[Federal Register Volume 87, Number 225 (Wednesday, November 23, 2022)]
[Rules and Regulations]
[Pages 71748-72310]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-23918]



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Vol. 87

Wednesday,

No. 225

November 23, 2022

Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Parts 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; 
COVID-19; Final Rule

  Federal Register / Vol. 87, No. 225 / Wednesday, November 23, 2022 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 411, 412, 413, 416, 419, 424, 485, and 489

[CMS-1772-FC; CMS-1744-F; CMS-3419-F; CMS-5531-F; CMS-9912-F]
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; 
COVID-19

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

ACTION: Final rule with comment period; final rules.

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SUMMARY: This final rule with comment period revises the Medicare 
hospital outpatient prospective payment system (OPPS) and the Medicare 
ambulatory surgical center (ASC) payment system for Calendar Year (CY) 
2023 based on our continuing experience with these systems. We describe 
the changes to the amounts and factors used to determine the payment 
rates for Medicare services paid under the OPPS and those paid under 
the ASC payment system. Also, this final rule updates and refines 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 also make 
updates to the requirements for Organ Acquisition, REHs, Prior 
Authorization, and Overall Hospital Quality Star Rating. We are 
establishing a new provider type for REHs, and we are finalizing 
proposals regarding payment policy, quality measures, and enrollment 
policy for REHs. In addition, we are finalizing the Conditions of 
Participation that REHs must meet in order to participate in the 
Medicare and Medicaid programs. This rule also finalizes changes to the 
Critical Access Hospitals (CAH) CoPs for the location and distance 
requirements, patient's rights requirements, and flexibilities for CAHs 
that are part of a larger health system. Finally, we are finalizing as 
implemented a number of provisions included in the COVID-19 interim 
final rules with comment period (IFCs).

DATES: 
    Effective date: The provisions of this rule are effective January 
1, 2023.
    Comment period: To be assured consideration, comments must be 
received at one of the addresses provided below, by January 3, 2023.
    Incorporation by reference: The incorporation by reference of 
certain publications listed in the rule is approved by the Director of 
the Federal Register as of January 1, 2023.

ADDRESSES: In commenting, please refer to file code CMS-1772-FC.
    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 https://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-FC; CMS-1744-F; CMS-
3419-F; CMS-5531-FC; CMS-9912-F, 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-FC; CMS-
1744-F; CMS-3419-F; CMS-5531-F; CMS-9912-F, 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 at [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 (Multiple Imaging and Mental Health), via email at 
Mitali Dayal via email at [email protected].
    Comprehensive APCs (C-APCs), contact Mitali Dayal via email at 
[email protected].
    COVID-19 Final Rules, contact Elise Barringer 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 Elise Barringer via email at 
[email protected].
    Inpatient Only (IPO) Procedures List, contact Abigail Cesnik via 
email at [email protected].
    Mental Health Services Furnished Remotely by Hospital Staff to 
Beneficiaries in Their Homes, contact Emily Yoder via email at 
[email protected].
    Method to Control Unnecessary Increases in the Volume of Clinic 
Visit Services Furnished in Excepted Off-Campus Provider-Based 
Departments (PBDs), contact Elise Barringer via email 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

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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].
    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 and Critical Access Hospital Conditions of 
Participation (CoP) Issues, contact Kianna Banks 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 Hospital (REH) Physician Self-Referral Law Update 
Issues, contact Lisa O. Wilson via email at [email protected] or 
Meredith Larson 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: https://www.regulations.gov. Follow the search instructions on that website to 
view public comments. CMS will not post on Regulations.gov public 
comments that make threats to individuals or institutions or suggest 
that the individual will take actions to harm the individual. CMS 
continues to encourage individuals not to submit duplicative comments. 
We will post acceptable comments from multiple unique commenters even 
if the content is identical or nearly identical to other comments.

Addenda Available Only Through the Internet on the CMS Website

    In the past, a majority of the Addenda referred to in our OPPS/ASC 
proposed and final rules were published in the Federal Register as part 
of the annual rulemakings. However, beginning with the CY 2012 OPPS/ASC 
proposed rule, all of the Addenda no longer appear in the Federal 
Register as part of the annual OPPS/ASC proposed and final rules to 
decrease administrative burden and reduce costs associated with 
publishing lengthy tables. Instead, these Addenda are published and 
available only on the CMS website. The Addenda relating to the OPPS are 
available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices. The Addenda relating to the ASC payment system are available 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.

Current Procedural Terminology (CPT) Copyright Notice

    Throughout this final rule with comment period, we use CPT codes 
and descriptions to refer to a variety of services. We note that CPT 
codes and descriptions are copyright 2021 American Medical Association 
(AMA). All Rights Reserved. CPT is a registered trademark of the AMA. 
Applicable Federal Acquisition Regulations and Defense Federal 
Acquisition Regulations 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 2023 OPPS/ASC Proposed 
Rule
    G. Public Comments Received on the CY 2022 OPPS/ASC Final Rule 
With Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Proposed Statewide Average Default Cost-to-Charge Ratios 
(CCRs)
    E. Adjustment for Rural Sole Community Hospitals (SCHs) and 
Essential Access Community Hospitals (EACHs) Under Section 
1833(t)(13)(B) of the Act for CY 2023
    F. Payment Adjustment for Certain Cancer Hospitals for CY 2023
    G. Hospital Outpatient Outlier Payments
    H. Calculation of an Adjusted Medicare Payment From the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New and Revised HCPCS Codes
    B. OPPS Changes--Variations Within APCs
    C. New Technology APCs
    D. Universal Low Volume APC Policy for Clinical and 
Brachytherapy APCs
    E. APC-Specific Policies
IV. OPPS Payment for Devices
    A. Pass-Through Payment for Devices
    B. Proposal to Publicly Post OPPS Device Pass-Through 
Applications
    C. Device-Intensive Procedures
V. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
Without Pass-Through Payment Status

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    C. Requirement in the Physician Fee Schedule CY 2023 Proposed 
and Final Rule for HOPDs and ASCs To Report Discarded Amounts of 
Certain Single-Dose or Single-Use Package Drugs
    D. Inflation Reduction Act--Section 11101 Regarding Beneficiary 
Co-Insurance
VI. 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. Estimate of Pass-Through Spending for CY 2023
VII. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 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. Services That Will Be Paid Only as Inpatient Services
    A. Background
    B. 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
    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 Devices and Studies
    G. OPPS Payment for Software as a Service
    H. Payment Adjustments Under the IPPS and OPPS for Domestic 
NIOSH-Approved Surgical N95 Respirators
    I. Exemption of 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. CY 2023 OPPS Payment Status and Comment Indicators
    A. CY 2023 OPPS Payment Status Indicator Definitions
    B. CY 2023 Comment Indicator Definitions
XII. MedPAC Recommendations
    A. OPPS Payment Rates Update
    B. ASC Conversion Factor Update
    C. ASC Cost Data
XIII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    B. ASC Treatment of New and Revised Codes
    C. Update to the List of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    D. Update and Payment for ASC Covered Surgical Procedures and 
Covered Ancillary Services
    E. ASC Payment System Policy for Non-Opioid Pain Management 
Drugs and Biologicals That Function as Surgical Supplies
    F. New Technology Intraocular Lenses (NTIOLs)
    G. ASC Payment and Comment Indicators
    H. 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. 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, and 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 Law 
Updates
    A. Rural Emergency Hospitals (REH) Payment Policies
    B. REH Conditions of Participation (CoP) and Critical Access 
Hospital (CAH) CoP Updates (CMS-3419-F)
    C. REH Provider Enrollment
    D. Use of the Medicare Outpatient Observation Notice by REHs
    E. Physician Self-Referral Law Update
XIX. Request for Information on Use of CMS Data To Drive Competition 
in Healthcare Marketplaces
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. Finalization of Certain COVID-19 Interim Final Rules With 
Comment Period Provisions
    A. Medicare and Medicaid Programs; Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency (CMS-
1744-IFC)
    B. Medicare and Medicaid Programs, Basic Health Program, and 
Exchanges; 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 (CMS-5531-IFC)
    C. OPPS Separate Payment for New COVID-19 Treatments Policy for 
the Remainder of the PHE (CMS-9912-IFC)
XXIII. Files Available to the Public via the internet
XXIV. Collection of Information Requirements
    A. Statutory Requirement for Solicitation of Comments
    B. ICRs for the Hospital OQR Program
    C. ICRs for the ASCQR Program
    D. ICRs for 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 Payment Adjustments for Domestic NIOSH-Approved 
Surgical N95 Respirators
    G. ICRs for REH Provider Enrollment Requirements
    H. ICRs for Rural Emergency Hospitals and CAHs CoPs
XXV. Response to Comments
XXVI. Economic Analyses
    A. Statement of Need
    B. Overall Impact of Provisions of This Final Rule With Comment 
Period
    C. Detailed Economic Analyses
    D. Regulatory Review Costs
    E. Regulatory Flexibility Act (RFA) Analysis
    F. Unfunded Mandates Reform Act Analysis
    G. Conclusion
    H. Federalism Analysis

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    I. Congressional Review

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In this final rule with comment period, we are updating the payment 
policies and payment rates for services furnished to Medicare 
beneficiaries in hospital outpatient departments (HOPDs) and ambulatory 
surgical centers (ASCs), beginning January 1, 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 
final rule with comment period also includes additional policy changes 
made in accordance with our experience with the OPPS and the ASC 
payment system and recent changes in our statutory authority. We 
describe these and various other statutory authorities in the relevant 
sections of this final rule with comment period. In addition, this rule 
updates and refines the requirements for the Hospital Outpatient 
Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) 
Program. We also make 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 REHs. In 
addition, we are finalizing the Conditions of Participation that REHs 
must meet in order to participate in the Medicare and Medicaid 
programs. This rule also finalizes changes to the Critical Access 
Hospitals (CAH) CoPs for the location and distance requirements, 
patient's rights requirements, and flexibilities for CAHs that are part 
of a larger health system. We thank commenters for submitting comment 
on the use of CMS data to drive competition in healthcare marketplaces, 
and the request for information on an alternative methodology for 
counting organs. Finally, we are finalizing as implemented, a number of 
provisions included in the COVID-19 interim final rules with comment 
period (IFCs).
2. Summary of the Major Provisions
     OPPS Update: For 2023, we are increasing the payment rates 
under the OPPS by an Outpatient Department (OPD) fee schedule increase 
factor of 3.8 percent. This increase factor is based on the final 
hospital inpatient market basket percentage increase of 4.1 percent for 
inpatient services paid under the hospital inpatient prospective 
payment system (IPPS) reduced by a final productivity adjustment of 0.3 
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 $86.5 billion, an increase of 
approximately $6.5 billion compared to estimated CY 2022 OPPS payments.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals that fail to meet the hospital 
outpatient quality reporting requirements by applying a reporting 
factor of 0.9807 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. However, cost report 
data usually lags the claims data by a year and we believe that the CY 
2020 cost report data are not the best overall approximation of 
expected outpatient hospital service costs 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 are 
utilizing 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 service ratesetting purposes. As a result, we 
are utilizing the CY 2021 claims data 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 are using 
the hospital-based PHP (HB PHP) geometric mean per diem costs 
consistent with our existing methodology. In addition, we are 
finalizing our proposal to use the latest available CY 2021 claims data 
and to continue to use the cost data that was available for the CY 2021 
rulemaking. Based on public comments, and in order to pay appropriately 
and protect access to PHP services in CMHCs, for CY 2023 but not for 
subsequent years, we are applying an equitable adjustment, under the 
authority set forth in section 1833(t)(2)(E) of the Act, to the CY 2023 
CMHC APC payment rate. For CY 2023, we are maintaining the CY 2022 CMHC 
APC payment rate of $142.70 as the CY 2023 CMHC APC final payment rate.
     Changes to the Inpatient Only (IPO) List: For 2023, we are 
finalizing our proposal, with modification, to remove eleven services 
from the Inpatient Only list.
     340B-Acquired Drugs: For CY 2023, in light of the Supreme 
Court decision in American Hospital Association v. Becerra, 142 S. Ct. 
1896 (2022), we are applying the default rate, generally average sales 
price (ASP) plus 6 percent, to 340B acquired drugs and biologicals in 
this final rule with comment period for CY 2023 and removing the 
increase to the conversion factor that was made in CY 2018 to implement 
the 340B policy in a budget neutral manner.
    We are still evaluating how to apply the Supreme Court's decision 
to prior calendar years. In the CY 2023 OPPS/ASC proposed rule, we 
solicited public comments on the best way to craft any potential 
remedies affecting cost years 2018-2022, and we will take these 
comments into consideration for separate rulemaking that will be 
published in advance of the CY 2024 OPPS/ASC proposed rule.
     Device Pass-Through Payment Applications: For CY 2023, we 
received 8 applications for device pass-through payments. We solicited 
public comment on these applications and are making final 
determinations on these applications in this final rule with comment 
period. Beginning for OPPS device pass-through applications received on 
or after March 1, 2023, we are publicly posting online the completed 
application forms and related materials that we receive from 
applicants, excluding certain copyrighted or other materials that

[[Page 71752]]

applicants indicate cannot otherwise be released to the public.
     Cancer Hospital Payment Adjustment: For CY 2023, we are 
continuing to provide additional payments to cancer hospitals so that a 
cancer hospital's payment-to-cost ratio (PCR) after the additional 
payments is equal to the weighted average PCR for the other OPPS 
hospitals using the most recently submitted or settled cost report 
data. However, section 16002(b) of the 21st Century Cures Act requires 
that this weighted average PCR be reduced by 1.0 percentage point. 
Based on the data and the required 1.0 percentage point reduction, we 
are using 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 will be the additional payments needed to result in 
a PCR equal to 0.89 for each cancer hospital.
     ASC Payment Update: For CYs 2019 through 2023, we adopted 
a policy to update the ASC payment system using the hospital market 
basket update. Using the hospital market basket methodology, for CY 
2023, we are increasing payment rates under the ASC payment system by 
3.8 percent for ASCs that meet the quality reporting requirements under 
the ASCQR Program. This increase is based on a hospital market basket 
percentage increase of 4.1 percent reduced by a productivity adjustment 
of 0.3 percentage point. Based on this update, we estimate that total 
payments to ASCs (including beneficiary cost-sharing and estimated 
changes in enrollment, utilization, and case-mix) for CY 2023 will be 
approximately $5.3 billion, an increase of approximately $230 million 
compared to estimated CY 2022 Medicare payments.
     Changes to the List of ASC Covered Surgical Procedures: 
For CY 2023, we are finalizing our proposal, with modification, to add 
four procedures, to the ASC covered procedures list (CPL) based upon 
existing criteria at Sec.  416.166.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program measure set, we are finalizing our proposals 
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 also requested 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 finalizing our 
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. We also requested 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.
     Organ acquisition payment policy: We issued 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 are finalizing our proposal to exclude research 
organs from the ratio used to calculate Medicare's share of organ 
acquisition costs and are modifying our requirement to offset costs by 
allowing providers to follow their accounting practices of adjusting 
costs, offsetting revenue or establishing a non-reimbursable cost 
center, which will maintain or lower the cost of procuring and 
providing research organs to the research community. Finally, we are 
finalizing our proposal to cover as organ acquisition costs certain 
hospital services provided to donors whose death is imminent, to 
promote organ procurement and enhance equity.
     Rural Emergency Hospitals (REH) and Critical Access 
Hospital Conditions of Participation (CoP): We are finalizing the 
Conditions of Participation that REHs must meet in order to participate 
in the Medicare and Medicaid programs. This rule also finalizes changes 
to the Critical Access Hospitals (CAH) CoPs for the location and 
distance requirements, patient's rights requirements, and flexibilities 
for CAHs that are part of a larger health system.
     Rural Emergency Hospitals (REH): Provider Enrollment: We 
are outlining provider enrollment requirements for REHs. The most 
important of these are that REHs: (1) must comply with all applicable 
provider enrollment provisions in 42 CFR part 424, subpart P, in order 
to enroll in Medicare; and (2) may submit a Form CMS-855A change of 
information application (rather than an initial enrollment application) 
to convert to an REH.
     Rural Emergency Hospitals (REH) Physician Self-Referral 
Law Update: We are finalizing revisions to certain existing exceptions 
to make them applicable to compensation arrangements to which an REH is 
a party. We are not finalizing the proposed exception for ownership or 
investment interests in an REH.
     Rural Emergency Hospital Quality Reporting (REHQR) 
Program: For the REHQR Program, we are finalizing our proposal 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. Also, we requested 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) requested comments on rural telehealth, 
behavioral and mental health, maternal health services, emergency 
services, and health equity.
     Overall Hospital Quality Star Ratings: For the Overall 
Hospital Quality Star Ratings, we are finalizing amending 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 
previous 12 months (instead of the ``previous year'').
     REH Payment Policy: Section 125 of the Consolidated 
Appropriations Act of 2021 (CAA) established a new provider type called 
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

[[Page 71753]]

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 finalizing all covered outpatient department services, other 
than inpatient hospital services as described in section 
1833(t)(1)(B)(ii) of the Act, 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. Also, we 
are finalizing our proposal 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 will not receive the 
additional 5 percent payment increase that CMS will apply to REH 
services.
    Finally, we are finalizing that REHs would receive a monthly 
facility payment of $272,866. After the initial payment is established 
in CY 2023, the monthly facility payment amount will increase in 
subsequent years by the hospital market basket percentage increase.
     Addition of a New Service Category for Hospital Outpatient 
Department Prior Authorization Process: We are adding 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 July 1, 2023.
     Mental Health Services Furnished Remotely by Hospital 
Staff to Beneficiaries in Their Homes: For CY 2023, we are considering 
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 have created 
OPPS-specific coding for these services. We are finalizing our proposal 
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 
clarifying that the requirement that an in-person visit occur within 6 
months prior to the initial mental health telehealth service does not 
apply to beneficiaries who began receiving mental health telehealth 
services in their homes during the PHE or during the 151-day period 
after the end of the PHE. We are also finalizing our proposal 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 are finalizing our proposal to replace cross-
references at Sec. Sec.  410.27(a)(1)(iv)(A) and (B) and 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 
are finalizing our proposal to revise Sec.  410.28(e) for clarity so 
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 finalizing our proposal 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 Healthcare Common Procedure Coding System (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).
     Final Payment Adjustments under the IPPS and OPPS for 
Domestic National Institute for Occupational Safety and Health (NIOSH)-
Approved Surgical N95 Respirators: As discussed in section X.H of this 
final rule with comment period, 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 finalizing our 
proposal 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 payment adjustments will account for 
these additional resource costs.
    We believe the payment adjustments will 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 
finalizing our proposal that the payment adjustments will commence for 
cost reporting periods beginning on or after January 1, 2023.
     Finalization of Certain COVID-19 Interim Final Rules With 
Comment Period Provisions: In this final rule with comment period, we 
are responding to public comments and stating our final policies for 
certain provisions in the IFCs titled ``Medicare and Medicaid Programs; 
Policy and Regulatory Revisions in Response to the COVID-19 Public 
Health Emergency'' (CMS-5531-IFC), ``Medicare and Medicaid Programs, 
Basic Health Program, and Exchanges; 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'' (CMS-5531-IFC), and ``Additional Policy and 
Regulatory Revisions in Response to the COVID-19 Public Health 
Emergency'' (CMS-9912-IFC).
3. Summary of Costs and Benefits
    In section XXV of this final rule with comment period, we set forth 
a detailed analysis of the regulatory and federalism impacts that the 
changes will have on affected entities and beneficiaries. Key estimated 
impacts are described below.
a. Impacts of All OPPS Changes
    Table 110 in section XXV.C of this final rule with comment period 
displays the distributional impact of all the OPPS changes on various 
groups of hospitals and CMHCs for CY 2023 compared to all

[[Page 71754]]

estimated OPPS payments in CY 2022. We estimate that the policies in 
this final rule with comment period will result in a 4.5 percent 
overall increase in OPPS payments to providers. We estimate that total 
OPPS payments for CY 2023, including beneficiary cost-sharing, to the 
approximately 3,500 facilities paid under the OPPS (including general 
acute care hospitals, children's hospitals, cancer hospitals, and 
CMHCs) will increase by approximately $3.0 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 no change in CY 2023 payments to 
CMHCs relative to their CY 2022 payments, based on our final policy of 
maintaining the CY 2022 OPPS payment rates in CY 2023.
b. Impacts of the Updated Wage Indexes
    We estimate that our update of the wage indexes based on the fiscal 
year (FY) 2023 IPPS final rule wage indexes will result in a 0.2 
percent increase for urban hospitals under the OPPS and no change for 
rural hospitals. These wage indexes include the continued 
implementation of the Office of Management and Budget (OMB) labor 
market area delineations based on 2010 Decennial Census data, with 
updates, as discussed in section II.C of this final rule with comment 
period.
c. Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 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 3.8 percent and applying that increase factor to the 
conversion factor for CY 2023. As a result of the OPD fee schedule 
increase factor and other budget neutrality adjustments, we estimate 
that urban hospitals will experience an increase in payments of 
approximately 5.3 percent and that rural hospitals would experience an 
increase in payments of 2.7 percent. Classifying hospitals by teaching 
status, we estimate nonteaching hospitals will experience an increase 
in payments of 3.4 percent, minor teaching hospitals would experience 
an increase in payments of 4.6 percent, and major teaching hospitals 
would experience an increase in payments of 7.2 percent. We also 
classified hospitals by the type of ownership. We estimate that 
hospitals with voluntary ownership would experience an increase of 5.2 
percent in payments, while hospitals with government ownership would 
experience an increase of 6.3 percent in payments. We estimate that 
hospitals with proprietary ownership will experience an increase of 1.6 
percent in payments.
    We estimate that the effect of paying for drugs acquired under the 
340B program at ASP plus 6 percent and removing the increase to the 
conversion factor that was added in CY 2018 to implement the 340B 
payment policy in a budget neutral manner will have varying effects 
across different provider categories. We note that while urban 
hospitals are estimated to have a 1.2 percent increase in payments, 
rural hospitals overall are estimated to have a 1.0 percent decrease in 
payments as a result of these changes.
e. Impacts of the Final 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 will increase payments by $230 
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

[[Page 71755]]

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; the Consolidated Appropriations Act, 2021 (Pub. L. 116-260), 
enacted on December 27, 2020; and the Inflation Reduction Act, 2022 
(Pub. L. 117-169), enacted on August 16, 2022.
    Under the OPPS, we generally pay for hospital Part B services on a 
rate-per-service basis that varies according to the APC group to which 
the service is assigned. We use the Healthcare Common Procedure Coding 
System (HCPCS) (which includes certain Current Procedural Terminology 
(CPT) codes) to identify and group the services within each APC. The 
OPPS includes payment for most hospital outpatient services, except 
those identified in section I.C of this final rule. Section 
1833(t)(1)(B) of the Act provides for payment under the OPPS for 
hospital outpatient services designated by the Secretary (which 
includes partial hospitalization services furnished by CMHCs), and 
certain inpatient hospital services that are paid under Medicare Part 
B.
    The OPPS rate is an unadjusted national payment amount that 
includes the Medicare payment and the beneficiary copayment. This rate 
is divided into a labor-related amount and a nonlabor-related amount. 
The labor-related amount is adjusted for area wage differences using 
the hospital inpatient wage index value for the locality in which the 
hospital or CMHC is located.
    All services and items within an APC group are comparable 
clinically and with respect to resource use, as required by section 
1833(t)(2)(B) of the Act. In accordance with section 1833(t)(2)(B) of 
the Act, subject to certain exceptions, items and services within an 
APC group cannot be considered comparable with respect to the use of 
resources if the highest median cost (or mean cost, if elected by the 
Secretary) for an item or service in the APC group is more than 2 times 
greater than the lowest median cost (or mean cost, if elected by the 
Secretary) for an item or service within the same APC group (referred 
to as the ``2 times rule''). In implementing this provision, we 
generally use the cost of the item or service assigned to an APC group.
    For new technology items and services, special payments under the 
OPPS may be made in one of two ways. Section 1833(t)(6) of the Act 
provides for temporary additional payments, which we refer to as 
``transitional pass-through payments,'' for at least 2 but not more 
than 3 years for certain drugs, biological agents, brachytherapy 
devices used for the treatment of cancer, and categories of other 
medical devices. For new technology services that are not eligible for 
transitional pass-through payments, and for which we lack sufficient 
clinical information and cost data to appropriately assign them to a 
clinical APC group, we have established special APC groups based on 
costs, which we refer to as New Technology APCs. These New Technology 
APCs are designated by cost bands which allow us to provide appropriate 
and consistent payment for designated new procedures that are not yet 
reflected in our claims data. Similar to pass-through payments, an 
assignment to a New Technology APC is temporary; that is, we retain a 
service within a New Technology APC until we acquire sufficient data to 
assign it to a clinically appropriate APC group.

C. Excluded OPPS Services and Hospitals

    Section 1833(t)(1)(B)(i) of the Act authorizes the Secretary to 
designate the hospital outpatient services that are paid under the 
OPPS. While most hospital outpatient services are payable under the 
OPPS, section 1833(t)(1)(B)(iv) of the Act excludes payment for 
ambulance, physical and occupational therapy, and speech-language 
pathology services, for which payment is made under a fee schedule. It 
also excludes screening mammography, diagnostic mammography, and 
effective January 1, 2011, an annual wellness visit providing 
personalized prevention plan services. The Secretary exercises the 
authority granted under the statute to also exclude from the OPPS 
certain services that are paid under fee schedules or other payment 
systems. Such excluded services include, for example, the professional 
services of physicians and nonphysician practitioners paid under the 
Medicare Physician Fee Schedule (MPFS); certain laboratory services 
paid under the Clinical Laboratory Fee Schedule (CLFS); services for 
beneficiaries with end-stage renal disease (ESRD) that are paid under 
the ESRD prospective payment system; and services and procedures that 
require an inpatient stay that are paid under the hospital IPPS. In 
addition, section 1833(t)(1)(B)(v) of the Act does not include 
applicable items and services (as defined in subparagraph (A) of 
paragraph (21)) that are furnished on or after January 1, 2017 by an 
off-campus outpatient department of a provider (as defined in 
subparagraph (B) of paragraph (21)). We set forth the services that are 
excluded from payment under the OPPS in regulations at 42 CFR 419.22.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals that are excluded from payment under the OPPS. These excluded 
hospitals 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.

[[Page 71756]]

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/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html.
3. Panel Meetings and Organizational Structure
    The Panel has held many meetings, with the last meeting taking 
place on August 22, 2022. Prior to each meeting, we publish a notice in 
the Federal Register to announce the meeting, new members, and any 
other changes of which the public should be aware. Beginning in CY 
2017, we have transitioned to one meeting per year (81 FR 31941). In CY 
2018, we published a Federal Register notice requesting nominations to 
fill vacancies on the Panel (83 FR 3715). CMS is currently accepting 
nominations at: https://mearis.cms.gov. 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 22, 2022, 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 https://facadatabase.gov.
    Comment: One commenter requested that CMS include at least one 
representative from the ASC community in the membership of the advisory 
Panel. The commenter explained that decisions regarding the clinical 
integrity of payment groups and relative payment weights impact ASC 
payments and, therefore, are of critical importance to ASCs.
    Response: We thank the commenter for their suggestion. This expert 
panel is composed of appropriate representatives of providers 
(currently employed full-time by hospitals or hospital systems, 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. Beginning in 2019, the Panel may also 
include a representative of a provider with ASC expertise, who advises 
CMS only on OPPS APC rates, as appropriate, impacting ASC covered 
procedures within the context and purview of the Panel's scope. 
Interested individuals, including those with relevant ASC expertise, 
are encouraged to apply to serve on the Panel. Nominations for the 
Panel are currently being accepted in the new electronic application 
system, Medicare Electronic Application Request Information 
SystemTM (MEARIS). Interested individuals may submit 
nominations for themselves or others on https://mearis.cms.gov.

[[Page 71757]]

F. Public Comments Received on the CY 2023 OPPS/ASC Proposed Rule

    We received approximately 1,599 timely pieces of correspondence on 
the CY 2023 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 27, 2022 (87 FR 44502) from individuals, elected 
officials, providers and suppliers, practitioners, and advocacy groups. 
We provide summaries of the public comments and our responses are set 
forth in the various sections of this final rule with comment period 
under the appropriate headings.

G. Public Comments Received on the CY 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. Updates Affecting OPPS Payments

A. 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 
section X.D of the CY 2023 OPPS/ASC proposed rule (87 FR 44680 through 
44682), 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.B. 
of this final rule with comment period, we are finalizing our proposal 
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 Ambulatory Payment Classifications (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 proposed 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 proposed 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: https://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: https://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 proposed 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 the CY 2023 OPPS/ASC proposed rule. HCPCS codes that we 
proposed to add for CY 2023 are identified by asterisks (*) in the 
fourth column of Addendum N.
    We did not receive any public comments on our general proposal to 
recalibrate the relative payment weights for each APC based on claims 
and cost report data for HOPD services or on our proposed bypass code 
process. We are adopting as final the proposed ``pseudo'' single claims 
process and the final CY 2023 list of bypass codes, as displayed in 
Addendum N to this final rule with comment period (which is available 
via the internet on the CMS website). For this final rule with comment 
period, for the purpose of recalibrating the final APC relative payment 
weights for CY 2023, we used approximately 93 million final actions 
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. For exact numbers of 
claims used and additional details on the claims accounting process, we 
refer readers to the claims accounting narrative under supporting 
documentation for this final rule with comment period on the CMS 
website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    For CY 2023, we proposed to continue to use the hospital-specific 
overall ancillary and departmental cost-to-charge ratios (CCRs) to 
convert charges to estimated costs through application of a revenue 
code-to-cost center crosswalk. 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 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 believed 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.

[[Page 71758]]

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 proposed 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 
ratesetting purposes. We discuss this proposal, the public comments we 
received, as well as our final policy in Section X.B. of this final 
rule with comment period.
    To calculate the APC costs on which the CY 2023 APC payment rates 
are based, we proposed 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 proposed 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: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Comment: One commenter requested that we revise our revenue code-
to-cost center crosswalk to provide consistency with the National 
Uniform Billing Committee (NUBC) definitions and to improve the 
accuracy of cost data for OPPS ratesetting with respect to chimeric 
antigen receptor therapy (CAR-T) administration services. The commenter 
suggested the following changes:
     Revising revenue code 0871 from Reserved to describe 
``cell collection'' and that revenue code 0871 be mapped to a primary 
cost center 6000 for clinic;
     Revising revenue codes 0872 and 0873 from Reserved to 
describe ``cell processing'' and remapping revenue codes 0872 and 0873 
to a primary cost center 3350 for laboratory/hematology;
     Map revenue codes 0874 or 0875 to cost center 4800 for 
intravenous therapy in the revenue code-to-cost center crosswalk;
     Map revenue code 089x series to cost center 5600 (drugs 
charged to patients), or, at the very least, only map revenue codes 
0891 and 0892 to cost center 5600.
    Response: We appreciate the commenter's recommendation for changes 
to our revenue code-to-cost center crosswalk. While we believe the 
current APC assignment and payment rate for CPT code 0540T (Chimeric 
antigen receptor t-cell (car-t) therapy; car-t cell administration, 
autologous) is appropriate, we intend to explore the implications of 
the commenter's recommendation further and may revisit these changes in 
future rulemaking.
    In accordance with our longstanding policy, we proposed to 
calculate CCRs for the standard cost centers--cost centers with a 
predefined label--and nonstandard cost centers--cost centers defined by 
a hospital--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 proposed not to include the nonstandard cost centers 
reported in this way in the OPPS ratesetting database construction. We 
solicited 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 final rule with comment period.
    Comment: One commenter supported our proposal and recommended that 
we not use current nonstandard lines in determining OPPS payment rates 
for CY 2023 without further understanding of the revenues and expenses 
going into those nonstandard lines.
    Response: We thank the commenter for their support. While we did 
not receive any specific concerns from commenters with regards to the 
data from these nonstandard cost center lines, we agree that additional 
context for and analyses into these nonstandard lines would be 
beneficial before including them in OPPS ratesetting.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, not to include 
nonstandard cost centers on cost report lines that do not correspond to 
the cost center number.
2. Final Data Development and Calculation of Costs Used for Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the OPPS payment

[[Page 71759]]

rates for CY 2023. The Hospital OPPS page on the CMS website on which 
this final rule with comment period is posted (https://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, 
https://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 the final rule with comment period.
    Previously, the OPPS established the scaled relative weights on 
which payments are based using APC median costs, a process described in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74188). 
However, as discussed in more detail in section II.A.2.f of the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68259 through 68271), we 
finalized the use of geometric mean costs to calculate the relative 
weights on which the CY 2013 OPPS payment rates were based. While this 
policy changed the cost metric on which the relative payments are 
based, the data process in general remained the same under the 
methodologies that we used to obtain appropriate claims data and 
accurate cost information in determining estimated service cost.
    We used the methodology described in sections II.A.2.a through 
II.A.2.c of this final rule with comment period to calculate the costs 
we used to establish the proposed relative payment weights used in 
calculating the OPPS payment rates for CY 2023 shown in Addenda A and B 
to this final rule with comment period (which are available via the 
internet on the CMS website at: https://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 final rule with comment period for a discussion of the conversion 
of APC costs to scaled payment weights.
    We note that under the OPPS, CY 2019 was the first year in which 
the claims data used for setting payment rates (CY 2017 data) contained 
lines with the modifier ``PN'', which indicates nonexcepted items and 
services furnished and billed by off-campus provider-based departments 
(PBDs) of hospitals. Because nonexcepted 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 
will continue to remove claim lines with modifier ``PN'' from the 
ratesetting process.
    For details of the claims accounting process used in this final 
rule with comment period, we refer readers to the claims accounting 
narrative under supporting documentation for this final rule with 
comment period on the CMS website at: https://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 proposed in the CY 2023 OPPS/ASC proposed rule 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 proposed to continue to 
simulate blood CCRs for each hospital that does not report a blood cost 
center by calculating the ratio of the blood-specific CCRs to 
hospitals' overall CCRs for those hospitals that do report costs and 
charges for blood cost centers. We also proposed to apply this mean 
ratio to the overall CCRs of hospitals not reporting costs and charges 
for blood cost centers on their cost reports to simulate blood-specific 
CCRs for those hospitals. We proposed to calculate the costs upon which 
the proposed CY 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 
proposed to continue to apply the blood-specific CCR methodology 
described in this section when calculating the costs of the blood and 
blood products that appear on claims with services assigned to the C-
APCs. Because the costs of blood and blood products would be reflected 
in the overall costs of the C-APCs (and, as a result, in the proposed 
payment rates of the C-APCs), we proposed not to make

[[Page 71760]]

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 the CY 2023 OPPS/ASC 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 proposed to continue to establish payment rates for 
blood and blood products using our blood-specific CCR methodology. We 
did not receive any comments on our proposal to establish payment rates 
for blood and blood products using our blood-specific CCR methodology 
and we are finalizing this policy as proposed. Please refer to Addendum 
B to this final rule with comment period (which is available via the 
internet on the CMS website) for the final CY 2023 payment rates for 
blood and blood products.
(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--cancer treatment through solid source radioactive 
implants--consisting of a seed or seeds (or radioactive source) 
(``brachytherapy sources'') separately from other services or groups of 
services. The statute provides certain criteria for the additional 
groups. For the history of OPPS payment for brachytherapy sources, we 
refer readers to prior OPPS final rules, such as the CY 2012 OPPS/ASC 
final rule with comment period (77 FR 68240 through 68241). As we have 
stated in prior OPPS updates, we believe that adopting the general OPPS 
prospective payment methodology for brachytherapy sources is 
appropriate for a number of reasons (77 FR 68240). The general OPPS 
methodology uses costs based on claims data to set the relative payment 
weights for hospital outpatient services. This payment methodology 
results in more consistent, predictable, and equitable payment amounts 
per source across hospitals by averaging the extremely high and low 
values, in contrast to payment based on hospitals' charges adjusted to 
costs. We believe that the OPPS methodology, as opposed to payment 
based on hospitals' charges adjusted to cost, also would provide 
hospitals with incentives for efficiency in the provision of 
brachytherapy services to Medicare beneficiaries. Moreover, this 
approach is consistent with our payment methodology for the vast 
majority of items and services paid under the OPPS. We refer readers to 
the CY 2016 OPPS/ASC final rule with comment period (80 FR 70323 
through 70325) for further discussion of the history of OPPS payment 
for brachytherapy sources.
    For CY 2023, except where otherwise indicated, we proposed 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 proposed 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 the CY 2023 OPPS/ASC proposed rule 
(87 FR 44568 through 44569), we proposed to base the payment rates for 
brachytherapy sources on the geometric mean unit costs for each source, 
consistent with the methodology that we propose for other items and 
services paid under the OPPS, as discussed in section II.A.2. of the CY 
2023 OPPS/ASC proposed rule (87 FR 44512 through 44513). We also 
proposed to continue the other payment policies for brachytherapy 
sources that we finalized and first implemented in the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60537). We proposed to pay for 
the stranded and nonstranded not otherwise specified (NOS) codes, HCPCS 
codes C2698 (Brachytherapy source, stranded, not otherwise specified, 
per source) and C2699 (Brachytherapy source, non-stranded, not 
otherwise specified, per source), at a rate equal to the lowest 
stranded or nonstranded prospective payment rate for such sources, 
respectively, on a per-source basis (as opposed to, for example, per 
mCi), which is based on the policy we established in the CY 2008 OPPS/
ASC final rule with comment period (72 FR 66785). We also proposed to 
continue the policy we first implemented in the CY 2010 OPPS/ASC final 
rule with comment period (74 FR 60537) regarding payment for new 
brachytherapy sources for which we have no claims data, based on the 
same reasons we discussed in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66786; which was delayed until January 1, 2010, 
by section 142 of Pub. L. 110-275). Specifically, this policy is 
intended to enable us to assign new HCPCS codes for new brachytherapy 
sources to their own APCs, with prospective payment rates set based on 
our consideration of external data and other relevant information 
regarding the expected costs of the sources to hospitals. The proposed 
CY 2023 payment rates for brachytherapy sources are included on 
Addendum B to the CY 2023 OPPS/ASC proposed rule (which is available 
via the internet on the CMS website) and identified with status 
indicator ``U''.
    For CY 2018, we assigned status indicator ``U'' (Brachytherapy 
Sources, Paid under OPPS; separate APC payment) to HCPCS code C2645 
(Brachytherapy planar source, palladium-103, per square millimeter) in 
the absence of claims data and established a payment rate using 
external data (invoice price) at $4.69 per mm\2\. For CY 2019, in the 
absence of sufficient claims data, we continued to establish a payment 
rate for C2645 at $4.69 per mm\2\. Our CY 2018 claims data available 
for the 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 interested parties, 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

[[Page 71761]]

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 proposed 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. 
As discussed in further detail in section X.C of the CY 2022 OPPS/ASC 
final rule with comment period (86 FR 63743 through 63747), we adopted 
this policy to mitigate wide variation in payment rates that occur from 
year to year for APCs with low utilization. Such volatility in payment 
rates from year to year can result in even lower utilization and 
potential barriers to access. For these Low Volume APCs, which had 
fewer than 100 CY 2021 single claims used for ratesetting purposes in 
the CY 2023 OPPS/ASC proposed rule, we used up to four 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 calculated 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 four years. 
For CY 2023, we proposed to designate 4 brachytherapy APCs as Low 
Volume APCs as these APCs meet our criteria to be designated as a Low 
Volume APC. For more information on the brachytherapy APCs we proposed 
to designate as Low Volume APCs, see section III.D of the CY 2023 OPPS/
ASC proposed rule (87 FR 44568 through 44569). In section III.D. of 
this final rule with comment period, we are finalizing our proposal to 
designate four brachytherapy APCs as Low Volume APCs for CY 2023.
    Comment: One commenter supported our proposal 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.
    Response: We thank the commenter for their support of our proposal.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, 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, we are finalizing our proposal to continue to set 
the payment rates for other brachytherapy sources that are not 
otherwise assigned to designated Low Volume APCs for CY 2023 using our 
established prospective payment methodology.
    The final CY 2023 payment rates for brachytherapy sources are 
included in Addendum B to this final rule with comment period (which is 
available via the internet on the CMS website) and are identified with 
status indicator ``U''.
    We continue to invite interested parties 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 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. One example of a primary service would be a partial mastectomy 
and an example of a secondary service packaged into that primary 
service would be a radiation therapy procedure.
    Services excluded from the C-APC policy under the OPPS include 
services that are not covered OPD services, services that cannot by 
statute be paid for under the OPPS, and services that are required by 
statute to be separately paid. This includes certain mammography and 
ambulance services that are not covered OPD services in accordance with 
section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which also 
are required by statute to receive separate payment under section 
1833(t)(2)(H) of the Act; pass-through payment drugs and devices, which 
also require separate payment under section 1833(t)(6) of the Act; 
self-administered drugs (SADs) that are not otherwise packaged as 
supplies because they are not covered under Medicare Part B under 
section 1861(s)(2)(B) of the Act; and certain preventive services (78 
FR 74865 and 79 FR 66800 through 66801). A list of services excluded 
from the C-APC policy is included in Addendum J to this final rule with 
comment period (which is available via the internet on the CMS website 
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

[[Page 71762]]

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 Food and Drug 
Administration (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). 
Please see section XXIII.C. for additional details regarding our 
finalized policy, which will end when the PHE ends.
    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'',\1\ 
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.
---------------------------------------------------------------------------

    \1\ Status indicator ``J1'' denotes Hospital Part B Services 
Paid Through a Comprehensive APC. Further information can be found 
in CY 2023 Addendum D1.
---------------------------------------------------------------------------

    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''.\2\ Specifically, we make a payment through C-
APC 8011 for a claim that:
---------------------------------------------------------------------------

    \2\ Status indicator ``J2'' denotes Hospital Part B Services 
That May Be Paid Through a Comprehensive APC. Further information 
can be found in CY 2023 Addendum D1.
---------------------------------------------------------------------------

     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 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, such as speech language 
pathology, 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

[[Page 71763]]

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.\3\
---------------------------------------------------------------------------

    \3\ https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/bp102c15.pdf.
---------------------------------------------------------------------------

    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 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

[[Page 71764]]

qualify for a complexity adjustment for CY 2023, we proposed to apply 
the frequency and cost criteria thresholds discussed above, testing 
claims reporting one unit of a single primary service assigned to 
status indicator ``J1'' and any number of units of a single add-on code 
for the primary ``J1'' service. If the frequency and cost criteria 
thresholds for a complexity adjustment are met and reassignment to the 
next higher cost APC in the clinical family is appropriate (based on 
meeting the criteria outlined above), we make a complexity adjustment 
for the code combination; that is, we reassign the primary service code 
reported in conjunction with the add-on code to the next higher cost C-
APC within the same clinical family of C-APCs. As previously stated, we 
package payment for add-on codes into the C-APC payment rate. If any 
add-on code reported in conjunction with the ``J1'' primary service 
code does not qualify for a complexity adjustment, payment for the add-
on service continues to be packaged into the payment for the primary 
service and is not reassigned to the next higher cost C-APC. We 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 final rule comment period (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 final rule with comment period 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 final rule with comment period 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 will be reassigned to the next 
higher cost C-APC within the clinical family. The combined statistics 
for all final 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 final 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 will be reassigned to C-APC 5224 when CPT code 33208 
is the primary code. Providing the information contained in Addendum J 
to the CY 2023 OPPS/ASC final rule allows interested parties the 
opportunity to better assess the impact associated with the assignment 
of claims with each of the paired code combinations eligible for a 
complexity adjustment.
    Comment: Multiple commenters requested that CMS apply a complexity 
adjustment to additional code combinations. The specific C-APC 
complexity adjustment code combinations requested by the commenters for 
CY 2023 are listed in Table 1 below.
BILLING CODE 4120-01-P

[[Page 71765]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.001


[[Page 71766]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.002

BILLING CODE 4120-01-C
    Response: We reviewed the requested code combinations suggested by 
commenters, listed in Table 1, against our complexity adjustment 
criteria. The code combination for primary HCPCS code 52000 with 
secondary HCPCS code C9738 met our cost and frequency criteria, 
qualifying for a complexity adjustment for CY 2023. The remaining code 
combinations failed to meet our cost or frequency criteria and do not 
qualify for complexity adjustments for CY 2023. Addendum J to the CY 
2023 OPPS/ASC final rule with comment period includes the cost 
statistics for each code combination that was evaluated for a 
complexity adjustment.
    We note that one code combination, HCPCS 20902 and HCPCS 28740, 
requested by comments was already proposed in the CY 2023 OPPS/ASC 
proposed rule and is being finalized in

[[Page 71767]]

this final rule with comment period as a qualifying complexity 
adjustment. Additionally, one code combination commenters requested, 
HCPCS 37243 and HCPCS C1983, does not qualify for a complexity 
adjustment because the secondary code, C1983, is not an add-on code and 
does not have a J1 status indicator. Accordingly, this code combination 
was not evaluated for a CY 2023 complexity adjustment.
    Comment: We also received support from commenters for a variety of 
existing and proposed complexity adjustments, including neurostimulator 
procedures as well as fusion and bunion surgery procedures.
    Response: We thank the commenters for their support.
    Comment: Several commenters requested that CMS modify or eliminate 
the established C-APC complexity adjustment eligibility criteria of 25 
or more claims reporting the code combination (frequency) and a 
violation of the 2 times rule in the originating C-APC (cost) to allow 
additional code combinations to qualify for complexity adjustments. 
Some commenters expressed concern that CMS' methodology for determining 
complexity adjustments is unnecessarily restrictive, particularly the 
25-claim threshold, and suggested that CMS implement a complexity 
adjustment whenever a code pair exceeds the cost threshold.
    Several commenters reiterated their request to allow clusters of 
procedures, consisting of a ``J1'' code pair and multiple other 
associated add-on codes used in combination with that ``J1'' code pair 
to qualify for complexity adjustments, stating that this may allow for 
more accurate reflection of medical practice when multiple procedures 
are performed together or there are certain complex procedures that 
include numerous add-on codes. Commenters also requested that CMS 
continue to monitor and report on the impact of complexity adjustments.
    Response: We appreciate these comments. At this time, we do not 
believe changes to the C-APC complexity adjustment criteria are 
necessary or that we should make exceptions to the criteria to allow 
claims with the code combinations suggested by the commenters to 
receive complexity adjustments. As we stated in the CY 2017 OPPS/ASC 
final rule (81 FR 79582), we believe that the complexity adjustment 
criteria, which require a frequency of 25 or more claims reporting a 
code combination and a violation of the 2 times rule in the originating 
C-APC, are appropriate to determine if a combination of procedures 
represents a complex, costly subset of the primary service that should 
qualify for the adjustment and be paid at the next higher paying C-APC 
in the clinical family. As we previously stated in the CY 2020 OPPS/ASC 
final rule with comment period (84 FR 61161), a minimum of 25 claims is 
already a very low threshold for a national payment system. Lowering 
the minimum of 25 claims further could lead to unnecessary complexity 
adjustments for service combinations that are rarely performed.
    As we explained in the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 58843), we do not believe that it is necessary to adjust 
the complexity adjustment criteria to allow claims that include more 
than two ``J1'' procedures or procedures that are not assigned to C-
APCs to qualify for a complexity adjustment. As previously mentioned, 
we believe the current criteria are adequate to determine if a 
combination of procedures represents a complex, costly subset of the 
primary service. We will continue to monitor the application of the 
complexity adjustment criteria.
    After consideration of the public comments we received on the 
proposed complexity adjustment policy, we are finalizing the C-APC 
complexity adjustment policy for CY 2023 as proposed. We are also 
finalizing the proposed complexity adjustments with the addition of the 
one new code combination, primary HCPCS code 52000 with secondary HCPCS 
code C9738, that meet our complexity adjustment criteria.
(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 
indicator ``J2'' when they are included on a claim with a ``J2'' 
service (84 FR 61167). We proposed 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. We did not receive any public comments on this policy and are 
finalizing it as proposed.
(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

[[Page 71768]]

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 proposed 
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 final CY 2023 
comprehensive APC payment policy exclusions.
    We also included a corresponding proposal in section XI ``Proposed 
CY 2023 OPPS Payment Status and Comment Indicators'' of the CY 2023 
OPPS/ASC proposed rule (87 FR 44698), to add a new definition to status 
indicator ``A'' to include unclassified drugs and biologicals that are 
reportable with HCPCS code C9399. The definition, found in Addendum D1 
to the CY 2023 OPPS/ASC 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.
    Comment: Interested parties expressed support of the proposal to 
exclude C9399 from ``J1'' and ``J2'' claims and to add a new definition 
to status indicator ``A'' to include unclassified drugs and biologicals 
that are reportable with C9399.
    Response: We thank commenters for their support.
    After consideration of the public comments we received, 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 are finalizing, without modification, our proposal 
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 the section titled ``CY 2023 OPPS 
Payment Status and Comment Indicators'' of this CY 2023 OPPS/ASC final 
rule with comment period for details regarding the new definition of 
status indicator ``A''.
(4) Additional C-APCs for CY 2023
    For CY 2023, we proposed to continue to apply the C-APC payment 
policy methodology. We refer readers to the CY 2017 OPPS/ASC final rule 
with comment period (81 FR 79583) for a discussion of the C-APC payment 
policy methodology and revisions.
    Each year, in accordance with section 1833(t)(9)(A) of the Act, we 
review and revise the services within each APC group and the APC 
assignments under the OPPS. As a result of our annual review of the 
services and the APC assignments under the OPPS, we proposed to add one 
C-APC under the existing C-APC payment policy in CY 2023: C-APC 5372 
(Level 2 Urology and Related Services). This APC was proposed because, 
similar to other C-APCs, this APC included 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 were 
previously converted to C-APCs.
    Comment: Commenters supported the creation of the new proposed C-
APC, based on resource cost and clinical characteristics.
    Response: We appreciate the commenters' support.
    Comment: Several commenters were concerned that the C-APC 
methodology lacks the charge capture mechanisms to accurately reflect 
the cost of radiation oncology services, particularly the delivery of 
brachytherapy for the treatment of cervical cancer. They stated that 
this type of cancer disproportionately impacts minorities, women, and 
rural populations and that undervaluing brachytherapy procedures risks 
exacerbating existing disparities in treatment. These commenters 
suggested that CMS discontinue the C-APC payment policy for all 
brachytherapy insertion codes and allow these procedures to be reported 
through

[[Page 71769]]

traditional APCs, move brachytherapy procedures (CPT codes 57155 and 
58346) to higher paying C-APCs, or pay separately for preparation and 
planning services to more fully account for the costs associated with 
these procedures.
    Response: We appreciate the comments. The calculations provided by 
commenters as to the cost of these services do not match how we 
calculate C-APC costs. We believe that the current C-APC methodology is 
appropriately applied to these surgical procedures and is accurately 
capturing costs, particularly as the brachytherapy sources used for 
these procedures are excluded from C-APC packaging and are separately 
payable. This methodology also enables hospitals to manage their 
resources with maximum flexibility by monitoring and adjusting the 
volume and efficiency of services themselves.
    We also reviewed the request by commenters to move brachytherapy 
procedures, CPT code 57155 and CPT code 58346, to a higher paying C-
APC. For CPT code 57155, the claims data in the two times rule 
evaluation show that this code is being paid at the appropriate level 
in C-APC 5415 (Level 5 Gynecologic Procedures). For CPT code 53846, 
given that this code has less than 100 claims, it does not meet the 
significance threshold of the two times rule evaluation and we do not 
believe the few claims available provide an accurate reflection of the 
service's cost sufficient to move this procedure to a higher C-APC. We 
will continue to examine these concerns and will determine if any 
modifications to this policy are warranted in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing as proposed C-APC 5372 (Level 2 Urology and Related 
Services) for CY 2023. Table 2 lists the final C-APCs for CY 2023. All 
C-APCs are displayed in Addendum J to this CY 2023 OPPS/ASC final rule 
with comment period (which is available via the internet on the CMS 
website). Addendum J to this final rule with comment period also 
contains all of the data related to the C-APC payment policy 
methodology, including the list of complexity adjustments and other 
information for CY 2023.
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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 proposed to continue our longstanding policy of limiting the 
aggregate payment for specified less resource-intensive mental health 
services furnished on the same date to the payment for a day of partial 
hospitalization services provided by a hospital, which we consider to 
be the most resource-intensive of all outpatient mental health 
services. We refer readers to the April 7, 2000 OPPS final rule with 
comment period (65 FR 18452 through 18455) for the initial discussion 
of this longstanding policy and the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74168) for more recent background.
    In the CY 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 Integrated OCE (I/OCE) will 
continue to determine whether to pay for these specified mental health 
services individually, or to make a single payment at the same payment 
rate established for APC 5863 for all of the specified mental health 
services furnished by the hospital on that single date of service. We 
continue to believe that the costs associated with administering a 
partial hospitalization program at a hospital represent the most 
resource intensive of all outpatient mental health services. Therefore, 
we do not believe that we should pay more for mental health services 
under the OPPS than the highest partial hospitalization per diem 
payment rate for hospitals.
    We proposed that when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on a 
single date of service, based on the payment rates associated with the 
APCs for the individual services, exceeds the maximum per diem payment 
rate for partial hospitalization services provided by a hospital, those 
specified mental health services would be paid through composite APC 
8010 for CY 2023. In addition, we proposed to set the payment rate for 
composite APC 8010 at the same payment rate that we proposed for APC 
5863, which is the maximum partial hospitalization per diem payment 
rate for a hospital, and that the hospital continue to be paid the 
proposed payment rate for composite APC 8010.
    Comment: Several commenters recommended that CMS change the status 
indicator for two neuropsychological testing codes (HCPCS 96133 and 
96137) from SI = N to SI = Q3 to allow separate payment for additional 
hours of testing on the same date or increase the payment rate for the 
primary testing procedure code. The commenters noted that the payment 
rate for Composite APC 8010, which is capped at the maximum per diem 
partial hospitalization rate, is lower than the individual HCPCS code 
APC payment rates and does not provide sufficient payment for these 
procedures.
    Response: After reviewing this issue, we believe the Composite APC 
methodology is being appropriately applied in this case, as packaging 
multiple testing services performed on a single date of service creates 
incentives for hospitals to provide these services in the most cost-
efficient manner. We will continue to examine these concerns and will 
determine if any modifications to this policy are warranted in future 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, that when the aggregate 
payment for specified mental health services provided by one hospital 
to a single beneficiary on a single date of service, based on the 
payment rates associated with the APCs for the individual services, 
exceeds the maximum per diem payment rate for partial hospitalization 
services provided by a hospital, those specified mental health services 
would be paid through composite APC 8010 for CY 2023. In addition, we 
are finalizing our proposal to set the payment rate for composite APC 
8010 for CY 2023 at the same payment rate that we set for APC 5863, 
which is the maximum partial hospitalization per diem payment rate for 
a hospital.
(2) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Effective January 1, 2009, we provide a single payment each time a 
hospital submits a claim for more than one imaging procedure within an 
imaging family on the same date of service, to reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session (73 FR 41448 through 41450). We 
utilize three imaging families based on imaging modality for purposes 
of this methodology: (1) ultrasound; (2) computed tomography (CT) and 
computed tomographic angiography (CTA); and (3) magnetic resonance 
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes 
subject to the multiple imaging composite policy and their respective 
families are listed in Table 3 below.
    While there are three imaging families, there are five multiple 
imaging

[[Page 71773]]

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 proposed to continue to pay for all multiple 
imaging procedures within an imaging family performed on the same date 
of service using the multiple imaging composite APC payment 
methodology. We continue to believe that this policy would reflect and 
promote the efficiencies hospitals can achieve when performing multiple 
imaging procedures during a single session.
    For CY 2023, except where otherwise indicated, we proposed 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 the CY 2023 OPPS/ASC 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 
have used 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 final rule (which is available via the internet on 
the CMS website \4\) and are discussed in more detail in section 
II.A.1.b of this final rule with comment period.
---------------------------------------------------------------------------

    \4\ CY 2023 Medicare Hospital Outpatient Prospective Payment 
System and Ambulatory Surgical Center Payment System Proposed Rule 
(CMS-1772-P); Notice of Final Rulemaking. Available at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
---------------------------------------------------------------------------

    In the CY 2023 OPPS/ASC proposed rule, for CY 2023, we were 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 3 
of the CY 2023 OPPS/ASC final rule with comment period lists the final 
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.
    We did not receive any public comments on this policy. We are 
finalizing continuing the use of multiple imaging composite APCs to pay 
for services providing more than one imaging procedure from the same 
family on the same date, without modification. Table 3 below lists the 
HCPCS codes that will be subject to the multiple imaging composite APC 
policy and their respective families and approximate composite APC 
final geometric mean costs for CY 2023.

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BILLING CODE 4120-01-C
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

[[Page 71778]]

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. Policy 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 did not propose any changes to the overall 
packaging policy previously discussed. We proposed 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 did not propose any changes to the overall packaging 
policy above, we solicited comments on potential modifications to our 
packaging policy, as described in section XIII.E.5 of the CY 2023 OPPS/
ASC proposed rule (87 FR 44717). Specifically, we solicited 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 section XIII.E of this final rule 
with comment period.
    We did not receive any public comments on our overall OPPS 
packaging policy and therefore, we are continuing the OPPS packaging 
policy for CY 2023 without modification. Specific packaging concerns 
are discussed in detail in their respective sections throughout this 
final rule with comment period.
    As discussed above and in the proposed rule, we solicited 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 section XIII.E of this final rule 
with comment period. Below is a summary of the comments received in 
response to the comment solicitation.
    Comment: Many commenters suggested CMS extend the policy described 
at Sec.  416.174 to also encompass the HOPD setting. Generally, 
commenters believed these products serve a valuable clinical purpose 
and their use should be encouraged in all settings of care. Several 
commenters provided data regarding how packaging negatively impacted 
the utilization of their products in the HOPD. Some commenters conceded 
that it is reasonable to think that the average hospital outpatient 
department would be able to absorb the extra costs; however, they 
believe that does not mean that every hospital outpatient department 
would be able to do so.
    Commenters also presented data showing potential access barriers 
affecting underserved communities. Commenters believed that the HOPD 
setting is more accessible to vulnerable and underserved populations 
relative to the ASC setting. Commenters stated that these are the 
populations that are also most negatively impacted by opioids.
    Response: We thank commenters for their comments on the comment 
solicitation to expand the non-opioid drug or biological payment policy 
to the HOPD setting. We will take these comments into consideration for 
future rulemaking. We remind interested parties that we are not 
modifying our policy at Sec.  416.174 or creating new policies in 
response to these comment solicitations. Any change to or expansion of 
the policy described at Sec.  416.174 would be done through notice and 
comment rulemaking.
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

[[Page 71779]]

with comment period (86 FR 63466 through 63483). For CY 2023, as we did 
for CY 2022, we proposed 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 Evaluation or Assessment and Management (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 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 discussed 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 
proposed to apply the same process using the estimated CY 2023 unscaled 
relative payment weights rather than scaled relative payment weights. 
We proposed 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 NFRM OPPS Claims Accounting 
(PDF)''.
    We proposed 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 proposed to adjust the calculated CY 2023 unscaled 
relative payment weights for purposes of budget neutrality. We proposed 
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 the CY 2023 OPPS/ASC proposed rule (which are 
available via the internet on the CMS website) are scaled and 
incorporate the recalibration adjustments discussed in sections II.A.1 
and II.A.2 of this CY 2023 OPPS/ASC proposed rule (87 FR 44510 through 
44525).
    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 the CY 2023 OPPS/ASC proposed rule (87 FR 
44644 through 44646)) is included in the budget neutrality calculations 
for the CY 2023 OPPS.
    We did not receive any public comments on the proposed weight 
scalar calculation. Therefore, we are finalizing our proposal to use 
the calculation process described in the proposed rule, without 
modification, for CY 2023. For CY 2023, as we did for CY 2022, we will 
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 2023, as we did for CY 2022, we will assign APC

[[Page 71780]]

5012 a relative payment weight of 1.00 and we will 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. To comply with this 
requirement concerning the APC changes, we will compare the estimated 
aggregate weight using the CY 2022 scaled relative payment weights to 
the estimated aggregate weight using the CY 2023 unscaled relative 
payment weights.
    Using updated final rule claims data, we are updating the estimated 
CY 2023 unscaled relative payment weights by multiplying them by a 
weight scalar of 1.4122 to ensure that the final CY 2023 relative 
payment weights are scaled to be budget neutral. The final CY 2023 
relative payments weights listed in Addenda A and B of this final rule 
with comment period (which are available via the internet on the CMS 
website) were scaled and incorporate the recalibration adjustments 
discussed in sections II.A.1 and II.A.2 of this final rule with comment 
period.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD 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/Long Term Care 
Hospital (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 noted in the proposed rule that under 
our regular process for the CY 2023 OPPS/ASC final rule, we would 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 different 
than the market basket used for the proposed rule, the CY 2023 OPPS/ASC 
final rule OPD rate increase factor would reflect that different market 
basket estimate.
    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 proposed that the MFP adjustment for the CY 2023 OPPS 
would be 0.4 percentage point. We also proposed that if more recent 
data become subsequently available after the publication of the CY 2023 
OPPS/ASC proposed rule (for example, a more recent estimate of the 
market basket increase and/or the MFP adjustment), we would use such 
updated data, if appropriate, to determine the CY 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.
    We note that section 1833(t)(3)(F) of the Act provides that 
application of this subparagraph may result in the OPD fee schedule 
increase factor under section 1833(t)(3)(C)(iv) of the Act being less 
than 0.0 percent for a year, and may result in OPPS payment rates being 
less than rates for the preceding year. As described in further detail 
below, we proposed for CY 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 proposed that hospitals that fail to meet the Hospital OQR 
Program reporting requirements would be subject to an additional 
reduction of 2.0 percentage points from the OPD fee schedule increase 
factor adjustment to the conversion factor that would be used to 
calculate the OPPS payment rates for their services, as required by 
section 1833(t)(17) of the Act. For further discussion of the Hospital 
OQR Program, we refer readers to section XIV of the CY 2023 OPPS/ASC 
proposed rule.
    To set the OPPS conversion factor for 2023, we proposed 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 proposed 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 proposed 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.
    We note that we did not include a budget neutrality factor for the 
proposed rule to account for the adjustment for drugs purchased under 
the 340B Program because we formally proposed to continue paying such 
drugs at ASP minus 22.5 percent, which was the same payment rate as in 
CY 2022. Given the timing of the Supreme Court's decision in American 
Hospital Association v. Becerra, 142 S. Ct. 1896 (2022), we lacked the 
necessary time to fully incorporate the adjustments to our budget 
neutrality calculations to account for that decision before issuing the 
CY 2023 OPPS/ASC proposed rule. Instead, we included alternative files 
with the proposed rule that detailed the impact of removing the 340B 
policy for CY 2023. The final budget neutrality factor for the 340B 
policy is discussed later in this section and section V.B.6. of this 
final rule with comment period.
    For the CY 2023 OPPS, we proposed to maintain the current rural 
adjustment policy, as discussed in section II.E. of the CY 2023 OPPS/
ASC proposed rule. Therefore, the proposed budget neutrality factor for 
the rural adjustment was 1.0000.
    We proposed to continue previously established policies for 
implementing the cancer hospital payment adjustment described in 
section 1833(t)(18) of the Act, as discussed in section II.F of the CY 
2023 OPPS/ASC proposed rule. We proposed 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

[[Page 71781]]

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 proposed to apply a budget neutrality adjustment factor 
of 1.0000 to the conversion factor for the cancer hospital payment 
adjustment. In accordance with section 1833(t)(18)(C) of the Act, as 
added by section 16002(b) of the 21st Century Cures Act (Pub. L. 114-
255), we applied a budget neutrality factor calculated as if the 
proposed cancer hospital adjustment target payment-to-cost ratio was 
0.90, not the 0.89 target payment-to-cost ratio we applied as stated in 
section II.F of the CY 2023 OPPS/ASC proposed rule.
    We estimated 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 estimated for the CY 
2023 OPPS/ASC 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 proposed 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 the CY 2023 OPPS/ASC proposed rule.
    For CY 2023, we also proposed that hospitals that fail to meet the 
reporting requirements of the Hospital OQR Program would continue to be 
subject to a further reduction of 2.0 percentage points to the OPD fee 
schedule increase factor. For hospitals that fail to meet the 
requirements of the Hospital OQR Program, we proposed to make all other 
adjustments discussed above, but use a reduced OPD fee schedule update 
factor of 0.7 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 proposed 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 proposed 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 resulted in 
a proposed conversion factor for CY 2023 of $86.785.
    Comment: Many commenters believed that the proposed OPD rate 
increase of 2.7 percent substantially underestimated the increases in 
costs for labor, equipment, and supplies that hospitals are facing. 
Commenters also asserted that the adjusted inpatient hospital rate 
increase of 3.8 percent that was implemented for the IPPS and 
calculated using more current economic data is also inadequate to 
address the large cost increases faced by hospitals. Many commenters 
raised concerns about sharply rising labor costs, especially the cost 
of nursing care. Commenters stated that during the COVID-19 pandemic, 
hospitals greatly increased their use of contract nurses whose wages 
and support costs were substantially higher than nurses regularly 
employed by hospitals. Commenters had serious concerns about whether 
the market basket data that measures labor costs were measuring the 
increased hospital labor costs. Commenters also were in favor of 
eliminating or substantially reducing the productivity adjustment from 
the OPD rate update. They believe that disruptions caused by the 
pandemic, inflation, and supply-chain issues have inhibited 
productivity growth, and that the proposed adjustment overestimates 
productivity efficiencies in the hospital sector of the economy.
    Commenters had several suggested actions or sources of information 
that could be used to measure and compensate for the increased costs 
hospitals face. Some commenters suggested using different measures of 
changes in costs and of inflation, including Medicare cost reports and 
the Consumer Price Index (CPI). Many commenters support a one-time 
Medicare payment rate increase in addition to the proposed OPD rate 
increase to meet current sharply rising costs and remedy what 
commenters said were inadequate increases to OPD rates in prior years.
    One commenter contended that we do not have to accept the adjusted 
inpatient hospital rate increase for the final OPD rate increase, 
pointing out that section 1833(t)(3)(C)(iv) of the Act states that ``. 
. . the `OPD fee schedule increase factor' for services furnished in a 
year is equal to the market basket percentage increase applicable under 
section 1886(b)(3)(B)(iii) . . .'' The commenter explained that section 
1886(b)(3)(B)(iii) of the Act defines the IPPS market basket percentage 
increase that section 1833(t)(3)(C)(iv) requires to be adopted by the 
OPPS. The commenter believes that section 1886(d)(5)(I)(i) of the Act, 
which states that ``(t)he Secretary shall provide by regulation for 
such other exceptions and adjustments to such payment amounts under 
this subsection as the Secretary deems appropriate . . . ,'' gives CMS 
flexibility to identify adjustments that could update the IPPS market 
basket to better reflect rapidly increasing input costs for hospitals.
    Response: Section 1833(t)(3)(C)(iv) of the Act requires that the 
OPD fee schedule increase factor equal the IPPS market basket 
percentage increase. The IPPS authority in section 1886(d)(5)(I)(i) of 
the Act gives the Secretary authority to make exceptions and 
adjustments to IPPS payment amounts under subsection (d) of section 
1886; it does not give the Secretary authority to adjust OPPS payment 
amounts. Section 1833(t)(3)(C)(iv) does give the Secretary discretion 
to substitute for the market basket percentage increase an annual 
percentage increase that is computed and applied with respect to 
covered OPD services furnished in a year in the same manner as the 
market basket

[[Page 71782]]

increase is determined and applied to inpatient hospital services for 
discharges occurring in a fiscal year, but we did not propose to 
substitute a covered OPD services-specific increase for the market 
percentage increase factor for CY 2023. Where CMS does not substitute 
this alternative, the OPD fee schedule increase factor must equal the 
market basket percentage increase. And as we noted in the FY 2023 IPPS/
LTCH PPS final rule, the final IPPS market basket growth rate of 4.1 
percent would be the highest market basket update implemented in an 
IPPS final rule since FY 1998 (87 FR 49052).
    Comment: Several commenters supported our proposed OPD rate 
increase of 2.7 percent updated based on more current market basket 
information for this final rule. Some of the commenters noted that our 
proposed increase was the minimum amount needed to reflect hospitals' 
higher costs and they encouraged us to implement an OPD rate increase 
larger than the proposed 2.7 percent OPD rate increase.
    Response: We appreciate the commenter's support for our proposed 
OPD rate increases. After reviewing the public comments that we 
received, we are finalizing these proposals with modification.
    For CY 2023, we proposed to continue previously established 
policies for implementing the cancer hospital payment adjustment 
described in section 1833(t)(18) of the Act (discussed in section II.F 
of this final rule with comment period). Based on the final rule 
updated data used in calculating the cancer hospital payment adjustment 
in section II.F. of this final rule with comment period, the target 
payment-to-cost ratio for the cancer hospital payment adjustment, which 
was 0.90 for CY 2022, is 0.90 for CY 2023. As a result, we are applying 
a budget neutrality adjustment factor of 1.0000 to the conversion 
factor for the cancer hospital payment adjustment.
    For this CY 2023 OPPS/ASC final rule with comment period, based on 
more recent data available for the FY 2023 IPPS/LTCH PPS final rule (87 
FR 49056) (that is, IHS Global Inc.'s (IGI's) second quarter 2022 
forecast of the 2018-based IPPS market basket rate-of-increase with 
historical data through the first quarter of 2022), the hospital market 
basket update for CY 2023 is 4.1 percent and the productivity 
adjustment for FY 2023 is 0.3 percent.
    We note that as a result of the modifications in final policy for 
the CY 2023 wage index we are also including a change to the wage index 
budget neutrality adjustment so that the final overall budget 
neutrality factor of 0.9998 would apply for wage index changes. This 
adjustment is comprised of a 1.0002 budget neutrality adjustment, using 
our standard calculation of comparing proposed total estimated payments 
from our simulation model using the final 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 as well as a 0.9996 budget neutrality 
adjustment for the final CY 2023 5-percent cap on wage index decreases 
(as discussed in section II.C of this final rule with comment period), 
requiring application of the 5-percent cap on CY 2022 wage indexes, to 
ensure that this wage index is implemented in a budget neutral manner.
    As a result of these finalized policies, the OPD fee schedule 
increase factor for the CY 2023 OPPS is 3.8 percent (which reflects the 
4.1 percent final estimate of the hospital inpatient market basket 
percentage increase with a -0.3 percentage point productivity 
adjustment). For CY 2023, we are using a conversion factor of $84.177 
in the calculation of the national unadjusted payment rates for those 
items and services for which payment rates are calculated using 
geometric mean costs; that is, the OPD fee schedule increase factor of 
3.8 percent for CY 2023, the required wage index budget neutrality 
adjustment of 0.9998, the adjustment to account for the change in 
policy for drugs purchased under the 340B Program of 0.9691, and the 
adjustment of 0.16 percentage point of projected OPPS spending for the 
difference in pass-through spending that results in a conversion factor 
for CY 2023 of $85.585. This information is listed in Table 4.
[GRAPHIC] [TIFF OMITTED] TR23NO22.009

C. Wage Index Changes

    Section 1833(t)(2)(D) of the Act requires the Secretary to 
determine a wage adjustment factor to adjust the portion of payment and 
coinsurance attributable to labor-related costs for relative 
differences in labor and labor-related costs across geographic regions 
in a budget neutral manner (codified at 42 CFR 419.43(a)). This portion 
of the OPPS payment rate is called the OPPS labor-related share. Budget 
neutrality is discussed in section II.B of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44528).
    The OPPS labor-related share is 60 percent of the national OPPS 
payment. This labor-related share is based on a regression analysis 
that determined that, for all hospitals, approximately 60 percent of 
the costs of services paid under the OPPS were attributable to wage 
costs. We confirmed that this labor-related share for outpatient 
services is appropriate during our regression analysis for the payment 
adjustment for rural hospitals in the CY 2006 OPPS final rule with 
comment period (70 FR 68553). In the CY 2023 OPPS/ASC proposed rule, we 
proposed to continue this policy for the CY 2023 OPPS. We referred 
readers to section II.H of the CY 2023 OPPS/ASC proposed rule (87 FR 
44535 through 44536) for a description and an example of how the wage 
index for a particular hospital is used to determine payment for the 
hospital.
    We did not receive any public comments on our proposal, and we are 
finalizing our proposal without modification.

[[Page 71783]]

    As discussed in the claims accounting narrative included with the 
supporting documentation for this final rule (which is available via 
the internet on the CMS website (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices)), for estimating APC costs, we 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. In the 
CY 2023 OPPS/ASC proposed rule, we proposed to implement this provision 
in the same manner as we have since CY 2011. Under this policy, the 
frontier State hospitals would receive a wage index of 1.00 if the 
otherwise applicable wage index (including reclassification, the rural 
floor, and rural floor budget neutrality) is less than 1.00. 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 referred 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.
    We did not receive any public comments on our proposal, and we are 
finalizing our proposal without modification.
    In addition to the changes required by the Affordable Care Act, we 
noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44529) 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 referred 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 noted 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.
    Core Based Statistical Areas (CBSAs) are made up of one or more 
constituent counties. Each CBSA and constituent county has its own 
unique identifying codes. The FY 2018 IPPS/LTCH PPS final rule (82 FR 
38130) discussed the two different lists of codes to identify counties: 
Social Security Administration (SSA) codes and Federal Information 
Processing Standard (FIPS) codes. Historically, CMS listed and used SSA 
and FIPS county codes to identify and crosswalk counties to CBSA codes 
for purposes of the IPPS and OPPS wage indexes. However, the SSA county 
codes are no longer being maintained and updated, although the FIPS 
codes continue to be maintained by the U.S. Census Bureau. The Census 
Bureau's most current statistical area information is derived from 
ongoing census data received since 2010; the most recent data are from 
2015. The Census Bureau maintains a complete list of changes to 
counties or county equivalent entities on the website at: https://www.census.gov/geo/reference/county-changes.html (which, as of May 6, 
2019, migrated to: https://www.census.gov/programs-surveys/geography.html). In the FY 2018 IPPS/LTCH PPS final rule (82 FR 38130), 
for purposes of crosswalking counties to CBSAs for the IPPS wage index, 
we finalized our proposal to discontinue the use of the SSA county 
codes and begin using only the FIPS county codes. Similarly, for the 
purposes of crosswalking counties to CBSAs for the OPPS wage index, in 
the CY 2018 OPPS/ASC final rule with comment period (82 FR 59260), we 
finalized our proposal to discontinue the use of SSA county codes and 
begin using only the FIPS county codes. For CY 2023, under the OPPS, we 
are continuing to use only the FIPS county codes for purposes of 
crosswalking counties to CBSAs.
    In the CY 2023 OPPS/ASC proposed rule, we proposed 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. We stated that, 
therefore, any policies and adjustments for the FY 2023 IPPS post-
reclassified wage index,

[[Page 71784]]

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 referred 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 referred readers to section II.B of the CY 2023 OPPS/ASC 
proposed rule (78 FR 44528). We stated that we continue to believe that 
using the IPPS post-reclassified wage index as the source of an 
adjustment factor for the OPPS is reasonable and logical, given the 
inseparable, subordinate status of the HOPD within the hospital 
overall.
    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. In the CY 2023 OPPS/ASC 
proposed rule, we proposed to continue this policy for CY 2023 and 
included 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 referred 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 
noted 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 proposed to continue our policy of 
allowing non-IPPS hospitals paid under the OPPS to qualify for the 
outmigration adjustment if they are located in a section 505 out-
migration county (section 505 of the MMA). Furthermore, we proposed 
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. We stated that 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.
    Comment: Multiple commenters supported our proposal for FY 2023 and 
subsequent years 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. Commenters stated that the 
proposal would provide payment stability for hospitals. Commenters also 
requested that the proposed 5-percent cap policy be excluded from 
budget neutrality, which would allow the cap to be applied while 
avoiding decreases to the wage index in areas with high wage indexes.
    Response: We appreciate the commenters' support of our proposal in 
the FY 2023 IPPS/LTCH PPS proposed rule to apply a 5-percent cap on any 
decrease to a hospital's wage index from its wage index in the prior 
FY. We finalized this proposal and the associated proposed budget 
neutrality adjustment in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49018 through 49021) and agree that the policy will promote payment 
stability for hospitals.
    We refer readers to the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49018 through 49021) for a detailed discussion of the wage index cap 
policy finalized for the FY 2023 IPPS wage index and for responses to 
these and other comments relating to the wage index cap policy.
    As we noted, in the FY 2023 IPPS/LTCH PPS final rule (87 FR 49018 
through 49021), for FY 2023 and subsequent years, we finalized an IPPS 
wage index policy to apply a 5-percent cap on any decrease to a 
hospital's wage index from its wage index in the prior fiscal year, 
regardless of the circumstances causing the decline. A hospital's wage 
index for FY 2023 will not be less than 95 percent of its final wage 
index for FY 2022, and for subsequent years, a hospital's wage index 
will not be less than 95 percent of its final wage index for the prior 
fiscal year. Except for newly opened hospitals, we will apply the cap 
for a fiscal year using the final wage index applicable to the hospital 
on the last day of the prior fiscal year. A newly opened hospital would 
be paid the wage index for the area in which it is geographically 
located for its first full or partial fiscal year, and it would not 
receive a cap for that first year because it would not have been 
assigned a wage index in the prior year. We stated in the FY 2023 IPPS/
LTCH PPS final rule (87 FR 49021) that we will apply the cap in a 
budget neutral manner through a national adjustment to the standardized 
amount each fiscal year. Specifically, we will apply a budget 
neutrality adjustment to ensure that estimated aggregate payments under 
our wage index cap policy for hospitals that would have a decrease in 
their wage indexes for the upcoming fiscal year of more than 5 percent 
would equal what estimated aggregate payments would have been without 
the wage index cap policy. We will apply a similar budget neutrality 
adjustment in the OPPS for each calendar year. For the OPPS, section 
1833(t)(2)(D) of the Act requires the Secretary to determine a wage 
adjustment factor to adjust the portion of payment and coinsurance 
attributable to labor related costs for relative differences in labor 
and labor-related costs across geographic regions in a budget neutral 
manner.
    Comment: One commenter was opposed to our proposal to apply a 5-
percent cap on any decrease to a hospital's wage index from its wage 
index in the prior FY. The commenter stated that our proposal goes 
against the purpose of having a wage index, which the commenter 
believes is to adjust payment rates to reflect the substantial 
geographic differences in hospital labor costs.
    Response: We appreciate the commenter's concerns. However, we 
believe applying a 5-percent cap on all wage index decreases supports 
increased predictability about OPPS payments for hospitals in the 
upcoming calendar year, enabling them to more effectively budget and 
plan their operations. That is, we proposed to cap decreases because we 
believe that a hospital would be able to more effectively budget and 
plan when there is predictability about its expected minimum level of 
OPPS payments in the upcoming calendar year. We believe that any 
potential difference in the wage index value hospitals in the same 
labor market area receive would likely be minimal and temporary.
    Comment: One commenter supported the application of the imputed 
floor wage index policy, including the policy's definition of all-urban 
states as well as its non-budget neutral application as required by 
section 9831

[[Page 71785]]

of the American Rescue Plan Act of 2021. Another commenter opposed the 
imputed floor policy, stating that it unfairly manipulates the wage 
index to benefit a handful of only-urban states and territories.
    Response: We appreciate the commenter's support of our application 
of the imputed floor wage index policy. In response to the commenter 
that opposed this policy, we underscore that the imputed floor was 
established for the IPPS wage index by section 9831 of the American 
Rescue Plan Act of 2021. As we stated in the CY 2022 OPPS/ASC final 
rule (86 FR 63502), we continue to believe that it is appropriate to 
apply the imputed floor policy in the OPPS in the same manner as under 
the IPPS, given the inseparable, subordinate status of the HOPD within 
the hospital overall.
    Comment: Multiple commenters requested that rural emergency 
hospitals (REHs) be eligible to be reclassified under Medicare 
Geographic Classification Review Board (MGCRB) reclassification 
process.
    Response: Pursuant to section 1861(kkk)(2)(B) of the Act, REHs may 
not provide acute care inpatient hospital services other than post-
hospital extended care services furnished by a distinct part unit 
licensed as a skilled nursing facility. Therefore, REHs are considered 
to be non-IPPS hospitals. Non-IPPS hospitals are not eligible for 
Medicare Geographic Classification Review Board (MGCRB) 
reclassification.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification 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. Any policies and 
adjustments for the FY 2023 IPPS post-reclassified wage index will be 
reflected in the final CY 2023 OPPS wage index beginning on January 1, 
2023, 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), 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, and a 
5-percent cap on any decrease to a hospital's wage index from its wage 
index in the prior FY. We refer readers to the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 48990 through 49021) and the FY 2023 hospital wage 
index files posted on the CMS website at https://www.cms.gov/medicare/acute-inpatient-pps/fy-2023-ipps-final-rule-home-page. With regard to 
budget neutrality for the CY 2023 OPPS wage index, we refer readers to 
section II.B. of this CY 2023 OPPS/ASC final rule.
    We also are finalizing our proposal without modification 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 also are finalizing our proposal without modification 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.
    For CMHCs, for CY 2023, we proposed to continue to calculate the 
wage index by using the post-reclassification IPPS wage index based on 
the CBSA where the CMHC is located. Furthermore, we proposed 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, we stated that 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 proposed 
that the wage index that would apply to CMHCs would not include the 
outmigration adjustment because that adjustment only applies to 
hospitals.
    We did not receive any public comments on these proposals, and we 
are finalizing these proposals without modification.
    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 final rule as Addendum L to this final rule, with 
the addition of non-IPPS hospitals that would receive the section 505 
outmigration adjustment under this final 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 final 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 (OMB NO: 0938-0050 for Form CMS-
2552-10) to determine outlier payments, payments for pass-through 
devices, and monthly interim transitional corridor payments under the 
OPPS during the PPS year. For certain hospitals, under the regulations 
at 42 CFR 419.43(d)(5)(iii), we use the statewide average default CCRs 
to determine the payments mentioned earlier if it is not possible to 
determine an accurate CCR for a hospital in certain circumstances. This 
includes hospitals that are new, hospitals that have not accepted 
assignment of an existing hospital's provider agreement, and hospitals 
that have not yet submitted a cost report. We also use the statewide 
average default CCRs to determine payments for hospitals whose CCR 
falls outside the predetermined ceiling threshold for a valid CCR or 
for hospitals in which the most recent cost report reflects an all-
inclusive rate status (Medicare Claims Processing Manual (Pub. 100-04), 
Chapter 4, Section 10.11).
    We discussed our policy for using default CCRs, including setting 
the ceiling threshold for a valid CCR, in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68594 through 68599) in the context of 
our adoption of an outlier reconciliation policy for cost reports 
beginning on or after January 1, 2009. For details on our process for 
calculating the statewide average CCRs, we refer readers to the CY 2022 
OPPS final rule Claims Accounting Narrative that is posted on our 
website. Due to concerns with cost report data as a result of the 
COVID-19 PHE, we proposed 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.D of 
the CY 2023 OPPS/ASC proposed rule (87 FR 44680 through 44682).
    We did not receive any public comments on our proposal and are

[[Page 71786]]

finalizing our proposal, without modification, 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.
    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 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. 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 proposed 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.
    Comment: Two commenters requested that the 7.1 percent payment 
adjustment be allowed for providers other than rural SCHs and EACHs. 
The commenters suggested the following providers should receive the 
adjustment: Medicare dependent hospitals, rural referral centers, urban 
sole community hospitals, and rural hospitals with fewer than 100 beds 
that cannot be classified as SCHs or CAHs because they do not meet the 
mileage requirements for SCHs and CAHs.
    Response: Our study of the difference in costs by APC between 
hospitals in rural areas and hospitals in urban areas only showed a 
significant difference in costs for rural SCHs. We did not identify 
significant cost differences between hospitals in urban areas and 
hospitals in rural areas for the types of hospitals described by the 
commenters. Therefore, we are not expanding the types of hospitals 
eligible for the 7.1 percent payment adjustment.
    Comment: Multiple commenters are in favor of our policy to apply a 
7.1 percent payment adjustment for rural SCHs, including EACHs.
    Response: We appreciate the commenters' support of our policy.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue our current 
policy of utilizing a budget neutral 7.1 percent payment adjustment for 
rural SCHs, including EACHs, for all services and procedures paid under 
the OPPS, excluding separately payable drugs and biologicals, devices 
paid under the passthrough payment policy, and items paid at charges 
reduced to costs.

F. 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 (OMB NO: 0938-0050), respectively), as applicable each year.

[[Page 71787]]

Section 1833(t)(7)(I) of the Act exempts TOPs from budget neutrality 
calculations.
    Section 3138 of the Affordable Care Act amended section 1833(t) of 
the Act by adding a new paragraph (18), which instructs the Secretary 
to conduct a study to determine if, under the OPPS, outpatient costs 
incurred by cancer hospitals described in section 1886(d)(1)(B)(v) of 
the Act with respect to APC groups exceed outpatient costs incurred by 
other hospitals furnishing services under section 1833(t) of the Act, 
as determined appropriate by the Secretary. Section 1833(t)(18)(A) of 
the Act requires the Secretary to take into consideration the cost of 
drugs and biologicals incurred by cancer hospitals and other hospitals. 
Section 1833(t)(18)(B) of the Act provides that, if the Secretary 
determines that cancer hospitals' costs are higher than those of other 
hospitals, the Secretary shall provide an appropriate adjustment under 
section 1833(t)(2)(E) of the Act to reflect these higher costs. In 
2011, after conducting the study required by section 1833(t)(18)(A) of 
the Act, we determined that outpatient costs incurred by the 11 
specified cancer hospitals were greater than the costs incurred by 
other OPPS hospitals. For a complete discussion regarding the cancer 
hospital cost study, we refer readers to the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74200 through 74201).
    Based on these findings, we finalized a policy to provide a payment 
adjustment to the 11 specified cancer hospitals that reflects their 
higher outpatient costs, as discussed in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74202 through 74206). Specifically, we 
adopted a policy to provide additional payments to the cancer hospitals 
so that each cancer hospital's final PCR for services provided in a 
given calendar year is equal to the weighted average PCR (which we 
refer to as the ``target PCR'') for other hospitals paid under the 
OPPS. The target PCR is set in advance of the calendar year and is 
calculated using the most recently submitted or settled cost report 
data that are available at the time of final rulemaking for the 
calendar year. The amount of the payment adjustment is made on an 
aggregate basis at cost report settlement. We note that the changes 
made by section 1833(t)(18) of the Act do not affect the existing 
statutory provisions that provide for TOPs for cancer hospitals. The 
TOPs are assessed, as usual, after all payments, including the cancer 
hospital payment adjustment, have been made for a cost reporting 
period. Table 5 displays the target PCR for purposes of the cancer 
hospital adjustment for CY 2012 through CY 2022.
[GRAPHIC] [TIFF OMITTED] TR23NO22.010

2. 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 proposed 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 did 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 used 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.D of the CY 2023 OPPS/ASC proposed 
rule (87 FR 44510 through 44511 and 87 FR 44680 through 44682), we 
proposed to use cost report data from the June 2020 HCRIS data set, 
which does not

[[Page 71788]]

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 proposed 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).
    Comment: One commenter supported our proposed target PCR of 0.89.
    Response: We thank the commenter for their support.
    After consideration of the public comment we received, we are 
finalizing our proposal to continue to use the CY 2021 and CY 2022 
target PCR of 0.89 for the 11 specified cancer hospitals for CY 2023 
without modification.
    Table 6 shows the 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 6 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 6 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.
[GRAPHIC] [TIFF OMITTED] TR23NO22.011

G. Hospital Outpatient Outlier Payments

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

[[Page 71789]]

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 
final rule with comment period, is approximately 1.16 percent. 
Therefore, for CY 2021, we estimate that we exceeded the outlier target 
by 0.16 percent of total aggregated OPPS payments.
    For this final rule with comment period, using CY 2021 claims data 
and CY 2022 payment rates, we estimate that the aggregate outlier 
payments for CY 2022 would be approximately 1.26 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 proposed to continue our policy of estimating 
outlier payments to be 1.0 percent of the estimated aggregate total 
payments under the OPPS. We proposed that a portion of that 1.0 
percent, an amount equal to less than 0.01 percent of outlier payments 
(or 0.0001 percent of total OPPS payments), would be allocated to CMHCs 
for PHP outlier payments. This is the amount of estimated outlier 
payments that would result from the proposed CMHC outlier threshold as 
a proportion of total estimated OPPS outlier payments. We proposed to 
continue our longstanding policy that if a CMHC's cost for partial 
hospitalization services, paid under APC 5853 (Partial Hospitalization 
for CMHCs), exceeds 3.40 times the payment rate for proposed APC 5853, 
the outlier payment would be calculated as 50 percent of the amount by 
which the cost exceeds 3.40 times the proposed APC 5853 payment rate.
    For further discussion of CMHC outlier payments, we refer readers 
to section VIII.C of this final rule with comment period.
    To ensure that the estimated CY 2023 aggregate outlier payments 
would equal 1.0 percent of estimated aggregate total payments under the 
OPPS, we proposed that the hospital outlier threshold be set so that 
outlier payments would be triggered when a hospital's cost of 
furnishing a service exceeds 1.75 times the APC payment amount and 
exceeds the APC payment amount plus $8,350.
    We calculated 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 proposed 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 proposed 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 proposed to use the April 
2022 OPSF for purposes of estimating costs for the OPPS outlier 
threshold calculation whereas in Section X.D. of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44680 through 44682) 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 stated that 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 explained that 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 the CY 2023 proposed rule, 
we applied 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

[[Page 71790]]

multiplier threshold of 1.75 times the APC payment rate, would allocate 
1.0 percent of aggregated total OPPS payments to outlier payments. For 
CMHCs, we proposed that, if a CMHC's cost for partial hospitalization 
services, paid under APC 5853, exceeds 3.40 times the payment rate for 
APC 5853, the outlier payment would be calculated as 50 percent of the 
amount by which the cost exceeds 3.40 times the APC 5853 payment rate.
    Section 1833(t)(17)(A) of the Act, which applies to hospitals, as 
defined under section 1886(d)(1)(B) of the Act, requires that hospitals 
that fail to report data required for the quality measures selected by 
the Secretary, in the form and manner required by the Secretary under 
section 1833(t)(17)(B) of the Act, incur a 2.0 percentage point 
reduction to their OPD fee schedule increase factor; that is, the 
annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that 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 Outpatient Quality Reporting 
(OQR) Program requirements. For hospitals that fail to meet the 
Hospital OQR Program requirements, we proposed 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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44726 through 44740).
    Comment: Many commenters expressed concern about the proposed CY 
2023 fixed-dollar threshold of $8,350 and its large increase from the 
final CY 2022 fixed-dollar threshold of $6,175. Many commenters were 
concerned that fewer cases would qualify for OPPS outlier payments, 
potentially underfunding hospitals, and missing our 1.0 percent target. 
Commenters also noted that, in the FY 2023 Inpatient Prospective 
Payment System (IPPS)/Long Term Care Hospital (LTCH) Prospective 
Payment System final rule, in response to stakeholder comments, we 
finalized a lower fixed loss amount for IPPS outliers after blending 
fixed loss amounts that were modeled with COVID inpatient admissions 
and without COVID inpatient admissions. Commenters recommended that we 
revisit our methodology for determining the CY 2023 OPPS fixed-dollar 
threshold to be sure that we meet our 1.0 percent target.
    Response: We appreciate the commenters' concerns regarding the 
large increase in CY 2023 OPPS fixed-dollar threshold from CY 2022. We 
have reviewed and analyzed our methodology as well as the most up to 
date CCRs available in the July 2022 OPSF for determining estimated 
outlier payments. We estimate that the increase in the fixed-dollar 
threshold from CY 2022 to CY 2023 is largely attributable to an 
increase in reported charges on hospital outpatient claims. Holding 
CCRs constant, an increase in reported charges otherwise increases the 
charges reduced to cost on hospital outpatient claims. An additional 
contributing factor is an increase in hospital CCRs in the July 2022 
OPSF when compared to the July 2021 OPSF. The increase in hospital CCRs 
further increases the charges reduced to cost on hospital outpatient 
claims. We believe the combination of these two factors has increased 
hospital outpatient costs, thereby allowing more cases to qualify for 
OPPS outlier payments. To counterbalance these increases, as described 
in our final calculation below, our modeling estimates a large increase 
in the OPPS fixed-dollar threshold is required to maintain a 1.0 
percent OPPS outlier spending target. As discussed further in section 
X.D of this final rule with comment period, we believe it is reasonable 
to assume that there would 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 did not exclude such COVID-
19 cases for determining the CY 2023 fixed-dollar threshold.
    As described in our final calculation below, we do not believe 
modification to the underlying methodology is warranted at this time. 
Therefore, we are finalizing our proposal to determine a fixed-dollar 
threshold, combined with the proposed multiplier threshold of 1.75 
times the APC payment rate, that would allocate 1.0 percent of 
aggregated total OPPS payments to outlier payments.
3. Final Outlier Calculation
    Historically, we have used updated data for the outlier fixed-
dollar threshold calculation for the final rule. However, as discussed 
in the CY 2022 OPPS/ASC final rule with comment period (86 FR 63510), 
we finalized our proposal to not use the most recent CCRs in the OPSF 
as they may be significantly impacted by the PHE. As we discussed in 
the CY 2023 OPPS/ASC proposed rule (87 FR 44533 through 44534), we 
believe the updated OPSF data for modeling the outlier fixed dollar 
threshold in the CY 2023 OPPS/ASC proposed rule provides a more 
accurate data source for estimating CY 2023 aggregate outlier payments. 
Similarly, we believe using updated OPSF data for this final rule with 
comment period provides the best source of CCRs for OPPS outlier 
calculations. For CY 2023, we are applying the overall ancillary CCRs 
from the July 2022 OPSF file after adjustment (using the CCR inflation 
adjustment factor 0.974495 to approximate CY 2023 CCRs) to charges on 
CY 2021 claims that were adjusted using a charge inflation factor of 
1.13218 to approximate CY 2023 charges. These are the same CCR 
adjustment and charge inflation factors that were used to model IPPS 
outlier payments and to determine the final IPPS fixed-loss threshold 
for the FY 2023 IPPS/LTCH PPS final rule (87 FR 49427). We simulated 
aggregated CY 2023 hospital outlier payments using these costs for 
several different fixed-dollar thresholds, holding the 1.75 multiple-
threshold constant and assuming that outlier payments will continue to 
be made at 50 percent of the amount by which the cost of furnishing the 
service would exceed 1.75 times the APC payment amount, until the total 
outlier payment equaled 1.0 percent of aggregated estimated total CY 
2023 OPPS payments. We estimated that a fixed-dollar threshold of 
$8,625 combined with the multiple-threshold of 1.75 times the APC 
payment rate, will allocate 1.0 percent of aggregated total OPPS 
payments to outlier payments. For example, in CY 2023, if 1.75 times 
the APC amount is $5,000 and the applicable costs on the claim totaled 
$10,000 (which also exceeds our CY 2023 fixed-dollar threshold of 
$8,625), the hospital would receive an outlier payment of $2,500 
(($10,000-$5,000) * 0.50). However, if the applicable cost on the claim 
totaled $8,000, which does not exceed our CY 2023 fixed-dollar 
threshold, no outlier payment would be made.
    For CMHCs, if a CMHC's cost for partial hospitalization services, 
paid under APC 5853, exceeds 3.40 times the payment rate, the outlier 
payment will be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times APC 5853.

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

    The national unadjusted payment rate is the is payment rate for 
most APC's before accounting for the wage index

[[Page 71791]]

adjustment or any applicable adjustments. 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 OPPS/ASC final rule with comment period, the 
payment rate for most services and procedures for which payment is made 
under the OPPS is the product of the conversion factor calculated in 
accordance with section II.B of this final rule with comment period and 
the relative payment weight described in section II.A of this final 
rule with comment period. The national unadjusted payment rate for most 
APCs contained in Addendum A to this final rule with comment period 
(which is available via the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Addendum-A-and-Addendum-B-Updates) and for most HCPCS codes to which 
separate payment under the OPPS has been assigned in Addendum B to this 
final rule with comment period (which is available on the CMS website 
link above) is calculated by multiplying the final 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 final rule with comment period.
    We demonstrated 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 final rule with comment period, 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 final 
rule with comment period (which are available via the internet on the 
CMS website) should follow the formulas presented in the following 
steps. For purposes of the payment calculations below, we refer to the 
national unadjusted payment rate for hospitals that meet the 
requirements of the Hospital OQR Program as the ``full'' national 
unadjusted payment rate. We refer to the national unadjusted payment 
rate for hospitals that fail to meet the requirements of the Hospital 
OQR Program as the ``reduced'' national unadjusted payment rate. The 
reduced national unadjusted payment rate is calculated by multiplying 
the reporting ratio of 0.9807 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 are continuing 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 final rule 
with comment period.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Public Law 
108-173. Addendum L to this final rule with comment period (which is 
available via the internet on the CMS website) contains the qualifying 
counties and the associated wage index increase developed for the final 
FY 2023 IPPS wage index, which are listed in Table 3 associated with 
the FY 2023 IPPS final rule and available via the internet on the CMS 
website at: https://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 Final Rule Home Page'' and 
select ``FY 2023 Final Rule Tables.'') This step is to be followed only 
if the hospital is not reclassified or redesignated under section 
1886(d)(8) or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the

[[Page 71792]]

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 = labor-portion of the 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).

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

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

    Step 7. The adjusted payment rate is the sum the wage adjusted 
labor-related portion of the national unadjusted payment rate and the 
nonlabor-related portion of the national unadjusted payment rate.

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

    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 $648.97. The reduced 
national adjusted payment rate for APC 5071 for a hospital that fails 
to meet the Hospital OQR Program requirements is $636.44. This reduced 
rate is calculated by multiplying the reporting ratio of 0.9807 by the 
full unadjusted payment rate for APC 5071.
    Step 1. The labor-related portion of the full national unadjusted 
payment is approximately $389.38 (.60 * $648.97). The labor-related 
portion of the reduced national adjusted payment is approximately 
$381.86 (.60 * $636.44).
    Step 2 & 3. The FY 2023 wage index for a provider located in CBSA 
35614 in New York, which includes the adoption of IPPS 2023 wage index 
policies, is 1.3329.
    Step 4. The wage adjusted labor-related portion of the full 
national unadjusted payment is approximately $519.00 ($389.38 * 
1.3329). The wage adjusted labor-related portion of the reduced 
national adjusted payment is approximately $508.98 ($381.86 * 1.3329).
    Step 5. The nonlabor-related portion of the full national 
unadjusted payment is approximately $259.59 (.40 * $648.97). The 
nonlabor-related portion of the reduced national adjusted payment is 
approximately $254.58 (.40 * $636.44).
    Step 6. For this example of a provider located in Brooklyn, New 
York, the rural adjustment for rural SCHs does not apply.
    Step 7. The sum of the labor-related and nonlabor-related portions 
of the full national unadjusted payment is approximately $778.59 
($519.00 + $259.59). The sum of the portions of the reduced national 
adjusted payment is approximately $763.56 ($508.98 + $254.58).
[GRAPHIC] [TIFF OMITTED] TR23NO22.012

    We did not receive any public comments on our proposal and 
therefore, we are finalizing it as proposed.

I. Beneficiary Copayments

1. Background
    Section 1833(t)(3)(B) of the Act requires the Secretary to set 
rules for determining the unadjusted copayment amounts to be paid by 
beneficiaries for covered OPD services. Section 1833(t)(8)(C)(ii) of 
the Act specifies that the Secretary must reduce the national 
unadjusted copayment amount for a covered OPD service (or group of such 
services) furnished in a year in a manner so that the effective 
copayment rate (determined on a national unadjusted basis) for that 
service in the year does not exceed a specified percentage. As 
specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 
2006, and in CYs thereafter, shall not exceed 40 percent of the APC 
payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure (including items such as drugs and biologicals) 
performed in a year to the amount of the inpatient hospital deductible 
for that year.
    Section 4104 of the Affordable Care Act eliminated the Medicare 
Part B coinsurance for preventive services furnished on and after 
January 1, 2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. 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).

[[Page 71793]]

    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).
    On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) (Pub. 
L. 117-169) was signed into law. Section 11101 of the Inflation 
Reduction Act requires a Part B inflation rebate for a Part B rebatable 
drug if the ASP of the drug rises at a rate that is faster than the 
rate of inflation. Section 11101(b) of the IRA amended sections 1833(i) 
and 1833(t)(8) by adding a new paragraph (9) and subparagraph (F), 
respectively, that specifies coinsurance under the ASC and OPPS payment 
systems. Section 1833(i)(9) requires that under the ASC payment system 
that beneficiary coinsurance for a Part B rebatable drug that is not 
packaged to be calculated using the inflation-adjusted amount when that 
amount is less than the otherwise applicable payment amount for the 
drug furnished on or after April 1, 2023. Section 1833(t)(8)(F) 
requires that under the OPPS payment system that beneficiary copayment 
for a Part B rebatable drug (except for a drug that has no copayment 
applied under subparagraph (E) of such section or packaged into the 
payment for a procedure) is to be calculated using the inflation-
adjusted amount when that amount is less than ASP plus 6 percent 
beginning April 1, 2023. Sections 1833(i)(9) and 1833(t)(8)(F) 
reference sections 1847A(i)(5) for the computation of the beneficiary 
coinsurance and 1833(a)(1)(EE) for the computation of the payment to 
the ASC or provider and state that the computations would be done in 
the same manner as described in such provisions. The computation of the 
coinsurance is described in section 1847A(i), specifically, in 
computing the amount of any coinsurance applicable under Part B to an 
individual to whom such Part B rebatable drug is furnished, the 
computation of such coinsurance shall be equal to 20 percent of the 
inflation-adjusted payment amount determined under section 
1847A(i)(3)(C) for such part B rebatable drug. The calculation of the 
payment to the provider or ASC is described in section 1833(a)(1)(EE), 
and the provider or ASC would be paid the difference between the 
beneficiary coinsurance or copayment of the inflation-adjusted amount 
and ASP plus 6 percent. We wish to make readers aware of this statutory 
change that begins April 1, 2023. We wish to make readers of this OPPS/
ASC final rule aware of this statutory change. There are no regulatory 
changes reflecting this provision of the Act in this final rule. 
Additionally, we refer readers to the full text of the IRA.\5\ 
Additional details on the implementation of section 11101 of the IRA 
are forthcoming and will be communicated through a vehicle other than 
the OPPS/ASC regulation.
---------------------------------------------------------------------------

    \5\ H.R. 5376 available online at: https://www.congress.gov/bill/117th-congress/house-bill/5376/text.
---------------------------------------------------------------------------

2. OPPS Copayment Policy
    For CY 2023, we proposed to determine copayment amounts for new and 
revised APCs using the same methodology that we implemented beginning 
in CY 2004. (We refer readers to the November 7, 2003 OPPS final rule 
with comment period (68 FR 63458).) In addition, we proposed to use the 
same standard rounding principles that we have historically used in 
instances where the application of our standard copayment methodology 
would result in a copayment amount that is less than 20 percent and 
cannot be rounded, under standard rounding principles, to 20 percent. 
(We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66687) in which we discuss our rationale for applying 
these rounding principles.) The final 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 the CY 2023 OPPS/ASC 
final rule (which are available via the internet on the CMS website).
    As discussed in section XIV.E of the CY 2023 proposed rule (87 FR 
44536) and this final rule with comment period, 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 beneficiary copayments closer to 20 percent of OPPS APC payments 
(68 FR 63458 through 63459).
    In the CY 2004 OPPS final rule with comment period (68 FR 63459), 
we adopted a new methodology to calculate unadjusted copayment amounts 
in situations including reorganizing APCs, and we finalized the 
following rules to determine copayment amounts in CY 2004 and 
subsequent years.
     When an APC group consists solely of HCPCS codes that were 
not paid under the OPPS the prior year because they were packaged or 
excluded or are new codes, the unadjusted copayment amount would be 20 
percent of the APC payment rate.
     If a new APC that did not exist during the prior year is 
created and consists of HCPCS codes previously assigned to other APCs, 
the copayment amount is calculated as the product of the APC payment 
rate and the lowest coinsurance percentage of the codes comprising the 
new APC.
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
equal to or greater than the prior year's rate, the copayment amount 
remains constant (unless the resulting coinsurance percentage is less 
than 20 percent).
     If no codes are added to or removed from an APC and, after 
recalibration of its relative payment weight, the new payment rate is 
less than the prior year's rate, the copayment amount is calculated as 
the product of the new payment rate and the prior year's coinsurance 
percentage.
     If HCPCS codes are added to or deleted from an APC and, 
after recalibrating its relative payment weight, holding its unadjusted 
copayment amount constant results in a

[[Page 71794]]

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).
    We did not receive any public comments on our proposal and 
therefore, we are finalizing our proposal to determine copayment 
amounts for new and revised APCs using the same methodology that we 
implemented beginning in CY 2004. In addition, we are finalizing the 
use of 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 finalized 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 the CY 
2023 OPPS/ASC final rule (which are available via the internet on the 
CMS website).
3. Calculation of an Adjusted Copayment Amount for an APC Group
    Individuals interested in calculating the national copayment 
liability for a Medicare beneficiary for a given service provided by a 
hospital that met or failed to meet its Hospital OQR Program 
requirements should follow the formulas presented in the following 
steps.
    Step 1. Calculate the beneficiary payment percentage for the APC by 
dividing the APC's national unadjusted copayment by its payment rate. 
For example, using APC 5071, $129.79 is approximately 20 percent of the 
full national unadjusted payment rate of $648.97. For APCs with only a 
minimum unadjusted copayment in Addenda A and B to this final rule with 
comment period (which are available via the internet on the CMS 
website), the beneficiary payment percentage is 20 percent.
    The formula below is a mathematical representation of Step 1 and 
calculates the national copayment as a percentage of national payment 
for a given service.

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

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

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

    Step 4. For a hospital that failed to meet its Hospital OQR Program 
requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.9807.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2023 are shown in Addenda A and B to this 
final rule with comment period (which are available via the CMS 
website). We note that the national unadjusted payment rates and 
copayment rates shown in Addenda A and B to this final rule with 
comment period reflect the CY 2023 OPD increase factor discussed in 
section II.B of this final rule with comment period.
    In addition, as noted earlier, section 1833(t)(8)(C)(i) of the Act 
limits the amount of beneficiary copayment that may be collected for a 
procedure performed in a year to the amount of the inpatient hospital 
deductible for that year.

III. OPPS Ambulatory Payment Classification (APC) Group Policies

A. OPPS Treatment of New and Revised HCPCS Codes

    Payments for OPPS procedures, services, and items are generally 
based on medical billing codes, specifically, 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 PLA CPT codes. Level II, which is established and 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 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 (MAAA);

[[Page 71795]]

     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 final rule with comment 
period, specifically, the ``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 status 
indicators and their definitions in Addendum D1 to this final rule with 
comment period.
1. HCPCS Codes That Were Effective for April 2022 for Which We 
Solicited Public Comments in the CY 2023 OPPS/ASC 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. We solicited public comments on the proposed APC and status 
indicator assignments for the codes listed in Table 5 (New HCPCS Codes 
Effective April 1, 2022) of the CY 2023 OPPS/ASC proposed rule (87 FR 
44539-44541), which are also displayed in Table 7.
    We received some public comments on the proposed OPPS APC and SI 
assignments for the new Level II HCPCS codes implemented in April 2022. 
The comments and our responses are addressed in their respective 
sections of this final rule with comment period, which include, but are 
not limited to: sections III.C. (New Technology APCs), III.E. (OPPS 
APC-Specific Policies), and IV. (OPPS Payment for Devices). For those 
April 2022 codes for which we received no comments, we are finalizing 
the proposed APC and status indicator assignments. We note that several 
of the temporary HCPCS C-codes have been replaced with permanent HCPCS 
J-codes, effective January 1, 2023.\6\ Their replacement codes are 
listed in Table 7. In addition, in prior years we included the final 
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 7. Therefore, readers are 
advised to refer to the OPPS Addendum B for the final OPPS status 
indicators, APC assignments, and payment rates for all codes reportable 
under the hospital OPPS. These new codes that were effective April 1, 
2022, were assigned to comment indicator ``NP'' in Addendum B to the CY 
2023 OPPS/ASC proposed rule to indicate that the codes are assigned to 
an interim APC assignment and comments would be accepted on their 
interim APC assignments. The complete list of status indicators and 
definitions used under the OPPS can be found in Addendum D1 to this 
final rule with comment period, while the complete list of comment 
indicators and definitions can be found in Addendum D2 to this final 
rule with comment period. 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.
---------------------------------------------------------------------------

    \6\ HCPCS C-codes are temporary billing codes that describe 
items and services for hospital outpatient use, including pass-
through devices, pass-through drugs and biologicals, brachytherapy 
sources, new technology procedures, and certain other services. 
HCPCS J-codes are permanent billing codes that describe drugs.
---------------------------------------------------------------------------

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2. HCPCS Codes That Were Effective July 1, 2021, for Which We Solicited 
Public Comments in the CY 2023 OPPS/ASC 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. We solicited 
public comments on the proposed APC and status indicator assignments 
for the codes listed in Table 6 (New HCPCS Codes Effective July 1, 
2022) of the CY 2023 OPPS/ASC proposed rule, which are also listed in 
Table 8 below.
    We received some public comments on the proposed OPPS APC and SI 
assignments for the new Level II HCPCS codes implemented in July 1, 
2022. The comments and our responses are addressed in their respective 
sections of this final rule with comment period, which include, but are 
not limited to: sections III.C (New Technology APCs), III.E (OPPS APC-
Specific Policies), and IV (OPPS Payment for Devices). For those July 
1, 2022, codes for which we received no comments, we are finalizing the 
proposed APC and status indicator assignments. We note that several of 
the HCPCS C-codes have been replaced with HCPCS J-codes and one with a 
HCPCS Q-code. Their replacement codes are listed in Table 8 below. We 
note that in prior years we included the final 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 8 below. Therefore, readers are advised to refer to the 
OPPS Addendum B for the final OPPS status indicators, APC assignments, 
and payment rates for all codes reportable under the hospital OPPS. 
These new codes that were effective July 1, 2022, were assigned to 
comment indicator ``NP'' in Addendum B to the CY 2023 OPPS/ASC proposed 
rule to indicate that the codes are assigned to an interim APC 
assignment and comments would be accepted on their interim APC 
assignments. The complete list of status indicators and definitions 
used under the OPPS can be found in Addendum D1 to this final rule with 
comment period, while the

[[Page 71799]]

complete list of comment indicators and definitions can be found in 
Addendum D2 to this final rule with comment period. 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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[[Page 71802]]

3. October 2022 HCPCS Codes for Which We Are Soliciting Public Comments 
in This CY 2023 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we are soliciting comments on 
the new CPT and Level II HCPCS codes that became effective October 1, 
2022, in this 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 proposed 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 invite 
public comments in this final rule with comment period on the status 
indicator and APC assignments for these codes, which would 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 Are Soliciting Public Comments 
in This CY 2023 OPPS/ASC Final Rule With Comment Period
    Consistent with past practice, we are soliciting comments on the 
new Level II HCPCS codes that will be effective January 1, 2023, in 
this 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 the CY 2023 OPPS/ASC 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 proposed 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 are finalizing our process of 
continuing our established policy of assigning comment indicator ``NI'' 
in Addendum B to this 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 are inviting public comments in this final rule with 
comment period on the status indicator and APC assignments for these 
codes, which would be finalized in the CY 2024 OPPS/ASC final rule with 
comment period.
b. CPT Codes for Which We Solicited Public Comments in the CY 2023 
OPPS/ASC Proposed Rule
    In the CY 2015 OPPS/ASC final rule with comment period (79 FR 66841 
through 66844), we finalized a revised process of assigning APC and 
status indicators for new and revised Category I and III CPT codes that 
would be effective January 1. Specifically, for the new/revised CPT 
codes that we receive in a timely manner from the AMA's CPT Editorial 
Panel, we finalized our proposal to include the codes that would be 
effective January 1 in the OPPS/ASC proposed rules, along with proposed 
APC and status indicator assignments for them, and to finalize the APC 
and status indicator assignments in the OPPS/ASC final rules beginning 
with the CY 2016 OPPS update. For those new/revised CPT codes that were 
received too late for inclusion in the OPPS/ASC proposed rule, we 
finalized our proposal to establish and use HCPCS G-codes that mirror 
the predecessor CPT codes and retain the current APC and status 
indicator assignments for a year until we can propose APC and status 
indicator assignments in the following year's rulemaking cycle. We note 
that even if we find that we need to create HCPCS G-codes in place of 
certain CPT codes for the PFS proposed rule, we do not anticipate that 
these HCPCS G-codes will always be necessary for OPPS purposes. We will 
make every effort to include proposed APC and status indicator 
assignments for all new and revised CPT codes that the AMA makes 
publicly available in time for us to include them in the 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 reminded readers that the CPT code descriptors that 
appear in Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item described by the CPT 
code. Therefore, we included the 5-digit placeholder codes and their 
long descriptors for the new and revised CY 2023 CPT codes in Addendum 
O to the proposed rule (which is available via the internet on the CMS 
website) so that the public could adequately comment on the proposed 
APCs and SI assignments. The 5-digit placeholder codes were included in 
Addendum O, specifically under the column labeled ``CY 2023 OPPS/ASC 
Proposed Rule 5-Digit AMA Placeholder Code,'' to the proposed rule. We 
noted that the final CPT code numbers would be included in this CY 2023 
OPPS/ASC final rule with comment period. We also noted that not every 
code listed in Addendum O is subject to public comment. For the new and 
revised Category I and III CPT codes, we requested public comments on 
only those codes that are assigned comment indicator ``NP''.
    In summary, in the CY 2023 OPPS/ASC proposed rule, we solicited 
public comments on the proposed CY 2023 SI and APC assignments for the 
new and revised Category I and III CPT codes that will be effective 
January 1, 2023. The CPT codes were listed in Addendum B to the 
proposed rule with short descriptors only. We listed them again in 
Addendum O to the proposed rule with long descriptors. We also proposed 
to finalize the SI and APC assignments for these codes (with their 
final CPT code numbers) in the CY 2023 OPPS/ASC final rule with comment 
period. The proposed SI and APC assignments for these codes were 
included in

[[Page 71803]]

Addendum B to the proposed rule (which is available via the internet on 
the CMS website).
    We received comments on several of the new CPT codes that were 
assigned to comment indicator ``NP'' in Addendum B to the CY 2023 OPPS/
ASC proposed rule. We have responded to those public comments in 
sections III.C (New Technology APCs), III.E (OPPS APC-Specific 
Policies), and IV (OPPS Payment for Devices) of this final rule with 
comment period.
    The final SIs, APC assignments, and payment rates for the new CPT 
codes that are effective January 1, 2023, can be found in Addendum B to 
this final rule with comment period. In addition, the SI meanings can 
be found in Addendum D1 (OPPS Payment Status Indicators for CY 2023) to 
this final rule with comment period. Both Addendum B and D1 are 
available via the internet on the CMS website.
    Finally, Table 9 below, which is a reprint of Table 7 from the CY 
2023 OPPS/ASC proposed rule (87 FR 44548), shows the comment timeframe 
for new and revised HCPCS codes. Table 9 provides information on our 
current process for updating codes through our OPPS quarterly update 
CRs, seeking public comments, and finalizing the treatment of these 
codes under the OPPS.
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B. OPPS Changes--Variations Within APCs

1. Background
    Section 1833(t)(2)(A) of the Act requires the Secretary to develop 
a classification system for covered hospital outpatient department 
services. Section 1833(t)(2)(B) of the Act provides that the Secretary 
may establish groups of covered OPD services within this classification 
system, so that services classified within each group are comparable 
clinically and with respect to the use of resources. In accordance with 
these provisions, we developed a grouping classification system, 
referred to as Ambulatory Payment Classifications (APCs), as set forth 
in regulations at 42 CFR 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

[[Page 71804]]

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 rule.
    Under the OPPS, we generally pay for covered hospital outpatient 
department services on a rate-per-service basis, where the service may 
be reported with one or more HCPCS codes. Payment varies according to 
the APC group to which the independent service or combination of 
services is assigned. In the CY 2023 OPPS/ASC proposed rule (87 FR 
44548), for CY 2023, we proposed that each APC relative payment weight 
represents the hospital cost of the services included in that APC, 
relative to the hospital cost of the services included in APC 5012 
(Clinic Visits and Related Services). The APC relative payment weights 
are scaled to APC 5012 because it is the hospital clinic visit APC and 
clinic visits are among the most frequently furnished services in the 
hospital outpatient setting.
2. Application of the 2 Times Rule
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
not less often than annually, and revise the APC groups, the relative 
payment weights, and the wage and other adjustments described in 
paragraph (2) to take into account changes in medical practice, changes 
in technology, the addition of new services, new cost data, and other 
relevant information and factors. Section 1833(t)(9)(A) of the Act also 
requires the Secretary to consult with an expert outside advisory panel 
composed of an appropriate selection of representatives of providers to 
review (and advise the Secretary concerning) the clinical integrity of 
the APC groups and the relative payment weights. We note that the 
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 this 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). For an example of significant procedure codes, refer to the 
discussion on cardiac computed tomography angiography (CCTA), 
specifically as it relates to CPT codes 75572 and 75574, which are 
discussed in section III.E. (Cardiac Computed Tomography Angiography 
(CCTA) (APC 5571)) of this final rule with comment period. This 
longstanding definition of when a procedure code is significant for 
purposes of the 2 times rule was selected because we believe that a 
subset of 1,000 or fewer claims is negligible within the set of 
approximately 100 million single procedure or single session claims we 
use for establishing costs. Similarly, a procedure code for which there 
are fewer than 99 single claims and that comprises less than 2 percent 
of the single major claims within an APC will have a negligible impact 
on the APC cost (75 FR 71832). In the CY 2023 OPPS/ASC proposed rule, 
for CY 2023, we proposed to make exceptions to this limit on the 
variation of costs within each APC group in unusual cases, such as for 
certain low-volume items and services.
    For the CY 2023 OPPS update, we identified the APCs with violations 
of the 2 times rule and we proposed changes to the procedure codes 
assigned to these APCs (with the exception of those APCs for which we 
proposed a 2 times rule exception) in Addendum B to the CY 2023 OPPS/
ASC proposed rule. We note that Addendum B does not appear in the 
printed version of the Federal Register as part of this final rule with 
comment period. 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 did not propose a 2 times rule 
exception, we proposed to reassign these procedure codes to new APCs 
that contain services that are similar with regard to both their 
clinical and resource characteristics. Refer to section III.E (APC-
Specific Policies) of this final rule with comment period for examples 
of various APC reassignments. In many cases, the proposed procedure 
code reassignments and associated APC reconfigurations for CY 2023 
included in the CY 2023 OPPS/ASC 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 the CY 2023 OPPS/ASC 
proposed rule identifies with a comment indicator ``CH'' those 
procedure codes for which we proposed a change to the APC assignment or 
status indicator, or both, that were initially assigned in the July 1, 
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. APC Exceptions to the 2 Times Rule
    Taking into account the APC changes that we proposed 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 the CY 2023 OPPS/ASC 
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 proposed 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 the CY 2023 OPPS/ASC proposed rule. We note that, on an 
annual basis, based on our analysis of the latest claims data, we 
identify

[[Page 71805]]

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 10 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 the CY 2023 OPPS/ASC proposed rule listed the 23 APCs 
for which we proposed 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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
    Based on the updated final rule CY 2021 claims data used for this 
CY 2023 final rule with comment period, we found a total of 25 APCs 
with violations of the 2 times rule. Of these 25 total APCs, 22 were 
identified in the proposed rule and three are newly identified APCs. 
The three newly identified APCs with violations of the 2 times rule are 
the following:

 APC 5341 (Abdominal/Peritoneal/Biliary and Related Procedures)
 APC 5361 (Level 1 Laparoscopy and Related Services)
 APC 5723 (Level 3 Diagnostic Tests and Related Services)

    Although we did not receive any comments on Table 8 of the CY 2023 
OPPS/ASC proposed rule (87 FR 44550), we did receive comments on APC 
assignments for specific HCPCS codes. The comments, and our responses, 
can be found in section III.D. (OPPS APC-Specific Policies) of this 
final rule with comment period.
    After considering the public comments we received on APC 
assignments and our analysis of the CY 2021 costs from hospital claims 
and cost report data available for this CY 2023 OPPS/ASC final rule 
with comment period, we are finalizing our proposals with some 
modifications. Specifically, we are finalizing our proposal to except 
22 of the 23 proposed APCs from the 2 times rule for CY 2021 and also 
excepting three additional APCs (APCs 5341, 5361, and 5723) for a total 
of 25 APCs.
    In summary, Table 10 below lists the 25 APCs that we are excepting 
from the 2 times rule for CY 2023 based on the criteria described 
earlier and a review of updated claims data for dates of service 
between January 1, 2021, and December 31, 2021, that were processed on 
or before June 30, 2022, and updated CCRs, if available. We note that, 
for cases in which a recommendation by the HOP Panel appears to result 
in or allow a violation of the 2 times rule, we generally accept the 
HOP Panel's recommendation because those recommendations are based on 
explicit consideration of resource use, clinical homogeneity, site of 
service, and the quality of the claims data used to determine the APC 
payment rates. The geometric mean costs for hospital outpatient 
services for these and all other APCs that were used in the development 
of this final rule with comment period can be found on the CMS website 
at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
BILLING CODE 4120-01-P

[[Page 71806]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.020

BILLING CODE 4120-01-C

C. New Technology APCs

1. Background
    In the CY 2002 OPPS final rule (66 FR 59903), we finalized changes 
to the time period in which a service can be eligible for payment under 
a New Technology APC. Beginning in CY 2002, we retain services within 
New Technology APC groups until we gather sufficient claims data to 
enable us to assign the service to an appropriate clinical APC. This 
policy allows us to move a service from a New Technology APC in less 
than 2 years if sufficient data are available. It also allows us to 
retain a service in a New Technology APC for more than 2 years if 
sufficient data upon which to base a decision for reassignment have not 
been collected.
    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

[[Page 71807]]

MEARISTM 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 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 included the proposed payment rates for New Technology APCs 1491 to 
1599 and 1901 through 1908 in Addendum A to the CY 2023 OPPS/ASC 
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.
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

[[Page 71808]]

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 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. In the 
CY 2023 OPPS/ASC proposed rule, we proposed 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.
    We did not receive any public comments on our proposed methodology 
for assigning low volume new technology procedures to New Technology 
APCs and, therefore, we are finalizing our proposal without 
modification.
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 proposed 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).
    We did not receive any public comments on our proposal 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, and we are finalizing our proposal without modification. 
The procedures assigned to the New Technology APCs are discussed below.
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/ASC final rule with comment period (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 proposed 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

[[Page 71809]]

Argus[supreg] II device or the device implantation procedure. These 
changes are described in Table 11.
    We did not receive any public comments on our proposal and, 
therefore, we are finalizing our proposal without modification.
[GRAPHIC] [TIFF OMITTED] TR23NO22.021

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 CPT 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 ($3001-$3500)). This code may be used to describe 
the administration of HCPCS 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 ($3001-$3500)) 
for HCPCS code C9770 (86 FR 63531 through 63532).
    HCPCS 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.\7\ 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.''
---------------------------------------------------------------------------

    \7\ Luxturna. FDA Package Insert. Available: https://www.fda.gov/media/109906/download.
---------------------------------------------------------------------------

    Interested parties, including the manufacturer of Luxturna[supreg], 
recommended CPT code 67036 (Vitrectomy, mechanical, pars plana 
approach) for the administration of the gene therapy.\8\ However, the 
manufacturer previously contended the administration was not accurately 
described by any existing codes as CPT code 67036 (Vitrectomy, 
mechanical, pars plana approach) does not account for the 
administration itself.
---------------------------------------------------------------------------

    \8\ 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 CPT 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 CPT 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 CPT code 67036. The placeholder 
code C97X1 was replaced by HCPCS code C9770. For CY 2021, we finalized 
our proposal to create HCPCS code 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 
($3001-$3500)) using the geometric mean cost of CPT code 67036. For CY 
2022, we continued to assign HCPCS code C9770 to APC 1561 (New 
Technology--Level 24 ($3001-$3500)) using the geometric mean cost of 
CPT 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 CPT code 67036. Given the low number of claims for this 
procedure, we proposed to

[[Page 71810]]

designate HCPCS code 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 HCPCS code 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 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 ($3501-$4000)). Therefore, we proposed to assign 
HCPCS code C9770 to APC 1562 for CY 2023.
    Please refer to Table 12 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 the CY 
2023 OPPS/ASC proposed rule (87 FR 44502).
[GRAPHIC] [TIFF OMITTED] TR23NO22.022

    Comment: We received a comment in support of the proposal to 
reassign HCPCS code C9770 to APC 1562 based on the most recent claims 
data.
    Response: We thank this commenter for their support. After 
consideration of the public comment we received, we are finalizing our 
policy as proposed. Specifically, we are finalizing our proposal to 
base the payment rate of HCPCS code C9770 on claims data for that code 
rather than on the geometric mean cost of CPT code 67036. We are also 
finalizing our proposal to designate HCPCS code 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 HCPCS code C9770 to a New Technology APC.
    Based on updated claims data available for this final rule with 
comment period, we have 13 single frequency claims available for 
ratesetting. Based on this updated claims data, we found the geometric 
mean cost for the service to be approximately $3,358, the arithmetic 
mean cost to be approximately $3,489, and the median cost to be 
approximately $3,770. 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 ($3501-$4000)). Therefore, we are 
assigning HCPCS code C9770 to APC 1562 for CY 2023.
    Please refer to Table 13 below for the final OPPS New Technology 
APC and status indicator assignments for HCPCS code C9770 for CY 2023. 
The final CY 2023 payment rates can be found in Addendum B to this 
final rule with comment period.
[GRAPHIC] [TIFF OMITTED] TR23NO22.023


[[Page 71811]]


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 ($3501-$4000)). Therefore, we assigned 
HCPCS code C9751 to APC 1562 for CY 2021.
    In CY 2022, we again used 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 proposed 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 ($3501-$4000)). Therefore, we proposed to continue 
to assign HCPCS code C9751 to APC 1562 (New Technology--Level 25 
($3501-$4000)), with a proposed payment rate of $3,750.50 for CY 2023. 
Details regarding HCPCS code C9751 are included in Table 14 below.
    Comment: One commenter supported our assignment of HCPCS code C9751 
to New Technology APC 1562.
    Response: We appreciate the support of the commenter for our 
policy. After consideration of the public comment we received, we are 
implementing our proposal without modification.

[[Page 71812]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.024

d. Cardiac Positron Emission Tomography (PET)/Computed Tomography (CT) 
Studies (APCs 1520, 1521, 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 ($2001-$2500)) with a payment rate 
of $2,250.50. CPT codes 78432 and 78433 were assigned to APC 1523 (New 
Technology--Level 23 ($2501-$3000)) with a payment rate of $2,750.50. 
We 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 ($2001-$2500)) 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 ($2501-$3000)) with a payment rate of 
$2,750.50.
    For CY 2023, we proposed 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 ($2001-
$2500)), where the procedure is currently assigned. We proposed, for CY 
2023, that CPT code 78431 be reassigned to APC 1523 (New Technology--
Level 23 ($2501-$3000)) with a payment rate of $2,750.50. Please refer 
to Table 15 below for the proposed New Technology APC and status 
indicator assignments for CPT code 78431.
    There were only five 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 proposed 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 4 
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 proposed, for CY 2023, to assign CPT code 78432 
to APC 1520 (New Technology--Level 20 ($1801-$1900)) with a payment 
rate of $1,850.50. Please refer to Table 15 for the proposed 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 ($2501-$3000)), where the procedure is 
currently assigned. We proposed, for CY 2023, that CPT code 78433 be 
reassigned to APC 1521 (New Technology--Level 21 ($1901-$2000)) with a 
payment rate of $1,950.50.
    Comment: Multiple commenters supported the assignment of CPT code 
78431 to APC 1523. However, these commenters also requested that CPT 
codes 78432 and 78433 also be assigned to APC 1523. The commenters felt 
that the number of claims available to estimate the cost of CPT codes 
78432 and 78433 was not enough to accurately calculate the costs of 
those services, and that the current cost estimates for the services 
underestimate the services' actual costs.
    Response: We appreciate the commenters' support of our assignment 
of CPT code 78431 to APC 1523. CPT code 78431 has a geometric mean of 
approximately $2,532 and will continue to be assigned to APC 1523 (New 
Technology--Level 23 ($2501-$3000)).
    Regarding the assignments for CPT codes 78432 and 78433, since CY 
2019 we have had in place a policy to estimate the cost of services 
assigned to

[[Page 71813]]

new technology APCs with a low volume of claims. The threshold for the 
low volume policy to apply to a service is 100 separately payable 
claims. We have identified 1,034 separately payable claims for CPT code 
78433, which is well above the threshold for the low volume 
methodology. Therefore, we use the geometric mean to calculate the cost 
of the service described by CPT code 78433, and that cost is 
approximately $1,998. That cost falls in the cost range for APC 1521 of 
$1,901 to $2,000, and therefore, we believe APC 1521 is the appropriate 
APC assignment for this service.
    Regarding CPT code 78432, there continues to be only five 
separately payable claims for the service. Therefore, we use the new 
technology low volume policy to determine the appropriate APC 
assignment for this service. We 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 4 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 $1,900, 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 of 
approximately $1,900, and therefore, the appropriate APC assignment for 
the service is APC 1520 (New Technology--Level 20 ($1801-$1900)).
    After consideration of the public comments we received, we are 
implementing our proposal without modification to assign CPT code 78431 
to APC 1523, CPT code 78432 to APC 1520, and CPT code 78433 to APC 
1521.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR23NO22.025


[[Page 71814]]


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 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 with comment period. 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 
proposed to continue to assign HCPCS code C9758 to New Technology APC 
1590 with a payment rate of $17,500.50 for CY 2023.
    Comment: One commenter supported our assignment of HCPCS code C9758 
to APC 1590.
    Response: We appreciate the commenter's support for our proposal. 
After consideration of the public comment we received, we are 
finalizing our proposal without modification. The final New Technology 
APC and status indicator assignments for HCPCS code C9758 are shown in 
Table 16.

[[Page 71815]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.026

f. Corvia Medical Interatrial Shunt Procedure (APC 1592)
    Corvia Medical has conducted 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.\9\ 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 
payment for the implantation of the Corvia Medical interatrial shunt.
---------------------------------------------------------------------------

    \9\ 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 
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 proposed 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 proposed to continue to assign HCPCS code C9760 to New 
Technology APC 1592.
    Comment: One commenter, the manufacturer, supported our proposal to 
assign HCPCS code C9760 to APC 1592.
    Response: We appreciate the commenter's support for our proposal. 
After consideration of the public comment we received, we are 
finalizing our proposal without modification. The final New Technology 
APC and status

[[Page 71816]]

indicator assignments for HCPCS code C9760 are shown in Table 17.
[GRAPHIC] [TIFF OMITTED] TR23NO22.027

g. Supervised Visits for Esketamine Self-Administration (APCs 1512 and 
1516)
    On March 5, 2019, FDA approved SpravatoTM (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 esketamine nasal spray 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 esketamine nasal spray 
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 
2 hours after receiving their esketamine nasal spray 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 nasal spray self-administration 
(84 FR 63102 through 63105).
    To facilitate prompt beneficiary access to the new, potentially 
life-saving treatment for TRD using esketamine, we created two new 
HCPCS G codes, G2082 and G2083, effective January 1, 2020. HCPCS code 
G2082 is for an outpatient visit for the evaluation and management of 
an established patient that requires the supervision of a physician or 
other qualified health care professional and provision of up to 56 mg 
of esketamine 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 proposed to use CY 2021 claims data to determine 
the payment rates for HCPCS codes G2082 and G2083. Therefore, for CY 
2023, we

[[Page 71817]]

proposed to assign these two HCPCS codes to New Technology APCs based 
on the codes' geometric mean costs. Specifically, we proposed to assign 
HCPCS code G2082 to New Technology APC 1511 (New Technology--Level 11 
($901-$1000)) based on its geometric mean cost of $995.47. We also 
proposed to assign HCPCS code G2083 to New Technology APC 1516 (New 
Technology--Level 16 ($1401-$1500)) 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 18. The proposed 
CY 2023 payment rates for these HCPCS codes can be found in Addendum B 
to the CY 2023 OPPS/ASC proposed rule (87 FR 44502).
[GRAPHIC] [TIFF OMITTED] TR23NO22.028

    Comment: Commenters were generally in favor of this proposal. 
Commenters welcomed efforts to make this treatment more available to 
beneficiaries and were supportive of CMS's proposed change to reassign 
HCPCS codes G2082 and G2083 to New Technology APCs 1511 and 1516, 
respectively.
    Response: We thank commenters for their support. After 
consideration of the public comments we received, for CY 2023, we are 
finalizing our proposal to assign HCPCS codes G2082 and G2083 to New 
Technology APCs based on the codes' geometric mean costs. However, we 
note the geometric mean costs have changed since the proposal rule. 
Based on updated claims data available for this final rule, the 
approximate geometric mean cost for HCPCS code G2082 is $1,056. Based 
on this geometric mean cost, we are assigning HCPCS code G2082 to APC 
1512 (New Technology--Level 12 ($1001-$1100)) for CY 2023. We proposed 
to assign HCPCS code G2082 to APC 1511 (New Technology--Level 11 ($901-
$1000)) based on the claims data available for the proposed rule, which 
reflected an approximate geometric mean of $995. Due to updated claims 
data for this final rule with comment period, we are assigning HCPCS 
code G2082 to APC 1512 (New Technology--Level 12 ($1001-$1100) CY 2023.
    Based on updated claims data available for this final rule with 
comment period, the approximate geometric mean cost for HCPCS code 
G2083 is $1,496. Based on this geometric mean cost, we are finalizing 
our proposal to assign HCPCS code G2083 to APC 1516 (New Technology--
Level 16 ($1401--$1500)) for CY 2023.
    Details about the New Technology APC and status indicator 
assignments for HCPCS codes G2082 and G2083 are shown in Table 19 
below. The final CY 2023 payment rates for these HCPCS codes can be 
found in Addendum B to this CY 2023 OPPS/ASC final rule with comment 
period.

[[Page 71818]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.029

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 proposed to continue assigning CPT code 
0693T to New Technology APC 1505.
    We did not receive any public comments on our proposal and are 
finalizing our proposal without modification. The final New Technology 
APC and status indicator assignments for CPT code 0693T are found in 
Table 20.

[[Page 71819]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.030

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.\10\ 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.
---------------------------------------------------------------------------

    \10\ 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 proposed to continue assigning CPT code 
0686T to New Technology APC 1575.
    We did not receive any public comments on our proposal and are 
finalizing our proposal without modification. The final New Technology 
APC and status indicator assignments for CPT code 0686T are found in 
Table 21.
[GRAPHIC] [TIFF OMITTED] TR23NO22.031

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

[[Page 71820]]

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 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 
proposed to continue assigning CPT code 0648T to New Technology APC 
1511.
    We did not receive any public comments on our proposal and are 
finalizing continuing to assign CPT code 0648T to New Technology APC 
1511. The final New Technology APC and status indicator assignments for 
CPT code 0648T are found in Table 22.
    In the CY 2022 OPPS/ASC final rule with comment period (86 FR 
63542), we finalized that the service represented by CPT code 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); single organ (list 
separately in addition to code for primary procedure) is a packaged 
service per the OPPS packaging policy for add-on code procedures. In 
this final rule with comment period, however, we are adopting a policy 
that Software as a Service (SaaS) add-on codes are not among the 
``certain services described by add-on codes'' for which we package 
payment with the related procedures or services under the regulation at 
42 CFR 419.2(b)(18). Instead, SaaS CPT add-on codes will be assigned to 
identical APCs and have the same status indicator assignments as their 
standalone codes. Therefore, we are assigning CPT code 0649T to the 
same APC as CPT code 0648T, specifically, New Technology APC 1511. We 
direct readers to section X.G. (OPPS Payment for Software as a Service) 
of this final rule with comment period for a more detailed discussion 
of our final payment policy for SaaS.
    The final New Technology APC and status indicator assignments for 
CPT codes 0648T and 0649T are found in Table 22. In addition, the final 
CY 2023 OPPS payment rates for CPT codes 0648T and 0649T can be found 
in Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the SI meanings for all codes reported under the OPPS. Both Addenda B 
and D1 are available via the internet on the CMS website, specifically 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
[GRAPHIC] [TIFF OMITTED] TR23NO22.032


[[Page 71821]]


k. Minimally Invasive Glaucoma Surgery (MIGS) (APC 1563)
    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 anterior 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 1563 (New Technology--Level 26 ($4001-
$4500)). We stated that we believed that 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 the CY 2023 OPPS/ASC 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 
proposed to continue assigning CPT codes 66989 and 66991 to New 
Technology APC 1563 for CY 2023. The proposed New Technology APC and 
status indicator assignments for CPT codes 66989 and 66991 are found in 
Table 23. Regrettably, we inadvertently misidentified the APC 
assignment for CPT codes 66989 and 66991 as APC 1526, rather than APC 
1563, in the preamble to the proposed rule.

[[Page 71822]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.033

    We did not receive any public comments on our proposal and are 
finalizing our proposal without modification. The final New Technology 
APC and status indicator assignments

[[Page 71823]]

for CPT codes 66989 and 66991 are found in Table 24.
[GRAPHIC] [TIFF OMITTED] TR23NO22.034


[[Page 71824]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.035

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 proposed to continue assigning CPT code 
0662T to New Technology APC 1520.
    We did not receive any public comments on our proposal and are 
finalizing our proposal without modification. The final New Technology 
APC and status indicator assignments for CPT code 0662T are found in 
Table 25.
[GRAPHIC] [TIFF OMITTED] TR23NO22.036

m. Optellum 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 payable under 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 proposed 
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 26.

[[Page 71825]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.037

    Comment: A commenter, the manufacturer of Optellum LCP, requested 
that we revise the description to the produced risk score to ``The 
physician uses the risk score to quantify the risk of lung cancer and 
to help determine what the next management step should be for the 
patient (e.g., CT surveillance versus invasive procedure).'' The 
commenter also supported the continual assignment of CPT code 0721T to 
New Technology APC 1508 and stated a lower payment would disincentivize 
its use.
    Response: We appreciate the commenter's input on the Optellum LCP 
produced risk score and agree with the suggested revision.
    After consideration of the public comment, we are finalizing our 
proposal without modification. Specifically, we are assigning CPT code 
0721T to APC 1508 for CY 2023.
    We note that the Optellum LCP service is also represented by CPT 
code 0722T, which is an add-on code. In this final rule with comment 
period, we are adopting a policy that SaaS add-on codes are not among 
the ``certain services described by add-on codes'' for which we package 
payment with the related procedures or services under the regulation at 
42 CFR 419.2(b)(18). Instead, SaaS CPT add-on codes will be assigned to 
identical APCs and have the same status indicator assignments as their 
standalone codes. Therefore, we are assigning CPT code 0722T to New 
Technology APC 1508. We direct readers to section X.G. (OPPS Payment 
for Software as a Service) of this final rule with comment period for a 
more detailed.
    The final New Technology APC and status indicator assignments for 
CPT codes 0721T and 0722T are found in Table 27.
    The final CY 2023 OPPS payment rates for CPT codes 0721T and 0722T 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final rule with 
comment period for the SI meanings for all codes reported under the 
OPPS. Both Addenda B and D1 are available via the internet on the CMS 
website, specifically at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.

[[Page 71826]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.038

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 New 
Technology APC 1511 (New Technology--Level 11($900-$1,000)).
    This service became payable under 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 proposed 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 28.

[[Page 71827]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.039

    Comment: A commenter, the manufacturer of QMRCP, supported the 
continual assignment of CPT 0723T to New Technology APC 1511.
    Response: We thank the commenter for their input on the assignment 
of CPT 0723T to New Technology APC 1511.
    After consideration of the public comment, we are finalizing our 
proposal without modification. Specifically, we are assigning CPT code 
0723T to APC 1511 for CY 2023.
    We note that the QMRCP service is also represented by CPT code 
0724T, which is an add-on code. In this final rule with comment period, 
we are adopting a policy that SaaS add-on codes are not among the 
``certain services described by add-on codes'' for which we package 
payment with the related procedures or services under the regulation at 
42 CFR 419.2(b)(18). Instead, SaaS CPT add-on codes will be assigned to 
identical APCs and have the same status indicator assignments as their 
standalone codes. Therefore, we are assigning CPT code 0724T to New 
Technology APC 1511. We direct readers to section X.G. (OPPS Payment 
for Software as a Service) of this final rule with comment period for a 
more detailed discussion.
    The final New Technology APC and status indicator assignments for 
CPT codes 0723T and 0724T are found in Table 29.
    The final CY 2023 OPPS payment rates for CPT codes 0723T and 0724T 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final rule with 
comment period for the SI meanings for all codes reported under the 
OPPS. Both Addenda B and D1 are available via the internet on the CMS 
website, specifically at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.

[[Page 71828]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.040

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 \11\ and the CardiAMP Cell Therapy Heart 
Failure Trial.\12\ 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. We direct readers to 
section X.F. (Coding and Payment for Category B Investigational Device 
Exemption Clinical Devices and Studies) of this final rule with comment 
period for a more detailed discussion of coding and payment for 
Category B IDE devices and studies.
---------------------------------------------------------------------------

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

    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. (Pass-Through Payment for 
Devices) of this final rule with comment period for a more detailed 
discussion of the transitional device pass-through applications.
    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 proposed 
to assign HCPCS code C9782 to New Technology APC 1590 with a status 
indication of ``T''.
    We did not receive any public comments on our proposal and are 
finalizing our proposal to assign HCPCS code C9782 to New Technology 
APC 1590 with a status indication of ``T''. The final New Technology 
APC and

[[Page 71829]]

status indicator assignments for HCPCS code C9782 are found in Table 
30.
[GRAPHIC] [TIFF OMITTED] TR23NO22.041

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 the CY 2023 
OPPS/ASC 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 four 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 the CY 2023 OPPS/ASC proposed 
rule, we proposed 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 CY 2023 
OPPS/ASC proposed rule.
    Table 31 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 APC's designation as a low volume APC; and 
the statistical methodology we proposed to use to determine the APC's 
cost for ratesetting purposes for CY 2023. For APC 5494 (Level 4 
Intraocular Procedures) and APC 5495 (Level 5 Intraocular Procedures), 
we are finalizing an APC cost metric based on

[[Page 71830]]

the median cost, the greatest of the cost metrics, using up to four 
years of claims data. For all other Low Volume APCs, we are finalizing 
an APC cost metric based on the arithmetic mean cost, the greatest of 
the cost metrics, using up to four years of claims data. 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.
    Comment: Some commenters supported our proposed use of the Low 
Volume APC methodology for the clinical and brachytherapy APCs with 
fewer than 100 claims available for ratesetting. One commenter was 
concerned about the proposed payment rate for APC 5495 (Level 5 
Intraocular Procedures), which would represent a 32 percent reduction 
from the CY 2022 payment rate for CPT code 0308T (Insertion of ocular 
telescope prosthesis including removal of crystalline lens or 
intraocular lens prosthesis). The commenter recommended that we use the 
equitable adjustment authority to apply a cap of 10 percent on the 
reduction in relative weights for Low Volume APCs in CY 2023. The 
commenter noted that a similar 10 percent cap on the decline in the 
relative weight for a Medicare Severity-adjusted Diagnosis-Related 
Group (MS-DRG) is applied under the IPPS.
    Response: We appreciate commenters' support for our proposal to 
utilize our Low Volume APC methodology for APCs with fewer than 100 
claims available for ratesetting. While we acknowledge the CY 2023 
payment rate for APC 5495 represents a sizeable reduction from the CY 
2022 payment rate, and that CPT code 0308T was the only procedure 
assigned to this APC in CY 2022, we believe the CY 2023 payment rate 
represents the historical tendency for this procedure as shown in Table 
31 below.
    Nonetheless, as discussed in section III.C of this final rule with 
comment period, we are accepting commenters' recommendation and 
assigning CPT code 0616T (Insertion of iris prosthesis, including 
suture fixation and repair or removal of iris, when performed; without 
removal of crystalline lens or intraocular lens, without insertion of 
intraocular lens) to APC 5495. The reassignment of CPT code 0616T to 
APC 5495 increases the CY 2023 APC cost metric from the proposed 
$16,711.80 to $18,602.90 and increases the OPPS payment rate from 
$16,564.54 to $18,089.98.
    After re-evaluating the APC 5495 cost metric following the 
reassignment of 0616T to APC 5495, given the increase in the OPPS 
payment rate from the proposed to the final rule and the historical 
payment rates for this APC, we are not accepting the commenter's 
recommendation to limit a Low Volume APC's decline in relative weights 
to no more than 10 percent. However, given the low claims volume for 
these APCs, as well as the high cost of many of these APCs, we will 
continue to monitor the costs and payment rates for procedures assigned 
to Low Volume APCs to determine if additional changes or refinements to 
our current policy are needed.
[GRAPHIC] [TIFF OMITTED] TR23NO22.042

    After consideration of the public comments we received, based on 
claims data for this final rule with comment period, for CY 2023, we 
are finalizing our proposal to continue to use up to 4 years of claims 
data to calculate Low Volume APCs' costs based on the greater of the 
median cost, arithmetic mean cost, or geometric mean cost. We note that 
APC 5881 (Ancillary Outpatient Services When Patient Dies) had at least 
100 claims for ratesetting based on claims data available for this 
final rule with comment period, whereas for the CY 2023 OPPS/ASC 
proposed rule only 71 claims were available. Despite not meeting our 
threshold for fewer than 100 claims, we are finalizing our proposal to 
designate APC 5881 as a Low Volume APC since stakeholders would not 
have had an opportunity to comment on the significant change in payment 
for this APC if we were to not apply our Low Volume APC methodology. 
Therefore, we are finalizing the APCs described in Table 32 as Low 
Volume APCs for CY 2023 and determining their payment rates using the 
Low Volume APC methodology. These four brachytherapy APCs and four 
clinical APCs are the same eight APCs we proposed to designate as Low 
Volume APCs in the CY 2023 OPPS/ASC proposed rule (87 FR 44568 through 
44569).

[[Page 71831]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.043

E. APC-Specific Policies

1. Abdominal Hernia Repair (APCs 5341 and 5361)
    For CY 2023, the CPT Editorial Panel deleted 18 abdominal hernia 
repair codes that were established in 1984 and 2009 and replaced them 
with 15 new codes. The 18 abdominal hernia repair codes will be deleted 
December 31, 2022, and replaced with new CPT codes effective January 1, 
2023.
    As listed in Table 33, the predecessor/deleted codes were assigned 
to one of the following APCs for CY 2022:

 APC 5341: Abdominal/Peritoneal/Biliary and Related Procedures
 APC 5361: Level 1 Laparoscopy and Related Services
 APC 5362: Level 2 Laparoscopy and Related Services


[[Page 71832]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.044

    Based on our evaluation of the new codes and because the 
predecessor codes are not a one-to-one match to the new CPT codes, we 
proposed to assign the new codes to APC 5341, as shown in Table 34 for 
CY 2023. Specifically,

[[Page 71833]]

we proposed to assign six of the 15 new codes to inpatient-only status, 
one to packaged/bundled status because the code describes an add-on 
procedure, and eight codes to APC 5341 with a proposed payment rate of 
$3,235.68. We indicated in the CY 2023 OPPS/ASC proposed rule that the 
final 5-digit CPT codes were not available when we published the 
proposed rule, so we included the placeholder codes in OPPS Addendum B. 
We also note that the predecessor and new codes were included in OPPS 
Addendum B with only the short descriptors. Because the short 
descriptors do not adequately describe the complete procedure, we 
included the 5-digit placeholder codes and long descriptors in Addendum 
O so that the public could adequately comment on the proposed APC and 
SI assignments. The 5-digit placeholder codes were included in Addendum 
O, specifically under the column labeled ``CY 2023 OPPS/ASC Proposed 
Rule 5-Digit AMA/CMS Placeholder Code.'' We further stated in the 
proposed rule that the final CPT code numbers would be included in this 
CY 2023 OPPS/ASC final rule with comment period.

[[Page 71834]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.045


[[Page 71835]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.046


[[Page 71836]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.047

    At the August 22, 2022, HOP Panel Meeting, a presenter provided 
information to the Panel on the APC assignments for the predecessor 
codes as well as the proposed APC assignments for the new codes. Based 
on the information presented at the meeting, the Panel made no 
recommendation on the APC assignments for the new codes.
    Comment: Some commenters disagreed with the proposed assignment to 
APC 5341 for the eight separately payable codes, and provided their 
recommendations on the APC

[[Page 71837]]

reassignments. They stated that the proposed APC assignment for the new 
codes would be insufficient to cover the cost of furnishing the 
procedures, and would impact beneficiary access. The commenters stated 
that the predecessor codes are not a one-to-match to the new codes, and 
that some of the predecessor codes crosswalk to multiple new codes. 
They also noted that the geometric mean cost for the predecessor codes 
exceed the proposed payment rate of $3,235, and assignment of the new 
codes to APC 5341 would result in significant underpayment for the 
procedures. Based on the geometric mean cost for the predecessor codes, 
several of the commenters recommended reassignment of the new codes to 
the Level 1 and Level 2 laparoscopy APCs, specifically, APCs 5361 and 
5362, and noted that many of the new codes are laparoscopic in nature. 
A few commenters identified the specific codes that should be 
crosswalked to APCs 5361 and 5362. Other commenters recommended 
establishing a new APC by grouping the new codes based on the length of 
the hernia or by length of the hernia, recurrence, and whether the 
hernia is incarcerated or strangulated. Some commenters suggested 
reassigning the eight codes to the Level 1 Laparoscopy APC, 
specifically, APC 5361, while another recommended assignment to New 
Technology APC 1566 (New Technology--Level 29 ($5501-$6000); proposed 
payment of $5,750.50). Some commenters favored establishing a new APC 
for the eight separately payable codes and suggested establishing the 
cost for the new APC based on the cost data from the predecessor codes. 
A few commenters specifically suggested establishing a new Level 2 
Abdominal/Peritoneal/Biliary and Related Procedures APC.
    Response: We appreciate the feedback and the many suggestions on 
the APC reassignments. Of the 15 new codes, 12 codes describe the 
repair of anterior abdominal hernias, specifically, epigastric, 
incisional, ventral, umbilical, and spigelian hernias that are 
performed via an open, laparoscopic, and robotic approach. Based on our 
review of the new codes, we noted that the eight new codes proposed to 
APC 5341 have one consistent feature in their code descriptions, 
specifically, that they are described as either ``reducible'' or 
``incarcerated/strangulated.'' This characteristic of ``reducible'' and 
``incarcerated/strangulated'' is also present in the predecessor/
deleted codes. The descriptions of ``reducible'' and ``incarcerated/
strangulated'' appear in both the predecessor and new codes, and 
because we have claims data for the predecessor codes, we believe that 
establishing the APCs based on this distinction provides us with more 
appropriate payments for the new codes.
    As stated above, the predecessor codes are not a one-to-match to 
the new codes, however, based on the various recommendations on the APC 
reassignment, further deliberation on the issue, and input from our 
medical advisors, we believe that assigning the new codes to APCs 5341 
and 5361 is the best option at this time. Consequently, we reconfigured 
APCs 5341 and 5361 by mapping the predecessor and new codes described 
as ``reducible'' to APC 5341 and the more complex and extensive 
``incarcerated/strangulated'' procedures to APC 5361. We note that we 
mapped predecessor CPT code 49590, which is not described as either 
``reducible'' or ``incarcerated/strangulated'' to APC 5341 since its 
geometric mean cost of about $4,134 is more consistent with the 
geometric mean cost of about $3,642 for APC 5341, rather than the 
geometric mean cost of approximately $5,360 for APC 5361. Based on our 
reconfiguration, the geometric mean cost for APC 5341 is approximately 
$3,642 while the geometric mean cost for APC 5361 is about $5,360. We 
believe the APC reconfigurations for APCs 5341 and 5361 will result in 
more appropriate payments for the new abdominal hernia repair codes and 
improves the clinical and resource homogeneity within the groupings.
    As stated above, we received many suggestions on the APC 
reassignments for the new codes. We evaluated the recommendations, 
modeled the suggestions, and analyzed the cost results of each 
suggestion. Based on our analysis, we believe that assignment of the 
new codes to APCs 5341 and 5361 is the best option at this time. We 
note that we review our claims data on an annual basis to establish the 
OPPS payment rates. We will reevaluate the APC assignments for the 
eight separately payable codes once we have claims data. The list below 
provides the various recommendations on the APC reassignments and our 
concerns associated with each suggestion.
    Suggestion #1: Assign the new CPT codes to APCs based on procedure 
complexity considering the length of the hernia, recurrence, and 
whether the hernia is incarcerated/strangulated.
    CMS Concern: The predecessor codes, on which we have claims data, 
do not describe the length of the hernia. This description only applies 
to the new codes.
    Suggestion #2: Assign the new CPT codes to APCs based on length of 
hernia.
    CMS Concern: The predecessor codes, on which we have claims data, 
do not describe the length of the hernia. This description only applies 
to the new codes.
    Suggestion #3: Reassign the new codes to APC 5361 (Level 1 
Laparoscopy and Related Services).
    CMS Concern: As stated previously, the predecessor codes are not a 
one-to-one match to the new CPT codes, and many of the predecessor 
codes on which we have claims data are not laparoscopy-related. 
However, based on input from our medical advisors, we are reassigning 
some of the new codes to APC 5361 from APC 5341, specifically, CPT 
codes 49592, 49594, and 49614. We note that several of the new codes 
describe various approaches of the procedure, specifically, they are 
described as open, laparoscopic, and robotic. Because the new codes are 
not an exact replacement for the predecessor codes, we believe that we 
should acquire claims data for the rest of new codes before assigning 
all eight codes to APC 5361. Once we have claims data, we will 
determine whether the codes should be reassigned to more appropriate 
APCs, or whether the establishment of new APCs is necessary.
    Suggestion #4: Reassign the new codes to APC 5361 (Level 1 
Laparoscopy and Related Services) and APC 5362 (Level 2 Laparoscopy and 
Related Services).
    CMS Concern: As stated above, the predecessor codes are not a one-
to-one match to the new CPT codes, and many of predecessor codes on 
which we have claims data are not laparoscopy-related. The new codes 
describe various approaches of the procedure, specifically, they are 
described as open, laparoscopic, and robotic. Because the new codes are 
not an exact replacement for the predecessor codes, we do not believe 
that assigning the new codes to these two APCs would be appropriate. We 
want to pay accurately for the new codes; however, we believe that we 
should acquire claims data for the new codes before assigning them to 
APCs 5361 and 5362. Once we have claims data, we will determine whether 
the codes should be reassigned to more appropriate APCs, or whether the 
establishment of new APCs is necessary.
    Suggestion #5: Establish a new APC.
    CMS Concern: While we have claims data for several codes, the 
predecessor codes are not a one-to-one match to the new CPT codes. To 
ensure that we pay accurately for these new codes, we

[[Page 71838]]

believe that we should acquire claims data before establishing a new 
APC.
    Suggestion #6: Reassign the new codes to New Technology APC 1566.
    CMS Concern: We do not believe this would be appropriate given that 
several of the predecessor codes have been in existence since 1984, and 
we have many years' of claims data for them.
    With respect to the concern of beneficiary access, we believe that 
assignment of the new codes to APCs 5341 and 5361 appropriately 
provides access to the abdominal hernia repair procedures. In light of 
the various suggestions on the APC reassignment and because there is 
not a one-to-one match between the predecessor codes and the new codes, 
we believe that assignment to APCs 5341 and 5361 is the best approach 
at this time. We reiterate that we view our claims data on an annual 
basis to establish the OPPS payment rates. Once we have data, we will 
reevaluate and, if necessary, reassign the codes to appropriate APCs 
based on the latest claims data.
    After carefully considering all of the comments that we received, 
we are finalizing our proposal with modification. Specifically, we are 
finalizing our proposal to assign CPT codes 49591, 49593, 49595, 49613, 
and 49615 to APC 5341, and assigning CPT codes 49592, 49594, and 49614 
to APC 5361. In addition, we are finalizing our proposal for CPT codes 
49596, 49616-49618, and 49621-49622, and assigning them to status 
indicator ``C'' to indicate that the codes are designated as 
``inpatient-only'' status for CY 2023. Further, we are finalizing our 
proposal for CPT code 49623 and assigning the code to status indicator 
``N'' for CY 2023 to indicate that the code is packaged since it is an 
add-on service to the primary code, and its payment is included in the 
primary service code. Refer to Table 35 for the final APC and SI 
assignments for the abdominal hernia repair codes for CY 2023. The 
final payment rates for the codes can be found in Addendum B to this 
final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TR23NO22.048


[[Page 71839]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.049


[[Page 71840]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.050

BILLING CODE 4120-01-C
2. Administration of Lacrimal Ophthalmic Insert Into Lacrimal 
Canaliculus (APC 5503)
    Dextenza, which is described by HCPCS code J1096 (Dexamethasone, 
lacrimal ophthalmic insert, 0.1 mg), is a drug indicated for ``the 
treatment of ocular inflammation and pain following ophthalmic 
surgery'' and for ``the treatment of ocular itching associated with 
allergic conjunctivitis.'' \13\ Interested parties previously asserted 
that this drug is administered and described by CPT code 0356T 
(Insertion of drug-eluting implant (including punctal dilation and 
implant removal when performed) into lacrimal canaliculus, each). 
Interested parties also previously stated that Dextenza is inserted in 
a natural opening in the eyelid (called the punctum) and that the drug 
is designed to deliver a tapered dose of dexamethasone to the ocular 
surface for up to 30 days. CPT code 0356T was deleted December 31, 
2021, and replaced with CPT code 68841 (Insertion of drug-eluting 
implant, including punctal dilation when performed, into lacrimal 
canaliculus, each), effective January 1, 2022.
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    \13\ Dextenza. FDA Package Insert. https://www.accessdata.fda.gov/drugsatfda_docs/label/2021/208742s007lbl.pdf.
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    For CY 2022, HCPCS code J1096 is assigned to APC 9308 (Dexametha 
opth insert 0.1 mg) with a status indicator of ``G'' (Pass-Through 
Drugs and Biologicals) to indicate that the drug has pass-through 
status under the OPPS. Refer to section V.A.5. of this final rule with 
comment period for further information regarding the pass-through 
status of HCPCS code J1096.
    In addition, as discussed in the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63544 through 63546), because of the clinical 
similarity between the predecessor CPT code 0356T and its replacement 
code, specifically, CPT code 68841, we proposed to assign CPT code 
68841 to the same APC, status indicator, and payment indicator 
assignments as CPT code 0356T. In the CY 2022 OPPS/ASC final rule, 
after taking into consideration commenter feedback, we finalized our 
proposal to assign CPT code 68841 to APC 5694 (Level 4 Drug 
Administration) with OPPS status indicator ``Q1'' for CY 2022. We note 
that CPT code 68841 was assigned to status indicator ``Q1'', indicating 
conditionally packaged payment under the OPPS. Packaged payment applies 
if a code assigned to status indicator ``Q1'' is billed on the same 
claim as a HCPCS code assigned status indicator ``S'', ``T'', or ``V''. 
Based on the OPPS status indicator assignment, CPT code 68841 was 
assigned to payment indicator ``N1'' in the ASC setting, meaning a 
packaged service/item.
    For CY 2023, as indicated in Table 39 (Drugs and Biologicals for 
Which Pass-through Payment Status or Separate Payment to Mimic Pass-
through Payment Will End on December 31, 2022) of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44628 and 44629), separate payment to mimic pass-
through status for Dextenza is expiring December 31, 2022. In addition, 
as discussed in the CY 2023 OPPS/ASC

[[Page 71841]]

proposed rule (87 FR 44720), we proposed that HCPCS code J1096 is a 
drug that functions as a surgical supply that meets the criteria 
described at Sec.  416.174, and we proposed to make separate payment 
for Dextenza as a non-opioid pain management drug that functions as a 
supply in a surgical procedure under the ASC payment system for CY 
2023. This means that, effective January 1, 2023, payment for Dextenza 
will be packaged when furnished in the HOPD but paid separately when 
furnished in an ASC. We proposed to package HCPCS code J1096 under the 
OPPS and assign the code to a status indicator of ``N'' (packaged). 
This is consistent with our packaging policy outlined at 42 CFR 
419.2(b), which lists the types of items and services for which payment 
is packaged under the OPPS. Specifically, Sec.  419.2(b)(16) includes 
drugs and biologicals that function as supplies when used in a surgical 
procedure as packaged costs. Historically, we have stated that we 
consider all items related to the surgical outcome and provided during 
the hospital stay in which the surgery is performed, including 
postsurgical pain management drugs, to be part of the surgery for 
purposes of our drug and biological surgical supply packaging policy 
(79 FR 66875).
    Although we have no data for CPT code 68841 because it is a new 
code effective January 1, 2022, we have claims data for the predecessor 
CPT code 0356T. Using cost data for the predecessor code, for CY 2023 
we proposed to continue to assign CPT code 68841 to APC 5694 with a 
proposed payment rate of $338.58. We also proposed to continue to 
assign CPT code 68841 OPPS status indicator ``Q1'' and an ASC payment 
indicator of ``N1.''
    The issue of payment of CPT code 68841 was brought to the Advisory 
Panel on Hospital Outpatient Payment (also known as HOP Panel) in 2022 
for CY 2023 rulemaking and interested parties requested a new APC 
placement. At the August 22, 2022 meeting, based on the information 
presented, the Panel recommended that CMS assign CPT code 68841 to APC 
5503 (Level 3 Extraocular, Repair, and Plastic Eye Procedures), with a 
status indicator (SI) of ``J1''. We note that for CY 2023, APC 5503 has 
a proposed payment rate of $2,140.55.
    Comment: Several commenters stated that increased payment, and 
separate payment, for CPT code 68841 was required in order to ensure 
continued beneficiary access to the drug Dextenza (HCPCS code J1096) in 
both the HOPD and ASC settings. Some commenters did not make a specific 
suggestion as to the final APC assignment, but contended that the 
proposed payment was inadequate. Commenters most frequently recommended 
assignment to APC 5503 for CPT code 68841. Interested parties believed 
this would be a clinically appropriate APC assignment as, in their 
view, the insertion of Dextenza is an extraocular procedure; therefore, 
it would be appropriate to place CPT code 68841 into APC 5503, which is 
titled Level 3 Extraocular, Repair, and Plastic Eye Procedures, as this 
procedure is clinically similar to other extraocular procedures in that 
APC. Commenters believe this assignment is appropriate given the 
geometric mean cost for the predecessor CPT code 0356T was $2,227.06 in 
the proposed rule, which was similar to the proposed rule geometric 
mean cost of $2,159.58 for APC 5503. Commenters also believed that CMS 
should assign CPT code 68841 to the same APC as CPT codes 0699T and 
66030 because all three procedures involve the delivery of medication 
to the eye. The commenters cited CPT code 66030 (Injection, anterior 
chamber of eye (separate procedure); medication) and CPT code 0699T 
(Injection, posterior chamber of eye; medication), which we proposed to 
assign to APC 5491 (Level 1 Intraocular Procedures) with a proposed 
payment rate of $2,201.12, as similar procedures to which CPT code 
68841 should be compared. However, commenters recognized that CPT codes 
0699T and 66030 were intraocular procedures, so it would not be 
appropriate to assign CPT code 68841 to the same APC. Since commenters 
recognized CPT code 68841 represented an extraocular procedure, they 
felt APC 5503 (Level 3 Extraocular, Repair, and Plastic Eye Procedures) 
would be an appropriate alternative APC assignment as this APC 
placement has a comparable payment rate to APC 5491. Some commenters 
stated that a ``Q1'' status indicator was inappropriate, but did not 
provide an alternative suggestion. However, some other commenters 
suggested assignment to a ``J1'' status indicator.
    Several commenters pointed to the clinical importance of providing 
Dextenza to patients, noting that it reduces ocular pain, inflammation, 
and reduces the burden of topical eyedrop application. Additionally, 
commenters stated that they usually perform the procedure to administer 
Dextenza in conjunction with ophthalmic surgeries. Commenters believed 
the procedure is a distinct surgical procedure that requires additional 
operating room time and resources. Commenters were concerned that the 
lack of increased or separate payment may reduce access to Dextenza, 
particularly in the ASC setting.
    Response: We thank commenters for their feedback. Based on input 
from stakeholders, we believe it is appropriate to assign CPT code 
68841 to a different APC than the one proposed for CY 2023. After 
careful consideration of the statements from the commenters, we 
analyzed available claims data and similar procedures that approximate 
the clinical resources associated with CPT code 68841. We agree with 
stakeholders and the HOP Panel that CPT code 68841 should be reassigned 
to APC 5503. For the CY 2023 OPPS update, based on claims submitted 
between January 1, 2021, and December 30, 2021, processed through June 
30, 2022, our analysis of the latest claims data for this final rule 
with comment period show a geometric mean cost of approximately $2,079 
for predecessor CPT code 0356T based on 122 single claims, which is 
comparable to the geometric mean cost of about $2,174 for APC 5503. 
Based on the data, we believe that a reassignment from to APC 5503 for 
CPT code 68841 is appropriate.
    However, we continue to believe that assignment of CPT code 68841 
to an OPPS status indicator of ``Q1'' and an associated ASC payment 
indicator of ``N1'', is appropriate. We continue to believe that CPT 
code 68841 is mostly performed during ophthalmic surgeries, such as 
cataract surgeries. A status indicator ``Q1'', indicating 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. Although stakeholders state this is an independent surgical 
procedure and should not be packaged into the primary ophthalmic 
procedure in which the drug and drug administration are associated, 
based on expected clinical patterns as to how the drug is used, we do 
not agree. We find it appropriate to conditionally package CPT code 
68841 under the OPPS based on its clinical use patterns. This is 
consistent with 42 CFR 419.2(b), which lists the types of items and 
services for which payment is packaged under the OPPS packaged. The 
conditional packaging of this code supports our overarching goal to 
make payments for all services paid under the OPPS and ASC payment 
system more

[[Page 71842]]

consistent with those of a prospective payment system and less like 
those of a per-service fee schedule. We believe that packaging 
encourages efficiency and is an essential component of a prospective 
payment system, and that packaging payments for items and services that 
are typically integral, ancillary, supportive, dependent, or adjunctive 
to a primary service is a fundamental part of the OPPS. We therefore 
believe packaging of CPT code 68841 is appropriate. After consideration 
of the public comments, we are finalizing our proposal with 
modification and reassigning CPT code 68841 from APC 5694 to APC 5503 
with OPPS status indicator ``Q1'' (STV-Packaged Codes) for CY 2023. In 
addition, based on the OPPS assignments, we are finalizing an ASC 
payment indicator of ``N1'' (Packaged service/item; no separate payment 
made) for CPT code 68841 for CY 2023. For the final CY 2023 OPPS 
payment rates, we refer readers to OPPS Addendum B to this final rule 
with comment period. In addition, we refer readers to OPPS Addendum D1 
to this final rule with comment period for the status indicator 
definitions for all codes reported under the OPPS. For the final CY 
2023 ASC payment rates and payment indicators, we refer readers to 
Addendum AA and Addendum BB for the ASC payment rates, and Addendum DD1 
for the ASC payment indicator and their definitions. The OPPS Addendum 
B and D1, and ASC Addendum AA, BB, and DD1 are available via the 
internet on the CMS website.\14\
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    Refer to Table 36 for the code descriptor, APC assignment, status 
indicator assignment, and payment indicator assignment for CPT code 
68841 for CY 2023.
[GRAPHIC] [TIFF OMITTED] TR23NO22.051

    Similarly, we are finalizing our proposal, without modification, to 
change HCPCS code J1096 from a status indicator of ``G'' (pass-through) 
to ``N'' (packaged) to indicate that Dextenza is packaged beginning 
January 1, 2023, as separate payment provision to mimic pass-through 
status will end on December 31, 2022. We find it appropriate to package 
HCPCS code J1096 based on its clinical use patterns. Consistent with 
our clinical review and commenters' input, we believe this drug is 
mostly performed during ophthalmic surgeries, such as cataract 
surgeries. The packaging of this drug is consistent with 42 CFR 
419.2(b). Specifically, 42 CFR 419.2(b)(16) includes drugs and 
biologicals that function as supplies when used in a surgical procedure 
among the items and services for which payment is packaged under the 
OPPS. Historically, we have stated that we consider all items related 
to the surgical outcome and provided during the hospital stay in which 
the surgery is performed, including postsurgical pain management drugs, 
to be part of the surgery for purposes of our drug and biological 
surgical supply packaging policy (79 FR 66875). The packaging of this 
code supports our overarching goal to make payments for all services 
paid under the OPPS and ASC payment system more consistent with those 
of a prospective payment system and less like those of a per-service 
fee schedule. We believe that packaging encourages efficiency and is an 
essential component of a prospective payment system and that packaging 
payments for items and services that are typically integral, ancillary, 
supportive, dependent, or adjunctive to a primary service is a 
fundamental part of the OPPS. We therefore believe packaging of HCPCS 
code J1096 is appropriate in the HOPD setting for CY 2023.
    Although packaged under the OPPS, as discussed in section XIII.E 
(ASC Payment System Policy for Non-Opioid Pain Management Drugs and 
Biologicals that Function as Surgical Supplies) of this final rule with 
comment period, we believe Dextenza (HCPCS code J1096), meets the 
criteria described at Sec.  416.174; and we are finalizing our proposal 
to make separate payment for Dextenza as a non-opioid pain management 
drug that functions as a supply in a surgical procedure under the ASC 
payment system for CY 2023. For more information on the ASC payment for 
HCPCS code J1096 for CY 2023, refer to section XIII.E (ASC Payment 
System Policy for Non-Opioid Pain Management Drugs and Biologicals that 
Function as Surgical Supplies) of this final rule with comment period.
    As a reminder, for OPPS billing, because charges related to 
packaged services are used for outlier and future rate setting, 
hospitals are advised to report both CPT code 68841 (administration 
service) and HCPCS code J1096 (Dextenza drug/product) on the claim 
whenever Dextenza is provided in the HOPD setting. It is extremely 
important that hospitals report all HCPCS codes consistent with their 
descriptors, CPT and/or CMS instructions and correct coding principles, 
and all charges for all services they furnish, whether payment for the 
services is made separately or is packaged.
    Finally, for the final CY 2023 OPPS payment rates, we refer readers 
to OPPS Addendum B to this final rule with comment period. In addition, 
we refer readers to OPPS Addendum D1 to this final rule with comment 
period for the status indicator definitions for all codes reported 
under the OPPS. For the final

[[Page 71843]]

CY 2023 ASC payment rates and payment indicators, we refer readers to 
Addendum AA and Addendum BB for the ASC payment rates, and Addendum DD1 
for the ASC payment indicator and their definitions. The OPPS Addendum 
B and D1, and ASC Addendum AA, BB, and DD1 are available via the 
internet on the CMS website.\15\
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3. Artificial Iris Insertion Procedures (APC 5495)
    For the July 2020 update, the AMA's CPT Editorial Panel established 
three CPT codes to describe the CUSTOMFLEX[supreg] ARTIFICIALIRIS 
device implantation procedure. The long descriptors for the codes are 
listed below.
     0616T: Insertion of iris prosthesis, including suture 
fixation and repair or removal of iris, when performed; without removal 
of crystalline lens or intraocular lens, without insertion of 
intraocular lens
     0617T: Insertion of iris prosthesis, including suture 
fixation and repair or removal of iris, when performed; with removal of 
crystalline lens and insertion of intraocular lens
     0618T: Insertion of iris prosthesis, including suture 
fixation and repair or removal of iris, when performed; with secondary 
intraocular lens placement or intraocular lens exchange
    In addition to the surgical procedure CPT codes, as discussed in 
the CY 2021 OPPS/ASC final rule with comment period (85 FR 85990 
through 85992), we approved the associated device, specifically, the 
CUSTOMFLEX[supreg] ARTIFICIALIRIS for pass-through status effective 
January 1, 2021, and established a new device category for this 
device--HCPCS code C1839 (Iris prosthesis). The designation of pass-
through status for the device indicates that, under the OPPS, the 
device is paid separately in addition to the surgical procedure CPT 
codes. Based on our assessment, we assigned CPT code 0616T to APC 5491 
(Level 1 Intraocular Procedures) because, after removing the device 
costs of the CUSTOMFLEX[supreg] ARTIFICIALIRIS for transitional pass-
through device status, we believed the insertion of the artificial iris 
procedure shared similar clinical characteristics and resource costs to 
the surgical procedures assigned to APC 5491. Similarly, we assigned 
CPT codes 0617T and 0618T to APC 5492 (Level 2 Intraocular Procedures) 
because, with the additional implantation of the intraocular lens, we 
believed CPT codes 0617T and 0618T shared similar clinical 
characteristics and resource costs to the surgical procedures assigned 
to APC 5492.
    For CY 2023, with the expiration of the pass-through device status 
for the CUSTOMFLEX[supreg] ARTIFICIALIRIS on January 1, 2023, and under 
our current packaging policies, we proposed to package the device cost 
associated with HCPCS code C1839 into the primary procedures, 
specifically, CPT codes 0616T, 0617T, and 0618T. We review, on an 
annual basis, the APC assignments for all services and items paid under 
the OPPS based on our analysis of the claims data available for the 
proposed rule. For the CY 2023 OPPS/ASC proposed rule, the geometric 
mean cost of CPT code 0616T was $12,846.69 based on 5 single claims, 
the geometric mean cost of CPT code 0617T was $17,516.70 based on the 2 
claims available for the proposed rule, and the geometric mean cost of 
CPT code 0618T was $13,257.21 based on 7 claims. With the additional 
costs from the expired pass-through device, we proposed to reassign CPT 
codes 0617T and 0618T from APC 5492 to APC 5495 (Level 5 Intraocular 
APC), which is a Low Volume APC and is discussed in further detail in 
section III.D of this final rule with comment period, with a proposed 
payment amount of $16,564.54. For CPT code 0616T, with the additional 
costs from the expired pass-through device, we proposed to reassign CPT 
code 0616T from APC 5491 to APC 5493 (Level 3 Intraocular Procedures) 
with a proposed payment rate $7,434.16.
    Comment: Commenters supported our proposed APC assignment of CPT 
codes 0617T and 0618T to APC 5495 but disagreed with our proposed 
assignment of CPT code 0616T to APC 5493 because of the proposed 
payment rate for that APC. Commenters believed that the proposed 
payment amount of $7,434.16 for CPT code 0616T would be significantly 
lower than the procedure's cost and would not adequately cover the cost 
of the artificial iris device. The commenters recommended that CPT code 
0616T be assigned to APC 5495 with a proposed payment rate of 
$16,564.54 for CY 2023, rather than APC 5493, as the commenters 
believed the clinical characteristics and resource costs of CPT code 
0616T are more similar to CPT codes 0617T and 0618T, which we proposed 
to assign to APC 5495.
    Response: We appreciate the commenters' recommendation and support 
of our proposal. For this final rule with comment period, based on 
claims submitted between January 1, 2021, and December 31, 2021, and 
processed through June 30, 2022, we have 6 claims for CPT code 0616T 
that yield a geometric mean cost of $14,151.11. Based on our assessment 
of the updated data, we do not believe a final payment rate of 
$7,217.54 for APC 5493 would adequately cover the costs associated with 
CPT code 0616T. Similar to the Level 5 Intraocular Procedures APC, APC 
5494 (Level 4 Intraocular Procedures) is a Low Volume APC. The only 
procedure assigned to APC 5494 is CPT code 67027 (Implantation of 
intravitreal drug delivery system (e.g., ganciclovir implant), includes 
concomitant removal of vitreous). Therefore, given the clinical 
similarity of the procedures assigned to APC 5495 when compared to APC 
5494 as well as the resource use similarity, we are accepting the 
commenters' recommendation and reassigning CPT code 0616T to APC 5495 
for CY 2023. After reassigning CPT code 0616T to Low Volume APC 5495, 
as discussed in further detail in section III.D. of this final rule 
with comment period, the APC cost of APC 5495 is $18,602.90 and a final 
payment amount of $18,089.98 for CY 2023.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, with modification, and assigning CPT codes 
0616T, 0617T, and 0618T to APC 5495 for CY 2023. The final CY 2023 OPPS 
payment rate for the code can be found in Addendum B to this final rule 
with comment period. In addition, we refer readers to Addendum D1 of 
this final rule with comment period for the status indicator (SI) 
meanings for all codes reported under the OPPS. Both Addendum B and D1 
are available via the internet on the CMS website.
4. Blood Product Not Otherwise Classified (NOC) (APC 9537)
    Providers and interested parties in the blood products field have 
reported that product development for new blood products has 
accelerated. They noted there may be several additional new blood 
products entering the market in the next few years, compared to only 
one or two new products entering the market over the previous 15 to 20 
years. To encourage providers to use these new products, providers and 
interested parties requested that we establish a new HCPCS code to 
allow for payment for unclassified blood products prior to these 
products receiving their own HCPCS codes. Under the OPPS, unclassified 
procedures are generally assigned to the lowest APC payment level of an 
APC family. However, because blood products are each assigned to their 
own unique APC, the

[[Page 71844]]

concept of a lowest APC payment level does not exist for blood 
products.
    Starting in CY 2020, we established a new HCPCS code, P9099 (Blood 
component or product not otherwise classified), which allows providers 
to report unclassified blood products. For a detailed discussion of the 
payment history of HCPCS P9099 from CY 2020 through CY 2022, please 
refer to the CY 2022 OPPS/ASC rule with comment period (86 FR 63546 
through 63548).
    For CY 2023, we proposed to assign HCPCS code P9099 to APC 9537 
(Blood component/product noc) with a proposed payment rate of $56.58. 
In addition, we proposed to continue our policy of setting a payment 
rate for HCPCS code P9099 that is equivalent to the lowest cost blood 
product that is separately payable in the OPPS. The separately payable 
blood product with the lowest cost at the time of publication of the 
proposed rule was HCPCS code P9060 (Fresh frozen plasma, donor 
retested, each unit), with a proposed payment rate of $56.58. 
Therefore, for CY 2023, we proposed that the payment rate for HCPCS 
code P9099 would be $56.58, equivalent to the payment rate for HCPCS 
code P9060.
    Comment: Multiple commenters have requested that unclassified blood 
products assigned to HCPCS code P9099 be paid based on reasonable cost 
and that HCPCS code P9099 be assigned a status indicator of ``F'' (paid 
at reasonable cost). Unclassified blood products paid on the basis of 
reasonable cost would receive payment based on individual invoices 
submitted by the provider that detail the actual cost of the 
unclassified blood products for the provider. The commenters believe 
our current policy severely underpays for most unclassified blood 
products, which limits the ability of providers to use these new 
products and discourages innovation in the blood products field. 
Commenters assert that the universe of blood products is very 
heterogeneous with each product having its own APC and payment rate, 
and our policy that assigns unclassified clinical services HCPCS codes 
to the lowest-paying APC in a clinical series is not appropriate for 
the payment of blood products.
    Response: We have concerns about paying unclassified blood products 
using reasonable cost and assigning HCPCS code P9099 to status 
indicator ``F''. Although reasonable cost would likely provide a more 
granular reflection of the cost of unclassified blood products to 
providers, there would be no incentive for providers to manage their 
costs when using unclassified blood products or for the manufacturers 
to seek individual HCPCS codes for their unclassified blood products. 
We believe that providers will prefer to receive full cost 
reimbursement for an unclassified blood product rather than risk 
receiving a prospective payment that could be less than full cost of 
the blood product if the blood product is classified and assigned a 
HCPCS code. Finally, we do not support reasonable cost payment for 
HCPCS code P9099 because the OPPS is a prospective payment system, and 
we want to limit rather than expand the types of services paid for 
under the OPPS that do not receive prospective payment.
    Comment: Two commenters supported a different approach to ensure 
that newly developed blood products can receive payment comparable to 
the cost of the product until a permanent HCPCS code can be established 
to describe the new blood products. One of the commenters stated that 
there is a four to six-month period between the time a new blood 
product receives FDA approval and clearance and when it is introduced 
into the market. The commenter suggested that we could evaluate a 
coding application for a new blood product during this period before 
the new blood product enters the market and establish a temporary HCPCS 
code that would allow the blood product to be payable in both the OPPS 
and the PFS payment systems. Along with establishing the temporary 
HCPCS code, the commenter also requests that we establish a payment 
rate that would be cross-walked to the payment rate of an existing 
blood product with similar characteristics to the new blood product. 
The temporary HCPCS code would stay in effect until a permanent HCPCS 
code is established for the new blood product.
    Response: We agree that the process suggested by the commenters is 
a reasonable approach to ensure new blood products receive payment that 
better reflects the cost of the product. We previously used this 
process around 2015 when products, including frozen, pathogen-reduced 
plasma and pathogen-reduced platelets, were new and required HCPCS 
codes to receive payment. We currently have the ability to create 
temporary HCPCS codes for blood products to allow the codes to be used 
in both the OPPS and the PFS payment systems, and we can assign payment 
rates that reasonably reflect the cost of the new blood products.
    After consideration of the public comments, we are finalizing our 
proposal without modification. Specifically, we will continue to assign 
HCPCS code P9099 to status indicator ``R'' (Blood and Blood Products. 
Paid under OPPS; separate APC payment.) and pay the code at a rate 
equal to the lowest paid separately payable blood product in the OPPS 
that has claims data for CY 2021, which is HCPCS code P9060 with an 
updated payment rate of $54.74 per unit. Therefore, we are finalizing 
our proposal, without modification, to continue to assign HCPCS code 
P9099 to APC 9537 (Blood component/product noc) for CY 2023.
5. Bone Density Tests/Bone Mass Measurement: Biomechanical Computed 
Tomography (BCT) Analysis and Digital X-ray Radiogrammetry-Bone Mineral 
Density (DXR-BMD) Analysis
    A bone mineral density test is used to predict fracture risk and 
detect osteoporosis based on the patient's bone mineral content and 
bone density of the spine, hip, lower arm, and hands. While the test is 
performed using x-rays, dual-energy X-ray absorptiometry (DEXA or DXA), 
and computed tomography (CT), recent advances in technology have 
introduced newer methods in detecting bone mineral density. These newer 
technologies have included the use of biomechanical computed tomography 
(BCT) analysis and digital x-ray radiogrammetry-bone mineral density 
(DXR-BMD) analysis. A BCT analysis involves the use of a previous CT 
scan that is used by a computer software program to measure both the 
bone strength and bone mineral density of the hip or spine region, 
while a DXR-BMD analysis involves the use of a digital x-ray, that is 
also used by a computer software, to measure bone mineral density of 
the hand.
    For CY 2023, the CPT Editorial Panel established one new CPT code, 
specifically, CPT code 0743T to describe the service associated with 
BCT analysis with concurrent vertebral fracture assessment (VFA), 
effective January 1, 2023. Because the final CY 2023 CPT code number 
was not available when we published the proposed rule, the code was 
listed as placeholder code X012T in OPPS Addendum B of the CY 2023 
OPPS/ASC proposed rule. Below is the complete long descriptor for CPT 
code 0743T.
     0743T: Bone strength and fracture risk using finite 
element analysis of functional data and bone mineral density, with 
concurrent vertebral fracture assessment, utilizing data from a 
computed tomography scan, retrieval and transmission of the scan data, 
measurement of bone strength and bone mineral density and 
classification of any vertebral fractures, with overall fracture risk 
assessment, interpretation and report

[[Page 71845]]

    In addition to new CPT code 0743T, there are five existing CPT 
codes describing BCT analysis that were effective July 1, 2019. The 
codes and their long descriptors are listed below.
     0554T: Bone strength and fracture risk using finite 
element analysis of functional data and bone-mineral density utilizing 
data from a computed tomography scan; retrieval and transmission of the 
scan data, assessment of bone strength and fracture risk and bone-
mineral density, interpretation and report
     0555T: Bone strength and fracture risk using finite 
element analysis of functional data and bone-mineral density utilizing 
data from a computed tomography scan; retrieval and transmission of the 
scan data
     0556T: Bone strength and fracture risk using finite 
element analysis of functional data and bone-mineral density utilizing 
data from a computed tomography scan; assessment of bone strength and 
fracture risk and bone-mineral density.
     0557T: Bone strength and fracture risk using finite 
element analysis of functional data and bone-mineral density utilizing 
data from a computed tomography scan; interpretation and report.
     0558T: Computed tomography scan taken for the purpose of 
biomechanical computed tomography analysis.
    For CY 2023, the CPT Editorial Panel also established two new CPT 
codes to describe the services associated with bone mineral density by 
digital x-ray radiogrammetry, specifically, CPT codes 0749T and 0750T. 
These services were listed as placeholder codes X031T and X032T in OPPS 
Addendum B of the CY 2023 OPPS/ASC proposed rule:
     0749T: Bone strength and fracture risk assessment using 
digital X-ray radiogrammetry-bone mineral density (DXR-BMD) analysis of 
bone-mineral density utilizing data from a digital X-ray, retrieval and 
transmission of digital X-ray data, assessment of bone strength and 
fracture risk and bone-mineral density, interpretation and report.
     0750T: Bone strength and fracture risk assessment using 
digital X-ray radiogrammetry-bone mineral density (DXR-BMD) analysis of 
bone-mineral density utilizing data from a digital X-ray, retrieval and 
transmission of digital X-ray data, assessment of bone strength and 
fracture risk and bone-mineral density, interpretation and report; with 
single view digital X-ray examination of the hand taken for the purpose 
of DXR-BMD.
    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 
included the 5-digit placeholder codes and long descriptors for the new 
CY 2023 CPT codes in Addendum O to the proposed rule (which is 
available via the internet on the CMS website) so that the public could 
adequately comment on the proposed APCs and SI assignments. The 5-digit 
placeholder codes were included in Addendum O, specifically under the 
column labeled ``CY 2023 OPPS/ASC Proposed Rule 5-Digit AMA Placeholder 
Code,'' to the proposed rule. We further stated in the proposed rule 
that the final CPT code numbers would be included in this CY 2023 OPPS/
ASC final rule with comment period.
    On June 24, 1998, we published in the Federal Register an interim 
final rule (IFR) with comment period (63 FR 34320) that specifies the 
uniform coverage of, and payment for, bone mass measurements for 
Medicare beneficiaries. This IFR implemented the provisions in section 
4106(a) of the Balanced Budget Act of 1997. Currently, Medicare pays 
for bone density tests when they meet the definition and coverage 
requirements of bone mass measurement as stated in 42 CFR 410.31. Bone 
mass measurement means a radiologic, radioisotopic, or other procedure 
that meets all of the following conditions:
     Is performed to identify bone mass, detect bone loss, or 
determine bone quality.
     Is performed with either a bone densitometer (other than 
single-photon or dual-photon absorptiometry) or a bone sonometer system 
that has been cleared for marketing for bone mass measurement (BMM) by 
the Food and Drug Administration (FDA) under 21 CFR part 807, or 
approved for marketing under 21 CFR part 814.
     Includes a physician's interpretation of the results.
    Based on our understanding of the services associated with the new 
codes, BCT and DXR-BMD analysis currently do not meet Medicare's 
definition of bone mass measurement. Therefore, for CY 2023, we 
proposed to assign the new codes, specifically, CPT codes 0743T, 0749T, 
and 0750T, to status indicator ``E1'' to indicate that they are not 
covered by Medicare, and not paid by Medicare when submitted on 
outpatient claims (any outpatient bill type). Similarly, we proposed to 
assign the existing BCT analysis CPT codes 0554T-0558T to status 
indicator ``E1'' for CY 2023.
    Comment: Some commenters disagreed with our proposed status 
indicator assignment of ``E1'' for the BCT analysis codes, 
specifically, CPT codes 0554T-0558T, and requested that we continue to 
pay separately for them. Another commenter stated that the VirtuOst 
software system that is associated with new CPT code 0743T, is an FDA-
cleared Class II bone densitometer medical device. The same commenter 
stated that BCT analysis of the hip is equivalent to that of DXA (CPT 
code 77080) while BCT analysis of the spine is similar to that of a 
qualitative diagnostic CT (CPT code 77078) for osteoporosis 
identification. Because CPT codes 77078 and 77080 are paid separately 
under the OPPS, the commenter suggested that the BCT analysis CPT codes 
should also be paid separately.
    Response: As stated above, based on our review and understanding of 
the service, BCT analysis does not meet Medicare's definition of bone 
mass measurement, as specified in Sec.  410.31(a) that specifies the 
coverage of, and payment for, bone mass measurements for Medicare 
beneficiaries. Consequently, for the October 2022 OPPS Update 
(Transmittal 11594, Change Request 12885, dated September 9, 2022), we 
revised the status indicator for CPT codes 0554T-0558T to ``E1'' to 
indicate that the codes are non-covered because the services described 
by the codes do not meet Medicare's definition of bone mass 
measurements (BMMs). As we have stated in every quarterly OPPS Update 
Change Request (CR), ``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 it is reasonable and 
necessary to treat the beneficiary's condition and whether it is 
excluded from payment.''
    In addition, we remind the commenters that requests for changes to 
the current BMM definition should be directed to CMS as described in 
Sec.  410.31(f). CMS may determine through the NCD process that 
additional BMM systems are reasonable and necessary under section 
1862(a)(1) of the Act for monitoring and confirming baseline BMMs. We 
note that on August 7, 2013, CMS published a Federal Register notice 
(78 FR 48164 through 48169), updating the process used for opening, 
deciding or reconsidering national coverage determinations (NCDs). 
Further information on the Medicare

[[Page 71846]]

coverage determination process, as well how to request a new NCD or 
revision to an existing NCD, can be found on Medicare's website, 
specifically, at https://www.cms.gov/Medicare/Coverage/DeterminationProcess.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, and assigning status indicator ``E1'' to the 
BCT analysis CPT codes 0554T-0558T and 0743T for CY 2023. In addition, 
we received no comments on the codes for DXR-BMD analysis and are 
finalizing our proposal to assign status indicator ``E1'' to CPT codes 
0748T and 0749T for CY 2023. We note that in the OPPS Addendum B that 
was released with the CY 2023 OPPS/ASC proposed rule, we inadvertently 
listed CPT code 0743T (placeholder code X012T) to status indicator 
``M'' (Items and Services Not Billable to the MAC. Not paid under 
OPPS.) when it should have been listed with status indicator ``E1'' 
(Not covered; Not paid by Medicare when submitted on outpatient claims 
(any outpatient bill type), similar to the status indicator proposed 
for CPT codes 0749T (placeholder code X031T) and 0750T (placeholder 
code X032T).
    Finally, we remind hospitals that Medicare does pay separately for 
certain BMM tests under the OPPS. Refer to the Medicare Administrative 
Contractors (MACs) website for the latest list of covered and payable 
BMM HCPCS codes. The final CY 2023 payment rates for all codes reported 
under the OPPS can be found in OPPS Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with for the complete list of status indicators (and 
definitions) used under the OPPS. Both Addendum B and D1 are available 
via the internet on the CMS website.
6. Calculus Aspiration With Lithotripsy Procedure (APC 5376)
    For CY 2023, we proposed to continue to assign HCPCS code C9761 to 
APC 5376 (Level 6 Urology and Related Services) with a proposed payment 
rate of $8,711.09. The code was effective October 1, 2020, and 
describes the procedure that uses a sterile, single-use aspiration-
irrigation catheter that is designed to assist in the removal of stone 
fragments during a standard ureteroscopy.
    Comment: One commenter urged CMS to maintain the current facility 
payment rates in both the hospital outpatient department and ambulatory 
surgery center setting. The commenter noted that the current payment in 
both sites of service is appropriate given the procedural complexity 
involved and stated that performing a steerable renal suction case 
requires extended operating room (OR) time, multiple technicians, and a 
full inventory of single-use surgical devices, such as endoscopes, 
ureteral access sheaths, guidewires, CVAC, and high-energy laser 
fibers.
    Response: HCPCS code C9761 was new in CY 2020, and this is the 
first year in which we have actual claims data for the procedure. Based 
on our analysis of the latest CY 2021 claims data available for CY 2023 
OPPS ratesetting, the geometric mean cost associated with HCPCS code 
C9761 is approximately $6,519 based on 24 single claims (out of 24 
total claims), which is consistent with the geometric mean cost for APC 
5376. We also note that the geometric mean cost for the significant 
HCPCS codes in APC 5375 (Level 5 Urology and Related Services) ranged 
between $4,105 and $6,495, which is below the geometric mean cost for 
HCPCS code C9761. Based on the data, we believe that APC 5376 is the 
more appropriate assignment rather than APC 5375 for HCPCS code C9761. 
Therefore, we agree with the commenter, and are maintaining the APC 
assignment to APC 5376 for CY 2023.
    Comment: Another commenter made a request to update the long 
descriptor for HCPCS code C9761 to reduce provider confusion and 
preserve device cost data integrity. The current long descriptors for 
CPT code 52356 and HCPCS code C9761 are listed in Table 37. According 
to the commenter, the 21 facilities in the 2021 claims data that billed 
procedures with HCPCS code C9761, despite not using a steerable vacuum 
aspiration catheter, likely did so because of the similarity between 
the long descriptors for HCPCS code C9761 and CPT code 52356. The 
commenter explained that the procedure described by HCPCS code C9761 
includes all the steps of a conventional laser lithotripsy (CPT code 
52356) plus a comprehensive removal of stone fragments from all areas 
of the collecting system, including the renal pelvis and all calyces. 
Table 37 lists the CY 2022 long descriptors for these codes.
[GRAPHIC] [TIFF OMITTED] TR23NO22.052

    To alleviate confusion, the commenter recommended a change in the 
long descriptor for HCPCS code C9761 to the following: ``Steerable 
vacuum aspiration with continuous irrigation of the kidney following 
cystourethroscopy, with ureteroscopy and/or pyeloscopy, with 
lithotripsy, including the renal pelvis and all calyces of the 
collecting system, ureter, bladder, and urethra if applicable.'' The 
commenter stated that the suggested revised long descriptor for C9761 
moves the device intensive and distinguishing features of the procedure 
(i.e., ``Steerable vacuum aspiration with continuous irrigation of the 
kidney'') to the beginning and more fully describes the complexity of 
the procedure by

[[Page 71847]]

calling out the aspiration of the renal pelvis and all calyces.
    Response: We do not agree that revising the long descriptor as 
recommended by the commenter is necessary to provide further 
clarification on how the procedure is performed. As listed in Table 37, 
the long descriptors for CPT code 52356 and HCPCS code C9761 do not 
share substantial similarity. The words ``steerable vacuum aspiration'' 
appear in the current long descriptor for HCPCS code C9761. We note 
that coders are generally aware that they need to read the entire long 
descriptors, and not rely on short descriptors alone, for the codes 
they are billing to ensure they are reporting the procedures, services, 
and items accurately. In addition, it is generally not our policy to 
judge the accuracy of provider coding and charging for purposes of 
ratesetting. We rely on hospitals and providers to accurately report 
the use of HCPCS codes in accordance with their code descriptors and 
CPT and CMS instructions and to report services accurately on claims 
and charges and costs for the services on their Medicare hospital cost 
report.
    Nonetheless, we are sympathetic to the commenter's concern 
regarding the descriptor, and consequently, we believe that a slight 
modification to the long descriptor is necessary. Specifically, we are 
adding the terms ``must use a steerable ureteral catheter'' to the end 
of the long descriptor for HCPCS code C9761, as shown in Table 38. The 
change to the long descriptor for HCPCS C9761 will be included in the 
January 2023 HCPCS file with an effective date of January 1, 2023. We 
note that this is the second change to the long descriptor for HCPCS 
code C9761 since the code was effective on October 1, 2020. Refer to 
Table 38 for the historical and current descriptor for the code.
[GRAPHIC] [TIFF OMITTED] TR23NO22.053

    In summary, after consideration of the public comments, we are 
finalizing our proposal for HCPCS code C9761 and assigning the code to 
APC 5376 for CY 2023. In addition, we are modifying the long descriptor 
for HCPCS code C9761 to assist HOPDs with reporting the code 
appropriately.
7. Cardiac Computed Tomography Angiography (CCTA) (APC 5571)
    For CY 2023, we proposed to continue to assign the following 
cardiac CCTA exam codes to APC 5571 (Level 1 Imaging with Contrast) 
with a proposed payment rate of $183.61. The CPT codes and their long 
descriptors are listed below.
     75572: Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology (including 3d image 
postprocessing, assessment of cardiac function, and evaluation of 
venous structures, if performed).
     75573: Computed tomography, heart, with contrast material, 
for evaluation of cardiac structure and morphology in the setting of 
congenital heart disease (including 3d image postprocessing, assessment 
of lv cardiac function, rv structure and function and evaluation of 
venous structures, if performed).
     75574: Computed tomographic angiography, heart, coronary 
arteries and bypass grafts (when present), with contrast material, 
including 3d image postprocessing (including evaluation of cardiac 
structure and morphology, assessment of cardiac function, and 
evaluation of venous structures, if performed).
    We received several comments related to our proposed payment for 
the CCTA codes. Many of the comments, mostly form letters, addressed 
the same issues that were brought to our attention in the CY 2021 OPPS/
ASC final rule (85 FR 85956 through 85959). Below is a summary of the 
public comments to the CY 2023 OPPS/ASC proposed rule and our responses 
to the comments.
    Comment: Some commenters expressed concern with the reimbursement 
and continued assignment to APC 5571 for CPT codes 75572, 75573, and 
75574. They stated that the current payment is below the cost of 
providing the service. Some commenters explained that numerous studies 
have shown CCTA to have the highest negative predictive value for 
ruling out coronary artery disease (CAD), and that for certain 
patients, this is the least invasive test to rule out CAD. They stated 
that the proposed payment is insufficient to cover the complete cost of 
furnishing the service, and urged CMS to group the CCTA codes in an 
appropriate APC with services that are

[[Page 71848]]

similar based on clinical intensity, resource utilization, and cost. 
The commenters indicated that the inadequate reimbursement for the 
service limits Medicare beneficiaries' access to the test. One 
commenter asserted that CCTA is more complex to perform and requires 
more time and resources compared to the other tests assigned to APC 
5571. The commenters urged CMS to increase the payment for CCTA and 
suggested revising the assignment from APC 5571 to APC 5572 to 
adequately compensate hospitals for the cost of providing the service.
    Response: The OPPS relies upon historical hospital claims data to 
establish the annual payment rates, and payments under the OPPS are 
based on our analysis of the latest available claims and cost report 
data submitted to Medicare. As we stated in the CY 2021 OPPS/ASC final 
rule with comment period (85 FR 85956), we have many years of claims 
data for CPT codes 75572, 75573, and 75574. The AMA established 
specific CPT codes for CCTA services beginning in 2006 when they were 
first described by Category III codes. The Category III CPT codes were 
subsequently deleted on December 31, 2009, and replaced with Category I 
CPT codes 75572, 75573, and 75574, which were effective on January 1, 
2010. Because OPPS payments are updated every year based on our 
analysis of the latest claims data, the payment rates have varied each 
year based on that data.
    For CY 2023, OPPS payments are based on claims submitted between 
January 1, 2021, through December 31, 2021, that were processed on or 
before June 30, 2022. Based on our review of the claims data for this 
final rule, the geometric mean costs for the CCTA codes range between 
$160 and $238. As shown in Table 39, our analysis reveals a geometric 
mean cost of approximately $160 for CPT code 75572 based on 19,245 
single claims (out of 35,554 total claims), about $238 for CPT code 
75573 based on 371 single claims (out of 542 total claims), and 
approximately $208 for CPT code 75574 based on 46,352 single claims 
(out of 68,420 total claims). Based on the geometric mean costs for the 
codes, our data show that the resources associated with providing CCTA 
services are similar to the costs of other tests assigned to APC 5571. 
The geometric mean cost for the CCTA codes range between $160 and $238, 
which are in line with the costs in APC 5571 whose more geometric mean 
costs for the significant HCPCS codes range between $118 and $247. 
Based on our claims data, we do not agree that the resource cost for 
the services in APC 5572 are similar to CCTA because the geometric mean 
costs for the significant HCPCS codes in APC 5572 are higher with costs 
ranging between $279 and $523.
    As shown in Table 39, we have many years' worth of claims data for 
CCTA services, and the volume has only increased throughout the years. 
Based on the volume of claims, we do not believe that Medicare 
beneficiaries have had access issues. In addition, our current and 
historical cost data for the CCTA CPT codes demonstrates that the 
resources of providing CCTA exams are consistent with the cost of the 
other services assigned to APC 5571. We believe our claims data 
accurately reflects the resources associated with furnishing CCTA 
services in the HOPD setting. Because CCTA services have been paid 
under the OPPS for many years, with payments based on the latest 
hospital claims and Medicare cost report data, we believe we are 
providing a consistent payment methodology that appropriately reflects 
the hospital costs required to perform CCTA exams.

[[Page 71849]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.054

    We remind the commenters that every year since the implementation 
of the OPPS on August 1, 2000, we receive many requests from specialty 
associations, device manufacturers, drug manufacturers, and consultants 
to increase the payments for codes associated with specific drugs, 
devices, services, and surgical procedures. Under the OPPS, one of our 
goals is to make payments that are appropriate for the items and 
services that are necessary for the treatment of Medicare 
beneficiaries. The OPPS, like other Medicare payment systems, is budget 
neutral and increases are generally limited to the annual payment 
update factor. As a budget neutral payment system, the OPPS does not 
pay the full hospital costs of services, however, we believe that our 
payment rates generally reflect the costs that are associated with 
providing care to Medicare beneficiaries. Furthermore, we believe that 
our payment rates are adequate to ensure access to services.
    Comment: Several commenters requested that we allow hospitals to 
submit charges for the CCTA CPT codes with revenue codes outside of 
general CT services, thereby allowing future cost estimates to 
accurately reflect the true cost of providing CCTA exams.
    Response: As we stated in the CY 2021 OPPS/ASC final rule with 
comment period (85 FR 85957), it is our standard ratesetting 
methodology to rely on hospital cost and charge information as it is 
reported to us through the claims and cost report data. The assignment 
to APC 5571 for the CCTA CPT codes is consistent with our standard 
ratesetting methodology, which provides appropriate incentives for 
efficiency. The OPPS is a prospective payment system that relies on 
hospital charges on the claims and cost report data from the hospitals 
that furnish the services in order to determine relative costs for OPPS 
ratesetting. We believe that the prospective payment rates for CPT 
codes 75572, 75573, and 75574, calculated based on the costs of those 
providers that furnished the services in CY 2021, provide appropriate 
payment to the providers who will furnish the services in CY 2023. We 
continue to believe that this standard ratesetting methodology 
accurately provides payment for CCTA exams provided to hospital 
outpatients.
    We further note that hospital outpatient facilities are responsible 
for reporting the appropriate cost centers and revenue codes. As stated 
in section 20.5 in Chapter 4 (Part B Hospital) of the Medicare Claims 
Processing, CMS ``does not instruct hospitals on the assignment of 
HCPCS codes to revenue codes for services provided under OPPS since 
hospitals' assignment of cost vary. Where explicit instructions are not 
provided, HOPDs should report their charges under the revenue code that 
will result in the charges being assigned to the same cost center to 
which the cost of those services are assigned in the cost report.'' 
Therefore, HOPDs must determine the most appropriate cost center and 
revenue code for the CCTA CPT codes 75572, 75573, and 75574.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, and assigning the CCTA 
CPT codes 75572, 75573, and 75574 to APC 5571. The final CY 2023 OPPS 
payment rates for the codes can be found in Addendum B

[[Page 71850]]

to this final rule with comment period. In addition, we refer readers 
to Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
8. Cardiac Contractility Modulation (CCM) Therapy (APC 5232)
    CPT code 0408T (Insertion or replacement of permanent cardiac 
contractility modulation system, including contractility evaluation 
when performed; and programming of sensing and therapeutic parameters; 
pulse generator with transvenous electrodes) was effective January 1, 
2016, and since then the code has been paid separately under the OPPS 
and assigned to APC 5231 (Level 1 ICD and Similar Procedures). For CY 
2022, the payment rate for CPT code 0408T (in APC 5231) is $23,550.85; 
however, for CY 2023, based on our examination of the latest claims 
data, we believe that reassignment to another APC is more appropriate. 
Specifically, for CY 2023, we proposed to move CPT code 0408T from APC 
5231 to APC 5232 (Level 2 ICD and Similar Procedures) with a proposed 
payment rate of $32,613.74.
    Comment: Several commenters supported the reassignment to APC 5232 
for CPT code 0408T. Commenters expressed that the costs clearly 
demonstrate the appropriateness of the reassignment.
    Response: We appreciate the commenters support of the proposed 
reassignment of CPT code 0408T to APC 5232. Based on our evaluation of 
the latest claims data for this final rule with comment period, which 
is based on claims submitted between January 1, 2021, and December 31, 
2021, processed through June 30, 2022, we believe that the reassignment 
to APC 5232 is appropriate. Our analysis shows a geometric mean cost of 
about $38,417 based on 115 single claims (out of 116 total claims) for 
CPT code 0408T, which is comparable to the geometric mean cost of 
approximately $32,986 for APC 5232, rather than the geometric mean cost 
of about $23,465 for APC 5231. The data demonstrate that the geometric 
mean cost for CPT code 0408T is consistent with the geometric mean cost 
of APC 5232. Therefore, we are increasing the payment for CPT code 
0408T and reassigning the code to APC 5232 for CY 2023.
    In summary, after our review of the public comments, we are 
finalizing our proposal without modification to assign CPT code 0408T 
to APC 5232 (Level 2 ICD and Similar Procedures) for CY 2023. The final 
CY 2023 payment rate for CPT code 0408T can be found in Addendum B to 
this final rule with comment period, which is available via the 
internet on the CMS website.
9. Cardiac Magnetic Resonance (CMR) Imaging (APC 5572 and 5573)
    For CY 2023, we proposed to continue to assign CPT code 75561 
(Cardiac magnetic resonance imaging for morphology and function without 
contrast material(s), followed by contrast material(s) and further 
sequences) to APC 5572 (Level 2 Imaging with Contrast) with a proposed 
CY 2023 OPPS payment rate of $375.11. We also proposed to assign CPT 
code 75563 (Cardiac magnetic resonance imaging for morphology and 
function without contrast material(s), followed by contrast material(s) 
and further sequences; with stress imaging) to APC 5573 (Level 3 
Imaging with Contrast) with proposed CY 2023 OPPS payment rate of 
$751.54.
    Comment: One commenter expressed concern with the fluctuating 
payment for cardiac MRI services, specifically, those described by CPT 
codes 75561 and 75563. They believe that these codes should be included 
with clinically similar services and reassigned to different APCs. The 
commenter is requesting that CPT code 75561 be reassigned to APC 5573. 
The commenter is also requesting that CPT code 75563 be reassigned to 
APC 5593 Level 3 (Nuclear Medicine and Related Services), which had a 
proposed CY 2023 OPPS payment rate of $1,353.52.
    Response: We review, on an annual basis, the APC assignments for 
all services and items paid under the OPPS based on our analysis of the 
latest claims data. Because payment rates are updated annually based on 
the latest claims data, OPPS payments for certain services may vary 
from year to year. We note that we have many years of claims data for 
CPT codes 75561 and 75563 since these codes were established in 2008. 
For the CY 2023 OPPS update, based on claims submitted between January 
1, 2021, and December 30, 2021, processed through June 30, 2022, our 
examination of the claims data for this CY 2023 OPPS/ASC final rule 
with comment period supports the continued assignment of CPT codes 
75561 and 75563 to APCs 5572 and 5573, respectively. For CPT code 
75561, our claims data reveals a geometric mean cost of approximately 
$434 based on 21,407 single claims (out of 25,141 total claims), which 
is comparable to the geometric mean cost of about $379 for APC 5572, 
rather the geometric mean cost of about $762 for APC 5573. Similarly, 
for CPT code 75563, our claims data shows a geometric mean cost of 
approximately $782 based on 3,132 single claims (out of 3,522 total 
claims), which is consistent with the geometric mean cost of about $762 
for APC 5573, rather than the geometric mean cost of approximately 
$1,365 for APC 5593. Based on our analysis, CPT codes 75561 and 75563 
are appropriately placed in APCs 5572 and 5573, respectively, based on 
their clinical and resource homogeneity to the services assigned to the 
APCs.
    In summary, after consideration of the public comment, we are 
finalizing our proposal, without modification, to assign the cardiac 
MRI CPT codes 75561 and 75563 to APCs 5572 and 5573, respectively. The 
final CY 2023 OPPS payment rates for these codes can be found in 
Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the SI meanings for all codes reported under the OPPS. Both Addendum B 
and D1 are available via the internet on the CMS website.
10. ClariFix Procedure (APC 5165)
    CMS established HCPCS code C9771 (Nasal/sinus endoscopy, 
cryoablation nasal tissue(s) and/or nerve(s), unilateral or bilateral)) 
to describe the technology associated with nasal endoscopy with 
cryoablation of nasal tissues and/or nerves. HCPCS code C9771 was 
established based on a New Technology application that was submitted to 
CMS for New Technology consideration under the OPPS. Based on our 
evaluation of the New Technology application, we assigned HCPCS code 
C9771 to APC 5164 (Level 4 ENT Procedures) with a payment rate of 
$2,736.39 effective January 1, 2021. In CY 2022, we continued to assign 
the code to APC 5164 with a payment rate of $ 2,793.98. For CY 2023, 
based on our examination of the latest claims data, we proposed to 
continue to assign HCPCS code C9771 to APC 5164 with a proposed payment 
rate of $2,896.26.
    Comment: We received one comment from the manufacturer requesting 
that HCPCS code C9771 be reassigned to APC 5165 (Level 5 ENT 
Procedures), which had a proposed CY 2023 OPPS payment rate of 
$5,377.70. The commenter believes that assigning HCPCS code C9771 to 
APC 5165 would be more appropriate based on CY 2021 claims data and the 
resource and clinical similarity to the procedures in that APC, 
specifically CPT codes 30468 (Repair of nasal valve collapse with 
subcutaneous/submucosal lateral wall implant(s)) and 69706

[[Page 71851]]

(Nasopharyngoscopy, surgical, with dilation of the eustachian tube 
(i.e., balloon dilation); bilateral).
    Response: We thank the commenter for their recommendation. We 
review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS based on our analysis of the latest claims 
data. For the CY 2023 OPPS update, based on claims submitted between 
January 1, 2021, and December 30, 2021, and processed through June 30, 
2022, our analysis of the latest claims data for this CY 2023 OPPS/ASC 
final rule supports the reassignment of HCPCS code C9771 to APC 5165. 
Specifically, our claims data show a geometric mean cost of 
approximately $6,405 for HCPCS code C9771 based on 123 single claims 
(out of 125 total claims), which is comparable to the geometric mean 
cost of approximately $5,491 for APC 5165, rather than to the geometric 
mean cost of about $2,926 for APC 5164. Based on our review of the CY 
2021 claims data for the CY 2023 OPPS ratesetting, we agree that HCPCS 
code C9771 would be more appropriately placed in APC 5165 based on its 
clinical and resource homogeneity to the procedures in the APC. 
Therefore, we are reassigning HCPCS code C9771 to APC 5165.
    In summary, after consideration of the public comment, we are 
finalizing reassigning HCPCS code C9771 to APC 5165 for CY 2023. The 
final CY 2023 OPPS payment rate for this code can be found in Addendum 
B to this final rule with comment period. In addition, we refer readers 
to Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
11. Cleerly Labs (APC 1511)
    Cleerly Labs is a Software as a Service (SaaS) that assesses the 
extent of coronary artery disease severity using Atherosclerosis 
Imaging-Quantitative Computer Tomography (AI-QCT). This procedure is 
performed to quantify the extent of coronary plaque and stenosis in 
patients who have undergone coronary computed tomography analysis 
(CCTA). The AMA CPT Editorial Panel established the following four 
codes associated with this service, effective January 1, 2021:
     0623T: Automated quantification and characterization of 
coronary atherosclerotic plaque to assess severity of coronary disease, 
using data from coronary computed tomographic angiography; data 
preparation and transmission, computerized analysis of data, with 
review of computerized analysis output to reconcile discordant data, 
interpretation and report.
     0624T: Automated quantification and characterization of 
coronary atherosclerotic plaque to assess severity of coronary disease, 
using data from coronary computed tomographic angiography; data 
preparation and transmission.
     0625T: Automated quantification and characterization of 
coronary atherosclerotic plaque to assess severity of coronary disease, 
using data from coronary computed tomographic angiography; computerized 
analysis of data from coronary computed tomographic angiography.
     0626T: Automated quantification and characterization of 
coronary atherosclerotic plaque to assess severity of coronary disease, 
using data from coronary computed tomographic angiography; review of 
computerized analysis output to reconcile discordant data, 
interpretation and report.
    In the CY 2021 OPPS/ASC final rule with comment period, we assigned 
the above codes to status indicator ``E1'' to indicate that the codes 
are not payable by Medicare when submitted on outpatient claims because 
the service had not received FDA clearance at the time of the 
assignment. We note that the codes listed in OPPS Addendum B were in 
effect as of July 1, 2022, and we requested comments on the OPPS APC 
and SI assignments.
    For the October 2022 update, based on our review of the New 
Technology application submitted to CMS for OPPS consideration, we 
evaluated the current status indicator assignments for CPT codes 0623T-
0626T. Based on the technology and its potential utilization in the 
HOPD setting, our evaluation of the service, as well as input from our 
medical advisors, we assigned CPT code 0625T to a separately payable 
status. We announced the change to the APC and SI in the October 2022 
OPPS update. Specifically, in the October 2022 OPPS Update CR (Change 
Request 12885, Transmittal 11594, dated September 9, 2022), we 
reassigned CPT code 0625T to status indicator ``S'' (Significant 
Procedures, Not Discounted when Multiple. Paid under OPPS; separate APC 
payment) and APC 1511 (New Technology--Level 11 ($900--$1000)) with a 
payment rate of $950.50, effective October 1, 2022, following review of 
the manufacturer's New Technology APC application.
    Comment: We received several comments requesting that we reassign 
CPT code 0625T to status indicator ``S'' and CPT 0624T to status 
indicator ``N'' (packaged). Commenters believed the status indicator 
assignment of ``E1'' was an error and that CPT codes 0624T and 0625T 
are comparable to other services such as HeartFlow, and should be 
assigned the same status indicators as 0502T and 0503T. Additionally, 
one commenter, the manufacturer of the technology associated with this 
service, requested that CPT code 0625T be reassigned to APC 1557 (New 
Technology--Level 17 ($1500-$1600).
    Response: We thank the commenters for their recommendations. As 
noted above, CPT code 0625T was reassigned to APC 1511 (New 
Technology--Level 11 ($900--$1000)) effective October 1, 2022. We 
believe that APC 1511, with a payment rate of $950.50, most accurately 
accounts for the resources associated with furnishing the procedure 
described by CPT code 0625T.
    We also agree with the commenters that CPT code 0624T should be 
reassigned to status indicator ``N'', and note that the technology 
associated with this service received FDA clearance in October 2020. We 
are finalizing the reassignment of CPT code 0624T to status indicator 
``N'' effective January 1, 2023. Additionally, we are reassigning CPT 
codes 0623T and 0626T to status indicator ``M'' to indicate that these 
codes are not payable under the OPPS.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, with modification, to reassign CPT code 0624T 
to status indicator ``N'' and reassign CPT codes 0623T and 0626T to 
status indicator ``M'' for CY 2023. We are also continuing to assign 
0625T to APC 1511 (New Technology--Level 11 ($900-$1000)) for CY 2023. 
The final APC assignment and status indicators for CPT codes 0623T-
0626T can be found in OPPS Addendum B. We refer readers to Addendum B 
of the final rule with comment period for the final payment rates for 
all codes reportable under the OPPS. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the SI meanings 
for all codes reported under the OPPS. Both Addendum B and Addendum D1 
are available via the internet on the CMS website.
12. Coflex[supreg] Interlaminar Implant Procedure (APC 5116)
    For CY 2023, we proposed to continue to assign CPT code 22867 
(Insertion of interlaminar/interspinous process stabilization/
distraction device, without fusion, including image guidance when 
performed, with open decompression, lumbar; single level) to APC 5116. 
CPT code 22867 describes the procedure associated with an open surgical 
decompression with interlaminar stabilization of the lumbar region.

[[Page 71852]]

    Comment: One commenter agreed with the proposed assignment to APC 
5116 and asked CMS to finalize the proposal.
    Response: CPT code 22867 was effective January 1, 2017, and since 
its inception, the code has been assigned to APC 5116. For the CY 2023 
OPPS update, the payment rates are based on claims submitted between 
January 1, 2021, through December 31, 2021, that were processed on or 
before June 30, 2022. Our analysis of the claims data for this final 
rule shows 582 single claims (out of 584 total claims) with a geometric 
mean cost of approximately $15,504, which falls within the range of the 
geometric mean cost for the significant HCPCS codes in APC 5116. The 
range of the geometric mean cost is between approximately $15,504 and 
$27,978. Based on the claims data for this final rule, we are 
finalizing our proposal and assigning CPT 22867 to APC 5116. We note 
that we review, on an annual basis, the APC assignments for all 
services and items paid under the OPPS.
    In summary, after consideration of the public comment, we are 
finalizing our proposal to assign CPT code 22867 to APC 5116. The final 
CY 2023 OPPS payment rate for the code can be found in Addendum B to 
this final rule with comment period. In addition, the complete list of 
status indicator meanings for the OPPS payment system can be found in 
Addendum D1 to this final rule with comment period. Both Addendum B and 
Addendum D1 are available via the internet on the CMS website.
13. Colonic Lavage (APC 5721)
    The CPT Editorial Panel created CPT code 0736T (Colonic lavage, 35 
or more liters of water, gravity-fed, with induced defecation, 
including insertion of rectal catheter) effective July 1, 2022. For CY 
2023, we proposed to assign the code to APC 5733 (Level 3 Minor 
Procedures) with status indicator ``Q1'', indicating conditionally 
packaged payment under the OPPS with a proposed 2023 payment rate of 
$58.50.
    Comment: We received one comment from the manufacturer requesting 
the reassignment of CPT code 0736T to APC 5694 (Level 4 Drug 
Administration). The commenter stated that the assignment of CPT code 
0736T to APC 5694 is more appropriate based on resource and clinical 
coherence with other codes within that APC. Because the code is new and 
we have no claims data, the commenter provided invoices for the 
equipment, supplies, and staff required to perform this procedure.
    Response: We appreciate the additional information provided by the 
commenter. Based on our understanding of the procedure and input from 
our medical advisors, we do not agree that the service associated with 
CPT code 0736T shares significant clinical or resource similarity with 
the services included in APC 5694 (Level 4 Drug Administration). We 
note that the long descriptor for the code describes a service that 
utilizes water and involves inserting a device, specifically, a rectal 
catheter, and does not describe the administration of a drug. 
Consequently, we do not believe that assignment to APC 5694 would be 
appropriate. However, based on the clinical characteristics of the 
procedure, we believe that the service should be reassigned to another 
more appropriate APC. Based on the nature of the procedure and the 
additional information provided to us, we believe that the service 
associated with CPT code 0736T is more appropriate in APC 5721 (Level 1 
Diagnostic Tests and Related Services). Moreover, based on our 
assessment, we believe that the service described by HCPCS code 0736T 
shares similar resource and clinical characteristics with some of 
services included in APC 5721. Therefore, for CY 2023, we are revising 
the assignment for CPT code 0736T to APC 5721, which is assigned to 
status indicator ``S''.
    In summary, after consideration of the public comment, we are 
finalizing the APC assignment for CPT code 0736T with modification. 
Specifically, we are revising the APC assignment for CPT code 0736T to 
APC 5721 and assigning the code to status indicator ``S'' for CY 2023. 
The final CY 2023 OPPS payment rate for this code can be found in 
Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the SI meanings for all codes reported under the OPPS. Addendum D1 is 
available via the internet on the CMS website. As we do every year, we 
will reevaluate the APC assignment for CPT code 0736T for the next 
rulemaking cycle. We note that we review, on an annual basis, the APC 
assignments for all services and items paid under the OPPS.
14. CoverScan (APC 5523)
    CPT code 0697T (Quantitative magnetic resonance for analysis of 
tissue composition (eg, fat, iron, water content), including 
multiparametric data acquisition, data preparation and transmission, 
interpretation and report, obtained without diagnostic mri examination 
of the same anatomy (eg, organ, gland, tissue, target structure) during 
the same session; multiple organs) describes a procedure that generates 
metrics for multiple organs from a single, non-contrast MRI scan. CPT 
code 0697T was established effective January 1, 2022, and since its 
establishment, the code has been assigned to APC 5523 (Level 3 Imaging 
without Contrast). Under the OPPS, we review our claims data on an 
annual basis to determine the payment rates. For CY 2023, the OPPS 
payment rates are based on claims submitted between January 1, 2021, 
and December 31, 2021, processed through June 30, 2022. Because the 
code was new in 2022, we have no claims data at this time. However, we 
note that with all new codes for which we lack pricing information, our 
policy has been to assign the service to an existing APC based on input 
from a variety of sources, including, but not limited to, review of the 
clinical similarity of the service to existing procedures, input from 
CMS medical advisors, and review of all other information available to 
us. The OPPS is a prospective payment system that provides payment for 
groups of services that share clinical and resource use 
characteristics. For CY 2022, based on our evaluation, we assigned CPT 
code 0697T to APC 5523. We believe the service associated with CPT code 
0697T shares similar clinical characteristics to the services assigned 
to APC 5523. For CY 2023, we proposed continuing to assign CPT code 
0697T to APC 5523 with a payment rate of $238.24.
    Comment: One commenter requested that CPT code 0697T be reassigned 
to New Technology APC 1523 (New Technology--Level 23 ($2501-$3000)) 
with a payment rate of $2,750.50. The commenter noted that the 
procedure described by CPT code 0697T captures images and provides 
metrics on multiple organs, however, the code for the service is 
assigned to an APC whose payment rate is much lower in comparison to 
similar procedures that only capture images and generate metrics for a 
single organ.
    Response: The developer of the service described by CPT code 0697T 
recently submitted an application for consideration as a new technology 
service through the CMS OPPS New Technology APC process. Because we are 
currently reviewing the application, we are not making any changes to 
the APC assignment for CPT code 0697T at this time. After our 
evaluation of the application, we will determine whether a change to 
the APC assignment is necessary.
    After consideration of the public comment, we are finalizing our 
proposal without modification to continue to

[[Page 71853]]

assign CPT code 0697T to APC 5523 for CY 2023. The final CY 2023 
payment rate for CPT code 0697T can be found in Addendum B to this 
final rule with comment period, which is available via the internet on 
the CMS website.
15. COVID-19 Vaccine 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 vaccines 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.\16\ 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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    \16\ 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 
and Use of Alternative Site-Neutral Methodology to Update Payment Rates 
for COVID-19 Vaccine Administration Services for CY 2023
    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.\17\ 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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    \17\ 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 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 primary series 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 to the CY 2021 
and 2022 OPPS/ASC final rules with comment period on the CMS OPPS 
website. As of July 1, 2022, there are approximately 18 COVID-19 
vaccine administration HCPCS codes. 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-averagesales-price/covid-19-vaccines-andmonoclonal-antibodies. Based on our review of CY 2021 
claims data associated with the COVID-19 vaccine administration HCPCS 
codes, we explained in the proposed rule that the geometric mean cost 
for APC 9397 is $25.86 and the geometric mean cost for APC 9398 is 
$36.80. We are generally using CY 2021 claims data to set CY 2023 
payment rates for APCs at the geometric mean costs for the APCs based 
on that data. We note, however, that CY 2021 utilization of the COVID-

[[Page 71854]]

19 vaccine administration codes in the outpatient hospital setting was 
very high, with nearly 7 million claims for these codes in that year, 
which may not be reflective of future year utilization. Because 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 explained 
in the proposed rule that 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, although the geometric mean costs for the 
APCs to which we assigned the COVID-19 vaccine administration codes are 
lower than $40, for CY 2023 we proposed to use the equitable adjustment 
authority in section 1833(t)(2)(E) of the Act to maintain the payment 
rate of $40 for each of the COVID-19 vaccine administration APCs: APC 
9397 and APC 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 noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44575) that 
we do not pay under the OPPS for monoclonal antibody products used to 
treat COVID-19 and their administration using the COVID-19 vaccine 
administration APCs. Rather, 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. For further discussion of payment 
for COVID-19 monoclonal antibody administration see section III.E.15.d 
below in this final rule with comment period.
    Under current policy, the payment rates for COVID-19 vaccine 
administration services are site-neutral across most outpatient and 
ambulatory settings. We requested 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 section 1833(t)(2)(E) of the Act) 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 was 
included in the July 29, 2022 Federal Register (87 FR 46221 through 
46222), we proposed to update the payment rate for the administration 
of preventive vaccines (other than for services paid under other 
payment systems such as the OPPS) using the annual increase to the 
Medicare Economic Index (MEI). We requested 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) of the Act, 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 referred readers to the CY 2023 
PFS proposed rule that was included in the July 29, 2022 Federal 
Register (87 FR 46218 through 46228).
    We also sought 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 proposed 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. Additionally, we requested 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) of the Act 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.
    Comment: Commenters supported our proposal 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 for CY 2023. One commenter recommended that CMS maintain 
these payment rates beyond CY 2023.
    One commenter expressed concerns over site-neutral payment policies 
for both COVID-19 vaccine administration when furnished in facilities 
and COVID-19 vaccine administration furnished in the patient's home. 
These commenters stated that site-neutral policies may make it more 
challenging for different settings to offer certain services when 
reimbursement does not adequately reflect the different costs involved 
in providing care.
    One commenter stated that adjustments to the payment rate for 
COVID-19 vaccine administration should be made based on the MEI and 
GAF, consistent with the proposal in the CY 2023 PFS proposed rule. 
This commenter stated that they believe that both updates could be 
adopted using CMS's equitable adjustment authority under section 
1833(t)(2)(E) of the Act.
    Response: We continue to believe that the resources associated with 
COVID-19 vaccine administration do not vary across settings of care and 
are largely consistent across physician office and hospital outpatient 
department settings. We agree that, for CY 2023, the payment rates for 
COVID-19 vaccine administration should be consistent across settings of 
outpatient care, and we are concerned that a higher payment rate in the 
physician office setting could create financial incentives to furnish 
COVID-19 vaccines in that setting, rather than the hospital setting. 
Therefore, for CY 2023, we are finalizing adoption of the PFS payment 
rates for COVID-19 vaccine administration using our equitable 
adjustment authority at section 1833(t)(2)(E) of the Act. We believe 
that our goal to promote broad and timely access to COVID-19 vaccines 
will be better served if our policies with respect to payment for these 
products continue until the EUA declaration pursuant to section 564 of 
the Federal

[[Page 71855]]

Food, Drug and Cosmetic (FD&C) Act covering these products is 
terminated. Therefore, we are finalizing payment rates for APCs 9397 
and 9398 of $41.52 if the EUA declaration \18\ persists into CY 2023 
and $31.14 if the EUA declaration is terminated in CY 2022. We note 
that we will display a payment rate of $41.52 in Addendum B of the CY 
2023 OPPS final rule with comment period and if needed will update the 
APC payment rates to $31.14 through sub regulatory guidance. We are 
also finalizing creation of a new APC, APC 9399 (Covid-19 vaccine home 
administration), with a payment rate of $36.85 and are reassigning 
HCPCS code M0201 so as to effectuate the same payment amount for at-
home COVID-19 vaccine administration when billed by both hospitals and 
physician offices. We will consider whether to implement permanent 
site-neutral payment rates in future rulemaking.
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    \18\ 85 FR 18250.
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c. Comment Solicitation on the Appropriate Payment Methodology for 
Administration of Preventive Vaccines
    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, we sought comments on the appropriate payment 
methodology for the administration of Part B preventive vaccines, 
including the COVID-19 vaccine post-PHE.
    Comment: Several commenters stated that, while they support a site-
neutral payment policy for vaccines in general because the resource 
costs of administering a vaccine are consistent across settings of 
care, they believe the OPPS payment rate is more accurate than the PFS 
rate and encouraged CMS to continue to use OPPS ratesetting for the 
Part B preventive vaccine administration services as the OPPS 
methodology is updated each year by new cost data based on OPPS claims, 
which is a more reliable source of current hospital costs for services.
    Response: We thank commenters for their input and will consider any 
changes to the payment methodology for preventive vaccines in future 
rulemaking.
d. 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 the availability of COVID-19 monoclonal antibody 
products, we noted in the CY 2023 OPPS/ASC proposed rule that as of the 
date of publication of that proposed rule, there were 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.\19\ We note that at the time of 
publication of this final rule with comment period, 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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    \19\ 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.\20\ The HCPCS 
codes associated with the COVID-19 monoclonal antibody products are 
assigned to 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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    \20\ 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 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,\21\ 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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    \21\ 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 APC assignments. For further 
information, please see Addendum B to the CY 2021 and 2022 OPPS/ASC 
final rules with comment period. For CY 2023, we proposed to use the 
equitable adjustment authority at section 1833(t)(2)(E) of the Act 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 noted 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 proposals regarding such 
payment, we referred readers to the CY 2023 PFS proposed

[[Page 71856]]

rule that was included in the July 29, 2022 Federal Register (87 FR 
46224 through 46228). In particular, the CY 2023 PFS proposed rule 
proposed 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 under section 564 of the FD&C Act for drugs and biological 
products is terminated. Additionally, we proposed to continue the 
existing policy to pay for monoclonal antibody products used as pre-
exposure prophylaxis for prevention of COVID-19 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.
    Comment: We did not receive any comments on our proposal to 
continue existing policy to pay for monoclonal antibody COVID-19 pre-
exposure prophylaxis products under the Part B vaccine benefit after 
the EUA declaration is terminated, provided those products have market 
authorization. Commenters stated that while they appreciated CMS's 
efforts to provide consistent payment policy for monoclonal antibodies 
and their administration during the PHE, they encouraged the agency to 
continue to work with providers to ensure that the payment rates are 
accurate, even if they vary by setting of care.
    Response: We thank commenters for their input and will consider any 
changes to payment policy for monoclonal antibodies and their 
administration in future rulemaking.
    Comment: Commenters encouraged CMS to work with providers as we 
scale back or wind down any PHE-specific flexibilities so that the 
agency provides clear guidance on how payment policies may be changing, 
and the impact that will have on providers.
    Response: We appreciate these comments and will consider how best 
to provide guidance on any policy changes either during the PHE or 
after.
    After consideration of public comments, we are finalizing our 
proposal to use the equitable adjustment authority at section 
1833(t)(2)(E) of the Act 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. We are also 
finalizing our proposal that this policy would continue to apply for 
OPPS payment for monoclonal antibody products used as pre-exposure 
prophylaxis for prevention of COVID-19 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.
16. Duplex Scan of Extracranial Arteries (APC 5523)
    For CY 2023, we proposed to continue to assign CPT code 93880 
(Duplex scan of extracranial arteries; complete bilateral study) to APC 
5523 (Level 3 Imaging without Contrast) with a proposed payment rate of 
$238.24.
    Comment: One commenter disagreed with the proposed payment amount 
and recommended that CPT code 93880 be reassigned from APC 5523 to APC 
5524 (Level 4 Imaging without Contrast) with a proposed payment rate of 
$512.73 for CY 2023. The commenter stated that CPT code 93880 should be 
reassigned due its clinical and resource similarity to CPT code 93306 
(Echocardiography, transthoracic, real-time with image documentation 
(2d), includes m-mode recording, when performed, complete, with 
spectral doppler echocardiography, and with color flow doppler 
echocardiography), which is assigned to APC 5524.
    Response: We are not accepting this recommendation. We review, on 
an annual basis, the APC assignments for all services and items paid 
under the OPPS based on our analysis of the latest claims data. For the 
CY 2023 OPPS update, based on claims submitted between January 1, 2021, 
and December 30, 2021, and processed through June 30, 2022, our 
analysis of the claims data for this final rule with comment period 
supports the continued assignment of CPT code 93880 to APC 5523 based 
on its clinical and resource homogeneity to the procedures and services 
in the APC. Specifically, our claims data show a geometric mean cost of 
approximately $225 based on 444,369 single claims (out of 514,044 total 
claims) for CPT code 93880, which is consistent with the geometric mean 
cost of about $240 for APC 5523, rather than the geometric mean cost of 
approximately $517 for APC 5524. We believe the resource requirements 
for CPT code 93880 are more similar to procedures found in APC 5523 
rather than in APC 5524. Therefore, for CY 2023, we will continue to 
assign CPT code 93880 to APC 5523.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification and assigning CPT code 
93880 to APC 5523 for CY 2023. The final CY 2023 OPPS payment rate for 
the code can be found in Addendum B to this final rule with comment 
period. In addition, we refer readers to Addendum D1 of this final rule 
with comment period for the status indicator (SI) meanings for all 
codes reported under the OPPS. Both Addendum B and D1 are available via 
the internet on the CMS website.
17. Endoscopic Submucosal Dissection (ESD) Procedure (APC 5303)
    CMS established HCPCS code C9779 (Endoscopic submucosal dissection 
(ESD), including endoscopy or colonoscopy, mucosal closure, when 
performed) effective October 1, 2021, to describe the endoscopic 
submucosal dissection (ESD) performed during an endoscopy or 
colonoscopy. HCPCS code C9779 was established based on a New Technology 
application that was submitted to CMS for New Technology consideration 
under the OPPS. Based on our assessment, we assigned the code to APC 
5313 (Level 3 Lower GI Procedures) because we believe the ESD procedure 
has similar clinical characteristics and resource costs as the surgical 
procedures assigned to APC 5313. We announced the assignment to APC 
5313 in the October 2021 OPPS quarterly update CR (Transmittal 10997, 
Change Request 12436, dated September 16, 2021) with a payment rate of 
$2,443.39. In CY 2022, we continued to assign the code to APC 5313 with 
a payment rate of $2,495.04. For CY 2023, we proposed to continue to 
assign HCPCS code C9779 to APC 5313 with a proposed payment rate of 
$2,611.51.
    Comment: Some commenters disagreed with the proposed payment amount 
and requested that HCPCS code C9779 be reassigned from APC 5313 to APC 
5303 (Level 3 Upper GI Procedures) with a proposed payment rate of 
$3,319.29 for CY 2023. Commenters stated that the ESD procedure's 
resource requirements and geometric mean cost of $4,049 are more 
similar to the resource requirements and geometric mean costs of 
procedures found in APC 5303. Further, commenters noted that the ESD 
procedure is technically more demanding, requires advanced skills to 
perform, and is clinically similar to CPT code 43497 (Lower esophageal 
myotomy, transoral (i.e., peroral endoscopic myotomy [POEM])), which is 
currently assigned to APC 5303.
    Response: Based on the comments received, further evaluation of the 
surgical procedure, and input from our medical advisors, we agree with 
the commenters that the resource requirements for HCPCS code C9779

[[Page 71857]]

may be more similar to the procedures assigned to APC 5303. Therefore, 
we are accepting the commenter's recommendation and reassigning HCPCS 
code C9779 to APC 5303 for CY 2023.
    In summary, after consideration of the public comments, we are 
finalizing reassigning HCPCS code C9779 to APC 5303 for CY 2023. We 
note that we review, on an annual basis, the APC assignments for all 
services and items paid under the OPPS based on our analysis of the 
latest claims data. The final CY 2023 OPPS payment rate for the code 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final rule with 
comment period for the status indicator (SI) meanings for all codes 
reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website.
18. Endovenous Femoral-Popliteal Arterial Revascularization (APC 5193)
    For CY 2023, we proposed to continue to assign CPT code 0505T 
(Endovenous femoral-popliteal arterial revascularization, with 
transcatheter placement of intravascular stent graft(s) and closure by 
any method, including percutaneous or open vascular access, ultrasound 
guidance for vascular access when performed, all catheterization(s) and 
intraprocedural roadmapping and imaging guidance necessary to complete 
the intervention, all associated radiological supervision and 
interpretation, when performed, with crossing of the occlusive lesion 
in an extraluminal fashion) to APC 5193 (Level 3 Endovascular 
Procedures) with a proposed payment rate of $10,760.97.
    Comment: One commenter requested the reassignment of CPT code 0505T 
to APC 5194 (Level 4 Endovascular Procedures). The commenter provided 
utilization claims data and asserted that CPT code 0505T is currently 
being studied in an IDE clinical trial and that the claims are not 
currently representative of the full cost of the procedure. The 
commenter stated that CPT code 0620T (Endovascular venous 
arterialization, tibial or peroneal vein, with transcatheter placement 
of intravascular stent graft(s) and closure by any method, including 
percutaneous or open vascular access, ultrasound guidance for vascular 
access when performed, all catheterization(s) and intraprocedural 
roadmapping and imaging guidance necessary to complete the 
intervention, all associated radiological supervision and 
interpretation, when performed), which is assigned to APC 5194, is 
clinically similar to CPT code 0505T.
    Response: Based on our review of the cost data and input from our 
clinical advisors, we disagree with the suggestion that CPT code 0505T 
should be assigned to APC 5194. We also do not agree that CPT code 
0505T is comparable to CPT 0620T. We review, on an annual basis, the 
APC assignments for all services and items paid under the OPPS. Based 
on our analysis of the claims data for this CY 2023 OPPS/ASC final rule 
with comment period, our data shows a geometric mean cost of about 
$14,264 for CPT code 0505T based on 22 single claims (out of 22 total 
claims), which is in line with the geometric mean cost of $10,916 for 
APC 5193. In contrast, the geometric mean cost for CPT code 0620T is 
significantly higher at approximately $26,468, which is based on 9 
single claims (out of 9 total claims). Our data demonstrates that the 
resource cost associated with CPT code 0505T is significantly lower 
than the cost of CPT code 0620T. We believe that the procedure 
described by CPT code 0505T is more clinically similar to the 
procedures assigned to APC 5193 (Level 3 Endovascular Procedures) and 
that the costs of other procedures in this APC more accurately compare 
to the costs associated with CPT code 0505T.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification to assign CPT code 0505T 
to APC 5193. The final CY 2023 payment rate for this code can be found 
in Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the SI meanings for all codes reported under the OPPS. Both Addendum B 
and D1 are available via the internet on the CMS website. For 
additional discussion regarding the commenter's request to add CPT code 
0505T to the ASC covered procedures list (CPL), refer to section XIII. 
(ASC Payment System) of this final rule.
19. External Electrocardiographic (ECG) Recording (APC 5732)
    For CY 2023, we proposed to assign CPT code 93242 (External 
electrocardiographic recording for more than 48 hours up to 7 days by 
continuous rhythm recording and storage; recording (includes connection 
and initial recording)) to APC 5732 (Level 2 Minor Procedures) with a 
proposed payment rate of $34.61. The code was new in CY 2021 with an 
effective date of January 1, 2021. Prior to CY 2021, the code was 
reported with CPT code 0296T (External electrocardiographic recording 
for more than 48 hours up to 21 days by continuous rhythm recording and 
storage; recording (includes connection and initial recording)), which 
was active between January 1, 2012, and December 31, 2020.
    Comment: We received a comment requesting that we assign CPT code 
93242 to APC 5733 or 5734 (Level 4 Minor Procedures). The commenter 
stated that the resource cost associated with furnishing the service 
described by CPT code 93242 is not reflected in the payment rate for 
APC 5732.
    Response: We review, on an annual basis, the APC assignments for 
all services and items paid under the OPPS based on our review of the 
latest claims data. For the CY 2023 OPPS update, based on claims 
submitted between January 1, 2021, and December 30, 2021, processed 
through June 30, 2022, our analysis of the latest claims data for this 
CY 2023 OPPS/ASC final rule supports the assignment of CPT code 93242 
to APC 5732 based on its clinical and resource homogeneity to the 
procedures and services in the APC. Specifically, our data shows a 
geometric mean cost of approximately $25 based on 15,603 single claims 
(out of 31,034 total claims) for CPT code 93242, which is consistent 
with the geometric mean cost of about $35 for APC 5732 rather than the 
geometric cost of about $59 for APC 5733 or the geometric mean cost of 
approximately $119 for APC 5734. Based on our data, the cost associated 
with furnishing CPT code 93242 is significantly less than the cost 
associated with the services assigned to APC 5733 or APC 5734. We 
believe that CPT code 93242 accurately fits in APC 5732 based on its 
clinical and resource homogeneity to the procedures in the APC.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification, and assigning CPT code 
93242 to APC 5732 for CY 2023. The final CY 2023 payment rate for this 
code can be found in Addendum B to this final rule with comment period. 
In addition, we refer readers to Addendum D1 of this final rule with 
comment period for the status indicator (SI) meanings for all codes 
reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website.
20. Eye Procedures (APCs 5502 and 5503)
    For CY 2023, we proposed to continue to assign CPT code 65426 
(Excision or transposition of pterygium; with graft) to APC 5503 (Level 
3 Extraocular, Repair, and Plastic Eye Procedures) with

[[Page 71858]]

a proposed payment rate of $2,140.55. In addition, we proposed to 
continue to assign CPT 65778 (Placement of amniotic membrane on the 
ocular surface; without sutures) to APC 5502 (Level 2 Extraocular, 
Repair, and Plastic Eye Procedures) with a proposed payment rate of 
$882.12.
    Comment: A commenter requested the reassignment of CPT code 65426 
to APC 5504 (Level 4 Extraocular, Repair, and Plastic Eye Procedures) 
and CPT 65778 to APC 5503 (Level 3 Extraocular, Repair, and Plastic Eye 
Procedures). The commenter stated that the inclusion of ``grafts'' in 
CPT 65426 code descriptor leads to billing discrepancies and 
underreported device and supply costs. The commenter believes that the 
device offset for CPT 65426 and CPT 65778 is not truly reflective of 
the cost of the graft as a result of the underreported device and 
supply costs. Additionally, the commenter cited CPT 65779 (Placement of 
amniotic membrane on the ocular surface; single layer, sutured) and CPT 
65780 (Ocular surface reconstruction; amniotic membrane 
transplantation, multiple layers) as two examples of procedures paid 
for under the OPPS that use the same graft as CPT code 65426 but are 
assigned to APC 5504, with CPT 65779 having a device offset amount of 
$1,242.53.
    Response: Based on our review of the cost data and input from our 
clinical advisors, we disagree with commenters that CPT code 65426 
should be assigned to APC 5504. For CY 2023, based on claims submitted 
between January 1, 2021, through December 31, 2021, that were processed 
on or before June 30, 2022, our analysis of the latest claims data for 
this final rule continues to support the assignment to APC 5503 for CPT 
code 65426. Specifically, our claims data reveal a geometric mean cost 
of approximately $2,474 for CPT code 65426 based on 1,092 single claims 
(out of 1,101 total claims), which is consistent with the geometric 
mean cost of about $2,174 for APC 5503, rather than the geometric mean 
cost of $3,595 for APC 5504. Similarly, we do not agree that CPT code 
65778 should be reassigned to APC 5503. Our claims data show a 
geometric mean cost of approximately $1,349 for CPT code 65778 based on 
190 single claims (out of 443 total claims), which is consistent with 
the geometric mean cost of about $897 for APC 5502, rather than the 
geometric mean cost of approximately $2,174 for APC 5503. We believe 
that assigning CPT code 65778 to APC 5503 would overpay for the 
procedures. In addition, we do not believe that CPT code 65426 is 
comparable to CPT code 65779 or CPT code 65780. Based on our review of 
the clinical characteristics of the procedure, and input from our 
medical advisors, we believe CPT code 65426 is more similar to the 
procedures assigned to APC 5503 and CPT code 65778 is more similar to 
the procedures assigned to APC 5502, and these payment rates better 
account for the cost of the procedures as well as the resources used.
    With respect to the issue of billing discrepancies, based on our 
review of the claims data for CPT codes 65426 and 65778, we have no 
reason to believe that the procedures are miscoded. Based on our 
analysis of the claims data for this final rule with comment period, we 
are unable to determine whether hospitals are misreporting the 
procedures. Moreover, it is generally not our policy to judge the 
accuracy of provider coding and charging for purposes of OPPS 
ratesetting. We rely on hospitals and providers to accurately report 
the use of HCPCS codes in accordance with their code descriptors and 
CPT and CMS instructions, and to report services accurately on claims 
and charges and costs for the services on their Medicare hospital cost 
report.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification, and assigning CPT code 
65426 to APC 5503 and CPT 65778 to APC 5502. The final CY 2023 payment 
rate for these codes can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the SI meanings for all codes 
reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website. For additional discussion regarding the 
commenter's request to increase the device offset of CPT code 65426 and 
CPT code 65779, refer to section IV.C. (Device-Intensive Procedures) of 
this final rule.
21. Eye-Movement Analysis Without Spatial Calibration (APC 5734)
    The CPT Editorial Panel established CPT code 0615T (Eye-movement 
analysis without spatial calibration, with interpretation and report), 
effective July 1, 2020, to describe eye-movement analysis without 
spatial calibration that involves the use of the EyeBOX system as an 
aid in the diagnosis of concussion, also known as mild traumatic brain 
injury (mTBI). The EyeBOX is intended to measure and analyze eye 
movements as an aid in the diagnosis of concussion within one week of 
head injury in patients 5 through 67 years of age in conjunction with a 
standard neurological assessment of concussion. A negative EyeBOX 
classification may correspond to eye movement that is consistent with a 
lack of concussion. A positive EyeBOX classification corresponds to eye 
movement that may be present in both patients with or without a 
concussion.
    For CY 2023, we proposed to continue to assign CPT code 0615T to 
APC 5734 (Level 4 Minor Procedures) with status indicator ``Q1'' 
(conditionally packaged) and a proposed CY 2023 OPPS payment rate of 
$118.32.
    Comment: A commenter requested a change in the status indicator for 
CPT code 0615T to ``S'' to make it separately payable to provide 
adequate reimbursement and to treat it similarly to other SaaS 
procedures. The commenter also stated that packaging payment for use of 
the EyeBox into payment for the clinic or emergency department visit 
produces insufficient reimbursement, just as CMS's current approach to 
the other packaged SaaS codes fails to provide appropriate payment for 
those services. The manufacturer also urged CMS to assign the procedure 
to an APC with a payment rate of at least $200 to ensure that hospitals 
are adequately reimbursed for this procedure.
    Response: Although HCPCS code 0615T was effective July 1, 2020, we 
have no claims data for the code. We note that for the CY 2023 OPPS 
update, payments are based on claims submitted between January 1, 2021, 
through December 31, 2021, and processed through June 30, 2022. Because 
we have no claims data, we believe that we should continue to assign 
CPT code 0615T to APC 5734 for CY 2023. We note that we review, on an 
annual basis, the APC assignments for all services and items paid under 
the OPPS. As a result, we will reevaluate the placement for CPT code 
0615T for the next rulemaking cycle.
    In addition, as listed in OPPS Addendum D1 of the CY 2023 OPPS/ASC 
proposed rule, codes assigned to status indicator ``Q1'' may be 
packaged, assigned to a composite APC, or paid separately under the 
OPPS. Specifically, a ``Q1'' status indicator may indicate a:
     Packaged APC payment if billed on the same claim as a 
HCPCS code assigned status indicator ``S'', ``T'', or ``V''; or
     Composite APC payment if billed with specific combinations 
of services based on OPPS composite-specific payment criteria. Payment 
is packaged into a single payment for specific combinations of 
services; or
     In other circumstances, payment is made through a separate 
APC payment

[[Page 71859]]

    After reviewing the procedure with our medical advisors, we believe 
that, similar to several other SaaS procedures, it is appropriate for 
the procedure described by CPT code 0615T to be paid separately. 
Therefore, we are revising the status indicator for the code from 
``Q1'' (conditionally packaged) to ``S'' (Procedure or Service, Not 
Discounted When Multiple) to indicate that the service is paid 
separately.
    After consideration of the public comment, we are finalizing our 
proposal with modification. Specifically, we are finalizing the 
assignment to APC 5734 for CPT code 0615T and revising the status 
indicator from ``Q1'' (conditionally packaged) to ``S'' (separately 
payable), consistent with the CY 2023 payment methodology for other 
SaaS procedures.
22. Fecal Microbiota Procedure (APC 5301)
    For January 1, 2023, the AMA's CPT Editorial Panel established new 
CPT code 0780T (Instillation of fecal microbiota suspension via rectal 
enema into lower gastrointestinal tract). We note that CPT code 0780T 
was listed as placeholder code X041T in the OPPS Addendum B of the CY 
2023 OPPS/ASC proposed rule. The CPT code descriptors that appear in 
Addendum B are short descriptors and do not accurately describe the 
complete procedure, so we included the 5-digit placeholder codes and 
long descriptors for the new CY 2023 CPT codes in Addendum O to the 
proposed rule (which is available via the internet on the CMS website) 
so that the public could adequately comment on the proposed APCs and SI 
assignments. The 5-digit placeholder codes were included in Addendum O, 
specifically under the column labeled ``CY 2023 OPPS/ASC Proposed Rule 
5-Digit AMA Placeholder Code,'' to the proposed rule. We further stated 
in the proposed rule that the final CPT code numbers would be included 
in this CY 2023 OPPS/ASC final rule with comment period. For CY 2023, 
we proposed to assign CPT code 0780T to status indicator ``B'', 
indicating that this code is not paid under OPPS and an alternate code 
that is recognized by OPPS may be available.
    Comment: We received one comment from the manufacturer requesting 
that CMS assign CPT code 0780T to status indicator ``T'' and APC 5301 
(Level 1 Upper GI Procedures) with a proposed payment rate of $841.07. 
The commenter stated that CPT code 0780T should be assigned to APC 5301 
based on its clinical and resource homogeneity to procedures in this 
APC. The commenter also expressed concern that the lack of payment for 
CPT code 0780T under the OPPS would negatively impact Medicare 
beneficiaries' access to procedure.
    Response: We thank the commenter for their feedback. The fecal 
microbiota procedure has been in existence for several years now, and 
although CPT code 0780T is a new code effective January 1, 2023, the 
procedure is already described by existing codes, specifically, HCPCS 
code G0455 and CPT code 44705. Since 2013, Medicare has paid separately 
for HCPCS code G0455 under the OPPS. Table 40 lists the long 
descriptors for all three codes. We note that CPT code 44705 was 
effective January 1, 2013, however, as we stated in both the CY 2013 
PFS final rule (77 FR 69052) and the CY 2014 OPPS/ASC final rule with 
comment period (78 FR 74978-74979), we did not recognize the CPT code, 
and instead established HCPCS code G0455, effective January 1, 2013. We 
note that the payment for the preparation and instillation of fecal 
microbiota is included in HCPCS code G0455. As stated in the CY 2013 
PFS final rule, Medicare's payment for the preparation of the donor 
specimen is only made if the specimen is ultimately used for the 
treatment of a beneficiary because Medicare is not authorized to pay 
for the costs of any services not directly related to the diagnosis and 
treatment of a beneficiary (77 FR 69052). For the fecal microbiota 
procedure, the only code payable under the OPPS is HCPCS code G0455 for 
this procedure.
    For CY 2023, we proposed to continue to assign HCPCS code G0455 to 
status indicator Q1 (conditionally packaged) and APC 5301 (Level 1 
Upper GI Procedures), which had a proposed CY 2023 OPPS payment rate of 
$841.07. Because HCPCS code G0455 exists to describe the fecal 
microbiota procedure, both CPT codes 44705 and 0780T are assigned to 
status indicator ``B'' (Codes that are not recognized by OPPS when 
submitted on an outpatient hospital Part B bill type (12x and 13x) to 
indicate that the codes are not recognized under OPPS, and instead, 
should be reported with another HCPCS code. In this case, the 
appropriate code that should be reported to Medicare under the OPPS is 
HCPCS code G0455 for the fecal microbiota procedure.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification and assigning CPT code 
0780T to status indicator ``B''. In addition, we note that we received 
no comments on CPT code 44705 or HCPCS code G0455 and are finalizing 
our proposals with respect to those codes without modification. Table 
40 list the long descriptors for the fecal microbiota HCPCS and CPT 
codes and their OPPS SI and APC assignments for CY 2023. We refer 
readers to Addendum D1 of this final rule with comment period for the 
status indicator (SI) meanings for all codes reported under the OPPS. 
Addendum D1 is available via the internet on the CMS website.

[[Page 71860]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.055

23. 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 service is 
indicated 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). In 2018, the CPT Editorial Panel established CPT code 0503T 
to describe the service associated with HeartFlow. Below is the long 
description for the CPT code:

     0503T: Noninvasive estimated coronary fractional flow 
reserve (ffr) derived from coronary computed tomography angiography 
data using computation fluid dynamics physiologic simulation software 
analysis of functional data to assess the severity of coronary artery 
disease; analysis of fluid dynamics and simulated maximal coronary 
hyperemia, and generation of estimated ffr model

    For many services paid under the OPPS, payment for analytics that 
are performed after the main diagnostic/image procedure are packaged 
into the payment for the primary service. However, in CY 2018, we 
determined that 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. Based on pricing information provided 
by the developer of the procedure that indicated the price of the 
procedure was approximately $1,500, in CY 2018, 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. Because the CPT code was new in 2018, we did not have 
Medicare claims data in CY 2019; and we continued to assign the service 
to New Technology APC 1516 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. We note that for CY 2020, the 
OPPS payment rates were based on claims submitted between January 1, 
2018, and December 31, 2018, processed through June 30, 2019. For the 
CY 2020 OPPS/ASC final rule with comment period, there were 957 claims 
reported 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. Therefore, 
in CY 2020, we assigned CPT code 0503T to New Technology APC 1511.
    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

[[Page 71861]]

policy. Therefore, we used our standard methodology rather than the 
low-volume methodology we previously used to determine the cost of CPT 
code 0503T. Based on the CY 2019 claims data used for the CY 2021 OPPS 
ratesetting, we found that the geometric mean cost decreased from the 
previous year. Specifically, our analysis found that the geometric mean 
cost for CPT code 0503T was $804.35, which was consistent with the 
geometric mean cost for New Technology APC 1510 (New Technology--Level 
10 ($801-$900)). However, providers and other stakeholders noted that 
the cost to furnish FFRCT services is approximately $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, in CY 2021, 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 New Technology APC 
1511, which is the same APC assignment 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 
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.
    Since 2018, CPT code 0503T has been paid separately under the OPPS. 
We now have several years' worth of claims data. Based on the 
historical claims data for the past three years, specifically, from CY 
2018, CY 2019, and CY 2021, and based on the claims data for the CY 
2023 OPPS/ASC proposed rule, we stated that we believe that CPT code 
0503T should be reassigned from a New Technology to a clinical APC. 
First, we explained that 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, about $808 in CY 2019, and approximately $827 
in CY 2021. Since the cost data have been stable for HeartFlow for the 
past several years, we stated that we believe it is appropriate to 
reassign the service to a clinical APC using our regular process of 
using the most recent year of claims data for a procedure. Based on our 
analysis of the claims data for the proposed rule, the geometric mean 
cost for CPT code 0503T is $826.52 based on 1,681 single claims. 
HeartFlow is a diagnostic service, and based on its geometric mean 
cost, we believe that the cost of furnishing the FFRCT service is 
similar to the other services within APC 5724 (Level 4 Diagnostic Tests 
and Related Services), whose geometric mean cost is $960.98. We further 
believe that CPT code 0503T appropriately fits in APC 5724 based on its 
clinical and resource homogeneity to the procedures in the APC. 
Therefore, for CY 2023, we proposed to reassign CPT code 0503T to 
clinical APC 5724 (Level 4 Diagnostic Tests and Related Services) with 
a proposed payment rate of $952.52.
    Comment: Multiple commenters, including the developer of HeartFlow, 
expressed support for our proposal to assign CPT code 0503T to clinical 
APC 5724. The commenters believe APC 5724 is an appropriate APC 
assignment that reflects most of the costs of the HeartFlow service. 
The commenters also appreciated the payment stability for the service 
that will occur since HeartFlow is assigned to a clinical APC rather 
than a new technology APC.
    Response: We appreciate the support of our proposal from the 
commenters. We note that analysis of the latest claims data for this 
final rule with comment period further supports the assignment to APC 
5724. Specifically, our analysis reveals a geometric mean cost of about 
$824 for CPT code 0503T based on 1,844 single claims (out of 6,660 
total claims), which is comparable to the geometric mean cost of 
approximately $961 for APC 5724.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification to assign CPT code 0503T 
to clinical APC 5724 (Level 4 Diagnostic Tests and Related Services) 
for CY 2023. Table 41 shows the current status indicator and APC 
assignment for CPT code 0503T for CY 2022, and the finalized status 
indicator and APC assignment for CPT code 0503T for CY 2023. We refer 
readers to Addendum B of this CY 2023 OPPS/ASC final rule for the 
payment rates for all codes reportable under the OPPS. Addendum B is 
available via the internet on the CMS website.

[[Page 71862]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.056

24. Gastrointestinal Motility (APC 5722)
    Gastrointestinal (GI) motility codes describe procedures that 
assesses the motor activity and muscle contractions of the colon or 
large intestine. For CY 2023, we proposed to assign CPT code 91117 
(Colon motility (manometric) study, minimum 6 hours continuous 
recording (including provocation tests, e.g., meal, intracolonic 
balloon distension, pharmacologic agents, if performed), with 
interpretation and report) and CPT code 91122 (Anorectal manometry) to 
APC 5371 (Level 1 Urology and Related Services), with a proposed 
payment rate of $224.14.
    Comment: Commenters expressed concerns with the proposed CY 2023 
geometric mean cost of APC 5371. Specifically, they are concerned that 
the decrease in the geometric mean cost for APC 5371 will adversely 
impact the payment rate for two GI motility codes, specifically, CPT 
codes 91117 and 91122. The commenters also contended that the two GI 
motility codes, currently assigned to APC 5371, do not share similar 
clinical characteristics with the urological services assigned to APC 
5371 as this APC series is designated for urology and related services. 
The commenters further pointed out that these services are more 
similar, clinically and with regard to resource utilization, to three 
other GI motility codes: CPT code 91037 (Esophageal function test, 
gastroesophageal reflux test with nasal catheter intraluminal impedance 
electrode(s) placement, recording, analysis and interpretation;), CPT 
code 91120 (Rectal sensation, tone, and compliance test (ie, response 
to graded balloon distention)), and CPT code 91132 
(Electrogastrography, diagnostic, transcutaneous;), which are currently 
assigned to APC 5722 (Level 2 Diagnostic Tests and Related Services), 
with a proposed payment rate of $285.63. The commenters argued that the 
proposed geometric mean cost of $324.49 for CPT code 91122 is in line 
with the geometric mean cost for the three GI motility codes (CPT codes 
91037, 91120, and 91132) currently assigned to APC 5722 (Level 2 
Diagnostic Tests and Related Services). The commenter further stated 
that the low volume of CPT code 91117 is primarily due to the procedure 
being performed in the pediatric population.
    Response: We agree with the commenters that CPT codes 91117 and 
91122 are clinically similar to CPT codes 91037, 91120, and 91132, 
which assess the GI motility. In terms of resource utilization, our 
analysis of the latest CY 2021 claims data for this CY 2023 OPPS/ASC 
final rule with comment period, yielded zero single claims for CPT code 
91117, therefore we have no data for its geometric mean cost. However, 
we observed 3,741 single claims for CPT code 91122 with a geometric 
mean cost of about $324.83. Therefore, we agree with the commenters 
that CPT code 91122 has a similar resource utilization to the 
procedures assigned to APC 5722, which include CPT code 91037 
(geometric mean cost: $207.23), CPT code 91120 (geometric mean cost: 
$213.02), and CPT code 91132 (geometric mean cost: $326.53). However, 
we note that APC 5722 is not limited to CPT codes 91037, 91120, and 
91132, but instead, includes a myriad of diagnostic tests besides GI 
motility procedures. We analyzed our claims data for this final rule 
with comment period, and the geometric mean cost for four of the five 
motility codes, specifically, 91037, 91120, 91122, and 91132, range 
between $207 and $327, which is in line with the geometric mean cost of 
about $288 for APC 5722. Although we have no claims data for CPT code 
91117, because the service is clinically similar to the services 
described by CPT codes 91037, 91120, 91122, and 91132, both from a 
clinical and resource perspective, we believe that assignment to APC 
5722 for the five codes is appropriate. We agree that assignment of 
these services to APC 5722 would improve the clinical and resource 
homogeneity of the services within the APC.
    In summary, after consideration of the public comments, we are 
finalizing the reassignment of CPT codes 91117 and 91122 to APC 5722. 
The final APC and status indicator assignments for CPT codes 91117 and 
91122 are found in Table 42 below. The final CY 2023 OPPS payment rates 
for the codes can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the SI meanings for all codes 
reported under the OPPS. Both Addenda B and D1 are available via the 
internet on the CMS website.

[[Page 71863]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.057

25. Gastrointestinal Myoelectrical Activity Study (APC 5723)
    For CY 2023, the CPT Editorial Panel created CPT code 0779T 
(Gastrointestinal myoelectrical activity study, stomach through colon, 
with interpretation and report) to describe the procedure associated 
with the G-Tech Wireless Patch System, which collects electrical 
signals from the stomach, intestine, and colon over multiple days, 
which are then transmitted to a phone that stores the transmissions in 
the cloud, where they are then processed by an algorithm that generates 
a report based on the transmitted information.
    CMS proposed to assign CPT code 0779T to APC 5733 (Level 3 Minor 
Procedures) with a proposed payment rate of around $59. We note that 
CPT code 0779T was listed as placeholder code X069T in Addendum B of 
the proposed rule. The CPT and Level II HCPCS code descriptors that 
appear in Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item. Therefore, we 
included the 5-digit placeholder codes and long descriptors for the new 
CY 2023 CPT codes in Addendum O to the proposed rule so that the public 
could adequately comment on the proposed APCs and SI assignments. 
Because CPT code 0779T is a new code effective January 1, 2023, we 
included the 5-digit placeholder code and long descriptor in Addendum 
O. We further stated in the proposed rule that the final CPT code 
numbers would be included in this CY 2023 OPPS/ASC final rule with 
comment period.
    Comment: We received several comments on this proposal. Commenters, 
including the device manufacturer, stated that the payment rate 
associated with APC 5733 does not capture all of the costs associated 
with providing the service described by CPT code 0779T. They indicated 
that the G-Tech Wireless Patch System itself costs around $950. They 
recommended that CMS reassign CPT code 0779T to either APC 5312 (Level 
2 Lower GI Procedures) with a proposed payment rate of $1,059.06 or APC 
5724 (Level 4 Diagnostic Tests and Related Services) with a proposed 
payment rate of $939.61.
    Response: While we agree with commenters that the proposed payment 
rate for APC 5733 does not accurately capture the costs associated with 
CPT code 0779T, we disagree with the APC assignments recommended by 
commenters. Because the code is new, we have no historical cost 
information on which to base an accurate payment for CPT code 0779T. As 
with all new codes for which we lack pricing information, our policy 
has been to assign the service to an existing APC based on input from a 
variety of sources, including, but not limited to, review of the 
clinical similarity of the service to existing procedures; input from 
CMS medical advisors; and review of all other information available to 
us. After further evaluation, we believe CPT code 0779T is more similar 
to CPT codes 91022 (Duodenal motility (manometric) study) and 91040 
(Esophageal balloon distension study, diagnostic, with provocation when 
performed), both of which are assigned to APC 5723 (Level 3 Diagnostic 
Tests and Related Services) with a proposed payment rate of $493.29. 
Because we believe that CPT code 0779T has similar clinical and 
resource characteristics as CPT codes 91022 and 91040, we are 
reassigning the assignment to APC 5723 for CY 2023.
    In summary, after consideration of the public comments, we are 
finalizing the reassignment of CPT code 0779T to APC 5723. The final CY 
2023 payment rate for this code can be found in Addendum B to this 
final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
26. Hemodialysis Arteriovenous Fistula Procedures (APC 5194)
    For CY 2019, based on two New Technology applications received by 
CMS for hemodialysis arterviovenous fistula creation, CMS established 
two new HCPCS codes to describe the surgical procedures associated with 
the two technologies as no specific CPT codes existed. Specifically, 
CMS established HCPCS codes C9754 for the Ellipsys System and C9755 for 
the WavelinQ System effective January 1, 2019. For the July 2020 
update, we deleted HCPCS codes C9754 and C9755 on June 30, 2020, and 
replaced them with G-codes effective July 1, 2020, to enable physicians 
to report the procedures when performed in the physician office 
setting. Specifically, HCPCS code C9754 was deleted and replaced with 
HCPCS Code G2170 (Percutaneous arteriovenous fistula creation (avf), 
direct, any site, by tissue approximation using thermal resistance 
energy, and secondary procedures to redirect blood flow (e.g., 
transluminal balloon angioplasty, coil embolization) when performed, 
and includes all imaging and radiologic guidance, supervision and 
interpretation, when performed) effective July 1, 2020.

[[Page 71864]]

Similarly, HCPCS code C9755 was deleted and replaced with HCPCS Code 
G2171 (Percutaneous arteriovenous fistula creation (avf), direct, any 
site, using magnetic-guided arterial and venous catheters and 
radiofrequency energy, including flow-directing procedures (e.g., 
vascular coil embolization with radiologic supervision and 
interpretation, wen performed) and fistulogram(s), angiography, 
enography, and/or ultrasound, with radiologic supervision and 
interpretation, when performed). In the CY 2021 OPPS/ASC final rule 
with comment period (85 FR 85954 through 95955), we assigned HCPCS 
codes G2170 and G2171 to APC 5194 (Level 4 Endovascular Procedures) for 
CY 2021. We continued this APC assignment for CY 2022.
    For the January 2023 update, the AMA's CPT Editorial Panel 
established CPT code 36836 (Percutaneous arteriovenous fistula 
creation, upper extremity, single access of both the peripheral artery 
and peripheral vein, including fistula maturation procedures (e.g., 
transluminal balloon angioplasty, coil embolization) when performed, 
including all vascular access, imaging guidance and radiologic 
supervision and interpretation) to describe the Ellipsys System. In 
addition to CPT code 36836, for the January 2023 update, the AMA's CPT 
Editorial Panel established CPT code 36837 (Percutaneous arteriovenous 
fistula creation, upper extremity, separate access sites of the 
peripheral artery and peripheral vein, including fistula maturation 
procedures (e.g., transluminal balloon angioplasty, coil embolization) 
when performed, including all vascular access, imaging guidance and 
radiologic supervision and interpretation) to describe the WavelinQ 
System. With the implementation of new CPT codes 36836 and 36837, we 
are deleting HCPCS codes G2170 and G2171 effective January 1, 2023. 
Based on claims data available for the CY 2023 OPPS/ASC proposed rule, 
the geometric mean cost of predecessor codes G2170 and G2171 was 
$12,055.90 and $13,486.08, respectively. For the CY 2023 proposed rule, 
based on our assessment of the geometric mean cost and APC assignment 
of the predecessor codes, we proposed to assign CPT codes 36836 and 
36837 to the same APC as the predecessor codes, APC 5194, with a 
proposed payment amount of $17,495.14 for CY 2023. We note that CPT 
code 36836 was listed as placeholder code 368X1 in the OPPS Addendum B 
of the CY 2023 OPPS/ASC proposed rule. Additionally, CPT code 36837 was 
listed as placeholder code 368X2 in the OPPS Addendum B of CY 2023 
OPPS/ASC proposed rule. Because 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, we 
included the 5-digit placeholder codes and long descriptors for the new 
CY 2023 CPT codes in Addendum O to the proposed rule (which is 
available via the internet on the CMS website) so that the public could 
adequately comment on the proposed APCs and SI assignments. The 5-digit 
placeholder codes were included in Addendum O, specifically under the 
column labeled ``CY 2023 OPPS/ASC Proposed Rule 5-Digit AMA Placeholder 
Code,'' to the proposed rule. We further stated in the proposed rule 
that the final CPT code numbers would be included in this CY 2023 OPPS/
ASC final rule with comment period.
    Comment: One commenter supported our proposal and recommending 
finalizing our assignment to APC 5194 for CPT codes 36836 and 36837.
    Response: We thank the commenter for their support. Based on our 
review of claims data available for this final rule with comment 
period, we believe an assignment to APC 5194 for CPT codes 36836 and 
36837 is appropriate for CY 2023.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification and assigning CPT codes 
36836 and 36837 to APC 5194 for CY 2023. The final CY 2023 OPPS payment 
rate for the code can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the status indicator (SI) meanings 
for all codes reported under the OPPS. Both Addendum B and D1 are 
available via the internet on the CMS website.
27. IB-Stim Application Service (APC 5724)
    For the July 2022 update, the CPT Editorial Panel established CPT 
code 0720T (Percutaneous electrical nerve field stimulation, cranial 
nerves, without implantation) to describe the service associated with 
the IB-Stim device, which received FDA De Novo marketing approval in 
June 2019. The device is placed behind the patient's ear rather than 
implanted, and is intended to be used in patients 11-18 years of age 
with functional abdominal pain associated with irritable bowel syndrome 
(IBS). For CY 2023, we proposed to assign CPT code 0720T to APC 5722 
(Level 2 Diagnostic Tests and Related Services) with a proposed payment 
rate of $285.63. We note that CPT code 0720T is a new code effective 
July 1, 2022.
    At the August 22, 2022 HOP Panel Meeting, a presenter provided 
information to the Panel on the description of the service, the cost of 
the IB-Stim kit, and the estimated total procedure cost. According to 
the presenter, the total cost of the procedure is approximately $1,323, 
which includes the cost of the IB-Stim kit ($1,195). At the conclusion 
of the presentation, the presenter advised the Panel to request that 
CMS reassign CPT code 0720T from APC 5722 to one of the following APCs:

 5431: Level 1 Nerve Procedures (proposed payment rate 
$1,829.84)
 5312: Level 2 Lower GI Procedures (proposed payment rate 
$1,102.72)
 1515: New Technology--Level 15 ($1301-$1400) (proposed payment 
rate $1,350.50)

    Based on the information presented at the meeting, the Panel 
recommended that CMS revise the payment and assign CPT code 0720T to 
APC 1515 to account for the costs and resource utilization of providing 
the service.
    Comment: A commenter disagreed with the proposed assignment to APC 
5722 and requested that CMS assign CPT code 0720T to APC 1515, as 
recommended by the HOP Panel. The commenter stated that the IB-Stim 
service is not similar, with respect to clinical and resource 
homogeneity, to the procedures assigned to APC 5722. The commenter 
explained that the IB-Stim service is therapeutic in nature, while the 
procedures in APC 5722 are primarily diagnostic. In addition, the 
resource cost associated with the procedures in APC 5722 is not as 
significant as that of CPT code 0720T. The commenter noted that the IB-
Stim application code involves the use of an expensive device, which is 
in contrast to the procedures in APC 5722 that have almost no device 
costs. The commenter reiterated the cost information provided at the 
August 22, 2022 HOP Panel Meeting and stated that the estimated 
procedure cost for the service is approximately $1,323, which includes 
the cost of the IB-Stim kit ($1,195). The commenter added that the most 
clinically appropriate assignment is APC 5461 (Level 1 Neurostimulator 
and Related Procedures), however, the proposed geometric mean cost of 
the APC is high at $3,491. Because the code is new and there is not an 
appropriate APC, both from a clinical and cost perspective, the 
commenter stated that

[[Page 71865]]

assignment to New Technology APC 1515 would be the best option until 
claims data becomes available, consistent with the recommendation of 
the HOP Panel at the August 22, 2022 meeting.
    Response: We rely upon historical hospital claims data to establish 
the annual payment rates under the OPPS. Because the code is new, we 
have no historical cost information on which to base an accurate 
payment for CPT code 0720T. Also, it should be noted that with all new 
codes for which we lack pricing information, our policy has been to 
assign the service to an existing APC based on input from a variety of 
sources, including, but not limited to, review of the clinical 
similarity of the service to existing procedures; input from CMS 
medical advisors; information from interested specialty societies; and 
review of all other information available to us. The OPPS is a 
prospective payment system that provides payment for groups of services 
that share clinical and resource use characteristics. Based on our 
assessment, we believe that the IB-Stim application service shares 
similar clinical characteristics to the services assigned to APC 5722. 
Consequently, we assigned CPT code 0720T to APC 5722 effective July 1, 
2022.
    As stated above, at the August 22, 2022 HOP Panel meeting, in lieu 
of APC 5722, the presenter requested a reassignment to either APC 5431, 
APC 5312, or APC 1515, whose proposed payment rate ranged between 
approximately $1,103 and $1,830. During the meeting, the Panel 
recommended that CMS reassign the code to New Technology APC 1515 with 
a payment of approximately $1,351. Based on the HOP Panel 
recommendation and comment, we reviewed the appropriateness of the 
existing APC assignment and determined that New Technology APC 1515 may 
overpay for the service. Consequently, we are not accepting the Panel's 
recommendation to assign the code to APC 1515. We still believe that 
CPT code 0720T has similar clinical characteristics as the services in 
APC 5722; however, we acknowledge the estimated device cost of $1,195 
for the IB-Stim kit, and we believe that APC 5724 (Level 4 Diagnostic 
Tests and Related Services) with a geometric mean cost of about $961, 
is the more appropriate assignment at this time. Therefore, we are 
revising the APC assignment for CPT code 0720T from APC 5722 to APC 
5724.
    We note that every year, since the implementation of the OPPS on 
August 1, 2000, we receive many requests from specialty associations, 
device manufacturers, drug manufacturers, and consultants to increase 
the reimbursement and ensure full payment for codes associated with 
specific drugs, devices, services, and surgical procedures. Under the 
OPPS, one of our goals is to make payments that are appropriate for the 
items and services that are necessary for the treatment of Medicare 
beneficiaries. The OPPS, like other Medicare payment systems, is budget 
neutral and increases are generally limited to the annual payment 
update factor. As a budget neutral payment system, the OPPS does not 
pay the full hospital costs of services. Nevertheless, we believe that 
our payment rates generally reflect the costs that are associated with 
providing care to Medicare beneficiaries. Furthermore, we believe that 
our payment rates are adequate to ensure access to services.
    In summary, after consideration of the public comment, we are 
finalizing assignment of CPT code 0720T to APC 5724. We note that we 
review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS based on our analysis of the latest claims 
data. The final CY 2023 OPPS payment rate for the code can be found in 
Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the status indicator (SI) meanings for all codes reported under the 
OPPS. Both Addendum B and D1 are available via the internet on the CMS 
website.
28. IDx-DR: Artificial Intelligence System To Detect Diabetic 
Retinopathy (APC 5733)
    For CY 2023, we proposed to continue to assign CPT code 92229 
(Imaging of retina for detection or monitoring of disease; with point-
of care automated analysis with diagnostic report; unilateral or 
bilateral) to APC 5733 (Level 3 Minor Procedures) with a proposed 
payment rate of $58.50.
    Comment: One commenter supported the continued assignment to APC 
5733 with a status indicator of ``S'' and praised CMS for recognizing 
the value of the service.
    Response: We thank the commenter for their support.
    After consideration of the public comment, we are finalizing our 
proposal without modification. Specifically, we are finalizing our 
proposal and assigning CPT code 92229 to APC 5733. The final CY 2023 
payment rate for this code can be found in Addendum B to this final 
rule with comment period. In addition, we refer readers to Addendum D1 
of this final rule with comment period for the complete list of status 
indicator meanings for all codes reported under the OPPS. Both Addendum 
B and D1 are available via the internet on the CMS website.
29. Insertion of Bioprosthetic Valve (APC 5184)
    For CY 2023, we proposed to assign CPT code 0744T (Insertion of 
bioprosthetic valve, open, femoral vein, including duplex ultrasound 
imaging guidance, when performed, including autogenous or nonautogenous 
patch graft (e.g., polyester, ePTFE, bovine pericardium), when 
performed) to APC 5184 (Level 4 Vascular Procedures) with a proposed 
payment rate of $5,220.31. CPT code 0744T was listed as placeholder 
code 0X13T in Addendum B of the proposed rule. The CPT and Level II 
HCPCS code descriptors that appear in Addendum B are short descriptors 
and do not accurately describe the complete procedure, service, or 
item. Therefore, we included the 5-digit placeholder codes and long 
descriptors for the new CY 2023 CPT codes in Addendum O to the proposed 
rule so that the public could adequately comment on the proposed APCs 
and SI assignments. Because CPT code 0744T is a new code effective 
January 1, 2023, we included the 5-digit placeholder code and long 
descriptor in Addendum O. We further stated in the proposed rule that 
the final CPT code numbers would be included in this CY 2023 OPPS/ASC 
final rule with comment period.
    Comment: We received a single comment supporting our proposed APC 
assignment.
    Response: We thank the commenter for their support.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification and assigning CPT code 
0744T (placeholder code 0X13T) to APC 5184. The final CY 2023 payment 
rate for the code can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the status indicator (SI) meanings 
for all codes reported under the OPPS. Both Addendum B and D1 are 
available via the internet on the CMS website.
30. InSpace Subacromial Tissue Spacer Procedure (APC 5115)
    For CY 2023, we proposed to continue to assign HCPCS code C9781 
(Arthroscopy, shoulder, surgical; with implantation of subacromial 
spacer (e.g., balloon), includes debridement (e.g., limited or 
extensive), subacromial decompression acromioplasty, and

[[Page 71866]]

biceps tenodesis when performed) to APC 5114 (Level 4 Musculoskeletal 
Procedures) with a proposed payment rate of $6,721.24.
    Comment: We received several comments from providers and the device 
manufacturers requesting the reassignment of HCPCS code C9781 to APC 
5115 (Level 5 Musculoskeletal Procedures) with a proposed payment rate 
of $13,274.06. The device manufacturer alternatively requested the 
reassignment of HCPCS code C9781 to APC 1575 (New Technology Level 38), 
with a proposed payment rate of $12,500.50 or APC 5115 in order to 
better reflect the costs of the procedure and resources used in the 
procedure, including the cost of the implant. The device manufacturer 
stated that the invoice for the device exceeds the proposed payment of 
$6,397, and that the combined cost for both the procedure and device is 
over $13,000. The device manufacturer asserted that the complete 
procedure was not described by a CPT code prior to the creation of 
HCPCS code C9781 and that HCPCS code C9781 includes multiple complex 
procedures, including: CPT code 29823 (Arthroscopy, shoulder, surgical; 
debridement, extensive, 3 or more discrete structures (e.g., humeral 
bone, humeral articular cartilage, glenoid bone, glenoid articular 
cartilage, biceps tendon, biceps anchor complex, labrum, articular 
capsule, articular side of the rotator cuff, bursal side of the rotator 
cuff, subacromial bursa, foreign body[ies])) and CPT code 29828 
(Arthroscopy, shoulder, surgical; biceps tenodesis). The manufacturer 
stated that the cost of CPT codes 29823 and 29828 plus the cost of the 
InSpace implant align closely with the costs of other services in APC 
5115. In support of this assertion, the device manufacturer submitted 
additional cost data, including numerous invoices. Additionally, 
commenters stated that HCPCS code C9781 is clinically similar to the 
reverse shoulder reconstruction and repair procedures assigned to APC 
5115.
    Response: We thank the commenters for their recommendations. After 
further evaluation of HCPCS code C9781, and additional review of the 
clinical characteristics of the procedure, input from our medical 
advisors, and the resources required to perform the procedure, we 
believe it is appropriate to reassign HCPCS code C9781 to APC 5115 
(Level 5 Musculoskeletal). Based on our evaluation of the additional 
information provided to CMS on the cost of the device, we believe that 
the resource cost associated with HCPCS code C9781 is higher than the 
proposed payment for APC 5114. Therefore, we are revising the APC 
assignment for HCPCS code C9781 for CY 2023.
    In summary, after consideration of the public comments, we are 
finalizing reassigning HCPCS code C9781 to APC 5115. The final CY 2023 
OPPS payment rate for this code can be found in Addendum B to this 
final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the SI meanings 
for all codes reported under the OPPS. Both Addendum B and D1 are 
available via the internet on the CMS website. For additional 
discussion regarding the commenter's request to increase the device 
offset, please refer to section IV.C. (Device-Intensive Procedures) of 
this final rule.
31. Intervertebral Disc Allogenic Cellular and/or Tissue-Based Product 
Percutaneous Injection (APC 5115)
    For the January 2021 update, the AMA's CPT Editorial Panel 
established four CPT codes to describe the VIA Disc NP procedure. The 
long descriptors for the codes are listed below.
    0627T: Percutaneous injection of allogeneic cellular and/or tissue-
based product, intervertebral disc, unilateral or bilateral injection, 
with fluoroscopic guidance, lumbar; first level
     0628T: Percutaneous injection of allogeneic cellular and/
or tissue-based product, intervertebral disc, unilateral or bilateral 
injection, with fluoroscopic guidance, lumbar; each additional level 
(list separately in addition to code for primary procedure)
     0629T: Percutaneous injection of allogeneic cellular and/
or tissue-based product, intervertebral disc, unilateral or bilateral 
injection, with ct guidance, lumbar; first level
     0630T: Percutaneous injection of allogeneic cellular and/
or tissue-based product, intervertebral disc, unilateral or bilateral 
injection, with ct guidance, lumbar; each additional level (list 
separately in addition to code for primary procedure)
    In the CY 2021 OPPS/ASC final rule with comment period, we 
finalized an APC assignment to APC 5115 (Level 5 Musculoskeletal 
Procedures) for CPT codes 0627T and 0629T. Additionally, we finalized a 
status indicator of ``J1'' for CPT codes 0627T and 0629T. CPT codes 
0628T and 0630T were assigned to status indicator ``N'' (packaged) to 
indicate that payment for the add-on service described by the codes is 
packaged. As discussed in the CY 2014 OPPS/ASC final rule (78 FR 
74942), add-on codes are generally packaged under the OPPS. We 
continued these APC assignments and status indicator assignments in CY 
2022. For CY 2023, we proposed to continue to assign CPT codes 0627T 
and 0629T to APC 5115 with a status indicator of ``J1''. Additionally, 
we proposed to continue to assign a status indicator of ``N'' to CPT 
codes 0628T and 0630T.
    Comment: One commenter supported our proposed APC assignment of CPT 
codes 0627T and 0629T. The commenter also recommended that we assign 
device-intensive status to CPT code 0629T.
    Response: We appreciate the commenter's recommendation and support 
of our proposal. We refer readers to section IV.B of this final rule 
with comment period for a discussion on device-intensive status 
designations under the OPPS and section XIII.C.1.b of this final rule 
with comment period for a discussion on device-intensive status 
designations under the ASC payment system. Based on our review of 
claims data available for this final rule with comment period, we 
believe an assignment to APC 5115 for CPT codes 0627T and 0629T is 
appropriate for CY 2023.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification and assigning CPT codes 
0627T and 0629T to APC 5115 for CY 2023. We are also finalizing our 
proposal to assign status indicator ``N'' under the OPPS to CPT codes 
0628T and 0630T as the OPPS packaging policy packages the cost of an 
add-on codes into the primary procedure. The final CY 2023 OPPS payment 
rate for the codes can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the status indicator (SI) meanings 
for all codes reported under the OPPS. Both Addendum B and D1 are 
available via the internet on the CMS website.
32. Magnetic Resonance-Guided Focused Ultrasound Surgery (MRgFUS) (APC 
5463)
    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) describes MRgFUS procedures for the treatment 
of essential tremor. Since CY 2021, CPT code 0398T has been assigned to 
APC 5463 (Level 3 Neurostimulator and Related Procedures). For CY 2023, 
we proposed to continue to assign CPT code 0398T to APC 5463 with a 
proposed payment rate of $12,866.05.

[[Page 71867]]

    Comment: Multiple commenters, including the manufacturer, requested 
a higher paying APC for CPT code 0398T because the current payment rate 
for APC 5463 of $12,866.05 is substantially lower than the geometric 
mean cost of the service. According to the commenters, the geometric 
mean cost for CPT code 0398T has steadily increased from $10,136 in CY 
2018 to $18,119 in CY 2021.
    Response: We appreciate the concerns of the commenters about the 
level of payment for CPT code 0398T. However, the OPPS is a prospective 
payment system and it is expected that any individual service may be 
paid more or less than the geometric mean cost of the service. For CY 
2023, the OPPS payment rates are based on our examination of the claims 
data for this final rule. Based on claims submitted between January 1, 
2021, and December 30, 2021, and processed through June 30, 2022, our 
analysis supports the continued assignment of CPT code 0398T to APC 
5463 based on its clinical and resource homogeneity to the procedures 
and services in the APC. Specifically, our data show a geometric mean 
cost of approximately $13,773 for CPT code 0398T based on 551 single 
claims (out of 551 total claims), which is comparable to the geometric 
mean cost of about $12,291 for APC 5463, rather than the geometric mean 
cost of about $6,791 for APC 5462 or the geometric mean cost of 
approximately $22,125 for APC 5464. We note that CPT code 0398T is 
grouped with other neurostimulator and related procedures that have 
clinical and resource similarity to the MRgFUS; and, based on our 
analysis of the claims data, we believe that the code is appropriately 
placed in APC 5463.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification and assigning CPT code 
0398T to APC 5463 for CY 2023. The final CY 2023 payment rate for CPT 
code 0398T can be found in Addendum B to this final rule with comment 
period, which is available via the internet on the CMS website.
33. Medical Physics Dose (APC 5723)
    For CY 2023, we proposed to continue to assign CPT code 76145 
(Medical physics dose evaluation for radiation exposure that exceeds 
institutional review threshold, including report) to APC 5612 (Level 2 
Therapeutic Radiation Treatment Preparation) with a proposed payment 
rate of $365.15. We previously discussed in the CY 2022 OPPS/ASC final 
rule with comment period that we believed APC 5612 was an appropriate 
placement for CPT code 76145, as APC 5612 contains CPT code 77307 
(Teletherapy isodose plan; complex (multiple treatment areas, 
tangential ports, the use of wedges, blocking, rotational beam, or 
special beam considerations), includes basic dosimetry calculation(s)), 
which we believed was clinically similar to CPT code 76145 in that CPT 
code 77307 describes the work of a medical physicist and dosimetrist. 
The full details of this assignment are discussed in the CY 2022 OPPS/
ASC final rule with comment period (86 FR 63557 through 63558).
    We note that the issue of payment for this code was brought to the 
Advisory Panel on Hospital Outpatient Payment (also known as HOP Panel) 
in 2022 for the CY 2023 rulemaking, and a new APC placement was 
requested by interested parties. At the August 22, 2022 meeting, the 
Panel recommended that CMS assign HCPCS code 76145 to APC 1505 (New 
Technology--Level 5 ($301-$400)).
    Comment: Generally, commenters disagreed with the assignment to APC 
5612 and requested a reassignment to APC 5724 (Level 4 Diagnostic Tests 
and Related Services), with a proposed payment rate of $952.52. 
Commenters further described the clinical process associated with this 
code and stated that the services assigned to APC 5724 require similar 
resource use as CPT code 76145. Commenters also stated that APC 5724 
contains a range of services that are clinically similar to CPT code 
76145 and asserted that CPT code 76145 is not a radiation oncology 
code. Commenters also pointed to the Medicare Physician Fee Schedule 
proposed CY 2023 payment of $907.65 for this service.
    Commenters agreed with the HOP Panel that it would also be 
appropriate to assign CPT code 76145 to a New Technology APC; however, 
interested parties believe assignment to APC 1510 (New Technology Level 
10 ($801-$900) would be more appropriate than the HOP Panel's 
recommended APC placement.
    Response: For CY 2023, the OPPS payment rates are based on claims 
submitted between January 1, 2021, and December 30, 2021, processed 
through June 30, 2022. CPT code 76145 was effective January 1, 2021, 
however, based on our review, we have no claims data for the code. 
After consideration of the comments, further evaluation of the service 
associated with CPT code 76145, and input from our medical advisors, we 
believe a revision of the APC assignment is appropriate. We agree that 
assignment to APC 5612 is not appropriate based on commenters' clinical 
description of the code, and instead, agree with interested parties 
that the Diagnostic Tests and Related Procedures APC series is 
appropriate. However, absent any claims data, we do not believe that 
assignment to APC 5724 is appropriate. Based on our assessment, we 
believe that CPT code 76145 fits more appropriately in APC 5723, rather 
than APC 5724 or a New Technology APC. Consequently, we are not 
accepting the HOP Panel recommendation because we believe that APC 5723 
is the more appropriate APC assignment. Therefore, we are assigning CPT 
code 76145 to APC 5723 for CY 2023. We note that we review our data on 
an annual basis. Once we have claims data, we will determine whether a 
change in the APC assignment is necessary.
    In summary, after consideration of the public comments, we are 
finalizing the reassignment of CPT code 76145 to APC 5723 for CY 2023. 
The final CY 2023 payment rate for this code can be found in Addendum B 
to this final rule with comment period. In addition, we refer readers 
to Addendum D1 to this final rule with comment period for the SI 
meanings for all codes reported under the OPPS. Both Addendum B and D1 
are available via the internet on the CMS website.
34. Minimally Invasive Glaucoma Surgery (MIGS) (APC 5491)
    For CY 2023, we proposed to continue to assign CPT code 0671T 
(Insertion of anterior segment aqueous drainage device into the 
trabecular meshwork, without external reservoir, and without 
concomitant cataract removal, one or more) to APC 5491 (Level 1 
Intraocular Procedures). Prior to CY 2022, this procedure was described 
by CPT code 0191T (Insertion of anterior segment aqueous drainage 
device, without extraocular reservoir, internal approach, into the 
trabecular meshwork; initial insertion).
    Comment: We received several comments requesting that we reassign 
CPT code 0671T to APC 5492 (Level 2 Intraocular Procedures) based on 
the claims data and APC assignment for its predecessor code, CPT code 
0191T. Commenters also argued that CPT code 0671T is clinically similar 
to several procedures in APC 5492. Additionally, this issue was 
presented at the 2022 HOP Panel, with the Panel recommending CPT code 
0671T be reassigned to APC 5492.
    Response: We thank commenters for their feedback. We note that, 
although CPT code 0191T has a geometric mean cost of $4,972.24 and was 
placed in APC 5492, CPT code 0191T was predominantly reported with CPT 
codes

[[Page 71868]]

66982 (Extracapsular cataract removal with insertion of intraocular 
lens prosthesis (1-stage procedure), manual or mechanical technique 
(e.g., irrigation and aspiration or phacoemulsification), complex, 
requiring devices or techniques not generally used in routine cataract 
surgery (e.g., iris expansion device, suture support for intraocular 
lens, or primary posterior capsulorrhexis) or performed on patients in 
the amblyogenic developmental stage; without endoscopic 
cyclophotocoagulation) and 66984 (Extracapsular cataract removal with 
insertion of intraocular lens prosthesis (1 stage procedure), manual or 
mechanical technique (e.g., irrigation and aspiration or 
phacoemulsification); without endoscopic cyclophotocoagulation). We 
believe that some of the costs of the concurrent cataract removal may 
be reflected in the geometric mean cost for CPT code 0191T. CPT code 
0671T describes insertion of intraocular lens without concurrent 
cataract removal and would never be billed alongside the cataract 
removal procedures resulting in an overall reduction in resource costs 
compared to CPT code 0191T. Based on our review of the clinical 
characteristics of the procedure and input from our medical advisors, 
we continue to believe that this service is more similar to the other 
services in APC 5491 and that the resource cost for this standalone 
procedure cannot be accurately compared to CPT code 0191T. 
Consequently, we are not accepting the HOP Panel's recommendation to 
reassign the code to APC 5492, and instead, we will continue to assign 
the code to APC 5491 for CY 2023.
    In summary, after consideration of the public comments, we are 
finalizing our proposal, without modification, to continue to assign 
CPT code 0671T to APC 5491. The final CY 2023 OPPS payment rates for 
these codes can be found in Addendum B to this final rule with comment 
period. In addition, we refer readers to Addendum D1 of this final rule 
with comment period for the SI meanings for all codes reported under 
the OPPS. Both Addendum B and D1 are available via the internet on the 
CMS website.
35. Musculoskeletal Procedures (APCs 5111 Through 5116)
    Prior to the CY 2016 OPPS, payment for musculoskeletal procedures 
was primarily divided according to anatomy and the type of 
musculoskeletal procedure. As part of the CY 2016 reorganization to 
better structure the OPPS payments to utilize prospective payment 
packages, we consolidated these individual APCs so that they became a 
general Musculoskeletal APC series (80 FR 70397 through 70398).
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 
59300), we continued to apply a six-level structure for the 
Musculoskeletal APCs because doing so provided an appropriate 
distinction for resource costs at each level and provided clinical 
homogeneity. However, we indicated that we would continue to review the 
structure of these APCs to determine whether additional granularity 
would be necessary. In the CY 2019 OPPS proposed rule (83 FR 37096), we 
recognized that commenters had previously expressed concerns regarding 
the granularity of the current APC levels and, therefore, requested 
comment on the establishment of additional levels. Specifically, we 
solicited comments on the creation of a new APC level between the 
current Level 5 and Level 6 within the Musculoskeletal APC series. 
While some commenters suggested APC reconfigurations and requested 
changes to APC assignments, many commenters requested that we maintain 
the current six-level structure and continue to monitor the claims data 
as they become available. Therefore, in the CY 2019 OPPS/ASC final rule 
with comment period, we maintained the six-level APC structure for the 
Musculoskeletal Procedures APCs (83 FR 58920 through 58921).
    Based on the claims data available for the CY 2023 OPPS/ASC 
proposed rule, we continued to believe that the six level APC structure 
for the Musculoskeletal Procedures APC series is appropriate and we 
proposed to maintain it for the CY 2023 OPPS update.
    Comment: One commenter requested that CPT codes 28297 (Correction, 
hallux valgus (bunionectomy), with sesamoidectomy, when performed; with 
first metatarsal and medial cuneiform joint arthrodesis, any method) 
and 28740 (Arthrodesis, midtarsal or tarsometatarsal, single joint) be 
reassigned from APC 5114 to APC 5115. The commenters noted that these 
procedures would cause two times rule violations if the codes were cost 
significant, which the commenters believed they might be at the time of 
the final rule.
    Response: We appreciate the commenter's recommendation regarding 
the APC assignment of CPT 28297 and 28740. CPT codes 28297 and 28740 
are currently assigned to APC 5114 (Level 4 Musculoskeletal 
Procedures). We note that APC 5114 does not currently have a 2 times 
rule violation in the final rule data. In addition, both CPT codes 
28297 and 28740 do not meet the requirements for cost significance for 
2 times rule purposes, under the requirements described in section 
III.B.2. of this final rule with comment period. We have reviewed the 
codes' geometric mean cost based on the available CY 2021 claims data 
as well as their clinical similarity to other codes within APC 5114 and 
believe that their current APC assignment continues to be appropriate.
    Comment: A commenter requested that CMS reassign CPT code 23472 
(Arthroplasty, glenohumeral joint; total shoulder (glenoid and proximal 
humeral replacement (e.g., total shoulder))) from APC 5115 to APC 5116, 
based on the hospital resources associated with the procedure as well 
as its estimated cost.
    Response: CPT code 23472 had a proposed CY 2023 OPPS assignment to 
APC 5115. In the claims data available for final CY 2023 OPPS 
ratesetting, APC 5115 has a range of HCPCS geometric mean costs for 
cost significant codes from approximately $10,554.18 to $17,441.14. 
While we note that the geometric mean cost of this CPT code is at the 
higher end of the cost range, we believe that its placement in APC 5115 
remains appropriate based on its clinical similarity to other codes in 
the APC. As a result, we are finalizing the proposed assignment of CPT 
code 23472 to APC 5115. However, we will continue to review the claims 
and cost data for these APCs.
    After consideration of the comments, we are finalizing our proposal 
without modification. The final CY 2023 OPPS payment rate for the codes 
can be found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final rule with 
comment period for the status indicator (SI) meanings for all codes 
reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website.
36. 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

[[Page 71869]]

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 interested parties 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 the CY 2023 OPPS/ASC proposed rule, we believed 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 was $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 was 
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 any individual 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 did not propose any changes in the CY 2023 OPPS/ASC 
proposed rule to the 5-level structure of the Neurostimulator and 
Related Procedures APC series, we recognized the interested parties' 
concerns regarding the granularity of the current APC levels and their 
request to create an additional level to address such concerns. 
Accordingly, we solicited 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 (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 (e.g., vagus 
nerve) neurostimulator electrode array and pulse generator.
    In summary, for CY 2023, we proposed to maintain the current 5-
level structure for the Neurostimulator and Related Procedure APC 
series. However, we also solicited comment on the creation of an 
additional Level 6 APC in the series from the current Level 5 APC.
    Comment: Several commenters supported the creation of a Level 6 
Neurostimulator and Related Procedures APC, believing that doing so 
would provide better payment specificity and support access to those 
procedures. However, others commenters recommended that we maintain the 
current 5 level APC structure, believing that it continues to remain 
appropriate and sufficient until claims data suggest otherwise. Several 
commenters also requested that HCPCS code 0424T be temporarily assigned 
to New Technology APC 1581, which has a proposed and final OPPS payment 
rate of $55,000.50. These commenters believed that doing so would 
provide appropriate and consistent payment and support beneficiary 
access for the new procedure until such time as sufficient claims data 
were available for ratesetting purposes. Finally, a commenter requested 
that there be transparency around the ratesetting methodology so that 
the public can also reproduce the OPPS rates.
    Response: We appreciate the concerns of the commenters and the 
different issues that they have raised. In reviewing the claims data 
available for OPPS ratesetting in this final rule, we continue to 
believe that the 5-level APC structure remains appropriate based on 
clinical and cost characteristics. However, we also recognize that for 
CPT code 0424T there remains a significant difference between its 
geometric mean cost and that of the APC. As a result, we agree that a 
temporary placement in New Technology APC 1581, which has a CY 2023 
OPPS payment rate of $50,000.50, is appropriate. We note that we will 
continue to monitor the claims data available for CPT code 0424T as 
well as the APC more broadly and reevaluate and potentially reconfigure 
it as is appropriate. With regard to transparency around the 
ratesetting process, we do make several data files related to each 
proposed and final rulemaking cycle available via the internet on the 
CMS website. We also refer readers to the claims accounting 
narrative(s) under supporting documentation for the proposed and final 
rules on the CMS Website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html to the CY 2022 
OPPS/. That document describes the process through which we establish 
the OPPS rates for each proposed and final rulemaking cycle.
    After consideration of the public comments we received, we are 
finalizing our proposal to maintain the 5-level structure of the 
Neurostimulator and Related Procedure APC series and reassigning CPT 
code 0424T to New Tech APC 1581 in the CY 2023 OPPS. Table 43 list the 
final geometric mean cost for the Neurostimulator and Related 
Procedures APCs.

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37. Optilume Cystourethroscopy (APC 5374)
    The Optilume cystourethroscopy is intended to treat urethral 
stricture disease. The procedure, represented by CPT code 0499T 
(Cystourethroscopy, with mechanical dilation and urethral therapeutic 
drug delivery for urethral stricture or stenosis, including 
fluoroscopy, when performed), became effective in January 2018. The 
procedure involves the use of a semi-compliant inflatable balloon that 
expands to create micro-fissures in the stricture to deliver the drug 
paclitaxel. Paclitaxel works as an anti-proliferative drug that stops 
new tissue growth and prevents fibrotic scarring that may result in 
stricture recurrence.
    For CY 2023, we proposed to delete CPT code 0499T. We note that in 
the OPPS Addendum B of the CY 2023 OPPS/ASC proposed rule, the code is 
assigned to status indicator ``D'' (Discontinued Codes) to indicate 
that the code would be deleted at the end of the year. For CY 2022, the 
code is assigned to APC 5374 (Level 4 Urology and Related Services).
    Comment: A commenter explained that CPT code 0499T would be deleted 
on December 31, 2022, with no replacement code. The commenter requested 
that CMS establish a new temporary HCPCS C-code to replace CPT code 
0499T and expressed concern that the lack of a specific HCPCS code 
would disrupt payment for the cystourethroscopy procedure. The 
commenter also requested the reassignment of CPT code 0499T to APC 5375 
(Level 5 Urology and Related Services; proposed payment rate of 
$4,783.70), and argued that the current payment for APC 5374 does not 
reimburse the facility for the cost of furnishing the procedure. The 
commenter estimated that the total cost to perform the Optilume 
cystourethroscopy is about $5,454 and the device alone is $2,395. The 
commenter contended that the device was not commercially available 
until January 2022, so the current cost data reflected in the proposed 
rule only reflects the clinical costs of the Optilume pivotal clinical 
trial and not the actual cost of providing the procedure in the HOPD 
setting.
    Additionally, the commenter requested a device offset adjustment of 
50 percent of APC 5375, citing a device cost of $2,395, which exceeds 
the 31 percent device offset threshold. The commenter further added 
that, based on the assignment to APC 5374, the device cost is more than 
76 percent of the procedure cost.
    Response: The CPT Editorial Summary of Panel Actions September 
2022, which was published on October 14, 2022 on the AMA website 
indicates that the CPT Editorial Panel rescinded the sunset of 0499T, 
therefore negating the necessity of a temporary HCPCS code for 0499T 
for CY 2023.
    While we are sympathetic to the commenter's argument that the 
current data reflect the clinical costs of the Optilume pivotal 
clinical trial, we believe that the current assignment to APC 5374 is 
appropriate. Our analysis of the claims data for this final rule with 
comment period reveal a geometric mean cost of about $2,583 based on 16 
single claims (out of 16 total claims) for CPT code 0499T, which is 
consistent with the geometric mean cost of about $3,296 for APC 5374, 
rather than the geometric mean cost of approximately $4,836 for APC 
5375. For the device offset amount for CPT 0499T, we direct readers to 
section IV.B of this final rule with comment period for a more detailed 
discussion.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification, and assigning CPT code 
0499T to APC 5374 for CY 2023. The final APC and status indicator 
assignment for CPT code 0499T is found in Table 44. The final CY 2023 
OPPS payment rate for the code can be found in Addendum B to this final 
rule with comment period. In addition, we refer readers to Addendum D1 
of this final rule with comment period for the SI meanings for all 
codes reported under the OPPS. Both Addenda B and D1 are available via 
the internet on the CMS website.

[[Page 71871]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.059

38. Pathology Services (APC 5672)
    The CPT Editorial Panel created CPT code 88121 (Cytopathology, in 
situ hybridization (eg, FISH), urinary tract specimen with morphometric 
analysis, 3-5 molecular probes, each specimen; using computer-assisted 
technology) to describe in situ hybridization testing using urine 
samples, effective January 1, 2011. For CY 2023, we proposed to 
reassign CPT code 88121 from APC 5673 (Level 3 Pathology) to APC 5672 
(Level 2 Pathology) with a proposed payment rate of $160.44.
    Comment: Some commenters emphasized that the proposed change 
represents a 46 percent decrease in the payment amount. While not 
reflected in the OPPS cost data, commenters assert that the costs 
associated with the service reported for CPT code 88121 is nearly three 
times the cost of an APC 5672 ``Level 2 Pathology'' service, based on 
physician fee schedule technical component cost differences. Commenters 
state that this proposed reassignment creates a resource cost rank 
order anomaly with other physician services, and the technical costs 
will not be fully recovered from each unit of service. Another 
commenter expressed concern that flawed data led to this change in APC 
level for CPT code 88121. The commenters requested that CMS maintain 
the assignment of CPT code 88121 to APC 5673 for CY 2023 and preserve 
access to this test that is used to detect bladder cancer for Medicare 
beneficiaries.
    Response: Based on our analysis of the claims data for this CY 2023 
OPPS/ASC final rule with comment period, our data reveals a geometric 
mean cost of about $175.28 for CPT code 88121 based on 1,423 single 
claims (out of 1,834 total claims), which is in line with the geometric 
mean cost of $161.71 for APC 5672 rather than the geometric mean cost 
of $333.29 for APC 5673. We believe that continuing to assign CPT code 
to APC 5673 would significantly overpay for the procedure.
    With respect to the flawed data issue, we rely upon historical 
hospital claims data to establish the annual payment rates under the 
OPPS. Based on our review of the claims data associated with CPT code 
88121, we have no reason to believe that the service is miscoded. In 
addition, based on our analysis of the CY 2023 claims data used for 
this final rule with comment period, we are unable to determine whether 
facilities are misreporting the service. It is generally not our policy 
to judge the accuracy of provider coding and charging for purposes of 
ratesetting. We rely on hospitals and providers to accurately report 
the use of HCPCS codes in accordance with their code descriptors and 
CPT and CMS instructions and to report services accurately on claims 
and charges and costs for the services on their Medicare hospital cost 
report.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification to assign CPT code 88121 
to APC 5672. The final CY 2023 OPPS payment rate for the code can be 
found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final rule with 
comment period for the status indicator (SI) meanings for all codes 
reported under the OPPS. Both Addendum B and D1 are available via the 
internet on the CMS website.
39. Percutaneous Arthrodesis of the Sacroiliac Joint (APC 5116)
    In 2015, the CPT Editorial Panel established CPT code 27279 to 
describe the procedure associated with a percutaneous arthrodesis of 
the sacroiliac joint that involves placement of a transfixing device. 
Prior to 2015, the procedure was reported with CPT code 0334T 
(Sacroiliac joint stabilization for arthrodesis, percutaneous or 
minimally invasive (indirect visualization), includes obtaining and 
applying autograft or allograft (structural or morselized), when 
performed, includes image guidance when performed (eg, ct or 
fluoroscopic)), which was effective July 1, 2013, and deleted December 
31, 2014, when it was replaced with CPT code 27279 effective January 1, 
2015.
    For CY 2023, the CPT Editorial Panel established new CPT code 
0775T, effective January 1, 2023, to describe a percutaneous 
arthrodesis of the sacroiliac joint that involves placement of an 
intra-articular implant, such as a bone allograft or synthetic 
device(s). The long descriptors for both CPT code 27279 and 0775T are 
listed in Table 45. The CPT 2023 code book clarifies the reporting of 
the new code, specifically, CPT code 0775T, and states that the new 
code should be reported when the procedure involves an implantable 
device that ``does not transfix the sacroiliac joint,'' while existing 
CPT code 27279 should be reported in cases that involve an implantable 
device that does transfix the sacroiliac joint. The CPT code book 
further states that the unlisted CPT code 27299 (Unlisted procedure, 
pelvis or hip joint) should be reported when the percutaneous 
arthrodesis of the sacroiliac joint involves the use of both a 
transfixation device and an intra-articular implant(s).
    As listed in Table 45, for CY 2023, we proposed to continue to 
assign CPT code 27279 to APC 5116 (Level 6 Musculoskeletal Procedures). 
We also proposed to assign new CPT code 0775T, which was listed as 
placeholder code X034T in Addendum B of the CY 2023 OPPS/ASC proposed 
rule, to the same APC. We note that the CPT and Level II HCPCS code 
descriptors that appear in Addendum B are short descriptors and do not 
accurately describe the complete procedure, service, or item. 
Therefore, we included the 5-digit placeholder codes and long 
descriptors for the new CY 2023 CPT

[[Page 71872]]

codes in Addendum O to the proposed rule so that the public could 
adequately comment on the proposed APCs and SI assignments. Because CPT 
code 0775T is a new code effective January 1, 2023, we included the 5-
digit placeholder code and long descriptor in Addendum O. We further 
stated in the proposed rule that the final CPT code numbers would be 
included in this CY 2023 OPPS/ASC final rule with comment period. We 
received some comments on the proposed APC assignment for CPT code 
0775T.
[GRAPHIC] [TIFF OMITTED] TR23NO22.060

    Comment: A few commenters disagreed with the proposed assignment to 
APC 5116 for CPT code 0775T. They indicated that the resources to 
perform the procedure are not as significant as the procedure described 
under existing CPT code 27279, and suggested lowering the payment for 
the procedure by reassigning the code to APC 5115 (Level 5 
Musculoskeletal Procedures), which has a proposed payment of 
$13,274.06. The commenters added that until CMS has sufficient claims 
data, APC 5115 is the more appropriate assignment for CPT code 0755T, 
and that finalizing the proposal to APC 5116 would result in 
overpayment for the procedure. One commenter listed the clinical 
differences between the two procedures, specifically with regard to 
procedure time, anesthesia, staffing requirements, recovery time, and 
device costs. The commenter stated that CPT code 27279 is a procedure 
that often takes 60 minutes to perform, requires a 3-5 cm incision, 
involves the use of general anesthesia, uses up to three implants, may 
require both assistants at surgery and co-surgeons, and requires 
several hours of post-operative recovery for pain control and 
mobilization. In contrast, CPT code 0775T is a procedure that takes 
between 20 to 30 minutes to perform, requires a 1-2 cm incision, 
involves local anesthesia, requires only a single bone allograft or 
implant, does not require co-surgeons or assistants at surgery, and 
typically involves minimal to no post-operative recovery period. Based 
on these differences, the commenter strongly urged CMS to lower the 
payment for the procedure and modify the assignment for CPT code 0775T 
from APC 5116 to APC 5115.
    Alternatively, several commenters reported that the new code, 
specifically, CPT code 0775T (posterior approach), shares similar 
resources and characteristics with existing CPT code 27279 (lateral 
approach), and, therefore, should be placed in the same APC. The 
commenters explained that prior to the establishment of CPT code 0775T, 
the procedure was reported for more than five years with CPT code 
27279. The same commenters stated that CPT code 0775T utilizes the same 
pre, post, and intra operative resources as the procedure described 
under existing CPT code 27279. According to the commenters, CPT code 
0775T shares these similar characteristics with existing CPT code 
27279: requires 1 to 1.5 hours of procedure time, involves the use of 
general anesthesia or MAC sedation, utilizes the same fluoroscopy time 
under indirect visualization, involves the same anatomical space (SI 
joint for fusion), and utilizes similar sites of service--both are 
performed in the HOPD and ASC settings. The commenter added that the 
estimated cost to perform the surgery associated with CPT code 0775T is 
approximately $14,379. Based on its similarity to existing CPT code 
27279, the commenters urged CMS to finalize the proposal to APC 5116 
for CPT code 0775T.
    Response: Based on the information submitted to CMS for CPT codes 
27279 and 0775T, and based on our understanding of the procedures, we 
believe that we should assign CPT code 0775T to APC 5116. While we are 
unable to confirm whether the service described by CPT code 0775T was 
previously billed with CPT code 27279, we believe that the new code 
(CPT code 0775T) does share some clinical similarities to the 
procedures assigned to APC 5116. Therefore, we believe it would be 
appropriate to assign CPT code 0775T to APC 5116. We note that if a 
procedure, service, or item is not described by any specific code, the 
unlisted code should be reported. In the case of new CPT code 0775T, if 
it was not described by any specific HCPCS

[[Page 71873]]

code prior to its establishment, we believe that HOPD facilities would 
have likely reported the procedure under an unlisted code (e.g., 22899, 
27299, etc.).
    Because the code is new for 2023, we currently do not have any 
claims data for CPT code 0775T. However, as we have stated several 
times since the implementation of the OPPS on August 1, 2000, we 
review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS based on our analysis of the latest claims 
data. We will review our claims data in the next rulemaking cycle, and 
if appropriate, revise the APC assignment for CPT code 0775T.
    In summary, after consideration of the public comments, we are 
finalizing our assignment to APC 5116 for CPT code 0775T. We did not 
receive any comments on the APC or SI assignment for CPT code 27279, 
therefore, we are finalizing our proposal for the code. Table 46 lists 
the final APC and SI assignments for CPT codes 27279 and 0775T for CY 
2023. The final CY 2023 payment rates for both codes can be found in 
Addendum B to the CY 2023 OPPS/ASC proposed rule with comment period. 
In addition, we refer readers to Addendum D1 of the CY 2023 OPPS/ASC 
final rule with comment period for the status indicator (SI) meanings 
for all codes reported under the OPPS. Both Addendum B and D1 are 
available via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TR23NO22.061

40. Placement of Breast Localization Devices (APCs 5071 and 5072)
    For CY 2023, we proposed to assign CPT code 19281 (Placement of 
breast localization device(s) (e.g., clip, metallic pellet, wire/
needle, radioactive seeds), percutaneous; first lesion, including 
mammographic guidance)) to APC 5072 (Level 2 Excision/Biopsy/Incision 
and Drainage Procedures) with a proposed payment rate of $1,520.37 and 
proposed to continue to assign CPT codes 19283 (Placement of breast 
localization device(s) (e.g., clip, metallic pellet, wire/needle, 
radioactive seeds), percutaneous; first lesion, including stereotactic 
guidance), 19285 (Placement of breast localization device(s) (e.g., 
clip, metallic pellet, wire/needle, radioactive seeds), percutaneous; 
first lesion, including ultrasound guidance), and code 19287 (Placement 
of breast localization device(s) (e.g., clip, metallic pellet, wire/
needle, radioactive seeds), percutaneous; first lesion, including 
magnetic resonance guidance) to APC 5071 (Level 1 Excision/Biopsy/
Incision and Drainage Procedures) with a proposed payment rate of 
$659.86.
    Comment: Several commenters shared their support for the 
reassignment of CPT code 19281 to APC 5072 while also requesting the 
reassignment of CPT codes 19283-19287 to APC 5072 in order to maintain 
clinical and resource homogeneity with CPT code 19281. The commenters 
stated that the procedures varied only by the type of guidance utilized 
and argued that reassigning these services to APC 5072 would avoid 
discrepancies in imaging guidance driven by payment assignments. 
Commenters also stated that CPT codes 19281 through 19287 were 
clinically similar to a series of percutaneous image-guided breast 
biopsy procedures that also vary by type of guidance, CPT codes 19081 
(Biopsy, breast, with placement of breast localization device(s) (e.g., 
clip, metallic pellet), when performed, and imaging of the biopsy 
specimen, when performed, percutaneous; first lesion, including 
stereotactic guidance) through 19086 (Biopsy, breast, with placement of 
breast localization device(s) (e.g., clip, metallic pellet), when 
performed, and imaging of the biopsy specimen, when performed, 
percutaneous; each additional lesion, including magnetic resonance 
guidance (List separately in addition to code for primary procedure)).
    Response: We thank the commenters for their support of our 
reassignment of CPT code 19281 to APC 5072. CPT code 19281 was 
reassigned due to a violation of the 2 times rule in APC 5071, as it 
met the criteria required for an exception under the 2 times rule. More 
specifically, to address the violation of the 2 times rule and improve 
clinical and resource homogeneity, we proposed to reassign CPT code 
19281 to APC 5072 to optimize clinical and resource cost homogeneity, 
given the available claims data.
    Based on our review of the cost and utilization data and input from 
our clinical advisors, we disagree with the suggestions to reassign CPT 
code 19283, CPT code 19285, and CPT code 19287 to APC 5072 and believe 
that APC 5071

[[Page 71874]]

better accounts for the cost of the procedure as well as the resources 
used. Our claims data for CPT codes 19283, 19285, and 19287, 
demonstrate that their geometric mean cost is consistent with APC 5071, 
whose geometric mean cost ranges between $476 and $1,032, rather than 
with APC 5072, whose geometric mean cost ranges between $1,192 and 
$2,372. Specifically, our data shows a geometric mean cost of 
approximately $1,032 for CPT code 19283 based on 1,167 single claims, a 
geometric mean cost of about $1,027 for CPT code 19285 based on 8,204 
single claims, and a geometric mean cost of about $715 for CPT code 
19287 based on 62 single claims. As we do every year, we will review 
the APC assignments for all services and items paid under the OPPS. 
Consequently, we will continue to monitor the claims data for APC 5071 
and APC 5072 as they become available.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification to assign CPT code 19281 
to APC 5072 and CPT code 19283, CPT code 19285, and CPT code 19287 to 
APC 5071. The final CY 2023 payment rate for these codes can be found 
in Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the SI meanings for all codes reported under the OPPS. Both Addendum B 
and D1 are available via the internet on the CMS website.
41. ProSense Cryoablation Procedure (APC 5091)
    For CY 2023, we proposed to continue to assign CPT code 0581T 
(Ablation, malignant breast tumor(s), percutaneous, cryotherapy, 
including imaging guidance when performed, unilateral) to status 
indicator ``E1'' to indicate that the code is not covered by Medicare 
and not paid by Medicare when submitted on outpatient claims (any 
outpatient bill type).
    Comment: A commenter disagreed with the proposed status indicator 
and requested a reassignment to APC 5092 (Level 2 Breast/Lymphatic 
Surgery and Related Procedures) with a proposed payment rate of 
$6,027.41. The commenter reported that the device 
(ProSenseTM Cryoablation System) associated with the 
procedure received FDA 510(k) marketing approval on December 20, 2019, 
and also received FDA Breakthrough Device Designation on March 31, 
2021. The commenter reported an estimated cost of approximately $7,016 
for the procedure, which includes the cost of the $2,200 single-use 
cryoprobe device. Based on the estimated cost for the procedure, the 
commenter suggested assigning the code to APC 5092 rather than APC 5091 
since the resource costs are comparable to APC 5092.
    Response: For CY 2023, we did not include the claims data in our 
ratesetting process because CPT code 0581T was previously assigned to 
status indicator ``E1'' under the OPPS. We do note that the FDA 510(k) 
marketing approval (K183213) for the device associated with CPT code 
0581T indicates that the device is used in a wide variety of surgical 
applications. Specifically, the FDA marketing approval indicates that 
the device is indicated for use in ``general surgery, dermatology, 
neurology (including cryoanalgesia), thoracic surgery, ENT, gynecology, 
oncology, proctology, and urology.'' Because of its variable 
applicability to other procedures unrelated to breast cryotherapy, and 
the 2019 FDA approval, we believe that the device cost may already be 
reflected in our payment for the other procedures. CPT code descriptors 
are general in nature and not specific to a particular product, so the 
device may be used in surgical procedures that are described by 
existing cryotherapy and cryoablation procedures CPT codes (e.g., 
20983, 32994, 47383, 50593, etc.). Consequently, we do not believe that 
assignment to APC 5092 would be appropriate. However, based on our 
analysis of the estimated resource cost, as well as our review of the 
clinical characteristics of the procedure and input from our medical 
advisors, we believe that CPT code 0581T should be assigned to APC 5091 
(Level 1 Breast/Lymphatic Surgery and Related Procedures Contrast) 
because of its clinical similarity to the procedures in the APC. We 
believe that assignment to APC 5091 is more appropriate than assignment 
to APC 5092, and adequately reflects the resources associated with 
providing the service. We note that we review, on an annual basis, the 
APC assignments for all services and items paid under the OPPS. We will 
reevaluate the APC assignment for CPT code 0581T once we have hospital 
outpatient claims data and, if appropriate, reassign and/or restructure 
the APC assignment.
    In summary, after consideration of the public comment, we are 
finalizing assignment of CPT code 0581T to APC 5091 for CY 2023. The 
final CY 2023 payment rate for the code can be found in Addendum B to 
this final rule with comment period. In addition, we refer readers to 
Addendum D1 to this final rule with comment period for the status 
indicator meanings used under the OPPS. Both Addendum B and D1 are 
available via the internet on the CMS website.
42. Pulmonary Rehabilitation Services (APC 5731)
    For CY 2023, we proposed to continue to assign HCPCS codes G0237 
(Therapeutic procedures to increase strength or endurance of 
respiratory muscles, face to face, one on one, each 15 minutes 
(includes monitoring)) and G0238 (Therapeutic procedures to improve 
respiratory function, other than described by G0237, one on one, face 
to face, per 15 minutes (includes monitoring)) to APC 5731 (Level 1 
Minor Procedures) with a proposed payment rate of $14.00. We also 
proposed to exclude claims data from C9803 (Hospital outpatient clinic 
visit specimen collection for severe acute respiratory syndrome 
coronavirus 2 (sars-cov-2) (coronavirus disease [covid-19]), any 
specimen source) from the calculation of the rate for APC 5731 as it is 
a high-volume but temporary code for the duration of the Public Health 
Emergency for COVID-19. However, we inadvertently included the claims 
data in ratesetting for the CY 2023 OPPS/ASC proposed rule, and so the 
proposed CY 2023 OPPS payment rate did not properly reflect that 
proposal.
    At the August 22, 2022 HOP panel meeting a presenter requested that 
CMS split APC 5731 into two separate APC categories to ensure a more 
representative payment for the pulmonary rehabilitation services 
described by HCPCS codes G0237 and G0238. The presenter stated that the 
payment rate associated with APC 5731 did not accurately capture the 
resources associated with HCPCS codes G0237 and G0238, which have a 
geometric mean cost of $28.76 and $26.91, respectively.
    The HOP Panel supported removing HCPCS code C9803 from APC 5731 and 
recommended recalculating the payment rates for the remaining services 
in APC 5731.
    Comment: A few commenters expressed concern over the proposed 
payment rate for APC 5731, noting that the presence of claims data for 
HCPCS code C9803 distorts the overall rate associated with APC 5731. 
These commenters noted that one solution would be to exclude the claims 
data associated with HCPCS code C9803 from the calculation of the 
payment rate for APC 5731. However, they also expressed concern that 
keeping HCPCS code C9803 in APC 5731 while excluding the claims data 
associated with this service from the calculation of the payment rate 
would result in a significant overpayment for HCPCS

[[Page 71875]]

code C9803. Another option according to commenters would be to split 
APC 5731 into two APCs. These commenters were concerned over the impact 
the payment rate for APC 5731 would have on pulmonary rehabilitation 
services.
    Response: We thank commenters for their concerns and refer them to 
section X.D. (Use of Claims Data for CY 2023 OPPS and ASC Payment 
System Ratesetting) of this final rule with comment period for a 
discussion of our finalized policy to exclude claims data associated 
with HCPCS code C9803 from the calculation of the payment rate for APC 
5731.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification. Specifically, we are 
continuing to assign HCPCS codes G0237 and G0238 to APC 5731. The final 
CY 2023 payment rate for the codes can be found in Addendum B to this 
final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
43. Remote Physiologic Monitoring Services
    For CY 2023, we proposed to continue to assign a status indicator 
of ``B'' to CPT codes 99457 (Remote physiologic monitoring treatment 
management services, clinical staff/physician/other qualified health 
care professional time in a calendar month requiring interactive 
communication with the patient/caregiver during the month; first 20 
minutes) and 99458 (Remote physiologic monitoring treatment management 
services, clinical staff/physician/other qualified health care 
professional time in a calendar month requiring interactive 
communication with the patient/caregiver during the month; each 
additional 20 minutes (list separately in addition to code for primary 
procedure)).
    Comment: We received a comment requesting that CMS revise the 
status indicators for these two services to ``S'' (Procedure or 
Service, Not Discounted When Multiple) and assign them to either APC 
5821 (Level 1 Health and Behavior Services) or 5822 (Level 2 Health and 
Behavior Services) with proposed payment rates of $30.21 or $76.98, 
respectively. These commenters stated that making these services 
separately payable will increase access to RPM in the HOPD setting.
    Response: As stated in the CY 2021 OPPS/ASC final rule with comment 
period, we assigned CPT codes 99457 and 99458 to status indicator ``B'' 
(Codes that are not recognized by OPPS when submitted on an outpatient 
hospital Part B bill type (12x and 13x). Not paid under OPPS.) 
effective March 1, 2020, to enable Critical Access Hospitals (CAHs) to 
bill under CAH's Method II for the service so that claims with this 
code would process appropriately in the Integrated Outpatient Code 
Editor (IOCE) (85 FR 85977-85979). We continue to believe that, since 
CPT code 99457 primarily describes the work associated with the billing 
of professional services, which would not be paid separately under the 
OPPS, and CPT code 99458 describes an add-on service to CPT code 99457, 
neither service is appropriate for separate payment under the OPPS. 
Therefore, we will continue to assign these codes to status indicator 
``B'' for CY 2023.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification. Specifically, we are 
continuing to assign HCPCS codes 99457 and 99458 to status indicator 
``B'' for CY 2023. We refer readers to Addendum D1 of this final rule 
with comment period for the status indicator (SI) meanings for all 
codes reported under the OPPS. Addendum D1 is available via the 
internet on the CMS website.
44. Repair of Nasal Valve Collapse (APC 5165)
    For CY 2023, the CPT Editorial Panel created a new code, CPT code 
30469 (Repair of nasal valve collapse with low-energy, temperature-
controlled based (i.e., radiofrequency) subcutaneous/submucosal 
remodeling), effective January 1, 2023, to describe minimally-invasive 
coagulation of soft tissue in the nasal airway to treat nasal airway 
obstruction. For CY 2023, we proposed to assign CPT code 30469 to a 
status indicator of ``S'' (Procedure or Service, Not Discounted When 
Multiple) and to APC 5164 (Level 4 ENT Procedures) with a proposed 
payment rate of $2,896.26. We note that CPT code 30469 was listed as 
placeholder code 37X01 in Addendum B of the CY 2023 OPPS/ASC proposed 
rule. In addition, the CPT and Level II HCPCS code descriptors that 
appear in Addendum B are short descriptors and do not accurately 
describe the complete procedure, service, or item. Therefore, we 
included the 5-digit placeholder codes and long descriptors for the new 
CY 2023 CPT codes in Addendum O to the CY 2023 OPPS/ASC proposed rule 
so that the public could adequately comment on the proposed APCs and SI 
assignments. Because CPT code 30469 is a new code effective January 1, 
2023, we included the 5-digit placeholder code and long descriptor in 
Addendum O. We further stated in the proposed rule that the final CPT 
code numbers would be included in this final rule with comment period.
    Comment: We received several comments on the proposed APC 
assignment for CPT code 30469. These commenters requested that CMS 
reassign CPT code 30469 to APC 5165 (Level 5 ENT Procedures), which has 
a proposed payment rate of $5,377.70. Commenters stated that CPT code 
30469 is clinically similar to CPT code 30468 (Repair of nasal valve 
collapse with subcutaneous/submucosal lateral wall implant) in that 
both procedures involve the bilateral repair of nasal valve collapse 
with similar surgical approaches, and, when performed in the hospital 
outpatient setting, virtually identical non-physician staffing, 
preparation, operating room requirements, supplies, trays, scopes, 
anesthesia, post-operative care, and other costs. Commenters also 
stated that CPT code 30469 is comparable to CPT code 69705 
(Nasopharangoscopy, surgical, with dilation of eustachian tube; 
unilateral) in that CPT code 69705 involves a similar surgical 
approach, similar hospital setting resource requirements (such as non-
physician staffing, operating room resources, anesthesia and supplies), 
and reliance on a single-use medical device. Both CPT codes 30468 and 
69705 are assigned to APC 5165.
    Response: CPT code 30469 is effective January 1, 2023, and because 
the code is new, we have no historical cost information on which to 
base an accurate payment. However, it should be noted that with all new 
codes for which we lack pricing information, our policy has been to 
assign the service to an existing APC based on input from a variety of 
sources, including, but not limited to, review of the clinical 
similarity of the service to existing procedures; input from CMS 
medical advisors; and review of all other information available to us. 
We note that CMS received an invoice suggesting that the device 
described by CPT code 30469 costs around $1,950. Based on the 
additional information provided to CMS and advice from our medical 
advisors, we agree that the surgical procedure described by CPT code 
30469 does share similar clinical and resource characteristics with the 
procedures described by CPT codes 30468 and 69705. We agree with the 
commenters that the two comparison codes provided are closer in terms 
of resource costs and clinical characteristics to the service described 
by CPT code 30469 and that,

[[Page 71876]]

inclusive of the costs of the device, APC 5165 would be a more accurate 
APC assignment. Analysis of our claims data for this final rule with 
comment period shows that the geometric mean cost for CPT code 30468 is 
approximately $5,987 based on 362 single claims (out of 368 total 
claims) and the geometric mean cost for CPT code 69705 is approximately 
$4,846 based on 263 single claims (out of 265 total claims). Because we 
agree that the clinical and resource costs are similar to CPT codes 
30468 and 69705, we are assigning CPT code 30469 to APC 5165 for CY 
2023.
    In summary, after consideration of the public comments, we are 
finalizing assignment of CPT code 30469 (placeholder code 37X01) to APC 
5165. The final CY 2023 payment rate for this code can be found in 
Addendum B to this final rule with comment period. In addition, we 
refer readers to Addendum D1 of this final rule with comment period for 
the status indicator (SI) meanings for all codes reported under the 
OPPS. Both Addendum B and D1 are available via the internet on the CMS 
website.
45. Single-Use Disposable Negative Pressure Wound Therapy (dNPWT) (APC 
5052)
    For CY 2023, we proposed to continue to assign CPT codes 97607 and 
97608 to status indicator ``T'' (Procedure or Service, Multiple 
Procedure Reduction Applies) and APC 5052 (Level 2 Skin Procedures) 
with a proposed payment rate of $379.94. Below are the long descriptors 
for the codes:
     97607: Negative pressure wound therapy, (e.g., vacuum 
assisted drainage collection), utilizing disposable, non-durable 
medical equipment including provision of exudate management collection 
system, topical application(s), wound assessment, and instructions for 
ongoing care, per session; total wound(s) surface area less than or 
equal to 50 square centimeters.
     97608: Negative pressure wound therapy, (e.g., vacuum 
assisted drainage collection), utilizing disposable, non-durable 
medical equipment including provision of exudate management collection 
system, topical application(s), wound assessment, and instructions for 
ongoing care, per session; total wound(s) surface area greater than 50 
square centimeters.
    Comment: One commenter requested that we change the status 
indicator for the codes to ``S'' so there would be no discounting 
involved when the service is performed with other procedures on the 
same day. The commenter further stated that the change in the status 
indicator would result in the OPPS payment completely covering the cost 
of the service, thus improving the quality of care for Medicare 
beneficiaries.
    Response: A procedure or service is assigned to status indicator 
``T'' to indicate that that it is subject to multiple procedure 
discounting when the service is performed with other services on the 
same day to reflect the savings associated with providing the service. 
We believe there are savings achieved when more than one service is 
performed on the same day or during a single operative session, as in 
the case of surgical procedures. The patient has to be prepared only 
once, and the costs associated with staff, anesthesia, operating and 
recovery room use, and other services required for the second procedure 
are incremental. We note that the reduced payment for the multiple 
procedures applies to both the beneficiary coinsurance and Medicare 
payment amounts, so this policy benefits beneficiaries.
    We disagree that CPT codes 97607 and 97608 should not be discounted 
when they are performed with other procedures on the same day. As 
stated above, there are savings associated with providing multiple 
services on the same day. We expect hospitals to furnish services most 
efficiently and to manage their resources with maximum flexibility. We 
do not agree that the Medicare beneficiary should be subject to the 
full coinsurance amount when there are savings achieved for multiple 
procedures performed on the same day/session. We believe it is in the 
best interest of the Medicare program to continue to assign procedures 
and services to the multiple procedure discounting methodology when 
appropriate.
    We note that we reviewed the CY 2021 OPPS claims data for this 
final rule with comment period and found that the geometric mean costs 
for both codes demonstrate that the assignment to APC 5052 with a 
status indicator of ``T'' is appropriate. Specifically, our data show a 
geometric mean cost of approximately $259 for CPT code 97607 based on 
8,059 single claims (out of 10,921) and a geometric mean cost of about 
$310 for CPT code 97608 based on 435 single claims (out of 769 total 
claims). The costs of $259 and $310 for CPT codes 97607 and 97608, 
respectively, are consistent with the geometric mean cost of 
approximately $384 for APC 5052, rather than the geometric mean cost of 
APC 5053, which is approximately $597. Based on our data, the 
assignment to status indicator ``T'' has not impacted the payment for 
the services inappropriately; rather, we believe the payment amounts 
for these services are adequate to ensure access.
    In summary, after consideration of the comment received, we are 
finalizing our proposals for CPT codes 97607 and 97608 without 
modification. Specifically, we are maintaining their assignment to APC 
5052 (Level 2 Skin Procedures) and status indicator to ``T'' (Procedure 
or Service, Multiple Procedure Reduction Applies) for CY 2023. The 
final CY 2023 OPPS payment rates for CPT codes 97607 and 97608 can be 
found in Addendum B to this final rule with comment period. In 
addition, we refer readers to Addendum D1 of this final rule with 
comment period for the SI meanings for all codes reported under the 
OPPS. Both Addendum B and D1 are available via the internet on the CMS 
website.
46. Surfacer[supreg] Inside-Out[supreg] Access Catheter System (APC 
1534)
    HCPCS code C9780 (Insertion of central venous catheter through 
central venous occlusion via inferior and superior approaches (e.g., 
inside-out technique), including imaging guidance) describes the 
procedure associated with the use of the Surfacer[supreg] Inside-
Out[supreg] Access Catheter System that is designed to address central 
venous occlusion. HCPCS code C9780 was established on October 1, 2021, 
and since its establishment the code has been assigned to New 
Technology APC 1534 (New Technology--Level 34 ($8001-$8500)). For CY 
2023, the OPPS payment rates are based on claims submitted between 
January 1, 2021, and December 31, 2021, processed through June 30, 
2022. Although the code was effective October 1, 2021, we have no 
claims data at this time. We note that under the OPPS, we review on an 
annual basis our claims data to determine the payment rates. Because we 
have no claims data, for CY 2023, we proposed continuing to assign 
HCPCS code C9780 to APC 1534 with a proposed payment rate of $8,250.50.
    Comment: Multiple commenters, including the developer, requested 
that HCPCS code C9780 be reassigned to New Technology APC 1575 (New 
Technology--Level 38 ($10,001-$15,000)) with a proposed payment rate of 
$12,500.50. The developer stated that the payment rate should be 
changed because the cost of the procedure has increased since they 
submitted their initial New Technology application to CMS. The 
developer noted that the increase in inflation has increased the costs 
of supplies, contrast agents, and labor used to perform the procedure. 
The developer also explained that data from hospitals that have 
performed the

[[Page 71877]]

procedure described by HCPCS code C9780 have reported substantially 
longer operating room time and recovery room time for the procedure 
than what was anticipated when the initial service code application was 
submitted.
    Response: We reviewed the request from the commenters, and we 
believe that it would be premature to revise the APC assignment for the 
service at this time. Because we have no claims data on which to base 
an accurate payment assignment, it is difficult to determine whether 
the costs of the procedure are substantially higher than what was 
anticipated when the developer made their initial request for this 
procedure to receive a unique HCPCS code. We review our claims data 
annually to establish the OPPS payment rates. Once we have claims data 
for HCPCS code C9780, we will reevaluate and determine whether an APC 
reassignment is necessary. For CY 2023, we believe that the assignment 
to New Technology 1534 is appropriate.
    After consideration of the public comments, we are finalizing our 
proposal without modification to continue to assign HCPCS code C9780 to 
New Technology APC 1534 for CY 2023. The final CY 2023 payment rate for 
HCPCS code C9780 can be found in Addendum B to this final rule with 
comment period, which is available via the internet on the CMS website.
47. Total Ankle Replacement Procedure (APC 5116)
    CPT code 27702 (Arthroplasty, ankle; with implant (total ankle)) 
describes the total ankle replacement (TAR) procedure. Between CY 2000 
and CY 2020, the code was assigned to inpatient-only status under the 
OPPS. In CY 2021, based on public comments and our evaluation of the 
procedure in an evolving healthcare environment, we removed the code 
from the inpatient-only list and paid separately for the procedure by 
assigning the code to APC 5115 (Level 5 Musculoskeletal Procedures) 
effective January 1, 2021. We continued with this APC assignment in CY 
2022, with a payment rate of $12,593.29.
    Under the OPPS, we review our claims data on an annual basis to set 
the payment rates. For the CY 2023 OPPS/ASC proposed rule, we 
identified approximately 1,733 paid claims for CY 2021 with a geometric 
mean cost of $22,501.63. Based on our examination of the proposed rule 
data, we revised the APC assignment for CPT code 27702. For CY 2023, we 
proposed to move CPT code 27702 from APC 5115 to APC 5116 (Level 6 
Musculoskeletal Procedures) with a proposed payment rate of $22,303.35.
    Comment: Several commenters supported the reassignment from APC 
5115 to APC 5116 for CPT code 27702. Commenters stated that the 
reassignment of outpatient TAR cases from APC 5115 to APC 5116 is 
consistent with Medicare's IPPS policy and would appropriately 
recognize the clinical complexity of these procedures. Commenters noted 
that the geometric mean cost of approximately $25,906 for CPT 27702 
exceeds the geometric mean cost of approximately $22,502 for APC 5116. 
They expressed concern that the cost does not reflect the total costs 
hospitals incur in furnishing TAR procedures in the HOPD setting, but 
that it would mitigate the significant shortfall currently associated 
with performing this procedure when it is assigned to APC 5115 and help 
preserve patient access to outpatient TAR surgery.
    Response: We appreciate the commenters' support of the reassignment 
of CPT code 27702 to APC 5116. Based on our evaluation of the latest 
claims data for this final rule with comment period, which is based on 
claims submitted between January 1, 2021, and December 31, 2021, 
processed through June 30, 2022, we believe that the reassignment to 
APC 5116 is appropriate. Specifically, our analysis reveals a geometric 
mean cost of about $26,036 based on 1,884 single claims (out of 1,904 
total claims) for CPT code 27702, which is in line with the geometric 
mean cost of approximately $22,519 for APC 5116, rather than the 
geometric mean cost of about $13,418 for APC 5115. We note that the 
geometric mean cost for CPT code 27702 falls within the range of the 
geometric mean cost for the significant HCPCS codes within APC 5116, 
which is between approximately $15,504 and $27,978. Based on the data, 
the geometric mean cost of about $26,036 for CPT code 27702 is 
consistent with the geometric mean cost of APC 5116. Therefore, for CY 
2023, we believe it is appropriate to increase the payment for the TAR 
procedure described by CPT code 27702 and reassign the code to APC 
5116.
    In summary, after consideration of the public comments, we are 
finalizing our proposal without modification to assign CPT code 27702 
to APC 5116 (Level 6 Musculoskeletal Procedures) for CY 2023. The final 
CY 2023 payment rate for CPT code 27702 can be found in Addendum B to 
this final rule with comment period, which is available via the 
internet on the CMS website.
48. Transcatheter Implantation of Coronary Sinus Reduction Device (APCs 
5193 and 5194)
    For the July 2022 update, we created HCPCS code C9783 (Blinded 
procedure for transcatheter implantation of coronary sinus reduction 
device or placebo control, including vascular access and closure, right 
heart catheterization, venous and coronary sinus angiography, imaging 
guidance and supervision and interpretation when performed in an 
approved Investigational Device Exemption (IDE) study) to describe the 
blinded arm of COSIRA-II clinical trial. We assigned this code to APC 
5193 (Level 2 Endovascular Procedures) with a proposed payment rate of 
$10,760.97. In addition, we proposed to assign CPT code 0645T 
(Transcatheter implantation of coronary sinus reduction device 
including vascular access and closure, right heart catheterization, 
venous angiography, coronary sinus angiography, imaging guidance, and 
supervision and interpretation, when performed) to status indicator 
``E1'' (Not covered. Not paid by Medicare when submitted on outpatient 
claims (any outpatient bill type)), as use of the device in a non-
blinded clinical trial had not been approved by the FDA for inclusion 
in an IDE study.
    Comment: We received a few public comments, including a comment 
from the device manufacturer, stating that as of July 21, 2022, the 
device manufacturer had revised the protocol for their clinical trial 
to add a single arm nonrandomized cohort to accommodate specified 
patients who do not qualify for the randomized arm of the trial. They 
stated that for patients in this cohort, the blinded code will not 
accurately describe the procedure, and instead, CPT code 0645T will 
need to be used to report the procedure. They requested that CPT code 
0645T be assigned to APC 1591 (New Technology--Level 40 ($20,001-
$25,000)) with a proposed payment rate of $22,500.50. Information 
provided to CMS by the manufacturer indicates that the estimated cost 
of the device is around $15,500.
    Response: We thank commenters for their responses. However, we 
believe that CPT code 0645T fits more appropriately in a clinical APC 
rather than a new technology APC. We believe that the procedure to 
implant the COSIRA-II device is most accurately described by CPT code 
93451 (Right heart catheterization including measurement(s) of oxygen 
saturation and cardiac output, when performed). Based on our analysis 
of the latest claims data for this final rule with

[[Page 71878]]

comment period, the geometric mean cost for CPT code 93451 is 
approximately $2,287. When the geometric mean cost of CPT code 93451 is 
added to the cost of the device, the total cost of the procedure 
described by CPT code 0645T is around $18,000, which is in line with 
the geometric mean cost of about $17,665 for APC 5194 (Level 4 
Endovascular Procedures). Based on the cost, we believe that CPT code 
0645T is more appropriate in APC 5194 rather than New Technology APC 
1591. As we do every year, we will reevaluate the APC assignment for 
CPT code 0645T for the next rulemaking cycle. We note that we review, 
on an annual basis, the APC assignments for all services and items paid 
under the OPPS.
    In summary, after consideration of the public comments, we are 
finalizing our proposal with modification. Specifically, we are 
assigning CPT code 0645T to APC 5194 for CY 2023. In addition, we did 
not receive any comments on the APC assignment for HCPCS code C9783 and 
are finalizing our proposal to assign the code to APC 5193. The final 
CY 2023 payment rate for this code can be found in Addendum B to this 
final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
49. Transnasal Esophagogastroduodenoscopy (EGD) Procedure (APC 5301 and 
5302)
    As shown in Table 47, we proposed to continue to assign CPT codes 
0652T and 0653T to APC 5301, and 0654T to APC 5302 for CY 2023. We also 
proposed to continue to assign device category HCPCS code C1748 to APC 
2029 with a status indicator of ``H'' to indicate that the device is on 
pass-through status under the OPPS.
[GRAPHIC] [TIFF OMITTED] TR23NO22.000

    Comment: Some commenters expressed concern with the proposed APC 
assignments for CPT codes 0652T, 0653T, and 0654T. They stated that the 
pass-through status for device HCPCS code C1748 will expire on June 30, 
2023, and consequently, HOPDs will no longer receive additional payment 
for the device beginning July 1, 2023. The commenter explained that the 
EvoEndo[supreg] Model LE Single-Use Gastroscope, which is a device used 
in the procedure, has an invoice price of $2,000. They also stated that 
the device cost is not reflected in our claims data because it just 
received FDA 510(k) marketing clearance on February 14, 2022, and they 
indicated that the cost of the device exceeds the proposed payment rate 
for both APC 5301 and APC 5302. In addition, despite the lack of data 
for the EvoEndo device, the commenters acknowledged that the five 
claims for CPT code 0654T suggest a change in the APC assignment from 
APC 5302 to APC 5303 is necessary. Specifically, they explained that 
the geometric mean cost of approximately $2,795 for CPT code 0654T 
included in the proposed rule shows that the cost to perform the 
procedure is similar to the procedures in APC 5303, whose geometric 
mean cost is about $3,349, rather than the geometric mean cost of 
approximately $1,784 for APC 5302. Based on our claims data, and 
because the proposed payment rates for the procedure codes do not 
account for the cost of the EvoEndo[supreg] Model LE Single-Use 
Gastroscope, the commenters requested a reassignment from APC 5301 to 
APC 5302 for CPT codes 0652T and 0653T, and from APC 5302 to APC 5303 
with a proposed payment rate of $3,319.29 for CPT code 0654T effective 
July 1, 2023, when the device pass-through status expires for HCPCS 
code C1748.

[[Page 71879]]

    Response: Based on the information submitted to CMS, the cost of 
the EvoEndo[supreg] Model LE Single-Use Gastroscope, and the recent 
510(k) FDA approval, we believe that we should modify the APC 
assignments for these procedure codes. As listed in Table 47, the 
proposed CY 2023 OPPS payment rates are $841.07 for CPT codes 0652T and 
0653T and $1,768.53 for CPT code 0654T, which, according to the 
commenter, are below the cost of the EvoEndo[supreg] Model LE Single-
Use Gastroscope. We note that for CY 2023, the OPPS payment rates are 
based on claims submitted between January 1, 2021, through December 31, 
2021, that were processed on or before June 30, 2022. Our analysis of 
the data for this final rule shows that we have no claims data for CPT 
codes 0652T and 0653T, however, because the cost of the device exceeds 
the proposed payment rate for APC 5301, we believe that we should 
reassign both codes to APC 5302. In addition, as mentioned by the 
commenters, we have some data for CPT 0654T, which is consistent with 
the geometric mean cost for APC 5303. Specifically, our claims for this 
final rule with comment period reveal 5 single claims (out of 5 total 
claims) with a geometric mean cost of approximately $2,804 for CPT code 
0654T. Based on this data, we believe a reassignment for CPT code 0654T 
to APC 5303 is appropriate. Therefore, effective July 1, 2023, we are 
reassigning CPT codes 0652T and 0653T from APC 5302 to APC 5303, and 
CPT code 0654T from APC 5303 to APC 5304. As we do every year, we will 
reevaluate the APC assignments for CPT codes 0652T, 0653T, and 0654T 
for the next rulemaking cycle. We note that we review, on an annual 
basis, the APC assignments for all services and items paid under the 
OPPS.
    In summary, after consideration of the public comments, we are 
finalizing our proposal with modification. First, for the January 1, 
2023 update, we are finalizing our proposal without modification for 
CPT codes 0652T, 0653T, 0654T and HCPCS code C1748. Secondly, effective 
July 1, 2023, we are revising the APC assignments for CPT codes 0652T, 
0653T, and 0654T to the APCs listed in Table 48. We note that the pass-
through status for device category HCPCS code C1748 will expire on June 
30, 2023, and at that time, the status indicator will change from ``H'' 
(device pass-through) to ``N'' (packaged) effective July 1, 2023. Table 
48 below list the final SI and APC assignments for CY 2023. The final 
CY 2023 payment rates for the codes can be found in Addendum B to this 
final rule with comment period. In addition, we refer readers to 
Addendum D1 of this final rule with comment period for the status 
indicator (SI) meanings for all codes reported under the OPPS. Both 
Addendum B and D1 are available via the internet on the CMS website.
[GRAPHIC] [TIFF OMITTED] TR23NO22.063

50. 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 based on other 
statutory or regulatory restrictions. Unlisted codes provide a way for 
providers to report services for which there is no

[[Page 71880]]

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 stated in the proposed rule that we 
believe 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 explained that we believe 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 
proposed to reassign CPT code 41899 to clinical APC 5871, which is the 
only, and therefore lowest, APC group that specifically describes 
dental procedures.
    In the CY 2023 OPPS proposed rule, we stated that, 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, 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 $2,310.42 while the geometric mean cost of 
the code's current APC assignment, APC 5161, was $212.05. In contrast, 
the geometric mean cost of APC 5871 (Dental Procedures) was $1,973.71. 
Table 49 below shows the current and proposed status indicator and APC 
assignment for CPT code 41899.
[GRAPHIC] [TIFF OMITTED] TR23NO22.064

    The following summaries describe the public comments we received on 
our proposal.
    Comment: Commenters expressed concern that patients with 
disabilities and children have limited access to dental care under 
general anesthesia in an operating room. Several commenters explained 
the importance of having access to this type of sedated dental care for 
vulnerable patient populations, especially patients with disabilities 
and other special health care needs. For example, one commenter 
explained that general anesthesia can lessen the trauma caused during 
dental exams or procedures to patients with special needs and sensory 
issues. Similarly, another commenter stated that the least traumatic 
option for children with disabilities and severe dental issues, is 
often full mouth dental rehabilitation under general anesthesia in a 
hospital setting. A comment from a dental association further 
highlighted the need for patient access to dental rehabilitation 
services in an operating room under anesthesia. The dental association 
explained that many patients' dental health deteriorated during the 
COVID-19 pandemic, due to changing eating habits, declining mental 
health, diminishing daily routines, and deferred elective health care 
procedures during quarantine. The commenter explained that an 
overwhelming number of patients, especially children, subsequently 
presented with rampant tooth decay and a dire need for sedation 
services, and will oftentimes face a waiting period of up to six months 
due lack of access to operating rooms. During this extended waiting 
period, the commenter explained that patients' dental health may 
further deteriorate; abscesses are more likely to develop and teeth 
that may initially have warranted crowns need to be emergently 
extracted via dental rehabilitation surgery. Per the commenter, the 
optimal care setting to address the oral health care needs for many 
patients who require complex dental services under general anesthesia, 
including dental rehabilitation surgery, is often in a hospital or 
another surgical setting, such as an ambulatory surgical center (ASC). 
This commenter further recommended that CMS create an oral 
rehabilitation code that would enable these services to be prioritized 
by hospitals and ensure patient access. We also received comments from 
several family members of adults and children with disabilities who 
require anesthetized dental care in an operating room and are unable to 
access it for their family members. These commenters explained they are 
often on waiting lists, have to travel long distances to receive care, 
or only have one provider in their area that could provide needed 
dental care for their family member. Similarly, we received comments 
from dentists struggling to reserve operating rooms to provide dental 
care to vulnerable patients that require general anesthesia in this 
setting. One dentist commented that the local children's hospital only 
provided a few operating room days per month, causing a backlog of over 
1,500 patients, mostly Medicaid beneficiaries, unable to receive dental 
services in an operating room. Commenters explained that dentists often 
need to provide surgical dental services and non-surgical dental 
services for vulnerable patient populations in operating rooms under 
general anesthesia given the time involved for these procedures, the 
often

[[Page 71881]]

complex equipment and anesthesia required, and the complexity of the 
services required for high-risk patients.
    Response: We thank the commenters for expressing their concerns on 
this important issue. We appreciate hearing about firsthand experiences 
from dentists and family members of patients in vulnerable populations 
who are unable to access dental care as their perspectives help us to 
better understand the issue. While we appreciate that the commenters 
have brought awareness to an important dental issue impacting health 
equity that needs to be addressed, we note that there are statutory and 
regulatory limitations regarding Medicare coverage and payment for 
dental services. Services must meet Medicare coverage requirements to 
be paid by Medicare, regardless of patient necessity. Therefore, while 
we understand that commenters believe that finalizing our proposal 
without modification would improve access to needed dental services for 
vulnerable populations, we are clarifying that the policies in this 
final rule apply only to hospital outpatient department services 
covered by Medicare Part B and paid under the OPPS.
    Comment: Commenters stated that they generally bill CPT code 41899 
to describe the provision of dental services in the outpatient setting, 
and that the code's CY 2022 OPPS payment rate is too low to cover 
facility costs and incentivize hospitals to reserve operating rooms for 
dentists to provide needed dental care for patients with disabilities 
under general anesthesia. All commenters were supportive of the 
proposed reassignment of CPT 41899 to APC 5871 (Dental Procedures) and 
explained that the resulting increase in Medicare payment for covered 
dental procedures under CPT code 41899 would have the potential to 
mitigate the current reimbursement obstacles to operating room access. 
One commenter in particular was supportive of our proposal because they 
believed the CY 2022 APC assignment of CPT 41899 to APC 5161 (Level 1, 
ENT Procedures) was not an accurate representation of the resource 
costs associated with the range of dental surgical services for which 
CPT code 41899 is billed.
    Response: We thank the commenters for their support of our 
proposal. As we noted in our proposal, 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. While we understand that finalizing our 
proposal without modification would have the effect of increasing the 
payment rate for CPT 41899, and that commenters believe the increased 
payment rate may improve access to needed dental procedures for 
vulnerable populations, we reiterate that CMS has a longstanding policy 
of assigning unlisted codes, like CPT 41899, to the lowest level APC 
within the most appropriate, clinically related APC group, without 
consideration of resource costs.
    Comment: Several commenters suggested that our proposal may improve 
access to dental care for Medicaid beneficiaries with disabilities, 
especially children. For example, one commenter stated that they hoped 
that state Medicaid systems would follow the proposed payment rate 
increase for unlisted code CPT code 41899.
    Response: While we understand that state Medicaid programs often 
use Medicare payment rates for their own rate-setting purposes, we are 
clarifying that the payment rates and APC assignments in this final 
rule with comment period only apply to the hospital outpatient 
department services paid under the hospital outpatient prospective 
payment system (OPPS) under Medicare Part B.
    Comment: One commenter requested that we review the fee schedule 
for anesthesiologists providing dental care sedation.
    Response: We note that this final rule with comment period does not 
set Medicare payment rates for physicians and other practitioners. The 
Medicare fee schedule for practitioners is provided annually in the 
Physician Fee Schedule (PFS) proposed and final rules.
    Comment: Some commenters referenced the dental proposals in the CY 
2023 PFS proposed rule as evidence that there will be a significant, 
and potentially expanding, number of dental procedures that will be 
covered by Medicare. One commenter stated that the CY 2023 PFS proposed 
rule implicitly supports an approach that would make individual CDT 
codes payable in the HOPD and ASC settings. Another commenter stated 
they suspected that dental surgical procedures that require anesthesia 
would be covered by Medicare.
    Response: We are clarifying that Medicare payment under the OPPS 
will be made for dental services that are covered by Medicare. As we 
stated in the proposed rule, the fact that a drug, device, procedure, 
or service is assigned a HCPCS code and a payment rate under the OPPS 
does not mean that the service is covered by the Medicare program, but 
indicates only how the product, procedure, or service may be paid if 
covered by the program. MACs determine whether a drug, device, 
procedure, or other service meets all program requirements for 
coverage. Therefore, even if a code describing a dental service is 
assigned to an APC, which has an associated payment rate, Medicare will 
make payment for the service if it meets coverage requirements. This 
means that dental services billed with CPT code 41899 will be paid by 
Medicare if they are covered. We are further clarifying that this 
policy does not serve as a coverage determination for dental services 
under general anesthesia. We direct readers to the CY 2023 PFS final 
rule for additional discussion of Medicare coverage and payment for 
dental services. We note the CY 2023 PFS final rule is scheduled to be 
issued within a few days of this final rule with comment period
    Finally, regarding the addition of other dental codes to the OPPS 
and the ASC CPL, CMS has not proposed to assign any additional codes 
describing specific dental services to an APC or to the ASC CPL for CY 
2023. We will address APC assignments for codes describing dental 
procedures that are described by the dental policy discussed in the CY 
2023 PFS final rule in future rulemaking, as appropriate, and as part 
of our annual review and revision of the APC groups.
    Comment: Several commenters requested that CMS cover and pay for 
dental surgeries furnished in the ASC setting. Commenters explained 
that not having dental surgical procedures on the ASC CPL severely 
impedes access to potential sites of service for Medicare and Medicaid 
beneficiaries, given that Medicaid typically follows Medicare coverage 
and payment guidelines. Additionally, some commenters requested we add 
CDT code D9420 (Hospital or Ambulatory Surgical Center Call) to the ASC 
CPL.
    Response: First, we reiterate that Medicare Part B pays for dental 
services when they meet our coverage requirements. In the CY 2023 PFS 
final rule, CMS clarified and codified certain dental services that may 
be covered and paid for under Medicare Part B. As a result, there may 
be at least some additional dental services that meet coverage 
requirements as outlined in the CY 2023 PFS final rule. As previously 
stated, the fact that a service is assigned a HCPCS code and a payment 
rate under the OPPS does not mean the service is covered by the 
Medicare program, but

[[Page 71882]]

indicates only how the product, procedure, or service may be paid if 
covered by the program. MACs determine whether a drug, device, 
procedure, or other service meets all program requirements for 
coverage. If a dental service is covered under Medicare Part B and 
meets the criteria for the ASC CPL (42 CFR 416.66), then it may be 
added to the ASC CPL. There are currently dental-related procedures on 
the ASC CPL that are described by CPT codes (i.e., 41800, 41805, 41806, 
41820-41828, 41830, 41850, 41870, 41872, and 41874), but no additional 
dental-related procedures were proposed for CY 2023. We thank the 
commenters for their suggestions and will consider this issue for 
future rulemaking.
    Comment: Several commenters requested that CMS expand its proposal 
to the ASC setting and add CPT 41899 to the ASC CPL. One commenter 
stated that some state Medicaid plans only make payments to ASCs for 
procedures found on the Medicare ASC CPL, which causes access issues if 
CPT 41899 is not on the ASC CPL.
    Response: We thank the commenters for their suggestion. However, 
our current regulations preclude the inclusion of procedures that can 
only be reported using unlisted CPT code on the ASC CPL (42 CFR 
416.166(c)(7)), as it would not be possible to evaluate whether 
procedures reported using unlisted codes meet the relevant criteria at 
42 CFR 416.166 to be included on the ASC CPL. As a reminder, under 
Sec. Sec.  416.2 and 416.166 of the Medicare regulations, subject to 
certain exclusions, Medicare covered surgical procedures in an ASC are 
surgical procedures that are separately paid under the OPPS, are not 
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. Covered surgical procedures in an ASC do not include those 
surgical procedures that generally result in extensive blood loss, 
require major or prolonged invasion of body cavities, directly involve 
major blood vessels, are generally emergent or life-threatening in 
nature, commonly require systemic thrombolytic therapy, are designated 
as requiring inpatient care under Sec.  419.22(n), only able to be 
reported using a CPT unlisted surgical procedure code, and are 
otherwise excluded under Sec.  411.15. For further discussion on ASC 
CPL, refer to section XIII.C.1.d (Additions to the List of ASC Covered 
Surgical Procedures) of this CY 2023 OPPS/ASC final rule with comment 
period.
    Based on the comments received, we are finalizing the following 
coding policy for dental services that meet Medicare coverage 
requirements as specified in the CY 2023 PFS final rule. First, we are 
creating a new code, HCPCS code G0330, to describe facility services 
for dental rehabilitation procedure(s) furnished to patients who 
require monitored anesthesia (e.g., general, intravenous sedation 
(monitored anesthesia care)) and use of an operating room. We are 
adopting this code based on extensive public comments expressing the 
need for a coding and payment mechanism to improve access to covered 
dental procedures under anesthesia, especially dental rehabilitation 
procedures, an issue that commenters explained is caused by barriers to 
securing sufficient operating room time to furnish these services. 
HCPCS code G0330 will be assigned to APC 5871 (Dental Procedures), the 
APC to which we proposed to assign CPT code 41899. Due to public 
comments detailing the lack of access to appropriate facilities to 
receive dental services under anesthesia, we are creating this code to 
enable HOPDs to bill the technical, facility-fee component of Medicare-
covered dental rehabilitation services only. We further note that HCPCS 
G0330 is only billable under the OPPS and must only be used to describe 
facility fees for dental rehabilitation services that meet Medicare 
coverage requirements as interpreted in the CY 2023 PFS final rule. 
Therefore, G0330 cannot be used to describe or bill the facility fee 
for non-covered dental professional services.
    Second, we are clarifying that the use of unlisted CPT code 41899 
should be limited to procedures that are not otherwise described by 
other, more specific dental codes. We stated in the CY 2005 OPPS final 
rule (70 FR 68515-68980) that the assignment of unlisted codes to the 
lowest level APC in the clinical category specified in the code 
descriptor provides a reasonable means for interim payment until such 
time as there is a code that specifically describes what is being paid. 
We stated that this policy encourages the creation of codes where 
appropriate and mitigates the risk of overpayment for services that are 
not clearly identified on the claim. That is why we are creating HCPCS 
code G0330 for providers to use to bill for facility services for 
dental rehabilitation procedures performed on patients who require 
monitored anesthesia in an operating room. We believe this new code is 
more clinically appropriate and would more accurately pay facility fees 
for covered dental rehabilitation services furnished to patients who 
require monitored anesthesia in an operating room rather than unlisted 
CPT code 41899, which is non-specific. Therefore, we are clarifying 
that unlisted CPT code 41899 may be used more broadly to describe other 
dental or dental-related procedures on the teeth and gums, not 
otherwise described by other HCPCS codes currently assigned to APCs, 
such as those performed in the clinical dental scenarios as described 
in the CY 2023 PFS final rule, as well as covered non-surgical dental 
services and surgical dental services provided to patients who do not 
require monitored anesthesia and the use of an operating room. In 
accordance with existing billing practices, providers will continue to 
use existing, specific CDT codes already assigned to APCs when 
available.
    After consideration of the public comments we received, we are not 
finalizing the proposed APC assignment for CPT code 41899 of APC 5871 
(Dental Procedures). We believe that because we are creating a new code 
that describes facility fees for dental rehabilitation services for 
patients that require hospital facilities and monitored anesthesia, 
unlisted code CPT 41899 should instead be used to identify other dental 
or dental-related services, and remain assigned to APC 5161 (Level 1, 
ENT Procedures), the lowest-level, clinically appropriate APC. The new 
G-code we are establishing, HCPCS code G0330, will be assigned to APC 
5871 (Dental Procedures) for CY 2023. HCPCS code G0330 describes 
facility services for dental rehabilitation procedures performed on 
patients who require monitored anesthesia (e.g., general, intravenous 
sedation (monitored anesthesia care)) and use of an operating room. 
While the new G-code is not payable in the ASC setting for CY 2023, we 
will consider adding it to the ASC CPL in future rulemaking. We 
reiterate that payment will be made for services identified with 
unlisted CPT code 41899 or HCPCS code G0330 when those services meet 
Medicare coverage requirements. We refer readers to Addendum B of this 
final rule with comment period for the payment rates for all codes 
reportable under the OPPS, including CPT code 41899 and G0330. Addendum 
B is 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. We note

[[Page 71883]]

that HCPCS code G0330 is assigned to comment indicator ``NI'' in 
Addendum B to indicate that comments will be accepted on the interim 
APC assignment.
51. 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 code 53440 (Male 
sling procedure) and CPT code 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 review of the latest claims data for this final rule with 
comment period, specifically, claims submitted between January 1, 2021, 
through December 31, 2021, and processed on or before June 30, 2022, we 
examined the procedures assigned to the Urology Procedures APCs. In the 
CY 2022 final rule with comment period (86 FR 63565), we stated that 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 CY 2019 claims data due to the PHE. For CY 2022, 
we did not finalize any APC reassignment for the urology-related 
procedures because our data analysis using the CY 2019 claims did not 
support the reassignment based on the geometric mean cost of these 
codes and the impact across the Urology and Related services' APC's.
    For the CY 2023 ratesetting, we proposed to use CY 2021 claims 
data. Using the CY 2021 claims data, we identified eight procedures 
(listed below) that were potentially appropriate to move from APC 5375 
to APC 5376 because the geometric mean cost for the procedures ranged 
between the two APCs. Specifically, the proposed geometric mean cost of 
these services was closer to the geometric mean cost of $8,788.53 for 
APC 5376, rather than the geometric mean cost of $4,826.23 for APC 
5375. This reassignment to APC 5376 would improve 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 proposed 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 (proposed geometric mean cost: 
$11,137.98).
     HCPCS C9769: Cystourethroscopy, with insertion of 
temporary prostatic implant/stent with fixation/anchor and incisional 
struts (proposed geometric mean cost: $7,742.45).
     CPT 51860: Cystorrhaphy, suture of bladder wound, injury 
or rupture; simple (proposed geometric mean cost: $7,548.83).
     CPT 53452 (0549T): Periurethral transperineal adjustable 
balloon continence device; unilateral insertion, including 
cystourethroscopy and imaging guidance (Proposed geometric mean cost: 
$7,337.54).
     CPT 53449: Repair of inflatable urethral/bladder neck 
sphincter, including pump, reservoir, and cuff (proposed geometric mean 
cost: $7,109.79).
     CPT 54344: Repair of hypospadias complication(s) (i.e., 
fistula, stricture, diverticula); requiring mobilization of skin flaps 
and urethroplasty with flap or patch graft (proposed 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 (proposed geometric mean cost: $7,069.06).
     CPT 55880: Ablation of malignant prostate tissue, 
transrectal, with high intensity-focused ultrasound (hifu), including 
ultrasound guidance (proposed geometric mean cost: $7,015.62).
    Comment: A commenter supported our proposal to reassign the above 
codes from APC 5375 to APC 5376. The commenter agreed that the 
reassignment improves the resource cost and homogeneity for the 
procedures within APC 5375 and APC 5376.
    Response: We thank the commenter for the input.
    Based on our examination of the latest claims data for this final 
rule with comment period, we continue to believe the reassignment of 
the above set of urological procedures improves the resource cost and 
clinical homogeneity for the procedures within APC 5375 and APC 5376.
    Comment: Commenters supported our proposal to reassign CPT code 
55880 (Ablation of malignant prostate tissue, transrectal, with high 
intensity-focused ultrasound (hifu), including ultrasound guidance) 
back to level 6 Urology and Related Services (APC 5376). They stated 
that the CY 2019 assignment of HIFU to the level 5 Urology and Related 
Services APC, specifically, APC 5375, limited Medicare beneficiaries' 
access to HIFU because the facility would have to absorb the cost for 
the procedure since the payment rate for APC 5375 does not reflect the 
cost of the service. Commenters believe the HIFU reassignment to APC 
5376 would increase access for African American men who are diagnosed 
with prostate cancer. One commenter requested CMS apply the 31 percent 
default device offset for HIFU.
    Response: Our analysis of the latest claims data used for this 
final rule with comment period supports the reassignment from APC 5375 
to APC 5376. Specifically, our review reveals a geometric mean cost of 
approximately $7,134 for CPT code 55880 based on 345 single claims (out 
of 348 total claims), which is consistent with the geometric mean cost 
of about $8,800 for APC 5376, rather than the geometric mean cost of 
approximately $4,836 for APC 5375. The data indicates that the resource 
costs associated with CPT code 55880 are consistent with the services 
assigned to APC 5376. Therefore, we believe it would be appropriate to 
reassign the code from APC 5375 to APC 5376 for CY 2023. However, based 
on the latest data available, we have no evidence that supports 
applying the default 31 percent device offset for HIFU (CPT 55880).
    Comment: A commenter supported the reassignment of HCPCS code C9769 
(Cystourethroscopy, with insertion of temporary prostatic implant/stent 
with fixation/anchor and incisional struts) to APC 5376 (Level 6 
Urology and Related Services). Additionally, the commenter supported 
the device offset percentage of 75.06 percent for HCPCS code C9769.
    Response: We examined our claims data for this final rule with 
comment period, and our analysis of the latest claims data shows that 
the geometric mean cost for HCPCS code C9769 is approximately $7,656 
based on 13 single claims (out of 13 total claims), which is in line 
with the geometric mean cost of about $8,800 for APC 5376 rather than 
the geometric mean cost of approximately $4,836 for APC 5375. The 
geometric mean cost for HCPCS

[[Page 71884]]

code C9769 demonstrates that its resource cost is consistent with the 
resources of the services assigned to APC 5376. Consequently, we 
believe that the assignment to APC 5376 for HCPCS code C9769 is 
appropriate. Additionally, based on the available evidence, we believe 
it is appropriate to adjust the device offset percentage to 75.06 
percent for CY 2023.
    In addition to the above codes, we also received a comment related 
to CPT code 53452. For CY 2023, we proposed to continue to assign CPT 
code 53452 (Periurethral transperineal adjustable balloon continence 
device; unilateral insertion, including cystourethroscopy and imaging 
guidance) to APC 5375 (Level 5 Urology and Related Services) with a 
proposed payment of $4,783.70.
    Comment: A commenter requested the reassignment of CPT code 53452 
to APC 5376 (Level 6 Urology and Related Services). The commenter also 
stated that prior to CY 2022, CPT code 53452 was billed as CPT code 
0549T (Transperineal periurethral balloon continence device; unilateral 
placement, including cystoscopy and fluoroscopy).
    Response: We agree that CPT code 53452 has been replaced with CPT 
code 0549T. We note that CPT codes 0549T and 53452 are assigned to the 
same APC. As noted above, the CY 2023 OPPS payment rates are based on 
our analysis of the claims data submitted between January 1, 2021, 
through December 31, 2021, and processed on or before June 30, 2022. 
Our analysis of the claims data for this final rule shows a geometric 
mean cost of about $7,315 for the predecessor CPT code 0549T based on 6 
single claims (out of 6 total claims), which is consistent with the 
geometric mean cost of approximately $8,800 for APC 5376, rather than 
the geometric mean cost of about $4,836 for APC 5375. Based on the 
data, we believe that the resource costs associated with CPT code 53452 
(previously billed as CPT code 0549T) are similar to the other 
surgeries assigned to APC 5376. We believe the reassignment of CPT code 
53452 is appropriate and improves both the resource cost and clinical 
homogeneity of the procedures within APC 5376.
    In summary, after consideration of the public comments, we are 
finalizing our proposal and reassigning the eight urology-related 
procedures discussed above from APC 5375 to APC 5376. In addition, we 
are finalizing our proposal with modification for CPT code 53452 and 
reassigning the code from APC 5375 to APC 5376 for CY 2023. Table 50 
below shows the final geometric mean cost for each APC within the 
Urology and Related Services grouping.
[GRAPHIC] [TIFF OMITTED] TR23NO22.065

52. Waterjet Prostate Ablation (APC 5376)
    The AquaBeam[supreg] System is intended for the resection and 
removal of prostate tissue in males suffering from lower urinary tract 
symptoms (LUTS) due to benign prostatic hyperplasia (BPH). The waterjet 
prostate ablation procedure is represented by CPT code 0421T 
(Transurethral waterjet ablation of prostate, including control of 
post-operative bleeding, including ultrasound guidance, complete 
(vasectomy, meatotomy, cystourethroscopy, urethral calibration and/or 
dilation, and internal urethrotomy are included when performed)). The 
procedure involves resection of the prostate to relieve symptoms of 
urethral compression. The resection is performed robotically using a 
high velocity, nonheated sterile saline water jet (in a procedure 
called Aquablation). The procedure utilizes real-time intra-operative 
ultrasound guidance to allow the surgeon to precisely plan the surgical 
resection area of the prostate and then the system delivers Aquablation 
therapy to accurately resect the obstructive prostate tissue without 
the use of heat. The AquaBeam[supreg] device, represented by HCPCS code 
C2596, received device transitional pass-through payment status 
beginning in CY 2020.
    For CY 2023, we proposed to continue to assign CPT code 0421T to 
APC 5376 (Level 6 Urology and Related Services) based on the CY 2021 
claims. Our analysis of the CY 2021 claims data for the CY 2023 OPPS/
ASC proposed rule with comment period, which was based on claims data 
submitted between January 1, 2021, through December 31, 2021, and 
processed through December 31, 2021, yielded 1,016 single claims for 
CPT code 0421T with a proposed geometric mean cost of about $8,754.54.
    Comment: A commenter supported the continued assignment of CPT code 
0421T to APC 5376 (Level 6 Urology and Related Services) based on its 
clinical and resource comparability to the procedures within the APC. 
The commenter noted that the transitional pass-through status for the 
AquaBeam[supreg] device (HCPCS code C2596), expires on December 31, 
2022, and urged CMS to package the device cost into the waterjet 
ablation procedure (CPT code 0421T).

[[Page 71885]]

Additionally, the commenter stated that the proposed device offset of 
35 percent is artificially low and argued that the PHE has exacerbated 
omissions in device coding. The commenter requested a device offset of 
66 percent.
    Response: We thank the commenter for the input. Based on our 
analysis of the updated claims data for this final rule with comment 
period, which is based on claims submitted between January 1, 2021, 
through December 31, 2021, processed through June 30, 2022, we believe 
the assignment of CPT code 0421T to APC 5376 is appropriate based on 
its resource cost and clinical homogeneity to the procedures within APC 
5376. Specifically, our claims data shows a geometric mean cost of 
approximately $8,677 based on 1,121 single claims (out of 1,128 total 
claims), which is consistent with the geometric mean cost of about 
$8,800 for APC 5376. We note that upon expiration of the device 
transitional pass-through at the end of December 2022, the cost of the 
AquaBeam[supreg] device, represented by HCPCS C2596, will be packaged 
into the waterjet ablation procedure (0421T). Additionally, based on 
the available data, we believe the device offset percentage of 35 
percent is appropriate for CPT code 0421T.
    In summary, after consideration of the public comment, we are 
finalizing our proposal without modification and assigning CPT code 
0421T to APC 5376. The final APC and status indicator assignments for 
CPT codes 0421T is found in Table 51. The final CY 2023 OPPS payment 
rates for this code can be found in Addendum B to this final rule with 
comment period. In addition, we refer readers to Addendum D1 of this 
final rule with comment period for the SI meanings for all codes 
reported under the OPPS. Both Addenda B and D1 are available via the 
internet on the CMS website, specifically, at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
[GRAPHIC] [TIFF OMITTED] TR23NO22.066

53. ZOLL [mu]CorTM Heart Failure Management System Service 
(HFSM) Monitoring
    The Heart Failure Management System Service (HFMS) is designed to 
help clinicians improve outcomes and reduce hospitalizations for heart 
failure patients with potential fluid-management problems by providing 
monitoring for pulmonary fluid levels, an early indicator for heart 
failure decompensation. The system uses a non-invasive, water-resistant 
sensor, which can be worn by patients 24 hours a day, and novel 
radiofrequency technology to monitor pulmonary fluid levels. 
Proprietary algorithms analyze patient-specific trends in the incoming 
data, allowing for early detection of deterioration in the patient's 
condition by the Independent Diagnostic Testing Facility (IDTF). 
Actionable clinical parameters recorded and available to clinicians 
include the thoracic fluid index, heart rate, respiration rate, 
activity, posture, and heart rhythm (ECG). Notifications relating to 
the condition of each patient are provided to the treating physician; 
data in the notifications aid the physician in the diagnosis and 
identification of various clinical conditions, events, or trends, 
allowing for timely intervention by the physician with the goal of 
avoiding a hospital readmission.
    The CPT Editorial Panel established CPT codes 0607T and 0608T to 
describe the HFSM monitoring effective July 1, 2020. For CY 2023, we 
proposed to continue to assign CPT code 0607T (Remote monitoring of an 
external continuous pulmonary fluid monitoring system, including 
measurement of radiofrequency- derived pulmonary fluid levels, heart 
rate, respiration rate, activity, posture, and cardiovascular rhythm 
(e.g., ECG data), transmitted to a remote 24-hour attended surveillance 
center; set-up and patient education on use of equipment) to status 
indicator ``V'' (clinic or emergency department visit) and APC 5012 
(Clinic Visits and Related Services) with a proposed payment rate of 
$122.82. We also proposed to continue to assign CPT code 0608T (Remote 
monitoring of an external continuous pulmonary fluid monitoring system, 
including measurement of radiofrequency-derived pulmonary fluid levels, 
heart rate, respiration rate, activity, posture, and cardiovascular 
rhythm (e.g., ECG data), transmitted to a remote 24-hour attended 
surveillance center;) to status indicator ``S'' (procedure or service, 
not discounted when multiple) and APC 5741 (Level 1 Electronic Analysis 
of Devices) with a proposed payment rate of $35.96.
    Comment: The manufacturer stated that the services associated with 
CPT codes 0607T and 0608T are not performed in the HOPD setting and are 
exclusively IDTF services. The manufacturer further added that the APC 
assignment for these codes under the OPPS has resulted in confusion 
that impedes availability of the HFMS to Medicare patients. The 
manufacturer requested that CMS revise the status indicators for CPT 
codes 0607T and 0608T to either ``A'', ``B'', or ``M'' to indicate that 
the services are not payable under the OPPS.

[[Page 71886]]

    The commenter explained that the HFMS services are provided only 
through ZOLL Laboratory Services, a Joint Commission, Medicare-enrolled 
IDTF and indicated that no hospital in the United States possesses the 
HFMS technology. In addition, the commenter noted that there have been 
no OPPS claims for CPT codes 0607T or 0608T because hospitals do not 
provide this service. This same commenter added that CPT codes 0607T 
and 0608T are currently contractor-priced by Medicare Administrative 
Contractors (MACs) under the PFS.
    Response: We thank the commenter for the feedback. Since the HFMS 
services are provided only through ZOLL's IDTF and no hospital in the 
U.S. has the technology to offer the service, we are accepting the 
recommendation and finalizing a change in the status indicators for 
these codes to ``A'' to indicate that the services associated with CPT 
codes 0607T and 0608T are contractor-priced. Status indicator ``A'' 
means that items or services are paid under another fee schedule or 
payment system or are contractor-priced by MACs. Because CPT codes 
0607T and 0608T are contractor-priced by MACs under PFS, we are 
assigning these services to status indicator ``A''.
    We refer readers to Addendum D1 of this final rule with comment 
period for the SI meanings for all codes reported under the OPPS. 
Addendum D1 is available via the internet on the CMS website.

IV. OPPS Payment for Devices

A. Pass-Through Payment for Devices

1. Beginning Eligibility Date for Device Pass-Through Status and 
Quarterly Expiration of Device Pass-Through Payments
a. Background
    The intent of transitional device pass-through payment, as 
implemented at 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-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.\22\
---------------------------------------------------------------------------

    \22\ 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 rule. The 
60-day notice was published in the Federal Register on April 29, 
2022 (87 FR 25488).
---------------------------------------------------------------------------

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 14 device categories eligible for 
pass-through payment. These devices are listed in Table 52 where we 
detail the expiration dates of pass-through payment status for each of 
the 14 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.D 
of the CY 2023 OPPS/ASC proposed rule (87 FR 44680 through 44682), we 
proposed 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.D, we did not propose to 
provide any additional quarters of separate payments for any drug, 
biological or device category whose pass-through payment status will 
expire between December 31, 2022, and September 30, 2023. We solicited 
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 payment status that expired between December 31, 2021, and 
September 30, 2022. We note that in section I.V of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44578) CMS proposed not to provide additional 
pass-through payments for any device categories expiring in CY2023. We 
were silent on the issue of providing additional pass-through payments 
for drugs and biologicals in both section I.V of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44578) and section (87 FR 44626 through 44627). 
However, consistent with the CY 2022 OPPS/ASC final rule with comment 
period (86 FR 63755), where 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

[[Page 71887]]

September 30, 2022 to mimic continued pass-through payment, we believe 
it is appropriate to address not only the comments received with 
respect to drugs and biologicals as they relate to providing additional 
quarters of pass-through status payments, but also the impact of CMS' 
finalized decision to resume the regular update process of using claims 
from the year 2 years prior to the year for which we are setting rates 
on drug and biological pass-through status payments.
    Comment: Many commenters noted that the Covid-19 PHE persisted 
through 2021 and into 2022, impacted beneficiary access to certain 
drugs, biologicals, and devices, and disrupted product utilization. 
Commenters expressed concern that the general reduction in utilization 
of devices and services will be reflected in the 2021 claims data, 
similar to what occurred with the 2020 data, and as such, the rationale 
for continuing separate payments for pass-through technologies impacted 
by the Covid-19 PHE remains just as pertinent for the CY 2023 OPPS/ASC 
final rule as it was in CY 2022 OPPS/ASC final rule. Commenters 
expressed further concern that using the 2021 claims data as proposed 
will result in insufficient claims data, inaccurate rate-setting, lower 
reimbursement rates that do not accurately reflect provider costs, and 
improper APC assignments.
    We received many comments specific to providing additional quarters 
of separate payments for drugs and biologicals whose pass-through 
payment status will expire between December 31, 2022 and December 30, 
2023. One commenter stated that there continue to be major distortions 
in the claims data impacting numerous specialties and that these 
distortions significantly impacted the CY 2021 claims data used for the 
CY 2023 rate-setting. Another commenter requested that CMS use its 
equitable adjustment authority to extend the pass-through period for 
all radiopharmaceuticals impacted by the ongoing COVID-19 public health 
emergency (PHE), including the pass-through period for A9590 (Iodine I-
131, iobenguane). This commenter recommended that this pass-through 
period extension continue as long as necessary to enable CMS to use 
three full years of claims data outside of the PHE period to capture 
radiopharmaceutical costs that will be packaged into nuclear medicine 
APC payments after pass-through status ends. Several commenters 
requested that CMS extend pass-through through December 31, 2024, for 
Detectnet, which was granted pass-through status beginning January 2021 
and, in addition to COVID-19 challenges, commenters cited claims 
processing issues during CY 2021 that impacted utilization.
    Response: We thank the commenters for their input. While we 
appreciate the concerns expressed by the commenters, we do not agree 
that 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, 2022. 
Based on CMS' decision to finalize the proposal 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, we believe that the data collected for CY 
2023 ratesetting will result in the necessary cost data being collected 
and incorporated into the costs for these drugs, biologicals, and 
devices into the procedure APC rate. Therefore, we believe that the 
claims data used in CY 2023 OPPS ratesetting for procedures including 
these drugs, biologicals, and devices with expiring pass-through status 
is sufficient and an additional extension of separate payment to mimic 
pass-through status is neither necessary nor appropriate. Due to clear 
improvement between the CY 2020 claims data and the CY 2021 claims data 
and CMS' return to the regular update process, we do not believe that 
the circumstances that resulted in CMS utilizing our equitable 
adjustment authority at section 1833(t)(2)(E) of the Act are similar to 
the circumstances in CY 2022. Therefore, we are finalizing our proposal 
to not provide any additional quarters of separate payments for any 
drug, biological, or device category whose pass-through payment status 
will expire between December 31, 2022, and December 30, 2023. We direct 
readers to section X.B of this final rule with comment period for a 
full discussion of use of claims data for CY 2023 OPPS/ASC payment 
system ratesetting due to the PHE.
    Comment: Many commenters stated their opposition to CMS's proposal 
to not 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 for CY 2023. These commenters 
encouraged CMS to use its legal authority under section 1833(t)(2)(E) 
of the Act to extend pass-through payments for devices an additional 
four quarters through CY 2023 due to a historic decline in utilization 
during the COVID-19 pandemic.
    Response: We thank the commenters for their input. Consistent with 
the statute and regulations, under section 1833(t)(6)(B)(iii) of the 
Act, the period for which a device category is eligible for 
transitional pass-through payments under the OPPS can be in effect is 
at least 2 years, but not more than 3 years (81 FR 79655). Once a 
device category has received transitional pass-through payments for 2 
to 3 years, the device category is no longer eligible for pass-through 
payments and we utilize the 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).
    The intent of transitional device pass-through payment, as 
implemented at 42 CFR 419.66, is to facilitate access for beneficiaries 
to the advantages of new and truly innovative devices by allowing for 
adequate payment for these new devices while the necessary cost data is 
collected to incorporate the costs for these devices into the procedure 
APC rate (66 FR 55861). We note that device pass-through payment status 
is intended to be temporary and we consider the cost data to be 
included in the payment rates regardless of whether the technology's 
use in the Medicare population has been frequent or infrequent during 
the time period under which a device was receiving transitional pass-
through payments.
    Recognizing some of the more acute effects of the Covid-19 PHE on 
the utilization of devices with pass-through status in CY 2020, 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 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). However, we do 
not believe that it is appropriate to adopt similar measures in CY 2023 
based on CMS' decision to finalize the proposal 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. We believe that the data collected for CY 
2023 ratesetting will result in the necessary cost data being collected 
and

[[Page 71888]]

incorporated into the costs for these devices into the procedure APC 
rate. Therefore, in this final rule with comment period, we are 
finalizing our proposal to not 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 for 
CY 2023. Again, we direct readers to section X.B of the this final rule 
with comment period a full discussion use of claims data for CY 2023 
OPPS/ASC payment system ratesetting due to the Covid-19 PHE.
    Comment: We received a comment from Stryker requesting that the 
pass-through status for SpineJack[supreg] (C1062, Intravertebral body 
fracture augmentation with implant (e.g., metal, polymer)) continue 
through CY 2024. Stryker noted concerns that there are unique 
considerations that support extending the SpineJack[supreg] period 
through CY 2024, including erroneous CMS National Correct Coding 
Initiative (NCCI) claims edits, commercial Medicare claims submission 
software errors, and insufficient CMS guidance on charging for the 
components of the associated bone preparation kit. As such, Stryker 
recommended that CMS use its equitable adjustment authority under 
1833(t)(2)(E) to provide four quarters of additional separate pass-
through payment for SpineJack[supreg]/C1062, through December 31, 2024.
    Response: We thank Stryker for providing information related to 
SpineJack[supreg]. SpineJack[supreg] currently has pass-through status 
through 2023. We note that the pass-through status for 
SpineJack[supreg] expires on December 31, 2023, and will remain 
effective throughout the OPPS CY 2023 final rule with comment period, 
as such we will take the recommendations provided into consideration in 
the CY 2024 rulemaking.
    Comment: We received a number of comments seeking clarification on 
whether several device category codes were omitted from Table 30 
(Devices with Pass-Through Status (or Adjusted Separate Payment) 
Expiring at the End of the Fourth Quarter of 2022, in 2023, or in 2024) 
in the proposed rule.
    Response: We appreciate the comments. In section IV.4.A.1 of the CY 
2023 OPPS/ASC proposed rule, we stated that, ``Currently, there are 
currently 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.'' While we correctly included 
the amount of 11 device categories and included all of those device 
categories in the CY 2023 proposed estimate of pass-through spending, 
we erroneously omitted two device categories from Table 30 in the 
proposed rule (84 FR 44579). The two device category codes that should 
have been included are C1832 (Autograft suspension, including cell 
processing and application, and all system components) and C1833 
(Monitor, cardiac, including intracardiac lead and all system 
components (implantable)). See Table 52 for the updated list of 14 
device category codes where we detail the expiration dates of pass-
through payment status for each of the 14 devices currently receiving 
device pass-through payment. Note that Table 52 includes the eight (8) 
device category codes included in the proposed estimate of pass-through 
spending with expiration dates in both 2023 and 2024, which includes 
the device code C1831 that received preliminary approval upon quarterly 
review effective October 1, 2021, and had pass-through payment status 
in CY 2022. In addition, Table 52 includes three (3) device category 
codes finalized in this final rule with comment period for a total of 
11 device categories receiving pass-through payments effective January 
1, 2023.
    Comment: We received a number of comments noting discrepancies in 
the dates provided in Table 30 of the CY 2023 OPPS/ASC proposed rule. 
Specifically, commenters noted that six (6) HCPCS codes included in 
Table 30 with a December 31, 2022, expiration date were later 
identified as estimated expenditures for CY 2023 in section VI. B., 
Proposed Estimate of Pass-Through Spending for CY 2023 (87 FR 44660), 
which suggested that the pass-through status for these codes continued 
in CY 2023. These six (6) HCPCS codes with CY 2022 expiration dates 
were identified as C1823 (Generator, neurostimulator (implantable), 
nonrechargeable, with transvenous sensing and stimulation leads), C1824 
(Generator, cardiac contractility modulation (implantable)), C1982 
(Catheter, pressure-generating, one-way valve, intermittently 
occlusive), C1839 (Iris prosthesis), C1734 (Orthopedic/device/drug 
matrix for opposing bone-to-bone or soft tissue-to bone (implantable)), 
and C2596 (Probe, image-guided, robotic, waterjet ablation).
    Response: We thank the commenters for their feedback. While those 
six (6) HCPCS codes listed in Table 30 contained correct CY 2022 
expiration dates (87 FR 44579), we inadvertently included these codes 
in section VI.B., Proposed Estimate of Pass-Through Spending for CY 
2023 (87 FR 44660). The six (6) HCPCS codes that were inadvertently 
included in the estimate of pass-through spending for CY 2023 were 
C1823 (Generator, neurostimulator (implantable), nonrechargeable, with 
transvenous sensing and stimulation leads), C1824 (Generator, cardiac 
contractility modulation (implantable)), C1982 (Catheter, pressure-
generating, one-way valve, intermittently occlusive), C1839 (Iris 
prosthesis), C1734 (Orthopedic/device/drug matrix for opposing bone-to-
bone or soft tissue-to bone (implantable)), and C2596 (Probe, image-
guided, robotic, waterjet ablation).
    In addition, consistent with the final approval for device-pass 
through payment status of C1831 (Personalized, anterior and lateral 
interbody cage (implantable)), as described in section IV.2.b.1 of this 
final rule with comment period, we have added C1831 to Table 52 in this 
final rule with comment period. We inadvertently did not include C1831 
in Table 30 in the CY 2023 OPPS/ASC proposed rule. However, as the 
device code received preliminary approval upon quarterly review 
effective October 1, 2021 and had pass-through payment status in CY 
2022, the device HCPCS code should have been included in Table 30 in 
the CY 2023 OPPS/ASC proposed rule. Table 52 has been updated to 
reflect the inclusion of C1831. Finally, HCPCS codes C1832 (Autograft 
suspension, including cell processing and application, and all system 
components) and C1833 (Monitor, cardiac, including intracardiac lead 
and all system components (implantable)) were included in the proposed 
estimate of pass-through spending for CY 2023 (87 FR 44660) but did not 
appear in Table 30 in the CY 2023 OPPS/ASC proposed rule. Both C1832 
and C1833 have been added to Table 52 in this final rule. These device 
categories were approved for device pass-through effective January 1, 
2022. As such, device category HCPCS codes C1831, C1832, and C1833 that 
were omitted from Table 30 in the proposed rule have been added to 
Table 52 in this final rule with comment period, and the six (6) HCPCS 
codes discussed above that were inadvertently included in the estimate 
of pass-through spending for CY 2023 have been removed to accurately 
reflect the final estimate of pass-through spending as part of 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.

[[Page 71889]]

    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 52 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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR23NO22.067


[[Page 71890]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.068

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 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

[[Page 71891]]

determination process. Device pass-through applications are still 
submitted to CMS through the quarterly subregulatory process, but the 
applications are 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: https://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 eight 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 aprevoTM 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, aprevoTM Intervertebral Body Fusion is discussed 
in section IV.2.b.1 of this final rule with comment period.
    Applications received for the later deadlines for the remaining 
2022 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) aprevoTM Intervertebral Body Fusion Device
    Carlsmed, Inc. submitted an application for a new device category 
for transitional pass-through payment status for aprevoTM 
Intervertebral Fusion Device (aprevoTM) 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 
aprevoTM 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 aprevoTM is used with supplemental fixation devices and 
bone graft packing. Per the applicant, the device was formerly known as 
``CorraTM.''
    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

[[Page 71892]]

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 claimed that 
aprevoTM 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, aprevoTM 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 aprevoTM. Per the applicant, other stock devices 
do not match the anatomy of each patient precisely. The applicant 
stated, in contrast, aprevoTM 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.
    AprevoTM is indicated for use as an adjunct to fusion at 
one or more levels of the lumbar spine in patients having an Oswestry 
Disability Index (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 autologous 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), 
aprevoTM 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 aprevoTM 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 
aprevoTM on May 27, 2021, which is within 3 years of the 
date of the initial FDA marketing authorization of both indications. We 
solicited public comment on whether aprevoTM meets the 
newness criterion.
    We did not receive public comments regarding whether 
aprevoTM meets the newness criterion at Sec.  419.66(b)(1). 
Because we received the aprevoTM pass-through application on 
May 27, 2021, which is within 3 years of July 1, 2020, December 3, 
2020, and June 30, 2021, the dates of FDA Breakthrough Device 
designation and 510(k) clearance, we have concluded that 
aprevoTM meets the newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, aprevoTM 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 
aprevoTM meets the device eligibility requirements of Sec.  
419.66(b)(4) because it is not an instrument, apparatus, implement, or 
item for which depreciation and financing expenses are recovered, and 
it is not a supply or material furnished incident to a service. We 
solicited public comments on whether aprevoTM meets the 
eligibility criteria at Sec.  419.66(b).
    Response: The applicant submitted a comment reiterating that 
aprevoTM meets the eligibility criteria at Sec.  
419.66(b)(3) and (4). Based on the information we have received and our 
review of the application, we agree with the applicant that 
aprevoTM is used for one patient only, comes in contact with 
human tissue, and is surgically implanted or inserted, and therefore 
meets the requirements in Sec.  419.66(b)(3). We also agree that 
aprevoTM meets the device eligibility requirements of Sec.  
419.66(b)(4) because it is not equipment, an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, and it is not a supply or material furnished incident to a 
service. Based on this assessment we have determined that 
aprevoTM meets the eligibility criteria at Sec.  
419.66(b)(3) and (4).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. The 
applicant describes aprevoTM 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 aprevoTM because 
none of the existing codes pertain to a patient-specific spinal 
interbody fusion device and, therefore, do not encompass 
aprevoTM.
    We stated in the CY 2023 OPPS/ASC proposed rule that we had not 
identified an existing pass-through payment category that describes 
aprevoTM and we solicited public comment on whether 
aprevoTM meets the device category criterion.
    We did not receive any comments on whether aprevoTM 
meets the criteria for establishing new device categories specified at 
Sec.  419.66(c)(1). We continue to believe that there is not an 
existing pass-through payment category that describes 
aprevoTM because none of the existing codes pertain to a 
patient-specific spinal interbody fusion device. Based on this 
information we have determined that aprevoTM meets the 
device category eligibility criterion at Sec.  419.66(c)(1). The second 
criterion for establishing a device category, at Sec.  419.66(c)(2), 
provides that CMS determines either of the following: (i) That a device 
to be included in the category has demonstrated that it will 
substantially improve the diagnosis or treatment of an illness or 
injury or

[[Page 71893]]

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). 
AprevoTM 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 
aprevoTM would be reported with HCPCS codes in Table 53.
[GRAPHIC] [TIFF OMITTED] TR23NO22.069

    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 aprevoTM 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 aprevoTM 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 stated in the CY 2023 OPPS/ASC proposed 
rule that we believe aprevoTM 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 $26,000 for 
aprevoTM 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 stated in 
the CY 2023 OPPS/ASC proposed rule that we believe aprevoTM 
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 aprevoTM 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 stated in the CY 2023 OPPS/ASC proposed rule that we believe that 
aprevoTM meets the third cost significance requirement.

[[Page 71894]]

    We solicited public comment on whether aprevoTM meets 
the device pass-through payment criteria discussed in this section, 
including the cost criterion for device pass-through payment status.
    Comment: The applicant provided a comment reiterating that 
aprevoTM meets the cost significance requirements.
    Response: We thank the applicant for reiterating that 
aprevoTM meets the cost significance requirements specified 
at Sec.  419.66(d). Based on our findings from the first, second, and 
third cost significant tests, we believe that aprevoTM meets 
the cost significance criterion specified at Sec.  419.66(d).
    Comment: The applicant commented on the cost criteria calculations 
and requested that CMS evaluate and adjust the device offset amount 
associated with the use of the aprevoTM interbody device to 
reflect only the interbody device-related costs for the procedure. 
Specifically, the applicant noted that CMS used APC 5115 for the 
calculations, which had a CY 2021 payment rate of $12,314.76 at the 
time the application was received, and a device-related portion of the 
APC payment amount for the related service of $6,851.93.
    The applicant requested that we also consider that the applicable 
HCPCS code used in this analysis (22633: Arthrodesis, combined 
posterior or posterolateral technique with posterior interbody 
technique including laminectomy and/or discectomy sufficient to prepare 
interspace (other than for decompression), single interspace lumbar), 
describes a procedure requiring both the posterior interbody fusion and 
posterolateral fusion. The posterolateral fusion is performed using 
screws, rods and bone graft. The applicant asserted that 
aprevoTM does not replace all existing technologies used in 
this procedure because the interbody device is not applicable to the 
posterolateral fusion.
    Response: We appreciate the applicant's input and additional 
information regarding the device criterion and associated offset. We 
have evaluated the information provided by the applicant and agree that 
we should adjust the off-set amount associated with the use of the 
aprevoTM interbody device to $0. We refer the reader to 
Addendum B of this CY 2023 OPPS/ASC with comment period for APC payment 
rates.
    Comment: We received one comment in support of finalizing pass-
through payment status for aprevoTM. The commenter stated 
that with new developments in personalized medicine moving forward, the 
innovation in products uniquely suited to an individual patient's 
anatomy offers a promising future for patient care.
    Response: We appreciate the commenter's support.
    After considering the public comments we received and our review of 
the device pass-through application, we are finalizing approval of 
device pass-through payment status for aprevoTM under the 
alternative pathway for devices that have an FDA Breakthrough Device 
designation and FDA market authorization for the indication for which 
the device has Breakthrough Device designation. Therefore, we will 
continue the device pass-through payment status for 
aprevoTM.
    Comment: We received comments from the applicant requesting that we 
change the device descriptor for C1831 to include the posterior/
transforaminal approach. In addition, we received a request from the 
applicant to remove CPT code 22612 as an applicable code with which to 
bill devices described by C1831. AprevoTM was granted 
multiple FDA clearances, all of which collectively cover the different 
approaches in which the device can be implanted into the patient (from 
the front, side, or back of the patient). AprevoTM 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 
aprevoTM lateral lumbar interbody fusion devices) on 
December 3, 2020. In addition, the applicant received 510(k) clearance 
from FDA for the Transforaminal (posterior) Intervertebral Body Fusion 
(IBF) device on June 30, 2021. We received a new device category for 
transitional pass-through payment status application for 
aprevoTM on May 27, 2021. AprevoTM was approved 
for device pass-through payment during the quarterly review process and 
received fast-track approval under the alternative pathway effective 
October 1, 2021.
    AprevoTM was temporarily assigned the HCPCS code C1831 
(Personalized, anterior and lateral interbody cage (implantable)). The 
associated MLN Matters October 2021 publication provided the following 
instruction: ``Always bill the device(s) in the category described by 
HCPCS code C1831 with 1 of the primary CPT codes 22558, 22586, 22612, 
22630, or 22633 and add-on code 22853 or 22854.'' Subsequent to C1831 
being created, CMS added CPT codes 22558 and 22586 (the anterior and 
lateral implant placement procedures) to the inpatient only list (IPO). 
As such, C1831 can no longer be billed with CPT codes 22558 and 22586 
as an OPPS service. However, C1831 may be billed with CPT codes 22612, 
22630 and 22633 (the posterior/transforaminal implant placement 
procedures).
    In response to this, the applicant requested that CMS take two 
actions: First, the applicant requested that CMS modify the current 
C1831 long descriptor, ``Personalized, anterior and lateral interbody 
cage (implantable)'' to read ``Personalized posterior interbody cage 
(implantable).'' The applicant stated that the current long descriptor 
includes ``anterior and lateral'' both of which are now on the IPO 
list, but does not include the posterior/transforaminal approach, which 
is not on the IPO list. The applicant provided that the 
aprevoTM device utilized for the posterior/transforaminal 
approach received FDA 510(k) clearance on June 30, 2021, and as such, 
the posterior/transforaminal approach should be included in the long 
descriptor.
    Second, the applicant asserts that the inclusion of CPT code 22612 
in the October 2021 MLN Matters article as an applicable code with 
which to bill devices described by C1831 is incorrect. As such, the 
applicant requested that CPT code 22612 be removed as an applicable 
code with which to bill devices described by C1831. The applicant 
asserts that that 22612 is not an interbody fusion procedure because, 
while it describes a posterolateral fusion, it is different from a 
posterior interbody fusion. The posterolateral fusion, 22612, involves 
fusing the back area of the spine, along the sides of the vertebrae, 
without doing an interbody fusion.
    Response: We thank the applicant for their comments. We agree with 
the applicant that the long descriptor for C1831 should be updated to 
include the posterior interbody implant device which is surgically 
placed through the posterior/transforaminal approach. However, we 
believe that the anterior and lateral implant devices should remain in 
the long descriptor at this time in the event that the surgical 
procedures for their placement are removed from the IPO list in the 
future. As such, we will revise the long descriptor for C1831 effective 
January 1, 2023, to read: ``Interbody cage, anterior,

[[Page 71895]]

lateral or posterior, personalized (implantable).'' We believe this 
description addresses all potential approaches. We also agree with the 
applicant that CPT code 22612 was incorrectly included in the October 
2021 MLN Matters article as an applicable code with which to bill 
devices described by C1831. Therefore, CMS will provide updated 
instructions in the January 2023 MLN Matters article reflecting the 
removal of CPT code 22612 as applicable code with which to bill devices 
described by C1831. In addition, we have determined that CPT code 22632 
and CPT code 22634 are applicable codes with which to bill devices 
described by C1831. As such, CMS will provide updated instructions in 
the January 2023 MLN Matters article reflecting the addition CPT code 
22632 and CPT code 22634 as applicable codes with which to bill devices 
described by C1831.
(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.\23\ 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.\24\
---------------------------------------------------------------------------

    \23\ 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.
    \24\ 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 solicited public comment on whether the 
Vivistim[supreg] System meets the newness criterion.
    Comment: With respect to the newness criterion at Sec.  
419.66(b)(1), the applicant reiterated that Vivistim[supreg] System 
received FDA marketing authorization on August 27, 2021. The applicant 
also noted that a manufacturing delay prevented market availability of 
the device until April 29, 2022. The applicant requested that CMS begin 
the newness period for the Vivistim[supreg] System using the latter 
market availability date of April 29, 2022.
    Response: We appreciate the commenter's input. Because we received 
Vivistim[supreg] System's pass-through application on September 1, 
2021, which is within 3 years of August 27, 2021, the date of FDA 
premarketing approval, we agree that the Vivistim[supreg] System meets 
the newness criterion, and as such we do not need to consider using the 
date on which the Vivistim[supreg] System was first marketed, April 29, 
2022.
    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 noted that the external components 
SAPS and WT were 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 
claimed that Vivistim[supreg] System meets the device eligibility 
requirements of Sec.  419.66(b)(4) because it is not an instrument, 
apparatus, implement, or item for which depreciation and financing 
expenses are recovered, and it is not a supply or material furnished 
incident to a service. However, we noted that the external

[[Page 71896]]

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 solicited public comments on whether 
Vivistim[supreg] System meets the eligibility criteria at Sec.  
419.66(b).
    Comment: In response to our concern 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 
provided that, like other implantable neurostimulator systems, the 
Vivistim[supreg] System includes implantable components and external 
components. The applicant stated that Vivistim[supreg] System (the IPG 
and Lead) 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. The 
applicant further noted the following: the external components 
communicate remotely with the implantable pulse generator, are integral 
to the function of the Vivistim[supreg] System, and the implanted 
components (the IPG and Lead) cannot work as intended without the 
external paired stimulation controller and vice versa. In addition, the 
applicant asserted that the existence of external components within an 
FDA-approved neurostimulator system does not negate eligibility under 
Sec.  419.66(b)(3). The applicant further provided that the FDA 
approval for the Vivistim[supreg] System does not acknowledge a 
distinction between implanted and non-implanted components, which are 
collectively approved as a ``device.'' The applicant clarified that 
this is not unique to the Vivistim[supreg] System since each of the 
neurostimulator systems for which a new device category was previously 
created (C1820, C1822, C1823, C1825) are provided with a reusable 
clinical interface (i.e., remed[emacr][supreg] System Programmer Model 
1102A1; Nevro[supreg] HF10 Clinician Programmer PG20002; CVRx[supreg] 
Programmer System Model 90103). The applicant asserted that the 
existence of reusable, external clinical interfaces does not, and has 
not, historically been construed to negate eligibility under Sec.  
419.66(b)(4).
    In response to our concern 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), the applicant again clarified that existence of a 
reusable clinical user interface is neither unique to the 
Vivistim[supreg] System nor negates eligibility under Sec.  
419.66(b)(4). The applicant stated the Vivistim[supreg] System external 
paired stimulation controller is provided at no cost under a loaner 
agreement, where ownership of the device is retained by the 
manufacturer
    Response: We appreciate the additional information from the 
applicant with respect to whether the device meets the criteria in 
Sec.  419.66(b)(3) and (4). Based on the information we have received 
and our review of the application, we agree with the applicant that the 
applicable components of the device are used for one patient only, come 
in contact with human tissue, and are surgically implanted or inserted. 
As such, we agree that Vivistim[supreg] System meets the eligibility 
criterion specified at Sec.  419.66(b)(3)). While we agree that 
Vivistim[supreg] System meets the eligibility criterion specified at 
Sec.  419.66(b)(3)), we note that the criteria FDA utilizes to grant 
medical device approvals differ from the criteria CMS has established 
to evaluate device eligibility for OPPS device pass-through payments.
    Based on the clarification provided by that applicant that they 
retain and maintain the Vivistim[supreg] System external paired 
stimulation controller (the reusable hardware components) at no charge 
to the providers via a loaner agreement, and ownership of the device is 
retained by the manufacturer, we agree with the applicant that the 
applicable components meet the device eligibility requirements of Sec.  
419.66(b)(4) because they are not equipment, an instrument, apparatus, 
implement, or item for which depreciation and financing expenses are 
recovered, and they are not a supply or material furnished incident to 
a service. We agree and conclude that the Vivistim[supreg] System 
device meets the eligibility requirements at Sec.  419.66(b)(4).
    Based on this assessment we have determined that the 
Vivistim[supreg] System meets the eligibility criterion at Sec.  
419.66(b)(3) and (4).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996.
    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 Table 54.

[[Page 71897]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.070

    Per the applicant, the codes in Table 54 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.
    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

[[Page 71898]]

C1825, the BaroStim NeoTM (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. We noted that it 
was 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 solicited public comment on 
whether the Vivistim[supreg] System meets the device category 
criterion.
    Comment: In response to our concern that the Vivistim[supreg] 
System may be appropriately described by C1767, the applicant sought to 
clarify the characterization provided in the application of the VNS 
Therapy[supreg] System (LivaNova, PLC) as an ``always-on'' stimulation 
delivery system. The applicant stated that this description was not 
meant to imply that the VNS Therapy[supreg] System is delivering 
continuous stimulation or that it lacks programmable stimulation 
features. Rather, the applicant stated that it intended to communicate 
that, in normal mode, the VNS Therapy[supreg] System is designed to 
deliver stimulation at preprogrammed intervals throughout the day and 
night (typically 5 minutes off, 30 seconds on) and normal mode settings 
result in approximately 130 minutes of stimulation daily at 1.5 mA. 
Further, the applicant noted that while in normal mode, the patient 
controller allows for the patient to turn off the system during certain 
activities such as speaking, exercise or eating, or to deliver a burst 
of stimulation when an impending seizure is sensed. However, outside of 
these circumstances, the VNS Therapy[supreg] System (LivaNova, PLC) is 
designed to deliver stimulation at regular intervals throughout the day 
and night (e.g., ``always on''). Conversely, in comparison to its 
device, the applicant stated that the Vivistim[supreg] System is not 
set to deliver stimulation on a pre-defined schedule, but to pair 
stimulation with specific movements during in-clinic therapy. The 
applicant reiterated that no current category appropriately describes a 
neurostimulator that is actively paired with movement during 
rehabilitation by a skilled therapist where she/he instructs the 
patient to perform upper limb rehabilitation exercises and delivers 
stimulation using a push-button feature of the external paired 
stimulation controller (i.e., the face-to-face, manual delivery of 
stimulation by a skilled therapist is necessary to pair stimulation 
with the specific time point when it will be most effective), and this 
``event-pairing'' of stimulation delivery that has been shown in 
clinical studies to deliver 2-3X the clinical benefit of intense 
rehabilitation alone. For example, the applicant stated that the 
circuitry of the Vivistim[supreg] System implantable pulse generator is 
uniquely designed to communicate at a distance with the external paired 
stimulation controller. The applicant specifically noted that the 
Vivistim[supreg] System IPG uses a medical implant communication system 
(MICS 403 MHz) with an effective range of 1-2 meters from the patient's 
body. The applicant asserted that this feature allows the external 
paired stimulation controller to communicate with the IPG from a 
greater distance, while the patient is actively moving. The applicant 
stated the VNS Therapy[supreg] devices (LivaNova, PLC) contain 
circuitry that communicates by inductive link communication, a 
different communication protocol, which limits the effective 
communication range to ~3-4 cm from the patient's body and utilizes a 
slower data transfer rate. The applicated further provided that during 
in-clinic therapy, stimulation is only delivered at a precise time-
point by a skilled therapist to maximize the clinical effect. The 
applicant stated as a result, the Vivistim[supreg] System delivers only 
9 minutes of stimulation at 0.8 mA during a typical in-clinic therapy 
session day.
    In response to our concern that IPG of the Vivistim[supreg] System 
can also be patient-engaged with a magnetic card, allowing the patient 
to continue therapy at home using the Vivistim[supreg] System and 
therefore, may be appropriately described by C1767, the applicant 
agreed patient-engaged features are common to neurostimulator devices. 
However, the applicant asserted that the existence of common features 
in the device should not negate the novelty of an in-clinic paired 
therapeutic delivery by a skilled therapist. In addition, the applicant 
clarified that the unique feature of the Vivistim[supreg] System is the 
external paired stimulation controller, not the patient-engaged 
features of the device. As such, the applicant asserted the 
Vivistim[supreg] System meets the first criterion for establishing a 
new device category at Sec.  419.66(c)(1) because there are no existing 
categories established for device TPT that describe the 
Vivistim[supreg] System.
    Response: After consideration of the public comment that we 
received from the applicant, we agree there is no existing pass-through 
payment category that appropriately describes the Vivistim[supreg] 
System because no current category appropriately describes a 
neurostimulator that is actively paired with movement during 
rehabilitation by a skilled therapist where she/he instructs the 
patient to perform upper limb rehabilitation exercises and delivers 
stimulation using a push-button feature of an external paired 
stimulation.
    Based on this information, we have determined that Vivistim[supreg] 
System meets the first eligibility criterion at Sec.  419.66(c)(1).
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
That a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA

[[Page 71899]]

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 48975 through 48977).
    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 criteria for device pass-through payment status, a 
device must pass all three tests of the cost criteria 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 criteria, 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 stated that 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 stated that 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 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 stated that we believe that Vivistim[supreg] System meets the third 
cost significance requirement.
    We solicited public comment on whether Vivistim[supreg] System 
meets the device pass-through payment criteria discussed in this 
section, including the cost criteria for device pass-through payment 
status.
    We did not receive any comments with regard to any of the cost 
significance requirements specified at Sec.  419.66(d). Based on our 
findings from the first, second, and third cost significant tests, we 
believe that the Vivistim[supreg] System meets the cost significance 
criteria specified at Sec.  419.66(d).
    After consideration of the public comments we received and our 
review of the device pass-through application, we have determined that 
the Vivistim[supreg] System meets the requirements for device pass-
through payment status described at Sec.  419.66. As stated previously, 
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)(i) for purposes of determining device 
pass-through payment status, but must meet the other criteria for 
device pass-through status, and we believe Vivistim[supreg] System 
meets those other criteria. Therefore, effective beginning January 1, 
2023, we are finalizing approval for device pass-through payment status 
for Vivistim[supreg] System under the alternative pathway for devices 
that have an FDA Breakthrough Device designation and have received FDA 
marketing authorization for the indication covered by the Breakthrough 
Device designation.
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

[[Page 71900]]

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 solicited public comments on whether 
the BrainScope TBI meets the newness criterion.
    We did not receive public comments in regard to whether the 
BrainScope TBI meets the eligibility criteria at Sec.  419.66(b)(1). 
Based on the fact that the BrainScope TBI application was received on 
February 23, 2022, within 3 years of the date of the initial FDA 
marketing authorization, we agree with the applicant that the 
BrainScope TBI meets the criteria of Sec.  419.66(b)(1).
    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 noted that while the Ahead 500 
component is used for one patient only and 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 noted 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 questioned 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 solicited public comments on whether the 
BrainScope TBI meets the eligibility criteria at Sec.  419.66(b).
    We did not receive public comments regarding whether the BrainScope 
TBI meets the eligibility criteria at Sec.  419.66(b)(3) or (4). With 
respect to the eligibility criterion at Sec.  419.66(b)(3), in the 
proposed rule, we noted that the Ahead 500 component of BrainScope TBI 
is not surgically implanted or inserted or applied in or on a wound or 
other skin lesion. In addition, we noted that the other component of 
the BrainScope TBI, the Handheld Device, is used by multiple patients, 
does not come in contact with the patient's tissue, and 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).
    With respect to the eligibility criterion at Sec.  419.66(b)(4), 
based on the information provided in the application, we have 
determined that the Handheld Device component of the BrainScope TBI is 
an instrument, apparatus, implement, or item for which depreciation and 
financing expenses are recovered in accordance with the device 
eligibility requirements in the proposed rule and, as such, does not 
meet the eligibility criteria at Sec.  419.66(b)(4).
    BrainScope TBI does not meet the eligibility criteria to be 
considered a device for transitional pass-through payment. Therefore, 
we did not evaluate the product on the other criteria required for 
transitional pass-through payment for devices, including, existing or 
previous categories, the substantial clinical improvement criterion, 
and the cost criteria. We are not approving BrainScope TBI for 
transitional pass-through payment status for CY2023 because the product 
does not meet the eligibility criteria to be considered a device.
    We note that we received public comments with regard to the cost 
criteria for this device, but, because we have determined that the 
device does not meet the eligibility criteria and therefore, is not 
eligible for approval for transitional pass-through payment status for 
CY 2023, we are not summarizing comments received or making a 
determination on those criteria in this final rule.
(2) NavSlimTM and NavPencil
    Elucent Medical, Inc. submitted an application for a new device 
category for transitional pass-through payment status for CY 2023 for 
the NavSlimTM 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,\25\ the Navigators are a component of the applicant's 
EnVisioTM Navigation System \26\ which is intended only for 
the non-imaging detection and localization (by navigation) of a 
SmartClipTM Soft Tissue Marker (SmartClipTM) that 
has been implanted in a soft tissue biopsy site or a soft tissue site 
intended for surgical removal.\27\ We noted in CY 2023 OPPS/

[[Page 71901]]

ASC proposed rule that the applicant submitted a separate application 
for pass-through payment status for the SmartClipTM 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 
EnVisioTM Navigation System components and the 
SmartClipTM, 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 
EnVisioTM Navigation System activate the implanted 
SmartClipTM within a 50cm x 50cm x 35cm volume. The 
applicant further explained that the SmartClipTM contains an 
application-specific integrated circuit (ASIC) which is activated at a 
specific frequency and communicates to the EnVisioTM 
Navigation System the precise, real-time location of both the 
SmartClipTM 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).
---------------------------------------------------------------------------

    \25\ As explained later in this section, the applicant received 
FDA 510(k) clearance for the EnVisioTM Navigation System, 
which includes the Navigators.
    \26\ The FDA 510(k) Summary for the EnVisioTM 
Navigation System states that the EnVisioTM 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 EnVisioTM 
Navigation System.
    \27\ The SmartClipTM has a separate FDA 510(k) 
clearance. Based on the FDA 510(k) Summary for the 
EnVisioTM Navigation System, the SmartClipTM 
does not appear to be part of the EnVisioTM Navigation 
System.
---------------------------------------------------------------------------

    The applicant stated that there are two types of Navigators: (1) 
the NavSlimTM (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 EnVisioTM 
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 
\28\ 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.
---------------------------------------------------------------------------

    \28\ 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 EnVisioTM Navigation System (which, as explained 
previously, includes the Navigators) for the non-imaging detection and 
localization (by navigation) of a SmartClipTM 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. In the 
CY 2023 OPPS/ASC proposed rule, we solicited public comments on whether 
the Navigators meet the newness criterion.
    Comment: The applicant stated that the pass-through payment 
application for the Navigators was submitted within 3 years of the date 
of the initial FDA marketing authorization.
    Response: We appreciate the applicant's input. Because we received 
the Navigator pass-through payment application on February 28, 2022, 
which is within 3 years of March 22, 2019, the date of FDA premarketing 
approval, we agree that 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 required at Sec.  
419.66(b)(3).\29\ The FDA 510(k) Summary (K183400) states that the 
Navigator is a sterile, non-patient contacting, single-use device. In 
the CY 2023 OPPS/ASC proposed rule, we stated that 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

[[Page 71902]]

surgical kit, or clip, other than radiological site marker). In the CY 
2023 OPPS/ASC proposed rule, we solicited public comments on whether 
the Navigators met the eligibility criteria at Sec.  419.66(b).
---------------------------------------------------------------------------

    \29\ In the proposed rule, we noted that by contrast, the 
SmartClipTM, discussed in the next section of this 
preamble, is inserted into human tissue.
---------------------------------------------------------------------------

    Comment: The applicant stated that the Navigators are single use 
devices intended for one patient only, and that without the Navigators, 
real-time surgical navigation using the Elucent system cannot be 
performed. The applicant asserted that, after attachment of a Navigator 
to the electrocautery tool, the surgeon runs a calibration step which 
allows the system to provide the precise location of the electrocautery 
tool tip relative to the SmartClipTM marker (implanted in or 
around the intended target). According to the applicant, this enables 
precise navigation to the tissue and surgeon-identified margins for 
excision. The applicant further stated the Navigator is inserted into 
the patient (generally into a surgical wound) as the surgeon uses the 
electrocautery tool to perform each component of the tissue excision, 
during which the Navigators come into temporary contact with patients' 
tissue. The applicant noted that the safety of this temporary contact 
has been confirmed through biocompatibility testing in accordance with 
ISO 10993.
    In addition, the applicant stated that the Navigators meet 
eligibility requirements of Sec.  419.66(b)(4) in that the Navigators 
are not (1) pieces of equipment, instruments, apparatus, implements, or 
items for which depreciation and financing expenses are recovered as 
depreciable assets (the applicant noted that the Navigators are single 
use patient devices); (2) materials or supplies furnished incident to a 
service (for example, a suture, customized surgical kit, or clip, other 
than radiological site marker). The applicant noted that the Navigators 
are utilized for real time three-dimensional surgical navigation.
    Response: We appreciate the applicant's input. Based on the 
information we have received and our review of the application, we 
agree with the applicant that the Navigators are integral to the 
service provided, used for one patient only, come in contact with human 
tissue, and are surgically implanted or inserted or applied in or on a 
wound or other skin lesion. In addition, we agree with the applicant 
that the Navigators meet the device eligibility requirements of Sec.  
419.66(b)(4) because they are not equipment, instruments, apparatus, 
implements, or items for which depreciation and financing expenses are 
recovered, and they are not supplies or materials furnished incident to 
a service. Therefore, based on the public comments we have received and 
our review of the application, we have determined that the Navigators 
meet the eligibility criteria at Sec.  419.66(b)(3) and (4).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. The 
applicant 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. We 
stated in the CY 2023 OPPS/ASC proposed rule that, upon review, it does 
not appear that there are any existing pass-through payment categories 
that might apply to the Navigators. We solicited public comments on 
whether the Navigators meet the device category criterion.
    Comment: The applicant asserted that the Navigators are not 
currently described by any existing categories or any category 
previously in effect and were not being paid as an outpatient service 
as of December 31, 1996. The applicant clarified that in its 
application it sought to compare the Navigators to single use 
duodenoscopes for descriptive purposes only. According to the 
applicant, both products are designed to offer high performance in a 
single patient use device and provide clinical guidance during a 
medical procedure, and that both products reduce infection rates that 
may be a result of improper reprocessing. In addition, the applicant 
stated that both products provide guidance to diseased targeted tissue 
and demonstrate the precise location for targeted tissue removal. 
However, the applicant emphasized that the products are completely 
different in form and reflect different clinical uses. Per the 
applicant, the duodenoscope is an endoscope used endoluminally in the 
GI tract (vs. surgically for Navigators) for different clinical 
conditions (removal of gallstones, endoscopic retrograde 
cholangiopancreatography (ERCP), evaluation of the bile and pancreatic 
ducts with potential interventions). In contrast, the applicant stated 
that the Navigators are attached to an electrocautery device and are 
intended to guide physicians to surgical margins through an open 
surgical wound during excision of diseased or malignant tissue.
    Response: We agree with the applicant that the Navigators can be 
differentiated from devices in HCPCS code C1748, including single use 
duodenoscopes, and that there is no current or previously in effect 
category that describes the Navigators. After consideration of the 
public comments we received, we continue to believe that there is not a 
current or previously existing pass-through payment category that 
describes the Navigators, and therefore, the Navigators meet the device 
category eligibility criterion at Sec.  419.66(c)(1).
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization 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

[[Page 71903]]

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 reduce 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 EnVisioTM Navigation System and 
SmartClipTM compared to wire localization (WL) on operative 
times, specimen volumes, margin positivity, and margin re-excision 
rates.\30\ 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 
55cm3 with WL versus 36cm3 with ESL (p=0.0012). 
In those with measurable tumor volume, excess tissue excised was larger 
with WL compared to ESL (median=73.2cm3 versus 
52.5cm3, 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.
---------------------------------------------------------------------------

    \30\ 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.\31\ The paper presented three cases from the 
Moffitt Cancer Center, including radiographic and other images, 
employing three different methods of breast mass localization: (1) 
SmartClipTM, (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 SmartClipTM 
localizers, SAVI SCOUT[supreg] localizers, and wire localizers.
---------------------------------------------------------------------------

    \31\ 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.\32\
---------------------------------------------------------------------------

    \32\ 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 
SmartClipTM. The authors noted that the 
SmartClipTM is the first device to provide three-plane 
localization information. The authors stated that a monitor displays 
the approximate position of the SmartClipTM allowing 
everyone in the operating room to assist with the localization of the 
SmartClipTM and provide knowledge of its location prior to 
and throughout the surgery. They further noted that the 
SmartClipTM 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 SmartClipTM. 
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 SmartClipTM 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 
SmartClipTM, 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 SmartClipTM in clinical 
practice.

[[Page 71904]]

    In addition, the applicant provided two physician case reports, 
each describing the use of the EnVisioTM Navigation System 
and SmartClipTM 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 SmartClipTM or 
EnVisioTM Navigation System. In the first surgical case 
report,\33\ the surgeon noted that the foot pedal activation of the 
EnVisioTM Navigation System allowed toggling between two 
SmartClipTM 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,\34\ the surgeon similarly 
noted that the EnVisioTM Navigation System helped her to map 
out and be more precise in her incision location and lumpectomy 
dissection.
---------------------------------------------------------------------------

    \33\ Kruper, Laura, Bracketing Lobulated Breast Lesion with the 
EnVisioTM Navigation System using Differentiated 
SmartClipTM.
    \34\ Henkel, Dana, Single SmartClipTM Case.
---------------------------------------------------------------------------

    The applicant also submitted several articles in general support of 
its application, which we summarized in the CY 2023 OPPS/ASC proposed 
rule 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%.\35\ 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.\36\ 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.\37\ 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.\38\ 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.\39\ 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.\40\ 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.\41\
---------------------------------------------------------------------------

    \35\ 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.
    \36\ 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.
    \37\ 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.
    \38\ 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.
    \39\ 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.
    \40\ 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.
    \41\ 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 noted the 
following concerns in the CY 2023 OPPS/ASC proposed rule. We noted that 
the first study appeared to be unpublished, and it was not clear 
whether it had been submitted for publication in a peer-reviewed 
journal. In addition, we stated that the study involved a sample of 97 
patients from one institution and appeared 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, we indicated that 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 noted a potential concern regarding practice/
selection effects bias inherent in the methodology presented.
    In addition, we noted that the second article was an undated,\42\ 
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. We also explained 
that the paper did not systematically compare the techniques across any 
measurable variables and the authors indicated that a clinical study 
was underway at the institution to evaluate the SmartClipTM 
in clinical practice. Similarly, we noted that the physician case 
reports were solely descriptive in nature--they presented each 
physician's anecdotal experience using the EnVisioTM 
Navigation System and SmartClipTM. Furthermore, we noted 
that the applicant provided several additional articles that, while 
informative, did not involve the Navigators and did not appear to 
directly support the applicant's claim of substantial clinical 
improvement. We stated that we would welcome additional information and 
evidence from larger, multi-center studies that provide comparative 
outcomes between the Navigators and existing technologies.
---------------------------------------------------------------------------

    \42\ Although the applicant reported the date of the study as 
January 2021, the copy of the study provided by the applicant was 
not dated.
---------------------------------------------------------------------------

    In the CY 2023 OPPS/ASC proposed rule, we further stated 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

[[Page 71905]]

marker migration, as claimed by the applicant. In addition, we 
indicated that 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 stated in the 
proposed rule that we would welcome additional evidence of substantial 
clinical improvement in cases related to non-breast cancer related 
procedures.
    We solicited public comments on whether the Navigators meet the 
substantial clinical improvement criterion.
    Comment: All commenters addressing the substantial clinical 
improvement criterion offered support for approval of the application.
    Some commenters, including the applicant, noted that for many 
years, the standard of care for breast conservation surgery has been 
wire localization and that little progress has been made. Such 
commenters noted that compared to the investments and advances that 
have been made in surgical technologies for other types of cancer 
(including male-predominant cancers such as prostate cancer) to reduce 
positive margin rates and increase quality of life, the tools for 
breast cancer surgery have remained limited. According to commenters, 
advances in surgical technologies for other types of cancer have 
included minimally invasive approaches inclusive of laparoscopic as 
well as robotic surgery, image-fusion, and advanced navigation. Such 
commenters considered the under-resourcing of breast surgery to be an 
equity issue due to the fact that breast surgery is primarily performed 
on women, and one commenter noted, in particular, that the downstream 
impacts of repeat surgeries (increased disfigurement, anxiety, 
infection risk, economic costs, time away from work and family) are 
particularly impactful to working women, especially those of child-
bearing age and lower socio-economic status. In addition, a commenter 
noted that breast tissue, unlike the liver or lungs, can be variably 
thick or dense versus fatty depending on the age and genetics of the 
patient, and that this makes the localization of abnormalities or 
cancers in a breast difficult as each case can be different depending 
on the amount of fat versus dense tissue and the patient's breast size. 
These commenters believed that advances in technology are needed in 
breast surgery to improve surgical results.
    Several commenters described numerous drawbacks and difficulties 
associated with wire localization techniques, including the following: 
(1) some patients require up to 4 wires to ``bracket'' an abnormality 
in the breast; (2) trauma and pain associated with having wires placed 
and then extruding from a breast on the morning of surgery; (3) 
scheduling difficulties associated with wire placement on the day of 
surgery; (4) movement or displacement prior to or during surgery; (5) 
wires can be cut or ``lost'' during the procedure, especially if the 
cautery or bovie gets too close to them during the procedure; and (6) 
wires are designed to have a small ``thicker'' portion placed at the 
site of the tumor or abnormality; this small thick portion is difficult 
to place accurately and if it migrates slightly can change the 
orientation of the excision. In addressing difficulties in localizing 
the wires, a commenter explained that surgeons attempt to localize the 
tumor by ``following the wire,'' palpation, and educated guesses as to 
where to resect tissue. Several commenters noted that these 
difficulties in accurate tumor localization have resulted in high re-
excision rates. A commenter noted that over 15-20% of patients annually 
require a second surgery to remove more breast tissue because the 
localization was inexact at the time of the first surgery. A second 
commenter stated that a recent meta-analysis showed an average 22% re-
excision rate for inadequate margins after primary lumpectomy. This 
commenter asserted that the human and health care costs of this failure 
rate are high and fall disproportionately on women. In addition, a 
commenter reported that when using an alternative wire-free solution 
with a radar detection marker, surgeons at his institution reported an 
increase in re-excision rates, nearly doubling that of wires. 
Commenters asserted that, as a result of difficulties and complications 
with wire techniques, new technologies for localizing a breast and/or 
lymph node abnormality requiring excision in the operating room are 
needed.
    Several commenters described clinical and surgical benefits of 
using the Navigator and SmartClipTM based on experience 
using this technology. Most of these commenters stated that using this 
technology decreases positive surgical margin and re-excision rates. A 
commenter noted that the system not only localizes the actual tumor 
targeted for removal, but also shows the surgeon suggested margins. 
That commenter added that with the Navigators and 
SmartClipTM, the specimens are more circumferential and 
consistent at a fixed (but surgeon selected) distance from the 
implanted clip which has resulted in fewer positive margins, reducing 
the need for a second surgery. Other commenters explained that the 
technology allows the surgeon to track the position of the implanted 
clip during surgery in 3D with real-time updates, allowing the surgeon 
to have an objective view of the tip of the surgical instrument with 
respect to the SmartClipTM, which according to commenters, 
can result in decreases in both positive margin and re-excision rates.
    In addition, a few commenters noted that the technology results in 
removal of less normal breast tissue, with one commenter noting that 
early data from major cancer centers is starting to show that less 
normal tissue is being removed when the Elucent technology is used. 
Commenters noted that this has major implications for post-surgical 
pain, deformity, oncoplastic reconstructions, and complications. A 
commenter asserted that it is unusual for a device to simultaneously 
decrease deformity, pain and suffering, health care costs, and cancer 
metrics like positive margin and re-excision rates.
    Furthermore, a commenter noted that, in their anecdotal experience, 
the use of the Navigators and SmartClipTM saves overall 
operating room time compared to the hook-wire technique. This commenter 
asserted that this decreases costs and anesthesia time and enables more 
efficient use of operating rooms for other cases. Another commenter 
reported that with the Navigators and SmartClipTM, there is 
less need for synchronization with radiology for localization 
procedures. This commenter asserted that in the past, the need to have 
tumors localized in radiology before coming to the operating room 
caused a number of problems such as displaced wires, operating room 
delays, long patient waiting times with wires protruding from the 
breast, and decreased efficiency.
    Some commenters described additional technical and operational 
advantages to using the Navigators and SmartClipTM. These 
commenters noted that the Navigators and SmartClipTM are 
unique because they allow the surgeons to track the position of the 
SmartClipTM during surgery in 3D with real time updates. A 
few commenters specifically noted that the SmartClipTM 
contains an ASIC chip which is activated at surgery once the patient 
lays on the operative table. A commenter further asserted that the 
field of navigation is over 30cm and can enable identification in a 
large or small breast or one that is wide or

[[Page 71906]]

narrow. This commenter claimed that the most important component of the 
system is the NavSlim and NavPencil which enable navigation in real 
time without using another device or probe. According to this 
commenter, the NavSlim and Pencil are placed onto the operative tool or 
cautery and do not have to be picked up intermittently.
    Another commenter stated a significant technical advantage of the 
technology is that a 3D readout is generated as a graphic 
representation of the clip relative to the tip of the handpiece 
(compared to an audio signal only) as a reflection of distance, which 
per the commenter, is a more intuitive way to understand the device 
localization. This commenter further stated that, perhaps most 
important to a surgeon, the detector portion of the handpiece is fixed 
to the cautery. According to this commenter, having the navigation 
portion of the system within the operative field for real-time 
detection significantly improves identification of the clip and the 
lesion, even when working in a small space or in detection of a very 
small target, as division or retraction of the tissue often causes the 
target to move in surgery. This commenter noted that with real-time and 
nearly continuous detection, loss or disorientation of the target is 
minimized while performing the operation.
    A few commenters described clinical outcome data from their 
experience using the Navigators and SmartClipTM. A commenter 
reported that he has decreased his re-excision rate from 16% in 2019 
prior to the COVID pandemic to 5% in 2021. This commenter stated that 
he performs an average of 200 breast conservation surgeries per year. 
This commenter also added that the adoption of the Elucent technology 
has resulted in fewer operative interventions for his patients 
undergoing breast conservation, improved cosmesis with one surgery, 
improved oncoplastic approaches as well as less anxiety and fewer 
delays in oncologic care. A second commenter stated that in the five 
months that they have implemented the technology, they have seen re-
excision rates drop to approximately 1.5%. Another commenter stated 
that his institution is in the process of analyzing its clinical 
outcomes data, which the commenter asserted illustrates the significant 
clinical impact of implementing the SmartClipTM and 
Navigator across six healthcare facilities and 235 surgical procedures.
    Finally, a few commenters acknowledged the need for additional 
research and larger clinical trials to support the preliminary positive 
outcomes data, including the data indicating that the Navigators and 
SmartClipTM decrease re-excision rates in breast 
conservation surgery for patients with breast malignancy. These 
commenters asserted that approval of pass-through payment for the 
Navigators and SmartClipTM would enable greater access to 
patients which will allow the surgical community to conduct additional 
studies and collect more comprehensive and multi-center data to further 
substantiate the clinical outcomes seen in early research studies.
    Response: We appreciate the input provided by these commenters. We 
have taken this information into consideration in making our final 
determination of the substantial clinical improvement criterion, 
discussed below.
    Comment: The applicant submitted comments in response to many of 
the concerns we expressed regarding the study abstract referenced in 
the proposed rule, which assessed the impact of ESL using the EnVisio 
Navigation System and SmartClipTM compared to wire 
localization. In response to our concern that the study was 
unpublished, the applicant stated that it submitted a manuscript for 
peer-review and potential publication. In response to our concern that 
this study appeared to be a feasibility study for a potentially larger 
randomized controlled trial, the applicant stated that the study 
authors did not make this statement and noted that prospective 
randomized controlled trials are exceedingly rare in this space and not 
considered necessary for adoption of a particular guidance technology. 
The applicant further claimed that the study referenced in the abstract 
has a rigorous cohort-matched design and a patient population size 
which is far beyond a feasibility study. In response to our concern 
about the lack of gender and age information, the applicant noted that 
this was an IRB-approved matched cohort analysis (1:1) of 194 patients 
(n=97 in both the study and control groups). The applicant further 
stated that the age in the ESL group was 64 versus 61 in the WL group 
(p=.015) (the applicant did not indicate whether these were average 
ages, median ages, or otherwise). The applicant added that the matched 
sample set included 190 females and four males. The applicant 
reiterated that the study authors matched patients, one-to-one, based 
on surgeon, procedure type with stratification for those having or not 
having nodal procedures, and pathologic stage or benign pathology, and 
restated the numerical results from the study abstract (which we 
summarized in the CY 2023 OPPS/ASC proposed rule (87 FR 44593)).
    In response to our concern that the differences in positive margin 
and re-excision rates between the ESL and WL groups were not 
statistically significant, the applicant asserted that the lack of 
statistical significance for re-excisions was driven solely by the 
sample size of the study. The applicant further noted that the 
retrospective cohort-matched design prioritized patient matching over 
sample size and the study was not prospectively powered for re-excision 
rates as the authors had no a priori knowledge that this would be an 
outcome of interest. The applicant claimed that, in hindsight, 
reasonably achievable increases in sample size would have made 
statistical conclusions possible. Specifically, the applicant claimed 
that with a sample size of 150 (rather than 97) in each group, and 
assuming identical re-excision rates, the difference between the ESL 
and WL groups becomes statistically significant (p=0.049, Fisher's 
exact test). The applicant further noted that ESL results were from the 
initial cases performed with ESL at the study center and included a 
learning curve, whereas the control wire localization cases were 
performed at a time where the learning curve had been overcome and 
surgeons had decades of experience with thousands of wire localization 
cases. In addition, the applicant asserted that its system is being 
used predominantly for the treatment of breast cancer, and that the 
early results demonstrate lower positive margin rates and removal of 
less normal tissue resulting in lower rates of re-excision by >50%.
    The applicant also noted other clinical impacts of the Navigators 
and SmartClipTM in supporting its claim of substantial 
clinical improvement. The applicant claimed that the electromagnetic 
navigation allows for more precise and accurate tissue localization, 
resulting in 34.5% less normal functioning tissue being removed at the 
time of surgery with ESL compared to WL. According to the applicant, 
this results in less deformity and simpler oncoplastic reconstructions 
and may decrease complications and post-procedure pain. The applicant 
noted that the amount of excess (i.e., unnecessary) tissue removed was 
statistically significant between the WL and ESL groups in the study 
abstract it referenced, and that even with less tissue removed, the re-
excision rate decreased for the ESL group. According to the applicant, 
the removal of less normal functioning non-neoplastic tissue during 
surgery when using the Navigator compared to WL will cause

[[Page 71907]]

less tissue deformity, pain, and suffering and, in and of itself, is 
evidence of substantial clinical improvement under Sec.  419.66(c)(2)--
specifically, that the removal of less normal functioning tissue 
substantially improves the diagnosis or treatment of an illness or 
injury or improves 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.
    In response to our concern that the applicant had not provided 
conclusive evidence that use of the Navigators reduces surgical site 
infection rates, the applicant explained that this study was not 
specifically powered to address surgical site infections, but stated 
that when compared to wires, there are several surgical principles that 
should contribute to lower SSI rates in adequately powered studies. The 
applicant noted that the protrusion of the wire from the patient is an 
infection risk because the wire is placed prior to surgery (often 
hours) in a separate physical location from the operating room (often 
radiology) and the patient is then transported to the operating room 
with a semi-sterile dressing. The applicant added that the wire is a 
further infection risk due to the added tissue trauma associated with 
removal of larger volumes of tissue to minimize positive margins and 
future additional procedures.
    In response to our concern that the applicant had not provided 
conclusive evidence that use of the Navigators reduces risk of tissue 
marker migration, the applicant claimed that there is currently no 
standard to determine tissue marker migration other than the 
histopathological results. The applicant stated that migration of the 
marker clip would result in an increase in positive margins and re-
excisions as well as an increase in the volume of tissue excised due to 
uncertainty as to the exact position of the target, but that neither of 
these findings was seen in the study. The applicant noted that the 
lower re-excision rates and lower positive margins seen in the ESL 
group are evidence of lack of tissue marker migration, in addition to 
the smaller specimens and excess tissue excised.
    Finally, the applicant asserted that breast cancer is the second 
leading cause of cancer mortality in women, and that the current 
standard localization technique (hook-wire) is both insufficient and 
has not changed for many decades, despite high positive margin rates. 
The applicant noted that in contrast to this, during this same time 
period, larger investments in advanced technologies have been made to 
decrease positive margin rates and increase quality of life in male-
predominant tumors such as prostate cancer. Thus, the applicant 
asserted that technology-driven improvements in patient outcomes are 
particularly important in breast cancer.
    Response: We appreciate the applicant's responses to our questions 
as well as the other comments we received about the Navigators. 
However, we maintain the concerns we articulated in the proposed rule. 
The provided published studies did not demonstrate a statistically 
significant difference in positive margin and re-excision rates between 
the ESL and WL technologies or provide evidence that 
SmartClipTM reduces surgical site infection rates or risk of 
tissue marker migration. Although the applicant noted that the amount 
of excess tissue removed was statistically significant between the WL 
and ESL groups in the study abstract it referenced, we do not agree 
that this result, in and of itself, is evidence of substantial clinical 
improvement under Sec.  419.66(c)(2)--that is, we do not believe that 
this result, in itself, is evidence that the technology substantially 
improves the diagnosis or treatment of an illness or injury or improves 
the functioning of a malformed body part. We continue to believe that 
additional information and evidence is necessary from larger, multi-
center published studies (including studies involving non-breast cancer 
related procedures) that provide comparative outcomes between the 
Navigators and existing technologies. Because of these concerns, we do 
not believe that the Navigators represent a substantial clinical 
improvement relative to currently existing technologies. After 
consideration of the public comments we received, and our review of the 
device pass through application, we are not approving the Navigators 
for transitional pass-through payment status in CY 2023 because the 
device does not meet the substantial clinical improvement criterion. 
Because we have determined that the Navigators do not meet the 
substantial clinical improvement criterion, we are not evaluating in 
this final rule whether the device meets the cost criterion.
(3) SmartClipTM
    Elucent Medical, Inc. submitted an application for a new device 
category for transitional pass-through payment status for CY 2023 for 
the SmartClipTM Soft Tissue Marker (SmartClipTM). 
The applicant described the SmartClipTM as an 
electromagnetically activated, single-use, sterile soft tissue marker 
used for anatomical surgical guidance. According to the applicant, the 
SmartClipTM is the only soft tissue marker that delivers 
independent coordinates of location when used in conjunction with the 
applicant's EnVisioTM Navigation System (which includes the 
Navigators discussed previously in this final rule. Per the applicant, 
at the time of surgical intervention, electromagnetic waves delivered 
by the EnVisioTM Navigation System activate the implanted 
SmartClipTM within a 50cm x 50cm x 35cm volume. The 
applicant further explained that the SmartClipTM contains an 
application-specific integrated circuit (ASIC), customized for use with 
the EnVisioTM Navigation System, which is activated at a 
specific frequency and communicates to the EnVisioTM 
Navigation System the precise, real-time location of both the 
SmartClipTM and the surgical margin, enabling the surgeon to 
plan the specimen (tumor and margin) for excision.\43\ 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.
---------------------------------------------------------------------------

    \43\ Based on the FDA 510(k) Summary for the 
EnVisioTM Navigation System, the SmartClipTM 
does not appear to be a component of the EnVisioTM 
Navigation System; the SmartClipTM has a separate FDA 
510(k) clearance as discussed later in this section.
---------------------------------------------------------------------------

    The applicant stated that the SmartClipTM 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 SmartClipTM 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 
SmartClipTM can be implanted into various types of soft 
tissue, such as lung, gastrointestinal system, and breast, and can 
subsequently be detected using the EnVisioTM 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 SmartClipsTM, 
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 SmartClipTM enables the surgeon to choose the 
safest, least

[[Page 71908]]

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 SmartClipTM 
enables the surgeon to measure and record specimen size post excision.
    The applicant further asserted that the SmartClipTM 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 SmartClipTM has characteristics that 
differentiate it from conventional fiducial markers. First, the 
applicant stated that the SmartClipTM location is expressed 
relative to the patient's position--medial/lateral, inferior/superior, 
anterior/posterior with 2mm precision. Second, according to the 
applicant, the SmartClipTM 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 SmartClipTM 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 SmartClipTM is not subject to registration errors 
often seen with navigation that utilizes pre-procedure imaging for 
guidance. Furthermore, the applicant asserted that the 
SmartClipTM is ideal for minimally invasive procedures in 
that it does not require line of sight. The applicant also stated that 
the SmartClipTM does not utilize any radioactive materials 
or contain any ionizing radiation. Per the applicant, the 
SmartClipTM does not require a separate imaging modality, 
however, if another imaging modality is utilized, the 
SmartClipTM is radiopaque. Finally, the applicant stated 
that the SmartClipTM provides the following advantages 
compared to current localization methods (including preoperative wire 
localization): (1) no migration of the SmartClipTM; (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 SmartClipTM 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 SmartClipTM 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 SmartClipTM could not be 
marketed until May 2019 because it is utilized in conjunction with the 
EnVisioTM Navigation System and FDA clearance for the 
EnVisioTM Navigation System was required prior to use of the 
SmartClipTM (as mentioned previously, the applicant received 
FDA clearance for the EnVisioTM Navigation System on March 
22, 2019). We note that, according to the FDA 510(k) Summary and 
Indications for Use for the SmartClipTM (K180640) and the 
EnVisioTM Navigation System (K183400), the 
SmartClipTM 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 
EnVisioTM Navigation System enables the 
SmartClipTM 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 
SmartClipTM 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 
EnVisioTM Navigation System. The applicant noted that while 
the SmartClipTM 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 SmartClipTM ASIC fault, so as to ensure 
patient care is not compromised. The applicant further stated that it 
did not consider pursuing marketability of the SmartClipTM 
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 
EnVisioTM Navigation System (March 22, 2019) as the 
applicable date for the SmartClipTM's initial marketability. 
In the CY 2023 OPPS/ASC proposed rule, we solicited public comments on 
whether the SmartClipTM meets the newness criterion.
    Comment: The applicant asserted that the COVID-19 pandemic, which 
started in the spring of 2020, and the subsequent halting of elective 
surgeries, screening mammography, and company access to hospitals 
substantially delayed the clinical implementation of the 
SmartClipTM as well as the follow-on research necessary to 
file a successful pass-through application. The applicant stated that, 
in light of the COVID-19 global pandemic resulting in the suspension of 
both research and elective surgical care, it believes the newness 
criterion, which it stated is measured by available time on market, is 
achieved.
    Response: We appreciate the applicant's input. The applicant 
submitted its application for consideration as a new device category 
for transitional pass-through payment status for the 
SmartClipTM on February 28, 2022, which is more than 3 years 
from the date of the initial FDA marketing authorization (June 4, 
2018). We do not agree that the COVID-19 pandemic created a basis for 
claiming a verifiable delay in U.S. market availability of the 
SmartClipTM. The applicant received 510(k) clearance from 
FDA to market the SmartClipTM on February 4, 2018, which was 
well before the beginning of the pandemic and thus we do not believe 
the pandemic created a verifiable delay. In addition, in its 
application, the applicant requested that we utilize the FDA clearance 
date for the EnVisioTM Navigation System (March 22, 2019) as 
the applicable date for the SmartClipTM's initial 
marketability (which also was before the onset of the COVID-19 
pandemic). In its application, the applicant asserted that it could not 
market the SmartClipTM

[[Page 71909]]

until May 2019 because it is utilized in conjunction with the 
EnVisioTM Navigation System and FDA clearance for the 
EnVisioTM Navigation System was required prior to use of the 
SmartClipTM. However, we note that, according to the FDA 
510(k) Summary and Indications for Use for the SmartClipTM 
(K180640) and the EnVisioTM Navigation System (K183400), the 
SmartClipTM also can be located and surgically removed 
through the use of imaging guidance such as x-ray, mammography, 
ultrasound, and MRI. Thus, we do not believe the March 22, 2019, FDA 
clearance date for the EnVisioTM Navigation System created a 
verifiable delay in the market availability of the 
SmartClipTM. Accordingly, we do not believe the applicant 
has provided a basis for a verifiable delay in U.S. market 
availability. Finally, in response to the applicant's assertion that 
the newness criterion is measured by available time on the market, we 
note that where there is a documented, verifiable delay in market 
availability, under Sec.  419.66(b)(1), CMS assesses compliance with 
the newness criterion by measuring amount of time from the date of 
market availability, not available time on the market; that is, where 
there is a verifiable delay, CMS will consider a pass-through 
application if it is submitted within three years from the date of 
market availability. After consideration of the public comments we 
received, and our review of the device pass through application, we 
have determined that the SmartClipTM does not meet the 
newness criterion.
    With respect to the eligibility criterion at Sec.  419.66(b)(3), 
according to the applicant, the SmartClipTM 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 SmartClipTM 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). In the CY 2023 OPPS/ASC proposed rule, we 
solicited public comments on whether the SmartClipTM meets 
the eligibility criteria at Sec.  419.66(b).
    Comment: The applicant asserted that the SmartClipTM 
meets eligibility requirements of Sec.  419.66(b)(4) in that (1) it is 
not a piece of equipment, an instrument, apparatus, implement, or item 
for which depreciation and financing expenses are recovered as 
depreciable assets (the applicant noted that the SmartClipTM 
is a permanently implantable single use device), and (2) it is not a 
material or supply furnished incident to a service (for example, a 
suture, customized surgical kit, or clip, other than radiological site 
marker). The applicant noted that the SmartClipTM is 
utilized for real time three-dimensional surgical navigation. As such, 
the applicant asserted that the SmartClipTM meets the 
eligibility criteria at Sec.  419.66(b).
    Response: Based on the information we have received and our review 
of the application, we agree with the applicant that the 
SmartClipTM is integral to the service provided, used for 
one patient only, comes in contact with human tissue, and is surgically 
implanted or inserted. In addition, we agree with the applicant that 
the SmartClipTM meets the device eligibility requirements of 
Sec.  419.66(b)(4) because it is not a piece of equipment, 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. Therefore, based on the public comments we have 
received and our review of the application, we have determined that the 
SmartClipTM meets the eligibility criteria at Sec.  
419.66(b)(3) and (4).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that a device to be included in the 
category is not appropriately described by any of the existing 
categories or by any category previously in effect, and was not being 
paid for as an outpatient service as of December 31, 1996. The 
applicant stated that it was not aware of an existing pass-through 
payment category that describes the SmartClipTM.
    The applicant identified three devices or device categories that it 
believes are most closely related to the SmartClipTM: (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 (SmartpillTM)).\44\
---------------------------------------------------------------------------

    \44\ HCPCS code 91112 is not a current or previous pass-through 
payment category. According to the applicant, the 
SmartpillTM 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 SmartClipTM 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 noted in the CY 2023 OPPS/ASC proposed rule 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.\45\ 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.\46\ 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 
SmartClipTM, 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) 
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 
SmartClipTM is an advanced interstitial implant that 
substantially improves upon both generic gold fiducial markers and 
common hook-wire localization systems. According to the applicant,

[[Page 71910]]

passive mechanical tissue markers such as gold fiducial markers and 
hook-wire systems are related devices created for roughly the same 
purpose as the SmartClipTM, but neither can be considered an 
adequate comparator due to the highly advanced technology embedded in 
the SmartClipTM. In contrast to both generic gold fiducial 
markers and hook-wire systems, the applicant asserted that the 
SmartClipTM contains an ASIC which is activated at a 
specific frequency and provides location information regarding both the 
SmartClipTM 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 SmartClipTM is described by HCPCS code A4648.
---------------------------------------------------------------------------

    \45\ Medicare Claims Processing Manual, Ch. 4, section 60.4.2.
    \46\ 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 solicited public comments on whether the SmartClipTM 
meets the device category criterion.
    Comment: A commenter stated that the SmartClipTM meets 
the criterion at Sec.  419.66(c)(1) and can be differentiated from 
other tissue markers. The commenter stated that the 
SmartClipTM soft tissue marker has replaced the hook-wire, 
and other non-directional, wire-free localization ``tissue markers'' 
across multiple sites at his institution since early March of 2022. The 
commenter asserted that because the SmartClipTM offers the 
uniqueness of integrated intelligence of precise location, he supported 
the claim that the SmartClipTM is the first and only soft 
tissue marker that provides the technical and clinical benefit of 
knowing the exact location within a three-dimensional space. The 
commenter added that the SmartClipTM is unique in that 
radiologists can approach the placement of the marker in any direction 
without any limitations on the depth, distance, or location of the 
targeted tissue. The commenter also asserted that the enhanced 
differentiation of the SmartClipTM's unique signature 
further allows placement that benefits complete removal of the tissue 
of concern. Per the commenter, the removal of complex lesions with the 
distant disease has been an area of concern for which improved 
localization markers have not been able to meet the clinical need. The 
commenter reported that his practice has explored alternative 
techniques and technologies, which increased re-excision rates, 
resulting in patients having to repeat the various procedures for 
localization and removal of additional tissue from the breast. The 
commenter added that since implementing the SmartClipTM soft 
tissue marker, his facilities have seen a significant reduction in the 
need for patients to return for additional interventions.
    Another commenter noted that in the proposed rule, the applicant 
identified HCPCS code 91112 (Gastrointestinal transit and pressure 
measurement, stomach through colon, wireless capsule, with 
interpretation and report (SmartPill)) as one of the device categories 
it believed was most closely related to the SmartClipTM and 
indicated that the SmartClipTM is used in procedures 
described by HCPCS code 91112. The commenter disagreed with the 
applicant's statement that these procedures would be reported with the 
SmartClipTM device. Per the commenter, the 
SmartClipTM and SmartPill, an endoluminal capsule used in 
the diagnosis of GI disorders, are not related devices used for similar 
purposes. The commenter stated that while the SmartClipTM is 
implanted in soft tissue and is used as a surgical marker, the 
SmartPill capsule is ingested, captures information as it moves through 
the GI tract, and passes naturally throughout the GI tract. According 
to the commenter, the SmartPill is intended to measure pH, pressure, 
and temperature throughout the GI tract, along with four different GI 
transit times. The commenter asserted that because the 
SmartClipTM and SmartPill, are not functionally related 
devices and have vastly different indications for use, it is unlikely 
that a surgical procedure to place a fiducial marker in soft tissue 
using the SmartClipTM device would be reported with the 
diagnostic procedure limited to the GI tract and described by CPT code 
91112. The commenter requested that CMS remove reference to SmartPill 
from considerations related to the SmartClipTM pass-through 
application.
    Response: We appreciate the information provided by the commenters 
and have taken this into consideration in making our final 
determination below regarding the criterion at Sec.  419.66(c)(1).
    Comment: The applicant stated that it does not believe the 
SmartClipTM is described by HCPCS code A4648 and explained 
that it can be differentiated from the passive tissue markers 
identified within HCPCS code A4648. According to the applicant, inert 
metal biopsy markers, gold fiducial markers, magnetic seeds, 
radioactive seeds, and hook-wires are used in conjunction with some 
form of detector to provide a localizable marker at the known site of 
disease. The applicant stated that these types of markers provide a 
visual location under imaging or are locatable with various types of 
detectors and are palpable at the time of surgery. The applicant added 
that, like the inert metal markers, the radioactive and magnetic 
markers are also passive, but can be located in the presence of a 
magnetic or radioactive detector. Per the applicant, the markers do not 
contain any computing capability within the marker itself, and thus no 
3D data can be communicated. The applicant asserted that the 
SmartClipTM soft tissue marker is unique in that it is 
designed to contain an ASIC. According to the applicant, this circuit 
is passive until it is in the presence of a specific radiofrequency at 
which time the SmartClipTM actively communicates with the 
Navigator to relay 3D coordinates to the surgeon at a rate of 16x per 
second. The applicant stated that the three different models (i.e., 
colors) of the SmartClipTM operate at slightly different 
frequencies so that they can be uniquely identified, individually 
located, and color coded for presentation to the surgeon.
    Response: We appreciate the commenters' input. For the reasons 
specified by the commenters, we agree that the SmartClipTM 
can be differentiated from the passive tissue markers identified within 
HCPCS code A4648. We agree that passive mechanical tissue markers such 
as gold fiducial markers and hook-wire systems are related devices 
created for roughly the same purpose as the SmartClipTM, but 
that neither can be considered an adequate comparator due to the highly 
advanced technology (ASIC) embedded in the SmartClipTM which 
can be activated at a specific radiofrequency and communicate 3D 
coordinates to the surgeon in real time.
    In addition, we agree with the commenter who noted that the 
SmartClipTM and SmartPill are not functionally related 
devices and have vastly different indications for use. We further agree 
that it is unlikely that a surgical procedure to place a fiducial 
marker in soft tissue using the SmartClipTM device would be 
reported with the diagnostic procedure limited to the GI tract and 
described by CPT code 91112.
    After consideration of the public comments we received, we believe 
that there is not a current or previously

[[Page 71911]]

existing pass-through payment category that describes the 
SmartClipTM, and therefore, the SmartClipTM meets 
the device category eligibility criterion at Sec.  419.66(c)(1).
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of the FDA's Breakthrough Devices Program and has 
received FDA marketing authorization for the indication covered by the 
Breakthrough Device designation.
    The applicant claimed that the use of the SmartClipTM 
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 SmartClipTM 
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 EnVisioTM 
Navigation System and SmartClipTM compared to wire 
localization (WL) on operative times, specimen volumes, margin 
positivity, and margin re-excision rates.\47\ 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 55cm3 with WL versus 36cm3 with ESL 
(p=0.0012). In those with measurable tumor volume, excess tissue 
excised was larger with WL compared to ESL (median=73.2cm3 versus 
52.5cm3, 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.
---------------------------------------------------------------------------

    \47\ 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.\48\ The paper presented three cases from the 
Moffitt Cancer Center, including radiographic and other images, 
employing three different methods of breast mass localization: (1) 
SmartClipTM, (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 SmartClipTM 
localizers, SAVI SCOUT[supreg] localizers, and wire localizers.
---------------------------------------------------------------------------

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

    \49\ 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 
SmartClipTM. The authors noted that the 
SmartClipTM is the first device to provide three-plane 
localization information. The authors stated that a monitor displays 
the approximate position of the SmartClipTM allowing 
everyone in the operating room to assist with the

[[Page 71912]]

localization of the SmartClipTM and provide knowledge of its 
location prior to and throughout the surgery. They further noted that 
the SmartClipTM localizer can be visualized on a small 
screen mounted on the electrocautery tool which, like the monitor, 
depicts the direction and depth to the SmartClipTM. 
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 SmartClipTM 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 
SmartClipTM, 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 SmartClipTM in clinical 
practice.
    In addition, the applicant provided three physician case reports 
(two by surgeons and one by radiologists), each describing the use of 
the SmartClipTM 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 SmartClipTM or 
EnVisioTM Navigation System. In the first surgical case 
report,\50\ the surgeon noted that the foot pedal activation of the 
EnVisioTM Navigation System allowed toggling between two 
SmartClipTM 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,\51\ the surgeon similarly 
noted that the EnVisioTM Navigation System helped her to map 
out and be more precise in her incision location and lumpectomy 
dissection. Finally, in the radiologists' case report,\52\ ultrasound 
guided SmartClipTM localization was ordered for definitive 
surgical management. The radiologists noted the visibility of the 
SmartClipTM relative to the coil clip, mass, and surrounding 
tissue, as well as the ease of the deployment.
---------------------------------------------------------------------------

    \50\ Kruper, Laura, Bracketing Lobulated Breast Lesion with the 
EnVisioTM Navigation System using Differentiated 
SmartClipTM.
    \51\ Henkel, Dana, Single SmartClipTM Case.
    \52\ Lee, Marie C., Mooney, Blaise, Right Breast IDC/DCIS.
---------------------------------------------------------------------------

    The applicant also submitted several articles in general support of 
its application, which we summarized in the CY 2023 OPPS/ASC proposed 
rule 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.\53\ 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.\54\ 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.\55\ 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.\56\ 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.\57\ 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.\58\ 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.\59\
---------------------------------------------------------------------------

    \53\ 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.
    \54\ 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.
    \55\ 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.
    \56\ 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.
    \57\ 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.
    \58\ 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.
    \59\ 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 noted the 
following concerns in the CY 2023 OPPS/ASC proposed rule. We noted that 
the first study appeared to be unpublished, and it was not clear 
whether it had been submitted for publication in a peer-reviewed 
journal. In addition, we stated that the study involved a sample of 97 
patients from one institution and appeared 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, we indicated that the authors did 
not report the sex or age of the study participants. Additionally, the 
authors reported that

[[Page 71913]]

the differences in positive margin and re-excision rates between ESL 
and WL groups were not statistically significant. We also noted a 
potential concern regarding practice/selection effects bias inherent in 
the methodology presented.
    In addition, we noted that the second article was an undated,\60\ 
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. We explained that 
the paper did not systematically compare the techniques across any 
measurable variables, and the authors indicated that a clinical study 
was underway at the institution to evaluate the SmartClipTM 
in clinical practice. Similarly, we noted that the physician case 
reports were solely descriptive in nature--they presented each 
physician's anecdotal experience using the EnVisioTM 
Navigation System and/or SmartClipTM. Furthermore, we noted 
that the applicant provided several additional articles that, while 
informative, did not involve the SmartClipTM and did not 
appear to directly support the applicant's claim of substantial 
clinical improvement. We stated that we would welcome additional 
information and evidence from larger, multi-center studies that provide 
comparative outcomes between the SmartClipTM and existing 
technologies.
---------------------------------------------------------------------------

    \60\ Although the applicant reported the date of the study as 
January 2021, the copy of the study provided by the applicant was 
not dated.
---------------------------------------------------------------------------

    In the CY 2023 OPPS/ASC proposed rule, we further stated that none 
of the articles and case reports provided conclusive evidence that the 
use of the SmartClipTM reduces surgical site infection rates 
or the risk of tissue marker migration, as claimed by the applicant. In 
addition, we indicated that 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 
SmartClipTM is utilized frequently in breast conserving 
surgery, lymph nodes, and head/neck cancers. We stated in the proposed 
rule that we would welcome additional evidence of substantial clinical 
improvement in cases related to non-breast cancer related procedures. 
We solicited public comments on whether the SmartClipTM 
meets the substantial clinical improvement criterion.
    Comment: All commenters addressing the SCI criterion offered 
support for approval of the SmartClipTM application. Some 
commenters, including the applicant, noted that for many years, the 
standard of care for breast conservation surgery has been wire 
localization and that little progress has been made. Such commenters 
noted that compared to the investments and advances that have been made 
in surgical technologies for other types of cancer (including male-
predominant cancers such as prostate cancer) to reduce positive margin 
rates and increase quality of life, the tools for breast cancer surgery 
have remained limited. According to commenters, advances in surgical 
technologies for other types of cancer have included minimally invasive 
approaches inclusive of laparoscopic as well as robotic surgery, image-
fusion, and advanced navigation. Such commenters considered the under-
resourcing of breast surgery to be an equity issue due to the fact that 
breast surgery is primarily performed on women, and one commenter 
noted, in particular, that the downstream impacts of repeat surgeries 
(increased disfigurement, anxiety, infection risk, economic costs, time 
away from work and family) are particularly impactful to working women, 
especially those of child-bearing age and lower socio-economic status. 
In addition, a commenter noted that breast tissue, unlike the liver or 
lungs, can be variably thick or dense versus fatty depending on the age 
and genetics of the patient, and that this makes the localization of 
abnormalities or cancers in a breast difficult as each case can be 
different depending on the amount of fat versus dense tissue and the 
patient's breast size. These commenters believed that advances in 
technology are needed in breast surgery to improve surgical results.
    Several commenters described numerous drawbacks and difficulties 
associated with wire localization techniques, including the following: 
(1) some patients require up to 4 wires to ``bracket'' an abnormality 
in the breast; (2) trauma and pain associated with having wires placed 
and then extruding from a breast on the morning of surgery; (3) 
scheduling difficulties associated with wire placement on the day of 
surgery; (4) movement or displacement prior to or during surgery; (5) 
wires can be cut or ``lost'' during the procedure, especially if the 
cautery or bovie gets too close to them during the procedure; and (6) 
wires are designed to have a small ``thicker'' portion placed at the 
site of the tumor or abnormality; this small thick portion is difficult 
to place accurately and if it migrates slightly can change the 
orientation of the excision. In addressing difficulties in localizing 
the wires, a commenter explained that surgeons attempt to localize the 
tumor by ``following the wire,'' palpation, and educated guesses as to 
where to resect tissue. Several commenters noted that these 
difficulties in accurate tumor localization have resulted in high re-
excision rates. A commenter noted that over 15-20% of patients annually 
require a second surgery to remove more breast tissue because the 
localization was inexact at the time of the first surgery. A second 
commenter stated that a recent meta-analysis showed an average 22% re-
excision rate for inadequate margins after primary lumpectomy. This 
commenter asserted that the human and health care costs of this failure 
rate are high and fall disproportionately on women. In addition, a 
commenter reported that when using an alternative wire-free solution 
with a radar detection marker, surgeons at his institution reported an 
increase in re-excision rates, nearly doubling that of wires. 
Commenters asserted that, as a result of difficulties and complications 
with wire techniques, new technologies for localizing a breast and/or 
lymph node abnormality requiring excision in the operating room are 
needed.
    Several commenters described clinical and surgical benefits of 
using the Navigator and SmartClipTM based on experience 
using this technology. Most of these commenters stated that using this 
technology decreases positive surgical margin and re-excision rates. A 
commenter noted that the system not only localizes the actual tumor 
targeted for removal, but also shows the surgeon suggested margins. 
That commenter added that with the Navigators and 
SmartClipTM, the specimens are more circumferential and 
consistent at a fixed (but surgeon selected) distance from the 
implanted clip which has resulted in fewer positive margins, reducing 
the need for a second surgery. Other commenters explained that the 
technology allows the surgeon to track the position of the implanted 
clip during surgery in 3D with real-time updates, allowing the surgeon 
to have an objective view of the tip of the surgical instrument with 
respect to the SmartClipTM, which according to commenters, 
can result in decreases in both positive margin and re-excision rates.
    In addition, a few commenters noted that the technology results in 
removal of less normal breast tissue, with one commenter noting that 
early data from major cancer centers is starting to show that less 
normal tissue is being removed when the Elucent technology is used.

[[Page 71914]]

Commenters noted that this has major implications for post-surgical 
pain, deformity, onco-plastic reconstructions, and complications. A 
commenter asserted that it is unusual for a device to simultaneously 
decrease deformity, pain and suffering, health care costs, and cancer 
metrics like positive margin and re-excision rates.
    Furthermore, a commenter noted that, in their anecdotal experience, 
the use of the Navigators and SmartClipTM saves overall 
operating room time compared to the hook-wire technique. This commenter 
asserted that this decreases costs and anesthesia time and provides the 
ability to more efficiently use operating rooms for other cases. 
Another commenter reported that with the Navigators and 
SmartClipTM, there is less need for synchronization with 
radiology for localization procedures. This commenter asserted that in 
the past, the need to have tumors localized in radiology before coming 
to the operating room caused a number of problems such as displaced 
wires, operating room delays, long patient waiting times with wires 
protruding from the breast, and decreased efficiency. This commenter 
and another noted that the SmartClipTM can be implanted at 
virtually any time prior to the surgery at the patient's convenience, 
thus avoiding delay or wire displacement on the day of surgery.
    Some commenters described additional technical and operational 
advantages to using the Navigators and SmartClipTM. These 
commenters noted that the Navigators and SmartClipTM are 
unique because they allow the surgeons to track the position of the 
SmartClipTM during surgery in 3D with real time updates. A 
few commenters specifically noted that the SmartClipTM 
contains an ASIC chip which is activated at surgery once the patient 
lays on the operative table. A commenter further asserted that the 
field of navigation is over 30cm and can enable identification in a 
large or small breast or one that is wide or narrow. This commenter 
claimed that the most important component of the system is the NavSlim 
and NavPencil which enable navigation in real time without using 
another device or probe. According to this commenter, the NavSlim and 
Pencil are placed onto the operative tool or cautery and do not have to 
be picked up intermittently.
    Another commenter stated a significant technical advantage of the 
technology is that a 3D readout is generated as a graphic 
representation of the clip relative to the tip of the handpiece 
(compared to an audio signal only) as a reflection of distance, which 
per the commenter, is a more intuitive way to understand the device 
localization. This commenter further stated that, perhaps most 
important to a surgeon, the detector portion of the handpiece is fixed 
to the cautery. According to this commenter, having the navigation 
portion of the system within the operative field for real-time 
detection significantly improves identification of the clip and the 
lesion, even when working in a small space or in detection of a very 
small target, as division or retraction of the tissue often causes the 
target to move in surgery. This commenter noted that with real-time and 
nearly continuous detection, loss or disorientation of the target is 
minimized while performing the operation.
    Furthermore, a commenter provided comments based on his personal 
experiences placing the SmartClipTM and direct observation 
of his colleagues' use of SmartClipTM. The commenter first 
noted that all non-wire/non-radioactive localization methods have some 
common benefits to patients, in that they allow for flexibility with 
scheduling, are generally less painful than wires, have less chance of 
dislodgment/migration after placement, can be used to localize targets 
in the axilla and non-palpable targets which are too superficial or too 
deep for a wire, and when operating room cases are unexpectedly 
cancelled or delayed, no harm comes to patients. The commenter asserted 
that the SmartClipTM has several unique benefits, observed 
at his institution, that demonstrate that it meets the criterion at 
Sec.  419.66(c)(2). First, the commenter stated that the utilization of 
the SmartClipTM provides the ability to localize targets 
deep in the breast and deep in the axilla, beneath overlying dense 
tissue such as muscle. The commenter noted that the 35cm detection 
depth available with the SmartClipTM soft tissue marker 
exceeds that of other types of markers such as the SaviScout, which the 
commenter stated are often not detectable when the target is deeper 
than 4 cm of normal breast tissue or beneath dense tissue, such as 
muscle encountered in axilla. The commenter stated that this causes the 
surgeon to have to ``cut down'' through tissue until the clip is 
detected, resulting in a less optimal approach, longer operating room 
time, and potential damage to the clip with electrocautery devices.
    According to this commenter, a second important benefit the 
SmartClipTM provides is the ability to localize targets 
surrounded by blood products/hematomas. Per the commenter, the ASIC 
computer chip within the SmartClipTM is not affected by 
surrounding human tissue, including hematomas. The commenter stated 
that in contrast, other tissue markers are often not detectable if a 
hematoma is present. The commenter noted that if a hematoma limits the 
signal and detection of a localizing clip, the result is delay in 
surgery or a prolonged, less accurate surgical excision and need for 
radiology staff to come to the operating room to assist the surgeon 
localizing the target using ultrasound technology/fluoroscopy.
    Third, the commenter stated that in his experience, the 
SmartClipTM provides more specific bracketing ability with 3 
differentiated clip signatures, due to the ASIC computer chip that 
delivers precise coordinates of the individual SmartClipTM 
signals and their locations. According to the commenter, this has 
resulted in smaller, more accurate surgical specimens.
    Fourth, the commenter noted that if there is migration of a 
localizing clip, a second clip must be placed, and asserted that 
because the SmartClipTM has 3 unique signals, this 
complication is easily remedied. Per the commenter, other clips which 
lack unique signals must be placed far enough from the migrated clip, 
resulting in time consuming imaging and communication to ensure the 
proper area is surgically excised, as well as more time, more 
radiation, and more tissue being removed as surgeons must make larger 
incisions.
    In addition, the commenter noted that when a patient undergoes 
neoadjuvant chemotherapy, the cancer must be localized before 
chemotherapy treatment to ensure the correct area is removed, and that 
response to treatment is often measured with MRI. Per the applicant, 
the SmartClipTM has less MRI artifact than other clips, 
which allows for accurate assessment of response to therapy. The 
commenter also stated that the SmartClipTM is highly visible 
clip with ultrasound. The commenter asserted that the ultrasound 
visibility makes placement easy for radiologists, as the 
SmartClipTM looks significantly larger and brighter than the 
biopsy clips which are already in the target tissue being localized. 
Additionally, the commenter stated that in the unexpected event that 
the SmartClipTM must be localized with ultrasound 
intraoperatively, the highly visible nature of the 
SmartClipTM makes this easier when compared to searching for 
other clips which are less echogenic.
    This commenter also described some technical advantages of the 
SmartClipTM. First, the commenter stated that the 
SmartClipTM is easy to deploy. The commenter specifically

[[Page 71915]]

noted that the needle is available in different lengths, specifically 
noting the second-generation needle called ``SmartClipTM 
Lite.'' The commenter stated that the bevel of this needle is longer 
than other needles, which makes cutting through dense tissue easier. 
The commenter added that the bevel is also etched and highly echogenic, 
and that when the bevel is pointed ``up'' towards the ultrasound probe, 
the SmartClipTM is very easy to see. The commenter explained 
that this allows the radiologist and ultrasound technologist to readily 
distinguish between structures in the breast, existing biopsy clips, 
and the tip of the deployment needle. Additionally, the commenter 
asserted that the thumb button and forward movement is intuitive and 
familiar to breast radiologists and can all be done with one hand (no 
need to put the ultrasound probe down to ``unlock'' the deployment 
needle). The commenter also stated that the needle is lightweight, but 
extremely sharp, and that the shape of the SmartClipTM makes 
ultrasound deployment easy. In addition, per the commenter, the clip is 
smooth with no external antennas or protrusions to get caught in tissue 
or bend in dense tissue. The commenter stated that, to date, they have 
not bent any needles or had any needles self-deploy. However, the 
commenter acknowledged that they have had two unsuccessful deployments 
due to an issue which has since been rectified, but the commenter 
stated that each of these situations was solved simply with the 
deployment of a second SmartClipTM without patient harm or 
delayed treatment. The commenter stated that the applicant has 
communicated an improved quality control process to prevent future 
incidents going forward.
    A few other commenters described clinical outcome data from their 
experience with the Navigators and SmartClipTM. A commenter 
reported that he has decreased his re-excision rate from 16% in 2019 
prior to the COVID pandemic to 5% in 2021. This commenter stated that 
he performs an average of 200 breast conservation surgeries per year. 
This commenter also added that the adoption of the Elucent technology 
has resulted in fewer operative interventions for his patients 
undergoing breast conservation, improved cosmesis with one surgery, 
improved oncoplastic approaches as well as less anxiety and fewer 
delays in oncologic care. A second commenter stated that in the five 
months that they have implemented the technology, they have seen re-
excision rates drop to approximately 1.5%. Another commenter stated 
that his institution is in the process of analyzing its clinical 
outcomes data, which the commenter asserted illustrate the significant 
clinical impact of implementing the SmartClipTM and 
Navigator across six healthcare facilities and 235 surgical procedures.
    Finally, a few commenters acknowledged the need for additional 
research and larger clinical trials to support the preliminary positive 
outcomes data, including the data indicating that the Navigators and 
SmartClipTM decrease re-excision rates in breast 
conservation surgery for patients with breast malignancy. These 
commenters asserted that approval of pass-through payment for the 
Navigators and SmartClipTM would enable greater access to 
patients which will allow the surgical community to conduct additional 
studies and collect more comprehensive and multi-center data to further 
substantiate the clinical outcomes seen in early research studies.
    Response: We appreciate the input provided by these commenters. We 
have taken this information into consideration in making our final 
determination of the substantial clinical improvement criterion, 
discussed below.
    Comment: The applicant submitted comments in response to many of 
the concerns we expressed regarding the study abstract referenced in 
the proposed rule, which assessed the impact of ESL using the EnVisio 
Navigation System and SmartClipTM compared to wire 
localization. In response to our concern that the study was 
unpublished, the applicant stated that it submitted a manuscript for 
peer-review and potential publication. In response to our concern that 
this study appeared to be a feasibility study for a potentially larger 
randomized controlled trial, the applicant stated that the study 
authors did not make this statement and noted that prospective 
randomized controlled trials are exceedingly rare in this space and not 
considered necessary for adoption of a particular guidance technology. 
The applicant further claimed that the study referenced in the abstract 
has a rigorous cohort-matched design and a patient population size 
which is far beyond a feasibility study. In response to our concern 
about the lack of gender and age information, the applicant noted that 
this was an IRB-approved matched cohort analysis (1:1) of 194 patients 
(n=97 in both the study and control groups). The applicant further 
stated that the age in the ESL group was 64 versus 61 in the WL group 
(p=.015) (the applicant did not indicate whether these were average 
ages, median ages, or otherwise). The applicant added that the matched 
sample set included 190 females and four males. The applicant 
reiterated that the study authors matched patients, one-to-one, based 
on surgeon, procedure type with stratification for those having or not 
having nodal procedures, and pathologic stage or benign pathology, and 
restated the numerical results from the study abstract (which we 
summarized in the CY 2023 OPPS/ASC proposed rule (87 FR 44593)).
    In response to our concern that the differences in positive margin 
and re-excision rates between the ESL and WL groups were not 
statistically significant, the applicant asserted that the lack of 
statistical significance for re-excisions was driven solely by the 
sample size of the study. The applicant further noted that the 
retrospective cohort-matched design prioritized patient matching over 
sample size and the study was not prospectively powered for re-excision 
rates as the authors had no a priori knowledge that this would be an 
outcome of interest. The applicant claimed that, in hindsight, 
reasonably achievable increases in sample size would have made 
statistical conclusions possible. Specifically, the applicant claimed 
that with a sample size of 150 (rather than 97) in each group, and 
assuming identical re-excision rates, the difference between the ESL 
and WL groups becomes statistically significant (p=0.049, Fisher's 
exact test). The applicant further noted that ESL results were from the 
initial cases performed with ESL at the study center and included a 
learning curve, whereas the control wire localization cases were 
performed at a time where the learning curve had been overcome and 
surgeons had decades of experience with thousands of wire localization 
cases. In addition, the applicant asserted that the Elucent system is 
being used predominantly for treatment of breast cancer, and that the 
early results demonstrate lower positive margin rates and removal of 
less normal tissue resulting in lower rates of re-excision by >50%.
    The applicant also noted other clinical impacts of the Navigators 
and SmartClipTM in supporting its claim of substantial 
clinical improvement. The applicant claimed that the electromagnetic 
navigation allows for more precise and accurate tissue localization, 
resulting in 34.5% less normal functioning tissue being removed at the 
time of surgery with ESL compared to WL. According to the applicant, 
this results in less deformity and simpler oncoplastic reconstructions 
and may decrease complications and

[[Page 71916]]

post-procedure pain. The applicant noted that the amount of excess 
(i.e., unnecessary) tissue removed was statistically significant 
between the WL and ESL groups in the study abstract it referenced, and 
that even with less tissue removed, the re-excision rate decreased for 
the ESL group. According to the applicant, the removal of less normal 
functioning non-neoplastic tissue during surgery when using the 
Navigator compared to WL will cause less tissue deformity, pain, and 
suffering and, in and of itself, is evidence of substantial clinical 
improvement under Sec.  419.66(c)(2)--specifically, that the removal of 
less normal functioning tissue substantially improves the diagnosis or 
treatment of an illness or injury or improves 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.
    In response to our concern that the applicant had not provided 
conclusive evidence that use of the SmartClipTM reduces 
surgical site infection rates, the applicant explained that this study 
was not specifically powered to address surgical site infections, but 
stated that when compared to wires, there are several surgical 
principles that should contribute to lower SSI rates in adequately 
powered studies. The applicant noted that the protrusion of the wire 
from the patient is an infection risk because the wire is placed prior 
to surgery (often hours) in a separate physical location from the 
operating room (often radiology) and the patient is then transported to 
the operating room with a semi-sterile dressing. The applicant added 
that the wire is a further infection risk due to the added tissue 
trauma associated with removal of larger volumes of tissue to minimize 
positive margins and future additional procedures.
    In response to our concern that the applicant had not provided 
conclusive evidence that use of the SmartClipTM reduces risk 
of tissue marker migration, the applicant claimed that there is 
currently no standard to determine tissue marker migration other than 
the histopathological results. The applicant stated that migration of 
the marker clip would result in an increase in positive margins and re-
excisions as well as an increase in the volume of tissue excised due to 
uncertainty as to the exact position of the target, but that neither of 
these findings was seen in the study. The applicant noted that the 
lower re-excision rates and lower positive margins seen in the ESL 
group are evidence of lack of tissue marker migration, in addition to 
the smaller specimens and excess tissue excised.
    Finally, the applicant asserted that breast cancer is the second 
leading cause of cancer mortality in women, and that the current 
standard localization technique (hook-wire) is both insufficient and 
has not changed for many decades, despite high positive margin rates. 
The applicant noted that in contrast to this, during this same time 
period, larger investments in advanced technologies have been made to 
decrease positive margin rates and increase quality of life in male-
predominant tumors such as prostate cancer. Thus, the applicant 
asserted that technology-driven improvements in patient outcomes are 
particularly important in breast cancer.
    Response: We appreciate the applicant's responses to our questions 
as well as the other comments we received about the 
SmartClipTM. However, we maintain the concerns we 
articulated in the proposed rule. The provided published studies did 
not demonstrate a statistically significant difference in positive 
margin and re-excision rates between the ESL and WL technologies or 
provide evidence that SmartClipTM reduces surgical site 
infection rates or risk of tissue marker migration. Although the 
applicant noted that the amount of excess tissue removed was 
statistically significant between the WL and ESL groups in the study 
abstract it referenced, we do not agree that this result, in and of 
itself, is evidence of substantial clinical improvement under Sec.  
419.66(c)(2)--that is, we do not believe that this result, in itself, 
is evidence that the technology substantially improves the diagnosis or 
treatment of an illness or injury or improves the functioning of a 
malformed body part. We continue to believe that additional information 
and evidence is necessary from larger, multi-center published studies 
(including studies involving non-breast cancer related procedures) that 
provide comparative outcomes between the SmartClipTM and 
existing technologies. Because of these concerns, we do not believe 
that the SmartClipTM represents a substantial clinical 
improvement relative to currently existing technologies. After 
consideration of the public comments we received, and our review of the 
device pass-through application, we are not approving the 
SmartClipTM for transitional pass-through payment status in 
CY 2023 because the device does not meet the newness or substantial 
clinical improvement criterion.
    We note that we received comments from the applicant with regard to 
the cost criteria for this device, but because we have determined that 
the device does not meet the newness or substantial clinical 
improvement criteria, and therefore, is not eligible for approval for 
transitional pass-through payment status for CY 2023, we are not 
summarizing comments received or making a determination on those 
criteria in this final rule.
(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

[[Page 71917]]

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.
    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 invited public comment on whether the Evoke[supreg] 
SCS System meets the newness criterion.
    Comment: The applicant reasserted that the Evoke[supreg] SCS System 
meets the newness criterion at Sec.  419.66(b)(1) as the application 
was submitted within 3 years of FDA approval.
    Response: We appreciate the commenter's input and agree that 
because we received the application for the Evoke[supreg] SCS System on 
March 1, 2022, which was within 3 years of the FDA premarketing 
approval on February 28, 2022, 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 noted 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 noted 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 invited public comment on 
whether the Evoke[supreg] SCS System meets the eligibility criteria at 
Sec.  419.66(b).
    Comment: The applicant stated the generator and charger components 
of the Evoke[supreg] SCS System meet the eligibility criteria at Sec.  
419.66(b)(3) and (4), as the new device category would only apply to 
these two components. The applicant stated that the Evoke generator is 
an integral part of the implant procedure of spinal neurostimulator 
pulse generator (CPT code 63685). The applicant explained that the 
charger is a rechargeable battery embedded in the implantable device, 
and all that apply to the implant also apply to the charger. The 
applicant stated that the generator and charger components meet the 
criterion at Sec.  419.66(b)(3) since they are used for one patient 
only, come in contact with human tissue, and are surgically inserted. 
The applicant stated that the generator and charger components meet the 
criterion at Sec.  419.66(b)(4) since they are not the type of item for 
which depreciation and financing expenses are recovered or they are 
materials or supplies furnished incident to a service.
    Response: Based on the information we have received and our review 
of the application, we agree with the applicant that the applicable 
components of the device are used for one patient only, come in contact 
with human tissue, and are surgically implanted or inserted. We also 
agree with the applicant that the applicable components meet the device 
eligibility requirements of Sec.  419.66(b)(4) because they are not 
equipment, an instrument, apparatus, implement, or item for which 
depreciation and financing expenses are recovered, and they are not a 
supply or material furnished incident to a service. Based on this 
assessment we have determined that the Evoke[supreg] SCS System meets 
the eligibility criteria at Sec.  419.66(b)(3) and (4).
    The criteria for establishing new device categories are specified 
at

[[Page 71918]]

Sec.  419.66(c). The first criteria 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 
55 below) and explained why each category does not describe the Evoke 
SCS System. In summary, the applicant asserted that the existing codes 
do not adequately describe the Evoke 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 SCS System is a rechargeable, closed-loop neurostimulator that 
provides stimulation to spinal nerves. Upon review, it did not appear 
that there are any existing pass-through payment categories that might 
apply to the Evoke[supreg] SCS System. We invited public comment on 
whether Evoke[supreg] SCS System meets the device category criterion.
    Comment: The applicant and many other commenters agreed with CMS's 
assessment that there are no existing pass-through payment categories 
that describe the Evoke[supreg] SCS System.
    A competitor asserted that the Evoke[supreg] SCS System is 
described by an existing category. The commenter stated that, in 
considering existing codes, CMS noted that Evoke is not described by 
``C1820--Generator, neurostimulator (implantable), with rechargeable 
battery and charging system'' or by ``C1822--Generator, neurostimulator 
(implantable), high frequency, with rechargeable battery and charging 
system'' because neither code describes a closed-loop neurostimulator. 
However, the commenter noted that CMS acknowledges in the proposed rule 
that Saluda Medical, Inc., the manufacturer of Evoke ``indicated that 
this stimulator delivers both open-loop and closed-loop stimulation 
modes.'' The commenter stated that the aforementioned codes are not 
explicitly for open-loop neurostimulators and have long been used for 
technology similar to close-loop stimulation such as Medtronic's 
AdaptiveStimTM. The commenter stated that 
AdaptiveStimTM, first commercially introduced by Medtronic 
in 2011, is also a closed-loop SCS device which incorporates an 
internal accelerometer in the generator to monitor patient movements 
and postural fluctuations and adjusts device settings such as output 
amplitude, thus closing the loop. The commenter stated that, while both 
the accelerometer technology and ECAP sensing technology purport to 
provide the same benefit, i.e., reduced uncomfortable paresthesias, 
there are no comparative clinical trials to determine if one technology 
is superior to the other. The commenter stated that, even if CMS 
asserts that codes C1820 and C1822 are only for open-loop 
neurostimulators as suggested in the proposed rule, the codes still 
apply to Evoke because the product--according to the manufacturer--also 
delivers open-loop stimulation mode. The commenter also stated that as 
the Evoke system can deliver both open-loop and closed-loop stimulation 
modes, there is nothing to prevent implanting the system and 
programming initially as a closed-loop system, and post implantation 
and billing, adjust the system to an-open looped system. The commenter 
explained that the existing closed-loop AdaptiveStimTM 
system has been accurately described since its commercial introduction 
by C1820 and therefore, Evoke entirely meets the description of the 
existing code, C1820, and thus would not satisfy the newness criteria 
Sec.  419.66(c)(1) for transitional pass-through payment status.
    Response: We appreciate the commenters' input. It is our 
understanding that a closed-loop system measures and uses the system's 
output to adjust subsequent output. Because the Evoke[supreg] SCS 
System measures and uses the evoked compound action potentials to 
instantaneously adjust subsequent stimulation output on every 
stimulation pulse, we believe it is uniquely a true closed-loop system. 
After consideration of the public comments we received, we continue to 
believe that there is not an existing pass-through payment category 
that describes the Evoke[supreg] SCS System, and therefore, the 
Evoke[supreg] SCS System meets the device category eligibility 
criterion at Sec.  419.66(c)(1).
BILLING CODE 4120-01-P

[[Page 71919]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.071

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

[[Page 71920]]

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- 
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.\61\ 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. 
Noninferiority (d=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.
---------------------------------------------------------------------------

    \61\ 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.\62\ 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.\63\ 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.\64\ 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).
---------------------------------------------------------------------------

    \62\ 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.
    \63\ 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.
    \64\ 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=0.0052) and at 12 months (83.1 percent vs 61.0 percent; 
difference 22.0 percent; p=0.0060). Non-inferiority was met at 3 months 
(p<0.0001) and 12 months

[[Page 71921]]

(p<0.0001), as was superiority (3 months, p=0[middot]0052; 12 months, 
p=0.0060).
    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, 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).\65\ 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).
---------------------------------------------------------------------------

    \65\ 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 patients [19 percent] [95 percent CI 10.8-30.9], and 11 adverse 
events in the open-loop group in 11 patients [16 percent] [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.\66\ 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).
---------------------------------------------------------------------------

    \66\ 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.\67\ 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

[[Page 71922]]

2015 to April 2017 for the Avalon study.\68\ 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).
---------------------------------------------------------------------------

    \67\ 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]
    \68\ 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.\69\ 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 
patients were high responders (>=80 percent pain reduction).
---------------------------------------------------------------------------

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

    Based upon the evidence presented by the applicant, we noted the 
following concerns regarding whether the Evoke[supreg] SCS System met 
the substantial clinical improvement criterion. First, we noted 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 invited 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 requested additional details about how 
these two studies' results would be generalizable to the U.S. 
population. We invited public comments on whether the Evoke[supreg] SCS 
System meets the substantial clinical improvement criterion.
    Comment: The applicant acknowledged that the device utilized as the 
control group in the Evoke[supreg] study was not commercially available 
at the time of the study. However, the applicant stated that the 
Evoke[supreg] System Summary of Safety and Effectiveness Data (SSED, 
P190002) published by FDA includes information highlighting that the 
control group can be considered representative of SCS devices that were 
commercially available at the time. As such, the applicant asserts that 
the published clinical results of Evoke[supreg] closed-loop SCS versus 
the choice of control indicate that the substantial clinical 
improvement (SCI) criterion has been met. The applicant explained that, 
as stated in FDA SSED, the Evoke[supreg] System open-loop stimulation 
mode delivers therapy that is equivalent to other commercially 
available open-loop SCS systems in terms of intended use, and with 
respect to their biological and technical characteristics. To support 
these claims, the applicant provided a comparison of effectiveness 
outcomes between Evoke[supreg] open-loop SCS and other FDA-approved 
commercial open-loop systems.
    Many commenters expressed the opinion that the Evoke[supreg] SCS 
System open-loop stimulation mode is largely equivalent to other 
commercially available SCS systems, consistent with the FDA's pre-
market approval for Evoke[supreg], and therefore served as an effective 
comparator between the Evoke[supreg] SCS System closed-loop stimulation 
mode and traditional open-loop stimulation.
    Many commenters noted that the use of the same Evoke[supreg] device 
in both the experimental and control arms had multiple benefits 
supporting the rigor and validity of the Randomized Clinical Trial 
(RCT). First, it made it possible to ensure proper double-blinding in 
the study. Second, using the Evoke[supreg] system in both arms of the 
clinical trial was a way to control for confounding factors associated 
with differences between different systems, and only study the 
differences in clinical effects between the open- loop and closed- loop 
aspects. Third, because the Evoke[supreg] SCS System could measure the 
neural response in both groups by quantifying the ECAPs, using the 
Evoke[supreg] SCS System in both groups allowed for a more direct 
comparison of spinal cord activation.
    Many commenters noted that the use of the Evoke[supreg] SCS System 
in both study groups was to the study participants' ultimate benefit 
since they were implanted with a device that could be switched to a 
closed-loop setting that can better manage their pain after the long-
term study is completed.
    Response: We appreciate the applicant's and other commenters' 
responses to our questions regarding the Evoke[supreg] SCS System. 
Based on commenters' inputs, we agree that the Evoke[supreg] SCS System 
open-loop stimulation mode is largely equivalent to other commercially 
available SCS systems and thus served as an appropriate comparator for 
closed-loop versus open-loop spinal cord stimulation. We believe this 
RCT comparison served to demonstrate the substantial clinical 
improvement provided by the closed-loop system, differentiating it from 
open-loop systems typically described by existing device categories, 
thus supporting the creation of a new device category.
    Comment: A competitor agreed with our concern regarding the use of 
the Evoke[supreg] device in both arms of the RCT, stating that there 
are no comparative data regarding the relative clinical benefit of the 
Evoke[supreg] closed loop system. In contrast, the commenter noted that 
the RCT for the Senza SCS system compared that system's 10 kHz high-
frequency, open-loop stimulation to a completely different commercially 
available device programmed to use low-frequency, open-loop 
stimulation.
    Response: We appreciate the commenter's input, however, we do not 
believe that the Senza SCS system RCT is equivalent to the situation of 
the Evoke[supreg] SCS System RCT, and thus does not provide a 
sufficient counterfactual.

[[Page 71923]]

    Comment: The applicant stated that the Evoke study was a 
prospective, multicenter, randomized, double-blind study statistically 
powered to test the efficacy of the Evoke[supreg] SCS System to treat 
patients with chronic, intractable pain of the trunk and/or limbs. The 
applicant explained that this study design was developed to be 
generalizable, preserve objectivity, and minimize bias. The sample size 
calculation and expected treatment effect were based on prior open-loop 
SCS studies by North et al. (2005),\70\ Kumar et al. (2007),\71\ and 
Kapural et al. (2015),\72\ as well as the preliminary results of 
Evoke[supreg] closed-loop SCS from the Avalon study. The applicant 
explained that the study design and sample size calculation for the 
Evoke study were reviewed and approved by FDA to test non-inferiority 
and superiority of Evoke[supreg] closed-loop SCS compared to open-loop 
SCS.
---------------------------------------------------------------------------

    \70\ North RB, Kidd DH, Farrokhi F, Piantadosi SA. Spinal cord 
stimulation versus repeated lumbosacral spine surgery for chronic 
pain: a randomized, controlled trial. Neurosurgery. 2005;56(1):98-
106; discussion 106-7.
    \71\ Kumar K, Taylor RS, Jacques L, Eldabe S, Meglio M, Molet J, 
et al. Spinal cord stimulation versus conventional medical 
management for neuropathic pain: A multicentre randomised controlled 
trial in patients with failed back surgery syndrome: Pain. 2007 
Nov;132(1):179-88.
    \72\ Kapural L, Yu C, Doust MW, Gliner BE, Vallejo R, Sitzman 
BT, et al. Novel 10-khz high-frequency therapy (HF10 therapy) is 
superior to traditional low-frequency spinal cord stimulation for 
the treatment of chronic back and leg pain: the SENZA-RCT randomized 
controlled trial. Anesthesiology. 2015 Oct;123(4):851-60.
---------------------------------------------------------------------------

    The applicant explained that the Evoke[supreg] study randomized 134 
subjects across 13 investigation sites and that no one site enrolled 
more than 18% of study subjects and no interaction was found in post 
hoc testing between study sites and treatments in the assessment of the 
primary study endpoint (p-value = 0.673). Additionally, the applicant 
explained that the randomization effectively generated directly 
comparable treatment groups. There were no statistically significant 
differences in the comparisons of the baseline characteristics between 
groups (p-value > 0.05). The applicant asserted that, therefore, both 
the multi-center and randomization requirements of this trial were 
effectively fulfilled, which enhances both the internal and external 
validity of the statistical conclusions drawn from this study.
    The applicant stated that patient populations and use of the device 
(including clinical practice and techniques) are similar between 
Australia and the U.S.; and therefore, the results from the Australian 
Avalon study are generalizable to the U.S. population. The applicant 
stated that the baseline characteristics of the patients in the Avalon 
Australian study population were very similar to those of the Evoke 
U.S. study population. The applicant also explained that the national 
medical societies from these geographies are in agreement regarding the 
conditions in which to recommend SCS as a treatment option for chronic 
pain. The clinical study protocols for both the Evoke and Avalon 
studies were designed in accordance with these recommendations. The 
applicant further explained that the U.S. and Australian instructions 
for use (IFU) used in each of these studies followed similar 
procedures, and that study personnel were required to have the 
requisite skills and sufficient experience and to complete training on 
the Evoke system and study procedures to participate in the studies.
    Many commenters stated that they believe the Evoke[supreg] RCT was 
powered adequately (i.e., had sufficient sample size) to detect 
differences in the primary outcome between groups. Many commenters also 
stated that they believe the demographic characteristics of the 
Australian and U.S. populations and uses of the device (including 
clinical practice and techniques) in the two countries are 
substantially similar, and this should not be a concern.
    Response: We appreciate the manufacturer's and other commenters' 
responses to our questions regarding the Evoke[supreg] SCS System. We 
concur with the commenters' inputs that the Evoke[supreg] RCT sample 
size was sufficient to detect differences in the primary outcome 
between study groups. Based on the commenters' inputs, we also agree 
that the results of the Avalon study are generalizable to the U.S. 
population.
    Comment: A competitor stated they do not believe that the 
Evoke[supreg] SCS System has successfully demonstrated substantial 
clinical improvement in relation to existing technologies. As an 
example, the commenter offered a comparison between some of the results 
of the Evoke[supreg] RCT and that of the Senza SCS system RCT. The 
Senza RCT compared a control arm of open-loop low-frequency stimulation 
to a treatment arm of open-loop high frequency 10 kHz stimulation. 
First, the commenter stated that the Evoke[supreg] RCT demonstrated a 
treatment effect for back pain at 3 months of 18.3%, while the Senza 
RCT demonstrated a treatment effect of 38.4%, more than twice that 
shown in the Evoke[supreg] RCT. Second, the commenter stated that while 
the Evoke[supreg] RCT demonstrated a statistically significant 
improvement in the treatment group for back pain, it did not 
demonstrate a statistically significant improvement in leg pain. On the 
other hand, the commenter stated that the Senza RCT demonstrated a 
statistically significant improvement in both back and leg pain.
    Response: We appreciate the commenter's input. We note that the 
treatment effects between the Evoke[supreg] RCT and Senza RCT are not 
directly comparable since those studies were designed to test the 
differences between different mechanisms of SCS (e.g., open-loop versus 
closed-loop and low-frequency versus high-frequency, respectively). 
Further, we note that the commenter only describes treatment effect 
differences at 3 months, while the Evoke RCT has consistently 
demonstrated substantial clinical improvements over 24 months. Last, 
with respect to the commenter's claim that the Evoke[supreg] RCT did 
not demonstrate a statistically significant improvement in leg pain, we 
believe the Evoke[supreg] RCT demonstrated statistically significant 
improvements in both leg pain and overall back and leg pain combined.
    Comment: Many commenters stated that they believe the Evoke[supreg] 
SCS System has demonstrated substantial clinical improvement. The 
commenters pointed out that the Evoke[supreg] RCT was the first to 
compare SCS between traditional open-loop and a novel closed-loop 
system using a highly rigorous study design, and it is one of the only 
double-blind SCS studies with such a substantial follow-up period 
(e.g., follow-ups at 12 months, 24 months, and eventually at 36 
months). The commenters stated that the RCT showed substantial clinical 
improvement in Evoke[supreg] SCS System over the open-loop SCS in terms 
of the overall pain reduction and other patient-reported outcomes. The 
commenters stated that the results of all the cited clinical studies 
demonstrate that use of closed-loop therapy provides an advantage 
compared to use of open-loop therapy, with a clinically meaningful 
reduction in pain for patients who suffer from chronic, intractable 
pain of the trunk and/or limbs. The commenters noted that given that 
currently available systems offer only open-loop therapy, the 
availability of the Evoke[supreg] SCS System provides an important 
clinical benefit over contemporary systems available in the market.
    Response: We appreciate the applicant's and other commenters' 
responses to our questions regarding the Evoke[supreg] SCS System. 
After consideration of the manufacturer's response and the public 
comments received, we believe

[[Page 71924]]

that commenters have addressed our concerns regarding whether the 
Evoke[supreg] SCS System meets the substantial clinical improvement 
criterion and that the Evoke[supreg] SCS System represents a 
substantial clinical improvement over existing technologies based on 
the data received from commenters.
    The third criteria 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 
criteria for device pass-through payment status, a device must pass all 
three tests of the cost criteria 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 criteria, 
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 stated that 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) [middot] 100 = 152.8 percent). 
Therefore, we stated that 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 
stated that we believe that the Evoke[supreg] SCS System meet the third 
cost significance requirement.
    We noted a concern regarding whether the Evoke[supreg] SCS System 
meets all 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 invited public comment on whether the Evoke[supreg] SCS System 
meets the device pass-through payment criteria discussed in this 
section, including the cost criteria for device pass-through payment 
status.
    Comment: The applicant asserted that the Evoke[supreg] SCS System 
meets all the cost criteria required under Sec.  419.66(b)(3). 
Specifically, the applicant stated that the internal, implantable 
components of the Evoke[supreg] SCS System (e.g., the generator and 
charger) meet the cost criteria, while the external components (the 
surgical accessories, clinical interface, clinical system transceiver, 
pocket console and chargers) do not meet the criteria. The applicant 
provided a cost breakdown of the eligible internal components as a 
subset of the entire system: the cost of the implanted generator and 
charger is $32,000, while the additional components included in the 
``system'', i.e., leads, anchors, lead extension, surgical accessories, 
etc. are $5,000.
    Response: We appreciate the applicant's input. As the applicant 
explained in response to our concerns regarding the device eligibility 
criteria specified at Sec.  419.66(b), their request for a new device 
category would only apply to the generator and charger components of 
the Evoke[supreg] SCS System since those are the only components that 
meet the device eligibility criteria. The applicant's clarification 
regarding the cost breakdown of the eligible versus ineligible 
components indicates that cost for just the generator and charger is 
$32,000, while the estimated average cost of the entire Evoke[supreg] 
SCS system is $37,000. When we recalculate the formulas for the three 
cost significance requirements, we find that the eligible Evoke 
components still meet all three cost significance requirements and, 
thus, the cost criteria required under Sec.  419.66(b)(3). After 
consideration of the public comments we received, and consideration of 
the cost criteria, we have determined that the Evoke[supreg] SCS System 
meets the cost criteria for device pass-through payment status.
    After considering the public comments we received and our review of 
the device pass-through application, we have determined that the 
Evoke[supreg] SCS System meets the criteria for device pass-through. 
Therefore, we are finalizing approval for device passthrough payment 
status for the Evoke[supreg] SCS System effective beginning January 1, 
2023.

[[Page 71925]]

(5) Pathfinder[supreg] Endoscope Overtube
    Neptune Medical, Inc. 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 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 solicited public comments on whether the 
Pathfinder[supreg] meets the newness criterion.
    We did not receive public comments in regard to whether the 
Pathfinder[supreg] meets the eligibility criterion at Sec.  
419.66(b)(1). Because we received the Pathfinder[supreg] pass-through 
application on November 30, 2021, which is within 3 years of August 20, 
2019, the date of initial FDA marketing authorization, we agree that 
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 solicited public comments on whether the 
Pathfinder[supreg] meets the eligibility criteria at Sec.  419.66(b).
    We did not receive public comments in regard to whether the 
Pathfinder[supreg] meets the eligibility criteria at Sec.  419.66(b)(3) 
or (4). Based on our review of the application, we agree with the 
applicant that the Pathfinder[supreg] meets the criterion of Sec.  
419.66(b).
    The criterion 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 RigidizationTM. 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 did not appear that there are any existing pass-
through payment categories that might apply to the Pathfinder[supreg]. 
We solicited public comment on whether the Pathfinder[supreg] meets the 
device category criterion.
    We did not receive public comments in regard to whether the 
Pathfinder[supreg] meets the eligibility criterion at Sec.  
419.66(c)(1) and upon review, it does not appear that there are any 
existing pass-through payment categories that might apply to the 
Pathfinder[supreg]. Therefore, we agree with the applicant that the 
Pathfinder[supreg] meets the criterion of Sec.  419.66(c)(1).
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of 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 
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 asserted 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 anastomosis, 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

[[Page 71926]]

and complications from scope looping, the applicant submitted a 
prospective single center study performed over 11 months by two 
endoscopists in the United States.\73\ 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.
---------------------------------------------------------------------------

    \73\ 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 
States.\74\ 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.
---------------------------------------------------------------------------

    \74\ 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,\75\ 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.
---------------------------------------------------------------------------

    \75\ 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 \76\ 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.
---------------------------------------------------------------------------

    \76\ 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 \77\ 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.
---------------------------------------------------------------------------

    \77\ 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.

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

[[Page 71927]]

    A sixth article \78\ 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.
---------------------------------------------------------------------------

    \78\ 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 \79\ 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. 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.
---------------------------------------------------------------------------

    \79\ 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 \80\ 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) \81\ 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.
---------------------------------------------------------------------------

    \80\ 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.
    \81\ 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,\82\ 
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.
---------------------------------------------------------------------------

    \82\ 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 \83\ 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.

[[Page 71928]]

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

    \83\ 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 \84\ 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 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.
---------------------------------------------------------------------------

    \84\ 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 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.\85\ 
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, 
but made no comparison to the use of other existing strategies or 
techniques that could be used for these procedures.\86\ The applicant 
also 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 had a concern that there has not been adequate comparison 
to other available devices used for similar indication. We asked for 
public comment on whether Pathfinder shows superiority over the 
existing devices/methods used in cases of endoscope looping and 
abnormal anatomy.
---------------------------------------------------------------------------

    \85\ 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.
    \86\ 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.
---------------------------------------------------------------------------

    Furthermore, with respect to the two articles 87 88 
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. Finally, we noted that there was 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.
---------------------------------------------------------------------------

    \87\ 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.
    \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.
---------------------------------------------------------------------------

    We invited public comments on whether the Pathfinder[supreg] meets 
the substantial clinical improvement criterion.
    Response: No comments were submitted regarding whether the 
Pathfinder[supreg] meets the substantial clinical improvement 
criterion. As such, we maintain our concerns listed in the CY 2023 
OPPS/ASC proposed rule. Specifically, we are concerned that the 
majority of the articles provided were a clinical case series which did 
not necessarily allow for a clear comparison with common mediation 
strategies. 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, but made no comparison to the use of other existing 
strategies or techniques that could be used for these procedures. We 
noted that while there are other devices available which can help 
assist the Endoscopist in procedures which are difficult to perform and 
the applicant mentioned the existence of such devices, the applicant 
did not provide studies comparing the efficacy of the 
Pathfinder[supreg] with other rigidization devices. Overall, we do not 
believe that there has not been an adequate comparison of the 
Pathfinder[supreg] to other available devices used for similar 
indication. In addition, we remain concerned that all the clinical case 
study series presented in the applicant's articles were based on small 
sample sizes. Moreover, we are concerned that in both articles 
presented to support the

[[Page 71929]]

substantial clinical improvement claim in reducing endoscopists' 
workload during endoscopy procedures, the authorships were identical 
for the same study center and time frame and there were only two 
participating endoscopists. As such, we believe it is difficult to make 
comparisons due to the lack of a diverse pool of endoscopists. 
Furthermore, factors such as center and clinical staff characteristics 
in both studies were difficult to control, which makes it difficult to 
determine if observed differences resulted from the Pathfinder[supreg] 
or from confounding variables. Finally, there was potential for some 
level of selection bias if providers were allowed to select the manner 
and order in which patients were treated, and thereby potentially 
influence outcomes seen in these studies. Because of these reasons, we 
do not believe that the Pathfinder[supreg] represents a substantial 
clinical improvement relative to existing technology currently 
available.
    After our review of the device pass through application, we are not 
approving the Pathfinder[supreg] for transitional pass-through payment 
status in CY 2023 because the technology does not meet the substantial 
clinical improvement criterion. Because we have determined that the 
Pathfinder[supreg] does not meet the substantial clinical improvement 
criterion, we are not evaluating whether the device meets the cost 
criterion.
(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 Uretero1TM 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 Uretero1TM 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 solicited public comments on whether 
the Uretero1 meets the newness criterion.
    We did not receive public comments in regard to whether the 
Uretero1 meets the newness criterion at Sec.  419.66(b)(1). Because we 
received the Uretero1 pass-through application on March 1, 2022, which 
is within 3 years of November 23, 2021, the date of FDA 510(k) approval 
to market the Uretero1, we have concluded that 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 
tissue when it is inserted to visualize organs, cavities, and canals in 
the urinary tract.83 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

[[Page 71930]]

incident to a service. We solicited public comments on whether the 
Uretero1 meets the eligibility criterion at Sec.  419.66(b).
    We did not receive any comments on whether the Uretero1 meets the 
eligibility criteria at Sec.  419.66(b)(3) or (4). We agree with the 
applicant that the Uretero1 device meets the criteria of Sec.  
419.66(b)(3) and (4).
    The criteria for establishing new device categories are specified 
at Sec.  419.66(c). The first criterion, at Sec.  419.66(c)(1), 
provides that CMS determines that 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.\84\ 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 solicited 
public comment on whether the Uretero1 meets the device category 
criterion.
    We did not receive any comments on whether the Uretero1 meets the 
criterion for establishing new device categories specified at Sec.  
419.66(c)(1). However, we agree that there is no existing pass-through 
payment category that appropriately describes the Uretero1. The 
Uretero1 is a single use, disposable, digital flexible ureteroscope 
that may be used in urologic procedures (ureteroscopy) to diagnose and 
treat conditions of the urinary tract. Therefore, the existing pass-
through code for a single-use, disposable, endoscopic device for GI 
imaging does not apply. Based on this information, we have determined 
that the Uretero1 meets the eligibility criterion at Sec.  
419.66(c)(1).
    The second criterion for establishing a device category, at Sec.  
419.66(c)(2), provides that CMS determines either of the following: (i) 
that a device to be included in the category has demonstrated that it 
will substantially improve the diagnosis or treatment of an illness or 
injury or improve the functioning of a malformed body part compared to 
the benefits of a device or devices in a previously established 
category or other available treatment; or (ii) for devices for which 
pass-through status will begin on or after January 1, 2020, as an 
alternative to the substantial clinical improvement criterion, the 
device is part of 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.\85\ 
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.\86\ 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.
    Another article included in the literature review by Ofstead et 
al.\87\ describes the risks associated with inefficient processing of 
reusable ureteroscopes using a time-driven activity-based costing 
(TDABC).\88\ This article, by Isaacson et al. (2017), notes the time 
and costs involved in the decontamination and sterilization processes 
of reusable flexible ureteroscopes.\89\ 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' 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.
    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.\90\ In the 
letter, FDA confirms it has received over 450 Medical Device Reports 
(MDRs)

[[Page 71931]]

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.\91\ 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.\92\
    To support its second claim that the Uretero1 reduces risk of 
contamination, the applicant again cited the literature review by 
Ofstead et al.\93\ Referencing the article by Lee et al., titled 
``Increasing potential risks of contamination from repetitive use of 
endoscope,'' \94\ 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.
    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.\95\ 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.\96\ 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.\97\ 
The Uretero1 device was not included as a comparison in this study 
either.
    The applicant referred to a study by Bozzini et al.\98\ 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).
    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.\99\ 
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 were cultured and 
visually inspected after they had been cleaned and sterilized with 
hydrogen peroxide gas.\100\ 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.\101\ 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.\102\ 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.
    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.\103\
    In summary, the applicant references these citations to support its 
assertions that the Uretero1 single-use disposable digital flexible 
ureteroscope presents a substantial clinical improvement over existing 
devices. We noted 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 included 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 
welcomed additional evidence demonstrating a comparison of

[[Page 71932]]

the Uretero1's performance against other similarly disposable devices. 
We also noted that the applicant cited an FDA news release \104\ 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 \105\ 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.
    We solicited public comments on whether the Uretero1 meets the 
substantial clinical improvement criterion.
    We did not receive any comments in regard to the second criterion 
for establishing a device category as specified at Sec.  419.66(c)(2), 
or a response to our concern about a direct comparison to another 
disposable device. The applicant provided source articles that 
demonstrated the increased risks associated with using reusable 
devices, but did not provide clinical studies that referenced another 
disposable device as a comparator. While we agree that it would be 
helpful to see comparative studies between the single-use Uretero1 
device and other disposable devices, we agree that the evidence 
demonstrating the improved patient outcomes and reduced patient risk 
associated with the disposable device in comparison with reusable 
devices represents substantial clinical improvement.
    The third criteria 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 56.
BILLING CODE 4120-01-P

[[Page 71933]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.072

BILLING CODE 4120-01-C
    To meet the cost criteria for device pass-through payment status, a 
device must pass all three tests of the cost criteria 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 criteria, 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 
Uretero1 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

[[Page 71934]]

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 $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 solicited public comment on whether the Uretero1 meets the 
device pass-through payment criteria discussed in this section, 
including the cost criteria for device pass-through payment status.
    We did not receive any comments with regard to any of the cost 
significance requirements specified at Sec.  419.66(d). Based on our 
findings from the first, second, and third cost significant tests, we 
believe that the Uretero1 device meets the cost significance criteria 
specified at Sec.  419.66(d).
    After reviewing the device pass-through application, we have 
determined that the Uretero1 single-use flexible disposable digital 
flexible ureteroscope meets the criteria for device pass-through. 
Therefore, we are approving the Uretero1 for transitional pass-through 
payment status beginning January 1, 2023.

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

    As noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44620), 
applicants seeking OPPS transitional pass-through status for medical 
devices (``OPPS device pass-through'') must submit an application to 
CMS containing certain information.\89\ The application is currently 
undergoing the Paperwork Reduction Act reapproval process, which has 
notice and comment periods separate from the CY 2023 OPPS/ASC proposed 
rule. The CMS-10052 package 60-day notice was published in the Federal 
Register on April 29, 2022 (87 FR 25488). The CMS-10052 package 30-day 
Federal Register Notice was published on July 15, 2022 (87 FR 42484), 
and was submitted to OMB on July 18, 2022, as an extension with no 
changes. 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.
---------------------------------------------------------------------------

    \89\ 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 CY 2023 OPPS/ASC proposed rule, we stated that 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. We further stated in the proposed rule that, 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,

[[Page 71935]]

we explained that 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 stated that we 
believe 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 stated in the proposed rule that we believe 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. We further explained that 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 applications we receive have been increasing over 
time. That is, making the applications available to the public online 
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 proposed to publicly post future applications for OPPS 
device pass-through payment online.\90\ Specifically, beginning with 
applications submitted on or after March 2, 2023, we proposed 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 proposed to post online information 
acquired subsequent to the application submission (e.g., updated 
application information, additional clinical studies, etc.). We 
proposed that we would publicly post all completed application forms 
and related materials at the same time that the proposed rule was 
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 did not propose 
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.
---------------------------------------------------------------------------

    \90\ CMS did not propose 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 proposed 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 proposed 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 solicited public comments on 
this proposal.
    We noted in the CY 2023 OPPS/ASC proposed rule that at times 
applicants furnish information marked as proprietary or trade secret 
information along with their applications for OPPS device pass-through 
payment. We explained that, 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.\91\ Consistent with the current application 
instructions, we noted that 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 
emphasized, however, that it is the applicant's responsibility to 
clearly identify data and information as such in its application.
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    \91\ 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.
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    Additionally, we noted 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 reiterated 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. As we stated in the CY 2023 OPPS/ASC proposed rule, 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. We explained that our 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 stated that we did not expect our 
proposal would place additional burdens on future applicants because we 
did not propose 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 in the CY 2023 OPPS/ASC proposed rule and throughout this 
section, the aim of our 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 stated that 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 explained that we would, 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 stated that 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. We 
further stated that, 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

[[Page 71936]]

medical device, and the nature of the supporting materials provided). 
We explained that 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 added that 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 
stated that 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. We stated that in the proposed rule, we would also 
continue to provide discussion of the concerns or issues we identified 
with respect to applications submitted, and 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 in the CY 2023 OPPS/ASC proposed rule and this final 
rule, we believe the proposal to 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 further noted in the CY 2023 OPPS/ASC proposed rule that if we 
adopted this proposal in the final rule, we would begin referring to 
publicly posted applications in the CY 2024 rulemaking cycle, depending 
on when they are received. We explained that this would mean 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. We stated that 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. We further stated that 
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 
with summaries and cross-references to the publicly posted 
applications, depending on when the application was submitted). We 
stated that 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 solicited 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. We stated that 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 noted 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. 
We explained that our goal in making these proposals under both the 
hospital OPPS and IPPS was 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 sought 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, or in the alternative, March 1, 
2023.
    Comment: We received several public comments regarding this policy 
proposal. Some commenters were fully supportive of the proposal. These 
commenters cited various reasons for their support, including that the 
proposal would enhance the transparency of the application evaluation 
process, streamline CMS' internal processes for reviewing and 
evaluating applications, and facilitate and foster more informed public 
comment and greater engagement from interested parties. A commenter 
specifically expressed appreciation for CMS' efforts to keep 
confidential and trade secret information private, provided the 
applicant clearly marks the information as such. Another commenter who 
supported the proposal requested that CMS make clear in the final rule, 
if it moves forward with its proposal, that it will retain a mechanism 
to enable applicants to submit proprietary or trade secret information 
that is not posted online, consistent with CMS' current policy.
    Finally, a commenter noted its appreciation for the improvements to 
the NTAP application posting process incorporated in the FY 2023 IPPS/
LTCH PPS final rule, and further stated that it appreciated that CMS 
reflected these improvements in the proposed OPPS pass-through payment 
application posting process in the CY 2023 OPPS/ASC proposed rule. This 
commenter expressed its general support of the OPPS transitional pass-
through payment policy, stating that it represents a significant 
success for the Medicare program. According to the commenter, the 
policy has helped reduce disincentives to the adoption of new 
technologies under the OPPS, and has accelerated access to those 
technologies for Medicare beneficiaries and encouraged investment in 
the development of innovative new products and therapies. This 
commenter further stated that it appreciates the significant effort and 
resources that CMS has dedicated to the management of the transitional 
pass-through payment program, and hopes the agency will proceed on any 
reasonable steps to improve the efficiency and capacity of the 
application and review process.
    Response: We appreciate the commenters' support for our proposal 
and our efforts toward greater transparency, public input, and 
improving and streamlining the device pass-through application process, 
as well as the support for our device pass-through payment policy 
generally. Given this support, and after further consideration of the 
proposal and feedback from other commenters, as

[[Page 71937]]

further discussed below, we are finalizing our proposal to post 
completed OPPS device pass-through applications and related materials 
online, with a modified effective date. We note that under the policy 
we are finalizing in this rule, we will provide a mechanism for 
applicants to submit confidential information, including proprietary or 
trade secret information that will not be posted online, as discussed 
later in this section.
    Comment: Some commenters urged CMS not to adopt the proposal, 
asserting that applicants may have proprietary and trade-sensitive 
information that, while appropriate to share with CMS for purposes of 
submission of a device pass-through application, may not be appropriate 
to share with the public or competitors. These commenters believed that 
the proposal may lead to a lack of rigorous information sharing between 
applicants and CMS, and that such transparency should be of primary 
concern to the agency as it reviews such applications to determine 
eligibility. These commenters asserted that public posting is unlikely 
to benefit Medicare patients, but is likely to impose additional legal 
and commercial burdens on innovators without benefit for the Medicare 
program.
    Another commenter stated that while it appreciates the effort to 
provide more information to the public for input to inform pass-through 
status decisions, they strongly believed that CMS' policy proposal 
poses more risk than benefit to medical product innovation. First, the 
commenter explained that pass-through applications contain a 
significant amount of proprietary information and data, and that the 
protection of this data is paramount to the research and development 
process for medical devices and other innovative products, including 
drugs and biologics. The commenter stated that although CMS notes that 
it is incumbent on applicants to indicate which components are 
considered confidential or proprietary, the commenter believed that 
public posting of these applications introduces an opportunity for 
irreversible and unintentional disclosure that is not present under the 
current process. The commenter also pointed to CMS' statement in the 
proposed rule (87 FR 44621) that, due to the need for public feedback, 
it would not be able to consider applications where the applicant deems 
the entirety of the submission to be proprietary or confidential for 
uses beyond internal agency review. The commenter claimed that 
determinations about the proprietary nature of information for purposes 
of public disclosure are beyond the scope of the CMS' authority, 
particularly when there is no clarity on what information CMS deems 
necessary for public feedback. The commenter asserted that 
manufacturers should retain discretion over what information is 
disclosed beyond the reviewing agency. The commenter further stated 
that the current approach that CMS uses to summarize, evaluate, and 
notify the public of its pass-through status determinations has proven 
adequate, and that CMS has used the notice and comment rulemaking 
process to collect public feedback on pass-through applications since 
2016 without issue. The commenter added that should CMS find it 
necessary to provide additional information to the public, it should 
work coordinately with applicants to determine what is appropriate to 
disclose.
    According to this commenter, the impact of publicly posting 
applications and supplemental material for pass-through status is 
likely to undermine the intent of transitional pass-through payment. 
The commenter asserted that, as demonstrated by its established 
success, the current process protects the interests of developers 
assuming the substantial risk of medical product innovation, while 
still allowing CMS to collect sufficient information to inform the 
public and solicit feedback. The commenter urged CMS to not finalize 
this policy and to protect the integrity of this vital means of 
allowing providers to adopt new medical products while lowering costs 
and improving health outcomes.
    Response: We appreciate the commenters' feedback. As discussed in 
the proposed rule, under our current OPPS device pass-through 
application review process, we will have a mechanism for applicants to 
submit confidential information, including proprietary and trade secret 
information, that will not be posted online. We anticipate providing a 
section on the application where applicants can submit confidential 
information separately from non-confidential information, or otherwise 
mark sections of the application for which we will not pose the 
information online. The OPPS device pass-through application existing 
instructions specify that the data provided in the application may be 
subject to disclosure and instructs the applicant to mark any 
proprietary or trade secret information so CMS can attempt, to the 
extent allowed under Federal law, to protect the information from 
public view. Consistent with our current policy, and under the policy 
we are finalizing in this rule, if an applicant submits confidential 
information as part of its application and identifies it as such, we 
will attempt, to the extent allowed by Federal law, to keep this 
information from public view, including public posting. We anticipate 
providing a section on the application where applicants can submit 
confidential information separately from non-confidential information, 
or otherwise marking sections or questions in the application for which 
we will not post the information online. Applicants should expect that, 
unless otherwise noted in the application that certain information will 
not be posted publicly (for example, contact information), everything 
may be posted publicly. We emphasize that it is the applicant's 
responsibility to put confidential information only in the areas of the 
application designated for confidential information and not elsewhere 
in the application. However, as previously noted, applicants should 
consider what they include in a confidential section of the application 
given that we generally do not consider any information that cannot be 
made public when determining whether a device meets the pass-through 
payment criteria. We note that, unlike the New Technology Add-on 
Payment (NTAP) applications, we believe applicants generally have 
limited need to submit confidential information, including proprietary 
or trade secret information as part of their OPPS device pass-through 
payment applications, given that a device must have FDA clearance or 
approval prior to the date of application. Because of this, and because 
the policy we are finalizing in this rule provides for protection of 
confidential information submitted as part of an application provided 
it is identified as such, we do not believe the policy would result 
lack of rigorous information sharing between applicants and CMS, or 
impose additional legal or commercial burdens on innovators, as 
suggested by a commenter.
    Additionally, we note that in the past we have received 
applications in which all the data and information in the application 
are marked as proprietary or confidential, or where certain information 
provided in support of the applicant's assertions regarding eligibility 
for pass-through payment status, for example a claim of substantial 
clinical improvement, is marked as such. In such cases, we reiterate 
that we generally will 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

[[Page 71938]]

is important that we provide the information needed for the public to 
meaningfully comment on the OPPS device pass-through payment 
applications, including the applicants' claims about meeting the OPPS 
device pass-through payment criteria. We believe that maintaining 
transparency with respect to the information we consider in making our 
device pass-through payment determinations will lead to greater 
information exchange and more informed device pass-through payment 
decisions which help to ensure appropriate payment for and access to 
new and innovative medical devices and technologies, ultimately 
benefiting Medicare patients and the Medicare program generally.
    In addition, because we will continue to allow applicants to 
identify information they consider confidential, including proprietary 
and trade secret information, so that it may be protected from public 
view, including public posting, we do not believe public posting of 
applications introduces an opportunity for irreversible and 
unintentional disclosure, or undermines the interests of developers or 
the intent of the OPPS device pass-through payment program, as claimed 
by a commenter. Furthermore, we emphasize that under our current policy 
as well as the policy we are finalizing in this rule, CMS does not make 
determinations about the proprietary nature of information for purposes 
of public disclosure. Instead, as explained previously, applicants make 
these determinations by identifying which information is appropriate to 
disclose publicly and which information is confidential and should not 
be disclosed. Thus, the applicants, not CMS, retain discretion to 
determine what information can be publicly disclosed.
    After considering the comments and for the reasons discussed, we 
are finalizing our proposal to publicly post OPPS device pass-through 
applications online, including the completed application forms and 
certain related materials (as described previously), and any additional 
updated application information submitted subsequent to the initial 
application submission (except information identified by the applicant 
as confidential), at the time the proposed rule is issued. In addition, 
we are finalizing, as proposed, a mechanism for applicants to submit 
confidential information that would not be posted online, such as in a 
separate section of the application, or by identifying particular 
questions for which the information submitted would not be publicly 
posted. Furthermore, we are finalizing as proposed our proposal with 
respect to the treatment of copyrighted information. With the exception 
of information included in a confidential information section of the 
application, and materials identified by the applicant as copyrighted 
and/or not otherwise releasable to the public, the contents of the 
application and related materials may be posted publicly.
    In the CY 2023 OPPS/ASC proposed rule, we proposed that this policy 
would apply to applications submitted on or after January 1, 2023; 
however, we also solicited comment on whether we should consider an 
alternative implementation date of March 1, 2023. We did not receive 
any comments regarding the implementation date of this policy, however, 
after further consideration, we are finalizing the alternative 
implementation date of March 1, 2023. As we explained in the proposed 
rule, if we were to finalize our proposal with an effective date of 
January 1, 2023, we would begin referring to publicly posted 
applications in the CY 2024 rulemaking cycle, depending on when 
applications are received. This would mean that some OPPS device pass-
through applications (those received on or before December 31, 2022) 
would follow the current process and be described fully in the proposed 
rule consistent with our historical practice (unless they elect to have 
their applications publicly posted), and other OPPS device pass-through 
applications (those received after the effective date of January 1, 
2023) would be summarized in the proposed rule with a cross-reference 
to the publicly posted application, consistent with our new policy. 
Thus, if our policy were effective January 1, 2023, device pass-through 
applications could be discussed in two different ways in the CY 2024 
proposed and final rules. We believe that this would be confusing to 
applicants and interested parties. Therefore, we are finalizing the 
alternative implementation date of March 1, 2023. Using this 
alternative effective date, we will begin publicly posting all OPPS 
device pass-through applications summarized with a cross-reference to 
the publicly posted application, as previously described beginning in 
the CY 2025 proposed and final rules consistent with our final policy. 
As noted in the proposed rule, this means that all OPPS device pass-
through applications discussed in the CY 2024 OPPS proposed and final 
rules will follow the current process and will be fully described in 
the proposed rule consistent with our historical practice.. We further 
clarify that we will post these application materials at the time the 
proposed rule is issued, and that we will not post applications that 
are withdrawn prior to the date the proposed rule is issued.

C. 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 final rule with comment period. A 
related device policy was the requirement that certain procedures 
assigned to device-intensive APCs require the reporting of a device 
code on the claim (80 FR 70422) and is discussed in detail in section 
IV.B.3 of this final rule with comment period. 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

[[Page 71939]]

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.C.1.b of the CY 2023 OPPS/ASC proposed rule (87 FR 44622 
through 44623) 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.C.3 and IV.C.4 of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44624 through 44625).
b. Use of the Three Criteria To Designate Device-Intensive Procedures
    We clarified our established policy in the CY 2018 OPPS/ASC final 
rule with comment period (82 FR 52474), where we explained that device-
intensive procedures require the implantation of a device and 
additionally are subject to the following criteria:
     All procedures must involve implantable devices that would 
be reported if device insertion procedures were performed;
     The required devices must be surgically inserted or 
implanted devices that remain in the patient's body after the 
conclusion of the procedure (at least temporarily); and
     The device offset amount must be significant, which is 
defined as exceeding 40 percent of the procedure's mean cost.
    We changed our policy to apply these three criteria to determine 
whether procedures qualify as device-intensive in the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66926), where we stated that we 
would apply the no cost/full credit and partial credit device policy--
which includes the three criteria listed previously--to all device-
intensive procedures beginning in CY 2015. We reiterated this position 
in the CY 2016 OPPS/ASC final rule with comment period (80 FR 70424), 
where we explained that we were finalizing our proposal to continue 
using the three criteria established in the CY 2007 OPPS/ASC final rule 
with comment period for determining the APCs to which the CY 2016 
device intensive policy will apply. Under the policies we adopted in 
CYs 2015, 2016, and 2017, all procedures that require the implantation 
of a device and meet the previously described criteria are assigned 
device-intensive status, regardless of their APC placement.
2. Device-Intensive Procedure Policy for CY 2019 and Subsequent Years
    As part of our effort to better capture costs for procedures with 
significant device costs, in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58944 through 58948), for CY 2019, we modified 
our criteria for device-intensive procedures. We had heard from 
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

[[Page 71940]]

comment period (81 FR 79658), we finalized a policy for CY 2017 to 
apply device-intensive status with a default device offset set at 41 
percent for new HCPCS codes describing procedures requiring the 
implantation or insertion of a device that did not yet have associated 
claims data until claims data are available to establish the HCPCS 
code-level device offset for the procedures. This default device offset 
amount of 41 percent was not calculated from claims data; instead, it 
was applied as a default until claims data were available upon which to 
calculate an actual device offset for the new code. The purpose of 
applying the 41-percent default device offset to new codes that 
describe procedures that implant or insert devices was to ensure ASC 
access for new procedures until claims data become available.
    As discussed in the CY 2019 OPPS/ASC proposed rule and final rule 
with comment period (83 FR 37108 through 37109 and 58945 through 58946, 
respectively), in accordance with our policy stated previously to lower 
the device offset percentage threshold for procedures to qualify as 
device-intensive from greater than 40 percent to greater than 30 
percent, for CY 2019 and subsequent years, we modified this policy to 
apply a 31-percent default device offset to new HCPCS codes describing 
procedures requiring the implantation of a device that do not yet have 
associated claims data until claims data are available to establish the 
HCPCS code-level device offset for the procedures. In conjunction with 
the policy to lower the default device offset from 41 percent to 31 
percent, we continued our current policy of, in certain rare instances 
(for example, in the case of a very expensive implantable device), 
temporarily assigning a higher offset percentage if warranted by 
additional information such as pricing data from a device manufacturer 
(81 FR 79658). Once claims data are available for a new procedure 
requiring the implantation 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 proposed to use CY 2021 claims information for determining 
device offset percentages and assigning device-intensive status.
    Comment: Many commenters requested that we use invoice or cost data 
submitted by manufacturers to determine device-intensive status and the 
device offset percentage for a procedure. Other commenters requested 
that we use invoice data, or a subset of claims data, to determine 
device-intensive status for the procedure and that hospitals have 
inaccurately coded devices as surgical supplies and, therefore, the 
device offset percentage calculated from our claims statistics does not 
reflect the true cost of the device. Specifically, commenters requested 
that we assign device-

[[Page 71941]]

intensive status to the following procedures:
     HCPCS code C9757 (Laminotomy (hemilaminectomy), with 
decompression of nerve root(s), including partial facetectomy, 
foraminotomy and excision of herniated intervertebral disc, and repair 
of annular defect with implantation of bone anchored annular closure 
device, including annular defect measurement, alignment and sizing 
assessment, and image guidance; 1 interspace, lumbar);
     CPT code 55880 (Ablation of malignant prostate tissue, 
transrectal, with high intensity-focused ultrasound (hifu), including 
ultrasound guidance);
     CPT code 58674 (Laparoscopy, surgical, ablation of uterine 
fibroid(s) including intraoperative ultrasound guidance and monitoring, 
radiofrequency);
     CPT code 65426 (Excision or transposition of pterygium; 
with graft);
     CPT code 65778 (Placement of amniotic membrane on the 
ocular surface; without sutures).
    Response: We are not accepting the commenters' recommendation to 
use invoices as an alternative data source for determining device-
intensive status for procedures that do not have a device offset 
percentage that exceeds our 30 percent device-intensive threshold based 
on claims data available for this final rule with comment period. As 
discussed in section II.A.1 of this final rule with comment period, we 
rely on claims and cost report data for hospital outpatient department 
services, using the most recent available data to construct our 
database. Under our current policy, hospitals are still expected to 
adhere to the guidelines of correct coding and append the correct 
device code to the claim when applicable and we believe our database 
represents the best source of device cost information available to us. 
We do not believe it would be appropriate under our current policy to 
eliminate in whole or in part the available claims data that we have 
for ratesetting and determining device offset percentages.
    Comment: One commenter recommended that we assign the device offset 
percentage of CPT code 0627T (Percutaneous injection of allogeneic 
cellular and/or tissue-based product, intervertebral disc, unilateral 
or bilateral injection, with fluoroscopic guidance, lumbar; first 
level) to 0629T (Percutaneous injection of allogeneic cellular and/or 
tissue-based product, intervertebral disc, unilateral or bilateral 
injection, with ct guidance, lumbar; first level) as both procedures 
use the same device.
    Response: For the CY 2023 OPPS/ASC proposed rule and this final 
rule with comment period, we do not have any claims data for CPT code 
0629T to determine a device offset percentage. Under our current 
policy, we may assign an alternative device offset percentage if we 
have claims data from a clinically similar procedure code that uses the 
same device. We agree with commenters that this policy can apply to CPT 
code 0629T. CPT code 0629T is clinically similar to CPT code 0627T and 
uses the same device as this procedure. Therefore, we are accepting the 
commenter's recommendation and, for CY 2023, we are assigning the 
device offset percentage of CPT code 0627T to CPT code 0629T and 
assigning CPT code 0629T device-intensive status.
    Comment: One commenter requested that we verify that the device 
costs associated with CPT code 0421T (Transurethral waterjet ablation 
of prostate, including control of post-operative bleeding, including 
ultrasound guidance, complete (vasectomy, meatotomy, cystourethroscopy, 
urethral calibration and/or dilation, and internal urethrotomy are 
included when performed)) include the cost of the pass-through device 
category HCPCS code C2596 (Probe, image-guided, robotic, waterjet 
ablation) which is expiring on January 1, 2023.
    Response: We reviewed our device categories used to determine 
device offset percentages for this final rule with comment period and 
verified that HCPCS code C2596 is indeed categorized as a device. The 
costs associated with this device are reflected in the device offset 
percentage of CPT code 0421T.
    Comment: One commenter stated that, while CMS changed the 
descriptor to HCPCS code C1889 (Implantable/insertable device, not 
otherwise classified), confusion continues to exist among hospitals, as 
evidenced by their reluctance to use HCPCS C1889 to report device costs 
for procedures that do not have device-intensive status. The commenter 
requested that CMS clarify that HCPCS code C1889 may be billed with a 
procedure that does not have device-intensive status.
    Response: HCPCS code C1889 may be billed with a procedure that does 
not have device-intensive status. In the CY 2019 OPPS/ASC final rule 
with comment period (83 FR 58950), we finalized our revision to the 
HCPCS C1889 to remove the specific applicability to device-intensive 
procedures to clarify this point. Additionally, in our April 2022 
update of the Hospital Outpatient Prospective Payment System, we 
revised Chapter 4, Section 61.1 of the Medicare Claims Processing 
Manual to clarify that hospitals should report HCPCS code C1889 for the 
use of devices that are not described by a specific HCPCS code. We will 
continue to monitor stakeholder feedback regarding the use of HCPCS 
code C1889 to determine if additional guidance is needed.
    After consideration of the public comments we received, we are 
finalizing our proposal to use CY 2021 claims information for 
determining device offset percentages and assigning device-intensive 
status.
    The full listing of the final CY 2023 device-intensive procedures 
can be found in Addendum P to the CY 2023 OPPS/ASC final rule with 
comment period (which is available via the internet on the CMS 
website). Further, our claims accounting narrative contains a 
description of our device offset percentage calculation. Our claims 
accounting narrative for this final rule with comment period can be 
found under supporting documentation for the CY 2023 OPPS/ASC final 
rule on our website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
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

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device-intensive procedures. For CY 2017 and subsequent years, we also 
specified that any device code, when reported on a claim with a device-
intensive procedure, will satisfy the edit. In addition, we created 
HCPCS code C1889 to recognize devices furnished during a device-
intensive procedure that are not described by a specific Level II HCPCS 
Category C-code. Reporting HCPCS code C1889 with a device-intensive 
procedure will satisfy the edit requiring a device code to be reported 
on a claim with a device-intensive procedure. In the CY 2019 OPPS/ASC 
final rule with comment period, we revised the description of HCPCS 
code C1889 to remove the specific applicability to device-intensive 
procedures (83 FR 58950). For CY 2019 and subsequent years, the 
description of HCPCS code C1889 is ``Implantable/insertable device, not 
otherwise classified''.
    Comment: Some commenters requested that CMS restore the device-to-
procedure and procedure-to-device edits. Commenters recommended that we 
apply such edits to specific procedures, such as total hip arthroplasty 
or total knee arthroplasty procedures, and require a specific device 
code rather than any device code.
    Response: As we stated in the CY 2015 OPPS/ASC final rule with 
comment period (79 FR 66794), we continue to believe that the 
elimination of device-to-procedure edits and procedure-to-device edits 
is appropriate due to the experience hospitals now have in coding and 
reporting these claims fully. Under our current policy, hospitals are 
still expected to adhere to the guidelines of correct coding and append 
the correct device code to the claim when applicable. While we believe 
our current device edits policy, which requires that a device code be 
reported on a claim for procedures that have significant device costs, 
continues to accurately capture the device costs associated with 
device-intensive procedures and provides the necessary flexibility to 
hospitals to code claims accurately, we will continue to monitor the 
reporting of device costs on hospital outpatient claims to determine if 
any modifications to our existing policy are warranted in future 
rulemaking.
    We did not propose any changes this policy for CY 2023. After 
consideration of the public comments we received, we are finalizing our 
proposal, without modification, to continue our device edits 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

[[Page 71943]]

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 did not propose any changes and we did not receive any public 
comments related to our policies regarding payment for no cost/full 
credit and partial credit devices for CY 2023.

V. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals. Throughout 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 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 the proposed rule (which are available on 
the CMS website).\92\
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    Section 1833(t)(6)(D)(i) of the Act specifies that the pass-through 
payment amount, in the case of a drug or biological, is the amount by 
which the amount determined under section 1842(o) of the Act for the 
drug or biological exceeds the portion of the otherwise applicable 
Medicare OPD fee schedule that the Secretary determines is associated 
with the drug or biological. The methodology for determining the pass-
through payment amount is set forth in regulations at 42 CFR 419.64. 
These regulations specify that the pass-through payment equals the 
amount determined under section 1842(o) of the Act minus the portion of 
the APC payment that CMS determines is associated with the drug or 
biological.
    Section 1847A of the Act establishes the average sales price (ASP) 
methodology, which is used for payment for drugs and biologicals 
described in section 1842(o)(1)(C) of the Act furnished on or after 
January 1, 2005. The ASP methodology, as applied under the OPPS, uses 
several sources of data as a basis for payment, including the ASP, the 
wholesale acquisition cost (WAC), and the average wholesale price 
(AWP). In the proposed rule, the term ``ASP methodology'' and ``ASP-
based'' are inclusive of all data sources and methodologies described 
therein. Additional information on the ASP methodology can be found on 
our website at: https://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 57. Most of these drugs and biologicals 
will have received OPPS pass-through payment for 3 years during the 
period of January 1, 2019 through

[[Page 71944]]

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 was proposed to be $135 for CY 2023), as discussed 
further in section V.B.1 of the CY 2023 OPPS/ASC proposed rule (87 FR 
44641 to 44643)). If the estimated per day cost for the drug or 
biological is less than or equal to the applicable OPPS drug packaging 
threshold, we would package payment for the drug or biological into the 
payment for the associated procedure in the upcoming calendar year. If 
the estimated per day cost of the drug or biological is greater than 
the OPPS drug packaging threshold, we proposed to provide separate 
payment at the applicable ASP-based payment amount (which is proposed 
at ASP plus 6 percent for CY 2023 and subsequent years), as discussed 
further in section V.B.2 of the CY 2023 OPPS/ASC proposed rule (87 FR 
44645).
    Comment: We received many comments specific to providing additional 
quarters of separate payments for drugs and biologicals whose pass-
through payment status will expire between December 31, 2022, and 
December 31, 2023.
    Response: We refer readers to section IV of this CY 2023 OPPS/ASC 
final rule with comment period for a full discussion of the comments 
and CMS's final decision not to provide any additional quarters of 
separate payment for any drug, biological, or device category whose 
pass-through payment status will expire between December 31, 2022, and 
December 31, 2023. Refer to Table 57 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 the CY 2023 OPPS/
ASC final rule with comment period (which is available on the CMS 
website).
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4. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through 
Payment Status Expiring in CY 2023
    We proposed 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 of the CY 2023 OPPS/
ASC proposed rule (87 FR 44632 through 44636). 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'' 
(Pass-Through Drugs and Biologicals) in Addenda A and B to the CY 2023 
OPPS/ASC proposed rule (which are available on the CMS website).\93\ 
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 of 
the CY 2023 OPPS/ASC proposed rule (87 FR 44632 through 44636).
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    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 proposed to continue to pay for 
pass-through drugs and biologicals at ASP plus 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 plus 6 percent. Therefore, we proposed 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 plus 6 percent, and the portion of the otherwise applicable OPD 
fee schedule that the Secretary determines is appropriate, which is 
also proposed at ASP plus 6 percent, is $0.
    In the case of policy-packaged drugs (which include the following: 
anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents, diagnostic radiopharmaceuticals, and stress 
agents); and drugs and biologicals that function as supplies when used 
in a surgical procedure), we proposed that their pass-through payment 
amount would be equal to ASP plus 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 the CY 2023 OPPS/ASC proposed rule (87 
FR 44641). We proposed this policy because, if not for the pass-through 
payment status of these policy-packaged products, payment for these 
products would be packaged into the associated procedure and therefore, 
there are associated OPD fee schedule amounts for them.
    We proposed 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 proposed 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 proposed to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which is proposed at ASP plus 
6 percent. If ASP data are not available for a radiopharmaceutical, we 
proposed to provide pass-through payment at WAC plus 3 percent 
(consistent with our proposed policy in section V.B.2.b of the CY 2023 
OPPS/ASC proposed rule (87 FR 44637)), the equivalent payment provided 
for pass-through drugs and biologicals without ASP information. 
Additional detail on the WAC plus 3 percent payment policy can be found 
in section V.B.2.b of the CY 2023 OPPS/ASC proposed rule (87 FR 44641). 
If WAC information also is not available, we proposed to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP. We refer readers to Table 58 below for the list of 
drugs and biologicals with pass-through payment status expiring during 
CY 2023.

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5. Drugs, Biologicals, and Radiopharmaceuticals With Pass-Through 
Payment Status Continuing in CY 2023
    We proposed to continue pass-through payment status in CY 2023 for 
49 drugs and biologicals. These drugs and biologicals, which were 
approved for pass-through payment status with effective dates beginning 
between April 1, 2021 and October 1, 2022, are listed in Table 59. 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 the CY 2023 OPPS/
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    Section 1833(t)(6)(D)(i) of the Act sets the amount of pass-through 
payment for pass-through drugs and biologicals (the

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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 proposed to 
continue to pay for pass-through drugs and biologicals at ASP plus 6 
percent, equivalent to the payment rate these drugs and biologicals 
would receive in the physician's office setting in CY 2023. We proposed 
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 plus 6 percent, and the portion of the otherwise 
applicable OPD fee schedule that the Secretary determines is 
appropriate, which is proposed at ASP plus 6 percent, is $0.
    In the case of policy-packaged drugs (which include the following: 
anesthesia drugs; drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure 
(including contrast agents, diagnostic radiopharmaceuticals, and stress 
agents); and drugs and biologicals that function as supplies when used 
in a surgical procedure), we proposed that their pass-through payment 
amount would be equal to ASP plus 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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44641). We proposed this policy because, if not 
for the pass-through payment status of these policy-packaged products, 
payment for these products would be packaged into the associated 
procedure and therefore, there are associated OPD fee schedule amounts 
for them.
    We proposed 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 proposed 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 proposed to follow the standard ASP 
methodology to determine the pass-through payment rate that drugs 
receive under section 1842(o) of the Act, which is proposed at ASP plus 
6 percent. If ASP data are not available for a radiopharmaceutical, we 
proposed to provide pass-through payment at WAC plus 3 percent 
(consistent with our proposed policy in section V.B.2.b of the CY 2023 
OPPS/ASC proposed rule (87 FR 44645)), the equivalent payment provided 
to pass-through drugs and biologicals without ASP information. 
Additional detail on the WAC plus 3 percent payment policy can be found 
in section V.B.2.b of the CY 2023 OPPS/ASC proposed rule (87 FR 44645). 
If WAC information also is not available, we proposed to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    The drugs and biologicals that we proposed to have pass-through 
payment status expire after December 31, 2023, are shown in Table 59.

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6. Provisions for Reducing Transitional Pass-Through Payments for 
Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals to Offset 
Costs Packaged Into APC Groups
    Under the 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 proposed to continue to 
apply the same policy-packaged offset policy to payment for pass-
through diagnostic radiopharmaceuticals, pass-through contrast agents, 
pass-through stress agents, and pass-through skin substitutes. The APCs 
to which a payment offset may be applicable for

[[Page 71960]]

pass-through diagnostic radiopharmaceuticals, pass-through contrast 
agents, pass-through stress agents, and pass-through skin substitutes 
are identified in Table 60.
[GRAPHIC] [TIFF OMITTED] TR23NO22.086

BILLING CODE 4120-01-C
    We proposed to continue to post annually on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Annual-Policy-Files.html a file that contains the 
APC offset amounts that will be used for that year for purposes of both 
evaluating cost significance for candidate pass-through payment device 
categories and drugs and biologicals and establishing any appropriate 
APC offset amounts. Specifically, the file will continue to provide the 
amounts and percentages of APC payment associated with packaged 
implantable devices, policy-packaged drugs, and threshold packaged 
drugs and biologicals for every OPPS clinical APC.
    Comment: We received a comment asking CMS to determine offsets to 
pass-through payments at the HCPCS level rather than the APC level, 
similar to the CMS policy for devices.
    Response: We thank the commenter for their suggestion, which we 
will take into consideration for future rulemaking.
    Comment: One commenter requested that CMS release a copy of the APC 
offset file with future OPPS/ASC proposed rules to enable the public to 
calculate the percentage of APC payment associated with packaged drug 
costs using APC offset data for the upcoming calendar year.
    Response: We thank the commenter for their suggestion, but at this 
time we disagree that it is necessary to release a copy of the APC 
offset file with the proposed OPPS/ASC proposed rule. After 
consideration of the comments received, we are finalizing our policy as 
proposed.

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

1. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Packaging Threshold
    In accordance with section 1833(t)(16)(B) of the Act, the threshold 
for establishing separate APCs for payment of drugs and biologicals was 
set to $50 per administration during CYs 2005 and 2006. In CY 2007, we 
used the four-quarter moving average Producer Price Index (PPI) levels 
for Pharmaceutical Preparations (Prescription) to trend the $50 
threshold forward from the third quarter of CY 2005 (when the Pub. L. 
108-173 mandated threshold became effective) to the third quarter of CY 
2007. We then rounded the resulting dollar amount to the nearest $5 
increment in order to determine the CY 2007 threshold amount of $55. 
Using the same methodology as that used in CY 2007 (which is discussed 
in more detail in the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68085 through 68086)), we set the packaging threshold for 
establishing separate APCs for drugs and biologicals at $130 for CY 
2022 (86 FR 63635 through 63637).
    Following the CY 2007 methodology, for the CY 2023 OPPS/ASC 
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 
proposed a packaging threshold for CY 2023 of $135.
    Comment: Generally, commenters did not support the proposal to 
increase the drug packaging threshold to $135. One commenter encouraged 
CMS to consider rolling back the threshold since the

[[Page 71961]]

increase in the threshold in their view has significantly outpaced the 
OPPS update in recent years.
    Response: We appreciate the commenters' feedback on the drug 
packaging threshold level of $135, but we do not agree with the 
suggestion. We reiterate our methodology, which was adopted in the CY 
2007 final rule with comment period (71 FR 68085 through 68086), for 
the CY 2023 drug packaging threshold calculation using the most current 
data available. We remind commenters that the OPPS drug packaging 
threshold is updated based on the Producer Price Index (PPI) levels for 
Pharmaceutical Preparations (Prescription). We believe this methodology 
is the most appropriate as it specifically accounts for increases in 
drug pricing relative to the general OPPS update, which is not specific 
to drug pricing. The PPI for prescription drugs reflects the inflation 
from a national market, which is different from the market for other 
health care services. For CY 2023, we calculated the drug packaging 
threshold to be $135. After consideration of the public comments, we 
are finalizing our proposal without modification to set the drug 
packaging threshold for CY 2023 at $135.
b. 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 the 
CY 2023 OPPS/ASC proposed rule (87 FR 44643), or for the following 
policy-packaged items that we proposed 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 plus 6 percent (which is the payment 
rate we proposed for separately payable drugs and biologicals) for CY 
2023, as discussed in more detail in section V.B.2.b of the CY 2023 
OPPS/ASC proposed rule (87 FR 44642)) 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 proposed 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 the CY 2023 OPPS/ASC 
proposed rule (which are available via the internet on the CMS website) 
because these are the most recent data available for use at the time of 
development of the CY 2023 OPPS/ASC 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 proposed 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 the CY 2023 OPPS/ASC proposed rule (which is 
available on the CMS website) \95\ for proposed payment in CY 2023.
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    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 the CY 2023 OPPS/ASC 
proposed rule, we proposed 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 proposed to use these 
data for budget neutrality estimates and impact analyses for the CY 
2023 OPPS/ASC 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 proposed 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 the CY 2023 OPPS/
ASC proposed rule may be different from the same drugs' HCPCS codes' 
packaging status determined based on the data used for this final rule 
with comment period. Under such circumstances, we proposed to continue 
to follow the established policies initially adopted for the CY 2005 
OPPS (69 FR 65780) in order to more equitably pay for those drugs whose 
costs fluctuate relative to the proposed CY 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,

[[Page 71962]]

consistent with our historical practice, we proposed to apply the 
following policies to those HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals whose relationship to the drug 
packaging threshold changes based on the updated drug packaging 
threshold and on the final updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 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.
    We did not receive any public comments on our proposal and, 
therefore, we are finalizing our proposal to recalculate the mean unit 
cost for items that do not currently have an ASP-based payment rate 
from all of the CY 2021 claims data and updated cost report information 
available for this CY 2023 final rule with comment period to determine 
their final per day cost. We also did not receive any public comments 
on our proposal to continue to follow the established policies, 
initially adopted for the CY 2005 OPPS (69 FR 65780), when the 
packaging status of HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals in the proposed rule is different from the same 
drug's HCPCS code's packaging status determined based on the data used 
for the final rule with comment period. For CY 2023, we are finalizing 
these two proposals without modification. Please refer to Addendum B to 
this final rule with comment period, which is available on the CMS 
website,\96\ for information on the packaging status of drugs, 
biologicals, and therapeutic radiopharmaceuticals.
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c. Policy-Packaged Drugs, Biologicals, and Radiopharmaceuticals
    As mentioned earlier in this section, under the OPPS, we package 
several categories of nonpass-through drugs, biologicals, and 
radiopharmaceuticals, regardless of the cost of the products. Because 
the products are packaged according to the policies in 42 CFR 419.2(b), 
we refer to these packaged drugs, biologicals, and radiopharmaceuticals 
as ``policy-packaged'' drugs, biologicals, and radiopharmaceuticals. 
These policies are either longstanding or based on longstanding 
principles and inherent to the OPPS and are as follows:
     Anesthesia, certain drugs, biologicals, and other 
pharmaceuticals; medical and surgical supplies and equipment; surgical 
dressings; and devices used for external reduction of fractures and 
dislocations (Sec.  419.2(b)(4));
     Intraoperative items and services (Sec.  419.2(b)(14));
     Drugs, biologicals, and radiopharmaceuticals that function 
as supplies when used in a diagnostic test or procedure (including, but 
not limited to, diagnostic radiopharmaceuticals, contrast agents, and 
pharmacologic stress agents) (Sec.  419.2(b)(15)); and
     Drugs and biologicals that function as supplies when used 
in a surgical procedure (including, but not limited to, skin 
substitutes and similar products that aid wound healing and implantable 
biologicals) (Sec.  419.2(b)(16)).
    The policy at Sec.  419.2(b)(16) is broader than that at Sec.  
419.2(b)(14). As we stated in the CY 2015 OPPS/ASC final rule with 
comment period: ``We consider all items related to the surgical outcome 
and provided during the hospital stay in which the surgery is 
performed, including postsurgical pain management drugs, to be part of 
the surgery for purposes of our drug and biological surgical supply 
packaging policy'' (79 FR 66875). The category described by Sec.  
419.2(b)(15) is large and includes diagnostic radiopharmaceuticals, 
contrast agents, stress agents, and some other products. The category 
described by Sec.  419.2(b)(16) includes skin substitutes and some 
other products. We believe it is important to reiterate that cost 
consideration is not a factor when determining whether an item is a 
surgical supply (79 FR 66875).
    Comment: Some commenters had general concerns regarding the risk of 
CMS packaging polices creating access barriers and incentives for 
stinting on care. Specifically, one commenter requested that we develop 
a policy to provide separate payment for drugs that are administered at 
the time of ophthalmic surgery and have an FDA-approved indication to 
treat or prevent postoperative issues.
    Response: We thank commenters for their feedback. We continue to 
believe in the importance of our packaging policies as an inherent 
principle of OPPS and ASC payment policy. In response to the commenter 
requesting that we develop a policy to provide separate payment for 
drugs that are administered at the time of ophthalmic surgery, a 
surgical procedure episode consists of both pre-operative and post-
operative care in addition to the surgical procedure itself. If a drug 
used to address a post-operative concern, such as pain management, is 
billed together with a surgical procedure, we assume that the pain 
management drug was given as a part of the overall surgical procedure. 
Because the pain management drug is ancillary to the primary ophthalmic 
surgery procedure, it is considered a surgical supply. The pain 
management drug is only administered to the patient because the patient 
has received ophthalmic surgery, and the drug would not have been 
administered to the patient if the patient did not have the surgery. In 
the OPPS, we pay one rate for the entire surgical procedure; and 
payment for supplies, such as pain management drugs, is packaged into 
the payment rate for the surgical procedure. We note exceptions to this 
policy in the ASC setting are discussed in section II.A.3.b. (Payment 
Policy for Non-Opioid Pain Management Drugs and Biologicals that 
Function as Surgical Supplies under the ASC Payment System) of this 
final rule with comment period.
    Comment: One commenter recommended that CMS continue to apply 
radiolabeled product edits to the nuclear medicine procedures to ensure 
that all packaged costs are included on nuclear medicine claims in 
order to establish appropriate payment rates in the future. The 
commenter was concerned that many providers performing nuclear medicine 
procedures are not including the cost of diagnostic 
radiopharmaceuticals used for the procedures in their claim 
submissions. The commenter believes this lack of drug cost reporting 
could be causing the cost of nuclear medicine procedures to be 
underreported and therefore requested that the radiolabeled product 
edits be reinstated.
    Response: We appreciate the commenter's feedback; however, we are

[[Page 71963]]

not reinstating the radiolabeled product edits to nuclear medicine 
procedures, which required a diagnostic radiopharmaceutical to be 
present on the same claim as a nuclear medicine procedure for payment 
to be made under the OPPS. As previously discussed in the CY 2020 OPPS/
ASC final rule with comment period (85 FR 86033 through 86034), the 
edits were in place between CY 2008 and CY 2014 (78 FR 75033). We 
believe the period of time in which the edits were in place was 
sufficient for hospitals to gain experience reporting procedures 
involving radiolabeled products and to become accustomed to ensuring 
that they code and report charges so that their claims fully and 
appropriately reflect the costs of those radiolabeled products. As with 
all other items and services recognized under the OPPS, we expect 
hospitals to code and report their costs appropriately, regardless of 
whether there are claims processing edits in place.
    Comment: Several commenters had concerns regarding the CMS policy 
to package diagnostic radiopharmaceuticals. These commenters believed 
radiopharmaceuticals are not supplies but instead are essential 
elements in driving the procedures themselves. Commenters believe that 
for newer, more innovative radiopharmaceuticals, packaging could lead 
to a lack of patient access to the technology after pass-through 
payment expires, especially if there is no clinical alternative. 
Commenters also discussed HR 4479/S. 2609 the ``Facilitating Innovative 
Nuclear Diagnostics Act (FIND Act) of 2021'' introduced in the U.S. 
House of Representatives, which would mandate that CMS make separate 
payment for precision diagnostic radiopharmaceuticals receiving FDA 
approval after 2008 that have an estimated mean per day product cost of 
at least $500.
    Several commenters requested that diagnostic radiopharmaceuticals 
be paid separately in all cases, not just when the drugs have pass-
through payment status. Some commenters mentioned that pass-through 
payment status helps the diffusion of new diagnostic 
radiopharmaceuticals into the market, but it is not enough to make up 
for what the commenters believe is inadequate payment after pass-
through status expires. Commenters opposed incorporating the cost of 
the drug into the associated APC and provided evidence showing 
procedures in which diagnostic radiopharmaceuticals are considered to 
be a surgical supply, which the commenter believed are often paid at a 
lower rate than the payment rate for the diagnostic radiopharmaceutical 
itself when the drug had pass-through payment status. Additionally, 
commenters proposed alternative payment methodologies, such as 
subjecting diagnostic radiopharmaceuticals to the drug packaging 
threshold; creating separate APC payments for diagnostic 
radiopharmaceuticals that cost more than $500; and using ASP, WAC, AWP, 
mean unit cost data, or various other payment methodologies to account 
for packaged radiopharmaceutical costs, including making sure 
diagnostic radiopharmaceuticals and their associated nuclear medicine 
APCs do not violate the ``two-times rule.'' Commenters suggested not 
consolidating the Nuclear Medicine APCs. Other commenters suggested 
creating new Nuclear Medicine APCs in order to pay adequately for 
higher cost diagnostic radiopharmaceuticals.
    Commenters were also concerned that by providing packaged payment 
for precision diagnostic radiopharmaceuticals in the outpatient 
setting, CMS is creating barriers for safety net hospitals serving a 
high proportion of Medicare beneficiaries and hospitals serving 
underserved communities. Commenters specified certain populations, such 
as those with Alzheimer's Disease, depend on the use of diagnostic 
radiopharmaceuticals. Commenters discussed difficulties enrolling 
hospitals in clinical studies to further research diagnostic 
radiopharmaceuticals due to CMS packaging policies. Commenters also 
suggested paying separately specifically for radiopharmaceuticals that 
are used for Alzheimer's Disease.
    Response: We thank commenters for their suggestions. Commenters 
have made many of these suggestions in the past, and we addressed them 
in previous rules, including the CY 2020 OPPS/ASC final rule (84 FR 
61314 through 61315) and the CY 2021 OPPS/ASC final rule (85 FR 86034). 
We continue to believe that diagnostic radiopharmaceuticals are an 
integral component of many nuclear medicine and imaging procedures and 
charges associated with them should be reported on hospital claims to 
the extent they are used. Accordingly, the payment for the 
radiopharmaceuticals should be reflected within the payment for the 
primary procedure. We note that rates are established in a manner that 
uses the geometric mean of reported costs to furnish the procedure 
based on data submitted to CMS from all hospitals paid under the OPPS 
to set the payment rate for the service. The costs that are calculated 
by Medicare reflect the average costs of items and services that are 
packaged into a primary procedure and will not necessarily equal the 
sum of the cost of the primary procedure and the average sales price of 
the specific items and services used in the procedure in each case. 
Furthermore, the costs are based on the reported costs submitted to 
Medicare by the hospitals and not the list price established by the 
manufacturer. Claims data that include the radiopharmaceutical packaged 
with the associated procedure reflect the combined cost of the 
procedure and the radiopharmaceutical used in the procedure. 
Additionally, we do not believe it is appropriate to create a new 
packaging threshold specifically for diagnostic radiopharmaceuticals as 
such a threshold would not align with our overall packaging policy, and 
commenters have submitted only limited data to support a specific 
threshold. With respect to the request that we create a new APC for 
each radiopharmaceutical product, we do not believe it is appropriate 
to create unique APCs for diagnostic radiopharmaceuticals. Diagnostic 
radiopharmaceuticals function as supplies during a diagnostic test or 
procedure and, following our longstanding packaging policy, these items 
are packaged under the OPPS. Packaging supports our goal of making OPPS 
payments consistent with those of a prospective payment system, which 
packages costs into a single aggregate payment for a service, 
encounter, or episode of care. Furthermore, diagnostic 
radiopharmaceuticals function as supplies that enable the provision of 
an independent service and are not themselves the primary therapeutic 
modality. Therefore, we do not believe they warrant separate payment 
through creation of a unique APC at this time.
    We welcome ongoing dialogue and engagement from stakeholders 
regarding suggestions for payment changes for consideration in future 
rulemaking.
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

[[Page 71964]]

others. We continue to believe that making packaging determinations on 
a drug-specific basis eliminates payment incentives for hospitals to 
report certain HCPCS codes for drugs and allows hospitals flexibility 
in choosing to report all HCPCS codes for different dosages of the same 
drug or only the lowest dosage HCPCS code. Therefore, we proposed to 
continue our policy to make packaging determinations on a drug-specific 
basis, rather than a HCPCS code-specific basis, for those HCPCS codes 
that describe the same drug or biological but different dosages in CY 
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 plus 6 percent across all of the 
HCPCS codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. The following drugs 
did not have pricing information available for the ASP methodology for 
the CY 2023 OPPS/ASC proposed rule; and, as is our current policy for 
determining the packaging status of other drugs, we used the mean unit 
cost available from the CY 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 plus 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 61.
    We did not receive any comments on our proposal and we are 
finalizing it as proposed.
BILLING CODE 4120-01-P

[[Page 71965]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.087

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

 A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
 A drug or biological for which a temporary HCPCS code has not 
been assigned.
 During CYs 2004 and 2005, an orphan drug (as designated by the 
Secretary).

    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY

[[Page 71966]]

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 plus 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.\97\
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    \97\ Medicare Payment Advisory Committee. June 2005 Report to 
the Congress. Chapter 6: Payment for pharmacy handling costs in 
hospital outpatient departments. Available at: https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/June05_ch6.pdf.
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    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 proposed to apply section 1833(t)(14)(A)(iii)(II) 
of the Act to all separately payable drugs and biologicals, including 
SCODs. Although we do not distinguish SCODs in this discussion, we note 
that we are required to apply section 1833(t)(14)(A)(iii)(II) of the 
Act to SCODs, but we also are applying this provision to other 
separately payable drugs and biologicals, consistent with our history 
of using the same payment methodology for all separately payable drugs 
and biologicals.
    For a detailed discussion of our OPPS drug payment policies from CY 
2006 to CY 2012, we refer readers to the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68383 through 68385). In the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68386 through 68389), we 
first adopted the statutory default policy to pay for separately 
payable drugs and biologicals at ASP plus 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 Payment Policy
    For CY 2023 and subsequent years, we proposed to continue our 
payment policy that has been in effect since CY 2013 to pay for 
separately payable drugs and biologicals, with the exception of 340B-
acquired drugs, at ASP plus 6 percent in accordance with section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). We formally 
proposed 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 CY 2023 OPPS/ASC final rule with comment 
period) but noted that we anticipated paying for 340B drugs at ASP plus 
6 percent. 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 proposed 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 proposed to 
apply this provision to non-SCOD separately payable drugs. Because we 
proposed to establish the average price for a drug paid based on WAC 
under section 1847A of the Act as WAC plus 3 percent instead of WAC 
plus 6 percent, we believe it is appropriate to price separately 
payable drugs paid based on WAC at the same amount under the OPPS. Our 
proposal to pay for drugs and biologicals at WAC plus 3 percent, rather 
than WAC plus 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 proposed that the 
payment amount for these drugs (in this case, at 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. of this CY 2023 OPPS/
ASC final rule with comment period for a full discussion of our 
finalized CY 2023 payment policy for 340B drugs.
    Consistent with our current policy, we proposed 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

[[Page 71967]]

the Act. We also proposed that the budget neutral weight scalar would 
not be applied in determining payments for these separately payable 
drugs and biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to the CY 2023 OPPS/ASC proposed rule 
(available on the CMS website \98\), which illustrate the proposed CY 
2023 payment of ASP plus 6 percent for separately payable nonpass-
through drugs and biologicals and ASP plus 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 the CY 2023 OPPS/ASC 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 
the CY 2023 OPPS/ASC 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 the CY 2023 OPPS/ASC proposed rule 
(reflecting April 2022 ASP data) that do not have ASP, WAC, or AWP 
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 the CY 2023 OPPS/ASC 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 the CY 2023 OPPS/ASC proposed 
rule.
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    \98\ https://www.cms.gov/medicare/medicare-fee-for-service-
payment/hospitaloutpatientpps.
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    Comment: We received several general comments on Medicare drug 
spending and drug spending under the OPPS and ASC. One commenter 
provided feedback on the rapidly rising costs of prescription drugs. 
Another commenter commented on the need to increase domestic generic 
drug manufacturing.
    Response: While we note these comments are generally out of scope 
for purposes of this OPPS/ASC final rule with comment period, we thank 
commenters for their interest and feedback.
    Comment: A few commenters supported separate payment for specific 
drugs, biologicals, and radiopharmaceuticals for CY 2023. Commenters 
also supported CMS paying for all separately payable drugs and 
biologicals as SCODs. Several commenters expressed their approval for 
our proposal to pay for separately payable drugs and biologicals at ASP 
plus 6 percent. The commenters generally believed this policy is 
consistent with statute and Congressional intent and generates more 
predictable payment for providers than previous payment methodologies 
for drugs and biologicals. A few of these commenters believed the ASP 
plus 6 percent payment policy ensures equivalent payment for drugs and 
biologicals between the outpatient hospital setting and the physician 
office, which, in their view, encourages Medicare beneficiaries to 
receive care in the most clinically appropriate setting.
    Response: We appreciate the commenters' feedback and support.
    Comment: One commenter requested that an add-on percentage of 
greater than 6 percent of ASP be paid for separately payable 
radiopharmaceuticals to reflect higher overhead and handling costs for 
these products.
    Response: The add-on percentage of 6 percent is generally viewed as 
reflecting the overhead and handling cost of most drugs, 
radiopharmaceuticals, and biologicals that are separately payable in 
the OPPS even though the overhead and handling costs for individual 
products may be higher or lower than 6 percent of the ASP. We believe 
that the add-on percentage of 6 percent is appropriate for separately 
payable radiopharmaceuticals.
    Comment: Several commenters requested that we maintain the status 
indicator assignment for HCPCS code Q2041 of ``K'' (Nonpass-Through 
Drugs and Nonimplantable Biologicals, Including Therapeutic 
Radiopharmaceuticals), rather than assigning it a status indicator of 
``N'' (Items and Services Packaged into APC Rates) as shown in the 
proposed rule addenda.
    Response: We agree with commenters and thank them for their 
comments on this discrepancy. HCPCS code Q2041 will be assigned to a 
status indicator of ``K'' for CY 2023 as shown in the addenda to this 
final rule with comment period on the CMS website.\99\
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    \99\ https://www.cms.gov/medicare/medicare-fee-for-service-
payment/hospitaloutpatientpps.
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    Comment: One commenter provided information regarding their drug 
Sinuva, described by HCPCS code J7402. This commenter believed their 
drug should be assigned to status indicator ``K'' upon pass-through 
expiration. This commenter explained that their drug does not fit into 
the category of drugs and biologicals that function as supplies when 
used in a surgical procedure.
    Response: We thank this commenter for this information regarding 
their product. We refer readers to section V.A. of this final rule with 
comment period for details regarding pass-through expiration of their 
product. Upon pass-through expiration, we will publish updated status 
indicator assignments through the regular quarterly releases, which can 
be found on the CMS website.\100\
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    \100\ https://www.cms.gov/medicare/medicare-fee-for-service-
payment/hospitaloutpatientpps.
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    Comment: Commenters requested that we exclude radiopharmaceuticals 
from our proposed policy that 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, payments can be made for 
drugs using WAC pricing plus a 3 percent price add-on. The commenters 
believe the cost of preparing radiopharmaceuticals is higher than the 
cost of preparing other drugs and biologicals and a 6 percent price 
add-on should be required anytime that we use WAC to price a 
radiopharmaceutical.
    Response: The WAC of a drug or biological is defined in section 
1847A(c)(6)(B) of the Act as the manufacturer's list price for the drug 
or biological to wholesalers or direct purchasers in the United States, 
not including prompt pay or other discounts, rebates or reductions in 
price, for the most recent month for which the information is 
available, as reported in wholesale price guides or other publications 
of drug or biological pricing data. Because the WAC does not include 
discounts, it typically exceeds ASP, and the use of a WAC-based payment 
amount for the same drug

[[Page 71968]]

results in higher dollar payments than the use of an ASP-based payment 
amount. Also, MedPAC in their June 2017 Report to the Congress (https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-source/reports/jun17_reporttocongress_sec.pdf) suggested that 
greater parity between ASP-based acquisition costs and WAC-based 
payments for Part B drugs could be achieved and recommended changing 
the 6 percent add-on for WAC-based payments to 3 percent. Given this 
evidence that WAC pricing tends to overestimate drug cost, we believe 
our current and proposed policy to pay drugs at WAC plus 3 percent for 
all drugs, biologicals, and radiopharmaceuticals when ASP is not 
available more accurately reflects the cost of new products recently 
entering the market than does WAC plus 6 percent.
    After considering the public comments we received, we are 
finalizing our proposals related to payment for SCODs and other 
separately payable drugs and biologicals without modification.
c. Biosimilar Biological Products
    For CY 2016 and CY 2017, we finalized a policy to pay for 
biosimilar biological products based on the payment allowance of the 
product as determined under section 1847A of the Act and to subject 
nonpass-through biosimilar biological products to our annual threshold-
packaged policy (for CY 2016, 80 FR 70445 through 70446; and for CY 
2017, 81 FR 79674). In the CY 2018 OPPS/ASC 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 payment for 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 proposed to continue our 
policy to make all biosimilar biological products eligible for pass-
through payment and not just the first biosimilar biological product 
for a reference product. We also formally proposed 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. 
of the CY 2023 OPPS/ASC proposed rule (87 FR 63644) for a full 
discussion of our proposed CY 2023 payment policy for 340B drugs.
    Comment: Commenters supported our proposal to continue our policy 
from CY 2018 to make biosimilar biological products eligible for pass-
through payment and not just the first biosimilar biological product 
for a reference product.
    Response: We appreciate the support of this established policy.
    Comment: Commenters expressed general concerns regarding payment 
for pass-through biosimilars acquired by 340B entities and the impact 
on those biosimilars' competitors that are not on pass-through and are 
also acquired by 340B entities. Many acknowledged the proposed changes 
to the 340B payment under the OPPS in the proposed rule may no longer 
make this a concern; however, these commenters also expressed concerns 
regarding CMS's ability to change 340B payment rates in the future and 
were concerned this may not create an even playing field for 
biosimilars on pass-through status and their reference biological 
products not on pass-through when acquired through the 340B program. 
These commenters believe that pass-through biosimilars have a 
substantial payment differential as compared to the innovator reference 
products and biosimilar biological products without pass-through status 
when purchased under the 340B program. Specifically, one commenter did 
not support our proposal to continue our CY 2018 policy to make all 
biosimilar biological products eligible for pass-through payment and 
not just the first biosimilar biological product for a reference 
product. The commenter believes that there should be a ``level playing 
field'' between biosimilars and their reference products in order to 
increase competition and reduce costs for beneficiaries. The commenter 
does not believe it is fair for biosimilars of a reference product to 
be receiving pass-through payment of ASP plus 6 percent of the 
reference product's ASP. The commenter believes that this difference in 
the payment rates for biosimilars and their reference products could 
potentially lead to increased Medicare spending on biosimilars as 
providers utilize biosimilars instead of the biosimilars' reference 
products because of the higher payment rates for biosimilars in these 
circumstances. The commenter believes use of biosimilars is 
inappropriately incentivized and that these products should not be 
eligible for pass-through status.
    Response: As discussed in the CY 2019 OPPS/ASC final rule with 
comment period (83 FR 58977), we continue to believe that eligibility 
for pass-through payment status reflects the unique, complex nature of 
biosimilars and is important as biosimilars become established in the 
market, just as it is for all other new drugs and biologicals. We note, 
for CY 2023, we are finalizing a policy to pay for biosimilars acquired 
under the 340B Program at the rate in which non 340B acquired 
biosimilars are paid, which is generally the biosimilar's ASP plus 6 
percent of the reference biological product's ASP, subject to section 
d. (Increased Payment for Biosimilars in the Inflation Reduction Act of 
2022) below. Our final policy regarding the payment rate for drugs and 
biologicals that are acquired under the 340B program is described in 
section V.B.6 of this final rule with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposed payment policy for biosimilar products, without 
modification, to continue the policy established in CY 2018 to make all 
biosimilar biological products eligible for pass-through payment and 
not just the first biosimilar biological product

[[Page 71969]]

for a reference product. We are continuing our policy to pay for all 
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 packaging 
policies as described through section V.B. of this final rule with 
comment period.
d. Increased Payment for Biosimilars in the Inflation Reduction Act of 
2022
    On August 16th, 2022, the Inflation Reduction Act of 2022 (IRA) 
(Pub. L. 117-169) was signed into law. Section 1847A(b)(8) of the Act, 
as amended by section 11403 of the IRA, requires a temporary increase 
in the add-on payment for qualifying biosimilar biological products 
from 6 percent to 8 percent of the ASP of the reference biological 
beginning October 1, 2022. This increase applies for a 5-year period as 
required by section 1847A(b)(8)(B). A qualifying biosimilar biological 
product is defined as a biosimilar with an ASP that is not more than 
the ASP of the reference biological. For qualifying biosimilar 
biological products for which payment was made using ASP as of 
September 30, 2022, the 5-year period begins on October 1, 2022. For 
qualifying biosimilar biological products for which payment is first 
made using ASP between October 1, 2022, through December 31, 2027, the 
5-year period begins on the first day of the calendar quarter during 
which such payment is first made.
    Because we generally base OPPS and ASC payments for biosimilar 
biological products on the methodology described in section 1847A(b)(8) 
of the Act (80 FR 70444 through 70446), payments for qualifying 
biosimilars, as defined at section 1847A(b)(8)(B)(iii) of the Act, will 
temporarily increase. Therefore, beginning October 1, 2022, payment for 
qualifying nonpass-through biosimilars under the OPPS and ASC payment 
systems generally changed from ASP plus 6 percent of the reference 
biological product's ASP, to ASP plus 8 percent of the reference 
biological product's ASP for a 5-year period. Similarly, payment for 
qualifying pass-through biosimilars under the OPPS and ASC payment 
systems generally changed from ASP plus 6 percent of the reference 
biological product's ASP to ASP plus 8 percent of the reference 
biological product's ASP for a 5-year period. For existing qualifying 
biosimilars for which payment was made using ASP as of September 30, 
2022, the 5-year period began on October 1, 2022. For new qualifying 
biosimilars for which payment is first made using ASP between October 
1, 2022, and December 31, 2027, the applicable 5-year period begins on 
the first day of the calendar quarter during which such payment is 
made. We note, additional details on the implementation of the IRA are 
forthcoming and will be communicated through a vehicle other than this 
CY 2023 OPPS/ASC final rule with comment period.
3. Payment Policy for Therapeutic Radiopharmaceuticals
    For CY 2023 and subsequent years, we proposed to continue the 
payment policy for therapeutic radiopharmaceuticals that began in CY 
2010. We pay for separately payable therapeutic radiopharmaceuticals 
under the ASP methodology adopted for separately payable drugs and 
biologicals. If ASP information is unavailable for a therapeutic 
radiopharmaceutical, we base therapeutic radiopharmaceutical payment on 
mean unit cost data derived from hospital claims. We believe that the 
rationale outlined in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60524 through 60525) for applying the principles of 
separately payable drug pricing to therapeutic radiopharmaceuticals 
continues to be appropriate for nonpass-through, separately payable 
therapeutic radiopharmaceuticals in CY 2023. Therefore, we proposed, 
for CY 2023 and subsequent years, to pay all nonpass-through, 
separately payable therapeutic radiopharmaceuticals at ASP plus 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 proposed 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 the CY 2023 OPPS/ASC proposed rule (which are available on the CMS 
website).\101\
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    \101\ https://www.cms.gov/medicare/medicare-fee-for-service-
payment/hospitaloutpatientpps.
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    Comment: Commenters supported the continuation of this policy to 
provide a predicable payment methodology and avoid the payment swings 
that occurred prior to adoption of the statutory default rate for 
therapeutic radiopharmaceuticals.
    Response: We thank commenters for their support and feedback on 
this policy.
    Comment: One commenter suggested CMS investigate HCPCS code A9699. 
This commenter stated that this code was packaged and no separate APC 
payment was made. This commenter suggested that CMS revise the status 
indicator of this drug to a status indicator of ``K'' in order to allow 
this code to be separately payable as they believed not doing so may 
impede beneficiary access to new therapeutic radiopharmaceuticals that 
may be billed with this code.
    Response: We thank this commenter for their recommendation to 
assign HCPCS code A9699 (Radiopharmaceutical, therapeutic, not 
otherwise classified) a status indicator of ``K.'' We note that this 
code is assigned an OPPS status indicator of ``N'' for CY 2023, which 
is a longstanding status indicator assignment under the OPPS.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to pay all 
nonpass-through, separately payable therapeutic radiopharmaceuticals at 
ASP plus 6 percent. We are also finalizing our proposal to continue 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. The CY 2023 
final payment rates for nonpass-through, separately payable therapeutic 
radiopharmaceuticals are included in Addenda A and B to this final rule 
with comment period (which are available on the CMS website).
4. 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

[[Page 71970]]

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 plus 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 proposed to pay for blood 
clotting factors at ASP plus 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: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    We proposed to provide payment for blood clotting factors under the 
same methodology as other separately payable drugs and biologicals 
under the OPPS and to continue payment of an updated furnishing fee. We 
will announce the actual figure of the percent change in the applicable 
CPI and the updated furnishing fee calculation based on that figure 
through the applicable program instructions and posting on the CMS 
website.
    Comment: One commenter supported our proposal to continue to pay 
for blood clotting factors at ASP plus 6 percent plus a furnishing fee 
for the clotting factors updated annually using the CPI. The commenter 
also supported our policy to pay the same clotting factor furnishing 
fee across different care settings.
    Response: We appreciate the commenter's support for our policies.
    After reviewing the public comment that we received, we are 
finalizing our proposal, without modification, to provide payment for 
blood clotting factors under the same methodology as other separately 
payable drugs and biologicals under the OPPS and to continue payment of 
an updated furnishing fee. We will announce the actual figure of the 
percent change in the applicable CPI and the updated furnishing fee 
calculation based on that figure through the applicable program 
instructions and posting on the CMS website.
5. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes But Without OPPS Hospital Claims 
Data
    For CY 2023 and subsequent years, we proposed 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 the CY 2023 OPPS/ASC proposed rule, 
which is available on the CMS website.\102\
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    \102\ https://www.cms.gov/medicare/medicare-fee-for-service-
payment/hospitaloutpatientpps.
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    We did not receive any specific public comments regarding our 
proposed payment for non-pass-through drugs, biologicals, and 
radiopharmaceuticals with HCPCS codes but without OPPS hospital claims 
data; however, many commenters did support paying for separately 
payable drugs under the statutory default. Therefore, we are finalizing 
our CY 2023 proposal without modification, including our proposal to 
assign drug or biological products status indicator ``K'' and pay for 
them separately for the remainder of CY 2023 if pricing information 
becomes available. The 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 
final rule with comment period, which is available 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 
plus 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 \103\ and MedPAC \104\ that 340B 
hospitals were acquiring drugs at a significant discount under HRSA's 
340B Drug Pricing Program. We direct readers to the CY 2018 OPPS/ASC 
final rule with comment period for a more detailed discussion of the 
340B drug payment policy (82 FR 52493 to 52511).
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    \103\ Government Accountability Office. ``Medicare Part B Drugs: 
``Action Needed to Reduce Financial Incentives to Prescribe 340B 
Drugs at Participating Hospitals.'' June 2015. Available at https://www.gao.gov/assets/gao-15-442.pdf.
    \104\ Medicare Payment Advisory Commission. March 2016 Report to 
the Congress: Medicare Payment Policy. March 2016. Available at 
Medicare Payment Advisory Commission. March 2016 Report to the 
Congress: Medicare Payment Policy. March 2016. Available at https://www.medpac.gov/document/http-www-medpac-gov-docs-default-source-reports-may-2015-report-to-the-congress-overview-of-the-340b-drug-pricing-program-pdf/.
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    This policy has been the subject of significant litigation, 
including the Supreme Court's recent decision in American Hospital 
Association v. Becerra, 142 S. Ct. 1896 (2022). Originally, in December 
2018, the United States District Court for the District of Columbia 
(the ``District Court'') concluded that the Secretary lacked the 
authority to adjust the default rate to bring it more 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

[[Page 71971]]

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. Plaintiffs then petitioned the United States 
Supreme Court for a writ of certiorari, which was granted on July 2, 
2021.\105\
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    \105\ 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) without having conducted a survey of hospitals' 
acquisition costs under subparagraph (t)(14)(A)(iii)(I). While the 
Supreme Court's decision addressed payment rates for CYs 2018 and 2019, 
it has implications for CY 2023 payment rates. However, given the 
timing of the Supreme Court's decision, we lacked the necessary time to 
fully incorporate the adjustments to the proposed payment rates and 
budget neutrality calculations to account for that decision before 
issuing the CY 2023 OPPS/ASC proposed rule, as explained further below. 
For that reason, the payment rates, tables, and addenda in the CY 2023 
OPPS/ASC proposed rule reflected 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. We also provided 340B 
alternate supporting files, which provide information regarding the 
payment effects to non-drug services from removing the 340B program 
payment policy and restoring drug payment to the default rate, 
generally ASP plus 6 percent, for CY 2023. We stated that we 
anticipated applying the default rate--generally ASP plus 6 percent--to 
such drugs and biologicals in the final rule for CY 2023, in light of 
the Supreme Court's recent decision. We noted we were still evaluating 
how to apply the Supreme Court's recent decision to prior calendar 
years 2018 through 2022.
    Each year since 2018, we have continued the policy of paying for 
drugs and biologicals acquired through the 340B Program at ASP minus 
22.5 percent. When we were developing the CY 2023 OPPS/ASC proposed 
rule, we intended to propose to continue our 340B policy based on the 
D.C. Circuit Court of Appeals' then-governing decision. That is, the 
rates that we previously developed, the tables, and the addenda that 
are part of the CY 2023 OPPS/ASC proposed rule built on the policy that 
had been in effect since 2018, which paid for drugs and biologicals at 
one rate if they were acquired through the 340B program (generally ASP 
minus 22.5 percent), and at another rate if they were not acquired 
through the 340B program (generally ASP plus 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 
subparagraph 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. In addition, section 
1833(t)(14)(H) separately provides that ``[a]dditional expenditures 
resulting from this paragraph . . . shall be taken into account'' in 
establishing the conversion, weighting, and other adjustment factors 
for any calendar year after 2005.
    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. As we explained in the proposed rule, 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 had changed the policy and accompanying 
rates in response to the Supreme Court's decision, the proposed rule 
would have been substantially delayed, which would have jeopardized our 
ability to develop this 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 the CY 2023 
OPPS/ASC 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. We noted that 
if interested parties or members of the public wished 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 would 
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 anticipated 
reverting to our prior policy of paying the default rate, generally ASP 
plus 6 percent, regardless of whether a drug was acquired through the 
340B program. We advised readers that a reversion to that policy would 
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 plus 6 percent in CY 2023, we explained that 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 rate-setting, which 
represent all drug lines for which the 340B program payment policy 
applied, we estimated the 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 indicated that 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 was 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

[[Page 71972]]

increased the conversion factor to budget neutralize the decreased 
spending for drugs acquired through the 340B program in CY 2018. In the 
CY 2018 proposed rule (87 FR 44648), we explained that 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 plus 6 percent. We 
noted 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 for all hospitals of removing the 
payment differential for 340B drugs and the corresponding budget 
neutrality adjustment for CY 2023 was 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 v. Azar, 348 F. Supp. 3d 62 (D.D.C.), 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. See 
Am. Hospital Ass'n v. Azar, No. 18-2084 (RC), 2019 WL 3037306. 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. See Am. Hospital Ass'n v. Azar, 967 F.3d 818. 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 this year 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. 
After the CY 2020 OPPS/ASC proposed rule was issued, we announced in 
the Federal Register (84 FR 51590) our intent to conduct a 340B 
hospital survey to collect drug acquisition cost data for certain 
quarters in CY 2018 and 2019. We stated that such survey data may be 
used in setting the Medicare payment amount for drugs acquired by 340B 
hospitals for 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. 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 our original interpretation of the statute 
to adjust ASP by minus 22.5 percent was reasonable.
    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 decision 
to calendar years 2018 through 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.'' Am. Hospital Ass'n, 142 S. Ct. at 1903. We solicited public 
comments on the best way to craft any proposed, potential remedies 
affecting calendar years 2018 through 2022.
    The Supreme Court remanded its decision to the D.C. Circuit, which 
in turn remanded it to the United States District Court for the 
District of Columbia. Upon the case's remand to the district court, the 
plaintiffs filed two motions seeking (1) to vacate the portion of the 
340B reimbursement rate in the CY 2022 final OPPS rule that is still in 
effect for the remainder of 2022; and (2) to remedy the reduced payment 
amounts to 340B hospitals under the reimbursement rates in the final 
OPPS rules for CYs 2018-2022.
    After the publication of the proposed CY 2023 OPPS rule, on 
September 28, 2022, the district court ruled on the first motion, 
vacating the 340B reimbursement rate for the remainder of 2022. The 
agency has since taken the necessary steps to implement that September 
28, 2022, decision, which the court clarified was a final 
judgment.\106\ The court also indicated in its decision on the first 
motion that it would issue a separate opinion resolving the second 
motion at a later time.
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    \106\ Vacating Differential Payment Rate for 340B-Acquired Drugs 
in 2022 Outpatient Prospective Payment System Final Rule with 
Comment Period. https://www.cms.gov/medicare/medicare-fee-for-
service-payment/hospitaloutpatientpps.
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    We received the following public comments in response to our 
comment solicitation on potential remedies affecting calendar years 
2018 through 2022.
    Comment: A majority of commenters requested that we promptly pay 
hospitals the additional amounts owed for 340B drug payments from 2018 
to 2022 as a result of the 340B policy no longer applying. Some 
commenters additionally requested that we include interest in these 
payments. A majority of commenters also requested that we not seek 
recoupment of funds received (which they characterize as holding 
hospitals harmless) for the increased rates for non-drug services from 
2018 through 2022, arguing that budget neutrality can be applied only 
prospectively and that there is no precedent for a retrospective budget 
neutrality adjustment. These commenters also argued that a 
retrospective payment adjustment would be unfair given the significant 
financial impact it would have on hospitals and that it would be 
penalizing hospitals for a policy that has been deemed unlawful by the 
Supreme Court. These commenters also pointed

[[Page 71973]]

to the logistical and administrative burdens that retroactive payment 
adjustment would impose on hospitals and contended that hospitals have 
spent most of the overpaid funds during the PHE.
    MedPAC and a few other commenters stated that any changes in 
response to the Supreme Court's decision should be made in a budget-
neutral manner to ensure consistency with the OPPS statute and CMS's 
longstanding budget neutral policy and because, given scarce fiscal 
resources, it would be fiscally imprudent to increase Medicare spending 
by approximately $2 billion in each year that CMS applied the 
overturned 340B policy (CY 2018 through CY 2022) without making a 
corresponding budget neutrality adjustment.
    Many commenters suggested that if CMS determines that it must 
address payments from 2018 through 2022 in a budget neutral manner, CMS 
should engage in a more fulsome notice-and-comment rulemaking process 
with opportunities for public comment regarding how it will carry out 
any policy changes. Several commenters suggested a budget neutral, 
prospective-only solution to address payments from 2018 through 2022. 
One commenter suggested that CMS defer adoption of a 340B-related 
budget neutrality adjustment for 2023 and instead issue a request for 
information to solicit comments on how to address the policy 
implications of the 340B policy reversal for all relevant years (2018 
through 2022) and all impacted providers. One commenter emphasized that 
whatever methodology CMS adopts, it should not involve the reprocessing 
of claims in order to avoid any impact on patient coinsurance. Several 
commenters urged CMS to ensure that the methodology used to remedy the 
reduced payment amounts between 2018 and 2022 does not inadvertently 
impact non-340B eligible providers, including Ambulatory Surgical 
Centers.
    Several commenters requested that the 340B payment rates for CY 
2022 be immediately updated to reflect ASP plus 6 percent given that 
the payment rate of ASP minus 22.5 percent was found to be unlawful. 
One commenter suggested that CMS develop and implement a simple 
attestation process for each year of reduced payment amounts pursuant 
to our policy in effect at the time. Another commenter suggested that 
CMS state clearly in the final rule that hospitals may forego 
collecting these payments from beneficiaries or insurance companies for 
the increased rate.
    Response: We thank commenters for their many thoughtful comments 
and will take their input into account as we formulate an appropriate 
remedy to address reduced payment amounts to 340B hospitals for CYs 
2018 through 2022. We agree with commenters who suggested that we 
should give stakeholders an opportunity to comment on a proposed 
remedy, but do not believe we need to delay the process by first 
issuing a separate request for information. We also acknowledge the 
motion pending before the district court with respect to this issue. In 
order to balance our ability to give the remedy the type of 
deliberation encouraged by the Medicare statute and Administrative 
Procedure Act, stakeholders' ability to comment, and their interest in 
a timely remedy, we plan to issue a separate proposed rule detailing 
our proposed remedy for CYs 2018 to CY 2022 in advance of the CY 2024 
OPPS/ASC proposed rule. As we previously announced, claims for 340B-
acquired drugs paid after the district court's September 28, 2022 
ruling are paid at the default rate (generally ASP plus 6 
percent).\107\
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    \107\ See https://www.cms.gov/outreach-and-educationoutreachffsprovpartprogprovider-partnership-email-archive/2022-10-13-mlnc#_Toc116466499.
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c. CY 2023 340B Drug Payment Policy
    As discussed above, given when the Supreme Court's decision in 
American Hospital Association v. Becerra was issued during our annual 
rulemaking process, we lacked the necessary time to account for that 
decision before issuing the CY 2023 OPPS/ASC proposed rule. For that 
reason, for CY 2023, we formally proposed to continue the 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 explained 
that we fully anticipated adopting a policy of paying ASP plus 6 
percent for 340B-acquired drugs and biologicals in this final rule with 
comment period. This formal proposal was in accordance with the policy 
choices and calculations that CMS made in the months leading up to 
publication of the CY 2023 OPPS/ASC proposed rule before the Supreme 
Court issued its decision in American Hospital Association. We 
proposed, 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 
proposed 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 proposed to continue the 340B payment adjustment 
for WAC-priced drugs, which is WAC minus 22.5 percent. We proposed that 
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 
proposed 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.
    Finally, we formally proposed 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.'' \108\
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    \108\ CMS established two Healthcare Common Procedure Coding 
System (HCPCS) Level II modifiers to identify 340B-acquired drugs:
     Modifier ``JG'' Drug or biological acquired with 340B 
drug pricing program discount, reported to trigger the payment 
reduction.
     Modifier ``TB'' Drug or biological acquired with 340B 
drug pricing program discount, reported for informational purposes.
---------------------------------------------------------------------------

    Again, we noted that, in light of the Supreme Court's decision in 
American Hospital Association, we fully anticipated reverting to our 
prior policy of paying for drugs at ASP plus 6 percent, regardless of 
whether they were acquired through the 340B program for CY 2023. We 
also explained that we fully expected that when we reverted to paying 
for drugs acquired through the 340B program at ASP plus 6 percent, we 
would 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

[[Page 71974]]

methodology for drugs and biologicals purchased under the 340B Program, 
we estimated 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.
    We welcomed public comments on the budget neutrality adjustment and 
stated that they would 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 plus 6 percent we also published the 340B Alternative supporting 
files, which included 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.
    We received the following public comments on our proposal for CY 
2023.
    Comment: The vast majority of commenters supported our intention to 
revert to our prior policy of paying for drugs at ASP plus 6 percent 
for non-pass-through separately payable drugs and biosimilar products 
acquired under the 340B program for CY 2023.
    Response: We thank these commenters for their comments.
    Comment: Some commenters opposed reverting to an ASP plus 6 percent 
payment rate and argued for a new drug cost survey to inform the 
payment rate for CY 2024. These commenters argued that the ASP plus 6 
percent payment rate was excessive and that conducting a new drug cost 
survey would ensure that CMS is paying a rate that more closely 
approximates the costs incurred by 340B providers.
    Response: We thank the commenters for their suggestions regarding 
drug cost surveys, we are under no statutory obligation to necessarily 
conduct a drug cost survey to inform the payment rate for any given 
year. According to the GAO hospitals survey in 2005, surveys be useful 
on occasion to validate rate-setting data CMS receives, such as ASP, 
but they also create a burden for hospitals and the data collector. For 
these reasons, GAO recommended that CMS survey hospitals only 
occasionally to validate hospital acquisition costs. Nonetheless, we 
will take the commenters' feedback regarding a survey of hospital drug 
acquisition costs into consideration for potential future rulemaking.
    Comment: One commenter who supported CMS conducting a new drug cost 
survey, argued that reverting to the ASP plus 6 percent payment rate 
would be arbitrary and capricious under the Administrative Procedure 
Act because (1) CMS did not examine relevant data provided in the CY 
2021 OPPS proposed rule, which provides evidence for finalizing 340B 
payment as ASP minus 28.7 percent; (2) CMS did not articulate a 
satisfactory explanation for the policy change to finalize payment at 
ASP plus 6 percent; (3) reversion to the ASP plus 6 percent payment 
rate is contrary to substantial evidence that 340B hospitals are vastly 
overpaid for drugs; and (4) reversion to the ASP plus 6 percent payment 
rate is otherwise an unreasonable decision.
    Response: Our policy for CY 2023 is consistent with the Supreme 
Court's decision in American Hospital Association. Additionally, we are 
reverting to our longstanding payment methodology, which is described 
in detail throughout section V. (OPPS Payment for Drugs, Biologicals, 
and Radiopharmaceuticals) of this final rule. This payment methodology 
is consistent with section 1833(t)(14)(A)(iii)(II) of the Act and is 
based on many years of notice and comment rulemaking.
    Comment: Many commenters opposed our proposal to continue requiring 
hospitals to use the ``JG'' and ``TB'' claims modifiers in CY 2023 to 
identify drugs acquired with the 340B discount and requested that we 
discontinue their use.
    Response: We appreciate these commenters' concerns; however, it is 
important for us to maintain the 340B modifiers for CY 2023 to allow us 
to track the utilization of 340B acquired drugs and biologicals under 
the OPPS.
    For CY 2023, we are maintaining the requirement for 340B hospitals 
to report the ``JG'' and ``TB'' modifiers for informational purposes, 
but they will have no effect on payment rates. The presence of modifier 
``JG'' on a claim to indicate a drug is acquired under the 340B program 
will not trigger a payment reduction and will be used only for 
informational purposes. Claims for 340B drugs and biologicals 
identified with a ``JG'' modifier will be paid at the same statutory 
default rate as non-340B drugs and biologicals. For CY 2023, rural sole 
community hospitals, children's hospitals, and PPS-exempt cancer 
hospitals should continue to bill the modifier ``TB'' on claim lines 
for drugs acquired through the 340B Program. All other 340B providers 
should continue to report the modifier ``JG.'' We believe maintaining 
both modifiers will reduce provider burden compared to shifting to a 
single modifier, as all providers can continue utilizing the modifier 
(either ``JG'' or ``TB'') in the same manner as they have been utilized 
for the past five calendar years.
    For CY 2023, we are finalizing the reversion to a payment rate of, 
generally, ASP plus 6 percent as the default payment rate for drugs and 
biologicals acquired under the 340B program and will pay for these 
drugs and biologicals no differently than we pay for those drugs and 
biologicals that are not acquired under the 340B program.
    Comment: A few commenters supported CMS's proposal to continue to 
require hospitals to use 340B billing modifiers to report separately 
payable drugs that were acquired under the 340B program.
    Response: We thank commenters for their input and it is important 
for us to maintain the 340B modifiers for CY 2023 to allow us to track 
the utilization of 340B acquired drugs and biologicals under the OPPS. 
For CY 2023, rural SCHs, children's hospitals, and PPS-exempt cancer 
hospitals) will report the ``TB'' modifier when a drug is acquired 
under the 340B program and paid under the OPPS. For CY 2023, hospitals 
reporting the modifier ``JG'' when a drug is acquired under the 340B 
program will not trigger a payment reduction. Instead, the modifier 
``JG'' is for informational purposes only and will be paid at the 
statutory payment rate for drugs and biologicals. Similarly, the ``TB'' 
modifier will continue to be for informational purpose only and 
reported by rural SCHs, children's hospitals, and PPS-exempt cancer 
hospitals. Providers shall continue utilizing the modifier (either 
``JG'' or ``TB'') in the same manner as they have been utilized for the 
past five calendar years.
    Comment: Many commenters opposed our intent to budget neutralize 
the increased payment for 340B drugs for CY 2023, arguing that the 
proposed negative 4.04 percent budget neutrality adjustment to the 
conversion factor would cancel out the 2.7 percent fee schedule 
increase. One of these commenters requested that we waive the 340B-
related budget neutrality adjustment for 2023 and instead engage with 
interested parties in the CY 2024 OPPS/ASC proposed rule to identify 
other remedies. Several of these commenters suggested, in the event CMS 
deems that an adjustment to the CY 2023 conversion factor is necessary, 
that CMS spread the CY 2023 adjustment out over four to five years to 
mitigate the single-year impact on hospitals.

[[Page 71975]]

    Response: We appreciate the commenters' concerns regarding the 
effect of the 340B budget neutrality adjustment for 2023. However, 
under sections 1833(t)(9)(B) and (t)(14)(H), adjustments for a year may 
not cause the estimated amount of expenditures for that year to 
increase or decrease from the estimated amount of expenditures that 
would have been made if the adjustments had not been made, and 
additional expenditures for drugs and biologicals in years after 2005 
must be taken account in establishing the conversion weighting, and 
other adjustment factors. Accordingly, the increase in payments for 
340B drugs must be accompanied by a corresponding budget neutrality 
adjustment in CY 2023. We calculated the proposed budget neutrality 
adjustment to conversion factor of 0.9596 using our standard 
methodology. However, we acknowledge there are alternative 
methodologies to calculate the budget neutrality factor consistent with 
the statute and, as discussed further below, agree with the commenters 
that such an alternative is more appropriate in these circumstances.
    Comment: Many commenters requested that, in the place of the -4.04 
percent adjustment to the CY 2023 OPPS conversion factor to maintain 
budget neutrality with CY 2022, we instead apply a budget neutrality 
adjustment that offsets the 3.19 percent increase we applied to the 
conversion factor in CY 2018 to account for the decreased payment for 
340B drugs under our policy, which would have the effect of undoing 
that policy.
    Response: We agree with commenters that under these specific 
circumstances it is appropriate to decrease payments for non-drug items 
and services by a percentage that would offset the percentage by which 
they were increased when CMS implemented the 340B policy in CY 2018. 
Accordingly, we are adopting this methodology based on the 
consideration of comments received. Our adjustment to the CY 2023 OPPS 
conversion factor will be 0.9691 rather than 0.9596, reflecting a 
budget neutrality adjustment of -3.09 percent rather than the -4.04 
percent we proposed. Reducing the conversion factor by 3.09 percent in 
CY 2023 is the reduction that is necessary to fully offset the 3.19 
percent increase to the conversion factor we implemented in CY 2018. 
The -3.09 percent adjustment is applied by multiplying the conversion 
factor by 0.9691 (1/1.0319). This adjustment to the conversion factor 
is appropriate in these circumstances, including because it removes the 
effect of the 340B policy as originally adopted in CY 2018, which was 
recently invalidated by the Supreme Court as explained above, from the 
CY 2023 conversion factor and ensures it is equivalent to the 
conversion factor that would be in place if the 340B drug payment 
policy had never been implemented.
    Comment: A commenter believed that the payment for non-drug 
services should have increased since 2018 as the 340B expenditure 
increased through application of an updated budget neutrality 
adjustment. The commenter suggested that CMS could apply a one-time 
budget neutrality adjustment for CY 2023 to increase non-drug payments 
to account for what commenters believed were underpayments for non-drug 
items and services in CY 2020 through CY 2022. In addition, the 
commenter recommended CMS apply a net budget neutrality adjustment for 
pass-through payments of 1.03 percent in place of the 0.34 budget 
neutrality adjustment reflected in the proposed rule due to the CY 2023 
payment rate for 340B drugs of ASP plus 6 percent.
    Response: We thank the commenter for the recommendation but the 
first comment is related to the budget neutrality adjustment from prior 
years. We will take it under consideration as we prepare a separate 
proposed rule to address the remedy for CY 2018 to 2022. In regards to 
the passthrough payment comment, we have updated the passthrough 
payment estimate for CY 2023 to account for the change in 340B policy 
as discussed in the passthrough payment estimate section of this final 
rule.
    Comment: Many commenters urged CMS to discard the 2020 drug survey 
for future ratesetting because the commenters contend it was not 
performed consistent with the statute. Many commenters also encouraged 
CMS to undertake, without delay, the survey of drug acquisition costs 
required by the Medicare statute and base OPPS payments for 340B 
hospitals on that survey starting with CY 2023.
    Response: We are not conducting or taking into account the results 
of a drug acquisition cost survey for CY 2023. For CY 2023, we are 
finalizing our policy to generally pay ASP plus 6 percent for 
separately payable drugs and biologicals, regardless of whether they 
were acquired through the 340B program
    Comment: One commenter requested that when determining its 340B 
payment policy for CY 2023, CMS consider the potentially negative 
impacts on rural hospitals that continue to struggle financially.
    Response: We appreciate this commenter's feedback. We note that 
while the original intent of this policy was not to benefit rural 
hospitals financially, we recognize that ending this policy means that 
payment rates for non-drug items and services will decrease, which will 
lead to lower total payments for all hospitals, including non-340B 
hospitals or hospitals that were exempt from the 340B payment policy 
for which the 340B policy had a positive financial effect. We 
appreciate the role rural hospitals play in serving their communities 
and understand the financial challenges of rural hospitals. As 
discussed previously, since the Supreme Court invalidated the previous 
payment rate of ASP minus 22.5 percent for 340B acquired drugs and 
biologicals, we must decrease other rates to offset the increase in 
340B drug payment. We believe the best interpretation of the statute is 
to require budget neutrality across the program.
    Comment: Several commenters requested that the ASC payment system 
be insulated from any reductions to the OPPS conversion factor for CY 
2023.
    Response: We note the budget neutrality adjustment does not impact 
the ASC conversion factor; however, because the ASC standard 
ratesetting methodology adopts OPPS payment rates and the device 
portion (or device offset amount), the revised OPPS conversion factor 
will have an impact on the ASC payment system. Specifically, because 
the device portion for device-intensive procedures is held constant 
with the OPPS and is not calculated with the ASC conversion factor, the 
revised OPPS conversion factor will lower the device portion for 
device-intensive procedures, including the payment rates for device-
intensive procedures under the ASC payment system. However, the decline 
in expenditures for device portions under the ASC payment system is 
fully offset through the ASC weight scalar, which increases payment for 
the non-device portions of all covered surgical procedures and certain 
covered ancillary services.
    Comment: One commenter expressed concern that the interaction of 
the 340B payment reduction with the exemption for pass-through products 
has the potential to create a disparity between payment for biosimilars 
with pass-through status and their reference products and branded pass-
through and nonpass-through products. The commenter contends that the 
disparity created by these combined policies could cause inappropriate 
financial incentives for prescribing biosimilars on pass-through status 
rather than nonpass-

[[Page 71976]]

through reference products including financial incentives to prescribe 
that could conflict inappropriately with clinical guidelines and/or 
standards of care.
    Response: We note that, by the time this final rule with comment 
period is issued, the 340B payment adjustment will no longer be in 
effect as we are reverting to our standard payment methodology of 
paying a statutory default amount of, in general, ASP plus 6 percent 
regardless of whether a drug is acquired under the 340B program.
    Comment: One commenter encouraged CMS and HHS to work with HRSA to 
improve the integrity of the 340B Drug Pricing Program, such as 
clarifying the definition of a ``patient,'' placing greater guardrails 
on when contract pharmacies may access the Program's discounts, and 
revising the formula for Disproportionate Share Hospital status from 
one based on inpatient days to one that is based on outpatient 
utilization.
    Response: We thank the commenter for this comment and note that 
this comment is outside of the scope of this final rule as we did not 
make any proposals involving the definition of a ``patient,'' placing 
greater guardrails on when contract pharmacies may access the 340B 
program's discounts, or revising the formula for Disproportionate Share 
Hospital status for CY 2023.
    After consideration of the public comments, for CY 2023 we are 
reverting to ASP plus 6 percent as the default payment rate for 340B-
acquired drugs and biologicals and will pay for 340B-acquired drugs and 
biologicals no differently than we pay for drugs and biologicals that 
are not acquired through the 340B program. We are finalizing a budget 
neutrality adjustment to the CY 2023 OPPS conversion factor of 0.9691 
percent rather than the 0.9596 percent adjustment we used for the 
alternative files in the proposed rule. This adjustment offsets the 
prior increase of 3.19 percent that was applied to the conversion 
factor when we implemented the 340B payment policy in CY 2018 in a 
budget neutrality manner.
    Effective January 1, 2023, the ``JG'' modifier will be used by 
hospitals (except for rural sole community hospitals, children's 
hospitals, and PPS-exempt cancer hospitals) to identify 340B drugs for 
informational purposes, rather than to trigger a payment adjustment. 
For CY 2023, rural sole community hospitals, children's hospitals, and 
PPS-exempt cancer hospitals will continue to use the ``TB'' modifier to 
identify 340B drugs for informational purposes.
7. High Cost/Low Cost Threshold for Packaged Skin Substitutes
a. Background
    In the CY 2014 OPPS/ASC final rule with comment period (78 FR 
74938), we unconditionally packaged skin substitute products into their 
associated surgical procedures as part of a broader policy to package 
all drugs and biologicals that function as supplies when used in a 
surgical procedure. As part of the policy to package skin substitutes, 
we also finalized a methodology that divides the skin substitutes into 
a high cost group and a low cost group, in order to ensure adequate 
resource homogeneity among APC assignments for the skin substitute 
application procedures (78 FR 74933). 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 (87 FR 2058) 
(the final rule correction and corrected Addenda A and B are available 
on the CMS website (https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices)).
    We have continued the high cost/low cost categories policy since CY 
2014, and we proposed 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

[[Page 71977]]

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 proposed 
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 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 clarified in the proposed rule that the 
availability of a HCPCS code for a particular human cell, tissue, or 
cellular or tissue-based product (HCT/P) does not mean that that 
product is appropriately regulated solely under section 361 of the PHS 
Act and the FDA regulations in 21 CFR part 1271. We noted that 
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 proposed to assign each skin 
substitute that exceeds either the MUC threshold or the PDC threshold 
to the high cost group. In addition, we proposed to assign any skin 
substitute with a MUC or a PDC that does not exceed either the MUC 
threshold or the PDC threshold to the low cost group except that we 
proposed 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 proposed to continue to assign skin substitutes 
with pass-through payment status to the high cost category. We proposed 
to assign skin substitutes with pricing information but without claims 
data to calculate a geometric MUC or PDC to either the high cost or low 
cost category based on the product's ASP+6 percent payment rate as 
compared to the MUC threshold. If ASP is not available, we proposed to 
use WAC+3 percent to assign a product to either the high cost or low 
cost category. Finally, if neither ASP nor WAC is available, we 
proposed to use 95 percent of AWP to assign a skin substitute to either 
the high cost or low cost category. We proposed to continue to use 
WAC+3 percent instead of WAC+6 percent to conform to our proposed 
policy described in section V.B.2.b of the CY 2023 OPPS/ASC proposed 
rule (87 FR 44645 through 44646) 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 (87 FR 46028 through 46029), there 
was 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 starting in CY 2024. We explained in the 
proposed rule that if this proposed policy is finalized, manufacturers 
would not report ASPs for skin substitute products, 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. We explained that having WAC and AWP pricing 
would allow us to continue to use our alternative process to assign 
graft skin substitute products to the high cost group when claims data 
for a product is not available.
    Comment: The HOP Panel recommended and several commenters supported 
ending the packaging of the graft skin substitute add-on codes (CPT 
codes 15272, 15274, 15276, and 15278; HCPCS codes C5272, C5274, C5276, 
and C5278). The HOP Panel and the commenters requested that these codes 
be assigned to APCs that reflect the estimated costs of these service 
codes. Commenters claim that packaging the graft skin substitute add-on 
codes eliminates the variation in payment for wound care treatments 
based on the size of the wound. They assert that providers are 
discouraged from treating wounds between 26 and 99 cm2 and over 100

[[Page 71978]]

cm2 in the outpatient hospital setting because of the financial losses 
they experience to provide such care. Commenters believe that packaging 
graft skin substitute add-on codes disrupts the methodology of how the 
American Medical Association (AMA), the organization that manages CPT 
service codes, intended graft skin substitute procedures to be paid.
    Response: We do not agree that the recommendation of the HOP Panel 
and the commenters is appropriate for paying for graft skin substitutes 
under the OPPS. The OPPS is a prospective payment system and not a fee-
for-service payment system. That means that we generally attempt to 
make one payment for all of the services billed with the primary 
medical procedure, including add-on procedures such as the ones 
described by CPT codes 15272, 15274, 15276, and 15278, and HCPCS codes 
C5272, C5274, C5276, and C5278.
    More specifically, we calculate the OPPS payment rate by first 
calculating the geometric mean cost of the procedure. This calculation 
includes claims for individual services that used a lower level of 
resources and claims for individual services that used a higher level 
of resources. The resulting geometric mean cost will reflect the median 
service cost for a given medical procedure. Next, we group the medical 
procedure with other medical procedures with clinical and resource 
similarity in an APC and calculate the geometric mean of these related 
procedures to generate a base payment rate for all procedures assigned 
to the APC.
    A prospective payment system like the OPPS is designed to pay 
providers the geometric mean cost of the primary service they provide, 
and such a system encourages efficiencies and cost-savings in the 
administration of health care. However, a prospective payment system is 
not intended to discourage providers from rendering medically necessary 
care to patients. For example, it is possible that a provider could 
experience a financial loss when they perform a service where a patient 
receives 85 cm\2\ of a graft skin substitute product, but that same 
provider could see a financial gain when the next patient receives a 
skin graft where only 10 cm\2\ of product is used. Paying separately 
for add-on codes in a prospective payment system defeats the goals of 
such a payment system. If providers are paid at cost or nearly at cost 
for each individual service they render, there is no incentive for them 
to control costs. Add-on codes should be packaged with the primary 
medical service to be able to establish a median payment rate that 
gives providers incentives to keep their costs in line with typical 
providers throughout the Medicare program. The need for cost 
efficiencies in the application of graft skin substitutes to treat 
wounds is no different than need for cost efficiencies in other 
procedures administered in the outpatient hospital setting. Therefore, 
we believe that add-on codes, including the add-on codes for the 
administration of graft skin substitutes, should remain packaged to 
maintain the integrity of the OPPS.
    Comment: The HOP Panel recommended and several commenters supported 
ensuring that the payment rate for graft skin substitute procedures be 
the same no matter where on the body the graft skin substitute product 
is applied to the patient. There are four graft skin substitute 
application procedures for high cost skin substitute products (CPT 
codes 15271, 15273, 15275, and 15277) and a similar four graft skin 
substitute applications for low cost skin substitute products (HCPCS 
codes C5272, C5274, C5276, and C5278). The reason there are four 
application service codes is that there are different service codes for 
applying graft skin substitutes to children and infants as compared to 
adults; and there are different service codes for applying graft skin 
substitutes to the trunk, arms, and legs as compared to the face, 
scalp, eyelids, mouth, neck, ears, orbits, genitalia, hands, feet, 
fingers, and toes. Commenters claim that the cost to apply graft skin 
substitute products does not depend on the location of the wound 
because the same amount of product is used on the wound and the same 
clinical resources are used to treat the wound independent of the 
location of the wound.
    Two other commenters made a similar request, asking that CPT code 
15277 (Application of skin substitute graft to face, scalp, eyelids, 
mouth, neck, ears, orbits, genitalia, hands, feet, and/or multiple 
digits, total wound surface area greater than or equal to 100 sq cm; 
first 100 sq cm wound surface area, or 1 percent of body area of 
infants and children) that is currently assigned to APC 5054 (Level 4 
Skin Procedures) be reassigned to APC 5055 (Level 5 Skin Procedures). 
That would mean that the two graft skin substitute application 
procedures for children for high cost skin substitute products (CPT 
code 15273 and 15277) would be in the same APC.
    Response: We appreciate commenters' concerns and note that current 
codes describing the application of high and low cost graft skin 
substitutes for adults (CPT codes 15271 and 15275, and HCPCS codes 
C5272 and C5276) have been assigned to the same APC (5054). Because 
they are currently included in the same APC, OPPS payment for them is 
the same, and this payment policy is consistent with the recommendation 
from the HOP Panel and other commenters. We note that the codes 
describing the application of high and low cost products for children 
and infants on the trunk, arms, and legs (CPT code 15273 or HCPCS code 
C5274) have been assigned to a lower-paying APC (APC 5054) than the APC 
assignment for the application of high and low cost graft skin 
substitute products for children in the face, scalp, eyelids, mouth, 
neck, ears, orbits, genitalia, hand, feet, fingers, and toes--CPT code 
15277 or HCPCS code C5277, which are assigned to APC 5055. The 
differences in costs that have determined APC assignments for these 
services for children have been supported by historical cost data. We 
also note that none of these service codes are in violation of the 2-
times rule.
    Comment: Multiple commenters requested that manufacturers continue 
to 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 when claims cost data from the OPPS 
for a product are not available. The commenters observed a 
contradiction between language in CY 2023 OPPS/ASC proposed rule and 
language in the CY 2023 PFS proposed rule. The commenters noted that 
the CY 2023 OPPS/ASC proposed rule stated that the CY 2023 PFS proposed 
rule would contain 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, and that the proposal 
could take effect in CY 2023. These commenters further stated that the 
CY 2023 PFS rule stated that we were considering paying for skin 
substitute products furnished in the physician office setting as 
incident-to supplies. However, the commenters stated that the CY 2023 
PFS proposed rule also stated that the earliest such a change would be 
proposed would be for CY 2024.
    Response: The statement included in the CY 2023 OPPS/ASC proposed 
rule was incorrect. We did not propose to pay for skin substitutes as 
contractor-priced incident to supplies in the CY 2023 PFS proposed 
rule. Instead, we proposed to treat skin substitutes (including 
synthetic skin substitutes) as incident to supplies as described under 
section 1861(s)(2)(A) of the Act when furnished in non-facility 
settings and to

[[Page 71979]]

include the costs of those products as resource inputs in establishing 
practice expense RVUs for associated physician's services, effective 
January 1, 2024. We also refer interested parties to the CY 2023 PFS 
final rule for more information on this proposal and the policy that we 
are finalizing for skin substitutes furnished in the physician office 
setting. With respect to payment for skin substitutes under the OPPS, 
since the ASP data will be available, we can continue to use ASP+6 
percent to determine if a skin substitute that does not have OPPS 
claims cost data should be assigned to the high cost or low cost skin 
substitute group. The ASP+6 percent rate would be used in the same 
manner as WAC+3 percent and 95 percent of AWP as proposed in the CY 
2023 OPPS/ASC proposed rule.
    Comment: One commenter requested that we assign powdered skin 
substitute products to the either the high cost skin substitute group 
or the low cost skin substitute group as is currently done for graft 
skin substitute products. The commenter asserted that ``powder products 
have demonstrated the same ability to form a sheet scaffolding for 
wound healing as sheet products,'' and ``powdered products generally 
consist of a micronized sheet skin substitute broken down into 
particulate form.'' The commenter also notes that there are no existing 
CPT codes that describe the application of powdered skin substitutes.
    Response: The high cost and low cost skin substitute groups contain 
four CPT codes (CPT codes 15271, 15273, 15275, 15277) and four HCPCS 
codes (HCPCS codes C5271, C5273, C5275, and C5277) that describe the 
application of ``skin substitute graft.'' We interpret the term ``skin 
substitute graft'' to mean the application of sheet skin substitute 
products that would be grafted in the wound area. A powder is not a 
graft even if the product forms a sheet scaffolding similar to a skin 
substitute product. If a skin substitute product is not a sheet 
product, then it is not described by the skin substitute graft 
application codes, and the product cannot be assigned to the high cost 
or low cost skin substitute groups.
    Comment: One commenter asked that we eliminate the high cost and 
low cost skin substitute groups for graft skin substitute products. 
Instead, the commenter requested that we no longer policy package skin 
substitute products in the OPPS. Instead, the commenter suggested we 
should pay for graft skin substitutes separate from the application 
procedure based on their ASP+6 percent price where available.
    Response: A substantial portion of the cost of a skin substitute 
graft application procedure is the graft skin substitute product 
itself, and the cost of the skin substitute graft products is reflected 
in the cost of the overall procedure. Packaging the cost of graft skin 
substitute products into the affiliated procedures leads to cost 
savings and efficiencies in the use of graft skin substitute products. 
Providers have the opportunity to assess the value of products of 
varying costs. The payment rates for the application procedures for 
graft skin substitute products reflect the decisions of providers all 
across the United States between the costs and benefits of all 
available products and should limit the use of the highest-cost graft 
skin substitute products over lower-cost products unless the highest-
cost products are found to be clinically superior. Packaging of graft 
skin substitute products helps to reduce costs for graft skin 
substitute procedures and allows more Medicare resources to be used for 
other categories of medical services.
    Comment: Multiple commenters supported our proposal to continue to 
assign skin substitutes to the low cost or high cost group. Commenters 
also supported our proposal that any skin substitute product that was 
assigned to the high cost group in CY 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.
    Response: We appreciate the commenters' support for our proposals.
    Comment: One commenter supported our assignment of HCPCS code Q4127 
(Talymed, per square centimeter) to the high cost skin substitute 
group. However, the commenter would prefer that we use ASP+6 percent, 
WAC+3 percent, or 95 percent of AWP to determine if the cost of the 
graft skin substitute product exceeds the overall MUC threshold or 
overall PDC threshold rather than using the MUC of the individual graft 
skin substitute product to compare against the overall MUC threshold or 
overall PDC threshold.
    Response: We appreciate the support of the commenter regarding the 
high cost group assignment for HCPCS Code Q4127. However, we do not 
support the request to use ASP+6 percent, WAC+3 percent, or 95 percent 
of AWP over an individual graft skin substitute product's MUC to 
determine if a product should be assigned to the high cost or low cost 
skin substitute group. The MUC of a product based on OPPS claims data 
is a better estimate of the cost of a graft skin substitute product for 
Medicare as compared to the other pricing measures because the MUC is 
based on Medicare payment data and reports the actual costs of the 
graft skin substitute product for hospitals.
    Comment: One commenter, the manufacturer, requested that we change 
the skin substitute group assignment for HCPCS code A2001 (Innovamatrix 
ac, per square centimeter) to reflect that the graft skin substitute 
product had been assigned to the high cost skin substitute group since 
January 1, 2022, and therefore should be assigned to the high cost skin 
substitute group for CY 2023.
    Response: We will update Table 62 to reflect that HCPCS code A2001 
will be assigned to the high cost skin substitute group for CY 2023.
    Comment: One commenter, the manufacturer, requested that HCPCS 
codes Q4122 (Dermacell, per square centimeter) and Q4150 (Allowrap ds 
or dry, per square centimeter) continue to be assigned to the high-cost 
skin substitute group.
    Response: HCPCS codes Q4122 and Q4150 were both assigned to the 
high cost group in CY 2022 and also were proposed to be assigned to the 
high-cost group for CY 2023. Any skin substitute assigned to the high 
cost group in CY 2022 will continue to be assigned to the high cost 
group in CY 2023 even if the MUC and PDC for the skin substitute 
product is below the overall MUC and PDC thresholds for all skin 
substitute products. Accordingly, we are finalizing our proposal to 
assign HCPCS codes Q4122 and Q4150 to the high-cost group in CY 2023.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification. Specifically, for CY 
2023, we are finalizing our proposal to continue to assign skin 
substitutes with pass-through payment status to the high cost category. 
We are also finalizing our proposal to assign skin substitutes with 
pricing information but without claims data to calculate a geometric 
MUC or PDC to either the high cost or low cost category based on the 
product's ASP+6 percent payment rate as compared to the MUC threshold.
    If ASP is not available, we are finalizing our policy 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 will use 95 
percent of AWP to assign a skin substitute to either the high cost or 
low cost category. New skin substitutes without pricing information 
would be assigned to the low cost category until pricing information is 
available through pricing compendia to compare to the CY 2023 MUC and 
PDC thresholds. Table 62 includes the final CY 2023 cost

[[Page 71980]]

category assignment for each skin substitute product covered by these 
policies and by the policies implemented as a result of the retirement 
of HCPCS Code C1849.
c. 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 
through 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.
    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 of that product 
provided WAC pricing data that showed the cost of the product was above 
the MUC threshold for graft skin substitute products and therefore, 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). 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, in CY 2022 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 (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.
    In the CY 2023 OPPS/ASC proposed rule, we noted that starting in 
January 2022, all new skin substitute products with an FDA 510(k) 
clearance received product-specific A-codes in the HCPCS A2XXX series 
(87 FR 44655). We also noted that 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. Nonetheless, 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). Starting in January 2022, skin substitute 
products with an 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 because they are not described by HCPCS code C1849, we made all 
HCPCS A2XXX series codes payable under the OPPS earlier this year. In 
the ``April 2022 Update of the Hospital Outpatient Prospective Payment 
System (OPPS)--Change Request 12666'' (https://www.cms.gov/files/document/r11305cp.pdf), effective April 1, 2022, we changed the status 
indicator of all skin substitute products described in the HCPCS A2XXX 
series to ``N'' (Paid under OPPS; payment is packaged into payment for 
other services). This change allowed packaged payment under the OPPS 
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 do not have a product-specific HCPCS 
code. 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 skin substitute products and for other unclassified 
FDA 510(k)-cleared products identified by HCPCS code A4100, we 
explained in the CY 2023 OPPS/ASC proposed rule that we believe 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 
were 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 that describe the same product: HCPCS code C1849 or the code in 
the HCPCS A2XXX series. For these reasons, we believed it was important 
to retire HCPCS code C1849.
    Nonetheless, we did not want to simply 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

[[Page 71981]]

high cost skin substitute group continued 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 two 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 did 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 
also consistent with our proposed policy in section V.B.7.b in the CY 
2023 OPPS/ASC proposed rule (87 FR 44650 through 44651) 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 proposed to delete HCPCS code C1849 
(Skin substitute, synthetic, resorbable, by per square centimeter). We 
also proposed 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 would be assigned to the 
high cost skin substitute group. We wanted to ensure these 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 product-
specific A-codes even if cost and pricing data are not available for 
these products. We believed 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 the 
subsequent year once a product is assigned to the high cost group for a 
given year.
    We also proposed that HCPCS code A4100 (Skin substitute, fda 
cleared as a device, not otherwise specified) would be assigned to the 
low cost skin substitute group, which was consistent with our existing 
payment policy that unclassified graft skin substitute products be 
assigned to the low cost skin substitute group. We welcomed comments on 
these proposals.
    Comment: Multiple commenters supported our proposal to delete HCPCS 
code C1849 and our proposal 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.
    Response: We appreciate the commenters' support for our proposals.
    Comment: Two commenters supported our proposal to assign HCPCS code 
A4100 to the low cost skin substitute group.
    Response: We appreciate the commenters' support for our proposal.
    Comment: Multiple commenters noted that when we proposed to delete 
HCPCS code C1849 and assign any current or future product-specific code 
in the HCPCS A2XXX series that is described by HCPCS code C1849 to the 
high cost group that we did not propose any additional A-codes to be 
assigned to the high cost skin substitute group beyond the A-codes that 
were identified as being assigned to the high cost group as of April 1, 
2022. These commenters requested that we identify the A-codes that 
would be described by HCPCS code C1849 and assign those codes to the 
high cost group. These commenters also suggested products that they 
believe are synthetic graft skin substitute products that are described 
by HCPCS code C1849. Other commenters requested that newer graft skin 
substitute products that were given codes in the HCPCS A2XXX series 
after the OPPS proposed rule is released be assigned to the high cost 
group.
    Response: We agree with the commenters that we need to state which 
graft skin substitute products that are assigned to the HCPCS A2XXX 
series will be in the high cost group starting January 1, 2023, based 
on the code descriptor for HCPCS code C1849 (Skin substitute, 
synthetic, resorbable, by per square centimeter). As explained in the 
CY 2023 PFS proposed rule (87 FR 46028 through 46029), the current 
categorization of skin substitutes as either synthetic or non-synthetic 
is not mutually exclusive given the expansion of skin substitute 
products that may contain both biological and synthetic elements. 
Having products with both biological and synthetic elements leads to 
difficulty defining which of the products assigned to the A2XXX series 
would be considered ``synthetic'' and described by HCPCS code C1849. 
Therefore, we have decided to assign all graft skin substitute products 
with a HCPCS A2XXX series code to the high cost skin substitute group 
starting January 1, 2023.
    After consideration of the public comments we received, we are 
finalizing our proposals with modifications. We are finalizing our 
proposal to delete HCPCS code C1849. We are also finalizing our 
proposal 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. In addition, any graft skin substitute 
product that is assigned a code in the HCPCS A2XXX series in the future 
will 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 product-specific A-codes even if cost and pricing 
data are not available for these products.
    We are also finalizing our proposal 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. 
Table 62 includes the final CY 2023 cost category assignment for each 
skin substitute product covered by these policies.
BILLING CODE 4120-01-P

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d. Key Objectives/Roadmap for Consistent Treatment of Skin Substitutes
    We outlined our HCPCS Level II coding and payment policy objectives 
in the CY 2023 OPPS/ASC proposed rule as we believed it would be 
beneficial for interested parties to understand, 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 settings; 2) 
ensuring that appropriate HCPCS codes describe skin substitute 
products; 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.
    In past years, 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 9 skin substitute 
products in accordance with the policy finalized in the CY 2022 PFS 
final rule, which are codes we typically assign to identify ambulance 
services and medical supplies, instead of ``Q'' codes, which we 
typically assign to identify drugs and biologicals. 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 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 what they will be paid when 
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, which would allow CMS 
sufficient time to consider input from interested parties on coding and 
policy changes primarily through our rulemaking process, with the goal 
of ensuring access to medically necessary care involving the use of 
these products.
    We welcomed 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 welcomed feedback on 
the 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 
settings, we included similar proposed changes in the CY 2023 PFS 
proposed rule, which were issued near the time the CY 2023 OPPS/ASC 
proposed rule was issued.
    Comment: A few commenters expressed support for CMS's efforts to 
create a consistent payment approach for skin substitutes across 
physician office and hospital outpatient department settings. One 
commenter agreed with the multi-year timeline and appreciated CMS 
recognizing the need to ensure that changes in skin substitute policies 
do not adversely impact beneficiary access and encouraged CMS to 
promote transparency as reforms are contemplated and allow stakeholders 
to review and comment on detailed proposals prior to adoption.
    Response: We appreciate the commenters' support of our key 
objectives and roadmap.
e. Changing the Terminology of Skin Substitutes
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44657), we stated that 
as we work to clarify our policies for these products, we believe that 
the existing terminology of ``skin substitutes'' 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 86065). 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. 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 typically regulated as devices by the FDA 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. 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. The FDA approves new drugs through 
the New Drug Application (NDA), and approves biologic products through 
the Biologics License Application (BLA).
    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 proposed to replace the term ``skin 
substitutes'' with the term ``wound care management'' or ``wound care 
management products.'' We explained that we believe these new terms 
more accurately describe 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 noted that we understand that the 
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,

[[Page 71986]]

99487, 99489, 99490-99491) that are commonly used by healthcare 
professionals. We also explained that we understand that the use of 
``management'' in the proposed terms might be construed by some to 
implicate AMA CPT Evaluation or Assessment and Management (E/M) codes. 
We clarified 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 noted that 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 alternatives considered.
    We solicited comment on the 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 
noted that we were 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 requested comment on other 
possible terms that could be used to more meaningfully and accurately 
describe the suite of products currently referred to as skin 
substitutes.
    Comment: One commenter supported the change in terminology to wound 
care management or wound care management products.
    Several commenters disagreed with the proposed terminology change. 
Some commenters suggested we should retain the term skin substitute. A 
few commenters suggested that CMS work directly with the CPT Editorial 
Panel and medical specialty societies to determine the optimal approach 
to updating skin substitutes terminology.
    Another commenter did not agree that a terminology change is 
necessary, but if CMS determined that it was, they suggested the term 
``wound care products.'' The commenter stated that inclusion of the 
word management in any description could be inappropriately construed 
to imply evaluation assessment and management services and would be 
confusing. Another commenter expressed support for efforts to more 
accurately define skin substitutes, but did not agree with the proposed 
terminology.
    A few commenters suggested alternatives including: Cellular and/or 
Synthetic Grafts for Surgical Wound Management; Bioengineered, Cellular 
or Tissue-Based Products. A few commenters supported use of one of our 
alternative recommended terms, Cellular and/or tissue-based products 
(CTPs) for skin wounds, and stated that it was consistent with the 
American Society for Standards and Materials (ASTM) definition of skin 
substitutes, and is nomenclature used by wound care clinicians.
    Response: We appreciate the feedback from commenters, and we are 
not finalizing a change in terminology at this time. We will take these 
comments into account, as well as other feedback from interested 
parties as we consider our approach to addressing inconsistencies in 
our policies for skin substitutes in future rulemaking. We also refer 
readers to the CY 2023 PFS final rule for additional discussion 
regarding changing the terminology and the roadmap for consistent 
treatment of 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.
    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 of 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.\109\ 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.
---------------------------------------------------------------------------

    \109\ 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

[[Page 71987]]

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 ensure adequate payment 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 proposed 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 proposed 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 received the following comments on our proposals.
    Comment: Two commenters opposed ending the additional $10 payment 
after December 31, 2024. The commenters supported continuing the 
payment either permanently or until a majority of radiopharmaceutical 
claims for Tc-99m reported HCPCS code Q9969, which would clearly show 
that the radiopharmaceutical is sourced with non-HEU material. These 
commenters were concerned that the claims data for radiopharmaceuticals 
does not fully report the costs of radiopharmaceuticals manufactured 
using non-HEU sourced materials. These commenters believe that will be 
the case even after all claims report radiopharmaceuticals manufactured 
from non-HEU-sourced materials starting in CY 2025. One of the 
commenters suggested adding a new claim edit to require providers to 
identify whether the Tc-99m radiopharmaceutical product they use is 
sourced from non-HEU or HEU reactors. These same commenters also 
requested that the $10 additional payment be increased to an amount 
that reflects what the payment would have been if it was adjusted 
annually by the hospital market basket since it was implemented in 
2013. The commenters also requested that the copayment amount for HCPCS 
code Q9969 be eliminated because they are concerned that the 
administrative burden of handling the beneficiary copayment is 
discouraging providers from reporting the $10 additional payment.
    Response: The certification by the Secretary of Energy regarding 
the supply of non-HEU-sourced Mo-99 effective January 2, 2022, stated 
that 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. That means radiopharmaceuticals starting 
in 2023 will no longer be sourced from HEU sources. CMS will be able to 
use claims generated in 2023 for rulemaking in the OPPS in CY 2025. As 
stated in the CY 2022 OPPS final rule, the purpose of the $10 
additional payment is limited to mitigating any adverse impact of 
transitioning to non-HEU sources (86 FR 63560). Once the transition is 
complete and payment rates reported for Tc-99m radiopharmaceuticals no 
longer include costs from HEU-sourced Tc-99m, there is no longer a need 
for the additional payment. This will be the case starting in CY 2025, 
at which time, the additional payment can cease.
    We also disagree with the request to waive the copayment for HCPCS 
code Q9969 as we do not believe the administrative burden associated 
with collecting copayments is significant enough to justify such an 
action. Providers regularly collect copayments for services paid under 
the OPPS, and we do not believe that collecting a copayment for the 
additional $10 payment is a significant additional burden for 
providers. Likewise, we do not agree with the suggestion to require a 
claim edit to identify a radiopharmaceutical as non-HEU or HEU sourced. 
We believe such a requirement would likely increase the administrative 
burden on providers unnecessarily. HCPCS code Q9969 is being reported 
on less than 15 percent of eligible claims, and it is unlikely that the 
use of HCPCS code Q9969 would ever exceed 50 percent of the eligible 
claims even if all Tc-99m radiopharmaceuticals are produced from non-
HEU sources. Therefore, we are not adopting this recommendation.
    Comment: One commenter supported our proposed policy to continue 
the $10 additional payment for CY 2023 and CY 2024 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. The commenter also 
requested that we evaluate and ensure costs reported in Medicare claims 
fully capture the cost of non-HEU-sourced Tc-99m before deciding to end 
the additional payment for non-HEU sourced Tc-99m payment starting in 
CY 2025.
    Response: We appreciate the support of the commenter for our 
proposed policy and plan to review our policy prior to CY 2025 ensure 
that the anticipated end of using HEU-sourced material to generate Tc-
99m radiopharmaceuticals has occurred by December 31, 2022, and claims 
data, starting in CY 2025, will only report Tc-99m radiopharmaceuticals 
manufactured from non-HEU sources.
    Comment: One commenter supported the portion of our proposal that 
would continue the $10 additional payment for non-HEU sourced Tc-99m 
radiopharmaceuticals through December 31, 2024.
    Response: We appreciate the support of the commenter.
    After consideration of the public comments we received, we are 
finalizing without modification our proposal to continue the additional 
$10 payment for CYs 2023 and 2024 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

[[Page 71988]]

the Medicare claims data. We also are finalizing without modification 
our proposal that the additional $10 payment will end after December 
31, 2024, as beginning with CY 2025, the Medicare claims data used to 
set payment rates will reflect the full cost of non-HEU-sourced Tc-99m.

C. Requirement in the Physician Fee Schedule CY 2023 Proposed and Final 
Rule for 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, the CY 2023 PFS proposed rule 
proposed 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 proposed 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.
    As explained in the OPPS/ASC proposed rule (87 FR 44717), because 
the CY 2023 PFS proposed rule proposed to codify certain billing 
requirements for HOPDs and ASCs, we explained in the proposed rule that 
we wanted to ensure interested parties were aware of them and knew to 
refer to that rule for a full description of the proposed policy. 
Interested parties were asked to 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. We stated public comments on 
these proposals will be addressed in the CY 2023 PFS final rule. We 
note that this same notice appeared in section XIII.D.3 of the CY 2023 
OPPS/ASC proposed rule (87 FR 44658).
    We thank commenters for their feedback on this proposal. As 
indicated in the OPPS/ASC proposed rule (87 FR 44717), public comments 
on the policies discussed above will be addressed in the CY 2023 PFS 
proposed rule. For final details on this policy, we refer readers to 
the CY 2023 PFS final rule, which is available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html. We note that 
this same notice appears in section XIII.D.3 of this CY 2023 OPPS/ASC 
final rule with comment period.

D. Inflation Reduction Act--Section 11101 Regarding Beneficiary Co-
Insurance

    On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) (Pub. 
L. 117-169) was signed into law. Section 11101 of the Inflation 
Reduction Act requires a drug manufacturer to pay a rebate if the ASP 
of their drug product rises at a rate that is faster than the rate of 
inflation. Section 11101(b) of the IRA amended sections 1833(i) and 
1833(t)(8) by adding a new paragraph (9) and subparagraph (F), 
respectively, that specify coinsurance under the ASC and OPPS payment 
systems. Section 1833(i)(9) requires that under the ASC payment system 
beneficiary coinsurance for a Part B rebatable drug that is not 
packaged be calculated using the inflation-adjusted amount when that 
amount is less than the otherwise applicable payment amount for the 
drug furnished on or after April 1, 2023. Section 1833(t)(8)(F) 
requires that under the OPPS payment system beneficiary copayment for a 
Part B rebatable drug (except for a drug that has no copayment applied 
under subparagraph (E) of such section or packaged into the payment for 
a procedure) is to be calculated using the inflation-adjusted amount 
when that amount is less than ASP plus 6 percent beginning April 1, 
2023. Sections 1833(i)(9) and 1833(t)(8)(F) reference sections 
1847A(i)(5) for the computation of the beneficiary coinsurance and 
1833(a)(1)(EE) for the computation of the payment to the ASC or 
provider and state that the computations would be done in the same 
manner as described in such provisions. The computation of the 
coinsurance is described in section 1847A(i); specifically, in 
computing the amount of any coinsurance applicable under Part B to an 
individual to whom such Part B rebatable drug is furnished, the 
computation of such coinsurance shall be equal to 20 percent of the 
inflation-adjusted payment amount determined under section 
1847A(i)(3)(C) for such part B rebatable drug. The calculation of the 
payment to the provider or ASC is described in section 1833(a)(1)(EE), 
and the provider or ASC would be paid the difference between the 
beneficiary coinsurance of the inflation-adjusted amount and ASP plus 6 
percent. We wish to make readers aware of this statutory change that 
begins April 1, 2023. Additionally, we refer readers to the full text 
of the IRA.\110\ Additional details on the implementation of section 
11101 of the IRA are forthcoming and will be communicated through a 
vehicle other than the CY 2023 OPPS/ASC regulation.
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    \110\ H.R. 5376 available online at: https://www.congress.gov/bill/117th-congress/house-bill/5376/text.
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VI. 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

[[Page 71989]]

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 
proposed to include an estimate of any skin substitutes and similar 
products in our estimate of pass-through spending for devices.
    For drugs and biologicals eligible for pass-through payment, 
section 1833(t)(6)(D)(i) of the Act establishes the pass-through 
payment amount as the amount by which the amount authorized under 
section 1842(o) of the Act (or, if the drug or biological is covered 
under a competitive acquisition contract under section 1847B of the 
Act, an amount determined by the Secretary equal to the average price 
for the drug or biological for all competitive acquisition areas and 
year established under such section as calculated and adjusted by the 
Secretary) exceeds the portion of the otherwise applicable fee schedule 
amount that the Secretary determines is associated with the drug or 
biological. Our proposed estimate of drug and biological pass-through 
payment for CY 2023 for this group of items was $622.6 million, as 
discussed below, because we proposed 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 proposed would be paid at 
ASP minus 22.5 percent, and because we proposed to pay for CY 2023 
pass-through payment drugs and biologicals at ASP+6 percent, as we 
discuss in section V.A of the CY 2023 OPPS/ASC proposed rule (87 FR 
44625). However, in light of the Supreme Court's recent decision, we 
explained that we fully anticipated applying a rate of ASP+6 percent to 
340B drugs and biologicals in the final rule for CY 2023, in which case 
we explained that our estimate of drug and biological pass-through 
payment for CY 2023 for this group of items was $40 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 
the CY 2023 OPPS/ASC proposed rule (87 FR 44643 through 44644). We 
proposed that all of these policy-packaged drugs and biologicals with 
pass-through payment status would be paid at ASP+6 percent, like other 
pass-through drugs and biologicals, for CY 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 the CY 
2023 OPPS/ASC proposed rule (87 FR 44641), 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 proposed to offset the amount of pass-through 
payment for the policy-packaged drug or biological. For these drugs or 
biologicals, the APC offset amount is the portion of the APC payment 
for the specific procedure performed with the pass-through drug or 
biological, which we refer to as the policy-packaged drug APC offset 
amount. If we determine that an offset is appropriate for a specific 
policy-packaged drug or biological receiving pass-through payment, we 
proposed to reduce our estimate of pass-through payments for these 
drugs or biologicals by the APC offset amount.
    Similar to pass-through spending estimates for devices, the first 
group of drugs and biologicals requiring a pass-through payment 
estimate consists of those products that were recently made eligible 
for pass-through payment and that will continue to be eligible for 
pass-through payment in CY 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. Estimate of Pass-Through Spending for CY 2023

    For CY 2023, we proposed 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

[[Page 71990]]

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 in 
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, and HCPCS code C2596 will cost $2.8 million in 
pass-through expenditures in CY 2023. Therefore, we proposed an 
estimate for the first group of devices of $48 million.
    Comment: We received a comment from the manufacturer of AVITA 
Medical's RECELL[supreg] System (RECELL) on the proposed estimate of 
pass-through spending for CY 2023. The commenter stated that under 
section VI. B, Proposed Estimate of Pass-through Spending for CY 2023, 
CMS lists the estimated transitional pass-through (TPT) expenditures 
for the 14 active TPT HCPCS codes in CY 2023. This list includes an 
estimate of $18.4 million in TPT expenditures for HCPCS code C1832. The 
CY 2023 OPPS/ASC proposed rule indicates that the TPT expenditure 
estimates are based on information from device manufacturers. However, 
the manufacturer stated that the TPT application for RECELL System 
estimated approximately 800 total devices annually with 10-15 percent 
of cases involving Medicare beneficiaries, for a total of 80-120 
devices under Medicare. With the stated list price of $7,500, the 
manufacturer's estimate of total annual TPT expenditures for C1832 of 
under $1 million (120 devices * $7,500.00 = $900,000).
    Response: We appreciate the comment. We agree with the commenter, 
and have updated this final rule with comment period to note that the 
HCPCS code C1832 will cost $900,000 in pass-through expenditures in CY 
2023.
    Comment: A number of commenters stated that CMS provided 
conflicting information in the proposed rule for Table 30: Devices with 
Pass-Through Status (or Adjusted Separate Payment) Expiring at the End 
of the Fourth Quarter of 2022, in 2023, or in 2024 where the expiration 
dates for devices with pass-through status expiring at the end of the 
fourth quarter of 2022 are also included in the proposed estimate of 
pass-through spending for CY 2023 as part of the first group of 
devices.
    Response: We appreciate the commenters' input. When we estimated 
pass-through spending for CY 2023 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 (87 FR 44660), we inadvertently included estimated 
device pass-through spending for device categories that are expiring in 
CY 2022. For the CY 2023 final rule, we have removed six (6) HCPCS 
codes with CY 2022 expiration dates from the final estimate of pass-
through payment for CY 2023. These codes for which pass-through status 
expires in CY 2022 are: C1823 (Generator, neurostimulator 
(implantable), nonrechargeable, with transvenous sensing and 
stimulation leads), C1824 (Generator, cardiac contractility modulation 
(implantable)), C1982 (Catheter, pressure-generating, one-way valve, 
intermittently occlusive), C1839 (Iris prosthesis), C1734 (Orthopedic/
device/drug matrix for opposing bone-to-bone or soft tissue-to bone 
(implantable)), and C2596 (Probe, image-guided, robotic, waterjet 
ablation). In addition, we inadvertently included C1831 as part of 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, where we estimated HCPCS 
code C1831 will cost $29,900 in pass-through expenditures in CY 2023 
(87 FR 44660). Instead, C1831 should have been included as part of the 
estimated proposed CY 2023 pass-through spending for device categories 
in the second group: device categories that we assumed at the time of 
the development of the proposed rule would be newly eligible for pass-
through payment in CY 2023 and additional device categories that we 
estimated could be approved for pass-through status after the 
development of the proposed rule and before January 1, 2023. Consistent 
with the final approval for device pass-through payment status of C1831 
(Personalized, anterior and lateral interbody cage (implantable)), as 
described in section IV.2.b.1 of this final rule with comment period, 
we have added C1831 to Table 52 in this final rule with comment period. 
We inadvertently did not include C1831 in Table 30 in the proposed 
rule. C1831 received preliminary approval as part of the October 1, 
2021 quarterly review process and had pass-through payment status in CY 
2022. Therefore, the device code should have been included in Table 30 
in the proposed rule. Table 52 has been updated to reflect the 
inclusion of C1831.
    As such, 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 7 active categories for CY 2023. The active categories are 
described by HCPCS codes C1052, C1062, C1748, C1761, C1825, C1832, and 
C1833. 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 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 
C1825 will cost $749,000 in pass-through expenditures in CY 2023, HCPCS 
code C1832 will cost $900,000 in pass-through expenditures in CY 2023, 
and HCPCS code C1833 will cost $5.1 million in pass-through 
expenditures in CY 2023. Therefore, we have finalized an estimate for 
the first group of devices of $21 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 would 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 the CY 2023 OPPS/ASC proposed rule (87 FR 
44660) 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 proposed to use the general

[[Page 71991]]

methodology described in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66778), while also taking into account recent OPPS 
experience in approving new pass-through device categories. For the 
proposed rule, the proposed estimate of CY 2023 pass-through spending 
for this second group of device categories is $101.4 million.
    We did not receive any public comments on this proposal. As stated 
earlier in this final rule with comment period, we are approving four 
devices for pass-through payment status in the CY 2023 rulemaking 
cycle: Uretero1TM Ureteroscope System, Evoke[supreg] SCS 
System, Vivistim[supreg] Paired VNSTM System, and 
aprevoTM Transforaminal IBF. The manufacturers of these 
systems provided utilization and cost data that indicate the amount of 
spending for the devices would be approximately $37.5 million for 
Uretero1TM Ureteroscope System, $7.4 million for 
Evoke[supreg] SCS System, $9 million for Vivistim[supreg] Paired 
VNSTM System, and $7.2 million for aprevoTM 
Transforaminal IBF. Therefore, we are finalizing an estimate of $61.1 
million for this second group of devices for CY 2023.
    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 proposed to use the CY 2021 Medicare hospital outpatient 
claims data regarding their utilization, information provided in their 
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 continue to 
have 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 
proposed 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 was $592.7 million for this group of 
drugs. However, in light of the Supreme Court's decision, we explained 
that we fully anticipated 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 was $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 proposed 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.
    We did not receive any public comments on our proposal. Using our 
methodology for this final rule with comment period, we calculated the 
CY 2023 spending estimate for this first group of drugs and biologicals 
as approximately $33.5 million. Because we are finalizing a payment 
rate of ASP+6 percent for separately payable drugs regardless of 
whether they are acquired under the 340B program, the proposed payment 
rate difference between the pass-through payment amount and the non 
pass-through payment amount is, therefore, $0.
    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 the CY 2023 OPPS/ASC proposed rule 
(87 FR 44660 through 44661) 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 the CY 2023 OPPS/ASC proposed rule (87 
FR 44660 through 44661) 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 
proposed to use utilization estimates from pass-through applicants, 
pharmaceutical industry data, clinical information, recent trends in 
the per-unit ASPs of hospital outpatient drugs, and projected annual 
changes in service volume and intensity as our basis for making the CY 
2023 pass-through payment estimate. We also proposed to consider the 
most recent OPPS experience in approving new pass-through drugs and 
biologicals. Using our proposed methodology for estimating CY 2023 
pass-through payments for this second group of drugs, we calculated a 
proposed spending estimate for this second group of drugs and 
biologicals of approximately $10 million.
    We did not receive any public comments on our proposal. Since the 
release of the CY 2023 OPPS/ASC proposed rule, we have identified eight 
additional policy-packaged drugs in addition to the four policy-
packaged drugs that had pass-through status when the proposed rule was 
released. Our original proposed estimate of $10 million of additional 
pass-through payments for the second group of drugs and biologicals 
anticipated the approval of some, but not all, of the additional 
policy-packaged drugs and biologicals with pass-through status. 
Therefore, for this final rule with comment period, we are revising our 
estimate of pass-through spending for the second group of drugs and 
biologicals to be $20 million.
    We estimated for the CY 2023 OPPS/ASC proposed rule (87 FR 44661) 
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 explained that we fully anticipated 
applying a rate of ASP+6 percent to 340B drugs and biologicals in the 
final rule with comment period for CY 2023, in which case we estimated 
for the CY 2023 OPPS/ASC proposed rule (87 FR 44641) 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

[[Page 71992]]

(approximately $149.4 million for device categories and approximately 
$29.9 million for drugs and biologicals). This alternative would have 
represented only 0.21 percent of total projected OPPS payments for CY 
2023. Therefore, we estimated that pass-through spending in CY 2023 
would not amount to 2.0 percent of total projected OPPS CY 2023 program 
spending.
    We estimate for this final rule with comment period 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 $135.5 million (approximately $82 million for device 
categories and approximately $53.5 million for drugs and biologicals), 
which represents only 0.16 percent of total projected OPPS payments for 
CY 2023 (approximately $86.5 billion). 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. OPPS Payment for Hospital Outpatient Visits and Critical Care 
Services

    For CY 2023, we proposed 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 proposed 
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 the CY 2023 OPPS/ASC proposed rule (87 FR 44502), we solicited 
public comments on any changes to these codes that we should consider 
for future rulemaking cycles. We continued to encourage commenters to 
provide the data and analysis necessary to justify any suggested 
changes.
    Comment: We received a comment suggesting that CMS develop a 
national standard for Emergency Department (ED) visit guidelines for 
all ED levels.
    Response: We thank the commenters for their suggestion. As we noted 
in CY 2008 OPPS/ASC final rule with comment period (72 FR 66579), we 
understand the interest in promulgating national guidelines, but we 
continue to believe that it is unlikely that one set of straightforward 
national guidelines could apply to the reporting of all ED visits. We 
may revisit this topic in the future as necessary.
    After consideration of the public comments, we are finalizing our 
proposal to continue our current ED outpatient visits and critical care 
payment policies.
    As we stated in the CY 2022 OPPS/ASC final rule with comment period 
(86 FR 63663), the volume control method for clinic visits furnished by 
non-excepted off-campus provider-based departments (PBDs) continues to 
apply for CY 2022 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 these departments. The PFS-equivalent rate for CY 2023 
is 40 percent of the proposed OPPS payment. Under this policy, these 
departments will be paid approximately 40 percent of the OPPS rate for 
the clinic visit service in CY 2023.
    Additionally, for CY 2023 we proposed that excepted off-campus 
provider-based departments (PBDs) (departments that bill the modifier 
``PO'' on claim lines) of rural Sole Community Hospitals (SCHs), 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 
the CY 2023 OPPS/ASC proposed rule (87 FR 44502). For CY 2023, we will 
be finalizing our proposal to exempt rural SCHs from the clinic visit 
payment policy. For a full discussion of this policy, we refer readers 
to section X. of this final rule with comment period.
    Comment: We received several comments on our overall clinic visit 
payment policy. Many commenters continued to express the belief that 
this policy undermines congressional intent and exceeds the agency's 
legal authority. As they have in previous years, commenters argued that 
the policy is based on flawed assumptions and urged CMS to eliminate 
this policy altogether.
    Response: We continue to believe that section 1833(t)(2)(F) of the 
Act gives the Secretary authority to develop a method for controlling 
unnecessary increases in the volume of covered OPD services, including 
a method that controls unnecessary volume increases by removing a 
payment differential that is driving a site-of-service decision, and as 
a result, is unnecessarily increasing service volume.\111\ As we noted 
in the CY 2019 OPPS/ASC proposed rule (83 FR 37138 through 37143), 
``[a] large source of growth in spending on services furnished in 
hospital outpatient departments (HOPDs) appears to be the result of the 
shift of services from (lower cost) physician offices to (higher cost) 
HOPDs.'' We continue to believe that these shifts in the sites of 
service are unnecessary if the beneficiary can safely receive the same 
services in a lower cost setting but instead receives care in a higher 
cost setting due to payment incentives. In most cases, the difference 
in payment is leading to unnecessary increases in the volume of covered 
outpatient department services, and we remain concerned that this shift 
in care setting increases beneficiary cost-sharing liability because 
Medicare payment rates for the same or similar services are generally 
higher in hospital outpatient departments than in physician offices. We 
continue to believe that our method will address the concerns as 
described in the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59005).
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    \111\ Available at: https://www.ssa.gov/OP_Home/ssact/title18/1833.htm.
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    Additionally, 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.
    Comment: Many commenters characterized the reductions to hospital 
payments for clinic visits as excessive and harmful, especially during 
the COVID-19 PHE. One commenter noted that ``Continuing to impose a 60% 
cut on clinic visit services in 2023, on top of the dire financial 
impacts on U.S. hospitals and health systems due to COVID-19, would 
greatly endanger the critical role that HOPDs play in their 
communities, including providing convenient access to care for the most 
vulnerable and medically complex beneficiaries.''
    Response: We share commenter's concerns about the financial 
difficulties brought on by the COVID-19 PHE. We have taken a variety of 
actions to

[[Page 71993]]

support hospitals so they can more effectively respond during the 
COVID-19 PHE, including waiving the provider-based rules and permitting 
on-campus and excepted off-campus provider-based departments to 
temporarily relocate and continue to be paid under the OPPS if they 
submit a temporary extraordinary relocation exception request to their 
Regional Office. We have continued to monitor the volume control clinic 
visit policy and will make adjustments as appropriate. For CY 2023, we 
are finalizing our proposal to exempt rural SCHs from the clinic visit 
payment policy. For a full discussion of this exemption, we refer 
readers to section X of this final rule with comment period.
    Comment: We received comments supporting CMS' efforts to continue 
implementing its method to control for unnecessary increases in the 
volume of outpatient services. One commenter asked that CMS continue to 
consider ways to expand and strengthen the current site-neutral payment 
policies. They noted that there may be other provider-based department 
settings where it makes sense to apply site-neutral payment policies, 
such as on-campus PBDs, ambulatory surgery centers, and emergency 
departments.
    Response: We appreciate the commenters' support and we will 
continue to monitor this policy and take commenters' suggestions into 
consideration for potential future rulemaking.
    After consideration of the public comments, we are finalizing our 
proposal to continue the volume control method under which we 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 PBDs.

VIII. Payment for Partial Hospitalization Services

A. Background

    A partial hospitalization program (PHP) is an intensive outpatient 
program of psychiatric services provided as an alternative to inpatient 
psychiatric care for individuals who have an acute mental illness, 
which includes, but is not limited to, conditions such as depression, 
schizophrenia, and substance use disorders. Section 1861(ff)(1) of the 
Act defines partial hospitalization services as the items and services 
described in paragraph (2) prescribed by a physician and provided under 
a program described in paragraph (3) under the supervision of a 
physician pursuant to an individualized, written plan of treatment 
established and periodically reviewed by a physician (in consultation 
with appropriate staff participating in such program), which sets forth 
the physician's diagnosis, the type, amount, frequency, and duration of 
the items and services provided under the plan, and the goals for 
treatment under the plan. Section 1861(ff)(2) of the Act describes the 
items and services included in partial hospitalization services. 
Section 1861(ff)(3)(A) of the Act specifies that a PHP is a program 
furnished by a hospital to its outpatients or by a community mental 
health center (CMHC), as a distinct and organized intensive ambulatory 
treatment service, offering less than 24-hour-daily care, in a location 
other than an individual's home or inpatient or residential setting. 
Section 1861(ff)(3)(B) of the Act defines a CMHC for purposes of this 
benefit. We refer readers to sections 1833(t)(1)(B)(i), 1833(t)(2)(B), 
1833(t)(2)(C), and 1833(t)(9)(A) of the Act and 42 CFR 419.21, for 
additional guidance regarding PHP.
    In CY 2008, we began efforts to strengthen the PHP benefit through 
extensive data analysis, along with policy and payment changes by 
implementing two refinements to the methodology for computing the PHP 
median. For a detailed discussion on these policies, we refer readers 
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66670 
through 66676). In CY 2009, we implemented several regulatory, policy, 
and payment changes. For a detailed discussion on these policies, we 
refer readers to the CY 2009 OPPS/ASC final rule 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 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).

[[Page 71994]]

    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. PHP APC Update for CY 2023

1. PHP APC Geometric Mean Per Diem Costs
    In summary, for CY 2023 only, we proposed to calculate the CMHC and 
hospital-based PHP geometric mean per diem costs in accordance with our 
existing methodology, except that while we proposed to use the latest 
available CY 2021 claims data, we proposed 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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44680 through 44682). Following this proposed 
methodology, we proposed 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, we proposed not to include data from certain nonstandard 
cost center lines in the OPPS ratesetting database construction for CY 
2023; however, we solicited public comment about these data for use in 
future ratesetting. Lastly, in accordance with our longstanding policy, 
we proposed 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)).
    We are finalizing the proposals in this CY 2023 OPPS/ASC final rule 
as proposed, but with a modification. For only CY 2023, and not 
subsequent years, we are applying an equitable adjustment, under the 
authority of section 1833(t)(2)(E) of the Act, to finalize $142.70 as 
the CY 2023 CMHC PHP APC payment rate, which is the same payment rate 
in effect for the CY 2022 CMHC PHP APC. Using the most recent updated 
claims and the cost report data that was available for the CY 2021 
rulemaking as proposed, the final hospital-based PHP geometric mean per 
diem cost is $275.83. We discuss our rationale and the public comments 
received 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 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 in the CY 2023 OPPS/ASC proposed rule (87 FR 44662 
through 4663), we proposed 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

[[Page 71995]]

and CMHCs. For the CY 2023 OPPS/ASC proposed rule (87 FR 44662 through 
44664), we noted that 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 noted that 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 
stated that we believe 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 noted in the PHP 
data, we also noted that even though hospital operations do not appear 
to have returned to the same levels as in 2019, the Medicare outpatient 
service volumes appear to be returning to more normal pre-pandemic 
levels. As discussed in section X.D of the CY 2023 OPPS/ASC proposed 
rule (87 FR 44680 through 44682), 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 stated that we recognize that future COVID-19 
variants may have potentially varying effects and that 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 explained that we believe the more recently available CY 
2021 claims data would better represent the volume and mix of claims 
for the CY 2023 OPPS. Accordingly, we stated that 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 
the CY 2023 OPPS/ASC proposed rule (87 FR 44681 through 44683), we 
proposed to use the latest available CY 2021 claims for CY 2023 PHP 
ratesetting.
    We also 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 
the CY 2023 OPPS/ASC proposed rule (87 FR 44681 through 44683), we 
explained that 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 have been $127.38, which would have been 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 stated that we believe 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 noted that we would continue to review the updated 
cost report data as they are available.
    Based on the results of this analysis, we proposed 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). Specifically, we would 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 proposed to do for other APCs 
under the OPPS as discussed in section X.D of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44680 through 44683), we proposed 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.
    Comment: We received one comment which expressed support of our 
proposal to use the CY 2021 claims 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 
and hospital-based PHP APC per diem costs.
    Response: We thank the commenter for their support of our proposal 
for CY 2023. We intend to continue monitoring the claims and cost 
report information for PHP providers during the ongoing COVID-19 PHE, 
and to consider which data are the best available for rulemaking in the 
future.
    Comment: We received 11 comments from providers, hospital 
associations, and national organizations expressing concerns about the 
proposed decrease in PHP per diem rates. Several commenters noted that 
the proposed CY 2023 PHP payment rates were below the calculated 
geometric mean per diem costs, and erroneously concluded that CMS had 
applied a different methodology to calculate PHP payment rates than in 
prior years. Commenters expressed that the proposed rates would not be 
sufficient to ensure the sustainability of the PHP program and could 
impact access to PHP services. Many of the commenters requested that 
CMS refrain from going forward with the proposed rate cuts for PHP 
services in CY 2023 and requested that CMS reconsider the proposed 
methodology for CY 2023 and its impact on the immediate future of PHP 
services. A few commenters suggested CMS explore alternate ways to 
protect against rate reductions, such as freezing the APC weights for 
PHP services at their CY 2022 levels or establishing a PHP base rate 
that is updated annually by an inflation factor.
    Response: We understand the concerns that commenters raised the 
regarding the proposed decreases in the PHP rates. Contrary to what 
some commenters suggested, the methodology we applied in calculating 
the proposed PHP payment rates is consistent with the methodology we 
have applied in prior years. We proposed to calculate the PHP payment 
rates based on our longstanding methodology, in accordance with the 
statutorily required relative payment weight calculations under the 
OPPS. Under the longstanding OPPS ratesetting methodology, CMS 
establishes APC payment rates by annually reviewing and revising the 
relative payment weights for APCs in accordance with sections 
1833(t)(2) and 1833(t)(9) of the Act, as further described in section 
II.A.4 of this final rule with comment period. We further note that the 
OPPS is subject to budget neutral adjustments to the weight scaler as 
described in section II.A.4. and is also subject to the OPPS conversion 
factor described in section II.B. of this final rule with comment 
period. As a result of those OPPS budget neutrality adjustments, the 
proposed and final APC payment rates may be higher or lower than their 
estimated APC geometric mean costs.
    Regarding commenters' suggestion to establish a fixed PHP base rate 
that is updated annually by an inflation factor, we do not believe such 
a methodology would be consistent the statutory requirements under 
sections 1833(t)(2) and 1833(t)(9) of the Act. However, we share 
commenters' concerns that the CMHC PHP payment rate be sufficient to 
protect access to CMHC PHP services in CY 2023. As we discussed in the 
CY 2023 OPPS/ASC proposed rule, we believed the most appropriate

[[Page 71996]]

methodology to use for setting PHP rates was our longstanding 
methodology. After considering the potential impact to PHP geometric 
mean per diem costs, we proposed to use the latest available CY 2021 
claims, but we proposed 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 believed that this proposed methodology would 
appropriately mitigate the effects of the COVID-19 PHE on the cost 
report data while accounting for the overall trend in Medicare 
outpatient service volumes, which we have noted appear to be returning 
to more normal pre-pandemic levels. After considering the comments we 
received, we agree with commenters requesting that CMS not finalize the 
proposed rate cuts for CMHC PHP services in CY 2023. As we have stated 
in previous rules, our goal is to support ongoing access to PHPs in 
CMHCs and, in furtherance of that goal, we have historically 
established mitigation policies in situations when we believe 
fluctuations in PHP payments do not accurately reflect a commensurate 
decrease in the cost of providing those services, particularly because 
costs generally increase over time. We have also implemented mitigation 
policies to stabilize CMHC PHP geometric mean per diem costs and 
thereby established PHP APC payment rates that would otherwise change 
significantly from one year to the next; these have been especially 
important to supporting the stability of the program given the small 
number of CMHC PHP providers.
    More specifically, even though the final CY 2023 CMHC PHP geometric 
mean cost of $135.68 is nearly the same as the final CY 2022 geometric 
mean cost floor of $136.14, the calculated payment rates for the 2 
years are substantially different, with the CY 2022 final payment rate 
being $142.70 and the proposed and final calculated payment rates for 
CY 2023 being $130.54 and $131.94, respectively. In addition, the final 
CY 2023 CMHC PHP geometric mean per diem cost is $135.68, which is 
higher than the calculated CY 2023 CMHC PHP APC payment rate of 
$131.94. However, the application of the OPPS standard methodology, 
including the effect of budget neutralizing all other OPPS policy 
changes unique to CY 2023, resulted in the final calculated CMHC PHP 
APC payment rate being unexpectedly lower than the CY 2022 final CMHC 
PHP APC rate. We believe this decrease in the calculated CY 2023 PHP 
APC payment rate for CMHC providers is likely not an accurate 
reflection of the cost of providing PHP services this year, since 
geometric mean costs for those services have remained relatively 
constant from CY 2022 to CY 2023. We are therefore concerned that the 
CY 2023 calculated payment rate for the CMHC PHP APC would not pay 
appropriately for those services and may result in access issues to PHP 
services in CMHCs. We believe providers would not expect their 
calculated final CY 2023 CMHC PHP APC payment rate to be significantly 
lower than the CY 2022 CMHC PHP APC payment rate under the existing 
payment methodology. In addition, as noted above, minimizing 
significant fluctuations in CMHC PHP payments is important to 
stabilizing the PHP program. Given the unique circumstances of CMHCs, 
which are only considered a Medicare provider of services for PHP, we 
are concerned that the decrease in the CMHC APC payment rate for CY 
2023 that would occur if we were to finalize the final calculated rate 
would not protect access for Medicare beneficiaries to PHP services in 
CMHCs, and we have considered in this final rule an approach to 
mitigate the proposed decrease in the CMHC PHP APC payment rate. 
Therefore, in the interest of accurately paying for CMHC PHP services, 
under the unique circumstances of budget neutralizing all other OPPS 
policy changes this year, and in keeping with our longstanding goal of 
protecting continued access to PHP services provided by CMHCs by 
ensuring that CMHCs remain a viable option as providers of mental 
health care in the beneficiary's own community, we are using the 
equitable adjustment authority of section 1833(t)(2)(E) of the Act to 
appropriately pay for CMHC PHP services. This equitable adjustment will 
apply for only CY 2023 and not subsequent years.
    Section 1833(t)(2)(E) of the Act provides that the Secretary shall 
establish, in a budget neutral manner, other adjustments as determined 
to be necessary to ensure equitable payments. As such, we are making an 
adjustment under this authority to the final CY 2023 CMHC PHP APC 
payment rate to more equitably and appropriately pay for CMHC PHP 
services. For this final rule, while we are using the latest available 
CY 2021 claims and the cost information from prior to the COVID-19 PHE, 
as proposed, we are finalizing that the CY 2023 payment rate for the 
CMHC APC is the same payment rate as for CY 2022, that is, $142.70, 
because we believe CMHC providers would expect to manage their programs 
to align with the CY 2022 CMHC APC payment of $142.70. We note that we 
are applying this adjustment for CY 2023 only and not for subsequent 
years.
    Additionally, as mentioned above and discussed in greater detail in 
section II.A.1.c of the CY 2023 OPPS/ASC proposed rule (87 FR 44510 
through 44511), 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.\112\ 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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    \112\ Chapter 40 of the Provider Reimbursement Manual (PRM), 
Part 2, available on the CMS website at https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Paper-Based-Manuals.
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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 
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 the CY 2023

[[Page 71997]]

OPPS/ASC proposed rule (87 FR 44510 through 44511) for other OPPS 
services, we proposed 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 solicited 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.
    We did not receive any public comments on whether there exist any 
specific concerns with regards to the accuracy of the data from 
nonstandard cost center lines that we would need to consider and are 
finalizing as proposed 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.
a. CMHC Data Preparation: Data Trims, Exclusions, and CCR Adjustments
    For this final rule with comment period, 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 proposed 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 final geometric mean per diem cost for 
CMHC APC 5853, we prepared the data by first applying trims and data 
exclusions and assessing CCRs as described in the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70463 through 70465), so that 
ratesetting is not skewed by providers with extreme data. Before any 
trims or exclusions were applied, there were 28 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, two CMHCs had a geometric 
mean cost per day above the trim's upper limit of $470.86, and one CMHC 
had a geometric mean cost per day below the trim's lower limit of 
$39.72. Therefore, we are excluding data for ratesetting from these 
three 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 final 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 the CY 2023 OPPS/ASC final rule ratesetting, there was one 
CMHC with a CCR greater than one, and seven CMHCs with missing CCR 
information. Therefore, we are defaulting the CCRs for these eight 
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 eight 
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 three CMHCs for failing the 2 standard 
deviation trim resulting in the inclusion of 24 CMHCs. There were 483 
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 3,732 CMHC claims in 
our CY 2023 final 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.\113\ 
The calculated CY 2023 geometric mean per diem cost for all CMHCs for 
providing 3 or more services per day (CMHC APC 5853) is $135.68, an 
increase from $129.93 calculated last year for CY 2022 ratesetting (86 
FR 63667).
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    \113\ 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.
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    Comment: We received several comments expressing concern about the 
proposed CY 2023 CMHC geometric mean per diem cost, which was $131.71. 
Specifically, commenters noted the proposed CY 2023 geometric per diem 
cost is a reduction from the CY 2021 geometric per diem cost, which was 
used as a floor for ratesetting in the CY 2022 OPPS/ASC final rule with 
comment period. One national association noted that the decrease in the 
proposed CY 2023 PHP rates, coupled with inflation across the country 
and labor costs for CMHCs, results in a gap between payments and costs 
for providing partial hospitalization services, making it difficult for 
these programs to continue operating. Some commenters recommended that 
CMS apply a cost floor for CY 2023 equal to the CMHC geometric mean per 
diem cost calculated for CY 2021.
    Response: We appreciate the concerns that commenters raised and 
recognize the importance of ensuring that PHP payment rates accurately 
reflect the financial costs to providers of providing PHP services to 
their communities. Under our longstanding methodology, the proposed and 
final calculated geometric mean per diem costs are based on the actual 
provider-reported claims and cost data and, therefore, we believe they 
accurately represent the cost of providing PHP services.

[[Page 71998]]

    As we noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44663), 
overall Medicare outpatient service volumes appear to be returning to 
more normal pre-pandemic levels. As discussed in section X.D of the CY 
2023 OPPS/ASC proposed rule (87 FR 44680 through 44682), 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 that 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 explained that we believe the more recently available CY 
2021 claims data would better represent the volume and mix of claims 
for the CY 2023 OPPS. Accordingly, we stated that we believe it is 
appropriate to use CY 2021 data for purposes of CY 2023 OPPS 
ratesetting. In order to mitigate the effects of the COVID-19 PHE on 
the CMHC geometric mean per diem cost calculation, we proposed 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).
    However, as we noted above, while the CY 2023 CMHC PHP geometric 
mean per diem cost accurately represents the cost of providing PHP 
services, we share commenters' concerns that the calculated final CY 
2023 CMHC PHP APC payment rate of $131.94 is unexpectedly below the 
final CY 2023 CMHC PHP geometric mean per diem costs of $135.68 and may 
not support ongoing access to PHPs in CMHCs in CY 2023.
    As we have stated in previous rules, our goal is to support ongoing 
access to PHPs in CMHCs and, in furtherance of that goal, we have 
historically established mitigation policies where we believe 
fluctuations in PHP payments do not accurately reflect a commensurate 
decrease in the cost of providing those services, particularly because 
costs generally increase over time. We have also implemented mitigation 
policies to stabilize CMHC PHP geometric mean per diem costs that would 
otherwise change significantly from one year to the next; these have 
been especially important in supporting the stability of the program 
given the small number of CMHC PHP providers.
    More specifically, as noted above, even though the final CY 2023 
CMHC PHP geometric mean cost of $135.68 is nearly the same as the final 
CY 2022 geometric mean cost floor of $136.14, the calculated payment 
rates for the two years are substantially different, with the CY 2022 
final payment rate being $142.70 and the proposed and final calculated 
payment rates for CY 2023 being $130.54 and $131.94, respectively. In 
addition, the final CY 2023 CMHC PHP geometric mean per diem costs is 
$135.68, which is higher than the calculated CY 2023 CMHC PHP APC 
payment rate of $131.94. However, the application of the OPPS standard 
methodology, including the effect of budget neutralizing all other OPPS 
policy changes unique to CY 2023, resulted in the final calculated CMHC 
PHP APC payment rate being unexpectedly lower than the CY 2022 final 
CMHC PHP APC rate. We believe this decrease in the calculated CY 2023 
PHP APC payment rate for CMHC providers is likely not an accurate 
reflection of the cost of providing PHP services this year, since 
geometric mean costs for those services have remained relatively 
constant from CY 2022 to CY 2023. We are therefore concerned that the 
CY 2023 calculated payment rate for the CMHC PHP APC would not pay 
appropriately for those services and may result in access issues to PHP 
services in CMHCs. We believe providers would not expect their 
calculated final CY 2023 CMHC APC rate to be significantly lower than 
their calculated CY 2023 CMHC APC calculated costs using the existing 
methodology. We believe CMHC providers would expect to manage their 
programs to align with the CY 2022 CMHC APC payment of $142.70. As 
such, we are making an adjustment to the final CY 2023 CMHC APC payment 
to more equitably and appropriately pay for PHP services in CMHCs. This 
adjustment will apply for only CY 2023 and not subsequent years.
    Section 1833(t)(2)(E) of the Act states that the Secretary shall 
establish, in a budget neutral manner, other adjustments as determined 
to be necessary to ensure equitable payments. Using the authority set 
forth in section 1833(t)(2)(E) of the Act, we are making an adjustment 
to the final CY 2023 CMHC APC payment rate to more equitably and 
appropriately pay for CMHC PHP services. This equitable adjustment will 
apply for CY 2023 and not for subsequent years.
    After consideration of the public comments we received, under the 
authority set forth in section 1833(t)(2)(E) of the Act, we are making 
an equitable adjustment to finalize $142.70 as the CY 2023 CMHC PHP APC 
payment rate. We reiterate that we are applying this adjustment for 
only CY 2023 and not for subsequent years.
b. Hospital-Based PHP Data Preparation: Data Trims and Exclusions
    For the CY 2023 OPPS/ASC final rule, we prepared data consistent 
with our policies as described in the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70463 through 70465) for hospital-based PHP 
providers, which is similar to that used for CMHCs. However, as 
discussed above, we proposed 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 425 hospital-based PHP providers for 
our calculations in this CY 2023 OPPS/ASC final 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 
the CY 2023 OPPS/ASC final rule ratesetting, no hospital-based PHP 
providers had a CCR greater than 5. Therefore, no hospital-based 
provider was excluded as 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).\114\
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    \114\ Click on the link labeled ``CY 2023 OPPS/ASC Notice of 
Final 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 NFRM OPPS Claims Accounting (PDF)''.
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    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

[[Page 71999]]

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).\115\ 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 
$275.83, which is an increase from $253.02 calculated last year for CY 
2022 ratesetting (86 FR 63668).
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    \115\ 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.
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    Comment: We received several comments expressing concern about the 
proposed CY 2023 hospital-based geometric mean per diem cost, which was 
$264.06. Specifically, commenters noted that payment updates are 
failing to keep pace with the growth in costs to deliver care, which 
will impact access to PHP services and medically necessary treatment. 
Several commenters noted that inflation across the country and rising 
labor costs are affecting hospital-based PHP providers. Several 
commenters noted that the CY 2023 hospital-based PHP cost per day was 
higher than the cost per day calculated for CY 2022, but one national 
association expressed concern that the proposed CY 2023 hospital-based 
PHP payment rate was calculated without using a cost floor, as it had 
been calculated in prior years.
    Response: We appreciate the concerns that commenters raised and 
recognize the importance of ensuring that PHP payment rates accurately 
reflect the financial costs to providers of providing PHP services to 
their communities. Under our longstanding methodology, the proposed and 
final calculated geometric mean per diem costs are based on the actual 
provider-reported claims and cost data and, therefore, we believe they 
accurately represent the cost of providing PHP services.
    With respect to the commenters' suggestions about continuing the 
use of cost floors, we did not propose to apply this methodology for CY 
2023 and we are not finalizing such a methodology in this final rule. 
As we noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44663), 
overall Medicare outpatient service volumes appear to be returning to 
more normal pre-pandemic levels. As discussed in section X.D of the CY 
2023 OPPS/ASC proposed rule (87 FR 44680 through 44682), 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 that 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 explained that we believe the more recently available CY 
2021 claims data would better represent the volume and mix of claims 
for the CY 2023 OPPS. Accordingly, we stated that we believe it is 
appropriate to use CY 2021 data for purposes of CY 2023 OPPS 
ratesetting. In order to mitigate the effects of the COVID-19 PHE on 
the hospital-based PHP geometric mean per diem cost calculation, we 
proposed 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).
    We further note that a cost floor would effectively have no impact 
on the CY 2023 hospital-based PHP geometric mean per diem cost 
calculation because both the proposed and final CY 2023 hospital-based 
geometric mean per costs are higher than those calculated in either CY 
2021 or CY 2022. As discussed earlier in this final rule with comment 
period, we note that the proposed and final PHP payment rates are 
calculated in accordance with the statutorily required relative payment 
weight calculations under the OPPS. Accordingly, the CY 2023 hospital-
based PHP payment rate calculation depends not only on the geometric 
mean per diem cost for PHP services, but also on the budget neutral 
adjustments to the weight scaler as described in section II.A.4. of 
this final rule and on the OPPS conversion factor described in section 
II.B. of this final rule. As a result of those OPPS budget neutrality 
adjustments, the proposed and final APC payment rates may be higher or 
lower than their estimated APC geometric mean costs.
    After consideration of the public comments we received, we are 
finalizing our proposal to calculate the costs per day using CY 2021 
claims data with cost report data through CY 2019 (prior to the PHE), 
which is consistent with the approach recommended for the broader CY 
2023 OPPS rate-setting. The calculated CY 2023 geometric mean per diem 
cost for all hospital-based PHPs for providing three or more services 
per day (APC 5863) is $275.83.
    The final CY 2023 PHP geometric mean per diem costs are shown in 
Table 63 and are used to derive the final CY 2023 PHP APC per diem 
rates for CMHCs (subject to the equitable adjustment discussed earlier 
in this section of this final rule) and hospital-based PHPs. The final 
CY 2023 PHP APC per diem rates are included in Addendum A to this final 
rule with comment period (which is available on our website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html).

[[Page 72000]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.091

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.
    As we discussed in the CY 2023 OPPS/ASC proposed rule (87 FR 
44665), we received four comments in response to the April 30, 2020 
interim final rule with comment regarding the interim final policy for 
PHP. Detailed summaries and responses to these comments are found in 
section XXII.B.4 of this CY 2023 OPPS/ASC final rule. In that section 
of this final rule, we are confirming as final the interim policy set 
forth in the April 30, 2020 interim final rule with comment.
    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.\116\ 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. However, we note that section 1861(ff)(3)(A) of the Act, 
which defines partial hospitalization services, 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.
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    \116\ https://www.psychiatrist.com/jcp/covid-19/telehealth-treatment-patients-intensive-acute-care-psychiatric-setting-during-covid-19/.

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[[Page 72001]]

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 the CY 2023 OPPS/ASC proposed rule 
(87 FR 44676 through 66479), we proposed 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 did not propose to recognize these proposed OPPS 
remote services as PHP services, we clarified 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 reminded 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 
is intended for patients who 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 reiterated 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), and Sec.  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 stated in the plan of care rather than in the actual hours of 
therapeutic services a patient receives.
    In accordance with these requirements, we stated that if the 
proposal at section X.A.5 of the CY 2023 OPPS/ASC proposed rule were 
finalized, we would 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. We 
also noted that the medical documentation should continue to support 
the patient's eligibility for participation in a PHP.
    Lastly, we noted 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 did not propose 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, we stated that 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 of the CY 2023 OPPS/ASC 
proposed rule were 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 CY 2023 OPPS/ASC proposed rule 
(87 FR 44666 through 44667), we requested 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.
    Comment: We received 17 comments in support of making remote 
behavioral health services available to patients in PHPs. Commenters 
noted that these services have not only been vital to ensure access to 
mental health care during the COVID-19 PHE, but have also demonstrated 
the general need for remote outpatient mental health services, 
especially for rural communities. Specifically, commenters stated that 
small rural hospitals have leveraged virtual care to meet the surging 
demand of behavioral health needs in the communities they serve, which 
has improved continuity of care and removed barriers to access mental 
health care in these isolated and underserved communities. Two 
commenters noted that remote services for PHP patients have been of 
great value in improving access to behavioral health by removing 
transportation, geographical, and adverse weather barriers that would 
otherwise prohibit patients from receiving services. In addition, they 
indicated remote services for PHP patients improve access for patients 
with challenging diagnoses, including trauma, agoraphobia, and anxiety, 
as well as provide access to medically complex patients who have 
difficulty leaving their home for outpatient services.
    Three commenters encouraged CMS to closely monitor the use of non-
PHP remote mental health codes for patients receiving PHP services. 
These commenters also noted that under the proposed clarification, 
remote behavioral health services would not be recognized as PHP 
services, and they encouraged CMS to carefully monitor whether 
clinicians are under the impression that these remote services may 
count toward the required care for PHP patients. These commenters 
further encouraged CMS to provide more specific instructions related to 
the documentation requirement to 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.
    Response: We thank commenters for their support. As some commenters 
noted, we did not propose to recognize remote mental health services as 
PHP services. In response to the concerns that commenters raised, we 
are clarifying that non-PHP remote mental health services furnished to 
a beneficiary in a PHP will not be counted as PHP services in the 
determination of payment for a PHP day. When these services are 
furnished to a beneficiary by a hospital, they will be paid at the 
established APC payment amount as discussed in section X.A.5 of this 
final rule. We also note that our longstanding OPPS policy limits 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 agree with commenters that remote non-PHP mental health services 
can help address barriers related to transportation, adverse weather, 
or other unforeseen circumstances. We clarified

[[Page 72002]]

in the CY 2023 OPPS/ASC proposed rule 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, including the proposed non-PHP remote mental health 
services.
    Although we will not recognize remote mental health services as PHP 
services, we acknowledge that there will be circumstances when a 
patient under a PHP plan of care may need to temporarily receive remote 
mental health services. We are clarifying that remote mental health 
services that are included in a PHP patient's plan of care will not 
limit a patient's eligibility for continued participation in a PHP if 
all other program requirements are met. That is, for a patient who 
needs at least 20 hours per week of PHP services, we will consider 
remote mental health services that are included in the patient's plan 
of care to be consistent with the regulation at Sec.  410.43(c)(1), 
which states that PHPs are intended for patients that require a minimum 
of 20 hours per week of therapeutic services as evidenced in their plan 
of care. As discussed in the CY 2023 OPPS/ASC proposed rule (87 FR 
44666 through 44667) and earlier in this final rule, 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 stated in 
the plan of care rather than in the actual hours of therapeutic 
services a patient receives. Therefore, if a PHP patient receives non-
PHP mental health services remote services, we expect that the plan of 
care will reflect such services, and we would not consider the 
inclusion of such services in the plan of care to limit the patient's 
eligibility for continued participation in a PHP to the extent that 
other patient eligibility requirements are met. In accordance with 
Sec.  410.43(c)(7), PHP is intended for patients who 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. For patients under a PHP plan of care that 
receive remote services, the medical documentation should continue to 
support the patient's eligibility for participation in a PHP. Regarding 
comments about access for medically complex patients and those with 
challenging diagnoses, we further note that the Medicare home health 
benefit may be available to meet the needs of the kinds of patients 
that commenters identified, provided all eligibility requirements are 
met. The home health beneficiary eligibility requirements at Sec.  
409.42 specify, among other requirements, that the beneficiary be 
confined to the home; under the care of a physician or allowed 
practitioner; be receiving services under a plan of care established 
and periodically reviewed by a physician or allowed practitioner; need 
skilled nursing care on an intermittent basis or physical therapy or 
speech-language pathology; or have a continuing need for occupational 
therapy. For more information on the home health benefit, we refer 
readers to the Medicare Benefit Policy Manual, Pub 100-02, chapter 7.
    Comment: One commenter requested CMS clarify that facility fees for 
providing PHP services via telehealth will continue to be covered after 
the end of the COVID-19 PHE.
    Response: As we discussed earlier in this final rule, we did not 
propose to recognize remote mental health services as PHP services. As 
discussed in section XXII.B.4 of this final rule with comment period, 
we are confirming as final that the flexibilities allowing PHP services 
to be furnished remotely will apply only for the duration of the COVID-
19 PHE. Accordingly, facilities will not be permitted to bill for PHP 
when services are provided remotely. However, hospital outpatient 
departments will be permitted to bill for remote mental health services 
on an individual basis and paid at the established APC payment amount 
as discussed in section X.A.5 of this final rule with comment period.
    In addition, as discussed in section XXII.B.5 of this final rule 
with comment period, we are finalizing that when a patient is receiving 
a professional service via telehealth in a location that is considered 
a hospital PBD, and the patient is a registered outpatient of the 
hospital, the hospital in which the patient is registered may bill the 
originating site facility fee for the service. We are also finalizing 
the applicability of section 603 of the BBA 2015 to hospitals 
furnishing care in the beneficiaries' homes (or other temporary 
expansion locations). Once the PHE for COVID-19 ends, these 
flexibilities will end as well.
    After consideration of the public comments we received, we are 
finalizing the clarification that PHP patients can continue to receive 
the full range of hospital outpatient services, including the new HCPCS 
codes that describe mental health services furnished to beneficiaries 
in their homes by clinical staff of the hospital. We are also 
finalizing the clarification that for PHP patients, the plan of care 
should be updated to reflect that remote services are being provided.
3. Request for Information Regarding Remote PHP Services Furnished by 
Hospital Outpatient Departments and CMHCs During the COVID-19 PHE
    In the CY 2023 OPPS/ASC proposed rule, we stated our interest 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 requested 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?
    We stated that 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. We asked that comments identify the 
question commenters are responding to, and include as much data as 
possible that supports their responses.
    We received 27 comments in response to the CY 2023 OPPS/ASC 
proposed rule pertaining to the questions raised in the request for 
information regarding remote PHP services furnished by hospital 
outpatient departments and CMHCs during the COVID-19 PHE. Commenters 
included members of national associations who overall responded that 
the flexibilities of remote mental health services for PHP patients 
during the COVID-19 PHE have allowed providers of PHP services to 
maintain continuity of care for patients and expand their programs to 
individuals otherwise outside of the provider's service area. 
Commenters explained remote PHP services have most often been used when 
patients are in quarantine due to contracting COVID-19, when patients 
do not have

[[Page 72003]]

transportation to attend in-person services, and to reach individuals 
living in an area without accessible PHP services.
    We thank commenters for their detailed responses to this request 
for information. We will take these comments into consideration to 
potentially inform future policy development.

D. Outlier Policy for CMHCs

    For 2023, we proposed to continue to calculate the CMHC outlier 
percentage, cutoff point and percentage payment amount, outlier 
reconciliation, outlier payment cap, and fixed dollar- threshold 
according to previously established policies. These topics are 
discussed in more detail. We refer readers to section II.G.1 of the CY 
2023 OPPS/ASC proposed rule (87 FR 44533) for our general policies for 
hospital outpatient outlier payments.
    We did not receive any public comments on our proposal and are 
finalizing as proposed.
1. Background
    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), we noted a significant difference in the 
amount of outlier payments made to hospitals and CMHCs for PHP 
services. Given the difference in PHP charges between hospitals and 
CMHCs, we did not believe it was appropriate to make outlier payments 
to CMHCs using the outlier percentage target amount and threshold 
established for hospitals. Therefore, beginning in CY 2004, we created 
a separate outlier policy specific to the estimated costs and OPPS 
payments provided to CMHCs. We designated a portion of the estimated 
OPPS outlier threshold specifically for CMHCs, consistent with the 
percentage of projected payments to CMHCs under the OPPS each year, 
excluding outlier payments, and established a separate outlier 
threshold for CMHCs. This separate outlier threshold for CMHCs resulted 
in $1.8 million in outlier payments to CMHCs in CY 2004 and $0.5 
million in outlier payments to CMHCs in CY 2005 (82 FR 59381). In 
contrast, in CY 2003, more than $30 million was paid to CMHCs in 
outlier payments (82 FR 59381).
2. CMHC Outlier Percentage
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 
through 59268), we described the current outlier policy for hospital 
outpatient payments and CMHCs. We note that we also discussed our 
outlier policy for CMHCs in more detail in section VIII.C of that same 
final rule (82 FR 59381). We set our projected target for all OPPS 
aggregate outlier payments at 1.0 percent of the estimated aggregate 
total payments under the OPPS (82 FR 59267). This same policy was also 
reiterated in the CY 2019 OPPS/ASC final rule with comment period (83 
FR 58996), 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 
the CY 2023 OPPS/ASC proposed rule (87 FR 44668), 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44668), so any 
provider's costs that exceed the CMHC outlier cap will have its 
payments adjusted downward. After accounting for the CMHC outlier cap, 
we 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 proposed to continue to calculate the CMHC outlier percentage 
according to previously established policies, and we did not propose 
any changes to our current methodology for calculating the CMHC outlier 
percentage for CY 2023. Therefore, based on our CY 2023 payment 
estimates, CMHCs are projected to receive 0.01 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.
    We did not receive any public comments on our proposal and are 
finalizing as proposed.
3. Cutoff Point and Percentage Payment Amount
    As described in the CY 2018 OPPS/ASC final rule with comment period 
(82 FR 59381), our policy has been to pay CMHCs for outliers if the 
estimated cost of the day exceeds a cutoff point. In CY 2006, we set 
the cutoff point for outlier payments at 3.4 times the highest CMHC PHP 
APC payment rate implemented for that calendar year (70 FR 68551). For 
CY 2018, the highest CMHC PHP APC payment rate is the payment rate for 
CMHC PHP APC 5853. In addition, in CY 2002, the final OPPS outlier 
payment percentage for costs above the multiplier threshold was set at 
50 percent (66 FR 59889). In CY 2018, we continued to apply the same 50 
percent outlier payment percentage that applies to hospitals to CMHCs 
and continued to use the existing cutoff point (82 FR 59381). 
Therefore, for CY 2018, we continued to pay for partial hospitalization 
services that exceeded 3.4 times the CMHC PHP APC payment rate at 50 
percent of the amount of 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

[[Page 72004]]

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 proposed to continue to pay for partial hospitalization 
services that exceed 3.4 times the proposed CMHC PHP APC payment rate 
at 50 percent of the CMHC PHP APC geometric mean per diem costs over 
the cutoff point. That is, for CY 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))].
    We did not receive any public comments on our proposal and are 
finalizing as proposed.
4. Outlier Reconciliation
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68594 
through 68599), we established an outlier reconciliation policy to 
address charging aberrations related to OPPS outlier payments. We 
addressed vulnerabilities in the OPPS outlier payment system that lead 
to differences between billed charges and charges included in the 
overall CCR, which are used to estimate cost and would apply to all 
hospitals and CMHCs paid under the OPPS. We initiated steps to ensure 
that outlier payments appropriately account for the financial risk when 
providing an extraordinarily costly and complex service, but are only 
being made for services that legitimately qualify for the additional 
payment.
    For a comprehensive description of outlier reconciliation, we refer 
readers to the CY 2019 OPPS/ASC final rules with comment period (83 FR 
58874 through 58875 and 81 FR 79678 through 79680).
    We proposed to continue these policies for partial hospitalization 
services provided through PHPs for CY 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).
    We did not receive any public comments on our proposal and are 
finalizing as proposed.
5. Outlier Payment Cap
    In the CY 2017 OPPS/ASC final rule with comment period, we 
implemented a CMHC outlier payment cap to be applied at the provider 
level, such that in any given year, an individual CMHC will receive no 
more than a set percentage of its CMHC total per diem payments in 
outlier payments (81 FR 79692 through 79695). We finalized the CMHC 
outlier payment cap to be set at 8 percent of the CMHC's total per diem 
payments (81 FR 79694 through 79695). This outlier payment cap only 
affects CMHCs, it does not affect other provider types (that is, 
hospital-based PHPs), and is in addition to and separate from the 
current outlier policy and reconciliation policy in effect. In the CY 
2020 OPPS/ASC final rule with comment period (84 FR 61351), we 
finalized a proposal to continue this policy in CY 2020 and subsequent 
years. In the CY 2023 OPPS/ASC proposed rule, we did not propose any 
changes to this policy.
    We did not receive any public comments on our proposal and are 
finalizing as proposed.
6. Fixed-Dollar Threshold
    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59267 
through 59268), for the hospital outpatient outlier payment policy, we 
set a fixed--dollar threshold in addition to an APC multiplier 
threshold. Fixed-dollar thresholds are typically used to drive outlier 
payments for very costly items or services, such as cardiac pacemaker 
insertions. CMHC PHP APC 5853 is the only APC for which CMHCs may 
receive payment under the OPPS, and is for providing a defined set of 
services that are relatively low cost when compared to other OPPS 
services. Because of the relatively low cost of CMHC services that are 
used to comprise the structure of CMHC PHP APC 5853, it is not 
necessary to also impose a fixed-dollar threshold on CMHCs. Therefore, 
in the CY 2018 OPPS/ASC final rule with comment period, we did not set 
a fixed-dollar threshold for CMHC outlier payments (82 FR 59381). This 
same policy was also reiterated in the CY 2020 OPPS/ASC final rule with 
comment period (84 FR 61351), 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 proposed to continue this policy for 
CY 2023.
    We did not receive any public comments on our proposal and are 
finalizing as proposed.

IX. 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

[[Page 72005]]

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 covered 
procedures 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 that, therefore, will not be paid by 
Medicare under the OPPS, as well as the criteria we have used to review 
the IPO 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. Changes to the Inpatient Only (IPO) List

    Using the five criteria listed above, in the CY 2023 OPPS/ASC 
proposed rule, for CY 2023, we identified 10 services described by the 
following codes that we proposed 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 (e.g., 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;

[[Page 72006]]

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 (eg, 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 proposed 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 were displayed 
in Table 46 (87 FR 44672).
    As noted above, we proposed 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 believed 
that this procedure met 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 proposed to assign CPT code 16036 to status indicator ``N''. 
We solicited 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 proposed 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 believed CPT code 22632 met 
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 
proposed to assign CPT code 22632 to status indicator ``N''. We 
solicited 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 proposed 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 stated that 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 
proposed to remove them from the IPO list for CY 2023. We proposed to 
assign these eight services to APC 5165--Level 5 ENT Procedures and 
status indictor ``J1''. We solicited public comment on our conclusion 
that the services described by CPT codes 21141, 21142, 21143, 21194, 
21196, 21347, 21366, and 21422 met criteria 1, 2, and 3 and our 
proposal to assign these services to APC 5165--Level 5 ENT Procedures 
and status indicator ``J1''.
    We proposed to add eight services described by codes that were 
newly created by the AMA CPT Editorial Panel for CY 2023 to the IPO 
list. The codes for these services, which will be effective on January 
1, 2023, are CPT codes 15778, 22860, 49596, 49616, 49617, 49618, 49621, 
and 49622. We note that these codes were referred to by the placeholder 
codes 157X1, 228XX, 49X06, 49X10, 49X11, 49X12, 49X13, and 49X14 
respectively in the CY 2023 OPPS/ASC proposed rule. After clinical 
review of these services, we found that they require a hospital 
inpatient admission or stay and we proposed to assign these services to 
status indicator ``C'' for CY 2023. The CPT codes, long descriptors, 
and the proposed CY 2023 payment indicators were displayed in Table 65.
    Comment: We received several public comments in support of our 
proposal to remove CPT codes 16036, 21141, 21142, 21143, 21194, 21196, 
21347, 21366, 21422, and 22632 from the IPO list and for the proposed 
status indicator and APC assignments for these codes for CY 2023. We 
also received several comments in support of adding CPT codes 15778, 
22860, 49596, 49616, 49617, 49618, 49621, and 49622 to the IPO list for 
CY 2023. Multiple commenters urged CMS to continue its current process 
of evaluating individual services against the five longstanding 
criteria to determine if the services are appropriate to remove from 
the IPO list. A few commenters also noted that they believed the 
current policy allows for the flexibility for physicians and their 
patients to choose the appropriate care and increases access to safe 
and affordable care, along with reducing potential harm to Medicare 
beneficiaries.
    Three commenters specifically expressed support for removing CPT 
codes 16036 and 22632 because they are add-on codes that are performed 
with primary procedures that have previously been removed from the IPO 
list. One commenter who supported our proposal to remove CPT code 22632 
from the IPO list requested that we not assign the code to status 
indicator ``N'', and instead provide separate payment for the code 
because the commenters believe it is a device intensive procedure and 
not providing separate payment would be problematic for providers.
    Response: We thank commenters for their support.
    We note that CPT code 22632 is an add-on code and will always be 
performed with a primary procedure. Because of this, we believe that 
assigning CPT code 22632 to status indicator ``N'' is the appropriate 
assignment and we are finalizing our proposal to reassign CPT 22632 to 
status indicator ``N'' for CY 2023.
    Comment: We received one comment that encouraged CMS to reconsider 
removing the proposed services from IPO list. The commenter stated that 
the proposed services cannot be safely performed in an outpatient 
setting

[[Page 72007]]

because they require the care and services available in the inpatient 
setting. The commenter believed that removing the proposed services 
would cause these services to be performed at lower levels of care than 
appropriate for the patients.
    We also received one comment that opposed removing CPT code 16036 
from the IPO list and recommended keeping the service on the list. The 
commenter stated that this service was typically provided in the 
operating room or emergency department if required, but is not widely 
performed in the hospital outpatient department setting and would not 
be performed in an ASC. They noted that for 2020, 84 percent of 
Medicare claims for this service had inpatient hospital status while 8 
percent of claims for this service were outpatient, which they believed 
represented the patients who received emergency treatment and then were 
sent to an outpatient burn center after stabilization. The commenter 
also expressed concern that claims submitted for both CPT code 16036 
and its primary procedure of CPT code 16035 were being miscoded as 
being performed in a non-facility setting, which could give the false 
impression that these services can safely be performed in an outpatient 
or non-facility setting and should therefore be removed from the IPO 
list.
    Response: We thank commenters for their feedback. In regard to the 
stakeholder's concerns about removing CPT code 16036, after further 
review, we agree with the stakeholder that this service would typically 
be performed in the inpatient setting. For this reason, we are not 
finalizing our proposal to remove CPT code 16036 from the IPO list and 
instead will continue to assign CPT code 16036 to a status indicator 
assignment of ``C''.
    We disagree that CPT codes 21141, 21142, 21143, 21194, 21196, 
21347, 21366, 21422, and 22632 cannot be safely furnished in the 
outpatient setting. As noted above, our clinical review found that 
these procedures were appropriate to remove from the IPO list. In 
regards to the stakeholders' concern that Medicare beneficiaries would 
receive these services at lower levels of care, we note that, as stated 
above, 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. The comments we received were 
generally in support of removing these services, with commenters noting 
that they believed the services could be appropriately furnished in the 
outpatient setting. We did not receive any additional supportive 
evidence or arguments that further explained why these procedures could 
not be performed in the hospital outpatient department setting. Given 
these reasons, we are finalizing our proposal to reassign CPT codes 
21141, 21142, 21143, 21194, 21196, 21347, 21366, and 21422 and to 
status indicator ``J1'' and APC 5165. We are also finalizing our 
proposal to reassign CPT code 22632 to status indicator ``N''.
    Comment: We received three comments requesting that CMS remove CPT 
code 47550 (Biliary endoscopy, intraoperative (choledochoscopy) (List 
separately in addition to code for primary procedure)) from the IPO 
list and reassign it to status indicator ``N''. The commenters stated 
that this add-on code is only reported as secondary to a primary 
procedure and allows for direct visualization and identification of 
abnormalities of tortuous anatomy and aids in the facilitation of the 
primary procedure, including diagnostic brushing/washing, biopsy, stone 
removal, strictures, and stenting within the biliary tract. The 
commenters noted that this service is associated and performed with 
several primary procedures that are not on the IPO list, including 
those described by CPT codes 47553 through 47541. Additionally, the 
commenters cited multiple studies that supported that this service can 
be performed safely in the outpatient setting. The commenters added 
that while the literature showed that the outpatient setting was not 
appropriate for all patients for this service, it needs to be an 
accessible site of service option. Additionally, the commenters noted 
that Medicare claims data show that this service has been billed by 
physicians in the outpatient setting, with 21.5% of physician claims 
being performed in the outpatient setting in CY 2020. The commenters 
argued that removing CPT code 47550 from the IPO list would increase 
access for Medicare beneficiaries and allow providers to determine the 
most appropriate site of service. Furthermore, this issue was presented 
at the 2022 HOP Panel, with the Panel recommending that CPT code 47550 
be removed from the IPO list.
    Response: We thank commenters for their feedback. After further in-
depth review of the evidence provided, we agree with the commenters 
that this service meets criteria 3 in our regulation text at Sec.  
419.23(b)(3) because the service or procedure is related to codes that 
CMS has already removed from the IPO list and can be appropriately 
removed from the IPO list. We are reassigning CPT code 47550 to status 
indicator ``N'' for CY 2023.
    Comment: One commenter requested that CMS also remove CPT codes 
21188, 21255, 21343, 21344, 21348, 21423, and 21436 from the IPO list, 
stating that these procedures can be performed outside of the inpatient 
setting similarly to proposed CPT codes 21141, 21142, 21143, 21194, 
21196, 21347, 21366, and 21422. The long descriptors for the requested 
codes are listed in Table 64 below.
BILLING CODE 4120-01-P

[[Page 72008]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.092

    Response: We thank the commenter for their feedback. After further 
review of the recommended codes, we agree with the stakeholder that the 
service described by CPT code 21255 can be appropriately removed from 
the IPO list and 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. We are reassigning CPT code 21255 to status indicator ``J1'' and 
APC 5165--Level 5 ENT Procedures, and continuing to assign CPT codes 
21188, 21343, 21344, 21348, 21423, and 21436 to status indicator ``C'' 
for CY 2023.
    Comment: We received two comments requesting that CMS reconsider 
reversing the elimination of the IPO list that was finalized in the CY 
2021 OPPS/ASC final rule with comment period. These commenters stated 
that they supported the elimination of the IPO list to allow for 
greater site-of-service flexibility. One commenter believed that 
physicians are in the best position to determine whether a procedure 
can be performed appropriately in the hospital outpatient setting or 
whether inpatient care is necessary. They continued to state that they 
believe that physician judgment, along with licensure and accreditation 
requirements, provide appropriate safeguards. Additionally, one 
commenter noted that innovations in medicine would lead to a less 
distinct difference between the need for inpatient care and the 
appropriateness of outpatient care.
    Response: We thank the commenters for their feedback. We are not 
considering eliminating the IPO list at this time. As stated in the CY 
2022 OPPS/ASC final rule with comment period, we believe the IPO list 
is a valuable tool for ensuring that the OPPS only pays for services 
that can safely be performed in the hospital outpatient setting and 
remains a necessary safeguard. In that final rule, we explained that we 
recognized that while physicians are able to make safety determinations 
for a specific beneficiary, CMS is in the position to make safety 
determinations for the broader population of Medicare beneficiaries, 
that is, the typical Medicare beneficiary. Furthermore, we explained 
that while we want to afford physicians and hospitals the maximum 
flexibility in choosing the most clinically appropriate site of service 
for the procedure, as long as the characteristics of the procedure are 
consistent with the criteria listed above. For further discussion on 
our decision to halt the elimination of the IPO list, we refer readers 
to the CY 2022 OPPS/ASC final rule with comment period (86 FR 63671 
through 63711).
    Comment: We received two comments urging CMS to develop guidance on 
which patients are appropriate candidates for receiving services in the 
inpatient setting versus the outpatient setting. Commenters specified 
that they would like guidance on which patients would be reasonable 
candidates for same-day discharge. The commenters state that they 
believe this would mitigate denials from payers and that

[[Page 72009]]

establishing guidance would not limit clinician decision-making as they 
would still able to provide supporting clinical documentation to 
justify inpatient stays for patients that may otherwise be candidates 
for outpatient surgery.
    Response: We thank the commenters for their feedback. In the CY 
2022 OPPS/ASC final rule with comment period, we noted the balance 
between several factors on this important issue, namely, the 
prohibition on CMS interfering with the practice of medicine in Section 
1801 of the Social Security Act, the need to provide clear information 
about CMS billing and payment rules that ensure hospitals, physicians, 
and other stakeholders can understand and operate within them, and that 
the specific decision about the most appropriate care setting for a 
given surgical procedure is a complex medical judgment made by the 
physician based on the beneficiary's individual clinical needs and 
preferences and on the general coverage rules requiring that any 
procedure be reasonable and necessary (86 FR 63675).
    We also noted that the Beneficiary and Family-Centered Care Quality 
Improvement Organizations (BFCC-QIOs) are contracted by CMS to review a 
sample of Medicare fee-for-service (FFS) short-stay inpatient claims 
(claims with hospital stays lasting less than 2 midnights after formal 
inpatient admission) for compliance with the 2-midnight rule. In the CY 
2022 OPPS/ASC final rule with comment period (86 FR 63736 through 
63740), we reinstated a two-year period of exemption from certain BFCC-
QIO medical review activities for procedures newly removed from the IPO 
list where the length of stay after inpatient admission is less than 2 
midnights. During the exemption period, BFCC-QIOs may conduct medical 
reviews for education purposes but will not deny claims or make 
referrals to recovery audit contractors (RACs) for noncompliance with 
the 2-midnight rule for procedures that are removed from the IPO list 
within the first 2 years of their removal. This exemption period is 
intended to allow providers time to become more familiar with the 
application of the 2-midnight rule to procedures newly removed from the 
IPO list, and allows the BFCC-QIOs the opportunity to provide education 
regarding application of that payment policy to such procedures. We 
also noted that we plan to use our experience gained through BFCC-QIO 
reviews to engage stakeholders to determine if developing additional 
materials for services that are newly removed from the IPO list would 
be helpful. We reiterate that any such materials will not supersede 
physicians' medical judgment about whether a procedure should be 
performed in the inpatient or outpatient hospital setting. For further 
discussion on this issue, we refer readers to the CY 2022 OPPS/ASC 
final rule with comment period (86 FR 63674 through 63675).
    In summary, after consideration of the public comments we received, 
we are finalizing our proposal to remove CPT codes 21141, 21142, 21143, 
21194, 21196, 21347, 21366, and 21422 from the IPO list and reassign 
them to status indicator ``J1'' and APC 5165 beginning in CY 2023. We 
are also finalizing our proposal to remove CPT code 22632 from the IPO 
list and reassign the service to status indicator ``N''. We are not 
finalizing our proposal to remove CPT code 16036 from the IPO list and 
will continue to assign CPT code 16036 to status indicator ``C''. 
Finally, we are removing CPT code 47550 and reassigning it to status 
indicator ``N'' and removing CPT code 21255 and reassigning it to 
status indicator ``J1'' and APC 5165--Level 5 ENT Procedures. Table 65 
below contains the 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 final rule with comment period, which is available 
via the internet on the CMS website.

[[Page 72010]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.093


[[Page 72011]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.094


[[Page 72012]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.095

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. Sections 1834(m)(4)(D) and (E) of the 
Act specify the types of health care professionals who 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

[[Page 72013]]

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 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. We note that 
this policy is being finalized elsewhere in this final rule with 
comment period.
3. Comment Solicitation in the CY 2022 OPPS/ASC Proposed 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

[[Page 72014]]

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.\117\ 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%)''.\118\
---------------------------------------------------------------------------

    \117\ https://www.cdc.gov/mmwr/volumes/69/wr/mm6932a1.htm.
    \118\ https://www.cdc.gov/mmwr/volumes/70/wr/mm7013e2.htm.
---------------------------------------------------------------------------

    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,\119\ with overdose death rates surging among 
Black and Latino Americans.\120\ 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.\121\ 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.\122\
---------------------------------------------------------------------------

    \119\ https://www.cdc.gov/nchs/nvss/vsrr/drug-overdose-data.htm.
    \120\ 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.
    \121\ https://www.cdc.gov/nchs/nvss/vsrr/drug-overdose-data.htm.
    \122\ 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/.
---------------------------------------------------------------------------

    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.\123\
---------------------------------------------------------------------------

    \123\ https://www.commonwealthfund.org/blog/2020/using-telehealth-meet-mental-health-needsduring-covid-19-crisis.
---------------------------------------------------------------------------

5. CY 2023 OPPS Payment 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 Federally 
Qualified Health Centers (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.

[[Page 72015]]

    Therefore, we proposed 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 proposed to create OPPS-specific coding 
to describe these services. The proposed code descriptors specified 
that the beneficiary must be in their home and that there is no 
associated professional service billed under the PFS. We noted 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 proposed 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 
(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 solicited 
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. Please see Table 66 for the final codes 
and their descriptors.
[GRAPHIC] [TIFF OMITTED] TR23NO22.096

    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 proposed to assign placeholder 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 explained that 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. We noted that if we use 
these PFS payment rates to approximate the costs associated with 
furnishing C7900 and C7901, 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 C7902 is an add-on code, payment 
would be packaged; and the code would not be assigned to an APC. See 
Table 67 for the final SI and APC assignments and payment rates for 
HCPCS codes C9700-C7902 (placeholder HCPCS codes CXX78-CXX80 in the 
proposed rule).

[[Page 72016]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.097

    We solicited 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 stated that 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 invited 
additional information from commenters on all aspects of this proposal. 
We stated that we will also monitor uptake of these services for any 
potential fraud and/or abuse. Finally, we noted this proposal would 
also allow these services to be billed by CAHs, even though CAHs are 
not paid under the OPPS.
    Comment: Many commenters supported our proposal to designate mental 
health services furnished by hospital staff to beneficiaries in their 
homes through communication technology as covered OPD services. 
Commenters stated that this policy would permit beneficiaries to 
maintain access to mental health services furnished through PHE-
specific flexibilities and that it has the potential to even expand 
access, particularly in areas where there is a shortage of in-person 
mental health care. A few commenters requested that CMS allow other 
services, such as services provided for the treatment of 
immunocompromised patients, to be furnished by hospital staff to 
beneficiaries in their homes through the use of telecommunications 
technology for other types of services beyond those described by the 
proposed HCPCS codes.
    Response: We thank commenters for their support for this proposal. 
We will consider any expansions to this policy for future rulemaking.
    Comment: Some commenters supported the creation of Medicare-
specific HCPCS codes to describe these services, while others stated 
that the use of C-codes was confusing because existing CPT codes 
described similar services and did not represent the whole range of 
mental health services and staff that furnish them in a HOPD. Some 
commenters recommended that CMS use existing CPT codes and create a 
modifier to identify when the service is furnished remotely to a 
beneficiary in their home.
    Response: We thank commenters for their support. While we 
understand that there may be some challenges surrounding when it would 
be appropriate to bill a Medicare-specific C-code where there are 
existing CPT codes that describe a similar service, however we believe 
that creating new codes rather than relying on existing CPT codes will 
reduce confusion because the CPT codes could also be billed by the 
hospital to account for the costs hospitals incurred when there is an 
associated professional service. Furthermore, creation of Medicare-
specific coding will allow CMS to monitor these services and make 
refinements to the coding to more accurately reflect clinical practice.
    Comment: A few commenters supported the proposed payment rates, 
while many others stated that the proposed rates did not accurately 
capture all of the costs to the hospital of providing these services. 
These commenters stated that, even if the beneficiary is not physically 
in the hospital, the hospital would still be accruing costs associate 
with staffing and technology and that using the facility payment rate 
under the PFS is inappropriate and would not account for the additional 
costs to the hospital of providing these services. Some commenters 
supported the use of the facility payment rate under the PFS to inform 
the APC-assignment of these services but recommended that CMS compare 
them to CPT codes 90832 (Psychotherapy, 30 minutes with patient) 
through 90838 (Psychotherapy, 60 minutes with patient when performed 
with an evaluation and management service (List separately in addition 
to the code for primary procedure)), as the commenters believe these 
codes better reflect the work and costs associated with care, which are 
consistent across physician office and hospital settings.
    Response: We continue to believe that the resources associated with 
hospital staff furnishing mental health services to beneficiaries in 
their homes through telecommunications technology is better accounted 
for through the facility payment rate under the PFS, and that using 
this payment rate to inform the APC assignment is a reasonable 
methodology until such time as we have claims data for these services. 
We acknowledge that there are likely costs to the hospital other than 
the time of the hospital staff providing the service, including the 
amount of infrastructure needed to provide the service; however, we 
believe these costs are likely

[[Page 72017]]

minimal given that the beneficiary is in their home and not in the 
hospital.
    Regarding the alternative codes commenters suggested we use to make 
appropriate APC assignments for the proposed C codes, we note that we 
do not believe the OPPS rates for these services serve as an 
appropriate crosswalk for the new mental health codes because these 
psychotherapy codes are for services performed at the hospital, not 
remotely.
    Comment: Most commenters recommended that CMS revise the 
requirements at 42 CFR 410.27(a)(1)(iii) and (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 to remove references to the services 
being ``in'' the hospital. These commenters stated that this would 
allow for maximum flexibility for practitioners and could increase 
access to mental health services. One commenter requested clarification 
as to whether the supervising physician would have to be physically 
located at the hospital to meet general supervision requirements.
    Response: We appreciate the additional information provided by 
commenters. We agree that not requiring the staff providing the mental 
health service to the beneficiary in their home to be physically in the 
hospital would likely maximize flexibility, particularly in areas where 
there is a shortage of healthcare practitioners. Therefore, we are 
finalizing an amendment to 42 CFR 410.27(a)(1)(iii) to add the phrase 
``except for mental health services furnished to beneficiaries in their 
homes through the use of communication technology'' and Sec.  
410.27(a)(1)(iv)(A) to add the phrase ``or through the use of 
communication technology for mental health services.'' 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.
    Comment: A few commenters requested that CMS clarify that when 
these services are furnished by hospitals that are owned or operated by 
the Indian Health Service, Indian Tribes, or Tribal Organizations, they 
are also covered, but will be paid at the applicable OMB rate that is 
established and published annually by the Indian Health Service rather 
than under the OPPS, in accordance with 42 CFR 419.20(b) and CMS's 
longstanding practice.
    Response: IHS facilities may be paid at the applicable all 
inclusive payment rate established and published annually by the Indian 
Health Service rather than under the OPPS, in accordance with 42 CFR 
419.20(b) when billing for these services.
    After consideration of the public comments we received, we are 
finalizing as proposed to assign HCPCS codes C7900 and C7901 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 are finalizing our proposal with 
modification to clarify at 42 CFR 410.27(a)(1)(iii) and (a)(1)(iv)(A) 
that mental health services provided to beneficiaries in their homes 
through communication technology are exempt from the requirement that 
therapeutic hospital or CAH services must be furnished in a hospital or 
CAH or in a department of the hospital or CAH.
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 6 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 under the PFS, and mental 
health services furnished remotely under the OPPS, we proposed 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 proposed 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 
Consolidated Appropriations Act, 2022 (CAA, 2022), delayed until

[[Page 72018]]

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 proposed that the in-person 
visit requirements would not apply until the 152nd day after the PHE 
for COVID-19 ends.
    Comment: A few commenters supported requirements for in-person 
visits; however, most opposed the proposal, particularly to require an 
in-person visit within 6 months prior to the first telehealth service. 
Commenters stated that CMS should defer to the clinical judgement of 
the treating practitioner, who is in the best position to understand 
the individual needs of their patients. Commenters appreciated that CMS 
proposed to allow exceptions to the subsequent 12-month visit 
requirement 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.
    Response: In section II.D.1.e of the CY 2023 PFS final rule 
entitled ``Implementation of Telehealth Provisions of the Consolidation 
Appropriations Acts, 2021 and 2022'', CMS clarifies that for purposes 
of the requirement that an in-person visit required within 6 months 
prior to the initial mental health telehealth services, this 
requirement does not apply to beneficiaries who began receiving mental 
health telehealth services in their homes during the PHE or during the 
151-day period after the end of the PHE. The requirement for an in-
person visit within 6 months of the initial telehealth mental health 
services takes effect only for telehealth mental health services 
beginning after the 152nd day after the end of the PHE. For reasons 
stated in the proposed rule, we believe it is important to maintain 
similar standards for mental health services furnished to beneficiaries 
in their homes through the use of telecommunications systems paid under 
OPPS. Therefore, we are making the same clarification; however, for 
patients newly receiving mental health services furnished remotely 
post-PHE, we continue to believe that the initial in-person visit 
within 6 months prior to the first remote mental health service is 
crucial to ensure the safety and clinical appropriateness of the 
following remote mental health services. We also reiterate that for 
both patients who began receiving mental health services in their homes 
during the PHE and those who began treatment post-PHE, we expect that 
these beneficiaries will receive an in-person, non-telehealth service 
every subsequent 12 months and that exceptions to this requirement will 
be documented in the patient's medical record.
    After consideration of the public comments we received, we are 
finalizing as proposed, and clarifying that beneficiaries who began 
receiving mental health telehealth services in their homes during the 
PHE or the 151-day period after the end of the PHE before the in-person 
visit requirements take effect do not need to have an in-person, non-
telehealth service within 6 months prior to receiving mental health 
service in their homes. Instead, the requirement to receive an in-
person visit within 12 months of each remote mental health telehealth 
service would apply.
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 \124\ and the existence of areas and populations where 
there is limited access to broadband due to geographic or socioeconomic 
challenges, 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 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 would 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 proposed a similar

[[Page 72019]]

policy for mental health services furnished remotely by hospital 
clinical staff to beneficiaries in their homes through communications 
technology. Specifically, we proposed 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.
    Comment: Commenters were very supportive of CMS's proposal to allow 
for audio-only communication technology in instances where the 
beneficiary did not have access to, or did not wish to use, two-way, 
audio/video communication technology. A few commenters disagreed with 
CMS's proposal to require the practitioner to have the capacity to 
furnish services via two-way, audio/video, stating that this may be 
problematic for practitioners in rural areas or areas without access to 
reliable broadband.
    Response: As we stated in the CY 2022 PFS final rule, because 
services furnished via communication technology are generally analogous 
to and must include the elements of the in-person service, it is 
generally appropriate to continue to require the use of two-way, real-
time audio/video communications technology to furnish the services (86 
FR 65061-65062). Therefore, we are maintaining the requirement that 
hospital staff must have the technical capability to use an interactive 
telecommunications system that includes two-way, real-time, interactive 
audio and video communications at the time that an audio-only mental 
health service is furnished.
    After consideration of the public comments we received, we are 
finalizing our proposal regarding use of audio-only communications 
technology as proposed.

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 section 
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.\125\
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    We solicited 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 welcomed 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.
    Comment: Commenters were generally supportive of CMS providing 
payment for IOP services. Some commenters stated that existing HCPCS 
coding was adequate to describe IOP services, while other commenters 
stated that it was necessary for the OPPS to create Medicare-specific 
coding to describe these services.
    Response: We thank commenters for the information provided and will 
consider their input for future rulemaking.

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 
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

[[Page 72020]]

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 
solicited comment on whether we should continue to allow direct 
physician supervision for these services to include presence of the 
supervising practitioner via two-way, audio/video communication 
technology through the end of CY 2023. We also solicited 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.
    Comment: We received many comments describing the value of 
rehabilitation services furnished to beneficiaries in their homes. 
Commenters requested that CMS maintain both the Hospitals Without Walls 
flexibility to make beneficiaries' homes provider-based departments of 
the hospital, and the definition of direct supervision to include the 
presence of the supervising practitioner through two-way, audio/video 
communication technology. Commenters requested that these changes be 
made permanent or, at the very least, maintained through the end of CY 
2023.
    Response: We thank commenters for the additional information. We do 
not have the flexibility to continue HWW beyond the conclusion of the 
PHE as it was accomplished through PHE-specific waivers that will 
expire when the PHE ends. This means that, following the expiration of 
the PHE, pulmonary, cardiac, and intensive cardiac rehabilitation 
services will no longer be able to be provided in a beneficiary's home. 
However, we note that the CPT codes describing cardiac, pulmonary, and 
intensive cardiac rehabilitation services were added to the Medicare 
telehealth services list in the CY 2022 PFS final rule. This will allow 
beneficiaries who live in rural areas to continue to receive these 
services through telehealth at medical facilities from 152 days after 
the conclusion of the PHE until the end of 2023 and beneficiaries in 
non-rural areas and at home to receive these services via telehealth 
for 151 days post-PHE. In the interest of maintaining a similar policy 
under the OPPS, we are finalizing extending the revised definition of 
direct supervision to include the presence of the supervising 
practitioner through two-way, audio/video when the beneficiary is 
physically located in the hospital until December 31, 2023.

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 the CY 2023 OPPS/ASC proposed rule 
(87 FR 44504), 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

[[Page 72021]]

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 proposed rule 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 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 continued 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 continued 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 extended across 
claims volume and applies to a majority of the clinical APCs in the 
OPPS, suggesting that, while clinical and billing patterns had not 
quite returned to their pre-PHE levels, they were beginning to do so.
    Similar to what we observed in CY 2022 OPPS ratesetting, we 
continued 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 available for proposed rule ratesetting, we saw a slight 
decline in volume to about 1.6 million services and noted that we would 
expect slightly more claims in the final rule data. Our view was 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 were 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44681), there 
were 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 (Level 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 
did 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 was based on 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 
volume 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 
had 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 
recognized that future COVID-19 variants may have potentially varying 
effects. Therefore, we explained that we believe it is reasonable to 
assume that there would 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 proposed to use the CY 2021 
claims for CY 2023 OPPS ratesetting.
    We proposed to use cost report data for the CY 2023 OPPS/ASC 
proposed rule (87 FR 44681) 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 2023 OPPS/APC 
relative weights (as

[[Page 72022]]

discussed in greater detail in section II.E of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44681 through 44682)). 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 was appropriate to 
continue to use the same set of cost reports that we used in developing 
CY 2022 OPPS ratesetting, so as to mitigate the impact of that 2020-
based data. We noted that we would 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 proposed 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 the CY 2023 OPPS/ASC proposed 
rule (87 FR 44681).
    As a result of our expectation that the CY 2021 claims that we 
would typically use would be appropriate for establishing the CY 2023 
OPPS, we proposed to use the CY 2021 claims for the CY 2023 OPPS/ASC 
ratesetting process. However, we proposed to use the cost reports from 
the June 2020 cost report extract, which contain only pre-PHE data, to 
remove the effect of the PHE cost report data on estimated service 
cost. In addition, we proposed to exclude from ratesetting claims that 
would be used to model the estimated cost of HCPCS code C9803 in the CY 
2023 OPPS/ASC proposed rule (87 FR 44681).
    We also considered 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 made 
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 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 were identified by the word ``Alternative'' in the 
filenames, similar to our approach in the CY 2022 OPPS/ASC proposed and 
final rules. We noted that the primary change as a result of the 
alternative proposed methodology would be in the scaled weights, which 
were 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 are located.
    Comment: Many commenters supported our proposed policy to use CY 
2021 claims data and the June 2020 cost report extract in CY 2023 OPPS 
ratesetting, believing that it was based on reasonable assumptions that 
recognize the unusual nature of CY 2020 claims and cost reports. These 
commenters generally also opposed the alternative methodology in which 
we would revert to our typical cost report data update.
    Response: We appreciate the commenters' support for our proposal.
    Comment: Three commenters believed that we should use more updated 
data in CY 2023 ratesetting, with one noting the option of using the 
December 2020 HCRIS extract, one requesting that we use our typical 
update process, and another recommending an update that would use Q3 
2022 data. Another commenter agreed with our proposal to set CY 2023 
OPPS rates using 2021 claims and the June 2020 HCRIS extract but 
believed that a growth estimate/cost inflation adjuster should be 
applied.
    Response: We have concerns about using each of the types of updated 
data commenters suggested, whether that data is from the cost report 
extract or claims. While more updated cost report data is available, it 
has more overlap between the cost reporting periods and the PHE, 
meaning that using those estimated cost to charge ratios, particularly 
those with cost reporting periods in 2020, may reflect changes that may 
not persist in CY 2023 or accurately approximate the CY 2023 outpatient 
experience. In addition, the June 2020 HCRIS extract is one that we 
have used in prior cycles and maintains stability in the cost 
estimation process. While we are using updated CY 2021 claims data, we 
recognize that there are PHE-related cost report issues, because cost 
report data usually lag the claims data by a year. Because of similar 
concerns as those we expressed in the CY 2022 OPPS/ASC final rule (86 
FR 63751 through 63754) about the impact of the PHE on our cost report 
data and as a result, our ratesetting process, we proposed to use the 
June 2020 HCRIS extract. We note that the commenter's request to use 
more recent cost report data was associated with a specific service and 
its estimated costs under that alternative. However, we must consider 
the effect of use of a particular cost report extract on the relative 
weights and estimated geometric mean costs for all services, not just 
certain ones. For these reasons, we continue to believe that the June 
2020 HCRIS extract is appropriate for calculating the CCRs used in CY 
2023 OPPS ratesetting because this set of cost report CCRs maintains 
consistency with cost report data we have previously used in 
ratesetting and mitigates some of the volatility and effects of the PHE 
on our data process, as we noted in the CY 2022 OPPS/ASC final rule (86 
FR 63751 through 63754) and CY 2023 OPPS/ASC proposed rule (87 FR 44680 
through 44682).
    With regard to using more updated claims data, we note that there 
are two issues. First, we base the ratesetting on a full calendar year 
of claims because the OPPS operates on a calendar year basis. Using 
more than a single calendar year of claims would potentially distort 
the volume of how services are represented as a portion of that 
calendar year. Second, if we were to solely establish rates based on 
available CY 2022 claims we would have a substantially smaller set of 
claims available on which to estimate service cost. Therefore, we do 
not believe it is appropriate to use more updated data beyond what we 
have historically used, which are claims data from two years prior to 
the prospective year for which we are setting OPPS rates.
    While we appreciate the request to return to the typical claims and 
cost report update process for ratesetting, there are issues with using 
that data because the data may reflect cost volatility and practice 
patterns specific to the PHE as noted in the CY 2023 OPPS/ASC proposed 
rule (87 FR 44680 through 44682). As more claims and cost report data 
become available over time, we will continue to review them

[[Page 72023]]

and their appropriateness for use in OPPS ratesetting.
    We do not agree with the suggestion that we should apply a growth 
estimate or cost inflation factor. As explained in the CY 2022 OPPS/ASC 
final rule with comment period (86 FR 63751 through 63754) and in the 
CY 2023 OPPS proposed rule (87 FR 44680 through 44682), we recognize 
that there are effects of the PHE on our claims and cost report data. 
We have tried to utilize a reasonable approach in addressing them 
through the policies we use for ratesetting. If we were to apply a 
growth estimate or cost inflation factor consistently across all 
available cost data for all services, it would not have any impact 
because the OPPS relative weights would remain the same. If we were to 
apply a cost inflation factor only to specific services, it would 
potentially distort the accuracy of the relative weights. Therefore, we 
do not believe it is appropriate to apply an additional cost inflation 
factor to the cost reports we use for CY 2023 OPPS ratesetting.
    We recognize that there are effects on the claims and cost report 
data as a result of the PHE and have applied an approach that accounts 
for what were some of the more significant effects of them on our data. 
We do not believe that it is appropriate to include those cost report 
data, which create significant cost volatility in our CY 2023 OPPS 
ratesetting process.
    Comment: A commenter requested that CMS continue the use of HCPCS 
code C9803 after the end of the PHE, due to concerns around the degree 
to which hospitals would make the service available if OPPS payment is 
not available for it. The commenter also suggested that some portion of 
claims, based on projections relative to CY 2020 levels of the service, 
be used for ratesetting purposes.
    Response: While we recognize the concern regarding the availability 
of the service after the PHE, the temporary nature of the code and its 
specific association with the duration of the PHE suggests that it is 
unlikely to be necessary for a separate specimen collection payment 
after the conclusion of the PHE. HCPCS code C9803 was created 
specifically to support collection of COVID-19 testing specimens by 
hospitals during the COVID-19 PHE. Once the PHE ends, we believe it 
will appropriate to pay for the collection of COVID-19 specimens as 
part of the COVID-19 testing payment, which is consistent with how 
payment for other laboratory tests is structured. As discussed in the 
CY 2023 OPPS/ASC proposed rule (87 FR 44681) the volume of claims of 
this code in APC 5731 (Level 1 Minor Procedures) are such that they 
would dictate the payment rate. Given that separate payment for this 
code is only to be made during the PHE, we do not believe including the 
claims data for this code in establishing CY 2023 payment rates would 
be appropriate. As a result, we continue to believe that it is 
appropriate to exclude these claims from CY 2023 OPPS ratesetting.
    Comment: A commenter agreed that including the C9803 data in CY 
2023 OPPS ratesetting was not appropriate. That commenter noted that, 
contrary to the proposal to exclude C9803 from CY 2023 OPPS 
ratesetting, that data was included in ratesetting for APC 5731 (Level 
1 Minor Procedures). The commenter's recommendation was that CMS either 
exclude the data from C9803 from ratesetting to ensure an accurate 
payment rate or consider establishing a second APC from the codes in 
the APC, based on distinguishing the two separate APCs based on 
differences in geometric mean cost between the services in the APC.
    Response: We appreciate the commenter's support for our proposal 
and note that while we proposed to remove the data from CY 2023 OPPS 
ratesetting, we inadvertently included the cost and volume data for 
C9803 in establishing the proposed CY 2023 OPPS payment rate for the 
APC to which it was assigned. HCPCS code C9803 is a temporary code that 
was created to support increased testing solely during the COVID-19 
PHE. Because it is a temporary code that will no longer be utilized 
after the PHE ends, we believe that it is appropriate to remove the 
claims for the service from ratesetting for this APC. In this final 
rule, we will remove the claims that would be used to model payment for 
C9803 from ratesetting.
    After consideration of the public comments we received, we are 
finalizing our proposed policies to use CY 2021 claims and the June 
2020 HCRIS extract in establishing the CY 2023 OPPS rates, as well as 
to exclude the claims and cost data associated with HCPCSC code C9803 
from ratesetting for APC 5731.

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.  [thinsp]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.  [thinsp]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.  
[thinsp]410.32.
    Section 410.32(b)(1), titled ``Basic rule,'' provides 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

[[Page 72024]]

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.  [thinsp]410.32(b)(1). Section 410.32(b)(3) defines 
the levels of supervision referenced in Sec.  [thinsp]410.32(b)(1): 
general supervision (Sec.  [thinsp]410.32(b)(3)(i)); direct supervision 
(Sec.  [thinsp]410.32(b)(3)(ii)); and personal supervision (Sec.  
[thinsp]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.  
[thinsp]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.  [thinsp]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.  [thinsp]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.  
[thinsp]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.  [thinsp]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.  [thinsp]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 410.27
    For purposes of clarity and consistency, we proposed to revise 
Sec.  [thinsp]410.28(e) to clarify that the same nonphysician 
practitioners that can provide general and personal supervision of 
diagnostic testing services payable under the PFS under Sec.  
[thinsp]410.32(b) can provide supervision of diagnostic testing 
services furnished to outpatients by hospitals or CAHs. Specifically, 
we proposed to revise our existing supervision requirements at Sec.  
[thinsp]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.
    Another revision that we proposed to Sec.  [thinsp]410.28(e) was to 
extend the end date of the flexibility allowing for the virtual 
supervision of outpatient diagnostic services through audio/video real-
time communications technology (excluding audio-only) from the end of 
the PHE to the end of the calendar year in which the PHE ends. The 
purpose of this proposal was to ensure consistency between the hospital 
and CAH regulations at Sec. Sec.  410.27 and 410.28 with the 
physicians' office regulations at Sec.  410.32. Although the proposed 
rule contained the proposed revisions to the regulatory text of Sec.  
[thinsp]410.28(e), regrettably, the above explanation of the reason for 
the proposed revisions was inadvertently omitted from the preamble of 
the proposed rule.
    We also proposed to replace the cross-references at Sec.  
[thinsp]410.28(e) to the definitions of general, direct (for outpatient 
services provided at a nonhospital location), and personal supervision 
at Sec.  [thinsp]410.32(b)(3)(i) through (iii) with the text of those 
definitions as newly designated paragraphs (e)(1), (e)(2)(i), (ii), and 
(iii), and (e)(3) so that they are now contained within Sec.  
[thinsp]410.28.
    Similarly, since Sec.  [thinsp]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.  [thinsp]410.32(b)(3)(i) and (iii), we proposed to 
replace the cross-references at Sec.  [thinsp]410.27(a)(1)(iv)(A) and 
(B) with the text of those definitions so that they are now contained 
within Sec.  [thinsp]410.27. Additionally, for clarity we proposed to 
designate the existing definition of direct supervision and the 
proposed definition of personal supervision at Sec.  
[thinsp]410.27(a)(1)(iv)(B) as Sec.  [thinsp]410.27(a)(1)(iv)(B)(1) and 
(2), respectively. Finally, since Sec.  [thinsp]410.27(a)(1)(iv)(B) and 
(D) contain duplicate definitions for direct supervision, we proposed 
to remove Sec.  [thinsp]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.  
[thinsp]410.27(a)(1)(iv)(B)(1).
    We received the following comments in response to our proposal:
    Comment: The majority of commenters supported our proposal, citing 
clarity, consistency, increased patient access to care and allowing 
nonphysician practitioners to practice at the top of their licenses and 
clinical training.
    Response: We thank commenters for their support for our proposal.
    Comment: Two commenters supported the proposal but objected to the 
continued use of the term ``nonphysician practitioner.'' One commenter 
suggested that we replace ``nonphysician practitioner'' with each 
practitioner's professional title (i.e., ``nurse practitioner,'' 
``physician assistant,'' etc.) or, collectively, ``advance practice 
providers'' and update all related regulations, guidance and 
information collection instruments accordingly. The second commenter 
similarly suggested that we expressly list ``physician assistant,'' 
``nurse practitioner,'' and other professionals in the place of 
``nonphysician practitioner'' and accordingly revise all related 
guidance documents.
    Response: We appreciate these comments and agree with the 
importance of employing the appropriate designations for these 
practitioners. We note that Sec. Sec.  410.27(g) and 410.28(e) 
specifically list the professional titles that are included in the term 
``nonphysician practitioner'' for the purpose of each regulation. It is 
therefore unnecessary and would be impractical to replace all instances 
of ``nonphysician practitioner'' throughout each regulation with a list 
of each practitioner's professional titles. With respect to replacing 
``nonphysician practitioner'' with ``advance practice providers,'' we 
understand the importance of using the most relevant and up to date 
terminology to describe these practitioners. However, as acknowledged 
by the commenters, ``nonphysician practitioner'' is used in

[[Page 72025]]

multiple regulations, guidance and other documents and any change in 
terminology would need to be considered in light of ensuring 
consistency across these authorities. We will take this suggestion into 
consideration for future rulemaking.
    Comment: One commenter supported the proposal and requested, for 
improved clarity and to eliminate inefficiencies or delays in care 
caused by a misinterpretation of supervision policy, that we revise the 
definitions for general and personal supervision at Sec.  
410.32(b)(2)(i) and (iii) to include the ``or other supervising 
practitioner'' language contained in the definition for direct 
supervision at Sec.  410.32(b)(2)(iii). Another commenter suggested 
that we revise the definitions for general and personal supervision at 
Sec.  410.32(b)(2)(i) and (iii) to specifically reference ``physician 
assistant.''
    Response: We appreciate the commenters' suggestions but disagree 
that adding ``or other supervising practitioner'' or individual 
professional titles to the definitions for general and personal 
supervision at Sec.  410.32(b)(2)(i) and (iii) would improve clarity or 
eliminate inefficiencies or delays in care caused by a 
misinterpretation of supervision policy. As acknowledged by the 
commenter, the ``basic rule'' governing supervision of diagnostic tests 
at Sec.  410.32(b)(1) provides the authority for nonphysician 
practitioners to provide all three levels of supervision for the 
purposes of diagnostic x-ray tests, diagnostic laboratory tests, and 
other diagnostic tests. Since regulations other than Sec.  410.32 rely 
upon the supervision definitions at Sec.  410.32(b)(2)(i) and (iii) and 
those regulations may or may not allow nonphysician practitioners to 
provide general or personal supervision, it would be inappropriate to 
add ``or other supervising practitioner'' to Sec.  410.32(b)(2)(i) and 
(iii) and doing so would likely result in further misinterpretations of 
supervision policy.
    Comment: Two commenters opposed the proposed change, arguing that 
nonphysician practitioner skill sets are not interchangeable with those 
of fully educated and trained physicians and that physicians' more 
extensive and rigorous educational and training requirements make them 
uniquely qualified to supervise diagnostic tests. The first commenter 
maintains that physicians must supervise diagnostic tests to ensure 
patient safety and the accuracy of test results due to the complexity 
of certain diagnostic tests and studies demonstrating that nonphysician 
practitioners order more diagnostic tests, including tests subjecting 
patients to harmful radiation, than physicians. This commenter also 
refers to a study that concluded that allowing nurse practitioners and 
physician assistants to function with independent patient panels under 
physician supervision in the primary care setting resulted in higher 
costs, higher utilization of services and lower quality of care as 
compared to panels of patients with a primary care physician. The 
second commenter references surveys indicating that patients prefer 
physicians to lead their health care team and that more patients trust 
a physician to deliver their medical care in an emergency as compared 
to a nurse, nurse practitioner or physician assistant. Finally, both 
commenters argue that expanding the scope of practice of nurse 
practitioners will not increase patient access to care because the 
actual practice locations of nurse practitioners reveal that they tend 
to work in the same large urban areas as physicians.
    Response: We acknowledge that physician skill sets are not fully 
interchangeable with the skill sets of nonphysician practitioners and 
that the education and training requirements of physicians differ from 
nonphysician practitioners. However, we do not agree that the skill 
sets, education and training of physicians render them solely qualified 
to supervise diagnostic services. With respect to the commenter's 
concerns about nonphysician practitioners' abilities to safely and 
accurately perform diagnostic tests, we note that the proposed 
regulation explicitly limits nonphysician supervision to that which is 
permitted under the nonphysician practitioner's scope of practice and 
state law. Furthermore, nothing in the proposed regulation prohibits or 
limits physicians from continuing to supervise any and all diagnostic 
tests. Providers and physicians are free to use their own judgment to 
determine whether supervision by nonphysician practitioners is 
appropriate on a systemic, categorical or case-by-case basis.
    As to the studies and surveys cited by commenters related to the 
functioning of nonphysician practitioners with independent patient 
panels in the primary care setting and patient preferences regarding 
who leads their care team and provides their emergency care, it is not 
clear what the relevancy of these are to allowing nonphysician 
practitioners to supervise diagnostic tests.
    Finally, we do not agree with commenters' claim that the practice 
locations of nurse practitioners demonstrate that patient access to 
care will not increase by allowing nonphysician practitioners to 
supervise diagnostic tests. We do not find the evidence submitted by 
the commenters sufficient to support the commenters' conclusion that 
most nurse practitioners tend to live in the same urban areas as 
physicians. Further, even if this evidence was sufficient, it only 
includes nurse practitioners; it fails to account for those rural areas 
in which nurse practitioners do reside, where it could be expected that 
allowing nonphysician practitioners to supervise diagnostic tests would 
increase patient access to care; and it fails to account for medically 
underserved urban areas where it could also be expected that allowing 
nonphysician practitioners to supervise diagnostic tests would increase 
patient access to care.
    Comment: One commenter supported making the terminology used for 
supervision definitions consistent but cautioned CMS against what the 
commenter characterized as ``rolling back'' supervision guidelines. 
This commenter argued that the continued proposals and regulatory 
changes allowing nonphysician practitioners to supervise services of 
various complexities undermines the expertise of physicians and the 
value of their work. The commenter also expressed concern that many 
providers conflate physician supervision with physician work, creating 
scenarios for abuse and inadequate support for clinical staff. Finally, 
the commenter requested that CMS consult with interested parties and 
clinical staff from various specialties capable of speaking to the 
impact these continued changes have had on services provided to 
beneficiaries.
    Response: We do not agree that allowing certain nonphysician 
practitioners to supervise diagnostic tests will undermine the 
expertise of physicians or the value of their work. As discussed above, 
nonphysician practitioners (NPPs) may only supervise diagnostic tests 
to the extent they are permitted to do so under their scope of practice 
and state law and nothing prohibits physicians from continuing to 
supervise any and all diagnostic tests. We appreciate the commenter's 
suggestion that CMS consult with interested parties and clinical staff 
capable of speaking to the impact of allowing certain nonphysician 
practitioners to supervise diagnostic tests, and we will consider doing 
so in the future.
    After consideration of the public comments we received, we are 
finalizing, as proposed, our revisions to

[[Page 72026]]

replace cross-references at Sec. Sec.  [thinsp]410.27(a)(1)(iv)(A) and 
(B) and[thinsp]410.28(e) to the definitions of general and personal 
supervision at Sec.  [thinsp]410.32(b)(3)(i) and (iii) with the text of 
those definitions and to revise Sec.  [thinsp]410.28(e) to (1) extend 
the end date of the flexibility allowing for the virtual supervision of 
outpatient diagnostic services through audio/video real-time 
communications technology (excluding audio-only) from the end of the 
PHE to the end of the calendar year in which the PHE ends, and (2) 
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.

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 part 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 (Nonexperimental/
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. 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 
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 proposed 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 intended 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

[[Page 72027]]

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 anticipated interested parties 
would 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 proposed 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. 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 in the study, as 
specified under Sec.  405.201, 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 proposed 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 
noted 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 invited comments on our 
proposal.
    Comment: Commenters were very supportive of our proposal. 
Commenters expressed that, if finalized as proposed, this proposal 
would help preserve the scientific validity of IDE studies involving 
blinding procedures. One commenter requested that CMS update our 
guidance related to coverage of IDE clinical studies to provide 
additional information for manufacturers regarding implementation and 
operation of the new policy. This commenter noted that the proposal did 
not provide details regarding the process for manufacturers to engage 
CMS in discussions regarding the appropriateness and need in relation 
to specific IDE studies and other operational issues.
    Response: We thank the commenters for their support. We agree with 
comments received that this proposal would help ensure the scientific 
validity of blinded category B IDE trials. Regarding manufacturer 
engagement with CMS, we envision that manufacturers will engage with 
CMS to notify us of a need for a unique code to preserve the scientific 
integrity of a Category B IDE trial. Billing instructions for Category 
B IDE device trials are provided in the Medicare Claims Processing 
Manual (Pub. 100-04) Chapter 68, Section 2 and will be updated to 
include any changes in policy.
    After consideration of the public comments received, we are 
finalizing our Category B IDE coding and payment policy as proposed for 
CY 2023.
4. Coding and Payment for Category B IDE Studies Regulation Text 
Changes
    We proposed 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 proposed 
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, such as by preventing the unblinding of the study. 
Additionally, in a new section, Sec.  419.47(b), we proposed that when 
we create a new HCPCS code or revise an existing HCPCS code under 
proposed paragraph (a), we would 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, including 
the frequency with which the investigational device is used in the 
study population.
    We did not receive any public comments on the specific regulation 
text changes. Because we are finalizing the coding and payment policy 
as proposed, we are also finalizing the corresponding regulation text 
changes as proposed.

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.

[[Page 72028]]

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 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 proposed 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 
final rule with comment period 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 thorugh 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 
through 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

[[Page 72029]]

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 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 68 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

[[Page 72030]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.098


[[Page 72031]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.099

    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 68. 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 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 proposed 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 explained that 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 proposed the C-codes be assigned to identical 
APCs and have the same status indicator assignments as their standalone 
codes.
    For the LiverMultiScan service, we proposed not to recognize CPT 
code 0649T under the OPPS and instead proposed 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. 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 proposed not to recognize CPT code 
0722T and instead proposed to establish placeholder HCPCS code 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 proposed not to recognize CPT code 0724T 
and instead proposed to establish placeholder HCPCS code C97X3 to 
describe the use of QMRCP that must be billed alongside a concurrent CT 
scan.

[[Page 72032]]

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 placeholder HCPCS codes C97X1, 
C97X2, and C97X3, as well as the standalone CPT codes that describe the 
same SaaS procedures, can be found in Addendum B to the CY 2023 OPPS/
ASC proposed rule, which is available via the CMS website.
    We received the following comments in response to our proposal:
    Comment: Some commenters, including MedPAC, opposed separate 
payment for expensive services that do not necessarily provide a 
substantial clinical improvement. MedPAC stated that paying separately 
undermines the integrity of PPS payment bundles and can limit the 
competitive forces that generate price reductions among like services, 
lead to overuse (to the extent clinically possible), and shift 
financial pressure from providers to Medicare. A commenter encouraged 
CMS to seek ways to increase packaging and the extent to which services 
can be bundled with related services based on encounters or episodes of 
care. Another commenter requested further stakeholder engagement and 
asked CMS to refrain from finalizing a SaaS payment policy until all 
policy considerations and concerns have been fully vetted.
    Response: We note that we only provide payment for SaaS 
technologies that have been approved by the FDA and that have received 
a CPT code from the AMA. We agree with the commenter that we should 
seek ways to increase packaged services, to the extent possible, 
because we believe packaging encourages efficiency and is an essential 
component of a prospective payment system. However, the services 
described by CPT add-on codes 0649T, 0722T, and 0724T are not 
consistent with our definition of add-on services for the purposes of 
our packaging policy. 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. We believe 
equitable payment for SaaS procedures represented by add-on codes can 
be achieved by setting their payment rates commensurate with the SaaS 
procedures represented by standalone codes.
    Comment: Commenters supported CMS's proposal to recognize the SaaS 
procedures described by CPT add-on codes as separate and distinct 
services. These commenters stated that these AI technologies are not 
consistent with the established definition for an add-on service and 
that they are separate and distinct services that should be paid for 
separately, rather than being packaged into a primary service payment. 
They stated that payment for SaaS procedures, when billed concurrently 
with the acquisition of the images, should be commensurate with the 
payment for the identical SaaS procedures when the services are 
furnished without imaging and described by the standalone CPT codes.
    Response: We agree with the commenters that the SaaS add-on codes 
describe separate and distinct services that should be paid for 
separately, rather than as services that are ancillary, supportive, 
dependent, or adjunctive to a primary service into which their payment 
would be packaged. We agree with the commenters we should pay 
separately for SaaS procedures furnished without an associated imaging 
service code at the same amount that we pay when SaaS procedures are 
furnished with an associated imaging service code.
    Comment: Some commenters supported our proposal to pay separately 
for SaaS procedures under the OPPS by creating HCPCS C-codes to replace 
the CPT add-on codes and assigning the HCPCS C-codes to the same APCs 
and status indicators as the standalone codes. The commenters stated 
that creating HCPCS codes is a consistent approach to pay separately 
for the same AI services represented by standalone codes and provides a 
mechanism to capture cost data for AI technology services. The 
commenters also noted that the creation of HCPCS codes may be necessary 
to facilitate appropriate facility billing and payment. Additionally, 
the commenters believed creating HCPCS C-codes in lieu of the CPT add-
on codes would be an appropriate method to ensure consistent payment 
across payment systems.
    Other commenters recommended that we provide for separate payment 
under the OPPS for SaaS procedures described by CPT add-on codes by 
creating HCPCS codes G-codes to replace the CPT add-on codes, rather 
than HCPCS C-codes. These commenters stated that if CMS creates new 
codes despite the significant confusion that different codes may create 
for providers in billing Medicare versus non-Medicare payers, CMS 
should use HCPCS G-codes instead of HCPCS C-codes because HCPCS G-codes 
are more recognized by non-Medicare payers.
    Other commenters supported our proposal to pay separately for SaaS 
procedures described by CPT add-on codes but opposed our proposal to 
create HCPCS C-codes for payment under the OPPS, rather than paying for 
the CPT codes already in use. These commenters expressed concerns that 
creating HCPCS C-codes for SaaS procedures for which there are already 
CPT add-on codes would be inefficient, duplicative, and confusing for 
providers and commercial payers. Commenters argued that because 
commercial payers do not recognize HCPCS C-codes, the existence of 
different codes for Medicare and non-Medicare payers for the same 
services would likely create significant confusion.
    A commenter stated that the designation of a code as an add-on code 
simply describes the relationship between two codes where the add-on 
code should be performed and reported with another code and noted that 
the concept of packaging is a concept specific to the OPPS. Another 
commenter argued that CMS can choose to pay separately under the OPPS 
for CPT add-on. The commenter acknowledged that 42 CFR 419.2(b)(18) 
requires packaging of certain services described by add-on codes, but 
contended that CMS is not required to package all services described by 
add-on codes but rather, that CMS has discretion to identify ``certain 
services.'' Therefore, the commenter believed CMS could choose not to 
identify SaaS add-on codes as among the ``certain services'' described 
by add-on codes for which payment is packaged under the regulation at 
42 CFR 419.2(b)(18).
    Response: We agree with the commenters that creating HCPCS C- or G-
codes for OPPS payment for SaaS procedures for which there are already 
CPT add-on codes is not an ideal or the only way to ensure separate 
payment under the OPPS. Furthermore, we agree with the commenters that 
the concept of packaging is specific to the OPPS and that AMA CPT's 
designation of certain codes as add-on codes is to signify a 
relationship between services that are performed together, not to 
dictate the way payment is made for add-on codes. For these reasons, we 
agree with commenters that we should pay

[[Page 72033]]

separately for SaaS CPT add-on codes, rather than creating new HCPCS 
codes for these services.
    Our policy in 42 CFR 419.2(b)(18) to package the costs of certain 
services described by add-on codes with payment for related procedures 
is services is consistent with the principle of a prospective payment 
system of promoting efficiency. However, where add-on codes do not 
identify separately paid services under the OPPS that are associated 
with another procedure or service, as is the case with SaaS add-on 
codes, we believe it is appropriate to except them from our packaging 
policy. We acknowledge that there are circumstances in which exceptions 
are needed in order to provide equitable payment for some services, 
such as drug administration add-on codes, which are currently paid 
separately under OPPS. We believe it is appropriate to except certain 
SaaS add-on codes from our general policy of packaging add-on services. 
We believe payment for the SaaS procedures assigned CPT add-on codes, 
when billed concurrent with the acquisition of the images, should be 
made separately at an amount equal to the amount of payment for the 
SaaS procedure when the service is furnished without imaging and 
described by the standalone CPT code. We believe this final policy is 
appropriate because the SaaS procedure is the same and requires the 
same resources regardless of whether it is furnished with or without 
the imaging service. Therefore, we believe it is appropriate to assign 
SaaS CPT add-on codes to identical APCs and status indicator 
assignments as their standalone codes.
    After consideration of the public comments we received, we are 
finalizing our proposal with modification. Specifically, we are 
recognizing SaaS CPT add-on codes and paying separately for them. We 
are not establishing HCPCS codes, specifically, C-codes, to describe 
the add-on codes as standalone services that would be billed with the 
associated imaging service. Based on public comments, we believe 
establishing a duplicative set of codes in place of CPT add-on codes is 
unnecessary and would be burdensome for hospitals. For CY 2023, we are 
adopting a policy that SaaS add-on codes are not among the ``certain 
services described by add-on codes'' for which we package payment with 
the related procedures or services under the regulation at 42 CFR 
419.2(b)(18). The SaaS CPT add-on codes will be assigned to identical 
APCs and have the same status indicator assignments as their standalone 
codes. For CY 2023, please see Table 69 for a list of recognized SaaS 
CPT codes and their APC and status indicator assignments.

[[Page 72034]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.100


[[Page 72035]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.101

BILLING CODE 4120-01-C
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.\126\ 
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.\127\ As a result of these variables and potentially others, 
there is significant price variation within the SaaS procedure space.
---------------------------------------------------------------------------

    \126\ https://www.fda.gov/medical-devices/software-medical-device-samd/artificial-intelligence-and-machine-learning-aiml-enabled-medical-devices.
    \127\ https://www.nature.com/articles/s41746-022-00609-6.pdf.
---------------------------------------------------------------------------

    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 therefore solicited 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 also solicited comment on the specific payment approach we might 
use for these services under the OPPS as

[[Page 72036]]

SaaS-type technology becomes more widespread across healthcare, which 
is 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 procedure 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 
procedure 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 welcomed 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 populations.\128\ 
Therefore, in addition to our comment solicitation on payment 
approaches, we solicited comments on how we could encourage software 
developers and other vendors to prevent and mitigate bias in their 
algorithms and predictive modeling. We also solicited comment 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.
---------------------------------------------------------------------------

    \128\ https://www.science.org/doi/10.1126/science.aax2342.
---------------------------------------------------------------------------

    We received the following public comments in response to our 
comment solicitation:
    Comment: Several commenters stated that SaaS technology represents 
a heterogenous group of technologies and that CMS's characterization of 
SaaS technology is overly inclusive. One commenter identified a need 
among interested parties in the CPT Editorial Panel process for 
consistent terminology to better understand how AI medical services fit 
into the CPT code set. Another commenter suggested that CMS adopt more 
clear and consistent definitions for AI-enhanced medical devices that 
incorporate the terms defined in the AMA AI taxonomy to ensure 
consistent definitions across agencies and interested parties. Another 
commenter expressed concern that our proposed payment approach did not 
account for independent SaaS procedures without an associated 
diagnostic imaging procedure. Some commenters suggested that CMS follow 
a framework established by the AMA and Digital Medicine Payment 
Advisory Group (DMPAG). Another commenter suggested that CMS consider 
SaaS as encompassing services furnished using software regulated by the 
FDA as Software as a Medical Device (SaMD).
    Some commenters argued that CMS should not establish a single 
policy that would apply to all SaaS-type technology but instead 
separately evaluate each new technology to determine the appropriate 
HCPCS coding, including whether or not a potential CPT code can be used 
to support payment for the separate and distinct service under the 
OPPS.
    Another commenter stated that CMS should be discerning in its 
classification of SaaS procedures so as not to include technologies 
that are designed to assist the clinician in decision making.
    Response: We thank commenters for their valuable information and 
will consider it for future rulemaking.
    Comment: Some commenters provided input on payment approaches 
suggested in the CY 2023 OPPS/ASC proposed rule with comment period. 
Several commenters did not support the creation of broad G-codes that 
could describe the diagnostic image and the SaaS procedure, citing 
operational concerns. Some commenters also did not support expansion of 
composite APCs to provide a single payment for groups of services that 
are performed together during a single clinical encounter because they 
believe CMS does not appreciate the wide array and diversity of AI-
based services for this option. They stated that CMS should not assume 
that the cost and resources are similar for all SaaS procedures for a 
given imaging modality and should not limit payment for SaaS to 
technologies used with imaging modalities.
    Some commenters expressed interest in using HCPCS codes (i.e., G- 
or C- codes) to describe both the diagnostic imaging and the associated 
SaaS procedure, and then assigning the code that describes the combined 
services to a New Technology APC that would pay for both services. 
However, these commenters also expressed concerns about the creation of 
a new combined code and CMS not recognizing either the standalone SaaS 
code or the add-on code. They also expressed concerns about disruption 
and undervaluation that could result from combining imaging and SaaS 
procedures into a single code.
    Response: We thank commenters for their valuable feedback on SaaS 
payment approaches and we will consider their input in future 
rulemaking.
    Comment: Some commenters suggested close communication and 
collaboration between CMS and the FDA to ensure appropriate 
standardization of transparency and bias prevention as the regulatory 
structure around software-based products evolves. Another commenter 
stated the FDA, not CMS, should evaluate an AI product's potential for 
introducing inappropriate bias into clinical decision making, 
especially bias which could influence outcomes for minoritized groups, 
and that such evaluation should be incorporated into the requirements 
for AI developers seeking authorization to market.
    Another commenter recommend that software developers use principles 
of transparency, reproducibility, and explainability, in addition to 
bias-control strategies, when developing products. The commenter stated 
that developers should also test algorithms in various populations with 
differential characteristics in terms of age, gender, race, sexual 
orientation, gender identity, and other demographic factors. The 
commenter also suggested that developers document and display the 
principles, techniques, methods, and populations they used in the 
evaluation and validation of their product.
    Response: We thank commenters for their valuable feedback on how to 
evaluate and mitigate bias in software algorithms.

[[Page 72037]]

H. 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 there, in the CY 2023 OPPS/ASC proposed rule (87 
FR 44689 through 44696), we proposed 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.\129\ Both the 
ongoing threat of COVID-19 and the potential for future pandemics 
necessitate significant investments in pandemic preparedness.
---------------------------------------------------------------------------

    \129\ White House, National COVID-19 Preparedness Plan, March 
2022; https://www.whitehouse.gov/wpcontent/uploads/2022/03/NAT-COVID-19-PREPAREDNESS-PLAN.pdf.
---------------------------------------------------------------------------

    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 \130\ to $5.75 \131\ or even $12.00 in some cases.\132\ 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.\133\ Failure to 
meet these requirements compromises safety of health care personnel and 
patients.
---------------------------------------------------------------------------

    \130\ Department of Health and Human Services, Office of the 
Assistant Secretary for Preparedness and Response, Supply Chain 
Control Tower analysis.
    \131\ 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.
    \132\ 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.
    \133\ 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.\134\ 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-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.
---------------------------------------------------------------------------

    \134\ 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

[[Page 72038]]

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 summarized in the CY 2023 OPPS/ASC proposed rule (87 FR 44690), 
we received many helpful comments in response to our comment 
solicitation in the FY 2023 IPPS/LTCH PPS proposed rule. After 
considering the comments received, we proposed in the CY 2023 OPPS/ASC 
proposed rule (87 FR 44689 through 44696) 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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44690 through 44691), for cost reporting periods 
beginning on or after January 1, 2023.
    For the IPPS, we proposed 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 proposed 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.
    Comment: We received many comments supporting the proposed payment 
adjustments. Several of these commenters acknowledged the challenges 
hospitals faced in acquiring surgical N95 respirators during the COVID-
19 pandemic and the importance of investing in domestic supply chains 
for future emergency preparedness.
    We also received several comments that were not supportive of the 
proposed payment adjustments, including from MedPAC, which stated that 
this proposal would undermine the prospective, bundled nature of 
Medicare's hospital payments by paying hospitals more as their costs 
increase. A few commenters expressed doubt on whether the proposed 
payment adjustments would be effective in achieving the stated policy 
goal. Some commenters stated that the payment adjustment amounts were 
not large enough to shift hospital purchasing decisions and that much 
more would need to be done beyond the Medicare program to achieve the 
stated policy goal.
    A few commenters raised concerns that the proposed payment 
adjustments could be susceptible to unintended consequences. One 
commenter stated that if manufacturers or vendors are aware that 
purchasers of their domestically produced surgical N95 respirators will 
be reimbursed, they may artificially inflate the price of their 
products. This commenter and others stressed that CMS should monitor 
utilization and cost data for any unintended consequences.
    One commenter stated that a more appropriate policy would be one in 
which CMS provides a payment adjustment to providers who attest to 
purchasing surgical N95s through contracts that include terms related 
to on-hand inventory. This commenter stated that a significant problem 
during the pandemic was the inability of domestic manufacturers to ramp 
up production quickly enough to meet spikes in demand. The commenter 
believes this alternative payment adjustment would incentivize domestic 
manufacturers to hold more inventory on-hand in the event of another 
spike in demand in the future.
    Response: We thank the commenters for their feedback on our 
proposals. While we agree with MedPAC and other commenters that payment 
for hospital services under the prospective payment systems should 
generally be made as part of the prospective, bundled payment, we 
believe that a payment adjustment that offsets hospitals' additional 
marginal costs in procuring wholly domestically made NIOSH approved 
surgical N95 respirators is appropriate in order to ensure that quality 
PPE is available to health care personnel when needed by maintaining 
production levels of wholly domestically made PPE. As discussed in the 
proposed rule and later in this final rule, as we gain more experience 
with this policy and the data collected, we may also consider 
modifications to the reasonable cost-based payment approach we are 
finalizing. With respect to those comments expressing doubt as to 
whether the proposed payment adjustments would be large enough to shift 
hospital purchasing decisions, we believe that by significantly 
lessening the cost disincentive that hospitals currently face when 
deciding whether to purchase domestic surgical N95 respirators over 
non-domestic surgical N95 respirators, the proposed payment adjustments 
would encourage the purchase of larger quantities of domestic surgical 
N95 respirators and thereby help to provide sustained support for the 
production and availability of these respirators over the long term. 
With respect to those comments expressing doubt as to whether the 
proposed

[[Page 72039]]

payment adjustments would be effective in achieving this policy goal, 
and that more would need to be done outside of the Medicare program, we 
note that this policy would not be adopted in isolation. For 
complementary efforts related to strengthening the U.S. public health 
and medical supply chain and industrial base, we refer the public to 
the ``Public Health Supply Chain and Industrial Base One-Year Report'' 
available on the HHS website at https://aspr.hhs.gov/MCM/IBx/2022Report/Pages/default.aspx.-
    We appreciate the comments regarding potential unintended 
consequences. We also thank the commenter for the suggested alternative 
payment adjustment approach. We will consider alternative approaches 
and/or modifications to address any unintended consequences for future 
rulemaking as we gain experience under the policy we are adopting in 
this final rule, as discussed further in this section.
    Comment: We received many comments urging CMS to expand this policy 
to cover other forms of PPE and critical medical supplies beyond 
surgical N95 respirators. A few commenters stated that other forms of 
PPE suffered shortages during the pandemic similar to surgical N95 
respirators and therefore investing in domestic production for these 
products was also important for future emergency preparedness.
    Response: We thank these commenters for their broader interest in 
ensuring domestic production of PPE. We will consider these comments 
for future rulemaking if appropriate as we gain more experience with 
our policy.
    After consideration of these comments, as well as the other 
comments received on our proposal that we summarize and respond to in 
the sections that follow, we are finalizing the proposed payment 
adjustments under the OPPS and IPPS for the additional resource costs 
that hospitals face in procuring domestic NIOSH-approved surgical N95 
respirators.
3. Proposed Definition of Domestic NIOSH-Approved Surgical N95 
Respirators
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44690 through 44691), 
for purposes of this policy, we proposed 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. In the proposed rule, we stated 
our belief 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.\135\ 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.'' \136\ Unless DoD grants a waiver 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.\137\
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    \135\ https://www.trade.gov/berry-amendment.
    \136\ https://www.trade.gov/berry-amendment-implementation.
    \137\ https://sgp.fas.org/crs/misc/R44850.pdf.
---------------------------------------------------------------------------

    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.\138\ In 
the CY 2023 OPPS/ASC proposed rule, we stated our belief 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.
---------------------------------------------------------------------------

    \138\ https://www.trade.gov/berry-amendment.
---------------------------------------------------------------------------

    Therefore, based on the Berry Amendment, we proposed 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 proposed 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 proposed 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 final 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.
    Comment: One commenter supported CMS using the Berry Amendment as a 
basis for our proposed definition of domestic NIOSH-approved surgical 
N95 respirators because the Berry Amendment is a familiar standard for 
the manufacturing industry. The commenter believes the definition is 
appropriate for incentivizing the domestic manufacturing of raw 
materials and other componentry for N95 masks. The commenter also 
stated that based on their own analysis, they believe there is a 
sufficient number of domestic manufacturers producing surgical N95 
respirators that meet the proposed definition and therefore the policy 
could be sustained.
    We received a few comments expressing concern with our proposed 
definition of domestic NIOSH-approved surgical N95 respirators. One 
commenter was concerned that the hospital community was not familiar 
with the Berry Amendment. The commenter believes that hospitals are 
more familiar with the Federal Trade Commission (FTC) ``Made in USA'' 
designation and that CMS should consider surgical N95 respirators

[[Page 72040]]

compliant with the FTC's Made in USA labeling rule as domestic for 
purposes of the proposed payment adjustment. The commenter stated that 
utilizing the Made in USA framework would drive greater efficiency, 
especially since exceptions under the Berry Amendment may evolve, 
making it more challenging for providers to receive written statements 
from manufacturers with each order.
    One commenter supported the requirement that the respirators be 
fully assembled in the U.S. but was concerned that the proposed 
definition would require all raw materials and components used in 
assembling the respirators to also be domestic. This commenter 
suggested that CMS instead adopt the content threshold requirements 
outlined in the Federal Acquisition Regulations that implement the Buy 
American Act, which require 60 percent of the value of a product's 
components to be manufactured in the U.S. The commenter stated that 
adopting the 60 percent threshold in the first year of the policy would 
allow the domestic raw materials supply base time to ramp up the 
production capacity required to support greater volume of domestically 
produced surgical N95 respirators.
    Response: We thank the commenters for their feedback on our 
proposed definition of domestic NIOSH-approved surgical N95 respirator 
for purposes of this policy. We agree with the commenter that the Berry 
Amendment is a familiar standard for the manufacturing industry, as 
also discussed in the CY 2023 OPPS/ASC proposed rule. We believe this 
is important since we proposed 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--which is based on the Berry Amendment. Moreover, 
using a definition of ``domestic'' that is based on the Berry 
Amendment, a contracting standard, provides a robust standard that will 
help ensure that a sufficient share of surgical N95 respirators are 
wholly made in the U.S.--that is, including raw materials and 
components. Therefore, we disagree that the FTC ``Made in USA'' 
designation, which is not a contracting standard, would be a more 
appropriate option for classifying domestic surgical N95 respirators 
for purposes of this policy. In response to the commenter's concern 
that exceptions under the Berry Amendment may evolve, we note that our 
proposed definition of a domestic NIOSH-approved surgical N95 
respirator did not include any of the exceptions allowed under the 
Berry Amendment. We utilized language from the Berry Amendment, which 
is familiar to manufacturers, to develop a proposed definition of a 
domestic NIOSH-approved surgical N95 respirator that is specifically 
applicable to this policy. We also note, as discussed in more detail 
below, we are not requiring the written manufacturer statements to 
cover a specific order or lot of domestic respirators purchased by a 
hospital as long as all of the domestic respirators purchased by the 
hospital are covered by associated written manufacturer statements.
    With respect to the comment suggesting CMS modify the proposed 
definition of a domestic surgical N95 respirator to include respirators 
in which at least 60 percent of the value of a product's components 
were manufactured in the U.S., we continue to believe manufacturers 
already have significant capacity to produce surgical N95 respirators 
that meet our proposed definition, as discussed in the proposed rule 
(87 FR 44695). Moreover, as discussed previously, we believe it is 
important to ensure that a sufficient share of surgical N95 respirators 
are wholly made in the U.S.--that is, including raw materials and 
components--because in a future pandemic or COVID-19-driven surge, 
hospitals need to be able to count on domestic manufacturers to deliver 
the equipment they need on a timely basis in order to protect health 
care workers and their patients. Therefore, we do not believe adopting 
this modified definition would be either necessary or maximally 
effective in achieving our stated policy goal of maintaining sufficient 
production levels of wholly domestically made surgical N95 respirators.
    Comment: We received several comments expressing concern that these 
proposed payment adjustments would significantly increase hospitals' 
reporting burden. Many of these commenters urged CMS to determine a 
less burdensome method of attestation and reporting for these payment 
adjustments. Some commenters not supportive of the proposed payment 
adjustments stated that the proposal would increase providers' costs 
and administrative burden beyond any additional payment. One of these 
commenters suggested that CMS not finalize this policy and instead 
raise payment rates across the board as means to compensate hospitals 
for increased costs without adding administrative burden. Commenters 
cited the proposed requirement that hospitals differentiate on their 
cost report domestic respirators purchased from non-domestic 
respirators purchased as an example of an increase in reporting burden. 
Commenters also cited the need for hospitals to obtain a written 
statement from the manufacturer stating that the surgical N95 
respirators the hospital purchased are domestic as an example of an 
increase in reporting burden. These commenters questioned how hospitals 
would be able to obtain such a written statement from the manufacturer. 
Some commenters expressed concern that the proposed policy would not 
require manufacturers to provide such statements and therefore 
hospitals could potentially miss payment adjustments even if they 
purchased domestic surgical N95 respirators. Some commenters suggested 
that CMS should require manufacturers to meet new labeling and 
reporting requirements to reduce burden. Another commenter suggested 
CMS maintain a list of manufacturers whose products meet the proposed 
domestic definition and make this information available.
    Response: As discussed in the proposed rule (87 FR 44815), we 
believe 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 the hospital for 
the period. As discussed later in the Collection of Information (COI) 
section of this document, we estimates that the total burden associated 
with this policy for each hospital would be 0.50 hours per year at a 
cost of $25.43. We note that we will be soliciting additional comment 
on the information collection requirements discussed in this section. 
The notice will be announced in the Federal Register and advise the 
public on how to obtain copies of the information collection request 
and on how to submit public comments. As described in the section X.H.5 
of this final rule, the collection of this information is required in 
order to calculate each hospital's payment adjustment.
    In response to the suggestion that CMS instead raise payment rates 
across the board as means to compensate hospitals for increased costs, 
we do not think such an alternative policy would be effective in 
helping to sustain production and availability of wholly domestically 
made NIOSH-approved surgical N95 respirators because the additional 
payments would not be directly and measurably associated with

[[Page 72041]]

the purchase of domestic NIOSH-approved surgical N95 respirators by 
hospitals.
    As reflected in the burden estimate previously discussed, we do not 
agree with commenters that obtaining written statements from the 
manufacturer would significantly increase hospitals' reporting burden. 
In the proposed rule (87 FR 44691), we listed multiple ways in which a 
hospital could acquire written statements from the manufacturer. We 
also do not currently share commenters' concerns that manufacturers may 
not be willing to provide these written statements or that CMS should 
maintain a list of such manufacturers. We believe that providing these 
written statements would be in the manufacturers' best interest, given 
hospitals comprise a significant portion of their customer base. While 
some commenters suggested that CMS should require manufacturers to meet 
new labeling and reporting requirements to reduce burden, they did not 
suggest a mechanism for doing so. As stated previously, once we gain 
experience under the policy we are adopting in this final rule, we may 
consider modifications in future rulemaking.
    Comment: One commenter found certain aspects of the proposed 
attestation process unclear. This commenter questioned whether a 
hospital would need to obtain a separate statement for every order and 
connect each statement to specific lots purchased. This commenter 
questioned whether manufacturers would be required to use a specific 
form and whether a hospital would need to verify the written statement 
provided is appropriately certified. The commenter also questioned 
whether suppliers or GPOs would be required to make this information 
available or verify manufacturers' statements or adherence to the 
proposed rule's requirement.
    Response: We thank the commenter for these questions. In 
recognition of the different purchasing practices of hospitals with 
respect to NIOSH-approved surgical N95 respirators, we are not 
requiring the written manufacturer statements to cover a specific order 
or lot of domestic respirators purchased by a hospital as long as all 
of the domestic respirators purchased by the hospital are covered by 
associated written manufacturer statements. As one of the simplest 
examples, if a hospital were to exclusively purchase respirators made 
by one manufacturer and all the respirators purchased from that 
manufacturer were domestic, a single written statement from that 
manufacturer covering all of the respirators purchased by that hospital 
for the hospital's cost reporting period might be sufficient 
documentation. As one alternative to that approach, a hospital could 
choose to obtain a written statement for each purchase throughout the 
year. Again, different approaches are acceptable as long as all of the 
domestic NIOSH-approved surgical N95 respirators purchased by the 
hospital and reported on its cost report as such are covered by 
associated written manufacturer statements.
    We are not requiring a specific format for the written statements 
from the manufacturers. As discussed in the proposed rule, hospitals 
should ensure that the written statements they receive directly or 
indirectly from the manufacturer for domestic NIOSH-approved surgical 
N95 respirators 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. If the written statement from the manufacturer indicates 
that it has been certified by one of these individuals, a hospital is 
not required to perform additional independent verification.
    We did not propose that suppliers or GPOs be required to obtain, 
provide to hospitals, or verify written statements from the 
manufacturers. However, we believe it is in the suppliers' and GPOs' 
best interest to obtain and provide such written manufacturer 
statements to hospitals given hospitals comprise a significant portion 
of their customer base.
4. Payment Adjustment Amount Under the IPPS and OPPS for Domestic 
NIOSH-Approved Surgical N95 Respirators
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44691), we discussed 
our expectation that domestic NIOSH-approved surgical N95 respirators 
will continue to be generally more costly than non-domestic 
respirators. However, we stated that 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 
proposed to initially base the payment adjustments on the IPPS and OPPS 
shares of the estimated difference in the reasonable costs \139\ of a 
hospital to purchase domestic NIOSH-approved surgical N95 respirators 
compared to non-domestic respirators. We proposed that 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 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44692 
through 44694). We stated that in future years, 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 the CY 2023 OPPS/ASC proposed rule 
(87 FR 44692 through 44694), 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 the CY 2023 OPPS/ASC proposed 
rule (87 FR 44692 through 44694), would be used to calculate a Medicare 
payment

[[Page 72042]]

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

    \139\ 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 proposed 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 did not propose to make the IPPS 
payment adjustment budget neutral under the IPPS.
    As also previously discussed, for the OPPS, we proposed 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, we 
proposed the OPPS payment adjustment would be budget neutral.
    Comment: Several commenters expressed concern with the proposed 
OPPS payment adjustment being budget neutral and urged CMS to provide 
the OPPS payment in a non-budget neutral manner. A few commenters 
stated that they are opposed to the proposed OPPS payment adjustment if 
the adjustment is budget neutral. Several commenters stated that 
redistributing payments from an already underfunded system will not 
benefit providers or patients. A few commenters believe that 
implementing the OPPS payment adjustment in a budget neutral manner 
would not incentivize hospitals to purchase domestic N95 respirators 
and therefore may prevent CMS from achieving the stated policy goal. 
One commenter believes that applying a budget neutral adjustment could 
have a detrimental effect on safety net or smaller hospitals, which may 
be less able to absorb the higher costs of acquiring domestically 
produced medical supplies. Similarly, another commenter stated that 
there are differences in the degree that hospitals have access to 
domestic surgical N95 respirators due to their size and geography and 
therefore, the commenter is concerned that a budget neutral approach 
would penalize more vulnerable hospitals that are not able to procure 
domestic respirators at the same rate as other hospitals. Several 
commenters urged CMS to work with Congress to pass a law that would 
allow CMS to implement the OPPS payment adjustment in a non-budget 
neutral manner.
    Response: The OPPS authority for this payment adjustment is 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. Implementing this policy in a 
non-budget neutral manner under the OPPS would not be consistent with 
the requirement in section 1833(t)(2)(E) of the Act that equitable 
adjustments be budget neutral. We acknowledge the concerns that some 
commenters raised regarding the impact of the budget neutrality 
adjustment on more vulnerable hospitals but reiterate that implementing 
this policy without an OPPS budget neutrality adjustment would not be 
consistent with section 1833(t)(2)(E) of the Act. Furthermore, we note 
that the proposed OPPS budget neutrality adjustment is relatively 
small. Therefore, we do not believe the budget neutrality adjustment 
will broadly disincentivize hospitals from purchasing domestic surgical 
N95 respirators or have a meaningful impact on hospitals that do not 
procure domestic surgical N95 respirators at the same rate as other 
hospitals.
5. 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 proposed 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 the CY 2023 
OPPS/ASC proposed rule (87 FR 44815). The draft new supplemental cost 
reporting worksheet was assigned OMB control number 0938-1425.\140\
---------------------------------------------------------------------------

    \140\ https://www.reginfo.gov/public/do/DownloadNOA?requestID=431065.
---------------------------------------------------------------------------

    In this section we describe the information we proposed 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 proposed 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.\141\
---------------------------------------------------------------------------

    \141\ 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.
---------------------------------------------------------------------------

    (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 proposed 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

[[Page 72043]]

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. We stated in the proposed rule 
that, as discussed in section X.H.8 of the proposed rule, 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 proposed 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 proposed to use cost data already reported on the 
hospital cost report. We specifically proposed to use the following 
from the OMB No. 0938-0050, 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 proposed 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 proposed 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 proposed 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 proposed 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.
    Comment: We received comments expressing concern with our proposed 
methodology for determining the payment adjustments. A few commenters 
expressed concern with CMS limiting this payment adjustment only to the 
estimated share of surgical N95 respirators used by the hospital when 
treating Medicare fee-for-service beneficiaries. One commenter was 
concerned that limiting this payment only to the Medicare share will 
not increase demand for domestically produced surgical N95 respirators 
enough to achieve the stated policy goal. This commenter urged CMS to 
expand these payment adjustments to cover the cost of domestic surgical 
N95 respirators used in treating all patients and if CMS does not have 
statutory authority to do this, that CMS work with Congress to include 
this flexibility in the Medicare statute. Other commenters raised 
equity issues and were concerned that hospitals that treat a high 
percentage of Medicaid patients or have low Medicare fee-for-service 
utilization would be disadvantaged by the use of the Medicare share.
    Response: We thank the commenters for sharing these concerns 
regarding the use of the Medicare share in determining the amount of 
the payment adjustments under the proposed methodology. With respect to 
those comments expressing concern that limiting this payment only to 
the Medicare share would not increase demand for domestically produced 
surgical N95 respirators enough to achieve the stated policy goal, we 
note that this policy would not be adopted in isolation. For 
complementary efforts related to strengthening the U.S. public health 
and medical supply chain and industrial base, we refer the public to 
the ``Public Health Supply Chain and Industrial Base One-Year Report'' 
available on the HHS website at https://aspr.hhs.gov/MCM/IBx/2022Report/Pages/default.aspx.
    Comment: MedPAC, while not supportive of the proposed payment 
adjustments, stated that if CMS concludes in this final rule that the 
proposed payment adjustments are necessary, CMS should set the unit 
cost differential between domestic and non-domestic NIOSH-approved 
surgical N95 respirators at a national level (rather than on a 
hospital-by-hospital basis). MedPAC believes this would reduce the 
administrative burden on hospitals, encourage hospitals to purchase the 
most economical domestically made product, and reduce the ability of 
hospitals to increase their payments by artificially inflating reported 
N95 costs. MedPAC expressed concern that under our proposal, hospitals 
could artificially inflate their reported surgical N95 respirator costs 
by getting discounts on other products in exchange for paying high 
prices on surgical N95 respirators.
    Conversely, we also received a comment that expressed concern with 
moving to a national unit cost differential in the future. This 
commenter stated that utilization of surgical N95 respirators varies by 
hospital and is dependent on factors such as localized COVID-19 
infection rates. This commenter was concerned using a national unit 
cost differential would lead to underpayments for hospitals that 
utilize a higher number of surgical N95 respirators.
    Response: We appreciate the comments submitted on the proposed 
payment adjustment methodology. With respect to MedPAC's concerns about 
utilizing hospital-specific unit cost differentials, as discussed in 
the proposed rule (87 FR 44695), as we gain more experience with the 
policy and the data collected, we may consider setting

[[Page 72044]]

the unit cost differential at the national level in future rulemaking.
    We believe the commenter who asserted such a change would lead to 
underpayments for hospitals that utilize a higher number of surgical 
N95 respirators may misunderstand the policy. If we were to make such a 
change in the future, the national unit cost differential would still 
be multiplied by the hospital-specific quantity of domestic surgical 
N95 respirators purchased. Thus, individual hospital volume of 
respirators would still be taken into account.
    Comment: One commenter requested that CMS provide additional 
clarity regarding the amount of the payment adjustment per surgical N95 
respirator as this information is needed to inform hospitals' 
purchasing decisions.
    Response: It is unclear to us what additional clarification this 
commenter is seeking. Using the payment methodology as described 
previously, in conjunction with the written manufacturer statements 
regarding which surgical N95 respirators are domestic under CMS's 
definition, hospitals can estimate the approximate payment amounts 
under various purchasing scenarios.
    To help demonstrate these calculations, in Table 70 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 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. Please note that the cost 
report below is a draft and is still subject to final OMB approval.
BILLING CODE 4120-01-P

[[Page 72045]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.102

BILLING CODE 4120-01-C

[[Page 72046]]

6. 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 proposed 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 proposed 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 the CY 2023 OPPS proposed rule, we had approximately 
103.4 million OPPS claims. Therefore, in the proposed rule, for CY 
2023, we estimated 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 was $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 it will take time for hospitals to adjust 
their purchasing patterns and therefore 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 proposed 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.
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44695), we estimated 
that total CY 2023 OPPS payments associated with this policy will be 
$8.3 million (or 103.4 million claims * $0.20 * 40 percent). This 
represents approximately 0.01 percent of the OPPS, which we proposed to 
budget neutralize through an adjustment to the OPPS conversion factor.
    We received no comments on the proposed methodology for determining 
the budget neutrality factor associated with the proposed OPPS payment 
adjustment.
    We noted in the proposed rule that the volume of claims data 
available for ratesetting typically increases between the proposed and 
final rules, so the proposed rule spending estimate may change in the 
final rule. As such, based on the outpatient claims volume available 
for ratesetting in this CY 2023 OPPS/ASC final rule with comment 
period, we have approximately 109.3 million OPPS claims. Therefore, for 
CY 2023, we are now 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 109.3 million. Our best 
estimate of the difference in the average unit cost of domestic and 
non-domestic NIOSH-approved surgical N95 respirators remains $0.20 and 
our best estimate of the percentage of NIOSH-approved surgical N95 
respirators used in the treatment of OPPS patients in CY 2023 that are 
domestic remains 40 percent. Therefore, we now estimate that total CY 
2023 OPPS payments associated with this policy will be $8.7 million (or 
109.3 million claims * $0.20 * 40 percent). This represents 
approximately 0.01 percent of the OPPS, which we are budget 
neutralizing through an adjustment to the OPPS conversion factor.
    As stated in the proposed rule, we believe this methodology is the 
best way to approximate CY 2023 OPPS spending associated with the 
proposed policy. However, we recognize that this approach to estimating 
budget neutrality under the OPPS is based on the limited data 
available. We may consider refining this approach for future years, 
especially once data collected on cost reports for this policy is 
available.
7. Regulation Amendments
    For the IPPS, we proposed 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 proposed to make conforming changes to 
Sec. Sec.  412.1(a) and 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 proposed 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.
    We did not receive any public comments on these proposed changes to 
the regulation text.

[[Page 72047]]

    In summary, after consideration of the comments received on our 
proposed policy, we are finalizing as proposed without modification the 
payment adjustments under the OPPS and IPPS for the additional resource 
costs that hospitals face in procuring domestic NIOSH-approved surgical 
N95 respirators, including the proposed amendments to the regulation 
text, as previously described.

I. Exemption of 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.
    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/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

[[Page 72048]]

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 proposed 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 proposed 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,\142\ Sole Community 
Hospital (SCH),\143\ or Medicare Dependent Hospital \144\--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 \145\ and Rural Referral Centers 
(RRCs),\146\ 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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    \142\ 42 CFR 485.601 through 485.647.
    \143\ 42 CFR 412.92.
    \144\ 42 CFR 412.108.
    \145\ 42 CFR 412.101.
    \146\ 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, 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 final rule, for CY 2023 we finalizing our proposal 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). However, many rural 
providers, and rural SCHs in particular, are often the only source of 
care in their communities,\147\ 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.
---------------------------------------------------------------------------

    \147\ https://www.shepscenter.unc.edu/wp-content/uploads/dlm_uploads/2017/11/SCHs_Differences_in_Community_Characteristics.pdf.

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[[Page 72049]]

    Rural areas often experience lower availability of health care 
professionals and hospitals than urban areas.\148\ 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.\149\ Rural areas are also disproportionally affected 
by declining population rates and decreasing employment rates.\150\ 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.
---------------------------------------------------------------------------

    \148\ https://www.gao.gov/assets/gao-21-93.pdf.
    \149\ https://www.gao.gov/assets/gao-21-93.pdf.
    \150\ 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. Our proposal also aligns with the special payment 
treatment rural SCHs receive under the OPPS.
    Accordingly, for CY 2023, we proposed 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 solicited 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 final payment would be approximately $121, 
with an approximate average copayment of $24. The final PFS-equivalent 
rate for a clinic visit would be approximately $48, with an approximate 
average copayment of $10. Under this final policy, 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 $14 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 proposed 
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 $71 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 the CY 2023 OPPS/ASC final rule.
    As detailed later in this section, after consideration of public 
comments, we are finalizing our proposal to exempt 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). We will continue to take 
information submitted by the commenters into consideration for future 
analysis.
    The following is a summary of the comments we received and our 
responses to those comments.
    Comment: The majority of commenters supported our proposal to 
exempt 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). 
Commenters urged us to finalize the exemption for rural SCHs. We 
received numerous comments from individuals in rural Washington 
describing how this policy has impacted their community and how the 
exemption would be a significant step in the continued stabilization of 
rural health care delivery systems. Commenters noted that rural SCHs 
are typically the chief, if not sole, source of community outpatient 
care for rural residents and this exemption is vital to ensuring 
continued access to the care they need. Further, commenters agreed that 
exempting rural SCHs from the clinic visit policy would support the 
ability of these critical providers to continue to maintain access to 
care in their rural communities.
    Response: We thank the commenters for their support. As we stated 
in the CY 2023 OPPS proposed rule, we believe that exempting rural SCHs 
from payment of the site-specific 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.
    Comment: Commenters noted that, while it is necessary to 
distinguish between urban and rural hospitals for a number of payment 
and policy mechanisms, they believe the Metropolitan Statistical Areas 
(MSAs) CMS uses to delineate between these areas is not the most 
precise tool. One commenter argued that CMS should extend this 
exemption to urban SCHs because using MSAs to determine urban and rural 
areas is imprecise and unfairly disadvantages urban SCHs that may be 
the sole source of hospital services in their communities.
    Response: We acknowledge the commenters' points about the important 
role that urban SCHs serve in their communities. However, we have not 
found that urban SCHs have the additional resource costs for covered 
outpatient department services that rural SCHs have, and as such are 
only applying the clinic visit policy exemption to rural SCHs.
    Comment: Several commenters suggested extending the exemption to 
hospitals that provide a disproportionate share of the nation's 
uncompensated care, and serve high

[[Page 72050]]

proportions of Medicaid, Medicare, and uninsured patients.
    The commenters argued that PBDs of these hospitals are 
disproportionately impacted by site-neutral payment policies and 
shielding these PBDs from the impact of these policies would ensure 
they can continue to cover the costs associated with providing 
comprehensive, coordinated care to complex patient populations in 
underserved areas. The commenters did acknowledge that CMS has not 
defined hospitals that meet these criteria and would need to do so in 
order to exempt associated PBDs from the clinic visit policy. They 
further recognized that rural SCHs are easily identified because there 
is an existing definition to capture the hospitals that fall into this 
group. They recommended that CMS first define a group of hospitals that 
meet these criteria and then exclude those hospitals' excepted PBDs 
from the clinic visit policy to ensure continued access for 
marginalized communities without other reliable sources of care.
    Response: As the commenter stated, CMS has not created a definition 
for the group of hospitals the commenter cited and would need to do so 
in order use this definition to exempt associated PBDs from the clinic 
visit policy. We will continue to monitor this issue and revisit any 
additional exemptions in future rulemaking as appropriate.
    Comment: One commenter presented data showing that 56 percent of 
rural SCHs, 73 percent of urban SCHs, and 60 percent of Medicare 
Dependent Hospitals (MDHs) are located in at least one type of 
medically underserved area (MUA) as designated by the Health Resources 
& Services Administration. Another commenter suggested that CMS 
consider using an expanded exception policy to help hospitals maintain 
essential primary care services, particularly for beneficiaries 
residing in shortage areas, and to provide patients in these areas with 
sufficient choices of providers. They suggested that one way that CMS 
could establish such an exception policy would be to determine which 
excepted off-campus provider-based departments are in a Primary Care 
Health Professional Shortage Area (PC-HPSA) or treat a certain 
percentage of patients that reside in a PC-HPSA, and instead pay them 
at the full OPPS rate for the clinic visit service.
    Response: We do not currently utilize MUAs or PC-HPSA designations 
to determine payment for covered outpatient department services under 
the OPPS. We believe our policy to exempt rural SCHs is consistent with 
our other policies that target this hospital type, which we have 
determined have higher resource costs for covered outpatient department 
services, and therefore, is an appropriate policy from an OPPS 
perspective.
    Comment: One commenter noted that while they support this 
exemption, they request that CMS monitor the effects of exempting these 
locations from site neutral payments. They went on to say that CMS 
should monitor utilization, trends in vertical consolidation among 
rural facilities, the types of financial relationships rural SCHs have 
with physicians, any shifts in services from other locations to rural 
SCHs, and the effect of site neutral payment exceptions on beneficiary 
cost sharing. Further, they requested that CMS release data to 
interested parties so they can also assess these impacts and that CMS 
reserve the right to modify this policy if the agency's findings point 
to any adverse, unintended consequences.
    Response: We share this commenter's concern and will continue to 
monitor the effects of exempting rural SCHs from the clinic visit 
policy. We may revisit this in future rulemaking as necessary.
    Comment: Many commenters suggested other provider types that may be 
appropriate to exempt from this policy. Many commenters felt that 
Medicare Dependent Hospitals (MDHs) or rural hospitals with fewer than 
100 beds should also be exempt from the clinic visit policy. Commenters 
expressed that the same reasoning that led CMS to propose to exempt 
rural SCHs also applies to MDHs. One commenter noted that MDHs 
hospitals have a larger percentage of inpatient days or discharges for 
Medicare patients and that they are therefore more vulnerable to 
inadequate Medicare payments than other hospitals because they are less 
able to cross-subsidize inadequate Medicare payments with more generous 
payments from private payers. Commenters expressed that this greater 
dependence on Medicare may make certain hospitals more financially 
vulnerable and thus, more worthy of being exempt from the clinic visit 
policy.
    Other commenters suggested that it would be appropriate to extend 
the exemption to urban SCHs. Commenters gave specific examples of 
instances where an SCH is designated urban by CMS, but the hospital is 
actually a considerable distance from the nearest urban area. 
Commenters expressed that there are many factors that underscore why 
urban SCHs and MDHs should also receive the payment exemption, 
including below-average patient care margins at these types of 
hospitals. Commenters also argued extending this exemption to MDHs and 
urban SCHs would only add nominally to the cost of the proposed policy.
    A few commenters suggested that Rural Referral Centers (RRCs) that 
provide rural populations with local access to a wide range of health 
care services should be exempt from the clinic visit policy. Commenters 
explained that RRCs localize care, minimize the need for further 
referrals and travel to urban areas, and provide services at costs 
lower than would be incurred in urban areas. Commenters also said these 
hospitals commonly establish satellite sites and outreach clinics to 
provide primary and emergency care services to surrounding underserved 
communities, a function that is becoming increasingly important as 
economic factors force many small rural hospitals to close.
    Commenters also urged CMS to extend this exemption to providers 
deemed Medicaid Disproportionate Share (DSH) hospitals as well. They 
explained that communities served by DSH hospitals are similar to those 
served by SCHs. They felt DSH hospitals are characterized by especially 
large numbers of low-income, Medicaid-covered, dually eligible, and 
uninsured residents. They also argued exempting DSH hospitals could 
entice physicians to practice in these communities and enhance access 
to care.
    Commenters also suggested that the exemption be extended to 
Medicare DSH hospitals. One commenter drew a parallel based on 
documented improvements in access after the Affordable Care Act's 
temporary increase in Medicaid payment rates for primary care went into 
effect; they believe that exempting Medicare DSH hospitals from the 
site-neutral policy will similarly reduce wait times for Medicare 
beneficiaries. Finally, commenters also suggested that Low-Volume 
Adjustment hospitals receive the exemption.
    Response: In the CY 2006 OPPS final rule with comment period (70 FR 
68556 through 68561) we uniquely identified rural SCHs as providers 
with demonstrated additional resource costs. We found that rural SCHs 
have 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. Building upon that foundation, 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 (we note that we are 
finalizing a policy to pay for 340B drugs and biologicals under the 
OPPS at the same rates we pay for non-340B drugs and biologicals 
(generally, ASP plus 6

[[Page 72051]]

percent)). We believe exempting rural SCHs, which have demonstrated 
additional resource costs, is appropriate to ensure these hospitals can 
remain open to serve the beneficiaries who rely on them for their care. 
We share commenters' concerns about the financial difficulties 
associated with maintaining access to care in medically vulnerable 
communities. However, in each of these cases, Congress did not 
determine that any of these hospital types required additional payments 
for outpatient services.
    Section 1833(t)(13)(B) authorizes an appropriate adjustment for 
hospitals located in rural areas where the Secretary determines, based 
on a study, that the costs incurred by these hospitals by APC group 
exceed costs incurred by hospitals in urban areas. In the CY 2006 OPPS 
final rule with comment period (70 FR 68556 through 68561), we 
summarized our study of the cost of covered outpatient department 
services to hospitals in rural areas and found that rural SCHs were the 
only rural hospital type that had higher resource costs for covered 
outpatient department services. Rural SCHs demonstrated significantly 
higher cost per unit than urban hospitals after controlling for labor 
input prices, service-mix complexity, volume, facility size, and type 
of hospital. In the CY 2006 OPPS final rule with comment period (70 FR 
68556 through 68561) we stated that we found no significant difference 
in cost between all small rural hospitals with 100 or fewer beds and 
urban hospitals. We found that there was insufficient evidence to 
conclude that rural hospitals with 100 or fewer beds have higher costs 
than urban hospitals.
    We proposed a narrow exception to our clinic visit policy largely 
based upon the historical treatment and documented additional resource 
costs of rural SCHs under the OPPS. We are only excepting rural SCHs 
because we continue to believe that the underlying principles of the 
clinic visit policy continue to justify application of the volume 
control method for clinic visits to the remaining hospital types, 
including most rural and safety-net providers. Where the difference in 
payment is leading to unnecessary increases in the volume of covered 
outpatient department services, we remain concerned that this shift in 
care setting increases beneficiary cost-sharing liability because 
Medicare payment rates for the same or similar services are generally 
higher in hospital outpatient departments than in physician offices. 
Further, we do not believe that commenters provided sufficient 
reasoning or data to show that the other provider types suggested 
(Medicare Dependent Hospitals, Urban Sole Community Hospitals, Rural 
Referral Centers, Medicaid DSH, Medicare DSH, and Low-Volume Adjustment 
Hospitals) demonstrate the additional resource costs that rural SCHs do 
and should therefore also be exempted from this OPPS payment policy. We 
share commenters' concerns about maintaining access to care in urban 
and rural settings and enhancing access to care in medically vulnerable 
communities. We also share commenters' concerns about profit margins. 
However, we are must balance the concerns of providers with the 
concerns of beneficiaries regarding the affordability of their care. 
For hospitals subject to the clinic visit policy, the proposed PFS-
equivalent rate for a clinic visit brings the approximate average 
copayment down from $26 to $10. We will continue to study access and 
cost to see if further exemptions to the clinic visit policy are 
appropriate.
    After consideration of public comments we received, we are 
finalizing our proposal to exempt 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). We believe that exempting rural SCHs from the 
clinic visit policy will 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 same rate paid when the service is furnished in 
on-campus departments. Finalizing this policy also aligns with the 
special payment treatment rural SCHs receive under the OPPS. We will 
continue to monitor the effects of this change in Medicare payment 
policy.

XI. CY 2023 OPPS Payment Status and Comment Indicators

A. 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 proposed 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 proposed 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 proposed 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.
    We solicited public comments on the proposed definitions of the 
OPPS payment status indicators for 2023.
    Comment: We received several comments in support of removing C9399 
from packaging when the code is included on a claim with status 
indicator ``J1'' or ``J2'' and adding a new definition to status 
indicator ``A'' to include unclassified drugs and biologicals that are 
reportable with C9399.
    Response: We thank commenters for their support. After 
consideration of the public comments we received, we are finalizing 
without modification the revision of status indicator ``A''.
    We did not receive any public comments related to the revision of 
status indicators ``F'' and ``L''. Therefore, we are finalizing our 
proposals to revise these status indicators without modification.
    The complete list of CY 2023 payment status indicators and their 
definitions is displayed in Addendum D1 to the CY 2023 OPPS/ASC final 
rule with comment period, which is available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.
    The CY 2023 payment status indicator assignments for APCs and HCPCS 
codes are shown in Addendum A and Addendum B, respectively, to the CY 
2023 OPPS/ASC final rule with comment period, which are available on 
the CMS website at: https://

[[Page 72052]]

www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/
HospitalOutpatientPPS/index.html.

B. CY 2023 Comment Indicator Definitions

    In the CY 2023 OPPS/ASC proposed rule (87 FR 44699), we proposed 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 proposed 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 OPPS comment indicators for CY 2023 are 
listed in Addendum D2 to the CY 2023 OPPS/ASC final rule with comment 
period, which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    We believe that the existing CY 2022 definitions of the OPPS 
comment indicators continue to be appropriate for CY 2023. Therefore, 
we proposed to use those definitions without modification for CY 2023.
    We solicited public comments on our proposed definitions of the 
OPPS comment indicators for 2023.
    We did not receive any public comments on our proposal and 
therefore, we are finalizing those definitions without modification for 
CY 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. 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.\151\ We 
appreciate MedPAC's recommendation and, as discussed further in Section 
II.B of the CY 2023 OPPS/ASC proposed rule (87 FR 44527 through 44528), 
we proposed 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 final rule with 
comment period.
---------------------------------------------------------------------------

    \151\ Medicare Payment Advisory Committee. March 2022 Report to 
the Congress. Chapter 3: Hospital inpatient and outpatient services, 
pp.65-66. Available at: https://www.medpac.gov.
---------------------------------------------------------------------------

B. 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.\152\ 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).
---------------------------------------------------------------------------

    \152\ 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.H 2.b. of the CY 2023 OPPS/ASC proposed 
rule (87 FR 44724 through 44725), we proposed 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 
final CY 2023 ASC conversion factor for ASCs meeting quality reporting 
requirements and the final hospital market basket update factor are 
discussed in section XIII of this final rule with comment period.

C. 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.\153\
---------------------------------------------------------------------------

    \153\ 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 did not propose 
any cost reporting requirements for ASCs in the 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

[[Page 72053]]

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.
    Comments received from MedPAC for other ASC payment system policies 
are discussed in the applicable sections of this final rule with 
comment period. The full March 2022 MedPAC Report to Congress can be 
downloaded from MedPAC's website at: https://www.medpac.gov.

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for 
the ASC Payment System
    For a detailed discussion of the legislative history and statutory 
authority related to payments to ASCs under Medicare, we refer readers 
to the CY 2012 OPPS/ASC final rule with comment period (76 FR 74377 
through 74378) and the June 12, 1998 proposed rule (63 FR 32291 through 
32292). For a discussion of prior rulemaking on the ASC payment system, 
we refer readers to the CYs 2012 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

[[Page 72054]]

year, and are implemented only through the January quarterly CR update. 
New and revised Category I CPT vaccine codes are released twice a year 
and are implemented through the January and July quarterly CR updates. 
We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed rule for 
an example of how this process is used to update HCPCS and CPT codes, 
which we finalized in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 42291; 76 FR 74380 through 74384).
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures, new codes, and 
codes with revised descriptors, to identify any that we believe meet 
the criteria for designation as ASC covered surgical procedures or 
covered ancillary services. Updating the lists of ASC covered surgical 
procedures and covered ancillary services, as well as their payment 
rates, in association with the annual OPPS rulemaking cycle is 
particularly important because the OPPS relative payment weights and, 
in some cases, payment rates, are used as the basis for the payment of 
many covered surgical procedures and covered ancillary services under 
the revised ASC payment system. This joint update process ensures that 
the ASC updates occur in a regular, predictable, and timely manner.

B. ASC Treatment of New and Revised Codes

1. Background on Current Process for Recognizing New and Revised HCPCS 
Codes
    Payment for ASC procedures, services, and items are generally based 
on medical billing codes, specifically, HCPCS codes, that are reported 
on ASC claims. The HCPCS is divided into two principal subsystems, 
referred to as Level I and Level II of the HCPCS. Level I is comprised 
of CPT (Current Procedural Terminology) codes, a numeric and 
alphanumeric coding system maintained by the 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 the CY 2023 OPPS/ASC 
proposed rule.
    We have separated our discussion below based on when the codes are 
released and whether we solicited public comments in the CY 2023 OPPS/
ASC proposed rule (and respond to those comments in this final rule 
with comment period) or whether we are soliciting public comments in 
this final rule with comment period.
    We note that we sought public comments in the CY 2022 OPPS/ASC 
final rule with comment period (86 FR 63767-63768) on the new and 
revised Level II HCPCS codes effective on either October 1, 2020 or 
January 1, 2021. These new and revised codes were flagged with comment 
indicator ``NI'' in Addenda AA and BB to the CY 2022 OPPS/ASC final 
rule with comment period to indicate that we were assigning them an 
interim payment status and payment rate, if applicable, which were 
subject to public comment following publication of the CY 2022 OPPS/ASC 
final rule with comment period. In the CY 2022 OPPS/ASC proposed rule 
(86 FR 42196), we stated that we will finalize the treatment of these 
codes under the ASC payment system in this CY 2023 OPPS/ASC final rule 
with comment period.
2. April 2022 HCPCS Codes for Which We Solicited Public Comments in the 
Proposed Rule
    For the April 2022 update, there were no new CPT codes appropriate 
for separate payment under the ASC payment system; 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 of the CY 2023 OPPS/ASC proposed rule (87 FR 44702) 
displayed the new Level II HCPCS codes that were implemented April 1, 
2022. We note that the proposed comment indicators (CI), payment 
indicators (PI), and payment rates for these April codes were listed in 
Addendum BB to the CY 2023 OPPS/ASC proposed rule. In addition, we note 
that the entire ASC addenda, which consist of the addenda listed below, 
are available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices:
    ASC Addendum AA: ASC Covered Surgical Procedures (Including 
Surgical Procedures for Which Payment is Packaged)
 ASC Addendum BB: Covered Ancillary Services Integral to 
Covered Surgical Procedures (Including Ancillary Services for Which 
Payment is Packaged)
 ASC Addendum DD1: ASC Payment Indicators (PI)
 ASC Addendum DD2: ASC Comment Indicators (CI)
 ASC Addendum EE: Surgical Procedures Excluded from Payment in 
ASCs
 ASC Addendum FF: ASC Device Offset Percentages

    We invited public comments on the proposed payment indicators for 
the new HCPCS codes that were recognized as ASC covered ancillary 
services in April 2022 through the quarterly update CRs, and as listed 
in Table 71 (New Level II HCPCS Codes for Ancillary Services Effective 
April 1, 2022). The new codes that were effective April 1, 2022, were 
assigned to comment indicator ``NP'' in ASC Addendum BB to the CY 2023 
OPPS/ASC proposed rule to indicate that the codes are assigned to 
interim payment indicators and comments would be accepted on their 
interim assignments. We proposed to finalize the payment indicators in 
this CY 2023 OPPS/ASC final rule with

[[Page 72055]]

comment period. We did not receive any comments on the proposed ASC 
payment indicator assignments for the new Level II HCPCS codes 
implemented in April 2022 and are finalizing the proposed ASC payment 
indicator assignments for these codes.
    We note that several of the temporary drug HCPCS C-codes have been 
replaced with permanent drug HCPCS J-codes. Their replacement codes are 
also listed in Table 71. In addition, although in prior years we 
included the final ASC payment indicators in the coding tables in the 
preamble, because we include the same information in the ASC addenda, 
we have not included them in Table 71. Therefore, readers are advised 
to refer to the ASC addenda for the final ASC payment indicators and 
payment rates for all codes reported under the ASC payment system. The 
list of ASC payment indicators and definitions used under the ASC 
payment system can be found in the ASC addenda. We note that the ASC 
addenda (AA, BB, DD1, DD2, EE, and FF) are available via the internet 
on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR23NO22.103

3. July 2022 HCPCS Codes for Which We Solicited Public Comments in the 
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 Covered Surgical Procedures and Covered Ancillary Services 
Effective July 1, 2022) of the CY 2023 OPPS/ASC proposed rule displayed 
the new HCPCS codes that were effective July 1, 2022. We invited public 
comments on the proposed payment indicators for these Level II HCPCS 
codes, and indicated that the proposed comment indicators, payment 
indicators, and payment rates for these codes were listed in Addendum 
AA and Addendum BB of the proposed rule. These new codes that were 
effective July 1, 2022, were assigned to comment indicator ``NP'' in 
ASC Addendum AA and Addendum BB to the CY 2023 OPPS/ASC proposed rule 
to indicate that the codes were assigned to interim payment indicators 
and comments would be accepted on their interim assignments. We further 
stated that we proposed to finalize the payment indicators in this CY 
2023 OPPS/ASC final rule with comment period. We note that several of 
the temporary drug

[[Page 72056]]

HCPCS C-codes have been replaced with HCPCS J-codes and HCPCS Q-codes. 
Their replacement codes are also listed in Table 72. In addition, 
although in prior years we included the final ASC payment indicators in 
the coding tables in the preamble, because we include the same 
information in Addendum AA and Addendum BB, we have not included them 
in Table 72. Therefore, readers are advised to refer to the ASC addenda 
for the final ASC payment indicators and payment rates for all codes 
reported under the ASC payment system.
    We did not receive any comments on the proposed ASC payment 
indicator assignments for the new Level II HCPCS codes that we added to 
the list of covered surgical procedures and ancillary services 
implemented as of July 2022 and we are finalizing the proposed ASC 
payment indicator assignments for these codes.
    We note that the ASC addenda (AA, BB, DD1, DD2, EE, and FF) are 
available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.
[GRAPHIC] [TIFF OMITTED] TR23NO22.104

    In addition, 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 were listed in Table 53 
(New Category III CPT Codes for Covered Ancillary Services Effective 
July 1, 2022) of the CY 2023 OPPS/ASC proposed rule (87 FR 44704), and 
also listed in Table 73 of this CY 2023 OPPS/ASC final rule with 
comment period. We invited public comments on the proposed payment 
indicators for these new Category III CPT codes, and indicated that the 
proposed comment indicators, payment indicators, and payment rates for 
these codes were listed in Addendum BB of the proposed rule. We further 
stated that we would finalize the payment indicators in this CY 2023 
OPPS/ASC final rule with comment period.
    We did not receive any comments on the proposed ASC payment 
indicator assignments for the new Level II HCPCS codes that we added to 
the list of covered ancillary services implemented in July 2022 and we 
are finalizing the proposed ASC payment indicator assignments for these 
codes. We note that the ASC addenda (AA, BB, DD1, DD2, EE, and FF) are 
available via the internet on the CMS website at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.

[[Page 72057]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.105

4. October 2022 HCPCS Codes for Which We Are Soliciting Public Comments 
in This Final Rule With Comment Period
    For CY 2023, consistent with our established policy, we proposed 
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 are 
inviting public comments in this final rule with comment period on the 
interim payment indicators, which would 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 Are Soliciting Public Comments in 
This 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 the CY 2023 OPPS/ASC 
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, however, the codes are flagged with comment 
indicator ``NI'' in ASC Addendum AA and Addendum BB to this final rule 
with comment period to indicate that we are assigning them an interim 
payment status, which is subject to public comment. Therefore, as we 
stated in the CY 2023 OPPS/ASC proposed rule, these Level II HCPCS 
codes that will be effective January 1, 2023, are included in this 
final rule with comment period, and will also be released to the public 
through in the January 2023 ASC Update CR and the CMS HCPCS website.
    In addition, for CY 2023, we 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 are inviting public comments in this 
final rule with comment period on the payment indicator assignments, 
which would be finalized in the CY 2024 OPPS/ASC final rule with 
comment period.
b. CPT Codes for Which We Solicited Public Comments in the 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 the 
CY 2023 OPPS/ASC proposed rule. The new, revised, and deleted CPT codes 
can be found in Addendum AA and Addendum BB to the CY 2023 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website 
at https://www.cms.gov/medicaremedicare-fee-service-paymentascpaymentasc-regulations-and-notices/cms-1772-p). We note that 
the new and revised CPT codes are assigned to comment indicator ``NP'' 
in ASC Addendum AA and Addendum BB of the CY 2023 OPPS/ASC proposed 
rule to indicate that the code is new for the next calendar year or the 
code is an existing code with substantial revision to its code 
descriptor in the next calendar year as compared to the current 
calendar year with a proposed payment indicator assignment. We stated 
that we would accept comments and finalize the payment indicators in 
this CY 2023 OPPS/ASC final rule with comment period. Further, we 
reminded 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 the CY 2023 
OPPS/ASC proposed rule so that the public could comment on our proposed 
payment indicator assignments. The 5-digit placeholder codes were 
listed in Addendum O to the CY 2023 OPPS/ASC proposed rule, 
specifically under the column labeled ``CY 2023 OPPS/ASC Proposed Rule 
5-Digit Placeholder Code.'' We also stated that we would include the 
final CPT code numbers in this CY 2023 OPPS/ASC final rule with comment 
period.
    We did not receive any comments on the proposed ASC payment 
indicators for the new CPT codes effective January 1, 2023, so we are 
finalizing these codes as proposed.
    Finally, in Table 74, we summarize our process for updating codes 
through our ASC quarterly update CRs, seeking public comments, and 
finalizing the treatment of these new codes under the ASC payment 
system.

[[Page 72058]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.106

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

1. Covered Surgical Procedures
a. Covered Surgical Procedures Designated as Office-Based
(1) Background
    In the August 2, 2007 ASC final rule, we finalized our policy to 
designate as ``office-based'' those procedures that are added to the 
ASC Covered Procedures List (CPL) in CY 2008 or later years that we 
determine are furnished predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC CPL beginning in CY 2008 that we determined were 
office-based were identified in Addendum AA to that rule 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) Changes for CY 2023 to Covered Surgical Procedures Designated as 
Office-Based
    In developing the 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 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

[[Page 72059]]

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.D of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44680 through 44682), 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 proposed to use the CY 2021 claims for CY 2023 OPPS ratesetting. 
Similarly, in the CY 2023 OPPS/ASC proposed rule (87 FR 44705 through 
44708), we proposed 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 believed met 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 believed that the services are of a level 
of complexity consistent with other procedures performed routinely in 
physicians' offices. The CPT codes that we proposed to permanently 
designate as office-based for CY 2023 are listed in Table 75.
[GRAPHIC] [TIFF OMITTED] TR23NO22.107

    Comment: One commenter recommended that we do not assign an office-
based payment indicator of ``P3'' to CPT code 36595 (Mechanical removal 
of pericatheter obstructive material (e.g., fibrin sheath) from central 
venous device via separate venous access) as this procedure was 
assigned a non office-based payment indicator of ``G2''

[[Page 72060]]

in prior years and was assigned a payment indicator of ``J8''--Device-
intensive procedure; paid at adjusted rate--for CY 2022.
    Response: In the CY 2014 OPPS/ASC final rule with comment period 
(78 FR 75071 through 75072), we finalized our proposal to permanently 
designate CPT code 36595 as an office-based procedure. As we have 
stated in past rulemaking (76 FR 74409 and 80 FR 70483), our current 
policy is for device-intensive status to supersede the assignment of 
the office-based designation. If the procedure no longer meets our 
criteria for device-intensive status we believe the permanent office-
based designation should still apply. After reviewing CY 2021 claims 
data available for this final rule, CPT code 36595 does not meet our 
criteria for device-intensive status for CY 2023. Therefore, we are not 
accepting the commenter's recommendation and are finalizing our 
proposal to assign an office-based payment indicator to CPT code 36595 
for CY 2023.
    Comment: Some commenters did not support our proposal to assign a 
permanent office-based designation to CPT code 15275 (Application of 
skin substitute graft to face, scalp, eyelids, mouth, neck, ears, 
orbits, genitalia, hands, feet, and/or multiple digits, total wound 
surface area up to 100 sq cm; first 25 sq cm or less wound surface 
area). One commenter claimed that an insufficient ASC payment rate has 
contributed to a low claims volume and a site of service shift away 
from the ASC setting. Another commenter stated that our office-based 
analysis only looked at the ASC and physician office claims volume and 
did not account for all outpatient settings, including hospital 
outpatient department utilization.
    Response: The commenter has inaccurately described our analysis for 
making office-based determinations under the ASC payment system. We 
propose procedures to be permanently designated as office-based based 
on physician claims that report the procedure across all settings of 
care, both inpatient and outpatient. If the office-based utilization 
exceeds 50% of total utilization across all settings of care and total 
utilization exceeds 50 claims, we propose such procedures be 
permanently designated as office-based. Based on our review of CY 2021 
claims and utilization data for this final rule with comment period, 
for CPT code 15725, there were a reported 90,211 claim lines in the 
physician office setting and a reported 154,108 claim lines across all 
settings of care. We believe this is volume is more than sufficient to 
make a permanent office-based designation to CPT code 15275 under our 
current policy.
    Comment: One commenter supported our proposal to assign a permanent 
office-based designation to CPT code 31574 (Laryngoscopy, flexible; 
with injection(s) for augmentation (eg, percutaneous, transoral), 
unilateral).
    Response: We appreciate the commenter's support of our office-based 
designation for CPT code 31574.
    After consideration of the comments received, we are finalizing our 
proposal, without modification, to permanently designate the procedures 
in Table 76 as office-based procedures.
[GRAPHIC] [TIFF OMITTED] TR23NO22.108


[[Page 72061]]


    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 are 
permanently assigned to the list of office-based procedures. In the 
absence of claims data, we 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.
    We 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 77. For all 8 surgical procedures, there were fewer 
than 50 claims or no claims in our data. Therefore, we proposed to 
continue to designate these procedures, shown in Table 77, 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 the CY 2023 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website 
at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices).

[[Page 72062]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.109

    We did not receive any public comments on our proposal to assign 
temporary office-based designations to the procedures listed in Table 
77. However, as discussed in section XIII.C.1.d of this final rule with 
comment period, we are finalizing the addition of a new CPT code 0581T 
(Ablation, malignant breast tumor(s), percutaneous, cryotherapy, 
including imaging guidance when performed, unilateral) to the ASC list 
of covered surgical procedures. We believe this procedure is clinically 
similar to CPT code 19105 (Ablation, cryosurgical, of fibroadenoma, 
including ultrasound guidance, each fibroadenoma) which is currently 
assigned an office-based payment indicator of ``P2'' under the ASC 
payment system. Therefore, we are finalizing our proposal, with a 
modification to include CPT code 0581T, to designate the procedures 
shown in Table 78 as temporarily office-based for CY 2023.

[[Page 72063]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.110

BILLING CODE 4120-01-C
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) 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

[[Page 72064]]

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 the 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 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.
    Comment: Many commenters requested that we use invoice or cost data 
submitted by manufacturers to determine the device portion for the ASC 
payment rate in lieu of the proposed default device offset percentage 
of 31 percent, specifically for the following procedures:

     HCPCS Code C9781 (Arthroscopy, shoulder, surgical; with 
implantation of subacromial spacer (e.g., balloon), includes 
debridement (e.g., limited or extensive), subacromial decompression, 
acromioplasty, and biceps tenodesis when performed);
     CPT code 30469 (Repair of nasal valve collapse with low 
energy, temperature-controlled (i.e., radiofrequency) subcutaneous/
submucosal remodeling);
     CPT code 69714 (Implantation, osseointegrated implant, 
temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; without mastoidectomy).

    Other commenters requested that we use invoice data or a subset of 
claims data to determine device-intensive status for certain procedures 
and stated that hospitals have inaccurately coded devices as surgical 
supplies, therefore, the device offset percentage calculated from our 
claims statistics does not reflect the true cost of the device. 
Specifically, commenters requested that we assign device-intensive 
status to the following procedures:
     HCPCS code C9761 (Cystourethroscopy, with ureteroscopy 
and/or pyeloscopy, with lithotripsy (ureteral catheterization is 
included) and vacuum aspiration of the kidney, collecting system and 
urethra if applicable);
     CPT code 0499T (Cystourethroscopy, with mechanical 
dilation and urethral therapeutic drug delivery for urethral stricture 
or stenosis, including fluoroscopy, when performed);
     CPT code 55880 (Ablation of malignant prostate tissue, 
transrectal, with high intensity-focused ultrasound (hifu), including 
ultrasound guidance);
     CPT code 66174 (Transluminal dilation of aqueous outflow 
canal; without retention of device or stent).
    Response: We are not accepting the commenters' recommendations to 
use invoice data in lieu of claims data or a subset of our cost data to 
determine the device portion of the ASC payment rate. As we stated in 
the CY 2023 OPPS/ASC proposed rule (87 FR 44623-24), we may temporarily 
assign a higher offset percentage if warranted by additional 
information in certain rare instances. Additionally, for new procedures 
that do not have claims data, we may assign a device offset percentage 
from a predecessor code, or, from a clinically similar procedure code 
that uses the same device. For procedures that we proposed to assign a 
default device offset percentage of 31 percent due to a lack of claims 
data and lack of either a predecessor code or clinically similar code 
that uses the same device, including HCPCS code C9781, CPT codes 30469 
and 69714, we believe the default device offset percentage of 31 
percent encourages efficiencies under the ASC payment system and is 
appropriate until we have available claims.
    We are also not accepting the commenters' recommendation to use 
invoice data from device manufacturers or a subset of claims data for 
determining device-intensive status for procedures that do not have a 
device offset percentage that exceeds our 30% device-intensive 
threshold based on claims data available for this final rule with 
comment period, including HCPCS code C9761, CPT codes 0499T, 55880, and 
66174. Under our current policy, hospitals are expected to adhere to 
the guidelines of correct coding and append the correct device code to 
the claim when applicable and we believe our claims database represents 
the most

[[Page 72065]]

accurate source of device cost information available to us. We do not 
believe it would be appropriate to exclude in whole or in part the 
available claims data that we have for ratesetting and for determining 
device offset percentages.
    Comment: Some commenters recommended that we refrain from wage-
adjusting the device portion of device-intensive procedures by the wage 
index for that particular area and only wage-adjust non device portions 
of the ASC payment rate. The commenters contend that wage-adjusting 50 
percent of the ASC payment rate by the wage index for a particular area 
can reduce ASC payment rates below the cost of certain devices.
    Response: We appreciate the commenters' recommendation. We did not 
propose such a change to our application of the ASC wage index but, as 
we stated in the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59042), such a policy would increase payment for providers with a 
relatively low wage index (that is, a wage index value of less than 1) 
and decrease it for providers with a relatively high wage index (that 
is, a wage index value of greater than 1). We did not make such a 
proposal, but we will consider the feasibility of this change and take 
this comment into consideration for future rulemaking.
    Comment: Commenters asked for further clarification on the source 
of the ASC device offset amount when billing for devices that have 
received transitional pass-through status under the OPPS and are 
separately paid under the ASC payment system. Commenters contend the 
procedure reduction in the ASC code pair file, which reflects the 
device offset amount, conflicts with information found in Addendum FF.
    Response: Addendum FF lists device offset percentages as well as 
device portions for all ASC covered surgical procedures. The device 
offset percentages are based on hospital outpatient cost data using the 
ASC standard ratesetting methodology and are a main component in 
determining whether or not a procedure can be assigned device-intensive 
status under the ASC payment system. These percentages are not the 
procedure reduction percentages that are found in the ASC code pair 
file when billing for devices that have received transitional pass-
through status. In a footnote to the CY 2023 OPPS/ASC proposed rule 
Addendum FF as well as Addendum FF to this final rule with comment 
period, we have clarified this distinction. In this final rule with 
comment period, we are restating that for device-intensive and non 
device-intensive procedures, unless otherwise specified, the device 
portion, which is found in Addendum FF, is the associated device offset 
dollar amount when billing for devices that have received transitional 
pass-through status under the OPPS and are separately paid under the 
ASC payment system. The procedure reduction percentage that is applied 
to the ASC payment rate which is found in the ASC code pair file can be 
calculated by dividing the procedure's device portion by the ASC 
payment rate.
    Comment: One commenter requested that we consider a modification to 
our established policy that would allow the continuation of the default 
device offset of 31 percent for procedures for which there were fewer 
than 100 claims used to calculate the device offset percentage.
    Response: We appreciate the commenter's request. We are concerned 
that such a policy would inaccurately assign device-intensive status to 
procedures that would otherwise consistently be ineligible for device-
intensive assignment. While we do not believe at this time that 
continuing the default device offset percentage over available claims 
data would be an improvement to our methodology for determining device 
offset amounts and device-intensive status for procedures for which 
there were fewer than 100 claims used to calculate the device offset 
percentage, we will take this comment into consideration for future 
rulemaking.
    Comment: One commenter recommended that we assign the device offset 
percentage of CPT code 0627T (Percutaneous injection of allogeneic 
cellular and/or tissue-based product, intervertebral disc, unilateral 
or bilateral injection, with fluoroscopic guidance, lumbar; first 
level) to 0629T (Percutaneous injection of allogeneic cellular and/or 
tissue-based product, intervertebral disc, unilateral or bilateral 
injection, with CT guidance, lumbar; first level) as both procedures 
use the same device.
    Response: For the CY 2023 OPPS/ASC proposed rule and this final 
rule with comment period, we do not have any claims data for CPT code 
0629T to determine a device offset percentage. Under our current 
policy, we may assign an alternative device offset percentage if we 
have claims data from a clinically similar procedure code that uses the 
same device. We agree with commenters that this policy can apply to CPT 
code 0629T, which is clinically similar to CPT code 0627T and uses the 
same device as this procedure. Therefore, we are accepting the 
commenter's recommendation and, for CY 2023, we are assigning the 
device offset percentage of CPT code 0627T to CPT code 0629T and 
assigning CPT code 0629T device-intensive status.
    Comment: Commenters supported the proposed device offset 
percentages for the following procedures:
     CPT code 0671T (Insertion of anterior segment aqueous 
drainage device into the trabecular meshwork, without external 
reservoir, and without concomitant cataract removal, one or more);
     HCPCS code C9764 (Revascularization, endovascular, open or 
percutaneous, lower extremity artery(ies), except tibial/peroneal; with 
intravascular lithotripsy, includes angioplasty within the same 
vessel(s), when performed); and,
     HCPCS code C9766 (Revascularization, endovascular, open or 
percutaneous, lower extremity artery(ies), except tibial/peroneal; with 
intravascular lithotripsy and atherectomy, includes angioplasty within 
the same vessel(s), when performed).
    Response: We appreciate the commenters' support. We are finalizing 
our proposal to assign device-intensive status to CPT code 0671T, HCPCS 
code C9764, and HCPCS code C9766. For final CY 2023 device offset 
percentages based on available claims data for this final rule with 
comment period, we refer readers to Addendum FF of this final rule with 
comment period.
    Comment: One commenter requested that we recalculate the device 
offset percentages, and subsequent ASC payment rate, for procedures 
performed with OPPS transitional pass-through device category C1748 
(Endoscope, single-use (i.e. disposable), Upper GI, imaging/
illumination device (insertable)) after expiration of its transitional 
pass-through status on July 1, 2023 for the July 2023 quarterly update.
    Response: We appreciate the commenter's recommendation. For 
procedures performed with transitional pass-through device categories 
that expire on April 1st, July 1st, or October 1st, we use the best 
claims data available to us to determine the procedures' applicable 
device offset percentages and recalculate the ASC payment rate if 
necessary.
    Comment: One commenter requested that we not assign device-
intensive status to CPT code 0428T (Removal of neurostimulator system 
for treatment of central sleep apnea; pulse generator only).
    Response: We agree with the commenter that CPT code 0428T does not 
involve significant device costs and

[[Page 72066]]

is therefore ineligible for device-intensive status under our current 
policy. Therefore, for CY 2023, we are accepting the commenter's 
recommendation and assigning an ASC payment indicator of ``G2''--Non 
office-based surgical procedure added in CY 2008 or later; payment 
based on OPPS relative payment weight.--to CPT code 0428T for CY 2023.
    As discussed in more detail in section XIII.D.1.c of the CY 2023 
OPPS/ASC proposed rule (87 FR 44712 through 44714), we proposed to 
create a special payment policy under the ASC payment system whereby we 
would add 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 proposed 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 the CY 2023 OPPS/ASC proposed rule.
    The ASC covered surgical procedures that we proposed to designate 
as device-intensive, and therefore subject to the device-intensive 
procedure payment methodology for CY 2023, are assigned payment 
indicator ``J8'' and are included in ASC Addendum AA and Addendum FF to 
the CY 2023 OPPS/ASC proposed rule (which is available via the internet 
on the CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentascpaymentasc-regulations-and-notices/cms-1772-p). The CPT code, 
the CPT code short descriptor, the proposed CY 2023 ASC payment rate 
are also included in Addendum AA to the CY 2023 OPPS/ASC proposed rule 
(which is available via the internet on the CMS website at https://www.cms.gov/medicaremedicare-fee-service-paymentascpaymentasc-regulations-and-notices/cms-1772-p). We solicited public comments on 
our proposal to assign device-intensive status to the new C codes that 
we proposed to add to the ASC CPL as well as our methodology for 
determining the device portion for such procedures.
    Comment: Commenters were in support of our proposed device-
intensive methodology for the new C codes we proposed to add to the ASC 
CPL and assign device-intensive status. Commenters asked that CMS 
publicly share data on the impact of this policy and if any adjustments 
are needed.
    Response: We appreciate the commenters support of our proposal. We 
intend to share with the public the impact of our new C code policy and 
consider adjusting and refining this policy in future rulemaking.
    After consideration of the public comments we received, we are 
finalizing our proposal to assign device-intensive status to the new C 
codes that we are adding to the ASC CPL for CY 2023 if the primary 
procedure is assigned device-intensive status as well. We are also 
finalizing our proposed methodology for determining the device portion 
for such procedures. For CY 2023, the device-intensive payment 
methodology for the new device-intensive C codes that we are adding to 
the ASC CPL relies on the final device portions (calculated from the 
final device offset percentages) using the CY 2021 OPPS claims and cost 
report data available for this final rule with comment period. The ASC 
covered surgical procedures that we are finalizing to designate as 
device-intensive, and therefore subject to the device-intensive 
procedure payment methodology for CY 2023, are assigned payment 
indicator ``J8'' and are included in ASC Addendum AA and Addendum FF to 
this CY 2023 OPPS/ASC final rule with comment period (which is 
available via the internet on the CMS website). The CPT code, the CPT 
code short descriptor, the final CY 2023 ASC payment rate are also 
included in Addendum AA to the CY 2023 OPPS/ASC final rule with comment 
period (which is available via the internet on the CMS website).
c. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC payment policy for costly devices implanted or inserted in 
ASCs at no cost/full credit or partial credit is set forth in Sec.  
416.179 of our regulations, and is consistent with the OPPS policy that 
was in effect until CY 2014. We refer readers to the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66845 through 66848) for a full 
discussion of the ASC payment adjustment policy for no cost/full credit 
and partial credit devices. ASC payment is reduced by 100 percent of 
the device offset amount when a hospital furnishes a specified device 
without cost or with a full credit and by 50 percent of the device 
offset amount when the hospital receives partial credit in the amount 
of 50 percent or more of the cost for the specified device.
    Effective CY 2014, under the OPPS, we finalized our proposal to 
reduce OPPS payment for applicable APCs by the full or partial credit a 
provider receives for a device, capped at the device offset amount. 
Although we finalized our proposal to modify the policy of reducing 
payments when a hospital furnishes a specified device without cost or 
with full or partial credit under the OPPS, in the CY 2014 OPPS/ASC 
final rule with comment period (78 FR 75076 through 75080), we 
finalized our proposal to maintain our ASC policy for reducing payments 
to ASCs for specified device-intensive procedures when the ASC 
furnishes a device without cost or with full or partial credit. Unlike 
the OPPS, there is currently no mechanism within the ASC claims 
processing system for ASCs to submit to CMS the 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

[[Page 72067]]

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 did not receive any comments on our policies related to no/cost 
full credit or partial credit devices, and we are continuing our 
existing policies for CY 2023 and subsequent years.
d. Additions to the List of ASC Covered Surgical Procedures
    Section 1833(i)(1) of the Act requires us, in part, to specify, in 
consultation with appropriate medical organizations, surgical 
procedures that are appropriately performed on an inpatient basis in a 
hospital but that can 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).

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

[[Page 72068]]

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 proposed to update the ASC 
CPL by adding one lymphatic procedure to the list for CY 2023, as shown 
in Table 79 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 proposed to include this procedure on the ASC CPL for CY 
2023.
[GRAPHIC] [TIFF OMITTED] TR23NO22.111

    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.
    Comment: Several specialty groups expressed broad support for 
expanding the ASC CPL and adding the lymph node procedure that CMS 
proposed to the ASC CPL for CY 2023. One hospital commenter disagreed 
with expanding the CPL, citing undue safety risks for patients in the 
ASC setting.
    Response: We thank the commenters for their feedback. When adding 
procedures to the ASC CPL, we evaluate them against the ASC CPL 
criteria in order to ensure that the procedure is not expected to pose 
a significant risk to beneficiary safety when performed in an ASC. As 
medical practice continues to evolve and advance, more procedures are 
able to be safely offered in the ASC setting for the typical Medicare 
beneficiary. As we have determined that these procedures meet our 
existing criteria such that they can be performed safely in the ASC 
setting on the typical Medicare beneficiary, we disagree that they pose 
an undue safety risk for patients in the ASC setting.
    Comment: A few stakeholders expressed disappointment that CMS only 
proposed to add one code for CY 2023. Multiple commenters recommended 
specific codes that they believed met the criteria to be added to the 
ASC CPL, including cardiovascular and cardiac ablation codes, thyroid-
related procedures, and electroconvulsive therapy. Several orthopedic 
providers requested that total shoulder arthroplasty, total ankle 
arthroplasty and lumbar spine fusion procedures be added to the CPL, 
based on claims of safe and routine performance in ASCs, low infection 
rates, and financial savings. We received 64 procedure recommendations 
in total, listed in Table 80 below. Some of these recommendations were 
accompanied by supporting literature or evidence, while other comments 
only provided anecdotal evidence and simply stated general support for 
these procedures to be furnished in the ASC setting.
    Response: We thank commenters for their recommendations. We 
individually assessed each of these 64 procedures, evaluating clinical 
data on these procedures from multiple sites of services, reviewing the 
literature and experiential data provided in public comments, and 
examining claims volume to determine whether these procedures meet each 
of the regulatory criteria at 42 CFR 416.166.
    Based on our review of the clinical characteristics of the 
procedures and their similarity to other procedures that are currently 
on the ASC CPL, we believe that four procedures (CPT codes 19307, 
37193, 38531, and 43774) out of the 64 procedure recommendations we 
received can be safely performed for the typical beneficiary in the ASC 
setting and meet the general standards and exclusion criteria for the 
ASC CPL as set forth in 42 CFR 416.166(b) and (c), respectively. This 
includes CPT code 38531, which we proposed to add to the CPL in the CY 
2023 OPPS/ASC proposed rule. These four codes correspond to procedures 
that have few to no inpatient admissions and are largely performed in 
outpatient settings. We agree with commenters who provided evidence 
stating that these procedures can be safely performed in an ASC 
setting. These procedures, listed in Table 81 below, are:
     CPT 19307 (Mastectomy, modified radical, including 
axillary lymph nodes, with or without pectoralis minor muscle, but 
excluding pectoralis major muscle)
     CPT 37193 (Retrieval (removal) of intravascular vena cava 
filter, endovascular approach including vascular access, vessel 
selection, and radiological supervision and interpretation, 
intraprocedural roadmapping, and imaging guidance (ultrasound and 
fluoroscopy), when performed)
     CPT 38531 (Biopsy or excision of lymph node(s); open, 
inguinofemoral node(s))
     CPT 43774 (Laparoscopy, surgical, gastric restrictive 
procedure; removal of

[[Page 72069]]

adjustable gastric restrictive device and subcutaneous port components)
     Due to patient safety concerns, we believe the remaining 
recommended procedures should not be added to the ASC CPL. We explain 
our rationale for not including the 60 remaining recommended procedures 
below, organized by anatomical category.
     20 vascular codes, including arterial revascularization, 
coronary atherectomies, and vena cava filter insertion or removal 
procedures. Many of these procedures have associated inpatient 
admissions, where the beneficiary requires active medical monitoring 
and care at midnight following the procedure. Additionally, a number of 
these procedures would pose a significant safety risk to beneficiaries 
without post-operative inpatient care and because patients requiring 
these procedures are often higher risk at baseline. Some of the 
vascular codes recommended in the CPT 90000 series were also non-
surgical procedures, which means they would not qualify for addition to 
the ASC CPL or the ancillary services list, as they are not integral to 
a covered surgical procedure.
     4 gastrointestinal codes, including paraesophageal hernia 
repairs, laparoscopic esophagogastric fundoplasty, laparoscopic 
enterolysis, appendectomy, and laparoscopic gastric restrictive 
procedures. While some of these procedures show increasing outpatient 
volume, many still have inpatient admissions and potential procedure 
risks, indicating that the beneficiary would require active monitoring 
and care past midnight following the procedure. Additionally, these 
procedures can involve prolonged invasion of body cavities, and be 
life-threatening or emergent in nature. Additionally, several of these 
procedures are less commonly done in Medicare patients and more 
frequently performed in a younger population.
     6 musculoskeletal codes, including total shoulder and 
ankle arthroplasty procedures as well as lumbar spine fusion 
procedures. Although a few of these procedures have some claims volume 
in the outpatient setting, many of them are also complex procedures 
with inpatient admissions and multiple post-operative inpatient days, 
where infections and need for intravenous antibiotics are not uncommon 
events, indicating that the beneficiary would require active monitoring 
and care past midnight following the procedure. In addition, we 
acknowledge the findings of studies that commenters provided related to 
these procedures. However, the studies we received had significant 
limitations including selection bias, an absence of age groups 
representative of the Medicare population, and a lack of 
generalizability to different types of ASCs around the country.
     4 endocrine codes, including thyroidectomy and 
parathyroidectomy procedures. While these procedures have increasing 
outpatient volume, there are inpatient admissions associated with these 
procedures, indicating the beneficiary would be expected to stay past 
midnight following the procedure. Additionally, the intraservice time 
for these procedures can vary greatly, often becoming a prolonged 
invasion of body cavities.
     2 nervous system codes, including laminectomy and 
laminotomy procedures. These codes have associated inpatient admissions 
and post-operative days, indicating that the beneficiary would require 
active monitoring and care past midnight following the procedure. Many 
of these procedures also pose a significant safety risk to the 
beneficiary when close post-operative neurosurgical surveillance is not 
frequently provided.
     24 medicine codes, including electroconvulsive therapy, 
cardioversion, echocardiography, esophageal recordings, intra-atrial 
and intra-ventricular recordings, comprehensive electrophysiologic 
evaluations. These codes are inherently non-surgical and would not 
qualify for the ASC CPL or the ancillary services list, as they are not 
integral to a covered surgical procedure.
    Given these considerations, we believe that these 60 codes do not 
meet the proposed criteria to be included on the ASC CPL due to the 
following factors: inpatient admissions, multiple-day stays past 
midnight, safety risks to the typical beneficiary without active post-
operative monitoring, involvement of major blood vessels, prolonged 
invasion of a body cavity, the risk of being life threatening or 
emergent, less common in Medicare beneficiaries, or are non-surgical.
    However, as medical practice continues to evolve, we recognize that 
there will be additional advancements and improvements that may allow 
these procedures to be safely offered in the ASC setting for the 
typical Medicare beneficiary. We believe that there is potential for 
some of the procedures recommended but not added to the ASC CPL to be 
added in the future if there is adequate evidence that these procedures 
meet our criteria and can be safely performed on the typical Medicare 
beneficiary in the ASC setting. We encourage interested parties to 
continue to submit this information in future rulemaking.
    Therefore, in this CY 2023 OPPS/ASC final rule with comment period, 
we are finalizing four procedures to be added to the ASC CPL. These 
procedures are listed below in Tables 80 and 81 of this CY 2023 OPPS/
ASC final rule with comment period.
    Comment: Commenters also offered suggestions on different 
approaches for CMS to consider when approaching the ASC CPL, including 
providing a rationale for each procedure that is added or denied, 
noting that CMS has previously stated they would disclose this 
information; standardizing CPL additions by covering all surgical 
procedures paid separately under the OPPS, unless the procedure meets 
the exclusionary criteria; offering additional guidance on the 
definition of the ``typical Medicare beneficiary''; and allowing 
clinicians to decide whether their patients are eligible for care in an 
ASC.
    Response: We thank the commenters for their suggestions and will 
take these suggestions into consideration for future rulemaking. CMS 
has provided rationales for denying codes in both CY 2022 and CY 2023. 
We provide rationales in code buckets, rather than for each individual 
code, because this format captures and conveys the various reasons we 
do not believe these procedures meet the ASC CPL criteria in a succinct 
and non-repetitive manner. We believe that all procedures that meet our 
ASC CPL criteria are currently on the ASC CPL and that standardizing 
this process by adding all eligible procedures paid separately under 
the OPPS would not change the list of ASC covered surgical procedures. 
In the CY 2022 OPPS/ASC final rule, we provided a detailed rationale 
for why we believe that CMS is in the position to make safety 
determinations for the broader population of Medicare beneficiaries, 
while physicians can make safety decisions for their specific 
beneficiaries (86 FR 63777 through 63779). We also provided additional 
context on the typical Medicare beneficiary, whose health status is 
representative of the broader Medicare population, and we believe this 
information is sufficient to understand the typical Medicare 
beneficiary terminology without additional clarification at this time.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C

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 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 proposed 
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 believed 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 proposed to revise the start date of 
the

[[Page 72076]]

recommendation process in the regulatory text. We proposed 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 welcomed all procedure submissions through the public 
comment process, as we have in previous years.
    Comment: Several commenters supported the clarification of the 
future pre-proposed rule recommendation process. A few commenters noted 
that they still preferred the term ``Nominations.'' Some commenters 
stated that they prefer the proposed process as it encourages CMS 
transparency, and some commenters urged CMS to implement this proposal 
without delay.
    Response: We thank the commenters for their input on this process.
    After consideration of the public comments we received, we are 
finalizing the proposal 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'' 
and revise the start date of the recommendation process to January 1, 
2024 in the regulatory text.
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'' is used in Addendum BB (which is available via the internet on 
the CMS website) to indicate covered ancillary services for which we 
proposed 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 CY 2023 OPPS/ASC final rule. All 
ASC covered ancillary services and their final payment indicators for 
CY 2023 are also included in Addendum BB to the CY 2023 OPPS/ASC 
proposed rule (which is available via the internet on the CMS website).

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

1. Final 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 CY 2023 OPPS/ASC final 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 (non-
device) 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 CY 2023 OPPS/ASC final 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 
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.

[[Page 72077]]

b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2023
    We proposed 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 CY 2023 OPPS/ASC final rule. As 
the proposed OPPS relative payment weights are generally based on 
geometric mean costs, we proposed that the ASC payment system will 
generally use the geometric mean cost to determine proposed relative 
payment weights under the ASC standard methodology. We proposed to 
continue to use the amount calculated under the ASC standard 
ratesetting methodology for procedures assigned payment indicators 
``A2'' and ``G2''.
    We proposed to calculate payment rates for office-based procedures 
(payment indicators ``P2'', ``P3'', and ``R2'') and device-intensive 
procedures (payment indicator ``J8'') according to our established 
policies and to identify device-intensive procedures using the 
methodology discussed in section XII.C.1.b of this CY 2023 OPPS/ASC 
final rule. Therefore, we proposed 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 proposed 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 proposed to 
continue our policy for device removal procedures, such that device 
removal procedures that are conditionally packaged in the OPPS (status 
indicators ``Q1'' and ``Q2'') will be assigned the current ASC payment 
indicators associated with those procedures and will continue to be 
paid separately under the ASC payment system.
    Comment: A few commenters expressed concerns about the lack of a 
cap on beneficiary coinsurance when a procedure is performed in the ASC 
setting while there is a statutory cap on beneficiary coinsurance when 
a procedure is performed in the HOPD setting. The commenters believe 
the lack of such a cap poses a financial challenge for beneficiaries, 
particularly with respect to transitional pass-through devices and 
higher-cost procedures that are device intensive, because in such 
cases, the coinsurance could be higher in the ASC setting than in the 
HOPD setting. The commenters stated their belief that ASCs are 
disadvantaged by the lack of a cap on coinsurance and believe this 
presents a beneficiary access issue. They request that CMS encourage 
the Congress to create a cap on coinsurance for services provided in 
the ASC setting.
    Response: We thank the commenters for their input but note that 
comments related to statutory changes are out of scope for this final 
rule.
    We did not receive any comments on the broader rate calculation 
methodologies for these procedures and we are finalizing our proposed 
policies without modification to calculate the CY 2023 payment rates 
for ASC covered surgical procedures according to our established rate 
calculation methodologies under Sec.  416.171 and using the modified 
definition of device-intensive procedures as discussed in section 
XIII.C.1.b. of this CY 2023 OPPS/ASC final rule with comment period. 
For covered office-based surgical procedures, the payment rate is the 
lesser of the final CY 2022 MPFS nonfacility PE RVU-based amount or the 
final CY 2023 ASC payment amount calculated according to the ASC 
standard ratesetting methodology. The final payment indicators and 
rates set forth in this final rule with comment period are based on a 
comparison using the PFS PE RVUs and the conversion factor effective 
January 1, 2023. For a discussion of the PFS rates, we refer readers to 
the CY 2023 PFS final rule with comment period, which is available on 
the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
c. ASC Payment for Combinations of Primary and Add-On Procedures 
Eligible for Complexity Adjustments Under the OPPS
    In this section we proposed 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 CY 2023 OPPS/ASC final 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 CY 2023 OPPS/ASC final 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

[[Page 72078]]

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).
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 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 the CY 2023 OPPS/ASC proposed rule, 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 estimated 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 proposed 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 proposed to add new Sec.  416.172(h) to 
codify this policy.
    We proposed 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 proposed 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 proposed 
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

[[Page 72079]]

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 proposed new C codes to add to the ASC CPL. These C 
codes for CY 2023 can be found in the ASC addenda. We proposed to add 
new Sec.  416.172(h)(1), titled Eligibility, to codify this policy.
    We proposed the following payment methodology for this proposed 
policy, which we would reflect in new Sec.  416.172(h)(2), titled 
Calculation of Payment. We proposed 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 proposed 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 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 proposed 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 proposed to add new Sec.  416.172(h)(2)(i) to codify 
this policy.
    As discussed in section XIII.C.1.b of the CY 2023 OPPS/ASC proposed 
rule (87 FR 44708), 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 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 proposed 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 proposed 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 proposed 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 welcomed comments on this proposal, including comments or 
suggestions regarding additional approaches that we should consider for 
this policy.
    Comment: All of the commenters who responded to this policy were 
supportive of providing a complexity adjustment for complex procedures 
in the ASC setting and urged CMS to finalize the ASC special payment 
policy for OPPS complexity adjusted C-APCs, as proposed. Commenters 
noted they believed this approach would result in more appropriate 
payments for those ASC procedures that require greater resources than 
the individual primary service and align with other site neutral 
payment policies. They recommended CMS continue to address any ASC 
payments that could interfere with meaningful beneficiary access to ASC 
covered services.

[[Page 72080]]

    Response: We thank the commenters for their support.
    Comment: Several commenters noted that they have received feedback 
and questions from ASC providers asking for additional detail on the 
specific HCPCS code combinations that correspond to the new C-codes. 
These commenters requested that CMS publish an addendum file or 
worksheet that lists the primary and secondary procedure HCPCS code, 
the new C-code to which they are assigned, and the final payment rate 
to ensure coding compliance and ease of implementation. Commenters 
believe this information will also allow for easier comparison for 
year-to-year changes in coding combinations that qualify for this 
special payment policy.
    Response: We thank the commenters for their input. We are providing 
a supplemental file to the ASC addenda that includes the requested 
information that be found at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.
    Comment: Several commenters recommended that CMS annually analyze 
and publicly share the impact of this new policy to assess if further 
adjustments to the methodology are needed. One commenter specifically 
noted this request in the context of retaining the device-intensive 
status of the primary procedure, as well as the device portion of the 
primary procedure rather than the device offset percentage.
    Response: We thank the commenters for their feedback. We anticipate 
reviewing this policy annually during future rulemaking.
    Comment: A few commenters noted that it is unclear why CMS proposed 
to create specific C-codes for these procedure combinations in the ASC 
payment system, unless there are claims processing limitations. They 
recommended CMS utilize the combination of the qualifying HCPCS codes 
to automatically trigger the adjusted payment level, rather than 
creating specific C-codes for ASC billing that may create confusion and 
unnecessary administrative burden.
    Response: The ASC claims processing system cannot accommodate the 
complexity adjustment payment mechanism that we are finalizing, so we 
believe that the best option for implementation of this policy is to 
create C codes that represent the code combination.
    After consideration of the public comments we received, we are 
finalizing the ASC special payment policy for OPPS complexity-adjusted 
C-APCs, as proposed. The final C codes for CY 2023 can be found in ASC 
addendum AA.
d. 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 the CY 2023 OPPS/ASC proposed 
rule, the ASC payment system generally uses OPPS geometric mean costs 
under the standard methodology to determine proposed relative payment 
weights under the standard ASC ratesetting methodology (87 FR 44712).
    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 the CY 2023 OPPS/ASC proposed 
rule, we proposed to designate 4 brachytherapy APCs and 4 clinical APCs 
as Low Volume APCs under the ASC payment system (87 FR 44714 through 
44175). The 4 clinical APCs and 4 brachytherapy APCs shown in Table 58 
of the CY 2023 OPPS/ASC proposed rule (87 FR 44715) met our criteria of 
having fewer than 100 single claims in the claims year (CY 2021 for the 
CY 2023 OPPS/ASC proposed rule) and therefore, we proposed 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 
not meet our claims threshold for the CY 2023 OPPS/ASC proposed rule.
    We did not receive any public comments on our proposal to assign 
the 4 brachytherapy APCs and 4 clinical APCs as Low Volume APCs under 
the ASC payment system. Based on claims data available for this final 
rule with comment period, we are finalizing our proposal to designate 
the 4 brachytherapy APCs and 4 clinical APCs shown in Table 82 as Low 
Volume APCs under the ASC payment system, because they continue to meet 
our criteria of having fewer than 100 single claims in the relevant 
claims year (2021). The APC cost metric for these APCS are based on the 
greatest of the median cost, arithmetic mean cost, or geometric mean 
cost using up to 4 years of claims data, as proposed.

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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).
    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

[[Page 72082]]

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.
    Comment: One commenter recommended that we publish guidance on how 
MACs are to calculate transitional pass-through payments under the ASC 
payment system for devices that are eligible for pass-through payment 
under the OPPS similar to how such guidance is provided under the OPPS. 
The commenter specifically recommended that CMS specify that J7 payment 
should be at least equal to the device cost, as reported by the ASC in 
box 19 or the electronic equivalent.
    Response: As previously discussed, devices that are eligible for 
pass-through payment under the OPPS are separately paid under the ASC 
payment system and are contractor-priced. Transitional pass-through 
payments under the OPPS utilize hospital cost-to-charge ratios to 
reduce the pass-through device to cost and provide the hospital an 
additional payment of the amount by which cost of the pass-through 
device exceeds the applicable device offset amount. ASCs do not submit 
cost reports and, as such, we are unable to replicate the OPPS 
transitional pass-through payment under the ASC payment system. 
Currently, MACs have been instructed to pay for such devices in the ASC 
setting based on invoice or cost. Because the calculation for 
transitional pass-through payments in the OPPS is different from the 
calculation for such payments in the ASC payment system, we believe the 
current guidance provided in Section 40, Chapter 14 of the Medicare 
Claims Processing Manual is sufficient.
b. Final Payment for Covered Ancillary Services for CY 2023
    We are finalizing our proposal 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 final CY 2023 
OPPS and ASC payment rates and subsequent years' payment rates. We are 
also finalizing our proposal 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 final payment indicators for 
CY 2023 are listed in Addendum BB of the CY 2023 OPPS/ASC final 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 final 
rates (similar to our office-based payment policy), the final payment 
indicators and rates set forth in the CY 2023 OPPS/ASC final rule are 
based on a comparison using the final PFS rates effective January 1, 
2023. For a discussion of the PFS rates, we refer readers to the CY 
2023 PFS final rule, which is available on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html.
3. Requirement in the Physician Fee Schedule CY 2023 Proposed and Final 
Rule for 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

[[Page 72083]]

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 proposed 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 proposed 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.
    As explained in the OPPS/ASC proposed rule (87 FR 44717), because 
the CY 2023 PFS proposed rule proposed to codify certain billing 
requirements for HOPDs and ASCs, we explained in the proposed rule that 
we wanted to ensure interested parties are aware of them and knew to 
refer to that rule for a full description of the proposed policy. 
Interested parties were asked to 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. We stated that public 
comments on these proposals will be addressed in the CY 2023 PFS final 
rule. We note that this same notice appeared in section V.A.C. of the 
CY 2023 OPPS/ASC proposed rule (87 FR 44716).
    We thank commenters for their feedback on this proposal. As 
indicated in the OPPS/ASC proposed rule (87 FR 44717), public comments 
on the policies discussed above will be addressed in the CY 2023 PFS 
proposed rule. For final details on this policy, we refer readers to 
the CY 2023 PFS final rule, which is available on the CMS website at: 
https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices.html. We note that 
this same notice appears in section V.A.C. of this CY 2023 OPPS/ASC 
final rule with comment period.
4. Inflation Reduction Act--Section 11101 Regarding Beneficiary Co-
Insurance
    On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) (Pub. 
L. 117-169) was signed into law. Section 11101 of the Inflation 
Reduction Act requires a drug manufacturer to pay a rebate if the ASP 
of their drug product rises at a rate that is faster than the rate of 
inflation. Section 11101(b) of the IRA amended sections 1833(i) and 
1833(t)(8) by adding a new paragraph (9) and subparagraph (F), 
respectively, that specify coinsurance under the ASC and OPPS payment 
systems. Section 1833(i)(9) requires that under the ASC payment system 
beneficiary coinsurance for a Part B rebatable drug that is not 
packaged to be calculated using the inflation-adjusted amount when that 
amount is less than the otherwise applicable payment amount for the 
drug furnished on or after April 1, 2023. Section 1833(t)(8)(F) 
requires that under the OPPS payment system beneficiary copayment for a 
Part B rebatable drug (except for a drug that has no copayment applied 
under subparagraph (E) of such section or packaged into the payment for 
a procedure) is to be calculated using the inflation-adjusted amount 
when that amount is less than ASP plus 6 percent beginning April 1, 
2023. Sections 1833(i)(9) and 1833(t)(8)(F) reference sections 
1847A(i)(5) for the computation of the beneficiary coinsurance and 
1833(a)(1)(EE) for the computation of the payment to the ASC or 
provider and state that the computations would be done in the same 
manner as described in such provisions. The computation of the 
coinsurance is described in section 1847A(i); specifically, in 
computing the amount of any coinsurance applicable under Part B to an 
individual to whom such Part B rebatable drug is furnished, the 
computation of such coinsurance shall be equal to 20 percent of the 
inflation-adjusted payment amount determined under section 
1847A(i)(3)(C) for such Part B rebatable drug. The calculation of the 
payment to the provider or ASC is described in section 1833(a)(1)(EE), 
and the provider or ASC would be paid the difference between the 
beneficiary coinsurance of the inflation-adjusted amount and the ASP 
plus 6 percent. We wish to make readers aware of this statutory change 
that begins April 1, 2023. Additionally, we refer readers to the full 
text of the IRA.\154\ Additional details on the implementation of 
section 11101 of the IRA are forthcoming and will be communicated 
through a vehicle other than the CY 2023 OPPS/ASC regulation.
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    \154\ H.R. 5376 available online at: https://www.congress.gov/bill/117th-congress/house-bill/5376/text.
---------------------------------------------------------------------------

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

[[Page 72084]]

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 
through 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), 416.171(b)(1), and 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 83 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).
[GRAPHIC] [TIFF OMITTED] TR23NO22.119


[[Page 72085]]


2. Eligibility Criteria Technical Clarification and Final 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. In the CY 2023 OPPS/ASC proposed rule, we proposed 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 proposed 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 proposed 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.
    Comment: We received several comments from interested parties 
acknowledging the two technical changes outlined above. Commenters were 
generally supportive of this action and believed these technical 
changes to the regulation text were appropriate.
    Response: We appreciate the support of commenters.
    After consideration of the public comments we received, we are 
finalizing as proposed the modifications to 416.174 to reflect our 
current policy as follows. We are finalizing Sec.  416.174(a)(3), which 
states 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 are finalizing Sec.  416.174(a)(4), which states 
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. Final 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 the CY 2023 OPPS/
ASC proposed rule, the OPPS drug packaging threshold was proposed to be 
$135. As discussed in section V.B.1.a of this CY 2023 OPPS/ASC final 
rule with comment period, the OPPS drug packaging threshold is 
finalized to be $135.
    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 
welcomed stakeholder comment on these evaluations.
a. 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 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 proposed to that section, to determine 
whether they continue to qualify for separate payment in CY 2023. Based 
on our evaluation, we proposed 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 proposed 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 CY 2023 OPPS/ASC final rule with comment period for additional 
details on the pass-through status of HCPCS code C9088. We welcomed 
comment on our evaluations below.
(a) Eligibility Evaluation for the Separate Payment of Exparel
    Based on our internal review as described in the proposed rule, we 
believed 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 proposed to that 
section, and we

[[Page 72086]]

proposed to continue paying separately 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.\155\ 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''.\156\ No component of Exparel is opioid-based. 
Accordingly, we proposed that Exparel meets the criterion described at 
Sec.  416.174(a)(1). Under the methodology described at V.B.1.a. of the 
CY 2023 OPPS/ASC proposed rule (87 FR 44641 through 44643), the per-day 
cost of Exparel exceeds the proposed $135 per-day cost threshold. 
Therefore, we proposed 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 proposed that Exparel meets the criteria we proposed to 
add to the regulation text at Sec.  416.174(a)(3) and (4).
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    \155\ Exparel. FDA Letter. 28 October 2011. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2011/022496s000ltr.pdf.
    \156\ Exparel. FDA Package Insert. 22 March 2021. https://www.accessdata.fda.gov/drugsatfda_docs/label/2021/022496s035lbl.pdf.
---------------------------------------------------------------------------

    Based on the above discussion, we believed that Exparel meets the 
criteria described at Sec.  416.174 and we proposed 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.
    Comment: There was overall general support for our proposal to pay 
separately in the ASC setting for the four drugs proposed in the 
proposed rule. Specifically, commenters supported Exparel having 
separately payable status in the ASC setting. Commenters believed that 
Exparel continued to meet the criteria specified in Sec.  416.174, 
including the proposed technical clarification. Commenters additionally 
provided clinical information supporting Exparel's use to ``reduce or 
even replace use of postsurgical opioid pain medication.'' Commenters 
strongly advocated for Exparel to be paid separately in the HOPD 
setting, as well the ASC setting, citing various rationales, including 
patients in HOPDs being more medically complex than those in ASCs, 
increased access to HOPDs for certain populations compared to ASCs, and 
decreased utilization of Exparel in HOPDs compared to ASCs.
    Response: We thank commenters for their support on our proposal to 
pay separately for Exparel in the ASC setting as a non-opioid pain 
management drug that functions as a surgical supply. We greatly 
appreciate the additional information provided by commenters regarding 
the clinical use of the drug. We refer readers to section II.3.b. of 
this final rule with comment period for our discussion on the comment 
solicitation regarding payment of non-opioid drugs and biologicals that 
function as surgical supplies in the HOPD setting.
    After consideration of the public comments we received, we believe 
that Exparel, described by HCPCS code C9290 (Injection, bupivacaine 
liposome, 1 mg), continues to meet the criteria described at Sec.  
416.174, including the technical clarifications we proposed and are 
finalizing to that section. We note that our proposed rule evaluation 
continues to be accurate. We are finalizing that we will continue to 
pay separately for Exparel 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) Eligibility Evaluation for the Separate Payment of Omidria
    Based on our internal review as discussed in the proposed rule, we 
believed 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 proposed 
to continue paying separately 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.\157\ 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''.\158\ No component 
of Omidria is opioid-based. Accordingly, we proposed that Omidria meets 
the criterion described at Sec.  416.174(a)(1). Under the methodology 
described at V.B.1.a of the CY 2023 OPPS/ASC proposed rule (87 FR 44641 
through 44643), the per-day cost of Omidria exceeds the proposed $135 
per-day cost threshold. Therefore, we proposed 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 proposed 
that Omidria meets the criteria we proposed to add to the regulation 
text at Sec.  416.174(a)(3) and (4).
---------------------------------------------------------------------------

    \157\ Omidria. FDA Letter. 30 May 2014. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2014/205388Orig1s000ltr.pdf.
    \158\ Omidria. FDA Package Insert. December 2017. https://www.accessdata.fda.gov/drugsatfda_docs/label/2017/205388s006lbl.pdf.
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    Based on the above discussion, we proposed 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.
    Comment: There was overall general support for our proposal to pay 
separately in the ASC setting for the four drugs proposed in the 
proposed rule. Specifically, commenters supported Omidria having 
separately payable status in the ASC setting. Commenters also provided 
updated clinical information regarding the use of Omidria and 
demonstrated how separate payment of Omidria in the ASC setting has 
supported utilization of the drug.
    Response: We thank commenters for their support and for their 
helpful comments and data analysis regarding the use of Omidria across 
different settings of care.
    After consideration of the public comments we received, 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), 
continues to meet the criteria described at Sec.  416.174, including 
the technical clarifications we proposed and are finalizing to that 
section. We note that our proposed rule evaluation continues to be 
accurate. We are finalizing that we will continue to pay separately for 
Omidria 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) Eligibility Evaluation for the Separate Payment of Xaracoll
    Based on our internal review as discussed in the proposed rule, we 
believed Xaracoll, described by C9089 (Bupivacaine, collagen-matrix 
implant, 1 mg), meets the criteria described at Sec.  416.174(a), and 
we proposed to continue paying separately for it under

[[Page 72087]]

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.\159\ 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''.\160\ No component of Xaracoll is opioid-based. 
Accordingly, we proposed that Xaracoll meets the criterion described at 
Sec.  416.174(a)(1). Under the methodology described at section 
V.B.1.a. of the CY 2023 OPPS/ASC proposed rule (87 FR 44641 through 
44643), the per-day cost of Xaracoll exceeds the proposed $135 per-day 
cost threshold. Therefore, we proposed 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 
proposed that Xaracoll meets the criteria we proposed to add to the 
regulation text at Sec.  416.174(a)(3) and (4).
---------------------------------------------------------------------------

    \159\ Xaracoll. FDA Letter. August 2020. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2020/209511Orig1s000ltr.pdf.
    \160\ Xaracoll. FDA Labeling. August 2020. https://www.accessdata.fda.gov/drugsatfda_docs/label/2020/209511s000lbl.pdf.
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    Based on the above discussion, we proposed that Xaracoll 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.
    Comment: There was overall general support for our proposal to pay 
separately in the ASC setting for the four drugs proposed in the 
proposed rule. Specifically, commenters supported Xaracoll having 
separately payable status in the ASC setting. Commenters believed that 
Xaracoll continued to meet the criteria specified in Sec.  416.174. 
Commenters additionally provided references to clinical literature 
supporting the effectiveness of Xaracoll as a pain management 
alternative to opioids.
    Response: We thank commenters for their support on our proposal to 
pay separately for Xaracoll in the ASC setting as a non-opioid pain 
management drug that functions as a surgical supply. We greatly 
appreciate the additional information provided by commenters regarding 
the clinical use of the drug.
    After consideration of the public comments we received, we believe 
that Xaracoll, described by C9089 (Bupivacaine, collagen-matrix 
implant, 1 mg), meets the criteria described at Sec.  416.174, 
including the technical clarifications we proposed and are finalizing 
to that section. We note that our proposed rule evaluation continues to 
be accurate. We are finalizing that we will continue to pay separately 
for Xaracoll 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) Eligibility Evaluation for the Separate Payment of Zynrelef
    Based on our internal review as described in the proposed rule, we 
believed that Zynrelef, described by HCPCS code C9088 (Instillation, 
bupivacaine and meloxicam, 1 mg/0.03 mg), does not meet the criteria 
described at Sec.  416.174, including the technical clarifications we 
proposed to that section, and we proposed not to pay separately for it 
under the ASC payment system policy for non-opioid pain management 
drugs and biologicals that function as surgical supplies for CY 2023. 
Zynrelef 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 proposed 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44641 through 44643) 
that its pass-through status will not expire until after CY 2023. 
Accordingly, we proposed 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.
    Comment: Commenters expressed concerns with CMS no longer paying 
for Zynrelef under the policy at Sec.  416.174. Specifically, 
commenters believed this drug should still receive separate payment as 
they believed the drug is beneficial for patients in managing their 
pain. Commenters also asked CMS to evaluate this drug for inclusion 
under the non-opioid pain management payment policy after the 
expiration of the drug's pass-through status on March 31, 2025, in 
order to ensure continued patient access.
    Response: We thank the commenters for their feedback. However, 
under our current policy, which we are codifying in this final rule at 
Sec.  416.174, Zynrelef is not eligible for separate payment in the ASC 
setting as a non-opioid pain management drug that functions as a supply 
in a surgical procedure, because it is already separately payable as a 
pass-through drug under Sec.  419.64. We note for commenters that 
Zynrelef will still be separately paid in both the ASC and HOPD 
settings under its current pass-through status. Please see section V.A 
(OPPS Transitional Pass-Through Payment for Additional Costs of Drugs, 
Biologicals, and Radiopharmaceuticals) of this CY 2023 OPPS/ASC final 
rule with comment period for additional details on transitional drug 
pass-through payments.
    Because Zynrelef receives separate payment consistent with its drug 
pass-through approval under Sec.  419.64, and its approval will not 
expire until after CY 2023, we are finalizing our proposal that 
Zynrelef is not 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. This is consistent with the 
technical changes we are finalizing to the regulation text at Sec.  
416.174(a)(3) and (4) and our current policy. We will evaluate this 
drug again when its pass-through status is set to expire, if 
appropriate, and if requested by interested parties.
b. Final Evaluations of Newly Eligible Non-Opioid Alternatives
    In this section, we evaluate drugs or biologicals, of which we were 
aware as of the CY 2023 OPPS/ASC proposed rule, that we believed 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). In the proposed rule, 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 proposed to 
that section. We proposed that Dextenza

[[Page 72088]]

receive separate payment in the ASC setting as a non-opioid pain 
management drug that functions as a surgical supply for CY 2023. We 
welcomed stakeholder comment on this evaluation.
(a) Eligibility Evaluation for the Separate Payment of Dextenza
    Based on our internal review as described in the proposed rule, we 
believed Dextenza, described by HCPCS code J1096 (Dexamethasone, 
lacrimal ophthalmic insert, 0.1 mg), meets the criteria described at 
Sec.  416.174; and we proposed 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.\161\ 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''.\162\ No component of Dextenza is opioid-based. 
Accordingly, we stated our belief that Dextenza meets the criterion 
described at Sec.  416.174(a)(1). Under the methodology described at 
V.B.1.a. of the CY 2023 OPPS/ASC proposed rule (87 FR 44641 through 
44643), 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 did not 
believe that it would 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 proposed that Dextenza meets the criteria 
described at 416.174, including the criteria we proposed to add to the 
regulation text at Sec.  416.174(a)(3) and (4), 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.
---------------------------------------------------------------------------

    \161\ Dextenza. FDA Letter. November 2018. https://www.accessdata.fda.gov/drugsatfda_docs/nda/2018/208742Orig1s000Approv.pdf.
    \162\ Dextenza. FDA Labeling. October 2021. https://www.accessdata.fda.gov/drugsatfda_docs/label/2021/208742s007lbl.pdf.
---------------------------------------------------------------------------

    Comment: There was broad general support for the separate payment 
of Dextenza. Some commenters provided non-specific statements of 
support for separate payment, while others advocated for separate 
payment in the ASC specifically and urged CMS to finalize its proposal 
to pay for Dextenza separately in the ASC setting as a non-opioid pain 
management drug. These commenters also contended that Dextenza may not 
function as a surgical supply and should be paid separately in both the 
HOPD and ASC setting.
    Response: We thank commenters for their responses. We believe this 
drug is mostly used during ophthalmic surgeries, such as cataract 
surgeries. The status of this drug as a surgical supply is consistent 
with 42 CFR 419.2(b). Historically, we have stated that we consider all 
items related to the surgical outcome and provided during the hospital 
stay in which the surgery is performed, including postsurgical pain 
management drugs, to be part of the surgery for purposes of our drug 
and biological surgical supply packaging policy (79 FR 66875). Please 
see section III.E.2. of this final rule with comment period for 
additional details on the status of HCPCS code J1096 and the CMS 
rationale for why we believe this drug continues to function as a 
surgical supply.
    After consideration of the public comments, we believe Dextenza, 
described by HCPCS code J1096 (Dexamethasone, lacrimal ophthalmic 
insert, 0.1 mg), meets the criteria described at Sec.  416.174 
including the technical clarifications we proposed and are finalizing 
to that section. Our proposed rule evaluation continues to be accurate. 
We are finalizing our proposal to pay separately 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. Please see section V.A. (OPPS 
Transitional Pass-Through Payment for Additional Costs of Drugs, 
Biologicals, and Radiopharmaceuticals) of this final rule with comment 
period for details on the pass-through status of J1096. Also, please 
see section III.E.2 of this final rule with comment period for details 
on the status of HCPCS code J1096 in the HOPD, as well as CPT code 
68841.
Comment Solicitation on Payment Policies for Separate Payment for 
Additional Drugs and Biologicals and Other Products That Function as 
Supplies in Surgical Procedures for CY 2023
    We solicited 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 encouraged commenters to 
include an explanation of how the drug or biological meets the 
eligibility criteria in Sec.  416.174, including the technical 
clarifications we proposed to that section. In this final rule with 
comment period, we are including a summary of comments we received and 
our analysis of whether these additional products suggested by 
commenters meet the eligibility criteria in Sec.  416.174. We stated in 
the proposed rule that if we find these additional drugs or biologicals 
do satisfy the criteria established at Sec.  416.174, we would finalize 
their separate payment status for CY 2023 in the ASC setting in this 
final rule with comment period.
    Comment: One commenter suggested CMS expand this policy to include, 
Posimir, a new drug that the commenter believed meets the eligibility 
criteria in Sec.  416.174. This commenter also provided additional 
clinical information supporting the use of Posimir as an alternative to 
opioids.
    Response: We thank the commenter for its feedback. We agree that 
Posimir, described by new HCPCS code C9144 (Injection, bupivacaine 
(Posimir), 1 mg), meets the criteria described at Sec.  416.174, 
including the technical clarifications we proposed and are finalizing 
to that section.
    Posimir was approved by FDA with a New Drug Application (NDA # 
204803) under section 505(c) of the Federal Food, Drug, and Cosmetic 
Act on February 1, 2021.\163\ ``Posimir contains an amide local 
anesthetic and is indicated in adults for administration into the 
subacromial space under direct arthroscopic visualization to produce 
post-surgical analgesia for up to 72 hours following arthroscopic 
subacromial decompression.'' \164\ No component of Posimir is opioid-
based. Accordingly, Posimir meets the criterion described at Sec.  
416.174(a)(1). Under the methodology described at section V.B.1.a. of 
this CY 2023 OPPS/ASC final rule with comment period, the per-day cost 
of Posimir exceeds the finalized $135 per-day cost threshold. 
Therefore, Posimir meets the criterion described at Sec.  
416.174(a)(2). Additionally, as of the publication of this final rule, 
Posimir 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, Posimir meets the criteria 
we are adding to the regulation text at Sec.  416.174(a)(3) and (4). If 
Posimir were to obtain transitional drug pass-through

[[Page 72089]]

status under Sec.  419.64 in CY 2023, then Posimir would no longer be 
eligible for separate payment as a non-opioid pain management drug that 
functions as a supply in a surgical procedure.
---------------------------------------------------------------------------

    \163\ Posimir. FDA Approval Letter. https://www.accessdata.fda.gov/drugsatfda_docs/appletter/2021/204803Orig1s000ltr.pdf.
    \164\ Posimir. FDA Package Insert. https://www.accessdata.fda.gov/drugsatfda_docs/label/2022/204803Orig1s001lbl.pdf.
---------------------------------------------------------------------------

    Based on the above discussion, and after consideration of the 
public comments we received, we believe that Posimir meets the criteria 
described at Sec.  416.174 and we are finalizing separate payment for 
Posimir 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 84 below lists the five drugs that we are finalizing as 
eligible 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.
[GRAPHIC] [TIFF OMITTED] TR23NO22.120

    Additionally, in the proposed rule, we solicited 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 solicited 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. Finally, we solicited 
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 welcomed 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 also summarized in section II.A.3 of 
this CY 2023 OPPS/ASC final rule with comment period.
    We have summarized comments received in response to our broad 
comment solicitation below. As discussed in the proposed rule, we 
stated we would take comments into consideration for potential future 
changes to this policy; therefore, we are making no policy changes for 
CY 2023 as a result of this comment solicitation. However, we are 
carefully considering these comments for future policy development and 
encourage interested party collaboration with CMS on this policy.
    Comment: A few commenters recommended that CMS create no additional 
criteria and found the existing criteria to be transparent and 
objective. These commenters thought additional criteria or criteria 
modifications may be burdensome.
    However, several commenters discussed potential criteria 
modifications. Commenters recommended that CMS modify the criterion set 
forth in Sec.  416.174(a)(1), which relates to FDA approval and 
indications. These commenters believed a specific FDA indication of 
pain management or as an analgesic was too restrictive and that CMS 
should broaden this policy to include drugs and biologicals that have 
pain management attributes, based on documentable clinical support or 
recommendations by relevant specialty societies. Some commenters 
recommended expanding the acceptable FDA indications, for example, to 
include anesthesia drugs. Other commenters requested that

[[Page 72090]]

one drug, Dexycu, as well as drugs in similar positions, should be 
grandfathered into this policy for a period of two to three years in 
order to allow them adequate time to receive an FDA indication for pain 
management or analgesia. These commenters believed that a temporary 
grandfathering policy would provide manufacturers the time and 
opportunity to complete new clinical trials in order to allow their 
products to apply for the necessary FDA approved indications. These 
commenters thought this was appropriate as they believed drugs such as 
Dexycu were already being used as pain management alternatives to 
opioids, despite not yet having FDA indications for pain management or 
analgesia.
    Additionally, several commenters recommended CMS remove the 
criterion set forth in Sec.  416.174(a)(2), which requires a drug to 
exceed the OPPS drug packaging threshold. Commenters stated this 
criterion created a perverse incentive for drug manufacturers to list 
their drugs at higher prices in order to qualify for this policy. 
Commenters thought that this criterion may result in limited access for 
beneficiaries to several important drugs, such as the drug Anjeso. The 
commenter stated that Anjeso falls below the per day cost threshold but 
the product has demonstrated meaningful and statistically significant 
reductions in post-operative opioid consumption.
    Finally, some commenters suggested we add additional criteria. For 
example, some commenters believed CMS should require that drugs have a 
demonstrated statistical significance with respect to the ability to 
eliminate or significantly reduce post-operative opioid use in order to 
qualify for separate payment under this policy. Commenters also stated 
that statistical significance for opioid reduction should be evaluated 
through clinical trials with relevant data published in a peer-reviewed 
journal.
    Response: We thank commenters for their comments on the criteria, 
including suggestions for changes to the criteria. We will take these 
comments into consideration for future rulemaking. We remind interested 
parties that we are not modifying our policy at Sec.  416.174 as a 
result of these comments at this time.
    Comment: Many commenters suggested CMS extend the policy described 
at Sec.  416.174 to the HOPD setting. Generally, commenters believed 
these products serve a valuable clinical purpose and their use should 
be encouraged in all settings of care. Several commenters provided data 
regarding how packaging negatively impacted the utilization of their 
products in the HOPD setting. Some commenters conceded that it is 
reasonable to think that the average HOPD would be able to absorb the 
extra costs; however, they believe that does not mean that every HOPD 
would be able to do so.
    Commenters also presented data showing potential access barriers 
affecting underserved communities. Commenters believed that the HOPD 
setting is more accessible to vulnerable and underserved populations 
relative to the ASC setting. Commenters stated that extending the 
policy to the HOPD setting will increase access to non-opioid pain 
management drugs for Black Americans, low-income Americans, and 
Americans living in rural areas, all of whom they believe use HOPDs 
more frequently than ASCs. Some commenters stated that these are the 
populations that are also most negatively impacted by opioids.
    Response: We thank commenters for their comments urging expansion 
of this policy to the HOPD setting. We will take these comments into 
consideration for future rulemaking. We remind interested parties that 
we are not modifying our policy at Sec.  416.174 or creating new 
policies in response to these comments at this time. Any change to or 
expansion of the policy described at Sec.  416.174 would be done 
through notice and comment rulemaking.
    Comment: We received several other suggestions for policy 
modifications from commenters. Some commenters recommended that CMS 
finalize a policy where the existing criteria will not change for 
several years, or finalize separate payment for particular products on 
a longer-term basis beyond CY 2023, or for CMS to finalize the 
qualification status of products after their pass-through status 
expires in the coming years. Commenters also suggested that CMS target 
its policies to directly help specific patient populations by removing 
all access barriers, such as packaged payment, to non-opioids for those 
patients who face an increased risk of long-term opioid use after 
addiction, such as those individuals recovering from substance use 
disorder, those with an active opioid use disorder, and those with a 
mental health condition. One commenter recommended CMS waive co-
insurance for its drug, Prialt, because, in the view of the commenter, 
the drug reduces opioid use, but constitutes a significant financial 
burden for beneficiaries.
    Additionally, commenters recommended CMS apply this policy to non-
drug items such as devices, including devices such as the NerveCap 
device and spinal stimulators, and associated procedures. Commenters 
also suggested CMS consider including in this policy payment for icing 
wraps, transcutaneous stimulators, continuous peripheral nerve blocks, 
topic analgesics, acupuncture, chiropractic services, osteopathic 
manipulation, cognitive behavioral therapy, physical therapy, ERAS 
protocols, multimodal protocols, acetaminophen, IV NSAIDs, systemic 
lidocaine, ketamine, long acting local anesthetics, gabapentinoids, 
``On-Q'' pain relief system, polar ice devices, topical THC oil, 
massage, and peri-operative pain management tools such as pain blocks, 
as well as many other related items and services to reduce the use of 
opioids.
    A few commenters also suggested additional criteria for these 
additional suggested policy extensions, including requiring devices to 
have peer-reviewed, published evidence demonstrating opioid reduction 
and effective pain management to be eligible for separate payment under 
this policy.
    Response: We thank commenters for their recommendations for policy 
modifications in this space. We will take these comments into 
consideration for future rulemaking. We remind interested parties that 
we are not modifying our policy at Sec.  416.174 or creating new 
policies as a result of these comment solicitations. With respect to 
the drug Prialt, we refer readers to our discussion in the CY 2022 
OPPS/ASC final rule with comment period (86 FR 63496).

F. 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: https://www.cms.gov/Medicare/Medicare-Fee-

[[Page 72091]]

for-Service-Payment/ASCPayment/NTIOLs.html.
     We announce annually, in the proposed rule updating the 
ASC and OPPS payment rates for the following calendar year, a list of 
all requests to establish new NTIOL classes accepted for review during 
the calendar year in which the proposal is published. In accordance 
with section 141(b)(3) of Public Law 103-432 and our regulations at 
Sec.  416.185(b), the deadline for receipt of public comments is 30 
days following publication of the list of requests in the proposed 
rule.
     In the final rule updating the ASC and OPPS payment rates 
for the following calendar year, we--
    ++ Provide a list of determinations made as a result of our review 
of all new NTIOL class requests and public comments.
    ++ When a new NTIOL class is created, identify the predominant 
characteristic of NTIOLs in that class that sets them apart from other 
IOLs (including those previously approved as members of other expired 
or active NTIOL classes) and that is associated with an improved 
clinical outcome.
    ++ Set the date of implementation of a payment adjustment in the 
case of approval of an IOL as a member of a new NTIOL class 
prospectively as of 30 days after publication of the ASC payment update 
final rule, consistent with the statutory requirement.
    ++ Announce the deadline for submitting requests for review of an 
application for a new NTIOL class for the following calendar year.
2. Requests To Establish New NTIOL Classes for CY 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.
    The comments and our responses to the comments are set forth below.
    Comment: Some commenters requested we re-evaluate our payment 
adjustment for a new NTIOL class. Commenters noted that our $50 payment 
adjustment has not been adjusted since CY 1999 and that the stagnant 
payment adjustment has been a barrier to intraocular lens innovation. 
Commenters recommended that we set the $50 payment adjustment at 
$86.49.
    Response: We thank the commenters for their recommendations. We did 
not propose revising the NTIOL payment adjustment amount for CY 2023. 
However, we will take the commenters' recommendations into 
consideration in future rulemaking.
4. Announcement of CY 2023 Deadline for Submitting Requests for CMS 
Review of Applications for a New Class of NTIOLs
    In accordance with 42 CFR 416.185(a) of our regulations, CMS 
announces that in order to be considered for payment effective 
beginning in CY 2024, requests for review of applications for a new 
class of new technology IOLs must be received by 5:00 p.m. EST, on 
March 1, 2023. Send requests via email to [email protected] or 
by mail to ASC/NTIOL, Division of Outpatient Care, Mailstop C4-05-17, 
Centers for Medicare and Medicaid Services, 7500 Security Boulevard, 
Baltimore, MD 21244-1850. To be considered, requests for NTIOL reviews 
must include the information requested on the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.

G. 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

[[Page 72092]]

become payable when claims data or payment information becomes 
available.
2. Final ASC Payment and Comment Indicators for CY 2023
    For CY 2023, we proposed new and revised Category I and III CPT 
codes as well as new and revised Level II HCPCS codes. Final 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 the CY 2023 OPPS/ASC final rule 
and labeled with comment indicator ``NP'' to indicate that these CPT 
and Level II HCPCS codes were open for comment as part of the CY 2023 
OPPS/ASC proposed rule.
    We did not receive any public comments on our proposal and we are 
finalizing their use as proposed without modification. We refer readers 
to Addenda DD1 and DD2 of the CY 2023 OPPS/ASC proposed rule (these 
addenda are available via the internet on the CMS website) for the 
complete list of ASC payment and comment indicators finalized for the 
CY 2023 update.

H. 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 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44715 
through 44716)), 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

[[Page 72093]]

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 did not receive any 
public comments on our proposed CY 2023 ASC wage indexes. For this CY 
2023 OPPS/ASC final rule with comment period, the CY 2023 ASC wage 
indexes fully reflect 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 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 the CY 2023 OPPS/ASC proposed 
rule (87 FR 44510), we are using the CY 2021 claims data to be 
consistent with the OPPS claims data for the CY 2023 OPPS/ASC proposed 
rule (87 FR 44510). Consistent with our established policy, we proposed 
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 proposed 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 
primary procedures when performed with add-on packaged services, CY 
2023 total payments will include spending and utilization related to 
these new C codes. In the CY 2023 OPPS/ASC proposed rule (87 FR 44724), 
we estimate the additional CY 2023 spending to be $5 million.
    We proposed 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 was 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

[[Page 72094]]

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 proposed to use the CY 2021 claims data to model our 
budget neutrality adjustment.
    Comment: Many commenters reiterated their past recommendation that 
we discontinue applying the ASC weight scalar to achieve budget 
neutrality. Commenters were concerned that the ASC weight scalar has 
decreased overall since the implementation of the revised ASC payment 
system for CY 2008 and state that relative weights have already been 
scaled for budget neutrality and do not require ``rescaling'' to 
achieve budget neutrality under the ASC payment system. Further, 
commenters requested an analysis to determine the long-term decrease in 
the ASC weight scalar as they contend the decrease in the ASC weight 
scalar has decreased ASC payment rates and driven procedures to be 
performed more often in the more expensive hospital outpatient setting.
    Response: We disagree with commenters' assessment and are not 
accepting the recommendation to discontinue applying the ASC weight 
scalar. As we have stated in past rulemaking (82 FR 59421), applying 
the ASC weight scalar, which is 0.8594 for this final rule with comment 
period and an increase from the CY 2022 ASC weight scalar of 0.8544, 
ensures that the ASC payment system remains budget neutral. This annual 
budget neutrality adjustment is performed similarly to updates for the 
IPPS, OPPS, PFS, and other Medicare payment systems. We apply the ASC 
weight scalar to scaled OPPS relative weights to ensure that current 
Medicare payments under the ASC payment system do not increase as a 
result of newer data to determine the cost relativity between surgical 
procedures. The scaled prospective OPPS relative weights that are used 
to determine scaled prospective ASC relative weights have not, as 
commenters suggest, been adjusted to achieve budget neutrality within 
the ASC payment system prior to the application of the ASC weight 
scalar. We also note that no stakeholder presented empirical evidence 
that the budget neutrality adjustment under the ASC payment system has 
impacted beneficiary access to surgical procedures in the ASC setting.
    After consideration of the public comments we received, we are 
finalizing our proposal 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 final CY 2023 ASC weight scalar is 0.8594. Consistent 
with historical practice, we are finalizing our proposal to 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. 
Additionally, in light of the fact that we are finalizing our proposal 
to provide a higher ASC payment rate through the use of new C codes for 
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 final rule with comment period, we estimate 
the additional CY 2023 spending to be $5 million.
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 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

[[Page 72095]]

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 was 
projected to be 3.1 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 proposed 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 proposed 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 the CY 
2023 OPPS/ASC proposed rule (87 FR 44754 through 44755) for a detailed 
discussion of our policies regarding payment reduction for ASCs that 
fail to meet ASCQR Program requirements. We proposed to utilize the 
hospital market basket update of 3.1 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 
proposed 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 proposed 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 proposed 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 requested comments on our proposals for updating the CY 2023 ASC 
conversion factor.
    Comment: Some commenters requested that any change as a result of 
the Supreme Court ruling in American Hospital Association v. Becerra 
not adversely affect ASC payment rates or the ASC conversion factor.
    Response: As discussed in further detail in Section V.B.6. of this 
final rule with comment period, the Supreme Court's decision in 
American Hospital Association v. Becerra, No. 20-1114, 2022 WL 2135490 
(June 15, 2022), concluded 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). 
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. In light of the Supreme Court's decision, for CY 2023 we are 
adopting a payment rate of ASP+6 percent for drugs and biologicals 
acquired through the 340B Program. To ensure budget neutrality under 
the OPPS, we are applying an adjustment to the OPPS conversion factor 
to offset the increase in the conversion factor that resulted from the 
budget neutral implementation of the payment policy for 340B drugs and 
biologicals in CY 2018. The budget neutrality adjustment of 0.9691 is 
applied to the OPPS conversion factor, for a revised OPPS conversion 
factor of $85.585 for CY 2023.
    The Supreme Court's decision does not impact the ASC conversion 
factor; however, because the ASC standard ratesetting methodology 
utilizes OPPS payment rates and the device portion (or device offset 
amount), the revised OPPS conversion factor will have an impact on the 
ASC payment system. Specifically, because the device portion for 
device-intensive procedures is held constant with the OPPS and is not 
calculated with the ASC conversion factor, the revised OPPS conversion 
factor will lower the device portions and, thus, the payment rates for 
device-intensive procedures under the ASC payment system. However, the 
decline in expenditures for device portions of device-intensive 
procedures under the ASC payment system is offset through an increase 
in the ASC weight scalar, which increases non-device portions for all 
covered surgical procedures and certain covered ancillary services.
    Comment: Many commenters supported our proposed increase to the CY 
2023 ASC payment rates and several commenters requested that we amend 
our regulations to permanently increase ASC payment rates by the 
hospital market basket update. Comments from hospital associations 
recommended that we end our policy of providing the hospital market 
basket update after CY 2023 and that CMS should work to collect ASC 
cost data to determine a more appropriate update factor for ASC payment 
rates.
    Response: We appreciate the commenters support of our proposal. As 
we stated in the CY 2019 OPPS/ASC final rule with comment period (83 FR 
59075 through 59080), we finalized a proposal to apply the hospital 
market basket update to ASC payment system rates for an interim period 
of 5 years (CY 2019 through CY 2023), during which we will assess 
whether there is a migration of the performance of procedures from the 
hospital setting to the ASC setting as a result of the use of a 
hospital market basket update, as well as whether there are any 
unintended consequences, such as less than expected migration of the 
performance of procedures from the hospital setting to the ASC setting. 
We intend to update the public on our assessment of service

[[Page 72096]]

migration and other factors in the CY 2024 OPPS/ASC proposed rule.
    After consideration of the public comments we received, consistent 
with our proposal that if more recent data are subsequently available 
(for example, a more recent estimate of the hospital market basket 
update and productivity adjustment), we would use such data, if 
appropriate, to determine the CY 2023 ASC update for the CY 2023 OPPS/
ASC final rule with comment period, we are incorporating more recent 
data to determine the final CY 2023 ASC update. Therefore, for this 
final rule with comment period, the hospital market basket update for 
CY 2023 is 4.1 percent, as published in the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49056), based on IGI's 2022 second quarter forecast with 
historical data through the first quarter of 2022. The productivity 
adjustment for this final rule with comment period is 0.3 percentage 
point, as published in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49056) based on IGI's 2022 second quarter forecast.
    For CY 2023, we are finalizing the hospital market basket update of 
4.1 percent minus the productivity adjustment of 0.3 percentage point, 
resulting in a productivity-adjusted hospital market basket update 
factor of 3.8 percent for ASCs meeting the quality reporting 
requirements. Therefore, we apply a 3.8 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 payments. We are finalizing the hospital market basket 
update of 4.1 percent reduced by 2.0 percentage points for ASCs that do 
not meet the quality reporting requirements and then subtract the 0.3 
percentage point productivity adjustment. Therefore, we apply a 1.8 
percent productivity-adjusted hospital market basket update factor to 
the CY 2022 ASC conversion factor for ASCs not meeting the quality 
reporting requirements.
    For CY 2023, we are adjusting the CY 2022 ASC conversion factor 
($49.916) by a wage index budget neutrality factor of 1.0008 in 
addition to the productivity-adjusted hospital market basket update of 
3.8 percent, discussed above, which results in a final CY 2023 ASC 
conversion factor of $51.854 for ASCs meeting the quality reporting 
requirements. For ASCs not meeting the quality reporting requirements, 
we are adjusting the CY 2022 ASC conversion factor ($49.916) by the 
wage index budget neutrality factor of 1.0008 in addition to the 
quality reporting productivity-adjusted hospital market 1.8 percent, 
discussed above, which results in a final CY 2023 ASC conversion factor 
of $50.855.
3. Display of the CY 2023 ASC Payment Rates
    Addenda AA and BB to the CY 2023 OPPS/ASC final rule (which are 
available on the CMS website) display the final ASC payment rates for 
CY 2023 for covered surgical procedures and covered ancillary services, 
respectively. The final payment rates included in Addenda AA and BB to 
this CY 2023 OPPS/ASC final rule reflect the full ASC final payment 
update and not the reduced payment update used to calculate payment 
rates for ASCs not meeting the quality reporting requirements under the 
ASCQR Program.
    These Addenda contain several types of information related to the 
final CY 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 ``Final CY 2023 Payment 
Weight'' are the final relative payment weights for each of the listed 
services for CY 2023. The final relative payment weights for all 
covered surgical procedures and covered ancillary services where the 
ASC payment rates are based on OPPS relative payment weights were 
scaled for budget neutrality. Therefore, scaling was not applied to the 
device portion of the device-intensive procedures; services that are 
paid at the MPFS nonfacility PE RVU-based amount; separately payable 
covered ancillary services that have a predetermined national payment 
amount, such as drugs and biologicals and brachytherapy sources that 
are separately paid under the OPPS; or services that are contractor-
priced or paid at reasonable cost in ASCs. This includes separate 
payment for non-opioid pain management drugs.
    To derive the final CY 2023 payment rate displayed in the ``Final 
CY 2023 Payment Rate'' column, each ASC payment weight in the ``Final 
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 final CY 2023 ASC 
conversion factor uses the CY 2023 productivity-adjusted hospital 
market basket update factor of 3.8 percent (which is equal to the 
projected hospital market basket update of 4.1 percent reduced by a 
projected productivity adjustment of 0.3 percentage point).
    In Addendum BB, there are no relative payment weights displayed in 
the ``Final CY 2023 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``Final CY 2023 Payment'' column displays 
the proposed CY 2023 national unadjusted ASC payment rates for all 
items and services. The final 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 to this CY 2023 OPPS/ASC final rule provides the HCPCS 
codes and short descriptors for surgical procedures that are finalized 
to be excluded from payment in ASCs for CY 2023.
    Addendum FF to this CY 2023 OPPS/ASC final rule displays the OPPS 
payment rate (based on the standard ratesetting methodology), the 
device offset percentage for determining device-intensive status (based 
on the standard ratesetting methodology), 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

[[Page 72097]]

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 with 
comment period (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 XIV.E of 
the CY 2023 OPPS/ASC final rule with comment period (87 FR 44739) 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 did not 
propose any changes to these policies in the CY 2023 OPPS/ASC 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 did 
not propose any changes to these policies in the CY 2023 OPPS/ASC 
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).\165\ We did not propose any changes to these policies 
in the CY 2023 OPPS/ASC proposed rule.
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    \165\ 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.
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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).\166\ We did not propose any changes to these policies in the CY 
2023 OPPS/ASC proposed rule.
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    \166\ 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.
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4. Modifications to Previously Adopted Measures
a. 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 
with comment period (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 \167\ stating that we would delay 
the implementation of OP-31, and we subsequently finalized in the CY 
2015 OPPS/ASC final rule with comment period (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.
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    \167\ 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.
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(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

[[Page 72098]]

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 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).
    As discussed in the CY 2023 OPPS/ASC proposed rule (87 FR 44727), 
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, in the CY 
2023 OPPS/ASC proposed rule, we proposed to change OP-31 from mandatory 
to voluntary beginning with the CY 2025 reporting period/CY 2027 
payment determination. Under the proposal, 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 stated in the 
proposed rule our plan to continue to evaluate this policy moving 
forward. To be clear, there are no changes to reporting for CY 2023 and 
CY 2024, during which the measure remains voluntary.
    As the OP-31 measure requires cross-setting coordination among 
clinicians of different specialties (that is, surgeons and 
ophthalmologists), we stated in the proposed rule that we believe it is 
appropriate to defer mandatory reporting at this time. We also stated 
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 invited public comment on our proposal.
    Comment: Many commenters expressed support for our proposal to 
change OP-31 from mandatory reporting to voluntary reporting beginning 
with the CY 2025 reporting period/CY 2027 payment determination.
    Response: We thank commenters for their support.
    Comment: A few commenters expressed their belief that OP-31 should 
be required for mandatory reporting. One commenter emphasized the need 
for public reporting of patient reported outcome measures to provide 
the public with ample quality and safety data related to outpatient 
procedures. Another commenter expressed that mandatory reporting for 
OP-31 should not be delayed further, as it has already been delayed in 
prior rulemaking.
    Response: We thank commenters for their input and agree on the 
importance of including a cataract surgery patient reported outcome 
measure in the Hospital OQR Program. We recognize the commenters' 
concerns in delaying mandatory reporting of OP-31; however, due to 
continued impact of the COVID-19 PHE, we believe it is appropriate to 
delay mandatory reporting of this measure at this time. As we noted 
previously and in the proposed rule (87 FR 44727), we intend to monitor 
national staffing and supply shortages resulting from the COVID-19 PHE 
for improvement, and we will consider mandatory reporting of OP-31 in 
light of such improvements.
    Comment: One commenter expressed that OP-31 should be maintained as 
voluntary until a digital version of the measure can be developed. The 
commenter explains that this strategy would support our vision to 
transition away from chart-abstracted measures and move toward digital 
measures by CY 2025.
    Response: We thank the commenter for its recommendation and will 
take it into consideration for future rulemaking. We agree that moving 
from chart-abstracted measures to digital measures is an important step 
in working toward interoperability, a goal which we outlined in the FY 
2022 IPPS/LTCH PPS final rule (86 FR 45342) and the FY 2023 IPPS/LTCH 
PPS final rule (87 FR 49181).
    Comment: Many commenters expressed their belief that OP-31 should 
never be made mandatory due to the high administrative burden of 
reporting this measure. A few commenters suggested we remove the 
measure entirely from the measure set for this reason.
    Response: We thank the commenters for their feedback. However, we 
support the inclusion of OP-31 in the Hospital OQR Program and 
reiterate that the measure addresses a high impact condition not 
otherwise adequately assessed by the program measure set. We believe 
the importance of this measure as a patient reported outcome measure 
justifies the administrative burden of reporting the measure. The CMS 
National Quality Strategy includes a goal to Foster Engagement to 
increase engagement between individuals and their care teams to improve 
quality, establish trusting relationships, and bring the voices of 
people and caregivers to the forefront. The Meaningful Measures 2.0 
goals also prioritize patient-reported measures and promoting better 
collection and integration of patient voices across CMS' quality 
programs.\168 169\ Some facilities have been voluntarily reporting this 
measure successfully while it has not been required, thus, we believe 
that this indicates that the measure is not overly burdensome and that 
the value of the measure in regard to information it provides to 
consumers about quality of care justifies any potential administrative 
burden that would prevent facilities from reporting it. We note that 
while it is recommended that the facility obtain the survey results 
from the appropriate physician or optometrist, the surveys can be 
administered by the facility via phone, mail, email, or during 
clinician

[[Page 72099]]

follow-up. We appreciate commenters' concerns and plan to retain this 
measure as voluntary instead of mandatory, while continuing to evaluate 
this policy moving forward, as we are committed to having a cataract 
surgery, patient-reported measure for the Hospital OQR Program.
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    \168\ https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/Value-Based-Programs/CMS-Quality-Strategy.
    \169\ https://www.cms.gov/medicare/meaningful-measures-framework/meaningful-measures-20-moving-measure-reduction-modernization.
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    Comment: One commenter recommended that we provide education and 
outreach on the survey instruments available for use with OP-31 and 
best practices based on the experiences of the facilities that have 
consistently reported the measure while it has been voluntary.
    Response: We thank the commenter for these recommendations; we 
agree that such information would be useful. We plan on adding resource 
information to the Hospital OQR Program Specifications Manual and have 
been in contact with facilities that have consistently reported data 
for this measure to glean how the measure has been implemented and best 
practices.
    Comment: One commenter expressed that instead of continuing to 
report OP-31, we should pursue adopting a measure related to post-
operation visual function within the CMS Merit-based Incentive Payment 
System (MIPS) or an equivalent program that can be reported through the 
standard CMS platform for physician quality measures.
    Response: We thank the commenters for their recommendations and 
will take them into consideration for future rulemaking. We note that 
the MIPS measures clinician-level quality reporting. We believe that 
assessing care through the Hospital OQR Program is essential to assess 
the quality of care provided at the facility level, in the outpatient 
setting. Quality-level reporting through the MIPS is complimentary to 
facility measurement within the Hospital OQR Program, not duplicative 
of it. Additionally, we believe that facilities are equally responsible 
for the quality of care provided in the outpatient departments as 
clinicians. Facilities have an obligation to ensure the best quality of 
care is provided by the clinicians operating in their outpatient 
departments.
    We refer readers to section 1833(t)(17) of the Act which outlines 
the statutory authority of the program to develop measures for care 
rendered in the outpatient setting.
    Comment: One commenter inquired about the measure specifications 
for OP-31.
    Response: We refer the commenter to the OP-31 measure 
specifications manual, which is available at: https://qualitynet.cms.gov/outpatient/specifications-manuals. After 
consideration of the public comments we received, we are finalizing our 
proposal to change OP-31 from mandatory to voluntary beginning with the 
CY 2025 reporting period/CY 2027 payment determination.
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 with comment 
period (85 FR 63846 through 63850) for a summary of the previously 
adopted Hospital OQR Program measure set for the CY 2024 payment 
determination. Table 85 summarizes the previously finalized Hospital 
OQR Program measure set for the CY 2024 payment determination:
BILLING CODE 4120-01-P

[[Page 72100]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.121


[[Page 72101]]


b. Summary of Hospital OQR Program Measure Set for the CY 2025 Payment 
Determination
    Table 86 summarizes the Hospital OQR Program measure set including 
our finalized proposal in this CY 2023 OPPS/ASC final rule for the CY 
2025 payment determination:
[GRAPHIC] [TIFF OMITTED] TR23NO22.122


[[Page 72102]]


c. Summary of Hospital OQR Program Measure Set for the CY 2026 Payment 
Determination and Subsequent Years
    Table 87 summarizes the Hospital OQR Program measure set for the CY 
2026 payment determination and subsequent years:
[GRAPHIC] [TIFF OMITTED] TR23NO22.123

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.\170\ In line with this trend, outpatient services 
increased by 0.7 percent in 2019 while inpatient services decreased by 
0.9 percent.\171\ 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.\172\
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    \170\ 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.
    \171\ 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/.
    \172\ 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

[[Page 72103]]

proxy for quality rather than directly measuring outcomes.\173\ 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.\174\ The 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 nine \175\ categories of procedures frequently performed in the 
hospital outpatient setting: Cardiovascular, Eye, Gastrointestinal, 
Genitourinary, Musculoskeletal, Nervous System, Respiratory, Skin, and 
Other.\176\ We adopted OP-26 based on evidence that the volume of 
surgical procedures, particularly of high-risk surgical procedures, is 
related to better patient outcomes, including decreased medical errors 
and mortality (76 FR 74466).177 178 179 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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    \173\ Jha AK. Back to the Future: Volume as a Quality Metric. 
JAMA Forum Archive. Published online June 10, 2015.
    \174\ Ibid.
    \175\ This number has been updated from eight categories in the 
proposed rule to nine categorizes, as it was erroneously stated in 
the proposed rule (87 FR 44731).
    \176\ Hospital Outpatient Specifications Manuals version 9.1. 
Available at: https://qualitynet.cms.gov/outpatient/specifications-manuals#tab7.
    \177\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor 
of Surgical Outcomes''. Edward H. Livingston, Jing Cao JAMA. 
2010;304(1):95-97.
    \178\ 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.
    \179\ 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. Thus, 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 stated in the CY 2023 OPPS/ASC proposed rule that 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 (87 
FR 44730 through 44732).
    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 their 
operation due to the use of innovative techniques and technologies 
available in the outpatient setting. \180\ \181\
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    \180\ 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.
    \181\ 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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    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, and volume can 
serve as an indicator for patients of which facilities are experienced 
with certain outpatient procedures.
    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 stated in the CY 2023 OPPS/ASC proposed rule (87 FR 
44731) that 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 noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44731) that 
the OP-26 measure was adopted in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74466 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.\182\ Therefore, 
for OP-26 to be adopted in the Hospital OQR Program measure set, the 
measure would need to first undergo

[[Page 72104]]

the pre-rulemaking process specified in section 1890A(a) of the Act.
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    \182\ 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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(2) 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 solicited 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 solicited comment 
on what volume data hospitals currently collect and if it is feasible 
to submit these data to the Hospital OQR Program, to minimize the 
collection and reporting burden of an alternative, new volume measure. 
Additionally, we solicited comment on an appropriate timeline for 
implementing and publicly reporting the measure data.
    Specifically, we invited public comment on the following:
    The usefulness of including a volume indicator in the Hospital OQR 
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 categories, and which 
procedures would benefit from volume reporting.
    The usefulness of Medicare versus non-Medicare reporting versus 
other or additional categories for reporting.
    We received public comments on this topic.
    Comment: A few commenters supported the reimplementation of OP-26 
or another volume measure. These commenters expressed that a volume 
measure would provide valuable data to evaluate patient outcomes and 
quality of care. One commenter stated that many studies have 
demonstrated a relationship between superior patient outcomes and 
routine procedures. One commenter expressed that a volume measure would 
not impose a significant data collection burden for most hospitals. 
Another commenter specifically supported future adoption of a claims-
based volume measure.
    Response: We thank the commenters for supporting the 
reimplementation of a procedure volume measure in the Hospital OQR 
Program. We will take these comments into consideration as part of 
future notice-and-comment rulemaking.
    Comment: Some commenters did not support the potential future 
reimplementation of OP-26 or adoption of another volume measure, 
expressing their belief that volume is not a clear indicator, or never 
is an indicator, of care quality and therefore procedure volume data 
would not be useful to consumers. A few commenters further stated that 
they believe there is a lack of evidence linking volume to quality of 
care and that this would make adoption of a volume measure inconsistent 
with the Meaningful Measures 2.0 Framework goal to ``promote innovation 
and modernization of all aspects of quality.'' Several commenters 
expressed concern that the burden of collecting and reporting data for 
OP-26 outweighs its value. One commenter also opposed reimplementation 
of OP-26 because the measure has not been endorsed by the NQF.
    Response: We thank the commenters for their feedback and 
acknowledge their concerns. We agree that we can determine facility 
volumes for procedures performed using Medicare FFS claims. However, 
the specifications for the OP-26 measure include reporting data for 
non-Medicare patients. The specifications for OP-26 are available in 
the Hospital Outpatient Specifications Manuals version 9.1 available at 
https://qualitynet.cms.gov/outpatient/specifications-manuals#tab7. As 
stated in the Specifications Manual, OP-26 measures the aggregate count 
of selected outpatient procedures in the following nine categories: 
Cardiovascular, Eye, Gastrointestinal, Genitourinary, Musculoskeletal, 
Nervous System, Skin, Respiratory, and Other. OP-26 excludes procedures 
performed within the emergency department (ED).
    We reiterate our belief grounded in the published scientific 
literature that volume metrics serve as an indicator of which 
facilities have experience with certain outpatient procedures and 
assist consumers in making informed decisions about where they receive 
care, acknowledging that many studies have shown that volume does serve 
as an indicator of quality of care.\183\ \184\ One study found that 
patients who had total hip arthroplasties performed at high-volume 
hospitals had lower rates of surgical site infections, complications, 
and mortality compared to patients at low-volume hospitals.\185\ 
Another study found that congestive heart failure (CHF) patients who 
stayed in hospitals with more experience in managing CHF received 
higher quality care and experienced better outcomes.\186\
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    \183\ Ogola, Gerald O. Ph.D., MPH; Crandall, Marie L. MD, MPH; 
Richter, Kathleen M. MS, MBA, MFA; Shafi, Shahid MD, MPH. High-
volume hospitals are associated with lower mortality among high-risk 
emergency general surgery patients. Journal of Trauma and Acute Care 
Surgery: September 2018--Volume 85--Issue 3--p 560-565 doi: 10.1097/
TA.0000000000001985.
    \184\ Xu, B., Redfors, B., Yang, Y., Qiao, S., Wu, Y., Chen, J., 
Liu, H., Chen, J., Xu, L., Zhao, Y., Guan, C., Gao, R., & 
G[eacute]n[eacute]reux, P. (2016). Impact of Operator Experience and 
Volume on Outcomes After Left Main Coronary Artery Percutaneous 
Coronary Intervention. JACC. Cardiovascular interventions, 9(20), 
2086-2093. https://doi.org/10.1016/j.jcin.2016.08.011.
    \185\ Mufarrih, S.H., Ghani, M.O.A., Martins, R.S. et al. Effect 
of hospital volume on outcomes of total hip arthroplasty: a 
systematic review and meta-analysis. J Orthop Surg Res 14, 468 
(2019). https://doi.org/10.1186/s13018-019-1531-0.
    \186\ Joynt, K.E., Orav, E.J., & Jha, A.K. (2011). The 
association between hospital volume and processes, outcomes, and 
costs of care for congestive heart failure. Annals of internal 
medicine, 154(2), 94-102. https://doi.org/10.7326/0003-4819-154-2-201101180-00008.
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    The adoption of such a measure would follow our standard measure 
adoption process, including our consideration of relevant measures 
endorsed by a consensus building entity. A volume measure would not be 
presented to consumers alone, but would be displayed complementary with 
other program quality measures that are focused on clinical processes 
and outcomes. We will take the commenters' feedback into consideration 
as we consider the potential future adoption of a volume measure that 
is useful to consumers and appropriately assesses the quality of care 
provided in the outpatient setting.
    Comment: Several commenters suggested that CMS choose measures that 
would be more meaningful to patients, especially outcome-based measures 
of quality and safety. A few commenters recommended that CMS work with 
interested parties to identify measures that would better evaluate the 
shift in procedures to the outpatient setting and the quality of care 
provided. A few commenters also recommended adopting a volume measure 
that is limited to a specific set of procedures.
    Response: We thank the commenters for their recommendations and 
will take them into consideration for future rulemaking.
    Comment: Many commenters provided recommendations to improve volume 
measure reporting. Several commenters recommended that a potential 
volume measure should receive NQF endorsement before it is proposed for 
adoption. One commenter recommended that CMS track volume via claims-
based data instead of

[[Page 72105]]

requiring submission of data via a web-based tool. Another commenter 
recommended the adoption of an all-payer volume indicator to provide 
useful data about facilities that also serve non-Medicare fee-for-
service (FFS) patients. One commenter stated that if a volume measure 
is adopted, it should be used only for confidential facility-level 
feedback.
    A commenter recommended expanding the reporting of clinical areas 
beyond the existing procedure categories, while another commenter 
suggested that CMS consider adopting a volume indicator measure that 
uses procedure codes to reduce data collection and reporting burden for 
hospitals. One commenter suggested that a pain management measure 
should not be developed based on a volume measure because the 
healthcare system is already overburdened by the ongoing opioid 
epidemic and the COVID-19 PHE. One commenter encouraged CMS to develop 
a volume electronic clinical quality measure (eCQM) instead of a 
measure that requires web-based submission through the Hospital Quality 
Reporting (HQR) portal.
    Response: We thank the commenters for their recommendations to 
provide meaningful information to consumers and improve the quality of 
outpatient care and will take them into consideration for future 
rulemaking. We note that the OP-26 measure, when required for the 
Hospital OQR Program, included the submission of Medicare and non-
Medicare volume data; conversely, relying solely on the use of Medicare 
FFS claims data to simplify reporting would limit a future volume 
measure to only this payer.
    Comment: A commenter noted that the CY 2023 OPPS/ASC proposed rule 
states, ``. . . 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,'' while the referenced study only 
reviewed patients who underwent diagnostic thoracoscopic lung biopsy.
    Response: We thank the commenter for this feedback. We believe that 
this statement still supports our point that procedures are moving from 
the inpatient to the outpatient setting, which has placed greater 
importance on tracking the volume of outpatient procedures. However, to 
better reflect the cited study, we acknowledge that its findings were 
limited to patients who undergo diagnostic thoracoscopic lung biopsy, 
of whom more than 70 percent of can be discharged on the day of the 
surgery itself due to the use of innovative techniques and technologies 
available in the outpatient setting.
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.\187\ \188\ \189\ \190\ \191\ \192\ \193\ \194\ \195\
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    \187\ 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.
    \188\ 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.
    \189\ 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.
    \190\ 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.
    \191\ 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.
    \192\ 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.
    \193\ https://www.minorityhealth.hhs.gov/assets/PDF/Update_HHS_Disparities_Dept-FY2020.pdf.
    \194\ www.cdc.gov/mmwr/volumes/70/wr/mm7005a1.htm.
    \195\ 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 referred readers to the full RFI in the FY 2023 IPPS/LTCH PPS 
proposed rule for full details on these considerations as well as the 
FY 2023 IPPS/LTCH PPS final rule for a summary of previous comments 
received in response to the RFI. For comments and feedback on the 
application of these principles to the Hospital OQR Program, we asked 
commenters to respond to the CY 2023 OPPS/ASC proposed rule (87 FR 
44732).
    Comment: Several commenters supported CMS's overall goal of 
addressing health equity through quality measurement and stratification 
and acknowledged the importance of this work. One commenter emphasized 
the importance of differentiating the role of health equity in the 
acute care versus community settings. A commenter noted that these 
overarching principles presented in the RFI could also help inform 
future equity frameworks across CMS programs. Several commenters also 
highlighted their general support for the conceptual approaches, the 
Within-Facility Disparity Method and the Across-Facility Disparity 
Method for measuring disparity, known as The CMS Disparity Methods. 
However, one commenter noted that if CMS chooses to stratify patient 
experiences measures in the future, they would discourage CMS from 
using the Across-Facility Disparity Method for these particular 
measures. Similarly, several commenters recommended prioritizing the 
Within-Facility Disparity Method over the Across-Facility Disparity 
Method. A commenter suggested that when utilizing the Across-Facility 
Disparity Method, that essential hospitals be identified as a distinct 
group. One commenter noted that in addition to evaluating disparities 
through the Within-Facility Disparity Method and Across-Facility 
Disparity Method, CMS should consider absolute performance as well. A 
commenter provided support to expand disparities reporting to all 
settings.
    Another commenter noted that it is important for workforce training 
and leadership development to be considered in efforts to improve 
health outcomes.
    A commenter stated that building off existing programs, such as the 
Medicare Shared Savings Program and the Medicare Promoting 
Interoperability Program, could be useful in determining a health 
equity infrastructure, particularly in the context of involving 
community stakeholders as in the Accountable Health Communities Model.
    Additionally, when considering potential approaches to quality

[[Page 72106]]

measurement and stratification, a commenter expressed the importance of 
considering which factors are controllable by the provider in order to 
be as specific and targeted in measurement efforts. Similarly, another 
commenter emphasized that social factors outside of the providers' 
control should not be measured through quality measurement efforts. A 
few commenters stated that CMS should take a phased approach for 
setting goals and expectations focused on reducing healthcare 
disparities, particularly to accommodate how different facilities are 
at different stages of building and implementing a health equity 
framework. Another commenter expressed that collaboration among 
healthcare providers to address inequity can reduce provider burden as 
well. A few commenters noted that a holistic approach that shifts the 
focus on the sickness of patients to the wellness of patients is needed 
to effectively address healthcare disparities.
    A commenter noted that they do not recommend comparing inequities 
across hospitals due to differing social contexts across hospitals and 
that this comparison can lead to incorrect conclusions in addition to 
not providing a facility with valuable information or incentives for 
improving its own performance in the health equity space.
    A few commenters flagged the potential impact of measurement bias 
and the unintended consequences when considering approaches to health 
equity measurement and stratification. One commenter noted that ``the 
implementation of a well-intentioned model'' can be biased and 
negatively affect historically marginalized groups. Another commenter 
suggested that an effort to mitigate potential unintended consequences 
could be to create public forums where historically marginalized groups 
can provide suggestions through more direct communication. This 
commenter emphasized the importance of stakeholder engagement and 
warned that not engaging stakeholders could threaten the validity of 
the disparity method used. A commenter also expressed that health 
equity frameworks should be evidence-based and ultimately focused on 
provider accountability.
    Several comments agreed with CMS that quality measures can help 
inform performance across many patient populations. A commenter stated 
that early in the process, it is important to clearly outline the role 
of healthcare quality measurement as aiming to improve health care 
itself in addition to wider community needs. A few commenters stated 
that stratification contributes to the identification of disparity, but 
does not inherently provide resources; therefore, stratification is 
only one component of advancing health equity.
    Response: We appreciate the feedback and suggestions provided by 
the commenters regarding overarching goals for measuring disparity 
across CMS quality programs, specifically in regard to conceptual 
approaches, stratification and the consideration of measurement bias. 
We will take commenters' feedback into consideration.
    Comment: Many commenters urged CMS to prioritize use of existing 
measures to capitalize on existing data collection efforts and tools, 
large datasets, and alignment across multiple programs. Several 
commenters suggested that this prioritization would help mitigate some 
of the administrative burden of data collection on providers and 
suggested that the measures could be modified based on setting as 
appropriate. Several commenters stressed the importance of data and 
measure transparency to ensure both providers and patients have 
adequate knowledge of disparities and efforts to address disparities. 
Several commenters additionally noted the potential financial burden on 
providers associated with data collection.
    Several commenters expressed concerns about low sample sizes that 
could affect data collection, data completeness, and interpretability 
of disparity method results. One commenter suggested pooling data 
across multiple years to increase sample size, giving higher 
statistical weights to more recent data. A few other commenters 
similarly echoed the importance of using recent data in evaluating 
disparities and indicated the transient nature of some social risk 
factors, such as homelessness.
    Several commenters offered additional suggestions about appropriate 
measure types to prioritize. A commenter noted the importance of 
considering how different measure types may be suited for different 
approaches to stratification. Similarly, a few commenters noted that 
stratification may not be suitable for all types of measures, and the 
measure types for which it is the most appropriate can be clarified 
through stakeholder input. Several commenters suggested prioritizing 
disparity measurement in process and access measures, and one commenter 
expressed that improving patient access to care is an essential goal 
driving health equity efforts. One commenter suggested prioritizing 
disparity measurement in condition-specific or in procedure-specific 
measures, and another commenter suggested expanding CMS's current 
condition- and procedure-specific measures to include evaluation of 
disparities for other conditions and procedures. One commenter 
suggested prioritizing measures of health system overuse and 
appropriateness of care.
    Response: We appreciate the commenters' concerns about small sample 
sizes. We thank the commenters for their recommendations regarding 
prioritization of existing measures, data collection efforts, and tools 
and will take this feedback into consideration.
    Comment: Many commenters supported using area-based indicators to 
stratify quality measures. Several commenters supported the use of 
imputed race and ethnicity data, while several other commenters 
conversely did not support imputed race and ethnicity data. One 
commenter suggested validating imputed race and ethnicity data by 
comparing the CMS Disparity Method results calculated using imputed 
data to those calculated using self-reported race and ethnicity data. 
Indeed, many commenters emphasized the role of self-reported patient 
data as the gold standard, and one commenter further noted that CMS's 
resources should be dedicated to collecting self-reported data rather 
than to data imputation.
    Many commenters suggested that CMS move to standardize data 
definitions and data collection processes across providers, programs, 
and existing tools to enhance interoperability and across-hospital data 
consistency. Several commenters agreed that social and demographic data 
are not currently captured in an accessible way, and consistent, 
standardized data collection of social needs data is ideal. Several 
commenters considered data standardization to be vital to ensuring data 
and measure validity and reliability. One commenter expressed a concern 
that comprehensive screening tools may unnecessarily burden providers, 
but nevertheless felt that standardization across hospitals and systems 
would ultimately be beneficial to all providers. A few commenters 
expressed support for provider screening of health-related social needs 
as this effort contributes to the larger framework of improving health 
equity.
    Several commenters noted that CMS should establish a timeline with 
data standardization and collection goals and milestones, as well as 
measure development and implementation. Optimizing data quality will 
necessitate time and new resources, such as building electronic health 
record (EHR) environments to support data collection.

[[Page 72107]]

Another commenter highlighted that data without context can contradict 
efforts to advance health equity through quality measurement. A 
commenter stated that comprehensive and actionable data are important 
for driving improvement. A few commenters noted that data 
harmonization, aggregation and alignment are key to consider in the 
context of health equity measures and suggested that Electronic Health 
Information Exchanges (HIEs) and Regional Health Improvement 
Collaboratives (RHICs) can serve as useful resources.
    In addition to data standardization and data harmonization, several 
commenters suggested that CMS incentivize use of Z-codes to capture 
social and demographic factors, and one commenter suggested that CMS 
reimburse providers for appropriately documenting Z-codes. Another 
commenter emphasized the importance of educating providers about the 
importance of collecting information regarding social drivers of 
health. Several commenters further suggested that CMS incentivize 
hospitals to collect self-reported social and demographic data from 
patients, and one commenter additionally suggested that payers collect 
these data themselves since patients may not be willing to provide 
social and demographic data to providers. One commenter noted that 
hospitals currently may collect social and demographic data to connect 
patients to available community resources and implementing measures may 
perversely incentivize providers to only perform social needs screening 
to collect data and not adequately follow up with patients to provide 
them with needed resources. Several commenters noted that data 
collection and disparity measurement efforts should include protections 
for patients. One commenter noted that CMS must ensure that patients do 
not face discrimination, and another commenter noted that patients' 
privacy must be protected.
    Several commenters expressed that the current measures of social 
and demographic risk--dual eligibility and race and ethnicity--are 
imperfect measures of inequity. One commenter emphasized that because 
race and ethnicity are proxies of social risk on which providers are 
unable to intervene, alternative direct measures of social risk should 
be used in measurement programs. One commenter suggested that CMS 
implement a standard process for validating data elements for use in 
future stratification efforts. Several commenters recommended convening 
Technical Expert Panels to provide stakeholders, including clinicians 
and medical coding experts, an opportunity to contribute to building 
valid and reliable stratification measures.
    Many commenters provided suggestions for other social and 
demographic variables to collect. One commenter noted the importance of 
being able to identify disparities across multiple social and 
demographic risk factors. Several commenters suggested that measures 
capturing patient experience are important to collect. One commenter 
suggested capturing patients' feelings of inclusion. In addition to 
race and ethnicity, several commenters suggested sex, sexual 
orientation and gender identity, language preference, tribal 
membership, and disability status as important social risk factors to 
capture. One commenter further suggested collection of access to care, 
veteran status, health literacy, and religious minority status data. 
One commenter noted that additional important data elements to collect 
include employment status, education, insurance status, income level, 
and geographical distance from provider. One commenter suggested 
stratifying by urban versus rural settings.
    Several commenters expressed concerns about penalizing providers 
for factors not in the control of the provider. One commenter 
questioned whether providers would be penalized in situations where 
patients refuse to provide social or demographic data. Another 
commenter expressed concern that safety-net hospitals caring for large 
proportions of patients with overlapping social and clinical needs 
would be penalized. Several commenters noted the importance of 
statistical risk adjustment for clinical characteristics and 
comorbidities, while one commenter expressed concern about adjusting 
quality measures for race and ethnicity. This commenter further 
highlighted the difference between systemic racism versus race as a 
social risk factor.
    Response: We thank the commenters for their support of the use of 
area-based indices for stratification and of imputed race and ethnicity 
data, but we also acknowledge the concern about using imputed race and 
ethnicity data instead of self-reported data. We appreciate commenters' 
recommendations regarding data standardization and intend to consider 
feedback regarding a timeline for data collection and measure 
development.
    We will take the commenters' recommendations to collect Z-code data 
into consideration. We appreciate the concern that proxy measures of 
social and demographic risk have limitations. We thank commenters for 
their suggestion to convene Technical Expert Panels, and we appreciate 
recommendations for other social and demographic factors to collect.
    We acknowledge the concern that providers should not be penalized 
for social and demographic risk factors outside of their control. We 
would like to clarify that the RFI did not directly address risk 
adjustment for patient social factors or demographic variables within 
measures, which may set different expected quality results for persons 
with certain social risk factors, but rather discusses approach to 
distinguish performance between groups to highlight underlying 
disparities.
    Comment: Several commenters provided specific feedback on methods 
for identifying meaningful performance differences within disparity 
results. A commenter expressed the importance of determining whether a 
stratification approach is suitable for a specific measure type. For 
example, the commenter stated that they would not recommend using the 
Across-Facility Disparity Method for patient experience measures 
because it risks implying that less favorable patient experiences are 
typical or expected for certain subgroups. The stakeholder suggested 
utilizing a benchmarking and performance threshold approach that 
includes the whole patient population rather than a small subgroup of 
patients.
    A few commenters supported benchmark approaches and a commenter 
noted that they may become more powerful comparison tools with time.
    A few commenters supported threshold approaches. On the other hand, 
a few commenters did not support threshold approaches; a few commenters 
stated that threshold approaches should follow benchmarking efforts or 
be used once the volume of data increases.
    A few commenters did not recommend fixed intervals/rank ordering 
approaches due to difficulties in identifying meaningful clinical 
differences.
    Another commenter supported peer grouping as opposed to risk 
adjustment for social risk factors to prevent the risk of potentially 
hiding disparities. Another commenter suggested the use of clinical 
risk grouping to categorize patients into illness burden groups for 
risk adjustment.
    A commenter expressed that it is important for measures to be 
continuously tested to ensure that they can statistically show 
differences in care, particularly when measuring disparities ``at the 
level of the

[[Page 72108]]

individual clinician.'' Another commenter stated that data-driven 
improved patient outcomes (for example, avoidable hospital admissions, 
complications, readmissions) should be at the forefront of identifying 
meaningful performance differences as opposed to only focusing on 
process measures. A commenter suggested that variability estimates be 
provided along with any disparity measurement results that use a 
statistical approach for disparity measurement.
    A few commenters stated that identifying performance differences in 
disparity results depends on the context of the measure, program, and 
setting rather than on a statistical standard being uniformly applied 
across programs; a few commenters also recommended convening a 
Technical Expert Panel to allow stakeholder input on this topic.
    A commenter suggested that if stratifying can illuminate 
disparities in care, then this should be a criterion for ``maintaining 
these measures in the programs.'' A commenter stated that the goal of 
helping patients seek equitable care should remain at the forefront 
when considering meaningful performance differences. A commenter noted 
that as the methodologies are still very new, hospitals should not be 
compared based on their ability to reverse negative trend. This 
commenter further explained that steps should be taken to identify 
facilities that have successfully identified social needs and 
implemented interventions to reverse negative trends.
    Response: We appreciate the feedback and suggestions provided by 
the commenters regarding the identification of meaningful performance 
differences within disparity results including threshold approaches, 
benchmarking, peer grouping and additional recommendations. We will 
take commenters' feedback into consideration in future policy 
development.
    Comment: Several commenters provided feedback on principles for use 
and application of the results of disparity measurement. A commenter 
supported CMS's suggestion for disparity reporting decisions to be made 
at the program level.
    Several stakeholders who commented on confidential reporting 
supported CMS's existing approach of an initial period of 
confidentially reporting stratified results before publicly reporting 
in order to provide facilities time to understand and improve upon 
their performance and to ensure sufficient data collection. A commenter 
noted that confidential reporting is particularly appropriate while 
more is learned about the impact of social determinants of health. 
Similarly, a commenter agreed with CMS's suggested approach of 
utilizing confidential reporting for new programs and measures. A few 
commenters expressed that when stratifying measures by race, ethnicity, 
and social factors, it is important to initially confidentially report 
and appropriately risk adjust to ensure that providers are not being 
held responsible for factors outside of their control. Another 
commenter stated that the value of creating and confidentially 
reporting a health equity score would be useful to hospitals in their 
improvement efforts. A commenter supported CMS's recommendation of 
reporting stratified measure results in tandem with overall measure 
results, specifically through confidential reporting. One commenter 
suggested that a phased approach would allow EHR vendors to build and 
implement changes in hospital systems. A commenter stated that assuming 
appropriate and actionable data are collected, confidential reporting 
should be prioritized since raising awareness to providers about health 
inequity is a critical step in initiating improvements.
    In terms of public reporting, a commenter supported publicly 
reporting stratified measure results and stated that doing so allows 
for useful comparisons to be made between individual facilities and 
state and national averages.
    A few commenters were opposed to publicly reporting disparity 
results. One commenter stated that publicly reporting disparity 
measurement is not appropriate at this time. A commenter expressed that 
publicly reporting data that are stratified by demographic variables 
could further perpetuate stereotypes about the type of care provided by 
facilities to specific subgroups of patients. Similarly, a commenter 
cautioned that public reporting of stratified data presents potential 
for a harmful cycle where patients may not want to receive care at 
hospitals that care for historically marginalized communities, 
resulting in fewer resources for those providers and patients. A few 
commenters expressed potential unintended consequences of placing 
burden on patients to understand disparity results and that if 
utilizing public reporting, it is imperative that providers ensure 
their patients understand disparity measurement. Similarly, several 
commenters expressed that efforts should be made to educate and inform 
patients on how to understand and interpret publicly reported disparity 
results.
    A commenter expressed the importance for stakeholder input before 
public reporting, particularly in the context of newer programs and 
measures. A commenter emphasized a similar point that the decision to 
publicly report results should be widely agreed upon before 
implementation.
    A few commenters acknowledged payment accountability as a principle 
for use and application of disparity measurement results. A commenter 
stated that a health equity score can be used for additional 
reimbursement to be linked with community need in order to provide more 
resources for specific patient populations. A few commenters made a 
similar point that disparity measurement data can help illuminate where 
additional resources are needed and this information can then inform 
the payment system accordingly to better meet their needs. A commenter 
state that it is important to carefully and slowly consider reporting 
options, particularly when payment is affected.
    Commenters provided additional thoughts when considering principles 
for use and application of disparity measurement results. A commenter 
noted that it is important to ensure reliability of reported measure 
result and a commenter stated sample size should play a role in 
determining whether results should be publicly reported. Similarly, 
another commenter stated that a challenge of reporting demographic 
variables is using the data for meaningful healthcare improvement. A 
commenter noted that privacy safeguards should be implemented as part 
of programs' reporting processes and a commenter stated that data 
collected for disparity measurement should undergo a validation 
process.
    A commenter stated that as more patient-reported data replace 
indirectly estimated data, those results should be reported in tandem 
for the purpose of comparison on an organizational basis. The commenter 
also suggested that allowing for a voluntary submission period would 
provide facilities with an opportunity to slowly begin the process of 
collecting and reporting equity data. Similarly, another commenter 
expressed that programs can ease into reporting through first reporting 
a smaller, well-established social risk variable while remaining 
transparent with overall intentions.
    Response: We appreciate the feedback and suggestions provided by 
the commenters regarding principles for use and application of the 
results of disparity measurement, including commenters' feedback to 
implement a

[[Page 72109]]

confidential reporting period during which hospitals will be provided 
their disparity method results privately and intend to consider the 
suggested phased approach. We will take commenters' feedback into 
consideration.
    Comment: A few commenters emphasized the administrative burden of 
collecting, validating, and managing data. Similarly, a few commenters 
also noted that digital health technology and software upgrades would 
be essential to support increased data collection efforts. A commenter 
noted that operationalizing healthcare technology could improve the 
patient experience as well by not having to provide social risk and 
demographic information multiple times. A few commenters noted that 
healthcare technology requires increased funding and resources, 
particularly resources for historically marginalized groups and groups 
with increased social needs. Another commenter added that actionable 
and timely data can assist hospitals in make informed decisions.
    A few commenters stated the importance of collaboration in 
advancing health equity, particularly best practices. More 
specifically, a commenter stated that collaboration should be 
prioritized over competition through all health equity advancement 
efforts. Similarly, a commenter emphasized that innovation should be 
rewarded and those engaging in innovative work in the health equity 
space should share it to support other efforts. A commenter expressed 
that research and development can contribute to improve health equity. 
Another commenter recommended that CMS consider convening a workgroup 
to understand potential challenges to health equity efforts and to come 
to consensus on recommendations. This commenter further suggested that 
CMS's efforts support provider efforts to achieve health equity through 
investment, guidance, and best practice facilitation.
    A commenter noted that community partnerships will need to be 
modified or created in order to ``achieve positive outcomes on social 
drivers of health results.'' A commenter noted that additional 
clarification about the role of community partnerships and engagement 
would be beneficial. A commenter suggested that CMS sponsor a technical 
assistance program for providers lacking resources. A commenter stated 
that CMS should consider adding questions to patient experience surveys 
that can illuminate the healthcare experiences of historically 
marginalized groups while ensuring that resources are provided so that 
all individuals can complete the survey. One commenter suggested that 
CMS provide hospitals with resources for identifying key social drivers 
of health that may contribute to disparities.
    Additionally, a few commenters noted that time is needed in order 
to implement these changes that would result in maximizing data 
collection efforts. A commenter suggested increased stakeholder 
engagement efforts, such as convening public forums. Another commenter 
stated that fair incentives for achieving value-based care objectives 
are important.
    One commenter suggested that CMS revise the numerator of the Social 
Drivers of Health screening measure to include patients screened in any 
setting in the prior year, given that current practice recommends not 
screening at every admission but instead screening annually.
    A commenter expressed support for reporting structural measures 
that that demonstrate health equity efforts integrated in hospital 
frameworks.
    Several commenters noted that their organizations have developed 
health equity initiatives or projects similar to the activities 
described in the Health Equity RFI and offered more details about their 
work.
    Response: We appreciate additional feedback and suggestions from 
commenters about additional topics such as the optimization of 
healthcare technology, collaboration among providers and communities 
and the administrative burden of data collection. We will take 
commenters' feedback into consideration for future rulemaking.
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 did not propose any changes 
to these policies in the CY 2023 OPPS/ASC 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 did not propose any changes to these 
policies in the CY 2023 OPPS/ASC 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 did not propose any changes to these policies in 
the CY 2023 OPPS/ASC 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

[[Page 72110]]

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 did not 
propose any changes to these policies in the CY 2023 OPPS/ASC proposed 
rule.

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

    Previously finalized quality measures and information collections 
discussed in this section were approved by OMB under control number 
0938-1109 (expiration date February 28, 2025). An updated PRA package 
reflecting the updated information collection requirements will be 
submitted for approval under the same OMB control number.
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 submission requirements at 42 
CFR 419.46(d).
a. Alignment of 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).\196\ 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 were submitted for 
validation and the beginning of the payments that are affected by these 
data, creating compressed processing timelines 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.
---------------------------------------------------------------------------

    \196\ 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.
---------------------------------------------------------------------------

    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,\197\ this misalignment has resulted in confusion among 
some hospitals regarding submission deadlines and data reporting 
quarters.
---------------------------------------------------------------------------

    \197\ FY 2011 IPPS/LTCH PPS final rule (75 FR 50220 and 50221).
---------------------------------------------------------------------------

(2) Alignment of 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
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44733 through 44735), 
beginning with the CY 2024 reporting period/CY 2026 payment 
determination, we proposed to align the patient encounter quarters for 
chart-abstracted measures with the calendar year. 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 
proposed 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). In the proposed rule, we stated our belief 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 finalized patient encounter quarters 
and clinical data submission deadlines for the CY 2028 payment 
determination are illustrated in Tables 88 and 89, respectively.
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[[Page 72111]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.125

    To facilitate this process, we proposed 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 90, 91 and 92 below. However, we note that data submission 
deadlines would not change.
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[GRAPHIC] [TIFF OMITTED] TR23NO22.127


[[Page 72112]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.128

BILLING CODE 4120-01-C
    We solicited public comment on our proposal.
    Comment: Many commenters supported our proposal to align the 
patient encounter quarters for chart-abstracted measures with the 
calendar year. Several commenters further stated that alignment would 
make the data submission process simpler and reduce the reporting 
burden for providers.
    Response: We thank the commenters for their support. We agree that 
alignment would streamline reporting for chart-abstracted measures and 
reduce provider burden.
    Comment: One commenter recommended that CMS consider the 
implications of this proposal for other measures that cross calendar 
years, such as the HCP Influenza Immunization measure. The commenter 
further stated that although the HCP Influenza Immunization measure is 
only required for the Hospital IQR Program, some hospitals report it 
for both the Hospital IQR and Hospital OQR Programs because separating 
the data would cause extensive burden.
    Response: We thank the commenter for its feedback and will take 
this recommendation into consideration for future rulemaking regarding 
non-chart-abstracted measures.
    Comment: One commenter noted that the clinical data submission 
deadlines listed in Table 64 ``Current CY 2028 Payment Determination'' 
of the CY 2023 OPPS/ASC proposed rule incorrectly stated a CY 2025 date 
for the Q2 deadline and CY 2026 dates for the Q1,Q3, and Q4 deadlines, 
and should have listed a CY 2026 date for the Q2 deadline and CY 2027 
dates for the Q1, Q3, and Q4 deadlines. Another commenter noted that 
the clinical data submission deadlines listed in Table 66 ``CY 2024 
Payment Determination'' of the CY 2023 OPPS/ASC proposed rule 
incorrectly stated CY 2023 and CY 2024 dates which did not match the 
deadlines for this payment determination that were stated in Table 67 
in the CY 2022 OPPS/ASC final rule with comment period (86 FR 63862).
    Response: We thank the commenters for their feedback and have 
updated the clinical submission deadlines listed in the tables in this 
final rule with comment period.
    After consideration of the public comments we received, we are 
finalizing our proposal to align the patient encounter quarters for 
chart-abstracted measures with the calendar year beginning with the CY 
2024 reporting period/CY 2026 payment determination.
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 did not propose any changes to 
these policies in the CY 2023 OPPS/ASC proposed rule.
3. Claims-Based Measure Data Requirements
    We refer readers to the CY 2019 OPPS/ASC final rule with comment 
period (83 FR 59106 through 59107), where we established a 3-year 
reporting period for OP-32: Facility 7-Day Risk-Standardized Hospital 
Visit Rate after Outpatient Colonoscopy beginning with the CY 2020 
payment determination. We refer readers to the CY 2022 OPPS/ASC final 
rule with comment period (86 FR 63863) where we finalized a 3-year 
reporting period for the Breast Cancer Screening Recall Rates measure 
(OP-39). We did not propose any changes to these policies in the CY 
2023 OPPS/ASC 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 did not propose any changes to these 
policies in the CY 2023 OPPS/ASC 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 with comment 
period (78 FR 75112 through 75115), the CY 2016 OPPS/ASC final rule 
with comment period (80 FR 70521), and the QualityNet website, 
available at https://qualitynet.cms.gov, for a discussion of the 
requirements for measure data

[[Page 72113]]

submitted via the HQR System (formerly referred to as the QualityNet 
Secure Portal) for the CY 2017 payment determination and subsequent 
years. The information collections finalized in the aforementioned 
final rules with comment period were approved under OMB control number 
0938-1109 (expiration date February 2, 2025). We did not propose any 
changes to these policies in the CY 2023 OPPS/ASC proposed rule.
b. Data Submission Requirements for Measures Submitted via the Centers 
for Disease Control and Prevention (CDC) National Healthcare Safety 
Network (NHSN) Website
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (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 with comment period (86 FR 63866), where we finalized the adoption 
of the COVID-19 Vaccination Coverage Among Health Care Personnel 
measure (OP-38) beginning with the CY 2022 reporting period/CY 2024 
payment determination. We did not propose any changes to these policies 
in the CY 2023 OPPS/ASC proposed rule.
6. eCQM Reporting and Submission Requirements
a. Background
    We refer readers to the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75106 and 75107), the CY 2015 OPPS/ASC final rule with 
comment period (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 (86 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, we 
finalized the adoption of the STEMI eCQM (OP-40) 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 93 for a summary of the previously 
finalized quarterly data increase in eCQM reporting beginning with the 
CY 2023 reporting period.
[GRAPHIC] [TIFF OMITTED] TR23NO22.129

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 Office of the National Coordinator for 
Health Information Technology (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 with comment period (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

[[Page 72114]]

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 did not propose any changes to these policies in the CY 2023 
OPPS/ASC 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; 
\198\ (2) may use third parties 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 certified EHR technology 
(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 did not propose any changes to these policies in 
the CY 2023 OPPS/ASC proposed rule.
---------------------------------------------------------------------------

    \198\ 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 did not propose any changes to 
these policies in the CY 2023 OPPS/ASC 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 
did not propose any changes to these policies in the CY 2023 OPPS/ASC 
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 did not propose any changes to these policies in the CY 2023 OPPS/
ASC 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 
did not propose any changes to these policies in the CY 2023 OPPS/ASC 
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 did not 
propose any changes to these policies in the CY 2023 OPPS/ASC 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 did not propose any changes to these policies in the 
CY 2023 OPPS/ASC 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 did not propose any changes to these policies in the 
CY 2023 OPPS/ASC 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

[[Page 72115]]

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 did not propose any changes to these 
policies in the CY 2023 OPPS/ASC proposed rule.
9. Hospital OQR Program Validation Requirements
a. Background
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72105 through 72106), the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68484 through 68487), the CY 2015 OPPS/ASC 
final rule with comment period (79 FR 66964 through 66965), the CY 2016 
OPPS/ASC final rule with comment period (80 FR 70524), the CY 2018 
OPPS/ASC final rule with comment period (82 FR 59441 through 59443), 
the CY 2022 OPPS/ASC final rule with comment period (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 with comment period (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 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 with comment period (86 FR 63870) for additional 
information on the use of electronic file submissions for chart-
abstracted measure medical records requests. We did not propose any 
changes to these policies in the CY 2023 OPPS/ASC 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 with comment 
period (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 did not propose any changes to these policies in 
the CY 2023 OPPS/ASC proposed rule.
d. Targeting Criteria
(1) Background
    In the CY 2012 OPPS/ASC final rule with comment period (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 with comment period (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 with comment 
period (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 with comment period (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 with comment period (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 with 
comment period (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) Addition of Targeting Criterion
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44737), beginning with 
validations affecting the CY 2023 reporting period/CY 2025 payment 
determination, we proposed 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 proposed that a hospital with less than 
four quarters of data subject to validation due to receiving an 
extraordinary circumstance exception (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 
proposed 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 with comment period (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

[[Page 72116]]

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 proposed 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 invited public comment on our proposal.
    Comment: A few commenters supported our proposal to add an 
additional targeting criterion, citing fair treatment of hospitals and 
appropriate focus of CMS's validation efforts on hospitals.
    Response: We thank the commenters for their support. After 
consideration of the public comments we received, we are finalizing our 
proposal to add a fifth criterion to the established targeting criteria 
at Sec.  419.46(f)(3) used to select 50 additional hospitals for 
validation.
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 with comment period 
(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 did not propose any changes 
to these policies in the CY 2023 OPPS/ASC proposed rule.
9. Extraordinary Circumstances Exception (ECE) Process
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68489), the CY 2014 OPPS/ASC final rule with comment 
period (78 FR 75119 through 75120), the CY 2015 OPPS/ASC final rule 
with comment period (79 FR 66966), the CY 2016 OPPS/ASC final rule with 
comment period (80 FR 70524), the CY 2017 OPPS/ASC final rule with 
comment period (81 FR 79795), the CY 2018 OPPS/ASC final rule with 
comment period (82 FR 59444), the CY 2022 OPPS/ASC final rule with 
comment period (86 FR 63873), and 42 CFR 419.46(e) for a complete 
discussion of our extraordinary circumstances exception (ECE) process 
under the Hospital OQR Program. We did not propose any changes to these 
policies in the CY 2023 OPPS/ASC proposed rule.
10. Hospital OQR Program Reconsideration and Appeals Procedures
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487 through 68489), the CY 2014 OPPS/ASC final rule 
with comment period (78 FR 75118 through 75119), the CY 2016 OPPS/ASC 
final rule with comment period (80 FR 70524), the CY 2017 OPPS/ASC 
final rule with comment period (81 FR 79795), the CY 2021 OPPS/ASC 
final rule with comment period (85 FR 68185), and 42 CFR 419.46(g) for 
our reconsideration and appeals procedures. We did not propose any 
changes to these policies in the CY 2023 OPPS/ASC 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

[[Page 72117]]

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 that fail to meet the 
requirements of the Hospital OQR Program. For example, the following 
standard adjustments apply to the reduced national unadjusted payment 
rates: the wage index adjustment, the multiple procedure adjustment, 
the interrupted procedure adjustment, the rural sole community hospital 
adjustment, and the adjustment for devices furnished with full or 
partial credit or without cost. Similarly, OPPS outlier payments made 
for high cost and complex procedures will continue to be made when 
outlier criteria are met. For hospitals that fail to meet the quality 
data reporting requirements, the hospitals' costs are compared to the 
reduced payments for purposes of outlier eligibility and payment 
calculation. We established this policy in the OPPS beginning in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60642). For a 
complete discussion of the OPPS outlier calculation and eligibility 
criteria, we refer readers to section II.G of the CY 2023 OPPS/ASC 
proposed rule (87 FR 44533 through 44534).
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2023
    We proposed to continue our established policy of applying the 
reduction of the OPD fee schedule increase factor through the use of a 
reporting ratio for those hospitals that fail to meet the Hospital OQR 
Program requirements for the full CY 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 proposed to continue 
to apply the reporting ratio to all services calculated using the OPPS 
conversion factor. We proposed to continue to apply the reporting 
ratio, when applicable, to all HCPCS codes to which we have proposed 
status indicator assignments of ``J1'', ``J2'', ``P'', ``Q1'', ``Q2'', 
``Q3'', ``R'', ``S'', ``T'', ``V'', and ``U'' (other than New 
Technology APCs to which we have proposed status indicator assignments 
of ``S'' and ``T''). We proposed to continue to exclude services paid 
under New Technology APCs. We proposed to continue to apply the 
reporting ratio to the national unadjusted payment rates and the 
minimum unadjusted and national unadjusted copayment rates of all 
applicable services for those hospitals that fail to meet the Hospital 
OQR Program reporting requirements. We also proposed to continue to 
apply all other applicable standard adjustments to the OPPS national 
unadjusted payment rates for hospitals that fail to meet the 
requirements of the Hospital OQR Program. Similarly, we proposed to 
continue to calculate OPPS outlier eligibility and outlier payment 
based on the reduced payment rates for those hospitals that fail to 
meet the reporting requirements. In addition to our proposal to 
implement the policy through the use of a reporting ratio, we also 
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 was 0.9805, which, when 
multiplied by the proposed full conversion factor of $86.785, equaled a 
proposed conversion factor for hospitals that fail to meet the 
requirements of the Hospital OQR Program (that is, the reduced 
conversion factor) of $85.093.
    We did not receive any public comments on our proposal. For this 
final rule with comment period, the final reporting ratio is 0.9807, 
which, when multiplied by the final full conversion factor of $85.585, 
equals a final conversion factor for hospitals that fail to meet the 
requirements of the Hospital OQR Program (that is, the reduced 
conversion factor) of $83.934. We are finalizing our proposal to 
continue to calculate OPPS outlier eligibility and outlier payment 
based on the reduced payment rates for those hospitals that fail to 
meet the reporting requirements. We are also finalizing our proposals 
to implement the policy through the use of a reporting ratio, and to 
calculate the reporting ratio to four decimals (rather than the 
previously used three decimals) to more precisely calculate the reduced 
adjusted payment and copayment rates for hospitals that fail to meet 
the Hospital OQR Program requirements for CY 2023 payment.

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

A. Background

1. Overview
    We refer readers to section XIV.A.1 of the CY 2020 OPPS/ASC final 
rule (84

[[Page 72118]]

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

    Previously finalized quality measures and information collections 
discussed in this section were approved by OMB under control number 
0938-1270 (expiration date August 31, 2025). An updated PRA package 
reflecting the updated information collection requirements will be 
submitted for approval under the same OMB control number.
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 did not propose any 
changes to these policies in the CY 2023 OPPS/ASC 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 did not propose any 
changes to this policy in the CY 2023 OPPS/ASC 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 did not 
propose any changes to these policies in the CY 2023 OPPS/ASC proposed 
rule.
3. 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 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).
    As discussed in the CY 2023 OPPS/ASC proposed rule (87 FR 44740), 
we now believe it is appropriate to suspend implementation of mandatory 
reporting and 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, in the CY 
2023 OPPS/ASC proposed rule, we proposed to continue with voluntary 
reporting and delay mandatory reporting requirements for the ASC-11 
measure until future rulemaking. Therefore, we proposed 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. Under the proposal, ASCs would not be 
subject to a payment reduction for failing to report this measure 
during the voluntary

[[Page 72119]]

reporting period; however, we strongly encourage ASCs to gain 
experience with the measure. We stated in the proposed rule our plan to 
continue to evaluate this policy moving forward. We note, there are no 
changes to reporting for the CY 2023 and CY 2024, during which the 
measure remains voluntary.
    As the ASC-11 measure requires cross-setting coordination among 
clinicians of different specialties (that is, surgeons and 
ophthalmologists), we stated in the proposed rule that we believe it is 
appropriate to defer mandatory reporting at this time. We also stated 
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 invited public comment on this proposal.
    Comment: Many commenters expressed support for our proposal to 
change ASC-11 from mandatory to voluntary beginning with the CY 2025 
reporting period/CY 2027 payment determination.
    Response: We thank the commenters for their support.
    Comment: One commenter recommended that ASC-11 should be maintained 
as voluntary until a digital version of the measure is developed. The 
commenter stated that this strategy would support our vision to 
transition away from chart-abstracted measures and move toward digital 
measures by 2025.
    Response: We thank the commenter for its recommendation and will 
consider it for future rulemaking. We agree that moving from chart-
abstracted measures to digital measures is an important step in working 
toward interoperability, a goal which we outlined in the FY 2022 IPPS/
LTCH PPS final rule (86 FR 45342) and the FY 2023 IPPS/LTCH PPS final 
rule (87 FR 49181).
    Comment: One commenter recommended that we provide education and 
outreach on the survey instruments available for use with ASC-11 and 
best practices based on the experiences of the facilities that have 
consistently reported the measure while it has been voluntary.
    Response: We thank the commenter for these recommendations; we 
agree that such information would be useful. We plan on adding resource 
information to the ASCQR Program Specifications Manual and have been in 
contact with facilities that have consistently reported data for this 
measure to glean how the measure has been implemented and best 
practices.
    Comment: Some commenters stated this measure was developed, tested 
and previously endorsed by the National Quality Forum (NQF) as a 
clinician-level measure (NQF #1536) and not to measure facility 
performance. Some of these commenters noted that CMS regulations at 42 
CFR 416.2 prohibit ASCs from offering anything beyond limited surgical 
services or separate but integral ancillary services immediately 
before, during or immediately after a surgical procedure and that the 
suggestion made in the ASCQR Specifications Manual that surveys be 
performed ``during clinician follow-up'' are at odds with this 
prohibition. These commenters further noted that ASCs have been very 
purposefully limited by the Federal Government to providing care 
narrowly focused to the day of surgery, and expectations that centers 
will easily be able to perform the extended follow-up for CMS quality 
measures is not very realistic. Some commenters stated most ASCs would 
find it challenging to conduct phone, mail or emails surveys of 
cataract surgery patients both pre-operatively and 90 days post-
operatively.
    Response: We agree with these commenters that the NQF #1536 measure 
was endorsed as a clinician-level performance measure; this alone does 
not preclude the measure from use in the ASCQR Program. The ASCQR 
Program is charged with reporting quality of care measures for care 
furnished in the ambulatory surgical center setting. We reiterate that 
facilities are equally responsible for the quality of care provided in 
ASCs as clinicians. Facilities have an obligation to ensure the best 
quality of care is provided by the clinicians they employ in their 
ASCs. Further, ASCs are responsible for the clinicians allowed to 
perform procedures upon their premises as well as aspects of the 
facility that contribute to care, for example. sterilization, the 
physical setting, and supporting staff that can contribute to quality 
of care.
    Regarding the ASC-11 measure, the measure specifies that follow-up 
is to be made ``within 90 days''; however, we agree that acceptable 
minimum timeframes for administration of the follow-up survey should be 
clarified. Per 42 CFR 416.52, the ASC must ensure each patient has the 
appropriate pre-surgical and post-surgical assessments completed and 
that all elements of the discharge requirements are completed. 
Additionally, when appropriate, ASCs are to make a follow-up 
appointment with the physician and ensure that all patients are 
informed, either in advance of their surgical procedure or prior to 
leaving the ASC of information including their physician contact 
information for follow-up care.
    With respect to the concern that surveys being performed ``during 
clinician follow-up'' may be at odds with the prohibition on ASCs 
providing care beyond the narrow focus of day of surgery, we recognize 
that some centers may not be able to coordinate with the patient's 
treating physician to obtain these survey results. However, a number of 
facilities have been able to collect these data and have been able to 
successfully report this measure during the voluntary reporting period. 
We believe these data are beneficial to patients and their caregivers 
when available, we believe it is appropriate to continue to allow 
voluntary reporting.
    Comment: Many commenters recommended that ASC-11 never be made 
mandatory due to the high administrative burden of reporting this 
measure. A few commenters suggested CMS remove the measure from the 
measure set for this reason. One commenter recommended that in addition 
to removing ASC-11, CMS adopt the Toxic Anterior Segment Syndrome 
(TASS) measure instead.
    Response: We thank the commenters for their recommendations. 
However, we believe ASC-11 remains important to assess the quality of 
care provided in the ASC setting because cataract surgery is one of the 
most commonly performed procedures in ASCs and there is currently no 
measure assessing the quality of care provided for this procedure for 
the ASCQR Program.
    We believe the importance of this measure as a patient reported 
outcome measure justifies the administrative burden of reporting the 
measure. The CMS National Quality Strategy includes a goal to Foster 
Engagement to increase engagement between individuals and their care 
teams to improve quality, establish trusting relationships, and bring 
the voices of people and caregivers to the forefront. The Meaningful 
Measures 2.0 goals also prioritize patient-reported measures and 
promoting better collection and

[[Page 72120]]

integration of patient voices across CMS' quality programs.
    Additionally, some facilities have been voluntarily reporting this 
measure successfully while it has not been required, thus, we believe 
that this indicates that the measure is not overly burdensome and that 
the value of the measure in regard to information it provides to 
consumers about quality of care justifies any potential administrative 
burden that would prevent facilities from reporting it. We note that 
while it is recommended that the facility obtain the survey results 
from the appropriate physician or optometrist, the surveys can be 
administered by the facility via phone, mail, email, or during 
clinician follow-up. We appreciate commenters' concerns and plan to 
retain this measure as voluntary, instead of mandatory, while 
continuing to evaluate this policy moving forward as we are committed 
to having a cataract surgery, patient-reported measure for the ASCQR 
Program.
    After consideration of the public comments we received, we are 
finalizing our proposal to change ASC-11 from mandatory to voluntary 
beginning with the CY 2025 reporting period/CY 2027 payment 
determination.
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 94 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.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR23NO22.130


[[Page 72121]]


b. Finalized ASCQR Program Quality Measure Set for the CY 2025 
Reporting Period/CY 2027 Payment Determination and Subsequent Years
    Table 95 summarizes the previously finalized ASCQR Program measure 
set for the CY 2025 reporting period/CY 2027 payment determination and 
as modified by the finalized proposal in this CY 2023 OPPS/ASC final 
rule.
[GRAPHIC] [TIFF OMITTED] TR23NO22.131

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, sought 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) 199
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    \199\ Centers for Medicare & Medicaid Services. Quality Payment 
Program Overview. Available at: https://qpp.cms.gov/about/qpp-overview.
    \200\ See Social Security Act section 1848(q).
    \201\ See id. Section 1848(q)(2)(A)(i) and (iii).
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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.\200\ The four performance categories on 
which clinicians are scored are quality, cost, improvement activities 
(IA), and Promoting Interoperability.\201\ Under MIPS, we have 
established measure and activity inventories from which clinicians may 
select measures and activities to report and complete,

[[Page 72122]]

respectively.\202\ While the Traditional MIPS program is being phased 
out over time,203 204 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:
---------------------------------------------------------------------------

    \202\ See id. Section 1848(q)(2)(D); see also 42 CFR 
414.1355(a).
    \203\ CY 2022 Physician Fee Schedule final rule (86 FR 65376).
    \204\ 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;
     Promote subgroup reporting that comprehensively reflects 
the services provided by multispecialty groups;
     Include measures selected using the Meaningful Measures 
\205\ approach and, wherever possible, include the patient voice;
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    \205\ 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 requested 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 \206\ can be found in Table 
96.
---------------------------------------------------------------------------

    \206\ 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?

[[Page 72123]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.132


[[Page 72124]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.133

     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.\207\ 
An example of an ophthalmology measure set using quality measures based 
on CY 2022 performance year MIPS quality measures \208\ can be found in 
Table 97. An example of a gastroenterology measure set can be found in 
Table 98. We welcome comment on these specific examples as well as 
comment on potential future measure sets for other specialization 
areas.
---------------------------------------------------------------------------

    \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.
    \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.
---------------------------------------------------------------------------

     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?

[[Page 72125]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.134


[[Page 72126]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.135

BILLING CODE 4120-01-C
    We invited public comment on this topic.
    Comment: Several commenters expressed their support of a potential 
future specialty centered approach for the ASCQR Program. A few 
commenters expressed that this approach would allow specialists to 
report more relevant measures, which would in turn benefit the patient 
population. Another commenter expressed that the general concept of 
quality reporting by specialty, in coordination with facility goals and 
patient population considerations, is feasible and could be desirable 
for ASCQR interested parties. Many commenters provided input on 
specific measures that could be included in our potential future 
specialty centered approach for the ASCQR Program, such as the Toxic 
Anterior Segment Syndrome (TASS) measure. One commenter recommended the 
inclusion of a cross-cutting measure on surgical site infection 
outcomes. Another commenter suggested that we retain current ASCQR 
Program measures within this specialized approach. Another commenter 
suggested that we incorporate current MIPS measures which are 
applicable to ASCs into this approach. A few commenters recommended 
that we apply additional measure scrutiny to refine and align chosen 
measures to ensure meaningful measure collection.
    Response: We thank the commenters for their support of the 
potential future specialty centered approach for the ASCQR Program and 
recommendations for specific measures. We agree that this approach 
could allow for more meaningful data reporting which will 
simultaneously benefit the patient population.
    Comment: Several commenters expressed concern over potential burden 
and redundancy of reporting related to this approach. One commenter 
expressed that physicians are already measured in a more specialty-
centered capacity under MIPS, the results of which are publicly 
reported. Another commenter stated that the potential Ophthalmology-
specific ASCQR measure set potential pathway would increase burden, as 
data that are intended to be reported by ASCs is in the surgeon's 
office and is, thus, inaccessible; however, this commenter also noted 
that, in contrast, the exemplary Gastroenterology ASCQR Program MVP 
measure set contains both process and claims measures that are more 
accessible to ASCs.
    Response: We acknowledge the commenters' concerns regarding 
redundant reporting, however, our potential future specialty centered 
approach for the ASCQR Program would not replicate the Quality 
Performance category of the MIPS. Rather, our approach is informed by 
the MIPS' specialty centered approach to quality measure selection. 
Furthermore, MIPS is largely a clinician quality reporting program. Our 
potential future specialty centered approach used within ASCs would 
provide important facility-level data that are currently not collected 
through MIPS. Additionally, this potential future specialty centered 
approach could be an important way to assess quality measurement in the 
ASC setting. ASC services for Medicare beneficiaries are limited to 
certain commonly performed outpatient procedures. Our potential future 
specialty centered approach would be

[[Page 72127]]

designed to streamline specialized measure sets, increasing the 
applicability of measure sets to a given specialized ASC facility. 
Patients could benefit through the provision of more relevant 
information on the quality and safety of care provided in ASCs that are 
primarily focused on specific procedures or areas of care.
    We reiterate that facilities are equally responsible for the 
quality of care provided in ASCs as clinicians. Facilities have an 
obligation to ensure the best quality of care is provided by the 
clinicians they employ in their ASCs.
    We thank commenters for providing feedback on the areas of 
specialization that would benefit from such an approach and we will 
consider this feedback for future rulemaking.
    Comment: Several commenters suggested that we consult relevant 
interested parties and clinicians while creating this approach to 
reduce potential burden, adopt appropriate measures, and ensure 
patients are supplied with adequate information to make comparisons 
between centers.
    Response: We thank the commenters for their recommendations and 
will take them into consideration for future rulemaking. We agree that 
input from relevant interested parties and clinicians is important.
    Comment: Many commenters provided feedback regarding requiring ASCs 
to report a subset of quality measures that apply broadly to all ASCs, 
and the preferred balance of required quality measures that apply 
broadly and those measures that apply to a particular area of 
specialization. One commenter expressed that potential universally 
applicable ASCQR Program quality measures would not reflect the 
specialty focus intended. One commenter suggested restricting the set 
of general ASC measures to no more than two outcome measures. Some 
commenters generally agreed with the creation of broadly applicable 
measures that are risk or case-mix adjusted. One commenter recommended 
limiting the number of specialty measures to no more than six. One 
commenter recommended that a given ASC not exceed two measures per 
specialty.
    Regarding the number of required measures, one commenter 
recommended at least twelve measures, and another recommended around 
two dozen measures. One commenter recommended that an individual or 
group report four measures. One commenter suggested that the facility 
should be required to report all measures in the specialty measure set.
    Regarding the self-selection of measures for individual facilities, 
one commenter expressed that measures should not be self-selected, and 
stated that ASCs should report on all measures that meet the declared 
minimum sample size. A few commenters suggested that CMS offer self-
selection of measures based on the specialties and strategic 
opportunities identified by the individual ASCs to add more meaningful 
measures toward overall quality improvement.
    Another commenter suggested that CMS prevent gaming by requiring 
ASCs that offer patient services for more than one specialty to choose 
at least one measure for each specialty represented in their practice, 
instead of only reporting measures on one specialty.
    Several commenters raised concern over alignment across quality 
reporting programs. Several commenters specifically raised concern over 
misalignment with the Hospital OQR Program if this future specialty 
centered approach is implemented.
    Response: We thank the commenters for their thoughtful 
recommendations regarding a specialty-centered approach for ASC quality 
reporting. We note that any changes to the ASCQR Program would require 
rulemaking and the input of all interested parties would be taken into 
consideration. We reiterate that currently we are not making any 
changes to the program's structure. We included this request for 
comment to get feedback on this potential future approach.
    Comment: A few commenters recommended that this future specialty 
centered approach include digitally reported measures, as opposed to 
chart-abstracted measures. One commenter stated that although digital 
measures are preferable, smaller facilities may not have adequate 
Electronic Medical Record resources to process these measures.
    Response: We thank the commenters for their recommendations and 
will take them into consideration in future rulemaking. We agree that 
moving from chart-abstracted measures to digital measures is an 
important step when working toward interoperability, a goal which we 
described in the FY 2022 IPPS/LTCH PPS final rule (86 FR 45342) and the 
FY 2023 IPPS/LTCH PPS final rule (87 FR 49181).
    Comment: One commenter recommended that the OAS CAHPS survey not be 
included in any future prospective model due to its potential to 
increase burden. Additionally, one commenter provided feedback on a 
potential implementation timeline for this potential future specialty 
centered approach. The commenter suggested an incremental 
implementation, which would include allowing ASCs to continue reporting 
their quality performance under the current ASCQR program for at least 
5 years.
    Response: We thank the commenter for the recommendation to employ a 
transition period for such a change as the specialty centered approach 
for the ASCQR Program if implemented and will take it into 
consideration for future rulemaking. We want to reiterate that 
currently we are not making any changes to the program. We included 
this request for comment to get feedback on this potential future 
approach.
    Comment: A few commenters raised concerns about our potential 
future specialty centered approach incorporating measures which collect 
data on outcomes that are outside the ASC's control.
    Response: We acknowledge that commenters have expressed this 
concern. However, the statutory charge of the ASCQR Program is to 
collect and make publicly available quality measure data for services 
provided in the ASC setting. Clinicians, regardless of financial 
relationship to the ASC, are performing services in that ASC. Further, 
ASCs are responsible for the clinicians allowed to perform procedures 
upon their premises as well as aspects of the facility that contribute 
to care, e.g. sterilization, the physical setting, and supporting staff 
that can contribute to quality of care. Therefore, the complete 
separation of the clinician from the ASC regarding quality reporting is 
not consistent with the program's statutory responsibilities. Existing 
outcome measures, such as ASC-1, ASC-2, ASC-3 and ASC-4, also reflect 
that ASCs and clinicians work in tandem.
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

[[Page 72128]]

ASC volume for surgical services provided to Medicare 
beneficiaries.\209\
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    \209\ 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.\210\ From 2014 to 2018, the volume of 
ASC services delivered per Medicare Part B Fee-for-Service (FFS) 
beneficiary increased by 2.1 percent.\211\ During the same time period, 
the number of Part B FFS beneficiaries who received ASC services 
increased on average by 1.4 percent annually.\212\ Research indicates 
that volume in ASCs will continue to grow, with some estimates 
projecting a 25 percent increase in patients between 2019 and 
2029.\213\
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    \210\ 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.
    \211\ 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/.
    \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\ 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.\214\ 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.\215\ The 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 ASC Surgical 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 seven categories of procedures frequently performed in 
the ASC setting: Gastrointestinal, Eye, Nervous System, 
Musculoskeletal, Skin, Respiratory, and Genitourinary.\216\ We adopted 
ASC-7 based on evidence that the volume of surgical procedures, 
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).217 218 219
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    \214\ Jha AK. Back to the Future: Volume as a Quality Metric. 
JAMA Forum Archive. Published online June 10, 2015.
    \215\ Ibid.
    \216\ ASC Specifications Manual version 5.1. Available at: 
https://qualitynet.cms.gov/asc/specifications-manuals#tab6.
    \217\ Livingston, E.H.; Cao, J ``Procedure Volume as a Predictor 
of Surgical Outcomes''. Edward H. Livingston, Jing Cao JAMA. 
2010;304(1):95-97.
    \218\ 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.
    \219\ 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.
---------------------------------------------------------------------------

    In the CY 2018 OPPS/ASC final rule with comment period (82 FR 59449 
and 59450), we removed ASC-7. We stated our belief based on the 
available literature 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. Thus, 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 and noted that the measure is not overly 
burdensome (82 FR 59449).
    We stated in the CY 2023 OPPS/ASC proposed rule that 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 (87 FR 44748 
through 44749).
    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.220 221 Given the 
relatively small number of HCPCS codes utilized by most ASCs, we 
believe that patients may benefit from the public reporting of 
facility-level volume measure data that illuminates which procedures 
are performed across ASCs, provides the ability to track volume changes 
by facility and procedure category, and can serve as an indicator for 
patients of which facilities are experienced with certain outpatient 
procedures. 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.
---------------------------------------------------------------------------

    \220\ 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.
    \221\ 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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    Furthermore, we stated in the CY 2023 OPPS/ASC proposed rule (87 FR 
44748 through 44749) that 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

[[Page 72129]]

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 noted in the CY 2023 OPPS/ASC proposed rule (87 FR 44748 through 
44749) 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.\222\ 
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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    \222\ 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.
---------------------------------------------------------------------------

(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 sought 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 sought comment on what volume data ASCs 
currently collect and if it is feasible to submit these data to the 
ASCQR Program, to minimize the collection and reporting burden of an 
alternative, new volume measure. Additionally, we sought comment on an 
appropriate timeline for implementing and publicly reporting the 
measure data.
     Specifically, we invited public 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 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.
    Comment: One commenter supported the reintroduction of a volume 
measure, stating that the measure would provide critical data about ASC 
quality to consumers.
    Response: We thank the commenter for supporting the 
reimplementation of a procedure volume measure in the ASCQR Program. We 
will take this comment into consideration as part of future notice-and-
comment rulemaking.
    Comment: Some commenters did not support the potential future 
reimplementation of ASC-7 or adoption of another volume measure. 
Several commenters expressed their belief that volume is not a clear 
indicator, or never is an indicator, of quality care and procedure 
volume data would not be useful to consumers. A few commenters also 
noted that the procedure categories for ASC-7 are too broad to provide 
meaningful information to consumers who want to know a facility's 
experience with a specific procedure. A few other commenters stated 
that the lack of evidence linking volume and clinical quality would 
make a volume measure inconsistent with the Meaningful Measures 2.0 
Framework goal to ``promote innovation and modernization of all aspects 
of quality.'' A few commenters also expressed their concern with the 
high reporting burden.
    Some commenters expressed concern that reporting procedure volume 
for the ASCQR Program would lead to an unnecessary duplication of data 
because CMS can determine facility volumes using existing claims data.
    Another commenter did not support the implementation of any 
additional measures during a public health emergency.
    Response: We thank the commenters for their feedback and 
acknowledge their concerns. We agree that CMS can determine facility 
volumes for procedures performed using Medicare FFS claims. However, 
the specifications for the ASC-7 measure include reporting data for 
non-Medicare patients. We refer readers to the specifications for ASC-7 
which are available in the ASC Specifications Manual version 5.1 
available at: https://qualitynet.cms.gov/asc/specifications-manuals#tab6. As stated in the Specifications Manual, ASC-7 measures 
the aggregate count of the most commonly performed surgical procedures 
for seven categories: Eye, Gastrointestinal, Genitourinary, 
Musculoskeletal, Nervous System, Respiratory, and Skin.
    We reiterate our belief grounded in the published scientific 
literature that volume metrics serve as an indicator of which 
facilities are experienced with certain outpatient procedures and 
assist consumers in making informed decisions about where they receive 
care, acknowledging that many studies have shown that volume does serve 
as an indicator of quality of care.223 224 One study found 
that patients who had total hip arthroplasties performed at high-volume 
hospitals had lower rates of surgical site infections, complications, 
and mortality compared to patients at low-volume hospitals.\225\ 
Another study found that congestive heart failure (CHF) patients who 
stayed in hospitals with more experience in managing CHF received 
higher quality care and experienced better outcomes.\226\
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    \223\ Ogola, Gerald O. Ph.D., MPH; Crandall, Marie L. MD, MPH; 
Richter, Kathleen M. MS, MBA, MFA; Shafi, Shahid MD, MPH. High-
volume hospitals are associated with lower mortality among high-risk 
emergency general surgery patients. Journal of Trauma and Acute Care 
Surgery: September 2018--Volume 85--Issue 3--p 560-565 doi: 10.1097/
TA.0000000000001985.
    \224\ Xu, B., Redfors, B., Yang, Y., Qiao, S., Wu, Y., Chen, J., 
Liu, H., Chen, J., Xu, L., Zhao, Y., Guan, C., Gao, R., & 
G[eacute]n[eacute]reux, P. (2016). Impact of Operator Experience and 
Volume on Outcomes After Left Main Coronary Artery Percutaneous 
Coronary Intervention. JACC. Cardiovascular interventions, 9(20), 
2086-2093. https://doi.org/10.1016/j.jcin.2016.08.011.
    \225\ Mufarrih, S.H., Ghani, M.O.A., Martins, R.S. et al. Effect 
of hospital volume on outcomes of total hip arthroplasty: a 
systematic review and meta-analysis. J Orthop Surg Res 14, 468 
(2019). https://doi.org/10.1186/s13018-019-1531-0.
    \226\ Joynt, K.E., Orav, E.J., & Jha, A.K. (2011). The 
association between hospital volume and processes, outcomes, and 
costs of care for congestive heart failure. Annals of internal 
medicine, 154(2), 94-102. https://doi.org/10.7326/0003-4819-154-2-201101180-00008.
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    The adoption of such measure would follow our standard measure 
adoption process, including our consideration of relevant measures 
endorsed by a consensus building entity. A volume measure would not be 
presented to consumers alone, but would be

[[Page 72130]]

displayed complementary with other program quality measures that are 
focused on clinical processes and outcomes. We will take the 
commenters' feedback into consideration as we consider the potential 
future adoption of a volume measure that is useful to consumers and 
appropriately assesses the quality of care provided in the outpatient 
setting.
    Comment: Several commenters provided recommendations for improving 
a potential volume measure in the ASCQR Program. A few commenters 
recommended that CMS consider volume reporting on a more granular level 
than the proposed clinical areas, such as by procedure or insurance 
type. One commenter stated that the volume measure should expand the 
reporting of clinical areas beyond the existing procedure categories. 
Another commenter suggested that CMS adopt a volume measure that is 
limited to a specific set of procedures. A few commenters recommended 
the adoption of an all-payer volume indicator to provide useful data 
about facilities that also serve non-Medicare fee-for-service (FFS) 
patients, and one commenter further noted that volume reporting by 
insurance type may be useful for monitoring equity or social risk 
factors.
    One commenter stated that if a volume measure is adopted, it should 
be used only for confidential facility-level feedback. One commenter 
encouraged CMS to develop a volume electronic clinical quality measure 
(eCQM) instead of a measure that requires web-based submission through 
the Hospital Quality Reporting (HQR) portal. Another commenter stated 
that a volume measure should receive NQF endorsement before being 
proposed for adoption.
    Several other commenters offered alternatives to reimplementing a 
volume measure. A few commenters encouraged CMS to use volume data that 
is already available to CMS through claims-based data. A few other 
commenters recommended that CMS focus on adopting more meaningful 
measures of quality and safety of care which have emerged since ASC-7 
was removed. Another commenter expressed that a pain management measure 
should not be developed based on a volume measure because the 
healthcare system is already overburdened by the ongoing opioid 
epidemic and the COVID-19 PHE.
    Response: We thank the commenters for their recommendations to 
provide meaningful information to consumers and improve the quality of 
ASC care and will take these comments into consideration for future 
rulemaking. We note that the ASC-7 measure, when required for the ASCQR 
Program, included the submission of Medicare and non-Medicare volume 
data; conversely, relying solely on the use of Medicare FFS claims data 
to simplify reporting would limit a future volume measure to only this 
payer.
(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.\227\ 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.\228\ 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.
---------------------------------------------------------------------------

    \227\ Social Security Act section 1848(o)(2), amended by HITECH 
Act of 2009 section 4101 (February 2009).
    \228\ 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.\229\ 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.\230\ 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.\231\
---------------------------------------------------------------------------

    \229\ 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.
    \230\ 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.
    \231\ 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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    In the CY 2023 OPPS/ASC proposed rule (87 FR 44750), we referred 
readers to the FY 2022 IPPS/LTCH PPS final rule (86 FR 45460 through 
45498) where we finalized changes to the Promoting Interoperability 
Program (87 FR 49319 through 49371), and the FY 2023 IPPS/LTCH PPS 
proposed rule (87 FR 28576 through 28612) which proposed 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: 
\232\
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    \232\ 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.
---------------------------------------------------------------------------

     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 sought comment in the CY 2023 OPPS/ASC proposed rule to explore 
how ASCs are implementing tools in their facilities toward the goal of 
interoperability (87 FR 44750). We are considering the usefulness of 
eCQMs in ASCs to aid in delivering effective, safe, efficient, patient-
centered, equitable, and timely care.\233\ 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

[[Page 72131]]

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 sought 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 eCQMs.
---------------------------------------------------------------------------

    \233\ 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 invited 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.\234\ 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.235 236 An example of Promoting Interoperability 
measures potentially applicable for the ASC setting can be found in 
Table 99. We welcomed comment on these specific measure examples, 
including whether ASCs believe these measures would be appropriate and 
feasible for use in ASCs.
---------------------------------------------------------------------------

    \234\ Centers for Medicare and Medicaid Services. Quality 
Payment Program Special Statuses. 2022. Available at: https://qpp.cms.gov/mips/special-statuses.
    \235\ 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.
    \236\ 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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[GRAPHIC] [TIFF OMITTED] TR23NO22.137

BILLING CODE 4120-01-C
    We invited public comment on this topic.
    Comment: Several commenters supported our goal of promoting 
interoperability by transitioning toward eCQMs to promote delivery of 
effective, safe, patient-centered, and timely care and increase 
alignment across quality reporting programs.
    Response: We thank the commenters for their support.
    Comment: Several commenters expressed concern regarding our 
consideration of a future shift in data reporting via the EHR. A few 
commenters expressed concern about the lack of ASCs currently using EHR 
systems and the financial and administrative burden of implementing an 
EHR system. A few commenters expressed concern about the lack of 
Federal requirements for ASCs to procure an EHR system and the lack of 
financial incentives for EHR adoption for ASCs, unlike hospitals which 
received such funding under HITECH Act of 2009.
    Response: We thank the commenters for their feedback. We sought 
comment to better understand the barriers to EHR adoption and 
interoperability in the ASC setting. We reiterate the importance of use 
of technology and data standards as a way to increase alignment across 
quality reporting programs, such as the Hospital OQR Program. We 
believe streamlining the reporting requirements, and aligning and 
harmonizing measures for the quality reporting programs will 
significantly ease the reporting burden on clinicians and ASCs, thus 
allowing clinicians to devote more time to direct patient care. Our 
goal is to reduce reporting burden for ASCs in the long term and 
promote patient-centered care.
    Establishing such a system will require additional infrastructure 
development by ASCs, however, once the infrastructure is accomplished, 
the adoption of many measures that rely on data obtained directly from 
EHRs would enable us to expand the ASCQR Program measure set with less 
cost and burden to ASCs. We believe that automatic data collection and 
streamlined reporting, like those in other quality reporting programs, 
will continue to minimize burden on other

[[Page 72134]]

care settings, a goal which we outlined in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49181). We will take commenters feedback into 
consideration for future rulemaking.
    Comment: Many commenters had recommendations regarding CMS' 
consideration of a future shift in reporting to EHRs. A few commenters 
recommended that any EHR requirements be gradually phased in to 
minimize burden on ASCs. One commenter recommended that CMS evaluate a 
hybrid paper and electronic record model. One commenter recommended 
that CMS assess the current capabilities of the ASC industry through a 
detailed environmental scan. One commenter recommended that 
interoperability initiatives be voluntary, with no penalties or 
negative ramifications on ASCs that fail to report. One commenter 
recommended that CMS provide sufficient financial support, resources, 
and time for ASCs to make the transition to the EHR. A few commenters 
recommended the development and use of health information technology, 
expanding past EHRs, to create a patient's care pathway so that digital 
data can be shared across all patient care experiences in order to 
provide access to a complete and comprehensive healthcare record which 
could improve patient satisfaction, patient outcomes, and affordability 
of care. One commenter recommended that CMS also consider use of non-
certified EHRs in order to encourage innovation and provide EHR systems 
to smaller provider groups that otherwise would be financially and 
resourcefully burdened.
    Response: We thank the commenters for their recommendations and 
will take them into consideration for future rulemaking.
    Comment: A few commenters recommended specific measure 
requirements, should we shift to EHR reporting for ASCs in the future. 
One commenter recommended that CMS use the Meaningful Measures 2.0 
Framework when developing eCQMs for ASCs. One commenter recommended 
that CMS use the May 2022 Officer of Inspector General (OIG) report, 
which recommended a significant expansion of measures, when developing 
eCQM measures for ASCs. One commenter recommended aligning eCQM 
measures across different quality reporting settings.
    Response: We thank the commenters for their recommendations and 
will take them into consideration for future rulemaking.
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 did not propose any changes to these 
policies in the CY 2023 OPPS/ASC 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 did not propose any changes to these policies in the CY 2023 
OPPS/ASC 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 [now 
referred to as the Hospital Quality Reporting (HQR) system] security 
official requirements, including requirements for setting up a 
QualityNet account and the associated timelines. These procedural 
requirements are codified at 42 CFR 416.310(c)(1)(i). We did not 
propose any changes to these policies in the CY 2023 OPPS/ASC 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 did not propose any changes to 
these policies in the CY 2023 OPPS/ASC proposed rule.

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

    Previously finalized quality measures and information collections 
discussed in this section were approved by OMB under control number 
0938-1270 (expiration date August 31, 2025). An updated PRA package 
reflecting the updated information collection requirements will be 
submitted for approval under the same OMB control number.
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 did not propose any changes to these policies in 
the CY 2023 OPPS/ASC 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 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 did 
not propose any changes to

[[Page 72135]]

these policies in the CY 2023 OPPS/ASC 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 did not propose any changes to these policies in the CY 2023 
OPPS/ASC 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 did not propose any changes to these policies in 
the CY 2023 OPPS/ASC 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 did 
not propose any changes to these policies in the CY 2023 OPPS/ASC 
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). 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. We did not 
propose any changes to these policies in the CY 2023 OPPS/ASC proposed 
rule.
e. ASCQR Program Data Submission Deadlines
    We refer readers to the CY 2021 OPPS/ASC final rule with comment 
period (85 FR 86191) for a detailed discussion of our data submission 
deadlines policy, which we codified at 42 CFR 416.310(f). We did not 
propose any changes to this policy in the CY 2023 OPPS/ASC 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 did not propose any changes to this policy in 
the CY 2023 OPPS/ASC 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 did not propose any changes 
to this policy in the CY 2023 OPPS/ASC 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) request policy. We did not propose any changes to this 
policy in the CY 2023 OPPS/ASC proposed rule.

E. 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

[[Page 72136]]

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 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 the CY 2013 OPPS/ASC 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 proposed 
the continuation of these policies for CY 2023. We did not receive any 
public comments on our proposal, and are finalizing 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 and 68494) for a detailed discussion of the 
priorities we consider for other quality programs for outpatient 
settings including the Hospital OQR and the Ambulatory

[[Page 72137]]

Surgical Center Quality Reporting (ASCQR) Programs.
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: (1) 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 (2) 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 XVIII of this final rule with comment 
period for 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, the Secretary is required 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 subsection (d) hospitals defined as rural 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 \237\ 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.\238\ The analysis concluded that 68 would consider 
converting.\239\ In contrast, an industry analysis--based on estimated 
REH reimbursement and several financial assumptions \240\ and four 
simulation methods--estimated that up to 600 CAHs would benefit from 
conversion to REH status.\241\ 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 discussed possible approaches for addressing these 
low volume concerns in section XVI.B of the CY 2023 OPPS/ASC proposed 
rule (87 FR 44764).
---------------------------------------------------------------------------

    \237\ 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/.
    \238\ Ibid. at 5.
    \239\ Ibid. at 1.
    \240\ 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.
    \241\ 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 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 included issues raised and 
suggestions made from that Request for Information in the CY 2023 OPPS/
ASC proposed rule (87 FR 44755) 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 are voluntary for CAHs. We intend to adopt measures for the 
REHQR Program that

[[Page 72138]]

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 100 and 101 
of this final 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,\242\ 
which is greater than the number of facilities having data displayed in 
Table 101 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.\243\ Table 100 reflects data for 
reporting by rurally located subsection (d) hospitals with not more 
than 50 beds, and Table 101 reflects data for reporting by CAHs for the 
most recent Care Compare results available. These analyses presented 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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    \242\ https://www.flexmonitoring.org/sites/flexmonitoring.umn.edu/files/media/PA_Annual%20Report_2020.pdf 
(Accessed June 5, 2022).
    \243\ 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.\244\ 
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.\245\ 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 REHQR 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 of digital quality 
measures in place of chart-abstraction. In addition, we believe that, 
to the extent possible, existing quality measures should align across 
quality reporting programs, Medicare, Medicaid, and other payers to 
minimize reporting burden.
     
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    \244\ 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.
    \245\ Ibid at 6 & 7.
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    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.
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.\246\ 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

[[Page 72143]]

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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    \246\ 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 service 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 meaningful distinctions between facilities. Possible approaches 
to quality measurement where low volume is expected are discussed in 
section XVI.B of the CY 2023 OPPS/ASC proposed rule and section XVI.B 
of this final 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.\247\ 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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    \247\ 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 summary of the RFI and comments we 
received in the FY 2023 IPPS/LTCH PPS final rule for details on these 
considerations (87 FR 48780). We also refer readers to section XVI.B of 
this final rule with comment period for a summary of comments received 
in response to the RFI. In this section of the final rule, we discuss 
comments and feedback on the application of these principles to a 
quality reporting program for REHs.
    We discussed possible measures of equity for use in a REHQR Program 
in section XVI.B of the CY 2023 OPPS/ASC proposed rule (87 FR 44760).
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.\248\ In the CY 2023 OPPS/ASC 
proposed rule (87 FR 44760), we requested comment on a selection of 
measures from this report as we review measures for potential future 
inclusion in the REHQR Program. We sought 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.\249\
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    \248\ https://www.hrsa.gov/sites/default/files/hrsa/advisory-committees/rural/2021-rural-emergency-hospital-policy-brief.pdf 
(Accessed April 8, 2022).
    \249\ https://qualitynet.cms.gov/outpatient/specifications-manuals (Accessed May 20, 2022).
---------------------------------------------------------------------------

(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 and 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 and 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 Tables 101 and 102 of this final rule with comment period). 
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

[[Page 72144]]

sending facility have been noted as most important: (1) performance of 
a prehospital electrocardiogram and (2) having established transfer 
protocols.\250\ 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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    \250\ 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 the OP-40 STEMI 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 100 and 101 above). However, about 70 percent of CAHs 
reported at least one case for this measure through the MBQIP 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 (see Table 102 
below) 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 102 below was 
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).
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    \251\ https://www.healthcatalyst.com/wp-content/uploads/2021/05/Data-Driven-Operations-Improve-ED-Efficiency.pdf.
[GRAPHIC] [TIFF OMITTED] TR23NO22.142

BILLING CODE 4120-01-C
(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.\251\ 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 100 
above). 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.
(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-

[[Page 72145]]

20 was removed from the Hospital OQR Program in the CY 2018 OPPS/ASC 
final rule beginning with CY 2020 payment determinations (82 FR 52570). 
During regular measure maintenance, specific concerns were raised by a 
Technical Expert Panel (TEP) 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, who 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 should be 
adopted, 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 (5) 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.
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.\252\ 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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    \252\ https://www.ruralcenter.org/resource-library/edtc-measure-data-reporting-resources (Accessed May 12 2022).
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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 
focused on two current measures that have publicly reported data and 
that focus on services expected to be provided by hospitals eligible 
for REH conversion: (1) OP-10 Abdomen Computed Tomography (CT)--Use of 
Contrast Material and (2) 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.\253\ 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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    \253\ 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.
    We sought comment on selected Hospital OQR Program measures 
recommended by the National Advisory Committee on Rural Health and 
Human Services as well as additional, claims-based measures for 
potential inclusion in an REHQR Program.
    We received public comments on these topics.
    Comment: Many commenters supported CMS' stated efforts to implement 
quality reporting for REHs and the adoption of Hospital OQR Program 
measures; specifically, highly reported chart-abstracted and NQF-
endorsed measures. Some commenters supported the inclusion of MBQIP

[[Page 72146]]

measures, as most CAHs already have processes in place for performance 
improvement initiatives based on measure results. Several commenters 
supported adoption of limited and claims-based measures to reduce 
financial and administrative burden associated with collecting quality 
data, with at least one stating concerns regarding the current, ongoing 
COVID-19 PHE. Similarly, several commenters supported the use of 
digital measures as a means of reducing provider burden. Some 
commenters stated strong support for OP-2, OP-3, and OP-4 with multiple 
commenters expressing the importance of timeliness and appropriateness 
of STEMI care, further citing persistent disparities in the outcomes 
for AMI patients treated in rural facilities. A commenter also 
supported the use of OP-20 in the REHQR Program; however, they 
requested detailed guidance if adopted due to concerns over the 
accuracy of EHR time stamps used to capture information. Some 
commenters supported adoption of OP-22 and OP-18, as well as additional 
Hospital OQR measures, OP-5 measure (Median Time to ECG) and OP-23: 
Head CT or MRI Scan Results for Acute Ischemic Stroke or Hemorrhagic 
Stroke who Received Head CT or MRI Scan Interpretation Within 45 
minutes of ED Arrival, as indicators relating to access and timeliness.
    Response: We thank the commenters for their support and 
suggestions. We agree that inclusion of appropriate quality measures in 
REHs would promote quality, safety, accessibility, and overall improve 
patient experience and patient outcomes. We will take all the feedback 
into consideration for future rulemaking.
    Comment: Several commenters neither supported nor opposed CMS' 
measure recommendations, stating concerns around variables and 
uncertainties surrounding Conditions of Participation, types of 
services to be provided, and other logistical expectations for REHs.
    Response: We thank the commenters for their feedback. We agree that 
the standards for REHs as a new Medicare provider type had not been 
finalizedat the time of the CY 2023 OPPS/ASC proposed rule, and they 
could impact the implementation of appropriate quality measures for 
REHs. We will take all REH policies such as those finalized in section 
XVIII of this final rule with comment period into consideration for 
future rulemaking.
    Comment: Many commenters did not support any of the measures 
outlined in the proposed rule for inclusion in the REHQR Program, 
stated that the Hospital OQR measures were inappropriate due to unique 
challenges associated with REHs; particularly, uncertainties around 
types of services that will be provided by this new provider type. 
Several commenters expressed concerns for adopting measures that are 
not currently active in other quality programs, not NQF endorsed, or 
which have not been vetted through consensus building body to ensure 
relevance for the REHs. Multiple commenters urged CMS to develop REH-
specific measures, including ones that may not require aggregation over 
longer timeframes, as timeliness of results could affect the usefulness 
of the data in ongoing quality improvement efforts.
    Some commenters also expressed concerns for adopting measures that 
are either removed from the Hospital OQR Program, digital, or chart-
abstracted, due to high administrative and financial burden. A few 
commenters specifically opposed the adoption of OP-2, OP-3, and OP-4 as 
these measures were removed from the Hospital OQR Program and had low 
public reporting rates. These commenters also raised concerns regarding 
high administrative burden associated with chart-abstracted measures. 
Many commenters opposed the adoption of ED-throughput and volume 
measures such as OP-18, OP-20, OP-22, and OP-32 questioning the 
clinical relevance, reliability, and usefulness of these measures in 
REHs.
    Some commenters provided their view that there is significant 
variation in patient cases presenting at any specific REH in contrast 
with other types of facilities which could affect performance-related 
metrics. These commenters also expressed concern regarding the impact 
of factors outside of facility's control, such as transfer transport or 
receiving facility capacity. A few commenters in referencing OP-10, 
acknowledged the importance of avoiding potential service overuse of 
services, but recognized compounding factors for clinical decision-
making.
    Response: We thank the commenters for their feedback. We 
acknowledge the variability in the services REHs could provide and will 
continue to assess the relevancy of specific quality measures as the 
number of hospitals that convert to REH status and the types of 
services provided evolves. We will take the commenters' feedback into 
consideration for future rulemaking.
    Comment: Some commenters urged CMS to focus the REHQR Program on 
incentives over penalties, with several commenters encouraging the 
program to be a pay-for-reporting program, at least in the beginning. 
Other comments suggested at least a one-year reporting delay to give 
facilities time to transition (that is, develop and become comfortable 
with their data collection mechanisms), and implement a potentially 
phased or slow approach to adding measures. One commenter suggested 
making the entire program voluntary to reduce burden, while another 
insisted on it being mandatory to ascertain quality outcomes. Several 
commenters urged CMS to contextually develop REH-specific measures, 
including ones that may not require extended performance periods, as 
timeliness of results could affect the usefulness of the data in 
ongoing quality improvement efforts. Many commenters also urged CMS to 
provide support, such as technical assistance and flexibilities, to 
implement quality measurement in this new setting.
    In addition, multiple commenters sought clarification on the intent 
of the REHQR Program, given the uniqueness of its existence that's more 
related to providing access to care than aiding patients in determining 
best places for care.
    Response: We thank the commenters for their input related to 
ensuring successful program outcomes. We will take all suggestions into 
consideration for future rulemaking.
d. Comments on Additional Measurement Topics and for Suggested Measures 
for REH Quality Reporting
    Our request for information in the CY 2022 OPPS/ASC proposed rule 
(86 FR 42285 through 42289) yielded suggested additional topics for 
quality measures appropriate to the REH setting. We requested comment 
on the below additional topics and requested suggestions for specific 
measures to assess the patient experience, outcome, and processes 
related to these topics. In addition, we requested 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.\254\ Additionally, 
section 301 of Division P of the Consolidated Appropriations Act (CAA), 
2022 extended certain telehealth flexibilities for Medicare patients 
for

[[Page 72147]]

151 days after the official end of the Federal public health emergency 
(PHE).\255\ The PHE was most recently extended on October 13, 2022 to 
January 11, 2023.\256\ 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.\257\
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    \254\ https://telehealth.hhs.gov (Accessed April 8, 2022).
    \255\ Public Law 117-103.
    \256\ https://aspr.hhs.gov/legal/PHE/Pages/covid19-13Oct2022.aspx (Accessed Oct. 14, 2022).
    \257\ 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 ED could allow 
for critical specialist knowledge transfer and reduce patient transfers 
and wait times.\258\ 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.\259\
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    \258\ https://telehealth.hhs.gov/providers/telehealth-for-emergency-departments/ (Accessed May 31, 2022).
    \259\ 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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(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.\260\ 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.\261\ This report identified the greatest (33 
percent) underlying cause of pregnancy-associated death in rural 
counties was attributed to ``other injuries,'' most of which were the 
result of motor vehicle crashes, as opposed to `all medical' (31 
percent), drug overdose (21 percent), suicide (10 percent), or homicide 
(5 percent).\262\ This was in contrast with the 4 to 10 percent of this 
category's attribution in the non-rural areas.\263\
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    \260\ 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).
    \261\ 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.
    \262\ Ibid. at 28.
    \263\ 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 obstetric (OB) services in ``OB deserts.'' 
\264\ 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.\265\ 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.\266\
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    \264\ https://telehealth.hhs.gov/providers/telehealth-for-maternal-health-services/bridging-the-gaps-with-telehealth/ 
(Accessed May 31, 2022).
    \265\ https://telehealth.hhs.gov/providers/telehealth-for-maternal-health-services/telehealth-and-high-risk-pregnancy/ 
(Accessed May 31, 2022).
    \266\ https://telehealth.hhs.gov/providers/telehealth-for-maternal-health-services/preparing-patients-and-providers/ (Accessed 
May 31, 2022).
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(3) Behavioral Health
    Rural populations are disproportionately affected by mental health 
concerns including substance use disorders (SUD).267 268 For 
example, suicide rates and drug overdose related deaths are especially 
on the rise among the rural population.269 270 Roughly 6.5 
million individuals, or about one-fifth of the rural population, had a 
mental illness in 2019.\271\ 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.\272\ 
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.\273\ There are also higher reported rates of prescription opioid 
misuse among rural residents, but reduced availability of outpatient 
substance use treatment services, with nearly four times greater 
likelihood of availability in urban areas than in rural areas.\274\
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    \267\ 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.
    \268\ 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.
    \269\ 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.
    \270\ 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.
    \271\ 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.
    \272\ 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.
    \273\ 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.
    \274\ 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,\275\ or offer teletherapies which can reduce stigma and privacy 
concerns.\276\
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    \275\ https://telehealth.hhs.gov/providers/telehealth-for-behavioral-health/tele-treatment-for-substance-use-disorders/ 
(Accessed May 31, 2022).
    \276\ https://telehealth.hhs.gov/providers/telehealth-for-behavioral-health/individual-teletherapy/ (Accessed May 31, 2022).
---------------------------------------------------------------------------

(4) ED Services
    Emergency departments (ED) 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.

[[Page 72148]]

    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.\277\ 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.\278\ 
Similarly, we recently sought stakeholder comments on a Medicaid 
measure under development, the All-Cause ED Utilization for Medicaid 
Beneficiaries measure.\279\ 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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    \277\ 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).
    \278\ 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.
    \279\ https://www.cms.gov/files/document/all-cause-ed-utilization-medicaid-beneficiaries-measure-framing-document.pdf 
(Accessed April 7, 2022).
---------------------------------------------------------------------------

    A patient who returns for an unscheduled visit to the emergency 
department (ED) shortly after initial discharge from the (that is, 
within 2-30 days) is called a ``bounce-back''.\280\ 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.
---------------------------------------------------------------------------

    \280\ 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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(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.\281\ The Hospital Commitment to Health Equity measure,\282\ 
which was finalized in the FY 2023 IPPS rule for the Hospital Inpatient 
Quality Reporting program (87 FR 48780), 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.
---------------------------------------------------------------------------

    \281\ https://www.cdc.gov/ruralhealth/about.html (Accessed June 
2, 2022).
    \282\ 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 sought public comment on the above additional measurement topics 
for potential future quality measures and on the ways to bridge various 
gaps to render equitable, quality of care in rural and rural emergency 
settings.
    We received public comments on these topics.
    Comment: Many commenters provided support and suggestions to 
collect quality data for a wide range of topics to assess quality of 
care provided in REHs. Multiple commenters supported collecting quality 
measure data for telehealth, mental health, substance use disorders, 
emergency department services, maternal health, patient safety, 
nutrition, and health equity.
    Several commenters emphasized the appropriateness and importance of 
triage and transfer along with patient experience in the EDs, further 
recommending the MBQIP measure for Emergency Department Transfer 
Communication (EDTC) and the adoption of Emergency Department Consumer 
Assessment of Healthcare Providers and Systems (ED CAHPS) survey in 
REHs. Some commenters suggested focusing quality measures on emergency 
services, such as time-sensitive conditions, as the main and consistent 
care between facilities of this setting, and unscheduled ED return 
visits. Several commenters encouraged CMS to adopt measures from other 
programs across the agency in an effort to align and reduce burden. A 
couple of commenters also recommended National Quality Forum's (NQF) 
Rural Health Advisory Group 2022 Key Rural Measures, noting relevance 
to rural setting and resiliency to low volume challenges. Several 
commenters supported inclusion of quality measures specific to 
telehealth services to ensure access to specialty care such as 
behavioral health and maternal health and provide quality of care that 
is comparable to in-person services in rural setting. Some commenters 
supported the inclusion of telehealth measures as a means of increasing 
access to medical expertise and maternal, mental, and behavioral health 
services. One commenter recommended measures reported in the NQF's 
Rural Telehealth and Healthcare System Readiness Measurement Framework.
    Multiple commenters recommended screening measures for conditions 
such as depression, substance use disorders, and malnutrition, as well 
as, structural measures for maternal health and health equity to 
further align with other quality programs. Many commenters agreed that 
health equity is an important aspect of healthcare and should be 
incorporated into the REHQR Program. Several commenters supported 
measure stratification by income, race, age, ethnicity, and dual-
eligibility to increase accountability and advance equitable care in 
rural setting. Some commenters suggested adjustments to health equity 
measure stratification, including to address risk and regional 
variations in community resources, as well as making the reporting of 
health equity measures voluntary to keep burden low.
    One commenter sought to clarify the definition of ``ED bounce 
back''.
    Response: We thank commenter' for their input on various topics for 
future quality measures for REHs. We appreciate the considered feedback 
provided on assessing quality of care provided in the rural setting. We 
clarify that ``ED bounce backs'' can be defined as a patient who 
returns for an unscheduled visit to the ED shortly after initial 
discharge (that is, within 2-30 days); however, the study cited relied 
on a shorter timeframe.283 284 We will take the commenters' 
feedback into consideration for future rulemaking.
---------------------------------------------------------------------------

    \283\ Gabayan, G, et al. (January 17, 2013) Factors Associated 
With Short-Term Bounce-Back Admissions After Emergency Department 
Discharge. Annals of Emergency Medicine, 62(2): 136-144. https://doi.org/10.1016/j.annemergmed.2013.01.017.https://doi.org/10.1016/j.annemergmed.2013.01.017.
    \284\ Hsia, Renee, et al. (November 2013). Is Emergency 
Department Crowding Associated With Increased ``Bounceback'' 
Admissions? Medical Care, 51(11): 1008-1014. doi: 10.1097/
MLR.0b013e3182a98310.
---------------------------------------------------------------------------

    Comment: Some commenters expressed concerns regarding the

[[Page 72149]]

capabilities of REHs to capture technology-based data, including 
telehealth and digital measures, given constrained resources. Multiple 
commenters recognized the capacity for digital measures to improve 
accuracy and decrease burden, and even encouraged the conversion or use 
of digital measures in the REHQR Program. Other commenters pointed out 
potential concerns, such as the financial investment and staff 
expertise required to successfully report digital measures, 
particularly as it related to EHR capabilities, which low-resourced 
facilities may not have.
    Several commenters suggested delaying reporting requirements on 
Social Determinants of Health or Social Drivers of Health (SDOH) to 
afford REHs sufficient time to develop processes to complete and 
document screenings. One commenter also sought clarification on how a 
health equity commitment measure would differentiate between hospitals 
and utilize stratified measure results to improve care. Similarly, some 
commenters expressed concerns regarding issues related to data 
collection, such as resource limitations, lack of standardization, and 
low case volumes potentially risking patient privacy. Another commenter 
noted the issue with ``bounce-back'' measurement, given the uniqueness 
of care-seeking in an REH that may lead patients to present for 
routine, follow-up, or new condition needs which could skew 
performance-based metrics.
    Response: We thank the commenters for their input as we continue to 
evaluate appropriate measures for the REHQR Program. We will take the 
commenters' feedback into consideration via future rulemaking.
e. Addressing Concerns Regarding Small Case Numbers
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44759), we noted that 
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.\285\ The panel 
recommended, 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 quality measures based on 
Medicare Fee-For-Service (FFS) claims.
---------------------------------------------------------------------------

    \285\ 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.
---------------------------------------------------------------------------

    Another panel recommendation was 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.\286\ 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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    \286\ 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 requested comment on these recommendations for addressing the 
low volume issues for performance measurement of rural providers.
    The comments and our responses are set forth below.
    Comment: Most commenters supported the acknowledgment of low-case 
volumes when considering measures for the REHQR Program. Several 
commenters recommended reliance on NQF processes and reports, such as 
rurally-recommended measures and the ``borrowing strength'' methodology 
to adequately address low volume issues. However, some commenters 
raised concerns regarding the reliability and validity of measures 
calculated with low volumes, which could lead to misinterpretation of 
data, if publicly reported. One of these commenters, additionally, 
noted how low case volumes potentially risk patient privacy. Many of 
these commenters suggested either aggregating measure data over longer 
periods of time to ensure adequate data collection, applying 
appropriate statistical methodology, or removing minimum case 
thresholds to allow REHs to report all data and publicly report data, 
annotating low case volume appropriately via footnotes.
    Response: We thank commenters for their input on this topic. We 
acknowledge the critical but complicated nature of addressing low case 
volumes in the REHQR Program to ensure viable and useful data. We are 
cognizant of the influence case volumes could have on measure selection 
for reliability and usefulness for public reporting. We will continue 
to assess options to ensure the integrity of the program and its 
measures as we develop it.

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 
section XVI.C of the CY 2023 OPPS/ASC proposed rule, we proposed 
foundational administrative requirements for REHs participating in the 
REHQR Program (87 FR 44765).
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

[[Page 72150]]

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.\287\ 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. In the CY 2023 OPPS/ASC 
proposed rule (87 FR 44765), we proposed 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 
proposed 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.
---------------------------------------------------------------------------

    \287\ https://qualitynet.cms.gov/outpatient/oqr/apu.
---------------------------------------------------------------------------

    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 will not be required.
    We invited public comment on this proposal.
    We did not receive comments on the proposal. For the reasons stated 
above and in the proposed rule (87 FR 44765), we are finalizing this 
proposal without modification. We note that 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 \288\ 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 \289\ reimburses transplant hospitals \290\ 
(THs) for their organ acquisition costs under reasonable cost 
principles \291\ 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 \292\ 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 \293\ on an annual basis.
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    \288\ 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 principles accounts for these 
differences and ensures that providers are paid appropriately for 
their share of organ acquisition costs.
    \289\ 42 CFR 412.2(e)(4) and 412.113(d).
    \290\ 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.
    \291\ See 42 CFR 412.113(d); HCFA Ruling 87-1 (April 1987); CMS 
Ruling 1543-R (December 2006).
    \292\ Id. Section 1138(b)(1)(F) of the Act; 42 CFR 
413.1(a)(1)(ii)(A); 413.420(a).
    \293\ 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,\294\ 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.
---------------------------------------------------------------------------

    \294\ 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 proposals at Sec.  413.418, with modifications, to 
require both donor community hospitals and transplant hospitals to bill 
OPOs for hospital services provided to deceased donors, the lesser of 
their customary charges that are reduced to cost by applying their most 
recently available hospital specific cost-to-charge ratio for the 
period in which the service was rendered, or a negotiated rate. We also 
finalized our proposal to move existing organ acquisition payment 
regulations, and portions of existing kidney acquisition regulations, 
within 42 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44765), we proposed 
additional revisions, clarifications and codifications pertaining to 
Medicare's

[[Page 72151]]

organ acquisition payment policies. In section XVII.B of the CY 2023 
OPPS/ASC proposed rule (87 FR 44766), we proposed 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44767), we proposed 
that organ acquisition costs include certain hospital services provided 
to a deceased donor or a donor whose death is imminent. In section 
XVII.D of the CY 2023 OPPS/ASC proposed rule (87 FR 44768), we proposed 
technical corrections to certain regulations. In section XVII.E of the 
CY 2023 OPPS/ASC proposed rule (87 FR 44768), we proposed to clarify 
the appropriate allocation of administrative and general costs for THs. 
Additionally, in section XVII.F of the CY 2023 OPPS/ASC proposed rule 
(87 FR 44769), we solicited 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 standard acquisition 
charge (SAC) for kidneys; 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 sharing purposes for pancreata for islet 
cell transplant for these trials is under Sec.  413.406(a). Under 42 
CFR 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 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 intended to be used for research 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 intended 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 intended 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 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 interested parties. 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 
organs intended for research.
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44767), we proposed to 
require that THs and OPOs exclude organs used for research from the 
denominator (total usable organs) in the ratio used to determine 
Medicare's share of organ acquisition costs on the Medicare cost 
report. Research organs include any organ (with the exception of 
certain pancreata as set forth in Sec.  413.406(a)) used for research, 
regardless of whether the organ was intended for research or intended 
for transplant under Sec.  413.412(a) but subsequently determined 
unsuitable for transplant and instead furnished for research. When a 
research organ is included as a total usable organ, this

[[Page 72152]]

results in assignment of a full SAC to each research organ. Our 
proposal would exclude research organs from being included in the count 
of total usable organs, and as a result would not assign a full SAC on 
the Medicare cost report for each research organ procured. We would not 
expect this proposal to increase the amounts charged for research 
organs. However, 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.
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44767) we stated that 
THs and OPOs are responsible for negotiating the amount charged for an 
organ used for research with the research entity receiving the research 
organ. We also proposed that THs and OPOs would 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.
    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 proposed to revise the policy set forth 
in Sec.  413.412(c) for OPOs and THs for counting organs used for 
research. Specifically, we proposed 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 proposed 
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 proposed 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 proposed 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 proposed 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 proposed 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.
    Comment: The majority of commenters were not supportive of our 
proposal for research organs and requested that we withdraw it. Many 
commenters mistakenly believed that under our proposal, Medicare would 
no longer share in the acquisition costs for organs that are initially 
intended for transplant but subsequently determined unsuitable for 
transplant and instead furnished for research. A few commenters noted 
that organs that are intended for transplant undergo more extensive 
testing and evaluation that results in more acquisition costs being 
assigned to these organs, as opposed to organs that are intended for 
research that do not undergo extensive testing and evaluations. Because 
commenters mistakenly believed that under our proposal Medicare would 
no longer share in the acquisition costs for research organs that were 
initially intended for transplant, they also mistakenly believed that 
these costs would be passed on to researchers, resulting in research 
organs becoming prohibitively expensive for research organizations. 
Commenters who believed that our proposal would result in Medicare no 
longer sharing in the acquisition costs for research organs that were 
initially intended for transplant asserted that research organizations 
generally operate on a limited budget and expressed concerns that our 
proposal could potentially disrupt innovation in research. Many 
commenters who were not supportive of our proposal also noted that the 
acquisition costs attributable to organs furnished for research are 
nominal because the acquisition costs are for limited services such as 
packaging, preservation solution or courier fees. The commenters 
indicated that unusable organs are often furnished to research 
organizations at no charge or at amounts that reflect only the nominal 
acquisition costs.
    Additionally, commenters expressed concern that our proposal would 
create an incentive for THs and OPOs to discard organs that were 
intended for transplant but subsequently determined unsuitable for 
transplant, rather than furnish those organs for research, because THs 
and OPOs would suffer a financial loss. A few commenters also believed 
that our proposal would create an incentive for THs and OPOs to discard 
organs that might otherwise be used for research because our proposal 
would allow the acquisition costs of discarded organs to be included in 
the administrative and general cost center while the acquisition costs 
of research organs would not be included in the administrative and 
general cost center. Several commenters believed the perceived 
disincentive to recover an organ that is unsuitable for transplant so 
that the organ can instead be used in research could result in donated 
organs being discarded, and that this might not honor the wishes of the 
organ donor or the donor's family.
    Response: We appreciate the comments received on our research organ 
proposal for purposes of determining Medicare's share of organ 
acquisition costs. In the FY 2022 IPPS/LTCH final rule, we added new 
Sec.  413.412(c) to specify Medicare's longstanding policy that for 
Medicare cost allocation purposes, organs used for research are not 
counted as Medicare usable organs in the ratio used to determine 
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 are not counted as Medicare usable kidneys in the ratio 
used to determine Medicare's share of kidney acquisition costs. This 
means that organs intended for research, and organs intended for 
transplant but

[[Page 72153]]

subsequently determined to be unsuitable for transplant and furnished 
for research, are not counted as Medicare usable organs. However, 
Medicare's cost reporting instructions relative to counting research 
organs in total usable organs differs for IOPOs and THs. The IOPO cost 
reporting instructions currently require IOPOs to exclude all research 
kidneys from the count of total usable kidneys used in the ratio to 
determine Medicare's share of kidney acquisition costs. The costs for 
these research kidneys are deducted from total kidney acquisition 
costs, or reduced by the revenue received for the research kidneys, or 
identified in a non-reimbursable cost center in accordance with the 
IOPO's accounting policy.\295\ However, the TH cost reporting 
instructions currently require THs to include organs intended for 
research in the count of total usable organs.\296\ This difference in 
the accounting of organs intended for research between OPOs and THs 
creates an increase in the costs to procure research organs by 
assigning a full SAC. Due to these differing cost reporting 
instructions, in the CY 2023 OPPS proposed rule, we proposed to codify 
a policy that would align the Medicare cost reporting practices for 
research organs for THs with the policy for IOPOs. Under our proposed 
policy, both IOPOs and THs would exclude organs intended for research 
from the count of total usable organs.
---------------------------------------------------------------------------

    \295\ IOPOs complete their cost report on the CMS-216-94 (OMB 
No. 0938-0102).
    \296\ THs complete the hospital cost report on the CMS 2552-10 
(OMB No. 0938-0050).
---------------------------------------------------------------------------

    Based on some comments we received on our research organ proposal 
in the CY 2023 OPPS/ASC proposed rule, we believe that the following 
statement made in the preamble may have created confusion among 
commenters: ``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'' (87 FR 44767). 
Many commenters mistakenly believed that under our proposal Medicare 
would no longer pay for organs initially intended for transplant if 
those organs were later used for research. We did not mean to imply 
that Medicare would not continue to share in the acquisition costs of 
organs that are intended for transplant but subsequently determined 
unsuitable for transplant and instead furnished for research. To 
address commenters' concerns, in this final rule we are clarifying that 
the acquisition costs of organs that are initially intended for 
transplant, but subsequently determined unsuitable for transplant and 
instead furnished for research, are allowable organ acquisition costs. 
This is similar to the organ acquisition costs for organs that are 
initially intended for transplant, but subsequently determined 
unsuitable for transplant and discarded, which are allowable organ 
acquisition costs.
    Therefore, in this final rule with comment period, we are affirming 
and reiterating our policy that acquisition costs associated with 
organs intended for transplant continue to be allowable organ 
acquisition costs and Medicare will continue to share in those 
acquisition costs for organs intended for transplant but subsequently 
determined unsuitable for transplant and are instead furnished for 
research. Additionally, in this final rule, we are also clarifying that 
the acquisition costs of organs that were initially intended for 
research are non-allowable organ acquisition costs (except pancreata 
for islet cell transplants as specified in Sec.  413.406(a)). Under 
Sec.  413.90, costs incurred for research purposes, over and above 
usual patient care, are not includable as allowable costs.
    Comment: Several commenters misunderstood our proposal for counting 
research organs and believed those organs could not be counted for cost 
finding purposes. Those commenters were not supportive of our proposal 
and requested CMS require IOPOs to continue following the guidance set 
forth in CMS-Ruling 1543-R.
    Response: We appreciate the commenters' input on our proposal. Our 
proposal was not intended to impact the process of allocating shared 
overhead costs (that is costs incurred for a deceased donor when 
multiple organs are procured) between renal and non-renal organs as 
described in CMS Ruling 1543-R. Our proposal was limited to counting 
research organs used in the ratio for determining Medicare's share of 
organ acquisition costs. Therefore, we are affirming that OPOs should 
continue to follow the guidance set forth in CMS Ruling 1543-R, 
``Allocation of Donor Acquisition Costs Incurred by Organ Procurement 
Organizations.'' That is, when an OPO has acquired organs other than 
kidneys, it would go through proper cost finding to ensure that 
overhead costs are allocated appropriately. To ensure proper allocation 
of shared overhead costs, these costs would be allocated to all organs 
the OPO intends to procure, regardless of whether the OPO actually 
recovers the organ for transplant. If procurement is attempted, but no 
organ actually retrieved, the organ would still be counted for purposes 
of proper cost finding. Organs in this instance are the statistical 
basis used to apportion shared overhead costs between renal and non-
renal cost centers, and all organs the OPO intends to procure would be 
used in the count.
    For example: Hospital A notifies OPO B that a death is imminent in 
its facility and that the individual is listed as a potential organ 
donor. OPO B arranges for surgeons to procure the organs, an operating 
room for the excisions to take place, and services necessary to 
maintain the organs in a viable state. Prior to calling the liver 
transplant surgeon, the OPO arranges for a liver function test, which 
shows that the liver is not viable. Surgeons remove all of the 
remaining organs, but, upon inspection, the heart surgeon determines 
that the heart is unsuitable for transplant. The lungs were designated 
for non-transplant research activities prior to the time the donor 
entered the operating room. Costs are allocated as follows: The cost of 
the liver function test is allocated to the liver cost center. No 
portion of the operating room fees or other services is allocated to 
the liver cost center, or to the lungs cost center. The costs for the 
operating room fees and the other services are allocated equally to the 
other organ cost centers, including the heart cost center. Surgeon's 
fees that are specific to a particular organ are allocated directly to 
that organ.
    Comment: A few commenters were concerned with our proposal in the 
CY 2023 OPPS proposed rule that requires OPOs to ``deduct the cost 
incurred in procuring an organ for research from their total organ 
acquisition cost.'' These commenters indicated that under current 
policy, OPOs exclude organs intended for research at the time of 
entering the operating room from the count of Medicare usable and total 
usable organs, which is the ratio used in calculating Medicare's share 
of organ acquisition costs. They also indicated that costs associated 
with procuring organs used for research are only included in total 
organ acquisition costs in circumstances where the organs were 
considered viable for potential transplant at the time the donor 
entered the operating room, but the organs were subsequently deemed 
unsuitable for clinical reasons. These commenters also noted that the 
acquisition costs associated with these organs are nominal, typically 
reimbursed either by the TH or the research institution, and OPOs 
account for any revenues received for research organs through an 
offset.

[[Page 72154]]

These commenters stated that to the extent costs incurred for organs 
intended for transplant, but determined unsuitable for transplant and 
instead furnished for research, exceed revenues received for such 
organs, those costs should be included in total acquisition costs. One 
commenter who expressed support for the proposal noted that the costs 
associated with these organs not used for transplant are insignificant 
in comparison to the care and testing needed for transplanted organs. 
This commenter observed that under Sec.  413.412(c), organs used for 
research are not counted for Medicare cost allocation purposes; 
therefore, THs'/OPOs' costs incurred are shared among the usable organs 
procured from the deceased donor.
    Response: We appreciate the commenters' input and agree that the 
acquisition costs for organs intended for transplant but subsequently 
determined unsuitable for transplant and furnished for research are 
allowable costs and are included in total organ acquisition costs. 
Based on commenters' input, the additional costs associated with these 
organs furnished for research are nominal and currently addressed by 
IOPOs through a revenue offset. We are finalizing a modified version of 
our proposal, under which OPOs and THs would be required to reduce 
their total organ acquisition costs when the organ is intended for 
transplant but determined unsuitable for transplant and instead 
furnished for research by either (i) deducting the costs to furnish 
organs for research from total organ acquisition costs, or (ii) by 
offsetting the total organ acquisition costs by the revenue received 
for these organs. In no event may the reduction in total organ 
acquisition costs as a result of this deduction or offset exceed the 
costs incurred to furnish organs for research. When the costs to 
procure organs for research are not included in total organ acquisition 
costs but are included in a non-reimbursable cost center, as in the 
case of organs that are intended for research and furnished for that 
purpose, no offset is necessary.
    In the CY 2023 OPPS/ASC proposed rule (87 FR 44767) we stated that 
regardless of amounts charged for an organ used for research, ``the 
costs must be offset against total organ acquisition costs.'' We 
believe finalizing a modified version of our proposal to provide that 
when costs to procure research organs are included in organ acquisition 
costs, THs and IOPOs must either deduct the costs to procure organs for 
research from total organ acquisition costs, or offset the costs to 
procure organs for research by the revenues received for furnishing 
these organs to research organizations will reduce burden by affording 
THs and IOPOs flexibility to account for research costs consistent with 
their accounting practices. We also believe this will mitigate 
confusion regarding the treatment of organ acquisition costs when an 
organ is intended for transplant but is subsequently determined 
unsuitable for transplant and furnished for research. In addition, we 
believe this will promote the furnishing of organs that are intended 
for transplant, but subsequently determined unsuitable for transplant 
to research organizations, rather than discarding these organs. 
Consistent with finalizing a modified version of our proposal would be 
that no cost offset is necessary for THs or IOPOs when the costs to 
procure organs for research are not included in total organ acquisition 
costs but are included in a non-reimbursable cost center.
    Comment: One commenter agreed with our proposals to (1) exclude 
organs used for research from the denominator (total usable organs) of 
the calculation used to determine Medicare's share of organ acquisition 
costs; and (2) for THs and OPOs to deduct the costs incurred in 
procuring an organ for research from their total organ acquisition 
costs. This commenter opined that the proposal would allow for a more 
accurate reporting of Medicare usable organs while still ensuring the 
Medicare Trust Fund is not inappropriately paying for research costs. A 
few commenters supported our proposal to exclude organs from the count 
of Medicare usable and total usable organs to support payment accuracy.
    A few commenters requested CMS provide examples and educational 
materials to support the accuracy of information on the Medicare cost 
report, should the proposals be finalized.
    Response: We appreciate the commenter's support and acknowledgement 
of our proposals. To address commenters' request for materials to help 
them understand how to submit information on Medicare cost reports that 
is accurate and consistent with the policy we are finalizing in this 
final rule with comment period, we include the following example.
    Example:
    Assume the following:
    A TH incurs $500,000 in organ acquisition costs (OAC). This OAC is 
made up of $100,000 to procure organs used for research ($70,000 for 
organs intended for transplant but subsequently determined unsuitable 
and furnished for research plus an additional $5,000 for these organs 
to be packaged and couriered to the research center plus $25,000 for 
organs intended for research) and $400,000 for organs transplanted.
    The TH receives $28,000 in revenue for organs provided for 
research.
    The TH reports 80 Medicare usable organs, 20 non-Medicare organs, 
and 25 research organs. The TH reports 100 total usable organs, 
excluding the 25 research organs.
    The TH's Medicare ratio is 0.80 (80 Medicare usable organs/100 
total usable organs = 0.80). The TH determines its allowable organ 
acquisition costs using its accounting practice of offsetting revenue.
    The TH's allowable organ acquisition cost is $472,000 ($500,000 
total OA costs - $28,000 in revenue received for organs provided for 
research).
    The TH determines Medicare's share of allowable organ acquisition 
costs as $377,600 by multiplying the allowable organ acquisition costs 
by its Medicare ratio ($472,000 allowable organ acquisition costs times 
0.80 Medicare ratio).
    Under the policy we are finalizing in this final rule with comment 
period, the TH in this example would be permitted to continue to follow 
its accounting practice and reduce its total organ acquisition costs by 
the revenue received ($28,000) rather than incur additional burden to 
identify the additional $5,000 cost for packaging and couriering the 
organs furnished for research. We will be updating the Medicare cost 
report forms and instructions for IOPOs and THs commensurate with this 
final policy.
    Comment: A few commenters indicated that they found the CY 2023 
OPPS/ASC proposed rule to be unclear on whether organs that are 
rehabilitated under a research protocol and subsequently transplanted 
into a Medicare beneficiary may be counted as Medicare organs, and 
asked CMS to clarify how the acquisition costs for such organs are 
accounted for. Commenters believed that we proposed to exclude Medicare 
coverage for organs transplanted in conjunction with a qualified 
clinical trial. These commenters believe this is inconsistent with 
CMS's policy of covering routine costs in qualifying clinical trials 
(NCD 310.1). Thus, commenters believed that disallowing the costs to 
procure organs rehabilitated under a research protocol that are 
subsequently transplanted as a component of clinical care is 
inconsistent both with Medicare's research policy and with the 
governing regulations (Sec. Sec.  413.5(c)(2) and 413.90(b)(2)).
    Response: We appreciate the commenters' concerns. As we discussed

[[Page 72155]]

in the CY 2023 OPPS/ASC proposed rule (75 FR 44767), we expect that 
when an organ is transplanted into a patient, the organ is counted as a 
total usable organ and a full SAC is assigned. This includes organs 
``rehabilitated under a research protocol'' that are subsequently 
transplanted into a patient, as well as organs transplanted under the 
Medicare clinical trial policy. The transplanted organ would 
additionally be counted as a Medicare usable organ if the transplanting 
hospital transplanted the organ into a Medicare beneficiary. Our 
regulations at Sec.  413.90(b)(2) stipulate that if research is 
conducted in conjunction with, and as a part of, the care of patients 
(such as a clinical trial), the costs of usual patient care and 
studies, analyses, surveys, and related activities to serve the 
provider's administrative and program needs are allowable costs in the 
determination of payment under Medicare.
    Because the organ is transplanted into a patient, THs and OPOs 
would not be required to deduct the cost incurred in procuring the 
organ from their total organ acquisition costs.
    Comment: Several commenters suggested that ``surgeon'' in proposed 
Sec.  413.412(d)(1) be replaced with ``physician'' or ``any physician'' 
because ``physician'' is broader than ``surgeon'' and covers the 
multiple types of physicians such as intensivists, cardiologists and 
pulmonologists who may make organ feasibility decisions. A few 
commenters supported our proposal and one such commenter suggested the 
``excising surgeon'' should be the one to maintain the discretion in 
determining initial organ viability.
    Response: We agree with commenters' concerns that the practitioner 
who determines, upon initial inspection or after removal of an organ, 
that the organ is not viable and not medically suitable for transplant 
and is therefore unusable, should not be limited to a surgeon because 
there are other physicians who may determine whether an organ is 
suitable for transplant. We agree with commenters' suggestion to 
replace ``surgeon'' with ``physician'' in proposed Sec.  413.412(d)(1).
    Comment: Commenters indicated confusion with the language ``For 
Medicare cost allocation purposes'' as used in Sec.  413.412(c) that 
says ``For Medicare cost allocation purposes, organs used for research 
are not counted as Medicare usable organs . . .'' In the CY 2023 OPPS/
ASC proposed rule, we proposed to redesignate Sec.  413.412(c) to Sec.  
413.412(c)(1), with additional proposals in Sec.  413.412(c)(1) to 
require that organs used for research not be counted as total usable 
organs. Thus, our proposed language for Sec.  413.412(c)(1) was ``For 
Medicare cost allocation purposes, organs used for research are not 
counted as Medicare usable organs or as total usable organs . . .'' 
Commenters said they were confused with the phrase ``For Medicare cost 
allocation purposes'' in proposed Sec.  413.412(c)(1), because the 
proposed paragraph concerns organs used for research.
    Response: As proposed in the 2023 CY OPPS/ACS proposed rule, Sec.  
413.412(c)(1) uses the term ``cost allocation'' to refer to the ratio 
used to determine Medicare's share of organ acquisition costs. We 
understand commenters' confusion with the use of the phrase ``cost 
allocation'' in proposed Sec.  413.412(c)(1); our intention was that 
proposed Sec.  413.412(c)(1) would be understood to mean that, when 
calculating Medicare's share of organ acquisition costs, 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)). However, commenters believed the 
meaning was for cost finding purposes as described in CMS Ruling 1543-
R.
    After consideration of the public comments received, and to address 
commenters' concerns and confusion with how to account for the costs to 
procure organs used for research, we are finalizing our proposal with 
modifications to Sec.  413.412 to more clearly organize and set forth 
the policies we proposed and intended to convey in the 2023 OPPS/ASC 
proposed rule.
    We are finalizing our proposal to modify the heading of Sec.  
413.412 with additional modifications to be ``Intent to transplant, 
intent for research, counting of en bloc, and unusable organs.'' We are 
also finalizing the heading of Sec.  413.412(a) as ``Principles for 
organs intended for transplant for organ acquisition payment 
purposes.'' We are modifying Sec.  413.412(a)(2) for further clarity 
with respect to costs to specify that OPOs and THs must identify the 
costs associated with the recovered and unrecovered organs and 
apportion those costs to the appropriate cost centers by organ type. 
These costs include the costs associated with an organ intended for 
transplant, but subsequently determined unsuitable for transplant and 
furnished to research. We are moving the concepts pertaining to 
research organs in Sec.  413.412(c) to newly added Sec.  413.412(a)(3) 
with revisions to more clearly specify that an organ intended for 
transplant but subsequently determined unsuitable for transplant and 
instead furnished for research is not counted as a Medicare usable 
organ or as a total usable organ in the ratio used to calculate 
Medicare's share of organ acquisition costs, as this principle is set 
forth in Sec.  413.412(c). We are also adding Sec.  413.412(a)(4)(i) 
and (ii) to specify that OPOs and THs must reduce total organ 
acquisition costs when the organ is intended for transplant but 
determined unsuitable for transplant and instead furnished for research 
as follows: (i) by deducting the costs to furnish organs for research 
from total organ acquisition costs or (ii) by offsetting the total 
organ acquisition costs by the revenue received for these organs. We 
are also adding Sec.  413.412(a)(4)(iii) to specify that in no event 
may the reduction in total organ acquisition costs as a result of 
application Sec.  413.412(a)(4) exceed the costs incurred to furnish 
organs for research.
    We are also adding Sec.  413.412(a)(5) to specify that when the 
costs to furnish organs for research are not included in total organ 
acquisition costs but are included in a non-reimbursable cost center, 
no offset is necessary.
    We are revising heading of Sec.  413.412(b) to ``Principles for 
organs intended for research for organ acquisition payment purposes'' 
and including some of the concepts in Sec.  413.412(c) relative to 
organs intended for research to this revised paragraph. Specifically, 
we are revising Sec.  413.412(b)(1) to specify that an organ is 
intended for research when the OPO or TH designates it for research 
prior to the time the donor enters the hospital's operating room for 
surgical removal of the organ. We are also revising Sec.  413.412(b)(2) 
to specify that Medicare does not share in the acquisition costs of an 
organ intended for research and costs to procure these organs must not 
be included in organ acquisition costs (except pancreata for islet cell 
transplants as specified in Sec.  413.406(a)). We are adding Sec.  
413.412(b)(3) to specify that an organ intended for research is not 
counted as a Medicare usable organ or as a total usable organ 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)).
    We are redesignating Sec.  413.412(b) introductory text and (b)(1) 
and (2) as Sec.  413.412(c) introductory text and (c)(1) and (2), 
respectively. We are also redesignating Sec.  413.412(b)(1) to Sec.  
413.412(c)(1). Additionally, we are redesignating Sec.  413.412(b)(2) 
to Sec.  413.412(c)(2).

[[Page 72156]]

    We are also finalizing our proposal with modifications based on 
comments received to amend Sec.  413.412(d)(1) to specify 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 physician 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. We are also amending the heading 
at Sec.  413.412(d), which currently reads ``Counting of unusable 
organs,'' so that it instead reads ``Unusable organs,'' because, as a 
result of the changes we are finalizing in this final rule with comment 
period, amended Sec.  413.412(d) not only refers to counting unusable 
organs, but also to the cost to procure unusable organs as well. 
Consistent with finalizing our proposal with modifications, we are also 
revising Sec.  413.402(a) to more clearly explain that costs related to 
organ acquisition include allowable costs incurred in the acquisition 
of organs intended for transplant, including those organs that are 
subsequently determined unsuitable for transplant and furnished for 
research. We are also making a technical correction to Sec.  413.402(a) 
to specify that there are administrative and general costs that may be 
allowable and included on the cost report for an OPO or a TH. 
Specifically, we are revising Sec.  413.402(a) to specify that costs 
recognized in Sec.  413.402(b) are allowable costs incurred in the 
acquisition of organs intended for transplant, including those organs 
that are subsequently determined unsuitable for transplant and 
furnished for research 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.

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 interested parties 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 donation 
policies.\297\ 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 whose death is imminent 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, in the CY 2023 OPPS/ASC proposed rule, 
we proposed 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. Specifically, as 
modified by our proposed amendments, Sec.  413.418(a) would provide 
that organ acquisition costs include hospital services authorized by 
the OPO (1) when there is consent to donate, and (2) a declaration of 
death has been made or, if no declaration of death has been made, where 
death is imminent and it is necessary that the services be provided 
prior to declaration of death to avoid compromising the viability of 
the organs for transplant. These costs must not be part of medical 
treatment that primarily offers a medical benefit to the patient as 
determined by a healthcare team.
---------------------------------------------------------------------------

    \297\ 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 believe that not including in 
organ acquisition costs certain donor management costs incurred by a 
donor whose death is imminent, but who has not been declared dead, 
creates a potential barrier to organ donation and could compromise 
organ viability. We believe our proposal to modify Sec.  413.418(a) to 
allow a donor community hospital or TH to incur costs for certain 
hospital services attributable to a donor prior to declaration of 
death, but when death is imminent supports organ donation and organ 
procurement costs and addresses a potential inequity in the transplant 
ecosystem.
    Comment: All the commenters were supportive of this proposal. Many 
commenters agreed with our proposal because they believed it would 
result in reimbursement that appropriately supports clinical situations 
where failure to provide hospital services to a donor whose death is 
imminent may compromise the viability of organs, limit organ donation, 
and fail to honor the donor or donor family's wishes to donate organs.
    Response: We thank commenters for their support of our proposal to 
modify Sec.  413.418(a) to be more inclusive of incurred costs for 
certain hospital services attributable to a deceased donor or a donor 
whose death is imminent.
    Comment: Several commenters were concerned that OPOs should provide 
proper authorization before hospitals incur costs for providing certain 
donor management services prior to death, but when death is imminent, 
which hospitals will then bill to OPOs. These commenters asked that we 
work to ensure that the costs of these services are appropriately 
authorized by the OPO.
    Response: We appreciate these comments and note that our existing 
regulation at Sec.  413.418(a) requires OPO authorization. We believe 
that best practices also include authorization by the OPO for hospitals 
to provide certain donor management services prior to death, but when 
death is imminent, being in place prior to a donor community hospital 
or TH incurring costs for these donor management services. Because the 
hospital will then bill the OPO for those services provided prior to 
declaration of death, but when death is imminent, the hospital and

[[Page 72157]]

OPO will want to ensure that their financial/business arrangements 
include providing that authorization prior to the hospital's incurring 
costs. Based on these comments, we have amended the regulation at Sec.  
413.418(a) to emphasize the authorization requirement by stating that 
these services ``must be authorized by the OPO''.
    Comment: We received a few comments related to Sec.  413.418(b) 
from commenters who asked that payments by the OPO to the TH reflect 
donor management costs incurred prior to death, but when death is 
imminent. Some commenters asked us to confirm that hospitals and OPOs 
can renegotiate their case rates paid to donor hospitals to account for 
these additional allowable costs, to facilitate the proper recording of 
these costs as organ acquisition costs. Some commenters noted that the 
costs would be included in the OPO's standard acquisition charge 
calculation. A few commenters asked that we clarify which cost-to-
charge ratio (CCR) donor community hospitals and THs must use if they 
bill OPOs for donor services by reducing their charges to cost. 
Specifically, these commenters asked whether the hospital-specific 
overall operating CCR or the hospital-specific overall operating and 
capital CCR should be used.
    Response: Donor community hospitals and THs that bill OPOs a 
negotiated rate are free to renegotiate those rates to account for 
these added costs. OPOs will be able to include the cost of these donor 
management services in their organ acquisition costs used in 
calculating their SACs. Regarding CCRs, we clarify that donor community 
hospitals and THs must use the hospital-specific inpatient operating 
CCR to reduce their charges to cost. In this final rule with comment 
period, we are finalizing Sec.  413.418(b) to specify that when a donor 
community hospital or TH incurs costs for services furnished to a 
deceased donor, or a donor whose death is imminent as described in 
Sec.  413.418(a), 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 inpatient operating CCR for the period in which the 
service was rendered, or a negotiated rate.
    Comment: A commenter asked that we codify in the regulations that 
certain expenses incurred prior to brain death declaration are 
reimbursable by Medicare.
    Response: The regulation text that we are finalizing in this final 
rule with comment period at Sec.  413.418 allows a donor community 
hospital or TH to incur costs for hospital services attributed to a 
deceased donor or a donor whose death is imminent. The regulation does 
not specify the type of donor death, but includes all deaths (cardiac 
deaths and brain deaths). Therefore, we do not see a need to modify the 
regulation text to refer to brain death specifically.
    Comment: A few commenters asked whether our proposed amendment to 
Sec.  413.418(a) to allow a donor community hospital or TH to incur 
costs for certain hospital services attributable to a donor prior to 
declaration of death, but when death is imminent would be effective for 
any open OPO cost reports.
    Response: For cost reporting periods beginning prior to February 
25, 2022,\298\ providers should follow the policy given in sub-
regulatory guidance (see Provider Reimbursement Manual 15-1, chapter 
31, section 3108.C). Effective for cost reporting periods beginning on 
or after February 25, 2022, and in accordance with our current 
regulation at Sec.  413.418(a), a donor community hospital (a Medicare-
certified non-transplant hospital) and a TH can incur organ acquisition 
costs for donor organ procurement services authorized by the OPO, but 
those costs are limited to costs incurred following declaration of 
death and consent to donate. Our proposed amendments to Sec.  
413.418(a) to permit organ acquisition costs to include certain donor 
management costs incurred prior to declaration of death, but when death 
is imminent, would only be effective for cost reporting periods 
beginning on or after the effective date of this final rule with 
comment period.
---------------------------------------------------------------------------

    \298\ February 25, 2022 was the effective date of the FY 2022 
IPPS final rule with comment period (Part 2).
---------------------------------------------------------------------------

    After consideration of the public comments we received, we are 
finalizing our proposal to amend Sec.  413.418(a), effective for cost 
reporting periods beginning on or after the effective date of this 
final rule with comment period, to specify that 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. We note that the regulation text we are finalizing 
in this final rule with comment period modifies the proposed regulation 
text, which specified that, in the case of a potential organ donor 
whose death is imminent, organ acquisition costs only include those 
hospital services that ``must be provided prior to declaration of 
death'' to instead include the condition that ``it is necessary that 
the services be provided prior to declaration of death in order to 
avoid compromising the viability of the organs for transplant.'' Based 
on comments received, we also strengthened the regulation so that it 
specifies that these services ``must be authorized by the OPO.'' 
Specifically, the regulation text that we are finalizing in this final 
rule with comment period would provide that 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. These services must not be part of medical treatment that 
primarily offers a medical benefit to the patient as determined by the 
healthcare team, must be authorized by the OPO, and are included as 
organ acquisition costs when: (1) there is consent to donate and (2) a 
declaration of death has been made or, if a declaration of death has 
not been made, death is imminent and it is necessary that the services 
be provided prior to declaration of death in order to avoid 
compromising the viability of the organs for transplant. In response to 
comments, in this final rule with comment period, we are also 
finalizing Sec.  413.418(b) to include the instructions for amounts 
billed for organ acquisition costs for donors whose declaration of 
death has not been made, but whose death is imminent, and to more 
clearly specify the CCR to be used in reducing charges to costs. 
Specifically, we are finalizing Sec.  413.418(b) to specify that when a 
donor community hospital or TH incurs costs for services furnished to a 
deceased donor, or a donor whose death is imminent as described in 
paragraph (a), 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 inpatient operating CCR for the period in which the service 
was rendered, or a negotiated rate.

D. Technical Corrections and Clarifications to 42 CFR 405.1801, 
412.100, 413.198, 413.402, 413.404, and 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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44768), we proposed to make a technical correction 
to Sec.  405.1801(b)(2)(ii), by removing the reference to Sec.  
413.200(g) and replacing it

[[Page 72158]]

with a reference to Sec.  413.420(g). We also proposed 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 heading, ``Payment to 
independent organ procurement organizations and histocompatibility 
laboratories for kidney acquisition costs.''
    We also proposed 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 proposed 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 
proposed 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 proposed 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 proposed to 
amend Sec.  413.420(a)(2) to correct a typographical error by changing 
``HOPOs'' to ``IOPOs''.
    We proposed 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 \299\ 
before being redesignated as Sec.  413.420 in the FY 2022 IPPS/LTCH PPS 
final rule with comment period.\300\ 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).
---------------------------------------------------------------------------

    \299\ 62 FR 43668, Aug. 15, 1997.
    \300\ 86 FR 73515, Dec. 27, 2021.
---------------------------------------------------------------------------

    Nomenclature Changes. In the CY 2023 OPPS/ASC proposed rule (87 FR 
44768), we proposed to amend Sec. Sec.  412.100(b); 413.402(a), (b)(3), 
(4), and (7), and (e)(8)(ii); 413.404(a)(2), (b)(3), and (c)(1)(i) and 
(ii); and 413.418 (the section heading 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 proposed 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 proposed to replace 
``cadaveric kidneys'' with ``deceased donor kidneys''.
    We proposed to amend Sec. 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).\301\
---------------------------------------------------------------------------

    \301\ 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 the CY 2023 OPPS/ASC proposed rule (87 FR 44768), we also 
proposed 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 unsuitable for 
transplantation.
    Finally, in the CY 2023 OPPS/ASC proposed rule (87 FR 44768), we 
proposed to amend Sec.  413.400 by adding ``TH'' in parentheses after 
the defined term ``transplant hospital''. Throughout subpart L, we 
proposed to replace the term ``transplant hospital'' with ``TH''. We 
did not receive any public comments on our proposed technical 
corrections and nomenclature changes, and therefore, we are finalizing 
our proposals as proposed.

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 report 
(MCR).\302\ 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 an organ 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.
---------------------------------------------------------------------------

    \302\ CMS 2552-10 (OMB No. 0938-0050).
---------------------------------------------------------------------------

    To ensure the appropriate allocation of A&G costs on a TH's MCR, we 
proposed 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 purchase cost for 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,\303\ 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.\304\
---------------------------------------------------------------------------

    \303\ Provider Reimbursement Manual, 15-2, chapter 40, section 
4020, https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.
    \304\ Provider Reimbursement Manual, 15-2, chapter 40, section 
4020, https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Paper-Based-Manuals-Items/CMS021935.
---------------------------------------------------------------------------

    Comment: Many commenters disagreed with our proposal to clarify 
Medicare's longstanding cost finding principles on the prohibition of 
cost duplication relative to a TH's allocation of overhead costs 
associated with their direct costs for purchased services that would 
instruct THs to remove from their allocation statistics the amounts for 
purchased services from OPOs. Some commenters asserted that Sec.  
413.24(d)(6) was inapplicable to a TH allocating its overhead costs to 
a purchased service amount from OPOs (or, in the case of

[[Page 72159]]

living donor paired exchanges, from the donor TH) because this 
regulation provides an example of the allocation of a hospital's A&G to 
a management contract for a hospital based rural health clinic. Some 
commenters asserted that there is no basis for treating the ``purchase 
price of an organ'' differently from other items and services purchased 
by the hospital, and said that CMS allows other cost centers to include 
the full cost of supplies and purchased services. Some commenters 
suggested that our proposed clarification inappropriately assumes that 
100 percent of costs associated with the purchased services from an OPO 
and a TH's A&G costs are ``like costs.'' These commenters suggested 
that IOPOs and THs each have separate and distinct administrative 
overhead structures where ``like costs'' would be non-existent or very 
minimal; whereas ``like costs'' may be found between a HOPO and its TH. 
A few commenters said that where ``like costs'' for A&G definitively 
exist and can be documented, those duplicative costs should be removed 
from the TH's accumulated cost statistic. A few commenters said that a 
hospital that acquires a high-cost medical device for implantation into 
a patient is similar to an organ furnished by an OPO to a TH. These 
commenters asserted that the device company has its own overhead cost 
structure that differs from the TH's overhead costs and there is no 
cost reporting instruction to remove the cost of the high-cost medical 
device from a hospital's accumulated cost statistic. Many commenters 
also said that there is no duplication of cost for the TH to allocate 
A&G when the TH receives the organ from the OPO because the TH bears 
the administrative expense of processing complex invoices from the OPO, 
the procuring surgeon, the transportation company and many other 
stakeholders in the transplant process. Commenters believe that the 
TH's A&G associated with these efforts must be included in the TH's 
organ acquisition calculation. Many commenters believed that the 
application of Sec.  413.24(d)(6) to THs would result in the 
underreporting and under reimbursement of what commenters assert are 
valid A&G reasonable costs incurred by a TH that is acting as a prudent 
buyer of goods and services. Most commenters said they would experience 
a considerable or significant financial loss.
    Response: We thank commenters for their comments and appreciate 
their comments and concerns. We disagree that there is no duplication 
of A&G costs from the OPO that provides the organ and the TH that 
receives it. Because organ acquisition costs are not included in the 
transplant DRG that Medicare pays to THs for Medicare covered 
transplants, Medicare pays THs for organ acquisition costs at cost, 
based upon Medicare's reasonable cost principles. Cost finding, as set 
forth in Sec.  413.24, is a longstanding Medicare reasonable cost 
principle, and is the process of allocating and prorating the data 
derived from the accounts ordinarily kept by a provider to determine 
the provider's costs of the various services provided. Cost finding is 
applied to items and services that are paid on a reasonable cost basis. 
An OPO is a supplier of organ acquisition services to the TH that 
includes providing the TH with the organ for transplant, and is a 
separate entity from the TH. We agree with commenters that an OPO and a 
TH each have their own A&G costs. However, as set forth in Sec.  
413.24(d)(6), where a provider purchases services and directly assigns 
the cost to a cost center for that provider, there is a risk of having 
excess costs in that cost center resulting from the directly assigned 
costs plus a share of overhead improperly allocated to the cost center 
which duplicates the directly assigned costs. We believe this can 
similarly occur when a TH purchases an organ from an OPO (which 
inherently includes services provided by the OPO) and directly assigns 
those costs to the TH's cost center for that specific organ resulting 
in excess overhead from the TH also being allocated. For example, an 
OPO furnishes a liver to the TH and the TH assigns to the TH's liver 
acquisition cost center the invoice amount it paid to the OPO. The 
issue becomes what, if any, A&G costs of the TH are appropriate to 
allocate to the liver cost center for the invoice amount it paid to the 
OPO. Specifically, what indirect costs are being allocated based on a 
beneficial, causal relationship to the projects, contracts or cost 
objectives to which they are allocated. When costs within a department 
are composed of subcontracted efforts or purchased services, the 
allocation of traditional A&G expenses becomes non-compliant. There is 
no beneficial or causal relationship of the amount of A&G expense 
allocated to the base over which these expenses are being allocated. We 
disagree with commenters who believe all of the TH's A&G costs should 
be allocated to the liver cost center equally based on the purchased 
service cost incurred. We agree with the few commenters who said that 
where ``like'' A&G costs definitively exist and can be documented, 
those duplicative costs should be removed from the TH's accumulated 
cost statistic. In this regard, removing the ``like costs'' that are 
duplicative of the directly assigned costs (i.e., purchased services 
from OPOs) from a TH's allocation statistic is necessary to remove a 
duplication of overhead costs from the TH and the OPO, to achieve an 
appropriate allocation of overhead, and thus an appropriate payment 
from Medicare.
    After consideration of the public comments we received, we are 
withdrawing our proposal to clarify that in accordance with Sec.  
413.24(d)(6), a TH must remove the directly assigned costs (purchased 
services) from its allocation statistic to assure a proper allocation 
of overhead. We believe that clarifying the appropriate allocation of 
A&G for THs' purchase costs from OPOs will require additional analysis, 
evaluation and provider education to ensure indirect costs are being 
allocated based on a beneficial, causal relationship to the purchased 
service to which they are allocated, in accordance with Medicare 
reasonable cost principles. As such, we may revisit the clarification 
of this issue in future rulemaking.

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 the CY 2023 OPPS/ASC proposed rule (87 FR 44769), we requested 
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 are not responding to specific comments submitted in 
response to this RFI in this final rule with comment period, we intend 
to use this input to inform future policy development.

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

[[Page 72160]]

to their urban and suburban counterparts.\305\ 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.
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    \305\ 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.
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    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. 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.\306\
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    \306\ 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;'' \307\ Executive Order 13988, 
``Preventing and Combating Discrimination on the Basis of Gender 
Identity or Sexual Orientation;'' \308\ and Executive Order 13995 
``Ensuring an Equitable Pandemic Response and Recovery.'' \309\
---------------------------------------------------------------------------

    \307\ 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/.
    \308\ 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/.
    \309\ 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, 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

[[Page 72161]]

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.\310\
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    \310\ 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.
    Starting on January 1, 2023, an REH that provides rural emergency 
hospital services (as defined in section 1861(kkk)(1) of the Act and in 
this final rule) 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. As discussed further in 
section XVI of the CY 2023 OPPS/ASC proposed rule (87 FR 44755), CMS 
requested information on certain quality measures and quality reporting 
requirements for REHs.
    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/ASC final rule with comment period.
3. Summary of Comments by Interested Parties in Response to REH Request 
for Information
    In preparation for developing 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

[[Page 72162]]

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 reviewed all comments from interested parties and took them into 
consideration while drafting the CY 2023 OPPS/ASC proposed rule. We 
appreciate the interested parties' input and responses to our outreach 
efforts.
    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's 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 had 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 proposed to define ``REH 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 noted 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 solicited comments on whether CMS should adopt a 
narrower definition of REH services than the definition we proposed, 
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.
    Comment: Multiple commenters supported CMS's proposal to designate 
all hospital outpatient services furnished by an REH as REH services, 
provided these services are furnished consistent with the applicable 
REH COPs. Commenters appreciated CMS taking a more expansive approach 
to the definition of REH services and accordingly, did not support 
narrowly limiting the definition of REH services. A few commenters, 
while supporting the proposed definition, cautioned CMS about the 
possible unintended consequences of such a broad definition, 
specifically that REHs could potentially become a point-of-service in 
larger systems who use the designation

[[Page 72163]]

as a means of generating higher payment for services that would 
otherwise be available at lower prices. The commenter encouraged CMS to 
monitor the REH program for this concern as the program develops.
    A few commenters expressed concerns that the proposed definition of 
REH services excluded services not paid under the OPPS, particularly 
services paid off the physician fee schedule. Some commenters 
specifically requested that, when a CAH converts to an REH, that the 
REH continue to be able to bill for physician services under the CAH 
method II payment methodology.
    Response: We appreciate commenters' support for our proposal. With 
regard to classification of services that are not hospital outpatient 
services paid under the OPPS as REH services, we believe that the 
statutory language in section 1834(x)(1) means 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'', and as this is the outer limit of the 
services CMS may specify as ``REH services'', we do not have the 
authority to expand this definition further. Given that the 
reimbursement for CAH method II billing is statutorily defined in 
Section 1834(g)(2) to only apply to CAHs, we likewise believe that we 
do not have the authority to apply the same policy to REHs as, once a 
CAH converts to an REH, it will no longer be a CAH, and therefore the 
CAH method II billing methodology would no longer be applicable. 
Instead, consistent with CMS's proposed approach to payment for 
outpatient services other than covered OPD services furnished by REHs 
discussed in Section XVIII.A.2.b of the proposed rule, physician 
services furnished in REHs would be paid off the Physician Fee 
Schedule. We also appreciate the concern over unintended consequences 
of adopting a broad definition of REH services, specifically concerns 
regarding the financial incentives for the provision of services in a 
REH rather than another hospital given the higher payment for REH 
services, and we will monitor utilization of REH services going 
forward.
    After consideration of the public comments we received, and for the 
reasons described here and in the proposed rule, we are finalizing our 
definition of REH services at 42 CFR 419.91 as proposed.
(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 proposed 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 proposed 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 proposed to utilize OPPS payment policies and rules to 
effectuate payment rates for REH services equivalent to the OPPS 
payment rates plus five percent, we believed 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 proposed 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 proposed, consistent with the requirement in section 
1834(x)(1) of the Act, that the copayment amount for an 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 proposed to codify in the REH 
payment regulation, at 42 CFR 419.92(a)(2), that the beneficiary 
copayment amounts for an 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 noted 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 
noted, 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.
    Comment: Multiple commenters supported excluding payment for REH 
services from OPPS budget neutrality requirements.
    Response: We appreciate the commenters' support of this policy.
    Comment: Commenters requested that CMS implement additional 
measures to support IHS facilities that convert to REHs. Policies 
suggested by commenters include providing supplemental payments to 
former IHS facilities that experience a revenue loss after their REH 
conversion, or allowing IHS facilities that convert to REHs to receive 
payment for services at the IHS all-inclusive encounter rate plus a 5 
percent premium payment to substitute for the OPPS payment rate plus 5 
percent additional payment rate for other REH providers. Commenters 
also requested that IHS facilities that have converted to REHs receive 
the REH monthly facility payment in addition to the IHS all-inclusive 
rate payment.
    Response: We appreciate the suggestions by the commenters. IHS 
facilities have limited staff and financial resources, factors which 
increase the risk of changing payment methodologies for medical 
services, especially if the new payment approach generates less revenue 
than anticipated. We understand that targeted supplemental payments or 
retaining familiar payment methodologies may encourage IHS facilities 
eligible to become REHs to convert. However, these payment suggestions 
for IHS facilities that

[[Page 72164]]

convert to REHs were neither proposed nor discussed in the CY 2023 
OPPS/APC proposed rule. Therefore, we will consider policy suggestions 
for alternative payment methodologies for IHS facilities that convert 
to REHs in future rulemaking along with consulting with interested 
tribal parties regarding these policies.
    Comment: Multiple commenters asked that eligibility requirements 
for the 340B Drug Pricing Program (340B Program) be modified so that 
REHs can participate in the program. Commenters are concerned that 
excluding REHs from being eligible for the 340B Program will discourage 
providers from converting to REHs because providers that are currently 
eligible for the 340B Program would no longer be able to purchase drugs 
through the 340B Program when they convert to REHs.
    Response: These comments are out-of-scope as HRSA, and not CMS 
regulates the 340B Program. HRSA is responsible for determining whether 
a healthcare provider is eligible for the 340B Program, and managing 
the 340B-eligible provider types that are listed in the 340B statute.
    Comment: One commenter requested that CMS designate REHs as 
graduate medical education (GME) eligible facilities similar to the GME 
designation for CAHs.
    Response: We appreciate the commenter's concern regarding residency 
training at REHs, however, we did not propose a policy to designate 
REHs as GME eligible facilities. We do not think it would be 
appropriate to adopt such a policy without describing it in a proposed 
rule and obtaining public comments from all interested parties. 
However, we will consider this comment for future rulemaking.
    After consideration of the public comments we received, and for the 
reasons described here and in the proposed rule, we are finalizing our 
proposals for the payment of REH services without modification. These 
proposals include:
     Calculating the payment rate for an REH service using the 
OPPS prospective payment rate for the equivalent covered OPD service 
increased by 5 percent. We will codify this policy in regulation at 42 
CFR 419.92(a)(1);
     Updating the OPPS claims processing logic to include an 
REH-specific payment flag, which REH providers will utilize to indicate 
that the provider is an REH and should not be paid at the OPPS payment 
rates, but instead will be paid at the REH payment rates. Claims from 
REH providers for REH services will be processed within the OPPS claims 
processing system; and
     Beneficiary copayment amounts for REH services will be the 
amounts determined under the OPPS for the equivalent covered OPD 
service, pursuant to section 1833(t)(8) of the Act, and will exclude 
the 5 percent payment increase that applies to the REH service payment. 
We will codify this policy in regulation, at 42 CFR 419.92(a)(2).
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. For further discussion of the REH COPs, please see section 
XVIII.B. of this final rule.
    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 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 
proposed to codify, at 42 CFR 419.92(c), 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 proposed 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 the CY 2023 OPPS/ASC proposed rule (87 FR 
44786 through 44787), 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

[[Page 72165]]

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 proposed 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.
    Comment: Many commenters requested that CMS pay the additional 5 
percent for services furnished in an REH that do not meet the 
definition of REH services, such as laboratory services paid off of the 
CLFS, and outpatient rehabilitation services. A few commenters 
supported CMS's proposal, stating that they recognized that CMS was 
limited in applying the additional 5 percent payment to those services 
described in section 1833(t)(1)(B) of the Act.
    One commenter asked CMS to clarify that its packaging policy for 
laboratory services will continue to apply to the adjusted OPPS payment 
made to an REH. The commenter noted that beginning in 2014, CMS 
packaged most laboratory tests into its OPPS payments on the basis that 
laboratory tests are integral, ancillary, supportive, dependent or 
adjunctive to a primary service or services when provided on the same 
day and ordered by the same physician for a hospital outpatient.
    Response: We agree with the commenters that CMS's ability to pay an 
additional 5 percent for services furnished by an REH that are not 
designated as REH services is precluded by the statute. Section 125 of 
the CAA 2021 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'' (e.g., covered OPD 
services other than those described in 1833(t)(1)(B)(ii)). The statute, 
in particular 1834(x)(3) and 1834(x)(4), as well as the proposed REH 
CoPs, anticipate that REHs will furnish certain types of services that 
do not fall within the definition of REH services. CMS believes that it 
is consistent with the statutory requirements for REHs that these 
facilities receive payment when they furnish such other services, and 
therefore that we proposed that such 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. With regard to 
packaging of laboratory services, the same rules apply for REHs as for 
OPPS hospitals. If a lab service would be packaged into an OPPS payment 
for a primary service or services furnished by a hospital that is paid 
under OPPS, then it will be packaged into the REH payment for the 
analogous primary service or services when furnished by a REH. If the 
lab service would have been paid separately under the CLFS if furnished 
by a hospital that is paid under OPPS, it likewise will be paid under 
the CLFS at the CLFS rate when furnished by a REH.
    Comment: Multiple commenters requested that CAHs with skilled 
nursing facilities that want to continue to provide skilled nursing 
services after conversion to an REH should have a transition period of 
up to 18 months before the skilled nursing facility is required to 
receive payment for skilled nursing services through the patient driven 
payment model (PDPM). These commenters suggested that during the 
transition period the skilled nursing facility should continue to 
receive payment at prior rates for swing bed payment.
    Response: As noted above, section 1834(x)(4) refers, with respect 
to payment for post-hospital extended care services furnished by an 
REH, to the provisions relating to payment for such services described 
in section 1888(e) of the Act. For the reasons previously discussed, 
CMS reads that provision to require that a skilled nursing facility 
that is a distinct part unit of an REH, including such a facility that 
was previously part of a CAH that has converted to a REH, to be paid 
through the skilled nursing facility prospective payment system. The 
statute makes no provision for skilled nursing facilities of former 
CAHs that convert to REHs to receive a period of transition from their 
former payment rates to payment under the skilled nursing facility 
prospective payment system. Nor was such a transitional period 
contemplated in the proposed rule.
    Because the commenter's request for CMS to establish transition 
payments for a skilled nursing facility that was previously a part of 
CAH if that CAH converts to an REH goes beyond the scope of the 
proposed framework for payment for services furnished by an REH, and 
does not appear to be supported by the REH statute, we are finalizing 
the policy for payment of post-hospital extended care services 
furnished by a distinct part unit within an REH as proposed, without a 
transition period for services furnished by the SNF units of former 
CAHs. After consideration of the public comments we received, and for 
the reasons described here and in the proposed rule, we are finalizing 
our proposals for payment of services performed by REHs that are not 
specified REH services, as set forth in 42 CFR 419.92(c), without 
modification.
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 
proposed 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

[[Page 72166]]

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 the CY 2023 OPPS/ASC proposed rule (87 FR 
44502), 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).
    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 regarding the application of the 
section 603 amendments to REHs that clarifies the application of 
provisions relating to off-campus outpatient department of a provider. 
The section states nothing in section 1886(kkk), 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 that are 
furnished by an off-campus outpatient department of a provider (as 
defined in subparagraph (B) of such paragraph).
    While we proposed 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 nonexcepted 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 nonexcepted 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 noted 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 noted 
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 proposed 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

[[Page 72167]]

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 solicited 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) of the 
Act. For example, CMS solicited 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) of the Act 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) of the 
Act. However, because sections 1833(t)(1)(B)(v) and (t)(21) of the Act 
would have applied to any nonexcepted off-campus PBDs of small rural 
hospital paid under the OPPS before that entity converted to an REH, 
any existing nonexcepted off-campus PBDs of the small rural hospital 
would continue to be considered nonexcepted off-campus PBDs and would 
continue to receive the PFS-equivalent rate under section 
1833(t)(21)(C) of the Act. Under this framework, any new off-campus 
PBDs created by the REH would be subject to the section 603 amendments. 
We solicited 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.
    Comment: Many commenters supported CMS's proposal to exempt both 
existing off-campus PBDs of entities converting to REHs and any off-
campus PBDs created post conversion to an REH from the section 603 
amendments to section 1833(t). These commenters encouraged CMS to 
finalize this proposal, and to not finalize the alternative payment 
approach.
    Response: We thank commenters for their support.
    Comment: We received multiple requests to clarify whether certain 
provider-based rural health clinics (RHCs) will maintain their excepted 
status under section 1861(kkk)(6)(B) of the Act after their associated 
hospital or CAH converts to an REH. Provider-based RHCs that meet 
specified criteria under this statute are entitled to special payment 
rules. Beginning April 1, 2021, an excepted RHC had their payment-limit 
per-visit established on their all-inclusive rate instead of the 
national statutory payment-limit of $100.
    Response: We agree with the commenters and believe that section 
1861(kkk)(6)(B) of the Act may be read to mean that if a provider-based 
RHC was entitled to ``grandfathering'' by virtue of being in existence 
on December 31, 2020 and forward, then that RHC could continue to 
utilize the exceptions set out in section 1833(f) of the Act if its 
associated hospital converts to an REH. We are finalizing our policy 
that provider-based RHCs may maintain their excepted status under 
section 1861(kkk)(6)(B) of the Act when their associated hospital 
converts to an REH.
    After consideration of the public comments we received, and for the 
reasons discussed here, we are finalizing our proposals for payment of 
services furnished by an off-campus Provider-Based Department of an 
REH, as set forth in 42 CFR 419.93, as proposed, while clarifying that 
provider-based RHCs that were previously entitled to excepted status 
under section 1833(f) of the Act may maintain this status when their 
associated hospital converts to an REH.
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 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 interpreted 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 proposed 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 proposed to include both amounts 
paid to CAHs from the Medicare program and from beneficiary copayments. 
Likewise, we proposed 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) of the Act. By including both Medicare trust fund 
payments and beneficiary copayments, we believe that the resulting

[[Page 72168]]

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 outpatient hospital spending for CAHs.\311\
---------------------------------------------------------------------------

    \311\ 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.
---------------------------------------------------------------------------

    As discussed in the proposed rule, 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 believed 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 final rule with comment 
period, \312\ we estimated in the proposed rule 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. Thus, in the 
proposed rule we estimated that 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 an 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. In the proposed rule, we also 
estimated that 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 see the detailed calculations from the proposed rule below:
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    \312\ In the CY 2023 OPPS proposed rule, we provided 
calculations for the total amount paid under title XVIII to CAHs in 
CY 2019 (as described in section 1834(x)(2)(C)(I)), which assumed 
that the beneficiary copayment share of CAH payment for Medicare 
services was 47 percent. As discussed further below, commenters 
noted in response to the proposed rule that although around 47 
percent of CAH outpatient hospital payment spending consists of 
beneficiary copayment dollars, the beneficiary copayment share for 
inpatient hospital services and skilled nursing services in CAHs is 
around 20 percent of total spending rather than the around 47 
percent of total Medicare spending for these services that we 
claimed in the CY 2023 OPPS proposed rule. In addition, commenters 
noted that CMS's estimate of total estimated prospective payment for 
CAHs in CY 2019 in our copayment discussion incorrectly excluded 
inpatient hospital supplemental payments that CAHs would receive if 
they were paid on a prospective basis. In response to these 
comments, CMS has provided revised calculations in this final rule 
that more accurately reflect the beneficiary copayment share of 
spending for inpatient hospital services and skilled nursing 
services furnished by CAHs in CY 2019, as well as the estimated 
total prospective payment for CAHs in CY 2019.

    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 believed that including both Medicare trust fund payments and 
beneficiary copayments in the calculation of the monthly facility 
payment reflected 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 proposed 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).
    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 proposed 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 did 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.
    Comment: Multiple commenters, including MedPAC, noticed that we 
reported two different amounts for the total estimated prospective 
payment for CAHs in CY 2019. For the comparison of the monthly facility 
payment aggregate amount as a share of total estimated prospective 
payment when including or excluding copayments, we reported a total 
estimated prospective payment for CAHs in CY 2019 of $7.03 billion. For 
the calculation of the monthly facility payment for an individual REH, 
we reported a total

[[Page 72169]]

estimated prospective payment for CAHs in CY 2019 of $7.68 billion. The 
commenters wanted know which number was the correct amount, and for us 
to correct the calculation with the incorrect amount.
    In addition, one commenter, MedPAC, disagreed with our 
determination that 47 percent of total Medicare payments to CAHs are 
beneficiary copayments. MedPAC stated that the 47 percent figure only 
applies to hospital outpatient services, and that copayment percentages 
for inpatient hospital services and skilled nursing services are much 
lower than outpatient hospitals services for CAHs. MedPAC noted that 
the copayment amounts for inpatient hospital and skilled nursing 
services are same for a CAH as it would be for a hospital receiving 
prospective payment.
    Response: The correct amount of total estimated prospective payment 
for CAHs in CY 2019 is $7.68 billion. The $7.03 billion amount 
mistakenly excluded supplemental inpatient hospital payments that are 
made to prospectively paid hospitals. In response to this comment, CMS 
has updated the calculations comparing the monthly facility payment 
aggregate amount as a share of total estimated prospective payment when 
including or excluding copayments presented in the CY 2023 OPPS/ASC 
proposed rule, as provided below.
    In addition, we agree with the copayment information stated by 
MedPAC, and have revised the calculations on this topic that were 
provided in the CY 2023 OPPS/ASC proposed rule, as shown below. For our 
revised calculations that compare the monthly facility payment 
aggregate amount as a share of total estimated prospective payment when 
including or excluding copayments we have made the below revised 
assumptions:
    (1) The copayment percentage of CAH outpatient hospital payment is 
approximately 47 percent;
    (2) The copayment percentage of prospective payment outpatient 
hospital payment is slightly under 20 percent because some preventive 
services have no copayment, and the copayment for a few high-cost 
outpatient services is capped at the cost of the inpatient hospital 
deductible; and
    (3) The copayment amounts for inpatient hospital services and 
skilled nursing services are the same whether the provider is a CAH or 
a prospectively-paid provider. Therefore, the copayment amounts cancel 
each other out in the equation.
    We revised our assumptions to be in agreement with the beneficiary 
copayment share of CAH Medicare spending and the beneficiary copayment 
share of Medicare spending for prospectively paid hospitals described 
by MedPAC.
    Our revised calculations are based on the detailed methodology 
presented in the CY 2023 OPPS/ASC proposed rule (87 FR 44781). These 
calculations do not include any updates to the detailed methodology 
that were made in this final rule. Our revised calculations are as 
follows:
    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: $7,679,358,171.
    Difference: $12,083,666,636-$7,679,358,171 = $4,404,308,465.
    Aggregate REH monthly facility payment with copayments: 
$4,404,308,465.
    Share of the aggregate REH monthly facility payment with copayments 
of the total estimated prospective payment for CAHs in CY 2019 with 
copayments: $4,404,308,465/$7,679,358,171 = 57 percent.
    Step 2: Total estimated CAH spending in CY 2019 removing 
copayments: $9,078,931,318.
    Total estimated prospective payment for CAHs in CY 2019 removing 
copayments: $7,002,437,498.
    Difference: $9,078,931,318-$7,002,437,498 = $2,076,493,820.
    Aggregate REH monthly facility payment without copayments: 
$2,076,493,820.
    Total estimated prospective payment for CAHs in CY 2019 with 
copayments: $7,679,358,171.
    Share of the aggregate REH monthly facility payment without 
copayments of the total estimated prospective payment for CAHs in CY 
2019 with copayments: $2,076,493,820/$7,679,358,171 = 27 percent.
    Our revised calculations, using updated assumptions about the 
percentage of total Medicare spending for CAHs in CY 2019 from 
beneficiary copayments and corrected estimates about of prospective 
payment for CAHs in 2019, indicate that the aggregate REH monthly 
facility payment including copayments would be 57 percent of the 
estimated prospective payment for CAHs in 2019. In comparison, our 
prior calculations from the CY 2023 OPPS/ASC proposed rule found that 
the aggregate REH monthly facility payment including copayments was 72 
percent of the estimated prospective payment for CAHs in 2019.
    In our revised calculations, 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 is 
more than twice the share of the estimated prospective payment amount 
than if copayments are removed from both the total amount of CAH 
spending in 2019 and the estimated prospective payment for CAHs in 2019 
to calculate the aggregate monthly facility payment. In comparison, our 
prior calculations from the CY 2023 OPPS/ASC proposed rule found that 
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 is more than 6 times the share of the 
estimated prospective payment amount than if copayments are removed 
from both the total amount of CAH spending in 2019 and the estimated 
prospective payment for CAHs in 2019 to calculate the aggregate monthly 
facility payment.
    Our updated calculations found a substantially smaller difference 
between an aggregate monthly facility payment calculated using both 
Medicare program spending and beneficiary copayment spending and an 
aggregate monthly facility payment calculated using only Medicare 
program spending and excluding beneficiary copayment spending than what 
we calculated in the CY 2023 OPPS/ASC proposed rule. However, the 
aggregate monthly facility payment calculated using both Medicare 
program spending and beneficiary copayment spending was still more than 
twice as large as the aggregate monthly facility payment calculated 
using only Medicare program spending and excluding beneficiary 
copayment spending. We believe the intent of creating the REH provider 
type was to provide financial support to hospitals that want to 
maintain outpatient hospital services in areas where it is no longer 
economically feasible to continue providing inpatient services. In 
order to do this, we believe the monthly facility payment was intended 
to help cover the difference in payment for services that a CAH would 
experience if it transitioned from receiving 101 percent of reasonable 
costs under the CAH payment methodology to prospective payment under 
the REH methodology. We believe an aggregate monthly facility payment 
that is calculated by factoring in both Medicare program spending and 
beneficiary copayment spending is the best way to address this 
difference.
    Comment: One commenter, MedPAC, stated that the REH monthly 
facility payment should be calculated by

[[Page 72170]]

removing copayment dollars from the both the total amount of CAH 
spending in 2019 and the estimated prospective payment for CAHs in 
2019. MedPAC determined that removing copayment dollars from the 
calculation of the aggregate monthly facility payment would result in a 
$1.5 million aggregate monthly payment per facility per year, instead 
of a proposed $3.2 million aggregate monthly payment per facility per 
year. MedPAC believes the smaller, $1.5 million aggregate monthly 
payment per facility per year will provide sufficient financial 
stability for REHs while also demonstrating that Medicare is a prudent 
payer of program funds. MedPAC believes a higher aggregate monthly 
payment is not the best policy considering that REHs will not be 
required to have a 24/7 emergency department staffed with a clinician 
as MedPAC believes one of the main purposes of the monthly facility 
payment would be to staff and support such a department. MedPAC is 
concerned that the higher monthly aggregate payment amount may result 
in too many facilities converting to REHs and further limiting access 
to inpatient hospital care in rural areas.
    Response: We thank MedPAC for their comment. We believe the intent 
of the REH legislation was to provide financial assistance to support 
existing outpatient hospital and emergency department care in rural 
areas when it may not be feasible in the future to maintain an 
inpatient hospital capacity. We note, based on a July 2021 policy brief 
from the NC Rural Health Research Program,\313\ that the majority of 
REHs are expected to be former CAHs. We believe the intent of the 
monthly facility payment was to address the gap in outpatient payment a 
CAH would experience in converting from receiving 101 percent of 
reasonable costs to receiving prospective payment. As such, we believe 
that an REH monthly facility payment that is calculated from both the 
total amount of Medicare program dollars and beneficiary copayments 
better reflects the potential gap in outpatient payment a REH would 
face after converting from a CAH, as the REH would receive not just 
lower Medicare payments for services, but also lower beneficiary 
copayments.
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    \313\ Pink GH, Thompson KW, Howard HA, Holmes GM. How Many 
Hospitals Might Convert to a Rural Emergency Hospital (REH)? NC 
Rural Health Research Program, UNC Sheps Center. July 2021.
---------------------------------------------------------------------------

    Comment: Multiple commenters supported our decision to calculate 
the REH monthly facility payment using both Medicare program dollars 
and beneficiary copayment funds.
    Response: We appreciate the commenters' support of our proposal.
    Comment: Multiple commenters supported our proposal to increase the 
REH monthly facility payment calculated in CY 2023 by the hospital 
market basket in subsequent years. However, many of the commenters were 
concerned that the hospital market basket increase may not be 
sufficient to capture all of the increased labor, supplies, and 
equipment costs that REHs may face in the future. These commenters 
strongly encourage us to monitor the annual market basket increase to 
ensure it is adequately covering the increased costs REHs are facing 
year over year.
    Some commenters also were concerned that the monthly facility 
payment was based on CY 2019 payments to CAHs and CY 2019 estimated 
prospective payments if CAHs were paid like prospective payment 
hospitals with no market basket adjustment to the payment amounts for 
the period of 2020 through 2022. These commenters requested that we 
adjust the REH monthly payment calculated from CY 2019 data by the 
change in the market basket percentage from 2020 through 2022.
    Response: We appreciate the support of the commenters for our 
proposal to increase the REH monthly facility payment calculated in CY 
2023 by the hospital market basket in subsequent years. As described 
above, section 1834(x)(2)(B)(ii) of the Act requires that we increase 
the initial monthly facility payment calculated for CY 2023 by the 
hospital market basket amount in CY 2024 and subsequent years. We 
intend to regularly monitor the annual increases to the REH monthly 
payment to ensure the adequacy of the payment in future years. With 
respect to the request to adjust the REH monthly facility payment 
amount for CY 2023 by the market basket increase for the period of 2020 
through 2022, we note that sections 1834(x)(2)(B)(i) and (C)(i) of the 
Act specify that the monthly facility payment for CY2023 should be 
based on the 2019 payment data and includes no provision for adjusting 
the payment amount to account for payment increases that CAHs and OPPS 
hospitals have received in the intervening years. Likewise, such an 
adjustment was not proposed in the proposed rule. Because the 
commenters' request goes beyond the scope of the proposed framework for 
calculation of the CY 2023 REH monthly facility payment and is not 
supported by the REH statute, we are finalizing the policy for 
calculation of the CY 2023 REH monthly facility payment based on CY 
payment 2019 data as proposed, without adjusting this data by the 
market basket increase for the period of 2020 through 2022.
    Comment: Multiple commenters supported our use of 2019 calendar 
year claims rather than 2019 fiscal year claims to calculate the REH 
monthly facility payment.
    Response: We appreciate the commenters' support for this decision.
    Comment: Commenters requested additional cost reporting guidance 
from us. A commenter wants us to develop a cost report for REH 
providers. The commenter implies that the REH provider cost report 
should be finalized in time for reporting CY 2023 provider cost data. 
The commenter suggests that an REH cost report be based on the cost 
reporting structure for CAHs. The commenter wants interested parties to 
have time to review the specifications for an REH cost report and 
provide feedback before an REH cost report is implemented. Another 
commenter wants guidance on how to report the cost of observation 
services performed by REHs and whether the cost of emergency care would 
be separated from the cost of observation services in a cost report.
    Response: We appreciate the commenters' suggestions regarding REH-
specific cost reporting. However, we are concerned that new reporting 
requirements might create an additional burden for providers and 
discourage eligible providers from converting to an REH. For now, we 
will follow our proposed policy to monitor cost reporting for REHs for 
CY 2023 and future years. We will allow REH providers to continue to 
use their current cost reporting formats to report costs. If REH-
specific cost reporting is determined to be necessary, we will consider 
this issue, including the commenters' policy suggestions, in future 
rulemaking.
    Comment: Multiple commenters supported our proposal to not 
establish new cost reporting requirements for REHs for CY 2023. Some of 
the commenters also supported our decision not to propose specific 
requirements for the spending of REH monthly facility payments.
    Response: We appreciate commenters' support of our proposals.
    After consideration of the public comments we received, we are 
finalizing our monthly facility payment proposals without modification. 
We are required by statute, for CY 2023, to calculate the REH monthly 
facility payment 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

[[Page 72171]]

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 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, as required by 
statute, the amount of the monthly facility payment for the previous 
year increased by the hospital market basket percentage increase.
    We are finalizing our policy to use both Medicare program spending 
and beneficiary copayments to calculate the monthly facility payment 
after correcting errors with our original calculations which gave a 
more accurate picture of the amount of the aggregate monthly facility 
payment calculated using both Medicare program spending and beneficiary 
copayments as compared to the amount of the aggregate monthly facility 
payment using Medicare program spending alone. We will calculate the 
monthly facility payment using claims data from calendar year 2019. We 
will not establish any new reporting or data collection requirements 
for REHs related to their use of the monthly facility payments for CY 
2023. 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. Methodology To Estimate Medicare CAH Spending in CY 2019
    Section 1834(x)(2)(C)(i)(I) of the Act 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 proposed 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 proposed 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).
    Comment: Multiple commenters wanted to know whether the amount 
calculated for total Medicare CAH spending in CY 2019 from CAH claims 
data included data of any Medicare cost report settlements.
    Response: The amount calculated for total Medicare CAH spending 
came from CAH claims data which does not have Medicare cost settlement 
data. Data on Medicare cost settlements only is found through Medicare 
cost reports. However as discussed in this section, we compared CAH 
claims data and Medicare cost report data for CY 2019 and found that 
the CAH claims data reported more than $450 million in Medicare 
spending than the Medicare cost report data, and the CAH claims data 
identified 42 more CAHs for CY 2019 than the Medicare cost report data. 
These findings indicate the CAH claims data are more complete than the 
Medicare cost report data even though the CAH claims data do not have 
cost settlement data.
    Comment: Commenters agreed with our decision to use 100 percent 
Medicare claims data to calculate the Medicare CAH spending amount and 
the estimated prospective payment amount for CY 2019.
    Response: We thank commenters for their support.

[[Page 72172]]

    After consideration of the public comments we received, we are 
finalizing this proposal without modification. We will use CAH claims 
data with service dates in CY 2019 to calculate the actual Medicare 
spending for CAHs for CY 2019. 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) 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 calendar year. We will calculate the total CAH Medicare spending 
for CY 2019 by including the total of the provider payment, coinsurance 
amounts, and deductible amounts for all of the claims. We will 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).
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 Inpatient Rehabilitation Facility (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 prospective 
payment for Medicare CAH services. To estimate Medicare CAH spending if 
CAHs were paid on a prospective basis, we therefore proposed to use CAH 
claims for inpatient hospital, inpatient rehabilitation, inpatient 
psychiatric, skilled nursing facilities, and outpatient hospital 
services. We also proposed 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 proposed 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 
section XVIII.A.5.c.(1) of the proposed rule for all claims except for 
skilled nursing facility claims or section XVIII.A.5.c.(2) of the 
proposed rule 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.\314\
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    \314\ 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 had 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.
    As discussed in the proposed rule, we did 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 would not be 
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 did not propose 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

[[Page 72173]]

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 proposed, 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 almost always be zero in the actual calculation. We 
estimated an aggregate projected prospective payment amount for CAHs, 
and therefore, we did not need to calculate IME and DSH for each 
individual CAH. Instead, we estimated an aggregate amount of IME and 
DSH spending for all CAHs. Our proposed approach was 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 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 used 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 was 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 used a similar approach to the 
approach we have described earlier in this section for calculating 
estimated DSH and IME payments for CAHs. The difference was that, for 
uncompensated care payments, we estimated 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 then aggregated the estimated uncompensated care 
payments for individual CAHs into a national estimate and included 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 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 proposed to codify our proposal to estimate the prospective 
spending for CAHs in 2019 under 42 CFR 419.92(b)(1)(ii).
Detailed Methodology To Estimate CY 2019 Prospective Payment for CAHs 
for Inpatient Hospital and Outpatient Hospital Services
    In the proposed rule we provided a detailed 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). That proposed methodology 
included the following steps:

Step 1: 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.\315\ Take the benefit

[[Page 72174]]

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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    \315\ 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.
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 notification 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,\316\ 
multiplied by capital cost-of-living adjustment;
---------------------------------------------------------------------------

    \316\ This value is set by statute and is the same value every 
year.
---------------------------------------------------------------------------

     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.
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 
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 did 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

[[Page 72175]]

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 did 
not propose to calculate IME payment directly from cost report data.
    Instead, we proposed 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: (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: 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: 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,\317\ and Discount Formula Indicator.
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    \317\ 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.\318\ For claim lines that have APC assignment, obtain 
relevant APC payment rate from the OPPS final rule/correction 
notification data files. Apply the following APC adjustments, as 
applicable:
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    \318\ 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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    [dagger][dagger] Device Credit, taken from value code ``FD'', is 
deducted from payment;
    [dagger][dagger] Off-campus Provider Based Department deduction 
indicated by modifier PO;
    [dagger][dagger] Computed tomography reduction (indicated by 
modifier CT and HCPCS code);
    [dagger][dagger] Reduction of X-rays taken with film (indicated by 
modifier FX);
    [dagger][dagger] 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.
    [dagger][dagger] Geographic adjustment factor is the sum of labor 
share multiplied by wage index and non-labor share;
    [dagger][dagger] 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.
    [dagger][dagger] Estimate claim line cost by adding line covered 
charge and charges from packaged services;
    [dagger][dagger] Line fixed threshold is the line OPPS payment plus 
the OPPS fix threshold of the calendar year

[[Page 72176]]

    [dagger][dagger] 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.
Detailed Methodology to Estimate CY 2019 Prospective Payment for CAHs 
for Provision of Skilled Nursing Facility Services
    We also proposed 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 
proposed 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 proposed to apply RUG PPS 
rules for claims with service dates between January 1, 2019, and 
September 30, 2019, and we proposed 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.
    Comment: Commenters wanted us to clarify whether spending for 
clinical lab, physician services, ambulance services, parenteral and 
enteral nutrition, durable medical equipment, prosthetics/orthotics, 
and supplies, and vaccines and Medicare Part B drugs were included in 
the reported amount for CAH Medicare spending for CY 2019.
    Response: As stated in the CY 2023 OPPS/ASC proposed rule, we 
included all of the services cited by the commenters, including 
clinical lab, physician services, ambulance services, parenteral and 
enteral nutrition, durable medical equipment, prosthetics/orthotics, 
supplies, vaccines, and Medicare Part B drugs, in the Medicare CAH 
spending amount for CY 2019, for the calculation of the monthly REH 
facility payment as provided by section 1834(x)(2)(C)(i)(I). However, 
the calculation of the estimated prospective payment for CAHs in CY 
2019, as described by section 1834(x)(2)(C)(i)(II), does not mention a 
different payment methodology for all of the services identified by the 
commenters except for Medicare Part B drugs administered in the 
outpatient hospital setting which are payable in the OPPS when paid 
prospectively. We interpret the omission of a different methodology to 
pay for clinical lab, physician services, ambulance services, 
parenteral and enteral nutrition, durable medical equipment, 
prosthetics/orthotics, supplies, and vaccines to mean that for the 
estimate of prospective payment for CAHs in CY 2019, as described by 
section 1834(x)(2)(C)(i)(II), the payment amount for these services 
will be same amount as the payment for these services used in the 
calculation of actual Medicare CAH spending for CY 2019, as described 
in section 1834(x)(2)(C)(i)(I). In the description of our detailed 
methodology provided in the CY 2023 OPPS/ASC proposed rule we did not 
specifically address the effect that these equal payment amounts would 
have on the calculation of the REH monthly facility payment. We are 
providing additional detail regarding this aspect of our methodology in 
this final rule in response to these comments. Specifically, payment 
for the services noted above will cancel each other out when 
calculating the REH monthly facility payment, which means the spending 
on these services will not affect the amount of the REH monthly 
facility payment.
    Comment: Commenters agreed with our decision not to attempt to 
adjust the CAH inpatient hospital claims to account for potential 
underreporting of patient co-morbidities on those claims. Commenters 
also agreed with our statement that there is not readily available data 
to compare the amount of co-morbidities between CAH inpatient hospital 
population with the prospective payment inpatient hospital population, 
and they agreed there was not time prior to the implementation of the 
REH provider type to obtain this data.
    Response: We appreciate the support of the commenters regarding 
this issue.
    Comment: Multiple commenters requested that we include Medicare 
Advantage (MA) payments in our calculation of CY 2019 Medicare CAH 
spending and CY 2019 estimated prospective payment for CAHs.
    Response: Although we did not explicitly address the treatment of 
MA payments in the description of the detailed methodology used to 
generate the monthly facility payment the CY 2023 OPPS/ASC proposed 
rule, we are providing additional detail regarding this aspect of our 
methodology in this final rule in response to these comments.
    Consistent with section 1834(x)(2)(C)(i) of the Act, CMS was 
required to determine the monthly facility payment based on the 
difference between the amount paid under Medicare to all CAHs in 2019 
and the

[[Page 72177]]

amount that would have been paid to CAHs if payment had been made for 
inpatient hospital, outpatient hospital, and skilled nursing facility 
services under the applicable prospective payment systems. MA payments 
are payments made by private health plans for the care CAHs provide to 
Medicare beneficiaries enrolled in Medicare Advantage. Medicare pays a 
per beneficiary capitation amount to the private health plans which in 
turn are responsible for paying the CAHs. Medicare Advantage 
organizations are not required to use the Medicare fee-for-service 
payment methodology to determine payments to CAHs. Rather, the amount 
of these payments is based upon the arrangement between the MA 
organization and the CAH. Thus, the amount of MA payments to CAHs would 
not be affected by a change in the payment methodology under fee-for-
service Medicare. Because the amount of Medicare Advantage payments 
would be the same for both CY 2019 Medicare CAH spending and for the 
estimate of CY 2019 prospective payments to CAHs, the Medicare 
Advantage payments were cancelled out and had no impact on the 
determination of the REH monthly facility payment.
    Comment: Commenters requested that we include payments for 
professional services made to those CAHs that elected Method II 
billing.
    Response: As noted above, Method II billing is a payment approach 
available to CAHs, which allows physicians employed at CAHs to assign 
payment for their professional services to be paid to the CAH instead. 
The commenters imply that because a CAH receives 115 percent of the 
MPFS rate for professional services reported using Method II billing, 
we should include the additional 15 percent of the MPFS payment add-on 
as a part of the calculation to determine the monthly facility payment. 
However, since the REH statute only mentions prospective payment 
systems, we believe it is appropriate to limit the scope of the 
calculation to services that are paid on a prospective basis. Thus, as 
with other payment items mentioned in this section, the additional 15 
percent payment to the CAH for service billed through Method II would 
be unaffected whether a CAH received reimbursement at 101 percent of 
cost or received reimbursement through prospective payment. That means 
the additional 15 percent payment would cancel out in the calculation 
to determine the REH monthly facility payment, and would have no impact 
on the final amount.
    Comment: Commenters believe that we failed to reduce the CY 2019 
CAH estimated prospective payment amount to account for the fact that 
CAHs are not subject to the 72-hour rule regarding the conversion of an 
observational service to an inpatient hospital service while hospitals 
paid on a prospective basis are subject to this rule.
    Response: We acknowledge that the 72-hour rule is part of 
prospective payment system requirements for both inpatient hospital and 
outpatient hospital payment. The 72-hour requires that payment for all 
outpatient services that occur with a 72-hour window of an associated 
inpatient service shall be packaged with the cost of the prospectively-
paid inpatient hospital service.
    An example would be a patient who has an inpatient admission for 
heart surgery, but 48 hours before their hospital admission received a 
series of imaging services in the outpatient hospital setting. With at-
cost payment at the CAH, the outpatient imaging services would be 
separately paid along with the inpatient heart surgery. With 
prospective payment, the outpatient imaging services would be packaged 
with the DRG payment for inpatient heart surgery. Our current 
methodology to calculate the CY 2019 prospective payment amount for the 
REH monthly payment does not package the payment for the outpatient 
hospital imaging services which increases the prospective payment 
amount and reduces the amount of the monthly facility payment.
    CMS has not identified a feasible approach that could be used to 
model the extent to which an outpatient service furnished by CAHs 
within 72 hours of an inpatient admission is an associated service that 
would be packaged under the 72-hour rule if the CAHs were paid 
prospectively for inpatient hospital and outpatient hospitals services 
under the IPPS and OPPS. For example, a diagnostic service closely 
related to the inpatient service received by a patient is quite likely 
to be associated with the inpatient service and should be packaged. 
However, there may be limited information on whether a therapeutic 
outpatient hospital service within the 72-hour window should be 
associated with the inpatient admission. We were not able to develop a 
reliable algorithm that works with CAH claims data to determine whether 
an outpatient service is admission-related or not. Therefore, we 
decided not to use the 72-hour rule to adjust the amount of the CY 2019 
CAH estimated prospective payment as a part of our calculations for the 
monthly REH facility payment.
    Comment: Commenters requested that we clarify and publish our 
calculations for projecting supplemental payments under the IPPS and 
OPPS. Commenters noted that because CAHs are paid based on a cost-
basis, their claims do not include supplemental payments that are 
normally paid under IPPS, such as indirect medical education (IME), 
disproportionate share hospital (DSH), and uncompensated care payments, 
and we need to estimate those payments to more accurately reflect the 
estimated prospective payment amount for CAH providers.
    Response: We have proposed a detailed methodology describing how we 
will model inpatient hospital supplemental payments for prospectively-
paid hospitals to generate a more representative estimate of the 
payment CAHs would receive if these providers were paid on a 
prospective basis. Our detailed methodology spells out the steps we 
have taken to calculate the REH monthly facility payment. We reviewed 
the rules to pay inpatient hospital services on a prospective basis to 
identify the supplemental payments applied to base service payment 
rates including low-volume adjustments, quality measures reporting, DSH 
and uncompensated care payments, and the use of electronic health 
records. Commenters provided multiple suggestions on how our detailed 
methodology could be improved. These suggestions will be addressed in 
the upcoming comments in this section. We have provided the final 
amount of the monthly facility payment along with the aggregate payment 
amounts for both Medicare CAH spending for CY 2019 and the estimated 
prospective payment amount for CAHs for 2019, which allows interested 
parties to compare the final results of their analyses with our final 
results. Estimates of the inpatient hospital supplemental payments are 
included in the total estimated prospective payment amount for CAHs.
    Comment: Commenters stated that it appears that we assumed all CAHs 
would have met the Hospital Inpatient Quality Reporting (IQR) Program. 
The commenters feel that it would be appropriate to assume all CAHs 
would be subject to the hospital inpatient quality reporting reduction 
because CAHs are not covered by the quality reporting requirements, and 
would not be familiar with how to submit the reports.
    Response: We do not believe it would be appropriate to assume CAHs 
would not comply with the IQR program because CAHs were not subject to 
the Quality Reporting program. The share of IPPS hospitals that are 
subject to the quality reporting program penalty is low, and we 
anticipate that CAHs would have had a similar level of compliance

[[Page 72178]]

to IPPS hospitals for the Quality Reporting program had they been 
subject to the program. We assume that the number of CAHs that would 
fail to comply with the Quality Reporting program would be very low and 
the reduction in CY 2019 CAH estimated prospective payment would not be 
significant enough to have a substantial impact on the REH monthly 
facility payment. Therefore, we believe it is more appropriate to 
assume CAHs would comply with the Quality Reporting program 
requirements, and would not experience a reduction in their estimated 
prospective inpatient hospital payments.
    Comment: Commenters noted that we did not consider reducing the CY 
2019 CAH estimated prospective payment to account for payment 
reductions associated with the Promoting Interoperability Program. The 
commenters support assuming that every CAH would not be a meaningful 
electronic health records user and would be subject to a 2 percent 
decrease in the amount of their inpatient hospital payment if receiving 
prospective payment.
    Response: The Promoting Interoperability Program is an initiative 
to incentivize hospitals to be meaningful electronic health records 
(EHR) users. Providers whose EHR systems do not meet the requirements 
of the Promoting Interoperability Program are subject to a 2 percent 
decrease to their inpatient hospital payments. We disagree with the 
commenters' recommendation to update our proposed calculation of the 
REH monthly facility payment based on the assumption that every CAH 
would not be a meaningful electronic health user and would be subject 
to the Promoting Interoperability Program 2 percent decrease to their 
projected inpatient hospital payments. It is challenging to anticipate 
CAH behavior regarding meaningful use of electronic health records when 
these providers are not subject to this performance requirement. 
However, we believe that if CAHs relied on prospective payment to pay 
for inpatient hospital services, most CAHs would comply with the 
meaningful use requirements for electronic health records as providers 
generally try to comply with incentive programs to avoid payment 
penalties. In addition, CAHs would be more likely to qualify for 
existing hardship exemptions to the payment reductions than subsection 
(d) hospitals because CAHs are small providers with limited financial 
resources. These hardship exemptions are available where an eligible 
facility can show that compliance with the requirement for being a 
meaningful EHR user would result in a significant hardship for reasons 
including the facility's use of decertified EHR technology, 
insufficient internet connectivity, and extreme and uncontrollable 
circumstances.\319\ These hardships are more likely to occur for CAHs 
than most hospitals because their limited financial resources make it 
more challenging for CAHs to obtain up-to-date EHR technology. Also, 
internet connectivity issues are more common in rural areas where CAHs 
are located. We assume that the number of CAHs that would fail to 
comply with the Promoting Interoperability Program would be very low 
and the reduction in CY 2019 CAH estimated prospective payment would 
not be significant enough to have a substantial impact on the REH 
monthly facility payment. For these reasons, we believe that it is more 
reasonable to assume that all CAHs would comply with the meaningful use 
requirements for electronic health records for our calculations for the 
monthly facility payment.
---------------------------------------------------------------------------

    \319\ ``Medicare Promoting Interoperability Program Frequently 
Asked Questions (FAQs).'' Centers for Medicare and Medicaid 
Services. Accessed October 20, 2022.
---------------------------------------------------------------------------

    Comment: Commenters wanted us to confirm that we did not reduce the 
DRG payment if the beneficiary was transferred to a swing bed and that 
the transfer fraction was applied only for those DRGs to which the 
post-acute transfer adjustment policy applies.
    Response: We can confirm that the transfer fraction was applied 
only for those DRGs to which the post-acute transfer adjustment policy 
applies; we checked if the discharge status code and DRG on the claim 
satisfy the condition of the adjustment.
    Comment: Commenters stated that the low-volume adjustment should 
not apply to CAHs that are within 15 miles of another provider, 
regardless of whether that facility is presently a CAH or subsection 
(d) hospital. They encouraged CMS to identify the CAHs that do not meet 
the criteria and eliminate the low-volume adjustment applied to those 
CAHs.
    Response: As the commenters note, our proposed methodology does not 
consider whether a CAH is within 15 miles of another CAH or subsection 
(d) hospital, and thus under the proposed methodology the low-volume 
adjustment was applied to all CAHs, regardless of whether the facility 
is located within 15 miles of another provider. It was our 
understanding is that few CAHs are likely to be within 15 miles of 
another hospital provider because in order for a hospital to become a 
CAH, a provider has to be more than 35 miles away from another 
hospital. In response to the commenters' request, we attempted to 
identify CAHs that were less than 15 road miles from another CAH or 
subsection (d) hospital. We found that some CAHs were within 15 road 
miles from other CAHs or subsection (d) hospitals and not eligible for 
the low-volume adjustment. Based on our analysis, we will revise our 
estimate of the low-volume adjustment to exclude CAHs that do not meet 
the 15 road miles distance requirement. This revision to our detailed 
methodology will increase, by a few thousand dollars, the REH monthly 
facility payment. We analyze the financial impact of this change in 
detail in section XVIII.A.5.e. of this final rule with comment period.
    Comment: Commenters raised concerns with our proposal to project 
the amount of DSH and uncompensated care add-on payments CAHs would 
have received if paid prospectively, noting that factors other than 
demographics determine the amount of DSH and uncompensated care. They 
recommend excluding the amount of DSH and uncompensated care add-on 
payments from the estimated prospective payment amount since there is 
not a reliable method to make projections. They believe only small 
rural hospitals that receive prospective payment and have less than 50 
beds with a geographic location assignment in a rural area should be 
identified for this purpose.
    Response: We acknowledge that interested parties are concerned 
about possible distinctions between rural subsection (d) hospitals 
versus CAHs for purposes of projecting the amount of DSH and 
uncompensated care add-on payments that CAHs would receive if they were 
paid prospectively. As discussed in the CY 2023 OPPS/ASC proposed rule 
(87 FR 44784), our proposed methodology includes elements intended to 
accurately reflect the amount of such add-on payments that CAHs would 
receive. We identified the subsection (d) hospital that was closest to 
an individual CAH and determined its ratio of DSH and uncompensated 
care payments to core inpatient hospital payments excluding any 
supplemental payments. We also identified the closest subsection (d) 
rural hospital to an individual CAH and determined the rural hospital's 
ratio of DSH and uncompensated care payments to core inpatient hospital 
payments excluding any supplemental payments. Then we averaged the two 
percentages to estimate the share of DSH and

[[Page 72179]]

uncompensated care payments for the CAH. This calculation is repeated 
for all CAHs throughout the United States to generate a national 
average percentage of DSH and uncompensated care payments for CAHs. 
Additionally, to further corroborate the proposed approach, Acumen also 
created a model that predicts the percentage of a prospective payment 
hospital's DSH and uncompensated care from its DRG payment. Three 
predictors were included in the model:
     A hospital's rural/urban indicator based on actual 
geographic location;
     The percentage of population below poverty line of the 
hospital's zip code area; and
     The percentage of the hospital's dually eligible Medicare 
beneficiaries.
    The three coefficients are all statistically significant. A 
location in a rural area reduces the amount of DSH and uncompensated 
care a hospital receives. According to MACPAC, only 11.5 percent of DSH 
spending in 2016 was for rural hospitals.\320\ Having a larger 
percentage of the population of a hospital's zip code area living below 
the poverty level increases the amount of DSH and uncompensated care a 
hospital receives. Likewise, having more dually eligible Medicare 
beneficiaries receive care at a hospital increases the amount of DSH 
and uncompensated care the hospital receives. Both of these variables 
are predictive of the share of people in a community who may lack the 
resources to pay for their medical care, and where hospitals would need 
more DSH and uncompensated care payments to make up for lost patient 
revenue. When applying this model to CAHs, the projected DSH and 
uncompensated care payment is very similar to the result based on 
proximity to providers in rural areas. Based on this analysis, we 
believe that the approach described in the proposed rule will produce a 
reasonably accurate projection of the amount of DSH and uncompensated 
care add-on payments that CAHs would have received if they had been 
paid prospectively in CY 2019.
---------------------------------------------------------------------------

    \320\ Report to Congress on Medicaid and CHIP. ``Chapter 5: 
Annual Analysis of Disproportionate Share Hospital Allotments to 
States''. Medicaid and CHIP Payment and Access Commission. March 
2021. Accessed October 20, 2022.
---------------------------------------------------------------------------

    Comment: Commenters stated that no IME add-on payments should be 
included for any CAH that did not have a residency program in CY 2019. 
Commenters believe that cost report data can be used to identify which 
CAHs had IME payments in 2019.
    Response: As we discussed in the CY 2023 OPPS/ASC proposed rule (87 
FR 44784), cost report data are not a reliable source to determine IME 
spending by CAHs. CAHs are paid by reasonable cost and there is limited 
incentive for CAHs to report their medical education spending. To 
address issues with the completeness of CAH cost report data for IME 
spending, we used IME spending from nearby rural subsection (d) 
hospitals to model CAH IME spending. Similar to our approach to DSH and 
uncompensated care payments, we calculate an estimate share of IME 
spending for each individual CAH. We then repeat this calculation for 
all CAHs throughout the United States to generate a national average 
percentage of IME payments for CAHs.
    Even though IME add-on payment is determined by the size of a 
residency program, rural/urban status and proximity to CAHs are highly 
associated with the percentage of IME payments that subsection (d) 
hospitals receive. CAHs are rural hospitals and few rural hospitals 
offer medical education programs. In the comparable group of rural 
subsection (d) hospitals, less than 10 percent of hospitals receive any 
IME payment. In other words, the projected IME add-on payment already 
factors the concerns of the commenters and treats most CAHs as if they 
do not receive IME payment. Our model of CAH IME spending estimates 
that IME spending is less than 1 percent of overall CAH spending.
    Comment: Multiple commenters supported our decision not to require 
CAHs to submit additional information in order to help us project 
payments for skilled nursing facilities such as the Minimum Data Set 
(MDS) 3.0 assessments for their SNF swing bed patients. The commenters 
agreed with our proposal to predict per-diem rates of claims through 
modeling.
    Response: We appreciate the support of our proposal by the 
commenters.
    After consideration of the public comments we received, and for the 
reasons discussed, we are implementing most of our proposals without 
modification. We modified our proposal regarding how we model the use 
of the low-volume adjustment to estimate the CY 2019 estimated 
prospective payment for CAHs to exclude from the low-volume adjustment 
any CAH within 15 road miles of another CAH or subsection (d) hospital. 
We use the detailed methodology described in this section to calculate 
the estimated prospective payment amount for CAHs for the REH monthly 
facility payment calculation.
d. Determination of the Total Number of CAHs in CY 2019
    We proposed 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 proposed 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 proposed that the number 
of distinct CAH CCNs includes providers that may have either been open 
or closed during CY 2019. We proposed 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 provides that we use the total number of CAHs in 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 proposed 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 proposed to codify our methodology to calculate 
the number of CAHs in CY 2019 under 42 CFR 419.92(b)(1)(iii).
    Comment: Commenters requested that we adjust the count of the 
number of CAHs to remove any CAHs that either opened or closed during 
CY 2019 and do not have a full year of data. Commenters are concerned 
that including CAHs that were only open for a part of 2019 when the 
monthly facility payment calculation is based on an annual payment 
total will lead to an REH facility payment that may underestimate 
monthly costs.
    Response: As noted above, section 1834(x)(2)(C)(ii) of the Act 
provides that CMS use the total number of CAHs in 2019 to calculate the 
monthly facility payment. In the proposed rule, we therefore proposed 
to determine the number of CAHs in 2019 for purposes of the monthly 
facility payment calculation described in 1834(x)(2)(C) by tallying the 
total number 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. As the commenters note, this approach includes any CAHs 
that operated during

[[Page 72180]]

2019 in the total described in section 1834(x)(2)(C)(ii), including 
such facilities that only operated for part of the year. This approach 
complies with the plain language of the statute which has no special 
provisions for counting CAHs that opened or closed during 2019. 
Accordingly, we are finalizing this aspect of our policy as proposed.
    After consideration of the public comments we received, and for the 
reasons discussed, we are finalizing our proposal for determining the 
total number of CAHs in CY 2019, as codified in 42 CFR 
419.92(b)(1)(iii), without modification.
e. 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 
proposed 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.
    Step 1 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 proposed that the monthly facility 
payment for REHs for CY 2023 would be $268,294. We requested 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.
    Comment: Commenters stated that the low-volume adjustment should 
not apply to CAHs that are within 15 miles of another provider, 
regardless of whether that facility is presently a CAH or subsection 
(d) hospital. They encouraged CMS to identify the CAHs that do not meet 
the criteria and eliminate the low-volume adjustment applied to those 
CAHs.
    Response: As we stated previously in this final rule, in response 
to the request of the commenters, we will revise our estimate of the 
low-volume adjustment to exclude CAHs that do not meet the 15 road 
miles distance requirement. This revision to our detailed methodology 
will decrease the estimated prospective payment for CAHs in CY 2019 by 
$75.1 million and will increase the REH monthly facility payment by 
$4,573.
    Comment: Commenters requested that we include in this final rule 
more detail regarding our calculations for the monthly REH facility 
payment for CY 2023. Commenters requested that we report CAH Medicare 
spending amounts and estimated prospective payment amounts by 
individual provider categories including: inpatient hospital, inpatient 
rehabilitation hospital, inpatient psychiatric hospital, outpatient 
hospital, and skilled nursing facility. Commenters requested we report 
these spending amounts in addition to the total overall spending 
amounts for CAH Medicare spending and estimated prospective payments 
that were reported in the CY 2023 OPPS/ASC proposed rule. The 
commenters believe that breaking down Medicare spending by each 
provider category will help interested parties evaluate our 
calculations for the monthly facility payment.
    Response: In the proposed rule we included a detailed calculation 
showing the key steps to establish the REH monthly facility payment. We 
provided the proposed final amount of the monthly facility payment 
along with the aggregate payment amounts for both Medicare CAH spending 
for CY 2019 and the estimated prospective payment amount for CAHs for 
CY 2019. By providing these figures, along with the detailed 
description of CMS's methodology included in the proposed rule, which 
further described e how we proposed to calculate Medicare CAH spending 
and the estimated prospective payment values described in sections 
183(x)(2)(C)(i)(I) and (II) of the Act, as well as the additional 
clarification about specific aspects of CMS's methodology described in 
this final rule, we believe we are providing sufficient information for 
interested parties to assess our calculation of the REH monthly 
facility payment.
    Comment: Multiple commenters requested that all REH payments, or at 
least the REH monthly facility payment, be exempted from sequestration. 
The commenters state the sequestration cuts are harmful to future REH 
providers, and play a role in reducing access to hospital care in rural 
areas.
    Response: Consistent with 2 U.S.C. 906(d)(1), sequestration will 
apply to all REH payments including the monthly facility payment. We 
note that the application of sequestration to the monthly facility 
payment is consistent with the application of sequestration to other 
types of Medicare payments that are not payments for services furnished 
to a single beneficiary, including GME and uncompensated care payments 
to hospitals, and shared savings payments under the Medicare Shared 
Savings Program.
    Comment: One commenter suggested that the monthly facility payment 
should not be a fixed amount. The commenter said the size of the 
payment should vary based on the size of the REH facility.
    Response: The methodology for determining the amount of the REH 
monthly facility payment provided by the REH statute at section 
1834(x)(2)(B) and (C) of the Act provides for CMS to determine a single 
amount for this monthly payment that shall apply to all REH providers, 
and makes no provision for CMS to change the amount of the payment 
based on the size of the provider. Likewise, such an adjustment was not 
proposed in the proposed rule. Because the commenter's request goes 
beyond the scope of the proposed framework for calculation of the CY 
2023 REH monthly facility payment and is not supported by the REH 
statute, we are finalizing this aspect of our proposed calculation of 
the CY 2023 REH monthly facility payment as proposed.
    Comment: Multiple commenters supported our proposal for the REH 
monthly facility payment.
    Response: We appreciate the support of the commenters for our 
policy.
    After consideration of the public comments we received, and for the 
reasons described here and in the proposed rule, we are finalizing our

[[Page 72181]]

proposed calculation of the monthly REH facility payment for CY 2023 
with the modification described here. Specifically, we are modifying 
our calculation of the monthly REH facility payment for CY 2023 to 
reflect the change in our detailed methodology used to calculated the 
estimated prospective payment amount for CAHs in CY 2019, to exclude 
CAH inpatient services from the low-volume adjustment if a CAH was 
within 15 road miles of another CAH or subsection (d) hospital.
    Our revised calculations of the monthly REH facility payment for CY 
2023 are as follows:
    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: $7.60 billion.
    Step 1 Difference: $12.08 billion-$7.60 billion = $4.48 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: $4,479,370,835.
    Number of Medicare CAHs in CY 2019: 1,368.
    REH Monthly Facility Payment: ($4,479,370,835/1,368)/12 = $272,866.
    Using our finalized calculations, the REH monthly facility payment 
for CY 2023 will be $272,866.
f. 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 proposed 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.
    Comment: Commenters supported our proposal to codify the increase 
the REH monthly facility payment calculated in CY 2023 by the hospital 
market basket in subsequent years.
    Response: We appreciate the support of the commenters for our 
proposal.
    After consideration of the public comments we received, we are 
finalizing without modification our proposal to codify at 42 CFR 
419.92(b)(2) the calculation of the REH monthly facility payment in CY 
2024 and subsequent years based on the value of the preceding year 
increased by the hospital market basket percentage increase.
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 proposed 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 determination 
of whether a rural emergency hospital meets the requirements 
established by CMS's proposed regulations at 42 CFR part 419, subpart K 
(``subpart K''); (2) the determination of payment amounts under 
proposed subpart K; and (3) the requirements of proposed subpart K.
    Comment: One commenter requested that we not codify the preclusion 
of administrative or judicial review of the requirements established by 
proposed subpart K, the determination of payment amounts under proposed 
subpart K, and the determination of whether an REH meets the 
requirements of proposed subpart K at this time. The commenter 
maintains that that the preclusion established by the statute 
constitutes a ``complete hands-off approach'' which is highly unusual 
for a new program and which does not foster a transparent, accountable, 
and equitable system. The commenter believes this creates a precarious 
position for CMS and for REHs because aspects of the program such as 
the REH monthly facility payment, other payment provisions and 
conditions of participation will likely be subject to future review and 
possible revisions.
    Response: As acknowledged by the commenter, the preclusion of 
administrative and judicial review that we proposed to codify at Sec.  
419.94 derives from section 1861(kkk)(9) of the Act, which states that 
there shall be no administrative or judicial review of the 
establishment of requirements under 1861(kkk) by the Secretary, the 
determination of whether a REH meets the requirements of 1861(kkk) or 
the determination of payment amounts under section 1834(x), including 
additional facility payments. The proposed regulatory text at Sec.  
[thinsp]419.94 simply codifies the statutorily mandated preclusion, and 
would apply to subpart K whether we codify it or not.
    After consideration of the public comment we received, we are 
finalizing our proposal, without modification, 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 determination of whether an REH meets the requirements established 
by proposed subpart K; (2) the determination of payment amounts under 
proposed subpart K; and (3) the requirements of proposed subpart K.
7. Conforming Revisions to 42 CFR Part 410 and 413
    In addition to proposing to codify the requirements of section 
1861(kkk) and 1834(x) of the Act at 42 CFR part 419 as described above, 
we proposed to make conforming changes to 42 CFR part 410, which 
describes the origin and destination requirements for the coverage of 
ambulance services, and 42 CFR part 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 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:

[[Page 72182]]

     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. 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 proposed 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 
proposed 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 invited 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.
    Comment: We received several comments in support of our proposal to 
include REHs as a covered origin and destination for ambulance 
transport under the AFS. A commenter supported our proposal 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 
coverage and payment requirements are met. The commenter further stated 
that high quality ambulance service is an essential component of 
emergency medical services and rural hospitals, and by extension, REHs 
often are the sole providers of those services in their communities.
    Response: We appreciate the commenters' support.
    Comment: Several commenters recommended two additional paragraphs 
be added to the regulation at Sec.  410.40(f): (1) A new paragraph 
addressing coverage for facility-to-facility transfers for emergency 
services: ``From a hospital, CAH, or REH to a hospital or CAH for 
emergency services not available at the hospital, CAH, or REH to which 
the patient came'' and (2) a new paragraph addressing coverage for 
hospital-to-SNF transfers: ``For a beneficiary who qualifies for SNF or 
swing bed services following an inpatient stay, from a hospital or CAH 
to a hospital, CAH, or SNF in the beneficiary's home community for SNF 
or swing bed services.''
    Response: The first recommended subsection seems to be subsumed in 
what the regulation already states so adding the recommendation is 
duplicative. Our regulations at Sec.  410.40(f) includes coverage of 
ambulance services from any point of origin to the nearest hospital, 
CAH, or SNF and we proposed to add REH that is capable of furnishing 
the required level and type of care for the beneficiary's illness or 
injury. The hospital or CAH must have available the type of physician 
or physician specialist needed to treat the beneficiary's condition. 
This requirement would cover a medically necessary ambulance transport 
for a beneficiary that needs to be transported from a hospital, CAH, or 
REH to a hospital or CAH for emergency services not available at the 
hospital, CAH, or REH to which the patient came.
    The second recommended subsection does not include REHs, and is out 
of scope because we didn't propose any new ambulance coverage 
requirements for hospital-to-SNF transports. This recommended 
subsection seems to circumvent the nearest appropriate facility 
requirement if the beneficiary gets ill and is hospitalized not near 
the beneficiary's home. Under the AFS, Medicare Part B covers ambulance 
services furnished to a Medicare beneficiary that meet the following 
requirements: There is medically necessary transportation of the 
beneficiary to the nearest appropriate facility that can treat the 
patient's condition and any other methods of transportation are 
contraindicated, meaning that traveling to the destination by any other 
means would endanger the health of the beneficiary. The beneficiary's 
condition must require both the ambulance transportation itself and the 
level of service provided in order for the billed service to be 
considered medically necessary.
    After consideration of the public comments we received, and for the 
reasons stated here and in the proposed rule, we are finalizing our 
proposals to revise our regulations at Sec.  410.40(f) to include an 
REH 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.

[[Page 72183]]

c. Conforming Revisions to 42 CFR 413.1, 413.13, and 413.24
    We also proposed to make conforming changes to the regulation text 
specifying principles of reasonable cost reimbursement in 42 CFR part 
413 to incorporate references to REHs. Specifically, we proposed to 
modify Sec.  413.1(a)(1)(ii) by adding paragraph (a)(1)(ii)(L), to 
state that section 1834(x) of the Act authorizes payment for services 
furnished by REHs and establishes the payment methodology. We also 
proposed 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 proposed to amend Sec.  413.13(c)(2) by adding 
paragraph (c)(2)(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 proposed 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 
proposed 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 paragraph (f)(4)(iv)(A)(5) to state that for REHs, these 
requirements are effective for cost reporting periods beginning on or 
after January 1, 2023.
    We did not receive any public comments on our proposal and, 
therefore, we are finalizing, without modification, our proposed 
conforming revisions to 42 CFR 413.1, 413.13, and 413.24.

B. REH Conditions of Participation (CoP) and Critical Access Hospital 
(CAH) CoP Updates (CMS-3419-F)

    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 Congress's growing concern over 
closures of rural hospitals. According to a report by the United States 
Government Accountability Office published in 2020, over 100 rural 
hospitals closed from January 2013-February 2020 (Rural Hospital 
Closures: Affected Residents Had Reduced Access to Health Care 
Services; GAO-21-93, https://www.gao.gov/products/gao-21-93). 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 not more 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 unit. The statute also allows the Secretary discretion to 
establish additional requirements for REHs in the interest of health 
and safety.
1. Provisions of the Proposed Regulations and Responses to Public 
Comments and Incorporation by Reference
    We published a Request for Information (RFI) for REHs in the CY 
2022 OPPS/ASC proposed rule (86 FR 42018, 42285) on August 4, 2021, and 
used this information to inform 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, in a proposed rule titled ``Medicare and Medicaid Programs; 
Conditions of Participation (CoPs) for Rural Emergency Hospitals (REHs) 
and Critical Access Hospital CoP Updates'' (87 FR 40350). All of the 
final health and safety policies for REHs and the CAH CoP updates are 
being published in this final rule with comment period.
Incorporation by Reference
    This final rule incorporates by reference the NFPA 101[supreg] 2012 
edition of the Life Safety Code (LSC), issued August 11, 2011, and all 
Technical Interim Amendments (TIA) issued prior to April 16, 2014; the 
NFPA 99[supreg] 2012 edition of the Health Care Facilities Code, issued 
August 11, 2011; NFPA 110[supreg] 2010 edition of the Standard for 
Emergency and Standby Power Systems, issued August 6, 2009; and all TIA 
issued prior to April 16, 2014. This includes: (1) NFPA 101, LSC, 2012 
edition, issued August 11, 2011; (i) TIA 12-1 to NFPA 101, issued 
August 11, 2011; (ii) TIA 12-2 to NFPA 101, issued October 30, 2012; 
(iii) TIA 12-3 to NFPA 101, issued October 22, 2013; (iv) TIA 12-4 to 
NFPA 101, issued October 22, 2013; (2) NFPA 99, Health Care Facilities 
Code, 2012 edition, issued August 11, 2011; (i) TIA 12-2 to NFPA 99, 
issued August 11, 2011; (ii) TIA 12-3 to NFPA 99, issued August 9, 
2012; (iii) TIA 12-4 to NFPA 99, issued March 7, 2013; (iv) TIA 12-5 to 
NFPA 99, issued August 1, 2013; (v) TIA 12-6 to NFPA 99, issued March 
3, 2014; and (3) NFPA 110[supreg] 2010 edition of the Standard for 
Emergency and Standby Power Systems, issued August 6, 2009, including 
TIAs to Chapter 7, issued August 6, 2009. A summary of these standards 
incorporated by reference can be found in sections XVIII.B.1.a.(21) and 
XVIII.B.1.a.(22) of this rule. The materials we incorporate by 
reference are available to interested parties and can be inspected at 
the CMS and the National Archives and Records Administration (NARA). 
Contact CMS at: CMS Information Resource Center, 7500 Security 
Boulevard, Baltimore, MD, email: [email protected] or call (410) 
786-9465. For information on the availability of this material at NARA, 
email [email protected], or go to: www.archives.gov/federal-register/cfr/ibr-locations.html. Copies may be obtained from the 
National Fire Protection Association, 1 Batterymarch Park, Quincy, MA 
02169, www.nfpa.org, 1 (617) 770-3000. If CMS wishes to adopt any 
changes in this edition of the Code, it would submit the revised 
document to notice and comment rulemaking.
    The comments and our responses to those comments are set forth 
below.
Comments Out of the Scope of This Rulemaking
    Comment: We received many comments regarding issues that were out 
of scope of this rulemaking, addressing subjects such as Medicare 
Advantage, home health payments, and Medicare coverage for all.
    Response: We have reviewed all of the comments, including those 
that were out of the scope of this rule. We will not be addressing them 
in this final rule with comment period; however, we will consider them 
for future rulemaking.
a. Rural Emergency Hospital Conditions for Participation (Proposed Part 
485, Subpart E)
    We proposed to add a new subpart E in 42 CFR part 485, to 
incorporate the REH CoPs. Proposed subpart E would include all the 
health and safety standards for REHs. Overall, the proposed 
requirements were modeled closely after the CoPs for CAHs. In some 
instances, we have also proposed requirements that are similar to the 
CoPs for hospitals and CfCs for Ambulatory Surgical Centers (ASCs). In 
each of the sections below, we specify the existing requirements for 
CAHs,

[[Page 72184]]

hospitals, or ASCs that we used to guide the proposed requirements.
(1) Basis and Scope (Sec.  485.500)
    We proposed to set forth the basis and scope of part 485, subpart 
E, at Sec.  485.500. As previously noted, proposed part 485, subpart E, 
would implement section 1861(kkk) of the Act, which establishes the 
requirements that an REH must meet in order to participate in the 
Medicare program. Section 1833(a) of the Act serves as the basis for 
the establishment of payment of benefits covered under Medicare for 
REHs.
    Technical assistance (TA) is available to hospitals and CAHs 
seeking REH designation from the Health Resources and Services 
Administration's REH TA Center. The REH TA Center, which has been 
awarded to the Rural Health Redesign Center (https://www.rhrco.org/reh-tac), provides TA to rural hospitals and CAHs exploring REH 
designation. Their aim is to assist facilities to financially model and 
assess the feasibility of an REH conversion; helping them complete the 
application process to CMS for REH designation; assist with strategic 
planning for REH conversion and identifying alternative care pathways 
to continue to meet the needs of their community; and provide ongoing 
support while new REHs implement service changes as a result of the 
conversion.
    We did not receive any public comments on our proposal and 
therefore, we are finalizing this provision as proposed.
(2) Definitions (Sec.  485.502)
    At Sec.  485.502, we proposed to define certain terms that would be 
used throughout the REH CoPs. We proposed to define the term ``Rural 
Emergency Hospital or REH'' in accordance with the definition set forth 
in section 1861(kkk) of the Act. In accordance with the Act, we 
proposed to define ``Rural Emergency Hospital or REH'' as 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. The REH must not 
provide inpatient services, except those furnished in a unit that is a 
distinct part licensed as a skilled nursing facility to furnish post-
REH or post-hospital extended care services.
    Comment: We received several comments on the REH RFI recommending 
that the average length of stay be increased in certain instances, such 
as when the REH is providing services to a patient who is need of 
inpatient psychiatric or inpatient rehabilitation services. The 
commenters stated that placement of these patients in an inpatient 
facility could be difficult with some patients potentially remaining in 
the REH for observation services for weeks. Commenters noted further 
that attending to these patients could produce an average length of 
stay that would exceed the proposed 24-hour annual per patient average 
length of stay. Other commenters requested that CMS be flexible in 
recognizing bed capacity issues for those patients awaiting placement 
in an inpatient facility and practice enforcement discretion related to 
the proposed length-of-stay requirement. Other commenters asked that 
CMS increase the length of stay, noting that in some instances patients 
may require a longer stay, potentially affecting compliance with this 
requirement.
    Response: We appreciate the comments received on this provision. 
The 24-hour annual per patient average length of stay is a statutory 
requirement and cannot be modified. We note that this is an annual 
average per patient requirement for all patients, and we expect that 
some patients will receive services for longer periods of time, while 
others will receive services there for a minimal amount of time 
throughout the year.
    Comment: Commenters suggested that we allow exemptions for the 
length of stay, particularly for low-risk labor and delivery, 
behavioral health and surgical services. Commenters stated that in some 
situations, a patient may require a longer stay or may not be able to 
be transferred in a timely fashion, if necessary. Allowing for 
exemptions will help to avoid non-compliance due to occasional 
situations in which the patient may require a longer stay. Some 
commenters also recommended that we exclude the length of stay for a 
patient whose transfer was delayed for more than 12 hours.
    Response: We understand that there may be situations in which a 
patient may have to stay in the facility for longer periods of time. 
However, since this is a statutory requirement we do not have the 
ability to make exceptions. We recommend that facilities maintain 
documentation of instances in which a patient is unable to be 
transferred timely or when there are specific situations in which the 
patient's stay may exceed 24 hours. If for any reason the REH exceeds 
an average annual per patient length of stay of 24 hours, the REH is 
expected to have documentation showing instances in which there were 
attempt(s) to transfer or reasons for an extended length of stay so 
that the information can be reviewed and considered by CMS when making 
determinations regarding the REH's compliance with the length of stay 
requirement. If the services being provided by the REH are appropriate 
for this provider type (such as outpatient low-risk labor and delivery 
and outpatient behavioral health services), the REH should not 
routinely exceed the length of stay. If more complex patients present 
to the REH, they would be expected to be transferred to a facility that 
is able to provide a higher level of care. We also reiterate that the 
length of stay requirement is an average, such that if an REH exceeds 
the length of stay requirement with greater frequency, it might suggest 
that the facility is not in compliance with the definition of an REH.
    Comment: Many commenters asked that we clarify how the length of 
stay will be calculated.
    Response: The method used to calculate the average annual per 
patient length of stay in an REH takes into account the outpatient-only 
nature of the REH. The time calculation for determining the length of 
stay of a patient receiving services at the REH is similar to the 
approach used in ASCs and begins with the registration, check-in or 
triage of the patient (whichever occurs first) and ends with the 
discharge of the patient from the REH. The discharge occurs when the 
physician or other appropriate clinician has signed the discharge 
order, or at the time the outpatient service is completed and 
documented in the medical record. The REH length of stay requirement is 
applicable to all patients receiving services provided by the REH.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.502 with modifications. We are revising Sec.  
485.502 by incorporating the methodology used to determine the annual 
per patient average length of stay for the REH.
(3) Basic Requirements (Sec.  485.504)
    At Sec.  485.504, we proposed to set forth the basic requirements 
for REHs in accordance with section 1861(kkk) of the Act. Participating 
REHs would be limited to those facilities that meet the definition in 
proposed Sec.  485.502 and have in effect a provider agreement as 
defined at 42 CFR 489.3. This final rule adds REHs to the list of 
providers required to obtain a provider agreement at Sec.  
[thinsp]489.2(b) in the ``Conforming Amendments and Technical 
Corrections'' section of this rule.
    Comment: Section 1861(kkk)(4)(A)(i) requires that a hospital or CAH 
seeking REH conversion submit a detailed

[[Page 72185]]

transition plan at the time of the submission of their revised CMS Form 
855-A. Several commenters suggested that CMS clarify in the final rule 
the process for submitting the transition plan.
    Response: Details regarding submission of the transition plan and 
the transition plan requirements will be published in future 
rulemaking.
    We did not receive any public comments on our proposal and 
therefore, we are finalizing our proposal.
(4) Designation and Certification of REHs (Sec.  485.506)
    At Sec.  485.506, we proposed to set forth the criteria for CMS 
certification of an REH in accordance with section 1861(kkk) of the 
Act. We proposed to establish that CMS would certify a facility as an 
REH if the facility was, as of the date of enactment of the CAA, a CAH, 
or a hospital as defined in section 1886(d)(1)(B) of the Act with not 
more than 50 beds located in a county (or equivalent unit of local 
government) considered rural (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, to be treated as being 
located in a rural area for the purpose of REH eligibility, we proposed 
that a hospital located in a metropolitan county that applies to be an 
REH must have had an active reclassification from urban to rural 
status, as specified in section 42 CFR 412.103, as of December 27, 
2020.
    Comment: Commenters asked if either a rural hospital with not more 
than 50 beds or a CAH were certified for participation in Medicare and 
Medicaid as of the date of enactment of the CAA (December 27, 2020), 
which subsequently closed after that date, would continue to be 
eligible to seek designation as an REH.
    Response: Section 1861(kkk)(3) describes an eligible facility that 
was a CAH or a rural hospital with not more than 50 beds as of the date 
of enactment of the CAA (December 27, 2020). Therefore, facilities that 
were CAHs or rural hospitals with not more than 50 beds as of the date 
of enactment of the CAA and then subsequently closed after that date, 
would be eligible to seek REH designation after the closure of the 
facility. However, the facility would have to meet all the CoPs for 
REHs in order to re-open as an REH.
    Comment: Commenters additionally inquired about the methodology 
used to determine if a rural hospital with not more than 50 beds meets 
the bed count requirement to seek REH designation.
    Response: The bed count will be determined by calculating the 
number of available bed days during the most recent cost reporting 
period divided by the number of days in the most recent cost reporting 
period. We use this methodology to determine if Medicare-dependent 
small rural hospitals meet the required bed count for that program. We 
believe this is an appropriate methodology for determining if a rural 
hospital meets the bed count requirement to seek REH designation, as 
this is a known and existing methodology for small rural hospitals 
seeking to determine bed count for eligibility in Medicare programs.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.506 as proposed.
(5) Compliance With Federal, State, and Local Laws and Regulations 
(Sec.  485.508)
    Consistent with the requirements for all Medicare- and Medicaid-
participating providers and suppliers, we proposed to require REHs to 
comply with Federal, state, and local laws and regulations. At Sec.  
485.508(a), we proposed to require the REH to be in compliance with 
applicable Federal laws, state, and local laws and regulations. In 
accordance with section 1861(kkk)(5) of the Act, we also proposed to 
require at Sec.  [thinsp]485.508(b) that the REH be located in a state 
that provides for the licensing of such hospitals under state or 
applicable local law. In addition, under Sec.  [thinsp]485.508(b)(1) 
and (2), we proposed that the REH be licensed in the state as an REH or 
be approved as meeting standards for licensing by the agency in the 
state or locality responsible for licensing hospitals. We note that in 
many instances, states and localities, have more stringent laws and 
regulations than the Federal requirements. In cases in which state law 
or regulations are more stringent, the REH would need to comply with 
the more stringent state or local requirements to meet the proposed 
requirements at Sec.  485.508(a).
    At Sec.  485.508(c), we proposed to require that the REH ensure 
that personnel are licensed or meet other applicable standards required 
by state or local laws to provide services within their respective 
applicable scope of practice.
    Comment: Some commenters on the REH RFI recommended that CMS 
encourage licensure portability among health care practitioners. 
Commenters on the RFI indicated that allowing practitioners to practice 
in multiple states would greatly support both in-person and virtual 
care models in rural areas where the closest health care provider could 
be across the state line.
    Response: This proposed standard does not prohibit a practitioner 
that is licensed in one state from providing care at an REH in another 
state; state laws govern whether this is permissible. Other than the 
comment provided in response to the RFI, e did not receive any public 
comments on our proposal and therefore, we are finalizing our proposal 
without change.
(6) Condition of Participation: Governing Body and Organizational 
Structure of the REH (Sec.  485.510)
    To ensure appropriate oversight of the REH, we proposed at Sec.  
485.510 to require the REH to have an effective governing body, or 
responsible individual or individuals, that is legally responsible for 
the conduct of the REH. This aligns with the CAH CoP for organizational 
structure at Sec.  [thinsp]485.627(a). In addition to oversight, we 
expect the responsibilities of the governing body or responsible 
individual to include ensuring that the REH is effectively executing 
its policies and decision-making about the REH's vision, mission, and 
strategies. If an REH does not have an organized governing body, we 
proposed to require that the person or persons legally responsible for 
the conduct of the REH carry out the functions specified in this part 
that pertain to the governing body.
    Consistent with the hospital governing body CoPs at Sec.  482.12, 
we proposed at Sec.  485.510(a)(1) to require the governing body, in 
accordance with state law, to determine which categories of 
practitioners are eligible candidates for appointment to the medical 
staff. Additionally, consistent with the interpretive guidelines for 
CAHs in Appendix W of the State Operations Manual for the standard for 
Governing Body or Responsible Individual at Sec.  485.627(a), we 
proposed to require that the governing body of the REH appoint members 
of the medical staff after considering the recommendations of the 
existing members of the medical staff. The role of the medical staff is 
the promotion of patient safety and the quality of care. This proposal 
would give maximum flexibility to an REH in determining and granting 
staff privileges and organizing its medical staff, and it would allow 
the REH to grant specific privileges related to patient care to various 
other types of licensed practitioners as needed, in addition to the 
privileges it would choose to grant to doctors of medicine or 
osteopathy. For example, an REH could choose to grant medical staff 
privileges to nurse practitioners and physician assistants if

[[Page 72186]]

permissible under state law. We also proposed to require that the REH's 
governing body ensure that its medical staff be accountable to the 
governing body for the quality of patient care provided by the REH; 
organize itself under bylaws; and ensure that the criteria for 
selection to the medical staff are individual character, competence, 
training, experience, and judgment.
    Many rural populations suffer from limited access to care due to a 
shortage of health care professionals, especially physicians. Often, 
clinicians other than physicians provide important care services to 
rural communities with physicians providing oversight. This may occur 
in different ways, including via the use of mobile health, video and 
audio technologies, digital photography and remote patient monitoring. 
With the development of technology that facilitates ``telemedicine,'' a 
physician could utilize a variety of methods to provide health care 
services, including being on-site at a facility or at a distant site 
furnishing services remotely to a patient located at an originating 
site.
    Commenters on the REH RFI noted that REHs should be able to act as 
an originating site (that is, the location where a Medicare patient 
receives medical services from a physician or other clinician through a 
telecommunications system) for the provision of telehealth services. As 
noted in the CY 2022 Medicare Physician Fee Schedule final rule (86 FR 
65057), section 125(c) of the CAA amended section 1834(m)(4)(C)(ii) of 
the Act to add REHs to the list of permissible telehealth originating 
sites. In accordance with section 1834(m)(4)(C)(ii)(XI) of the Act, as 
added by section 125(c) of the CAA, we have already finalized a 
revision to Sec.  410.78(b)(3) of our regulations to add REH, as 
defined in section 1861(kkk)(2) of the Act, as a permissible 
originating site for telehealth services furnished on or after January 
1, 2023.
    For the purposes of this rule, similar to our interpretation in the 
policy set out in our 2011 final rule, ``Medicare and Medicaid 
Programs; Changes Affecting Hospital and Critical Access Hospital 
Conditions of Participation: Telemedicine Credentialing and 
Privileging'' (76 FR 25550, May 5, 2011), we see telemedicine as 
encompassing the overall delivery of health care to the patient through 
the practice of patient assessment, diagnosis, treatment, consultation, 
transfer and interpretation of medical data, and patient education all 
via a telemedicine link (for example, audio, video, and data 
telecommunications as may be utilized by distant-site physicians and 
practitioners). Therefore, in order to make clear that the 
credentialing and privileging provisions proposed for REHs were not 
limited to the narrower subset of services and sites eligible for 
Medicare telehealth payment, we chose to use the term, 
``telemedicine,'' throughout this rule instead of ``telehealth.'' As 
noted previously, payment policies for REHs, including for services 
furnished via telehealth/telemedicine, will be addressed in separate 
notice and comment rulemaking.
    In recognition of the important role that telemedicine can play in 
the provision of care in rural communities, we believe it is necessary 
to establish a more efficient process for REHs to credential and 
privilege clinicians who provide telemedicine services for the REH's 
patients. We proposed requirements similar to the telemedicine 
credentialing and privileging process requirements established for 
hospitals and CAHs that would allow for an optional and more 
streamlined credentialing and privileging process that REHs may use for 
practitioners providing telemedicine services for their patients. We 
believe that REHs might lack the resources to fully carry out the 
traditional credentialing and privileging process for all of the 
physicians and practitioners that may be available to provide 
telemedicine services. Small hospitals and CAHs seeking to provide 
enhanced access to care through the use of telemedicine services for 
their patients have already encountered this issue. In addition to the 
costs and administrative staff needed for this process, REHs would also 
most likely not have in-house medical staff with the clinical expertise 
to adequately evaluate and privilege the wide range of specialty 
physicians that larger hospitals can provide their patients through the 
use of telemedicine services.
    Therefore, at Sec.  485.510(a)(8) we proposed that the REH's 
governing body ensure that when telemedicine services are furnished to 
the REH's patients through an agreement with a Medicare-participating 
hospital (the ``distant-site''--the site at which the physician or 
practitioner is located at the time the service is provided via a 
communications system, as defined at section 1834(m)(4)(A) of the Act), 
the agreement must specify that the governing body of the distant-site 
hospital providing the telemedicine services must meet the requirements 
in Sec.  485.510(a)(1) through (7) with regard to its physicians and 
practitioners who are providing telemedicine services. These provisions 
cover the distant-site hospital's governing body responsibilities for 
its medical staff that all Medicare-participating hospitals must 
currently meet and that REHs would be required to meet when this rule 
is finalized. The proposed requirements at Sec.  485.510(a)(8) would 
allow the governing body of the REH whose patients are receiving the 
telemedicine services to grant privileges based on the recommendations 
of its medical staff, who would rely on information provided by the 
distant-site hospital, as a more efficient means of privileging the 
individual distant-site physicians and practitioners. This provision 
would be accompanied by the proposed requirement in the ``Medical 
staff'' CoP at Sec.  485.510(a), which would provide the basis on which 
the REH's governing body, through its agreement as noted above, can 
choose to have its medical staff rely upon information furnished by the 
distant-site hospital when making recommendations on privileges for the 
individual physicians and practitioners providing such services. This 
option would not prohibit an REH's medical staff from continuing to 
perform its own periodic appraisals of telemedicine members of its 
staff, nor would it bar them from continuing to use the proposed 
traditional credentialing and privileging process proposed at Sec.  
485.512(a)(2). The intent of this proposed requirement is to relieve 
burden for REHs by providing for a less duplicative and more efficient 
privileging scheme with regard to physicians and practitioners 
providing telemedicine services. However, in an effort to ensure 
accountability to the process, we also proposed at (Sec.  485.512(a)(3) 
that the REH, in order to choose this less burdensome option for 
privileging, would have to ensure that (1) the distant-site hospital 
providing the telemedicine services was a Medicare-participating 
hospital; (2) the individual distant-site physician or practitioner was 
privileged at the distant-site hospital providing telemedicine 
services, and that this distant-site hospital provided a current list 
of the physician's or practitioner's privileges; (3) the individual 
distant-site physician or practitioner held a license issued or 
recognized by the state in which the REH, whose patients are receiving 
the telemedicine services, was located; and (4) with respect to a 
distant-site physician or practitioner granted privileges by the REH, 
the REH had evidence of an internal review of the distant-site 
physician's or practitioner's performance of these privileges and send 
the distant-site hospital this information for use in its periodic 
appraisal of the individual

[[Page 72187]]

distant-site physician or practitioner. We also proposed that, at a 
minimum, the information sent for use in the periodic appraisal would 
have to include a description of all adverse events that could result 
from telemedicine services provided by the distant-site physician or 
practitioner to the REH's patients and all complaints the REH had 
received about the distant-site physician or practitioner. We proposed 
at Sec.  485.512(c)(5) to require that REH's medical staff bylaws 
include criteria for determining privileges and a procedure for 
applying the criteria to individuals requesting privileges. We proposed 
to add language to stipulate that in cases where distant-site 
physicians and practitioners requested privileges to furnish 
telemedicine services through an agreement with an REH, the criteria 
for determining those privileges and the procedure for applying the 
criteria would be subject to the proposed requirements at Sec. Sec.  
485.510(a)(8) and (9) and 485.512(a)(3) and (4).
    Similar to the revisions we made in the ``Changes Affecting 
Hospital and Critical Access Hospital Conditions of Participation'' 
final rule (76 FR 25556), we also concluded that it would be important 
that the medical staff of a distant-site telemedicine entity, which 
might not be a Medicare-participating hospital, also be included in an 
optional and streamlined credentialing and privileging process for 
those REHs electing to enter into agreements for telemedicine services 
with such entities. However, similar to the situation we faced for 
hospitals and CAHs in the May 2011 final rule (that is, the inclusion 
of distant-site telemedicine entities into this streamlined process 
without CMS having any regulatory or oversight authority over them, we 
realized that the proposed requirements for REHs would need to hold 
distant-site telemedicine entities accountable to the originating-site 
REH for meeting CMS practitioner credentialing and privileging 
standards. And like the current requirements for hospitals and CAHs 
using telemedicine services, REHs would need to provide, upon request 
when surveyed, the most current telemedicine services agreement showing 
that the distant-site entities providing the services were required to 
comply with the CMS standards (even though CMS has no direct authority 
over those entities) in order for the REH to make use of the more 
streamlined process when credentialing and privileging practitioners 
from these distant-site telemedicine entities. Similar to our 
regulations proposed for REHs using the telemedicine services of 
distant-site Medicare-participating hospitals, the written agreement 
between the REH and the distant-site telemedicine entity would be the 
foundation for ensuring accountability on both sides. However, due to 
the differences already discussed between Medicare-participating 
distant-site hospitals providing telemedicine services and distant-site 
practitioners under section 1834(m) of the Act providing similar 
services, there would also have to be differences in the way the 
regulations were written.
    Therefore, we also proposed requirements that would apply to the 
credentialing and privileging process and the agreements between REHs 
and distant-site telemedicine entities (Sec. Sec.  485.510(a)(9) and 
485.512(a)(4)). These provisions would require the governing body of 
the REH (or responsible individual), through its written agreement with 
the distant-site telemedicine entity, to ensure that the distant-site 
telemedicine entity, acting as a contractor of services, furnished its 
services in a manner that would enable the REH to comply with all 
applicable CoPs and standards. For the contracted services, the 
applicable CoPs and standards would include, but are not limited to, 
the credentialing and privileging requirements for distant-site 
physicians and practitioners furnishing telemedicine services.
    Comment: Commenters were generally supportive of the provisions in 
this proposed section. Several commenters suggested that local 
physicians and/or physicians with rural emergency care experience serve 
on the governing board of the REHs. Other commenters suggested that a 
physician with board certification in emergency medicine oversee the 
care and services provided by the REH given their primary function of 
providing emergency care.
    Response: We want to promote a high degree of flexibility in how 
REHs handle staffing decisions, including in how REH staff helps in 
deciding the Board or responsible individual. While we do not speak to 
whether local physicians or physicians with rural emergency experience 
must serve on the governing boards of REHs, the REHs themselves have 
the discretion to develop their own set of best practices regarding the 
specifics of governance. We appreciate the suggestion, but do not 
believe at this time that there should be requirements of which 
credentials physicians must have to qualify for appointment to an REH's 
governing board.
    Comment: Some commenters wanted to ensure that CMS would not 
obstruct the ability for REHs to provide services via telemedicine, 
while other commenters suggested that CMS take steps to ensure that 
telemedicine was not used in a wasteful or inappropriate manner to 
substitute for visitation with a local physician.
    Response: We thank commenters for their statements regarding 
telemedicine. The proposed requirements mirror the CAH and hospital 
requirements regarding telemedicine. The aim of the requirements is to 
ensure that REHs, like CAHs and hospitals, have a written agreement 
regarding the provision of services via telemedicine. We will require 
that the REH have a credentialing and privileging process in place, 
holding the REH responsible for telemedicine services provided under 
arrangement and agreement. The requirement includes process to allow 
for the use of telemedicine by another Medicare-participating facility 
or a non-Medicare participating entity in the provision of services by 
the REH.
    After consideration of the public comments we received, we are 
finalizing these provisions as proposed.
(7) Condition of Participation: Provision of Services (Sec.  485.514)
    Consistent with the CAH CoPs at Sec.  485.635(a)(1), we proposed at 
Sec.  485.514(a) to require that the REH's health care services be 
furnished in accordance with appropriate written policies consistent 
with applicable state law and at Sec.  485.514(b) that the REH must 
have policies that are developed with the advice of members of the 
REH's professional health care staff, including one or more doctors of 
medicine or osteopathy and one or more physician assistants, nurse 
practitioners, or clinical nurse specialists, if they are on staff (as 
defined at Sec.  485.528(b)(1)). This requirement would align with the 
CAH CoPs at Sec.  485.635(a)(2).
    At Sec.  485.514(c) we proposed requirements for the written 
policies to include a description of the services the REH furnishes 
(including those furnished through agreement or arrangement), policies 
and procedures for emergency medical services, guidelines for the 
medical management of health problems, and policies and procedures that 
address the post-acute care needs of all patients receiving services 
furnished by an REH. Because the statute prohibits REHs from providing 
of inpatient services (with the exception of patients receiving SNF 
services in a distinct part SNF), post-acute care for an REH patient is 
any care the REH patient receives once they are discharged from the 
REH. Lastly, at Sec.  485.514(d), we proposed to require the

[[Page 72188]]

policies to be reviewed at least biennially by the group of 
professional personnel required at Sec.  485.514(b) and updated as 
necessary by the REH. These requirements align with the CAH CoPs at 
Sec.  485.635(a)(3).
    Comment: Commenters were supportive of our proposals. After 
consideration of the public comments we received, we are finalizing as 
proposed.
(8) Condition of Participation: Emergency Services (Sec.  485.516)
    In accordance with section 1861(kkk)(2)(D)(iv) of the Act, REHs 
must comply with the CAH emergency services requirements at Sec.  
485.618 as well as the hospital emergency services requirements, which 
are located at Sec.  482.55, as determined to be applicable. As such, 
at Sec.  485.516 we proposed to require that the REH must provide the 
emergency care necessary to meet the needs of its patients in 
accordance with acceptable standards of practice.
    Additionally, because the primary function of an REH is to provide 
emergency services, we proposed at Sec.  485.516(a) that the REH must 
have emergency services that are organized under the direction of a 
qualified member of the medical staff and are integrated with other 
departments of the REH, similar to the requirements for hospitals. We 
anticipate that there will be instances in which a patient is receiving 
outpatient services other than emergency services and may unexpectedly 
require care in the emergency department. In this instance, having 
emergency services that are integrated with the other departments of 
the REH will facilitate care coordination and promote patient-centered 
care.
    At Sec.  485.516(b), we proposed that there be adequate medical and 
nursing personnel qualified in emergency care to meet the needs of the 
facility. To comply with this requirement, we would expect the REH to 
conduct an analysis based on the anticipated staffing needs and once 
the REH begins to provide services, the analysis would include actual 
staffing needs. Lastly, at Sec.  485.516(c), we proposed to require the 
REH to provide emergency services that meet the CAH requirements 
specified at Sec.  485.618(a) through (e), as required by section 
1861(kkk)(2)(D)(iv)(I) of the Act.
    Comment: Commenters noted that REHs should be required to have at 
least one physician, nurse practitioner, clinical nurse specialist, or 
physician assistant with training or experience in emergency care 
staffing their emergency department at all times and that these 
clinicians should be required to be physically located on the REH's 
campus (or in adjacent buildings) to meet the REH staffing requirement. 
Some commenters noted that because the primary purpose of the REH is 
emergency access, the facility needs to have a clinician with board 
certification or at a minimum, training in emergency medicine 
immediately available to provide the care or oversee the care delivered 
by non-physician practitioners. Other commenters supported the 
proposal, noting the appropriateness of not requiring a practitioner to 
be on-site at the REH at all times given the expected low volume of 
patients and services in the rural communities they serve.
    Response: We are appreciative of these comments. We believe that 
given the workforce challenges faced by healthcare facilities providing 
care and services in rural communities, it would be overly burdensome 
to require specific expertise of the practitioners who are providing 
services to patients presenting to the REH for emergency care. However, 
REHs are expected to have staff that meet the needs of the community 
they serve. We would also like to highlight that that we are finalizing 
the requirements for Staffing and Staff Responsibilities at Sec.  
485.528 with modification, such that the individual who fulfills the 
requirement that the REH must be staffed at all times must be an 
individual who is competent in the skills needed to address emergency 
medical care. This individual must be able to receive patients and 
activate the appropriate medical resources to meet the care needed by 
the patient. We believe that in doing so, we have sufficiently address 
the commenters' concerns that the REH's emergency department be 
appropriately staffed.
    Comment: One commenter asks that CMS to provide a waiver that 
allows REHs to divert patients to a higher-level facility on the 
continuum if the clinical staff at the REH does not believe the 
facility can provide the appropriate level of care and the patient is 
stable enough to transport, with the commenter noting that they believe 
that CMS has the ability to modify the Emergency Medical Treatment and 
Labor Act (EMTALA) regulations to provide this flexibility to REHs.
    Response: Consistent with the requirements for hospitals and CAHs 
with emergency departments, we note that section 1867(e)(5) applies the 
EMTALA requirements to REHs. EMTALA requires hospitals with emergency 
departments to provide a medical screening examination to any 
individual who comes to the emergency department and requests such an 
examination, and prohibits hospitals with emergency departments from 
refusing to examine or treat individuals with an emergency medical 
condition. We note that REHs will be familiar with the EMTALA 
requirements because they complied with them as either a hospital with 
an emergency department or a CAH. Section 125 of the CAA does not allow 
for a waiver of the EMTALA requirements for REHs.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.516 as proposed.
(9) Condition of Participation: Laboratory Services (Sec.  485.518)
    We proposed at Sec.  485.518 that REHs, similar to CAHs (Sec.  
485.635(b)(2)), would be required to provide basic laboratory services 
essential to the immediate diagnosis and treatment of the patient. The 
CAH requirements cite specific laboratory services that should be 
provided by the CAH, such as chemical examination of urine, hemoglobin 
or hematocrit, blood glucose, examination of stool specimens for occult 
blood, pregnancy tests, and primary culturing for transmittal to a 
certified laboratory. However, we believe that given the REH's nature 
of primarily providing emergency services, it is appropriate that REHs 
provide laboratory services that are consistent with nationally 
recognized standards of care for emergency services. In addition to the 
laboratory services identified in the CAH CoPs, we encourage the REH to 
provide laboratory services that include a complete blood count, basic 
metabolic panel (also known as a ``chem 7''), magnesium, phosphorus, 
liver function tests, amylase, lipase, cardiopulmonary tests (troponin, 
brain natriuretic peptide, and d-dimer), lactate, coagulation studies 
(prothrombin time, partial thromboplastin time, and international 
normalized ratio), arterial blood gas, venous blood gas, quantitative 
human chorionic gonadotropin, and urine toxicology. In accordance with 
the Clinical Laboratory Improvement Amendments of 1988 (CLIA), at Sec.  
485.518(a), we proposed to require that the REH must ensure that all 
laboratory services provided to its patients are performed in a 
facility certified in accordance with the CLIA requirements at 42 CFR 
part 493. Furthermore, at Sec.  485.518(b) we proposed that REHs must 
have emergency laboratory services available that would be essential to 
the immediate diagnosis of the patient, 24 hours a day. This proposal 
is appropriate given the provision that REHs must provide emergency 
services 24 hours a day.

[[Page 72189]]

    Comment: Commenters were generally supportive of our proposals. 
However, some commenters suggested that the laboratory services 
provided by REHs should not exceed the laboratory services that must be 
provided by a CAH. Other commenters suggested that REHs be required to 
provide specific laboratory services that include those suggested in 
the preamble, as well as laboratory services that include that blood, 
urine, cerebrospinal fluid (CSF), and other body fluid cultures; CSF 
analysis and synovial fluid analysis; serum and urine pregnancy tests; 
and ammonia level tests.
    Response: The proposed standard for laboratory services for REHs 
requires the REH to provide basic laboratory services essential to the 
immediate diagnosis and treatment of the patient consistent with 
nationally recognized standards of care for emergency services. We did 
not propose to require that the REH provide specific laboratory 
services beyond ensuring that they are providing such services that are 
consistent with nationally recognized standards of practice. We believe 
that REHs should have the flexibility to determine the laboratory 
services that are appropriate for their scope of services and patient 
population. Specific laboratory services were highlighted in the 
proposed rule and include a complete blood count, basic metabolic panel 
(also known as a ``chem 7''), magnesium, phosphorus, liver function 
tests, amylase, lipase, cardiopulmonary tests (troponin, brain 
natriuretic peptide, and d-dimer), lactate, coagulation studies 
(prothrombin time, partial thromboplastin time, and international 
normalized ratio), arterial blood gas, venous blood gas, quantitative 
human chorionic gonadotropin, and urine toxicology. Based on the 
current nationally recognized standards for practice, the scope of 
services provided by the REH, and the patient population receiving REH 
services, the REH may determine the laboratory services that meet the 
needs of the community it serves.
    After consideration of the public comments we received, we are 
finalizing this provision with modification by incorporating language 
into the requirement at Sec.  485.518 that specifically notes that the 
laboratory services must be consistent with the patient population and 
services offered.
(10) Condition of Participation: Radiologic Services (Sec.  485.520)
    Radiologic services play an integral role in the provision of 
emergency services. Commenters on the REH RFI noted that radiologic 
services, also referred to as imaging services, should be provided at 
REHs. A study in the American Journal of Roentgenology noted that, 
``The use of imaging in the emergency department (ED) has increased 
over time, and by 2010 nearly half of all ED visits in the U.S. 
included at least one imaging test.'' These imaging tests include 
computed tomography (CT), also known as a computerized axial tomography 
(CAT) scan, magnetic resonance imaging (MRI), and ultrasound. These 
tests can be used to diagnose bone fractures, infections, arthritis, 
injuries from trauma, tumors and cancers. They can also be used to 
monitor and evaluate the growth and development of a fetus, and offer a 
way to examine many of the body's internal organs such as the liver, 
gallbladder, kidneys, and bladder.
    We expect that REHs will need to provide radiologic services given 
their focus on emergency services and given the number of emergency 
department patients who receive imaging services. Therefore, we 
proposed that the REH radiologic requirements mirror the hospital 
radiologic requirements found at Sec.  482.26, which is consistent with 
the current CAH standard at Sec.  485.635(b)(3) and interpretative 
guidelines for CAHs in Appendix W of the State Operations Manual (SOM).
    The CAH standard for radiology services found at Sec.  
485.635(b)(3) requires that these services be furnished by personnel 
qualified under state law, and that such services do not expose 
patients or staff to radiation hazards. In addition, we note that the 
interpretative guidelines for Sec.  485.635(b)(3) in Appendix W of the 
SOM provides guidance for designating qualified radiologic personnel, 
developing policies and procedures that ensure safety from radiation 
hazards, inspecting and maintaining radiologic equipment, and 
maintaining CAH radiology records.
    We proposed to align the REH requirements with the hospital 
requirements for radiologic services and proposed additional standards 
related to safety, personnel responsibilities, and record keeping. We 
believe that facilities that transition to an REH would need to perform 
these activities to support the delivery of radiology services. We also 
believe that these proposed requirements are in accordance with the 
interpretative guidelines that CAHs currently follow for the provision 
radiological services. We do not expect these requirements to create 
additional burden for REHs over those applicable to CAHs.
    As such, at Sec.  485.520, we proposed to require that the REH 
provide diagnostic radiologic services. At Sec.  485.520(a), we 
proposed to require that all radiologic services furnished by the REH 
be provided by qualified personnel in accordance with state law; such 
services could expose REH patients or personnel to radiation hazards. 
As with hospitals, we also proposed to require that the REH must have 
radiologic services that meet the needs of their patients. For example, 
we expect an REH that is located in a mining community to offer x-ray 
services due to the effects of mining on one's lungs or an REH being 
able to furnish ultrasounds to evaluate the growth and health of a 
fetus.
    At Sec.  485.520(b), we proposed basic factors relating to safety 
hazard standards for patients and personnel by specifying that the REH 
must institute proper safety precautions, perform periodic inspections 
of equipment, periodically check radiation workers for exposure, and 
only provide radiologic services based on the order of practitioners 
with clinical privileges or authorization by the medical staff and 
governing body. We proposed the personnel standard at Sec.  485.520(c) 
to require that a qualified radiologist, or other personnel qualified 
under state law either full-time, part-time, or on a consulting basis 
interpret radiologic tests that require specialized knowledge. This 
requirement can be fulfilled through arrangements with off-site 
providers via telehealth. Like hospitals, we proposed that the 
radiologist in an REH must sign reports only of their interpretations. 
We proposed to allow the medical staff and the individual responsible 
for radiological services to designate who is qualified to use 
radiological equipment. Lastly, at Sec.  485.520(d), we also proposed 
to require that records of departmental activities be maintained and 
that radiological reports and films be preserved for 5 years, 
consistent with the proposed requirements for the maintenance and 
retention of the REH medical records.
    Comment: Most commenters supported this requirement. Some 
commenters stated that radiologic services should not have separate 
requirements, but should instead be included in the Provision of 
Services CoP.
    Response: We appreciate the comments stating that radiological 
services should not be a separate requirement. However, Hospital and 
CAHs requirements have separate provisions for radiological services so 
for consistency across providers we will keep them as separate 
requirements.

[[Page 72190]]

    After consideration of the public comments we received, we are 
finalizing as proposed.
(11) Condition of Participation: Pharmaceutical Services (Sec.  
485.522)
    While the current CAH requirements do not have a separate CoP for 
pharmaceutical services, there are standards throughout the CAH CoPs 
for the oversight, storage, and administration of drugs and 
biologicals. Regulations at Sec.  485.623(b)(3) requires the CAH to 
store drugs and biologicals properly, and Sec.  485.635(a)(3)(iv) 
requires the CAH to develop rules for the storage, handling, 
dispensation, and administration of drugs and biologicals including a 
drug storage area administered in accordance with accepted principles. 
In addition, there are standards throughout the CAH CoPs regarding 
provisions for infection prevention and control and antibiotic 
stewardship programs that reference pharmacy leadership and pharmacy 
services. Therefore, we believe that CAHs and hospitals that transition 
to an REH would already be in compliance with REH requirements to 
support the delivery of pharmaceutical services; we do not expect these 
requirements to create additional burden for REHs.
    At Sec.  485.522, we are requiring that the REH's pharmaceutical 
services meet the needs of the patients. According to the American 
Society of Health-System Pharmacists Guidelines on Emergency Medicine 
Pharmacy Services, some factors that an ED is expected to consider when 
determining how the pharmaceutical services can best meet the needs of 
the patients include the type and setting of the ED (for example, 
academic, community, urban, or rural), the size of the ED, the number 
of annual visits, the patient population served, and any specialty 
services available. At Sec.  485.522(a), we proposed to require the REH 
to have a pharmacy or drug storage area administered in accordance with 
accepted professional principles and state and Federal laws. 
Additionally, we proposed to require at Sec.  485.522(a)(1) that a 
registered pharmacist or other qualified individual in accordance with 
state scope of practice laws direct the pharmaceutical services or, 
when appropriate, have a drug storage area that is supervised by an 
individual who is competent to do so. Rural communities are often 
challenged by the lack of pharmacists willing to move to rural areas 
and for this reason, we recognize that there may be REHs that can 
provide pharmaceutical services only by having a drug storage area that 
is under the supervision of a qualified individual. In these instances, 
the facility must establish qualifications for the individual with 
oversight of the drug storage area for competency purposes and ensure 
that someone who meets those requirements is fulfilling the role. This 
is consistent with the interpretive guidelines for the CAH CoPs 
contained in Appendix W of the SOM for Sec.  485.635(a)(3). We proposed 
that this individual be available for a sufficient time to provide such 
oversight based on the scope and complexity of the services offered at 
the REH. This individual would not be required to be a full-time 
pharmacist. We believe that requiring ``sufficient time'' in the 
regulatory language provides the REH with the flexibility to determine 
how frequently the pharmacist or other qualified individual is 
available.
    In addition, the CAH interpretive guidelines for Sec.  
485.635(a)(3) state that the compounding, packaging, and dispensing of 
drugs should be consistent with accepted professional principles. In 
accordance with guidance issued by the Food and Drug Administration, 
accepted professional principles for compounding, packaging, and 
dispensing of drugs include having a licensed pharmacist, or in some 
cases a physician, perform these activities (or having them performed 
under the supervision of a licensed pharmacist, when appropriate) 
(https://www.fda.gov/drugs/guidance-compliance-regulatory-information/
human-drug-
compounding#:~:text=Compounding%20is%20generally%20a%20practice,needs%20
of%20an%20individual%20patient). As such, we proposed at Sec.  
485.522(b)(1) that all compounding, packaging, and dispensing of drugs 
must be done by a licensed pharmacist or a licensed physician, or under 
the supervision of a pharmacist or other qualified individual acting in 
accordance with state scope of practice laws and be performed 
consistent with state and Federal laws. In addition, we proposed that 
all drugs and biologicals must be kept in secure areas, and locked when 
appropriate. All drugs listed in Schedules II, III, IV, and V as 
outlined in the Comprehensive Drug Abuse Prevention and Control Act of 
1970 (Pub. L. 91-513, as amended), must be locked within a secure area 
and only authorized personnel may have access to locked areas. We 
proposed that outdated, mislabeled, or otherwise unusable drugs and 
biologicals must not be available for patient use and drugs and 
biologicals can only be removed from the pharmacy or storage area by 
personnel designated in the policies of the medical staff and 
pharmaceutical service, in accordance with state and Federal law. These 
proposed requirements are also consistent with the CAH interpretive 
guidelines for Sec.  485.635(a)(3).
    Lastly, at Sec.  485.522(c), we proposed to set forth the standards 
for the administration of drugs. We note that the existing CAH CoP at 
Sec.  485.635(a)(3)(iv) requires that the CAH have written policies 
that include the rules for the storage, handling, dispensation, and 
administration of drugs and biologicals. The CAH CoPs continue to 
require that these rules provide that there is a drug storage area that 
is administrated in accordance with accepted professional principles. 
Similarly, we proposed to require that drugs be prepared and 
administered in an REH according to established policies and acceptable 
standards of practice and consistent with the CAH requirement at Sec.  
485.635(a)(3)(v), we proposed to require that any adverse reactions be 
reported to the physician responsible for the patient and documented in 
the record. While the CAH CoPs require that the CAH have procedures for 
reporting adverse drug reactions and errors in the administration of 
drugs, we recognize that a nationally recognized standard of practice 
is to report adverse drug reactions to the physician responsible for 
the care of the patient. We proposed, that the REH be required to 
administer blood transfusions, blood products and intravenous 
medications in accordance with state law and approved medical staff 
policies and procedures, and that orders given orally for drugs and 
biologicals be followed by a written order, signed by the prescribing 
physician or other authorized prescriber at Sec.  485.522(c)(2) and (3) 
respectively. We also proposed at Sec.  485.522(c)(4) to require that 
the REH have a procedure for reporting transfusion reactions, adverse 
drug reactions, and errors in administration of drugs.
    Comment: Several commenters supported this proposed requirement and 
noted that it afforded flexibilities for providing pharmaceutical 
services in REHs. We also received some comments stating that this 
proposed CoP is based on the hospital CoP for pharmaceutical services 
at 42 CFR 482.25 and requested that the proposal instead only include 
the provisions of the CAH CoPs at Sec. Sec.  485.623(b)(3) and 
485.635(a)(3)(iv) and (v).
    Response: As previously noted, we believe that small hospitals and 
CAHs that transition to the REH provider-type would currently be 
complying with the proposed REH requirements to support the delivery of 
pharmaceutical services

[[Page 72191]]

when they changed provider-type. We do not expect the requirements we 
are finalizing to create additional burden for REHs. We also note that 
the proposed REH pharmaceutical services requirements incorporates the 
CAH requirements at Sec. Sec.  485.623(b)(3) and 485.635(a)(3)(iv) and 
(v). We have maintained flexibilities afforded to CAHs such as allowing 
qualified individuals, other than pharmacists, to operate and oversee 
drug storage areas and allowing physicians to compound, package, and 
dispense drugs in place of a pharmacist. Therefore, we do not believe 
it that we should revise the proposed REH requirements for 
pharmaceutical services.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.522 as proposed.
(12) Condition of Participation: Additional Outpatient Medical and 
Health Services (Sec.  485.524)
    We proposed at Sec.  485.524 that if the REH chooses to provide 
additional outpatient medical and health services, that the services 
would be required to be appropriately organized and to meet the needs 
of the patients in accordance with acceptable standards of practice. 
Additionally, at Sec.  485.524(a)(1) we proposed to require that the 
provision of the additional service be based on nationally recognized 
guidelines and standards of practice, aligning the proposed requirement 
with the hospital CoPs for outpatient services at Sec.  482.54. Given 
that the REH does not provide inpatient services, patients requiring a 
higher level of care would be required to be transferred to an acute 
care hospital or CAH. As a result of this, and based on comments 
received on the REH RFI, we further proposed to require that the REH 
have a system in place for referral from the REH to different levels of 
care, including follow-up care, as appropriate. Some of the REH RFI 
comments also indicated that REHs should be required to have 
established relationships with hospitals that have the resources and 
capacity available to deliver care that is beyond the scope of care 
delivered at the REH. Hospital admissions and transfers account for 
roughly 20 percent of all patient dispositions from emergency 
departments across the U.S. As a result, we can expect that REHs will 
transfer at least 20 percent of their patients; we agreed with 
commenters and proposed to require that REHs have established 
relationships with hospitals that have the resources and capacity 
available to deliver care beyond the scope delivered at the REH.
    Ensuring effective communication between providers of health care 
services and patients and their family is a critical element in the 
provision of care and the discharge or transfer of patients. We 
proposed to require that the REH have effective communication systems 
in place between the REH and patients (or responsible individuals) and 
their families, ensuring that the REH would be responsive to their 
needs and preferences. We believe this will assist with effective care 
coordination as well as improved patient outcomes.
    At Sec.  485.524(b), we proposed personnel requirements for REHs 
that choose to provide additional outpatient medical and health 
services. These requirements ensure that the additional services 
provided by the REH are overseen by at least one responsible 
individual, have appropriate professional and nonprofessional personnel 
available at each location where outpatient services are offered, and 
are provided by a physician or other clinician with experience and 
training in the specialty service area.
    At Sec.  485.524(c), we proposed to specify standards that REHs 
must have for ordering outpatient medical and health services; such 
standards would be consistent with the hospital requirements at 42 CFR 
482.54(c). Specifically, we proposed to require outpatient medical and 
health services to only be ordered by a practitioner who: (1) is 
responsible for the care of the patient; (2) is licensed in the state 
where they provide care to the patient; (3) is acting within their 
scope of practice under state law; and (4) is authorized in accordance 
with state law and policies adopted by the medical staff, and approved 
by the governing body, to order the applicable outpatient services. We 
also proposed that these requirements would apply to those 
practitioners who are appointed to the REH's medical staff and who have 
been granted privileges to order the applicable outpatient services; 
and those practitioners not appointed to the medical staff, but who 
satisfy the above criteria for authorization by the REH for ordering 
the applicable outpatient services and for referring patients for such 
services.
    Lastly, the importance of allowing REHs to provide outpatient 
surgical services was especially noted by commenters in response to the 
REH RFI. A 2011 rural policy brief by the Rural Policy Research 
Institute (RUPRI) Center for Rural Health Policy Analysis states that, 
``Like residents of any community, rural residents have surgical needs 
that range from the predictable (for example, cataract procedures) to 
the emergent (for example, appendectomy). Innovations in surgery over 
the past several decades have made possible the provision of many 
surgical procedures on an outpatient basis, reducing inpatient 
admissions.'' \17\ The policy brief found that across four states 
(Colorado, North Carolina, Vermont, and Wisconsin) in 2011, surgeries 
were performed across 107 CAHs with an average of 522 outpatient 
procedures performed per year. This is 75 to 80 percent of the total 
surgical procedure volume in the state for that year and demonstrates 
that there will be a need for outpatient surgical services in 
communities in which CAHs convert to an REH. Therefore, we proposed at 
Sec.  485.524(d) to set forth standards for an REH performing 
outpatient surgical services that are consistent with the CAH 
requirements for surgical services at Sec.  485.639. These include 
proposed standards for ensuring that the services are conducted in a 
safe manner by qualified practitioners with specific protocols for 
administering anesthesia.
    Given that in accordance with the statutory provision at 
section1861(kkk)(1)(A) of the Act services furnished by the REH must 
not exceed an annual per patient average of 24 hours in the REH, we 
expect REHs, like ASCs, to provide surgical services to patients not 
requiring hospitalization and in which the expected duration of 
services would not exceed 24 hours following an admission.
    Comment: Many commenters supported the proposals related to the 
provision of outpatient and medical health diagnostic and therapeutic 
items and services in an REH and stated that REHs should be allowed 
flexibility in determining the outpatient services that meet the needs 
of their communities. Commenters also believed that allowing REHs to 
provide outpatient services could improve the health of rural 
communities and reduce the reliance on emergency departments for 
primary care services. Commenters specifically mentioned that REHs 
should be able to provide services such as outpatient surgeries, 
behavioral and mental health services, case management and social 
services, substance use disorder services (including detoxification, 
counseling, and medication assisted therapy) and post-hospital care and 
coordination. Numerous commenters mentioned the need for maternal 
health services to be provided in REHs due to the lack of access to 
these resources in rural areas. These commenters supported REHs 
providing pre-natal care, low-risk labor and delivery services, and any 
outpatient surgical procedures associated with labor and delivery, as

[[Page 72192]]

appropriate, with the necessary staff, equipment and medications to 
ensure that the patient can be treated or stabilized and transferred if 
necessary. Other commenters stated that providing low-risk deliveries 
and a surgical team to handle these cases would put a financial burden 
on REHs.
    Response: We thank the interested parties for their comments. 
Section 1861(kkk)(1)(A)(ii) of the Act allows REHs to provide 
additional outpatient medical and health services as specified by the 
Secretary through rulemaking. In the proposed rule (87 FR 40391), we 
specifically mentioned the REH providing outpatient services commonly 
furnished in a physician's office or at another entry point into the 
health care delivery system such as radiology, laboratory, outpatient 
rehabilitation, surgical, maternal health, and behavioral health 
services. We also noted that the REH could provide additional 
outpatient medical and health services, if the services aligned with 
the health needs of the community served by the REH as required by 
Sec.  485.524(a). We agree with the numerous commenters who highlighted 
the need for comprehensive maternal health services to be provided in 
REHs. This aligns with a priority of the Biden-Harris Administration to 
improve access to maternal health care services. Therefore, we expect 
that REHs will provide various outpatient services suggested by 
commenters including, but not limited to services such as, low-risk 
labor and delivery supported by any emergency surgical procedures 
necessary and substance use disorder treatment, if identified by a 
health needs assessment of their community and in accordance with the 
CoPs for additional outpatient medical and health services finalized in 
this rule.
    Comment: We received some comments requesting that REHs be allowed 
to establish a distinct part inpatient psychiatric and/or inpatient 
rehabilitation facility to treat patients requiring these services, 
similar to the allowance for REHs to have distinct part unit licensed 
as a SNF. These commenters noted that they have experienced difficulty 
in locating facilities where these patients may be transferred.
    Response: Section 1861(kkk)(2)(B) of the Act defines an REH as not 
providing any inpatient services (other than SNFs distinct part units). 
Therefore, REHs, are not allowed to operate a distinct part inpatient 
psychiatric or rehabilitation unit. We would expect the REH to transfer 
patients requiring these inpatient services to a provider who could 
offer the appropriate level of care. As stated previously, we recommend 
that facilities maintain documentation of instances in which a patient 
is unable to be transferred timely or when there are specific 
situations where the patient's stay may exceed 24 hours.
    Comment: Some commenters requested clarity regarding whether an REH 
is allowed to operate a provider-based rural health clinic (RHC).
    Response: As stated in the CAA of 2021, a rural emergency hospital 
may be considered a hospital with less than 50 beds for purposes of the 
exception to the payment limit for rural health clinics under section 
1833(f) of the Act. Therefore, the statute implicitly states that an 
REH may continue its operation of provider-based RHCs that meet the 
qualifications detailed under section 1833(f) of the Act.
    Comment: We received over 3,000 comments from the CRNA community 
opposing the proposal that CRNAs be required to be supervised by an 
operating practitioner.
    Response: We thank the CRNA community for their comments. The 
proposed CRNA supervision requirement is consistent with the hospital, 
CAH and ambulatory surgical center requirements. Furthermore, the 
proposal, consistent with the hospital, CAH and ambulatory surgical 
center requirements, included a requirement that allows states to opt-
out of the CRNA supervision requirement. To be exempt from this 
requirement, CMS requires a letter from the governor of the state 
requesting the exemption. In the letter, the governor must attest to 
the following:
     The governor has consulted with State Boards of Medicine 
and Nursing about issues related to access to and the quality of 
anesthesia services in the State, and
     The governor has concluded that it is in the best 
interests of the State's citizens to opt-out of the current physician 
supervision requirement, and that the opt-out is consistent with State 
law.
    Lastly, please note the provision of surgical services are optional 
for REHs and are not are required service in accordance with the CAA.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.524 as proposed.
(13) Condition of Participation: Infection Prevention and Control and 
Antibiotic Stewardship Programs (Sec.  485.526)
    Similar to the requirements that we finalized with regard to 
infection prevention and control and antibiotic stewardship programs 
for hospitals and CAHs in the September 30, 2019 final rule ``Medicare 
and Medicaid Programs; Regulatory Provisions To Promote Program 
Efficiency, Transparency, and Burden Reduction; Fire Safety 
Requirements for Certain Dialysis Facilities; Hospital and Critical 
Access Hospital (CAH) Changes To Promote Innovation, Flexibility, and 
Improvement in Patient Care'' (84 FR 51732), we proposed in this rule 
that each REH has facility-wide infection prevention and control and 
antibiotic stewardship programs that are coordinated with the REH 
quality assessment and performance improvement (QAPI) program, for the 
surveillance, prevention, and control of HAIs and other infectious 
diseases and for the optimization of antibiotic use through 
stewardship. Further, we proposed in this rule at Sec.  485.526(a)(1) 
that the REH ensure that an individual (or individuals), who are 
qualified through education, training, experience, or certified in 
infection, prevention and control, are appointed by the governing body, 
or responsible individual, as the infection preventionist(s)/infection 
control professional(s) responsible for the infection prevention and 
control program at the REH and that the appointment is based on the 
recommendations of medical staff and nursing leadership.
    At Sec.  485.526(a)(2), we proposed that the infection prevention 
and control program, as documented in its policies and procedures, 
employ methods for preventing and controlling the transmission of 
infections within the REH and between the REH and other health care 
settings. The program, as documented in its policies and procedures, 
would have to employ methods for preventing and controlling the 
transmission of infection within the REH setting (for example, among 
patients, personnel, and visitors) as well as between the REH 
(including outpatient services) and other institutions and health care 
settings. At Sec.  485.526(a)(3) we proposed that the infection 
prevention and control program include surveillance, prevention, and 
control of HAIs, including maintaining a clean and sanitary environment 
to avoid sources and transmission of infection, and that the program 
also address any infection control issues identified by public health 
authorities. We proposed at Sec.  485.526(a)(4) that the infection 
prevention and control program reflect the scope and complexity of the 
services provided by the REH.
    At Sec.  485.526(b), we proposed to set standards for the 
organization and policies of the antibiotic stewardship

[[Page 72193]]

program. Specifically, we proposed at Sec.  485.526(b)(1) to require 
that the REH's governing body ensure that an individual, who is 
qualified through education, training, or experience in infectious 
diseases and/or antibiotic stewardship is appointed as the leader of 
the antibiotic stewardship program and that the appointment is based on 
the recommendations of medical staff and pharmacy leadership. The 
proposed requirements at Sec.  485.526(b)(2)(i) through (iii) would 
ensure that certain goals for an antibiotic stewardship program are 
met. These include: (i) demonstrating coordination among all components 
of the REH responsible for antibiotic use and resistance, including, 
but not limited to, the infection prevention and control program, the 
QAPI program, the medical staff, and nursing and pharmacy services; 
(ii) documenting the evidence-based use of antibiotics in all 
departments and services of the REH; and (iii) documenting 
improvements, including sustained improvements, in proper antibiotic 
use. We believe that these three components are essential for an 
effective program.
    The provisions at Sec.  485.526(b)(3) and (4) would require the REH 
to ensure that the antibiotic stewardship program adhered to nationally 
recognized guidelines, as well as best practices, for improving 
antibiotic use, and that the REH's stewardship program reflects the 
scope and complexity of services offered. We believe these proposed 
requirements are necessary to promote a facility-wide culture of 
quality improvement. We reiterate that these requirements mirror the 
hospital and CAH requirements for infection prevention and control and 
antibiotic stewardship and we note that in the proposed rule for those 
requirements, published on June 16, 2016 (81 FR 39455), our intention 
to build flexibility into the regulation by requiring hospitals to 
demonstrate adherence to nationally recognized guidelines rather than 
any specific guideline or set of guidelines for infection prevention 
and control and for antibiotic stewardship. While the CDC guidelines 
represent one set, there are other sets of nationally recognized 
guidelines from which facilities might choose, such as those 
established by the Society for Healthcare Epidemiology of America and 
the Infectious Diseases Society of America. We believe this approach 
will provide hospitals the flexibility they need to select and 
integrate those standards that best suit their individual infection 
prevention and control and antibiotic stewardship programs. We also 
believe this approach will allow hospitals the flexibility to adapt 
their policies and procedures in concert with any updates in the 
guidelines they have elected to follow. This rationale applies to REHs.
    We require that the governing body or responsible individual ensure 
that the infection prevention and control issues identified by the 
infection prevention and control professionals be addressed in 
collaboration with REH leadership. Therefore, at Sec.  
[thinsp]485.526(c)(1)(i) and (ii), we proposed certain requirements 
that the governing body or responsible individual must adhere to 
including--
     Ensuring systems are in place and operational for the 
tracking of all infection surveillance, prevention, and control, and 
antibiotic use activities to demonstrate the implementation, success, 
and sustainability of such activities; and
     Ensuring all HAIs and other infectious diseases identified 
by the infection prevention and control program and antibiotic use 
issues identified by the antibiotic stewardship program are addressed 
in collaboration with REH QAPI leadership.
    At Sec.  485.526(c)(2)(i) through (vi), we proposed that the 
responsibilities of the infection prevention and control professionals 
would include the development and implementation of facility-wide 
infection surveillance, prevention, and control policies and procedures 
that adhere to nationally recognized guidelines. The infection 
preventionist(s)/infection control professional(s) would be responsible 
for all documentation, written or electronic, of the infection 
prevention and control program and its surveillance, prevention, and 
control activities.
    Additionally, the infection preventionist(s)/infection control 
professional(s) would be responsible for the following--
     Communication and collaboration with the REH's QAPI 
program on infection prevention and control issues;
     Competency-based training and education of REH personnel 
and staff including professional health care staff and, as applicable, 
personnel providing services in the REH under agreement or arrangement, 
on the practical applications of infection prevention and control 
guidelines, policies and procedures;
     Prevention and control of HAIs, including auditing of 
adherence to infection prevention and control policies and procedures 
by REH personnel; and
     Communication and collaboration with the antibiotic 
stewardship program.
    At Sec.  485.526(c)(3), we proposed requirements for the leader(s) 
of the antibiotic stewardship program that are similar, but not 
identical, to the proposed responsibilities for the REH's designated 
infection preventionist(s)/infection control professional(s) at 
proposed Sec.  485.526(c)(2). We believe that an REH's antibiotic 
stewardship program is the most effective means for ensuring 
appropriate antibiotic use. We also believe that such a program 
requires a leader who is responsible and accountable for its success. 
Therefore, we proposed that the leader of the antibiotic stewardship 
program would be responsible for the development and implementation of 
a facility-wide antibiotic stewardship program, based on nationally 
recognized guidelines, to monitor and improve the use of antibiotics. 
We do not expect that each new leader would develop a new antibiotic 
stewardship program, unless it is determined that a new program is 
necessary. We also proposed that the leader of the antibiotic 
stewardship program would be responsible for all documentation, written 
or electronic, of antibiotic stewardship program activities. The leader 
would also be responsible for communicating and collaborating with 
medical and nursing staff, pharmacy leadership, and the REH's infection 
prevention and control and QAPI programs, on antibiotic use issues.
    We also proposed that the leader would be responsible for the 
competency-based training and education of REH personnel and staff, 
including medical staff, and, as applicable, personnel providing 
contracted services in the REH, on the practical applications of 
antibiotic stewardship guidelines, policies, and procedures.
    Similar to a standard in the hospital CoPs, we proposed a standard 
at Sec.  [thinsp]485.526(d) for REHs that would allow for the governing 
body of an REH that is part of a system consisting of multiple, 
separately certified hospitals, CAHs, and/or REHs using a single system 
governing body that is legally responsible for the conduct of two or 
more hospitals, CAHs, and/or REHs, to elect to have unified and 
integrated infection prevention and control and antibiotic stewardship 
programs for all of its member facilities, including any REHs, after 
determining that such a decision is in accordance with all applicable 
state and local laws. We proposed a similar standard for CAHs at Sec.  
[thinsp]485.640(g). The system's single governing body would be 
responsible for ensuring that each of its separately certified REHs met 
the requirements of

[[Page 72194]]

this section. We note that each separately certified REH subject to the 
system's single governing body would need to demonstrate that the 
unified and integrated infection prevention and control and antibiotic 
stewardship programs:
     Were established in a manner that takes into account each 
member REH's unique circumstances and any significant differences in 
patient populations and services offered in each REH;
     Established and implemented policies and procedures to 
ensure that the needs and concerns of each of its separately certified 
REHs, regardless of practice or location, are given due consideration; 
and
     Had mechanisms in place to ensure that issues localized to 
particular REHs were duly considered and addressed.
    The REH would also need to demonstrate that it had designated a 
qualified individual (or individuals) with expertise in infection 
prevention and control and in antibiotic stewardship at the REH to be 
responsible for:
     Communicating with the system's unified infection 
prevention and control and antibiotic stewardship programs;
     Implementing and maintaining the policies and procedures 
governing infection prevention and control and antibiotic stewardship 
as directed by the unified infection prevention and control and 
antibiotic stewardship programs; and
     Providing education and training on the practical 
applications of infection prevention and control and antibiotic 
stewardship to REH staff.
    Finally, in response to the COVID-19 pandemic, on September 2, 
2020, CMS published an interim final rule with comment period to track 
the incidence and impact of COVID-19 to assist public health officials 
in detecting outbreaks and saving lives (85 FR 54820). CMS then 
published a final rule with comment containing reporting requirements 
for hospitals and CAHs to report acute respiratory illness during the 
public health emergency (PHE) for COVID-19 (85 FR 86304) on December 4, 
2020. Lastly, on November 5, 2021, CMS published an interim final rule 
with comment establishing COVID-19 vaccination requirements for most 
Medicare- and Medicaid-certified providers and suppliers (86 FR 61623). 
Consistent with the recent changes we made to the hospital and CAH 
infection control CoPs related to COVID-19 (87 FR 28108) and the 
declared PHE, we proposed the following three standards for REHs:
     Reporting of data related to viral and bacterial pathogens 
and infectious diseases of pandemic or epidemic potential, which would 
require an REH to electronically report information on Acute 
Respiratory Illness (including, but not limited to, Seasonal Influenza 
Virus, Influenza-like Illness, and Severe Acute Respiratory Infection), 
SARS-CoV-2/COVID-19, and other viral and bacterial pathogens and 
infectious diseases of pandemic or epidemic potential only when the 
Secretary has declared a Public Health Emergency, directly related to 
such specific pathogens and infectious diseases.
     COVID-19 reporting, which would require an REH to 
electronically report information about COVID-19 and seasonal influenza 
in a standardized format specified by the Secretary, including the 
REH's current inventory supplies of any COVID-19-related therapeutics 
that have been distributed and delivered to the REH and the current 
usage rate for those therapeutics beginning at the conclusion of the 
COVID-19 PHE, and continuing until April 30, 2024, unless the Secretary 
specifies an earlier end date.
     COVID-19 Vaccination of REH staff, which would require the 
REH to develop and implement policies and procedures to ensure that all 
staff, with the exception of those with valid exemptions, are fully 
vaccinated for COVID-19 until November 4, 2024, unless the Secretary 
specifies an earlier end date for the requirements of this paragraph. 
Section 902 of the Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 establishes a general 3-year timeline for 
publishing a Medicare final regulation after a proposed regulation or 
an interim final regulation has been published. The referenced November 
4, 2024 date aligns with the statutory 3-year ``Section 902'' deadline 
for the IFC that implemented the COVID-19 staff vaccination 
requirements for the provider and supplier types covered under that 
rule. Even though this final rule is not itself subject to the section 
902 deadline, we are finalizing a policy that will terminate this 
vaccination requirement at the same time and under the same 
circumstances as the vaccination requirement applicable to all other 
provider-types.
    Comment: Commenters were very supportive of this proposal. Several 
commenters did request we consider delaying implementation to allow for 
additional time to train staff and develop better QAPI standards.
    Response: The proposed standards currently mirror those for CAHs 
and hospitals and have become an industry standard over the years, 
especially since the COVID-19 pandemic helped spur innovations in 
infection control nationwide. We believe that a delay in implementation 
is unnecessary as REHs should be familiar with the infection control 
standards and techniques given their previous status as a CAH or 
hospital and the requirement that they comply with the provisions.
    After consideration of the public comments we received, we are 
finalizing these provisions as proposed.
(14) Condition of Participation: Staffing and Staff Responsibilities 
(Sec.  485.528)
    Sections 1861(kkk)(1)(B)(i) and (ii) of the Act require that the 
emergency department of the REH be staffed 24 hours a day, 7 days a 
week. We proposed to implement this requirement at Sec.  485.528(a). 
The statute does not speak to the type of staff at the REH that is 
required to fulfill this role. As such, we believe that REHs should 
have the flexibility to determine how to staff the emergency department 
at the REH 24 hours, 7 days a week. We expect that the individual(s) 
staffing the emergency department is competent to receive patients and 
activate the appropriate medical resources for the treatment of the 
patient. In our proposed rule, we noted that such staff may include a 
nurse, nursing assistant, clinical technician, or an emergency medical 
technician, (EMT).
    We proposed for REHs to meet the applicable CAH requirements at 
Sec.  485.631 for staffing and staff responsibilities. We believe that 
many of the CAH staffing requirements are appropriate for application 
to REHs and as a result, at Sec.  485.528(b) through (e), we set for 
the proposed standards for staffing, responsibilities of the doctor of 
medicine or osteopathy, physician assistant, nurse practitioner, and 
clinical nurse specialist responsibilities similar to CAHs. For 
instance, the CAH CoPs require at Sec.  485.631(a)(5) that a registered 
nurse, clinical nurse specialist, or licensed practical nurse is on 
duty whenever the CAH has one or more inpatients. Since REHs are 
required to furnish emergency services and observation care, we 
proposed a similar requirement as CAHs to require that a registered 
nurse, clinical nurse specialist, or licensed practical nurse be on 
duty whenever the REH has one or more patients receiving emergency 
services or observation care.
    We also proposed to require standards for the periodic review of 
clinical privileges and performance that are also identical to the CAH 
standards at Sec.  485.631, with the exception of the CAH standard at 
Sec.  485.631(b)(1)(iv),

[[Page 72195]]

which requires that a doctor of medicine or osteopathy periodically 
review and sign the records of all inpatients cared for by nurse 
practitioners, clinical nurse specialists, certified nurse midwives, or 
physician assistants. We did not propose this standard for REHs given 
that the REHs are providers of outpatient services exclusively.
    We did not believe that it was necessary to apply the CAH 
requirement that a doctor of medicine or osteopathy, nurse 
practitioner, clinical nurse specialist, or physician assistant is 
available to furnish patient care services at all times the CAH 
operates (Sec.  485.631(a)(4)) to REHs. Instead, we proposed to require 
that the REH standards align with the CAH emergency services 
requirements at Sec.  485.618. The CAH provision at Sec.  485.618(d) 
requires that there be a doctor of medicine or osteopathy, a physician 
assistant, a nurse practitioner, or a clinical nurse specialist, with 
training or experience in emergency care, on call and immediately 
available by telephone or radio contact, and available on site within 
specified timeframes. This allows for the alignment of the REH proposed 
provisions with the CAH emergency services standards, as required by 
the statute.
    In response to the REH RFI, commenters indicated that CMS should 
require board-certified emergency physicians to serve as medical 
directors of the REH. While we agree that having a board-certified 
emergency physician serving as the medical director of the REH would 
benefit patients by ensuring that the REH is overseen by a highly 
qualified physician with a high level of expertise in emergency 
medicine, we believe that requiring this of REHs would be unduly 
burdensome due to the challenges faced by rural communities in 
obtaining and retaining medical professionals to provide health care 
services. While we did not propose to require that REHs have a board-
certified emergency physician serve as the medical director, we would 
encourage REHs to have such a physician serve in the capacity of 
medical director if possible.
    Comment: Some commenters agreed with our proposed policy of only 
having a physician or other practitioner on-call and available on-site 
within specified timeframes. Other commenters believed a clinician 
should be on-site at all times and that an EMT or a nurse would not 
provide sufficient staffing to meet the requirement that an REH be 
staffed 24 hours a day, 7 days a week. These commenters felt that that 
this role should be filled by a physician, nurse practitioner, clinical 
nurse specialist, or physician assistant with training or experience in 
emergency care.
    Response: The statute does not explicitly specify who needs to fill 
this role. We believe that the intent of the legislation is to ensure 
that REHs have the flexibility to determine who best meets the needs of 
their community while ensuring the provision of safe, quality patient 
care. We expect REHs to determine who is best to fill this role based 
on the scope of services provided by the REH and the population served.
    After consideration of the public comments suggesting that a staff 
with certain training or experience in emergency care fill the 
requirement that the emergency department be staffed at all times, we 
are finalizing our proposal at Sec.  485.528 with modification. We will 
require that the REH be staffed at all times by an individual who is 
competent in the skills needed to address emergency medical care. This 
individual must be able to receive patients and activate the 
appropriate medical resources to meet the care needed by the patient. 
We believe that this focus on skills needed to address emergency 
medical care will ensure that the individual staffing the REH at all 
times is appropriate. We expect that this individual has the ability to 
effectively communicate information regarding the condition of patients 
presenting to the emergency department for treatment to the physician 
or other practitioner notified of the patient's arrival. We remind 
readers that the Emergency Services provision at Sec.  485.516 will 
require the REH to comply with the CAH Emergency Services CoP at Sec.  
485.618, such that the REH must have a physician or other practitioner 
on-call at all times and available on-site within 30 or 60 min 
(depending on if the facility is located in a frontier area). We also 
expect the individual staffing the emergency department of the REH to 
have the ability to recognize life-threatening emergencies and provide 
cardiopulmonary resuscitation to patients presenting to the emergency 
department, if necessary.
    As noted in the discussion of the Emergency Services requirements 
at Sec.  485.516, we believe that these revisions sufficiently address 
commenters concern regarding ensuring the REH's emergency department is 
appropriately staffed.
(15) Condition of Participation: Nursing Services (Sec.  485.530)
    The CoPs for hospitals and CAHs include a provision for nursing 
services. However, given that each of these providers offers acute care 
inpatient services, we do not believe that all nursing services 
requirements for hospitals and CAHs are appropriate for REHs, which are 
outpatient-only providers. In evaluating the appropriateness of nursing 
services requirements for REHs, we also took into consideration the 
CfCs for ambulatory surgery centers at 42 CFR part 416 since they, like 
REHs, only offer outpatient services.
    Consistent with the hospital requirements, we proposed at Sec.  
485.530 to require that REHs have an organized nursing service that is 
available to provide 24-hour nursing services for the provision of 
patient care. We believe that the REH should have a sufficient number 
of nurses available to provide services, based on the number of 
patients receiving services in the REH and the level of care required 
to be provided to those patients.
    Similar to the standard for hospitals set out at Sec.  482.23(a), 
we proposed at Sec.  485.530(a) to require that patient care 
responsibilities must be delineated for all nursing service personnel 
and that nursing services must be provided in accordance with 
recognized standards of practice. Also consistent with the hospital 
standards for nursing services, we proposed to require at Sec.  
485.530(b) that the REH have a director of nursing who is a licensed 
registered nurse and who is responsible for the operation of the 
nursing services.
    Comment: Commenters were generally supportive of the proposal. One 
commenter suggested that an RN always be available on-site at the REH.
    Response: This provision was modeled after the CAH requirement at 
Sec.  485.631(a)(5) that a registered nurse, clinical nurse specialist, 
or licensed practical nurse be on duty whenever the CAH has one or more 
inpatients. Although REHs are outpatient-only facilities, they are 
required to provide emergency services and observation care. As a 
result, we believe it is appropriate for them to have a registered 
nurse, clinical nurse specialist, or licensed practical nurse on duty 
whenever the REH is providing emergency services and observation care 
to one or more patients, as required at Sec.  485.528(b)(4). We are 
also requiring the REH to have nursing services that are available to 
be provided 24-hours a day for the provision of patient care. In cases 
in which there is not a patient receiving emergency services or 
observation care, but a patient subsequently presents to the REH for 
such services or care, the REH would be required to provide nursing 
services for the patient.

[[Page 72196]]

    Additionally, the statute requires that the REH be staffed at all 
times. As discussed in the section for Staffing and Staff 
Responsibilities (Sec.  485.528), we are requiring that the 
individual(s) who fulfills the requirement that the REH must be staffed 
at all times must be an individual(s) who is competent in the skills 
needed to address emergency medical care. This individual(s) must be 
able to receive patients and activate the appropriate medical resources 
to meet the care needed by the patient. Furthermore, we are 
incorporating staffing into the REH's QAPI program at Sec.  
485.536(a)(1) to further address commenters concerns related to the REH 
staff and staff responsibilities.
    After consideration of the public comments we received, we are 
finalizing as proposed.
(16) Condition of Participation: Discharge Planning (Sec.  485.532)
    Hospitals and CAHs have very similar discharge planning 
requirements at Sec. Sec.  482.43 and 485.642, respectively. These 
requirements were revised in the final rule entitled ``Medicare and 
Medicaid Programs; Revisions to Requirements for Discharge Planning for 
Hospitals, Critical Access Hospitals, and Home Health Agencies, and 
Hospital and Critical Access Hospital Changes to Promote Innovation, 
Flexibility, and Improvement in Patient Care'' (84 FR 51836). Many 
commenters on the REH RFI noted the importance of having in-depth 
discharge planning requirements for REHs, highlighting the need for REH 
patients to have safe, well-coordinated discharge processes due to the 
availability of fewer health care resources in rural environments. As a 
result, we proposed to closely align the proposed discharge planning 
requirements for REHs with the requirements for hospitals and CAHs. 
Specifically, proposed at Sec.  485.532 to require that the patient's 
discharge plan address the patient's goals of care and treatment 
preferences. During the discharge planning process, we would expect 
that the appropriate medical staff would discuss the patient's post-
acute care goals and treatment preferences with the patient, the 
patient's family or their caregiver/support persons (or both) and 
subsequently document these goals and preferences in the medical 
record. We would expect these documented goals and treatment 
preferences to be taken into account throughout the entire discharge 
planning process. We note that as a provider of emergency services, the 
REH may receive patients from nursing homes who require emergency care. 
Having a robust discharge planning process in place is imperative for 
this patient population. There may be instances in which a patient 
comes to the REH from a nursing home and the nursing home either 
expresses an intent not to accept the patient or delays the patient's 
return back to the nursing home after the completion of emergency care 
by the REH. Under these circumstances, we would encourage the REH to 
contact their State's long-term care ombudsman or State Survey Agency. 
We also encourage the REH to inform patients who arrive from or are 
discharged to a long-term care facility about how to contact the 
Ombudsman and State Survey Agency, if a patient is having quality of 
care or quality of life concerns. The Administration of Community 
Living's Long-Term Care Ombudsman Programs, ``. . . work to resolve 
problems related to the health, safety, welfare, and rights of 
individuals who live in LTC facilities, such as nursing homes, board 
and care and assisted living facilities, and other residential care 
communities. Ombudsman programs promote policies and consumer 
protections to improve long-term services and supports at the facility, 
local, state, and national levels.''
    At Sec.  485.532(a) introductory text and (a)(1), we proposed to 
require that REHs implement a discharge planning process to begin 
identifying, early in the provision of services, the anticipated post-
discharge goals, preferences, and needs of the patient and begin to 
develop an appropriate discharge plan for patients who are likely to 
suffer adverse health consequences upon discharge in the absence of 
adequate discharge planning. Timely identification of the patient's 
goals, preferences, and needs and development of the discharge plan 
would reduce delays in the overall discharge process. Patient referrals 
to or consultation with community care organizations will be a key 
step, for some, in assuring successful patient outcomes. Therefore, we 
believe that discharge planning for patients is a process that involves 
the consideration of the patient's unique circumstances, treatment 
preferences, and goals of care, and is not solely a documentation 
process.
    In addition, in order to encourage patient engagement and 
understanding of their discharge plan or instructions, we recommend 
that providers follow the National Standards for Culturally and 
Linguistically Appropriate Services (CLAS) in Health and Health Care 
(https://www.thinkculturalhealth.hhs.gov/class/standards), which 
provide guidance on providing instructions in a culturally and 
linguistically appropriate manner. We remind providers of their 
obligations to take reasonable steps to provide meaningful access to 
individuals with limited English proficiency in accordance with Title 
VI of the Civil Rights Act of 1964 and section 1557 of the Patient 
Protection and Affordable Care Act (the Affordable Care Act). In 
addition, providers are reminded to take appropriate steps to ensure 
effective communication with individuals with disabilities, including 
the provision of auxiliary aids and services, in accordance with 
section 504 of the Rehabilitation Act, the Americans with Disabilities 
Act (ADA), and section 1557 of the Affordable Care Act (see, https://www.hhs.gov/civil-rights and https://www.ada.gov for more information 
on these requirements). Discharge planning would be of little value to 
patients who cannot understand or appropriately follow the discharge 
plans discussed in this rule. Without appropriate language assistance 
or auxiliary aids and services, discharge planners would not be able to 
fully involve the patient and caregiver/support person in the 
development of the discharge plan. Furthermore, the discharge planner 
would not be fully aware of the patient's goals for discharge.
    Additionally, effective discharge planning would assist REHs in 
complying with the U.S. Supreme Court's holding in Olmstead v. L.C. 
(527 U.S. 581 (1999)), which found that the unjustified segregation of 
people with disabilities is a form of unlawful discrimination under the 
ADA. We note that effective discharge planning may assist REHs in 
ensuring that individuals being discharged who would otherwise be 
entitled to institutional services, have access to community-based 
services when--(1) such placement is appropriate; (2) the affected 
person does not oppose such treatment; and (3) the placement can be 
reasonably accommodated. As noted by comments received in response to 
the REH RFI, discharge planning should focus on returning the patient 
to a home or community-based setting to the fullest extent possible 
with necessary supports and service. These proposed discharge planning 
standards are aimed at achieving this goal.
    At Sec.  485.532(a)(2), we proposed to require an REH to perform a 
discharge planning evaluation which would have to include an evaluation 
of a patient's likely need for appropriate services following care that 
has been furnished by an REH, including, but not limited to, hospice 
care services, post-REH extended care services, home health services, 
and non-health care services

[[Page 72197]]

and community-based care providers, and must also include a 
determination of the availability of the appropriate services as well 
as of the patient's access to those services.
    At Sec.  485.532(a)(3), we proposed to require that the patient's 
discharge needs evaluation and discharge plan be documented and 
completed on a timely basis, based on the patient's goals, preferences, 
strengths, and needs, so that appropriate arrangements for post-REH 
care could be made before discharge. This requirement would prevent the 
patient's discharge or transfer from being unduly delayed. We expect 
that in response to this requirement, REHs would establish more 
specific time frames for completing the evaluation and discharge plans 
based on the needs of their patients and their own operations. All 
relevant patient information would be incorporated into the discharge 
plan to facilitate its implementation and the discharge plan would have 
to be included in the patient's medical record. The results of the 
evaluation would also have to be discussed with the patient or 
patient's representative. Furthermore, we believe that REHs would use 
their evaluation of the discharge planning process, with solicitation 
of feedback from other providers and suppliers in the community, as 
well as from patients and caregivers, to revise their timeframes, as 
needed. We encourage REHs to make use of available health information 
technology, such as electronic health records, as well as entities that 
can facilitate exchange, such as health information exchanges, to 
enhance the efficiency and effectiveness of their discharge process.
    At Sec.  485.532(a)(4), we proposed to require the REH to arrange 
for the development and initial implementation of a discharge plan for 
those patients so identified as well as for other patients upon the 
request of the patient's physician. We proposed at Sec.  485.532(a)(5) 
to require that a registered nurse, social worker, or other personnel 
qualified in accordance with the REH's discharge planning policy 
coordinate the discharge needs evaluation and the development of the 
discharge plan.
    At Sec.  485.532(a)(6), we proposed to require that the REH's 
discharge planning process ensure an ongoing patient evaluation 
throughout the patient's REH stay or visit to identify any changes in 
the patient's condition that would require modifications to the 
discharge plan. The evaluation to determine a patients continued stays 
at the REH (or in other words, their readiness for discharge or 
transfer), is a current standard of medical practice.
    We proposed to require at Sec.  485.532(a)(7) that the hospital 
assess its discharge planning process on a regular basis and include, 
as part of the assessment, an ongoing review of a representative sample 
of discharge plans. We expect that this would include patients who were 
emergency department revisits or presented to the emergency department 
within 30 days of a previous visit, to ensure that the REH is 
responsive to the discharge needs of patients.
    In addition to standards for evaluating the discharge needs of 
patients and the development of discharge plans, the hospital and CAH 
discharge planning provisions also require that the hospital and CAH 
assist patients, their families, or the patient's representative in 
selecting a post-acute care provider by using and sharing data that 
includes, but is not limited to, home health agency (HHA), SNF, 
inpatient rehabilitation facility (IRF), or long-term care hospital 
(LTCH) data on quality measures and data on resource use measures. 
Furthermore, the CoPs for those facility-types require the hospital and 
CAH to ensure that the post-acute care data on quality measures and 
data on resource use measures is relevant and applicable to the 
patient's goals of care and treatment preferences. We believe these 
requirements are applicable to REHs, given that we expect some patients 
of the REH to be discharged to a post-acute care provider. As result, 
we proposed at Sec.  485.532(a)(8) to require REHs to share data on 
quality measures and resource use measures of local post-acute care 
providers with patients to assist them in selecting a post-acute care 
provider.
    We proposed at Sec.  485.532(b) to require that the REH would be 
required to discharge the patient, and also transfer or refer the 
patient where applicable, along with all necessary medical information 
pertaining to the patient's course of illness and treatment, post-
discharge goals of care, and treatment preferences, at the time of 
discharge, to the appropriate post-acute care service providers and 
suppliers, facilities, agencies, and other outpatient service providers 
and practitioners responsible for the patient's follow-up or ancillary 
care.
    The Agency for Healthcare Research and Quality (AHRQ) released an 
environmental scan report on Improving the Emergency Department 
Discharge Process, that evaluated the state of the emergency department 
discharge process and ways in which it could be improved.[20] The 
report found that a high-quality emergency department discharge 
incorporates the following:
     Informs and educates patients on their diagnosis, 
prognosis, treatment plan, and expected course of illness. This 
includes informing patients of the details of their visit (treatments, 
tests, procedures).
     Supports patients in receiving post-emergency department 
discharge care. This might include medications, home care of injuries, 
use of medical devices/equipment, further diagnostic testing, and 
further health care provider evaluation; and
     Coordinates emergency department care within the context 
of the health care system (other health care providers, social 
services, etc.).
    We believe discharge planning requirements proposed for REHs 
address the goals identified in the report.
    Comment: Commenters were generally supportive and appreciated the 
robust requirements proposed for REHs given the rural communities they 
serve, highlighting the importance of care coordination and 
transitional care in these communities. One commenter suggested that 
CMS require REHs to comply with the hospital discharge planning 
standard at Sec.  482.43(c)(2), which requires that the hospital, as 
part of the discharge planning process, inform the patient or the 
patient's representative of their freedom to choose among participating 
Medicare providers and suppliers of post-discharge services and must, 
when possible, respect the patient's or the patient's representative's 
goals of care and treatment preferences, as well as other preferences 
they express.
    Response: We appreciate the commenters' support of our proposal. In 
response to the commenters' suggestion that CMS require REHs to comply 
with the hospital discharge planning standard at Sec.  482.43(c)(2), 
this requirement is applicable to hospitals only, and is not applied to 
CAHs or REHs. The hospital discharge planning statutory requirements 
for patient choice are located at sections 1861(ee)(2)(H) and 
1861(ee)(3) of the Act, under the definition of ``Discharge Planning 
Process.''
    We also note that we proposed at Sec.  485.532 to require that REHs 
have an effective discharge planning process that focused on the 
patient's goals and treatment preferences and includes the patient and 
their caregivers/support person(s) as active partners in the discharge 
planning for post-discharge care. The discharge planning process and 
the discharge plan must be consistent with the patient's goals for

[[Page 72198]]

care and their treatment preferences, ensure an effective transition of 
the patient from the REH to post-discharge care, and reduce the factors 
leading to preventable hospital admissions or readmissions. We 
highlight that this requirement is intended to ensure that the patient 
and their caregiver/support person(s) are an integral part of the 
discharge planning process and we expect that to include making the 
patient aware of their freedom to choose among participating Medicare 
providers and suppliers of post-discharge services.
    After consideration of the public comments we received, we are 
finalizing this provision as proposed.
(17) Condition of Participation: Patient's Rights (Sec.  485.534)
    It is imperative for patients to have the ability to exercise 
certain rights and protections while seeking and receiving necessary 
care and services at an REH. As previously mentioned, the appropriate 
provision of behavioral health is very important in the treatment and 
safety of patients and staff. Behavioral health is a challenge in rural 
areas, due to the accessibility, affordability, acceptability and 
availability of these services. The demand for mental health is 
increasing, with 67 percent of organizations seeing an increase in the 
demand for services (National Council for Mental Wellbeing: https://www.thenationalcouncil.org/press-releases/new-report-40-of-mental-health-and-addiction-treatment-organizations-will-survive-less-than-a-year-without-additional-financial-support/). According to a 2017 report 
from the National Council for Behavioral Health, there is a shortage of 
mental health professionals leading to a gap of up to 15,000 
practitioners by 2025. This lack of access to psychiatric services is 
contributing to an increase in the unitization of hospital emergency 
departments. Therefore, we anticipate that some patients may rely on 
REH's to access behavioral health care services, and we believe it is 
important to have policies and procedures in place for REHs and CAHs 
(discussed later in this rule) in the event of a mental health crisis 
and the need for the use of restraints and seclusions. We proposed to 
establish a CoP for patient's rights at Sec.  485.534 that would set 
forth the rights of all patients to receive care in a safe setting, and 
would require the facility to protect the patient's emotional and 
physical health and safety. Furthermore, we proposed to establish the 
patient's rights CoP for REHs closely to the patient's rights CoP for 
hospitals at Sec.  482.13. The REH would be required to inform patients 
of and permit them to exercise their rights; address privacy and 
safety; adhere to the confidentiality of patient records; abide by 
restrictions on the use of restraint and seclusion; and adhere to 
patient visitation rights. We proposed to add these same patient's 
rights CoPs for CAHs, as well. Some of these requirements are currently 
in the SOM for CAHs while some are not explicitly required. We believe 
that these patient rights provisions are important for hospitals, CAHs, 
and REHs. However, some of the provisions proposed for REHs and CAHs 
are less prescriptive than those for hospitals because we proposed to 
allow for these providers to develop policies and procedures based on 
the scope of services they provide and patient populations that they 
serve. For example, we believe that REHs, like CAHs, would have a lower 
volume of patients than hospitals and the use of restraints and 
seclusion would not be as frequent as with other providers. REHs would 
not be providing inpatient services and if a patient presented at the 
REH in crisis or needing a level of care so acute that restraints or 
seclusions became necessary, we would expect the REH to arrange for the 
transfer of the patient to a higher level of care.
Notice of Rights
    At Sec.  485.534(a), we proposed that an REH inform each patient or 
patient's representative (as allowed under state law), of the patient's 
rights, in advance of furnishing or discontinuing patient care whenever 
possible. This included a proposal to require the REH to establish a 
process for the oversight and prompt resolution of patient grievances 
and for informing each patient whom to contact to file a grievance.
Exercise of Rights
    At Sec.  485.534(b), we proposed to specify those rights a patient 
has regarding their medical care, which includes the right to make 
informed decisions regarding their care, to be fully informed about 
such care, and the right to request or refuse treatment. We noted that 
this right was not to be construed as a mechanism to demand the 
provision of treatment or services deemed medically unnecessary or 
inappropriate. In addition, we proposed to specify that the patient 
also has the right to formulate advance directives and to have REH 
staff and practitioners who provide care in the REH comply with these 
directives.
Privacy, Safety, and Confidentiality of Patient Records
    At Sec.  485.534(c), we proposed to specify that the patient has 
the right to personal privacy, receive care in a safe setting, and be 
free from all forms of abuse or harassment. At Sec.  
[thinsp]485.534(d), we proposed to specify that the patient has the 
right to the confidentiality of their medical records and the right to 
access their medical records. We also proposed that the REH be required 
to provide the patient with their records in a form and format 
requested by the patient, and within a reasonable timeframe, so as not 
to frustrate the legitimate efforts of individuals to gain access to 
their own medical records.
Use of Restraints and Seclusion
    At Sec.  485.534(e), we proposed rules relating to the use of 
restraints and seclusion that would be less burdensome than those for 
hospitals, because we believe that the likelihood of an REH needing to 
utilize restraints and seclusion would be relatively low. In addition, 
in the event that there were patients requiring restraint and 
seclusion, we would expect them to be transferred quickly to a higher 
level of care. We note that we have similar expectations for CAHs and 
are finalizing similar requirements for CAHs in this rule. We proposed 
to specify that all patients have the right to be free from physical or 
mental abuse, from corporal punishment, and from restraint or 
seclusion, of any form, imposed as a means of coercion, discipline, 
convenience, or retaliation by staff. We proposed that restraint or 
seclusion would only be imposed to ensure the immediate physical safety 
of the patient, a staff member, or others, and would have to be 
discontinued at the earliest possible time. We proposed to define 
``restraint'' as any manual method, physical or mechanical device, 
material, or equipment that immobilizes or reduces the ability of a 
patient to move their arms, legs, body, or head freely; or a drug or 
medication when it is used as a restriction to manage the patient's 
behavior or restrict the patient's freedom of movement and is not a 
standard treatment or dosage for the patient's condition. A restraint 
does not include devices, such as orthopedically prescribed devices, 
surgical dressings or bandages, protective helmets, or other methods 
that involve the physical holding of a patient for the purpose of 
conducting routine physical examinations or tests, or to protect the 
patient from falling out of bed, off of a stretcher, or out of a chair, 
or to permit the patient to participate in activities without the risk 
of physical harm (this does not include a physical escort). We proposed 
to define ``seclusion'' as the involuntary confinement of a patient 
alone in a room or area from which the

[[Page 72199]]

patient is physically prevented from leaving. Seclusion could only be 
used for the management of violent or self-destructive behavior.
    At Sec.  485.534(e)(2), we proposed to require that the restraint 
or seclusion only be used when less restrictive interventions had been 
determined to be ineffective to protect the patient, a staff member, or 
others from harm, and at Sec.  485.534(e)(3) that the type or technique 
of restraint or seclusion used would have to be the least restrictive 
intervention that will be effective to protect the patient, staff 
member, or others from harm. At Sec.  485.534(e)(4), we proposed that 
the REH would have to have written policies and procedures regarding 
the use of restraint and seclusion consistent with current standards of 
practice. These requirements would allow for the REH to use restraints 
and seclusion in the event that it was necessary and as a last resort 
to respond to immediate safety concerns, but would present a lesser 
burden and allow for more flexibility than existing hospital CoPs. We 
believe that allowing the REH the flexibility to develop their own 
policies and procedures for restraints and seclusion based on the scope 
of services they provide is necessary given their patient volumes, 
populations, and access to resources. We proposed to require that such 
policies and procedures be consistent with current standards of 
practice.
Staff Training Requirements for the Use of Restraints or Seclusion
    The following staff training requirements are not as prescriptive 
as the existing hospital requirements, and we proposed these same 
requirements for CAHs in the REH NPRM. At Sec.  485.534(f), we proposed 
to establish staff training requirements for the use of restraints and 
seclusion. Specifically, we proposed that the patient has the right to 
safe implementation of restraint or seclusion, when necessary, by 
trained staff. We proposed at Sec.  485.534(f)(1) that the REH would 
have to provide competency-based training and education of REH 
personnel and staff, including medical staff and contractors, on the 
use of restraint and seclusion. We proposed to require that the 
training be patient-centered, meaning that t staff are able to ensure 
that the use of restraint and seclusion for patients receiving services 
in an REH is respectful of, and responsive to, individual patient 
preferences, needs and values. Additionally, to ensure that staff are 
educated and trained on using the least restrictive intervention 
necessary for the safety of the patients and REH staff, we proposed at 
Sec.  [thinsp]485.534(f)(2) to require that the REH staff train their 
staff in alternatives to the use of restraint and seclusion. For 
example, we proposed that staff have trauma-informed knowledge 
competencies and be aware of effective de-escalation techniques that 
could be used to avoid the use of restraint and seclusion and the 
trauma that may be associated with their use. Trained peer workers 
(people who share similar experiences of being diagnosed with mental 
health conditions, substance use disorders, or both) and community 
health workers (CHWs) could also serve a useful role in assisting 
patients and other staff. This could include helping to monitor use of 
restraint and seclusion, deescalating interactions with patients and 
contributing to a positive and supportive environment for patients, 
family members, and REH staff. REHs are encouraged to consider the use 
of peer workers and CHWs in their staffing plans. For further 
information, please see the 2007 guidance on use of peers in the 
Medicaid program (https://www.medicaid.gov/federal-policy-guidance/downloads/SMD081507A.pdf) and resources from the Substance Abuse and 
Mental Health Services Administration (https://www.samhsa.gov/brss-tacs/recovery-support-tools/peers). In addition, facilities are 
encouraged to consider any nutritional needs while a patient is 
restrained, such as a need to provide food and water.
Death Reporting Requirements
    The REH death reporting requirements are similar to the hospital 
requirements at Sec.  482.13. At Sec.  485.534(g), we proposed to 
establish requirements that REHs must follow when reporting deaths 
associated with the use of seclusion or restraint. Specifically, we 
proposed to require that the REH report to CMS, by telephone, 
facsimile, or electronically, as determined by CMS, no later than the 
close of business on the next business day the following information--
(1) Each death that occurs while a patient is in restraint or 
seclusion; (2) Each death that occurs within 24 hours after the patient 
has been removed from restraint or seclusion; (3) Each death known to 
the REH that occurs within 1 week after restraint or seclusion where it 
is reasonable to assume that use of restraint or placement in seclusion 
contributed directly or indirectly to a patient's death, regardless of 
the type(s) of restraint used on the patient during this time. We note 
that ``reasonable to assume'' in this context would include, but is not 
limited to, deaths related to restrictions of movement for prolonged 
periods of time, or death related to chest compression, restriction of 
breathing, or asphyxiation.
    For instances when no seclusion had been used and when the only 
restraints used on the patient were those applied exclusively to the 
patient's wrist(s), and which are composed solely of soft, non-rigid, 
cloth-like materials, the REH staff would have to record in an internal 
log or other system, the following information: (1) Any death that 
occurs while a patient was in such restraints; (2) Any death that 
occurred within 24 hours after a patient had been removed from such 
restraints. Furthermore, we proposed that staff document in the 
patient's medical record the date and time the death was reported to 
CMS or recorded in the internal log or other system. Also, for 
instances when no seclusion had been used and when the only restraints 
used on the patient were those applied exclusively to the patient's 
wrist(s),we proposed to require that entries into the internal log or 
other system must be documented no later than seven days after the date 
of death of the patient, include the patient's name, date of birth, 
date of death, name of attending physician or other licensed 
practitioner who is responsible for the care of the patient, medical 
record number, and primary diagnosis(es), and to be made available in 
either written or electronic form to CMS immediately upon request.
Patient Visitation Rights
    At Sec.  485.534(h), we proposed to establish requirements related 
to a patient's visitation rights. These requirements would be 
consistent with the current hospital and CAH regulations. Specifically, 
we proposed that an REH have written policies and procedures regarding 
the visitation rights of patients, including those setting forth any 
clinically necessary or reasonable restriction or limitation that the 
REH may need to place on such rights and the reasons for the clinical 
restriction or limitation. An REH would have to inform patients (or 
support persons, where appropriate) of their visitation rights, 
including any clinical restriction or limitation on such rights, when 
they were informed of their other rights. Each patient would be 
informed (or support persons, where appropriate) of the right, subject 
to their consent, to receive the visitors whom they designated, 
including, but not limited to, a spouse, a domestic partner (including 
a same-sex domestic partner), another family member, or a friend. The 
patient would also have the right to withdraw or deny such consent at 
any

[[Page 72200]]

time. The facility could not restrict, limit, or otherwise deny 
visitation privileges on the basis of race, color, national origin, 
religion, sex, gender identity, sexual orientation, or disability, and 
ensure that all visitors enjoy full and equal visitation privileges 
consistent with patient preferences.
    Comment: Most commenters supported the proposed patient's rights 
requirements for REHs. Commenters stated that REHs should have the same 
patient rights requirements as hospitals. A commenter suggested that we 
follow HIPAA requirements for patient confidentiality rights and 
privacy to avoid any confusion.
    Response: We appreciate the support and suggestions from interested 
parties. Our goal was to establish patient's rights that would set 
forth the rights of all patients to receive care in a safe setting and 
provide protection for a patient's emotional health and safety as well 
as their physical safety. We believe that we have done that and allowed 
the flexibility for REHs to develop their own policies and procedures 
in response to the use of restraints and seclusions, in the event that 
they are necessary.
    After consideration of the public comments we received, we are 
finalizing these provisions as proposed.
(18) Condition of Participation: Quality Assessment and Performance 
Improvement Program (QAPI Program) (Sec.  485.536)
    An effective QAPI program that is engaged in continuous improvement 
efforts is essential to a provider's ability to deliver high quality 
and safe care to its patients, while reducing the incidence of medical 
errors and adverse events. Therefore, we believe the QAPI programs for 
REHs should conform to the current health care industry standards that 
require providers to proactively design quality improvement into each 
program at the outset, monitor data (indicators, measures and reports 
of staff/residents/families), determine root causes of problems, 
develop and implement plans that affect system improvement, and monitor 
the success of this systematic approach to improving quality.
    At Sec.  485.536, we proposed to require that every REH develop, 
implement, and maintain an effective, ongoing, REH-wide, data-driven 
QAPI program. This requirement ensures that the REH systematically 
reviews its operating systems and processes of care to identify and 
implement opportunities to deliver effective care to its patients 
focusing on improving health outcomes and preventing and reducing 
medical errors.
    In the development of the proposed requirements for the REH QAPI 
program, we reviewed the CAH QAPI requirements at Sec.  485.641, which 
we note are also closely aligned with the hospital QAPI requirements at 
Sec.  482.21. We also took into account the comments on the REH RFI and 
input from other interested parties who requested that CMS consider the 
clinical and administrative limitations that rural providers experience 
and, where appropriate, we have proposed requirements that minimize 
burden while maintaining the ability of the REH to proactively maximize 
quality improvement activities and programs.
    The proposed QAPI program contained the following five parts: (a) 
Program and scope; (b) Program data collection and analysis; (c) 
Program activities; (d) Executive responsibilities; and (e) Unified and 
integrated QAPI program for an REH in a multi-hospital system.
    Similar to the program scope standard for hospitals at Sec.  
482.21(a)(1) and (2), at Sec.  485.536(a)(1), we proposed to require 
the REH to have an ongoing QAPI program that reflects improvement in 
quality indicators related to health outcomes and reductions in medical 
errors. In proposed paragraph Sec.  485.536(a)(2) we would require REHs 
to measure, analyze, and track these quality indicators. At Sec.  
485.536(b), we proposed to mirror the program data collection and 
analysis standard for CAHs at Sec.  485.641(e) and require that the 
REH's QAPI program incorporate quality indicator data including patient 
care data, quality measures data, and other relevant data in order to 
attain quality improvement.
    Similar to the program activities standard for hospitals at Sec.  
[thinsp]482.21(c), at Sec.  [thinsp]485.536(c)(1), we proposed to 
require the REH to set priorities for its performance improvement 
activities focused on high-risk, high-volume, or problem-prone areas. 
We also proposed to require the REH to consider the incidence, 
prevalence, and severity of problems in those identified areas and that 
the set priority areas affect health outcomes, patient safety, and 
quality of care. At Sec.  485.536(c)(2) and (3), we proposed to require 
the REH's performance improvement activities to track medical errors 
and adverse events, analyze their causes, and implement preventive 
actions. We would expect the REH to conduct analyses at regular 
intervals to track performance and ensure that improvements were 
sustained.
    We proposed at Sec.  485.536(d), similar to the standard for 
executive responsibilities for hospitals at Sec.  482.21(e), that the 
responsibilities for the REH's governing body (or organized group or 
individual who assumes full legal authority and responsibility for 
operations of the REH), medical staff, and administrative officials 
include ensuring that the QAPI program is implemented and maintained, 
properly evaluated, and appropriately resourced.
    Lastly, consistent with the standard included at Sec.  482.21(f) in 
the hospital CoPs for QAPI programs, we proposed at Sec.  485.536(e) to 
allow REHs that are part of a multi-facility system consisting of 
multiple separately certified hospitals, CAHs, and/or REHs to elect to 
have a unified and integrated QAPI program if in accordance with all 
applicable state and local laws. Specifically, we proposed to specify 
that the system's governing body would be responsible and accountable 
for ensuring that each of its separately certified REHs met the 
proposed QAPI program requirements. We expect this policy would be 
beneficial to REHs that may lack time, resources or staff to implement 
an REH-specific QAPI program. The REH would be able to benefit from the 
resources and expertise of a multi-hospital system in implementing 
their QAPI program, as well as potentially reduce the time and labor 
investments required to enact and maintain the program.
    We were interested in input from the public regarding possible 
unintended consequences that could occur as a result of allowing REHs 
to participate in a unified and integrated QAPI program. We were 
interested in feedback regarding how the integrated health system's 
governing body would ensure that they consider the REH's unique 
circumstances and any significant differences in patient populations 
and services offered at the REH. We also sought comments regarding how 
the integrated health system's governing body would ensure that an REH 
participating in a unified and integrated QAPI program provided the 
appropriate level of care to patients being treated in the REH, 
including being appropriately transferred to another facility when 
necessary.
    Comment: Commenters were generally supportive of the proposals for 
QAPI programs for REHs. Some commenters specifically noted their 
support of the proposal to allow REHs that are part of a multi-facility 
system to elect to have a unified and integrated QAPI program stating 
that it could help relive administrative burden for REHs. Other 
commenters noted that REHs may not have the resources to gather and 
analyze data to inform a QAPI program.

[[Page 72201]]

    Response: We thank the commenters for their feedback. With regard 
to providers lacking the resources to implement a QAPI program, as we 
stated in the proposed rule, the proposed requirements for REH QAPI 
programs were developed with the intent of being consistent with the 
CAH QAPI requirements at Sec.  [thinsp]485.641. Many hospitals who may 
convert to an REH currently adhere to these standards. Therefore, we 
believe our finalized QAPI requirements will not overburden the REH 
staff.
    Comment: We received two comments regarding the proposed standard 
at Sec.  485.536(d) for Executive Responsibilities. These commenters 
noted that this standard mirrored the QAPI standard for Executive 
Responsibilities at Sec.  482.21(e) for hospitals and requested that we 
instead mirror the CAH standard for Governance and Leadership at Sec.  
[thinsp]485.641(c) for REHs.
    Response: As stated in the proposed rule, when developing the 
proposed QAPI requirements for REHs we reviewed both the CAH QAPI 
requirements at Sec.  [thinsp]485.641 and the hospital QAPI 
requirements at Sec.  [thinsp]482.21. We chose not to mirror the CAH 
standard for Governance and Leadership at Sec.  [thinsp]485.641(c) for 
REHs because this standard references a requirement that the CAH's 
governing body be ultimately responsible for addressing outcome 
indicators related to readmissions, which is not relevant for REHs 
because they do not provide inpatient services. Therefore, we instead 
aligned this requirement with the hospital QAPI regulations at Sec.  
482.21 that require the governing body (or organized group or 
individual who assumes full legal authority and responsibility for 
operations of the REH), medical staff, and administrative officials 
include to ensure that the QAPI program is implemented and maintained, 
properly evaluated, and appropriately resourced. We believed this 
standard was reasonable for REHs as well and fairly similar to the CAH 
requirement at Sec.  485.641(c).
    Comment: As discussed in the Staffing and Staff Responsibilities 
section, some commenters noted concerns regarding the staffing of an 
REH. Some commenters believed that an EMT or a nurse would not provide 
sufficient staffing to meet the requirement that an REH be staffed 24 
hours a day, 7 days a week. These commenters felt that that this role 
should be filled by a physician, nurse practitioner, clinical nurse 
specialist, or physician assistant with training or experience in 
emergency care. Other commenters stated that if the REH was not 
sufficiently staffed, it could impact the ability to respond to an 
obstetrical emergency.
    Response: As noted at Sec.  485.528, we are requiring that the 
individual(s) who fulfills the requirement that the REH must be staffed 
at all times must be an individual(s) who is competent in the skills 
needed to address emergency medical care. This individual(s) must be 
able to receive patients and activate the appropriate medical resources 
to meet the care needed by the patient. We believe that incorporating 
staffing into the REH's QAPI program will further address commenters 
concerns related to the REH staff and staff responsibilities. 
Therefore, we are revising the standard at Sec.  485.536(a)(2) to 
specifically require the REH to measure, analyze, and track staffing as 
a quality indicator to assesses processes of care, REH service and 
operations.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.536(a)(2) with a modification to require the REH 
to specifically measure, analyze, and track staffing as a quality 
indicator.
(19) Condition of Participation: Agreements (Sec.  485.538)
    Section 1861(kkk)(2)(C) of the Act, as added by the CAA, requires 
an REH to have in effect a transfer agreement with a level I or level 
II trauma center. In accordance with section 1861(kkk)(2)(C) of the 
Act, at Sec.  485.538 we proposed to require that REHs have in effect 
an agreement with at least one Medicare-certified hospital that is a 
level I or level II trauma center for the referral and transfer of 
patients requiring emergency medical care beyond the capabilities of 
the REH. We would require that the level I or level II trauma center 
meets certain licensure requirements including being licensed as a 
hospital in a state that provides for the licensing of hospitals under 
state or applicable local law or approved by the agency of such state 
or locality responsible for licensing hospitals, as meeting standards 
established for licensing established by the agency of the state. It is 
also acceptable for the level I or II trauma center to be located in a 
state other than the state where the REH is located. In addition, we 
proposed to require that the level I or level II trauma center must 
also be licensed or designated by the state or local government 
authority as level I or level II trauma center or is verified by the 
American College of Surgeons as a level I or level II trauma center.
    We received several comments to the REH RFI regarding transfer 
agreements between REHs and hospitals that are not designated as a 
level I or II trauma center. Specifically, commenters stated that due 
to distance, or the possibility that level I or level II trauma centers 
may not have available beds, many rural CAHs currently transfer 
patients to level III or level IV trauma centers based on the patient's 
specific needs. Commenters requested that CMS allow these facilities to 
retain these agreements, should they convert to REHs. We would expect 
REHs to comply with the CoP detailed at Sec.  485.538 and to have a 
transfer agreement in place with a level I or II trauma center. 
However, we do not believe that the statute precludes an REH from also 
having a transfer agreement with a hospital that is not designated as a 
level I or II trauma center. An REH may have pre-existing relationships 
with hospitals that are not designated as level I or level II trauma 
centers. In these instances, the proposed requirement would not 
preclude them from maintaining those relationships and leveraging 
resources and capacity that may be available to deliver care that is 
beyond the scope of care delivered at the REH.
    Comment: Many commenters were supportive of the proposed 
requirement for an REH to have in effect a transfer agreement with at 
least one Medicare-certified hospital that is a level I or level II 
trauma center. Commenters noted that agreements with level I or level 
II trauma centers are vital to ensure that patients requiring serious 
medical care are able to receive it. Some commenters suggested that 
REHs that are located more than 50 miles distance from a level I or II 
trauma center be allowed to meet this requirement by maintaining 
agreements with closer facilities that may not be designated as a level 
I or level II trauma center.
    Response: We previously noted that REHs are required by section 
1861(kkk)(2)(C) of the Act to have in effect a transfer agreement with 
a level I or level II trauma center. We stated in the proposed rule 
that we did not believe that the statute precluded an REH from also 
having a transfer agreement with a hospital that is not designated as a 
level I or II trauma center. However, we do not have the authority to 
exempt REHs from this requirement or allow the requirement to be met by 
only maintaining arrangements with other types of facilities that are 
not designated as level I or level II trauma centers. Further, we 
believe that even if an REH rarely transfers a patient to a level I or 
level II trauma center, having an agreement in place will save critical 
time and

[[Page 72202]]

resources if the transfer of a patient is medically necessary.
    Comment: One commenter recommended that CMS require REHs to include 
the capacity for telemedicine capabilities with a physician with, at 
the minimum, experience in the practice of emergency medicine in the 
transfer agreement with a level I or level II trauma center. Another 
commenter recommended that REHs be required to have transfer agreements 
with a trauma center that has pediatric trauma capability. Other 
commenters recommended that CMS require REHs to enter into transfer 
agreements with the closest inpatient psychiatric facility in order to 
transfer patients who require behavioral health services.
    Response: We believe that REHs should have the flexibility to 
determine the content of the agreements with a level I or level II 
trauma center based on what will best meet the needs of the patients in 
their communities as well as the providers involved in the agreement. 
With regard to transfer agreements with facilities that offer 
specialties such as pediatric trauma care and inpatient psychiatric 
services, we also believe that the REH is in the best position to 
determine the necessity for these agreements without establishing a CoP 
to require such.
    After consideration of the public comments we received, we are 
finalizing Sec.  [thinsp]485.538 as proposed.
(20) Condition of Participation: Medical Records (Sec.  485.540)
    The maintenance of a medical records system is a longstanding 
requirement in both the hospital and CAH CoPs. In the development of 
proposed requirements for medical records for REHs, we reviewed the 
CoPs for medical records for CAHs established at Sec.  [thinsp]485.638, 
including the requirements finalized in the May 2020 final rule, 
``Medicare and Medicaid Programs; Patient Protection and Affordable 
Care Act; Interoperability and Patient Access'' (85 FR 25510 through 
25585), focused on electronic patient event notifications of a 
patient's admission, discharge, and/or transfer to another health care 
facility or to another community provider. We also considered the 
comments from the REH RFI that encouraged CMS to closely align the CoPs 
for REHs with currently established requirements for CAHs. After 
reviewing the CoPs for medical records for CAHs at Sec.  485.638, we 
believed that the requirements established for medical records for CAHs 
are also appropriate for REHs. We also would expect that many 
facilities that may elect to convert to an REH would presently have 
these systems in place, which may minimize administrative burden. 
Therefore, at Sec.  485.540(a), we proposed to require that the REH 
maintain a medical records system in accordance with written policies 
and procedures; that such records be legible, complete, accurately 
documented, readily accessible, and systematically organized and that a 
designated member of the professional staff be responsible for 
maintaining the records. We also proposed to require that for each 
patient receiving health care services, the REH would be required to 
maintain a record that would include, as applicable, identification and 
social data, evidence of properly executed informed consent forms, 
pertinent medical history, assessment of the health status and health 
care needs of the patient, and a brief summary of the episode, 
disposition, and instructions to the patient. We proposed that the 
record requirements include reports of physical examinations; 
diagnostic and laboratory test results, including clinical laboratory 
services; consultative findings and all orders of doctors of medicine 
or osteopathy or other practitioners; reports of treatments and 
medications; nursing notes and documentation of complications; and 
other pertinent information necessary to monitor the patient's 
progress, such as temperature graphics or progress notes describing the 
patient's response to treatment. Lastly, we proposed that the record 
include dated signatures of the doctor of medicine or osteopathy or 
other health care professional.
    At Sec.  485.540(b) and (c), we proposed to require the REH to 
maintain the confidentiality of patients' medical record information 
and to ensure that such records would be retained for at least 5 years 
from date of last entry, and longer if required by state statute, or if 
the records may be needed in any pending proceeding.
    Lastly, at Sec.  485.540(d), we proposed a standard for electronic 
notifications if the REH utilizes an electronic medical records system 
or other electronic administrative system that conforms with the 
content exchange standard at 45 CFR 170.205(d)(2). This requirement was 
intended to limit the applicability of this CoP to those REHs which 
currently possess an EHR or other electronic administrative system with 
the technical capacity to generate information for electronic patient 
event notifications. As discussed in the CMS Interoperability and 
Patient Access final rule (85 FR 25585), electronic patient event 
notifications can be an effective tool for improving care coordination 
across settings, especially when patients are discharged. We proposed 
to require the REH to demonstrate that the system's notification 
capacity was fully operational and sends notifications with at least 
specified patient information, as appropriate, and facilitates the 
exchange of health information when the patient is registered, 
discharged, or transferred from the REH's emergency department. 
Finally, we proposed to require that the REH make a reasonable effort 
to ensure that the system would send notifications to specific 
recipients, including the patient's applicable post-acute care and 
primary care services providers.
    Comment: Commenters supported the proposed requirement for the 
maintenance of medical records. One commenter asked whether a physician 
or other health care professional would be required to sign the medical 
record for patients receiving observation services.
    Response: We appreciate the commenters' input. At Sec.  
485.540(a)(4)(iv), the REH is required to maintain records that are 
dated and signed by the doctor of medicine or osteopathy or other 
health care professional for each patient receiving health care 
services, including observation services.
    After consideration of the public comments we received, we are 
finalizing Sec.  485.540 as proposed.
(21) Condition of Participation: Emergency Preparedness (Sec.  485.542)
    Over the past several years, the U.S. has been challenged by 
several natural and man-made disasters. As a result of the September 
11, 2001 terrorist attacks, the subsequent anthrax attacks, the 
catastrophic hurricanes in the Gulf Coast states in 2005, flooding in 
the Midwestern states in 2008, tornadoes and floods in the spring of 
2011, the 2009 H1N1 influenza pandemic, and Hurricane Sandy in 2012 and 
most recently, the COVID-19 pandemic, readiness for public health 
emergencies has been put on the national agenda. On September 16, 2016, 
we published a final rule, ``Medicare and Medicaid Programs; Emergency 
Preparedness Requirements for Medicare and Medicaid Participating 
Providers and Suppliers'' (81 FR 63860), to establish emergency 
preparedness requirements for Medicare and Medicaid participating 
providers and suppliers to plan adequately for both natural and man-
made disasters, and coordinate with Federal, state, tribal, regional, 
and local emergency preparedness systems. Disasters can disrupt the 
health care environment and change the demand for health care services. 
This makes it essential that health care providers and

[[Page 72203]]

suppliers ensure that emergency management is integrated into their 
daily functions and values.
    Thus, we proposed emergency preparedness requirements to establish 
a comprehensive, consistent, flexible, and dynamic regulatory approach 
to emergency preparedness for REHs that would align with the existing 
emergency preparedness standards for other Medicare and Medicaid 
participating providers and suppliers. These proposed requirements 
mirrored the existing CAH emergency preparedness requirements. The 
emergency preparedness requirements for all Medicare-participating 
providers and suppliers are generally consistent, with some differences 
based on the provider type (such as inpatient versus outpatient).
    Consistent with the standards for most other Medicare and Medicaid 
participating providers and suppliers, we proposed to require REHs to 
comply with all applicable Federal, state, and local emergency 
preparedness requirements. In addition, we proposed to require that the 
REH establish and maintain an emergency preparedness program that 
addressed four core elements that we believe are central to an 
effective emergency preparedness system. The four elements are: (1) 
risk assessment and planning; (2) policies and procedures; (3) 
communication; and (4) training and testing.
    At Sec.  485.542(a), we proposed to require that REHs develop and 
maintain an emergency preparedness plan that would have to be reviewed 
and updated at least every 2 years. Specifically, we proposed to 
require that the REHs emergency plan--(1) Be based on and include a 
documented, facility-based and community-based risk assessment, 
utilizing an all-hazards approach; (2) include strategies for 
addressing emergency events identified by the risk assessment; (3) 
address the patient population, including, but not limited to, the type 
of services the REH has the ability to provide in an emergency; and 
continuity of operations, including delegations of authority and 
succession plans; and (4) include a process for cooperation and 
collaboration with local, tribal, regional, state, and Federal 
emergency preparedness officials' efforts to maintain an integrated 
response during a disaster or emergency situation.
    At Sec.  485.542(b), we proposed to require REHs to develop and 
implement policies and procedures, based on the emergency plan, risk 
assessment, and communication plan, which would be reviewed and updated 
at least every 2 years. Specifically, we proposed to require that the 
policies and procedures would have to address the following:
     Provision of subsistence needs for staff and patients, 
whether they evacuate or shelter in place, including, but not limited 
to food, water, medical and pharmaceutical supplies, other sources of 
energy to maintain temperatures, emergency lighting, fire detection and 
sewage and waste disposal;
     A system to track the location of on-duty staff and 
sheltered patients in the REH's care during an emergency; if staff were 
being relocated the REH would have to document the specific name and 
location of the receiving facility or other location;
     Safe evacuation from the REH, to include consideration of 
care and treatment needs of the evacuees, staff responsibilities and 
transportation and identification of the evacuation location(s);
     A means to shelter in place for any patients, staff and 
volunteers that remain at the REH;
     A system of medical documentation that would preserve 
patient information, protects confidentiality of all patient 
information and secures and maintains the availability of the records;
     The use of volunteers in an emergency and other staffing 
strategies, including the process and role for integration of state and 
federally designated health care professionals to address surge needs 
during an emergency; and
     The role of the REH under a waiver declared by the 
Secretary, in accordance with section 1135 of the Act, in the provision 
of care and treatment at an alternate care site identified by emergency 
management officials.
    We believe that small, rural REHs would be able to develop an 
appropriate emergency preparedness plan and develop policies and 
procedures in accordance with our proposed requirements with the 
assistance of resources in their state and local community guidance.
    At Sec.  485.542(c), we proposed to require REHs to develop and 
maintain an emergency preparedness communication plan that would comply 
with both Federal and state law; the plan would have to be reviewed and 
updated at least every 2 years. The communication plan would be 
required to include the following:
     Names and contact information for staff, entities 
providing services under agreement, patients' physicians and 
volunteers;
     Contact information for Federal, state, tribal, regional, 
and local emergency preparedness staff and other sources of assistance;
     Primary and alternate means for communicating with the 
REH's staff and Federal, state, tribal, regional, and local emergency 
management agencies;
     A method for sharing information and medical documentation 
for patients under the REH's care, as necessary, with other health care 
providers to maintain the continuity of care;
     A means, in the event of an evacuation, to release patient 
information;
     A means of providing information about the general 
condition and location of patients under the facility's care; and
     A means of providing information about the REH's needs, 
and its ability to provide assistance, to the authority having 
jurisdiction, the Incident Command Center, or designee.
    We would expect patient care to be well-coordinated within the REH, 
across healthcare providers, and with state and local public health 
departments and emergency management agencies and systems to protect 
patient health and safety in the event of a disaster. The following 
link is to the Federal Emergency Management Agency's (FEMA's) 
comprehensive preparedness guide to develop and maintain emergency 
operations plans: https://www.fema.gov/sites/default/files/2020-05/CPG_101_V2_30NOV2010_FINAL_508.pdf. During an emergency, it would be 
critical for REHs to have a system to contact appropriate staff, 
patients' treating physicians, and other necessary persons in a timely 
manner to ensure continuation of patient care functions throughout the 
facilities and to ensure that these functions were carried out in a 
safe and effective manner.
    At Sec.  485.542(d), we proposed to require the REH to develop and 
maintain an emergency preparedness training and testing program based 
on the emergency plan, policies and procedures and communication plan, 
and reviewed and updated at least every 2 years. We proposed to require 
at Sec.  485.542(d)(1) that the training program include initial 
training in the emergency preparedness policies and procedures for new 
and existing staff, individuals providing on-site services under 
arrangement, and volunteers, consistent with their expected roles. We 
also proposed to require the facility to provide emergency preparedness 
training at least every 2 years, maintain documentation of all 
emergency preparedness training, demonstrate staff knowledge of 
emergency procedures, and if the emergency preparedness policies and 
procedures were significantly updated, conduct training

[[Page 72204]]

on the updated policies and procedures. The Homeland Security Exercise 
and Evaluation Program (HSEEP), developed by FEMA, includes a section 
on the establishment of a Training and Exercise Planning Workshop 
(TEPW). The TEPW section provides guidance to organizations in 
conducting an annual TEPW and developing a Multi-year Training and 
Exercise Plan (TEP) in line with the HSEEP (https://www.fema.gov/sites/default/files/2020-04/Homeland-Security-Exercise-and-Evaluation-Program-Doctrine-2020-Revision-2-2-25.pdf).
    We proposed at Sec.  485.542(d)(2) to require that the REH conduct 
exercises to test the emergency plan at least annually. Specifically, 
we proposed to require that the REH conduct two testing exercises, a 
full-scale or functional exercise and an additional exercise of its 
choice, every 2 years. First, the REH would be required to participate 
in a full-scale community-based exercise. If a community-based exercise 
was not accessible, we proposed that the REH would have to conduct a 
facility-based functional exercise; or, if the REH experienced an 
actual natural or man-made emergency that required activation of the 
emergency plan, the REH would be exempt from engaging in its next 
required community-based or individual, facility-based functional 
exercise following the onset of the emergency event. Second, the REH 
would have to conduct an additional exercise, opposite the year the 
full-scale or functional exercise was conducted, that could include, 
but would not be limited to, a second full-scale community-based 
exercise or an individual, facility-based functional exercise, a mock 
disaster drill, or a tabletop exercise or workshop led by a 
facilitator, including a group discussion using a narrated, clinically-
relevant emergency scenario, and a set of problem statements, directed 
messages, or prepared questions designed to challenge an emergency 
plan. Lastly, we proposed to require that the REH analyze its response 
to and maintain documentation of all drills, tabletop exercises, and 
emergency events and revise the REH's emergency plan, as needed.
    We proposed at Sec.  485.642(e) that REHs be required to store 
emergency fuel and associated equipment and systems as required by the 
2000 edition of the Life Safety Code (LSC) of the NFPA[supreg]. In 
addition to the emergency power system inspection and testing 
requirements found in NFPA[supreg] 99 and NFPA[supreg] 110 and 
NFPA[supreg] 101, we proposed that REHs test their emergency and stand-
by-power systems for a minimum of 4 continuous hours every 12 months at 
100 percent of the power load the REH anticipates it will require 
during an emergency. The NFPA 101[supreg] 2012 edition of the LSC 
(including the technical interim amendments (TIAs)) provides minimum 
requirements, with due regard to function, for the design, operation 
and maintenance of buildings and structures for safety to life from 
fire. Its provisions also aid life safety in similar emergencies. The 
NFPA 99[supreg] 2012 edition of the Health Care Facilities Code 
(including the TIAs) provides minimum requirements for health care 
facilities for the installation, inspection, testing, maintenance, 
performance, and safe practices for facilities, material, equipment, 
and appliances, including other hazards associated with the primary 
hazards. The NFPA 110 covers performance requirements for emergency and 
standby power systems providing an alternate source of electrical power 
in buildings and facilities in the event that the normal electrical 
power source fails. Systems include power sources, transfer equipment, 
controls, supervisory equipment, and accessory equipment needed to 
supply electrical power to the selected circuits.
    Finally, at Sec.  485.542(f), we proposed to specify that if an REH 
was part of a healthcare system consisting of multiple separately 
certified healthcare facilities that elected to have a unified and 
integrated emergency preparedness program, the REH could choose to 
participate in the healthcare system's coordinated emergency 
preparedness program. If the REH elected this, we proposed that the 
unified and integrated emergency preparedness program would have to 
demonstrate that each separately certified facility within the system 
actively participated in the development of the unified and integrated 
emergency preparedness program and be developed and maintained in a 
manner that took into account each separately certified facility's 
unique circumstances, patient populations, and services offered.
    In addition, we proposed that each separately certified REH in the 
system would have to be capable of actively using the unified and 
integrated emergency preparedness program and was in compliance with 
the program's requirements. We also proposed that the unified and 
integrated emergency preparedness program would have to include a 
unified and integrated emergency plan that is based on a documented 
community-based risk assessment, utilizing an all-hazards approach and 
a documented individual facility-based risk assessment for each 
separately certified REH within the health system, utilizing an all-
hazards approach. Lastly, we proposed that the unified and integrated 
emergency preparedness program would have to have integrated policies 
and procedures, a coordinated communication plan, and training and 
testing programs.
    Comment: We received few comments regarding the emergency 
preparedness requirements. However, the few that we received were 
supportive and suggested that we continue to review the EP requirements 
based on experience from the most recent pandemic.
    Response: CMS appreciates the support for the EP requirements that 
we set forth for REHs. CMS has held several listening sessions with 
interested parties on the existing EP requirements and will use this 
information to inform any future updates, as needed.
    After consideration of the public comments we received, we are 
finalizing these provisions as proposed.
(22) Condition of Participation: Physical Environment (Sec.  485.544)
    The LSC is a compilation of fire safety requirements for new and 
existing buildings, and is updated and published every 3 years by the 
National Fire Protection Association (NFPA), a private, nonprofit 
organization dedicated to reducing loss of life due to fire. The 
Medicare and Medicaid regulations have historically incorporated these 
requirements by reference, along with Secretarial waiver authority. The 
statutory basis for incorporating NFPA's LSC into the regulations we 
apply to Medicare and, as applicable, Medicaid providers and suppliers 
is the Secretary's facility-specific authority to stipulate health and 
safety regulations for each type of Medicare and (if applicable) 
Medicaid-participating facility. For REHs, that statutory authority is 
set out at new section 1861(kkk)(2)(D)(v) of the Act. The following 
provisions we have proposed are similar to the Hospital, CAH, and ASC 
LSC and Health Care Facilities Code requirements.
    The NFPA 101[supreg]2012 edition of the LSC (including the 
technical interim amendments (TIAs)) provides minimum requirements, 
with due regard to function, for the design, operation and maintenance 
of buildings and structures for safety to life from fire. Its 
provisions also aid life safety in similar emergencies. The NFPA 
99[supreg] 2012 edition of the Health Care Facilities Code (including 
the TIAs) provides minimum requirements for health care facilities for 
the installation, inspection, testing, maintenance, performance, and 
safe practices for facilities, material,

[[Page 72205]]

equipment, and appliances, including other hazards associated with the 
primary hazards. The NFPA 110 2010 edition covers performance 
requirements for emergency and standby power systems providing an 
alternate source of electrical power in buildings and facilities in the 
event that the normal electrical power source fails. Systems include 
power sources, transfer equipment, controls, supervisory equipment, and 
accessory equipment needed to supply electrical power to the selected 
circuits.
    We review each new edition of the NFPA 101 and NFPA 99, which are 
issued every 3 years, to see if there are any significant provisions 
that we need to adopt. We will continue to review these documents every 
3 years to see if there are relevant or updated provisions that we need 
to adopt. The 2012 edition of the LSC includes provisions that we 
believe are vital to the health and safety of all patients and staff. 
Our intention is to ensure that patients and staff continue to 
experience the highest degree of fire safety possible. All Medicare and 
Medicaid participating providers and suppliers are currently subject to 
the requirements of the 2012 edition of the LSC and the 2012 edition of 
the Health Care Facilities Code as adopted by CMS (with some minor 
expectations which are set out in the various facilities' ``physical 
environment'' regulations).
    In order to ensure the minimum level of protection afforded by NFPA 
99 is applicable to all patient and resident care areas within a health 
care facility, we proposed to adopt the 2012 edition of NFPA 99, with 
the exception of chapters 7--Information Technology and Communications 
Systems for Health Care Facilities; 8--Plumbing; 12--Emergency 
Management; and 13--Security Management.
    At Sec.  485.544(a), we proposed that the REH be constructed, 
arranged, and maintained to ensure the safety of the patient and to 
provide facilities for diagnosis and treatment and for special hospital 
services appropriate to the needs of the community. Specifically, we 
proposed that the condition of the physical plant and the overall REH 
environment would have to be developed and maintained in such a manner 
that the safety and well-being of patients would be assured. This would 
include emergency power and lighting in at least all areas serviced by 
the emergency supply source, including but not limited to, the 
operating, recovery, and emergency rooms, and stairwells. In all other 
areas not serviced by the emergency supply source the REH would be 
required to have battery lamps and flashlights available. In addition, 
we proposed to require the REH to have facilities for emergency gas and 
water supply and a safe and sanitary environment, that is properly 
constructed, equipped and maintained to protect the health and safety 
of all patients.
    At Sec.  485.544(b), we proposed that the REH be required to 
maintain adequate facilities for its services that includes diagnostic 
and therapeutic facilities that are located in a manner that ensures 
the safety of patients. We also would require the REH to maintain 
facilities, supplies, and equipment in a manner that ensures an 
acceptable level of safety and quality. We proposed further that the 
facility be designed and maintained to reflect the scope and complexity 
of the services it offers in accordance with accepted standards of 
practice and that there must be proper ventilation, light, and 
temperature controls in pharmaceutical, food preparation, and other 
appropriate areas.
    At Sec.  485.544(c), we proposed that REHs meet the provisions 
applicable to Ambulatory Health Care Occupancies in the 2012 edition of 
the LSC, regardless of the number of patients the facility serves. We 
believe the protection provided in the Ambulatory Health Care 
Occupancies chapter is necessary to protect the health and safety of 
patients who are incapable of caring for themselves at any point in 
time. We proposed at Sec.  485.544(c)(2) to implement requirements 
related to the Secretary's waiver authority for periods deemed 
appropriate, which would result in unreasonable hardship, but only if 
the waiver will not adversely affect the health and safety of patients. 
We proposed at Sec.  485.544(c)(3) that the provisions of the LSC would 
not apply in a state if CMS finds that a fire and safety code imposed 
by state law adequately protected patients. We also proposed at Sec.  
485.544(c)(4) requirements related to protection against inappropriate 
access for alcohol-based hand rub dispensers. At Sec.  485.544(c)(5), 
we proposed to require that a REH with a sprinkler system that was out 
of service for more than 10 hours in a 24-hour period would be required 
to evacuate the building or portion of the building affected by the 
system outage, or establish a fire watch until the system was back in 
service, notwithstanding the lower standard of the 2012 LSC.
    Lastly, at Sec.  485.544(d) we proposed to require REHs to comply 
with the 2012 edition of the NFPA 99. We proposed that chapters 7, 8, 
12, and 13 would not apply to REHs. We also proposed to allow for 
waivers of these provisions under the same conditions and procedures 
that we currently use for waivers of applicable provisions of the LSC.
    Comment: We received minimal comments regarding the NFPA 101 and 
NFPA 99. The comments that we did receive were supportive. We did 
receive a few comments asking if we anticipated adopting a newer 
version of the 101 and 99 NFPA codes, since CMS currently requirements 
the use of the 2012 editions. Some commenters suggested that we follow 
the same ``Physical Environment'' requirements as Hospitals or CAHs, as 
they are similar providers as REHs.
    Response: As noted previously, we review any new LSC codes every 3 
years to determine if there are substantive changes that would warrant 
the adoption of these updates through rulemaking. There have not been 
significant changes to adopt a newer version since the 2012 edition. We 
plan to review the 2024 edition within the next year and determine 
whether to adopt the new 2024 NFPA 101 and 99 as a part of future 
rulemaking. We appreciate the comments about using hospital and CAH 
requirements for REHs; however, REHs are not inpatient facilities; 
therefore, ASC requirements are more appropriate for REHs.
    After consideration of the public comments we received, we are 
finalizing these provisions as proposed.
(23) Condition of Participation: Skilled Nursing Facility Distinct Part 
Unit (Sec.  485.546)
    Section 1861(kkk)(2)(D)(vi) of the Act allows REHs to establish a 
unit that is a distinct part licensed as a SNF to furnish post-REH or 
post-hospital (in the event the services were provided at a hospital or 
a CAH) extended care services (or SNF services). A distinct part SNF is 
an area that is separately licensed and certified to provide SNF 
services at all times. A distinct part SNF must be physically 
distinguishable from the REH, must be fiscally separate for cost 
reporting purposes, and the beds in the certified distinct part SNF 
unit of an REH must meet the requirements applicable to distinct part 
SNFs at 42 CFR part 483, subpart B. Medicare payment for SNF services 
furnished in these distinct part SNFs of an REH would be under the SNF 
prospective payment system as required under section 1834(x)(4) of the 
Act. We note that a distinct part SNF of an REH is not subject to the 
REH's length of stay limits of less than an annual per patient average 
of 24 hours.
    We highlight that a distinct part SNF unit is not the same as a CAH 
or

[[Page 72206]]

hospital utilizing swing-beds. CAHs and hospitals may provide swing-bed 
services, allowing them to use their beds for acute inpatient care or 
for post-hospital or CAH SNF care. These facilities must be certified 
by CMS to provide swing-bed services. CAHs or hospitals utilizing 
swing-beds are not required to have their swing-beds in a special unit 
or area within the facility.
    To implement that statutory provision allowing REHs to establish 
distinct part SNFs, we proposed at Sec.  [thinsp]485.546 to require 
REHs choosing to establish such a distinct part unit to meet the 
requirements for long-term care facilities at 42 CFR part 483, subpart 
B.
    Comment: Commenters were supportive of this proposal. Some 
commenters requested clarification regarding how Medicare beneficiaries 
can qualify for services in a REH's distinct part SNF unit given that a 
3-day prior inpatient care stay is required for beneficiaries to 
receive Medicare SNF services and an REH visit does not constitute an 
acute inpatient stay.
    Response: In order to receive services in an REH's distinct part 
SNF unit, a beneficiary must have a 3-day prior inpatient stay at a 
provider such as an acute care hospital or CAH. Following the 3-day 
inpatient stay, the patient can be transferred to the REH's distinct 
part SNF unit for the provision of SNF services.
    After consideration of the public comments we received, we are 
finalizing Sec.  [thinsp]485.546 as proposed. We are adding clarifying 
language to the regulatory requirement to indicate that the distinct 
part SNF must be separately licensed and certified, in addition to 
complying with the requirements of participation for long-term care 
facilities specified in part 483, subpart B of this subchapter. This is 
not an additional requirement and was presented in the discussion for 
this requirement in our proposed rule. The addition of this requirement 
in the CoP is for clarification only.
b. Changes for Critical Access Hospital Conditions of Participation 
(Part 485, Subpart F)
(1) Condition of Participation: Status and Location (Sec.  485.610(c))
(a) Adding the Definition of ``Primary Roads''
    Generally, a CAH must meet certain criteria for designation, as set 
out in section 1820(c)(2)(B) of the Act. These criteria specify certain 
``distance requirements'' relative to other hospitals or CAHs, and 
specifically require that a CAH be (1) ``located more than a 35-mile 
drive (or, in the case of mountainous terrain or in areas with only 
secondary roads available, a 15-mile drive) from a hospital'' or (2) 
``certified before January 1, 2006, by the State as being a necessary 
provider of health care services to residents in the area''. The 
current regulatory requirement at Sec.  485.610(c) sets forth the 
distance requirements for CAHs relative to other CAHs and hospitals, 
and specific definitions as related to the distance requirements are 
found in the SOM, Chapter 2, Section 2256A.
    We proposed to incorporate the definition of a ``primary road'' in 
the CAH distance requirement regulations, both as part of the 35-mile 
drive requirement, and as applicable through the ``secondary roads'' 
definition for the 15-mile drive requirement. Specifically, we proposed 
to revise Sec.  485.610(c) to clarify that the location distance for a 
CAH is one for more than a 35-mile drive on primary roads (or, in the 
case of mountainous terrain or in areas with only secondary roads 
available, a 15-mile drive) from a hospital or another CAH. In 
addition, at Sec.  485.610(c)(2), we proposed to specify that primary 
road of travel for determining the driving distance of a CAH and its 
proximity to other providers as a numbered Federal highway, including 
interstates, intrastates, expressways or any other numbered Federal 
highway; or a numbered State highway with two or more lanes each way. 
We also solicited comments regarding the description of a numbered 
Federal highway in this proposed definition. Specifically, we requested 
feedback on whether the definition of ``primary roads'' should include 
numbered Federal highways with two or more lanes, similar to the 
description of numbered State highways, and exclude numbered Federal 
highways with only one lane in each direction.
    We stated that codifying the definition of ``primary roads'' in the 
regulations would provide clarity and consistency regarding the 
distance requirements.
    Furthermore, to support these regulatory changes we are planning to 
establish a centralized, data-driven review procedure that focuses on 
hospitals being certified in proximity to a CAH, rather than focusing 
specifically on road classifications. CMS will review all hospitals and 
CAHs within a 50-mile radius of each CAH during each review of 
eligibility, and then subsequently on a 3-year cycle. Following the 
initial review of distance and location, further investigations would 
focus primarily on expanded healthcare capacity and access to care 
within the 35-mile radius of the CAH being examined and less on the 
actual roadway designations used in making the calculations. Those CAHs 
with no new hospitals within 50 miles would be immediately recertified. 
Those CAHs with new hospitals within 50 miles will receive additional 
review based on the distance from the new hospital and the definitions 
for ``primary roads'' and ``mountainous terrain''. To facilitate this 
review, the CAH Distance Analysis Committee and the CMS Survey 
Operations Group (SOG) Locations will utilize the geocoding of 
hospitals to identify those CAHs that are located within 50 miles of 
another certified hospital. Those CAHs that do not meet the regulatory 
distance and location requirements at the time of review would be 
identified as no longer qualified and may lose their CAH status. We 
believe this change will help surveyors to make evidence-based and 
objective determinations of continued CAH eligibility. We expect the 
new distance review procedure, coupled with regulatory clarity on the 
proposed primary roads definition, will provide greater consistency in 
evaluating if CAHs meet the statutory 35 or 15-mile distance 
requirements from other acute care hospitals and CAHs as well greater 
adherence to statutory language by ensuring that CAHs operate under the 
CAH designation until, or unless, a hospital moves within 35 miles or 
15 miles of the existing CAH.
    Comment: Many commenters supported refining the current definition 
of ``primary roads'' and codifying the definition in the regulations. 
We received numerous comments stating that proposed definition of 
``primary roads'' should be revised to require numbered Federal 
highways to have two or more lanes each way, similar to the description 
of numbered State highways, and exclude numbered Federal highways with 
only one lane in each direction from the ``primary roads'' definition. 
These commenters stated that including one-lane numbered Federal 
highways as primary roads in the CAH distance requirements could 
prevent their facility from gaining or maintaining eligibility for the 
CAH designation. We received comments from small, rural hospitals that 
stated that defining one-lane numbered Federal highways as ``primary 
roads'' would impact their ability to pursue a CAH designation because 
including these roads in the distance calculations puts other hospitals 
or CAHs within the required 35-mile drive radius. We also received 
numerous comments from existing CAHs that were concerned that their

[[Page 72207]]

eligibility for CAH designation could be in jeopardy if numbered 
Federal highways with only one lane in each direction were included in 
the ``primary roads'' definition. Commenters also claimed that many 
one-lane numbered Federal highways are not well maintained, difficult 
to travel on, and more similar to one-lane state highways, which are 
not included in the ``primary roads'' definition. Some commenters also 
suggested that we include a definition of ``secondary roads'' in the 
regulations text.
    Response: We appreciate the feedback from interested parties 
regarding the definition of primary roads in the CAH distance 
requirements. After further review, we agree with the commenters that 
the proposed definition may have unintended consequences for hospitals 
interested in applying for CAH designation as well as existing CAHs 
that could prevent these providers from being eligible to operate as a 
CAH. Our goal for codifying the definition of primary roads in the 
regulations language at Sec.  485.610(c) was to provide greater 
flexibility, consistency and clarity to providers with regards to CAH 
designations. Therefore, we are finalizing the definition of ``primary 
roads'' at Sec.  485.610(c) to include numbered Federal highways with 
two or more lanes each way, similar to the description of numbered 
State highways, and exclude numbered Federal highways with only one 
lane in each direction.
    With regard to adding a ``secondary roads'' definition in the CAH 
distance requirements regulations, we do not believe that it is 
necessary to include a definition of ``secondary roads'' in the 
regulations text at this time. As stated, we remain committed to 
providing reducing burden for providers in meeting the distance 
criteria. Currently, we believe the language at Sec.  485.610(c) 
coupled with guidance in the SOM, Chapter 2, Section 2256A regarding 
the application of the 15-mile drive standard based on secondary roads 
adequately describes how we determine what constitutes a secondary 
road. Specifically, this language states that to be eligible for the 
lesser distance standard due to the secondary road criteria under Sec.  
485.610(c), the CAH would have to document that there is a drive of 
more than 15 miles between the CAH and any hospital or other CAH where 
there are no primary roads. We also plan to continue to allow a CAH to 
qualify for application of the ``secondary roads'' criterion if there 
is a combination of primary and secondary roads between it and any 
hospital or other CAH, so long as more than 15 of the total miles from 
the hospital or other CAH consists of areas in which only secondary 
roads are available. We will continue to monitor this issue to 
determine if further refinements to the description of secondary roads 
are necessary for future rulemaking.
    Comment: We received comments requesting clarification about the 
CAH eligibility review process. Commenters questioned the method that 
will be used to determine the mileage calculation. One commenter stated 
that CMS should use a 35-mile radius for the basis of the calculation.
    Response: In accordance with Sec.  485.610(c), the CAH review 
process will measure the driving distance between a CAH-main campus and 
any other CAH or hospital within a 35-mile distance, using definition 
of primary roads established in this rule, or a 15-mile distance using 
secondary roads or mountainous terrain. These regulatory requirements 
will also continue to be used for initial and recertification reviews 
for all CAHs.
    Comment: We received several comments requesting clarification 
regarding whether the establishment of an REH could prevent an existing 
or potential CAH from meeting the CAH distance requirements, given that 
a CAH must be located more than a 35-mile drive (or more than a 15-mile 
drive on in areas with only secondary roads available or in mountainous 
terrain) from a hospital or another CAH.
    Response: We would like to clarify that an existing or potential 
CAH may still be eligible for a CAH designation if there is an REH 
established within less than a 35-mile drive (or less than a 15-mile 
drive in areas with only secondary roads available or in mountainous 
terrain). We note that an REH cannot, by statute, provide inpatient 
services, therefore we believe that the services provided by an REH 
would not duplicate or overlap with those provided at a CAH and an REH 
would serve a distinct purpose in the community.
    Comment: Some commenters requested that CMS allow existing CAHs to 
be exempt from the proposed primary roads definition and instead 
``grandfather in'' the CAH designation of existing CAHs based on 
meeting the distance requirements with the current definition of 
primary roads. Other commenters stated that CAHs that are certified as 
``necessary providers'' should continue to be exempt from the CAH 
distance and location requirements.
    Response: As stated previously, by statute, the CAH distance 
requirements must continually be met in order for the hospital to 
maintain its status as a CAH. While we strive to allow CAHs flexibility 
in meeting these requirements, we do not believe it is within the 
statutory authority at section 1820(h)(3) of the Act to allow all 
existing CAHs, other than those certified as necessary providers, to 
have their CAH designation grandfathered. Therefore, existing CAHs will 
be subject to CAH distance requirements, including the primary roads 
definition, as finalized in this rule. CAHs that are certified as 
``necessary providers'' will continue to be exempt from the distance 
requirement relative to other CAHs and hospitals as noted at Sec.  
485.610(c). ``Necessary provider'' CAHs are still required to meet the 
rural location requirement at Sec.  485.610(b).
    Comment: We received several other comments related to the CAH 
distance and location requirements that were separate from the 
definition of primary roads proposal. We received a request to codify 
in the regulations text the guidance from the SOM Chapter 2, at 2256A 
that the proximity of IHS and Tribal hospitals or CAHs and non-IHS or 
Tribal hospitals or CAHs to each other is not considered when assessing 
CAH distance requirements and requests to allow exceptions for 
hospitals to qualify for CAH designation that do not meet the current 
or proposed CAH distance requirements.
    Response: We thank these commenters for their input, however, we 
did not propose any changes to these policies. Therefore, these 
comments are out of scope of this rule.
    After consideration of the public comments, we are finalizing the 
language at Sec.  485.610(c) as proposed. In addition, we are 
finalizing the language at Sec.  485.610(c)(2) with a modification, to 
specify a primary road of travel for determining the driving distance 
of a CAH and its proximity to other providers is a numbered Federal 
highway, including interstates, intrastates, expressways or any other 
numbered Federal highway with two or more lanes each way; or a numbered 
State highway with two or more lanes each way.
(2) Condition of Participation: Patient's Rights (Sec.  485.614)
    We proposed to establish a CoP for patient's rights for CAHs at 
Sec.  485.614 that would set forth the rights of all patients to 
receive care in a safe setting and provide protection for a patient's 
emotional health and safety as well as their physical safety. This 
would include proposed requirements for the CAH to inform patients of 
and exercise their rights; address privacy and safety;

[[Page 72208]]

adhere to the confidentiality of patient records; responsibilities for 
the use of restraint and seclusion; and adherence to patient visitation 
rights.
Notice of Rights
    At Sec.  485.614(a), we proposed that a CAH must inform each 
patient, or when appropriate, the patient's representative (as allowed 
under state law), of the patient's rights, in advance of furnishing or 
discontinuing patient care whenever possible. This includes a proposal 
to require the CAH to establish a process for the oversight and prompt 
resolution of patient grievances and for informing each patient whom to 
contact to file a grievance.
Exercise of Rights
    At Sec.  485.614(b), we proposed to specify those rights a patient 
has regarding their medical care, which includes the right to 
participate in the development and implementation of their plan of 
care, to make informed decisions regarding their care, to be fully 
informed about such care, and the right to request or refuse treatment, 
and finally the right to have a family member or representative of 
their choice and their own physician notified promptly of their 
admission to the hospital. We note that this right must not be 
construed as a mechanism to demand the provision of treatment or 
services deemed medically unnecessary or inappropriate. In addition, we 
proposed to specify that the patient also has the right to formulate 
advance directives and to have CAH staff and practitioners who provide 
care in the CAH comply with these directives.
Privacy, Safety, and Confidentiality of Patient Records
    At Sec.  485.614(c), we proposed to specify that the patient has 
the right to personal privacy, receive care in a safe setting, and be 
free from all forms of abuse or harassment. At Sec.  
[thinsp]485.614(d), we proposed to specify that patients have the right 
to the confidentiality of their medical records and the right to access 
their medical records. We proposed that the CAH must provide the 
patients with their records in a form and format requested by the 
requestor when requested and within a reasonable timeframe, as not to 
frustrate the legitimate efforts of individuals to gain access to their 
own medical records.
Use of Restraints and Seclusion
    At Sec.  485.614(e), we proposed patients' rights relating to the 
use of restraints and seclusion less burdensome than those for 
hospitals because given the level of services provided by CAHs and 
their patient volume, we expect the likelihood of their need to utilize 
restraints and seclusion to be relatively low.
    Specifically, we proposed to specify that all patients would have 
the right to be free from physical or mental abuse, and from corporal 
punishment and from restraint or seclusion, of any form, imposed as a 
means of coercion, discipline, convenience, or retaliation by staff. We 
proposed that restraint or seclusion could only be imposed to ensure 
the immediate physical safety of the patient, a staff member, or others 
and would have to be discontinued at the earliest possible time. We 
proposed to define ``restraint'' as any manual method, physical or 
mechanical device, material, or equipment that immobilizes or reduces 
the ability of a patient to move their arms, legs, body, or head 
freely; or a drug or medication when it is used as a restriction to 
manage the patient's behavior or restrict the patient's freedom of 
movement, and is not a standard treatment or dosage for the patient's 
condition. A restraint does not include devices, such as orthopedically 
prescribed devices, surgical dressings or bandages, protective helmets, 
or other methods that involve the physical holding of a patient for the 
purpose of conducting routine physical examinations or tests, or to 
protect the patient from falling out of bed, off of a stretcher, or out 
of a chair, or to permit the patient to participate in activities 
without the risk of physical harm (this does not include a physical 
escort). We proposed to define ``seclusion'' as the involuntary 
confinement of a patient alone in a room or area from which the patient 
is physically prevented from leaving. Seclusion may only be used for 
the management of violent or self-destructive behavior.
    At Sec.  485.614(e)(2), we proposed to require that the restraint 
or seclusion could only be used when less restrictive interventions had 
been determined to be ineffective to protect the patient a staff member 
or others from harm. At Sec.  485.614(e)(3), we proposed to require 
that the type or technique of restraint or seclusion used would have to 
be the least restrictive intervention that would be effective to 
protect the patient, a staff member, or others from harm. At Sec.  
485.614(e)(4) we proposed to require the CAH to have written policies 
and procedures regarding the use of restraint and seclusion that are 
consistent with current standards of practice. These requirements will 
allow for the CAH to use restraints and seclusion in the event that 
either or both were necessary, and only as a last resort to respond to 
immediate safety concerns. However, the CAH provision would reduce the 
burden and allow for more flexibility than the current hospital CoP. We 
believe that allowing the CAH the flexibility to develop their own 
policies and procedures for restraints and seclusion based on the scope 
of services they provide is necessary given their patient volumes, 
populations, and access to resources. The policies and procedures would 
have to be consistent with current standards of practice.
Staff Training Requirements for the Use of Restraints or Seclusion
    At Sec.  485.614(f), we proposed to establish that the patient 
would have the right to safe implementation of restraint or seclusion 
by trained staff. We proposed that the CAH would have to provide 
competency-based training and education of CAH personnel and staff, 
including medical staff, and, as applicable, personnel providing 
contracted services in the CAH, on the use of restraint and seclusion. 
To ensure that the use of restraint and seclusion for patients 
receiving services in a CAH would be respectful of, and responsive to, 
individual patient preferences, needs and values, we proposed to 
require that the training be patient-centered. Additionally, to ensure 
that staff would be educated and trained on using the least restrictive 
intervention necessary for the safety of the patients and CAH staff, we 
proposed at Sec.  485.614(f)(2) to require that the CAH train their 
staff in alternatives to the use of restraint and seclusion. Staff 
should have trauma-informed knowledge competencies and be aware of 
effective de-escalation techniques that could be used to avoid the use 
of restraint and seclusion so not to trigger any previous mental health 
issues because of the use of restraints and seclusion. Trained peer 
workers (people who share similar experiences of being diagnosed with 
mental health conditions, substance use disorders, or both) and CHWs 
could also serve a useful role in assisting patients and other staff. 
This could include helping to monitor use of restraint and seclusion, 
deescalating interactions with patients and contributing to a positive 
and supportive environment for patients, family members, and CAH staff. 
CAHs are encouraged to consider the use of peer workers and CHWs in 
their staffing plans. For further information, please see the 2007 
guidance on use of peers in the Medicaid program (https://www.medicaid.gov/federal-policy-guidance/downloads/SMD081507A.pdf) and 
resources from the Substance Abuse and Mental Health Services

[[Page 72209]]

Administration (https://www.samhsa.gov/brss-tacs/recovery-support-tools/peers). In addition, facilities are encouraged to consider any 
nutritional needs while a patient is restrained, such as a need to 
provide food and water.
Death Reporting Requirements
    The proposed CAH death reporting requirements were similar to the 
hospital requirements at Sec.  482.13. At Sec.  485.614(g), we proposed 
to establish requirements that CAHs must follow when reporting deaths 
associated with the use of seclusion or restraint. Specifically, we 
proposed to require that the CAH report to CMS, by telephone, 
facsimile, or electronically, as determined by CMS, no later than the 
close of business on the next business day the following information--
(1) Each death that occurs while a patient is in restraint or 
seclusion; (2) Each death that occurs within 24 hours after the patient 
has been removed from restraint or seclusion; (3) Each death known to 
the CAH that occurs within 1 week after restraint or seclusion, where 
it is reasonable to assume that use of restraint or placement in 
seclusion contributed directly or indirectly to a patient's death, 
regardless of the type(s) of restraint used on the patient during this 
time. We note that ``reasonable to assume'' in this context would 
include, but is not limited to, deaths related to restrictions of 
movement for prolonged periods of time, or death related to chest 
compression, restriction of breathing, or asphyxiation.
    For instances when no seclusion had been used and when the only 
restraints used on the patient were those applied exclusively to the 
patient's wrist(s), and composed solely of soft, non-rigid, cloth-like 
materials, the CAH staff would have to record in an internal log or 
other system, the following information--(1) Any death that occurred 
while a patient was in such restraints; (2) Any death that occurred 
within 24 hours after a patient had been removed from such restraints. 
Furthermore, we proposed that staff also document in the patient's 
medical record the date and time the death was reported to CMS or 
recorded in the internal log or other system. Also, for instances when 
no seclusion had been used and when the only restraints used on the 
patient were those applied exclusively to the patient's wrist(s),we 
proposed to require that entries into the internal log or other system 
would have to be documented no later than seven days after the date of 
death of the patient, and include the patient's name, date of birth, 
date of death, name of attending physician or other licensed 
practitioner who is responsible for the care of the patient, medical 
record number, and primary diagnosis(es), and be made available in 
either written or electronic form to CMS immediately upon request.
Patient Visitation Rights
    We proposed to redesignate Sec.  485.635(f) as Sec.  485.614(h). At 
Sec.  485.614(h), we proposed to establish new requirements in addition 
to the existing requirements for CAHs related to a patient's visitation 
rights. Specifically, we proposed to require that a CAH would have to 
have written policies and procedures regarding the visitation rights of 
patients, including those setting forth any clinically necessary or 
reasonable restriction or limitation that the CAH may need to place on 
such rights and the reasons for the clinical restriction or limitation. 
However, we note that the requirements at Sec.  485.614(f) are existing 
requirements for CAHs and our intent is to redesignate these existing 
requirements for patient visitation as Sec.  485.614(h).
    Comment: Most commenters supported the new proposed patient's 
rights CoP for CAHs. Commenters stated that CAHs should have the same 
patient rights requirements as hospitals, as they are similar. One 
commenter stated that since the CAH patient rights provisions are brand 
new, we should delay the effective date to give facilities the time to 
establish processes and train staff.
    Response: We appreciate all the support for this new provision in 
CAHs. Our goal was to establish patient's rights that would set forth 
the rights of all patients to receive care in a safe setting and 
provide protection for a patient's emotional health and safety as well 
as their physical safety. We are aware that these are new requirements 
for CAHs and will take time to establish policies, procedures and train 
staff, therefore this does not take effect until 60 days from the 
publication date. We did receive information from some commenters 
stating that some CAHs have already incorporated patient rights into 
their daily practices.
    After consideration of the public comments we received, we are 
finalizing as proposed.
(3) Condition of Participation: Staffing and Staff Responsibilities 
(Sec.  485.631)
Unified and Integrated Medical Staff for a CAH in a Multi-Facility 
System
    In alignment the current standards for hospitals, we proposed at 
Sec.  [thinsp]485.631(e) to allow for either a unique medical staff for 
each CAH or for a unified and integrated medical staff shared by 
multiple hospitals, CAHs, and REHs within a health care system. We 
proposed to require that a CAH ensure that the medical staff members of 
each separately certified CAH in the system (that is, all medical staff 
members who hold specific privileges to practice at that CAH) have 
voted by majority, in accordance with medical staff bylaws, either to 
accept a unified and integrated medical staff structure or to opt out 
of such a structure and to maintain a separate and distinct medical 
staff for their respective CAH.
    In addition, we proposed to require that the unified and integrated 
medical staff have bylaws, rules, and requirements that described its 
processes for self-governance, appointment, credentialing, privileging, 
and oversight, as well as its peer review policies and due process 
rights guarantees, and which include a process for the members of the 
medical staff of each separately certified CAH (that is, all medical 
staff members who hold specific privileges to practice at that CAH) to 
be advised of their rights to opt out of the unified and integrated 
medical staff structure after a majority vote by the members of that 
specific certified CAH to maintain a separate and distinct medical 
staff for their CAH. We proposed that the unified and integrated 
medical staff be established in a manner that would take into account 
each CAH's unique circumstances, and any significant differences in 
patient populations and services offered in each CAH. Lastly, we 
proposed that the unified and integrated medical staff give due 
consideration to the needs and concerns of individual members of the 
medical staff, regardless of practice or location, and the CAH has 
mechanisms in place to ensure that issues specific to particular CAHs 
are duly considered and addressed.
    In proposing this allowance for CAHs in the requirements here, we 
considered this past rulemaking experience with those multi-hospital 
systems using the single governing body and unified and integrated 
medical staff model for separately certified hospitals within their 
systems, as well as our decision to also propose this flexibility for 
REHs, and applied the same model to CAHs within single governing body 
systems. As we continue to do with hospitals, we thought it is in the 
best interest of CAHs, medical staff members, and patients to proposed 
this requirement allowing for the use of a unified and integrated 
medical staff for a multi-facility system and its member CAHs, in order 
to enable the medical staff of each

[[Page 72210]]

CAH to voluntarily integrate itself into a larger system medical staff.
    Comment: Commenters were supportive of our proposals.
    Response: We did not receive any comments suggesting edits or 
changes to our proposal. After consideration of the public comments we 
received, we are finalizing as proposed.
(4) Condition of Participation: Infection Prevention and Control and 
Antibiotic Stewardship Programs (Sec.  485.640)
Unified and Integrated Infection Prevention and Control and Antibiotic 
Stewardship Programs for a CAH in a Multi-Facility System
    Similar to our standard in the hospital CoPs, we proposed a 
standard at Sec.  [thinsp]485.649(h) for CAHs that would allow for the 
governing body of a CAH that is part of a system consisting of multiple 
separately certified hospitals, CAHs, and/or REHs using a single system 
governing body that is legally responsible for the conduct of two or 
more hospitals, CAHs, and/or REHs, to elect to have unified and 
integrated infection prevention and control and antibiotic stewardship 
programs for all of its member facilities, including any CAHs, after 
determining that such a decision would be in accordance with all 
applicable state and local laws. The system's single governing body 
would be responsible for ensuring that each of its separately certified 
CAHs meets all of the requirements of this section. We note that each 
separately certified CAH subject to the system's single governing body 
would need to demonstrate that the unified and integrated infection 
prevention and control and antibiotic stewardship programs:
     Were established in a manner that takes into account each 
member CAH's unique circumstances and any significant differences in 
patient populations and services offered in each CAH;
     Established and implemented policies and procedures to 
ensure that the needs and concerns of each of its separately certified 
CAHs, regardless of practice or location, were given due consideration; 
and
     Had mechanisms in place to ensure that issues localized to 
particular CAHs were duly considered and addressed.
    The CAH would also need to demonstrate that it had designated a 
qualified individual (or individuals) with expertise in infection 
prevention and control and in antibiotic stewardship at the CAH to be 
responsible for:
     Communicating with the system's unified infection 
prevention and control and antibiotic stewardship programs;
     Implementing and maintaining the policies and procedures 
governing infection prevention and control and antibiotic stewardship 
as directed by the unified infection prevention and control and 
antibiotic stewardship programs; and
     Providing education and training on the practical 
applications of infection prevention and control and antibiotic 
stewardship to CAH staff.
    Comment: Commenters suggested that we work with Congress to 
implement support/funding for electronic surveillance systems in 
infection control. They believed that the automated systems could help 
in decreasing costs while helping to follow the infection control 
standards in the regulation.
    Response: Comments regarding the use of electronic systems for 
infection control fall outside the scope of the rulemaking. We support 
their use in improving patient care standards, but note that there are 
flexibilities offered to providers. REHs are responsible maintaining 
patient care standards which comply with the regulations.
    After consideration of the public comments we received, we are 
finalizing the provisions as proposed.
(5) Condition of Participation: Quality Assessment and Performance 
Improvement Program (Sec.  485.641)
Unified and Integrated QAPI Program for a CAH in a Multi-Facility 
System
    Consistent with the standard included at Sec.  482.21(f) in the 
hospital CoPs for QAPI programs, we proposed at Sec.  485.641(f) to 
allow CAHs that are part of a multi-facility system consisting of 
multiple separately certified hospitals, CAHs, and/or REHs to elect to 
have a unified and integrated QAPI program after determining that such 
a decision is in accordance with all applicable state and local laws. 
Specifically, we proposed to specify that the system's governing body 
is responsible and accountable for ensuring that each of its separately 
certified CAHs meets the proposed QAPI program requirements. We 
expected that this would be beneficial to CAHs that may lack time, 
resources, or staff to implement a QAPI program. The CAH would be able 
to benefit from the resources and expertise of a multi-hospital system 
in implementing their QAPI program, as well as potentially reducing the 
time and labor investments required to enact and maintain the program.
    We did not receive any public comments on our proposal and 
therefore, we are finalizing our proposal.
c. Conforming Amendments and Technical Corrections
(1) Technical Correction to Sec.  485.635(b)(2)
    We proposed to make a technical correction to the laboratory 
services CAH CoP at Sec.  485.635(b)(2). In the September 1, 1994, 
final rule entitled ``Medicare Program; Changes to the Hospital 
Inpatient Prospective Payment Systems and Fiscal Year 1995 Rates'' (59 
FR 45403), we revised the CAH laboratory services requirement to 
require the CAH laboratory services to meet the standards imposed under 
section 353 of the Public Health Service Act (42 U.S.C. 236a). We 
inadvertently included an error in the referenced Public Health Service 
Act standard. The referenced standard at Sec.  485.635(b)(2) should 
read, ``. . .353 of the Public Health Service Act (42 U.S.C. 263a).''
(2) Conforming Amendments Sec. Sec.  489.2(b) and 489.24(b)
    The provider agreement and supplier approval requirements for 
Medicare participating providers and suppliers are located at 42 CFR 
part 489. Section 489.2 sets forth the basic requirements for submittal 
and acceptance of a provider agreement under Medicare, with the 
providers that are subject to the provisions of this part listed at 
Sec.  489.2(b). We proposed to add REHs to the list of applicable 
providers at Sec.  489.2(b) and therefore require REHs to adhere to the 
requirements for submittal and acceptance of provider agreements under 
Medicare as defined by Sec.  489.3. The requirements at 42 CFR part 489 
also set forth requirements for Medicare hospitals in emergency cases. 
These provisions apply to hospitals that have emergency departments. 
Under this section, a hospital includes a critical access hospital as 
defined in section 1861(mm)(1) of the Act. The CAA amends section 
1867(e)(5) of the Act by including REHs, as defined in 1861(kkk)(2), as 
hospitals that have emergency departments. As a result, we are proposed 
to add REHs to the definitions at Sec.  489.24(b) for Medicare 
hospitals in emergency cases under the hospital definition and to the 
definition of a participation hospital.

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

[[Page 72211]]

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) of the Act states that REHs must be 
enrolled under section 1866(j) of the Act. We proposed several 
regulatory 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, hereafter occasionally referenced as 
a ``section 1886(d)(1)(B) hospital''); or (2) the Secretary determines 
that the facility does not meet the requirements for REHs under this 
subsection. To clarify 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 proposed to add a new Sec.  424.575 to 
subpart P. Paragraph (a) of Sec.  424.575 would state that an REH (as 
that term is defined in 42 CFR 485.502) must comply with all applicable 
provisions and requirements in subpart P in order to enroll and 
maintain enrollment in Medicare. We noted that these requirements 
include, but are not limited to, the following:
     Per Sec.  424.510(a)(1) and (d)(1), completion and 
submission of the applicable enrollment application, which, for REHs, 
is 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.
    We did not receive any public comments regarding proposed new Sec.  
424.575(a). We are therefore finalizing this proposal.
2. Application Fees, Submission of the Form CMS-855A, and Screening 
Levels
    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 must 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 proposed 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 application. In other words, the facility would 
merely be reporting its conversion from a CAH or a section 
1886(d)(1)(B) hospital to an REH (as well as submitting any other 
required information and documentation); it would not be newly 
enrolling in the Medicare program. We explained in the proposed rule 
our belief that this would alleviate the burden on prospective REHs and 
expedite the processing of their Form CMS-855As, for change of 
information applications typically take less time for Medicare 
Administrative Contractors (MAC) to process than initial applications. 
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 not apply.
    In addition, we note that Sec.  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. 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 hospitals, 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 proposed to revise Sec.  424.518(a)(1)(viii) to 
incorporate REHs therein.
3. Effective Date of Billing Privileges
    We also mentioned in the proposed rule that 42 CFR 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 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 was unnecessary to 
revise Sec.  424.520(a) to specifically reference them. We

[[Page 72212]]

discussed this issue in the proposed rule so that prospective REHs 
would understand what their effective date of billing privileges would 
be.
    We received the following comments regarding this proposal:
    Comment: Numerous commenters expressed support for our proposals 
to: (1) permit a Form CMS-855A change of information submission rather 
than an initial enrollment application (and, with this, the 
inapplicability of the application fee requirement); and (2) revise 
Sec.  424.518(a) to include REHs within the limited screening category.
    Response: We appreciate the commenters' support.
    Comment: Several commenters asked whether an REH could convert back 
to a CAH or a section 1886(d)(1)(B) hospital via a Form CMS-855A change 
of information application.
    Response: We explained in the proposed rule our general, 
longstanding policy that a provider or supplier that is changing its 
provider or supplier type (for example, a home health agency (HHA) 
switching to a home infusion therapy supplier) must terminate its 
existing enrollment and initially enroll as the new provider or 
supplier type. Specifically, and using the example in the previous 
sentence, the entity must submit: (1) a Form CMS-855A application to 
terminate its existing HHA enrollment; and (2) a separate Form CMS-855B 
initial enrollment application to enroll as a HIT supplier. While we 
proposed in Sec.  424.575(b) to permit the submission of a Form CMS-
855A change of information for the initial conversion of a CAH or 
section 1886(d)(1)(B) hospital to an REH, Sec.  424.575(b) does not 
(and was not intended to) apply to any future conversion back to a CAH 
or a section 1886(d)(1)(B) hospital. Once the CAH or section 
1886(d)(1)(B) hospital has converted to an REH, any subsequent change 
to a different provider or supplier type would require an initial 
enrollment application as well as adherence to all requirements in 
subpart P associated therewith, such as payment of an application fee.
    We stated in the proposed rule that ``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)'' (87 FR 
44788). Upon further reflection, we believe this language could convey 
the erroneous impression that conversions back to a CAH or section 
1886(d)(1)(B) hospital merely require a Form CMS-855A change of 
information application. This statement was not meant to pronounce such 
a policy. Instead, we cited section 1861(kkk)(4)(B)(i) merely to 
illustrate the sufficiently close nexus between REHs and CAHs/section 
1886(d)(1)(B) hospitals as justification for our proposal to permit a 
Form CMS-855A change of information application for the initial 
conversion to an REH. We did not propose anywhere in new Sec.  424.575 
to permit Form CMS-855A changes of information for conversions back to 
CAHs or section 1886(d)(1)(B) hospitals because it was not our 
intention to do so. To the contrary, Sec.  424.575(a) was specifically 
meant to apply to such situations, meaning, as stated in the previous 
paragraph, that an initial Form CMS-855A application would be required 
consistent with Part 424, subpart P.
    We also wish to clarify that although a CAH or section 
1886(d)(1)(B) hospital converting to an REH need not submit a separate 
Form CMS-855A application to voluntarily terminate its enrollment as a 
CAH or section 1886(d)(1)(B) hospital, its CAH or section 1886(d)(1)(B) 
hospital enrollment is terminated as part of the REH conversion 
process. Put another way, merely because the CAH or section 
1886(d)(1)(B) hospital need not submit a Form CMS-855A voluntary 
termination application does not mean it can remain enrolled as such 
after its conversion to an REH. The facility cannot be enrolled as both 
an REH and a CAH or section 1886(d)(1)(B) hospital.
    Comment: A commenter asked whether a prospective payment rural 
hospital can enroll as an REH by submitting a Form CMS-855A change of 
information rather than an initial application.
    Response: If, by the term ``prospective payment rural hospital,'' 
the commenter is referencing a facility that (1) is a CAH or a section 
1886(d)(1)(B) hospital and (2) is otherwise eligible to convert to an 
REH under section 1861(kkk) of the Act and all applicable Medicare 
regulations, the hospital may submit a Form CMS-855A change of 
information. Comment: A commenter asked whether a CAH or section 
1886(d)(1)(B) hospital that closed after December 27, 2020 but is 
otherwise eligible under section 1861(kkk) of the Act and all 
applicable Medicare regulations to convert to an REH can submit a Form 
CMS-855A change of information rather than an initial application.
    Response: As previously discussed, the statute does not prohibit a 
facility that was eligible to seek REH designation as of the date of 
enactment of the CAA (December 27, 2020) but subsequently closed after 
that date from seeking REH designation after the facility's closure. As 
such, under the circumstances the commenter describes, the facility may 
submit a Form CMS-855A change of information instead of an initial 
enrollment. To clarify this, we will revise the opening of our proposed 
regulatory text of Sec.  424.575(b). The current language reads, ``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. 
. . .''. We will change ``is currently enrolled in Medicare'' to ``was 
enrolled in Medicare as of December 27, 2020''. We believe this 
revision is consistent with the opening language of 1861(kkk)(3), which 
explains that 1861(kkk) applies to facilities that were CAHs or section 
1886(d)(1)(B) hospitals ``as of December 27, 2020''.
    Comment: Several commenters requested that CMS: (1) disseminate 
detailed guidance and provide in-depth training to the MACs regarding 
the REH enrollment process; and (2) identify specific individuals who 
can assist these facilities regarding any enrollment issues arising 
with the MACs.
    Response: CMS will post information on its website and issue 
detailed guidance to the MACs regarding the processing of REH 
enrollment applications. We will also issue a Medicare Learning Network 
[supreg] Matters article explaining: (1) the enrollment process to 
prospective REHs; and (2) where REHs can direct any questions they have 
concerning this process.
    Comment: A commenter stated that REH enrollment requirements must 
be sufficiently broad and flexible to accommodate the diverse needs of 
rural communities.
    Response: We appreciate this comment. We noted previously that our 
proposal to permit Form CMS-855A change of information submissions was 
intended in large part to alleviate the burden on REHs and to afford 
them flexibility in this regard.
    After consideration of the public comments we received, we are 
finalizing our proposals with one minor exception. As a mere technical 
elucidation, we are inserting the following language in Sec.  
424.575(b) immediately following the parenthetical referencing section 
1886(d)(1)(B) of the Act: ``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''. 
This language is taken from section 1861(kkk)(3)(B) of the Act, and we 
believe it will further

[[Page 72213]]

clarify for readers the types of rural hospitals that are eligible to 
convert to an REH.

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 solicited 
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.
    We did not receive any public comments on the use of the MOON by 
REHs, and given the inapplicability of the NOTICE Act requirements to 
this new provider type, we are not requiring that the MOON be used by 
REHs.

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 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).

[[Page 72214]]

2. Application of the Physician Self-Referral Law to REHs
    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 Conditions of Participation (CoPs) for rural emergency 
hospitals (REH), as finalized in this final rule with comment period, 
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 may 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 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). 
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

[[Page 72215]]

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 exception for such entities, for the reasons 
explained in the CY 2023 OPPS/ASC proposed rule (87 FR 44798-44799), we 
did not propose to do so.
    In the CY 2023 OPPS/ASC proposed rule, we stated that we were 
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 proposed 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 solicited comment on the proposed exception, 
including 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 also solicited comment regarding the 
appropriateness of such requirements in the context of an REH and 
whether they are necessary to protect against program and patient 
abuse.
    We did not propose any new exceptions for specific designated 
health services or for compensation arrangements between REHs and 
physicians (or immediate family members of physicians). We stated our 
belief 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). We noted, 
however, that certain of the exceptions in existing 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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44799-44800), and using the Secretary's authority 
under section 1877(b)(4) of the Act, we proposed 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 and solicited comments 
on this approach.
3. Proposed Exception for REHs (Proposed Sec.  411.356(c)(4))
a. Scope and Structure of the Proposed REH Exception
    The proposed REH exception would have been available only to 
entities that are ``rural emergency hospitals.'' To delineate the scope 
of the applicability of the proposed REH exception, we proposed 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'' would have 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 was 
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, under that proposal, 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.
    We did not receive any comments on the proposed definition of 
``rural emergency hospital.'' Although, as explained in our response to 
comments below, we are not finalizing the proposed REH exception due to 
our concern that the exception, as proposed, does not satisfy the 
standard under section 1877(b)(4) of the Act that financial 
relationships permitted under exceptions established by the Secretary 
do not pose a risk of program or patient abuse, the term ``rural 
emergency hospital'' is incorporated into the revisions to the 
exceptions at Sec.  411.357(e), (r), (t), (v), (x), and (y) that we are 
finalizing in this CY 2023 OPPS/ASC final rule with comment period. 
Therefore, we are finalizing the definition of ``rural emergency 
hospital'' as proposed.
    In the CY 2023 OPPS/ASC proposed rule, we explained that 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 followed the established construct of the 
existing exceptions for other specific providers and we proposed that 
it would have applied to all referrals and billing for designated 
health services furnished by an REH. Thus, if all the requirements of 
the proposed REH exception were satisfied, the referral and billing 
prohibitions of the physician self-referral law would not have applied 
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 
stated in the CY 2023 OPPS/ASC proposed rule that we believed it was 
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 
(c)(3)(iv). We proposed that these requirements would have applied 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 did not propose to include every requirement 
of existing Sec.  411.362 in the proposed REH

[[Page 72216]]

exception; rather, our focus was on certain requirements in existing 
Sec.  411.362(b)(4) that relate to ensuring bona fide investment as 
they would apply to an REH. We stated that, 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. We expressed 
concern 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. We 
noted 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 agreed 
that it is a requirement to ensure bona fide ownership and investment 
and proposed to include a similar requirement at proposed Sec.  
411.356(c)(4)(iii).
b. Entity Enrolled as an REH
    We proposed that the entity must be enrolled in Medicare as an REH. 
If finalized, 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. We stated that 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 expansion and exceeding the aggregate percentage of 
investment interests held by physicians (and their immediate family 
members) as of March 23, 2010.
c. Ownership in the Entire REH
    We proposed 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 
stated that 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 stated our similar belief 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) would be 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.
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 proposed to require at Sec.  
411.356(c)(4)(iii) that the REH 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 stated that we would interpret the requirements applicable to 
REHs and hospitals in the same way.
    In the CY 2023 OPPS/ASC proposed rule, we noted 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. We stated that, 
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 stated that 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, we stated that the REH may not condition the 
amount of an ownership or

[[Page 72217]]

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 in 
the CY 2023 OPPS/ASC proposed rule were for illustrative purposes only 
and were not intended to indicate, nor do they indicate, that any 
particular absolute number, percentage, or other standard is acceptable 
or unacceptable. We solicited 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 solicited 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), if finalized, 
would have prohibited policies and conduct that directly or indirectly 
condition 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 stated that, 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). We further stated that 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. We continued that, 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 proposed requirement, we stated that 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 recognized 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 
recognized 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 did not propose, 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. We stated that 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. We 
cautioned that, 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, we stated that, 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)

[[Page 72218]]

would have required a case-by-case determination, including a review of 
the underlying purpose of, need for, and available alternatives to the 
minimum requirement.
    We also stated 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. We noted that this would not per se be prohibited 
under proposed Sec.  411.356(c)(4)(iii), but 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. In the CY 2023 OPPS/ASC 
proposed rule, we stated that 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) would have required 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 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). In the CY 2023 OPPS/ASC proposed rule, we expressly stated that 
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 the CY 2023 OPPS/ASC 
proposed rule (87 FR 44795) 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.
    As proposed Sec.  411.356(c)(4)(iii) would have prohibited 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. We stated that, for purposes of 
proposed Sec.  411.356(c)(4)(iii), we would have interpreted the making 
of referrals to an REH in the same way.
    In the CY 2023 OPPS/ASC proposed rule, we noted that, 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. We highlighted that, under Sec.  411.351, 
``referral'' is defined in the context of a physician's action or 
conduct, and stated that 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 noted 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.)
    We proposed that Sec.  411.356(c)(4)(iii) also would prohibit 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 stated that 
we would interpret the phrase ``otherwise generating business'' in 
proposed Sec.  411.356(c)(4)(iii) consistent with our

[[Page 72219]]

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). We noted that 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.
    In the CY 2023 OPPS/ASC proposed rule, we stated 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 stated that 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.
e. Offer of Ownership or Investment on More Favorable Terms
    We proposed 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 stated that 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 noted that, in the requirement at existing Sec.  
411.362(b)(4)(ii) from which this proposed requirement was drawn, the 
word ``who'' follows ``person.'' We stated our belief 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 proposed 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).
f. Providing Loans or Financing for Ownership or Investment
    We proposed 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 stated that 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.
    We also stated that, under our interpretation of the proposed 
exception, 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.
g. Guarantee, Make a Payment on, or Otherwise Subsidize a Loan
    At proposed Sec.  411.356(c)(4)(vi), we proposed 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 stated that we would interpret the requirements applicable to 
REHs and hospitals in the same way. We noted 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 have also prohibited 
guaranteeing, making a payment toward,

[[Page 72220]]

or otherwise subsidizing a loan for a group of physician owners or 
investors.
    In the CY 2023 OPPS/ASC proposed rule, we stated that, 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 stated that 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 further stated that 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 
have been prohibited from garnishing the wages or other 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), we 
stated that 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. We stated that, 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.
h. Proportional Distributions
    We proposed 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 stated that 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 stated that we would interpret 
``proportional'' as it is defined in the dictionary: corresponding in 
size or amount.
    Under the proposed REH exception, 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, we would have required that 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.
i. Guaranteed Receipt of or Right To Purchase Other Business Interests
    We also proposed 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 at proposed Sec.  411.356(c)(4)(viii) 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 stated that we would 
interpret the requirements applicable to REHs and hospitals in the same 
way.
    For purposes of this proposed requirement, we stated that 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 stated that 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. We further stated 
that, 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

[[Page 72221]]

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.
j. Offer To Purchase or Lease Other Property on More Favorable Terms
    Finally, at proposed Sec.  411.356(c)(4)(ix), we proposed 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 whole hospital exceptions, and we stated 
that we would interpret the requirements applicable to REHs and 
hospitals in the same way.
    We highlighted that there are two main differences between the 
requirements at proposed 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 stated that we would interpret this 
requirement in the same way as proposed Sec.  411.356(c)(4)(iv), which, 
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 noted 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. We stated our belief 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) included 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).
k. 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) from the 
definition of ``hospital'' 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 did not propose 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. We explained that, if we had proposed to include REHs as 
``hospitals'' for purposes of the physician self-referral law, we would 
not have proposed to establish the exception for ownership or 
investment in an REH with the requirements described in the 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. We stated that, if we were to include REHs as 
hospitals for

[[Page 72222]]

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.
    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.
Provisions of the Final Rule
    As noted above, we are finalizing the definition of ``rural 
emergency hospital'' as proposed. For the reasons explained in the 
following responses to public comments, we are not finalizing our 
proposal to establish an exception at Sec.  411.356(c)(4) for ownership 
or investment in an REH.
    Comment: Several commenters strongly objected to the establishment 
of the REH exception and urged CMS not to finalize the exception at all 
or without modification. The commenters were particularly concerned 
that the REH exception would not protect against the specific types of 
patient and program abuse that the physician self-referral law is 
intended to deter, including overutilization, mis-utilization, and 
patient steering to lower quality, higher cost, or less convenient 
services. One of these commenters suggested that the exception, if 
finalized, could actually worsen problems with access to the full range 
of necessary care in rural areas because CAHs and small rural hospitals 
may abandon inpatient services in favor of higher Medicare 
reimbursement and potential physician-owner control over referrals for 
designated health services if they convert to an REH. This commenter, 
along with others, highlighted the potential impact of financial self-
interest on medical decision-making by physicians who invest in REHs.
    Some of the commenters that urged CMS not to finalize the REH 
exception raised concerns regarding the adequacy of the program 
integrity protections of the proposed REH exception. These commenters 
asserted that the REH exception, as proposed, falls outside the 
Secretary's authority under section 1877(b)(4) of the Act to establish 
regulatory exceptions only for financial relationships that do not pose 
a risk of program or patient abuse. The commenters disagreed with our 
rationale for not including certain of the program integrity 
requirements imposed on hospitals that use the whole hospital and rural 
provider exceptions, and opined that the proposed exception would 
impose less of a burden on REHs than the whole hospital and rural 
provider exceptions pose for physician ownership or investment in 
hospitals. One of the commenters maintained that, when relying on the 
authority provided in section 1877(b)(4) of the Act, CMS should not 
create an exception for ownership or investment in an REH with 
requirements that are less rigorous than those set forth by the 
Congress for the type of entity from which the REH converted. This 
commenter urged that, if CMS adopts an REH-specific exception for 
physician ownership or investment, we should include in the final 
exception all requirements applicable to physician ownership or 
investment in hospitals under the whole hospital and rural provider 
exceptions, including prohibitions on facility expansion, transparency 
requirements, and patient safety requirements. This recommendation was 
endorsed by other commenters. None of the commenters suggested 
potential program integrity requirements alternative to the existing 
requirements in the statute and our regulations applicable to physician 
ownership or investment in hospitals, although some noted that the REH 
exception as proposed would not prevent physician-owned REHs from 
limiting the services they offer to those most likely to be highly 
reimbursed or profitable (``cherry-picking''), choosing not to offer 
less profitable services or treat sicker and costlier patients (``lemon 
dropping''), and engaging in other behaviors that would have negative 
effects on care for beneficiaries in rural areas. Despite their 
opposition to the REH-specific exception for ownership or investment in 
an REH, the commenters did not object to CMS treating REHs as 
``hospitals'' for purposes of the physician self-referral law instead 
of finalizing the proposed REH exception.
    Response: After reviewing comments on a broad array of proposed REH 
policies, including comments on the physician self-referral law 
proposals, we are persuaded that financial relationships permitted 
under the REH exception, as it was proposed, may present a risk of 
patient or program abuse. As we noted in the CY 2023 OPPS/ASC proposed 
rule, REHs may provide a broad range of outpatient services, including 
various types of designated health services. As one of the commenters 
suggested, the lure of financial reward from referrals for highly-
reimbursed or profitable services could influence the medical decision-
making of an REH's physician owners and investors. In light of the 
flexibilities afforded REHs under the payment and other policies set 
forth in this final rule with comment period, we agree with the 
commenters that the potential for cherry-picking and lemon-dropping, as 
well as other harms the physician self-referral law aims to deter, may 
persist in the REH context, particularly for REHs with service areas 
that include a mix of rural and urban areas. We share the commenters' 
concerns that the ability to capture the referrals of physician owners 
or investors may provide an incentive for existing CAHs and small rural 
hospitals that are economically capable of sustaining inpatient beds to 
nonetheless convert to REHs and avoid

[[Page 72223]]

the physician self-referral law's more stringent requirements for 
hospitals.
    Any exception to the physician self-referral law established by the 
Secretary under section 1877(b)(4) of the Act that permits physician 
ownership or investment in REHs must include sufficient program 
integrity requirements to ensure that such ownership or investment 
interests do not pose a risk of program or patient abuse. After 
reviewing the comments on the CY 2023 OPPS/ASC proposed rule, we 
believe that the REH exception--as proposed--may not meet the 
requirement of section 1877(b)(4) of the Act that the physician 
ownership or investment interests it would permit do not pose no risk 
of patient or program abuse. We considered the comments that encouraged 
CMS to include existing requirements for physician-owned hospitals in 
any final REH exception. We decline to do so because we continue to 
believe that certain of the requirements that are currently applicable 
to hospitals, such as the limitation on expansion of the aggregate 
number of operating rooms, procedure rooms, and beds for which the 
hospital was licensed on March 23, 2010, are not suitable for 
application to REHs. Commenters did not suggest alternative program 
integrity criteria that, if included in the exception, would satisfy 
the statutory requirement that permitted financial relationships do not 
pose a risk of program or patient abuse. Therefore, we are not 
finalizing the proposed REH exception at this time.
    Because they are not ``hospitals,'' REHs located in rural areas, as 
defined in Sec.  411.351, may use the rural provider exception in 
section 1877(d)(2) of the Act and codified at Sec.  411.356(c)(1), 
without application of the additional requirements for hospitals in 
Sec.  411.362. As set forth in statute and incorporated into our 
regulations without additional requirements, the rural provider 
exception is available to entities located in rural areas and has only 
one substantive requirement. Specifically, the entity must furnish 
substantially all (not less than 75 percent) of the designated health 
services it provides to residents of rural areas. We emphasize that the 
``substantially all'' requirement at Sec.  411.356(c)(1) applies only 
to designated health services furnished by an entity. As applied to an 
REH, this means that the REH must furnish not less than 75 percent of 
the designated health services that it furnishes (such as radiology and 
other imaging services) to residents of a rural area, but would not 
need to monitor the residence of patients to whom it provides any 
services that are not considered designated health services under Sec.  
411.351.
    In the proposed rule, we recognized that monitoring the residence 
of beneficiaries receiving designated health services could be 
burdensome for REHs. Even so, we believe that REHs that are located in 
rural areas and primarily serve beneficiaries who reside in rural areas 
will have no difficulty meeting this threshold. The monitoring burden 
would most likely be limited to REHs that are located in rural areas 
but have service areas that encompass urban areas as well. As described 
in section XXIV.G and H of this CY 2023 OPPS/ASC final rule with 
comment period, we expect only a limited number of CAHs and small rural 
hospitals will convert to REHs; therefore, any monitoring burden under 
the rural provider exception would be limited to only those few REHs 
located in rural areas but that have service areas that encompass urban 
areas.
    Comment: Several commenters offered general support permitting 
physician ownership of REHs, but did not address specific provisions of 
the proposal. Some commenters that supported the proposed REH exception 
recognized the need for program integrity protections in exceptions to 
the physician self-referral law. None of the commenters expressly 
addressed whether the requirements of the proposed REH exception are 
sufficient to ensure that physician ownership or investment in an REH 
would not pose a risk of program or patient abuse.
    Response: We appreciate the commenters' support of policies 
designed to promote access to care in underserved rural areas. However, 
based on the concerns raised by other commenters, which were not 
addressed by the commenters that supported the proposal to establish an 
exception for ownership or investment in an REH, we are not finalizing 
the proposed exception. As explained in the response to the previous 
comment, the rural provider exception remains available to most, if not 
all, REHs.
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's referral and billing prohibitions 
for compensation arrangements between entities and physicians (or 
immediate family members of physicians) that satisfy all requirements 
of the exception. 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 proposed 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 existing 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 proposed 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 proposed 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 also proposed 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. As 
proposed, the cross-referenced definition would also apply to REHs 
under this proposal.
    The existing exception for electronic prescribing items and 
services at

[[Page 72224]]

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 
the proposed rule 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 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 existing 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 are finalizing without modification our proposal 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. Our responses to the public comments we received on these 
proposals are below.
    Comment: A few commenters addressed the proposed changes to the 
exceptions at Sec.  411.357(e), (r), (t), (v), (x), and (y) that would 
make these exceptions applicable to compensation arrangements involving 
REHs. These commenters generally supported the proposed revisions to 
the exceptions. No commenters identified any concerns related to the 
proposed revisions, despite specific requests for comments regarding 
the need for an REH to recruit physicians to establish or join a 
medical practice in the geographic area served by the REH (and how to 
define such a service area), provide assistance to compensate a 
nonphysician practitioner, or offer obstetrical malpractice insurance 
subsidies.
    Response: As we stated in the proposed rule, we believe that many 
of the party-limited exceptions could be important to ensuring access 
to necessary designated health services and other care furnished by an 
REH, as well as advance our goals to expand the use of electronic 
prescribing and the adoption of electronic health records. We remind 
parties that all requirements of an applicable exception must be 
satisfied to avoid the referral and billing prohibitions of the 
physician self-referral law. We do not believe that making the 
exceptions at Sec.  411.357(e), (r), (t), (v), (x), and (y) available 
to compensation arrangements involving REHs would pose a risk of 
program or patient abuse, and we are finalizing the revisions to the 
noted exceptions as proposed.
Revised Cross-Reference in Definition of ``Rural Area'' for Purposes of 
the Physician Self-Referral Law
    As discussed in section XVIII.E of this final rule with comment 
period, 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 412.62 
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 proposed 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 proposed 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 solicited comment on this proposal.
    We did not receive any public comments on our proposal. We are 
finalizing without modification the proposed technical change to the 
definition of ``rural area'' at Sec.  411.351.

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

    In the CY 2023 OPPS/ASC proposed rule (87 FR 44800 through 44802), 
we included a Request for Information (RFI) related to the use of CMS 
data to drive competition in healthcare marketplaces. We received 
approximately 21 timely pieces of correspondence that were submitted in 
response to the Competition RFI questions. Additionally, we received 
180 pieces of correspondence (176 of the 180 submissions were form 
letters) related to CMS' hospital price transparency efforts and its 
role in driving competition, generally. We thank all interested parties 
for their comments and will take them into consideration in the future.

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.'' \321\ As part of the CY 2021 OPPS/ASC final 
rule with

[[Page 72225]]

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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    \321\ See also correction notification issued January 3, 2020 
(85 FR 224).
---------------------------------------------------------------------------

    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. Addition of a New Service Category
    In accordance with Sec.  419.83(b), we proposed to require prior 
authorization for a new service category: Facet Joint Interventions. We 
proposed adding the new service category at Sec.  419.83(a)(3). We also 
proposed 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 proposed that prior authorization would be required for this 
service category at a later date than for the first seven service 
categories, we proposed 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 proposed 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 proposed that existing paragraph (a)(3) be moved to paragraph 
(b), and that paragraph (b) be revised by modifying the heading to 
read, ``Adoption of the list of services and technical updates.'' We 
also proposed to re-designate the current paragraph (b) as paragraph 
(b)(1). We proposed that paragraph (b)(1) would provide 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. We proposed 
that current paragraph (a)(3) would be moved to new paragraph (b)(2) 
and provide that 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.
    We proposed that the 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 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 proposed 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 103. For ease of review and brevity, we only 
included 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 103. 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). Again, we proposed 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 proposed an 
effective date slightly earlier in the calendar year (compared to July 
1, 2020, and July 1, 2021, effective dates for the service 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 Adding a New Service Category
    As part of our responsibility to protect the Medicare Trust Funds, 
we noted in the proposed rule that we continue our routine analysis of 
data associated with all aspects of the Medicare program. This 
responsibility includes monitoring the total amount or types of claims 
submitted by providers and suppliers; analyzing the claims data to 
assess the growth in the number of claims submitted over time (for 
example, monthly and annually, among other intervals); and conducting 
comparisons of the data with other relevant data, such as the total 
number of Medicare beneficiaries served by providers, to help ensure 
the continued appropriateness of payment for services furnished in the 
hospital OPD setting.
    In the proposed rule, we noted that 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

[[Page 72226]]

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.
    In the proposed rule, we noted that our analysis of Integrated Data 
Repository (IDR) \322\ 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.
---------------------------------------------------------------------------

    \322\ 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.
---------------------------------------------------------------------------

    As noted in the proposed rule, 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.
    We also noted in the proposed rule that the Department of Health 
and Human Services' Office of the Inspector General (OIG) had 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.\323\ 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.\324\ Further, 
in March 2022, the Department of Justice reported on a $250 million 
healthcare 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 facet joint injections due to their high reimbursement 
rates.\325\ CMS' data analysis and research show that the increases in 
volume for these procedures are unnecessary, and further program 
integrity action is warranted.
---------------------------------------------------------------------------

    \323\ https://oig.hhs.gov/oas/reports/region9/92003003.asp.
    \324\ https://oig.hhs.gov/oas/reports/region9/92103002.asp.
    \325\ https://www.justice.gov/opa/pr/16-defendants-including-12-physicians-sentenced-prison-distributing-66-million-opioid-pills.
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    In the proposed rule, we said that 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 noted our belief 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. In 
the proposed rule, we reaffirmed our belief that prior authorization is 
an effective mechanism to ensure Medicare beneficiaries receive 
medically necessary care while protecting the Medicare Trust Funds from 
unnecessary increases in volume by virtue of improper payments without 
adding onerous new documentation requirements. A broad program 
integrity strategy must use a variety of tools to best account for 
potential fraud, waste, and abuse, including unnecessary increases in 
volume. We believe prior authorization for these services will be an 
effective method for controlling unnecessary increases in the volume of 
these services and expect that it will reduce the instances in which 
Medicare pays for services that are determined not to be medically 
necessary. We solicited comments on the addition of this service 
category and specifically requested comments on the potential for any 
unintended clinical consequences from the addition of this service 
category.
    We received 69 comments on this proposal, including comments from 
healthcare providers, professional and trade organizations, and device 
manufacturers. The following is a summary of the comments we received 
and our responses.
    Comment: We received comments in support of the addition of a new 
service category to the prior authorization process to ensure the 
appropriateness of payment for Medicare services.
    Response: We appreciate the positive responses on the addition of a 
new service category to our prior authorization process and agree that 
prior authorization is an effective method for controlling unnecessary 
increases in the volume of the new service category.
    Comment: Commenters conveyed that prior authorization processes can 
add burden and costs, unnecessary delays or denials of appropriate 
care, and directly impact the patient's access to timely proper medical 
care. Additionally, some commenters stated that prior

[[Page 72227]]

authorization is contrary to CMS's Patients Over Paperwork initiative.
    Response: We remain fully committed to the agency's initiative to 
reduce unnecessary burden while still protecting our programs' 
sustainability by serving as a responsible steward of public funds. We 
continue to believe that the hospital outpatient department (HOPD) 
prior authorization process can expand to include additional services 
without the referenced delays in patient care. We believe that we have 
structured the prior authorization processes to effectively account for 
concerns associated with processing timeframes, patient care, and other 
administrative concerns. We recognize apprehension resulting from 
problems with prior authorization in other settings related to the 
burden, cost, and patient access, but as with our other Medicare Fee-
For-Service prior authorization processes, we believe that the HOPD 
prior authorization process for the new Facet joint interventions 
service category will not have these problems. We have established 
timeframes for contractors to render decisions on prior authorization 
requests, as well as an expedited review process when the regular 
review timeframe could seriously jeopardize the beneficiary's health, 
which enables hospitals to receive timely provisional affirmations.
    Additionally, we note that our prior authorization policy does not 
create any new documentation requirements. Instead, it requires 
hospitals to submit the same documents needed to support claim 
payments, just earlier in the process. Therefore, HOPDs should not need 
to divert resources from patient care. We note that prior authorization 
has the added benefit of giving hospitals some assurance of payment for 
services for which they received a provisional affirmation. In 
addition, beneficiaries have information regarding coverage prior to 
receiving the service and benefit from knowing in advance of receiving 
the service if they will incur financial liability because the service 
is non-covered. CMS will continue tracking MAC timeliness metrics and 
is confident that the MACs will continue to meet the required review 
and decision timeframes to avoid causing an additional burden for HOPDs 
or delaying medically necessary services.
    Comment: Several commenters expressed concern about expanding the 
program while the COVID-19 public health emergency (PHE) is ongoing, 
noting that as hospitals return to full operations, CMS may not have 
the necessary resources to handle the increased volume of prior 
authorization requests. We received several comments recommending 
extending the March 1, 2023 implementation date until at least July 1, 
2023, consistent with the timeline CMS has used when implementing prior 
authorization for other service categories so that providers, CMS, and 
MACs have more time to prepare for the process.
    Response: CMS provides necessary resources to the MACs and 
maintains a robust oversight process to ensure the accuracy and 
consistency of their review decisions. We are confident that MACs have 
sufficient resources and the clinical expertise necessary to administer 
the prior authorization process effectively. Also, no new documentation 
requirements are created as a result of this process. Instead, 
currently required documents are submitted earlier in the process.
    Although we believe CMS and MACs have sufficient resources to 
manage additional prior authorization requests, we acknowledge the 
commenters' concerns about the proposed March 1, 2023, implementation 
date for the new service category. While we explained in the proposed 
rule that the effective date for the new service category would be 
March 1, 2023, because MACs, CMS, and HOPDs already have knowledge of 
and experience with the prior authorization process, we recognize that 
all participants would benefit from additional time to prepare for the 
addition of Facet joint interventions service category to the prior 
authorization processes. Accordingly, we are finalizing an 
implementation date for prior authorization for the Facet joint 
interventions service category of July 1, 2023, which is consistent 
with previous July 1 implementation dates for current service 
categories.
    Comment: Some commenters specifically said that prior authorization 
of the Facet joint interventions service category could cause delays in 
appropriate care and lead patients toward alternative pain relief 
options like opioids. One commenter stated that Facet joint 
interventions should not be added as a new category because the 
services in the proposed category are not cosmetic or elective and are 
used to treat spinal diagnoses that cannot often be addressed with 
other procedures or address chronic pain that has been refractory to 
other conservative treatments.
    Response: We thank the commenters for their input. We believe the 
proposal is in alignment with the Department of Health and Human 
Services (HHS) Pain Management Best Practices Inter-Agency Task Force 
Report \326\ that encourages Medicare and other payers to provide 
timely insurance coverage of such procedures. We continue to believe 
that the 10-day timeframe for obtaining a decision on a prior 
authorization request is not significant considering that these are 
non-emergency procedures that require the beneficiary to undergo 
conservative treatment prior to the procedure. Additionally, providers 
may request expedited review of a prior authorization request under the 
regulation at 42 CFR 419.82(c)(2), where the processing of the request 
must be expedited due to the beneficiary's life, health, or ability to 
regain maximum function being in jeopardy. We also note that under the 
regulation at 42 CFR 419.83(c), CMS may elect to exempt a provider from 
the prior authorization process upon the provider's demonstration of 
compliance with Medicare coverage, coding, and payment rules.
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    \326\ https://www.hhs.gov/sites/default/files/pmtf-final-report-2019-05-23.pdf.
---------------------------------------------------------------------------

    Commenters are correct that many services in other categories for 
which we require prior authorization are cosmetic, while services in 
the Facet joint intervention service category are not. We also 
acknowledge the benefits that Facet joint intervention services offer 
for chronic pain. However, we reiterate that these are non-emergency 
procedures that require the beneficiary to undergo at least 3 months of 
conservative treatment prior to the procedure. For that reason, these 
procedures generally are elective.
    Comment: Some of the commenters were also concerned the time 
estimate provided in the proposed rule only considers the time required 
by the surgeon's clerical staff.
    Response: We typically use a clerical staff rate because the 
documentation being submitted is the same documentation that should be 
regularly maintained in support of claims submitted for payment. The 
prior authorization process does not require anything new with regard 
to documentation. The prior authorization process merely requires the 
documentation to be provided earlier in the process. With regard to the 
time burden, we included 3 hours of training in our burden estimate for 
each provider. During this time, the staff can be educated on the 
services that require prior authorization under this program and what 
documentation is needed as part of the prior authorization request. 
Moreover, we included the 3 hours each year so that new staff can be 
trained and current staff can have a refresher course.

[[Page 72228]]

Given that this process does not create any new documentation 
requirements and merely necessitates the submission of the 
documentation earlier in the claims process, we believe the amount 
estimated is appropriate. As we have noted, we have endeavored to 
minimize the burden associated with this prior authorization process, 
and this burden is more than outweighed by the need to control 
unnecessary increases in the volume of these services.
    Comment: Some of the commenters stated that the data for the Facet 
joint interventions service category do not truly represent ``an 
unnecessary increase in the volume'' of these services and that there 
could be many reasons for the increase in their utilization. The 
commenters also questioned the methodologies we used to calculate the 
percentage increase in utilization of these services. Additionally, 
some commenters asked CMS to release the MACs' prior authorization 
data, such as how many HOPDs have achieved the exemption, the accuracy 
rate for exempt providers, average processing timeframes for initial 
and resubmission requests, and whether there are any changes in the 
volume of utilization for the services that are required prior 
authorization.
    Response: We thank the commenters for their input. We continue to 
believe that comparing the utilization rate for services in the 
proposed service category to the baseline growth rate for all Medicare 
HOPD services is an appropriate method for identifying unnecessary 
increases in volume. After reviewing all possible causes, including 
questionable billing practices discussed in published in OIG reports, 
we found no evidence suggesting other plausible reasons for the 
increases. We believe financial motivation, as opposed to medical 
necessity reasons, is the most likely cause. With regard to the 
providers' data, the number of exempt providers varies among MAC 
jurisdictions. Among all MACs, the average volume of exempt OPD 
providers is 16.7 percent, with one MAC having as many as 35 percent of 
OPD providers exempt. While we require the MACs to make decisions 
within 10 days, the average initial review timeframe is 4.4 days, and 
the average resubmission review timeframe is 4.3 days. CMS will 
consider sharing data regarding the changes in the volume of 
utilization of the HOPD services that require prior authorization. We 
are unclear what the commenter meant by the accuracy rate for exempt 
providers, but in order to be exempt, all exempt providers must achieve 
a provisional affirmation rate threshold of at least 90 percent based 
on their submitted initial prior authorization requests.
    Comment: Several comments asked us to clarify the process for 
removing and suspending services from the prior authorization 
requirements.
    Response: As stated in paragraph (d), CMS may suspend the prior 
authorization process requirements generally or for a particular 
service at any time by issuing a notification on the CMS website. We 
communicate and collaborate with interested parties, and when notified 
of a concern with a specific procedure, we research their concerns. 
Following feedback from providers, in June 2020, we removed CPT code 
21235 (obtaining ear cartilage for grafting) from the list of codes 
that require prior authorization as a condition of payment because it 
was more commonly associated with procedures unrelated to rhinoplasty 
that are not likely to be cosmetic in nature. Similarly, after 
reviewing the claim processing requirements for CPT codes 63685 
(insertion or replacement of spinal neurostimulator pulse generator or 
receiver, direct or inductive coupling) and 63688 (revision or removal 
of implanted spinal neurostimulator pulse generator or receiver) in 
response to interested parties' feedback, we temporarily removed them 
from the list of OPD services that require prior authorization in May 
2021. OPD providers are required to submit one prior authorization 
request either for trial or permanent insertion procedures. CPT codes 
63685 and 63688 would only apply to the permanent insertion procedure, 
and leaving them on the list would cause claim denials if a provider 
submits a prior authorization request for the trial procedure (CPT 
63650) only. In January 2022, after communications with the interested 
party, we removed CPT 67911 (correction of lid retraction) from the 
list of codes that require prior authorization because this service 
commonly occurred secondary to another condition and medical review 
criteria applicable to the services under blepharoplasty service 
category do not apply to CPT 67911.
    Comment: Some commenters continue to question our policy to require 
prior authorization for Botulinum toxin injections, implanted 
neurostimulators, and cervical fusion with disc removal and urge CMS to 
remove the prior authorization requirement finalized in the CY 2020 and 
CY 2021 OPPS/ASC final rules with comment for these services.
    Response: We thank the commenters for their feedback. Our rationale 
for subjecting Botulinum toxin injections and implanted neurostimulator 
and cervical fusion with disc removal to prior authorization that is 
included in the CY 2020 OPPS/ASC final rule with comment period \327\ 
and CY 2021 OPPS/ASC final rule with comment period,\328\ respectively, 
still applies to the continued prior authorization requirement for 
these service categories. We refer the commenter to those final rules 
with comment period for further information about why we believe prior 
authorization is an effective method to control unnecessary volume 
increases for these service categories.
---------------------------------------------------------------------------

    \327\ See 84 FR 61448-61449.
    \328\ See 85 FR 86237-86238.
---------------------------------------------------------------------------

    Comment: Some commenters suggested that prior authorization is 
unnecessary and we should use the existing tools, such as Local 
Coverage Determinations (LCDs) and Articles, to inform providers when 
services can be used. The commenters do not believe our proposal 
accounts for them.
    Response: LCDs are contractor determinations about whether a 
particular item or service is covered on a contractor-wide basis in 
accordance with the ``reasonable and necessary'' standard in section 
1862(a)(1) of the Act. Articles are contractor publications that 
provide relevant coding and billing information. The existence of these 
documents does not, in and of itself, guarantee compliance with 
Medicare's coverage requirements. Instead, a broad program integrity 
strategy must use a variety of tools to reduce overpayments and combat 
fraud, waste, and abuse. Among other methods, we use prior 
authorization, prepayment, and postpayment reviews to check for 
compliance with these policies. Thus, we believe that the use of prior 
authorization in the HOPD setting is and will continue to be an 
effective tool in controlling unnecessary increases in the volume of 
covered HOPD services by ensuring that the correct payments are made 
for medically necessary HOPD services while at the same time being 
consistent with our overall strategy of protecting the Medicare Trust 
Fund from improper payments, reducing the number of Medicare appeals, 
and improving provider compliance with Medicare program requirements.
    Comment: Some commenters continue to question whether section 
1833(t)(2)(F) of the Act grants CMS the authority to establish a prior 
authorization process. They contend that CMS should not add a new 
service category as the commenters believe we have not demonstrated 
that increases in the volume of services for which we proposed to 
require prior authorization are unnecessary and have not shown

[[Page 72229]]

there are no other necessary reasons for the increases in Facet joint 
interventions.
    Response: As we conveyed in the CY 2020 OPPS/ASC and CY 2021 OPPS/
ASC final rules with comment period, section 1833(t)(2)(F) of the Act 
gives us the discretion to determine the appropriate methods to control 
unnecessary increases in the volume of covered OPD services. We 
carefully considered all available options in choosing to propose the 
prior authorization process, which has already been shown to be an 
effective tool in Medicare Fee-for-Service, and which we believe will 
be effective at controlling unnecessary increases for Facet joint 
interventions. Our extensive data analysis included in this year's 
proposed rule demonstrates that there have been unnecessary increases 
for this proposed service category and that we did not identify other 
legitimate reasons for the sustained increases.
    Comment: A commenter expressed difficulty dealing with third-party 
auditors, such as Recovery Auditors, retrospectively denying payment 
for procedures that were granted prior authorization. The comment also 
mentions that these reviews and denials create a substantial 
administrative and financial burden for hospitals.
    Response: We agree that, generally, claims receiving a provisional 
affirmation decision should not be subject to additional medical 
reviews, including by Recovery Auditors. However, claims may be 
reviewed by the Comprehensive Error Rate Testing (CERT) contractor if 
chosen as part of the random sample to calculate the improper payment 
rate or by the Unified Program Integrity Contractor (UPIC) if there are 
concerns of fraud, waste, and abuse. We encourage hospitals to contact 
us with specific examples of postpayment reviews of claims with a 
provisional affirmation prior authorization decision, so we can 
investigate further.
    Comment: We received comments with concerns that reimbursement 
should not be withheld when the service performed is different from the 
one that was originally submitted for prior authorization.
    Response: We recognize that sometimes a procedure's necessity could 
not be anticipated before it was furnished; however, when a service 
requiring prior authorization as a condition of payment is billed 
without an affirmation decision, it will be denied. Providers may 
submit prior authorization requests for multiple potential procedures 
if they believe that this could be a possibility. It may be best to 
submit a prior authorization request with several potential service 
codes; however, providers should be aware that this may result in a 
partial affirmation decision if the documentation does not support the 
need for all of the services requested.
    Comment: Some commenters recommended that CMS include further 
guidance or information on what must be included in the proposed prior 
authorization request for facet joint injections in the final rule and 
asked CMS to clarify specific methodologies used to calculate the 
affirmation rate for non-exempt providers and the approval rate for the 
exempt providers if the Facet joint interventions are added to the 
prior authorization list. Another commenter asked for further 
clarification about whether, if the Facet joint intervention receives 
provisional affirmation, would associated anesthesia care also 
automatically receive provisional affirmation.
    Response: We thank the commenter for the recommendation. As we 
noted above, our prior authorization policy does not create any new 
documentation or administrative requirements. Instead, it just requires 
the same documents that are currently required to be submitted earlier 
in the process. Medicare contractors will calculate the compliance rate 
by dividing the total number of initial requests with provisional 
affirmations by the total number of initial requests for all eight 
service categories and notify providers with a compliance rate of 90 
percent or greater. To calculate the claim approval rate, contractors 
will divide the total number of approved claims in sample by the total 
number of the claims in that sample for all eight service categories 
for exempt providers and notify providers with approval rate of 90 
percent or greater. Detailed information on the process of submitting 
documents in support of the final claim and specifics regarding the 
calculation of the affirmation and approval rates can be found in 
subregulatory guidance such as OPD Operational Guide, which is 
available on the CMS OPD Prior Authorization and Pre-claim Review 
Initiatives website.\329\ A provider's MAC may request additional, 
optional elements for submission of the prior authorization request. 
While the associated claim for anesthesia care would follow standard 
claim review guidelines and does not require prior authorization, in 
accordance with Sec.  419.82(b)(2), CMS or its contractor may deny a 
claim that has received a provisional affirmation based on either of 
the following: (i) Technical requirements that can only be evaluated 
after the claim has been submitted for formal processing; or (ii) 
Information not available at the time of a prior authorization request. 
Additionally, in accordance with Sec.  419.83(b)(3), CMS or its 
contractor may deny claims for services related to services on the list 
of hospital outpatient department services for which the provider has 
received a denial. The codes for the associated services can be found 
in the table located in Appendix B (OPD PA Part B Associated Codes 
List) of the Operational Guide.
---------------------------------------------------------------------------

    \329\ https://www.cms.gov/research-statistics-data-systems/medicare-fee-service-compliance-programs/prior-authorization-and-pre-claim-review-initiatives/prior-authorization-certain-hospital-outpatient-department-opd-services.
---------------------------------------------------------------------------

    Comment: One commenter emphasized the need to ensure that review of 
prior authorization requests for Facet joint interventions service 
category is conducted by board-certified pain medicine specialists. 
Some commenters suggested that CMS should explore requiring electronic 
approvals across all payers, thereby increasing the speed of the prior 
authorization process and curtailing unnecessary delays in care 
provision.
    Response: In all Medicare Fee-for-Service medical review programs, 
we require that MACs utilize clinicians, specifically, registered 
nurses when reviewing medical documentation. We also require the 
oversight of a Medical Director and additional clinician engagement if 
necessary. Medical Directors are physicians from different medical 
specialties, including anesthesiology and pain management. We are 
confident that MACs have the requisite expertise to review prior 
authorization requests effectively. We are committed to incorporating 
automation into our prior authorization processes and recognize the 
value of automation in shortening the receipt of prior authorization 
requests and our response time. We recognize that not all providers 
have the same level of technology and allow various methods of 
submission of a prior authorization request. With regard to the 
hospital OPD prior authorization process, the majority of providers so 
far continue to submit requests and medical information to the MACs via 
facsimile. Other providers submit the requests through the United 
States (U.S.) postal service. We also support a variety of electronic 
mechanisms used by providers in submitting prior authorization 
requests, including individual MAC portals and CMS's electronic 
submission of medical documentation (esMD) system. We continue to 
monitor other Federal and industry initiatives in order to improve

[[Page 72230]]

the efficiency of our prior authorization processes, increase provider 
willingness to submit requests electronically, reduce provider burden, 
decrease delays in patient care, and promote high-quality, affordable 
health care.
    In sum, we continue to believe prior authorization is an effective 
mechanism to ensure Medicare beneficiaries receive medically necessary 
care while protecting the Medicare Trust Funds from unnecessary 
increases in volume by virtue of improper payments without adding 
onerous new documentation requirements. A broad program integrity 
strategy must use a variety of tools to best account for potential 
fraud, waste, and abuse, including unnecessary increases in volume. We 
believe prior authorization for these services will be an effective 
method for controlling unnecessary increases in the volume of these 
services and expect that it will reduce the instances in which Medicare 
pays for services that are determined not to be medically necessary.
    After consideration of the public comments we received, we are 
finalizing our proposal to add the Facet joint interventions service 
category to the list of hospital outpatient department services 
requiring prior authorization with modification. In particular, we are 
finalizing an implementation date for prior authorization for the Facet 
joint interventions service category of July 1, 2023, rather than the 
March 1, 2023 implementation date we proposed and making this change in 
the proposed regulation text at Sec.  419.83(a)(3). Other than this 
change in the implementation date, we are finalizing the proposed 
regulation text changes as proposed.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR23NO22.143


[[Page 72231]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.144


[[Page 72232]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.145


[[Page 72233]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.146

BILLING CODE 4120-01-C

XXI. Overall Hospital Quality Star Rating

A. Background
---------------------------------------------------------------------------

    \330\ CPT 67911 (Correction of lid retraction) was removed on 
January 7, 2022.
    \331\ CPT 21235 (Obtaining ear cartilage for grafting) was 
removed on June 10, 2020.
    \332\ 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 comment period.
---------------------------------------------------------------------------

    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 \333\ (now reported on its 
successor website at https://www.medicare.gov/care-compare and referred 
to as Care Compare) and has been refreshed multiple times, with the 
most current refresh planned for 
2022.334 335 336 337 338 339 340 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.
---------------------------------------------------------------------------

    \333\ 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.
    \334\ Centers for Medicare & Medicaid Services. (2016, May). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2016 
Updates and Specifications Report.
    \335\ Centers for Medicare & Medicaid Services. (2016, October). 
Overall Hospital Quality Star Rating on Hospital Compare: December 
2016 Updates and Specifications Report.
    \336\ Centers for Medicare & Medicaid Services. (2017, October). 
Overall Hospital Quality Star Rating on Hospital Compare: July 2017 
Updates and Specifications Report.
    \337\ 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.
    \338\ 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.
    \339\ 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.
    \340\ 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.
---------------------------------------------------------------------------

    In the CY 2023 OPPS/ASC proposed rule (87 FR 44807-44809), we: (1) 
provided information on the previously finalized policy for inclusion 
of quality measure data from Veterans Health Administration (VHA) 
hospitals; (2) proposed 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) conveyed 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 measures when compared to non-VHA 
hospitals for most measure groups. VHA hospitals in the five-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 were 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

[[Page 72234]]

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 arthroplasty (TKA)), we used measure data that were 
publicly reported in October 2020. These 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.
    While we did not make any proposals for VA hospital data in the 
proposed rule, we received some comments, which we are summarizing 
below.
    Comment: A few commenters provided support to include Veterans 
Health Administration (VHA) hospitals in Overall Star Ratings and one 
commenter expressed support for providing VHA hospitals with increased 
access to quality measurement data that they can use to compare to non-
VHA hospitals.
    Response: We thank commenters for their support of including VHA 
Hospitals in Overall Star Ratings.
    Comment: Some commenters expressed opposition to including VHA 
hospitals in Overall Star Ratings. A few commenters noted concern about 
how VHA hospitals and non-VHA hospitals can be meaningfully compared 
due to a distinct case mix and the differing services that are provided 
to patients at VHA and non-VHA hospitals. Another commenter noted that 
the fewer number of measures reported by VHA hospitals, particularly in 
the Safety and Readmission measure groups, prevents comparability among 
these measures between VHA and non-VHA hospitals. A commenter stated 
that including VHA hospitals in Overall Star Ratings may cause 
confusion for VHA patients who are also Medicare beneficiaries and that 
including VHA hospitals in Overall Star Ratings may not be the best 
method of providing VHA quality data. Another commenter expressed 
concern about how peer grouping was affected when VHA hospitals were 
added to Overall Star Ratings and suggested phasing the VHA hospitals 
into Overall Star Ratings over many years to attain increased measure 
reporting and a less sizeable peer group shift. The commenter also 
noted that creating cohorts of like facilities is important for Overall 
Star Ratings and the commenter is concerned about how the integration 
of VHA hospitals affects the overall goal of peer grouping. Similarly, 
a commenter suggested another alternative approach to including VHA 
hospital quality data in Overall Star Ratings by recommending that 
Critical Access Hospitals and VHA hospitals are assigned to their own 
peer groups specifically for their hospital types. A few other 
commenters suggested similar approaches where VHA hospitals would be 
situated in their own cohort as a result of categorizing hospitals 
through other types of peer grouping.
    Response: We acknowledge commenters' concerns, but we believe it is 
important for veterans to have information about hospital quality for 
non-VHA hospitals in addition to VHA hospitals to inform their care 
decisions. Medicare beneficiaries who are also veterans may choose to 
seek care outside the VHA system. When we initially considered options 
for peer grouping in the CY 2021 OPPS/ASC proposed rule (85 FR 49024), 
we discussed the potential to peer group by hospital characteristics, 
recognizing that some types of hospitals offer different sets of 
services. After extensive outreach with our Provider Leadership and 
Patient & Advocate Workgroups, as well as our Technical Expert Panel, 
we determined that the best approach to peer grouping was to use 
measure group count as measure group reporting was closely correlated 
with hospital type (85 FR 86229). We maintain that VA hospitals should 
be compared to other hospitals that report similar numbers of measures 
and we recognize that hospitals may still differ within each peer group 
regarding the types of services they offer. Additionally, VHA hospital 
data are already included in individual measure calculations and 
publicly reported on Care Compare for 15 measures.
    While the results of the VHA hospital Star Rating internal analyses 
demonstrated that VHA hospitals report fewer measures on average, 63 
percent of VHA hospitals still reported at least three measures in all 
five measure groups, which landed them in the five-measure group peer 
group (87 FR 44808). Many hospitals that report fewer measures than VHA 
hospitals are included in Overall Star Ratings, and we believe it is 
important for the public to have access to Overall Star Ratings for as 
many hospitals as possible, while still adhering to the Overall Star 
Ratings guiding principles to:
     Use scientifically valid methods that are inclusive of 
hospitals and measure information and able to accommodate underlying 
measure changes;
     Align with Care Compare or its successor website and CMS 
programs;
     Provide transparency of the methods for calculating the 
Overall Star Rating; and
     Be responsive to stakeholder input.
    We also disagree that including Overall Star Ratings scores for VHA 
hospitals will cause confusion among VHA patients who are also Medicare 
beneficiaries. Publishing Overall Star Ratings for VHA hospitals will 
allow dual VHA/Medicare beneficiaries to have more complete information 
about the quality of care for hospitals in their area and empower them 
to make health care decisions, in part, based on performance on the 
underlying Overall Star Ratings measures. In our internal analysis, 
3,119 (93 percent) of non-VHA hospitals maintained the same number of 
stars after adding VHA hospitals to the 2021 Overall Star Ratings (87 
FR

[[Page 72235]]

44808). As with any update to either the underlying measures or the 
Overall Hospital Quality Star Ratings methodology, we expect that some 
hospitals will shift Star Ratings with the addition of peer group 
members. The small shift in the Overall Star Ratings scores observed 
with the addition of VHA hospitals is consistent with prior changes to 
the measures or methodology in our experience. Instead of grouping VHA 
hospitals separately, incorporating them into Overall Star Ratings 
allows VHA hospitals to be compared to other hospitals with similar 
measure group reporting rates.
    Comment: One commenter appreciated the VHA impact analysis provided 
in the CY 2023 OPPS/ASC proposed rule while a few commenters 
recommended that more detailed information about the VHA impact 
analysis is shared with stakeholders, specifically focused on how non-
VA hospitals will be affected with the inclusion of VHA hospitals.
    Response: We thank the commenters for their support of the VHA 
impact analyses. As part of regular Overall Star Ratings work, we 
routinely conduct analyses to ensure the continued reliability and 
validity of Overall Star Ratings. Part of this work will include close 
monitoring of differences in VHA and non-VHA reporting rates and scores 
for the 2023 Overall Star Ratings and beyond. If for some reason 
results would require updates to Overall Star Ratings, we would address 
this topic through future rulemaking.
    Comment: A few commenters provided alternatives to including VHA 
hospitals in Overall Star Ratings. A few commenters suggested the 
implementation of a filter on Care Compare where users would choose to 
include VHA hospitals in the Overall Star Ratings data. Another 
commenter proposed a similar alternative where VHA hospitals would not 
receive an Overall Star Rating, but VHA hospitals would still be 
included in the measure data in order to have access to comparisons 
between VHA hospitals and non-VHA hospitals.
    Response: We thank the commenters for their suggestion and 
recognize the appeal of being able to tailor Overall Star Ratings to 
certain types of patients or hospitals. We acknowledge that some 
individuals or organizations may wish to compare Overall Star Ratings 
to a very specific group of hospitals, like the VHA, as opposed to all 
hospitals. However, filtering by VHA versus non-VHA hospitals would 
pose several implementation and communications challenges that prevent 
us from incorporating this suggestion. The Overall Star Ratings 
methodology utilizes a clustering algorithm to assign Overall Star 
Ratings based on a hospital's performance compared to all other 
hospitals included in Overall Star Ratings. When a specific group or 
type of hospital is removed from Overall Star Ratings, the hospitals to 
which the clustering algorithm is applied to changes and in turn 
hospitals are compared to different hospitals and some may receive a 
different Overall Star Rating. As such, adding a filter for VHA 
hospitals would lead to hospitals having three different Overall Star 
Ratings scores: (1) Overall Star Ratings for non-VHA hospitals and VHA 
hospitals when both are included; (2) Overall Star Ratings for non-VHA 
hospitals only; and (3) Overall Star Ratings for VHA hospitals only. 
Therefore, the same hospital may appear as 4-star, 3-star, or 5-star 
depending on which comparison group is selected. We believe that this 
would be confusing to consumers and hospitals. Moreover, it would also 
necessitate sending hospitals three different hospital specific reports 
that may confuse local quality improvement efforts. Lastly, adopting 
this suggestion may lead to additional requests to filter by other 
types of hospitals, resulting in an even greater numbers of Star 
Ratings scores depending on which filter was applied.
    Comment: A commenter suggested that the VHA could potentially 
implement its own Overall Star Ratings program but acknowledged that 
this alternative likely falls outside of the scope of CMS's Overall 
Star Ratings Program.
    Response: The VHA previously used its own rating system, however, 
it was discontinued in 2020 as part of a broader effort to support 
veteran's health access and choice beyond VHA hospitals alone. 
Approximately 50 percent of veterans enrolled in the VHA healthcare 
system are eligible for Medicare. The goal of this collaboration 
between us and the VHA healthcare system is to present the VHA's 
quality and safety data to veterans, their families, and the public in 
a useful and understandable format. Section 206(c) of The Veteran's 
Access, Choice, and Accountability Act of 2014 requires the Secretary 
of VA to enter into an agreement with the Secretary of HHS to report 
and make publicly available patient quality and outcome information 
concerning the VA medical centers.
    While we did not make any proposals for VHA hospital data in the 
proposed rule, we appreciate related stakeholder feedback that we 
received.

C. Frequency of Publication and Data Used

    In the CY 2023 OPPS/ASC proposed rule (87 FR 44807), we proposed 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). As discussed in the CY 2023 OPP/ASC 
proposed rule, 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 proposed to change Sec.  412.190(c) to provide that 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 
2023, October 2022, or July 2022.
    We invited public comments on this proposal.
    Comment: A few commenters supported the clarification of data 
period refreshes in the CY 2023 OPPS/ASC proposed rule. Several 
commenters expressed that the clarifications of the potential 
measurement reporting periods for use in Overall Star Ratings would 
allow for more consistent and timely Overall Star Ratings releases. A 
few commenters added that Overall Star Ratings being released different 
months each calendar year was not ideal, and that consistent annual or 
biannual Overall Star Ratings releases should be considered. Another 
commenter noted that the unpredictability of Overall Star Rating 
releases cause difficulty in projecting trends and suggested that CMS 
release Overall Star Ratings more consistently, specifically the same 
month each year.
    Response: We thank the commenters for their support of our 
proposal. We would like to reiterate that we are not finalizing a 
change in the Care Compare refreshes available to use for any given 
Overall Star Ratings release. Rather, we are specifying the specific 
Care Compare data that would be available and used for any given 
Overall Star Ratings release. We intend to release Overall Star Ratings 
at the same time every year

[[Page 72236]]

but need to be able to accommodate unforeseen circumstances.
    Comment: A commenter emphasized the importance of informing the 
public in a timely manner which dataset will be used for a given 
Overall Star Ratings release in order for providers to optimize their 
use of the program. A commenter also thought that the ability for 
Overall Star Ratings releases to utilize the data period simultaneously 
refreshed that same exact month as outlined in the proposed rule (for 
example, a July 2023 Overall Star Ratings release can use July 2023 
data) does not allow enough advanced notice for providers to first 
digest the underlying measure results; an intention that was expressed 
in the CY 2021 OPPS/ASC final rule with comment period. A few 
commenters recommended that further clarification is provided regarding 
which data are used for Overall Star Ratings releases. More 
specifically, a few commenters also stated that the wording of 
``previous 12 months'' causes confusion because 1 of 5 individual 
quarterly refreshes could be used for any given Overall Star Ratings 
release and 4 quarters is traditionally thought of as one full year.
    Response: We appreciate these comments and recognize the importance 
of providing hospitals and the public with as much notice as possible 
regarding an upcoming Star Ratings release. We would also like to note 
that while the regulation allows us to use data from the same month the 
Star Ratings are released, in practice there is usually at least a 6-
month delay between the Care Compare data and when Star Ratings are 
released. This gap between individual measure refreshes and Overall 
Star Ratings is intentional and is based upon prior public comment in 
which stakeholders acknowledged the lack of alignment but noted the 
benefit of allowing for any Care Compare corrections as well as 
hospital preparation prior to Overall Star Ratings releases (85 FR 
86203). We agree with commenters that the prior language did not make 
it clear which specific Care Compare refreshes could be used for any 
Star Ratings release. We would like to acknowledge that the CY 2023 
OPPS/ASC proposed rule incorrectly referenced the January 2022 refresh 
in the example of data that could be used for July 2023 Overall 
Hospital Quality Star Ratings, when it should have referenced the 
January 2023 refresh. We believe this contributed to some of the 
confusion mentioned. We are confirming our interpretation of ``previous 
12 months'' to include Care Compare refreshes that occur in either the 
first or last month of that 12-month period, and any time in between. 
For example, for a 2023 Overall Star Ratings release there are five 
data refreshes that can be used: July 2022, October 2022, January 2023, 
April 2023, and July 2023.
    Comment: A commenter expressed that the use of older data (up to a 
year old) in calculating Overall Star Ratings has the potential to 
limit its value to hospitals in addition to possibly leading to 
misunderstandings among patients. Similarly, another commenter stated 
their belief that the lag between data collection and public 
availability prevents patients from making timely decisions related to 
choosing a facility.
    Response: We understand the need for data that are as up to date as 
possible when reporting on quality of care. However, Overall Star 
Ratings must balance this goal with the fact that Overall Star Ratings 
include measures with various measurement periods and refresh cycles. 
Moreover, there are times where we are required to use less recent Care 
Compare data due to situations where measure scores or programs are 
compromised due to unforeseen circumstances like the COVID-19 PHE. 
Historically, Overall Star Ratings were published simultaneously with 
Care Compare refreshes, however, since the institution of a lag between 
Care Compare refreshes and Overall Star Ratings releases, such 
challenges have been fewer or absent.
    After consideration of the public comments we received, we are 
finalizing the proposal as proposed and thank the commenters for their 
input.

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).\341\ 
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).\342\ 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).
---------------------------------------------------------------------------

    \341\ 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.
    \342\ 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.
---------------------------------------------------------------------------

    We discussed in the CY 2023 OPPS/ASC proposed rule (87 FR 44807) 
that we recognize 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 (that is, 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-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 and Prevention's (CDC) National Healthcare Safety 
Network (NHSN) for this data period.\343\ Because the ECE

[[Page 72237]]

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

    \343\ 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 
pay-for-performance 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 final 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 we intend to 
publish the Overall Hospital Quality Star Rating in 2023, we may 
exercise the authority described above should the COVID-19 PHE 
substantially affect the underlying measure data.
    While we did not make any proposals in this section, we are 
summarizing comments received below.
    Comment: A few commenters noted appreciation for CMS's 
clarification of the potential circumstances that could warrant 
suppression of Overall Star Ratings, particularly in the case of a PHE 
that ``substantially affects the underlying measure data'' (87 FR 
44809). A commenter further expressed their support for CMS's 
acknowledgement that programs should not be negatively affected by 
factors unrelated to quality of care provided.
    Response: We thank commenters for their support regarding the 
potential suppression of 2023 Overall Star Ratings in the case of a PHE 
that ``substantially affects the underlying measure data'' (87 FR 
44809).
    Comment: A few commenters expressed approval of the language to 
enable CMS to suppress the Overall Star Ratings when appropriate. 
Another commenter voiced support of Overall Star Ratings suppression if 
the impact of COVID-19 significantly affects quality measurement. 
Multiple commenters requested continued transparency in any future 
impacts to Overall Star Ratings and one commenter sought further 
clarification on circumstances where suppression of Overall Star 
Ratings would be appropriate.
    Response: We thank the commenters for their input on the potential 
suppression of 2023 Overall Star Ratings. We will continue to evaluate 
the impacts of COVID-19 and the PHE on 2023 Overall Star Ratings and 
maintain transparency regarding the results. If future data continue to 
be significantly affected by COVID-19 and the PHE, we will consider 
exercising the suppression policy to suppress 2023 Overall Star 
Ratings. We will continue to assess changes in our methodology to 
improve its robustness and in the future continue to communicate when 
suppression of Overall Star Ratings may be necessary.
    Comment: A commenter expressed the importance of analyzing measures 
and policies in Medicare that are tied to payment and publicly reported 
programs given the impact of the COVID-19 pandemic on measures in terms 
of data suppression and measure reliability.
    Response: We agree with the commenter on the importance of 
continuing to analyze the data, and we continue to assess the impact of 
the COVID-19 pandemic on quality measures that are tied to payment and 
publicly reported programs. Different policies have long had impact on 
healthcare delivery and could impact individual measure score data or 
calculations. We conduct regular reevaluation of measures as well as 
ongoing stakeholder engagement for individual measures to support 
reporting. While Overall Star Ratings are calculated using measure 
scores publicly reported on Care Compare, Overall Star Ratings does not 
separately modify measures to further adjust for patient or hospital-
level factors. We will continue to conduct analyses examining the 
reliability and validity of 2023 Overall Star Ratings and we reserve 
the right to suppress them.
    Comment: Several commenters emphasized the importance of CMS 
transparency related to impacts of COVID-19 on Overall Star Ratings if 
Overall Star Ratings are released in 2023. More specifically, a few 
commenters suggested that alongside 2023 Overall Star Ratings, data be 
provided that demonstrates exact COVID-19 impacts to the Ratings, such 
as the number of hospitals that no longer meet the minimum threshold to 
receive an Overall Star Rating, or the number of hospitals that have 
reduced measurement periods available due to COVID-19 impact, 
emphasizing reliability concerns. The commenters also suggested that if 
that Overall Star Ratings are published in 2023, it would be important 
to gather feedback from beneficiaries about their interpretation of the 
impact of COVID-19 on Overall Star Ratings to better understand the 
patient perspective in this context. A commenter expressed concern 
about how CMS will determine whether underlying measure data are 
``substantially affected'' to warrant suppression of Overall Star 
Ratings. The commenter suggested that an analysis to show this effect 
on Overall Star Ratings is communicated through stakeholder engagement 
efforts. The commenter emphasized that beneficiaries are still 
interested in accessing hospital performance data provided through the 
Overall Star Ratings program during the COIVD-19 pandemic.
    Response: We did not propose to publicly post detailed analyses on 
the COVID-19 impact on Care Compare and are not planning to do so. 
Should we discover that the impact of COVID-19 on the underlying 
measures meets the suppression criteria, then we will suppress 2023 
Overall Star Ratings.
    Comment: Multiple commenters conveyed the importance of reviewing 
the suppression policy and understanding the effects of the COVID-19 
PHE on data prior to making a final decision on 2023 Overall Star 
Ratings.

[[Page 72238]]

One commenter opposed suppression of 2023 Overall Star Ratings, 
suggesting instead that the methodology mature to withstand adverse 
events, such as public health emergencies. A few commenters disagreed 
with the approach to include quality measures in Overall Star Ratings 
that are suppressed for payment programs but still reported on Care 
Compare. One of the commenters believed that the misalignment of 
quality measures reported for payment programs and Care Compare will 
cause confusion and warrants suppression of the 2023 Overall Star 
Ratings.
    Response: We understand that there may be confusion regarding the 
decision to include quality measures that are reported on Care Compare 
but suppressed in payment programs. However, as stated in the CY 2021 
OPPS final rule (85 FR 86195), the goal of Overall Star Ratings is to 
include measures that ``are publicly reported on Hospital Compare or 
its successor websites.'' Overall Star Ratings are meant to be a 
consumer-friendly tool that summarizes measure scores reported on Care 
Compare, and as such do not take into consideration the status of these 
measures in payment programs. Since the inception of Overall Star 
Ratings, many measures not included in payment programs, such as the 
Hospital Value-Based Purchasing or Hospital Readmissions Reduction 
Programs, have been publicly reported as part of the Hospital Inpatient 
Quality Reporting or Outpatient Quality Reporting Programs on Care 
Compare, and have been included in Overall Star Ratings based on 
Technical Expert input and Work Group input. The primary goal of the 
Overall Star Rating is to ``use an established, evidence-based 
statistical approach to summarize hospital quality measure results 
reported on Care Compare'' (85 FR 86194). Thus, measures that are 
reported on Care Compare will continue to be included in Overall Star 
Ratings, even if they have been suppressed in payment programs.
    While we did not make any proposals for the suppression of Overall 
Star Ratings in the proposed rule, we appreciate related stakeholder 
feedback that we received.

XXII. Finalization of Certain COVID-19 Interim Final Rules With Comment 
Period Provisions

A. Medicare and Medicaid Programs; Policy and Regulatory Revisions in 
Response to the COVID-19 Public Health Emergency (CMS-1744-IFC)

    In this final rule with comment, we are responding to public 
comments and stating our final policies for certain provisions in the 
IFC titled ``Medicare and Medicaid Programs; Policy and Regulatory 
Revisions in Response to the COVID-19 Public Health Emergency'' (CMS-
1744-IFC), which appeared in the April 6, 2020 Federal Register (85 FR 
19230; hereinafter referred to as the April 6, 2020 IFC).
1. Inpatient Hospital Services Furnished Under Arrangements Outside the 
Hospital During the Public Health Emergency (PHE) for the COVID-19 
Pandemic
    For purposes of Medicare payment, section 1861(b) of the Act 
defines inpatient hospital services in part as the following items and 
services furnished to an inpatient of a hospital and (except as 
provided in paragraph (3)) by the hospital: (1) bed and board; (2) such 
nursing services and other related services, such use of hospital 
facilities, and such medical social services as are ordinarily 
furnished by the hospital for the care and treatment of inpatients, and 
(3) such other diagnostic or therapeutic items or services, furnished 
by the hospital or by others under arrangements with them made by the 
hospital, as are ordinarily furnished to inpatients either by such 
hospital or by others under such arrangements.
    Routine services in the hospital setting are those described in 
sections 1861(b)(1) and (b)(2) of the Act, under the definition of 
``inpatient hospital services.'' Under our historical policy for 
hospital services furnished under arrangements that we adopted in the 
FY 2012 IPPS/LTCH PPS rulemaking (76 FR 51714), routine services cannot 
be provided under arrangement outside the hospital. Only the 
therapeutic and diagnostic services described in section 1861(b)(3) of 
the Act can be provided under arrangement outside the hospital.
    In the April 6, 2020 IFC (85 FR 19278), we provided an overview of 
the FY 2012 IPPS/LTCH PPS rulemaking, which set forth the rationale and 
statutory basis for our under arrangements policy. In particular, we 
stated in the FY 2012 rulemaking that we believe this policy is 
consistent with the statute because the statutory language specifying 
that the routine services described in sections 1861(b)(1) and (b)(2) 
of the Act be provided ``by the hospital'' suggests that the hospital 
is required to exercise professional responsibility over the services, 
including quality controls. In situations in which certain routine 
services are provided through arrangement ``in the hospital,'' for 
example, contracted nursing services, we stated that we believe the 
arrangement generally results in the hospital exercising the same level 
of control over those services as the hospital does in situations in 
which the services are provided by the hospital's salaried employees.
    Therefore, if routine services are provided in the hospital to its 
inpatients, we consider the service as being provided by the hospital. 
However, if these services are provided to its patients outside the 
hospital, the services are considered as being provided under 
arrangement, and not by the hospital. Therefore, consistent with the 
statute, we stated that only therapeutic and diagnostic services can be 
provided under arrangement outside the hospital.
    Furthermore, we noted that, at the time of the FY 2012 rulemaking, 
we were aware that some hospitals were furnishing certain routine 
services, including ICU services, under arrangement, which we believed 
might result in inappropriate and potentially excessive Medicare 
payments for such services in certain circumstances. We explained that 
limiting the furnishing of routine services under arrangements to 
situations in which the services are furnished in the hospital would 
reduce the opportunity for gaming and ensure that the hospital 
exercises sufficient control over the use of hospital resources when 
furnishing these services.
    For additional details on our prior rulemaking, refer to the 
discussion in section II.CC.2 of the April 6, 2020 IFC (85 FR 19278) 
and the FY 2012 IPPS/LTCH PPS final rule (76 FR 51711).
    As we noted in the April 6, 2020 IFC (85 FR 19279), while we 
continue to believe that our historical policy is consistent with the 
statute and appropriate for the reasons discussed in the FY 2012 IPPS/
LTCH PPS rulemaking, we wished to give hospitals that provide services 
to Medicare beneficiaries additional flexibilities to respond 
effectively to the serious public health threats posed by the spread of 
COVID-19. Recognizing the urgency of this situation, and understanding 
that some pre-existing Medicare payment rules might inhibit use of 
capacity that might otherwise be effective in the efforts to mitigate 
the impact of the pandemic on Medicare beneficiaries and the American 
public, we changed our ``under arrangements'' policy during the PHE for 
the COVID-19 pandemic beginning March 1, 2020, so that hospitals could 
be allowed broader flexibilities to furnish inpatient services, 
including routine services outside the hospital's campus or premises.
    We believe that our concerns articulated in the FY 2012 rulemaking

[[Page 72239]]

regarding gaming of routine services provided outside the hospital for 
payment reasons are significantly mitigated by the existence of the 
PHE. As we explained in the April 6, 2020 IFC, we expected that during 
the PHE for the COVID-19 pandemic, hospitals would be treating patients 
in locations outside the hospital for a variety of reasons, including 
limited beds and/or limited specialized equipment such as ventilators, 
and for a limited time period, and that during this time hospitals 
would not be treating patients outside the hospital for gaming reasons.
    Moreover, we stated that we did not believe that the statute would 
preclude this temporary change in policy to allow routine services to 
be provided under arrangements outside the hospital, in light of the 
compelling circumstances and the need for additional, short-term 
flexibility during the current PHE for the COVID-19 pandemic. 
Consistent with this, we noted that we received comments during the FY 
2012 rulemaking stating that our policy to limit the services a 
hospital may provide under arrangements is not required by the statute 
and that CMS' reading of the statutory definition of ``inpatient 
hospital services'' is only one possible interpretation of the statute.
    While we changed our under arrangements policy during the PHE for 
the COVID-19 pandemic to allow hospitals broader flexibilities in 
furnishing inpatient services, we emphasized in the April 6, 2020 IFC 
that we were not changing our policy that a hospital needs to exercise 
sufficient control and responsibility over the use of hospital 
resources in treating patients, as discussed in the FY 2012 IPPS/LTCH 
PPS final rule and Section 10.3 of Chapter 5 of the Medicare General 
Information, Eligibility, and Entitlement Manual (Pub. 100-01). Nothing 
in the current PHE for the COVID-19 pandemic has changed our policy or 
thinking with respect to this issue and we made no modifications to 
this aspect of the policy. We emphasized that hospitals need to 
continue to exercise sufficient control and responsibility over the use 
of hospital resources in treating patients regardless of whether that 
treatment occurs in the hospital or outside the hospital under 
arrangements. If a hospital cannot exercise sufficient control and 
responsibility over the use of hospital resources under arrangements, 
the hospital should not provide those services outside the hospital 
under arrangements.
    Comment: Commenters expressed support for the modification to our 
policy concerning routine services provided under arrangements outside 
the hospital during the COVID-19 PHE. Several commenters noted that 
these flexibilities would promote patient access to safe alternative 
care settings while minimizing risk of exposure to COVID-19.
    Response: We appreciate the commenters' support for our policy.
    Comment: A number of commenters recommended that CMS extend the 
modification to our under arrangements policy for a reasonable period 
after the termination of the PHE, for example one year, stating that 
this would give hospitals time to revert to normal operations while 
being prepared to respond to a potential subsequent wave of the virus. 
A few commenters requested that CMS adopt the modification permanently.
    Response: As we noted in the April 6, 2020 IFC (85 FR 19278), we 
adopted this modification to our under arrangements policy in 
recognition of the urgent and compelling circumstances associated with 
the COVID-19 PHE and the understanding that some pre-existing Medicare 
payment rules might inhibit use of capacity that might otherwise be 
effective in the efforts to mitigate the impact of the pandemic. We 
continue to believe that outside of the context of the COVID-19 PHE, 
our policy prohibiting routine services from being provided under 
arrangements outside the hospital is consistent with the statute and 
appropriate for the reasons discussed in the FY 2012 IPPS/LTCH PPS 
rulemaking. With respect to the recommendation that we maintain these 
flexibilities for a limited period of time after the termination of the 
COVID-19 public health emergency, we note that CMS has regularly 
updated the provider community on the status of the various COVID-19-
related flexibilities and reiterated that these flexibilities will 
expire once the PHE ends. We also believe that, in the absence of 
widespread capacity issues such as those experienced earlier during the 
pandemic, the majority of hospitals are experiencing more typical 
patterns of inpatient care. Thus, we believe that providers will have 
had time to prepare for a return to normal operations and to wind down 
those flexibilities that are no longer critical in nature, and that an 
extension of the modifications to our policy beyond the end of the PHE 
is unnecessary. In the event that circumstances in a future PHE warrant 
additional flexibilities, we will address this issue in future 
rulemaking. For these reasons, we are not adopting the commenters' 
suggestions that we make this modification permanent or extend the 
modification past the end of the COVID-19 PHE.
    After consideration of the comments received, and for the reasons 
discussed, we are finalizing without modification our policy that, 
effective for services provided for discharges for patients admitted to 
the hospital during the PHE for COVID-19 beginning March 1, 2020 until 
the end of the PHE, if routine services are provided under arrangements 
outside the hospital to its inpatients, these services are considered 
as being provided by the hospital. We are not changing our policy that 
a hospital needs to exercise sufficient control and responsibility over 
the use of hospital resources in treating patients regardless of 
whether that treatment occurs in the hospital or outside the hospital 
under arrangements. When the COVID-19 PHE ends, and consistent with the 
policy adopted in the FY 2012 IPPS/LTCH PPS rulemaking, for purposes of 
Medicare payment, only the therapeutic and diagnostic items and 
services described in section 1861(b)(3) of the Act may be furnished 
under arrangements outside the hospital. If routine services are 
provided in the hospital to its inpatients, these services will be 
considered as being provided by the hospital. However, if these 
services are provided to patients outside the hospital, the services 
will be considered as being provided under arrangement, and not by the 
hospital.
2. Counting Resident Time During the PHE for the COVID-19 Pandemic
    In the April 6, 2020-IFC (85 FR 19269), we included provisions 
revising 42 CFR 415.172, 415.174, 415.180, 415.184, and 415.208 for the 
duration of the PHE that allowed a hospital to claim a resident for 
indirect medical education (IME) or direct graduate medical education 
(DGME) if the resident is performing patient care activities within the 
scope of his or her approved program via telecommunications, in his or 
her own home, or in a patient's home. This allowed medical residents to 
perform their duties in alternate locations, including their own home 
or a patient's home, as long as the activities meet appropriate 
physician supervision requirements, which could also be met via 
telecommunications participation.
    In this section of this final rule, we are responding to the public 
comments that we received on these provisions in the April 6, 2020 IFC 
and finalizing the interim policies.
    Comment: We received overwhelming support for the provisions 
allowing teaching hospitals to claim DGME and IME for the time a 
resident performs

[[Page 72240]]

patient care activities within the scope of their approved program in 
their own home, or in an established patient's home for the duration of 
the PHE. A few commenters requested making this change permanent.
    Response: We appreciate the commenters' support of this policy 
during the COVID-19 PHE. Outside of the context of the COVID-19 PHE, 
performing patient care activities in a patient's home, or in a 
resident's home for the purpose of a hospital claiming IME or DGME 
payment is not permissible under the statute's definition of 
nonprovider setting \344\ and the hospital conditions of participation 
under 42 CFR part 482. Therefore, once the COVID-19 PHE ends we do not 
believe it would be appropriate to continue to permit a hospital to 
claim a resident for IME or DGME if the resident is performing patient 
care activities in his or her own home, or in a patient's home either 
on a temporary or permanent basis. In the event circumstances in a 
future PHE warrant additional flexibilities, we will address this issue 
in future rulemaking.
---------------------------------------------------------------------------

    \344\ Section 1886(h)(5)(K) of the Act.
---------------------------------------------------------------------------

    In this final rule with comment period, we are finalizing the 
provisions of the April 6, 2020 IFC without modification, to allow a 
hospital to claim a resident for IME or DGME if the resident is 
performing patient care activities within the scope of his or her 
approved program in his or her own home, or in a patient's home for the 
duration of the COVID-19 PHE. We note, when the COVID-19 PHE ends, a 
hospital may not count a resident for purposes of Medicare DGME 
payments or IME payments if the resident is performing activities with 
the scope of his/her approved program in his/her own home, or a 
patient's home. This policy does not require any changes to the 
regulations text.
3. Modification of the Inpatient Rehabilitation Facility (IRF) Face-to-
Face Requirement for the PHE During the COVID-19 Pandemic
    Under 42 CFR 412.622(a)(3)(iv), for an inpatient rehabilitation 
facility (IRF) claim to be considered reasonable and necessary under 
section 1862(a)(1) of the Act, there must be a reasonable expectation 
at the time of the patient's admission to the IRF that the patient 
requires physician supervision by a rehabilitation physician, defined 
as a licensed physician with specialized training and experience in 
inpatient rehabilitation. The requirement for medical supervision means 
that the rehabilitation physician must conduct face-to-face visits with 
the patient at least 3 days per week throughout the patient's stay in 
the IRF to assess the patient both medically and functionally, as well 
as modify the course of treatment as needed to maximize the patient's 
capacity to benefit from the rehabilitation process. The purpose of the 
physician supervision requirement is to ensure that the patient's 
medical and functional statuses are being continuously monitored as the 
patient's overall plan of care is being carried out.
    We note that, in the FY 2021 IRF PPS final rule (85 FR 48450 
through 48453), we amended the IRF coverage requirements to allow, 
beginning with the second week of admission to the IRF, a nonphysician 
practitioner who is determined by the IRF to have specialized training 
and experience in inpatient rehabilitation to conduct 1 of the 3 
required face-to-face visits with the patient per week, provided that 
such duties are within the non-physician practitioner's scope of 
practice under applicable state law.
    We continue to believe that it is in the patient's best interest to 
be seen in person by a rehabilitation physician (or, in accordance with 
the revised regulations, a nonphysician practitioner) to assess their 
medical and functional statuses while at the IRF, and we encourage 
rehabilitation physicians (or, in accordance with the revised 
regulations, nonphysician practitioners) to continue to visit IRF 
patients in person as long as all necessary precautions, including the 
use of PPE, are taken to ensure the health and safety of the patient 
and the physician. However, in the April 6, 2020 IFC (85 FR 19252), we 
stated that we would temporarily allow the face-to-face visit 
requirements at Sec. Sec.  412.622(a)(3)(iv) and 412.29(e) to be 
conducted via telehealth to safeguard the health and safety of Medicare 
beneficiaries and the rehabilitation physicians (or, in accordance with 
the revised regulations, the nonphysician practitioners) treating them 
during the PHE for the COVID-19 pandemic. This provision allowed 
rehabilitation physicians (or, in accordance with the revised 
regulations, nonphysician practitioners) to use telehealth services, as 
defined in section 1834(m)(4)(F) of the Act, to conduct the required 3 
physician visits per week during the PHE for the COVID-19 pandemic. By 
increasing access to telehealth, we believe that this provision has 
provided the necessary flexibility for Medicare beneficiaries to be 
able to receive medically necessary services without jeopardizing their 
health or the health of those who are providing those services, while 
minimizing the overall risk to public health.
    We received several comments on the flexibility allowing 
rehabilitation physicians (or, in accordance with the revised 
regulations, nonphysician practitioners) to use telehealth services as 
defined in section 1834(m)(4)(F) of the Act to conduct the required 3 
physician visits per week during the COVID-19 PHE, which are addressed 
below.
    Comment: Commenters expressed support for the modification to our 
policy to allow rehabilitation physicians (or, in accordance with the 
revised regulations, nonphysician practitioners) to use telehealth 
services as defined in section 1834(m)(4)(F) of the Act to conduct the 
required 3 physician visits per week during the COVID-19 PHE. The 
commenters thanked CMS for our rapid response to the pandemic.
    Response: We appreciate the commenters' support for our policy, and 
are finalizing the policy for the duration of the PHE.
    Comment: One commenter said that this temporary flexibility should 
not be made permanent.
    Response: We agree with the commenter that this temporary 
flexibility should expire when the PHE ends. As we said in the IFC, we 
believe it is in the patient's best interest to be seen in person by a 
rehabilitation physician (or, in accordance with the revised 
regulations, a nonphysician practitioner) to assess their medical and 
functional statuses while at the IRF. Accordingly, this policy will 
automatically terminate with the end of the PHE, and rehabilitation 
physicians (or, in accordance with the revised regulations, 
nonphysician practitioners) will be required to visit IRF patients 
face-to-face at least 3 times per week.
    After carefully considering the comments we received, and for the 
reasons discussed, we are finalizing without modification our policy 
that during the COVID-19 PHE, rehabilitation physicians (or, in 
accordance with the revised regulations, nonphysician practitioners) 
may use telehealth services as defined in section 1834(m)(4)(F) of the 
Act to conduct the 3 physician visits required under Sec. Sec.  
412.622(a)(3)(iv) and 412.29(e). When the COVID-19 PHE ends, 
rehabilitation physicians (or, in accordance with the revised 
regulations, nonphysician practitioners) will be required to visit IRF 
patients face-to-face at least 3 times per week. To effectuate these 
changes, we are finalizing without modification the revisions to the 
regulations at Sec. Sec.  412.622(a)(3)(iv) and 412.29(e) described 
within the April 6, 2020 IFC.

[[Page 72241]]

4. Direct Supervision by Interactive Telecommunications Technology
    In the April 6, 2020 IFC (85 FR 19245 through 19246) we altered, 
for the duration of the PHE, the definition of direct supervision at 
Sec. Sec.  410.32(b)(3)(ii) and 410.28(e), to state that the necessary 
presence of the physician includes virtual presence through audio/video 
real-time communications technology when use of such technology was 
indicated to reduce exposure risks for the beneficiary or health care 
provider. We similarly altered the definition of direct supervision of 
pulmonary, cardiac and intensive rehabilitation at Sec.  
410.27(a)(1)(iv)(D), to state that the necessary presence of the 
physician 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.
    In the CY 2021 PFS final rule (85 FR 84538 through 84540), we 
revised Sec.  410.32(b)(3)(ii) to extend the duration of the altered 
definition of direct supervision until the later of December 31st, 
2021, or the end of the calendar year in which the PHE ends. In the CY 
2021 OPPS final rule (85 FR 86110 through 86113), we revised Sec.  
410.27(a)(1)(iv)(D) to extend the duration of the altered definition of 
direct supervision of pulmonary, cardiac and intensive rehabilitation 
until the later of December 31st, 2021 or the end of the calendar year 
in which the PHE ends.
    In the CY 2023 OPPS proposed rule (87 FR 44834 through 44835), we 
proposed to revise Sec.  410.28(e) to extend the duration of the 
altered definition of direct supervision from the end of the PHE to the 
end of the calendar year in which the PHE ends for consistency with 
Sec. Sec.  410.32(b)(3)(ii) and 410.27(a)(1)(iv)(D). In section X.E of 
this final rule with comment period, we are finalizing the revisions to 
Sec.  410.28(e) as proposed.
    In the CY 2023 OPPS proposed rule (87 FR 44679 through 87 FR 
44680), we solicited comment as to whether we should extend the 
duration of the altered definition of direct supervision of pulmonary, 
cardiac and intensive rehabilitation through the end of CY 2023. Based 
on the comments we received in response to our solicitation, in section 
X.C of this final rule with comment period, we are finalizing revisions 
to Sec.  410.27(a)(1)(iv)(D) to extend the duration of the altered 
definition of direct supervision of pulmonary, cardiac and intensive 
rehabilitation until the later of December 31st, 2023, or the end of 
the calendar year in which the PHE ends.
    We refer readers to the April 6, 2020 IFC (85 FR 19245 through 
19246), CY 2021 PFS final rule (85 FR 84538 through 84540), CY 2021 
OPPS final rule (85 FR 86110 through 86113) and the above referenced 
sections of this CY 2023 OPPS final rule for a more detailed discussion 
of the reasoning behind our revisions to Sec. Sec.  410.32(b)(3)(ii), 
410.28(e), and 410.27(a)(1)(iv)(D).
    Comment: We received public comments on the direct supervision 
definitions that we adopted on an interim basis in the IFC provisions 
related to Sec. Sec.  410.32(b)(3)(ii), 410.28(e), and 
410.27(a)(1)(iv)(D). Many commenters supported the alteration of the 
definition of direct supervision at Sec. Sec.  410.32(b)(3)(ii), 
410.28(e), and 410.27(a)(1)(iv)(D) to include the virtual presence of 
the physician through audio/video real-time communications technology 
for the duration of the PHE. Several of these commenters encouraged CMS 
to make the revisions to these definitions permanent. Several 
commenters expressed appreciation for CMS's acknowledgement in the 
April 6, 2020 IFC (85 FR 19245 through 19246) that virtual direct 
supervision facilitates the provision of telehealth services by 
clinical staff of physicians and other practitioners incident to their 
own professional services and cited this as a reason for CMS to make 
the revisions to direct supervision permanent. Finally, a few 
commenters expressed concern about the safety of allowing virtual 
supervision of home infusion therapy services.
    Response: We appreciate commenters' input on this policy and will 
consider these comments for future rulemaking. In this final rule with 
comment period, we are finalizing the proposal to revise the definition 
of direct supervision in Sec.  410.28(e) for consistency with 
Sec. Sec.  410.32(b)(3)(ii) and 410.27(a)(1)(iv)(D). We are also 
finalizing revisions to Sec.  410.27(a)(1)(iv)(D) to extend the 
duration of the altered definition of direct supervision of pulmonary, 
cardiac and intensive rehabilitation until the later of December 31st, 
2023 or the end of the calendar year in which the PHE ends. This means 
that for Sec. Sec.  410.32(b)(3)(ii), 410.28(e), and 
410.27(a)(1)(iv)(D), virtual direct supervision will conclude on 
December 31st of the calendar year in which the PHE ends. We also note 
that the Secretary renewed the PHE for the COVID-19 pandemic for a 90-
day period beginning on October 13, 2022,\345\ which will expire on 
January 11, 2023, absent another renewal of the PHE by the Secretary. 
As such, direct supervision through a virtual presence will continue to 
be permitted through at least the end of CY 2023 under our finalized 
policies.
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B. Medicare and Medicaid Programs, Basic Health Program, and Exchanges; 
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 (CMS-5531-IFC)

    In this final rule with comment we are also responding to public 
comments and stating our final policies for certain provisions in the 
IFC titled ``Medicare and Medicaid Programs, Basic Health Program, and 
Exchanges; 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'' (CMS-5531-IFC), which appeared in the May 8, 2020 Federal 
Register (85 FR 27550; hereinafter referred to as the May 8, 2020 IFC).
1. Medical Education Payments
a. Indirect Medical Education
(1) Holding Hospitals Harmless From Reductions in Indirect Medical 
Education (IME) Payments Due to Increases in Bed Counts
    In the May 8, 2020 IFC (85 FR 27567 through 27568), we implemented 
several policies on an interim final basis related to holding hospitals 
harmless from reductions in IME payments due to increases in bed counts 
during the COVID-19 PHE. As discussed later in this section of this CY 
2023 OPPS/ASC final rule, we also implemented a policy to hold IRFs and 
IPFs harmless from reductions to teaching status adjustment payments 
due to COVID-19. We refer readers to the May 8, 2020 IFC, for an 
overview of IME (85 FR 27567).
    We received public comments on the policies that we adopted on an 
interim basis in the IFC provisions related to the holding hospitals 
harmless from reductions in IME payments due to increases in bed counts 
due to COVID-19 (85 FR 27567 through 27568). The following is a summary 
of the comments we received and our responses.
    Comment: Commenters overwhelming supported the provision allowing 
the hospital's available bed count to be considered the same as it was 
on the

[[Page 72242]]

day before the COVID-19 PHE was declared. A few commenters recommended 
making the provision a permanent policy whenever there is a PHE 
declaration.
    Response: We appreciate the commenters' support of this policy 
during the COVID-19 PHE. In the event circumstances in a future PHE 
warrant additional flexibilities, we will address this issue in future 
rulemaking.
    In this final rule with comment period, we are finalizing the 
provisions of the May 8, 2020 IFC without modification, allowing a 
hospital to maintain the same available bed count as it was on the day 
before the COVID-19 PHE was declared, for the duration of the COVID-19 
PHE. When the COVID-19 PHE ends, any added beds will be considered in 
determining the hospital's IME payments.
(2) Holding IRFs and IPFs Harmless From Reductions to Teaching Status 
Adjustment Payments Due to COVID-19
    As we discussed in the May 8, 2020 IFC (85 FR 27567 through 27568), 
we were asked by IRFs and IPFs if CMS can hold facilities harmless from 
a reduction in teaching status adjustment payments resulting from the 
temporary increase in facilities' ADC due to the influx of COVID-19 
patients. We were concerned that, if a teaching IRF or IPF accepts 
patients from the inpatient acute care hospital to alleviate bed 
capacity during the PHE for the COVID-19 pandemic, the IRF's or IPF's 
ADC would increase, which would artificially decrease the IRF's or 
IPF's ratio of number of interns and residents to ADC and thereby 
decrease the facility's teaching status adjustment. To ensure that 
teaching IRFs or teaching IPFs could alleviate bed capacity issues by 
taking patients from the inpatient acute care hospitals without being 
penalized by lower teaching status adjustments, we established an 
interim final policy to freeze the IRFs' or IPFs' teaching status 
adjustment payments at their values prior to the COVID-19 PHE. 
Therefore, we stated that for the duration of the COVID-19 PHE, an 
IRF's or an IPF's teaching status adjustment payment amount would be 
the same as it was on the day before the COVID-19 PHE was declared.
    Comment: We received 6 comments in response to this interim final 
policy. Commenters generally supported this policy and noted that it 
would enable hospitals, including IRFs and IPFs, to expand capacity 
while continuing to support medical education. One commenter requested 
that CMS clarify that academic medical centers and other facilities who 
are eligible for teaching status adjustments will not have their IME 
payments reduced after the PHE, noting that CMS could provide a 
transition policy to support hospitals as they prepare for future 
potential surges or attempt to adapt to more regular practices. Another 
commenter requested that CMS implement the policy in a manner that 
achieves the intent without potentially subjecting IRFs and IPFs to 
unintended consequences as a result of freezing a facility's teaching 
status adjustment at the level that it was immediately before the 
COVID-19 PHE, which in some cases could potentially reflect an 
unusually low ratio of interns and residents to ADC. This commenter 
requested that CMS allow IRFs and IPFs the option to utilize the 
cumulative resident full-time equivalent (FTE) count and average daily 
census count from July 1, 2019 through January 26, 2020 and apply that 
ratio until the end of the PHE. In addition, this commenter requested 
that CMS allow IPFs and IRFs that send residents to work in another 
hospital to claim such resident FTE time spent at another hospital.
    Response: We appreciate the support from commenters about this 
interim final policy. As we explained in the May 8, 2020 IFC, this 
policy will apply for the duration of the COVID-19 PHE, after which 
time any IRF's or IPF's teaching adjustment will be based on the ratio 
of the number of interns and residents to the IRF's or IPF's ADC. We 
did not establish a transition policy as part of this interim final 
policy, and we are not finalizing a transition policy in this final 
rule, as we believe that sufficient time has passed to allow IPFs and 
IRFs to adapt their business practices at the end of the COVID-19 PHE.
    In response to the request that we implement the policy in a manner 
that achieves the intent without potentially subjecting IRFs and IPFs 
to unintended consequences, we note that our intent was to hold IRFs 
and IPFs harmless and not to limit their teaching adjustments to the 
level prior to the PHE. IPF and IRF teaching status adjustments are 
made on a claim basis as an interim payment, and the final payment in 
full for the claim is made during the final settlement of the cost 
report. In accordance with this hold harmless policy, we intend to 
clarify in the cost reporting instructions that for cost reporting 
periods ending on or after March 1, 2020 and beginning before the end 
of the COVID-19 Public Health Emergency, if an IRF's or IPF's 
calculated teaching adjustment factor is below the teaching adjustment 
factor that was applicable on February 29, 2020, then the IRF's or 
IPF's teaching adjustment factor is equal to the teaching adjustment 
factor that was applicable on February 29, 2020.
    Lastly, regarding the suggestion that we allow IPFs and IRFs that 
send residents to work in another hospital to claim such resident FTE 
time spent at another hospital, we note that we did not include this as 
part of our interim final policy for IRF and IPF teaching adjustments, 
and we are not finalizing such a policy in this final rule with comment 
period.
    After consideration of the public comments we received, we are 
confirming as final this interim final policy to hold IRF and IPF 
teaching status adjustments harmless for the duration of the COVID-19 
PHE. Therefore, we are finalizing that for the duration of the COVID-19 
PHE, an IRF's or an IPF's teaching status adjustment payment amount 
will not be less than it was on the day before the COVID-19 PHE was 
declared.
b. Time Spent by Residents at Another Hospital During the PHE
    In the May 8, 2020 IFC (85 FR 27568 through 27569), we implemented 
several policies on an interim final basis related to time spent by 
residents at another hospital during the COVID-19 PHE. We refer readers 
to the May 8, 2020 IFC, for an overview of GME (85 FR 27568).
    We received public comments on policies that we adopted on an 
interim basis in the IFC provisions related to time spent by residents 
at another hospital during the COVID-19 PHE (85 FR 27568 through 
27569). The following is a summary of the comments we received and our 
responses.
    Comment: All commenters supported allowing teaching hospitals 
during the COVID-19 PHE to claim for purposes of IME and DGME payments 
the time spent by residents training at other hospitals. A few 
commenters suggested making the provision permanent. Additional 
commenters requested a grace period for hospitals to resume and be 
subject to existing FTE counting policies, in order to not disrupt 
patient care activities.
    Response: We appreciate the commenters' support of this policy 
during the COVID-19 PHE. We continue to believe that outside of the 
context of the COVID-19 PHE our policy that a hospital cannot claim the 
time spent by residents training at another hospital is consistent with 
the statute. Therefore, once the COVID-19 PHE ends we do not believe it 
would be appropriate to continue permitting a hospital to claim the 
time spent by residents training at another hospital on a permanent 
basis.

[[Page 72243]]

In the event circumstances in a future PHE warrant additional 
flexibilities, we will address this issue in future rulemaking.
    Comment: One commenter requested confirmation that the sending 
hospital can only claim the resident time if both the sending and 
receiving hospital agree that the sending hospital will claim the time. 
In addition, the commenter requested confirmation that a new teaching 
hospital can accept residents as a receiving hospital from a sending 
hospital without having to include them on its cost report.
    Response: While we believe our statements have been clear on this 
point, we confirm for the duration of the COVID-19 PHE, both the 
sending and receiving hospital agree that the sending hospital will 
claim the time and new teaching hospitals can accept residents as a 
receiving hospital from a sending hospital without having to include 
them on its cost report. We refer readers to the May 8, 2020 IFC where 
we discuss requirements for this provision (85 FR 27568 through 27569).
    Comment: One commenter stated that the third requirement, which 
requires the resident be at the sending hospital prior to going to the 
receiving hospital and return to the sending hospital at the end of PHE 
is unnecessary, and instead sending and receiving hospitals should be 
allowed to enter into arrangements on when a resident goes back to the 
sending hospital.
    Response: We disagree with the commenter and continue to believe 
that the third requirement is necessary. A hospital is required under 
42 CFR 413.75(d) to submit supporting documentation in order to receive 
payment for GME. These documentation requirements apply to hospitals 
entering into a GME affiliation agreement, therefore, despite the 
commenters suggestion, the sending and receiving hospital will need to 
provide documentation listed Sec.  413.75(d). For a detailed discussion 
on documentation requirements, we refer readers to the September 29, 
1989 final rule (54 FR 40291 and 40304) and the August 18, 2006 IPPS 
final rule (71 FR 48077 through 48080).
    In this final rule with comment period, we are finalizing the 
provisions of the May 8, 2020 IFC without modification, allowing 
teaching hospitals during the COVID-19 PHE to claim for purposes of IME 
and DGME payments the time spent by residents training at other 
hospitals during the COVID-19 PHE. It is important to note that when 
the COVID-19 PHE ends, the presence of residents in non-teaching 
hospitals will trigger establishment of IME and/or DGME FTE resident 
caps at those non-teaching hospitals (and for DGME will trigger 
establishment of per resident amounts (PRAs) at those non-teaching 
hospitals).
2. CARES Act Waiver of the ``3-Hour Rule''
    As a condition of payment for IRF services, Sec.  412.622(a)(3)(ii) 
generally requires that a beneficiary requires and can be reasonably 
expected to actively participate in, and benefit from, an intensive 
rehabilitation therapy program on admission to the IRF. Under current 
industry standards, this intensive rehabilitation therapy program 
generally consists of at least 3 hours of therapy (physical therapy, 
occupational therapy, speech-language pathology, or prosthetics/
orthotics therapy) per day at least 5 days per week. In certain well-
documented cases, this intensive rehabilitation therapy program might 
instead consist of at least 15 hours of intensive rehabilitation 
therapy within a 7-consecutive day period, beginning with the date of 
admission to the IRF. Benefit from this intensive rehabilitation 
therapy program is demonstrated by measurable improvement that will be 
of practical value to the patient in improving the patient's functional 
capacity or adaptation to impairments. The required therapy treatments 
must begin within 36 hours from midnight of the day of admission to the 
IRF.
    On March 27, 2020, the CARES Act was enacted. Section 3711(a) of 
the CARES Act requires the Secretary to waive Sec.  412.622(a)(3)(ii) 
during the emergency period described in section 1135(g)(1)(B) of the 
Act (the COVID-19 PHE). This waiver was issued on April 15, 2020. The 
waiver required by section 3711(a) of the CARES Act was not limited to 
particular IRFs or patients, and therefore, is available during the 
emergency period described in section 1135(g)(1)(B) of the Act 
regardless of whether a patient was admitted for standard IRF care or 
to relieve acute care hospital capacity. In the May 8, 2020 IFC (85 FR 
27572), we therefore waived Sec.  412.622(a)(3)(ii) for all patients 
during the COVID-19 PHE to reflect the waiver required by section 
3711(a) of the CARES Act.
    We received several comments on the CARES Act waiver of the ``3-
hour rule,'' which are addressed below.
    Comment: Commenters generally expressed support for the waiver of 
the ``3-hour rule'' during the PHE. However, a commenter expressed 
concern that this waiver, applied without exception, could harm 
beneficiaries and their families and increase costs for the Medicare 
program, and urged CMS to place additional limits on the use of the 
waiver.
    Response: We appreciate the commenters' support for this temporary 
waiver to assist IRFs in providing relief to acute care hospitals for 
the duration of the PHE. As we noted in the IFC, the waiver required by 
section 3711(a) of the CARES Act is not limited to particular IRFs or 
patients, and therefore, is available during the emergency period 
described in section 1135(g)(1)(B) of the Act regardless of whether a 
patient was admitted for standard IRF care or to relieve acute care 
hospital capacity. We do not believe that the CARES Act authorizes any 
exceptions.
    Comment: A commenter requested that we provide a ``glide path'' or 
transition at the end of this waiver by continuing the waiver for IRF 
admissions occurring at least 2 months after the end of the PHE. 
Conversely, another commenter requested that we terminate this waiver 
at the end of the PHE to ensure that beneficiaries receive the care 
that they need when the pandemic is over.
    Response: As the PHE has lasted for over 2\1/2\ years, we believe 
that IRFs have had sufficient time to prepare for the end of the PHE 
and the corresponding expiration of this waiver. Thus, we do not agree 
that it is necessary to continue to provide this waiver for 2 months 
after the end of the PHE. In addition, we agree with the commenter who 
said that this policy is important to ensuring that beneficiaries 
receive the care that they need in an IRF after the PHE ends. However, 
to ensure that beneficiaries who are admitted under the waiver do not 
have requirements suddenly changed in the middle of their IRF stay, we 
are terminating the waiver for all IRF admissions occurring after the 
PHE expires. Thus, patients who are admitted to the IRF under this 
waiver will continue to benefit from this waiver until they are 
discharged.
    After carefully considering the comments we received, and for the 
reasons discussed, we are finalizing the waiver of the requirements in 
Sec.  412.622(a)(3)(ii) during the COVID-19 PHE, as authorized by 
section 3711(a) of the CARES Act. We will terminate this waiver for all 
IRF admissions occurring after the end of the COVID-19 PHE, so that 
patients who are admitted to IRFs during the PHE will be able to remain 
under the waiver until they are discharged from the IRFs.

[[Page 72244]]

3. Modification of IRF Coverage and Classification Requirements for 
Freestanding IRF Hospitals for the PHE During the COVID-19 Pandemic
    IRF care is only considered by Medicare to be reasonable and 
necessary under section 1862(a)(1) of the Act if the patient meets all 
of the IRF coverage requirements outlined in Sec.  412.622(a)(3), (4), 
and (5). These requirements include requiring 2 or more types of 
therapy, being sufficiently stable to tolerate an intensive 
rehabilitation therapy program typically provided in IRFs, needing 
close medical supervision by a rehabilitation physician, and requiring 
an interdisciplinary approach to care. Failure to meet the IRF coverage 
criteria in a particular case results in denial of the IRF claim.
    We note that the April 6, 2020 IFC removed the requirement at Sec.  
412.622(a)(4)(ii) to complete a postadmission physician evaluation 
during the COVID-19 PHE, as defined in Sec.  400.200. In follow up to 
this temporary removal of the waiver, the FY 2021 IRF PPS final rule 
(85 FR 48445 through 48446) removed this requirement permanently, 
effective for all IRF discharges beginning on or after October 1, 2020.
    While we generally believe that all IRFs should have to comply with 
the requirements at Sec. Sec.  412.29(d), (e), (h), and (i) and 
412.622(a)(3), (4), and (5), we recognize that there are certain 
institutional differences between freestanding IRF hospitals and IRF 
distinct part units of hospitals that may impose barriers on 
freestanding IRF hospitals seeking to admit patients to relieve acute 
care hospital capacity during the COVID-19 PHE. Specifically, 
freestanding IRF hospitals do not have the same close affiliations with 
acute care hospitals that IRF distinct part units of hospitals have, 
and are not as able to establish billing procedures under the IPPS that 
IRF distinct part units have established, by virtue of the fact that 
the distinct part units have access to (or at least affiliations with) 
their parent hospitals' billing departments. Therefore, in the May 8, 
2020 IFC, we amended the requirements at Sec. Sec.  412.29(d), (e), 
(h), and (i) and 412.622(a)(3), (4), and (5) to add an exception for 
care furnished to patients admitted to freestanding IRF hospitals 
(identified as those facilities with the last 4 digits of their 
Medicare provider numbers between 3025 through 3099) solely to relieve 
acute care hospital capacity during the COVID-19 PHE.
    We believe that freestanding IRF hospitals have needed the 
flexibility during the COVID-19 PHE to determine the best care for each 
patient who is admitted solely to relieve acute care hospital capacity. 
For the purposes of exercising these IRF flexibilities that are 
intended to provide broad flexibility for freestanding IRF hospitals to 
provide surge capacity in support of acute care hospitals in their 
state or community, CMS considers surge to be alleviated with regard to 
exercising these flexibilities when the state (or region, as 
applicable) in which the freestanding IRF is located has moved beyond 
phase 1 of reopening. Thus, these flexibilities are no longer available 
to the freestanding IRF hospital when the state is in phase 2 or phase 
3 of reopening. In the Guidelines for Opening Up America Again, Phase 1 
of reopening is defined specifically as a state (or region, as 
applicable) that satisfies all of the following, as determined by 
applicable state and local officials:
     All vulnerable individuals continue to shelter in place.
     Individuals continue social distancing.
     Individuals avoid socializing in groups of more than 10.
     Non-essential travel is minimized.
     Visits to senior living facilities and hospitals are 
prohibited.
     Schools and organized youth activities remain closed.
    These flexibilities apply to specific patients who must be 
discharged from the acute care hospitals to the freestanding IRFs to 
provide surge capacity for the acute care hospitals, and therefore 
apply only when those specific patients are admitted to the 
freestanding IRF hospitals and continue for the duration of that 
patient's care. We believe this allows for continuity of care and care 
planning consistency at admission and throughout a patient's stay if 
the same flexibilities apply for the duration of a patient's IRF stay. 
These limitations only apply to the provisions stated in the IFC and 
not to any blanket waivers issued, which have their own conditions. 
Freestanding IRF hospitals must document the particular phase for the 
state when admitting the patient and electing to exercise these 
flexibilities.
    For billing purposes, we have required freestanding IRF hospitals 
to append the ``DS'' modifier to the end of the IRF's unique patient 
identifier number (used to identify the patient's medical record in the 
IRF) to identify patients who are being treated in a freestanding IRF 
hospital solely to alleviate inpatient bed capacity in a state that is 
experiencing a surge during the PHE for the COVID-19 pandemic. The 
modifier has also been used to identify those patients for whom the 
requirements in Sec.  412.622(a)(3)(i), (iii), and (iv) and (a)(4) and 
(5) do not apply. Freestanding IRF hospitals are paid at the IRF PPS 
rates for patients with the ``DS'' modifier.
    We have expected freestanding IRF hospitals to take advantage of 
these flexibilities for those beneficiaries who are surge patients from 
inpatient hospitals, while continuing to provide standard IRF-level 
care for those beneficiaries who would benefit from IRF-level care and 
would otherwise receive such care in the absence of the COVID-19 PHE. 
This has provided crucial flexibility to allow freestanding IRF 
hospitals to aid in the response to the COVID-19 pandemic in several 
ways. First, some of the patients that freestanding IRF hospitals have 
cared for during the COVID-19 PHE in states experiencing a surge would 
need high-acuity clinical care but may not need or be able to tolerate 
the intensive rehabilitation therapy typically provided in an IRF, such 
as at least two types of therapy. Second, waiving the documentation 
requirements in Sec.  412.622(a)(4) and (5) for patients alleviating 
inpatient hospital bed capacity has allowed freestanding IRF hospitals 
to concentrate on providing care for surge patients from the acute care 
hospitals in a state that is experiencing a surge, instead of 
completing documentation that may not be applicable to these acute 
patients during the PHE. Third, this flexibility has allowed 
freestanding IRF hospitals to maximize their available beds to take 
advantage of space where COVID-19 patients or surge patients could be 
safely managed. We believe this policy has allowed freestanding IRF 
hospitals to make a clinical determination about what level of care 
each individual patient needs during the PHE for the COVID-19 pandemic.
    We received several comments on the modification of IRF coverage 
and classification requirements for freestanding IRF hospitals for the 
PHE during the COVID-19 pandemic, which are addressed below.
    Comment: All of the commenters expressed support for CMS's 
flexibility in waiving these requirements to help freestanding IRFs 
alleviate acute care hospital capacity during the PHE. A few commenters 
expressed concern about the fact that this waiver is restricted to 
states or regions in Phase 1 (or prior to Phase 1) of reopening, 
especially given the diversity of the states' reopening plans, and 
requested that we consider applying the waiver to any freestanding IRF 
patients admitted to alleviate COVID-19 surge capacity.

[[Page 72245]]

    Response: We appreciate the commenters' support for these temporary 
flexibilities to assist IRFs in providing relief to acute care 
hospitals for the duration of the PHE. These flexibilities were 
specifically targeted to helping alleviate acute care hospital surge 
capacity issues during the height of the PHE, when the PHE was most 
significantly testing the capacity of acute care hospitals in state or 
regions that were overwhelmed with the surge of COVID-19 patients. We 
believe that the conditions placed on the waiver were effective in 
targeting the precise hospitals that were in most urgent need of help, 
and we therefore believe that the limitations that we placed on the 
waiver were appropriate.
    Comment: A few commenters also requested that CMS provide 
additional guidance on this waiver, to ensure that providers and 
contractors have a clear understanding of how it is applied.
    Response: We appreciate the commenters' suggestions to provide 
additional guidance on this waiver. In response to their concerns, we 
issued Technical Direction Letter #200515 to our contractors and 
additional information on our COVID-19 flexibilities and waivers 
website at https://www.cms.gov/coronavirus-waivers.
    Comment: One commenter suggested that we consider implementing 
additional oversight of this waiver to ensure that it is not abused.
    Response: We believe that we tailored this waiver narrowly enough 
to only those states (or regions, as applicable) that were in phase 1 
or prior to entering phase 1 of reopening, to minimize the potential 
for abuse. In addition, we have monitored the use of this waiver during 
the PHE and have not found any evidence to date of any abuse. We thank 
the commenter for the suggestion, and we will continue to ensure that 
we have adequate safeguards in place to minimize abuses of these 
policies.
    Comment: One commenter requested that we terminate this waiver at 
the end of the PHE to ensure that beneficiaries receive the care that 
they need when the pandemic is over.
    Response: We thank the commenter for this suggestion and agree that 
the waiver is no longer needed after the PHE ends.
    After carefully considering the comments we received, and for the 
reasons discussed, we are finalizing without modification the waiver of 
the requirements at Sec. Sec.  412.29(d), (e), (h), and (i) and 
412.622(a)(3), (4), and (5) during the COVID-19 PHE for freestanding 
IRF hospitals admitting patients in support of acute care hospitals 
when the state (or region, as applicable) is in phase 1 or prior to 
entering phase 1 of reopening described in the May 8, 2020 IFC. 
Patients who are admitted to IRFs during the PHE will remain under 
these waivers until they are discharged from the IRFs. However, these 
waivers will no longer apply to patients who are admitted to IRFs after 
the end of COVID-19 PHE.
    To effectuate these changes, we are finalizing without modification 
the revisions to Sec. Sec.  412.29(d), (e), (h), and (i) and 
412.622(a)(3), (4), and (5) described in the May 8, 2020 IFC. 
Specifically, in Sec.  412.622(a)(3)(i), (ii), (iii), and (iv) we are 
finalizing language providing that these IRF coverage criteria continue 
to be required, except for care furnished to patients in a freestanding 
IRF hospital solely to relieve acute care hospital capacity in a state 
(or region, as applicable) that is experiencing a surge during the PHE, 
as defined in Sec.  400.200. Similarly, in Sec.  412.622(a)(4), we are 
finalizing this paragraph to state that the IRF documentation 
requirements must be present in the IRF medical record, except for care 
furnished to patients in a freestanding IRF hospital solely to relieve 
acute care hospital capacity in a state (or region, as applicable) that 
is experiencing a surge during the PHE, as defined in Sec.  400.200. In 
Sec.  412.622(a)(5), we are finalizing this paragraph to state that an 
interdisciplinary team approach to care is required, except for care 
furnished to patients in a freestanding IRF hospital solely to relieve 
acute care hospital capacity in a state (or region, as applicable) that 
is experiencing a surge during the PHE, as defined in Sec.  400.200. We 
are also finalizing the revisions to Sec.  412.29(d), (e), (h), and (i) 
to align the provisions we have waived in Sec.  412.622 with the 
classification criteria for payment to freestanding IRF hospitals under 
the IRF prospective payment system. Finally, we are finalizing the 
revisions to Sec.  412.622(c) to add a definition of state (or region, 
as applicable) that are experiencing a surge and Sec.  412.29 to cross-
reference that definition where applicable.
4. Furnishing Outpatient Services in Temporary Expansion Locations of a 
Hospital or a Community Mental Health Center (CMHC) (Including the 
Patient's Home)
a. Hospital Outpatient and CMHC Therapy, Education, and Training 
Services
Partial Hospitalization Program (PHP)
    A 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 and schizophrenia. 
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 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.
    In the May 8, 2020 IFC (85 FR 27563 through 27566), we stated that 
infection control was a primary goal of CMS initiatives undertaken 
during the COVID-19 PHE. We also stated that we believe continuity of 
behavioral health services is critical for those participating in a 
PHP, particularly at a time of heightened anxiety and uncertainty. As 
we noted in the May 8, 2020 interim final rule (85 FR 27562), we issued 
numerous blanket waivers under section 1135 of the Act, including for 
hospitals and CMHCs providing PHP services, to give health care 
providers needed flexibility to address the COVID-19 PHE and support 
the goal of infection control while maintaining access to partial 
hospitalization services and ensuring continuity of care for patients. 
Effective as of March 1, 2020, and for the duration of the COVID-19 
PHE, we established an interim final policy that a temporary expansion 
location where the beneficiary may be located, including a 
beneficiary's home, may be a provider-based department (PBD) of the 
hospital, or may be a temporary extension of the CMHC (discussed in 
more detail below).
    Consistent with the goals of infection control and maintaining 
access, for the duration of the COVID-19 PHE only, we established that 
providers could furnish certain partial hospitalization services 
remotely to patients in a temporary

[[Page 72246]]

expansion location of the hospital or CMHC, which could include the 
patient's home to the extent it was made provider-based to the hospital 
or an extension of the CMHC. PHP services consist of unique 
combinations of services designated at section 1861(ff)(2) of the Act, 
including individual psychotherapy, patient education, and group 
psychotherapy. We further noted that certain PHP services such as these 
require communication and interaction, but do not require the clinical 
staff or patient to be in the same location, nor do clinical staff need 
to be in the hospital or CMHC when furnishing these PHP services. 
Therefore, we established that the following types of services--to the 
extent they were already billable as PHP services in accordance with 
existing coding requirements prior to the COVID-19 PHE--could be 
furnished to beneficiaries by facility staff using telecommunications 
technology during the COVID-19 PHE: (1) Individual psychotherapy; (2) 
patient education; and (3) group psychotherapy. Because of the 
intensive nature of PHP, we stated that we expect 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, we stated that only in the case 
that both audio and video are not possible can the service be furnished 
exclusively with audio. We further clarified that services that 
required drug administration could not be furnished using 
telecommunications technology. To facilitate public understanding of 
the types of PHP services that could be furnished using 
telecommunications technology by the hospital to a patient in the 
hospital (including the patient's home if it was a PBD of the hospital) 
or by the CMHC to a patient in an expanded CMHC location, we provided 
on our website \346\ a list of the individual psychotherapy, patient 
education, and group psychotherapy services that hospital or CMHC staff 
could furnish during the COVID-19 PHE to a beneficiary in their home or 
other temporary expansion location that functions as a PBD of the 
hospital or expanded CMHC when the beneficiary was registered as an 
outpatient. We noted that this list may not have included every service 
that fell into this category and that we intended to update the list 
periodically, to the extent that would be helpful for public awareness.
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    \346\ https://www.cms.gov/coronavirus-waivers.
---------------------------------------------------------------------------

    We further explained that although these services can be furnished 
remotely, all other PHP requirements were unchanged and still in 
effect, including that all services furnished under the PHP still 
required an order by a physician, had to be supervised and certified by 
a physician, and had to be furnished in accordance with coding 
requirements by a clinical staff member working within his or her scope 
of practice. We 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 would 
continue to be required. We further explained that when these services 
are provided by clinical staff of the physician or other practitioner 
and furnished incident to their professional services, and are not 
provided by staff of the hospital or CMHC, the hospital or CMHC would 
not bill for the services. The physician or other practitioner would 
bill for such services incident to their own services and would be paid 
under the PFS.
(a) Hospital-Based PHP Providers
    As detailed in the May 8, 2020 IFC (85 FR 27564), as part of the 
initiative to promote infection control and maintain access to PHP 
services, we waived the requirements for being a PBD of the hospital in 
Sec.  413.65, as well as certain requirements under the Medicare 
conditions of participation in Sec. Sec.  482.41 and 485.623, to 
facilitate the availability of temporary expansion locations. As we 
noted in that IFC, for purposes of the COVID-19 PHE and effective as of 
March 1, 2020, a temporary expansion location where the beneficiary may 
be located, including a beneficiary's home, may be a PBD of the 
hospital where the location meets the non-waived conditions of 
participation. We stated that together, these waivers allow hospitals 
to consider a temporary expansion location where the beneficiary may be 
located, including their homes, an HOPD only in the context of the 
COVID-19 PHE. Thus, we explained that for the duration of the COVID-19 
PHE, we would consider the PHP services furnished by hospital clinical 
staff, when the beneficiary was registered as an outpatient of the 
hospital and in accordance with the supervising practitioner's scope of 
practice, to have been furnished in the hospital to the beneficiary in 
a temporary expansion location, including a beneficiary's home, so long 
as such temporary expansion location was made provider-based to the 
hospital. We noted that the hospital was instructed to bill for these 
services as if they were furnished in the hospital and consistent with 
any specific requirements for billing Medicare during the COVID-19 PHE.
(b) Community Mental Health Centers
    A CMHC is a provider of PHP services defined under section 
1861(ff)(3)(B) of the Act. As we discussed in the May 8, 2020 IFC (85 
FR 27564), for the duration of the COVID-19 PHE, we waived the 
restriction at Sec.  485.918(b)(1)(iii) for the purpose of providing 
PHP services to CMHC patients in their homes, which we stated would be 
considered a temporary expansion location of a CMHC. Certain 
therapeutic services by CMHC staff would be paid when provided for 
beneficiaries registered as outpatients, in accordance with the 
supervising practitioner's scope of practice, consistent with any 
specific requirements for billing Medicare during the COVID-19 PHE.
    Comment: We received four comments in response to this interim 
final policy. One commenter, a national nonprofit organization, 
expressed support for this flexibility to ensure services were 
available safely to people with Medicare. Another commenter, a 
healthcare services company, encouraged CMS to ensure that temporary 
expansion location policies did 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 to fight the spread of 
COVID-19 and recover from the impacts of the virus.
    One national insurance company voiced support for the 
flexibilities, stating that these flexibilities were necessary to 
ensure that PHP beneficiaries continue to have access to the level of 
care they required and prevent potential relapse and overdose. This 
commenter noted that structured patient engagement is an important 
component of PHP and they believe the remote and audio-only 
flexibilities did not diminish this important component. They further 
noted that for PHP patients and providers, these flexibilities also 
reduced the risk of contracting or spreading the coronavirus. This 
commenter also expressed concern about clerical staff lacking the 
qualifications to provide the services described, and requested 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 PHP services,

[[Page 72247]]

stating it is comparable to in-person interaction. 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 lend itself to the structure of group 
therapy or ongoing assessments. Consequently, the commenter stated that 
audio-only therapeutic services impede 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.
    Response: We appreciate the support from commenters about this 
interim final policy. In response to the concerns about audio-only 
therapeutic services, we noted in the May 8, 2020 IFC 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, we stated that only in the case that both audio and 
video are not possible could the service be furnished exclusively with 
audio (85 FR 27564).
    Regarding the concern about clerical staff lacking the 
qualifications to provide the services described, we note that we 
explained in the May 8, 2020 IFC 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 (85 FR 27564).
    Lastly, regarding the commenter's suggestion of a transition 
policy, as we explained in the May 8, 2020 IFC, this interim final 
policy depends on numerous blanket waivers under section 1135 of the 
Act, and will apply for the duration of the COVID-19 PHE. After those 
blanket waivers expire at the end of the COVID-19 PHE, section 
1861(ff)(3)(A) of the Act limits Medicare's ability to pay for partial 
hospitalization services furnished to beneficiaries in a home or 
residential setting.
    After consideration of the public comments we received, we are 
confirming as final this interim final policy. Therefore, for the 
duration of the COVID-19 PHE only, providers can furnish certain 
partial hospitalization services remotely to patients in a temporary 
expansion location of the hospital or CMHC, which may include the 
patient's home to the extent it is made provider-based to the hospital 
or an extension of the CMHC.
5. Furnishing Hospital Outpatient Services Remotely for Services Other 
Than Mental Health
    As we explained in the May 8, 2020 IFC (85 FR 27562 through 27566), 
outpatient 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 temporary expansion locations, including 
beneficiaries' homes, to become provider-based departments (PBDs) of 
the hospital during the COVID-19 PHE and therapeutic outpatient 
hospital services furnished to beneficiaries in these provider-based 
locations can meet the requirement that these services be furnished in 
the hospital so long as all other requirements are met, including the 
hospital conditions of participation, to the extent not waived, during 
the COVID-19 PHE. . In light of the need for infection control and a 
desire for continuity of care, 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 8, 2020 IFC (85 FR 27564), we made clear that 
when a hospital's clinical staff are furnishing hospital outpatient 
services (such as drug administration, 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). Further, we 
clarified that when a patient is receiving a professional service via 
telehealth in a location that is considered a hospital PBD, and the 
patient is a registered outpatient of the hospital, the hospital in 
which the patient is registered may bill the originating site facility 
fee for the service. Finally, we also clarified the applicability of 
section 603 of the BBA 2015 to hospitals furnishing care in the 
beneficiaries' homes (or other temporary expansion locations), and 
whether those locations are considered relocated, partially relocated, 
or new PBDs.
    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.
    In section X.A.1 of this final rule with comment period we are 
finalizing the IFC policy with respect to mental health services 
furnished remotely to beneficiaries in their homes, through an 
alternate regulatory authority that does not rely upon the HWW 
framework.
    Comment: We received a number of comments supporting this policy. 
Commenters stated that this flexibility helps reduce the spread of 
COVID-19 by allowing beneficiaries to receive outpatient education and 
training services in their homes when furnished by hospital staff. A 
few commenters requested that CMS clarify the intersection of Hospitals 
Without Walls and the expansion of Medicare telehealth services paid 
under the Physician Fee Schedule.
    Response: We thank commenters for their support. With regard to the 
intersection of Hospitals Without Walls and Medicare telehealth, we 
have stated in subregulatory guidance issued since the publication of 
the May 8, 2020 IFC that if a Medicare distant site practitioner 
furnishes a Medicare telehealth service to a beneficiary whose home has 
been reclassified as a temporary provider-based department of a 
hospital, the hospital should bill for the originating site facility 
fee. However, if the hospital furnishes services to the beneficiary 
without the involvement of a distant site practitioner furnishing a 
Medicare telehealth service, the hospital should accordingly bill for 
whatever service is being furnished as though it occurred within the 
four walls of the hospital.
    Comment: Some commenters requested additional clarification 
regarding compliance with conditions of participation and life safety 
code requirements.
    Response: We appreciate the requests for clarification. We have 
continued to update our guidance online and through CMS Office Hours to 
address provider questions and concerns in real time.
    In this final rule, we are finalizing the provisions of the May 8, 
2020 IFC (85 FR 27562 through 27566), without

[[Page 72248]]

modification, including that when a hospital's clinical staff are 
furnishing hospital outpatient 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 for the duration of the PHE for COVID-19. We are 
finalizing that when a patient is receiving a professional Medicare 
telehealth service in a location that is considered a hospital PBD, and 
the patient is a registered outpatient of the hospital, the hospital in 
which the patient is registered may bill the originating site facility 
fee for the service. We are also finalizing the applicability of 
section 603 of the BBA 2015 to hospitals furnishing care in the 
beneficiaries' homes (or other temporary expansion locations). Once the 
PHE for COVID-19 ends, these flexibilities will end as well.
6. Treatment of New and Certain Relocating Provider-Based Departments 
During the PHE
    In the May 8, 2020 IFC (85 FR 27567 through 27568), we implemented 
a policy on an interim final basis related to treatment of new and 
certain relocating provider-based departments (PBDs) during the PHE. We 
refer readers to the May 8, 2020 IFC for an overview of that policy (85 
FR 27567).
    Comment: Many commenters expressed their support for allowing on 
and off-campus PBDs to temporarily relocate while maintaining their 
eligibility to bill as excepted off-campus PBDs. Several commenters 
requested that CMS expand the extraordinary circumstances policy after 
the PHE. Commenters wrote that excepted PBDs forced to relocate due to 
unforeseen circumstances beyond their control should be allowed to 
relocate without losing their excepted status. Other commenters felt 
that hospital operations may not return to normal on the date the PHE 
is lifted as many will need to transition back to normal operations and 
will need to implement new operating policies to address patient 
treatment and safety in a post COVID-19 world. They recommended that 
CMS consider extending the ability of temporarily relocated PBDs to 
bill at the OPPS rate for at least three months following the 
conclusion of the PHE. This, commenters argued, would help to 
facilitate their transition back to traditional billing rates and would 
allow them to transition care of patients as needed.
    Response: We thank the commenters for their support. We continue to 
believe that our current extraordinary circumstance relocation policy 
is appropriate when the COVID-19 PHE is no longer in effect. We noted 
in the May 8, 2020 IFC (85 FR 27567 through 27568) that this temporary 
extraordinary circumstances relocation policy is time-limited to the 
PHE for COVID-19 to enable short-term hospital relocation of excepted 
off-campus and on-campus departments to improve access to care for 
patients during this time. The temporary extraordinary circumstances 
relocation policy established in the May 8, 2020 IFC (85 FR 27567 
through 27568) will end when the PHE for the COVID-19 pandemic ends, 
and we anticipate that most, if not all, PBDs that relocated during the 
COVID-19 PHE will relocate back to their original location prior to, or 
soon after, the end of the COVID-19 PHE. PBDs that hospitals choose to 
permanently relocate off-campus would be considered new off-campus PBDs 
billing after November 2, 2015, and, therefore, would be required to 
bill using the ``PN'' modifier for hospital outpatient services 
furnished from that PBD location and would be paid the PFS-equivalent 
rate once the COVID-19 PHE ends. Following the COVID-19 PHE, hospitals 
may seek an extraordinary circumstances relocation exception for 
excepted off-campus locations that have permanently relocated, but 
these hospitals would need to follow the standard extraordinary 
circumstances application process we adopted in CY 2017 and file an 
updated CMS-855A enrollment form to reflect the new address(es) of the 
PBD(s). We note that our standard relocation exception policy only 
applies to excepted off-campus PBDs that relocate; on-campus PBDs that 
wish to permanently relocate off-campus will not be able to receive an 
extraordinary circumstances relocation exception under the standard 
extraordinary circumstances relocation request process after the 
conclusion of the COVID-19 PHE. We also note that hospitals should not 
rely on having relocated the off-campus PBD during the COVID-19 PHE as 
the reason the off-campus PBD should be permanently excepted following 
the end of the COVID-19 PHE. In other words, the fact that the off-
campus PBD relocated in response to the pandemic will not, by itself, 
be considered an ``extraordinary circumstance'' for purposes of a 
permanent relocation exception, although CMS Regional Offices will 
continue to have discretion to approve or deny relocation requests for 
hospitals that apply after the COVID-19 PHE, depending on whether the 
relocation request meets the requirements for the extraordinary 
circumstances exception. Following the COVID-19 PHE, if temporarily 
relocated off-campus PBDs do not go back to their original location, 
they will be considered to be non-excepted PBDs and paid the PFS-
equivalent rate.
    Comment: Many commenters felt additional clarification was needed 
on the documentation required on when a PBD relocates to a 
beneficiary's home. Commenters expressed the burden of having to 
provide individual beneficiary addresses to the CMS RO. Commenters 
requested that CMS further streamline the process and outline the steps 
and documents needed to establish a temporary PBD at a beneficiary's 
home during the COVID-19 PHE.
    Response: We believe that the process as outlined in the May 8, 
2020 IFC (85 FR 27567 through 27568) sufficiently addresses the 
flexibility needed by providers while maintaining some program 
integrity safeguards. We do not believe it is overly burdensome for 
providers. We have continued to update our guidance online and through 
CMS Office Hours to address provider questions and concerns in real 
time.
    Comment: The Medicare Payment Advisory Commission (MedPAC) 
commented that they fully recognize the benefit of modifying 
regulations to provide hospitals with flexibility to effectively 
address the COVID-19 PHE. They also commended CMS for creating an 
application process that allows hospitals to quickly transfer resources 
to new off-campus locations and also provides CMS with the data 
necessary to identify the locations of new off-campus PBDs. However, 
they expressed their concern that most, if not all, PBDs that relocated 
might not return to their original location when the COVID-19 PHE is 
over. They encouraged CMS to maintain the information from the 
application about the excepted PBDs that relocated and to be diligent 
in identifying which of these excepted PBDs return to their original 
location and which remain in their new location to ensure these 
providers are paid at rates that are consistent with Section 603 of BBA 
2015.
    Response: We thank MedPAC for their support. As the PHE ends, we 
will monitor those PBDs that submitted relocation requests to ensure 
that these providers are paid at rates that are consistent with section 
603 of BBA 2015 given their post-PHE location.
    In this final rule with comment period, we are finalizing the 
provisions of the May 8, 2020 IFC (85 FR 27567

[[Page 72249]]

through 27568) without modification, including a temporary 
extraordinary circumstances relocation exception policy for excepted 
off-campus PBDs that relocate off-campus during the COVID-19 PHE. 
Additionally, we are finalizing without modification the extension of 
the temporary policy for on-campus PBDs that relocate off-campus during 
the COVID-19 PHE that permits the relocating PBDs to continue to be 
paid under the OPPS during the PHE. Finally, we are finalizing without 
modification the streamlining of the process for relocating PBDs to 
obtain the temporary extraordinary circumstances policy exception. All 
of these flexibilities will end when the PHE for COVID-19 ends.

C. OPPS Separate Payment for New COVID-19 Treatments Policy for the 
Remainder of the PHE (CMS-9912-IFC)

    In this final rule with comment period we are also responding to 
public comments and stating our final policy for a provision titled 
``Additional Policy and Regulatory Revisions in Response to the COVID-
19 Public Health Emergency'' (CMS-9912-IFC), which appeared in the 
November 6, 2020 Federal Register (85 FR 71142; hereinafter referred to 
as the November 6, 2020 IFC regarding separate payment under the OPPS 
for new COVID-19 treatments for the remainder of the PHE (85 FR 71158 
through 71160)).
    Under the OPPS Comprehensive APC (C-APC) policy, when a service 
that we have designated as a primary C-APC service is reported on a 
hospital outpatient claim, with certain exceptions, we make payment for 
all other items and services reported on the claim as being integral, 
ancillary, supportive, dependent, and adjunctive to the primary service 
and representing components of a complete comprehensive service. 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. Under our current policy, payment for drugs or 
biological products with emergency authorization or approved to treat 
COVID-19 in the outpatient setting would be packaged into the payment 
for a primary service when billed on the claim for that service.
    In the November 9, 2020 IFC, we stated that although many 
beneficiaries would likely not receive both a primary C-APC service and 
a drug or biological for treating COVID-19, we nonetheless believed 
that, as drugs or biologicals became available and were authorized or 
approved for the treatment of COVID-19 in the outpatient setting, it 
would be appropriate to mitigate any potential financial disincentives 
for hospitals to provide these new treatments during the PHE for COVID-
19. Accordingly, effective for services furnished on or after the 
effective date of the November 9, 2020 IFC and until the end of the PHE 
for COVID-19, we created an exception to our OPPS C-APC policy to 
ensure new COVID-19 treatments that meet two criteria would, for the 
remainder of the PHE for COVID-19, always be separately paid and not 
packaged into a C-APC when they appear on the same claim as the primary 
C-APC service.
    The first criterion is that the treatment must be a drug or 
biological product (which could include a blood product) authorized to 
treat COVID-19, as indicated in section ``I. Criteria for Issuance of 
Authorization'' of the letter of authorization for the drug or 
biological product, or the drug or biological product must be approved 
by the FDA for treating COVID-19. The second criterion is that the EUA 
for the drug or biological product (which could include a blood 
product) must authorize the use of the product in the outpatient 
setting or not limit its use to the inpatient setting, or the product 
must be approved by the FDA to treat COVID-19 disease and not limit its 
use to the inpatient setting. We refer readers to the November 6, 2020 
IFC for a full overview of this policy (85 FR 71158 through 71160).
    Comment: We received a few comments that supported this policy. 
Generally, commenters appreciated CMS's recognition of the significant 
cost associated with new COVID-19 therapies provided to Medicare 
beneficiaries in the HOPD setting. Commenters believed this would 
ensure access to these therapies.
    Response: We thank the commenters for their support.
    Comment: Commenters had some suggestions related to this policy. 
They requested CMS confirm the exact payment methodology it would use 
to calculate separate payment for qualifying COVID-19 therapies. 
Generally, commenters advocated that qualifying COVID-19 therapies be 
excluded from the OPPS 340B payment adjustment. Commenters also 
recommended CMS waive the co-insurance associated with COVID-19 
therapies Finally, commenters requested CMS make this C-APC exemption 
permanent and extending it beyond the end of the PHE.
    Response: We appreciate the commenters' support of this policy 
during the COVID-19 PHE. Since this IFC was published, there have been 
significant changes to the OPPS 340B payment policy and the commenter 
request for excluding qualifying COVID-19 therapies from the 340B 
payment adjustment would no longer be applicable for CY 2023. We refer 
readers to section V.B.6 in this final rule with comment period for 
further information about the 340B policy changes. Regarding the 
request to waive co-insurance associated with COVID-19 therapies, we do 
not believe that CMS has the statutory authority to waive coinsurance 
for these therapies, as suggested by the commenter. We believe that 
outside of the context of the COVID-19 PHE, our standard and 
longstanding policy of packaging adjunctive items and services into 
payment for primary C-APC services is appropriate for COVID-19 
treatments, as they are similar to other treatments that currently can 
have their payment packaged into the payment for a primary service 
under the OPPS. Therefore, once the COVID-19 PHE ends, we do not 
believe it would be appropriate to continue paying separately for new 
COVID-19 treatments provided on the same claim as a C-APC on a 
permanent basis. In the event that future circumstances warrant 
additional flexibilities, we will reconsider this issue in future 
rulemaking.
    Given the public comments we received, we are finalizing this 
policy as implemented in the November 6, 2020 IFC. Accordingly, this 
policy will end with the end of the PHE.

XXIII. Files Available to the Public via the Internet

    The Addenda to the OPPS/ASC proposed rules and 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 proposed 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

[[Page 72250]]

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 proposed 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 proposed to update the 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 proposed 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. For CY 2023, we did not receive any public comments and, 
therefore, are finalizing our proposal to update the column to include 
devices, so that the column reads: ``Drug and Device Pass-Through 
Expiration during Calendar Year'' where we would 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 the CY 2023 OPPS/ASC proposed rule 
pertaining to proposed CY 2023 payments under the OPPS, we refer 
readers to the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html; select ``CMS-1772-FC'' from the list of 
regulations. All OPPS Addenda to this proposed rule are contained in 
the zipped folder titled ``2023 NFRM OPPS Addenda'' in the related 
links section at the bottom of the page. To view the Addenda to the CY 
2023 OPPS/ASC proposed rule pertaining to CY 2023 payments under the 
ASC payment system, we refer readers to the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html; select ``CMS-1772-FC'' from the list of 
regulations. The ASC Addenda to the CY 2023 OPPS/ASC proposed rule are 
contained in a zipped folder titled ``2023 NFRM Addendum AA, BB, DD1, 
DD2, EE, and FF'' in the related links section at the bottom of the 
page.

XXIV. Collection of Information Requirements

A. Statutory Requirement for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995 (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 solicited public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

B. ICRs for the Hospital OQR Program

1. Background
    The Hospital 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 the CY 2023 OPPS/ASC final rule, we have updated 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 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; \347\ 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.
---------------------------------------------------------------------------

    \347\ 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 XIV.B.4 of this final rule with comment period, we are 
finalizing to: (1) change the Cataracts: Improvement in Patient's 
Visual Function within 90 days Following

[[Page 72251]]

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 
XIV.B.5.b of this final rule with comment period, we are finalizing 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, we estimate only 20 percent of 
hospitals will 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 will 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 XIV.B.4 of this final rule with comment period, we are 
finalizing to adopt an additional targeting criterion to the validation 
selection policy beginning with the CY 2023 reporting period/CY 2025 
payment determination. We also are finalizing to codify this targeting 
criterion at Sec.  419.46(f)(3). We do not believe this policy will 
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 XIV.B.4.b of this final rule with comment period, we are 
finalizing to align patient encounter quarters with the calendar year 
(January through December), beginning with the CY 2026 payment 
determination and subsequent years. This finalized period will not 
result in any increase in information collection burden because it will 
not change the amount of data hospitals will 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 policies 
promulgated in this final rule with comment period 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 104 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 did not finalize 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.

[[Page 72252]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.147

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 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 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; 
\348\ 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.
---------------------------------------------------------------------------

    \348\ 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'', 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.

[[Page 72253]]

2. Summary
    In section XV.B.4 of this final rule with comment period, we are 
finalizing 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 final 
rule with comment period, we are finalizing 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 our finalized policy, we estimate only 20 
percent of ASCs will 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 with comment period, 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 will 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 final 
rule with comment period will 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 105 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.
[GRAPHIC] [TIFF OMITTED] TR23NO22.148


[[Page 72254]]



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

    As discussed in section XVIII.E of this final rule with comment 
period, we are finalizing our proposal 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 are finalizing our 
proposal 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 finalized proposals will 
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 
did not propose, and are not finalizing, any changes to the existing 
writing, signature, or record retention requirements. The burden 
associated with writing and signature requirements will be the time and 
effort necessary to prepare written documents and obtain signatures of 
the parties. The burden associated with record retention requirements 
is the time and effort necessary to compile and store the records.
    As noted in the CY 2023 OPPS/ASC proposed rule, 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.
    We did not receive any public comments regarding our position that 
the burden associated with these requirements is a usual and customary 
business practice that is exempt from the PRA.

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).\349\ 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.
---------------------------------------------------------------------------

    \349\ See also correction notification issued January 3, 2020 
(85 FR 224).
---------------------------------------------------------------------------

    In accordance with Sec.  419.83(b), we are finalizing our proposal 
to require prior authorization for a new service category: Facet joint 
interventions. We are adding the service category to Sec.  
419.83(a)(3). We also are finalizing that the prior authorization 
process for the additional service category will be effective for dates 
of services on or after July 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 July 1, 2023 start date, the first year of the prior authorization 
for the new service category will only include 6 months. Based on CY 
2019 data, we estimate that for those first 6 months there will be 
41,701initial requests mailed during the year. In addition, we estimate 
there will be 13,683 resubmissions of a request mailed following a non-
affirmed decision. Therefore, the total mailing cost is estimated to be 
$276,920 (55,384 mailed requests x $5). Based on CY 2019 data for the 
new service category, we estimate that annually there will be 83,401 
initial requests mailed during a year. In addition, we estimate there 
will 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 will be required for 
attending educational meetings, training staff on what services require 
prior authorization, and reviewing training documents.
    The average labor costs (including 100 percent fringe benefits) 
used to estimate the costs were calculated using data available from 
the Bureau of Labor Statistics (BLS). Based on the BLS information, we 
estimate an average clerical hourly rate of $17.13 with a loaded rate 
of $34.26. The prior authorization program for the new

[[Page 72255]]

service category will not create any new documentation requirements. 
Instead, it will just require the same documents needed to support 
claim payments to be submitted earlier in the claim process. The 
estimate uses the clerical rate since we do not believe that clinical 
staff will need to spend more time on completing the documentation than 
will be needed in the absence of the prior authorization policy. The 
hourly rate reflects the time needed for the additional clerical work 
of submitting the prior authorization request itself. CMS believes 
providers will have provided education to their staff on what services 
are included in the prior authorization process. Following this 
education, the staff will know which services need prior authorization 
and will not need additional time or resources to determine if a 
service requires prior authorization. We estimate that the total number 
of submissions for the first year (6 months) will be 184,613(129,229 
submissions through fax or electronic means + 55,384 mailed 
submissions). Therefore, we estimate that the total burden for the 
first year (6 months) for the new service category, allotted across all 
providers, will be 99,768 hours (0.5 hours x 184,613 submissions plus 3 
hours x 2,487 providers for education). The burden cost for the first 
year (6 months) is $3,694,954 (99,768 hours x $34.26 plus $276,920 for 
mailing costs). In addition, we estimate that the total annual number 
of submissions will 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, will be 
192,074 hours (0.5 hours x 369,225 submissions plus 3 hours x 2,487 
providers for education). The annual burden cost will 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 161,305 hours and $5,987,835 million. The 
annualized burden is based on an average of 3 years, that is, 1 year at 
the 6-month burden and 2 years at the 12-month burden. The ICR approved 
under OMB control number 0938-1368 will be revised and submitted to OMB 
for approval.
    Table 106 below is a chart reflecting the total burden and 
associated costs for the provisions included in this final rule with 
comment period.
[GRAPHIC] [TIFF OMITTED] TR23NO22.149

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

    In section X.H of this final rule with comment period, we are 
finalizing 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 
payment adjustments will 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 final rule with 
comment period, in order to calculate the N95 payment adjustment for 
each eligible cost reporting period, we created a new cost report 
worksheet to collect additional information from hospitals.
    Specifically, the new cost report worksheet will 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 new information will be used along with other information 
already collected on the Hospitals and Health Care Complex Cost Report 
(Form CMS-2552-10) approved under OMB control number 0938-0050 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. The 
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 filling out this new N95 cost report 
worksheet will 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. We estimate the number of 
respondents to be 4,662. This number is comprised of 3,240 Medicare 
certified 1886(d) hospitals eligible for the payment adjustment under 
Part A and Part B (including 30 Indian Health Services Hospitals 
excluded from the Part B payment adjustment as they are paid an all-
inclusive rate for Part B services) plus 1,422 additional hospitals 
paid for outpatient services under the hospital OPPS.\350\ We estimate 
the average burden hours per facility to be 0.50 hours which breaks 
down to approximately 0.40 hours per provider for recordkeeping and 
0.10 hours per provider for reporting. We recognize this average varies 
depending on the provider size and complexity.
---------------------------------------------------------------------------

    \350\ Data sourced from the System for Tracking Audit and 
Reimbursement (STAR), an internal CMS data system maintained by the 
Office of Financial Management (OFM).
---------------------------------------------------------------------------

    We estimate the associated labor costs as follows. The estimated 
0.40 hours for recordkeeping includes time for bookkeeping activities. 
Based on the most recent Bureau of Labor Statistics (BLS) in its 2021 
Occupation Outlook

[[Page 72256]]

Handbook, the mean hourly wage for Category 43-3031 is $21.70.\351\ We 
added 100 percent of the mean hourly wage to account for fringe and 
overhead benefits, which calculates to $43.40 ($21.70 + $21.70) and 
multiplied it by 0.40 hours, to determine the annual recordkeeping 
costs per hospital to be $17.36 ($43.40 per hour multiplied by 0.40 
hours). The estimated 0.10 hours for reporting includes time for 
accounting and audit professionals' activities. The mean hourly wage 
for Category 13-2011 \352\ is $40.37. We added 100% of the mean hourly 
wage to account for fringe and overhead benefits, which calculates to 
$80.74 ($40.37 plus $40.37) and multiplied it by 0.10 hours, to 
determine the annual reporting costs per hospital to be $8.07 ($80.74 
per hour multiplied by 0.10 hours). We calculated the total average 
annual cost per hospital of $25.43 by adding the recordkeeping costs of 
$17.36 plus the reporting costs of $8.07. We estimated the total annual 
cost to be $118,555 ($25.43 cost per hospital multiplied by 4,662 
hospitals). In addition to the announcement in this final rule, we will 
publish a separate 30-day notice in the Federal Register to solicit 
additional comments on this topic. The information collection request 
is identified as CMS-10821 and titled ``Supplemental to Form CMS-2552-
10, Payment Adjustment for Domestic NIOSH-Approved Surgical N95 
Respirators.'' The notice will inform the public on where to find the 
information collection request for which we are seeking OMB approval 
and how to submit comments on it.
---------------------------------------------------------------------------

    \351\ Bookkeeping, accounting and auditing clerks (https://www.bls.gov/oes/current/oes433031.htm).
    \352\ www.bls.gov/oes/current/oes132011.htm.
---------------------------------------------------------------------------

G. ICRs for REH Provider Enrollment Requirements

    As stated earlier in section XIX.C.1 of this final rule with 
comment period, we are finalizing our proposal at Sec.  424.575, as 
well as existing Sec.  424.510(a)(1) and (d)(1), which require REHs to 
complete and submit the applicable enrollment application, which, for 
REHs, will be the Form CMS-855A (OMB control number 0938-0685). The 
only impacts associated with our 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 \353\ 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 will do so within the first year of our proposed 
requirements.
---------------------------------------------------------------------------

    \353\ 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 https://www.bls.gov/oes/current/oes_nat.htm#43-0000). With fringe benefits and 
overhead, the figure is $40.94. This will result in an estimated Year 1 
burden involving final policy at Sec.  424.575 of 68 hours (68 
applications x 1 hour) at a cost of $2,784.
    The burden associated with this 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.

H. ICRs for Rural Emergency Hospitals and CAHs CoPs

1. Factors Influencing ICR Burden Estimates
    Under this final rule with comment period, an REH's ICR may differ 
from that of a hospital or CAH, given that REHs would be providers of 
outpatient services and would not provide inpatient services. We based 
the ICRs for REHs on the ICRs for hospitals and CAHs in some cases 
because, in accordance with section 1861(kkk) of the Act, REHs must 
convert from either a rural hospital with not more than 50 beds or a 
CAH. In the discussion that follows, we rely heavily on the study of 
the North Carolina Rural Health Research Program's (NC RHRP's) study 
titled ``How Many Hospitals Might Convert to a Rural Emergency Hospital 
(REH)?'' \354\ This study examined data on existing rural hospitals 
(Medicare-funded through both the prospective payment system and cost-
reimbursements to CAHs) to determine how many might meet three key 
criteria (1) 3 years of negative total financial margins; (2) average 
daily census of acute and swing beds of less than three persons; and 
(3) net patient revenue of less than $20 million annually. The study 
further assumed that all the statutory and regulatory requirements 
would be met by every REH. The NC RHRP study assumes that hospitals and 
CAHs meeting the necessary requirements would apply for election of 
coverage under the new REH program. The study did not address the 
potential caseload, cost, or revenue changes from electing conversion 
and implicitly assumed that the net effects would be positive.
---------------------------------------------------------------------------

    \354\ This study can be accessed here: https://www.shepscenter.unc.edu/product/how-many-hospitals-might-convert-to-a-rural-emergency-hospital-reh/.
---------------------------------------------------------------------------

    We note that another study from consulting firm CLA also examines 
the number of facilities likely to convert to REHs titled ``A Path 
Forward: CLA's Simulations on Rural Emergency Hospital Designation.'' 
\355\ The CLA study estimated that between 11 and 600 CAHs would 
benefit from conversion to REH status--based on estimated REH 
reimbursement and several financial assumptions (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) and four simulation methods. A key takeaway from both 
studies is that available data support a possible wide range of 
conversion decisions. In addition, we note that these results and the 
calculations on which they rely are subject to a wide range of 
uncertainty as illustratively shown in the CLA study's summary estimate 
and the NC RHRP study makes the same point in describing its central 
estimate set of results. In the analysis that follows, we use for 
simplicity of exposition the NC RHRP study results, which depend on 
data and calculations presented in the study at a level of detail that 
allows reader analysis and present our summary estimates based on the 
NC RHRP study's central estimate.
---------------------------------------------------------------------------

    \355\ CLA, ``A Path Forward: CLA's Simulations on Rural 
Emergency Hospital Designation'', February 8, 2022, at https://www.claconnect.com/resources/articles/2022/a-path-forward-clas-simulations-on-rural-emergency-hospital-designation.

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[[Page 72257]]

    In total, the NC RHRP study estimated that there are 1,673 
hospitals (mostly CAHs) eligible to convert to an REH and of these, 68 
would convert to REH status. The reasons why some would convert are 
presented in the NC RHRP study and include low levels of inpatient 
revenue, low levels of swing bed nursing care revenue, and negative 
financial margins over a period of years.
    The finances of individual rural hospitals and CAHs vary widely, as 
do the local economic and demographic circumstances of the communities 
served by these facilities (for example some rural areas are gaining 
population even as most face declining populations). Competition from 
other hospitals either in the rural area or in nearby cities also 
varies widely, with the only certainty in forecasting REH conversion is 
that seemingly similar hospitals and CAHs will make widely different 
decisions. What the NC RHRP did, in essence, was predict that the 
hospitals and CAHs facing the most severe financial difficulties would 
be the most likely to convert.
    For purposes of our analysis, we use the NC RHRP estimate of 68 
conversions though acknowledge that the number of conversions could be 
less than or significantly greater than this estimate. In addition, 
when considering the PRA burden for REHs, given that the CoPs align 
closely with existing standards, we considered both the existing burden 
estimates for CAHs and hospitals, as well as our ongoing experience 
with these provider types. We also considered that REHs would only be 
furnishing outpatient services, which would lessen their burden.
2. Sources of Data Used in Estimates of Burden Hours and Cost Estimates
    For the estimated costs contained in the analysis below, we used 
data from the U.S. Bureau of Labor Statistics (BLS) to determine the 
mean hourly wage for the positions used in this analysis.\356\ For the 
total hourly cost, we doubled the mean hourly wage for a 100 percent 
increase to cover overhead and fringe benefits, according to standard 
HHS estimating procedures. If the total cost after doubling resulted in 
0.50 or more, the cost was rounded up to the next dollar. If it was 
0.49 or below, the total cost was rounded down to the next dollar. The 
total costs used in this analysis are indicated in Table 107.
---------------------------------------------------------------------------

    \356\ BLS. May 2020 National Occupational Employment and Wage 
Estimates United States. United States Department of Labor. Accessed 
at https://www.bls.gov/oes/current/oes_nat.htm. Accessed on August 
25, 2021.
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BILLING CODE 4120-01-P

[[Page 72258]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.150

BILLING CODE 4120-01-C
3. Rural Emergency Hospitals
a. ICRs Regarding Condition of Participation: Provision of Services 
(Sec.  485.514)
    Section 485.514(a) would require REHs to furnish health care 
services in accordance with appropriate written policies that are 
consistent with applicable state law. In addition, Sec.  485.514(b) 
would require REHs to develop the policies with the advice of members 
of the REH's professional health care staff, while Sec.  485.514(d) 
would require REHs to conduct a biennial review of all its policies and 
procedures. We have not designated any specific process or format for 
REHs to use in developing their policies or conducting a review of 
their policies because we believe they need the flexibility to 
determine how best to accomplish these tasks.
    In accordance with the section 1861(kkk)(3) of the Act, REHs must 
have been either a CAH or a rural hospital with not more than 50 beds 
as of the date of enactment of the CAA, December 27, 2020, to convert 
to an REH. We estimate that 68 facilities will convert to an REH and we 
believe that they will be developing REH-specific policies that are 
based on policies that were utilized when the facility was a rural 
hospital or CAH. As a result, we estimate that it would take an REH 
approximately 80 hours for administrative and clinical staff to develop 
policies. If there are 68 REHs to comply with the policy development 
requirement and each REH uses 80 hours to comply: (16 hours for a 
physician + 16 hours for an administrator + 16 hours for a mid-level 
practitioner + 16 hours for a nurse + 16 hours for a clerical staff 
person), then the burden hours are 5,440 (68 REHs x 80 hours). The cost 
is $8,800 per REH ($3,360 for a physician (16 hours x $210) + $1,952 
for an administrator (16 hours x $122) + $1,616 for a mid-level 
practitioner (16 hours x $101) + $1,264 for a nurse (16 hours x $79) + 
$608 for a clerical staff person (16 hours x $38)). The total cost is 
598,400 (68 REHs x $8,800). We estimate that it would take an REH's 
professional personnel 16 hours to review and make changes to policies 
and procedures biennially. Therefore, for all 68 REHs to comply with 
the policy review requirement it would require an estimated 16 burden 
hours biennially, or 8 hours annually

[[Page 72259]]

(1.5 hours for a physician + 2 hours for an administrator + 1.5 hours 
for a mid-level practitioner + 1.5 hours for a nurse + 1.5 hours for a 
clerical staff person). The burden hours are 544 (8 hours x 68 REHs). 
The cost per REH is $886 ($315 for a physician (1.5 hours x $210) + 
$244 for an administrator (2 hours x $122) + $151.50 for a mid-level 
practitioner (1.5 hours x $101) + $118.50 for a nurse (1.5 hours x $79) 
+ $57 for a clerical staff person (1.5 hours x $38)). The total cost is 
$60,248 ($886 x 68 REHs). Therefore, the total cost for each REH to 
comply with these requirements would be $658,648 annually and 5,984 
burden hours.
b. ICRs Regarding Condition of Participation: Infection Prevention and 
Control and Antibiotic Stewardship Programs (Sec.  485.526)
COVID-19 and Seasonal Influenza Reporting
    Consistent with the recent changes we made to the hospital and CAH 
infection control CoPs related to COVID-19 and the declared public 
health emergency (PHE), we proposed to require REHs, after the 
conclusion of the current COVID-19 PHE, to report COVID-19 and seasonal 
influenza-related reporting. The requirements would apply upon 
conclusion of the COVID-19 PHE and would continue until April 30, 2024, 
unless the Secretary establishes an earlier ending date. The data 
elements align closely with those COVID-19 reporting requirements for 
long-term care (LTC) facilities that were finalized on November 9, 2021 
(86 FR 62421) and are representative of the guidance provided to 
hospitals and CAHs for reporting. Therefore, we do not expect that 
these categories of data elements would require REHs to report any 
information beyond that which they have already been reporting as 
existing rural hospitals or CAHs. Furthermore, similar to the 
requirements for LTC facilities, this requirement would also allow for 
the scope and frequency of data collection to be reduced and limited 
responsive to the evolving clinical and epidemiological circumstances.
    Based on our experience with those existing hospitals and CAHs and 
the current COVID-19 and related reporting requirements, we believe 
that this will primarily be the responsibility of a registered nurse 
and we have used this position in this analysis at an average hourly 
salary of $79. According to the most recent COVID-19 hospital reporting 
guidance (available at https://www.hhs.gov/sites/default/files/covid-19-faqs-hospitals-hospital-laboratory-acute-care-facility-data-reporting.pdf), hospitals are reporting COVID-19 and influenza-related 
data on a daily basis, with backdating permitted for weekends and 
holidays, except psychiatric and rehabilitation hospitals who report 
weekly. Some data element reporting fields are inactive for data 
collection, and therefore, hospitals can optionally report data for 
these fields. The inactive fields and active fields together reflect 
what is listed in this rule for COVID-19 and influenza-related 
reporting as well as future reporting in the event of a declared PHE, 
which we discuss next. We do not expect, nor did we propose, daily 
reporting for COVID-19 or influenza outside of a declared PHE.
    If we were to assume a weekly reporting frequency, we would 
anticipate that there are reduced cases and fewer data elements (with 
no line level patient data) being reported. Based on these assumptions, 
we estimate that total annual burden hours for REHs to comply with 
these requirements would be 5,304 hours based on weekly reporting of 
the required information by 68 REHs x 52 weeks per year and at an 
average weekly response time of 1.5 hours for a registered nurse with 
an average hourly salary of $79. Therefore, the estimate for total 
annual costs for all hospitals and CAHs to comply with the required 
reporting provisions weekly would be $419,016 or approximately $6,162 
per facility annually. We acknowledge that the data elements and 
reporting frequency could increase or decrease over the next two years, 
and those changes would impact this burden estimate.
    We note that this estimate is assumed to be a one-day snapshot of 
reporting information as opposed to a cumulative weekly report 
accounting for information based on each day of that week. If we 
assumed a cumulative weekly account, we can assume reduced burden 
related to the actual reporting time, but anticipate that the estimate 
would be slightly higher to account for the need to track closely to 
daily reporting. We also acknowledge that respondents may have to track 
and invest in infrastructure in order to timely and accurately report 
on the specified frequency. Thus, respondents may face ongoing burdens 
associated with this collection even in the case of reduced frequency 
of submissions. We solicit comment on this potentiality.
    Furthermore, we note that this estimate likely overestimates the 
costs associated with reporting because it assumes that all REHs will 
report manually. Efforts are underway to automate reporting that have 
the potential to significantly decrease reporting burden and improve 
reliability.
Future Reporting in the Event of a Future PHE Declaration
    In addition, we proposed to establish reporting requirements for 
future PHEs related to epidemics and pandemics by requiring REHs to 
electronically report information on Acute Respiratory Illness 
(including, but not limited to, Seasonal Influenza Virus, Influenza-
like Illness, and Severe Acute Respiratory Infection), SARS-CoV-2/
COVID-19, and other viral and bacterial pathogens or infectious 
diseases of pandemic or epidemic potential only when the Secretary has 
declared a PHE directly related to such specific pathogens and 
infectious diseases. Specifically, when the Secretary has declared a 
PHE, we proposed to require REHs to report specific data elements to 
the CDC's National Health Safety Network (NHSN), or other CDC-supported 
surveillance systems, as determined by the Secretary. The final 
requirements of this section would apply to local, state, and national 
PHEs as declared by the Secretary. Relevant to the declared PHE, the 
categories of data elements that this report would include are as 
follows: suspected and confirmed infections of the relevant infectious 
disease pathogen among patients and staff; total deaths attributed to 
the relevant infectious disease pathogen among patients and staff; 
personal protective equipment and other relevant supplies in the 
facility; capacity and supplies in the facility relevant to the 
immediate and long term treatment of the relevant infectious disease 
pathogen, such as ventilator and dialysis/continuous renal replacement 
therapy capacity and supplies; total REH bed and intensive care unit 
bed census, capacity, and capability; staffing shortages; vaccine 
administration status of patients and staff for conditions monitored 
under this section and where a specific vaccine is applicable; relevant 
therapeutic inventories and/or usage; isolation capacity, including 
airborne isolation capacity; and key co-morbidities and/or exposure 
risk factors of patients being treated for the pathogen or disease of 
interest in this section that are captured with interoperable data 
standards and elements.
    We also proposed to require that, unless the Secretary specifies an 
alternative format by which a REH must report each applicable infection 
(confirmed and suspected) and the applicable vaccination data in a 
format that provides person-level information, to include medical 
record identifier, race, ethnicity, age, sex, residential

[[Page 72260]]

county and zip code, and relevant comorbidities for affected patients, 
unless the Secretary specifies an alternative format by which the REH 
would be required report these data elements. We also proposed in this 
provision to limit any person-level, directly or potentially 
individually identifiable, information for affected patients and staff 
to items outlined in this section or otherwise specified by the 
Secretary. We note that the provided information obtained in this 
surveillance system that would permit identification of any individual 
or institution is collected with a guarantee that it will be held in 
strict confidence, will be used only for the purposes stated, and will 
not otherwise be disclosed or released without the consent of the 
individual, or the institution in accordance with sections 304, 306, 
and 308(d) of the Public Health Service Act (42 U.S.C. 242b, 242k, and 
242m(d)). Lastly, we proposed that a REH would provide the information 
specified on a daily basis, unless the Secretary specifies a lesser 
frequency, to the Centers for Disease Control and Prevention's National 
Healthcare Safety Network (NHSN) or other CDC-supported surveillance 
systems as determined by the Secretary.
    For purposes of this burden collection, we acknowledge the unknown 
and the ongoing burdens that may exist even if CMS is not collecting 
information outside of a declared PHE. We recognize that considerations 
such as building and maintaining the infrastructure to support 
readiness are necessary to ensure compliance with this requirement.
    CMS will pursue an emergency review of the collection of 
information in the case of a declared PHE and, if approved, use such 
burden estimate to inform its approach at that time. CMS will also 
publish an accompanying Federal Register Notice concurrent with its 
submission of a request to collect information, in addition to all 
other actions in accordance with the implementing regulations of the 
PRA at 5 CFR 1320.13. CMS commits to ensuring that respondents are well 
aware in advance of the intention to collect such information and 
solicits comment on the appropriate timeline and notification process 
for such actions.
c. ICRs Regarding Condition of Participation: Staffing and Staff 
Responsibilities (Sec.  485.528)
    We proposed that the emergency department of the REH be staffed 24 
hours a day, 7 days a week, and we propose this requirement at Sec.  
485.6528(a) and that a doctor of medicine or osteopathy, nurse 
practitioner, clinical nurse specialist, or physician assistant must be 
available to furnish services in the REH in the facility 24 hours a 
day. The burden associated with this requirement is the time it takes 
to review the REH's written policies and make appropriate changes or 
updates regarding its staffing and staff responsibilities for the 
services it furnishes. In conjunction with a mid-level practitioner, 
the physician develops, executes, and periodically reviews the REH's 
written policies governing the services it furnishes. We estimate that 
it will take the physician and mid-level practitioner 1 hour each to 
review the REH written policies and make the appropriate changes. We 
also estimate that a REH will utilize the services of one clerical 
person for half an hour to process any changes or updates, for a total 
of 2.5 burden hours and an estimated cost per REH of $ 330 ((1 hour x 
$210 for a physician) + (1 hour x $101 for a mid-level practitioner) + 
(0.5 hours x $38 for clerical staff)). Therefore, the burden associated 
with this requirement is an estimated 170 burden hours (2.5 hours x 68 
REHs) at an estimated cost of $22,440 ($330 x 68 REHs).
d. ICRs Regarding Condition of Participation: Patient's Rights (Sec.  
485.534)
(1) Standard: Notice of Rights: Sec.  485.534(a)(1) and (2)
    Proposed Sec.  485.534(a) would require REHs to notify a patient of 
their rights and of whom to contact to file a grievance. We allow REHs 
the flexibility to use different approaches to meet this CoP. We have 
set forth general elements that should be common to all grievance 
processes, but have not delineated strategies and policies for 
implementing this system. We believe that in large measure, REHs would 
be able to use existing systems for providing patients with information 
and handling complaints, and the elements listed in the regulation only 
serve to give basic assurance that these systems are responsive to 
patient grievances and act effectively. A less specific approach would 
permit a nominal, non-functional system that in essence did not serve 
the very purpose intended by the regulation. Costs associated with 
formalizing a process and modifying any existing notices or processes 
will most likely be partially offset by a reduction in patient-
initiated lawsuits regarding care, and should provide a valuable tool 
for targeting internal quality assurance mechanisms.
    We asked that the patient be provided with written notice 
containing a contact person's name, the steps taken on behalf of the 
patient to investigate the grievance, the results of the grievance 
process, and the date of completion. Steps taken on behalf of the 
patient need not include a detailed description of who was spoken to 
and when. It might merely be that the appropriate staff were 
interviewed and that records were reviewed to investigate the 
grievance, and that the investigation found the grievance to be either 
unsubstantiated or substantiated. Second, the figures represented are 
estimates. We know of no existing system that tracks how many 
complaints are lodged in aggregate in hospitals or CAHs each year; 
however, for REHs, we believe that the grievance response can largely 
rely on standardized language with only relevant information filled in, 
or could be created in a check-sheet format, or in many other ways.
    Thus, the burden associated with this requirement is the time and 
effort necessary to modify any existing notices to include the proposed 
grievance process requirements. We believe that an office assistant may 
be tasked with drafting or updating the notices and distributing or 
posting, as appropriate, the information. We estimate that this would 
require no more than two hours of the clerical staff time. Based on 
this we estimate that this will create a one-time cost of $5,168 (68 
REHs x 2 hours x $38 clerical staff hourly wage). In addition, we 
estimate that it will require the office assistant 2 minutes (.0333 
hours) to provide the notice per REH patient on an annual basis. The 
number of notices required will depend on the number of patients 
received at the REH. Therefore, the per facility burden associated with 
providing the notice will vary based on the unique factors of the REH. 
According to an OIG report, there were 2,316,675 outpatient visits in 
2011 at CAHs.\357\ Based on this estimate, we assume that the REH will 
have an average of 1,743 outpatient/emergency department visits per 
year that would require informing each patient of their rights which 
would take 58 hours (.0333 hours x 1,743 notices). The cost is $149,872 
($38 clerical staff wage x 58 hours x 68 REHs).
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    In its resolution of a grievance, a REH must provide the patient 
with written notice of its decision that contains the name of the REH 
contact person, the steps taken on behalf of the patient to investigate 
the grievance, the results of

[[Page 72261]]

the grievance process, and the date of completion.
    The burden associated with this requirement is the time and effort 
necessary to disclose the written notice to each patient who filed a 
grievance. We estimate that on average it will take each REH 15 minutes 
to develop and disseminate the required notice and estimate that an REH 
may have to provide 50 notices on an annual basis for a total annual 
burden. The burden hours would be 13 hours (0.25 hours x 50 notices). 
The total burden hours would be 884 hours (13 hours x 68 REHs) at the 
cost of $33,592 ($38 x 884 hours). Therefore, the total burden 
associated with this requirement is $188,632 ($5,168 to update notices, 
$149,872 to provide the notices, and $33,592 to provide the results of 
a grievance investigation).
(2) Standard: Confidentiality of Patient Records (Sec.  485.534(d))
    Section 485.534(d), which sets forth the patient's right to access 
information in their records, will involve minimal burden as many 
states' existing laws cover this point. We have not proposed to require 
disclosure of all records, inasmuch as we recognize that there are 
situations where such a release could be harmful to the patient or 
another individual. Furthermore, we have not taken a prescriptive 
approach in specifying how quickly this information must be provided to 
the patient, or by setting a rate that the REH can charge. In the 
absence of state law, the REH should charge whatever is reasonable and 
customary in its community for duplication services (based on rates at 
local commercial copy centers, post offices, or other venues in which 
one could make photocopies). Therefore, while this requirement is 
subject to the PRA, we believe that the burden associated with this 
requirement is exempt from the PRA, as defined in 5 CFR 1320.3(b)(2) 
and (3) because this requirement is considered standard industry 
practice and/or is required under state or local law.
(3) Standard: Restraint and Seclusion (Sec.  485.534(e))
    Section 485.534(e) requires that REH must have written policies and 
procedures regarding the use of restraint and seclusion that are 
consistent with current standards of practice. While the requirement is 
subject to the PRA, we believe the associated burden is exempt in 
accordance with 5 CFR 1320.3(b)(2) because the time, and effort, and 
financial resources necessary to comply with this requirement would be 
incurred by persons in the normal course of their activities. These are 
reasonable and customary state practices based on current standards of 
practice and the state would impose this standard for efficient 
utilization of Medicare or Medicaid services in the absence of a 
Federal requirement. However, we are soliciting comment on whether this 
is a customary business practice or whether this would impose an 
additional burden on those providers eligible to convert to an REH.
(4) Standard: Restraint and Seclusion: Staff Training Requirements 
(Sec.  485.534(f))
    Section 485.534(f) requires facilities to establish staff training 
requirements for the use of restraints and seclusion. The REH must 
provide competency-based training and education of REH personnel and 
staff, including medical staff, and, as applicable, personnel providing 
contracted services in the REH, on the use of restraint and seclusion. 
While these information collection requirements are subject to the PRA, 
we believe the burden associated with them are exempt as defined in 5 
CFR 1320.3(b)(2) because the time, effort, and financial resources 
necessary to comply with the requirement are incurred by persons in the 
normal course of their activities. However, we are soliciting comment 
on whether this is a customary business practice or whether this would 
impose an additional burden on those providers eligible to convert to 
an REH.
(5) Standard: Death Reporting Requirements (Sec.  485.534(g))
    Section 485.534(g) requires the facility to report the death of a 
resident associated with restraint or seclusion to the CMS regional 
office. A report must include the name of the resident involved in the 
serious occurrence, a description of the occurrence, and the name, 
street address, and telephone number of the facility.
    We estimate it will take 5 minutes to report each death to the CMS 
regional office and to document that report. We estimate fewer than 10 
deaths annually for all 68 facilities. Five (5) minutes x 10 deaths 
annually would equate to a national burden of 50 minutes per year. The 
hourly adjusted rate for a Medical and Health Service Manager 
responsible for notifying the CMS regional office of a death a 
documenting the report is $122/hour. Multiplying the total burden of 
0.83 hours by the hourly wage yields an associated cost of about 
$101.67.
(6) Standard: Patient Visitation Rights (Sec.  485.534(h))
    Section 485.534(h) requires a REH to have written policies and 
procedures regarding the visitation rights of patients, including any 
clinically necessary or reasonable restriction or limitation that the 
REH may need to place on such rights and the reasons for the clinical 
restriction or limitation. Specifically, the written policies and 
procedures must contain the information listed in Sec.  485.534(h)(1) 
through (4). Given that the statute requires a REH to have been either 
a CAH or rural hospital as of the date of enactment of the CAA, we 
expect these facilities to already have a visitation policy in 
accordance with the CAH and hospital CoPs at Sec. Sec.  485.635(f) and 
482.13(h), respectively. Therefore, the ICR burden associated with this 
requirement would be the time and effort necessary for a REH to review 
and make any necessary updates given its conversion to an REH and to 
distribute that information to patients. We expect that an office 
secretary or other clerical staff would update and distribute, or post 
as appropriate, the information and could accomplish this task in 15 
minutes for an estimated one-time burden total of 17 hours (0.25 hours 
x 68 REHs) and at the cost of $646 ($38 x 17 hours).
e. ICRs Regarding Condition of Participation: Transfer Agreements 
(Proposed Sec.  485.538)
    At Sec.  485.538, we proposed that each REH must have a transfer 
agreement in effect with at least one certified hospital that is a 
level I or level II trauma center for the referral and transfer of 
patients requiring emergency medical care beyond the capabilities of 
the REH. We estimate that it would require an REH administrator and a 
clerical person 2 hours each to develop the initial agreement and 
obtain the appropriate approvals. According to Table 1, the REH 
administrator's total hourly cost is $122 per hour. The clerical staff 
person's total hourly cost is $38. We estimate that for each REH to 
comply with the requirements in this section it would require 4 burden 
hours which would be a total of 272 hours (4 hours x 68 REHs). The cost 
is $320 ($244 (2 hours x $122 for an administrator) + $76 (2 hours x 
$38 for a clerical staff person)) for each REH. The total cost is 
$21,760 ($320 x 68 REHs). This is a one-time cost.

[[Page 72262]]

f. ICRs Regarding Condition of Participation: Medical Records (Proposed 
Sec.  485.540)
    There is no burden attributed to this task. The REH's health care 
services are furnished in accordance with appropriate written policies 
that are consistent with applicable state law. The policies include a 
description of the services the REH furnishes directly and those 
furnished through agreement or arrangement; policies and procedures for 
emergency medical services and guidelines for medical management of 
health problems that include the conditions requiring medical 
consultation and/or patient referral and the maintenance of health care 
records.
    We are not including burden associated with certain patient related 
activities such as health care plans, patient records, medical records, 
etc., because prudent institutions already incur this burden in the 
course of doing everyday business. As stated in 5 CFR 1320.3(b)(2), the 
burden associated with usual and customary business practices is exempt 
from the PRA. However, we are soliciting comment on whether this is a 
customary business practice or whether this would impose an additional 
burden on those providers eligible to convert to an REH. Further, state 
laws require providers to maintain patient records. (For example, the 
annotated Code of Maryland (10.11.03.13) requires a provider to be 
responsible for maintaining patient records for services that it 
provides.) State law requires record information that should include: 
documentation of personal interviews; diagnosis and treatment 
recommendations; records of professional visits and consultations; and 
consultant notes which shall be appropriately initialed or signed.
g. ICRs Regarding Condition of Participation: Quality Assessment and 
Performance Improvement Program (QAPI) (Proposed Sec.  485.536)
    At Sec.  485.536, we require REHs to develop, implement, and 
maintain an effective, ongoing, REH-wide, data-driven quality 
assessment and performance improvement (QAPI) program. The REH's 
governing body must ensure that the program reflects the complexity of 
the REH's organization and services; involves all REH departments and 
services (including those services furnished under contract or 
arrangement); and focuses on indicators related to improved health 
outcomes and the prevention and reduction of medical errors. The REH 
must maintain and demonstrate evidence of its QAPI program for review 
by CMS. In addition, REHs must comply with all of the requirements set 
forth in proposed Sec.  485.536(a) through (e). We believe that the REH 
QAPI leadership (consisting of a physician, and/or administrator, mid-
level practitioner, and a nurse) would need to have at least one and 
potentially two meetings to ensure that the current QAPI program that 
the provider has established is in accordance with the proposed 
requirements at Sec.  485.536. The first meeting would be to discuss 
the current QAPI program and what, if anything, needs to be revised 
based on the proposed QAPI requirements at Sec.  485.536. The second 
meeting, if needed, would be to discuss strategies to update the 
current policies, and then to discuss the process for incorporating 
those changes. We believe that these meetings would take approximately 
2 hours each. We estimate that the physician would have a limited 
amount of time, approximately 1 hour to devote to the QAPI activities. 
Additionally, we estimate these activities would require 4 hours of an 
administrator's time, 4 hours of a mid-level practitioner's time, 8 
hours of a nurse's time, and 2 hours of a clerical staff person's time 
for a total of 19 burden hours. We believe that the REH's QAPI 
leadership would need to meet periodically to review and discuss the 
changes that would need to be made to their program. We also believe 
that a nurse would likely spend more time developing the program with 
the mid-level practitioner. The physician would likely review and 
approve the program. The clerical staff member would probably assist 
with the program's development and ensure that the program was 
disseminated to all of the necessary parties in the REH.
    Based on these factors, we estimate that for each REH to comply 
with the requirements in this section it would require annually 19 
burden hours (1 hour for a physician + 4 hours for an administrator + 4 
hours for a mid-level practitioner + 8 hours for a nurse + 2 hours for 
a clerical staff person) at a cost of $1,810 ($210 for a physician (1 
hour x $210) + $488 for an administrator (4 hours x $122) + $404 for a 
mid-level practitioner (4 hours x $101) + $632 for a nurse (8 hours x 
$79) + $76 for a clerical staff person (2 hours x $38)). Therefore, for 
all 68 REHs to comply with these requirements, it would require 1,292 
burden hours (19 hours x 68 REHs) at a cost of approximately $123,080 
($1,810 x 68 REHs).
h. ICRs Regarding Condition of Participation: Emergency Preparedness 
(Sec.  485.542)
    Section 485.542 sets forth the emergency preparedness requirements 
for REHs. We note that these emergency preparedness standards are 
consistent national parameters that all Medicare and Medicaid 
participating providers and suppliers must meet. This includes both 
rural hospitals and CAHs and therefore facility that converts to an REH 
would have already incurred the costs to develop and implement their 
emergency preparedness plan. Based on this, the burden associated with 
these requirements would be the on-going costs to review, maintain and 
implement the emergency preparedness program to ensure ongoing 
compliance with the requirements and as such we have developed this COI 
section based largely on the existing COI burden for CAHs and 
hospitals.
i. Standard: Risk Assessment and Planning (Sec.  485.542(a))
    We proposed to require REHs to develop and maintain an emergency 
preparedness plan that must be reviewed and updated at least 
biennially. We expect that each REH facilities director ($104 per hour) 
would conduct a thorough risk assessment that will consider its 
location and geographical area; patient population, including those 
with special needs; and the type of services they have the ability to 
provide in an emergency (12 hours biennially or 6 hours annually) based 
on the services that they are now providing as an REH. They each would 
also need to review the measures needed to ensure continuity of its 
operation, including delegations and succession plans. We estimate that 
ongoing compliance with this requirement would require 6 burden hours 
annually (12 biennially) from the REH facilities director. Therefore, 
for all 68 REHs to comply with this requirement, it would require 408 
burden hours (6 x 68 REHs) at a cost of approximately $42,432 (408 
hours x $104).
(1) Standard: Policies and Procedures (Sec.  485.542(b))
    REHs are required to maintain emergency preparedness policies and 
procedures in accordance with their emergency plan, risk assessment, 
and communication plan. Each needs to review their emergency 
preparedness policies and procedures and revise, or in some cases, 
develop new policies and procedures that would ensure that the 
emergency preparedness plans address

[[Page 72263]]

the specific requirements of the regulations.
    We believe that the requirement for REHs to review and update their 
policies and procedures annually constitutes a usual and customary 
business practice and is not subject to the PRA in accordance with 5 
CFR 1320.3(b)(2). However, we are soliciting comment on whether this is 
a customary business practice or whether this would impose an 
additional burden on those providers eligible to convert to an REH.
(2) Standard: Communication Plan (Sec.  485.542(c))
    REHs are required to develop and maintain an emergency preparedness 
communication plan that complies with both Federal and state law and 
must be reviewed and updated at least annually. The burden associated 
with this requirement would be the time and effort necessary to review, 
revise, and if necessary, develop a new communications plan to ensure 
that it complies with the requirements of this regulation. However, we 
believe that most REHs have some type of emergency preparedness 
communication plan based on their prior status as a CAH or rural 
hospital. It is standard practice in the health care industry to have 
and maintain contact information for both staff and outside sources of 
assistance; alternate means of communications in case there is an 
interruption in phone service to the facility, such as cell phones; and 
a method for sharing information and medical documentation with other 
health care providers to ensure continuity of care for their patients.
    If any revisions or additions are necessary to satisfy the 
requirements as an REH, we expect the revisions or additions would be 
those incurred during the course of normal business and thereby impose 
no additional burden. Thus, the ICRs related to the communication plan 
would constitute a usual and customary business practice as stated in 
the implementing regulations of the PRA at 5 CFR 1320.3(b)(2) and we 
did not include this activity in the burden analysis. We are soliciting 
comment on whether this is a customary business practice or whether 
this would impose an additional burden on those providers eligible to 
convert to an REH.
(3) Standard: Training and Testing (Sec.  485.542(d))
    REHs are required to develop and maintain an emergency preparedness 
training and testing program. The training program must include initial 
training in emergency preparedness policies and procedures for all new 
and existing staff, individuals providing services under arrangement, 
and volunteers, consistent with their expected roles and must be 
documented. The testing program must include participation in a full-
scale exercise that is community-based or when a community-based 
exercise is not accessible, an individual, facility-based. If an actual 
natural or man-made emergency that requires activation of the emergency 
plan is experienced, then this requirement is exempt for 1 year 
following the onset of the actual event. In addition, the testing 
program must include one additional testing exercise, which may be 
determined by the REH. The training must be provided biennially and two 
testing exercises must be conducted annually.
    We expect that all REHs will review their current training programs 
in their current capacity as hospitals or CAHs, and compare them to 
their risk assessments and emergency preparedness plans, emergency 
policies and procedures, and emergency communication plans. The CAHs 
will need to revise and, if necessary, develop new sections or 
materials to ensure their training and testing programs complied with 
our requirements. We anticipate that ongoing compliance with this 
requirement will require the involvement of an administrator, the mid-
level practitioner, the facilities director, and clerical staff. We 
expect that a mid-level practitioner will perform the initial review of 
the training program (4 hours), brief the administrator and the 
director of facilities (2 hours), and clerical staff to revise or 
develop new sections for the training program (1 hour), based on the 
group's decisions, if necessary. This will result in a cost of $894 
($404 for a mid-level practitioner (4 hours x $101) + $244 for an 
administrator (2 hours x $122) + $208 for a director of facilities (2 
hours x $104) + $38 for a clerical staff person (1 hour x $38)) for 
each REH. Therefore, for all REHs to comply with this requirement it 
will require an estimated 476 burden hours (7 hours x 68 REHs) at a 
cost of $60,792 ($894 x 68 REHs).
j. ICRs Regarding Conditions of Participation: Physical Environment 
(Sec.  485.544)
(1) Standard: Life Safety Code (Sec.  485.544)
    The REH must meet the applicable provisions of the 2012 edition of 
the Life Safety Code (LSC) of the National Fire Protection Association. 
If CMS finds that the state has a fire and safety code imposed by the 
state law that adequately protects patients, CMS may allow the state 
survey agency to apply the state's fire and safety code instead of the 
LSC if waiving the provisions of the LSC does not adversely affect the 
health and safety of patients. This regulation requires a REH to 
maintain written evidence of regular inspections and approval by state 
fire control agencies. We estimate that the burden associated with 
maintaining written evidence of state inspections and approval would be 
an average of 30 minutes for clerical personnel to file the 
documentation, for a total of 34 burden hours (0.5 hours x 68 REHs) and 
a cost of $1,292 (34 hours x $38). The burden will be accounted for in 
a new information collection request (request for a new OMB control 
number) submitted for OMB approval.
    Table 108 that follows summarizes our estimates of burden hours and 
costs for REHs. We emphasize that these estimates assume 68 conversions 
and that the number actually converting could be a fraction of this 
figure, or much higher, which as discussed earlier is an uncertainty 
addressed in both the NC RHRP and CLA study that estimated likely 
conversions. Our estimates of the cost per entity, however, would not 
be affected by the number of conversions.
BILLING CODE 4120-01-P

[[Page 72264]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.151

[GRAPHIC] [TIFF OMITTED] TR23NO22.152


[[Page 72265]]


BILLING CODE 4120-01-C
4. Critical Access Hospitals
a. ICRs Regarding Condition of Participation: Patient's Rights (Sec.  
485.614)
(1) Standard: Notice of Rights: Sec.  485.614(a)(1) and (2)
    Section 485.614(a) proposed to require CAHs to notify the patient 
of their rights and of whom to contact to file a grievance. We allow 
REHs the flexibility to use different approaches to meet this CoP. We 
have set forth general elements that should be common to all grievance 
processes, but have not delineated strategies and policies for 
implementing this system. We believe that in large measure, CAHs would 
be able to use existing systems for providing patients with information 
and handling complaints, and the elements listed in the regulation only 
serve to give basic assurance that these systems are responsive to 
patient grievances and act effectively. A less specific approach would 
permit a nominal, non-functional system that in essence did not serve 
the very purpose intended by the regulation. Costs associated with 
formalizing a process and modifying any existing notices or processes 
will most likely be offset by a reduction in patient-initiated lawsuits 
regarding care, and should provide a valuable tool for targeting 
internal quality assurance mechanisms.
    We proposed that the patient be provided with written notice 
containing a contact person's name, the steps taken on behalf of the 
patient to investigate the grievance, the results of the grievance 
process, and the date of completion. Steps taken on behalf of the 
patient need not include a detailed description of who was spoken to 
and when. It might merely be that the appropriate staff were 
interviewed and that records were reviewed to investigate the 
grievance, and that the investigation found the grievance to be either 
unsubstantiated or substantiated. Second, the figures represented are 
estimates. We know of no existing system that tracks how many 
complaints are lodged in aggregate in CAHs each year; however, we 
believe that the grievance response can largely rely on standardized 
language with only relevant information filled in, or could be created 
in a check-sheet format, or in many other ways.
    Thus, the burden associated with this requirement is the time and 
effort necessary to modify any existing notices to include the 
grievance process requirements. We believe that an office assistant may 
be tasked with drafting or updating the notices and distributing or 
posting, as appropriate, the information. We estimate that this would 
require no more than two hours of the clerical staff time. The burden 
hours are 2,720 (2 hours x 1,360). Based on this we estimate that this 
will create a one-time cost of $103,360 (2,720 hours x $38). In 
addition, we estimate that it will require the office assistant 2 
minutes (.0333 hours) to provide the notice per CAH patient on an 
annual basis. The number of notices required will depend on the number 
of patients received at the CAH. Therefore, the per facility burden 
associated with providing the notice will vary based on the unique 
factors of the CAH. According to a 2013 OIG report, there were 
approximately 1,753 patient visits per CAH in 2011.\358\ Based on this 
estimate, the burden hours would be 58 hours (.0333 hours x 1,753 
notices). The total burden hours would be 78,880 hours (58 hours x 
1,360 CAHs). Therefore, we estimate that the CAH would have had to 
inform each of these patient of their rights at a cost of $2,997,440 
($38 x 78,880 hours).
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    In its resolution of a grievance, a CAH must provide the patient 
with written notice of its decision that contains the name of the CAH 
contact person, the steps taken on behalf of the patient to investigate 
the grievance, the results of the grievance process, and the date of 
completion.
    The burden associated with this requirement is the time and effort 
necessary to disclose the written notice to each patient who filed a 
grievance. We estimate that on average it will take each REH 15 minutes 
to develop and disseminate the required notice and estimate that a CAH 
may have to provide 50 notices on an annual basis. The burden hours for 
each CAH will be 12.5 (0.25 hour x 50 notices) for a total of 17,000 
burden hours (12.5 hours x 1,360 CAHs). The total annual burden cost is 
$646,000 ($38 x 17,000).
    Therefore, the total burden hours are 98,600 (78,880 + 17,000 + 
2,720) and the total cost associated with this requirement is 
$3,746,800 ($103,360 to update notices, $2,997,440 to provide the 
notices, and $646,000 to provide the results of a grievance 
investigation).
(2) Standard: Confidentiality of Patient Records (Sec.  485.614(d))
    Section 485.614(d), which sets forth the patient's right to access 
information in their records, will involve minimal burden as many 
states' existing laws cover this point. We did not propose to require 
disclosure of all records, inasmuch as we recognize that there are 
situations where such a release could be harmful to the patient or 
another individual. Furthermore, we have not taken a prescriptive 
approach in specifying how quickly this information must be provided to 
the patient, or by setting a rate that the CAH can charge. In the 
absence of state law, the REH should charge whatever is reasonable and 
customary in its community for duplication services (based on rates at 
local commercial copy centers, post offices, or other venues in which 
one could make photocopies). Therefore, while this requirement is 
subject to the PRA, we believe that the burden associated with this 
requirement is exempt from the PRA, as defined in 5 CFR 1320.3(b)(2) 
and (3) because this requirement is considered standard industry 
practice and/or is required under state or local law.
(3) Standard: Restraint and Seclusion (Sec.  485.614 (e))
    Section 485.614(e) requires that each CAH have written policies and 
procedures regarding the use of restraint and seclusion that are 
consistent with current standards of practice. While the requirement is 
subject to the PRA, we believe the associated burden is exempt in 
accordance with 5 CFR 1320.3(b)(2) because the time, and effort, and 
financial resources necessary to comply with this requirement would be 
incurred by persons in the normal course of their activities. These are 
reasonable and customary state practices and the state would impose 
this standard for efficient utilization of Medicare and Medicaid 
services in the absence of a Federal requirement. However, we are 
soliciting comment on whether this is a customary business practice or 
whether this would impose an additional burden.
(4) Standard: Restraint and Seclusion: Staff Training Requirements 
(Sec.  485.614(f))
    Section 485.614(f) requires facilities to establish staff training 
requirements for the use of restraints and seclusion. The CAH must 
provide competency-based training and education of CAH personnel and 
staff, including medical staff, and, as applicable, personnel providing 
contracted services in the CAH, on the use of restraint and seclusion. 
While these information collection requirements are subject to the PRA, 
we believe the burden associated with them are exempt as defined in 5 
CFR 1320.3(b)(2) because the time, effort, and financial resources 
necessary to comply with the requirement are incurred by persons in

[[Page 72266]]

the normal course of their activities. However, we are soliciting 
comment on whether this is a customary business practice or whether 
this would impose an additional burden.
(5) Standard: Death Reporting Requirements (Sec.  485.614(g))
    Section 485.614(g) requires the facility to report the death of a 
resident associated with seclusion or restraint to the CMS regional 
office. A report must include the name of the resident involved in the 
serious occurrence, a description of the occurrence, and the name, 
street address, and telephone number of the facility.
    We estimate it will take 5 minutes to report each death to the CMS 
regional office and to document that report. We estimate fewer than 10 
deaths annually for all 1,360 facilities. Five (5) minutes x 10 deaths 
annually would equate to a national burden of 50 minutes per year. The 
hourly adjusted rate for a Medical and Health Service Manager 
responsible for notifying the CMS regional office of a death a 
documenting the report is $122/hour. Multiplying the total burden of 
0.83 hours by the hourly wage yields an associated cost of about 
$101.26.
[GRAPHIC] [TIFF OMITTED] TR23NO22.153

    The burden for the proposed CAH provisions will be accounted for 
under OMB control number 0938-1043.

XXV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We consider all comments we received by 
the date and time specified in the DATES section of this preamble and 
responded to the comments in the preamble of this final rule with 
comment period.

XXVI. Economic Analyses

A. Statement of Need

    This final rule with comment period 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 are revising 
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 June 30, 2022, and June 2020 HCRIS 
information with cost reporting periods prior to the PHE, consistent 
with our final policy of using data prior to the start of the PHE.
    This final rule with comment period 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.
    In the CY 2019 OPPS/ASC final rule with comment period (83 FR 59075 
through 59079), we finalized a policy to update the ASC payment system 
rates using the hospital market basket update instead of the CPI-U for 
CY 2019 through 2023. We believe that this policy will help stabilize 
the differential between OPPS payments and ASC payments, given that the 
CPI-U has been generally lower than the hospital market basket, and 
encourage the migration of services to lower cost settings as 
clinically appropriate.
    In this final rule with comment period, we received comments on the 
Request for Information included in the CY 2023 OPPS/ASC proposed rule 
on possible alternative methodologies for counting organs for 
transplant hospitals and organ procurement organizations to calculate 
Medicare's share of organ acquisition costs. We will consider those 
comments in developing possible future rulemaking or other guidance.
    Additionally, we are finalizing our proposal to exclude research 
organs from total usable organs used in the ratio to calculate 
Medicare's share of

[[Page 72267]]

organ acquisition costs, and finalizing with modification our proposal 
to require an offset of costs for research organs, to provide more 
flexibility in how THs and OPOs remove or reduce costs associated with 
research organs. We are unable to estimate the extent to which the 
final research organ policy may impact the costs to Medicare. We are 
also finalizing our proposal to clarify that certain costs incurred 
prior to declaration of death, but when death is imminent, are included 
as organ acquisition costs; we do not anticipate any significant impact 
from this final policy. Therefore, there is no impact from the organ 
acquisition proposals in this final rule with comment period.

B. Overall Impact of Provisions of This Final Rule With Comment Period

    We have examined the impacts of this final rule with comment 
period, as required by Executive Order 12866 on Regulatory Planning and 
Review (September 30, 1993), Executive Order 13563 on Improving 
Regulation and Regulatory Review (January 18, 2011), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Social Security Act, section 202 of the Unfunded 
Mandates Reform Act of 1995 (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 final rule with 
comment period contains the impact and other economic analyses for the 
provisions we are finalizing 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.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with significant regulatory action/s and/or with economically 
significant effects ($100 million or more in any 1 year). This final 
rule with comment period 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 final rule with comment 
period has been reviewed by the Office of Management and Budget. We 
have prepared a regulatory impact analysis that, to the best of our 
ability, presents the costs and benefits of the provisions of this 
final rule with comment period. We solicited public comments on the 
regulatory impact analysis in the CY 2023 OPPS/ASC proposed rule, and 
we address any public comments we received in this 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 to 
the changes to the OPPS in this final rule with comment period, will be 
approximately $2.53 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 
will be approximately $86.5 billion, which is approximately $6.5 
billion higher than estimated OPPS expenditures in CY 2022. Because the 
provisions of the OPPS are part of a final rule with comment period 
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 110 of this final rule with 
comment period displays the distributional impact of the CY 2023 
changes in OPPS payment to various groups of hospitals and for CMHCs.
    We note that under our final CY 2023 policy, drugs and biologicals 
that are acquired under the 340B Program will generally be paid at ASP 
plus 6 percent, WAC plus 6 percent, or 95 percent of AWP, as 
applicable. The impacts on hospital rates as a result of this final 
policy are reflected in the discussion of the estimated effects of this 
final rule with comment period. Because we are reverting to our 
previous policy of generally paying ASP plus 6 percent for drugs 
acquired under the 340B program, we are removing the increase to the 
OPPS conversion factor that was adopted as part of the budget neutral 
implementation of the 340B policy, 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 final update to the conversion factor and 
other budget neutrality adjustments will increase total OPPS payments 
by 4.8 percent in CY 2023. The changes to the APC relative payment 
weights, the changes to the wage indexes, the continuation of a payment 
adjustment for rural SCHs, including EACHs, and the payment adjustment 
for cancer hospitals will not increase total OPPS payments because 
these changes to the OPPS are budget neutral. However, these updates 
will change the distribution of payments within the budget neutral 
system. We estimate that the total change in payments between CY 2022 
and CY 2023, considering all budget-neutral payment adjustments, 
changes in estimated total outlier 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 
exception for rural sole community hospitals from the clinic visit 
policy when provided at off-campus provider based departments, and the 
payment adjustment for the additional resource costs for domestic 
NIOSH-approved surgical N95 respirators will increase total estimated 
OPPS payments by 4.5 percent.
    We estimate the total increase (from changes to the ASC provisions 
in this final rule with comment period, as well as from enrollment, 
utilization, and case-mix changes) in Medicare expenditures (not 
including beneficiary cost-sharing) under the ASC payment system for CY 
2023 compared to CY 2022, to be approximately $230 million. Tables 111 
and 112 of this final rule with comment period 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.

[[Page 72268]]

C. Detailed Economic Analyses

1. Estimated Effects of OPPS Changes in This Final Rule With Comment 
Period
a. Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the final CY 2023 policy changes on various hospital groups. We post 
our hospital-specific estimated payments for CY 2023 on the CMS website 
with the other supporting documentation for this final rule with 
comment period. To view the hospital-specific estimates, we refer 
readers to the CMS website at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. On the 
website, select ``Regulations and Notices'' from the left side of the 
page and then select ``CMS-1772-FC'' from the list of regulations and 
notices. The hospital-specific file layout and the hospital-specific 
file are listed with the other supporting documentation for this final 
rule with comment period. We show hospital-specific data only for 
hospitals whose claims were used for modeling the impacts shown in 
Table 110 of this final rule with comment period. We do not show 
hospital-specific impacts for hospitals whose claims we were unable to 
use. We refer readers to section II.A of this final rule with comment 
period for a discussion of the hospitals whose claims we do not use for 
ratesetting or impact purposes.
    We estimate the effects of the individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes in order to 
isolate the effects associated with specific policies or updates, but 
any policy that changes payment could have a behavioral response. In 
addition, we have not made 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 final rule with comment period, we discuss 
our final policy to adjust the payment amount for nonpass-through, 
separately payable drugs acquired by certain 340B participating 
hospitals through the 340B Program. In this final rule with comment 
period for CY 2023, for hospitals paid under the OPPS, payment for 
separately payable drugs and biologicals that are obtained with a 340B 
discount will generally be ASP plus 6 percent. Additionally, we are 
decreasing the OPPS conversion factor by the same percentage that we 
increased the OPPS conversion factor in CY 2018 to implement the 340B 
policy in a budget neutral manner. After applying this payment 
methodology for drugs and biologicals purchased under the 340B Program, 
we currently estimate that we would apply a budget neutrality 
adjustment of 0.9691 to the OPPS conversion factor to remove the 
original CY 2018 OPPS budget neutrality adjustment for 340B acquired 
drugs. More information on the comments received on the 340B policy can 
be found in section V.B.6 of this final rule with comment period.
c. Effects of the IPPS and OPPS Payment Adjustment for Domestic NIOSH-
Approved Surgical N95 Respirators
    As discussed in section X.H of this final rule with comment period, 
we are finalizing IPPS and OPPS payment adjustments for the additional 
resource costs that hospitals incur in procuring domestic NIOSH-
approved surgical N95 respirators. The payment adjustments will 
commence for cost reporting periods beginning on or after January 1, 
2023.
    For the IPPS, we are making 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 making 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
    (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 final rule accounted for approximately 7.3 million IPPS discharges 
and 38.4 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 38.4 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 38.4 million covered days * $0.20 
* 40 percent).
    For the OPPS, we are making 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 final OPPS payment adjustment will 
be

[[Page 72269]]

budget neutral. In section X.H of this final rule with comment period, 
we estimate that total CY 2023 OPPS payments associated with this 
policy will be $8.7 million. This represents approximately 0.01 percent 
of the OPPS, which we are budget neutralizing through an adjustment to 
the OPPS conversion factor.
d. Estimated Effects of OPPS Changes on Hospitals
    Table 110 shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the change in payments to all facilities, has 
always included cancer and children's hospitals, which are held 
harmless to their pre-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 110, 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 are continuing to pay CMHCs for 
partial hospitalization services under APC 5853 (Partial 
Hospitalization for CMHCs) and to pay hospitals for partial 
hospitalization services under APC 5863 (Partial Hospitalization for 
Hospital-Based PHPs).
    The estimated increase in the total payments made under the OPPS is 
determined largely by the increase to the conversion factor under the 
statutory methodology. The distributional impacts presented do not 
include assumptions about changes in volume and service-mix. The 
conversion factor is updated annually by the OPD fee schedule increase 
factor, as discussed in detail in section II.B of this final rule with 
comment period.
    Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee 
schedule increase factor is equal to the market basket percentage 
increase applicable under section 1886(b)(3)(B)(iii) of the Act, which 
we refer to as the IPPS market basket percentage increase. The IPPS 
market basket percentage increase applicable to the OPD fee schedule 
for CY 2023 is 4.1 percent. Section 1833(t)(3)(F)(i) of the Act reduces 
that 4.1 percent by the productivity adjustment described in section 
1886(b)(3)(B)(xi)(II) of the Act, which is 0.3 percentage point for CY 
2023 (which is also the productivity adjustment for FY 2023 in the FY 
2023 IPPS/LTCH PPS final rule (87 FR 49056)), resulting in the CY 2023 
OPD fee schedule increase factor of 3.8 percent. We are using the OPD 
fee schedule increase factor of 3.8 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 110 of this final rule with comment period.
    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 110 
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 3.8 percent OPD fee schedule increase factor update to the 
conversion factor (Column 4); the estimated differential impact of the 
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 change to except rural sole 
community hospitals from the clinic visit policy when provided at 
campus provider based departments, and the 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 are maintaining 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, observed redistributions of payments 
in the impact table for hospitals largely depend on the mix of services 
furnished by a hospital (for example, how the APCs for the hospital's 
most frequently furnished services will change), and the impact of the 
wage index changes on the hospital. However, total payments made under 
this system and the extent to which this final rule with comment period 
will redistribute money during implementation also will depend on 
changes in volume, practice patterns, and the mix of services billed 
between CY 2022 and CY 2023 by various groups of hospitals, which CMS 
cannot forecast.
    Overall, we estimate that the rates for CY 2023 will increase 
Medicare OPPS payments by an estimated 4.5 percent. Removing payments 
to cancer and children's hospitals because their payments are held 
harmless to the pre-OPPS ratio between payment and cost and removing 
payments to CMHCs results in an estimated 4.7 percent increase in 
Medicare payments to all other hospitals. These estimated payments will 
not significantly impact other providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 110 shows the total number of 
facilities (3,508), 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 
final rule with comment period. At this time, we are unable to 
calculate a DSH variable for hospitals that are not also paid under the 
IPPS because DSH payments are only made to hospitals paid under the 
IPPS. Hospitals for which we do not have a DSH variable are grouped 
separately and generally include freestanding psychiatric hospitals, 
rehabilitation hospitals, and long-term care hospitals. We show the 
total number of OPPS hospitals (3,414), 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

[[Page 72270]]

therefore, we removed them from our impact analyses. We show the 
isolated impact on the 27 CMHCs at the bottom of the impact table 
(Table 110) 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 0.2 percent to an 
increase of 0.5, depending on the number of beds. Rural hospitals will 
experience an estimated decrease of 0.1 overall. Major teaching 
hospitals will experience an estimated decrease of 0.3 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 CY 2023 changes in 
wage index policy, discussed in section II.C of this final rule with 
comment period. We did not model a budget neutrality adjustment for the 
rural adjustment for SCHs because we are continuing the rural payment 
adjustment of 7.1 percent to rural SCHs for CY 2023, as described in 
section II.E of this final rule with comment period. 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 final rule with 
comment period.
    We modeled the independent effect of updating the wage indexes by 
varying only the wage indexes, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the CY 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: Removal of 340b Drug Payment Policy
    Column 4 demonstrates the impact of paying for 340B-acquired drugs 
at ASP+6 percent and removing the 3.19 percent increase to the 
conversion factor that was made in CY 2018 to implement the 340B policy 
in a budget neutral manner.
Column 5: All Budget Neutrality Changes Combined With the Market Basket 
Update
    Column 5 demonstrates the combined impact of all of the changes 
previously described and the update to the conversion factor of 3.8 
percent. Overall, these changes will increase payments to urban 
hospitals by 5.3 percent and to rural hospitals by 2.7 percent. Sole 
community hospitals receive an estimated increase of 1.7 percent while 
other rural hospitals receive an estimated increase of 4.3 percent.
Column 6: Rural SCH Exception to Off-Campus PBD Clinic Visit Payment 
Policy
    Column 6 displays the estimated effect of the exception for rural 
sole community hospitals to 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 40 percent of the OPPS rate for a clinic 
visit service for CY 2023. This exception is estimated to increase 
payments to rural sole community hospitals by 1.1 percent.
Column 7: All Changes for CY 2023
    Column 7 depicts the full impact of the final 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 7 shows 
the combined budget neutral effects of Columns 2 and 3; the OPD fee 
schedule increase; the impact of estimated OPPS outlier payments, as 
discussed in section II.G of this final rule with comment period; the 
change in the Hospital OQR Program payment reduction for the small 
number of hospitals in our impact model that failed to meet the 
reporting requirements (discussed in section XIV of this final rule 
with comment period); the change to except rural sole community 
hospitals from the clinic visit policy when provided at excepted off-
campus provider-based departments, and the 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 20 
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 4.5 
percent for CY 2022. We modeled the independent effect of all changes 
in Column 7 using the final relative payment weights for CY 2022 and 
the final relative payment weights for CY 2023. We used the final 
conversion factor for CY 2023 of $85.585 and the final CY 2022 
conversion factor of $84.177 discussed in section II.B of this final 
rule with comment period. While the calculation to determine the 
conversion factor includes the differences between the amounts carved 
out for pass-through payment in CYs 2022 and 2023, as this change is 
implemented in a budget neutral manner, we have excluded it from the 
impact calculations displayed in Table 110 below because it has no 
estimated overall effect on OPPS total payments.
    Column 7 contains simulated outlier payments for each year. We used 
the 1-year charge inflation factor used in the FY 2023 IPPS/LTCH PPS 
final rule (87 FR 49427) of 6.4 percent (1.06404) to increase charges 
on the CY 2021 claims, and we used the overall CCR in the July 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 1.26 percent of total payments. The 
estimated current outlier payments of 1.26 percent are incorporated in 
the comparison in Column 5. We used the same set of claims and a charge 
inflation

[[Page 72271]]

factor of 13.2 percent (1.13218) and the CCRs in the July 2022 OPSF, 
with an adjustment of 0.974495 (87 FR 49427), to reflect relative 
changes in cost and charge inflation between CY 2021 and CY 2023, to 
model the final CY 2023 outliers at 1.0 percent of estimated total 
payments using a multiple threshold of 1.75 and a fixed-dollar 
threshold of $8,625. The charge inflation and CCR inflation factors are 
discussed in detail in the FY 2023 IPPS/LTCH PPS final rule (87 FR 
49422 through 49429).
    Overall, we estimate that facilities will experience an increase of 
4.5 percent under this final rule in CY 2023 relative to total spending 
in CY 2022. This projected increase (shown in Column 7) of Table 110 of 
this final rule with comment period reflects the 3.8 percent OPD fee 
schedule increase factor, the change to except rural sole community 
hospitals from the clinic visit policy when provided at excepted off-
campus provider-based departments, and the adjustment for the 
additional resource costs of acquiring domestic NIOSH-approved surgical 
N95 respirators, minus the difference in estimated outlier payments 
between CY 2022 (1.26 percent) and CY 2023 (1.0 percent). We estimate 
that the combined effect of all changes for CY 2023 will increase 
payments to urban hospitals by 4.9 percent. Overall, we estimate that 
rural hospitals will experience a 2.9 percent increase as a result of 
the combined effects of all the changes for CY 2023.
    Among hospitals, by teaching status, we estimate that the impacts 
resulting from the combined effects of all changes will include an 
increase of 6.8 percent for major teaching hospitals and an increase of 
3.1 percent for nonteaching hospitals. Minor teaching hospitals will 
experience an estimated increase of 4.2 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
will experience an increase of 4.9 percent, proprietary hospitals will 
experience an increase of 1.3 percent, and governmental hospitals will 
experience an increase of 5.9 percent.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR23NO22.154


[[Page 72273]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.155


[[Page 72274]]


[GRAPHIC] [TIFF OMITTED] TR23NO22.156

BILLING CODE 4120-01-C
e. Estimated Effects of OPPS Changes on CMHCs
    The last line of Table 110 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 final rule. We excluded days with one or two 
services because our policy only pays a per diem rate for partial 
hospitalization when three or more qualifying services are provided to 
the beneficiary. We note that under our final policy, in order to pay 
appropriately and protect access to PHP services in CMHCs, for CY 2023 
but not for subsequent years, we are applying an equitable adjustment, 
under the authority set forth in section 1833(t)(2)(E) of the Act, to 
the CY 2023 CMHC APC payment rate by maintaining the CY 2022 CMHC APC 
payment rate. As a result, we estimate that CMHCs will experience no 
change in CY 2023 payments relative to their CY 2022 payments.(shown in 
Column 7). For a detailed discussion of our final PHP policies, please 
see section VIII of this final rule with comment period.
    Column 3 shows the estimated impact of adopting the final FY 2023 
wage index values which result in an increase of 0.0 percent to CMHCs. 
Column 4 shows that combining the OPD fee schedule increase factor, 
along with the final changes in APC policy for CY 2023 and the final FY 
2023 wage index updates, will result in an estimated decrease of--3.1 
percent. Column 7 reflects no change, per our final policy to maintain 
the CY 2022 CMHC APC payment rates in 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 
final rule with comment period. In all cases, section 1833(t)(8)(C)(i) 
of the Act limits beneficiary liability for copayment for a procedure 
performed in a year to the hospital inpatient deductible for the 
applicable year.
    We estimate that the aggregate beneficiary coinsurance percentage 
would be approximately 18.1 percent for all services paid under the 
OPPS in CY 2023. The estimated aggregate beneficiary coinsurance 
reflects general system adjustments, including the Final CY 2023 
comprehensive APC payment policy discussed in section II.A.2.b of this 
final rule with comment period. 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 final rule with comment period. No types of providers or 
suppliers other than hospitals, CMHCs, and ASCs will

[[Page 72275]]

be affected by the changes in this final rule with comment period.
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 
$2.53 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 
final rule with comment period will increase these Medicaid beneficiary 
payments by approximately $150 million in CY 2023. Currently, there are 
approximately 10 million dual-eligible beneficiaries, which represent 
approximately 30 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 $150 million 
Medicaid increase, approximately $85 million will be from the Federal 
Government and $65 million will be from State governments.
i. Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we proposed and the reasons for 
our selected alternatives are discussed throughout this final rule with 
comment period.
     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 final rule with comment 
period for a discussion of our final policy of using cost report data 
prior to the PHE. We note, in that section we discuss the alternative 
proposal we considered 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 final rule with comment period, 
as discussed in section X.D, we are finalizing 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.
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 final rule with comment period, we are 
setting the CY 2023 ASC relative payment weights by scaling the final 
CY 2023 OPPS relative payment weights by the final ASC scalar of 
0.8594. The estimated effects of the updated relative payment weights 
on payment rates are varied and are reflected in the estimated payments 
displayed in Tables 111 and 112.
    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 1.0008 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 3.8 percent (which is equal to the projected hospital 
market basket update of 4.1 percent reduced by a productivity 
adjustment of 0.3 percentage point). The CY 2023 ASC conversion factor 
is $51.854 for ASCs that successfully meet the quality reporting 
requirements.
a. Limitations of Our Analysis
    Presented here are the projected effects of the final 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 final CY 2023 changes will be small in 
the aggregate for all ASCs. However, such changes may have differential 
effects across surgical specialty groups, as ASCs continue to adjust to 
the payment rates based on the policies of the revised ASC payment 
system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs 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 final update to the CY 2023 payments will depend on a number 
of factors, including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion includes tables that display estimates of the 
impact of the final 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 111 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 112 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 111, 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 111.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group

[[Page 72276]]

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 
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 111, for the six specialty groups that account 
for the most ASC utilization and spending, we estimate that the final 
update to ASC payment rates for CY 2023 will result in a 3 percent 
increase in aggregate payment amounts for eye and ocular adnexa 
procedures, a 4 percent increase in aggregate payment amounts for 
nervous system procedures, 7 percent increase in aggregate payment 
amounts for musculoskeletal system procedures, a 5 percent increase in 
aggregate payment amounts for digestive system procedures, a 2 percent 
increase in aggregate payment amounts for cardiovascular system 
procedures, and a 4 percent increase in aggregate payment amounts for 
genitourinary system procedures. We note that these changes can be a 
result of different factors, including updated data, payment weight 
changes, and changes in policy. In general, spending in each of these 
categories of services is increasing due to the 3.8 percent payment 
rate update. After the payment rate update is accounted for, aggregate 
payment increases or decreases for a category of services can be higher 
or lower than a 3.8 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 7 percent increase in aggregate musculoskeletal 
procedure payments. The increase in payment rates for musculoskeletal 
procedures as a result of increased OPPS relative weights and device 
portions is further increased by the 3.8 percent ASC rate update for 
these procedures. Conversely, we estimate only a 3 percent increase in 
aggregate eye and ocular adnexa procedures related to a decrease in 
OPPS relative weights partially offsetting the 3.8 percent ASC rate 
update. For estimated changes for selected procedures, we refer readers 
to Table 111 provided later in this section.
BILLING CODE 4120-01-P
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    Table 111 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 final update.

[[Page 72277]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.158

c. Estimated Effects of ASC Payment System Policies on Beneficiaries
    We estimate that the CY 2023 update to the ASC payment system will 
be generally positive (that is, result in lower cost-sharing) for 
beneficiaries with respect to the new procedures 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 generally 
will be no greater than the

[[Page 72278]]

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).
Accounting Statements and Tables for OPPS and ASC Payment System
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget website at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/assets/OMB/circulars/a004/a-4.html), we have 
prepared accounting statements to illustrate the impacts of the OPPS 
and ASC changes in this final rule with comment period. The first 
accounting statement, Table 113, illustrates the classification of 
expenditures for the CY 2023 estimated hospital OPPS incurred benefit 
impacts associated with the final CY 2023 OPD fee schedule increase. 
The second accounting statement, Table 114, illustrates the 
classification of expenditures associated with the 3.8 percent CY 2023 
update to the ASC payment system, based on the provisions of this final 
rule with comment period and the baseline spending estimates for ASCs. 
Both tables classify most estimated impacts as transfers. Table 115 
includes the annual estimated impact of hospital OQR and ASCQR 
programs, and the prior authorization process.
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[GRAPHIC] [TIFF OMITTED] TR23NO22.160

[GRAPHIC] [TIFF OMITTED] TR23NO22.161

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 Finalized Rule Policies
    We do not anticipate that the CY 2023 Hospital OQR Program policies 
will impact the number of facilities that will receive payment 
reductions. In this final rule with comment period, we are finalizing 
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 104 in section XXIII.B.4 (Collection of 
Information) of this final rule with comment period, we estimate a 
total information collection burden decrease for 3,350 OPPS hospitals 
of -325,847 hours at a cost of

[[Page 72279]]

-$15,138,852 annually associated with our finalized 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 final rule with comment period (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 
finalized 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 final rule with comment period, we discuss 
our finalized 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 Finalized Policies
    In section XVI of this final rule with comment period, we are 
finalizing to change the reporting for the ASC-11 measure from 
mandatory to voluntary beginning with the CY 2023 reporting period. As 
shown in Table 105 in section XXIII.C.3.e (Collection of Information) 
of this final rule with comment period, 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 finalized 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 this final rule with comment period (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 finalized 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 final rule with comment period, we 
discuss our finalized policies to provide payment to REHs, including 
the following finalized 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 Final Rule With Comment Period 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 \359\ 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.
---------------------------------------------------------------------------

    \359\ ``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 finalized monthly 
facility payment for CY 2023 is $272,866. When this amount is 
multiplied by 12 months, the total annual facility payment is equal to 
$3,274,392. 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 $3,274,392 by 68 providers 
which equals $222, 658, 656. Finally, we combine the two amounts 
together, and we obtain a final estimate of the impacts of the REH 
provider policy of an additional $408,035,476 in Medicare payments.
7. Effects of Rural Emergency Hospitals (REH) Physician Self-Referral 
Law Updates
    The discussion of the physician self-referral law provisions 
related to REHs appears in section XVIII.E of this final rule with 
comment period. As discussed in section XVIII.A.4 of this final rule 
with comment period, we are finalizing our proposal to revise certain 
existing exceptions to the physician self-referral law 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 are revising 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

[[Page 72280]]

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 revisions will ensure that exceptions applicable to 
compensation arrangements 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 Provider Enrollment
    The only impacts of our finalized 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 final rule with comment period. 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).
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).\360\ 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, December 29, 2020). The 
regulations governing the prior authorization process are located in 42 
CFR part 419, subpart I, specifically at Sec. Sec.  419.80 through 
419.89.
---------------------------------------------------------------------------

    \360\ See also correction notification issued January 3, 2020 
(85 FR 224).
---------------------------------------------------------------------------

    In accordance with Sec.  419.83(b), we are finalizing our proposal 
to require prior authorization for a new service category: Facet joint 
interventions. We are adding the service category to Sec.  
419.83(a)(3). We are also requiring that the prior authorization 
process for the additional service category will be effective for dates 
of services on or after July 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 116, 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 117, Annual 
Private Sector Costs, and Table 118, Estimated Annual Administrative 
Costs to CMS. Together, Tables 117 and 118 combine to convey the 
overall economic cost impact to the health sector for the new service 
category, which is illustrated in Table 116. It should be noted that 
due to the July start date for prior authorization for the new service 
category, year one includes only 6 months of prior authorization 
requests.
    Based on the estimate, the overall economic cost impact is 
approximately $13.3 million in the first year based on 6 months for the 
new service category. The 5-year impact is approximately $118.7 
million, and the 10-year impact is approximately $250.4 million. The 5- 
and 10-year impacts account for year one, including only 6 months. 
Additional administrative paperwork costs to private sector providers 
and an increase in Medicare spending to conduct reviews combine to 
create the financial impact; however, this impact is offset by Medicare 
savings. Annually, we estimate an overall Medicare savings of $65.3 
million. We believe there are likely to be other benefits that result 
from the prior authorization requirement for the new service category, 
though many of those benefits are difficult to quantify. For instance, 
we expect to see savings in the form of reduced unnecessary 
utilization, fraud, waste, and abuse, including a reduction in improper 
Medicare fee-for-service payments (we note that not all improper 
payments are fraudulent). We solicited public comments on the potential 
increased costs and benefits associated with this proposed provision 
for the new service category.
[GRAPHIC] [TIFF OMITTED] TR23NO22.162

    According to the RFA's use of the term, most suppliers and 
providers are small entities. Likewise, the vast majority of physician 
and nurse practitioner (NP) practices are considered small businesses 
according to the SBA's size standards of having total revenues of $10 
million or less in any 1 year. While the economic costs and benefits 
are substantial in the aggregate, the economic impact on individual 
entities compliant with Medicare program coverage and utilization rules 
and regulations will be relatively small. We estimate that 90 to 95 
percent of providers who provide these services are small entities 
under the RFA definition. The rationale behind requiring prior 
authorization is to control unnecessary increases in the volume of 
covered OPD services. The impact on providers not in compliance with 
Medicare coverage, coding, and payment rules and regulations could be 
significant, as the final rule with comment period will change the 
billing practices of those providers. We believe that the purpose of 
the statute and this rule is to avoid unnecessary increases in 
utilization of OPD services. Therefore,

[[Page 72281]]

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 will be 
minimal on providers who are compliant with Medicare coverage, coding, 
and payment rules and requirements. Adding the new service category 
will 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 will significantly affect the 
number of legitimate claims submitted for the new service category. 
However, we do expect a decrease in the overall amount paid for the 
services resulting from a reduction in unnecessary utilization of the 
services requiring prior authorization.
    We estimate that the private sector's per-case time burden 
attributed to submitting documentation and associated clerical 
activities in support of a prior authorization request for the 
additional service category will be equivalent to that of submitting 
documentation and clerical activities associated with prepayment 
review, which is 0.5 hours. We apply this time burden estimate to 
initial submissions and resubmissions.
[GRAPHIC] [TIFF OMITTED] TR23NO22.163

2. Administrative Costs to CMS
    CMS will 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.

[[Page 72282]]

[GRAPHIC] [TIFF OMITTED] TR23NO22.164

BILLING CODE 4120-01-C
3. Estimated Beneficiary Costs
    We 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 permits utilization that is medically necessary, OPD services 
that are not medically necessary may still provide convenience or 
usefulness for beneficiaries; any rule-induced loss of such convenience 
or usefulness constitutes a cost of the rule that we lack data to 
quantify. Additionally, beneficiaries may have out-of-pocket costs for 
those services that are determined not to comply with Medicare 
requirements and thus, are not eligible for Medicare payment. We lack 
the data to quantify these costs as well.
c. Estimated Benefits
    There will be quantifiable benefits for this rule because we expect 
a reduction in the unnecessary utilization of 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 6 
months, there will be savings of $32.6 million overall. Annually, we 
estimate an overall gross savings of $65.3 million. These savings 
represent a Medicare benefit from more efficient use of health care 
resources while still maintaining the same health outcomes for 
necessary services. We will closely monitor utilization and billing 
practices. The expected benefits will also include changed billing 
practices that would also enhance the coordination of care for the 
beneficiary. For example, requiring prior authorization for the 
additional OPD services category will 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 will likely be reduced by the requirement that a provider 
submits clinical documentation created as part of its prior 
authorization request.
10. Rural Emergency Hospitals CoPs
    This final rule with comment period addresses the CoPs required for 
REH designation, which in accordance with the statute, may be sought by 
CAHs and small rural hospitals. It also finalizes several new CAH 
requirements that we believe are appropriate under the existing program 
as well as to REHs. However, note that the costs of these CAH 
requirements are not attributable to the new REH program (except where 
such costs are experienced by entities that remain open due to the REH 
option but would have closed otherwise). The baseline for the estimates 
of REH costs is the status quo had the new program had not been 
created. The final CoPs for the new REH provider type are similar to 
those already met by the facilities that will potentially convert to 
REH status, and for collection of information purposes we did not 
subtract offsetting savings from providers who would already meet these 
standards and who decide to make little change when updating their 
status.
    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, small entities 
include small businesses, nonprofit organizations, and small 
governmental jurisdictions. Most hospitals and most other healthcare 
providers and suppliers are small entities, either by nonprofit status 
or by having revenues of less than $8.0 million to $41.5 million in any 
1 year. Individuals and states are not included in the definition of a 
small entity. We estimate that almost all of the new REH facilities, 
and the great majority of CAHs, are or would be small entities on the 
basis of legal status, revenues, or both. The North American Industry 
Classification System Code for the converting hospitals is 622110 
(General Medical and Surgical Hospitals), and for the REHs to which 
they convert the closest Code is 621493 (Freestanding Ambulatory 
Surgical and Emergency Centers). HHS uses an increase in costs or 
decrease in revenues of more than 3 percent as its threshold for 
``significant economic impact''. Our collection of information 
estimates are that the 68 facilities converting to REH status (as 
estimated by the NC RHRP study referenced in the COI section) would 
face average annual costs of about $22,600 each (68 x $22,600 = 
$1,537,000 (COI burden estimate)). The North Carolina Rural Health 
Research Program estimated that the 68 hospitals it thought most likely 
to convert to REH status had average patient revenues of $7.3 million. 
For these facilities, the 3 percent threshold would be about $219,000, 
almost ten times our estimated cost of information collection. The CLA 
study does not present average facility revenues. However, we note that 
while it reaches a broad range of conversion estimates, we do not 
believe that it would have reached different conclusions had it 
presented such calculations. These relationships between revenues and 
costs would not be substantially different if the number of conversions 
was substantially fewer or substantially greater in number. More 
importantly, these facilities would be converting voluntarily to the 
new program. We expect that the costs any facility faces would be less 
than the anticipated gains of conversion, or it would not convert. This 
positive relationship of expected gains from conversion compared to 
current costs and revenues is explicit in the CLA modeling. The effects 
of the final policy changes on CAHs are even smaller. The average 
annual cost per CAH for the new Conditions of Participation would

[[Page 72283]]

be about $2,755 each (1,360 facilities x $2,755 = the $3,747,000 COI 
estimate), a tiny fraction of 1 percent of annual patient revenues 
estimated in the NC RHRP study at about $24 million a year. Moreover, 
the final change in the definition of primary roads could prevent the 
loss of the CAH designation for 3 to 4 CAHs. We note that we proposed 
no change in rural hospital standards, so they are not directly 
regulated by this final rule with comment period. For these reasons, an 
Initial Regulatory Flexibility Analysis is not required for the REH CoP 
provisions. Furthermore, as described provision by provision earlier in 
this preamble, we carefully sought to keep regulatory burdens on REH 
providers to a reasonable minimum, taking into account our obligation 
to reduce health care inequities, their small size, and the statutory 
and practical limitations on their status as providers. For example, we 
proposed to allow systems composed of multiple and separately certified 
hospitals, CAHs, and/or REHs to have unified or integrated governing 
bodies, unified infection prevention and control and antibiotic 
stewardship programs, and unified and integrated medical staff.

D. Regulatory Review Costs

    If regulations impose administrative costs on private entities, 
such as the time needed to read and interpret this 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 the rule, we assumed that the number of commenters on 
this year's proposed rule will be the number of reviewers of this final 
rule. We acknowledge that this assumption may understate or overstate 
the costs of reviewing this rule. It is possible that not all 
commenters reviewed this year's proposed 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 commenters on 
the CY 2023 OPPS/ASC proposed rule would be a fair estimate of the 
number of reviewers of this final 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.
    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 final rule. For each entity 
that reviews the rule, the estimated cost is $921.76 (8 hours x 
$115.22). Therefore, we estimate that the total cost of reviewing this 
regulation is $1,473,89 4 ($921.76 x 1,599 reviewers on the CY 2023 
OPPS/ASC proposed rule).

E. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, many hospitals are 
considered small businesses either by the Small Business 
Administration's size standards with total revenues of $41.5 million or 
less in any single year or by the hospital's not-for-profit status. 
Most ASCs and most CMHCs are considered small businesses with total 
revenues of $16.5 million or less in any single year. For details, we 
refer readers to the Small Business Administration's ``Table of Size 
Standards'' at https://www.sba.gov/content/table-small-business-size-standards. As its measure of significant economic impact on a 
substantial number of small entities, HHS uses a change in revenue of 
more than 3 to 5 percent. We do not believe that this threshold will be 
reached by the requirements in this final rule with comment period. As 
a result, the Secretary has determined that this rule will not have a 
significant impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has 100 or fewer beds. We estimate that this final 
rule with comment period will increase payments to small rural 
hospitals by approximately 2.5 percent. Therefore, it should not have a 
significant impact on the approximately 549 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 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 final 
rule with comment period does not mandate any requirements for State, 
local, or tribal governments, or for the private sector.

G. Conclusion

    The changes we are finalizing in this final rule with comment 
period will 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 110 demonstrates the estimated distributional impact of the 
OPPS budget neutrality requirements that will result in a 4.5 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, exception for rural SCHs from the clinic visit policy for 
services furnished at off campus PBDs, and 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 will 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 
will

[[Page 72284]]

affect each of the approximately 5,900 ASCs currently approved for 
participation in the Medicare program. The effect on an individual ASC 
will 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 111 
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 final rule with comment period in accordance with Executive Order 
13132, Federalism, and have determined that they will not have a 
substantial direct effect on State, local, or tribal governments, 
preempt State law, or otherwise have a federalism implication. As 
reflected in Table 110 of this final rule with comment period, we 
estimate that OPPS payments to governmental hospitals (including State 
and local governmental hospitals) will increase by 5.9 percent under 
this final rule with comment period. While we do not know the number of 
ASCs or CMHCs with government ownership, we anticipate that it is 
small. The analyses we have provided in this section of this final rule 
with comment period, in conjunction with the remainder of this 
document, demonstrate that this final rule with comment period is 
consistent with the regulatory philosophy and principles identified in 
Executive Order 12866, the RFA, and section 1102(b) of the Act.
    This final rule with comment period will affect payments to a 
substantial number of small rural hospitals and a small number of rural 
ASCs, as well as other classes of hospitals, CMHCs, and ASCs, and some 
effects may be significant. However, as noted in section XXIII of this 
final rule with comment period, this rule should not have a significant 
effect on small rural hospitals.

I. Congressional Review

    This final regulation is subject to the Congressional Review Act 
provisions of the Small Business Regulatory Enforcement Fairness Act of 
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress 
and the Comptroller General for review.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on October 26, 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.

42 CFR Part 485

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

42 CFR Part 489

    Health facilities, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services 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) of 
this chapter, 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)(iii) and (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) * * *
    (iii) In the hospital or CAH or in a department of the hospital or 
CAH, as defined in Sec.  413.65 of this subchapter, except for mental 
health services furnished to beneficiaries in their homes through the 
use of communication technology;
    (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 subchapter, or through the use of 
communication technology for mental health services, general 
supervision means the procedure is furnished under the physician's or 
nonphysician practitioner's overall

[[Page 72285]]

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 subchapter ends or December 31, 2023, the 
presence of the physician for the purpose of the supervision of 
pulmonary rehabilitation, cardiac rehabilitation, and intensive cardiac 
rehabilitation services includes virtual presence through audio/video 
real-time communications technology (excluding audio-only); and
    (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 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, rural 
emergency hospital (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 ``Rural area'' 
and adding the definition ``Rural emergency hospital'' in alphabetical 
order 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 411.357 is amended by revising paragraphs (e)(6), (r)(2) 
introductory text, (r)(2)(ii) through (v), (t)(5), (v)(1)(i), and 
(x)(7) and (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

[[Page 72286]]

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 in 
the preceding sentence 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 this 
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 paragraph (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
10. The authority citation for part 412 continues to read as follows:

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

0
11. 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
12. 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.
* * * * *

0
13. 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
14. Section 412.113 is amended by adding paragraph (f) to read as 
follows:


Sec.  412.113  Other payments.

* * * * *

[[Page 72287]]

    (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
15. 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; PROSPECTIVELY DETERMINED PAYMENT 
RATES FOR SKILLED NURSING FACILITIES; PAYMENT FOR ACUTE KIDNEY 
INJURY DIALYSIS

0
16. 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
17. 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
18. 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 J, of this chapter.
* * * * *

0
19. 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 (f)(4), ``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) of this section 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;
    (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
20. 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
21. 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.
* * * * *

[[Page 72288]]

    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
22. 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 intended for transplant, including those organs 
that are subsequently determined unsuitable for transplant and 
furnished for research 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 a TH.
    (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
23. Section 413.404 is amended by revising paragraphs (a)(2), (b)(2), 
(b)(3) introductory text, (b)(3)(i) heading, (b)(3)(i)(A) through (C), 
(b)(3)(ii) heading, (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 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

[[Page 72289]]

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
24. Section 413.412 is revised to read as follows:


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

    (a) Principles for organs intended for transplant for organ 
acquisition payment purposes. (1) An organ is intended for transplant 
when the OPO or TH designates it for transplant prior to the time the 
donor enters the hospital's operating room for surgical excision/
recovery of the organ(s).
    (2) OPOs and THs must identify the costs associated with the 
recovered and unrecovered organs and apportion those costs to the 
appropriate cost centers by organ type. These costs include the costs 
associated with an organ intended for transplant, but subsequently 
determined unsuitable for transplant and furnished for research.
    (3) An organ intended for transplant but subsequently determined 
unsuitable for transplant and instead furnished for research is not 
counted as a Medicare usable organ or as a total usable organ in the 
ratio used to calculate Medicare's share of organ acquisition costs.
    (4) Subject to paragraph (a)(4)(iii) of this section, OPOs and THs 
must reduce total organ acquisition costs, when the organ is intended 
for transplant but determined unsuitable for transplant and instead 
furnished for research, as follows:
    (i) By deducting the costs to furnish organs for research from 
total organ acquisition costs; or
    (ii) By offsetting the total organ acquisition costs by the revenue 
received for these organs.
    (iii) In no event may the reduction in total organ acquisition 
costs as a result of application of paragraph (a)(4) of this section 
exceed the costs incurred to furnish organs for research.
    (5) When the costs to furnish organs for research are not included 
in total organ acquisition costs but are included in a non-reimbursable 
cost center, no offset is necessary.
    (b) Principles for organs intended for research for organ 
acquisition payment purposes. (1) An organ is intended for research 
when the OPO or TH designates it for research
    prior to the time the donor enters the hospital's operating room 
for surgical removal of the organ.
    (2) Medicare does not share in the acquisition costs of an organ 
intended for research and
    costs to procure these organs must not be included in organ 
acquisition costs (except pancreata for islet cell transplants as 
specified in Sec.  413.406(a)).
    (3) An organ intended for research is not counted as a Medicare 
usable organ or as a total usable organ 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)).
    (c) Counting en bloc organs. En bloc organs can be en bloc lungs or 
en bloc kidneys. For Medicare cost allocation purposes, OPOs and THs 
count -
    (1) En bloc lungs or en bloc kidneys procured and transplanted en 
bloc (two organs transplanted as one unit) as one total usable organ. 
En bloc organs transplanted into a Medicare beneficiary count as one 
Medicare usable organ or one Medicare usable kidney.
    (2) En bloc lungs and en bloc kidneys procured en bloc but 
separated and transplanted into two different recipients as two total 
usable organs. For each organ transplanted into a Medicare beneficiary, 
count each as one Medicare usable organ or one Medicare usable kidney.
    (d) 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 physician 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
25. 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) * * *

[[Page 72290]]

    (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
26. 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, 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
27. 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. These services must 
not be part of medical treatment that primarily offers a medical 
benefit to the patient as determined by a healthcare team, must be 
authorized by the OPO, and are included as organ acquisition costs 
when:
    (1) There is consent to donate; and
    (2) Declaration of death has been made, or if a declaration of 
death has not been made, death is imminent and it is necessary that the 
services be provided prior to declaration of death in order to avoid 
compromising the viability of the organs for transplant.
    (b) Amounts billed for organ acquisition costs. When a donor 
community hospital or TH incurs costs for services furnished to a 
deceased donor, or a donor whose death is imminent as described in 
paragraph (a) of this section, 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 inpatient operating cost-to-charge ratio 
for the period in which the service was rendered, or a negotiated rate.

0
28. 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

[[Page 72291]]

between that contractor and the IOPO or laboratory.
* * * * *

PART 416--AMBULATORY SURGICAL SERVICES

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

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

0
30. 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 covered procedures list (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
31. 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 comprehensive APC (C-APC) complexity adjustment 
under the OPPS; and
    (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) of this 
subchapter); and
    (B) The non-device portion is calculated in accordance with the 
methodology specified in Sec.  416.171(a).

0
32. 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 of this subchapter. In the case where 
a drug or biological otherwise meets the requirements under this 
section 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 this 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
33. The authority citation for part 419 continues to read as follows:

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

0
34. Part 419 is amended by revising the heading to read as set forth 
above.

0
35. 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
36. 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 extraordinary circumstance exception (ECE) for one or more 
quarters.
* * * * *

0
37. 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

[[Page 72292]]

care items and services, as specified under Sec.  405.201 of this 
chapter, when CMS determines that:
    (1) The Medicare coverage IDE study criteria in Sec.  405.212 of 
this chapter 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 the 
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 
Sec.  405.201 of this chapter; 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
38. 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 July 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 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 Current Procedural Terminology (CPT) code, 
will be published on the CMS website.
* * * * *

0
39. Subpart J is added to read as follows:
Subpart J--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 J--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 
outpatient prospective payment system (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 at 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

[[Page 72293]]

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 under 
Sec.  419.91 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
40. The authority for part 424 continues to read as follows:

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

0
41. Section 424.518 is amended 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
42. 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 was enrolled in Medicare as of December 27, 
2020, as a critical access hospital or a hospital (as defined in 
section 1886(d)(1)(B) of the Social Security Act) 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 Social Security 
Act) (or treated as being located in a rural area pursuant to section 
1886(d)(8)(E) of the Social Security 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.

PART 485--CONDITIONS OF PARTICIPATION: SPECIALIZED PROVIDERS

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

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

0
44. Subpart E is added to read as follows:
Subpart E--Conditions of Participation: Rural Emergency Hospitals 
(REHs)
Sec.
485.500 Basis and scope.
485.502 Definitions.
485.504 Basic requirements.
485.506 Designation and certification of REHs.
485.508 Condition of participation: Compliance with Federal, state, 
and local laws and regulations.
485.510 Condition of participation: Governing body and 
organizational structure of the REH.
485.512 Condition of participation: Medical staff.
485.514 Condition of participation: Provision of services.
485.516 Condition of participation: Emergency services.
485.518 Condition of participation: Laboratory services.
485.520 Condition of participation: Radiologic services.
485.522 Condition of participation: Pharmaceutical services.
485.524 Condition of participation: Additional outpatient medical 
and health services.
485.526 Condition of participation: Infection prevention and control 
and antibiotic stewardship programs.
485.528 Condition of participation: Staffing and staff 
responsibilities.
485.530 Condition of participation: Nursing services.
485.532 Condition of participation: Discharge planning.
485.534 Condition of participation: Patient's rights.
485.536 Condition of participation: Quality assessment and 
performance improvement program.
485.538 Condition of participation: Agreements.
485.540 Condition of participation: Medical records.
485.542 Condition of participation: Emergency preparedness.
485.544 Condition of participation: Physical environment.
485.546 Condition of participation: Skilled nursing facility 
distinct part unit.

Subpart E--Conditions of Participation: Rural Emergency Hospitals 
(REHs)


Sec.  485.500  Basis and scope.

    Section 1861(kkk) of the Act requires the Secretary to establish 
the conditions REHs must meet in order to participate in the Medicare 
program and which are considered necessary to ensure the health and 
safety of patients receiving services at these entities.


Sec.  485.502  Definitions.

    As used in this subpart, rural emergency hospital or REH means 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. The time calculation 
for determining the length of stay of a patient receiving REH services 
begins with the registration, check-in or triage of the patient 
(whichever occurs first) and ends with the discharge of the patient 
from the REH. The discharge occurs when the physician or other 
appropriate clinician has signed the discharge order, or at the time 
the outpatient service is completed and documented in the medical 
record. The entity must not provide inpatient services, except those 
furnished in a unit that is a distinct part licensed as a skilled 
nursing facility to furnish post-hospital extended care services.


Sec.  485.504  Basic requirements.

    Participation as an REH is limited to facilities that--
    (a) Meet the definition in Sec.  485.502.
    (b) Have in effect a provider agreement as defined at Sec.  489.3 
of this chapter to provide services.
    (c) Meet the conditions of participation set out in this subpart.


Sec.  485.506  Designation and certification of REHs.

    CMS certifies a facility as an REH if the facility was, as of 
December 27, 2020--
    (a) A critical access hospital; or
    (b) A hospital as defined in section 1886(d)(1)(B) of the Act with 
not more than 50 beds located in a county (or equivalent unit of local 
government)

[[Page 72294]]

that is considered rural (as defined in section 1881(d)(2)(D) of the 
Act); or
    (c) A hospital as defined in section 1881(d)(1)(B) of the Act with 
not more than 50 beds that was treated as being located in a rural area 
that has had an active reclassification from urban to rural status as 
specified in Sec.  412.103 of this chapter as of December 27, 2020.


Sec.  485.508   Condition of participation: Compliance with Federal, 
state, and local laws and regulations.

    (a) The REH must be in compliance with applicable Federal laws 
related to the health and safety of patients.
    (b) The REH must be located in a state that provides for the 
licensing of such hospitals under state or applicable local law; and is
    (1) Licensed in the state as an REH; or
    (2) Approved as meeting standards for licensing established by the 
agency of the state or locality responsible for licensing hospitals.
    (c) The REH must assure that personnel are licensed or meet other 
applicable standards that are required by state or local laws to 
provide services within the applicable scope of practice.


Sec.  485.510  Condition of participation: Governing body and 
organizational structure of the REH

    There must be an effective governing body, or responsible 
individual or individuals, that is legally responsible for the conduct 
of the REH. If an REH does not have an organized governing body, the 
person or persons legally responsible for the conduct of the REH must 
carry out the functions specified in this subpart that pertain to the 
governing body.
    (a) Standard: Medical staff. The governing body must:
    (1) Determine, in accordance with state law, which categories of 
practitioners are eligible candidates for appointment to the medical 
staff.
    (2) Appoint members of the medical staff after considering the 
recommendations of the existing members of the medical staff.
    (3) Ensure that the medical staff has bylaws.
    (4) Approve medical staff bylaws and other medical staff rules and 
regulations.
    (5) Ensure that the medical staff is accountable to the governing 
body for the quality of care provided to patients.
    (6) Ensure the criteria for selection are individual character, 
competence, training, experience, and judgment.
    (i) Members of the medical staff must be legally and professionally 
qualified for the positions to which they are appointed and for the 
performance of privileges granted. The REH grants privileges in 
accordance with recommendations from qualified medical personnel.
    (ii) Medical staff privileges must be periodically reappraised by 
the REH. The scope of procedures performed in the REH must be 
periodically reviewed and amended as appropriate.
    (iii) If the REH assigns patient care responsibilities to 
practitioners other than physicians, it must have established policies 
and procedures, approved by the governing body, for overseeing and 
evaluating their clinical activities.
    (7) Ensure that under no circumstances is the accordance of staff 
membership or professional privileges in the REH dependent solely upon 
certification, fellowship, or membership in a specialty body or 
society.
    (8) Ensure that, when telemedicine services are furnished to the 
REH's patients through an agreement with a distant-site hospital, the 
agreement is written and that it specifies that it is the 
responsibility of the governing body of the distant-site hospital to 
meet the requirements in paragraphs (a)(1) through (7) of this section 
with regard to the distant-site hospital's physicians and practitioners 
providing telemedicine services. The governing body of the REH whose 
patients are receiving the telemedicine services may, in accordance 
with Sec.  485.512(a)(3), grant privileges based on its medical staff 
recommendations that rely on information provided by the distant-site 
hospital.
    (9) Ensure that when telemedicine services are furnished to the 
REH's patients through an agreement with a distant-site telemedicine 
entity, the written agreement specifies that the distant-site 
telemedicine entity is a contractor of services to the REH and as such, 
in accordance with paragraph (b) of this section, furnishes the 
contracted services in a manner that permits the REH to comply with all 
applicable conditions of participation for the contracted services, 
including, but not limited to, the requirements in paragraphs (a)(1) 
through (7) of this section with regard to the distant-site 
telemedicine entity's physicians and practitioners providing 
telemedicine services. The governing body of the REH whose patients are 
receiving the telemedicine services may, in accordance with Sec.  
485.512(a)(4), grant privileges to physicians and practitioners 
employed by the distant-site telemedicine entity based on such REH's 
medical staff recommendations; such staff recommendations may rely on 
information provided by the distant-site telemedicine entity.
    (10) Consult directly with the individual assigned the 
responsibility for the organization and conduct of the REH's medical 
staff, or their designee. At a minimum, this direct consultation must 
occur periodically throughout the fiscal or calendar year and include 
discussion of matters related to the quality of medical care provided 
to patients of the REH. For a multi-facility system, including a multi-
hospital or multi-REH system, using a single governing body, the single 
multi-facility or multi-REH system governing body must consult directly 
with the individual responsible for the organized medical staff (or 
their designee) of each hospital or REH within its system in addition 
to the other requirements of this paragraph (a).
    (b) Standard: Contracted services. The governing body must be 
responsible for services furnished in the REH whether or not they are 
furnished under contracts. The governing body must ensure that a 
contractor of services (including one for shared services and joint 
ventures) furnishes services that permit the REH to comply with all 
applicable conditions of participation and standards for the contracted 
services.
    (1) The governing body must ensure that the services performed 
under a contract are provided in a safe and effective manner.
    (2) The REH must maintain a list of all contracted services, 
including the scope and nature of the services provided.


Sec.  485.512  Condition of participation: Medical staff.

    The REH must have an organized medical staff that operates under 
bylaws approved by the governing body, and which is responsible for the 
quality of medical care provided to patients by the REH.
    (a) Standard: Eligibility and process for appointment to medical 
staff. The medical staff must be composed of doctors of medicine or 
osteopathy. In accordance with state law, including scope-of-practice 
laws, the medical staff may also include other categories of physicians 
(as listed at Sec.  482.12(c)(1) of this chapter and non-physician 
practitioners who are determined to be eligible for appointment by the 
governing body.
    (1) The medical staff must periodically conduct appraisals of its 
members.
    (2) The medical staff must examine the credentials of all eligible 
candidates for medical staff membership and make

[[Page 72295]]

recommendations to the governing body on the appointment of these 
candidates in accordance with state law, including scope-of-practice 
laws, and the medical staff bylaws, rules, and regulations. A candidate 
who has been recommended by the medical staff and who has been 
appointed by the governing body is subject to all medical staff bylaws, 
rules, and regulations, in addition to the requirements contained in 
this section.
    (3) When telemedicine services are furnished to the REH's patients 
through an agreement with a distant-site hospital, the governing body 
of the REH whose patients are receiving the telemedicine services may 
choose, in lieu of the requirements in paragraphs (a)(1) and (2) of 
this section, to have its medical staff rely upon the credentialing and 
privileging decisions made by the distant-site hospital when making 
recommendations on privileges for the individual distant-site 
physicians and practitioners providing such services, if the REH's 
governing body ensures, through its written agreement with the distant-
site hospital, that all of the following provisions are met:
    (i) The distant-site hospital providing the telemedicine services 
is a Medicare-participating hospital.
    (ii) The individual distant-site physician or practitioner is 
privileged at the distant-site hospital providing the telemedicine 
services, which provides a current list of the distant-site physician's 
or practitioner's privileges at the distant-site hospital.
    (iii) The individual distant-site physician or practitioner holds a 
license issued or recognized by the state in which the REH whose 
patients are receiving the telemedicine services is located.
    (iv) With respect to a distant-site physician or practitioner, who 
holds current privileges at the REH whose patients are receiving the 
telemedicine services, the REH has evidence of an internal review of 
the distant-site physician's or practitioner's performance of these 
privileges and sends the distant-site hospital such performance 
information for use in the periodic appraisal of the distant-site 
physician or practitioner. At a minimum, this information must include 
all adverse events that result from the telemedicine services provided 
by the distant-site physician or practitioner to the REH's patients and 
all complaints the REH has received about the distant-site physician or 
practitioner.
    (4) When telemedicine services are furnished to the REH's patients 
through an agreement with a distant-site telemedicine entity, the 
governing body of the REH whose patients are receiving the telemedicine 
services may choose, in lieu of the requirements in paragraphs (a)(1) 
and (2) of this section, to have its medical staff rely upon the 
credentialing and privileging decisions made by the distant-site 
telemedicine entity when making recommendations on privileges for the 
individual distant-site physicians and practitioners providing such 
services, if the REH's governing body ensures, through its written 
agreement with the distant-site telemedicine entity, that the distant-
site telemedicine entity furnishes services that, in accordance with 
paragraph (d) of this section, permit the REH to comply with all 
applicable conditions of participation for the contracted services. The 
REH's governing body must also ensure, through its written agreement 
with the distant-site telemedicine entity, that all of the following 
provisions are met:
    (i) The distant-site telemedicine entity's medical staff 
credentialing and privileging process and standards at least meet the 
standards at Sec.  485.510(a)(1) through (7) and paragraphs (a)(1) and 
(2) of this section.
    (ii) The individual distant-site physician or practitioner is 
privileged at the distant-site telemedicine entity providing the 
telemedicine services, which provides the REH with a current list of 
the distant-site physician's or practitioner's privileges at the 
distant-site telemedicine entity.
    (iii) The individual distant-site physician or practitioner holds a 
license issued or recognized by the state in which the REH whose 
patients are receiving such telemedicine services is located.
    (iv) With respect to a distant-site physician or practitioner, who 
holds current privileges at the REH whose patients are receiving the 
telemedicine services, the REH has evidence of an internal review of 
the distant-site physician's or practitioner's performance of these 
privileges and sends the distant-site telemedicine entity such 
performance information for use in the periodic appraisal of the 
distant-site physician or practitioner. At a minimum, this information 
must include all adverse events that result from the telemedicine 
services provided by the distant-site physician or practitioner to the 
REH's patients, and all complaints the REH has received about the 
distant-site physician or practitioner.
    (b) Standard: Medical staff organization and accountability. The 
medical staff must be well organized and accountable to the governing 
body for the quality of the medical care provided to patients.
    (1) The medical staff must be organized in a manner approved by the 
governing body.
    (2) If the medical staff has an executive committee, a majority of 
the members of the committee must be doctors of medicine or osteopathy.
    (3) The responsibility for organization and conduct of the medical 
staff must be assigned only to one of the following:
    (i) An individual doctor of medicine or osteopathy.
    (ii) A doctor of dental surgery or dental medicine, when permitted 
by state law of the state in which the hospital is located.
    (iii) A doctor of podiatric medicine, when permitted by state law 
of the state in which the hospital is located.
    (4) If an REH is part of a system consisting of multiple separately 
certified hospitals, critical access hospitals, and/or REHs, and the 
system elects to have a unified and integrated medical staff for its 
member hospitals, critical access hospitals, and/or REHs after 
determining that such a decision is in accordance with all applicable 
state and local laws, each separately certified REH must demonstrate 
that:
    (i) The medical staff members of each separately certified REH in 
the system (that is, all medical staff members who hold specific 
privileges to practice at that REH) have voted by majority, in 
accordance with medical staff bylaws, either to accept a unified and 
integrated medical staff structure or to opt out of such a structure 
and to maintain a separate and distinct medical staff for their 
respective REH;
    (ii) The unified and integrated medical staff has bylaws, rules, 
and requirements that describe its processes for self-governance, 
appointment, credentialing, privileging, and oversight, as well as its 
peer review policies and due process rights guarantees, and which 
include a process for the members of the medical staff of each 
separately certified REH (that is, all medical staff members who hold 
specific privileges to practice at that REH) to be advised of their 
rights to opt out of the unified and integrated medical staff structure 
after a majority vote by the members to maintain a separate and 
distinct medical staff for their REH;
    (iii) The unified and integrated medical staff is established in a 
manner that takes into account each member REH's unique circumstances 
and any significant differences in patient populations and services 
offered in each hospital, critical access hospital (CAH), and REH; and

[[Page 72296]]

    (iv) The unified and integrated medical staff establishes and 
implements policies and procedures to ensure that the needs and 
concerns expressed by members of the medical staff, at each of its 
separately certified hospitals, CAHs, and REHs, regardless of practice 
or location, are given due consideration, and that the unified and 
integrated medical staff has mechanisms in place to ensure that issues 
localized to particular hospitals, CAHs, and REHs are duly considered 
and addressed.
    (c) Standard: Medical staff bylaws. The medical staff must adopt 
and enforce bylaws to carry out its responsibilities. The bylaws must:
    (1) Be approved by the governing body.
    (2) Include a statement of the duties and privileges of each 
category of medical staff (for example, active, courtesy, etc.).
    (3) Describe the organization of the medical staff.
    (4) Describe the qualifications to be met by a candidate in order 
for the medical staff to recommend that the candidate be appointed by 
the governing body.
    (5) Include criteria for determining the privileges to be granted 
to individual practitioners and a procedure for applying the criteria 
to individuals requesting privileges. For distant-site physicians and 
practitioners requesting privileges to furnish telemedicine services 
under an agreement with the REH, the criteria for determining 
privileges and the procedure for applying the criteria are also subject 
to the requirements in Sec.  485.510(a)(8) and (9) and paragraphs 
(a)(3) and (4) of this section.


Sec.  485.514  Condition of participation: Provision of services.

    (a) The REH's health care services must be furnished in accordance 
with appropriate written policies that are consistent with applicable 
state law.
    (b) The policies must be developed with the advice of members of 
the REH's professional health care staff, including one or more doctors 
of medicine or osteopathy and one or more physician assistants, nurse 
practitioners, or clinical nurse specialists, if they are on staff 
under the provisions of Sec.  485.528(b)(1).
    (c) The policies must include the following:
    (1) A description of the services the REH furnishes, including 
those furnished through agreement or arrangement.
    (2) Policies and procedures for emergency medical services.
    (3) Guidelines for the medical management of health problems that 
include the conditions requiring medical consultation and/or patient 
referral, the maintenance of health care records, and procedures for 
the periodic review and evaluation of the services furnished by the 
REH.
    (4) Policies and procedures that address the post-acute care needs 
of patients receiving services in the REH.
    (d) The policies must be reviewed at least biennially by the group 
of professional personnel required under paragraph (b) of this section 
and updated as necessary by the REH.


Sec.  485.516  Condition of participation: Emergency services.

    The REH must provide the emergency care necessary to meet the needs 
of its patients in accordance with acceptable standards of practice.
    (a) Standard: Organization and direction. The emergency services of 
the REH must be--
    (1) Organized under the direction of a qualified member of the 
medical staff; and
    (2) Integrated with other departments of the REH.
    (b) Standard: Personnel. There must be adequate medical and nursing 
personnel qualified in emergency care to meet the written emergency 
procedures and needs anticipated by the facility.
    (c) Standard: Compliance with CAH requirements. The REH must meet 
the requirements specified in Sec.  485.618, with respect to:
    (1) 24-hour availability of emergency services (Sec.  485.618(a)).
    (2) Equipment, supplies, and medication (Sec.  485.618(b)).
    (3) Blood and blood products (Sec.  485.618(c)).
    (4) Personnel (Sec.  485.618(d)).
    (5) Coordination with emergency response systems (Sec.  
485.618(e)).


Sec.  485.518  Condition of participation: Laboratory services.

    The REH must provide basic laboratory services essential to the 
immediate diagnosis and treatment of the patient consistent with 
nationally recognized standards of care for emergency services, patient 
population, and services offered. The REH must ensure that--
    (a) Laboratory services are available, either directly or through a 
contractual agreement with a certified laboratory that meets 
requirements of part 493 of this chapter.
    (b) Emergency laboratory services are available 24 hours a day.


Sec.  485.520  Condition of participation: Radiologic services.

    The REH must maintain, or have available, diagnostic radiologic 
services. If therapeutic services are also provided, the therapeutic 
services, as well as the diagnostic services, must be furnished by the 
REH and provided by personnel qualified under state law. The REH must 
ensure that REH patients or personnel are not exposed to radiation 
hazards.
    (a) Standard: Radiologic services. The REH must maintain, or have 
available, radiologic services according to needs of the patients.
    (b) Standard: Safety for patients and personnel. The radiologic 
services, particularly ionizing radiology procedures, must be free from 
hazards for patients and personnel.
    (1) Proper safety precautions must be maintained against radiation 
hazards. This includes adequate shielding for patients, personnel, and 
facilities, as well as appropriate storage, use, and disposal of 
radioactive materials.
    (2) Periodic inspection of equipment must be made and hazards 
identified must be promptly corrected.
    (3) Radiation workers must be checked periodically, by the use of 
exposure meters or badge tests, for amount of radiation exposure.
    (4) Radiologic services must be provided only on the order of 
practitioners with clinical privileges or, consistent with state law, 
of other practitioners authorized by the medical staff and the 
governing body to order the services.
    (c) Standard: Personnel. (1) The REH must have a full-time, part-
time, or consulting qualified radiologist, or other personnel qualified 
under State law, to interpret only those radiologic tests that are 
determined by the medical staff to require specialized knowledge. For 
purposes of this section, a radiologist is a doctor of medicine or 
osteopathy who is qualified by education and experience in radiology.
    (2) Only personnel designated as qualified by the medical staff may 
use the radiologic equipment and administer procedures.
    (d) Standard: Records. Records of radiologic services must be 
maintained.
    (1) The radiologist or other practitioner who performs radiology 
services must sign reports of their interpretations.
    (2) The REH must maintain the following for at least 5 years:
    (i) Copies of reports and printouts.
    (ii) Films, scans, and other image records, as appropriate.

[[Page 72297]]

Sec.  485.522  Condition of participation: Pharmaceutical services.

    The REH must have pharmaceutical services that meet the needs of 
its patients. The REH must have a pharmacy or a drug storage area that 
is directed by a registered pharmacist or other qualified individual in 
accordance with state scope of practice laws. The medical staff is 
responsible for developing policies and procedures that minimize drug 
errors. This function may be delegated to the REH's registered 
pharmacist or other qualified individual.
    (a) Standard: Pharmacy management and administration. The pharmacy 
or drug storage area must be administered in accordance with accepted 
professional principles and in accordance with state and Federal laws.
    (1) A pharmacist or competent individual in accordance with state 
scope of practice laws must be responsible for developing, supervising, 
and coordinating all the activities of the pharmacy services. The 
pharmacist or competent individual in accordance with state law and 
scope of practice must be available for a sufficient time to provide 
oversight of the REH's pharmacy services based on the scope and 
complexity of the services offered at the REH.
    (2) The pharmaceutical service must have an adequate number of 
personnel to ensure quality pharmaceutical services for the provision 
of all services provided by the REH.
    (3) Current and accurate records must be kept of the receipt and 
disposition of all scheduled drugs.
    (b) Standard: Delivery of services. Drugs and biologicals must be 
controlled and distributed in accordance with applicable standards of 
practice, consistent with Federal and state law, to ensure patient 
safety.
    (1) All compounding, packaging, and dispensing of drugs must be 
done by a licensed pharmacist or a licensed physician, or under the 
supervision of a pharmacist or competent individual in accordance with 
state law and scope of practice and performed consistent with state and 
Federal laws.
    (2) All drugs and biologicals must be kept in a secure area, and 
locked when appropriate.
    (i) All drugs listed in Schedules II, III, IV, and V of the 
Comprehensive Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. 
801 et seq.) must be kept locked within a secure area.
    (ii) Only authorized personnel may have access to locked areas.
    (3) Outdated, mislabeled, or otherwise unusable drugs and 
biologicals must not be available for patient use.
    (4) Drugs and biologicals must be removed from the pharmacy or 
storage area only by personnel designated in the policies of the 
medical staff and pharmaceutical service, in accordance with Federal 
and state law.
    (c) Standard: Administration of drugs. Drugs must be prepared and 
administered according to established policies and acceptable standards 
of practice.
    (1) Adverse reactions must be reported to the physician responsible 
for the patient and must be documented in the record.
    (2) Blood transfusions, blood products, and intravenous medications 
must be administered in accordance with state law and approved medical 
staff policies and procedures.
    (3) Orders given orally for drugs and biologicals must be followed 
by a written order, signed by the prescribing physician or other 
authorized prescriber.
    (4) There must be an REH procedure for reporting transfusion 
reactions, adverse drug reactions, and errors in administration of 
drugs.


Sec.  485.524  Condition of participation: Additional outpatient 
medical and health services.

    If the REH provides outpatient medical and health services in 
addition to providing emergency services and observation care, the 
medical and health services must be appropriately organized and meet 
the needs of the patients in accordance with acceptable standards of 
practice.
    (a) Standard: Patient services. 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. If the REH provides 
outpatient and medical health diagnostic and therapeutic items and 
services, those items and services must align with the health needs of 
the community served by the REH. If the REH provides outpatient medical 
and health services in addition to providing emergency services, the 
REH must--
    (1) Provide items and services based on nationally recognized 
guidelines and standards of practice;
    (2) Have a system in place for referral from the REH to different 
levels of care, including follow-up care, as appropriate;
    (3) Have effective communication systems in place between the REH 
and the patient (or responsible individual) and their family, ensuring 
that the REH is responsive to their needs and preferences;
    (4) Have established relationships with hospitals that have the 
resources and capacity available to deliver care that is beyond the 
scope of care delivered at the REH; and
    (5) Have personnel providing these services who meet the 
requirements at paragraph (b) of this section.
    (b) Standard: Personnel for additional outpatient and medical 
health services. The REH must--
    (1) Assign one or more individuals to be responsible for outpatient 
services.
    (2) Have appropriate professional and nonprofessional personnel 
available at each location where outpatient services are offered, based 
on the scope and complexity of outpatient services.
    (3) For any specialty services offered at the REH, have a doctor of 
medicine or osteopathy, nurse practitioner, clinical nurse specialist, 
or physician assistant providing services with experience and training 
in the specialty service area and in accordance with their scope of 
practice.
    (c) Standard: Orders for outpatient medical and health services. 
Outpatient medical and health services must be ordered by a 
practitioner who meets the following conditions:
    (1) Is responsible for the care of the patient.
    (2) Is licensed in the state where they provide care to the 
patient.
    (3) Is acting within their scope of practice under state law.
    (4) Is authorized in accordance with state law and policies adopted 
by the medical staff, and approved by the governing body, to order the 
applicable outpatient services. This applies to the following:
    (i) All practitioners who are appointed to the REH's medical staff 
and who have been granted privileges to order the applicable outpatient 
services.
    (ii) All practitioners not appointed to the medical staff, but who 
satisfy the requirements of paragraphs (c)(1) through (4) of this 
section for authorization by the medical staff and the REH for ordering 
the applicable outpatient services for their patients.
    (d) Standard: Surgical services. If the REH provides outpatient 
surgical services, surgical procedures must be performed in a safe 
manner by qualified practitioners who have been granted clinical 
privileges by the governing body, or responsible individual, of the REH 
in accordance with the designation requirements under paragraph (a) of 
this section.

[[Page 72298]]

    (1) Designation of qualified practitioners. The REH designates the 
practitioners who are allowed to perform surgery for REH patients, in 
accordance with its approved policies and procedures, and with state 
scope of practice laws. Surgery is performed only by--
    (i) A doctor of medicine or osteopathy, including an osteopathic 
practitioner recognized under section 1101(a)(7) of the Act;
    (ii) A doctor of dental surgery or dental medicine; or
    (iii) A doctor of podiatric medicine.
    (2) Anesthetic risk and evaluation. (i) A qualified practitioner, 
as specified in paragraph (a) of this section, must examine the patient 
immediately before surgery to evaluate the risk of the procedure to be 
performed.
    (ii) A qualified practitioner, as specified in paragraph (d)(3) of 
this section, must examine each patient before surgery to evaluate the 
risk of anesthesia.
    (iii) Before discharge from the REH, each patient must be evaluated 
for proper anesthesia recovery by a qualified practitioner, as 
specified in paragraph (d)(3) of this section.
    (3) Administration of anesthesia. The REH designates the person who 
is allowed to administer anesthesia to REH patients in accordance with 
its approved policies and procedures and with state scope-of-practice 
laws.
    (i) Anesthesia must be administered by only--
    (A) A qualified anesthesiologist;
    (B) A doctor of medicine or osteopathy other than an 
anesthesiologist; including an osteopathic practitioner recognized 
under section 1101(a)(7) of the Act;
    (C) A doctor of dental surgery or dental medicine;
    (D) A doctor of podiatric medicine;
    (E) A certified registered nurse anesthetist (CRNA), as defined in 
Sec.  410.69(b) of this chapter;
    (F) An anesthesiologist's assistant, as defined in Sec.  410.69(b) 
of this chapter; or
    (G) A supervised trainee in an approved educational program, as 
described in Sec.  413.85 or Sec. Sec.  413.76 through 413.83 of this 
chapter.
    (ii) In those cases in which a CRNA administers the anesthesia, the 
anesthetist must be under the supervision of the operating practitioner 
except as provided in paragraph (e) of this section. An 
anesthesiologist's assistant who administers anesthesia must be under 
the supervision of an anesthesiologist.
    (4) Discharge. All patients are discharged in the company of a 
responsible adult, except those exempted by the practitioner who 
performed the surgical procedure.
    (5) Standard: State exemption. (i) An REH may be exempted from the 
requirement for physician supervision of CRNAs as described in 
paragraph (d)(3) of this section, if the state in which the REH is 
located submits a letter to CMS signed by the Governor, following 
consultation with the state's Boards of Medicine and Nursing, 
requesting exemption from physician supervision for CRNAs. The letter 
from the Governor must attest that they have consulted with the state 
Boards of Medicine and Nursing about issues related to access to and 
the quality of anesthesia services in the state and has concluded that 
it is in the best interests of the state's citizens to opt-out of the 
current physician supervision requirement, and that the opt-out is 
consistent with state law.
    (ii) The request for exemption and recognition of state laws and 
the withdrawal of the request may be submitted at any time, and are 
effective upon submission.


Sec.  485.526  Condition of participation: Infection prevention and 
control and antibiotic stewardship programs.

    The REH must have active facility-wide programs for the 
surveillance, prevention, and control of healthcare-associated 
infections (HAIs) and other infectious diseases, and for the 
optimization of antibiotic use through stewardship. The programs must 
demonstrate adherence to nationally recognized infection prevention and 
control guidelines, as well as to best practices for improving 
antibiotic use where applicable, and for reducing the development and 
transmission of HAIs and antibiotic-resistant organisms. Infection 
prevention and control problems and antibiotic use issues identified in 
the programs must be addressed in collaboration with the facility-wide 
quality assessment and performance improvement (QAPI) program.
    (a) Standard: Infection prevention and control program organization 
and policies. The REH must demonstrate that:
    (1) An individual (or individuals), who is qualified through 
education, training, experience, or certification in infection 
prevention and control, is appointed by the governing body, or 
responsible individual, as the infection preventionist(s)/infection 
control professional(s) responsible for the infection prevention and 
control program and that the appointment is based on the 
recommendations of medical staff leadership and nursing leadership;
    (2) The infection prevention and control program, as documented in 
its policies and procedures, employs methods for preventing and 
controlling the transmission of infections within the REH and between 
the REH and other health care settings;
    (3) The infection prevention and control program include 
surveillance, prevention, and control of HAIs, including maintaining a 
clean and sanitary environment to avoid sources and transmission of 
infection, and that the program also addresses any infection control 
issues identified by public health authorities; and
    (4) The infection prevention and control program reflects the scope 
and complexity of the services furnished by the REH.
    (b) Standard: Antibiotic stewardship program organization and 
policies. The REH must demonstrate that --
    (1) An individual (or individuals), who is qualified through 
education, training, or experience in infectious diseases and/or 
antibiotic stewardship, is appointed by the governing body, or 
responsible individual, as the leader(s) of the antibiotic stewardship 
program and that the appointment is based on the recommendations of 
medical staff leadership and pharmacy leadership;
    (2) The facility-wide antibiotic stewardship program:
    (i) Demonstrates coordination among all components of the REH 
responsible for antibiotic use and resistance, including, but not 
limited to, the infection prevention and control program, the QAPI 
program, the medical staff, nursing services, and pharmacy services;
    (ii) Documents the evidence-based use of antibiotics in all 
departments and services of the REH; and
    (iii) Documents any improvements, including sustained improvements, 
in proper antibiotic use;
    (3) The antibiotic stewardship program adheres to nationally 
recognized guidelines, as well as best practices, for improving 
antibiotic use; and
    (4) The antibiotic stewardship program reflects the scope and 
complexity of the services furnished by an REH.
    (c) Standard: Leadership responsibilities. (1) The governing body, 
or responsible individual, must ensure all of the following:
    (i) Systems are in place and operational for the tracking of all 
infection surveillance, prevention and control, and antibiotic use 
activities, in order to demonstrate the

[[Page 72299]]

implementation, success, and sustainability of such activities.
    (ii) All HAIs and other infectious diseases identified by the 
infection prevention and control program as well as antibiotic use 
issues identified by the antibiotic stewardship program are addressed 
in collaboration with the REH's QAPI leadership.
    (2) The infection prevention and control professional(s) are 
responsible for:
    (i) The development and implementation of facility-wide infection 
surveillance, prevention, and control policies and procedures that 
adhere to nationally recognized guidelines.
    (ii) All documentation, written or electronic, of the infection 
prevention and control program and its surveillance, prevention, and 
control activities.
    (iii) Communication and collaboration with the REH's QAPI program 
on infection prevention and control issues.
    (iv) Competency-based training and education of REH personnel and 
staff, including medical staff, and, as applicable, personnel providing 
contracted services in the REH, on the practical applications of 
infection prevention and control guidelines, policies and procedures.
    (v) The prevention and control of HAIs, including auditing of 
adherence to infection prevention and control policies and procedures 
by REH personnel.
    (vi) Communication and collaboration with the antibiotic 
stewardship program.
    (3) The leader(s) of the antibiotic stewardship program is 
responsible for:
    (i) The development and implementation of a facility-wide 
antibiotic stewardship program, based on nationally recognized 
guidelines, to monitor and improve the use of antibiotics.
    (ii) All documentation, written or electronic, of antibiotic 
stewardship program activities.
    (iii) Communication and collaboration with medical staff, nursing, 
and pharmacy leadership, as well as the REH's infection prevention and 
control and QAPI programs, on antibiotic use issues.
    (iv) Competency-based training and education of REH personnel and 
staff, including medical staff, and, as applicable, personnel providing 
contracted services in the REH, on the practical applications of 
antibiotic stewardship guidelines, policies, and procedures.
    (d) Standard:Unified and integrated infection prevention and 
control and antibiotic stewardship programs for multi-facility systems. 
If a REH is part of a system consisting of multiple separately 
certified hospitals, CAHs, and/or REHs using a system governing body 
that is legally responsible for the conduct of two or more hospitals, 
CAHs, and/or REHs, the system governing body can elect to have unified 
and integrated infection prevention and control and antibiotic 
stewardship programs for all of its member facilities after determining 
that such a decision is in accordance with all applicable state and 
local laws. The system governing body is responsible and accountable 
for ensuring that each of its separately certified REHs meets all of 
the requirements of this section. Each separately certified REH subject 
to the system governing body must demonstrate that:
    (1) The unified and integrated infection prevention and control and 
antibiotic stewardship programs are established in a manner that takes 
into account each member REH's unique circumstances and any significant 
differences in patient populations and services offered in each REH;
    (2) The unified and integrated infection prevention and control and 
antibiotic stewardship programs establish and implement policies and 
procedures to ensure that the needs and concerns of each of its 
separately certified REHs, regardless of practice or location, are 
given due consideration;
    (3) The unified and integrated infection prevention and control and 
antibiotic stewardship programs have mechanisms in place to ensure that 
issues localized to particular REHs are duly considered and addressed; 
and
    (4) A qualified individual (or individuals) with expertise in 
infection prevention and control and in antibiotic stewardship has been 
designated at the REH as responsible for communicating with the unified 
infection prevention and control and antibiotic stewardship programs, 
for implementing and maintaining the policies and procedures governing 
infection prevention and control and antibiotic stewardship as directed 
by the unified infection prevention and control and antibiotic 
stewardship programs, and for providing education and training on the 
practical applications of infection prevention and control and 
antibiotic stewardship to REH staff.
    (e) COVID-19 and seasonal influenza reporting. Beginning at the 
conclusion of the COVID-19 Public Health Emergency, as defined in Sec.  
400.200 of this chapter, and continuing until April 30, 2024, except 
when the Secretary specifies an earlier end date for the requirements 
of this paragraph (e), the REH must electronically report information 
about COVID-19 and seasonal influenza in a standardized format 
specified by the Secretary.
    (1) Related to COVID-19, to the extent as required by the 
Secretary, this report must include the following data elements:
    (i) Suspected and confirmed COVID-19 infections among patients and 
staff.
    (ii) Total COVID-19 deaths among patients and staff.
    (iii) Personal protective equipment and testing supplies.
    (iv) Ventilator use, capacity, and supplies.
    (v) Total patient census and capacity.
    (vi) Staffing shortages.
    (vii) COVID-19 vaccine administration data of patients and staff.
    (viii) Relevant therapeutic inventories or usage, or both.
    (2) Related to seasonal influenza, to the extent as required by the 
Secretary, this report must include the following data elements:
    (i) Confirmed influenza infections among patients and staff.
    (ii) Total influenza deaths among patients and staff.
    (iii) Confirmed co-morbid influenza and COVID-19 infections among 
patients and staff.
    (f) Standard: Reporting of data related to viral and bacterial 
pathogens and infectious diseases of pandemic or epidemic potential. 
The REH must electronically report information on acute respiratory 
illness (including, but not limited to, seasonal influenza virus, 
influenza-like illness, and severe acute respiratory infection), SARS-
CoV-2/COVID-19, and other viral and bacterial pathogens and infectious 
diseases of pandemic or epidemic potential only when the Secretary has 
declared a Public Health Emergency (PHE), as defined in Sec.  400.200 
of this chapter, directly related to such specific pathogens and 
infectious diseases. The requirements of this paragraph (f) will be 
applicable to local, state, regional, or national PHEs as declared by 
the Secretary.
    (1) The REH must electronically report information about the 
infectious disease pathogen, relevant to the declared PHE, in a 
standardized format specified by the Secretary. To the extent as 
required by the Secretary, this report must include, the following:
    (i) Suspected and confirmed infections of the relevant infectious 
disease pathogen among patients and staff.
    (ii) Total deaths attributed to the relevant infectious disease 
pathogen among patients and staff.

[[Page 72300]]

    (iii) Personal protective equipment and other relevant supplies in 
the REH.
    (iv) Capacity and supplies in the REH relevant to the immediate and 
long term treatment of the relevant infectious disease pathogen, such 
as ventilator and dialysis/continuous renal replacement therapy 
capacity and supplies.
    (v) Total patient census, capacity, and capability.
    (vi) Staffing shortages.
    (vii) Vaccine administration data of patients and staff for 
conditions monitored under this section and where a specific vaccine is 
applicable.
    (viii) Relevant therapeutic inventories or usage, or both.
    (ix) Isolation capacity, including airborne isolation capacity.
    (x) Key co-morbidities or exposure risk factors, or both, of 
patients being treated for the pathogen or disease of interest in this 
section that are captured with interoperable data standards and 
elements.
    (2) Unless the Secretary specifies an alternative format by which 
the REH must report these data elements, the REH must report the 
applicable infection (confirmed and suspected) and vaccination data in 
a format that provides person-level information, which must include 
medical record identifier, race, ethnicity, age, sex, residential 
county and zip code, and relevant comorbidities for affected patients. 
Facilities must not report any directly or potentially individually-
identifiable information for affected patients (for example, name, 
social security number) that is not set out in this section or 
otherwise specified by the Secretary.
    (3) The REH must provide the information specified in this 
paragraph (f) on a daily basis, unless the Secretary specifies a lesser 
frequency, to the Centers for Disease Control and Prevention's (CDC) 
National Healthcare Safety Network or other CDC-supported surveillance 
systems as determined by the Secretary.
    (g) Standard: COVID-19 vaccination of REH staff. Until November 4, 
2024, unless the Secretary specifies an earlier end date for the 
requirements of this paragraph (g), the REH must develop and implement 
policies and procedures to ensure that all staff are fully vaccinated 
for COVID-19. For purposes of this section, staff are considered fully 
vaccinated if it has been 2 weeks or more since they completed a 
primary vaccination series for COVID-19. The completion of a primary 
vaccination series for COVID-19 is defined here as the administration 
of a single-dose vaccine, or the administration of all required doses 
of a multi-dose vaccine.
    (1) Regardless of clinical responsibility or patient contact, the 
policies and procedures must apply to the following REH staff, who 
provide any care, treatment, or other services for the REH and/or its 
patients:
    (i) REH employees;
    (ii) Licensed practitioners;
    (iii) Students, trainees, and volunteers; and
    (iv) Individuals who provide care, treatment, or other services for 
the REH and/or its patients, under contract or by other arrangement.
    (2) The policies and procedures of this section do not apply to the 
following REH staff:
    (i) Staff who exclusively provide telehealth or telemedicine 
services outside of the REH setting and who do not have any direct 
contact with patients and other staff specified in paragraph (f)(1) of 
this section; and
    (ii) Staff who provide support services for the REH that are 
performed exclusively outside of the REH setting and who do not have 
any direct contact with patients and other staff specified in paragraph 
(f)(1) of this section.
    (3) The policies and procedures must include, at a minimum, the 
following components:
    (i) A process for ensuring all staff specified in paragraph (f)(1) 
of this section (except for those staff who have pending requests for, 
or who have been granted, exemptions to the vaccination requirements of 
this section, or those staff for whom COVID-19 vaccination must be 
temporarily delayed, as recommended by the CDC, due to clinical 
precautions and considerations) have received, at a minimum, a single-
dose COVID-19 vaccine, or the first dose of the primary vaccination 
series for a multi-dose COVID-19 vaccine prior to staff providing any 
care, treatment, or other services for the REH and/or its patients;
    (ii) A process for ensuring that all staff specified in paragraph 
(f)(1) of this section are fully vaccinated for COVID-19, except for 
those staff who have been granted exemptions to the vaccination 
requirements of this section, or those staff for whom COVID-19 
vaccination must be temporarily delayed, as recommended by the CDC, due 
to clinical precautions and considerations;
    (iii) A process for ensuring the implementation of additional 
precautions, intended to mitigate the transmission and spread of COVID-
19, for all staff who are not fully vaccinated for COVID-19;
    (iv) A process for tracking and securely documenting the COVID-19 
vaccination status of all staff specified in paragraph (f)(1) of this 
section;
    (v) A process for tracking and securely documenting the COVID-19 
vaccination status of any staff who have obtained any booster doses as 
recommended by the CDC;
    (vi) A process by which staff may request an exemption from the 
staff COVID-19 vaccination requirements based on an applicable Federal 
law;
    (vii) A process for tracking and securely documenting information 
provided by those staff who have requested, and for whom the REH has 
granted, an exemption from the staff COVID-19 vaccination requirements 
based on recognized clinical contraindications or applicable Federal 
laws;
    (viii) A process for ensuring that all documentation, which 
confirms recognized clinical contraindications to COVID-19 vaccines and 
which supports staff requests for medical exemptions from vaccination, 
has been signed and dated by a licensed practitioner, who is not the 
individual requesting the exemption, and who is acting within their 
respective scope of practice as defined by, and in accordance with, all 
applicable state and local laws, and for further ensuring that such 
documentation contains:
    (A) All information specifying which of the authorized COVID-19 
vaccines are clinically contraindicated for the staff member to receive 
and the recognized clinical reasons for the contraindications; and
    (B) A statement by the authenticating practitioner recommending 
that the staff member be exempted from the REH's COVID-19 vaccination 
requirements for staff based on the recognized clinical 
contraindications;
    (ix) A process for ensuring the tracking and secure documentation 
of the vaccination status of staff for whom COVID-19 vaccination must 
be temporarily delayed, as recommended by the CDC, due to clinical 
precautions and considerations, including, but not limited to, 
individuals with acute illness secondary to COVID-19, and individuals 
who received monoclonal antibodies or convalescent plasma for COVID-19 
treatment; and
    (x) Contingency plans for staff who are not fully vaccinated for 
COVID-19.


Sec.  485.528  Condition of participation: Staffing and staff 
responsibilities.

    (a) Standard: Emergency department staffing. The emergency 
department of the REH must be staffed 24 hours a day, 7 days a week by 
an individual or individuals competent in the skills needed to address 
emergency medical care. This individual(s) must be able to receive 
patients and activate the

[[Page 72301]]

appropriate medical resources to meet the care needed by the patient.
    (b) Standard: Staffing. (1) The REH must have a professional health 
care staff that includes one or more doctors of medicine or osteopathy, 
and may include one or more physician assistants, nurse practitioners, 
or clinical nurse specialists.
    (2) Any ancillary personnel are supervised by the professional 
staff.
    (3) The staff is sufficient to provide the services essential to 
the operation of the REH.
    (4) A registered nurse, clinical nurse specialist, or licensed 
practical nurse is on duty whenever the REH has one or more patients 
receiving emergency care or observation care.
    (c) Standard: Responsibilities of the doctor of medicine or 
osteopathy. (1) The doctor of medicine or osteopathy must --
    (i) Provide medical direction for the REH's health care activities 
and consultation for, and medical supervision of, the health care 
staff.
    (ii) In conjunction with the physician assistant and/or nurse 
practitioner member(s), participate in developing, executing, and 
periodically reviewing the REH's written policies governing the 
services it furnishes.
    (iii) In conjunction with the physician assistant and/or nurse 
practitioner members, periodically review the REH's patient records, 
provide medical orders, and provide medical care services to the 
patients of the REH.
    (iv) Periodically review and sign a sample of outpatient records of 
patients cared for by nurse practitioners, clinical nurse specialists, 
certified nurse midwives, or physician assistants only to the extent 
where state law requires record reviews or co-signatures, or both, by a 
collaborating physician.
    (2) A doctor of medicine or osteopathy must be present for 
sufficient periods of time to provide medical direction, consultation, 
and supervision for the services provided in the REH, and is available 
through direct radio or telephone communication or electronic 
communication for consultation, assistance with medical emergencies, or 
patient referral.
    (d) Standard: Physician assistant, nurse practitioner, and clinical 
nurse specialist responsibilities. (1) The physician assistant, the 
nurse practitioner, or clinical nurse specialist members of the REH's 
staff must --
    (i) Participate in the development, execution and periodic review 
of the written policies governing the services the REH furnishes; and
    (ii) Participate with a doctor of medicine or osteopathy in a 
periodic review of the patients' health records.
    (2) The physician assistant, nurse practitioner, or clinical nurse 
specialist performs the following functions to the extent they are not 
being performed by a doctor of medicine or osteopathy:
    (i) Provides services in accordance with the REH's policies.
    (ii) Arranges for, or refers patients to, needed services that 
cannot be furnished at the REH, and assures that adequate patient 
health records are maintained and transferred as required when patients 
are referred.
    (3) Whenever a patient is placed in observation care at the REH by 
a nurse practitioner, physician assistant, or clinical nurse 
specialist, a doctor of medicine or osteopathy on the staff of the REH 
is notified of the patient's status.
    (e) Standard: Periodic review of clinical privileges and 
performance. The REH requires that --
    (1) The quality and appropriateness of the diagnosis and treatment 
furnished by nurse practitioners, clinical nurse specialists, and 
physician assistants at the REH must be evaluated by a member of the 
REH staff who is a doctor of medicine or osteopathy or by another 
doctor of medicine or osteopathy under contract with the REH.
    (2) The quality and appropriateness of the diagnosis and treatment 
furnished by doctors of medicine or osteopathy at the REH must be 
evaluated by one of the following --
    (i) One Quality Improvement Organization (QIO) or equivalent 
entity.
    (ii) In the case of distant-site physicians and practitioners 
providing telemedicine services to the REH's patient under an agreement 
between the REH and a distant-site hospital, the distant-site hospital; 
or
    (iii) In the case of distant-site physicians and practitioners 
providing telemedicine services to the REH's patients under a written 
agreement between the REH and a distant-site telemedicine entity, one 
Quality Improvement Organization (QIO) or equivalent entity.
    (3) The REH staff consider the findings of the evaluation and make 
the necessary changes as specified in paragraphs (b) through (d) of 
this section.


Sec.  485.530  Condition of participation: Nursing services.

    The REH must have an organized nursing service that is available to 
provide 24-hour nursing services for the provision of patient care. The 
nursing services must be furnished and supervised by a registered 
nurse. Nursing services must meet the needs of patients.
    (a) Standard: Organization and staffing. Patient care 
responsibilities must be delineated for all nursing service personnel. 
Nursing services must be provided in accordance with recognized 
standards of practice.
    (b) Standard: Nursing leadership. The director of the nursing 
service must be a licensed registered nurse. The individual is 
responsible for the operation of the service, including determining the 
types and numbers of nursing personnel and staff necessary to provide 
nursing care for all areas of the REH.


Sec.  485.532  Condition of participation: Discharge planning.

    An REH must have an effective discharge planning process that 
focuses on the patient's goals and treatment preferences and includes 
the patient and their caregivers/support person(s) as active partners 
in the discharge planning for post-discharge care. The discharge 
planning process and the discharge plan must be consistent with the 
patient's goals for care and their treatment preferences, ensure an 
effective transition of the patient from the REH to post-discharge 
care, and reduce the factors leading to preventable hospital admissions 
or readmissions.
    (a) Standard: Discharge planning process. The REH's discharge 
planning process must identify, at an early stage of the provision of 
services, those patients who are likely to suffer adverse health 
consequences upon discharge in the absence of adequate discharge 
planning and must provide a discharge planning evaluation for those 
patients so identified as well as for other patients upon the request 
of the patient, patient's representative, or patient's physician.
    (1) Any discharge planning evaluation must be made on a timely 
basis to ensure that appropriate arrangements for post-REH care will be 
made before discharge and to avoid unnecessary delays in discharge.
    (2) A discharge planning evaluation must include an evaluation of a 
patient's likely need for appropriate services following those 
furnished by the REH, including, but not limited to, hospice care 
services, post-REH extended care services, home health services, and 
non-health care services and community-based care providers, and must 
also include a determination of the availability of the appropriate 
services as well as of the patient's access to those services.
    (3) The discharge planning evaluation must be included in the 
patient's

[[Page 72302]]

medical record for use in establishing an appropriate discharge plan 
and the results of the evaluation must be discussed with the patient 
(or the patient's representative).
    (4) Upon the request of a patient's physician, the REH must arrange 
for the development and initial implementation of a discharge plan for 
the patient.
    (5) Any discharge planning evaluation or discharge plan required 
under this paragraph (a) must be developed by, or under the supervision 
of, a registered nurse, social worker, or other appropriately qualified 
personnel.
    (6) The REH's discharge planning process must require regular re-
evaluation of the patient's condition to identify changes that require 
modification of the discharge plan. The discharge plan must be updated, 
as needed, to reflect these changes.
    (7) The REH must assess its discharge planning process on a regular 
basis. The assessment must include ongoing periodic review of a 
representative sample of discharge plans.
    (8) The REH must assist patients, their families, or the patient's 
representative in selecting a post-acute care provider by using and 
sharing data that includes, but is not limited to, home health agency 
(HHA), skilled nursing facility (SNF), inpatient rehabilitation 
facility (IRF), or long term care hospital (LTCH) data on quality 
measures and data on resource use measures. The REH must ensure that 
the post-acute care data on quality measures and data on resource use 
measures is relevant and applicable to the patient's goals of care and 
treatment preferences.
    (b) Standard: Discharge of the patient and provision and 
transmission of the patient's necessary medical information. The REH 
must discharge the patient, and also transfer or refer the patient 
where applicable, along with all necessary medical information 
pertaining to the patient's current course of illness and treatment, 
post-discharge goals of care, and treatment preferences, at the time of 
discharge, to the appropriate post-acute care service providers and 
suppliers, facilities, agencies, and other outpatient service providers 
and practitioners responsible for the patient's follow-up or ancillary 
care.


Sec.  485.534  Condition of participation: Patient's rights.

    An REH must protect and promote each patient's rights.
    (a) Standard: Notice of rights. (1) An REH must inform each 
patient, or when appropriate, the patient's representative (as allowed 
under state law), of the patient's rights, in advance of furnishing or 
discontinuing patient care whenever possible.
    (2) The REH must establish a process for prompt resolution of 
patient grievances and must inform each patient whom to contact to file 
a grievance. The REH's governing body or responsible individual must 
approve and be responsible for the effective operation of the grievance 
process and must review and resolve grievances, unless it delegates the 
responsibility in writing to a grievance committee. The grievance 
process must include a mechanism for timely referral of patient 
concerns regarding quality of care or premature discharge to the 
appropriate Utilization and Quality Control Quality Improvement 
Organization. At a minimum:
    (i) The REH must establish a clearly explained procedure for the 
submission of a patient's written or verbal grievance to the REH.
    (ii) The grievance process must specify time frames for review of 
the grievance and the provision of a response.
    (iii) In its resolution of the grievance, the REH must provide the 
patient with written notice of its decision that contains the name of 
the REH contact person, the steps taken on behalf of the patient to 
investigate the grievance, the results of the grievance process, and 
the date of completion.
    (b) Standard: Exercise of rights. The patient has the right to--
    (1) Participate in the development and implementation of their plan 
of care.
    (2) Make informed decisions regarding their care, including being 
informed of their health status, and being able to request or refuse 
treatment. This right must not be construed as a mechanism to demand 
the provision of treatment or services deemed medically unnecessary or 
inappropriate.
    (3) Formulate advance directives and to have REH staff and 
practitioners who provide care in the REH comply with these directives, 
in accordance with Sec. Sec.  489.100, 489.102, and 489.104 of this 
chapter.
    (c) Standard: Privacy and safety. The patient has the right to--
    (1) Personal privacy.
    (2) Receive care in a safe setting.
    (3) Be free from all forms of abuse or harassment.
    (d) Standard: Confidentiality of patient records. (1) The patient 
has the right to the confidentiality of their medical records.
    (2) The patient has the right to access their medical records, 
including current medical records, upon an oral or written request.
    (i) The records must be provided in the form and format requested 
by the individual, if it is readily producible in such form and format. 
This includes in an electronic form or format when such medical records 
are maintained electronically or if not, in a readable hard copy form 
or such other form and format as agreed to by the facility and the 
individual.
    (ii) The records must be provided within a reasonable time frame. 
The REH must not frustrate the legitimate efforts of individuals to 
gain access to their own medical records and must actively seek to meet 
these requests as quickly as its record keeping system permits.
    (e) Standard: Restraint or seclusion. All patients have the right 
to be free from physical or mental abuse, and corporal punishment. All 
patients have the right to be free from restraint or seclusion, of any 
form, imposed as a means of coercion, discipline, convenience, or 
retaliation by staff. Restraint or seclusion may only be imposed to 
ensure the immediate physical safety of the patient, a staff member, or 
others and must be discontinued at the earliest possible time.
    (1)(i) A restraint is--
    (A) Any manual method, physical or mechanical device, material, or 
equipment that immobilizes or reduces the ability of a patient to move 
their arms, legs, body, or head freely; or
    (B) A drug or medication when it is used as a restriction to manage 
the patient's behavior or restrict the patient's freedom of movement 
and is not a standard treatment or dosage for the patient's condition.
    (C) A restraint does not include devices, such as orthopedically 
prescribed devices, surgical dressings or bandages, protective helmets, 
or other methods that involve the physical holding of a patient for the 
purpose of conducting routine physical examinations or tests, or to 
protect the patient from falling out of bed, off of a stretcher, or out 
of a chair, or to permit the patient to participate in activities 
without the risk of physical harm (this does not include a physical 
escort).
    (ii) Seclusion is the involuntary confinement of a patient alone in 
a room or area from which the patient is physically prevented from 
leaving. Seclusion may only be used for the management of violent or 
self-destructive behavior.
    (2) Restraint or seclusion may only be used when less restrictive 
interventions have been determined to be ineffective to protect the 
patient, a staff member or others from harm.

[[Page 72303]]

    (3) The type or technique of restraint or seclusion used must be 
the least restrictive intervention that will be effective to protect 
the patient, a staff member, or others from harm.
    (4) The REH must have written policies and procedures regarding the 
use of restraint and seclusion that are consistent with current 
standards of practice.
    (f) Standard: Restraint or seclusion: Staff training requirements. 
The patient has the right to safe implementation of restraint or 
seclusion by trained staff.
    (1) The REH must provide patient-centered competency-based training 
and education of REH personnel and staff, including medical staff, and, 
as applicable, personnel providing contracted services in the REH, on 
the use of restraint and seclusion.
    (2) The training must include alternatives to the use of restraint/
seclusion.
    (g) Standard: Death reporting requirements. REHs must report deaths 
associated with the use of seclusion or restraint.
    (1) With the exception of deaths described under paragraph (g)(2) 
of this section, the REH must report the following information to CMS 
by telephone, facsimile, or electronically, as determined by CMS, no 
later than the close of business on the next business day following 
knowledge of the patient's death:
    (i) Each death that occurs while a patient is in restraint or 
seclusion.
    (ii) Each death that occurs within 24 hours after the patient has 
been removed from restraint or seclusion.
    (iii) Each death known to the REH that occurs within 1 week after 
restraint or seclusion where it is reasonable to assume that use of 
restraint or placement in seclusion contributed directly or indirectly 
to a patient's death, regardless of the type(s) of restraint used on 
the patient during this time. ``Reasonable to assume'' in this context 
includes, but is not limited to, deaths related to restrictions of 
movement for prolonged periods of time, or death related to chest 
compression, restriction of breathing, or asphyxiation.
    (2) When no seclusion has been used and when the only restraints 
used on the patient are those applied exclusively to the patient's 
wrist(s), and which are composed solely of soft, non-rigid, cloth-like 
materials, the REH staff must record in an internal log or other 
system, the following information:
    (i) Any death that occurs while a patient is in such restraints.
    (ii) Any death that occurs within 24 hours after a patient has been 
removed from such restraints.
    (3) The staff must document in the patient's medical record the 
date and time the death was:
    (i) Reported to CMS for deaths described in paragraph (g)(1) of 
this section; or
    (ii) Recorded in the internal log or other system for deaths 
described in paragraph (g)(2) of this section.
    (4) For deaths described in paragraph (g)(2) of this section, 
entries into the internal log or other system must be documented as 
follows:
    (i) Each entry must be made not later than seven days after the 
date of death of the patient.
    (ii) Each entry must document the patient's name, date of birth, 
date of death, name of attending physician or other licensed 
practitioner who is responsible for the care of the patient, medical 
record number, and primary diagnosis(es).
    (iii) The information must be made available in either written or 
electronic form to CMS immediately upon request.
    (h) Standard: Patient visitation rights. An REH must have written 
policies and procedures regarding the visitation rights of patients, 
including those setting forth any clinically necessary or reasonable 
restriction or limitation that the REH may need to place on such rights 
and the reasons for the clinical restriction or limitation. An REH must 
meet the following requirements:
    (1) Inform each patient (or support person, where appropriate) of 
their visitation rights, including any clinical restriction or 
limitation on such rights, when they are informed of their other rights 
under this section.
    (2) Inform each patient (or support person, where appropriate) of 
the right, subject to their consent, to receive the visitors whom they 
designate, including, but not limited to, a spouse, a domestic partner 
(including a same-sex domestic partner), another family member, or a 
friend, and their right to withdraw or deny such consent at any time.
    (3) Not restrict, limit, or otherwise deny visitation privileges on 
the basis of race, color, national origin, religion, sex, gender 
identity, sexual orientation, or disability.
    (4) Ensure that all visitors enjoy full and equal visitation 
privileges consistent with patient preferences.


Sec.  485.536  Condition of participation: Quality assessment and 
performance improvement program.

    The REH must develop, implement, and maintain an effective, 
ongoing, REH-wide, data-driven quality assessment and performance 
improvement (QAPI) program. The REH's governing body must ensure that 
the program reflects the complexity of the REH's organization and 
services; involves all REH departments and services (including those 
services furnished under contract or arrangement); and focuses on 
indicators related to improved health outcomes and the prevention and 
reduction of medical errors. The REH must maintain and demonstrate 
evidence of its QAPI program for review by CMS.
    (a) Standard: Program scope. (1) The program must include, but not 
be limited to, an ongoing program that shows measurable improvement in 
indicators for which there is evidence that it will improve health 
outcomes and identify and reduce medical errors.
    (2) The REH must measure, analyze, and track quality indicators, 
including adverse patient events, staffing, and other aspects of 
performance that assess processes of care including REH service and 
operations.
    (b) Standard: Program data collection and analysis. The program 
must incorporate quality indicator data including patient care data, 
and other relevant data, in order to achieve the goals of the QAPI 
program.
    (c) Standard: Program activities. (1) The REH must set priorities 
for its performance improvement activities that--
    (i) Focus on high-risk, high-volume, or problem-prone areas;
    (ii) Consider the incidence, prevalence, and severity of problems 
in those areas; and
    (iii) Affect health outcomes, patient safety, and quality of care.
    (2) Performance improvement activities must track medical errors 
and adverse patient events, analyze their causes, and implement 
preventive actions and mechanisms that include feedback and learning 
throughout the REH. An adverse patient event means an untoward, 
undesirable, and usually unanticipated event that causes death or 
serious injury or the risk thereof. Medical error means an error that 
occurs in the delivery of health care services.
    (3) The REH must take actions aimed at performance improvement and, 
after implementing those actions, the REH must measure its success, and 
track performance to ensure that improvements are sustained.
    (d) Standard: Executive responsibilities. The REH's governing body 
(or organized group or individual who assumes full legal authority and 
responsibility for operations of the REH), medical staff, and 
administrative

[[Page 72304]]

officials are responsible and accountable for ensuring the following:
    (1) That an ongoing program for quality improvement and patient 
safety, including the reduction of medical errors, is defined, 
implemented, and maintained.
    (2) That the REH-wide quality assessment and performance 
improvement efforts address priorities for improved quality of care and 
patient safety; and that all improvement actions are evaluated.
    (3) That clear expectations for safety are established.
    (4) That adequate resources are allocated for measuring, assessing, 
improving, and sustaining the REH's performance and reducing risk to 
patients.
    (e) Standard: Unified and integrated QAPI program for an REH in a 
multi-facility system. If an REH is part of a system consisting of 
multiple separately certified hospitals, CAHs, and/or REHs using a 
system governing body that is legally responsible for the conduct of 
two or more hospitals, CAHs, and/or REHs, the system governing body can 
elect to have a unified and integrated QAPI program for all of its 
member facilities after determining that such a decision is in 
accordance with all applicable state and local laws. The system 
governing body is responsible and accountable for ensuring that each of 
its separately certified REHs meets all of the requirements of this 
section. Each separately certified REH subject to the system governing 
body must demonstrate that--
    (1) The unified and integrated QAPI program is established in a 
manner that takes into account each member REH's unique circumstances 
and any significant differences in patient populations and services 
offered in each REH; and
    (2) The unified and integrated QAPI program establishes and 
implements policies and procedures to ensure that the needs and 
concerns of each of its separately certified REHs, regardless of 
practice or location, are given due consideration, and that the unified 
and integrated QAPI program has mechanisms in place to ensure that 
issues localized to particular REHs are duly considered and addressed.


Sec.  485.538  Condition of participation: Agreements.

    The REH must have in effect an agreement with at least one 
certified hospital that is a level I or level II trauma center for the 
referral and transfer of patients requiring emergency medical care 
beyond the capabilities of the REH that is--
    (a) Licensed as a hospital in a state that provides for the 
licensing of hospitals under state or applicable local law or approved 
by the agency of such state or locality responsible for licensing 
hospitals, as meeting standards established for licensing established 
by the agency of the state; and
    (b) Licensed or designated by the state or local government 
authority as level I or level II trauma center or is verified by the 
American College of Surgeons as a level I or level II trauma center.


Sec.  485.540  Condition of participation: Medical records.

    (a) Standard: Records system. (1) The REH must maintain a medical 
records system in accordance with written policies and procedures.
    (2) The records must be legible, complete, accurately documented, 
readily accessible, and systematically organized.
    (3) A designated member of the professional staff is responsible 
for maintaining the records and for ensuring that they are completely 
and accurately documented, readily accessible, and systematically 
organized.
    (4) For each patient receiving health care services, the REH must 
maintain a record that includes, as applicable--
    (i) Identification and social data, evidence of properly executed 
informed consent forms, pertinent medical history, assessment of the 
health status and health care needs of the patient, and a brief summary 
of the episode, disposition, and instructions to the patient;
    (ii) Reports of physical examinations, diagnostic and laboratory 
test results, including clinical laboratory services, and consultative 
findings;
    (iii) All orders of doctors of medicine or osteopathy or other 
practitioners, reports of treatments and medications, nursing notes and 
documentation of complications, and other pertinent information 
necessary to monitor the patient's progress, such as temperature 
graphics, progress notes describing the patient's response to 
treatment; and
    (iv) Dated signatures of the doctor of medicine or osteopathy or 
other health care professional.
    (b) Standard: Protection of record information. (1) The REH must 
maintain the confidentiality of record information and provides 
safeguards against loss, destruction, or unauthorized use.
    (2) The REH must have written policies and procedures that govern 
the use and removal of records from the REH and the conditions for the 
release of information.
    (3) The patient's written consent is required for release of 
information not required by law.
    (c) Standard: Retention of records. The records must be retained 
for at least 5 years from date of last entry, and longer if required by 
state statute, or if the records may be needed in any pending 
proceeding.
    (d) Standard: Electronic notifications. If the REH utilizes an 
electronic medical records system or other electronic administrative 
system, which is conformant with the content exchange standard at 45 
CFR 170.205(d)(2), then the REH must demonstrate that--
    (1) The system's notification capacity is fully operational and the 
REH uses it in accordance with all state and Federal statutes and 
regulations applicable to the REH's exchange of patient health 
information.
    (2) The system sends notifications that must include at least 
patient name, treating practitioner name, and sending institution name.
    (3) To the extent permissible under applicable Federal and state 
law and regulations, and not inconsistent with the patient's expressed 
privacy preferences, the system sends notifications directly, or 
through an intermediary that facilitates exchange of health 
information, at the time of the patient's registration in the REH's 
emergency department.
    (4) To the extent permissible under applicable Federal and state 
law and regulations, and not inconsistent with the patient's expressed 
privacy preferences, the system sends notifications directly, or 
through an intermediary that facilitates exchange of health 
information, either immediately prior to, or at the time the patient's 
discharge or transfer from the REH's emergency department.
    (5) The REH has made a reasonable effort to ensure that the system 
sends the notifications to all applicable post-acute care services 
providers and suppliers, as well as to any of the following 
practitioners and entities, which need to receive notification of the 
patient's status for treatment, care coordination, or quality 
improvement purposes:
    (i) The patient's established primary care practitioner;
    (ii) The patient's established primary care practice group or 
entity; or
    (iii) Other practitioner, or other practice group or entity, 
identified by the patient as the practitioner, or practice group or 
entity, primarily responsible for their care.

[[Page 72305]]

Sec.  485.542  Condition of participation: Emergency preparedness.

    The REH must comply with all applicable Federal, state, and local 
emergency preparedness requirements. The REH must establish and 
maintain an emergency preparedness program that meets the requirements 
of this section. The emergency preparedness program must include, but 
not be limited to, the following elements:
    (a) Emergency plan. The REH must develop and maintain an emergency 
preparedness plan that must be reviewed, and updated at least every 2 
years. The plan must do the following:
    (1) Be based on and include a documented, facility-based and 
community-based risk assessment, utilizing an all-hazards approach.
    (2) Include strategies for addressing emergency events identified 
by the risk assessment.
    (3) Address patient population, including, but not limited to, the 
type of services the REH has the ability to provide in an emergency; 
and continuity of operations, including delegations of authority and 
succession plans.
    (4) Include a process for cooperation and collaboration with local, 
tribal, regional, state, and Federal emergency preparedness officials' 
efforts to maintain an integrated response during a disaster or 
emergency situation.
    (b) Policies and procedures. The REH must develop and implement 
emergency preparedness policies and procedures, based on the emergency 
plan set forth in paragraph (a) of this section, risk assessment at 
paragraph (a)(1) of this section, and the communication plan at 
paragraph (c) of this section. The policies and procedures must be 
reviewed and updated at least every 2 years. At a minimum, the policies 
and procedures must address the following:
    (1) The provision of subsistence needs for staff and patients, 
whether they evacuate or shelter in place, include, but are not limited 
to--
    (i) Food, water, medical, and pharmaceutical supplies;
    (ii) Alternate sources of energy to maintain:
    (A) Temperatures to protect patient health and safety and for the 
safe and sanitary storage of provisions;
    (B) Emergency lighting;
    (C) Fire detection, extinguishing, and alarm systems; and
    (D) Sewage and waste disposal.
    (2) A system to track the location of on-duty staff and sheltered 
patients in the REH's care during an emergency. If on-duty staff or 
sheltered patients are relocated during the emergency, the REH must 
document the specific name and location of the receiving facility or 
other location.
    (3) Safe evacuation from the REH, which includes the following:
    (i) Consideration of care and treatment needs of evacuees.
    (ii) Staff responsibilities.
    (iii) Transportation.
    (iv) Identification of evacuation location(s).
    (v) Primary and alternate means of communication with external 
sources of assistance.
    (4) A means to shelter in place for patients, staff, and volunteers 
who remain in the REH.
    (5) A system of medical documentation that does the following:
    (i) Preserves patient information.
    (ii) Protects confidentiality of patient information.
    (iii) Secures and maintains the availability of records.
    (6) The use of volunteers in an emergency and other staffing 
strategies, including the process and role for integration of state and 
federally designated health care professionals to address surge needs 
during an emergency.
    (7) The role of the REH under a waiver declared by the Secretary, 
in accordance with section 1135 of the Act, in the provision of care 
and treatment at an alternate care site identified by emergency 
management officials.
    (c) Communication plan. The REH must develop and maintain an 
emergency preparedness communication plan that complies with Federal, 
state, and local laws and must be reviewed and updated at least every 2 
years. The communication plan must include all of the following:
    (1) Names and contact information for the following:
    (i) Staff.
    (ii) Entities providing services under arrangement.
    (iii) Patients' physicians.
    (iv) Volunteers.
    (2) Contact information for the following:
    (i) Federal, state, tribal, regional, and local emergency 
preparedness staff.
    (ii) Other sources of assistance.
    (3) Primary and alternate means for communicating with the 
following:
    (i) REH's staff.
    (ii) Federal, state, tribal, regional, and local emergency 
management agencies.
    (4) A method for sharing information and medical documentation for 
patients under the REH's care, as necessary, with other health care 
providers to maintain the continuity of care.
    (5) A means, in the event of an evacuation, to release patient 
information as permitted under 45 CFR 164.510(b)(1)(ii).
    (6) A means of providing information about the general condition 
and location of patients under the facility's care as permitted under 
45 CFR 164.510(b)(4).
    (7) A means of providing information about the REH's needs, and its 
ability to provide assistance, to the authority having jurisdiction, 
the Incident Command Center, or designee.
    (d) Training and testing. The REH must develop and maintain an 
emergency preparedness training and testing program that is based on 
the emergency plan set forth in paragraph (a) of this section, risk 
assessment at paragraph (a)(1) of this section, policies and procedures 
at paragraph (b) of this section, and the communication plan at 
paragraph (c) of this section. The training and testing program must be 
reviewed and updated at least every 2 years.
    (1) Training program. The REH must do all of the following:
    (i) Provide initial training in emergency preparedness policies and 
procedures to all new and existing staff, individuals providing on-site 
services under arrangement, and volunteers, consistent with their 
expected roles.
    (ii) Provide emergency preparedness training at least every 2 
years.
    (iii) Maintain documentation of all emergency preparedness 
training.
    (iv) Demonstrate staff knowledge of emergency procedures.
    (v) If the emergency preparedness policies and procedures are 
significantly updated, the REH must conduct training on the updated 
policies and procedures.
    (2) Testing. The REH must conduct exercises to test the emergency 
plan at least annually. The REH must do the following:
    (i) Participate in a full-scale exercise that is community-based 
every 2 years.
    (A) When a community-based exercise is not accessible, conduct a 
facility-based functional exercise every 2 years; or
    (B) If the REH experiences an actual natural or man-made emergency 
that requires activation of the emergency plan, the REH is exempt from 
engaging in its next required community-based or individual, facility-
based functional exercise following the onset of the emergency event.
    (ii) Conduct an additional exercise at least every 2 years, 
opposite the year the full-scale or functional exercise under paragraph 
(d)(2)(i) of this section is conducted, that may include, but is not 
limited to the following:
    (A) A second full-scale exercise that is community-based, or an 
individual, facility-based functional exercise; or

[[Page 72306]]

    (B) A mock disaster drill; or
    (C) A tabletop exercise or workshop that is led by a facilitator 
and includes a group discussion using a narrated, clinically-relevant 
emergency scenario, and a set of problem statements, directed messages, 
or prepared questions designed to challenge an emergency plan.
    (iii) Analyze the REH's response to and maintain documentation of 
all drills, tabletop exercises, and emergency events and revise the 
REH's emergency plan, as needed.
    (e) Emergency and standby power systems. The CAH must implement 
emergency and standby power systems based on the emergency plan set 
forth in paragraph (a) of this section.
    (1) Emergency generator location. The generator must be located in 
accordance with the location requirements found in the Health Care 
Facilities Code (NFPA 99 and Tentative Interim Amendments TIA 12-2, TIA 
12-3, TIA 12-4, TIA 12-5, and TIA 12-6), Life Safety Code (NFPA 101 and 
Tentative Interim Amendments TIA 12-1, TIA 12-2, TIA 12-3, and TIA 12-
4), and NFPA 110, when a new structure is built or when an existing 
structure or building is renovated.
    (2) Emergency generator inspection and testing. The CAH must 
implement emergency power system inspection and testing requirements 
found in the Health Care Facilities Code, NFPA 110, and the Life Safety 
Code.
    (3) Emergency generator fuel. CAHs that maintain an onsite fuel 
source to power emergency generators must have a plan for how it will 
keep emergency power systems operational during the emergency, unless 
it evacuates.
    (f) Integrated healthcare systems. If an REH is part of a 
healthcare system consisting of multiple separately certified 
healthcare facilities that elects to have a unified and integrated 
emergency preparedness program, the REH may choose to participate in 
the healthcare system's coordinated emergency preparedness program. If 
elected, the unified and integrated emergency preparedness program 
must--
    (1) Demonstrate that each separately certified facility within the 
system actively participated in the development of the unified and 
integrated emergency preparedness program.
    (2) Be developed and maintained in a manner that takes into account 
each separately certified facility's unique circumstances, patient 
populations, and services offered.
    (3) Demonstrate that each separately certified facility is capable 
of actively using the unified and integrated emergency preparedness 
program and is in compliance.
    (4) Include a unified and integrated emergency plan that meets the 
requirements of paragraphs (a)(2), (3), and (4) of this section. The 
unified and integrated emergency plan must also be based on and include 
the following:
    (i) A documented community-based risk assessment, utilizing an all-
hazards approach.
    (ii) A documented individual facility-based risk assessment for 
each separately certified facility within the health system, utilizing 
an all-hazards approach.
    (5) Include integrated policies and procedures that meet the 
requirements set forth in paragraph (b) of this section, a coordinated 
communication plan and training and testing programs that meet the 
requirements of paragraphs (c) and (d) of this section, respectively.
    (g) Incorporation by reference. The material listed in this 
paragraph (g) is incorporated by reference into this section with the 
approval of the Director of the Federal Register in accordance with 5 
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that 
specified in this section, CMS must publish a document in the Federal 
Register and the material must be available to the public. All approved 
material is available for inspection at CMS and the National Archives 
and Records Administration (NARA). Contact CMS at: CMS Information 
Resource Center, 7500 Security Boulevard, Baltimore, MD, email: 
[email protected] or call (410) 786-9465. For information on the 
availability of this material at NARA, email: [email protected], 
or go to: www.archives.gov/federal-register/cfr/ibr-locations.html. The 
material may be obtained from the following source(s) in this paragraph 
(g):
    (1) National Fire Protection Association, 1 Batterymarch Park, 
Quincy, MA 02169, www.nfpa.org, 1.617.770.3000.
    (i) NFPA 99, Health Care Facilities Code, 2012 edition, issued 
August 11, 2011.
    (ii) Technical interim amendment (TIA) 12-2 to NFPA 99, issued 
August 11, 2011.
    (iii) TIA 12-3 to NFPA 99, issued August 9, 2012.
    (iv) TIA 12-4 to NFPA 99, issued March 7, 2013.
    (v) TIA 12-5 to NFPA 99, issued August 1, 2013.
    (vi) TIA 12-6 to NFPA 99, issued March 3, 2014.
    (vii) NFPA 101, Life Safety Code, 2012 edition, issued August 11, 
2011.
    (viii) TIA 12-1 to NFPA 101, issued August 11, 2011.
    (ix) TIA 12-2 to NFPA 101, issued October 30, 2012.
    (x) TIA 12-3 to NFPA 101, issued October 22, 2013.
    (xi) TIA 12-4 to NFPA 101, issued October 22, 2013.
    (xii) NFPA 110, Standard for Emergency and Standby Power Systems, 
2010 edition, including TIAs to chapter 7, issued August 6, 2009.
    (2) [Reserved]


Sec.  485.544  Condition of participation: Physical environment.

    The REH must be constructed, arranged, and maintained to ensure the 
safety of the patient, and to provide facilities for diagnosis and 
treatment and for special services appropriate to the needs of the 
community.
    (a) Standard: Buildings. The condition of the physical plant and 
the overall REH environment must be developed and maintained in such a 
manner that the safety and well-being of patients are ensured.
    (1) There must be emergency power and lighting in at least the 
operating, recovery, and emergency rooms, and stairwells. In all other 
areas not serviced by the emergency supply source, battery lamps and 
flashlights must be available.
    (2) There must be facilities for emergency gas and water supply.
    (3) The REH must have a safe and sanitary environment, properly 
constructed, equipped, and maintained to protect the health and safety 
of patients.
    (b) Standard: Facilities. The REH must maintain adequate facilities 
for its services.
    (1) Diagnostic and therapeutic facilities must be located for the 
safety of patients.
    (2) Facilities, supplies, and equipment must be maintained to 
ensure an acceptable level of safety and quality.
    (3) The extent and complexity of facilities must be determined by 
the services offered.
    (4) There must be proper ventilation, light, and temperature 
controls in patient care, pharmaceutical, food preparation, and other 
appropriate areas.
    (c) Standard: Safety from fire. (1) Except as otherwise provided in 
this section, the REH must meet the provisions applicable to Ambulatory 
Health Care Occupancies, regardless of the number of patients served, 
and must proceed in accordance with the Life Safety Code (NFPA 101 and 
Tentative Interim Amendments TIA 12-1, TIA 12-2, TIA 12-3, and TIA 12-
4).
    (2) In consideration of a recommendation by the state survey

[[Page 72307]]

agency or accrediting organization or at the discretion of the 
Secretary, CMS may waive, for periods deemed appropriate, specific 
provisions of the Life Safety Code, which would result in unreasonable 
hardship upon an REH, but only if the waiver will not adversely affect 
the health and safety of the patients.
    (3) The provisions of the Life Safety Code do not apply in a state 
if CMS finds that a fire and safety code imposed by state law 
adequately protects patients in an REH.
    (4) An REH may place alcohol-based hand rub dispensers in its 
facility if the dispensers are installed in a manner that adequately 
protects against inappropriate access.
    (5) When a sprinkler system is shut down for more than 10 hours, 
the REH must:
    (i) Evacuate the building or portion of the building affected by 
the system outage until the system is back in service, or
    (ii) Establish a fire watch until the system is back in service.
    (d) Standard: Building safety. Except as otherwise provided in this 
section, the REH must meet the applicable provisions and must proceed 
in accordance with the 2012 edition of the Health Care Facilities Code 
(NFPA 99, and Tentative Interim Amendments TIA 12-2, TIA 12-3, TIA 12-
4, TIA 12-5 and TIA 12-6).
    (1) Chapters 7, 8, 12, and 13 of the adopted Health Care Facilities 
Code do not apply to an REH.
    (2) If application of the Health Care Facilities Code required 
under paragraph (d) of this section would result in unreasonable 
hardship for the REH, CMS may waive specific provisions of the Health 
Care Facilities Code, but only if the waiver does not adversely affect 
the health and safety of patients.
    (e) Incorporation by reference. The material listed in this 
paragraph (e) is incorporated by reference into this section with the 
approval the Director of the Federal Register in accordance with 5 
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that 
specified in this section, CMS must publish a document in the Federal 
Register and the material must be available to the public. All approved 
material is available for inspection at CMS and the National Archives 
and Records Administration (NARA). Contact CMS at: CMS Information 
Resource Center, 7500 Security Boulevard, Baltimore, MD, email 
[email protected] or call (410) 786-9465. For information on the 
availability of this material at NARA, email [email protected] or 
go to: www.archives.gov/federal-register/cfr/ibr-locations.html. The 
material may be obtained from the following source(s) in this paragraph 
(e).
    (1) National Fire Protection Association, 1 Batterymarch Park, 
Quincy, MA 02169, www.nfpa.org, 1.617.770.3000.
    (i) NFPA 99, Health Care Facilities Code, 2012 edition, issued 
August 11, 2011.
    (ii) Technical interim amendment (TIA) 12-2 to NFPA 99, issued 
August 11, 2011.
    (iii) TIA 12-3 to NFPA 99, issued August 9, 2012.
    (iv) TIA 12-4 to NFPA 99, issued March 7, 2013.
    (v) TIA 12-5 to NFPA 99, issued August 1, 2013.
    (vi) TIA 12-6 to NFPA 99, issued March 3, 2014.
    (vii) NFPA 101, Life Safety Code, 2012 edition, issued August 11, 
2011;
    (viii) TIA 12-1 to NFPA 101, issued August 11, 2011.
    (ix) TIA 12-2 to NFPA 101, issued October 30, 2012.
    (x) TIA 12-3 to NFPA 101, issued October 22, 2013.
    (xi) TIA 12-4 to NFPA 101, issued October 22, 2013.
    (2) [Reserved]


Sec.  485.546  Condition of participation: Skilled nursing facility 
distinct part unit.

    If the REH provides skilled nursing facility services in a distinct 
part unit, the services furnished by the distinct part unit must be 
separately licensed and certified and comply with the requirements of 
participation for long-term care facilities specified in part 483, 
subpart B, of this chapter.

0
3. Section 485.610 is amended by revising paragraph (c) to read as 
follows:


Sec.  485.610  Condition of participation: Status and location.

* * * * *
    (c) Standard: Location relative to other facilities or necessary 
provider certification. (1) The CAH is located more than a 35-mile 
drive on primary roads (or, in the case of mountainous terrain or in 
areas with only secondary roads available, a 15-mile drive) from a 
hospital or another CAH, or before January 1, 2006, the CAH is 
certified by the State as being a necessary provider of health care 
services to residents in the area. A CAH that is designated as a 
necessary provider on or before December 31, 2005, will maintain its 
necessary provider designation after January 1, 2006.
    (2) Primary roads of travel for determining the driving distance of 
a CAH and its proximity to other providers is defined as:
    (i) A numbered Federal highway, including interstates, intrastates, 
expressways, or any other numbered Federal highway with 2 or more lanes 
each way; or
    (ii) A numbered State highway with 2 or more lanes each way.
* * * * *

0
45. Section 485.614 is added to read as follows:


Sec.  485.614  Condition of participation: Patient's rights.

    A CAH must protect and promote each patient's rights.
    (a) Standard: Notice of rights. (1) A hospital must inform each 
patient, or when appropriate, the patient's representative (as allowed 
under state law), of the patient's rights, in advance of furnishing or 
discontinuing patient care whenever possible.
    (2) The hospital must establish a process for prompt resolution of 
patient grievances and must inform each patient whom to contact to file 
a grievance. The hospital's governing body must approve and be 
responsible for the effective operation of the grievance process and 
must review and resolve grievances, unless it delegates the 
responsibility in writing to a grievance committee. The grievance 
process must include a mechanism for timely referral of patient 
concerns regarding quality of care or premature discharge to the 
appropriate Utilization and Quality Control Quality Improvement 
Organization. At a minimum:
    (i) The hospital must establish a clearly explained procedure for 
the submission of a patient's written or verbal grievance to the 
hospital.
    (ii) The grievance process must specify time frames for review of 
the grievance and the provision of a response.
    (iii) In its resolution of the grievance, the hospital must provide 
the patient with written notice of its decision that contains the name 
of the hospital contact person, the steps taken on behalf of the 
patient to investigate the grievance, the results of the grievance 
process, and the date of completion.
    (b) Standard: Exercise of rights. (1) The patient has the right to 
participate in the development and implementation of their plan of 
care.
    (2) The patient or their representative (as allowed under state 
law) has the right to make informed decisions regarding their care. The 
patient's rights include being informed of their health status, being 
involved in care planning and treatment, and being able to request or 
refuse treatment. This right must not

[[Page 72308]]

be construed as a mechanism to demand the provision of treatment or 
services deemed medically unnecessary or inappropriate.
    (3) The patient has the right to formulate advance directives and 
to have hospital staff and practitioners who provide care in the 
hospital comply with these directives, in accordance with Sec. Sec.  
489.100, 489.102, and 489.104 of this chapter.
    (4) The patient has the right to have a family member or 
representative of their choice and their own physician notified 
promptly of their admission to the hospital.
    (c) Standard: Privacy and safety. (1) The patient has the right to 
personal privacy.
    (2) The patient has the right to receive care in a safe setting.
    (3) The patient has the right to be free from all forms of abuse or 
harassment.
    (d) Standard: Confidentiality of patient records. (1) The patient 
has the right to the confidentiality of their clinical records.
    (2) The patient has the right to access their medical records, 
including current medical records, upon an oral or written request, in 
the form and format requested by the individual, if it is readily 
producible in such form and format (including in an electronic form or 
format when such medical records are maintained electronically); or, if 
not, in a readable hard copy form or such other form and format as 
agreed to by the facility and the individual, and within a reasonable 
time frame. The hospital must not frustrate the legitimate efforts of 
individuals to gain access to their own medical records and must 
actively seek to meet these requests as quickly as its record keeping 
system permits.
    (e) Standard: Restraint or seclusion. All patients have the right 
to be free from physical or mental abuse, and corporal punishment. All 
patients have the right to be free from restraint or seclusion, of any 
form, imposed as a means of coercion, discipline, convenience, or 
retaliation by staff. Restraint or seclusion may only be imposed to 
ensure the immediate physical safety of the patient, a staff member, or 
others and must be discontinued at the earliest possible time.
    (1)(i) A restraint is--
    (A) Any manual method, physical or mechanical device, material, or 
equipment that immobilizes or reduces the ability of a patient to move 
their arms, legs, body, or head freely; or
    (B) A drug or medication when it is used as a restriction to manage 
the patient's behavior or restrict the patient's freedom of movement 
and is not a standard treatment or dosage for the patient's condition.
    (C) A restraint does not include devices, such as orthopedically 
prescribed devices, surgical dressings or bandages, protective helmets, 
or other methods that involve the physical holding of a patient for the 
purpose of conducting routine physical examinations or tests, or to 
protect the patient from falling out of bed, or to permit the patient 
to participate in activities without the risk of physical harm (this 
does not include a physical escort).
    (ii) Seclusion is the involuntary confinement of a patient alone in 
a room or area from which the patient is physically prevented from 
leaving. Seclusion may only be used for the management of violent or 
self-destructive behavior.
    (2) Restraint or seclusion may only be used when less restrictive 
interventions have been determined to be ineffective to protect the 
patient a staff member or others from harm.
    (3) The type or technique of restraint or seclusion used must be 
the least restrictive intervention that will be effective to protect 
the patient, a staff member, or others from harm.
    (4) The CAH must have written policies and procedures regarding the 
use of restraint and seclusion that are consistent with current 
standards of practice.
    (f) Standard: Restraint or seclusion: Staff training requirements. 
The patient has the right to safe implementation of restraint or 
seclusion by trained staff.
    (1) The CAH must provide patient-centered, trauma informed 
competency-based training and education of CAH personnel and staff, 
including medical staff, and, as applicable, personnel providing 
contracted services in the CAH, on the use of restraint and seclusion.
    (2) The training must include alternatives to the use of restraint/
seclusion.
    (g) Standard: Death reporting requirements. Hospitals must report 
deaths associated with the use of seclusion or restraint.
    (1) With the exception of deaths described under paragraph (g)(2) 
of this section, the hospital must report the following information to 
CMS by telephone, facsimile, or electronically, as determined by CMS, 
no later than the close of business on the next business day following 
knowledge of the patient's death:
    (i) Each death that occurs while a patient is in restraint or 
seclusion.
    (ii) Each death that occurs within 24 hours after the patient has 
been removed from restraint or seclusion.
    (iii) Each death known to the hospital that occurs within 1 week 
after restraint or seclusion where it is reasonable to assume that use 
of restraint or placement in seclusion contributed directly or 
indirectly to a patient's death, regardless of the type(s) of restraint 
used on the patient during this time. ``Reasonable to assume'' in this 
context includes, but is not limited to, deaths related to restrictions 
of movement for prolonged periods of time, or death related to chest 
compression, restriction of breathing, or asphyxiation.
    (2) When no seclusion has been used and when the only restraints 
used on the patient are those applied exclusively to the patient's 
wrist(s), and which are composed solely of soft, non-rigid, cloth-like 
materials, the hospital staff must record in an internal log or other 
system, the following information:
    (i) Any death that occurs while a patient is in such restraints.
    (ii) Any death that occurs within 24 hours after a patient has been 
removed from such restraints.
    (3) The staff must document in the patient's medical record the 
date and time the death was:
    (i) Reported to CMS for deaths described in paragraph (g)(1) of 
this section; or
    (ii) Recorded in the internal log or other system for deaths 
described in paragraph (g)(2) of this section.
    (4) For deaths described in paragraph (g)(2) of this section, 
entries into the internal log or other system must be documented as 
follows:
    (i) Each entry must be made not later than seven days after the 
date of death of the patient.
    (ii) Each entry must document the patient's name, date of birth, 
date of death, name of attending physician or other licensed 
practitioner who is responsible for the care of the patient, medical 
record number, and primary diagnosis(es).
    (iii) The information must be made available in either written or 
electronic form to CMS immediately upon request.

0
46. Section 485.631 is amended by adding paragraph (e) to read as 
follows:


Sec.  485.631   Condition of participation: Staffing and staff 
responsibilities.

* * * * *
    (e) Standard: Unified and integrated medical staff for a CAH in a 
multi-facility system. If a CAH is part of a system consisting of 
multiple separately certified hospitals, CAHs, and/or REHs, and the 
system elects to have a unified

[[Page 72309]]

and integrated medical staff for its member hospitals, CAHs, and/or 
REHs after determining that such a decision is in accordance with all 
applicable state and local laws, each separately certified CAH must 
demonstrate that:
    (1) The medical staff members of each separately certified CAH in 
the system (that is, all medical staff members who hold specific 
privileges to practice at that CAH) have voted by majority, in 
accordance with medical staff bylaws, either to accept a unified and 
integrated medical staff structure or to opt out of such a structure 
and to maintain a separate and distinct medical staff for their 
respective CAH;
    (2) The unified and integrated medical staff has bylaws, rules, and 
requirements that describe its processes for self-governance, 
appointment, credentialing, privileging, and oversight, as well as its 
peer review policies and due process rights guarantees, and which 
include a process for the members of the medical staff of each 
separately certified CAH (that is, all medical staff members who hold 
specific privileges to practice at that CAH) to be advised of their 
rights to opt out of the unified and integrated medical staff structure 
after a majority vote by the members to maintain a separate and 
distinct medical staff for their CAH;
    (3) The unified and integrated medical staff is established in a 
manner that takes into account each member CAH's unique circumstances 
and any significant differences in patient populations and services 
offered in each hospital, CAH, and REH; and
    (4) The unified and integrated medical staff establishes and 
implements policies and procedures to ensure that the needs and 
concerns expressed by members of the medical staff, at each of its 
separately certified hospitals, CAHs, and REHs, regardless of practice 
or location, are given due consideration, and that the unified and 
integrated medical staff has mechanisms in place to ensure that issues 
localized to particular hospitals, CAHs, and REHs are duly considered 
and addressed.


Sec.  485.635  [Amended]

0
47. Section 485.635 is amended--
0
a. In paragraph (b)(2) introductory text by removing the reference ``42 
U.S.C. 236a'' and adding in its place the reference ``42 U.S.C. 263a''; 
and
0
b. By redesignating paragraph (f) as Sec.  485.614(h).

0
48. Section 485.640 is amended by adding paragraph (g) to read as 
follows:


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

* * * * *
    (g) Standard: Unified and integrated infection prevention and 
control and antibiotic stewardship programs for a CAH in a multi-
facility system. If a CAH is part of a system consisting of multiple 
separately certified hospitals, CAHs, and/or REHs using a system 
governing body that is legally responsible for the conduct of two or 
more hospitals, CAHs, and/or REHs, the system governing body can elect 
to have unified and integrated infection prevention and control and 
antibiotic stewardship programs for all of its member facilities after 
determining that such a decision is in accordance with all applicable 
state and local laws. The system governing body is responsible and 
accountable for ensuring that each of its separately certified CAHs 
meets all of the requirements of this section. Each separately 
certified CAH subject to the system governing body must demonstrate 
that:
    (1) The unified and integrated infection prevention and control and 
antibiotic stewardship programs are established in a manner that takes 
into account each member CAH's unique circumstances and any significant 
differences in patient populations and services offered in each CAH;
    (2) The unified and integrated infection prevention and control and 
antibiotic stewardship programs establish and implement policies and 
procedures to ensure that the needs and concerns of each of its 
separately certified CAHs, regardless of practice or location, are 
given due consideration;
    (3) The unified and integrated infection prevention and control and 
antibiotic stewardship programs have mechanisms in place to ensure that 
issues localized to particular CAHs are duly considered and addressed; 
and
    (4) A qualified individual (or individuals) with expertise in 
infection prevention and control and in antibiotic stewardship has been 
designated at the CAH as responsible for communicating with the unified 
infection prevention and control and antibiotic stewardship programs, 
for implementing and maintaining the policies and procedures governing 
infection prevention and control and antibiotic stewardship as directed 
by the unified infection prevention and control and antibiotic 
stewardship programs, and for providing education and training on the 
practical applications of infection prevention and control and 
antibiotic stewardship to CAH staff.

0
49. Section 485.641 is amended by adding paragraph (f) to read as 
follows:


Sec.  485.641  Condition of participation: Quality assessment and 
performance improvement program.

* * * * *
    (f) Standard: Unified and integrated QAPI program for a CAH in a 
multi-facility system. If a CAH is part of a system consisting of 
multiple separately certified hospitals, CAHs, and/or REHs using a 
system governing body that is legally responsible for the conduct of 
two or more hospitals, CAHs, and/or REHs, the system governing body can 
elect to have a unified and integrated QAPI program for all of its 
member facilities after determining that such a decision is in 
accordance with all applicable state and local laws. The system 
governing body is responsible and accountable for ensuring that each of 
its separately certified CAHs meets all of the requirements of this 
section. Each separately certified CAH subject to the system governing 
body must demonstrate that:
    (1) The unified and integrated QAPI program is established in a 
manner that takes into account each member CAH's unique circumstances 
and any significant differences in patient populations and services 
offered in each CAH; and
    (2) The unified and integrated QAPI program establishes and 
implements policies and procedures to ensure that the needs and 
concerns of each of its separately certified CAHs, regardless of 
practice or location, are given due consideration, and that the unified 
and integrated QAPI program has mechanisms in place to ensure that 
issues localized to particular CAHs are duly considered and addressed.

PART 489--PROVIDER AGREEMENTS AND SUPPLIER APPROVAL

0
50. The authority citation for part 489 continues to read as follows:

    Authority:  42 U.S.C. 1302, 1395i-3, 1395x, 1395aa(m), 1395cc, 
1395ff, and 1395hh.


0
51. Section 489.2 is amended by adding paragraph (b)(11) to read as 
follows:


Sec.  489.2  Scope of part.

* * * * *
    (b) * * *
    (11) Rural emergency hospitals (REHs).
* * * * *

0
52. Section 489.24 is amended in paragraph (b) by revising the 
definitions of ``Hospital'' and ``Participating hospital'' to read as 
follows:

[[Page 72310]]

Sec.  489.24  Special responsibilities of Medicare hospitals in 
emergency cases.

* * * * *
    Hospital includes a critical access hospital as defined in section 
1861(mm)(1) of the Act and a rural emergency hospital as defined in 
section 1861(kkk)(2).
* * * * *
    Participating hospital means:
    (i) A hospital;
    (ii) A critical access hospital as defined in section 1861(mm)(1) 
of the Act that has entered into a Medicare provider agreement under 
section 1866 of the Act; or
    (iii) A rural emergency hospital as defined in section 1861(kkk)(2) 
of the Act.
* * * * *

    Dated: October 31, 2022.
Xavier Becerra,
Secretary, Department of Health and Human Services.
[FR Doc. 2022-23918 Filed 11-3-22; 4:15 pm]
 BILLING CODE 4120-01-P