehicle crashes, as opposed to `all medical' (31 
percent), drug overdose (21 percent), suicide (10 percent), or homicide 
(5 percent).\255\ This was in contrast with the 4 percent to 10 percent 
of this category's attribution in the non-rural areas.\256\
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    \253\ The Commonwealth Fund. Restoring Access to Maternity Care 
in Rural America. September 30, 2021. https://www.commonwealthfund.org/publications/2021/sep/restoring-access-maternity-care-rural-america (Accessed April 8, 2022).
    \254\ Illinois Department of Public Health, Illinois Maternal 
Morbidity and Mortality Report, 2016-2017 25 (April 2021), available 
at https://dph.illinois.gov/content/dam/soi/en/web/idph/files/maternalmorbiditymortalityreport0421.pdf.
    \255\ Ibid. at 28.
    \256\ Ibid. at 28.
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    REHs could provide valuable emergency care and other outpatient 
services for preserving and improving maternal health in rural areas, 
such as providing outpatient OB services in ``OB deserts''.\257\ REHs 
could also leverage remote patient monitoring. This could include 
implementing telehealth systems to ensure engagement and timely 
notification and care among high-risk patients, while also reducing 
barriers to care, like distance and travel.\258\ In addition, REHs 
could possibly fill gaps in the maternity care continuum, or play a 
critical role in a patient's emergency plan by being identified as 
their closest medical facility equipped to handle a maternal health 
emergency.\259\
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    \257\ https://telehealth.hhs.gov/providers/telehealth-for-maternal-health-services/bridging-the-gaps-with-telehealth/ 
(Accessed May 31, 2022).
    \258\ https://telehealth.hhs.gov/providers/telehealth-for-maternal-health-services/telehealth-and-high-risk-pregnancy/ 
(Accessed May 31, 2022).
    \259\ https://telehealth.hhs.gov/providers/telehealth-for-maternal-health-services/preparing-patients-and-providers/ (Accessed 
May 31, 2022).
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    We seek public comment on potential future quality measures for 
maternal health services in rural and rural emergency settings, and on 
the ways in which REHs could utilize telehealth and telemedicine to 
bridge both gaps in expertise and distance to render quality maternal 
health care services.
(3) Mental Health
    Rural populations are disproportionately affected by mental health 
concerns including substance use disorders.260 261 For 
example, suicide rates and drug overdose related deaths are especially 
on the rise among the rural population.262 263 Roughly 6.5 
million individuals, or about one-fifth of the rural population, had a 
mental illness in 2019.\264\ While rates of mental illness and 
substance use disorder between rural and urban areas are comparable, 
serious mental illness (SMI) was found to be 1.7 percent greater for 
rural adults 18 and older than their urban counterparts.\265\ 
Contributing to this problem is the presence of contextual and cultural 
factors, such as stigma, isolation, and poverty, and the lack of access 
to trained and specialized mental health providers, with over 60 
percent of rural Americans living within a designated shortage 
area.\266\ There are also higher reported rates of prescription opioid 
misuse among rural residents, but

[[Page 44764]]

reduced availability of outpatient substance use treatment services, 
with nearly four times greater likelihood of availability in urban 
areas than in rural areas.\267\
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    \260\ White B.G. (2015 January 28). Rural America's Silent 
Housing Crisis. The Atlantic. Retrieved from: https://www.theatlantic.com/business/archive/2015/01/rural-americas-silent-housing-crisis/384885.
    \261\ Shawnda S. (2017 November). Rural Behavioral Health. Rural 
Health Research RECAP. Retrieved from: https://www.ruralhealthresearch.org/assets/658-1990/rural-behavioral-health-recap.pdf.
    \262\ Centers for Disease Control and Prevention. (2018 February 
28). Drug Overdose in Rural America. Retrieved from: https://www.cdc.gov/ruralhealth/drug-overdose/index.html.
    \263\ Centers for Disease Control and Prevention. (2018 March 
22). Suicide Policy Brief: Preventing Suicide in Rural America. 
Retrieved from: https://www.cdc.gov/ruralhealth/suicide/policybrief.html.
    \264\ Morales, D.A., Barksdale, C.L., & Beckel-Mitchener, A.C. 
(2020). A call to action to address rural mental health disparities. 
Journal of clinical and translational science, 4(5), 463-467. 
https://doi.org/10.1017/cts.2020.42.
    \265\ Neylon, K.A. (2020). Strategies for the Delivery of 
Behavioral Health Crisis Services in Rural and Frontier Areas of the 
U.S. Alexandria, VA: National Association of State Mental Health 
Program Directors.
    \266\ Morales, D.A., Barksdale, C.L., & Beckel-Mitchener, A.C. 
(2020). A call to action to address rural mental health disparities. 
Journal of clinical and translational science, 4(5), 463-467. 
https://doi.org/10.1017/cts.2020.42.
    \267\ In Brief: Rural Behavioral Health: Telehealth Challenges 
and Opportunities, SUBSTANCE ABUSE AND MENTAL HEALTH SERVICES 
ADMINISTRATION, (Nov. 2016) https://store.samhsa.gov/product/In-Brief-Rural-BehavioralHealth-Telehealth-Challenges-and-Opportunities/SMA16-4989.
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    These high rates of mental health and substance use issues, 
compounded by lack of access to treatment, underscores the need for an 
array of behavioral health crisis services in rural areas. REHs could 
fill this need by providing valuable emergency care and other 
outpatient services for patients experiencing mental health and 
substance use crises, and possibly bridging the gaps in the continuum 
of care. For example, REHs could use telehealth services to reduce care 
delays,\268\ or offer teletherapies which can reduce stigma and privacy 
concerns.\269\
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    \268\ https://telehealth.hhs.gov/providers/telehealth-for-behavioral-health/tele-treatment-for-substance-use-disorders/ 
(Accessed May 31, 2022).
    \269\ https://telehealth.hhs.gov/providers/telehealth-for-behavioral-health/individual-teletherapy/ (Accessed May 31, 2022).
---------------------------------------------------------------------------

    We seek public comment on potential future quality measures for 
behavioral health services in rural and rural emergency settings, and 
on the ways in which REHs could utilize telehealth and telemedicine to 
bridge both gaps in expertise and distance to render quality behavioral 
health care services.
(4) ED Services
    Emergency departments and the services provided in this setting are 
expected to be a focus of REHs. OP-18: Median Time from ED Arrival to 
ED departure for Discharged ED Patients, OP-20: Door to Diagnostic 
Evaluation by a Qualified Medical Professional, and OP-22: Left Without 
Being Seen, for example, all measure important aspects of ED care.
    ED utilization is another important aspect of ED care and quality 
measures for Medicare Advantage plans as well as for Medicaid 
beneficiaries point to this. The Emergency Department Utilization (EDU) 
Health Effectiveness Data and Information Set (HEDIS) measure assesses 
ED utilization among Medicare Advantage (18 and older) beneficiaries 
through an observed-to-expected ratio.\270\ For this measure, Medicare 
Advantage plans report observed rates of ED use and a predicted rate of 
ED use based on the health of their member population and factors.\271\ 
Similarly, we recently sought stakeholder comments on a Medicaid 
measure under development, the All-Cause ED Utilization for Medicaid 
Beneficiaries measure.\272\ This measure is defined as the number of 
all-cause ED visits per 1,000 beneficiary months among Medicaid 
beneficiaries aged 18 years and older with at least 10 months of 
enrollment.
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    \270\ All-Cause Emergency Department (ED) Utilization for 
Medicaid Beneficiaries Public Comment Framing Document. https://cmit.cms.gov/cmit/#/MeasureView?variantId=4867&sectionNumber=1 
(Accessed April 8, 2022).
    \271\ We note that we would not be seeking to propose measures 
that have been developed for Medicare Advantage plans or for 
Medicaid beneficiaries as developed for an REHQR Program; we intend 
only to illustrate that ED utilization is considered an important 
area for quality measurement.
    \272\ https://www.cms.gov/files/document/all-cause-ed-utilization-medicaid-beneficiaries-measure-framing-document.pdf 
(Accessed April 7, 2022).
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    A patient who returns for an unscheduled visit to the emergency 
department (ED) shortly after initial discharge (that is, within 2-30 
days) is called a ``bounce-back.'' \273\ ED bounce-backs are associated 
with ED facility and ED patient metrics, including quality of care, 
patient insurance status, patient age, ED overcrowding and patient 
satisfaction, or an unscheduled return visit. Measures for ED 
utilization, boarding, and unscheduled ED return visits (bounce-backs) 
could be useful quality metrics for the REH setting.
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    \273\ Curcio J, Little A, Bolyard C, et al. (September 17, 2020) 
Emergency Department ``Bounce-Back'' Rates as a Function of 
Emergency Medicine Training Year. Cureus 12(9): e10503. https://doi.org/10.7759/cureus.10503.
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    We seek public comment on potential future quality measures for 
emergency care services in rural and rural emergency settings, and on 
the ways in which REHs could utilize telehealth and telemedicine to 
bridge both gaps in expertise and distance to render quality of care.
(5) Equity
    Rural populations, among others, face historic and current 
disproportionate health impacts that have resulted in the higher 
prevalence, increased risk, and greater barriers to care for medical 
conditions.\274\ The Hospital Commitment to Health Equity measure,\275\ 
which we have proposed in the FY 2023 IPPS rule for the Hospital 
Inpatient Quality Reporting program, has five attestation-based 
questions that each represent a domain of commitment to health equity: 
strategic planning, data collection, data analysis, quality 
improvement, and leadership engagement. Additionally, a potential 
future measure for health equity could be an attestation-based 
structural measure of a disparities impact statement (DIS) or 
organizational pledge that outlines how infrastructure supports the 
delivery of care that is equitable for all patient populations could 
provide important information regarding organizational commitment to 
health equity.
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    \274\ https://www.cdc.gov/ruralhealth/about.html (Accessed June 
2, 2022).
    \275\ Centers for Medicare and Medicaid Services (CMS), Summary 
of Technical Expert Panel (TEP) Meeting # 1, November 16, 2021: 
Health Equity Quality Measurement, Hospital Commitment to Health 
Equity Measure, 2016-2017 (February 2022), available at https://www.cms.gov/files/document/health-equity-quality-measurement-tep-1-summary-report-hospital-commitment-health-equity.pdf.
---------------------------------------------------------------------------

    We seek public comment on potential future quality measures for 
health equity in rural and rural emergency settings, and on the ways in 
which REHs could utilize telehealth and telemedicine to bridge both 
gaps in expertise and distance to render equitable, quality of care.
e. Addressing Concerns Regarding Small Case Numbers
    There are significant methodological challenges with measurement in 
rural and low-volume settings. Measure reliability and validity often 
hinge on having a sufficient volume of cases to ensure the reported 
rates are reliable. Determining appropriate approaches to addressing 
low-volume measurement issues will be imperative for public reporting 
of REH data given expected low volume of these facilities as evidenced 
by the numbers of rurally located subsection (d) hospitals with not 
more than 50 beds and CAHs with sufficient case numbers to have data 
publicly available on Care Compare. The NQF most recently provided 
expert panel recommendations for addressing the low volume challenge 
for performance measurement of rural providers in 2019.\276\ The panel 
recommends, to the extent possible, to ``borrow strength'' (that is, to 
aggregate measured data over longer timeframes to ensure sufficient 
data collection for analysis) and leverage expertise and statistical 
methodology suited to this type of collection. These approaches have 
been used to model the number of facilities that could achieve 
sufficient measure volume to produce reliable

[[Page 44765]]

quality measures based on Medicare Fee-For-Service (FFS) claims.
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    \276\ National Quality Forum, Addressing Low Case-Volume in 
Healthcare Performance Measurement of Rural Providers: 
Recommendations from the MAP Rural Health Technical Expert Panel, 
Final Report 3 (March 2019) available at https://www.qualityforum.org/Publications/2019/04/MAP_2019_Recommendations_from_the_Rural_Health_Technical_Expert_Panel_Final_Report.aspx.
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    Another panel recommendation is to report exceedance probabilities 
as an alternate to reporting absolute performance values. An exceedance 
probability is the probability that a certain value will be exceeded in 
a predefined future time period; it is often used for predicting the 
probability of an event. This approach would better reflect the 
uncertainty of observed quality measure results.\277\ For example, an 
exceedance probability statement might be: ``We can be 84 percent sure 
that hospital A is performing above the mean on this particular 
measure.''
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    \277\ Shwartz M, Pek[ouml]z EA, Burgess JF Jr, Christiansen CL, 
Rosen AK, Berlowitz D. A probability metric for identifying high-
performing facilities: An application for pay-for performance 
programs. Med Care. 2014 Dec; 52(2):1030-1036.
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    We request comment on these recommendations for addressing the low 
volume issues for performance measurement of rural providers.

C. Quality Reporting Requirements Under the REH Quality Reporting 
(REHQR) Program

1. Administrative Requirements
    Section 1861(kkk)(7)(B)(i) of the Act provides that, with respect 
to each year beginning with 2023, (or each year beginning on or after 
the date that is 1 year after one or more measures are first specified 
under subparagraph (C)), a rural emergency hospital shall submit data 
to the Secretary in accordance with clause (ii). Clause (ii) states 
that, with respect to each such year, a rural emergency hospital shall 
submit to the Secretary data in a form and manner, and at a time, 
specified by the Secretary for purposes of this subparagraph. In this 
section of the proposed rule, we propose foundational administrative 
requirements for REHs participating in the REHQR Program.
2. Requirements for Registration on QualityNet and Security Official 
(SO)
    We currently use the CMS QualityNet Secure Portal (referred to as 
the Hospital Quality Reporting (HQR) secure portal) to host our CMS 
online data submission tool. To submit quality measure data to CMS 
using the HQR system, a hospital must establish a secure account 
through the QualityNet website and designate a Security Official (SO). 
For more information regarding the HQR system, we refer readers to CY 
2022 OPPS/ASC final rule with comment period (85 FR 86179), as well as 
https://qualitynet.cms.gov. An SO must establish user account(s) for 
the purpose of submitting quality measure data to the HQR system, as 
well as for authorized users to review and correct data submissions and 
preview measure information prior to public reporting. The term SO 
refers to the individual(s) who have responsibilities for security and 
account management requirements for a facility (85 FR 86182).
    Hospitals that currently report quality measure data under CMS 
quality programs including, but not limited to, the Hospital IQR and 
Hospital OQR Programs have existing QualityNet accounts. For the CY 
2022 payment determination under the Hospital OQR Program, 3,268 
hospitals met all reporting requirements including data submission, 
whereas, only 30 hospitals did not meet all requirements.\278\ In 
addition, of 1,354 CAHs, 1,291 reported data through the Hospital OQR 
Program. Thus, the vast majority of all subsection (d) hospitals and 
CAHs have an account for reporting data via the HQR system. The 
QualityNet and SO registration process should therefore be familiar to 
many hospitals that convert to being an REH. Thus, we propose that for 
an REH to participate in the REHQR Program, they must: (1) have an 
account for the purpose of submitting data to the HQR system. If an REH 
already has an account for a CMS hospital quality reporting program, 
the REH can fulfill this requirement by updating its existing account 
with its new REH CMS Certification Number (CCN). If the REH does not 
have an account, we are proposing that it must register a new account. 
Once an REH has an account, it must then (2) have an SO. Since 
hospitals in the REHQR Program will have new REH CCNs, these hospitals 
would have to request SO access for the new CCN following the standard 
instructions posted on the QualityNet website.
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    \278\ https://qualitynet.cms.gov/outpatient/oqr/apu.
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    From our experience, an SO typically fulfills a variety of 
responsibilities related to quality reporting such as creating, 
approving, editing, and terminating user accounts within an 
organization, and monitoring account usage to maintain proper security 
and confidentiality protocols. While an SO is initially required to 
enable a hospital's QualityNet account for data submission and allows 
the set-up of basic user accounts with capabilities including data 
submission, it will not be necessary or required to maintain an SO. We 
highly recommend that hospitals have and maintain a Security Official; 
though after initial set-up, we reiterate, an SO would not be required.
    We invite public comment on this proposal. We intend to propose 
additional administrative requirements for the REHQR Program in 
subsequent rulemaking.

XVII. Organ Acquisition Payment Policy

A. Background of Organ Acquisition Payment Policies

    The Medicare Program supports organ transplantation by providing an 
equitable \279\ means of payment for the variety of organ acquisition 
services. Medicare excludes organ acquisition costs from the inpatient 
hospital prospective diagnosis-related group (DRG) payment for an organ 
transplant, and separately \280\ reimburses transplant hospitals \281\ 
(THs) for their organ acquisition costs under reasonable cost 
principles \282\ under section 1861(v) of the Act, based on the TH's 
ratio of Medicare usable organs to total usable organs. Medicare 
authorizes payment to designated independent organ procurement 
organizations (IOPOs) for kidney acquisition costs, under reasonable 
cost principles \283\ in accordance with section 1861(v) of the Act, 
based on the IOPO's ratio of Medicare usable kidneys to total usable 
kidneys (see section 1881(b)(2)(A) of the Act). In accordance with 42 
CFR 413.24(f), Medicare requires THs and IOPOs to complete a Medicare 
cost report \284\ on an annual basis.
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    \279\ In this context ``equitable'' means fair and equal to all 
parties. Medicare recognizes that organ acquisition costs can vary 
among patients due to different levels of acuity, clinical factors 
and genetic make-up. Some patients may require different or 
additional testing and care during the organ acquisition process. 
Payment under reasonable cost accounts for these differences and 
ensures that providers are paid appropriately for their share of 
organ acquisition costs.
    \280\ 42 CFR 412.2(e)(4) and 412.113(d).
    \281\ Under 42 CFR 482.70, a transplant hospital is a hospital 
that furnishes organ transplants and other medical and surgical 
specialty services required for the care of transplant patients.
    \282\ See 42 CFR 412.113(d); HCFA Ruling 87-1 (April 1987); CMS 
Ruling 1543-R (December 2006).
    \283\ Id. Section 1138(b)(1)(F) of the Act; 42 CFR 
413.1(a)(1)(ii)(A); 413.420(a).
    \284\ THs complete the hospital cost report on the CMS 2552-10 
(OMB No. 0938-0050) and IOPOs complete their cost report on the CMS-
216-94 (OMB No. 0938-0102).
---------------------------------------------------------------------------

    In the FY 2022 Inpatient Prospective Payment System (IPPS)/Long 
Term Care Hospital (LTCH) PPS proposed rule (86 FR 25070), which 
appeared in the Federal Register on May 10, 2021, we explained the 
background and history of Medicare's organ acquisition payment policy 
and proposed to change, clarify, and codify Medicare organ acquisition 
payment policies relative to OPOs,\285\

[[Page 44766]]

THs, and donor community hospitals. We proposed to change the manner in 
which an organ is counted as a Medicare usable organ for purposes of 
calculating Medicare's share of organ acquisition costs by counting 
only organs transplanted into Medicare beneficiaries. We also proposed 
to codify that Medicare does not share in the costs to procure organs 
used for research, except where explicitly required by law. In 
addition, we proposed to require donor community (not transplant) 
hospitals to bill OPOs their customary charges reduced to costs for 
services provided to deceased organ donors.
---------------------------------------------------------------------------

    \285\ We refer to organ procurement organizations generally as 
``OPOs'' throughout, unless differentiation of IOPO is required for 
cost reporting purposes for OPOs that file a cost report on the CMS-
216-94 (OMB No. 0938-0102).
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS final rule with comment period (86 FR 
73416), which appeared in the Federal Register on December 27, 2021, we 
responded to public comments on the proposed rule, and finalized 
certain proposals to codify longstanding Medicare organ acquisition 
payment policies, with some modifications, in new subpart L of part 
413. We finalized at Sec.  413.418 proposals with respect to donor 
community hospitals and THs' charges for hospital services provided to 
deceased donors. We also finalized our proposal to move existing organ 
acquisition payment regulations, and portions of existing kidney 
acquisition regulations, within title 42 of CFR part 412, subpart G, 
and part 413, subpart H, to a new subpart L in part 413, so that all 
organ acquisition payment policies would be housed together.
    We did not finalize our proposal to count as Medicare usable organs 
only organs transplanted into Medicare beneficiaries. We also did not 
finalize certain provisions of the proposed policy with respect to 
counting organs procured for research for purposes of calculating 
Medicare's share of organ acquisition costs. In the FY 2022 IPPS/LTCH 
PPS final rule with comment period, we stated that due to the nature of 
the public comments received, we would address the organ counting 
policy in subsequent rulemaking, as appropriate.
    In this proposed rule, we propose additional revisions, 
clarifications and codifications pertaining to Medicare's organ 
acquisition payment policies. In section XVII.B of this proposed rule, 
we propose changes to how organs procured for research are counted for 
THs and OPOs for purposes of calculating Medicare's share of organ 
acquisition costs. In section XVII.C of this proposed rule, we propose 
that organ acquisition costs include certain hospital costs incurred 
for services provided to deceased donors. In section XVII.D of this 
proposed rule, we propose technical corrections to certain regulations. 
In section XVII.E of this proposed rule, we are clarifying the 
appropriate allocation of administrative and general costs for THs. 
Additionally, in section XVII.F of this proposed rule, we are 
soliciting comments on an alternative methodology for counting organs 
used in the calculation of Medicare's share of organ acquisition costs; 
allowing IOPOs to create a SAC for non-renal organs; and Medicare's 
reconciliation of non-renal organs for IOPOs.

B. Counting Research Organs To Calculate Medicare's Share of Organ 
Acquisition Costs

    In the FY 2022 IPPS/LTCH PPS final rule with comment period (86 FR 
73470), we clarified that for Medicare payment purposes, Medicare does 
not include in Medicare's share of organ acquisition costs the costs to 
procure an organ for research, except where explicitly required by law. 
Section 733 of the Medicare Prescription Drug, Improvement and 
Modernization Act of 2003 provided Medicare coverage of pancreata for 
islet cell transplant for beneficiaries participating in a National 
Institute of Diabetes and Digestive and Kidney Diseases clinical trial. 
An exception for Medicare cost allocation purposes for pancreata for 
islet cell transplant for these trials is under Sec.  413.406(a). Under 
Sec. Sec.  413.5(c)(2) and 413.90(a), costs incurred for research 
purposes, over and above usual patient care, are not includable as 
Medicare allowable costs.
    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25668), we 
clarified that for organ acquisition cost allocation purposes, a 
``research organ'' is an organ procured and used for research 
regardless of whether it is transplanted as part of clinical care (with 
the exception of certain pancreata). We proposed to codify that organs 
used for research are not counted as Medicare usable organs in 
Medicare's share of organ acquisition costs (except certain pancreata 
procured for islet cell transplants). We also proposed that OPOs and 
THs do not count organs designated for research activities prior to the 
time the donor entered the hospital's operating room for surgical 
removal of the organs as Medicare usable organs but count as total 
usable organs. Finally, we proposed that OPOs and THs do not count 
organs designated for transplant prior to the time the donor entered 
the hospital's operating room for surgical removal of the organs but 
subsequently determined to be unusable and donated to research, as 
Medicare usable organs or total usable organs.
    In the FY 2022 IPPS/LTCH PPS final rule with comment period, we 
finalized our proposal to require that organs used for research be 
excluded from Medicare usable organs in Medicare's share of organ 
acquisition costs (except pancreata for islet cell transplants as 
specified in Sec.  413.406(a)), and kidneys used for research be 
excluded from Medicare usable kidneys in Medicare's share of kidney 
acquisition costs under Sec.  413.412(c). However, due to the number 
and nature of the comments received, we did not finalize our proposal 
that would have required OPOs and THs to include organs designated for 
research activities prior to the time the donor entered the hospital's 
operating room for surgical removal of the organs in the count of total 
usable organs or our proposal to exclude organs designated for 
transplant but subsequently determined to be unusable and donated to 
research from Medicare usable organs or total usable organs. We 
indicated that we may address these issues in future rulemaking.
    Commenters on these proposals overall expressed concern that our 
proposals would negatively impact the affordability and availability of 
research organs and hinder the advancement of clinical research (86 FR 
73494). Some commenters suggested that including research organs in the 
count of total usable organs reflected a change in policy for IOPOs 
that would require assignment of a full SAC (including administrative, 
general, and overhead costs) to each research organ they procured and 
would also result in significantly higher acquisition costs that would 
be borne by the research community. One commenter suggested that our 
proposal to exclude organs donated for research from the count of 
Medicare and total usable organs would result in procurement costs 
being passed on to researchers, which could discourage the use of human 
organs in research studies. A few commenters reported that IOPOs charge 
researchers an agreed upon fee for furnishing an organ for use in 
research. They asserted that if our proposal to include organs in the 
count of total usable organs were finalized, IOPOs would need to charge 
significantly higher amounts for furnishing research organs to the 
research community. A few commenters noted that procuring an organ for 
use in research may involve less extensive testing and evaluation than 
is necessary when procuring an organ for

[[Page 44767]]

transplantation. We believe that most THs and OPOs currently charge the 
research community agreed upon prices to procure research organs 
instead of charging a SAC. We have heard from some interested parties 
in the transplant community that THs and OPOs use agreed upon pricing 
because the SAC may include procurement services that are unnecessary 
to procure research organs.
    In the time since we issued the FY 2022 IPPS/LTCH PPS final rule 
with comment period, we have continued to review the potential impacts 
of our research organ proposal on stakeholders. We agree with the 
comments on the FY 2022 IPPS/LTCH PPS proposed rule that suggested that 
including research organs in the count of total usable organs would 
require the assignment of a full SAC on the Medicare cost report for 
each research organ procured. We understand that this practice may 
increase the amount the research community pays for obtaining organs 
for research. We also recognize that procurement costs may differ for 
research organs and transplanted organs because organs procured for 
research may be subject to less extensive testing and evaluation than 
organs that are to be transplanted. We believe that when THs and OPOs 
furnish organs for research, they should charge amounts that more 
accurately reflect the testing and evaluation associated with procuring 
research organs. This amount should represent the actual costs incurred 
by the TH or OPO for furnishing organs used for research instead of a 
token fee that does not cover the procurement cost of the organs.
    In response to commenters' concerns with the research organ 
counting proposals in the FY 2022 IPPS/LTCH PPS proposed rule, in this 
proposed rule we propose to require that THs and OPOs exclude organs 
used for research from the numerator (Medicare usable organs) and the 
denominator (total usable organs) of the calculation used to determine 
Medicare's share of organ acquisition costs on the Medicare cost 
report. For the purpose of determining Medicare's share of organ 
acquisition costs, we intend a ``research organ'' to be an organ used 
for research (with the exception of certain pancreata), regardless of 
whether the organ was intended for research, or intended for transplant 
under Sec.  413.412(a) and instead used for research. Including organs 
used for research in the count of Medicare usable organs and total 
usable organs results in assignment of a full SAC to each research 
organ. Our proposal would not require assignment of a full SAC on the 
Medicare cost report for each research organ procured; and therefore, 
would not result in a significant increase in amounts charged for 
research organs. We expect that when an organ, identified as a research 
organ, is transplanted into a patient, the organ is counted as a total 
usable organ and a full SAC is assigned.
    Under our proposal, THs and OPOs would also be required to deduct 
the cost incurred in procuring an organ for research from their total 
organ acquisition costs. This process would ensure that research organ 
procurement costs are not allocated across all transplantable organs 
and consequently, that Medicare is not paying for non-allowable 
research activities. Additionally, this practice would ensure that 
Medicare does not pay for non-allowable research costs in instances 
where the TH or OPO charges a fee that does not cover the cost it 
incurred to procure the organ for research.
    Although TH/HOPOs are currently including research organs in the 
total usable organ \286\ count and assigning a full SAC to each 
research organ, we believe this proposal, if finalized, would not 
affect the TH/HOPOs ability to charge research entities a fair and 
accurate amount for procuring organs used for research. THs and OPOs 
are responsible for negotiating the amount charged for an organ used 
for research with the research entity receiving the research organ; 
however, regardless of amounts charged, the costs must be offset 
against total organ acquisition costs. In accordance with 42 U.S.C. 
273(b)(1)(B) and Sec.  486.303(c), OPOs are required to have accounting 
and other fiscal procedures necessary to assure the fiscal stability of 
the organization.
---------------------------------------------------------------------------

    \286\ CMS 2552-10 (OMB No. 0938-0050).
---------------------------------------------------------------------------

    The availability of organs for research is important for continued 
innovation in transplant medicine and for the discovery of new 
treatments for diseases. In order to ensure the research community has 
access to organs for research and to lower the procurement costs 
associated with such organs, we propose to revise the policy set forth 
in Sec.  413.412(c) for OPOs and THs for counting organs used for 
research. Specifically, we propose to revise Sec.  413.412(c) as 
follows: first, by redesignating paragraph (c) (after the subparagraph 
heading) as paragraph (c)(1); second, by revising redesignated 
paragraph (c)(1) to specify that for Medicare cost allocation purposes, 
organs used for research are not counted as Medicare usable organs or 
as total usable organs in the ratio used to calculate Medicare's share 
of organ acquisition costs (except pancreata for islet cell transplants 
as specified in Sec.  413.406(a) and, third, by striking the language 
that specifies that kidneys used for research are not counted as 
Medicare usable kidneys or as total usable kidneys in Medicare's share 
of kidney acquisition costs; (we believe this language is duplicative 
because the reference to ``organs'' includes kidneys). We also propose 
to amend Sec.  413.412(c) by adding paragraph (c)(2) which would 
require that OPOs and THs must reduce their costs to procure organs for 
research from total organ acquisition costs on the Medicare cost 
report.
    Regarding the counting of unusable organs as described in Sec.  
413.412(d), we propose to remove the specification that the 
determination that an organ is unusable is made by the excising 
surgeon; our proposed amendment would allow this determination to be 
made by any surgeon. As revised, paragraph (d)--which we propose to 
redesignate as paragraph (d)(1)--would provide that an organ is not 
counted as a Medicare usable organ or a total usable organ in the ratio 
used to calculate Medicare's share of organ acquisition costs if a 
surgeon determines, upon initial inspection or after removal of the 
organ, that the organ is not viable and not medically suitable for 
transplant and is therefore unusable. In addition, we propose to 
clarify in Sec.  413.412(d) that Medicare shares in the costs to 
procure unusable organs through the application of the Medicare ratio 
and to clarify how OPOs and THs must report these organs on their 
Medicare cost reports to ensure that Medicare shares in the costs to 
procure these organs. Specifically, we propose to add new paragraph 
(d)(2), which would specify that OPOs and THs include the costs to 
procure unusable organs, as described in Sec.  413.412(d)(1), in total 
organ acquisition costs reported on their Medicare cost reports.

C. Costs of Certain Services Furnished to Potential Deceased Donors

    In the FY 2022 IPPS/LTCH PPS final rule with comment period, we 
codified at Sec.  413.418(a) our longstanding policy that only costs 
incurred after the declaration of the donor's death and consent to 
donate are permitted to be included as organ acquisition costs (86 FR 
73500 through 73503). However, after finalizing that rule, we received 
feedback from some stakeholders that indicated that OPOs may incur 
certain costs for donor management prior to declaration of death, but 
when death is imminent, in accordance with OPTN

[[Page 44768]]

donation policies.\287\ This is typical in cases of donation after 
cardiac death (DCD). We researched this issue further and found that 
these costs are for certain services that can only be performed prior 
to declaration of death, when death is imminent, to evaluate the organs 
for transplant viability and to prepare the donor for donation. Failure 
to provide these services to the potential donor may compromise the 
viability of organs, limit organ donation, and would not honor the 
donor or donor family's wishes to donate organs. To avoid these 
unintended consequences, we propose to modify Sec.  413.418(a) to allow 
a donor community hospital or TH to incur costs for hospital services 
attributable to a deceased donor or a donor whose death is imminent. 
Organ acquisition costs include hospital services authorized by the OPO 
when there is consent to donate, and a declaration of death has been 
made or death is imminent and these services must be provided prior to 
declaration of death. These costs must not be part of medical treatment 
that primarily offers a medical benefit to the patient as determined by 
a healthcare team.
---------------------------------------------------------------------------

    \287\ OPTN Policy Manual, Policy 2, available at https://optn.transplant.hrsa.gov/media/eavh5bf3/optn_policies.pdf, accessed 
February 4, 2022.
---------------------------------------------------------------------------

    Under this proposal, hospitals would bill the OPO for these 
services in accordance with Sec.  413.418(b), and the OPO would record 
those billed amounts as organ acquisition costs on its Medicare cost 
report. Because these services are intended to determine or maintain 
the viability of organs for transplant, the patient's health insurance 
would not be billed for the organ acquisition costs, and the patient or 
patient's family would not be responsible for those amounts. 
Stakeholders were concerned that without this clarification, if 
services authorized by the OPO and provided by the hospital could not 
be included as organ acquisition costs, hospitals may bill the donor's 
family or a third-party payor. Doing so could create a barrier to organ 
donation based on economic means, by forcing costs associated with 
organ acquisition to be borne by the donor's family or a third-party 
payor. Making the donor's family responsible for these costs could 
preclude those of lesser economic means from fulfilling their wishes to 
donate organs and would be inequitable. It could also be a deterrent to 
deceased donor organ donation and as a result reduce the supply of 
organs available for transplant. We are committed to supporting organ 
donation in an equitable fashion and view this issue as a potential 
barrier to organ donation. We believe our proposal supports organ 
donation and organ procurement costs and addresses a potential inequity 
in the transplant ecosystem.

D. Technical Corrections and Clarifications to 42 CFR 405.1801, 
412.100, 413.198, 413.402, 413.404, 413.420 and Nomenclature Changes to 
42 CFR 412.100 and 42 CFR Part 413, Subpart L

    Technical Corrections and Clarifications. In the FY 2022 IPPS/LTCH 
PPS final rule with comment period, Sec.  413.200 was reserved and 
redesignated as Sec.  413.420 with revisions. In this proposed rule, we 
propose to make a technical correction to Sec.  405.1801(b)(2)(ii), by 
removing the reference to Sec.  413.200(g) and replacing it with a 
reference to Sec.  413.420(g). We also propose to make a technical 
correction to Sec.  413.198(b)(4)(ii), by removing the reference to 
``Section 413.200, Reimbursement of OPAs and histocompatibility 
laboratories'' and replacing it with a reference to ``Section 
413.420,'' and that section's title, ``Payment to independent organ 
procurement organizations and histocompatibility laboratories for 
kidney acquisition costs.''
    We also propose to clarify Sec. Sec.  412.100(b) and 413.402(a) by 
removing ``as appropriate'' and instead specifying that organ 
acquisition costs are allowable costs incurred in the acquisition of 
organs from a living donor or a deceased donor by a hospital, or from a 
deceased donor by an OPO.
    We propose to revise Sec.  413.404(c)(2)(i)(C) so that it is 
written in the active voice and not the passive voice. In addition, we 
propose to revise this provision to clarify that the kidney SAC amount 
is the interim payment made by the TH or other OPO to the IOPO, as set 
forth in Sec.  413.420(d)(1).
    We propose to amend Sec.  413.420(a)(1) by striking ``after 
September 30, 1978,'' as we believe it is no longer necessary that the 
regulations specify that the reasonable cost reimbursement principles 
in part 413 only apply to covered services furnished after that date; 
and to replace the acronym ``OPOs'' with ``IOPOs''. We propose to amend 
Sec.  413.420(a)(2) to correct a typographical error by changing 
``HOPOs'' to ``IOPOs''.
    We propose to amend Sec.  413.420(c)(1)(v) to correct the statutory 
reference to section 1861 of the Act so that it instead refers to 
section 1881 of the Act; the original regulation text was in Sec.  
413.178, and was redesignated as Sec.  413.200 in 1997 \288\ before 
being redesignated as Sec.  413.420 in the FY 2022 IPPS/LTCH PPS final 
rule with comment period.\289\ The original regulation at Sec.  413.178 
referred to section 1881 of the Act, but a typographical error changed 
``1881'' to ``1861'' when other changes to the regulation were proposed 
in 1987 (52 FR 28674) and finalized in 1988 (53 FR 6548).
---------------------------------------------------------------------------

    \288\ 62 FR 43668, Aug. 15, 1997.
    \289\ 86 FR 73515, Dec. 27, 2021.
---------------------------------------------------------------------------

    Nomenclature Changes. In this proposed rule, we propose to amend 
Sec. Sec.  412.100(b); 413.402(a) and (b)(3), (4), (7) and (8)(ii); 
413.404(a)(2), (b)(3), and (c)(1)(i) and (ii); and 413.418 (the section 
title and paragraph (b)), by replacing the term ``cadaveric'' with 
``deceased'', to be consistent with terminology used within the 
transplant community when referring to deceased donors, and to promote 
sensitivity regarding the process and decision of donating organs from 
deceased donors. In Sec.  413.404(b)(3)(ii), we propose to replace 
``cadaveric SAC'' with ``deceased donor SAC'' and ``cadaveric 
organ(s)'' with ``deceased donor organ(s)''; and in Sec.  
413.404(c)(2), we propose to replace ``cadaveric kidneys'' with 
``deceased donor kidneys''.
    We propose to amend Sec.  413.404(c)(2)(i)(A), (B), and (D) and 
413.414(c)(1) by replacing references to ``Medicare contractor'' with 
``contractor'', to conform to terminology changes made in the FY 2015 
IPPS final rule (79 FR 49854 at 50199) and in accordance with the 
definition at 42 CFR 405.201(b).\290\
---------------------------------------------------------------------------

    \290\ 42 CFR 405.201(b) defines contractors as Medicare 
Administrative Contractors and other entities that contract with CMS 
to review and adjudicate claims for Medicare payment of items and 
services.
---------------------------------------------------------------------------

    In this proposed rule, we also propose to remove the term 
``discarded'' from Sec.  413.412(d) and replace it with ``unusable'', 
to promote sensitivity in scenarios where donated organs are unused 
because they are not suitable for transplantation.
    Finally, in this proposed rule, we propose to amend Sec.  413.400 
by adding ``TH'' in parentheses after the defined term ``transplant 
hospital''. Throughout subpart L, we propose to replace the term 
``transplant hospital'' with ``TH''.

E. Clarification of Allocation of Administrative and General Costs

    When a TH procures organs for transplantation, it is required to 
allocate administrative and general (A&G) costs to the appropriate 
organ acquisition cost centers on its Medicare hospital cost

[[Page 44769]]

report (MCR).\291\ This practice is in accordance with Medicare's 
reasonable cost principles under section 1861(v) of the Act and the 
regulations at Sec. Sec.  413.20 and 413.24. When a TH receives organs 
from an OPO or other TH, it makes payment to the OPO or TH that 
furnished the organ for the cost incurred to procure the organ. We are 
aware that some THs that receive organs place the ``purchase cost'' for 
the organs they receive in the accumulated cost statistic by which A&G 
is allocated. Under Sec.  413.24(d)(6), including a statistical cost 
which does not relate to the allocation of A&G expenses causes an 
improper distribution of overhead and could result in improper Medicare 
payment. In this scenario, when the receiving TH includes the purchase 
cost of the organ it received in the statistical cost by which A&G is 
allocated, overhead is improperly distributed to the receiving TH organ 
acquisition cost center.
---------------------------------------------------------------------------

    \291\ CMS 2552-10 (OMB No. 0938-0050)
---------------------------------------------------------------------------

    To ensure the appropriate allocation of A&G costs on a TH's MCR, we 
propose to clarify that when a TH receives organs from an OPO or other 
TH, the receiving TH must exclude from its accumulated cost statistic 
the cost associated with these organs because these costs already 
include A&G costs. In accordance with Sec.  413.24(d)(6), purchased 
services for a department that are directly assigned to the department 
that include A&G costs result in an excessive allocation of overhead. 
This duplication of A&G costs results in improper Medicare payment to 
the provider. In accordance with MCR instructions,\292\ if some of the 
costs in the department that received this direct assignment of 
purchased services should receive A&G costs, the TH must remove the 
directly assigned costs (purchased services) from its allocation 
statistic to assure a proper allocation of overhead. This process 
facilitates appropriate Medicare payment and ensures that the receiving 
TH's organ acquisition cost center does not receive an improper 
distribution of overhead costs that it did not incur. These 
longstanding Medicare cost finding principles are in accordance with 
Sec.  413.24(d)(6), and specifically expressed in the MCR instructions 
for THs.\293\
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    \292\ PRM 15-2, chapter 40, section 4020.
    \293\ Id.
---------------------------------------------------------------------------

F. Organ Payment Policy--Request for Information on Counting Organs for 
Medicare's Share of Organ Acquisition Costs, IOPO Kidney SACs, and 
Reconciliation of All Organs for IOPOs

    In this proposed rule, we are requesting information on an 
alternative methodology for counting organs for purposes of calculating 
Medicare's share of organ acquisition costs; IOPOs' kidney SACs; and 
Medicare's reconciliation of all organs for IOPOs. While we will not be 
responding to specific comments submitted in response to this RFI in 
the CY 2023 OPPS final rule, we intend to use this input to inform 
future policy development.
1. Counting Organs for Medicare's Share of Organ Acquisition Costs
    Medicare calculates its share of organ acquisition costs for THs/
HOPOs by multiplying the allowable organ acquisition costs by the ratio 
of Medicare usable organs (the numerator) to total usable organs (the 
denominator) reported on the Medicare hospital cost report.\294\ 
Currently, THs/HOPOs must include the following as Medicare usable 
organs in the numerator of the Medicare share fraction: \295\ (1) 
organs transplanted into Medicare beneficiaries; (2) organs 
transplanted into Medicare beneficiaries that were partially paid by a 
primary insurance payor in addition to Medicare; (3) organs sent to 
other THs or OPOs; (4) kidneys transplanted into Medicare Advantage 
beneficiaries for dates of service on or after January 1, 2021; \296\ 
(5) kidneys sent to United States military renal transplant centers 
(MRTCs) with a reciprocal sharing agreement with the HOPO in effect 
prior to March 3, 1988, and approved by the contractor; and (6) 
pancreata procured for the purpose of acquiring pancreatic islet cells 
for transplantation into Medicare beneficiaries participating in a 
National Institute of Diabetes and Digestive and Kidney Diseases 
clinical trial pursuant to section 733 of the Medicare Prescription 
Drug, Improvement and Modernization Act of 2003 (Pub. L. 108-173); 42 
U.S.C 1395l (MMA).\297\ However, ``(3) organs sent to other THs or 
OPOs'' and ``(5) kidneys sent to United States MRTCs with a reciprocal 
sharing agreement with the HOPO in effect prior to March 3, 1988, and 
approved by the contractor,'' may include organs that are not actually 
transplanted into Medicare beneficiaries. Including organs that are not 
transplanted into Medicare beneficiaries in Medicare usable organs 
inflates Medicare's share of organ acquisition costs.
---------------------------------------------------------------------------

    \294\ CMS Pub. 15-2, chapter 40, section 4028.
    \295\ Pursuant to PRM Sec.  3115.A. and CMS Pub. 15-2, chapter 
40, section 4028.3.
    \296\ Section 17006 of the 21st Century Cures Act, (Pub. L. 114-
255). Section 17006(c) of the Cures Act amended section 
1852(a)(1)(B)(i) of the Act to exclude coverage for organ 
acquisitions for kidney transplants from the Medicare benefits an MA 
plan is required to cover for an MA enrollee, including as covered 
under section 1881(d) of the Act. Effective January 1, 2021, these 
costs are covered under the original Medicare FFS program. The MA 
kidney transplants are included in the numerator and denominator on 
the MCR to determine Medicare's share of kidney acquisition costs 
(85 FR 33796, 33824, June 2, 2020).
    \297\ Section 733 of the Medicare Prescription Drug, Improvement 
and Modernization Act of 2003 (Pub. L. 108-173); 42 U.S.C. 1395l.
---------------------------------------------------------------------------

    Currently, THs/HOPOs must include the following as total usable 
organs in the denominator of the Medicare share fraction: (1) Medicare 
usable organs; (2) organs excised with the intention to be used for 
research; (3) organs excised and either transplanted or furnished to 
other THs or OPOs; (4) organs obtained from another TH or OPO and 
either transplanted or furnished to other THs or OPOs; (5) organs 
furnished to veterans' hospitals or organs sent outside the United 
States, under Sec.  413.203; (6) organs transplanted into non-Medicare 
beneficiaries, under Sec.  413.203; (7) organs for which the transplant 
was totally or partially paid by primary insurance other than Medicare; 
(8) kidneys furnished to United States MRTCs with or without a 
contractor approved reciprocal sharing agreement with the HOPO in 
effect prior to March 3, 1988; and (9) pancreata procured on or after 
October 1, 2004, for the purpose of acquiring pancreatic islet cells 
for transplantation into participants in a National Institute of 
Diabetes and Digestive and Kidney Diseases clinical trial in accordance 
with the MMA.\298\
---------------------------------------------------------------------------

    \298\ Id.
---------------------------------------------------------------------------

    For IOPOs, Medicare calculates its share of kidney acquisition 
costs by multiplying the total allowable kidney acquisition costs by 
the ratio of Medicare usable kidneys (the numerator) to total usable 
kidneys (the denominator) reported on the Medicare IOPO cost 
report.\299\ Currently, IOPOs must include the following as Medicare 
usable kidneys: (1) kidneys sent to THs; (2) kidneys sent to certified 
OPOs; and (3) kidneys sent to United States MRTCs with a reciprocal 
sharing agreement with the IOPO in effect prior to March 3, 1988, and 
approved by the contractor. However, not all kidneys that are counted 
as Medicare usable kidneys are

[[Page 44770]]

transplanted into Medicare beneficiaries.
---------------------------------------------------------------------------

    \299\ CMS Pub. 15-2, chapter 33, section 3312.
---------------------------------------------------------------------------

    IOPOs must currently include the following as total usable kidneys: 
(1) Medicare usable kidneys; (2) kidneys procured and furnished to 
other THs or OPOs; (3) kidneys furnished to veterans' hospitals or 
organs sent outside the United States in accordance with Sec.  413.203; 
(4) kidneys for which the transplant was covered by a MA plan for dates 
of service prior to January 1, 2021; and (5) kidneys furnished to 
United States MRTCs with or without a contractor-approved reciprocal 
sharing agreement with the IOPO in effect prior to March 3, 1988.
    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25656), we 
provided a historical overview of Medicare's organ acquisition payment 
policy to explain why Medicare currently shares in the organ 
acquisition costs for some organs that are not actually transplanted 
into Medicare beneficiaries. When Medicare added the ESRD benefit to 
Medicare coverage in 1972, Medicare presumed that most kidney 
transplant recipients would be Medicare beneficiaries receiving the 
ESRD benefit, and thus Medicare would pay a larger share of kidney 
acquisition costs.\300\ As Medicare added benefits for transplantation 
of non-renal organs and included the costs to procure non-renal organs, 
Medicare cost reporting instructions incorporated the presumption that 
the ultimate transplant recipient was unknown, but likely a Medicare 
beneficiary. Currently, when a TH sends an organ to another TH or to an 
OPO, or when an OPO sends an organ to another OPO or to a TH, Medicare 
assumes that some of the unknown transplant recipients are Medicare 
beneficiaries, and permits those organs to be counted as Medicare 
usable organs in the numerator of the fraction for Medicare usable 
organs to total usable organs, to be assured that Medicare is paying 
its share of organ acquisition costs. Thus, some organs that are not 
ultimately transplanted into Medicare beneficiaries are currently being 
included in ``Medicare usable organs'' or ``Medicare usable kidneys'', 
resulting in Medicare paying more than its share of organ acquisition 
costs (86 FR 25665).
---------------------------------------------------------------------------

    \300\ Intermediary Letter 73-25 (July 1973) and 54 FR 5619, 
February 6, 1989.
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25664), we stated 
that Medicare does not intend to share in the cost of procuring organs 
that are not transplanted into Medicare beneficiaries (except those 
organs designated for transplant but subsequently determined to be 
unusable). In the 1988 proposed rule titled ``Medicare Program; Payment 
for Kidneys Sent to Foreign Countries or Transplanted in Non-Medicare 
Beneficiaries'' (53 FR 6672, 6673), which appeared in the Federal 
Register on March 2, 1988, CMS stated that allowing all kidneys to be 
counted as Medicare kidneys was not aligned with anti-cross 
subsidization principles set forth in section 1861(v)(1)(A) of the Act. 
CMS (which was at that time known as the Health Care Financing 
Administration, or HCFA) observed that the Medicare Program had been 
paying the cost of procuring kidneys transplanted into non-Medicare 
beneficiaries and stated it was necessary to amend the regulations in 
order to effectuate the statutory principles embodied in section 
1861(v)(1)(A), including that the cost of services be borne by the 
appropriate payor. We stated that the cost associated with the kidneys 
not used by Medicare beneficiaries must be borne by the responsible 
individual or third-party payor and that Medicare is precluded from 
paying any costs associated with kidneys not used by Medicare 
beneficiaries. We proposed to establish in the regulations at Part 413 
a requirement for OPOs to reduce their acquisition costs for kidneys 
furnished to foreign transplant centers and kidneys transplanted in 
non-Medicare patients, which would be achieved by including these 
kidneys in total usable kidneys and excluding them from Medicare usable 
kidneys. This proposal was finalized in the final rule titled 
``Medicare Program; Payment for Kidneys Sent to Foreign Countries or 
Transplanted in Patients Other Than Medicare Beneficiaries'' (54 FR 
5619) and currently appears at Sec.  413.202.\301\ Similarly, under 
Sec.  413.203, THs are required to reduce their acquisition costs for 
organs they furnish to foreign transplant centers and organs 
transplanted in non-Medicare patients. This is achieved by including 
these organs in total usable organs and excluding them from Medicare 
usable organs.
---------------------------------------------------------------------------

    \301\ The requirement in Sec.  413.202 (titled ``Organ 
procurement organization (OPO) cost for kidneys sent to foreign 
countries or transplanted in patients other than Medicare 
beneficiaries'' (titled ``Organ procurement agencies' (OPAs') or 
transplant centers' costs for kidneys sent to foreign countries or 
transplanted in non-Medicare beneficiaries''), was originally 
codified under Sec.  413.179 (54 FR 5619, February 6, 1989). Section 
413.179 was subsequently redesignated as Sec.  413.202 (62 FR 43665, 
August 15, 1997)).
---------------------------------------------------------------------------

    In the FY 2022 IPPS/LTCH PPS proposed rule, we proposed to require 
that THs count the number of organs, and IOPOs count the number of 
kidneys, actually transplanted into Medicare beneficiaries on their 
Medicare cost reports to more accurately calculate Medicare's share of 
organ acquisition costs. Our proposal used the current methodology to 
calculate Medicare's share where for THs, organs furnished to other THs 
or OPOs are included in the numerator and denominator of the Medicare 
fraction, and for IOPOs, kidneys furnished to other OPOs or THs are 
included in the numerator and denominator of the Medicare fraction. 
Under our proposal, THs and IOPOs would have been required to track 
organs they furnish to other facilities and to determine and report on 
their Medicare cost reports, the number of those organs that were 
transplanted into Medicare beneficiaries.
    In the FY 2022 IPPS/LTCH PPS final rule with comment period, we 
stated that we were not finalizing the organ counting proposals 
included in the FY 2022 IPPS/LTCH PPS proposed rule, due to the number 
and nature of the comments received, and we indicated we may revisit 
this issue in future rulemaking. Many commenters expressed 
acknowledgment and understanding of CMS' objective to pay for organ 
acquisition costs for only organs transplanted into Medicare 
beneficiaries. However, commenters expressed concerns over potential 
operational challenges and increases in burden for THs and OPOs if CMS 
were to finalize the proposal and require tracking of organs furnished 
to other THs and OPOs, from donors to recipients. Commenters also 
expressed concern over the revenue reductions that OPOs and THs, 
particularly THs that are children's hospitals, were expected to 
experience under the proposal to count only organs transplanted into 
Medicare beneficiaries as Medicare usable organs. Many commenters 
indicated that because of their traditionally very low Medicare 
utilization, THs that are children's hospitals would experience a 
greater financial burden under the proposed organ counting methodology 
than would be experienced by THs that are not children's hospitals. 
Commenters indicated that THs that are children's hospitals would have 
difficulty in making up for the loss of Medicare revenue from other 
payor sources. Commenters indicated that stakeholders would need more 
time to renegotiate contracts with other payors, including Medicaid 
payments from states. Commenters expressed concern over the potential 
impact on the transplantation

[[Page 44771]]

ecosystem and suggested the proposed policy would result in a decreased 
organ supply, although they did not explain how the proposed policy 
might cause this to occur. Commenters asked CMS to either withdraw the 
proposal or delay its implementation. Commenters also requested that 
CMS conduct additional analyses.
    In the FY 2022 IPPS/LTCH PPS final rule with comment period, we 
indicated that we would conduct additional analyses of impacts upon 
THs, children's hospitals, and OPOs before considering a possible re-
proposal in future rulemaking of a policy that would only count organs 
transplanted into Medicare beneficiaries for purposes of calculating 
Medicare's share of organ acquisition costs. We examined the states 
where the children's transplant hospitals are located and how often 
their State legislatures meet. We found that all children's hospitals 
that are certified as THs are in states where legislatures meet 
annually, except for four children's hospitals located in Texas, where 
the legislature meets biennially.
    Due to the comments received on the FY 2022 IPPS/LTCH PPS proposed 
rule, in this RFI we are seeking information as we consider an 
alternative methodology for counting organs that will not require THs 
and OPOs to track exported organs but would require TH/HOPOs and OPOs 
to report only organs transplanted into Medicare beneficiaries for 
purposes of calculating Medicare's share of organ acquisition costs. 
Under such methodology, TH/HOPOs would include as Medicare usable 
organs only organs transplanted within their TH into Medicare 
beneficiaries. In this regard, we would exclude organs that a TH 
furnishes to other THs or OPOs from its Medicare share fraction, in 
both the numerator (Medicare usable organs) and denominator (total 
usable organs), and require revenue offsets against total organ 
acquisition costs for these organs. Such a methodology would result in 
an apportionment of costs and redistribution of reasonable organ 
acquisition costs to only organs transplanted into Medicare 
beneficiaries within the recipient TH, but it would not require TH/
HOPOs to track organs they furnish to other THs and OPOs, removing a 
burden that was concerning to many commenters on the FY 2022 IPPS/LTCH 
PPS proposed rule.
    For OPOs, we are considering an alternative methodology for 
counting organs where OPOs would count all organs, not just kidneys, 
and calculate Medicare's share of organ acquisition costs using a ratio 
of Medicare usable organs to total usable organs. OPOs would include in 
Medicare usable organs only organs transplanted into Medicare 
beneficiaries, using recipient payor data provided to OPOs by the OPTN. 
Under such a methodology, OPOs would also be required to offset total 
organ acquisition costs with revenue received for Medicare usable 
organs. Under the methodology, IOPOs would not be required to track 
organs they furnish to other OPOs or THs to determine whether the organ 
recipient is a Medicare beneficiary, removing a burden that was 
concerning to many commenters on the FY 2022 IPPS/LTCH PPS proposed 
rule. Such a methodology would result in an apportionment of costs and 
redistribution of reasonable organ acquisition costs to only organs 
transplanted into Medicare beneficiaries.
    We would like to better understand and obtain more detailed 
information on the extent to which THs, OPOs, and other interested 
parties would be impacted under these alternative organ counting 
methodologies used to calculate Medicare's share of organ acquisition 
costs. Specifically, CMS seeks public comment on the following:
    1. What proportion of organs used for transplant are acquired by 
your hospital, received from other THs directly, or received from OPOs? 
Does this vary by type of organ, age category, or insurance status of 
the potential recipient and if so, how?
    2. Of all the transplants performed in your hospital in the past 5 
years, what percentage were for:
    (a) Medicare beneficiaries; (b) Medicaid patients; (c) private pay 
patients; (d) patients who receive financial assistance for services 
provided at a free or reduced rate?
    3. Describe how THs and OPOs currently support organ acquisition 
costs financially. What revenue and income streams (for example, 
grants, fundraising, etc.) support these activities?
    4. Are you able to quantify the revenue your facility has received 
over the past 5 years resulting from Medicare's organ counting policy 
because acquisition costs were assigned to Medicare usable organs for 
THs, or Medicare usable kidneys for IOPOs, that were transplanted into 
non-Medicare beneficiaries? If so, what are the amounts?
    5. Describe the impact of the revenue reduction resulting from an 
alternate organ counting methodology, both in absolute terms and 
relative to your IOPO, or transplant program and hospital as a whole.
    6. Should children's hospitals be treated differently under an 
alternate organ counting methodology, and if so, why and how?
    7. In your State, does Medicaid cover organ transplants and 
acquisition costs? If so, explain the Medicaid payment methodology. 
Would an alternative organ counting methodology to calculate Medicare's 
share of organ acquisition costs impact your payments received from 
Medicaid for transplants and/or organ acquisition costs? Additionally, 
would a potential change in organ counting affect access to care, and 
if so, how?
    8. Do other payors pay equitably to share in the costs to acquire 
organs for transplant for their patients? If so, under an alternate 
organ counting methodology for Medicare would all payors, including 
Medicaid, continue to equitably share in the cost to acquire organs for 
transplant? By ``equitably'', we mean other payors pay their share of 
organ acquisition costs for organs transplanted into their respective 
patients.
    9. If an alternate organ counting methodology were implemented, are 
there any timing issues for implementation that we should consider 
regarding other payors, including State Medicaid Agencies, to address 
their organ acquisition and/or transplant payment methodologies?
    10. Describe what services your TH or IOPO may need to reduce or 
change to accommodate a reduction in revenue from Medicare stemming 
from an alternate organ counting methodology to count only organs 
transplanted into Medicare beneficiaries to calculate Medicare's share 
of organ acquisition costs.
    11. Will your facility perform less transplants if revenue is 
eliminated from Medicare under an alternate organ counting methodology? 
If so, why and how? Will your facility perform less organ acquisitions 
if revenue is eliminated from Medicare under an alternate organ 
counting methodology? If so, why and how?
    12. Is the cost to acquire an organ for transplantation into a 
Medicare beneficiary different than the cost to acquire an organ for 
transplantation into a non-Medicare beneficiary? If so, what factors 
contribute to the difference in organ acquisition costs?
    13. Describe how clinical decision-making affects organ allocation 
and transplantation. Are there other factors that affect organ 
allocation and transplantation that we should be aware of?

[[Page 44772]]

2. IOPO Kidney Standard Acquisition Charges
    Currently, the contractor \302\ establishes each IOPO's kidney SAC, 
and adjusts it if necessary, in accordance with Sec.  413.404(c)(2). 
IOPOs must bill their kidney SAC for the costs of Medicare and non-
Medicare kidneys procured for transplant, and are paid their SAC amount 
by the entity receiving the kidney (Sec.  413.404(c)(3)). At the end of 
the cost reporting period, the contractor reconciles the IOPO's 
Medicare kidney acquisition costs with the revenue the IOPO received 
for those kidneys, and settles with the IOPO to ensure it is paid the 
reasonable costs of Medicare kidney acquisition (Sec.  
413.420(e)(2)).\303\
---------------------------------------------------------------------------

    \302\ ``Contractor'' refers to the Medicare Administrative 
Contractor (MAC) and conforms to terminology changes made in the FY 
2015 IPPS final rule (79 FR 50199) and with the definition given at 
42 CFR 405.201(b).
    \303\ Section 1861(v) of the Act requires that certain Medicare 
services, including organ acquisition costs, must be paid based on 
reasonable cost.
---------------------------------------------------------------------------

    Currently, IOPOs count almost all of the kidneys they procure as 
Medicare usable kidneys. (Kidneys sent outside of the United States are 
not counted as Medicare usable kidneys.) Consequently, Medicare's 
current share of kidney acquisition costs is nearly 100 percent, and 
the reconciliation process currently makes the IOPO whole for nearly 
all its kidney acquisition costs, on a reasonable cost basis. However, 
not all kidneys that are counted as Medicare usable kidneys are 
transplanted into Medicare beneficiaries; some of those kidneys are 
transplanted into patients with Medicaid, private insurance, etc. As 
discussed in the Request for Information (RFI) in section XVII.F.1 of 
this proposed rule, we are considering an alternative organ counting 
methodology that would require IOPOs to count as Medicare usable organs 
only those organs that are actually transplanted into Medicare 
beneficiaries, including renal and non-renal organs. Such a methodology 
would result in IOPOs' organ acquisition costs being reconciled and 
settled for all organ acquisition costs for organs actually 
transplanted into Medicare beneficiaries.
    Additionally, for kidneys, such an alternative organ counting 
methodology would limit the kidney revenue IOPOs receive from THs and 
other OPOs to the kidney SAC amount. Longstanding policy currently 
requires the contractor to establish the kidney SAC amount (Sec.  
413.404(c)(2)). To ensure that an IOPO's kidney SAC appropriately 
covers its costs, we are considering a methodology under which IOPOs, 
rather than the Medicare contractor, would establish their kidney SACs, 
similar to how they establish their SACs for non-renal organs. This 
alternative methodology would place the fiscal responsibility on the 
IOPOs for kidneys, similar to non-renal organs, by placing the IOPO in 
control of its kidney acquisition revenue stream through control of its 
kidney SAC.
    Specifically, we are considering an alternative methodology where 
an IOPO would estimate the reasonable and necessary costs it expects to 
incur for services furnished to procure deceased donor kidneys during 
its cost reporting period and divide that estimated amount by the 
projected number of deceased donor kidneys the IOPO expects to procure 
within its cost reporting period. We are also considering a potential 
policy approach that would permit an IOPO to adjust its kidney SAC 
during the year, if necessary, to account for cost changes. We believe 
these alternative policy approaches are in alignment with section 
371(b)(1)(B) of the Public Health Service Act and the conditions of 
participation at Sec.  486.303(c), which require OPOs to have 
accounting and other fiscal procedures necessary to assure the fiscal 
stability of the organization, including procedures to obtain payment 
for kidneys and non-renal organs provided to THs.
    We are requesting information on these alternative policy 
approaches that we are considering related to the IOPO kidney SAC. 
Specifically, we are seeking information pertaining to the following 
questions:
    1. Do IOPOs have any concerns with establishing (and where 
necessary, adjusting) their own kidney SAC, in accordance with the 
potential policy approach under consideration? Do IOPOs have any 
concerns with the potential methodology under consideration for 
calculating the kidney SAC amount?
    2. We have heard from stakeholders that some IOPOs have lengthy 
internal processes to adjust their SACs. Do IOPOs have the ability to 
respond quickly to cost changes that might necessitate a SAC 
adjustment? How frequently do IOPOs currently need to adjust their SACs 
due to cost changes that are higher or lower than usual?
    3. Are there specific high cost items or services associated with 
organ procurement that potentially could increase a SAC? If yes, please 
explain. What rules or parameters should CMS consider to account for 
these items or services when developing a potential methodology for how 
IOPOs calculate their SACs?
    4. Do IOPOs believe that being in control of their kidney SAC, as 
they are of their non-renal organ SACs, would improve their fiscal 
stability?
    5. Do stakeholders have concerns about IOPOs establishing their 
kidney SACs?
3. Reconciliation for All Organs for IOPOs
    Currently, the contractor is required to review IOPOs' kidney 
acquisition costs and reconcile and settle those costs to ensure that 
Medicare pays its share on a reasonable cost basis. However, there is 
no similar requirement for the contractor to review, reconcile and 
settle IOPOs' non-renal organ acquisition costs. Over the years, 
through various rulings and national coverage determinations (NCDs), 
Medicare has added coverage for transplantation of non-renal organs 
such as heart, liver, or lungs. Non-renal organs were covered for 
transplantation through a CMS Ruling (for heart transplants) and 
through NCDs (for other non-renal organs),\304\ and payment policies 
were subsequently implemented through notice-and-comment 
rulemaking.\305\ We modeled our reimbursement for non-renal organ 
acquisition costs on our earlier kidney acquisition policies. In 
addition, the OIG \306\ and Congress \307\ have expressed concerns 
regarding some OPOs' financial practices. As such, we believe there is 
a need to provide more contractor review of non-renal organ acquisition 
costs to protect the Medicare Trust Fund and the transplant ecosystem. 
Therefore, we are considering a requirement that the contractor review, 
reconcile and settle Medicare's share of costs to acquire non-renal 
organs for IOPOs under reasonable

[[Page 44773]]

cost principles, similar to the current practice for kidneys.
---------------------------------------------------------------------------

    \304\ See CMS Ruling 87-1, April 1987; National Coverage 
Determinations Manual, IOM 100-03, chapter 1, Part 4, section 260 
(available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/ncd103c1_Part4.pdf).
    \305\ 52 FR 33034, September 1, 1987 (heart); 55 FR 8545, March 
8, 1990 and 56 FR 15013, April 12, 1991 (liver); 60 FR 6537, 
February 2, 1995 (lung); 64 FR 41497, July 30, 1999 (pancreas); 66 
FR 39828, August 1, 2001 (intestine, with reasonable cost coverage 
of acquisition costs beginning October 1, 2001).
    \306\ https://oig.hhs.gov/oas/reports/region9/90800033.pdf; 
https://oig.hhs.gov/oas/reports/region9/90900087.pdf; https://oig.hhs.gov/oas/reports/region9/90500034A.pdf; https://oig.hhs.gov/oas/reports/region9/91102039.pdf.
    \307\ https://oversight.house.gov/news/press-releases/oversight-subcommittee-launches-investigation-into-poor-performance-waste- and 
https://www.young.senate.gov/newsroom/press-releases/young-joins-finance-committee-members-to-probe-us-organ-transplant-system; 
https://www.congress.gov/117/chrg/CHRG-117hhrg44569/CHRG-117hhrg44569.pdf.
---------------------------------------------------------------------------

    To reconcile Medicare's share of non-renal organ acquisition costs, 
the contractor would review the Medicare cost report to determine if 
the costs are reasonable. This would entail the contractor's review of 
all IOPO organ acquisition costs, and would ensure that IOPOs' costs 
that are reported as organ acquisition costs are appropriate, in 
accordance with Sec.  413.402, and are reasonable and necessary, in 
accordance with section 1861(v) of the Act and Sec. Sec.  413.5 and 
413.9.
    If an IOPO establishes a non-renal SAC that is higher than its 
reasonable costs, that higher charge becomes an inflated non-renal 
organ acquisition cost to the TH or other OPO receiving the organ. 
Medicare shares in these inflated costs as a portion are ultimately 
paid by Medicare when Medicare reconciles THs' organ acquisition costs. 
Without reconciliation and settlement of IOPOs' non-renal organ 
acquisition costs, Medicare cannot recover those inflated costs, 
resulting in Medicare paying more than reasonable costs for Medicare's 
share of organ acquisitions. Conversely, if an IOPO establishes a non-
renal SAC that is less than its reasonable costs, the charge becomes an 
organ acquisition cost to the TH receiving the organ. The lower costs 
are ultimately paid to the TH by Medicare when reconciled through the 
TH's Medicare cost report. Without reconciliation and settlement of 
IOPOs' non-renal organ acquisition costs, Medicare is unable to make 
IOPOs whole for Medicare's share of the reasonable costs. If IOPOs are 
consistently underpaid for their non-renal Medicare organ acquisitions 
costs because IOPOs establish SACs that are too low, their fiscal 
stability could be compromised.
    In the FY 2022 IPPS/LTCH PPS proposed rule (86 FR 25675), we 
proposed regulatory changes to Sec.  413.200, and a commenter expressed 
concern that CMS did not make a proposal to reconcile and settle an 
IOPO's non-renal organ acquisition costs. The commenter noted that not 
reconciling and settling IOPO non-renal organ acquisition costs could 
result in fewer non-renal organs being made available for transplant 
when an IOPO's total non-renal organ acquisition costs exceed the total 
revenue the IOPO receives for organs it provides to other OPOs or THs. 
In the FY 2022 IPPS/LTCH PPS final rule with comment period, we 
responded that we would consider this issue in future rulemaking (86 FR 
73479). While the inconsistency in reconciliation and settlement of 
renal and non-renal organ acquisition costs may compromise fiscal 
stability if costs consistently exceed revenue, we do not know the 
extent to which this inconsistency might also affect equity in organ 
procurement or patient access to transplants. We are committed to 
identifying and addressing Medicare payment inequities for organ 
acquisition costs in the transplant ecosystem.
    Another commenter on the FY 2022 IPPS/LTCH PPS proposed rule 
suggested that the contractor review, approve, and publish IOPO non-
renal SACs to provide needed oversight. We responded that we would 
consider our options for future rulemaking (86 FR 73479). We believe it 
is important that IOPOs continue their responsibility for establishing 
their non-renal SACs to maintain financial stability and control over 
their operating revenue and cash flow, which is based upon the SACs 
they bill (42 U.S.C. 273(b)); however, requiring reconciliation and 
settlement of IOPOs' non-renal organ acquisition costs would provide 
needed contractor review to ensure alignment with Medicare's reasonable 
cost principles while still encouraging IOPOs' fiscal responsibility.
    Our authority to reconcile and settle non-renal organ acquisition 
costs exists under section 1138(b) of the Act. Medicare payment for 
organ procurement costs may be made only if an OPO has been designated 
by the Secretary as the OPO for its service area (Sec.  486.301(a)(1)). 
An OPO must enter into an agreement with CMS in order for the organ 
procurement costs attributable to the OPO to be reimbursed under 
Medicare and Medicaid (Sec.  486.304(c)). Consequently, all OPOs 
wishing to receive Medicare and Medicaid reimbursement for the 
procurement of organs must have a signed agreement with CMS.\308\
---------------------------------------------------------------------------

    \308\ See form CMS 576-A, expires January 31, 2023; OMB No. 
0938-0512.
---------------------------------------------------------------------------

    For these reasons, we are considering a potential policy approach 
under which Medicare would reconcile and settle for its share of an 
IOPO's non-renal organ acquisition costs, in accordance with section 
1861(v) of the Act and Sec. Sec.  413.60 and 413.64(f). Under this 
potential policy approach, Medicare-certified IOPOs would submit a 
Medicare cost report for review, reconciliation, and settlement of non-
renal organ acquisition costs to determine Medicare's reasonable costs. 
This potential policy approach would mirror our current approach for 
determining Medicare's reimbursement of IOPOs' kidney acquisition 
costs. In addition, as part of this potential policy approach, we would 
require IOPOs to provide their non-renal SACs to the contractor, 
similar to how IOPOs are currently required to share their renal SACs 
with the contractor (see Sec.  413.420(d)(4)). This potential policy 
approach that we are considering would provide needed contractor 
oversight to protect the Medicare Trust Fund and the transplant 
ecosystem, and would ensure that non-renal organ acquisition costs are 
paid on a reasonable cost basis. Such an approach would promote fiscal 
responsibility for IOPOs, and would also create a more equitable, 
consistent process for billing and reimbursing organ acquisition costs 
for non-renal versus renal organs. We are requesting information on the 
alternative policy approach under consideration, and on the following 
questions:
    1. Does the current policy of not reconciling and settling IOPOs' 
non-renal organ acquisition charges lead to excessive non-renal SACs? 
If yes, please explain.
    2. How often and to what extent do IOPOs have non-renal organ 
acquisition costs that exceed the revenue they receive for those non-
renal organs procured? Are there particular situations or items or 
services where an IOPO's non-renal organ costs would exceed the non-
renal SAC amount received from the TH (or other IOPO) for the organ(s) 
procured?
    3. Does the current lack of reconciliation and settlement of non-
renal organ acquisition costs disincentivize IOPOs from procuring non-
renal organs? Does it create an inequity in organ procurement for renal 
vs. non-renal organs? Would a potential policy approach that included a 
requirement to reconcile and settle non-renal organ acquisition costs 
better support the transplant ecosystem?
    4. How would contractor review, reconciliation, and settlement of 
IOPOs' non-renal organ acquisition costs affect the transplant 
ecosystem? Would there be any effect on those waiting for a non-renal 
transplant or on transplant hospitals?
    5. Would CMS's adoption of a policy approach that required 
reconciliation and settlement of non-renal organ acquisition costs 
cause IOPOs to procure fewer organs, more organs, or about the same 
number of organs for transplant? If so, how and why?

[[Page 44774]]

XVIII. Rural Emergency Hospitals (REH): Payment Policies, Conditions of 
Participation, Provider Enrollment, Use of the Medicare Outpatient 
Observation Notice, and Physician Self-Referral Law Updates

A. Rural Emergency Hospitals (REH) Payment Policies

1. Introduction
    Americans who live in rural areas of the nation make up about 20 
percent of the United States (U.S.) population, and they often 
experience shorter life expectancy, higher all-cause mortality, higher 
rates of poverty, fewer local doctors, and greater distances to travel 
to see health care providers, compared to their urban and suburban 
counterparts.\309\ In addition, one in five rural residents identifies 
as Black, Hispanic, American Indian/Alaska Native (AI/AN), Asian 
American/Pacific Islander (AA/PI), or a combination of ethnic 
backgrounds. Compared to the non-Hispanic White rural population, these 
rural minority groups often and regularly experience several 
disadvantageous social determinants of health.\310\
---------------------------------------------------------------------------

    \309\ Rural Health Research Gateway. (2018). Rural Communities: 
Age, Income, and Health Status. https://www.ruralhealthresearch.org/assets/2200-8536/rural-communities-age-income-health-status-recap.pdf.
    \310\ Health Resources & Services Administration (2021). Rural 
Hospital Programs. https://www.hrsa.gov/rural-health/rural-hospitals/.
---------------------------------------------------------------------------

    The health care inequities that many rural Americans face raise 
serious concerns that the trend for poor health care access and worse 
outcomes overall in rural areas will continue unless the potential 
causes of such health care inequities are addressed.
    There have been growing concerns over the closures of rural 
hospitals and critical access hospitals (CAHs). Between 2010 and 
February 2022, 138 rural hospitals stopped providing inpatient 
services, 44 of which were Critical Access Hospitals. There were 75 
complete hospital closures where all services ended and 63 hospital 
conversions where inpatient services ended but some type of health care 
service continued.\311\ Rural hospitals report they continue to face 
the threat of closure because they lack sufficient patient volume to 
offer traditional hospital inpatient acute care services required for 
Medicare payment; however, the demand still exists for emergency and 
outpatient services in areas served by these hospitals. Rural hospitals 
are essential to providing health care to their communities and the 
closure of these hospitals limits access to care for the communities 
they once served and reduces employment opportunities, further 
impacting local economies. Barriers such as workforce shortages can 
impact health care access in rural communities and can lead to unmet 
health needs, delays in receiving appropriate care, inability to get 
preventive services, financial burdens, and preventable 
hospitalizations.\312\
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    \311\ UNC: Cecil G. Sheps Center for Health Services Research. 
(2022). Rural Hospital Closures. https://www.shepscenter.unc.edu/programs-projects/rural-health/rural-hospital-closures/.
    \312\ Healthy People 2020 (n.d.) Access to Health Services. 
https://www.healthypeople.gov/2020/topics-objectives/topic/Access-to-Health-Services.
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    The Consolidated Appropriations Act (CAA), 2021, was signed into 
law on December 27, 2020. In this legislation, Congress established a 
new rural Medicare provider type: Rural Emergency Hospitals (REHs). 
These providers will furnish emergency department and observation care, 
and other specified outpatient medical and health services, if elected 
by the REH, that do not exceed an annual per patient average of 24 
hours. Hospitals may convert to REHs if they were CAHs or rural 
hospitals with not more than 50 beds participating in Medicare as of 
the date of enactment of the CAA.
    REHs are expected to help address the barriers in access to health 
care, particularly emergency services and other outpatient services 
that result from rural hospital closures, and by doing so, may help 
address observed inequities in health care in rural areas.
    On January 20 and 21, 2021, President Biden issued three executive 
orders related to issues of health equity: Executive Order 13985 
``Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government;'' \313\ Executive Order 13988, 
``Preventing and Combating Discrimination on the Basis of Gender 
Identity or Sexual Orientation;'' \314\ and Executive Order 13995 
``Ensuring an Equitable Pandemic Response and Recovery.'' \315\
---------------------------------------------------------------------------

    \313\ The White House. (2021). Briefing Room: Executive Order on 
Advancing Racial Equity and Support for Underserved Communities 
Through the Federal Government. https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-advancing-racial-equity-andsupport-for-underserved-communities-through-thefederal-government/.
    \314\ The White House. (2021). Briefing Room: Executive Order on 
Preventing and Combating Discrimination on the Basis of Gender 
Identity or Sexual Orientation. https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-preventing-and-combatingdiscrimination-on-basis-of-gender-identity-orsexual-orientation/.
    \315\ The White House. (2021). Briefing Room: Executive Order on 
Ensuring an Equitable Pandemic Response and Recovery. https://www.whitehouse.gov/briefing-room/presidentialactions/2021/01/21/executive-order-ensuring-anequitable-pandemic-response-and-recovery/.
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    Executive Order 13985, ``Advancing Racial Equity and Support for 
Underserved Communities Through the Federal Government'' requires the 
Federal Government to pursue a comprehensive approach to advancing 
equity for all, including people of color and others who have been 
historically underserved, marginalized, and adversely affected by 
persistent poverty and inequality by recognizing and working to redress 
inequities in its policies and programs that serve as barriers to equal 
opportunity. In accordance with this executive order, persons who live 
in rural areas are identified as belonging to underserved communities 
that have been adversely affected by inequality.
    Executive Order 13988, ``Preventing and Combating Discrimination on 
the Basis of Gender Identity or Sexual Orientation'' requires the 
Federal Government to prevent and combat discrimination, including when 
accessing health care, on the basis of gender identity or sexual 
orientation, and to fully enforce Title VII of the Civil Rights Act. 
This executive order also requires the Federal Government to fully 
enforce other laws that prohibit discrimination on the basis of gender 
identity or sexual orientation, all of which impact all persons, 
including those in rural communities.
    In accordance with Executive Order 13995, ``Ensuring an Equitable 
Pandemic Response and Recovery,'' the Federal Government must identify 
and eliminate health and social inequities resulting in 
disproportionately higher rates of exposure, illness, and death related 
to COVID-19 and take swift action to prevent and remedy differences in 
COVID-19 care and outcomes within communities of color and other 
underserved populations. The executive order highlights the observed 
inequities in rural and Tribal communities, territories, and other 
geographically isolated communities. We believe the services furnished 
by REHs, could be one means of addressing some of the issues raised in 
these orders, particularly, barriers to access health care in rural 
communities.
    Consistent with these executive orders, in implementing the new REH 
provider type, we are committed to advancing equity for all, including 
racial and ethnic minorities, members of the lesbian, gay, bisexual, 
transgender, and queer/questioning (LGBTQ) community, people with 
limited English proficiency, people with disabilities,

[[Page 44775]]

rural populations, and people otherwise adversely affected by 
persistent poverty or inequality.
2. Statutory Authority and Establishment of Rural Emergency Hospitals 
as a Medicare Provider Type
    Section 125 of Division CC of the CAA was signed into law on 
December 27, 2020 and establishes REHs as a new Medicare provider type. 
Section 125 of the CAA added section 1861(kkk) to the Social Security 
Act (the Act), which sets forth the requirements for REHs. Section 
1861(kkk)(2) of the Act defines an REH as a facility that is enrolled 
in the Medicare program as an REH; does not provide any acute care 
inpatient services (other than post-hospital extended care services 
furnished in a distinct part unit licensed as a skilled nursing 
facility (SNF)); has a transfer agreement in effect with a level I or 
level II trauma center; meets certain licensure requirements; meets 
requirements of a staffed emergency department; meets staff training 
and certification requirements established by the Secretary of the 
Department of Health and Human Services (the Secretary); and meets 
certain conditions of participation (CoPs) applicable to hospital 
emergency departments and CAHs with respect to emergency services.
    Additionally, section 125(a)(1) of the CAA added section 
1861(kkk)(1) of the Act, which requires that REHs provide emergency 
department services and observation care and, at the election of the 
REH, other medical and health services furnished on an outpatient 
basis, as specified by the Secretary through rulemaking. The REH must 
also have a staffed emergency department 24 hours a day, 7 days a week, 
have a physician, nurse practitioner, clinical nurse specialist, or 
physician assistant available to furnish rural emergency hospital 
services in the facility 24 hours a day, and meet applicable staffing 
requirements similar to those for CAHs.\316\
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    \316\ Congress.gov. (2020). H.R.133--Consolidated Appropriations 
Act, 2021. https://www.congress.gov/116/bills/hr133/BILLS-116hr133enr.pdf.
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    In order to become an REH, section 1861(kkk)(3) of the Act requires 
that the facility, on the date of enactment of the CAA, 2021 (December 
27, 2020), was a CAH or a rural hospital with not more than 50 beds. 
For the purpose of REH designation, section 1861(kkk)(3)(B) defines 
rural hospital as a subsection (d) hospital (as defined in section 
1886(d)(1)(B) with not more than 50 beds located in a county (or 
equivalent unit of local government) in a rural area (as defined in 
section 1886(d)(2)(D) of the Act)), or treated as being located in a 
rural area pursuant to section 1886(d)(8)(E) of the Act. In addition, 
the REH must meet certain other requirements under section 1861(kkk) of 
the Act, including, but not limited to the following:
     An annual per patient average of 24 hours or less in the 
REH;
     Staff training and certification requirements established 
by the Secretary;
     Emergency services CoPs applicable to CAHs;
     Hospital emergency department CoPs determined applicable 
by the Secretary;
     The applicable SNF requirements (if the REH includes a 
distinct part SNF);
     A transfer agreement with a level I or level II trauma 
center; and
     Any other requirements the Secretary finds necessary in 
the interest of the health and safety of individuals who are furnished 
services by an REH.
    Starting on January 1, 2023, an REH that provides rural emergency 
hospital services (as defined in section 1861(kkk)(1) of the Act) will 
receive a Medicare payment for those services pursuant to section 
1834(x)(1) of the Act, as added by section 125 of the CAA, that is 
equal to the amount of payment that would otherwise apply under the 
Medicare Hospital Outpatient Prospective Payment System (OPPS) for 
covered outpatient department (OPD) services increased by 5 percent. 
The beneficiary co-payments for these services will be calculated the 
same way as under the OPPS for the service, excluding the 5 percent 
payment increase. In addition, section 1834(x)(2) of the Act provides 
an additional monthly facility payment to an REH.
    To participate in the Medicare program and receive payment for 
services furnished to Medicare beneficiaries, providers of services 
such as hospitals, home-health agencies, hospices, SNFs, and now REHs 
must enter into a provider agreement with CMS, in accordance with 
section 1866 of the Act. Medicaid providers, likewise, must enter into 
provider agreements with State Medicaid agencies to be eligible for 
participation in that program as described in section 1902(a)(27) of 
the Act. By entering into a provider agreement, a facility agrees that 
it will comply with the applicable requirements of the Medicare and 
Medicaid statutes and the regulations that the Secretary issues under 
the respective statute.
    Section 1861(kkk)(7) of the Act requires the Secretary to establish 
quality measurement reporting requirements for REHs, which may include 
claims-based outcome measures and/or patient experience surveys. An REH 
must submit quality measure data to the Secretary with respect to each 
year beginning in 2023 (or each year beginning on or after the date 
that is one year after one or more measures are first specified), and 
the Secretary is required to establish procedures to make the data 
available to the public on the CMS website. At this time, CMS is 
requesting information on certain quality measures and quality 
reporting requirements for REHs as discussed further in section XVI of 
this proposed rule.
    The Quality Improvement Organization requirements of the Act shall 
apply to REHs in the same manner that they apply to hospitals and CAHs, 
in accordance with section 1866(a) of the Act (as amended by section 
125(b)(1) of the CAA). In addition, the requirements established at 
section 1864 of the Act for hospitals and CAHs to be surveyed for 
compliance with the CoPs shall apply to REHs in the same manner as 
other hospitals and CAHs, in accordance with section 125(d)(2) of the 
CAA.
    In accordance with section 1864 of the Act, CMS uses State 
surveyors to determine whether a provider or supplier subject to 
certification qualifies for an agreement to participate in Medicare. 
Additionally, under section 1865 of the Act, some providers or 
suppliers subject to certification have the option to instead elect to 
be accredited by private accrediting organizations (AOs) whose Medicare 
accreditation programs have been approved by CMS as having standards 
and survey procedures that meet or exceed all applicable Medicare 
requirements. The survey process for Medicare and Medicaid 
participating providers and suppliers provides an opportunity for these 
providers and suppliers to demonstrate compliance with all of the 
applicable CoPs, conditions for coverage (CfCs) or requirements. The 
methods used by CMS to determine compliance with the regulations 
include surveys conducted by a State survey agency, surveys conducted 
by AOs that have deeming authority for Medicare providers and 
suppliers, and self-attestation. CMS would require REHs participating 
in Medicare to demonstrate and maintain compliance with the provisions 
included in the CY 2023 OPPS final rule with comment period.

[[Page 44776]]

3. Summary of Comments by Interested Parties in Response to REH Request 
for Information
    In preparation for developing these proposed standards and to gain 
a clear understanding of the challenges faced by facilities providing 
health care services in rural communities, we published a Request for 
Information (RFI) on REHs in the proposed rule, ``Medicare Program: 
Hospital Outpatient Prospective Payment and Ambulatory Surgical Center 
Payment Systems and Quality Reporting Programs; Price Transparency of 
Hospital Standard Charges; Radiation Oncology Model; Request for 
Information on Rural Emergency Hospitals'' (86 FR 42018) on August 4, 
2021. CMS sought public input on a broad range of issues to inform our 
policymaking in establishing this new provider type. The RFI solicited 
public input on the concerns of rural providers, including in the areas 
of health and safety standards, health equity, payment policies, 
quality measures and quality reporting, and additional considerations 
and unintended consequences that should be considered during the 
development of standards for REHs.
    Commenters on the RFI generally noted that CMS should take into 
consideration the challenges associated with the provision of health 
care services in rural communities. Some commenters noted that, while 
Congress did not specify the exact steps that CMS should take to 
calculate the annual facility payment, CMS should do so in a manner 
that maximizes potential payment to REHs to ensure these hospitals can 
continue to operate. Other commenters cautioned CMS against calculating 
the monthly facility payment in a way that leads to excessive payment. 
Commenters also encouraged CMS to set forth the details of the payment 
calculation in rulemaking, so that interested parties could replicate 
the calculation. With regard to the services provided by REHs, 
commenters recommended that REHs should provide maternal health, 
behavioral/mental health services, and telehealth services to further 
support the communities that they will serve. Commenters recommended 
that CMS pay for all REH services at the OPPS rate plus 5 percent. A 
few commenters also suggested that CMS should pay for all services 
furnished by an REH, including those that are not designated as REH 
services, at the applicable rate plus 5 percent. With regard to health 
equity, several interested parties commented that REHs could have 
significant value for underserved, rural populations by maintaining 
local access to care, reducing travel times for care, and serving as 
leaders for community health improvement efforts including efforts to 
address the social determinants of health. We note that CMS is 
committed to reducing inequities in rural communities and we are 
considering the best approach to address health equity in the standards 
for all Medicare and Medicaid participating providers and suppliers, 
including REHs.
    We have reviewed all comments from interested parties and have 
taken them into consideration while drafting this proposed rule. We 
appreciate the interested parties' input and responses to our outreach 
efforts thus far.
    During the development of the policies to implement this new 
provider type, we reviewed the public comments received on the REH RFI, 
and held public listening sessions with national stakeholder 
organizations as well as tribal communities. We also gave presentations 
at CMS' hospital, rural health, and SNF open door forums and sought 
public feedback.
4. Payment for Services Performed by REHs
a. Covered Outpatient Department (OPD) Services Performed by REHs
(1) Defining ``REH Services''
    Section 1861(kkk)(1)(A) defines the term ``REH services'' as 
emergency department and observation services as well as, at the 
election of the REH, other medical and health services furnished on an 
outpatient basis as specified by the Secretary through rulemaking.
    We considered how to determine what other covered outpatient 
medical and health services should be considered ``REH services'' for 
purposes of payment under section 1834(x)(1). Section 1834(x)(1) 
provides that the amount of payment for REH services shall be equal to 
the amount of payment that would otherwise apply under section 1833(t) 
of the Act for covered OPD services (as defined in section 
1833(t)(1)(B) (other than clause (ii) of such section, which are 
inpatient hospital services paid under the OPPS)), increased by 5 
percent. We interpret this statutory language to mean that the scope of 
covered OPD services as defined in 1833(t)(1)(B) of the Act (excluding 
1833(t)(1)(B)(ii)) represents the outer limit of services that CMS may 
specify as ``REH services.'' 1834(x)(1) frames the services that may 
receive the 5 percent increase provided under the statute for ``REH 
services'' exclusively in terms of covered OPD services, which we 
believe precludes including any services that are not ``covered OPD 
services'' in this definition. Although we interpret 1834(x)(1) to 
limit the potential scope of REH services to what is included within 
the definition of ``covered OPD services,'' we are not suggesting that 
REHs would be unable to furnish, and receive payment for, other 
services. Rather, we are stating that only services that are covered 
OPD services can be paid as specified under Section 1834(x)(1). For 
further discussion of CMS's proposals pertaining to payment for other 
services performed by REHs, please see discussion in the below section 
titled ``Services performed by REHs that are not specified REH 
services.''
    Within the universe of covered OPD services, in its broadest 
interpretation, ``REH services'' could be defined to encompass all 
services included in the definition of ``covered OPD services,'' as 
provided in section 1833(t)(1)(B) of the Act, when furnished by an REH, 
with the exception of services described in clause (ii) of such 
section, which are hospital inpatient services, as REHs are precluded 
by section 1861(kkk)(2)(B) of the Act from providing acute inpatient 
services. Alternatively, CMS could define ``REH services'' to include 
only a smaller subset of services. For instance, we considered limiting 
``REH services'' to services that are emergent in nature, such as those 
services described by the specific HCPCS codes describing emergency 
department visits and observation services.
    We have some concerns, however, about narrowly defining the covered 
OPD services for which REHs may receive payment as REH services to only 
services that are emergent in nature. For one, if CMS were to limit the 
definition of REH services to strictly emergency services, this might 
cause REHs to cease to furnish other covered OPD services previously 
provided by the facility upon conversion of the facility to an REH, 
which could limit access to such services for some beneficiaries. This 
would seem antithetical to the purpose of section 125 of the CAA, which 
was created with the goal of ensuring greater access to outpatient 
services in rural areas. Further, a narrower definition could exclude 
services that may be desirable for REHs to provide in order to expand 
or maintain access to outpatient services in rural areas, including 
behavioral health, routine imaging, or clinic visits.
    In light of our concerns with narrowly defining ``REH services'' 
and our interest in allowing maximum flexibility for REHs to tailor the 
services provided to the needs of their individual communities, for 
purposes of payment, we are proposing to define ``REH

[[Page 44777]]

services,'' at 42 CFR 419.91, as all covered outpatient department 
services, as defined in section 1833(t)(1)(B) of the Act, excluding 
services described in section 1833(t)(1)(B)(ii), furnished by an REH 
that would be paid under the OPPS when provided in a hospital paid 
under the OPPS for outpatient services, provided that the REH meets the 
various applicable REH CoPs. In other words, all services that are paid 
under the OPPS when furnished in an OPPS hospital, with the exception 
of acute inpatient services, would be REH services when furnished in a 
REH. We note that this definition of REH services excludes services 
described in section 1833(t)(1)(B)(ii) of the Act, which cannot be 
considered REH services because they are inpatient services, which REHs 
are not permitted to furnish pursuant to section 1861(kkk)(2)(B) of the 
Act.
    Additionally, we are soliciting comments on whether CMS should 
adopt a narrower definition of REH services than the definition we are 
proposing, and if so, how commenters believe we should define these 
services and what methodology commenters suggest CMS use to determine 
whether a service meets this definition.
(2) Payment for REH Services
    Section 1834(x)(1) of the Act states that payment for REH services 
``. . . shall be equal to the amount of payment that would otherwise 
apply under section 1833(t) for covered OPD services (as defined in 
section 1833(t)(1)(B) (other than clause (ii) of such section)), 
increased by 5 percent to reflect the higher costs incurred by such 
hospitals, and shall include the application of any copayment amount 
determined under section 1833(t)(8) as if such increase had not 
occurred.'' As a result, we propose that payments for REH services 
would be calculated using existing OPPS payment policies and rules. The 
only differences between the payment for a covered OPD service 
furnished by an OPPS provider and the payment for an REH service 
furnished by an REH provider would be that the service payment to the 
REH would be equal to the applicable OPPS payment for the same service 
plus an additional 5 percent. Accordingly, we propose to codify, at 42 
CFR 419.92(a)(1), that the payment rate for an REH service would be 
calculated using the OPPS prospective payment rate for the equivalent 
covered OPD service increased by 5 percent.
    Because we are proposing to utilize OPPS payment policies and rules 
to effectuate payment rates for REH services equivalent to the OPPS 
payment rates plus five percent, we believe it would be most efficient 
from a claims processing perspective for the REHs to utilize the OPPS 
claims processing system to process REH payments. We propose updating 
the OPPS claims processing logic to include an REH-specific payment 
flag, which an REH provider would utilize to indicate that the provider 
is an REH and should not be paid at the OPPS payment rates, but should 
instead be paid at the REH payment rates. Claims from REH providers for 
REH services would be processed within the OPPS claims processing 
system. However, when a REH submits a facility claim with the REH-
specific payment flag, this payment flag would trigger payment for REH 
services on the claim at the REH services payment rate, which is the 
OPPS payment rate plus 5 percent.
    We also propose, consistent with the requirement in section 
1834(x)(1) of the Act, that the copayment amount for a REH service 
would be determined as if the 5 percent payment increase had not 
occurred. That is, the additional 5 percent payment for REH services, 
above the amount that would be paid for covered OPD services, would not 
be subject to a copayment. Therefore, we propose to codify in the REH 
payment regulation, at 42 CFR 419.92(a)(2), that the beneficiary 
copayment amounts for REH service would be the amounts determined under 
the OPPS for the equivalent covered OPD service, pursuant to section 
1833(t)(8) of the Act, and would exclude the 5 percent payment increase 
that applies to the REH service payment.
    Finally, we note that section 1834(x)(5)(A) of the Act states that 
``. . . except as provided in subparagraph (B), payments under this 
subsection shall be made from the Federal Supplementary Medical 
Insurance Trust Fund under section 1841.'' The statute makes clear that 
payments for services rendered by REHs receive payment from the Federal 
Supplementary Medical Insurance Trust Fund under section 1841. We note, 
however, that payments for REH services would have no impact on OPPS 
budget neutrality because REH services are not covered OPD services 
under section 1833(t) of the Act to which the OPPS budget neutrality 
requirements apply. This also means that REH claims would not be used 
for OPPS rate setting purposes. Consistent with section 1834(x)(5)(A) 
of the Act, REH service payments will be paid from the Federal 
Supplementary Medical Insurance Trust Fund under section 1841 of the 
Act.
b. Services Performed by REHs That Are Not Specified REH Services
    Section 1834(x)(1) specifically addresses the payment rate that 
applies for ``REH services,'' which, as discussed above, include at 
most the full range of covered OPD services for which payment can be 
made under the OPPS. Likewise, as discussed further below, sections 
1834(x)(3) and 1834(x)(4) of the Act specifically address payment for 
ambulance services and post-hospital extended care services that are 
furnished by an REH. However, section 125 of the CAA is silent on how 
CMS should pay for other services furnished by an REH, such as services 
paid under the Clinical Laboratory Fee Schedule (CLFS) or outpatient 
therapy services, that may be provided on an outpatient basis by 
hospital outpatient departments, but that are not covered OPD services, 
as defined under section 1833(t)(1)(B) of the Act, and thus, pursuant 
to the limiting language in 1834(x)(1) of the Act, would not be payable 
as REH services when furnished by an REH.
    In order for a REH to fulfill the statutory requirements set forth 
in section 1861(kkk)(2) of the Act, as well as the proposed CoPs for 
REHs described in the proposed rule ``Medicare and Medicaid Programs; 
Conditions of Participation (CoPs) for Rural Emergency Hospital (REH) 
and Critical Access Hospital CoP Updates,'' which appeared in the 
Federal Register on July 6, 2022 (87 FR 40350), REHs must be capable of 
providing certain types of outpatient services that are not covered OPD 
services, such as basic laboratory services and certain diagnostic 
services. Additionally, the proposed REH CoPs state that the REH may 
provide outpatient and medical health diagnostic and therapeutic items 
and services that are commonly furnished in a physician's office or at 
another entry point into the health care delivery system that include, 
but are not limited to, radiology, laboratory, outpatient 
rehabilitation, surgical, maternal health, and behavioral health 
services.
    As discussed above, section 1834(x)(1) of the Act provides that the 
amount CMS shall pay for REH services furnished by an REH shall be the 
same amount that would otherwise apply under section 1833(t) of the Act 
for covered OPD services plus five percent. However, section 125 of the 
CAA does not indicate that the additional 5 percent payment described 
in 1834(x)(1) of the Act would apply to any services other than those 
within the definition of ``REH services.'' While some of the

[[Page 44778]]

services described by the proposed REH CoPs would meet the definition 
of an REH service because they are also covered OPD services under 
section 1833(t)(1)(B) of the Act and would therefore be eligible for 
the 5 percent additional payment specified in 1834(x)(1) of the Act, 
others--such as laboratory services paid off of the CLFS, and 
outpatient rehabilitation services--are outside the scope of covered 
OPD services and therefore, for the reasons previously discussed, could 
not meet the definition of a REH service. However, CMS believes that it 
is consistent with the statutory requirements for rural emergency 
hospitals set forth in section 1861(kkk)(2) of the Act for these 
services to be paid when they are furnished in an REH. As a result, we 
are proposing that any outpatient service furnished by an REH 
consistent with the statutory requirements governing this provider type 
and the proposed REH CoPs, that does not meet the proposed definition 
of REH services, would be paid at the same rate the service would be 
paid if performed in a hospital outpatient department and paid under a 
fee schedule other than the OPPS, provided the requirements for payment 
under that system are met.
    As noted above, section 1834(x)(3) of the Act states that ``. . . 
for provisions relating to payment for ambulance services furnished by 
an entity owned and operated by a rural emergency hospital, see section 
1834(l).'' Section 1834(l) of the Act establishes the Medicare 
ambulance fee schedule. Therefore, consistent with section 1834(x)(3) 
of the Act, we propose to codify, at 42 CFR 419.92(c)(1), that an 
entity that is owned and operated by an REH that provides ambulance 
services will receive payment for such services under the ambulance fee 
schedule as described in section 1834(l) of the Act and, as described 
in section VIII.A.7.b of this proposed rule, to revise Sec.  410.40(f) 
to include an REH as a covered origin and destination for ambulance 
transport.
    Section 1861(kkk)(6)(A) of the Act provides discretion for REHs to 
include a unit that is a distinct part of the facility licensed as a 
skilled nursing facility to furnish post-hospital extended care 
services. Further, section 1834(x)(4) of the Act states that ``. . . 
for provisions relating to payment for post-hospital extended care 
services furnished by a rural emergency hospital that has a unit that 
is a distinct part licensed as a skilled nursing facility, see section 
1888(e).'' Section 1888(e) of the Act establishes the skilled nursing 
facility prospective payment system. Consistent with section 
1834(x)(4), we therefore propose to codify, at 42 CFR 419.92(c)(2), 
that post-hospital extended care services provided by an REH in such a 
unit receive payment through the skilled nursing facility prospective 
payment system as described at section 1888(e) of the Act.
c. Payment for an Off-Campus Provider-Based Department of an REH
    As discussed above, section 1834(x)(1) of the Act sets forth the 
amounts that shall be paid for REH services in terms of amounts that 
would be otherwise apply for ``covered OPD services'' under 1833(t). 
Section 1833(t)(1)(B)(v) of the Act, which was added by section 603 of 
the Bipartisan Budget Act of 2015 (Pub. L. 114-74), enacted on November 
2, 2015, (``BBA''), specifically excludes from the definition of 
``covered OPD services'' applicable items and services furnished by an 
off-campus outpatient department of a provider as defined by sections 
1833(t)(21)(A) and (B) of the Act. In light of the exclusion contained 
in 1833(t)(1)(B)(v) of the Act, CMS has carefully considered how an REH 
will be paid for items and services furnished by in an off-campus 
outpatient department of the REH. Section 1861(kkk)(8) of the Act 
appears to speak to this issue, stating that nothing in that provision, 
section 1833(a)(10), or section 1834(x) shall affect the application of 
paragraph (1)(B)(v) of section 1833(t), relating to applicable items 
and services (as defined by 1833(t)(21)(A)) that are furnished by an 
off-campus outpatient department of a provider (as defined by 
1833(t)(21)(B)). For the reasons discussed in this section, CMS is 
proposing to interpret this language as stipulating that the new 
provisions governing payments for services furnished by REHs are not 
intended to change the existing scope and applicability of the section 
603 amendments to section 1833(t) of the Act, and that, as a result, 
the section 603 amendments would not apply to the determination of the 
payment rates for services furnished by an off-campus outpatient 
department of a REH.
    Section 603 of the BBA amended section 1833(t)(1)(B) of the Act by 
adding a new clause (v), which excludes from the definition of 
``covered OPD services'' applicable items and services (defined in 
paragraph (21)(A) of the section) that are furnished on or after 
January 1, 2017, by an off-campus outpatient department of a provider, 
as defined in paragraph (21)(B) of the section. Section 603 also added 
a new paragraph (21) to section 1833(t) of the Act, which defines the 
terms ``applicable items and services'' and ``off-campus outpatient 
department of a provider,'' and requires the Secretary to make payments 
for such applicable items and services furnished by an off-campus 
outpatient department of a provider under an applicable payment system 
(other than the OPPS). In defining the term ``off-campus outpatient 
department of a provider,'' section 1833(t)(21)(B)(i) of the Act 
specifies that the term means a department of a provider (as defined at 
42 CFR 413.65(a)(2) as that regulation was in effect on November 2, 
2015) that is not located on the campus (as defined in Sec.  
413.65(a)(2)) of the provider, or within the distance (as described in 
the definition of campus) from a remote location of a hospital facility 
(as defined in section Sec.  413.65(a)(2)). We note that, in order to 
be considered part of a hospital, an off-campus department of a 
hospital must meet the provider-based criteria established under 42 CFR 
413.65. Accordingly, in this proposed rule, we refer to an ``off-campus 
outpatient department of a provider,'' which is the term used in 
section 603, as an ``off-campus outpatient provider-based department'' 
or an ``off-campus PBD.''
    Sections 1833(t)(21)(B)(ii) through (vi) of the Act except from the 
definition of ``off-campus outpatient department of a provider,'' for 
purposes of paragraphs (1)(B)(v) and (21)(B) of the section, an off-
campus PBD that was billing under section 1833(t) of the Act with 
respect to covered OPD services furnished prior to November 2, 2015, as 
well as off-campus PBDs that meet the ``mid build'' requirement 
described in section 1833(t)(21)(B)(v) of the Act and the departments 
of certain cancer hospitals. Likewise, the department of a provider 
located on the campus of such provider or within the distance 
(described in the definition of campus at Sec.  413.65(a)(2)) from a 
remote location of a hospital facility (as defined in Sec.  
413.65(a)(2)), is also excepted from the definition of ``off-campus 
outpatient department of a provider'' pursuant to section 
1833(t)(21)(B)(i). The items and services furnished on or after January 
1, 2017 (or during 2018 or a subsequent year for off-campus PBDs that 
qualify for the mid-build exception), by the various types of excepted 
off-campus PBDs described in 1833(t)(21)(B) continue to be paid under 
the OPPS. In addition, we note that in defining ``applicable items and 
services,'' section 1833(t)(21)(A) of the Act specifically excludes 
items and services furnished by a dedicated emergency department as 
defined at 42 CFR 489.24(b).

[[Page 44779]]

    In the CY 2017 OPPS/ASC final rule with comment period (81 FR 79699 
through 79720), we established a number of policies to implement the 
section 603 amendments. Broadly, we: (1) defined applicable items and 
services in accordance with section 1833(t)(21)(A) of the Act for 
purposes of determining whether such items and services are covered OPD 
services under section 1833(t)(1)(B)(v) of the Act or whether payment 
for such items and services will instead be made under the applicable 
payment system designated under section 1833(t)(21)(C) of the Act; (2) 
defined off-campus PBD for purposes of sections 1833(t)(1)(B)(v) and 
(t)(21) of the Act; and (3) established policies for payment for 
applicable items and services furnished by an off-campus PBD 
(nonexcepted items and services) under section 1833(t)(21)(C) of the 
Act. We specified the Medicare Physician Fee Schedule (PFS) as the 
applicable payment system for most nonexcepted items and services 
furnished by nonexcepted off-campus PBDs. Nonexcepted items and 
services furnished by nonexcepted off-campus PBDs are generally paid 
under the PFS at the applicable OPPS payment rate adjusted by the PFS 
Relativity Adjuster of 40 percent (82 FR 53030).
    Section 125(a)(1) of the CAA added the following language, at 
section 1861(kkk)(8) of the Act, regarding the application of the 
section 603 amendments to REHs:
    ``(8) CLARIFICATION REGARDING APPLICATION OF PROVISIONS RELATING TO 
OFF-CAMPUS OUTPATIENT DEPARTMENT OF A PROVIDER.--Nothing in this 
subsection, section 1833(a)(10), or section 1834(x) shall affect the 
application of paragraph (1)(B)(v) of section 1833(t), relating to 
applicable items and services (as defined in subparagraph (A) of 
paragraph (21) of such section) that are furnished by an off-campus 
outpatient department of a provider (as defined in subparagraph (B) of 
such paragraph).''
    While we are proposing to define REH services as the covered OPD 
services furnished by an REH, REHs are not paid under the OPPS; we do 
not interpret the language in section 1861(kkk)(8) to indicate that the 
section 603 amendments to section 1833(t) should apply to off-campus 
PBDs of a REH. Rather, we believe section 1861(kkk)(8) can reasonably 
be interpreted as demonstrating an intent that the creation of the REH 
provider type would not change the existing scope and applicability of 
the section 603 amendments, such that the exclusion of items and 
services furnished by non-excepted off-campus PBDs from the definition 
of covered outpatient department services under the section 603 
amendments continues to apply only to items and services furnished by 
the non-excepted off-campus PBDs of subsection (d) hospitals paid under 
the OPPS and does not apply to items and services furnished by an off-
campus PBD of an REH, because REHs are a different provider type and 
are not paid under the OPPS.
    We note that interpreting section 1861(kkk)(8) of the Act to 
instead mean that the section 603 amendments should apply to items and 
services furnished by off-campus PBDs of REHs appears to be contrary to 
the Congressional intent for creating this new provider type, as this 
interpretation would potentially disincentivize some otherwise eligible 
facilities from choosing to convert to REHs. Specifically, we note that 
section 603 does not apply to items and services furnished by the off-
campus PBDs of CAHs. However, if the section 603 amendments applied to 
the off-campus PBDs of a former CAH that becomes an REH, these off-
campus PBDs would appear to meet the statutory definition of ``off-
campus outpatient department of a provider,'' and items and services 
furnished by these entities would be excluded from the definition of 
``covered OPD services'' and paid at the alternative applicable payment 
system as provided under section 1833(t)(21)(C). Thus, if a CAH becomes 
an REH and as a result becomes subject to the section 603 amendments, 
it would experience a significant decrease in payment for items and 
services furnished by its off-campus PBDs, relative to the amount paid 
for such services when the entity was a CAH (where it is generally paid 
at 101 percent of reasonable cost). This would create a financial 
disincentive for CAHs to convert to REHs and would seem to be contrary 
to the Congressional intent for creating this new provider type.
    We propose to codify in the REH payment regulation, at 42 CFR 
419.93(a), that items and services furnished by off-campus PBDs of REHs 
are not applicable items and services under sections 1833(t)(1)(B)(v) 
or (t)(21) of the Act, and thus that items and services furnished by 
these off-campus PBDs that otherwise meet the definition of ``REH 
services'' will receive the REH services payment amount of the OPPS 
payment plus 5 percent, as provided in section 1834(x)(1) of the Act 
and described in the proposed regulation text at 42 CFR 419.92(a)(1). 
Likewise, items and services furnished by the off-campus PBD of a REH 
that do not meet the definition of ``REH services'' would be paid under 
the payment system applicable to that item or service, provided the 
requirements for payment under the relevant system are met, as 
described in the proposed regulation text at 42 CFR 419.92(c).
    We seek comment on alternative payment approaches for items and 
services furnished by the off-campus PBDs of REHs that may be supported 
by the REH statute, including section 1861(kkk)(8). For example, CMS 
seeks comment on whether application of the section 603 amendments to 
an off-campus PBD of an REH should depend on whether that provision 
applied to the entity before it converted to an REH. Under that 
framework, if a CAH converts to a REH, because section 1833(t)(1)(B)(v) 
did not apply to the CAH before converting, REH services furnished by 
any existing off-campus PBDs of the CAH would be paid at 105 percent of 
the OPPS rate, rather than at the PFS-equivalent rate required by 
section 1833(t)(1)(B)(v) and (t)(21). However, because sections 
1833(t)(1)(B)(v) and (t)(21) would have applied to any non-excepted 
off-campus PBDs of small rural hospital paid under the OPPS before that 
entity converted to an REH, any existing non-excepted off-campus PBDs 
of the small rural hospital would continue to be considered non-
excepted off-campus PBDs and would continue to receive the PFS-
equivalent rate under section 1833(t)(21)(C). Under this framework, any 
new off-campus PBDs created by the REH would be subject to the section 
603 amendments. We are seeking comment on our proposed approach for 
paying for items and services furnished by the off-campus PBDs of REHs, 
as well as any alternative approaches to this issue that interested 
parties may have.
5. Monthly REH Facility Payment
a. Overview of the Monthly REH Facility Payment
    Section 1834(x)(2) of the Act establishes an additional facility 
payment that is paid monthly to an REH. Section 1834(x)(5)(B) specifies 
that this monthly facility payment shall be made from the Federal 
Hospital Insurance Trust Fund under section 1817. Sections 
1834(x)(2)(B) and 1834(x)(2)(C) of the Act require that, for 2023, the 
monthly payment is determined by first calculating the total amount 
that CMS determines was paid to all CAHs under Title 18 of the Act in 
2019 minus the estimated total amount that would have been paid under 
Title 18 to CAHs in 2019 if payment were made for inpatient hospital, 
outpatient hospital, and skilled nursing facility

[[Page 44780]]

services under the applicable prospective payment systems for such 
services during 2019. The difference is divided by the number of CAHs 
enrolled in Medicare in 2019 to calculate the annual amount of this 
additional facility payment per individual REH for 2023. The annual 
payment amount is then divided by 12 to calculate the monthly facility 
payment that each REH will receive. For 2024 and subsequent years, the 
monthly facility payment will be the amount of the monthly facility 
payment for the previous year increased by the hospital market basket 
percentage increase as described under section 1886(b)(3)(B)(iii) of 
the Act.
    We interpret the references to the year 2019 in sections 
1834(x)(2)(C)(i) and 1834(x)(2)(C)(ii) of the Act to mean calendar year 
2019 (CY 2019) rather than fiscal year 2019 (FY 2019) because, in the 
absence of language implicitly or explicitly denoting the year as 
fiscal, we believe calendar year is the most logical reading. The REH 
payment system is based on the OPPS, which sets its payment rates and 
rules on a CY schedule. Additionally, section 1834(x)(1) of the Act 
states that payments for REH services will begin on January 1, 2023, 
which is the first day of the CY. Accordingly, we propose to codify the 
calculation of the REH monthly facility payment, under 42 CFR 
419.92(b)(1), to specifically refer to the amounts that were and would 
have been paid to CAHs in calendar year 2019. Under this proposal, we 
would apply the CY schedule even when the sections refer to the 
inpatient hospital prospective payment system or the skilled nursing 
facility prospective payment system where substantial policy changes 
are implemented on a fiscal year schedule. Therefore, when we calculate 
the total amount that would have been paid to CAHs if inpatient 
hospital services, outpatient hospital services, and skilled nursing 
facility services were paid under their respective prospective payment 
systems, we would use claims data from the last nine months of FY 2019 
and the first three months of FY 2020 to calculate payment data for CY 
2019 for both inpatient hospital services and skilled nursing facility 
services and claims data from CY 2019 for outpatient hospital services.
    When determining ``the total amount that . . . was paid under this 
title to all critical access hospitals,'' as described in section 
1834(x)(2)(C)(i)(I) of the Act, we propose to include both amounts paid 
to CAHs from the Medicare program and from beneficiary copayments. 
Likewise, we propose to include both projected payments from the 
Medicare program and projected beneficiary copayments when determining 
the estimated total amount that would have been paid to CAHs had they 
been paid on a prospective basis, as described in section 
1834(x)(2)(C)(i)(II). By including both Medicare trust fund payments 
and beneficiary copayments, we believe that the resulting calculations 
will reflect the actual payments CAHs received for services provided in 
CY 2019 and ensure that the full amount of additional payments made to 
CAHs are reflected in the determination of the monthly REH facility 
payment. Because CAHs are generally paid at 101 percent of reasonable 
cost, a 2014 report found that in 2012 beneficiary copayments consisted 
of around 47 percent of the total Medicare-related spending for 
CAHs.\317\
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    \317\ Office of Inspector General, Department of Health and 
Human Services. 2014. Medicare beneficiaries paid nearly half of the 
costs for outpatient services at critical access hospitals. OEI-05-
12-00085. Washington, DC: OIG.
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    Excluding around 47 percent of the payment CAHs received in 2019 
for Medicare services from the REH monthly facility payment calculation 
would generate a monthly facility payment that would cover a 
substantially smaller share of the costs REHs face. We believe that if 
the calculation of the monthly facility payment does not reflect 
payments from beneficiaries, CAHs and small rural hospitals could be 
discouraged from converting into REHs because the monthly facility 
payment would be too small.
    Using our calculations, which we will discuss in more detail in 
sections XVIII.A.5.b and XVIII.A.5.c of this proposed rule, we have 
determined that the estimated prospective payment for CAHs in 2019 is 
58.2 percent of total CAH spending in 2019 when copayments are included 
for both total CAH spending and the estimated prospective payment for 
CAHs. The aggregate REH monthly facility payment would be 72 percent of 
the estimated prospective payment for CAHs in 2019. The combination of 
the estimated prospective payment for CAHs and the aggregate REH 
monthly facility payment where copayments are included in the 
calculation for an REH would be close to the amount that REH would have 
received from Medicare if it had decided to stay as a CAH and not 
convert to an REH. Therefore, it less likely that a CAH would lose 
revenue if it converted to an REH in the future, which may encourage a 
CAH to convert to an REH. If copayments are removed from both the total 
amount of CAH spending in 2019 and the estimated prospective payment 
for CAHs in 2019, the aggregate monthly facility payment for all 
providers only would be 11.1 percent of the estimated prospective 
payment for CAHs in 2019 where the estimated prospective payment amount 
includes copayments. That means a CAH converting to an REH would face a 
substantial reduction in Medicare payment if it converted to an REH. 
Please review the detailed calculations below:

Step 1: Total estimated CAH spending in CY 2019 with copayments: 
$12,083,666,636
    Total estimated prospective payment for CAHs in CY 2019 with 
copayments: $7,033,248,418
    Difference: $12,083,666,636-$7,033,248,418 = $5,050,418,218
    Aggregate REH monthly facility payment with copayments: 
$5,050,418,218
    Share of the aggregate REH monthly facility payment with copayments 
of the total estimated prospective payment for CAHs in CY 2019 with 
copayments: $5,050,418,218/$7,033,248,418 = 72 percent

Step 2: Total estimated CAH spending in CY 2019 removing copayments: 
$12,083,666,636 x 0.53 = $6,404,343,317
    Total estimated prospective payment for CAHs in CY 2019 removing 
copayments: $5,626,598,734
    Difference: $6,404,343,317-$5,626,598,734 = $777,744,583
    Aggregate REH monthly facility payment without copayments: 
$777,744,583
    Total estimated prospective payment for CAHs in CY 2019 with 
copayments: $7,033,248,418
    Share of the aggregate REH monthly facility payment without 
copayments of the total estimated prospective payment for CAHs in CY 
2019 with copayments: $777,744,583/$7,033,248,418 = 11.1 percent

    We believe that including both Medicare trust fund payments and 
beneficiary copayments in the calculation of the monthly facility 
payment reflects the intent of the statute to provide incentives for 
CAHs and small rural hospitals that might otherwise close to convert to 
REHs and continue to provide outpatient hospital care in rural 
communities. We propose to codify including payments from the Medicare 
program and beneficiary copayments for CAHs to calculate the monthly 
facility payment under 42 CFR 419.92(b)(1)(i) and (ii).

[[Page 44781]]

    Finally, section 1834(x)(2)(D) of the Act states that ``[a] rural 
emergency hospital receiving the additional facility payment under this 
paragraph shall maintain detailed information as specified by the 
Secretary as to how the facility has used the additional facility 
payments. Such information shall be made available to the Secretary 
upon request.'' Accordingly, we are proposing to codify this reporting 
requirement, under 42 CFR 419.92(b)(3), to state that an REH receiving 
the additional monthly facility payment must maintain detailed 
information as to how the facility has used the monthly facility 
payments and must make this information available upon request. We 
believe that this requirement can be met using existing cost reporting 
requirements for outpatient hospital facilities that would include 
REHs. The cost reports track spending on outpatient hospital services 
as a part of overall provider spending. This information will show if a 
sufficient share of revenue to the REH, which includes the monthly 
facility payment, is being directed to outpatient care. For CY 2023, we 
therefore do not propose to establish any new reporting or data 
collection requirements for REHs related to their use of the REH 
monthly facility payments. However, we will monitor this issue in CY 
2023 to see if we may need to propose new reporting or data collection 
requirements for REHs in future rulemaking.
b. Proposed Methodology To Estimate Medicare CAH Spending in CY 2019
    Section 1834(x)(2)(C)(i)(I) requires that CMS use ``the total 
amount that the Secretary determines was paid under this title to all 
critical access hospitals in 2019'' as part of the calculation used to 
determine the monthly facility payment that each REH will receive in 
2023. Although the statute provides that this amount shall be an amount 
determined by the Secretary, the statute is silent regarding what data 
source the Secretary should use in making such determination. We 
considered whether CAH claims or cost reports would be the most 
appropriate data source from which to determine the payments made to 
CAHs in 2019.
    Because CAHs are generally paid at 101 percent of their reasonable 
costs in furnishing services to Medicare beneficiaries and receive an 
annual cost settlement for all services covered by Medicare, we did not 
initially believe that CAH claims would reflect all payments that 
Medicare may have made to CAHs under Title 18 of the Act. We were most 
concerned about modelling the annual cost settlement using CAH claims 
data, because the cost settlement is an accounting action that is not 
linked to payments reported on individual claims. It was not clear how 
we would identify the payment or recoupment performed for the cost 
settlement. By contrast, hospital cost reports track not only payments 
for claims when they are first submitted to Medicare but also track the 
annual cost settlements made with CAHs. However, some hospital cost 
report data can take up to 3 years to be received and processed which 
raises concerns whether the cost report data for CY 2019 is fully 
complete. We compared our calculation of Medicare CAH spending in CY 
2019 using CAH claims data to our calculation of Medicare CAH spending 
in CY 2019 using CAH cost report data.
    We found that CAH claims data reported approximately $450 million 
more in CAH Medicare spending ($12,083,666,636) compared to CAH cost 
report data ($11,631,762,706). Also, the CAH claims data identified 42 
more CAHs than the CAH hospital cost report data. Both findings 
indicated that the CAH claims data may have a more complete report of 
CAH spending than the CAH cost report data. Finally, we would need to 
use CAH claims data to estimate prospective Medicare spending for CAHs. 
CAH claims data is the only payment data source that allows service-
specific payment rates to be linked to individual services, which is 
necessary to estimate Medicare prospective spending. When comparing 
data for two different sets of calculations, it is generally preferred 
to use the same data source for both calculations unless an alternate 
source is clearly superior. Since we are using CAH claims data to 
estimate prospective Medicare spending for CAHs, we determined that CAH 
claims data are the best available resource to fulfill the requirements 
of section 1834(x)(2)(C)(i)(I) of the Act to determine the amount of 
Medicare payments to all CAHs in CY 2019.
    We propose to use CAH claims data with service dates in CY 2019 to 
calculate the actual Medicare spending for CAHs for CY 2019 as required 
under section 1834(x)(2)(C)(i)(I) of the Act. Our calculation of CAH 
Medicare spending will include CAH claims data for inpatient hospital 
services, inpatient rehabilitation services, inpatient psychiatric 
services, outpatient hospital services, and skilled nursing services 
including both hospital-based and swing bed services. As discussed 
above, we interpret the references to the year 2019 in sections 
1834(x)(2)(C)(i) of the Act to mean calendar year 2019 (CY 2019) rather 
than fiscal year 2019 (FY 2019) because, in the absence of language 
implicitly or explicitly denoting the year as fiscal, we believe 
calendar year is the most logical reading. Additionally, section 
1834(x)(1) of the Act states that payments for REH services will begin 
on January 1, 2023, which is the first day of the CY. Therefore, we are 
using CY 2019 CAH claims data to align with our interpretation of the 
statute that references to the year 2019 are for the calendar year, and 
to avoid unintended discrepancies by combining calendar year and fiscal 
year data. Once we identify the claims that we will use for the 
calculation, we will calculate the total CAH Medicare spending for CY 
2019 by getting the total of the provider payment, coinsurance amounts, 
and deductible amounts for all of the claims. We propose to codify the 
calculation of total CAH Medicare spending in CY 2019 to create the 
monthly facility payment for CY 2023 under 42 CFR 419.92(b)(1)(i).
c. Proposed Methodology To Estimate The Projected Prospective Medicare 
Payment for CAHs for CY 2019
    Section 1834(x)(2)(C)(i)(II) of the Act directs CMS to use ``the 
estimated total amount that the Secretary determines would have been 
paid under this title to such hospitals in 2019 if payment were made 
for inpatient hospital, outpatient hospital, and skilled nursing 
facility services under the applicable prospective payment systems for 
such services during such year'' as part of the calculation used to 
determine the monthly facility payment that each REH will receive in 
2023. The statute clearly directs us to use policy and payment rules 
from the IPPS, the IRF-PPS, the IPF-PPS, the OPPS, and the Skilled 
Nursing Facility PPS (SNF PPS) as they applied in CY 2019 to determine 
the projected prospective Medicare payment for CAHs for CY 2019.
    To determine the estimated prospective Medicare payment that CAHs 
would have received for CY 2019, CMS will need to use data reflecting 
the Medicare-covered services rendered by CAHs in CY 2019. However, the 
statute does not specify what data source should be used for generating 
this estimation. We researched this issue and determined that CAH 
claims would be the only resource available to estimate projected 
prospective payment as directed by section 1834(x)(2)(C)(i)(II). We are 
aware of no other data sources that report individual services received 
by Medicare beneficiaries in CAHs, and the amounts paid to CAHs for 
those services, that could be used to estimate projected

[[Page 44782]]

prospective payment for Medicare CAH services. To estimate Medicare CAH 
spending if CAHs were paid on a prospective basis, we therefore propose 
to use CAH claims for inpatient hospital, inpatient rehabilitation, 
inpatient psychiatric, skilled nursing facilities, and outpatient 
hospital services. We also propose to include services and items that 
are paid through other payment subsystems including clinical lab 
services; physician services; ambulance services; parenteral and 
enteral nutrition services; durable medical equipment, prosthetics/
orthotics; and supplies; and vaccines and Medicare Part B drugs if 
those services and items are reported on an inpatient CAH claim, an 
outpatient CAH claim, or a skilled nursing CAH claim. We propose to 
model prospective Medicare payment for CAHs by processing the CAH 
claims data through the IPPS, IRF-PPS, IPF-PPS, OPPS, or SNF-PPS in a 
test environment as appropriate following the detailed methodologies 
described in either XVIII.A.5.c.(1) for all claims except for skilled 
nursing facility claims or XVIII.A.5.c.(2) for skilled nursing facility 
claims.
    In response to our request for information in the CY 2022 OPPS/ASC 
proposed rule which discussed REH payment policies (86 FR 42288 through 
42289), MedPAC expressed concerns that, since CAHs are paid based on 
procedure cost for inpatient hospital services, they have less 
incentive to fully document a patient's comorbidities than if the 
inpatient hospital services were paid prospectively where only 
documented diagnoses can generate payment for a provider. MedPAC was 
concerned that if the claims used to document CAH inpatient hospital 
services do not fully report all relevant patient diagnoses, the amount 
of projected Medicare prospective payment assigned to CAHs under the 
IPPS could be underestimated, which would cause the monthly REH 
facility payment to be larger than the amount that would be paid if CMS 
made this calculation using a projected Medicare prospective payment 
that more accurately reflected all relevant diagnoses of patients that 
received inpatient hospital services from CAHs assuming CAHs have the 
same distribution of reported primary diagnoses as hospitals receiving 
prospective payment.\318\
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    \318\ Medicare Payment Advisory Commission. September 10, 2021. 
Comment Letter. https://www.medpac.gov/wp-content/uploads/2021/10/09102021_OPPS_ASC_2022_MEDPAC_COMMENT_SEC.pdf. Accessed April 4, 
2022.
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    However, we have concerns about adopting a methodology that assigns 
additional diagnoses for CAH inpatient hospital claims so that these 
claims are consistent with the distribution of reported primary 
diagnoses for hospitals receiving prospective payment. The relative 
health levels of CAH patients compared to patients of hospitals 
receiving prospective payment would be needed to be able to confirm 
MedPAC's hypothesis that CAH inpatient hospital claims may be missing 
some primary diagnosis information because the information is not 
required for CAHs to receive full payment for the services they render.
    We do not have immediately available data describing in aggregate 
whether Medicare patients receiving care at CAHs are healthier, less 
healthy, or have a similar level of health compared to Medicare 
patients receiving care in facilities receiving prospective payment. 
Also, it is not feasible to gather these data before the implementation 
of the REH provider type. Obtaining such data would likely involve 
identifying a representative sample of the patients of CAHs and 
hospitals receiving prospective payment to determine if there are 
similar or different distributions of patients based on health status, 
age, income, and race, which is beyond the scope of this rulemaking 
process. Therefore, when calculating the projected prospective Medicare 
payment for CAHs, we are not proposing to adjust the distribution of 
reported primary diagnoses on the CAH inpatient hospital claims to 
reflect the distribution of reported primary diagnoses for hospitals 
receiving prospective payment.
    Another issue with relying on inpatient hospital and outpatient 
hospital CAH claims to estimate the prospective Medicare payment that 
CAHs would have received in CY 2019 is that these claims do not report 
the Medicare supplemental payments that hospitals receive through the 
inpatient and outpatient prospective payment systems. Supplemental 
payments include IPPS new technology payments, outlier claims payments, 
clotting factor payments, indirect medical education (IME) payments, 
disproportionate-share hospital (DSH) payments, including uncompensated 
care payments under section 1886(r) of the Act, low-volume hospital 
payments, hospital value-based purchasing program (VBP) payments, and 
hospital readmissions reduction program (HRRP) adjustments. However, to 
accurately model how much CAHs would have received if they had instead 
been paid for applicable services under the inpatient and outpatient 
prospective payment systems, as provided by section 
1834(x)(2)(C)(i)(II) of the Act, we must estimate the various 
supplemental payments that CAHs would have received under these 
prospective payment systems.
    We therefore propose, in addition to medical claims service data, 
that CAH payment information used to calculate the projected Medicare 
prospective payment for CAHs include IPPS new technology payments, 
outlier claims payments in both the IPPS and the OPPS, clotting factor 
payments, indirect medical education (IME) payments, DSH payments, 
uncompensated care payments, and low-volume hospital payments. We chose 
these supplemental payments because these payments are used to 
determine the payment amount for claims in either the IPPS or the OPPS.
    We are able to estimate new technology add-on payments, outlier 
payments, and clotting factor payments from the existing CAH claims 
data.
    For IME and DSH adjustments, CAHs generally do not have up-to-date 
entries in the Provider Specific File. Therefore, the IME and DSH 
adjustments would be almost always zero in the actual calculation. We 
are estimating an aggregate projected prospective payment amount for 
CAHs, and therefore, we do not need to calculate IME and DSH for each 
individual CAH. Instead, we will estimate an aggregate amount of IME 
and DSH spending for all CAHs. Our approach is the following:
     First, identify all IPPS hospitals that are classified as 
rural and calculate the average percentage of additional DSH payment 
and the average percentage of IME payment for these rural hospitals. We 
use rural IPPS hospitals as a proxy to estimate the percentage of 
additional DSH payment and the average percentage of IME payment. Rural 
IPPS hospitals are more likely to have complete and timely data to 
allow the calculation of DSH and IME payments than CAHs, because rural 
IPPS hospitals need to report their data to receive payment. CAHs, 
where all services are paid at 101 percent of cost, do not have an 
incentive to report data to generate DSH and IME payments.
     Second, for each CAH, find the closest IPPS hospital to 
that CAH, even if the IPPS hospital is located in an urban area, and 
link the additional DSH payment percentage and additional IME payment 
percentage of the nearby IPPS hospital to the CAH.
     Finally, average the overall rural IPPS DSH payment 
percentage and IME payment percentage with the modelled DSH payment 
percentage and IME payment percentage for each individual

[[Page 44783]]

CAH. These individual average additional DSH and IME payments for each 
CAH can be aggregated to get a national estimate of DSH and IME 
spending for CAHs.
    We will use the methodology described in the CY 2019 IPPS/LTCH PPS 
final rule to estimate the low-volume hospital adjustment for CAHs (83 
FR 41399). For discharges occurring in FYs 2019 through 2022, the low-
volume hospital payment adjustment is determined using a continuous, 
linear sliding scale ranging from an additional 25 percent payment 
adjustment for low-volume hospitals with 500 or fewer discharges (both 
Medicare and non-Medicare discharges) to a zero percent additional 
payment for low-volume hospitals with more than 3,800 discharges in the 
fiscal year.
    For uncompensated care payments, we will use a similar approach to 
the approach we have described earlier in this section for calculating 
estimated DSH and IME payments for CAHs. The difference will be that, 
for uncompensated care payments, we will estimate the share of 
uninsured patients in each CAH receiving uncompensated care based on a 
nearby IPPS hospital and adjusted by the average share of uncompensated 
care patients for all rural IPPS hospitals. These calculations will be 
performed in addition to calculating the percentage of Medicare 
inpatient days attributed to patients eligible for both Medicare Part A 
and Supplemental Security Income (SSI) and the percentage of total 
inpatient days attributable to patients eligible for Medicaid but not 
Medicare Part A. We will then aggregate the estimated uncompensated 
care payments for individual CAHs into a national estimate and include 
that estimate in the CAH estimated projected prospective payment 
amount.
    We also considered modelling hospital value-based purchasing 
program (VBP) payments, hospital readmissions reduction program (HRRP) 
adjustments, and hospital-acquired condition (HAC) reduction program. 
However, we have identified no feasible way to estimate these 
adjustments for either individual CAHs or for all CAHs in aggregate. 
These payments are made based on the actions of individual hospitals, 
and there are no trends regarding these payments based on whether the 
hospital is located in a rural or urban area or on the size of the 
hospital. CAHs do not participate in the VBP, HRRP, or HAC reduction 
program themselves. So, the only way to model these payments would be 
to identify trends in comparable hospitals. Since there are no payment 
trends with the VBP, HRRP, and HAC reduction program, we decided to not 
include these adjustments in the estimate of projected prospective 
payment for CAHs.
    We propose to codify our proposal to estimate the prospective 
spending for CAHs in 2019 under 42 CFR 419.92(b)(1)(ii).
(1) Detailed Proposed Methodology To Estimate CY 2019 Prospective 
Payment for CAHs for Inpatient Hospital and Outpatient Hospital 
Services
    This section provides a proposed methodology using inpatient 
hospital and outpatient hospital CAH claims and estimated supplemental 
payments to estimate the projected Medicare prospective payment for 
CAHs for inpatient hospital and outpatient hospital services. For more 
detailed information regarding the methodology for estimating the 
projected aggregate prospective payment for inpatient and outpatient 
CAH services, please refer to the supplementary document ``Calculation 
of Rural Emergency Hospital (REH) Monthly Additional Facility Payment 
for 2023'' on the CMS website (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices).
Step 1: Proposed CAH Inpatient Prospective Payment (IPPS) Calculation
Preparing Inpatient Claims for CAHs
     Identify CAH inpatient hospital claims by using the 
provider CCN number.
     Exclude Medicare Advantage encounter claims and claims 
where Medicare is not the primary payer from the analysis file.
     Feed CAH claims through MS-DRG grouper software to assign 
MS-DRG code. If the DRG code field on the claim is empty, take the 
grouper-assigned MS-DRG code as input to calculate payment. Otherwise, 
take the claim MS-DRG code as input.
     Group CAH claims that have the same Provider CCN, 
Admission Date, and Beneficiary ID combination into inpatient 
stays.\319\ Take the benefit exhaust date (if present and earlier than 
discharge date) or discharge date of the last claim in the grouping as 
the discharge date of the stay. Take the calendar year of the stay 
discharge date as the calendar year of the stay (and claims making up 
the stay).
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    \319\ PPS payment is made at the stay level instead of the claim 
level, that is, there will be up to one final claim per inpatient 
stay. CAHs can split-bill an inpatient stay, that is, multiple 
claims that make up one stay can have positive payment. In order to 
calculate PPS payment for CAH claims, stay grouping is necessary.
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     Identify paid CAH stays by checking if there is at least 
one paid claim (Type-of-Bill not being ``110'') within the stay. The 
non-paid stays or non-discharging claims will be assigned zero payment, 
and the discharging claim (last claim) will be assigned total PPS 
payment for the stay.
Calculating PPS Payment for Each Component
    The Medicare PPS payment includes the components described in the 
following sections.
1. DRG Payment
    DRG payment is calculated as the sum of operating base rate and 
capital base rate multiplied by DRG weight and Transfer Fraction and 
their respective geographic adjustment factor.
     The operating and capital base rates and DRG weight are 
taken from the relevant Final Rule/Correction Notice for either FY 2019 
or FY 2020;
     Transfer Fraction is calculated by the covered days of 
stay and the Geometric Mean Length of Stay of the DRG code, per post-
acute-care transfer adjustment policy;
     Operating geographic adjustment factor is calculated as 
the weighted sum of wage index and operation cost-of-living adjustment, 
the weights being the labor share and one minus labor share;
     Capital geographic adjustment for inpatient hospital 
services is the wage index raised to the power of 0.6848,\320\ 
multiplied by capital cost-of-living adjustment;
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    \320\ This value is set by statute and is the same value every 
year.
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     Wage index is taken from the CMS provider wage index file 
or impact file. If not found, take wage index from CBSA wage index file 
or inpatient provider specific file;
     The covered length of stay is calculated as the maximum of 
utilization days and cost report days. If either is 0, take the 
discharge date minus admission date plus one as the covered days.
2. New Technology Add-On Payments
     Check the applicable relevant Diagnosis, Procedure, and 
Drug code on the claim to determine if the claim is eligible to receive 
new-tech add-on payment.
     Calculate the new-tech payment as the maximum amount for 
the new-tech or the operating loss multiplied by the new-tech factor, 
whichever is smaller.
     The operating loss is defined as operation cost minus 
operating DRG

[[Page 44784]]

payment (defined in the ``DRG Payment'' section above).
     Perform New-Tech add-on calculation for all applicable new 
technologies found on claim and sum all eligible New-Tech add-ons as 
total new-tech add-on.
3. Outlier Payments
     Calculate outlier payment as the excess cost over outlier 
threshold multiplied by the cost sharing factor. Cost is defined as the 
sum of operating cost and capital cost;
     Operating cost is estimated by total covered charges 
multiplied by operating cost-to-charge ratio;
     Capital cost is estimated by total covered charges 
multiplied by capital cost-to-charge ratio, divided by wage index of 
provider raised to the power of 0.6848.
4. Clotting Factor Payments
     Calculate the clotting factor payment as the 
multiplication of revenue unit of clotting factor line and the clotting 
factor payment rate from the Part B drug ASP file.
5. Adjusting PPS Payment
    The following sections describe adjustments to the payment 
calculation. This methodology includes Disproportionate Share Hospital 
(DSH) payment, Uncompensated Care Payment (UCP), Indirect Medical 
Education (IME) payment, and Low-Volume Adjustment (LVA) payment. 
Performance-based payment adjustments, such as Value-based Purchasing, 
Hospital Readmission Reduction Program, and Hospital-Acquired Condition 
Reduction Program, are not included. These performance programs 
typically exclude CAHs and are of smaller magnitude than IME, DSH, UCP 
and LVA. As stated previously, there are no payment trends with the 
VBP, HRRP, and HAC reduction program in the rural IPPS hospital data, 
and we decided to not include these adjustments in the estimate of 
projected prospective payment for CAHs.
a. Disproportionate Share Hospital (DSH) and Uncompensated Care Payment 
(UCP)
    The DSH payment adjustment and UCP are both provider-specific add-
on payments for IPPS claims. In order to apply these two adjustments to 
CAHs, we must assess how they are calculated for IPPS hospitals. DSH is 
a percentage-based adjustment to the IPPS DRG payment that is 
determined by the sum of: (1) the percentage of Medicare inpatient days 
attributed to patients eligible for both Medicare Part A and 
Supplemental Security Income (SSI), and (2) the percentage of total 
inpatient days attributable to patients eligible for Medicaid but not 
Medicare Part A. UCP is determined by the percent of individuals under 
65 who are uninsured, and hospitals' amounts of uncompensated care. 
These calculations are performed in addition to calculating the 
percentage of Medicare inpatient days attributed to patients eligible 
for both Medicare Part A and Supplemental Security Income (SSI), and 
the percentage of total inpatient days attributable to patients 
eligible for Medicaid but bot Medicare Part A. All of the factors used 
in determining DSH/UCP are ultimately determined by the demographics of 
the patient populations hospitals serve. Operationally, CMS collects 
and calculates these factors from hospitals' cost report data from 
prior years. If CAHs' cost report data were as complete and timely as 
that of IPPS hospitals, DSH and UCP could be calculated for CAHs in the 
same way. However, because CAHs are reimbursed based on reasonable 
cost, they do not have the same incentives to complete their cost 
reports as IPPS hospitals. Because of the data availability and 
validity concerns, we do not propose to calculate DSH/UCP directly from 
cost report data.
    To simplify the calculations, define the DSH UCP ratio as the ratio 
of a hospital's total DSH and UCP payment amount over its core payment 
(i.e., inpatient hospital DRG payment before the inclusion of 
supplemental payments) for 2019. The goal is to calculate a reasonable 
DSH UCP ratio for CAHs. Starting from the premise that DSH/UCP are 
determined by the demographics the hospitals serve, we take the 
following steps:
     Select IPPS hospitals that are located in rural areas.
     For each CAH, identify the IPPS hospital that is closest 
based on distance from the CAH.
     Identify the closest rural IPPS hospital and then 
calculate the average DSH UCP ratio for that hospital.
    As a validation, we run a linear regression model that predicts an 
IPPS hospital's DSH UCP ratio using urban/rural indicator, the 
percentage of population below the poverty line (at zip code level, 
obtained from American Community Survey) and the percentage of dually 
enrolled inpatient beneficiaries (calculated from claims and enrollment 
data). Then, apply the parameter estimates of the model to the CAHs 
(i.e., out of sample prediction) and calculate the average predicted 
DSH UCP ratio. The results show all the covariates are significant 
predictors of DSH UCP ratio. Furthermore, the validation produces very 
similar DSH UCP ratios for CAHs as the proposed method.
    After we calculate and validate the DSH UCP ratios for the CAHs, we 
multiply the ratios by the core payment amount for each CAH to 
determine the estimate amount of DSH and UCP payments the CAH would 
receive. We then add the DSH and UCP payment amounts to the estimated 
prospective payment for the CAH.
b. Indirect Medical Education (IME)
    The IME payment is a provider-specific add-on payment for IPPS 
claims. The IME adjustment factor is determined by a hospital's ratio 
of residents to beds. Operationally, CMS collects and calculates the 
adjustment from hospitals' cost report data from prior years. Because 
of the data availability and validity concerns (stated above), we do 
not propose to calculate IME payment directly from cost report data.
    Instead, we propose to define the IME ratio as the ratio of a 
hospital's total IME payment over its core payment (i.e., DRG payment) 
for 2019. The goal is to calculate a reasonable IME ratio for CAHs. We 
take the following steps:
     Select IPPS hospitals that are located in rural areas.
     For each CAH, identify the IPPS hospital that is closest 
to it.
     Identify the closest rural IPPS hospital and then 
calculate the IME ratio for the rural IPPS hospital for 2019.
    As validation, run a linear regression model that predicts an IPPS 
hospital's IME ratio using urban/rural indicator and the average IPPS 
DRG weight per discharge (calculated from claims data). The urban/rural 
indicator is assumed to be correlated to the likelihood of a hospital 
to run an approved graduate medical education (GME) program and 
attractiveness of such program to medical school graduates; the average 
IPPS DRG weight is a measurement of level of complexity of inpatient 
care a hospital provides and is assumed to be correlated to the size of 
and need for GME. The results show both urban/rural indicator and 
average IPPS DRG weight per discharge are significant predictors of IME 
ratio.
c. Low Volume Adjustment
    The Low-Volume Hospital Payment Adjustment is an additional payment 
adjustment based on the per discharge amount (including capital, DSH, 
IME, and outlier payments) to the qualifying IPPS hospitals during CY 
2019. For discharges occurring in FYs 2019 through 2022, the qualifying 
criteria are:

[[Page 44785]]

(1) the hospital is more than 15 road miles from another subsection (d) 
hospital, and (2) the hospital has less than 3,800 total discharges 
during the fiscal year. If these qualifying criteria for the Low-Volume 
Hospital payment adjustment were also applied to CAHs, they meet the 
first criterion, as CAHs must be located either more than 35-miles from 
the nearest hospital or more than 15 miles in areas with mountainous 
terrain or with only secondary roads. We then check the number of total 
discharges from each CAH to determine if the CAH has less than 3,800 
total discharges. The adjustment factor is calculated using the 
following formula for hospitals between 500 and 3,800 total discharges:

Low-Volume Hospital Payment Adjustment = 0.25-[0.25/3300] x (number of 
total discharges-500) = (95/330)-(number of total discharges/13,200)
    If a hospital has less than 500 total discharges, then the low-
volume hospital payment adjustment is 25 percent. The number of total 
discharges of CAHs is obtained from Hospital Cost Report Data, 
Worksheet S-3, Part I, Line 14, and Column 15.
6. Other Adjustments
     Device credit (if applicable) is deducted from the claims 
payment.
     Sequestration:
    ++ Subtract the actual coinsurance and deductible amount from PPS 
payment, and
    ++ Remove 2 percent as sequester reduction.
     Subtract the sequester reduction from the PPS payment.
Step 2: Proposed CAH Inpatient Rehabilitation Facility (IRF) and 
Inpatient Psychiatric Facility (IPF) PPS Payment Calculation
     IRF PPS rules that applied in FY 2019 or FY 2020 based on 
date of service to claims furnished by the rehabilitation units of 
CAHs.
     IPF PPS rules that applied in FY 2019 or FY 2020 based on 
date of service to claims furnished by the psychiatric units of CAHs.
     The Rehabilitation and Psychiatric Units of CAH are 
actually paid by IRF PPS and IPF PPS payment rules; therefore, we 
calculate their PPS payment by summing up their actual payment.
Step 3: Proposed Outpatient PPS Payment Calculation
Preparing Outpatient Claims for CAHs
    Identify CAH outpatient hospital claims. Feed CAH claim lines to 
the IOCE grouper software to assign Status Indicator, Ambulatory 
Payment Classification (APC) code,\321\ and Discount Formula Indicator.
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    \321\ Since CAH outpatient claims have type of bill ``85x'', the 
IOCE software will not assign status indicator or APC code. In order 
to use the software properly, change the type of bill to ``131'' 
(the same bill type OPPS hospitals use to bill) before feeding the 
claims to the software.
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Calculating OPPS Payment for CAHs
     Flag claim lines that have OPPS payable status 
indicator.\322\ For claim lines that have APC assignment, obtain 
relevant APC payment rate from the OPPS Final Rule/Correction Notice 
data files. Apply the following APC adjustments, as applicable:
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    \322\ First digit of status indicator to be ``F'', ``G'', ``H'', 
``J'', ``K'', ``L'', ``P'', ``Q'', ``R'', ``S'', ``T'', ``U'', 
``V'', and ``X''.
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    ++ Device Credit, taken from value code ``FD'', is deducted from 
payment;
    ++ Off-campus Provider Based Department deduction indicated by 
modifier PO;
    ++ Computed tomography reduction (indicated by modifier CT and 
HCPCS code);
    ++ Reduction of X-rays taken with film (indicated by modifier FX);
    ++ 22.5 percent ASP rate reduction for Part B drugs (indicated by 
modifier JG and status indicator K).
     Adjust APC payment rate with OPPS discount factor based on 
the Discount Formula Indicator.
     Multiply adjusted APC payment rate with the number of 
revenue units to get APC payment.
     Adjust APC payment with geographic adjustment factor.
    ++ Geographic adjustment factor is the sum of labor share 
multiplied by wage index and non-labor share;
    ++ Wage index is determined by the wage index file, CBSA code, and 
provider specific record of the provider.
     Calculate line outlier payment by multiplying excess line 
cost over line multiple threshold with OPPS loss share ratio, if line 
estimated cost is greater than line multiple threshold and line fixed 
threshold.
    ++ Estimate claim line cost by adding line covered charge and 
charges from packaged services;
    ++ Line fixed threshold is the line OPPS payment plus the OPPS fix 
threshold of the calendar year
    ++ Line multiple threshold is line OPPS payment multiplied by the 
OPPS outlier factor of the calendar year
     Aggregate claim line level payment to claim level and 
apply sequester reduction to calculate final PPS payment for CAHs.
Calculating Payment for Other Claim Lines
    Calculate payment for other claim lines with applicable fee 
schedule rules (OPPS Status Indicator ``A'').
     Clinical Lab Fee Schedule lines.
     Physician Fee Schedule lines.
     Ambulance Fee Schedule lines.
     Parenteral and Enteral Nutrition Fee Schedule lines.
     Durable Medical Equipment, Prosthetics/Orthotics, and 
Supplies Fee (DMEPOS) Schedule lines.
     Vaccine and Part B drug lines.
(2) Detailed Proposed Methodology To Estimate CY 2019 Prospective 
Payment for CAHs for Provision of Skilled Nursing Facility Services
    We also propose to use CAH claims to make estimates of the 
prospective payment amounts for skilled nursing swing bed payments. 
Under the SNF PPS, facilities are paid a pre-determined daily rate for 
each day of SNF care for each individual provided services, adjusted by 
each patient's unique medical needs and diagnoses. In order to 
calculate PPS payment for CAH claims that were not paid under PPS, we 
propose to assign a PPS equivalent daily rate to CAH claims factoring 
in patient case mix. CAH swing bed claims generally do not have minimum 
data set (MDS) records (that is, assessment data), which are the 
critical input to the Grouper software for Resource Utilization Group 
(RUG)/Patient Driven Payment Model (PDPM) code assignment. Therefore, 
RUG/PDPM codes for the CAH claims cannot be generated by the RUG/PDPM 
Grouper software. The RUG codes (which have been phased out of the SNF 
PPS, to be replaced by the PDPM) are determined mainly by the number of 
therapy minutes provided or expected to be provided to the beneficiary. 
However, the therapy minute variable is reported only through the MDS 
and not recorded on claims. Because of the lack of MDS data, RUG/PDPM 
rates cannot be directly obtained from the CAH swing bed claims. 
However, RUG/PDPM rates of CAH swing-bed claims can be predicted by 
modeling the RUG/PDPM per-diem-rates of claims that were actually paid 
under PPS rules. Under the statute, the SNF benefit must generally be 
qualified by a preceding inpatient stay. The information on the 
qualifying inpatient claim can be used to predict the RUG/PDPM per-
diem-rate.
    On October 1, 2019, a new case-mix classification model, the PDPM, 
under SNF PPS began. The use of RUG coding assignments ended, and the 
use of PDPM coding assignments started. We

[[Page 44786]]

propose to apply RUG PPS rules for claims with service dates between 
January 1, 2019, and September 30, 2019, and we propose to apply PDPM 
rules for those with service dates between October 1, 2019, and 
December 31, 2019. The primary steps to estimate the projected 
prospective skilled nursing payment for CAHs are as follows:
    Step 1: Use the PPS payment calculation formula to estimate payment 
for skilled nursing facility PPS claims.
    Step 2: Process claims using the RUG/PDPM rate prediction model.
    Step 3: Use the PPS payment calculation formula to estimate payment 
for CAH swing-bed claims.
    For more detailed information regarding the methodology for each of 
the steps listed to estimate the aggregate projected prospective 
payment for CAH skilled nursing services, please refer to the 
supplementary document ``Calculation of Rural Emergency Hospital (REH) 
Monthly Additional Facility Payment for 2023'' on the CMS website.
d. Proposal To Determine the Total Number of CAHs in CY 2019
    We propose to use the CAH claims data to determine the total number 
of CAHs in CY 2019, which is required to determine the amount of the 
monthly facility payment pursuant to section 1834(x)(2)(C)(ii) of the 
Act. We propose that the number of CAHs in 2019 should be calculated as 
the distinct count of CAH CMS certification numbers (CCNs) that have 
any paid Medicare FFS claims from January 1, 2019 to December 31, 2019, 
based on service date. We propose that the number of distinct CAH CCNs 
includes providers that may have either been open or closed during CY 
2019. We propose that CAHs that were open for only part of the year in 
CY 2019 will be reported as full providers in our count of distinct 
CAHs and will not be weighted in the count by the portion of the year 
they were open. Section 1834(x)(2)(C)(ii) of the Act requires that we 
use the number of CAHs that were in existence during 2019 and does not 
make any provision for counting CAHs only open for a part of the year 
differently from CAHs open the entire year. We propose to check the 
CCNs to ensure that if a CAH reports claims data from rehabilitation, 
psychiatric, skilled nursing facility or swing bed units in addition to 
the primary hospital unit, that only one facility is included in the 
count of total CAHs. We propose to codify our methodology to calculate 
the number of CAHs in CY 2019 under 42 CFR 419.92(b)(1)(iii).
e. Proposed Calculation of the Monthly REH Facility Payment for CY 2023
    As stated above, section 1834(x)(2) of the Act requires an 
additional facility payment be paid monthly to an REH. For CY 2023, we 
propose that this facility payment be determined, per the requirements 
of the CAA and consistent with our proposed regulation text at 42 CFR 
419.92(b)(1), using the following calculation:

Step 1: The total amount of Medicare spending for CAHs in CY 2019 (as 
described in section 1834(x)(2)(C)(i)(I) of the Act) minus the 
projected Medicare spending for CAHs in CY 2019 if inpatient hospital 
services, outpatient hospital services, and skilled nursing services 
had been paid on a prospective basis rather than at 101 percent of 
total cost (as described in section 1834(x)(2)(C)(i)(II) of the Act) 
and calculated according to the methodology described above.
    Total Amount of Medicare Spending for CAHs in CY 2019: $12.08 
billion
    Total Projected Amount of Medicare Spending for CAHs if Paid 
Prospectively in CY 2019: $7.68 billion
    Step1 Difference: $12.08 billion-$7.68 billion = $4.40 billion
Step 2: The difference in Step 1 would be divided by the number of CAHs 
enrolled in Medicare in CY 2019 to calculate the annual payment per 
individual REH. The annual payment amount would be divided by 12 to 
calculate the monthly REH facility payment. Each REH would receive the 
same facility payment.
    Step 1 Difference: $ 4,404,308,465
    Number of Medicare CAHs in CY 2019: 1,368
    REH Monthly Facility Payment: ($4,404,308,465/1,368)/12 = $268,294
    Using this calculation, we propose that the monthly facility 
payment for REHs for CY 2023 would be $268,294. We are seeking public 
comments on our methodology to determine the total amount was paid by 
Medicare to all critical access hospitals in 2019, our methodology to 
estimate the total amount that would have been paid to CAHs in 2019 for 
inpatient hospital, outpatient hospital, and skilled nursing facility 
services under the applicable prospective payment systems, and our 
overall methodology to calculate the monthly REH facility payment for 
CY 2023.
f. Proposed Calculation of the Monthly REH Facility Payment for CY 2024 
and Subsequent Calendar Years
    Section 1834(x)(2)(B) of the Act states that ``[t]he annual 
additional facility payment amount specified in this subparagraph is . 
. . for 2024 and each subsequent year, the amount determined under this 
subparagraph for the preceding year, increased by the hospital market 
basket percentage increase.'' Accordingly, we are proposing to codify, 
at 42 CFR 419.92(b)(2), that for CY 2024 and each subsequent calendar 
year, the amount of the additional annual facility payment is the 
amount of the preceding year's additional annual facility payment, 
increased by the hospital market basket percentage increase as 
described under section 1886(b)(3)(B)(iii) of the Act.
6. Preclusion of Administrative or Judicial Review
    Section 1861(kkk)(9) of the Act explicitly precludes administrative 
or judicial review under section 1869 of the Act, section 1878 of the 
Act, or otherwise of (1) the establishment of requirements by the 
Secretary under subsection 1861(kkk) of the Act; (2) the determination 
of payment amounts under section 1834(x) of the Act, including the 
determination of additional facility payments; and (3) the 
determination of whether a rural emergency hospital meets the 
requirements of subsection 1861(kkk) of the Act.
    Consequently, we propose to codify, at Sec.  419.94, the preclusion 
of administrative or judicial review under section 1869 of the Act, 
section 1878 of the Act, or otherwise of (1) the requirements 
established by proposed Subpart K; (2) the determination of payment 
amounts under proposed Subpart K; and (3) the determination of whether 
an REH meets the requirements of proposed Subpart K.
7. Conforming Revisions to 42 CFR 410 and 413
    In addition to codifying the requirements of section 1861(kkk) and 
1834(x) of the Act at 42 CFR 419 as proposed above, we propose to make 
conforming changes to 42 CFR 410, which describes the origin and 
destination requirements for the coverage of ambulance services, and 42 
CFR 413, which specifies principles of reasonable cost reimbursement.
a. Rural Emergency Hospitals Ambulance Services Background
    Section 1861(s)(7) of the Act establishes an ambulance service as a 
Medicare Part B service where the use

[[Page 44787]]

of other methods of transportation is contraindicated by the 
individual's condition, but only to the extent provided in regulations. 
The House Ways and Means Committee and Senate Finance Committee Reports 
that accompanied the 1965 Social Security Amendments suggests that the 
Congress intended:
     The ambulance benefit cover transportation services only 
if other means of transportation are contraindicated by the 
beneficiary's medical condition; and
     Only ambulance service to local facilities be covered 
unless necessary services are not available locally, in which case, 
transportation to the nearest facility furnishing those services is 
covered (H.R. Rep. No. 213, 89th Cong., 1st Sess. 37 and Rep. No. 404, 
89th Cong., 1st Sess. Pt 1, 43 (1965)).
    The reports indicate that transportation may also be provided from 
one hospital to another, to the beneficiary's home, or to an extended 
care facility. Since April 1, 2002, payment for ambulance services is 
made under the ambulance fee schedule (AFS), which the Secretary 
established under section 1834(l) of the Act.
    We have established regulations at Sec.  410.40 that govern 
Medicare coverage of ambulance services. Under Sec.  410.40(e)(1), 
Medicare Part B covers ground (land and water) and air ambulance 
transport services only if they are furnished to a Medicare beneficiary 
whose medical condition is such that other means of transportation are 
contraindicated. The beneficiary's condition must require both the 
ambulance transportation itself and the level of service provided for 
the billed services to be considered medically necessary. The origin 
and destination requirements for coverage of ambulance services are 
addressed in our regulations at Sec.  410.40(f).
b. Proposed Revision to the Origin and Destination Requirements Under 
the AFS (42 CFR 410.40(f))
    Section 125 of the Consolidated Appropriations Act, 2021, added 
section 1834(x)(3) of the Act for payment for ambulance services. 
Specifically, newly added section 1834(x)(3) of the Act states: ``For 
provisions relating to payment for ambulance services furnished by an 
entity owned and operated by a rural emergency hospital, see section 
1834(l) of the Act.'' Accordingly, the statute makes clear that the 
ambulance provisions under section 1834(l) of the Act apply to REHs 
that owns and operates an ambulance transportation in the same manner 
that they do for other ambulance providers and suppliers that receive 
AFS payment for ambulance services. The previous section includes a 
discussion about this provision, including CMS's proposal, consistent 
with section 1834(x)(3) of the Act, to codify, at 42 CFR 419.92(c)(1), 
that an entity that is owned and operated by an REH that provides 
ambulance services will receive payment for such services under the 
ambulance fee schedule as described in section 1834(l) of the Act.
    The REH is an appropriate destination for an ambulance transport if 
furnished to a Medicare beneficiary whose medical condition is such 
that other means of transportation are contraindicated. The 
beneficiary's condition must require both the ambulance transportation 
itself and the level of service provided for the billed services to be 
considered medically necessary. We propose to revise our regulations at 
Sec.  410.40(f) to include REH as a covered origin and destination for 
ambulance transport.
    There are several different types of ambulance providers and 
suppliers that are enrolled in Medicare and furnished ambulance 
services payable under the AFS, such as a hospital provider. We propose 
that an REH that owns and operates an ambulance transportation may 
enroll in Medicare as an ambulance provider and receive payment under 
the AFS if all coverage and payment requirements are met.
    We invite comments on our proposals to include REHs as a covered 
origin and destination for ambulance transport under the AFS and that 
an REH that owns and operates an ambulance transportation may enroll in 
Medicare as an ambulance provider and receive payment under the AFS if 
all coverage and payment requirements are met.
c. Conforming Revisions to 42 CFR 413.1; 413.13 and 413.24
    We also propose to make conforming changes to the regulation text 
specifying principles of reasonable cost reimbursement in 42 CFR 413 to 
incorporate references to REHs. Specifically, we propose to modify 
Sec.  413.1(a)(1)(ii) by adding subparagraph (L), to state that Section 
1834(x) of the Act authorizes payment for services furnished by REHs 
and establishes the payment methodology. We also propose to modify 
Sec.  413.1(a)(2)(i) to add REHs to the listing of provider types 
covered by the regulations in 42 CFR part 413. Additionally, we propose 
to amend Sec.  413.13(c)(2) by adding subparagraph (vii) to the listing 
of services not subject to the lesser of costs or charges principle, to 
specify that services furnished by REHs are subject to the payment 
methodology set forth in part 419, subpart K.
    Furthermore, we propose to amend Sec.  413.24(f)(4)(i) to specify 
that an REH is required to file annual cost reports, and to amend Sec.  
413.24(f)(4)(ii) to specify that effective for cost reporting periods 
beginning on or after January 1, 2023, REHs are required to submit 
their cost reports in a standardized electronic format. Finally, we 
propose to amend Sec.  413.24(f)(4)(iv)(A), which requires providers to 
submit a hard copy of a settlement summary, if applicable, and the 
certification statement described in Sec.  413.24(f)(4)(iv)(B), by 
adding subparagraph (5) to state that for REHs, these requirements are 
effective for cost reporting periods beginning on or after January 1, 
2023.

B. REH Conditions of Participation

    Section 125 of Division CC of the Consolidated Appropriations Act, 
2021 (CAA) added a new section 1861(kkk) to establish REHs as a new 
Medicare provider type to address the growing concern over closures of 
rural hospitals. The CAA created a pathway for certain critical access 
hospitals (CAHs) and certain rural hospitals to convert to this new 
provider type, allowing for continued access to emergency care in rural 
areas. In accordance with the statute, a facility is eligible to be an 
REH if it was a CAH or rural hospital with less than 50 beds as of the 
date of enactment of the CAA (December 27, 2020). REHs must provide 
emergency services and observation care and they may not provide 
inpatient services. Additionally, REHs may provide skilled nursing 
facility services in a separately certified distinct part skilled 
nursing facility. The statute also allows the Secretary discretion to 
establish additional requirements for REHs in the interest of health 
and safety.
    CMS published a Request for Information (RFI) for REHs in the CY 
2022 OPPS/ASC proposed rule on August 4, 2021, and used this 
information to inform our development of the REH health and safety, 
payment, quality measures, and enrollment policies. The proposed health 
and safety standards (that is, the Conditions of Participation) for 
REHs were published in the Federal Register on July 6, 2022 titled 
``Medicare and Medicaid Programs; Conditions of Participation (CoPs) 
for Rural Emergency Hospitals (REHs) and Critical Access Hospital CoP 
Updates'' (87 FR 40350), while the proposed payment, quality measures, 
and enrollment policies are included in this proposed rule. All of the 
final health and safety, payment, quality measures, and enrollment 
policies will

[[Page 44788]]

be published in the CY 2023 OPPS/ASC final rule with comment period.

C. REH Provider Enrollment

    Section 1866(j)(1)(A) of the Act requires the Secretary to 
establish a process for the enrollment of providers and suppliers in 
the Medicare program. The overall purpose of the enrollment process is 
to help confirm that providers and suppliers seeking to bill Medicare 
for services and items furnished to Medicare beneficiaries meet all 
Federal and State requirements to do so. The process is, to an extent, 
a ``gatekeeper'' that prevents unqualified and potentially fraudulent 
individuals and entities from being able to enter and inappropriately 
bill Medicare. Since 2006, we have taken steps via rulemaking to 
outline our enrollment procedures. These regulations are generally 
incorporated in 42 CFR part 424, subpart P (currently Sec. Sec.  
424.500 through 424.570 and hereafter occasionally referenced as 
subpart P). They address, among other things, requirements that 
providers and suppliers must meet to obtain and maintain Medicare 
billing privileges. All enrolling and enrolled Medicare providers and 
suppliers, irrespective of type and including REHs, must comply with 
these regulatory provisions.
    Section 1861(kkk)(2)(A) states that REHs must be enrolled under 
section 1866(j) of the Act. We are proposing several provisions that 
identify the enrollment requirements with which REHs must comply as 
part of the enrollment process.
1. General Compliance With Part 424, Subpart P
    In addition to the previously mentioned requirement for REHs to 
enroll in Medicare, section 1861(kkk)(4)(B) of the Act states that an 
REH's enrollment remains in effect until: (1) the REH elects to convert 
back to its prior designation as a CAH or a hospital (as defined in 
section 1886(d)(1)(B) of the Act); or (2) the Secretary determines that 
the facility does not meet the requirements for REHs under this 
subsection. We are concerned that section 1861(kkk)(4)(B) of the Act 
could be misconstrued to suggest that our ordinary enrollment 
authorities do not apply to REHs (such as the authority to revoke the 
REH's enrollment if, for example, the provider: (1) certifies as 
``true'' misleading or false information on the enrollment application; 
(2) abuses its billing privileges; or (3) fails to report certain 
required information). To clarify and confirm that our enrollment 
authority under subpart P applies to REHs to the same extent it does to 
all other Medicare provider and supplier types, we propose to add a new 
Sec.  424.575 to subpart P. Paragraph (a) of this section would state 
that an REH (as that term is defined in 42 CFR 485.502) must comply 
with all applicable provisions and requirements in this subpart in 
order to enroll and maintain enrollment in Medicare.\323\ We note that 
these requirements would include, but not be limited to, the following:
---------------------------------------------------------------------------

    \323\ This definition of rural emergency hospital is being 
proposed in the CMS proposed rule titled ``Medicare and Medicaid 
Programs; Conditions of Participation (CoPs) for Rural Emergency 
Hospitals (REH) and Critical Access Hospital CoP Updates.''
---------------------------------------------------------------------------

     Per Sec.  424.510(a)(1) and (d)(1), completion and 
submission of the applicable enrollment application, which, for REHs, 
would be the Form CMS-855A (Medicare Enrollment Application: 
Institutional Providers; OMB control number 0938-0685).
     Submission of all required supporting documentation with 
the enrollment application per Sec.  424.510(d)(1) and (d)(2)(iii).
     Per Sec.  424.510(d)(5), completion of any applicable 
State surveys, certifications, and provider agreements.
     Reporting changes to any of the REH's enrollment 
information per Sec.  424.516.
     Revalidation of enrollment per Sec.  424.515.
     Undergoing risk-based screening per Sec.  424.518 
(discussed further in section XVIII.C.2 of this proposed rule).
    Another requirement in subpart P pertains to application fees. 
Section 424.514 states that institutional providers submitting an 
initial or revalidation application, or adding a new practice location, 
must submit either or both of the following: (1) the applicable 
application fee (which, for CY 2022, is $631); or (2) a request for a 
hardship exception to the application fee. The term ``institutional 
provider'' is defined (for purposes of the application fee) in Sec.  
424.502. It means any provider or supplier that submits a paper 
Medicare enrollment application using the Form CMS-855A, Form CMS-855B 
(not including physician and non-physician practitioner organizations) 
(Medicare Enrollment Application: Clinics/Group Practices and Certain 
Other Suppliers; OMB control number 0938-1377), Form CMS-855S (Medicare 
Enrollment Application--Durable Medical Equipment, Prosthetics, 
Orthotics, and Supplies (DMEPOS) Suppliers; OMB control number: 0938-
1056), or an associated internet-based PECOS enrollment application.
    Although an REH would submit a Form CMS-855A to enroll as such, it 
would not have to pay an application fee with its application. This is 
because we are proposing at new Sec.  424.575(b) that the REH would 
submit a Form CMS-855A change of information under Sec.  424.516 
instead of an initial enrollment; that is, the facility would be merely 
reporting its conversion from a CAH or a hospital (as defined in 
section 1886(d)(1)(B) of the Act) to an REH--as well as submitting any 
other required information and documentation--and not newly enrolling 
in the Medicare program. Since this particular REH enrollment 
transaction would not be an initial enrollment, revalidation, or 
practice location addition, the fee payment requirement in Sec.  
424.514 would be inapplicable.
    Our general policy has long been that a provider or supplier that 
is changing its provider or supplier type (for example, a home health 
agency switching to a home infusion therapy supplier) must terminate 
its existing enrollment and initially enroll as the new provider or 
supplier type. We believe the situation involving REHs is unique and 
warrants a deviation from this policy. Section 1861(kkk)(3) of the Act 
defines an REH, in part, as a facility that, as of the date of 
enactment of the Consolidated Appropriations Act, 2021 (December 27, 
2020), was a CAH or a hospital (as defined in section 1886(d)(1)(B) of 
the Act). In addition: (1) section 1861(kkk)(4)(B)(i) of the Act 
references a ``conversion'' from an REH back to a CAH or a section 
1886(d)(1)(B) hospital (rather than termination as an REH and initial 
enrollment as a CAH or section 1886(d)(1)(B) hospital); and (2) 
payments to REHs are to begin effective January 1, 2023, as already 
explained in this proposed rule. In light of this, and strictly from an 
enrollment application processing perspective, we believe there is a 
sufficiently close nexus between REHs and CAHs/section 1886(d)(1)(B) 
hospitals such that any conversion to an REH can be accomplished via a 
change of information application. We prefer this mechanism because 
such applications generally involve the mere disclosure of enrollment 
data that has changed as opposed to, with initial enrollments, the 
completion of the entire application. MACs can typically process change 
of information applications faster than initial applications. This is 
an important consideration given the need for CMS to also determine the 
facility's compliance with the REH conditions of participation before 
the REH can be enrolled as such. We want to ensure that the foregoing 
processes can be completed by January 1, 2023 so that

[[Page 44789]]

REHs can begin billing for services effective upon that date, and we 
believe permitting a change of information submission can help 
facilitate this. We note, however, that this deviation based on the 
unique circumstances of REH enrollment does not change our 
aforementioned general policy that requires an initial enrollment 
application for enrolled individuals and entities aiming to change 
their provider or supplier type.
2. Screening Risk Levels
    Section 424.518 outlines provider enrollment screening categories 
and requirements based on our assessment of the risk of fraud, waste, 
and abuse posed by a particular category of provider or supplier. In 
general, the higher the level of risk that a certain provider or 
supplier type poses, the greater the degree of scrutiny with which we 
will screen and review enrollment applications submitted by providers 
or suppliers within that category. There are three levels of screening 
addressed in Sec.  424.518: limited; moderate; and high. Irrespective 
of which level a provider or supplier type falls within, the MAC 
performs certain minimum screening functions upon receipt of an initial 
enrollment application, a revalidation application, or an application 
to add a new practice location. These include:
     Verification that the provider or supplier meets all 
applicable Federal regulations and State requirements for their 
provider or supplier type.
     State license verifications.
     Database reviews on a pre- and post-enrollment basis to 
ensure that providers and suppliers continue to meet the enrollment 
criteria for their provider or supplier type.
    Providers and suppliers at the moderate and high categorical risk 
levels must also undergo a site visit. Moreover, for those in the high 
categorical risk level, the MAC performs two additional functions under 
Sec.  424.518(c)(2). First, the MAC requires the submission of a set of 
fingerprints for a national background check from all individuals who 
maintain a 5 percent or greater direct or indirect ownership interest 
in the provider or supplier. Second, it conducts a fingerprint-based 
criminal history record check of the Federal Bureau of Investigation's 
(FBI) Integrated Automated Fingerprint Identification System on all 
individuals who maintain a 5 percent or greater direct or indirect 
ownership interest in the provider or supplier. These additional 
verification activities are intended to correspond to the heightened 
risk involved with such provider or supplier types.
    Hospitals currently fall within the limited screening category per 
Sec.  424.518(a)(1)(viii). This also includes, as stated in Sec.  
424.518(a)(1)(viii), CAHs, Department of Veterans Affairs, and other 
federally-owned hospital facilities. We have no evidence to suggest 
that REHs as a category of provider type would present a risk of fraud, 
waste, and abuse warranting placement in the moderate or high screening 
level. Accordingly, we propose to revise Sec.  424.518(a)(1)(viii) to 
incorporate REHs therein.
3. Effective Date of Billing Privileges
    Section 424.520 lists the effective dates of billing privileges for 
enrolling Medicare providers and suppliers. For surveyed, certified, or 
accredited providers and suppliers, Sec.  424.520(a) states that the 
effective date of billing privileges is that specified in 42 CFR 
489.13. Paragraph (b) of the latter section states, in part, that the 
provider agreement or approval is effective on the date the State 
agency, CMS, or the CMS contractor survey is completed (or on the 
effective date of the accreditation decision, as applicable) if, on 
that date, the provider or supplier meets all applicable Federal 
requirements. Among these Federal requirements are the previously 
referenced enrollment requirements in Part 424, subpart P; as mentioned 
in 42 CFR 489.13(b), CMS determines the date on which all enrollment 
requirements have been met.
    Hospitals and CAHs are among the provider types that fall within 
the scope of Sec.  424.520(a). Since REHs, like other hospitals, would 
also come within the purview of Sec.  424.520(a), it is unnecessary to 
revise Sec.  424.520(a) to specifically reference them. We are merely 
discussing this issue in this proposed rule so that prospective REHs 
will understand what their effective date of billing privileges would 
be.

D. Use of the Medicare Outpatient Observation Notice by REHs

    REHs are prohibited by section 1866(kkk)(2)(B) of the Act from 
providing inpatient services, other than those that are provided in a 
distinct part SNF. Section 2 of the Notice of Observation Treatment and 
Implication for Care Eligibility Act (NOTICE Act) (Pub. L. 114-42), 
amended section 1866(a)(1) of the Act by adding a new subparagraph (Y) 
that requires hospitals and CAHs to provide written notification and an 
oral explanation of such notification to individuals receiving 
observation services as outpatients for more than 24 hours. The 
notification must explain the status of the individual as an 
outpatient, not an inpatient, and the implications of such status. We 
implemented section 1866(a)(1)(Y), as added by section 2 of the Notice 
Act, in the FY 2017 IPPS/LTCH final rule (81 FR 57037 through 57052).
    REHs will furnish emergency department and observation care, and 
other specified outpatient medical and health services, if elected by 
the REH, that do not exceed an annual per patient average of 24 hours. 
There may be instances in which REH patients receive observation 
services at an REH for a period exceeding 24 hours, but REHs are not 
required to provide required notification under the NOTICE Act, known 
as the Medicare Outpatient Observation Notice (MOON), because REHs are 
excluded from the definition of ``hospital'' in section 1861(e) and the 
requirements at section 1866(a)(1)(Y) of the Act apply only to 
hospitals and CAHs. We understand that there may be occasional 
circumstances in which a facility is not immediately available to 
provide a higher level of care, resulting in patients receiving 
services at an REH for more than 24 hours. Notwithstanding the 
inapplicability of the NOTICE Act requirements at section 1866(a)(1)(Y) 
to REHs and the expected infrequency of individuals receiving 
observation services in REHs for more than 24 hours, CMS is soliciting 
comments on the potential need for REHs to notify beneficiaries of 
their status as outpatients, the implications of such status, and 
whether the MOON would be the appropriate notice for communicating this 
information.

E. Physician Self-Referral Law Update

1. Background
    Section 1877 of 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 the 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 the authority to create 
regulatory exceptions for financial relationships that do not pose

[[Page 44790]]

a risk of program or patient abuse. Section 1903(s) of the Act extends 
aspects of the physician self-referral prohibitions to Medicaid. (For 
additional information about section 1903(s) of the Act, see 66 FR 857 
through 858.)
    The following discussion provides a chronology of our more 
significant and comprehensive rulemakings; it is not an exhaustive list 
of all rulemakings related to the physician self-referral law. After 
the passage of section 1877 of the Act, we proposed rulemakings in 1992 
(related only to referrals for clinical laboratory services) (57 FR 
8588) (the 1992 proposed rule) and 1998 (addressing referrals for all 
designated health services) (63 FR 1659) (the 1998 proposed rule). We 
finalized the proposals from the 1992 proposed rule in 1995 (60 FR 
41914) (the 1995 final rule) and issued final rules following the 1998 
proposed rule in three stages. The first final rulemaking (Phase I) was 
a final rule with comment period published in the January 4, 2001 
Federal Register (66 FR 856). The second final rulemaking (Phase II) 
was an interim final rule with comment period (69 FR 16054) published 
in the March 26, 2004 Federal Register. Due to a printing error, a 
portion of the Phase II preamble was omitted from the March 26, 2004 
Federal Register publication. That portion of the preamble, which 
addressed reporting requirements and sanctions, was published in the 
April 6, 2004 Federal Register (69 FR 17933). The third final 
rulemaking (Phase III) was a final rule published in the September 5, 
2007 Federal Register (72 FR 51012).
    After passage of the Patient Protection and Affordable Care Act of 
2010 (Pub. L. 111-148) (Affordable Care Act), we issued final 
regulations on November 29, 2010 in the CY 2011 PFS final rule with 
comment period that codified a disclosure requirement established by 
the Affordable Care Act for the in-office ancillary services exception 
(75 FR 73443). We also issued final regulations on November 24, 2010 in 
the CY 2011 OPPS final rule with comment period (75 FR 71800), on 
November 30, 2011 in the CY 2012 OPPS final rule with comment period 
(76 FR 74122), and on November 10, 2014 in the CY 2015 OPPS final rule 
with comment period (79 FR 66987) that established or revised certain 
regulatory provisions concerning physician-owned hospitals to codify 
and interpret the Affordable Care Act's revisions to section 1877 of 
the Act.
    On November 16, 2015, in the CY 2016 PFS final rule, we issued 
regulations to reduce burden and facilitate compliance (80 FR 71300 
through 71341). In that rulemaking, we established two new exceptions 
to the physician self-referral law, clarified certain provisions of the 
physician self-referral regulations, updated regulations to reflect 
changes in terminology, and revised definitions related to physician-
owned hospitals. In the December 2, 2020 Federal Register, we published 
a final rule entitled ``Modernizing and Clarifying the Physician Self-
Referral Regulations'' (the ``MCR final rule'') (85 FR 77492) that 
established three new exceptions to the physician self-referral law 
applicable to compensation arrangements that qualify as ``value-based 
arrangements,'' established exceptions for limited remuneration to a 
physician and the donation of cybersecurity technology and services, 
and revised or clarified several existing exceptions. The MCR final 
rule also provided guidance and updated or established regulations 
related to the fundamental terminology used in many provisions of the 
physician self-referral law. Most notably, we defined the term 
``commercially reasonable'' in regulation, established an objective 
test for evaluating whether compensation varies with the volume or 
value of referrals or other business generated between the parties, and 
revised the definitions of ``fair market value'' and ``general market 
value.'' The MCR final rule also revised the definition of ``indirect 
compensation arrangement,'' which was further revised in the CY 2022 
PFS final rule (86 FR 65343 through 65353).
2. Application of The Physician Self-Referral Law To Rural Emergency 
Hospitals
    The referral and billing prohibitions of the physician self-
referral law are implicated only when all six of the following elements 
are present: a physician makes a referral for designated health 
services payable by Medicare to an entity with which the physician (or 
an immediate family member of the physician) has a financial 
relationship. Where all six elements exist, the physician self-referral 
law prohibits the physician from making a referral for designated 
health services to the entity with which he or she has the financial 
relationship unless an exception applies and its requirements are 
satisfied.
    Our regulations at Sec.  411.351 define ``entity'' to mean a 
person, sole proprietorship, public or private agency or trust, 
corporation, partnership, limited liability company, foundation, 
nonprofit corporation, or unincorporated association that furnishes 
designated health services. Section 1877(h)(6) of the Act defines 
``designated health services'' to mean any of the following items or 
services: clinical laboratory services; physical therapy services; 
occupational therapy services; outpatient speech-language pathology 
services; radiology services, including magnetic resonance imaging, 
computerized axial tomography, and ultrasound services; radiation 
therapy services and supplies; durable medical equipment and supplies; 
parenteral and enteral nutrients, equipment, and supplies; prosthetics, 
orthotics, and prosthetic devices and supplies; home health services; 
outpatient prescription drugs; and inpatient and outpatient hospital 
services. Under the regulation at Sec.  411.351, only services payable 
in whole or in part by Medicare are designated health services. 
Services that are paid by Medicare as part of a composite rate are 
excluded from the definition of ``designated health services.''
    The proposals described in the proposed rule titled ``Medicare and 
Medicaid Programs; Conditions of Participation (CoPs) for Rural 
Emergency Hospitals (REH) and Critical Access Hospital CoP Updates'' 
(87 FR 40350), if finalized, would require an REH to furnish radiology 
and certain imaging services, clinical laboratory services, and 
outpatient prescription drugs, all of which are designated health 
services under section 1877(h) of the Act. An REH could elect to 
provide other designated health services as well. Therefore, with 
respect to such services furnished to Medicare beneficiaries, an REH 
would be an entity that furnishes designated health services payable 
(in whole or in part) by Medicare for purposes of the physician self-
referral law.
    For purposes of the physician self-referral law, a physician has 
the meaning set forth in section 1861(r) of the Act. A physician makes 
a referral when the physician requests or orders a designated health 
service, certifies or recertifies the need for a designated health 
service, or establishes a plan of care that includes the provision of a 
designated health service. (If the physician personally performs or 
provides the designated health service, the physician has not made a 
referral.) Under the regulations at Sec.  411.354, a physician (or an 
immediate family member of a physician) has a financial relationship 
with an entity if the physician (or immediate family member) has a 
direct or indirect ownership or investment interest in the entity or 
has a direct or indirect

[[Page 44791]]

compensation arrangement with the entity.
    Once an entity is enrolled in Medicare as an REH, the physician 
self-referral law would prohibit a physician from making a referral for 
designated health services to the REH if the physician (or an immediate 
family member of the physician) has a financial relationship with the 
REH unless an exception to the law's referral and billing prohibitions 
applies and all its requirements are satisfied. There are numerous 
statutory and regulatory exceptions to the physician self-referral 
law's prohibitions.
    Although there are more than 40 exceptions to the physician self-
referral law's prohibitions, only five permit all specified referrals 
by a physician to an entity in which the physician (or an immediate 
family member of the physician) has an ownership or investment interest 
when all requirements of the exception are satisfied. These are the 
exceptions for publicly traded securities, mutual funds, rural 
providers (commonly referred to as the ``rural provider exception''), 
hospitals in Puerto Rico, and hospitals outside of Puerto Rico 
(commonly referred to as the ``whole hospital exception''). Nine 
additional ``services'' exceptions in Sec.  411.355, when applicable, 
may permit a physician's referral on a service-by-service basis, but 
the protection from the law's prohibitions requires an analysis of each 
referral by the physician and the resulting designated health service 
furnished by the entity.
    We believe that most physician-owned entities that are not publicly 
traded or hospitals located in Puerto Rico rely on the rural provider 
and whole hospital exceptions in section 1877(d)(2) and (3) of the Act 
and in our regulations at Sec.  411.356(c)(1) and (3), respectively. An 
entity that is a ``hospital'' for purposes of the physician self-
referral law, including a critical access hospital or small rural 
hospital, may use either the rural provider exception (if applicable) 
or the whole hospital exception to avoid the law's referral and billing 
prohibitions, provided that all requirements of the selected exception 
are satisfied, including requirements set forth in the Affordable Care 
Act and included in our regulations at Sec.  411.362.
    The rural provider exception requires that the designated health 
services are furnished in a rural area and that the entity furnishes 
not less than 75 percent of the designated health services that it 
furnishes to residents of a rural area. For purposes of the physician 
self-referral law, a rural area is an area that is not an urban area, a 
term further defined elsewhere in CMS regulations to include certain 
areas defined by the Executive Office of Management and Budget (OMB). 
(See section XVIII.E.6 of this proposed rule for our proposal to make a 
technical amendment to the definition of ``rural area'' in Sec.  
411.351 to address changes in terminology used by OMB in its 
designation of these areas.) OMB regularly publishes updates to the 
list of areas that CMS considers to be urban areas. The whole hospital 
exception is available only to entities that are ``hospitals'' for 
purposes of the physician self-referral law. Under Sec.  411.351, a 
hospital is an entity that qualifies as a ``hospital'' under section 
1861(e) of the Act, as a ``psychiatric hospital'' under section 1861(f) 
of the Act, or as a ``critical access hospital'' under section 
1861(mm)(1) of the Act.
    Whether an entity furnishes designated health services in a rural 
area is subject to change as OMB updates the list of areas that CMS 
considers to be urban areas. Therefore, the continuous applicability of 
the rural provider exception to a particular entity is not guaranteed. 
Reliance on the rural provider exception also requires the entity to 
monitor the residence of the patients to whom it furnishes designated 
health services in order to ensure that the entity furnishes not less 
than 75 percent of the designated health services that it furnishes to 
residents of a rural area. As with the location where designated health 
services are furnished, whether an individual resides in a rural area 
is subject to change as OMB updates the list of areas that CMS 
considers to be urban areas, which may increase the monitoring burden.
    Satisfaction of the requirements of the whole hospital exception is 
not dependent on whether the entity--which must be a hospital for 
purposes of the exception--furnishes designated health services in a 
rural area or where its patients reside. However, section 1861(e) of 
the Act, as amended by section 125 of the CAA, expressly excludes REHs 
from qualifying as a hospital for most Medicare purposes. Although 
critical access hospitals and small rural hospitals meet the definition 
of ``hospital'' in Sec.  411.351, once a critical access hospital or 
small rural hospital converts to an REH, it will no longer be a 
``hospital'' for purposes of the physician self-referral law and, 
therefore, the whole hospital exception will no longer be available to 
it. Although we considered deeming REHs to be hospitals for purposes of 
the physician self-referral law, which would have continued access to 
the whole hospital for such entities, as explained in section XVIII.E.4 
of this proposed rule, we are not proposing to do so because we believe 
it would likely undermine the ability of REHs to ensure access to 
outpatient care for residents of rural and underserved communities as 
contemplated in the CAA.
    We are concerned that, without a broadly-applicable exception to 
its referral and billing prohibitions for ownership or investment in 
REHs, the physician self-referral law could inhibit access to medically 
necessary designated health services furnished by REHs that are owned 
or invested in by physicians (or their immediate family members) and 
thwart the underlying goal of section 125 of the CAA to safeguard or 
expand such access. For this reason, using the Secretary's authority 
under section 1877(b)(4) of the Act to establish exceptions to the 
physician self-referral law for financial relationships that do not 
pose a risk or program or patient abuse, we propose a new exception at 
Sec.  411.356(c)(4) for ownership or investment interests in an REH for 
purposes of the designated health services furnished by the REH. For 
purposes of this preamble, we refer to this exception as ``the proposed 
REH exception.''
    We are not proposing any new exceptions for specific designated 
health services or for compensation arrangements between REHs and 
physicians (or immediate family members of physicians). We believe 
that, for the most part, the existing exceptions in Sec. Sec.  411.355 
and 411.357 are sufficiently comprehensive to allow for nonabusive 
referrals and compensation arrangements between REHs and physicians (or 
immediate family members of physicians). However, certain of the 
exceptions in Sec.  411.357 are applicable only to compensation 
arrangements between a hospital (or other specific type of entity) and 
a physician (or an immediate family member of a physician). Because an 
REH is not considered a hospital for purposes of the physician self-
referral law and is not one of the other specific types of entities to 
which the exceptions currently apply, for the reasons explained in 
section XVIII.E.5 of this proposed rule, and using the Secretary's 
authority under section 1877(b)(4) of the Act, we propose to amend our 
regulations to permit an REH to use these exceptions where doing so 
would not be a risk of program or patient abuse.

[[Page 44792]]

3. Proposed Exception for Rural Emergency Hospitals (Proposed Sec.  
411.356(c)(4))
a. Scope and Structure of the Proposed REH Exception
    The proposed REH exception would be available only to entities that 
are ``rural emergency hospitals.'' To delineate the scope of the 
applicability of the proposed REH exception, we propose to amend Sec.  
411.351 to add a definition of ``rural emergency hospital'' for 
purposes of the physician self-referral law. Under proposed Sec.  
411.351, the term ``rural emergency hospital'' has the meaning set 
forth in section 1861(kkk)(2) of the Act and Sec.  419.91. As proposed, 
Sec.  419.91 cross-references Sec.  485.502, which is proposed in a 
separate rulemaking to define ``rural emergency hospital'' to mean an 
entity that operates for the purpose of providing emergency department 
services, observation care, and other outpatient medical and health 
services specified by the Secretary in which the annual per patient 
average length of stay does not exceed 24 hours. In addition, the 
entity must not provide inpatient services, except those in connection 
with a distinct part unit licensed as a skilled nursing facility to 
furnish post-hospital extended care services.
    Section 1877(d) of the Act and Sec.  411.356(c) establish 
exceptions for ownership of or investment in specific types of 
providers: rural providers, hospitals located in Puerto Rico, and 
hospitals located outside of Puerto Rico. These exceptions apply only 
with respect to referrals for and billing of the specific services 
identified in the relevant exception. For example, the exception at 
section 1877(d)(1) of the Act and Sec.  411.356(c)(2) applies to all 
referrals and billing for designated health services furnished by a 
hospital located in Puerto Rico. In contrast, the exception at section 
1877(d)(2) of the Act and Sec.  411.356(c)(1) applies only to referrals 
and billing for designated health services that the entity furnishes in 
a rural area. The proposed REH exception follows the established 
construct of the existing exceptions for other specific providers and 
would apply to all referrals and billing for designated health services 
furnished by an REH. If all the requirements of the exception are 
satisfied, the referral and billing prohibitions of the physician self-
referral law would not apply with respect to designated health services 
referred by a physician who has (or whose immediate family member has) 
an ownership or investment interest in the REH.
    Because all REHs would have been critical access hospitals or small 
rural hospitals prior to their enrollment in Medicare as an REH, we 
believe it is appropriate to include in the proposed REH exception 
program integrity requirements similar to those that apply to 
hospitals, including critical access hospitals and small rural 
hospitals, under the rural provider and whole hospital exceptions at 
Sec.  411.356(c)(1) and (3)(iv). These requirements would apply to an 
REH even if it was not owned or invested in by physicians (or their 
immediate family members) when it was a critical access hospital or 
small rural hospital. We are not proposing to include every requirement 
of existing Sec.  411.362 in the proposed REH exception; rather, our 
focus is on certain requirements in existing Sec.  411.362(b)(4) that 
relate to ensuring bona fide investment as they would apply to an REH. 
In our view, requirements that relate to disclosure of conflicts of 
interest, prohibition on facility expansion, and prohibition on 
increasing aggregate physician ownership or investment levels are 
program integrity policies that the Congress applied specifically to 
physician-owned hospitals under the Affordable Care Act. If the 
Congress had intended all of these requirements to also apply to REHs, 
it could have considered an REH to be a hospital for purposes of 
section 1877 of the Act or expressly applied them to REHs under section 
1877 of the Act. Importantly, we are concerned that limitations on 
facility expansion or the amount of physician investment or ownership 
in an REH could negatively impact access to needed services in rural 
and other underserved areas. Also, we are confident that the 
comprehensive set of program integrity requirements included in the 
proposed REH exception is sufficient to protect against program and 
patient abuse; therefore, the inclusion of other requirements in 
section 1877(i) of the Act and Sec.  411.362, such as reporting and 
website disclosure requirements, is not necessary. We note that the 
requirement at existing Sec.  411.362(b)(3)(ii)(B), which states that a 
hospital must not condition any physician ownership or investment 
interests either directly or indirectly on the physician owner or 
investor making or influencing referrals to the hospital or otherwise 
generating business for the hospital, is included under the statutory 
and regulatory set of requirements related to disclosure of conflict of 
interests. However, as explained in the Conference Committee report for 
the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-
152), this requirement was seen as a requirement to ensure bona fide 
ownership and investment (Conference Committee report, H. Rept. No. 
443, 111th Cong., 2nd Sess. 354 (2010)). We agree that it is a 
requirement to ensure bona fide ownership and investment and are 
proposing to include a similar requirement at proposed Sec.  
411.356(c)(4)(iii) as described later in this section XVIII.E.3 of this 
proposed rule.
    We seek comment on this approach and whether we should apply more 
or fewer of the requirements related to physician-owned hospitals to 
physician ownership of or investment in an REH. We are considering 
whether to require that an REH must submit an annual report to CMS 
containing a detailed description of the identity of each owner of or 
investor in the REH, as well as the nature and extent of all ownership 
and investment interests in the REH. We would require that the REH 
submit the report at such time and in such manner as specified by CMS. 
In addition, we are seeking comment on whether we should require an REH 
to disclose on any public website for the REH and in public advertising 
for the REH that it is owned or invested in by physicians (or immediate 
family members of physicians), and require an REH to require that each 
physician with an ownership or investment interest in the REH who is a 
member of the REH's medical staff to agree, as a condition of continued 
medical staff membership, to provide written disclosure of their 
ownership or investment interest in the REH to all patients whom the 
physician refers to the REH. We would require that disclosure must be 
made by a time that permits the patient to make a meaningful decision 
regarding the receipt of care. We seek comment regarding the 
appropriateness of these requirements and whether they are necessary to 
protect against program and patient abuse.
b. Entity Enrolled as an REH
    We propose that an entity that uses the proposed REH exception must 
be enrolled in Medicare as an REH. The requirement at proposed Sec.  
411.356(c)(4)(i) would ensure that a hospital (for purposes of the 
physician self-referral law) that may technically meet the definition 
of ``rural emergency hospital'' but is not enrolled in Medicare as such 
may not avail itself of the proposed REH exception. A hospital must 
instead use the rural provider or whole hospital exception, and all of 
the requirements in Sec.  411.362 would apply, including the 
prohibitions on facility

[[Page 44793]]

expansion and exceeding the aggregate percentage of investment 
interests held by physicians (and their immediate family members) as of 
March 23, 2010. We seek comment on this proposed requirement.
c. Ownership in the Entire REH
    We propose to require at proposed Sec.  411.356(c)(4)(ii) that the 
physician's (or immediate family member's) ownership or investment 
interest is in the entire REH and not merely in a distinct part or 
department of the REH. This requirement is similar to the requirement 
at Sec.  411.356(c)(3)(iii) in the whole hospital exception, and we 
would interpret it in the same manner for REHs. When the physician 
self-referral law was first enacted and later amended to apply to 
referrals of designated health services beyond clinical laboratory 
services, the Congress included the whole hospital exception to allow 
physician ownership or investment in hospitals because, at the time, 
there were a number of rural hospitals in particular where physicians 
held ownership interests, and avoiding barriers to accessible health 
care for patients in rural areas was imperative. These hospitals were 
usually the only hospitals in the area and provided a breadth of 
services, and therefore, the Congress did not view ownership or 
investment in the hospital as a significant incentive for self-
referral. Even so, the whole hospital exception explicitly prohibited 
ownership in a subdivision of a hospital because of the concern that if 
physicians owned only the particular part of a hospital to which they 
referred--such as a cardiac wing or department--there would be an 
incentive for self-referral. (See Opening Statement of the Honorable 
Bill Thomas, Physician Ownership and Referral Arrangements and H.R. 
345, ``The Comprehensive Physician Ownership and Referral Act of 
1993,'' House of Representatives, Committee on Ways and Means, 
Subcommittee on Health, April 20, 1993, 145-146; Comments of the 
Honorable Pete Stark, Hearing before the Committee on Ways and Means of 
the U.S. House of Representatives 109th Cong., 1st Sess., 4-5 (Mar. 8, 
2005) (Ser. No. 109-37); and House Committee on Budget Report on H.R. 
3200 and H.R. 4872, H. Rep. No. 443, pt.1, 111th Cong., 2nd Sess., 355-
356 (2010).) We similarly believe that ownership or investment in only 
a distinct part or department of an REH--such as an imaging center--
would be an incentive for self-referral, and, therefore, that proposed 
Sec.  411.356(c)(4)(ii) is necessary to protect against the harms the 
physician self-referral law was enacted to address, namely, 
overutilization and patient steering to less convenient, lower quality, 
or more expensive services and facilities. We seek comment on this 
proposed requirement.
d. Conditioning Ownership or Investment on Making or Influencing 
Referrals or Generating Business for the REH
    In line with requirements for hospitals under the rural provider 
and whole hospital exceptions, we propose to require at Sec.  
411.356(c)(4)(iii) that the REH does not directly or indirectly 
condition any ownership or investment interest held or to be held by a 
physician (or an immediate family member of a physician) on the 
physician making or influencing referrals to the REH or otherwise 
generating business for the REH. This proposed requirement is 
essentially identical to the requirement at existing Sec.  
411.362(b)(3)(ii)(B), which applies to hospitals that use the rural 
provider and whole hospital exceptions, and we would interpret the 
requirements applicable to REHs and hospitals in the same way.
    It is our position that an REH might fail to satisfy this proposed 
requirement if it requires a specified action or achievement with 
respect to referrals to or the generation of business for the REH prior 
to the purchase or receipt of the ownership or investment interest, or 
requires divestiture of an ownership or investment interest following 
the occurrence or nonoccurrence of a specified action or achievement 
with respect to referrals to or the generation of business for the REH. 
For example, we would consider an REH to condition the ownership or 
investment interest to be held by a physician on the physician making 
or influencing referrals to the REH or otherwise generating business 
for the REH if the physician was permitted to purchase an ownership 
interest in the REH only if the physician had ordered a specific number 
of advanced imaging services during each of the 2 years prior to the 
purchase date of the ownership interest. We would also consider an REH 
to condition an ownership or investment interest held by a physician on 
the physician making or influencing referrals to the REH or otherwise 
generating business for the REH if the REH required the physician to 
sell their ownership interest back to the REH in the event that they 
failed to perform a specific percentage of their outpatient surgeries 
at the REH during the current year or reduced the hours that they work 
in their private practice below 75 percent of the prior year. 
Similarly, the REH may not condition the amount of an ownership or 
investment interest that a physician (or an immediate family member of 
a physician) may purchase, receive, or maintain on the occurrence or 
nonoccurrence of a specified action or achievement under proposed Sec.  
411.356(c)(4)(iii). For example, if a physician who performs at least 
80 percent of their surgeries at an REH would be permitted to purchase 
and maintain 20 shares in the REH, while a physician who performs only 
25 percent of their surgeries at the REH would be permitted to purchase 
and maintain only 5 shares in the REH, we would consider the REH to 
condition an ownership or investment interest held or to be held by a 
physician on the physician making or influencing referrals to the REH 
or otherwise generating business for the REH. The examples provided 
here are for illustrative purposes only and are not intended to 
indicate, nor do they indicate, that any particular absolute number, 
percentage, or other standard is acceptable or unacceptable. We seek 
comment on our interpretation of what it means to ``condition'' an 
ownership or investment interest held or to be held by a physician (or 
an immediate family member of a physician) on the physician making or 
influencing referrals to the REH or otherwise generating business for 
the REH under proposed Sec.  411.356(c)(4)(iii). We also seek comment 
specifically on whether we should consider an REH's policy or other 
mandate that a physician (or an immediate family member of a physician) 
must relinquish their ownership or investment interest in an REH upon 
the physician's full retirement from the practice of medicine or the 
relocation of the physician's medical practice to a location outside 
the REH's service area to fail to satisfy the proposed requirement at 
Sec.  411.356(c)(4)(iii), as well as other examples of conduct that we 
should consider to ``condition'' an ownership or investment interest 
held or to be held by a physician (or an immediate family member of a 
physician) on the physician making or influencing referrals to the REH 
or otherwise generating business for the REH under proposed Sec.  
411.356(c)(4)(iii).
    Like existing Sec.  411.362(b)(3)(ii)(B), which applies to 
hospitals that use the rural provider and whole hospital exceptions, 
the requirement at proposed Sec.  411.356(c)(4)(iii) prohibits policies 
and conduct that directly or indirectly condition ownership or 
investment interests held or to be held by a

[[Page 44794]]

physician (or an immediate family member of a physician) on the 
physician making or influencing referrals to the REH or otherwise 
generating business for the REH. For purposes of this requirement, an 
REH directly conditions ownership or investment interests by adopting 
policies that require a specific number, volume, or value of referrals 
to or other business for the REH during a particular time period. For 
example, a requirement that a physician owner of an REH must have 
ordered at least 50 clinical laboratory tests during three of the prior 
four quarters to maintain their ownership (or level of ownership) would 
not satisfy the requirement at proposed Sec.  411.356(c)(4)(iii). 
Similarly, a policy that permits an immediate family member to purchase 
an ownership or investment interest in an REH only if their child, who 
is a physician in private practice, increases the number of patients 
that they refer to the REH by 25 percent during the calendar year prior 
to the purchase would not satisfy the proposed requirement. However, if 
the REH directs the referrals of the physician under a bona fide 
employment relationship, personal service arrangement, or managed care 
contract between the REH and the physician, and the directed referral 
requirement meets all the conditions of Sec.  411.354(d)(4), we would 
not consider the directed referral requirement to constitute directly 
or indirectly conditioning an ownership or investment interest held or 
to be held by a physician (or an immediate family member of a 
physician) on the physician making or influencing referrals to the REH 
or otherwise generating business for the REH.
    For purposes of this requirement, we would consider an REH to 
indirectly condition ownership or investment interests if it adopted 
policies or standards of another person or organization to establish 
qualification criteria for purchasing or maintaining ownership or 
investment interests in the REH and those policies or standards 
required the physician to make or influence referrals to or generate 
business for the REH. For example, if an REH required that a physician 
have active medical staff privileges at the REH to hold an ownership or 
investment interest in the REH, and also approved the medical staff 
bylaws that required a minimum of 50 outpatient therapeutic services 
per year performed or supervised by the physician, the REH would likely 
not satisfy the requirement at proposed Sec.  411.356(c)(4)(iii). This 
is because the REH would indirectly adopt the policy mandating a 
minimum of 50 outpatient therapeutic services per year as the REH's own 
criteria for qualification to hold an ownership or investment interest 
in the REH. We recognize that the medical staff of an entity, although 
accountable to the entity's governing body for the quality of patient 
care provided by medical staff members to the entity's patients, is 
independently organized under its own bylaws and establishes the 
criteria for appointment to the medical staff, credentialing, 
privileging, and oversight. We also recognize that an entity's medical 
staff is responsible for peer review, which, to be effective, requires 
the review of a minimum body of a medical staff member's work in order 
to determine whether to grant or continue active (or some other 
category of) medical staff privileges. We are not proposing, nor would 
we be able, to establish a bright-line rule applicable in all instances 
defining an acceptable number of referrals to or amount of business 
generated for an entity that a medical staff could require in order to 
complete effective peer review activities. Rather, such medical staff 
requirements must directly relate to its peer review obligations--
including the evaluation of a physician's (or other practitioner's) 
individual character, competence, training, experience, and judgment--
and not be a proxy for referrals to or the generation of business for 
the entity. To be clear, if an REH adopted a requirement that a 
physician owner of or investor in the REH must have active privileges 
at the REH, we would consider it to have effectively (albeit 
indirectly) adopted a condition that the physician owner must make the 
same number of referrals to or generate the same amount of business for 
the REH for purposes of the requirement at proposed Sec.  
411.356(c)(4)(iii) as the number of referrals to or amount of business 
for the REH that is required by the medical staff to hold active 
privileges at the REH. To illustrate, if the REH requires all physician 
owners or investors to maintain active medical staff privileges, and 
the REH's medical staff requires a physician to admit and treat a 
minimum of five patients per year to maintain active privileges, we 
would consider the REH to require a minimum of five admissions per year 
for physician owners to hold their ownership interests in the REH. 
Whether the requirement constitutes prohibited indirect conditioning of 
ownership or investment in the REH under proposed Sec.  
411.356(c)(4)(iii) requires a case-by-case determination, including a 
review of the underlying purpose of, need for, and available 
alternatives to the minimum requirement.
    It is our position that there are many ways that an REH could 
indirectly condition an ownership or investment interest held or to be 
held by a physician (or an immediate family member of a physician) on 
the physician making or influencing referrals to the REH or otherwise 
generating business for the REH. For example, an REH could require a 
physician to earn a minimum number of ``points'' in a year to maintain 
the physician's (or an immediate family member's) ownership interest or 
level of ownership. Although this would not per se be prohibited under 
proposed Sec.  411.356(c)(4)(iii), if the required points are merely a 
proxy for referrals to or the generation of business for the REH (for 
example, if the physician is awarded one point for each designated 
health service that they order), we would consider the REH to 
indirectly condition an ownership or investment interest held or to be 
held by a physician (or an immediate family member of a physician) on 
the physician making or influencing referrals to the REH or otherwise 
generating business for the REH. An REH could also indirectly condition 
ownership or investment interests under a points system if it awards 
points only for a physician's personally performed services but the 
personally performed services also result in the furnishing of 
designated health services by the REH. Whether a point system or other 
condition for ownership or investment in an REH runs afoul of proposed 
Sec.  411.356(c)(4)(iii) requires a case-by-case determination. A point 
system that allows the awarding of only one point per patient closely 
ties the referral of the patient or the generation of the business to 
the physician who ordered the designated health service or other REH 
service and, therefore, would likely not be permissible. In contrast, a 
point system that awards points for a variety of physician activities, 
including activities that are not tied to the physician's own referral 
of the patient or business generated for the REH (such as points for 
chairing a committee of the REH, serving as an assistant at surgery, or 
providing a professional consultation for another physician's patient), 
may be permissible under proposed Sec.  411.356(c)(4)(iii).
    As we explained in the MCR final rule, our policies with respect to 
determining whether compensation is determined in any manner that takes 
into account the volume or value of a physician's referrals (the 
``volume or

[[Page 44795]]

value standard'') or the other business generated by a physician (the 
``other business generated standard'') have never applied and do not to 
apply for purposes of analyzing ownership or investment interests for 
compliance with the physician self-referral law, as none of our 
exceptions in Sec.  411.356 include a requirement identical or 
analogous to the volume or value standard or other business generated 
standard (85 FR 77541). Any guidance regarding our interpretation of 
the volume or value standard or other business generated standard is 
not relevant for purposes of applying the exceptions at Sec.  
411.356(c)(1) and (3), both of which incorporate the requirements of 
Sec.  411.362, including the requirement at Sec.  411.362(b)(3)(ii)(B) 
that a hospital must not condition any physician ownership or 
investment interests either directly or indirectly on the physician 
owner or investor making or influencing referrals to the hospital or 
otherwise generating business for the hospital (85 FR 77541). The same 
is true with respect to the proposed REH exception--our interpretation 
of the volume or value standard and the other business generated 
standard is not relevant. Likewise, the interpretations with respect to 
the proposed REH exception explained in this proposed rule are not 
relevant for purposes of applying the special rules at Sec.  
411.354(d)(6) when analyzing compensation arrangements for compliance 
with the physician self-referral law.
    Proposed Sec.  411.356(c)(4)(iii) prohibits an REH conditioning any 
ownership or investment interests held or to be held by a physician (or 
an immediate family member of a physician) on the physician making or 
influencing referrals to the REH (or otherwise generating business for 
the REH). For purposes of the physician self-referral law generally, a 
physician makes a referral (as defined in Sec.  411.351) by ordering 
the designated health service, writing a prescription for a designated 
health service, including the provision of a designated health service 
in a plan of care, certifying or recertifying the need for a designated 
health service, or otherwise requesting the designated health service. 
A physician also makes a referral when the physician requests a 
consultation with another physician and the consulting physician orders 
a designated health service to be performed by (or under the 
supervision of) the consulting physician. (A physician who transfers 
the care of a patient, in whole or in part, to another physician for 
specialty or other care to be provided by the other physician--as 
opposed to a request for a consultation with the other physician--does 
not make a referral for designated health services ordered or otherwise 
referred by the other physician.) A physician may make a referral 
orally, in writing, electronically, or in any other form. For purposes 
of proposed Sec.  411.356(c)(4)(iii), we would interpret the making of 
referrals to an REH in the same way.
    With respect to the influencing of referrals to an REH under 
proposed Sec.  411.356(c)(4)(iii), impactful pressure or persuasion to 
refer, or an enforceable requirement for or control over the referrals 
of another, would demonstrate a physician's influence over the 
referrals of another physician to an REH. Under Sec.  411.351, 
``referral'' is defined in the context of a physician's action or 
conduct. We would interpret the term ``referral'' consistent with its 
meaning throughout the physician self-referral regulations, and 
interpret the requirement at proposed Sec.  411.356(c)(4)(iii) to 
relate only to the influencing of referrals by a physician to the REH. 
For example, an REH would not satisfy the requirement at proposed Sec.  
411.356(c)(4)(iii) if it withheld the opportunity to purchase an 
ownership or investment interest in the REH from the physician owners 
of a physician practice unless the practice required all of its 
employed and contracted physicians to refer all of their patients to 
the REH for diagnostic testing and clinical laboratory services, or 
required them to perform all outpatient surgeries at the REH. (We note 
that, with respect to the employed and contracted physicians' referrals 
for designated health services furnished by the physician practice, the 
requirement for referrals to the REH may be permissible, provided that 
all requirements of Sec.  411.354(d)(4) are satisfied.)
    Proposed Sec.  411.356(c)(4)(iii) also prohibits an REH 
conditioning any ownership or investment interests held or to be held 
by a physician (or an immediate family member of a physician) on the 
physician otherwise generating business for the REH. We would interpret 
the phrase ``otherwise generating business'' in proposed Sec.  
411.356(c)(4)(iii) consistent with our interpretation of the same and 
similar phrases in our other regulations. We addressed our 
interpretation of the phrase ``other business generated'' and its 
variations, such as ``otherwise generating business,'' in several of 
our prior rulemakings. We indicated that other business generated does 
not include a physician's personally performed services, but does 
include a referred technical component that corresponds to a 
physician's personally performed service (69 FR 16067 through 16068). 
We also indicated that other business generated by a physician includes 
Federal and private pay business (other than Medicare) (66 FR 877), as 
well as non-Federal health care business (69 FR 16068). It is important 
to highlight that these statements are examples of what is and is not 
``other business generated'' for purposes of the physician self-
referral law. Our longstanding interpretation of the phrase ``other 
business generated'' is that it means any other business or revenues 
generated by a physician (66 FR 877) (emphasis added). Although such 
business or revenues may be generated through the furnishing of health 
care services by the entity, our interpretation is not limited to 
business or revenue generated through the furnishing of health care 
services.
    It is our position that a physician may generate business for an 
REH in a variety of ways, including, but not limited to, ordering 
services to be furnished or billed by the REH, writing a prescription 
for a service to be furnished or billed by the REH, establishing a plan 
of care for services to be furnished or billed by the REH, certifying 
or recertifying the need for services to be furnished or billed by the 
REH, or otherwise requesting services to be furnished or billed by the 
REH. A physician may also generate business for an REH that is 
unrelated to the REH's furnishing of health care services. We interpret 
the generation of business by a physician to include the physician's 
direct actions and the actions of others whom the physician directs or 
otherwise influences to generate business for the REH.
    We seek comment on our interpretation of this proposed requirement 
and request specific examples of directly and indirectly conditioning 
any ownership or investment interests held or to be held by a physician 
(or an immediate family member of a physician) on the physician making 
or influencing referrals to the REH or otherwise generating business 
for the REH. We are particularly interested in examples of conduct by 
an REH that would constitute ``conditioning'' of ownership or 
investment interests, as well as examples of conduct that we should not 
consider to condition ownership or investment interests. We are also 
interested in examples of conduct by a physician (or an immediate 
family member of a physician) that could ``influence'' referrals to an 
REH, as well as examples of conduct that we should

[[Page 44796]]

not consider to influence referrals to an REH.
e. Offer of Ownership or Investment on More Favorable Terms
    We propose to require at Sec.  411.356(c)(4)(iv) that the REH does 
not offer any ownership or investment interests to a physician (or an 
immediate family member of a physician) on terms more favorable than 
the terms offered to a person that is not a physician (or an immediate 
family member of a physician). This proposed requirement is essentially 
identical to the requirement at existing Sec.  411.362(b)(4)(ii), which 
applies to hospitals that use the rural provider and whole hospital 
exceptions, and we would interpret the requirements applicable to REHs 
and hospitals in the same way. For example, an REH that permits a 
physician owner or investor to pay for purchased shares in the REH over 
5 years while requiring non-physicians to pay the full purchase price 
in advance of the purchase would not satisfy the proposed requirement. 
Similarly, an REH could not permit a physician to purchase additional 
shares in the REH every year while allowing non-physicians to purchase 
shares only once every 3 years.
    We note that, in the requirement at existing Sec.  
411.362(b)(4)(ii) from which this proposed requirement is drawn, the 
word ``who'' follows ``person.'' We believe that the statutory 
requirement on which that regulation is based is intended to prohibit 
the offering of ownership or investment interests to physicians (or 
immediate family members of physicians) on terms more favorable than 
any other owner of or investor in a hospital. For this reason, we 
propose to use the word ``that'' following ``person'' to indicate that 
the person to which less favorable terms are offered could be a natural 
person (that is, an individual) or a non-natural person (that is, a 
corporation, partnership, or similar organization).
    We seek comment regarding this proposed requirement and specific 
examples of conduct that would satisfy (or fail to satisfy) the 
proposed requirement.
f. Providing Loans or Financing for Ownership or Investment
    We propose at Sec.  411.356(c)(4)(v) to prohibit an REH and the 
owners of or investors in the REH from directly or indirectly providing 
loans or financing for any investment in the REH by a physician (or an 
immediate family member of a physician). This proposed requirement is 
essentially identical to the requirement at existing Sec.  
411.362(b)(4)(iii), which applies to hospitals that use the rural 
provider and whole hospital exceptions, and we would interpret the 
requirements applicable to REHs and hospitals in the same way. For 
purposes of this proposed requirement, an REH directly provides loans 
or financing by lending the funds or other assets of the REH for use in 
purchasing the physician's (or immediate family member's) ownership or 
investment interest in the REH. In such a case, the REH is the lender. 
Similarly, an individual or corporate owner of or investor in an REH 
directly provides loans or financing by lending their own funds or 
other assets for use in purchasing the physician's (or immediate family 
member's) ownership or investment interest in the REH.
    An REH indirectly provides loans or financing for investment in the 
REH by controlling or meaningfully influencing another person's 
decision to lend funds or assets for use in purchasing the physician's 
(or immediate family member's) ownership or investment interest in the 
REH. In such a case, the REH is not the lender. For example, if an REH 
is the sole owner of the corporation that loans money to a physician to 
purchase an ownership or investment interest in the REH, we would 
consider the REH to indirectly provide the loan because the REH 
exercises control over its wholly-owned subsidiary corporation. In 
contrast, merely introducing a physician (or an immediate family member 
of a physician) to an individual or corporation that might lend funds 
or assets for use in purchasing an ownership or investment interest in 
an REH, in the absence of actual control or meaningful influence over 
the lender's decision whether a loan will be provided, would not 
constitute the indirect provision of a loan or financing for investment 
in the REH.
    We seek comment on our interpretation of this proposed requirement 
and request specific examples of directly and indirectly providing 
loans or financing for investment in an REH.
g. Guarantee, Make a Payment on, or Otherwise Subsidize a Loan
    At proposed Sec.  411.356(c)(4)(vi), we propose to prohibit an REH 
and the owners of or investors in the REH from directly or indirectly 
guaranteeing a loan, making a payment toward a loan, or otherwise 
subsidizing a loan for a physician (or an immediate family member of a 
physician) that is related to acquiring any ownership or investment 
interest in the REH. This proposed requirement is essentially identical 
to the requirement at existing Sec.  411.362(b)(4)(iv), which applies 
to hospitals that use the rural provider and whole hospital exceptions, 
and we would interpret the requirements applicable to REHs and 
hospitals in the same way. We note that existing Sec.  
411.362(b)(4)(iv) extends the prohibition on guaranteeing, making a 
payment toward, or otherwise subsidizing a loan to such activities when 
they are for a group of physician owners or investors, whereas proposed 
Sec.  411.356(c)(4)(vi) prohibits these activities as they relate to 
individual physicians (and immediate family members). A group of 
physician owners or investors is made up of individual physicians and, 
therefore, the proposed requirement would also prohibit guaranteeing, 
making a payment toward, or otherwise subsidizing a loan for a group of 
physician owners or investors.
    For purposes of proposed Sec.  411.356(c)(4)(vi), an REH, 
individual owner of or investor in an REH, or corporate owner of or 
investor in an REH guarantees a loan when the REH, owner, or investor 
formally or informally promises the lender that, should a physician (or 
an immediate family member of a physician) fail to make a required 
payment on a loan related to the physician's (or immediate family 
member's) acquisition of any ownership or investment interest in the 
REH, the REH, owner, or investor, respectively, will make or otherwise 
ensure that the payment will be made to the lender. A direct guarantee 
would include pledging the guarantor's own funds or assets as 
collateral for the guaranteed loan, whereas an indirect guarantee would 
include pledging or arranging for the pledge of the funds or assets of 
another individual or corporate entity as collateral for the guaranteed 
loan. We would also consider the pledge of funds or assets of an REH, 
individual owner of or investor in an REH, or corporate owner of or 
investor in an REH to guarantee a loan for property that serves as 
collateral for the loan related to acquiring the physician's (or 
immediate family member's) ownership or investment interest in the REH 
to be an indirect guarantee of such loan.
    We would interpret the direct or indirect making of a payment 
toward a loan similarly. That is, a person directly makes a payment 
toward a loan by using the person's own funds or assets to make the 
payment, and indirectly makes a payment toward a loan by using or 
arranging for the use of the funds or assets of another individual or 
corporate entity to make the payment. An REH would not be prohibited 
from garnishing the wages or other

[[Page 44797]]

compensation due to a physician (or an immediate family member of a 
physician) to make loan payments on behalf of the physician (or 
immediate family member).
    Finally, for purposes of proposed Sec.  411.356(c)(4)(vi), an REH, 
individual owner of or investor in an REH, or corporate owner of or 
investor in an REH otherwise subsidizes a loan when the REH, owner, or 
investor pays part of the cost of a loan for a physician (or an 
immediate family member of a physician). Subsidies would include, for 
example, payments to reduce the principal amount of the loan, reduce 
the interest rate applied to the loan, or cover the cost of fees, such 
as origination fees, late fees, or early payoff penalties. As with 
guaranteeing or making payments toward a loan, we would interpret 
directly and indirectly subsidizing a loan to mean that a person 
directly subsidizes a loan by using the person's own funds or assets to 
pay part of the cost of the loan, and indirectly subsidizes a loan by 
using or arranging for the use of funds or assets of another individual 
or corporate entity to pay part of the cost of the loan.
    We seek comment on our interpretation of this proposed requirement 
and request specific examples of direct and indirect guarantees of, 
payments toward, and otherwise subsidizing a loan for a physician (or 
an immediate family member of a physician) that is related to acquiring 
any ownership or investment interest in an REH.
h. Proportional Distributions
    We propose to require at Sec.  411.356(c)(4)(vii) that ownership or 
investment returns are distributed to each owner of or investor in an 
REH in an amount that is directly proportional to the ownership or 
investment interest in the REH of such owner or investor. This proposed 
requirement is essentially identical to the requirement at existing 
Sec.  411.362(b)(4)(v), which applies to hospitals that use the rural 
provider and whole hospital exceptions, and we would interpret the 
requirements applicable to REHs and hospitals in the same way. Simply 
put, distributions of profits, dividend payments, and other payouts on 
equity may only be tied to the number of shares owned by an investor, 
and not to their referrals or the other business the investor generates 
for the REH. We would interpret ``proportional'' as it is defined in 
the dictionary: corresponding in size or amount.
    To ensure that the ownership or investment return to each owner of 
or investor in the REH is directly proportional to the particular 
owner's or investor's interest in the REH, all owners and investors 
must be treated the same. That is, if any owner or investor is eligible 
to receive or actually receives an ownership or investment return, all 
other owners or investors must be eligible to receive or actually 
receive an ownership or investment return, respectively. For example, 
an REH wholly-owned by physicians would not satisfy this proposed 
requirement if the REH made distributions only to physicians who 
generate a minimum amount of business for the REH during the ownership 
or investment period. In addition, an REH could not exclude owners or 
investors that are not physicians (or their immediate family members) 
from eligibility for ownership or investment returns for the purpose of 
making distributions only to owners or investors who are physicians in 
a position to generate business for the REH or their immediate family 
members. This would be the case even if the distributions were in 
amounts that are directly proportional to the physician's (or immediate 
family member's) ownership or investment interest in the REH.
    We seek comment on our interpretation of this proposed requirement 
and request specific examples of potentially nonabusive classifications 
of owners or investors that could justify the distribution of ownership 
or investment returns only to a subset of owners or investors in an REH 
or in an amount that is not directly proportional to the ownership or 
investment interest in the REH of each owner or investor.
i. Guaranteed Receipt of or Right To Purchase Other Business Interests
    We are also proposing to require that any physician (or immediate 
family member of a physician) who has an ownership or investment 
interest in an REH does not directly or indirectly receive any 
guaranteed receipt of or right to purchase other business interests 
related to the REH, including the purchase or lease of any property 
under the control of any other owner of or investor in the REH or 
located near the premises of the REH. This requirement is at proposed 
Sec.  411.356(c)(4)(viii) and is essentially identical to the 
requirement at existing Sec.  411.362(b)(4)(vi), which applies to 
hospitals that use the rural provider and whole hospital exceptions. We 
would interpret the requirements applicable to REHs and hospitals in 
the same way.
    For purposes of this requirement, other business interests related 
to the REH would include a wide array of investment opportunities, 
ventures, and interests, as well as the examples of the purchase and 
lease of property under the control of any other owner of or investor 
in the REH that are listed in the statutory and regulatory requirements 
applicable to hospitals that use the rural provider and whole hospital 
exceptions. We would consider the business interests of any owner of or 
investor in the REH to be business interests related to the REH. For 
example, under the proposed requirement at Sec.  411.356(c)(4)(viii), a 
physician owner of or investor in an REH may not directly or indirectly 
receive an interest in another component of the health care system that 
includes an REH upon the physician's purchase of their ownership or 
investment interest in the REH, nor may the physician owner directly or 
indirectly be guaranteed the right to invest in a venture in which 
another owner of the REH is also an investor. In these examples, the 
physician owner would directly receive an interest or be guaranteed the 
right to invest in a business interest related to an REH if the 
interest is held or would be held, if purchased, in the physician's 
name. In contrast, the physician owner would indirectly receive an 
interest or be guaranteed the right to invest in a business interest 
related to an REH if the interest is received by, held in the name of, 
or, if purchased, would be held in the name of a person or corporate 
entity over which the physician exercises meaningful control or 
influence, such as a partnership or limited liability company in which 
the physician holds a substantial interest. We seek comment on our 
interpretation of this proposed requirement and request specific 
examples of direct and indirect guaranteed receipt of other business 
interests, direct and indirect guaranteed rights to purchase business 
interests, and the types of business interests we should consider 
related to an REH.
j. Offer To Purchase or Lease Other Property on More Favorable Terms
    Finally, at proposed Sec.  411.356(c)(4)(ix), we propose to require 
that an REH does not offer a physician (or an immediate family member 
of a physician) the opportunity to purchase or lease any property under 
the control of the REH or any other owner of or investor in the REH on 
more favorable terms than the terms offered to a person that is not a 
physician (or an immediate family member of a physician). This proposed 
requirement is essentially identical to the requirement at existing 
Sec.  411.362(b)(4)(vii), which applies to hospitals that use the rural 
provider and

[[Page 44798]]

whole hospital exceptions, and we would interpret the requirements 
applicable to REHs and hospitals in the same way.
    We highlight that there are two main differences between the 
requirements at proposed Sec. Sec.  411.356(c)(4)(viii) and (ix). The 
former applies to any business interests related to the REH and 
prohibits the guaranteed receipt of or right to purchase such other 
business interests. The latter applies only to property under the 
control of the REH, an owner of the REH, or an investor in the REH, and 
prohibits the offering of the opportunity to purchase or lease such 
property on terms more favorable than the terms offered to a person 
that is not a physician (or an immediate family member of a physician).
    With respect to the prohibition on offering an opportunity to 
purchase or lease property on terms more favorable than the terms 
offered to a person that is not a physician (or an immediate family 
member of a physician), we would interpret this requirement in the same 
way as proposed Sec.  411.356(c)(4)(iv), which, as described earlier in 
this section XVIII.E.3 of this proposed rule, would prohibit an REH 
from offering any ownership or investment interests to a physician (or 
an immediate family member of a physician) on terms more favorable than 
those offered to a person that is not a physician (or an immediate 
family member of a physician). We note that the requirement at existing 
Sec.  411.362(b)(4)(vii), from which this proposed requirement is 
drawn, states that the physician owner may not be offered the 
opportunity to purchase or lease certain property on more favorable 
terms than those offered to an ``individual'' who is not a physician 
owner or investor, in contrast to the requirement at existing Sec.  
411.362(b)(4)(ii), which references ``persons'' in a similar manner, as 
described earlier in this section XVIII.E.3 of this proposed rule. We 
believe that the statutory requirement on which existing Sec.  
411.362(b)(4)(vii) is based is intended to prohibit the offering of the 
opportunity to purchase or lease the specified property on terms more 
favorable than any other owner of or investor in a hospital. For this 
reason, proposed Sec.  411.356(c)(4)(ix) includes the words ``person 
that'' in the same way as proposed Sec.  411.356(c)(4)(iv) to indicate 
that the person to which less favorable terms are offered could be a 
natural person (that is, an individual) or a non-natural person (that 
is, a corporation, partnership, or similar organization).
4. Alternative To Proposed REH Exception Considered But Not Proposed
    Section 1861(e) of the Act excludes critical access hospitals 
(formerly referred to as rural primary care hospitals) for most 
purposes of Title XVIII of the Act unless the context otherwise 
requires. However, as we explained in the 1998 proposed rule, we 
believe that the reference to context in this statutory provision 
indicates that critical access hospitals may be deemed to be hospitals 
where, in specific contexts, it is consistent with the purpose of the 
legislation to do so (63 FR 1681). For that reason, we included such 
entities in our definition of ``hospital'' at Sec.  411.351 (66 FR 
954). We based this policy on our belief that a physician who has a 
financial relationship with a critical access hospital is in as much of 
a position to profit from overutilizing referrals to the critical 
access hospital as they would be if the financial relationship was with 
an ordinary hospital. In addition, a critical access hospital provides 
services that are very similar to inpatient hospital services (63 FR 
1681).
    Section 125 of the CAA amended section 1861(e) of the Act to also 
exclude REHs from the definition of ``hospital'' for most Medicare 
purposes, unless the context otherwise requires. We considered whether 
to include REHs in the definition of ``hospital'' in Sec.  411.351 for 
purposes of the physician self-referral law similar to our treatment of 
critical access hospitals. We are not proposing to do so for two 
primary reasons. First, REHs are not the same as critical access 
hospitals (or other hospitals that furnish inpatient care). By 
definition, an REH may not furnish inpatient care, a fundamental 
attribute of and requirement for a hospital for purposes of Medicare. 
(See section 1861(e) of the Act.) Second, if we were to consider an REH 
to be a hospital for purposes of the physician self-referral law, in 
order for an REH to avoid the law's referral and billing prohibitions, 
the ownership or investment interests of physicians (and their 
immediate family members) would have to satisfy the requirements of one 
of the existing exceptions applicable to such ownership or investment 
interests, which could prove challenging, thus limiting the ability of 
such potential investors to bring needed resources to underserved and 
rural communities. If we proposed to include REHs as ``hospitals'' for 
purposes of the physician self-referral law, we would not propose to 
establish the exception for ownership or investment in an REH with the 
requirements described in this section XVIII.E of this proposed rule 
because we do not believe that the Secretary's authority under section 
1877(b)(4) of the Act would permit us to establish an exception that 
applies to only one type of hospital (for purposes of the physician 
self-referral law) without including the same (or equally stringent) 
program integrity requirements established by the Congress in statute.
    To avoid the physician self-referral law's referral and billing 
prohibitions under the rural provider or whole hospital exception, an 
ownership or investment interest must satisfy the requirements of the 
applicable exception at the time of the physician's referral and the 
hospital must meet the requirements of section 1877(i) of the Act and 
Sec.  411.362 no later than September 23, 2011. Section 1877(i)(1)(A) 
of the Act and Sec.  411.362(b)(1) require that the hospital had 
physician ownership or investment on December 31, 2010, and a provider 
agreement under section 1866 of the Act on that date (emphasis added). 
Put another way, for a hospital to bill Medicare (or another 
individual, entity, or third-party payer) for a designated health 
service furnished as a result of a physician owner's referral today, 
the hospital must have had both physician ownership or investment and a 
Medicare provider agreement on December 31, 2010. Thus, the hospital 
submitting the claim today must be the same hospital that had both 
physician ownership or investment and a Medicare provider agreement on 
December 31, 2010.
    If we were to include REHs as hospitals for purposes of the 
physician self-referral law, certain REHs would be presumptively 
excluded from using the rural provider or whole hospital exceptions: 
REHs that had no physician owners or investors, as defined at Sec.  
411.362(a), on March 23, 2010 or December 31, 2010, and REHs that did 
not have a Medicare provider agreement in effect on December 31, 2010. 
Although we are uncertain how many REHs this would affect, we believe 
that prohibiting critical access hospitals and small rural hospitals 
that could not avail themselves of the rural provider or whole hospital 
exceptions prior to conversion to an REH from accepting investment in 
the REH by a physician (or an immediate family member of a physician) 
after conversion could undermine the purpose of section 125 of the CAA 
to safeguard access to necessary care for underserved patients and 
those in rural areas, and we are hesitant to do so.

[[Page 44799]]

    Critical access hospitals and small rural hospitals that had 
physician ownership on March 23, 2010 and December 31, 2010 and a 
Medicare provider agreement in effect on December 31, 2010 may avail 
themselves of the rural provider and whole hospital exceptions, 
provided that all other requirements of the applicable exception are 
satisfied. This would continue after conversion to an REH if we deemed 
REHs to be hospitals for purposes of the physician self-referral law. 
However, as noted above, the REH/hospital would have to be the same 
hospital that had physician ownership on March 23, 2010 and December 
31, 2010 and a Medicare provider agreement in effect on December 31, 
2010 (the ``original hospital''). We would consider many factors when 
determining whether an REH would qualify as the same hospital that had 
physician ownership on March 23, 2010 and December 31, 2010 and a 
Medicare provider agreement in effect on December 31, 2010 including, 
but not limited to: status of, type of, and party to the State license 
for both the REH and the original hospital, including any lapses in 
State licensure or operation of either the REH or the original 
hospital; status of and party to the Medicare provider agreement, 
including any lapses in Medicare participation of either the REH or the 
original hospital; whether the REH has the same Medicare provider 
number as the original hospital; the location and structure of the REH 
building(s) and those of the original hospital; whether the REH is 
under the same State's licensure regime as the original hospital; 
whether the REH serves the same community as the original hospital; 
whether the REH provides the same scope of services as the original 
hospital; REH ownership and that of the original hospital; and the 
number of operating rooms, procedure rooms, and beds operated by the 
REH and that of the original hospital. No one factor would be 
dispositive.
    Finally, were we to deem REHs to be hospitals for purposes of the 
physician self-referral law, even those REHs that qualify to use the 
rural provider or whole hospital exception could not increase the 
amount of physician ownership or investment in the REH beyond the level 
of the original hospital on March 23, 2010. In addition, the REH could 
not expand its aggregate number of operating rooms and procedure rooms 
(it will likely not have licensed beds by definition) beyond the 
aggregate number of operating rooms, procedure rooms, and beds for 
which the original hospital was licensed on March 23, 2010 (or, in the 
case of an original hospital that did not have a Medicare provider 
agreement in effect as of March 23, 2010, but did have a Medicare 
provider agreement in effect on December 31, 2010, the effective date 
of its Medicare provider agreement) (its ``baseline number of operating 
rooms, procedure rooms, and beds''). Given that an REH may not furnish 
inpatient services under section 125 of the CAA and the regulations 
proposed in this proposed rule, the latter limitation may not have a 
significant impact on access to care in rural and other underserved 
areas, as an REH could continue to increase the number of its operating 
rooms and procedure rooms until it reached its baseline number of 
operating rooms, procedure rooms, and beds. However, as noted, we 
believe that physicians and their immediate family members may be an 
important source of needed capital for REHs. We are concerned that 
limiting the amount of physician ownership or investment in an REH to 
the level of such ownership or investment in the original hospital on 
March 23, 2010 could limit the services available to its patients and 
the community in which it is located and run counter to the purpose of 
section 125 of the CAA.
5. Applicability of Certain Exceptions in Sec.  411.357 for 
Compensation Arrangements Involving REHs
    Section 1877(e) of the Act and Sec.  411.357 set forth exceptions 
to the physician self-referral law for compensation arrangements 
between entities and physicians (or immediate family members of 
physicians) when all requirements of the exception are satisfied. Some 
of these exceptions apply only to specified types of compensation, 
specified types of entities, or both. The exceptions in Sec.  411.357 
that are applicable only to compensation arrangements to which one 
party is a hospital, federally qualified health center, or rural health 
clinic would not be available to an REH because it is not a hospital 
under section 1861(e) of the Act or our regulations at Sec.  411.351. 
We believe that many of these party-limited exceptions could be 
important to ensuring access to necessary designated health services 
and other care furnished by an REH. Therefore, using the Secretary's 
authority under section 1877(b)(4) of the Act, we propose to revise the 
exceptions at Sec.  411.357(e), (r), (t), (v), (x), and (y) to make 
them applicable to compensation arrangements to which an REH is a 
party.
    The current exceptions for physician recruitment (Sec.  
411.357(e)), obstetrical malpractice insurance subsidies (Sec.  
411.357(r)), retention payments in underserved areas (Sec.  
411.357(t)), and assistance to compensate a nonphysician practitioner 
(Sec.  411.357(x)) are available to hospitals, federally qualified 
health centers, and rural health clinics. We propose to revise these 
exceptions to also permit an REH to provide remuneration to a physician 
if all requirements of the applicable exception are satisfied because 
we believe that REHs will face the same challenges as hospitals, 
federally qualified health centers, and rural health clinics in 
recruiting and retaining qualified physicians and other practitioners 
in their service areas. Consistent with our rationale when expanding 
the statutory exception for physician recruitment to federally 
qualified health centers (69 FR 16095), we propose the extension of 
these exceptions to REHs to help ensure that the physician self-
referral law does not impede efforts by REHs, which will provide 
substantial services to underserved populations, to recruit, assist 
with the recruitment of, and retain adequate staffs. We do not believe 
that a compensation arrangement between an REH and a physician (or an 
immediate family member of a physician) that is properly structured to 
satisfy all the requirements of these exceptions would pose a risk of 
program or patient abuse. We are also proposing a technical amendment 
at proposed Sec.  411.357(t)(5) to cross-reference the definition of 
the geographic area served by a federally qualified health center or 
rural health clinic that was previously omitted from this paragraph. 
The cross-referenced definition would also apply to REHs under this 
proposal.
    The current exception for electronic prescribing items and services 
at Sec.  411.357(v) is available only to hospitals, group practices 
that meet the requirements in Sec.  411.352, PDP sponsors, and MA 
organizations and applies to hardware, software, or information 
technology and training services necessary and used solely to receive 
and transmit electronic prescription information that is provided to 
physicians specified in the regulation. For the reasons set forth in 
this and many of our prior rulemakings regarding the benefits of 
electronic prescribing, we believe that allowing REHs to use the 
exception at Sec.  411.357(v) would advance our goals to expand the use 
of electronic prescribing. We do not believe that a compensation 
arrangement between an REH and a

[[Page 44800]]

physician (or an immediate family member of a physician) that is 
properly structured to satisfy all the requirements of the exception 
would pose a risk of program or patient abuse.
    The current exception for timeshare arrangements at Sec.  
411.357(y) is available only to hospitals and certain physician 
organizations (as defined in Sec.  411.351) and applies to arrangements 
for the use of premises, equipment, personnel, items, supplies, and 
services. One of the underlying policy considerations for establishing 
this exception was to facilitate access to care in rural and other 
underserved areas (80 FR 71326). We believe that timeshare arrangements 
between REHs and physicians (or physician organizations in whose shoes 
such physicians stand under Sec.  411.354(c)) may similarly increase 
access to necessary care for patients in underserved areas, and that it 
would be appropriate to extend the availability of the exception for 
timeshare arrangements to REHs. We do not believe that a compensation 
arrangement between an REH and a physician (or an immediate family 
member of a physician) that is properly structured to satisfy all the 
requirements of the exception would pose a risk of program or patient 
abuse.
    We seek comment on our proposals to permit an REH to use the 
exceptions for physician recruitment (Sec.  411.357(e)), obstetrical 
malpractice insurance subsidies (Sec.  411.357(r)), retention payments 
in underserved areas (Sec.  411.357(t)), electronic prescribing items 
and services (Sec.  411.357(v)), assistance to compensate a 
nonphysician practitioner (Sec.  411.357(x)), and timeshare 
arrangements (Sec.  411.357(y)). Because the REH will not provide 
inpatient services and may elect not to provide outpatient services 
beyond emergency room and observation services, we are particularly 
interested in comments regarding the need for an REH to recruit 
physicians to establish or join medical practices in the geographic 
area served by the REH and how to define the geographic service area 
served by an REH for physician recruitment purposes. For the same 
reason, we are interested in comments regarding the need to extend the 
availability of the exception for assistance to compensate a 
nonphysician practitioners. We are also particularly interested in 
comments regarding the need for an REH to subsidize obstetrical 
malpractice insurance premium costs in light of the fact that an REH 
may elect not to serve obstetrical and newborn patients outside its 
emergency department.
    We note that the current exception for medical staff incidental 
benefits at Sec.  411.357(m) applies to items or services (not 
including cash or cash equivalents) provided to a member of the 
entity's medical staff. The exception applies to hospitals, as well as 
other facilities and health care clinics (including, but not limited 
to, federally qualified health centers) that have bona fide medical 
staffs. Prior to conversion to an REH, as a hospital for purposes of 
the physician self-referral law, a critical access hospital or small 
rural hospital would have been able to use the exception for medical 
staff incidental benefits. An REH that has a bona fide organized 
medical staff could use the exception for medical staff incidental 
benefits under current Sec.  411.357(m)(8). However, we seek comment 
regarding whether we should revise Sec.  411.357(m) to expressly 
include REHs as entities to which the exception applies.
6. Revised Cross-Reference in Definition of ``Rural Area'' for Purposes 
of the Physician Self-Referral Law
    As discussed earlier in section XVIII.E of this proposed rule, the 
rural provider exception applies to designated health services 
furnished in a rural area. Section 1877(d)(2) of the Act defines 
``rural area'' by reference to section 1886(d)(2)(D) of the Act. In the 
1992 proposed rule, we proposed to define ``rural area'' as an area 
that is not an ``urban area,'' as the term is the term is defined at 
Sec.  412.62(f)(1)(ii) (57 FR 8598). Section 411.62 established the 
Federal rates for inpatient operating costs for fiscal year 1984. We 
finalized the definition of ``rural area,'' including the reference 
Sec.  412.62(f)(1)(ii), in the 1995 final rule (60 FR 41980). In the FY 
2005 IPPS final rule, CMS revised the definitions of urban and rural 
areas based on OMB's revised standards for defining Metropolitan 
Statistical Areas (MSAs) (69 FR 49077). The revised definitions of 
urban and rural areas were codified at Sec.  412.64(b). Section 412.64 
establishes Federal rates for inpatient operating costs for Federal 
fiscal year 2005 and subsequent fiscal years. Despite the revised 
definition of rural and urban areas in the FY 2005 IPPS final rule, the 
definition of ``rural area'' as codified in Sec.  411.351 for purposes 
of the physician self-referral law was never updated to reflect OMB's 
revised standards for defining MSAs. As a consequence, the current 
definition of ``rural area'' in Sec.  411.351 includes, by reference to 
Sec.  412.62(f)(1)(ii), terminology that is no longer employed by OMB, 
such as ``New England County Metropolitan Area (NECMA)'' (see, for 
example, 65 FR 51065). To ensure that the definition of ``rural area'' 
for purposes of the physician self-referral law is aligned with CMS' 
updated definitions of rural and urban areas at Sec.  412.64 and takes 
into account OMB's revised standards for defining MSAs, we propose to 
modify the definition of ``rural area'' in Sec.  411.351 to reference 
Sec.  412.64(b) instead of Sec.  412.62(f). Specifically, we propose to 
define ``rural area'' as an area that is not an urban area as defined 
at Sec.  412.64(b) of this chapter. We believe that this technical 
change will have no effect on the entities that qualify as ``rural 
providers'' under Sec.  411.356(c)(1). We seek comment on this 
proposal.

XIX. Request for Information on Use of CMS Data To Drive Competition in 
Healthcare Marketplaces

A. Background

    On July 9, 2021, the President issued an Executive Order on 
Promoting Competition in the American Economy (E.O. 14036). According 
to E.O. 14036, ``robust competition is critical to preserving America's 
role as the world's leading economy,'' and ``the American promise of a 
broad and sustained prosperity depends on an open and competitive 
economy.''
    A fact sheet released in conjunction with E.O. 14036 \324\ goes on 
to identify hospital consolidation as a major concern, stating 
``[h]ospital consolidation has left many areas, especially rural 
communities, without good options for convenient and affordable 
healthcare service.'' Research suggests that mergers in rural areas 
could result in reduced service lines and responsiveness to community 
needs.\325\ Furthermore, in urban and rural areas, hospitals in 
consolidated markets charge far higher prices than hospitals in markets 
with several competitors. The Fact Sheet that accompanies E.O. 14036:
---------------------------------------------------------------------------

    \324\ https://www.whitehouse.gov/briefing-room/statements-releases/2021/07/09/fact-sheet-executive-order-on-promoting-competition-in-the-american-economy/.
    \325\ Hencke, RM, et al. ``Access To Obstetric, Behavioral 
Health, And Surgical Inpatient Services After Hospital Mergers In 
Rural Areas,'' https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2021.00160, October 2021.
---------------------------------------------------------------------------

     Underscores that hospital mergers can be harmful to 
patients and encourages the Justice Department and the Federal Trade 
Commission to review and revise their merger guidelines to ensure 
patients are not harmed by such mergers.
     Directs HHS to support existing hospital price 
transparency rules and to finish implementing bipartisan Federal

[[Page 44801]]

legislation to address surprise hospital billing.
    Additionally, in 2018, MedPAC reviewed the literature and data on 
health care provider consolidation in response to a congressional 
request.\326\ They found that by 2017, in most markets, a single 
hospital system had more than a 50 percent market share of discharges, 
and that hospital consolidation leads to higher prices for commercially 
insured patients. Furthermore, the literature synthesized by MedPAC 
suggested these high prices primarily reflected hospitals negotiating 
higher prices with insurers, rather than cost shifting as a result of 
lower Medicare or Medicaid rates. Even when Medicare or Medicaid 
revenues increase, hospitals still aimed to negotiate larger, rather 
than smaller, rate increases from commercial insurers. The MedPAC 
report concludes that ``taken together, these findings imply that 
hospitals seek higher prices from insurers and will get them when they 
have greater bargaining power.''
---------------------------------------------------------------------------

    \326\ March 2018 Report to the Congress: Medicare Payment 
Policy. Accessed online 4/20/2022. https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/mar18_medpac_entirereport_sec_rev_0518.pdf.
---------------------------------------------------------------------------

    Research has similarly demonstrated that higher prices are also 
observed when physician practices merge, for example, one national 
study found that physicians in the most concentrated markets charged 
fees that were 14-30 percent higher than fees in the least concentrated 
markets.\327\
---------------------------------------------------------------------------

    \327\ Abe Dunn and Adam Shapiro. ``Do Physicians Possess Market 
Power? '' Journal of Law and Economics 57, no. 1 (January 1, 2014).
---------------------------------------------------------------------------

    Overall, while provider mergers increased prices, their effects on 
quality were mixed. The MedPAC report noted ``Because the literature is 
mixed, we cannot make a definitive conclusion about the effect of 
mergers on the quality of care other than to say the effect is not 
large enough to result in consistent findings across studies.''
    Over the years, CMS has undertaken several value-base purchasing 
activities that drive value care and support competition. For example, 
beginning in 2001, HHS and CMS began launching Quality Initiatives 
\328\ to assure quality health care for all Americans through 
accountability and public disclosure. The various Quality Initiatives 
touch every aspect of the healthcare system. Some initiatives focus on 
publicly reporting quality measures for nursing homes, home health 
agencies, hospitals, and kidney dialysis facilities. Consumers can use 
the quality measures information that is available at www.medicare.gov 
for these healthcare settings to assist them in making healthcare 
choices or decisions. CMS also releases vast amounts of healthcare cost 
information that is available to the public, such as select measures 
provided by Medicare providers through their annual cost report,\329\ 
and detailed use and payment information for procedures, services, and 
prescription drugs by specific inpatient and outpatient healthcare 
providers and suppliers.\330\ CMS also finalized regulations designed 
to enhance healthcare price transparency to drive competition through 
its Hospital Price Transparency \331\ and Transparency in Coverage 
\332\ initiatives.
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    \328\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo.
    \329\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Cost-Report.
    \330\ https://data.cms.gov/provider-summary-by-type-of-service.
    \331\ https://www.cms.gov/hospital-price-transparency.
    \332\ https://www.cms.gov/healthplan-price-transparency.
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    More recently, CMS has released data files to the public outlining 
hospital and nursing facilities' mergers, acquisitions, consolidations, 
and changes in ownership that were reported to the Medicare Provider 
Enrollment, Chain, and Ownership System (PECOS) from 2016 to 2022, in 
order to promote transparency of these mergers, acquisitions, 
consolidations, and changes in ownership.\333\
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    \333\ https://www.cms.gov/newsroom/press-releases/hhs-releases-new-data-and-report-hospital-and-nursing-home-ownership.
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    PECOS is the System of Record for Medicare Provider Enrollment and 
was created to collect and maintain information regarding provider or 
supplier enrollment into Medicare. In addition to collecting 
information about individual practitioners or organizational entities, 
the CMS 855 forms collect information about ownership, authorized 
officials, delegated officials, managing employees, practice location, 
provider or supplier type, provider and supplier specific information, 
and affiliated provider information.
    For additional information about the data that is collected in the 
PECOS system, please refer to the CMS 855 forms at this link: https://www.cms.gov/Medicare/Provider-Enrollment-and-Certification/Enrollment-Applications.
    In conjunction with this release of PECOS information showing 
hospital and skilled nursing facility mergers, acquisitions, 
consolidations, and changes in ownership, HHS's Office of the Assistant 
Secretary for Planning and Evaluation (ASPE) also released a related 
report analyzing the CMS data to examine trends in changes of ownership 
over the 6 years.\334\ The ASPE report identified several findings from 
the new data release including:
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    \334\ https://aspe.hhs.gov/sites/default/files/documents/4d960147d5fd8e2ea9af508f115ca7b7/aspe-datapoint-change-ownership-pecos.pdf.
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     Changes in ownership have been much more common in nursing 
homes than hospitals over the 6-year period.
     There is wide variation in ownership changes by State. For 
instance, 19 percent of hospitals (14 out of 73) in South Carolina were 
sold during the 6-year period, while most states had fewer than 4 
percent of hospitals change ownership.
     A majority (62.3 percent) of skilled nursing facilities 
(SNFs) that were purchased have a single organizational owner, 6.9 
percent have multiple organization owners, while 18.2 percent have only 
individual owners and 12.7 percent have both types of owners.
    These merger, acquisition, consolidation, and changes in ownership 
data are available on data.CMS.gov and are expected to be updated on a 
quarterly basis going forward.

B. Request for Public Comment

    In response to the E.O. 14036's call for a ``whole-of-government 
approach'' to address excessive concentration, abuses of market power, 
unfair competition, and the effects of monopoly and monopsony, CMS is 
seeking information from the public on how data that CMS collects could 
be used to promote competition across the health care system or protect 
the public from the harmful effects of consolidation within healthcare. 
Specifically, CMS seeks comment from the public on the following:
     What additional data that is already collected by form 
855A (PECOS) would be helpful to release to the public and researchers, 
to help identify the impact of provider mergers, acquisitions, 
consolidations, and changes in ownership on the affordability and 
availability of medical care, and why?
     Do commenters suggest that CMS release data on any 
mergers, acquisitions, consolidations, and changes in ownership that 
have taken place for any additional types of providers beyond nursing 
facilities and hospitals? If so, for which types of providers?
     What additional information collected by CMS would be 
useful for the public or researchers who are studying the impacts of 
mergers,

[[Page 44802]]

acquisitions, consolidations, or changes in ownership?
     Section 6401(a) of the Affordable Care Act established a 
requirement for all enrolled providers/suppliers to revalidate their 
Medicare enrollment information in PECOS under new enrollment screening 
criteria. In 2016, the Centers for Medicare & Medicaid Services (CMS) 
completed its initial round of revalidations and resumed regular 
revalidation cycles in accordance with 42 CFR 424.515.\335\ Would data 
for transactions occurring before the 2016 CMS revalidation effort be 
useful for the public or researchers, even if such data may be less 
complete?
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    \335\ https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/SE1605.pdf.
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XX. Addition of a New Service Category 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 (84 FR 61142, 61446 through 61456) 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.'' \336\ As part of the CY 2021 OPPS/ASC final 
rule with comment period, we added two additional service categories to 
the prior authorization process for certain hospital OPD services (85 
FR 85866, 86236 through 86248). The regulations governing the prior 
authorization process for certain hospital OPD services are located in 
subpart I of 42 CFR part 419, specifically at Sec. Sec.  419.80 through 
419.89, with the specific service categories listed in Sec.  419.83.
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    \336\ See also Correction Notice issued January 3, 2020 (85 FR 
224).
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    Paragraph (a)(1) of Sec.  419.83 lists the specific service 
categories for which prior authorization must be obtained for service 
dates on or after July 1, 2020, which are: (i) Blepharoplasty; (ii) 
Botulinum toxin injections; (iii) Panniculectomy; (iv) Rhinoplasty; and 
(v) Vein ablation. Paragraph (a)(2) of Sec.  419.83 lists two 
additional service categories for which prior authorization must be 
obtained for service dates on or after July 1, 2021, which are: (i) 
Cervical Fusion with Disc Removal; and (ii) Implanted Spinal 
Neurostimulators. Paragraph (b) states that CMS will adopt the list of 
hospital outpatient department-service categories requiring prior 
authorization and any updates or geographic restrictions through formal 
notice-and-comment rulemaking. Additionally, 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 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 a New Service Category
    In accordance with Sec.  419.83(b), we propose to require prior 
authorization for a new service category: Facet Joint Interventions. We 
propose adding the new service category at Sec.  419.83(a)(3). We also 
propose that the prior authorization process for this additional 
service category would be effective for dates of services on or after 
March 1, 2023. As explained more fully below, the proposed addition of 
this service category 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. 
Because we propose that prior authorization would be required for this 
service category at a later date than for the first seven service 
categories, we propose to revise paragraph (a)(3) to include this new 
service category and reflect the March 1, 2023 implementation date for 
the prior authorization requirement for this additional service 
category. Specifically, we propose that paragraph (a)(3) would read, 
``[t]he Facet Joint Interventions service category requires prior 
authorization beginning for service dates on or after March 1, 2023.'' 
We also propose that existing paragraph (a)(3) be moved to paragraph 
(b) and that paragraph (b) be revised by modifying the title to read, 
``Adoption of the list of services and technical updates.'' We also 
propose to re-designate the current paragraph (b) as subparagraph 
(b)(1). Subparagraph (b)(1) would read, ``CMS will adopt the list of 
hospital outpatient department service categories requiring prior 
authorization and any updates or geographic restrictions through formal 
notice-and-comment rulemaking.'' As previously mentioned, current 
paragraph (a)(3) would be moved to new paragraph (b)(2) and read, 
``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.''
    The proposed Facet Joint Interventions service category would 
consist of facet joint injections, medial branch blocks, and facet 
joint nerve destruction. Facet joint injections are procedures in which 
a practitioner injects a medication into the facet joints (the 
connections between the bones of the spine) to help diagnose the cause 
and location of pain and also to provide pain relief. Medial branch 
block is a procedure in which a medication is injected near the medial 
branch nerve connected to a specific facet joint to achieve pain 
relief. Facet joint nerve destruction (also known as nerve denervation) 
is a procedure that uses heat to destroy the small area of the facet 
joint nerve for pain management.
    We propose that the list of proposed additional OPD services in the 
Facet Joint Interventions service category that would require prior 
authorization beginning on March 1, 2023 are those identified by the 
CPT codes in Table 79. For ease of review and brevity, we only include 
in the regulation text in proposed new Sec.  419.83(a)(3) the name of 
the service category, but not the CPT codes that fall into that service 
category, which are listed in Table 79. Note that this is the same 
approach we took in establishing the initial five service categories in 
Sec.  419.83(a)(1) and two additional service categories in Sec.  
419.83(a)(2). For ease of reference, we have included the 2020 Final 
List of Outpatient Services that Require Prior Authorization for the 
five initial service categories and the 2021 Final List of Outpatient 
Services that Require Prior Authorization for two additional service 
categories in Table 80. Again, we propose that the prior authorization 
process for the proposed additional service category would be effective 
for dates of service on or after March 1, 2023. We propose an effective 
date slightly earlier in the calendar year (compared to the July 1, 
2020 and July 1, 2021 effective dates for the services categories 
previously added to the prior authorization regulation) because 
Medicare Contractors, CMS, and the OPD providers already have knowledge 
of and experience with the prior authorization process. Also, this new 
service category can be performed by some of the same provider types 
who furnish other services currently subject to the OPD prior 
authorization process, such as implanted spinal neurostimulators and 
cervical fusion with disc removal.
2. Basis for Proposing To Add a New Service Category
    As part of our responsibility to protect the Medicare Trust Funds, 
we continue our routine analysis of data associated with all aspects of 
the Medicare

[[Page 44803]]

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.
    In proposing the addition of this new service category, we reviewed 
approximately 1 billion claims related to OPD services during the 10-
year period from 2012 through 2021. We determined that the overall rate 
of OPD claims submitted for payment to the Medicare program increased 
each year by an average rate of 0.6 percent. This equated to an 
increase from approximately 105 million OPD claims submitted for 
payment in 2012 to approximately 111 million claims submitted for 
payment in 2021. The 0.6 percent rate reflects a decrease when compared 
to the 2.8 percent rate identified in the CY 2021 OPPS/ASC proposed 
rule, when we looked at the period from 2007 through 2018. 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 4.2 percent. Again, this is a decrease when compared to 
the 7.8 percent rate identified in the CY 2021 OPPS/ASC proposed rule 
for a slightly earlier timeframe. The decrease in the average annual 
increase in the claim volume and allowed amount from the increases 
noted in the CY 2021 OPPS/ASC proposed rule is likely due in part to 
the PHE as discussed in more detail below. We found that the total 
Medicare allowed amount for the OPD services claims processed in 2012 
was approximately $48 billion and increased to $73 billion in 2021, 
while during this same 10-year period, the average annual increase in 
the number of Medicare beneficiaries per year was only 0.4 percent.
    Our analysis of Integrated Data Repository (IDR \337\) data showed 
that, with regard to the facet joint interventions, CPT codes 64490-
64495 and 64633-64636, claims volume increased by 47 percent between 
2012 and 2021, reflecting a 4 percent average annual increase, which is 
higher than the 0.6 percent annual increase for all OPD services. For 
the facet joint injection and medial branch block services, CPT codes 
64490-64495, we observed an increase of 27 percent between 2012 and 
2021, reflecting a 2.5 percent average annual increase. This reflects 
an increase from approximately 136,000 claims submitted for payment in 
2012 to approximately 173,775 claims submitted for payment in 2021. For 
the nerve destruction services, CPT codes 64633 through 64636, we 
observed an increase in volume of 102 percent between 2012 and 2021, 
which was an average annual increase of 7 percent. This accounts for an 
increase from approximately 48,000 claims submitted for payment in 2012 
to approximately 97,000 claims submitted for payment in 2021. Both the 
facet joint injections/medial branch block CPT codes and nerve 
destruction CPT codes, with 2.5 and 7 percent annual increases, 
respectively, demonstrated higher average annual increases in claim 
submissions between 2012 and 2021 than the 0.6 percent annual increase 
for all OPD services over the same time period.
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    \337\ 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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    When analyzing the data, we took the COVID-19 Public Health 
Emergency (PHE) into consideration. As a result of the PHE, healthcare 
use and spending dropped sharply due to cancellations of elective and 
non-emergency care to increase hospital capacity and social distancing 
measures to reduce the community spread of the coronavirus. 
Consequently, the claims data for CY 2020 showed a significant decrease 
in volume compared to the previous year, which is likely due to the 
PHE. However, over the 9-year period of our analysis, services for 
facet joint interventions demonstrated increases. These volume 
increases led us to further research the reasons behind them, to 
determine if they were unnecessary.
    The Department of Health and Human Services' Office of the 
Inspector General (OIG) has published multiple reports indicating 
questionable billing practices, improper Medicare payments, and 
questionable utilization of facet joint interventions. An OIG report 
published in 2020 identified $748,555 in improper payments out of $3.3 
million in paid Medicare claims for facet joint injections with an 
audit period from January 1, 2017 through May 31, 2019. The OIG 
recommended that CMS and its contractors provide additional oversight 
on claims for facet joint injections to prevent additional improper 
payments.\338\ In 2021, the OIG published a report on facet denervation 
procedures. During the audit period from January 2019 through 2020, the 
OIG reported that Medicare improperly paid physicians $9.5 million for 
selected facet joint denervation procedures. According to the OIG, 
these improper payments occurred because CMS's oversight was not 
adequate to prevent or detect improper payments for selected facet-
joint denervation procedures.\339\ Further, in March 2022, the 
Department of Justice reported on a $250 million health care fraud 
scheme that took place from 2007 to 2018 involving physicians from 
multiple states who allegedly subjected their patients to medically 
unnecessary facet joint injections in order to obtain illegal 
prescriptions for opioids. The physicians required patients to receive 
the facet joint injections due to their high reimbursement rates.\340\ 
Both our data analysis and research show that the increases in volume 
for these procedures are unnecessary, and further program integrity 
action is warranted.
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    \338\ https://oig.hhs.gov/oas/reports/region9/92003003.asp.
    \339\ https://oig.hhs.gov/oas/reports/region9/92103002.asp.
    \340\ https://www.justice.gov/opa/pr/16-defendants-including-12-physicians-sentenced-prison-distributing-66-million-opioid-pills.
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    Our conclusion that increases in volume for facet joint services 
are unnecessary was based not only on the data specific to this service 
category, but also on a comparison of the rate of increase for the 
service category to the overall trends for all OPD services. We believe 
that comparing the utilization rate for the particular service category 
to the overall rate of growth for Medicare OPD services generally is an 
appropriate method for identifying unnecessary increases in volume, 
particularly where there are no legitimate clinical or coding reasons 
for the changes. 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 that 
was the case. 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

[[Page 44804]]

authorization for these services will be an effective method for 
controlling unnecessary increases in the volume of these services and 
expect that it will reduce the instances in which Medicare pays for 
services that are determined not to be medically necessary. We request 
comments on the addition of this service category, and specifically 
request comments on the potential for any unintended clinical 
consequences from the addition of this service category.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TP26JY22.103


[[Page 44805]]


[GRAPHIC] [TIFF OMITTED] TP26JY22.104

     
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    \341\ CPT 67911 (Correction of lid retraction) was removed on 
January 7, 2022.

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[[Page 44806]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.105

     
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    \342\ CPT 21235 (Obtaining ear cartilage for grafting) was 
removed on June 10, 2020.

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[[Page 44807]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.106

BILLING CODE 4120-01-C

XXII. Overall Hospital Quality Star Rating

A. Background

    The Overall Hospital Quality 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 (85 FR 86193). The Overall 
Hospital Quality Star Rating was first introduced and reported on our 
Hospital Compare website in July 2016 \344\ (now reported on its 
successor website at https://www.medicare.gov/care-compare) and has 
been refreshed multiple times, with the most current refresh planned 
for 2022.345 346 347 348 349 350 351 In the CY 2021 OPPS/ASC 
final rule with comment period (85 FR 86182), we finalized a 
methodology to calculate the Overall Hospital Quality Star Rating. 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 and 42 CFR 412.190 
for details.
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    \343\ CPT codes 63685 (Insertion or replacement of spinal 
neurostimulator pulse generator or receiver) and 63688 (Revision or 
removal of implanted spinal neurostimulator pulse generator or 
receiver) were temporarily removed from the list of OPD services 
that require prior authorization, as finalized in the CY 2021 OPPS/
ASC final rule with comment period.
    \344\ Centers for Medicare & Medicaid Services. (2016, July 27). 
First Release of the Overall Hospital Quality Star Rating on 
Hospital Compare. Retrieved from CMS.gov newsroom at: https://www.cms.gov//newsroom//fact-sheets//first-release-overall-hospital-quality-star-rating-hospital-compare.
    \345\ Centers for Medicare & Medicaid Services. (2016, May). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2016 
Updates and Specifications Report.
    \346\ Centers for Medicare & Medicaid Services. (2016, October). 
Overall Hospital Quality Star Rating on Hospital Compare: December 
2016 Updates and Specifications Report.
    \347\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2017 
Updates and Specifications Report.
    \348\ 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.
    \349\ 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.
    \350\ 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.
    \351\ Centers for Medicare & Medicaid Services. (2022, May 17). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2022 
Updates and Specifications Report. Retrieved from qualitynet.org: 
https://qualitynet.org/inpatient/public-reporting/overall-ratings/resources#tab2.
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    In this proposed rule, we are: (1) providing information on the 
previously finalized policy for inclusion of quality measure data from 
Veteran's Health Administration (VHA) hospitals; (2) proposing to amend 
the language of Sec.  412.190(c) to state that we would use publicly 
available measure results on Hospital Compare or its successor websites 
from a quarter within the prior twelve months; and (3) conveying that 
although CMS intends to publish Overall Hospital Quality Star Ratings 
in 2023, we may apply the suppression policy if applicable.

B. Veterans Health Administration Hospitals

    In the CY 2021 OPPS/ASC final rule with comment period (85 FR 86197 
and 86198), we finalized a policy to include Veterans Health 
Administration hospitals' (VHA hospitals) quality measure data for the 
purpose of calculating the Overall Hospital Quality Star Ratings 
beginning with the 2023 refresh. In that final rule, we also stated 
that we intended 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 (85 FR 48999). Since the 
publication of the CY 2021 OPPS/ASC final rule, we conducted an 
internal analysis from February 28, 2022, through March 30, 2022, with 
measure data from all VHA hospitals in the calculation of the Overall 
Hospital Quality Star Ratings methodology. The internal analysis 
included a period of confidential reporting and feedback during which 
VHA hospitals reviewed their Overall Hospital Quality Star Ratings 
internal analysis results, and in addition, further familiarized 
themselves with the Overall Hospital Quality Star Ratings methodology 
and had the opportunity to ask questions. All VHA hospitals were made 
aware of the internal analysis and were provided the opportunity to 
participate. For the internal analysis, the Overall Hospital Quality 
Star Ratings were calculated using VHA hospital measure data along with 
subsection (d) hospitals and CAHs. The internal analysis included the 
same measures used for the April 2021 refresh of Overall Hospital 
Quality Star Ratings on our public reporting website, Care Compare. At 
the time of the 2022 VHA internal analysis, VHA hospitals in each peer 
group reported a similar number of

[[Page 44808]]

measures when compared to non-VHA hospitals for most measure groups. 
VHA hospitals in the 5 measure group peer group reported a lower median 
number of Safety and Readmission measures. VHA hospitals in all three 
peer groups reported fewer measures in the Timely and Effective Care 
measure group. The measurement periods for VHA and non-VHA hospitals 
were the same, except for the HAI-1, HAI-2, PSI 04, PSI 90, and OP-22 
measures. The specific performance periods for these measures were 
provided to VHA hospitals during the internal analysis. The reasons for 
the differing measure reporting periods are:
     The HAI-1 and HAI-2 measures were first publicly reported 
for VHA hospitals in July 2021, but only included one quarter of 
measure data. Therefore, we chose to use the next public reporting, 
April 2022, which included four quarters of these measures' data.
     For the PSI 04 and PSI 90 measures, we used measure data 
that was publicly reported in July 2021. VHA hospitals first publicly 
reported these measures in October 2020; however, a different software 
was used for the measure calculations than the software used to 
calculate subsection (d) hospitals and CAHs measure data. We chose to 
use measure data publicly reported in 2021 for better comparison.
     For the OP-22 measure, VHA hospitals began submitting 
their measure data in January 2021 for public reporting.
     For the HIP/KNEE measures (total hip arthroplasty (THA) 
and total knee arthoroplasty (TKA)), we used measure data that was 
publicly reported in October 2020. This data did not initially include 
VHA hospitals, so we recalculated to include them. The recalculated 
results including VHA hospitals was not publicly reported until July 
2021.
    Using these data from the internal analysis, we compared 2021 
Overall Hospital Quality Star Ratings scores for non-VHA hospitals 
before and after adding VHA hospitals to Overall Hospital Quality Star 
Ratings. 119 out of 171 VHA hospitals met the requirements to receive a 
Star Rating. This increased the number of hospitals receiving a star 
rating from 3,355 to 3,474. The distribution of Star Ratings was nearly 
identical for VHA and non-VHA hospitals. As part of the Overall 
Hospital Quality Star Ratings methodology, hospitals are assigned to 
peer groups based on the number of measure groups with at least three 
measures. Peer group assignments were similar across VHA and non-VHA 
hospitals. In Peer Group 3, assignments were 12 percent VHA vs. 10 
percent non-VHA; in Peer Group 4, assignments were 25 percent VHA vs. 
16 percent non-VHA; and in Peer Group 5, assignments were 63 percent 
VHA vs. 74 percent non-VHA). 3,119 (93 percent) non-VHA hospitals 
maintained the same number of stars after adding VHA hospitals to 2021 
Overall Hospital Quality Star Ratings. For the 236 non-VHA hospitals 
with a different star rating, 23 gained a star and 213 lost a star. No 
hospital gained or lost more than one star. As with any update to 
either the underlying measures or the Overall Hospital Quality Star 
Ratings methodology, we expect that some hospitals would shift star 
rating categories. However, for this internal analysis, over 90 percent 
of non-VHA hospitals did not experience a change in their Overall 
Hospital Quality Star Ratings score, which is consistent with prior 
changes to the measures or methodology in our experience. As previously 
finalized, we intend to include VHA hospitals in future Overall 
Hospital Quality Star Ratings.

C. Frequency of Publication and Data Used

    We are also proposing to amend our policy regarding the data 
periods used to refresh Overall Hospital Quality Star Ratings. In the 
CY 2021 OPPS final rule with comment period, we stated that ``we would 
use publicly available measure results on Hospital Compare or its 
successor websites from a quarter within the prior year'' to refresh 
Overall Hospital Quality Star Ratings (85 FR 86202). Since adopting 
that policy, it has come to our attention that this wording could be 
confusing. We intended for the phrase ``within the prior year'' to 
refer to any time within the prior 12 months, and not to a Care Compare 
refresh from the prior calendar year. Therefore, we are proposing to 
change Sec.  412.190 (c) to state ``The Overall Star Rating are 
published once annually using data publicly reported on Hospital 
Compare or its successor website from a quarter within the previous 12 
months.'' For example, for the Overall Hospital Quality Star Ratings in 
July 2023, we would use any Care Compare refreshes from the previous 12 
months: July 2023, April 2023, January 2022, October 2022, or July 
2022.
    We invite public comments on this proposal.

D. Overall Hospital Quality Star Ratings Suppression

    During development of the Overall Hospital Quality Star Ratings, we 
established guiding principles to use methods that are scientifically 
valid, inclusive of hospitals and measure information, account for the 
heterogeneity of available measures and hospital reporting, and 
accommodate changes in the underlying measures (85 FR 86193).\352\ 
Overall Hospital Quality Star Ratings aggregates performance on 
underlying measures adopted under certain CMS quality programs, so any 
changes or updates to the measures from those programs are already 
included (85 FR 86194).\353\ We continue to believe that the robustness 
of Overall Hospital Quality Star Ratings to changes in the underlying 
measures enables the methodology to maintain validity even when there 
are changes in the health system or underlying measure data (85 FR 
86203 through 86205).
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    \352\ 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.
    \353\ 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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    We recognize that there may be some concerns with publishing 
Overall Hospital Quality Star Ratings if the underlying measures 
reflect some aspect of extenuating circumstances, for example, skewed 
data or performance related to treating patients with COVID-19. 
However, we want to balance that with providing important quality 
information to Medicare beneficiaries and the public during times when 
hospital care is critical. The goal of the Overall Hospital Quality 
Star Ratings is to summarize hospital quality information in a way that 
is simple and easy for patients to understand to increase transparency 
and empower patients to make more informed decisions about their 
healthcare.
    Although Overall Hospital Quality Star Ratings will have been 
refreshed twice (i.e., in 2021 and 2022) since the emergence of COVID-
19, almost all measures included in both Overall Hospital Quality Star 
Ratings refreshes used pre-COVID-19 data to calculate both the 2021 and 
2022 Overall Star Ratings. This is because we issued a nationwide 
Extraordinary Circumstance Exception (ECE) for hospitals and other 
facilities participating in our quality reporting and value-based 
purchasing programs in response to the COVID-19 Public Health Emergency 
(PHE). The ECE can be found at this website: https://www.cms.gov/files/
document/guidance-memo-exceptions-and-extensions-quality-reporting-and-
value-

[[Page 44809]]

based-purchasing-programs.pdf. Among other requirements, this ECE 
exempted data reporting requirements for Q1 and Q2 2020 data, including 
excluding the use of claims data and data collected through the Centers 
for Disease Control's (CDC) National Healthcare Safety Network (NHSN) 
for this data period.\354\ Because the ECE only applied through Q2 
2020, beginning July 1, 2020, any subsequent measure data collected 
from these programs would be incorporated into the Overall Hospital 
Quality Star Ratings. This would include measurement periods that are 
either partially or fully concurrent with the COVID-19 PHE.
---------------------------------------------------------------------------

    \354\ CMS, 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 (Mar. 27, 2020), https://www.cms.gov/files/document/guidance-memo-exceptions-and-extensions-quality-reporting-and-value-based-purchasing-programs.pdf.
---------------------------------------------------------------------------

    If a measure is considered valid and reliable enough to be reported 
on Care Compare then it meets the criteria to be included in Overall 
Hospital Quality Star Ratings calculations (85 FR 86193 through 86236). 
This remains true even for measures that were suppressed in certain 
programs due to the impact of COVID-19 (86 FR 45301 through 45304). 
Consistent with this policy, we will continue to include measures in 
the Overall Hospital Quality Star Ratings that might have been 
suppressed in the Hospital Value-Based Purchasing, Hospital-Acquired 
Condition Reduction, and Hospital Readmissions Reduction Programs but 
are still publicly reported (86 FR 44778 through 44779).
    In the CY 2021 OPPS/ASC rule with comment period (85 FR 48996 
through 49027), we finalized that we will allow for suppression, but 
only in limited circumstances. Specifically, for the Overall Hospital 
Quality Star Rating beginning with the CY 2021 and for subsequent 
years, we adopted a policy that we would consider suppressing the 
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 Hospital 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.
    This is codified at Sec.  412.190(f)(1). Although CMS intends to 
publish the Overall Hospital Quality Star Rating in 2023, CMS may 
exercise the authority described above should the COVID-19 PHE 
substantially affect the underlying measure data.

XXII. 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 titled ``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 2023, we propose to retain 
these columns, updated to reflect the amount of the 2023 inpatient 
deductible. In the CY 2022 OPPS/ASC final rule with comment period (85 
FR 86266), we updated the format of the OPPS Addenda A, B, and C by 
adding a column titled ``Drug Pass-Through Expiration during Calendar 
Year'' where we flagged through the use of an asterisk, each drug for 
which pass-through payment was expiring during the calendar year on a 
date other than December 31. For CY 2023, we propose to retain these 
columns that are updated to reflect the drug codes for which pass-
through payment is expiring in CY 2023.
    In addition, for CY 2023, we propose to update a column titled 
``Drug Pass-Through Expiration during Calendar Year'' to include 
devices, so that the column reads ``Drug and Device Pass-Through 
Expiration during Calendar Year'' where we propose to flag through the 
use of an asterisk, each drug and device for which pass-through payment 
would be expiring during the calendar year on a date other than 
December 31.
    To view the Addenda to this proposed rule pertaining to proposed CY 
2023 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-1772-P'' from the list of regulations. All OPPS Addenda to 
this proposed rule are contained in the zipped folder titled ``2023 
NPRM OPPS Addenda'' in the related links section at the bottom of the 
page. To view the Addenda to this proposed rule pertaining to CY 2023 
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-1772-
P'' from the list of regulations. The ASC Addenda to this proposed rule 
are contained in a zipped folder titled ``Addendum AA, BB, DD1, DD2, 
EE, and FF'' in the related links section at the bottom of the page.

XXIII. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995 (PRA), 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 title 44 of the U.S. Code, as 
added by section 2 of the Paperwork Reduction Act of 1995, requires 
that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

[[Page 44810]]

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 Inpatient Quality Reporting 
(IQR) Program. We refer readers to the CY 2011 through CY 2022 OPPS/ASC 
final rules (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; 84 FR 61468 through 
61469; 85 FR 86266 through 86267; and 86 FR 63961 through 63968, 
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 February 28, 2025.
    In the CY 2022 OPPS/ASC final rule with comment period, our burden 
estimates were based on an assumption of 3,300 hospitals (86 FR 63961). 
For this proposed rule, we propose to update our assumption to 3,350 
hospitals based on recent data from the CY 2022 payment determination 
which reflects a closer approximation of the total number of hospitals 
reporting data for the Hospital OQR Program.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
52617), 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. In BLS' most recent set of 
National Occupational Employment and Wage Estimates published on March 
31, 2022, this occupation title has been removed. As a result, we now 
utilize the ``Medical Records Specialists'' occupation title. The BLS 
describes Medical Records Specialists as those responsible for 
compiling, processing, and maintaining medical records of hospital and 
clinic patients in a manner consistent with medical, administrative, 
ethical, legal, and regulatory requirements of the healthcare system 
and classifying medical and healthcare concepts, including diagnosis, 
procedures, medical services, and equipment, into the healthcare 
industry's numerical coding system; \355\ 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 from the BLS' May 2021 Occupational Employment and 
Wages data reflects a median hourly wage of $23.23 per hour for a 
Medical Records Specialists. We have finalized a policy to calculate 
the cost of overhead, including fringe benefits, at 100 percent of the 
mean hourly wage (82 FR 52617). 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 ($23.23 x 2 = $46.46) to estimate the total cost 
is a reasonably accurate estimation method and allows for a 
conservative estimate of hourly costs.
---------------------------------------------------------------------------

    \355\ https://www.bls.gov/oes/current/oes292072.htm (Accessed 
June 23, 2022). The hourly rate of $46.46 includes an adjustment of 
100 percent of the median hourly wage to account for the cost of 
overhead, including fringe benefits.
---------------------------------------------------------------------------

2. Summary
    In section XV.B.4 of this proposed rule, we propose to: (1) change 
the Cataracts: Improvement in Patient's Visual Function within 90 days 
Following Cataract Surgery measure (OP-31) to voluntary beginning with 
the CY 2025 reporting period/CY 2027 payment determination; (2) add an 
additional targeting criterion to the validation selection policy 
beginning with the CY 2023 reporting period; and (3) align the patient 
encounter quarters with the calendar year and update the data 
submission deadlines for each of these quarters beginning with the Q2 
2023 reporting period.
3. Estimated Burden of Hospital OQR Program Requirements for the CY 
2025 Payment Determination and Subsequent Years
a. Information Collection Burden Estimate for OP-31: Cataracts--
Improvement in Patient's Visual Function Within 90 Days Following 
Cataract Surgery Measure
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63845 
through 63846), we finalized to require this measure with mandatory 
reporting beginning with the CY 2025 reporting period/CY 2027 payment 
determination. We previously finalized voluntary reporting of this 
measure in the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66947 through 66948) and estimated that 20 percent of hospitals would 
elect to report it annually (79 FR 67014). As discussed in section 
XV.B.5.b of this proposed rule, we propose to change this measure to 
voluntary beginning with the CY 2025 reporting period/CY 2027 payment 
determination. We continue to estimate it will require hospitals 10 
minutes once annually to report this measure using a CMS web-based 
tool. As a result of this proposal, we estimate only 20 percent of 
hospitals would voluntarily submit data, which results in a total 
annual burden estimate of 112 hours (3,350 hospitals x 20 percent x 
0.1667 hours) at a cost of $5,188 (112 hours x $46.46/hour). In 
addition to reporting the measure, for hospitals that chose to 
voluntarily submit, we also require hospitals to perform chart 
abstraction and estimate that each hospital would spend 2.92 minutes 
(0.049 hours) per case per measure to perform this activity. In the CY 
2022 OPPS/ASC final rule with comment period, we used an estimate of 25 
minutes per case per measure (86 FR 63963). Upon review, this estimate 
was erroneous, therefore we are correcting our assumption to 2.92 
minutes (0.049 hours) per case per measure as finalized in the CY 2016 
OPPS/ASC final rule (80 FR 70582). The currently approved burden 
estimate assumes 242 cases per measure. For chart abstraction, we 
estimate an annual burden of 12 hours (0.049 hours x 242 cases) at a 
cost of $549 (12 hours x $46.46/hour) per hospital and a total annual 
burden of 7,891 hours (3,350 hospitals x 20 percent x 12 hours) at a 
cost of $368,028 (7,891 hours x $46.46/hour) for all participating 
hospitals. In aggregate, we estimate a total annual burden of 8,003 
hours (112 hours + 7,891 hours) at a cost of $373,216 ($5,188 + 
$368,028) for all hospitals. This is a decrease of 325,847 hours and 
$15,138,852 per year from the currently approved estimate due to the 80 
percent of hospitals we assume will no longer report this measure, the 
updated assumption of the number of hospitals participating in the 
Hospital OQR Program, the updated burden estimate for chart 
abstraction, and the updated wage rate.
    The information collection requirement and the associated burden 
will be submitted as part of a revision of the information collection 
request currently approved under OMB control number 0938-1109, which 
expires on February 28, 2025.
b. Information Collection Burden Estimate for the Addition of an 
Additional Targeting Criterion to the Validation Selection Policy
    In section XV.B.4 of this proposed rule, we propose to adopt an 
additional targeting criterion to the validation

[[Page 44811]]

selection policy beginning with the CY 2023 reporting period/CY 2025 
payment determination. We also propose to codify this targeting 
criterion at Sec.  419.46(f)(3). We do not believe this proposal would 
increase reporting burden, because it changes neither the total number 
of hospitals required to submit data nor the amount of data hospitals 
selected for validation would be required to submit.
c. Information Collection Burden Estimate for the Alignment of Patient 
Encounter Quarters With the Calendar Year
    In section XV.B.4.b of this proposed rule, we propose to align 
patient encounter quarters with the calendar year (January through 
December), beginning with the CY 2026 payment determination and 
subsequent years. We do not anticipate that this proposal, if 
finalized, would result in any increase in information collection 
burden because it would not change the amount of data hospitals would 
be required to submit.
d. Summary of Information Collection Burden Estimates for the Hospital 
OQR Program
    In summary, under OMB control number 0938-1109 which expires on 
February 28, 2025 we estimate that the updated assumptions and 
proposals in this proposed rule will result in a decrease of 325,847 
hours annually for 3,350 OPPS hospitals for the CY 2025 reporting 
period/CY 2027 payment determination and subsequent years. The total 
cost decrease related to this information collection is approximately -
$15,138,852 (325,847 hours x $46.46/hour) (which also reflects use of 
an updated hourly wage rate as previously discussed). Table 81 
summarizes the estimated total burden change compared to our currently 
approved information collection burden estimates. We will submit the 
revised information collection estimates to OMB for approval under OMB 
control number 0938-1109. We are not proposing any changes for the CY 
2024 reporting period/CY 2026 payment determination, therefore the 
previously finalized burden estimates for the CY 2024 reporting period/
CY 2026 payment determination remain unchanged.
[GRAPHIC] [TIFF OMITTED] TP26JY22.107

C. ICRs for the ASCQR Program

1. Background
    We refer readers to the CY 2012 OPPS/ASC final rule (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, CY 2020, CY 2021, 
and CY 2022 OPPS/ASC final rules (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; 84 FR 61469; 85 FR 86267; and 86 FR 63968 through 
63971, 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 July 31, 
2024.
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 52619 
through 52620), we finalized a proposal to utilize the median hourly 
wage rate for Medical Records and Health Information Technicians, in 
accordance with the BLS, to calculate our burden estimates for the 
ASCQR Program. In BLS' most recent set of National Occupational 
Employment and Wage Estimates published on March 31, 2022, this 
occupation title has been removed. As a result, we now utilize the 
``Medical Records Specialists'' occupation title. The BLS describes 
Medical Records Specialists as those responsible for compiling, 
processing, and maintaining medical records of hospital and clinic 
patients in a manner consistent with

[[Page 44812]]

medical, administrative, ethical, legal, and regulatory requirements of 
the healthcare system and classifying medical and healthcare concepts, 
including diagnosis, procedures, medical services, and equipment, into 
the healthcare industry's numerical coding system; \356\ therefore, we 
believe it is reasonable to assume that these individuals will be 
tasked with abstracting clinical data for submission to the ASCQR 
Program. The latest data from the BLS' May 2021 Occupational Employment 
and Wages data reflects a median hourly wage of $23.23 per hour for a 
Medical Records Specialists. We have finalized a policy to calculate 
the cost of overhead, including fringe benefits, at 100 percent of the 
mean hourly wage (82 FR 52619 through 52620). This by necessity is 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 ($23.23 x 2 = $46.46) to 
estimate the total cost is a reasonably accurate estimation method and 
allows for a conservative estimate of hourly costs.
---------------------------------------------------------------------------

    \356\ https://www.bls.gov/oes/current/oes292072.htm (Accessed 
June 23, 2022). The hourly rate of $42.40 includes an adjustment of 
100 percent of the median hourly wage to account for the cost of 
overhead, including fringe benefits.
---------------------------------------------------------------------------

    Based on an analysis of the CY 2020 payment determination data, we 
found that of the 6,651 ASCs that met eligibility requirements for the 
ASCQR Program, 3,494 were required to participate in the Program and 
did so. In addition, 689 ASCs that were not required to participate due 
to having low Medicare claims volume (less than 240), did so, for a 
total of 4,183 participating facilities. As noted in section XXV.C.5.a 
of the ``Regulatory Impact Analysis'' of this proposed rule, for the CY 
2021 payment determination, all 6,811 ASCs that met eligibility 
requirements for the ASCQR Program received the annual payment update 
due to data submission requirements being excepted under the ASCQR 
Program's ECE policy in consideration of the COVID-19 PHE; 3,957 of 
these ASCs would have been required to participate without the PHE 
exception. Therefore, we estimate that 3,957 plus 689, or 4,646, ASCs 
will submit data for the ASCQR Program for the CY 2023 payment 
determination unless otherwise noted.
2. Summary
    In section XV.B.4 of this proposed rule, we propose to change the 
Cataracts: Improvement in Patient's Visual Function within 90 days 
Following Cataract Surgery measure (ASC-11) to voluntary beginning with 
the CY 2025 reporting period/CY 2027 payment determination.
3. Estimated Burden of ASCQR Program Requirements for the CY 2025 
Payment Determination and Subsequent Years
a. Information Collection Burden Estimate for Proposal To Change ASC-
11: Cataracts--Improvement in Patient's Visual Function Within 90 Days 
Following Cataract Surgery Measure From Mandatory to Voluntary
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 63886 
through 63887), we finalized to require this measure with mandatory 
reporting beginning with the CY 2025 reporting period/CY 2027 payment 
determination. We previously finalized voluntary reporting of this 
measure in the CY 2015 OPPS/ASC final rule with comment period (79 FR 
66985) and estimated that 20 percent of ASCs would elect to report it 
annually (79 FR 67016). As discussed in section XV.B.5.b of this 
proposed rule, we propose to change the ASC-11 measure to voluntary 
beginning with the CY 2025 reporting period/CY 2027 payment 
determination. We continue to estimate it will require ASCs 10 minutes 
once annually to report this measure using a CMS web-based tool. As a 
result of this proposal, we estimate only 20 percent of ASCs would 
voluntarily submit data, which results in a total annual burden 
estimate for all participating ASCs of 155 hours (4,646 ASCs x 20 
percent x 0.1667 hours) at a cost of $7,194 (115 hours x $46.46/hour). 
In addition to reporting the measure, for ASCs that chose to 
voluntarily submit, we also require ASCs to perform chart abstraction 
for a minimum required sample size of 63 cases. In the CY 2022 OPPS/ASC 
final rule, we estimated that each ASC would spend 15 minutes (0.25 
hours) per case to perform this activity (86 FR 63969). However, upon 
review, we believe the effort involved with this activity is similar to 
what is required for the OP-31 measure in the Hospital OQR Program, 
therefore, we are updating our assumption to 2.92 minutes (0.049 hours) 
per case per measure. Therefore, we estimate an annual burden of 3.1 
hours (0.049 hours x 63 cases) at a cost of $142 (3.1 hours x $46.46/
hour) per ASC and a total annual burden of 2,848 hours (4,646 ASCs x 20 
percent x 3.1 hours) at a cost of $132,333 (2,848 hours x $46.46/hour) 
for all participating ASCs. In aggregate, we estimate a total annual 
burden of 3,003 hours (155 hours + 2,848 hours) at a cost of $139,527 
($7,194 + $132,333) for all ASCs. This is a decrease of 72,107 hours 
and $3,350,091 per year from the currently approved estimate due to the 
80 percent of ASCs we assume would no longer report this measure, the 
updated burden estimate per case per measure, and the updated wage 
rate.
b. Summary of Information Collection Burden Estimates for the ASCQR 
Program
    In summary, under OMB control number 0938-1270 which expires on 
July 31, 2024, we estimate that the policies promulgated in this 
proposed rule would result in a decrease of 72,107 hours annually for 
4,646 ASCs for the CY 2025 reporting period/CY 2027 payment 
determination and subsequent years. The total cost decrease related to 
this information collection is approximately $3,350,091 (72,107 hours x 
$46.46/hour). Table 82 summarizes the total burden change compared to 
our currently approved information collection burden estimates. We will 
submit the revised information collection estimates to OMB for approval 
under OMB control number 0938-1270.

[[Page 44813]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.108

D. ICRs for Rural Emergency Hospitals (REH) Physician Self-Referral Law 
Update

    As discussed in section XVIII.E of this proposed rule, we propose 
to revise certain existing exceptions applicable to compensation 
arrangements involving specific types of providers to make them 
applicable to compensation arrangements to which an REH is a party. 
Specifically, we propose to revise the exceptions for physician 
recruitment at Sec.  411.357(e), obstetrical malpractice insurance 
subsidies at Sec.  411.357(r), retention payments in underserved areas 
at Sec.  411.357(t), electronic prescribing items and services at Sec.  
411.357(v), assistance to compensate a nonphysician practitioner at 
Sec.  411.357(x), and timeshare arrangements at Sec.  411.357(y) to 
also permit an REH to provide remuneration to a physician (or an 
immediate family member of a physician) if all requirements of the 
applicable exception are satisfied. All of the proposed revisions would 
ensure that exceptions that may already be utilized by existing 
hospitals eligible to undergo conversion to an REH remain available to 
REHs.
    The existing exceptions at Sec.  411.357(e), (r), (t), (v), (x), 
and (y) each require that the compensation arrangements to which the 
exceptions apply be documented in a writing signed by the parties. The 
existing exception at Sec.  411.357(t)(2) also requires a written 
certification that the physician has a bona fide opportunity for future 
employment by a hospital, academic medical center, or physician 
organization that requires the physician to move the location of his or 
her medical practice at least 25 miles and outside the geographic area 
served by the hospital. The existing exception at Sec.  411.357(x) also 
requires that records of the actual amount of remuneration provided by 
the hospital to the physician, and by the physician to the nonphysician 
practitioner, must be maintained for a period of at least 6 years. We 
are not proposing any changes to the existing writing, signature, or 
record retention requirements. The burden associated with writing and 
signature requirements would be the time and effort necessary to 
prepare written documents and obtain signatures of the parties. The 
burden associated with record retention requirements would be the time 
and effort necessary to compile and store the records.
    While the writing, signature, and record retention requirements are 
subject to the PRA, we believe the associated burden is exempt under 5 
CFR 1320.3(b)(2). We believe that the time, effort, and financial 
resources necessary to comply with these requirements would be incurred 
by persons without Federal regulation during the normal course of their 
activities. Specifically, we believe that, for normal business 
operations purposes, health care providers and suppliers document their 
financial arrangements with physicians and others and retain these 
documents in order to identify and be able to enforce the legal 
obligations of the parties. Therefore, we believe that the writing, 
signature, and record retention requirements should be considered usual 
and customary business practices.

E. ICRs for Addition of a New Service Category 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, 61446 through 61456).\357\ As part of the CY 2021 OPPS/ASC final 
rule with comment period we added additional service categories to the 
prior authorization process (85 FR 85866, 86236 through 86248). 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.
---------------------------------------------------------------------------

    \357\ See also Correction Notice issued January 3, 2020 (85 FR 
224).

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

[[Page 44814]]

    In accordance with Sec.  419.83(b), we propose to require prior 
authorization for a new service category: Facet Joint Interventions. We 
propose adding the service category to Sec.  419.83(a)(3). We also 
propose that the prior authorization process for the additional service 
category would be effective for dates of services on or after March 1, 
2023. 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 
new category, Facet Joint Interventions, 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 proposed March 1, 2023 start date, the first year of the prior 
authorization for the new service category would only include 10 
months. Based on CY 2019 data, we estimate that for those first 10 
months there would be 69,501 initial requests mailed during the year. 
In addition, we estimate there would be 22,805 resubmissions of a 
request mailed following a non-affirmed decision. Therefore, the total 
mailing cost is estimated to be $461,532 (92,306 mailed requests x $5). 
Based on CY 2019 data for the new service category, we estimate that 
annually there would be 83,401 initial requests mailed during a year. 
In addition, we estimate there would be 27,366 resubmissions of a 
request mailed following a non-affirmed decision. Therefore, the total 
annual mailing cost is estimated to be $553,838 (110,786 mailed 
requests x $5). We also estimate that an additional 3 hours per 
provider would 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 $17.13 with a loaded rate 
of $34.26. The prior authorization program for the new service category 
would not create any new documentation or administrative requirements. 
Instead, it would 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 would need to spend more time on completing the documentation 
than would 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 would have provided education to their staff on what services 
are included in the prior authorization process. Following this 
education, the staff would know which services need prior authorization 
and would 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 (10 months) will be 307,688 (215,382 
submissions through fax or electronic means + 92,306 mailed 
submissions). Therefore, we estimate that the total burden for the 
first year (10 months) for the new service category, allotted across 
all providers, would be 161,305 hours (.5 hours x 307,688 submissions 
plus 3 hours x 2,487 providers for education). The burden cost for the 
first year (10 months) is $5,987,841 (161,305 hours x $34.26 plus 
$461,532 for mailing costs). In addition, we estimate that the total 
annual number of submissions would be 369,225 (258,458 submissions 
through fax or electronic means + 110,768 mailed submissions). The 
annual burden hours for the new service category, allotted across all 
providers, would be 192,074 hours (.5 hours x 369,225 submissions plus 
3 hours x 2,487 providers for education). The annual burden cost would 
be $7,134,276 (192,074 hours x $34.26 plus $553,838 for mailing costs). 
For the total burden and associated costs for the new service category, 
we estimate the annualized burden to be 181,818 hours and $6,752,131 
million. The annualized burden is based on an average of 3 years, that 
is, 1 year at the 10-month burden and 2 years at the 12-month burden. 
The ICR approved under OMB control number 0938-1368 would be revised 
and submitted to OMB for approval.
    Table 83 below is a chart reflecting the total burden and 
associated costs for the provisions included in this proposed rule.
[GRAPHIC] [TIFF OMITTED] TP26JY22.109


[[Page 44815]]



F. ICRs for Proposed Payment Adjustments for Domestic NIOSH-Approved 
Surgical N95 Respirators

    In section X.H of this proposed rule, we propose IPPS and OPPS 
payment adjustments for the additional resource costs of domestic 
NIOSH-approved surgical N95 respirators for cost reporting periods 
beginning on or after January 1, 2023. The proposed payment adjustments 
would be based on the IPPS and OPPS shares of the estimated difference 
in the reasonable costs of a hospital to purchase domestic NIOSH-
approved surgical N95 respirators compared to non-domestic ones. As 
discussed in section X.H of this proposed rule, in order to calculate 
the N95 payment adjustment for each eligible cost reporting period, we 
propose to create a new cost report form to collect additional 
information from hospitals.
    Specifically, we propose to collect the following: (1) total 
quantity of domestic NIOSH-approved surgical N95 respirators purchased 
by hospital; (2) total aggregate cost of domestic NIOSH-approved 
surgical N95 respirators purchased by hospital; (3) total quantity of 
non-domestic NIOSH-approved surgical N95 respirators purchased by 
hospital; and (4) total aggregate cost of non-domestic NIOSH-approved 
surgical N95 respirators purchased by hospital. This information would 
be used along with other information already collected on the cost 
report to calculate an IPPS payment adjustment amount and an OPPS 
payment adjustment amount. This new cost report worksheet may be 
submitted by a provider of service as part of the annual filing of the 
cost report and make available to its contractor and CMS, documentation 
to substantiate the data included on this Medicare cost report 
worksheet. These proposed documentation requirements are based on the 
recordkeeping requirements at current Sec.  413.20, which require 
providers of services to maintain sufficient financial records and 
statistical data for proper determination of costs payable under 
Medicare.
    The burden associated with this proposal would be the time and 
effort necessary for the provider to locate and obtain the relevant 
supporting documentation to report the quantity and aggregate costs of 
domestic NIOSH-approved surgical N95 respirators and non-domestic 
NIOSH-approved surgical N95 respirators purchased by hospital for the 
period.

G. ICRs for Proposed REH Provider Enrollment Requirements

    As stated earlier in section XIX.C.1 of this proposed rule, 
proposed Sec.  424.575, as well as existing Sec.  424.510(a)(1) and 
(d)(1), would require REHs to complete and submit the applicable 
enrollment application, which, for REHs, would be the Form CMS-855A 
(OMB control number 0938-0685). The only impacts associated with our 
proposed REH enrollment policies are those concerning the submission of 
a Form CMS-855A change of information application to convert from a CAH 
or hospital (as defined in section 1886(d)(1)(B) of the Act) to an REH. 
Per a North Carolina Rural Health Research Program \358\ study (and as 
stated in the CMS proposed rule titled ``Medicare and Medicaid 
Programs; Conditions of Participation (CoPs) for Rural Emergency 
Hospitals (REHs) and Critical Access Hospital CoP Updates,'' published 
in the Federal Register on July 6, 2022 (87 FR 40350), we estimate that 
68 REHs would convert from either a CAH or section 1886(d)(1)(B) 
hospital. (However, as we did in the aforementioned July 6, 2022 
proposed rule, we acknowledge that the number of conversions could be 
less than or significantly greater than this estimate.) For purposes of 
these calculations, we assume that all of these facilities would do so 
within the first year of our proposed requirements.
---------------------------------------------------------------------------

    \358\ https://www.shepscenter.unc.edu/product/how-many-hospitals-might-convert-to-a-rural-emergency-hospital-reh/.
---------------------------------------------------------------------------

    Form CMS-855A applications are typically completed by the 
provider's office or administrative staff. According to the most recent 
BLS wage data for May 2021, the mean hourly wage for the general 
category of ``Office and Administrative Support Workers, All Other'' 
(the most appropriate BLS category for owners) is $20.47 (see http://www.bls.gov/oes/current/oes_nat.htm#43-0000). With fringe benefits and 
overhead, the figure is $40.94. This would result in an estimated Year 
1 burden involving proposed Sec.  424.575 of 68 hours (68 applications 
x 1 hour) at a cost of $2,784. Over a 3-year period, this results in an 
annual burden of 23 hours at a cost of $928.
    The burden associated with this proposed requirement will be 
included as part of a resubmission of the information collection 
previously approved under 0938-0685. In addition to the announcement in 
this rule, we will also be publishing the required 60-day and 30-day 
notices to formally announce the aforementioned resubmission request 
and to both inform the public on where to find the revised PRA package 
for review and where to submit comments.

XXIV. 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 consider all comments we receive by 
the date and time specified in the DATES section of this preamble, and, 
when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

XXV. Economic Analyses

A. Statement of Need

    This proposed rule is necessary to make updates to the Medicare 
hospital OPPS rates. It is necessary to make changes to the payment 
policies and rates for outpatient services furnished by hospitals and 
CMHCs in CY 2023. We are required under section 1833(t)(3)(C)(ii) of 
the Act to update annually the OPPS conversion factor used to determine 
the payment rates for APCs. We also are required under section 
1833(t)(9)(A) of the Act to review, not less often than annually, and 
revise the groups, the relative payment weights, and the wage and other 
adjustments described in section 1833(t)(2) of the Act. We must review 
the clinical integrity of payment groups and relative payment weights 
at least annually. We propose to revise the APC relative payment 
weights using claims data for services furnished on and after January 
1, 2021, through and including December 31, 2021, and processed through 
December 31, 2021, and June 2020 HCRIS information with cost reporting 
periods prior to the PHE, as discussed in section X.B of this proposed 
rule with comment period.
    This proposed rule also is necessary to make updates to the ASC 
payment rates for CY 2023, enabling CMS to make changes to payment 
policies and payment rates for covered surgical procedures and covered 
ancillary services that are performed in ASCs in CY 2023. Because ASC 
payment rates are based on the OPPS relative payment weights for most 
of the procedures performed in ASCs, the ASC payment rates are updated 
annually to reflect annual changes to the OPPS relative payment 
weights. In addition, we are required under section 1833(i)(1) of the 
Act to review and update the list of surgical procedures that can be 
performed in an ASC, not less frequently than every 2 years.

[[Page 44816]]

    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 believed that this policy would 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.
    In this proposed rule we are also requesting information on 
possible alternative methodologies for counting organs for transplant 
hospitals and organ procurement organizations to calculate Medicare's 
share of organ acquisition costs, but we are not making any proposals 
at this time. We propose to exclude research organs from total usable 
organs used in the calculation of Medicare's share of organ acquisition 
costs and require a cost offset, but we are unable to estimate the 
extent to which the research organ proposal may impact the cost of 
research organs and the costs to Medicare. We also propose to clarify 
that certain costs associated with cardiac death are covered as organ 
acquisition costs but we do not anticipate an impact from this 
proposal. Therefore, there is no impact from the organ acquisition 
proposals in this proposed rule.

B. Overall Impact of Provisions of This Proposed Rule

    We have examined the impacts of this proposed rule, as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Social 
Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 
(March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism 
(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)). 
This section of this proposed rule contains the impact and other 
economic analyses for the provisions we propose for CY 2023.
    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). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule: (1) having an 
annual effect on the economy of $100 million or more in any 1 year, or 
adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) creating a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially altering the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raising novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order. Executive Order 13563 
emphasizes the importance of quantifying both costs and benefits, of 
reducing costs, of harmonizing rules, and of promoting flexibility. 
This proposed rule has been designated as an economically significant 
rule under section 3(f)(1) of Executive Order 12866 and hence also a 
major rule under Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (also known as the Congressional 
Review Act).'' Accordingly, this proposed rule has been reviewed by the 
Office of Management and Budget. We have prepared a regulatory impact 
analysis that, to the best of our ability, presents the costs and 
benefits of the provisions of this proposed rule. We are soliciting 
public comments on the regulatory impact analysis in this proposed 
rule, and we will address any public comments we receive in the final 
rule with comment period, as appropriate.
    We estimate that the total increase in Federal Government 
expenditures under the OPPS for CY 2023, compared to CY 2022, due only 
to the proposed changes to the OPPS in this proposed rule, would be 
approximately $1.79 billion. Taking into account our estimated changes 
in enrollment, utilization, and case-mix for CY 2023, we estimate that 
the OPPS expenditures, including beneficiary cost-sharing, for CY 2023 
would be approximately $86.2 billion, which is approximately $6.2 
billion higher than estimated OPPS expenditures in CY 2022. Because the 
provisions of the OPPS are part of a proposed rule that is economically 
significant, as measured by the threshold of an additional $100 million 
in expenditures in 1 year, we have prepared this regulatory impact 
analysis that, to the best of our ability, presents its costs and 
benefits. Table 84 of this proposed rule displays the distributional 
impact of the CY 2023 changes in OPPS payment to various groups of 
hospitals and for CMHCs.
    We note that we formally propose for CY 2023 that drugs and 
biologicals that are acquired under the 340B Program would be paid at 
ASP minus 22.5 percent, WAC minus 22.5 percent, or 69.46 percent of 
AWP, as applicable. The impacts on hospital rates as a result of this 
formal proposal are reflected in the discussion of the estimated 
effects of this proposed rule. However, we fully expect to revert to 
our previous policy of paying ASP plus 6 percent for drugs acquired 
under the 340B program and anticipate budget neutralizing the increase 
in payments for these drugs consistent with our longstanding policy of 
offsetting increases or decreases in particular payments through an 
adjustment to the OPPS conversion factor.
    We estimate that the proposed update to the conversion factor and 
other budget neutrality adjustments would increase total OPPS payments 
by 2.7 percent in CY 2023. The proposed changes to the APC relative 
payment weights, the proposed changes to the wage indexes, the proposed 
continuation of a payment adjustment for rural SCHs, including EACHs, 
the formal proposed continuation of payment policy for separately 
payable drugs acquired under the 340B program, and the proposed payment 
adjustment for cancer hospitals would not increase total OPPS payments 
because these changes to the OPPS are budget neutral. However, these 
updates would change the distribution of payments within the budget 
neutral system. We estimate that the total change in payments between 
CY 2022 and CY 2023, considering all budget-neutral payment 
adjustments, changes in estimated total outlier payments, pass-through 
payments, 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, the proposed exception for 
rural sole community hospitals from the clinic visit policy when 
provided at off-campus provider based departments, and the proposed 
payment adjustment for the additional resource costs for domestic 
NIOSH-approved surgical N95 respirators would increase total estimated 
OPPS payments by 2.9 percent.
    We estimate the total increase (from changes to the ASC provisions 
in this

[[Page 44817]]

proposed rule as well as from enrollment, utilization, and case-mix 
changes) in Medicare expenditures (not including beneficiary cost-
sharing) under the ASC payment system for CY 2023 compared to CY 2022, 
to be approximately $130 million. Tables 85 and 86 of this proposed 
rule display the redistributive impact of the CY 2023 changes regarding 
ASC payments, grouped by specialty area and then grouped by procedures 
with the greatest ASC expenditures, respectively.

C. Detailed Economic Analyses

1. Estimated Effects of OPPS Changes in This Proposed Rule
a. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the proposed CY 2023 policy changes on various hospital groups. We 
post on the CMS website our hospital-specific estimated payments for CY 
2023 with the other supporting documentation for this proposed rule. To 
view the hospital-specific estimates, we refer readers to the CMS 
website at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the website, select 
``regulations and notices'' from the left side of the page and then 
select ``CMS-1772-P'' from the list of regulations and notices. The 
hospital-specific file layout and the hospital-specific file are listed 
with the other supporting documentation for this proposed rule. We show 
hospital-specific data only for hospitals whose claims were used for 
modeling the impacts shown in Table 84 of this proposed rule. We do not 
show hospital-specific impacts for hospitals whose claims we were 
unable to use. We refer readers to section II.A of this proposed rule 
for a discussion of the hospitals whose claims we do not use for 
ratesetting 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 any adjustments for future changes in 
variables, such as service volume, service-mix, or number of 
encounters.
b. Estimated Effects of the Payment Policy for Drugs and Biologicals 
Obtained Under the 340B Program
    In section V.B of this proposed rule, we discuss our formal 
proposal to adjust the payment amount for nonpass-through, separately 
payable drugs acquired by certain 340B participating hospitals through 
the 340B Program. Rural SCHs, children's hospitals, and PPS-exempt 
cancer hospitals which we propose continue to be excepted from this 
payment policy in CY 2023. Specifically, in this proposed rule for CY 
2023, for hospitals paid under the OPPS (other than those that are 
proposed to be excepted for CY 2023), we formally propose to pay for 
separately payable drugs and biologicals that are obtained with a 340B 
discount, excluding those on pass-through payment status and vaccines, 
at ASP minus 22.5 percent. Because we formally propose to continue 
current Medicare payment policy for CY 2022, the budget neutrality 
adjustment does not reflect a change as a result of the 340B drug 
payment policy.
    However, in light of the Supreme Court's recent decision in 
American Hospital Association, we fully anticipate reverting to our 
prior policy of paying for drugs at ASP+6 percent, regardless of 
whether they were acquired through the 340B program.\359\ We also fully 
expect that when we revert to paying for drugs acquired through the 
340B program at ASP+6 percent, we will budget neutralize that increase 
consistent with the OPPS statute and our longstanding policy by making 
a corresponding decrease to the OPPS conversion factor to account for 
the increase in payment rates for these drugs. As set forth earlier in 
this proposed rule, to ensure budget neutrality under the OPPS, after 
applying this alternative payment methodology for drugs and biologicals 
purchased under the 340B Program, we currently estimate that we would 
apply an offset of approximately $1.96 billion to decrease the OPPS 
conversion factor, which would result in a budget neutrality adjustment 
of 0.9596 to the OPPS conversion factor, for a revised conversion 
factor of $83.279. Accordingly, we have included information with this 
proposed rule that presents the potential impact on OPPS providers and 
payment rates if we finalize our anticipated alternative policy to pay 
for drugs acquired through the 340B program at ASP plus 6 for CY 2023. 
We are providing a file comparing the budget neutrality and certain 
other ratesetting adjustments calculated associated with this potential 
change. Finally, we are making available other proposed rule supporting 
data files based on this potential change that we ordinarily would have 
provided if we had had sufficient time to formally propose paying for 
340B drugs at ASP plus 6 percent, including: the OPPS impact file, the 
impact table, addenda, and budget neutrality factors. We refer the 
reader to the CMS website for this proposed rule for more information 
on where these supplemental files can be found. Public comments on the 
budget neutrality adjustment are welcome and will be carefully 
considered.
---------------------------------------------------------------------------

    \359\ Given the timing of the Supreme Court's decision in 
American Hospital Ass'n v. Becerra, we lacked the necessary time to 
account for that decision before issuing this proposed rule and, for 
that reason alone, we formally propose here to continue our former 
policy.
---------------------------------------------------------------------------

c. Effects of the Proposed IPPS and OPPS Payment Adjustment for 
Domestic NIOSH-Approved Surgical N95 Respirators
    As discussed in section X.H of the preamble of this proposed rule, 
we propose IPPS and OPPS payment adjustments for the additional 
resource costs that hospitals incur in procuring domestic NIOSH-
approved surgical N95 respirators. We propose that the payment 
adjustments would commence for cost reporting periods beginning on or 
after January 1, 2023.
    For the IPPS, we propose to make this payment adjustment for the 
additional resource costs of domestic NIOSH-approved surgical N95 
respirators under section 1886(d)(5)(I) of the Act. To further support 
the strategic policy goal of sustaining a level of supply resilience 
for domestic NIOSH-approved surgical N95 respirators that is critical 
to protect the health and safety of personnel and patients in a public 
health emergency, we are not proposing to make the IPPS payment 
adjustment budget neutral under the IPPS. The data currently available 
to calculate a spending estimate for CY 2023 under the IPPS is limited. 
However, we believe the methodology described next to calculate this 
spending estimate under the IPPS for CY 2023 is reasonable based on the 
information available.
    To calculate the estimated total spending associated with this 
policy under the IPPS we multiplied together estimates of the 
following:
    (1) Estimate of the total number of NIOSH-approved surgical N95 
respirators used in the treatment of IPPS patients in CY 2023.
    (2) Estimate of the difference in the average unit cost of domestic 
and non-domestic NIOSH-approved surgical N95 respirators.

[[Page 44818]]

    (3) Estimate of the percentage of NIOSH-approved surgical N95 
respirators used in the treatment of IPPS patients in CY 2023 that are 
domestic.
    For purposes of this estimate, we believe it is reasonable to 
assume that on average approximately one NIOSH-approved surgical N95 
respirator is used for every day a beneficiary is in the hospital. The 
FY 2021 MedPAR claims data used for ratesetting in the FY 2023 IPPS/
LTCH proposed rule accounted for approximately 7.2 million IPPS 
discharges and 38.3 million Medicare covered days. Therefore, for CY 
2023, we are estimating that the total number of NIOSH-approved 
surgical N95 respirators (both domestic and non-domestic) used in the 
treatment of IPPS patients will be 38.3 million. Based on available 
data, our best estimate of the difference in the average unit costs of 
domestic and non-domestic NIOSH-approved surgical N95 respirators is 
$0.20.
    It is particularly challenging to estimate the percentage of NIOSH-
approved surgical N95 respirators that will be used in the treatment of 
IPPS patients in CY 2023 that will be domestic. The OMB's Made in 
America Office recently conducted a data call on capacity in which 
several entities attested to being able to supply 3.6 billion NIOSH-
approved and Berry-compliant surgical N95 respirators annually in the 
future if there were sufficient demand. We recognize that it may take 
time for this capacity to be fully reflected in hospital purchases. 
Therefore, although this would be sufficient capacity to supply the 
entire hospital industry if it were to be available and focused on this 
segment of the marketplace in 2023, we believe it is reasonable to 
assume that this will not happen instantaneously and hospitals in 
aggregate may in fact be able to purchase less than half of their 
NIOSH-approved surgical N95 respirators as domestic in 2023. Therefore, 
for purposes of this IPPS spending estimate, we set the percentage of 
NIOSH-approved surgical N95 respirators used in the treatment of IPPS 
patients in CY 2023 that are domestic to 40 percent, or slightly less 
than half. We estimate that total CY 2023 IPPS payments associated with 
this policy will be $3.1 million (or 38.3 million covered days * $0.20 
* 40 percent).
    For the OPPS, we propose to make this payment adjustment for the 
additional resource costs of domestic NIOSH-approved surgical N95 
respirators under section 1833(t)(2)(E) of the Act, which authorizes 
the Secretary to establish, in a budget neutral manner, other 
adjustments as determined to be necessary to ensure equitable payments. 
Consistent with this authority, the proposed OPPS payment adjustment 
would be budget neutral. In section X.H of the preamble of this 
proposed rule, we estimate that total CY 2023 OPPS payments associated 
with this policy will be $8.3 million. This represents approximately 
0.01 percent of the OPPS, which we propose to budget neutralize through 
an adjustment to the OPPS conversion factor.
d. Estimated Effects of OPPS Changes on Hospitals
    Table 84 shows the estimated impact of this proposed rule on 
hospitals. Historically, the first line of the impact table, which 
estimates the change in payments to all facilities, has always included 
cancer and children's hospitals, which are held harmless to their pre-
Balanced Budget Act (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 84, 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 2023, we propose to continue to pay CMHCs 
for partial hospitalization services under APC 5853 (Partial 
Hospitalization for CMHCs) and to pay hospitals for partial 
hospitalization services under APC 5863 (Partial Hospitalization for 
Hospital-Based PHPs).
    The estimated increase in the total payments made under the OPPS is 
determined largely by the increase to the conversion factor under the 
statutory methodology. The distributional impacts presented do not 
include assumptions about changes in volume and service-mix. The 
conversion factor is updated annually by the OPD fee schedule increase 
factor, as discussed in detail in section II.B of this proposed rule.
    Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee 
schedule increase factor is equal to the market basket percentage 
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which 
we refer to as the IPPS market basket percentage increase. The proposed 
IPPS market basket percentage increase applicable to the OPD fee 
schedule for CY 2023 is 3.1 percent. Section 1833(t)(3)(F)(i) of the 
Act reduces that 3.1 percent by the productivity adjustment described 
in section 1886(b)(3)(B)(xi)(II) of the Act, which is 0.4 percentage 
point for CY 2023 (which is also the productivity adjustment for FY 
2023 in the FY 2023 IPPS/LTCH PPS proposed rule (87 FR 28403)), 
resulting in the CY 2023 OPD fee schedule increase factor of 2.7 
percent. We propose to use the OPD fee schedule increase factor of 2.7 
percent in the calculation of the CY 2023 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 estimates in Table 84 of this 
proposed rule.
    To illustrate the impact of the CY 2023 changes, our analysis 
begins with a baseline simulation model that uses the CY 2022 relative 
payment weights, the FY 2022 final IPPS wage indexes that include 
reclassifications, and the final CY 2022 conversion factor. Table 84 
shows the estimated redistribution of the increase or decrease in 
payments for CY 2023 over CY 2022 payments to hospitals and CMHCs as a 
result of the following factors: the impact of the APC reconfiguration 
and recalibration changes between CY 2022 and CY 2023 (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 2.7 percent OPD fee schedule increase factor update to the 
conversion factor (Column 4); the estimated differential impact of the 
proposed rural SCH exception to the Off Campus Provider Based 
Department Visits Policy (Column 5); the estimated impact taking into 
account all payments for CY 2023 relative to all payments for CY 2022, 
including the impact of changes in estimated outlier payments, changes 
to the pass-through payment estimate, the proposed change to except 
rural sole community hospitals from the clinic visit policy when 
provided at campus provider based departments, and the proposed payment 
adjustment for the additional resource costs to hospitals of acquiring 
domestic NIOSH-approved surgical N95 respirators (Column 6).
    We did not model an explicit budget neutrality adjustment for the 
rural adjustment for SCHs because we propose to maintain the current 
adjustment percentage for CY 2023. 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 2023 are 
applied uniformly across services,

[[Page 44819]]

observed redistributions of payments in the impact table for hospitals 
largely depend on the mix of services furnished by a hospital (for 
example, how the APCs for the hospital's most frequently furnished 
services will change), and the impact of the wage index changes on the 
hospital. However, total payments made under this system and the extent 
to which this proposed rule will redistribute money during 
implementation also will depend on changes in volume, practice 
patterns, and the mix of services billed between CY 2022 and CY 2023 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, we estimate that the rates for CY 2023 would increase 
Medicare OPPS payments by an estimated 2.9 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 3.0 percent increase in 
Medicare payments to all other hospitals. These estimated payments 
would not significantly impact other providers.

Column 1: Total Number of Hospitals

    The first line in Column 1 in Table 84 shows the total number of 
facilities (3,502), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2021 hospital 
outpatient and CMHC claims data to model CY 2022 and CY 2023 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 2022 or CY 2023 payment and entities that are not paid 
under the OPPS. The latter entities include CAHs, all-inclusive 
hospitals, and hospitals located in Guam, the U.S. Virgin Islands, 
Northern Mariana Islands, American Samoa, and the State of Maryland. 
This process is discussed in greater detail in section II.A. of this 
proposed rule. At this time, we are unable to calculate a DSH variable 
for hospitals that are not also paid under the IPPS because DSH 
payments are only made to hospitals paid under the IPPS. Hospitals for 
which we do not have a DSH variable are grouped separately and 
generally include freestanding psychiatric hospitals, rehabilitation 
hospitals, and long-term care hospitals. We show the total number of 
OPPS hospitals (3,411), 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 25 CMHCs at the bottom of the impact 
table (Table 84) 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 a 0.1 
increase, with the impact ranging from a decrease of 0.3 percent to an 
increase of 0.6, depending on the number of beds. Rural hospitals will 
experience an estimated decrease of 0.1 overall. Major teaching 
hospitals will experience an estimated increase of 0.4 percent.

Column 3: Wage Indexes and the Effect of the Provider Adjustments

    Column 3 demonstrates the combined budget neutral impact of the APC 
recalibration; the updates for the wage indexes with the FY 2023 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 2022 conversion factor that 
included the OPD fee schedule increase and a budget neutrality 
adjustment for differences in wage indexes.
    Column 3 reflects the independent effects of the updated wage 
indexes, including the application of budget neutrality for the rural 
floor policy on a nationwide basis, as well as the proposed CY 2023 
changes in wage index policy discussed in section II.C this proposed 
rule. We did not model a budget neutrality adjustment for the proposed 
rural adjustment for SCHs because we propose to continue the rural 
payment adjustment of 7.1 percent to rural SCHs for CY 2023, as 
described in section II.E of this proposed rule. We also did not model 
a budget neutrality adjustment for the proposed cancer hospital payment 
adjustment because the proposed payment-to-cost ratio target for the 
cancer hospital payment adjustment in CY 2023 is 0.89, the same as the 
ratio that was reported for the CY 2022 OPPS/ASC final rule with 
comment period (85 FR 85914). 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 proposed rule.
    We modeled the independent effect of updating the wage indexes by 
varying only the wage indexes, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the CY 2023 
scaled weights and a CY 2022 conversion factor that included a budget 
neutrality adjustment for the effect of the changes to the wage indexes 
between CY 2022 and CY 2023.

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 2.7 
percent. Overall, these changes will increase payments to urban 
hospitals by 3.0 percent and to rural hospitals by 2.6 percent. Sole 
community hospitals receive an estimated increase of 2.5 percent while 
other rural hospitals receive an estimated increase of 2.6 percent.

Column 5: Off-Campus PBD Clinic Visit Payment Policy

    Column 5 displays the estimated effect of including the volume 
control method to pay for clinic visit HCPCS code G0463 ((Hospital 
outpatient clinic visit for assessment and management of a patient) 
when billed with modifier ``PO'' by an excepted off-campus PBD at a 
rate that would continue be 40 percent of the OPPS rate for a clinic 
visit service for CY 2023. Based on our proposal to apply an exception 
to this policy for rural sole community hospitals in the CY 2023 OPPS, 
the column includes estimated increases in payment, which are non-
budget neutral.

Column 6: All Changes for CY 2023

    Column 6 depicts the full impact of the proposed CY 2023 policies 
on each hospital group by including the effect of all changes for CY 
2023 and comparing them to all estimated payments in CY 2021. Column 6 
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 proposed rule; the change in the 
Hospital OQR Program payment reduction for the small number of

[[Page 44820]]

hospitals in our impact model that failed to meet the reporting 
requirements (discussed in section XIV of this proposed rule); the 
proposed change to except rural sole community hospitals from the 
clinic visit policy when provided at excepted off-campus provider-based 
departments, and the proposed adjustment for the additional resource 
costs of acquiring domestic NIOSH-approved surgical N95 respirators.
    Of those hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2022 update (and assumed, for 
modeling purposes, to be the same number for CY 2023), we included 33 
hospitals in our model because they had both CY 2021 claims data and 
recent cost report data. We estimate that the cumulative effect of all 
changes for CY 2023 will increase payments to all facilities by 2.9 
percent for CY 2022. We modeled the independent effect of all changes 
in Column 6 using the final relative payment weights for CY 2022 and 
the proposed relative payment weights for CY 2023. We used the proposed 
conversion factor for CY 2023 of $86.785 and the final CY 2022 
conversion factor of $84.177 discussed in section II.B of this proposed 
rule.
    Column 6 contains simulated outlier payments for each year. We used 
the 1-year charge inflation factor used in the FY 2021 IPPS/LTCH PPS 
final rule (87 FR 28667) of 6.4 percent (1.06404) to increase charges 
on the CY 2021 claims, and we used the overall CCR in the April 2022 
Outpatient Provider-Specific File (OPSF) to estimate outlier payments 
for CY 2022. Using the CY 2021 claims and a 6.4 percent charge 
inflation factor, we currently estimate that outlier payments for CY 
2022, using a multiple threshold of 1.75 and a fixed-dollar threshold 
of $6,175, will be approximately 1.29 percent of total payments. The 
estimated current outlier payments of 1.29 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 April 
2022 OPSF, with an adjustment of 0.974495 (86 FR 25718), to reflect 
relative changes in cost and charge inflation between CY 2021 and CY 
2023, to model the proposed CY 2023 outliers at 1.0 percent of 
estimated total payments using a multiple threshold of 1.75 and a 
fixed-dollar threshold of $8,350. The charge inflation and CCR 
inflation factors are discussed in detail in the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28666 through 28667).
    Overall, we estimate that facilities would experience an increase 
of 2.9 percent under this proposed rule in CY 2023 relative to total 
spending in CY 2022. This projected increase (shown in Column 6) of 
Table 84 of this proposed rule reflects the 2.7 percent OPD fee 
schedule increase factor, plus 0.34 percent for the change in the pass-
through payment estimate between CY 2022 and CY 2023, the proposed 
change to except rural sole community hospitals from the clinic visit 
policy when provided at excepted off-campus provider-based departments, 
and the proposed adjustment for the additional resource costs of 
acquiring domestic NIOSH-approved surgical N95 respirators, minus the 
difference in estimated outlier payments between CY 2022 (1.29 percent) 
and CY 2023 (1.0 percent). We estimate that the combined effect of all 
proposed changes for CY 2023 would increase payments to urban hospitals 
by 2.9 percent. Overall, we estimate that rural hospitals would 
experience a 3.2 percent increase as a result of the combined effects 
of all the proposed changes for CY 2023.
    Among hospitals, by teaching status, we estimate that the impacts 
resulting from the combined effects of all changes would include an 
increase of 2.6 percent for major teaching hospitals and an increase of 
3.3 percent for nonteaching hospitals. Minor teaching hospitals would 
experience an estimated increase of 3.0 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
would experience an increase of 2.9 percent, proprietary hospitals 
would experience an increase of 3.5 percent, and governmental hospitals 
would experience an increase of 2.8 percent.
    We note that under our anticipated alternative policy in which 
340B-acquired drugs would be paid at ASP+6 percent that providers would 
experience different estimated changes based on the alternative policy.
    Under the anticipated alternative OPPS, the combined effect of all 
proposed changes for CY 2023 would increase payments to urban hospitals 
by 4.0 percent. Overall, we estimate that, under the anticipated 
alternative, rural hospitals would experience a 2.1 percent increase as 
a result of the combined effects of all the proposed changes for CY 
2023.
    Among hospitals, by teaching status, under the anticipated 
alternative, we estimate that the impacts resulting from the combined 
effects of all changes would include an increase of 5.9 percent for 
major teaching hospitals and an increase of 2.3 percent for nonteaching 
hospitals. Under the anticipated alternative, minor teaching hospitals 
would experience an estimated increase of 3.5 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, under the anticipated alternative, 
we estimate that voluntary hospitals would experience an increase of 
4.0 percent, proprietary hospitals would experience an increase of 0.5 
percent, and governmental hospitals would experience an increase of 4.9 
percent.
    For more information on the changes associated with the anticipated 
alternative OPPS policy, please see the supporting data files 
associated with the alternative policy on the CMS website.
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e. Estimated Effects of OPPS Changes on CMHCs
    The last line of Table 84 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization services under the 
OPPS. In CY 2022, 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 2021 claims used for 
ratesetting in the proposed rule. We excluded days with 1 or 2 services 
because our policy only pays a per diem rate for partial 
hospitalization when 3 or more qualifying services are provided to the 
beneficiary. We estimate that CMHCs would experience an overall 8.4 
percent decrease in payments from CY 2022 (shown in Column 6). We note 
that this includes the trimming methodology as well as the proposed CY 
2023 geometric mean costs used for developing the PHP payment rates 
described in section VIII. of this proposed rule.
    Column 3 shows the estimated impact of adopting the proposed FY 
2023 wage index values would result in an increase of 0.2 percent to 
CMHCs. Column 4 shows that combining the OPD fee schedule increase 
factor, along with proposed changes in APC policy for CY 2023 and the 
proposed FY 2023 wage index updates, will result in an estimated 
decrease of 8.7 percent. Column 6 shows that adding the changes in 
outlier and pass-through payments would result in a total -8.4 percent 
decrease in payment for CMHCs. This reflects all proposed changes for 
CMHCs for CY 2023.
f. 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.H of this 
proposed rule. In all cases, section 1833(t)(8)(C)(i) of the Act limits 
beneficiary liability for copayment for a procedure performed in a year 
to the hospital inpatient deductible for the applicable year.
    We estimate that the aggregate beneficiary coinsurance percentage 
would be 17.8 percent for all services paid under the OPPS in CY 2023. 
The estimated aggregate beneficiary coinsurance reflects general system 
adjustments, including the proposed CY 2023 comprehensive APC payment 
policy discussed in section II.A.2.b of this proposed rule. We note 
that the individual payments, and therefore copayments, associated with 
services may differ based on the setting in which they are furnished. 
However, at the aggregate system level, we do not currently observe 
significant impact on beneficiary coinsurance as a result of those 
policies.
g. 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 this proposed rule. No types of providers or suppliers other than 
hospitals, CMHCs, and ASCs would be affected by the changes in this 
proposed rule.
h. Estimated Effects of OPPS Changes on the Medicare and Medicaid 
Programs
    The effect on the Medicare program is expected to be an increase of 
$1.8 billion in program payments for OPPS services furnished in CY 
2023. 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 
proposed rule would increase these Medicaid beneficiary payments by 
approximately $115 million in CY 2023. 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 30 
percent of the beneficiary cost-sharing impact. The national average 
split of Medicaid payments is 57 percent Federal payments and 43 
percent State payments. Therefore, for the estimated $115 million 
Medicaid increase, approximately $65 million would be from the Federal 
Government and $50 million would be from State governments.
i. Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we propose and the reasons for our 
selected alternatives are discussed throughout this proposed rule.
     Alternatives Considered for the Claims Data used in OPPS 
and ASC Ratesetting due to the PHE.
    We refer readers to section X.B of this proposed rule for a 
discussion of our proposed policy of using cost report data prior to 
the PHE. We note that in that section we discuss the alternative 
proposal we are considering regarding applying the standard ratesetting 
process, in particular the selection of cost report data used, which 
would include claims and cost report data including the timeframe of 
the PHE. We note that there are potential issues related to that data, 
including the effect of the PHE on the provider departmental CCRs that 
would be used to estimate cost. In this proposed rule, as discussed in 
section X.D, we propose a policy of using updated CY 2021 claims data 
in CY 2023 OPPS ratesetting, while using cost report CCRs with 
reporting periods prior to the PHE.
    We note that these policy considerations also have ASC implications 
since the relative weights for certain surgical procedures performed in 
the ASC setting are developed based on the OPPS relative weights and 
claims data.
     Alternative Considered for the Proposed Adjustment for 
Acquisition of Domestic NIOSH-approved Surgical N95 Respirators.
    We refer readers to section X.H of this proposed rule for a 
discussion of our proposed IPPS and OPPS payment adjustments for the 
additional resource costs that hospitals incur in procuring domestic 
NIOSH-approved surgical N95 respirators. We note that in that section 
we discuss an alternative proposal of basing the payment adjustments on 
the national average cost differential between a domestic NIOSH-
approved surgical N95 respirator and a non-domestic one as collected on 
the hospital cost reports, rather than using hospital specific 
differentials. We state that we may consider this alternative proposal 
once we've gained more experience with this payment policy, if 
finalized, its impact on the N95 marketplace, and the data collected. 
As discussed later in this section, our best estimate of the difference 
in the average unit costs of domestic and non-domestic NIOSH-approved 
surgical N95 respirators is $0.20. Using this figure, we estimate the 
impact of this alternative policy would be the same as the policy we 
propose in section X.H of this proposed rule. Our estimates of the CY 
2023 IPPS and OPPS payment associated with our proposed policy are $3.1 
million and $8.3 million, respectively, and are discussed in more 
detail in this section.

[[Page 44825]]

2. Estimated Effects of CY 2023 ASC Payment System Changes
    Most ASC payment rates are calculated by multiplying the ASC 
conversion factor by the ASC relative payment weight. As discussed 
fully in section XIII of this proposed rule, we are setting the CY 2023 
ASC relative payment weights by scaling the proposed CY 2023 OPPS 
relative payment weights by the proposed ASC scalar of 0.8474. The 
estimated effects of the proposed updated relative payment weights on 
payment rates are varied and are reflected in the estimated payments 
displayed in Tables 85 and 86.
    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 update 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 (as projected by 
the Secretary for the 10-year period, ending with the applicable fiscal 
year, year, cost reporting period, or other annual period). For ASCs 
that fail to meet their quality reporting requirements, the CY 2023 
payment determinations would be based on the application of a 2.0 
percentage point reduction to the annual update factor, which would be 
the hospital market basket update for CY 2023. We calculated the CY 
2023 ASC conversion factor by adjusting the CY 2022 ASC conversion 
factor by 1.0010 to account for changes in the pre-floor and pre-
reclassified hospital wage indexes between CY 2022 and CY 2023 and by 
applying the CY 2023 productivity-adjusted hospital market basket 
update factor of 2.7 percent (which is equal to the projected hospital 
market basket update of 3.1 percent reduced by a productivity 
adjustment of 0.4 percentage point). The CY 2023 ASC conversion factor 
is $51.315 for ASCs that successfully meet the quality reporting 
requirements.
a. Limitations of Our Analysis
    Presented here are the projected effects of the proposed changes 
for CY 2023 on Medicare payment to ASCs. A key limitation of our 
analysis is our inability to predict changes in ASC service-mix between 
CY 2021 and CY 2023 with precision. We believe the net effect on 
Medicare expenditures resulting from the proposed CY 2023 changes would 
be small in the aggregate for all ASCs. However, such changes may have 
differential effects across surgical specialty groups, as ASCs continue 
to adjust to the payment rates based on the policies of the revised ASC 
payment system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs would experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
b. Estimated Effects of ASC Payment System Policies on ASCs
    Some ASCs are multispecialty facilities that perform a wide range 
of surgical procedures from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the proposed update to the CY 2023 payments would depend on a 
number of factors, including, but not limited to, the mix of services 
the ASC provides, the volume of specific services provided by the ASC, 
the percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion includes tables that display estimates of the 
impact of the proposed CY 2023 updates to the ASC payment system on 
Medicare payments to ASCs, assuming the same mix of services, as 
reflected in our CY 2021 claims data. Table 85 depicts the estimated 
aggregate percent change in payment by surgical specialty or ancillary 
items and services group by comparing estimated CY 2022 payments to 
estimated CY 2023 payments, and Table 86 shows a comparison of 
estimated CY 2022 payments to estimated CY 2023 payments for procedures 
that we estimate would receive the most Medicare payment in CY 2022.
    In Table 85, 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 85.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped and the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes, 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated CY 2022 ASC Payments were calculated 
using CY 2021 ASC utilization data (the most recent full year of ASC 
utilization) and CY 2022 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2022 ASC payments.
     Column 3--Estimated CY 2023 Percent Change is the 
aggregate percentage increase or decrease in Medicare program payment 
to ASCs for each surgical specialty or ancillary items and services 
group that is attributable to proposed updates to ASC payment rates for 
CY 2023 compared to CY 2022.
    As shown in Table 85, for the six specialty groups that account for 
the most ASC utilization and spending, we estimate that the proposed 
update to ASC payment rates for CY 2023 would result in a 1 percent 
increase in aggregate payment amounts for eye and ocular adnexa 
procedures, a 4 percent increase in aggregate payment amounts for 
nervous system procedures, 6 percent increase in aggregate payment 
amounts for musculoskeletal system procedures, a 2 percent increase in 
aggregate payment amounts for digestive system procedures, a 1 percent 
increase in aggregate payment amounts for cardiovascular system 
procedures, and a 3 percent increase in aggregate payment amounts for 
genitourinary system procedures. We note that these changes can be a 
result of different factors, including updated data, payment weight 
changes, and proposed changes in policy. In general, spending in each 
of these categories of services is increasing due to the 2.7 percent 
proposed payment rate update. After the payment rate update is 
accounted for, aggregate payment increases or decreases for a category 
of services can be higher or lower than a 2.0 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 6 percent increase in 
proposed aggregate musculoskeletal procedure payments. The increase in 
payment

[[Page 44826]]

rates for musculoskeletal procedures as a result of increased device 
portions is further increased by the proposed 2.7 percent ASC rate 
update for these procedures. Conversely, we estimate only a 1 percent 
increase in proposed aggregate eye and ocular adnexa procedures related 
to a decrease in OPPS relative weights partially offsetting the 2.7 
percent ASC rate update. For estimated changes for selected procedures, 
we refer readers to Table 85 provided later in this section.
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    Table 85 shows the estimated impact of the updates to the revised 
ASC payment system on aggregate ASC payments for selected surgical 
procedures during CY 2023. The table displays 30 of the procedures 
receiving the greatest estimated CY 2022 aggregate Medicare payments to 
ASCs. The HCPCS codes are sorted in descending order by estimated CY 
2022 program payment.
     Column 1--CPT/HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2022 ASC Payments were calculated 
using CY 2021 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2022 ASC payment rates. The estimated CY 2022 
payments are expressed in millions of dollars.
     Column 4--Estimated CY 2023 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2022 and 
the estimated payment for CY 2023 based on the proposed update.
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c. Estimated Effects of Proposed ASC Payment System Policies on 
Beneficiaries
    We estimate that the proposed CY 2023 update to the ASC payment 
system would be generally positive (that is, result in lower cost-
sharing) for beneficiaries with respect to the new procedures proposed 
to be designated as office-based for CY 2023. First, other than certain 
preventive services where coinsurance and the Part B deductible is 
waived to comply with sections 1833(a)(1) and (b) of the Act, the ASC 
coinsurance rate for all procedures is 20 percent. This contrasts with 
procedures performed in HOPDs under the OPPS, where the beneficiary is 
responsible for copayments that range from 20 percent to 40 percent of 
the procedure payment (other than for certain preventive services), 
although the majority of HOPD procedures have a 20-percent copayment. 
Second, in almost all cases, the ASC payment rates under the ASC 
payment system are lower than payment rates for the same procedures 
under the OPPS. Therefore, the beneficiary coinsurance amount under the 
ASC payment system will almost always be less than the OPPS copayment 
amount for the same services. (The only exceptions will be if the ASC 
coinsurance amount exceeds the hospital inpatient deductible since the 
statute requires that OPPS copayment amounts not exceed the hospital 
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 proposed to designate as office-
based in CY 2023, the beneficiary coinsurance amount under the ASC 
payment system

[[Page 44828]]

generally will be no greater than the beneficiary coinsurance under the 
PFS because the coinsurance under both payment systems generally is 20 
percent (except for certain preventive services where the coinsurance 
is waived under both payment systems).
3. Accounting Statements and Tables
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget website at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/assets/OMB/circulars/a004/a-4.html), we have 
prepared accounting statements to illustrate the impacts of the OPPS 
and ASC changes in this proposed rule. The first accounting statement, 
Table 87, illustrates the classification of expenditures for the CY 
2023 estimated hospital OPPS incurred benefit impacts associated with 
the proposed CY 2023 OPD fee schedule increase. The second accounting 
statement, Table 88, illustrates the classification of expenditures 
associated with the proposed 2.7 percent CY 2023 update to the ASC 
payment system, based on the provisions of this proposed rule and the 
baseline spending estimates for ASCs. Both tables classify most 
estimated impacts as transfers. Table 89 includes the annual estimated 
impact of hospital OQR and ASCQR programs, and the prior authorization 
process.
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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 (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 2021 payment determinations. Of the 3,356 hospitals that 
met eligibility requirements for the CY 2022 payment determination, we 
determined that 88 hospitals did not meet the requirements to receive 
the full annual Outpatient Department (OPD) fee schedule increase 
factor.
b. Impact of CY 2023 OPPS/ASC Proposed Rule Policies
    We do not anticipate that the CY 2023 Hospital OQR Program proposed 
policies will impact the number of facilities that will receive payment 
reductions. In this proposed rule, we propose to--(1) add an additional 
targeting criterion to the validation selection policy beginning with 
the CY 2023 reporting period; (2) align the patient encounter quarters 
with the calendar year beginning with the CY 2024 reporting period; and 
(3) change reporting for the OP-31 measure from mandatory to voluntary 
beginning with the CY 2025 payment determination.
    As shown in Table 81 in section XXIII.B.4 (Collection of 
Information) of this proposed rule, we estimate a total information 
collection burden decrease for 3,350 OPPS hospitals of -325,847

[[Page 44829]]

hours at a cost of -$15,138,852 annually associated with our proposed 
policies and updated burden estimates for the CY 2025 reporting period/
CY 2027 payment determination and subsequent years, compared to our 
currently approved information collection burden estimates. We refer 
readers to section XXIII.B of this proposed rule (information 
collection requirements) for a detailed discussion of the calculations 
estimating the changes to the information collection burden for 
submitting data to the Hospital OQR Program. We do not believe the 
proposed policies will have any further economic impact beyond 
information collection burden.
5. Effects of Requirements for the ASCQR Program
a. Background
    In section XV of this proposed rule, we discuss our proposed 
policies affecting the Ambulatory Surgical Center Quality Reporting 
(ASCQR) Program. For the CY 2022 payment determination, of the 5,386 
ASCs that met eligibility requirements, we determined that 290 ASCs did 
not meet the requirements to receive the full annual payment update 
under the ASC fee schedule.
b. Impact of CY 2023 OPPS/ASC Proposed Policies
    In section XVI of this proposed rule, we propose to change 
reporting for the ASC-11 measure from mandatory to voluntary beginning 
with the CY 2023 reporting period. As shown in Table 82 in section 
XXIII.C.3.e (Collection of Information), we estimate a total 
information collection burden decrease for 4,646 ACSs of -72,107 hours 
at a cost of -$3,350,091 annually associated with our proposed policies 
and updated burden estimates for the CY 2025 reporting period/CY 2027 
payment determination and subsequent years, compared to our currently 
approved information collection burden estimates. We refer readers to 
section XXIII.C of the preamble of this proposed rule (information 
collection requirements) for a detailed discussion of the calculations 
estimating the changes to the information collection burden for 
submitting data to the ASCQR Program. We do not believe the proposed 
policy will have any further economic impact beyond information 
collection burden.
6. Effects of Requirements for the Rural Emergency Hospitals (REH) 
Program
a. Background
    In section XVIII.A of this proposed rule, we discuss our proposed 
policies to provide payment to REHs, including the following proposals: 
(1) the payment rate for an REH service would be calculated using the 
OPPS prospective payment rate for the equivalent covered OPD service 
increased by 5 percent; (2) the additional 5 percent payment for REH 
services, above the amount that would be paid for covered OPD services, 
would not be subject to a copayment; (3) For CY 2023, the monthly 
facility payment that each REH will receive would be determined by 
first calculating the total amount that CMS determines was paid to all 
CAHs under Title 18 of the Act in CY 2019 minus the estimated total 
amount that would have been paid under Title 18 to CAHs in CY 2019 if 
payment were made for inpatient hospital, outpatient hospital, and 
skilled nursing facility services under the applicable prospective 
payment systems for such services during CY 2019. The difference is 
divided by the number of CAHs enrolled in Medicare in CY 2019 to 
calculate the annual amount of this additional facility payment per 
individual REH. The annual payment amount is then divided by 12 to 
calculate the monthly facility payment that each REH will receive.
b. Impact of CY 2023 OPPS/ASC Proposed Rule REH Policies
    For CY 2023, we have determined there are 1,716 CAHs and rural 
subsection (d) hospitals with 50 or fewer beds that are eligible to 
convert to become an REH in the nation. A study \360\ estimated that 68 
eligible providers or approximately 4 percent of all eligible providers 
would become a REH in CY 2023, and we use this number of REHs for our 
impact analyses. We acknowledge that the number of conversions could be 
less than or significantly greater than this estimate.
---------------------------------------------------------------------------

    \360\ ``How Many Hospitals Might Convert to a Rural Emergency 
Hospital (REH)?'' July 2021. Pink, GH et al. Findings Brief--NC 
Rural Health Research Program.
---------------------------------------------------------------------------

    We developed a percentile analysis estimating how much revenue from 
rendering medical services a provider would lose or gain during CY 2023 
if it decided to convert to a REH. We estimated that a provider in the 
95th percentile of total annual REH medical service payment would 
receive an additional $2,089,700 in Medicare payments. We estimated 
that a provider in the 100th percentile of total annual REH medical 
service payment would receive an additional $3,362,560 in Medicare 
payments. Since a REH provider conversion rate of 4 percent falls 
between the 95th percentile and the 100th percentile of total annual 
REH medical service payment spending, we took the average of the 
additional spending for the 95th and 100th percentiles to determine the 
additional medical service spending for each provider converting to a 
REH in CY 2023 would be $2,726,130. Since we do not have any 
information on individual providers that may convert, nor do we have 
any information on characteristics of regions where REH conversions may 
be more likely, our best assumption regarding the impact of the REH 
policy is that providers who anticipate the most financial benefit from 
converting to an REH would be the most likely providers to convert.
    Next, we determined the annual facility payment amount for a 
provider that converts to an REH in CY 2023. The proposed monthly 
facility payment for CY 2023 is $268,294. When this amount is 
multiplied by 12 months, the total annual facility payment is equal to 
$3,219,524. To determine the total impacts of the REH policy, we need 
to multiply the additional medical service spending amount of 
$2,726,130 by 68 providers which equals $185,376,820. Next, we multiply 
the total annual facility payment amount of $3,219,524 by 68 providers 
which equals $218,927,610. Finally, we combine the two amounts 
together, and we obtain a final estimate of the impacts of the REH 
provider policy of an additional $404,304,430 in Medicare payments.
7. Effects of Rural Emergency Hospitals (REH) Physician Self-Referral 
Law Updates
    The physician self-referral law provisions related to REHs are 
discussed in section XVII.E. of this proposed rule.
    As discussed in section XVIII.E.3 of this proposed rule, we propose 
a new exception at Sec.  411.356(c)(4) for ownership or investment 
interests held by physicians (or immediate family members of 
physicians) in an REH. If all the requirements of the proposed 
exception are satisfied, the physician's (or immediate family member's) 
ownership or investment interest in the REH would not constitute a 
financial relationship for purposes of the physician self-referral law, 
and the referral and billing prohibitions of the physician self-
referral law would not apply.
    All the hospitals that are eligible to convert to an REH are either 
critical access hospitals or small rural hospitals and, therefore, are 
currently considered ``hospitals'' for purposes of the physician self-
referral law. We believe that most physician-owned entities that are 
not publicly traded currently rely on

[[Page 44830]]

the rural provider and whole hospital exceptions in our regulations at 
Sec.  411.356(c)(1) and (3), respectively. The proposed REH exception 
includes program integrity requirements similar to those under the 
rural provider and whole hospital exceptions. Thus, we anticipate that 
the requirements of the proposed REH exception would result in no 
additional burden to a physician-owned REH and would protect against 
program or patient abuse. We believe that the proposed REH exception 
would ensure that the physician self-referral law does not inhibit 
access to medically necessary designated health services furnished by 
REHs that are owned or invested in by physicians (or their immediate 
family members) or thwart the underlying goal of section 125 of the CAA 
to safeguard or expand such access.
    As discussed in section XVIII.E.5 of this proposed rule, we also 
propose to revise certain existing exceptions applicable to 
compensation arrangements involving specific types of providers to make 
them applicable to compensation arrangements to which an REH is a 
party. Specifically, we propose to revise the exceptions for physician 
recruitment at Sec.  411.357(e), obstetrical malpractice insurance 
subsidies at Sec.  411.357(r), retention payments in underserved areas 
at Sec.  411.357(t), electronic prescribing items and services at Sec.  
411.357(v), assistance to compensate a nonphysician practitioner at 
Sec.  411.357(x), and timeshare arrangements at Sec.  411.357(y) to 
also permit an REH to provide remuneration to a physician (or an 
immediate family member of a physician) if all requirements of the 
applicable exception are satisfied. All the proposed revisions would 
ensure that exceptions that may already be used by existing CAHs and 
small rural hospitals eligible to undergo conversion to an REH remain 
available to REHs. We believe that the continued availability of these 
exceptions could be important to ensuring access to necessary 
designated health services and other care furnished by an REH.
8. REH Enrollment
    The only impacts of our proposed REH enrollment policies are the 
information collection requirements associated with the facility's 
completion and submission of a Form CMS-855A change of information 
application to convert from a CAH or hospital (as defined in section 
1886(d)(1)(B) of the Act) to an REH. These are addressed in detail in 
section XXIII.G of this proposed rule. As explained in that section, we 
estimate a Year 1 burden of 68 hours (68 applications x 1 hour per 
application) at a cost of $2,784 (based on an hourly wage estimate of 
$40.94). Over a 3-year period, this results in an annual burden of 23 
hours at a cost of $928.
9. Effects of Addition of a New Service Category for Hospital 
Outpatient Department (OPD) Prior Authorization Process
a. Overall Impact
    In the CY 2020 OPPS/ASC final rule with comment period, we 
established a prior authorization process for certain hospital OPD 
services using our authority under section 1833(t)(2)(F) of the Act, 
which allows the Secretary to develop ``a method for controlling 
unnecessary increases in the volume of covered OPD services'' (84 FR 
61142, November 12, 2019).\361\ As part of the CY 2021 OPPS/ASC final 
rule (CMS-1736-FC), we added additional service categories to the prior 
authorization process (85 FR 85866, December 29, 2020). 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.
---------------------------------------------------------------------------

    \361\ See also Correction Notice issued January 3, 2020 (85 FR 
224).
---------------------------------------------------------------------------

    In accordance with Sec.  419.83(b), we propose to require prior 
authorization for a new service category: Facet Joint Interventions. We 
propose adding the service category to Sec.  419.83(a)(3). We also 
propose that the prior authorization process for the additional service 
category would be effective for dates of services on or after March 1, 
2023. The addition of the service category 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 the additional service category is dependent on 
the number of claims affected. Table 90, Overall Economic Impact on the 
Health Sector, lists an estimate of the overall economic impact on the 
health sector for the new service category. The values populating this 
table were obtained from the cost reflected in Table 91, Annual Private 
Sector Costs, and Table 92, Estimated Annual Administrative Costs to 
CMS. Together, Tables 91 and 92 combine to convey the overall economic 
cost impact to the health sector for the new service category, which is 
illustrated in Table 90. It should be noted that due to the March start 
date for prior authorization for the new service category, year one 
includes only 10 months of prior authorization requests.
    Based on the estimate, the overall economic cost impact would be 
approximately $22 million in the first year based on 10 months for the 
new service category. The 5-year impact would be approximately $127.4 
million, and the 10-year impact would be approximately $259.2 million. 
The 5- and 10-year impacts account for year one, including only 10 
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 $65.3 million. We believe there are likely to be other benefits that 
would result from the prior authorization requirement for the new 
service category, though many of those benefits are difficult to 
quantify. For instance, we would expect to see savings in the form of 
reduced unnecessary utilization, fraud, waste, and abuse, including a 
reduction in improper Medicare fee-for-service payments (we note that 
not all improper payments are fraudulent). We are soliciting public 
comments on the potential increased costs and benefits associated with 
this proposed provision for the new service category.

[[Page 44831]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.118

    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 would be relatively small. We estimate that 90 to 95 
percent of providers who provide these services are small entities 
under the RFA definition. The rationale behind requiring prior 
authorization is to control unnecessary increases in the volume of 
covered OPD services. The impact on providers not in compliance with 
Medicare coverage, coding, and payment rules and regulations could be 
significant, as the proposed rule would 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 additional OPD 
service category subject to unnecessary utilization by providers to be 
a condition that we must mitigate. We believe that the effect would be 
minimal on providers who are compliant with Medicare coverage, coding, 
and payment rules and requirements. Adding the new service category 
would offer additional protection to a provider's cash flow as the 
provider would 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 would significantly affect the 
number of legitimate claims submitted for the new service category. 
However, we would 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 
additional service category would be equivalent to that of submitting 
documentation and clerical activities associated with prepayment 
review, which is 0.5 hours. We would apply this time burden estimate to 
initial submissions and resubmissions.
BILLING CODE 4120-01-P

[[Page 44832]]

[GRAPHIC] [TIFF OMITTED] TP26JY22.119

BILLING CODE 4120-01-C
2. Administrative Costs to CMS
    CMS would incur additional costs associated with processing the 
prior authorization requests for the new service category. 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, 
outreach, and system changes.
[GRAPHIC] [TIFF OMITTED] TP26JY22.120

3. Estimated Beneficiary Costs
    We would expect a reduction in the utilization of the new Medicare 
OPD service category 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 would 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 would be quantifiable benefits for this rule because we 
expect a reduction in the unnecessary utilization of the new Medicare 
OPD service category subject to prior authorization. It is difficult to 
project the exact decrease in unnecessary utilization; however, based 
on a 25 percent savings percentage, we estimate that for the first ten 
months, there would be savings of $54.4 million overall. Annually, we 
estimate an overall gross savings of $65.3 million. This savings 
represents a Medicare benefit from more efficient use of health care 
resources while still maintaining the same health outcomes for 
necessary services. We would closely monitor utilization and billing 
practices. The expected benefits would also include changed billing 
practices

[[Page 44833]]

that would also enhance the coordination of care for the beneficiary. 
For example, requiring prior authorization for the additional OPD 
services category 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 submits clinical 
documentation created as part of its prior authorization request.
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 
last year's proposed rule (18,664) will be the number of reviewers of 
this proposed rule. We acknowledge that this assumption may understate 
or overstate the costs of reviewing this rule. It is possible that not 
all commenters reviewed last year's rule in detail, and it is also 
possible that some reviewers choose not to comment on the proposed 
rule. For these reasons we thought that the number of past commenters 
would be a fair estimate of the number of reviewers of this rule. We 
welcome any comments on the approach to estimating the number of 
entities that will review the proposed rule. We also recognize that 
different types of entities are, in many cases, affected by mutually 
exclusive sections of the proposed rule, and therefore, for the 
purposes of our estimate, we assume that each reviewer reads 
approximately 50 percent of the rule. We seek comments on this 
assumption.
    Using the wage information from the BLS for medical and health 
service managers (Code 11-9111), we estimated that the cost of 
reviewing this rule is $115.22 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 would take approximately 8 
hours for the staff to review half of this proposed rule. For each 
facility that reviewed the proposed rule, the estimated cost is $921.76 
(8 hours x $115.22). Therefore, we estimate that the total cost of 
reviewing this regulation is $17,203,729 ($921.76 x 18,664).

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 proposed rule. As a result, the 
Secretary has determined that this proposed rule would 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 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this final 
rule with comment period would increase payments to small rural 
hospitals by approximately 3 percent. Therefore, it should not have a 
significant impact on the approximately 563 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. We note that the policies established in this proposed rule 
apply more broadly to OPPS providers and do not specifically focus on 
small rural hospitals. As a result, the impact on those providers may 
depend more significantly on their case mix of services provided, since 
the broader impact on the hospital category is more dependent on the 
OPD update factor, as indicated in the impact table.

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. In 2022, that 
threshold level is currently approximately $165 million. This proposed 
rule does not mandate any requirements for State, local, or tribal 
governments, or for the private sector.

G. Conclusion

    The changes we propose in this proposed rule would affect all 
classes of hospitals paid under the OPPS as well as affect both CMHCs 
and ASCs. We estimate that most classes of hospitals paid under the 
OPPS would experience a modest increase or a minimal decrease in 
payment for services furnished under the OPPS in CY 2023. Table 84 
demonstrates the estimated distributional impact of the OPPS budget 
neutrality requirements that would result in a 2.9 percent increase in 
payments for all services paid under the OPPS in CY 2023, 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, changes to the pass-through payment 
estimate, proposed exception for rural SCHs from the clinic visit 
policy for services furnished at off campus PBDs, and proposed 
adjustment for the additional resource costs of acquiring domestic 
NIOSH-approved surgical N95 respirators. However, some classes of 
providers that are paid under the OPPS would experience more 
significant gains or losses in OPPS payments in CY 2023.
    The updates we are making to the ASC payment system for CY 2023 
would affect each of the approximately 5,900 ASCs currently approved 
for participation in the Medicare program.

[[Page 44834]]

The effect on an individual ASC would depend on its mix of patients, 
the proportion of the ASCs 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 than in 
previous years. Table 85 demonstrates the estimated distributional 
impact among ASC surgical specialties of the productivity-adjusted 
hospital market basket update factor of 2.7 percent for CY 2023.

H. Federalism Analysis

    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct costs on State and local 
governments, preempts State law, or otherwise has federalism 
implications. We have examined the OPPS and ASC provisions included in 
this proposed rule in accordance with Executive Order 13132, 
Federalism, and have determined that they will not have a substantial 
direct effect on State, local or tribal governments, preempt State law, 
or otherwise have a federalism implication. As reflected in Table 84 of 
this proposed rule, we estimate that OPPS payments to governmental 
hospitals (including State and local governmental hospitals) would 
increase by 2.8 percent under this proposed rule. While we do not know 
the number of ASCs or CMHCs with government ownership, we anticipate 
that it is small. The analyses we have provided in this section of this 
proposed rule, in conjunction with the remainder of this document, 
demonstrate that this proposed rule is consistent with the regulatory 
philosophy and principles identified in Executive Order 12866, the RFA, 
and section 1102(b) of the Act.
    This proposed rule would affect payments to a substantial number of 
small rural hospitals and a small number of rural ASCs, as well as 
other classes of hospitals, CMHCs, and ASCs, and some effects may be 
significant. However, as noted in section XXV, this proposed rule 
should not have a significant effect on small rural hospitals.

    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on July 6, 2022.

List of Subjects

42 CFR Part 405

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

42 CFR Part 410

    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 413

    Diseases, Health facilities, Medicare, Puerto Rico, Reporting and 
recordkeeping requirements.

42 CFR Part 416

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 424

    Emergency medical services, Health facilities, Health professions, 
Medicare, Reporting and recordkeeping requirements.

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

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

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

    Authority:  42 U.S.C. 263a, 405(a), 1302, 1320b-12, 1395x, 
1395y(a), 1395ff, 1395hh, 1395kk, 1395rr, and 1395ww(k).

0
2. Section 405.1801 is amended by revising paragraph (b)(2)(ii) to read 
as follows:


Sec.  405.1801   Introduction.

* * * * *
    (b) * * *
    (2) * * *
    (ii) Some of these nonprovider entities are required to file 
periodic cost reports and are paid on the basis of information 
furnished in these reports. Except as provided at Sec.  413.420(g), 
these nonprovider entities may not obtain a contractor hearing or a 
Board hearing under section 1878 of the Act or this subpart.
* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

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

0
4. Section 410.27 is amended by:
0
a. Revising paragraphs (a)(1)(iv)(A) and (B); and
0
b. Removing paragraph (a)(1)(iv)(D).
    The revisions read as follows:


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

    (a) * * *
    (1) * * *
    (iv) * * *
    (A) For services furnished in the hospital or CAH, or in an 
outpatient department of the hospital or CAH, both on and off-campus, 
as defined in Sec.  413.65 of this chapter, general supervision means 
the procedure is furnished under the physician's or nonphysician 
practitioner's overall direction and control, but the physician's or 
nonphysician practitioner's presence is not required during the 
performance of the procedure.
    (B) Certain therapeutic services and supplies may be assigned 
either direct supervision or personal supervision.
    (1) 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);

[[Page 44835]]

    (2) Personal supervision means the physician or nonphysician 
practitioner must be in attendance in the room during the performance 
of the procedure;
* * * * *
0
5. Section 410.28 is amended by revising paragraph (e) to read as 
follows:


Sec.  410.28   Hospital or CAH diagnostic services furnished to 
outpatients: Conditions.

* * * * *
    (e) Medicare Part B makes payment under section 1833(t) of the Act 
for diagnostic services furnished by or under arrangements made by the 
participating hospital only when the diagnostic services are furnished 
under one of the three levels of supervision (as defined in paragraphs 
(e)(1) through (3) of this section) specified by CMS for the particular 
service by a physician or, to the extent that they are authorized to do 
so under their scope of practice and applicable State law, by a 
nonphysician practitioner (physician assistant, nurse practitioner, 
clinical nurse specialist, certified nurse-midwife or certified 
registered nurse anesthetist).
    (1) General supervision. General supervision means the procedure is 
furnished under the physician's or nonphysician practitioner's overall 
direction and control, but the physician's or nonphysician 
practitioner's presence is not required during the performance of the 
procedure. Under general supervision at a facility accorded provider-
based status, the training of the nonphysician personnel who actually 
perform the diagnostic procedure and the maintenance of the necessary 
equipment and supplies are the continuing responsibility of the 
facility.
    (2) Direct supervision. (i) For services furnished directly or 
under arrangement in the hospital or in an on-campus or off-campus 
outpatient department of the hospital, as defined in Sec.  413.65 of 
this chapter, ``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 where the procedure is performed.
    (ii) For services furnished under arrangement in nonhospital 
locations, ``direct supervision'' means the physician or nonphysician 
practitioner must be present in the office suite and 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.
    (iii) 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 or nonphysician practitioner under 
paragraphs (e)(2)(i) and (ii) of this section includes virtual presence 
through audio/video real-time communications technology (excluding 
audio-only).
    (3) Personal supervision. Personal supervision means the physician 
or nonphysician practitioner must be in attendance in the room during 
the performance of the procedure.
* * * * *
0
6. Section Sec.  410.40 is amended by revising paragraphs (f)(1), (2), 
and (5) to read as follows:


Sec.  410.40  Coverage of ambulance services.

* * * * *
    (f) * * *
    (1) From any point of origin to the nearest hospital, CAH, REH, or 
SNF that is capable of furnishing the required level and type of care 
for the beneficiary's illness or injury. The hospital or CAH or REH 
must have available the type of physician or physician specialist 
needed to treat the beneficiary's condition.
    (2) From a hospital, CAH, REH, or SNF to the beneficiary's home.
* * * * *
    (5) During a Public Health Emergency, as defined in Sec.  400.200 
of this chapter, a ground ambulance transport from any point of origin 
to a destination that is equipped to treat the condition of the patient 
consistent with any applicable State or local Emergency Medical 
Services protocol that governs the destination location. Such 
destinations include, but are not limited to, alternative sites 
determined to be part of a hospital, critical access hospital, REH 
(effective January 1, 2023), or skilled nursing facility, community 
mental health centers, federally qualified health centers, rural health 
clinics, physician offices, urgent care facilities, ambulatory surgical 
centers, any location furnishing dialysis services outside of an ESRD 
facility when an ESRD facility is not available, and the beneficiary's 
home.
* * * * *

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

0
7. 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
8. Section 411.351 is amended by revising the definition of ``Rural 
area'' and adding a definition for ``Rural emergency hospital'' to read 
as follows:


Sec.  411.351   Definitions.

* * * * *
    Rural area means an area that is not an urban area as defined at 
Sec.  412.64(b) of this chapter.
    Rural emergency hospital has the meaning set forth in section 
1861(kkk)(2) of the Act and Sec.  419.91 of this chapter.
* * * * *
0
9. Section 411.356 is amended by adding paragraph (c)(4) to read as 
follows:


Sec.  411.356   Exceptions to the referral prohibition related to 
ownership or investment interests.

* * * * *
    (c) * * *
    (4) A rural emergency hospital, in the case of designated health 
services that are furnished by such rural emergency hospital, if all of 
the following requirements are satisfied:
    (i) The entity is enrolled in Medicare as a rural emergency 
hospital.
    (ii) The ownership or investment interest is in the entire rural 
emergency hospital and not merely in a distinct part or department of 
the rural emergency hospital.
    (iii) The rural emergency hospital does not directly or indirectly 
condition any ownership or investment interests held or to be held by a 
physician (or an immediate family member of a physician) on the 
physician making or influencing referrals to the rural emergency 
hospital or otherwise generating business for the rural emergency 
hospital.
    (iv) The rural emergency hospital does not offer any ownership or 
investment interests to a physician (or an immediate family member of a 
physician) on terms more favorable than the terms offered to a person 
that is not a physician (or an immediate family member of a physician).
    (v) Neither the rural emergency hospital nor any owner of or 
investor in the rural emergency hospital directly or indirectly 
provides loans or financing for any investment in the rural emergency 
hospital by a physician (or an immediate family member of a physician).
    (vi) Neither the rural emergency hospital nor any owner of or 
investor in the rural emergency hospital directly or indirectly 
guarantees a loan, makes a payment toward a loan, or otherwise 
subsidizes a loan for a physician (or an immediate family member of a

[[Page 44836]]

physician) that is related to acquiring any ownership or investment 
interest in the rural emergency hospital.
    (vii) Ownership or investment returns are distributed to each owner 
of or investor in the rural emergency hospital in an amount that is 
directly proportional to the ownership or investment interest in the 
rural emergency hospital of such owner or investor.
    (viii) Physicians (or immediate family members of physicians) who 
have ownership or investment interests in the rural emergency hospital 
do not directly or indirectly receive any guaranteed receipt of or 
right to purchase other business interests related to the rural 
emergency hospital, including the purchase or lease of any property 
under the control of any other owner of or investor in the rural 
emergency hospital or located near the premises of the rural emergency 
hospital.
    (ix) The rural emergency hospital does not offer a physician (or an 
immediate family member of a physician) the opportunity to purchase or 
lease any property under the control of the rural emergency hospital or 
any other owner of or investor in the rural emergency hospital on more 
favorable terms than the terms offered to a person that is not a 
physician (or an immediate family member of a physician).
0
10. Section 411.357 is amended by revising paragraphs (e)(6), (r)(2) 
introductory text, (r)(2)(ii) through (v), (t)(5), (v)(1)(i), (x)(7), 
and (x)(8) and adding paragraph (y)(10) to read as follows:


Sec.  411.357  Exceptions to the referral prohibition related to 
compensation arrangements.

* * * * *
    (e) * * *
    (6)(i) This paragraph (e) applies to remuneration provided by a 
federally qualified health center, rural health clinic, or rural 
emergency hospital in the same manner as it applies to remuneration 
provided by a hospital.
    (ii) The ``geographic area served'' by a federally qualified health 
center, rural health clinic, or rural emergency hospital is the area 
composed of the lowest number of contiguous or noncontiguous zip codes 
from which the federally qualified health center, rural health clinic, 
or rural emergency hospital draws at least 90 percent of its patients, 
as determined on an encounter basis. The geographic area served by the 
federally qualified health center, rural health clinic, or rural 
emergency hospital may include one or more zip codes from which the 
federally qualified health center, rural health clinic, or rural 
emergency hospital draws no patients, provided that such zip codes are 
entirely surrounded by zip codes in the geographic area described above 
from which the federally qualified health center, rural health clinic, 
or rural emergency hospital draws at least 90 percent of its patients.
* * * * *
    (r) * * *
    (2) A payment from a hospital, federally qualified health center, 
rural health clinic, or rural emergency hospital that is used to pay 
for some or all of the costs of malpractice insurance premiums for a 
physician who engages in obstetrical practice as a routine part of his 
or her medical practice, if all of the following conditions are met:
* * * * *
    (ii) The arrangement is set out in writing, is signed by the 
physician and the hospital, federally qualified health center, rural 
health clinic, or rural emergency hospital providing the payment, and 
specifies the payment to be made by the hospital, federally qualified 
health center, rural health clinic, or rural emergency hospital and the 
terms under which the payment is to be provided.
    (iii) The arrangement is not conditioned on the physician's 
referral of patients to the hospital, federally qualified health 
center, rural health clinic, or rural emergency hospital providing the 
payment.
    (iv) The hospital, federally qualified health center, rural health 
clinic, or rural emergency hospital does not determine the amount of 
the payment in any manner that takes into account the volume or value 
of referrals by the physician or any other business generated between 
the parties.
    (v) The physician is allowed to establish staff privileges at any 
hospital(s), federally qualified health center(s), rural health 
clinic(s), or rural emergency hospital(s) and to refer business to any 
other entities (except as referrals may be restricted under an 
employment arrangement or services arrangement that complies with Sec.  
411.354(d)(4)).
* * * * *
    (t) * * *
    (5) Application to other entities. This paragraph (t) applies to 
remuneration provided by a federally qualified health center, rural 
health clinic, or rural emergency hospital in the same manner as it 
applies to remuneration provided by a hospital. For purposes of 
paragraph (t), the geographic area served by a federally qualified 
health center, rural health clinic, or rural emergency hospital has the 
meaning set forth in section (e)(6)(ii) of this section.
* * * * *
    (v) * * *
    (1) * * *
    (i) Hospital or rural emergency hospital to a physician who is a 
member of its medical staff;
* * * * *
    (x) * * *
    (7)(i) This paragraph (x) may be used by a hospital, federally 
qualified health center, rural health clinic, or rural emergency 
hospital only once every 3 years with respect to the same referring 
physician.
    (ii) Paragraph (x)(7)(i) of this section does not apply to 
remuneration provided by a hospital, federally qualified health center, 
rural health clinic, or rural emergency hospital to a physician to 
compensate a nonphysician practitioner to provide NPP patient care 
services if--
    (A) The nonphysician practitioner is replacing a nonphysician 
practitioner who terminated his or her employment or contractual 
arrangement to provide NPP patient care services with the physician (or 
the physician organization in whose shoes the physician stands) within 
1 year of the commencement of the employment or contractual 
arrangement; and
    (B) The remuneration provided to the physician is provided during a 
period that does not exceed 2 consecutive years as measured from the 
commencement of the compensation arrangement between the nonphysician 
practitioner who is being replaced and the physician (or the physician 
organization in whose shoes the physician stands).
    (8)(i) This paragraph (x) applies to remuneration provided by a 
federally qualified health center, rural health clinic, or rural 
emergency hospital in the same manner as it applies to remuneration 
provided by a hospital.
    (ii) The ``geographic area served'' by a federally qualified health 
center, rural health clinic, or rural emergency hospital has the 
meaning set forth in paragraph (e)(6)(ii) of this section.
    (y) * * *
    (10) This paragraph (y) applies to remuneration provided by a rural 
emergency hospital in the same manner as it applies to remuneration 
provided by a hospital.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

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


[[Page 44837]]


0
12. Section 412.1 is amended by revising paragraph (a)(1)(iv) to read 
as follows:


Sec.  412.1   Scope of part.

    (a) * * *
    (1) * * *
    (iv) Additional payments are made for outlier cases, bad debts, 
indirect medical education costs, for serving a disproportionate share 
of low-income patients, and for the additional resource costs of 
domestic National Institute for Occupational Safety and Health approved 
surgical N95 respirators.
* * * * *
0
13. Section 412.2 is amended by adding paragraph (f)(10) to read as 
follows:


Sec.  412.2  Basis of payment.

* * * * *
    (f) * * *
    (10) A payment adjustment for the additional resource costs of 
domestic National Institute for Occupational Safety and Health approved 
surgical N95 respirators as specified in Sec.  412.113 of subpart H.
* * * * *
0
14. Section 412.100 is amended by revising paragraph (b) to read as 
follows:


Sec.  412.100  Special treatment: Kidney transplant programs.

* * * * *
    (b) Costs of kidney acquisition. Kidney acquisition costs include 
allowable costs incurred in the acquisition of a kidney from a living 
or a deceased donor by the hospital, or from a deceased donor by an 
organ procurement organization. These costs are listed in Sec.  
413.402(b) of this chapter.
0
15. Section 412.113 is amended by adding paragraph (f) to read as 
follows:


Sec.  412.113   Other payments.

* * * * *
    (f) Additional resource costs of domestic National Institute for 
Occupational Safety and Health approved surgical N95 respirators. (1) 
For cost reporting periods beginning on or after January 1, 2023, a 
payment adjustment to a hospital for the additional resource costs of 
domestic National Institute for Occupational Safety and Health approved 
surgical N95 respirators is made as described in paragraph (f)(2) of 
this section.
    (2) The payment adjustment is based on the estimated difference in 
the reasonable cost incurred by the hospital for domestic National 
Institute for Occupational Safety and Health approved surgical N95 
respirators purchased during the cost reporting period as compared to 
other National Institute for Occupational Safety and Health approved 
surgical N95 respirators purchased during the cost reporting period.
0
16. Section 412.190 is amended by revising paragraph (c) to read as 
follows:


Sec.  412.190  Overall Hospital Quality Star Rating.

* * * * *
    (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 previous 12 
months.
* * * * *

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

0
17. The authority citation for part 413 is revised to read as follows:

    Authority: 42 U.S.C. 1302, 1395d(d), 1395f(b), 1395g, 1395l(a), 
(i), and (n), 1395m, 1395x(v), 1395x(kkk), 1395hh, 1395rr, 1395tt, 
and 1395ww.

0
18. Section 413.1 is amended by adding paragraph (a)(1)(ii)(L) and 
revising paragraph (a)(2)(i) to read as follows:


Sec.  413.1   Introduction.

    (a) * * *
    (1) * * *
    (ii) * * *
    (L) Section 1834(x) of the Act authorizes payment for services 
furnished by Rural Emergency Hospitals (REHs) and establishes the 
payment methodology.
    (2) * * *
    (i) Hospitals, critical access hospitals (CAHs), and rural 
emergency hospitals (REHs);
* * * * *
0
19. Section 413.13 is amended by adding paragraph (c)(2)(vii) to read 
as follows:


Sec.  413.13   Amount of payment if customary charges for services 
furnished are less than reasonable costs.

* * * * *
    (c) * * *
    (2) * * *
    (vii) Services furnished by a rural emergency hospital (REH). 
Services furnished by a rural emergency hospital are subject to the 
payment methodology set forth in part 419, subpart K.
* * * * *
0
20. Section 413.24 is amended by revising paragraphs (f)(4)(i) and (ii) 
and (f)(4)(iv)(A) to read as follows:


Sec.  413.24  Adequate cost data and cost finding.

* * * * *
    (f) * * *
    (4) * * *
    (i) As used in this paragraph, ``provider'' means a hospital, rural 
emergency hospital, skilled nursing facility, home health agency, 
hospice, organ procurement organization, histocompatibility laboratory, 
rural health clinic, federally qualified health center, community 
mental health center, or end-stage renal disease facility.
    (ii) Effective for cost reporting periods beginning on or after 
October 1, 1989 for hospitals; cost reporting periods ending on or 
after February 1, 1997 for skilled nursing facilities and home health 
agencies; cost reporting periods ending on or after December 31, 2004 
for hospices, and end-stage renal disease facilities; cost reporting 
periods ending on or after March 31, 2005 for organ procurement 
organizations, histocompatibility laboratories, rural health clinics, 
Federally qualified health centers, and community mental health 
centers; and cost reporting periods beginning on or after January 1, 
2023 for rural emergency hospitals, a provider is required to submit 
cost reports in a standardized electronic format. The provider's 
electronic program must be capable of producing the CMS standardized 
output file in a form that can be read by the contractor's automated 
system. This electronic file, which must contain the input data 
required to complete the cost report and to pass specified edits, must 
be forwarded to the contractor for processing through its system.
* * * * *
    (iv)(A) Effective as specified in paragraphs (f)(4)(iv)(A)(1) 
through (5) and except as provided in paragraph (f)(4)(iv)(C) of this 
section, a provider must submit a hard copy of a settlement summary, if 
applicable, which is a statement of certain worksheet totals found 
within the electronic file, and the certification statement described 
in paragraph (f)(4)(iv)(B) of this section signed by its administrator 
or chief financial officer certifying the accuracy of the electronic 
file or the manually prepared cost report.
    (1) For hospitals, effective for cost reporting periods ending on 
or after September 30, 1994;
    (2) For skilled nursing facilities and home health agencies, 
effective for cost reporting periods ending on or after February 1, 
1997;

[[Page 44838]]

    (3) For hospices and end-stage renal disease facilities, effective 
for cost reporting periods ending on or after December 31, 2004;
    (4) For organ procurement organizations, histocompatibility 
laboratories, rural health clinics, Federally qualified health centers, 
and community mental health centers, effective for cost reporting 
periods ending on or after March 31, 2005; and
    (5) For rural emergency hospitals, effective for cost reporting 
periods beginning on or after January 1, 2023.
* * * * *
0
21. Section 413.198 is amended by revising paragraph (b)(4)(ii) to read 
as follows:


Sec.  413.198   Recordkeeping and cost reporting requirements for 
outpatient maintenance dialysis.

* * * * *
    (b) * * *
    (4) * * *
    (ii) Section 413.420, Payment to independent organ procurement 
organizations and to histocompatibility laboratories for kidney 
acquisition costs;
* * * * *
0
22. Section 413.400 is amended by revising the definitions of 
``Hospital-based organ procurement organization (HOPO)'', ``Transplant 
hospital'', ``Transplant hospital/HOPO (TH/HOPO)'', and ``Transplant 
program'' to read as follows:


Sec.  413.400  Definitions.

* * * * *
    Hospital-based organ procurement organization (HOPO) means an organ 
procurement organization that is considered a department of the TH and 
reports organ acquisition costs it incurs on the TH's Medicare cost 
report.
* * * * *
    Transplant hospital (TH) means a hospital that furnishes organ 
transplants and other medical and surgical specialty services required 
for the care of transplant patients.
    Transplant hospital/HOPO (TH/HOPO) refers to a TH, or a TH that 
operates a HOPO (as previously defined in this section) and performs 
organ procurement activities as one entity reported on the TH's 
Medicare cost report.
    Transplant program means an organ-specific transplant program 
within a TH (as defined in this section).
* * * * *
0
23. Section 413.402 is amended by revising paragraphs (a), (b)(3), (4), 
and (7), (b)(8)(i) and (ii), and (d)(2)(ii) to read as follows:


Sec.  413.402   Organ acquisition costs.

    (a) Costs related to organ acquisition. Costs recognized in 
paragraph (b) of this section are allowable costs incurred in the 
acquisition of organs from a living donor or a deceased donor by the 
hospital, or from a deceased donor by an OPO. Additionally, there are 
administrative and general costs that may be allowable and included on 
the cost report for an OPO or TH/HOPO.
    (b) * * *
    (3) Other costs associated with excising organs, such as general 
routine and special care services (for example, intensive care unit or 
critical care unit services), provided to the living or deceased donor.
    (4) Operating room and other inpatient ancillary services 
applicable to the living or deceased donor.
* * * * *
    (7) Surgeons' fees for excising deceased organs (currently limited 
to $1,250 for kidneys).
    (8) * * *
    (i) Excised organ to the TH; and
    (ii) Deceased donor to procure organs when it is necessary to 
preserve clinical outcomes or to avoid loss of potentially 
transplantable organs.
* * * * *
    (d) * * *
    (2) * * *
    (ii) Transportation costs of the deceased donor after organ 
procurement for funeral services or for burial.
* * * * *
0
24. Section 413.404 is amended by revising paragraphs (a)(2), (b)(2), 
(b)(3) introductory text, (b)(3)(i) introductory text, (b)(3)(i)(A) 
through (C), (b)(3)(ii) introductory text, (b)(3)(ii)(A) and (B), 
(b)(3)(ii)(C) introductory text, (b)(3)(ii)(C)(1) through (3), 
(c)(1)(i) and (ii), (c)(2)(i) through (iv), and (c)(3) to read as 
follows:


Sec.  413.404  Standard acquisition charge.

    (a) * * *
    (2) The SAC represents the average of the total organ acquisition 
costs associated with procuring either deceased donor organs or living 
donor organs, by organ type.
* * * * *
    (b) * * *
    (2) When a TH/HOPO furnishes an organ to another TH or IOPO, it 
must bill the receiving TH or IOPO its SAC by organ type, or the 
hospital's standard departmental charges that are reduced to cost.
    (3) A TH must establish SACs for living donor organs. A TH/HOPO 
must establish SACs for deceased donor organs.
    (i) Living donor SAC for THs--
    (A) Definition. The living donor SAC is an average organ 
acquisition cost that a TH incurs to procure an organ from a living 
donor.
    (B) Establishment of living donor SAC. A TH must establish a living 
donor SAC before the TH bills its first living donor transplant to 
Medicare.
    (C) Calculating the living donor SAC--(1) Initial living donor SAC. 
A TH calculates its initial living donor SAC for each living donor 
organ type as follows:
    (i) By estimating the reasonable and necessary organ acquisition 
costs it expects to incur for services furnished to living donors, and 
pre-admission services furnished to recipients of living donor organs 
during the hospital's cost reporting period.
    (ii) By dividing the estimated amount described in paragraph 
(b)(3)(i)(C)(1)(i) of this section by the projected number of usable 
living donor organs to be procured by the TH during the TH's cost 
reporting period.
    (2) Subsequent living donor SAC. A TH calculates its subsequent 
years' living donor SAC for each living donor organ type as follows:
    (i) By using the TH's actual organ acquisition costs for the living 
donor organ type from the prior year's Medicare cost report, adjusted 
for any changes in the current year.
    (ii) Dividing the costs in paragraph (b)(3)(i)(C)(2)(i) of this 
section by the actual number of usable living donor organs procured by 
the TH during that prior cost reporting period.
* * * * *
    (ii) Deceased donor SAC for TH/HOPOs--(A) Definition. The deceased 
donor SAC is an average cost that a TH/HOPO incurs to procure a 
deceased donor organ.
    (B) Calculating the deceased donor SAC--(1) Initial deceased donor 
SAC. A TH/HOPO calculates its initial deceased donor SAC for each 
deceased donor organ type as follows:
    (i) By estimating the reasonable and necessary costs it expects to 
incur to procure deceased donor organs, combined with the expected 
costs of acquiring deceased donor organs from OPOs or other THs.
    (ii) By dividing the estimated amount described in paragraph 
(b)(3)(ii)(B)(1)(i) of this section by the projected number of usable 
deceased donor organs to be procured by the TH/HOPO within the TH's 
cost reporting period.
    (2) Subsequent deceased donor SAC. A TH/HOPO calculates its 
subsequent years' deceased donor SAC for each deceased donor organ type 
as follows:
    (i) By using the TH's actual organ acquisition costs for the 
deceased donor

[[Page 44839]]

organ type from the prior year's Medicare cost report, adjusted for any 
changes in the current year.
    (ii) By dividing the costs in paragraph (b)(3)(ii)(B)(2)(i) of this 
section by the actual number of usable deceased donor organs procured 
by the TH/HOPO during that prior cost reporting period.
    (C) Costs to develop the deceased donor SAC. Costs that may be used 
to develop the deceased donor SAC include, but are not limited to the 
following:
    (1) Costs of organs acquired from other THs or OPOs.
    (2) Costs of transportation as specified in Sec.  413.402(b)(8).
    (3) Surgeons' fees for excising deceased donor organs (currently 
limited to $1,250 for kidneys).
* * * * *
    (c) * * *
    (1) * * *
    (i) Estimating the reasonable and necessary costs it expects to 
incur for services furnished to procure deceased donor non-renal organs 
during the IOPO's cost reporting period; and
    (ii) Dividing the amount estimated in paragraph (c)(1)(i) of this 
section by the projected number of deceased donor non-renal organs the 
IOPO expects to procure within its cost reporting period.
* * * * *
    (2) * * *
    (i) General. An IOPO's contractor establishes the kidney SAC based 
on an estimate of, initial year projected or subsequent years' actual, 
reasonable and necessary costs the IOPO expects to incur to procure 
deceased donor kidneys during the IOPO's cost reporting period, divided 
by the, initial year projected or subsequent years' actual, number of 
usable deceased donor kidneys the IOPO expects to procure.
    (ii) Initial year. The contractor develops the IOPO's initial 
kidney SAC based on the IOPO's budget information.
    (iii) Subsequent years. The contractor computes the kidney SAC for 
subsequent years using the IOPO's costs related to kidney acquisition 
that were incurred in the prior cost reporting period and dividing 
those costs by the number of usable deceased donor kidneys procured 
during that cost reporting period. The kidney SAC amount is the interim 
payment made by the TH or other OPO to the IOPO, as set forth in Sec.  
413.420(d)(1).
    (iv) SAC adjustments. The IOPO's contractor may adjust the kidney 
SAC during the year, if necessary, for cost changes.
* * * * *
    (3) Billing SACs for organs generally. When an IOPO obtains an 
organ from another IOPO, the receiving IOPO is responsible for paying 
the procuring IOPO's SAC. The receiving IOPO uses its SAC for each 
organ type and not the procuring IOPO's SAC when billing the TH 
receiving the organ.
0
25. Section 413.412 is amended by revising the section heading and 
paragraphs (c) and (d) to read as follows:


Sec.  413.412   Intent to transplant, and counting en bloc, research, 
and unusable organs.

* * * * *
    (c) Research organs. (1) For Medicare cost allocation purposes, 
organs used for research are not counted as Medicare usable organs or 
as total usable organs in the ratio used to calculate Medicare's share 
of organ acquisition costs (except pancreata for islet cell transplants 
as specified in Sec.  413.406(a)).
    (2) OPOs and THs must reduce their costs to procure organs for 
research from total organ acquisition costs on the Medicare cost 
report.
    (d) Counting of unusable organs. (1) An organ is not counted as a 
Medicare usable organ or a total usable organ in the ratio used to 
calculate Medicare's share of organ acquisition costs if a surgeon 
determines, upon initial inspection or after removal of the organ, that 
the organ is not viable and not medically suitable for transplant and 
is therefore unusable.
    (2) OPOs and THs include the cost to procure unusable organs, as 
described in paragraph (d)(1) of this section, in total organ 
acquisition costs reported on their Medicare cost report.
0
26. Section 413.414 is amended by revising paragraphs (a), (b), (c) 
introductory text, (c)(1) and (2), and (c)(3)(i) and (ii) to read as 
follows:


Sec.  413.414  Medicare secondary payer and organ acquisition costs.

    (a) General principle. If a Medicare beneficiary has a primary 
health insurer other than Medicare and that primary health insurer has 
primary liability for the transplant and organ acquisition costs, the 
Medicare Program may share a liability for organ acquisition costs as a 
secondary payer to the TH that performs the transplant in certain 
instances. To determine whether Medicare has liability to the TH that 
performs the transplant as a secondary payer for organ acquisition 
costs, it is necessary for the TH that performs the transplant to 
review the TH's agreement with the primary insurer.
    (b) Medicare has no secondary payer liability for organ acquisition 
costs. If the primary insurer's agreement requires the TH to accept the 
primary insurer's payment as payment in full for the transplant and the 
associated organ acquisition costs, Medicare has zero liability as a 
secondary payer with no payment obligation for the transplantation 
costs or the organ acquisition costs, and the organ at issue is not a 
Medicare usable organ.
    (c) Medicare may have secondary payer liability for organ 
acquisition costs. When the primary insurer's agreement does not 
require the TH that performs the transplant to accept the payment from 
the primary insurer as payment in full, and the payment the TH receives 
from the primary insurer for the transplant and organ acquisition costs 
is insufficient to cover the entire cost, Medicare may have a secondary 
payer liability to the TH that performs the transplant for the organ 
acquisition costs.
    (1) To determine whether Medicare has a secondary payer liability 
for the organ acquisition costs, it is necessary for the TH that 
performs the transplant to submit a bill to its contractor and to 
compare the total cost of the transplant, including the transplant DRG 
amount and the organ acquisition costs, to the payment received from 
the primary payer.
    (2) If the payment from the primary payer is greater than the cost 
of the transplant DRG and the organ acquisition costs, there is no 
Medicare liability and the TH must not count the organ as a Medicare 
usable organ.
    (3) * * *
    (i) The TH must pro-rate the payment from the primary payer between 
the transplant DRG payment and the organ acquisition payment.
    (ii) Only the TH that performs the transplant counts the organ as a 
Medicare usable organ.
* * * * *
0
27. Section 413.416 is amended by revising paragraphs (a), (b), (c) 
introductory text, (c)(2) through (4), (d) introductory text, and 
(d)(1) to read as follows:


Sec.  413.416  Organ acquisition charges for kidney-paired exchanges.

    (a) Initial living donor evaluations. When a recipient and donor 
elect to participate in a kidney paired exchange, the costs of the 
initial living donor evaluations are incurred by the originally 
intended recipient's TH, regardless of whether the living donor 
actually donates to their originally intended recipient, a kidney 
paired exchange recipient, or does not donate at all.
    (b) Additional tests after a match. In a kidney paired exchange, 
regardless of whether an actual donation occurs, once the donor and 
recipient are matched,

[[Page 44840]]

any additional tests requested by the recipient's TH and performed by 
the donor's TH, are billed to the recipient's TH as charges reduced to 
cost (using the donor's TH's cost to charge ratio) and included as 
acquisition costs on the recipient TH's Medicare cost report.
    (c) Procurement and transport of a kidney. When a donor's TH 
procures and furnishes a kidney to a recipient's TH all of the 
following are applicable:
* * * * *
    (2)(i) The donor's TH bills the recipient's TH.
    (ii) The donor's TH bills its charges reduced to cost, or bills its 
applicable kidney SAC for the reasonable costs associated with 
procuring, packaging, and transporting the kidney.
    (3) The donor's TH records the costs described in paragraph 
(c)(2)(ii) of this section on its Medicare cost report as kidney 
acquisition costs and offsets any payments received from the 
recipient's TH against its kidney acquisition costs.
    (4) The recipient's TH records as part of its kidney acquisition 
costs--
    (i) The amounts billed by the donor's TH for the reasonable costs 
associated with procuring, packaging, and transporting the organ; and
    (ii) Any additional testing performed and billed by the donor's TH.
    (d) Donor's procurement occurs at recipient TH. In a kidney-paired 
exchange--
    (1) When a donor's TH does not procure a kidney, but the donor 
travels to the recipient's TH for the organ procurement, the reasonable 
costs associated with the organ procurement are included on the 
Medicare cost report of the recipient's TH; and
* * * * *
0
28. Section 413.418 is revised to read as follows:


Sec.  413.418   Amounts billed to organ procurement organizations for 
hospital services provided to deceased donors and included as organ 
acquisition costs.

    (a) General. A donor community hospital (a Medicare-certified non-
TH) and a TH incur costs for hospital services attributable to a 
deceased donor or a donor whose death is imminent. Organ acquisition 
costs include hospital services authorized by the OPO when there is 
consent to donate, and declaration of death has been made or death is 
imminent and these services must be provided prior to declaration of 
death. These costs must not be part of medical treatment that primarily 
offers a medical benefit to the patient as determined by a healthcare 
team.
    (b) Amounts billed for organ acquisition costs. For cost reporting 
periods beginning on or after February 25, 2022, when a donor community 
hospital or TH incurs costs for services furnished to a deceased donor, 
as authorized by the OPO, the donor community hospital or TH must bill 
the OPO the lesser of its customary charges that are reduced to cost by 
applying its most recently available hospital specific cost-to-charge 
ratio for the period in which the service was rendered, or a negotiated 
rate.
0
29. Section 413.420 is amended by revising paragraphs (a), (c)(1)(ii), 
(iv), and (v), (d), and (e)(2)(i) and (ii) to read as follows:


Sec.  413.420  Payment to independent organ procurement organizations 
and histocompatibility laboratories for kidney acquisition costs.

    (a) Principle. (1) Covered services furnished by IOPOs and 
histocompatibility laboratories in connection with kidney acquisition 
and transplantation are reimbursed under the principles for determining 
reasonable cost contained in this part.
    (2) Services furnished by IOPOs and histocompatibility 
laboratories, that have an agreement with the Secretary in accordance 
with paragraph (c) of this section, are paid directly by the TH using a 
kidney SAC (for an IOPO) or contractor-established rates (for a 
histocompatibility laboratory). (The reasonable costs of services 
furnished by IOPOs or laboratories are reimbursed in accordance with 
the principles contained in Sec. Sec.  413.60 and 413.64.)
* * * * *
    (c) * * *
    (1) * * *
    (ii) To permit CMS to designate a contractor to determine the 
interim reimbursement rate, payable by the THs for services provided by 
the IOPO or laboratory, and to determine Medicare's reasonable cost 
based upon the cost report filed by the IOPO or laboratory.
* * * * *
    (iv) To pay to CMS amounts that have been paid by CMS to THs and 
that are determined to be in excess of the reasonable cost of the 
services provided by the IOPO or laboratory.
    (v) Not to charge any individual for items or services for which 
that individual is entitled to have payment made under section 1881 of 
the Act.
* * * * *
    (d) Interim reimbursement. (1) THs with approved kidney transplant 
programs pay the IOPO or histocompatibility laboratory for their pre-
transplantation services on the basis of an interim rate established by 
the contractor for that IOPO or laboratory.
    (2) The interim rate is a kidney SAC or contractor established 
rates, based on costs associated with procuring a kidney for 
transplantation, incurred by an IOPO or laboratory respectively, during 
its previous fiscal year. If there is not adequate cost data to 
determine the initial interim rate, the contractor determines it 
according to the IOPO's or laboratory's estimate of its projected costs 
for the fiscal year.
    (3) Payments made by THs on the basis of interim rates are 
reconciled directly with the IOPO or laboratory after the close of its 
fiscal year, in accordance with paragraph (e) of this section.
    (4) Information on the interim rate for all IOPOs and 
histocompatibility laboratories must be disseminated to all THs and 
contractors.
    (e) * * *
    (2) * * *
    (i) Retroactive adjustment. A retroactive adjustment in the amount 
paid under the interim rate is made in accordance with Sec.  413.64(f).
    (ii) Lump sum adjustment. If the determination of reasonable cost 
reveals an overpayment or underpayment resulting from the interim 
reimbursement rate paid to THs, a lump sum adjustment is made directly 
between that contractor and the IOPO or laboratory.
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

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

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

0
31. Section 416.166 is amended by revising paragraph (d)(1) to read as 
follows:


Sec.  416.166  Covered surgical procedures.

* * * * *
    (d) * * *
    (1) Pre-proposed rule CPL recommendation process. On or after 
January 1, 2024, an external party may recommend a surgical procedure 
by March 1 of a calendar year for the list of ASC covered surgical 
procedures for the following calendar year.
* * * * *
0
32. Section 416.172 is amended by adding paragraph (h) to read as 
follows:


Sec.  416.172   Adjustments to national payment rates.

* * * * *
    (h) Special payment for certain code combinations--(1) Eligibility. 
A code combination is eligible for the payment specified in paragraph 
(h)(2) of this section if the code combination is--
    (i) Eligible for a C-APC complexity adjustment under the OPPS; and

[[Page 44841]]

    (ii) Comprised of a separately payable surgical procedure, that is 
listed on the ASC Covered Procedures list (Sec.  416.166), and one or 
more packaged add-on codes that are listed on the ASC covered 
procedures or ancillary services lists (Sec.  416.164(b)).
    (2) Calculation of payment. (i) Except as specified in paragraph 
(h)(2)(ii) of this section, CMS calculates the payment for code 
combinations that meet the eligibility requirements in paragraph (h)(1) 
of this section by applying the methodology specified in Sec.  
416.171(a) to the OPPS C-APC complexity-adjusted relative weights.
    (ii) For primary procedures assigned device-intensive status that 
are a component of a code combination that is eligible for payment 
under paragraph (h)(2) of this section, the primary procedure of the 
code combination retains its device-intensive status, and--
    (A) The device portion is equivalent to the device portion of the 
device-intensive APC under the OPPS (Sec.  419.44(b)); and
    (B) The non-device portion is calculated in accordance with the 
methodology specified in Sec.  416.171(a).
0
33. Section 416.174 is amended by revising paragraph (a) to read as 
follows:


Sec.  416.174   Payment for non-opioid pain management drugs and 
biologicals that function as supplies in surgical procedures.

    (a) Eligibility for separate payment for non-opioid pain management 
drugs and biologicals. Beginning on or after January 1, 2022, a non-
opioid pain management drug or biological that functions as a surgical 
supply is eligible for separate payment for an applicable calendar year 
if CMS determines it meets the following requirements through that 
year's rulemaking:
    (1) The drug is approved under a new drug application under section 
505(c) of the Federal Food, Drug, and Cosmetic Act (FDCA), under an 
abbreviated new drug application under section 505(j), or, in the case 
of a biological product, is licensed under section 351 of the Public 
Health Service Act. The product has an FDA approved indication for pain 
management or analgesia.
    (2) The per-day cost of the drug or biological estimated by CMS for 
the year exceeds the OPPS drug packaging threshold set for such year 
through notice and comment rulemaking.
    (3) The drug or biological does not have transitional pass-through 
payment status under Sec.  419.64. In the case where a drug or 
biological otherwise meets the requirements under Sec.  416.174 and has 
transitional pass-through payment status that expires during the 
calendar year, the drug or biological will qualify for separate payment 
as specified in paragraph (a) during such calendar year on the first 
day of the next calendar year quarter following the expiration of its 
pass-through status.
    (4) The drug or biological is not already separately payable in the 
OPPS or ASC payment system under a policy other than the one specified 
in this section.
* * * * *

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

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

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

0
35. Part 419 is amended by revising the heading to read as set forth 
above.
0
36. Section 419.43 is amended by adding paragraph (j) to read as 
follows:


Sec.  419.43   Adjustments to national program payment and beneficiary 
copayment amounts.

* * * * *
    (j) Additional resource costs of domestic National Institute for 
Occupational Safety and Health approved surgical N95 respirators--(1) 
General rule. For cost reporting periods beginning on or after January 
1, 2023, CMS provides for a payment adjustment for the additional 
resource costs of domestic National Institute for Occupational Safety 
and Health approved surgical N95 respirators as described in paragraph 
(j)(2) of this section.
    (2) Amount of adjustment. The payment adjustment is based on the 
estimated difference in the reasonable cost incurred by the hospital 
for domestic National Institute for Occupational Safety and Health 
approved surgical N95 respirators purchased during the cost reporting 
period as compared to other National Institute for Occupational Safety 
and Health approved surgical N95 respirators purchased during the cost 
reporting period.
    (3) Budget neutrality. CMS establishes the payment adjustment under 
paragraph (j)(2) of this section in a budget neutral manner.
0
37. Section 419.46 is amended by revising paragraph (f)(3)(iv) and 
adding paragraph (f)(3)(v) to read as follows:


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

* * * * *
    (f) * * *
    (3) * * *
    (iv) Any hospital that passed validation in the previous year but 
had a two-tailed confidence interval that included 75 percent; or
    (v) Any hospital with a two-tailed confidence interval that is less 
than 75 percent, and that had less than four quarters of data due to 
receiving an ECE for one or more quarters.
* * * * *
0
38. Section 419.47 is added to read as follows:


Sec.  419.47   Coding and Payment for Category B Investigational Device 
Exemption (IDE) Studies.

    (a) Creation of a new HCPCS code for Category B IDE Studies. CMS 
will create a new HCPCS code, or revise an existing HCPCS code, to 
describe a Category B IDE study, which will include both the treatment 
and control arms, related device(s) of the study, as well as routine 
care items and services, as specified under 42 CFR 405.201, when CMS 
determines that:
    (1) The Medicare coverage IDE study criteria in 42 CFR 405.212 are 
met; and
    (2) A new or revised code is necessary to preserve the scientific 
validity of such a study, such as by preventing the unblinding of 
study.
    (b) Payment for Category B IDE Studies. Where CMS creates a new 
HCPCS code or revises an existing HCPCS code under paragraph (a) of 
this section, CMS will:
    (1) Make a single packaged payment for the HCPCS code that includes 
payment for the investigational device, placebo control, and routine 
care items and services of a Category B IDE study, as specified under 
42 CFR 405.201; and
    (2) Calculate the single packaged payment rate for the HCPCS code 
based on the average resources utilized for each study participant, 
including the frequency with which the investigational device is used 
in the study population.
0
39. Section 419.83 is amended by revising paragraphs (a)(3) and (b) to 
read as follows:


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

    (a) * * *
    (3) The Facet Joint Interventions service category requires prior 
authorization beginning for service dates on or after March 1, 2023.
    (b) Adoption of the list of services and technical updates. (1) CMS 
will adopt the list of hospital outpatient department service 
categories requiring prior authorization and any updates or

[[Page 44842]]

geographic restrictions through formal notice-and-comment rulemaking.
    (2) Technical updates to the list of services, such as changes to 
the name of the service or CPT code, will be published on the CMS 
website.
* * * * *
0
40. Subpart K is added to read as follows:

Subpart K--Payments to Rural Emergency Hospitals (REHs)

Sec.
419.90 Basis and scope of subpart.
419.91 Definitions.
419.92 Payment to rural emergency hospitals.
419.93 Payment for an off-campus provider-based department of a 
rural emergency hospital.
419.94 Preclusion of administrative and judicial review.

Subpart K--Payments to Rural Emergency Hospitals (REHs)


Sec.  419.90   Basis and scope of subpart.

    (a) Basis. This subpart implements sections 1861(kkk) and 1834(x) 
of the Act, which establish the rural emergency hospital Medicare 
provider type and the payment requirements applying to such entities.
    (b) Scope. This subpart describes the methodologies used to 
determine payment for REH services and the monthly facility payment 
amount paid to REHs.


Sec.  419.91   Definitions.

    As used in this subpart--
    Rural Emergency Hospital or REH means an entity as defined in Sec.  
485.502 of this chapter.
    Rural Emergency Hospital (REH) Services means all covered 
outpatient department (OPD) services, as defined in section 
1833(t)(1)(B) of the Act, excluding services described in section 
1833(t)(1)(B)(ii), furnished by an REH that would be paid under the 
OPPS when provided in a hospital paid under the OPPS for outpatient 
services, provided that such services are furnished consistent with the 
conditions of participation in Sec. Sec.  485.510 through 485.544 of 
this chapter.


Sec.  419.92   Payment to rural emergency hospitals.

    (a) Payment for REH services--(1) Medicare payment. A rural 
emergency hospital that furnishes a REH service on or after January 1, 
2023, is paid an amount equal to the amount of payment that would 
otherwise apply under section 1833(t) of the Act for the equivalent 
covered OPD service, increased by 5 percent.
    (2) Beneficiary copayment. The beneficiary copayment for a REH 
service is the amount determined under section 1833(t)(8) of the Act 
for the equivalent covered OPD service, excluding the 5 percent payment 
increase described in paragraph (a)(1) of this section.
    (b) Monthly facility payment. Effective January 1, 2023, REHs are 
paid a monthly facility payment equal to 1/12 of the annual additional 
facility payment amount described in paragraphs (b)(1) and (2) of this 
section.
    (1) Calculation of monthly facility payment for 2023. For calendar 
year 2023, the annual additional facility payment amount is:
    (i) The total amount that the Secretary determines was paid by the 
Medicare program and from beneficiary copayments to all critical access 
hospitals in calendar year 2019; minus--
    (ii) The estimated total amount that the Secretary determines would 
have been paid by the Medicare program and from beneficiary copayments 
to critical access hospitals in calendar year 2019 if payment were made 
for inpatient hospital, outpatient hospital, and skilled nursing 
facility services under the applicable prospective payment systems for 
such services during calendar year 2019; divided by--
    (iii) The total number of critical access hospitals enrolled in 
Medicare in calendar year 2019.
    (2) Calculation of monthly facility payment for 2024 and subsequent 
years. For calendar year 2024 and each subsequent calendar year, the 
amount of the additional annual facility payment is the amount of the 
preceding year's additional annual facility payment, increased by the 
hospital market basket percentage increase as described under section 
1886(b)(3)(B)(iii) of the Act.
    (3) Recording and Reporting the use of the monthly facility 
payment. A rural emergency hospital receiving the monthly facility 
payment must maintain detailed information as specified by the 
Secretary as to how the facility has used the monthly facility payments 
and must make this information available to the Secretary upon request.
    (c) Payment for services furnished by an REH that do not meet the 
definition of REH services. A service furnished by an REH that does not 
meet the definition of an REH service under Sec.  419.91, including a 
hospital service that is excluded from payment under the OPPS as 
described in Sec.  419.22, is paid for under the payment system 
applicable to the service, provided the requirements for payment under 
that system are met.
    (1) Payment for ambulance services. Ambulance services furnished by 
an entity owned and operated by a rural emergency hospital are paid 
under the ambulance fee schedule as described at section 1834(l) of the 
Act.
    (2) Payment for post-hospital extended care services. Post-hospital 
extended care services furnished by a rural emergency hospital that has 
a unit that is a distinct part licensed as a skilled nursing facility 
are paid under the skilled nursing facility prospective payment system 
described at section 1888(e) of the Act.


Sec.  419.93   Payment for an off-campus provider-based department of a 
rural emergency hospital.

    (a) Items and services furnished by an off-campus provider-based 
department of an REH, as defined in paragraph (b) of this section, are 
not applicable items and services under sections 1833(t)(1)(B)(v) and 
(t)(21) of the Act and are paid as follows:
    (1) REH services furnished by an off-campus provider-based 
department of an REH are paid as described in Sec.  419.92(a)(1).
    (2) Services that do not meet the definition of REH services that 
are furnished by an off-campus provider-based department of an REH are 
paid as described under Sec.  419.92(c).
    (b) For the purpose of this section, ``off-campus provider-based 
department of an REH'' means a ``department of a provider'' (as defined 
at Sec.  413.65(a)(2) of this chapter) that is not located on the 
campus (as defined in Sec.  413.65(a)(2) of this chapter) or within the 
distance described in such definition from a ``remote location of a 
hospital'' (as defined in Sec.  413.65(a)(2) of this chapter) that 
meets the requirements for provider-based status under Sec.  413.65 of 
this chapter.


Sec.  419.94   Preclusion of administrative and judicial review.

    There is no administrative or judicial review under section 1869 of 
the Act, section 1878 of the Act, or otherwise of the following:
    (a) The determination of whether a rural emergency hospital meets 
the requirements of this subpart.
    (b) The determination of payment amounts under this subpart.
    (c) The requirements established by this subpart.

PART 424--CONDITIONS FOR MEDICARE PAYMENT

0
41. The authority for part 424 continues to read as follows:

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


[[Page 44843]]


0
42. Amend Sec.  424.518 by revising paragraph (a)(1)(viii) to read as 
follows:


Sec.  424.518   Screening levels for Medicare providers and suppliers.

    (a) * * *
    (1) * * *
    (viii) Hospitals, including critical access hospitals, rural 
emergency hospitals, Department of Veterans Affairs hospitals, and 
other federally owned hospital facilities.
* * * * *
0
43. Add Sec.  424.575 to read as follows:


Sec.  424.575   Rural emergency hospitals.

    (a) A rural emergency hospital (as defined in Sec.  485.502 of this 
chapter) must comply with all applicable provisions in this subpart in 
order to enroll and maintain enrollment in Medicare.
    (b) A provider that is currently enrolled in Medicare as a critical 
access hospital or a hospital (as defined in section 1886(d)(1)(B) of 
the Act) converts its existing enrollment to that of a rural emergency 
hospital (as defined in Sec.  485.502 of this chapter) via a Form CMS-
855A change of information application per Sec.  424.516 rather than a 
Form CMS-855A initial enrollment application.

    Dated: July 14, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-15372 Filed 7-15-22; 4:15 pm]
 BILLING CODE 4120-01-P