```

[Federal Register Volume 78, Number 237 (Tuesday, December 10, 2013)]
[Rules and Regulations]
[Pages 74825-75200]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28737]

[[Page 74825]]

Vol. 78

Tuesday,

No. 237

December 10, 2013

Part III

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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

Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment 
and Ambulatory Surgical Center Payment Systems and Quality Reporting 
Programs; Hospital Value-Based Purchasing Program; Organ Procurement 
Organizations; Quality Improvement Organizations; Electronic Health 
Records (EHR) Incentive Program; Provider Reimbursement Determinations 
and Appeals; Final Rule

Federal Register / Vol. 78 , No. 237 / Tuesday, December 10, 2013 / 
Rules and Regulations

[[Page 74826]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 405, 410, 412, 419, 475, 476, 486, and 495

[CMS-1601-FC]
RIN 0938-AR54

Medicare and Medicaid Programs: Hospital Outpatient Prospective 
Payment and Ambulatory Surgical Center Payment Systems and Quality 
Reporting Programs; Hospital Value-Based Purchasing Program; Organ 
Procurement Organizations; Quality Improvement Organizations; 
Electronic Health Records (EHR) Incentive Program; Provider 
Reimbursement Determinations and Appeals

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

ACTION: Final rule with comment period and 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 CY 2014 to 
implement applicable statutory requirements and changes arising from 
our continuing experience with these systems. In this final rule with 
comment period, we describe the changes to the amounts and factors used 
to determine the payment rates for Medicare services paid under the 
OPPS and those paid under the ASC payment system. In addition, this 
final rule with comment period updates and refines the requirements for 
the Hospital Outpatient Quality Reporting (OQR) Program, the ASC 
Quality Reporting (ASCQR) Program, and the Hospital Value-Based 
Purchasing (VBP) Program.
    In the final rules in this document, we are finalizing changes to 
the conditions for coverage (CfCs) for organ procurement organizations 
(OPOs); revisions to the Quality Improvement Organization (QIO) 
regulations; changes to the Medicare fee-for-service Electronic Health 
Record (EHR) Incentive Program; and changes relating to provider 
reimbursement determinations and appeals.

DATES: Effective Dates: The final rule with comment period and final 
rules in this document are effective on January 1, 2014, with the 
exception of 42 CFR 412.167; 42 CFR 486.316 and 486.318; 42 CFR 475.1 
and 475.100 through 475.107; and 42 CFR 495.4 and 495.104, which are 
effective on January 27, 2014.
    Implementation Date: The implementation date for the policies 
specified under section II.A.2.e. of the final rule with comment period 
relating to comprehensive Ambulatory Payment Classification (APC) 
groups is January 1, 2015.
    Comment Period: We will consider comments on the payment 
classification assigned to HCPCS codes identified in Addenda B, AA, and 
BB of this final rule with comment period with the ``NI'' comment 
indicator, and on other areas specified throughout this rule, received 
at one of the addresses provided in the ADDRESSES section no later than 
5 p.m. EST on January 27, 2014.
    Application Deadline--New Class of New Technology Intraocular 
Lenses: Request for review of applications for a new class of new 
technology intraocular lenses must be received by 5 p.m. EST on March 
3, 2014.

ADDRESSES: In commenting, please refer to file code CMS-1601-FC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (no duplicates, 
please):
    1. Electronically. You may (and we encourage you to) submit 
electronic comments on this regulation to http://www.regulations.gov. 
Follow the instructions under the ``submit a comment'' tab.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1601-FC, P.O. Box 8013, 
Baltimore, MD 21244-1850.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments via 
express or overnight mail to the following address only: Centers for 
Medicare & Medicaid Services, Department of Health and Human Services, 
Attention: CMS-1601-FC, Mail Stop C4-26-05, 7500 Security Boulevard, 
Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal Government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call the telephone number (410) 786-7195 in advance to schedule 
your arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    For information on viewing public comments, we refer readers to the 
beginning of the SUPPLEMENTARY INFORMATION section.
    Applications for a new class of new technology intraocular lenses: 
Requests for review of applications for a new class of new technology 
intraocular lenses must be sent by regular mail to: ASC/NTIOL, Division 
of Outpatient Care, Mailstop C4-05-17, Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: Marjorie Baldo, (401) 786-4617, for 
issues related to new CPT and Level II HCPCS codes, exceptions to the 2 
times rule, platelet rich plasma, and stereotactic radiosurgery 
services.
    Anita Bhatia, (410) 786-7236, for issues related to the Ambulatory 
Surgical Center Quality Reporting (ASCQR) Program--Program 
Administration and Reconsideration Issues.
    Chuck Braver, (410) 786-9379, for issues related to the Advisory 
Panel on Hospital Outpatient Payment (HOP Panel).
    Erick Chuang, (410) 786-1816, for issues related to OPPS APC 
weights, mean calculation, copayments, wage index, outlier payments, 
cost-to-charge ratios (CCRs), and rural hospital payments.
    Diane Corning, (410) 786-8486, for issues related to the Conditions 
for Coverage for Organ Procurement Organizations (OPOs).
    Dexter Dickey, (410) 786-6856, or Dorothy Myrick, (410) 786-9671, 
for issues related to partial hospitalization and community mental 
health center (CMHC) issues.

[[Page 74827]]

    Roxanne Dupert-Frank, (410) 786-4827, for issues related to the 
Hospital Value-Based Purchasing (VBP) Program.
    Dan Duvall, (410) 786-4592, for issues related to comprehensive 
APCs.
    Shaheen Halim, (410) 786-0641, for issues related to the Hospital 
Outpatient Quality Reporting Program (OQR)--Measures Issues and 
Publication of Hospital OQR Program Data, and Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program--Measures Issues and 
Publication of ASCQR Program Data.
    James Hart, (410) 786-9520, for issues related to the Medicare fee-
for-service Electronic Health Record (EHR) Incentive Program.
    Jeneen Iwugo, (410) 786-1028, for issues related to the revisions 
of the Quality Improvement Organization (QIO) Regulations.
    Twi Jackson, (410) 786-1159, for issues related to blood products, 
device-dependent APCs, extended assessment and management composite 
APCs, hospital outpatient visits, inpatient-only procedures, and no 
cost/full credit and partial credit devices.
    Marina Kushnirova, (410) 786-2682, for issues related to OPPS 
status indicators and comment indicators.
    Barry Levi, (410) 786-4529, for issues related to OPPS pass-through 
devices, brachytherapy sources, intraoperative radiation therapy 
(IORT), brachytherapy composite APC, multiple imaging composite APCs, 
and cardiac electrophysiologic evaluation and ablation composite APC.
    Ann Marshall, (410) 786-3059, for issues related to packaged items/
services, hospital outpatient supervision, proton beam therapy, therapy 
caps in CAHs, incident to physician or nonphysician practitioner 
services, and provider-based issues.
    Danielle Moskos, (410) 786-8866, or Michael Zleit, (410) 786-2050, 
for issues related to Provider Reimbursement Determination Appeals.
    James Poyer, (410) 786-2261, for issues related to the Hospital 
Outpatient Quality Reporting--Program Administration, Validation, and 
Reconsideration Issues.
    Char Thompson, (410) 786-2300, for issues related to OPPS drugs, 
radiopharmaceuticals, biologicals, blood clotting factors, new 
technology intraocular lenses (NTIOLs), and ambulatory surgical center 
(ASC) payments.
    Marjorie Baldo, (410) 786-4617, for all other issues related to 
hospital outpatient and ambulatory surgical center payments not 
previously identified.

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 Web site as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that Web site to view public comments.
    Comments received timely will also be available for public 
inspection, generally beginning approximately 3 weeks after publication 
of the rule, at the headquarters of the Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD 21244, on Monday 
through Friday of each week from 8:30 a.m. to 4:00 p.m. EST. To 
schedule an appointment to view public comments, phone 1-800-743-3951.

Electronic Access

    This Federal Register document is also available from the Federal 
Register online database through Federal Digital System (FDsys), a 
service of the U.S. Government Printing Office. This database can be 
accessed via the internet at http://www.gpo.gov/fdsys/.

Addenda Available Only Through the Internet on the CMS Web site

    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 Web site. The Addenda relating to the OPPS 
are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The Addenda relating to the 
ASC payment system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/index.html.

Alphabetical List of Acronyms Appearing in This Federal Register 
Document

AHA American Hospital Association
AMA American Medical Association
APC Ambulatory Payment Classification
ASC Ambulatory surgical center
ASCQR Ambulatory Surgical Center Quality Reporting
ASP Average sales price
AWP Average wholesale price
BBA Balanced Budget Act of 1997, Pub. L. 105-33
BBRA Medicare, Medicaid, and SCHIP [State Children's Health 
Insurance Program] Balanced Budget Refinement Act of 1999, Pub. L. 
106-113
BIPA Medicare, Medicaid, and SCHIP Benefits Improvement and 
Protection Act of 2000, Pub. L. 106-554
BLS Bureau of Labor Statistics
CAH Critical access hospital
CAP Competitive Acquisition Program
CASPER Certification and Survey Provider Enhanced Reporting
CAUTI Catheter associated urinary tract infection
CBSA Core-Based Statistical Area
CCI Correct Coding Initiative
CCN CMS Certification Number
CCR Cost-to-charge ratio
CDC Centers for Disease Control and Prevention
CEO Chief executive officer
CERT Comprehensive Error Rate Testing
CfC [Medicare] Condition for coverage
CFR Code of Federal Regulations
CLFS Clinical Laboratory Fee Schedule
CMHC Community mental health center
CMS Centers for Medicare & Medicaid Services
CoP [Medicare] Condition of participation
CPI-U Consumer Price Index for All Urban Consumers
CPT Current Procedural Terminology (copyrighted by the American 
Medical Association)
CQM Clinical quality measure
CR Change request
CSAC Consensus Standards Approval Committee
CY Calendar year
DFO Designated Federal Official
DRA Deficit Reduction Act of 2005, Pub. L. 109-171
DRG Diagnosis-Related Group
DSH Disproportionate share hospital
EACH Essential access community hospital
eCQM Electronically specified clinical quality measure
ECT Electroconvulsive therapy
ED Emergency department
E/M Evaluation and management
EHR Electronic health record
ESRD End-stage renal disease
FACA Federal Advisory Committee Act, Pub. L. 92-463
FDA ood and Drug Administration
FFS [Medicare] Fee-for-service
FY Fiscal year
FFY Federal fiscal year
GAO Government Accountability Office
HAI Healthcare-associated infection
HCERA Health Care and Education Reconciliation Act of 2010, Pub. L. 
111-152
HCPCS Healthcare Common Procedure Coding System
HCRIS Hospital Cost Report Information System
HEU Highly enriched uranium

[[Page 74828]]

HIPAA Health Insurance Portability and Accountability Act of 1996, 
Pub. L. 104-191
HITECH Health Information Technology for Economic and Clinical 
Health [Act] (found in the American Recovery and Reinvestment Act of 
2009, Pub. L. 111-5)
HOP Hospital Outpatient Payment [Panel]
HOPD Hospital outpatient department
ICD-9-CM International Classification of Diseases, Ninth Revision, 
Clinical Modification
ICD Implantable cardioverter defibrillator
ICU Intensive care unit
IHS Indian Health Service
IMRT Intensity Modulated Radiation Therapy
I/OCE Integrated Outpatient Code Editor
IOL Intraocular lens
IOM Institute of Medicine
IORT Intraoperative radiation treatment
IPPS [Hospital] Inpatient Prospective Payment System
IQR [Hospital] Inpatient Quality Reporting
LDR Low dose rate
LOS Length of Stay
LTCH Long-term care hospital
MAC Medicare Administrative Contractor
MAP Measure Application Partnership
MedPAC Medicare Payment Advisory Commission
MEI Medicare Economic Index
MFP Multifactor productivity
MGCRB Medicare Geographic Classification Review Board
MIEA-TRHCA Medicare Improvements and Extension Act under Division B, 
Title I of the Tax Relief Health Care Act of 2006, Pub. L. 109-432
MIPPA Medicare Improvements for Patients and Providers Act of 2008, 
Pub. L. 110-275
MMA Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003, Pub. L. 108-173
MMEA Medicare and Medicaid Extenders Act of 2010, Pub. L. 111-309
MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007, Pub. L. 
110-173
MPFS Medicare Physician Fee Schedule
MRA Magnetic resonance angiography
MRI Magnetic resonance imaging
MSA Metropolitan Statistical Area
NCCI National Correct Coding Initiative
NHSN National Healthcare Safety Network
NQF National Quality Forum
NTIOL New technology intraocular lens
NUBC National Uniform Billing Committee
OACT [CMS] Office of the Actuary
OBRA Omnibus Budget Reconciliation Act of 1996, Pub. L. 99-509
OIG [HHS] Office of the Inspector General
OMB Office of Management and Budget
OPD [Hospital] Outpatient Department
OPO Organ Procurement Organization
OPPS [Hospital] Outpatient Prospective Payment System
OPSF Outpatient Provider-Specific File
OQR [Hospital] Outpatient Quality Reporting
OT Occupational therapy
PBD Provider-Based Department
PCR Payment-to-cost ratio
PE Practice expense
PEPPER Program for Evaluating Payment Patterns Electronic Report
PHP Partial hospitalization program
PHS Public Health Service [Act], Pub. L. 96-88
PPI Producer Price Index
PPS Prospective payment system
PQRS Physician Quality Reporting System
PT Physical therapy
QDC Quality data code
QIO Quality Improvement Organization
RFA Regulatory Flexibility Act
RTI Research Triangle Institute, International
RVU Relative value unit
SCH Sole community hospital
SCOD Specified covered outpatient drugs
SI Status indicator
SIR Standardized infection ratio
SLP Speech-language pathology
SNF Skilled Nursing Facility
SRS Stereotactic Radiosurgery
TEP Technical Expert Panel
TMS Transcranial Magnetic Stimulation Therapy
TOPs Transitional Outpatient Payments
UR Utilization review
USPSTF United States Preventive Services Task Force
UTI Urinary tract infection
VBP Value-based purchasing
WAC Wholesale acquisition cost

Table of Contents

I. Summary and Background
    A. Executive Summary of This Document
    1. Purpose
    2. Summary of the Major Provisions
    3. Summary of Costs and Benefits
    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), Formerly Named the Advisory Panel on Ambulatory 
Payment Classification Groups (APC Panel)
    1. Authority of the Panel
    2. Establishment of the Panel
    3. Panel Meetings and Organizational Structure
    F. Public Comments Received in Response to the CY 2014 OPPS/ASC 
Proposed Rule
    G. Public Comments Received on the CY 2013 OPPS/ASC Final Rule 
with Comment Period
II. Updates Affecting OPPS Payments
    A. Recalibration of APC Relative Payment Weights
    1. Database Construction
    a. Database Source and Methodology
    b. Use of Single and Multiple Procedure Claims
    c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    a. Claims Preparation
    b. Splitting Claims and Creation of ``Pseudo'' Single Procedure 
Claims
    (1) Splitting Claims
    (2) Creation of ``Pseudo'' Single Procedure Claims
    c. Completion of Claim Records and Geometric Mean Cost 
Calculations
    (1) General Process
    (2) Recommendations of the Panel Regarding Data Development
    d. Calculation of Single Procedure APC Criteria-Based Costs
    (1) Device-Dependent APCs
    (2) Blood and Blood Products
    (3) Brachytherapy Source Payment
    e. Establishment of Comprehensive APCs
    (1) Definitions and General Principles
    (2) Comprehensive APCs for Device-Dependent Services
    f. Calculation of Composite APC Criteria-Based Costs
    (1) Extended Assessment and Management Composite APCs (APCs 8002 
and 8003)
    (2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC 
(APC 8001)
    (3) Cardiac Electrophysiologic Evaluation and Ablation Composite 
APC (APC 8000)
    (4) Mental Health Services Composite APC (APC 0034)
    (5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 
8007, and 8008)
    (6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
    3. Changes to Packaged Items and Services
    a. Summary of CY 2014 Final Packaging Policies
    b. Background
    c. Basis for New Packaging Policies for CY 2014
    d. New Packaging Policies for CY 2014
    (1) Drugs, Biologicals, and Radiopharmaceuticals That Function 
as Supplies When Used in a Diagnostic Test or Procedure
    (2) Drugs and Biologicals That Function as Supplies When Used in 
a Surgical Procedure
    (3) Clinical Diagnostic Laboratory Tests
    (4) Procedures Described by Add-On Codes
    (5) Ancillary Services (Status Indicator ``X'')
    (6) Diagnostic Tests on the Bypass List
    (7) Device Removal Procedures
    e. Clarification Regarding Supplies That Are Packaged in the 
OPPS
    f. Revision and Clarification of the Regulations at 42 CFR 
419.2(b) and 42 CFR 419.22
    g. Comment Solicitation on Increased Packaging for Imaging 
Services
    4. Calculation of OPPS Scaled Payment Weights
    B. Conversion Factor Update
    C. Wage Index Changes
    D. Statewide Average Default CCRs
    E. Adjustment for Rural SCHs and EACHs under Section 
1833(t)(13)(B) of the Act
    F. OPPS Payment to Certain Cancer Hospitals Described by Section 
1886(d)(1)(B)(v) of the Act
    1. Background
    2. Payment Adjustment for Certain Cancer Hospitals for CY 2014
    G. Hospital Outpatient Outlier Payments
    1. Background
    2. Proposed Outlier Calculation
    3. Final Outlier Calculation
    H. Calculation of an Adjusted Medicare Payment from the National 
Unadjusted Medicare Payment
    I. Beneficiary Copayments
    1. Background
    2. OPPS Copayment Policy
    3. Calculation of an Adjusted Copayment Amount for an APC Group

[[Page 74829]]

III. OPPS Ambulatory Payment Classification (APC) Group Policies
    A. OPPS Treatment of New CPT and Level II HCPCS Codes
    1. Treatment of New CY 2013 Level II HCPCS and CPT Codes 
Effective April 1, 2013 and July 1, 2013 for Which We Solicited 
Public Comments in the CY 2014 OPPS/ASC Proposed Rule
    2. Process for New Level II HCPCS Codes That Will Be Effective 
October 1, 2013 and New CPT and Level II HCPCS Codes That Will Be 
Effective January 1, 2014 for Which We Are Soliciting Public 
Comments in this CY 2014 OPPS/ASC Final Rule with Comment Period
    B. OPPS Changes--Variations within APCs
    1. Background
    2. Application of the 2 Times Rule
    3. Exceptions to the 2 Times Rule
    C. OPPS APC-Specific Policies
    1. Cardiovascular and Vascular Services
    a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)
    b. Subcutaneous Defibrillator (APC 0107)
    c. Thrombolytic Therapy (APC 0621)
    d. Vascular Ligation (APCs 0091 and 0092)
    2. Gastrointestinal Services
    a. Fecal Microbiota Transplantation (APC 0340)
    b. Transoral Incisionless Fundoplication (APC 0422)
    3. Genitourinary Services
    a. Percutaneous Renal Cryoablation (APC 0423)
    b. Anoscopy with Directed Submucosal Injection (APC 0150)
    4. Musculoskeletal Services
    a. Arthroplasty (APC 0425)
    b. Joint Stabilization (APC 0052)
    5. Nervous System Services
    a. Chemodenervation (APCs 0161 and 0204)
    b. Nerve Conduction Studies (APCs 0216 and 0218)
    c. Parasympathetic Function and Sympathetic Function (APC 0215)
    d. Epidural Lysis (APCs 0203 and 0207)
    e. Cerebrospinal Shunt Reprogramming (APC 0692)
    6. Ocular Services
    a. Retinal Prosthesis (APC 0672)
    b. Tear Film (APC 0230)
    7. Imaging
    a. Myocardial Sympathetic Innervation Imaging (APC 0398)
    b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)
    8. Radiology Oncology
    a. Intraoperative Radiation Therapy (IORT) Related Services 
(APCs 0028 and 0065)
    b. Proton Beam Therapy (APCs 0664 and 0667)
    c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)
    9. Respiratory Services
    a. Bronchial Thermoplasty (APC 0415)
    b. Direct Laryngoscopy (APC 0074)
    c. Pulmonary Rehabilitation Services (APC 0077)
    10. Other Services
    a. Balloon Sinus Dilation (APCs 0074 and 0075)
    b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)
    c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)
    d. Flow Cytometry (APC 0443)
    e. Hormone Pellet Implant (APC 0420)
    f. Peyronie Disease Injection Procedure (APC 0164)
    g. Negative Pressure Wound Therapy (NPWT) (APC 0016)
    h. Platelet Rich Plasma (PRP) (APC 0186)
    i. Payment for Radioisotopes Derived From Non-Highly Enriched 
Uranium (HEU) Sources (APC 1442)
IV. OPPS Payment for Devices
    A. Pass-Through Payments for Devices
    1. Expiration of Transitional Pass-Through Payments for Certain 
Devices
    a. Background
    b. CY 2014 Policy
    2. Provisions for Reducing Transitional Pass-Through Payments to 
Offset Costs Packaged into APC Groups
    a. Background
    b. CY 2014 Policy
    3. Changes to Device Pass-Through Criteria: Integral and 
Subordinate Criterion
    B. Adjustment to OPPS Payment for No Cost/Full Credit and 
Partial Credit Devices
    1. Background
    2. Policy for CY 2014
V. OPPS Payment Changes for Drugs, Biologicals, and 
Radiopharmaceuticals
    A. OPPS Transitional Pass-Through Payment for Additional Costs 
of Drugs, Biologicals, and Radiopharmaceuticals
    1. Background
    2. Drugs and Biologicals with Expiring Pass-Through Status in CY 
2013
    3. Drugs, Biologicals, and Radiopharmaceuticals with New or 
Continuing Pass-Through Status in CY 2014
    4. Provisions for Reducing Transitional Pass-Through Payments 
for 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 to 
Offset Costs Packaged into APC Groups
    a. Background
    b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    c. Payment Offset Policy for Contrast Agents
    d. Payment Offset Policy for Products Packaged According to the 
Policy to Package 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
    B. OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals 
without Pass-Through Status
    1. Background
    2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
    a. Background
    b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    c. Packaging Determination for HCPCS Codes That Describe the 
Same Drug or Biological But Different Dosages
    3. 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 and Packaged Drugs and Biologicals
    b. CY 2014 Payment Policy
    4. Payment Policy for Therapeutic Radiopharmaceuticals
    5. Payment for Blood Clotting Factors
    6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals with HCPCS Codes but without OPPS Hospital 
Claims Data
    C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits
VI. Estimate of OPPS Transitional Pass-Through Spending for Drugs, 
Biologicals, Radiopharmaceuticals, and Devices
    A. Background
    B. Estimate of Pass-Through Spending
VII. OPPS Payment for Hospital Outpatient Visits
    A. Background
    B. Payment for Hospital Outpatient Clinic and Emergency 
Department Visits
    C. Payment for Critical Care Services
VIII. Payment for Partial Hospitalization Services
    A. Background
    B. PHP APC Update for CY 2014
    C. Discussion of Possible Future Initiatives, Request for Public 
Comments, and Summary of Public Comments Received
    D. Separate Threshold for Outlier Payments to CMHCs
IX. Procedures That Will Be Paid Only as Inpatient Procedures
    A. Background
    B. Changes to the Inpatient List
X. Nonrecurring Policy Changes
    A. Supervision of Hospital Outpatient Therapeutic Services
    1. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
    2. Supervision Requirements for Observation Services
    B. Application of Therapy Caps in CAHs
    C. Requirements for Payment of Outpatient Therapeutic 
(``Incident to'') Hospital or CAH Services
    1. Overview
    2. Background
    3. Proposed and Final Policy
    4. Technical Correction
    D. Collecting Data on Services Furnished in Off-Campus Provider-
Based Departments
XI. CY 2014 OPPS Payment Status and Comment Indicators
    A. CY 2014 OPPS Payment Status Indicator Definitions
    B. CY 2014 Comment Indicator Definitions
XII. Updates to the Ambulatory Surgical Center (ASC) Payment System
    A. Background
    1. Legislative History, Statutory Authority, and Prior 
Rulemaking for the ASC Payment System
    2. Policies Governing Changes to the Lists of Codes and Payment 
Rates for ASC

[[Page 74830]]

Covered Surgical Procedures and Covered Ancillary Services
    B. Treatment of New Codes
    1. Process for Recognizing New Category I and Category III CPT 
Codes and Level II HCPCS Codes
    2. Treatment of New Level II HCPCS Codes and Category III CPT 
Codes Implemented in April 2013 and July 2013 for Which We Solicited 
Public Comments in the CY 2014 OPPS/ASC Proposed Rule
    3. Process for New Level II HCPCS Codes and Category I and 
Category III CPT Codes for Which We Are Soliciting Public Comments 
in This CY 2014 OPPS/ASC Final Rule with Comment Period
    C. Update to the Lists of ASC Covered Surgical Procedures and 
Covered Ancillary Services
    1. Covered Surgical Procedures
    a. Additions to the List of ASC Covered Surgical Procedures
    b. Covered Surgical Procedures Designated as Office-Based
    (1) Background
    (2) Changes for CY 2014 to Covered Surgical Procedures 
Designated as Office-Based
    c. ASC Covered Surgical Procedures Designated as Device-
Intensive
    (1) Background
    (2) Changes to List of Covered ASC Surgical Procedures 
Designated as Device-Intensive for CY 2014
    d. Adjustment to ASC Payments for No Cost/Full Credit and 
Partial Credit Devices
    e. ASC Treatment of Surgical Procedures Removed from the OPPS 
Inpatient List for CY 2014
    2. Covered Ancillary Services
    D. ASC Payment for Covered Surgical Procedures and Covered 
Ancillary Services
    1. ASC Payment for Covered Surgical Procedures
    a. Background
    b. Update to ASC Covered Surgical Procedure Payment Rates for CY 
2014
    c. Waiver of Coinsurance and Deductible for Certain Preventive 
Services
    d. Payment for Cardiac Resynchronization Therapy Services
    e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy 
Composite
    2. Payment for Covered Ancillary Services
    a. Background
    b. Payment for Covered Ancillary Services for CY 2014
    E. New Technology Intraocular Lenses (NTIOLs)
    1. NTIOL Application Cycle
    2. Requests to Establish New NTIOL Classes for CY 2015
    3. Payment Adjustment
    4. Announcement of CY 2014 Deadline for Submitting Requests for 
CMS Review of Applications for a New Class of NTIOLs
    F. ASC Payment and Comment Indicators
    1. Background
    2. ASC Payment and Comment Indicators
    G. Calculation of the ASC Conversion Factor and the ASC Payment 
Rates
    1. Background
    2. Calculation of the ASC Payment Rates
    a. Updating the ASC Relative Payment Weights for CY 2014 and 
Future Years
    b. Updating the ASC Conversion Factor
    3. Display of CY 2014 ASC Payment Rates
XIII. Hospital Outpatient Quality Reporting Program Updates
    A. Background
    1. Overview
    2. Statutory History of the Hospital Outpatient Quality 
Reporting (Hospital OQR) Program
    3. Measure Updates and Data Publication
    a. Process for Updating Quality Measures
    b. Publication of Hospital OQR Program Data
    B. Process for Retention of Hospital OQR Program Measures 
Adopted in Previous Payment Determinations
    C. Removal or Suspension of Quality Measures from the Hospital 
OQR Program Measure Set
    1. Considerations in Removing Quality Measures from the Hospital 
OQR Program
    2. Removal of Two Chart-Abstracted Measures from the Hospital 
OQR Program
    a. Removal of OP-19: Transition Record with Specified Elements 
Received by Discharged ED Patients
    b. Removal of OP-24: Cardiac Rehabilitation Measure: Patient 
Referral from an Outpatient Setting
    D. Quality Measures Previously Adopted for the CY 2014 and CY 
2015 Payment Determinations and Subsequent Years
    E. Quality Measures for the CY 2016 Payment Determination and 
Subsequent Years
    1. Influenza Vaccination Coverage Among Healthcare Personnel 
(NQF 0431)
    2. Complications Within 30 Days Following Cataract Surgery 
Requiring Additional Surgical Procedures (NQF 0564)
    3. Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval 
for Normal Colonoscopy in Average Risk Patients (NQF 0658)
    4. Endoscopy/Polyp Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659)
    5. Cataracts--Improvement in Patient's Visual Function Within 90 
Days Following Cataract Surgery (NQF 1536)
    F. Possible Hospital OQR Program Measure Topics for Future 
Consideration
    G. Payment Reduction for Hospitals That Fail to Meet the 
Hospital OQR Program Requirements for the CY 2014 Payment Update
    1. Background
    2. Reporting Ratio Application and Associated Adjustment Policy 
for CY 2014
    H. Requirements for Reporting of Hospital OQR Data for the CY 
2015 Payment Determination and Subsequent Years
    1. Administrative Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    2. Form, Manner, and Timing of Data Submitted for the Hospital 
OQR Program
    a. Background
    b. Effects of Changes on Data Submission for CY 2015 and CY 2016 
Payment Determinations and Subsequent Years
    c. General Requirements
    d. Chart-Abstracted Measure Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    e. Claims-Based Measure Data Requirements for the CY 2015 
Payment Determination and Subsequent Years
    f. Data Submission Requirements for Measure Data Submitted via 
Web-Based Tool for the CY 2016 Payment Determination and Subsequent 
Years
    g. Data Submission Requirements for a Measure Reported via NHSN 
for the CY 2016 Payment Determination and Subsequent Years
    h. Population and Sampling Data Requirements for the CY 2015 
Payment Determination and Subsequent Years
    3. Hospital OQR Program Validation Requirements for Chart-
Abstracted Measure Data Submitted Directly to CMS for the CY 2015 
Payment Determination and Subsequent Years
    a. Selection of Hospitals for Data Validation of Chart-
Abstracted Measures for the CY 2015 Payment Determination and 
Subsequent Years
    b. Targeting Criteria for Data Validation Selection for the CY 
2015 Payment Determination and Subsequent Years
    c. Methodology for Encounter Selection for the CY 2015 Payment 
Determination and Subsequent Years
    d. Medical Record Documentation Requests for Validation and 
Validation Score Calculation for the CY 2015 Payment Determination 
and Subsequent Years
    I. Hospital OQR Reconsideration and Appeals Procedures for the 
CY 2015 Payment Determination and Subsequent Years
    J. Extraordinary Circumstances Extension or Waiver for the CY 
2014 Payment Determination and Subsequent Years
XIV. Hospital Value-Based Purchasing (VBP) Program Updates
    A. Background
    B. Additional CMS Appeals Review Process
    1. Statutory Basis
    2. Independent CMS Review
    C. Performance and Baseline Periods for Certain Outcome Measures 
for the FY 2016 Hospital VBP Program
XV. Requirements for the Ambulatory Surgical Centers Quality 
Reporting (ASCQR) Program
    A. Background
    1. Overview
    2. Statutory History of the ASC Quality Reporting (ASCQR) 
Program
    3. Regulatory History of the ASCQR Program
    B. ASCQR Program Quality Measures
    1. Considerations in the Selection of ASCQR Program Quality 
Measures
    2. ASCQR Program Quality Measures Adopted in Previous Rulemaking
    3. Additional ASCQR Program Quality Measures for the CY 2016 
Payment Determination and Subsequent Years

[[Page 74831]]

    a. Complications Within 30 Days Following Cataract Surgery 
Requiring Additional Surgical Procedures
    b. Endoscopy/Polyp Surveillance: Appropriate Follow-Up for 
Normal Colonoscopy in Average Risk Patients (NQR 0658)
    c. Endoscopy/Polyp Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659)
    d. Cataracts: Improvement in Patient's Visual Function within 90 
Days Following Cataract Surgery (NQF 1536)
    4. ASCQR Program Measure Topics for Future Consideration
    5. Technical Specification Updates and Data Publication
    C. Payment Reduction for ASCs That Fail to Meet the ASCQR 
Program Requirements
    1. Statutory Background
    2. Reduction to the ASC Payment Rates for ASCs That Fail to Meet 
the ASCQR Program Requirements for Each Payment Determination Year
    D. Administrative Requirements
    1. Requirements Regarding QualityNet Account and Security 
Administrator
    a. Background for the CY 2014 and CY 2015 Payment Determinations
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    2. Requirements Regarding Participation Status
    a. Background for the CY 2014 Payment Determination and 
Subsequent Years
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    3. Requirements Regarding Data Processing and Collection Periods 
for Claims-Based Measures for the CY 2014 Payment Determination and 
Subsequent Years
    4. Minimum Threshold, Minimum Case Volume, and Data Completeness 
for Claims-Based Measures Using QDCs
    a. Background for the CY 2014 Payment Determination and 
Subsequent Years
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years
    5. Requirements for Data Submitted Via a CMS Online Data 
Submission Tool
    a. Background for the CY 2015 Payment Determination and 
Subsequent Years
    b. Requirements for the CY 2016 Payment Determination and 
Subsequent Years for Measures Currently Finalized
    c. Requirements for the CY 2016 Payment Determination and 
Subsequent Years for New Measures with Data Submission Via a CMS 
Web-Based Tool
    6. Data Submission Requirements for a Measure Reported Via the 
National Healthcare Safety Network (NHSN) for the CY 2016 Payment 
Determination
    a. Background for the CY 2016 Payment Determination
    b. Requirements for the CY 2016 Payment Determination
    7. ASCQR Program Validation of Claims-Based and CMS Web-Based 
Measures
    8. Extraordinary Circumstances Extensions or Waivers for the CY 
2014 Payment Determination and Subsequent Years
    a. Background
    b. Additional Criterion for Extraordinary Circumstance Waiver or 
Extension for CY 2014 and Subsequent Years
    9. ASCQR Program Reconsideration Procedures for the CY 2014 
Payment Determination and Subsequent Years
XVI. Final Rule: Changes to the Conditions for Coverage (CfCs) for 
Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G)
    A. Background
    B. Regulatory Changes
XVII. Final Rule: Revisions of the Quality Improvement Organization 
(QIO) Regulations
    A. Legislative History
    B. Basis for Proposals and Finalized Policies
    C. Changes to the Nomenclature and Regulations under 42 CFR 
Parts 475 and 476
    1. Nomenclature Changes
    2. Addition and Revision of Definitions
    3. Scope and Applicability of Subpart C of Part 475
    4. Eligibility Requirements for QIOs (Sec. Sec.  475.101 through 
475.106)
    a. Eligibility to be Awarded a QIO Contract (Sec.  475.101)
    b. Eligibility Requirements for QIOs to Perform Case Reviews and 
Quality Improvement Initiatives (Sec.  475.102 and Sec.  475.103)
    c. Prohibitions on Eligibility as a QIO (Sec. Sec.  475.105 and 
475.106)
    5. QIO Contract Awards (Sec.  475.107)
XVIII. Final Rule: Medicare Fee-for-Service Electronic Health Record 
(EHR) Incentive Program
    A. Incentive Payments for Eligible Professionals (EPs) 
Reassigning Benefits to Method II CAHs
    1. Background for Definition of EPs and EHR Incentive Payments 
to EPs
    2. Special Circumstances of EPs Reassigning Benefits to Method 
II CAHs
    B. Cost Reporting Periods for Interim and Final EHR Incentive 
Payments to Hospitals
    1. Background
    2. Special Circumstances
XIX. Medicare Program: Provider Reimbursement Determinations and 
Appeals: Final Rule
    A. Matters Not Subject to Administrative or Judicial Review 
(Sec.  405.1804)
    1. Background
    2. Technical Conforming Change
    B. Clarification of Reopening of Predicate Facts in Intermediary 
Determinations of Provider Reimbursement (Sec.  405.1885)
XX. Files Available to the Public Via the Internet
XXI. Collection of Information Requirements
    A. Legislative Requirements for Solicitation of Comments
    B. Requirements in Regulation Text
    1. Changes to the Outcome Measure Requirement for OPOs
    2. Changes to the Medicare Fee-for-Service EHR Incentive Program
    C. Associated Information Collections Not Specified in 
Regulatory Text
    1. Hospital OQR Program
    a. Hospital OQR Program Requirements for the CY 2015 Payment 
Determinations and subsequent Years
    b. Chart-Abstracted Measures for the CY 2016 Payment 
Determination and Subsequent Years
    c. Web-Based Measures Submitted Directly to CMS for the CY 2016 
Payment Determination and Subsequent Years
    d. NHSN HAI Measure for the CY 2016 Payment Determination and 
Subsequent Years
    e. Hospital OQR Program Validation Requirements for the CY 2015 
Payment Determination and Subsequent Years
    f. Hospital OQR Program Reconsideration and Appeals Procedures
    2. ASCQR Program Requirements
    a. Claims-Based Measures for the CY 2014 Payment Determination
    b. Claims-Based and Web-Based Measures for the CY 2015 and CY 
2016 Payment Determinations
    c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstance and Extension or Waiver Requests; 
Reconsideration Requests
    3. Hospital VBP Program Requirements
XXII. Response to Comments
XXIII. Economic Analyses
    A. Regulatory Impact Analysis
    1. Introduction
    2. Statement of Need
    3. Overall Impacts for the OPPS and ASC Payment Provisions
    4. Detailed Economic Analyses
    a. Estimated Effects of Final OPPS Changes in This Final Rule 
With Comment Period
    (1) Limitations of Our Analysis
    (2) Estimated Effects of OPPS Changes on Hospitals
    (3) Estimated Effects of OPPS Changes on CMHCs
    (4) Estimated Effect of OPPS Changes on Beneficiaries
    (5) Estimated Effects of OPPS Changes on Other Providers
    (6) Estimated Effects of OPPS Changes on the Medicare and 
Medicaid Programs
    (7) Alternative OPPS Policies Considered
    b. Estimated Effects of CY2014 ASC Payment System Final Policies
    (1) Limitations of Our Analysis
    (2) Estimated Effects of CY2014ASC Payment System Final Policies 
on ASCs
    (3) Estimated Effects of ASC Payment System Final Policies on 
Beneficiaries
    (4) Alternative ASC Payment Policies Considered
    c. Accounting Statements and Tables
    d. Effects of Requirements for the Hospital OQR Program
    e. Effects of CY2014 Policies for the ASCQR Program
    f. Effects of Changes to the CfCs for OPOs Relating to the 
Outcome Measure Requirement for Recertification
    g. Effects of Revisions of the QIO Regulations
    h. Effects of Revised Policies Regarding Medicare Fee-for-
Service EHR Incentive Program
    B. Regulatory Flexibility Act (RFA) Analysis
    C. Unfunded Mandates Reform Act Analysis
    D. Conclusion
XXIV. Federalism Analysis
XXV. Waiver of 60-Day Delay of Effective Date

[[Page 74832]]

Regulation Text

I. Summary and Background

A. Executive Summary of This Document

1. Purpose
    In the final rule with comment period of this document, we are 
updating the payment policies and payment rates for services furnished 
to Medicare beneficiaries in hospital outpatient departments and 
Ambulatory Surgical Centers (ASCs) beginning January 1, 2014. Section 
1833(t) of the Social Security Act (the Act) requires us to annually 
review and update the relative payment weights and the conversion 
factor for services payable under the Outpatient Prospective Payment 
System (OPPS). Under section 1833(i) of the Act, we annually review and 
update the ASC payment rates. We describe these and various other 
statutory authorities in the relevant sections of this final rule with 
comment period. In addition, the final rule with comment period updates 
and refines the requirements for the Hospital Outpatient Quality 
Reporting (OQR) Program, the ASC Quality Reporting (ASCQR) Program, and 
the Hospital Value-Based Purchasing (VBP) Program.
    In the final rules in this document, we are finalizing changes to 
the conditions for coverage (CfCs) for organ procurement organizations 
(OPOs); revisions to the Quality Improvement Organization (QIO) 
regulations; changes to the Medicare fee-for-service Electronic Health 
Record (EHR) Incentive Program; and changes relating to provider 
reimbursement determinations and appeals.
    After publication of our annual proposed rule for CY 2014, we 
discovered that in applying our established and proposed methodologies 
to develop the CY 2014 proposed OPPS and ASC payment rates, specific 
cost estimation errors occurred in the OPPS modeling process. The 
errors resulting from the cost modeling used to develop the CY 2014 
proposed OPPS payment rates were isolated to a few specific ambulatory 
payment classifications (APCs). However, because the OPPS is a budget 
neutral payment system, there was a resulting impact on other proposed 
OPPS payment rates. In addition, because the ASC payment rates are 
based on the OPPS relative payment weights for the majority of items 
and services that are provided at ASCs, corrections to the proposed CY 
2014 OPPS relative payment weights also had an impact on the proposed 
CY 2014 ASC relative payment weights and ASC payment rates. Therefore, 
we released corrected data files on August 28, 2013, and extended the 
comment period to September 16, 2013, on the technical corrections 
noted in the correcting document published in the Federal Register on 
September 6, 2013 (78 FR 54842). This final rule with comment period 
refers to the corrected OPPS and ASC information.
2. Summary of the Major Provisions
     OPPS Update: For CY 2014, we are increasing the 
payment rates under the OPPS by an Outpatient Department (OPD) fee 
schedule increase factor of 1.7 percent. This increase is based on the 
final hospital inpatient market basket percentage increase of 2.5 
percent for inpatient services paid under the hospital inpatient 
prospective payment system (IPPS), minus the multifactor productivity 
(MFP) adjustment of 0.5 percentage points, and minus a 0.3 percentage 
point adjustment required by the Affordable Care Act. Under this final 
rule with comment period, we estimate that total payments for CY 2014, 
including beneficiary cost-sharing, to the approximately 4,100 
facilities paid under the OPPS (including general acute care hospitals, 
children's hospitals, cancer hospitals, and community mental health 
centers (CMHCs)), will be approximately $50.4 billion, an increase of 
approximately $4.372 billion compared to CY 2013 payments, or $600 
million excluding our estimated changes in enrollment, utilization, and 
case-mix.
    We are continuing to implement the statutory 2.0 percentage point 
reduction in payments for hospitals failing to meet the hospital 
outpatient quality reporting requirements, by applying a reporting 
factor of 0.980 to the OPPS payments and copayments for all applicable 
services.
     Rural Adjustment: We are continuing the adjustment of 7.1 
percent to the OPPS payments to certain rural sole community hospitals 
(SCHs), including essential access community hospitals (EACHs). This 
adjustment will apply to all services paid under the OPPS, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to cost.
     Cancer Hospital Payment Adjustment: For CY 2014, we are 
continuing our policy to provide additional payments to cancer 
hospitals so that the hospital's payment-to-cost ratio (PCR) with the 
payment adjustment is equal to the weighted average PCR for the other 
OPPS hospitals using the most recent submitted or settled cost report 
data. Based on those data, a target PCR of 0.89 will be used to 
determine the CY 2014 cancer hospital payment adjustment to be paid at 
cost report settlement. That is, the payment amount associated with the 
cancer hospital payment adjustment will be the additional payment 
needed to result in a PCR equal to 0.89 for each cancer hospital.
     Payment of Drugs, Biologicals, and Radiopharmaceuticals: 
For CY 2014, payment for the acquisition and pharmacy overhead costs of 
separately payable drugs and biologicals that do not have pass-through 
status will be set at the statutory default of average sales price 
(ASP) plus 6 percent.
     Packaging Policies: Beginning in CY 2014, we are 
unconditionally or conditionally packaging the following five 
categories of items and services and adding them to the list of OPPS 
packaged items and services in 42 CFR 419.2(b):
    (1) Drugs, biologicals, and radiopharmaceuticals used in a 
diagnostic test or procedure;
    (2) Drugs and biologicals when used as supplies in a surgical 
procedure;
    (3) Certain clinical diagnostic laboratory tests;
    (4) Procedures described by add-on codes; and
    (5) Device removal procedures.
    Further details are provided in section II.A.3. of this document.
     Establishing Comprehensive APCs: In order to improve the 
accuracy and transparency of our payment for certain device-dependent 
services, we are finalizing our policy to establish 29 comprehensive 
APCs to prospectively pay for the most costly hospital outpatient 
device-dependent services, but we are delaying implementation of this 
policy until CY 2015. We have defined a comprehensive APC as a 
classification for the provision of a primary service and all adjunct 
services provided to support the delivery of the primary service. For 
services that trigger a comprehensive APC payment, the comprehensive 
APC will treat all individually reported codes on the claim as 
representing components of the comprehensive service, resulting in a 
single prospective payment based on the cost of all individually 
reported codes on the claim. We will make a single payment for the 
comprehensive service based on all charges on the claim, excluding only 
charges for services that cannot be covered by Medicare Part B or that 
are not payable under the OPPS. We also have modified our methodology 
to make larger payments for many complex and costly multiple device 
procedures. Due to our decision to delay

[[Page 74833]]

implementation until CY 2015 for operational reasons, we are inviting 
comment on this section of the final rule. We have published tables in 
the rule to demonstrate how this policy would have been implemented in 
CY 2014, and we will be considering comments as we update the policy 
for CY 2015 to account for changes that may occur in the CY 2013 claims 
data.
     Payment of Hospital Outpatient Visits: For CY 2014, we are 
finalizing our proposal to replace the current five levels of visit 
codes for each clinic visit with a new alphanumeric Level II HCPCS code 
representing a single level of payment for clinic visits. We are 
finalizing our proposal to assign the new alphanumeric Level II HCPCS 
to newly created APC 0634 with CY 2014 OPPS payment rates based on the 
total mean costs of Level 1 through Level 5 clinic visit codes obtained 
from CY 2012 OPPS claims data. For CY 2014, we are not finalizing our 
proposal to replace the current five levels of visit codes for each 
Type A ED, and Type B ED visits with two new alphanumeric Level II 
HCPCS codes representing a single level of payment for two types of ED 
visits, respectively.
     OPPS Nonrecurring Policy Changes: The enforcement 
instruction for the supervision of outpatient therapeutic services 
furnished in CAHs and small rural hospitals will expire at the end of 
CY 2013. In addition, we are amending the conditions of payment for 
``incident to'' hospital or CAH outpatient services (sometimes referred 
to as hospital or CAH ``therapeutic'' services) to explicitly require 
that individuals furnishing these services be in compliance with State 
law. In the CY 2014 OPPS/ASC proposed rule, we solicited public 
comments regarding a potential new claims or other data element that 
would indicate that the services were furnished in an off-campus 
provider-based department, which we discuss in this final rule with 
comment period. Finally, we refer readers to the CY 2014 Medicare 
Physician Fee Schedule (MPFS) final rule (CMS-1600-F) to review 
Medicare's policies on application of the therapy caps and related 
provisions under section 1833(g) of the Act to physical therapy (PT), 
speech-language pathology (SLP) and occupational therapy (OT) 
(``therapy'') services that are furnished by a CAH, effective January 
1, 2014.
     Ambulatory Surgical Center Payment Update: For CY 2014, we 
are increasing payment rates under the ASC payment system by 1.2 
percent. This increase is based on a projected CPI-U update of 1.7 
percent minus a multifactor productivity adjustment required by the 
Affordable Care Act that is projected to be 0.5 percent. 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 2014 will be approximately $3.992 billion, an increase 
of approximately $143 million compared to estimated CY 2013 payments.
     Hospital Outpatient Quality Reporting (OQR) Program: For 
the Hospital OQR Program, we are adopting four new quality measures for 
the CY 2016 payment determination and subsequent years: Three where 
aggregate data (numerators, denominators, and exclusions) are collected 
and data submitted via an online Web-based tool located on a CMS Web 
page and one HAI measure submitted through the CDC's NHSN. We also are 
removing two measures and are codifying administrative procedures.
     Ambulatory Surgical Center Quality Reporting (ASCQR) 
Program: For the ASCQR Program, we are adopting three new quality 
measures for the CY 2016 payment determination and subsequent years 
where data collection will begin in CY 2014. We are collecting 
aggregate data (numerators, denominators, and exclusions) on all ASC 
patients for these four chart-abstracted measures via an online Web-
based tool located on a CMS Web page. We also are adopting, for the CY 
2016 payment determination and subsequent years' payment 
determinations, requirements for a QualityNet account and security 
administrator, facility participation, a minimum threshold and minimum 
volume for claims-based measures, and data collection and submission 
for new measures and for certain previously finalized measures.
     Changes to Organ Procurement Organization (OPO) 
Regulations. In section XVI. of this document, we are finalizing our 
proposals to modify the current requirement that OPOs meet all three 
outcome measures set forth in 42 CFR 486.318. Specifically, the final 
rule provides that an OPO must meet two out of the three outcome 
measures. This change to the outcome measures requirement will allow 
those OPOs that fail only one outcome measure to avoid automatic 
decertification in the 2014 recertification cycle.
     Revisions to the Quality Improvement Organizations 
Regulations. We are updating the regulations at 42 CFR Parts 475 and 
476 based on the recently enacted Trade Adjustment Assistance Extension 
Act of 2011 (TAAEA) (Pub. L. 112-40, Section 261) whereby Congress 
authorized numerous changes to the original legislation and included 
additional flexibility for the Secretary in the administration of the 
QIO program. The existing regulations at 42 CFR Part 475 include 
definitions and standards governing eligibility and the award of 
contracts to QIOs. In this final rule with comment period, we are 
finalizing the partial deletion and revision of the regulations under 
42 CFR Parts 475 and 476, which relate to the QIO program, including 
the following: (1) Replace nomenclature in Parts 475 and 476 that has 
been amended by the TAAEA; (2) revise the existing definition for the 
term ``physician''; (3) add new definitions as necessary to support the 
new substantive provisions in Subpart C; and (4) replace some of the 
substantive provisions in Subpart C in their entirety to fully exercise 
the Secretary's authority for the program and update the contracting 
requirements to align with contemporary quality improvement.
     Changes to the Medicare Fee-for-Service Electronic Health 
Record (EHR) Incentive Program. We are revising the regulations to 
provide a special method for making hospital-based determinations for 
2014 only in the cases of those eligible professionals (EPs) who 
reassign their benefits to Method II CAHs. Previously, we have been 
unable to make EHR payments to these EPs for their CAH II claims, or to 
take those claims into consideration in making hospital-based 
determinations because of systems limitations. Finalizing the adoption 
of our method for 2014 will allow us to begin making payments based on 
CAH II one year earlier than we would be able to do under existing 
regulations. We also are adopting a minor clarification to the 
regulations concerning the cost reporting period to be used in 
determining final EHR payments for hospitals.
3. Summary of Costs and Benefits
    In sections XXIII. and XXIV. 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 the OPPS Update
(1) Impacts of All OPPS Changes
    Table 55 in section XXIII. 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 2014 compared to all

[[Page 74834]]

estimated OPPS payments in CY 2013. We estimate that the policies in 
this final rule will result in a 1.8 percent overall increase in OPPS 
payments to providers. We estimate that the increase in OPPS 
expenditures, including beneficiary cost-sharing, will be approximately 
$600 million, not taking into account potential changes in enrollment, 
utilization, and case-mix. Taking into account estimated spending 
changes that are attributable to these factors, we estimate an increase 
of approximately $4.372 billion in OPPS expenditures, including 
beneficiary cost-sharing, for CY 2014 compared to CY 2013 OPPS 
expenditures. We estimate that total OPPS payments, including 
beneficiary cost-sharing, will be $50.4 billion for CY 2014.
    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 that we adopted 
beginning in CY 2011 and basing payment fully on the type of provider 
furnishing the service, we estimate a 1.8 percent increase in CY 2014 
payments to CMHCs relative to their CY 2013 payments.
(2) Impacts of Policies Other Than Outpatient Laboratory Test Packaging
    We estimate that our final policies other than packaging outpatient 
laboratory tests will have a less significant impact than we proposed 
for CY 2014, as several proposed policies were not finalized. These 
final policies include packaging drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure (stress agents and Cysview), drugs and 
biologicals that function as supplies when used in a surgical procedure 
(skin substitutes), certain procedures described by add-on codes, and 
device removal procedures; new cost report data for estimating CT and 
MRI relative weights; and revisions to coding and APC structure for 
stereotactic radiosurgery.
(3) Impacts of Packaging Outpatient Laboratory Tests
    Packaging laboratory services modestly reduces payment to rural and 
major teaching hospitals, as they will no longer receive separate 
payment for common laboratory tests.
(4) Impacts of the Updated Wage Indices
    Adjustments to the wage indices other than the frontier State wage 
adjustment will not significantly affect most hospitals and CMHCs. The 
nonbudget neutral frontier wage index adjustment will result in payment 
increases to rural and urban hospitals in West North Central and 
Mountain States.
(5) Impacts of the Rural Adjustment and the Cancer Hospital Payment 
Adjustment
    There are no significant impacts of our CY 2014 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 and cancer hospital payment 
adjustments, and the adjustment amounts do not significantly impact the 
budget neutrality adjustments for these policies.
(6) Impacts of the OPD Fee Schedule Increase Factor
    We estimate that, for many hospitals, the application of the OPD 
fee schedule increase factor of 1.7 percent to the conversion factor 
for CY 2014 will mitigate the small negative impacts of the budget 
neutrality adjustments. While most classes of hospitals will receive an 
increase that is in line with the 1.7 percent overall increase after 
the update is applied to the budget neutrality adjustments, some 
hospitals will receive smaller but still generally positive overall 
increases.
b. Impacts of the ASC Payment Update
    For impact purposes, the procedures on the ASC list of covered 
surgical procedures are aggregated into surgical specialty groups using 
CPT and HCPCS code range definitions. The percentage change in 
estimated total payments by specialty groups under the CY 2014 payment 
rates compared to estimated CY 2013 payment rates ranges between -11 
percent for ancillary items and services and 14 percent for respiratory 
system procedures.
c. Impacts of the Hospital OQR Program
    We do not expect our CY 2014 final policies to significantly affect 
the number of hospitals that do not receive a full annual payment 
update.
d. Impacts of the ASCQR Program
    We do not expect our CY 2014 final policies to significantly affect 
the number of ASCs that do not receive a full annual payment update 
beginning in CY 2015.
e. Impacts for the QIO Program Changes
    We estimate the effects of the QIO Program changes to be consistent 
with the Congressional Budget Office's 2011 Cost Estimate of the Trade 
Bill (H.R. 2832) which included a reduction in spending of $330 million 
over the 2012-2021 period. According to the CBO Estimate and 
subsequently the regulatory changes ``would modify the provisions under 
which CMS contracts with independent entities called [``]Quality 
Improvement Organizations (QIOs)[''] in Medicare. QIOs, generally 
staffed by health care professionals, review medical care, help 
beneficiaries with complaints about the quality of care, and implement 
care improvements. H.R. 2832 would make several changes to the 
composition and operation of QIOs, and would harmonize QIO contracts 
with requirements of the Federal Acquisition Regulation. Among those 
changes are a modification to expand the geographic scope of QIO 
contracts and a lengthening of the contract period. CBO estimates that 
those provisions would reduce spending by $330 million over the 2012-
2021 period.''

B. Legislative and Regulatory Authority for the Hospital OPPS

    When Title XVIII of the Social Security 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

[[Page 74835]]

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; and the 
American Taxpayer Relief Act of 2012 (Pub. L. 112-240), enacted January 
2, 2013.
    Under the OPPS, we pay for hospital outpatient 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 with comment 
period. 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 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 (section 1833(t)(2)(B) of 
the Act). In accordance with section 1833(t)(2) 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 originally 
exercised the authority granted under the statute to also exclude from 
the OPPS those 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 MPFS; 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. We set forth the services that are 
excluded from payment under the OPPS in regulations at 42 CFR 419.22. 
This final rule with comment period modifies 42 CFR 419.22 and includes 
in the OPPS some of these previously excluded services.
    Under Sec.  419.20(b) of the regulations, we specify the types of 
hospitals and entities that are excluded from payment under the OPPS. 
These excluded entities include: Maryland hospitals, but only for 
services that are paid under a cost containment waiver in accordance 
with section 1814(b)(3) of the Act; CAHs; 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) of the Act requires the Secretary to review certain 
components of the OPPS, not less often than annually, and to revise the 
groups, relative payment weights, and other adjustments that take into 
account changes in medical practices, changes in technologies, and the 
addition of new services, new cost data, and other relevant information 
and factors.
    Since initially implementing the OPPS, we have published final 
rules in the Federal Register annually to implement statutory 
requirements and changes arising from our continuing experience with 
this system. These rules can be viewed on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

E. Advisory Panel on Hospital Outpatient Payment (the HOP Panel or the 
Panel), Formerly Named the Advisory Panel on Ambulatory Payment 
Classification Groups (APC Panel)

1. Authority of the Panel
    Section 1833(t)(9)(A) of the Act, as amended by section 201(h) of 
Pub. L. 106-113, and redesignated by section 202(a)(2) of Pub. L. 106-
113, requires that we consult with an external advisory panel of 
experts to annually review the clinical integrity of the payment groups 
and their weights under the OPPS. In CY 2000, based on section 
1833(t)(9)(A) of the Act and section 222 of the Public Health Service 
(PHS) Act, the Secretary established the Advisory Panel on Ambulatory 
Payment

[[Page 74836]]

Classification Groups (APC Panel) to fulfill this requirement. In CY 
2011, based on section 222 of 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 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 HOP Panel, at that time named the APC Panel. This 
expert panel, which may be composed of up to 19 appropriate 
representatives of providers (currently employed full-time, not as 
consultants, in their respective areas of expertise), reviews clinical 
data and advises 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 continues to be technical in 
nature; is governed by the provisions of the FACA; may convene up to 
three meetings per year; has a Designated Federal Official (DFO); and 
is chaired by a Federal Official designated by the Secretary. The 
current charter was amended on November 15, 2011 and the Panel was 
renamed to reflect expanding the Panel's authority to include 
supervision of hospital outpatient therapeutic services and therefore 
to add CAHs to its membership.
    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 Web site at: http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGroups.asp#TopOfPage.
3. Panel Meetings and Organizational Structure
    The Panel has held multiple meetings, with the last meetings taking 
place on March 11, 2013 and August 26-27, 2013. Prior to each meeting, 
we publish a notice in the Federal Register to announce the meeting 
and, when necessary, to solicit nominations for Panel membership and to 
announce new members.
    The Panel has established an operational structure that, in part, 
currently includes the use of three subcommittees to facilitate its 
required review process. The three current subcommittees are the Data 
Subcommittee, the Visits and Observation Subcommittee, and the 
Subcommittee for APC Groups and Status Indicator (SI) Assignments.
    The Data Subcommittee is responsible for studying the data issues 
confronting the Panel and for recommending options for resolving them. 
The Visits and Observation Subcommittee reviews and makes 
recommendations to the Panel on all technical issues pertaining to 
observation services and hospital outpatient visits paid under the OPPS 
(for example, APC configurations and APC relative payment weights). The 
Subcommittee for APC Groups and SI Assignments advises the Panel on the 
following issues: The appropriate SIs 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; and the appropriate APC 
placement of HCPCS codes regarding services for which separate payment 
is made.
    Each of these subcommittees was established by a majority vote from 
the full Panel during a scheduled Panel meeting, and the Panel 
recommended at the August 2013 meeting that the subcommittees continue. 
We accepted this recommendation.
    Discussions of the other recommendations made by the Panel at the 
March 2013 and August 2013 Panel meetings are included in the sections 
of this final rule that are specific to each recommendation. For 
discussions of earlier Panel meetings and recommendations, we refer 
readers to previously published OPPS/ASC proposed and final rules, the 
CMS Web site mentioned earlier in this section, and the FACA database 
at: http://fido.gov/facadatabase/public.asp.

F. Public Comments Received in Response to the CY 2014 OPPS/ASC 
Proposed Rule

    We received approximately 2,677 timely pieces of correspondence on 
the CY 2014 OPPS/ASC proposed rule that appeared in the Federal 
Register on July 19, 2013 (78 FR 43534) and the correcting document 
published in the Federal Register on September 6, 2013 (78 FR 54842). 
This final rule with comment period refers to the corrected information 
wherever applicable. We note that we received some public comments that 
were outside the scope of the proposed rule and that are not addressed 
in this final rule with comment period. Summaries of the public 
comments to the proposed rule and the correcting document that are 
within the scope of the proposed rule and our responses are set forth 
in the various sections of this final rule with comment period under 
the appropriate subject-matter headings.

G. Public Comments Received on the CY 2013 OPPS/ASC Final Rule With 
Comment Period

    We received approximately 27 timely pieces of correspondence on the 
CY 2013 OPPS/ASC final rule with comment period that appeared in the 
Federal Register on November 15, 2012 (77 FR 68210), some of which 
contained comments on the interim APC assignments and/or status 
indicators of HCPCS codes identified with comment indicator ``NI'' in 
Addenda B, AA, and BB to that final rule. Summaries of these public 
comments on topics that were open to comment and our responses to them 
are set forth in various sections of this final rule with comment 
period under the appropriate subject-matter headings.

II. Updates Affecting OPPS Payments

A. Recalibration of APC Relative Payment Weights

1. Database Construction
a. Database Source and Methodology
    Section 1833(t)(9)(A) of the Act requires that the Secretary review 
not less often than annually and revise the relative payment weights 
for APCs. In the April 7, 2000 OPPS final rule with comment period (65 
FR 18482), we explained in detail how we calculated the relative 
payment weights that were implemented on August 1, 2000 for each APC 
group.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43544), for the CY 
2014 OPPS, we proposed to recalibrate the APC relative payment weights 
for services furnished on or after January 1, 2014, and before January 
1, 2015 (CY 2014), using the same basic methodology that we described 
in the CY 2013 OPPS/ASC final rule with comment period. 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, using the most recent available data to

[[Page 74837]]

construct a database for calculating APC group weights. Therefore, for 
the purpose of recalibrating the proposed APC relative payment weights 
for CY 2014, we used approximately 146 million final action claims 
(claims for which all disputes and adjustments have been resolved and 
payment has been made) for hospital outpatient department services 
furnished on or after January 1, 2012, and before January 1, 2013. For 
this final rule with comment period, for the purpose of recalibrating 
the final APC relative payment weights for CY 2014, we used 
approximately 158 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, 2012, and before 
January 1, 2013. For exact counts of claims used, we refer readers to 
the claims accounting narrative under supporting documentation for the 
CY 2014 OPPS/ASC proposed rule and this final rule with comment period 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    Of the approximately 158 million final action claims for services 
provided in hospital outpatient settings used to calculate the CY 2014 
OPPS payment rates for this final rule with comment period, 
approximately 125 million claims were the type of bill potentially 
appropriate for use in setting rates for OPPS services (but did not 
necessarily contain services payable under the OPPS). Of the 
approximately 125 million claims, approximately 6 million claims were 
not for services paid under the OPPS or were excluded as not 
appropriate for use (for example, erroneous cost-to-charge ratios 
(CCRs) or no HCPCS codes reported on the claim). From the remaining 
approximately 119 million claims, we created approximately 125 million 
single records, of which approximately 80 million were ``pseudo'' 
single or ``single session'' claims (created from approximately 31 
million multiple procedure claims using the process we discuss later in 
this section). Approximately 1 million claims were trimmed out on cost 
or units in excess of +/-3 standard deviations from the geometric mean, 
yielding approximately 124 million single bills for ratesetting. As 
described in section II.A.2. of this final rule with comment period, 
our data development process is designed with the goal of using 
appropriate cost information in setting the APC relative payment 
weights. The bypass process is described in section II.A.1.b. of this 
final rule with comment period. This section discusses how we develop 
``pseudo'' single procedure claims (as defined below), with the 
intention of using more appropriate data from the available claims. In 
some cases, the bypass process allows us to use some portion of the 
submitted claim for cost estimation purposes, while the remaining 
information on the claim continues to be unusable. Consistent with the 
goal of using appropriate information in our data development process, 
we only use claims (or portions of each claim) that are appropriate for 
ratesetting purposes.
    The final APC relative weights and payments for CY 2014 in Addenda 
A and B to this final rule with comment period (which are available via 
the Internet on the CMS Web site) were calculated using claims from CY 
2012 that were processed through June 30, 2013. While prior to CY 2013 
we had historically based the payments on median hospital costs for 
services in the APC groups, beginning with the CY 2013 OPPS, we 
established the cost-based relative payment weights for the OPPS using 
geometric mean costs, as discussed in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68259 through 68271). For the CY 2014 OPPS, 
we proposed and are using this same methodology, basing payments on 
geometric mean costs. Under this methodology, we select claims for 
services paid under the OPPS and match these claims to the most recent 
cost report filed by the individual hospitals represented in our claims 
data. We continue to believe that it is appropriate to use the most 
current full calendar year claims data and the most recently submitted 
cost reports to calculate the relative costs underpinning the APC 
relative payment weights and the CY 2014 payment rates.
b. Use of Single and Multiple Procedure Claims
    For CY 2014, in general, as we proposed, we are continuing to use 
single procedure claims to set the costs on which the APC relative 
payment weights are based. We generally use single procedure claims to 
set the estimated costs for APCs because we believe that the OPPS 
relative weights on which payment rates are based should be derived 
from the costs of furnishing one unit of one procedure and because, in 
many circumstances, we are unable to ensure that packaged costs can be 
appropriately allocated across multiple procedures performed on the 
same date of service.
    It is generally desirable to use the data from as many claims as 
possible to recalibrate the APC relative payment weights, including 
those claims for multiple procedures. As we have for several years, we 
are continuing to use date of service stratification and a list of 
codes to be bypassed to convert multiple procedure claims to ``pseudo'' 
single procedure claims. Through bypassing specified codes that we 
believe do not have significant packaged costs, we are able to use more 
data from multiple procedure claims. In many cases, this enables us to 
create multiple ``pseudo'' single procedure claims from claims that 
were submitted as multiple procedure claims spanning multiple dates of 
service, or claims that contained numerous separately paid procedures 
reported on the same date on one claim. We refer to these newly created 
single procedure claims as ``pseudo'' single procedure claims. The 
history of our use of a bypass list to generate ``pseudo'' single 
procedure claims is well documented, most recently in the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68227 through 68229). In 
addition, for CY 2008 (72 FR 66614 through 66664), we increased 
packaging and created the first composite APCs, and continued those 
policies through CY 2013. Increased packaging and creation of composite 
APCs also increased the number of bills that we were able to use for 
ratesetting by enabling us to use claims that contained multiple major 
procedures that previously would not have been usable. Further, for CY 
2009, we expanded the composite APC model to one additional clinical 
area, multiple imaging services (73 FR 68559 through 68569), which also 
increased the number of bills we were able to use in developing the 
OPPS relative weights on which payments are based. We have continued 
the composite APCs for multiple imaging services through CY 2013, and 
as we proposed, we are continuing this policy for CY 2014. In addition, 
as we proposed, we are further expanding our packaging policies for CY 
2014. We refer readers to section II.A.2.f. of this final rule with 
comment period for a discussion of the use of claims in modeling the 
costs for composite APCs and to section II.A.3. of this final rule with 
comment period for a discussion of our packaging policies for CY 2014.
    As we proposed, we are continuing to apply these processes to 
enable us to use as much claims data as possible for ratesetting for 
the CY 2014 OPPS. This methodology enabled us to create, for this final 
rule with comment period, approximately 80 million ``pseudo'' single 
procedure claims, including

[[Page 74838]]

multiple imaging composite ``single session'' bills (we refer readers 
to section II.A.2.f.(5) of this final rule with comment period for 
further discussion), to add to the approximately 43 million ``natural'' 
single procedure claims.
    For CY 2014, we proposed to bypass 179 HCPCS codes that were 
identified in Addendum N to the CY 2014 OPPS/ASC proposed rule (which 
is available via the Internet on the CMS Web site). Since the inception 
of the bypass list, which is the list of codes to be bypassed to 
convert multiple procedure claims to ``pseudo'' single procedure 
claims, we have calculated the percent of ``natural'' single bills that 
contained packaging for each HCPCS code and the amount of packaging on 
each ``natural'' single bill for each code. Each year, we generally 
retain the codes on the previous year's bypass list and use the updated 
year's data (for CY 2014, data available for the March 11, 2013 meeting 
of the Advisory Panel on Hospital Outpatient Payment (the Panel) from 
CY 2012 claims processed through September 30, 2012, and CY 2011 claims 
data processed through June 30, 2012, used to model the payment rates 
for CY 2013) to determine whether it would be appropriate to add 
additional codes to the previous year's bypass list. For CY 2014, we 
proposed to continue to bypass all of the HCPCS codes on the CY 2013 
OPPS bypass list, with the exception of HCPCS codes that we proposed to 
delete for CY 2014, which were listed in Table 1 of the proposed rule 
(78 FR 43546). We also proposed to remove HCPCS codes that are not 
separately paid under the OPPS because the purpose of the bypass list 
is to obtain more data for those codes relevant to ratesetting. Some of 
the codes we proposed to remove from the CY 2014 bypass list are 
affected by the CY 2014 packaging final policy, discussed in section 
II.A.3. of this final rule with comment period. In addition, we 
proposed to add to the bypass list for CY 2014 HCPCS codes not on the 
CY 2013 bypass list that, using either the CY 2013 final rule data (CY 
2011 claims) or the March 11, 2013 Panel data (first 9 months of CY 
2012 claims), met the empirical criteria for the bypass list that are 
summarized below. Finally, to remain consistent with the CY 2014 final 
policy to continue to develop OPPS relative payment weights based on 
geometric mean costs, we also proposed that the packaged cost criterion 
continue to be based on the geometric mean cost. The entire list 
proposed for CY 2014 (including the codes that remain on the bypass 
list from prior years) was open to public comment in the CY 2014 OPPS/
ASC proposed rule. Because we must make some assumptions about 
packaging in the multiple procedure claims in order to assess a HCPCS 
code for addition to the bypass list, we assumed that the 
representation of packaging on ``natural'' single procedure claims for 
any given code is comparable to packaging for that code in the multiple 
procedure claims. As we proposed, the criteria for the bypass list are:
     There are 100 or more ``natural'' single procedure claims 
for the code. This number of single procedure claims ensures that 
observed outcomes are sufficiently representative of packaging that 
might occur in the multiple claims.
     Five percent or fewer of the ``natural'' single procedure 
claims for the code have packaged costs on that single procedure claim 
for the code. This criterion results in limiting the amount of 
packaging being redistributed to the separately payable procedures 
remaining on the claim after the bypass code is removed and ensures 
that the costs associated with the bypass code represent the cost of 
the bypassed service.
     The geometric mean cost of packaging observed in the 
``natural'' single procedure claims is equal to or less than $55. This 
criterion also limits the amount of error in redistributed costs. 
During the assessment of claims against the bypass criteria, we do not 
know the dollar value of the packaged cost that should be appropriately 
attributed to the other procedures on the claim. Therefore, ensuring 
that redistributed costs associated with a bypass code are small in 
amount and volume protects the validity of cost estimates for low cost 
services billed with the bypassed service.
    We note that, as we did for CY 2013, we proposed to continue to 
establish the CY 2014 OPPS relative payment weights based on geometric 
mean costs. To remain consistent in the metric used for identifying 
cost patterns, we proposed to use the geometric mean cost of packaging 
to identify potential codes to add to the bypass list.
    In response to public comments on the CY 2010 OPPS/ASC proposed 
rule requesting that the packaged cost threshold be updated, we 
considered whether it would be appropriate to update the $50 packaged 
cost threshold for inflation when examining potential bypass list 
additions. As discussed in the CY 2010 OPPS/ASC final rule with comment 
period (74 FR 60328), the real value of this packaged cost threshold 
criterion has declined due to inflation, making the packaged cost 
threshold more restrictive over time when considering additions to the 
bypass list. Therefore, adjusting the threshold by the market basket 
increase would prevent continuing decline in the threshold's real 
value. Based on the same rationale described for the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68221), we proposed for CY 2014 
to continue to update the packaged cost threshold by the market basket 
increase. By applying the final CY 2013 market basket increase of 1.8 
percent to the prior nonrounded dollar threshold of $53.76 (77 FR 
68221), we determined that the threshold remains for CY 2014 at $55 
($54.73 rounded to $55, the nearest $5 increment). Therefore, we 
proposed to set the geometric mean packaged cost threshold on the CY 
2012 claims at $55 for a code to be considered for addition to the CY 
2014 OPPS bypass list.
     The code is not a code for an unlisted service. Unlisted 
codes do not describe a specific service, and thus their costs would 
not be appropriate for bypass list purposes.
    In addition, we proposed to continue to include on the bypass list 
HCPCS codes that CMS medical advisors believe have minimal associated 
packaging based on their clinical assessment of the complete CY 2014 
OPPS proposal. Some of these codes were identified by CMS medical 
advisors and some were identified in prior years by commenters with 
specialized knowledge of the packaging associated with specific 
services. We also proposed to continue to include certain HCPCS codes 
on the bypass list in order to purposefully direct the assignment of 
packaged costs to a companion code where services always appear 
together and where there would otherwise be few single procedure claims 
available for ratesetting. For example, we have previously discussed 
our reasoning for adding HCPCS code G0390 (Trauma response team 
associated with hospital critical care service) to the bypass list (73 
FR 68513).
    As a result of the multiple imaging composite APCs that we 
established in CY 2009, the program logic for creating ``pseudo'' 
single procedure claims from bypassed codes that are also members of 
multiple imaging composite APCs changed. When creating the set of 
``pseudo'' single procedure claims, claims that contain ``overlap 
bypass codes'' (those HCPCS codes that are both on the bypass list and 
are members of the multiple imaging composite APCs) were identified 
first. These HCPCS codes were then processed to create multiple imaging 
composite ``single session'' bills, that is, claims containing HCPCS 
codes from only one

[[Page 74839]]

imaging family, thus suppressing the initial use of these codes as 
bypass codes. However, these ``overlap bypass codes'' were retained on 
the bypass list because, at the end of the ``pseudo'' single processing 
logic, we reassessed the claims without suppression of the ``overlap 
bypass codes'' under our longstanding ``pseudo'' single process to 
determine whether we could convert additional claims to ``pseudo'' 
single procedure claims. (We refer readers to section II.A.2.b. of this 
final rule with comment period for further discussion of the treatment 
of ``overlap bypass codes.'') This process also created multiple 
imaging composite ``single session'' bills that could be used for 
calculating composite APC costs. ``Overlap bypass codes'' that are 
members of the multiple imaging composite APCs are identified by 
asterisks (*) in Addendum N to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    Comment: One commenter supported the CY 2014 proposal to remove 
certain codes from the bypass list, in particular for the anatomic 
pathology procedures, suggesting that the bypass list undervalues 
codes, and artificially lowers their estimated costs, as evidenced by 
the estimated increase in payment for some of those services in the 
proposed CY 2014 OPPS.
    Response: We appreciate the commenter's support. The bypass list 
process is used to extract more data from claims that would otherwise 
be unusable. We use a variety of information in identifying codes that 
could be potentially added to the bypass list each year, including 
codes selected based on the empirical criteria, CMS medical advisor 
recommendations, and commenter requests. In doing so, we attempt to 
ensure that the amount of packaged cost being redistributed as a result 
of the process is limited.
    As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43545 
through 43546), we proposed to remove the bypass codes listed in Table 
1 of the proposed rule, several of which were affected by the CY 2014 
proposed packaging policy. Codes that would not be separately paid in 
the prospective year, whether because of prospective packaging policies 
or deletions prior to the claims year, would not be appropriately 
applied to the bypass process. Bypassing packaged codes would 
potentially remove costs that would otherwise be used in calculating 
payment weights for other separately payable procedures, which would be 
inappropriate. We note that OPPS payment rates may fluctuate from year 
to year based on a variety of other factors, including updated data, 
APC recalibration, and increased packaging.
    Comment: Several commenters believed that an inconsistency existed 
in the application of the bypass policy and the E&M codes. They noted 
that visit codes 99211 and 99215 were not included on the proposed CY 
2014 OPPS bypass list, and that because those codes were part of the 
proposed new visit APC 0634 (Hospital Clinic Visits), which also would 
be used in calculating the OPPS relative payment weights, an error had 
occurred.
    Response: We acknowledge that the proposed CY 2014 OPPS bypass list 
did not include several of the E&M codes. With the exception of CPT 
code 99205, which we proposed to add to the CY 2014 OPPS bypass list, 
the other visit codes already had been on the bypass list in prior 
years based on the empirical criteria previously described. Applying 
those empirical criteria would continue to exclude the remaining E&M 
codes from the bypass list. Therefore, we do not believe that those 
exclusions are an error. While we recognize that there are interactions 
between the visits policy discussed in section VII. of this final rule 
with comment period and the bypass process to derive more information, 
those interactions allow for policy interpretations based on the 
individual rules and goals being applied. In developing the proposed CY 
2014 OPPS bypass list, we tried to retain the principles and guidelines 
we have used in the past while accommodating other proposals where they 
might interact, such as with the CY 2014 OPPS proposed packaging 
policy. We appreciate the meaningful policy comments that stakeholders 
provide, especially where these policy intersections occur. We will 
continue to review the codes on the bypass list and their 
appropriateness, especially in the context of the packaging policies 
described in section II.A.3. of this final rule with comment period.
    We note that while we proposed that the new CY 2014 visit APC 0634 
would be the new base APC on which the scaled weights would be 
calculated, it was selected as a baseline because clinic visits are one 
of the most frequently performed services in the hospital outpatient 
setting, similar to APCs 0606 and 0601 in prior years. However, choice 
of the APC on which to base the proposed relative payment weights for 
all other APCs does not affect the payments made under the OPPS because 
the weights are scaled for budget neutrality. Therefore, any potential 
miscalculations or policy issues related to an APC would generally be 
concentrated in those APCs because, for scaling purposes, it would be 
similar to selecting any number as a baseline, which would later be 
budget neutralized through a weight scaler. The CY 2014 OPPS weight 
scaler is discussed in section II.A.4. of this final rule with comment 
period.
    Comment: One commenter noted that many of the codes on the bypass 
list may no longer be appropriate because the proposed CY 2014 
packaging policy would potentially cause many of the natural single 
major claims, to which CMS applies the empirical criteria, to exceed 
the packaged cost thresholds.
    Response: We appreciate the issue that the commenter has raised 
regarding the application of the bypass list and its interaction with 
our proposed CY 2014 policies. In prior years, we generally continued 
bypassing codes that were on the previous year's bypass list under the 
assumption that packaging, billing, and clinical patterns would 
generally remain similar from year to year. As the commenter noted, 
under the proposed CY 2014 OPPS packaging policies, the data on which 
we identify codes potentially added to the bypass list may change. We 
will continue to examine the cost patterns for codes which may be 
appropriately added or removed from the bypass list.
    After consideration of the public comments we received, we are 
adopting as final the proposed ``pseudo'' single claims process. As 
discussed earlier in this section, there are interactions between the 
application of a bypass list and various other OPPS payment policies. 
As a result of modifications to the packaging policies described in 
section III. of this final rule with comment period, we are adding 
codes that we had originally proposed to remove from the CY 2014 bypass 
list back on the CY 2014 final OPPS bypass list. Addendum N to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site) includes the list of bypass codes for CY 2014.
    The list of bypass codes contains codes that were reported on 
claims for services in CY 2012 and, therefore, includes codes that were 
in effect in CY 2012 and used for billing but were deleted for CY 2013. 
We retained these deleted bypass codes on the CY 2014 bypass list 
because these codes existed in CY 2012 and were covered OPD services in 
that period, and CY 2012 claims data are used to calculate CY 2014 
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

[[Page 74840]]

codes'' that were members of the multiple imaging composite APCs are 
identified by asterisks (*) in the third column of Addendum N to this 
final rule with comment period. HCPCS codes that we are adding for CY 
2014 are identified by asterisks (*) in the fourth column of Addendum 
N.
    Table 1 of the proposed rule contained the list of codes that we 
proposed to remove from the CY 2014 bypass list for CY 2014 (78 FR 
43546). Table 1 below contains the list of codes that we are removing 
from the final CY 2014 bypass list because these codes were either 
deleted from the HCPCS before CY 2012 (and therefore were not covered 
OPD services in CY 2012) or were not separately payable codes under the 
CY 2014 OPPS because these codes are not used for ratesetting through 
the bypass process. The list of codes for removal from the bypass list 
includes those that will be affected by the CY 2014 OPPS packaging 
policy described in section II.A.3. of this final rule with comment 
period.
[GRAPHIC] [TIFF OMITTED] TR10DE13.261

c. Calculation and Use of Cost-to-Charge Ratios (CCRs)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43547), we proposed to 
continue to use the hospital-specific overall ancillary and 
departmental cost-to-charge ratios (CCRs) to convert charges to 
estimated costs through application of a revenue code-to-cost center 
crosswalk. To calculate the APC costs on which the proposed CY 2014 APC 
payment rates were based, we calculated hospital-specific overall 
ancillary CCRs and hospital-specific departmental CCRs for each 
hospital for which we had CY 2012 claims data from the most recent 
available hospital cost reports, in most cases, cost reports beginning 
in CY 2011. For the CY 2014 OPPS proposed rates, we used the set of 
claims processed during CY 2012. We applied the hospital-specific CCR 
to the hospital's charges at the most detailed level possible, based on 
a revenue code-to-cost center crosswalk that contains a hierarchy of 
CCRs used to estimate costs from charges for each revenue code. That 
crosswalk is available for review and continuous comment on the CMS Web 
site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    To ensure the completeness of the revenue code-to-cost center 
crosswalk, we reviewed changes to the list of revenue codes for CY 2012 
(the year of claims data we used to calculate the proposed CY 2014 OPPS 
payment rates) and found that the National Uniform Billing Committee 
(NUBC) did not add any new revenue codes to the NUBC 2012 Data 
Specifications Manual.
    In accordance with our longstanding policy, we calculated CCRs for 
the standard and nonstandard cost centers accepted by the electronic 
cost report database. In general, the most detailed level at which we 
calculated CCRs was the hospital-specific departmental level. For a 
discussion of the hospital-specific overall ancillary CCR calculation, 
we refer readers to the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 67983 through 67985). One longstanding exception to this general 
methodology for calculation of CCRs used for converting charges to 
costs on each claim, as detailed in the CY 2007 OPPS/ASC final rule 
with comment period, is the calculation of blood costs, as discussed in 
section II.A.2.d.(2) of this final rule with comment period and which 
has been our standard policy since the CY 2005 OPPS.
    For the CCR calculation process, we used the same general approach 
that we used in developing the final APC rates for CY 2007 and 
thereafter, using the revised CCR calculation that excluded the costs 
of paramedical education programs and weighted the outpatient charges 
by the volume of outpatient services furnished by the hospital. We 
refer readers to the CY 2007 OPPS/ASC final rule with comment period 
for more information (71 FR 67983 through 67985). We first limited the 
population of cost reports to only those hospitals that filed 
outpatient claims in CY 2012 before determining whether the CCRs for 
such hospitals were valid.
    We then calculated the CCRs for each cost center and the overall 
ancillary CCR for each hospital for which we had claims data. We did 
this using hospital-specific data from the Hospital Cost Report 
Information System (HCRIS). We used the most recent available cost 
report data, which, in most cases, were from cost reports with cost 
reporting periods beginning in CY 2011. For the proposed rule, we used 
the most recently submitted cost reports to calculate the CCRs to be 
used to calculate costs for the proposed CY 2014 OPPS payment rates. If 
the most recently available cost report was submitted but not settled, 
we looked at the last settled cost report to determine the ratio of 
submitted to settled cost using the overall ancillary CCR, and we then 
adjusted the most recent available submitted, but not settled, cost 
report using that ratio. We then calculated both an overall ancillary 
CCR and cost center-specific CCRs for each hospital. We used the 
overall ancillary CCR referenced above for all purposes that require 
use of an overall ancillary CCR. We proposed to continue this

[[Page 74841]]

longstanding methodology for the calculation of costs for CY 2014.
    Since the implementation of the OPPS, some commenters have raised 
concerns about potential bias in the OPPS cost-based weights due to 
``charge compression,'' which is the practice of applying a lower 
charge markup to higher cost services and a higher charge markup to 
lower cost services. As a result, the cost-based weights may reflect 
some aggregation bias, undervaluing high-cost items and overvaluing 
low-cost items when an estimate of average markup, embodied in a single 
CCR, is applied to items of widely varying costs in the same cost 
center. This issue was evaluated in a report by the Research Triangle 
Institute, International (RTI). The RTI final report can be found on 
RTI's Web site at: http://www.rti.org/reports/cms/HHSM-500-2005-0029I/PDF/Refining_Cost_to_Charge_ratios_200807_Final.pdf. For a 
complete discussion of the RTI recommendations, public comments, and 
our responses, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68519 through 68527).
    We addressed the RTI finding that there was aggregation bias in 
both the IPPS and the OPPS cost estimation of expensive and inexpensive 
medical supplies in the FY 2009 IPPS final rule (73 FR 48458 through 
45467). Specifically, we created one cost center for ``Medical Supplies 
Charged to Patients'' and one cost center for ``Implantable Devices 
Charged to Patients,'' essentially splitting the then current cost 
center for ``Medical Supplies Charged to Patients'' into one cost 
center for low-cost medical supplies and another cost center for high-
cost implantable devices in order to mitigate some of the effects of 
charge compression. In determining the items that should be reported in 
these respective cost centers, we adopted commenters' recommendations 
that hospitals should use revenue codes established by the AHA's NUBC 
to determine the items that should be reported in the ``Medical 
Supplies Charged to Patients'' and the ``Implantable Devices Charged to 
Patients'' cost centers. For a complete discussion of the rationale for 
the creation of the new cost center for ``Implantable Devices Charged 
to Patients,'' a summary of public comments received, and our responses 
to those public comments, we refer readers to the FY 2009 IPPS final 
rule.
    The cost center for ``Implantable Devices Charged to Patients'' has 
been available for use for cost reporting periods beginning on or after 
May 1, 2009. In the CY 2013 OPPS/ASC final rule with comment period, we 
determined that a significant volume of hospitals were utilizing the 
``Implantable Devices Charged to Patients'' cost center. Because a 
sufficient amount of data from which to generate a meaningful analysis 
was available, we established in the CY 2013 OPPS/ASC final rule with 
comment period a policy to create a distinct CCR using the 
``Implantable Devices Charged to Patients'' cost center (77 FR 68225). 
For the CY 2014 OPPS, as we proposed, we are continuing to use data 
from the ``Implantable Devices Charged to Patients'' cost center to 
create a distinct CCR for use in calculating the OPPS relative payment 
weights.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 
50080), we finalized our proposal to create new standard cost centers 
for ``Computed Tomography (CT),'' ``Magnetic Resonance Imaging (MRI),'' 
and ``Cardiac Catheterization,'' and to require that hospitals report 
the costs and charges for these services under these new cost centers 
on the revised Medicare cost report Form CMS 2552-10. As we discussed 
in the FY 2009 IPPS and CY 2009 OPPS/ASC proposed and final rules, RTI 
also found that the costs and charges of CT scans, MRIs, and cardiac 
catheterization differ significantly from the costs and charges of 
other services included in the standard associated cost center. RTI 
concluded that both the IPPS and the OPPS relative payment weights 
would better estimate the costs of those services if CMS were to add 
standard costs centers for CT scans, MRIs, and cardiac catheterization 
in order for hospitals to report separately the costs and charges for 
those services and in order for CMS to calculate unique CCRs to 
estimate the cost from charges on claims data. We refer readers to the 
FY 2011 IPPS/LTCH PPS final rule (75 FR 50075 through 50080) for a more 
detailed discussion on the reasons for the creation of standard cost 
centers for CT scans, MRIs, and cardiac catheterization. The new 
standard cost centers for CT scans, MRIs, and cardiac catheterization 
were effective for cost report periods beginning on or after May 1, 
2010, on the revised cost report Form CMS-2552-10.
    Using the December 2012 HCRIS update which we used to estimate 
costs in the CY 2014 OPPS ratesetting process, as discussed in the CY 
2014 OPPS/ASC proposed rule (78 FR 43549), we were able to calculate a 
valid implantable device CCR for 2,936 hospitals, a valid MRI CCR for 
1,853 hospitals, a valid CT scan CCR for 1,956 hospitals, and a valid 
Cardiac Catheterization CCR for 1,367 hospitals. We believed that there 
was a sufficient amount of data in the Form CMS 2552-10 cost reports 
from which to generate a meaningful analysis of the impact on CCRs 
associated with using the new MRI, CT, and cardiac catheterization cost 
centers. We provided the data analyses in Tables 2 and 3 of the 
proposed rule (and are republishing them below) demonstrating the 
changes as a result of including the distinct CCRs calculated from the 
new standard cost centers into the CY 2014 OPPS ratesetting process.
BILLING CODE 4120-01-P

[[Page 74842]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.262

[[Page 74843]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.263

BILLING CODE 4120-01-C
    In our CY 2014 OPPS/ASC proposed rule discussion, we noted that the 
estimated changes in geometric mean estimated APC cost of using data 
from the new standard cost centers for CT scans and MRIs appeared 
consistent with RTI's analysis of cost report and claims data in the 
July 2008 final report (pages 5 and 6). RTI concludes that ``in 
hospitals that aggregate data for CT scanning, MRI, or nuclear medicine 
services with the standard line for Diagnostic Radiology, costs for 
these services all appear substantially overstated, while the costs for 
plain films, ultrasound and other imaging procedures are 
correspondingly understated.'' We also noted that there were limited 
additional impacts in the implantable device-related APCs from adopting 
the new cost report form CMS 2552-10 because we had used data from the 
standard cost center for implantable medical devices in CY 2013 OPPS 
ratesetting, as discussed above.
    As we have indicated in prior rulemaking (77 FR 68223 through 
68225), once we have determined that cost report data for the new 
standard cost centers were sufficiently available, we would analyze 
that data and, if appropriate, we would propose to use the distinct 
CCRs for new standard cost centers described above in the calculation 
of the OPPS relative payment weights. As stated in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43550), we have conducted our analysis and 
concluded that we should develop distinct CCRs for each of the new cost 
centers and use them in ratesetting. Therefore, beginning in the CY 
2014 OPPS, we proposed to calculate the OPPS relative payment weights 
using distinct CCRs for cardiac catheterization, CT scan, and MRI and 
to continue using a distinct CCR for implantable medical devices. 
Section XXIII. of this final rule with comment period includes the 
impacts of calculating the CY 2014 OPPS relative payment weights using 
these new standard cost centers.
    Comment: Commenters generally supported the proposals to implement 
the standard cost center CCRs for implantable devices and cardiac 
catheterization. However, many commenters requested that CMS reconsider 
the impact of distinct CCRs for MRI and CT scan cost centers before 
adopting them. Various commenters opposed the implementation of 
distinct MRI and CT scan CCRs, expressing concern that doing so would 
result in very low CCRs for these services because of gross hospital 
cost reporting practices that allocate capital costs for MRIs and CT 
scans across the entire hospital, rather than to the appropriate CT 
scan and MRI cost centers. Specifically, commenters reported that some 
hospitals currently use an imprecise ``square feet'' allocation 
methodology for the costs of large moveable equipment like CT scan and 
MRI machines. They indicated that while CMS recommends using two 
alternative allocation methods, ``direct assignment'' or ``dollar 
value,'' as a more accurate methodology for directly assigning 
equipment costs, industry analysis suggests that approximately only 
half of the reported cost centers for CT scans and MRIs rely on these 
preferred methodologies. The commenters expressed concern that ``square 
feet'' allocation results in CCRs that lack face validity because the 
proposed CCRs for CT scans and MRIs are less than the proposed CCR for 
general diagnostic radiology, inaccurately reflecting the higher 
resources used for MRIs and CT scans relative to the less expensive 
plain film x-rays. These commenters also noted that, under the CY 2014 
OPPS proposed policy of using standard CT and MRI cost center data from 
the Medicare cost report Form CMS 2552-10, payment for certain x-rays 
would be similar to that

[[Page 74844]]

of CT imaging services, despite their belief that CT services would 
cost significantly more to perform. Other commenters suggested that if 
CMS were to finalize the new CCRs, CMS should only use cost report data 
that meet minimum data quality standards, such as only including: (1) 
Cost report data based on dollar value or direct assignment cost 
allocation methods; (2) ``plausible'' costs for CT and MRI cost 
centers; and (3) data when there is evidence of reclassified costs from 
diagnostic radiology to standard CT and MRI cost centers. Commenters 
also raised concerns with CMS' analysis and indicated that similarity 
of the APC payment impacts in the CY 2014 OPPS proposed rule and those 
in the RTI report did not confirm the validity of the proposed CCRs. 
Commenters asserted that more time is needed by hospitals to modify 
their cost reporting practices, while other commenters suggested that 
it was unrealistic to expect hospitals to adopt cost allocation methods 
that would improve the accuracy of the cost data at all, due to the 
significant expenses involved and the limited benefit to each 
individual hospital.
    Commenters also noted that the Deficit Reduction Act (DRA) of 2005 
sets the technical component (TC) of advanced imaging services under 
the Medicare Physician Fee Schedule (MPFS) to the lesser of: (1) The 
payment under the MPFS; or (2) the payment under the OPPS. The 
commenters stated that, as proposed, the separate cost centers for MRI 
and CT scans would result in significant cuts to the MPFS technical 
component payments and that such payment cuts could affect beneficiary 
access to care. The commenters urged CMS not to use the proposed CCRs 
for MRIs and CT scans until the payment effects have been thoroughly 
analyzed.
    Response: We appreciate the comments regarding the use of standard 
cost center CCRs for implantable devices, MRIs, CT scans, and cardiac 
catheterization. We appreciate the support for our proposal to use 
distinct CCRs for implantable devices and cardiac catheterization. We 
have reviewed the comments objecting to implementation of distinct CCRs 
for MRIs and CT scans. We note that the new standard cost centers for 
CT scans, MRIs, and cardiac catheterization have been in effect since 
cost reporting periods beginning on or after May 1, 2010, on the 
revised Medicare cost report Form CMS-2552-10. Therefore, the cost 
reports that we are using to develop the CY 2014 OPPS relative payment 
weights were either the first or the second opportunity for hospitals 
to submit cost reports with the new CT scan and MRI cost centers (lines 
57 and 58 of Worksheets A and C, Part I of the Form CMS-2552-10), 
depending on the hospital's cost reporting period. Simultaneous with 
implementing the new CT scan and MRI cost centers, in the FY 2011 IPPS/
LTCH PPS final rule (75 FR 50077) and the CY 2011 OPPS/ASC final rule 
(75 FR 71824), we also notified hospitals of the need and importance of 
properly reporting the capital costs of moveable equipment on the 
Medicare cost report.
    In the FY 2011 IPPS/LTCH PPS final rule (75 FR 50078), we explained 
that, in accordance with Section 104 of CMS Pub. 15-1, Chapter 1, CT 
scans and MRIs are major moveable equipment, and the costs should be 
reported together with the rest of the hospital's major moveable 
equipment cost in the Capital-Related Costs--Moveable Equipment cost 
centers on Worksheet A (lines 2 and 4 on the Form CMS-2552-96 and line 
2 on the Form CMS-2552-10). The costs in these cost centers are 
allocated to all the hospital's cost centers that use major moveable 
equipment (including CT and MRI), using ``dollar value'' (which is the 
``recommended'' or default statistical basis, in accordance with the 
cost reporting instructions contained in Section 4095 of CMS Pub. 15-2, 
for the Form CMS-2552-10). Alternatively, the hospital may have 
obtained the contractor's approval under Section 2313 of CMS Pub. 15-1 
to use the simplified cost allocation methodology known as ``square 
feet.'' However, a hospital that historically has been using ``square 
feet'' and is concerned that this method of allocation may result in 
inaccurate CCRs (on Worksheet C, Part I) for the CT scan, MRI, and 
other ancillary cost centers may request contractor approval in 
accordance with Section 2307 of the CMS Pub. 15-1 to use the ``direct 
assignment'' allocation method, and directly assign the cost of 
moveable equipment to all of the hospital's cost centers that use 
moveable equipment, including CT scans and MRIs, using the provider's 
routine accounting process. This would ensure that the cost of the CT 
scanning and MRI equipment would be reflected in the CCR that would be 
calculated for those departments and that would be used to estimate the 
cost of CT scan and MRI services. In any case, hospitals should correct 
their cost reporting practices to come into compliance with CMS' 
longstanding policy regarding the ``Capital-Related Costs--Moveable 
Equipment'' cost center, by either using the recommended statistical 
allocation method of ``dollar value'' for costs in Worksheet A, Column 
2 for Capital- Related Costs--Moveable Equipment or by requesting 
contractor approval in accordance with Section 2307 of CMS Pub. 15-1 to 
use the ``direct assignment'' allocation method. In the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53283), we reiterated this policy, and added 
that ``Hospitals that still need to correct their cost reporting 
practices in this regard should do so soon'' so that distinct CT and 
MRI cost center CCRs would accurately reflect the costs associated with 
providing those services.
    In the CY 2014 OPPS/ASC proposed rule, we provided information 
about the CT and MRI cost center CCRs and the estimated effects on APC 
payment of adopting those cost centers. We noted the similarities 
between our estimations and the RTI report results not only to 
demonstrate that they were generally consistent with each other, but to 
again note that any concerns and criticisms of the data and its 
corresponding impact on the payment rates would be the same as were 
expected when the report was initially published in July 2008, absent 
any improvements in cost reporting practice. We further note that some 
of the concerns that commenters described related to differentials in 
payment for plain film x-rays based on proposed CY 2014 OPPS payment 
rates being similar to those of the CT and MRI services have abated 
because the ancillary services and diagnostic tests on the bypass list 
packaging proposals are not being finalized for CY 2014. Various 
packaged items and services under those proposals may have created some 
of the estimated increase in service cost for plain film x-rays.
    While some commenters believe that it is unrealistic for hospitals 
to adopt cost allocation methods that improve data and payment 
accuracy, we believe that those recommended changes are critical in the 
shared goal of developing OPPS relative payment weights that accurately 
reflect service costs. We also believe that because approximately half 
of hospitals reporting either the new CT scan or MRI standard cost 
center thus far have adopted one of the more accurate cost allocation 
methods, other hospitals also should be able to do so. Of the 1,961 
hospitals reporting a new CT scan standard cost center, 1,055 hospitals 
reported using either ``direct assignment'' or ``dollar value'' as the 
cost allocation method. Similarly, of the 1,871 hospitals reporting a 
new MRI standard cost center, approximately 985 hospitals report using 
either ``direct assignment'' or ``dollar value'' as the

[[Page 74845]]

cost allocation method. Commenters have previously recognized the 
significant impact that the CT scan and MRI standard cost center data 
would have on multiple payment systems, and we believe that the 
significant effects of these data on payment should inherently 
encourage more accurate cost reporting (75 FR 71824). Standard cost 
centers for CT and MRI services were developed in the revised Medicare 
cost report Form CMS-2552-10 to more accurately capture the costs 
associated with providing these important services. Not including the 
cost report data derived from these cost centers in ratesetting with no 
future indication of improvement would be contrary to their purpose and 
our goal to develop OPPS relative payment weights that accurately 
reflect service costs.
    We have considered the public comments recommending that if CMS 
does finalize distinct CCRs for CT scans and MRIs for the OPPS relative 
payment weights, CMS adopt certain minimum quality standards, such as 
using only cost report data of hospitals that use either direct 
assignment or the dollar value statistical allocation method, have at 
least $250,000 of cost in the CT scan or MRI cost center, and have 
reclassified overhead costs from the diagnostic radiology cost center 
to the CT scan and/or MRI cost centers. We appreciate the commenters' 
shared concern surrounding the goal of using the best available 
information to estimated costs associated with these new standard cost 
centers.
    For the FY 2014 IPPS/LTCH PPS final rule, we did not agree with the 
adoption of commenters' suggested minimum data standards because doing 
so would have ignored the fact that many hospitals have chosen (at 
least up to this point) to employ the square feet statistical 
allocation methodology, perhaps for reasons unrelated to the costs of 
MRIs and CT scans, and, therefore, those data reflect, in large part, 
the best available data that we have. It also is not administratively 
feasible for CMS to determine, using HCRIS data, whether hospitals have 
reclassified overhead costs from the diagnostic radiology cost center 
to the CT scan and/or MRI cost centers. However, in the FY 2014 IPPS/
LTCH PPS final rule, we recognized that while only a fraction of the 
negative impact would be manifested in the IPPS MS-DRGs, the OPPS 
relative payment weights would be more significantly affected by the 
adoption of the new standard cost center CCRs (78 FR 50521).
    We took note of the many comments regarding the ramifications of 
developing distinct CT scan and MRI CCRs on beneficiary access to care 
and other payment systems. We understand that any such change could 
have significant payment impacts under the MPFS where the TC payment 
for many imaging services is capped at the OPPS payment. These 
significant payment effects based on adoption of the new CT scan and 
MRI standard cost center CCRs further underscore the need for accurate 
cost reporting for ratesetting purposes. Although these payment effects 
are significant, we do not believe that they would likely significantly 
affect beneficiary access to imaging because imaging is readily 
available at different sites of service and the magnitude of the 
payment effects are not so drastic that providers and suppliers of 
imaging would likely discontinue offering CT and MRI services.
    We appreciate the concerns expressed by the commenters related to 
payment changes of implementing these cost center CCRs, and the 
importance of not providing an incentive for hospitals to furnish, or 
not furnish, certain services. However, we are not convinced that 
further delay or further trimming of CCR values is necessary in order 
to implement all of the proposed CCRs. Although hospitals have been 
permitted to use the alternative basis cost allocation (that is, 
``square feet'') under Section 2313 of CMS Pub. 15-1, this methodology 
does not ensure precise CCRs for CT scans and MRIs. Therefore, we 
encouraged hospitals over the past several years to use the most 
precise cost reporting methods in response to the new cost report 
lines. Specifically, the longstanding cost report instructions 
contained in Section 4020 (previously Section 3617) of CMS Pub. 15-2 
state that ``The statistical basis shown at the top of each column on 
Worksheet B-1 is the recommended basis of allocation of the cost center 
indicated which must be used by all providers completing this form 
(Form CMS-2552-10), even if a basis of allocation other than the 
recommended basis of allocation was used in the previous iteration of 
the cost report (Form CMS-2552-96).'' Under Table 1 of the Medicare 
cost report, which lists the Record Specifications for the cost centers 
on Worksheet B-1, ``dollar value'' is specified as the recommended 
statistical allocation method for Column 2, Capital-Related Costs--
Moveable Equipment. While the ``dollar value'' statistical allocation 
method is more precise than ``square feet,'' to ensure even more 
precise CCRs for CT scans and MRIs, 90 days prior to the beginning of 
their next cost reporting period, hospitals may request permission from 
their Medicare contractors in accordance with Section 2307 of CMS Pub. 
15-1 to use the ``direct assignment'' allocation method on Worksheet B, 
Part II, Column 0. Although ``direct assignment'' is the preferred and 
most precise allocation method, hospitals that do not have the 
resources to directly assign the costs of every cost center are 
strongly encouraged to instead use the ``dollar value'' statistical 
allocation method. (We note that, under Section 2313 of CMS Pub. 15-1, 
hospitals not currently using ``dollar value'' should notify their 
contractor of their intention to switch their statistical allocation 
basis to ``dollar value'' at least 90 days prior to the end of a cost 
reporting period.) We also intend to communicate with the Medicare 
contractors to facilitate approval of hospitals' requests to switch 
from the square feet statistical allocation method to the ``direct 
assignment'' or ``dollar value'' allocation method for the costs of 
major moveable equipment. We believe that, by adopting more refined 
CCRs, we are fostering more careful cost reporting. Therefore, we 
generally do not believe that the concerns expressed by the commenters 
warrant further delay in implementing the proposed CCRs for CT scans 
and MRIs for use in OPPS ratesetting.
    However, we recognize the commenters' concerns with regard to the 
application of the new CT and MRI standard cost center CCRs and their 
use in OPPS ratesetting. As compared to the IPPS, there is increased 
sensitivity to the cost allocation method being used on the cost report 
forms for these new standard imaging cost centers under the OPPS due to 
the limited size of the OPPS payment bundles and because the OPPS 
applies the CCRs at the departmental level for cost estimation 
purposes. As a means of addressing the commenters' concerns related to 
the new CT and MRI standard cost centers, when calculating the CT and 
MRI cost center CCRs used to estimate costs for the CT and MRI APCs 
listed in Table 4 below, we removed all claims from providers that use 
``square feet'' as a cost allocation method. We identified providers 
using ``square feet'' as the cost allocation method by extracting HCRIS 
data on Worksheet B-1. Table 4 displays information about the relative 
effect on CT and MRI APC payments after removing cost data for 
providers that report CT and MRI standard cost centers using ``square 
feet'' as the cost allocation method. Table 5 below provides 
statistical values based on the CT and MRI standard cost center CCRs

[[Page 74846]]

using the different cost allocation methods.
[GRAPHIC] [TIFF OMITTED] TR10DE13.264

    As we have stated in prior rulemaking (77 FR 53281 through 53283 
and 77 FR 68224), once we determined that a sufficient amount of cost 
report data were available from which to generate a meaningful 
analysis, we would propose, and finalize if appropriate, the use of the 
distinct CCRs described above in the calculation of the OPPS relative 
payment weights. We believe that the analytic findings described in the 
proposed rule, and the volume of hospitals that have ``valid'' CCRs 
described above, computed using the July 2013 HCRIS update, support our 
original decision to create new cost centers and distinct CCRs for 
implantable devices, MRIs, CT scans,

[[Page 74847]]

and cardiac catheterization, and we see no reason to further delay 
implementation of the CCRs of each of these cost centers for the OPPS. 
Therefore, we are finalizing a policy for the CY 2014 OPPS to remove 
claims from providers that use a cost allocation method of ``square 
feet'' to calculate CCRs used to estimate costs associated with the CT 
and MRI APCs identified in Table 4. This change allows hospitals 
additional time to use one of the more accurate cost allocation 
methods, and thereby improve the accuracy of the CCRs on which the OPPS 
relative payment weights are developed. As part of this transitional 
policy to estimate the CT and MRI APC relative payment weights using 
only cost data from providers that do not use ``square feet'' as the 
cost allocation statistic, we will sunset this policy in 4 years once 
the updated cost report data become available for ratesetting purposes. 
We believe that 4 years is sufficient time for hospitals that have not 
done so to transition to a more accurate cost allocation method and for 
the related data to be available for ratesetting purposes. Therefore, 
in CY 2018, we will estimate the CT and MRI APC relative payment 
weights using cost data from all providers, regardless of the cost 
allocation statistic employed.
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to use data from the 
``Implantable Devices Charged to Patients'' and ``Cardiac 
Catheterization'' cost centers to create distinct CCRs for use in 
calculating the OPPS relative payment weights for CY 2014. For the 
``Magnetic Resonance Imaging (MRI)'' and ``Computed Tomography (CT) 
Scan'' APCs identified in Table 4 earlier in this section, we are 
modifying our proposal so that the final policy will remove claims from 
cost modeling for those providers using ``square feet'' as the cost 
allocation statistic.
2. Data Development Process and Calculation of Costs Used for 
Ratesetting
    In this section of this final rule with comment period, we discuss 
the use of claims to calculate the OPPS payment rates for CY 2014. The 
Hospital OPPS page on the CMS Web site on which this final rule with 
comment period is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) provides an 
accounting of claims used in the development of the final payment 
rates. That accounting provides additional detail regarding the number 
of claims derived at each stage of the process. In addition, below in 
this section we discuss the file of claims that comprises the data set 
that is available for purchase under a CMS data use agreement. The CMS 
Web site, http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, includes information about purchasing 
the ``OPPS Limited Data Set,'' which now includes the additional 
variables previously available only in the OPPS Identifiable Data Set, 
including ICD-9-CM diagnosis codes and revenue code payment amounts. 
This file is derived from the CY 2012 claims that were used to 
calculate the final payment rates for the CY 2014 OPPS.
    In the history of the OPPS, we have traditionally established the 
scaled relative weights on which payments are based using APC median 
costs, which is a process described in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74188). However, as discussed in more detail 
in section II.A.2.f. of the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68259 through 68271), we finalized the use of geometric 
mean costs to calculate the relative weights on which the CY 2013 OPPS 
payment rates were based. While this policy changed the cost metric on 
which the relative payments are based, the data process in general 
remained the same, under the methodologies that we used to obtain 
appropriate claims data and accurate cost information in determining 
estimated service cost. For CY 2014, as we proposed, we are continuing 
to use geometric mean costs to calculate the relative weights on which 
the CY 2014 OPPS payments rates are based.
    We used the methodology described in sections II.A.2.a. through 
II.A.2.f. of this final rule with comment period to calculate the costs 
we used to establish the relative weights used in calculating the OPPS 
payment rates for CY 2014 shown in Addenda A and B to this final rule 
with comment period (which are available via the Internet on the CMS 
Web site). 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.
    Comment: Commenters expressed concern with respect to the 
volatility of the OPPS payment rates from year to year. One commenter 
suggested a ``dampening policy'' that would limit declines in payment 
service from year to year.
    Response: As previously discussed in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68225), there are a number of factors 
that contribute to cost fluctuations from one year to the next, 
including (but not limited to) hospital behavior in adjusting mix of 
services, changes in hospital costs and charges each year resulting in 
changes to the CCRs, reassignments of HCPCS codes, changes to OPPS 
payment policy (for example, changes to packaging policies), and 
implementation of composite APCs. We cannot stabilize hospital-driven 
fundamental inputs to the calculation of OPPS payment rates. However, 
we have strived to resolve some of the other potential reasons for 
instability from year to year. Specifically, we continue to seek ways 
to use more claims data so that we have fewer APCs for which there are 
small numbers of single bills used to set the APC costs. Moreover, we 
have tried to eliminate APCs with very small numbers of single bills 
where we could do so. We recognize that changes to payment policies, 
such as the packaging of payment for ancillary and supportive services 
and the implementation of composite APCs, may contribute to volatility 
in payment rates in the short term. However, we believe that larger 
payment packages and bundles should help to stabilize payments in the 
long term by enabling us to use more claims data and by establishing 
payments for larger groups of services. Further, in seeking to mitigate 
fluctuations in the OPPS, we believe that implementing the policy 
suggested by the commenters would make payments less reflective of the 
true service costs. Limiting decreases to payments across all APCs in a 
budget neutral payment system could unfairly reduce the payments for 
other services due to the effects of the scaling that is necessary to 
maintain budget neutrality and would distort the relativity of payment 
that is based on the cost of all services.
a. Claims Preparation
    For this final rule with comment period, we used the CY 2012 
hospital outpatient claims processed through June 30, 2013, to 
calculate the geometric mean costs of APCs that underpin the relative 
payment weights for CY 2014. (For the proposed rule, we used CY 2012 
hospital outpatient claims processed through December 31, 2012.) To 
begin the calculation of the relative payment weights for CY 2014, we 
pulled all claims for outpatient services furnished in CY 2012 from the 
national claims history file. This is not the population of claims paid 
under the OPPS, but all outpatient claims (including, for example, 
critical access hospital (CAH) claims and hospital claims for clinical 
laboratory tests for persons who are neither inpatients nor outpatients 
of the hospital).

[[Page 74848]]

    We then excluded claims with condition codes 04, 20, 21, and 77 
because these are claims that providers submitted to Medicare knowing 
that no payment would be made. For example, providers submit claims 
with a condition code 21 to elicit an official denial notice from 
Medicare and document that a service is not covered. We then excluded 
claims for services furnished in Maryland, Guam, the U.S. Virgin 
Islands, American Samoa, and the Northern Mariana Islands because 
hospitals in those geographic areas are not paid under the OPPS, and, 
therefore, we do not use claims for services furnished in these areas 
in ratesetting.
    We divided the remaining claims into the three groups shown below. 
Groups 2 and 3 comprise the 125 million claims that contain hospital 
bill types paid under the OPPS.
    1. Claims that were not bill types 12X (Hospital Inpatient 
(Medicare Part B only)), 13X (Hospital Outpatient), 14X (Hospital--
Laboratory Services Provided to Nonpatients), or 76X (Clinic--Community 
Mental Health Center). Other bill types are not paid under the OPPS; 
therefore, these claims were not used to set OPPS payment.
    2. Claims that were bill types 12X, 13X or 14X. Claims with bill 
types 12X and 13X are hospital outpatient claims. Claims with bill type 
14X are laboratory specimen claims, of which we use a subset for the 
limited number of services in these claims that are paid under the 
OPPS.
    3. Claims that were bill type 76X (CMHC).
    To convert charges on the claims to estimated cost, we multiplied 
the charges on each claim by the appropriate hospital-specific CCR 
associated with the revenue code for the charge as discussed in section 
II.A.1.c. of this final rule with comment period. We then flagged and 
excluded CAH claims (which are not paid under the OPPS) and claims from 
hospitals with invalid CCRs. The latter included claims from hospitals 
without a CCR; those from hospitals paid an all-inclusive rate; those 
from hospitals with obviously erroneous CCRs (greater than 90 or less 
than 0.0001); and those from hospitals with overall ancillary CCRs that 
were identified as outliers (that exceeded +/-3 standard deviations 
from the geometric mean after removing error CCRs). In addition, we 
trimmed the CCRs at the cost center (that is, departmental) level by 
removing the CCRs for each cost center as outliers if they exceeded +/- 
3 standard deviations from the geometric mean. We used a four-tiered 
hierarchy of cost center CCRs, which is the revenue code-to-cost center 
crosswalk, to match a cost center to every possible revenue code 
appearing in the outpatient claims that is relevant to OPPS services, 
with the top tier being the most common cost center and the last tier 
being the default CCR. If a hospital's cost center CCR was deleted by 
trimming, we set the CCR for that cost center to ``missing'' so that 
another cost center CCR in the revenue center hierarchy could apply. If 
no other cost center CCR could apply to the revenue code on the claim, 
we used the hospital's overall ancillary CCR for the revenue code in 
question as the default CCR. For example, if a visit was reported under 
the clinic revenue code but the hospital did not have a clinic cost 
center, we mapped the hospital-specific overall ancillary CCR to the 
clinic revenue code. The revenue code-to-cost center crosswalk is 
available for inspection on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Revenue codes that we do not use in establishing relative 
costs or to model impacts are identified with an ``N'' in the revenue 
code-to-cost center crosswalk.
    We applied the CCRs as described above to claims with bill type 
12X, 13X, or 14X, excluding all claims from CAHs and hospitals in 
Maryland, Guam, the U.S. Virgin Islands, American Samoa, and the 
Northern Mariana Islands and claims from all hospitals for which CCRs 
were flagged as invalid.
    We identified claims with condition code 41 as partial 
hospitalization services of hospitals and moved them to another file. 
We note that the separate file containing partial hospitalization 
claims is included in the files that are available for purchase as 
discussed above.
    We then excluded claims without a HCPCS code. We moved to another 
file claims that contained only influenza and pneumococcal pneumonia 
(PPV) vaccines. Influenza and PPV vaccines are paid at reasonable cost; 
therefore, these claims are not used to set OPPS rates.
    We next copied line-item costs for drugs, blood, and brachytherapy 
sources to a separate file (the lines stay on the claim, but are copied 
onto another file). No claims were deleted when we copied these lines 
onto another file. These line-items are used to calculate a per unit 
arithmetic and geometric mean and median cost and a per day arithmetic 
and geometric mean and median cost for drugs and nonimplantable 
biologicals, therapeutic radiopharmaceutical agents, and brachytherapy 
sources, as well as other information used to set payment rates, such 
as a unit-to-day ratio for drugs.
    Prior to CY 2013, our payment policy for nonpass-through separately 
paid drugs and biologicals was based on a redistribution methodology 
that accounted for pharmacy overhead by allocating cost from packaged 
drugs to separately paid drugs. This methodology typically would have 
required us to reduce the cost associated with packaged coded and 
uncoded drugs in order to allocate that cost. However, for CY 2013, we 
paid for separately payable drugs and biologicals under the OPPS at 
ASP+6 percent, based upon the statutory default described in section 
1833(t)(14)(A)(iii)(II) of the Act. Under that policy, we did not 
redistribute the pharmacy overhead costs from packaged drugs to 
separately paid drugs. For the CY 2014 OPPS, as we proposed, we are 
continuing the CY 2013 payment policy for separately payable drugs and 
biologicals. We refer readers to section V.B.3. of this final rule with 
comment period for a complete discussion of our CY 2014 final payment 
policy for separately paid drugs and biologicals.
    We then removed line-items that were not paid during claim 
processing, presumably for a line-item rejection or denial. The number 
of edits for valid OPPS payment in the Integrated Outpatient Code 
Editor (I/OCE) and elsewhere has grown significantly in the past few 
years, especially with the implementation of the full spectrum of 
National Correct Coding Initiative (NCCI) edits. To ensure that we are 
using valid claims that represent the cost of payable services to set 
payment rates, we removed line-items with an OPPS status indicator that 
were not paid during claims processing in the claim year, but have a 
status indicator of ``S,'' ``T,'' ``V,'' or ``X,'' in the prospective 
year's payment system. This logic preserves charges for services that 
would not have been paid in the claim year but for which some estimate 
of cost is needed for the prospective year, such as services newly 
removed from the inpatient list for CY 2013 that were assigned status 
indicator ``C'' in the claim year. It also preserves charges for 
packaged services so that the costs can be included in the cost of the 
services with which they are reported, even if the CPT codes for the 
packaged services were not paid because the service is part of another 
service that was reported on the same claim or the code otherwise 
violates claims processing edits.
    For CY 2014, as we proposed, we are continuing the policy we 
implemented for CY 2013 to exclude line-item data for pass-through 
drugs and biologicals

[[Page 74849]]

(status indicator ``G'' for CY 2012) and nonpass-through drugs and 
biologicals (status indicator ``K'' for CY 2012) where the charges 
reported on the claim for the line were either denied or rejected 
during claims processing. Removing lines that were eligible for payment 
but were not paid ensures that we are using appropriate data. The trim 
avoids using cost data on lines that we believe were defective or 
invalid because those rejected or denied lines did not meet the 
Medicare requirements for payment. For example, edits may reject a line 
for a separately paid drug because the number of units billed exceeded 
the number of units that would be reasonable and, therefore, is likely 
a billing error (for example, a line reporting 55 units of a drug for 
which 5 units is known to be a fatal dose). As with our trimming in the 
CY 2013 OPPS/ASC final rule with comment period (77 FR 68226) of line-
items with a status indicator of ``S,'' ``T,'' ``V,'' or ``X,'' we 
believe that unpaid line-items represent services that are invalidly 
reported and, therefore, should not be used for ratesetting. We believe 
that removing lines with valid status indicators that were edited and 
not paid during claims processing increases the accuracy of the data 
used for ratesetting purposes.
    For the CY 2014 OPPS, as part of our packaging of certain clinical 
diagnostic laboratory tests, we also apply the line item trim to these 
services if they did not receive payment in the claims year. Removing 
these lines ensures that, in establishing the CY 2014 OPPS relative 
payments weights, we appropriately allocate the costs associated with 
packaging these services. For a more detailed discussion of the final 
policy to package certain clinical diagnostic laboratory tests, we 
refer readers to section II.A.3.b.(3) of this final rule with comment 
period.
b. Splitting Claims and Creation of ``Pseudo'' Single Procedure Claims
(1) Splitting Claims
    For the CY 2014 OPPS, we then split the remaining claims into five 
groups: single majors; multiple majors; single minors; multiple minors; 
and other claims. (Specific definitions of these groups are presented 
below.) We note that, under the final CY 2014 OPPS packaging policy, we 
are not deleting status indicator ``X'' and not revising the title and 
description of status indicator ``Q1'' to reflect that deletion, as 
discussed in sections II.A.3. and XI. of this final rule with comment 
period. For CY 2014, as we proposed, we are continuing our current 
policy of defining major procedures as any HCPCS code having a status 
indicator of ``S,'' ``T,'' or ``V''; defining minor procedures as any 
code having a status indicator of ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' 
``R,'' ``U,'' or ``N''; and classifying ``other'' procedures as any 
code having a status indicator other than one that we have classified 
as major or minor. For CY 2014, we had originally proposed to delete 
status indicator ``X'' as part of our proposal to package ancillary 
services under that status indicator. However, as discussed in section 
II.A.3. of this final rule with comment period, we are not establishing 
that policy in CY 2014 and may reexamine that policy in the future. 
Therefore, for CY 2014, we are defining HCPCS codes having a status 
indicator of ``X'' as major procedure, due to the retention of the 
status indicator. For CY 2014, we are continuing to assign status 
indicator ``R'' to blood and blood products; status indicator ``U'' to 
brachytherapy sources; status indicator ``Q1'' to all ``STVX-packaged 
codes''; status indicator ``Q2'' to all ``T-packaged codes''; and 
status indicator ``Q3'' to all codes that may be paid through a 
composite APC based on composite-specific criteria or paid separately 
through single code APCs when the criteria are not met.
    As discussed in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68709), we established status indicators ``Q1,'' ``Q2,'' and 
``Q3'' to facilitate identification of the different categories of 
codes. As we proposed, we are treating these codes in the same manner 
for data purposes for CY 2014 as we have treated them since CY 2008. 
Specifically, we are continuing to evaluate whether the criteria for 
separate payment of codes with status indicator ``Q1'' or ``Q2'' are 
met in determining whether they are treated as major or minor codes. 
Codes with status indicator ``Q1'' or ``Q2'' are carried through the 
data either with status indicator ``N'' as packaged or, if they meet 
the criteria for separate payment, they are given the status indicator 
of the APC to which they are assigned and are considered as ``pseudo'' 
single procedure claims for major codes. Codes assigned status 
indicator ``Q3'' are paid under individual APCs unless they occur in 
the combinations that qualify for payment as composite APCs and, 
therefore, they carry the status indicator of the individual APC to 
which they are assigned through the data process and are treated as 
major codes during both the split and ``pseudo'' single creation 
process. The calculation of the geometric mean costs for composite APCs 
from multiple procedure major claims is discussed in section II.A.2.f. 
of this final rule with comment period.
    Specifically, we divided the remaining claims into the following 
five groups:
    1. Single Procedure Major Claims: Claims with a single separately 
payable procedure (that is, status indicator ``S,'' ``T,'' ``V,'' or 
``X'' which includes codes with status indicator ``Q3''); claims with 
one unit of a status indicator ``Q1'' code (``STVX-packaged'') where 
there was no code with status indicator ``S,'' ``T,'' ``V,'' or ``X'' 
on the same claim on the same date; or claims with one unit of a status 
indicator ``Q2'' code (``T-packaged'') where there was no code with a 
status indicator ``T'' on the same claim on the same date.
    2. Multiple Procedure Major Claims: Claims with more than one 
separately payable procedure (that is, status indicator ``S,'' ``T,'' 
``V,'' or ``X'' which includes codes with status indicator ``Q3''), or 
multiple units of one payable procedure. These claims include those 
codes with a status indicator ``Q2'' code (``T-packaged'') where there 
was no procedure with a status indicator ``T'' on the same claim on the 
same date of service but where there was another separately paid 
procedure on the same claim with the same date of service (that is, 
another code with status indicator ``S,'' ``V,'' or ``X''). We also 
include in this set claims that contained one unit of one code when the 
bilateral modifier was appended to the code and the code was 
conditionally or independently bilateral. In these cases, the claims 
represented more than one unit of the service described by the code, 
notwithstanding that only one unit was billed.
    3. Single Procedure Minor Claims: Claims with a single HCPCS code 
that was assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' ``L,'' 
``R,'' ``U,'' or ``N'' and not status indicator ``Q1'' (``STVX-
packaged'') or status indicator ``Q2'' (``T-packaged'') code.
    4. Multiple Procedure Minor Claims: Claims with multiple HCPCS 
codes that are assigned status indicator ``F,'' ``G,'' ``H,'' ``K,'' 
``L,'' ``R,'' ``U,'' or ``N''; claims that contain more than one code 
with status indicator ``Q1'' (``STVX-packaged'') or more than one unit 
of a code with status indicator ``Q1'' but no codes with status 
indicator ``S,'' ``T,'' ``V,'' or ``X'' on the same date of service; or 
claims that contain more than one code with status indicator ``Q2'' (T-
packaged), or ``Q2'' and ``Q1,'' or more than one unit of a code with 
status indicator ``Q2'' but no code with status indicator ``T'' on the 
same date of service.

[[Page 74850]]

    5. Non-OPPS Claims: Claims that contain no services payable under 
the OPPS (that is, all status indicators other than those listed for 
major or minor status). These claims were excluded from the files used 
for the OPPS. Non-OPPS claims have codes paid under other fee 
schedules, for example, durable medical equipment, and do not contain a 
code for a separately payable or packaged OPPS service. Non-OPPS claims 
include claims for therapy services paid sometimes under the OPPS but 
billed, in these non-OPPS cases, with revenue codes indicating that the 
therapy services would be paid under the Medicare Physician Fee 
Schedule (MPFS).
    The claims listed in numbers 1, 2, 3, and 4 above are included in 
the data file that can be purchased as described above. Claims that 
contain codes to which we have assigned status indicators ``Q1'' 
(``STVX-packaged'') and ``Q2'' (``T-packaged'') appear in the data for 
the single major file, the multiple major file, and the multiple minor 
file used for ratesetting. Claims that contain codes to which we have 
assigned status indicator ``Q3'' (composite APC members) appear in both 
the data of the single and multiple major files used in this final rule 
with comment period, depending on the specific composite calculation.
(2) Creation of ``Pseudo'' Single Procedure Claims
    To develop ``pseudo'' single procedure claims for this final rule 
with comment period, we examined both the multiple procedure major 
claims and the multiple procedure minor claims. We first examined the 
multiple major procedure claims for dates of service to determine if we 
could break them into ``pseudo'' single procedure claims using the 
dates of service for all lines on the claim. If we could create claims 
with single major procedures by using dates of service, we created a 
single procedure claim record for each separately payable procedure on 
a different date of service (that is, a ``pseudo'' single procedure 
claim).
    As proposed, we also use the bypass codes listed in Addendum N to 
this final rule with comment period (which is available via the 
Internet on our Web site) and discussed in section II.A.1.b. of this 
final rule with comment period to remove separately payable procedures 
which we determined contained limited or no packaged costs or that were 
otherwise suitable for inclusion on the bypass list from a multiple 
procedure bill. As discussed above, we ignore the ``overlap bypass 
codes,'' that is, those HCPCS codes that are both on the bypass list 
and are members of the multiple imaging composite APCs, in this initial 
assessment for ``pseudo'' single procedure claims. The final CY 2014 
``overlap bypass codes'' are listed in Addendum N to this final rule 
with comment period (which is available via the Internet on the CMS Web 
site). When one of the two separately payable procedures on a multiple 
procedure claim was on the bypass list, we split the claim into two 
``pseudo'' single procedure claim records. The single procedure claim 
record that contained the bypass code did not retain packaged services. 
The single procedure claim record that contained the other separately 
payable procedure (but no bypass code) retained the packaged revenue 
code charges and the packaged HCPCS code charges. We also removed lines 
that contained multiple units of codes on the bypass list and treated 
them as ``pseudo'' single procedure claims by dividing the cost for the 
multiple units by the number of units on the line. If one unit of a 
single, separately payable procedure code remained on the claim after 
removal of the multiple units of the bypass code, we created a 
``pseudo'' single procedure claim from that residual claim record, 
which retained the costs of packaged revenue codes and packaged HCPCS 
codes. This enabled us to use claims that would otherwise be multiple 
procedure claims and could not be used.
    We then assessed the claims to determine if the criteria for the 
multiple imaging composite APCs, discussed in section II.A.2.f.(5) of 
this final rule with comment period, were met. If the criteria for the 
imaging composite APCs were met, we created a ``single session'' claim 
for the applicable imaging composite service and determined whether we 
could use the claim in ratesetting. For HCPCS codes that are both 
conditionally packaged and are members of a multiple imaging composite 
APC, we first assessed whether the code would be packaged and, if so, 
the code ceased to be available for further assessment as part of the 
composite APC. Because the packaged code would not be a separately 
payable procedure, we considered it to be unavailable for use in 
setting the composite APC costs on which the CY 2014 OPPS relative 
payment weights are based. Having identified ``single session'' claims 
for the imaging composite APCs, we reassessed the claim to determine 
if, after removal of all lines for bypass codes, including the 
``overlap bypass codes,'' a single unit of a single separately payable 
code remained on the claim. If so, we attributed the packaged costs on 
the claim to the single unit of the single remaining separately payable 
code other than the bypass code to create a ``pseudo'' single procedure 
claim. We also identified line-items of overlap bypass codes as a 
``pseudo'' single procedure claim. This allowed us to use more claims 
data for ratesetting purposes.
    As we proposed, we also examined the multiple procedure minor 
claims to determine whether we could create ``pseudo'' single procedure 
claims. Specifically, where the claim contained multiple codes with 
status indicator ``Q1'' (``STVX-packaged'') on the same date of service 
or contained multiple units of a single code with status indicator 
``Q1,'' we selected the status indicator ``Q1'' HCPCS code that had the 
highest CY 2013 relative payment weight, and set the units to one on 
that HCPCS code to reflect our policy of paying only one unit of a code 
with a status indicator of ``Q1.'' We then packaged all costs for the 
following into a single cost for the ``Q1'' HCPCS code that had the 
highest CY 2013 relative payment weight to create a ``pseudo'' single 
procedure claim for that code: additional units of the status indicator 
``Q1'' HCPCS code with the highest CY 2013 relative payment weight; 
other codes with status indicator ``Q1''; and all other packaged HCPCS 
codes and packaged revenue code costs. We changed the status indicator 
for the selected code from the data status indicator of ``N'' to the 
status indicator of the APC to which the selected procedure was 
assigned for further data processing and considered this claim as a 
major procedure claim. We used this claim in the calculation of the APC 
geometric mean cost for the status indicator ``Q1'' HCPCS code.
    Similarly, if a multiple procedure minor claim contained multiple 
codes with status indicator ``Q2'' (``T-packaged'') or multiple units 
of a single code with status indicator ``Q2,'' we selected the status 
indicator ``Q2'' HCPCS code that had the highest CY 2013 relative 
payment weight and set the units to one on that HCPCS code to reflect 
our policy of paying only one unit of a code with a status indicator of 
``Q2.'' We then packaged all costs for the following into a single cost 
for the ``Q2'' HCPCS code that had the highest CY 2013 relative payment 
weight to create a ``pseudo'' single procedure claim for that code: 
additional units of the status indicator ``Q2'' HCPCS code with the 
highest CY 2013 relative payment weight; other codes with status 
indicator ``Q2''; and other packaged HCPCS codes and packaged revenue

[[Page 74851]]

code costs. We changed the status indicator for the selected code from 
a data status indicator of ``N'' to the status indicator of the APC to 
which the selected code was assigned, and we considered this claim as a 
major procedure claim.
    If a multiple procedure minor claim contained multiple codes with 
status indicator ``Q2'' (``T-packaged'') and status indicator ``Q1'' 
(``STVX-packaged''), we selected the T-packaged status indicator ``Q2'' 
HCPCS code that had the highest relative payment weight for CY 2013 and 
set the units to one on that HCPCS code to reflect our policy of paying 
only one unit of a code with a status indicator of ``Q2.'' We then 
packaged all costs for the following into a single cost for the 
selected (``T-packaged'') HCPCS code to create a ``pseudo'' single 
procedure claim for that code: additional units of the status indicator 
``Q2'' HCPCS code with the highest CY 2013 relative payment weight; 
other codes with status indicator ``Q2''; codes with status indicator 
``Q1'' (``STVX-packaged''); and other packaged HCPCS codes and packaged 
revenue code costs. We selected status indicator ``Q2'' HCPCS codes 
instead of ``Q1'' HCPCS codes because ``Q2'' HCPCS codes have higher CY 
2013 relative payment weights. If a status indicator ``Q1'' HCPCS code 
had a higher CY 2013 relative payment weight, it became the primary 
code for the simulated single bill process. We changed the status 
indicator for the selected status indicator ``Q2'' (``T-packaged'') 
code from a data status indicator of ``N'' to the status indicator of 
the APC to which the selected code was assigned and we considered this 
claim as a major procedure claim.
    We then applied our process for creating ``pseudo'' single 
procedure claims to the conditionally packaged codes that do not meet 
the criteria for packaging, which enabled us to create single procedure 
claims from them, if they met the criteria for single procedure claims. 
Conditionally packaged codes are identified using status indicators 
``Q1'' and ``Q2,'' and are described in section XI.A. of this final 
rule with comment period.
    Lastly, we excluded those claims that we were not able to convert 
to single procedure claims even after applying all of the techniques 
for creation of ``pseudo'' single procedure claims to multiple 
procedure major claims and to multiple procedure minor claims. As has 
been our practice in recent years, we also excluded claims that 
contained codes that were viewed as independently or conditionally 
bilateral and that contained the bilateral modifier (Modifier 50 
(Bilateral procedure)) because the line-item cost for the code 
represented the cost of two units of the procedure, notwithstanding 
that hospitals billed the code with a unit of one.
    We proposed to continue to apply the methodology described above 
for the purpose of creating ``pseudo'' single procedure claims for the 
CY 2014 OPPS.
    We did not receive any public comments on this proposal, and 
therefore are finalizing our proposal to continue to apply the 
methodology described above for the purpose of creating ``pseudo'' 
single procedure claims for the CY 2014 OPPS.
c. Completion of Claim Records and Geometric Mean Cost Calculations
(1) General Process
    We then packaged the costs of packaged HCPCS codes (codes with 
status indicator ``N'' listed in Addendum B to this final rule with 
comment period (which is available via the Internet on the CMS Web 
site) and the costs of those lines for codes with status indicator 
``Q1'' or ``Q2'' when they are not separately paid), and the costs of 
the services reported under packaged revenue codes in Table 6 below 
that appeared on the claim without a HCPCS code into the cost of the 
single major procedure remaining on the claim. For a more complete 
discussion of our final CY 2014 OPPS packaging policy, we refer readers 
to section II.A.3. of this final rule with comment period.
    As noted in the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66606), for the CY 2008 OPPS, we adopted an APC Panel recommendation 
that CMS should review the final list of packaged revenue codes for 
consistency with OPPS policy and ensure that future versions of the I/
OCE edit accordingly. As we have in the past, and as we proposed, we 
are continuing to compare the final list of packaged revenue codes that 
we adopt for CY 2014 to the revenue codes that the I/OCE will package 
for CY 2014 to ensure consistency.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68531), we replaced the NUBC standard abbreviations for the revenue 
codes listed in Table 2 of the CY 2009 OPPS/ASC proposed rule with the 
most current NUBC descriptions of the revenue code categories and 
subcategories to better articulate the meanings of the revenue codes 
without changing the list of revenue codes. In the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60362 through 60363), we 
finalized changes to the packaged revenue code list based on our 
examination of the updated NUBC codes and public comment on the CY 2010 
proposed list of packaged revenue codes.
    For CY 2014, as we did for CY 2013, we reviewed the changes to 
revenue codes that were effective during CY 2012 for purposes of 
determining the charges reported with revenue codes but without HCPCS 
codes that we proposed to package for CY 2014. We believe that the 
charges reported under the revenue codes listed in Table 6 below 
continue to reflect ancillary and supportive services for which 
hospitals report charges without HCPCS codes. Therefore, for CY 2014, 
we proposed to continue to package the costs that we derive from the 
charges reported without HCPCS codes under the revenue codes displayed 
in Table 6 below for purposes of calculating the geometric mean costs 
on which the final CY 2014 OPPS/ASC payment rates are based.
    Comment: One commenter recommended that CMS consider examining 
revenue codes not currently on the list of CY 2014 packaged revenue 
codes for potential addition to the list of packaged revenue codes. The 
commenter stated that with increased packaging of ancillary and 
adjunctive services, it becomes more important to ensure that all OPPS 
service costs are packaged into the pertinent OPPS furnished service.
    Response: In the CY 2010 OPPS/ASC proposed rule and the final rule 
with comment period, we reviewed the revenue code-to-cost center 
crosswalk and the revenue codes which are considered for use in OPPS 
ratesetting. Although there was an extensive discussion in the CY 2010 
OPPS/ASC final rule with comment period about the use of revenue codes 
in OPPS ratesetting, we did not receive any public comments regarding 
additions or removals of revenue codes from the packaged revenue code 
list (78 FR 43554). Similarly, commenters' specific concerns have 
typically been isolated to the adoption of the new standard cost center 
CCRs in the Medicare cost report Form CMS-2552-10. However, we 
recognize the commenter's concern and believe that an examination of 
both the current packaged revenue code list and potential addition or 
removal of revenue codes in the future may be worth performing.
    After consideration of the public comments we received, we are 
finalizing the proposed packaged revenue codes for CY 2014, which are 
identified in Table 6 below, without

[[Page 74852]]

modification. We note that these revenue codes include only revenue 
codes that were in effect in CY 2012, the year of the claims data on 
which the final CY 2014 OPPS payment rates are based.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
    In accordance with our longstanding policy, we proposed to continue 
to exclude: (1) Claims that had zero costs after summing all costs on 
the claim; and (2) claims containing packaging flag number 3. Effective 
for services furnished on or after July 1, 2004, the I/OCE assigned 
packaging flag number 3 to claims on which hospitals submitted token 
charges less than $1.01 for a service with status indicator ``S'' or 
``T'' (a major separately payable service under the OPPS) for which the 
fiscal intermediary or Medicare administrative contractor (MAC) was 
required to allocate the sum of charges for services with a status 
indicator equaling ``S'' or ``T'' based on the relative payment weight 
of the APC to which each code was assigned. We do not believe that 
these charges, which were token charges as submitted by the hospital, 
are valid reflections of hospital resources. Therefore, we deleted 
these claims. We also deleted claims for which the charges equaled the 
revenue center payment (that is, the Medicare payment) on the 
assumption that, where the charge equaled the payment, to apply a CCR 
to the charge would not yield a valid estimate of relative provider 
cost. We proposed to continue these processes for the CY 2014 OPPS.
    For the remaining claims, we proposed to then standardize 60 
percent of the costs of the claim (which we have previously determined 
to be the labor-related portion) for geographic differences in labor 
input costs. We made this adjustment by determining the wage index that 
applied to the hospital that furnished the service and dividing the 
cost for the separately paid HCPCS code furnished by the hospital by 
that wage index. The claims accounting that we provide for the proposed 
and final rule contains the

[[Page 74855]]

formula we use to standardize the total cost for the effects of the 
wage index. As has been our policy since the inception of the OPPS, we 
proposed to use the pre-reclassified wage indices for standardization 
because we believe that they better reflect the true costs of items and 
services in the area in which the hospital is located than the post-
reclassification wage indices and, therefore, would result in the most 
accurate unadjusted geometric mean costs.
    In accordance with our longstanding practice, we also proposed to 
exclude single and ``pseudo'' single procedure claims for which the 
total cost on the claim was outside 3 standard deviations from the 
geometric mean of units for each HCPCS code on the bypass list 
(because, as discussed above, we used claims that contain multiple 
units of the bypass codes).
    After removing claims for hospitals with error CCRs, claims without 
HCPCS codes, claims for immunizations not covered under the OPPS, and 
claims for services not paid under the OPPS, approximately 119 million 
claims were left. Using these approximately 119 million claims, we 
created approximately 125 million single and ``pseudo'' single 
procedure claims, of which we used approximately 124 million single 
bills (after trimming out approximately 1 million claims as discussed 
in section II.A.1.a. of this final rule with comment period) in the CY 
2014 geometric mean cost development and ratesetting.
    As discussed above, the OPPS has historically developed the 
relative weights on which APC payments are based using APC median 
costs. For the CY 2013 OPPS, we calculated the APC relative payment 
weights using geometric mean costs, and we do the same for CY 2014. 
Therefore, the following discussion of the 2 times rule violation and 
the development of the relative payment weight refers to geometric 
means. For more detail about the CY 2014 OPPS/ASC policy to calculate 
relative payment weights based on geometric means, we refer readers to 
section II.A.2.f. of this final rule with comment period.
    We proposed to use these claims to calculate the CY 2014 geometric 
mean costs for each separately payable HCPCS code and each APC. The 
comparison of HCPCS code-specific and APC geometric mean costs 
determines the applicability of the 2 times rule. Section 1833(t)(2) of 
the Act provides that, subject to certain exceptions, the items and 
services within an APC group shall not be treated as 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 within the 
group is more than 2 times greater than the lowest median cost (or mean 
cost, if so elected) for an item or service within the same group (the 
2 times rule). While we have historically applied the 2 times rule 
based on median costs, in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68270), as part of the CY 2013 policy to develop the OPPS 
relative payment weights based on geometric mean costs, we also applied 
the 2 times rule based on geometric mean costs. For the CY 2014 OPPS, 
we are continuing to develop the APC relative payment weights based on 
geometric mean costs.
    We note that, for purposes of identifying significant HCPCS codes 
for examination in the 2 times rule, we consider codes that have more 
than 1,000 single major claims or codes that have both greater than 99 
single major claims and contribute at least 2 percent of the single 
major claims used to establish the APC geometric mean cost to be 
significant. This longstanding definition of when a HCPCS code is 
significant for purposes of the 2 times rule was selected because we 
believe that a subset of 1,000 claims is negligible within the set of 
approximately 124 million single procedure or single session claims we 
use for establishing geometric mean costs. Similarly, a HCPCS code for 
which there are fewer than 99 single bills and which comprises less 
than 2 percent of the single major claims within an APC will have a 
negligible impact on the APC geometric mean. We note that this method 
of identifying significant HCPCS codes within an APC for purposes of 
the 2 times rule was used in prior years under the median-based cost 
methodology. Under our proposed CY 2014 policy to continue to base the 
relative payment weights on geometric mean costs, we believe that this 
same consideration for identifying significant HCPCS codes should apply 
because the principles are consistent with their use in the median-
based cost methodology. Unlisted codes are not used in establishing the 
percent of claims contributing to the APC, nor are their costs used in 
the calculation of the APC geometric mean. Finally, we reviewed the 
geometric mean costs for the services for which we pay separately under 
this final rule with comment period, and we reassigned HCPCS codes to 
different APCs where it was necessary to ensure clinical and resource 
homogeneity within the APCs. The APC geometric means were recalculated 
after we reassigned the affected HCPCS codes. Both the HCPCS code-
specific geometric means and the APC geometric means were weighted to 
account for the inclusion of multiple units of the bypass codes in the 
creation of ``pseudo'' single procedure claims.
    Comment: Several commenters remarked on the quality of the data and 
the degree to which technical errors caused modeling problems 
throughout the rest of the system. These commenters believed that CMS 
did not provide adequate data to allow hospitals to assess the impact 
of the major revisions. Commenters also commented on the complexity 
inherently in the payment system and increased by the many interactions 
between various proposed and existing policies. These commenters 
remarked that CMS had not fully explained the impacts of each proposal 
in a manner that would allow stakeholders to provide meaningful input. 
Based on the assertions about a lack of transparency, impact analysis, 
guidance on how rates were developed, policy details, technical errors, 
etc., commenters suggested that those proposals be delayed until more 
accurate and detailed information was available. Other commenters 
stated that CMS had ignored previous HOP Panel suggestions on analyzing 
the impact of expanded packaging policies, and believed that the 
potential for unintended downstream consequences existed.
    Response: We appreciate the commenters' concerns with regards to 
the complexity of modeling the OPPS. There are many interactions 
between the various goals and pieces of the payment system. For 
example, as discussed in section II.A.1.b. of this final rule with 
comment period, the goal of extracting more data from the available 
claims through the bypass list process is also balanced by the impact 
of any packaged costs that may be redistributed as a result of that 
data process. In developing the CY 2014 OPPS/ASC proposed rule, we 
strived to provide as accurate information as possible with regard to 
the calculated rates. We discovered that, in the process of applying 
established and proposed methodologies to develop the CY 2014 proposed 
OPPS and ASC payment rates, specific cost estimation errors occurred in 
the OPPS modeling process. We released corrected data files on August 
28, 2013, and extended the comment period to September 16, 2013, on the 
technical corrections noted in the correcting document published in the 
Federal Register on September 6, 2013 (78 FR 54842). While, in a budget 
neutral system, changes to any OPPS

[[Page 74856]]

relative payment weights have redistributional effects throughout the 
system, any policy change or data update has the potential to do the 
same. Therefore, the technical corrections described in the correcting 
document were made to address issues where the calculated payment rates 
were not appropriately reflective of the proposed policies. While, as 
discussed in the correcting document to the CY 2014 OPPS/ASC proposed 
rule, new proposed visit APC 0634 contained a technical error that 
excluded certain packaged costs from the APC, the fact that we proposed 
to use APC 0634 as the baseline APC for scaling the aggregate CY 2014 
OPPS weight for budget neutrality, did not distort the relativity of 
the OPPS payment weights. As discussed in section II.A.4. of this final 
rule with comment period, the selection of the base APC or any other 
number, from which to establish the relative payment weights, does not 
have an impact because OPPS weights are scaled for budget neutrality.
    With regard to the adequacy of available data, each year, CMS makes 
available an extensive amount of OPPS data that can be used for any 
data analysis an interested party would care to perform. Specifically, 
we make available a considerable amount of data for public analysis 
each year through the supporting data files that are posted on the CMS 
Web site in association with the display of the proposed and final 
rules. In addition, we make available the public use files of claims, 
including, for CY 2008 and later, supplemental line item cost data for 
every HCPCS code under the OPPS and a detailed narrative description of 
our data process for the annual OPPS/ASC proposed and final rules that 
the public can use to perform any desired analyses. Therefore, we 
believe commenters are able to examine and analyze these data to 
develop specific information to assess the impact and effect of 
packaging for the services of interest to them. This information is 
available to support their requests for changes to payments under the 
OPPS, whether with regard to separate payment for a packaged service or 
other issues. We understand that the OPPS is a complex payment system 
and that it may be difficult to determine the quantitative amount of 
packaged cost included in the geometric mean cost for every independent 
service. However, commenters routinely provide us with meaningful 
analyses at a very detailed and service-specific level based on the 
claims data we make available. We routinely receive complex and 
detailed public comments, including extensive code-specific data 
analysis on packaged and separately paid codes using the data from this 
and prior proposed and final rules. Among the public comments received 
in response to the CY 2014 OPPS/ASC proposed rule, we received many 
detailed public comments that included data analysis.
    We disagree that the CY 2014 OPPS policy proposals should be 
delayed as a result of the data concerns that commenters have raised. 
While we are sympathetic to the challenges that have been described, we 
develop policy and model the OPPS payment rates under those same 
constraints. In general, we have tried to limit the changes beyond the 
current year OPPS with regards to data modeling, so that little 
additional logic changes would be necessary and would instead be built 
off existing processes. While we continuously examine ways in which the 
data process could be simplified or made clearer, we also welcome and 
appreciate public comment with regards to potential improvements. 
Similarly, we appreciate the meaningful comments that stakeholders 
provide regarding ways that the cost modeling process could be more 
accurate or methods to extract more appropriate data from the claims 
available for OPPS cost modeling.
    The technical errors described in the correcting document published 
in the Federal Register on September 6, 2013 (78 FR 54842) were 
generally isolated to specific policy areas and did not substantively 
affect the proposed policies described in the CY 2014 OPPS/ASC proposed 
rule. The correcting document merely corrected the underlying data 
errors to conform to the proposed policies clearly intended in the 
preamble of the proposed rule.
    As commenters have described, modeling the OPPS payment rates can 
sometimes be a complex undertaking. We have tried to alleviate some of 
those concerns about the complexity and transparency of the OPPS cost 
modeling process by having an extensive discussion of the data process 
in the preamble discussion, through providing code lists, isolating the 
impacts of certain proposals in the regulatory impact analysis, and 
providing a claims accounting with documented claims volume throughout 
each stage of the process. Commenters have stated that CMS has not 
provided data regarding packaging policies to the Advisory Panel on 
Hospital Outpatient Payment (referred to in this document as the 
Panel). However, in the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68573), the CY 2010 OPPS/ASC final rule with comment period (74 
FR 60409 through 60412), the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 71682 through 71868), the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74184 through 74185), and the CY 2013 OPPS/
ASC final rule final rule with comment period (77 FR 68273 through 
68274), we describe various data analyses we have provided to the Panel 
based on its recommendations.
    After consideration of the public comments we received, we are 
finalizing our proposed CY 2014 methodology for calculating the 
geometric mean costs upon which the CY 2014 OPPS payment rates are 
based.
    As we discuss in sections II.A.2.d., II.A.2.f., and VIII.B. of this 
final rule with comment period, in some cases, APC geometric mean costs 
are calculated using variations of the process outlined above. 
Specifically, section II.A.2.d. of this final rule with comment period 
addresses the calculation of single APC criteria-based geometric mean 
costs. Section II.A.2.f. of this final rule with comment period 
discusses the calculation of composite APC criteria-based geometric 
mean costs. Section VIII.B. of this final rule with comment period 
addresses the methodology for calculating the geometric mean costs for 
partial hospitalization services.
(2) Recommendations of the Panel Regarding Data Development
    At the August 2013 meeting of the Panel, we discussed the claims 
accounting process for the CY 2014 OPPS proposed rule, the proposed 
adoption of the new standard cost centers for CT, MRI, and cardiac 
catheterization in the new Medicare cost report Form CMS-2552-10, as 
well as the CY 2014 OPPS policy of calculating OPPS relative payment 
weights using geometric mean costs.
    At the August 2013 Panel meeting, the Panel made a number of 
recommendations related to the data process. The Panel's data-related 
recommendations and our responses follow.
    Recommendation: The Panel recommends that the work of the Data 
Subcommittee continue.
    CMS Response: We are accepting this recommendation.
    Recommendation: The Panel recommends that John Marshall, C.R.A., 
R.C.C, R.T., serve as chair of the Data Subcommittee.
    CMS Response: We are accepting this recommendation.
    In addition, the Panel requested that CMS provide additional 
information about the impacts of certain CY 2014 policy proposals at 
the 2014 spring

[[Page 74857]]

meeting. Depending upon the CY 2014 final policy decisions, we will 
consider providing additional relevant information to the Panel at the 
Spring 2014 Panel meeting.
d. Calculation of Single Procedure APC Criteria-Based Costs
(1) Device-Dependent APCs
    Historically, device-dependent APCs are populated by HCPCS codes 
that usually, but not always, require that a device be implanted or 
used to perform the procedure. The standard methodology for calculating 
device-dependent APC costs utilizes claims data that generally reflect 
the full cost of the required device by using only the subset of single 
procedure claims that pass the procedure-to-device and device-to-
procedure edits; do not contain token charges (less than $1.01) for 
devices; do not contain the ``FB'' modifier signifying that the device 
was furnished without cost to the provider, or where a full credit was 
received; and do not contain the ``FC'' modifier signifying that the 
hospital received partial credit for the device. For a full history of 
how we have calculated payment rates for device-dependent APCs in 
previous years and a detailed discussion of how we developed the 
standard device-dependent APC ratesetting methodology, we refer readers 
to the CY 2008 OPPS/ASC final rule with comment period (72 FR 66739 
through 66742). Overviews of the procedure-to-device edits and device-
to-procedure edits used in ratesetting for device-dependent APCs are 
available in the CY 2005 OPPS final rule with comment period (69 FR 
65761 through 65763) and the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68070 through 68071).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43558 through 43561), 
for CY 2014, we proposed in section II.A.2.e. to define 29 device-
dependent APCs as single complete services and to assign them to 
comprehensive APCs that would provide all-inclusive payments for those 
services. As we explained in that section, we proposed this policy as a 
further step to improve the accuracy and transparency of our payments 
for these services where the cost of the device is large compared to 
the other costs that contribute to the cost of the service. Table 5 of 
the proposed rule provided a list of the 39 APCs currently recognized 
as device-dependent APCs and identified those 29 APCs that we proposed 
to include in the comprehensive APCs proposal (78 FR 43557). We 
proposed to treat the remaining 10 device-dependent APCs by applying 
our standard APC ratesetting methodology to calculate their CY 2014 
payment rates. We initially adopted a specific device-dependent APC 
ratesetting methodology because commenters had previously expressed 
concerns that the costs associated with certain high-cost devices were 
not always being accurately reported and included in the calculation of 
relative payment weights for the associated procedures. As we stated in 
the proposed rule, we do not believe that it is necessary to continue 
to apply the more specific device-dependent APC ratesetting methodology 
to ensure accurate ratesetting for the 10 APCs that were not included 
in the comprehensive APCs proposal because hospitals now have had 
several years of experience reporting procedures involving implantable 
devices and have grown accustomed to ensuring that they code and report 
charges so that their claims fully and appropriately reflect the costs 
of those devices. Therefore, we believe that it is possible to 
calculate the payment rates for these APCs using our standard APC 
ratesetting methodology (78 FR 43556).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43556 through 43557), 
beginning in CY 2014, we also proposed to no longer implement 
procedure-to-device edits and device-to-procedure edits for any APCs. 
We explained that, under this proposal, hospitals would still be 
expected to adhere to the guidelines of correct coding and append the 
correct device code to the claim when applicable. However, claims would 
no longer be returned to providers when specific procedure and device 
code pairings do not appear on a claim. We stated that we believe that 
this is appropriate because of the experience hospitals now have had in 
coding and reporting these claims fully and because, for the more 
costly devices, the proposed comprehensive APCs would reliably reflect 
the cost of the device if it is included anywhere on the claim. 
Therefore, we do not believe that the burden on hospitals of adhering 
to the procedure-to-device edits and device-to-procedure edits, and the 
burden on the Medicare program of maintaining those edits, continue to 
be warranted. 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: Commenters urged CMS not to finalize its proposal to 
eliminate device-to-procedure edits and procedure-to-device edits in 
order to ensure continued complete and accurate cost reporting by 
hospitals. In addition, one commenter requested that CMS, if it elects 
to delete these edits, commit to only using complete and correctly 
coded claims from CY 2014 for the CY 2016 ratesetting process. Some 
commenters, while supporting elimination of the contractor edits, 
opposed dropping the use of the edit criteria when selecting the set of 
claims to be used to calculate the geometric mean costs of services. 
One commenter requested that CMS remove APC 0648 from the list of 
device-dependent APCs.
    Response: 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 and because, for the more costly devices, the proposed 
comprehensive APCs would reliably reflect the cost of the device if it 
is included anywhere on the claim. We remind commenters that, under our 
proposed policy, hospitals would still be expected to adhere to the 
guidelines of correct coding and append the correct device code to the 
claim when applicable. 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. We expect the CY 2014 claims that we will use for the CY 2016 
ratesetting to reflect this correct coding and cost reporting. While we 
believe that device-to-procedure edits and procedure-to-device edits 
are no longer necessary at this time, we are sensitive to the 
commenters' concerns that all relevant costs for the 39 APCs currently 
recognized as device-dependent APCs are appropriately included in the 
claims that CMS will use for ratesetting. In light of those concerns, 
we are further assessing whether we need to continue claims processing 
edits requiring a device code to be on the claim under the 
comprehensive APCs in CY 2015.
    We believe that APC 0648 is appropriately included in the current 
list of device-dependent APCs, as APC 0648 is populated by HCPCS codes 
that usually, but not always, require that a device be implanted or 
used to perform the procedure.
    After consideration of the public comments we received, and in 
conjunction with our finalized comprehensive APC policy, which is fully 
discussed in section II.A.2.e. of this final rule with comment period, 
we are finalizing our proposal to no longer apply the current device-
dependent APC ratesetting methodology to the 10 currently recognized 
device-dependent APCs not included in the

[[Page 74858]]

comprehensive APC proposal and apply our standard APC ratesetting 
methodology to calculate their payment rates, but delaying the 
implementation of this finalized policy until CY 2015. For CY 2014, we 
will continue to apply the current device-dependent APC ratesetting 
methodology to the 39 currently recognized device-dependent APCs.
    Table 7 below provides a list of the 39 APCs currently recognized 
as device-dependent APCs for CY 2014 and identifies those 29 APCs that 
we are including in the finalized comprehensive APCs policy for CY 
2015.

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(2) 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.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43557), for CY 2014, 
we proposed to continue to establish payment rates for blood and blood 
products using our blood-specific CCR methodology, which utilizes 
actual or simulated CCRs from the most recently available hospital cost 
reports to convert hospital charges for blood and blood products to 
costs. This methodology has been our standard ratesetting methodology 
for blood and blood products since CY 2005. It was developed in 
response to data analysis indicating that there was a significant 
difference in CCRs for those hospitals with and without blood-specific 
cost centers, and past public comments indicating that the former OPPS 
policy of defaulting to the overall hospital CCR for hospitals not 
reporting a blood-specific cost center often resulted in an 
underestimation of the true hospital costs for blood and blood 
products. Specifically, in order to address the differences in CCRs and 
to better reflect hospitals' costs, we 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 would then apply this mean ratio to the overall 
CCRs of hospitals not reporting costs and charges for blood cost 
centers on their cost reports in order to simulate blood-specific CCRs 
for those hospitals. We stated that we calculated the costs upon which 
the proposed CY 2014 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 the hospital-specific, blood-specific CCR 
methodology best responds to the absence of a blood-specific CCR for a 
hospital than alternative methodologies, such as defaulting to the 
overall hospital CCR or applying an average blood-specific CCR across 
hospitals. Because this methodology takes into account the unique 
charging and cost accounting structure of each hospital, we believe 
that it yields more accurate estimated costs for these products. We 
continue to believe that this methodology in CY 2014 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 did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposed policy, without modification, 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, for CY 2014. We 
continue to believe that this methodology in CY 2014 will result in 
costs for blood and blood products that appropriately reflect the 
relative estimated costs of these products for hospitals without blood 
cost centers and, therefore, for these blood products in general.
    We note that, as discussed in section II.A.2.e. of this final rule 
with comment period, we are establishing comprehensive APCs that will 
provide all-inclusive payments for certain device-dependent procedures. 
Under this policy, we will include the costs of blood and blood 
products when calculating the overall costs of these comprehensive 
APCs. We note that we will 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 comprehensive APCs. Because the costs of blood and blood 
products will be reflected in the overall costs of the comprehensive 
APCs (and, as a result, in the payment rates of the comprehensive 
APCs), we will not make separate payments for blood and blood products 
when they appear on the same claims as services assigned to the 
comprehensive APCs.
    We refer readers to Addendum B to this final rule with comment 
period (which is available via the Internet on the CMS Web site) for 
the CY 2014 payment rates for blood and blood products (which are 
identified with status indicator ``R''). For a more detailed discussion 
of the blood-specific CCR methodology, we refer readers to the CY 2005 
OPPS proposed rule (69 FR 50524 through 50525). For a full history of 
OPPS payment for blood and blood products, we refer readers to the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66807 through 
66810).
(3) Brachytherapy Source Payment
    Section 1833(t)(2)(H) of the Act provides that the Secretary shall 
create additional groups of covered OPD services that classify devices 
of brachytherapy consisting of a seed or seeds (or radioactive source) 
(``brachytherapy sources'') separately from other services or groups of 
services, in a manner that reflects the number, isotope, and 
radioactive intensity of the brachytherapy sources furnished and must 
include separate groups for palladium-103 and iodine-125 sources, and 
for stranded and non-stranded devices furnished on or after July 1, 
2007. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60533 through 60537), we adopted for CY 2010 the general OPPS 
prospective payment methodology for brachytherapy sources, consistent 
with section 1833(t)(2)(C) of the Act, with payment rates based on 
source-specific costs, which has been utilized for each year's 
brachytherapy source payment since CY 2010 (74 FR 60537; 75 FR 71980; 
76 FR 74162; 77 FR 68242). As we have previously stated, we believe 
that adoption of the general OPPS prospective payment methodology for 
brachytherapy sources is appropriate (77 FR 68240).
    Comment: Commenters expressed concern regarding CMS' brachytherapy 
source data and stated that there are longstanding problems with CMS' 
OPPS data used to set brachytherapy source payment rates. Commenters 
also stated that the brachytherapy source data continue to show huge 
variation in per unit costs across hospitals. Commenters noted that 
high dose rate (HDR) brachytherapy sources decay over a 90-day period 
and are used to treat multiple patients. Therefore, the commenters 
believed that the true cost of brachytherapy sources per use depends on 
the number of patients treated during the 90-day period, which makes it 
difficult to establish fair and adequate payment rates. Commenters also 
believed that CMS' claims data contain rank order anomalies between the 
high-activity palladium-103 source (HCPCS code C2635) and the low-
activity palladium-103 sources (HCPCS codes C2640 and C2641), and 
stated that the high-activity palladium-103 source always costs more 
than low-activity palladium-103 sources.
    Response: We believe that the claims data used for brachytherapy 
ratesetting

[[Page 74861]]

are adequate to ensure accurate payment for these services. Also, as we 
have stated in previous OPPS/ASC proposed and final rules, we believe 
that our per-source payment methodology specific to each source's 
radioisotope, radioactive intensity, and stranded or non-stranded 
configuration, supplemented by payment based on the number of sources 
used in a specific clinical case, adequately accounts for the major 
expected sources of variability across treatments (72 FR 66782; 74 FR 
60534; 75 FR 71979; 76 FR 74161; and 77 FR 68241). We have also 
explained in previous OPPS/ASC proposed and final rules that a 
prospective payment system such as the OPPS relies on the concept of 
averaging, where the payment may be more or less than the estimated 
cost of providing a service for a particular patient, and with the 
exception of outlier cases, the prospective payment is adequate to 
ensure access to appropriate care (72 FR 66782; 74 FR 60535; 75 FR 
71979; and 77 FR 68241). In the case of brachytherapy sources for which 
the law requires separate payment groups, without packaging, the costs 
of these individual items could be expected to show greater variation 
than some other APCs under the OPPS because higher variability in costs 
for some component items and services is not balanced with lower 
variability in costs for other component items and services. In 
addition, relative payment weights are typically estimated using a 
smaller set of claims.
    As we have stated in previous OPPS/ASC proposed and final rules, we 
agree that HDR brachytherapy sources such as HDR irirdium-192 have a 
fixed active life and must be replaced every 90 days (75 FR 71980; 76 
FR 74162; and 77 FR 68242). As a result, hospitals' per-treatment cost 
for the source would be dependent on the number of treatments furnished 
per source. The source cost must be amortized over the life of the 
source. Therefore, when establishing their charges for HDR iridium-192, 
we expect hospitals to project the number of treatments that would be 
provided over the life of the source and establish their charges for 
the source accordingly (72 FR 66783; 74 FR 60535; 75 FR 71980; 76 FR 
74162; and 77 FR 68242). For most of these OPPS services, our practice 
is to establish prospective payment rates based on the costs determined 
from hospitals' claims data to provide incentives for efficient and 
cost effective delivery of these services.
    In the case of high-activity and low-activity iodine-125 sources, 
our CY 2012 claims data show that the hospitals' relative costs for the 
high-activity source as reported on hospital claims and in cost report 
data are greater than the costs of the low-activity sources, as we have 
noticed in the past. However, this relationship is reversed for 
palladium-103 sources, as a few commenters pointed out. As we have 
stated in the past, we do not have any information about the expected 
cost differential between high-activity and low-activity sources of 
various isotopes other than what is available in our claims and 
hospital cost report data (75 FR 71979; 76 FR 74162; and 77 FR 68242). 
For the high-activity palladium-103 source, only 7 hospitals reported 
this service in CY 2012, compared to 118 and 171 hospitals for the low-
activity palladium-103 sources described by HCPCS codes C2640 and 
C2641, respectively. As we stated regarding this issue in the CYs 2010, 
2011, 2012, and 2013 OPPS/ASC final rules with comment period, it is 
clear that fewer hospitals furnished the high-activity palladium-103 
source than the low-activity palladium-103 sources, and we expect that 
the hospital cost distribution for those hospitals could be different 
than the cost distribution of the large number of hospitals reporting 
the low-activity palladium-103 sources (74 FR 60535; 75 FR 71979; 76 FR 
74162; and 77 FR 68242).
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to set the payment rates for 
brachytherapy sources using our established prospective payment 
methodology, which is based on geometric mean costs. The CY 2014 final 
payment rates for brachytherapy sources are found in Addendum B to this 
final rule with comment period.
e. Establishment of Comprehensive APCs
(1) Definition and General Principles
    During the initial development of a proposal for an outpatient 
prospective payment system in 1998 (63 FR 47552 through 48036), we 
considered developing the payment system based on a comprehensive 
outpatient bundle, as opposed to on a HCPCS component level. In 2000, 
we implemented an OPPS based generally on making payments at the HCPCS 
level (65 FR 18434 through 18820). Since then, however, we have been 
steadily moving the OPPS towards a more comprehensive approach that 
increases flexibility and opportunity for efficiencies in a prospective 
system.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, 
we proposed to create 29 comprehensive APCs to replace 29 existing 
device-dependent APCs. We proposed to define a comprehensive APC as a 
classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Because a comprehensive APC would treat all individually 
reported codes as representing components of the comprehensive service, 
our proposal was to make a single prospective payment based on the cost 
of all individually reported codes that represent the provision of a 
primary service and all adjunctive services provided to support that 
delivery of the primary service. Specifically, we proposed to create 
comprehensive APCs for the 29 most costly device-dependent services, 
where the cost of the device is more expensive than the other costs 
that contribute to the cost of delivering the primary service.
    We stated in the proposed rule that we believe that, under the 
authority of sections 1833(t)(1) and (t)(2) of the Act, the Secretary 
has the discretion to establish comprehensive APCs as part of 
developing the OPPS classification system, and that this proposal 
furthers our ongoing efforts to move the OPPS towards a more 
comprehensive payment system in support of our objectives to increase 
flexibility and efficiencies.
    The OPPS data we have accumulated over the past decade have enabled 
us to continue to address several longstanding goals, including: 
continuing to improve the validity of our payments to most accurately 
reflect costs; improving transparency and reducing complexity and 
administrative burden whenever possible; and increasing flexibility for 
hospitals to develop increased efficiencies in the delivery of quality 
care.
    We stated that we believe that this proposal to establish 
comprehensive APCs will improve our ability to accurately set payment 
rates. In the normal process of setting payment rates, costs in certain 
cost centers (``uncoded costs'') are added to the costs of services 
reported with specific HCPCS codes only when they can be reliably 
assigned to a single service. Under the proposal, the entire claim 
would be associated with a single comprehensive service so all costs 
reported on the claim may be reliably assigned to that service. This 
increases the accuracy of the payment for the comprehensive service and 
also increases the stability of the payment from year to year.
    We also stated that we believe that our policy will enhance 
beneficiary understanding and transparency. Typically beneficiaries 
understand the primary procedure to be the OPPS service they receive, 
and do not generally consider that the other HCPCS

[[Page 74862]]

codes are separate services. For example, beneficiaries believe that a 
single service includes procedures such as ``getting my gall bladder 
removed'' or ``getting a pacemaker.'' We believe that defining certain 
services within the OPPS in terms of a single comprehensive service 
delivered to the beneficiary improves transparency for the beneficiary, 
for physicians, and for hospitals by creating a common reference point 
with a similar meaning for all three groups and using the comprehensive 
service concept that already identifies these same services when they 
are performed in an inpatient environment.
    Finally, we believe that larger bundles that contain a wider mix of 
related services in the prospectively paid bundles increase the 
opportunities for providers to tailor services to the specific needs of 
individual beneficiaries, thereby increasing the opportunities for 
efficiencies and improving the delivery of medical care.
    Comment: Overall, commenters were generally supportive of the 
concept of creating larger payment bundles, but were uncertain that 
they fully understood the specifics of the proposed comprehensive APC 
payment policy. Commenters acknowledged many potential advantages for 
hospitals, and possibly also for beneficiaries in terms of lower 
coinsurance payments and increased transparency, as well as for 
increased physician flexibility.
    A few commenters fully endorsed the proposal for CY 2014. For 
example, MedPAC stated that it has long supported CMS' efforts to 
expand the size of payment units in the OPPS and supported this 
proposal, as well as other packaging proposals in this final rule with 
comment period. MedPAC stated that the comprehensive APC groups have 
similarities to the diagnosis related groups (DRGs) used in the 
inpatient prospective payment system (IPPS) and that this payment 
structure encourages hospitals to identify the most efficient and 
efficacious methods to provide care for each patient, which will help 
contain Medicare spending. Another commenter believed that the proposed 
device-dependent APCs were particularly appropriate for comprehensive 
APCs because the independent services that require these devices are 
generally clearly defined and the other services furnished during the 
encounter are generally furnished in order to facilitate the 
independent service. The commenter supported the ability of this 
proposal to use all claims data in establishing a payment rate for the 
comprehensive APC.
    Several commenters recommended a more expansive policy. One 
commenter recommended that CMS identify other procedures that would be 
suitable for the creation of comprehensive APCs. Other commenters 
suggested that CMS require hospitals to report charges for all items 
and services for which comprehensive APC payment is being made as 
covered charges and specify that hospitals may not charge beneficiaries 
for these items and services (because the copayment for the APC 
constitutes the only beneficiary cost sharing for the package of 
services). Commenters also suggested that CMS limit the national 
unadjusted payment for each comprehensive APC under the OPPS to no more 
than the standardized DRG amount that would be paid for the same 
service provided to an inpatient without complications or 
comorbidities.
    Response: We appreciate the support of the commenters for our 
proposal to create comprehensive packages. We agree with the commenters 
that this would improve our ability to more accurately establish 
payment rates for these services by enabling us to use all claims for 
the primary service in a comprehensive APC when establishing payment 
for that APC. We appreciate the commenters' interest in identifying 
other services that would be suitable for the creation of comprehensive 
APCs, as well as ways to consider setting payment relative to the IPPS. 
We agree with the commenters that hospitals should report charges for 
all items and services for which a comprehensive APC payment is being 
made, and note that it has been a longstanding requirement as stated in 
the Claims Processing Manual IOM 100-4, Chapter 4, Section. 10.4.A that 
hospitals must report all services that were furnished on an outpatient 
claim regardless of whether or not those services are separately paid, 
and that Medicare providers may not separately bill beneficiaries for 
services that are covered under Medicare.
    Comment: The majority of commenters recommended that CMS delay 
implementation of the comprehensive APCs until CY 2015 or later. While 
they generally supported the idea of larger payment bundles, commenters 
were concerned that they could not verify the accuracy of the proposed 
payments and urged CMS not to implement these policies until the agency 
has verified that its calculations are accurate. Commenters asserted 
that it has become increasingly difficult for stakeholders to verify 
OPPS payment rates because the complexity of the modeling logic is far 
beyond other payment systems that CMS administers, such as the IPPS. 
Some commenters were concerned that they were not able to replicate 
CMS' calculations, preventing independent analyses and affecting their 
ability to develop comments and alternative proposals. Some commenters 
requested that CMS provide stakeholders with additional information 
about how estimated costs for these APCs are being calculated for CY 
2014, and give stakeholders an opportunity to comment on the additional 
information provided.
    Some commenters requested that CMS provide individual impacts of 
each proposed policy when proposing several policies that have an 
interactive effect. Several commenters stated that CMS' packaging 
proposals discussed in section II.A.3. of the proposed rule, combined 
with this proposal to create 29 new comprehensive APCs, created a 
complicated ``layering'' effect that made their understanding of how 
final estimated costs for proposed comprehensive APCs would be 
calculated a much more involved process.
    Finally, commenters recommended a delayed implementation to allow 
hospitals more time to assess the impact of such a new payment approach 
on their particular institution and to consider how they may need to 
adjust organizational processes. Commenters also suggested that we 
might need more time to implement revisions to our claims processing 
systems.
    Response: We agree with the commenters that we should delay 
implementation of the proposed comprehensive APCs. As we discuss later 
in this section, we are finalizing our proposal to create 29 
comprehensive APCs with modification, but we are delaying 
implementation and final configuration of those comprehensive APCs 
until CY 2015. We acknowledge commenters' concerns that this is a 
complex proposal for a new payment structure under the OPPS. We agree 
that hospitals should have time to prepare for a comprehensive payment 
structure, and we also agree with the commenters that a delay in 
implementation will allow us more time to operationalize changes 
necessary to process comprehensive payments.
    In response to public commenters' requesting additional detail on 
our calculation of the comprehensive APC relative payment weights, we 
provide a granular discussion of our methodology for constructing the 
comprehensive APC payment rates later in this section, as well as the 
specific APC configurations we would implement for CY 2014 if we had 
not delayed implementation until CY 2015. We also believe that the 
delay

[[Page 74863]]

in implementation will give hospitals more time to study the final 
methodology for calculating APC relative payment weights that we 
discuss in this section for the modification that recognizes resource 
differences in complex and simple versions of the same primary service. 
We are taking advantage of the delay in implementation and requesting 
additional public comments on this methodology.
    With regard to the commenters' concern that they could not fully 
model the proposal, we provide all of the information we would have 
used to create APC relative payment weights for CY 2014 using the CY 
2012 claims data to illustrate the final methodology below. We believe 
that this will assist interested parties in replicating our 
methodology. We will recalibrate all of the comprehensive APC relative 
payment weights for CY 2015 using CY 2013 claims data consistent with 
our annual recalibration of APC relative payment weights to reflect the 
most recently available claims and cost report information in next 
year's rulemaking cycle. We discuss the limited methodological errors 
that we discovered in the proposed rule and subsequent correcting 
document in section II.A.3. of this final rule with comment period.
    With regard to the availability of detailed impacts, we believe 
that a delay in implementation until CY 2015 along with the 
illustrations of the methodology included in this section will give 
stakeholders the requested time to model this final policy and assess 
the impact on their organization. We will incorporate the proposed 
payment rates for CY 2015 comprehensive APCs in our CY 2015 impact 
analysis in the CY 2015 OPPS/ASC proposed rule.
    Comment: Commenters were also concerned that this proposal would 
impose a significant administrative burden on providers and that there 
is not sufficient time for information system technology vendors and 
operational processes to adjust to the new regulations or to allow 
hospitals enough time to fully understand how the proposals would 
affect their outpatient finances, making hospital budgeting for the 
upcoming year nearly impossible. Moreover, several commenters were 
concerned that neither CMS nor its Medicare Administrative Contractors 
(MACs) would be prepared to implement the proposed changes for CY 2014.
    Other commenters believed that providers are likely to have 
increased costs and challenges in their efforts to accurately separate 
claims for unrelated services. One commenter recommended that CMS make 
the necessary operational changes to billing instructions before moving 
forward with its proposal, and implement the proposed comprehensive 
APCs only after the agency has used the new billing instructions long 
enough to have claims data that identify related services for the 
purpose of defining a comprehensive APC.
    Response: This proposal does not require any changes in provider 
coding and billing practices, nor would we expect providers to change 
their billing and coding practices in response to a change in payments. 
We do expect providers to assess their delivery of these comprehensive 
services in light of internal organizational processes. As previously 
stated, we are finalizing the comprehensive APC proposal with 
modification in this final rule with comment period, but we are 
delaying implementation of the finalized policy until CY 2015. This 
will allow us sufficient time to develop appropriate claims processing 
systems protocols for comprehensive APCs and to test those new 
protocols prior to implementation.
    Comment: Many commenters were concerned that a comprehensive DRG-
like payment would provide a single payment for a wide range of cases 
characterized by widely varying complexity and widely varying costs. 
Such a system could potentially disadvantage hospitals willing to take 
on the treatment of sicker, more complex and costly cases while 
rewarding those that handle less complex and less costly cases. One 
commenter was specifically concerned that the level of payment was not 
sufficient to support the higher level of diagnostic testing and 
ancillary services that occur at academic medical centers. Another 
commenter stated that the costs of these cases are relatively fixed 
when they are dependent on one or more expensive devices and hospitals 
can either perform these complex procedures at a loss or cease 
performing them altogether, which has implications for beneficiary 
access to care. One commenter stated that hospitals have only limited 
ability to reduce costs for complex procedures and recommended that CMS 
incorporate a ``severity level'' APC similar to the Medicare Severity 
Diagnosis Related Group (MS-DRG) system where there is a base DRG, a 
complication or comorbidity DRG (CC DRG), and a major complication or 
comorbitity DRG (MCC DRG). In adapting the concept to the APC 
classification system, the commenter recommended that complexity could 
be based on the included components, for example, an ICD insertion 
comprehensive APC and another higher-weighted comprehensive APC for ICD 
insertion with removal of previously implanted device.
    A few commenters believed that the comprehensive payment may have 
unintended consequences that could include quality consequences, cost 
consequences, and payment consequences. Several commenters were 
concerned that the quality of care could suffer because the commenters 
believed that there are currently no outcome programs or measures in 
place, similar to inpatient quality measures, readmission reduction 
programs and value based purchasing incentives, to monitor the quality 
of care provided under an encounter-based payment that creates an 
incentive for hospitals to improve delivery efficiency. The commenters 
believed that inappropriate attempts to garner additional profit could 
lead to reduced access and lower quality of health care services 
provided in the hospital outpatient setting. Several commenters were 
concerned that there might be unintended Medicare cost consequences if 
hospitals split services and delayed ancillary procedures until a 
subsequent encounter. Some of these commenters believed that the 
proposal should be tested or evaluated through a demonstration project 
or some other appropriate mechanism before broader introduction, while 
one commenter objected to the CY 2014 implementation because CMS had 
not proposed mechanisms to retrospectively assess the ramifications of 
these proposed policy changes on patients. Finally, one commenter 
opined that the proposal does not conform the requirement under section 
1833(t)(2) of the Act that items and services shall not be treated as 
comparable with respect to the use of resources if the highest mean 
cost for an item or service is more than 2 times greater than the 
lowest mean cost.
    Response: We agree with the commenters that there is wide spread 
variation in the comprehensive costs of individual claims within each 
primary procedure, and we further agree with the commenters that we do 
not want to financially disadvantage hospitals that treat beneficiaries 
who require more complex and costly procedures. We also understand that 
complex beneficiaries may require more diagnostic tests. We agree with 
the commenters that there are constraints on individual hospitals' 
ability to reduce costs associated with complex procedures, and we 
agree with the commenters who recommended recognizing the level of 
resources

[[Page 74864]]

associated with more complex forms of a procedure not unlike the 
severity levels used in the IPPS. Therefore, we are modifying our 
proposed policy for creating comprehensive APCs to recognize variation 
in the complexity of services that will be paid through comprehensive 
APCs for CY 2015.
    We do not believe that there is any issue with 2 times rule 
violations in the proposed rule or in this final rule with comment 
period. The statute directs the Secretary to establish groups of 
covered OPD services that are comparable both clinically and with 
respect to use of resources. In doing so, the statute requires the 
Secretary to compare the mean cost of items and services within a group 
and ensure that the highest mean cost item or service is no more than 2 
times greater than the lowest mean cost item or service within a group 
(2 times rule). With respect to each proposed comprehensive APC, no 2 
times rule violations were observed. However, as noted above, we do 
observe widespread variation within the comprehensive costs of primary 
services. As we discuss below in more detail, our final policy 
recognizes differences in complexity and resource costs of complex 
forms of the primary service to address variation within the 
comprehensive costs of individual primary procedures.
    Commenters raised concerns about quality decreases because of 
economic pressures, and access issues because of a reluctance of 
facilities to provide these device-intensive procedures to certain 
beneficiaries if the expected costs for complex cases would greatly 
exceed the comprehensive APC payment. We note that these same concerns 
were raised with the introduction of both the IPPS and the OPPS, but 
that claims data continue to show that hospitals continue to provide 
complex services to beneficiaries. We believe that hospitals understand 
that there will be considerable variation in the costs of providing a 
comprehensive primary service to individual beneficiaries relative to 
the comprehensive payment amount.
    We disagree with the commenters on the need for greater outcomes 
measures prior to implementation of the comprehensive APC payment 
policy. As noted, in this final rule with comment period, we are 
recognizing the resource differential for complex forms of primary 
procedures. Further, we believe that outpatient procedures, such as 
these device-intensive procedures, that are also performed on an 
inpatient basis benefit from hospital protocols established for 
inpatient hospital quality programs such as quality measures, 
readmission reduction programs, and value-based purchasing incentives. 
Therefore, we do not agree with the commenters who were concerned that 
patient care might suffer or that quality measures need to be 
strengthened before implementation of the comprehensive APC policy.
    We are concerned by some of the comments that imply that some 
providers might change their practice of providing a comprehensive 
service and instead perform split or staged procedures in order to 
maximize payment. Although we do not believe that practitioners or 
facilities would voluntarily expose beneficiaries to an increased risk 
of additional surgery and anesthesia, we recognize that payment can 
influence behavior. When we implement the finalized comprehensive APC 
policy in CY 2015, we will closely monitor billing patterns for split 
or staged procedures and consider claims processing edits or other 
approaches to ensure that our prospective payments uniformly apply to 
complete services, if necessary.
    With regard to the commenters' request for evaluation under a 
demonstration project before full implementation, we do not believe 
that comprehensive APCs are sufficiently different from our historical 
hospital payment practices to warrant a demonstration project. Further, 
we are adopting the proposed policy with modification and are delaying 
implementation of the comprehensive APC policy until CY 2015 in this 
final rule with comment period to the public to allow us and the public 
time to transition to this new payment approach.
(2) Comprehensive APCs for Device-Dependent Services
(a) Identification of High-Cost Device-Dependent Procedures
    As we discussed in the CY 2014 OPPS/ASC proposed rule, in order to 
identify those services for which comprehensive packaging would have 
the greatest impact on cost validity, payment accuracy, beneficiary 
transparency, and hospital efficiency, we ranked all APCs by CY 2012 
costs and then identified 29 device-dependent APCs where we believe 
that the device-dependent APC is characterized by a costly primary 
service with relatively small cost contributions from adjunctive 
services.
    Comment: Several commenters asked for additional information on the 
criteria utilized by CMS to create the comprehensive APCs and how CMS 
would evaluate services and procedures to qualify for comprehensive 
APCs going forward. One commenter asked why the other 10 device-
dependent APCs were not included, and why no other nondevice-dependent 
APCs were classified as a comprehensive APC. Another commenter 
recommended that CMS consider the comprehensive approach for a smaller 
number of APCs (four or five), while other commenters recommended that 
additional APCs be paid as comprehensive APCs, including 
recommendations for a broader application of the comprehensive APC 
criteria to all claims dominated by a single procedure and specifically 
recommended procedures such as those assigned to APC 0067 (Stereotactic 
Radiosurgery).
    Response: As we stated in the proposed rule, we initially proposed 
a subset of device-dependent APCs for conversion to comprehensive APCs 
because we believed that these procedures represented a cohesive 
subgroup with which to introduce a broader packaging initiative. We 
stated that comprehensive APCs are appropriate when they reflect a 
single global service that the beneficiary would be receiving from the 
hospital. In this case, we have identified procedures where the 
beneficiary would reasonably consider the encounter to be for the 
implantation of a device, and we limited our proposal to the most 
costly procedures where the geometric mean cost of the comprehensive 
procedure was approximately five times the current beneficiary 
inpatient deductible or greater. This created a consistent group of 
services with similar clinical and resource characteristics, which were 
archetypal for our definition of a comprehensive service.
    However, we agree with the commenters that there is no reason that 
comprehensive payments could not be extended in future years to other 
procedures. In addition, we do not agree with the commenters that we 
should limit the comprehensive APCs to a small trial of four or five 
APCs. We are adopting the proposed policy with modification and are 
delaying implementation of the comprehensive APC policy until CY 2015 
in this final rule with comment period to the public to allow us and 
the public time to transition to this new payment approach. We believe 
that the identified subgroup of device-related APCs is clinically 
cohesive and similar in resource construction. We will consider 
possibly adding a comprehensive APC for single session cranial 
stereotactic radiosurgery (procedures assigned to APC 0067) in CY 2015.

[[Page 74865]]

(b) Creation of Comprehensive APCs for Certain Device-Dependent 
Procedures
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), for CY 2014, 
we proposed to create 29 comprehensive APCs to prospectively pay for 
device-dependent services associated with 136 HCPCS codes. We proposed 
to base the single all-inclusive comprehensive APC payment on all 
outpatient charges reported on the claim, excluding only charges that 
cannot be covered by Medicare Part B or that are not payable under the 
OPPS. This comprehensive APC payment would include: (1) packaged 
payment for all packaged services and supplies in CY 2014 and as 
discussed in section II.A.3. of this final rule with comment period; 
and (2) packaged payment for all adjunctive services, which are those 
services and supplies that typically would receive separate payment 
when appearing on any claim that does not contain a HCPCS code reported 
as a primary service assigned to a comprehensive APC, including certain 
items and services currently paid through other fee schedules. We 
present these two categories for ease of presentation, but generally 
consider both sets of services to be ``adjunctive'' in that they are 
integral and ancillary to, supportive of, and dependent on the primary 
procedure. Therefore, we consider all outpatient services on a 
comprehensive APC claim to be adjunctive to the primary service with a 
few exceptions, such as mammography services and ambulance services, 
which are never payable as hospital outpatient services in accordance 
with section 1833(t)(1)(B)(iv) of the Act; brachytherapy seeds, which 
must receive separate payment under section 1833(t)(2)(H) of the Act; 
and pass-through drugs and devices, which also require separate payment 
under section 1833(t)(6) of the Act.
(3) Inclusion of Otherwise Packaged Services and Supplies
    As part of the comprehensive APCs, we proposed to package all 
services that are packaged in CY 2013, and all services proposed for 
unconditional or conditional packaging for CY 2014.
    We did not receive any separate public comments on this proposal 
outside of the public comments we received on our proposal to create 
comprehensive APCs for CY 2014 (which final policy with modification, 
we are delaying implementation until CY 2015) discussed in section 
II.A.3. of this final rule with comment period.
(4) Inclusion of Adjunctive Services
    We previously noted in section II.A.3.a. of the proposed rule that 
it has been a goal of the OPPS to package services that are typically 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service. We proposed to package into the comprehensive APCs all of 
these integral, ancillary, supportive, dependent, and adjunctive 
services, hereinafter collectively referred to as ``adjunctive 
services,'' provided during the delivery of the comprehensive service. 
This includes the 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; 
outpatient department services delivered by therapists as part of the 
comprehensive 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 are 
provided during the comprehensive service, except for mammography 
services and ambulance services, which are never payable as OPD 
services in accordance with section 1833(t)(1)(B)(iv) of the Act.
    Comment: Several commenters expressed concerns regarding the 
packaging of unrelated services reported on the claim. Given that a 
single claim can span multiple days, a few commenters believed that 
under current billing instructions this proposal would arbitrarily 
package all services occurring within a 30-day or 60-day period. 
Currently, there is no means on outpatient claims to differentiate 
between adjunct services that are related to the primary procedure and 
other services that are ordered by other physicians and/or are 
unrelated to the primary procedure. These commenters were concerned 
that if CMS assumed that all services reported on the claim are 
related, it could lead to incorrect ratesetting. Alternatively, these 
commenters reasoned that if CMS revised billing instructions to allow 
all unrelated services (not merely labs) to be billed on separate 
claims, hospitals would need to change their billing systems to bill 
separately for unrelated services and would experience significant 
administrative burden separating unrelated from related items and 
services.
    Response: We do not agree with the commenters' assertions that a 
significant amount of unrelated services would be billed on the claim 
for the primary service. We note that most commenters were concerned 
about unrelated services reported on claims spanning 30 days. We remind 
hospitals that we have previously issued manual guidance in the 
Internet Only Manual at 100-4, Chapter 1, Section 50.2.2 that only 
recurring services should be billed monthly. Moreover, we have further 
specified that in the event that a recurring service occurs on the same 
day as an acute service that falls within the span of the recurring 
service claim, hospitals should bill separately for recurring services 
on a monthly claim (repetitive billing) and submit a separate claim for 
the acute service. We also do not expect that these claims for 
comprehensive services in the outpatient setting would extend beyond a 
few days.
    Additionally, we have noted that occasionally beneficiaries may, 
for reasons of convenience or coincidence, receive laboratory services 
at the hospital that are unrelated to the primary service. When 
beneficiaries are at the hospital for the non-trivial procedures in 
comprehensive APCs, we do not expect that unrelated laboratory services 
would be a common occurrence, but we have nonetheless instructed 
hospitals that laboratory tests ordered by unrelated providers for 
unrelated medical conditions may be billed on a 14X bill-type. We refer 
readers to section II.A.3.c.(3) of this final rule with comment period 
for more discussion of this final policy.
    Beyond these two sets of circumstances, we believe that other 
services performed at the time of these major procedures can reasonably 
be considered to be related to the primary service or procedure. We 
proposed that we would consider all services reported on the claim to 
be related to the primary service. Under such a presumption, all 
services delivered to a beneficiary during an encounter for a 
comprehensive procedure would be included in establishing the payment 
rate for the comprehensive APC. As we are including all adjunctive 
services in the comprehensive APC calculation, hospitals would not need 
to look for unrelated services. We considered all covered costs when 
calculating the comprehensive APC payment as is done with IPPS DRGs. As 
previously noted, hospitals would continue to code and bill for these 
services in the same way that they currently code and bill.
    Comment: One commenter asked that CMS modify the proposal by 
specifically excluding clinical diagnostic laboratory tests and the

[[Page 74866]]

facility component of anatomic pathology procedures from comprehensive 
APC payment for the same reasons that other commenters believed that 
these services should not be packaged as part of our general packaging 
proposals.
    Response: We do not agree with this commenter that laboratory and 
the facility component of anatomic pathology procedures should be 
excluded from the comprehensive APC payment. We are finalizing our 
other proposed policy to package laboratory tests, as described in 
section II.A.3.c.(3) of this final rule with comment period. We note 
that laboratory and anatomic pathology tests are almost always 
performed as part of the provision of the primary service in the case 
of these comprehensive services and are, therefore, appropriately 
considered ancillary and supportive. In summary, we believe that these 
device-dependent procedures represent archetypal cases of a single 
comprehensive service and that laboratory and anatomic pathology 
services are classic examples of adjunctive services that are 
supportive of the primary procedure.
(5) Inclusion of Devices, Durable Medical Equipment, Prosthetics, 
Orthotics and Supplies (DMEPOS)
    As part of the comprehensive service packaging policy described 
above, we proposed to package all devices; implantable durable medical 
equipment (DME); implantable prosthetics; DME, prosthetics, and 
orthotics when used as supplies in the delivery of the comprehensive 
service; and supplies used in support of these items when these items 
or supplies are provided as part of the delivery of a comprehensive 
service. We have a longstanding policy of providing payment under the 
OPPS for implantable DME, implantable prosthetics, and medical and 
surgical supplies, as provided at sections 1833(t)(1)(B)(i) and 
(t)(1)(B)(iii) of the Act and 42 CFR 419.2(b)(4), (b)(10), and (b)(11). 
Under this proposal, DME, prosthetics, and orthotics, when used as 
supplies in the delivery of the comprehensive service, would be covered 
OPD services as provided under section 1833(t)(1)(B)(i) of the Act and 
Sec.  419.2(b)(4) of the regulations. Under this proposal, we believe 
that when such items and services are provided as adjunctive components 
in the delivery of a comprehensive service, such items are appropriate 
for coverage under the OPPS as covered OPD services, and for payment 
under the OPPS. We noted that, at other times, such items when not 
provided as adjunctive components in the delivery of a comprehensive 
service would not constitute covered OPD services, and such items would 
be appropriately provided by suppliers and paid for under the DMEPOS 
benefit. More specifically, we do not believe that this proposed policy 
limits a hospital's ability to function as a DMEPOS supplier and bill 
DMEPOS items to the DME-MAC when those items are unrelated to the 
outpatient procedure and provided outside of the delivery of the 
comprehensive service.
    In summary, we proposed to consider all DMEPOS items to be covered 
hospital outpatient department services and to be adjunctive to the 
primary service when they are delivered during the comprehensive 
service, as described above and, therefore, proposed to package such 
items into the applicable comprehensive service. This policy includes 
any items described by codes that are otherwise covered and paid 
separately in accordance with the payment rules for DMEPOS items and 
services, and applies to those items when they are provided as part of 
the delivery of the comprehensive service. Under this proposal, when 
such items are provided during the delivery of a comprehensive service, 
we proposed that they are covered OPD services as provided under 
sections 1833(t)(1)(B)(i) and (t)(1)(B)(iii) of the Act and Sec. Sec.  
419.2(b)(4), (b)(10), and (b)(11) of the regulations, and payable under 
the OPPS, as described above.
    We did not receive any public comments on our proposal to include 
these DMEPOS items in the comprehensive APC payment. We did receive 
public comments on the impact of these new items on budget neutrality, 
which we discuss below, and comments on how DMEPOS items impact APC 
0227 (Implantation of Drug Infusion Device), which we discuss in 
greater detail later in this section.
(6) Inclusion of OPD Services Reported by Therapy Codes
    Generally, section 1833(t)(1)(B)(4) of the Act excludes therapy 
services from the OPPS. We have previously noted that therapy services 
are those provided by therapists under a plan of care, and are paid 
under section 1834(k) of the Act subject to an annual therapy cap, when 
applied. However, certain other activities similar to therapy services 
are considered and paid as outpatient services. Although some 
adjunctive services may be provided by therapists and reported with 
therapy codes, we do not believe that these services always constitute 
therapy services. In the case of adjunctive components of a 
comprehensive service that are described by codes that would, under 
other circumstances, be indicative of therapy services, we note that 
there are a number of factors that would more appropriately identify 
them as OPD services. These services are not independent services, but 
are delivered as an integral part of the OPD service on the order of 
the physician who is providing the service; they are not typically 
provided under an established plan of care, but on a direct physician 
order; they may be performed by nontherapists; and they frequently do 
not contribute to a rehabilitative process. For example, we note that 
therapists might be asked to provide a detailed documentation of 
patient weaknesses to be used by the physician to help identify or 
quantify a possible procedure-associated stroke or help with the 
mobilization of the patient after surgery in order to prevent blood 
clots. We note that these nontherapy services furnished by a therapist 
are limited to the immediate perioperative period, consistent with 
their inclusion as part of the larger service to deliver the device, 
and are distinct from subsequent therapy services furnished under a 
therapy plan of care, which serve to establish rehabilitative needs and 
begin the process of rehabilitation.
    For that reason, when provided within this very limited context of 
a comprehensive service such as the implantation of an expensive 
device, in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we 
proposed that services reported by therapy HCPCS codes, including costs 
associated with revenue codes 042X, 043X and 044X would be considered 
to be adjunctive OPD services in support of the primary service when 
those services occur within the perioperative period; that is, during 
the delivery of this comprehensive service that is bracketed by the OPD 
registration to initiate the service and the OPD discharge at the 
conclusion of the service. These services do not constitute therapy 
services provided under a plan of care, are not subject to a therapy 
cap, if applied, and are not paid separately as therapy services.
    Comment: Physical therapy stakeholders commented that they were 
concerned about the effect this proposal may have on necessary physical 
therapy services that are provided in conjunction with these proposed 
29 APCs and any comprehensive APCs that may be added in the future. The 
commenter stated that, generally, section 1833(t)(1)(B)(4) of the Act 
excludes therapy services from the OPPS. The commenter further stated 
that, instead, the majority of therapy services in the hospital setting 
are

[[Page 74867]]

provided by therapists under a plan of care, and are paid under the 
physician fee schedule (we refer readers to section 1834(k) of the 
Act). However, the commenter acknowledged that there is a subset of 
services designated as ``sometimes therapy'' services that are paid 
under the OPPS when they are not furnished as therapy under a certified 
plan of care in an outpatient hospital or critical access hospital 
(CAH).
    The commenter stated that physical therapy should not be considered 
to be an adjunctive service because physical therapists are 
consultative members of the health care team, physical therapy is a 
separate benefit, and some services provided during the perioperative 
period, such as a physical therapy evaluation to establish a plan of 
care, could still be considered to be therapy services. The commenter 
was also concerned that the comprehensive APC payment would not be 
adequate to cover the services provided by therapists during this 
perioperative period, that rehabilitation could be prolonged if the 
therapist is unable to intervene ``to increase the patient's mobility, 
function and endurance prior to surgery,'' and that it could be 
difficult to reliably and reproducibly differentiate those 
perioperative services that are not therapy from those that could be 
separately billed as therapy services. Another commenter asked if 
functional reporting requirements would apply in these cases of 
adjunctive services reported with therapy codes.
    Response: We agree with the commenter that physical therapy is a 
separate benefit that is not part of an OPPS service. However, after 
consideration of the public comments we received, we continue to 
believe that services provided during the perioperative period are 
adjunctive services and not 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 note that 
adjunctive services are those services provided in support of another 
service, that is, they are typically performed to facilitate the 
primary service and are unnecessary or serve a different function if 
the primary service is not provided. Adjunctive services may be 
provided by consultative members of the healthcare team. For example, 
an add-on procedure performed by a cardiac surgeon is nonetheless 
adjunctive to the primary procedure, as an add-on procedure by 
definition cannot exist in the absence of the procedure to which it is 
added.
    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 under 
section 1834(k) of the Act subject to an annual therapy cap, when 
applied. However, certain other activities similar to therapy services 
are considered and paid as outpatient services. Specifically, we have 
said in the Claims Processing Manual IOM 100-4, Chapter 5, Section 20.1 
that some services, described as ``sometimes therapy services,'' may at 
times be considered therapy, but at other times may be consider to be 
outpatient department services, such as when those services are 
provided by non-therapists or provided in the absence of a plan of 
care. We stated in the proposed rule that we believe services reported 
with therapy codes, but that are provided as part of a comprehensive 
service are similar to ``sometimes therapy'' services in that these 
services are not properly considered to be therapy services even though 
they may be reported with therapy HCPCS codes (78 FR 43559 through 
43560).
    Considering the services that commenters believed should be therapy 
services, we note that these are outpatient procedures; therefore, the 
comprehensive procedure includes only the perioperative period, a brief 
period of time immediately before and immediately following the 
procedure. We would not expect that an evaluation performed immediately 
following the surgery would establish the beneficiary's needs for 
rehabilitation because the beneficiary is still under the influence of 
the completed primary surgical procedure. Rather, services reported 
with therapy codes during that brief time period may represent 
interventions to promote breathing and ambulation, traditional post-
operative nursing services, or may represent assessments to provide the 
surgeon with specific clinical information relative to the immediate 
effects of the surgery. We would not expect therapy assessments or 
rehabilitative therapy until after the patient has recovered from the 
immediate effects of the procedure and associated anesthesia. With 
respect to the statement that it may be beneficial to increase the 
beneficiary's endurance prior to surgery, we agree with the commenter 
that this can be a desirable and necessary service, but we would not 
expect that therapists are routinely increasing ``mobility, function 
and endurance'' in the hour or two immediately before the surgery. 
Therefore, we do not expect that providers and reviewers would struggle 
to differentiate separately paid therapy services from appropriately 
packaged nontherapy services. We believe that therapy services would be 
separated in time from the comprehensive services, and would not be 
provided during the span of the comprehensive service, from OPD 
registration to discharge, because we do not expect that the 
comprehensive service would extend beyond the immediate perioperative 
period. We also believe that, for a beneficiary who is already 
receiving therapy on an ongoing basis, it is very unlikely that a 
therapist would deliver that service during a comprehensive service. 
There are rare exceptions, for example, in the case of a beneficiary 
receiving therapy for a burn or contracture. In that case, we have 
previously published guidance stating that recurring services may be 
separated from acute services and billed on a separate claim.
    We have stated that the relative cost of these comprehensive 
services includes all of the estimated costs reported on the claims for 
these services. Therefore, the total payment for the comprehensive 
service includes a payment for the services reported with therapy codes 
that is proportional to the frequency with which these codes are 
reported on the claims. As the comprehensive payment now reflects 
costs, we believe that the aggregate comprehensive payment will 
continue to be adequate to cover the cost of the service provided, and 
we do not expect that these services would be discontinued when they 
are medically necessary. We also note that there is no provision in 
this final rule with comment period that prohibits a hospital from 
providing any medically necessary service as part of a comprehensive 
service, regardless of the code with which it is otherwise commonly 
reported.
    With respect to functional reporting, we note that these services 
reported with therapy codes are outpatient department services not 
therapy services and, therefore, the requirement for functional 
reporting does not apply. These changes will be implemented in the 
claims processing systems prior to the start of CY 2015.
(7) Inclusion of Additional Hospital Room and Board Revenue Cost 
Centers in the Calculation of Covered Costs
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we stated that 
we believe that the cost of the bed and room occupied by the patient, 
the cost of nursing services, and the cost of any necessary fluid and 
nutrition (board) are considered covered costs when incurred during the 
provision of an OPD service,

[[Page 74868]]

that is, during the provision of the comprehensive service. Because we 
are able to assign all costs reported on the claim to the comprehensive 
service, we believe that we have an opportunity to better capture costs 
by including these costs in our calculations even when they appear in 
certain revenue cost centers not usually used to report OPPS costs. 
Specifically, we proposed to include costs reported with room, board, 
and nursing revenue codes 012X, 013X, 015X, 0160, 0169, 0200 through 
0204, 0206 through 0209, 0210 through 0212, 0214, 0219, 0230 through 
0234, 0239, 0240 through 0243, and 0249 because we believe these 
revenue cost centers are sometimes associated with the costs of room, 
nutrition, and nursing care provided during these comprehensive 
services.
    Comment: One commenter supported the specific inclusion of room and 
board revenue cost centers on outpatient claims, but another commenter 
believed that reporting may be difficult for hospitals and hospital 
systems. Commenters were concerned that CMS did not discuss how those 
charges would be included in the cost calculation for the comprehensive 
APCs or provide a cost center source for converting those charges to 
costs in the CY 2014 OPPS Revenue Code to Cost Center Crosswalk 
released with the proposed rule. Another commenter was concerned that 
additional funds were not moved into the OPPS system to account for 
these ``new'' costs.
    Response: We appreciate the commenter's support for our decision to 
specifically identify the costs of room and board as being covered 
costs in certain outpatient stays. We understand the other commenters' 
confusion as to why room and board revenue codes would appear on an 
outpatient claim because our claims processing instructions do not 
allow payment for these revenue codes on Part B claims as they are 
reserved exclusively for inpatient use. (For example, we refer readers 
to our recent contractor instructions under Change Request (CR) 8185, 
``CMS Administrator's Ruling: Part A to Part B Rebilling of Denied 
Hospital Inpatient Claims'', which excludes these revenue codes on 
rebilled Part B inpatient claims because room and board services are 
not covered under Medicare Part B). For this reason, we have not 
included these revenue codes on our revenue code to cost center 
crosswalk. Although we proposed to include costs estimated from charges 
for these revenue codes in our estimate of comprehensive APC costs, we 
did not include any of these costs. We failed to modify our revenue 
code-to-cost center crosswalk that we use to estimate costs from 
charges on claims to include room and board revenue codes. Without 
revenue codes and associated CCRs from identified cost centers, our 
model ignored those revenue codes and did not estimate a cost for the 
room and board revenue codes. We did not include any additional 
estimated costs in our proposed comprehensive APC payment calculation. 
We discuss the role of the revenue code-to-cost center crosswalk in 
section II.A.1.c. of this final rule with comment period.
    We now believe that the appearance of these revenue codes on 
hospital outpatient claims would be improper billing. Charges on 
ancillary revenue codes for recovery room and observation, for example, 
should reflect the complete costs of furnishing those services, 
including the capital cost of the room and nursing labor costs. 
Further, we would expect that hospitals would allocate these costs, and 
if appropriate, board costs for services furnished to outpatients, to 
ancillary cost centers on their Medicare hospital cost report 
consistent with the matching principles of cost accounting principles. 
We believe that, as calculated, our estimated costs for comprehensive 
APCs appropriately includes all costs and charges associated with 
staying in a room for the duration of the comprehensive service as an 
outpatient, and we are not finalizing our proposal to include the costs 
reported with certain inpatient room, board, and nursing revenue codes.
(8) Inclusion of Hospital-Administered Drugs
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we also 
proposed to package all drugs provided to the beneficiary as part of 
the delivery of the comprehensive service, except for those drugs 
separately paid through a transitional pass-through payment. 
Intravenous drugs, for example, are OPPS services that are considered 
adjunctive to the primary procedure because the correct administration 
of the drug either promotes a beneficial outcome, such as the use of 
intravenous pain medications, or prevents possible complications, such 
as the use of intravenous blood pressure medications to temporarily 
replace oral blood pressure medications and reduce the risk of a sudden 
rise in blood pressure when a normal daily medication is stopped. We 
noted that, in defining these packaged drugs, we were applying both our 
existing definitions of self-administered drugs (SADs) and our existing 
definition of drugs as supplies to the situation where the OPD service 
is a comprehensive service.
    We proposed that all medications provided by the hospital for 
delivery during a comprehensive service pursuant to a physician order, 
regardless of the route of administration, would be considered to be 
adjunctive supplies and, therefore, packaged as part of the 
comprehensive APC payment. We stated that we believe that the physician 
order demonstrates that the delivery of the medication by the hospital 
is necessary to avoid possible complications during the delivery of the 
comprehensive service, to ensure patient safety, and to ensure that the 
comprehensive service delivery is not compromised and, therefore, the 
medication should be considered an adjunctive supply.
    Therefore, we proposed to consider all medications to be supplies 
that are adjunctive to the primary service if the medicines are ordered 
by the physician and supplied and delivered by the hospital for 
administration during the comprehensive service.
    Comment: Commenters generally supported the inclusion of drugs as 
supplies in the comprehensive APC payment. For example, one commenter 
stated that this proposal would be extremely helpful to beneficiaries 
by reducing their financial burden and would greatly reduce the 
processing burden on the hospital. Several commenters stated that CMS' 
reasoning was sound and the concept should be expanded to all self-
administered drugs incident to practitioners' therapeutic services, not 
just in comprehensive APCs because the commenters believed that the 
concept that drugs are integral and adjunctive to the furnishing of a 
therapeutic service applies to observation and other procedures. For 
example, one commenter stated that self-administered drugs provided 
during an ED visit are directly related to the necessary care. The 
commenter suggested that a requirement to bill for self-administered 
drugs be established so that these costs could be identified for 
inclusion in ratesetting.
    However, one commenter was concerned that including all hospital-
administered drugs, regardless of the route of administration, in the 
cost calculations of the comprehensive APCs will not accurately account 
for the significant cost variation in required drugs from beneficiary 
to beneficiary based on individual beneficiary requirements and that, 
as a result, the payment rate for a comprehensive APC might not provide 
adequate payment for the specific drugs and biologicals an individual 
beneficiary needs, and that

[[Page 74869]]

hospitals would be discouraged from providing appropriate drugs during 
a comprehensive service.
    Response: We appreciate the commenters' support for our proposal to 
consider drugs, regardless of their route of administration, to be 
adjunctive supplies used in support of the primary comprehensive 
service when ordered by a physician and delivered during the 
administration of a comprehensive service.
    Self-administered drugs are a special issue because they are 
excluded from Medicare Part B coverage by section 1861(s)(2)(B) of the 
Act as implemented in the regulations at 42 CFR 410.27. However, as we 
have stated in the Benefit Policy Manual IOM 100-2, Chapter 15, Section 
50.2, drugs that are integral to a procedure are considered to be 
supplies used in the delivery of covered hospital outpatient services, 
and not part of the Part B drug benefit as described under section 
1861(s)(2)(B) of the Act and 42 CFR 410.27. We do not view this 
proposal to include all medications provided by the hospital for 
delivery during a comprehensive service pursuant to a physician order, 
regardless of the route of administration, as adjunctive supplies to be 
an exception to the benefit category exclusion for self-administered 
drugs, but rather that covered outpatient services include supplies and 
other ancillary items needed to deliver these comprehensive services. 
As stated in our discussion above, we have historically instructed 
hospitals to include charges for self-administered drugs as supplies on 
submitted claims, and we, therefore, include them in our calculation of 
APC payments. We also do not view this proposal as an expansion of 
coverage, but rather as the application of an existing policy to a 
broader payment bundle.
    Although some cost of drugs that are used as supplies have been 
included in APC payments, we recognize that there are some drugs that 
previously may not have been considered as supplies because previously 
they were provided outside of the defined service. We generally address 
public comments about how costs for newly included adjunctive items 
will be considered under budget neutrality below.
    We do not believe that including these drugs and biologicals in the 
comprehensive APC payment greatly increases a hospital's financial risk 
for providing a comprehensive service. Further, we expect that a 
payment based on geometric mean estimated cost would reflect the 
relative resources of drugs used as supplies included on comprehensive 
service claims, along with all other ancillary supplies and services, 
and that while the cost of any given case will vary, the hospital would 
receive a payment based on average estimated cost for all cases. We do 
not believe that comprehensive APC payments that include physician-
ordered, hospital-administered drugs delivered during the comprehensive 
service would be inadequate to cover the cost of providing the service, 
and we do not believe that the comprehensive APC payment would 
discourage hospitals from providing appropriate drugs during delivery 
of these comprehensive services.
    Finally, we agree with the commenters that all covered costs 
related to a service should be included on the claim per our manual 
instruction in the Claims Processing Manual IOM 100-4, Chapter 4, 
Section 10.4.A and as discussed in section II.3.a. (Packaging) of this 
final rule with comment period and that those costs should be reported 
as precisely as possible using HCPCS codes when available or uncoded 
revenue cost centers when HCPCS codes do not exist. Overall, we believe 
that drug costs, regardless of the route of administration, are 
accurately accounted for in the APC relative payment weight. We believe 
that overall payment for the comprehensive service is adequate and will 
permit access to the specific drugs and biologicals required for an 
individual beneficiary.
    After consideration of all of the public comments we received, we 
are finalizing our proposal to package all outpatient services, 
including 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; coded and uncoded services and supplies used during the 
service; outpatient department services delivered by therapists as part 
of the comprehensive service; durable medical equipment, as well as 
prosthetic and orthotic items and supplies when provided as part of the 
outpatient service; and any other outpatient components reported by 
HCPCS codes that are provided during the comprehensive service, except 
for certain services including mammography services, ambulance 
services, brachytherapy seeds, and pass-through drugs and devices. When 
billed on a claim in conjunction with a primary procedure assigned to 
status indicator ``J1'' in CY 2015, we will pay for these services 
through the OPPS comprehensive APC payment. We are not finalizing our 
proposal to include costs reported with room, board, and nursing 
revenue codes 012X, 013X, 015X, 0160, 0169, 0200 through 0204, 0206 
through 0209, 0210 through 0212, 0214, 0219, 0230 through 0234, 0239, 
0240 through 0243, and 0249.
    The APCs for which we are finalizing this proposal for CY 2015 are 
identified below in Table 8.

[[Page 74870]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.268

[[Page 74871]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.269

(c) Methodology
    As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43534), 
we calculated the proposed relative payment weights for these device-
dependent comprehensive APCs by using relative costs derived from our 
standard process as described in section II.A. of the proposed rule and 
this final rule with comment period. Specifically, after converting 
charges to costs on the claims, we identified all claims containing 1 
of the 136 HCPCS codes that define procedures specified as constituting 
a comprehensive service. These claims were, by definition, classified 
as single major procedure claims. Any claims that contained more than 
one of these HCPCS codes were identified, but were not included in 
calculating the cost of the procedure that had the greatest cost when 
traditional HCPCS level accounting was applied. All other costs were 
summed to calculate the total cost of the comprehensive service, and 
statistics for those services were calculated in the usual manner. 
Comprehensive claims for each primary service reported by a HCPCS code 
were excluded when their comprehensive claim cost exceeded +/- 3 
standard deviations from the geometric mean comprehensive cost of the 
primary service HCPCS code.
(d) Payments
    As we further stated in the CY 2014 OPPS/ASC proposed rule (78 FR 
43534), we used the proposed APC relative payment weights for each of 
these device-dependent comprehensive services to calculate proposed 
payments following our standard methodology. The proposed payments for 
the HCPCS codes assigned to these proposed comprehensive APCs were 
included in Addendum B of the proposed rule (which is available via the 
Internet on the CMS Web site). We proposed to assign a new status 
indicator, ``J1'' (OPD services paid through a comprehensive APC), to 
these device-dependent procedures. The claims processing system would 
be configured to make a single payment for the device-dependent 
comprehensive service whenever a HCPCS code reporting one of these 
primary procedures appears on the claim. From a processing system 
perspective, all other adjunctive services except mammography, 
ambulance, and pass-through services would be conditionally packaged 
when a comprehensive service is identified on a claim. From our data, 
we determined that multiple primary HCPCS codes are reported together 
in 24 percent of these device-dependent claims, but rarely represent 
unrelated services. Having determined that having multiple unrelated 
device-dependent services reported on a claim is an uncommon event, we 
proposed to only pay the largest comprehensive payment associated with 
a claim. However, the costs of all of these more extensive or 
additional services are included in the calculations of the relative 
payment weights for the comprehensive service, so the prospective 
payment includes payment for these occurrences.
    Comment: Some commenters suggested that errors and lack of clarity 
pertaining to some HCPCS codes proposed for comprehensive payment in 
the proposed rule prevented the public from being able to respond 
informatively to the comprehensive APC proposal. One commenter was 
concerned that CMS stated in the preamble text that there are 136 HCPCS 
codes that define the device-dependent services to be included in the 
proposed comprehensive APCs whereas, in Addendum B to the proposed 
rule, there are 148 HCPCS codes listed. Other commenters identified 
occasional instances in the proposed rule APC cost statistics data 
files where the number of single procedures was reported as more than 
the number of total procedures, and they also identified several 
inconsistencies in Addendum B where the HCPCS code's status indicator 
was listed as ``Q2'' (conditionally packaged), yet the APC assignment 
was associated with status indicator ``J1'' (comprehensive APC, all 
other items on the claim are packaged).
    Response: We discussed 136 primary procedure codes in our proposal 
for comprehensive APCs (78 FR 43534). Commenters are correct that we 
also identified 148 primary procedure codes in Addendum B to the 
proposed rule as corrected (which is available on the CMS Web site at: 
http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). As we discussed in our September 6, 
2013 correcting document, we revised the status indicators of several 
HCPCS codes that appeared in Addendum B from ``Q2'' to ``J1'' to 
reflect their status as a primary procedure code in a comprehensive 
APC. The remaining difference in these two numbers is that 136 
represents the number of CY 2012

[[Page 74872]]

device-dependent HCPCS codes reported on the CY 2012 claims that we are 
using to model CY 2014 geometric mean costs to illustrate the 
comprehensive APC methodology. We generally discuss our modeling of the 
CY 2012 claims data to establish CY 2014 payment rates in section 
II.A.1.c. of this final rule with comment period. However, considering 
the revisions to specific procedure codes used to report certain 
procedures, such as the new percutaneous coronary intervention 
procedure codes (CPT codes 92920 through 92943) beginning in CY 2013, 
the number of CY 2013 device-dependent HCPCS codes appropriately 
assigned to comprehensive APCs increased to 148. Upon adoption of the 
new coding scheme for CY 2014, the number of HCPCS codes assigned to a 
comprehensive APC for payment in this final rule with comment period as 
it would have been implemented for CY 2014 is 167. All of these 
comprehensive HCPCS codes for each year (CY 2012 through 2014) appear 
below in Table 9. Before we implement this policy in CY 2015, we will 
assess all active codes for CY 2015 and assign the procedure to status 
indicator ``J1,'' as appropriate.
    We believe that the corrections to the status indicators assigned 
to the device-dependent procedure codes that appeared in Addendum B to 
our correcting document (http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html) were minor and 
did not compromise the ability of commenters to analyze and respond to 
our comprehensive APC proposal. We note that some commenters were able 
to correctly identify the claims that we used to model the proposed CY 
2014 payment rates for comprehensive APCs by identifying the device-
related HCPCS codes associated with the 29 comprehensive APCs for CY 
2012. Some commenters also were able to correctly identify the HCPCS 
codes that we proposed would trigger a comprehensive payment in CY 2014 
based on our identification of HCPCS codes in Addendum B. The 
commenters were able to model relative payments based on our 
identification of the inclusion of all services reported on the claim 
except mammography, ambulance, and pass-through services, and were able 
to determine the impact of the proposal based on our publication of 
proposed payment rates for those 29 comprehensive APCs. Our proposed 
payment rate for these comprehensive APCs did not change appreciably 
with the correcting document. In addition, we are delaying 
implementation of the finalized comprehensive APC policy until CY 2015, 
and we are providing a detailed discussion of our final methodology for 
establishing comprehensive APC relative payment weights through this 
final rule with comment period.

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    Comment: Commenters stated that they had difficulty understanding 
the APC assignment of a specific claim when two or more procedure codes 
assigned to status indicator ``J1'' appear on a single claim and 
indicated that they could not independently replicate the proposed 
comprehensive APC methodology. Commenters believed that there was 
ambiguity in whether the primary HCPCS code assignment was based on CY 
2012 Medicare payment for the primary procedure or CY 2012 claims cost 
as determined by reported charges converted to costs in the CY 2012 
claims data set using CMS' methodology outlined in section II.A.1.c. of 
the proposed rule and this final rule with comment period. One 
commenter believed that using a ranking based on CY 2012 payments would 
be inconsistent with setting a prospective payment rate for CY 2014 
because prioritizing by payment was potentially more reflective of 
historical costs than CY 2102 costs and also reflected units in a way 
that assigned some procedures reporting claims with single units to one 
APC and other procedures reporting claims with multiple units to a 
different APC. This latter issue was particularly concerning to 
commenters because the commenters believed that some claims contributed 
to the cost of one APC, yet would actually be paid through a different 
APC.
    Response: We disagree with the commenters that we proposed 
different criteria to assign procedures to comprehensive APCs for 
modeling payments and to assign procedures to comprehensive APCs for 
payment in the claims processing system. However, we recognize that the 
wording of our proposed methodology for assigning procedures to 
comprehensive APCs could be interpreted in several ways, and we are 
receptive to commenters concerns that they better understand the 
proposed comprehensive APC payment methodology for the treatment of 
claims reporting multiple device-related procedures. While we are 
finalizing a comprehensive APC policy, we are delaying the effective 
date of this policy until CY 2015, and we invite comment on the final 
methodology discussed in this section.

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    We stated in the proposed rule that, ``Any claims that contained 
more than one of these procedures were identified but were included in 
calculating the cost of the procedure that had the greatest cost when 
traditional HCPCS level accounting was applied.'' Using this 
methodology, we proposed to identify a primary service on claims 
reporting multiple HCPCS codes assigned to status indicator ``J1'' by 
identifying the HCPCS code assigned to status indicator ``J1'' on the 
claim that had the highest device-dependent APC geometric mean cost. 
The primary service is not only the most costly service but also 
typically represents the most significant or core service that is being 
provided to the beneficiary. To facilitate claims processing and to 
ensure that we identified the most costly device-related procedure on 
each claim, including those billed with multiple units, we envisioned 
using the CY 2014 device-dependent APC payment amount that would have 
been made for the service in the absence of a proposal for 
comprehensive APCs to identify the most costly procedure described by a 
HCPCS code assigned to status indicator ``J1'' on the claim. We 
proposed to assign the procedure described by a HCPCS code assigned to 
status indicator ``J1'' with the highest device-dependent APC line-item 
payment, considering the entire payment when multiple units are billed, 
as the primary procedure and to make payment for the claim through the 
associated comprehensive APC. We note that the device-dependent APC 
payment rates have the same relativity as device-dependent geometric 
mean costs, as those costs underpin final budget neutral payment rates.
    We agree with the commenters that the methodology by which a claim 
that has at least one procedure described by a HCPCS code that is 
assigned to status indicator ``J1'' is assigned to a comprehensive APC 
is fundamental to understanding final payment under the comprehensive 
APC policy. If there is only one procedure described by a HCPCS code 
assigned to status indicator ``J1'' reported on the claim, the 
comprehensive APC assignment is straightforward; the claim is paid 
through the comprehensive APC associated with that procedure. This is 
true under the proposed methodology as well as under the revised 
methodology we are finalizing in this final rule with comment period. 
In the event that more than one procedure described by a HCPCS code 
assigned to status indicator ``J1'' was present on the claim, an 
important goal of our proposed methodology was to ensure that the 
costliest procedure, including increased cost due to multiple units, 
would be identified as the primary procedure on the claim so that the 
claim would be paid through the most costly potential comprehensive APC 
and ultimately garner the highest potential comprehensive APC payment. 
After review of the public comments we received, we are modifying our 
proposed methodology for assigning a primary procedure described by a 
HCPCS code assigned to status indicator ``J1'' reported on a claim to 
an appropriate comprehensive APC when more than one procedure described 
by a HCPCS code assigned to status indicator ``J1'' is reported. First, 
we will only use current ratesetting estimated cost information and not 
device-dependent APC payment rates to identify the primary procedure 
described by the HCPCS code assigned to status indicator ``J1'' on the 
claim and the subsequent comprehensive APC through which payment for 
the service would be made. For CY 2015, we will use estimated costs on 
CY 2013 claims to calibrate comprehensive APC payment amounts.
    Second, we will recognize the greater resources attributable to 
more complex cases. Commenters suggested addressing variations in cost 
of comprehensive APCs by recognizing the greater resources attributable 
to more complex cases with multiple device-dependent procedures in some 
manner similar to the severity adjustment incorporated into the IPPS 
MS-DRG system. We agree with the commenters that instituting a higher 
comprehensive payment for complex cases would both allow us to continue 
a comprehensive payment methodology where the most costly service 
reported with status indicator ``J1'' on the claim determines the 
comprehensive APC assignment and also recognize relative resource 
differences associated with multiple device-dependent procedures. In 
this response, we discuss the first step in this process of identifying 
a primary HCPCS service assigned to status indicator of ``J1'' for each 
claim. We present the methodology for identifying complex subsets of 
primary services and reassigning claims to higher-level APCs in the 
following comment and response.
    To address concerns presented by some of the commenters that they 
could not fully model the proposal, we provide all of the information 
we used to create relative payment weights for CY 2014 using the CY 
2012 claims data to illustrate the final methodology below. We believe 
that this will assist interested parties in replicating our 
methodology. We will recalibrate all of the comprehensive APC relative 
payment weights for CY 2015 using CY 2013 claims data, consistent with 
our annual recalibration of APC relative payment weights, to reflect 
the most recently available claims and cost information.
    To arrive at the illustrative CY 2014 comprehensive geometric mean 
cost for the comprehensive APCs in Table 8, we began by first 
identifying all claims reporting a single procedure described by a 
HCPCS code with status indicator ``J1.'' As noted earlier, this is 
approximately 75 percent of claims with any procedure described by a 
HCPCS code reported with status indicator ``J1.'' On claims reporting a 
single procedure described by a HCPCS code with status indicator 
``J1,'' we considered that procedure to be the primary service that 
determines the comprehensive APC assignment. We then used these single 
``J1'' claims to calculate a comprehensive APC single ``J1'' procedure 
claim geometric mean cost for all comprehensive APCs using the total 
cost on each claim. These comprehensive APC single ``J1'' procedure 
claim geometric mean costs appear in Table 9.
    We then began the process of identifying a ``primary HCPCS code'' 
that represents the ``primary service'' or ``primary procedure'' on a 
claim reporting multiple procedures described by HCPCS codes with 
status indicator ``J1.'' We used the APC geometric mean comprehensive 
cost based on claims reporting a single ``J1'' procedure described by a 
HCPCS code with status indicator ``J1'' (Table 9) to identify the most 
costly procedure reported on each claim. Specifically, we selected the 
primary HCPCS code by determining the comprehensive procedure that is 
assigned to the APC with the highest geometric mean comprehensive cost 
based on claims with a single service with status indicator ``J1.'' We 
undertook a second step when a comprehensive service claim contained 
two or more procedures described by a HCPCS code with status indicator 
``J1'' that are assigned to the same APC. Of those procedures described 
by a HCPCS code with status indicator ``J1'' that are also assigned to 
the same APC with the highest comprehensive APC cost from Table 9, we 
identified the service described by a HCPCS code reported with status 
indicator ``J1'' with the highest HCPCS-level geometric mean cost, also 
derived from the comprehensive cost of claims that contain a single 
procedure with status indicator ``J1,'' to be the primary HCPCS code on 
the claim.

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    In the event that a HCPCS-level geometric mean comprehensive cost 
cannot be determined for a particular HCPCS code from the claims data, 
such as new HCPCS codes that are not represented in the claims data or 
an add-on code for which there are no claims with only that procedure, 
we will model a HCPCS-level comprehensive geometric mean cost that we 
will only use to identify a primary procedure. For procedure codes with 
missing data, we will include an estimated comprehensive HCPCS code 
geometric mean cost in each proposed or final rule, as appropriate, 
using the best information we have available about each code. However, 
we will not use modeled HCPCS-level comprehensive geometric mean costs 
to set comprehensive APC payment rates. We will only use modeled HCPCS-
level comprehensive geometric mean costs in our claims processing 
systems to identify a primary HCPCS code reported on a claim with 
multiple procedures described by HCPCS codes assigned to status 
indicator ``J1'' in the same comprehensive APC. Our goal in modeling 
such a HCPCS-specific geometric mean cost is to identify a primary 
HCPCS code on a claim with multiple procedures in the same 
comprehensive APC with sufficient accuracy for a few years until actual 
claims data become available. This modeled geometric mean cost is not 
intended in any way to presuppose the actual cost of the service for 
future ratesetting.
    Table 9 contains a list of all HCPCS codes assigned to status 
indicator ``J1'' that are assigned to APCs, which are associated with a 
comprehensive payment. Deleted codes are those codes that were used to 
estimate geometric mean costs, but are not valid codes for CY 2104 
while new codes are those codes that will be valid for payment in CY 
2014, but were not present in the CY 2012 claims data. The 
comprehensive APC assignment that we proposed for each HCPCS code 
assigned to status indicator ``J1'' in the proposed rule is shown in 
Column 3, and the illustrative final CY 2014 comprehensive APC 
assignment that we would have been established based on public comment 
on the CY 2014 proposed rule and using CY 2012 claims data is shown in 
Column 4. Column 7 shows the APC geometric mean cost and Column 8 shows 
the HCPCS code geometric mean cost; together these two columns allow 
the determination of the primary service HCPCS code and initial APC 
assignment for any claims with a combination of HCPCS codes reported 
with status indicator ``J1.'' We have not provided any modeled HCPCS 
geometric mean costs for CY 2013 or CY 2014 ``J1'' HCPCS codes for 
which we do not have claims data as we are finalizing this policy with 
modification, but delaying implementation until CY 2015. We will make 
those modeled geometric mean costs available in next year's proposed 
rule.
    Comment: Commenters expressed concern that CMS' proposal for a 
single, comprehensive APC payment would not adequately cover the higher 
cost of cases where multiple expensive devices are used. Commenters 
also raised several concerns with paying claims with multiple primary 
procedures under a single APC payment. The commenters noted that, under 
comprehensive APCs, hospitals would find simple claims with a single 
comprehensive HCPCS code and few services to be more profitable on a 
case basis than complex claims with a greater number of comprehensive 
HCPCS codes and more ancillary services. Commenters believed that this 
could be a significant issue for many of the comprehensive APCs because 
only one primary service is paid and one quarter of all claims have 
multiple procedures. Many commenters believed that a single, 
comprehensive APC payment for single and multiple device insertion 
procedures would create an incentive to not perform complex and 
multiple procedures where the cost materially exceeds payment and that 
it also could create an incentive for hospitals to use inappropriately 
less expensive devices, services, and supplies to offset the financial 
threat of reduced ``packaged'' payments, including cases where those 
substitutions could increase program costs as a whole and carry greater 
risk for beneficiaries.
    Commenters argued that hospitals systematically performing more 
multiple device insertion procedures may face severe financial hardship 
because they would not have enough simple, single primary procedure 
cases to cover the cost of their many multiple device insertion 
procedures, which may limit their ability to provide these services as 
they have in the past. While we stated that we believed that the 
comprehensive APC proposal would encourage hospitals to negotiate 
better rates on supplies and increase the efficiency of individual 
procedures, commenters stated that the added cost of additional 
expensive devices cannot be routinely reduced to approximate the cost 
of a single device procedure.
    Response: We agree with the commenters that there is wide spread 
variation in the comprehensive costs of individual claims within each 
primary procedure, and we further agree with the commenters that we do 
not want to financially disadvantage hospitals that treat sicker 
beneficiaries that require more complex and costly procedures. We also 
agree with the commenters that the presence of certain device-related 
procedures reported together on a claim can, but does not always, 
constitute a more complex and resource-intensive subset of a 
comprehensive procedure.
    In calculating the proposed payment rates for comprehensive APCs, 
we proposed to allocate the costs of all ancillary and adjunctive 
services to the primary procedure assigned to status indicator ``J1,'' 
including the costs of additional procedures identified with status 
indicator ``J1.'' A comprehensive approach increases opportunities for 
hospitals to garner efficiencies in the delivery of these services, but 
also increases the variation in estimated total claim costs 
contributing to the comprehensive APC relative payment weight 
calculation. We agree with the commenters that, in certain instances, 
cost variation could be too large and could potentially create undue 
financial risk for hospitals that treat complex patients. We also agree 
with the commenters that there are some limitations on individual 
hospitals' ability to reduce costs associated with complex procedures, 
especially in the short term. Cost reductions may involve changing 
suppliers or renegotiating contracts for expensive devices. Further, it 
may be difficult for hospitals to immediately analyze the effects of 
changing payment models and rapidly implement the practices that they 
use to handle cost variations within inpatient DRGs.
    Given our interest in establishing a comprehensive APC payment 
under the OPPS that is comparable to a severity level DRG payment 
adjustment, we agree with the commenters who recommended assigning 
combinations of procedures that are reported together which indicate a 
more complex and resource-intensive version of the primary procedure to 
higher level comprehensive APCs, not unlike the IPPS policy of 
assigning procedures with certain conditions to higher paying MS-DRGs. 
After reviewing significant public comments pointing out common 
clinical scenarios for combinations of device insertion procedures 
assigned to status indicator ``J1,'' we decided to recognize complexity 
in these device-dependent procedures by reassigning claims for certain 
forms of the primary procedures to higher level comprehensive APCs as a 
modification to our proposal. We welcome public

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comments on recognizing the cost of more complex forms of primary 
procedures through our final policy to reassign claims for complex 
forms of the primary procedures discussed below. We identify the 
complex forms of primary procedures that we would reassign for CY 2014 
using CY 2012 claims data if we were implementing the comprehensive APC 
policy in CY 2014 in Table 10. We discuss our consideration of code-
specific comments by clinical family later in this section.
    We took several steps to moderate resource cost variation in 
comprehensive APC payments. First, we undertook a standard APC 
recalibration. We specifically evaluated the APC assignment of some 
primary procedures and moved those procedures from one APC to another 
to better align resource and clinical homogeneity. In considering the 
APC assignment of these procedures, we looked at the traditional 
parameters of geometric mean cost for the primary service and clinical 
characteristics of the APC. We created, consolidated, or redefined the 
primary procedures in the comprehensive APCs as necessary to better 
group services with clinical and resource homogeneity. Second, we 
identified complex subsets of primary procedures, which consist of the 
primary HCPCS code reported in combination with other HCPCS codes that 
together describe a more complex form of the primary service. We 
reassigned many claims with complex subsets of primary procedures to a 
higher level comprehensive APC in the same clinical family through this 
methodology. We define a clinical family of comprehensive APCs to be a 
set of clinically related comprehensive APCs that represent different 
resource levels of clinically comparable services.
    Reassignment of claims with complex subsets of the primary 
procedures does not change the primary service identified on a claim. 
We continue to consider all services reported on the claim, even the 
additional ``J1'' HCPCS codes identifying a claim as complex, to be 
adjunctive and packaged into the primary service. We make a distinction 
here between the idea of a primary service under comprehensive APCs and 
the concept of a composite service as discussed in section II.A.2.f. of 
this final rule with comment period. Both methodologies foster more 
accurate ratesetting by allowing us to use additional information 
reported on a claim to establish a geometric mean cost and accompanying 
relative payment weight. However, under a composite payment approach, 
we identify certain procedures that are frequently performed together 
during a single clinical encounter as a single service and identify 
that set of services as a complete service. For comprehensive APCs, we 
assess many combinations of procedure codes for purposes of determining 
complex forms of a primary service, but the combination of codes is not 
considered to be separate and distinct service. For comprehensive APCs, 
the primary service continues to represent the complete furnished 
service.
    For the purpose of evaluating HCPCS code combinations for 
reassignment to a higher level comprehensive APC after identifying one 
of the procedures described by a HCPCS code assigned to status 
indicator ``J1''reported on the claim as being the primary service, we 
recognized a combination of procedure codes as complex and 
appropriately reassigned to a higher level APC in the same clinical 
family of services if the complex combination of procedures met all of 
the following criteria.
     The comprehensive geometric mean cost of the claims with 
the combination of procedures was more than two times the comprehensive 
geometric mean cost of claims reporting only a single comprehensive 
procedure described by a HCPCS code assigned to status indicator 
``J1.''
     There were greater than 100 claims with the specific 
combination of procedure codes.
     The number of claims reporting the specific combination of 
procedure codes exceeded 5 percent of the total volume of claims 
reporting that procedure as the primary service described by a HCPCS 
code assigned to status indicator ``J1'', and we did not determine that 
the combination of procedure codes represented an uncommon clinical or 
resource extreme value within the entire family of services.
    In reviewing the CY 2012 claims data for purposes of illustrating 
this final methodology, we addressed all of the combinations of 
procedures reported on claims that met all of these criteria, but also 
addressed other combinations of procedures reported on claims that did 
not meet all of these criteria if clinical consistency suggested that 
additional reassignment was necessary.
    Once we determined that a particular procedure code combination for 
a primary service was complex because it represented a sufficiently 
costly case and frequent subset within the primary procedure overall, 
we evaluated alternate APC assignments for those claims reporting a 
combination of procedure codes. We assessed resource variation for 
reassigned claims within the receiving APC using the geometric mean 
cost for all reassigned claims for the primary service relative to 
other services assigned to that APC using the 2 times rule criteria. We 
maintained clinical homogeneity by reassigning claims within the same 
clinical family of comprehensive APCs. Any combinations of multiple 
comprehensive HCPCS codes that were not sufficiently frequent or which 
did not represent sufficiently costly cases relative to the cost of the 
primary procedure established with simple, single procedure claims were 
not identified as complex subsets of the primary procedures and were 
not reassigned. We repeated this process for each APC for which 
commenters expressed concerns regarding complexity of cases 
contributing to wide variation in costs. After both reassigning some 
procedure codes to different comprehensive APCs and reassigning claims 
for complex cases of primary services, we then calculated the final 
comprehensive geometric mean cost for the comprehensive APCs. The 
illustrative comprehensive geometric mean costs that we would have 
calculated for the comprehensive APCs for CY 2014 appear in Table 8.
    Infrequently, we will not have claims data for some procedures 
described by HCPCS codes that are assigned to status indicator ``J1'' 
and, therefore, no claims cost information upon which to base an 
assessment of volume or costliness. In this case, we will use the best 
information available to us to prospectively identify a complex version 
of the primary service, which is indicated by the combination of 
procedure codes reported on a claim and assign those complex cases to a 
higher level comprehensive APC. We will reassess the appropriateness of 
identifying certain combinations of procedure codes as complex subsets 
of a primary service once cost information becomes available. This is 
comparable to our policy for assigning new codes or codes without 
claims data to an APC based on the best information we have available 
at the time of assignment and reassessing that resource homogeneity of 
that APC assignment when claims data become available.
    Table 10 shows the combinations of procedure codes that we 
identified within the 136 primary procedure codes assigned to status 
indicator ``J1'' in the CY 2012 claims data that we used in our 
illustration of CY 2014 modeling and the APC to which those 
combinations of procedures would be reassigned, as well as combinations 
of CY 2013 and CY 2014 procedure codes that are not represented in our 
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which we identified a clinical similarity to existing services and 
would have identified for reassignment as a complex subset of the 
primary service for CY 2014. We intend to reassess both procedure code 
assignments in the comprehensive APCs and our identification and 
reassignment of complex cases represented by combinations of procedure 
codes using updated claims and cost report data as we establish 
relative payment weights each year. We note that we will have CY 2013 
claims data for some of the procedure codes listed in Table 10 and we 
will reassess our identification of combinations of procedures as 
complex for CY 2015 in light of data and in response to comments 
received on this final rule with comment period in our CY 2015 OPPS/ASC 
proposed rule.
    In summary, after consideration of the public comments we received, 
we are finalizing the following methodology for establishing an APC 
relative payment weight for the comprehensive APC policy, which is our 
proposed policy with a modification. During ratesetting, single claims 
reporting a single procedure described by a HCPCS code assigned to 
status indicator ``J1'' are used to establish an initial APC assignment 
for each procedure described by that HCPCS code. The geometric mean of 
the total estimated costs on each claim is used to establish resource 
similarity for each procedure code's APC assignment and is evaluated 
within the context of clinical similarity, with assignment starting 
from the APC assignments in effect for the current payment year. Claims 
reporting multiple procedures described by HCPCS codes assigned to 
status indicator ``J1'' are identified and the procedures are then 
assigned to a comprehensive APC, based on the primary HCPCS code, that 
has the highest geometric mean estimated cost. This ensures that 
multiple procedures described by HCPCS codes assigned to status 
indicator ``J1'' reported on claims are always paid through and 
assigned to the comprehensive APC that would generate the highest APC 
payment. If multiple procedures described by HCPCS codes assigned to 
status indicator ``J1'' that are reported on the same claim have the 
same APC geometric mean estimated cost, as would be the case when two 
different procedures described by HCPCS codes assigned to status 
indicator ``J1'' are assigned to the same APC, identification of the 
primary HCPCS code is then based on the procedure described by the 
HCPCS code assigned to status indicator ``J1'' with the highest HCPCS-
level geometric mean cost based on claims with a single HCPCS code 
assigned to status indicator ``J1.'' Where we have no claims data upon 
which to establish a HCPCS-level comprehensive geometric mean cost, we 
will model a HCPCS-level geometric mean cost for the sole purpose of 
appropriately assigning the primary HCPCS code reported on a claim. The 
comprehensive APC assignment of each procedure described by HCPCS codes 
assigned to status indicator ``J1'' is then confirmed by verifying that 
the APC assignment remains appropriate when considering the clinical 
similarity, as well as the estimated cost of all claims reporting each 
procedure described by HCPCS codes assigned to status indicator ``J1,'' 
including simple and complex claims, with multiple device-related 
procedures.
    We are providing in Table 9 the APC assignments for each procedure 
described by HCPCS codes assigned to status indicator ``J1,'' the APC 
geometric mean estimated cost based on claims reporting single 
procedures, and the HCPCS geometric mean estimated cost based on the 
claims reporting single procedures that we used to identify primary 
HCPCS codes and to assign the procedure to an appropriate comprehensive 
APC. If we were implementing this policy in CY 2014, Table 9 would 
contain the same information as the claims processing system and could, 
therefore, be used to determine the initial APC assignment and APC 
geometric mean estimated cost for any procedure described by HCPCS 
codes assigned to status indicator ``J1'' reported on claims prior to 
any reassignment of certain costly claims for a primary service that 
represent a complex form of the primary service to higher level APCs. 
Table 9 is configured for CY 2104 and will be updated for 
implementation in CY 2015.
    We then considered reassigning complex subsets of claims for each 
primary service HCPCS code. All claims reporting more than one 
procedure described by HCPCS codes assigned to status indicator ``J1'' 
are evaluated for the existence of commonly occurring combinations of 
procedure codes reported on claims that exhibit a materially greater 
comprehensive geometric mean cost relative to the geometric mean cost 
of the claims reporting that primary HCPCS code. This indicates that 
the subset of procedures identified by the secondary HCPCS code has 
increased resource requirements relative to less complex subsets of 
that procedure. If a combination of procedure codes reported on claims 
is identified that meets these requirements, that is, commonly 
occurring and exhibiting materially greater resource requirements, it 
is further evaluated to confirm clinical validity as a complex subset 
of the primary procedure and the combination of procedure codes is then 
identified as complex, and primary service claims with that combination 
of procedure codes are subsequently reassigned as appropriate. If a 
combination of procedure codes does not meet the requirement for a 
materially different cost or does not occur commonly, it is not 
considered to be a complex, and primary service claims with that 
combination of procedure codes are not reassigned. All combinations of 
procedures described by HCPCS codes assigned to status indicator ``J1'' 
for each primary HCPCS code are similarly evaluated.
    Once all combinations of procedures described by HCPCS codes 
assigned to status indicator ``J1'' have been evaluated, all claims 
identified for reassignment for each primary service are combined and 
the group is assigned to a higher level comprehensive APC within a 
clinical family of comprehensive APCs, that is, an APC with greater 
estimated resource requirements than the initially assigned 
comprehensive APC and with appropriate clinical homogeneity. We 
assessed resource variation for reassigned claims within the receiving 
APC using the geometric mean cost for all reassigned claims for the 
primary service relative to other services assigned to that APC using 
the 2 times rule criteria.
    For new HCPCS codes and codes without data, we will use the best 
data available to us to identify combinations of procedures that 
represent a more complex form of the primary procedure and warrant 
reassignment to a higher level APC. We will reevaluate our APC 
assignments, and identification and APC placement of complex claims 
once claims data become available. We then recalculate all APC 
comprehensive geometric mean costs and ensure clinical and resource 
homogeneity.
    We have provided in Table 10 the combinations of procedures 
described by HCPCS codes assigned to status indicator ``J1'' that we 
used to set payment rates and the additional combinations of procedures 
described by new HCPCS codes assigned to status indicator ``J1'' that 
would be identified for reassignment as a complex form of the primary 
procedure in CY 2014. If we were implementing this policy in CY 2014, 
Table 10 would contain the same information as the claims processing 
system and could, therefore, be used to

[[Page 74888]]

determine the final comprehensive APC assignment and comprehensive APC 
geometric mean estimated cost for any procedure described by HCPCS 
codes assigned to status indicator ``J1'' reported on an individual 
claims. Table 10 is configured for CY 2104. We will update this table 
for implementation in CY 2015.

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BILLING CODE 4120-01-C
(e) Impact of Proposed Comprehensive APCs for Device-Dependent 
Procedures
 Impact on Medicare Payments
    In our proposed rule, we stated that because these device-dependent 
comprehensive APCs are entirely derived from existing services 
currently reported on Medicare claims, the policy is effectively budget 
neutral in its impact on Medicare payments. We noted that room, board, 
and nursing services have been covered costs in the delivery of 
outpatient services that require the patient to receive nursing 
services, occupy a bed for outpatient care, and maintain a controlled 
metabolic intake during a prolonged outpatient stay. Although we 
proposed to include new revenue center costs for room and board when 
reported on these claims, we emphasized that we were proposing to 
include them to increase the accuracy of reporting and not because they 
represent a new cost.
    Comment: One commenter opined that CMS is correct to include the 
costs of all component services and supplies that would be packaged 
under the proposal for CY 2014; all adjunctive services, including 
laboratory tests, diagnostic tests and evaluation and management 
services; DMEPOS for which payment would be made under the OPPS; 
services reported by therapy codes that would be payable under the 
OPPS; room and board as reported in room and board revenue cost 
centers; and cost of hospital-administered drugs (regardless of the 
route of administration) to ensure that the geometric mean cost upon 
which the payment for these comprehensive APCs would be based would 
include all necessary costs of the services. However, several 
commenters were concerned that CMS did not account for the payments for 
services proposed to contribute to the comprehensive APC geometric mean 
costs into the CY 2013 current year payment estimates in budget 
neutrality calculations, but included these costs in the CY 2014 OPPS 
payment rate calculations. The commenters pointed out that CMS proposed 
to include the CLFS payments for laboratory services proposed for 
packaging in the OPPS current year (CY 2013) total payment amount when 
calculating budget neutrality adjustments for the prospective payment 
year (CY 2014), but that CMS apparently did not add payments to the 
OPPS current year total payment estimate for the adjunctive items and 
services that would be newly paid under the OPPS through the 29 
comprehensive APCs. In short, payment for newly added services should 
be added to the total CY 2013 payment level against which CY 2014 
payments would be held budget neutral. These commenters defined the 
additional services that would be newly paid under the OPPS to include 
durable medical equipment, therapy services, inpatient nursing 
services, and inpatient room and board for overnight outpatient stays. 
The commenters further stated that the proposed rule provides no 
information concerning how this calculation was made and data was not 
provided to allow the public to review and validate the determination 
of budget neutrality.
    Response: We appreciate the acknowledgement that we correctly 
identified and included the costs of adjunctive services contributing 
to these comprehensive OPD services, with the exception of charges on 
inpatient revenue codes, including room and board revenue codes. We 
agree with the commenters that we should have included payments for 
adjunctive services proposed for payment through the OPPS for the first 
time in the current year budget neutrality calculations as well as in 
the relative payment weights for the proposed year calculation. In 
calculating budget neutrality adjustments for CY 2015 we will 
incorporate modeled payments for services that will be newly included 
in the comprehensive APCs on both sides of the budget neutrality 
calculation as we did for those laboratory services that we are 
packaging for CY 2014.
    Comment: Several commenters stated that, although they recognized 
that changes in assignments in a prospective (average) payment system 
cause some payments to increase and others to decrease, the commenters 
were concerned that payment amounts have not been set to appropriately 
encompass the additional services that will be packaged. Another 
commenter noted that the shift from limited to comprehensive APCs would 
be accompanied by wide shifts in payment and questioned whether the 
changes with the expanded bundles, including occasional decreases, 
accurately reflected the costs of the additional packaged services. 
They requested that CMS delay proposed payments for the comprehensive 
APCs to ensure payment amounts have been set appropriately to include 
the additional packaged services.
    Response: We agree with commenters that, for some services, there 
was considerable variation in the payment change from an isolated 
payment for the primary service, a device-related procedure, to a 
comprehensive payment for the complete service. There were a number of 
reasons for this variation. First, services varied considerably with 
respect to the number and estimated cost of adjunctive services that 
were typically provided during the same encounter. Some services were 
almost completely described by the primary HCPCS code with status 
indicator ``J1'' with few additional adjunctive services reported in 
the claims data. Proposed comprehensive payment for these services did 
not change significantly. Other services, however, appear with many 
adjunctive services reported in the claims data that became packaged 
into the comprehensive payment, so the comprehensive payment for those 
primary HCPCS codes was considerably greater than the payment for the 
primary service alone.
    Second, comprehensive payments allow us to use almost all of the 
claims for the primary service, rather than using a smaller subset of 
claims that have a single major procedure and no other significant 
procedures. We believe that this methodology provides much more 
accurate cost estimates for these comprehensive services, including 
incorporating the cost of all adjunctive services proportional to their 
presence on claims reporting comprehensive services into our final APC 
relative payment weight calculation. Our adoption of the geometric 
mean-based methodology rather than the median-based methodology to 
establish relative payment weights finalized in the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68229 through 68233) ensures that 
the final APC relative payment weight captures the complete spectrum of 
estimated geometric mean costs of procedures reported on claims and 
assigned to that APC. We recognize that the magnitude and direction of 
the change in payment from current OPPS payment structure for more 
granular payment for individual services to the proposed single 
comprehensive APC payment for the primary service and its adjunctive 
services varied from primary service to primary service. In a few 
instances, the relative geometric mean cost of the entire comprehensive 
service was less than the geometric mean cost of the primary service 
alone. We believe that this is largely attributable to the improved 
accuracy of our ratesetting process. Under our traditional ratesetting 
methodology, we attempt to identify a cost for each separately payable 
service from our claims data. We use many strategies to use as much 
claims data as possible, but we cannot use all claims to estimate the 
APC

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geometric mean cost underpinning the relative payment weight. 
Comprehensive APCs allow us to use almost all of the claims for the 
primary service to calculate the geometric mean cost and the 
comprehensive APC to which the primary service is assigned.
    Finally, we note that we reassigned some procedures described by 
HCPCS codes assigned to status indicator ``J1'' to different 
comprehensive APCs based on public comments that we received. Also in 
response to public comments that we received, we are finalizing a 
methodology for identifying complex subsets of the procedures reported 
in combination with the primary service that contain multiple device-
dependent procedures and require greater resources, and we are 
reassigning these complex cases to a higher level comprehensive APC. We 
believe that reassigning claims for complex forms of the primary 
procedure to a higher level APC within the same clinical family 
directly addresses commenters' concerns regarding recognizing the 
additional cost of ancillary services in complex procedures and 
improves the relative accuracy of the final OPPS payment for the 
primary service.
    Comment: Several commenters questioned whether outlier payments 
would be adequate under the OPPS as the new comprehensive APCs are 
formed and packaging is expanded. The commenters noted that under the 
IPPS outlier payments are set at 5.1 percent of total payments, 
compared to 1 percent under the OPPS, and costs reported above the 
outlier threshold under the IPPS are paid at 80 percent compared to 50 
percent under the OPPS. One commenter suggested that CMS increase 
outlier payments for comprehensive APCs, while another commenter 
suggested that outlier payments are an issue that CMS should examine 
and perhaps should have examined prior to advancing new packaging 
policies.
    Response: Although we did not propose a change in outlier payments, 
we will consider whether we should expand our current outlier payment 
policy. Section 1833(t)(5)(C) of the Act specifies that the estimated 
total of additional payments for outliers cannot exceed 3 percent of 
estimated total program payments in that year. Currently, we allocate 1 
percent of total program payments to outlier payments each year. 
Overall, we believe that the current structure of the OPPS, which 
continues to make separate payment for most services, does not create 
the same financial risk for individually costly cases as IPPS payment 
through MS-DRGs, for example. Further, we are not sure an expansion to 
our outlier payment policy is necessary because we believe that our 
final policy to reassign claims for complex forms of primary services 
to higher level APCs reduces financial risk associated with 
comprehensive APC payment.
 Impact on APCs
    Impact on Composite APCs. There is currently one device-dependent 
composite service under the OPPS, cardiac resynchronization therapy, 
which is assigned to APC 0108. Because a comprehensive APC will treat 
all individually reported codes as representing components of the 
comprehensive service, all of the elements of the composite service are 
included in the new comprehensive service. Therefore, cardiac 
resynchronization therapy will no longer be identified as a composite 
service, but will be identified as a comprehensive service. All 
services currently assigned to APC 0108, including cardiac 
resynchronization therapy services, were assigned to the new 
comprehensive APC in our CY 2014 proposal.
    Comment: Several commenters noted that, whereas we proposed making 
APC 0085 (Level II Electrophysiologic Procedures) a comprehensive APC, 
we did not discuss composite APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation Composite), which also would be absorbed by the 
new comprehensive APC policy. The commenters also noted that they 
believed that CMS calculated an APC geometric mean cost and payment 
rate based on the same set of claims for both APCs.
    Response: We stated that cardiac resynchronization therapy services 
(assigned to APC 0108 Cardiac Resychronization Therapy) would no longer 
be identified as a composite service because it would be incorporated 
into a comprehensive service. However, we did not state in the proposed 
rule that the same situation existed in terms of APC 8000. Commenters 
are correct that the same principle applies. Because one of the 
components of the composite service is assigned a procedure assigned to 
status indicator ``J1,'' all of those claims reporting these services 
would trigger the comprehensive payment policy that we are finalizing 
with modification in this final rule with comment period. Commenters 
also are correct that in the proposed rule, we incorrectly assigned 
procedures to both APCs and calculated geometric mean costs and 
relative payment weights based on the same set of claims. We will 
reassign the previous status indicators for procedures assigned to APC 
8000 from ``S'' and ``T'' to status indicator ``J1'' for CY 2015, and 
we will make a comprehensive APC payment for cardiac electrophysiologic 
evaluation and ablation services.
    Impact on Claims Used to Calculate Other APCs. Some of the costs 
reported on claims for device-dependent procedures may no longer be 
available to contribute to the calculations for other services through 
the pseudo-single process described in section II.A. of this final rule 
with comment period. However, the loss of usable cost data for these 
services will not create a significant impact on other APCs because 
most of these services currently cannot be isolated as the ``single 
services'' that can be used in the cost calculation process. The 
exceptions are services such as EKGs and chest x-rays that occur in 
very high frequency across all types of encounters, and laboratory 
services and drugs, neither of which are calculated based on average 
cost. Finally, it is also important to note that the impact associated 
with the loss in usable claims data is lessened when assessing the 
benefit of more accurate cost calculations and ratesetting that will be 
achieved from the use of 400,000 new claims that can now be used for 
these purposes because of the establishment of the comprehensive APCs.
    Impact on Device-Dependent APCs. The impact on current device-
dependent APCs is described above in section II.A.2.d.(1) of this final 
rule with comment period. Comprehensive APC geometric mean costs 
generally exceed the device-dependent procedure geometric mean costs by 
an average of 11 percent, less than $1,000 per claim. The direct cost 
contribution of other adjunctive OPPS services accounts for most of 
this increase, with laboratory tests contributing approximately $18 per 
claim (a 0.1 percent increase) and other adjunctive covered outpatient 
services (not currently paid under the OPPS) contributing an additional 
$18 per claim. There is significant variation across comprehensive 
APCs, however, not only because the distribution of adjunctive services 
varies, but also because the larger bundles allow a more complete 
incorporation of packaged costs. Finally, the use of comprehensive APCs 
would allow the number of claims used to estimate costs for these 
services to almost triple from 233,000 to 649,000, increasing the 
accuracy of our relative cost estimates.
    Comment: Several commenters were concerned about hospitals' 
willingness to consider new technologies, which can be costly. The 
commenters

[[Page 74903]]

expressed concern that this proposal would impact device pass-through 
payment, New Technology APC provisions, and payments for device-
dependent APCs. The commenters also were concerned that packaging is 
likely to limit the data available for future OPPS updates because the 
commenters believed that hospital reporting would be less accurate if 
there were no payment consequences for omitting a device on the claim 
and that the sunset of device edits would reduce the reliability of the 
data provided for payment calculations for the same reason. The 
commenters also were concerned that future potential pass-through 
device categories may be disadvantaged because pass-through eligibility 
includes demonstrating costliness relative to several thresholds based 
on APC payment. Specifically, the commenters were concerned that fewer 
device categories would be eligible for pass-though payment because 
fewer device categories would exceed a new higher threshold as a 
percent of the APC payment amount as payment increases with expanded 
packaging. Some commenters requested that CMS continue to apply the 
procedure-to-device and device-to-procedure edits. One commenter 
asserted that hospitals do not find these edits to be burdensome, that 
the edits are a useful flag for accurate charging and that, if it is 
eliminated, providers could fail to report device charges completely.
    Response: We do not agree with commenters that comprehensive APC 
payment will inhibit adoption of new technology. We have not proposed 
any changes to the New Technology APCs or device pass-through payment 
provisions and we discuss these payment policies in sections 
II.A.2.d.(1) and I.B. of this final rule with comment period. These 
processes for supporting new technologies will continue. New Technology 
APCs are reserved for new services that are not eligible for 
transitional pass-through payments for a device, drug, or biological, 
and for which we lack sufficient clinical information and cost data to 
appropriately assign them to a clinical APC group. Our proposed policy 
does not impact our New Technology APC policy, and our determination of 
new technology eligibility is not dependent on a particular cost 
threshold.
    With regard to pass-through payment eligibility, we agree with the 
commenters that comprehensive APCs will create expanded bundles and 
generally higher payment from which the dollar value of the various 
cost thresholds that are part of the pass-through eligibility process 
will be determined. The specific cost thresholds used in determining 
eligibility of a new device pass-through category are listed in 42 CFR 
419.66(d). For CY 2015, payment for device-dependent procedures through 
comprehensive APC payment will create a higher costliness threshold 
against which new device categories interested in pass-through status 
must demonstrate costliness. We believe that the statutory construction 
of the OPPS envisions the relative cost of services to vary over time 
as services are redefined, recoded, and reassigned among APCs, and as 
new claims and cost report data become available, which would raise or 
lower the cost threshold for pass-through payment eligibility under 
section 1833(t)(6)(A)(iv)(II) of the Act. We estimate that, for CY 
2014, the inclusion of additional adjunctive packaged services, in 
aggregate, account for approximately 11 percent of the cost of these 
device-intensive services. Relative payment weights for device-related 
procedures can change by this amount each year due to annual 
recalibration. As we implement the comprehensive APC payment policy in 
CY 2015, we will monitor the impact of eligibility for device pass-
through payments for a change in the percent of potential device 
categories failing to clear the current cost threshold criteria.
    We also believe that that expanded payment bundles encourage 
adoption of new technologies by giving hospitals more flexibility over 
how they deliver a particular service and creating more opportunities 
for hospitals to make tradeoffs to absorb the cost of improved devices. 
As we discuss in section II.A.2.d.(1) of this final rule with comment 
period, we plan to continue our historical device editing in CY 2014. 
Also as indicated in that section, we are further assessing whether we 
need to continue claims processing edits requiring a device HCPCS code 
to be reported on the claim when we implement the comprehensive APCs 
policy in CY 2015.
 Impact on Beneficiary Payments
    Under the comprehensive service APCs, instead of paying copayments 
for a number of separate services that are generally, individually 
subject to the copayment liability cap at section 1833(t)(8)(C)(i) of 
the Act, beneficiaries can expect to only pay a single copayment that 
is subject to the cap. This will likely reduce beneficiary overall 
liability for most of these claims.
    Comment: Several commenters agreed with CMS that, due to the 
inpatient deductible cap on beneficiary copayments, net beneficiary 
coinsurance would decrease under the proposed change. One commenter was 
concerned that beneficiary out-of-pocket costs may still be higher for 
any individual beneficiary. The commenter was particularly concerned 
that new cost-sharing with beneficiaries for laboratory services would 
be contrary to statue and congressional intent. The commenter objected 
to a proposal that would impose new beneficiary cost-sharing 
requirements in order to cut total projected Medicare spending for 
outpatient services.
    Response: We believe that this proposal decreases the liability for 
almost all beneficiaries receiving primary procedures assigned to 
comprehensive APCs in CY 2015 because the inpatient deductible cap, 
mandated by statute to apply to single services, will now apply to the 
entire hospital claim, as it is now considered a single service or 
procedure. We agree with the commenters that there may be some isolated 
beneficiaries who may have a higher beneficiary liability than they 
would have had we not proposed comprehensive APCs. In many instances, 
and for these device-related procedures in particular, beneficiaries 
will no longer make copayments for individual ancillary services. 
Because the device insertion procedures that we have proposed as 
comprehensive services are universally very expensive, the cap will 
apply to the majority of claims reporting services assigned to 
comprehensive APC. We received many public comments on our proposal to 
package laboratory services and address those comments and concerns in 
our discussion of that final policy in section II.A.3.c.(3) of this 
final rule with comment period.
 Impact on Specific APCs
    In conjunction with our proposed rule, we published Addendum B, 
which identified specific proposed comprehensive payments associated 
with HCPCS codes proposed for assignment to status indicator ``J1'' 
under the proposed comprehensive APC payment policy. We identified the 
29 device-dependent APCs proposed for comprehensive APCs and assigned 
HCPCS codes based on their prior APC assignment. Most of the public 
comments that we received were specific to certain HCPCS codes, certain 
APCs, or certain families of services.
    Although we are not implementing this final comprehensive APC 
payment policy until CY 2015, to address concerns by some commenters 
that they could not fully model the proposal, we provide all of the 
information we would use to create a relative payment weight

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for CY 2014 using the CY 2012 claims data in order to illustrate the 
final comprehensive APC methodology. We summarize and respond to the 
public comments on individual services in this section, as if we were 
implementing this policy for CY 2014, grouped by those families of 
services below. We will recalibrate all of the comprehensive APC 
relative payment weights for CY 2015 using CY 2013 claims data, 
consistent with our annual recalibration of APC relative payment 
weights, to reflect the most recently available claims and cost 
information in next year's rulemaking cycle.
    Comment: With reference to the neurostimulator family of APCs, APCs 
0039, 0041, 0061, and 0318, one commenter was concerned that the CY 
2014 proposal would broadly decrease payments for neurostimulator 
insertions. Other commenters believed that total payments would remain 
approximately the same, but also believed that the spread of costs 
within a given APC was too great when certain combinations of devices 
were used. Commenters argued that there is a vast difference in supply 
(device) costs between a battery or generator replacement and a paddle 
lead implant or even a percutaneous lead implant. Commenters argued 
that bundling all of the different variations of neurostimulator 
implants into one comprehensive payment could create an unintended 
incentive to use less effective single leads and to increase the number 
of device replacements and revisions, which could potentially limit the 
therapeutic effectiveness for patients with complex pain syndromes.
    With respect to leads, commenters stated that payment for dual lead 
trials would be decreased by nearly 40 percent, while single lead 
trials would be increased by 25 percent, encouraging single lead 
trials. Similarly, the payment for the initial dual lead implant would 
decrease by 16 percent. The commenter asserted that this policy may 
reverse the common clinical practice of dual lead trials for the 
majority of patients and create a financial incentive to reduce the 
number of leads used for permanent implants, increasing the need for 
additional lead placements at a later time, which would result in an 
increase in readmissions and possible increase in adverse events and 
complications.
    Additionally, commenters believed that this proposal could create 
incentives to use shorter life devices such as non-rechargeable 
devices, requiring more frequent replacement procedures in future 
years. The commenters stated that on the one hand, providers would have 
a financial incentive to use less expensive devices initially. However, 
the commenter further stated that on the other hand because CMS is 
proposing to increase the generator replacement payment rate by 29 
percent, providers could be encouraged to use shorter life devices that 
may require more frequent replacements with a consequent increase in 
Medicare spending and beneficiary cost sharing.
    Commenters proposed a number of modifications to address these 
issues, including the creation of composite APCs to pay appropriately 
for the combination of devices provided to an individual patient. The 
commenters recommended that CMS retain the existing single component 
APCs for use when only one component (that is, a generator or an array) 
is implanted or replaced, and create two new composite APCs that 
reflect different combinations of components--pulse generator and one 
array and pulse generator and two or more arrays. Alternatively, the 
commenters recommended Comprehensive APC 0318 (Implantation of 
Neurostimulator Pulse Generator and Electrode) as the appropriate 
assignment for most complete neurostimulator systems procedures because 
it is already used to describe complete cranial nerve and vagus nerve 
systems procedures. Several commenters recommended maintaining a 
differentiation between laminectomy lead implants and percutaneous 
implants, and between spinal systems and sacral systems.
    Response: We do not agree with the commenters who are concerned 
that we are underestimating payments for neurostimulators. We believe 
that by using all claims for these services, instead of the much 
smaller subsets of single claims that we used for our device-dependent 
methodology, any adjustments in the payments for specific services 
represent a more accurate estimation of relative resources required for 
the primary service than past estimates. We also note that by 
estimating the total cost of the procedure by packaging all charges 
reported on the claim, we ensure that all of the estimated costs of all 
of these services contribute to the cost estimation for the 
neurostimulator procedure. Our methodology for identifying single 
claims, which is designed to isolate the unique costs associated with a 
specific service, makes some assumptions about assigning packaged costs 
to individual services. However, we agree with the commenters who were 
concerned that complex procedures such as those characterized by 
multiple units and multiple comprehensive components have a wide 
variation in comprehensive costs and that the geometric mean cost of 
these subsets is often materially greater than the geometric mean cost 
of all claims that include both simple and complex versions of the 
procedure. We agree with the commenters that delivery of these complex 
services could potentially be impacted under our proposed comprehensive 
APC payment policy.
    Specifically, we agree with the commenters that procedures that 
implant individual elements of device systems, such as a generator 
without leads, may have significantly different costs than procedures 
that implant entire systems. We also agree with the commenters that 
there may be significant resource differences between individual 
elements of neurostimulator systems, such as transcutaneous leads and 
implanted paddles, and between different systems, such as epidural 
systems and sacral systems. These differences may then be reflected in 
the variation in the estimated geometric mean costs of the 
comprehensive service due to different combinations of component 
services. Therefore, we are accepting the commenters' suggestions and 
we would reconfigure these APCs to better separate procedures for 
individual elements of neurostimulator systems from procedures in which 
the entire system is implanted, and to more closely align relative 
resource requirements of complex subsets of the service with the 
corresponding payment for that subset if we were implementing this 
comprehensive APC policy in CY 2014.
    Once we reassign complex claims for a primary service to a higher 
level APC, as we discuss below, we believe that many of the concerns 
raised by the commenters would be directly addressed, and therefore, we 
do not believe that we should not consider these procedures for a 
comprehensive APC assignment in CY 2015. We believe that hospitals 
understand that under a prospective payment system the cost of 
providing care to individual patients may vary relative to the payment 
amount, which is one hallmark of a prospective payment system. We are 
comfortable implementing comprehensive APCs for neurostimulators in CY 
2015 with variance in the geometric mean costs of individual services 
that are comparable to the variance we see in estimated hospital costs 
for traditional, discrete, noncomprehensive services.
    To implement the commenters' suggestions we would use the four 
techniques described above to reassign claims for complex forms of the 
primary

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service to higher level APCs. We have analyzed the claims in which 
multiple units or multiple HCPCS codes assigned to status indicator 
``J1''are present and have divided individual services into simple and 
complex services, with complex services characterized by complete 
systems, multiple components or other associations that correlate with 
high resource requirements (high cost). We are adopting the basic 
suggestion of differentiating between partial systems and complete 
systems, and we plan to use the claims data to group clinically 
similar, high-volume, complex procedures into APCs with similar costs 
in CY 2015. In this final rule with comment period, we invite 
commenters to apply the analysis, methodology, and the payment 
estimation techniques presented here to specific neurostimulator 
services and to provide comment on these illustrative CY 2014 
reassignments of complex neurostimulator claims.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, if we were implementing this policy for CY 2014, for this 
neurostimulator family of APCs are as follows:
     APC Redesignations: We would eliminate APC 0315, and we 
would rename APC 0039 and APC 0318.
     APC Reassignments: We would reassign CPT codes 43647 and 
63655 from APC 0061 to APC 0039; CPT code 0268T from APC 0039 to APC 
0040; CPT codes 63664 and 64553 from APC 0040 to APC 0061; and CPT code 
61886 from APC 0315 to APC 0318.
     Complexity Reassignment: We would reassign certain HCPCS 
code combinations that occur with CPT codes 0282T, 61885, 63650, 63663, 
63685, 64555, and 64590 as complex forms of the primary service. We 
summarize all of the codes that we would reassign as complex forms of 
their primary procedure in Table 10 as if we were implementing this 
policy in CY 2014.
    We request comment on these specific HCPCS code movements and 
complex claim reassignments. We will reassess the application of this 
policy to this neurostimulator family of APCs with CY 2013 claims data 
for CY 2015 implementation, and we will update them based on new claim 
and cost report data and any relevant new CY 2015 codes through next 
year's rulemaking cycle.
    Comment: With reference to the endovascular family of APCs, APCs 
0082, 0083, 0104, 0229, 0319, and 0656, one commenter was supportive of 
the approach to further integrate the payment methodologies for the 
inpatient and outpatient systems in this case and agreed that patients 
who receive the major services contained within the 29 comprehensive 
APCs are unlikely to be receiving unrelated services on the same day. 
The commenter urged CMS to monitor the effects of this new system to 
ensure that patients continue to receive access to the most appropriate 
care. Other commenters were generally supportive of the approach, but 
believed that there were specific reasons for not applying 
comprehensive status to the endovascular family APCs, for delaying the 
implementation for these comprehensive APCs, or for modifying payments 
within the family. One commenter specifically was concerned about a 
substantial decline in payment for APC 0083 (Coronary Angioplasty, 
Valvuloplasty, and Level I Endovascular Revascularization of the Lower 
Extremity).
    Commenters noted that for CY 2011, 16 new HCPCS codes were 
implemented to create comprehensive codes for endovascular treatment in 
the lower extremity arterial territories; for CY 2013, new base and 
add-on codes were created for coronary artery interventions; and four 
new comprehensive endovascular codes will be added for CY 2014. Several 
commenters objected to the creation of any comprehensive APCs using any 
CPT codes that are less than 3 years old, as they believe the data is 
not yet reliable.
    Several commenters noted that the existing OPPS payment structure 
for coronary and peripheral revascularization procedures (angioplasty 
and stent placement) is component-based, providing separate but often 
reduced APC payments for each clinical aspect of the revascularization 
service, which are frequently assigned a status indicator of ``T'' 
(multiple reduction applies). Commenters argued that the clinical 
scenarios for revascularization procedures are based on each 
beneficiary's unique clinical needs, making them incredibly complex 
with required resources varying significantly from patient to patient. 
Given this complexity, one commenter opined that coronary and 
peripheral revascularization procedures are ill-suited for 
comprehensive APCs because this type of payment structure is unable to 
capture the differences in hospital resources associated with the 
differences in revascularization services offered to patients. A few 
commenters believed that the proposal will inevitably give hospitals an 
incentive to use less expensive items and less extensive procedures 
even if those items will increase program costs as a whole and carry 
greater risk for beneficiaries. In a specific example, one commenter 
was concerned that all cardiac magnetic resonance imaging and other 
imaging studies within a 30-day period would be bundled into payment 
for the comprehensive APC, discourage the use of appropriate imaging 
modalities, and result in cost as the driving factor in patient access 
to needed medical imaging services.
    Finally, another commenter believed that comprehensive APCs for 
stent placement procedures would allow a few patients receiving all the 
possible components of the bundle to experience a lesser hospital 
outpatient copayment amount, but would cause many beneficiaries to pay 
for services that they have not received and do not need.
    Response: We appreciate the commenters' support for our conclusion 
that beneficiaries receiving these major services are unlikely to be 
receiving unrelated services on the same day, and we appreciate 
commenters who were generally supportive of our intent to create 
comprehensive packages. We recognize that there has been recent change 
in the coding and billing of many of these endovascular procedures, but 
we believe that hospitals prepare to adopt new codes each year and 
establish a charge relative to the best cost information available to 
them. We use estimated costs from claims data as soon as it becomes 
available to establish APC relative payment weights generally, and we 
have no reason to believe that continuing that practice for 
comprehensive APCs is not appropriate. With respect to the comments 
concerning APC 0083, for example, we note that the estimated hospital 
costs for the procedure alone did not change significantly between CY 
2011 and CY 2012, and that the proposed comprehensive service geometric 
mean cost was approximately 10 percent higher than the single procedure 
geometric mean cost, a ratio that is comparable to the average 
aggregate increase in cost for the additional ancillary services 
observed across all proposed comprehensive services, indicating 
continued stability in the relative cost estimations despite changes to 
a methodology that now aggregates all estimated costs reported on each 
claim before calculating a geometric mean cost.
    However, we agree with the commenters that endovascular procedure 
coding has historically been component based. In general, commenters 
argued that multi-vessel endovascular procedures have different 
resource requirements than single-vessel procedures. We agree with the

[[Page 74906]]

commenters that there is a correlation between the number of vessels 
treated and hospital costs. However, we also observe that there are a 
variety of endovascular procedures where the geometric mean costs of 
some single-vessel procedures are similar to the geometric mean costs 
of other multi vessel procedures. Nonetheless, we generally agree with 
the commenters that the range of estimated costs for any individual 
HCPCS code or HCPCS code combination is wide, with considerable overlap 
occurring across primary service codes and code combinations. We agree 
that, in general, payments for multiple vessel services should be 
adjusted to account for higher complexity and resources when those 
higher resources are reflected in our claims data.
    To model commenters' suggestions for illustration purposes in CY 
2014, we have used the techniques described above to reassign claims 
for certain high-cost, complex versions of the primary service, 
primarily multiple vessel endovascular procedures. We analyzed the 
claims in which multiple units of a primary service or multiple HCPCS 
codes assigned to status indicator ``J1,'' including the primary 
service, are present. We divided individual services into simple and 
complex services, with complex services characterized by multiple 
components, multiple vessels, or other associations that correlate with 
high resource requirements (high cost). For our CY 2014 illustration, 
we are adopting the basic suggestion of differentiating between single 
vessel and multiple vessel procedures, and we are using the claims data 
to group clinically similar, high-volume, complex procedures into APCs 
with similar costs. In this final rule with comment period, we invite 
commenters to apply the analysis, methodology, and the payment 
estimation techniques presented here to specific endovascular services 
and to provide comment on these illustrative CY 2014 reassignments of 
complex claims for endovascular services.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, if we were implementing this policy for CY 2014 for this 
endovascular family of APCs are as follows:
     APC Redesignations: We would delete APC 0082 and reassign 
its services to other APCs. We would create a new APC, APC 0445 (Level 
III Endovascular Procedures). We would rename APCs 0083, 0104, 0229, 
0319, and 0656.
     APC Reassignments: We would reassign CPT codes 37229, 
37230 and 92995 from APC 0082 to APC 0445; CPT codes 92984, 92987, 
92990, and 92997 from APC 0083 to APC 0104; and HCPCS code G0291 from 
APC 0656 to APC 0319 (for the purpose of estimating geometric mean 
costs from CY 2012 claims data used for CY 2014 ratesetting).
     New HCPCS Codes: The comprehensive APC assignments that we 
would make for new HCPCS codes for this family are listed in Table 9. 
The new codes in this family would include CPT codes 37236, 37237, 
37238, 37239, 37241, 37242, 37243, 37244, 92920, 92921, 92924, 92925, 
92928, 92933, 92934, 92937, 92938, 92941, 92943, 92944, and HCPCS codes 
C9600, C9601, C9602, C9603, C9604, C9605, C9606, C9607, and C9608.
     Complexity Reassignments: We would reassign certain HCPCS 
code combinations that occur with HCPCS and CPT codes 0238T, 35471, 
35475,35476, 37204, 37205, 37220, 37221, 37224, 37225, 92920, 92928, 
92933, 92941, 92943, 92980, 92981, 92982, 92995, C9600, C9602, C9604, 
C9606, C9608, G0290, and G0291. We summarize all of the codes that we 
would reassign as complex forms of their primary service in Table 10 as 
if we were implementing this policy in CY 2014.
    We request comment on these specific HCPCS movements and complex 
claim reassignments. We will reassess the application of this policy to 
this endovascular services family of APCs with CY 2013 claims data for 
CY 2015 implementation, and we will update them based on new claims 
data and any relevant new CY 2015 codes through next year's rulemaking 
cycle.
    Comment: Commenters generally did not object to the creation of 
comprehensive APCs for cardiac electrophysiology (EP) studies and one 
commenter specifically supported the proposal. However, commenters were 
confused and concerned about the impact of comprehensive APCs on 
payment for certain ablation procedures when performed in conjunction 
with EP studies. In the proposed rule, we discussed the creation of 
comprehensive APCs for EP studies, applying our proposed methodology in 
which all adjunctive services, with a few exceptions already discussed, 
reported on the claim are packaged into the payment for the primary 
service, which is based on the average comprehensive cost of those 
claims. However, we also inadvertently included a discussion of the 
continued existence of composite APC 8000 (Cardiac Electrophysiologic 
Evaluation and Ablation), a composite payment based on the performance 
of an ablation procedure with an EP service. Claims containing HCPCS 
codes for both an ablation and an EP study would, therefore, meet the 
criteria for the composite, but would also meet the criteria for 
comprehensive APC 0085 (Level II Electrophysiologic Procedures), 
understandably generating reader confusion and causing commenters to 
ask how any services would be paid as composite APC 8000 services when 
they would all be subsumed under comprehensive APC 0085. We also 
believe that we added to this confusion by initially including some 
claims and estimated costs in the cost calculation of both APC 8000 and 
APC 0085, duplicating the reporting of composite APC 8000 claims and 
causing some statistics for the two APCs to be incorrect. Moreover, we 
also were not consistent in our application of status indicators or in 
our treatment of EP-ablation composites that for CY 2013 were reported 
with new CPT codes.
    Commenters proposed several alternatives to our proposed treatment 
of EP studies and ablations but all of the alternatives involved 
differentially paying for ablation procedures when those procedures 
were performed in conjunction with EP procedures. One commenter 
recommended retaining one of the remaining ablation codes, CPT code 
93650 (Ablate heart dysrhythm focus), as a status indicator ``Q3'' 
codes that may be paid through a composite APC when not conditionally 
packaged. Noting that a status indicator of ``Q3'' would have the same 
packaging effect as including it in the comprehensive package as 
proposed, we believe this commenter intended to recommend a higher 
payment for EP procedures performed with an ablation, such as would 
occur when the two codes would determine a composite APC assignment. 
Another commenter expressed concerns that CPT code 93620 
(Electrophysiology evaluation) was also listed with a status indicator 
of ``Q3'' but assigned to comprehensive APC 0085. Commenters requested 
that we clarify the intended treatment of EP and ablation services, 
differentially pay for the lower costs of EP studies performed alone 
relative to the higher costs of EP-ablation procedures, and create a 
consistent treatment of services within these sets of codes.
    Response: We agree with the commenters that our proposed rule 
provisions were not consistent in regard to our treatment of the 
electrophysiology-ablation procedures as composite services and as 
comprehensive services. We also agree with the commenters that there 
are significant differences between

[[Page 74907]]

estimated costs of EP studies and estimated costs of EP-ablation 
procedures, and that the costs of services reported with EP-ablation 
combination codes are similar to the costs of single EP-ablation 
services assigned to composite APC 8000. For CY 2015, we intend to 
modify our proposal to create a separate comprehensive APC for new CY 
2013 HCPCS codes that represent an EP study procedure with ablation, 
and we also intend to identify combined EP-ablation services reported 
with multiple HCPCS codes as a complex form of EP services and reassign 
them to a higher level APC. Finally, we also intend to delete composite 
APC 8000 as we move payment for these services under the comprehensive 
APC payment policy. In this final rule with comment period, we invite 
commenters to apply the analysis, methodology, and the payment 
estimation techniques presented here to specific EP services and to 
provide comment on these illustrative CY 2014 reassignments of complex 
claims for EP services.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, as if we were implementing this policy for CY 2014, for this 
set of electrophysiologic evaluation and ablation APCs are as follows:
     APC Redesignations: We would redesignate composite APC 
8000 as comprehensive APC 0444 (Level III Electrophysiologic 
Procedures).
     New codes: We would reassign CPT codes 93653, 93654 and 
93656 from APC 8000 to APC 0444.
     Complexity Reassignments: We would reassign HCPCS codes 
93619 and 93620, in combination with CPT code 93650, as complex forms 
of the primary EP service, and we would reassign those claims to APC 
0444. For purposes of modeling the policy for CY 2014, we treated 
claims previously assigned to composite APC 8000 as complex forms of 
the primary service. We summarize all of the codes that we would 
reassign as complex forms of their primary procedures in Table 10 as if 
we were implementing this policy in CY 2014.
    We request public comment on these specific HCPCS movements and 
complex claim reassignments. We will reassess the application of this 
policy to this set of electrophysiologic evaluation and ablation APCs 
with CY 2013 claims data for CY 2015 implementation, and we will update 
them based on new claims data and any relevant new CY 2015 codes 
through next year's rulemaking cycle.
    Comment: In addition to the general comment that CMS should ensure 
that complex (multiple device) procedures are not inappropriately 
grouped with single device insertions, there were several public 
comments regarding the pacemaker-defibrillator family of services, APCs 
0089, 0090, 0106, 0107, 0108, 0654, 0655, and 0674. With the exception 
of public comments on cardiac resynchronization therapy (CRT), these 
comments dealt with general issues such as the difficulty in modeling 
the impacts of payment changes based on the information provided in the 
proposed rule and are discussed elsewhere in this final rule with 
comment period. Currently, we pay for CRT services through composite 
APC 0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)) 
based on the geometric mean costs of procedures reported on claims with 
a specific set of codes describing the parts of this composite service 
(77 FR 68258). Our proposal for comprehensive payment would have 
subsumed the need for a composite APC in CY 2014. One commenter 
requested that CRT services continue to be paid based on the geometric 
mean cost of the composite service rather than based on the geometric 
mean cost of all services furnished with multiple lead pacemakers or 
defibrillators that would occur with both our proposal to package 
procedures described by add-on codes and the comprehensive APC policy.
    Response: We agree with the commenters that complex forms of 
certain services, generally characterized by combinations of codes in 
which components were separately reported in order to describe the 
delivery of an entire pacemaker or defibrillator system, have different 
resource profiles from simple procedures that implant system components 
or certain simple devices. We agree that CRT services are one of the 
most costly subsets of pacemaker implantation services but that other 
complex combinations of codes also exist. However, as part of the 
process of converting these APCs to comprehensive APCs, we noted that 
the comprehensive geometric mean cost of these services differed 
considerably, in some cases, from our estimates of the primary service 
calculated through our traditional single bill methodology and these 
new cost estimates suggested reassigning codes among the family of 
pacemaker APCs in order to increase resource homogeneity. These 
reassignments also suggested renaming or restructuring APCs as 
necessary. We found these reassignments would reduce much of the cost 
to payment variance.
    Therefore, in response to public comments we received, we would 
modify our proposal to establish comprehensive payments for pacemaker 
related services. We would realign the APCs by moving primary services 
subject to our standard 2 times rule methodology. In addition, we have 
identified a number of HCPCS combinations that represent high volume, 
high cost, more complex subsets of the primary service, and we would 
reassign those claims to a higher level APC. We note that our decision 
to finalize this proposed comprehensive APC policy with modification in 
this final rule with comment period, but to delay implementation of the 
policy until CY 2015 creates the opportunity for the public to further 
review the illustrative reconfigurations of comprehensive APCs that we 
would make in response to comment. In this final rule with comment 
period, we invite commenters to apply the analysis, methodology, and 
the payment estimation techniques presented here to specific pacemaker 
services and to provide comment on these illustrative CY 2014 APC 
configurations, APC assignments, and complexity reassignments.
    Changes to implement commenters' suggestions and concerns for CY 
2014, if we were implementing this policy for CY 2014, for this 
pacemaker-defibrillator family of APCs are as follows:
     APC Redesignations: We would rename APC 0089 ``Level III 
Insertion/Replacement of Permanent Pacemaker,'' and we would rename APC 
0106 ``Insertion/Replacement of Pacemaker Components.''
     APC Reassignments: We would reassign CPT code 33217 from 
APC 0106 to APC 0090; CPT code 33229 from APC 0645 to APC 0655; CPT 
code 33231 from APC 0107 to APC 0108; CPT codes 33208, 33214, and 33224 
from APC 0655 to APC 0089; and CPT code 33221 from APC 0654 to APC 
0089.
     Complexity Reassignments: We would reassign certain 
combinations of the following CPT codes 33206, 33207, 33208, 33210, 
33212, 33213, 33216, 33224, 33227, 33228, 33230, 33240, 33263, and 
33264 as complex forms of the primary pacemaker-defibrillator service. 
We summarize all of the codes that we would reassign as complex forms 
of their primary procedures in Table 10 as if we were implementing this 
policy in CY 2014.
    We request comment on these specific HCPCS movements and complex 
claim reassignments. We will reassess the application of this policy to 
this pacemaker-defibrillator family of APCs with CY 2013 claims data 
for CY 2015 implementation, and we will update them based on new claims 
data and any

[[Page 74908]]

relevant new CY 2015 codes through next year's rulemaking cycle.
    Comment: Several commenters requested that CMS not designate APC 
0202 (Level VII Female Reproductive Procedures) as a comprehensive APC. 
The commenters opined that, as opposed to the stated description of 
comprehensive APCs, APC 0202 does not contain a single major procedure 
with relatively small cost contributions from adjunctive services but 
contains independent services that are frequently performed in 
combination with each other. Commenters also noted that CMS is 
currently achieving payment efficiencies for these concomitant 
procedures by reducing the payment for any second procedure to 50 
percent even when that second procedure contains an additional medical 
device. The commenters stated that when multiple services are performed 
together under a comprehensive payment, the averaged payment assigned 
to the APC may be significantly less than the cost of the individual 
services performed. The commenters believed that this may encourage 
some hospitals to delay or stage procedures inappropriately, increasing 
overall Medicare costs and potentially threatening patient access to 
certain devices.
    One commenter believed that APCs 0385 (Level I Prosthetic 
Urological Procedures) and 0386 (Level II Prosthetic Urological 
Procedures) similarly would have sizable reductions in Medicare 
payments that could create significant disincentives for hospitals to 
perform certain procedures that utilize medical devices. Another 
commenter believed that this result also applied to APC 0674 (Prostate 
Cryoablation).
    Response: We do not agree with the commenters that these APCs 
represent a different class of services. All of the services described 
by the HCPCS codes in these APCs represent major surgical procedures 
where the encounter can be viewed as a single primary service and where 
a beneficiary would view the encounter globally. What commenters are 
describing as unrelated procedures are individual components of a 
single surgical procedure, which is, in turn, the primary reason for 
the encounter. CPT codes are designed by physicians to facilitate 
reporting of variation in physician work and, as a result, often 
describe individual components of services that can be grouped in 
various ways. However, from a hospital payment perspective, many of 
those component codes are ancillary to or supportive of a primary 
service. For example, during a procedure to repair the urogenital tract 
the surgeon may report CPT code 57265 (Extensive repair of vagina) 
along with CPT code 57288 (Repair bladder defect), but these individual 
physician services are both part of the comprehensive surgical repair 
procedure. In the proposed rule, we proposed defining the most costly 
component of a comprehensive service as the primary service that 
determines the APC assignment and final payment of the service, and we 
believe that this methodology remains appropriate for these services.
    We agree with the commenters generally and that, with respect to 
these reproductive surgery APCs specifically, there are some instances 
of commonly performed clinically coherent combinations of HCPCS codes 
assigned to status indicator ``J1'' that are associated with high 
estimated cost and sufficient volume, and we would designate these 
procedures as complex subsets of these primary services eligible for 
reassignment to a higher level APC if we were implementing this policy 
in CY 2014. We would have applied this methodology along with other 
techniques described above for CY 2014 in order to facilitate the 
transition from discrete incremental payments to a single comprehensive 
payment for the entire service. For APCs 0385, 0386, and 0674, as well 
as APC 0202, we also identified several combinations of HCPCS codes 
that represented common, costly subsets of services and we would 
reassign several HCPCS codes to different APCs to reduce the variance 
between the geometric mean estimated cost of the complex services and 
geometric mean cost of the APC to which the services would be assigned. 
In this final rule with comment period, we are inviting commenters to 
apply the analysis, methodology, and the payment estimation techniques 
presented here to specific reproductive services and to provide comment 
on these illustrative CY 2014 reassignment of complex reproductive 
services claims.
    Changes to implement the commenters' suggestions and concerns for 
CY 2014, if we were implementing the policy for CY 2014, for this 
urogenital procedures family of APCs are as follows:
     APC Redesignations: We would rename APC 0385 ``Level I 
Urogenital Procedures''; APC 0386 ``Level II Urogenital Procedures''; 
and APC 0674 ``Level III Urogenital Procedures''.
     APC Reassignments: We would reassign CPT code 53445 from 
APC 0386 to APC 0674; CPT code 55873 from APC 0674 to APC 0385; and CPT 
code 57423 from APC 0202 to APC 0385.
     Complexity Reassignments: We would reassign certain 
combinations of CPT codes 54405, 57265, 57282, and 57285 as complex 
forms of the primary service. We summarize all of the codes that we 
would reassign as complex forms of their primary procedures in Table 10 
as if we were implementing this policy in CY 2014.
    We request comment on these specific HCPCS movements and complex 
claim reassignments. We will reassess the application of this policy to 
this urogenital procedures family of APCs with CY 2013 claims data for 
CY 2015 implementation, and we will update them based on new claims 
data and any relevant new CY 2015 codes through next year's rulemaking 
cycle.
    Comment: One commenter noted that APC 0082, a cardiovascular APC, 
includes CPT code 37204 (Transcatheter occlusion), which is 
occasionally used to report brachytherapy for liver therapy. The 
commenter believed that packaging yttrium in the cost of APC 0082 would 
be in conflict with section 1833(t)(2)(H) of the Act, which requires 
separate payment for brachytherapy.
    Response: We agree with the commenters that the statute specifies 
that brachytherapy devices (seeds) shall be classified separately under 
the OPPS from other services. Because brachytherapy devices could be 
used during some encounters to deliver comprehensive services, we will 
modify our proposal to state that brachytherapy devices, like 
mammography and ambulance services, will not be included in the 
comprehensive payments beginning in CY 2015 and will continue to 
receive separate payment.
    Comment: One commenter stated that CMS should not consider APC 0227 
(Implantation of Drug Infusion Device) to be a comprehensive APC 
because the drug that is used to fill the reservoir is not part of the 
comprehensive service. The commenter stated that the drug that is used 
to fill the pump should not be considered adjunctive because the drug 
itself is therapeutic and separate and apart from the implantation of 
the primary (pump) service. This commenter believed that therapeutic 
drugs in general should be excluded from a comprehensive APC payment 
and expressed concern that packaging may decrease hospital use of 
costly drugs, such as PRIALT, which is a non-narcotic alternative. 
Another commenter stated that CMS should provide greater data 
transparency if it decides to move ahead with the inclusion of DME 
items within a comprehensive APC. The commenter was concerned that 
there will be a decrease in the payment rate for APC 0227 relative to 
the CY 2013 payment rate, which will render the

[[Page 74909]]

payment inadequate to cover the cost of the services in question.
    Response: We do not agree with the commenters that drugs being 
supplied to the patient to fill the reservoir of a pump at the time of 
pump implantation should be excluded from the comprehensive APC 
payment. Drugs supplied to fill the pump during implantation of the 
pump are adjunctive to the procedure. As we have noted above, costs of 
costly adjunctive services are included proportionally into the cost 
estimation for the primary services through our ability to use almost 
all claims for a service and adoption of the geometric mean cost upon 
which to establish relative payment weights. Certainly, the greater the 
cost variance of a particular component and the less frequently that 
exceptional component is used, the less the relative payment weight, 
based on a geometric mean of estimated cost, will reflect those less 
frequent, costly cases. Hospitals are also aware that the costs of 
extremely costly cases are partially mitigated by outlier payments, 
which would continue to apply in this case upon implementation of the 
comprehensive APC policy in CY 2015. Finally, with respect to APC 0227, 
we note that the comprehensive estimated geometric mean costs are in 
fact approximately 10 percent higher than the individual procedure 
estimated geometric mean costs, consistent with the relative 
contribution of adjunctive services across all comprehensive APCs.
    Therefore, we are confirming that drugs used to fill in pumps at 
the time of a comprehensive pump insertion procedure are considered to 
be ancillary and supportive to the primary procedure and packaged as 
part of the comprehensive APC payment regardless of whether the drug 
was previously packaged within the OPPS payment, was previously 
separately paid under the OPPS, or was previously paid according to a 
DMEPOS fee schedule.
(f) Summary of Creation of Comprehensive APCs for High-Cost Device 
Dependent Procedures for Implementation in CY 2015
    In summary, in response to public comments we received, we have 
decided to finalize the comprehensive APCs with modification and to 
delay the implementation or effective date of the policy until CY 2015. 
We acknowledge commenters' concerns that this is a complex new payment 
structure under the OPPS. We agree that hospitals should have time to 
prepare for this comprehensive payment structure, and we also agree 
with the commenters that a delay in implementation will allow us (and 
them) more time to operationalize changes necessary to process 
comprehensive payments.
    In response to public commenters' request for additional detail on 
our calculation of the comprehensive APC relative payment weights, we 
have provided a granular discussion of our methodology for constructing 
the comprehensive APC payment rates as well as the specific APC 
configurations we would implement for CY 2014 if we were not delaying 
implementation to CY 2015. We also believe that the delay in 
implementation will give hospitals more time to study the final 
methodology for calculating relative payment weights that we discuss in 
this section, and specifically how the methodology recognizes resource 
differences in complex and simple versions of the same primary service. 
We are taking advantage of the delay in implementation and requesting 
additional comment on this methodology.
    For CY 2015, we will recalibrate comprehensive APCs and final 
reassignment of complex claims in light of any comments on the 
illustrative CY 2014 assignments that we present and updated CY 2013 
claims and cost report data next year. For CY 2014, we will continue 
our payment for device-dependent APCs and composite payment for both 
CRT and cardiac electrophysiologic evaluation and ablation as discussed 
elsewhere in this final rule with comment period.
    Effective for CY 2015, we will include all integral, ancillary, 
supportive, dependent, and adjunctive outpatient services into the 
comprehensive APC payment, excluding certain services such as ambulance 
services; mammography services; brachytherapy sources; and drugs, 
biologicals, and devices receiving pass-through payment. We will not 
include charges reported with inpatient room and board revenue codes as 
we do not believe outpatient costs are correctly reported in those 
revenue codes. Adjunctive items and services that will be 
unconditionally packaged into the comprehensive APC payment for CY 2015 
include the following.
     All packaged services that were packaged in CY 2013.
     All services finalized for unconditional or conditional 
packaging for CY 2014.
     All adjunctive services and supplies provided during the 
delivery of the comprehensive service, which includes all other cover 
OPPS items and services appearing on a claim, including those with a 
HCPCS with status indicator ``J1''; implantable DMEPOS supplies 
provided during the comprehensive OPPS service; services performed by 
therapists provided during the OPPS service; and all other covered 
outpatient items and services appearing on the claim.
     All packaged hospital-administered drugs pursuant to a 
physician order, excluding pass-through drugs that are required to be 
separately paid by statute.
    We are finalizing a modification to our proposed methodology for 
identifying a primary service, assigned to status indicator ``J1'' on a 
claim reporting multiple procedures described by HCPCS codes assigned 
to status indicator ``J1'' in order to effectuate an appropriate 
comprehensive APC payment. We are finalizing a multiple step process to 
include an evaluation of costliness based on the comprehensive 
geometric mean cost of single procedures assigned to status indicator 
``J1'' reported on claims. We also have determined that there are 
certain subsets of outpatient cases for a primary service that should 
be more appropriately paid when stratified according to the complexity 
of the service. Therefore, we have identified a number of complexity 
reassignments for certain high-volume, costly, complex versions of a 
primary service, and we have reassigned these subsets of procedures 
representing a complex version of the primary service to higher-level 
APCs in the same clinical family.
    In response to public comments we received, we discuss how we would 
have revised some comprehensive APC definitions and reassigned HCPCS 
codes to specific APCs in order to better align the comprehensive 
geometric mean cost of primary services with APCs that better capture 
the resource and clinical aspects of the service if we were 
implementing this policy for CY 2014. We discuss the methodology that 
we followed for all of those modifications to our proposal in detail 
earlier in this section. We display the final APC revisions that we 
would make and final comprehensive geometric mean cost for those APCs, 
if we were implementing this policy for CY 2014 in Table 8. We display 
final HCPCS assignments in Table 9 and complexity reassignments in 
Table 10 that we would make if we were implementing this policy for CY 
2014.
    We have reconciled the inconsistency in our proposal to pay for 
cardiac electrophysiology-ablation procedures under both composite and 
comprehensive methodologies. For CY 2015, we are reassigning the codes 
assigned to composite APC 8000 into a new composite APC 0444, along 
with complex services from APC 0085 that

[[Page 74910]]

are characterized by composite EP-ablation procedures described by 
HCPCS code combinations.
    Therefore, for CY 2015, we are creating 29 comprehensive APCs to 
prospectively pay for services associated with 167 CY 2014 HCPCS codes, 
which is the most recent code set available. We note that the list of 
HCPCS codes represent the procedures that would be assigned to a 
comprehensive APC if we implemented this policy for CY 2014. We will 
update this list as indicated in our proposed and final OPPS rules for 
CY 2015.
    For CY 2015, we are treating all individually reported procedures 
that are assigned to status indicator ``J1,'' which will appear in the 
CY 2015 Addendum B to the proposed rule, as representing components of 
a comprehensive service characterized by a primary service, and we will 
make a single payment for the comprehensive service. We will be making 
a single all-inclusive payment for each comprehensive service reported 
on a claim with that payment subject to a single beneficiary copayment, 
up to the cap set at the level of the inpatient hospital deductible, as 
provided at section 1833(t)(8)(C)(i) of the Act.
f. 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 extended assessment and management services, low 
dose rate (LDR) prostate brachytherapy, cardiac electrophysiologic 
evaluation and ablation services, mental health services, multiple 
imaging services, and cardiac resynchronization therapy services. We 
refer readers to the CY 2008 OPPS/ASC final rule with comment period 
for a full discussion of the development of the composite APC 
methodology (72 FR 66611 through 66614 and 66650 through 66652) and the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74163) for more 
recent background.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43561), for CY 2014, 
we proposed to continue our composite policies for extended assessment 
and management services, LDR prostate brachytherapy services, cardiac 
electrophysiologic evaluation and ablation services, mental health 
services, and multiple imaging services, as discussed below. We 
proposed to discontinue and supersede the cardiac resynchronization 
therapy composite APC with our proposed comprehensive APC 0108, as 
discussed in section II.A.2.e. of the proposed rule (78 FR 43561). 
Comments on cardiac resynchronization therapy relating to comprehensive 
APCs are discussed in section II.A.2.e. of this final rule with comment 
period.
(1) Extended Assessment and Management Composite APCs (APCs 8002 and 
8003)
(a) Background
    Beginning in CY 2008, we included composite APC 8002 (Level I 
Extended Assessment and Management Composite) and composite APC 8003 
(Level II Extended Assessment and Management Composite) in the OPPS to 
provide payment to hospitals in certain circumstances when extended 
assessment and management of a patient occur (an extended visit). In 
most of these circumstances, observation services are supportive and 
ancillary to the other services provided to a patient. From CY 2008 
through CY 2013, in the circumstances when observation care is provided 
in conjunction with a high level visit, critical care, or direct 
referral and is an integral part of a patient's extended encounter of 
care, payment is made for the entire care encounter through one of the 
two composite APCs as appropriate. We refer readers to the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74163 through 74165) for 
a full discussion of this longstanding policy for CY 2013 and prior 
years.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43562 through 43563), 
for CY 2014, we proposed to modify our longstanding policy to provide 
payment to hospitals in certain circumstances when extended assessment 
and management of a patient occur. We proposed to create one new 
composite APC, entitled ``Extended Assessment and Management (EAM) 
Composite'' (APC 8009), to provide payment for all qualifying extended 
assessment and management encounters rather than recognize two levels 
of EAM composite APCs. We proposed to allow any visit furnished by a 
hospital in conjunction with observation services of substantial 
duration to qualify for payment through EAM composite APC 8009. These 
policies are discussed in greater detail below.
(b) Payment for Extended Assessment and Management Services
    As we discussed in section VII. of the CY 2014 OPPS/ASC proposed 
rule (78 FR 43614 through 43617), we proposed to no longer recognize 
five distinct visit levels for clinic visits and emergency department 
visits based on the existing HCPCS E/M codes, and instead recognize 
three new alphanumeric HCPCS codes for each visit type. Currently, the 
payment criteria for the EAM composite APCs 8002 and 8003 include a 
high level visit represented by HCPCS code 99205, 99215, 99284, 99285, 
or G0304; critical care represented by CPT code 99281; or direct 
referral represented by HCPCS code G0379 provided in conjunction with 
observation care represented by HCPCS code G0378. We stated that in 
light of the proposal to no longer differentiate visit payment levels, 
and the fact that the current high level visit codes (HCPCS codes 
99205, 99215, 99284, 99285 and G0304) would no longer be recognized 
under the OPPS, it would no longer be feasible to continue with our 
current payment criteria for the EAM composite APCs 8002 and 8003 for 
CY 2014. Therefore, to ensure that we continue to provide payment to 
hospitals in certain circumstances when extended assessment and 
management of a patient occur, for CY 2014, we proposed to provide 
payment for the entire care encounter through proposed new EAM 
Composite APC 8009 when observation care is provided in conjunction 
with a visit, critical care, or direct referral and is an integral part 
of a patient's extended encounter of care. Specifically, for CY 2014, 
we proposed to provide EAM composite APC payment through a newly 
created composite APC in circumstances when a clinic or ED visit, 
identified by one of the three new alphanumeric HCPCS codes proposed in 
section VII. of the proposed rule, is accompanied by observation care 
of substantial duration on a claim. We would no longer recognize 
composite APC 8002 or APC

[[Page 74911]]

8003. The specific criteria we proposed to be met for the proposed new 
EAM composite APC to be paid is provided below in the description of 
the claims that we proposed to select for the calculation of the 
proposed CY 2016 geometric mean costs for this composite APC.
    We proposed to calculate the geometric mean costs for the proposed 
new EAM composite APC (APC 8009) for CY 2014 using CY 2012 single and 
``pseudo'' single procedure claims that meet each of the following 
criteria:
     The claim does not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we assured that they would not contain a code for a service 
with status indicator ``T'' on the same date of service.);
     The claim contains 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claim contains one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as G0378; or CPT code 99201 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 1)); CPT code 99202 (Office or other outpatient visit for the 
evaluation and management of a new patient (Level 2)); CPT code 99203 
(Office or other outpatient visit for the evaluation and management of 
a new patient (Level 3)); CPT code 99204 (Office or other outpatient 
visit for the evaluation and management of a new patient (Level 4)); 
CPT code 99205 (Office or other outpatient visit for the evaluation and 
management of a new patient (Level 5)); CPT code 99211 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 1)); CPT code 99212 (Office or other outpatient visit 
for the evaluation and management of an established patient (Level 2)); 
CPT code 99213 (Office or other outpatient visit for the evaluation and 
management of an established patient (Level 3)); CPT code 99214 (Office 
or other outpatient visit for the evaluation and management of an 
established patient (Level 4)); CPT code 99215 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 5)); 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)); or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes) provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378.
    The proposed CY 2014 geometric means cost resulting from this 
methodology for the proposed new EAM composite APC (APC 8009) was 
approximately $1,357, which was calculated from 318,265 single and 
``pseudo'' single claims that met the required criteria.
    We stated in the proposed rule that when hospital claims data for 
the CY 2014 proposed clinic and ED visit codes becomes available, we 
proposed to calculate the geometric mean cost for the proposed new EAM 
composite APC (APC 8009) for CY 2016 using CY 2014 single and 
``pseudo'' single procedure claims that meet each of the following 
criteria:
     The claims do not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we ensure that they would not contain a code for a service with 
status indicator ``T'' on the same date of service.);
     The claims contain 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claims contain one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as HCPCS code G0378; or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes); or newly proposed alphanumeric 
Level II HCPCS code GXXXA (Type A ED visit); newly proposed 
alphanumeric Level II HCPCS code GXXXB (Type B ED visit); or newly 
proposed alphanumeric Level II HCPCS code GXXXC (Clinic visit) provided 
on the same date of service or 1 day before the date of service for 
HCPCS code G0378.
    Comment: One commenter supported CMS' proposal to delete composite 
APCs 8002 and 8003 and to pay for extended assessment and management 
services through newly created composite APC 8009. Another commenter, 
who did not support the proposal, stated that the proposed policy did 
not accurately account for the cost of providing an extended assessment 
and management service and urged CMS to carefully assess the potential 
impact of this proposal upon different types of facilities and patients 
before moving forward.
    Response: We appreciate the commenter's support of our proposal. We 
disagree with the one commenter's argument that our proposal does not 
accurately account for the cost of providing an extended assessment and 
management service. We believe that this proposal accurately accounts 
for the cost of providing an extended assessment and management service 
and that this proposal does not have any substantial impact on any 
particular type of facility or patient type.
    After consideration of the public comments we received, we are 
finalizing our proposal to create a new composite APC, entitled 
``Extended Assessment and Management (EAM) Composite'' (APC 8009), to 
provide payment for all qualifying extended assessment and management 
encounters rather than recognizing two levels of EAM Composite APCs. In 
light of our CY 2014 final visit payment policy, which is discussed in 
detail in section VII. of this final rule with comment period, we are 
modifying our proposal to allow any clinic and certain high level ED 
visits furnished by a hospital in conjunction with observation services 
of substantial duration to qualify for payment through the newly 
created Extended Assessment and Management (EAM) Composite APC (APC 
8009). Specifically, we are allowing a clinic visit (for CY 2014, there 
will be one code to describe all clinic visits), a Level 4 or Level 5 
Type A ED visit, or a Level 5 Type B ED visit furnished by a hospital 
in conjunction with observation services of substantial duration to 
qualify for payment through composite APC 8009. This modification of 
the proposed EAM composite APC criteria is due to our decision not to 
finalize any changes to the Type A or Type B ED visit codes for CY 
2014. Because we are not changing the ED visit codes for CY 2014, we 
also are not changing for CY 2014 the particular ED visit codes that 
qualify for the EAM composite APC.

[[Page 74912]]

    We also are modifying our proposal to calculate the payment rate 
for the new EAM composite APC (APC 8009). Specifically, we calculated 
the geometric mean cost for procedures assigned to APC 8009 for CY 2014 
using CY 2012 single and ``pseudo'' single procedure claims that met 
each of the following criteria:
     The claim does not contain a HCPCS code to which we have 
assigned status indicator ``T'' that is reported with a date of service 
1 day earlier than the date of service associated with HCPCS code 
G0378. (By selecting these claims from single and ``pseudo'' single 
claims, we assured that they would not contain a code for a service 
with status indicator ``T'' on the same date of service.);
     The claim contains 8 or more units of HCPCS code G0378 
(Observation services, per hour); and
     The claim contains one of the following codes: HCPCS code 
G0379 (Direct referral of patient for hospital observation care) on the 
same date of service as HCPCS code G0378; or CPT code 99201 (Office or 
other outpatient visit for the evaluation and management of a new 
patient (Level 1)); CPT code 99202 (Office or other outpatient visit 
for the evaluation and management of a new patient (Level 2)); CPT code 
99203 (Office or other outpatient visit for the evaluation and 
management of a new patient (Level 3)); CPT code 99204 (Office or other 
outpatient visit for the evaluation and management of a new patient 
(Level 4)); CPT code 99205 (Office or other outpatient visit for the 
evaluation and management of a new patient (Level 5)); CPT code 99211 
(Office or other outpatient visit for the evaluation and management of 
an established patient (Level 1)); CPT code 99212 (Office or other 
outpatient visit for the evaluation and management of an established 
patient (Level 2)); CPT code 99213 (Office or other outpatient visit 
for the evaluation and management of an established patient (Level 3)); 
CPT code 99214 (Office or other outpatient visit for the evaluation and 
management of an established patient (Level 4)); CPT code 99215 (Office 
or other outpatient visit for the evaluation and management of an 
established patient (Level 5)); 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 G0384 (Type B 
emergency department visit (Level 5)); or CPT code 99291 (Critical 
care, evaluation and management of the critically ill or critically 
injured patient; first 30-74 minutes) provided on the same date of 
service or 1 day before the date of service for HCPCS code G0378.
    The final CY 2014 payment rate for composite APC 8009 is 
approximately $1,199.
(2) Low Dose Rate (LDR) Prostate Brachytherapy Composite APC (APC 8001)
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the composite treatment service because there are separate 
codes that describe placement of the needles/catheters and the 
application of the brachytherapy sources: CPT code 55875 (Transperineal 
placement of needles or catheters into prostate for interstitial 
radioelement application, with or without cystoscopy) and CPT code 
77778 (Interstitial radiation source application; complex), which are 
generally present together on claims for the same date of service in 
the same operative session. In order to base payment on claims for the 
most common clinical scenario, and to further our goal of providing 
payment under the OPPS for a larger bundle of component services 
provided in a single hospital encounter, beginning in CY 2008, we began 
providing a single payment for LDR prostate brachytherapy when the 
composite service, reported as CPT codes 55875 and 77778, is furnished 
in a single hospital encounter. We based the payment for composite APC 
8001 (LDR Prostate Brachytherapy Composite) on the geometric mean cost 
derived from claims for the same date of service that contain both CPT 
codes 55875 and 77778 and that do not contain other separately paid 
codes that are not on the bypass list. We refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66652 through 66655) for 
a full history of OPPS payment for LDR prostate brachytherapy services 
and a detailed description of how we developed the LDR prostate 
brachytherapy composite APC.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43563), for CY 2014, 
we proposed to continue to pay for LDR prostate brachytherapy services 
using the composite APC methodology proposed and implemented for CY 
2008 through CY 2013. That is, we proposed to use CY 2012 claims on 
which both CPT codes 55875 and 77778 were billed on the same date of 
service with no other separately paid procedure codes (other than those 
on the bypass list) to calculate the payment rate for composite APC 
8001. Consistent with our CY 2008 through CY 2013 practice, we proposed 
not to use the claims that meet these criteria in the calculation of 
the geometric mean costs of procedures or services assigned to APC 0163 
(Level IV Cystourethroscopy and Other Genitourinary Procedures) and APC 
0651 (Complex Interstitial Radiation Source Application), the APCs to 
which CPT codes 55875 and 77778 are assigned, respectively. We proposed 
to continue to calculate the geometric mean costs of procedures or 
services assigned to APCs 0163 and 0651 using single and ``pseudo'' 
single procedure claims. We stated that we believe that this composite 
APC contributes to our goal of creating hospital incentives for 
efficiency and cost containment, while providing hospitals with the 
most flexibility to manage their resources. We also continue to believe 
that data from claims reporting both services required for LDR prostate 
brachytherapy provide the most accurate geometric mean cost upon which 
to base the composite APC payment rate.
    Using a partial year of CY 2012 claims data available for the CY 
2014 OPPS/ASC proposed rule, we were able to use 1,487 claims that 
contained both CPT codes 55875 and 77778 to calculate the geometric 
mean cost of these procedures upon which the proposed CY 2014 payment 
rate for composite APC 8001 was based. The proposed payment rate for 
composite APC 8001 for CY 2014 was approximately $4,340.
    Comment: A few commenters asserted that the existing methodology to 
create ``pseudo'' single claims from multiple procedure claims is not 
yielding a significant number of claims to be used to calculate 
adequate payment rates for APC 8001, APC 0312 (Radioelement 
Applications), and APC 0313 (Brachytherapy). The commenters believed 
that use of this methodology and its insignificant results is a 
continuing trend.
    Response: For CY 2014, we have 591 final rule claims available for 
APC 8001 geometric mean cost calculation, while for CY 2013 we were 
able to use 677 claims that contained both CPT codes 55875 and 77778 to 
calculate the geometric mean cost of these procedures upon which the 
final CY 2013 payment rate for composite APC 8001 was based. For CY 
2014, we have 52 single claims available for geometric mean cost 
calculation for APC 0312, compared to 74 claims available for CY 2013. 
For APC 0313, we have 17,810 single claims available for CY 2014 for 
geometric mean cost calculation compared to 17,743 single claims 
available for CY

[[Page 74913]]

2013. Therefore, there is approximately the same number of ``pseudo'' 
single claims available for APCs 8001 and 0313 geometric mean cost 
calculation compared to CY 2013. With regard to APC 0312 geometric mean 
cost calculation, the number of single claims available for ratesetting 
for CY 2014 compared to CY 2013 is somewhat low for both years. We 
agree with the commenter that it would be preferable if we had a larger 
volume of single claims on which to base the payment rate for APC 0312. 
We will continue to evaluate additional refinements and improvements to 
our ratesetting methodologies in order to maximize our use of claims 
data. In addition, we will continue to study means by which we can use 
a larger volume of claims data to establish the payment rate for APC 
0312 specifically.
    Comment: One commenter supported CMS' proposal to continue paying 
for LDR prostate brachytherapy services using composite APC 8001 and 
noted recognition of the proposed increase in payment.
    Response: We appreciate the commenter's support for this proposal.
    After consideration of the public comments we received, we are 
finalizing our policy to continue paying for LDR prostate brachytherapy 
services using composite APC 8001 for CY 2014, with a final CY 2014 
geometric mean cost for APC 8001 of approximately $3,858.
(3) Cardiac Electrophysiologic Evaluation and Ablation Composite APC 
(APC 8000)
    Effective January 1, 2008, we established APC 8000 (Cardiac 
Electrophysiologic Evaluation and Ablation Composite) to pay for a 
composite service made up of at least one specified electrophysiologic 
evaluation service and one specified electrophysiologic ablation 
service. Correctly coded claims for these services often include 
multiple codes for component services that are reported with different 
CPT codes and that, prior to CY 2008, were always paid separately 
through different APCs (specifically, APC 0085 (Level II 
Electrophysiologic Evaluation), APC 0086 (Ablate Heart Dysrhythm 
Focus), and APC 0087 (Cardiac Electrophysiologic Recording/Mapping)). 
Calculating a composite APC for these services allowed us to utilize 
many more claims than were available to establish the individual APC 
geometric mean costs for these services, and advanced our stated goal 
of promoting hospital efficiency through larger payment bundles. In 
order to calculate the geometric mean cost upon which the payment rate 
for composite APC 8000 is based, we used multiple procedure claims that 
contained at least one CPT code from Group A for evaluation services 
and at least one CPT code from Group B for ablation services reported 
on the same date of service on an individual claim. Table 9 in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66656) identified 
the CPT codes that are assigned to Groups A and B. For a full 
discussion of how we identified the Group A and Group B procedures and 
established the payment rate for the cardiac electrophysiologic 
evaluation and ablation composite APC, we refer readers to the CY 2008 
OPPS/ASC final rule with comment period (72 FR 66655 through 66659). 
Where a service in Group A is furnished on a date of service that is 
different from the date of service for a CPT code in Group B for the 
same beneficiary, payments are made under the appropriate single 
procedure APCs and the composite APC does not apply.
    Subsequent to the publication of the CY 2013 OPPS/ASC proposed 
rule, the AMA's CPT Editorial Panel created five new CPT codes 
describing cardiac electrophysiologic evaluation and ablation services, 
effective January 1, 2013. These five new codes are:
     CPT code 93653 (Comprehensive electrophysiologic 
evaluation including insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia with 
right atrial pacing and recording, right ventricular pacing and 
recording, His recording with intracardiac catheter ablation of 
arrhythmogenic focus; with treatment of supraventricular tachycardia by 
ablation of fast or slow atrioventricular pathway, accessory 
atrioventricular connection, cavo-tricuspid isthmus or other single 
atrial focus or source of atrial re-entry);
     CPT code 93654 (Comprehensive electrophysiologic 
evaluation including insertion and repositioning of multiple electrode 
catheters with induction or attempted induction of an arrhythmia with 
right atrial pacing and recording, right ventricular pacing and 
recording, His recording with intracardiac catheter ablation of 
arrhythmogenic focus; with treatment of ventricular tachycardia or 
focus of ventricular ectopy including intracardiac electrophysiologic 
3D mapping, when performed, and left ventricular pacing and recording, 
when performed);
     CPT code 93655 (Intracardiac catheter ablation of a 
discrete mechanism of arrhythmia which is distinct from the primary 
ablated mechanism, including repeat diagnostic maneuvers, to treat a 
spontaneous or induced arrhythmia (List separately in addition to code 
for primary procedure));
     CPT code 93656 (Comprehensive electrophysiologic 
evaluation including transseptal catheterizations, insertion and 
repositioning of multiple electrode catheters with induction or 
attempted induction of an arrhythmia with atrial recording and pacing, 
when possible, right ventricular pacing and recording, His bundle 
recording with intracardiac catheter ablation of arrhythmogenic focus, 
with treatment of atrial fibrillation by ablation by pulmonary vein 
isolation); and
     CPT code 93657 (Additional linear or focal intracardiac 
catheter ablation of the left or right atrium for treatment of atrial 
fibrillation remaining after completion of pulmonary vein isolation 
(List separately in addition to code for primary procedure)).
    The CPT Editorial Panel also deleted two electrophysiologic 
ablation codes, CPT code 93651 (Intracardiac catheter ablation of 
arrhythmogenic focus; for treatment of supraventricular tachycardia by 
ablation of fast or slow atrioventricular pathways, accessory 
atrioventricular connections or other atrial foci, singly or in 
combination) and CPT code 93652 (Intracardiac catheter ablation of 
arrhythmogenic focus; for treatment of ventricular tachycardia), 
effective January 1, 2013.
    As we described in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68425), new CPT codes 93653, 93654, and 93656 are primary 
electrophysiologic services that encompass evaluation as well as 
ablation, while new CPT codes 93655 and 93657 are add-on codes. Because 
CPT codes 93653, 93654, and 93656 already encompass both evaluation and 
ablation services, we assigned them to composite APC 8000 with no 
further requirement to have another electrophysiologic service from 
either Group A or Group B furnished on the same date of service, and we 
assigned them interim status indicator ``Q3'' (paid through a composite 
APC) in Addendum B to the CY 2013 OPPS/ASC final rule with comment 
period. To facilitate implementing this policy, we assigned CPT codes 
93653, 93654, and 93656 to a new Group C, which is paid at the 
composite APC 8000 payment rate. (We noted that we will use single and 
pseudo single claims for CPT codes 93653, 93654, and 93656 when they 
become available for calculating the geometric mean costs upon which 
the payment rate for APC 8000 will be based in future ratesetting.) 
Because CPT codes 93655 and 93657 are

[[Page 74914]]

dependent services that may only be performed as ancillary services to 
the primary CPT codes 93653, 93654, and 93656, we believed that 
packaging CPT codes 93655 and 93657 with the primary procedures is 
appropriate, and we assigned them interim status indicator ``N.'' 
Because the CPT Editorial Panel deleted CPT codes 93651 and 93652, 
effective January 1, 2013, we deleted them from the Group B code list, 
leaving only CPT code 93650 (Intracardiac catheter ablation of 
atrioventricular node function, atrioventricular conduction for 
creation of complete heart block, with or without temporary pacemaker 
placement) in Group B.
    As is our usual practice for new CPT codes that were not available 
at the time of the proposed rule, our treatment of new CPT codes 93653, 
93654, 93655, 93656, and 93657 was open to public comment for a period 
of 60 days following the publication of the CY 2013 OPPS/ASC final rule 
with comment period.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43564), for CY 2014, 
we proposed to continue to pay for cardiac electrophysiologic 
evaluation and ablation services using the composite APC methodology 
proposed and implemented for CY 2008 through CY 2013. We also proposed 
to continue the new Group C methodology we first established for CY 
2013, described above, in response to the CPT Editorial Panel's 
creation of primary CPT codes 93653, 93654, and 93656. We stated that 
we continue to believe that the geometric mean cost for cardiac 
electrophysiologic evaluation and ablation services calculated from a 
high volume of correctly coded multiple procedure claims would result 
in an accurate and appropriate proposed payment for these services when 
at least one evaluation service is furnished during the same clinical 
encounter as at least one ablation service. Consistent with our 
practice since CY 2008, we proposed not to use the claims that met the 
composite payment criteria in the calculation of the geometric mean 
costs for APC 0085, to which the CPT codes in both Groups A and B for 
composite APC 8000 are otherwise assigned. We proposed that the 
geometric mean costs for APC 0085 would continue to be calculated using 
single procedure claims. For CY 2014, using a partial year of CY 2012 
claims data available for the CY 2014 OPPS/ASC proposed rule, we were 
able to use 15,817 claims containing a combination of Group A and Group 
B CPT codes (Group C was not effective until January 1, 2013) to 
calculate a proposed geometric mean cost of approximately $13,402 for 
composite APC 8000.
    Table 6 of the proposed rule listed the groups of procedures upon 
which we proposed to base composite APC 8000 for CY 2014 (78 FR 43565).
    Comment: One commenter on the CY 2013 OPPS/ASC final rule with 
comment period expressed concern with CMS' treatment of CPT codes 
93653, 93654, and 93656, which are assigned to new Group C and paid at 
the composite APC 8000 payment rate. Specifically, the commenter stated 
that CMS considers CPT code 93462 (Left heart catheterization by 
transseptal puncture through intact septum or by transapical puncture 
(List separately in addition to code for primary procedure)) as 
separately payable. However, the commenter believed that when CPT code 
93462 appears on the claim in combination with CPT code 93656 CMS 
should treat the claims as single procedures for building composite APC 
8000 in regard to cases where CPT code 93462 was used to describe 
services to treat atrial fibrillation (AF). The commenter contended 
that CMS did not do so for CY 2013, which resulted in an underpayment 
for cases assigned to composite APC 8000. The commenter noted that when 
the CPT Editorial Panel created CPT code 93656, it specifically listed 
CPT code 93462 as one of the codes that should not be reported in 
combination with CPT code 93656. The commenter asserted that CMS' 
treatment of CPT code 93462 had several ratesetting consequences. 
According to the commenter, when CPT code 93462 appeared on any 
electrophysiology (EP) claim, it prevented that claim from becoming a 
``single procedure'' claim for composite APC 8000 ratesetting purposes. 
Because CPT code 93462 occurs most frequently for EP treatment of AF, 
preventing EP claims with CPT code 93462 from becoming ``single 
procedure'' claims disproportionately excludes AF claims from composite 
APC 8000 cost calculation. In addition, the commenter stated, because 
those claims are more expensive than the average EP claim, this result 
also reduces both the frequency and average cost of claims used to 
calculate the geometric mean cost of composite APC 8000. The commenter 
stated that separate payment of CPT code 93462 prevents packaging CPT 
code 93462 costs on claims for EP involved with AF, which is contrary 
to the CPT instructions regarding CPT code 93656.
    In response to the CY 2014 OPPS/ASC proposed rule, this same 
commenter and one other commenter expressed appreciation for CMS' 
proposal to package the cost of CPT code 93462 within the APC payment 
rates of other services, and recommended that CMS finalize the proposed 
method of calculating the cost of APC 8000 for CY 2014.
    Response: We assigned CPT code 93462 to APC 0080 for CY 2013, with 
a payment rate of $2,649.52. CPT code 93462 is an add-on code. For CY 
2014, we proposed to package most add-on codes, including CPT code 
93462. As a result of our packaging proposal, the geometric mean cost 
and frequency for composite APC 8000 have increased. Based on CY 2014 
final cost data, the geometric mean cost of composite APC 8000 is 
approximately $13,161 based on 16,937 claims available for cost 
calculation of composite APC 8000. We believe that packaging the cost 
of CPT code 93462 within the APC payment rates of other services as a 
result of the add-on code packaging policy addresses the commenters' 
concerns.
    Comment: One commenter who agreed with CMS' proposed methodology 
not to use claims that meet the composite APC 8000 criteria for 
geometric mean cost calculation purposes for APC 0085, expressed 
concern regarding the proposed payment rate for APC 0085. The commenter 
noted that the proposed payment rate for APC 0085 for CY 2014 is 
$11,517 (the corrected proposed rate included in the September 6, 2013 
OPPS Addendum B, which was posted on the CMS Web site is approximately 
$11,345), which is significantly higher than the CY 2013 payment rate 
of $4,035. However, the commenter believed that this variation is a 
result of unintended reuse of claims used to calculate the composite 
APC 8000 payment rate. The commenter further believed that excluding 
the composite APC 8000 claims from APC 0085 cost calculation will lower 
the geometric mean cost of APC 0085 significantly, and urged CMS to 
correct this error.
    Response: We acknowledge that the proposed payment rate for APC 
0085 was incorrectly initially published as approximately $11,517, as 
well as the corrected payment rate (which was posted on the CMS Web 
site) of $11,345. The proposed rule payment rate for APC 0085 was based 
on our comprehensive APC methodology, which packaged the cost of 
ancillary and other services. However, our comprehensive APC 
methodology will not be effective until CY 2015. The final geometric 
mean cost for APC 0085 is approximately $4,248, based on 6,362 claims 
available for ratesetting.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue

[[Page 74915]]

payment for composite APC 8000 for CY 2014. Based on a full year of CY 
2012 claims data, the final geometric mean cost of composite APC 8000 
is approximately $13,162, based on 16,935 claims available for 
ratesetting. We also are finalizing the payment for APC 0085, based on 
a geometric mean cost of approximately $4,248.
    Table 11 below lists the groups of procedures upon which we based 
composite APC 8000 for CY 2014
BILLING CODE 4120-01-P

[[Page 74916]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.294

[[Page 74917]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.295

BILLING CODE 4120-01-C
(4) Mental Health Services Composite APC (APC 0034)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43565), for CY 2104, 
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 
treatments. 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.
    We proposed that when the aggregate payment for specified mental 
health services provided by one hospital to a single beneficiary on one 
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

[[Page 74918]]

services provided by a hospital, those specified mental health services 
would be assigned to APC 0034 (Mental Health Services Composite). 
Specifically, we proposed to continue to set the payment rate for APC 
0034 at the same payment rate that we proposed to establish for APC 
0176 (Level II Partial Hospitalization (4 or more services) for 
hospital-based PHPs), which is the maximum partial hospitalization per 
diem payment rate for a hospital and proposed that the hospital would 
continue to be paid one unit of APC 0034. Under this policy, the I/OCE 
would 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 0176 for all of the specified mental 
health services furnished by the hospital on that single date of 
service. We stated that 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 treatments. 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 did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2014 proposal, without modification, to 
continue our longstanding policy of limiting the aggregate payment for 
specified less resource-intensive mental health services furnished on 
the same date by a hospital to the payment for APC 0176, which is the 
maximum partial hospitalization per diem payment for a hospital for CY 
2014.
(5) Multiple Imaging Composite APCs (APCs 8004, 8005, 8006, 8007, and 
8008)
    Effective January 1, 2009, we provide a single payment each time a 
hospital bills more than one imaging procedure within an imaging family 
on the same date of service, in order to reflect and promote the 
efficiencies hospitals can achieve when performing multiple imaging 
procedures during a single session (73 FR 41448 through 41450). We 
utilize three imaging families based on imaging modality for purposes 
of this methodology: (1) Ultrasound; (2) computed tomography (CT) and 
computed tomographic angiography (CTA); and (3) magnetic resonance 
imaging (MRI) and magnetic resonance angiography (MRA). The HCPCS codes 
subject to the multiple imaging composite policy and their respective 
families are listed in Table 6 of the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68253 through 68257).
    While there are three imaging families, there are five multiple 
imaging composite APCs due to the statutory requirement under section 
1833(t)(2)(G) of the Act that we differentiate payment for OPPS imaging 
services provided with and without contrast. While the ultrasound 
procedures included in 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 for APC 8008, the ``with contrast'' composite APC.
    We make a single payment for those imaging procedures that qualify 
for composite APC payment, as well as any packaged services furnished 
on the same date of service. The standard (noncomposite) APC 
assignments continue to apply for single imaging procedures and 
multiple imaging procedures performed across families. For a full 
discussion of the development of the multiple imaging composite APC 
methodology, we refer readers to the CY 2009 OPPS/ASC final rule with 
comment period (73 FR 68559 through 68569).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43566), for CY 2014, 
we proposed to continue to pay for all multiple imaging procedures 
within an imaging family performed on the same date of service using 
the multiple imaging composite APC payment methodology. We continue to 
believe that this policy would reflect and promote the efficiencies 
hospitals can achieve when performing multiple imaging procedures 
during a single session. The proposed CY 2014 payment rates for the 
five multiple imaging composite APCs (APC 8004, APC 8005, APC 8006, APC 
8007, and APC 8008) were based on geometric mean costs calculated from 
a partial year of CY 2012 claims available for the CY 2014 OPPS/ASC 
proposed rule that qualified for composite payment under the current 
policy (that is, those claims with more than one procedure within the 
same family on a single date of service). To calculate the proposed 
geometric mean costs, we used the same methodology that we used to 
calculate the final CY 2012 and CY 2013 geometric mean costs for these 
composite APCs, as described in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74169). 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, pursuant to our established methodology (76 FR 
74169), were identified by asterisks in Addendum N to the proposed rule 
(which is available via the Internet on the CMS Web site) and were 
discussed in more detail in section II.A.1.b. of the proposed rule.
    For the CY 2014 proposed rule, we were able to identify 
approximately 0.8 million ``single session'' claims out of an estimated 
1.5 million potential composite cases from our ratesetting claims data, 
more than half of all eligible claims, to calculate the proposed CY 
2014 geometric mean costs for the multiple imaging composite APCs.
    Table 7 of the proposed rule listed the proposed HCPCS codes that 
would be subject to the multiple imaging composite policy and their 
respective families and approximate composite APC geometric mean costs 
for CY 2014 (78 FR 43567). We noted that the proposed geometric mean 
costs calculated for many imaging APCs, including the multiple imaging 
composite APCs, have changed significantly from the geometric mean 
costs calculated for the CY 2013 OPPS/ASC final rule with comment 
period for these APCs as a result of the proposed adoption of the new 
MRI and CT cost centers, as discussed in section II.A.1.c. of the 
proposed rule.
    Comment: Some commenters supported CMS' decision not to propose any 
new multiple imaging composite APCs. Other commenters urged CMS to 
restore separate payment for each imaging procedure, regardless of the 
date of service because of the decreases in payment for imaging 
services over several years, which according to the commenters may 
create disincentives to performing multiple imaging services on the 
same date. Some commenters stated

[[Page 74919]]

that other CMS proposals such as the CY 2014 proposed new CCRs for CT 
and MRI services have further decreased payment rates for imaging 
services for CY 2014, and the use of the new cost centers is directly 
responsible for the substantial decreases in payment for multiple 
imaging APCs, including composite APCs. Some commenters suggested that 
CMS provide an analysis of the impacts from decreases in payments for 
imaging services.
    Response: As explained earlier in this section, we continue to 
believe that our multiple imaging composite policies reflect and 
promote the efficiencies hospitals can achieve when performing multiple 
imaging procedures during a single session. We have a total of 1.6 
million composite cases in our claims data for CY 2014 ratesetting, 
which we believe is a sufficiently robust number of multiple imaging 
cases performed for ratesetting purposes. We address the concern that 
the new cost centers may be responsible for substantial decreases in 
payment for multiple imaging APCs in section II.A.1.c. of this final 
rule with comment period.
    After consideration of the public comments we received, for this CY 
2014 final rule with comment period, we were able to identify 
approximately 0.7 million ``single session'' claims out of an estimated 
1.6 million potential composite cases from our ratesetting claims data, 
approximately 45 percent of all eligible claims, to calculate the final 
CY 2014 geometric mean costs for the multiple imaging composite APCs.
    Table 12 below lists the HCPCS codes that will be subject to the 
multiple imaging composite policy and their respective families and 
approximate composite APC geometric mean costs for CY 2014.
BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
(6) Cardiac Resynchronization Therapy Composite APC (APC 0108)
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizing a pacing electrode implanted in combination with an 
implantable cardioverter defibrillator (ICD) is known as CRT-D. 
Hospitals commonly report the implantation of a CRT-D system using CPT 
codes 33225 (Insertion of pacing electrode, cardiac venous system, for 
left ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (including upgrade to dual 
chamber system) (List separately in addition to code for primary 
procedure)) and 33249 (Insertion or repositioning of electrode lead(s) 
for single or dual chamber pacing cardioverter-defibrillator and 
insertion of pulse generator). As described in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74176), over the past several 
years, stakeholders have pointed out significant fluctuations in the 
payment rate for CPT code 33225 and that, because the definition of CPT 
code 33225 specifies that the pacing electrode is inserted at the same 
time as an ICD or pacemaker, CMS would not have many valid claims upon 
which to calculate an accurate cost. In response to these concerns, we 
established a policy beginning in CY 2012 to recognize CPT codes 33225 
and 33249 as a single, composite service when the procedures are 
performed on the same day and to assign them to APC 0108 (Insertion/
Replacement/Repair of AICD Leads, Generator, and Pacing Electrodes) 
when they appear together on a claim with the same date of service. We 
refer readers to the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74176 through 74182) for a full description of how we developed 
this policy.
    As described in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74182), hospitals continue to use the same CPT codes to report 
CRT-D implantation services, and the I/OCE will identify when the 
combination of CPT codes 33225 and 33249 on the same day qualify for 
composite service payment. We make a single composite payment for such 
cases. When not performed on the same day as the procedure described by 
CPT code 33225, the procedure described by CPT code 33249 is also 
assigned to APC 0108. When not performed on the same day as the 
procedure described by CPT code 33249, the procedure described by CPT 
code 33225 is assigned to APC 0655 (Insertion/Replacement/Conversion of 
a Permanent Dual Chamber Pacemaker).
    In order to ensure that hospitals correctly code for CRT services, 
we also finalized a policy in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74182) to implement claims processing edits that 
will return to providers incorrectly coded claims on which a pacing 
electrode insertion (the procedure described by CPT code 33225) is 
billed without one of the following procedures to insert an ICD or 
pacemaker, as specified by the AMA in the CPT codebook:
     33206 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial);
     33207 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); ventricular);
     33208 (Insertion or replacement of permanent pacemaker 
with transvenous electrode(s); atrial and ventricular);
     33212 (Insertion or replacement of pacemaker pulse 
generator only; single chamber, atrial or ventricular);
     33213 (Insertion or replacement of pacemaker pulse 
generator only; dual chamber, atrial or ventricular);
     33214 (Upgrade of implanted pacemaker system, conversion 
of single chamber system to dual chamber system (includes removal of 
previously placed pulse generator, testing of existing lead, insertion 
of new lead, insertion of new pulse generator));
     33216 (Insertion of a single transvenous electrode, 
permanent pacemaker or cardioverter-defibrillator);
     33217 (Insertion of 2 transvenous electrodes, permanent 
pacemaker or cardioverter-defibrillator);
     33222 (Revision or relocation of skin pocket for 
pacemaker);
     33233 (Removal of permanent pacemaker pulse generator);
     33234 (Removal of transvenous pacemaker electrode(s); 
single lead system, atrial or ventricular);
     33235 (Removal of transvenous pacemaker electrode(s); dual 
lead system, atrial or ventricular);
     33240 (Insertion of single or dual chamber pacing 
cardioverter-defibrillator pulse generator); or
     33249 (Insertion or repositioning of electrode lead(s) for 
single or dual chamber pacing cardioverter-defibrillator and insertion 
of pulse generator).
    We continued for CY 2013 to recognize CRT-D as a single, composite 
service as described above and finalized in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68259). By continuing to recognize 
these procedures as a single, composite service, we are able to use a 
higher volume of correctly coded claims for CPT code 33225, which, 
because of its add-on code status, is always performed in conjunction 
with another procedure. We also noted that this policy is consistent 
with the principles of a prospective payment system, specifically to 
place similar services that

[[Page 74925]]

utilize technologies with varying costs in the same APC in order to 
promote efficiency and decision-making based on individual patient's 
clinical needs rather than financial considerations. Because CPT codes 
33225 and 33249 may be treated as a composite service for payment 
purposes, we continued to assign them status indicator ``Q3'' (Codes 
that may be paid through a composite APC) in Addendum B to the proposed 
rule (which is available via the Internet on the CMS Web site). The 
assignment of CPT codes 33225 and 33249 to APC 0108 when treated as a 
composite service was also reflected in Addendum M to the proposed rule 
(which is available via the Internet on the CMS Web site).
    In addition, for CY 2013, we revised the claims processing edits in 
place for CPT code 33225 due to revised guidance from the AMA in the 
CPT codebook specifying the codes that should be used in conjunction 
with CPT code 33225. Specifically, on February 27, 2012, the AMA posted 
a correction as errata to the CY 2012 CPT codebook on the AMA Web site 
at: http://www.ama-assn.org/resources/doc/cpt/cpt-corrections.pdf. This 
correction removed CPT code 33222 (Revision or relocation of skin 
pocket for pacemaker) as a service that should be provided in 
conjunction with CPT code 33225, and added CPT codes 33228 (Removal of 
permanent pacemaker pulse generator with replacement of pacemaker pulse 
generator; dual lead system), 33229 (Removal of permanent pacemaker 
pulse generator with replacement of pacemaker pulse generator; multiple 
lead system), 33263 (Removal of pacing cardioverter-defibrillator pulse 
generator with replacement of pacing cardioverter-defibrillator pulse 
generator; dual lead system), and 33264 (Removal of pacing 
cardioverter-defibrillator pulse generator with replacement of pacing 
cardioverter-defibrillator pulse generator; multiple lead system). In 
accordance with this revised guidance, we deleted CPT code 33222 as a 
code that can satisfy the claims processing edit for CPT code 33225, 
and added CPT codes 33228, 33229, 33263, and 33264 as codes that can 
satisfy this edit beginning in CY 2012 (77 FR 68259).
    For CY 2014, we proposed to discontinue and supersede the cardiac 
resynchronization therapy composite APC with our proposed comprehensive 
APC 0108, as discussed in section II.A.2.e. of the proposed rule (78 FR 
43561). The public comments that we received on cardiac 
resynchronization therapy that relate to proposed comprehensive APCs 
are discussed in section II.A.2.e. of this final rule with comment 
period.
    As discussed in section II.A.2.e. of this final rule with comment 
period, comprehensive APCs will not be effective until CY 2015. 
Therefore, for CY 2014, we are finalizing the continuation of our 
current CRT-D composite policy, without modification and finalizing 
payment for CRT services using the composite APC 0108 payment 
methodology that we used for CYs 2012 and 2013, as discussed above. 
That is, for CY 2014, CRT-D will be recognized as a single, composite 
service as described above and finalized in the CY 2012 and CY 2013 
OPPS/ASC final rules with comment period. In calculating the costs upon 
which the final payment rate for APC 0108 is based for CY 2014, for 
this final rule with comment period, we included single procedure 
claims for the individual services assigned to APC 0108, as well as 
single procedure claims that contain the composite CRT-D service, 
defined as the combination of CPT codes 33225 and 33249 with the same 
date of service. We were able to use 15,454 single bills from the CY 
2014 final rule claims data to calculate a final geometric mean cost of 
approximately $32,257 for APC 0108. Because CPT codes 33225 and 33249 
may be treated as a composite service for payment purposes, we are 
continuing to assign them status indicator ``Q3'' (Codes that may be 
paid through a composite APC) in Addendum B to this final rule with 
comment period.
3. Changes to Packaged Items and Services
a. Summary of CY 2014 Final Packaging Policies
    Beginning in CY 2014, we are unconditionally or conditionally 
packaging the following items and services and adding them to the list 
of OPPS packaged items and services in 42 CFR 419.2(b):
    (1) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure;
    (2) Drugs and biologicals that function as supplies when used in a 
surgical procedure;
    (3) Certain clinical diagnostic laboratory tests;
    (4) Certain procedures described by add-on codes; and
    (5) Device removal procedures.
    The HCPCS codes that we are packaging for CY 2014 are displayed in 
both Addendum P and Addendum B of this final rule with comment period. 
The supporting documents for this final rule with comment period, 
including but not limited to these Addenda, are available at the CMS 
Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. Further details including 
comments and responses on the particular packaging proposals are 
discussed below.
b. Background
    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 bundle of specific services for a particular 
patient. The OPPS packages payment 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 to maximize hospitals' incentives to 
provide care in the most efficient manner. For example, where there are 
a variety of devices, drugs, items, supplies, etc. that could be used 
to furnish a service, some of which are more expensive than others, 
packaging encourages hospitals to use the most cost-efficient item that 
meets the patient's needs, rather than to routinely use a more 
expensive item, which often results if separate payment is provided for 
the items.
    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 payment for items and services 
that are typically integral, ancillary, supportive, dependent, or 
adjunctive to a primary service has been

[[Page 74926]]

a fundamental part of the OPPS since its implementation in August 2000. 
Most, but not necessarily all, items and services currently packaged in 
the OPPS are listed in 42 CFR 419.2(b). For an extensive discussion of 
the history and background of the OPPS packaging policy, we refer 
readers to the CY 2000 OPPS final rule (65 FR 18434), the CY 2008 OPPS/
ASC proposed rule (72 FR 42628) and the CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66580).
    Over the last 15 years, we have refined our understanding and 
implementation of the OPPS and have packaged numerous services that we 
originally paid as primary services. As we continue to consider the 
development of larger payment groups that more broadly reflect services 
provided in an encounter or episode of care, we may propose to expand 
these packaging policies as they apply to services that we currently 
separately pay as primary services. We use the term ``primary service'' 
to refer to the HCPCS codes that represent the primary therapeutic or 
diagnostic modality into which we package payment for a dependent 
service.
    Hospitals include HCPCS codes and charges for packaged services on 
their claims, and the estimated costs associated with those packaged 
services are then added to the costs of separately payable procedures 
on the same claims to establish prospective payment rates for the 
combination of the separately payable services and any associated 
packaged services. We emphasize that hospitals should report all HCPCS 
codes for provided services, including those for packaged services, 
unless the CPT Editorial Panel or CMS provides other specific guidance. 
The appropriateness of the OPPS payment rates depends on the quality 
and completeness of the claims data that hospitals submit for the 
services they furnish to Medicare beneficiaries.
    In addition to the packaged items and services listed in 42 CFR 
419.2(b), in the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66610 through 66659), we adopted the packaging of payment for items and 
services in seven categories with the primary diagnostic or therapeutic 
modality to which we believe these items and services are typically 
ancillary and supportive. The seven categories are: (1) Guidance 
services; (2) image processing services; (3) intraoperative services; 
(4) imaging supervision and interpretation services; (5) diagnostic 
radiopharmaceuticals; (6) contrast media; and (7) observation services. 
We specifically chose these categories of HCPCS codes for packaging 
because we believe that the items and services described by the codes 
in these categories are typically ancillary and supportive to a primary 
diagnostic or therapeutic modality and, in those cases, are an integral 
part of the primary service they support. In addition, in the CY 2009 
OPPS/ASC final rule with comment period (73 FR 68634), we packaged 
products described as implantable biologicals. As discussed below, in 
the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to add 
each of these categories of packaged items and services that were 
packaged beginning in CYs 2008 and 2009, along with newly proposed 
packaged items and services for CY 2014 as described below to the OPPS 
packaging regulation at 42 CFR 419.2(b). Composite APCs under the OPPS, 
which are described in section II.A.2.f. of this final rule with 
comment period, and comprehensive APCs, which are described in section 
II.A.2.e. of this final rule with comment period, also include 
packaging.
c. Basis for New Packaging Policies for CY 2014
    As discussed above, the OPPS is a prospective payment system. It is 
not intended to be a fee schedule, in which separate payment is made 
for each coded line item. However, the OPPS is currently a prospective 
payment system that packages some items and services but not others. 
Payment for some items and services in the OPPS is according to the 
principles of a prospective payment system, while the payment for other 
items and services is more like that of a fee schedule. Our overarching 
goal is to make OPPS payments for all services paid under the OPPS more 
consistent with those of a prospective payment system and less like 
those of a per service fee schedule, 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 in the OPPS to determine which 
OPPS services can be packaged to achieve the objective of advancing the 
OPPS as a prospective payment system.
    Therefore, as we did in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66610 through 66659), we have 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 of the primary service they support. Specifically, we 
examined the HCPCS code definitions (including CPT code descriptors) to 
see whether there were categories of codes for which packaging would be 
appropriate according to existing OPPS packaging policies or a logical 
expansion of those existing OPPS packaging policies. In general, in the 
CY 2014 OPPS/ASC proposed rule, we proposed to package the costs of 
selected HCPCS codes into payment for services reported with other 
HCPCS codes where we believe that one code reported an item or service 
that was integral, ancillary, supportive, dependent, or adjunctive to 
the provision of care that was reported by another HCPCS code. Below we 
discuss categories and classes of items and services that we proposed 
to package beginning in CY 2014. In several cases, we proposed that 
services be conditionally packaged so that if they are provided without 
other services, there will be a separate payment for the service. The 
proposed policies detailed below are not exhaustive, and we expect to 
continue to review the OPPS and consider additional packaging policies 
in the future.
d. New Packaging Policies for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43570 through 43575), 
we proposed to package the following categories of items and services 
beginning in 2014:
    (1) Drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure;
    (2) Drugs and biologicals that function as supplies when used in a 
surgical procedure;
    (3) Certain clinical diagnostic laboratory tests;
    (4) Procedures described by add-on codes;
    (5) Ancillary services (status indicator ``X'');
    (6) Diagnostic tests on the bypass list; and
    (7) Device removal procedures.
    Category (2) listed above was described in the proposed rule as 
``drugs and biologicals that function as supplies or devices when used 
in a surgical procedure.'' In this final rule with comment period, we 
are deleting the words ``or devices'' from the name of this category 
because the words are redundant of ``supplies.'' In this context, 
devices are a type of supply (78 FR 43571), so it is not necessary to 
include the words ``or devices'' after supplies in the name of this 
category of packaged items.
    Comment: Many commenters requested that CMS postpone finalizing all 
of the packaging proposals because of the commenters' inability to 
replicate

[[Page 74927]]

the CY 2014 proposed OPPS payment rates, which the commenters asserted 
limited their ability to fully evaluate and, therefore, meaningfully 
comment on the packaging proposals. Many commenters also stated that, 
given the significance and scope of the proposals, CMS should delay 
implementation of these policies to allow stakeholders more time to 
evaluate these packaging proposals. In addition, the Advisory Panel on 
Hospital Outpatient Payment recommended that CMS delay implementation 
of the CY 2014 packaging proposals until data can be reviewed by the 
Panel at its spring 2014 meeting regarding interactions between the 
proposals and their potential cumulative impact.
    Response: We appreciate that it requires time and effort to examine 
proposed policies. We discovered some limited methodological errors 
concentrated in a handful of APCs during the comment period. In 
response, we issued corrected data files on August 28, 2013, and 
published a correcting document in the Federal Register on September 6, 
2013 (78 FR 54842) to address these technical errors. We also afforded 
the public a 10-day extension of the comment period on those topics 
affected by the corrected proposed rates. We believe that our standard 
60-day comment period afforded commenters an adequate amount of time to 
meaningfully comment on the proposed policies. While we acknowledge 
that the OPPS is one of the more complicated Medicare payment systems 
to simulate, we make extensive data files and descriptions publicly 
available, in addition to proposed payment rates, in an effort to 
assist commenters in their review. Furthermore, the isolated technical 
errors that were corrected in the correcting document had limited 
interaction with the packaging proposals, and we believe the relativity 
(the relative magnitude of the difference between payment rates for 
different procedures) of the proposed payment rates for almost all APCs 
was sufficient for meaningful comment. Finally, we received numerous 
substantive, thoughtful, and helpful comments on our packaging 
proposals, which suggested that the public had sufficient time to 
meaningfully comment on the seven CY 2014 proposed packaging policies, 
and therefore, we do not believe a delay in implementation is 
necessary. We will review additional information regarding the impacts 
of the packaging policies with the Panel at future Panel meetings.
    Below we discuss our proposals and summarize and respond to the 
numerous substantive public comments we received on each packaging 
proposal.
(1) Drugs, Biologicals, and Radiopharmaceuticals That Function as 
Supplies When Used in a Diagnostic Test or Procedure
    As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 
43570), in the OPPS, we currently unconditionally package the following 
six categories of drugs, biologicals, and radiopharmaceuticals (unless 
temporary pass-through status applies): (1) those with per day costs at 
or below the packaging threshold (discussed further in section V.B.2. 
of the proposed rule and this final rule with comment period); (2) 
diagnostic radiopharmaceuticals; (3) contrast agents; (4) anesthesia 
drugs; (5) drugs used as supplies according to Sec.  419.2(b)(4); and 
(6) implantable biologicals. For CY 2014, we reviewed all of the drugs, 
biologicals, and radiopharmaceuticals administered in the hospital 
outpatient setting to identify categories or classes of drugs, 
biologicals, and radiopharmaceuticals that either should be packaged 
according to existing packaging policies or should be packaged as a 
logical expansion of existing OPPS packaging policies for drugs, 
biologicals, and radiopharmaceuticals.
    Currently, two of the categories of drugs, biologicals, and 
radiopharmaceuticals that are packaged in the OPPS (contrast agents and 
diagnostic radiopharmaceuticals) have a common characteristic--they 
both describe products that function as supplies when used in a 
diagnostic test or procedure. Although in the past we identified these 
specific categories of drugs, biologicals, and radiopharmaceuticals as 
packaged unless pass-through status applied, we recognize that they 
actually represent subcategories of a broader category of drugs, 
biologicals, and radiopharmaceuticals that should be packaged in the 
OPPS according to OPPS packaging principles: drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. In particular, we are referring to drugs, 
biologicals, and radiopharmaceuticals that function as supplies as a 
part of a larger, more encompassing service or procedure, namely, the 
diagnostic test or procedure in which the drug, biological, or 
radiopharmaceutical is employed. Because diagnostic 
radiopharmaceuticals and contrast agents represent specific examples of 
a broader category of drugs, biologicals, or radiopharmaceuticals that 
function as supplies that are integral and supportive to a diagnostic 
test or procedure, we proposed to unconditionally package drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure, except when the drug, 
biological, or radiopharmaceutical has pass-through payment status.
    A diagnostic test or procedure is defined as any kind of test or 
procedure performed to aid in the diagnosis, detection, monitoring, or 
evaluation of a disease or condition. A diagnostic test or procedure 
also includes tests or procedures performed to determine which 
treatment option is optimal. A diagnostic test or procedure can have 
multiple purposes, but at least one purpose must be diagnostic. We 
proposed to revise the regulations at 42 CFR 419.2(b) to specify that 
any drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in diagnostic tests or procedures will be packaged 
as supplies in the OPPS, except when pass-through status applies. This 
proposed broader category of packaged drugs, biologicals, and 
radiopharmaceuticals includes the currently packaged categories of 
contrast agents and diagnostic radiopharmaceuticals.
    In the proposed rule, we identified one new class of drugs (stress 
agents) and one specific drug (Cysview) that we believe also fit within 
this new category of packaged items, that is, drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. We discuss the application of this policy 
to these specific drugs and the associated comments below.
(a) Stress Agents
    Our review of OPPS drugs identified pharmacologic stress agents 
(``stress agents'') as a class of drugs that is described by the 
proposed packaged category of drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. Stress agents are a class of drugs that 
are used in diagnostic tests to evaluate certain aspects of cardiac 
function. In many cases, these agents are used in patients who are 
unable to perform an exercise stress test, which typically precedes 
additional diagnostic imaging. The primary diagnostic test in which 
these agents are used is myocardial perfusion imaging (MPI), which is 
primarily reported with CPT code 78452 and is the highest cost nuclear 
medicine procedure in the OPPS, with total payments exceeding $800 
million in CY 2012. In the

[[Page 74928]]

proposed rule, we reported that approximately 96 percent of MPI is 
billed with CPT code 78452. Stress agents include the following drugs 
described by these HCPCS codes: HCPCS codes J0152 (Injection, adenosine 
for diagnostic use, 30 mg); J1245 (Injection, dipyridamole, per 10 mg); 
J1250 (Injection, dobutamine hydrochloride, per 250 mg); and J2785 
(Injection, regadenoson, 0.1 mg). For CY 2013, HCPCS codes J1245 and 
J1250 are packaged in the OPPS, and J0152 and J2785 are separately 
paid. OPPS payments for the two separately payable stress agents 
totaled approximately $111 million in CY 2012.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we proposed to 
package all stress agents that function as supplies into the diagnostic 
tests or procedures in which they are employed, consistent with the 
policy proposed above. The primary service in which stress agents are 
employed is MPI. MPI with stress encompasses the imaging service, the 
stress test, and either exercise to induce stress or the administration 
of a pharmacologic stress agent. In the proposed rule, we included 
Table 8 which showed the CY 2013 separate payment versus the proposed 
CY 2014 packaged payment for MPI (78 FR 43571). We note that some of 
the payment rates for MPI in Table 8 were corrected in the correcting 
document published in the Federal Register on September 6, 2013 (78 FR 
54842).
    Comment: Some commenters supported packaging stress agents into MPI 
because they believed that it supports CMS' goal to make OPPS payments 
more consistent with those of a prospective payment system.
    Response: We appreciate the commenters' support.
    Comment: Several commenters objected to this proposal. Some 
commenters stated that CMS should not expand packaging to any new 
categories of drugs, biologicals, and radiopharmaceuticals, including 
stress agents. One commenter objected to the proposed policy for the 
following reasons and suggested changes or alternatives to the proposed 
policy:
     Packaging stress agents into MPI could adversely affect 
patient access to stress agents;
     Because a stress agent is not used with 100 percent of MPI 
tests, CMS should only package drugs that are used at least 80 percent 
of the time with the primary procedure, to ensure that the packaged 
payment reflects the full cost of the packaged drug;
     Hospitals would have a financial incentive not to use a 
stress agent with MPI, because stress can be induced with exercise 
instead of a stress agent;
     To avoid incurring the cost of a stress agent, hospitals 
will encourage patients to exercise, and this could be dangerous for 
the patient;
     As a consequence of packaging stress agents, hospitals may 
perform inadequate MPI tests (without proper stress), resulting is 
misdiagnoses;
     CMS should require hospitals to code stress agents on MPI 
claims to ensure that costs are adequately captured; and
     CMS should create separate APCs for MPI with and without 
use of a stress agent.
    Response: We disagree with the commenter that packaging stress 
agents will limit beneficiary access to MPI tests with a stress agent 
when it is not clinically appropriate for the patient to induce stress 
through exercise. Rather, as we discuss below, we believe that a single 
payment for MPI establishes better incentives to ensure clinically 
appropriate patient care.
    We are not adopting the commenter's recommendation that we adopt a 
minimum utilization requirement of 80 percent for drug packaging. We 
package services that are typically integral, ancillary, supportive, 
dependent, or adjunctive to a primary service, irrespective of the 
frequency with which this packaged service is used in any given primary 
procedure. This policy has been a fundamental part of the OPPS since 
its implementation in August 2000. In some cases, a packaged item may 
be associated with a primary service 100 percent of the time and in 
other cases a packaged item may be rarely used with the procedure or 
service with which it is packaged. Using the geometric mean cost for an 
APC ensures that minor changes in the total for items and services from 
low volume packaged services will impact the APC payment rate. 
Receiving some incremental amount for packaged items allows the 
hospital to best determine the most efficient and clinically 
appropriate delivery of a service. An 80 percent utilization threshold 
for packaging is more reflective of a fee schedule than a prospective 
payment system, creating payment for a single service of MPI and stress 
agent that would not encourage the efficient delivery of MPI. We 
believe a minimum utilization threshold would be unduly restrictive in 
the context of a prospective payment system because such a threshold 
would exclude services or items from packaging that are typically 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service.
    Regarding the commenter's concern that hospitals will have a 
financial incentive not to use a stress agent with MPI, again we note 
that the established payment rate is based on the geometric mean cost 
of claims with and without a stress agent and that hospitals will now 
receive incrementally more payment for each MPI, proportional to 
included costs for stress agents on the claims, even when they do not 
use a stress agent. We believe that knowing the full amount of payment 
for the MPI, with or without the stress agent, will allow the hospital 
to make the most efficient decision that is clinically appropriate. As 
we state above, like other prospective payment systems, the OPPS relies 
on the concept of averaging, where the payment may be more or less than 
the estimated cost of providing a specific service or bundle of 
specific services for a particular patient. Finally, the recent 
availability of certain generic stress agents should further mitigate 
any financial incentive not to use a stress agent with MPI.
    With regard to clinical concerns that hospitals may encourage 
physicians to order exercise rather than an MPI with stress agent, we 
disagree that hospitals and physicians are likely to settle for 
inadequate stress-MPI tests rather than incur the cost of the stress 
agent because a truly inadequate stress test would not provide the 
physician with sufficient information to arrive at a diagnosis and 
would require repeat testing. We believe that hospitals and physicians 
choose the most clinically appropriate diagnostic testing approach for 
their patients and that they will use a stress agent when necessary.
    With regard to the suggestion that we require hospitals to code 
stress agents in MPI claims, we have repeatedly stated that hospitals 
should report all codes and associated charges on the claim for the 
item and services provided to the patient, so that we will be able to 
monitor trends in stress agent utilization over time.
    Finally, we are not accepting the suggestion that we assign MPI 
tests with and without the use of a stress agent to different APCs. As 
with the minimum utilization threshold, we believe that establishing 
separate APCs would result in unnecessary differentiation between 
stress MPI with stress induced through exercise and stress MPI with 
stress induced through a stress agent, and that such a difference could 
discourage the efficient delivery of MPI. Further, the MPI CPT code 
descriptors include stress or rest, and stress can be induced either 
through exercise or use of a stress agent.
    After consideration of the public comments we received, we are

[[Page 74929]]

finalizing our proposed policy to package stress agents under our 
policy that packages all drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure. 
We are assigning HCPCS codes J0151 (which replaces HCPCS code J0152 in 
CY 2014) and J2785 the status indicator of ``N,'' indicating 
unconditional packaging in the OPPS for CY 2014.
(b) Hexaminolevulinate Hydrochloride (Cysview[supreg])--HCPCS Code 
C9275
    Cysview is a drug for which pass-through status expired on December 
31, 2012. Beginning in CY 2013, Cysview was unconditionally packaged in 
the OPPS as a contrast agent (77 FR 68364). The indications and usage 
of Cysview as listed in the FDA-approved label are as follows: 
``Cysview is an optical imaging agent indicated for use in the 
cystoscopic detection of non-muscle invasive papillary cancer of the 
bladder among patients suspected or known to have lesion(s) on the 
basis of a prior cystoscopy. Cysview is used with the Karl Storz D-
Light C Photodynamic Diagnostic (PDD) system to perform cystoscopy with 
the blue light setting (Mode 2) as an adjunct to the white light 
setting (Mode 1).''
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
42672), we described contrast agents as follows: ``Contrast agents are 
generally considered to be those substances introduced into or around a 
structure that, because of the differential absorption of x-rays, 
alteration of magnetic fields, or other effects of the contrast medium 
in comparison with surrounding tissues, permit visualization of the 
structure through an imaging modality. The use of certain contrast 
agents is generally associated with specific imaging modalities, 
including x-ray, computed tomography (CT), ultrasound, and magnetic 
resonance imaging (MRI), for purposes of diagnostic testing or 
treatment.''
    Upon reexamining this description of contrast agents and 
considering our prior application of this description to specific 
compounds, we believe that contrast agents should include those 
compounds that are used with the imaging modalities x-ray, computed 
tomography (CT), ultrasound, magnetic resonance imaging (MRI), and 
other related modalities that could represent advancements of these 
modalities. Based on the indications and usage described above for 
Cysview, we do not believe that Cysview is best described as a contrast 
agent. Rather, we believe Cysview is more appropriately described as a 
drug used in a procedure to diagnose bladder cancer.
    As discussed above, in the CY 2014 OPPS/ASC proposed rule, we 
proposed a new policy to package all drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure. Cysview is a drug that functions as a 
supply when used in a diagnostic test or procedure for the purpose of 
the ``detection of non-muscle invasive papillary cancer of the 
bladder.'' Therefore, as a drug that functions as a supply when used in 
a diagnostic test or procedure, we proposed to package Cysview for CY 
2014 under the OPPS (78 FR 43571). Cysview is currently assigned to 
status indicator ``N'' for CY 2013, and under this proposal, the status 
indicator assignment of ``N'' would continue for CY 2014.
    Comment: Many of the commenters on CMS' proposal to package Cysview 
were urologists who consider Cysview to be valuable in the care of 
bladder cancer patients and who expressed concern that CMS' proposed 
packaging policy will restrict access to blue light cystoscopy, which 
is the service in which Cysview is employed. One commenter stated that:
     Packaging Cysview limits patient access to the drug;
     Cystoscopy procedures that employ Cysview are not 
clinically comparable to other procedures assigned to the same APCs;
     CMS does not have the authority to package drugs, 
biologicals, and radiopharmaceuticals used in a diagnostic test or 
procedure;
     Packaging Cysview results in an inequitable payment for 
Cysview;
     Cysview does not function as a supply and therefore should 
not be packaged;
     Cysview is a treatment and is not used in a diagnostic 
test and therefore should not be packaged under the policy that 
packages drugs, biologicals, and radiopharmaceuticals used as a supply 
in a diagnostic test or procedure.
     CMS must create a separate APC for Cysview as it has done 
for procedures that use contrast agents.
    Response: We disagree with the commenters that packaging will limit 
patient access to Cysview. As we state above, like other prospective 
payment systems, the OPPS relies on the concept of averaging, where the 
payment may be more or less than the estimated cost of providing a 
specific service or bundle of specific services for a particular 
patient. There are many items and services in the OPPS in which use of 
the item or service may increase the cost per case above that of the 
average or typical case, and there are cases where no additional items 
or services are necessary and the cost of a typical case is much less 
than the average. This is a fundamental aspect of a prospective payment 
system. Overall, we believe that OPPS payments reflect average 
estimated costs for both situations and encourage the hospital to 
assess the appropriate use of those additional items and services in 
diagnosing bladder cancer and other diseases.
    Cysview is used in blue light cystoscopy, which is an optional 
adjunct to white light cystoscopy. The various CPT codes for cystoscopy 
include white light cystoscopy with or without blue light cystoscopy. 
Cysview is packaged into the cystoscopy procedures. We believe that the 
current structure of the APCs that include the various cystoscopy 
procedures sufficiently reflects clinical and resource homogeneity as 
required by section 1833(t)(2)(B) of the Act because most of the codes 
in these APCs are cystoscopy procedures or other urological endoscopy 
procedures that, like cystoscopy, employ an endoscope. We also do not 
believe that packaging Cysview in the OPPS is inequitable. We package 
all drugs that function as supplies when used in a diagnostic test or 
procedure, and we will continue to review drugs used in the OPPS to 
assess whether they function as supplies or are otherwise integral, 
ancillary, and supportive to a diagnostic test or procedure, and 
therefore appropriately packaged into the procedure.
    We disagree with the commenters who suggested that we do not have 
the authority to package drugs, biologicals, and radiopharmaceuticals 
that function as supplies when used in a diagnostic test or procedure. 
We discussed our authority to package drugs, biologicals, and 
radiopharmaceuticals extensively in 2008, when we packaged diagnostic 
radiopharmaceuticals and contrast agents, and refer readers to that 
discussion in the CY 2008 OPPS final rule (72 FR 66610).
    We disagree with the commenter's view that Cysview should not be 
packaged because it does not function as a supply when used in a 
diagnostic test. We believe that the commenter misunderstands the term 
``supply'' as it is used in the OPPS. Supply is a very broad term that 
describes many types of products in the OPPS. As discussed elsewhere in 
this section and in the CY 2014 OPPS/ASC proposed rule (78 FR 43571 
through 43575), supplies is a large category of items that typically 
are either for single patient use or have a shorter life span in use 
than equipment. A supply in the OPPS can be anything

[[Page 74930]]

that is not equipment, and supplies can be either expensive or 
inexpensive and either commonly or uncommonly used. According to OPPS 
policy, drugs, biologicals, radiopharmaceuticals, medical devices, and 
other items and products that are not equipment can be supplies in the 
OPPS (78 FR 43571 and 43575). Since the inception of the OPPS, 
implantable medical devices have been considered supplies in the OPPS 
(65 FR 18443). Many implantable medical devices are very 
technologically sophisticated, costly, and tailored to specific medical 
needs but they are nonetheless supplies in the OPPS. Cysview 
facilitates diagnosis through blue light cystoscopy, and therefore we 
consider it to be a drug that functions as a supply in a diagnostic 
test in the OPPS.
    We do not believe that Cysview and blue light cystoscopy are 
therapeutic. The FDA-approved label for Cysview states that Cysview is 
used for ``cystoscopic detection of non-muscle invasive papillary 
cancer of the bladder,'' which is a diagnostic purpose according to our 
definition of a diagnostic test described above and in the proposed 
rule (78 FR 43570). Also, Cysview itself does not eliminate bladder 
cancer cells. It enables better localization of the bladder cancer 
cells as compared to white light cystoscopy alone, which then requires 
a therapeutic procedure such as resection.
    Finally, we disagree with the commenter's suggestion that we must 
create a separate APC according to section 1833(t)(2)(G) of the Act for 
procedures that use Cysview. Cysview is not being packaged as a 
contrast agent. Instead, it is being packaged into the service in which 
it is used under the policy of packaging drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, which also currently includes diagnostic 
radiopharmaceuticals, contrast agents, and stress agents.
    Comment: One commenter requested clarification regarding CMS' 
definition of the term ``contrast agent,'' and requested that CMS 
recognize these products as drugs and that CMS refrain from calling 
these products supplies.
    Response: The purpose of the clarification of the term ``contrast 
agent'' in the proposed rule (78 FR 43571), which is repeated above, 
was to explain that we believe that contrast agents are products used 
in certain types of imaging techniques (or advancements of those 
techniques), namely x-ray, computed tomography (CT), ultrasound, and 
magnetic resonance imaging (MRI). Contrast agents are typically drugs 
and are eligible for pass-through as drugs in the OPPS. However, as 
mentioned above, drugs can also function as supplies, and be paid as 
such, when used in a diagnostic test or procedure in the OPPS. Contrast 
agents function as supplies when used in an imaging test and are 
packaged in the OPPS, unless pass-through status applies. This is a 
well-established OPPS packaging policy, and this policy makes no 
fundamental changes to the policy of unconditionally packaging contrast 
agents. We consider packaging of contrast agents under the more general 
packaging category of drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure, and 
this packaging category is being codified at 42 CFR 419.2(b)(15).
    After consideration of the public comments we received, we are 
finalizing our proposed policy to package Cysview as a drug under our 
policy that packages drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure. 
Therefore, HCPCS code C9275 (Cysview) will be assigned status indicator 
``N'' (unconditionally packaged) in CY 2014.
    Comment: One commenter requested that radiopharmaceuticals used for 
dosimetry not be considered diagnostic radiopharmaceuticals but instead 
be treated as therapeutic radiopharmaceuticals.
    Response: Radiopharmaceuticals used for dosimetry are packaged 
supplies in the OPPS according to established OPPS policy (68 FR 
63443). In addition, the purpose of dosimetry is to establish the 
treatment dose or the optimal treatment for the patient. As stated in 
the proposed rule (78 FR 43570) and again above, diagnostic items 
``include tests or procedures performed to determine which treatment 
option is optimal.'' Therefore, because dosimetry is performed to 
determine the optimal treatment dose of a therapeutic 
radiopharmaceutical, we believe, according to our definition of a 
diagnostic item, test, or procedure, that it is diagnostic and not 
therapeutic. Therefore, radiopharmaceuticals used for dosimetry are 
packaged in the OPPS.
(2) Drugs and Biologicals That Function As Supplies When Used in a 
Surgical Procedure
    Since the inception of the OPPS we have packaged medical devices, 
medical and surgical supplies, and surgical dressings into the related 
procedure under Sec.  419.2(b)(4). Medical and surgical supplies are a 
broad category of items used in the hospital outpatient setting. 
Supplies is a large category of items that typically are either for 
single patient use or have a shorter life span in use than equipment. 
Supplies include not only minor, inexpensive, or commodity-type items 
but also include a wide range of products used in the hospital 
outpatient setting, including certain implantable medical devices. We 
consider implantable medical devices to be integral to, dependent on, 
and supportive to a surgical implantation procedure. For further 
discussion, we refer readers to the CY 2000 OPPS final rule (65 FR 
18443). Packaged supplies can include certain drugs, biologicals, and 
radiopharmaceuticals. Packaged supplies in the OPPS also include 
implantable biologicals, which are packaged because they function as 
implantable devices which, as noted above, are considered to be a type 
of supply in the OPPS. We refer readers to the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68634) for a more detailed discussion 
of implantable biologicals. We believe that the existing packaging 
policy for implantable biologicals represents an example of a broader 
category of drugs and biologicals that should be packaged in the OPPS 
according to longstanding regulations and existing policies: drugs and 
biologicals that function as supplies when used in a surgical 
procedure. Therefore, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43571), beginning in the CY 2014 OPPS, we proposed to unconditionally 
package all drugs and biologicals that function as supplies in a 
surgical procedure, following the current packaging policy for 
implantable biologicals.
    Skin substitutes are a class of products that we treat as 
biologicals that fit within the proposed packaging category of drugs 
and biologicals that function as supplies in a surgical procedure. The 
term ``skin substitutes'' refers to a category of products that are 
most commonly used in outpatient settings for the treatment of diabetic 
foot ulcers and venous leg ulcers. Although the term ``skin 
substitute'' has been adopted to refer to this category of products in 
certain contexts, these products do not actually function like human 
skin that is grafted onto a wound; they are not a substitute for a skin 
graft. Instead, these products are applied to wounds to aid wound 
healing and through various mechanisms of action they stimulate the 
host to regenerate lost tissue. We refer readers to the ``Skin 
Substitutes for Treating Chronic Wounds Technology Assessment Report at 
ES-2'' which is available on the AHRQ Web site at:

[[Page 74931]]

http://www.ahrq.gov/research/findings/ta/skinsubs/HCPR0610_skinsubst-final.pdf. Skin substitutes are regulated by the FDA as either medical 
devices (and classified as wound dressings) or as human cell, tissue, 
and cellular and tissue-based products (HCT/Ps) under section 361 of 
the Public Health Service Act. Most of the various skin substitutes are 
applied to a wound during a surgical procedure described by CPT codes 
under the heading in the 2013 CPT codebook ``Skin Replacement Surgery'' 
and the subheading ``Skin Substitute Grafts'' in the CPT code range 
15271 through 15278. To be properly performed, every surgical procedure 
in this CPT code range requires the use of at least one skin substitute 
product. These surgical procedures include preparation of the wound and 
application of the skin substitute product through suturing or various 
other techniques. Currently skin substitutes are separately paid in the 
OPPS as if they are biologicals according to the ASP methodology and 
are subject to the drug and biological packaging threshold.
    Because a skin substitute must be used to perform any of the 
procedures described by a CPT code in the range 15271 through 15278, 
and conversely because it is the surgical procedure of treating the 
wound and applying a covering to the wound that is the independent 
service, skin substitute products serve as a necessary supply for these 
surgical repair procedures. In addition, the FDA classifies many skin 
substitutes as wound dressings, which make them in many cases similar 
to surgical dressings that are packaged under Sec.  419.2(b)(4). 
Finally, implantable biological products are very similar to (and in 
some instances the same as) skin substitute products, except that the 
clinical applications for implantable biologicals are typically an 
internal surgery versus the application to a wound for a skin 
substitute. Some products that are used as skin substitutes have dual 
uses as both skin substitutes and implantable biologicals, which 
underscores the similarity of these overlapping classes of products. 
Some products that function as skin substitutes can also function as 
implantable biologicals. Implantable biologicals and skin substitutes 
both function as supplies that are used in surgical procedures and, 
therefore, we believe that they should be packaged with the surgical 
procedure in which the products are used. Since CY 2009, we have 
packaged implantable biologicals. We see no reason to distinguish skin 
substitutes from implantable biologicals for OPPS packaging purposes 
based on the clinical application of individual products. Therefore, in 
the CY 2014 OPPS/ASC proposed rule (78 FR 43572), we proposed to 
unconditionally package skin substitutes into their associated surgical 
procedures. Packaging payment for these skin substitutes into the APC 
payment for the related surgical procedures would result in a total 
prospective payment that is more reflective of the average resource 
costs of the procedures because prices for these products vary 
significantly from product to product. Packaging these products also 
would promote more efficient resource use by hospitals and would be 
more consistent with the treatment of similar products under the OPPS. 
Pass-through payment status would still be available to new skin 
substitutes that meet the pass-through payment criteria.
    Comment: Many commenters supported CMS' proposal to package skin 
substitutes, and believed that packaging will result in greater access 
to the full range of skin substitute products, that patients will 
benefit, and that Medicare will also benefit through cost savings from 
this proposed change in payment policy.
    Response: We appreciate the commenters' support.
    Comment: Many commenters opposed CMS' proposal to package skin 
substitutes and argued that because all skin substitutes or two skin 
substitutes in particular, Apligraf and Dermagraft, are specified 
covered outpatient drugs (SCODs) under section 1833(t)(14)(B) of the 
Act, CMS cannot package these products and instead must pay separately 
for them in the OPPS.
    Response: We disagree with the commenters' assertion that skin 
substitutes generally or Apligraf and Dermagraft specifically are 
SCODs. Section 1833(t)(14)(B) of the Act defines a SCOD as a ``covered 
outpatient drug (as defined in section 1927(k)(2)) . . . .'' Covered 
outpatient drugs under section 1927(k)(2) of the Act are generally 
limited to products approved as drugs by the FDA, biologicals licensed 
under section 351 of the Public Health Service Act, and insulin. Skin 
substitutes, including Apligraf and Dermagraft, are not within any of 
these categories of products because they were approved by the FDA as 
either medical devices or as human cell, tissue, and cellular and 
tissue-based products (HCT/Ps) under section 361 of the Public Health 
Service Act. Therefore, none of these products are covered outpatient 
drugs under section 1927(k)(2) of the Act, and therefore no skin 
substitutes are SCODs according to section 1833(t)(14)(B) of the Act. 
Furthermore, we explained in finalizing our policies of packaging 
diagnostic radiopharmaceuticals and contrast agents in the CY 2008 OPPS 
final rule (72 FR 66766) that CMS has the authority to package the 
payment of SCODs in the OPPS and that we may consider additional 
packaging options for SCODs and other separately payable drugs in the 
future.
    Comment: Many commenters believed that skin substitutes should 
continue to be separately paid and not packaged because, according to 
these commenters, they are neither supplies, nor comparable to 
implantable biologicals, nor wound dressings, and because they have a 
therapeutic purpose. Some commenters requested that CMS begin referring 
to these products as ``cellular and/or tissue based products for wounds 
(CTPs)'' instead of using the term ``skin substitutes'' to describe the 
products that are applied in the procedures described by the CPT codes 
15271 through 15278. Commenters also expressed concern about CMS' use 
of the term ``wound dressing'' to describe skin substitutes.
    Response: We disagree with the commenters that we should not 
describe skin substitutes as a type of supply used in a surgical 
procedure. As explained in the proposed rule (78 FR 43571 and 43575) 
and elsewhere in this final rule with comment period, supplies are a 
large category of items that typically are either for single patient 
use or have a shorter life span in use than equipment. Supplies can be 
anything that is not equipment and include not only minor, inexpensive, 
or commodity-type items but also include a wide range of products used 
in the hospital outpatient setting, including certain implantable 
medical devices, which we have considered supplies since the inception 
of the OPPS (65 FR 18443). Supplies can also be drugs, biologicals, or 
radiopharmaceuticals. We consider implantable medical devices to be 
integral to, dependent on, and supportive to a surgical implantation 
procedure. We consider implantable biologicals to be supplies used in a 
surgical procedure because, as a part of a surgical procedure, they 
reinforce and aid the healing of various internal structures, which 
makes them integral to, dependent on, and supportive to a surgical 
procedure. Similarly, we believe that skin substitutes are supplies 
used in a surgical procedure because, as a part of a surgical repair 
procedure, they reinforce and aid the healing of tissue like 
implantable biologicals, but with skin substitutes, the tissue is skin 
instead of internal connective tissues.

[[Page 74932]]

Like implantable biologicals, skin substitutes are integral to, 
dependent on, and supportive to the surgical procedures in which they 
are used. Therefore, we believe it is appropriate to describe skin 
substitutes as supplies, and it is consistent with OPPS policy to 
consider skin substitutes as a type of supply (like an implantable 
biological or medical device) used in a surgical repair procedure.
    We disagree with the commenters who stated that skin substitutes 
are unlike packaged implantable biologicals and therefore should not be 
packaged. Our proposal to package skin substitutes relies on our 
determination that these products act as supplies that are integral to, 
dependent on, and supportive to a surgical procedure. We also believe 
that a reasonable analogy can be made that skin substitutes are similar 
to and operate as implantable biologicals in terms of composition, 
clinical use, role in hospital outpatient care, and product function in 
healing and repair such that packaging skin substitutes represents a 
logical expansion of our current packaging policy that packages 
implantable biologicals as surgical supplies. For example, implantable 
biologicals are used in internal surgeries for healing and to improve 
the structural integrity of joints, soft tissues and nerves, among 
others, and skin substitutes do the same for external surgical repairs 
of the integumentary system. In fact, several of the skin substitute 
products that are described by HCPCS Q-codes in the Q4100 series are 
used both as implantable biologicals and skin substitutes.
    With regard to the comments relating to our use of the term ``wound 
dressing'' to describe skin substitutes, we discussed surgical 
dressings in the proposed rule as an example of packaged surgical 
supplies that have some similarities to skin substitutes, many of which 
FDA classifies as ``wound dressings.'' We believe that commenters may 
have misunderstood our description of skin substitutes in the proposed 
rule as wound dressings and assumed that we were conflating skin 
substitutes with products in the Medicare benefit category of surgical 
dressings described in section 1861(s)(5) of the Act. We are not 
conflating these two product categories. We note that the FDA uses the 
term ``wound dressing'' to classify many of the skin substitutes. For 
example, the skin substitutes Apligraf and Dermagraft are classified by 
the FDA as ``dressing, wound and burn, interactive,'' and the skin 
substitute Oasis is classified by the FDA as ``dressing, wound, 
collagen.'' Further, we assign HCPCS A-codes to surgical dressings; 
HCPCS Q-codes are typically assigned to drugs and biologicals and are 
used to describe skin substitutes, unless a HCPCS C-code has been 
assigned to a skin substitute with pass-through payment status.
    Regarding the comment that skin substitutes should not be packaged 
because they have a therapeutic purpose, we proposed for CY 2014 the 
packaging of drugs and biologicals that function as supplies when used 
in a surgical procedure, and surgical procedures typically have a 
therapeutic purpose. This CY 2014 packaging proposal for drugs and 
biologicals that function as supplies does not exclude items with a 
therapeutic purpose.
    We use the term ``skin substitute'' to describe the products that 
are used in the surgical procedures described by CPT codes 15271 
through 15278 because the CPT code descriptors for these codes include 
the term ``skin substitute graft'' for the products that are applied in 
these procedures. For example, the descriptor for CPT code 15271 is 
``Application of skin substitute graft to trunk, arms, legs, total 
wound surface area up to 100 sq cm; first 25 sq cm or less wound 
surface area.'' While we acknowledge that the term ``skin substitutes'' 
may be more or less appropriate for specific products, we believe that 
this term is currently the best term for these products in order to 
avoid ambiguity. The term ``skin substitutes'' is conventional in the 
medical vernacular for these products and it is also used in the CPT 
code descriptor for the surgical procedures that apply these products. 
In addition, we do not believe that we should adopt the term ``cellular 
and/or tissue based products for wounds (CTPs) to describe skin 
substitutes,'' because ``CTP'' is too close to the abbreviation HCT/P 
that the FDA uses to refer to human cell, tissue, and cellular and 
tissue-based products (HCT/Ps) under section 361 of the Public Health 
Service Act, which is the regulatory pathway for only some skin 
substitutes.
    We acknowledge that there are differences in composition among the 
various skin substitute products and that is why each is assigned a 
distinct HCPCS Q-code (or HCPCS C-code in some cases). If all of the 
products were identical, we would only need one code to describe all of 
them. Skin substitutes are those products that are used in wound 
healing procedures and that are typically assigned a HCPCS Q-code in 
the Q4100 series (or assigned a HCPCS C-code if OPPS pass-through 
payment status applies). We understand that some of the products 
described by HCPCS Q-codes in the HCPCS code Q4100 series function both 
as skin substitutes and implantable biologicals.
    Comment: Many commenters opposed packaging skin substitutes, but 
also requested that, if CMS does package skin substitutes, CMS exclude 
from the packaging policy any products that are approved by the FDA 
through the premarket approval (PMA) process, the biologic license 
application (BLA) process, or the new drug application (NDA) process. 
Some commenters believed that products that achieve marketability 
through one of these processes are clinically superior to the other 
skin substitutes that are regulated by FDA as either 510(k) medical 
devices or as HCT/Ps because the PMA, NDA, or BLA-approval routes are 
more rigorous. As a consequence, they believe that PMA, NDA, or BLA-
approved products deserve special recognition under the OPPS versus 
other skin substitutes that are regulated by FDA through another 
process. However, other commenters stated that the FDA regulatory 
pathway does not necessarily establish the clinical utility of the 
product. Other commenters argued that the various skin substitutes 
should not be packaged because they are different products each with 
different characteristics; for example, some skin substitutes are 
constructed of living cells while others are not.
    Commenters also stated that among the range of skin substitutes, 
some products, including those approved through the PMA process, have 
higher costs than other skin substitutes that are used in the skin 
substitute surgical procedures. They argued that surgical procedures 
using these higher cost skin substitutes should not receive the same 
payment rate as those surgical procedures using less costly skin 
substitutes. These commenters were concerned that hospitals would have 
a financial incentive to use the least expensive skin substitute. Other 
commenters suggested different approaches to payment based on 
differential skin substitute cost or other skin substitute properties.
    Response: Payment under the OPPS is established based on an 
assessment of resource and clinical homogeneity. We disagree that 
certain products with FDA regulatory approval should be exempt from 
packaging. With notable regulatory and statutory exceptions, clinical 
superiority, utility, and efficacy are not aspects of a service or 
product that we consider in developing a payment rate under the OPPS. 
However, we are persuaded by numerous public comments that there is a 
significant difference in resource costs among the numerous skin 
substitute products and

[[Page 74933]]

that multiple codes based on resource differences may be more 
appropriate.
    We do not believe that the FDA approval process should exempt 
products from this packaging proposal or factor into the level of 
Medicare payment. While some skin substitutes have been approved by FDA 
as medical devices through the PMA process, including Apligraf, 
Dermagraft, and the Integra skin substitutes, all of the other current 
skin substitutes are regulated as either 510(k) medical devices or HCT/
Ps under section 361 of the Public Health Service Act. Proponents of 
some of the products approved through the PMA process request that we 
make an exception to packaging for these products (or any products 
approved through a PMA, NDA, or BLA). We believe that this request is 
based on the presumption that, because these FDA approval routes 
typically require clinical trials, these products have stronger 
evidence that supports their clinical performance as compared to the 
non-PMA approved products, and therefore PMA approval can be used as a 
proxy for evidence of clinical superiority relative to non-PMA-approved 
skin substitutes. However, we consider factors such as clinical and 
resource homogeneity for OPPS payment. As previously stated in regard 
to implantable biologicals, ``We do not believe that it is necessary to 
make our OPPS payment policies regarding implantable biologicals 
dependent on categories of FDA approval, the intent of which is to 
ensure safety and efficacy . . .'' (74 FR 60476), but rather according 
to our established criteria of clinical and resource homogeneity. 
Therefore, as in the case of implantable biologicals, we also believe 
that the FDA regulatory pathway should not determine OPPS skin 
substitute payment policy. Generally, once a service is covered, 
clinical and resource homogeneity, as well as other considerations, 
determines APC placement and packaging status. Determinations related 
to the clinical merits of a product are outside the scope of this rule. 
We proposed to apply the packaging policy to all skin substitutes 
recognized by CMS, regardless of the FDA regulatory pathway.
    However, we agree with commenters that, among the range of skin 
substitutes, there is sufficient resource heterogeneity such that all 
of the skin substitutes should not be packaged into the same 
application procedures and placed in the same APC. As noted above, 
factors in APC assignment in the OPPS include clinical homogeneity and 
resource homogeneity. While the procedures described by CPT codes 15271 
through 15278 are clearly clinically homogeneous, there is significant 
resource heterogeneity in the payment amount for the various skin 
substitutes from approximately $6.95 per sq cm for the least expensive 
to approximately $200 per sq cm for the most expensive. In order to 
ensure adequate resource homogeneity among APC assignments, in this 
final rule with comment period, we are dividing the skin substitutes 
into two groups for packaging purposes: high cost skin substitutes and 
low cost skin substitutes. Assignments to the high cost or low cost 
groups depended upon a comparison of the July 2013 payment amount for 
the skin substitute in OPPS Addendum B to the weighted average payment 
per unit of all skin substitutes using the skin substitute utilization 
from the CY 2012 claims data and the July 2013 payment amounts in OPPS 
Addendum B; this weighted average is $32 per sq cm. Skin substitutes 
with a payment amount above $32 per sq cm are classified in the high 
cost group and those at or below $32 are classified in the low cost 
group. Table 13 below lists the skin substitutes and their assignment 
as either a high cost or low cost skin substitute. We also note that a 
few skin substitute products are applied as either liquids or powders 
per milliliter or per milligram and are employed in procedures outside 
of CPT codes 15271 through 15278. These products will not be classified 
as either high cost or low cost but will be packaged into the surgical 
procedure in which they are used. These products are not listed below 
in Table 13 but appear in Addendum B to this final rule with comment 
period (which is available via Internet on the CMS Web site).
BILLING CODE 4120-01-P

[[Page 74934]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.301

[[Page 74935]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.302

BILLING CODE 4120-01-C
    We will update the groupings of high cost and low cost skin 
substitutes annually through rulemaking for existing skin substitutes 
according to the current skin substitute prices. We also will initially 
assign new skin substitutes that do not qualify for pass-through 
payment status to either the high cost or low cost category on a 
quarterly basis using the weighted average per square centimeter number 
defining high and low cost identified in each final rule. For any new 
skin substitute products approved for payment during CY 2014, we will 
use $32 per square centimeter to determine mapping to the high or low 
cost skin substitute category. We expect manufacturers to continue 
reporting ASP to facilitate cost category assignment. Any new skin 
substitutes without pricing information will be assigned to the low 
cost category until pricing information is available.
    High cost skin substitutes will continue to be billed using the 
existing skin substitute application CPT codes 15271 through 15278. We 
are creating a new set of HCPCS C-codes that parallel the current set 
of skin substitute application CPT codes (15271 through 15278) for 
application of low cost skin substitutes beginning in CY 2014 (HCPCS 
codes C5271, C5272, C5273, C5274, C5275, C5276, C5277, and C5278). We 
are establishing code edits in our claims processing system that 
require that the high cost skin substitutes be reported with the CPT 
codes and the low cost skin substitutes be reported with the new HCPCS 
C-codes. Geometric mean costs for the various procedures were 
calculated using only claims for the skin substitutes that are assigned 
to each class; that is, claims for services described by CPT codes 
15271, 15273, 15275, and 15277, including only high cost skin 
substitutes, were used to calculate the geometric mean costs for these 
procedures and claims for HCPCS codes C5271, C5273, C5275, and C5277, 
including only low cost skin substitutes, were used to calculate the 
geometric mean costs for these procedures. The add-on CPT skin 
substitute application codes (CPT codes 15272, 15274, 15276, and 15278) 
and the add-on HCPCS C-codes for skin substitute application (HCPCS 
codes C5272, C5274, C5276, and C5278) are packaged in the OPPS under 
the add-on code packaging policy described in section II.B.3.d.(4) of 
this final rule with comment period. CPT codes 15271, 15273, 15275, and 
15277 and HCPCS C-codes C5271, C5273, C5275, and C5277 were assigned to 
one of the following four skin repair APCs according to the geometric 
mean cost for the code: APC 0326 (Level I Skin Repair); APC 0327 (Level 
II Skin Repair); APC 0328 (Level III Skin Repair); and APC 0329 (Level 
IV Skin Repair). These procedure codes and the CY 2014 APC assignments 
and status indicator for each of the procedure codes are listed in the 
Table 14 below.

BILLING CODE 4120-01-P

[[Page 74936]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.303

[[Page 74937]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.304

BILLING CODE 4120-01-C
    Skin substitutes with pass-through payment status should be 
reported with CPT codes 15271 through 15278. We will apply an offset to 
the payment for pass-through skin substitutes according to the offset 
policy described in section V.A.4.d of this final rule with comment 
period.
    Comment: A few commenters stated that CMS should not package skin 
substitutes because the claims data used for modeling the cost does not 
accurately represent the actual cost of the skin substitutes used in 
the HOPD. They suggested that inaccurate coding and reporting by 
hospitals, and charge compression, result in packaged costs that are 
lower than the actual costs of the skin substitutes used in the 
surgical procedures in which skin substitutes are employed.
    Response: It is our longstanding policy to use the claims and cost 
report data available to us, without significant editing or 
modification, to model the prospective payment year OPPS payment rates. 
We have stated previously that: ``[b]eyond our standard OPPS trimming 
methodology . . . that we apply to those claims that have passed 
various types of claims processing edits, it is not our general policy 
to judge the accuracy of hospital coding and charging for purposes of 
ratesetting'' (75 FR 71838). We do not believe that a problem exists 
with skin substitute reporting or with the associated data used in 
modeling the packaged payments for the procedures that includes the 
cost of the skin substitute. Currently, there is an incentive to code 
properly for skin substitute application services as the significant 
majority of the overall payment for these services stems from the 
separately paid and reported skin substitute, which we believe provides 
sufficient motivation for the hospitals to

[[Page 74938]]

accurately report the amount of skin substitute used. We do not have 
any evidence of systemic underreporting of these products. We have 
estimated costs for skin substitutes as we have for all other services 
in our claims data using our standard methodology outlined in section 
II.A.2.c. of this final rule with comment period, and we believe these 
costs to be sufficient for establishing payment for skin substitute 
application procedures as they are for all other services paid under 
the OPPS and ASC payment systems. Regarding charge compression, we have 
addressed charge compression in the OPPS through new cost centers. We 
refer readers to section II.A.1.c. of this final rule with comment 
period for a discussion of this topic.
    Comment: A few commenters requested that CMS not package 
implantable biologicals that are used for various surgical procedures 
in which the implantable biological product is implanted into the body 
as a part of surgical procedure.
    Response: Implantable biologicals have been packaged in the OPPS 
since 2009. We did not propose to reconsider this packaging policy for 
CY 2014. In fact, part of the rationale for extending packaging in the 
OPPS to include skin substitutes that function as surgical supplies is 
that we already package several products that are the same as or 
similar to skin substitutes in the OPPS that are described by the term 
``implantable biological'' due to their particular clinical use. 
Several of the products in the HCPCS code Q4100 series are dual use or 
multi-use products in that they serve as both skin substitutes and 
implantable biologicals. We believe that both implantable biologicals 
and skin substitutes should be packaged into the surgical procedures 
that employ these products when they function as supplies.
    Comment: Some commenters expressed concern that packaging skin 
substitutes in the OPPS will inhibit the development of biotechnology 
products and that this proposed policy will result in less investment 
in such technology.
    Response: We do not believe that this policy will result in less 
investment in biotechnology. New skin substitutes remain eligible for 
pass-through payment status for at least 2 years, but not more than 3 
years. Pass-through payments are intended to facilitate the adoption of 
certain new products. In addition, we believe that the packaged 
payments for the associated surgical procedures, including payment for 
the skin substitute are adequate and will not discourage use of the 
skin substitute products used in these procedures. Furthermore, the 
final policy that distinguishes high cost from low cost skin 
substitutes addresses the issue of differential cost among the range of 
skin substitute products. Finally, this packaging policy applies to 
skin substitutes and other drugs and biologicals used in surgical 
procedures. It does not apply broadly to all biotechnology.
    Comment: Some commenters mentioned that the skin substitute 
packaging policy will result in a site-of-service shift to the 
physician office setting where separate payment for skin substitutes 
will be made in CY 2014.
    Response: The physician, in consultation with his or her patient, 
decides the site of service for treatment and many factors are 
considered as a part of that decision. We believe that we have 
adequately addressed concerns about heterogeneous resource costs 
resulting in payment inadequacy and that these procedures will continue 
to be performed in the HOPD.
    We received a few additional public comments regarding a single 
product that we also proposed to package because it is a drug that 
functions as a supply in a surgical procedure. We summarize and respond 
to these comments below.
    Comment: A few commenters objected to the packaging of the drug 
Mitosol (HCPCS code J7315) when used as a supply in a surgical 
procedure, which was the interim assignment for new HCPCS code J7315 in 
the CY 2013 OPPS/ASC final rule with comment period. We refer readers 
to Addendum B.--Final OPPS Payment by HCPCS Code for CY 2013 available 
on the Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices-Items/CMS-1589-FC.html?DLPage=1&DLSort=2&DLSortDir=descending. One commenter in 
particular complained that, although Mitosol is indicated as ``an 
adjunct for ab externo glaucoma surgery,'' OPPS packaging requires that 
an item be integral to the procedure. The commenter stated that because 
the use of Mitosol is optional in some cases of glaucoma surgery, it 
should not be packaged in the OPPS. The commenter stated that ``up to 
20% of glaucoma surgeries do not include an anti-fibrotic [including 
Mitosol].'' The commenter further stated that Mitosol serves a separate 
clinical purpose from glaucoma surgery. The commenter emphasized CMS' 
threshold packaging policy for drugs, biologicals, and 
radiopharmaceuticals, and suggested that drugs with per day costs above 
the threshold should not be packaged. Finally, the commenter stated 
that the clinical benefits and orphan drug designation are reasons to 
not package Mitosol.
    Response: Mitosol is an anti-fibrotic drug (meaning that it 
inhibits wound healing) that is used in glaucoma surgery. Since this 
comment was filed, we granted Mitosol pass-through payment status. We 
address the commenter's specific points as follows. First, we want to 
dispel the notion that packaged drugs must be used in the associated 
procedure 100 percent of the time that the procedure is performed. That 
is not our OPPS packaging policy. As stated above and throughout the 
proposed rule, we believe packaging is appropriate for items and 
services that are integral or ancillary or supportive or dependent or 
adjunctive to the primary procedure. Therefore, items and services that 
fall within any of these categories may be properly packaged in the 
OPPS. Mitosol, as an adjunct to trabeculectomy, would therefore be 
appropriately packaged as a surgical supply if pass-through payment 
status were not in effect because it functions as a supply in a 
surgical procedure, and supplies are integral to, dependent on, and 
supportive of a primary service, as noted above.
    We also disagree with the commenter's assertion that Mitosol serves 
a different clinical purpose than trabeculectomy, which is to create a 
functioning filtering bleb for control of intraocular pressure. Mitosol 
prevents the bleb from scarring, which helps to maintain a functioning 
filtering bleb, which is the purpose of the glaucoma surgery. 
Determinations related to the clinical merit of a product are outside 
the scope of this rule. As noted above, relative clinical value or 
effectiveness was not proposed as a criterion for OPPS packaging 
determinations. Finally, while FDA orphan drug designation results in 
additional exclusivity according to the Federal Food Drug, and Cosmetic 
Act, it does not exempt a drug from packaging in the OPPS. Upon 
expiration of pass-through payment status for Mitosol, it is our intent 
to package it as a supply with glaucoma surgery in the OPPS.
    After consideration of the public comments we received, we are 
packaging all skin substitutes according to the scheme described above, 
which assigns skin substitutes to either the high cost category or the 
low cost category unless pass-through payment status applies. Skin 
substitutes assigned to the high cost category will be reported with 
CPT codes 15271 through 15278 and the applicable skin substitute HCPCS 
Q-code, while skin substitutes assigned to the low cost category will 
be

[[Page 74939]]

reported with HCPCS codes C5271 through C5278 and the applicable skin 
substitute HCPCS Q-code. In addition, the few skin substitute products 
that are applied as either liquids or powders per milliliter or per 
milligram and are currently employed in procedures outside of the CPT 
code range of 15271 through 15278 will not be classified as either high 
cost or low cost, but will be packaged into the surgical procedure in 
which they are used.
    The skin substitute products that are unconditionally packaged 
under this final policy and assigned to status indicator ``N'' for CY 
2014 are listed in Addendum P to this CY 2014 OPPS/ASC final rule with 
comment period. The payment for CPT codes 15271 through 15278 for 
surgical application of high cost skin substitutes (payment rate per 
square centimeter over $32 for CY 2014) and HCPCS codes C5271 through 
C5278 for surgical application of low cost skin substitutes (payment 
rate per square centimeter $32 and under for CY 2014), including the 
cost of the packaged skin substitutes, for CY 2014, are listed in 
Addendum B to this final rule with comment period. The OPPS addenda are 
available on the CMS Web site at: http://www.cms.hhs.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
(3) Clinical Diagnostic Laboratory Tests
    Since the beginning of the OPPS, clinical diagnostic laboratory 
tests (laboratory tests) provided in the hospital outpatient setting 
have been separately paid to hospitals at Clinical Laboratory Fee 
Schedule (CLFS) rates (65 FR 18442). Section 1833(t)(1)(B)(i) of the 
Act authorizes the Secretary to designate the hospital outpatient 
services that are paid under the OPPS. Under this authority, the 
Secretary excluded from the OPPS those services that are paid under fee 
schedules or other payment systems. As stated in the April 17, 2000 
OPPS final rule with comment period: ``Rather than duplicate existing 
payment systems that are effectively achieving consistency of payments 
across different service delivery sites, we proposed to exclude from 
the outpatient PPS those services furnished in a hospital outpatient 
setting that were already subject to an existing fee schedule or other 
prospectively determined payment rate'' (65 FR 18442). Because payment 
rates for laboratory tests were based on the CLFS, laboratory tests are 
among the services excluded from the OPPS. We codified this policy at 
42 CFR 419.22(l).
    As discussed above, it is our intent to revise the structure of the 
OPPS to adopt greater aspects of a prospective payment system and 
retain less of a fee schedule structure, which makes separate payment 
for each separately coded item. We have examined the services performed 
in the hospital outpatient setting to determine those services that we 
believe should be packaged in order to make the OPPS a more complete 
and robust prospective payment system. We were guided by our 
longstanding OPPS packaging principle of packaging the payment of items 
or services when they are provided along with primary services they 
support. Based on this approach, we believe that laboratory tests 
(other than molecular pathology tests, as discussed below) that are 
integral, ancillary, supportive, dependent, or adjunctive to the 
primary services provided in the hospital outpatient setting are 
services that should be packaged. Laboratory tests and their results 
support clinical decision making for a broad spectrum of primary 
services provided in the hospital outpatient setting, including surgery 
and diagnostic evaluations. Therefore, except as discussed below for 
molecular pathology tests, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43572), we proposed to package laboratory tests when they are integral, 
ancillary, supportive, dependent, or adjunctive to a primary service or 
services provided in the hospital outpatient setting. Specifically, we 
proposed that laboratory tests would be integral, ancillary, 
supportive, dependent, or adjunctive to a primary service or services 
provided in the hospital outpatient setting and appropriate for 
packaging into the payment of the primary service when they are 
provided on the same date of service as the primary service and when 
they are ordered by the same practitioner who ordered the primary 
service. We stated that the laboratory test codes that we were 
proposing to be packaged and assigned status indicator ``N'' for CY 
2014 were listed in Addendum P to the proposed rule (which is available 
via the Internet on the CMS Web site). We also proposed to revise the 
regulation text at Sec.  419.2(b) and Sec.  419.22(l) to reflect this 
laboratory test packaging proposal.
    We stated that we would consider a laboratory test to be unrelated 
to a primary service and, therefore, not part of the proposed packaging 
policy when the laboratory test is the only service provided on a date 
of service or when the laboratory test is provided on the same date of 
service as the primary service but is ordered for a different purpose 
than the primary service by a practitioner different than the 
practitioner who ordered the primary service provided in the hospital 
outpatient setting. We stated that laboratory tests not included in the 
packaging proposal would continue to be paid separately at CLFS rates 
when billed on a 14X bill type. We note that hospitals already use the 
14X bill type to bill for referred specimens or any situation where the 
beneficiary receives laboratory tests but is not a registered 
outpatient of the hospital.
    We also proposed an exception to our proposal to package laboratory 
tests for molecular pathology tests described by CPT codes in the 
ranges of 81200 through 81383, 81400 through 81408, and 81479. We did 
not propose that these services be packaged because we believe that 
these relatively new tests may have a different pattern of clinical 
use, which may make them generally less tied to a primary service in 
the hospital outpatient setting than the more common and routine 
laboratory tests that we proposed to package. As we gain more 
experience with molecular pathology tests, we stated that we will 
consider if packaging them in the OPPS in the future would be 
appropriate. These services would continue to be billed on a 13x claim 
and be assigned status indicator ``A.''
    In addition to the laboratory packaging policy proposals described 
above, we considered proposing an alternative laboratory packaging 
policy that would package those laboratory tests meeting the proposed 
policies above, but exclude laboratory tests with costs greater than 
some dollar threshold similar to the approach we use for separately 
paid drugs and biologicals in the OPPS so that only laboratory tests 
(meeting the proposed standards above) with CLFS payment rates below a 
certain dollar threshold amount would be packaged. Under this 
alternative policy, tests meeting the proposed standards above, but for 
which the CLFS payment rates are above the threshold amount, would 
continue to be separately paid. We decided not to propose this 
alternative policy because, as discussed above in the background 
section, our packaging policies generally do not consider the cost of 
the individual items and services that are packaged, meaning that we 
package both inexpensive and expensive items according to OPPS 
packaging principles.
    We recognize that the Medicare Part B deductible and coinsurance 
generally do not apply for laboratory tests paid to hospitals at CLFS 
rates and that the deductible and coinsurance would apply to laboratory 
tests packaged into other services in the OPPS. The purpose

[[Page 74940]]

of the laboratory packaging proposal was not to shift program costs 
onto beneficiaries. It is to encourage greater efficiency by hospitals 
and the most economical delivery of medically necessary laboratory 
tests which would contain unnecessary growth in hospital outpatient 
spending over the long run, which benefits all stakeholders. We stated 
that we estimate that the combination of packaging laboratory tests 
into a wide array of primary services provided in the hospital 
outpatient setting combined with our longstanding methodology to adjust 
the copayment percentages to 20 percent as provided in section 
1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. of the 
proposed rule (78 FR 43586 through 43587), and the limitation on the 
copayment amount for a procedure to the inpatient hospital deductible 
as set forth at section 1833(t)(8)(C)(i) of the Act would fully offset 
the financial impact on Medicare beneficiaries receiving laboratory 
tests that would be subject to the proposed packaging policy.
    Further, we stated that we believe that creating these larger 
bundles will result in a more efficient use of laboratory tests when 
they are adjunctive to an outpatient service. In addition, to the 
extent that the coinsurance and deductible do not apply under the CLFS, 
they would continue not to apply for tests that are ordered, provided, 
and billed independently from a primary service as discussed above, or 
for molecular pathology tests. We invited public comments on the effect 
of packaging laboratory tests on beneficiary coinsurance.
    Comment: Some commenters supported the proposal to package 
laboratory tests because they believed that packaging laboratory tests 
is consistent with CMS' goal to move the structure of the OPPS closer 
to a prospective payment system and away from a fee schedule 
construction.
    Response: We appreciate the commenters' support.
    Comment: A few commenters opposed the proposal to package 
laboratory tests because they believed that it could harm beneficiary 
access to these laboratory tests.
    Response: We disagree. We believe that beneficiaries will continue 
to receive laboratory tests that are medically necessary. We are 
continuing to pay for these laboratory tests and have included the cost 
of the associated laboratory tests with the estimated cost of primary 
hospital outpatient services when establishing payment for these 
services. We believe that packaged payment will allow hospitals to 
better assess when and which laboratory tests are appropriate and 
provide these services more efficiently, but that this policy will not 
affect beneficiaries' access to reasonable and appropriate care.
    Comment: A few commenters opposed the proposal to package 
laboratory tests because they believed that it would not achieve CMS' 
objective of greater cost efficiency in hospitals.
    Response: We disagree. Packaging encourages efficiency and is an 
essential component of a prospective payment system. Packaging payment 
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. 
We believe that packaging encourages hospitals to furnish services in 
the most efficient way by enabling hospitals to manage their resources 
with the maximum flexibility, thereby encouraging long-term cost 
containment. Therefore, our packaging policies support our strategic 
goal of incentivizing hospitals to provide appropriate care in the most 
efficient manner.
    Comment: One commenter suggested that CMS does not have the 
legislative authority to package laboratory tests in the OPPS. The 
commenter states that section 1833(h)(1)(A) of the Act requires that 
CMS pay for laboratory tests (except inpatient laboratory tests) in all 
settings according to the CLFS.
    Response: We disagree. Although section 1833(h)(1)(A) of the Act 
established the CLFS, it does not prohibit outpatient laboratory tests 
from being paid either separately or as part of a packaged payment 
under the OPPS. Section 1833(t) of the Act gives the Secretary 
discretion to designate which services are covered OPD services, with 
the exception of those listed in section 1833(t)(1)(B)(iv) of the Act, 
and laboratory tests are not among the services listed in section 
1833(t)(1)(B)(iv) of the Act. Laboratory tests provided in the hospital 
outpatient department have always been considered hospital outpatient 
services. However, until this proposal, we have since the inception of 
the OPPS elected to separately pay for laboratory tests in the hospital 
outpatient setting at the CLFS payment rates. For CY 2014, we proposed 
to include certain laboratory tests as covered OPD services under the 
OPPS, and we proposed to package payment for certain tests, similar to 
other covered outpatient services that are typically integral, 
ancillary, supportive, dependent, or adjunctive to a primary hospital 
outpatient services under the OPPS.
    Comment: A few commenters expressed concern about increased 
beneficiary liability associated with laboratory tests being paid under 
the OPPS, which has a coinsurance obligation, unlike payment for 
laboratory tests under the CLFS, which does not have an associated 
coinsurance obligation by statute. One commenter also requested that, 
if CMS does finalize the laboratory test packaging policy for CY 2014, 
it exclude laboratory tests from the services into which they are 
packaged for the purpose of determining the coinsurance amount.
    Response: We appreciate the commenters' concern about the welfare 
of Medicare beneficiaries. We assessed the financial impact of 
packaging laboratory tests on beneficiaries for the proposed rule and 
reassessed the impact for this final rule with comment period. We 
estimated in the proposed rule that the combination of packaging 
laboratory tests into a wide array of primary services provided in the 
hospital outpatient setting combined with our longstanding methodology 
to adjust the copayment percentages to 20 percent, as provided in 
section 1833(t)(3)(B)(ii) of the Act and as discussed in section II.I. 
of the proposed rule (78 FR 43573, 43586 through 43587), and the 
limitation on the copayment amount for a procedure to the inpatient 
hospital deductible as set forth at section 1833(t)(8)(C)(i) of the 
Act, would offset the financial impact on Medicare beneficiaries 
receiving laboratory tests that will be subject to the finalized 
packaging policy.
    In this final rule with comment period, we are not finalizing our 
proposed policy to package ancillary services with a CY 2013 status 
indicator of ``X'' and diagnostic tests on the bypass list in response 
to public comments. We estimate that, in aggregate, the percentage of 
beneficiary liability for OPPS payments for CY 2014, including payment 
for certain clinical diagnostic laboratory tests, will be 21.7 percent 
in CY 2014, consistent with aggregate beneficiary liability under the 
OPPS in recent years. We believe that our final policy to create 29 
comprehensive APCs for CY 2015 will reduce the aggregate beneficiary 
liability in CY 2015.
    In addition, we believe that creating larger payment bundles will 
result in a more efficient use of clinical diagnostic laboratory tests 
when they are integral or supportive of an outpatient service. 
Furthermore, to the extent that the coinsurance and deductible do not 
apply under the CLFS, they would

[[Page 74941]]

continue not to apply for tests that are ordered, provided, and billed 
independently from a primary service as discussed above, or for 
molecular pathology tests, which will continue to be paid under the 
CLFS.
    Regarding the commenter's request that CMS exclude laboratory tests 
from the services into which they are packaged for the purpose of 
determining the coinsurance amount, we do not have the authority under 
section 1833(t)(8) of the Act to exclude laboratory tests from the 
services into which they are packaged for the purpose of determining 
the coinsurance amount.
    Comment: Some commenters expressed concern about CMS' proposed 
exception to packaging for laboratory tests provided on the same date 
of service as another hospital outpatient service or services, but that 
are ordered by a different practitioner than the practitioner who 
ordered the primary hospital outpatient service or services and where 
the ordered laboratory test also is for a different purpose than the 
primary service. Commenters were concerned about hospitals' 
administrative burden associated with billing for separately paid 
laboratory tests. Commenters suggested that CMS implement claims 
processing changes and instructions in advance of adopting the 
laboratory packaging policy to ease hospitals' transition to this 
policy and the exceptions to this policy.
    Response: We believe that these commenters may have misunderstood 
the nature of the proposed laboratory packaging policy. We proposed to 
package laboratory tests when they are integral, ancillary, supportive, 
dependent, or adjunctive to a primary service or services provided in 
the hospital outpatient setting; that is, when they are provided on the 
same date of service as the primary service and when they are ordered 
by the same practitioner who ordered the primary service. One exception 
to our proposal to package laboratory tests is to exempt molecular 
pathology tests, which would continue to be separately paid when billed 
on a 13x claim.
    A laboratory test can be separately paid when (1) the laboratory 
test is the only service provided to that beneficiary on that date of 
service; or (2) the laboratory test is on the same date of service as 
the primary service but is ordered for a different purpose than the 
primary service by a practitioner different than the practitioner who 
ordered the primary service. When a laboratory test is the only service 
provided to a beneficiary at the hospital, the hospital can receive 
separate payment for those laboratory tests by billing for these 
services on a 14x claim; we would pay hospitals for these laboratory 
tests based on the CLFS payment rate. To illustrate the second 
scenario, a beneficiary has eye surgery scheduled with physician A, an 
ophthalmologist, but also has an order from physician B, a 
cardiologist, for unrelated laboratory tests. The beneficiary goes to 
the hospital for the eye procedure and decides to have the laboratory 
tests that have been ordered by physician B for a different purpose 
than the eye procedure on the same date of service. While the 
laboratory test is on the same date of service as the eye procedure, 
the laboratory tests are ordered for a different purpose than the 
primary service by a practitioner different than the practitioner who 
ordered the eye procedure. In this situation, the hospital can bill 
Medicare for the unrelated laboratory tests on a 14x claim and receive 
separate payment under the CLFS, similar to when the laboratory tests 
are the only service performed in the hospital outpatient department on 
a given date of service. However, if, in this example, physician A also 
ordered some laboratory tests as a part of a preoperative evaluation 
for the eye procedure and the beneficiary had the tests on the same 
date of service as the eye procedure, then the hospital would report 
those laboratory tests on a 13x claim along with the eye surgery. 
Payment for those preoperative laboratory tests would be packaged into 
the payment for the surgery, which is the primary procedure that would 
be paid separately. It will be the hospital's responsibility to 
determine when to separately bill laboratory tests on the 14x claim 
according to this description of these limited exceptions. We plan to 
issue revised contractor instructions for billing for these laboratory 
tests on a 14x bill type in January 2014, and we also will install 
claims processing edits.
    Comment: A few commenters suggested that CMS adopt the alternative 
laboratory packaging policy discussed briefly above and in the proposed 
rule (78 FR 43573) to package only those laboratory tests with payment 
rates below some dollar threshold, similar to the approach that CMS 
uses for most drugs, biologicals, and therapeutic radiopharmaceuticals 
in the OPPS. Commenters stated that such a policy would enable hospital 
specialty clinics to perform more complex, expensive, and esoteric 
laboratory tests.
    Response: We appreciate the commenters' thoughts on this 
alternative. We continue to believe that a dollar packaging threshold 
is not appropriate for laboratory tests because almost all laboratory 
tests are inexpensive (97 percent of all laboratory tests have CLFS 
national limitation amounts of less than $100) relative to other 
services that are provided in the hospital outpatient department. This 
is unlike many of the drugs and biologicals that are used in the 
hospital outpatient department that not uncommonly cost thousands of 
dollars per dose. Therefore, we continue to believe that it is not 
necessary to adopt a payment threshold policy for packaging laboratory 
tests similar to the threshold policy for packaging drugs and 
biologicals.
    Comment: A few commenters requested additional exceptions to the 
proposal to package specific laboratory tests, including, for example, 
tests for in situ hybridization and cardiovascular screening. These 
commenters stated that, like molecular pathology tests for which CMS 
proposed an exception to the proposal to conditionally package 
laboratory tests, these tests have a different pattern of clinical use 
than most other laboratory tests and, therefore, should continue to be 
separately paid in the hospital outpatient setting.
    Response: After considering the various requests for exceptions for 
specific laboratory tests that we received, we do not believe that 
additional exceptions to the laboratory packaging policy are necessary. 
We understand that there are laboratory tests that are less common and 
frequent than a standard panel, such as new tests. We do not believe 
that the tests described by the commenters or other laboratory tests 
that were proposed to be packaged are similar to the tests in the 
molecular pathology test series such that additional exceptions are 
warranted. We proposed to exclude the molecular pathology tests from 
our packaging proposal because, as a class of laboratory tests, their 
overall pattern of clinical use has not yet developed and we believe 
that these tests are less tied to a primary service than other 
laboratory tests. Once their pattern of use develops, we will assess 
whether we believe these laboratory tests also should be conditionally 
packaged. We do not believe that in situ hybridization and 
cardiovascular screening or other types of laboratory tests are a 
developing class of laboratory tests for which we do not know the 
pattern of use. For example, in situ hybridization may be a part of a 
comprehensive evaluation for a suspected malignancy. In response to 
commenter requests for additional exceptions, we also reviewed all of 
the laboratory tests listed in Addendum P to the proposed rule and do 
not believe that further exceptions to

[[Page 74942]]

our proposal to conditionally package laboratory tests are necessary.
    After consideration of the public comments we received, for CY 
2014, we are finalizing our proposal without modification to package 
laboratory tests in the OPPS when they are integral, ancillary, 
supportive, dependent, or adjunctive to a primary service or services 
provided in the hospital outpatient setting; that is, when they are 
provided on the same date of service as the primary service and when 
they are ordered by the same practitioner who ordered the primary 
service. This means that a laboratory test will not be packaged when 
(1) a laboratory test is the only service provided to that beneficiary 
on that date of service; or (2) a laboratory test is conducted on the 
same date of service as the primary service but is ordered for a 
different purpose than the primary service by a practitioner different 
than the practitioner who ordered the primary service. We also are 
finalizing our proposal without modification to except molecular 
pathology tests described by CPT codes in the ranges of 81200 through 
81383, 81400 through 81408, and 81479 from this packaging proposal. In 
addition, we are finalizing our proposal without modification to revise 
the regulation text at Sec.  419.2(b) and Sec.  419.22(l) to reflect 
this conditional laboratory test packaging policy.
    The laboratory test codes subject to this packaging policy will be 
assigned status indicator ``N'' because any laboratory tests reported 
on a 13x bill type will be packaged for CY 2014. These codes are listed 
in Addendum P to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
(4) Procedures Described by Add-On Codes
    Add-on codes describe procedures that are always performed in 
addition to a primary procedure. CPT defines add-on codes as codes that 
describe ``procedures [that] are commonly carried out in addition to 
the primary procedure performed,'' and also states that ``[a]dd-on 
codes are always performed in addition to the primary service or 
procedure and must never be reported as a stand-alone code'' (2013 CPT 
Codebook Professional Edition, page xi). CPT add-on codes are listed in 
Appendix D of the CPT codebook. Add-on codes can also be Level II HCPCS 
codes. For example, the procedure described by CPT code 11001 is 
``Debridement of extensive eczematous or infected skin; each additional 
10% of the body surface, or part thereof (list separately in addition 
to code for primary procedure).'' This code is used for additional 
debridement beyond that described by the primary procedure code. 
Historically, the OPPS has generally paid separately for add-on codes 
based on an APC assignment with status indicator ``T'' indicating that 
the multiple procedure payment reduction for surgeries applies.
    Procedures described by add-on codes represent an extension or 
continuation of a primary procedure, which means that they are 
typically supportive, dependent, or adjunctive to a primary service, 
which is usually a surgical procedure. The primary code defines the 
purpose and typical scope of the patient encounter and the add-on code 
describes incremental work, when the extent of the procedure 
encompasses a range rather than a single defined endpoint applicable to 
all patients. The CPT codebook states that an add-on code describes 
``additional intra-service work associated with the primary procedure'' 
(2013 CPT Codebook Professional Edition, page xi). For example, add-on 
CPT code 11001 is used for each additional 10 percent of debridement 
beyond that described by the primary code. Given the dependent nature 
and adjunctive characteristics of procedures described by add-on codes 
and in light of longstanding OPPS packaging principles described above, 
we believe add-on procedures should be packaged with the primary 
procedure. In the CY 2014 OPPS/ASC proposed rule (78 FR 43573), we 
proposed to unconditionally package all procedures described by add-on 
codes in the OPPS.
    Aside from advancing the OPPS as a prospective payment system by 
packaging add-on codes, an additional benefit to packaging add-on codes 
is more accurate OPPS payment for procedures described by add-on codes. 
Currently, calculating geometric mean costs for procedures described by 
add-on codes is problematic in the OPPS because, as with many claims 
with multiple procedures, we cannot determine which costs on a claim 
are attributable to the primary procedure and which costs are 
attributable to the add-on procedure. Furthermore, because we use 
single claims and pseudo single procedure claims for ratesetting, we 
generally must rely on incorrectly coded claims containing only the 
add-on code to determine payment rates for add-on procedures. Claims 
containing only an add-on code are incorrectly coded because they 
should be reported with (or ``added-on'' to) a primary procedure. 
Packaging the line item costs associated with an add-on code into the 
cost of the primary procedure will help address this ratesetting 
problem because the costs of the add-on code would be packaged into the 
primary procedure, and we would no longer have to use miscoded claims 
to calculate estimated costs for add-on codes. Packaging add-on codes 
also would increase the number of single bills available for 
ratesetting for the primary procedures. We discuss how we model claims 
to establish relative payment weights, including definitions of 
multiple, single, and pseudo single claims in section II.A.2. of this 
final rule with comment period.
    We proposed to revise the regulations at Sec.  419.2(b) to include 
the packaging of add-on codes. The specific add-on codes that we 
proposed to be unconditionally packaged and assigned status indicator 
``N'' for CY 2014 are listed in Addendum P to the proposed rule, which 
is available via the Internet on the CMS Web site.
    Comment: Some commenters supported the proposal to package add-on 
codes, and agreed with CMS that packaging add-on codes is consistent 
with a prospective payment system and will improve OPPS ratesetting.
    Response: We appreciate the commenters' support.
    Comment: Several commenters objected to the proposal to package 
add-on codes for the following reasons:
     According to the commenters, procedures described by add-
on codes are not necessarily integral, ancillary, supportive, 
dependent, or adjunctive to the primary service into which they would 
be packaged.
     Some procedures described by add-on codes include 
expensive implantable medical devices, and although they are integral 
to the primary procedure, commenters note that packaging these 
procedures into the primary procedure risks significant underpayment 
for the overall procedure that includes additional medical devices, 
which could negatively affect patient access to these devices.
     Add-on code packaging should not apply to infrequently 
performed add-on codes as the cost of these infrequent services will 
not be sufficiently reflected in the payment for the primary procedure.
     Some add-on codes are not related to the primary procedure 
but represent incremental additional physician work, and for this 
reason should not be packaged.
    To insure continued patient access to these procedures, commenters 
requested that CMS establish exceptions to its proposal to package add-
on codes for specific services that commenters believed would be 
underpaid under the policy, including, but not limited to,

[[Page 74943]]

kyphoplasty add-on procedure, endoscopic retrograde 
cholangiopancreatography add-on procedure, pelvic reconstruction add-on 
procedures, neurolysis, and pathology services.
    Response: We disagree with commenters that add-on services are not 
integral, ancillary, supportive, dependent, or adjunctive to the 
primary service. The fundamental nature of an add-on code procedure is 
that it typically describes some form of a related extension of or 
addition to the primary procedure or service described by the primary 
procedure. The very definition of an add-on code is that it is an 
extension of a primary, base service. CPT states that ``add-on codes 
describe additional intra-service work associated with the primary 
procedure'' (emphasis added) (2013 CPT Codebook Professional Edition, 
page xi). Therefore, we believe that add-on code procedures are related 
extensions, supportive, integral, or adjunctive of the primary 
procedure and, therefore, it is appropriate to package the cost of the 
add-on codes into the payment calculation for the primary procedure. 
For the same reasons, we also do not agree with commenters that some 
add-on codes are not related to the primary procedure but represent a 
separate procedure that should be paid separately from the primary 
procedure.
    Regarding the packaging of add-on procedures that use expensive 
medical devices, we note that the most expensive medical devices used 
in procedures to insert or implant devices in the outpatient setting 
are included in procedures we proposed to be assigned to comprehensive 
APCs. In section II.A.2.e. of this final rule with comment period, we 
discuss this policy, which we are adopting, but delaying the 
implementation until CY 2015. We will continue to separately pay for 
procedures described by add-on codes that are currently assigned to 
device-dependent APCs. We note that almost all such codes will be 
included in a comprehensive APC for CY 2015. Therefore, until the 
comprehensive APC policy is implemented, we will continue to pay 
separately for procedures described by add-on codes that are assigned 
to device-dependent APCs. The device-dependent add-on codes that will 
continue to be separately paid in CY 2014 are listed below in Table 15.

BILLING CODE 4120-01-P

[[Page 74944]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.306

BILLING CODE 4120-01-C
    However, in general the cost of all medical devices used along with 
all of the other costs associated with the add-on code procedures are a 
part of the costs used to calculate the payment for a primary procedure 
when add-on codes are packaged. Most important, a prospective payment 
system pays an average amount for a unit of service, which may be more 
or less costly on a case-by-case basis. Unless an ancillary service is 
always performed with a primary procedure or service, a prospective 
payment will not reflect the full estimated cost of the packaged 
procedure or service. Payment for the primary procedure rather would 
reflect

[[Page 74945]]

some payment for the ancillary procedure, but each time the primary 
procedure is performed, the hospital receives additional payment, even 
when the ancillary service is not provided. Unless an add-on code is 
always performed with a primary procedure, we would not expect the 
relative payment weight to reflect the full costs associated with 
performing the primary procedure and certain add-on procedures, 
especially if the add-on procedures are performed relatively 
infrequently as compared to the primary procedure. Our experience with 
packaging services under the OPPS, where we continue to see packaged 
services furnished with the primary procedure, leads us to believe that 
hospitals will continue to provide the full range of medically 
necessary care to beneficiaries under overall prospective payment for 
the primary procedure and any add-on procedures. Therefore, we do not 
believe that it is necessary to create additional exceptions to the 
add-on code policy for select infrequently performed services that may 
cost more (in addition to the cost of the primary procedure) to pay 
more than the prospective payment for the primary service with add-on 
code procedures packaged into them.
    However, we acknowledge that, under certain circumstances, certain 
primary code and add-on code combinations could be more likely to 
result in a relatively highly costly case as compared to the packaged 
payment for the primary code. Therefore, in light of this new policy to 
unconditionally package most add-on codes, we will examine our 
estimated OPPS outlier percentage in light of all final packaging 
policies contained in this final rule with comment period and consider 
increasing it in the future to accommodate greater potential risk from 
high cost outlier cases that would result from packaging of certain 
add-on codes. An increase in the outlier percentage would accommodate 
more relatively high cost cases.
    Comment: Some commenters objected to packaging drug administration 
add-on codes, which typically describe each additional hour of infusion 
or each additional intravenous push, etc. in addition to the initial 
drug administration service. The commenters believed that such a policy 
could disadvantage providers of longer drug administration services, 
which are often protocol driven and are not necessarily dictated by the 
hospital but by the characteristics of the specific drug or biological 
being administered to the patient.
    Response: We believe that, given the frequency of drug 
administration services in the hospital outpatient department and their 
use in such a wide variety of different drug treatment protocols for 
various diseases in all types of hospitals, further study of the 
payment methodology for these services is warranted at this time. 
Therefore, we are not finalizing our proposal to package the drug 
administration add-on codes in CY 2014. However, we may continue to 
explore other payment options, including packaging and variations on 
packaging, in future years.
    After consideration of the public comments we received, we are 
finalizing our proposal to unconditionally package procedures described 
by add-on codes, with the exception of add-on codes for drug 
administration services and for CY 2014 add-on codes assigned to 
device-dependent APCs. In addition, for CY 2014 only, we will continue 
to separately pay for procedures described by add-on codes that are 
currently assigned to device-dependent APCs. We also are revising Sec.  
419.2(b) to include add-on code procedures among the services that are 
packaged in the OPPS. The specific add-on codes that we are 
unconditionally packaging and assigning status indicator ``N'' for CY 
2014 are listed in Addendum P and Addendum B to this final rule with 
comment period (which are available via the Internet on the CMS Web 
site).
(5) Ancillary Services (Status Indicator ``X'')
    Under the OPPS, we currently pay separately for certain ancillary 
services that are assigned to status indicator ``X,'' defined as 
``ancillary services.'' Those ancillary services assigned status 
indicator ``X'' in the OPPS and paid separately are, by definition, 
ancillary to primary services provided in the OPPS and include many 
minor diagnostic tests and procedures that are typically performed with 
a primary service, although there are instances where hospitals provide 
such services alone and without another primary service on the same 
date.
    As mentioned above, our intent is that the OPPS be more of a 
prospective payment system through expanded packaging. Given that the 
longstanding OPPS policy is to package items and services that are 
integral, ancillary, supportive, dependent, or adjunctive to a primary 
service, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43573) 
that we believe that these ancillary services, which are assigned 
status indicator ``X,'' should be packaged when they are performed with 
another service, but should continue to be separately paid when 
performed alone. We indicated that this packaging approach is most 
consistent with a prospective payment system and the regulation at 
Sec.  419.2(b) that packages ancillary services into primary services 
while preserving separate payment for those instances in which one of 
these services is provided alone (not with a separate primary service) 
to a hospital outpatient.
    In summary, in the proposed rule, we proposed to conditionally 
package all ancillary services that were previously assigned a status 
indicator of ``X'' and assign these services to status indicator ``Q1'' 
(packaged when provided with a service assigned a status indicator of 
``S,'' ``T,'' or ``V''). Status indicator ``X'' would be discontinued. 
To encourage maximum flexibility to beneficiaries across different 
sites of service, we did not propose to conditionally package 
preventive services assigned to status indicator ``X'' and instead 
proposed to change the status indicator for preventive services from 
the currently assigned status indicator ``X'' to status indicator 
``S.'' The specific codes for procedures assigned to status indicator 
``X'' that were proposed to be conditionally packaged and assigned to 
status indicator ``Q1'' for CY 2014 were listed in Addendum P to the 
proposed rule (which is available via the Internet on the CMS Web 
site).
    Comment: A few commenters agreed with CMS' proposal to package 
services assigned the status indictor ``X'' (ancillary services) 
because they believed that this proposal was consistent with CMS' 
policy of packaging services that are typically integral, ancillary, 
supportive, dependent, or adjunctive to a primary HOPD service.
    Response: We appreciate the commenters' support.
    Comment: Many commenters opposed the proposal to conditionally 
package services currently assigned status indicator ``X.'' These 
commenters stated that this category of services is too varied and that 
the services in this category are not always ancillary to the services 
into which they would be packaged. The commenters specifically 
mentioned radiation oncology planning services and pathology services 
as examples of services that, under the proposal, could be packaged 
into a visit but would not be ancillary to that visit. They also 
objected because, in some cases, relatively costly services could be 
packaged into services with a low payment, especially a visit code 
because there is so much volume in visit codes that high cost, low 
volume ancillary

[[Page 74946]]

services would not measurably impact visit payments.
    Response: We believe that the commenters have raised some valid 
points regarding whether all of the services currently assigned status 
indicator ``X'' are in all cases ancillary to the services into which 
their payment would be packaged. We believe that a reexamination of 
this group of services is warranted to determine which services are 
best described as ancillary services and packaged on that basis and 
which services should either be packaged under a different policy or 
separately paid in the OPPS.
    However, we will finalize the conditional packaging of one 
ancillary service described by CPT code 93017 (Cardiovascular stress 
test using maximal or submaximal treadmill or bicycle exercise, 
continuous electrocardiographic monitoring, and/or pharmacological 
stress; tracing only, without interpretation and report). Stress 
testing is often performed as a part of myocardial perfusion imaging 
(MPI). MPI is most commonly reported with CPT code 78452 (Myocardial 
perfusion imaging, tomographic (SPECT) (including attenuation 
correction, qualitative or quantitative wall motion, ejection fraction, 
by first pass or gated technique, additional quantification, when 
performed); multiple studies, at rest and/or stress (exercise or 
pharmacologic) and/or redistribution and/or rest reinjection). As 
indicated by the code descriptor, MPI includes stress testing as 
described by CPT code 93017, and approximately 96 percent of MPI is 
performed under stress. Therefore, we believe that, because stress 
testing is both integral and ancillary to MPI, it should be packaged 
into MPI when a stress test accompanies MPI.
    After consideration of the public comments we received, we are not 
finalizing our proposal to conditionally package codes currently 
assigned the ancillary service status indicator ``X'' for CY 2014 when 
performed with another service, with the exception that CPT code 93017 
will be conditionally packaged. We may review the services assigned 
status indicator ``X'' (ancillary services) to determine which may be 
appropriate for packaging as ancillary services in the OPPS in future 
years.
(6) Diagnostic Tests on the Bypass List
    For the CY 2013 OPPS, we continued our policy to use a bypass list 
to convert lines from multiple procedure claims into ``pseudo'' single 
procedure claims. In the CY 2014 OPPS/ASC proposed rule (78 FR 43574), 
we proposed to continue developing ``pseudo'' single procedure claims 
using a bypass list for the CY 2014 OPPS, as discussed in section 
II.A.1.b. of the proposed rule. The bypass list of separately paid 
services is used to convert claims with multiple separately payable 
procedures, which are generally not used for ratesetting purposes, into 
claims with the isolated costs of a single separately paid procedure 
that can be used for ratesetting. Services on the bypass list have 
limited associated packaged costs so they can be bypassed when 
assigning packaged costs on a claim to a separately paid procedure on 
the same claim.
    As noted above, beginning in CY 2008, we packaged several 
diagnostic items and services including guidance services, image 
processing services, intraoperative services, imaging supervision and 
interpretation services, diagnostic radiopharmaceuticals, and contrast 
agents. In the CY 2014 OPPS/ASC proposed rule (78 FR 43570), we also 
proposed to conditionally package several diagnostic items and 
services, including drugs, biologicals, and radiopharmaceuticals that 
function as supplies when used in a diagnostic test or procedure, 
ancillary services (many of which are diagnostic tests), and certain 
clinical laboratory tests. We stated that we believe that the 
diagnostic tests on the bypass list share many of the characteristics 
with these other conditionally or unconditionally packaged or proposed 
packaged categories of items and services in that they are diagnostic 
and are integral, ancillary, supportive, dependent, or adjunctive to a 
primary service. Examples include a barium swallow test (CPT code 
74220) and a visual field examination (CPT code 92081). Given the 
nature of these services, we proposed to conditionally package these 
procedures. We recognize that some of these services are sometimes 
provided without other services and, therefore, they will continue to 
be separately paid in those circumstances.
    We proposed to conditionally package codes on the bypass list and 
to assign them the appropriate status indicator ``Q1'' beginning in the 
CY 2014 OPPS. Some of these diagnostic tests on the bypass list are 
currently assigned to status indicator ``X'' and, therefore, would be 
conditionally packaged under the proposed policy to conditionally 
package ancillary services currently assigned status indicator ``X.'' 
The only diagnostic codes on the bypass list affected by this proposal 
are currently assigned to status indicator ``S.'' The specific codes 
for the diagnostic tests on the bypass list that we proposed to be 
conditionally packaged and assigned to status indicator ``Q1'' for CY 
2014 were listed in Addendum P to the proposed rule (which is available 
via the Internet on the CMS Web site). Similar to our conditional 
packaging proposal for services previously assigned to status indicator 
``X,'' we did not propose to conditionally package preventive services 
that are diagnostic tests on the bypass list.
    Comment: Some commenters supported CMS' proposal to package 
diagnostic codes on the bypass list because they believed that they are 
generally ancillary and supportive to other HOPD services.
    Response: We appreciate the commenters' support.
    Comment: Some commenters opposed packaging diagnostic tests on the 
bypass list for the following reasons:
     Some of the tests, for example, echocardiography, included 
in this category are not typically integral, ancillary, supportive, 
dependent, or adjunctive to the service into which they would be 
packaged.
     Some of the procedures on the bypass list would be 
packaged into significantly lower paying procedures, including visits.
     The interaction between conditional packaging of these 
diagnostic tests and other status indicator logic sometimes produces 
anomalous payments.
     Hospitals have an incentive to schedule procedures on 
different days to avoid packaging.
     Access to some of these tests may be negatively impacted 
by packaging.
    Response: We believe that the commenters have raised some valid 
points regarding whether all of the services included in the category 
``diagnostic codes on the bypass list'' are integral, ancillary, 
supportive, dependent, or adjunctive to the service into which their 
payment is packaged. We believe that a reexamination of this group of 
services is warranted to determine which services are best described as 
integral, ancillary, supportive, dependent, or adjunctive services to 
the service into which it would be packaged to determine which services 
should either be packaged under a different policy or separately paid 
in the OPPS.
    Therefore, after consideration of the public comments we received, 
we are not finalizing our proposal to conditionally package diagnostic 
tests on the bypass list for CY 2014, or our proposal to assign these 
codes a status indicator of ``Q1.'' We will review the services 
currently listed in Addendum P under ``diagnostic tests on the bypass 
list'' to determine which tests may be

[[Page 74947]]

appropriate for packaging in the OPPS in future years. Codes that would 
have been affected by the CY 2014 packaging proposal for this category 
of services will remain on the bypasss list for the CY 2014 OPPS, as 
discussed in section II.A.1.b. of this final rule with comment period.
(7) Device Removal Procedures
    Implantable devices frequently require a procedure to remove or 
replace the device due to wear, failure, recall, and infection, among 
other reasons. Since the beginning of the OPPS, implantable devices 
have been packaged (either as supplies, implantable prosthetics, or 
implantable DME) into their associated procedures. A device removal 
procedure is sometimes described by a code that may include repair or 
replacement. In other cases, a device removal procedure is described by 
a separate code that only describes the surgical procedure to remove a 
device. Device removal procedures are frequently performed with 
procedures to repair or replace devices, although it is possible that a 
device removal procedure may occur without repair or replacement if the 
clinical indication for the device that was removed no longer exists. 
When a separately coded device removal procedure is performed with a 
separately coded device repair or replacement procedure, the device 
removal procedure should be considered as one part of an overall 
procedure for removing a device with repair or replacement of the 
device.
    Given that a separately coded device removal procedure that 
accompanies a device repair or replacement procedure represents a 
service that is integral and supportive to a primary service, in the CY 
2014 OPPS/ASC proposed rule (78 FR 73574), we proposed to conditionally 
package device removal codes when they are billed with other surgical 
procedures involving repair or replacement and assign a status 
indicator of ``Q2.'' We stated that we believe that this conditional 
packaging policy is appropriate under longstanding OPPS packaging 
principles because these device removal procedures are an integral and 
supportive step in a more comprehensive overall procedure. Furthermore, 
conditionally packaging these device removal procedures with the 
replacement or revision codes would be consistent with our packaging 
policies for other dependent services. The specific codes for the 
device removal procedures that we proposed to be conditionally packaged 
and assigned to status indicator ``Q2'' for CY 2014 were listed in 
Addendum P to the proposed rule (which is available via the Internet on 
the CMS Web site).
    Comment: Some commenters agreed with CMS' proposal to conditionally 
package device removal procedures in the OPPS because they are often 
part of a larger procedure to revise or replace a device.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our policy to conditionally package device removal 
procedures in the OPPS when performed together with a repair or 
replacement of a device and to assign a status indicator of ``Q2.'' The 
specific device removal procedure codes that we are conditionally 
packaging and assigning to status indicator ``Q2'' for CY 2014 are 
listed in Addendum P to this final rule with comment period (which is 
available via the Internet on the CMS Web site).
e. Clarification Regarding Supplies That Are Packaged in the OPPS
    Under the regulations at Sec.  419.2(b)(4), medical and surgical 
supplies and equipment are unconditionally packaged in the OPPS and 
have been since the beginning of the payment system. Supplies is a 
large category of items that typically are either for single patient 
use or have a shorter life span in use than equipment. Packaged 
supplies can include certain drugs, biologicals, and 
radiopharmaceuticals. The only supplies that are sometimes paid 
separately in the hospital outpatient setting are prosthetic supplies 
under Sec.  419.22(j), and if paid separately, they are paid according 
to the DMEPOS fee schedule. As we discussed in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43575), in our annual review of the OPPS for CY 
2014, we discovered many supplies that should be packaged in the OPPS 
according to Sec.  419.2(b)(4), but that are currently assigned to 
status indicator ``A'' and are separately paid in the hospital 
outpatient setting according to the DMEPOS fee schedule. For CY 2014, 
we proposed to revise the status indicator for all supplies described 
by Level II HCPCS A-codes (except for prosthetic supplies) from status 
indicator ``A'' to ``N,'' so that these supplies would be 
unconditionally packaged as required by Sec.  419.2(b)(4).
    Comment: A few commenters supported CMS' proposed change in the 
status indicators for these supplies from ``A'' to ``N.'' One commenter 
urged CMS not to finalize this proposal because the commenter believed 
that hospitals should be separately paid for supplies given to the 
patient to take home.
    Response: Our longstanding regulations at Sec.  419.2(b)(4) require 
that we package all supplies in the OPPS except prosthetic supplies.
    After consideration of the public comments we received, we are 
updating the status indicators for all supplies (except prosthetic 
supplies) to ``N.'' The specific Level II HCPCS A-codes whose status 
indicator are revised from ``A'' to ``N'' are listed in Addendum P to 
this CY 2014 OPPS/ASC final rule with comment period (which is 
available via the Internet on the CMS Web site).
f. Revision and Clarification of the Regulations at 42 CFR 419.2(b) and 
42 CFR 419.22
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68272), after consideration of public comments we received on the 
proposed rule, we clarified the regulatory language at Sec.  419.2(b) 
to make explicit that the OPPS payments for the included costs of the 
nonexclusive list of items and services covered under the OPPS referred 
to in this paragraph are packaged into the payments for the related 
procedures or services with which such items and services are provided. 
In the CY 2014 OPPS/ASC proposed rule (78 FR 43575), we proposed to 
further revise this regulation to add the packaging categories that 
were adopted in CYs 2008 and 2009 in addition to the new proposed 
policies described above. We also proposed to make some further minor 
revisions and editorial clarifications to the existing language of 
Sec.  419.2(b) to make it more clearly reflect current packaging 
policy. Finally, we proposed to revise the list of services excluded 
from the OPPS at Sec.  419.22.
    Comment: Some commenters urged CMS not to revise the regulations at 
42 CFR 419.2(b) as a part of their request that CMS not adopt any of 
the packaging proposals.
    Response: We believe that codifying the new policies will promote 
clarity regarding OPPS packaging policy, and therefore we are 
finalizing our revision of the regulations.
    After consideration of the public comments received, we are 
finalizing our revision of the regulations at 42 CFR 419.2(b) and 
419.22 to reflect the new packaging policies.
g. Comment Solicitation on Increased Packaging for Imaging Services
    We currently package several kinds of imaging services in the OPPS, 
including image guidance services, image processing services, 
intraoperative imaging, and imaging supervision and interpretation 
services. In addition to

[[Page 74948]]

these imaging services that are either packaged or proposed to be 
packaged, we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43575) 
that we are considering a proposal for CY 2015 that would conditionally 
package all imaging services with any associated surgical procedures. 
We stated that imaging services not provided with a surgical procedure 
would continue to either be separately paid according to a standard 
clinical APC or a composite APC. We requested public comments on this 
potential CY 2015 proposal.
    Comment: Some commenters objected to this potential future proposal 
on the grounds that such a packaging policy could result in less access 
to imaging in the HOPD. One commenter asked about the claims logic 
hierarchy for packaging imaging into surgery as it relates to the 
imaging composites.
    Response: We appreciate these thoughtful comments, and we will 
consider them as we further consider packaging imaging services in the 
OPPS.
4. Calculation of OPPS Scaled Payment Weights
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43576), for CY 2014, 
we proposed to calculate the relative payment weights for each APC for 
CY 2014 shown in Addenda A and B to the proposed rule (which are 
available via the Internet on the CMS Web site) using the APC costs 
discussed in sections II.A.1. and II.A.2. of the proposed rule. For 
this CY 2014 final rule with comment period, we are continuing to use 
this methodology to calculate the relative payment weights for each APC 
for CY 2014. In years prior to CY 2007, we standardized all the 
relative payment weights to APC 0601 (Mid-Level Clinic Visit) because 
mid-level clinic visits were among the most frequently performed 
services in the hospital outpatient setting. We assigned APC 0601 a 
relative payment weight of 1.00 and divided the median cost for each 
APC by the median cost for APC 0601 to derive the relative payment 
weight for each APC.
    Beginning with the CY 2007 OPPS (71 FR 67990), we standardized all 
of the relative payment weights for APC 0606 (Level 3 Clinic Visits) 
because we deleted APC 0601 as part of the reconfiguration of the 
clinic visit APCs. We selected APC 0606 as the base because APC 0606 
was the mid-level clinic visit APC (that is, Level 3 of five levels).
    For the CY 2013 OPPS (77 FR 68283), we established a policy of 
using geometric mean-based APC costs to calculate relative payment 
weights. For the CY 2014 OPPS, we proposed to continue basing the 
relative payment weights on which OPPS payments will be made by using 
geometric mean costs (78 FR 43576). As we discuss in section VII. of 
the proposed rule and this final rule with comment period, we proposed 
to reconfigure the CY 2014 visit APCs so that they would include a 
single level for each visit type. However, in an effort to maintain 
consistency in calculating unscaled weights that represent the cost of 
some of the most frequently provided services, we proposed to use the 
cost of the clinic visit APC in calculating unscaled weights, which for 
CY 2014 was proposed APC 0634. While we have previously used APC 0606 
as the base from which to develop the OPPS budget neutral weight 
scaler, under our proposal to reconfigure the visit APCs, we proposed 
to have a single APC for each visit type. The proposal to reconfigure 
the visit APCs is discussed in more detail in section VII. of the 
proposed rule and this final rule with comment period. Following our 
general methodology for establishing relative payment weights derived 
from APC costs, but using the proposed CY 2014 geometric mean cost for 
APC 0634, for CY 2014, we proposed to assign APC 0634 a relative 
payment weight of 1.00 and to divide the geometric mean cost of each 
APC by the proposed geometric mean cost for APC 0634 to derive the 
proposed unscaled relative payment weight for each APC. The choice of 
the APC on which to base the proposed relative payment weights for all 
other APCs does not affect the payments made under the OPPS because we 
scale the weights for budget neutrality.
    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 2014 is neither 
greater than nor less than the estimated aggregate weight that would 
have been made without the changes. To comply with this requirement 
concerning the APC changes, as we proposed, we compare the estimated 
aggregate weight using the CY 2013 scaled relative payment weights to 
the estimated aggregate weight using the CY 2014 unscaled relative 
payment weights.
    For CY 2013, we multiplied the CY 2013 scaled APC relative payment 
weight applicable to a service paid under the OPPS by the volume of 
that service from CY 2012 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 2014, we 
are applying the same process using the CY 2014 unscaled relative 
payment weights rather than scaled relative payment weights. We 
calculate the weight scaler by dividing the CY 2013 estimated aggregate 
weight by the CY 2014 estimated aggregate weight. The service-mix is 
the same in the current and prospective years because we use the same 
set of claims for service volume in calculating the aggregate weight 
for each year. We note that, as a result of the CY 2014 OPPS packaging 
policy for laboratory tests described in section II.A.3.b.(3) of this 
final rule with comment period, we need to incorporate the estimated 
relative payment weights from those services. Therefore, the CY 2013 
estimated OPPS aggregate weight include payments for outpatient 
laboratory tests paid at the CLFS rates.
    For a detailed discussion of the weight scaler calculation, we 
refer readers to the OPPS claims accounting document available on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
    We include estimated payments to CMHCs in our comparison of the 
estimated unscaled relative payment weights in CY 2014 to the estimated 
total relative payment weights in CY 2013 using CY 2012 claims data, 
holding all other components of the payment system constant to isolate 
changes in total weight. Based on this comparison, we adjusted the CY 
2014 unscaled relative payment weights for purposes of budget 
neutrality. The CY 2014 unscaled relative payment weights were adjusted 
by multiplying them by a weight scaler of 1.2732 to ensure that the CY 
2014 relative payment weights are budget neutral.
    Section 1833(t)(14) of the Act provides the payment rates for 
certain SCODs. Section 1833(t)(14)(H) of the Act states 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.3. of this final rule with 
comment period) is included in the budget neutrality calculations for 
the CY 2014 OPPS.
    Comment: One commenter expressed the concern that CMS may have 
underfunded the OPPS in developing the budget neutral weight scaler for 
the additional costs associated with laboratory tests for CY 2014.

[[Page 74949]]

    Response: We appreciate the commenter's concern. We discussed the 
calculation of the proposed CY 2014 budget neutral weight scaler in the 
CY 2014 OPPS/ASC proposed rule (78 FR 43576) as well as the claims 
accounting narrative that we make available via the Internet on the CMS 
Web site. In calculating the CY 2014 OPPS budget neutral weight scaler, 
we calculated the CY 2013 aggregate payment weight associated with the 
laboratory tests paid at CLFS rates by applying the CY 2013 CLFS 
payment rates to the laboratory tests performed in the hospital 
setting. We note that this is the standard process we use to develop 
relative payment weights for budget neutrality for items and services 
that have predetermined payment rates, such as separately paid OPPS 
drugs and New Technology APCs. We note that we released corrected data 
files on August 28, 2013, and extended the comment period to September 
16, 2013, on the technical corrections noted in the correcting document 
published in the Federal Register on September 6, 2013 (78 FR 54842). 
However, there were no corrections associated with the amount of the 
estimated payment weight being budget neutralized from these clinical 
diagnostic laboratory tests.
    After consideration of the public comments we received, we are 
finalizing our proposed methodology for calculating the OPPS scaled 
relative payment weights without modification, including updating of 
the budget neutrality scaler for this final rule with comment period. 
Under this methodology, the final unscaled relative payment weights 
were adjusted by a weight scaler of 1.2732 for this final rule with 
comment period. The CY 2014 unscaled relative payment weights listed in 
Addenda A and B to this final rule with comment period (which are 
available via the Internet on the CMS Web site) incorporate the 
recalibration adjustments discussed in sections II.A.1. and II.A.2. of 
this final rule with comment period.

B. Conversion Factor Update

    Section 1833(t)(3)(C)(ii) of the Act requires the Secretary to 
update the conversion factor used to determine the payment rates under 
the OPPS on an annual basis by applying the OPD fee schedule increase 
factor. For purposes of section 1833(t)(3)(C)(iv) of the Act, subject 
to sections 1833(t)(17) and 1833(t)(3)(F) of the Act, the OPD fee 
schedule increase factor is equal to the hospital inpatient market 
basket percentage increase applicable to hospital discharges under 
section 1886(b)(3)(B)(iii) of the Act. In the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50607), consistent with current law, based on IHS 
Global Insight, Inc.'s second quarter 2013 forecast of the FY 2014 
market basket increase, the final FY 2014 IPPS market basket update is 
2.5 percent. However, sections 1833(t)(3)(F) and 1833(t)(3)(G)(iii) of 
the Act, as added by section 3401(i) of the Patient Protection and 
Affordable Care Act of 2010 (Pub. L. 111-148) and as amended by section 
10319(g) of that law and further amended by section 1105(e) of the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), 
provide adjustments to the OPD fee schedule increase factor for CY 
2014.
    Specifically, section 1833(t)(3)(F)(i) of the Act requires that, 
for 2012 and subsequent years, the OPD fee schedule increase factor 
under subparagraph (C)(iv) be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II) of the Act. Section 
1886(b)(3)(B)(xi)(II) of the Act defines the productivity adjustment as 
equal to the 10-year moving average of changes in annual economy-wide, 
private nonfarm business multifactor productivity (MFP) (as projected 
by the Secretary for the 10-year period ending with the applicable 
fiscal year, year, cost reporting period, or other annual period) (the 
``MFP adjustment''). In the FY 2012 IPPS/LTCH PPS final rule (76 FR 
51689 through 51692), we finalized our methodology for calculating and 
applying the MFP adjustment. In the FY 2014 IPPS/LTCH PPS proposed rule 
(78 FR 27572), we discussed the calculation of the proposed MFP 
adjustment for FY 2014, which was 0.4 percentage point.
    We proposed that if more recent data became subsequently available 
after the publication of the proposed rule (for example, a more recent 
estimate of the market basket increase and the MFP adjustment), we 
would use such data, if appropriate, to determine the CY 2014 market 
basket update and the MFP adjustment, components in calculating the OPD 
fee schedule increase factor under sections 1833(t)(3)(C)(iv) and 
1833(t)(3)(F) of the Act, in this CY 2014 OPPS/ASC final rule with 
comment period. In the FY 2014 IPPS/LTCH PPS final rule (78 FR 50607), 
we discussed the calculation of the final MFP adjustment for FY 2014, 
which is 0.5 percentage point.
    In addition, section 1833(t)(3)(F)(ii) of the Act requires that, 
for each of years 2010 through 2019, the OPD fee schedule increase 
factor under section 1833(t)(3)(C)(iv) of the Act be reduced by the 
adjustment described in section 1833(t)(3)(G) of the Act. For CY 2014, 
section 1833(t)(3)(G)(iii) of the Act provides a 0.3 percentage point 
reduction to the OPD fee schedule increase factor under section 
1833(t)(3)(C)(iv) of the Act. Therefore, in accordance with sections 
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(iii) of the Act, in the CY 2014 
OPPS/ASC proposed rule (78 FR 43577), we proposed to apply a 0.3 
percentage point reduction to the OPD fee schedule increase factor for 
CY 2014.
    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 for a year, and may result in payment rates under the OPPS for 
a year being less than such payment rates for the preceding year. As 
described in further detail below, using the final methodology and more 
recent data results in an OPD fee schedule increase factor of 1.7 
percent for the CY 2014 OPPS (which is 2.5 percent, the final estimate 
of the hospital inpatient market basket percentage increase, less the 
final 0.5 percentage point MFP adjustment, and less the 0.3 percentage 
point additional adjustment).
    We note that hospitals that fail to meet the Hospital OQR Program 
reporting requirements are subject to an additional reduction of 2.0 
percentage points from the OPD fee schedule increase factor adjustment 
to the conversion factor that would be used to calculate the OPPS 
payment rates for their services, as required by section 1833(t)(17) of 
the Act. As a result, using the final methodology and more recent data, 
those hospitals failing to meet the Hospital OQR Program reporting 
requirements will receive an OPD fee schedule increase factor of -0.3 
percent (which is 2.5 percent, the final estimate of the hospital 
inpatient market basket percentage increase, less the final 0.5 
percentage point MFP adjustment, less the 0.3 percentage point 
additional adjustment, and less 2.0 percentage points for the Hospital 
OQR Program reduction). For further discussion of the Hospital OQR 
Program, we refer readers to section XIII. of this final rule with 
comment period.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43577), we proposed to 
amend 42 CFR 419.32(b)(1)(iv)(B) by adding a new paragraph (5) to 
reflect the requirement in section 1833(t)(3)(F)(i) of the Act that, 
for CY 2014, we reduce the OPD fee schedule increase factor by the MFP 
adjustment as determined by CMS, and to reflect the requirement in 
section 1833(t)(3)(G)(iii) of the Act, as required by section 
1833(t)(3)(F)(ii) of the Act, that we reduce the OPD fee schedule 
increase factor by an additional 0.3 percentage point for CY 2014.

[[Page 74950]]

    We did not receive any public comments on our proposed adjustments 
to the OPD fee schedule increase factor or on the proposed changes to 
Sec.  419.32(b)(1)(iv)(B) to add a new paragraph (5). For the reasons 
discussed above, we are adjusting the OPD fee schedule increase factor 
and adopting, as final, the amendment to Sec.  419.32(b)(1)(iv)(B), as 
proposed.
    We did not receive any public comments on our proposed methodology 
for calculating the CY 2014 conversion factor. Therefore, we are 
finalizing our proposed methodology for calculating the budget 
neutrality adjustment factors, as described in the following 
discussion.
    As we proposed, to set the OPPS conversion factor for CY 2014, we 
are increasing the CY 2013 conversion factor of $71.313 by 1.7 percent. 
In accordance with section 1833(t)(9)(B) of the Act, we are further 
adjusting the conversion factor for CY 2014 to ensure that any 
revisions made to the updates for a revised wage index and rural 
adjustment are made on a budget neutral basis. We are calculating an 
overall budget neutrality factor of 1.0002 for wage index changes by 
comparing total estimated payments from our simulation model using the 
final FY 2014 IPPS wage indices to those payments using the FY 2013 
IPPS wage indices, as adopted on a calendar year basis for the OPPS.
    For CY 2014, we did not propose to make a change to our rural 
adjustment policy, and as discussed in section II.E. of this final rule 
with comment period, we are not making any changes to the rural 
adjustment policy. Therefore, the budget neutrality factor for the 
rural adjustment is 1.0000.
    For CY 2014, we are finalizing our proposal to continue previously 
established policies for implementing the cancer hospital payment 
adjustment described in section 1833(t)(18) of the Act, as discussed in 
section II.F. of this final rule with comment period. We are 
calculating a CY 2014 budget neutrality adjustment factor for the 
cancer hospital payment adjustment by comparing the estimated total CY 
2014 payments under section 1833(t) of the Act, including the CY 2014 
cancer hospital payment adjustment, to the estimated CY 2014 total 
payments using the CY 2013 final cancer hospital payment adjustment as 
required under section 1833(t)(18)(B) of the Act. The difference in the 
CY 2014 estimated payments as a result of applying the CY 2014 cancer 
hospital payment adjustment relative to the CY 2013 final cancer 
hospital payment adjustment has a limited impact on the budget 
neutrality calculation. Therefore, we are applying a budget neutrality 
adjustment factor of 1.0005 to the conversion factor to ensure that the 
cancer hospital payment adjustment is budget neutral.
    For this final rule with comment period, we estimate that pass-
through spending for both drugs and biologicals and devices for CY 2014 
will equal approximately $12.3 million, which represents 0.02 percent 
of total projected CY 2014 OPPS spending. Therefore, the conversion 
factor is also adjusted by the difference between the 0.15 percent 
estimate of pass-through spending for CY 2013 and the 0.02 percent 
estimate of CY 2014 pass-through spending, resulting in an adjustment 
for CY 2014 of 0.13 percent. Finally, estimated payments for outliers 
remain at 1.0 percent of total OPPS payments for CY 2014.
    The final OPD fee schedule increase factor of 1.7 percent for CY 
2014 (that is, the estimate of the hospital inpatient market basket 
percentage increase of 2.5 percent less the final 0.5 percentage point 
MFP adjustment and less the 0.3 percentage point required under section 
1833(t)(3)(F)(ii) of the Act), the required wage index budget 
neutrality adjustment of approximately 1.0002, the cancer hospital 
payment adjustment of 1.0005, and the adjustment of 0.13 percent of 
projected OPPS spending for the difference in the pass-through spending 
result in a conversion factor for CY 2014 of $72.672.
    As we stated in the proposed rule (78 FR 43578), hospitals that 
fail to meet the reporting requirements of the Hospital OQR Program 
will continue to be subject to a further reduction of 2.0 percentage 
points to the OPD fee schedule increase factor adjustment to the 
conversion factor that would be used to calculate the OPPS payment 
rates made for their services as required by section 1833(t)(17) of the 
Act. For a complete discussion of the Hospital OQR Program requirements 
and the payment reduction for hospitals that fail to meet those 
requirements, we refer readers to section XIII.G. of this final rule 
with comment period. To calculate the CY 2014 reduced market basket 
conversion factor for those hospitals that fail to meet the 
requirements of the Hospital OQR Program for the full CY 2014 payment 
update, we are making all other adjustments discussed above, but using 
a reduced OPD fee schedule update factor of -0.3 percent (that is, the 
OPD fee schedule increase factor of 1.7 percent further reduced by 2.0 
percentage points as required by section 1833(t)(17)(A)(i) of the Act 
for failure to comply with the Hospital OQR requirements). This results 
in a reduced conversion factor for CY 2014 of $71.219 for those 
hospitals that fail to meet the Hospital OQR requirements (a difference 
of -$1.453 in the conversion factor relative to those hospitals that 
met the Hospital OQR requirements).
    In summary, for CY 2014, we are using a final conversion factor of 
$72.672 in the calculation of the national unadjusted payment rates for 
those items and services for which payment rates are calculated using 
geometric mean costs. We are finalizing our proposed amendment to Sec.  
419.32(b)(1)(iv)(B) by adding a new paragraph (5) to reflect the 
reductions to the OPD fee schedule increase factor that are required 
for CY 2014 in order to satisfy the statutory requirements of sections 
1833(t)(3)(F) and (t)(3)(G)(iii) of the Act. We also are using a 
reduced conversion factor of $71.219 in the calculation of payments for 
hospitals that fail to comply with the Hospital OQR Program 
requirements to reflect the reduction to the OPD fee schedule increase 
factor that is required by section 1833(t)(17) of the Act.

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 this final 
rule with comment period.
    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). Therefore, we did not propose to revise 
this policy for the CY 2014 OPPS. We refer readers to section II.H. of 
this final rule with comment period for a description and example of 
how the wage index for a particular hospital is used to determine the 
payment for the hospital.
    As discussed in section II.A.2.c. of this final rule with comment 
period, for estimating APC costs, we standardize 60 percent of 
estimated claims costs for geographic area wage variation using the

[[Page 74951]]

same FY 2014 pre-reclassified wage index that the IPPS uses 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 the copayment amount.
    Under 42 CFR 419.41(c)(1) and 419.43(c) (published in the original 
OPPS April 7, 2000 final rule with comment period (65 FR 18495 and 
18545)), the OPPS adopted the final fiscal year IPPS wage index as the 
calendar year wage index for adjusting the OPPS standard payment 
amounts for labor market differences. Thus, 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 believed 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 provisions affecting the wage 
index. These provisions were discussed in the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74191). As discussed in that final rule 
with comment period, section 10324 of the Affordable Care Act added 
section 1886(d)(3)(E)(iii)(II) to the Act, which defines ``frontier 
State,'' and amended section 1833(t) of the Act to add new 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 in 
Sec.  419.43(c)(2) and (c)(3) of our regulations. In the CY 2014 OPPS/
ASC proposed rule, we stated that, for the CY 2014 OPPS, we will 
implement this provision in the same manner as we have since CY 2011. 
That is, frontier State hospitals will receive a wage index of 1.00 if 
the otherwise applicable wage index (including reclassification, rural 
and imputed floor, and rural floor budget neutrality) is less than 
1.00. Similar to our current policy for HOPDs that are affiliated with 
multicampus hospital systems, the HOPD will receive a wage index based 
on the geographic location of the specific inpatient hospital with 
which it is associated. Therefore, if the associated hospital is 
located in a frontier State, the wage index adjustment applicable for 
the hospital will also apply for the affiliated HOPD. We refer readers 
to the following sections in the FY 2011 through FY 2014 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: FY 
2011 (75 FR 50160 through 50161), FY 2012 (76 FR 51793, 51795, and 
51825), FY 2013 (77 FR 53369 through 53370), and FY 2014 (78 FR 50590 
through 50591).
    In addition to the changes required by the Affordable Care Act, we 
note that the final FY 2014 IPPS wage indices continue to reflect a 
number of adjustments implemented over the past few years, including, 
but not limited to, reclassification of hospitals to different 
geographic areas, the rural and imputed floor provisions, an adjustment 
for occupational mix, and an adjustment to the wage index based on 
commuting patterns of employees (the out-migration adjustment). We 
refer readers to the FY 2014 IPPS/LTCH PPS final rule (78 FR 50585 
through 50596) for a detailed discussion of all changes to the FY 2014 
IPPS wage indices. In addition, we refer readers to the CY 2005 OPPS 
final rule with comment period (69 FR 65842 through 65844) and 
subsequent OPPS rules for a detailed discussion of the history of these 
wage index adjustments as applied under the OPPS.
    For purposes of the OPPS, we proposed to continue our policy for CY 
2014 of allowing non-IPPS hospitals paid under the OPPS to qualify for 
the out-migration adjustment if they are located in a section 505 out-
migration county (section 505 of the Medicare Prescription Drug, 
Improvement, and Modernization Act of 2003 (MMA) (Pub. L. 108-173)). We 
noted that, because non-IPPS hospitals cannot reclassify, they are 
eligible for the out-migration wage adjustment. Table 4J from the FY 
2014 IPPS/LTCH PPS final rule as corrected (available via the Internet 
on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html) identifies counties 
eligible for the out-migration adjustment and hospitals that will 
receive the adjustment for FY 2014. We also noted that, beginning with 
FY 2012, under the IPPS, an eligible hospital that waives its Lugar 
status in order to receive the out-migration adjustment has effectively 
waived its deemed urban status and, thus, is rural for all purposes 
under the IPPS, including being considered rural for the 
disproportionate share hospital (DSH) payment adjustment, effective for 
the fiscal year in which the hospital receives the out-migration 
adjustment. We refer readers to the FY 2014 IPPS/LTCH PPS final rule 
(78 FR 50592) for a more detailed discussion on the Lugar redesignation 
waiver for the out-migration adjustment. As we have done in prior 
years, we are including Table 4J from the FY 2014 IPPS/LTCH PPS final 
rule as corrected as Addendum L to this final rule with comment period 
with the addition of non-IPPS hospitals that will receive the section 
505 out-migration adjustment under the CY 2014 OPPS. Addendum L is 
available via the Internet on the CMS Web site.
    As discussed in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50586), 
the Office of Management and Budget (OMB) issued revisions to the 
current geographic area designations on February 28, 2013, that 
included a number of significant changes such as new CBSAs, urban 
counties that become rural, rural counties that become urban, and 
splitting existing CBSAs (OMB Bulletin 13-01). This bulletin can be 
found at: http://www.whitehouse.gov/sites/default/files/omb/bulletins/2013/b13-01.pdf. All of these designations have corresponding effects 
on the wage index system and its adjustments. In order to allow for 
sufficient time to assess the new revisions and their ramifications, we 
intend to propose changes to the IPPS wage index based on the newest 
CBSA designations in the FY 2015 IPPS/LTCH PPS proposed rule. 
Similarly, in the OPPS, which uses the IPPS wage index, we intend to 
propose changes based on the new OMB revisions in the CY 2015 OPPS/ASC 
proposed rule, consistent with any proposals in the FY 2015 IPPS/LTCH 
PPS proposed rule.
    As stated earlier in this section, we continue to believe that 
using the IPPS wage index as the source of an adjustment factor for the 
OPPS is reasonable and logical, given the inseparable, subordinate 
status of the HOPD within the hospital overall. Therefore, we did not 
propose to change our current regulations which require that we use the 
FY 2014 IPPS wage indices for calculating OPPS payments in CY 2014.
    We did not receive any public comments on our proposals. Therefore, 
we are finalizing our proposals without modification and are adopting 
the FY 2014 IPPS wage index for the CY 2014 OPPS in its entirety, 
including the rural floor, geographic reclassifications, and all other 
wage index adjustments. As stated earlier in this section, we continue 
to believe that using the IPPS wage index as the source of an 
adjustment factor for the OPPS is reasonable and logical, given the 
inseparable, subordinate status of the

[[Page 74952]]

HOPD within the hospital overall. Therefore, we are using the final FY 
2014 IPPS wage indices for calculating OPPS payments in CY 2014. With 
the exception of the out-migration wage adjustment table (Addendum L to 
this final rule with comment period, which is available via the 
Internet on the CMS Web site), which includes non-IPPS hospitals paid 
under the OPPS, we are not reprinting the final FY 2014 IPPS wage 
indices referenced in this discussion of the wage index. We refer 
readers to the CMS Web site for the OPPS at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At this link, readers will find a link to the final FY 2014 
IPPS wage index tables.

D. Statewide Average Default CCRs

    In addition to using CCRs to estimate costs from charges on claims 
for ratesetting, CMS uses overall hospital-specific CCRs calculated 
from the hospital's most recent cost report to determine outlier 
payments, payments for pass-through devices, and monthly interim 
transitional corridor payments under the OPPS during the PPS year. 
Medicare contractors cannot calculate a CCR for some hospitals because 
there is no cost report available. For these hospitals, CMS uses the 
statewide average default CCRs to determine the payments mentioned 
above until a hospital's Medicare contractor is able to calculate the 
hospital's actual CCR from its most recently submitted Medicare cost 
report. These hospitals include, but are not limited to, hospitals that 
are new, have not accepted assignment of an existing hospital's 
provider agreement, and have not yet submitted a cost report. CMS also 
uses the statewide average default CCRs to determine payments for 
hospitals that appear to have a biased CCR (that is, the 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). In the CY 2014 OPPS/ASC proposed rule (78 FR 
43579), we proposed to update the default ratios for CY 2014 using the 
most recent cost report data. We discuss 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 CY 2014, we proposed to continue to use our standard 
methodology of calculating the statewide average default CCRs using the 
same hospital overall CCRs that we use to adjust charges to costs on 
claims data for setting the proposed CY 2014 OPPS relative payment 
weights. Table 9 published in the proposed rule (78 FR 43580 through 
43581) listed the proposed CY 2014 default urban and rural CCRs by 
State and compared them to last year's default CCRs. These proposed 
CCRs represented the ratio of total costs to total charges for those 
cost centers relevant to outpatient services from each hospital's most 
recently submitted cost report, weighted by Medicare Part B charges. We 
also proposed to adjust ratios from submitted cost reports to reflect 
the final settled status by applying the differential between settled 
to submitted overall CCRs for the cost centers relevant to outpatient 
services from the most recent pair of final settled and submitted cost 
reports. We then proposed to weight each hospital's CCR by the volume 
of separately paid line-items on hospital claims corresponding to the 
year of the majority of cost reports used to calculate the overall 
CCRs. We refer readers to the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66680 through 66682) and prior OPPS rules for a more 
detailed discussion of our established methodology for calculating the 
statewide average default CCRs, including the hospitals used in our 
calculations and our trimming criteria.
    We did not receive any public comments on our CY 2014 proposal. We 
are finalizing our proposal to apply our standard methodology of 
calculating the statewide average default CCRs using the same hospital 
overall CCRs that we used to adjust charges to costs on claims data for 
setting the CY 2014 OPPS relative payment weights. We used this 
methodology to calculate the statewide average default CCRs listed in 
Table 16 below.
    For Maryland, we used an overall weighted average CCR for all 
hospitals in the Nation as a substitute for Maryland CCRs. Few 
hospitals in Maryland are eligible to receive payment under the OPPS, 
which limits the data available to calculate an accurate and 
representative CCR. The weighted CCR is used for Maryland because it 
takes into account each hospital's volume, rather than treating each 
hospital equally. We refer readers to the CY 2005 OPPS final rule with 
comment period (69 FR 65822) for further discussion and the rationale 
for our longstanding policy of using the national average CCR for 
Maryland. In general, observed changes in the statewide average default 
CCRs between CY 2013 and CY 2014 are modest and the few significant 
changes are associated with areas that have a small number of 
hospitals.
    Table 16 below lists the finalized statewide average default CCRs 
for OPPS services furnished on or after January 1, 2014.

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E. Adjustment for Rural SCHs and EACHs Under Section 1833(t)(13)(B) of 
the Act

    In the CY 2006 OPPS final rule with comment period (70 FR 68556), 
we finalized a payment increase for rural 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

[[Page 74956]]

under the OPPS, excluding separately payable drugs and biologicals, 
brachytherapy sources, and devices paid under the pass-through payment 
policy, in accordance with section 1833(t)(13)(B) of the Act.
    In CY 2007, we became aware that we did not specifically address 
whether the adjustment applies to EACHs, which are considered to be 
SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Thus, under the 
statute, EACHs are treated as SCHs. Therefore, in the CY 2007 OPPS/ASC 
final rule with comment period (71 FR 68010 and 68227), for purposes of 
receiving this rural adjustment, we revised Sec.  419.43(g) of the 
regulations to clarify that EACHs also are eligible to receive the 
rural SCH adjustment, assuming these entities otherwise meet the rural 
adjustment criteria. Currently, three 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 2013. Further, in the CY 
2009 OPPS/ASC final rule with comment period (73 FR 68590), we updated 
the regulations at Sec.  419.43(g)(4) to specify, in general terms, 
that items paid at charges adjusted to costs by application of a 
hospital-specific CCR are excluded from the 7.1 percent payment 
adjustment.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed to 
continue our policy of a 7.1 percent payment adjustment that is done in 
a budget neutral manner for rural SCHs, including EACHs, for all 
services and procedures paid under the OPPS, excluding separately 
payable drugs and biologicals, devices paid under the pass-through 
payment policy, and items paid at charges reduced to costs.
    Comment: Several commenters supported the proposed continuation of 
the 7.1 percent rural SCH adjustment. One commenter also recommended 
that CMS update the analysis in the near future to assess if the 7.1 
percent payment adjustment remains a valid figure. One commenter 
recommended that any potential future changes to the rural adjustment 
be implemented 12 months after the changes are finalized, to address 
concerns about budgeting.
    Response: We appreciate the commenters' support. We agree that it 
is appropriate to continue the 7.1 percent adjustment for rural SCHs 
(including EACHs) as we proposed for CY 2014. As we indicated in the 
proposed rule (78 FR 43582), we may reassess the 7.1 percent rural 
adjustment in the near future by examining differences between urban 
hospitals' costs and rural hospitals' costs using updated claims, cost 
reports, and provider information. We recognize the concerns that 
commenters present regarding budgeting concerns and will take into 
consideration these concerns for any review and revision of the 
adjustment in the future.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to apply the 7.1 
percent payment adjustment to rural SCHs, including EACHs, for all 
services and procedures paid under the OPPS in CY 2014, excluding 
separately payable drugs and biologicals, devices paid under the pass-
through payment policy, and items paid at charges reduced to costs.

F. OPPS Payment to Certain Cancer Hospitals Described by Section 
1886(d)(1)(B)(v) of the Act

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 
cancer hospitals identified in section 1886(d)(1)(B)(v) of the Act 
under the OPPS for covered outpatient hospital services. There are 11 
cancer hospitals that meet the classification criteria in section 
1886(d)(1)(B)(v) of the Act that are exempted from payment under the 
IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget Refinement 
Act of 1999 (Pub. L. 106-113), Congress established section 1833(t)(7) 
of the Act, ``Transitional Adjustment to Limit Decline in Payment,'' to 
hold harmless cancer hospitals and children's hospitals based on their 
pre-BBA amount under the OPPS. 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 under the OPPS than the payment 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 an amount equal to the product of 
the reasonable cost of the hospital for covered outpatient services for 
the portions of the hospital's cost reporting period (or periods) 
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,'' including the determination of the base PCR, are 
defined at 42 CFR 419.70(f). TOPs are calculated on Worksheet E, Part 
B, of the Hospital and Hospital Health Care Complex Cost Report (Form 
CMS-2552-96 or Form CMS-2552-10, as applicable) each year. Section 
1833(t)(7)(I) of the Act exempts TOPs from budget neutrality 
calculations.
    Section 3138 of the Affordable Care Act of 2010 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 the costs 
incurred by other hospitals furnishing services under section 1833(t) 
of the Act, as determined appropriate by the Secretary. In addition, 
section 1833(t)(18)(A) of the Act requires the Secretary to take into 
consideration the cost of drugs and biologicals incurred by such 
hospitals when studying cancer hospital costliness. Further, section 
1833(t)(18)(B) of the Act provides that if the Secretary determines 
that costs by these cancer hospitals with respect to APC groups are 
determined to be greater than the costs of other hospitals furnishing 
services under section 1833(t) of the Act, the Secretary shall provide 
an appropriate adjustment under section 1833(t)(2)(E) of the Act to 
reflect these higher costs. After conducting the study required by 
section 1833(t)(18)(A) of the Act, we determined in 2011 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 our findings that costs incurred by cancer hospitals were 
greater than the costs incurred by other OPPS hospitals, we finalized a 
policy to provide a payment adjustment to the 11 specified cancer 
hospitals that reflects the higher outpatient costs as discussed

[[Page 74957]]

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 each of the 11 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 recent 
submitted or settled cost report data that are available at the time of 
final rulemaking for the calendar year. The amount of the payment 
adjustment is made on an aggregate basis at cost report settlement. We 
note that the changes made by section 1833(t)(18) of the Act do not 
affect the existing statutory provisions that provide for TOPs for 
cancer hospitals. The TOPs are assessed as usual after all payments, 
including the cancer hospital payment adjustment, have been made for a 
cost reporting period. For CYs 2012 and 2013, the target PCR for 
purposes of the cancer hospital payment adjustment was 0.91.
2. Payment Adjustment for Certain Cancer Hospitals for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43582), we proposed to 
continue our policy to provide additional payments to cancer hospitals 
so that each cancer hospital's final PCR is equal to the weighted 
average PCR (or ``target PCR'') for the other OPPS hospitals using the 
most recent submitted or settled cost report data that were available 
at the time of the development of the proposed rule. To calculate the 
proposed CY 2014 target PCR, we used the same extract of cost report 
data from HCRIS, as discussed in section II.A. of the proposed rule, 
used to estimate costs for the CY 2014 OPPS. Using these cost report 
data, we included data from Worksheet E, Part B, for each hospital, 
using data from each hospital's most recent cost report, whether as 
submitted or settled. We estimated that, on average, the OPPS payments 
to other hospitals furnishing services under the OPPS were 
approximately 90 percent of reasonable cost (weighted average PCR of 
0.90). Based on these data, we proposed a target PCR of 0.90 that would 
be used to determine the CY 2014 cancer hospital payment adjustment 
that would be paid at cost report settlement. Therefore, we proposed 
that the payment amount associated with the cancer hospital payment 
adjustment to be determined at cost report settlement would be the 
additional payment needed to result in a proposed target PCR equal to 
0.90 for each cancer hospital.
    Comment: Similar to public comments received in response to the CY 
2013 OPPS/ASC proposed rule that we addressed in the CY 2013 OPPS/ASC 
final rule with comment period, commenters representing the cancer 
hospitals again stated that the PCR is only one component of the 
adjustment needed to account for the differences in providing cancer 
care. The commenters suggested that CMS utilize a methodology that they 
stated would ensure that the 11 cancer hospitals' losses (on a per unit 
PCR basis) equal the losses (on a per unit PCR basis) of the other PPS 
hospitals. The commenters provided details of this ``equivalent loss 
per unit'' methodology which they indicated would result in a target 
PCR equal to 0.94 for CY 2014.
    Response: As we indicated in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68293), section 3138 of the Affordable Care Act 
provides that if the Secretary determines under section 1833(t)(18)(A) 
of the Act that costs incurred by cancer hospitals exceed those costs 
of other hospitals furnishing services under section 1833(t) of the 
Act, the Secretary shall provide for an appropriate adjustment under 
section 1833(t)(2)(E) of the Act to reflect the higher costs. Because 
the statute requires that we provide a cancer hospital payment 
adjustment to reflect the higher costs, not losses, incurred at cancer 
hospitals, we believe that it would be inappropriate to revise our 
cancer hospital payment adjustment policy so that the target PCR is 
calculated based on the cancer hospitals' losses per unit PCR compared 
to the other OPPS hospitals' losses per unit PCR.
    Comment: Commenters stated that CMS should not recalculate the 
target PCR annually because the cancer hospitals require payment 
stability and predictability in order to provide services to Medicare 
beneficiaries.
    Response: As we stated in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68294) in response to this same comment, we 
believe that annual recalculation of the target PCR will provide a 
timely assessment of the changes in OPPS payments relative to costs 
and, therefore, will enable us to provide payment adjustments to cancer 
hospitals that are accurate and equitable. In addition, because the 
target PCR is set in advance of each calendar year, cancer hospitals 
can easily predict the amount of their hospital-specific payment 
adjustment associated with the target PCR for the following year and 
budget accordingly.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue our policy to provide additional 
payments to cancer hospitals so that each cancer hospital's final PCR 
is equal to the weighted average PCR for the other OPPS hospitals using 
the most recent submitted or settled cost report data that were 
available at the time of this final rule with comment period. To 
calculate the final CY 2014 target PCR, we used the same extract of 
cost report data from HCRIS, as discussed in section II.A. of this 
final rule with comment period, used to estimate costs for the CY 2014 
OPPS. Using these cost report data, we included data from Worksheet E, 
Part B, for each hospital, using data from each hospital's most recent 
cost report, whether as submitted or settled. We then limited the 
dataset to the hospitals with CY 2012 claims data that we used to model 
the impact of the final CY 2014 APC relative payment weights (4,044 
hospitals) because it is appropriate to use the same set of hospitals 
that we are using to calibrate the modeled CY 2014 OPPS. The cost 
report data for the hospitals in this dataset were from cost report 
periods with fiscal year ends ranging from 2011 to 2012. We then 
removed the cost report data of the 48 hospitals located in Puerto Rico 
from our dataset because we do not believe that their cost structure 
reflects the costs of most hospitals paid under the OPPS and, 
therefore, their inclusion may bias the calculation of hospital-
weighted statistics. We also removed the cost report data of 116 
hospitals because these hospitals had cost report data that were not 
complete (missing aggregate OPPS payments, missing aggregate cost data, 
or missing both), so that all cost reports in the study would have both 
the payment and cost data necessary to calculate a PCR for each 
hospital, leading to an analytic file of 3,880 hospitals with cost 
report data.
    Using this smaller dataset of cost report data, we estimated that, 
on average, the OPPS payments to other hospitals furnishing services 
under the OPPS are approximately 89 percent of reasonable cost 
(weighted average PCR of 0.89). Based on these data, we used a target 
PCR of 0.89 to determine the CY 2014 cancer hospital payment adjustment 
to be paid at cost report settlement. Therefore, the payment amount 
associated with the cancer hospital payment adjustment to be determined 
at cost report settlement will be the additional payment needed to 
result in a PCR equal to 0.89 for each cancer hospital.

[[Page 74958]]

    Table 17 below indicates the estimated percentage increase in OPPS 
payments to each cancer hospital for CY 2014 due to the cancer hospital 
payment adjustment policy. The actual amount of the CY 2014 cancer 
hospital payment adjustment for each cancer hospital will be determined 
at cost report settlement and will depend on each hospital's CY 2014 
payments and costs. 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 will be assessed 
as usual after all payments, including the cancer hospital payment 
adjustment, have been made for a cost reporting period.

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BILLING CODE 4120-01-C

G. Hospital Outpatient Outlier Payments

1. Background
    Currently, the OPPS provides outlier payments on a service-by-
service basis. In CY 2012, the outlier threshold was determined to be 
met when the cost of furnishing a service or procedure by a hospital 
exceeds 1.75 times the APC payment amount and exceeds the APC payment 
rate plus a $2,025 fixed-dollar threshold. We introduced a fixed-dollar 
threshold in CY 2005, in addition to the traditional multiple 
threshold, in order to better target outlier payments to those high-
cost and complex procedures where a very costly service could present a 
hospital with significant financial loss. If the cost of a service 
meets both of these conditions, the multiple threshold and the fixed-
dollar threshold, the outlier payment is calculated as 50 percent of 
the amount by which the cost of furnishing the service exceeds 1.75 
times the APC payment rate. Before CY 2009, this outlier payment had 
historically been considered a final payment by longstanding OPPS 
policy. However, we implemented a reconciliation process similar to the 
IPPS outlier reconciliation process for cost reports with cost 
reporting periods beginning on or after January 1, 2009, in our CY 2009 
OPPS/ASC final rule with comment period (73 FR 68594 through 68599).
    It has been our policy for the past several years to report the 
actual amount of outlier payments as a percent of total spending in the 
claims being used to model the proposed OPPS. Our current estimate of 
total outlier payments as a percent of total CY 2012 OPPS payment, 
using available CY 2012 claims and the revised OPPS expenditure 
estimate for the 2013 Trustee's Report, is approximately 1.2 percent of 
the total aggregated OPPS payments. Therefore, for CY 2012, we estimate 
that we paid 0.2 percent above the CY 2012 outlier target of 1.0 
percent of total aggregated OPPS payments.
    As explained in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68295 through 68297), we set our projected target for aggregate 
outlier payments at 1.0 percent of the estimated aggregate total 
payments under the OPPS for CY 2013. The outlier thresholds were set so 
that estimated CY 2013 aggregate outlier payments would equal 1.0 
percent of the total estimated aggregate payments under the OPPS. Using 
CY 2012 claims data and CY 2013 payment rates, we currently estimate 
that the aggregate outlier payments for CY 2013 will be approximately 
1.1 percent of the total CY 2013 OPPS payments. The difference between 
1.1 percent and 1.0 percent is reflected in

[[Page 74959]]

the regulatory impact analysis in section XXIII. of this final rule 
with comment period. We note that we provide estimated CY 2014 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 Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.
2. Proposed Outlier Calculation
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43584), we proposed to 
continue our policy of estimating outlier payments to be 1.0 percent of 
the estimated aggregate total payments under the OPPS for outlier 
payments. We proposed that a portion of that 1.0 percent, an amount 
equal to 0.18 percent of outlier payments (or 0.0018 percent of total 
OPPS payments) would be allocated to CMHCs for PHP outlier payments. 
This is the amount of estimated outlier payments that would result from 
the proposed CMHC outlier threshold as a proportion of total estimated 
OPPS outlier payments. As discussed in section VIII.D. of the CY 2014 
OPPS/ASC proposed rule (78 FR 43622), for CMHCs, we proposed to 
continue our longstanding policy that if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 (Level I Partial 
Hospitalization (3 services) for CMHCs) or APC 0173 (Level II Partial 
Hospitalization (4 or more services) for CMHCs), exceeds 3.40 times the 
payment rate for APC 0173, the outlier payment would be calculated as 
50 percent of the amount by which the cost exceeds 3.40 times the APC 
0173 payment rate. For further discussion of CMHC outlier payments, we 
refer readers to section VIII.D. of this final rule with comment 
period.
    To ensure that the estimated CY 2014 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 the cost of furnishing a 
service or procedure by a hospital exceeds 1.75 times the APC payment 
amount and exceeds the APC payment rate plus a $2,775 fixed-dollar 
threshold.
    We calculated the proposed fixed-dollar threshold using largely the 
standard methodology, most recently used for CY 2013 (77 FR 68295 
through 68297). For purposes of estimating outlier payments for the 
proposed rule, we used the hospital-specific overall ancillary CCRs 
available in the April 2013 update to the Outpatient Provider-Specific 
File (OPSF). The OPSF contains provider-specific data, such as the most 
current CCR, which are maintained by the Medicare contractors and used 
by the OPPS Pricer to pay claims. The claims that we use to model each 
OPPS update lag by 2 years.
    In order to estimate the CY 2014 hospital outlier payments for the 
proposed rule, we inflated the charges on the CY 2012 claims using the 
same inflation factor of 1.0993 that we used to estimate the IPPS 
fixed-dollar outlier threshold for the FY 2014 IPPS/LTCH PPS proposed 
rule (78 FR 27767). We used an inflation factor of 1.0485 to estimate 
CY 2013 charges from the CY 2012 charges reported on CY 2012 claims. 
The methodology for determining this charge inflation factor is 
discussed in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 27767) as 
well as the FY 2014 IPPS/LTCH PPS final rule (78 FR 50982). As we 
stated in the CY 2005 OPPS final rule with comment period (69 FR 
65845), we believe that the use of these charge inflation factors are 
appropriate for the OPPS because, with the exception of the inpatient 
routine service cost centers, hospitals use the same ancillary and 
outpatient cost centers to capture costs and charges for inpatient and 
outpatient services.
    As noted in the CY 2007 OPPS/ASC final rule with comment period (71 
FR 68011), we are concerned that we could systematically overestimate 
the OPPS hospital outlier threshold if we did not apply a CCR inflation 
adjustment factor. Therefore, in the CY 2014 OPPS/ASC proposed rule, we 
proposed to apply the same CCR inflation adjustment factor that we 
apply for the FY 2014 IPPS outlier calculation to the CCRs used to 
simulate the CY 2014 OPPS outlier payments to determine the fixed-
dollar threshold. Specifically, for CY 2014, we proposed to apply an 
adjustment factor of 0.9732 to the CCRs that were in the April 2013 
OPSF to trend them forward from CY 2013 to CY 2014. The methodology for 
calculating this proposed adjustment was discussed in the FY 2014 IPPS/
LTCH PPS proposed rule (78 FR 27766 through 27768) as well as the FY 
2014 IPPS/LTCH PPS final rule (78 FR 50978 through 50982).
    Therefore, to model hospital outlier payments for the proposed 
rule, we applied the overall CCRs from the April 2013 OPSF file after 
adjustment (using the proposed CCR inflation adjustment factor of 
0.9732 to approximate CY 2014 CCRs) to charges on CY 2012 claims that 
were adjusted (using the charge inflation factor of 1.0993 to 
approximate CY 2014 charges). We simulated aggregated CY 2014 hospital 
outlier payments using these costs for several different fixed-dollar 
thresholds, holding the 1.75 multiple 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 2014 OPPS payments. We 
estimated that a proposed fixed-dollar threshold of $2,775, combined 
with the proposed multiple threshold of 1.75 times the APC payment 
rate, would allocate 1.0 percent of aggregated total OPPS payments to 
outlier payments. We proposed to continue to make an outlier payment 
that equals 50 percent of the amount by which the cost of furnishing 
the service exceeds 1.75 times the APC payment amount when both the 
1.75 multiple threshold and the proposed fixed-dollar threshold of 
$2,775 were met. For CMHCs, we proposed that, if a CMHC's cost for 
partial hospitalization services, paid under either APC 0172 or APC 
0173, exceeds 3.40 times the payment rate for APC 0173, the outlier 
payment would be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times the APC 0173 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 
1833(t)(17)(B) of the Act, incur a 2.0 percentage point reduction to 
their OPD fee schedule increase factor, that is, the annual payment 
update factor. The application of a reduced OPD fee schedule increase 
factor results in reduced national unadjusted payment rates that will 
apply to certain outpatient items and services furnished by hospitals 
that are required to report outpatient quality data and that fail to 
meet the Hospital OQR Program requirements. For hospitals that fail to 
meet the Hospital OQR Program requirements, we proposed to continue the 
policy that we implemented in CY 2010 that the hospitals' costs will be 
compared to the reduced payments for purposes of outlier eligibility 
and payment calculation. For more information on the Hospital OQR 
Program, we refer readers to section XIII. of this final rule with 
comment period.
    Comment: Several commenters urged CMS to reconsider the increase in 
the CY 2014 OPPS outlier threshold. The commenters believed that the 
thresholds were being set higher than was

[[Page 74960]]

necessary to achieve the OPPS outlier spending target, based on their 
analysis of the thresholds and aggregate outlier spending in prior 
years. Commenters also desired transparency about why an outlier 
threshold increase was necessary, when historical evidence suggested 
that such a change is unwarranted. One commenter recommended that the 
OPPS outlier percentage spending target be reduced to 0.5 percent of 
the system because patients who develop complications requiring complex 
care are highly likely to be admitted to inpatient care.
    Response: Many of the commenters who recommended changes to the 
OPPS fixed-dollar outlier threshold relied on direct comparisons 
between aggregate spending and the OPPS outlier thresholds. As 
discussed earlier in this section, OPPS outliers are paid and modeled 
based on comparisons between APC payment and estimated cost. As a 
result, changing the OPPS fixed-dollar outlier threshold by any 
increment does not result in an evenly distributed change in OPPS 
outlier spending as well as services that receive OPPS outlier 
payments.
    There are a variety of factors that may affect the OPPS fixed-
dollar outlier threshold, including data changes such as hospital 
charging practices and fluctuations in the overall ancillary CCRs as 
well as changes in OPPS payment policy such as those involving 
packaging and compositing. Those changes can influence the individual 
comparisons between APC service payment and estimated costs. While the 
OPPS outlier threshold has been relatively stable in the past several 
years, historically the OPPS fixed-dollar outlier threshold has 
fluctuated from year to year as identified in the Annual Policy Files 
which are available via the Internet on the CMS Web site. In the CY 
2014 OPPS/ASC proposed rule, we proposed to update several OPPS 
packaging policies which would have a corresponding effect on the OPPS 
fixed-dollar outlier threshold by potentially increasing APC payment 
for certain paid service lines while moving affected services from 
previously being on the payment portion of the OPPS outlier payment 
comparison into the cost portion. In particular, by conditionally 
packaging certain clinical diagnostic laboratory tests previously paid 
at CLFS rates, the CY 2014 fixed-dollar OPPS outlier threshold would 
have to account for significant changes to both the APC payment and 
estimated cost portions of the OPPS outlier payment comparison.
    We appreciate the recommendation regarding revisiting the correct 
OPPS outlier spending target and will continue to consider whether a 
1.0 percent OPPS outlier percentage spending target continues to remain 
appropriate.
3. Final Outlier Calculation
    Consistent with historical practice, we use updated data for this 
final rule with comment period for our outlier calculation. For CY 
2014, we are applying the overall CCRs from the October 2013 OPSF with 
a CCR adjustment factor of 0.9645 to approximate CY 2014 CCRs to 
charges on the final CY 2012 claims that were adjusted to approximate 
CY 2014 charges (using the final 2-year charge inflation factor of 
1.0969). These are the same CCR adjustment and charge inflation factors 
that were used to set the IPPS fixed dollar threshold for the FY 2014 
IPPS/LTCH PPS final rule (78 FR 50982). We simulated aggregated CY 2014 
hospital outlier payments using these costs for several different 
fixed-dollar thresholds, holding the 1.75 multiple threshold constant 
and assuming that outlier payment 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 2014 OPPS 
payments. We estimate that a fixed-dollar threshold of $2,900, combined 
with the multiple threshold of 1.75 times the APC payment rate, will 
allocate 1.0 percent of estimated aggregated total OPPS payments to 
outlier payments.
    In summary, for CY 2014, we will continue to make an outlier 
payment that equals 50 percent of the amount by which the cost of 
furnishing the service exceeds 1.75 times the APC payment amount when 
both the 1.75 multiple threshold and the final fixed-dollar threshold 
of $2,900 are met. For CMHCs, if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 or APC 0173, 
exceeds 3.40 times the payment rate for APC 0173, the outlier payment 
is calculated as 50 percent of the amount by which the cost exceeds 
3.40 times the APC 0173 payment rate. We estimate that this threshold 
will allocate 0.16 percent of outlier payments to CMHCs for PHP outlier 
payments.

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

    The basic methodology for determining prospective payment rates for 
HOPD services under the OPPS is set forth in existing regulations at 42 
CFR Part 419, Subparts C and D. For this CY 2014 OPPS/ASC final rule 
with comment period, the payment rate for most services and procedures 
for which payment is made under the OPPS is the product of the 
conversion factor calculated in accordance with section II.B. of this 
final rule with comment period and the relative payment weight 
determined under section II.A. of this final rule with comment period. 
Therefore, the national unadjusted payment rate for most APCs contained 
in Addendum A to this final rule with comment period (which is 
available via the Internet on the CMS Web site) and for most HCPCS 
codes to which separate payment under the OPPS has been assigned in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site) was calculated by multiplying the 
CY 2014 scaled weight for the APC by the CY 2014 conversion factor.
    We note that section 1833(t)(17) of the Act, which applies to 
hospitals as defined under section 1886(d)(1)(B) of the Act, requires 
that hospitals that fail to submit data required to be submitted on 
quality measures selected by the Secretary, in the form and manner and 
at a time specified by the Secretary, incur a reduction of 2.0 
percentage points to their OPD fee schedule increase factor, that is, 
the annual payment update factor. The application of a reduced OPD fee 
schedule increase factor results in reduced national unadjusted payment 
rates that apply to certain outpatient items and services provided by 
hospitals that are required to report outpatient quality data and that 
fail to meet the Hospital OQR Program (formerly referred to as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP)) 
requirements. For further discussion of the payment reduction for 
hospitals that fail to meet the requirements of the Hospital OQR 
Program, we refer readers to section XIII. of this final rule with 
comment period.
    We demonstrate in the steps below how to determine the APC payments 
that will be made in a calendar year under the OPPS to a hospital that 
fulfills the Hospital OQR Program requirements and to a hospital that 
fails to meet the Hospital OQR Program requirements for a service that 
has any of the following status indicator assignments: ``P,'' ``Q1,'' 
``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``U,'' ``V,'' or ``X'' (as defined 
in Addendum D1 to this final rule with comment period), 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,

[[Page 74961]]

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. We note that we 
had proposed to create status indicator ``J1'' to reflect the 
comprehensive APCs discussed in section II.A.2.e. of this final rule 
with comment period. However, the comprehensive APCs will not be 
implemented in the CY 2014 OPPS, and therefore status indicator ``J1'' 
will not apply. We also note that we had proposed to delete status 
indicator ``X'' as part of the CY 2014 packaging proposal for ancillary 
services, discussed in section II.A.4. of this final rule with comment 
period. We are not finalizing the ancillary services packaging policy, 
and therefore status indicator ``X'' will continue to be active in the 
CY 2014 OPPS.
    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 Web site) should follow the formulas presented in the following 
steps. For purposes of the payment calculations below, we refer to the 
national unadjusted payment rate for hospitals that meet the 
requirements of the Hospital OQR Program as the ``full'' national 
unadjusted payment rate. We refer to the national unadjusted payment 
rate for hospitals that fail to meet the requirements of the Hospital 
OQR Program as the ``reduced'' national unadjusted payment rate. The 
reduced national unadjusted payment rate is calculated by multiplying 
the reporting ratio of 0.980 times the ``full'' national unadjusted 
payment rate. The national unadjusted payment rate used in the 
calculations below is either the full national unadjusted payment rate 
or the reduced national unadjusted payment rate, depending on whether 
the hospital met its Hospital OQR Program requirements in order to 
receive the full CY 2014 OPPS fee schedule increase factor of 1.7 
percent.
    Step 1. Calculate 60 percent (the labor-related portion) of the 
national unadjusted payment rate. Since the initial implementation of 
the OPPS, we have used 60 percent to represent our estimate of that 
portion of costs attributable, on average, to labor. We refer readers 
to the April 7, 2000 OPPS final rule with comment period (65 FR 18496 
through 18497) for a detailed discussion of how we derived this 
percentage. During our regression analysis for the payment adjustment 
for rural hospitals in the CY 2006 OPPS final rule with comment period 
(70 FR 68553), we confirmed that this labor-related share for hospital 
outpatient services is appropriate.
    The formula below is a mathematical representation of Step 1 and 
identifies the labor-related portion of a specific payment rate for a 
specific service.
    X is the labor-related portion of the national unadjusted payment 
rate.
    X =.60 * (national unadjusted payment rate).
    Step 2. Determine the wage index area in which the hospital is 
located and identify the wage index level that applies to the specific 
hospital. The wage index values assigned to each area reflect the 
geographic statistical areas (which are based upon OMB standards) to 
which hospitals are assigned for FY 2014 under the IPPS, 
reclassifications through the MGCRB, section 1886(d)(8)(B) ``Lugar'' 
hospitals, reclassifications under section 1886(d)(8)(E) of the Act, as 
defined in Sec.  412.103 of the regulations, and hospitals designated 
as urban under section 601(g) of Pub. L. 98-21. (For further discussion 
of the changes to the FY 2014 IPPS wage indices, as applied to the CY 
2014 OPPS, we refer readers to section II.C. of this final rule with 
comment period.) As we proposed, we are continuing to apply a wage 
index floor of 1.00 to frontier States, in accordance with section 
10324 of the Affordable Care Act of 2010.
    Step 3. Adjust the wage index of hospitals located in certain 
qualifying counties that have a relatively high percentage of hospital 
employees who reside in the county, but who work in a different county 
with a higher wage index, in accordance with section 505 of Pub. L. 
108-173. Addendum L to this final rule with comment period (which is 
available via the Internet on the CMS Web site) contains the qualifying 
counties and the associated wage index increase developed for the FY 
2014 IPPS and listed as Table 4J in the FY 2014 IPPS/LTCH PPS final 
rule and available via the Internet on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/AcuteInpatientPPS/index.html. This step is to be followed only if the 
hospital is not reclassified or redesignated under section 1886(d)(8) 
or section 1886(d)(10) of the Act.
    Step 4. Multiply the applicable wage index determined under Steps 2 
and 3 by the amount determined under Step 1 that represents the labor-
related portion of the national unadjusted payment rate.
    The formula below is a mathematical representation of Step 4 and 
adjusts the labor-related portion of the national unadjusted payment 
rate for the specific service by the wage index.
    Xa is the labor-related portion of the national unadjusted payment 
rate (wage adjusted).
    Xa = .60 * (national unadjusted payment rate) * applicable wage 
index.
    Step 5. Calculate 40 percent (the nonlabor-related portion) of the 
national unadjusted payment rate and add that amount to the resulting 
product of Step 4. The result is the wage index adjusted payment rate 
for the relevant wage index area.
    The formula below is a mathematical representation of Step 5 and 
calculates the remaining portion of the national payment rate, the 
amount not attributable to labor, and the adjusted payment for the 
specific service.
    Y is the nonlabor-related portion of the national unadjusted 
payment rate.
    Y = .40 * (national unadjusted payment rate).
Adjusted Medicare Payment = Y + Xa.
    Step 6. If a provider is an SCH, set forth in the regulations at 
Sec.  412.92, or an EACH, which is considered to be an SCH under 
section 1886(d)(5)(D)(iii)(III) of the Act, and located in a rural 
area, as defined in Sec.  412.64(b), or is treated as being located in 
a rural area under Sec.  412.103, multiply the wage index adjusted 
payment rate by 1.071 to calculate the total payment.
    The formula below is a mathematical representation of Step 6 and 
applies the rural adjustment for rural SCHs.
Adjusted Medicare Payment (SCH or EACH) = Adjusted Medicare Payment * 
1.071.
    We have provided examples below of the calculation of both the full 
and reduced national unadjusted payment rates that will apply to 
certain outpatient items and services performed by hospitals that meet 
and that fail to meet the Hospital OQR Program requirements, using the 
steps outlined above. For purposes of this example, we used a provider 
that is located in Brooklyn, New York that is assigned to CBSA 35644. 
This provider bills one service that is assigned to APC 0019 (Level I 
Excision/Biopsy). The CY 2014 full national unadjusted payment rate for 
APC 0019 is approximately $318.79. The reduced national unadjusted 
payment rate for APC 0019 for a hospital that fails to meet the 
Hospital OQR Program requirements is approximately $312.41. This 
reduced rate is calculated by multiplying the reporting ratio of 0.980 
by the full unadjusted payment rate for APC 0019.

[[Page 74962]]

    The FY 2014 wage index for a provider located in CBSA 35644 in New 
York is 1.3129. The labor-related portion of the full national 
unadjusted payment is approximately $251.12 (.60 * $318.79 * 1.3129). 
The labor-related portion of the reduced national unadjusted payment is 
approximately $246.10 (.60 * $312.41 * 1.3129). The nonlabor-related 
portion of the full national unadjusted payment is approximately 
$127.52 (.40 * 318.79). The nonlabor-related portion of the reduced 
national unadjusted payment is approximately $124.96 (.40 * $312.41). 
The sum of the labor-related and nonlabor-related portions of the full 
national adjusted payment is approximately $378.64 ($251.12 + $127.52). 
The sum of the reduced national adjusted payment is approximately 
$371.06 ($246.10 + $124.96).

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 calendar years thereafter, shall not exceed 40 percent of 
the APC payment rate.
    Section 1833(t)(3)(B)(ii) of the Act provides that, for a covered 
OPD service (or group of such services) furnished in a year, the 
national unadjusted copayment amount cannot be less than 20 percent of 
the OPD fee schedule amount. However, section 1833(t)(8)(C)(i) of the 
Act limits the amount of beneficiary copayment that may be collected 
for a procedure performed in a year to the amount of the inpatient 
hospital deductible for that year.
    Section 4104 of the Affordable Care Act eliminated the Part B 
coinsurance for preventive services furnished on and after January 1, 
2011, that meet certain requirements, including flexible 
sigmoidoscopies and screening colonoscopies, and waived the Part B 
deductible for screening colonoscopies that become diagnostic during 
the procedure. Our discussion of the changes made by the Affordable 
Care Act with regard to copayments for preventive services furnished on 
and after January 1, 2011, may be found in section XII.B. of the CY 
2011 OPPS/ASC final rule with comment period (75 FR 72013).
2. OPPS Copayment Policy
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43586), for CY 2014, 
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 proposed national unadjusted copayment 
amounts for services payable under the OPPS that would be effective 
January 1, 2014, were shown in Addenda A and B to the proposed rule 
(which are available via the Internet on the CMS Web site). As 
discussed in section XIII.G. of the proposed rule, for CY 2014, the 
proposed Medicare beneficiary's minimum unadjusted copayment and 
national unadjusted copayment for a service to which a reduced national 
unadjusted payment rate applies will equal the product of the reporting 
ratio and the national unadjusted copayment, or the product of the 
reporting ratio and the minimum unadjusted copayment, respectively, for 
the service.
    We noted 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/ASC 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).
    We did not receive any public comments regarding the proposed 
methodology for calculating copayments for CY 2014. Therefore, for the 
reasons set forth in this final rule with comment period, we are 
finalizing our CY 2014 copayment methodology without modification.
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 0019, approximately $63.76 is 20 percent of the 
full national unadjusted payment rate of approximately $318.79. 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 Web site), 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

[[Page 74963]]

requirements, multiply the copayment calculated in Step 3 by the 
reporting ratio of 0.980.
    The unadjusted copayments for services payable under the OPPS that 
will be effective January 1, 2014, are shown in Addenda A and B to this 
final rule with comment period (which are available via the Internet on 
the CMS Web site). 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 full CY 2014 OPD fee schedule increase 
factor discussed in section II.B. of this final rule with comment 
period.
    In addition, as noted above, 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 CPT and Level II HCPCS Codes

    CPT and Level II HCPCS codes are used to report procedures, 
services, items, and supplies under the hospital OPPS. Specifically, 
CMS recognizes the following codes on OPPS claims:
     Category I CPT codes, which describe surgical procedures 
and medical services;
     Category III CPT codes, which describe new and emerging 
technologies, services, and procedures; and
     Level II HCPCS codes, which are used primarily to identify 
products, supplies, temporary procedures, and services not described by 
CPT codes.
    CPT codes are established by the American Medical Association (AMA) 
and the Level II HCPCS codes are established by the CMS HCPCS 
Workgroup. These codes are updated and changed throughout the year. CPT 
and HCPCS code changes that affect the OPPS are published both through 
the annual rulemaking cycle and through the OPPS quarterly update 
Change Requests (CRs). CMS releases new Level II HCPCS codes to the 
public or recognizes the release of new CPT codes by the AMA and makes 
these codes effective (that is, the codes can be reported on Medicare 
claims) outside of the formal rulemaking process via OPPS quarterly 
update CRs. This quarterly process offers hospitals access to codes 
that may more accurately describe items or services furnished and/or 
provides payment or more accurate payment for these items or services 
in a timelier manner than if CMS waited for the annual rulemaking 
process. We solicit public comments on these new codes and finalize our 
proposals related to these codes through our annual rulemaking process. 
As we proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43587), in 
Table 18 below (Table 11 of the proposed rule), we summarized our 
process for updating codes through our OPPS quarterly update CRs, 
seeking public comments, and finalizing their treatment under the OPPS. 
We note that because the payment rates associated with codes effective 
July 1 were not available to us in time for incorporation into the 
Addenda of the proposed rule, the Level II HCPCS codes and the Category 
III CPT codes implemented through the July 2013 OPPS quarterly update 
CR were not included in Addendum B of the proposed rule (which is 
available via the Internet on the CMS Web site), while those codes 
based upon the April 2013 OPPS quarterly update were included in 
Addendum B. Nevertheless, we requested public comments on the codes 
included in the July 2013 OPPS quarterly update and included these 
codes in the preamble of the proposed rule.

[[Page 74964]]

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    This process is discussed in detail below. We have separated our 
discussion into two sections based on whether we solicited public 
comments in the CY 2014 OPPS/ASC proposed rule or whether we are 
soliciting public comments in this CY 2014 OPPS/ASC final rule with 
comment period. We note that we sought public comments in the CY 2013 
OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2013. We also sought public 
comments in the CY 2013 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2012. These new codes, 
with an effective date of October 1, 2012, or January 1, 2013, were 
flagged with comment indicator ``NI'' (New code, interim APC 
assignment; comments will be accepted on the interim APC assignment for 
the new code) in Addendum B to the CY 2013 OPPS/ASC final rule with 
comment period to indicate that we were assigning them an interim 
payment status and an APC and payment rate, if applicable, which were 
subject to public comment following publication of the CY 2013 OPPS/ASC 
final rule with comment period. We are responding to public comments 
and finalizing our interim OPPS treatment of these codes in this CY 
2014 OPPS/ASC final rule with comment period.
    We received public comments on several new codes that were assigned 
to comment indicator ``NI'' in Addendum B of the CY 2013 OPPS/ASC final 
rule with comment period. We respond to those comments in sections 
II.A.2., III.C., V.A., and V.B. of this CY 2014 OPPS/ASC final rule 
with comment period. Table 19 below lists the long descriptors for the 
CPT and Level II HCPCS codes that were assigned to comment indicator 
``NI'' for which we received public comments on the CY 2013 OPPS/ASC 
final rule with comment period and the specific sections where the 
comments are addressed.

[[Page 74965]]

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[[Page 74966]]

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[[Page 74967]]

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[[Page 74968]]

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1. Treatment of New CY 2013 Level II HCPCS and CPT Codes Effective 
April 1, 2013 and July 1, 2013 for Which We Solicited Public Comments 
in the CY 2014 OPPS/ASC Proposed Rule
    Through the April 2013 OPPS quarterly update CR (Transmittal 2664, 
Change Request 8228, dated March 1, 2013), and the July 2013 OPPS 
quarterly update CR (Transmittal 2718, Change Request 8338, dated June 
7, 2013), we recognized several new HCPCS codes for separate payment 
under the OPPS. Effective April 1 and July 1 of CY 2013, we made 
effective 18 new Level II HCPCS codes and 6 Category III CPT codes. 
Specifically, 8 new Level II HCPCS codes were effective for the April 
2013 quarterly update and another 10 new Level II HCPCS codes were 
effective for the July 2013 quarterly update for a total of 18. In 
addition, six new Category III CPT codes were effective for the July 
2013 quarterly update. Of the 24 new HCPCS and CPT codes, we recognized 
for separate payment under the OPPS 14 new codes from the April and 
July 2013 OPPS quarterly updates.
    Through the April 2013 OPPS quarterly update CR, we allowed 
separate payment for five new Level II HCPCS codes. Specifically, as 
displayed in Table 12 of the proposed rule, we provided separate 
payment for HCPCS codes C9130, C9297, C9298, C9734, and C9735. HCPCS 
codes Q0507, Q0508, and Q0509 were assigned to OPPS status indicator 
``A'' to indicate that they are paid through another Medicare payment 
system other than the OPPS. Although HCPCS codes Q0507, Q0508, and 
Q0509 were effective April 1, 2013, they were previously described by 
HCPCS code Q0505, which was deleted on March 31, 2013.
[GRAPHIC] [TIFF OMITTED] TR10DE13.317

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43588), we solicited 
public comments on the proposed status indicators and APC assignments 
for Level II HCPCS codes C9130, C9297, C9298, C9734, C9735, Q0507, 
Q0508, and Q0509, which were listed in Table 12 of the proposed rule 
(78 FR 43588) and now appear in Table 20 of this final rule with 
comment period.
    We did not receive any public comments on the proposed APC 
assignments and status indicators for HCPCS codes C9130, C9297, C9298, 
Q0507, Q0508, and Q0509. However, we

[[Page 74969]]

received several public comments on HCPCS codes C9734 and C9735, which 
are addressed in sections III.C.10.c. and III.C.3.b., respectively, of 
this final rule with comment period.
    For CY 2014, the HCPCS Workgroup replaced HCPCS codes C9130, C9297, 
and C9298 with permanent HCPCS J-codes. Table 21 below lists the 
replacement HCPCS J-codes for the temporary HCPCS C-codes. Consistent 
with our general policy of using permanent HCPCS codes rather than 
using temporary HCPCS codes for the reporting of drugs under the OPPS 
in order to streamline coding, we are showing the replacement HCPCS 
codes for HCPCS codes C9130, C9297, and C9298, which are effective 
January 1, 2014, in Table 21.
    In this final rule with comment period, we are assigning the Level 
II HCPCS codes listed in Table 21 below to the specified APCs and 
status indicators for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.318

    For CY 2014, we note that we are not making any changes to the 
status indicator and APC assignment for HCPCS code C9735. Specifically, 
HCPCS code C9735 will continue to be assigned to APC 0150 for CY 2014 
with a status indicator of ``T.'' However, we are reassigning HCPCS 
code C9734 from APC 0067 (Level II Stereotactic Radiosurgery) to APC 
0065 (IORT, MRgFUS, and MEG), as discussed in section III.C.10.c. of 
this final rule with comment period. In addition, we are reassigning 
HCPCS codes Q0507, Q0508, and Q0509 from status indicator ``A'' to 
``N'' to indicate that they are now packaged under the hospital OPPS, 
consistent with our packaging guidelines, which are discussed in 
section II.A.3. of this final rule with comment period.
    Furthermore, because HCPCS codes J1556, J9262, and J7316 describe 
the same drug and the same dosage currently described by HCPCS codes 
C9130, C9297, and C9298, respectively, these drugs will continue their 
pass-through status in CY 2014. Therefore, we are assigning HCPCS codes 
J1556, J9262, and J7316 to the same APCs and the same status indicators 
as their predecessor HCPCS codes, as shown in Table 21.
    As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43589), 
through the July 2013 OPPS quarterly update CR, which included HCPCS 
codes that were made effective July 1, 2013, we allowed separate 
payment for 5 of the 10 new Level II HCPCS codes. Specifically, as 
displayed in Table 22 below (also Table 13 of the proposed rule), we 
provided separate OPPS payment for HCPCS codes C9131, C9736, G0460, 
Q2050, and Q2051.

[[Page 74970]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.319

    We note that two of the Level II HCPCS Q-codes that were made 
effective July 1, 2013, were previously described by HCPCS J-codes that 
were separately payable under the hospital OPPS. First, the HCPCS 
Workgroup replaced HCPCS code J9002 (Injection, doxorubicin 
hydrochloride, liposomal, Doxil, 10 mg) with new HCPCS code Q2050, 
effective July 1, 2013, to appropriately identify and pay for both the 
brand and generic forms of doxorubicin hydrochloride liposome. 
Consequently, the status indicator for HCPCS code J9002 was changed to 
``E'' (Not Payable by Medicare), effective July 1, 2013. Because HCPCS 
code Q2050 describes the same product as HCPCS code J9002, we continued 
its separate payment status and assigned HCPCS code Q2050 to status 
indicator ``K'' (Nonpass-through drugs and nonimplantable biologicals, 
including therapeutic radiopharmaceuticals; paid under OPPS; separate 
APC payment). We also assigned HCPCS code Q2050 to the same APC as 
HCPCS code J9002, specifically APC 7046 (Doxil injection), effective 
July 1, 2013.
    Secondly, the HCPCS Workgroup replaced HCPCS codes J3487 
(Injection, zoledronic acid (Zometa), 1 mg) and J3488 (Injection, 
zoledronic acid (Reclast), 1 mg) with one new HCPCS code, specifically 
Q2051, effective July 1, 2013, to appropriately identify and pay for 
both the brand and generic forms of zoledronic acid. Consequently, the 
status indicators for HCPCS codes J3487 and J3488 were changed to 
``E,'' effective July 1, 2013, to indicate that the codes were not 
separately payable by Medicare. Because HCPCS code Q2051 described the 
same product as HCPCS codes J3487 and J3488, we assigned HCPCS code 
Q2051 to separate payment status indicator ``K,'' effective July 1, 
2013. Because HCPCS codes J3487 and J3488, which were assigned to two 
separate APCs, were replaced with only one code, we assigned HCPCS code 
Q2051 to a new APC to maintain data consistency for future rulemaking. 
Specifically, HCPCS code Q2051 was

[[Page 74971]]

assigned to APC 1356 (Zoldedronic acid 1 mg), effective July 1, 2013.
    Of the 10 Level II HCPCS codes that were made effective July 1, 
2013, we did not recognize for separate payment the following 5 HCPCS 
codes: HCPCS codes K0008, K0013, and K0900, which were assigned to 
status indicator ``Y'' (Non-implantable durable medical equipment; not 
paid under OPPS); HCPCS code Q2033, which was assigned to status 
indicator ``L'' (Not paid under OPPS; paid at reasonable cost); and 
HCPCS code Q0090, which was assigned to status indicator ``E'' (Not 
payable/Non-covered by Medicare; not paid under OPPS).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we solicited 
public comments on the proposed status indicators and APC assignments 
for the HCPCS codes that were listed in Table 13 of the proposed rule 
and now appear in Tables 22 and 23 of this final rule with comment 
period.
    We did not receive any public comments on the proposed APC 
assignments and status indicators for HCPCS codes C9131, K0008, K0013, 
K0900, Q0090, Q2033, Q2050, and Q2051. Therefore, we are adopting as 
final, without modification, our proposal to assign these eight Level 
II HCPCS codes to the APCs and status indicators as proposed for CY 
2014.
    We received several public comments on HCPCS codes C9736 and G0460, 
which are addressed in section III.C. of this final rule with comment 
period.
    Table 23 below includes a complete list of the Level II HCPCS codes 
that were made effective July 1, 2013, with their final status 
indicators and APC assignments for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.320

[[Page 74972]]

    We note that the HCPCS Workgroup replaced HCPCS codes C9131, Q0090, 
and Q2051 with HCPCS codes J9354, J7301, and J3489, respectively, 
effective January 1, 2014. Because HCPCS code J9354 describes the same 
drug currently described by HCPCS code C9131, this drug will continue 
its pass-through status in CY 2014. Therefore, we are assigning HCPCS 
code J9354 to the same APC and status indicator as its predecessor 
HCPCS code, which shares the same dosage descriptor, as shown in Table 
23. We note that because HCPCS code Q2051 is assigned to status 
indicator ``K'' (Nonpass-Through Drugs; Paid under OPPS; Separate APC 
payment), its replacement HCPCS code J3489, which describes the same 
item as its predecessor code, will also continue its nonpass-through 
status and APC assignment in CY 2014. In addition, because HCPCS code 
Q0090 is assigned to status indicator ``E'' to indicate that this drug 
is not covered by Medicare, its replacement HCPCS code J7301 will also 
continue its noncovered status in CY 2014. We note that two HCPCS 
codes, specifically, HCPCS codes C9736 and Q2033, will be replaced with 
CPT codes 0336T and 90673, respectively, effective January 1, 2014. As 
noted in Table 23, CPT code 90673, which is the replacement code for 
HCPCS code Q2033, will be assigned to status indicator ``L.'' However, 
CPT code 0336T, which replaces HCPCS code C9736, will be assigned to 
APC 0174. We refer readers to section III.C.10.b. of this final rule 
with comment period for further discussion of the APC assignment of CPT 
code 0336T, which replaced HCPCS code C9736.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43589), we proposed to 
continue our established policy of recognizing Category I CPT vaccine 
codes for which FDA approval is imminent and Category III CPT codes 
that the AMA releases in January of each year for implementation in 
July through the OPPS quarterly update process. Under the OPPS, 
Category I CPT vaccine codes and Category III CPT codes that are 
released on the AMA Web site in January are made effective in July of 
the same year through the July quarterly update CR, consistent with the 
AMA's implementation date for the codes. For the July 2013 quarterly 
update, there were no new Category I CPT vaccine codes. However, we 
note that Level II HCPCS code Q2033, which is listed in Tables 22 and 
23, describes a flu vaccine that was effective July 1, 2013, and is 
separately payable by Medicare at reasonable cost.
    Through the July 2013 OPPS quarterly update CR (Transmittal 2718, 
Change Request 8338, dated June 7, 2013), we allowed separate payment 
for four of the six new Category III CPT codes effective July 1, 2013. 
Specifically, as displayed in Table 24 (also shown in Table 14 of the 
CY 2014 OPPS/ASC proposed rule), we allowed separate payment for 
Category III CPT codes 0330T, 0331T, 0332T, and 0334T. We did not 
recognize for separate payment Category III CPT code 0329T because the 
device associated with this procedure has not received FDA approval. In 
addition, we did not recognize for separate payment Category III CPT 
code 0333T because this procedure is not covered by Medicare. As listed 
in Table 24, both CPT codes 0329T and 0333T were assigned to status 
indicator ``E'' (Not payable/Non-covered by Medicare; not paid under 
OPPS).
    We received public comments on several of the Category III CPT 
codes that were implemented in July 2013, specifically on CPT codes 
0330T, 0331T, 0332T, and 0334T, which are addressed in section III.C. 
of this final rule with comment period. Table 24 below lists the 
Category III CPT codes that were implemented in July 2013, along with 
their final status indicators, APC assignments, and payment rates for 
CY 2014.

[[Page 74973]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.322

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43588 through 43590), 
we proposed to continue our process of soliciting public comments on 
our status indicators and APC assignments for the CPT/HCPCS codes 
effective April 1 and July 1. For the CY 2014 update, we solicited 
public comments on the CY 2014 proposed status indicators and the 
proposed APC assignments and payment rates for the Level II HCPCS codes 
and the Category III CPT codes that were effective April 1, 2013, and 
July 1, 2013, through the respective OPPS quarterly update CRs. These 
codes were listed in Tables 12, 13, and 14 of the proposed rule. We 
proposed to finalize their status indicators and their APC assignments 
and payment rates, if applicable, in this CY 2014 OPPS/ASC final rule 
with comment period. Because the new Category III CPT and Level II 
HCPCS codes that become effective for July are not available to us in 
time for incorporation into the Addenda to the OPPS/ASC proposed rule, 
our policy is to include the codes, their proposed status indicators, 
proposed APCs (where applicable), and proposed payment rates (where 
applicable) in the preamble of the proposed rule but not in the Addenda 
to the proposed rule. These codes were listed in Tables 13 and 14, 
respectively, of the proposed rule. We proposed to incorporate these 
codes into Addendum B to this CY 2014 OPPS/ASC final rule with comment 
period, which is consistent with our annual OPPS update policy. The 
Level II HCPCS codes implemented or modified through the April 2013 
OPPS update CR and displayed in Table 12 were included in Addendum B to 
the proposed rule (which is available via the Internet on the CMS Web 
site), where their proposed CY 2014 payment rates were also shown.
    We did not receive any additional public comments on this process. 
The final status indicators, APC assignments, and payment rates, if 
applicable, for the Level II HCPCS codes and the Category III CPT codes 
that were implemented or modified through the April 2013 or July 2013 
OPPS update CR can be found in Tables 21, 23, and 24, or in Addendum B 
to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
2. Process for New Level II HCPCS Codes That Were Effective October 1, 
2013 and New CPT and Level II HCPCS Codes That Will Be Effective 
January 1, 2014 for Which We Are Soliciting Public Comments in This CY 
2014 OPPS/ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and III CPT codes and new Level II HCPCS codes that are 
effective January 1 in the final rule with comment period updating the 
OPPS for the following calendar year. These codes are released to the 
public via the CMS HCPCS Workgroup Web site (for Level II HCPCS codes) 
and the AMA Web site (for CPT codes), and also through the January OPPS 
quarterly update CRs. In the past, we also have released new Level II

[[Page 74974]]

HCPCS codes that are effective October 1 through the October OPPS 
quarterly update CRs and incorporated these new codes in the final rule 
with comment period updating the OPPS for the following calendar year. 
For CY 2014, these codes are flagged with comment indicator ``NI'' in 
Addendum B to this final rule with comment period to indicate that we 
are assigning them an interim payment status, which is subject to 
public comment. In addition, the CPT and Level II HCPCS codes that will 
be effective January 1, 2014, are flagged with comment indicator ``NI'' 
in Addendum B to this final rule with comment period. Specifically, the 
status indicator and the APC assignment and payment rate, if 
applicable, for all such codes flagged with comment indicator ``NI'' 
are open to public comment in the final rule with comment period, and 
we respond to these comments in the final rule with comment period for 
the next calendar year's OPPS/ASC update. In the CY 2014 OPPS/ASC 
proposed rule (78 FR 43590), we proposed to continue this process for 
CY 2014. Specifically, for CY 2014, we proposed to include in Addendum 
B to this CY 2014 OPPS/ASC final rule with comment period the new 
Category I and III CPT codes effective January 1, 2014 (including the 
Category III CPT codes that were released by the AMA in July 2013) that 
would be incorporated in the January 2014 OPPS quarterly update CR and 
the new Level II HCPCS codes, effective October 1, 2013, or January 1, 
2014, that would be released by CMS in its October 2013 and January 
2014 OPPS quarterly update CRs. As proposed, in this final rule with 
comment period, the October 1, 2013 and January 1, 2014 codes are 
flagged with comment indicator ``NI'' in Addendum B to this CY 2014 
OPPS/ASC final rule with comment period to indicate that we have 
assigned them an interim OPPS payment status for CY 2014. As proposed, 
in this final rule with comment period, their status indicators and 
their APC assignments and payment rates, if applicable, are open to 
public comment and will be finalized in the CY 2015 OPPS/ASC final rule 
with comment period.
    For the CY 2014 update, we are finalizing our proposal to flag new 
Level II HCPCS codes that become effective October 1, 2013, and new CPT 
and Level II HCPCS codes that become effective January 1, 2014 with 
comment indicator ``NI'' in Addendum B to this CY 2014 OPPS/ASC final 
rule with comment period to indicate that these codes have been 
assigned an interim OPPS payment status for CY 2014. In addition, 
because these codes have been assigned to comment indicator ``NI,'' 
their status indicators and their APC assignments and payment rates, if 
applicable, are open to public comment and will be finalized in the CY 
2015 OPPS/ASC final rule with comment period.

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 Sec.  419.31 of the regulations. We use Level I and Level II HCPCS 
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.
    We have packaged into payment for each procedure or service within 
an APC group the costs associated with those items or services that are 
directly related to, and supportive of, performing the main independent 
procedures or furnishing the primary and complete services. Therefore, 
we do not make separate payment for these packaged items or services. 
In general, according to the regulations at Sec.  419.2(b), packaged 
items and services include, but are not limited to:
    (1) Use of an operating suite, procedure room, or treatment room;
    (2) Use of recovery room;
    (3) Use of an observation bed;
    (4) 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;
    (5) Supplies and equipment for administering and monitoring 
anesthesia or sedation;
    (6) Intraocular lenses (IOLs);
    (7) Incidental services such as venipuncture;
    (8) Capital-related costs;
    (9) Implantable items used in connection with diagnostic X-ray 
tests, diagnostic laboratory tests, and other diagnostic tests;
    (10) Durable medical equipment that is implantable;
    (11) Implantable prosthetic devices (other than dental) which 
replace all or part of an internal body organ (including colostomy bags 
and supplies directly related to colostomy care), including replacement 
of these devices;
    (12) Costs incurred to procure donor tissue other than corneal 
tissue.
    Significant revisions to the regulations at Sec.  419.2(b) were 
proposed. Further discussion of our packaging proposals was included in 
section II.A.3. of the proposed rule (78 FR 43568 through 43575).
    In CY 2008, we implemented 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 (72 FR 66650 through 66652). Under the CY 2013 OPPS 
(77 FR 68243 through 68258), we provided composite APC payments for 10 
categories of services:
    (1) Mental Health Services (APC 0034);
    (2) Cardiac Electrophysiologic Evaluation and Ablation (APC 8000);
    (3) Low Dose Rate (LDR) Prostate Brachytherapy (APC 8001);
    (4) Level I Extended Assessment & Management Composite (APC 8002);
    (5) Level II Extended Assessment & Management Composite (APC 8003);
    (6) Ultrasound (APC 8004);
    (7) CT and CTA without Contrast (APC 8005);
    (8) CT and CTA with Contrast (APC 8006);
    (9) MRI and MRA without Contrast Composite (APC 8007); and
    (10) MRI and MRA with Contrast Composite (APC 8008).
    Further discussion of composite APCs is included in section 
II.A.2.f. of this final rule with comment period.
    Under the OPPS, we generally pay for hospital outpatient services 
on a rate-per-service basis, where the service may be reported with one 
or more HCPCS codes. Payment varies according to the APC group to which 
the independent service or combination of services is assigned. 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 new proposed APC 0634 (Hospital Clinic Visits). 
The APC relative payment weights are scaled to

[[Page 74975]]

new APC 0634 because it is the hospital clinic visit APC and because 
clinic visits are among the most frequently furnished services in the 
hospital outpatient setting. We refer readers to section VII. of the 
proposed rule and this final rule with comment period for further 
discussion of the establishment of new APC 0634.
    Section 1833(t)(9)(A) of the Act requires the Secretary to review, 
on a recurring basis occurring no less 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 
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 (the Panel 
recommendations for specific services for the CY 2014 OPPS and our 
responses to them are discussed in the relevant specific sections 
throughout this final rule with comment period).
    Finally, section 1833(t)(2) of the Act provides that, subject to 
certain exceptions, the items and services within an APC group cannot 
be considered comparable with respect to the use of resources if the 
highest cost for an item or service in the group is more than 2 times 
greater than the lowest cost for an item or service within the same 
group (referred to as the ``2 times rule''). The statute authorizes the 
Secretary to make exceptions to the 2 times rule in unusual cases, such 
as low-volume items and services (but the Secretary may not make such 
an exception in the case of a drug or biological that has been 
designated as an orphan drug under section 526 of the Federal Food, 
Drug, and Cosmetic Act).
2. Application of the 2 Times Rule
    In accordance with section 1833(t)(2) of the Act and Sec.  419.31 
of the regulations, we annually review the items and services within an 
APC group to determine, with respect to comparability of the use of 
resources, if the cost of the highest cost item or service within an 
APC group is more than 2 times greater than the cost of the lowest cost 
item or service within that same group. In making this determination, 
we consider only those HCPCS codes that are significant based on the 
number of claims. We note that, for purposes of identifying significant 
HCPCS codes for examination of the 2 times rule, we consider codes that 
have more than 1,000 single major claims, or codes that have both 
greater than 99 single major claims and contribute at least 2 percent 
of the single major claims used to establish the APC cost to be 
significant (75 FR 71832). This longstanding criterion to determine 
when a HCPCS code is significant for purposes of the 2 times rule was 
established because we believe that a subset of 1,000 claims is 
negligible within the set of approximately 100 million single procedure 
or single session claims we use for establishing costs. Similarly, a 
HCPCS code for which there are fewer than 99 single bills and which 
comprises less than 2 percent of the single major claims within an APC 
will have a negligible impact on the APC cost. In the CY 2014 OPPS/ASC 
proposed rule (78 FR 43592), we proposed to make exceptions to this 
limit on the variation of costs within each APC group in unusual cases, 
such as low-volume items and services, for CY 2014.
    In the CY 2014 OPPS/ASC proposed rule, we identified APCs with 2 
times rule violations, for which we proposed changes to their HCPCS 
codes' APC assignments in Addendum B to the proposed rule. We note that 
Addendum B did not appear in the printed version of the Federal 
Register as part of the CY 2014 OPPS/ASC proposed rule. Rather, it was 
published and made available via the Internet on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. In these cases, to eliminate a 2 
times rule violation or to improve clinical and resource homogeneity, 
we proposed to reassign the HCPCS codes to APCs that contain services 
that are similar with regard to both their clinical and resource 
characteristics. We also proposed to rename existing APCs or create new 
clinical APCs to accommodate proposed HCPCS code reassignments. In many 
cases, the proposed HCPCS code reassignments and associated APC 
reconfigurations for CY 2014 included in the proposed rule are related 
to changes in costs of services that were observed in the CY 2012 
claims data newly available for CY 2014 ratesetting. We also proposed 
changes to the status indicators for some HCPCS codes that were not 
specifically and separately discussed in the CY 2014 OPPS/ASC proposed 
rule. In these cases, we proposed to change the status indicators for 
some HCPCS codes because we believe that another status indicator would 
more accurately describe their payment status from an OPPS perspective 
based on the policies that we proposed for CY 2014. Addendum B to the 
CY 2014 OPPS/ASC proposed rule identified with comment indicator ``CH'' 
those HCPCS codes for which we proposed a change to the APC assignment 
or status indicator, or both, that were initially assigned in the April 
2013 Addendum B Update (available via the Internet on the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html). In contrast, Addendum B to this 
final rule with comment period (available via the Internet on the CMS 
Web site) identifies with the ``CH'' comment indicator the final CY 
2014 changes compared to the HCPCS codes' status as reflected in the 
October 2013 Addendum B update.
3. Exceptions to the 2 Times Rule
    As discussed earlier, we may make exceptions to the 2 times limit 
on the variation of costs within each APC group in unusual cases such 
as low-volume items and services. Taking into account the APC changes 
that we proposed for CY 2014, we reviewed all the APCs to determine 
which APCs would not satisfy the 2 times rule. Then we used the 
following criteria to decide 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 OPPS final rule with comment period (65 FR 18457 and 
18458).
    For the CY 2014 OPPS/ASC proposed rule, the list of 10 APCs that 
appeared in Table 15 of the CY 2014 OPPS/ASC proposed rule (78 FR 
43592) that were excepted from the 2 times rule were based on claims 
data for dates of service between January 1, 2012, and December 31, 
2012, that were processed before January 1, 2013. For this final rule 
with comment period, we used claims data for dates of service between 
January 1, 2012, and December 31, 2012, that were processed on or 
before June 30, 2013 and updated CCRs, if available. Therefore, after 
considering the public comments we received on the CY 2014 OPPS/ASC 
proposed rule and making changes to APC assignments based on those 
comments, we analyzed the CY 2012 claims data used for this final rule 
with comment period to identify the APCs with 2 times rule violations. 
Based on the final CY 2012 claims data, we found 10 APCs with 2 times 
rule

[[Page 74976]]

violations, which is the same number of APCs that violated the 2 times 
rule in the proposed rule. We applied the criteria as described earlier 
to identify the APCs that are exceptions to the 2 times rule for CY 
2014, and identified six new APCs that meet the criteria for exception 
to the 2 times rule for this final rule with comment period, but that 
did not meet the criteria using proposed rule claims data. 
Specifically, we found that the following six new APCs violated the 2 
times rule: APC 0066 (Level I Stereotactic Radiosurgery); APC 0067 
(Level II Stereotactic Radiosurgery); APC 0193 (Level V Female 
Reproductive Procedures); APC 0342 (Level I Pathology); APC 0370 
(Multiple Allergy Tests); and APC 0634 (Hospital Clinic Visits).
    After consideration of the public comments we received and our 
review of the CY 2012 costs from hospital claims and cost report data 
available for this final rule with comment period, we are finalizing 
our proposals with some modifications. Specifically, we are finalizing 
our proposal to except 4 of the proposed 10 original APCs from the 2 
times rule for CY 2014, specifically, APCs 0057, 0272, 0330, and 0690. 
In contrast, we are not finalizing our proposal to except 6 of the 
proposed 10 original APCs from the 2 times rule, specifically, APCs 
0060 (Manipulation Therapy), 0075 (Level V Endoscopy Upper Airway), 
0105 (Repair/Revision/Removal of Pacemakers, AICDs, or Vascular 
Devices), 0148 (Level I Anal/Rectal Procedures), 0278 (Diagnostic 
Urography), and 0402 (Level II Nervous System Imaging). Our data 
analysis for this final rule with comment period revealed that these 
six APCs no longer violate the 2 times rule. Table 25 below lists 10 
APCs that we are excepting from the 2 times rule for CY 2014 based on 
the criteria above and a review of updated claims data. 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 
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 Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html.
[GRAPHIC] [TIFF OMITTED] TR10DE13.323

C. OPPS APC-Specific Policies

1. Cardiovascular and Vascular Services
a. Non-Ophthalmic Fluorescent Vascular Angiography (APC 0263)
    We created HCPCS code C9733 (Non-ophthalmic fluorescent vascular 
angiography (FVA)), effective April 1, 2012, for a service that became 
known to us through the new technology APC application process. We 
assigned HCPCS code C9733 to APC 0397 (Vascular Imaging), which had a 
CY 2012 payment rate of $154.87 and a status indicator of ``Q2.'' The 
``Q2'' status indicator shows that payment for the service will be 
packaged in the APC payment if billed on the same date of service as a 
HCPCS code assigned status indicator ``T''; and in all other 
circumstances, a separate APC payment for the service will be made. We 
maintained the assignment of HCPCS code C9733 to APC 0397 for CY 2013, 
which has a payment rate of $330.97, and continued the assignment of 
status indicator ``Q2.''
    Comment: One commenter objected to the continued assignment of 
status indicator ``Q2'' to the service described by HCPCS code C9733, 
as well as packaging payment for the service as a result of the breast 
reconstruction surgery primary code being included in a comprehensive 
APC, because the commenter believed that both of these proposed 
policies would result in packaging the payment for the service 
described by HCPCS code C9733. The commenter stated that packaging 
payment for a service or item is only appropriate when the cost of the 
service or item can be taken into account in establishing the payment 
rate for the separately paid services. The commenter pointed out that 
there were no single claims reporting HCPCS code C9733 in the claims 
data used for the proposed rule ratesetting, and asserted that, because 
HCPCS code C9733 described a new service with no single claims, payment 
should not be packaged until several years after the code's creation, 
when there will be sufficient claims data. The commenter further 
asserted that the proposed packaging payment for the service described 
by HCPCS code C9733 with payment for CPT code 19357 (Breast 
reconstruction, immediate or delayed, with tissue expander, including 
subsequent expansion) does not comport with CMS'

[[Page 74977]]

principle that packaging payment for services should reflect how the 
service is reported. The commenter stated that its disagreement with 
the packaging proposals is supported by CMS' acknowledgement that none 
of the 10 claims reporting HCPCS code C9733 were identified as single 
claims and, according to an analysis that the commenter conducted, 
HCPCS code C9733 was reported in combination with CPT code 19357 
approximately 90 percent of the time. The commenter also believed that 
packaging payment for HCPCS code C9733 contradicts the principle that 
CMS should be able to map the costs of the packaged service to the 
separately payable services with which it is performed.
    Response: We disagree with the commenter that payment for the 
service described by HCPCS code C9733 should not be packaged when it is 
used intraoperatively on the same date of service as the primary 
procedure. While it is true that HCPCS code C9733 is a relatively new 
service, the commenter stated that its own data analysis shows that the 
service is being reported in combination with CPT code 19357 
approximately 90 percent of the time. Therefore, payment for the 
service described by HCPCS code C9733 is being taken into account in 
establishing the payment rate for the separately paid services with 
which it is performed. In addition, we believe that packaging payment 
for the service described by HCPCS code C9733 does reflect how the 
service is furnished and how it is being reported on a claim in 
combination with CPT code 19357. Although none of the 10 claims 
available for the proposed rule ratesetting were single claims, the 
services reported on the 10 claims appear to have been mapped to 
appropriate separately paid procedures. The procedure described by 
HCPCS code C9733 is often performed intraoperatively in combination 
with a number of primary procedures, including facial reconstruction 
and reanimation, muscle flaps, trauma reconstruction, and digital and 
limb reattachment and, as the commenter stated, breast reconstruction, 
which appears to be the focus of the commenter's concern. In other 
words, there are a number of plastic and reconstructive surgical 
procedures with which the imaging procedure described by HCPCS code 
C9733 can be used, not just breast reconstruction surgery.
    While we proposed to maintain the assignment of HCPCS code C9733 to 
APC 0397, in this final rule with comment period, we are deleting APC 
0397 because of multiple 2 times rule violations in APC 0397 based on 
the final rule claims data. Once we removed the high-cost services from 
APC 0397, only several low-volume services remained in this APC, 
including HCPCS code C9733, which we reassigned to another APC. We have 
reassigned HCPCS code C9733 to APC 0263 (Level I Miscellaneous 
Radiology Procedures) for CY 2014, with a final rule geometric mean 
cost of approximately $319.
    After consideration of the public comment we received, we are 
finalizing our proposal to maintain the assignment of ``Q2'' status 
indicator to HCPCS code C9733. However, we are reassigning HCPCS code 
C9733 to APC 0263 when the service described by HCPCS code C9733 is 
performed and reported separately. Further discussion of comprehensive 
APCs is included in section II.A.2.e. of this final rule with comment 
period. However, we note that we are not implementing our comprehensive 
APC policy until CY 2015.
b. Subcutaneous Defibrillator (APC 0107)
    For CY 2014, we proposed to continue to assign CPT code 0319T 
(Insertion or replacement of subcutaneous implantable defibrillator 
system with subcutaneous electrode) to APC 0107 (Level I Implantation 
of Cardioverter-Defibrillators (ICDs)), for which we proposed a CY 2014 
geometric mean cost of approximately $25,447. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: Commenters objected to the proposed assignment of CPT code 
0319T to APC 0107 and requested that CMS reassign CPT code 0319T to APC 
0108 (Level II Implantation of Cardioverter-Defibrillators (ICDs)), for 
which we proposed a CY 2014 geometric mean cost of approximately 
$31,911. The commenters believed that CPT code 0319T is similar in 
clinical application and resource use to CPT code 33249 (Insertion or 
replacement of permanent pacing cardioverter-defibrillator system with 
transvenous lead(s), single or dual chamber), which is currently 
assigned to APC 0108.
    Response: We believe that the procedure described by CPT code 0319T 
is sufficiently clinically similar to the other procedures assigned to 
APC 0107. In addition, because we do not have CY 2012 claims data for 
CPT code 0319T for the CY 2014 ratesetting cycle, we cannot determine 
the resource costs for this procedure at this time. We expect to have 
claims data for CPT code 0319T in preparation for the CY 2015 
rulemaking cycle and will reevaluate the APC assignment of CPT code 
0319T at that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign CPT code 0319T to APC 0107, which has a final CY 2014 APC 
geometric mean cost of approximately $25,106.
c. Thrombolytic Therapy (APC 0621)
    For CY 2014, we proposed to continue to assign CPT code 37211 
(Transcatheter therapy, arterial infusion for thrombolysis other than 
coronary, any method, including radiological supervision and 
interpretation, initial treatment day) and CPT code 37212 
(Transcatheter therapy, venous infusion for thrombolysis other than 
coronary, any method, including radiological supervision and 
interpretation, initial treatment day) to APC 0621 (Level I Vascular 
Access Procedures), for which we proposed a CY 2014 geometric mean cost 
of approximately $866. (The proposed payment rate reflects the 
corrected proposed rate included in the September 6, 2013 OPPS Addendum 
B, which was posted on the CMS Web site.)
    Comment: One commenter objected to the proposed continued 
assignment of CPT codes 37211 and 37212 to APC 0621. The commenter 
stated that CPT codes 37211 and 37212, which both are assigned status 
indicator ``T,'' are often times performed in conjunction with CPT code 
75710 (Angiography, spinal selective, radiological supervision and 
interpretation) which is assigned status indicator ``Q2'' and is 
assigned to APC 0279 (Level II Angiography and Venography), for which 
we proposed a CY 2014 geometric mean cost of approximately $2,700. The 
commenter stated that, because CPT code 75710 is not separately paid 
when it appears on a claim in combination with other services assigned 
to status indicator ``T'' (such as CPT codes 37211 and 37212), 
providers receive significantly lower payment for CPT code 75710 when 
performed and reported in conjunction with CPT code 37211 or CPT code 
37212, compared to payment for the services when performed and reported 
separately, although significantly more resources are used. The 
commenter stated that payment for CPT codes 37211 and 37212 should not 
be packaged with payment for CPT code 75710 when the services described 
by CPT codes 37211 and 37212 are performed on the same date as CPT code 
75710.

[[Page 74978]]

    Response: We believe that the procedure described by CPT codes 
37211 and 37212 are sufficiently clinically similar to the other 
procedures assigned to APC 0621. In addition, CPT codes 37211 and 37212 
are new codes for CY 2013, and because we do not have claims data 
available for these two new CPT codes for CY 2013 ratesetting, we do 
not have a way to validate or substantiate the claims made by 
commenters. We expect to have claims data for CPT codes 37211 and 37212 
in preparation for the CY 2015 rulemaking cycle and will reevaluate the 
APC assignment of CPT codes 37211 and 37212 at that time.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign CPT codes 37211 and 37212 to APC 0621, which has a final CY 2014 
APC geometric mean cost of approximately $853.
d. Vascular Ligation (APCs 0091 and 0092)
    For CY 2014, we proposed to continue to assign CPT codes 36475 
(Endovenous ablation therapy of incompetent vein, extremity, inclusive 
of all imaging guidance and monitoring, percutaneous, radiofrequency; 
first vein treated) and 37191 (Insertion 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) to APC 0091 (Level II Vascular Ligation), 
which had a proposed payment rate of approximately $2,882.
    In addition, we proposed to continue to assign CPT code 36478 
(Endovenous ablation therapy of incompetent vein, extremity, inclusive 
of all imaging guidance and monitoring, percutaneous, laser; first vein 
treated) to APC 0092 (Level I Vascular Ligation), which had a proposed 
payment rate of approximately $2,047.
    (The proposed payment rates reflect the corrected proposed rates 
included in the September 6, 2013 OPPS Addendum B, which was posted on 
the CMS Web site.)
    Comment: One commenter stated that the CPT codes assigned to APCs 
0091 and 0092 do not meet the CMS requirement of clinical and cost 
homogeneity, and requested that CMS consider restructuring APCs 0091 
and 0092. The commenter requested that CMS review the clinical and cost 
characteristics of all the procedures assigned to these APCs and 
consider either combining APCs 0091 and 0092 or reassigning specific 
procedures to more appropriate APCs in order to establish clinical 
homogeneity. In particular, the commenter requested that CMS review the 
APC assignments for CPT codes 37191 and 36475 (assigned to APC 0091) 
and CPT code 36478 (assigned to APC 0092). The commenter stated that 
CPT code 37191 is not similar to the other procedures assigned to APC 
0091 because it is not a ligation procedure, and is the only procedure 
assigned to APC 0091 that requires an expensive implanted device. The 
commenter further stated that the cost associated with CPT code 37191 
is significantly higher than the cost of most of the other procedures 
assigned to APC 0091. The commenter also recommended that CPT codes 
36475 and 36478 be assigned to the same APC because they are nearly 
identical procedures. The commenter stated that the CPT clinical 
vignettes for CPT code 36475 (radiofrequency) and CPT code 36478 
(laser) show similarities between these two procedures, which further 
support the clinical homogeneity of these two procedures. The commenter 
believed that assigning both of these procedures to two different APCs, 
and maintaining a payment differential between CPT code 36475 and CPT 
code 36478, incentivizes providers to choose radiofrequency instead of 
laser, which is a clinically comparable procedure. The commenter 
believed that assigning the two procedures to the same APC would 
encourage providers to make treatment decisions based solely on 
clinical characteristics.
    Response: We appreciate the commenter's suggestions. We agree with 
the commenter's recommendations for reassignment of CPT codes 36475, 
36478, and 37191. With respect to CPT codes 36475 and 36478, we have 
further analyzed updated hospital outpatient claims data and determined 
that both procedures are comparable in terms of clinical homogeneity 
and resource costs and should be assigned to the same APC. Analysis of 
updated CY 2012 hospital outpatient claims data for the CY 2014 final 
rule shows a geometric mean cost of approximately $1,966 for CPT code 
36478, which is comparable to the geometric mean cost of approximately 
$2,382 for CPT code 36475. We also agree with the commenter that CPT 
code 37191 should be reassigned to another APC that is more appropriate 
based on the nature of the procedure. Based on our review of the 
existing vascular-related APCs and input from our medical advisors, we 
believe that CPT code 37191 would be more appropriately reassigned to 
APC 0093 (Vascular Reconstruction/Fistula Repair) because of the 
clinical homogeneity and similar resource costs of other procedures 
assigned to APC 0093.
    By accepting the commenter's recommendation to reassign CPT code 
37191 from APC 0091 to APC 0093, and after taking into consideration 
all of the procedures in APCs 0091 and 0092, we have determined that 
combining APCs 0091 and 0092 into one APC is appropriate. To accomplish 
this reconfiguration, we are establishing new APC 0219 (Vascular 
Ligation), which has a geometric mean cost of approximately $2,147. The 
geometric mean cost of new APC 0219 is based on the costs of all of the 
22 procedures assigned to APCs 0091 and 0092; the most significant cost 
among these 22 procedures ranged between $1,455 (for CPT code 37765) 
and $2,382 (for CPT code 36475). In addition, because of the 
reassignment of CPT code 37191 to APC 0093, we are modifying the title 
of APC 0093 to read: ``Vascular Reconstruction/Fistula Repair'' to 
appropriately describe all the procedures assigned to this APC.
    After further consideration of the public comment that we received, 
we are revising the APC assignment for CPT codes 36475, 36478, and 
37191. Specifically, we are reassigning CPT codes 36475 and 36478 to 
new APC 0219, reassigning CPT code 37191 to APC 0093, and modifying the 
title of APC 0093 to read: ``Vascular Reconstruction/Fistula Repair''. 
The final CY 2014 geometric mean cost of APC 0219 is approximately 
$2,147, and approximately $2,857 for APC 0093. The final CY 2014 
payment rates for CPT codes 36475, 36478, and 37191 can be found in 
Addendum B to this CY 2014 OPPS/ASC final rule with comment period 
(which is available via the Internet on the CMS Web site).
2. Gastrointestinal Services
a. Fecal Microbiota Transplantation (APC 0340)
    For CY 2014, we proposed to continue to assign HCPCS code G0455 
(Preparation with instillation of fecal microbiota by any method, 
including assessment of donor specimen) to APC 0340 (Level I Minor 
Procedures), which had a proposed payment rate of approximately $74. 
Although the CPT Editorial Panel established CPT code 44705 
(Preparation of fecal microbiota for instillation, including assessment 
of donor specimen), effective January 1, 2013, to describe a fecal 
microbiota procedure, we did not recognize the

[[Page 74979]]

CPT code for payment under the OPPS. As we stated in the CY 2013 MPFS 
final rule with comment period (77 FR 69052), by policy, Medicare's 
payment for the preparation of the donor specimen would only be made if 
the specimen is ultimately used for the treatment of a beneficiary. 
Because of this policy, we believe that it was appropriate to bundle 
the preparation and instillation of fecal microbiota into one payable 
HCPCS code. Consequently, we established HCPCS code G0455, effective 
January 1, 2013, for Medicare reporting of the fecal microbiota 
procedure.
    Comment: One commenter stated that the CY 2013 payment rate of 
approximately $50 for HCPCS code G0455 is insufficient. The commenter 
further stated that this payment rate does not appear to recognize the 
patient preparation for the implantation or the instillation of the 
donor microbes, the supplies, or the overall work involved in providing 
this procedure. The commenter stated that if the microbiota 
instillation is performed via colonoscopy or esophagogastroduodenoscopy 
(EGD), the CY 2013 payment rate for the procedure does not include the 
cost of the endoscopic portion of the procedure. To pay appropriately 
for this procedure, the commenter recommended that CMS delete existing 
HCPCS code G0455 and replace it with three new HCPCS G-codes. The 
commenter suggested that the three recommended HCPCS G-codes 
differentiate the various preparation methods used in performing the 
procedure and be assigned accordingly to appropriate APCs. 
Specifically, the commenter recommended that one HCPCS G-code describe 
instillation by oronasogastric tube or enema, the second HCPCS G-code 
describe instillation by upper endoscopy, and the third HCPCS G-code 
describe instillation by colonoscopy.
    Response: We appreciate the commenter's suggestions. However, we 
believe that the existing HCPCS code G0455 appropriately describes the 
procedure for which Medicare should pay. Under Medicare, payment for 
the preparation of the donor specimen would only be 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. 
Because of this policy, we believe that it is appropriate to bundle the 
preparation and instillation of fecal microbiota under HCPCS code 
G0455.
    Based on our understanding of the procedure, we believe that HCPCS 
code G0455 is appropriately assigned to APC 0340 for CY 2014. Because 
this code was new for CY 2013, we expect to have claims data for HCPCS 
code G0455 for the CY 2015 ratesetting process. As has been our 
practice since the implementation of the OPPS, we annually review all 
the items and services within an APC group to determine, with respect 
to comparability of the use of resources, for any 2 times rule 
violations. In making this determination, we review our claims data and 
determine whether we need to make changes to the current APC 
assignments for the following year. We will reevaluate the status 
indicator and APC assignment for HCPCS code G0455 for the CY 2015 OPPS 
rulemaking cycle.
    After consideration of the public comment that we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign HCPCS code G0455 to APC 0340. The final CY 2014 geometric mean 
cost of HCPCS code G0455 is approximately $54. The final CY 2014 
payment rate for HCPCS code G0455 can be found in Addendum B to this CY 
2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site).
b. Transoral Incisionless Fundoplication (APC 0422)
    For CY 2014, we proposed to continue to assign CPT code C9724 
(Endoscopic full-thickness plication of the stomach using endoscopic 
plication system (eps); includes endoscopy) to APC 0422 (Level III 
Upper GI Procedures), which had a proposed payment rate of 
approximately $1,967. (The proposed payment rate reflects the corrected 
proposed rate included in the September 6, 2013 OPPS Addendum B, which 
was posted on the CMS Web site.)
    HCPCS code C9724, which was established by CMS effective April 1, 
2005, describes an endoscopic full-thickness plication procedure for 
the treatment of gastroesophageal reflux disease (GERD). Since April 
2005, HCPCS code C9724 has been assigned to APC 0422. Of the three 
existing upper GI APCs, APC 0422 is the highest paying APC.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68333), we stated that a presenter at the August 2012 HOP Panel meeting 
requested that CMS either reassign HCPCS code C9724 from APC 0422 to 
New Technology APC 1565 (New Technology--Level XXVIII ($5000-$5500)) or 
create a new APC with a descriptor of ``Level IV Upper GI Procedures.'' 
We also stated that, based on the Panel's review and discussion of the 
claims data, we accepted the Panel's recommendation to continue to 
assign HCPCS code C9724 to APC 0422 for the CY 2013 update.
    Furthermore, because of concerns related to the descriptor of HCPCS 
code C9724, in that same final rule with comment period, we revised the 
long descriptor of HCPCS code C9724 to read ``Endoscopic full-thickness 
plication of the stomach using endoscopic plication system (eps); 
includes endoscopy,'' effective January 1, 2013, to accurately describe 
how the procedure is currently performed.
    At the August 2013 HOP Panel meeting, the same presenter at the 
August 2012 HOP Panel meeting requested that the Panel recommend that 
CMS reassign HCPCS code C9724 from APC 0422 to a new APC with a 
descriptor of ``Level IV Upper GI Procedures.'' The Panel did not make 
this recommendation at the meeting.
    Comment: Several commenters disagreed with the proposal to continue 
to assign HCPCS code C9724 to APC 0422. The commenters stated that the 
proposed payment rate for APC 0422 does not adequately pay for the cost 
of performing the procedure. These commenters urged CMS to establish a 
new APC with a descriptor of ``Level IV Upper GI Procedures'' or 
``Level IV Upper GI Transoral Procedures,'' with a payment rate of 
between $3,000 and $5,000, and reassign HCPCS code C9724 and CPT code 
43257 to this newly created APC.
    Response: Because HCPCS code C9724 became effective April 1, 2005, 
we have several years of claims data. We examined the latest hospital 
outpatient claims data for HCPCS code C9724, based on claims data for 
dates of service between January 1, 2012, and December 31, 2012, that 
were processed on or before June 30, 2013. Our analysis of these latest 
claims data shows a geometric mean cost of approximately $6,801 based 
on 12 single claims (out of 73 total claims) for HCPCS code C9724. 
Overall, APC 0422 has a geometric mean cost of approximately $1,976, 
which is based on the seven procedures assigned to this APC. Of the 
seven procedures assigned to APC 0422, three procedures have geometric 
mean cost ranging between approximately $1,431 (for CPT code 43830) and 
approximately $2,042 (for CPT code 43228).
    APC 0422 consists of other procedures that manipulate the natural 
or an artificial entrance to the stomach, similar to the procedure 
described by TIF. We believe that maintaining the assignment of HCPCS 
code C9724 to

[[Page 74980]]

APC 0422 continues to be appropriate because several other procedures 
assigned to this APC are highly clinically similar to the procedure 
described by HCPCS code C9724 in that they are upper gastrointestinal 
endoscopy procedures. In particular, CPT code 43257 describes an upper 
gastrointestinal endoscopy procedure for the treatment of GERD, which 
is also the method and purpose of HCPCS code C9724. Consistent with our 
longstanding policy since the implementation of OPPS in 2000, we will 
reevaluate the APC assignment for every code during our annual 
rulemaking cycle.
    After consideration of the public comments that we received, we are 
finalizing our CY 2014 proposal, without modification, to maintain the 
assignment of HCPCS code C9724 to APC 0422. The final CY 2014 geometric 
mean costs for APC 0422 is approximately $1,976. The final CY 2014 
payment rate for HCPCS code C9724 can be found in Addendum B to this CY 
2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site).
3. Genitourinary Services
a. Percutaneous Renal Cryoablation (APC 0423)
    For CY 2014, we proposed to continue to assign CPT code 50593 
(Ablation, renal tumor(s), unilateral, percutaneous, cryotherapy) to 
APC 0423 (Level II Percutaneous Abdominal and Biliary Procedures), with 
a proposed payment rate of approximately $4,114. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.) CPT code 
50593 became effective in CY 2008; however, the same service was 
previously described by CPT code 0135T (Ablation renal tumor(s), 
unilateral, percutaneous, cryotherapy). We note that, for CY 2007, 
based upon the APC Panel's recommendation made at its March 2006 
meeting, we reassigned CPT code 0135T (now CPT code 50593) from APC 
0163 (Level IV Cystourethroscopy and Other Genitourinary Procedures) to 
APC 0423, effective January 1, 2007.
    Comment: One commenter expressed concern that the proposed payment 
rate of approximately $4,114 for APC 0423, the APC to which CPT code 
50593 is assigned, is inadequate because the proposed payment rate does 
not accurately account for the costs incurred by hospitals in 
performing the procedure described by CPT code 50593. Further, the 
commenter indicated that hospitals are hesitant to perform this 
procedure because of the inadequate APC payment rate assigned to the 
procedure. The commenter asked CMS to designate CPT code 50593 as a 
``device-dependent'' procedure and require hospitals to submit claims 
with the appropriate device C-code, specifically, HCPCS code C2618 
(Probe, cryoablation). The commenter believed that the inadequacy of 
the proposed payment rate for APC 0423 is attributable to claims data 
that do not accurately capture the full costs of the procedure 
described by CPT code 50593. The commenter stated that approximately 
half of the single claims reporting CPT code 50593 do not contain the 
associated charge for the required device used in performing the 
service, specifically HCPCS code C2618 (Probe, cryoablation). The 
commenter stated that designating CPT code 50593 as a device-dependent 
procedure would result in a more accurate payment for the procedure and 
continued Medicare beneficiary access to percutaneous renal 
cryoablation in the HOPD.
    Response: We continue to believe that CPT code 50593 is 
appropriately assigned to APC 0423 based on clinical and resource 
similarities compared to other procedures also proposed for assignment 
to APC 0423 for CY 2014. As we stated in the CY 2007 OPPS final rule 
with comment period (71 FR 68049 through 68050), the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66709), the CY 2009 OPPS/ASC 
final rule with comment period (73 FR 68611), the CY 2010 OPPS/ASC 
final rule with comment period (74 FR 60444), and the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 71910), we initially revised the 
APC assignment for the percutaneous renal cryoablation procedure from 
APC 0163 to APC 0423 in CY 2007 based on the APC Panel's 
recommendation. In addition, based on our CY 2012 claims data, the 
resource use associated with CPT code 50593 is comparable to the other 
procedures assigned to APC 0423. Specifically, our latest hospital 
outpatient claims data shows that the geometric mean cost for CPT code 
50593, based on 667 single claims (out of 1,357 total claims), is 
approximately $5,047. Overall, APC 0423 has a geometric mean cost of 
approximately $4,121, which is based on claims data for the eight 
procedures assigned to this APC. Of the eight procedures, six 
procedures have the most significant geometric mean cost, ranging 
between approximately $3,117 (for CPT code 47511) and approximately 
$5,047 (for CPT code 50593). Based on our latest claims data, and the 
clinical homogeneity and resource similarity of the procedure described 
by CPT code 50593 to the other procedures assigned to APC 0423, we 
believe that CPT code 50593 is appropriately assigned to APC 0423.
    Moreover, we disagree with the commenter's assertion that hospitals 
are reluctant to perform this procedure because of the inadequate 
payment rate. We believe that the payment rate for APC 0423, the APC to 
which CPT code 50593 is assigned, is sufficient to ensure Medicare 
beneficiary access to this service.
    With regard to the commenter's request to designate CPT code 50593 
as a device-dependent procedure in an APC, we do not agree that CPT 
code 50593 should be designated as a device-dependent procedure. We do 
not identify individual HCPCS codes as device-dependent HCPCS codes 
under the OPPS. Rather, we first consider the clinical and resource 
characteristics of a procedure and determine the most appropriate APC 
assignment. When we determine that we should assign a procedure to an 
APC that is device-dependent, based on whether that APC has been 
historically identified under the OPPS as having very high device 
costs, we then consider the implementation of device edits, as 
appropriate. We again note that the identification of device-dependent 
APCs was particularly important in the early years of the OPPS when 
separate pass-through payment for many implantable devices expired. At 
that time, a variety of methodologies to package the costs of those 
devices into procedural APCs was utilized over several years to ensure 
appropriate incorporation of the device costs into the procedure 
payments. At this point in time, hospitals have significantly more 
experience reporting HCPCS codes for packaged and separately payable 
items and services under the OPPS and the payment groups are more 
mature. We believe that our standard ratesetting methodology typically 
results in appropriate payment rates for new procedures that utilize 
devices, as well as those that do not use high-cost devices. In recent 
years, we have not encountered circumstances whereby we have had to 
establish new device-dependent APCs because we were not able to 
accommodate the clinical and resource characteristics of a procedure by 
assigning it to an existing APC (whether device-dependent or non-
device-dependent), and the procedure described by CPT code 50593 is no 
exception.
    While all of the procedures assigned to APC 0423 require the use of

[[Page 74981]]

implantable devices, for many of the procedures, there are no Level II 
HCPCS codes that describe all of the technologies that may be used in 
the procedures. Therefore, it would not be possible for us to develop 
procedure-to-device edits for all of the CPT codes assigned to APC 
0423. Under the OPPS, there are many other procedures that require the 
use of implantable devices that, because they are assigned to OPPS APCs 
that are not device-dependent, do not have procedure-to-device edits 
applied, even if those claims processing edits would be feasible. We 
continue to believe that our payments for procedures that utilize high-
cost devices are appropriate for those services, even when those 
services are grouped with other procedures that either do not require 
the use of implantable devices or which utilize devices that are not 
described by specific Level II HCPCS codes. When reporting CPT code 
50593, we expect hospitals to also report the device HCPCS code C2618, 
which is associated with this procedure. We also remind hospitals that 
they must report all of the HCPCS codes that appropriately describe the 
items used to provide services, regardless of whether the HCPCS codes 
are packaged or paid separately. If hospitals use more than one probe 
in performing the procedure described by CPT code 50593, we expect 
hospitals to report this information on the claim and adjust their 
charges accordingly. Hospitals should report the number of cryoablation 
probes used to perform the procedure described by CPT code 50593 as the 
number of units of HCPCS code C2618, which describes these devices, 
with their charges for the probes. Since CY 2005, we have required 
hospitals to report device HCPCS codes for all devices used in 
procedures if there are appropriate HCPCS codes available. In this way, 
we can be confident that hospitals have included charges on their 
claims for costly devices used in procedures when they submit claims 
for those procedures. For further discussion of device-dependent edits, 
we refer readers to section II.A.2.d. of this CY 2014 OPPS/ASC final 
rule with comment period.
    Comment: One commenter requested that CMS revise the code 
descriptor for device HCPCS code C2618 consistent with how cryoablation 
probes are now classified by the medical industry. The commenter stated 
that since the implementation of the OPPS and the development of device 
descriptions, cryoablation probes have improved and these devices are 
now referred to as cryoablation needles. The commenter believed that 
modifying the description of HCPCS code C2618 will enable hospitals to 
appropriately report the use of the device when submitting claims to 
CMS and other payers.
    Response: Based on input from our medical advisors, we agree that a 
change in the description of HCPCS code C2618 is appropriate. 
Therefore, for the CY 2014 update, we are revising the description for 
HCPCS code C2618 from ``Probe, cryoablation'' to ``Probe/needle, 
cryoablation'' effective January 1, 2014.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign CPT code 50593 to APC 0423, which has a final CY 2014 geometric 
mean cost of approximately $4,121. In addition, we are revising the 
code descriptor for HCPCS code C2618 to read: ``Probe/needle, 
cryoablation'' effective January 1, 2014. The final CY 2014 payment 
rate for CPT code 50593 can be found in Addendum B to this CY 2014 
OPPS/ASC final rule with comment period (which is available via the 
Internet on the CMS Web site).
b. Anoscopy With Directed Submucosal Injection (APC 0150)
    We created HCPCS code C9735 (Anoscopy; with directed submucosal 
injection(s), any substance) effective April 1, 2013, and assigned the 
code to APC 0150 (Level IV Anal/Rectal Procedures) for CY 2013, which 
has a payment rate of $2,365.97. The procedure described by HCPCS code 
C9735 involves injection of a bulking agent, L8605 (Injectable bulking 
agent dextranomer/hyaluronic acid copolymer implant, anal canal, 1 ml, 
includes shipping and necessary supplies). For CY 2014, we proposed to 
maintain the assignment of HCPCS code C9735 to APC 0150, with a 
proposed payment rate of approximately $2,520. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: One commenter believed that the proposed assignment of 
HCPCS code C9735 to APC 0150 is inappropriate. The commenter stated 
that the bulking agent used in the performance of the procedure 
described by HCPCS code C9735 costs $4,900 for the 4 mL required for 
the injections, and that the total cost of the procedure described by 
HCPCS code C9735 is more than the proposed payment rate of 
approximately $2,519 for APC 0150. The commenter recommended creating a 
new Level V Anal/Rectal Procedures APC, composed of HCPCS code C9735, 
and two other procedures, CPT code 46762 (Sphincteroplasty, anal, for 
incontinence, adult; implantation artificial sphincter), and CPT code 
0184T (Excision of rectal tumor, transanal endoscopic microsurgical 
approach (ie, TEMS), including muscularis propria (ie, full 
thickness)). The commenter stated that the procedure described by CPT 
code 46762 is clinically similar to the procedure described by HCPCS 
code C9735 because both procedures involve implantation of a product to 
treat fecal incontinence, and that the procedure described by HCPCS 
code C9735 is similar to the procedure described by CPT code 0184T 
because both procedures involve new technology with significant 
procedure costs.
    Alternatively, the commenter recommended assigning HCPCS code C9735 
to New Technology APC 1526, with a CY 2014 proposed payment rate of 
approximately $4,250.
    Response: HCPCS code C9735 was created effective April 1, 2013. 
Therefore, we do not have claims data on this procedure at this time. 
Our longstanding policy is to wait until claims data are available on a 
new procedure before reassigning the procedure to another clinical APC. 
We do not agree with the commenter that creating a Level V Anal/Rectal 
Procedures APC is warranted at this time. The three codes recommended 
for assignment to such an APC, all of which are currently assigned to 
the Level IV Anal/Rectal Procedures APC, are low volume or no volume 
services. According to our CY 2012 claims data, CPT code 0184T has 104 
single frequency claims, CPT code 46762 has 8 single claims, and HCPCS 
code C9735 has no claims volume. The low volume of claims for such an 
APC would contribute to APC cost and payment volatility. Regarding the 
commenter's recommendation to assign HCPCS code C9735 to a New 
Technology APC, we believe that HCPCS code C9735 is clinically similar 
to the other services assigned to APC 0150, which includes another 
anoscopy service, and, therefore, APC 0150 is an appropriate APC 
assignment for HCPCS code C9735. Based on our established OPPS 
ratesetting methodology, we will review the APC assignment for HCPCS 
code C9735 once we have OPPS claims data for this service during our 
annual OPPS update process. Therefore, we are finalizing our proposal 
to maintain the assignment of HCPCS code C9735 to APC 0150 for CY 2014. 
The final CY 2014 geometric mean cost for APC 0150 is approximately 
$2,510.

[[Page 74982]]

4. Musculoskeletal Services
a. Arthroplasty (APC 0425)
    APC 0425 (Level II Arthroplasty or Implantation with Prosthesis) 
contains arthroplasty procedures as well as osseointegrated implant 
procedures. For CY 2014, we proposed to convert APC 0425 to a 
comprehensive APC, with a proposed geometric mean cost of approximate 
$9,939. (The proposed payment rate reflects the corrected proposed rate 
included in the September 6, 2013 OPPS Addendum B, which was posted on 
the CMS Web site.)
    Comment: One commenter requested that CMS review the current 
composition of APC 0425 for clinical homogeneity and resource cost 
cohesion, including the newly added adjunctive costs that would result 
from converting APC 0425 to a comprehensive APC. The commenter 
recommended that CMS remove the following osseointegrated implant 
procedure codes from APC 0425 and assign them to a more clinically 
appropriate APC: CPT code 69714 (Implantation, osseointegrated implant, 
temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; without mastoidectomy); CPT code 69715 
(Implantation, osseointegrated implant, temporal bone, with 
percutaneous attachment to external speech processor/cochlear 
stimulator; with mastoidectomy); CPT code 69717 (Replacement (including 
removal of existing device), osseointegrated implant, temporal bone, 
with percutaneous attachment to external speech processor/cochlear 
stimulator; without mastoidectomy); and CPT code 69718 (Replacement 
(including removal of existing device), osseointegrated implant, 
temporal bone, with percutaneous attachment to external speech 
processor/cochlear stimulator; with mastoidectomy).
    Response: In response to the commenter's request, we have again 
reviewed the composition of APC 0425 for clinical and resource 
homogeneity. Although we are not making comprehensive APCs effective 
until CY 2015, the proposed procedural composition of APC 0425 is the 
same whether this APC is a comprehensive APC or not. We found in our 
review that the clinical and resource composition of proposed APC 0425 
is appropriate because all of the procedures assigned to the APC 
involve surgical procedures that use high-cost devices, including the 
osseointegrated device procedures represented by CPT codes 69714, 
69715, 69717, and 69718. Therefore, we do not believe that it is 
necessary to reconfigure the proposed APC 0425.
    After consideration of the public comment we received, we are 
finalizing the proposed composition of APC 0425 for CY 2014 with the 
modification that APC 0425 will not be made a comprehensive APC until 
CY 2015. The final CY 2014 geometric mean cost of APC 0425 is 
approximately $9,766.
b. Joint Stabilization (APC 0052)
    The CPT Editorial Panel created 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)), effective July 1, 
2013. For CY 2013, we assigned CPT code 0334T to APC 0208 (Laminotomies 
and Laminectomies) with a payment rate of $3,758.59. For CY 2014, we 
proposed to maintain the assignment of CPT code 0334T to APC 0208, with 
a proposed payment rate of approximately $4,109. (The proposed payment 
rate reflects the corrected proposed rate included in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: A few commenters objected to our proposed assignment of 
CPT code 0334T to APC 0208, and stated that APC 0208 is not an 
appropriate assignment for CPT code 0334T either in terms of resources 
or clinical homogeneity. The commenters stated that the proposed 
payment rate for APC 0208 is insufficient to cover the approximately 
$10,500 in implant costs. The commenters further stated that the other 
procedures assigned to APC 0208 do not have appreciable device costs. 
One commenter performed a cost analysis on claims reporting CPT code 
27280 (Arthrodesis, sacroiliac joint (including obtaining graft)), the 
CPT code that would have been used for minimally invasive Sacroiliac 
(SI) fusion procedures in CY 2012, the year used for the CY 2014 
ratesetting. Based on the commenter's analysis, 38 hospitals submitted 
outpatient claims reporting CPT code 27280. However, no claims were 
used for CY 2014 Medicare ratesetting because CPT code 27280 was 
included on the OPPS inpatient only list for CY 2012 (and currently 
remains on this list). The commenter calculated a geometric mean cost 
of $14,733 based on these 38 claims. The commenter believed that these 
38 claims represented migration of the procedure described by CPT code 
27280, which uses minimally invasive techniques and implants, to the 
hospital outpatient setting. Some commenters also stated that other 
procedures assigned to APC 0208 are primarily used for decompressing 
the disc and neural structures, which differ in location and purpose 
from the procedure described by CPT code 0334T. The commenters 
recommended that CMS consider assigning CPT code 0334T to a New 
Technology APC with a payment rate range between $14,500 and $15,000, 
based on the commenter's analysis of the claims reporting CPT code 
27280; or creating a new clinical APC and assigning CPT code 0334T to 
that APC based on the cost estimate for performing the procedure 
described by CPT code 27280 because there are no other clinical APCs 
that are appropriate to assign CPT code 0334T.
    Response: We appreciate the commenters' suggestions. However, in 
regard to the commenter's cost analysis performed using the 38 CY 2012 
claims for CPT code 27280, we do not believe that these 38 claims 
likely represent the cost of performing the procedure described by CPT 
code 0334T. As the commenter stated, CPT code 27280 was listed as an 
inpatient only service for CY 2012, currently remains on the inpatient 
only list for CY 2013, and is proposed to remain on the inpatient only 
list for CY 2014. CPT code 27280 is used primarily to report open 
sacroiliac joint fusion procedures, rather than minimally invasive SI 
joint fusion procedures. Therefore, while some of the 38 claims may 
involve the minimally invasive techniques, we are not convinced that 
these claims represent minimally invasive techniques, but consist 
mainly of open SI joint fusion procedures, which are the primarily 
reported procedures for this code. Regarding the commenters' suggested 
option to create a new device pass-through category, we do not discuss 
the merits of OPPS pass-through status applications in our proposed or 
final rules. Regarding the commenters' recommended option to assign CPT 
code 0334T to a New Technology APC or to create a new clinical APC for 
CPT code 0334T, we agree with the commenters that there may be a more 
appropriate APC to which we could assign CPT code 0334T based on 
resource use and clinical homogeneity. However, we believe that CPT 
code 0334T can be appropriately assigned to an existing clinical APC, 
which is preferable because other clinically similar procedures 
populate the APC. The final geometric mean cost of APC 0208 is 
approximately $4,017. We agree that the resource use associated with 
the

[[Page 74983]]

procedure described by CPT code 0334T is likely to be greater than the 
resource use associated with the typical procedures assigned to APC 
0208. Therefore, we believe that a more appropriate initial APC 
assignment based on clinical and resource homogeneity for this new 
procedure is APC 0052 (Level IV Musculoskeletal Procedures Except Hand 
and Foot). APC 0052 includes several orthopedic fusion procedures that 
are clinically similar to the procedure described by CPT code 0334T, 
and we believe that it is appropriate clinically to assign CPT code 
0344T to APC 0052, which has a final geometric mean cost of 
approximately $6,530. In accordance with our longstanding policy, we 
will review the assignment of CPT code 0334T in a future annual OPPS 
update, when we have available claims data for ratesetting.
    After consideration of the public comments we received, we are not 
finalizing our CY 2014 proposal to maintain the assignment of CPT code 
0334T to APC 0208. Rather, for CY 2014, we are assigning CPT code 0334T 
to APC 0052, which has a final geometric mean cost of approximately 
$6,530.
5. Nervous System Services
a. Chemodenervation (APCs 0161 and 0204)
    CPT codes 64615 (Chemodenervation of muscle(s); muscle(s) 
innervated by facial, trigeminal, cervical spinal and accessory nerves, 
bilateral (e.g., for chronic migraine)) and 52287 (Cystourethroscopy, 
with injection(s) for chemodenervation of the bladder) both became 
effective January 1, 2013. For CY 2014, we proposed to continue to 
assign CPT code 52287 to APC 0161 (Level II Cystourethroscopy and Other 
Genitourinary Procedures), with a proposed payment rate of 
approximately $1,201. In addition, we proposed to continue to assign 
CPT code 64615 to APC 0204 (Level I Nerve Injections), with a proposed 
payment rate of approximately $214. (The proposed payment rates reflect 
the corrected proposed rates included in the September 6, 2013 OPPS 
Addendum B, which was posted on the CMS Web site.)
    Comment: One commenter requested that CMS reassign CPT code 64615 
from APC 0204 to APC 0206 (Level II Nerve Injections) because of the 
clinical similarity to the procedure described by CPT code 64613 
(Chemodenervation of muscle(s); neck muscle(s) (eg, for spasmodic 
torticollis, spasmodic dysphonia)), which is assigned to APC 0206. This 
commenter stated that the payment rate for APC 0204 does not adequately 
pay for the cost of providing the procedure. The commenter submitted 
this same request in response to the CY 2013 OPPS/ASC final rule with 
comment period.
    Response: We disagree with the commenter's assertion that the 
procedure described by CPT code 64615 is more similar to the procedure 
described by CPT code 64613. Based on the description of the procedure, 
the procedure described by CPT code 64615 is most similar to the 
procedure described by CPT code 64612 (Chemodenervation of muscle(s); 
muscle(s) innervated by facial nerve, unilateral (eg, for 
blepharospasm, hemifacial spasm)), which is assigned to APC 0204. The 
procedures described by CPT codes 64612 and 64615 both involve facial 
nerve muscles, whereas the procedure described by CPT code 64613 
involves the neck muscles. Consequently, we believe that CPT code 64615 
is appropriately assigned to APC 0204 based on its clinical homogeneity 
to CPT code 64612.
    We note that, in addition to the payment for the procedure, 
hospitals would receive separate payment for the drug 
onabotulinumtoxina, which is described by HCPCS code J0585 (Injection, 
onabotulinumtoxina, 1 unit), when the drug is administered during the 
procedure.
    Consistent with CMS' longstanding policy since the implementation 
of the OPPS in 2000, we evaluate, on an annual basis, all of the APC 
assignments for appropriateness. We note that because CPT code 64615 is 
a new code that became effective for CY 2013, we will have a full year 
of claims data available next year, and as with every HCPCS code or CPT 
code, we will reevaluate its APC assignment during the annual 
rulemaking cycle.
    Comment: One commenter requested that CMS reassign CPT code 52287 
from APC 0161 to APC 0162 (Level III Cystourethroscopy and Other 
Genitourinary Procedures). The commenter stated that the proposed APC 
assignment for CPT code 52287 is economically and clinically 
inappropriate. The commenter further stated that the procedure 
described by CPT code 52287 is more clinically similar to the procedure 
described by CPT code 52283 (Cystourethroscopy, with steroid injection 
into stricture), which is assigned to APC 0162. The commenter submitted 
this same request in response to the CY 2013 OPPS/ASC final rule with 
comment period.
    Response: APC 0161 consists of a variety of procedures, some of 
which describe cystourethroscopic procedures of the urethra and 
bladder. We believe that the procedure described by CPT code 52287 is 
more clinically similar to the other cystourethroscopic procedures 
assigned to APC 0161, such as the procedure described by CPT code 
52281, than to procedures assigned to APC 0162, such as the procedure 
described by CPT code 52287 as mentioned by the commenter. We also note 
that in addition to a payment for the procedure at the payment rate for 
APC 0161, hospitals also receive separate payment for the 
chemodenervation drug. For the CY 2014 update, the payment rate for APC 
0161 is approximately $1,205. As has been our practice since the 
implementation of the OPPS, we annually review all of the items and 
services within an APC group to determine, with respect to 
comparability of the use of resources, any 2 times rule violations. In 
making this determination, we review all claims data and determine 
whether we need to make changes to the current APC assignments for the 
following year. We will reevaluate the status indicator and APC 
assignment for CPT code 52287 for the CY 2015 OPPS rulemaking cycle.
    After consideration of the public comments received, we are 
finalizing our CY 2014 proposals, without modification, to continue to 
assign CPT code 64615 to APC 0204, and to continue to assign CPT code 
52287 to APC 0161. The final CY 2014 geometric mean costs for APCs 0204 
and 0161 are approximately $203 and $1,209, respectively.
b. Nerve Conduction Studies (APCs 0216 and 0218)
    For CY 2013, the AMA's CPT Editorial Panel established seven new 
CPT codes to describe nerve conduction tests, which were effective 
January 1, 2013. For CY 2014, we proposed to continue to assign CPT 
codes 95907, 95908, 95909, and 95910 to APC 0215 (Level I Nerve and 
Muscle Services), with a proposed payment rate of approximately $67. In 
addition, we proposed to reassign CPT codes 95911, 95912, and 95913 
from APC 0218 (Level II Nerve and Muscle Services) to APC 0215. The 
descriptors for these seven CPT codes and our proposed APC assignments 
are listed in Table 26 below.
    Comment: Some commenters expressed concern with the proposed APC 
assignments of CPT codes that describe the nerve conduction tests. The 
commenters stated that the proposed payment of $67 for APC 0215 is 
inadequate because it does not cover the

[[Page 74984]]

expenses associated with providing these services. The commenters urged 
CMS to reconsider the proposed APC assignments for CPT codes 95907 
through 95913, and suggested specific alternative APC assignments for 
these specific codes. Specifically, the commenters recommended the 
reassignment of CPT code 95907 from APC 0215 to APC 0218, the 
reassignment of CPT codes 95908, 95909, and 95910 from APC 0215 to APC 
0216 (Level III Nerve and Muscle Services), and the reassignment of CPT 
codes 95911, 95912, and 95913 from APC 0218 to APC 0216.
    We also received a comment in response to the CY 2013 OPPS/ASC 
final rule with comment period relating to these codes. The commenter 
stated that the CY 2013 OPPS payment rates for these new codes were 
significantly lower for these services when they were performed in the 
hospital outpatient setting compared to when they were performed in the 
physician office setting, and suggested that the lower payment rates 
would negatively impact beneficiary access to neurologic care.
    Response: After further consultation with our medical advisors, we 
agree with the commenters that a revision to the APC assignments for 
CPT codes 95907 through 95913 is necessary. Based on the nature of the 
procedures described by these codes and the additional information 
submitted to us by the commenters on the CY 2013 OPPS/ASC final rule 
with comment period and the CY 2014 OPPS/ASC proposed rule, we believe 
that the nerve conduction tests described by CPT codes 95908, 95909, 
95910, 95911, 95912, and 95913 would be more appropriately assigned to 
APC 0216. In addition, we believe that the nerve conduction test 
described by CPT code 95907 would be more appropriately assigned to APC 
0218.
    Therefore, after consideration of the public comments we received, 
we are revising our CY 2014 proposed APC reassignment of CPT codes 
95908, 95909, 95910, 95911, 95912, and 95913 from APC 0215 to APC 0216. 
In addition, we are revising our CY 2014 proposed APC reassignment of 
CPT code 95907 from APC 0215 to APC 0218. The final APC assignments for 
these codes, along with the final status indicators are listed in Table 
26 below. The final CY 2014 payment rates for CPT codes 95907 through 
95913 are included in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
    We remind hospitals that, consistent with our longstanding policy 
since the implementation of OPPS in 2000, we will reevaluate the APC 
assignments for these codes in next year's rulemaking cycle. As has 
been our practice, we annually review all the items and services within 
an APC group to determine, with respect to comparability of the use of 
resources, if the geometric mean cost of the highest cost item or 
service within an APC group is more than 2 times greater than the 
geometric mean cost of the lowest cost item or service within that same 
group. In making this determination, we review our claims data and 
determine whether we need to make changes to the current APC 
assignments for the following year. We note that, because CPT codes 
95907 through 95913 became effective for CY 2013, we will not have 
applicable claims data available for these services for ratesetting 
until the CY 2015 rulemaking cycle.
[GRAPHIC] [TIFF OMITTED] TR10DE13.324

c. Parasympathetic Function and Sympathetic Function (APC 0215)
    In CY 2013, the AMA's Editorial Panel created two new codes to 
describe testing of parasympathetic and sympathetic functions of the 
autonomic nervous system at the same time, with and without use of 
passive tilt: CPT code 95943 (Simultaneous, independent, quantitative 
measures of both parasympathetic function and sympathetic function) and 
CPT code

[[Page 74985]]

95924 (Testing of autonomic nervous system function; combined 
parasympathetic and sympathetic adrenergic function testing with at 
least 5 minutes of passive tilt). For CY 2013, we assigned CPT code 
95943 to APC 0215 (Level I Nerve and Muscle Tests), which has a CY 2013 
payment rate of approximately $43. We also assigned comment indicator 
``NI'' to CPT code 95943 to indicate that the code was new for CY 2013 
with an interim APC assignment that was subject to public comment 
following the publication of the CY 2013 final rule with comment 
period. We assigned CPT code 95924 (Testing of autonomic nervous system 
function; combined parasympathetic and sympathetic adrenergic function 
testing with at least 5 minutes of passive tilt) to APC 0218 (Level II 
Nerve and Muscle Tests), which has a CY 2013 payment rate of 
approximately $80.
    Comment: One commenter who addressed the interim APC assignment of 
CPT code 95943 believed that the test described by CPT code 95943 is 
more similar in terms of clinical homogeneity and resource use to the 
services assigned to APC 0218, and requested that CMS reassign CPT code 
95943 to APC 0218 for CY 2014, which has a final rule geometric mean 
cost of approximately $128. APC 0215 has a final rule geometric mean 
cost of approximately $50. The commenter noted that the predecessor 
codes for CPT code 95943, CPT code 95921 (Testing of autonomic nervous 
system function; cardiovagal innervation (parasympathetic function)) 
and CPT code 95922 (Testing of autonomic nervous system function; 
vasomotor adrenergic innervation (sympathetic adrenergic function)), 
were assigned to APC 0218. In addition, the commenter stated that the 
test described by CPT code 95943 is almost identical to the test 
described by CPT code 95924, which is assigned to APC 0218. The 
commenter stated that, although the test described by CPT code 95924 is 
the only test that uses a tilt table, the monitor used to perform the 
test described by CPT code 95943 is more expensive than the monitor 
used to perform the test described by CPT code 95924.
    Response: We agree with the commenter that the service described by 
CPT code 95943 is clinically similar to the other services assigned to 
APC 0218, including its predecessor codes, CPT codes 95921 and 95922. 
Therefore, for CY 2014, we are reassigning CPT code 95943 from APC 0215 
to APC 0218.
    We will reconsider the APC assignments for this code once claims 
data are available, as part of our usual ratesetting methodology for CY 
2015.
d. Epidural Lysis (APCs 0203 and 0207)
    For CY 2013, CPT code 62263 (Epidural lysis, multiple sessions) and 
CPT code 62264 (Epidural lysis on single day) are assigned to APC 0203 
(Level IV Nerve Injections), with a payment rate of approximately $857. 
For CY 2014, we proposed to reassign CPT code 62264, which had a 
proposed rule geometric mean cost of approximately $874 from APC 0203 
(which had a proposed rule geometric mean cost of approximately $1,574) 
to APC 0207 (Level III Nerve Injections), which had a proposed rule 
geometric mean cost of approximately $687.
    Comment: One commenter objected to the reassignment of CPT code 
62264 from APC 0203 to APC 0207 asserting that the resources used to 
perform the procedures described by CPT codes 62263 and 62264 are the 
same and that CPT code 62263 is rarely used.
    Response: The geometric mean costs for performing the procedures 
described by CPT codes 62263 and 62264 were not the same for CY 2013: 
CPT code 62263 had a CY 2013 final rule geometric mean cost of 
approximately $1,406, and CPT code 62264 had a CY 2013 final rule 
geometric mean cost of approximately $876. The geometric mean costs of 
the procedures described by CPT codes 62263 and 62264 continued to 
differ by a similar magnitude for CY 2014: the CY 2014 proposed rule 
geometric mean cost of the procedure described by CPT code 62263 was 
approximately $1,492, while the CY 2014 proposed rule geometric mean 
cost of CPT code 62264 was approximately $874. However, for CY 2014, we 
determined that continuing to assign CPT code 62264 to APC 0203 would 
create a 2 times rule violation because the geometric mean cost of the 
APC increased from approximately $881 in CY 2013 to approximately 
$1,550 for CY 2014. To correct the 2 times rule violation, we proposed 
to reassign CPT code 62264 from APC 0203 to APC 0207, which has a final 
rule geometric mean cost of approximately $672.
    Based on updated claims data, the resources required to furnish the 
procedure described by CPT code 62264 (which has a final rule geometric 
mean cost of approximately $883) continue to be more similar to the 
resources required for services assigned to APC 0207 (which has a final 
rule geometric mean cost of approximately $672) than for services 
assigned to APC 0203 (which has a final rule geometric mean cost of 
approximately $1,550). Therefore, after consideration of the public 
comment we received, we are finalizing our proposal to reassign CPT 
code 62264 from APC 0203 to APC 0207 for CY 2014.
e. Cerebrospinal Shunt Reprogramming (APC 0692)
    For CY 2014, we proposed to reassign CPT code 62252 (Reprogramming 
of programmable cerebrospinal shunt), which had a proposed rule 
geometric mean cost of approximately $155, from APC 0691 (Level III 
Electronic Analysis of Devices), which had a proposed payment rate of 
approximately $274, to APC 0692 (Level II Electronic Analysis of 
Devices), which had a proposed payment rate of approximately $139. 
(These proposed rates reflect the corrected proposed rates included in 
the September 6, 2013 OPPS Addendum B, which was posted on the CMS Web 
site.)
    Comment: One commenter asked CMS to explain the rationale for the 
proposed reassignment of CPT code 62252 from APC 0691 to APC 0692.
    Response: We proposed to reassign CPT code 62252 from APC 0691 to 
APC 0692 because it would violate the 2 times rule if we continued to 
assign it to APC 0691.
    After consideration of the public comment we received, we are 
finalizing our proposal to reassign CPT code 62252 from APC 0691 to APC 
0692, which has a final rule geometric mean cost of approximately $116. 
In addition, based on our review of the configuration of APCs 0691 and 
0692, we determined that we need to improve the clinical and resource 
homogeneity of these two APCs. In order to avoid several 2 times rule 
violations in these APCs, we are reassigning CPT code 95971 (Simple 
neurostimulator analysis), which has a final rule geometric mean cost 
of approximately $113 and CPT code 95972 (Complex neurostimulator 
analysis), which has a final rule geometric mean cost of approximately 
$145 from the higher Level III APC 0691 (which has a final rule 
geometric mean cost of approximately $277) to the lower Level II APC 
0692 (which has a final rule geometric mean cost of approximately 
$116). In addition, to avoid 2 times rule violations we are reassigning 
CPT code 62367 (Analysis of spinal fusion pump), which has a final rule 
geometric mean cost of approximately $202, CPT code 62368 (Analysis 
with reprogramming), which has a final rule geometric mean cost of 
approximately $216, CPT code 62369 (Analysis with reprogramming and 
fill), which has a final rule geometric mean cost of approximately 
$339, and CPT code 62370 (Analysis with reprogramming and fill 
requiring the skill of a physician or other qualified

[[Page 74986]]

health care professional), which has a final rule geometric mean cost 
of approximately $286, from the lower Level II APC 0692 to the higher 
Level III APC 0691, which has a final rule geometric mean cost of 
approximately $277.
6. Ocular Services
a. Retinal Prosthesis (APC 0672)
    For CY 2014, we proposed to continue to assign the category III CPT 
code 0100T (Placement of a subconjunctival retinal prosthesis receiver 
and pulse generator, and implantation of intra-ocular retinal electrode 
array, with vitrectomy), to APC 0672 (Level III Posterior Segment Eye 
Procedures), based on the similarity of the procedure to the other 
services currently assigned to APC 0672. The device implanted during 
this procedure (HCPCS code C1841 (Retinal prosthesis)) includes all 
internal and external components, and was granted pass-through status 
beginning October 1, 2013.
    Comment: One commenter requested that CMS reassign CPT code 0100T 
to a new APC with a payment rate of approximately $6,500, which the 
commenter estimated by combining the costs of procedures that the 
commenter believed to be components of CPT code 0100T. The commenter 
also asserted that the procedure described by CPT code 0100T is more 
complex than the other procedures assigned to APC 0672.
    Response: There are no claims data available for the procedure 
described by CPT code 0100T at this time. We estimate that more than 95 
percent of the overall cost of the procedure is associated with the 
device, which is paid separately as a pass-through payment device. 
Because the device used in the procedure described by CPT code 0100T is 
in pass-through payment status, we do not believe that it is 
appropriate to create and assign CPT code 0100T to a new APC at this 
time. We also believe that the procedure described by CPT code 0100T is 
similar to the other procedures assigned to APC 0672. While we 
acknowledge that the procedure described by CPT code 0100T is complex, 
the other services assigned to APC 0672, for example the procedure 
described by CPT code 67113 (Repair of complex retinal detachment), are 
also complex and involve many different techniques and require 
extensive resources.
b. Tear Film (APC 0230)
    For CY 2014, we proposed to assign the new Category III CPT code 
0330T (Tear film imaging, unilateral or bilateral, with interpretation 
and report), effective July 1, 2013, to APC 0230 (Level I Eye Tests and 
Treatments) based on the similarity of the service to the other 
services currently assigned to APC 0230.
    Comment: One commenter requested that CMS reassign CPT code 0330T 
to APC 0698 (Level II Eye Tests and Treatments). The commenter believed 
that the clinical and resource similarities of the service described by 
CPT code 0330T to the services currently assigned to APC 0698 warrant 
reassignment.
    Response: We believe that the service described by CPT code 0330T 
is most similar to the other imaging services assigned to APC 0230, 
such as corneal topography or eye photography. We currently have no 
claims data for this service for ratesetting purposes because CPT code 
0330T became effective July l, 2013, and is considered new. Once we 
have claims data for CPT code 0330T, we will reevaluate the APC 
assignment of CPT code 0330T in future years through our standard 
review process.
    After consideration of the public comment we received, we are 
finalizing our CY 2014 proposal to assign CPT code 0330T to APC 0230.
7. Imaging
a. Myocardial Sympathetic Innervation Imaging (APC 0398)
    Effective July 1, 2013, the AMA's CPT Editorial Panel created CPT 
code 0331T (Myocardial sympathetic innervation imaging, planar 
qualitative and quantitative assessment) and CPT code 0332T (Myocardial 
sympathetic innervation imaging, planar qualitative and quantitative 
assessment; with tomographic SPECT). For CY 2014, we proposed to assign 
CPT codes 0331T and 0332T to APC 0398 (Level I Cardiac Imaging), which 
had a proposed payment rate of approximately $397. (The proposed 
payment rate reflects the corrected proposed rate in the September 6, 
2013 OPPS Addendum B, which was posted on the CMS Web site.)
    Comment: Several commenters disagreed with the proposed assignment 
of CPT codes 0331T and 0332T to APC 0398. The commenters stated that 
the proposed payment rate for APC 0398 would not cover the cost of 
performing the new procedures. Some of these commenters emphasized that 
the proposed payment rate for APC 0398 is substantially lower than the 
cost of the radiopharmaceutical alone used in these procedures. The 
commenters believed that the assignment of CPT codes 0331T and 0332T to 
APC 0398 would impede Medicare beneficiaries' access to these new 
services. Some commenters suggested that CPT codes 0331T and 0332T be 
assigned to a New Technology APC with a payment rate that would better 
reflect the estimated costs for these procedures. Other commenters 
indicated that these new procedures are more comparable to the 
procedures assigned to APC 0377 (Level II Cardiac Imaging) in terms of 
clinical and resource similarities.
    Response: We do not agree with the commenters that CPT codes 0331T 
and 0332T should be assigned to a New Technology APC for CY 2014 
because we believe that these procedures are clinically similar to the 
other services assigned to either APC 0398 (Level I Cardiac Imaging) or 
APC 0377 (Level II Cardiac Imaging). However, because the estimated 
cost of the diagnostic radiopharmaceutical that is used in performing 
the procedures described by CPT codes 0331T and 0332T (HCPCS code 
A9582) is approximately $1,320 based on the drug cost statistics file 
for the proposed rule, we agree with the commenters that it is more 
appropriate in terms of resource similarity to assign CPT codes 0331T 
and 0332T to APC 0377 and, therefore, are modifying the codes' APC 
assignment for CT 2014.
    After consideration of the public comments we received, for CY 
2014, we are assigning CPT codes 0331T and 0332T to APC 0377, which has 
a final geometric mean cost of approximately $1,158.
b. Neurologic Imaging (APCs 0402, 0403, 0406 and 0414)
    The pass-through payment status of HCPCS code A9584 (Iodine I-123 
ioflupane, diagnostic, per study dose up to 5 millicuries) expires on 
December 31, 2013. For CY 2014, payment for this radiopharmaceutical, 
typically referred to as DaTscan, will be packaged with payment for CPT 
code 78607 (Brain imaging; tomographic (SPECT)), which had a CY 2014 
proposed rule geometric cost of approximately $1,179). The procedure 
described by CPT code 78607 is used to assist in the evaluation of 
adult patients with suspected Parkinson's disease. For CY 2014, we 
proposed to continue to assign CPT code 78607 to APC 0402 (Level II 
Nervous System Imaging), which had a proposed payment rate of 
approximately $1,009. (The proposed payment rate reflects the corrected 
proposed rate in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.) We proposed to maintain the assignment of 
CPT code 78607 to APC 0402 for CY 2014, providing an exception to a 2 
times rule violation involving the cost of CPT code 78645 as

[[Page 74987]]

compared to the cost of CPT code 78607 (78 FR 43592).
    For CY 2014, we proposed to reassign CPT code 78647 (Cerebrospinal 
fluid flow, imaging (not including introduction of material); 
tomographic (SPECT)), which had a proposed rule geometric mean cost of 
approximately $467 from APC 0402 (Level II Nervous System Imaging), 
which had a proposed rule geometric mean cost of approximately $1,009) 
to APC 0403 (Level I Nervous System Imaging), which had a proposed rule 
geometric mean cost of approximately $179.
    For CY 2014, we proposed to reassign CPT code 78605 (Brain imaging, 
4 or more static views), which had a CY 2014 proposed rule geometric 
mean cost of approximately $835 from APC 0403 (Level I Nervous System 
Imaging), which has a CY 2013 payment rate of approximately $264, to 
APC 0402 (Level II Nervous System Imaging) which had a CY 2014 proposed 
payment rate of approximately $1,009.
    For CY 2014, we also proposed to reassign CPT code 78801 
(Radiopharmaceutical localization of tumor or distribution of 
radiopharmaceutical agent(s); multiple areas) from APC 0414 (Level II 
Tumor/Infection Imaging), which has a CY 2013 payment rate of 
approximately $503, to APC 0406 (Level I Tumor/Infection Imaging), 
which had a proposed rule payment rate of approximately $383.
    (The proposed payment rates cited above reflect the corrected 
proposed rates in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.)
    Comment: Several commenters objected to the proposed reduction in 
the CY 2014 payment rate for the DaTscan imaging procedure (including 
the packaged radiopharmaceutical) as a result of packaging of the 
radiopharmaceutical into CPT code 78607 and retention of the procedure 
in APC 0402, following expiration of the pass-through status of the 
procedure. The commenters objected to the reduction from the pass-
through payment amount of approximately $1,975 for HCPCS code A9584 in 
addition to the payment of approximately $458 for CPT code 78607 for CY 
2013. The commenters believed that the payment rate reduction for CPT 
code 78607 (into which the radiopharmaceutical will be packaged for CY 
2014) would hinder beneficiary access to care for this service. Several 
commenters believed that CPT code 78607 would be more appropriately 
assigned to APC 0308 (Positron Emission Tomography (PET) Imaging) 
rather than APC 0402 because CPT code 78607 is a new imaging service 
that uses more resources and is not clinically similar to the 
cisternography and shunt evaluation scans assigned to APC 0402. (We 
note that the CY 2014 final rule geometric mean cost of APC 0308 is 
approximately $1,315.)
    Response: We agree with the commenters that it would be appropriate 
to reassign CPT code 78607 to an APC that contains services more 
similar in terms of costs to CPT code 78607 and to correct the 2 times 
rule violation in APC 0402. However, we do not agree with the 
commenters that the procedure described by CPT code 78607 is clinically 
similar to PET scans. Therefore, we are not assigning CPT code 78607 to 
APC 0308. Based on clinical homogeneity and similar resource use, we 
are reassigning CPT code 78607 from APC 0402 to APC 0408 (Level III 
Tumor/Infection Imaging) for CY 2014, which has a final rule geometric 
mean cost of approximately $1,161.
    Comment: One commenter asked CMS to explain its rationale for 
proposing to reassign CPT code 78647 from APC 0402 to APC 0403. The 
commenter believed that this reassignment would decrease the payment 
rate for the procedure described by CPT code 78647.
    Response: The final rule geometric mean cost of APC 0402 is 
approximately $535, and the final rule geometric mean cost of APC 0403 
is approximately $163. The final rule geometric mean cost of CPT code 
78647 is approximately $434, which is much closer to the final rule 
geometric mean cost of APC 0402 than the final rule geometric mean cost 
of APC 0403. While there is no violation of the 2 times rule in APC 
0403 due to the claims volume of the services in this APC, the 
geometric mean cost of CPT code 78647 is more than two times the 
geometric mean cost of the other services in APC 0403. Because the 
final rule geometric mean cost of CPT code 78647 is more similar to the 
geometric mean costs of the services assigned to APC 0402, we are not 
finalizing our proposal to reassign CPT code 78647 from APC 0402 to APC 
0403. We will continue to maintain the code's current assignment to APC 
0402 for CY 2014.
    Comment: One commenter asked CMS to explain its rationale for 
proposing to reassign CPT code 78605 from APC 0403 to APC 0402 for CY 
2014.
    Response: Based on updated CY 2012 claims data, the final rule 
geometric mean cost of CPT code 78605 (approximately $781) is much 
closer to the final rule geometric mean cost of APC 0402 (approximately 
$535) than to the final rule geometric mean cost of APC 0403 
(approximately $163). Therefore, based on the similarity of the costs 
of the services assigned to APCs 0402 and 0403, we are finalizing our 
proposal to reassign CPT code 78605 from APC 0403 to APC 0402.
    Comment: One commenter asked CMS to explain its rationale for 
proposing to reassign CPT code 78801 from APC 0414 to APC 0406 for CY 
2014.
    Response: We proposed the reassignment of CPT code 78801 from APC 
0414 to APC 0406 for CY 2014 because we had updated claims data for CY 
2014 ratesetting, which indicated that the continued assignment of CPT 
code 78801 to APC 0414 would violate the 2 times rule. The final rule 
geometric mean cost of CPT code 78801 (approximately $362) is much 
closer to the final rule geometric mean cost of APC 0406 (approximately 
$384) than the final rule geometric mean cost of APC 0414 
(approximately $659), and is clinically similar to the other tumor 
imaging services assigned to APC 0406. Therefore, we are finalizing our 
proposal to reassign CPT code 78801 from APC 0414 to APC 0406 for CY 
2014.
8. Radiology Oncology
a. Intraoperative Radiation Therapy (IORT) Related Services (APCs 0028 
and 0065)
    HCPCS code C9726 (Placement and removal (if performed) of 
applicator into breast for radiation therapy) was created, effective 
January 1, 2006, to describe the procedure of placing and removing (if 
performed) an applicator into the breast for radiation therapy. We 
became aware of the procedure via a New Technology APC application, and 
upon approval of the application, we created HCPCS code C9726 because 
there were no HCPCS codes that described this procedure. For CY 2013, 
HCPCS code C9726 is assigned to APC 0028, which has a payment rate of 
$1,862.77. Based on our CY 2014 proposed rule claims data, HCPCS code 
C9726 had a proposed geometric mean cost of approximately $2,165 based 
upon 8 single claims, and APC 0028 had a proposed geometric mean cost 
of approximately $2,047.
    The AMA's CPT Editorial Panel created two new Category I CPT codes 
for intraoperative radiation therapy (IORT) treatment delivery, 
effective January 1, 2012: CPT codes 77424 (Intraoperative radiation 
treatment delivery, x-ray, single treatment session) and 77425 
(Intraoperative radiation treatment delivery, electrons, single

[[Page 74988]]

treatment session). For CY 2013, we finalized a policy to assign these 
CPT codes to APC 0065 (Level I Stereotactic Radiosurgery, MRgFUS, and 
MEG), with a CY 2013 payment rate of $978.25 because we believed these 
IORT service codes were similar to other services assigned to APC 0065 
in terms of clinical characteristics, and the range of estimated costs 
for IORT services (77 FR 68345). For CY 2014, we proposed to maintain 
the APC assignment for CPT codes 77424 and 77425 to APC 0065, which we 
proposed to rename ``APC 0065 (IORT, MRgFUS, and MEG)'', with a 
proposed payment rate of approximately $1,715. (The proposed payment 
rate reflects the corrected proposed rate in the September 6, 2013 OPPS 
Addendum B, which was posted on the CMS Web site.)
    In the CY 2014 OPPS/ASC proposed rule, we noted that both CPT codes 
77424 and 77425 describe the placement and removal (if performed) of an 
applicator into the breast for radiation therapy, as well as the 
delivery of radiation therapy when performed intraoperatively, and that 
it would no longer be required to report the placement and removal of 
the applicator via HCPCS code C9726 on a claim. Therefore, we proposed 
to delete HCPCS code C9726, effective January 1, 2014 (78 FR 43593). 
Under this proposal, hospitals would report the costs of the service to 
place and remove (if performed) an applicator into the breast for 
radiation therapy, as well as the delivery of radiation therapy when 
performed intraoperatively, with CPT codes 77424 and 77425, which we 
proposed to continue to assign to APC 0065.
    Comment: Many commenters disagreed with CMS' assertion that IORT 
services include the placement and removal (if performed) of an 
applicator into the breast for radiation therapy, as well as the 
delivery of radiation therapy when performed intraoperatively, and with 
the proposal to delete HCPCS code C9726 because it would no longer be 
required to report that service on the claim. Several commenters 
indicated that the service described by HCPCS code C9726 is performed 
by the surgeon before and after IORT delivery, and represents the cost 
of the applicator and hospital costs related to the surgeon's placement 
of the applicator, while CPT codes 77424 and 77425 represent radiation 
therapy treatment delivery performed by the radiation oncologist and 
medical physicist and are limited to the technical costs of IORT 
delivery. Many commenters stated that the AMA's CPT Editorial Panel did 
not include placement and removal of the applicator in the descriptions 
of CPT codes 77424 and 77425. Some commenters also indicated that 
placement and removal of applicators for radiation therapy for various 
other parts of the body are separately reported on claims and paid 
under the OPPS. Some commenters expressed concern with the quality of 
the data used for ratesetting, such as the small number of single 
frequency claims available reporting CPT codes 77424 and 77425. One 
commenter suggested that CMS propose a comprehensive APC payment 
methodology for IORT for CY 2015 to include CPT codes 77424 and 77424 
because the services are performed in a single operative session.
    Response: Our proposal to delete HCPCS code C9726 was based on the 
premise that placement of an applicator is a necessary part of the 
delivery of IORT, and that the placement of an applicator was included 
in the procedures described by CPT codes 77424 and 77425. There are 
currently no service codes other than HCPCS code C9726 that separately 
describe placement of a rigid applicator for IORT breast radiation 
delivery, as there are for some other radiation delivery services. The 
commenters argued that the service that has been reported along with 
HCPCS code C9726 by providers on claims is surgical, not a radiation 
oncology service, and that the service is not included in the 
descriptions of CPT codes 77424 and 77425. Therefore, after considering 
all of the public comments on IORT, we are not finalizing our proposal 
to delete HCPCS code C9726 for CY 2014. However, to make the coding 
consistent with other intraoperative procedures involving catheters or 
applicators used for radiation therapy treatment of the breast, for CY 
2014, we are designating HCPCS code C9726 as an add-on code to the 
primary procedure that involved the intraoperative placement of the 
applicator into the breast. We are revising the code descriptor for 
HCPCS code C9726 to read: ``Placement and removal (if performed) of 
applicator into breast for intraoperative radiation therapy, add-on to 
primary breast procedure.'' Payment for HCPCS code C9726 is being 
packaged into the payment for the primary procedure, consistent with 
our policy to package add-on codes for CY 2014.
    We agree with the commenters that there are a small number of 
single frequency claims for CPT codes 77424 and 77425, and we believe 
that is the case for HCPCS code C9726 as well. We appreciate the 
commenters' suggestions for alternative payment methodologies for IORT 
and may consider such alternatives in the future.
    After consideration of the public comments we received, we are not 
finalizing our proposal to delete HCPCS code C9726 for CY 2014. We are 
designating HCPCS code C9726 as an add-on code for which payment is 
being packaged into the payment for CPT codes 77424 and 77425, the 
primary procedures that involve the intraoperative placement of the 
applicator into the breast, consistent with our policy to package add-
on codes for CY 2014. We are revising the code descriptor for HCPCS 
code C9726 to read: ``Placement and removal (if performed) of 
applicator into breast for intraoperative radiation therapy, add-on to 
primary breast procedure.'' We are continuing to assign CPT codes 77424 
and 77425 to APC 0065 for CY 2014, which has a final geometric mean 
cost of $1,253. We are also changing the descriptor of APC 0065 to 
``IORT, MRgFUS, and MEG''.
b. Proton Beam Therapy (APCs 0664 and 0667)
    APC 0664 (Level I Proton Beam Radiation Therapy) includes two 
procedures: CPT code 77520 (Proton treatment delivery; simple, without 
compensation) and CPT code 77522 (Proton treatment delivery; simple, 
with compensation). APC 0667 (Level II Proton Beam Radiation Therapy) 
also includes two procedures: CPT code 77523 (Proton treatment 
delivery, intermediate) and CPT code 77525 (Proton treatment delivery, 
complex). The payment rates for proton beam radiation therapy services 
are set annually based on claims data according to the standard OPPS 
ratesetting methodology.
    Based on the claims data used in developing the CY 2014 proposed 
rule, we determined a violation of the 2 times rule in APC 0664. As we 
discuss in section III.B. of this final rule with comment period, a 2 
times rule violation occurs when the cost of the highest cost 
significant item or service within an APC group is more than 2 times 
greater than the cost of the lowest cost significant item or service 
within that same group. In making this determination, we consider only 
codes that have more than 1,000 single major claims or codes that have 
both greater 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. If neither of these claims thresholds is met, there is not 
a 2 times rule violation even if the highest cost item or service is 
more than 2 times greater than the cost of the lowest cost

[[Page 74989]]

item or service in the APC. In prior years, even though the cost of CPT 
code 77522 was more than 2 times the cost of CPT code 77520, there was 
no 2 times rule violation within APC 0664 because the claims volume for 
CPT code 77520 was not significant (72 FR 66719; 75 FR 71901; and 77 FR 
68341). However, for CY 2014, the volume of claims in the proposed rule 
claims data for CPT code 77520 increased--the number of single claims 
was greater than 99 and contributed at least 2 percent of the single 
claims used to establish the cost of APC 0664--resulting in a 2 times 
rule violation within APC 0664.
    To resolve the 2 times rule violation, in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43593), we proposed to reassign CPT codes 77520 
and 77522 from APC 0664 to APC 0667, and to revise the title of APC 
0667 to ``Proton Beam Radiation Therapy,'' which would now include all 
proton beam radiation therapy services. We also proposed to delete APC 
0664. We invited public comments on this proposal.
    Comment: Several commenters stated that they duplicated CMS' 
ratesetting calculations for proton beam therapy services and 
determined that the threshold for claims volume that would constitute a 
2 times rule violation in APC 0664 was not met. The commenters asserted 
that because there was no 2 times rule violation within APC 0664 
according to their calculations, CMS should not finalize its proposal 
to delete APC 0664 and reassign CPT codes 77520 and 77522 to APC 0667 
in order to avoid a 2 times rule violation. The commenters also 
believed that the simple proton beam treatment delivery services 
assigned to APC 0664 are not clinically similar enough to warrant their 
combination with the intermediate and complex proton beam treatment 
delivery services currently assigned to APC 0667.
    Response: Using the additional final rule claims data in accordance 
with our standard OPPS ratesetting methodology, we determined that the 
number of claims for CPT code 77520 is not significant and, therefore, 
a 2 times rule violation within APC 0664 does not exist for CY 2014.
    After consideration of the public comments we received, because 
there is now no 2 times rule violation within APC 0664, we are not 
finalizing our proposal to delete APC 0664 and reassign CPT codes 77520 
and 77522 to APC 0667. We are continuing the current APC configuration 
for CY 2014. As we do annually for all APCs, we will review the 
appropriateness of the APC assignments for proton beam therapy services 
for the CY 2015 rulemaking cycle.
c. Stereotactic Radiosurgery (SRS) Services (APCs 0066 and 0067)
    Since 2001, we have distinguished the various methods of delivery 
of stereotactic radiosurgery (SRS) with HCPCS G-codes. SRS includes two 
different radiation source types, specifically, Cobalt-60 and linear 
accelerator (linac). Among the linac-based SRS procedures, the current 
HCPCS G-codes distinguish between procedures that use robotic and non-
robotic linac devices (66 FR 59865). In CY 2007, new CPT codes for SRS 
were established, and at that time, we recognized one of the three SRS 
CPT codes for separate payment under the OPPS. We did not replace all 
of the HCPCS G-codes for SRS with all of the new CPT codes in CY 2007 
because we believed at that time that the distinctions reflected in the 
HCPCS G-codes should be maintained for APC assignment purposes. 
Specifically, in CY 2007 we replaced HCPCS code G0243 (Multi-source 
photon stereotactic radiosurgery, delivery including collimator changes 
and custom plugging, complete course of treatment, all lesions) with 
CPT code 77371 because this CPT code corresponded directly to 
procedures described by HCPCS code G0243. We refer readers to the CY 
2007 OPPS final rule (71 FR 68023 through 68026) for a detailed 
discussion of the history of the SRS codes.
    Since CY 2007, HCPCS codes G0173, G0251, G0339, G0340, and CPT code 
77371 have been the codes used under the OPPS to describe SRS treatment 
delivery procedures. However, SRS techniques and equipment have evolved 
and expanded over time. In light of these developments and our 
understanding of current SRS technology and clinical practice, we have 
reexamined the HCPCS G-codes and CPT codes for SRS with the intent of 
identifying the codes that would best capture the significant 
differences between the various procedures while eliminating 
unnecessary complexity, redundancy, and outdated distinctions that no 
longer represent meaningful distinctions for purposes of OPPS payment. 
Based on our review of the current SRS technology, we understand that 
most current linac-based SRS technology incorporates some type of 
robotic feature. Therefore, we believe that it is no longer necessary 
to continue to distinguish robotic versus non-robotic linac-based SRS 
through the HCPCS G-codes.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43593 through 43594), 
we proposed to replace the existing four HCPCS codes: G0173, G0251, 
G0339, and G0340 with the SRS CPT codes 77372 and 77373. We stated that 
we believe that utilizing all of the CPT codes for SRS (CPT codes 
77371, 77372, and 77373) would more accurately capture the distinctions 
between the various SRS procedures that are currently used; namely, (1) 
Cobalt-60 versus linac and (2) single session cranial treatment versus 
fractionated treatments. Table 16 of the proposed rule showed the 
complete list of HCPCS G-codes and CPT codes for SRS, along with their 
long descriptors. The table also showed the proposed CPT codes and 
their associated status indicators and APC assignments for the current 
HCPCS G-codes for SRS that we proposed to replace. We proposed to 
assign only CPT code 77373 to APC 0066, which we proposed to rename 
``Level I Stereotactic Radiosurgery.'' We proposed to reassign CPT code 
77371 and assign CPT code 77372, the two single session cranial 
treatment codes, to APC 0067, which we proposed to rename ``Level II 
Stereotactic Radiosurgery.'' We believe that the high degree of 
clinical similarity of CPT codes 77371 and 77372 supports the proposed 
grouping of these procedures together in the proposed renamed APC 0067. 
The CY 2014 proposed APC payment rates for the CPT codes for SRS were 
listed in Addendum B to the proposed rule (which is available via the 
Internet on the CMS Web site). Further, we proposed to finalize their 
status indicators and their APC assignments and payment rates in this 
CY 2014 OPPS/ASC final rule with comment period.
    We note that we published a corrected OPPS Addendum B payment file 
that was posted on the CMS Web site on September 6, 2013, after it was 
brought to our attention that the initial proposed payment rates that 
were published on July 19, 2013, for the SRS codes did not include the 
claims data for the SRS HCPCS G-codes. Specifically, our initial 
proposed payment rate of approximately $2,481 for APC 0066 only 
included claims data for CPT code 77373 and did not include claims data 
for HCPCS codes G0251, G0339, and G0340. In addition, our initial 
proposed payment rate of approximately $8,576 for APC 0067 only 
included claims data for CPT codes 77372 and 77371 and did not include 
claims data for HCPCS code G0173. Consequently, we corrected this error 
and posted the corrected payment rates for APCs 0066 and 0067 on

[[Page 74990]]

September 6, 2013. Because of this correction, we extended the public 
comment period for the CY 2014 SRS proposals to September 16, 2013 (78 
FR 54842). Table 27 below shows the list of HCPCS G-codes and CPT codes 
for SRS, along with their long descriptors, and the corrected CY 2014 
proposed APC payment rates.
    In addition, although the SRS HCPCS G-codes will no longer be 
separately payable under the OPPS, the HCPCS codes will remain active 
under the MPFS for CY 2014. Consequently, we proposed to change the 
OPPS status indicator for HCPCS G-codes for SRS from status indicator 
``S'' to ``B'' (Alternative code may be available under the OPPS) for 
CY 2014.
    Comment: Most commenters agreed with CMS' proposal and urged CMS to 
finalize the coding, APC assignment, and payment levels for the SRS CPT 
codes. The commenters agreed that utilizing the CPT codes would 
standardize the reporting of SRS services across all payers, which the 
hospital industry has favored since the SRS treatment delivery CPT 
codes were established in CY 2007. One commenter noted that the use of 
the CPT codes would eliminate confusion among providers regarding how 
to report the SRS treatment delivery services.
    Response: We appreciate the commenters' support for our proposal. 
We believe that adopting the SRS treatment delivery CPT codes and 
restructuring the SRS APCs appropriately distinguishes payment for 
single session cranial SRS treatment from fractionated SRS treatment.
    Comment: Several commenters that utilize both the linear 
accelerator-based SRS technology and Cobalt-60 SRS technology supported 
CMS' proposal and stated that the change would equalize payments for 
both technologies for single session cranial SRS. One commenter stated 
that the proposal is appropriate because there is no clinical data that 
supports the need for differential payment for these technologies. This 
commenter further stated that current medical literature cites no 
difference in clinical effectiveness for one system over another, and 
stated that in terms of outcomes, the linac-based system is clinically 
comparable to a Cobalt-60 system for single session cranial SRS. In 
addition, some commenters stated that the proposal is consistent with 
the provisions of section 634 of the American Taxpayer Relief Act 
(ATRA) of 2012.
    Response: We appreciate the commenters' support for our proposal. 
As specified in the April 2013 OPPS Update CR (Transmittal 2664, CR 
8228) dated March 1, 2013, section 634 of the ATRA requires that, 
effective April 1, 2013, if the payment amount for Cobalt-60 based SRS, 
as described by CPT code 77371, exceeds the payment amount for linear 
accelerator-based SRS, as described by HCPCS code G0173 (or a successor 
code), the payment for CPT code 77371 must be reduced to the payment 
amount for HCPCS code G0173. The requirement does not apply to rural 
hospitals, sole community hospitals, or rural referral centers. In this 
final rule with comment period, for CY 2014, we are reassigning CPT 
code 77371 and assigning CPT code 77372 (the successor codes for HCPCS 
code G0173) to APC 0067. Therefore, CPT codes 77371 and 77372 will have 
the same payment amount. We agree with the commenters that this APC 
assignment satisfies the requirements of section 634 of the ATRA.
    Comment: Some commenters expressed concern regarding the proposal 
for SRS and suggested that CMS delay implementation of the proposal. 
The commenters suggested that, to pay appropriately for SRS services, 
CMS consider for CY 2015 the development of a comprehensive APC for the 
procedures assigned to APC 0067 (which includes CPT codes 77371 and 
77372), similar to the comprehensive APC proposal for high-cost, 
device-dependent services. The commenters stated that single session 
cranial SRS procedures performed with either Cobalt 60-based SRS or 
linac-based SRS are device-dependent procedures and cannot be performed 
without use of the costly technology. The commenter further stated that 
having one comprehensive APC for single session cranial SRS is 
appropriate and consistent with the requirements of section 634 of the 
ATRA. The commenters encouraged CMS to consider the comprehensive APC 
payment methodology to appropriately pay for services, regardless of 
the specific equipment used to deliver SRS treatment.
    Response: We do not agree with the commenters' suggestion to delay 
implementation of the proposal because we believe that adopting the CPT 
codes and restructuring the SRS APCs improve the clinical and resource 
homogeneity for SRS while satisfying the requirements of section 634 of 
the ATRA.
    We appreciate the commenters' suggestion to create a comprehensive 
APC payment methodology for SRS services. However, because such a 
change would require public notice and opportunity to comment, we will 
consider and evaluate the appropriateness of such a payment methodology 
in the future.
    Comment: Some commenters who were not supportive of the proposals 
relating to SRS stated that the corrected proposed APC payment rates 
for the SRS codes were too low, and requested that CMS utilize the 
initial proposed APC payment rates for APCs 0066 and 0067.
    Response: As explained above, we revised the initial proposed 
payment rates for APCs 0066 and 0067 after it was brought to our 
attention that our ratesetting for these APCs did not include claims 
data for the appropriate HCPCS codes, including the various HCPCS G-
codes that were proposed for deletion. We should have included the CY 
2012 SRS HCPCS G-code claims data in our proposed CY 2014 ratesetting; 
otherwise, some of the services would be significantly underrepresented 
in the APC payment calculations. We believe that the corrected proposed 
APC payment rates that include claims data for the SRS HCPCS G-codes 
accurately reflect all of the SRS services that are used to configure 
APCs 0066 and 0067.
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    Comment: Some commenters expressed concern with the proposed 
packaging of payments for certain CPT codes describing the Cobalt-60 
SRS procedure. In particular, the commenters indicated that the 
proposal to package ancillary services, including certain SRS radiation 
planning codes, penalizes hospitals for providing the more efficient 
form of SRS, namely, the Cobalt-60 technology, which is provided as a 
single-day service. Some of the commenters stated that under CMS' 
packaging proposal, hospitals would experience a decrease in payment 
for performing the Cobalt-60 procedure because the procedures that they 
perform on the same day would no longer be paid separately. In 
particular, the commenters were concerned that the proposed policy for 
packaging of payment for CPT codes 77290, 77295, 77300, 77334, and 
77370, if finalized, would result in higher payments for patients 
treated with linac-based SRS technologies because the payment for 
planning services would not be packaged--that is, planning services 
occur on a different day than the day of delivery of linac-based SRS 
services.
    Response: As discussed in section II.A.3. of this final rule with 
comment period, we are not finalizing our proposal to package payment 
of ancillary tests. The SRS planning services, specifically those 
described by CPT codes 77290, 77295, 77300, 77334, and 77370, for which 
payments were initially proposed to be packaged under our packaging 
proposal for ancillary services, will continue to be paid separately 
for CY 2014. The final CY 2014 long descriptors, status indicators, and 
APC assignments for these CPT codes are listed in Table 28 below.

[[Page 74993]]

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    Comment: Some commenters questioned the use of claims data for 
certain HCPCS G-codes for determining the corrected payment rates for 
APCs 0066 and 0067. The commenters stated that the initial proposed 
payment rates were correct. In addition, some commenters did not 
believe that claims data for HCPCS code G0173 should have been used to 
determine the payment rate for APC 0067 because this code was more than 
likely reported for ``other than brain'' tumors. In addition, the 
commenters stated that the corrected payment rates result in a 2 times 
rule violation in both APC 0066 and APC 0067, and, therefore, CMS 
should not finalize its proposal.
    Response: HCPCS code G0173 describes a single session linac-based 
SRS procedure. We believe that this code is appropriately crosswalked 
to CPT code 77372, and adequately represents single session cranial SRS 
cases. Although a 2 times rule violation did occur in APC 0067, as we 
describe in section II.A.B.3. of this final rule with comment period, 
we may make exceptions to the 2 times rule in certain cases. In the 
case of the SRS treatment delivery services, we believe that adopting 
the CPT codes and restructuring the SRS APCs improves clinical and 
resource homogeneity for both types of cranial single session SRS 
procedures. Furthermore, assigning CPT codes 77371 and 77372 to the 
same APC also satisfies the requirements of section 634 of the ATRA. If 
CPT codes 77371 and 77372 were assigned to different APCs, the payment 
rate for CPT code 77371 would have to be reduced to equal the payment 
rate for CPT code 77372. As a majority of the commenters preferred, we 
believe that the assignment of CPT codes 77371 and 77372 to the same 
APC, with the blended payment rate as opposed to current CY 2013 
payment reduction for CPT code 77371, is most appropriate.
    Comment: One commenter recommended that CMS exclude the claims data 
associated with HCPCS code G0251 when determining the payment rate for 
APC 0066. The commenter indicated that HCPCS code G0251 is used most 
often for fractionated cranial SRS, not for stereotactic body radiation 
therapy (SBRT), as described by CPT code 77373. The commenter

[[Page 74994]]

recommended that CMS reassign HCPCS code G0251 to its own APC, which is 
similar to the CY 2013 APC assignment.
    Response: Both HCPCS code G0251 and CPT code 77373 describe 
fractionated cranial SRS services that involve between 1 to 5 fractions 
of treatment. Based on the code descriptor, we believe that the service 
described by HCPCS code G0251 is appropriately crosswalked to CPT code 
77373.
    Comment: Some commenters stated that CMS only used approximately 20 
percent of the claims data for CPT code 77371 to set the payment rate 
for APC 0067, and suggested that CMS use more of the claims data for 
Cobalt-60 SRS in the ratesetting process.
    Response: For the CY 2014 update, we proposed to set the payment 
rate for APC 0067 based on claims data for HCPCS code G0173 and CPT 
codes 77371 and 77372. To determine the corrected proposed APC payment 
rates, we used approximately 41 percent (953 single claims out of 4,672 
total claims) of the claims for CPT code 77371 to set the proposed 
payment rate for APC 0067. For this final rule with comment period, we 
used approximately 27 percent (425 single claims out of 4,672 total 
claims) of the claims for CPT code 77371 and approximately 72 percent 
of the claims for HCPCS code G0173 (1,136 single claims out of 1,771 
total claims to set the payment rate for APC 0067. Based on these 
codes, our analysis of the latest hospital outpatient claims data shows 
a final CY 2014 geometric mean cost of approximately $3,604 for APC 
0067.
    Comment: Several commenters disagreed with the proposal to replace 
the HCPCS G-codes and use the CPT codes to describe the SRS treatment 
delivery services. The commenters stated that the SRS HCPCS G-codes are 
preferable to the CPT codes because they accurately describe the 
current standard SRS techniques. The commenters further stated that the 
CPT code descriptors reflect old technologies. In addition, some 
commenters requested that CMS retain the existing APC structure and use 
of HCPCS G-codes for SRS treatment delivery services because they 
believed the HCPCS G-codes more accurately reflect the costs and 
practice of full body, cranial, multi- and single-session robotic SRS. 
One commenter also suggested that CMS delete CPT codes 77371 and 77372 
and replace them with one code that describes a single session 
intracranial SRS treatment procedure with no mention of the radiation 
source in the code descriptor.
    Response: As stated above, we believe that it is no longer 
necessary to continue to distinguish robotic versus non-robotic linac-
based SRS through HCPCS G-codes. We believe that the CPT codes for SRS 
treatment delivery, although more general than the HCPCS G-codes, 
accurately describe the most significant distinctions between the 
various SRS procedures: (1) Cobalt-60 versus linac radiation sources; 
and (2) single session cranial versus fractionated treatments. If the 
three-code SRS delivery CPT coding scheme that was created by the CPT 
Editorial Panel for CY 2007 is considered to be inadequate by SRS 
stakeholders, we believe that coding reform in this area would be best 
addressed through a dedicated CPT workgroup that would include all of 
the various physician specialties, such as neurosurgery and radiation 
oncology, and the other stakeholders involved in the delivery of this 
critical treatment modality. We also believe that it is best that we 
generally refrain from creating supplemental HCPCS G-codes or C-codes 
that describe the attributes of a particular device under the 
assumption of more precise coding but without the benefit of a broad 
perspective of stakeholder and physician specialist input. Otherwise, 
we risk unintentionally creating a competitive advantage for a 
particular technology through the establishment and use of codes that 
may not be based on the most complete understanding of the clinical 
science of SRS treatment delivery.
    Comment: Several commenters requested that CMS clarify the report 
instructions for CPT codes 77372 and 77373 because there is confusion 
regarding how these services should be reported. The commenters stated 
that the lack of clarify promotes inefficiency and ensures misuse of 
CPT codes.
    Response: We agree with the commenters that the transition from the 
HCPCS G-codes to the CPT codes could be confusing in certain cases. 
Therefore, we are providing the following coding guidance for CPT codes 
77371, 77372, and 77373. CPT code 77371 is to be used only for single 
session cranial SRS cases performed with a Cobalt-60 device, and CPT 
code 77372 is to be used only for single session cranial SRS cases 
performed with a linac-based device. The term ``cranial'' means that 
the pathological lesion(s) that are the target of the radiation is 
located in the patient's cranium or head. The term ``single session'' 
means that the entire intracranial lesion or lesions that comprise the 
patient's diagnosis are treated in their entirety during a single 
treatment session on a single day. CPT code 77372 is never to be used 
for the first fraction or any other fraction of a fractionated 
treatment. CPT code 77372 is to be used only for single session cranial 
linac-based SRS treatment. Fractionated SRS treatment is any SRS 
delivery service requiring more than a single session of SRS treatment 
for a cranial lesion, up to a total of no more than five fractions, and 
one to five sessions (but no more than five) for non-cranial lesions. 
CPT code 77373 is to be used for any fraction (including the first 
fraction) in any series of fractionated treatments, regardless of the 
anatomical location of the lesion or lesions being radiated. 
Fractionated cranial SRS treatment is any cranial SRS delivery service 
that exceeds one treatment session and fractionated non-cranial SRS 
treatment is any non-cranial SRS delivery service, regardless of the 
number of fractions but never more than five. Therefore, CPT code 77373 
is the exclusive code (and the use of no other SRS treatment delivery 
code is permitted) for any and all fractionated SRS treatment services 
delivered anywhere in the body, including, but not limited to, the 
cranium or head. CPT code 77372 is not to be used for the first 
fraction of a fractionated cranial SRS treatment series and must only 
be used in cranial SRS delivery service when there is a single 
treatment session to treat the patient's entire condition.
    Although we believe that this coding guidance is clear to ensure 
reporting compliance, we will activate coding edits to prevent the use 
of more than one type of SRS treatment delivery CPT code per diagnosis 
per patient along with no more than five fractions for CPT code 77373.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal without modification. Specifically, we 
are finalizing our proposal to reassign CPT code 77371 to APC 0067; 
replace HCPCS code G0173 with CPT code 77372 and assign the code to APC 
0067; and replace HCPCS codes G0251, G0339, and G0340 with CPT code 
77373 and assign this code to APC 0066. In addition, although the SRS 
HCPCS G-codes will no longer be separately payable under the OPPS, the 
codes will remain active under the MPFS for CY 2014. Consequently, we 
are finalizing our proposal to change the status indicator for the 
HCPCS G-codes for SRS services to OPPS status indicator ``B'' 
(Alternative code may be available under the OPPS) for CY 2014. Table 
29 below shows the final CPT codes for the SRS treatment delivery 
services, their status indicators, APC assignments, and payment rates 
for CY 2014.
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9. Respiratory Services
a. Bronchial Thermoplasty (APC 0415)
    Effective January 1, 2013, the CPT Editorial Panel created two new 
Category I CPT codes: CPT code 31660 (Bronchoscopy, rigid or flexible, 
including fluoroscopic guidance, when performed; with bronchial 
thermoplasty, 1 lobe) and CPT code 31661 (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with 
bronchial thermoplasty, 2 or more lobes). These new CPT codes replaced 
two Category III CPT codes: CPT code 0276T (Bronchoscopy, rigid or 
flexible, including fluoroscopic guidance, when performed; with 
bronchial thermoplasty, 1 lobe) and CPT code 0277T (Bronchoscopy, rigid 
or flexible, including fluoroscopic guidance, when performed; with 
bronchial thermoplasty, 2 or more lobes), which were deleted as of 
January 1, 2013. In the CY OPPS/ASC 2013 final rule with comment period 
(77 FR 68352), we finalized a policy that, beginning January 1, 2014, 
device category C1886 (Catheter, extravascular tissue ablation, any 
modality (insertable)) will no longer be eligible for pass-through 
payments, and its device costs will be packaged with the costs of the 
procedures with which the HCPCS code C1886 device is reported in the 
claims data. We reiterated that final policy in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43595). The HCPCS code C1886 device is used in the 
procedures described by CPT codes 31660 and 31661. Therefore, the HCPCS 
code C1886 device costs will be packaged with the costs of the 
procedures described by CPT codes 31660 and 31661. Bronchial 
thermoplasty CPT codes 0276T and 0277T are assigned to APC 0415 (Level 
II Endoscopy Lower Airway) for CY 2013, and we proposed to assign 
bronchial thermoplasty CPT codes 31660 and 31661 to APC 0415 for CY 
2014 with a proposed payment rate of approximately $2,177.
    Comment: One commenter stated that bronchial thermoplasty CPT codes 
31660 and 31661 (as well as the CPT codes 0276T and 0277T) are 
inappropriately assigned to APC 0415. The commenter expressed concern 
that under the CMS proposal to expire device HCPCS code C1886 from 
pass-through payment status, the payment rate for APC 0415 will not 
reflect the costs associated with CPT codes 31660 and 31661, the 
procedure with which the HCPCS code C1886 device is used. The commenter 
stated that the two bronchial thermoplasty CPT codes available in CY 
2012, CPT code 0276T and CPT code 0277T, were subject to noncoverage 
policies for all Category III CPT codes by most Medicare Administrative 
Contractors (MACs), which resulted in few Medicare claims for CY 2012, 
the claims data year used for CY 2014 ratesetting. The commenter 
further stated that claims data show that some providers submitted 
claims reporting bronchial thermoplasty services with the HCPCS code 
C1886 device, while others did not, and that, as a result, the HCPCS 
code C1886 device charge data understate the cost of the C1886 device, 
which is reportedly $2,500.
    The commenter also expressed its concerns regarding the composition 
of APC 0415. The commenter believed that the payment rate for APC 0415 
is driven by claims reporting one high-volume code, CPT code 31629 
(Bronchoscopy, rigid or flexible, including fluoroscopic guidance, when 
performed; with transbronchial needle aspiration biopsy(s), trachea, 
main stem and/or lobar bronchus(i)) because the proposed payment rate 
of APC 0415 of approximately $2,177 is close to the CPT code 31629 
proposed rule geometric mean cost of approximately $2,122. The 
commenter recommended two options to increase the payment rate for 
bronchial thermoplasty services as a means to adequately pay for the 
cost of the service. One option was to split APC 0415 into two levels, 
with many of the higher volume, lower cost procedure codes assigned to 
the Level II Endoscopy Lower Airway APC and the lower volume, higher 
cost procedure codes assigned to a new proposed Level III Endoscopy 
Lower Airway APC. The second option recommended by the commenter was to 
assign CPT codes 31660 and 31661 to APC 0423 (Level II Percutaneous 
Abdominal and Biliary Procedures), which the commenter believed has a 
number of clinical similarities, including one pulmonary procedure 
described by CPT code 32998 (Ablation therapy for reduction or 
eradication of 1 or more pulmonary tumor(s) including pleura or chest 
wall when involved by tumor extension, percutaneous, radiofrequency, 
unilateral).
    Response: Regarding the commenter's concerns about the claims data 
for bronchial thermoplasty services, we believe that the cost of the 
HCPCS code C1886 device is reflected in the proposed payment rate for 
APC 0415, the APC to which we proposed to assign CPT codes 31660 and 
31661. In a data analysis of the claims reporting CPT codes 0276T and 
0277T, we found that, of the 37 single frequency claims available for 
the data analysis for CPT code 0276T, 16 single claims reported the 
HCPCS code C1886 device with a geometric mean cost of approximately 
$3,726, while 21 single claims did not report the HCPCS code C1886 
device, yet the geometric mean cost was approximately $3,825. 
Therefore, it appears that hospitals did not separately report the 
HCPCS code C1886 device for pass-through payment on claims reporting 
CPT code 0276T but instead reported the cost of the HCPCS code C1886 
device as part of the cost of the procedure described by CPT code 
0276T. Of the 18 claims reporting the procedure described by CPT code 
0277T in our CY 2012 claims data, 10 claims were submitted with the 
HCPCS code C1886 device reported separately, with a geometric mean cost 
of approximately $4,175, while 8 claims were submitted without the 
HCPCS code C1886 device reported separately, with a somewhat lower 
geometric mean cost of $2,780. However, our final geometric mean costs 
(based on the final rule claims data) for CPT codes 0276T and 0277T, 
$4,019 and $3,700, respectively, are similar to the geometric mean cost 
of bronchial thermoplasty services with the HCPCS code C1886 device 
reported separately that we found in our analysis of CPT codes 0276T 
and 0277T described above. Therefore, we believe that the payment rate 
for APC 0415 appropriately reflects the costs of the HCPCS code C1886 
device.
    We do not agree that APC 0423 would be a more appropriate APC 
assignment for CPT codes 31660 and 31661. Although there is one 
pulmonary procedure in APC 0423, CPT code 32998, it is a procedure with 
a percutaneous approach, which is very different than a bronchoscopy 
approach. In addition, we do not agree with the commenter's suggestion 
that APC 0415 be split into two lower airway endoscopy APCs. The 
creation of a Level III lower airway endoscopy APC suggested by the 
commenter would result in relatively few single frequency claims 
available for ratesetting--495 claims for the suggested Level III APC 
compared to 5,174 single claims for the suggested Level II APC, based 
on CY 2014 final rule claims data. This lower frequency would promote 
volatility of costs for such a Level III lower airway endoscopy APC. 
Based on the reasons set forth above, we are finalizing our proposal to 
assign bronchial thermoplasty services CPT codes 31660 and 31661 to APC 
0415 for CY 2014, which has a geometric mean cost of approximately 
$2,007.

[[Page 74997]]

b. Direct Laryngoscopy (APC 0074)
    For CY 2013, we assigned CPT code 31571 (Laryngoscopy, direct, with 
injection into vocal cord(s), therapeutic; with operating microscope or 
telescope) to APC 0075 (Level V Endoscopy Upper Airway), with a payment 
rate of $2,026.82. For CY 2014, we proposed to assign CPT code 31571 to 
APC 0074 (Level IV Endoscopy Upper Airway), with a proposed payment 
rate of approximately $1,532. (The proposed payment rate reflects the 
corrected proposed rate in the September 6, 2013 OPPS Addendum B, which 
was posted on the CMS Web site.)
    Comment: One commenter stated that the proposed rule cost of CPT 
code 31571 does not support the reassignment of this procedure code 
from APC 0075 to APC 0074. The commenter believed that the proposed 
payment rate for APC 0074 does not adequately cover the cost of the 
procedure described by CPT code 31571, in light of the fact that the 
geometric mean cost of CPT code 31571 increased from approximately 
$1,849 for CY 2013 to $1,956 in the CY 2014 proposed rule.
    Response: The structure of APCs 0074 and 0075 required the proposed 
realignment of the procedures within those APCs to avoid 2 times rule 
violations. If CPT code 31571 remained assigned to APC 0075, a 2 times 
rule violation would have resulted because the cost of the procedure is 
more than two times less than the significant procedure with the 
highest geometric mean cost, CPT code 31276 (Nasal/sinus endoscopy, 
surgical with frontal sinus exploration, with or without removal of 
tissue from frontal sinus), which had a proposed rule geometric mean 
cost of approximately $4,623. This situation appears to remain the case 
based on final rule claims data. The final rule geometric mean cost of 
CPT code 31571 is approximately $1,951 and the final rule geometric 
mean cost of CPT code 31276 is approximately $4,504, which would result 
in a 2 times rule violation if the two procedures were assigned to the 
same APC. We note that the geometric mean cost of APC 0074 has 
increased from $1,390.85 for CY 2013, to approximately $1,547 for the 
CY 2014 proposed rule, and approximately $1,887 for this CY 2014 final 
rule with comment period. Furthermore, we believe that the procedure 
described by CPT code 31571 is similar in terms of clinical composition 
and resource costs to the other procedures assigned to APC 0074. The 
final rule geometric mean cost of CPT code 31571 is approximately 
$1,951, while the final rule geometric mean cost for APC 0074 is 
approximately $1,887, and the final rule geometric mean cost for APC 
0075 is approximately $3,062. Therefore, we are finalizing our proposal 
to reassign CPT code 31571 from APC 0075 to APC 0074 for CY 2014.
c. Pulmonary Rehabilitation Services (APC 0077)
    For CY 2014, we proposed to reassign HCPCS code G0424 (Pulmonary 
rehabilitation, including exercise (includes monitoring), one hour, per 
session, up to two sessions per day) from APC 0102 (Level II Pulmonary 
Treatment) to APC 0077 (Level I Pulmonary Treatment), with a proposed 
payment rate of approximately $39. (The proposed payment rate reflects 
the corrected proposed rate in the September 6, 2013 OPPS Addendum B, 
which was posted on the CMS Web site.) We note that, for CY 2013, HCPCS 
code G0424 was assigned to APC 0102 with a similar payment rate of 
approximately $39.
    CMS established HCPCS code G0424 effective January 1, 2010, to 
describe a one-hour session of pulmonary rehabilitation. This HCPCS 
code was established consistent with the requirements set forth in 
section 144(a)(1) of Public Law 110-275 (MIPPA), which added section 
1861(fff) to the Act, to provide Medicare Part B coverage and payment 
for a comprehensive program of pulmonary rehabilitation services 
furnished to beneficiaries with chronic obstructive pulmonary disease, 
effective January 1, 2010.
    Comment: Several commenters expressed concern about the 
reassignment of HCPCS code G0424 to APC 0077, which is the same APC to 
which HCPCS codes G0237 (Therapeutic procedures to increase strength or 
endurance of respiratory muscles, face to face, one on one, each 15 
minutes (includes monitoring)), G0238 (Therapeutic procedures to 
improve respiratory function, other than described by G0237, one on 
one, face to face, per 15 minutes (includes monitoring)), and G0239 
(Therapeutic procedures to improve respiratory function or increase 
strength or endurance of respiratory muscles, two or more individuals 
(includes monitoring)), are assigned. Several commenters stated that 
the length of time in performing the service described by HCPCS code 
G0424 is not consistent with the length of time to perform the other 
services assigned to APC 0077. In particular, the commenters stated 
that HCPCS code G0424 represents a 60-minute to 90-minute procedure, 
which is not similar to the time requirement of the two procedures 
assigned to APC 0077, HCPCS codes G0237 and G0238, which represent 15-
minute procedures. Because of the time required to perform the service, 
the commenters believed that HCPCS code G0424 should not be assigned to 
the same APC as HCPCS codes G0237 and G0238. In addition, several 
commenters stated that the assignment of HCPCS code G0424 to APC 0077 
would create a 2 times rule violation. Some commenters further believed 
that hospitals are underreporting the costs of the procedure described 
by HCPCS code G0424, and stated that hospitals may be confused about 
the differences in costs for the procedures described by HCPCS codes 
G0237 and G0238 (15-minute procedures) and G0424 (60-90 minute 
procedures). Some commenters recommended that CMS establish a payment 
for HCPCS code G0424 using claims data from HCPCS codes G0237, G0238, 
and G0239, similar to the simulated methodology that CMS used in CY 
2010 before actual claims data for HCPCS code G0424 became available.
    Response: Prior to CY 2012, we did not have available actual claims 
data for HCPCS code G0424, and consequently, for CY 2010 and CY 2011, 
we utilized a simulated methodology to arrive at an appropriate payment 
for the procedure described by HCPCS code G0424. We discussed this 
simulated methodology extensively in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74263 through 74267). Because HCPCS code 
G0424 became effective January 1, 2010, the first year of actual claims 
data for this service was used in the CY 2012 OPPS update. 
Specifically, in CY 2012, we had data available for HCPCS code G0424 
for payments for OPPS services based on claims submitted from January 
1, 2010 through December 31, 2010. Payment for HCPCS code G0424 for CY 
2012 was approximately $37.42. For the CY 2014 OPPS update, payment for 
the procedure described by HCPCS code G0424 is based on claims 
submitted from January 1, 2012 through December 31, 2012. Similar to 
our findings for the CY 2012 and CY 2013 OPPS updates, we have a very 
robust set of claims for the procedure described by HCPCS code G0424 
for the CY 2014 update. Based on our latest hospital outpatient claims 
data, the resource cost associated with HCPCS code G0424 is comparable 
to the other services assigned to APC 0077. Specifically, our latest 
hospital outpatient claims data show that the geometric mean cost for 
HCPCS code G0424 is approximately $43, based on 457,226 single claims 
(out of 459,199

[[Page 74998]]

total claims), which is similar to the proposed payment rate of 
approximately $39 for APC 0077. We note that APC 0077 included various 
pulmonary treatments whose geometric mean costs range between $23 and 
$43. Based on the latest hospital outpatient claims data, we believe 
that HCPCS code G0424 can be appropriately reassigned to APC 0077.
    Regarding the commenters' statement about hospitals underreporting 
the costs of the procedure described by HCPCS code G0424, we have no 
evidence of such underreporting. Furthermore, as we have previously 
stated, ``[b]eyond our standard OPPS trimming methodology . . . that we 
apply to those claims that have passed various types of claims 
processing edits, it is not our general policy to judge the accuracy of 
hospital coding and charging for purposes of ratesetting'' (75 FR 
71838). We expect hospitals to report their services appropriately.
    We disagree with the commenters' assertion that assigning HCPCS 
code G0424 to APC 0077 would create a 2 times rule violation. We 
reviewed the costs of the procedures that would be assigned to APC 
0077, including the cost of the procedure described by HCPCS code G0424 
and did not find a violation of the 2 times rule in the APC. As has 
been our practice since the implementation of the OPPS, we annually 
review all the items and services within an APC group to determine, 
with respect to comparability of the use of resources, any 2 times rule 
violations. In making this determination, we review our claims data and 
determine whether we need to make changes to the current APC 
assignments for the following year. For HCPCS code G0424, we evaluated 
its APC assignment for the CY 2014 update, and determined that APC 0077 
is the appropriate assignment for this service based on its clinical 
homogeneity and resource similarity to the other services assigned to 
APC 0077.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification, to reassign 
HCPCS code G0424 from APC 0102 to APC 0077. APC 0077 has a final CY 
2014 geometric mean cost of approximately $39. The final CY 2014 
payment rate for HCPCS code G0424 can be found in Addendum B to this CY 
2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site).
10. Other Services
a. Balloon Sinus Dilation (APCs 0074 and 0075)
    For CY 2013, we assigned CPT codes 31295 (Nasal/sinus endoscopy, 
surgical; with dilation of maxillary sinus ostium (eg, balloon 
dilation), transnasal or via canine fossa), 31296 (Nasal/sinus 
endoscopy, surgical; with dilation of frontal sinus ostium (eg, balloon 
dilation)), and 31297 (Nasal/sinus endoscopy, surgical; with dilation 
of sphenoid sinus ostium (eg, balloon dilation)) to APC 0075 (Level V 
Endoscopy Upper Airway), with a payment rate of $2,026.82. For CY 2014, 
we proposed to continue to assign CPT codes 31295, 31296, and 31297 to 
APC 0075.
    Comment: One commenter stated that the proposed geometric mean cost 
of APC 0075 of approximately $2,378 is driven by the cost and frequency 
of a single code, CPT code 31541 (Laryngoscopy, direct, operative, with 
excision of tumor and/or stripping of vocal cords or epiglottis; with 
operating microscope or telescope), which had a proposed geometric mean 
cost of approximately $2,085, and comprised 61 percent of the APC's 
single frequency claims for ratesetting. The commenter requested that 
CMS analyze the appropriateness of continuing to assign CPT codes 
31295, 31296, and 31297 to APC 0075 and/or the appropriateness of 
continuing to assign CPT code 31541 to APC 0075.
    Response: Based on updated claims data, we reviewed the procedures 
in APC 0074 (Level IV Endoscopy Upper Airway) and APC 0075. During our 
review, we found 2 times rule violations in both APCs. To resolve one 
of the 2 times rule violations, we reassigned CPT code 31541 from APC 
0075 to APC 0074 for CY 2014. As a result, the final rule geometric 
mean cost of APC 0075 increased to approximately $3,062.
    The final rule geometric mean costs of CPT codes 31295, 31296, and 
31297 are $2,456, $2,894, and $1,905, respectively. Therefore, while we 
are continuing to assign CPT codes 31295 and 31296 to APC 0075 for CY 
2014, to avoid another 2 times rule violation, we are reassigning CPT 
code 31297, which has an appreciably lower geometric mean cost than the 
geometric mean cost of CPT codes 31295 and 31296, to APC 0074 for CY 
2014. APC 0074 has a CY 2014 final geometric mean cost of approximately 
$1,887.
    After consideration of the public comments we received, we are 
continuing to assign CPT codes 31295 and 31296 to APC 0075 for CY 2014, 
as we proposed. However, we are reassigning CPT code 31297 to APC 0074 
for CY 2014. In addition, we are reassigning CPT code 31541 from APC 
0075 to APC 0074 for CY 2014.
b. Radiofrequency Ablation of Uterine Fibroids (APC 0174)
    We created HCPCS code C9736 (Laparoscopy, surgical, radiofrequency 
ablation of uterine fibroid(s), including intraoperative guidance and 
monitoring, when performed) effective July 1, 2013. The procedure 
became known to us by means of an application to assign the procedure 
to a New Technology APC. We assigned HCPCS code C9736 to APC 0131 
(Level II Laparoscopy) because we believed that it has the greatest 
degree of clinical similarity to the laparoscopic procedures assigned 
to that APC. APC 0131 has a CY 2013 payment rate of $3,487.15. We 
proposed to continue to assign HCPCS code C9736 to APC 0131 for CY 
2014, with a proposed payment rate of approximately $3,765. (The 
proposed payment rate reflects the corrected proposed rate in the 
September 6, 2013 OPPS Addendum B, which was posted on the CMS Web 
site.)
    The AMA's CPT Editorial Panel recently created new Category III CPT 
code 0336T (Laparoscopy, surgical, ablation of uterine fibroid(s), 
including intraoperative ultrasound guidance and monitoring, 
radiofrequency), to be effective January 1, 2014, which describes the 
procedure described by HCPCS code C9736. Because HCPCS code C9736 
became effective July 1, 2013, there are no claims data available for 
this code for ratesetting purposes.
    At its August 26, 2013 meeting, the HOP Panel recommended that CMS 
move HCPCS code C9736 from APC 0131 to APC 0174 (Level IV Laparoscopy).
    Comment: A few commenters recommended that CMS reassign HCPCS code 
C9736 (or its successor code, CPT code 0336T) to APC 0174 for CY 2014 
because the resources involved in performing the procedure are more 
similar to the resources used in performing procedures assigned to APC 
0174. The commenters stated that two CPT codes assigned to APC 0174, 
CPT code 47370 (Laparoscopy, surgical, ablation of 1 or more liver 
tumor(s); radiofrequency) and CPT code 50542 (Laparoscopy, surgical; 
ablation of renal mass lesion(s), including intraoperative ultrasound 
guidance and monitoring, when performed), have clinical and resource 
characteristics similar to the characteristics of the procedures 
described by HCPCS code C9736. The commenters stated that both 
procedures are performed in an operating room

[[Page 74999]]

(OR) under general anesthesia and involve diagnostic laparoscopy, and 
both procedures use approximately 160 to 180 minutes of OR time. One 
commenter estimated that OR time for other procedures assigned to APC 
0131 averages 122 minutes. Other commenters stated that the single-use 
RF probe used in the procedure described by HCPCS code C9736 costs 
$2,584, which is part of more than $3,400 in total device and supply 
costs. They added that other procedures assigned to APC 0131 are not as 
device intensive, whereas procedures assigned to APC 0174 are device 
intensive. The commenters also requested that CMS delete HCPCS code 
C9736 and use the new CPT code 0336T, upon its effective date, January 
1, 2014.
    Response: We do not have claims data on HCPCS code C9736 for 
ratesetting purposes because the code is new, effective July 1, 2013. 
We routinely assign procedure or service codes to clinical APCs before 
we have claims data that are indicative of the resource costs of a 
procedure or service. We make these assignments initially, using the 
best currently available information, while reviewing claims data once 
such data become available and making reassignments accordingly, based 
on those data. We agree with the HOP Panel and the commenters that 
resources used to perform the procedure described by HCPCS code C9736 
appear to be more similar to the resources used to perform some of the 
services already assigned to APC 0174. Because new CPT code 0336T 
describes the procedure described by HCPCS code C9736 and is considered 
its successor code, we are deleting HCPCS code C9736, effective January 
1, 2014, and assigning CPT code 0336T to APC 0174 for CY 2014. As with 
all new services under the OPPS, the APC assignment of CPT code 0336T 
is subject to review once our claims data begin to reflect the cost of 
this procedure.
    After consideration of the public comments we received, we are 
deleting HCPCS code C9736, effective January 1, 2014, and assigning CPT 
code 0336T to APC 0174 for CY 2014, which has a final geometric mean 
cost of approximately $8,623.
c. Magnetic Resonance Image Guided Focused Ultrasound (APC 0065)
    The AMA's CPT Editorial Panel created two Category III CPT codes 
that describe Magnetic Resonance Image Guided Focused Ultrasound 
(MRgFUS) used in ablation of uterine fibroids, effective January 1, 
2005: CPT codes 0071T (Focused ultrasound ablation of uterine 
leiomyomata, including MR guidance; total leiomyomata volume less than 
200 cc of tissue) and 0072T (Focused ultrasound ablation of uterine 
leiomyomata, including MR guidance; total leiomyomata volume greater or 
equal to 200 cc of tissue). The CMS HCPCS Workgroup created a third 
code related to MRgFUS, HCPCS code C9734 (Focused ultrasound ablation/
therapeutic intervention, other than uterine leiomyomata, with magnetic 
resonance (MR) guidance), effective April 1, 2013. HCPCS code C9734 
originally described the service ``with or without MR guidance''. 
However, effective July l, 2013, we changed the descriptor to only 
specify ``with magnetic resonance guidance''. For CY 2013, all three of 
the MRgFUS codes are assigned to APC 0067 (Level II Stereotactic 
Radiosurgery), with HCPCS code C9734 added to APC 0067 effective April 
1, 2013. The CY 2013 payment rate for APC 0067 is $3,300.64. For CY 
2014, as part of a proposed restructuring of the Stereotactic 
Radiosurgery (SRS) APCs and procedures, we proposed to reassign SRS 
procedures to other APCs and to maintain intraoperative radiation 
therapy (IORT) and magnetoencephalography (MEG) procedures in APC 0065. 
We proposed to reassign the service codes for MRgFUS procedures to APC 
0065 based on clinical coherence to the other procedures assigned to 
APC 0065. In addition, we proposed to rename APC 0065 ``IORT, MRgFUS, 
and MEG,'' which has a CY 2014 proposed payment rate of approximately 
$1,714 (78 FR 43593 through 43594). (The CY 2014 proposed payment rate 
reflects the corrected proposed rate in the September 6, 2013 OPPS 
Addendum B, which was posted on the CMS Web site.) The proposal to 
restructure the APCs that pay for SRS, IORT, MRgFUS, and MEG procedures 
would reduce the number of APCs under which payment is made for SRS, 
IORT, MRgFUS, and MEG procedures from four to three APCs. We note that 
there are no claims data for CPT codes 0071T and 0072T, or HCPCS code 
C9734, available for CY 2014 ratesetting purposes.
    Comment: Commenters expressed concern about the CY 2014 proposed 
reassignment of MRgFUS services to APC 0065, and stated that MRgFUS 
services are not appropriate for assignment to APC 0065 based on 
clinical and resource characteristics of other services assigned to APC 
0065. One commenter opined that MRgFUS services are more similar 
clinically to the SRS services assigned to APC 0067, in terms of 
treatment set-up, delivery of radiation, and post-procedure recovery, 
except that MRgFUS services use nonionizing radiation. This commenter 
also believed that MRgFUS services are similar in resources to the SRS 
services assigned to APC 0067, estimating hospital costs for services 
described by CPT codes 0071T and 0072T at $5,439 each, and the cost of 
the service described by HCPCS code C9734 at $6,073, which are similar 
to the proposed payment rate of APC 0067 of approximately $5,615.
    A few commenters urged CMS not to reduce the payment rates for 
MRgFUS services, as part of restructuring the SRS APCs, or to package 
payment for other services related to MRgFUS. The commenters noted that 
the CY 2014 proposal would reduce the payment rate for MRgFUS services 
by nearly half of the amount of the payment rate for APC 0067 for CY 
2013, in addition to reductions in payment as a result of the packaging 
of related radiation oncology services.
    One commenter identified a number of services performed with MRgFUS 
for which CMS has proposed to package payment and estimated the 
foregone separate payments for these services, if CMS packages them, to 
total approximately $2,800. The commenter recommended that, if CMS 
finalizes packaging of these services, CMS compensate providers for 
performance of the MRgFUS services by assigning MRgFUS procedure codes 
to either APC 0229 (Level II Endovascular Revascularization of the 
Lower Extremity), which has a proposed payment rate of approximately 
$10,314, or a New Technology APC reflecting a similar level of 
resources use. The commenter acknowledged that there are few Medicare 
claims data reporting the MRgFUS procedure codes, and stated that the 
procedures described by CPT codes 0071T and 0072T are generally 
performed on younger women and that, although HCPCS code C9734 is a new 
code effective in CY 2013, the commenter expects there will be a 
significant number of patients over age 65 with metastatic bone cancer 
who will receive treatment with the procedure described by HCPCS code 
C9734.
    Response: We do not agree with the commenter that MRgFUS procedures 
are similar to SRS procedures assigned to APC 0067 because of the 
clinical differences between MRgFUS and SRS, which is a specialized 
type of radiation therapy. We believe that MRgFUS procedures are more 
similar to the services in restructured APC 0065, which are distinct 
from SRS clinical characteristics. We note there are no claims data 
available for CPT codes 0071T and 0072T or HCPCS code C9734

[[Page 75000]]

for CY 2014 ratesetting. Regarding the cost estimates for MRgFUS 
procedures presented by the commenter, it is our longstanding policy to 
reassign procedures to APCs based on Medicare claims data that support 
reassignment, rather than relying on external cost estimates.
    After consideration of the public comments we received, we are 
finalizing our proposal to reassign CPT codes 0071T, 0072T, and HCPCS 
code C9734 to APC 0065 for CY 2014. The final rule geometric mean cost 
of APC 0065 is approximately $1,253.
    Our proposed and final packaging policies for CY 2014 are discussed 
in section II.A.3. of this final rule with comment period.
d. Flow Cytometry (APC 0433)
    For CY 2014, we proposed to reassign CPT code 88184 (Flow 
cytometry, cell surface, cytoplasmic, or nuclear marker, technical 
component only; first marker) from APC 0433 (Level II Pathology) to APC 
0344 (Level IV Pathology), with a proposed payment rate of 
approximately $273. (The proposed payment rate reflects the corrected 
proposed rate in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.) In addition, for CY 2014, we proposed to 
package payment for CPT code 88185 (Flow cytometry, cell surface, 
cytoplasmic, or nuclear marker, technical component only; each 
additional marker (list separately in addition to code for first 
marker)), which is currently assigned to APC 0342 (Level I Pathology) 
as an add-on code. We refer readers to section II.A.3. of this final 
rule with comment period for further discussion of our proposed and 
final payment methodology for add-on codes for CY 2014.
    Comment: One commenter expressed disappointment with CMS' decision 
to decrease the payment rate for flow cytometry CPT codes 88184 and 
88185.
    Response: We note that the CY 2013 payment rate for CPT code 88184 
was approximately $23 and the CY 2013 payment rate for CPT code 88185 
was approximately $13. For CY 2014, we proposed to reassign CPT code 
88184 from APC 0433 to APC 0344 with a payment rate of approximately 
$273 based on our claims data for the proposed rule.
    We also proposed to package payment for CPT code 88185 because it 
is an add-on code. We refer readers to section II.A.3. of this final 
rule with comment period for further discussion of our final payment 
methodology for add-on codes for CY 2014.
    Based on our latest hospital outpatient claims data, we decided not 
to revise the APC assignment for CPT code 88184 and instead decided to 
retain the code's assignment to APC 0433 (Level II Pathology), which is 
the same APC to which CPT code 88184 was assigned for CY 2013. Analysis 
of the claims data shows a final rule geometric mean cost of 
approximately $35 for CPT code 88184, which is similar to the final 
rule geometric mean cost of approximately $37 for APC 0433.
    After consideration of the public comment that we received and 
review of our latest hospital outpatient claims data for this final 
rule with comment period, we are revising our proposal and will 
continue to assign CPT code 88184 to APC 0433 for CY 2014. CPT code 
88184 has a final payment rate of approximately $37 for CY 2014, which 
is slightly higher than the payment rate of approximately $23 for CY 
2013. This final payment rate also can be found in Addendum B to this 
CY 2014 OPPS/ASC final rule with comment period (which is available via 
the Internet on the CMS Web site). The final policy for packaging CPT 
code 88185 as an add-on code for CY 2014 is discussed in section 
II.A.3. of this final rule with comment period.
e. Hormone Pellet Implant (APC 0420)
    For CY 2014, we proposed to reassign CPT code 11980 (Subcutaneous 
hormone pellet implantation (implantation of estradiol and/or 
testosterone pellets beneath the skin)) from APC 0340 (Level I Minor 
Procedures) to APC 0420 (Level II Minor Procedures), with a proposed 
payment rate of approximately $103. (The proposed payment rate reflects 
the corrected proposed rate in the September 6, 2013 OPPS Addendum B, 
which was posted on the CMS Web site.)
    In the proposed rule, we note that we proposed to make some changes 
related to APC 0340 for CY 2014. We proposed to revise the title of APC 
0340 from ``Minor Ancillary Procedures'' to ``Level I Minor 
Procedures'' and to establish a second level APC to describe minor 
ancillary procedures, specifically, APC 0420, with the title of ``Level 
II Minor Procedures,'' as listed in Addendum A to the CY 2014 OPPS/ASC 
proposed rule, which was posted on the CMS Web site. Based on our 
review of the latest CY 2012 hospital outpatient claims data, we 
believed that these changes were necessary to pay appropriately for the 
services assigned to APC 0340.
    Comment: One commenter expressed concern about the APC assignment 
of CPT code 11980 and suggested two options to address the code's APC 
assignment. Under the first option, the commenter suggested that CMS 
consider establishing a new APC that describes minor ancillary 
procedures, specifically a Level III Minor Procedures APC, and assign 
CPT code 11980 to this newly created APC. Because there are several 
procedures with varying costs assigned to APC 0340 and APC 0420, the 
commenter suggested restructuring the minor procedures APCs by 
establishing payment ranges for each level of service. In particular, 
the commenter suggested that the Level I Minor Procedures APC would 
have a geometric means cost in the range of $0 to $120, the Level II 
Minor Procedures APC would have a geometric mean cost in the range of 
$121 to $300, and the Level III Minor Procedures would have a geometric 
mean cost of greater than $300. As an alternative option, the commenter 
recommended that CMS reassign CPT code 11980 to APC 0189 (Level III 
Female Reproductive Procedure).
    Response: As the commenter stated, the procedure described by CPT 
code 11980 involves both testosterone pellets for men and estradiol 
pellets for women. Because all the procedures in APC 0189 relate to 
female procedures, we do not believe that APC 0189 would be an 
appropriate APC assignment for CPT code 11980. In addition, based on 
our review of the updated hospital outpatient claims data, we believe 
the two-level APC appropriately pays for the minor procedures that are 
currently assigned to APCs 0340 and 0420.
    As has been our practice since the implementation of the OPPS, we 
annually review all the items and services within an APC group to 
determine, with respect to comparability of the use of resources, for 
any 2 times rule violations. In making this determination, we review 
our claims data and determine whether we need to make changes to the 
current APC assignments for the following year. We will reevaluate the 
APC assignment of CPT code 11980 for the CY 2015 OPPS rulemaking cycle.
    After consideration of the public comment that we received, we are 
finalizing our proposal to reassign CPT code 11980 to APC 0420, which 
has a final geometric mean cost of approximately $99 for CY 2014. The 
final CY 2014 payment rate for CPT code 11980 can be found in Addendum 
B to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
f. Peyronie Disease Injection Procedure (APC 0164)
    For CY 2014, we proposed to reassign CPT code 54200 (Injection 
procedure for peyronie disease) from APC 0164 (Level

[[Page 75001]]

II Urinary and Anal Procedures) to APC 0126 (Level I Urinary and Anal 
Procedures), with a proposed payment rate of approximately $137, based 
on its clinical and resource similarity to other procedures assigned to 
APC 0126. (The proposed payment rate reflects the corrected proposed 
rate in the September 6, 2013 OPPS Addendum B, which was posted on the 
CMS Web site.)
    Comment: One commenter expressed concern with the proposal to 
reassign CPT code 54200 to APC 0126 and requested that CMS continue to 
assign this code to APC 0164, which is the APC assignment for CY 2013. 
The commenter stated the CPT code 54200 is clinically similar to the 
procedures described by CPT codes 54220 (Irrigation of corpora 
cavernosa for priapism) and 54235 (Injection of corpora cavernosa with 
pharmacologic agent(s) (eg, papaverine, phentolamine)), which are 
assigned to APC 0164. The commenter indicated that all three procedures 
(CPT codes 54200, 54220, and 54235) involve needle placements and 
should be assigned to the same APC. In addition, the commenter 
requested that CMS establish a low geometric mean cost of $163 for APC 
0164.
    Response: We examined the latest CY 2012 hospital outpatient claims 
data, which are based on claims submitted from January 1, 2012 through 
December 31, 2012, and we agree with the commenter's suggestion to 
continue to assign CPT code 54200 to APC 0164. Our analysis reveals 
that the resource cost associated with the procedure described by CPT 
code 54200 is similar to the resource cost of the procedure described 
by CPT code 54220, which is assigned to APC 0164. Specifically, the 
geometric mean cost for CPT code 54200 is approximately $167 based on 
330 single claims (out of 351 total claims), which is similar to the 
geometric mean cost of approximately $166 for CPT code 54220 based on 
25 single claims (out of 427 total claims). Based on the claims data, 
we believe that CPT code 54200 should continue to be assigned to APC 
0164.
    With regard to the commenter's suggestion to set the geometric mean 
cost at $163 for APC 0164, we do not cap the geometric mean cost based 
on suggested amounts. The geometric mean cost is determined based on 
consideration of the costs of all of the procedures and the number of 
claims within a given APC. We refer readers to section II.A. of this 
final rule with comment period for a discussion of our methodology in 
determining the APC geometric mean costs.
    After consideration of the public comment we received, we are not 
finalizing our proposal to reassign CPT code 54200 from APC 0164 to APC 
0126 for CY 2014. Rather, we are maintaining the APC assignment for CPT 
code 54200 to APC 0164, which has a final CY 2014 geometric mean cost 
of approximately $212. The final CY 2014 payment rate for CPT code 
54200 can be found in Addendum B to this final rule with comment period 
(which is available via the Internet on the CMS Web site).
g. Negative Pressure Wound Therapy (NPWT) (APC 0016)
    We established HCPCS code G0456 (Negative pressure wound therapy, 
(e.g. vacuum assisted drainage collection) using a mechanically-powered 
device, not durable medical equipment, including provision of cartridge 
and dressing(s), 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) and HCPCS code G0457 
(Negative pressure wound therapy, (e.g. vacuum assisted drainage 
collection) using a mechanically-powered device, not durable medical 
equipment, including provision of cartridge and dressing(s), topical 
application(s), wound assessment, and instructions for ongoing care, 
per session; total wound(s) surface area greater than 50 square 
centimeters), effective January 1, 2013, to provide a payment mechanism 
for negative pressure wound therapy services furnished through a 
disposable device. We assigned these services to APC 0016 (Level IV 
Debridement & Destruction), which has a CY 2013 payment rate of 
approximately $210. For CY 2014, we proposed to continue to assign 
HCPCS codes G0456 and G0457 to APC 0016, with a proposed payment rate 
of approximately $272. (The proposed payment rate reflects the 
corrected proposed rate in the September 6, 2013 OPPS Addendum B, which 
was posted on the CMS Web site.)
    Comment: Some commenters requested that CMS reassign HCPCS codes 
G0456 and G0457 from APC 0016 to proposed APC 0186 (Level III Skin 
Repair). The commenters believed that, based on clinical homogeneity 
and resource costs of the other procedures assigned to proposed APC 
0186, proposed APC 0186 is the most appropriate assignment for HCPCS 
codes G0456 and G0457. Another commenter stated that the cost of 
providing NPWT is in the range of $450 to $500, which more closely 
aligns with the CY 2013 payment rate of approximately $393 for proposed 
APC 0135 (Level IV Skin Repair). One commenter believed that HCPCS 
codes G0456 and G0457 are clinically similar to the wound care 
procedures described by CPT codes 12020, 13100, 13101, 15002, and 
15003, which were assigned to APC 0135 for CY 2013.
    Response: We disagree with the commenters' assertion that HCPCS 
codes G0456 and G0457 are similar, in terms of clinical homogeneity or 
resource costs, to CPT codes 12020, 13100, 13101, and 15002. Our 
analysis of the latest hospital outpatient claims data indicates that 
the resource costs for the services described by CPT codes 12020, 
13100, 13101, and 15002 are in the range of $474 to $570. Specifically, 
the geometric mean cost for CPT code 12020 is approximately $522 based 
on 1,082 single claims (out of 2,254 total claims), for CPT code 13100, 
approximately $474 based on 81 single claims (out of 341 total claims), 
for CPT code 13101, approximately $570 based on 1,198 single claims 
(out of 3,725 total claims), and for CPT code 15002, approximately $547 
based on 657 single claims (out of 4,119 total claims). (We have not 
included the geometric mean cost for CPT code 15003 in this discussion 
because it is an add-on code that will be packaged in the CY 2014 OPPS 
update.) We believe that the resource costs for the services described 
by the negative pressure wound therapy HCPCS codes G0456 and G0457 may 
be slightly higher than the resource costs for the services described 
by the negative pressure wound therapy CPT codes 97605 and 97606, but 
not as significant as those services described by CPT codes 12020, 
13100, 13101, and 15002. Our claims data show that the geometric mean 
cost for HCPCS code 97605 is approximately $100 based on 66,355 single 
claims (out of 85,285 total claims), and approximately $140 for CPT 
code 97606 based on 7,681 single claims (out of 10,771 total claims). 
Based on the nature of the procedure, the advice from our medical 
advisors, and our claims data for CPT codes 12020, 13100, 13101, 15002, 
97605, and 97606, we believe that APC 0016, which has a geometric mean 
cost of approximately $276, is the more appropriate APC assignment for 
HCPCS codes G0456 and G0457 because these procedures describe 
debridement-type services rather than skin repair procedures.
    Because HCPCS codes G0456 and G0457 are new for CY 2013, we expect 
to have claims data next year, at which time, we will reevaluate the 
APC assignments for both codes in preparation for the CY 2015 
rulemaking cycle. We remind hospitals that we

[[Page 75002]]

review, on an annual basis, the APC assignments for all services and 
items paid under the OPPS.
    Comment: One commenter who responded to the CY 2013 OPPS/ASC final 
rule with comment period believed that the CY 2013 payment rate of 
approximately $210 for both HCPCS codes G0456 and G0457 is 
inappropriate considering that the current national average selling 
price for the device used with the procedure is approximately $270. In 
addition, the commenter requested that CMS revise the status indicator 
of HCPCS codes G0456 and G0457 from ``T'' (Significant Procedure, 
Multiple Reduction Applies) to ``S'' (Significant Procedure, Not 
Discounted When Multiple) in order to not undercompensate hospitals for 
performing the procedure when it is performed with other services on 
the same day.
    Response: For the CY 2014 update, the payment rate for HCPCS codes 
G0456 and G0457 will increase from $210 for CY 2013 to approximately 
$275 for CY 2014. As stated above, because HCPCS codes G0456 and G0457 
are new for CY 2013, we expect to have claims data next year, at which 
time we will reevaluate the APC assignments for both codes in 
preparation for the CY 2015 rulemaking cycle.
    With regards to the status indicator assignment of HCPCS codes 
G0456 and G0457, we note that all codes assigned to APC 0016 are 
crosswalked to status indicator ``T'' and have no corresponding ``S'' 
status indicator. In addition, we do not believe that every service or 
procedure should be paid at 100 percent. The multiple procedure 
reduction for status indicator ``T'' services recognizes that 
efficiencies are gained when multiple procedures are performed in a 
single session. We believe that this policy is appropriately applied to 
the wound treatment procedures in question.
    After consideration of the public comments that we received, we are 
finalizing our CY 2014 proposal, without modification, to continue to 
assign HCPCS codes G0456 and G0457 to APC 0016, which has a final CY 
2014 geometric mean cost of approximately $276. The final CY 2014 
payment rate for HCPCS codes G0456 and G0457 can be found in Addendum B 
to this final rule with comment period (which is available via the 
Internet on the CMS Web site).
h. Platelet Rich Plasma (PRP) (APC 0327)
    For CY 2014, we proposed to continue to assign HCPCS code G0460 
(Autologous platelet rich plasma for chronic wounds/ulcers, including 
phlebotomy, centrifugation, and all other preparatory procedures, 
administration and dressings, per treatment) to APC 0013 (Level II 
Debridement & Destruction) with a proposed payment rate of 
approximately $83. (The proposed payment rate reflects the corrected 
proposed rate in the September 6, 2013 OPPS Addendum B, which was 
posted on the CMS Web site.)
    Comment: Many of the commenters disagreed with the proposed APC 
assignment for HCPCS code G0460. Several commenters stated that the 
proposed payment rate of approximately $83 for APC 0013 does not 
adequately pay for the cost of providing the service described by HCPCS 
code G0460. Some of the commenters reported that the actual cost to 
provide PRP services is between $400 and $450. Other commenters 
reported a specific cost of $458 to perform the procedure. Most of the 
commenters stated that HCPCS code G0460 is inappropriately assigned to 
APC 0013 and urged CMS to reassign the code to APC 0135 (Level IV Skin 
Repair), which had a proposed payment rate of approximately $862. One 
commenter stated that PRP services are more analogous to the tissue-
based wound procedures that are assigned to APC 0135 (Level III Skin 
Repair) for CY 2013, which has a payment rate of $393.38 for the first 
100cm2.
    Response: We reviewed all the codes assigned to the Debridement & 
Destruction APCs as well as the Skin Repair APCs. After further 
consultation with our medical advisors, we agree with the commenters 
that HCPCS code G0460 would be more appropriately assigned to one of 
the Skin Repair APCs. For CY 2014, there are four Skin Repair APCs. We 
have renumbered these APCS with sequential numbers as follows: (1) APC 
0326 (Level I Skin Repair); (2) APC 0327 (Level II Skin Repair); (3) 
APC 0328 (Level III Skin Repair); and (4) APC 0329 (Level IV Skin 
Repair). After consideration of the public comments we received, and 
based on the clinical comparability of the procedure and the 
approximate resource costs associated with the procedure as compared to 
other procedures assigned to the Skin Repair APCs, we believe that APC 
0327 is the most appropriate APC assignment for HCPCS code G0460. APC 
0327 has a final geometric mean cost of approximately $411 for CY 2014. 
The final CY 2014 payment rate for HCPCS code G0460 can be found in 
Addendum B to this final rule with comment period (which is available 
via the Internet on the CMS Web site).
    It has been our practice since the implementation of the OPPS in 
2000 to review, on an annual basis, the APC assignments for the 
procedures and services paid under the OPPS. We will review the APC 
assignment for HCPCS code G0460 and determine whether an APC 
reassignment is necessary for the CY 2015 ratesetting.
i. Payment for Radioisotopes Derived From Non-Highly Enriched Uranium 
(HEU) Sources (APC 1442)
    Radioisotopes are widely used in modern medical imaging, 
particularly for cardiac imaging and predominantly for the elderly 
(Medicare) population. Technetium 99 (Tc-99m), the radioisotope used in 
the majority of such diagnostic imaging services, is currently produced 
in legacy reactors outside of the United States using highly enriched 
uranium (HEU).
    The Administration has established an agenda to eliminate domestic 
reliance on these reactors, and is promoting the conversion of all 
medical radioisotope production to non-HEU sources. Alternative methods 
for producing Tc-99m without HEU are technologically and economically 
viable, and conversion to such production has begun and is expected to 
be completed within a 5-year time period. We expect this change in the 
supply source for the radioisotope used for modern medical imaging will 
introduce new costs into the payment system that are not accounted for 
in the historical claims data. Therefore, for CY 2013, we finalized a 
policy to provide an additional payment of $10 for the marginal cost 
for radioisotopes produced from non-HEU sources over the costs for 
radioisotopes produced by HEU sources (77 FR 68316). 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.
    Comment: Several commenters requested changes in the additional 
payment for Technetium-99m produced from non-highly enriched uranium 
(non-HEU) sources, as described by HCPCS code Q9969. One commenter was 
concerned that CMS did not utilize stakeholder feedback to craft a more 
effective payment methodology, such as ensuring that the payment leads 
to Full Cost Recovery higher in the supply chain, or paying 
radiopharmacies for the additional costs of maintaining segregated 
channels for HEU and LEU.

[[Page 75003]]

One commenter was concerned about the beneficiary's responsibility for 
a 20-percent copayment. That commenter also believed that the $10 
payment was too low. Specific changes requested by commenters included 
elimination of the copayment, increase in the payment rate, expanding 
it to other radioisotopes, and modifying the payment in response to 
industry suggestions during stakeholder meetings and/or paying 
separately for diagnostic radiopharmaceuticals.
    Response: We implemented this payment for a specific purpose based 
on industry and government concerns and considering stakeholder 
requests and stakeholder feedback. We determined that non-HEU sourced 
Mo-99, the Tc-99m precursor, is expected to cost more than current 
sources from legacy reactors, and this increased cost will adversely 
impact hospitals. In evaluating that concern, we determined that there 
is a probability that those costs will not be passed on uniformly as 
the industry converts. Therefore, we used our authority under section 
1833(t)(2)(E) of the Act to ensure payment equity among hospitals to 
propose and finalize a policy through rulemaking that created this 
additional payment to address the incremental cost of obtaining Tc-99m 
from the new sources of supply. We stated in our CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68316) that our expectation was that 
the transition to non-HEU sourced Mo-99 would be completed within 4 to 
5 years and that there might be a need to make differential payments 
for a period of 4 to 5 years. We further 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. We have reassessed this payment for CY 2014 
and have not identified any new information that would cause us to 
modify the payment at this time. We do not agree with the commenters' 
suggestion to eliminate the beneficiary's copayment because section 
1833(t)(8) of the Act and Sec. Sec.  419.41 through 419.45 of the 
regulations require a beneficiary copayment.

IV. OPPS Payment for Devices

A. Pass-Through Payments for Devices

1. Expiration of Transitional Pass-Through Payments for Certain Devices
a. Background
    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, but not more than 3 years. This pass-through 
payment eligibility period begins with the first date on which 
transitional pass-through payments may be made for any medical device 
that is described by the category. We may establish a new device 
category for pass-through payment in any quarter. Under our established 
policy, we base the pass-through status expiration date for a device 
category on the date on which pass-through payment is effective for the 
category, which is the first date on which pass-through payment may be 
made for any medical device that is described by such category. We 
propose and finalize the dates for expiration of pass-through status 
for device categories as part of the OPPS annual update.
    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). Brachytherapy 
sources, which are now separately paid in accordance with section 
1833(t)(2)(H) of the Act, are an exception to this established policy.
    There currently are three device categories eligible for pass-
through payment. These device categories are described by HCPCS codes 
C1830 (Powered bone marrow biopsy needle) and C1840 (Lens, intraocular 
(telescopic)), which we made effective for pass-through payment as of 
October 1, 2011; and HCPCS code C1886 (Catheter, extravascular tissue 
ablation, any modality (insertable)), which we made effective for pass-
through payment as of January 1, 2012. Recognizing that these three 
device categories were eligible for at least 2, but not more than 3, 
years of pass-through status, in the CY 2013 OPPS/ASC final rule with 
comment period, we finalized the expiration of pass-through payment for 
all three of these HCPCS codes, which will expire after December 31, 
2013 (77 FR 68352). Therefore, in accordance with our established 
policy, after December 31, 2013, we will package the respective costs 
of the HCPCS codes C1830, C1840, and C1886 devices into the costs of 
the procedures with which the devices are reported in the hospital 
claims data used in OPPS ratesetting.
b. CY 2014 Policy
    As previously stated, we 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). In the CY 2013 OPPS/ASC proposed rule (78 FR 43595), in the 
case of device category C1840, we proposed that the device costs be 
packaged only when billed with CPT code 0308T (Insertion of ocular 
telescope prosthesis including removal of crystalline lens), which 
became effective on July 1, 2012. We announced the policy that device 
category C1840 must be billed with CPT code 0308T, effective July 1, 
2012, in Transmittal 2483, dated June 8, 2012. CPT code 0308T is 
currently assigned to APC 0234 (Level IV Anterior Segment Eye 
Procedures), which had a proposed geometric mean cost of approximately 
$1,794. When the HCPCS code C1840 device costs are packaged into the 
cost of CPT code 0308T (and the equivalent procedure described by HCPCS 
code C9732 for the first half of 2012), the proposed geometric mean 
cost of the procedure is approximately $15,249. Based on this geometric 
mean cost for CPT code 0308T, we proposed to create new APC 0351 (Level 
VII Anterior Segment Eye Procedures), and to assign CPT code 0308T to 
this APC, which had a proposed geometric mean cost of approximately 
$15,249. We stated in the proposed rule that the geometric mean cost 
for CY 2014 that will be reported in the final rule for this new APC 
will depend on the geometric mean cost of CPT code 0308T (including the 
cost of HCPCS code C1840) as calculated using claims data available for 
the final rule.
    Comment: One commenter requested that CMS extend the pass-through 
payment period of HCPCS code C1830 because one local Medicare 
contractor had denied ASC payment at least twice because the Medicare 
claim form was reportedly incorrectly completed. The commenter stated 
that there is a lack of consistent guidance on how ASC claims for pass-
through items are to be submitted.
    Response: We are not extending the period of pass-through payment 
of HCPCS code C1830. Under the ASC payment system, Sec.  416.164(b)(2) 
of the regulations requires that we pay separately for certain 
implantable items and services that have pass-through status under the 
OPPS.
    HCPCS code C1830 was made effective for pass-through payment as of 
October 1, 2011, and we finalized a December 31, 2013 expiration date 
from pass-through payment for HCPCS code C1830 under the OPPS in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68353). We cannot 
extend the pass-through payment status of HCPCS code C1830 through CY 
2014, because such an extension would make

[[Page 75004]]

the pass-through payment status effective longer than the maximum 3-
year period permitted under section 1833(t)(6)(B)(iii) of the Act. As 
we stated in the proposed rule, after December 31, 2013, the costs for 
devices described by HCPCS code C1830 will be packaged into the costs 
of the procedure with which the device is reported in the hospital 
claims data used in the development of the OPPS relative payment 
weights that will be used to establish the ASC payment rates for CY 
2014 (78 FR 43638). Therefore, we are not altering the decision to 
expire category C1830 from pass-through payment as of January 1, 2014, 
or our ASC policy. We are not aware of systematic problems with billing 
of HCPCS code C1830 either in the OPPS payment system or the ASC 
payment system. The commenter cited that there were several instances 
in which one local contractor rejected HCPCS code C1830 claims from an 
ASC. Our OPPS claims data reflect that nearly 1,900 claims from for 
HCPCS code C1830 were processed with a geometric mean cost of 
approximately $126. Therefore, it appears that most HCPCS code C1830 
pass-through payment claims were adjudicated successfully in the OPPS, 
and we believe this is true in the ASC setting as well. Because pass-
through devices are contractor priced in the ASC, there may be more 
interactions between ASCs and MACs on pass-through claims than is 
typical for hospitals. We are not aware of widespread problems with ASC 
processing of claims for HCPCS code C1830.
    Comment: One commenter concurred with the proposed assignment of 
CPT code 0308T to new APC 0351, as well as the designation of this 
procedure as device-intensive in the ASC setting. The commenter also 
urged CMS to only use claims from hospitals that are customers of the 
manufacturer of the HCPCS code C1840 device as claims used with CPT 
code 0308T because that company is reportedly the sole manufacturer of 
the device. The commenter noted that four claims were from a hospital 
that was not a customer, and which apparently reported costs with CPT 
code 0308T that were much too low to represent the HCPCS code C1840 
device cost.
    Response: We appreciate the commenter's support for the APC 
assignment of CPT code 0308T. Regarding the recommendation to use 
claims only from customers of the device manufacturer, we do not 
generally screen claims in the manner suggested by the commenter.
    After consideration of the public comments we received, we are 
maintaining our previous decision to expire device categories C1830, 
C1840, and C1886 from pass-through payment status, which we finalized 
in the CY 2013 OPPS/ASC final rule with comment period, and we are 
finalizing our proposal to package the costs of these devices with the 
procedures with which they are billed. We also are finalizing for CY 
2014 the proposed assignment of CPT code 0308T to APC 0351. The final 
CY 2014 geometric mean cost of APC 0351 is approximately $15,606.
    As we indicated in the CY 2014 OPPS/ASC proposed rule, with the 
expiration of device categories C1830, C1840, and C1886 from pass-
through payment status at the end of CY 2013, there are no currently 
active categories for which we would expire pass-through status in CY 
2014. If we create new device categories for pass-through payment 
status during the remainder of CY 2013 or during CY 2014, we will 
propose future expiration dates in accordance with the statutory 
requirement that they be eligible for pass-through payments for at 
least 2, but not more than 3, years from the date on which pass-through 
payment for any medical device described by the category may first be 
made. (There is one new device category eligible for pass-through 
payment that we created effective October 1, 2013, C1841 (Retinal 
prosthesis, includes all internal and external components). However, 
this category will not expire in CY 2014.)
2. Provisions for Reducing Transitional Pass-Through Payments To Offset 
Costs Packaged Into APC Groups
a. Background
    Section 1833(t)(6)(D)(ii) of the Act sets the amount of additional 
pass-through payment for an eligible device as the amount by which the 
hospital's charges for a device, adjusted to cost (the cost of the 
device) exceeds the portion of the otherwise applicable Medicare 
outpatient department fee schedule amount (the APC payment amount) 
associated with the device. We have an established policy to estimate 
the portion of each APC payment rate that could reasonably be 
attributed to the cost of the associated devices that are eligible for 
pass-through payments (66 FR 59904) for purposes of estimating the 
portion of the otherwise applicable APC payment amount associated with 
pass-through devices. For eligible device categories, we deduct an 
amount that reflects the portion of the APC payment amount that we 
determine is associated with the cost of the device, defined as the 
device APC offset amount, from the charges adjusted to cost for the 
device, as provided by section 1833(t)(6)(D)(ii) of the Act, to 
determine the eligible device's pass-through payment amount. We have 
consistently used an established methodology to estimate the portion of 
each APC payment rate that could reasonably be attributed to the cost 
of an associated device eligible for pass-through payment, using claims 
data from the period used for the most recent recalibration of the APC 
rates (72 FR 66751 through 66752). We establish and update the 
applicable device APC offset amounts for eligible pass-through device 
categories through the transmittals that implement the quarterly OPPS 
updates.
    Currently, we have published a list of all procedural APCs with the 
CY 2013 portions (both percentages and dollar amounts) of the APC 
payment amounts that we determine are associated with the cost of 
devices on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The dollar 
amounts are used as the device APC offset amounts. In addition, in 
accordance with our established practice, the device APC offset amounts 
in a related APC are used in order to evaluate whether the cost of a 
device in an application for a new device category for pass-through 
payment is not insignificant in relation to the APC payment amount for 
the service related to the category of devices, as specified in our 
regulations at Sec.  419.66(d).
    Beginning in CY 2010, we include packaged costs related to 
implantable biologicals in the device offset calculations in accordance 
with our policy that the pass-through evaluation process and payment 
methodology for implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) and that 
are newly approved for pass-through status beginning on or after 
January 1, 2010, be the device pass-through process and payment 
methodology only (74 FR 60476).
b. CY 2014 Policy
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), we proposed to 
continue, for CY 2014, our established methodology to estimate the 
portion of each APC payment rate that could reasonably be attributed to 
(that is, reflect) the cost of an associated device eligible for pass-
through payment, using claims data from the period used for the most 
recent recalibration of the APC payment rates. We proposed to continue 
our policy, for CY 2014, that the pass-through evaluation process and 
pass-

[[Page 75005]]

through payment methodology for implantable biologicals that are 
surgically inserted or implanted (through a surgical incision or a 
natural orifice) and that are newly approved for pass-through status 
beginning on or after January 1, 2010, be the device pass-through 
process and payment methodology only. The rationale for this policy is 
provided in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60471 through 60477). We also proposed to continue our established 
policies for calculating and setting the device APC offset amounts for 
each device category eligible for pass-through payment. In addition, we 
proposed to continue to review each new device category on a case-by-
case basis to determine whether device costs associated with the new 
category are already packaged into the existing APC structure. If 
device costs packaged into the existing APC structure are associated 
with the new category, we proposed to deduct the device APC offset 
amount from the pass-through payment for the device category. As stated 
earlier, these device APC offset amounts also would be used in order to 
evaluate whether the cost of a device in an application for a new 
device category for pass-through payment is not insignificant in 
relation to the APC payment amount for the service related to the 
category of devices (Sec.  419.66(d)).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43595), for CY 2014, 
we also proposed to continue our policy established in CY 2010 to 
include implantable biologicals in our calculation of the device APC 
offset amounts. In addition, we proposed to continue to calculate and 
set any device APC offset amount for any new device pass-through 
category that includes a newly eligible implantable biological 
beginning in CY 2014 using the same methodology we have historically 
used to calculate and set device APC offset amounts for device 
categories eligible for pass-through payment, and to include the costs 
of implantable biologicals in the calculation of the device APC offset 
amounts (78 FR 43596).
    In addition, in the CY 2014 OPPS/ASC proposed rule (78 FR 43596), 
we proposed to update the list of all procedural APCs with the final CY 
2014 portions of the APC payment amounts that we determine are 
associated with the cost of devices on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html so that this information is available 
for use by the public in developing potential CY 2014 device pass-
through payment applications and by CMS in reviewing those 
applications.
    We did not receive any public comments on these proposals. 
Therefore, we are finalizing them for CY 2014 without modification. In 
addition, we will update, on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html, the list of all procedural APCs with the final CY 2014 
portions of the APC payment amounts that we determine are associated 
with the cost of devices so that this information is available for use 
by the public in developing potential CY 2014 device pass-through 
payment applications and by CMS in reviewing those applications.
3. Changes to Device Pass-Through Criteria: Integral and Subordinate 
Criterion
    We established a number of specific criteria that new medical 
devices must meet to be considered eligible for pass-through payments 
under section 1833(t)(6) of the Act (42 CFR 419.66; 65 FR 18480 and 65 
FR 47672 through 47674). In the CY 2014 OPPS/ASC proposed rule (78 FR 
43596), we proposed to change one of these criteria for device pass-
through payment, described at Sec.  419.66(b)(3), which requires that a 
device ``is an integral and subordinate part of the service furnished, 
is used for one patient only, comes in contact with human tissue, and 
is surgically implanted or inserted whether or not it remains with the 
patient when the patient is released from the hospital'' (65 FR 47674).
    Regarding the existing regulation at Sec.  419.66(b)(3), applicants 
for device pass-through status have continued to ask what is meant by 
the phrase ``integral and subordinate part of the service furnished,'' 
and more specifically, what the terms ``integral'' and ``subordinate'' 
mean. These terms have not been specifically defined or described in 
prior regulatory language, preamble, or guidance. In an effort to 
reduce further confusion and ensure all applicants understand the 
intent of the existing regulation, we proposed to provide guidance on 
the meaning of the term ``integral'' and delete the term 
``subordinate'' from the existing regulation in the proposed rule. In 
the proposed rule, we stated that we have interpreted the term 
``integral'' to mean that the device is necessary to furnish or deliver 
the primary procedure with which it is used. For example, a pacemaker 
is integral to the procedure of implantation of a pacemaker. We have 
interpreted the accompanying term ``subordinate'' in conjunction with 
the term ``integral,'' in that a ``subordinate'' device is dependent 
upon the overall procedure of implanting the device, and we have not 
interpreted the term separately, or applied the term ``subordinate'' as 
a separate criterion. Because of confusion among pass-through status 
applicants regarding the use of both terms ``integral'' and 
``subordinate,'' and because we do not believe it is necessary that the 
regulation specifically state that a device must be subordinate to the 
procedure, in addition to the requirement that a device be integral to 
the procedure, and have not treated ``subordinate'' as a separate 
criterion, as previously explained, we proposed to delete the term 
``subordinate'' from this criterion's regulatory text under existing 
Sec.  419.66(b)(3). The proposed revised Sec.  419.66(b)(3) regulatory 
language read as follows: ``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, whether or not 
it remains with the patient when the patient is released from the 
hospital.''
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing, without modification, our proposal to delete the 
term ``subordinate'' from this criterion's regulatory text under 
existing Sec.  419.66(b)(3). The final revised Sec.  419.66(b)(3) 
regulatory language reads as follows: ``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, 
whether or not it remains with the patient when the patient is released 
from the hospital.''

B. Adjustment to OPPS Payment for No Cost/Full Credit and Partial 
Credit Devices

1. Background
    To ensure equitable payment when the 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 are 
instructed to report no cost/full credit cases 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, the hospital is instructed to report 
a token device charge of less than $1.01. In cases in

[[Page 75006]]

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, the hospital is instructed to report as the 
device charge the difference between its usual charge for the device 
being implanted and its 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 are 
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'' payment 
adjustment policies (72 FR 66743 through 66749).
2. Policy for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597), 
beginning in CY 2014, we proposed to modify our existing 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 has 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 proposed to reduce OPPS payment, for the 
applicable APCs listed in Table 17 of the proposed rule, by the full or 
partial credit a hospital receives for a replaced device. Specifically, 
under this proposed policy for CY 2014, hospitals would be required to 
report the amount of the credit in the amount portion for value code 
``FD'' (Credit Received from the Manufacturer for a Replaced Medical 
Device) when the hospital receives a credit for a replaced device 
listed in Table 18 of the proposed rule that is 50 percent or greater 
than the cost of the device. Under this proposal, hospitals would no 
longer be required to append the ``FB'' or ``FC'' modifier when 
receiving a device at no cost or with a full or partial credit.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43596 through 43597), 
for CY 2014, we proposed to continue using the three criteria 
established in the CY 2007 OPPS/ASC final rule with comment period for 
determining the APCs to which our modified CY 2014 policy applies (71 
FR 68072 through 68077). Specifically: (1) All procedures assigned to 
the selected APCs must involve implantable devices that would be 
reported if device insertion procedures were performed; (2) 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 (3) the device offset amount must be 
significant, which, for purposes of this policy, is defined as 
exceeding 40 percent of the APC cost. We also proposed to continue to 
restrict the devices to which the APC payment adjustment would apply to 
a specific set of costly devices to ensure that the adjustment would 
not be triggered by the implantation of an inexpensive device whose 
cost would not constitute a significant proportion of the total payment 
rate for an APC. We stated that we continue to believe these criteria 
are appropriate because no cost devices and device credits are likely 
to be associated with particular cases only when the device must be 
reported on the claim and is of a type that is implanted and remains in 
the body when the beneficiary leaves the hospital. We believe that the 
reduction in payment is appropriate only when the cost of the device is 
a significant part of the total cost of the APC into which the device 
cost is packaged, and that the 40-percent threshold is a reasonable 
definition of a significant cost.
    Comment: A majority of commenters supported CMS' proposed 
adjustment to the OPPS payment for no cost/full credit and partial 
credit devices, while some commenters requested that CMS rescind its 
proposal because they believed it would cause additional administrative 
burden. One commenter argued that using the ``FD'' value code 
methodology in the OPPS would lead to inaccuracy of claims. One 
commenter stated that, in some cases, if a full credit were received, 
the entire APC payment would be consumed by the credit and the hospital 
would receive no payment for the procedural portion of the service. 
That commenter suggested that CMS develop a floor for the offset and 
urged CMS to work with hospital stakeholders to better understand the 
overall impact to hospitals and to ensure that hospitals would be 
appropriately paid for the procedural aspect of the device/lead 
replacement. Another commenter requested that CMS remove APCs 0082, 
0083 0104, 0229, 0319, and 0656 from the final listing of APCs covered 
by the no cost/full credit policy.
    Response: We appreciate the support of our proposal by the majority 
of commenters. We disagree with commenters' assertion that the proposed 
change from the ``FB''/``FC'' modifiers to the ``FD'' value code for 
the adjustment to OPPS payment for no cost/full credit and partial 
credit devices would cause added administrative burden. We believe that 
the use of the ``FD'' value code will not cause added administrative 
burden for hospitals. We also disagree with the assertion that using 
the ``FD'' value code methodology in the OPPS would lead to an 
inaccuracy in claims. We believe that the use of the ``FD'' value code 
methodology could lead to greater accuracy in our claims data. However, 
we are sensitive to the commenter's concerns that, in some cases, if a 
full credit were received, the entire APC payment would be consumed by 
the credit and the hospital would receive no payment for the nondevice 
portion of the costs related to the service. Therefore, we are limiting 
the OPPS payment deduction for the applicable APCs listed below in 
Table 30 of this final rule with comment period to the total amount of 
the device offset when the ``FD'' value code appears on a claim. 
Hospitals would still be required to report the amount of the credit in 
the amount portion for value code ``FD'' when the hospital receives a 
credit for a replaced device listed in Table 18 of the proposed rule 
that is 50 percent or greater than the cost of the device. We continue 
to believe that APCs 0082, 0083, 0104, 0229, 0319, and 0656 are 
appropriately identified as APCs to which the no cost/full credit and 
partial credit device adjustment policy will apply for CY 2014.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal to modify our existing policy of 
reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. 
Specifically, we are finalizing our proposal to require hospitals to 
report the amount of the credit in the amount portion for value code 
``FD'' (Credit Received from the Manufacturer for a Replaced Medical 
Device) when the hospital receives a credit for a replaced device 
listed in Table 31 of this final rule with comment period that is 50 
percent or greater than the cost of the device. We also are finalizing 
our proposal to limit the OPPS payment deduction for the applicable 
APCs listed below in Table 30 of this final rule with comment period to 
the total amount of

[[Page 75007]]

the device offset when the ``FD'' value code appears on a claim.
    We proposed to update the lists of APCs and devices to which the 
proposed modified no cost/full credit and partial credit device 
adjustment policy would apply for CY 2014, consistent with the three 
criteria discussed earlier in this section, based on the final CY 2012 
claims data available for the CY 2014 OPPS/ASC final rule with comment 
period.
    We examined the offset amounts calculated from the CY 2014 final 
rule data and the clinical characteristics of the final CY 2014 APCs to 
determine which APCs meet the criteria for CY 2014. Based on the CY 
2012 claims data available for this final rule with comment period, we 
are not making any changes to the proposed lists of APCs and devices to 
which this modified policy applies.
    Table 30 below lists the APCs to which the finalized modified 
payment adjustment policy for no cost/full credit and partial credit 
devices applies in CY 2014.
    Table 31 below lists the devices to which the finalized modified 
payment adjustment policy for no cost/full credit and partial credit 
devices applies in CY 2014.
BILLING CODE 4120-01-P

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[GRAPHIC] [TIFF OMITTED] TR10DE13.329

[[Page 75009]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.330

[[Page 75010]]

BILLING CODE 4120-01-C

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

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

1. Background
    Section 1833(t)(6) of the Act provides for temporary additional 
payments or ``transitional pass-through payments'' for certain drugs 
and biologicals (also referred to as biologics). As enacted by the 
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 
(BBRA) (Pub. L. 106-113), this provision requires the Secretary to make 
additional payments to hospitals for: current orphan drugs, as 
designated under section 526 of the Federal Food, Drug, and Cosmetic 
Act (Pub. L. 107-186); current drugs and biologicals and brachytherapy 
sources used in cancer therapy; and current radiopharmaceutical drugs 
and biologicals. ``Current'' refers to drugs or biologicals that are 
outpatient hospital services under Part B for which payment was made on 
the first date the hospital OPPS was implemented.
    Transitional pass-through payments also are provided for certain 
``new'' drugs and biologicals that were not being paid for as an HOPD 
service as of December 31, 1996 and whose cost is ``not insignificant'' 
in relation to the OPPS payments for the procedures or services 
associated with the new drug or biological. For pass-through payment 
purposes, radiopharmaceuticals are included as ``drugs.'' As required 
by statute, transitional pass-through payments for a drug or biological 
described in section 1833(t)(6)(C)(i)(II) of the Act can be made for a 
period of at least 2 years, but not more than 3 years, after the 
payment was first made for the product as a hospital outpatient service 
under Medicare Part B. Proposed CY 2014 pass-through drugs and 
biologicals and their designated APCs were assigned status indicator 
``G'' in Addenda A and B to the proposed rule, which are available via 
the Internet on the CMS Web site.
    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. If the drug or biological is covered under 
a competitive acquisition contract under section 1847B of the Act, the 
pass-through payment amount is determined by the Secretary to be equal 
to the average price for the drug or biological for all competitive 
acquisition areas and the year established under such section as 
calculated and adjusted by the Secretary. However, we note that the 
Part B drug competitive acquisition program (CAP) has been postponed 
since CY 2009, and such a program has not been reinstated for CY 2014.
    This methodology for determining the pass-through payment amount is 
set forth in regulations at 42 CFR 419.64. These regulations specify 
that the pass-through payment equals the amount determined under 
section 1842(o) of the Act minus the portion of the APC payment that 
CMS determines is associated with the drug or biological. Section 1847A 
of the Act establishes the average sales price (ASP) methodology, which 
is used for payment for drugs and biologicals described in section 
1842(o)(1)(C) of the Act furnished on or after January 1, 2005. The ASP 
methodology, as applied under the OPPS, uses several sources of data as 
a basis for payment, including the ASP, the wholesale acquisition cost 
(WAC), and the average wholesale price (AWP). In this final rule with 
comment period, the term ``ASP methodology'' and ``ASP-based'' are 
inclusive of all data sources and methodologies described therein. 
Additional information on the ASP methodology can be found on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    The pass-through application and review process for drugs and 
biologicals is explained on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/passthrough_payment.html.
2. Drugs and Biologicals With Expiring Pass-Through Status in CY 2013
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43598), we proposed 
that the pass-through status of 15 drugs and biologicals would expire 
on December 31, 2013, as listed in Table 19 of the proposed rule (78 FR 
43599). All of these drugs and biologicals will have received OPPS 
pass-through payment for at least 2 years and no more than 3 years by 
December 31, 2013. These drugs and biologicals were approved for pass-
through status on or before January 1, 2012. With the exception of 
those groups of drugs and biologicals that are always packaged when 
they do not have pass-through status, specifically diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, and our new 
groups of policy packaged products described in section II.A.3. of the 
proposed rule, namely 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, our standard methodology for providing payment for drugs and 
biologicals with expiring pass-through status in an upcoming calendar 
year is to determine the product's estimated per day cost and compare 
it with the OPPS drug packaging threshold for that calendar year (which 
is $90 for CY 2014), as discussed further in section V.B.2. of this 
final rule with comment period. 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 would 
provide separate payment at the applicable relative ASP-based payment 
amount (which is ASP+6 percent for CY 2014, as discussed further in 
section V.B.3. of this final rule with comment period).
    Comment: One commenter recommended that CMS provide pass-through 
status for new drugs, specifically diagnostic radiopharmaceuticals, for 
a full 3-year period. The commenter asserted that providing pass-
through status for 3 years would help provide a more current and 
accurate data set on which to base payment for the associated nuclear 
medicine procedure into which the radiopharmaceutical is subsequently 
packaged. To provide for a full 3-year pass-through period, the 
commenter recommended that the pass-through status for drugs and 
biologicals expire on a quarterly basis rather than on an annual basis.
    Response: As we stated in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74287), the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68363), and as described in section V.A. of this 
final rule with comment period, section 1833(t)(6)(C)(i)(II) of the Act 
permits CMS to make pass-through payments for a period of at least 2 
but not more than 3 years, after the product's first payment as a 
hospital outpatient service under Medicare Part B. We continue to 
believe that this period of payment appropriately facilitates 
dissemination of these new products into clinical practice and 
facilitates the collection of sufficient hospital claims data 
reflective

[[Page 75011]]

of their costs for future OPPS ratesetting. Our longstanding practice 
has been to provide pass-through payment for a period of 2 to 3 years, 
with expiration of pass-through status proposed and finalized through 
the annual rulemaking process. Each year, when proposing to expire the 
pass-through status of certain drugs and biologicals, we examine our 
claims data for these products. We observe that hospitals typically 
have incorporated these products into their chargemasters based on the 
utilization and costs observed in our claims data. Under the existing 
pass-through policy, we begin pass-through payment on a quarterly 
basis, depending on when applications are submitted to us for 
consideration. We are confident that the period of time for which 
drugs, biologicals, contrast agents, and radiopharmaceuticals receive 
pass-through status, which is at least 2 but no more than 3 years, is 
appropriate for CMS to collect the sufficient amount of data to make a 
packaging determination. We further note that we are in full compliance 
with the requirements of the Act, which states that pass-through status 
is given for at least 2 but no more than 3 years.
    Comment: One commenter stated that the pass-through status for 
HCPCS code Q4131 (Epifix, per square centimeter) should not expire on 
December 31, 2013, because this product has not received pass-through 
payments for a period of at least 2 years after the payment was first 
made for this product as a hospital outpatient service under Medicare 
Part B, as required by statute. The commenter indicated that pass-
through payment for HCPCS code Q4131 was first made in February 2012.
    Response: Upon review of our CY 2012 claims data, we agree with the 
commenter that HCPCS code Q4131 has not received pass-through payments 
for the minimum period of ``at least 2 years'' as required by statute. 
Therefore, we are not finalizing our proposal to expire the pass-
through status for HCPCS code Q4131 on December 31, 2013.
    After consideration of the public comments we received, we are 
modifying our proposal to expire the pass-through status of the 15 
drugs and biologicals that were listed in Table 19 of the CY 2014 OPPS/
ASC proposed rule (78 FR 43599). The pass-through status for HCPCS code 
Q4131 will not expire on December 31, 2013, but will continue for CY 
2014. Table 32 lists the drugs and biologicals for which pass-through 
status will expire on December 31, 2013, as well as the final status 
indicators and the final APC assignments for these drugs and 
biologicals for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.331

[[Page 75012]]

3. Drugs, Biologicals, and Radiopharmaceuticals With New or Continuing 
Pass-Through Status in CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43599), we proposed to 
continue pass-through status in CY 2014 for 18 drugs and biologicals. 
None of these drugs and biologicals will have received OPPS pass-
through payment for at least 2 years and no more than 3 years by 
December 31, 2013. These drugs and biologicals, which were approved for 
pass-through status between April 1, 2012 and July 1, 2013, were listed 
in Table 20 of the proposed rule (78 FR 43600). The APCs and HCPCS 
codes for these drugs and biologicals approved for pass-through status 
through April 1, 2013 were assigned status indicator ``G'' in Addenda A 
and B of the proposed rule. Addenda A and B for the proposed rule are 
available via the Internet on the CMS Web site.
    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. Payment for drugs and biologicals with pass-through 
status under the OPPS is currently made at the physician's office 
payment rate of ASP+6 percent. We stated in the proposed rule that we 
believe it is consistent with the statute to propose to continue to 
provide payment for drugs and biologicals with pass-through status at a 
rate of ASP+6 percent in CY 2014, which is the amount that drugs and 
biologicals receive under section 1842(o) of the Act.
    Therefore, for CY 2014, we proposed to pay for pass-through drugs 
and biologicals at ASP+6 percent, equivalent to the rate these drugs 
and biologicals would receive in the physician's office setting in CY 
2014. We proposed that a $0.00 pass-through payment amount would be 
paid for most pass-through drugs and biologicals under the CY 2014 OPPS 
because the difference between the amount authorized under section 
1842(o) of the Act, which is ASP+6 percent, and the portion of the 
otherwise applicable OPD fee schedule that the Secretary determines is 
appropriate, proposed at ASP+6 percent, is $0.
    In the case of policy-packaged drugs (which include contrast 
agents, diagnostic radiopharmaceuticals, anesthesia drugs, and our new 
groups of policy packaged products described in section II.A.3. of this 
final rule with comment period, namely 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), we proposed that their 
pass-through payment amount would be equal to ASP+6 percent for CY 2014 
because, if not on pass-through status, payment for these products 
would be packaged into the associated procedure.
    In addition, we proposed to continue to update pass-through payment 
rates on a quarterly basis on the CMS Web site during CY 2014 if later 
quarter ASP submissions (or more recent WAC or AWP information, as 
applicable) indicate that adjustments to the payment rates for these 
pass-through drugs or biologicals are necessary. For a full description 
of this policy, we refer readers to the CY 2006 OPPS/ASC final rule 
with comment period (70 FR 42722 and 42723).
    In CY 2014, as is consistent with our CY 2013 policy for diagnostic 
and therapeutic radiopharmaceuticals, we proposed to provide payment 
for both diagnostic and therapeutic radiopharmaceuticals that are 
granted pass-through status based on the ASP methodology. As stated 
above, 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 
status during CY 2014, 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 ASP+6 percent. If 
ASP data are not available for a radiopharmaceutical, we proposed to 
provide pass-through payment at WAC+6 percent, the equivalent payment 
provided to pass-through drugs and biologicals without ASP information. 
If WAC information is also not available, we proposed to provide 
payment for the pass-through radiopharmaceutical at 95 percent of its 
most recent AWP.
    Comment: One commenter requested that CMS provide a higher payment 
amount for radiopharmaceuticals that are granted pass-through status.
    Response: We note that, for CY 2014, consistent with our CY 2013 
payment policy for diagnostic and therapeutic radiopharmaceuticals, we 
proposed to provide payment for both diagnostic and therapeutic 
radiopharmaceuticals with pass-through status based on the ASP 
methodology. As stated above, the ASP methodology, as applied under the 
OPPS, uses several sources of data as a basis for payment, including 
the ASP, WAC if ASP is unavailable, and 95 percent of the 
radiopharmaceutical's most recent AWP if ASP and WAC are unavailable. 
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 status during CY 2014, we 
proposed to follow the standard ASP methodology to determine its pass-
through payment rate under the OPPS to account for the acquisition as 
well as pharmacy overhead and handling costs. We continue to believe 
that a single payment is appropriate for diagnostic 
radiopharmaceuticals with pass-through status in CY 2014, and that the 
payment rate of ASP+6 percent (or payment based on the ASP methodology) 
is appropriate to provide payment for both the radiopharmaceutical's 
acquisition cost and any associated handling and overhead costs.
    After consideration of the public comments we received, we are 
finalizing our proposal to provide payment for drugs, biologicals, 
diagnostic and therapeutic radiopharmaceuticals, and contrast agents 
that are granted pass-through status based on the ASP methodology. If a 
diagnostic or therapeutic radiopharmaceutical receives pass-through 
status during CY 2014, we will follow the standard ASP methodology to 
determine the pass-through payment rate that drugs receive under 
section 1842(o) of the Act, which is ASP+6 percent. If ASP data are not 
available for a radiopharmaceutical, we will provide pass-through 
payment at WAC+6 percent, the equivalent payment provided to pass-
through drugs and biologicals without ASP information. If WAC 
information is also not available, we will provide payment for the 
pass-through radiopharmaceutical at 95 percent of its most recent AWP.
    As discussed in more detail in section II.A.3. of this final rule 
with comment period, over the last 6 years, we implemented a policy 
whereby payment for all nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, and anesthesia drugs is packaged 
into payment for the associated procedure. In the CY 2014 OPPS/ASC 
proposed rule, we proposed to continue the packaging of these items, 
and we also proposed new groups of policy-packaged products described 
in section II.A.3. of the proposed rule, namely drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test

[[Page 75013]]

or procedure and drugs and biologicals that function as supplies when 
used in a surgical procedure, regardless of their per day cost, in CY 
2014. As stated earlier, pass-through payment is 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. Because payment 
for a drug that is policy-packaged would otherwise be packaged if the 
product did not have pass-through status, we believe the otherwise 
applicable OPPS payment amount would be equal to the policy-packaged 
drug APC offset amount for the associated clinical APC in which the 
drug or biological is utilized. The calculation of the policy-packaged 
drug APC offset amounts is described in more detail in section IV.A.2. 
of this final rule with comment period. It follows that the copayment 
for the nonpass-through payment portion (the otherwise applicable fee 
schedule amount that we would also offset from payment for the drug or 
biological if a payment offset applies) of the total OPPS payment for 
those drugs and biologicals would, therefore, be accounted for in the 
copayment for the associated clinical APC in which the drug or 
biological is used.
    According to section 1833(t)(8)(E) of the Act, the amount of 
copayment associated with pass-through items is equal to the amount of 
copayment that would be applicable if the pass-through adjustment was 
not applied. Therefore, as we did in CY 2013, we proposed to continue 
to set the associated copayment amount to zero for CY 2014 for pass-
through diagnostic radiopharmaceuticals, contrast agents, and 
anesthesia drugs that would otherwise be packaged if the item did not 
have pass-through status. We also proposed to set the associated 
copayment amount to zero for the additional categories of policy-
packaged products proposed for CY 2014 described in section II.A.3. of 
the proposed rule.
    The separate OPPS payment to a hospital for the pass-through 
diagnostic radiopharmaceutical, contrast agent, anesthesia drug, and 
the additional categories of policy-packaged products proposed for CY 
2014 is not subject to a copayment according to the statute. Therefore, 
we proposed to not publish a copayment amount for these items in 
Addenda A and B to the proposed rule (which are available via the 
Internet on the CMS Web site).
    Comment: Commenters supported the CY 2014 proposal to continue to 
set the associated copayment amounts to zero for pass-through 
diagnostic radiopharmaceuticals, contrast agents, and other drugs and 
biologicals that would otherwise be packaged if the product did not 
have pass-through status. The commenters noted that this policy is 
consistent with statutory requirements and provides cost-saving 
benefits to beneficiaries. One commenter requested that CMS expand the 
$0 copayment policy to pass-through therapeutic radiopharmaceuticals as 
well.
    Response: We appreciate the commenters' support of our proposal. 
According to section 1833(t)(8)(E) of the Act, the amount of copayment 
associated with pass-through items is equal to the amount of copayment 
that would be applicable if the pass-through adjustment was not 
applied. Therefore, we believe that the copayment amount should be zero 
for drugs and biologicals that would otherwise be packaged if the item 
did not have pass-through status. However, therapeutic 
radiopharmaceuticals without pass-through status are not packaged but 
are paid at ASP+6 percent. Therefore, the copayment for a therapeutic 
radiopharmaceutical with pass-through status cannot be zero but must be 
based on the payment amount for the therapeutic radiopharmaceutical 
when it does not have pass-through status.
    After consideration of the public comments received, we are 
finalizing our proposal, without modification, to continue to set the 
associated copayment amount for pass-through diagnostic 
radiopharmaceuticals, contrast agents, and anesthesia drugs that would 
otherwise be packaged if the item did not have pass-through status to 
zero for CY 2014. We also are finalizing our proposal to extend this 
policy to the additional categories of policy-packaged drugs and 
biologicals that have pass-through status, and to set a copayment 
amount of zero for these drugs and biologicals for CY 2014.
    The 26 drugs and biologicals that will continue to have pass-
through status for CY 2014 or have been granted pass-through status as 
of January 2014 are shown in Table 33 below. As is our standard 
methodology, we annually review new permanent HCPCS codes and delete 
temporary HCPCS C-codes if an alternate permanent HCPCS code is 
available for purposes of OPPS billing and payment. Table 33 includes 
those coding changes.

BILLING CODE 4120-01-P

[[Page 75014]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.332

[[Page 75015]]

BILLING CODE 4120-01-C
4. Provisions for Reducing Transitional Pass-Through Payments for 
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 to Offset Costs Packaged 
into APC Groups
a. Background
    Prior to CY 2008, diagnostic radiopharmaceuticals and contrast 
agents were paid separately under the OPPS if their mean per day costs 
were greater than the applicable year's drug packaging threshold. In CY 
2008 (72 FR 66768), we began a policy of packaging payment for all 
nonpass-through diagnostic radiopharmaceuticals and contrast agents as 
ancillary and supportive items and services into their associated 
nuclear medicine procedures. Therefore, beginning in CY 2008, nonpass-
through diagnostic radiopharmaceuticals and contrast agents were not 
subject to the annual OPPS drug packaging threshold to determine their 
packaged or separately payable payment status, and instead all nonpass-
through diagnostic radiopharmaceuticals and contrast agents were 
packaged as a matter of policy. For CY 2014, in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43601), we proposed to continue to package payment 
for all nonpass-through diagnostic radiopharmaceuticals, contrast 
agents, and anesthesia drugs and to begin packaging all nonpass-through 
drugs, biologicals, and radiopharmaceuticals that function as supplies 
when used in a diagnostic test or procedure and drugs and biologicals 
that function as supplies when used in a surgical procedure, as 
discussed in section II.A.3. of this final rule with comment period.
b. Payment Offset Policy for Diagnostic Radiopharmaceuticals
    As previously noted, radiopharmaceuticals are considered to be 
drugs for OPPS pass-through payment purposes. As described above, 
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. There are 
currently two diagnostic radiopharmaceuticals with pass-through status 
under the OPPS. HCPCS code A9584 (Iodine I-123 ioflupane, diagnostic, 
per study dose, up to 5 millicuries) was granted pass-through status 
using HCPCS code C9406 beginning July 1, 2011, and we proposed that its 
pass-through status would expire on December 31, 2013. HCPCS code C1204 
(Technetium Tc 99m tilmanocept, diagnostic, up to 0.5 millicuries) was 
granted pass-through status beginning October 1, 2013. We currently 
apply the established radiopharmaceutical payment offset policy to 
pass-through payment for these products. As described earlier in 
section V.A.3. of this final rule with comment period, we proposed that 
new pass-through diagnostic radiopharmaceuticals would be paid at ASP+6 
percent, while those new pass-through diagnostic radiopharmaceuticals 
without ASP information would be paid at WAC+6 percent or, if WAC is 
not available, payment would be based on 95 percent of the product's 
most recently published AWP.
    Because a payment offset is necessary in order to provide an 
appropriate transitional pass-through payment, we deduct from the pass-
through payment for diagnostic radiopharmaceuticals an amount 
reflecting the portion of the APC payment associated with predecessor 
radiopharmaceuticals in order to ensure no duplicate 
radiopharmaceutical payment is made. In CY 2009, we established a 
policy to estimate the portion of each APC payment rate that could 
reasonably be attributed to the cost of predecessor diagnostic 
radiopharmaceuticals when considering a new diagnostic 
radiopharmaceutical for pass-through payment (73 FR 68638 through 
68641). Specifically, we use the policy-packaged drug offset fraction 
for APCs containing nuclear medicine procedures, calculated as 1 minus 
the following: the cost from single procedure claims in the APC after 
removing the cost for policy-packaged drugs divided by the cost from 
single procedure claims in the APC.
    In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60480 
through 60484), we finalized a policy to redefine policy-packaged drugs 
as only nonpass-through diagnostic radiopharmaceuticals and contrast 
agents, as a result of the policy discussed in sections V.A.4. and 
V.B.2.d. of the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60471 through 60477 and 60495 through 60499, respectively) that treats 
nonpass-through implantable biologicals that are surgically inserted or 
implanted (through a surgical incision or a natural orifice) and 
implantable biologicals that are surgically inserted or implanted 
(through a surgical incision or a natural orifice) with newly approved 
pass-through status beginning in CY 2010 or later as devices, for 
purposes of the OPPS, rather than drugs.
    To determine the actual APC offset amount for pass-through 
diagnostic radiopharmaceuticals that takes into consideration the 
otherwise applicable OPPS payment amount, we multiply the policy-
packaged drug offset fraction by the APC payment amount for the nuclear 
medicine procedure with which the pass-through diagnostic 
radiopharmaceutical is used and, accordingly, reduce the separate OPPS 
payment for the pass-through diagnostic radiopharmaceutical by this 
amount. For CY 2014, as we did in CY 2013, we proposed to continue to 
apply the diagnostic radiopharmaceutical offset policy to payment for 
pass-through diagnostic radiopharmaceuticals.
    Beginning in CY 2011 and as discussed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 71934 through 71936), we finalized a 
policy to require hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures and to report a token charge of less than 
$1.01 in cases in which the diagnostic radiopharmaceutical is received 
without cost or with full credit. Beginning in CY 2014, we proposed to 
no longer require hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures or to report a token charge of less than 
$1.01 in cases in which the diagnostic radiopharmaceutical is received 
at no cost/full credit (78 FR 43601). Under this proposed policy, the 
OPPS payment amount for nuclear medicine procedures are not reduced 
when a diagnostic radiopharmaceutical is received at no cost or full 
credit. Based on claims data, it appears that hospitals rarely receive 
diagnostic radiopharmaceuticals at no cost or full credit. Therefore, 
we do not believe that the burden on hospitals of adhering to the 
nuclear medicine ``FB'' modifier policy continues to be warranted.
    Comment: Commenters recommended that CMS publish preliminary offset 
amounts for diagnostic radiopharmaceuticals and contrast agents with 
the proposed rule to allow for meaningful assessment of and public 
comment on the data.
    Response: The exact data used to calculate all of the proposed and 
final payment rates, including the associated offset amounts, for the 
CY 2014 OPPS are available for purchase under a CMS data use agreement 
through the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. This Web site 
includes

[[Page 75016]]

information about purchasing the ``OPPS Limited Data Set,'' which now 
includes the additional variables previously available only in the OPPS 
identifiable data set, including ICD 9 CMS diagnosis codes and revenue 
code payment amounts. We do not post the offset amounts by APC until 
publication of the final rule with comment period because we assign 
services to APCs based on our estimate of their full resource cost, 
including, but not limited to, packaged diagnostic radiopharmaceuticals 
and contrast agents. The offset amount is the portion of each APC 
payment rate that could reasonably be attributed to the cost of 
predecessor diagnostic radiopharmaceuticals and contrast agents when 
considering a new diagnostic radiopharmaceutical and contrast agent for 
pass-through payment and has no bearing on APC assignment.
    Comment: One commenter believed that CMS should not discontinue the 
requirement for hospitals to append modifier ``FB'' to specified 
nuclear medicine procedures in cases in which the diagnostic 
radiopharmaceutical is received at no cost or full credit. The 
commenter suggested that this is a relatively new policy and, 
therefore, should be maintained for at least another year.
    Response: Based on claims data, it appears that hospitals rarely 
receive diagnostic radiopharmaceuticals at no cost or full credit. 
Therefore, we do not believe that the ``FB'' modifier policy, as it 
relates to diagnostic radiopharmaceuticals, is warranted.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to continue to apply the 
diagnostic radiopharmaceutical offset policy to payment for pass-
through diagnostic radiopharmaceuticals, as described in the CY 2014 
OPPS/ASC proposed rule (78 FR 43601). We will continue to reduce the 
payment amount for procedures in the APCs listed in Table 34 in this 
final rule with comment period by the full policy-packaged offset 
amount appropriate for diagnostic radiopharmaceuticals. We also are 
finalizing our proposal to no longer require hospitals to append 
modifier ``FB'' to specified nuclear medicine procedures or to report a 
token charge of less than $1.01 in cases in which the diagnostic 
radiopharmaceutical is received at no cost or full credit. Under this 
finalized policy, the OPPS payment amount for nuclear medicine 
procedures is not reduced when a diagnostic radiopharmaceutical is 
received at no cost or full credit.
    Table 34 below displays the APCs to which nuclear medicine 
procedures will be assigned in CY 2014 and for which we expect that an 
APC offset could be applicable in the case of diagnostic 
radiopharmaceuticals with pass-through status.
[GRAPHIC] [TIFF OMITTED] TR10DE13.333

[[Page 75017]]

c. Payment Offset Policy for Contrast Agents
    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. Currently, there 
are no contrast agents with pass-through status under the OPPS. As 
described in section V.A.4.c. of the proposed rule (78 FR 43602), we 
proposed that new pass-through contrast agents would be paid at ASP+6 
percent, while those new pass-through contrast agents without ASP 
information would be paid at WAC+6 percent or, if WAC is not available, 
at 95 percent of the product's most recently published AWP.
    Although there are currently no contrast agents with pass-through 
status, we believe that a payment offset is necessary in the event that 
a new contrast agent is approved for pass-through status during CY 2014 
in order to provide an appropriate transitional pass-through payment 
for new contrast agents because all of these items are packaged when 
they do not have pass-through status. In accordance with our standard 
offset methodology, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43602), we proposed, for new contrast agents that are approved for 
pass-through status as a drug or biological during CY 2014, to deduct 
from the payment an amount that reflects the portion of the APC payment 
associated with predecessor contrast agents. This was proposed in order 
to ensure that no duplicate contrast agent payment is made.
    In CY 2010, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor contrast agents when considering new contrast agents for 
pass-through payment (74 FR 60482 through 60484). For CY 2014, as we 
did in CY 2013, we proposed to continue to apply this same policy to 
contrast agents. Specifically, we proposed to utilize the policy-
packaged drug offset fraction for procedural APCs, calculated as 1 
minus the following: the cost from single procedure claims in the APC 
after removing the cost for policy packaged drugs divided by the cost 
from single procedure claims in the APC. To determine the actual APC 
offset amount for pass-through contrast agents that takes into 
consideration the otherwise applicable OPPS payment amount, we proposed 
to multiply the policy packaged drug offset fraction by the APC payment 
amount for the procedure with which the pass-through contrast agent is 
used and, accordingly, reduce the separate OPPS payment for the pass-
through contrast agent by this amount. We proposed to continue to apply 
this methodology for CY 2014 to recognize that when a contrast agent 
with pass-through status is billed with any procedural APC listed in 
Table 22 of the proposed rule (78 FR 43602 through 43603), a specific 
offset based on the procedural APC would be applied to the payment for 
the contrast agent to ensure that duplicate payment is not made for the 
contrast agent.
    We proposed to identify procedural APCs for which we expect a 
contrast offset could be applicable in the case of a pass-through 
contrast agent as any procedural APC with a policy-packaged drug amount 
greater than $20 that is not a nuclear medicine APC identified in Table 
34 above, and these APCs are displayed in Table 35 below. The 
methodology used to determine a threshold cost for application of a 
contrast agent offset policy is described in detail in the CY 2010 
OPPS/ASC final rule with comment period (70 FR 60483 through 60484). 
For CY 2014, we proposed to continue to recognize that when a contrast 
agent with pass-through status is billed with any procedural APC listed 
in Table 22 of the proposed rule (78 FR 43602 through 43603), a 
specific offset based on the procedural APC would be applied to payment 
for the contrast agent to ensure that duplicate payment is not made for 
the contrast agent.
    As we proposed, for this final rule with comment period, we will 
continue to post annually on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.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 device categories and drugs and biologicals, 
including contrast agents, 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.
    After consideration of the public comments we received, we are 
finalizing our proposal for CY 2014 without modification. We will 
continue to recognize that when a contrast agent with pass-through 
status is billed with any procedural APC listed in Table 35 below, a 
specific offset based on the procedural APC will be applied to the 
payment for the contrast agent to ensure that duplicate payment is not 
made for the contrast agent.

[[Page 75018]]

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d. Payment Offset Policy for Products Packaged According to the Policy 
To Package 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
    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. As discussed in 
section II.A.3. of the CY 2014 OPPS/ASC proposed rule, as a part of our 
proposed policy to package 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, we specifically proposed that skin substitutes and 
stress agents used in myocardial perfusion imaging (MPI) be policy 
packaged in CY 2014, in addition to diagnostic radiopharmaceuticals, 
contrast agents, and anesthesia drugs (78 FR 43570 through 43572). We 
believe that a payment offset, similar to the offset

[[Page 75019]]

currently in place for pass-through devices, diagnostic 
radiopharmaceuticals, and contrast agents, is necessary in order to 
provide an appropriate transitional pass-through payment for 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 because all of 
these are packaged, or proposed to be packaged, when they do not have 
pass-through status. In accordance with our standard offset 
methodology, we proposed for CY 2014 to deduct an amount that reflects 
the portion of the APC payment associated with predecessor products in 
order to ensure no duplicate payment is made from the payment for pass-
through drugs, biologicals, and radiopharmaceuticals that function as 
supplies when used in a diagnostic test or procedure and drugs and 
biologicals that function as supplies when used in a surgical procedure 
(78 FR 43603).
    In CY 2009, we established a policy to estimate the portion of each 
APC payment rate that could reasonably be attributed to the cost of 
predecessor diagnostic radiopharmaceuticals when considering a new 
diagnostic radiopharmaceutical for pass-through payment (73 FR 68638 
through 68641). For CY 2014, we proposed to apply this same policy to 
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 (78 FR 
43603). Specifically, in the case of pass-through skin substitutes, we 
proposed to utilize the policy-packaged drug offset fraction for skin 
substitute procedural APCs, calculated as 1 minus the following: The 
cost from single procedure claims in the APC after removing the cost 
for policy-packaged drugs divided by the cost from single procedure 
claims in the APC. Because policy packaged radiopharmaceuticals also 
would be included in the drug offset fraction for the APC to which MPI 
procedures are assigned, in the case of pass-through stress agents, we 
proposed to utilize the policy-packaged drug offset fraction for the 
procedural APC, calculated as 1 minus the following: The cost from 
single procedure claims in the APC after removing the cost for policy-
packaged drugs excluding policy-packaged diagnostic 
radiopharmaceuticals divided by the cost from single procedure claims 
in the APC. To determine the actual APC offset amount for pass-through 
skin substitutes and pass-through stress agents that takes into 
consideration the otherwise applicable OPPS payment amount, we proposed 
to multiply the policy-packaged drug offset fraction by the APC payment 
amount for the procedure with which the pass-through skin substitute or 
pass-through stress agent is used and, accordingly, reduce the separate 
OPPS payment for the pass-through skin substitute or pass-through 
stress agent by this amount (78 FR 43603).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our proposal, without modification, to recognize that 
when a skin substitute with pass-through status is billed with any 
procedural APC listed in Table 36 below, a specific offset based on the 
procedural APC will be applied to the payment for the skin substitute 
to ensure that duplicate payment is not made for the skin substitute. 
In addition, when a stress agent with pass-through status is billed 
with any procedural APC listed in Table 37 below, a specific offset 
based on the procedural APC will be applied to the payment for the 
stress agent to ensure that duplicate payment is not made for the 
stress agent.
    Table 36 below displays the APCs to which skin substitute 
procedures will be assigned in CY 2014 and for which we expect that an 
APC offset could be applicable in the case of skin substitutes with 
pass-through status.
    Table 37 below displays the APCs to which MPI procedures will be 
assigned in CY 2014 and for which we expect that an APC offset could be 
applicable in the case of a stress agent with pass-through status.
    As we proposed, we will continue to post annually on the CMS Web 
site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.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 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.

[[Page 75020]]

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

1. Background
    Under the CY 2013 OPPS, we currently pay for drugs, biologicals, 
and radiopharmaceuticals that do not have pass-through status in one of 
two ways: as a packaged payment included in the payment for the 
associated service, or as a separate payment (individual APCs). We 
explained in the April 7, 2000 OPPS final rule with comment period (65 
FR 18450) that we generally package the cost of drugs and 
radiopharmaceuticals into the APC payment rate for the procedure or 
treatment with which the products are usually furnished. Hospitals do 
not receive separate payment for packaged items and supplies, and 
hospitals may not bill beneficiaries separately for any packaged items 
and supplies whose costs are recognized and paid within the national 
OPPS payment rate for the associated procedure or service. (Transmittal 
A-01-133, issued on November 20, 2001, explains in greater detail the 
rules regarding separate payment for packaged services.)
    Packaging costs into a single aggregate payment for a service, 
procedure, or episode-of-care is a fundamental principle that 
distinguishes a prospective payment system from a fee schedule. In 
general, packaging the costs of items and services into the payment for 
the primary procedure or service with which they are associated 
encourages hospital efficiencies and also enables hospitals to manage 
their resources with maximum flexibility.
2. Criteria for Packaging Payment for Drugs, Biologicals, and 
Radiopharmaceuticals
a. Background
    As indicated in section V.B.1. of this final rule with comment 
period, 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 
$60 for CYs 2008 and 2009. For CY 2010, we set the packaging threshold 
at $65; for CY 2011, we set the packaging threshold at $70; for CY 
2012, we set the packaging threshold at $75; and for CY 2013, we set 
the packaging threshold at $80.
    Following the CY 2007 methodology, for the CY 2014 OPPS/ASC 
proposed rule (78 FR 43604), we used the most recently available four 
quarter moving average PPI levels to trend the $50 threshold forward 
from the third quarter of CY 2005 to the third quarter of CY 2014 and 
rounded the resulting dollar amount ($87.70) to the nearest $5 
increment, which yielded a figure of $90. 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 (BLS) series code WPUSI07003) from CMS' 
Office of the Actuary (OACT). We refer below to this series generally 
as the PPI for Prescription Drugs.
    We chose the PPI for Prescription Drugs as it reflects price 
changes associated with the average mix of all pharmaceuticals in the 
overall economy. In addition, we chose this price series because it is 
publicly available and regularly published, improving public access and 
transparency. Forecasts of the PPI for Prescription Drugs are developed 
by IHS Global Insight, Inc., a nationally recognized economic and 
financial forecasting firm. As actual inflation for past quarters 
replaced forecasted amounts, the PPI estimates for prior quarters have 
been revised (compared with those used in the CY 2007 OPPS/ASC final 
rule with

[[Page 75021]]

comment period) and have been incorporated into our calculation. Based 
on the calculations described above, we proposed a packaging threshold 
for CY 2014 of $90. (For a more detailed discussion of the OPPS drug 
packaging threshold and the use of the PPI for Prescription Drugs, we 
refer readers to the CY 2007 OPPS/ASC final rule with comment period 
(71 FR 68085 through 68086).)
b. Cost Threshold for Packaging of Payment for HCPCS Codes That 
Describe Certain Drugs, Certain Biologicals, and Therapeutic 
Radiopharmaceuticals (``Threshold-Packaged Drugs'')
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43604), to determine 
the proposed CY 2014 packaging status for all nonpass-through drugs and 
biologicals that are not policy packaged, we calculated, on a HCPCS 
code-specific basis, the per day cost of all drugs, biologicals, and 
therapeutic radiopharmaceuticals (collectively called ``threshold-
packaged'' drugs) that had a HCPCS code in CY 2012 and were paid (via 
packaged or separate payment) under the OPPS. We used data from CY 2012 
claims processed before January 1, 2013 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.2.c. of the proposed rule, or for diagnostic 
radiopharmaceuticals, contrast agents, anesthesia drugs, and 
implantable biologicals that we proposed to continue to package in CY 
2014, or for the new categories of policy-packaged products proposed 
for CY 2014, as discussed in section II.A.3. of the proposed rule.
    In order to calculate the per day costs for drugs, biologicals, and 
therapeutic radiopharmaceuticals to determine their proposed packaging 
status in CY 2014, we used 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 70 FR 68638). For each drug and biological HCPCS code, we 
used an estimated payment rate of ASP+6 percent (which is the payment 
rate we proposed for separately payable drugs and biologicals for CY 
2014, as discussed in more detail in section V.B.3.b. of the proposed 
rule) to calculate the CY 2014 proposed rule per day costs. We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2012 
(data that were used for payment purposes in the physician's office 
setting, effective April 1, 2013) to determine the proposed rule per 
day cost.
    As is our standard methodology, for CY 2014, we proposed to use 
payment rates based on the ASP data from the fourth quarter of CY 2012 
for budget neutrality estimates, packaging determinations, impact 
analyses, and completion of Addenda A and B to the proposed rule (which 
are available via the Internet on the CMS Web site) because these were 
the most recent data available for use at the time of development of 
the proposed rule. These data also were the basis for drug payments in 
the physician's office setting, effective April 1, 2013. 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 
2012 hospital claims data to determine their per day cost.
    We proposed to package items with a per day cost less than or equal 
to $90, and identify items with a per day cost greater than $90 as 
separately payable. Consistent with our past practice, we crosswalked 
historical OPPS claims data from the CY 2012 HCPCS codes that were 
reported to the CY 2013 HCPCS codes that we displayed in Addendum B of 
the proposed rule (which is available via the Internet on the CMS Web 
site) for payment in CY 2014.
    Comment: The majority of commenters objected to the proposed 
increase in the OPPS packaging threshold to $90 for CY 2014. The 
commenters recommended that CMS consider either eliminating the drug 
packaging threshold and providing separate payment for all drugs with 
HCPCS codes or freezing the packaging threshold at $80 for CY 2014. A 
few commenters suggested that CMS limit increases in the packaging 
threshold amount to the hospital market basket update factor for the 
year that is reflective of all statutory adjustments.
    Response: As stated in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68086), we believe that packaging certain items is a 
fundamental component of a prospective payment system, that updating 
the packaging threshold of $50 for the CY 2005 OPPS is consistent with 
industry and government practices, and that the PPI for Prescription 
Drugs is an appropriate mechanism to gauge Part B drug inflation. 
Therefore, because of our continued belief that packaging is a 
fundamental component of a prospective payment system that continues to 
provide important flexibility and efficiency in the delivery of high 
quality hospital outpatient services, we are not adopting the 
commenters' recommendations to pay separately for all drugs, 
biologicals, and radiopharmaceuticals for CY 2014 or to eliminate or to 
freeze the packaging threshold at $80.
    We disagree with the commenters who suggested that CMS limit 
increases in the outpatient drug packaging threshold amount to the 
hospital update factor for the year, reflective of all statutory 
adjustments or the market basket update. As stated above, we continue 
to believe that updating the $50 threshold of the CY 2005 OPPS is 
consistent with industry and government practices and that the PPI for 
Prescription Drugs is an appropriate mechanism to gauge Part B drug 
inflation. As we stated in the CY 2007 OPPS/ASC final rule with comment 
period (71 FR 68085), we believe that the PPI for Prescription Drugs 
reflects price changes at the wholesale or manufacturer stage. Because 
OPPS payment rates for drugs and biologicals are generally based on the 
ASP data that are reported by their manufacturers, we believe that the 
PPI for Prescription Drugs is an appropriate price index to use to 
update the packaging threshold for CY 2007 and beyond. In contrast, the 
market basket update contains numerous price proxies, including, but 
not limited to, proxies for wages and salaries, utilities, and 
nonlabor-related expenses, that are not related to price increases for 
prescription drugs. Therefore, we believe that the market basket as a 
whole is not an appropriate mechanism for determining the outpatient 
drug packaging threshold amount. Within the calculation of the market 
basket update, we use the PPI for Prescription Drugs specifically to 
measure the price growth for prescription drugs, but price changes for 
prescription drugs are only one component of price changes for the 
numerous items and services hospitals purchase.
    Since publication of the CY 2014 OPPS/ASC proposed rule, consistent 
with our policy of updating the packaging threshold with more recently 
available data for this final rule with comment period, we have again 
followed the CY 2007 methodology for CY 2014 and used updated four 
quarter moving average PPI index levels provided by the CMS Office of 
the Actuary to trend the $50 threshold forward from the third quarter 
of CY 2005 to the third quarter of CY 2014. We then rounded the 
resulting updated dollar amount ($91.27) to the nearest $5 increment, 
which yielded a figure of $90. Therefore, after consideration for the 
public comments we received, and consistent with our methodology for

[[Page 75022]]

establishing the packaging threshold using the most recent PPI forecast 
data, we are adopting a CY 2014 packaging threshold of $90.
    Our policy during previous cycles of the OPPS has been to use 
updated ASP and claims data to make final determinations of the 
packaging status of HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals for the OPPS/ASC final rule with comment period. 
We note that it is also our policy to make an annual packaging 
determination for a HCPCS code only when we develop the OPPS/ASC final 
rule with comment period for the update year. Only HCPCS codes that are 
identified as separately payable in the final rule with comment period 
are subject to quarterly updates. For our calculation of per day costs 
of HCPCS codes for drugs and biologicals in this final rule with 
comment period, we used ASP data from the first quarter of CY 2013, 
which is the basis for calculating payment rates for drugs and 
biologicals in the physician's office setting using the ASP 
methodology, effective July 1, 2013, along with updated hospital claims 
data from CY 2012. We note that we also used these data for budget 
neutrality estimates and impact analyses for this final rule with 
comment period.
    Payment rates for HCPCS codes for separately payable drugs and 
biologicals included in Addenda A and B to this final rule with comment 
period are based on ASP data from the second quarter of CY 2013. These 
data are the basis for calculating payment rates for drugs and 
biologicals in the physician's office setting using the ASP 
methodology, effective October 1, 2013. These payment rates will then 
be updated in the January 2014 OPPS update, based on the most recent 
ASP data to be used for physician's office and OPPS payment as of 
January 1, 2014. For items that do not currently have an ASP-based 
payment rate, we recalculated their mean unit cost from all of the CY 
2012 claims data and updated cost report information available for this 
CY 2014 final rule with comment period to determine their final per day 
cost.
    Consequently, the packaging status of some HCPCS codes for drugs, 
biologicals, and therapeutic radiopharmaceuticals in this CY 2014 OPPS/
ASC final rule with comment period may be different from the same drug 
HCPCS code's packaging status determined based on the data used for the 
proposed rule. 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 cost 
fluctuates relative to the proposed CY 2014 OPPS drug packaging 
threshold and the drug's payment status (packaged or separately 
payable) in CY 2013. Specifically, for CY 2014, consistent with our 
historical practice, we proposed to apply the following policies to 
these HCPCS codes for drugs, biologicals, and therapeutic 
radiopharmaceuticals whose relationship to the drug packaging threshold 
changes based on the updated drug packaging threshold and on the final 
updated data:
     HCPCS codes for drugs and biologicals that were paid 
separately in CY 2013 and that were proposed for separate payment in CY 
2014, and that then have per day costs equal to or less than the CY 
2014 final rule drug packaging threshold, based on the updated ASPs and 
hospital claims data used for the CY 2014 final rule, would continue to 
receive separate payment in CY 2014.
     HCPCS codes for drugs and biologicals that were packaged 
in CY 2013 and that are proposed for separate payment in CY 2014, and 
that then have per day costs equal to or less than the CY 2014 final 
rule drug packaging threshold, based on the updated ASPs and hospital 
claims data used for the CY 2014 final rule, would remain packaged in 
CY 2014.
     HCPCS codes for drugs and biologicals for which we 
proposed packaged payment in CY 2014 but then have per day costs 
greater than the CY 2014 final rule drug packaging threshold, based on 
the updated ASPs and hospital claims data used for the CY 2014 final 
rule, would receive separate payment in CY 2014.
    We did not receive any public comments on our proposal to apply the 
established policies initially adopted for the CY 2005 OPPS (69 FR 
65780) in order to more equitably pay for those drugs whose cost 
fluctuates relative to the CY 2014 OPPS drug packaging threshold and 
the drug's payment status (packaged or separately payable) in CY 2013. 
Therefore, we are finalizing our proposal, without modification, for CY 
2014.
    We note that we proposed to package HCPCS codes 90734 
(Meningococcal conjugate vaccine, serogroups a, c, y and w-135 
(tetravalent), for intramuscular use), J0630 (Injection, calcitonin 
salmon, up to 400 units), and J1570 (Injection, ganciclovir sodium, 500 
mg) for CY 2014. Using updated ASPs and the CY 2012 hospital claims 
data available for this final rule with comment period, HCPCS codes 
90734, J0630, and J1570 now have per day costs greater than $90. In 
accordance with our established policy for such cases, for CY 2014 we 
will pay for HCPCS codes 90734, J0630, and J1570 separately.
    In addition, because we did not have claims data for HCPCS code 
J7191 (Factor viii (antihemophilic factor (porcine)), per IU) in the CY 
2014 OPPS/ASC proposed rule, we had proposed a status indicator of 
``E'' for this product in CY 2014. However, since publication of the 
proposed rule, we have received claims data and the per day cost for 
this product is more than the $90 CY 2014 packaged threshold. HCPCS 
code J7191 will be paid separately and will be assigned a status 
indicator of ``K'' for CY 2014.
c. Packaging Determination for HCPCS Codes That Describe the Same Drug 
or Biological But Different Dosages
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66776), we began recognizing, for OPPS payment purposes, multiple HCPCS 
codes reporting different dosages for the same covered Part B drugs or 
biologicals in order to reduce hospitals' administrative burden by 
permitting them to report all HCPCS codes for drugs and biologicals. In 
general, prior to CY 2008, the OPPS recognized for payment only the 
HCPCS code that described the lowest dosage of a drug or biological. We 
extended this recognition to multiple HCPCS codes for several other 
drugs under the CY 2009 OPPS (73 FR 68665). During CYs 2008 and 2009, 
we applied a policy that assigned the status indicator of the 
previously recognized HCPCS code to the associated newly recognized 
code(s), reflecting the packaged or separately payable status of the 
new code(s). In the CY 2008 OPPS/ASC final rule with comment period (72 
FR 66775), we explained that once claims data were available for these 
previously unrecognized HCPCS codes, we would determine the packaging 
status and resulting status indicator for each HCPCS code according to 
the general, established HCPCS code-specific methodology for 
determining a code's packaging status for a given update year. However, 
we also stated that we planned to closely follow our claims data to 
ensure that our annual packaging determinations for the different HCPCS 
codes describing the same drug or biological did not create 
inappropriate payment incentives for hospitals to report certain HCPCS 
codes instead of others.
    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

[[Page 75023]]

for a drug, rather than an individual HCPCS code, when a drug has 
multiple HCPCS codes describing different dosages. We analyzed CY 2008 
claims data for the HCPCS codes describing different dosages of the 
same drug or biological that were newly recognized in CY 2008 and found 
that our claims data would result in several different packaging 
determinations for different codes describing the same drug or 
biological. Furthermore, we found that our claims data included few 
units and days for a number of newly recognized HCPCS codes, resulting 
in our concern that these data reflected claims from only a small 
number of hospitals, even though the drug or biological itself may be 
reported by many other hospitals under the most common HCPCS code. 
Based on these findings from our first available claims data for the 
newly recognized HCPCS codes, we believed that adopting our standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes 
instead of others, particularly because we do not currently require 
hospitals to report all drug and biological HCPCS codes under the OPPS 
in consideration of our previous policy that generally recognized only 
the lowest dosage HCPCS code for a drug or biological for OPPS payment.
    For CY 2014, we continue to believe that adopting the standard 
HCPCS code-specific packaging determinations for these codes could lead 
to payment incentives for hospitals to report certain HCPCS codes for 
drugs instead of others. Making packaging determinations on a drug-
specific basis eliminates these incentives 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, in 
the CY 2014 OPPS/ASC proposed rule (78 FR 43606), 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 
2014.
    For CY 2014, 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 2012 claims data 
and our pricing information at ASP+6 percent across all of the HCPCS 
codes that describe each distinct drug or biological in order to 
determine the mean units per day of the drug or biological in terms of 
the HCPCS code with the lowest dosage descriptor. The following drugs 
did not have pricing information available for the ASP methodology for 
this CY 2014 OPPS/ASC final rule with comment period and, as is our 
current policy for determining the packaging status of other drugs, we 
used the mean unit cost available from the fourth quarter CY 2012 
claims data to make the packaging determinations for these drugs: HCPCS 
codes J3471 (Injection, hyaluronidase, ovine, preservative free, per 1 
usp unit (up to 999 usp units)); J3472 (Injection, hyaluronidase, 
ovine, preservative free, per 1000 usp units); Q0171 (Chlorpromazine 
hydrochloride, 10 mg, oral, FDA approved prescription antiemetic, for 
use as a complete therapeutic substitute for an IV antiemetic at the 
time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen); Q0172 (Chlorpromazine hydrochloride, 25 mg, oral, FDA 
approved prescription anti-emetic, for use as a complete therapeutic 
substitute for an IV anti-emetic at the time of chemotherapy treatment, 
not to exceed a 48-hour dosage regimen); Q0175 (Perphenazine, 4 mg, 
oral, FDA approved prescription anti-emetic, for use as a complete 
therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen); Q0176 
(Perphenazine, 8 mg, oral, FDA approved prescription anti-emetic, for 
use as a complete therapeutic substitute for an IV anti-emetic at the 
time of chemotherapy treatment, not to exceed a 48-hour dosage 
regimen); Q0177 (Hydroxyzine pamoate, 25 mg, oral, FDA approved 
prescription anti-emetic, for use as a complete therapeutic substitute 
for an IV anti-emetic at the time of chemotherapy treatment, not to 
exceed a 48-hour dosage regimen); and Q0178 (Hydroxyzine pamoate, 50 
mg, oral, FDA approved prescription anti-emetic, for use as a complete 
therapeutic substitute for an IV anti-emetic at the time of 
chemotherapy treatment, not to exceed a 48-hour dosage regimen).
    For all other drugs and biologicals that have HCPCS codes 
describing different doses, we then multiplied the weighted average 
ASP+6 percent per unit payment amount across all dosage levels of a 
specific drug or biological by the estimated units per day for all 
HCPCS codes that describe each drug or biological from our claims data 
to determine the estimated per day cost of each drug or biological at 
less than or equal to $90 (so that all HCPCS codes for the same drug or 
biological would be packaged) or greater than $90 (so that all HCPCS 
codes for the same drug or biological would be separately payable).
    We did not receive any public comments on this proposal. Therefore, 
we are finalizing our CY 2014 proposal, without modification, to 
continue to make packaging determinations on a drug-specific basis, 
rather than a HCPCS code-specific basis, for those HCPCS codes that 
describe the same drug or biological but different dosages. The 
packaging status of each drug and biological HCPCS code to which this 
methodology will apply is displayed in Table 38 below.
BILLING CODE 4120-01-P

[[Page 75024]]

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[[Page 75025]]

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[[Page 75026]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.338

BILLING CODE 4120-01-C
3. 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 and Packaged Drugs and Biologicals
    Section 1833(t)(14) of the Act defines certain separately payable 
radiopharmaceuticals, drugs, and biologicals and mandates specific 
payments for these items. Under section 1833(t)(14)(B)(i) of the Act, a 
``specified covered outpatient drug'' (known as a SCOD) is defined as a 
covered outpatient drug, as defined in section 1927(k)(2) of the Act, 
for which a separate APC has been established and that either is a 
radiopharmaceutical agent or is a drug or biological for which payment 
was made on a pass-through basis on or before December 31, 2002.
    Under section 1833(t)(14)(B)(ii) of the Act, certain drugs and 
biologicals are designated as exceptions and are not included in the 
definition of SCODs. These exceptions are--
     A drug or biological for which payment is first made on or 
after January 1, 2003, under the transitional pass-through payment 
provision in section 1833(t)(6) of the Act.
     A drug or biological for which a temporary HCPCS code has 
not been assigned.
     During CYs 2004 and 2005, an orphan drug (as designated by 
the Secretary).
    Section 1833(t)(14)(A)(iii) of the Act requires that payment for 
SCODs in CY 2006 and subsequent years be equal to the average 
acquisition cost for the drug for that year as determined by the 
Secretary, subject to any adjustment for overhead costs and taking into 
account the hospital acquisition cost survey data collected by the 
Government Accountability Office (GAO) in CYs 2004 and 2005, and later 
periodic surveys conducted by the Secretary as set forth in the 
statute. If hospital acquisition cost data are not available, the law 
requires that payment be equal to payment rates established under the 
methodology described in section 1842(o), section 1847A, or section 
1847B of the Act, as calculated and adjusted by the Secretary as 
necessary. Most physician Part B drugs are paid at ASP+6 percent 
pursuant to 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.
    It has been our longstanding policy to apply the same treatment to 
all separately payable drugs and biologicals, which include SCODs, and 
drugs and biologicals that are not SCODs. Therefore, we apply the 
payment methodology in section 1833(t)(14)(A)(iii) of the Act to SCODs, 
as required by statute, but we also apply it to separately payable 
drugs and biologicals that are not SCODs, which is a policy 
determination rather than a statutory requirement. In the CY 2014 OPPS/
ASC proposed rule (78 FR 43608), 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.
    Since CY 2006, we have attempted to establish a drug payment 
methodology that reflects hospitals' acquisition costs for drugs and 
biologicals while taking into account relevant pharmacy overhead and 
related handling expenses. We have attempted to collect more data on 
hospital overhead charges for drugs and biologicals by making several 
proposals that would require hospitals to change the way they report 
the cost and charges for drugs. None of these proposals were adopted 
due to significant stakeholder concern, including that hospitals stated 
that it would be administratively burdensome to report hospital 
overhead charges. We established a payment policy for separately 
payable drugs and biologicals, authorized by section 
1833(t)(14)(A)(iii)(I) of the Act, based on an ASP+X amount that is 
calculated by comparing the estimated aggregate cost of separately 
payable drugs and biologicals in our claims data to the estimated 
aggregate ASP dollars for separately payable drugs and biologicals, 
using the ASP as a proxy for average acquisition cost (70 FR 68642). We 
referred to this methodology as our standard drug payment methodology.
    In CY 2010, taking into consideration comments made by the pharmacy 
stakeholders and acknowledging the limitations of the reported data due 
to charge compression and hospitals' reporting practices, we added an 
``overhead adjustment'' (an internal adjustment of the data) by 
redistributing

[[Page 75027]]

cost from coded and uncoded packaged drugs and biologicals to 
separately payable drugs in order to provide more appropriate payments 
for drugs and biologicals in the HOPD. We continued this overhead 
adjustment methodology through CY 2012, and further refined our 
overhead adjustment methodology by finalizing a policy to update the 
redistribution amount for inflation and to keep the redistribution 
ratio constant between the proposed rule and the final rule. 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).
    We noted in the CY 2013 OPPS/ASC final rule with comment period (77 
FR 68386) that application of the standard drug payment methodology, 
with the overhead adjustment, has always yielded a finalized payment 
rate in the range of ASP+4 percent to ASP+6 percent for nonpass-through 
separately payable drugs. We stated that the historic ASP+4 to ASP+6 
percentage range is an appropriate payment rate for separately payable 
drugs and biologicals administered within the HOPD, including 
acquisition and pharmacy overhead and related expenses. However, 
because of continuing uncertainty about the full cost of pharmacy 
overhead and acquisition cost, based in large part on the limitations 
of the submitted hospital charge and claims data for drugs, we 
indicated our concern that the continued use of the standard drug 
payment methodology (including the overhead adjustment) still may not 
appropriately account for average acquisition and pharmacy overhead 
cost and, therefore, may result in payment rates that are not as 
predictable, accurate, or appropriate as they could be.
    In that final rule with comment period, we discussed that section 
1833(t)(14)(A)(iii)(II) of the Act requires an alternative methodology 
for determining payment rates for SCODs wherein, if hospital 
acquisition cost data are not available, payment shall be equal 
(subject to any adjustment for overhead costs) 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. In the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68386), we noted that section 1833(t)(14)(A)(iii)(II) of 
the Act authorizes the Secretary to calculate and adjust, as necessary, 
the average price for a drug in the year established under section 
1842(o), 1847A, or 1847B of the Act, as the case may be, in determining 
payment for SCODs. Pursuant to sections 1842(o) and 1847A of the Act, 
Part B drugs are paid at ASP+6 percent when furnished in physicians' 
offices. We indicated that we believe that establishing the payment 
rates based on the statutory default of ASP+6 percent is appropriate as 
it yields increased predictability in payment for separately payable 
drugs and biologicals under the OPPS. We also noted that ASP+6 percent 
is an appropriate payment amount because it is consistent with the 
range of payment amounts yielded by our drug payment methodologies over 
the past 7 years. Therefore, considering stakeholder and provider 
feedback, continued limitations of the hospital claims and cost data on 
drugs and biologicals, and Panel recommendations, in the CY 2013 OPPS/
ASC final rule with comment period (77 FR 68389), we finalized our 
proposal for CY 2013 to pay for separately payable drugs and 
biologicals at ASP+6 percent based on section 1833(t)(14)(A)(iii)(II) 
of the Act, referred to as the statutory default. We also finalized our 
proposal that the ASP+6 percent payment amount for separately payable 
drugs and biologicals requires no further adjustment and represents the 
combined acquisition and pharmacy overhead payment for drugs and 
biologicals, that payments for separately payable drugs and biologicals 
are included in the budget neutrality adjustments under the 
requirements in section 1833(t)(9)(B) of the Act, and that the budget 
neutral weight scaler is not applied in determining payments for these 
separately paid drugs and biological for CY 2013 (77 FR 68389).
b. CY 2014 Payment Policy
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43608), we proposed to 
continue our CY 2013 policy and pay for separately payable drugs and 
biologicals at ASP+6 percent pursuant to section 
1833(t)(14)(A)(iii)(II) of the Act, referred to as the ``statutory 
default.'' We proposed that the ASP+6 percent payment amount for 
separately payable drugs and biologicals requires no further adjustment 
and represents the combined acquisition and pharmacy overhead payment 
for drugs and biologicals. We also proposed that payments for 
separately payable drugs and biologicals are included in the budget 
neutrality adjustments, under the requirements in section 1833(t)(9)(B) 
of the Act, and that the budget neutral weight scaler is not applied in 
determining payments for these separately paid drugs and biologicals.
    Comment: Commenters supported CMS' proposal to pay for separately 
payable drugs and biologicals based on the statutory default rate of 
ASP+6 percent. The commenters stated that ASP+6 percent is 
administratively simple, improves stability of drug and biological 
payments, and better covers the costs of drug acquisition and pharmacy 
overhead. A few commenters supported CMS' proposal, but recommended 
that CMS examine ways to compensate hospitals for the unique, higher 
overhead and handling costs associated with therapeutic 
radiopharmaceuticals. One commenter recommended that CMS design a 
payment strategy that would maintain the current ASP+6 percent for 
branded drug products but provide for a much higher payment rate for 
multi-source generic drugs.
    Response: We appreciate the commenters' support of our proposal. We 
continue to believe that ASP+6 percent based on the statutory default 
is appropriate for hospitals for CY 2014 and that this percentage 
amount includes payment for acquisition and overhead cost. We see no 
evidence that an additional overhead adjustment is required for 
separately payable drugs, biologicals and therapeutic 
radiopharmaceuticals for CY 2014. With regard to the development of a 
multi-tiered payment strategy that would encourage the use of generic 
drugs over their branded counterparts, we made no such proposal and, 
therefore, consider this comment outside the scope of the proposed 
rule.
    Comment: Some commenters recommended that CMS require hospitals to 
bill all drugs with HCPCS codes under revenue code 0636 in order to 
improve its data on packaged drugs.
    Response: We do not accept the commenter's recommendation that CMS 
require drugs and biologicals to be reported under revenue code 0636. 
We believe that drugs and biologicals also may be appropriately 
reported in revenue code categories other than revenue code 0636, 
including, but not limited to, revenue codes 025x and 062x. As we 
stated in the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71966), we recognize that hospitals may carry the costs of drugs and 
biologicals in multiple cost centers and that it may not be appropriate 
to report the cost of all drugs and biologicals in one specified 
revenue code. In addition, we generally require hospitals to follow 
National Uniform Billing Committee (NUBC) guidance for the choice of an 
appropriate revenue code that is also appropriate for the hospital's 
internal accounting processes.

[[Page 75028]]

    Comment: One commenter asked that, for CY 2014, CMS consider paying 
for influenza and PPV vaccines at 106 percent of ASP instead of paying 
for the items at reasonable cost.
    Response: We consider this comment outside the scope of the 
proposed rule.
    After consideration of the public comments we received, we are 
finalizing our proposal, without modification, to pay for separately 
payable drugs and biologicals at ASP+6 percent based on section 
1833(t)(14)(A)(iii)(II) of the Act (the statutory default). The ASP+6 
percent payment amount for separately payable drugs and biologicals 
requires no further adjustment and represents the combined acquisition 
and pharmacy overhead payment for drugs and biologicals for CY 2014. In 
addition, we are finalizing our proposal which states that payment for 
separately payable drugs and biologicals be included in the budget 
neutrality adjustments, under the requirements of section 1833(t)(9)(B) 
of the Act, and that the budget neutral weight scaler is not applied in 
determining payment of these separately paid drugs and biologicals.
    We note that separately payable drug and biological payment rates 
listed in Addenda A and B to this final rule with comment period, which 
illustrate the final CY 2014 payment of ASP+6 percent for separately 
payable nonpass-through drugs and biologicals and ASP+6 percent for 
pass-through drugs and biologicals, reflect either ASP information that 
is the basis for calculating payment rates for drugs and biologicals in 
the physician's office setting effective October 1, 2013, or WAC, AWP, 
or mean unit cost from CY 2012 claims data and updated cost report 
information available for this final rule with comment period. In 
general, these published payment rates are not reflective of actual 
January 2014 payment rates. This is because payment rates for drugs and 
biologicals with ASP information for January 2014 will be determined 
through the standard quarterly process where ASP data submitted by 
manufacturers for the third quarter of 2013 (July 1, 2013 through 
September 30, 2013) are used to set the payment rates that are released 
for the quarter beginning in January 2014 near the end of December 
2013. In addition, payment rates for drugs and biologicals in Addenda A 
and B to this final rule with comment period for which there was no ASP 
information available for October 2013 are based on mean unit cost in 
the available CY 2012 claims data. If ASP information becomes available 
for payment for the quarter beginning in January 2014, we will price 
payment for these drugs and biologicals based on their newly available 
ASP information. Finally, there may be drugs and biologicals that have 
ASP information available for this final rule with comment period 
(reflecting October 2013 ASP data) that do not have ASP information 
available for the quarter beginning in January 2014. These drugs and 
biologicals will then be paid based on mean unit cost data derived from 
CY 2012 hospital claims. Therefore, the payment rates listed in Addenda 
A and B to this final rule with comment period are not for January 2014 
payment purposes and are only illustrative of the CY 2014 OPPS payment 
methodology using the most recently available information at the time 
of issuance of this final rule with comment period.
4. Payment Policy for Therapeutic Radiopharmaceuticals
    Beginning in CY 2010 and continuing for CY 2013, we established a 
policy to pay for separately paid 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 2014. Therefore, in the CY 2014 
OPPS/ASC proposed rule (78 FR 43609), we proposed for CY 2014 to pay 
all nonpass-through, separately payable therapeutic 
radiopharmaceuticals at ASP+6 percent, based on the statutory default 
described in section 1833(t)(14)(A)(iii)(II) of the Act. For a full 
discussion of ASP-based payment for therapeutic radiopharmaceuticals, 
we refer readers to the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60520 through 60521). We also proposed to rely on CY 2012 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 available. 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).
    Comment: Commenters supported CMS' proposal to pay for separately 
payable therapeutic radiopharmaceuticals under the statutory default 
payment rate of ASP+6 percent, if ASP data are submitted to CMS.
    Response: We appreciate the commenters' support. We continue to 
believe that providing payment for therapeutic radiopharmaceuticals 
based on ASP or mean unit cost if ASP information is not available 
would provide appropriate payment for these products. When ASP data are 
not available, we believe that paying for therapeutic 
radiopharmaceuticals using mean unit cost will appropriately pay for 
the average hospital acquisition and associated handling costs of 
nonpass-through separately payable therapeutic radiopharmaceuticals. As 
we stated in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60523), although using mean unit cost for payment for therapeutic 
radiopharmaceuticals when ASP data are not available is not the usual 
OPPS process (the usual process relies on alternative data sources such 
as WAC or AWP when ASP information is temporarily unavailable, prior to 
defaulting to the mean unit cost from hospital claims data), we 
continue to believe that WAC or AWP is not an appropriate proxy to 
provide OPPS payment for average therapeutic radiopharmaceutical 
acquisition cost and associated handling costs when manufacturers are 
not required to submit ASP data. Payment based on WAC or AWP under the 
established OPPS ASP methodology for payment of separately payable 
drugs and biologicals is usually temporary for a calendar quarter until 
a manufacturer is able to submit the required ASP data in accordance 
with the quarterly ASP submission timeframes for reporting under 
section 1847A of the Act. Because ASP reporting for OPPS payment of 
separately payable therapeutic radiopharmaceutical is not required, a 
manufacturer's choice to not submit ASP could result in payment for a 
separately payable therapeutic radiopharmaceutical based on WAC or AWP 
for a full year, a result which we believe would be inappropriate.

[[Page 75029]]

    Comment: One commenter indicated that the proposed payment rate for 
the therapeutic radiopharmaceutical identified by HCPCS code A9517 
(Iodine i-131 sodium iodide capsule(s), therapeutic, per millicurie) 
decreased by 54 percent compared to the CY 2013 payment rate and 
questioned the reason for this proposed reduction.
    Response: The CY 2013 payment rate for HCPCS code A9517 is $17.74 
per millicurie. The proposed CY 2014 payment rate for HCPCS code A9517 
was $18.70, which is a 5.4 percent increase compared to the CY 2013 
payment rate. The final CY 2014 payment rate for HCPCS code A9517 is 
$18.52, which is a 4.4 percent increase compared to the CY 2013 payment 
rate.
    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+6 percent. We are also finalizing our proposal to continue to rely 
on CY 2012 mean unit cost data derived from hospital claims data for 
payment rates for therapeutic radiopharmaceuticals for which ASP data 
are unavailable. The CY 2014 final rule payment rates for nonpass-
through separately payable therapeutic radiopharmaceuticals are 
included in Addenda A and B to this final rule with comment period 
(which are available via the Internet on the CMS Web site).
5. Payment for Blood Clotting Factors
    For CY 2013, we provided payment for blood clotting factors under 
the same methodology as other nonpass-through separately payable drugs 
and biologicals under the OPPS and continued paying an updated 
furnishing fee. That is, for CY 2013, we provided payment for blood 
clotting factors under the OPPS at ASP+6 percent, plus an additional 
payment for the furnishing fee. We note that when blood clotting 
factors are provided in physicians' offices under Medicare Part B and 
in other Medicare settings, a furnishing fee is also applied to the 
payment. The CY 2013 updated furnishing fee was $0.188 per unit.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43609), for CY 2014, 
we proposed to pay for blood clotting factors at ASP+6 percent, 
consistent with our proposed payment policy for other nonpass-through 
separately payable drugs and biologicals, and to continue our policy 
for payment of the furnishing fee using an updated amount. Our policy 
to pay for a furnishing fee for blood clotting factors under the OPPS 
is consistent with the methodology applied in the physician office and 
inpatient hospital setting, and 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 was 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 MPFS and OPPS/ASC 
proposed rules are published, we were 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 the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html.
    Comment: Commenters supported CMS' proposal to pay for blood 
clotting factors at ASP+6 percent and to continue to apply the 
furnishing fee for blood clotting factors provided in the OPD.
    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 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 Web site.
6. Payment for Nonpass-Through Drugs, Biologicals, and 
Radiopharmaceuticals With HCPCS Codes but Without OPPS Hospital Claims 
Data
    The Medicare Prescription Drug, Improvement, and Modernization Act 
of 2003 (Pub. L. 108-173) did not address the OPPS payment in CY 2005 
and subsequent years for drugs, biologicals, and radiopharmaceuticals 
that have assigned HCPCS codes, but that do not have a reference AWP or 
approval for payment as pass-through drugs or biologicals. Because 
there was no statutory provision that dictated payment for such drugs, 
biologicals, and radiopharmaceuticals in CY 2005, and because we had no 
hospital claims data to use in establishing a payment rate for them, we 
investigated several payment options for CY 2005 and discussed them in 
detail in the CY 2005 OPPS final rule with comment period (69 FR 65797 
through 65799).
    For CYs 2005 to 2007, we implemented a policy to provide separate 
payment for new drugs, biologicals, and radiopharmaceuticals with HCPCS 
codes (specifically those new drug, biological, and radiopharmaceutical 
HCPCS codes in each of those calendar years that did not crosswalk to 
predecessor HCPCS codes) but which did not have pass-through status, at 
a rate that was equivalent to the payment they received in the 
physician's office setting, established in accordance with the ASP 
methodology for drugs and biologicals, and based on charges adjusted to 
cost for radiopharmaceuticals. For CYs 2008 and 2009, we finalized a 
policy to provide payment for new drugs (excluding contrast agents and 
diagnostic radiopharmaceuticals) and biologicals (excluding implantable 
biologicals for CY 2009) with HCPCS codes, but which did not have pass-
through status and were without OPPS hospital claims data, at ASP+5 
percent and ASP+4 percent, respectively, consistent with the final OPPS 
payment methodology for other separately payable drugs and biologicals. 
New therapeutic radiopharmaceuticals were paid at charges adjusted to 
cost based on the statutory requirement for CY 2008 and CY 2009 and 
payment for new diagnostic radiopharmaceuticals was packaged in both 
years.
    For CY 2010, we continued to provide payment for new drugs 
(excluding contrast agents) and biologicals with HCPCS codes that do 
not have pass-through status and are without OPPS hospital claims data 
at ASP+4 percent, consistent with the CY 2010 payment methodology for 
other separately payable nonpass-through drugs and biologicals. We also 
finalized a policy to extend the CY 2009 payment methodology to new 
therapeutic radiopharmaceutical HCPCS codes, consistent with our final 
policy in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60581 through 60526), providing separate payment for therapeutic 
radiopharmaceuticals that do not crosswalk to CY 2009 HCPCS codes, do 
not have pass-through status, and are without OPPS hospital claims data 
at ASP+4 percent. This policy was continued in CYs 2011, 2012, and 
2013, paying for new drugs, biologicals, and

[[Page 75030]]

radiopharmaceuticals that do not have pass-through status, and are 
without OPPS hospital claims data at ASP+5 percent, ASP+4 percent, and 
ASP+6 percent, respectively, consistent with the final OPPS payment 
methodology for other separately payable drugs and biological during 
those payment years.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43610), we proposed to 
provide payment for new drugs, biologicals, and therapeutic 
radiopharmaceuticals that do not have pass-through status at ASP+6 
percent, consistent with the proposed CY 2014 payment methodology for 
other separately payable nonpass-through drugs, biologicals, and 
therapeutic radiopharmaceuticals to pay at ASP+6 percent based on the 
statutory default. We believe this proposed policy would ensure that 
new nonpass-through drugs, biologicals, and therapeutic 
radiopharmaceuticals would be treated like other drugs, biologicals, 
and therapeutic radiopharmaceuticals under the OPPS.
    For CY 2014, we also proposed to package payment for all new 
nonpass-through policy-packaged products (diagnostic 
radiopharmaceuticals, contrast agents, 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) with HCPCS 
codes but without claims data (those new CY 2014 HCPCS codes that do 
not crosswalk to predecessor HCPCS codes). This is consistent with the 
proposed policy packaging of all existing nonpass-through diagnostic 
radiopharmaceuticals, contrast agents, 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, as discussed in 
more detail in section II.A.3. of the proposed rule and this final rule 
with comment period.
    In accordance with the OPPS ASP methodology, in the absence of ASP 
data, for CY 2014, we proposed to continue our policy of using the WAC 
for the product to establish the initial payment rate for new nonpass-
through drugs and biologicals with HCPCS codes, but which are without 
OPPS claims data. However, we noted that if the WAC is also 
unavailable, we would make payment at 95 percent of the product's most 
recent AWP. We also proposed to assign status indicator ``K'' 
(Separately paid nonpass-through drugs and biologicals, including 
therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and 
biologicals without OPPS claims data and for which we have not granted 
pass-through status. With respect to new nonpass-through drugs and 
biologicals for which we do not have ASP data, we proposed that once 
their ASP data become available in later quarterly submissions, their 
payment rates under the OPPS would be adjusted so that the rates would 
be based on the ASP methodology and set to the finalized ASP-based 
amount (proposed for CY 2014 at ASP+6 percent) for items that have not 
been granted pass-through status. This proposed policy, which utilizes 
the ASP methodology that requires us to use WAC data when ASP data are 
unavailable and 95 percent of AWP when WAC and ASP data are 
unavailable, for new nonpass-through drugs and biologicals with an ASP, 
is consistent with prior years' policies for these items, and would 
ensure that new nonpass-through drugs and biologicals would be treated 
like other drugs and biologicals under the OPPS, unless they are 
granted pass-through status.
    Similarly, we proposed to continue to base the initial payment for 
new therapeutic radiopharmaceuticals with HCPCS codes, but which do not 
have pass-through status and are without claims data, on the WACs for 
these products if ASP data for these therapeutic radiopharmaceuticals 
are not available. If the WACs are also unavailable, we proposed to 
make payment for new therapeutic radiopharmaceuticals at 95 percent of 
the products' most recent AWP because we would not have mean costs from 
hospital claims data upon which to base payment. As we proposed with 
new drugs and biologicals, we proposed to continue our policy of 
assigning status indicator ``K'' to HCPCS codes for new therapeutic 
radiopharmaceuticals without OPPS claims data for which we have not 
granted pass-through status.
    Consistent with other ASP-based payment, we proposed to announce 
any changes to the payment amounts for new drugs and biologicals in 
this CY 2014 OPPS/ASC final rule with comment period and also on a 
quarterly basis on the CMS Web site during CY 2014 if later quarter ASP 
submissions (or more recent WACs or AWPs) indicate that changes to the 
payment rates for these drugs and biologicals are necessary. The 
payment rates for new therapeutic radiopharmaceuticals also would be 
changed accordingly based on later quarter ASP submissions. We note 
that the new CY 2014 HCPCS codes for drugs, biologicals, and 
therapeutic radiopharmaceuticals were not available at the time of 
development of the proposed rule. However, these agents are included in 
Addendum B to this CY 2014 OPPS/ASC final rule with comment period 
(which is available via the Internet on the CMS Web site), where they 
are assigned comment indicator ``NI.'' This comment indicator reflects 
that their interim final OPPS treatment is open to public comment in 
this CY 2014 OPPS/ASC final rule with comment period.
    There are several nonpass-through drugs and biologicals that were 
payable in CY 2012 and/or CY 2013 for which we did not have CY 2012 
hospital claims data available for the proposed rule and for which 
there are no other HCPCS codes that describe different doses of the 
same drug, but which have pricing information available for the ASP 
methodology. In order to determine the packaging status of these 
products for CY 2014, we proposed to continue our policy to calculate 
an estimate of the per day cost of each of these items by multiplying 
the payment rate of each product based on ASP+6 percent, similar to 
other nonpass-through drugs and biologicals paid separately under the 
OPPS, by an estimated average number of units of each product that 
would typically be furnished to a patient during one day in the 
hospital outpatient setting (78 FR 43610). This rationale was first 
adopted in the CY 2006 OPPS/ASC final rule with comment period (70 FR 
68666 and 68667). We proposed to package items for which we estimated 
the per day administration cost to be less than or equal to $90 and to 
pay separately for items for which we estimated the per day 
administration cost to be greater than $90 (with the exception of 
diagnostic radiopharmaceuticals, contrast agents, 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, which we 
proposed to package regardless of cost) in CY 2014. We also proposed 
that the CY 2014 payment for separately payable items without CY 2012 
claims data would be ASP+6 percent, similar to payment for other 
separately payable nonpass-through drugs and biologicals under the 
OPPS. In accordance with the ASP methodology paid in the physician's 
office setting, in the absence of ASP data, we proposed to use the WAC 
for the product to establish the initial payment rate and, if the WAC 
is also unavailable, we would make payment at 95 percent of the most 
recent AWP available. The proposed estimated units

[[Page 75031]]

per day and status indicators for these items were displayed in Table 
26 of the proposed rule (78 FR 43611).
    Finally, there were 11 drugs and biologicals, shown in Table 27 of 
the proposed rule (78 FR 43612), that were payable in CY 2012 but for 
which we lacked CY 2012 claims data and any other pricing information 
for the ASP methodology for the CY 2014 OPPS/ASC proposed rule. For CY 
2010, we finalized a policy to assign status indicator ``E'' (Not paid 
by Medicare when submitted on outpatient claims (any outpatient bill 
type)) whenever we lacked claims data and pricing information and were 
unable to determine the per day cost of a drug or biological. In 
addition, we noted that we would provide separate payment for these 
drugs and biologicals if pricing information reflecting recent sales 
became available mid-year for the ASP methodology. We continued this 
policy for CY 2011, CY 2012, and CY 2013 (75 FR 71973, 76 FR 74334, and 
77 FR 68396, respectively). For CY 2014, we proposed to continue to 
assign status indicator ``E'' to drugs and biologicals that lack CY 
2012 claims data and pricing information for the ASP methodology. All 
drugs and biologicals without CY 2012 hospital claims data and data 
based on the ASP methodology that were assigned status indicator ``E'' 
on this basis at the time of the proposed rule for CY 2014 were 
displayed in Table 27 of the proposed rule (78 FR 43612). We also 
proposed to continue our policy to assign the products status indicator 
``K'' and pay for them separately for the remainder of CY 2014 if 
pricing information were to become available.
    We did not receive any public comments on our CY 2014 proposals to 
provide payment for new drugs, biologicals, and therapeutic 
radiopharmaceuticals using the ASP methodology and to use an estimated 
per day cost in order to determine the packaging status of drugs and 
biologicals for which we have pricing information available but do not 
have hospital claims data available. Therefore, we are finalizing these 
proposals without modification. The final estimated units per day and 
status indicators for drugs and biologicals for which we have pricing 
information available but do not have hospital claims data available 
for CY 2014 are displayed in Table 39 below.
    We also did not receive any public comments on our proposal to 
continue to assign status indicator ``E'' to drugs and biologicals that 
lack CY 2012 claims data and pricing information for the ASP 
methodology and, therefore, we are finalizing this proposal without 
modification. All drugs and biologicals without CY 2012 hospital claims 
data and data based on the ASP methodology that are assigned status 
indicator ``E'' on this basis at the time of this final rule with 
comment period for CY 2014 are displayed in Table 40 below.
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C. Nuclear Medicine Procedure-to-Radiolabeled Product Edits

    Beginning January 1, 2008, CMS implemented OPPS edits that require 
hospitals to include a HCPCS code for a radiolabeled product when a 
separately payable nuclear medicine procedure is present on a claim. In 
the CY 2014 OPPS/ASC proposed rule (78 FR 43612), we proposed to no 
longer require the nuclear medicine procedure-to-radiolabeled product 
edits. Under this proposal, hospitals would still be expected to adhere 
to the guidelines of correct coding and append the correct radiolabeled 
product code to the claim when applicable. However, claims would no 
longer be returned to providers when HCPCS codes for radiolabeled 
products do not appear on claims with nuclear medicine procedures.
    Comment: Several commenters indicated that CMS should continue to 
apply the nuclear medicine procedure-to-radiolabeled product edits to 
ensure that all packaged costs are included on nuclear medicine claims 
in order to establish appropriate payment rates in the future.
    Response: We do not agree with commenters that we should continue 
the nuclear medicine procedure-to-radiolabeled product edits. We 
believe that hospitals have now had several years of experience 
reporting procedures involving radiolabeled products and have grown 
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.
    After consideration of the public comments we received, we are 
finalizing our proposal to no longer require the nuclear medicine 
procedure-to-radiolabeled product edits. Hospitals

[[Page 75034]]

will still be expected to adhere to the guidelines of correct coding 
and append the correct radiolabeled product code to the claim when 
applicable.

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

A. Background

    Section 1833(t)(6)(E) of the Act limits the total projected amount 
of transitional pass-through payments for drugs, biologicals, 
radiopharmaceuticals, and categories of devices for a given year to an 
``applicable percentage,'' currently not to exceed 2.0 percent of total 
program payments estimated to be made for all covered services under 
the OPPS furnished for that year. If we estimate before the beginning 
of the calendar year that the total amount of pass-through payments in 
that year would exceed the applicable percentage, section 
1833(t)(6)(E)(iii) of the Act requires a uniform prospective reduction 
in the amount of each of the transitional pass-through payments made in 
that year to ensure that the limit is not exceeded. We estimate the 
pass-through spending to determine whether payments exceed the 
applicable percentage and the appropriate prorata reduction to the 
conversion factor for the projected level of pass-through spending in 
the following year to ensure that total estimated pass-through spending 
for the prospective payment year is budget neutral, as required by 
section 1833(t)(6)(E) of the Act.
    For devices, developing an estimate of pass-through spending in CY 
2014 entails estimating spending for two groups of items. The first 
group of items consists of device categories that were recently made 
eligible for pass-through payment and that will continue to be eligible 
for pass-through payment in CY 2014. The CY 2008 OPPS/ASC final rule 
with comment period (72 FR 66778) describes the methodology we have 
used in previous years to develop the pass-through spending estimate 
for known device categories continuing into the applicable update year. 
The second group of items consists of items that we know are newly 
eligible, or project may be newly eligible, for device pass-through 
payment in the remaining quarters of CY 2013 or beginning in CY 2014. 
The sum of the CY 2014 pass-through estimates for these two groups of 
device categories equals the total CY 2014 pass-through spending 
estimate for device categories with pass-through status. We base the 
device pass-through estimated payments for each device category on the 
amount of payment as established in section 1833(t)(6)(D)(ii) of the 
Act, and as outlined in previous rules, including the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68397). We note that, beginning 
in CY 2010, the pass-through evaluation process and pass-through 
payment 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) is the device pass-through process and payment methodology (74 
FR 60476). As has been our past practice (76 FR 74335), we include an 
estimate of any implantable biologicals eligible for pass-through 
payment 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. We note that the Part B drug CAP program has been postponed 
since CY 2009, and such a program has not been proposed to be 
reinstated for CY 2014. Because we will pay for most nonpass-through 
separately payable drugs and biologicals under the CY 2014 OPPS at 
ASP+6 percent, as we discussed in section V.B.3. of this final rule 
with comment period, which represents the otherwise applicable fee 
schedule amount associated with most pass-through drugs and 
biologicals, and because we will pay for CY 2014 pass-through drugs and 
biologicals at ASP+6 percent, as we discussed in section V.A. of this 
final rule with comment period, our estimate of drug and biological 
pass-through payment for CY 2014 for this group of items was $0, as 
discussed below.
    Furthermore, payment for certain drugs, specifically diagnostic 
radiopharmaceuticals and contrast agents, without pass-through status 
will always be packaged into payment for the associated procedures and 
these products will not be separately paid. In addition, as we 
proposed, we are policy-packaging all nonpass-through drugs, 
biologicals, and radiopharmaceuticals that function as supplies when 
used in a diagnostic test or procedure and drugs and biologicals that 
function as supplies when used in a surgical procedure for CY 2014, as 
discussed in section II.A.3. of this final rule with comment period. 
All of these policy-packaged drugs and biologicals with pass-through 
status will be paid at ASP+6 percent like other pass-through drugs and 
biologicals for CY 2014. Therefore, our estimate of pass-through 
payment for policy-packaged drugs and biologicals with pass-through 
status approved prior to CY 2014 is not $0. In section V.A.4. of this 
final rule with comment period, we discuss our proposed and finalized 
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 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 
reduce our estimate of pass-through payments for these drugs or 
biologicals by this amount.
    Similar to pass-through 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 2014. 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 2013 or beginning in CY 2014. The sum of 
the CY 2014 pass-through estimates for these two groups of drugs and 
biologicals equals the total CY 2014 pass-through spending estimate for 
drugs and biologicals with pass-through status.

B. Estimate of Pass-Through Spending

    As we proposed in the CY 2014 OPPS/ASC proposed rule (78 FR 43613), 
we are setting the applicable pass-through payment percentage limit at 
2.0

[[Page 75035]]

percent of the total projected OPPS payments for CY 2014, consistent 
with section 1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from 
CY 2004 through CY 2013 (77 FR 68398).
    For the first group of devices for pass-through payment estimation 
purposes, there is one device category, C1841 (Retinal prosthesis, 
includes all internal and external components), receiving pass-through 
payment for CY 2013, made effective subsequent to the proposed rule on 
October 1, 2013, that will continue to be eligible for pass-through 
payment for CY 2014. As discussed in section IV.A. of this final rule 
with comment period, we finalized in the CY 2013 OPPS/ASC final rule 
with comment period the expiration of pass-through payment for three 
device categories after the end of CY 2013. Therefore, we estimate that 
CY 2014 pass-through expenditures for the first group of pass-through 
device categories to be $0.5 million. In estimating our CY 2014 pass-
through spending for device categories in the second group, we include: 
device categories that we knew at the time of the development of the 
final rule will be newly eligible for pass-through payment in CY 2014 
(of which there are none); additional device categories that we 
estimate could be approved for pass-through status subsequent to the 
development of the final rule and before January 1, 2014; and 
contingent projections for new device categories established in the 
second through fourth quarters of CY 2014. We are using the general 
methodology described in the CY 2008 OPPS/ASC final rule with comment 
period (72 FR 66778), while also taking into account recent OPPS 
experience in approving new pass-through device categories.
    We did not receive any public comments regarding our proposed 
estimate for device pass-through spending. For this final rule with 
comment period, the estimate of CY 2014 pass-through spending for this 
second group of device categories is $9.5 million, which is a slight 
decrease from the $10 million estimate in the proposed rule (78 FR 
43613). Using our established methodology, we are establishing that the 
total estimated pass-through spending for device categories for CY 2014 
(spending for the first group of device categories ($0.5 million) plus 
spending for the second group of device categories ($9.5 million)) will 
be $10 million.
    To estimate CY 2014 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 
status for CY 2014, we utilized the most recent Medicare physician's 
office data regarding their utilization, information provided in the 
respective pass-through applications, historical hospital claims data, 
pharmaceutical industry information, and clinical information regarding 
those drugs or biologicals to project the CY 2014 OPPS utilization of 
the products.
    For the known drugs and biologicals (excluding policy-packaged 
diagnostic radiopharmaceuticals, contrast agents, drugs, biologicals, 
and radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure, and drugs and biologicals that function 
as supplies when used in a surgical procedure) that will be continuing 
on pass-through status in CY 2014, we estimate the pass-through payment 
amount as the difference between ASP+6 percent and the payment rate for 
nonpass-through drugs and biologicals that will be separately paid at 
ASP+6 percent, which is zero for this group of drugs. Because payment 
for policy-packaged drugs and biologicals is packaged if the product 
was not paid separately due to its pass-through status, we include in 
the CY 2014 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 
determined that the 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. For the proposed rule, using the 
methodology described above, we calculated a CY 2014 proposed spending 
estimate for this first group of drugs and biologicals of approximately 
$0.962 million.
    We did not receive any public comments on our proposed methodology 
for calculating the spending estimate for the first group of drugs and 
nonimplantable biologicals. Therefore, for this final rule with comment 
period, we are finalizing our proposed methodology. Using our 
established methodology and updated data and information, we calculated 
a final CY 2014 spending estimate for the first group of drugs and 
nonimplantable biologicals of approximately $1.4 million.
    To estimate CY 2014 pass-through spending for drugs and biologicals 
in the second group (that is, drugs and biologicals that we knew at the 
time of development of the final rule are newly eligible for pass-
through payment in CY 2014, additional drugs and biologicals that we 
estimate could be approved for pass-through status subsequent to the 
development of the final rule and before January 1, 2014, and 
projections for new drugs and biologicals that could be initially 
eligible for pass-through payment in the second through fourth quarters 
of CY 2014), we 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 
2014 pass-through payment estimate. We also consider the most recent 
OPPS experience in approving new pass-through drugs and biologicals. 
Using our proposed methodology for estimating CY 2014 pass-through 
payments for this second group of drugs, we calculated a spending 
estimate for this second group of drugs and biologicals of 
approximately $0.165 million.
    We did not receive any public comments on our proposed methodology 
for estimating CY 2014 pass-through payments for this second group of 
drugs and nonimplantable biologicals. Therefore, for this final rule 
with comment period, we are finalizing our proposed methodology. Using 
that methodology and updated data and information, we calculated a 
final CY 2014 spending estimate for this second group of drugs and 
implantable biologicals of approximately $0.9 million.
    As discussed in section V.A. of this final rule with comment 
period, radiopharmaceuticals are considered drugs for pass-through 
purposes. Therefore, we include radiopharmaceuticals in our CY 2014 
pass-through spending estimate for drugs and biologicals. Our CY 2014 
estimate for total pass-through spending for drugs and biologicals 
(spending for the first group of drugs and biologicals ($1.4 million) 
plus spending for the second group of drugs and biologicals ($0.9 
million)) equals $2.3 million.
    In summary, in accordance with the methodology described above in 
this section, for this final rule with comment period, we estimate that 
total pass-through spending for the device categories and the drugs and 
biologicals that are continuing to receive pass-through payment in CY 
2014 and those device categories, drugs, and biologicals that first 
become eligible for pass-through payment during CY 2014 will be 
approximately $12.3 million

[[Page 75036]]

(approximately $10 million for device categories and approximately $2.3 
million for drugs and biologicals), which represents 0.02 percent of 
total projected OPPS payments for CY 2014. We estimate that pass-
through spending in CY 2014 will not amount to 2.0 percent of total 
projected OPPS CY 2014 program spending.

VII. OPPS Payment for Hospital Outpatient Visits

A. Background

    Currently, hospitals report HCPCS visit codes to describe three 
types of OPPS services: clinic visits, emergency department (ED) 
visits, and critical care services, including trauma team activation. 
Historically, we have recognized the CPT and HCPCS codes describing 
clinic visits, Type A and Type B (ED) visits, and critical care 
services, which are listed below in Table 41. We refer readers to the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74338 through 
74346) for a full discussion of our policy on OPPS payment for hospital 
outpatient visits for CY 2013 and prior years.

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B. Payment for Hospital Outpatient Clinic and Emergency Department 
Visits

    Since April 7, 2000, we have instructed hospitals to report 
facility resources for clinic and ED hospital outpatient visits using 
the CPT E/M codes and to develop internal hospital guidelines for 
reporting the appropriate visit level (65 FR 18451). Because a national 
set of hospital-specific codes and guidelines do not currently exist, 
we have advised hospitals that each hospital's internal guidelines that 
determine the levels of clinic and ED visits to be reported should 
follow the intent of the CPT code descriptors, in that the guidelines 
should be designed to reasonably relate the intensity of hospital 
resources to the different levels of effort represented by the codes.
    While many hospitals have advocated for hospital-specific national 
guidelines for visit billing since the OPPS started in 2000, and we 
have signaled through rulemaking our intent to develop guidelines, this 
complex undertaking has proven challenging. Our work with interested 
stakeholders, such as hospital associations, along with a contractor, 
has confirmed that no single approach could consistently and accurately 
capture hospitals' relative costs. Public comments received on this 
issue, as well as our own knowledge of how clinics operate, have led us 
to conclude that it is not feasible to adopt a set of national 
guidelines for reporting hospital clinic visits that can accommodate 
the enormous variety of patient populations and service-mix provided by 
hospitals of all types and sizes throughout the country. Moreover, no 
single approach appears to be broadly endorsed by the stakeholder 
community.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43614 through 43616), 
for CY 2014, we proposed to modify our longstanding policies related to 
hospital outpatient clinic and ED visits. Rather than recognizing five 
levels of clinic and ED visits respectively, we proposed to create 
three new alphanumeric Level II HCPCS codes to describe all levels of 
each type of clinic and ED visit, as discussed in greater detail below. 
We stated that we believe a policy that recognizes a single visit level 
for clinic visits, Type A ED visits, and Type B ED visits for payment 
under the OPPS is appropriate for several reasons. First, we indicated 
that the proposal is in line with our strategic goal of using larger 
payment bundles to maximize hospitals' incentives to provide care in 
the most efficient manner as stated in section II.A.3. of the proposed 
rule. We stated that we believed this proposal will remove any 
incentives hospitals may have to provide medically unnecessary services 
or expend additional, unnecessary resources to achieve a higher level 
of visit payment under the OPPS. Second, we stated that we believe that 
it is important to consider ways in which we can reduce the 
administrative burden that Medicare payment policies place on 
hospitals, while maintaining our ability to calculate accurate payment 
rates under the OPPS. We believed that replacing the 20 HCPCS codes 
currently recognized for clinic visits and ED visits with three new 
alphanumeric Level II HCPCS codes would reduce administrative burden 
and would be easily adopted by hospitals, because the three new codes 
would require hospitals to distinguish only among clinic visits, Type A 
ED visits, and Type B ED visits. We stated that discontinuing the use 
of the five levels of HCPCS visit codes for clinic and Type A and Type 
B ED visits would reduce hospitals' administrative burden by 
eliminating the need for them to develop and apply their own internal 
guidelines to differentiate among five levels of resource use for every 
clinic visit and ED visit they provide, and by eliminating the need to 
distinguish between new and established patients. Third, we stated that 
our proposal would allow a large universe of claims to be utilized for 
ratesetting for each of the three newly proposed alphanumeric Level II 
HCPCS visit codes. We stated that we believe this large volume of 
claims available for ratesetting for each of the newly proposed 
alphanumeric Level II HCPCS visit codes will allow us to capture a very 
broad spectrum of cases ranging from extremely low complexity cases to 
extremely high complexity cases. We believed this large and diverse 
spectrum of clinical complexity and resource variation within the 
claims as well as the very high volume of claims that we proposed to 
use for ratesetting for the newly proposed alphanumeric Level II HCPCS 
visit new codes will allow us to have very accurate data upon which to 
develop accurate and appropriate payments. Lastly, we also stated that 
we believe that removing the differentiation among five levels of 
intensity for each visit will eliminate any incentive for hospitals to 
``upcode'' patients whose visits do not fall clearly into one category 
or another.
    For these reasons, for CY 2014, we proposed to discontinue our 
longstanding policy of recognizing five distinct visit levels for 
clinic visits and ED visits based on the existing HCPCS E/M codes, and 
instead recognize three new alphanumeric HCPCS codes for each visit 
type. Specifically, we proposed to create a new alphanumeric HCPCS G-
code for hospital use only representing any clinic visit under the OPPS 
and to assign the newly created alphanumeric clinic visit HCPCS G-code 
to its own newly created APC 0634. Using CY 2012 claims data, we 
proposed to develop CY 2014 OPPS payment rates for the new HCPCS G-code 
based on the total geometric mean cost of the levels 1 through 5 CPT E/
M codes for clinic visits currently recognized under the OPPS (CPT 
codes 99201 through 99205 and 99211 through 99215). We stated that 
while we would use data for CPT codes 99201 through 99205 and 99211 
through 99215 from

[[Page 75039]]

claims billed in CY 2012 to calculate the geometric mean cost for new 
APC 0634, we would no longer recognize those CPT codes when they appear 
on hospital claims effective January 1, 2014. We also proposed to no 
longer recognize a distinction between new and established patient 
clinic visits. Under this proposal, all clinic visits would be reported 
using the new HCPCS G-code, regardless of whether or not the patient 
has been registered as an inpatient or outpatient of the hospital 
within the 3 years prior to a visit.
    In addition, in the CY 2014 OPPS/ASC proposed rule (78 FR 43614 
through 43617), we proposed to discontinue our longstanding policy of 
recognizing five distinct visit levels for Type A ED visits and instead 
proposed to create a new alphanumeric HCPCS G-code for hospital use 
only representing any Type A ED visit under the OPPS. We proposed to 
assign the newly created alphanumeric Type A ED visit HCPCS G-code to 
its own newly created APC 0635. Using CY 2012 claims data, we proposed 
to develop CY 2014 OPPS payment rates for new HCPCS G-code based on the 
total geometric mean cost of the levels 1 through 5 CPT E/M codes for 
Type A ED visits currently recognized under the OPPS (CPT codes 99281 
through 99285). We stated that while we would use data for CPT codes 
99281 through 99285 from claims billed in CY 2012 to calculate the 
geometric mean cost for new APC 0635, we would no longer recognize 
those CPT codes when they appear on hospital claims effective January 
1, 2014. Similarly, we also proposed to discontinue our longstanding 
policy of recognizing five distinct visit levels for Type B ED visits 
and instead proposed to create a new alphanumeric HCPCS G-code 
representing all Type B ED visits under the OPPS. We proposed to assign 
the newly created alphanumeric Type B ED visit HCPCS G-code to its own 
newly created APC 0636. Using CY 2012 claims data, we proposed to 
develop CY 2014 OPPS payment rates for new HCPCS G-code based on the 
total geometric mean cost of the levels 1 through 5 HCPCS codes for 
Type B ED visits currently recognized under the OPPS (HCPCS codes G0380 
through G0384). We stated that while we would use data for HCPCS codes 
G0380 through G0384 from claims billed in CY 2012 to calculate the 
geometric mean cost for new APC 0636, we would no longer recognize 
those HCPCS codes for Type B ED visits when they appear on hospital 
claims effective January 1, 2014.
    We noted that we would use the hospital claims data for the three 
new HCPCS G-codes when available for future ratesetting. We summarized 
the proposed changes to the visit coding and payment structure in Table 
29 of the proposed rule (78 FR 43616). We welcomed public comments on 
our CY 2014 proposal to recognize a single visit level for clinic, Type 
A ED, and Type B ED visits for payment under the OPPS. We stated that 
we believe this proposal will allow us to make accurate payments for 
visits broad-scale because we will be using data from the universe of 
hospital outpatient visits, for which we have an extremely high volume 
of claims representing the entire spectrum of costs incurred by 
hospitals. Nonetheless, we indicated that we were interested in hearing 
from stakeholders regarding whether a different approach may be 
preferable to capture the resource utilization for extremely low 
complexity cases as well as extremely high complexity cases or to 
otherwise recognize a difference among visit levels. We stated that 
while we do not believe, based on our current assessment, that it is 
necessary to provide additional payment levels or carve out these cases 
to make accurate and appropriate payments for visits, we were 
interested in hearing from hospitals whether there are certain cases 
that would not be best accommodated by a single level of payment. If 
such cases exist, we welcomed stakeholder input into whether and how 
this proposal could be changed in the final rule to either make 
exceptions for or accommodate these special cases. We stated that if 
commenters provided compelling comments describing such special cases 
or the need for additional payment levels, should they exist, and if 
there are alternative policies that would more accurately and 
appropriately pay for visits, we would consider implementing a 
different policy in the final rule. We noted that, to the extent that 
commenters recommended that additional levels of payment or special 
high complexity or low complexity cases be recognized, we also would be 
interested in how we should define and differentiate those levels or 
cases.
    Comment: Commenters specifically opposed CMS' proposal to collapse 
the current five levels of ED visits into a single visit level for both 
Type A and Type B ED visits. Commenters stated that the proposed single 
payment for Type A ED and Type B ED visits captures too broad a range 
of ED visits, which could result in payment rates that are inadequate 
for treatment of beneficiaries who require higher levels of care. 
Commenters also stated that a single ED visit level would result in 
higher copayment amounts for beneficiaries receiving services 
consistent with a lower level ED visit. Commenters expressed concern 
that hospitals would pressure physicians and hospital staff to reduce 
the time in the ED to lessen the potential loss of revenues associated 
with a single level ED visit payment, potentially leading to a 
deterioration of patient care. Commenters argued that the proposed ED 
visit policy is inequitable to hospitals that consistently have a more 
complex case-mix and a greater than average utilization of the higher 
level ED visit codes, such as trauma centers, teaching hospitals, and 
hospitals that have taken steps to shift lower-acuity ED patients into 
Type B EDs or onsite or nearby urgent care clinics. Commenters urged 
CMS to exclude trauma care from any consolidation of ED payment levels 
to ensure that designated trauma centers are fairly paid for the care 
they provide. Commenters expressed reservations about a single payment 
for ED visits in light of a potential increase in ED usage and ED 
patient acuity due to newly insured individuals having access to care 
under the Affordable Care Act.
    Commenters also argued that there is a bias toward lower level 
visit code costs in calculating the geometric mean cost for the new 
collapsed visit codes as higher level visit codes are more often billed 
with separately paid procedures on the same day of service. Commenters 
expressed additional reservations with the proposed policy in light of 
their inability to conduct impact analysis on the proposed policy due 
to initial errors in the CY 2014 OPPS/ASC proposed rule data. 
Commenters also stated the proposed policy removes CMS' ability to 
track and document differences in patient acuity and is inconsistent 
with CMS' previously stated purpose in creating Medicare Severity 
Diagnosis-Related Groups (MS-DRGs) under the IPPS to account for 
differences in costs due to differences in patient severity.
    Moreover, commenters stated that the proposed policy should not be 
implemented in CY 2014 due to its interaction with CMS' proposal to 
expand packaging of services and hospitals' administrative training 
sessions currently underway to implement International Classification 
of Diseases, 10th Edition (ICD-10). Commenters asserted that the 
proposed policy would create added administrative burden as other 
payers will continue to require the reporting of the five E/M code 
levels. Commenters suggested that CMS work with the AMA to develop 
facility-specific CPT codes

[[Page 75040]]

for Type A ED and Type B ED visits and seek input from industry 
stakeholders, specifically hospital representatives, to develop 
descriptions for these new codes that allow for their consistent 
application by hospital outpatient departments. Commenters also 
recommended that CMS develop hospital-specific national guidelines for 
hospitals to report ED visits.
    Commenters stated that they did not understand why this proposal is 
necessary in light of CMS' previous statements that hospitals are 
generally billing appropriately and in a consistent manner that 
distinguishes among the different levels of visits based on the 
required hospital resources and CMS' current utilization of 
Comprehensive Error Rate Testing (CERT), Recovery Audit Contractors 
(RACs), Zone Program Integrity Contractors (ZPICs), and other methods 
of review to identify medically unnecessary services. Commenters stated 
that CMS should conduct selected focused audits in lieu of the proposed 
policy if CMS believes that hospitals are upcoding.
    Response: We appreciate all of the public comments we received on 
our proposal to collapse the current five levels of ED visits into a 
single visit level for both Type A and Type B ED visits. We 
specifically sought comment on whether there are certain high or low 
complexity cases that would not be best accommodated by a single level 
of payment. We stated in the proposed rule that, if such cases exist, 
we would welcome stakeholder input into whether and how this proposal 
could be changed in the final rule to either make exceptions for or 
accommodate these special cases. We also stated in the proposed rule 
that if commenters provided compelling comments describing such special 
cases or the need for additional payment levels, should they exist, and 
if there are alternative policies that would more accurately and 
appropriately pay for visits, we would consider implementing a 
different policy in the final rule. As discussed above, we received 
several comments that a single payment for an ED visit might 
underrepresent resources required to treat the most complex patients, 
such as trauma patients. We find this to be a compelling issue, for 
which an alternative payment structure, possibly including more than 
one payment level, may be warranted. However, at this time, additional 
study is needed to fully assess the most suitable payment structure for 
ED visits, including the particular number of visit levels that would 
not underrepresent resources required to treat the most complex 
patients, such as trauma patients. For CY 2014, we believe it is best 
to delay any change in ED visit coding while we reevaluate the most 
appropriate payment structure for Type A and Type B ED visits. We will 
maintain the current coding structure consisting of five visit levels 
for CY 2014 while we consider alternative payment structures.
    Comment: Commenters suggested the following alternatives to our 
proposed policy: One commenter requested that CMS alter its proposal 
and create one APC for Type A ED and Type B ED visits as proposed, but 
continue to allow the reporting of the current CPT E/M codes instead of 
creating new HCPCS codes. Multiple commenters suggested that CMS employ 
a three acuity level model to pay for Type A ED and Type B ED visits 
under the OPPS. Another commenter suggested CMS continue to use the 
current CPT codes for clinic E/M services but assign the CPT codes to 
one of three ED Visit APCs. One commenter suggested CMS create three 
composite ED services based on the ancillary services packaged with ED 
claim. A few commenters recommended, on a short-term basis, that CMS 
develop a set of three trauma[hyphen]specific HCPCS codes for all 
trauma patients, for whom a trauma team is activated.
    Response: We appreciate the thoughtful and detailed alternatives 
presented by commenters. We need additional time to study and fully 
consider these alternatives and other comments received with respect to 
how our proposed ED visits policy would affect payments for the most 
complex patients. We believe it is best to delay any change in ED visit 
coding while we consider further the most appropriate payment structure 
for Type A and Type B ED visits.
    Comment: Commenters generally opposed our proposal to create a 
single new alphanumeric HCPCS G-code for hospital use only representing 
all clinic visits under the OPPS and to assign the newly created 
alphanumeric clinic visit HCPCS G-code to its own newly created APC 
0634. Some commenters raised similar concerns about a single payment 
for clinic visits as they did for ED visits, although there were fewer 
objections to a single payment for clinic visits and those objections 
lacked the forcefulness and specificity of the objections to a single 
level of payment for Type A and Type B ED visits. A few commenters 
stated that, while they did not favor a single payment for clinic 
visits, given the nature of the services provided at clinic visits, a 
single payment level would be acceptable. A majority of commenters 
supported CMS' proposal to eliminate the distinction between ``new'' 
and ``established'' patient visits. As with ED visits, commenters 
stated that the proposed single clinic visit code and associated single 
payment are overly broad, which could result in payment rates that are 
inadequate for treatment of beneficiaries who require higher levels of 
care and higher copayment amounts for beneficiaries receiving lower 
level visits. Commenters expressed concern that hospitals would 
pressure physicians and hospital staff to reduce the time in clinic 
visits to lessen the potential loss of revenues associated with a 
single level clinic visit payment, potentially leading to a 
deterioration of patient care. Commenters asserted that the proposed 
policy would create added administrative burden as other payers will 
continue to require the reporting of the five E/M CPT codes to describe 
clinic visits. Commenters argued that the proposed policy is 
inequitable to many tertiary care and teaching hospitals, including 
those hospitals that consistently have a more complex case-mix and a 
greater than average utilization of the higher level E/M codes. 
Commenters also argued there is a likely bias toward lower level visit 
code costs in calculating the geometric mean cost for the new collapsed 
visit codes as higher level visit codes are more often billed with 
separately paid procedures on the same day of service. Commenters 
expressed additional reservations with the proposal in light of their 
inability to conduct impact analysis on the proposed policy due to 
initial errors in the CY 2014 OPPS/ASC proposed rule data. Commenters 
stated that the proposed policy removes CMS' ability to track and 
document differences in patient acuity and is inconsistent with CMS' 
previously stated purpose in creating MS-DRGs under the IPPS to account 
for differences in costs due to differences in patient severity. 
Moreover, commenters stated the proposed policy should not be 
implemented in CY 2014 due to its interaction with CMS' proposal to 
expand packaging and hospitals' administrative training sessions 
currently underway to implement ICD-10. Commenters suggested CMS work 
with the AMA to develop facility-specific CPT codes for E/M clinic 
visits (with no distinction between new and established patients) and 
seek input from industry stakeholders, specifically hospital 
representatives, to develop descriptions for these new codes that allow 
for their consistent application by hospital outpatient clinics. 
Commenters also recommended that CMS develop

[[Page 75041]]

hospital-specific national guidelines for hospitals to report clinic 
visits.
    Commenters expressed a lack of understanding of why this proposal 
is necessary in light of CMS' previous statements that hospitals are 
generally billing appropriately and in a consistent manner that 
distinguishes among the different levels of visits based on the 
required hospital resources and CMS' current utilization of CERT, RACs, 
ZPICs, and other methods of review to identify medically unnecessary 
services. Commenters stated that CMS should conduct selected focused 
audits in lieu of the proposed policy if CMS believes that hospitals 
are upcoding.
    Response: We appreciate all of the public comments we received on 
our proposed policy to create a single new alphanumeric HCPCS G-code 
for hospital use only representing any clinic visit under the OPPS and 
the assignment of the newly created alphanumeric clinic visit HCPCS G-
code to its own newly created APC 0634. We disagree with the commenters 
that the proposed clinic visit code is overly broad. While we agree 
that the proposed clinic APC encompasses a range of visits for 
beneficiaries with different medical issues, we believe that the 
spectrum of hospital resources provided during an outpatient hospital 
clinic visit is appropriately captured and reflected in the single 
level payment for clinic visits. We also believe that a single visit 
code is consistent with a prospective payment system, where payment is 
based on an average estimated relative cost for the service, although 
the cost of individual cases may be more or less costly than the 
average. We do not observe wide disparity among the estimated geometric 
mean costs for new or established clinic visits in our data, and there 
is significantly less disparity in estimated geometric mean costs among 
the current five clinic visit levels than there is among the five ED 
visit levels.
    We believe the proposed payment rate for APC 0634 represents an 
appropriate payment for clinic visits as it is based on the geometric 
mean costs of all visits. Although the cost for any given clinic visit 
may be higher or lower than the geometric mean cost of APC 0634, the 
payment remains appropriate to the hospital delivering a variety of 
clinic visits. The high volume of claims from every level of clinic CPT 
code that we used for ratesetting for the newly created alphanumeric 
Level II HCPCS clinic visit code allows us to have accurate data upon 
which to develop appropriate payment rates.
    With regard to specific concerns for hospitals that treat patients 
with a more complex case-mix, we note that the relatively low estimated 
cost of clinic visits overall would result in much less underpayment or 
overpayment for hospitals that may serve a population with a more 
complex overall case-mix. We also note that the range among the 
geometric mean cost of the current five clinic visit levels is much 
smaller than the range for the current five levels of ED visits. In 
addition, the commenters' support for eliminating distinctions for new 
and established patients suggests that hospitals prefer the 
administrative ease of not tracking new or established patients even 
though we make differential payment for these visits, and we observe 
differential costs for these CPT codes in our claims data.
    We disagree with the commenters' statement that there is a likely 
bias toward including more lower level visit code costs in calculating 
the geometric mean cost for the new collapsed visit codes. Commenters 
have argued that higher level visit codes are more often billed with 
separately paid procedures on the same day of service and that we are 
less likely to be able to isolate claims with a single higher level CPT 
code. For clinic visits, we observed comparable distributions of claims 
between higher and lower levels across new and established clinic visit 
CPT codes in both the single bill claims used for ratesetting and all 
claims. We concluded that the distribution of claims data among higher 
and lower level CPT codes used to establish the proposed payment rate 
for APC 0634 is comparable to the total distribution of claims among 
CPT code levels in the CY 2012 claims data in our CPT cost files. We do 
not believe that our single bill methodology biases the resulting 
geometric mean in any way.
    We disagree with commenters that our proposal for a single payment 
is contrary to CMS' stated purpose in creating MS-DRGs under the IPPS 
to account for differences in costs due to differences in patient 
severity. MS-DRGs are designed to reflect significant differences in 
resource costs for an inpatient stay. The MS-DRG classification of a 
particular discharge is based, as appropriate, on the patient's age, 
sex, principal diagnosis (that is, the diagnosis established after 
study to be chiefly responsible for causing the patient's admission to 
the hospital), secondary diagnoses, procedures performed, and discharge 
status. A single payment for a clinic visit does not pose the same 
level of financial risk. The observed cost differences among levels of 
CPT codes in the claims data are not dramatic. Further, hospitals will 
receive separate payment for many other services furnished in the same 
encounter and will not incur the same level of financial risk as for an 
inpatient stay.
    Regarding the commenters' inability to conduct impact analysis on 
our visit proposal because of some initial limited errors in the 
proposed rule payment files, we note that we released corrected data 
files on August 28, 2013, and extended the comment period to September 
16, 2013, on the technical corrections noted in the correcting document 
published in the Federal Register on September 6, 2013 (78 FR 54842). 
For a more detailed discussion of the OPPS data process, we refer 
readers to section II.A. of this final rule with comment period.
    We disagree with the commenters that hospitals would pressure 
physicians and hospital staff to furnish a diminished level of care to 
beneficiaries in an attempt to mitigate any potential loss of revenue 
associated with a single level clinic visit payment that is based on an 
average of relative costs of all clinic visit codes and is proportional 
to their appearance in the claims data. As with all prospective payment 
systems that depend upon a prospectively established payment derived 
from relative cost, less costly cases generate greater net revenue for 
the hospital than more costly cases. Payments may be greater than or 
less than the cost of any particular case. It is our belief and 
continued expectation that hospitals and physicians and other 
practitioners will furnish appropriate care to Medicare beneficiaries.
    We continue to believe discontinuing the use of the five levels of 
HCPCS visit codes for clinic visits will reduce hospitals' 
administrative burden by eliminating the need for them to develop and 
apply their own internal guidelines to differentiate among five levels 
of resource use for every clinic visit they provide. We believe the 
advantages of this reduced administrative burden outweigh any potential 
loss in CMS' ability to track and document differences in patient 
acuity for clinic visits. We note that the level of CPT code is not the 
only method for assessing patient acuity. Diagnosis coding and the type 
and frequency of other services billed on a visit claim also 
communicate patient acuity. We disagree with the commenters that 
finalization of our proposed clinic visit policy should be delayed 
because of our CY 2014 proposal to expand packaging or the presence of 
hospital training sessions to implement ICD-10 coding. We note that our 
CY 2014 OPPS packaging policies create no additional administrative

[[Page 75042]]

burden for hospital coding for visits. We continue to expect hospitals 
to correctly code for the services they furnish. We also believe that 
the combination of a single HCPCS G-code to describe all clinic visits, 
the discontinuance of the requirement that hospitals track criteria for 
billing either new or established clinic visits, and the discontinuance 
of the requirement for hospitals to distinguish different clinic visit 
levels through internal guidelines will result in significant 
administrative simplification for hospitals.
    With regard to national guidelines, we have stated that it would be 
desirable to many hospitals to have national guidelines (76 FR 74345 
through 74346). However, we also understand that it would be disruptive 
and administratively burdensome to other hospitals that have 
successfully adopted internal guidelines to implement any new set of 
national guidelines. With regard to the potential for facility-specific 
CPT codes, as we have also stated in the past (76 FR 74346), if the AMA 
were to create facility-specific CPT codes for reporting visits 
provided in HOPDs, we would consider such codes for OPPS use.
    With regard to the comment that the proposal is unexpected, each 
annual rulemaking cycle includes some proposed policy changes to the 
OPPS, and some of those proposals may be more or less predictable. We 
believe that, despite hospitals' use of internal guidelines, 
differentiating between five different clinic visit levels is 
challenging because the difference between consecutive levels is 
incremental and nuanced. A single code and a single level of payment 
for all clinic visits eliminate the difficulty of distinguishing, for 
example, a level 1 clinic visit versus a level 2, or a level 2 versus a 
level 3, etc. A single code also negates the ability or incentive for 
hospitals to ``upcode'' patients whose visits do not fall clearly into 
one category or another, and removes any financial advantage to any 
hospitals that would engage in upcoding in the future.
    Comment: Commenters suggested the following alternatives to our 
proposed policy: One commenter suggested that CMS alter its proposal 
and create one APC for each type of E/M visit per encounter as 
proposed, but continue to allow the reporting of the current CPT E/M 
codes instead of creating new HCPCS codes. Multiple commenters 
suggested that CMS employ a three acuity level model to pay for clinic 
visits under the OPPS. Another commenter suggested that CMS continue to 
use the current CPT codes for clinic E/M services but assign the CPT 
codes to one of two Clinic Visit APCs.
    Response: We appreciate the thoughtful and detailed suggestions 
presented by the commenters. We continue to believe that creating a new 
HCPCS code is more appropriate than maintaining the current CPT coding 
and then creating a separate payment. Separate CPT codes would continue 
to require guidelines. It also would be more difficult to eliminate the 
distinction between new and established clinic visits while continuing 
to recognize CPT codes that make that distinction. With regard to 
creating three APCs rather than one, we do not believe this achieves 
the incentive for efficiency associated with a single clinic visit 
code, and that three APCs would maintain some of the same incentives in 
the current five levels of APCs. At this time we believe that 
collapsing the existing five levels of clinic visit codes into one new 
alphanumeric HCPCS G-code and assigning this code to new APC 0634 is 
the optimal OPPS payment policy for clinic visits.
    After consideration of the public comments we received, we are 
finalizing our proposal to create a new alphanumeric HCPCS code, G0463 
(Hospital outpatient clinic visit for assessment and management of a 
patient), for hospital use only representing any clinic visit under the 
OPPS and to assign new HCPCS code G0463 to new APC 0634. We also are 
finalizing our proposal to use CY 2012 claims data to develop CY 2014 
OPPS payment rates for the new HCPCS code G0463 based on the total 
geometric mean cost of the levels one through five CPT E/M codes for 
clinic visits currently recognized under the OPPS (CPT codes 99201 
through 99205 and 99211 through 99215). In addition, we are finalizing 
our proposal to no longer recognize a distinction between new and 
established patient clinic visits.
    We are not finalizing our proposal for CY 2014 to discontinue our 
longstanding policy of recognizing five distinct visit levels for Type 
A ED visits and to create a new alphanumeric HCPCS G-code for hospital 
use only representing any Type A ED visit under the OPPS. Similarly, we 
are not finalizing our proposal for CY 2014 to discontinue our 
longstanding policy of recognizing five distinct visit levels for Type 
B ED visits and to create a new alphanumeric HCPCS G-code for hospital 
use only representing any Type B ED visit under the OPPS. In addition, 
we are not finalizing our proposal to assign the newly created 
alphanumeric Type A ED visit HCPCS G-code to its own newly created APC 
0635, nor are we finalizing our proposal to assign the newly created 
alphanumeric Type B ED visit HCPCS G-code to its own newly created APC 
0636. Instead, we will continue to use our existing methodology to 
recognize the existing CPT codes for Type A ED visits as well as the 
five HCPCS codes that apply to Type B ED visits, and establish the CY 
2014 OPPS payment under our established standard process (77 FR 68399 
through 68404). These codes and their APC assignments for CY 2013 
compared to their APC assignments for CY 2014 are depicted below in 
Table 42.

[[Page 75043]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.343

    We intend to further explore the issues described above related to 
ED visits, for example, concerns about excessively costly patients, 
such as trauma patients, and potential alternatives that commenters 
provided to address this issue. We may propose changes to the coding 
and APC assignments for ED visits in future rulemaking.

C. Payment for Critical Care Services

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43616 through 43617), 
we proposed to continue the methodology established in the CY 2011 
OPPS/ASC final rule with comment period for calculating a payment rate 
for critical care services that includes packaged payment of ancillary 
services. For CY 2010 and in prior years, the AMA CPT Editorial Panel 
defined critical care CPT codes 99291 (Critical care, evaluation and 
management of the critically ill or critically injured patient; first 
30-74 minutes) and 99292 (Critical care, evaluation and management of 
the critically ill or critically injured patient; each additional 30 
minutes (List separately in addition to code for primary service)) to 
include a wide range of ancillary services such as electrocardiograms, 
chest X-rays, and pulse oximetry. As we have stated in manual 
instruction, we expect hospitals to report in accordance with CPT 
guidance unless we instruct otherwise. For critical care in particular, 
we instructed hospitals that any services that the CPT Editorial Panel 
indicates are included in the reporting of CPT code 99291 (including 
those services that would otherwise be reported by and paid to 
hospitals using any of the CPT codes specified by the CPT Editorial 
Panel) should not be billed separately. Instead, hospitals were 
instructed to report charges for any services provided as part of the 
critical care services. In establishing payment rates for critical care 
services and other services, CMS packages the costs of certain items 
and services separately reported by HCPCS codes into payment for 
critical care services and other services, according to the standard 
OPPS methodology for packaging costs (Medicare Claims Processing 
Manual, Pub. 100-04, Chapter 4, Section 160.1).
    For CY 2011, the AMA CPT Editorial Panel revised its guidance for 
the critical care codes to specifically state that, for hospital 
reporting purposes, critical care codes do not include the specified 
ancillary services. Beginning in CY 2011, hospitals that report in 
accordance with the CPT guidelines should report all of the ancillary 
services and their associated charges separately when they are provided 
in conjunction with critical care. Because the CY 2011 payment rate for 
critical care services was based on hospital claims data from CY 2009, 
during which time hospitals would have reported

[[Page 75044]]

charges for any ancillary services provided as part of the critical 
care services, we stated in the CY 2011 OPPS/ASC final rule with 
comment period that we believed it was inappropriate to pay separately 
in CY 2011 for the ancillary services that hospitals may now report in 
addition to critical care services (75 FR 71988). Therefore, for CY 
2011, we continued to recognize the existing CPT codes for critical 
care services and established a payment rate based on historical data, 
into which the cost of the ancillary services was intrinsically 
packaged. We also implemented claims processing edits that 
conditionally package payment for the ancillary services that are 
reported on the same date of service as critical care services in order 
to avoid overpayment. We noted in the CY 2011 OPPS/ASC final rule with 
comment period that the payment status of the ancillary services would 
not change when they are not provided in conjunction with critical care 
services. We assigned status indicator ``Q3'' (Codes That May Be Paid 
Through a Composite APC) to the ancillary services to indicate that 
payment for these services is packaged into a single payment for 
specific combinations of services and made through a separate APC 
payment or packaged in all other circumstances, in accordance with the 
OPPS payment status indicated for status indicator ``Q3'' in Addendum 
D1 to the CY 2011 OPPS/ASC final rule with comment period. The 
ancillary services that were included in the definition of critical 
care prior to CY 2011 and that are conditionally packaged into the 
payment for critical care services when provided on the same date of 
service as critical care services for CY 2011 were listed in Addendum M 
to that final rule with comment period.
    Because the CY 2012 costs for critical care services were based 
upon CY 2010 claims data, which reflected the CPT billing guidance that 
was in effect prior to CY 2011, in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74343 through 74344), we continued the 
methodology established in the CY 2011 OPPS/ASC final rule with comment 
period of calculating a payment rate for critical care services based 
on our historical claims data, into which the cost of the ancillary 
services is intrinsically packaged for CY 2012. We also continued to 
implement claims processing edits that conditionally package payment 
for the ancillary services that are reported on the same date of 
service as critical care services in order to avoid overpayment.
    As we discussed in the CY 2013 OPPS/ASC final rule with comment 
period, the CY 2011 hospital claims data on which the CY 2013 payment 
rates are based reflect the first year of claims billed under the 
revised CPT guidance to allow the reporting of all the ancillary 
services and their associated charges separately when they are provided 
in conjunction with critical care (77 FR 68402). Because our policy to 
establish relative payment weights based on geometric mean cost data 
for CY 2013 represented a change from our historical practice to base 
payment rates on median costs, and because we had hospital claims data 
for the first time reflecting the revised coding guidance for critical 
care, we reviewed the CY 2011 hospital claims data available for the CY 
2013 OPPS/ASC final rule with comment period and determined that the 
data showed increases in both the geometric mean and median line item 
costs as well as the geometric mean and median line item charges for 
CPT code 99291, when compared to CY 2010 hospital claims data. 
Specifically, we noted that the geometric mean and median line item 
costs increased 13 percent and 16 percent, respectively, and the 
geometric mean and median line item charges increased 11 percent and 14 
percent, respectively. Additionally, when compared to CY 2010 hospital 
claims data, CY 2011 hospital claims data showed no substantial change 
in the ancillary services that were presented on the same claims as 
critical care services, and also showed continued low volumes of many 
ancillary services. We stated in the CY 2013 OPPS/ASC final rule with 
comment period that, had the majority of hospitals changed their 
billing practices to separately report and charge for the ancillary 
services formerly included in the definition of critical care CPT codes 
99291 and 99292, we would have expected to see a decrease in the costs 
and charges for these CPT codes, and a significant increase in 
ancillary services reported on the same claims. We indicated that the 
lack of a substantial change in the services reported on critical care 
claims, along with the increases in the line item costs and charges for 
critical care services, strongly suggested that many hospitals did not 
change their billing practices for CPT code 99291 following the 
revision to the CPT coding guidance effective January 1, 2011.
    In light of not having claims data to support a significant change 
in hospital billing practices, we stated in the CY 2013 OPPS/ASC final 
rule with comment period that we continued to believe that it is 
inappropriate to pay separately in CY 2013 for the ancillary services 
that hospitals may now report in addition to critical care services. 
Therefore, for CY 2013, we continued our CY 2011 and CY 2012 policy to 
recognize the existing CPT codes for critical care services and 
establish a payment rate based on historical claims data. We also 
continued to implement claims processing edits that conditionally 
packaged payment for the ancillary services that were reported on the 
same date of service as critical care services in order to avoid 
overpayment. We stated that we would continue to monitor the hospital 
claims data for CPT code 99291 in order to determine whether revisions 
to this policy are warranted based on changes in hospitals' billing 
practices.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43617), we stated that 
when compared to CY 2011 hospital claims data used for the CY 2013 OPPS 
ratesetting, CY 2012 hospital claims data used for the CY 2014 OPPS 
ratesetting showed increases in the geometric mean line item costs as 
well as the geometric mean line item charges for CPT code 99291, which 
continue to suggest that hospitals did not change their billing 
practices for CPT code 99291 following the revision to the CPT coding 
guidance effective January 1, 2011. In light of not having claims data 
to support a significant change in hospital billing practices, we 
stated that we continue to believe that it is inappropriate to pay 
separately in CY 2014 for the ancillary services that hospitals may now 
report in addition to critical care services. Therefore, for CY 2014, 
we proposed to continue our CY 2011, CY 2012, and CY 2013 policy to 
recognize the existing CPT codes for critical care services and 
establish a payment rate based on historical claims data. We also 
proposed to continue to implement claims processing edits that 
conditionally package payment for the ancillary services that are 
reported on the same date of service as critical care services in order 
to avoid overpayment.
    Comment: Commenters recommended that CMS, in setting the payment 
rate for packaging ancillary services into the critical care services, 
establish a methodology that ensures that multiple cost report revenue 
centers are included in the review.
    Response: The methodology that the commenters recommended is 
consistent with the methodology we already have in place. As discussed 
in section II.A.1.c. of this final rule with comment period, we 
calculate hospital-specific overall ancillary CCRs and hospital-
specific departmental CCRs for each

[[Page 75045]]

hospital for which we have claims data. We apply 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. Therefore, we base our cost estimation of each packaged ancillary 
service on the most specific cost center to which the revenue code 
reported with that service maps. We then package the cost that we 
estimate as a result of that process into the geometric mean cost 
calculation for critical care.
    After consideration of the public comments received, we are 
finalizing our proposal to continue our CY 2011, CY 2012, and CY 2013 
policy to recognize the existing CPT codes for critical care services 
and establish a payment rate based on historical claims data. We also 
are finalizing our proposal to continue to implement claims processing 
edits that conditionally package payment for the ancillary services 
that are reported on the same date of service as critical care services 
in order to avoid overpayment.
    We will continue to monitor the hospital claims data for CPT code 
99291 in order to determine whether revisions to this policy are 
warranted based on changes in hospitals' billing practices.

VIII. Payment for Partial Hospitalization Services

A. Background

    Partial hospitalization is an intensive outpatient program of 
psychiatric services provided to patients as an alternative to 
inpatient psychiatric care for individuals who have an acute mental 
illness. 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 partial hospitalization program (PHP) is a 
program furnished by a hospital to its outpatients or by a community 
mental health center (CMHC) (as defined in subparagraph (B)), and 
``which is a distinct and organized intensive ambulatory treatment 
service offering less than 24-hour-daily care other than in an 
individual's home or in an inpatient or residential setting.'' Section 
1861(ff)(3)(B) of the Act defines a community mental health center for 
purposes of this benefit.
    Section 1833(t)(1)(B)(i) of the Act provides the Secretary with the 
authority to designate the OPD services to be covered under the OPPS. 
The Medicare regulations that implement this provision specify, under 
42 CFR 419.21, that payments under the OPPS will be made for partial 
hospitalization services furnished by CMHCs as well as Medicare Part B 
services furnished to hospital outpatients designated by the Secretary, 
which include partial hospitalization services (65 FR 18444 through 
18445).
    Section 1833(t)(2)(C) of the Act, in pertinent part, requires the 
Secretary to ``establish relative payment weights for covered OPD 
services (and any groups of such services described in subparagraph 
(B)) based on median (or, at the election of the Secretary, mean) 
hospital costs'' using data on claims from 1996 and data from the most 
recent available cost reports. In pertinent part, subparagraph (B) 
provides that the Secretary may establish groups of covered OPD 
services, within a classification system developed by the Secretary for 
covered OPD services, so that services classified within each group are 
comparable clinically and with respect to the use of resources. In 
accordance with these provisions, we have developed the PHP APCs. 
Section 1833(t)(9)(A) of the Act requires the Secretary to ``review not 
less often than annually and revise the groups, the relative payment 
weights, and the wage and other adjustments described in 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.''
    Because a day of care is the unit that defines the structure and 
scheduling of partial hospitalization services, we established a per 
diem payment methodology for the PHP APCs, effective for services 
furnished on or after July 1, 2000 (65 FR 18452 through 18455). Under 
this methodology, the median per diem costs have been used to calculate 
the relative payment weights for PHP APCs.
    From CY 2003 through CY 2006, the median per diem costs for CMHCs 
fluctuated significantly from year to year, while the median per diem 
costs for hospital-based PHPs remained relatively constant. We were 
concerned that CMHCs may have increased and decreased their charges in 
response to Medicare payment policies. Therefore, we began efforts to 
strengthen the PHP benefit through extensive data analysis and policy 
and payment changes finalized in the CY 2008 OPPS/ASC final rule with 
comment period (72 FR 66670 through 66676). We made two refinements to 
the methodology for computing the PHP median: the first remapped 10 
revenue codes that are common among hospital-based PHP claims to the 
most appropriate cost centers; and the second refined our methodology 
for computing the PHP median per diem cost by computing a separate per 
diem cost for each day rather than for each bill. We refer readers to a 
complete discussion of these refinements in 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, including a two-tiered payment approach for PHP services under 
which we paid one amount for days with 3 services (APC 0172 Level I 
Partial Hospitalization) and a higher amount for days with 4 or more 
services (APC 0173 Level II Partial Hospitalization). We refer readers 
to section X.B. of the CY 2009 OPPS/ASC final rule with comment period 
(73 FR 68688 through 68693) for a full discussion of the two-tiered 
payment system. In addition, for CY 2009, we finalized our policy to 
deny payment for any PHP claims submitted for days when fewer than 3 
units of therapeutic services are provided (73 FR 68694).
    Furthermore, for CY 2009, we revised the regulations at 42 CFR 
410.43 to codify existing basic PHP patient eligibility criteria and to 
add a reference to current physician certification requirements under 
42 CFR 424.24 to conform our regulations to our longstanding policy (73 
FR 68694 through 68695). These changes have helped to strengthen the 
PHP benefit. We also revised the partial hospitalization benefit to 
include several coding updates. We refer readers to section X.C.3. of 
the CY 2009 OPPS/ASC final rule with comment period (73 FR 68695 
through 68697) for a full discussion of these requirements.
    For CY 2010, we retained the two-tiered payment approach for PHP 
services and used only hospital-based PHP data in computing the APC per 
diem payment rates. We used only hospital-based PHP data because we 
were concerned about further reducing both PHP APC per diem payment 
rates

[[Page 75046]]

without knowing the impact of the policy and payment changes we made in 
CY 2009. Because of the 2-year lag between data collection and 
rulemaking, the changes we made in CY 2009 were reflected for the first 
time in the claims data that we used to determine payment rates for the 
CY 2011 rulemaking (74 FR 60556 through 60559).
    In CY 2011, in accordance with section 1301(b) of the Health Care 
and Education Reconciliation Act of 2010 (HCERA 2010), we amended the 
description of a PHP in our regulations to specify that a PHP must be a 
distinct and organized intensive ambulatory treatment program offering 
less than 24-hour daily care ``other than in an individual's home or in 
an inpatient or residential setting.'' In addition, in accordance with 
section 1301(a) of HCERA 2010, we revised the definition of a CMHC in 
the regulations to conform to the revised definition now set forth 
under section 1861(ff)(3)(B) of the Act. We discussed our finalized 
policies for these two provisions of HCERA 2010 in section X.C. of the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71990).
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 
71994), we also established four separate PHP APC per diem payment 
rates, two for CMHCs (for Level I and Level II services) and two for 
hospital-based PHPs (for Level I and Level II services), based on each 
provider's own unique data. As stated in the CY 2011 OPPS/ASC proposed 
rule (75 FR 46300) and the final rule with comment period (75 FR 
71991), for CY 2011, using CY 2009 claims data, CMHC costs had 
significantly decreased again. We attributed the decrease to the lower 
cost structure of CMHCs compared to hospital-based PHP providers, and 
not the impact of the CY 2009 policies. CMHCs have a lower cost 
structure than hospital-based PHP providers, in part, because the data 
showed that CMHCs generally provide fewer PHP services in a day and use 
less costly staff than hospital-based PHPs. Therefore, it was 
inappropriate to continue to treat CMHCs and hospital-based providers 
in the same manner regarding payment, particularly in light of such 
disparate differences in costs. We also were concerned that paying 
hospital-based PHPs at a lower rate than their cost structure reflects 
could lead to hospital-based PHP closures and possible access problems 
for Medicare beneficiaries because hospital-based PHPs are located 
throughout the country and, therefore, offer the widest access to PHP 
services. In contrast, CMHC-based PHPs are largely concentrated in 
certain geographical areas with particular prevalence in Florida, 
Texas, and Louisiana. Creating the four payment rates (two for CMHCs 
and two for hospital-based PHPs) based on each provider's data 
supported continued access to the PHP benefit, while also providing 
appropriate payment based on the unique cost structures of CMHCs and 
hospital-based PHPs. In addition, separation of data by provider type 
was supported by several hospital-based PHP commenters who responded to 
the CY 2011 OPPS/ASC proposed rule (75 FR 71992).
    For CY 2011, we instituted a 2-year transition period for CMHCs to 
the CMHC APC per diem payment rates based solely on CMHC data. For CY 
2011, under the transition methodology, CMHC PHP APCs Level I and Level 
II per diem costs were calculated by taking 50 percent of the 
difference between the CY 2010 final hospital-based PHP median costs 
and the CY 2011 final CMHC median and then adding that number to the CY 
2011 final CMHC median. A 2-year transition under this methodology 
moved us in the direction of our goal, which is to pay appropriately 
for PHP services based on each provider type's data, while at the same 
time allowing providers time to adjust their business operations and 
protect access to care for beneficiaries. We also stated that we would 
review and analyze the data during the CY 2012 rulemaking cycle and, 
based on these analyses, we might further refine the payment mechanism. 
We refer readers to section X.B. of the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 71991 through 71994) for a full discussion.
    After publication of the CY 2011 OPPS/ASC final rule with comment 
period, a CMHC and one of its patients filed an application for a 
preliminary injunction, challenging the OPPS payment rates for PHP 
services provided by CMHCs in CY 2011 as adopted in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 71995). We refer readers to 
the court case, Paladin Cmty. Mental Health Ctr. v. Sebelius, No. 10-
949, 2011 WL 3102049 (W.D.Tex. 2011), aff'd, No. 11-50682, 2012 WL 
2161137 (5th Cir. June 15, 2012) (Paladin). The plaintiffs in the 
Paladin case challenged the agency's use of cost data derived from both 
hospitals and CMHCs in determining the relative payment weights for the 
OPPS payment rates for PHP services furnished by CMHCs, alleging that 
section 1833(t)(2)(C) of the Act requires that such relative payment 
weights be based on cost data derived solely from hospitals. As 
discussed above, section 1833(t)(2)(C) of the Act requires CMS to 
``establish relative payment weights for covered OPD services (and any 
groups of such services . . .) . . . based on . . . hospital costs.'' 
Numerous courts have held that ``based on'' does not mean ``based 
exclusively on.'' On July 25, 2011, the District Court dismissed the 
plaintiffs' complaint and application for a preliminary injunction for 
lack of subject-matter jurisdiction, which the plaintiffs appealed to 
the United States Court of Appeals for the Fifth Circuit. On June 15, 
2012, the Court of Appeals affirmed the District Court's dismissal for 
lack of subject-matter jurisdiction and found that the Secretary's 
payment rate determinations for PHP services are not a facial violation 
of a clear statutory mandate. (Paladin at *6).
    For CY 2012, as discussed in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74348 through 74352), we determined the relative 
payment weights for PHP services provided by CMHCs based on data 
derived solely from CMHCs and the relative payment weights for 
hospital-based PHP services based exclusively on hospital data. The 
statute is reasonably interpreted to allow the relative payment weights 
for the OPPS payment rates for PHP services provided by CMHCs to be 
based solely on CMHC data and relative payment weights for hospital-
based PHP services to be based exclusively on hospital data. Section 
1833(t)(2)(C) of the Act requires the Secretary to ``establish relative 
payment weights for covered OPD services (and any groups of such 
services described in subparagraph (B)) based on . . . hospital 
costs.'' In pertinent part, subparagraph (B) provides that ``the 
Secretary may establish groups of covered OPD services . . . so that 
services classified within each group are comparable clinically and 
with respect to the use of resources.'' In accordance with subparagraph 
(B), we developed the PHP APCs, as set forth in Sec.  419.31 of the 
regulations (65 FR 18446 and 18447; 63 FR 47559 through 47562 and 47567 
through 47569). As discussed above, PHP services are grouped into APCs.
    Based on section 1833(t)(2)(C) of the Act, we believe that the word 
``establish'' can be interpreted as applying to APCs at the inception 
of the OPPS in 2000 or whenever a new APC is added to the OPPS. In 
creating the original APC for PHP services (APC 0033), we did 
``establish'' the initial relative payment weight for PHP services, 
provided in both hospital-based and CMHC-based settings, only on the 
basis of hospital data. Subsequently, from CY 2003 through CY 2008, the 
relative payment weights for

[[Page 75047]]

PHP services were based on a combination of hospital and CMHC data. For 
CY 2009, we established new APCs for PHP services based exclusively on 
hospital data. Specifically, we adopted a two-tiered APC methodology 
(in lieu of the original APC 0033) under which CMS paid one rate for 
days with 3 services (APC 0172) and a different payment rate for days 
with 4 or more services (APC 0173). These two new APCs were established 
using only hospital data. For CY 2011, we added two new APCs (APCs 0175 
and 0176) for PHP services provided by hospitals and based the relative 
payment weights for these APCs solely on hospital data. APCs 0172 and 
0173 were designated for PHP services provided by CMHCs and were based 
on a mixture of hospital and CMHC data. As the Secretary argued in the 
Paladin case, the courts have consistently held that the phrase ``based 
on'' does not mean ``based exclusively on.'' Thus, the relative payment 
weights for the two APCs for PHP services provided by CMHCs in CY 2011 
were ``based on'' hospital data, no less than the relative payment 
weights for the two APCs for hospital-based PHP services.
    Although we used hospital data to establish the relative payment 
weights for APCs 0033, 0172, 0173, 0175, and 0176 for PHP services, we 
believe that we have the authority to discontinue the use of hospital 
data in determining the OPPS relative payment weights for PHP services 
provided by CMHCs. Other parts of section 1833(t)(2)(C) of the Act make 
plain that the data source for the relative payment weights is subject 
to change from one period to another. Section 1833(t)(2)(C) of the Act 
provides that, in establishing the relative payment weights, ``the 
Secretary shall [ ] us[e] data on claims from 1996 and us[e] data from 
the most recent available cost reports.'' We used 1996 data (in 
addition to 1997 data) in determining only the original relative 
payment weights for 2000. In the ensuing calendar year updates, we 
continually used more recent cost report data.
    Moreover, section 1833(t)(9)(A) of the Act requires the Secretary 
to ``review not less often than annually and revise the groups, the 
relative payment weights, and the wage and other adjustments described 
in 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.'' For purposes of the CY 2012 
update, we exercised our authority under section 1833(t)(9)(A) of the 
Act to change the data source for the relative payment weights for PHP 
services provided by CMHCs based on ``new cost data, and other relevant 
information and factors.''
    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, on geometric means 
rather than on the medians. For CY 2013, we established the four PHP 
APC per diem payment rates based on geometric mean cost levels 
calculated using the most recent claims data for each provider type. We 
refer readers to the CY 2013 OPPS/ASC final rule with comment period 
for a more detailed discussion (77 FR 68406 through 68412).

B. PHP APC Update for CY 2014

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43618 through 43622), 
for CY 2014, we proposed 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. We 
computed proposed CMHC PHP APC geometric mean per diem costs for Level 
I (3 services per day) and Level II (4 or more services per day) PHP 
services using only CY 2012 CMHC claims data, and proposed hospital-
based PHP APC geometric mean per diem costs for Level I and Level II 
PHP services using only CY 2012 hospital-based PHP claims data. These 
proposed geometric mean per diem costs that were shown in Table 30 of 
the CY 2014 OPPS/ASC proposed rule (78 FR 43620) are reflected in Table 
42a below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.344

    For CY 2014, the proposed geometric mean per diem costs for days 
with 3 services (Level I) was approximately $95 for CMHCs and 
approximately $213 for hospital-based PHPs. The proposed geometric mean 
per diem costs for days with 4 or more services (Level II) was 
approximately $106 for CMHCs and approximately $215 for hospital-based 
PHPs.
    The CY 2014 proposed geometric mean per diem costs for CMHCs 
calculated under the proposed CY 2014 methodology using CY 2012 claims 
data have remained relatively constant when compared to the CY 2013 
final geometric mean per diem costs for CMHCs established in the CY 
2013

[[Page 75048]]

OPPS/ASC final rule with comment period (77 FR 68412), with proposed 
geometric mean per diem costs for Level I PHP services increasing from 
approximately $87 to approximately $95 for CY 2014, and proposed 
geometric mean per diem costs for Level II PHP services decreasing from 
approximately $113 to approximately $106 for CY 2014.
    The CY 2014 proposed geometric mean per diem costs for hospital-
based PHPs calculated under the proposed CY 2014 methodology using CY 
2012 claims data show more variation when compared to the CY 2013 final 
geometric mean per diem costs for hospital-based PHPs, with proposed 
geometric mean per diem costs for Level I PHP services increasing from 
approximately $186 to approximately $213 for CY 2014, and proposed 
geometric mean per diem costs for Level II PHP services decreasing from 
approximately $235 to approximately $215 for CY 2014.
    The proposed CY 2014 geometric mean per diem costs for the PHP APCs 
were shown in Tables 31 and 32 of the CY 2014 OPPS/ASC proposed rule 
(78 FR 43620 through 43621). We invited public comments on these 
proposals.
    Comment: Many commenters supported the continued distinction 
between APC payments for PHP services provided by CMHCs and APC 
payments for PHP services provided by hospital-based PHPs. These 
commenters believed that the cost structures of the two provider types 
are significantly different and, therefore, the payments should be 
different. Conversely, a few commenters stated that they do not like 
the distinction between provider types. Instead, these commenters 
believed that CMHCs and hospital-based PHPs should receive the same 
payment rates. The commenters believed that the ratesetting methodology 
used to establish payment rates for PHP services also has fueled a 
fundamental shift in payments away from less expensive CMHCs to more 
expensive hospital-based PHPs, resulting in overall higher CMS 
expenditures for the same services, which is discriminating against 
CMHCs that provide identical PHP services.
    One commenter did not agree with CMS' statement that ``CMHCs have a 
lower cost structure than hospital-based PHP providers, in part because 
the data showed that CMHCs provide fewer PHP services in a day and use 
less costly staff than hospital-based PHPs.'' The commenter stated that 
CMS implies that ``CMHCs provide less valuable services than hospital-
based PHPs, hire less qualified staff, and overall perform very poorly 
compared to hospital-based PHPs.''
    Some commenters also continued to support CMS' creation of two-
tiered payments for partial hospitalization services. They believed 
that these changes to the PHP payment structure have been a positive 
step in addressing the twin goals of ensuring long-term stability and 
improving the accuracy of payments.
    Response: We understand the concerns raised by the commenters 
regarding the differences between CMHC PHP APC per diem payment rates 
and hospital-based PHP APC per diem payment rates. We are not 
discriminating against CMHCs or any other health care provider, nor are 
we encouraging the use of a specific provider type which would lead to 
a shift in payments; we are calculating the payment rates for PHP 
services based on the claims and cost report data submitted by our 
providers. We continue to believe that it is important to calculate PHP 
APC per diem payment rates based on the data for each type of provider 
in order to appropriately pay for PHP services. We also believe that 
the CMHC and the hospital-based PHP APC per diem payment rates 
accurately reflect the claims and cost report data of CMHCs and 
hospital-based providers, respectively. The PHP APC per diem payment 
rates are directly related to the accuracy of the claims and cost 
report data submitted by providers. Therefore, it is imperative that 
providers submit accurate claims and cost reports in order for the 
payment rates to most accurately reflect the costs to providers. The 
resulting PHP APC per diem payment rates reflect the cost of what 
providers expend to maintain such programs.
    CMHCs and hospital-based PHPs continue to show significant 
differences in their costs. As we explained in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74347), we attributed the 
decrease in costs to CMHCs having a lower cost structure than hospital-
based PHP providers, in part, because the data showed (and continue to 
show) that CMHCs provide fewer PHP services in a day and use less 
costly staff than hospital-based PHPs. In other words, hospital-based 
providers have traditionally provided more services than CMHCs during a 
PHP day. Providing fewer services during a PHP day results in less 
overhead expense for the provider; that is, less time the provider 
needs to pay staff, less time the provider needs to heat the building, 
and less time the provider needs to light the building. Therefore, 
providing fewer PHP services during a day directly contributes to a 
lower overall cost structure. We did not intend to imply that, in 
comparison to hospital-based PHPs, CMHCs provide inferior, less 
valuable or poor quality services or are poor performers; we were 
merely stating the differences in these providers' cost structures 
based on cost analysis. In light of these differences in cost 
structures between provider types, it is inappropriate to treat CMHCs 
and hospital-based PHP providers in the same manner. We have been 
concerned that paying hospital-based PHPs at a lower payment rate than 
their cost structure reflects could lead to closures and possible 
access problems for hospital-based programs providing services to 
Medicare beneficiaries, given that hospital-based PHPs offer the widest 
access to PHP services because they are located across the country. At 
the same time, we believe it is inappropriate to overpay CMHCs in 
comparison to their cost structures.
    We appreciate the commenters who continue to support the two-tiered 
payments for PHP services. We believe that paying providers based on 
the four PHP APC per diem payment rates supports continued access to 
the PHP benefit, while also providing appropriate payment based on the 
unique cost structures of CMHCs and hospital-based PHPs.
    Finally, we consistently monitor the OPPS to identify potential 
refinements that would improve the accuracy and stability of the 
payment system. We will continue to monitor the impact of our payment 
policies on the PHP benefit and its providers.
    Comment: A few commenters expressed concern regarding the adverse 
impact the proposed payment rates for CY 2014 would have on CMHC 
providers across the country. One commenter stated that since the 
adoption of the provider-specific structure in CY 2011, payment for 
partial hospitalization services provided by CMHCs has decreased by 
approximately 50 percent. This commenter indicated that, in CY 2013, 
the per diem payment rates for PHP services provided by CMHCs decreased 
by another 4.4 percent as a result of changing the methodology from 
median-based relative payment weights to geometric mean-based relative 
payment weights. The commenter also stated that, for CY 2014, CMS is 
proposing to further decrease payments for PHP services provided by 
CMHCs by approximately 3.8 percent. A few commenters stated that many 
Medicare CMHCs have closed over the years and they believed that 
payment rate reductions are a primary reason for the closures. These 
commenters pointed out

[[Page 75049]]

that another reduction in the per diem payment rates may result in more 
CMHC closures, therefore decreasing the number of providers and 
available resources for the most disadvantaged portion of the 
beneficiary population.
    Commenters also expressed concern regarding the decrease in payment 
rates for Level II hospital-based PHP services. One commenter stated 
that the proposed 9.2 percent decrease in the Level II per diem payment 
rate for hospital-based PHPs would result in inadequate payment for 
hospitals' direct and indirect costs and that any further reductions to 
Medicare payment rates will put their program in jeopardy. A few 
commenters requested that CMS suspend the proposed PHP per diem payment 
rates for CY 2014 and, instead, maintain the CY 2013 PHP per diem 
payment rates for CY 2014.
    Response: We understand the concerns raised by the commenters that 
a reduction in payment rates for CY 2014 will not adequately pay for 
their costs to provide PHP services and may result in closures for both 
CMHCs and hospital-based PHPs. However, based on the final geometric 
mean per diem costs for CY 2014, CMHCs will receive an increase in 
geometric mean per diem costs from CY 2013 to CY 2014 for APC 0172 
Level I (3 service days) from $87.39 to $99.39 and the geometric mean 
per diem costs for APC 0173 Level II (4 or more service days) will 
basically remain the same ($112.12 for CY 2014 compared to $112.82 for 
CY 2013). Hospital-based PHPs also will receive an increase in 
geometric mean per diem costs from CY 2013 to CY 2014 for APC 0175 
Level I (3 service days) from $185.90 to $190.82. Only the geometric 
mean per diem costs for APC 0176 Level II (4 or more service days) will 
decrease from CY 2013 to CY 2014 from $234.81 to $214.39. As discussed 
in the prior response, we believe that the CMHC and the hospital-based 
PHP APC per diem payment rates accurately reflect the claims and cost 
report data of the CMHCs and hospital-based providers, respectively. 
The resulting PHP APC per diem payment rates and the APC payment 
structures reflect the cost of what providers expend to maintain such 
programs. Therefore, it is unclear to us why this would lead to program 
or business closures. As we stated in the CY 2012 OPPS/ASC final rule 
with comment period (76 FR 74350), the closure of PHPs may be due to a 
number of reasons, such as poor business management or marketing 
decisions, competition, oversaturation of certain geographic areas, and 
Federal and State fraud and abuse efforts, among others. However, we 
take seriously the commenters' concerns that a reduction in PHP APC per 
diem payment rates could erode the viability of PHPs and make it more 
difficult for beneficiaries to receive needed mental health services. 
Therefore, we monitor facility closings and openings to make sure that 
access issues do not exist, and we will continue to do so in the 
future.
    In response to the comment that the payment rates for PHP services 
have decreased as a result of changing the methodology from median-
based relative payment weights to geometric mean-based relative payment 
weights, we have made changes throughout the history of the OPPS with a 
goal of deriving more accurate information from available claims and 
cost report data, as well as increasing the benefits of using a metric 
that more accurately describes the range of costs associated with 
providing services and, thus, resulting in the most appropriate 
payments. We continue to believe that basing the relative payment 
weights on geometric mean costs promotes better stability in the 
payment system by making OPPS payments more reflective of the range of 
costs associated with providing services. Therefore, we believe that 
using geometric mean costs to calculate the relative payment weights 
for the OPPS represents an improvement to our cost estimation process 
and leads to the establishment of relative payment weights that are 
more reflective of service cost patterns.
    Finally, in response to commenters requesting that we suspend the 
proposed CY 2014 PHP payment rates and maintain the CY 2013 PHP APC 
payment rates, as we discussed above, we cannot establish payment rates 
that do not accurately reflect current claims and cost report data. 
Therefore, we are not suspending implementation of the CY 2014 PHP APC 
per diem payment rates.
    Comment: Several commenters indicated that the proposed PHP per 
diem payment rates for CY 2014 show again that payment rates continue 
to materially fluctuate from one year to another. The commenters 
expressed concern regarding the variation in payment from year to year 
for this critically important service and noted that significant 
fluctuations from year to year make budgeting difficult for hospital-
based PHPs. Another commenter asked if the decrease in the APC 0176 
payment rate is due solely to the costs associated with the services, 
or if the decrease is compounded by the other significant changes in 
the proposed rule--namely, a significant change in the packaging of 
services, which will shift significant dollars around in the OPPS 
system.
    Response: We recognize the commenters' concern regarding variance 
in payment rates from year to year. We believe that payment rates for 
PHP services fluctuate from year to year based on a variety of factors, 
including direct changes to the PHP APC per diem payment rate, changes 
to the OPPS, and provider-driven changes.
    Over the past several years, we have made changes to PHP APC per 
diem payment rates to more accurately align the payments with costs. 
The changes have included establishing separate APCs and associated per 
diem payment rates for CMHCs and hospital-based providers based on each 
provider's costs, under which we pay one amount for days with 3 
services and another amount for days with 4 or more services.
    Additionally, the OPPS is a budget neutral payment system, and as a 
result, changes in the relative payment weights associated with certain 
services may affect those of other services in the payment system. 
Further, changes in payment policy also may have effects on the payment 
rates each year. For example, basing the relative payment weights on 
geometric mean costs rather than median costs affected the payment 
rates.
    Finally, provider-driven changes affect the payment rates. The 
case-mix and number of services provided, as well as changes to the 
charging structure and the variety of hospitals and CMHCs providing the 
services, contribute to changes in the payment rates. Providers may 
choose to update or maintain their charges each year based on a variety 
of business reasons, but these changes to charges often vary depending 
on the different services each provider furnishes as well as the 
business decisions of the provider. Therefore, a provider's decision to 
change its mix of services or to change its charges and clinical 
practice for some services also contributes to the fluctuation in 
payment rates. Therefore, both policy and data changes influence the 
changes in the PHP APC payment rates, as they do for all services each 
year.
    In response to the commenter who asked if the decrease in the 
payment rate for APC 0176 is due solely to the costs associated with 
PHP services, or if the decrease is compounded by other significant 
changes in the proposed rule, the decrease is due to both. There is a 
decrease in the Level II PHP hospital-based geometric mean per diem 
costs of approximately $21 from the CY 2013 Level II hospital-based PHP 
per diem amount of $235 to the CY 2014 Level II

[[Page 75050]]

hospital-based PHP per diem amount of approximately $214 before any 
changes that may result from relative payment weights associated with 
other services in the OPPS. That said, we believe that the payment rate 
for APC 0176 continues to accurately reflect the costs associated with 
providing PHP services in the hospital setting.
    We will continue to explore ways to minimize fluctuations in the 
PHP payment rates because we agree that a high level of volatility is 
not desirable. However, we also believe that changes in estimated costs 
from one year to the next are appropriate in a payment system that is 
annually updated to more accurately estimate the cost of a service upon 
which the relative payment weights are based.
    In summary, after consideration of the public comments we received, 
we are finalizing our CY 2014 proposal, without modification, to update 
the four PHP APC per diem payment rates based on geometric mean cost 
levels calculated using the most recent claims data for each provider 
type. The updated PHP APCs geometric mean per diem costs for PHP 
services that we are finalizing for CY 2014 are shown in Tables 43 and 
44 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.345

C. Discussion of Possible Future Initiatives, Request for Public 
Comments, and Summary of Public Comments Received

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43621 through 43622), 
we noted that we are considering a number of possible future 
initiatives that may help to ensure the long-term stability of PHPs and 
further improve the accuracy of payment for PHP services. Along with 
our broad, ongoing objectives of ensuring stability of the PHP benefit 
and promoting payment accuracy for PHPs, we want to ensure that PHPs 
are used by individuals who are specifically in need of such services. 
The PHP benefit was designed to assist individuals with an acute 
exacerbation of a psychiatric illness to manage debilitating symptoms 
and prevent the need for admission and readmission into hospitals. 
Accordingly, we stated that we are considering a number of possible 
future modifications to certain aspects of the PHP benefit. We did not 
propose new Medicare policy in this discussion of possible future 
modifications in the CY 2014 OPPS/ASC proposed rule. Instead, we 
requested public comments on possible future initiatives.
    For example, under the current methodology, we use the most recent 
claims data to compute geometric mean per diem costs for Level I (3 
services per day) and Level II (4 or more services per day) PHP 
services for CMHCs and for hospital-based PHPs. We are interested in 
examining the payment structure for PHP services to determine whether 
alternative methodologies to pay for PHP services would reduce 
unnecessary care while maintaining or increasing the quality of care 
provided. We invited public comments on alternative payment 
methodologies.
    Another area in which we solicited public comments is whether 
payment based on an episode of care, or a per diem similar to those 
used in the inpatient psychiatric facility (IPF) PPS, would result in 
more appropriate payment for PHP services than the current payment 
structure. The IPF PPS is a per diem prospective payment system for 
inpatient psychiatric hospital services furnished in psychiatric 
hospitals, and psychiatric units in acute care hospitals and critical 
access hospitals. The IPF PPS base rate is adjusted to account for 
patient and facility characteristics that contribute to higher costs 
per day, including age, diagnosis-related group assignment, 
comorbidities, days of the stay, geographic wage area, rural location, 
teaching status, cost of living for IPFs located in Alaska and Hawaii, 
and the presence of a qualifying emergency

[[Page 75051]]

department. The IPF PPS methodology includes a payment provision for 
interrupted stays, additional payment for outlier cases, and a per 
treatment payment for electroconvulsive therapy (ECT) treatments. For 
detailed information regarding the implementation of the IPF PPS, we 
refer readers to the FY 2005 IPF PPS final rule published in the 
Federal Register on November 15, 2004 (69 FR 66922). To find additional 
information about the IPF PPS, we refer readers to the CMS Web site at: 
http://www.cms.hhs.gov/inpatientpsychfacilpps.
    Comment: Commenters primarily opposed changing the PHP payment 
methodology from a per diem based calculation to an episode of care 
based calculation. We received several public comments requesting a 
single payment for PHP services, as well as several public comments 
stating that there is a need for more research to determine the best 
method of payment. Mainly, commenters suggested that CMS take three 
steps: (1) Establish a ratesetting task force to develop a new payment 
rate methodology that captures all relevant data and reflects the real 
costs to providers to deliver these services; (2) examine the Medicare 
mental health benefits; and (3) encourage legislative changes to expand 
mental health services. These commenters stressed that any proposed 
change to the payment methodology for PHP services must involve 
relevant stakeholders in Federal agencies (such as SAMHSA) as well as 
representatives from CMHCs and hospital providers and associations.
    Response: We appreciate the commenters' input and suggestions and 
will take them under advisement for future refinements.
    Comment: Commenters indicated that the Medicare PHP benefit is 
critical in keeping beneficiaries out of emergency rooms and in the 
community, and urged CMS to proceed cautiously in proposing reforms 
that may erode what is already a fragile safety net of providers. The 
commenters believed that any changes to the PHP payment methodology 
should not be considered in isolation. The commenters suggested that 
CMS look at Medicare benefits for psychiatric services overall and take 
the necessary steps to develop coverage of a comprehensive set of 
services across all settings of care that meet the needs of the 
population.
    Several commenters cited a recent report sponsored by the National 
Association of Psychiatric Health Systems which they said found that 
the benefits derived from patients participating in PHPs extend the 
time between readmissions. According to their analysis, the time-to-
readmission ratio for these Medicare beneficiaries was 131 days versus 
59 days between admissions for those beneficiaries who did not 
participate in PHPs.
    Many commenters representing hospitals and hospital associations 
indicated that it would be premature to assume that a change in the 
payment methodology would achieve the goals that CMS has described in 
the proposed rule without statutory changes to the existing PHP 
benefit. A few commenters indicated that in the absence of any relevant 
payment research or substantive proposals, they could not comment on 
whether an episode of care or a per diem based payment for the PHP 
benefit would result in more suitable payment rates, indicating that 
additional research is an important next step before determining 
whether or not either approach would have the intended effects and is 
sustainable.
    One commenter believed that improvements in PHP models can be made 
and suggested that CMS consider other treatment approaches that are 
less rigid than the current PHP guidelines, especially the required 
number of service hours and days of treatment required per week. The 
commenter believed that more flexibility in this area is necessary to 
accommodate patients' work and family schedules. For example, a model 
of intensive outpatient services estimated at 3 hours per day, 3 days 
per week would allow more flexibility to meet patient needs clinically 
and personally. The commenter did not believe that the application of 
an episode of care payment methodology for PHP services would be 
appropriate due to the vagueness of the period and the intensity and 
uniqueness of each patient's illness. However, the commenter supported 
CMS' efforts to communicate with stakeholders on possible future 
initiatives for PHP services.
    Commenters also stated that an enhanced per diem payment rate that 
reflects the costs of treating patients with more complicated clinical 
needs similar to the IPF PPS would also be worth considering.
    Many commenters representing hospital associations indicated that 
it would be useful to evaluate the way in which overall Medicare mental 
health benefits are structured. The commenters believed that, compared 
to the scope of services many private health insurers cover, Medicare 
benefits are much narrower. The commenters stated, for instance, that 
Medicare beneficiaries are currently limited to only 190 days of 
inpatient psychiatric hospital care in their lifetime. According to the 
commenters, no other Medicare inpatient hospital service has this type 
of arbitrary cap on benefits. In addition, the commenters stated that, 
rather than covering the full continuum of behavioral health care 
services, Medicare currently covers only inpatient psychiatric care, 
hospital-based and CMHC-based PHP services, and office-based services. 
The commenters further stated that the PHP benefit is drawn very 
narrowly so as to only cover care for the most acutely ill patients who 
would otherwise require hospitalization. As a result, according to the 
commenters, the parts of the continuum missing from current Medicare 
benefits include formal coverage of intensive outpatient care, 
residential treatment, psychosocial rehabilitation, and care 
management. The commenters believed that this makes it difficult for 
providers to provide Medicare beneficiaries with the appropriate 
services at the right level and time.
    These commenters stated that broadening the Medicare mental health 
benefit structure to encompass the other components of the continuum 
would require statutory changes. The commenters believed that making 
minimal changes, such as revising the PHP payment structure, will not 
address the larger limitations of the Medicare benefit design.
    One commenter recommended that a single provider-based payment 
structure be established for PHP services that reflects the intensity 
of services that people with serious mental illnesses generally require 
because this benefit is meant to substitute for inpatient care or as a 
step-down level of care. To achieve long-term stability and payment 
accuracy, the commenter suggested that CMS maintain the per diem 
payment methodology. The commenter believed that an episode-of-care 
payment methodology is more appropriate for the typical and predictable 
treatment of physical ailments and issues, but not for mental health 
treatment.
    One commenter recommended that CMS establish the same payment rates 
and two-tiered payment structure for all providers with no 
differentiation between payment rates for hospital-based PHP services 
and payments rates for PHP services provided by CMHCs. The commenter 
also urged CMS to establish quality and outcomes criteria to evaluate 
performance, influence future ratesetting, and provide rewards to 
individual providers for outstanding quality and outcomes while at the 
same time keeping their cost under control.

[[Page 75052]]

    Response: We appreciate the commenters' suggestions and 
recommendations for strengthening the PHP benefit and payment 
structure. We will take them under advisement for any future 
refinements.
    Another area on which we solicited public comments was physician 
certification/recertification that an individual would require 
inpatient psychiatric care in the absence of PHP services. In order for 
a hospital or CMHC to be paid for partial hospitalization services 
furnished to a Medicare beneficiary, a physician must certify (and 
recertify when such services are furnished over a period of time), 
among other things, that the individual would require inpatient 
psychiatric care in the absence of such services. In addition, an 
individualized written plan of treatment for furnishing such services 
must be established and reviewed periodically by a physician, and such 
services must be furnished while the individual is under the care of a 
physician. For more details, we refer readers to 42 CFR 424.24(e).
    Current regulations specify that a physician recertification must 
be signed by a physician who is treating the patient and has knowledge 
of the patient's response to treatment. A recertification is required 
as of the 18th day of partial hospitalization services. Subsequent 
recertifications are required at intervals established by the provider, 
but no less frequently than every 30 days. We invited public comments 
on whether the current requirement under Sec.  424.24(e)(3)(ii) of the 
regulations, which requires the first recertification by the physician 
to be as of the 18th day of partial hospitalization services, reflects 
current PHP treatment practices. Specifically, we stated that we were 
interested in whether the first recertification date should be changed 
to some other standard that accords with best practices and why.
    Comment: Several commenters indicated that they had no recommended 
changes to physician certification and recertification requirements and 
did not believe that an alternative recommendation is warranted at this 
time. The commenters indicated that they did not believe that there was 
any reason to change the 18-day recertification requirement and the 
``no longer than 30 days'' length of time requirement for a subsequent 
recertification. In addition, the commenters indicated that their 
organization member hospitals have not identified these requirements as 
a problem, nor are they aware of any best practices that would suggest 
the need for such a change in the requirements.
    Response: We thank the commenters for their input and suggestions 
and will take them under advisement for future refinements
    With respect to the individualized written plan of treatment for 
furnishing partial hospitalization services, as discussed above, a 
physician must establish and periodically review the written plan of 
treatment. The written plan of treatment sets forth the physician's 
diagnosis, the type, amount, duration, and frequency of the services, 
and the treatment goals under the written plan. The physician 
determines the frequency and duration of the PHP services taking into 
account accepted norms of medical practice and a reasonable expectation 
of improvement in the patient's condition. (We refer readers to Sec.  
424.24(e)(2) of the regulations.) We indicated that we are interested 
in what requirements should be included in the written plan of 
treatment to better direct PHP resources toward appropriate discharge 
and follow-up with appropriate support services. Specifically, we 
invited public comments on two issues: (1) the best way that discharge 
from a PHP could be expedited for those individuals no longer at risk 
of inpatient psychiatric hospitalization; and (2) whether the written 
plan of treatment requirements under Sec.  424.24(e)(2)(i)(C), which 
require that the written plan of treatment set forth the treatment 
goals, should be revised to require that specific actions be taken by 
the physician and/or staff to assist a beneficiary in transitioning 
from a PHP to a lower level of care. For example, we are interested in 
whether the written plan of treatment should require that, upon 
discharge, patients have written instructions that include:
     A full list of their medications, dosages and any 
necessary prescriptions;
     Their next scheduled appointment with a psychiatrist or 
qualified practitioner who may bill for his or her professional 
services under Medicare Part B, including the phone number, address, 
and appointment date and time;
     A confirmed place to live in a stable environment with 
support services; and
     Other care coordination information.
    Comment: With regard to additions to the written plan of treatment, 
several commenters supported including in the written plan of treatment 
a full list of patients' medications, dosages, and any necessary 
prescriptions as well as written notice of the next scheduled 
appointment with a psychiatrist or qualified practitioner who may bill 
for his or her professional services under Medicare Part B, including 
the phone number, address and appointment date and time. However, the 
commenters did not believe that it would be feasible for a PHP to 
provide a ``confirmed place to live in a stable environment with 
support services'' for its patients. The commenters noted that among 
the admission criteria for a PHP is the requirement that the patient 
``have an adequate support system to sustain/maintain themselves 
outside the partial hospitalization program.'' The commenters believed 
that, while a PHP may be able to provide some limited assistance for a 
patient to maintain and enhance his or her stable environment, the 
program cannot ensure the sustainability of the environment or keep a 
patient enrolled in a PHP until that environment can be established.
    The commenters pointed out that ensuring this type of environment 
would require intensive case management. The commenters believed that, 
if intensive case management was included in the PHP benefit available 
to Medicare beneficiaries, it would be a helpful enhancement to the 
program. Therefore, the commenters urged CMS to continue stakeholder 
engagement to discuss the goals of additional documentation 
requirements within the written plan of treatment.
    Several commenters suggested additional requirements for the 
written plan of treatment to better direct PHP resources to ensure 
appropriate discharges and follow-up services, such as expedited 
discharge for patients who are no longer at risk for inpatient 
psychiatric hospitalizations, and specific actions to assist patients 
at discharge, including providing written instructions for medications, 
documentation of the next appointment with the appropriate Medicare 
Part B participating practitioner, confirmation of a place of 
residence, and other care coordination information. One commenter 
stated that the PHP medical necessity criterion should include care for 
the acute exacerbation of a psychiatric condition and care for 
prevention of admission or readmission to the hospital. One commenter 
suggested that any written treatment plan for a patient receiving PHP 
services include goals that will curtail the patient's need for a 
higher level of care through adherence to the PHP's attendance 
requirements and his or her prescribed medication regimen, identify the 
patient's symptoms and prognosis for improvement, and take into 
consideration the patient's coping skills. The commenter stated that 
the treatment plan must be concise. Another commenter agreed that the 
diagnosis of

[[Page 75053]]

a patient enrolled in a PHP should be consistent with those 
attributable to persons with chronic and persistent mental illnesses 
and included in the written treatment plan for PHP services.
    Response: We thank the commenters for their input and suggestions 
and will take them under advisement for future refinements.
    We also stated that we were interested in receiving public feedback 
about quality measures for a PHP. Quality health care is a high 
priority for CMS. We implement quality initiatives to ensure quality 
health care for Medicare beneficiaries through accountability and 
public disclosure. We use quality measures under various quality 
initiatives, which utilize pay-for-reporting and public reporting 
mechanisms. We requested public comments on quality measures for PHP 
services for future consideration. Specifically, if we were to 
establish quality measures for PHP services and require quality data 
reporting, what should be included in those measures? In addition, 
should the quality measures be similar or identical to those measures 
established for IPFs under the IPF Quality Reporting (IPFQR) Program?
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), we stated that 
we would appreciate feedback on all of these areas for future 
consideration and invited public comments on these issues.
    Comment: Many commenters indicated that they have long supported 
the quality measures that are now included as part of the IPFQR 
program, and noted that the measures are well tested, reliable, and 
valid and have broad stakeholder support. The commenters asked that CMS 
initiate a conversation with the measure developers to determine if any 
of these measures would be suitable for the outpatient setting. In 
particular, the commenters indicated that the care transition measure 
(HBIPS 7) and the antipsychotic medication measures (HBIPS 4 and 5) are 
likely candidates and worthy of further discussion. Other commenters 
also suggested that CMS consider the HBIPS 6 measure regarding 
continuity of care and the HBIPS 1 measure regarding admission 
screening for violence risk, substance use, psychological trauma 
history, and patient strengths. These commenters stated that preserving 
the continuity of care between the inpatient and outpatient setting is 
an important goal, and indicated that starting with these inpatient 
measures may prove informative as CMS moves forward in considering 
alternative measures for the hospital outpatient department setting.
    Many commenters urged CMS to work collaboratively with the 
Technical Expert Panel that it has established to develop, test, and 
fully vet any measure concepts before proceeding with measure 
development. Many commenters supported measuring the quality and safety 
of behavioral health care across the continuum of care and indicated 
that it may be appropriate to implement measures for PHPs. However, the 
commenters stated that any measures selected to assess the quality of 
PHP services should be specified, tested and National Quality Forum 
(NQF)-endorsed for that care setting, and reviewed by the Measure 
Applications Partnership (MAP) before the measures are proposed for 
inclusion under a quality reporting program for PHP services provided 
on an outpatient basis. One commenter supported the development of 
quality measures for PHP services and recommended that CMS work with 
SAMHSA on their proposed National Behavioral Health Quality Framework 
that was recently released for public comment, to determine how this 
framework might apply or be modified to apply to quality measures for 
PHP services.
    Another commenter stated that the quality indicators CMS are 
seeking must be very specific and relate to the patient's current 
outpatient visit. The commenter suggested the following quality 
indicators and discharge requirements for PHP services in order to 
evaluate performance: (1) Access--The number of program days of 
scheduled operation from the time of a request for services to the 
first scheduled day of service; (2) Treatment Intensity--The percentage 
of scheduled attendance consistent with a minimum attendance average of 
4 days per calendar week over an episode of care; (3) Discharge 
Planning--The percentage of patients with a scheduled follow-up 
appointment within 14 days after the date of discharge (as needed); and 
(4) Continuity of Care--The percentage of post-discharge continuity of 
care plans provided to the next level of care providers upon discharge.
    Another commenter suggested that, instead of calculating the PHP 
APC per diem payment rates using claims data, CMS should use the 
quality of the provided services to base payments, including record 
reviews, denials due to lack of medical necessity or inadequate 
documentation, site visits, interviews with patients, and most 
importantly patient outcomes. The commenter stated that rewarding 
providers for higher quality care as measured by selected standards 
instead of rewarding providers for increasing the cost of the services 
provided is a better way to improve the quality of any service. The 
commenter further stated that establishing quality measures will 
support constructive changes throughout the payment system and will 
encourage performance improvements by all providers (regardless of 
setting--CMHC or hospital outpatient department). The commenter 
believed that value-based purchasing incentives (rather than antiquated 
payment methodologies involving cost-based purchasing) is more 
appropriate to improve the quality of care provided.
    Response: We thank the commenters for their input and suggestions 
and will take them under advisement for future refinements.
    We appreciate the wide range of comments we received from health 
and behavioral health care associations, hospitals, providers and 
professionals interested in future initiatives related to partial 
hospitalization services. We will take them into consideration for 
further rulemaking to strengthen the PHP benefit and payment structure.

D. Separate Threshold for Outlier Payments to CMHCs

    As discussed in the CY 2004 OPPS final rule with comment period (68 
FR 63469 through 63470), after examining the costs, charges, and 
outlier payments for CMHCs, we believed that establishing a separate 
OPPS outlier policy for CMHCs would be appropriate. A CMHC-specific 
outlier policy would direct OPPS outlier payments towards genuine cost 
of outlier cases, and address situations where charges were being 
artificially increased to enhance outlier payments. We created a 
separate outlier policy that would be specific to the estimated costs 
and OPPS payments provided to CMHCs. We note that, in the CY 2009 OPPS/
ASC final rule with comment period, we established an outlier 
reconciliation policy to comprehensively address charging aberrations 
related to OPPS outlier payments (73 FR 68594 through 68599). 
Therefore, beginning in CY 2004, we designated a portion of the 
estimated OPPS outlier target amount 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.
    The 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. In contrast, in CY 2003, more than $30 
million was paid to CMHCs in outlier payments. We

[[Page 75054]]

believe that this difference in outlier payments indicates that the 
separate outlier threshold for CMHCs has been successful in keeping 
outlier payments to CMHCs in line with the percentage of OPPS payments 
made to CMHCs.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), we proposed to 
continue designating a portion of the estimated 1.0 percent outlier 
target amount specifically for CMHCs, consistent with the percentage of 
projected payments to CMHCs under the OPPS in CY 2014, excluding 
outlier payments. CMHCs are projected to receive 0.07 percent of total 
OPPS payments in CY 2014, excluding outlier payments. Therefore, we 
proposed to designate 0.0016 percent of the estimated 1.0 percent 
outlier target amount for CMHCs, and establish a threshold to achieve 
that level of outlier payments. Based on our simulations of CMHC 
payments for CY 2014, we proposed to continue to set the threshold for 
CY 2014 at 3.40 times the highest CMHC PHP APC payment rate (that is, 
APC 0173 (Level II Partial Hospitalization)). We stated that we 
continue to believe that this approach would neutralize the impact of 
inflated CMHC charges on outlier payments and better target outlier 
payments to those truly exceptionally high-cost cases that might 
otherwise limit beneficiary access. In addition, we proposed to 
continue to apply the same outlier payment percentage that applies to 
hospitals. Therefore, for CY 2014, we proposed to continue to pay 50 
percent of CMHC per diem costs over the threshold. In section II.G. of 
the CY 2014 OPPS/ASC proposed rule (78 FR 43622), for the hospital 
outpatient outlier payment policy, we proposed to set a dollar 
threshold in addition to an APC multiplier threshold. Because the PHP 
APCs are the only APCs for which CMHCs may receive payment under the 
OPPS, we would not expect to redirect outlier payments by imposing a 
dollar threshold. Therefore, we did not propose to set a dollar 
threshold for CMHC outlier payments.
    In summary, we proposed to establish that if a CMHC's cost for 
partial hospitalization services, paid under either APC 0172 or APC 
0173, exceeds 3.40 times the payment rate for APC 0173, the outlier 
payment would be calculated as 50 percent of the amount by which the 
cost exceeds 3.40 times the APC 0173 payment rate. We invited public 
comments on these proposals.
    Comment: A few commenters stated that no changes should be made to 
outlier payments for CMHCs.
    Response: We appreciate the commenters' input.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal to set a separate outlier threshold for 
CMHCs. As discussed in section II.G. of this final rule with comment 
period, using more recent data for this final rule with comment period, 
we set the target for hospital outpatient outlier payments at 1.00 
percent of total estimated OPPS payments. We allocated a portion of the 
1.00 percent, an amount equal to 0.16 percent of outlier payments or 
0.0016 percent of total estimated OPPS payments to CMHCs for PHP 
outlier payments. For CY 2014, as proposed, we are setting the CMHC 
outlier threshold at 3.40 multiplied by the APC 0173 payment amount and 
the CY 2014 outlier percentage applicable to costs in excess of the 
threshold at 50 percent. In other words, if a CMHC's cost for partial 
hospitalization services, paid under either APC 0172 or APC 0173, 
exceeds 3.40 times the payment rate for APC 0173, the outlier payment 
will be calculated as 50 percent of the amount by which the cost 
exceeds 3.40 times the APC 0173 payment rate.

IX. Procedures That Will Be Paid Only as Inpatient Procedures

A. Background

    We refer readers to the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74352 through 74353) for a full historical discussion of 
our longstanding policies on how we identify procedures that are 
typically provided only in an inpatient setting (referred to as the 
inpatient list) and, therefore, will not be paid by Medicare under the 
OPPS; and on the criteria that we use to review the inpatient list each 
year to determine whether or not any procedures should be removed from 
the list.

B. Changes to the Inpatient List

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43622), for the CY 
2014 OPPS, we proposed to use the same methodology (described in the 
November 15, 2004 final rule with comment period (69 FR 65835)) of 
reviewing the current list of procedures on the inpatient list to 
identify any procedures that may be removed from the list. The 
established criteria upon which we make such a determination are as 
follows:
    1. Most outpatient departments are equipped to provide the services 
to the Medicare population.
    2. The simplest procedure described by the code may be performed in 
most outpatient departments.
    3. The procedure is related to codes that we have already removed 
from the inpatient list.
    4. A determination is made that the procedure is being performed in 
numerous hospitals on an outpatient basis.
    5. A determination is made that the procedure can be appropriately 
and safely performed in an ASC, and is on the list of approved ASC 
procedures or has been proposed by us for addition to the ASC list.
    Using this methodology, we did not identify any procedures that 
potentially could be removed from the inpatient list for CY 2014. 
Therefore, we proposed to not remove any procedures from the inpatient 
list for CY 2014.
    Comment: Several commenters requested that CMS remove CPT codes 
37182 (Insertion of transvenous intrahepatic portosystemic shunt(s) 
(TIPS) (includes venous access, hepatic and portal vein 
catheterization, portography with hemodynamic evaluation, intrahepatic 
tract formation/dilatation, stent placement and all associated imaging 
guidance and documentation); 37183 (Revision of transvenous 
intrahepatic portosystemic shunt(s) (TIPS) (includes venous access, 
hepatic and portal vein catheterization, portography with hemodynamic 
evaluation, intrahepatic tract recanulization/dilatation, stent 
placement and all associated imaging guidance and documentation); 54411 
(Removal and replacement of a multi-component inflatable penile 
prosthesis through an infected field at the same operative session); 
and 54417 (Removal and replacement of a non-inflatable (semi-rigid) or 
inflatable (self-contained) penile prosthesis through an infected field 
at the same operative session) from the CY 2014 inpatient list based on 
their own experience, specialty society recommendation, or designation 
of a procedure as safe in the outpatient setting under one of the many 
clinical guidelines available.
    Response: We reevaluated data on CPT codes 37182, 37183, 54411, and 
54417 using recent utilization data and further clinical review 
performed by CMS medical advisors. As a result of the reevaluation, we 
have determined that these procedures can be safely performed only in 
the inpatient setting. We are not removing them from the inpatient list 
for CY 2014.
    Comment: Some commenters requested that CMS add CPT codes 44202 
(Laparoscopy, surgical; enterectomy, resection of small intestine, 
single resection and anastomosis), 44203 (Laparoscopy, surgical; each 
additional small intestine

[[Page 75055]]

resection and anastomosis), 44204 (Laparoscopy, surgical; colectomy, 
partial, with anastomosis); 44205 (Laparoscopy, surgical; colectomy, 
partial, with removal of terminal ileum with ileocolostomy), 44206 
(Laparoscopy, surgical; colectomy, partial, with end colostomy and 
closure of distal segment (Hartmann type procedure)), 44207 
(Laparoscopy, surgical; colectomy, partial, with anastomosis, with 
coloproctostomy (low pelvic anastomosis)), 44208 (Laparoscopy, 
surgical; colectomy, partial, with anastomosis, with coloproctostomy 
(low pelvic anastomosis) with colostomy), and 44213 (Laparoscopy, 
surgical, mobilization (take-down) of splenic flexure performed in 
conjunction with partial colectomy (List separately in addition to 
primary procedure)) to the inpatient list.
    Response: We reevaluated data on CPT codes 44206, 44207, 44208, and 
44213 using recent utilization data and further clinical review 
performed by CMS medical advisors. As a result of the reevaluation, we 
agree with the commenters that these procedures can be safely performed 
only in the inpatient setting. Therefore, we are adding CPT codes 
44206, 44207, 44208, and 44213 to the inpatient list. We note that CPT 
codes 44202, 44203, 44204, and 44205 are currently assigned to the 
inpatient list.
    Comment: Other commenters requested that CMS add CPT codes 33233 
(Removal of permanent pacemaker pulse generator only), 33234 (Removal 
of transvenous pacemaker electrode(s): single lead system, atrial or 
Ventricular), 33235 (Removal of transvenous pacemaker electrode(s): 
dual lead system), 33241 (Removal of pacing cardioverter defibrillator 
pulse generator only), and 33244 (Removal of single or dual chamber 
pacing cardioverter-defibrillator electrodes; by transvenous 
extraction) to the inpatient list.
    Response: We reevaluated data on CPT codes 33233, 33234, 33235, 
33241, and 33244 using recent utilization data and further clinical 
review performed by CMS medical advisors. As a result of the 
reevaluation, we determined that these five procedures can be safely 
performed in the outpatient setting. Therefore, we are not adding CPT 
codes 33233, 33234, 33235, 33241, and 33244 to the inpatient list for 
CY 2014.
    Comment: A few commenters requested that the inpatient list be 
eliminated in its entirety.
    Response: We continue to believe that the inpatient only 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 we are 
not eliminating the inpatient only list at this time. We believe that 
there are many surgical procedures that cannot be safely performed on a 
typical Medicare beneficiary in the hospital outpatient setting. 
Therefore, it would be inappropriate for us to assign them separately 
payable status indicators and establish payment rates in the OPPS.
    Comment: One commenter recommended that CMS remove the fourth 
criterion, ``A determination is made that the procedure is being 
performed in numerous hospitals on an outpatient basis,'' to determine 
whether codes potentially could be removed from the inpatient list 
because it will be difficult, if not impossible, to meet this 
criterion.
    Response: We disagree with the commenter that this criterion is 
impossible to meet and note that the criterion has been a part of our 
longstanding and established methodology for identifying any procedures 
that potentially could be removed from the inpatient list for a number 
of years without significant concern raised by public commenters. We 
also remind the commenter that removal from the inpatient list does not 
necessarily require that all five criteria be satisfied. It is possible 
that a procedure could be removed from the inpatient list even if only 
a subset of the five criteria is satisfied for a particular service. 
Therefore, we do not find reason to remove the fourth criterion from 
our established methodology for identifying any procedures that 
potentially could be removed from the inpatient list. If this were the 
case for a service (even though it may appear unlikely), the service 
may be a good candidate for removal from the inpatient list.
    After consideration of the public comments we received, we are 
finalizing our proposal to continue to use the methodology described in 
the November 15, 2004 final rule with comment period to identify any 
procedure that may be removed from the inpatient list, and are 
modifying our proposal for procedures on the inpatient list for CY 2014 
by adding CPT codes 44206, 44207, 44208, and 44213 to the CY 2014 
inpatient only list.
    The procedures that we are adding to the inpatient only list for CY 
2014 and their CPT codes, long descriptors, and status indictors are 
displayed in Table 45 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.346

[[Page 75056]]

    The complete list of codes that we will be paid by Medicare in CY 
2014 only as inpatient procedures is included as Addendum E to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).

X. Nonrecurring Policy Changes

A. Supervision of Hospital Outpatient Therapeutic Services

1. Enforcement Instruction for the Supervision of Outpatient 
Therapeutic Services in CAHs and Certain Small Rural Hospitals
    In the CY 2009 OPPS/ASC proposed rule and final rule with comment 
period (73 FR 41518 through 41519 and 73 FR 68702 through 68704, 
respectively), we clarified that direct supervision is required for 
hospital outpatient therapeutic services covered and paid by Medicare 
in hospitals, as well as in provider-based departments of hospitals, as 
set forth in the CY 2000 OPPS final rule with comment period (65 FR 
18525). In the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60575 through 60591), we finalized a technical correction to the title 
and text of the applicable regulations at 42 CFR 410.27 to clarify that 
this standard applies in CAHs as well as hospitals. In response to 
concerns expressed by the hospital community, in particular CAHs and 
small rural hospitals, that they would have difficulty meeting this 
standard, on March 15, 2010, we instructed all Medicare contractors not 
to evaluate or enforce the supervision requirements for therapeutic 
services provided to outpatients in CAHs from January 1, 2010 through 
December 31, 2010, while the agency revisited the supervision policy 
during the CY 2011 OPPS/ASC rulemaking cycle.
    Due to continued concerns expressed by CAHs and small rural 
hospitals, we extended this notice of nonenforcement (``enforcement 
instruction'') as an interim measure for CY 2011, and expanded it to 
apply to small rural hospitals having 100 or fewer beds (75 FR 72007). 
We continued to consider the issue further in our annual OPPS notice 
and comment rulemaking, and implemented an independent review process 
in 2012 to obtain advice from the Hospital Outpatient Payment Panel 
(the Panel) on this matter (76 FR 74360 through 74371). Under this 
process used since CY 2012, the Panel considers and advises CMS 
regarding stakeholder requests for changes in the required level of 
supervision of individual hospital outpatient therapeutic services. In 
addition, we extended the enforcement instruction the past 2 years 
(through CY 2012 and CY 2013) to provide hospitals with adequate 
opportunity to become familiar with the new independent review process 
and submit evaluation requests, and to meet the required supervision 
levels for all hospital outpatient therapeutic services (we refer 
readers to 76 FR 74371 and 77 FR 68425). In the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68426), we stated that we expect CY 
2013 to be the final year that the enforcement instruction would be in 
effect, as during this year there would be additional opportunities for 
stakeholders to bring their issues to the Panel, and for the Panel to 
evaluate and provide us with recommendations on those issues. The 
current enforcement instruction is available on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html?redirect=/HospitalOutpatientPPS/01_
overview.asp.
    In CY 2012 and CY 2013, the Panel met and considered several 
requests from CAHs and other stakeholders for changes in the required 
level of supervision for observation and other services. Based on the 
Panel's recommendations, we modified our supervision requirements to 
provide that most of the services considered may be furnished under 
general supervision, in accordance with applicable Medicare regulations 
and policies. These decisions are posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf.
    We believe the independent Panel review advisory process has proved 
an effective means for the hospital community to identify hospital 
outpatient therapeutic services that can safely be furnished under 
general supervision, where the supervising practitioner does not have 
to be immediately available in person to provide assistance and 
direction. Therefore, as we discussed in the CY 2014 OPPS/ASC proposed 
rule (78 FR 43623), we believe it is appropriate to allow the 
enforcement instruction to expire at the end of CY 2013, to ensure the 
quality and safety of hospital and CAH outpatient therapeutic services 
paid by Medicare. We stated in the proposed rule that, for CY 2014, we 
anticipated allowing the enforcement instruction to expire, such that 
all outpatient therapeutic services furnished in hospitals and CAHs 
would require a minimum of direct supervision unless the service is on 
the list of services that may be furnished under general supervision or 
is designated as a nonsurgical extended duration therapeutic service 
(the list of services is available on the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf). 
In the proposed rule, we stated that we were interested in receiving 
public comments on any potential impacts on access to care and quality 
of care for specific services that may result from allowing the 
enforcement instruction to expire at the end of CY 2013. We requested 
public comments on specific services for which CAHs and small rural 
hospitals anticipate difficulty furnishing the required direct 
supervision, including specific factors that may contribute to the lack 
of available staff.
    Comment: Most commenters urged CMS to extend the direct supervision 
enforcement instruction for at least one more year in order to study 
the possible unintended consequences on Medicare beneficiary access to 
care and, at the same time, to develop policies that exempt CAHs and 
small, rural PPS hospitals from the requirement for direct supervision. 
The commenters stated that some small rural hospitals and CAHs have 
insufficient staff available to furnish direct supervision in CY 2014. 
The primary contributing factors cited were difficulty recruiting 
physician and nonphysician practitioners to practice in rural areas, 
and a desire by patients to see the providers they are familiar and 
comfortable with locally, outside of working hours. The commenters 
stated that it is particularly difficult to furnish direct supervision 
for critical specialty services, such as radiation oncology services, 
that cannot be supervised by a hospital emergency department physician 
or nonphysician practitioner, because of the volume of emergency 
patients or lack of specialty expertise.
    These commenters believed that if the direct supervision 
requirement is enforced in CY 2014 for CAHs and small rural hospitals, 
some of these facilities will be forced to close altogether, and others 
will have to limit their hours of operation for chemotherapy, 
intravenous infusion of antibiotics and other drugs, cardiac and 
pulmonary rehabilitation, observation, blood transfusion, radiation 
oncology and wound care services. The commenters expressed concern that 
hospital revenues would be reduced from these business lines, and that 
some patients would elect to discontinue their care because of 
increased cost or inability to travel farther distances to obtain 
access to these services. The commenters

[[Page 75057]]

believed that reduced access will result in additional hospital 
readmissions and increased Medicare spending. Several commenters 
believed that access will be especially difficult given the anticipated 
increase in utilization likely to begin in 2014 as a result of the 
implementation of the online health insurance marketplaces and the 
expansion of Medicaid under the Affordable Care Act.
    MedPAC stated in its public comment that, in light of the decision 
to enforce the supervision instructions, CMS should continue working 
with the Panel to define services that are appropriate for general 
supervision.
    Response: We continue to believe that direct supervision is the 
most appropriate level of supervision for most hospital outpatient 
therapeutic services under the ``incident to'' provisions of section 
1861(s)(2)(B) of the Act, as we discussed in the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72006). Most hospital outpatient 
therapeutic services must be furnished directly (are not delegable); 
therefore, general supervision would not be appropriate for the 
majority of services. The independent Panel review advisory process was 
established through notice and comment rulemaking as the means of 
identifying hospital outpatient therapeutic services that can safely be 
furnished under general supervision, where the supervising practitioner 
does not have to be immediately available in person to provide 
assistance and direction (76 FR 74360 through 74371). We encourage 
hospitals to continue using the Panel process to bring to CMS' 
attention services that may not require the immediate availability of a 
supervising practitioner, especially where it is possible to reduce the 
burden on the workforce available to small rural hospitals and CAHs 
while ensuring the quality and safety of patient care. We encourage 
hospitals and CAHs to continue using the established Panel process to 
request changes they believe would be appropriate in supervision levels 
for individual hospital outpatient therapeutic services, especially 
those the commenters mentioned that have not yet been evaluated by the 
Panel, such as blood transfusion, chemotherapy and radiation therapy, 
and wound care services. Instructions for submitting evaluation 
requests are available on the Panel Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/FACA/AdvisoryPanelonAmbulatoryPaymentClassificationGroups.html).
    Regarding pulmonary rehabilitation (PR) and cardiac rehabilitation 
(CR) services also mentioned by the commenters, in the CY 2009 OPPS/ASC 
final rule with comment period (74 FR 60573), we stated that while we 
have some flexibility to determine the type of practitioner who may 
supervise other hospital outpatient therapeutic services, in the case 
of PR, CR, and intensive cardiac rehabilitation (ICR) services, the 
statutory language does not provide such flexibility. Section 
1861(eee)(2)(B) of the Act imposes strict requirements, describing the 
direct physician supervision standard for PR, CR, and ICR services, and 
does not give flexibility to modify the requirement to allow for other 
supervisory practitioners.
    After consideration of the public comments we received, we are not 
extending the enforcement instruction another year for CY 2014. The 
enforcement instruction will expire December 31, 2013.
2. Supervision Requirements for Observation Services
    In the CY 2011 OPPS/ASC final rule with comment period (75 FR 71999 
through 72013), we revised the supervision requirements for observation 
services furnished in the hospital by designating observation services 
(HCPCS codes G0378 (Hospital observation services, per hour) and G0379 
(Direct admission of patient for observation care)) as nonsurgical 
extended duration therapeutic services (``extended duration 
services''). As we provided in the CY 2011 OPPS/ASC final rule with 
comment period and 42 CFR 410.27(a)(1)(iv)(E), extended duration 
services require direct supervision at the initiation of the service, 
which may be followed by general supervision for the remainder of the 
service at the discretion of the supervising physician or appropriate 
nonphysician practitioner, once that practitioner has determined that 
the patient is stable. The determination by the supervising physician 
or appropriate nonphysician practitioner that the beneficiary is stable 
and may be transitioned to general supervision must be documented in 
progress notes or in the medical record (75 FR 72011).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43624), we stated that 
since we designated observation services as extended duration services, 
we have received several inquiries from stakeholders regarding whether 
Medicare requires multiple evaluations of the beneficiary during the 
provision of observation services. Specifically, stakeholders asked 
whether, once the supervising physician or appropriate nonphysician 
practitioner transitions the beneficiary to general supervision and 
documents the transition in the medical record, Medicare requires 
further assessment of the beneficiary either per hour (because 
observation services are billed per hour) or at some other point during 
provision of the service. In the CY 2014 OPPS/ASC proposed rule, we 
stated that we are clarifying that, for observation services, if the 
supervising physician or appropriate nonphysician practitioner 
determines and documents in the medical record that the beneficiary is 
stable and may be transitioned to general supervision, general 
supervision may be furnished for the duration of the service. Medicare 
does not require an additional initiation period(s) of direct 
supervision during the service.
    Comment: Commenters supported this clarification, stating that it 
answers many questions regarding whether Medicare requires hourly 
evaluations of the patient during the provision of observation 
services.
    Response: We appreciate the commenters' support and are finalizing 
our clarification without modification. We believe that this 
clarification will assist hospitals in furnishing the required 
supervision of observation services without undue burden on their 
staff.

B. Application of Therapy Caps in CAHs

    For outpatient physical therapy (PT), occupational therapy (OT), 
and speech-language pathology (SLP) (collectively, ``outpatient 
therapy'') services covered under Medicare Part B, section 1833(g) of 
the Act applies annual, per beneficiary limitations on incurred 
expenses, commonly referred to as ``therapy caps,'' for these services. 
There is one therapy cap for OT services and another separate therapy 
cap for PT and SLP services combined. As we discussed in the CY 2014 
OPPS/ASC proposed rule (78 FR 43624), in the CY 2014 Medicare Physician 
Fee Schedule (MPFS) proposed rule (78 FR 43332), we proposed to subject 
outpatient therapy services furnished by a CAH to the therapy caps and, 
if extended by statute, the exceptions process and the manual medical 
review process beginning on January 1, 2014. The American Taxpayer 
Relief Act of 2012 (Pub. L. 112-240) required that therapy services 
furnished by a CAH during 2013 are counted toward the therapy caps 
using the MPFS rate, and we proposed to continue this methodology for 
2014 and subsequent years. CAHs will still be paid for therapy services 
under the reasonable cost methodology for CAH outpatient services 
described under section 1834(g) of the Act. We refer

[[Page 75058]]

readers to the CY 2014 MPFS final rule with comment period for detailed 
information about our proposal, a summation of the public comments we 
received on the proposal and our responses, and detailed information 
about our final policy. After consideration of all of the public 
comments we received, in the CY 2014 MPFS final rule, we are finalizing 
our proposal to apply the therapy caps and related provisions to 
services furnished by a CAH beginning on January 1, 2014. We are 
including in this CY 2014 OPPS/ASC final rule with comment period a 
reference to the final policy as an additional means to direct CAHs' 
attention to our policies in the CY 2014 MPFS final rule.

C. Requirements for Payment of Outpatient Therapeutic (``Incident To'') 
Hospital or CAH Services

1. Overview
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), 
we proposed to amend the Medicare conditions of payment for therapeutic 
outpatient hospital or CAH services and supplies furnished ``incident 
to'' a physician's or nonphysician practitioner's service (which we 
refer to as hospital or CAH outpatient therapeutic services) to require 
that individuals furnishing these services do so in compliance with 
applicable State law. Under current policy, we generally defer to 
hospitals to ensure that State scope of practice and other State rules 
relating to health care delivery are followed, such that these services 
are performed only by qualified personnel in accordance with all 
applicable laws and regulations. We proposed to revise the existing 
regulations to explicitly require that individuals who perform hospital 
or CAH outpatient therapeutic services must do so in compliance with 
applicable State laws and regulations as a condition of payment under 
Medicare Part B. In this section, we are using the term ``hospital'' to 
include a CAH unless otherwise specified. Although the term 
``hospital'' does not generally include a CAH, section 1861(e) of the 
Act provides that the term ``hospital'' includes a CAH if the context 
otherwise requires. We believe it would be appropriate to apply our 
policy regarding compliance with applicable State law, as we do for 
other conditions of payment for hospital outpatient therapeutic 
services, to CAHs as well as other hospitals.
2. Background
    Section 1861(s)(2)(B) of the Act establishes the benefit category 
for hospital ``incident to'' medical and other health services, which 
are paid under Medicare Part B. The statute specifies that ``incident 
to'' services are ``hospital services (including drugs and biological 
which are not usually self-administered by the patient) incident to 
physicians' services rendered to outpatients and partial 
hospitalization services incident to such services.'' In the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74369 through 74370), we 
clarified that hospital outpatient therapeutic services furnished 
incident to a physician's service even when described by benefit 
categories other than the specific ``incident to'' provision in section 
1861(s)(2)(B) of the Act (for example, radiation therapy services 
described under section 1861(s)(4) of the Act). Because hospital 
outpatient therapeutic services are furnished incident to a physician's 
professional service, the conditions of payment that derive from the 
``incident to'' nature of the services paid apply to all hospital 
outpatient therapeutic services.
    In addition to the requirements of the statute, the regulation at 
42 CFR 410.27 sets forth specific requirements that must be met in 
order for a hospital to be paid under Medicare Part B for therapeutic 
hospital or CAH services and supplies furnished incident to a 
physician's or nonphysician practitioner's service (hospital or CAH 
outpatient therapeutic services). Section 410.27 describes hospital or 
CAH services and supplies furnished incident to a physician's or 
nonphysician practitioner's services as therapeutic services and 
provides the conditions of payment. Specifically, Sec.  410.27(a) 
provides that Medicare Part B pays for therapeutic hospital or CAH 
services and supplies furnished incident to a physician's or 
nonphysician practitioner's service. These are defined, in part, as all 
services and supplies furnished to hospital or CAH outpatients that are 
not diagnostic services and that aid the physician or nonphysician 
practitioner in the treatment of the patient, including drugs and 
biologicals that cannot be self-administered, if they are furnished--
     By or under arrangements made by the participating 
hospital or CAH, except in the case of a SNF resident as provided in 42 
CFR 411.15(p);
     As an integral although incidental part of a physician's 
or nonphysician practitioner's services;
     In the hospital or CAH or in a department of the hospital 
or CAH, as defined in 42 CFR 413.65 [a provider-based department]; and
     Under the direct supervision (or other level of 
supervision as specified by CMS for the particular service) of a 
physician or a nonphysician practitioner. For purposes of this section, 
``nonphysician practitioner,'' as defined in Sec.  410.27(g), means a 
clinical psychologist, licensed clinical social worker, physician 
assistant, nurse practitioner, clinical nurse specialist, or certified 
nurse-midwife.
    Sections 410.27(b) through (f) provide additional conditions of 
payment for partial hospitalization services, drugs and biologicals, 
emergency services, and services furnished by an entity other than the 
hospital (or CAH). We commonly refer to the services described in Sec.  
410.27 as ``incident to'' services.
    In recent years, we have discussed and refined the supervision 
regulations under Sec.  410.27, which are conditions of Medicare Part B 
payment for hospital outpatient ``incident to'' (``therapeutic'') 
services. For example, we have discussed our belief that direct 
supervision is the most appropriate level of supervision for most of 
these services, unless personal supervision or personal performance of 
the services by the physician or nonphysician practitioner is more 
appropriate, given the ``incident to'' nature of the services as an 
integral although incidental part of a physician's or nonphysician 
practitioner's services (74 FR 60584, 75 FR 72006, and 76 FR 42281). We 
have stated our historical interpretation of section 1861(s)(2)(B) of 
the Act, specifically, that ``incident to'' services are furnished 
under the order of a physician (or nonphysician practitioner), the 
physician is involved in the management of the patient, and the 
physician supervises the provision of those services when he or she 
does not provide them directly (75 FR 72006). This is reflected in our 
requirement for a minimum of direct supervision, except for a limited 
set of services that may be furnished under general supervision or are 
designated as nonsurgical extended duration therapeutic services which 
require direct supervision initially with potential transition to 
general supervision (we refer readers to the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/CY2013-OPPS-General-Supervision.pdf).
    In Sec.  410.27(a)(1)(iv)(C) and (D), we regulate the 
qualifications of physicians and nonphysician practitioners supervising 
other personnel that are personally performing a service, or part of a 
service. In the CY 2011 OPPS/ASC

[[Page 75059]]

final rule with comment period, we stated our belief that that in order 
to furnish assistance and direction, the supervising practitioner would 
have to be State-licensed and possess hospital privileges to perform 
the supervised procedure (75 FR 72007). Similarly, in the CY 2010 OPPS/
ASC final rule with comment period, we stated that the supervisory 
practitioner ``must have, within his or her State scope of practice and 
hospital-granted privileges, the ability to perform the service or 
procedure'' that he or she is supervising (74 FR 60580).
    Similarly, we provide in the Medicare Benefit Policy Manual (MBPM, 
Pub. 100-02) that hospital outpatient therapeutic services and supplies 
must be furnished under the order of a physician or other practitioner 
practicing within the extent of the Act, the Code of Federal 
Regulations, and State law (Chapter 6, Section 20.5.2 of the MBPM). 
Section 20.5.2 of the MBPM specifies that the services must be 
furnished by hospital personnel under the appropriate supervision of a 
physician or nonphysician practitioner in accordance with 42 CFR 410.27 
and 482.12. This does not mean that each occasion of service by a 
nonphysician need also be the occasion of the actual rendition of a 
personal professional service by the physician responsible for care of 
the patient. However, during any course of treatment rendered by 
auxiliary personnel, the physician must personally see the patient 
periodically and sufficiently often to assess the course of treatment 
and the patient's progress and, when necessary, to change the treatment 
regimen. A hospital service or supply would not be considered incident 
to a physician's service if the attending physician merely wrote an 
order for the services or supplies and referred the patient to the 
hospital without being involved in the management of that course of 
treatment.
    Central to the issue of services that hospitals may bill to 
Medicare that are not performed personally by the physician is the 
assessment of the qualifications of the individuals to whom the 
services are delegated. As medical practice has evolved over time, the 
services performed in the hospital outpatient setting have expanded to 
include more complicated services such as advanced surgery and a 
complex variety of radiation therapy. In addition, the types of 
services that can be furnished incident to a physician's or 
nonphysician practitioner's services have expanded. Under current 
Medicare Part B payment policy, we generally defer to hospitals to 
ensure that State scope of practice laws are followed and that the 
personnel who furnish hospital outpatient therapeutic (``incident to'') 
services are licensed and are otherwise qualified to do so. 
Specifically, we have stated that, considering that hospitals furnish a 
wide array of complex outpatient services and procedures, including 
surgical procedures, we would expect that hospitals have the 
credentialing procedures, bylaws, and other policies in place to ensure 
that hospital outpatient services furnished to Medicare beneficiaries 
are being provided only by qualified practitioners in accordance with 
all applicable laws and regulations (74 FR 60584; Chapter 6, Section 
20.5.4 of the MBPM). However, our payment regulations do not contain 
restrictions on the types of auxiliary personnel that can perform 
hospital outpatient therapeutic (``incident to'') services, other than 
rules relating to supervision by a physician or qualified nonphysician 
practitioner, and do not specifically require that performance of these 
services be in compliance with applicable State law. Over the past 
years, several situations have come to our attention where Medicare was 
billed for ``incident to'' services that were performed by an 
individual who did not meet the State standards for those services in 
the State in which services were performed. The physician or 
nonphysician practitioner billing for the services would have been 
permitted under State law to personally furnish the services, but the 
services were actually provided by other individuals who were not in 
compliance with State law in providing the particular services (or 
aspect of the services).
    Although we would expect that all hospital services for which 
Medicare payment is made would be furnished in accordance with State 
law, the Medicare requirements for hospital outpatient therapeutic 
services and supplies incident to a physician's services (Sec.  410.27, 
discussed above) do not specifically make compliance with State law a 
condition of payment for services (or aspects of services) and supplies 
furnished and billed as ``incident to'' services. Nor do any of the 
payment regulations regarding hospital outpatient therapeutic services 
and supplies incident to the services of nonphysician practitioners 
contain this requirement. Therefore, Medicare has had limited recourse 
when hospital outpatient therapeutic (``incident to'') services are not 
furnished in compliance with State law.
    In 2009, the Office of Inspector General (OIG) issued a report 
entitled ``Prevalence and Qualifications of Nonphysicians Who Performed 
Medicare Physician Services'' (OEI-09-06-00430) that considered, in 
part, the qualifications of auxiliary personnel providing ``incident 
to'' physician services. After finding that services were being 
provided and billed to Medicare by auxiliary personnel `` . . . who did 
not possess the required licenses or certifications according to State 
laws, regulations, and/or Medicare rules,'' the OIG recommended that we 
revise the ``incident to'' rules to, among other things, ``require that 
physicians who do not personally perform the services they bill to 
Medicare ensure that no persons except . . . nonphysicians who have the 
necessary training, certification, and/or licensure pursuant to State 
laws, State regulations, and Medicare regulations personally perform 
the services under the direct supervision of a licensed physician.'' In 
the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), we 
proposed amendments to our regulations in order to address this 
recommendation.
3. Proposed and Final Policy
    To ensure that the practitioners and other personnel providing 
hospital outpatient therapeutic services to Medicare beneficiaries 
incident to a physician's or nonphysician practitioner's service do so 
in accordance with the requirements of the State in which the services 
are furnished, and to ensure that Medicare payments can be recovered 
when such services are not furnished in compliance with the State law, 
in the CY 2014 OPPS/ASC proposed rule (78 FR 43624 through 43626), we 
proposed to add a new condition of payment to the ``incident to'' 
regulations at Sec.  410.27, Therapeutic outpatient hospital or CAH 
services and supplies incident to a physician's or nonphysician 
practitioner's service: Conditions. Specifically, we proposed to add a 
provision under a new paragraph (a)(1)(vi) under Sec.  410.27 to 
specify that ``Medicare Part B pays for therapeutic hospital or CAH 
services and supplies furnished incident to a physician's or 
nonphysician practitioner's service . . . if they are furnished ``In 
accordance with applicable State law.'' We stated that the proposed 
policy would recognize the role of States in establishing the licensure 
and other qualifications of physicians and other health care 
professionals for the delivery of hospital (or CAH) outpatient 
therapeutic services.
    We indicated that the proposal is consistent with other areas of 
the Medicare program where CMS defers to State rules regarding the 
delivery of

[[Page 75060]]

hospital services. For example, in determining who can admit patients 
as inpatients of a hospital, the hospital conditions of participation 
(CoPs) defer to State law and the authority of the hospital's governing 
body and medical staff to grant admitting privileges in accordance with 
the laws of the State in which the hospital is located. Section 
482.12(c)(2) provides: ``Patients are admitted to the hospital only on 
the recommendation of a licensed practitioner permitted by the State to 
admit patients to a hospital.'' The CoP also provides that, ``If a 
Medicare patient is admitted by a practitioner not specified in 
paragraph (c)(1) of this section [which lists practitioners that must 
care for Medicare patients], that patient is under the care of a doctor 
of medicine or osteopathy.'' Therefore, in determining who may admit 
inpatients to a hospital, Medicare defers to State law rules. As we 
stated in a recent rule addressing credentialing and privileging and 
telemedicine services under the CoPs (77 FR 29047): ``CMS recognizes 
that practitioner licensure laws and regulations have traditionally 
been, and continue to be, the provenance of individual States, and we 
are not seeking to preempt State authority in this matter.'' Similarly, 
under the CoP at 42 CFR 482.22(a), we provide that a hospital's medical 
staff which grants admitting privileges ``must include doctors of 
medicine or osteopathy. In accordance with State law, including scope-
of-practice laws, the medical staff may also include other categories 
of nonphysician practitioners determined as eligible for appointment by 
the governing body.'' Under the CoP at 42 CFR 482.11(c), the hospital 
must assure that personnel are licensed or meet other applicable 
standards that are required by State or local laws.
    We believe it is appropriate to similarly require as a condition of 
payment for individual services that all hospital outpatient services 
furnished incident to a physician's or nonphysician practitioner's 
services be furnished in accordance with State law requirements. As 
evidenced by these examples, throughout the Medicare program, the 
qualifications required for the delivery of health care services are 
generally determined with reference to State law. In addition to the 
health and safety benefits we believe would accrue to the Medicare 
patient population, this approach would assure that Federal dollars are 
not expended for services that do not meet the standards of the States 
in which they are being furnished, and provides the ability for the 
Federal Government to recover funds paid where services and supplies 
are not furnished in accordance with State law.
    We solicited public comments on our proposal.
    Comment: Several commenters supported the general premise that 
individuals who provide services and supplies incident to a physician's 
services must do so in compliance with State law. However, the 
commenters opposed the ``broad nature'' of the proposed regulatory text 
because they believed that it might expose hospitals to liability under 
the False Claims Act in situations where a hospital improperly billed 
Medicare for services because the physician or practitioner had some 
minor defect with his or her license or certification, but there was no 
concern about a practitioner acting outside the scope of practice or 
the quality of care furnished. Several commenters asserted that the 
proposal is not necessary or appropriate because sanctions for these 
issues are already available under the CoPs and section 1156 of the 
Act. These commenters noted that section 1156 of the Act requires 
hospitals to ensure that the services it furnishes are of a quality 
that meet professionally recognized standards of care, and, upon a 
finding that in a substantial number of cases the hospital failed to 
comply substantially with this obligation, or that it grossly and 
flagrantly violated this obligation in one or more instances, the 
hospital is subject to a corrective action plan. The commenters noted 
that, while the sanction for violating the CoPs and the penalties under 
section 1156 of the Act do not include payment recoupment for the 
particular services furnished, the sanctions, including termination of 
the Medicare provider agreement and corrective action plans, are 
significant.
    Several commenters supported the proposal because they recommended 
that CMS allow hospital personnel to continue working, possibly 
indefinitely, without the direct supervision of physicians or other 
qualified nonphysician practitioners in certain smaller hospitals. 
These commenters believed the proposal would be an important means of 
ensuring that ancillary personnel are properly trained, experienced, 
and potentially--in some States--even licensed, given that they would 
furnish services relatively independently in CAHs and small rural 
hospitals without direct supervision. The commenters stated that the 
proposal would ensure that technicians and other individuals furnishing 
``incident to'' services are properly educated, trained, and 
experienced, and would ensure high quality care, not just for Medicare 
beneficiaries, but for all patients.
    Response: We agree with commenters that the CoPs and other 
statutory provisions provide for corrective action plans as a condition 
to continued eligibility to provide Medicare and Medicaid services on a 
reimbursable basis. However, we believe it is appropriate to also 
recoup payment for individual services if they are not furnished in 
accordance with applicable State law, and that the possibility of 
sanctions in the form of payment recoupment can help ensure compliance 
with the law.
    We are concerned with the comments that indicated that our proposed 
revision to Sec.  410.27 is necessary, in the absence of a direct 
supervision standard for payment, to ensure the safety and quality of 
care or compliance with State law. The instruction regarding 
enforcement of supervision requirements (discussed in section XI.A. of 
this final rule with comment period) does not relieve CAHs or small 
rural hospitals of their obligations under State law, the hospital 
CoPs, or section 1156 of the Act, to ensure that the individuals who 
furnish hospital outpatient therapeutic services are licensed and 
otherwise qualified to do so. The enforcement instruction (available on 
the CMS Web site at http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Downloads/Physician_Supervision_Nonenf_Notice.pdf) specifically states, ``CMS continues 
to expect the hospitals covered under this notice to fulfill all other 
Medicare program requirements when providing services to Medicare 
beneficiaries and when billing Medicare for those services. While CMS 
is instructing contractors not to enforce the supervision requirements 
for outpatient therapeutic services in these hospitals for CY 2010-
2013, we continue to emphasize quality and safety for services provided 
to all patients in these facilities.'' We note that as discussed in 
section X.A.1. of this final rule with comment period, the enforcement 
instruction will not be extended for CY 2014. These public comments 
reinforce our belief that conditions of payment for individual 
services, in the form of both the outpatient supervision rules and the 
proposed requirement for compliance with State laws, are necessary to 
ensure the safety and quality of care for Medicare beneficiaries. The 
hospital outpatient supervision rules are directed at ensuring that 
supervisory practitioners are licensed or authorized by the State and 
possess hospital

[[Page 75061]]

privileges to direct and, if necessary, intervene in the services they 
supervise (75 FR 72007), while our proposed requirement for compliance 
with applicable State law ensures that supervised individuals are 
licensed and qualified to provide the services or aspects of services 
that are delegated to them.
    After consideration of the public comments we received, we are 
finalizing proposed new paragraph (a)(1)(vi) under Sec.  410.27, 
without modification, to provide that Medicare Part B pays for 
therapeutic hospital or CAH services and supplies furnished incident to 
a physician's or nonphysician practitioner's service if they are 
furnished ``. . . In accordance with applicable State law.'' This final 
policy does not impose any new requirements on hospitals that bill the 
Medicare program because practitioners and other personnel furnishing 
services already are required to comply with the laws of the State in 
which the services are furnished. This regulatory change simply adopts 
the existing requirements as a condition of payment under Medicare. 
Codifying this requirement provides the Federal government with a clear 
basis to deny Medicare payment when services are not furnished in 
accordance with applicable State law, as well as to ensure that 
Medicare pays for services furnished to beneficiaries only when the 
services meet the requirements imposed by the States to regulate health 
care delivery for the health and safety of their citizens.
4. Technical Correction
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43626), we stated 
that, in our review of Sec.  410.27, we noted that paragraph (a) 
defines therapeutic hospital or CAH services and supplies furnished 
incident to a physician's or nonphysician practitioner's service as 
``all services and supplies furnished to hospital or CAH outpatients 
that are not diagnostic services and that aid the physician or 
nonphysician practitioner in the treatment of the patient, including 
drugs and biologicals that cannot be self-administered.'' Section 
1861(s)(2)(B) of the Act describes these services as ``hospital 
services (including drugs and biologicals which are not usually self-
administered by the patient) incident to physicians' services rendered 
to outpatients and partial hospitalization services incident to such 
services.'' The statute includes in this benefit category ``drugs and 
biologicals which are not usually self-administered by the patient.'' 
In the CY 2014 OPPS/ASC proposed rule, we proposed to make a technical 
correction that would amend the description of these drugs and 
biologicals at Sec.  410.27(a) to more appropriately reflect the 
statutory language. Specifically, we proposed to delete the phrase 
``drugs and biologicals that cannot be self-administered'' and replace 
it with the phrase ``drugs and biologicals which are not usually self-
administered.'' Under this proposed technical correction, the language 
of Sec.  410.27(a) would read, ``Medicare Part B pays for therapeutic 
hospital or CAH services and supplies furnished incident to a 
physician's or nonphysician practitioner's service, which are defined 
as all services and supplies furnished to hospital or CAH outpatients 
that are not diagnostic services and that aid the physician or 
nonphysician practitioner in the treatment of the patient, including 
drugs and biologicals which are not usually self-administered. . . .''
    We did not receive any public comments on this proposed technical 
correction. Therefore, we are finalizing the correction without 
modification.

D. Collecting Data on Services Furnished in Off-Campus Provider-Based 
Departments

    As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43626) 
and in the CY 2014 Medicare Physician Fee Schedule (MPFS) proposed rule 
(78 FR 43301), in recent years, the research literature and popular 
press have documented the increased trend toward hospital acquisition 
of physician practices, integration of those practices as a department 
of the hospital, and the resultant increase in the delivery of 
physicians' services in a hospital setting (for example, we refer 
readers to Carol M. Ostrom, ``Why You Might Pay Twice for One Visit to 
a Doctor,'' Seattle Times, November 3, 2012, and Ann O'Malley, Amelia 
M. Bond, and Robert Berenson, Rising Hospital Employment of Physicians: 
Better Quality, Higher Costs?, Issue Brief No. 136, Center for Studying 
Health System Change, August 2011). When a Medicare beneficiary 
receives outpatient services in a hospital, the total payment amount 
for outpatient services made by Medicare is generally higher than the 
total payment amount made by Medicare when a physician furnishes those 
same services in a freestanding clinic or in a physician's office. As 
more physician practices become hospital-based, news articles have 
highlighted beneficiary liability that is incurred when services are 
provided in a hospital-based physician practice. MedPAC has questioned 
the appropriateness of increased Medicare payment and beneficiary cost-
sharing when physicians' offices become hospital outpatient departments 
and has recommended that Medicare pay selected hospital outpatient 
services at the MPFS rates (MedPAC March 2012 Report to Congress, 
``Addressing Medicare Payment Differences across Settings,'' 
presentation to the Commission on March 7, 2013).
    The total payment (including both Medicare program payment and 
beneficiary cost-sharing) generally is higher when outpatient services 
are furnished in the hospital outpatient setting rather than in a 
freestanding clinic or in a physician office. When a service is 
furnished in a freestanding clinic or a physician office, only one 
payment is made to the physician (under the MPFS). However, when a 
service is provided in a hospital or a ``physician office'' that is a 
provider-based department of a hospital, Medicare pays the hospital a 
``facility fee'' and pays the physician separately for the physician 
portion of the service. When a service is furnished in a hospital (or a 
provider-based department of a hospital), the payment to the physician 
is lower than the payment to the physician for the same service 
furnished outside the hospital (or the provider-based department of a 
hospital). However, the total payment (facility fee plus physician fee) 
is generally more for a service furnished in a hospital (or a provider-
based department of a hospital) than for the same service furnished in 
a freestanding clinic or a physician office. The beneficiary pays 
coinsurance for both the physician payment and the hospital outpatient 
payment.
    Upon acquisition of a physician practice, hospitals frequently 
treat the practice locations as off-campus provider-based departments 
of the hospital and bill Medicare for services furnished at those 
locations under the OPPS. (For further information on the provider-
based regulations at 42 CFR 413.65, we refer readers to http://www.gpo.gov/fdsys/pkg/CFR-2010-title42-vol2/pdf/CFR-2010-title42-vol2-sec413-65.pdf). Since October 1, 2002, we have not required hospitals 
to seek from CMS a determination of provider-based status for a 
facility that is located off campus. We also do not have a formal 
process for gathering information on the frequency, type, and payment 
of services furnished in off-campus provider-based departments of the 
hospital.
    We stated in the CY 2014 OPPS/ASC and MPFS proposed rules that in 
order to better understand the growing trend toward hospital 
acquisition of physician offices and subsequent treatment of those 
locations as off-campus provider-

[[Page 75062]]

based outpatient departments, we were considering collecting 
information that would allow us to analyze the frequency, type, and 
payment of services furnished in off-campus provider-based hospital 
departments. We stated that we have considered several potential 
methods for physician and hospital claims. Claims-based approaches 
could include: (1) For physician services, creating a new place of 
service (POS) code for off campus departments of a provider as part of 
item 24B of the CMS-1500 claim form, comparable to current POS codes 
such as ``22 Outpatient'' and ``23 Emergency Room-Hospital'' when 
physician services are furnished in an off-campus provider-based 
department; or (2) creating a HCPCS modifier that could be reported 
with every code for services furnished in an off-campus provider-based 
department of a hospital on the CMS-1500 claim form for physician 
services and the UB-04 (CMS Form 1450) for hospital outpatient claims. 
In addition, we have considered asking hospitals to break out the costs 
and charges for their provider-based departments as outpatient service 
cost centers on the Medicare hospital cost report, CMS Form 2552-10. We 
noted that some hospitals already break out these costs voluntarily or 
because of cost reporting requirements for the 340B Drug Discount 
Program, but this practice is not consistent or standardized. In the 
proposed rules, we invited public comments on the best means for 
collecting information on the frequency, type, and payment of services 
furnished in off-campus provider-based departments of hospitals.
    Comment: While most commenters agreed on the need to collect 
information on the frequency, type, and payment of services furnished 
in off-campus provider-based departments of hospitals, they expressed 
different opinions on how to best collect these additional data. Some 
commenters preferred identifying services furnished in provider-based 
departments on the Medicare cost report, while other commenters 
preferred one of the claims-based approaches. Some commenters supported 
either approach and noted the trade-offs in terms of the type of data 
that could be collected accurately and the administrative burden 
involved. Some commenters suggested that CMS convene a group of 
stakeholders to develop consensus on the best approach. Commenters 
generally recommended that CMS choose the least administratively 
burdensome approach that would ensure accurate data collection, but did 
not necessarily agree on what approach would optimally achieve that 
result. For example, commenters indicated that limiting the data 
collection to cost report approaches results in little administrative 
burden for physicians because they do not file cost reports, but could 
result in varying degrees of administrative effort for hospitals, 
depending on the specific cost reporting requirements.
    Several commenters noted that some hospitals already voluntarily 
identify costs specific to provider-based departments on their cost 
reports. These commenters asserted that because cost and charge 
information is already reported separately, there would be no 
additional burden, although additional variables or changes to the 
structure of the cost report may be required. In addition, the 
commenters noted that cost report information would be transparent and 
audited for accuracy. One commenter recommended aggregate reporting of 
all off-campus provider-based departments as one or several cost 
centers. Another commenter suggested that CMS consider assigning 
separate subprovider numbers for off-campus departments similar to 
those used for rehabilitation and psychiatric units.
    Other commenters believed that a HCPCS modifier would more clearly 
identify specific services provided, and would provide better 
information about the type and level of care furnished. Some commenters 
believed that a HCPCS modifier would be the least administratively 
burdensome approach because hospitals and physicians already report a 
number of claims-based modifiers. However, other commenters, using this 
same fact about the number of existing claims-based modifiers, argued 
that additional modifiers would increase administrative burden because 
this approach would increase the modifiers that would need to be 
considered when billing. Commenters recommended that CMS consider the 
establishment of a new POS code because they believed this approach 
would be less administratively burdensome than attaching a modifier to 
each service reported on the claim that was furnished in an off-campus 
provider-based department. Some commenters stated that establishing a 
new POS code would generate a better outcome under the MPFS than the 
OPPS because, under the OPPS, a single claim is more likely to contain 
lines for services furnished in both on-campus and off-campus 
departments of the hospital on the same day for the same beneficiary.
    MedPAC believed there may be some limited value in collecting data 
on services furnished in off-campus provider-based departments to 
validate the accuracy of site-of-service reporting when the physician's 
office is off-campus but bills as an outpatient department, but did not 
recommend a particular data collection approach. MedPAC indicated that 
any data collection effort should not prevent the development of 
policies to align payment rates across settings.
    Response: We appreciate the public feedback in response to our 
solicitation of public comments in the CY 2014 OPPS/ASC and MPFS 
proposed rules. We will take the public comments received into 
consideration as we continue to consider approaches to collecting data 
on services furnished in off-campus provider-based departments.

XI. CY 2014 OPPS Payment Status and Comment Indicators

A. CY 2014 OPPS Payment Status Indicator Definitions

    Payment status indicators (SIs) that we assign to HCPCS codes and 
APCs serve an important role in determining payment for services under 
the OPPS. They indicate whether a service represented by a HCPCS code 
is payable under the OPPS or another payment system and also whether 
particular OPPS policies apply to the code. The complete list of the CY 
2014 status indicators and their definitions is displayed in Addendum 
D1 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The CY 2014 
status indicator assignments for APCs and HCPCS codes are shown in 
Addendum A and Addendum B, respectively, on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. The changes to CY 2014 status 
indicators and their definitions are discussed in detail below.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43627), for CY 2014, 
we proposed to create a new status indicator ``J1'' to identify HCPCS 
codes that are paid under a comprehensive APC. We proposed that a claim 
with the new proposed status indicator ``J1'' would trigger a 
comprehensive APC payment for the claim.
    The public comments that we received on the status indicator ``J1'' 
are discussed in detail in section II.A.2.e. of this final rule with 
comment period. After consideration of the public comments we received, 
we have decided to finalize status indicator ``J1''

[[Page 75063]]

but with a delayed effective date of CY 2015.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43627), for CY 2014, 
we proposed to delete status indicator ``X'' and assign ancillary 
services that are currently assigned status indicator ``X'' to either 
status indicator ``Q1'' or ``S.'' Services assigned status indicator 
``Q1'' include many minor diagnostic tests that are generally ancillary 
to and performed with another service. However, services assigned to 
status indicator ``Q1'' also may be performed alone. Given the nature 
of these services and their role in hospital outpatient care, we stated 
that we believe that when these services are performed with another 
service, they should be packaged, but that they should be separately 
paid when performed alone. Therefore, we stated that we believe it is 
appropriate to conditionally package all ancillary services that are 
currently assigned to status indicator ``X,'' and we proposed to assign 
them to status indicator ``Q1.'' We also proposed that preventive 
services currently assigned status indicator ``X'' would continue to 
receive separate payment in all cases and be assigned status indicator 
``S'' for CY 2014. These proposed changes are discussed in greater 
detail in section II.A.3. of this final rule with comment period. In 
addition, we proposed to revise the definition of status indicator 
``Q1'' by removing status indicator ``X'' from the packaging criteria, 
so that codes assigned status indicator ``Q1'' are STV-packaged, rather 
than STVX-packaged, because status indicator ``X'' was proposed for 
deletion.
    The public comments that we received regarding ancillary services 
assigned to status indicator ``X'' are discussed in detail in section 
II.A.3. of this final rule with comment period. As discussed in that 
section, we are not finalizing our CY 2014 proposal to package 
ancillary services. Therefore, we are not deleting status indicator 
``X'' for CY 2014.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43628), for CY 2014, 
we proposed to revise the definitions of status indicators ``S'' and 
``T'' to remove the word ``significant'' from these definitions. We 
stated that it is no longer necessary to distinguish significant 
procedures from ancillary services because we proposed to delete the 
status indicator that describes ancillary services. We also proposed to 
add the word ``service'' to the definitions of status indicators ``S'' 
and ``T'' to indicate ``procedure or service; not discounted when 
multiple,'' as applicable to status indicator ``S'' and ``procedure or 
service; multiple reduction applies,'' as applicable to status 
indicator ``T.''
    Comment: One commenter recommended that CMS consider allowing 
different status indicator assignments for HCPCS codes within an APC 
(for example, some of the codes within an APC could be assigned status 
indicator ``S'' and others could be assigned status indicator ``T'') 
and evaluate the need to permit HCPCS codes within the same APC to have 
a different assigned status indicator than that assigned to the APC 
under which it is being paid. The commenter believed this was needed to 
ensure appropriate payments and access to affected services.
    Response: We appreciate the commenter's interest in refining the 
methodology used for assigning status indicators ``S'' and ``T'' under 
the OPPS. However, we did propose a change to our policy of assigning 
status indicators to APCs and, therefore, are not making such a change 
for CY 2014. However, we may consider this comment during future 
rulemaking.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal, without modification. We are 
finalizing our proposal to revise the definitions of status indicators 
``S'' and ``T'' to remove the word ``significant'' from these 
definitions; and to add the word ``service'' to the definition of 
status indicator ``S'' to indicate ``procedure or service; not 
discounted when multiple'' and to status indicator ``T'' to indicate 
``procedure or service; multiple reduction applies.'' We believe that 
these revisions better describe the entire range of procedures and 
services that will be assigned these status indicators for CY 2014.
    In addition, we proposed to update the definition of status 
indicator ``A'' for CY 2014. We proposed to remove ``Routine Dialysis 
Services for ESRD Patients Provided in a Certified Dialysis Unit of a 
Hospital'' from the list of items and services applicable for the 
definition of status indicator ``A'' because these services are not 
recognized by OPPS when submitted on an outpatient hospital Part B bill 
type and are instead assigned to status indicator ``B.''
    We did not receive any public comments regarding our proposed 
update of the definition of status indicator ``A.'' Therefore, we are 
adopting, as final, our proposal for CY 2014.

B. CY 2014 Comment Indicator Definitions

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43628), for the CY 
2014 OPPS, we proposed to use the same two comment indicators that are 
in effect for the CY 2013 OPPS.
     ``CH''--Active HCPCS codes in current and next calendar 
year; status indicator and/or APC assignment have changed or active 
HCPCS code that will be discontinued at the end of the current calendar 
year.
     ``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.
    We proposed to use the ``CH'' comment indicator in the CY 2014 
OPPS/ASC proposed rule to indicate HCPCS codes for which the status 
indicator or APC assignment, or both, were proposed for change in CY 
2014 compared to their assignment as of June 30, 2013. We stated that 
we believe that using the ``CH'' indicator in the proposed rule would 
facilitate the public's review of the changes that we proposed for CY 
2014.
    We proposed to use the ``CH'' comment indicator in this CY 2014 
OPPS/ASC final rule with comment period to indicate HCPCS codes for 
which the status indicator or APC assignment, or both, would change in 
CY 2014 compared to their assignment as of December 31, 2013. We stated 
that the use of the comment indicator ``CH'' in association with a 
composite APC indicates that the configuration of the composite APC 
would be changed in the CY 2014 OPPS/ASC final rule with comment 
period.
    In addition, we proposed that any existing HCPCS codes with 
substantial revisions to the code descriptors for CY 2014 compared to 
the CY 2013 descriptors would be labeled with comment indicator ``NI'' 
in Addendum B to the CY 2014 OPPS/ASC final rule with comment period. 
However, we stated that in order to receive the comment indicator 
``NI,'' the CY 2014 revision to the code descriptor (compared to the CY 
2013 descriptor) must be significant such that the new code descriptor 
describes a new service or procedure for which the OPPS treatment may 
change. We use comment indicator ``NI'' to indicate that these HCPCS 
codes will be open for comment as part of this CY 2014 OPPS/ASC final 
rule with comment period. Like all codes labeled with comment indicator

[[Page 75064]]

``NI,'' we stated that we would respond to public comments and finalize 
their OPPS treatment in the CY 2015 OPPS/ASC final rule with comment 
period.
    In accordance with our usual practice, we proposed that CPT and 
Level II HCPCS codes that are new for CY 2014 also would be labeled 
with comment indicator ``NI'' in Addendum B to the CY 2014 OPPS/ASC 
final rule with comment period.
    Only HCPCS codes with comment indicator ``NI'' in this CY 2014 
OPPS/ASC final rule with comment period are subject to comment. HCPCS 
codes that do not appear with comment indicator ``NI'' in this CY 2014 
OPPS/ASC final rule with comment period are not open to public comment, 
unless we specifically request additional comments elsewhere in this 
final rule with comment period.
    Comment: One commenter requested that CMS create a new comment 
indicator for changes to an APC assignment and to keep comment 
indicator ``CH'' to designate changes to status indicators. The 
commenter also suggested that CMS create a new comment indictor to 
indicate that a code's descriptor has changed significantly while 
retaining comment indicator ``NI'' to indicate that a code is brand 
new.
    Response: We have no operational need to create additional comment 
indicators that are specific to various types of changes. Therefore, we 
believe that the CY 2013 definitions of the OPPS comment indicators 
continue to be appropriate for CY 2014 and we are continuing to use 
those definitions without modification for CY 2014. The final 
definitions of the OPPS status indicators are listed in Addendum D2 on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html.

XII. 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 ASCs, 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 CY 
2012 OPPS/ASC final rule with comment period (76 FR 74378 through 
74379) and the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68434 through 68467).
2. Policies Governing Changes to the Lists of Codes and Payment Rates 
for ASC Covered Surgical Procedures and Covered Ancillary Services
    Under Sec.  416.2 and Sec.  416.166 of the regulations, subject to 
certain exclusions, covered surgical procedures in an ASC are surgical 
procedures that are separately paid under the OPPS, that would not be 
expected to pose a significant risk to beneficiary safety when 
performed in an ASC, and that would not be expected to require active 
medical monitoring and care at midnight following the procedure 
(``overnight stay''). We adopted this standard for defining which 
surgical procedures are covered under the ASC payment system as an 
indicator of the complexity of the procedure and its appropriateness 
for Medicare payment in ASCs. We use this standard only for purposes of 
evaluating procedures to determine whether or not they are appropriate 
to be furnished to Medicare beneficiaries in ASCs. We define surgical 
procedures as those described by Category I CPT codes in the surgical 
range from 10000 through 69999, as well as those Category III CPT codes 
and Level II HCPCS codes that directly crosswalk or are clinically 
similar to ASC covered surgical procedures (72 FR 42478).
    In the August 2, 2007 final rule, we also established our policy to 
make separate ASC payments for the following ancillary items and 
services when they are provided integral to ASC covered surgical 
procedures: (1) Brachytherapy sources; (2) certain implantable items 
that have pass-through status under the OPPS; (3) certain items and 
services that we designate as contractor-priced, including, but not 
limited to, procurement of corneal tissue; (4) certain drugs and 
biologicals for which separate payment is allowed under the OPPS; and 
(5) certain radiology services for which separate payment is allowed 
under the OPPS. These covered ancillary services are specified in Sec.  
416.164(b) and, as stated previously, are eligible for separate ASC 
payment (72 FR 42495). Payment for ancillary items and services that 
are not paid separately under the ASC payment system is packaged into 
the ASC payment for the covered surgical procedure.
    We update the lists of, and payment rates for, covered surgical 
procedures and covered ancillary services in ASCs in conjunction with 
the annual proposed and final rulemaking process to update the OPPS and 
the ASC payment system (Sec.  416.173; 72 FR 42535). In addition, as 
discussed in detail in section XII.B. of this final rule with comment 
period, because we base ASC payment policies for covered surgical 
procedures, drugs, biologicals, and certain other covered ancillary 
services on the OPPS payment policies, we also provide quarterly update 
change requests (CRs) for ASC services throughout the year (January, 
April, July, and October). CMS releases new Level II codes to the 
public or recognizes the release of new CPT codes by the AMA and makes 
these codes effective (that is, the codes are recognized on Medicare 
claims) outside of the formal rulemaking process via these ASC 
quarterly update CRs. Thus, these quarterly updates are to implement 
newly created Level II HCPCS and Category III CPT codes for ASC payment 
and to update the payment rates for separately paid drugs and 
biologicals based on the most recently submitted ASP data. New Category 
I CPT codes, except vaccine codes, are released only once a year and, 
therefore, are implemented only through the January quarterly update. 
New Category I CPT vaccine codes are released twice a year and, 
therefore, are implemented through the January and July quarterly 
updates. We refer readers to Table 41 in the CY 2012 OPPS/ASC proposed 
rule for the process used to update the HCPCS and CPT codes (76 FR 
42291).
    In our annual updates to the ASC list of, and payment rates for, 
covered surgical procedures and covered ancillary services, we 
undertake a review of excluded surgical procedures (including all 
procedures newly proposed for removal from the OPPS inpatient list), 
new procedures, and procedures for which there is revised coding, 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 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.

[[Page 75065]]

B. Treatment of New Codes

1. Process for Recognizing New Category I and Category III CPT Codes 
and Level II HCPCS Codes
    Category I CPT, Category III CPT, and Level 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: (1) Category I CPT codes, which describe surgical procedures 
and vaccine codes; (2) Category III CPT codes, which describe new and 
emerging technologies, services, and procedures; and (3) Level II HCPCS 
codes, which are used primarily to identify products, supplies, 
temporary procedures, and services not described by CPT codes.
    We finalized a policy in the August 2, 2007 final rule to evaluate 
each year all new 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 (72 FR 42533 through 42535). In addition, we identify 
new codes as ASC covered ancillary services based upon the final 
payment policies of the revised ASC payment system.
    We have separated our discussion below into two sections based on 
whether we proposed to solicit public comments in the CY 2014 OPPS/ASC 
proposed rule (and respond to those comments in this CY 2014 OPPS/ASC 
final rule with comment period) or whether we are soliciting public 
comments in this CY 2014 OPPS/ASC final rule with comment period (and 
responding to those comments in the CY 2015 OPPS/ASC final rule with 
comment period).
    We note that we sought public comment in the CY 2013 OPPS/ASC final 
rule with comment period on the new Category I and III CPT and Level II 
HCPCS codes that were effective January 1, 2013. We also sought public 
comment in the CY 2013 OPPS/ASC final rule with comment period on the 
new Level II HCPCS codes effective October 1, 2012. These new codes, 
with an effective date of October 1, 2012, or January 1, 2013, were 
flagged with comment indicator ``NI'' in Addenda AA and BB to the CY 
2013 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 2013 OPPS/ASC final rule with comment period. In the proposed 
rule, we stated that we will respond to public comments and finalize 
the treatment of these codes under the ASC payment system in this CY 
2014 OPPS/ASC final rule with comment period.
2. Treatment of New Level II HCPCS Codes and Category III CPT Codes 
Implemented in April 2013 and July 2013 for Which We Solicited Public 
Comments in the CY 2014 OPPS/ASC Proposed Rule
    In the April 2013 and July 2013 CRs, we made effective for April 1, 
2013 and July 1, 2013, respectively, a total of nine new Level II HCPCS 
codes and two new Category III CPT codes that describe covered ASC 
services that were not addressed in the CY 2013 OPPS/ASC final rule 
with comment period.
    In the April 2013 ASC quarterly update (Transmittal 2662, CR 8237, 
dated March 1, 2013), we added one new surgical Level II HCPCS code and 
three new drug and biological Level II HCPCS codes to the list of 
covered surgical procedures and covered ancillary services, 
respectively. Table 33 of the CY 2014 OPPS/ASC proposed rule (78 FR 
43630) listed the new Level II HCPCS codes that were implemented April 
1, 2013, along with their proposed payment indicators for CY 2014.
    In the July 2013 quarterly update (Transmittal 2717, Change Request 
8328, dated May 31, 2013), we added one new surgical Level II HCPCS 
code to the list of covered surgical procedures and one new vaccine 
Level II HCPCS code, and three new drug and biological Level II HCPCS 
codes to the list of covered ancillary services. Table 34 of the CY 
2014 OPPS/ASC proposed rule, as corrected (78 FR 43630; Table 34 was 
corrected in the September 6, 2013 correcting document (78 FR 54845)) 
listed the new Level II HCPCS codes that were implemented July 1, 2013, 
along with their proposed payment indicators and proposed ASC payment 
rates for CY 2014.
    We assigned payment indicator ``K2'' (Drugs and biologicals paid 
separately when provided integral to a surgical procedure on the ASC 
list; payment based on OPPS rate) to the six new drug and biological 
Level II HCPCS codes that are separately paid when provided in ASCs. We 
assigned payment indicator ``L1'' (Influenza vaccine; pneumococcal 
vaccine; packaged item/service, no separate payment made) to the new 
vaccine Level II HCPCS code and payment indicator ``G2'' (Non-office-
based surgical procedure added in CY 2008 or later; payment based on 
OPPS relative payment weight) to the two new surgical Level II HCPCS 
codes.
    We solicited public comment on the proposed CY 2014 ASC payment 
indicators and payment rates for the covered surgical procedures and 
covered ancillary services listed in Tables 33 and 34 of the proposed 
rule, as corrected (78 FR 43630; Table 34 was corrected in the 
September 6, 2013 correcting document (78 FR 54845)). Those HCPCS codes 
became payable in ASCs beginning April 1, or July 1, 2013, and are paid 
at the ASC rates posted for the appropriate calendar quarter on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/11_Addenda_Updates.html.
    The HCPCS codes listed in Table 33 of the CY 2014 OPPS/ASC proposed 
rule (78 FR 43630) were included in Addenda AA or BB to the proposed 
rule, as corrected (which are available via the Internet on the CMS Web 
site). We note that all ASC addenda are only available via the Internet 
on the CMS Web site. Because the payment rates associated with the new 
Level II HCPCS codes that became effective July 1, 2013 (listed in 
Table 34 of the proposed rule, as corrected) were not available to us 
in time for incorporation into the Addenda to the OPPS/ASC proposed 
rule, our policy is to include these HCPCS codes and their proposed 
payment indicators and payment rates in the preamble to the proposed 
rule but not in the Addenda to the proposed rule. These codes and their 
final payment indicators and rates are included in the appropriate 
Addendum to this CY 2014 OPPS/ASC final rule with comment period. Thus, 
the codes implemented by the July 2013 ASC quarterly update CR and 
their proposed CY 2014 payment rates (based on July 2013 ASP data) that 
are displayed in Table 34 of the CY 2014 OPPS/ASC proposed rule as 
corrected (78 FR 43630; 78 FR 54845) were not included in Addenda AA or 
BB to the proposed rule, as corrected (which are available via the 
Internet on the CMS Web site). The final list of ASC covered surgical 
procedures and covered ancillary services and the associated payment 
weights and payment indicators are included in Addenda AA or BB to this 
CY 2014 OPPS/ASC final rule with comment period, consistent with our 
annual update policy.
    We solicited public comment on these proposed payment indicators 
and the proposed payment rates for the new Level II HCPCS codes that 
were newly recognized as ASC covered surgical procedures or covered 
ancillary services in April 2013 and July 2013 through the quarterly 
update CRs, as listed in Tables

[[Page 75066]]

33 and 34 of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 
43630; 78 FR 54845). We proposed to finalize their payment indicators 
and their payment rates in this CY 2014 OPPS/ASC final rule with 
comment period.
    We did not receive any public comments regarding our proposals. We 
are adopting as final for CY 2014 the ASC payment indicators for the 
ASC covered surgical procedures and covered ancillary services 
described by the new Level II HCPCS codes implemented in April and July 
2013 through the quarterly update CRs as shown below, in Tables 46 and 
47, respectively. These new HCPCS codes are also displayed in Addenda 
AA and BB to this final rule with comment period. We note that after 
publication of the CY 2014 OPPS/ASC proposed rule, the CMS HCPCS 
Workgroup created permanent HCPCS J-codes for CY 2014 to replace 
certain temporary HCPCS C-codes made effective for CY 2013. These 
permanent CY 2014 HCPCS J-codes are listed alongside the temporary CY 
2013 HCPCS C-codes in Tables 46 and 47 below.
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[GRAPHIC] [TIFF OMITTED] TR10DE13.348

    Through the July 2013 quarterly update CR, we also implemented ASC 
payment for two new Category III CPT codes as ASC covered ancillary 
services, effective July 1, 2013. These codes were listed in Table 35 
of the CY 2014 OPPS/ASC proposed rule, as corrected (78 FR 43631; Table 
35 was corrected in the September 6, 2013 correcting document

[[Page 75067]]

(78 FR 54845)), along with their proposed payment indicators and 
proposed payment rates for CY 2014. Because the payment rates 
associated with the new Category III CPT codes that became effective 
for July were not available to us in time for incorporation into the 
Addenda to the OPPS/ASC proposed rule, our policy is to include the 
codes, their proposed payment indicators, and proposed payment rates in 
the preamble to the proposed rule but not in the Addenda to the 
proposed rule. The codes listed in Table 35 of the CY 2014 OPPS/ASC 
proposed rule, as corrected (78 FR 43631; 78 FR 54845) and their final 
payment indicators and rates are included in Addendum BB to this CY 
2014 OPPS/ASC final rule with comment period.
    We proposed to assign payment indicator ``Z2'' (Radiology service 
paid separately when provided integral to a surgical procedure on ASC 
list; payment based on OPPS relative payment weight) to the two new 
Category III CPT codes implemented in July 2013. ASC covered ancillary 
services are certain items and services that are integrally related to 
the provision of ASC covered surgical procedures that are paid 
separately under the OPPS. We solicited public comment on the proposed 
payment indicators and the payment rates for the new Category III CPT 
codes that were newly recognized as ASC covered ancillary services in 
July 2013 through the quarterly update CR, as listed in Table 35 of the 
proposed rule, as corrected. We proposed to finalize their payment 
indicators and their payment rates in this CY 2014 OPPS/ASC final rule 
with comment period.
    We did not receive any public comments regarding this proposal. We 
are adopting as final for CY 2014 the ASC payment indicators for the 
covered ancillary services described by the new Category III CPT codes 
implemented in the July 2013 CR as shown in Table 48 below. The new CPT 
codes implemented in July 2013 are also displayed in Addendum BB to 
this final rule with comment period (which is available via the 
Internet on the CMS Web site).
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3. Process for New Level II HCPCS Codes and Category I and III CPT 
Codes for Which We Are Soliciting Public Comments in This CY 2014 OPPS/
ASC Final Rule With Comment Period
    As has been our practice in the past, we incorporate those new 
Category I and Category III CPT codes and new Level II HCPCS codes that 
are effective January 1 in the final rule with comment period updating 
the ASC payment system for the following calendar year. These codes are 
released to the public via the CMS HCPCS (for Level II HCPCS codes) and 
AMA Web sites (for CPT codes), and also through the January ASC 
quarterly update CRs. In the past, we also have released new Level II 
HCPCS codes that are effective October 1 through the October ASC 
quarterly update CRs and incorporated these new codes in the final rule 
with comment period updating the ASC payment system for the following 
calendar year. All of these codes are flagged with comment indicator 
``NI'' in Addenda AA and BB to the OPPS/ASC final rule with comment 
period to indicate that we are assigning them an interim payment status 
which is subject to public comment. The payment indicator and payment 
rate, if applicable, for all such codes flagged with comment indicator 
``NI'' are open to public comment in the OPPS/ASC final rule with 
comment period, and we respond to these comments in the final rule with 
comment period for the next calendar year's OPPS/ASC update.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43631), we proposed to 
continue this process for CY 2014. Specifically, for CY 2014, we 
proposed to include in Addenda AA and BB to the CY 2014 OPPS/ASC final 
rule with comment period the new Category I and III CPT codes effective 
January 1, 2014, that would be incorporated in the January 2014 ASC 
quarterly update CR and the new Level II HCPCS codes, effective October 
1, 2013 or January 1, 2014, that would be released by CMS in its 
October 2013 and January 2014 ASC quarterly update CRs. We stated that 
these codes would be flagged with comment indicator ``NI'' in Addenda 
AA and BB to this CY 2014 OPPS/ASC final rule with comment period to 
indicate that we have assigned them an interim payment status. We also 
stated that their payment indicators and payment rates, if applicable, 
would be open to public comment in the CY 2014 OPPS/ASC final rule with 
comment period and would be finalized in the CY 2015 OPPS/ASC final 
rule with comment period.
    We did not receive any public comments regarding this proposed 
process. For CY 2014, we are finalizing our proposal, without 
modification, to continue our established process for recognizing and 
soliciting public comments on new Level II HCPCS codes and Category I 
and III CPT codes that become effective on October 1, 2013, or January 
1, 2014, as described above.

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

1. Covered Surgical Procedures
a. Additions to the List of ASC Covered Surgical Procedures
    We conducted a review of all HCPCS codes that currently are paid 
under the

[[Page 75068]]

OPPS, but not included on the ASC list of covered surgical procedures, 
to determine if changes in technology and/or medical practice affected 
the clinical appropriateness of these procedures for the ASC setting. 
Upon review, we did not identify any procedures that are currently 
excluded from the ASC list of procedures that met the definition of a 
covered surgical procedure based on our expectation that they would not 
pose a significant safety risk to Medicare beneficiaries or would 
require an overnight stay if performed in ASCs. Therefore, in the CY 
2014 OPPS/ASC proposed rule (78 FR 43631), we did not propose additions 
to the list of ASC covered surgical procedures for CY 2014.
    Comment: One commenter reiterated a previous request that, with 
knowledge of the anatomic location, CMS should apply the safety 
criteria to the entire spectrum of services reportable by an unlisted 
code. The commenter believed that, under such an analysis, CMS would 
determine that the following unlisted codes associated with eye 
procedures would not compromise patient safety and, therefore, should 
be added to the list of ASC covered surgical procedures: CPT code 66999 
(Unlisted procedure, anterior segment of eye); CPT code 67299 (Unlisted 
procedure, posterior segment); CPT code 67399 (Unlisted procedure, 
ocular muscle); CPT code 67999 (Unlisted procedure, eyelids); CPT code 
68399 (Unlisted procedure, conjunctiva); and CPT code 68899 (Unlisted 
procedure, lacrimal system).
    Response: As we have stated in the past (72 FR 42484 through 42486; 
75 FR 72032 through 72033; 76 FR 74380; and 77 FR 68439), procedures 
that are reported by the CPT unlisted codes are not eligible for 
addition to the ASC list because we do not know what specific procedure 
would be represented by an unlisted code. Our charge requires us to 
evaluate each surgical procedure for potential safety risk and expected 
need for overnight monitoring and to exclude from ASC payment 
procedures that would be expected to pose a threat to beneficiary 
safety or require active medical monitoring at midnight following the 
procedure. It is not possible to evaluate procedures that would be 
reported by unlisted CPT codes according to these criteria. This final 
policy is discussed in detail in the August 2, 2007 final rule (72 FR 
42484 through 42486).
    Comment: Commenters requested that CMS add the procedures described 
by the 54 CPT codes displayed in Table 49 below to the list of ASC 
covered surgical procedures. The commenters argued that these 
procedures are as safe as procedures that are currently on the list of 
ASC covered procedures and, based on a survey, ASCs report positive 
outcomes when these procedures are performed on non-Medicare patients.
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[[Page 75069]]

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[[Page 75070]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.351

    Response: We reviewed all of the eligible surgical procedures that 
commenters requested for addition to the ASC list of covered surgical 
procedures. Of the 54 requested procedures requested for addition to 
the ASC list, we did not review the 6 procedures that are reported by 
CPT codes that are on the OPPS inpatient only list (identified with one 
asterisk in Table 49) or the 2 procedures that may be reported by CPT 
unlisted codes because these codes are not eligible for addition to the 
ASC list (identified with two asterisks in Table 49), consistent with 
our final policy which is discussed in detail in the August 2, 2007 
final rule (72 FR 42484 through 42486; 42 CFR 416.171(c)). In addition, 
we did not review the 7 procedures reported by CPT codes that are 
already on the ASC list of covered surgical procedures (identified with 
three asterisks in Table 49).
    With regard to the remaining 39 procedures in Table 49 that 
commenters requested be added to the list of ASC covered surgical 
procedures, we do not agree that all of the procedures are appropriate 
for provision to Medicare beneficiaries in ASCs. Although the 
commenters asserted that the procedures they were requesting for 
addition to the list are as safe as procedures already on the list, our 
review did not support those assertions. We exclude from ASC payment 
any procedure for which standard medical practice dictates that the 
beneficiary who undergoes the procedure would typically be expected to 
require active medical monitoring and care at midnight following the 
procedure (overnight stay) as well as all surgical procedures that our 
medical advisors determine may be expected to pose a significant safety 
risk to Medicare beneficiaries when performed in an ASC. The criteria 
used under the revised ASC payment system to identify procedures that 
would be expected to pose a significant safety risk when performed in 
an ASC include, but are not limited to, those 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); can only be reported using a CPT unlisted 
surgical procedure code; or are otherwise excluded under Sec.  411.15 
(we refer readers to Sec.  416.166).
    In our review of the procedures listed in Table 49, we found that 
many of the

[[Page 75071]]

procedures either would be expected to pose a threat to beneficiary 
safety or require active medical monitoring at midnight following the 
procedure. Specifically, we found that prevailing medical practice 
called for inpatient hospital stays for beneficiaries undergoing many 
of the procedures and that some of the procedures directly involve 
major blood vessels and/or may result in extensive blood loss. However, 
we agree with commenters that the procedures described by CPT codes 
27415, 27524, 60240, and 60500 meet the criteria under Sec.  416.166 
and would be safely performed in the ASC setting and would not require 
overnight stays. We are adding these CPT codes to the ASC list of 
covered surgical procedures for CY 2014.
    After consideration of the public comments we received, we are 
finalizing the addition of the four procedures requested by the 
commenters to the CY 2014 list of ASC covered surgical procedures. The 
procedures, their descriptors, and payment indicators are displayed in 
Table 50 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.352

b. 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 list of covered surgical procedures in CY 2008 or later years that 
we determine are performed predominantly (more than 50 percent of the 
time) in physicians' offices based on consideration of the most recent 
available volume and utilization data for each individual procedure 
code and/or, if appropriate, the clinical characteristics, utilization, 
and volume of related codes. In that rule, we also finalized our policy 
to exempt all procedures on the CY 2007 ASC list from application of 
the office-based classification (72 FR 42512). The procedures that were 
added to the ASC list of covered surgical procedures beginning in CY 
2008 that we determined were office-based were identified in Addendum 
AA to that rule by payment indicator ``P2'' (Office-based surgical 
procedure added to ASC list in CY 2008 or later with MPFS nonfacility 
PE RVUs; payment based on OPPS relative payment weight); ``P3'' 
(Office-based surgical procedures added to ASC list in CY 2008 or later 
with MPFS nonfacility PE RVUs; payment based on MPFS nonfacility PE 
RVUs); or ``R2'' (Office-based surgical procedure added to ASC list in 
CY 2008 or later without MPFS nonfacility PE RVUs; payment based on 
OPPS relative payment weight), depending on whether we estimated it 
would be paid according to the standard ASC payment methodology based 
on its OPPS relative payment weight or at the MPFS nonfacility PE RVU-
based amount.
    Consistent with our final policy to annually review and update the 
list of surgical procedures eligible for payment in ASCs, each year we 
identify surgical procedures as either temporarily office-based, 
permanently office-based, or non-office-based, after taking into 
account updated volume and utilization data.
(2) Changes for CY 2014 to Covered Surgical Procedures Designated as 
Office-Based
    In developing the CY 2014 OPPS/ASC proposed rule, we followed our 
policy to annually review and update the surgical procedures for which 
ASC payment is made and to identify new procedures that may be 
appropriate for ASC payment, including their potential designation as 
office-based. We reviewed CY 2012 volume and utilization data and the 
clinical characteristics for all surgical procedures that are assigned 
payment indicator ``G2'' (Non-office-based surgical procedure added in 
CY 2008 or later; payment based on OPPS relative payment weight) in CY 
2013, as well as for those procedures assigned one of the temporary 
office-based payment indicators, specifically ``P2*,'' ``P3*,'' or 
``R2*'' in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68444 through 68448).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43632), we stated that 
our review of the CY 2012 volume and utilization data resulted in our 
identification of three covered surgical procedures that we believe 
meet the criteria for designation as office-based. We stated that the 
data indicated that these procedures are performed more than 50 percent 
of the time in physicians' offices and that our medical advisors 
believe the services are of a level of complexity consistent with other 
procedures performed routinely in physicians' offices. The three CPT 
codes we proposed to permanently designate as office-based were listed 
in Table 36 of the CY 2014 OPPS/ASC proposed rule (78 FR 43632). We 
invited public comment on this proposal.
    Comment: One commenter disagreed with the policy to make payment at 
the lower of the ASC rate or the MPFS nonfacility PE RVU payment amount 
for procedures that CMS identifies as office-based. This commenter 
expressed concern that this policy does not provide adequate payment 
for some services performed in an ASC.
    Response: We have responded to this comment in the past and we 
continue to believe that our policy of identifying low complexity 
procedures that are usually provided in physicians' offices

[[Page 75072]]

and limiting their payment in ASCs to the physician's office payment 
amount is necessary and valid. We believe this is the most appropriate 
approach to prevent payment incentives for services to move from 
physicians' offices to ASCs for the many newly covered low complexity 
procedures on the ASC list. We refer readers to our response to this 
comment in the CY 2010, CY 2011, CY 2012, and CY 2013 OPPS/ASC final 
rules with comment period (74 FR 60605 through 60607; 75 FR 72034 
through 72036; 76 FR 74401; and 77 FR 68444 through 68445, 
respectively).
    Comment: One commenter believed that the procedure described by CPT 
code 37761 (Ligation of perforator vein(s), subfascial, open, including 
ultrasound guidance, when performed, 1 leg) should not be designated as 
office-based. This commenter suggested that inaccurate coding for place 
of service results in the volume and utilization data indicating that 
the procedure is performed more than 50 percent of the time in 
physicians' offices and that the level of complexity associated with 
CPT code 37761 is not consistent with other procedures performed 
routinely in physicians' offices.
    Response: Our review of the CY 2012 volume and utilization data 
indicates that CPT code 37761 is performed 53 percent of the time in 
physicians' offices. Our policy is to designate as office-based those 
procedures that are performed more than 50 percent of the time in 
physicians' offices; therefore, we are designating CPT code 37761 as 
office-based for CY 2014 as we proposed.
    After consideration of the public comments we received, we are 
finalizing our CY 2014 proposal to designate the procedures described 
by CPT codes 26341, 36595, and 37761 as permanently office-based as 
displayed in Table 51 below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.353

    We also reviewed CY 2012 volume and utilization data and other 
information for the eight procedures finalized for temporary office-
based status in Table 51 and Table 53 in the CY 2013 OPPS/ASC final 
rule with comment period (77 FR 68442 through 68444 and 68448). Among 
these eight procedures, there were very few claims data for four 
procedures: CPT code 0099T (Implantation of intrastromal corneal ring 
segments); CPT code 0124T (Conjunctival incision with posterior 
extrascleral placement of pharmacological agent (does not include 
supply of medication)); CPT code C9800 (Dermal injection procedure(s) 
for facial lipodystrophy syndrome (LDS) and provision of Radiesse or 
Sculptra dermal filler, including all items and supplies); and CPT code 
67229 (Treatment of extensive or progressive retinopathy, one or more 
sessions; preterm infant (less than 37 weeks gestation at birth), 
performed from birth up to 1 year of age (e.g., retinopathy of 
prematurity), photocoagulation or cryotherapy). Consequently, we 
proposed to maintain their temporary office-based designations for CY 
2014.
    The volume and utilization data for one procedure that has a 
temporary office-based designation for CY 2013, CPT code 0227T 
(Anoscopy, high resolution (HRA) (with magnification and chemical agent 
enhancement); with biopsy(ies)), is sufficient to indicate that this 
procedure is not performed predominantly in physicians' offices and, 
therefore, should not be assigned an office-based payment indicator in 
CY 2014. Consequently, we proposed to

[[Page 75073]]

assign payment indicator ``G2'' to this covered surgical procedure code 
in CY 2014 (78 FR 43632).
    The three remaining procedures that have temporary office-based 
designations for CY 2013 were proposed to be packaged under the OPPS 
for CY 2014 as discussed in section II.A.3. of the proposed rule. 
Consequently, we proposed to assign payment indicator ``N1'' to the 
following three covered surgical procedure codes in CY 2014:
     CPT code 0226T (Anoscopy, high resolution (HRA) (with 
magnification and chemical agent enhancement); diagnostic, including 
collection of specimen(s) by brushing or washing when performed);
     CPT code 0299T (Extracorporeal shock wave for 
integumentary wound healing, high energy, including topical application 
and dressing care; initial wound); and
     CPT code 0300T (Extracorporeal shock wave for 
integumentary wound healing, high energy, including topical application 
and dressing care; each additional wound (list separately in addition 
to code for primary procedure)).
    The proposed CY 2014 payment indicator designations for the eight 
procedures that were temporarily designated as office-based in CY 2013 
were displayed in Table 37 of the CY 2014 OPPS/ASC proposed rule (78 FR 
43632 through 43633). The procedures for which the proposed office-
based designations for CY 2014 are temporary also were indicated by 
asterisks in Addendum AA to the proposed rule, as corrected (which is 
available via the Internet on the CMS Web site). We invited public 
comment on these proposals.
    We did not receive any public comments on these proposals. For CY 
2014, we are finalizing our proposal, without modification, to continue 
to designate four of the eight procedures (listed in Table 37 of the CY 
2014 OPPS/ASC proposed rule (78 FR 43632 through 43633) and restated in 
Table 52 below), which were designated as temporarily office-based for 
CY 2013, as temporarily office-based for CY 2014. In addition, we are 
finalizing our proposal to not designate CPT code 0227T (Anoscopy, high 
resolution (HRA) (with magnification and chemical agent enhancement); 
with biopsy(ies)) as office-based in CY 2014 and are assigning payment 
indicator ``G2'' to this code. Finally, we are finalizing our proposal 
to assign payment indicator ``N1'' to HCPCS code 0300T because this 
procedure will be packaged under the OPPS for CY 2014. However, we are 
not finalizing our proposal to package the procedures identified by 
HCPCS codes 0226T and 0299T under the OPPS. We reviewed CY 2012 volume 
and utilization data and other information for HCPCS codes 0226T and 
0299T which had temporary office-based designations in CY 2013. Because 
there are very few claims reporting HCPCS codes 0226T and 0299T, we 
will maintain their temporary office-based designations for CY 2014.
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    As we discuss in section XII.B.3. of the CY 2014 OPPS/ASC proposed 
rule (78 FR 43631) and this final rule with comment period, we 
incorporate new Category I and Category III CPT codes and new Level II 
HCPCS codes that are effective October 1, 2013 and January 1, 2014 in 
this final rule with comment period. Because these codes were not 
available to us until after the CY 2014 OPPS/ASC proposed rule was 
published, these codes were not included in that rule. After reviewing 
the clinical characteristics, utilization, and volume of related codes, 
we determined that two of the procedures described by new CPT codes 
would be predominantly performed in physicians' offices. However, 
because we had no utilization data for the procedures specifically 
described by these new CPT

[[Page 75075]]

codes, we made the office-based designations temporary rather than 
permanent and we will reevaluate the procedures when data become 
available.
    The temporary payment indicators for the two office-based 
procedures displayed in Table 53 below are flagged with comment 
indicator ``NI'' in Addendum AA to this OPPS/ASC final rule with 
comment period to indicate that we are assigning them an interim 
payment status which is subject to public comment. We will respond to 
any public comments received in the CY 2015 OPPS/ASC final rule with 
comment period.
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c. ASC Covered Surgical Procedures Designated as Device-Intensive
(1) Background
    As discussed in the August 2, 2007 final rule (72 FR 42503 through 
42508), we adopted a modified payment methodology for calculating the 
ASC payment rates for covered surgical procedures that are assigned to 
the subset of OPPS device-dependent APCs with a device offset 
percentage greater than 50 percent of the APC cost under the OPPS, in 
order to ensure that payment for the procedure is adequate to provide 
packaged payment for the high-cost implantable devices used in those 
procedures.
(2) Changes to List of ASC Covered Surgical Procedures Designated as 
Device-Intensive for CY 2014
    As discussed in section II.A.2.e of the CY 2014 OPPS/ASC proposed 
rule (78 FR 43558 through 43561), for CY 2014, we proposed to create 29 
comprehensive APCs to replace 29 of the most costly device-dependent 
APCs under the OPPS. We proposed to define a comprehensive APC as a 
classification for the provision of a primary service and all 
adjunctive services provided to support the delivery of the primary 
service. Because a comprehensive APC would treat all individually 
reported codes as representing components of the comprehensive service, 
our OPPS proposal is to make a single prospective payment based on the 
cost of all individually reported codes that represent the provision of 
a primary service and all adjunctive services provided to support the 
delivery of the primary service. We proposed to apply our standard APC 
ratesetting methodology to the remaining 10 device-dependent APCs to 
calculate their CY 2014 OPPS payment rates.
    Unlike the OPPS claims processing system that can be configured to 
make a single payment for the encounter-based comprehensive service 
whenever a HCPCS code that is assigned to a comprehensive APC appears 
on the claim, the ASC claims-processing system does not allow for this 
type of conditional packaging. Therefore, we proposed that all 
separately paid OPPS ancillary services that are provided integral to 
surgical procedures that map to comprehensive APCs would continue to be 
separately paid under the ASC payment system instead of being packaged 
into the payment for the comprehensive APC as under the OPPS. In 
addition, to avoid duplicate payment for separately paid ancillary 
services provided integral to the surgical procedure because the OPPS 
relative weights for comprehensive APCs include costs for ancillary 
services, we proposed that the ASC payment rates and device offset 
amounts for comprehensive APCs would be based on the CY 2014 OPPS 
relative payments weights that have been calculated using the standard 
APC ratesetting methodology instead of the relative payment weights 
that are based on the comprehensive service.
    Payment rates for ASC device-intensive procedures are based on a 
modified payment methodology to ensure that payment for the procedure 
is adequate to provide packaged payment for the high-cost implantable 
devices used in those procedures. Device-intensive procedures are 
currently defined as those procedures that are assigned to device-
dependent APCs with a device offset percentage greater than 50 percent 
of the APC cost under the OPPS. Because we proposed to create 
comprehensive APCs to replace 29 of the 39 device-dependent APCs under 
the OPPS, we proposed to define ASC device-intensive procedures as 
those procedures that are assigned to any APC with a device offset 
percentage

[[Page 75076]]

greater than 50 percent based on the standard OPPS APC ratesetting 
methodology. We proposed changes to Sec.  416.171(b)(2) to reflect this 
proposal.
    We also proposed to update the ASC list of covered surgical 
procedures that are eligible for payment according to our device-
intensive procedure payment methodology, consistent with this modified 
definition of device-intensive procedures, reflecting the proposed APC 
assignments of procedures and APC device offset percentages based on 
the CY 2012 OPPS claims and cost report data available for the proposed 
rule.
    The ASC covered surgical procedures that we proposed to designate 
as device-intensive and that would be subject to the device-intensive 
procedure payment methodology for CY 2014 were listed in Table 38 of 
the CY 2014 OPPS/ASC proposed rule (78 FR 43634 through 43635). The CPT 
code, the CPT code short descriptor, the proposed CY 2014 ASC payment 
indicator (PI), the proposed CY 2014 OPPS APC assignment, the proposed 
CY 2014 OPPS APC device offset percentage, and an indication if the 
full credit/partial credit (FB/FC) device adjustment policy would apply 
were also listed in Table 38. All of these procedures were included in 
Addendum AA to the proposed rule, as corrected (which is available via 
the Internet on the CMS Web site). We invited public comment on this 
proposal.
    Comment: Some commenters expressed the same general concerns made 
in previous rulemakings regarding the sufficiency of ASC payment for 
device-related services and recommended modifications to the ASC 
device-intensive payment methodology. The commenters argued that CMS 
should apply the device-intensive payment methodology to all procedures 
for which CMS can establish a median device cost and not just to the 
procedures where the device offset percentage is greater than 50 
percent of the APC cost under the OPPS. In a related suggestion, some 
commenters urged CMS to establish the threshold used to determine 
device-intensive procedures at 50 percent of the ``unadjusted'' ASC 
payment rate (OPPS relative weight multiplied by the ASC conversion 
factor) instead of the OPPS payment rate. The commenters also made the 
same argument as made in prior rulemakings--that CMS should not adjust 
the device portion of the ASC payment for device-intensive procedures 
by the wage index.
    Response: In the August 2, 2007 final rule (72 FR 42504), we 
established a modified payment methodology for calculating ASC payment 
rates for device-intensive procedures under the ASC payment system. We 
defined device-intensive procedures as those procedures that are 
assigned to device-dependent APCs under the OPPS with device costs of 
greater than 50 percent of the APC cost (that is, the device offset 
percentage is greater than 50). In the CY 2014 OPPS/ASC proposed rule 
(78 FR 43558 through 43561), we proposed to create comprehensive APCs 
to replace 29 of the 39 device-dependent APCs under the OPPS. Because 
of this proposed change for the OPPS, we proposed to define ASC device-
intensive procedures as those procedures that are assigned to any APC 
with a device offset percentage greater than 50 percent. Because we are 
not implementing the comprehensive APC policy under the OPPS until CY 
2015, as discussed in section II.A.2.e. of this final rule with comment 
period, we are not finalizing this proposal for the ASC payment system 
and will continue to use our current definition of device-intensive 
procedures.
    We do not agree with the commenters that the device-intensive 
methodology should be applied to all procedures where a device offset 
can be established. Nor do we agree with the commenters who suggested 
using a threshold to determine device-intensive procedures that is 
based on 50 percent of the ASC payment rate instead of the OPPS payment 
rate. We continue to believe that when device costs comprise 50 percent 
or less of total procedure costs, those costs are less likely to be as 
predictable across sites-of-service. Accordingly, we believe that it is 
possible for ASCs to achieve efficiencies relative to HOPDs when 
providing those procedures, and that the application of the ASC 
conversion factor to the entire ASC payment weight is appropriate. We 
refer readers to our response to this comment in the CY 2010, CY 2011, 
CY 2012, and CY 2013 OPPS/ASC final rules with comment period (74 FR 
60608 and 60609; 75 FR 72039; 76 FR 74409; and 77 FR 68449, 
respectively).
    We also continue to believe it would not be appropriate to vary the 
portion of the national payment that is wage-adjusted for different 
services, such as applying the wage index only to the service portion 
of the ASC payment for device-intensive procedures, as the commenters 
requested, because our ASC policy is to be consistent with the OPPS 
because ASC payment rates are based on the OPPS relative payment 
weights. Therefore, we apply the ASC geographic wage adjustment to the 
entire ASC payment rate for device-intensive procedures. We refer 
readers to our response to this comment in the CY 2009, CY 2010, CY 
2011, CY 2012 and CY 2013 OPPS/ASC final rules with comment period (73 
FR 68735; 74 FR 60608 through 60609; 75 FR 72039; 76 FR 74409; and 77 
FR 68449, respectively).
    As indicated in section II.A.2.e of this final rule with comment 
period, after consideration of the public comments we received 
regarding the proposed OPPS comprehensive APC policy, we are finalizing 
our proposal to create 29 comprehensive APCs to replace 29 of the most 
costly device dependent APCs under the OPPS, but we will not implement 
the comprehensive APC policy until CY 2015. Therefore, under the ASC 
payment system, we are not finalizing our proposal to revise Sec.  
416.171(b)(2) to define ASC device-intensive procedures as those 
procedures that are assigned to any APC with a device offset percentage 
greater than 50 percent. For CY 2014, we will continue to define ASC 
device-intensive procedures as those procedures that are assigned to 
device-dependent APCs under the OPPS with device costs greater than 50 
percent of the APC cost. We are updating the ASC list of covered 
surgical procedures that are eligible for payment according to our 
current device-intensive procedure payment methodology and reflecting 
the APC assignments of procedures and APC device offset percentages 
based on the CY 2012 OPPS claims and cost report data available for 
this final rule with comment period. We are designating the ASC covered 
surgical procedures displayed in Table 54 below as device-intensive and 
subject to the device-intensive procedure payment methodology for CY 
2014. The CPT code, the CPT code short descriptor, the final CY 2014 
ASC payment indicator (PI), the final CY 2014 OPPS APC assignment, the 
final CY 2014 OPPS APC device offset percentage, and an indication if 
the full credit/partial credit (FB/FC) device adjustment policy will 
apply, also are listed in Table 54 of this final rule with comment 
period. All of these procedures are included in Addendum AA to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).
d. Adjustment to ASC Payments for No Cost/Full Credit and Partial 
Credit Devices
    Our ASC policy with regard to payment for costly devices implanted 
in ASCs at no cost/full credit or partial credit as set forth in Sec.  
416.179 is consistent with the current OPPS policy. The established ASC 
policy adopts the OPPS policy and reduces payment to ASCs when a 
specified

[[Page 75077]]

device is furnished without cost or with full credit or partial credit 
for the cost of the device for those ASC covered surgical procedures 
that are assigned to APCs under the OPPS to which this policy applies. 
We refer readers to the CY 2009 OPPS/ASC final rule with comment period 
for a full discussion of the ASC payment adjustment policy for no cost/
full credit and partial credit devices (73 FR 68742 through 68744).
    As discussed in section IV.B. of the CY 2014 OPPS/ASC proposed rule 
(78 FR 43596 through 43598), we proposed to modify our existing policy 
of reducing OPPS payment for specified APCs when a hospital furnishes a 
specified device without cost or with a full or partial credit. 
Currently under the OPPS, our policy is 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 proposed to reduce OPPS payment for applicable 
APCs by the full or partial credit a provider receives for a replaced 
device.
    Although we proposed 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, we proposed to maintain our current ASC 
policy for reducing payments to ASCs for specified device-intensive 
procedures when the ASC furnishes a device without cost or with full or 
partial credit. Unlike the OPPS, there is currently no mechanism within 
the ASC claims processing system for ASCs to submit to CMS the actual 
amount received when furnishing a specified device at full or partial 
credit. Therefore, under the ASC payment system, we proposed 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. We also proposed to update 
the list of ASC covered device-intensive procedures that would be 
subject to the no cost/full credit and partial credit device adjustment 
policy for CY 2014. Table 38 of the CY 2014 OPPS/ASC proposed rule (78 
FR 43634 through 43635) displays the ASC covered device-intensive 
procedures that we proposed would be subject to the no cost/full credit 
or partial credit device adjustment policy for CY 2014. Specifically, 
when a procedure that was listed in Table 38 is subject to the no cost/
full credit or partial credit device adjustment policy and is performed 
to implant a device that is furnished at no cost or with full credit 
from the manufacturer, the ASC would append the HCPCS ``FB'' modifier 
on the line with the procedure to implant the device. The contractor 
would reduce payment to the ASC by the device offset amount that we 
estimate represents the cost of the device when the necessary device is 
furnished without cost to the ASC or with full credit. We continue to 
believe that the reduction of ASC payment in these circumstances is 
necessary to pay appropriately for the covered surgical procedure being 
furnished by the ASC.
    For partial credit, we proposed to reduce the payment for 
implantation procedures listed in Table 38 that are subject to the no 
cost/full credit or partial credit device adjustment policy 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 of the cost of the new device. The ASC would append the 
HCPCS ``FC'' modifier to the HCPCS code for a surgical procedure listed 
in Table 38 that is subject to the no cost/full credit or partial 
credit device adjustment policy, when the facility receives a partial 
credit of 50 percent or more of the cost of a device. In order to 
report that they received a partial credit of 50 percent or more of the 
cost of a new device, ASCs would have the option of either: (1) 
Submitting the claim for the device replacement procedure to their 
Medicare contractor after the procedure's performance but prior to 
manufacturer acknowledgment of credit for the device, and subsequently 
contacting the contractor regarding a claim adjustment once the credit 
determination is made; or (2) holding the claim for the device 
implantation procedure until a determination is made by the 
manufacturer on the partial credit and submitting the claim with the 
``FC'' modifier appended to the implantation procedure HCPCS code if 
the partial credit is 50 percent or more of the cost of the replacement 
device. Beneficiary coinsurance would continue to be based on the 
reduced payment amount. We invited public comment on these proposals.
    We did not receive any comments on our CY 2014 proposal to continue 
the no cost/full credit and partial credit device adjustment policy for 
ASCs. For CY 2014, as proposed, we will reduce the payment for the 
device implantation procedures listed in Table 54 below that are 
subject to the adjustment by the full device offset amount if a device 
is furnished without cost or with full credit. ASCs must append the 
HCPCS modifier ``FB'' to the HCPCS code for a surgical procedure listed 
in Table 54 below when the device is furnished without cost or with 
full credit. In addition, for CY 2014, we will reduce the payment for 
the device implantation procedures listed in Table 54 below that are 
subject to the adjustment by one half of the device offset amount if a 
device is provided with partial credit, if the credit to the ASC is 50 
percent or more of the device cost. The ASC must append the HCPCS 
``FC'' modifier to the HCPCS code for a surgical procedure listed in 
Table 54 below that is subject to the partial credit device adjustment 
policy when the facility receives a partial credit of 50 percent or 
more of the cost of a device.
BILLING CODE 4120-01-P

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e. ASC Treatment of Surgical Procedures Removed From the OPPS Inpatient 
List for CY 2014
    As we discussed in the CY 2009 OPPS/ASC final rule with comment 
period (73 FR 68724), we adopted a policy to include in our annual 
evaluation of the ASC list of covered surgical procedures, a review of 
the procedures that are being proposed for removal from the OPPS 
inpatient list for possible inclusion on the ASC list of covered 
surgical procedures. There are no procedures proposed for removal from 
the OPPS inpatient list for CY 2014, so in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43636) we did not propose any procedures for 
possible inclusion on the ASC list of covered surgical procedures under 
this section.
2. Covered Ancillary Services
    Consistent with the established ASC payment system policy, we 
proposed to update the ASC list of covered ancillary services to 
reflect the proposed payment status for the services under the CY 2014 
OPPS. Maintaining consistency with the OPPS may result in proposed 
changes to ASC payment indicators for some covered ancillary items and 
services because of changes that are being proposed under the OPPS for 
CY 2014. For example, a covered ancillary service that was separately 
paid under the revised ASC payment system in CY 2013 may be proposed 
for packaged status under the CY 2014 OPPS and, therefore, also under 
the ASC payment system for CY 2014. More specifically, as discussed in 
section II.A.3. of the CY 2014 OPPS/ASC proposed rule (78 FR 43568 
through 43576), we proposed to package the following categories of 
ancillary or adjunctive services under the OPPS for CY 2014: 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; clinical 
diagnostic laboratory tests; procedures described by add-on codes; 
ancillary services (status indicator ``X''); diagnostic tests on the 
bypass list; and device removal procedures.
    To maintain consistency with the OPPS, we proposed that these 
services also would be packaged under the ASC payment system for CY 
2014. Comment indicator ``CH,'' discussed in section XII.F. of the 
proposed rule (78 FR 43639), was used in Addendum BB to the proposed 
rule, as corrected (which is available via the Internet on the CMS Web 
site) 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 2014.
    Except for the Level II HCPCS codes and Level III CPT codes listed 
in Table 34 and Table 35 of the CY 2014 OPPS/ASC proposed rule, as 
corrected (78 FR 43630 through 43631; 78 FR 54845), all ASC covered 
ancillary services and their proposed payment indicators for CY 2014 
were included in Addendum BB to the proposed rule, as corrected. We 
invited public comment on this proposal.
    We did not receive any public comments on our proposal. Therefore, 
we are finalizing, without modification, our proposal to update the ASC 
list of covered ancillary services to reflect the payment status for 
the services under the OPPS. All CY 2014 ASC covered ancillary services 
and their final payment indicators are included in Addendum BB to this 
final rule with comment period (which is available via the Internet on 
the CMS Web site).

[[Page 75081]]

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

1. ASC Payment for Covered Surgical Procedures
a. Background
    Our ASC payment policies for covered surgical procedures under the 
revised ASC payment system are fully described in the CY 2008 OPPS/ASC 
final rule with comment period (72 FR 66828 through 66831). Under our 
established policy for the revised ASC payment system, the ASC standard 
ratesetting methodology of multiplying the ASC relative payment weight 
for the procedure by the ASC conversion factor for that same year is 
used 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 were, therefore, subject to 
transitional payment prior to CY 2011. Although the 4-year transitional 
period has ended and payment indicator ``A2'' is no longer required to 
identify surgical procedures subject to transitional payment, we 
retained payment indicator ``A2'' because it is used to identify 
procedures that are exempted from application of the office-based 
designation.
    The rate calculation established for device-intensive procedures 
(payment indicator ``J8'') is structured so that the packaged device 
payment amount is the same as under the OPPS, and only the service 
portion of the rate is subject to the ASC standard ratesetting 
methodology. In the CY 2013 OPPS/ASC final rule with comment period (77 
FR 68434 through 68467), we updated the CY 2012 ASC payment rates for 
ASC covered surgical procedures with payment indicators of ``A2,'' 
``G2,'' and ``J8'' using CY 2011 data, consistent with the CY 2013 OPPS 
update. Payment rates for device-intensive procedures also were updated 
to incorporate the CY 2013 OPPS device offset percentages.
    Payment rates for office-based procedures (payment indicators 
``P2,'' ``P3,'' and ``R2'') are the lower of the MPFS nonfacility PE 
RVU-based amount (we refer readers to the CY 2014 MPFS final rule with 
comment period) or the amount calculated using the ASC standard 
ratesetting methodology for the procedure. In the CY 2013 OPPS/ASC 
final rule with comment period, we updated the payment amounts for 
office-based procedures (payment indicators ``P2,'' ``P3,'' and ``R2'') 
using the most recent available MPFS and OPPS data. We compared the 
estimated CY 2013 rate for each of the office-based procedures, 
calculated according to the ASC standard ratesetting methodology, to 
the MPFS nonfacility PE RVU-based amount to determine which was lower 
and, therefore, would be the CY 2013 payment rate for the procedure 
according to the final policy of the revised ASC payment system (Sec.  
416.171(d)).
b. Update to ASC Covered Surgical Procedure Payment Rates for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43636 through 43637), 
we proposed to update ASC payment rates for CY 2014 using the 
established rate calculation methodologies under Sec.  416.171 and 
using our proposed modified definition for device-intensive procedures 
as discussed above. Because the proposed OPPS relative payment weights 
are based on geometric mean costs for CY 2014, the ASC system will use 
geometric means 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 that payment rates for office-based procedures (payment 
indicators ``P2,'' ``P3,'' and ``R2'') and device-intensive procedures 
(payment indicator ``J8'') be calculated according to our established 
policies, incorporating the device-intensive procedure methodology as 
appropriate. Thus, we proposed to update the payment amounts for 
device-intensive procedures, using our proposed modified definition of 
device intensive procedures, based on the CY 2014 OPPS device offset 
percentages that have been calculated using the standard APC 
ratesetting methodology, and to make payment for office-based 
procedures at the lesser of the proposed CY 2014 MPFS nonfacility PE 
RVU-based amount or the proposed CY 2014 ASC payment amount calculated 
according to the standard ratesetting methodology. We invited public 
comment on these proposals.
    Comment: With regard to device removal procedures, commenters 
recommended that CMS modify its policy to package procedures in the ASC 
when the procedures are conditionally packaged in the OPPS. The 
commenters stated that, under this policy, no Medicare payment would be 
made for device removal procedures performed in an ASC if the device 
was removed and not replaced because the device removal procedures are 
proposed to be conditionally packaged under the OPPS.
    Response: We agree with the commenters' concerns regarding payment 
for device removal procedures performed in an ASC. Under the OPPS, a 
conditionally packaged code (status indicators ``Q1'' or ``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 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, we are 
finalizing a proposal to conditionally package device removal codes for 
CY 2014. Therefore, under our current ASC policy to package payment for 
services that are conditionally packaged in the OPPS, no Medicare 
payment would be made when a device removal procedure is performed in 
an ASC without another surgical procedure included on the claim. We 
believe that our ASC policy to package procedures that are 
conditionally packaged in the OPPS should be modified with regard to 
device removal procedures so that these procedures will continue to be 
separately paid in the ASC.
    After consideration of the public comments we received, we are 
finalizing our proposal to calculate CY 2014 payment rates for ASC 
covered surgical procedures according to our established methodologies, 
with the exception of device removal procedures. For the 71 device 
removal procedures that are conditionally packaged in the OPPS (status 
indicator ``Q2''), we will not follow our usual policy to package these 
procedures in the ASC but, instead, will assign the current ASC payment 
indicators associated with these procedures and continue to provide 
separate payment in CY 2014.
c. Waiver of Coinsurance and Deductible for Certain Preventive Services
    As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43637), 
section 1833(a)(1) and section 1833(b)(1) of the Act waive the 
coinsurance and the Part B deductible for those preventive services 
under section 1861(ddd)(3)(A) of the Act as described in section 
1861(ww)(2) of the Act (excluding electrocardiograms) that are 
recommended by the United States Preventive Services Task Force 
(USPSTF) with a grade of A or B for any indication or population and 
that are appropriate for the individual. Section

[[Page 75082]]

1833(b) of the Act also waives the Part B deductible for colorectal 
cancer screening tests that become diagnostic. In the CY 2011 OPPS/ASC 
final rule with comment period, we finalized our policies with respect 
to these provisions and identified categories of services and the ASC 
covered surgical procedures and covered ancillary services that are 
preventive services that are recommended by the USPSTF with a grade of 
A or B for which the coinsurance and the deductible are waived. For a 
complete discussion of our policies and categories of services, we 
refer readers to the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72047 through 72049). We did not propose any changes to our 
policies or the categories of services for CY 2014 in the CY 2014 OPPS/
ASC proposed rule (78 FR 43637). We identify the specific services with 
a double asterisk in Addenda AA and BB to this final rule with comment 
period.
d. Payment for Cardiac Resynchronization Therapy Services
    Cardiac resynchronization therapy (CRT) uses electronic devices to 
sequentially pace both sides of the heart to improve its output. CRT 
utilizes a pacing electrode implanted in combination with either a 
pacemaker or an implantable cardioverter defibrillator (ICD). CRT 
performed by the implantation of an ICD along with a pacing electrode 
is referred to as ``CRT-D.'' In the CY 2012 OPPS/ASC final rule with 
comment period, we finalized our proposal to establish the CY 2012 ASC 
payment rate for CRT-D services based on the OPPS payment rate 
applicable to APC 0108 when procedures described by CPT codes 33225 
(Insertion of pacing electrode, cardiac venous system, for left 
ventricular pacing, at time of insertion of pacing cardioverter-
defibrillator or pacemaker pulse generator (eg, for upgrade to dual 
chamber system) (list separately in addition to code for primary 
procedure)) and 33249 (Insertion or replacement of permanent pacing 
cardioverter-defibrillator system with transvenous lead(s), single or 
dual chamber) are performed on the same date of service in an ASC. ASCs 
use the corresponding HCPCS Level II G-code (G0448) for proper 
reporting when the procedures described by CPT codes 33225 and 33249 
are performed on the same date of service. For a complete discussion of 
our policy regarding payment for CRT-D services in ASCs, we refer 
readers to the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74427 through 74428). For CY 2014, CPT code 33249, the primary code for 
CRT-D services, is proposed for continued assignment to APC 0108 but 
CPT code 33225 is proposed to be packaged under the OPPS.
    Consequently, in the CY 2014 OPPS/ASC proposed rule (78 FR 43637), 
we proposed that CPT code 33225 would also be packaged under the ASC 
payment system for CY 2014. Because CPT code 33225 is proposed to be 
packaged under the ASC payment system and, therefore, would not receive 
separate payment, it would no longer be necessary that ASCs use the 
HCPCS Level II G-code (G0448) for proper reporting when the procedures 
described by CPT codes 33225 and 33249 are performed on the same date 
of service. Therefore, we proposed that the ASC payment rate for CRT-D 
services (procedures described by CPT codes 33249 and 33225) would be 
based on the OPPS relative payment weight for APC 0108 for CY 2014 and 
that ASCs would no longer be required to assign HCPCS code G0448 when 
the procedures described by CPT codes 33225 and 33249 are performed on 
the same date of service. We invited public comment on these proposals.
    As indicated in section II.A.2.e. of this final rule with comment 
period, after consideration of public comments we received regarding 
the proposed OPPS comprehensive APC policy, we are finalizing our 
proposal to create 29 comprehensive APCs to replace 29 of the most 
costly device-dependent APCs under the OPPS but we will not implement 
the finalized comprehensive APC policy until CY 2015. Consequently, CPT 
code 33225 will not be packaged under the OPPS for CY 2014 but will be 
separately paid. Therefore, we are not finalizing our proposal to 
package CPT code 33225 under the ASC payment system. For CY 2014, we 
will continue our current policy regarding ASC payment for CRT-D 
services. The CY 2014 ASC payment rate for CRT-D services will be based 
on the OPPS payment rate applicable to APC 0108 when procedures 
described by CPT codes 33225 and 33249 are performed on the same date 
of service in an ASC. ASCs will use the corresponding HCPCS Level II G-
code (G0448) for proper reporting when the procedures described by CPT 
codes 33225 and 33249 are performed on the same date of service. When 
not performed on the same day as the service described by CPT code 
33225, ASC payment for the service described by CPT code 33249 will be 
based on APC 0108 using the device-intensive methodology. When not 
performed on the same day as the service described by CPT code 33249, 
ASC payment for the service described by CPT code 33225 will be based 
on APC 0655 using the device-intensive methodology.
e. Payment for Low Dose Rate (LDR) Prostate Brachytherapy Composite
    LDR prostate brachytherapy is a treatment for prostate cancer in 
which hollow needles or catheters are inserted into the prostate, 
followed by permanent implantation of radioactive sources into the 
prostate through the needles/catheters. At least two CPT codes are used 
to report the treatment service because there are separate codes that 
describe placement of the needles/catheters and the application of the 
brachytherapy sources: CPT code 55875 (Transperineal placement of 
needles or catheters into prostate for interstitial radioelement 
application, with or without cystoscopy); and CPT code 77778 
(Interstitial radiation source application; complex). Generally, the 
component services represented by both codes are provided in the same 
operative session on the same date of service to the Medicare 
beneficiary being treated with LDR brachytherapy for prostate cancer.
    In the CY 2013 OPPS/ASC final rule with comment period, we 
finalized our proposal to establish the CY 2013 ASC payment rate for 
LDR prostate brachytherapy services based on the OPPS relative payment 
weight applicable to APC 8001 when CPT codes 55875 and 77778 are 
performed on the same date of service in an ASC. ASCs use the 
corresponding HCPCS Level II G-code (G0458) for proper reporting when 
the procedures described by CPT codes 55875 and 77778 are performed on 
the same date of service, and therefore receive the appropriate LDR 
prostate brachytherapy composite payment. When not performed on the 
same day as the service described by CPT code 55875, the service 
described by CPT code 77778 will continue to be assigned to APC 0651. 
When not performed on the same day as the service described by CPT code 
77778, the service described by CPT code 55875 will continue to be 
assigned to APC 0163. For a complete discussion of our policy regarding 
payment for LDR prostate brachytherapy services in ASCs, we refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68457). In the CY 2014 OPPS/ASC proposed rule (78 FR 43637), we did not 
propose any changes to our current policy regarding ASC payment for LDR 
prostate brachytherapy services for CY 2014.

[[Page 75083]]

2. Payment for Covered Ancillary Services
a. Background
    Our final payment policies under the revised ASC payment system for 
covered ancillary services 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 proposed rule (77 FR 45169), we 
further clarified our policy regarding the payment indicator assignment 
of codes that are conditionally packaged in the OPPS (status indicators 
``Q1'' and ``Q2''). Under the OPPS, a conditionally packaged code 
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 always packaged (payment 
indictor ``N1'') under the ASC payment system. Thus, our final policy 
generally aligns ASC payment bundles with those under the OPPS (72 FR 
42495). In all cases, in order for those ancillary services also to be 
paid, ancillary items and services must be provided integral to the 
performance of ASC covered surgical procedures for which the ASC bills 
Medicare.
    Our ASC payment policies provide separate payment for drugs and 
biologicals that are separately paid under the OPPS at the OPPS rates. 
We generally pay for separately payable radiology services at the lower 
of the MPFS nonfacility PE RVU-based (or technical component) amount or 
the rate calculated according to the ASC standard ratesetting 
methodology (72 FR 42497). However, as finalized in the CY 2011 OPPS/
ASC final rule with comment period (75 FR 72050), payment indicators 
for all nuclear medicine procedures (defined as CPT codes in the range 
of 78000 through 78999) that are designated as radiology services that 
are paid separately when provided integral to a surgical procedure on 
the ASC list are set to ``Z2'' so that payment is made based on the ASC 
standard ratesetting methodology rather than the MPFS nonfacility PE 
RVU amount, regardless of which is lower. This modification to the ASC 
payment methodology for ancillary services was finalized in response to 
a comment on the CY 2011 OPPS/ASC proposed rule that suggested it is 
inappropriate to use the MPFS-based payment methodology for nuclear 
medicine procedures because the associated diagnostic 
radiopharmaceutical, although packaged under the ASC payment system, is 
separately paid under the MPFS (42 CFR 416.171(d)(1)). We set the 
payment indicator to ``Z2'' for these nuclear medicine procedures in 
the ASC setting so that payment for these procedures would be based on 
the OPPS relative payment weight rather than the MPFS nonfacility PE 
RVU-based amount to ensure that the ASC will be compensated for the 
cost associated with the diagnostic radiopharmaceuticals.
    In addition, because the same issue exists for radiology procedures 
that use contrast agents (the contrast agent is packaged under the ASC 
payment system but is separately paid under the MPFS), we finalized in 
the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 
through 74430) 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 and will, therefore, 
include the cost for the contrast agent (42 CFR 416.171(d)(2)).
    ASC payment policy for brachytherapy sources mirrors the payment 
policy under the OPPS. ASCs are paid for brachytherapy sources provided 
integral to ASC covered surgical procedures at prospective rates 
adopted under the OPPS or, if OPPS rates are unavailable, at 
contractor-priced rates (72 FR 42499). Since December 31, 2009, ASCs 
have been paid for brachytherapy sources provided integral to ASC 
covered surgical procedures at prospective rates adopted under the 
OPPS.
    Other separately paid covered ancillary services in ASCs, 
specifically corneal tissue acquisition and device categories with OPPS 
pass-through status, do not have prospectively established ASC payment 
rates according to the final policies of the revised ASC payment system 
(72 FR 42502 and 42508 through 42509; 42 CFR 416.164(b)). Under the 
revised ASC payment system, corneal tissue acquisition is paid based on 
the invoiced costs for acquiring the corneal tissue for 
transplantation. Devices that are eligible for pass-through payment 
under the OPPS are separately paid under the ASC payment system. 
Currently, the four devices that are eligible for pass-through payment 
in the OPPS are described by HCPCS code C1830 (Powered bone marrow 
biopsy needle), HCPCS code C1840 (Lens, intraocular (telescopic)), 
HCPCS code C1841 (Retinal prosthesis, includes all internal and 
external components), and HCPCS code C1886 (Catheter, extravascular 
tissue ablation, any modality (insertable)). Payment amounts for HCPCS 
codes C1830, C1840, C1841, and C1886 under the ASC payment system are 
contractor priced. In the CY 2013 OPPS/ASC final rule with comment 
period, we finalized the expiration of pass-through payment for HCPCS 
codes C1830, C1840, and C1886, which will expire after December 31, 
2013 (77 FR 68353). Therefore, after December 31, 2013, the costs for 
devices described by HCPCS codes C1830, C1840, and C1886 will be 
packaged into the costs of the procedures with which the devices are 
reported in the hospital claims data used in the development of the 
OPPS relative payment weights that are used to establish ASC payment 
rates for CY 2014. HCPCS code C1841 was approved for pass-through 
payment effective October 1, 2013, and will continue to be eligible for 
pass-through payment in CY 2014.
b. Payment for Covered Ancillary Services for CY 2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43638 through 43639), 
for CY 2014, we proposed to update the ASC payment rates and make 
changes to ASC payment indicators as necessary to maintain consistency 
between the OPPS and ASC payment system regarding the packaged or 
separately payable status of services and the proposed CY 2014 OPPS and 
ASC payment rates. We also proposed to set the CY 2014 ASC payment 
rates for brachytherapy sources and separately payable drugs and 
biologicals equal to the proposed CY 2014 OPPS rates.
    Consistent with established ASC payment policy (72 FR 42497), the 
proposed CY 2014 payment for separately payable covered radiology 
services was based on a comparison of the proposed CY 2014 MPFS 
nonfacility PE RVU-based amounts (we refer readers to the CY 2014 MPFS 
proposed rule) and the proposed CY 2014 ASC payment rates calculated 
according to the ASC standard ratesetting methodology and then set at 
the lower of the two amounts (except as discussed below for nuclear 
medicine procedures and radiology services that use contrast agents). 
Alternatively, payment for a radiology service may be packaged into

[[Page 75084]]

the payment for the ASC covered surgical procedure if the radiology 
service is packaged or conditionally packaged under the OPPS. The 
payment indicators in Addendum BB to the proposed rule, as corrected, 
indicate whether the proposed payment rates for radiology services are 
based on the MPFS nonfacility PE RVU-based amount or the ASC standard 
ratesetting methodology, or whether payment for a radiology service is 
packaged into the payment for the covered surgical procedure (payment 
indicator ``N1''). Radiology services that we proposed to pay based on 
the ASC standard ratesetting methodology were assigned payment 
indicator ``Z2'' (Radiology service paid separately when provided 
integral to a surgical procedure on ASC list; payment based on OPPS 
relative payment weight) and those for which the proposed payment is 
based on the MPFS nonfacility PE RVU-based amount were assigned payment 
indicator ``Z3'' (Radiology service paid separately when provided 
integral to a surgical procedure on ASC list; payment based on MPFS 
nonfacility PE RVUs).
    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 for these procedures will be based on the OPPS relative 
payment weight (rather than the MPFS nonfacility PE RVU-based amount, 
regardless of which is lower) and, therefore, will include the cost for 
the diagnostic radiopharmaceutical. We proposed to continue this 
modification to the payment methodology in CY 2014 and, therefore, set 
the payment indicator to ``Z2'' for nuclear medicine procedures.
    As finalized in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74429 through 74430), payment indicators for radiology services 
that use contrast agents are set to ``Z2'' so that payment for these 
procedures will be based on the OPPS relative payment weight and, 
therefore, will include the cost for the contrast agent. We proposed to 
continue this modification to the payment methodology in CY 2014 and, 
therefore, set the payment indicator to ``Z2'' for radiology services 
that use contrast agents.
    Most covered ancillary services and their proposed payment 
indicators were listed in Addendum BB to the proposed rule, as 
corrected (which is available via the Internet on the CMS Web site). We 
invited public comment on these proposals.
    Comment: One commenter requested that the procedure described by 
CPT code 33225 (Insertion of pacing electrode, cardiac venous system, 
for left ventricular pacing, at time of insertion of pacing 
cardioverter-defibrillator or pacemaker pulse generator (e.g., for 
upgrade to dual chamber system) (list separately in addition to code 
for primary procedure)) be excluded from the OPPS policy to package 
add-on codes due to impact on the proposed CY 2014 ASC payment rates 
for cardiac resynchronization therapy implant procedures (CRT-P, which 
is identified by CPT codes 33206 (Insertion of new or replacement of 
permanent pacemaker with transvenous electrode(s); atrial) and 33207 
(Insertion of new or replacement of permanent pacemaker with 
transvenous electrode(s); ventricular)) that include this add-on code. 
The commenter indicated that the proposed ASC payment rates for CRT-P 
services decrease by about 35 percent due to OPPS packaging of the add-
on CPT code 33225.
    Response: Our payment policies under the revised ASC payment system 
for covered ancillary services provide 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 
provide packaged ASC payment for other ancillary items and services 
that are packaged or conditionally packaged (status indicators ``N,'' 
``Q1,'' and ``Q2'') under the OPPS. As detailed in section II.A.3.c. of 
this final rule with comment period, we are finalizing our proposal to 
package procedures described by add-on codes under the OPPS for CY 
2014. Therefore, in order to align the ASC payment bundles with those 
under the OPPS, the ASC payment for CPT code 33225 will be packaged 
into the payment for the associated procedures and will not be 
separately paid in CY 2014.
    Comment: Commenters stated that hospitals perform more ancillary 
services than ASCs and, therefore, greater packaging is appropriate 
under the OPPS, but not under the ASC payment system. Commenters also 
suggested that, because laboratory tests associated with ASC procedures 
are paid under the Clinical Laboratory Fee Schedule, duplicate payment 
will occur if the OPPS relative weights that are used to calculate ASC 
payment rates include costs for laboratory tests.
    Response: As detailed in section II.A.3. of this final rule with 
comment period, we are finalizing our proposal to package the following 
items and services under the OPPS for CY 2014: (1) Drugs, biologicals, 
and radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure; (2) drugs and biologicals that function 
as supplies when used in a surgical procedure; (3) clinical diagnostic 
laboratory tests; (4) procedures described by add-on codes; and (5) 
device removal procedures. However, we are not finalizing our proposal 
to package ancillary services or diagnostic tests on the bypass list 
under the OPPS for CY 2014. Therefore, with respect to the commenters' 
concerns about the proposed packaging of ancillary services, ancillary 
services will continue to have separate payment in CY 2014 under the 
OPPS.
    With respect to the concern raised by commenters regarding 
duplicate payment of laboratory tests, packaging laboratory services 
under the OPPS will increase the relative payment weights and, 
subsequently, the ASC payment rates for those surgical procedures that 
include laboratory tests when provided in the hospital outpatient 
department. However, because we uniformly scale the ASC relative 
payment weights each update year to make them budget neutral, the 
changes to the relative payment weights that are associated with 
laboratory packaging will not result in duplicate or additional 
Medicare payment in aggregate. In addition, because the packaged 
laboratory tests are spread over many APCs, we also believe that the 
impact on particular services is minor. Furthermore, fewer laboratory 
tests should be necessary in the ASC as diagnostic evaluations are not 
performed in the ASC.
    After consideration of the public comments we received, we are 
providing CY 2014 payment for covered ancillary services in accordance 
with the policies finalized in the CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68458 through 68459). Covered ancillary services 
and their final CY 2014 payment indicators are listed in Addendum BB 
(which is available via the Internet on the CMS Web site) to this final 
rule with comment period.

E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Application Cycle
    Our process for reviewing applications to establish new classes of 
new technology intraocular lenses (NTIOLs) is as follows:

[[Page 75085]]

     Applicants submit their NTIOL requests for review to CMS 
by the annual deadline. For a request to be considered complete, we 
require submission of the information that is found in the guidance 
document entitled ``Application Process and Information Requirements 
for Requests for a New Class of New Technology Intraocular Lenses 
(NTIOLs) or Inclusion of an IOL in an existing NTIOL Class'' posted on 
the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/NTIOLs.html.
     We announce annually in the proposed rule updating the ASC 
and OPPS payment rates for the following calendar year, a list of all 
requests to establish new NTIOL classes accepted for review during the 
calendar year in which the proposal is published. In accordance with 
section 141(b)(3) of Pub. L. 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--
    [cir] Provide a list of determinations made as a result of our 
review of all new NTIOL class requests and public comments;
    [cir] When a new NTIOL class is created, we 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.
    [cir] The date of implementation of a payment adjustment in the 
case of approval of an IOL as a member of a new NTIOL class would be 
set prospectively as of 30 days after publication of the ASC payment 
update final rule, consistent with the statutory requirement.
    [cir] 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 2014
    As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43639), 
we did not receive any requests for review to establish a new NTIOL 
class for CY 2014 by March 1, 2013, the due date published in the CY 
2013 OPPS/ASC final rule with comment period (77 FR 68461).
3. Payment Adjustment
    The current payment adjustment for a 5-year period from the 
implementation date of a new NTIOL class is $50 per lens. Since 
implementation of the process for adjustment of payment amounts for 
NTIOLs in 1999, we have not revised the payment adjustment amount, and 
we did not propose to revise the payment adjustment amount for CY 2014.
4. Announcement of CY 2014 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 2015, requests for review of applications for a new 
class of new technology IOLs must be received at CMS by 5 p.m. EST, on 
March 3, 2014. Send requests 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 Web site at: http://www.cms.gov/ASCPayment/downloads/NTIOLprocess.pdf.

F. ASC Payment and Comment Indicators

1. Background
    In addition to the payment indicators that we introduced in the 
August 2, 2007 final rule, we also 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 list of 
covered services 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 used 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'' is also assigned to existing 
codes with substantial revisions to their descriptors such that we 
consider them to be describing new services, as discussed in the CY 
2010 OPPS/ASC final rule with comment period (74 FR 60622). In this CY 
2014 OPPS/ASC final rule with comment period, we respond to public 
comments and finalize the ASC treatment of all codes that are labeled 
with comment indicator ``NI'' in Addenda AA and BB to the CY 2013 OPPS/
ASC final rule with comment period.
    The ``CH'' comment indicator is used in Addenda AA and BB to the 
proposed rule, as corrected (which are available via the Internet on 
the CMS Web site) to indicate that the payment indicator assignment has 
changed for an active HCPCS code in the current year and next calendar 
year; an active HCPCS code is newly recognized as payable in ASCs; or 
an active HCPCS code is discontinued at the end of the current calendar 
year. The ``CH'' comment indicators that are published in the final 
rule with comment period are provided to alert readers that a change 
has been made from one calendar year to the next, but do not indicate 
that the change is subject to comment.
2. ASC Payment and Comment Indicators
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43640), we did not 
propose any changes to the definitions of the ASC payment and comment 
indicators for CY 2014. We referred readers to Addenda DD1 and DD2 to 
the CY 2014 OPPS/ASC proposed rule (which are available via the 
Internet on the CMS Web site) for the complete list of ASC payment and 
comment indicators proposed for the CY 2014 update.
    Addenda DD1 and DD2 to this final rule with comment period (which 
are available via the Internet on the CMS Web site) contain the 
complete list of payment and commenter indicators for the CY 2014 
update.

[[Page 75086]]

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

1. Background
    In the August 2, 2007 final rule (72 FR 42493), we established our 
policy to base ASC relative payment weights and payment rates under the 
revised ASC payment system on APC groups and the OPPS relative payment 
weights. Consistent with that policy and the requirement at section 
1833(i)(2)(D)(ii) of the Act that the revised payment system be 
implemented so that it would be budget neutral, the initial ASC 
conversion factor (CY 2008) was calculated so that estimated total 
Medicare payments under the revised ASC payment system in the first 
year would be budget neutral to estimated total Medicare payments under 
the prior (CY 2007) ASC payment system (the ASC conversion factor is 
multiplied by the relative payment weights calculated for many ASC 
services in order to establish payment rates). That is, application of 
the ASC conversion factor was designed to result in aggregate Medicare 
expenditures under the revised ASC payment system in CY 2008 equal to 
aggregate Medicare expenditures that would have occurred in CY 2008 in 
the absence of the revised system, taking into consideration the cap on 
ASC payments in CY 2007 as required under section 1833(i)(2)(E) of the 
Act (72 FR 42522). We adopted a policy to make the system budget 
neutral in subsequent calendar years (72 FR 42532 through 42533; 42 CFR 
416.171(e)).
    We note that we consider the term ``expenditures'' in the context 
of the budget neutrality requirement under section 1833(i)(2)(D)(ii) of 
the Act to mean expenditures from the Medicare Part B Trust Fund. We do 
not consider expenditures to include beneficiary coinsurance and 
copayments. This distinction was important for the CY 2008 ASC budget 
neutrality model that considered payments across the OPPS, ASC, and 
MPFS payment systems. However, because coinsurance is almost always 20 
percent for ASC services, this interpretation of expenditures has 
minimal impact for subsequent budget neutrality adjustments calculated 
within the revised ASC payment system.
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66857 
through 66858), we set out a step-by-step illustration of the final 
budget neutrality adjustment calculation based on the methodology 
finalized in the August 2, 2007 final rule (72 FR 42521 through 42531) 
and as applied to updated data available for the CY 2008 OPPS/ASC final 
rule with comment period. The application of that methodology to the 
data available for the CY 2008 OPPS/ASC final rule with comment period 
resulted in a budget neutrality adjustment of 0.65.
    For CY 2008, we adopted the OPPS relative payment weights as the 
ASC relative payment weights for most services and, consistent with the 
final policy, we calculated the CY 2008 ASC payment rates by 
multiplying the ASC relative payment weights by the final CY 2008 ASC 
conversion factor of $41.401. For covered office-based surgical 
procedures and covered ancillary radiology services (excluding covered 
ancillary radiology services involving certain nuclear medicine 
procedures or involving the use of contrast agents, as discussed in 
section XII.D.2.b. of this final rule with comment period), the 
established policy is to set the payment rate at the lower of the MPFS 
unadjusted nonfacility PE RVU-based amount or the amount calculated 
using the ASC standard ratesetting methodology. Further, as discussed 
in the CY 2008 OPPS/ASC final rule with comment period (72 FR 66841 
through 66843), we also adopted alternative ratesetting methodologies 
for specific types of services (for example, device-intensive 
procedures).
    As discussed in the August 2, 2007 final rule (72 FR 42517 through 
42518) and as codified at Sec.  416.172(c) of the regulations, the 
revised ASC payment system accounts for geographic wage variation when 
calculating individual ASC payments by applying the pre-floor and pre-
reclassified hospital wage indices 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 cost when calculating individual ASC 
payments by applying the pre-floor and pre-reclassified hospital wage 
index values that CMS calculates for payment, using updated Core Based 
Statistical Areas (CBSAs) issued by OMB in June 2003. The 
reclassification provision provided at section 1886(d)(10) of the Act 
is specific to hospitals. We believe that using the most recently 
available raw pre-floor and pre-reclassified hospital wage indices 
results in the most appropriate adjustment to the labor portion of ASC 
costs. In addition, use of the unadjusted hospital wage data avoids 
further reductions in certain rural statewide wage index values that 
result from reclassification. We continue to believe that the 
unadjusted hospital wage indices, which are updated yearly and are used 
by many other Medicare payment systems, appropriately account for 
geographic variation in labor costs for ASCs.
    We note that in certain instances there might be urban or rural 
areas for which there is no IPPS hospital whose wage index data would 
be used to set the wage index for that area. For these areas, our 
policy has been to use the average of the wage indices 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). We have applied 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 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 indices 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 will 
continue our current policy of calculating an urban or rural area's 
wage index by calculating the average of the wage indices for CBSAs (or 
metropolitan divisions where applicable) that are contiguous to the 
area with no wage index.
    Comment: Several commenters made the same recommendation that was 
made in the CY 2010 (74 FR 60625), CY 2011 (75 FR 72059), CY 2012 (76 
FR 74446), and CY 2013 (77 FR 68463) rulemakings--that is, that CMS 
adopt for the ASC payment system the same wage index values used for 
hospital payment under the OPPS.
    Response: We have responded to this comment in the past, and 
believe our prior rationale for using unadjusted wage indices is still 
a sound one. We continue to believe that the unadjusted hospital wage 
indices, which are updated yearly and are used by almost all Medicare 
payment systems, appropriately account for geographic variance in labor 
costs for ASCs. We refer readers to our response to this comment in the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72059). We 
discuss our budget neutrality adjustment for changes to the wage 
indices below in section XIV.H.2.b. of this final rule with comment 
period.
    After consideration of the public comments we received, we are 
continuing our established policy to account for geographic wage 
variation in labor cost when calculating individual ASC payment by 
applying the pre-floor and pre-reclassified hospital wage index

[[Page 75087]]

values that CMS calculated for payment, using updated CBSAs. Further, 
we are continuing our established policy to use the average of the wage 
indices for CBSAs (or metropolitan divisions as applicable) that are 
contiguous to the area that has no wage index. For CY 2014, we also are 
continuing our policy established in the CY 2011 OPPS/ASC final rule 
with comment period (75 FR 72058 through 72059) to set the ASC wage 
index by calculating the average of all wage indices for urban areas in 
the State when there is no IPPS hospital that has wage index data that 
could be used to set the wage index for that area, and all contiguous 
areas to the CBSA are rural.
2. Calculation of the ASC Payment Rates
a. Updating the ASC Relative Payment Weights for CY 2014 and Future 
Years
    We update the ASC relative payment weights each year using the 
national OPPS relative payment weights (and MPFS nonfacility PE RVU-
based amounts, as applicable) for that same calendar year and uniformly 
scale the ASC relative payment weights for each update year to make 
them budget neutral (72 FR 42533). Consistent with our established 
policy, in the CY 2014 OPPS/ASC proposed rule (78 FR 43640 through 
43641), we proposed to scale the CY 2014 relative payment weights for 
ASCs according to the following method. Holding ASC utilization and the 
mix of services constant from CY 2012, we proposed to compare the total 
payment using the CY 2013 ASC relative payment weights with the total 
payment using the CY 2014 relative payment weights to take into account 
the changes in the OPPS relative payment weights between CY 2013 and CY 
2014. We proposed to use the ratio of CY 2013 to CY 2014 total payment 
(the weight scaler) to scale the ASC relative payment weights for CY 
2014. The proposed CY 2014 ASC scaler is 0.9102 as corrected (78 FR 
43641; 78 FR 54843, 54845) and scaling would apply to the ASC relative 
payment weights of the covered surgical procedures and covered 
ancillary radiology services for which the ASC payment rates are based 
on OPPS relative payment weights.
    Scaling would not apply in the case of ASC payment for separately 
payable covered ancillary services that have a predetermined national 
payment amount (that is, their national ASC payment amounts are not 
based on OPPS relative payment weights), such as drugs and biologicals 
that are separately paid or services that are contractor-priced or paid 
at reasonable cost in ASCs. Any service with a predetermined national 
payment amount would be included in the ASC budget neutrality 
comparison, but scaling of the ASC relative payment weights would not 
apply to those services. The ASC payment weights for those services 
without predetermined national payment amounts (that is, those services 
with national payment amounts that would be based on OPPS relative 
payment weights) would be scaled to eliminate any difference in the 
total payment between the current year and the update year.
    For any given year's ratesetting, we typically use the most recent 
full calendar year of claims data to model budget neutrality 
adjustments. At the time of the CY 2014 proposed rule, we had available 
98 percent of CY 2012 ASC claims data. For this final rule with comment 
period, we have approximately 99 percent of all ASC claims data for CY 
2012.
    To create an analytic file to support calculation of the weight 
scaler and budget neutrality adjustment for the wage index (discussed 
below), we summarized available CY 2012 ASC claims by ASC and by HCPCS 
code. We used the National Provider Identifier for the purpose of 
identifying unique ASCs within the CY 2012 claims data. We used the 
supplier zip code reported on the claim to associate State, county, and 
CBSA with each ASC. This file, available to the public as a supporting 
data file for the proposed rule, is posted on the CMS Web site at: 
http://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/LimitedDataSets/ASCPaymentSystem.html.
    For this final rule with comment period, we used our methodology 
described above to calculate the scaler adjustment using updated ASC 
claims data. The final CY 2014 scaler adjustment is 0.9235. This scaler 
adjustment is necessary to make the difference in aggregate ASC 
payments calculated using the CY 2013 ASC relative payment weights and 
the CY 2014 relative payment weights budget neutral. We calculated the 
difference in aggregate payments due to the change in relative payment 
weights holding constant the ASC conversion factor, the most recent CY 
2012 ASC utilization from our claims data, and the CY 2013 wage index 
values. For this final CY 2014 calculation, we used the CY 2013 ASC 
conversion factor updated by the CY 2014 CPI-U, which is projected to 
be 1.7 percent, less the multifactor productivity adjustment of 0.5 
percent, as discussed below in section XIV.H.2.b. of this final rule 
with comment period.
b. Updating the ASC Conversion Factor
    Under the OPPS, we typically apply a budget neutrality adjustment 
for provider level changes, most notably a change in the wage index 
values for the upcoming year, to the conversion factor. Consistent with 
our final ASC payment policy, in the CY 2014 OPPS/ASC proposed rule (78 
FR 43641 through 43642), for the CY 2014 ASC payment system, we 
proposed 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 2014, we calculated this proposed adjustment for the ASC payment 
system by using the most recent CY 2012 claims data available and 
estimating the difference in total payment that would be created by 
introducing the proposed CY 2014 pre-floor and pre-reclassified 
hospital wage indices. Specifically, holding CY 2012 ASC utilization 
and service-mix and the proposed CY 2014 national payment rates after 
application of the weight scaler constant, we calculated the total 
adjusted payment using the CY 2013 pre-floor and pre-reclassified 
hospital wage indices and the total adjusted payment using the proposed 
CY 2014 pre-floor and pre-reclassified hospital wage indices. 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 2013 pre-floor and pre-reclassified hospital wage indices 
to the total adjusted payment calculated with the proposed CY 2014 pre-
floor and pre-reclassified hospital wage indices and applied the 
resulting ratio of 1.0004 (the proposed CY 2014 ASC wage index budget 
neutrality adjustment) to the CY 2013 ASC conversion factor to 
calculate the proposed CY 2014 ASC conversion factor. We note that, on 
February 28, 2013, OMB issued OMB Bulletin No. 13-01 announcing 
revisions to the delineation of Metropolitan Statistical Areas, 
Micropolitan Statistical Areas, and Combined Statistical Areas. The 
proposed pre-floor and pre-reclassified hospital wage indices for FY 
2014 do not reflect OMB's new area delineations. Because the ASC wage 
indices are the pre-floor and pre-reclassified hospital wage indices, 
the CY 2014 ASC wage indices do not reflect the OMB changes.
    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

[[Page 75088]]

``shall be increased by the percentage increase in the Consumer Price 
Index for all urban consumers (U.S. city average) as estimated by the 
Secretary for the 12-month period ending with the midpoint of the year 
involved.'' The statute, therefore, does not mandate the adoption of 
any particular update mechanism, but it requires the payment amounts to 
be increased by the CPI-U in the absence of any update. Because the 
Secretary updates the ASC payment amounts annually, we adopted a 
policy, which we codified at 42 CFR 416.171(a)(2)(ii), to update the 
ASC conversion factor using the CPI-U for CY 2010 and subsequent 
calendar years. Therefore, the annual update to the ASC payment system 
is the CPI-U (referred to as the CPI-U update factor).
    Section 3401(k) of the Affordable Care Act amended section 
1833(i)(2)(D) of the Act by adding a new clause (v) which requires that 
``any annual update under [the ASC payment] system for the year, after 
application of clause (iv), shall be reduced by the productivity 
adjustment described in section 1886(b)(3)(B)(xi)(II)'' of the Act 
effective with the calendar year beginning January 1, 2011. The statute 
defines the productivity adjustment to be equal to the 10-year moving 
average of changes in annual economy-wide private nonfarm business 
multifactor productivity (MFP) (as projected by the Secretary for the 
10-year period ending with the applicable fiscal year, year, cost 
reporting period, or other annual period) (the ``MFP adjustment''). 
Clause (iv) of section 1833(i)(2)(D) of the Act authorizes the 
Secretary to provide for a reduction in any annual update for failure 
to report on quality measures. Clause (v) of section 1833(i)(2)(D) of 
the Act states that application of the MFP adjustment to the ASC 
payment system may result in the update to the ASC payment system being 
less than zero for a year and may result in payment rates under the ASC 
payment system for a year being less than such payment rates for the 
preceding year.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized a policy that ASCs begin submitting data on 
quality measures for services beginning on October 1, 2012 for the CY 
2014 payment determination under the ASCQR Program. In the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68499 through 68500), we 
finalized a methodology to calculate 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 the CY 2014 payment determination and subsequent 
years. The application of the 2.0 percentage point reduction to the 
annual update factor, which currently is the CPI-U, may result in the 
update to the ASC payment system being less than zero for a year for 
ASCs that fail to meet the ASCQR Program requirements. We amended 
Sec. Sec.  416.160(a)(1) and 416.171 to reflect these policies.
    In accordance with section 1833(i)(2)(C)(i) of the Act, before 
applying the MFP adjustment, the Secretary first determines the 
``percentage increase'' in the CPI-U, which we interpret cannot be a 
negative percentage. Thus, in the instance where the percentage change 
in the CPI-U for a year is negative, we would hold the CPI-U update 
factor for the ASC payment system to zero. For the CY 2014 payment 
determination and subsequent years, under section 1833(i)(2)(D)(iv) of 
the Act, we would reduce the annual update by 2.0 percentage points for 
an ASC that fails to submit quality information under the rules 
established by the Secretary in accordance with section 1833(i)(7) of 
the Act. Section 1833(i)(2)(D)(v) of the Act, as added by section 
3401(k) of the Affordable Care Act, requires that the Secretary reduce 
the annual update factor, after application of any quality reporting 
reduction, by the MFP adjustment, and states that application of the 
MFP adjustment to the annual update factor after application of any 
quality reporting reduction may result in the update being less than 
zero for a year. If the application of the MFP adjustment to the annual 
update factor after application of any quality reporting reduction 
would result in an MFP-adjusted update factor that is less than zero, 
the resulting update to the ASC payment rates would be negative and 
payments would decrease relative to the prior year. Illustrative 
examples of how the MFP adjustment would be applied to the ASC payment 
system update are found in the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72062 through 72064).
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43642), based on IHS 
Global Insight's (IGI's) 2013 first quarter forecast with historical 
data through 2012 fourth quarter, for the 12-month period ending with 
the midpoint of CY 2014, the CPI-U update was projected to be 1.4 
percent. Also, based on IGI's 2013 first quarter forecast, the MFP 
adjustment for the period ending with the midpoint of CY 2014 was 
projected to be 0.5 percent. IGI is a nationally recognized economic 
and financial forecasting firm that contracts with CMS to forecast the 
components of CMS' market baskets as well as the CPI-U and MFP. The 
methodology for calculating the MFP adjustment was finalized in the CY 
2011 MPFS final rule with comment period (75 FR 73394 through 73396) as 
revised in the CY 2012 MPFS final rule with comment period (76 FR 73300 
through 73301). Because the ASCQR Program affects payment rates 
beginning in CY 2014, there would be a 2.0 percentage point reduction 
to the CPI-U for ASCs that fail to meet the ASCQR Program requirements.
    We proposed to reduce the CPI-U update of 1.4 percent by the MFP 
adjustment of 0.5 percentage point, resulting in an MFP-adjusted CPI-U 
update factor of 0.9 percent for ASCs meeting the quality reporting 
requirements. Therefore, we proposed to apply a 0.9 percent MFP-
adjusted CPI-U update factor to the CY 2013 ASC conversion factor for 
ASCs meeting the quality reporting requirements. We proposed to reduce 
the CPI-U update of 1.4 percent by 2.0 percentage points for ASCs that 
do not meet the quality reporting requirements and then apply the 0.5 
percentage point MFP reduction. Therefore, we proposed to apply a -1.1 
percent quality reporting/MFP-adjusted CPI-U update factor to the CY 
2013 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 CY 
2014 CPI-U update and MFP adjustment), we would use such data, if 
appropriate, to determine the CY 2014 ASC update for the final rule 
with comment period.
    For CY 2014, we also proposed to adjust the CY 2013 ASC conversion 
factor ($42.917) by the wage adjustment for budget neutrality of 1.0004 
in addition to the MFP-adjusted update factor of 0.9 percent discussed 
above, which results in a proposed CY 2014 ASC conversion factor of 
$43.321 for ASCs meeting the quality reporting requirements. For ASCs 
not meeting the quality reporting requirements, we proposed to adjust 
the CY 2013 ASC conversion factor ($42.917) by the wage adjustment for 
budget neutrality of 1.0004 in addition to the quality reporting/MFP-
adjusted update factor of -1.1 percent discussed above, which results 
in a proposed CY 2014 ASC conversion factor of $42.462. We invited 
public comment on these proposals.
    Comment: As in previous years, commenters requested that CMS adopt 
the hospital market basket to update the ASC payment system instead of 
using the CPI-U. The commenters argued that the CPI-U does not fairly 
represent the costs borne by the ASC industry because the prices 
measured in the basket of

[[Page 75089]]

goods comprising the index reflect the types and weights of categories 
typical of an American household, rather than an outpatient surgical 
provider. Commenters believed that the hospital market basket more 
closely reflects the cost structure of ASCs than does the basket of 
goods included in the CPI-U. Commenters stated that adopting the 
hospital market basket to update ASC payment rates would minimize the 
divergence in CY 2014 payments in ASCs compared to HOPDs and would 
ensure continued beneficiary access to ASCs.
    Commenters also indicated that the hospital market basket is a more 
appropriate index to use for the ASC update now that CMS is required to 
apply the MFP adjustment to the ASC annual update. Commenters stated 
that, as an output price index, the CPI-U index already accounts for 
productivity thus ASCs, in essence, are receiving a productivity 
adjustment that is twice that applied to the HOPD update. Because CMS 
has discretion regarding the index used to update ASCs, but is required 
in statute to adjust the ASC update by the MFP, commenters urged CMS to 
use the hospital market basket, which is an input price index that does 
not already account for productivity, to update ASC payment rates and 
thereby allow the appropriate application of the required productivity 
adjustment. These commenters suggested that if the CPI-U continues to 
be used to update ASC payment rates, CMS should remove the productivity 
gains from the CPI-U. Commenters also requested that the 10-year MFP 
measurement period be uniform in ASCs and HOPDs so that there is no 
discrepancy in the estimates of the MFP that will provide additional 
divergence between the ASC and HOPD updates.
    Response: While commenters argue that the items included in the 
CPI-U index may not adequately measure inflation for the goods and 
services provided by ASCs and that use of the hospital market basket 
would minimize the divergence in the payment rates between the OPPS and 
ASC payment system, we believe that the hospital market basket does not 
align with the cost structures of ASCs. Hospitals provide a much wider 
range of services, such as room and board and emergency services, and 
the costs associated with providing these services are not part of the 
ASC cost structure. Therefore, at this time, we do not believe that it 
is appropriate to use the hospital market basket for the ASC annual 
update.
    We recognize that the CPI-U is an output price index that accounts 
for productivity. However, section 1833(i)(2)(D)(v) of the Act requires 
the agency to reduce the annual update factor by the MFP adjustment. 
For the reasons stated above, we do not believe that the hospital 
market basket appropriately reflects the cost structures of ASCs, and 
because we do not have cost data on ASCs, we are continuing to use the 
CPI-U which we believe provides a reasonable approximation of the price 
increases facing ASCs. We appreciate the commenter's suggestion to 
adjust the CPI-U for productivity and will take this suggestion into 
consideration should we propose changes to the ASC update factor in the 
future. Regarding alignment of the MFP adjustment across payment 
systems, for the reasons stated in the CY 2011 MPFS final rule with 
comment period (75 FR 73396), we believe that it is more appropriate to 
align the MFP adjustment with the update timeframe for each payment 
system rather than aligning the MFP adjustment across payment systems.
    After consideration of the public comments we received, we are 
applying our established methodology for determining the final CY 2014 
ASC conversion factor. Using more complete CY 2012 data for this final 
rule with comment period than was available for the proposed rule, we 
calculated a wage index budget neutrality adjustment of 1.0009. Based 
on IGI's 2013 third quarter forecast, the CPI-U for the 12-month period 
ending with the midpoint of CY 2014 is now projected to be 1.7 percent, 
while the MFP adjustment (using the revised IGI series to proxy the 
labor index used in the MFP forecast calculation as discussed and 
finalized in the CY 2012 MPFS final rule with comment period (76 FR 
73300 through 73301) is 0.5 percent, resulting in an MFP-adjusted CPI-U 
update factor of 1.2 percent for ASCs that meet the quality reporting 
requirements. The final ASC conversion factor of $43.471, for ASCs that 
meet the quality reporting requirements, is the product of the CY 2013 
conversion factor of $42.917 multiplied by the wage index budget 
neutrality adjustment of 1.0009 and the MFP-adjusted CPI-U payment 
update of 1.2 percent. For ASCs that do not meet the quality reporting 
requirements, we are reducing the CPI-U update of 1.7 percent by 2.0 
percentage points and then we are applying the 0.5 percent MFP 
reduction, resulting in a -0.8 percent quality reporting/MFP-adjusted 
CPI-U update factor. The final ASC conversion factor of $42.612 for 
ASCs that do not meet the quality reporting requirements is the product 
of the CY 2013 conversion factor of $42.917 multiplied by the wage 
index budget neutrality adjustment of 1.0009 and the quality reporting/
MFP-adjusted CPI-U payment update of -0.8 percent.
3. Display of CY 2014 ASC Payment Rates
    Addenda AA and BB to this CY 2014 OPPS/ASC final rule with comment 
period (which are available via the Internet on the CMS Web site) 
display the final updated ASC payment rates for CY 2014 for covered 
surgical procedures and covered ancillary services, respectively. The 
payment rates included in these addenda reflect the full ASC payment 
update and not the reduced payment update used to calculate payment 
rates for ASCs not meeting the quality reporting requirements under the 
ASCQR Program. These addenda contain several types of information 
related to the CY 2014 payment rates. Specifically, in Addendum AA, a 
``Y'' in the column titled ``Subject to Multiple Procedure 
Discounting'' indicates that the surgical procedure will be subject to 
the multiple procedure payment reduction policy. As discussed in the CY 
2008 OPPS/ASC final rule with comment period (72 FR 66829 through 
66830), most covered surgical procedures are subject to a 50-percent 
reduction in the ASC payment for the lower-paying procedure when more 
than one procedure is performed in a single operative session. Display 
of the comment indicator ``CH'' in the column titled ``Comment 
Indicator'' indicates a change in payment policy for the item or 
service, including identifying discontinued HCPCS codes, designating 
items or services newly payable under the ASC payment system, and 
identifying items or services with changes in the ASC payment indicator 
for CY 2014. Display of the comment indicator ``NI'' in the column 
titled ``Comment Indicator'' indicates that the code is new (or 
substantially revised) and that the payment indicator assignment is an 
interim assignment that is open to comment in the final rule with 
comment period.
    The values displayed in the column titled ``CY 2014 Payment 
Weight'' are the relative payment weights for each of the listed 
services for CY 2014. The payment weights for all covered surgical 
procedures and covered ancillary services whose ASC payment rates are 
based on OPPS relative payment weights were scaled for budget 
neutrality. Thus, 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

[[Page 75090]]

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.
    To derive the CY 2014 payment rate displayed in the ``CY 2014 
Payment Rate'' column, each ASC payment weight in the ``CY 2014 Payment 
Weight'' column was multiplied by the CY 2014 conversion factor of 
$43.471. 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 (as discussed in section 
XII.H.2.b. of this final rule with comment period).
    In Addendum BB, there are no relative payment weights displayed in 
the ``CY 2014 Payment Weight'' column for items and services with 
predetermined national payment amounts, such as separately payable 
drugs and biologicals. The ``CY 2014 Payment'' column displays the CY 
2014 national unadjusted ASC payment rates for all items and services. 
The CY 2014 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 October 2013.
    Addendum EE provides the HCPCS codes and short descriptors for 
surgical procedures that are to be excluded from payment in ASCs for CY 
2014.
    We did not receive any public comments regarding the continuation 
of our policy to provide CY 2014 ASC payment information as detailed in 
Addenda AA and BB. Therefore, Addenda AA and BB to this final rule with 
comment period (which are available via the Internet on the CMS Web 
site) display the updated ASC payment rates for CY 2014 for covered 
surgical procedures and covered ancillary services, respectively, and 
provide additional information related to the CY 2014 rates.

XIII. Hospital Outpatient Quality Reporting Program Updates

A. Background

1. Overview
    CMS has implemented quality measure reporting programs for multiple 
settings of care. These programs promote higher quality, more efficient 
health care for Medicare beneficiaries. The quality data reporting 
program for hospital outpatient care, known as the Hospital Outpatient 
Quality Reporting (Hospital OQR) Program, formerly known as the 
Hospital Outpatient Quality Data Reporting Program (HOP QDRP), has been 
generally modeled after the quality data reporting program for hospital 
inpatient services known as the Hospital Inpatient Quality Reporting 
(Hospital IQR) Program (formerly known as the Reporting Hospital 
Quality Data for Annual Payment Update (RHQDAPU) Program). Both of 
these quality reporting programs for hospital services have financial 
incentives for the reporting of quality data to CMS.
    CMS also has implemented quality measure reporting programs for 
other settings of care and for certain professionals, including:
     Care furnished by physicians and other eligible 
professionals, under the Physician Quality Reporting System (PQRS, 
formerly referred to as the Physician Quality Reporting Program 
Initiative (PQRI));
     Inpatient rehabilitation facilities, under the Inpatient 
Rehabilitation Facility Quality Reporting Program (IRF QRP);
     Long-term care hospitals, under the Long-Term Care 
Hospital Quality Reporting (LTCHQR) Program;
     PPS-exempt cancer hospitals, under the PPS-Exempt Cancer 
Hospital Quality Reporting (PCHQR) Program;
     Ambulatory surgical centers, under the Ambulatory Surgical 
Center Quality Reporting (ASCQR) Program;
     Inpatient psychiatric facilities, under the Inpatient 
Psychiatric Facility Quality Reporting (IPFQR) Program;
     Home health agencies, under the Home Health Quality 
Reporting Program (HH QRP); and
     Hospices, under the Hospice Quality Reporting Program.
    Finally, CMS has implemented a Hospital Value-Based Purchasing 
Program and an end-stage renal disease (ESRD) Quality Incentive Program 
that link payment to performance.
    In implementing the Hospital OQR Program and other quality 
reporting programs, we have focused on measures that have high impact 
and support national priorities for improved quality and efficiency of 
care for Medicare beneficiaries as reflected in the National Quality 
Strategy, as well as conditions for which wide cost and treatment 
variations have been reported, despite established clinical guidelines. 
To the extent possible under various authorizing statutes, our ultimate 
goal is to align the clinical quality measure requirements of the 
Hospital OQR Program and various other programs, such as the Hospital 
IQR Program, the ASCQR Program, and the Medicare and Medicaid 
Electronic Health Record (EHR) Incentive Programs, authorized by the 
Health Information Technology for Economic and Clinical Health Act, so 
that the burden for reporting will be reduced. As appropriate, we will 
consider the adoption of measures with electronic specifications, to 
enable the collection of this information as part of care delivery. 
Establishing such an alignment will require interoperability between 
EHRs, and CMS data collection systems, with data being calculated and 
submitted via certified EHR technology; additional infrastructural 
development on the part of hospitals and CMS; and the adoption of 
standards for capturing, formatting, and transmitting the data elements 
that make up the measures. Once these activities are accomplished, the 
adoption of many measures that rely on data obtained directly from EHRs 
will enable us to expand the Hospital OQR Program measure set with less 
cost and burden to hospitals.
    In implementing this and other quality reporting programs, we refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68467 through 68469) for the discussion of the principles for our 
considerations for future measures, and we intend to generally apply 
these same principles in future rulemaking.
    Comment: One commenter requested that for burden reduction 
purposes, CMS should not implement more than two chart-abstracted 
measures per year.
    Response: We consider potential reporting burden on hospitals. We 
do weigh the relevance and the utility of measures against potential 
burden on providers. We thank the commenters for the feedback and will 
take it into consideration for future proposals. We note that we are 
working toward the eventual adoption of electronically-specified 
measures, which will reduce the burden of chart-abstracted measures.
    Comment: A few commenters recommended that CMS ensure that the 
proposed measures are specified to provide an opportunity for 
stakeholders' input.
    Response: We note that all the proposed measures are fully 
specified and we have provided links to the detailed measure 
specifications. Since all of the proposed measures are NQF-endorsed, 
the specifications were all submitted to NQF by the measure stewards. 
We believe that these measure specifications will provide the detailed 
information needed for the public to understand the measures being 
proposed and to provide meaningful comments on the proposed measures 
during the rulemaking process. Proposed measures are not included in 
the Hospital OQR Specifications Manual because we generally incorporate

[[Page 75091]]

specifications for measures to be used in the program into the Hospital 
OQR Specifications Manual, along with implementation guidance after 
publication of the final rule with comment period, but prior to 
implementation. For maintenance of technical specifications, our 
general policy is to provide six months lead time between Hospital OQR 
Specifications Manual publication and the start date of collection so 
that providers have adequate time to prepare for new reporting 
requirements.
2. Statutory History of the Hospital Outpatient Quality Reporting 
(Hospital OQR) Program
    We refer readers to the CY 2011 OPPS/ASC final rule with comment 
period (75 FR 72064) for a detailed discussion of the statutory history 
of the Hospital OQR Program.
3. Measure Updates and Data Publication
a. Process for Updating Quality Measures
    Technical specifications for the Hospital OQR Program measures are 
listed in the Hospital OQR Specifications Manual, which is posted on 
the CMS QualityNet Web site at: http://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FSpecsManualTemplate&cid=1228772438492.
    We maintain the technical specifications for the measures by 
updating this Hospital OQR Specifications Manual and including detailed 
instructions and calculation algorithms. In some cases where the 
specifications are available elsewhere, we may include links to Web 
sites hosting technical specifications. These resources are for 
hospitals to use when collecting and submitting data on required 
measures.
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 
through 68767), we established an additional subregulatory process for 
making updates to the measures we have adopted for the Hospital OQR 
Program. We believe that a measure can be updated through this 
subregulatory process provided it is a nonsubstantive change. We expect 
to make the determination of what constitutes a substantive versus a 
nonsubstantive change on a case-by-case basis.
    Examples of nonsubstantive changes to measures might include 
updated diagnosis or procedure codes, medication updates for categories 
of medications, broadening of age ranges, and exclusions for a measure 
(such as the addition of a hospice exclusion to the 30-day mortality 
measures). We believe that non-substantive changes may include updates 
to measures based upon changes to guidelines upon which the measures 
are based. We will revise the Hospital OQR Specifications Manual so 
that it clearly identifies the updates and provide links to where 
additional information on the updates can be found. As stated in CY 
2009 OPPS/ASC, we also will post the updates on the QualityNet Web site 
at https://www.QualityNet.org. We will provide sufficient lead time for 
facilities to implement the changes where changes to the data 
collection systems would be necessary. We generally release the 
Hospital OQR Specifications Manual every 6 months and release addenda 
as necessary. This release schedule provides at least 3 months of 
advance notice for nonsubstantive changes such as changes to ICD-10, 
CPT, NUBC, and HCPCS codes, and at least 6 months of advance notice for 
changes to data elements that would require significant systems 
changes.
    We will continue to use rulemaking to adopt substantive updates to 
measures we have adopted for the Hospital OQR Program. Examples of 
changes that we might consider to be substantive would be those in 
which the changes are so significant that the measure is no longer the 
same measure, or when a standard of performance assessed by a measure 
becomes more stringent (for example, changes in acceptable timing of 
medication, procedure/process, or test administration). Another example 
of a substantive change would be where the NQF has extended its 
endorsement of a previously endorsed measure to a new setting, such as 
extending a measure from the inpatient setting to hospice.
    We believe that the policy finalized in the CY 2009 OPPS/ASC final 
rule adequately balances our need to incorporate nonsubstantive updates 
to Hospital OQR Program measures in the most expeditious manner 
possible, while preserving the public's ability to comment on updates 
that so fundamentally change an endorsed measure that it is no longer 
the same measure that we originally adopted. We also note that the NQF 
process incorporates an opportunity for public comment and engagement 
in the measure maintenance process. These policies regarding what is 
considered substantive versus non-substantive apply to all measures in 
the Hospital OQR Program.
    Comment: One commenter noted that the conversion of a measure to 
use ICD-10-CM/PCS should be considered a substantive change that 
follows current proposed rulemaking processes. The commenter requested 
clarification regarding the publication, preview, and comment period 
via rulemaking for ICD-9-CM to ICD-10-CM/PCS mappings for all value 
sets for diagnoses and procedures used by measures specified in this 
rule.
    Response: In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53504), we 
included examples in the Hospital IQR Program context of what we might 
generally regard as nonsubstantive changes to measures. Our examples 
included updated diagnosis or procedure codes, medication updates for 
categories of medications, or a broadening of age ranges.
    We will be transitioning all of our billing and measurement systems 
from ICD-9 to ICD-10. In preparation for this transition, we: (1) 
translated the ICD-9 versions of the measure specifications to ICD-10; 
(2) recently published this crosswalk for the Hospital OQR Program on 
our Web site at: http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/HospitalQualityInits/HospitalOutpatientQualityReportingProgram.html; and. (3) solicited 
comment on this crosswalk from July 1, 2013 through August 31, 2013.
    We normally incorporate coding updates for the measures using our 
established subregulatory process because such updates do not change 
the basic, underlying concepts being measured. Moving from ICD-9 to the 
ICD-10 coding system falls within the parameters of our subregulatory 
process. However, we recognize that in moving to ICD-10 coding, there 
may be some nuances in the measures that, when translated, result in 
unanticipated differences in performance, and consequently, prior 
measure results do not correspond to results for the same measures 
under the new coding system. In this situation, we will determine 
whether to continue publicly reporting the quarters of data that were 
collected under the ICD-9 coding system, or report only the newer 
quarters of data collected under the ICD-10 coding system. We intend to 
study the effect of transitioning to the ICD-10 system on trendability 
of results once implementation has occurred and data are available to 
do so in order to inform this future policy.
    We will continue to use rulemaking to adopt substantive updates to 
measures we have adopted for the Hospital OQR Program. However, any 
change to a measure would need to be evaluated on a case by-case basis 
to determine whether or not it is, in fact, substantive.

[[Page 75092]]

b. Publication of Hospital OQR Program Data
    We refer readers to the CY 2014 OPPS/ASC proposed rule (78 FR 
43645) for the discussion of our policy for the publication of Hospital 
OQR Program data on Hospital Compare and non-interactive CMS Web sites.
    Comment: One commenter encouraged CMS to ensure the Hospital 
Compare Web site remains user-friendly, even though it must present 
data that can be complicated and potentially confusing if not well 
structured. The commenter emphasized that the information published on 
Hospital Compare be accurate and fair, but also impartial and presented 
in plain English at a sixth-grade reading level. The commenter 
recommended that CMS display data on Hospital Compare in a simple 
format with easy navigation and minimal graphics in the interest of 
data that loads quickly on a variety of devices and at slower internet 
connection speeds. The commenter encouraged CMS to offer the data in 
languages commonly spoken in the United States, and cites the Medicare 
Prescription Drug Benefit Manual, Chapter 2, Section 30.7 to point out 
that CMS has standards governing Web site translation that should be 
applied for the purpose of making the data available on Hospital 
Compare more accessible.
    Response: We thank this commenter for this thoughtful feedback 
regarding the public reporting of data on Hospital Compare. We will 
look at the feasibility of modifying the Web site to incorporate these 
suggestions.

B. Process for Retention of Hospital OQR Program Measures Adopted in 
Previous Payment Determinations

    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68471), for the purpose of streamlining the rulemaking process, we 
finalized a policy that, beginning with the CY 2013 rulemaking, when we 
adopt measures for the Hospital OQR Program as beginning with a payment 
determination and subsequent years, these measures are automatically 
adopted for all subsequent years' payment determinations, unless we 
propose to remove, suspend, or replace the measures.

C. Removal or Suspension of Quality Measures From the Hospital OQR 
Program Measure Set

1. Considerations in Removing Quality Measures From the Hospital OQR 
Program
    In the FY 2010 IPPS/LTCH PPS rulemaking, we finalized a process for 
immediate retirement (a term we later changed to ``removal'') of 
Hospital IQR Program measures based on evidence that the continued use 
of the measure as specified raised patient safety concerns (74 FR 43864 
through 43865). We adopted this same immediate measure retirement 
policy for the Hospital OQR Program in the CY 2010 OPPS/ASC final rule 
with comment period (74 FR 60634).
    In the CY 2013 OPPS/ASC final rule with comment period, we changed 
the term from ``retirement'' to ``removal,'' in line with the same 
change in the Hospital IQR Program. We discuss our reasons for this 
change at 77 FR 68472 through 68473. In the FY 2011 IPPS/LTCH PPS final 
rule (75 FR 50185), we finalized a set of criteria to use when 
determining whether to remove measures from the Hospital IQR Program 
(formerly known as the RHQDAPU Program) measures. These criteria are: 
(1) Measure performance among hospitals is so high and unvarying that 
meaningful distinctions and improvements in performance can no longer 
be made (``topped out'' measures); (2) performance or improvement on a 
measure does not result in better patient outcomes; (3) a measure does 
not align with current clinical guidelines or practice; (4) the 
availability of a more broadly applicable (across settings, 
populations, or conditions) measure for the topic; (5) the availability 
of a measure that is more proximal in time to desired patient outcomes 
for the particular topic; (6) the availability of a measure that is 
more strongly associated with desired patient outcomes for the 
particular topic; and (7) collection or public reporting of a measure 
leads to negative unintended consequences such as patient harm. These 
criteria were suggested by commenters during Hospital IQR Program 
rulemaking, and we determined that these criteria are also applicable 
in evaluating Hospital OQR Program quality measures for removal. In the 
CY 2013 OPPS/ASC final rule with comment period (77 FR 68472 through 
68473), we finalized our proposal to apply these measure removal 
criteria in the Hospital OQR Program as well.
    In addition to these criteria, we take into account the views of 
the MAP in the evaluation of measure removal. Furthermore, for 
efficiency and streamlining purposes, we strive to eliminate redundancy 
of similar measures.
    Comment: A few commenters urged CMS to remove 7 previously adopted 
Hospital OQR Program measures (OP-9, OP-10, OP-14, OP-15, OP-20, OP-22, 
and OP-25), which are either not NQF-endorsed or not recommended by the 
MAP.
    Response: While this comment is outside the scope of what we 
proposed, we would like to provide some clarification. In the CY 2013 
OPPS/ASC final rule with comment period, we responded to the same 
comments on these measures. We refer readers to our responses in 77 FR 
68472 through 68473.
2. Removal of Two Chart-Abstracted Measures from the Hospital OQR 
Program
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43646 through 43647), 
we proposed in section XIII.C.2, titled ``Proposed Removal of Two 
Chart-Abstracted Measures From the Hospital OQR Program,'' to remove 
two measures from the Hospital OQR Program for the CY 2016 payment 
determination and subsequent years: (1) OP-19: Transition Record with 
Specified Elements Received by Discharged ED Patients, and (2) OP-24: 
Cardiac Rehabilitation Measure: Patient Referral from an Outpatient 
Setting. We reflected our proposal in a chart (78 FR 43647) depicting 
measures we proposed to remove, and also referred in the title of the 
chart to CY 2016 as the first payment year affected by our proposal. 
However, in section XIII.H.2.b of the proposed rule (78 FR 43653), 
titled ``Effects of Proposed Changes on data submission for CY 2015 and 
CY 2016 Payment Determinations and Subsequent Years,'' we proposed to 
remove these measures for the CY 2015 payment determination and 
subsequent years. We received comments regarding this contradictory 
information and inquiries about when the proposed removal of both OP-19 
and OP-24 would actually be effective. We would like to address those 
comments here before discussing individual measures.
    Comment: Many commenters noted that the discussions in the preamble 
of the proposed rule regarding the removal of OP-19 and OP-24 were 
inconsistent in sections XIII.C.2 and XIII.H.2.b. of the proposed rule. 
Commenters requested clarification and many also encouraged CMS to 
remove these measures for the CY 2015 payment determination and 
subsequent years.
    Response: We would like to apologize for this error and wish to 
clarify that we intended to propose removing these measures for the CY 
2015 payment determination and subsequent years, and instead 
inadvertently referred to their removal as being proposed for the CY 
2016 payment determination and subsequent years in XIII.C.2. We

[[Page 75093]]

appreciate commenters support for removing OP-19 and OP-24 for the CY 
2015 payment determination and subsequent years.
    The rationales for proposing to remove these measures are discussed 
below.
a. Removal of OP-19: Transition Record with Specified Elements Received 
by Discharged ED Patients
    We previously adopted measure OP-19 for the Hospital OQR Program 
for the CY 2013 payment determination with data collection beginning 
with January 1, 2012 encounters in the CY 2011 OPPS/ASC final rule with 
comment period. Shortly after data collection for this measure began in 
January 2012, hospitals raised concerns about the measure 
specifications, including potential privacy issues related to releasing 
certain elements of the transition record to either the patient being 
discharged from an emergency department or the patient's caregiver. 
Some examples provided by hospitals are the release of sensitive lab 
results or radiological findings to a parent, spouse, or guardian of a 
minor patient, or to the responsible party for a physically 
incapacitated patient.
    In order to address the safety concerns related to confidentiality 
as raised by the industry in the above discussion, in April 2012, we 
took immediate action to suspend OP-19. On April 12, 2012, we released 
a Memorandum entitled SDPS 12-100-OD, ``Revised: Temporary Suspension 
of Hospital Outpatient Quality Reporting Measure OP-19: Transition 
Record with Specified Elements Received by Discharged Patients'' to 
make clear our intent not to use any data submitted on this measure for 
payment determinations, public reporting, or data validation. This 
memorandum can be located at http://qualitynet.org under the option 
``Email Notifications'' within the ``Hospitals--Outpatient'' drop down 
menu found at the top of the page.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68474 
through 68476) for the CY 2014 payment determination and subsequent 
years, we confirmed that we suspended the collection of data for the 
measure OP-19: Transition Record with Specified Elements Received by 
Discharged ED Patients, which specified that either patients or their 
caregivers (emphasis added) receive a transition record at the time of 
ED discharge.
    We chose to suspend this measure rather than to immediately remove 
the measure from the program at the time, because the probability of 
harm occurring was relatively low; any potential harm that occurred 
would not be the direct result of patient care rendered at facilities; 
and the measure steward, the American Medical Association Physician 
Consortium for Performance Improvement (AMA-PCPI), believed that the 
measure could be quickly re-specified in a manner that would mitigate 
the concerns raised by hospitals and stakeholders. In the CY 2013 OPPS/
ASC final rule with comment period, we noted that the measure steward 
was working to revise the measure specifications to address the 
concerns raised by affected parties. We also noted that the measure was 
scheduled for NQF maintenance review in 2013. We stated that after 
completion of the NQF maintenance process, we anticipated that normal 
program operations for this measure could resume once we updated the 
Hospital OQR Specifications Manual and made any necessary changes to 
our data collection infrastructure. In addition, we stated that we 
would notify hospitals of changes in the suspension status of the 
measure for the Hospital OQR Program via email blast. However, we 
indicated that if we determined that these concerns cannot be 
adequately addressed by measure specifications, we would propose to 
remove this measure in a future OPPS/ASC rule.
    We have determined that the measure cannot be implemented with the 
degree of specificity that would be needed to fully address the 
concerns of stakeholders without being overly burdensome to both 
hospitals and CMS. The measure steward resolved the safety issue by 
refining the measure, but the refinement has made data abstraction more 
subjective because individual hospitals can determine which information 
should be included in the transition record in order to comply with 
this measure. In the absence of standardized data elements, we were not 
able to resolve this issue of data abstraction for common data 
elements, and therefore, could not ensure consistency of data 
submission and accuracy of measure results.
    We also learned that all aspects for this transition record measure 
are currently required to meet the Medicare EHR Incentive Program's 
meaningful use (MU) core objective for eligible hospitals and critical 
access hospitals (CAHs) to provide patients the ability to view online, 
download, and transmit information about a hospital admission. This 
measure is workable in the Medicare EHR Incentive Program because, 
unlike the Hospital OQR Program, it does not rely on chart-abstraction, 
which can result in variations in data elements. Instead, the Medicare 
EHR Incentive Program incorporates a methodology that includes 
standardized data elements. In addition, there are no comparable 
patient privacy concerns, since in the Medicare EHR Incentive Program, 
patient e-data is password protected.
    This MU core objective provides patients discharged from the 
inpatient department or Emergency Department (ED) online access to the 
ED visit data. These ED visit data are the specified data elements 
included in the OP-19 Transition Record measure. This means that if we 
were to keep this measure, hospitals would need to submit this data for 
both the Hospital OQR Program using chart-abstraction and via 
attestation for the MU core objective. Therefore, to reduce duplicative 
requirements among programs and measurement burden, we proposed to 
remove this measure from the Hospital OQR Program. We invited public 
comment on the proposed removal of this measure from the Hospital OQR 
Program.
    Comment: Many commenters stated that data collection for measure 
OP-19 is burdensome and strongly supported CMS' justifications for 
removing the measure.
    Response: We thank the commenters for supporting our decision to 
remove OP-19 for the CY 2015 payment determination and subsequent 
years.
    Comment: One commenter noted that, in the case of OP-19, hospitals 
were instructed to continue to report some value for this measure 
because the CMS data systems are not able to accommodate a missing 
field without error. The commenter stated that while OP-19 was 
suspended, reporting hospitals needed to continue to collect and report 
data and ensure that the data field for OP-19 was completed to ensure 
the entire file would be accepted into the CMS clinical data warehouse.
    Response: We appreciate the commenter's concern. We refer the 
reader to the CY 2012 OPPS/ASC final rule with comment period (77 FR 
68475 through 68476) for a discussion of this same topic. We reiterate 
that, while it is true that the burden of populating some value in the 
data field for OP-19 is indeed placed on the reporting hospital, it is 
not accurate that the hospital is now or ever was required to continue 
to collect OP-19 data by chart abstraction or to report a meaningful 
value for OP-19 to the clinical data warehouse once we suspended the 
measure. In our memorandum to suspend OP-19, in subsequent discussions 
in the Federal Register, and in our educational materials and 
educational support calls, we attempted to make clear that we

[[Page 75094]]

would not use or validate any data that came in for OP-19.
    We agree it is burdensome that our current system will not accept a 
null value for OP-19. An upcoming release of our Hospital Reporting 
system will address this issue by removing OP-19 and OP-24 from our 
data collection fields. This system release is anticipated for summer 
2014. We have also instructed the system contractor to build 
flexibility into the data collection system so that, in the future, we 
are able to execute our policy for suspension or removal of measures 
without causing undue burden to the reporting community.
    After consideration of the public comments we received, we are 
finalizing the removal of OP-19 with the clarification that removal 
applies for the CY 2015 payment determination and subsequent years.
b. Removal of OP-24: Cardiac Rehabilitation Measure: Patient Referral 
from an Outpatient Setting
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68476), we deferred data collection for this measure to January 1, 2014 
encounters. This was due to the unavailability of detailed abstraction 
instructions for data collection in time for the July 2012 release of 
the Hospital OQR Specifications Manual. These instructions were needed 
for chart-abstraction beginning on January 1, 2013. We also indicated 
that this measure would be applied to the CY 2015 payment 
determination.
    In the CY 2014 OPPS/ASC proposed rule, we proposed to remove this 
measure from the Hospital OQR Program due to continued difficulties 
with defining the measure care setting. The measure specifications 
provided by the measure steward, the American College of Cardiology 
(ACC), identify the applicable care setting as a `Clinician Office/
Clinic.' However, in developing the specifications for this measure for 
a hospital outpatient clinic setting, several issues arose, including 
difficulty in accurately identifying hospital outpatient visits for 
evaluation and management purposes using either chart abstraction or 
HOPD claims data, and difficulty in determining the particular hospital 
outpatient clinic visit that resulted in a cardiac rehabilitation 
referral for any given patient. Therefore, given the difficulties in 
accurately applying the measure to the hospital outpatient setting, we 
proposed to remove OP-24 from the Hospital OQR Program. We invited 
public comment on this proposal.
    Comment: Many commenters strongly supported CMS' justification for 
removing measure OP-24.
    Response: We appreciate all the feedback supporting our proposal to 
remove OP-24 from the Hospital OQR Program measure set for the CY 2015 
payment determination and subsequent years.
    After consideration of the public comments we received, we are 
finalizing the removal of OP-19 and OP-24 for the CY 2015 payment 
determination and subsequent years.
[GRAPHIC] [TIFF OMITTED] TR10DE13.359

D. Quality Measures Previously Adopted for the CY 2014 and CY 2015 
Payment Determinations and Subsequent Years

    The table below lists 25 measures that we previously adopted and 
retained for the CY 2014 and CY 2015 payment determination and 
subsequent years under the Hospital OQR Program. This table also 
includes OP-19 and OP-24, with a notation that we are removing these 
two measures for the CY 2015 payment determination and subsequent 
years.
BILLING CODE 4120-01-P

[[Page 75095]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.360

[[Page 75096]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.361

    Comment: Some commenters expressed views regarding some of the 
previously finalized measures that CMS intends to continue using under 
the Hospital OQR Program. Commenters also provided suggestions on these 
measures, regarding measure implementation, adding exceptions, and 
revising measure specifications.
    Response: We thank the commenters for their comments. Because these 
comments address measures that we have finalized in the past through 
notice and comment rulemaking, we do not believe they are within the 
scope of this current rulemaking. However, we intend to consider all of 
these views for future rulemaking and Hospital OQR Program development.

E. Quality Measures for the CY 2016 Payment Determination and 
Subsequent Years

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43647 through 43651), 
we proposed to adopt five new measures for the Hospital OQR Program for 
the CY 2016 payment determination and subsequent years. These measures 
include one HAI measure--Influenza Vaccination Coverage among 
Healthcare Personnel (NQF 0431), currently collected by the 
Centers for Disease Control and Prevention (CDC) via the National 
Healthcare Safety Network (NHSN)--and four chart-abstracted measures. 
The chart-abstracted measures are: (1) Complications within 30 Days 
Following Cataract Surgery Requiring Additional Surgical Procedures 
(NQF 0564), (2) Endoscopy/Polyp Surveillance: Appropriate 
follow-up interval for normal colonoscopy in average risk patients (NQF 
0658), (3) Endoscopy/Polyp surveillance: Colonoscopy Interval 
for Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use (NQF 0659), and (4) Cataracts: Improvement 
in Patient's Visional Function within 90 Days Following Cataract 
Surgery (NQF 1536).
    All of the proposed measures were included on a publicly available 
document entitled ``List of Measures Under Consideration for December 
1, 2012'' on the NQF Web site at: http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx in 
compliance with section 1890A(a)(2) of the Act. Section 1890A(a)(2) is 
part of the pre-rulemaking process established under section 1890A of 
the Act, and requires the Secretary to make available to the public by 
December 1st of each year a list of certain categories of quality and 
efficiency measures that the Secretary is considering for the Medicare 
program. The measures we proposed were reviewed by the MAP in its ``MAP 
Pre-Rulemaking Report: 2013 Recommendations on Measures Under 
Consideration by HHS,'' which has been made available on the NQF Web 
site at: http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partnership.aspx. As required under section 
1890A(a)(4) of the Act, we considered the input and recommendations 
provided by the MAP in selecting measures to propose for the Hospital 
OQR Program.
    All five of the proposed measures are NQF-endorsed, and therefore 
meet the requirements that measures selected for the program ``reflect 
consensus among affected parties and, to the extent feasible and 
practicable, that these measures include measures set forth by one or 
more national consensus building entities'' under section 
1833(t)(17)(C)(i) of the Act. Furthermore, the services targeted in the 
proposed measures are services commonly provided to patients who visit 
hospital outpatient departments and, for this reason, we believe that 
these proposed measures are appropriate for the measurement of quality 
of care furnished by hospitals in outpatient settings as required under 
section 1833(t)(17)(C)(i) of the Act.
    We proposed to collect aggregate data (numerators, denominators, 
exclusions) for the four chart-abstracted measures via an online, Web-
based tool that will be made available to HOPDs via the QualityNet Web 
site, just as we do for OP-22. This Web-based tool is currently in use 
in the Hospital OQR Program to collect structural measure information.
    More information regarding the proposed method of collection was 
provided in section XIII.H.2. of the proposed rule (78 FR 43653).
    To enhance our efforts to collect high quality data for the 
Hospital OQR measures while minimizing burden for HOPDs, we also sought 
public comment on whether we should collect patient-level data via 
certified EHR technology on the four proposed chart-abstracted measures 
(this would not apply to the one HAI measure, Influenza Vaccination 
Coverage among Healthcare Personnel), and the potential timing for 
doing so. Any future ability to collect patient-level data via EHR 
technology would allow CMS to validate the accuracy of the data and 
also link data for patients over time to assess patient outcomes of 
care related to treatment.
    Comment: A few commenters recommended that if CMS finalizes new 
chart-abstracted measures in the Hospital OQR Program, CMS should not 
collect patient-level data through EHR technology for these measures; 
rather, CMS should limit data collection to aggregate data. Many 
commenters did not support patient-level data collection specifically 
due to EHR system concerns. These commenters supported collecting 
aggregate data because the EHR environment is not mature. One commenter 
stated that a group of its stakeholder hospitals are in the early 
stages of adopting EHR systems and encouraged CMS to delay requiring 
patient-level data where their infrastructure is not ready to collect 
patient information.
    Some commenters do not support patient-level data collection using 
EHR technology due to concerns about protecting the privacy of EHR 
data. One commenter believed that until CMS can ensure patients' 
records can be securely maintained and transmitted, CMS should not 
collect patient-level data via EHR technology.
    Response: We appreciate the comments we received on whether we 
should collect patient-level data via certified EHR technology on the 
four

[[Page 75097]]

proposed chart-abstracted measures and the potential timing for doing 
so.
    We agree with commenters that chart-abstracted measure data 
collected in aggregate form is currently the most appropriate 
collection method, and we are finalizing the aggregate mode of data 
collection for the three new chart-abstracted measures in section 
XIII.H.2.f. of this final rule with comment period.
    We will consider these commenters' concerns in proposing future 
updates to the program and updates or expansions to the Hospital OQR 
Program measures. Specifically, we will continue to consider the 
maturity of EHR systems in future proposals to collect HOPD data via 
EHR technology. We understand the need for additional infrastructural 
development on the part of hospitals and CMS and the adoption of 
standards for capturing, formatting, and securely transmitting the data 
elements that make up measures. Once these activities are accomplished, 
the adoption of many measures that rely on data obtained directly from 
EHRs will enable us to expand the Hospital OQR Program measure set with 
less cost and burden to hospitals.
    Comment: A few commenters did not support aggregate data collection 
for the proposed chart-abstracted measures, and suggested that CMS only 
adopt measures where a validation strategy is in place. These 
commenters pointed out that the use of aggregate data in lieu of 
patient-level data does not allow for validation of data accuracy. The 
commenters believed that without validation, there is no opportunity 
for robust field-testing to ensure that electronic and chart-abstracted 
measures provide comparable results.
    Response: We interpret these commenters' views as being in support 
of patient-level data collection and data collection via EHR 
technology. We likewise support the future adoption of measures with 
patient-level data collection, via EHR technology, and where submitted 
data may be validated. We have not, to date, proposed measures for the 
OQR Program with the EHR mode of data collection. In this final rule 
with comment period, we have finalized three measures that are chart-
abstracted with aggregate data submission via the Web-based tool. We 
cannot validate the data that is submitted in this manner. We agree 
with commenters that validation is a way to measure the accuracy of 
data submitted, and hope to be able to accomplish validation using EHR 
technology to collect data sometime in the near future.
    Comment: Some commenters pointed out that CMS' collection of 
aggregate data might not actually have the effect of reducing burden. 
These commenters believed this would be the case if hospitals must 
first perform a patient-level review for each medical record in order 
to compile the aggregate data. Commenters were generally concerned 
about burden, and some commenters favored both an emphasis on adoption 
of claims-based measures and measures that do not require chart 
abstraction.
    Response: We appreciate the commenters' concerns about the burden 
that can be involved in collecting aggregate-level data. We sought 
public comment on whether we should collect patient-level data via 
certified EHR technology on the four proposed chart-abstracted measures 
(this would not apply to the one HAI measure, Influenza Vaccination 
Coverage among Healthcare Personnel), and the potential timing for 
doing so. We interpret these commenters as being in favor of collecting 
patient-level data when it is feasible. We will take these comments 
into consideration in future rulemaking.
    These comments are similar to comments we received related to how 
hospitals should gather information to report on our most recent 
proposed measures. We refer readers to section XIII.H.2.f of this final 
rule with comment period where we address these comments.
    Comment: Many commenters offered views generally applicable to data 
collection in the Hospital OQR Program, but not specific to the 
proposed measures described in section XIII.E of the CY 2014 OPPS/ASC 
proposed rule (78 FR 43647). Commenters voiced commitment to: (1) 
providing data to measure quality of care; (2) supporting CMS' 
alignment of measures and requirements across data reporting and value 
based purchasing programs whenever possible and as early as possible in 
the implementation phases of new programs; (3) allowing stakeholders to 
meet Meaningful Use (MU) standards through submission of data to the 
Hospital OQR Program; and, (4) adopting future EHR measures that are 
fully endorsed, tested, and specified by CMS. Many commenters asked CMS 
to consider technology barriers to efficient and accurate EHR-based 
quality reporting, including the need for widely adopted standards, 
information models, and vocabularies to support EHR-based reporting. 
Many commenters also asked CMS not to adopt aggressive timelines for 
EHR data submission and recommended specific policies and timelines 
related to electronic submission. Some commenters urged CMS to 
carefully consider confidentiality, privacy, and security regulations, 
and to consider State-based regulations before implementing EHR 
measures for use by Partial Hospitalization Programs (PHPs) in HOPDs. 
Finally, several commenters suggested that CMS should convene a work 
group that includes the hospital industry to collaborate on how best to 
collect the data needed to accurately capture the care provided in off-
campus provider-based departments.
    Response: We will take these comments into consideration for future 
rulemaking for our quality reporting programs.
    Each of the proposed measures is described in greater detail below.
1. Influenza Vaccination Coverage Among Healthcare Personnel (NQF 
 0431)
    The proposed measure assesses the percentage of healthcare 
personnel (HCP) who have been immunized for influenza. Rates of serious 
illness and death resulting from influenza and its complications are 
increased in high-risk populations such as persons over 50 years or 
under four years of age, and persons of any age who have underlying 
conditions that put them at an increased risk. HCP can acquire 
influenza from patients and can transmit influenza to patients and 
other HCP. Many HCP provide care for, or are in frequent contact with, 
patients with influenza or patients at high risk for complications of 
influenza. The involvement of HCP in influenza transmission has been a 
long-standing concern.1 2 3
---------------------------------------------------------------------------

    \1\ Maltezou, H.C., Drancourt, M.: Nosocomial influenza in 
children. Journal of Hospital Infection 2003; 55:83-91.
    \2\ Hurley, J.C., Flockhart, S.: An influenza outbreak in a 
regional residential facility. Journal of Infection Prevention 2010; 
11:58-61.
    \3\ Salgado, C.D, Farr, B.M., Hall, K.K., Hayden, F.G.: 
Influenza in the acute hospital setting. The Lancet Infectious 
Diseases 2002; 2:145-155.
---------------------------------------------------------------------------

    Vaccination is an effective preventive measure against influenza, 
and can prevent many illnesses, deaths, and losses in productivity.\4\ 
HCP are considered a high priority for expanding influenza vaccine use. 
Achieving and sustaining a high rate of influenza vaccination coverage 
among HCP is intended to help protect HCP and their patients in 
hospital settings and reduce disease burden and healthcare costs. Due 
to the potentially significant impact of HCP influenza vaccination on 
patient outcomes, we believe this measure is

[[Page 75098]]

appropriate for measuring the quality of care in hospital outpatient 
departments.
---------------------------------------------------------------------------

    \4\ Wilde, M.A., McMillan, J.A., Serwint, J., Butta, J., 
O'Riordan, M.A., Steinhoff, M.C.: Effectiveness of influenza vaccine 
in health care professionals; a randomized trial. The Journal of the 
American Medical Association 1999;281:908-913.
---------------------------------------------------------------------------

    We proposed to adopt this process measure for the CY 2016 payment 
determination and subsequent years. We also proposed that Hospital OPDs 
use the NHSN infrastructure and protocol to report the measure for 
Hospital OQR Program purposes. Hospitals currently submit data to NHSN 
to comply with the requirements of the Hospital IQR Program and those 
requirements will be unchanged for data submission to NHSN for the 
Hospital OQR Program. The measure numerator is: HCP in the denominator 
population who during the time from October 1 (or when the vaccine 
became available) through March 31 of the following year: (a) received 
an influenza vaccination administered at the healthcare facility, or 
reported in writing (paper or electronic) or provided documentation 
that influenza vaccination was received elsewhere; (b) were determined 
to have a medical contraindication/condition of severe allergic 
reaction to eggs or to other component(s) of the vaccine, or history of 
Guillain-Barre Syndrome within 6 weeks after a previous influenza 
vaccination; (c) declined a vaccination; or (d) persons with unknown 
vaccination status or who do not otherwise meet any of the definitions 
of the above-mentioned numerator categories. The measure denominator 
is: the number of HCP who are working in the healthcare facility for at 
least 1 working day between October 1 and March 31 of the influenza 
season, regardless of clinical responsibility or patient contact. The 
specifications for this measure are available at http://www.qualityforum.org/QPS/QPSTool.aspx?Exact=false&Keyword=0431.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported inclusion of this measure in the Hospital 
OQR Program and noted that the measure would address a measure type 
that is not adequately represented in the program measure set. 
Furthermore, the adoption of this measure will align with both the 
Hospital IQR Program, which adopted the measure for the FY 2015 payment 
determination and subsequent years, and the ASCQR Program, which 
adopted the measure for the CY 2016 payment determination and 
subsequent years.
    In the CY 2012 OPPS/ASC proposed rule (76 FR 42323 through 42324), 
we proposed this measure for the CY 2015 payment determination. 
However, in the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74470 through 74472), we decided not to finalize the measure (76 FR 
74472) and, instead, decided to propose it in future rulemaking for the 
CY 2016 payment determination and subsequent years in order to address 
measure refinements in the denominator and operational issues. We 
believe that these refinements have since been made and that the 
operational issues have been resolved.
    We have learned that many States are proactively aligning their 
reporting requirements for this measure to mirror the federal 
requirements in an effort to reduce burden on providers and suppliers. 
We also recently learned that the measure may soon be undergoing some 
minor updates and review by NQF. Consistent with our policy to use a 
subregulatory process to adopt nonsubstantive changes to measures 
arising out of the NQF process stated in the CY 2009 OPPS/ASC final 
rule with comment period (73 FR 68766 through 68767), we would use this 
process to adopt the upcoming NQF revisions for this measure, if the 
revisions are nonsubstantive.
    We refer readers to section XIII.H.2. of the proposed rule for a 
detailed discussion of data collection (78 FR 43656). We invited public 
comment on this proposal.
    Comment: Several commenters opposed this measure and contended that 
the measure is duplicative of the Influenza vaccination measure in the 
Hospital IQR Program. Commenters stated that it is burdensome to report 
the same measure for both settings. A few commenters requested 
clarifications for the measure inclusions for both hospital inpatient 
and outpatient settings. Some commenters noted that hospital staff may 
float between different hospital inpatient and outpatient locations on 
different days and they requested clear guidelines to identify staff 
working at different hospital locations. A few commenters recommended 
allowing hospitals to report by attesting through the Hospital IQR 
Program that both their inpatient and outpatient healthcare personnel 
are vaccinated.
    Response: We recognize that the current measure specifications may 
lead to some redundancy in data collection and data submission of this 
measure in both the inpatient and outpatient settings. We are aware 
that some HCP may work across both of these settings. We also realize 
that it may be difficult for hospitals to accurately attribute HCP 
using current instructions to report accurate data for both the 
Hospital IQR and Hospital OQR Programs.
    After considering the public comments we received and our 
discussion with the CDC's NHSN, we plan to address the commenters' 
concerns by providing clear instructions on the appropriate attribution 
of HCP working in the outpatient setting. We intend to provide these 
instructions in time for the first data collection period beginning in 
October 2014 and before the data submission deadline on May 15, 2015. 
The instructions will be included in the measure specifications in our 
planned December 2013 addendum to the Hospital OQR Specifications 
Manual, which will be available on the QualityNet Web site (https://
www.qualitynet.org).
    We also intend to separately clarify HCP definitions for the 
inpatient setting with respect to the Hospital IQR Program in the 
Hospital IQR Specifications Manual, which we anticipate will be 
published on April 1, 2014 to cover the discharges dated October 1, 
2014-June 30, 2015. In addition, as the measure steward, the CDC's NHSN 
plans to set up the capability to clearly differentiate reporting on 
its Web site for the hospital inpatient and outpatient settings.
    Comment: One commenter believed that this measure may not be 
necessary as many hospitals already require the influenza vaccination 
as a condition for employment. Another commenter requested a waiver for 
States with legislation prohibiting healthcare providers from requiring 
employees to obtain influenza vaccination as a condition for 
employment.
    Response: We believe that this proposed measure is necessary for 
achieving high levels of vaccination in HCP and that this new measure 
provides useful information to consumers of healthcare services. We 
note that a recent report by CDC (Morbidity and Mortality Weekly Report 
2013; 62(38):781-786) found that during the 2012-2013 influenza season, 
30 percent of HCP worked in settings where influenza vaccination was 
required, 46 percent worked in settings where it was promoted but not 
required, and 24 percent worked in settings where it was neither 
required nor promoted. Vaccination adherence at facilities with a 
contingency requirement for employment was 96.5 percent. Rates were 
lower in facilities that promoted, but did not require vaccination 
(76.9 percent) and lower still in facilities that neither required nor 
promoted vaccination (50.4 percent). Thus, there is wide variation in 
workplace programs for the influenza vaccination and in vaccine 
coverage among HCP. Therefore, we believe that tracking influenza 
vaccination coverage is pivotal to raise vaccination adherence to

[[Page 75099]]

higher and more uniform levels across the Nation.
    We acknowledge the commenter's concern regarding State laws 
prohibiting providers from requiring that healthcare workers get an 
influenza vaccination. We want to clarify that the numerator of the 
population of this measure includes more than just HCPs who received an 
influenza vaccination administered at the healthcare facility, or who 
reported in writing (paper or electronic) or provided documentation 
that they received an influenza vaccination elsewhere. The numerator 
population also includes HCP who: (a) have a medical contraindication/
condition of severe allergic reaction to eggs or to other components of 
the vaccine; (b) have a history of Guillain-Barre Syndrome within 6 
weeks after a previous influenza vaccination; (c) declined a 
vaccination; (d) have an unknown vaccination status or do not otherwise 
meet any of the other definitions in the numerator categories. We 
believe that these last three categories encompass HCP who may not have 
been vaccinated and cannot be required to comply with a vaccination 
requirement under State law. Therefore, we do not believe that a waiver 
is needed for States where legislation prohibits providers from 
requiring that HCPs get influenza vaccinations as a condition of 
employment. Regardless of whether requiring the influenza vaccination 
with employment is prohibited by the State, HOPDs can still take 
actions to improve their vaccination rates.
    Comment: One commenter asked whether CMS would publicly report this 
measure separately for the Hospital OQR Program, instead of reporting a 
hospital-wide rate, which includes hospital inpatient units and off-
campus clinics, among others.
    Response: In the upcoming CY 2015 OPPS/ASC proposed rulemaking, we 
will provide detailed proposals regarding the public reporting of this 
measure as stated above.
    After consideration of the public comments we received, we are 
finalizing as proposed the measure OP-27: Influenza Vaccination 
Coverage among Healthcare Personnel (NQF 0431) for the 
Hospital OQR Program for the CY 2016 payment determination and 
subsequent years.
    For the proposed rule, we received many general comments applicable 
to the four proposed chart-abstracted measures. We have organized this 
preamble by first summarizing and responding to these general comments 
applicable to these four measures, summarizing and responding to 
measure-specific comments, and then describing our final policy.
    Comment: A few commenters supported adopting all four proposed 
chart-abstracted measures. However, many other commenters opposed all 
four proposed chart-abstracted measures based on their claims that 
follow-up visits and assessments are performed in places other than in 
HOPDs. Thus, HOPDs may not be able to access other patient records or 
they may not be able to track down the patients who may go elsewhere 
for follow-up. The commenters stated that HOPDs merely provide a 
facility for physicians to perform certain procedures, but follow-up 
visits are performed at physician offices. Many commenters viewed the 
four proposed chart-abstracted measures as ``Clinician Office'' setting 
measures designed to measure, for example, ophthalmologist and other 
physician performance and not HOPD performance. Commenters stated that, 
for example, ophthalmologists assess post-operative visual function and 
patient outcomes, and determine additional surgical procedures as 
necessary in their respective offices and not in the HOPD. Likewise, 
physicians perform colonoscopy at HOPDs, but follow-up colonoscopy 
intervals are determined by the physician and documented in medical 
records kept in the physician's office.
    Some commenters asserted that measures for the outpatient setting 
should be geared towards tracking the care of patients during their 
HOPD visits. Patients who receive some type of care in the HOPD do not 
always receive the majority of their care in HOPDs, because they are 
most likely to be followed by their primary care physicians for other 
medical care. Therefore, it is generally not practical to have the HOPD 
tracking the long-term follow-up care of its patients.
    The commenters recommended that because CMS wishes to eventually 
align the hospital and physician quality programs, CMS must design 
measures that recognize that there are differences in how facilities 
and physicians collect information, report quality measures, and 
interact with patients.
    Many commenters concluded that these four measures are more 
appropriate as Physician Quality Reporting System (PQRS) measures, 
because physicians are better suited to track and follow-up patients 
(PQRS is a voluntary reporting system that provides an incentive 
payment to identified individual eligible physicians). Commenters 
asserted that the measures are duplicative as both PQRS measures and 
Hospital OQR Program measures.
    Some commenters expressed concerns that the measures are neither 
NQF-endorsed for the HOPD setting nor field-tested.
    Response: We thank those commenters who expressed support for the 
measures. While these measures are suitable for clinician office 
settings, as indicated by commenters, we also believe they are suitable 
for settings that supply services to the same target populations for 
the measures, such as HOPDs. The intent of the measures is to promote 
accountability for Medicare beneficiaries, improve the coordination of 
services, reduce fragmented care, encourage redesigned care processes 
for high quality and efficient service delivery, and incentivize higher 
value care. These measures focus on the patient and encourage 
physicians, such as ophthalmologists, to collaborate, communicate, and 
share information with HOPDs. We hope this new mode of coordination 
will become the common practice in healthcare delivery.
    HOPDs provide care without the higher cost associated with 
inpatient hospitalization. More and more procedures are done safely and 
effectively on an outpatient basis and we expect this trend will 
continue. Therefore, we believe that assessing care coordination is a 
very important aspect of evaluating the overall quality of care 
furnished by HOPDs. We stress that true clinical integration is 
evidenced by effective patient coordination of care across health care 
settings, providers, and suppliers and is best shown when there is a 
structure in place that is patient-focused and where clinicians 
collaborate on best practices in an effort to furnish higher quality 
care that they likely would not achieve if working independently.
    We do not believe these measures are duplicative of PQRS measures 
because, even though the measures' indicators are the same, the level 
of analysis is different (facility versus physician). We plan to make 
nonsubstantive tweaks to the measure, such as updating and modifying 
HCPCS codes, in order to better fit the measure for a HOPD level of 
analysis. We hope to set new milestones in the integral coordination 
and collaboration of care across outpatient provider types and 
facilities, as spurred by these measures. Regarding the comments that 
the proposed chart-abstracted measures have not been field-tested, we 
note that all three measures that we are finalizing (as discussed 
below) were field-tested in the HOPD facility setting by the measure 
stewards. These three measures are: (1)

[[Page 75100]]

Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal 
colonoscopy in average risk patients (NQF 0658); (2) 
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a 
History of Adenomatous Polyps--Avoidance of Inappropriate Use (NQF 
0659); and, (3) Cataracts: Improvement in Patient's Visual 
Function within 90 Days Following Cataract Surgery (NQF 1536).
    We are finalizing the same three chart-abstracted measures in both 
the Hospital OQR Program and ASCQR Program for the CY 2016 payment 
determination and subsequent years.
    Finalizing these measures for the Hospital OQR Program would 
further align measures across outpatient hospital and ambulatory 
settings, which furnish many similar services to beneficiaries. The 
availability of identical outcome measures at HOPDs and ASCs will 
enable beneficiaries to compare facilities and make informed decisions.
    In addition, we believe the measures are appropriate for the HOPD 
setting, because the services assessed by these measures are frequently 
performed in HOPDs. Also, all three of the chart-abstracted measures 
that we are finalizing are NQF-endorsed for the Ambulatory Care: 
Clinician Office/Clinic setting, which we have historically interpreted 
as including the HOPD setting.
    Comment: Some commenters noted that an initial cataract surgery or 
colonoscopy may be performed at a different HOPD. This situation would 
make retrieving data burdensome. Some commenters believed that 
obtaining office visit records and surgical outcome data from other 
physician offices is an intrusive violation of patient privacy.
    Response: There may be some instances in which a HOPD may have 
great difficulty in obtaining information from other HOPDs, and some 
additional information may need to be obtained directly from patients 
for these measures. But as a general matter, our overarching goal for 
adopting the three proposed measures is to encourage the coordination 
of care across health care settings, providers, and suppliers as often 
as possible. We would like to see HOPDs, ophthalmologists and other 
physicians actively and routinely engaged in exchanging information to 
better communicate and coordinate the care of patients.
    We note that there are a variety of ways to collect patient-related 
data and, at times, it may be appropriate for HOPDs to obtain data 
directly from the ophthalmologist or other physician who either ordered 
a procedure for a patient or performed that procedure. HOPDs may have 
professional and commercial relationships with these ophthalmologists 
or other physicians. As such, an HOPD may have the ability to develop 
the means to obtain follow-up information including using contractual 
requirements to share such information with HOPDs.
    We also note that HOPDs and referring physicians are generally 
subject to the HIPAA Privacy, Security, and Breach Notification Rules, 
and are required to protect the privacy and confidentiality of their 
patients' protected health information as required by those rules. We 
expect that HOPDs and physicians would adhere to any applicable 
requirements in providing and obtaining this information in order to 
prevent any violations of patient privacy.
    We believe that our implementation strategy for these measures will 
minimize collection and reporting burden. We detail the data submission 
procedures for the measures in section XIII.H.2. of this final rule 
with comment period.
    Comment: Many commenters asserted that it is extremely burdensome 
to retrieve timely the data from physician offices and that the data 
would be difficult to validate. A few commenters strongly believed that 
the huge reporting burden from the four proposed chart-abstracted 
measures could be diminished if claims are used as the data source.
    Response: We appreciate commenters' concerns that it could be 
difficult or burdensome for hospitals to retrieve from physician 
offices the data they will need for the chart-abstracted measures in a 
timely manner. We believe such problems are more likely to occur in the 
early phases of establishing these measures, when hospitals and 
physicians have not yet set up effective infrastructures to routinely 
exchange information. In order to accommodate these concerns, we have 
taken several steps that we believe should alleviate some of this 
burden. The Web-based collection strategy we are finalizing for the 
measures and subsequent release of specifications and implementation 
guidance in the Hospital OQR Specifications Manual will address some of 
the concerns about feasibility of data collection raised by the 
commenters. To further reduce burden, we are also finalizing a low case 
threshold exemption and a sampling methodology for hospitals with a 
high volume of cases covered by the new measures. We believe that these 
provisions should together significantly reduce burden for the three 
chart-abstracted measures we are finalizing. We have discussed these 
modifications in more detail in section XIII.H.2.f of this final rule 
with comment period.
    We do not include chart-abstracted measures submitted via the Web-
based tool in our validation procedures and, therefore, we will not be 
validating these measures at this time. Although some commenters would 
prefer that we use claims as the source for this data, we believe these 
measures will have the positive effect, in a number of instances, of 
requiring providers to communicate with each other. Using these kinds 
of measures will help us capture HOPDs' efforts at care coordination, 
which is something we want to measure, and that we do not believe we 
can measure with claims. We are also not aware of any applicable coding 
to capture this communication and coordination of patient care.
    We received specific comments on the individual proposed chart-
abstracted measures and they are discussed below.
2. Complications Within 30 Days Following Cataract Surgery Requiring 
Additional Surgical Procedures (NQF 0564)
    The proposed measure assesses the percentage of patients aged 18 
years and older with a diagnosis of uncomplicated cataract who had 
cataract surgery and had any of a specified list of surgical procedures 
in the 30 days following cataract surgery which would indicate the 
occurrence of any of the following major complications: retained 
nuclear fragments, endophthalmitis, dislocated or wrong power 
intraocular lens (IOL), retinal detachment, or wound dehiscence.
    Although complications that may result in a permanent loss of 
vision following cataract surgery are uncommon, this outcome measure 
seeks to identify those complications from surgery that can reasonably 
be attributed to the surgery. It focuses on patient safety and 
monitoring for events that, while uncommon, can signify important 
issues in the care being provided. Advances in technology and surgical 
skills over the last 30 years have rendered cataract surgery safer and 
more effective. An analysis of Managed Care Organization data 
demonstrated that the rate of complications for this measure were 1 to 
2 percent. However, with an annual volume of 2.8 million cataract 
surgeries in the United States, many of which are performed in hospital 
surgical outpatient departments, a 2-percent rate is a significant 
number of

[[Page 75101]]

surgeries associated with complications.\5\
---------------------------------------------------------------------------

    \5\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complications+within+30+days+following+cataract+surgery.
---------------------------------------------------------------------------

    The measure numerator is: patients who had one or more specified 
operative procedures for any of the following major complications 
within 30 days following cataract surgery: retained nuclear fragments, 
endophthalmitis, dislocated or wrong power IOL, retinal detachment, or 
wound dehiscence. The measure denominator is: all patients aged 18 
years and older who had cataract surgery and no significant pre-
operative ocular conditions impacting the surgical complication rate. 
This measure excludes patients with certain comorbid conditions 
impacting the surgical complication rate. The specifications for this 
measure are available at http://www.qualityforum.org/QPS/0564.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported this measure and noted that the measure 
addresses a high impact condition that is not adequately addressed in 
the Hospital OQR measure set. Currently the NQF endorsement is time-
limited.
    We refer readers to section XIII.H.2. of the proposed rule for a 
detailed discussion of data collection. We invited public comment on 
this proposal.
    Comment: Many commenters noted that this measure is unnecessary as 
complications from cataract surgery are rare and data collection would 
be very burdensome, since the volume of cataract surgery performed is 
huge. Commenters added that this measure requires very detailed 
information about not only specific complications that may have 
occurred, but also data on any additional follow up surgical procedures 
to accurately report data for this measure.
    Response: As discussed in the proposed rule (78 FR 43649), a large 
number of complications from cataract surgery occur even though the 
percentage of complications from cataract surgery is small. The MAP 
indicated that the measure addresses a high impact condition that is 
not adequately addressed in the Hospital OQR measure set. Therefore, we 
believe that complications following cataract surgery which would 
require additional surgical procedures are important to measure.
    However, unlike the other three measures we proposed, we agree that 
a HOPD would incur significant additional burden to collect the 
detailed information about specific complications and required 
additional surgical procedures to accurately report this measure. This 
would far exceed the burden we believe accompanies the other chart-
abstracted measures that we proposed in the proposed rule. We have 
emphasized that we believe that care coordination between providers and 
practitioners is an essential element of appropriate, high quality 
care, and that the element of coordination cannot be measured using a 
claims-based or other form of measure.
    Nonetheless, this is one instance in which we believe the burden 
involved in collecting the data required for chart-abstraction far 
outweighs the benefits in measuring care coordination.
    We have based our conclusion on the fact that a HOPD would be 
required to acquire far more information than the more fundamental 
follow up information that accompanies the other measures we proposed 
(such as the patient survey data for OP-31, which basically involves 
collecting a patient's perceptions about visual improvement following 
cataract surgery). In contrast, there is far more information necessary 
for OP-28 and the nature of that information is more detailed, 
complicated, and very likely much more difficult for an HOPD to 
acquire. We agree with the commenters that this measure requires very 
detailed information about not only specific complications that may 
have occurred, but also data on specific additional follow up surgical 
procedures to accurately report data for this measure.
    Because we continue to believe this is an important area to measure 
quality of care, we plan to explore other ways to collect this data, 
including the potential development of a claims-based risk-adjusted 
outcome measure of cataract complications, which would address the same 
quality issues as this measure, but minimize the burden associated with 
measurement to the greatest degree possible. Further, we anticipate 
that the new measure would be applicable to both the ASC and HOPD 
settings. We have previously developed a robust methodology for using 
claims to identify surgical complications for patients who have had 
total hip and knee replacements, and therefore, we believe that it may 
be possible to do so for cataract surgeries as well. This is not the 
case with the other three measures, which do not measure surgical 
complications.
    After consideration of the public comments we received, and in 
light of the above reasons, we are not finalizing this proposed measure 
for the Hospital OQR Program at this time.
3. Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for 
Normal Colonoscopy in Average Risk Patients (NQF 0658)
    The proposed measure assesses the percentage of patients aged 50 
years and older receiving screening colonoscopy without biopsy or 
polypectomy who had a recommended follow-up interval of at least 10 
years for repeat colonoscopy documented in their colonoscopy report.
    In the average-risk population, colonoscopy screening is 
recommended in current guidelines at 10-year intervals.\6\ Our analysis 
indicated that about 25 percent of surgeries/procedures performed in 
HOPDs and ASCs are colonoscopies. Performing colonoscopy too frequently 
increases patients' exposure to procedural harm. This measure aims to 
assess whether average risk patients with normal colonoscopies receive 
a recommendation to receive a repeat colonoscopy in an interval that is 
less than the recommended amount of 10 years.
---------------------------------------------------------------------------

    \6\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    The measure numerator is: patients who had a recommended follow-up 
interval of at least 10 years for repeat colonoscopy documented in 
their colonoscopy report. The measure denominator is: all patients aged 
50 years and older receiving screening colonoscopy without biopsy or 
polypectomy. This measure excludes patients with documentation of 
medical reason(s) for recommending a follow-up interval of less than 10 
years (for example, an above-average risk patient or inadequate prep). 
The specifications for this measure are available at: http://www.qualityforum.org/QPS/0658.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported the direction of the measure. Currently 
the NQF endorsement is time-limited.
    We refer readers to section XIII.H.2. of the proposed rule for a 
detailed discussion of data collection. We

[[Page 75102]]

invited public comment on this proposal.
    Comment: One commenter interpreted the MAP's recommendation of 
``Support Direction,'' to mean that a measure was not, in the MAP's 
opinion, ready for implementation in the Hospital OQR Program. 
Commenters stated that CMS should only finalize measures fully 
supported by the MAP.
    Response: We take into account all MAP input when deciding on which 
measures to adopt for the program. We note that in addition to MAP 
input, we also consider feedback that we receive from many other 
stakeholders such as providers, specialty societies, measure 
developers, patients, and their caregivers during the rulemaking public 
comment period in evaluating whether to finalize measures. We 
continuously review and revise the measures in our programs to ensure 
that only the highest caliber measures are selected. We stress, 
however, that we are only required to consider the input provided by 
the MAP. The ultimate decision on whether to include a measure for the 
program rests solely with the Secretary. Although, ideally, we would 
want the MAP to fully support all measures for our programs, we 
recognize that it is not always possible. A ``support direction'' 
recommendation by the MAP indicates ``measures, measure concepts, or 
measure ideas that should be phased into the program measure set over 
time, after specific issues are addressed.'' The MAP's reasons for 
supporting the direction of a measure can vary greatly, from measure to 
measure. In some instances, for example, the MAP might simply believe 
that a measure should first receive NQF endorsement.
    We believe that this measure addresses the critical issue of 
colonoscopies potentially performed too frequently and potentially 
increasing patients' exposure to procedural harm. Because the procedure 
is performed often at HOPDs, we believe that this measure is necessary 
for the Hospital OQR Program.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2016 payment determination and 
subsequent years as proposed.
    4. Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients 
with a History of Adenomatous Polyps--Avoidance of Inappropriate Use 
(NQF 0659)
    This measure assesses the percentage of patients aged 18 years and 
older receiving a surveillance colonoscopy, with a history of a prior 
colonic polyp in previous colonoscopy findings who had a follow-up 
interval of 3 or more years since their last colonoscopy documented in 
the colonoscopy report.
    Colonoscopy is the recommended method of surveillance after the 
removal of adenomatous polyps, because it has been shown to 
significantly reduce subsequent colorectal cancer incidence. The timing 
of follow-up colonoscopy should be tailored to the number, size, and 
pathologic findings of the adenomatous polyps removed. A randomized 
trial of 699 patients showed that after newly diagnosed adenomatous 
polyps have been removed by colonoscopy, follow-up colonoscopy at 3 
years detects important colonic lesions as effectively as follow-up 
colonoscopy at both 1 and 3 years.7 8
---------------------------------------------------------------------------

    \7\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complications+within+30+days+following+cataract+surgery.
    \8\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    The measure numerator for the proposed measure is: patients who had 
an interval of 3 or more years since their last colonoscopy. The 
measure denominator is: all patients aged 18 years and older receiving 
a surveillance colonoscopy with a history of a prior colonic polyp in a 
previous colonoscopy. This measure excludes patients with: (1) 
Documentation of medical reason(s) for an interval of less than 3 years 
since the last colonoscopy (for example, last colonoscopy incomplete, 
last colonoscopy had inadequate prep, piecemeal removal of adenomas, or 
last colonoscopy found greater than 10 adenomas); or (2) documentation 
of a system reason(s) for an interval of less than 3 years since the 
last colonoscopy (for example, unable to locate previous colonoscopy 
report, previous colonoscopy report was incomplete). The specifications 
for this measure are available at http://www.qualityforum.org/QPS/0659.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported the direction of the measure. A ``support 
direction'' recommendation by the MAP indicates ``measures, measure 
concepts, or measure ideas that should be phased into the program 
measure set over time, after specific issues are addressed'' (for 
example, obtaining NQF endorsement). Currently the NQF endorsement is 
time-limited.
    We refer readers to section XIII.H.2. of the proposed rule for a 
detailed discussion of data collection. We invited public comment on 
this proposal.
    Comment: One commenter interpreted the MAP's ``Support Direction'' 
recommendation to mean that a measure was not, in the MAP's opinion, 
ready for implementation in the HQQR Program. Commenters stated that 
CMS should only finalize measures fully supported by the MAP.
    Response: We refer readers to our response above to the same MAP 
recommendation concerns expressed with respect to the Endoscopy/Polyp 
Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in 
Average Risk Patients (NQF 0658) measure.
    We believe that this measure addresses the critical area of timely 
following-up colonoscopies to detect important colonic lesions after 
newly diagnosed adenomatous polyps have been removed by colonoscopy. 
Proper timing can be effective in reducing the incidence of subsequent 
colorectal cancer. Because colonoscopy is so commonly performed at 
HOPDs, and because this measure addresses a significant gap in the 
Hospital OQR Program, we believe that this measure is necessary for the 
Hospital OQR Program. We also note that NQF recently lifted its time-
limited endorsement and the measure is now fully-endorsed by NQF. We 
expect that this change will appear on the NQF Web site in the near 
future.
    After consideration of the public comments we received, we are 
finalizing this measure, without modification, for the Hospital OQR 
Program as proposed.
5. Cataracts--Improvement in Patient's Visual Function Within 90 Days 
Following Cataract Surgery (NQF 1536)
    The proposed measure assesses the percentage of patients aged 18 
years and older who had cataract surgery and had improvement in visual 
function achieved within 90 days following the cataract surgery.
    Cataract surgery is performed to improve a patient's vision and 
associated functioning. This outcome is achieved consistently through 
careful attention to the accurate measurement of axial length and 
corneal power and the appropriate selection of an IOL. Failure to 
achieve improved visual functioning after surgery in eyes without 
comorbid ocular conditions that could impact the success of the surgery

[[Page 75103]]

would reflect care that should be assessed for opportunities for 
improvement. Evidence suggests that visual improvement occurs in about 
86-98 percent of surgeries in eyes without comorbid conditions. 
However, with an annual volume of 2.8 million cataract surgeries in the 
United States, many of which are performed in hospital outpatient 
surgical departments, the impact could affect a significant number of 
patients per year.\9\
---------------------------------------------------------------------------

    \9\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982.
---------------------------------------------------------------------------

    We proposed to adopt this measure for the CY 2016 payment 
determination and subsequent years. The measure numerator is: patients 
18 years and older (with a diagnosis of uncomplicated cataract) in a 
sample who had improvement in visual function achieved within 90 days 
following cataract surgery, based on completing a pre-operative and 
post-operative visual function instrument. The measure denominator is: 
all patients aged 18 years and older in sample who had cataract 
surgery. There are no exclusions. The specifications for this measure 
are available at http://www.qualityforum.org/QPS/1536. Additional 
information for the measure specifications can be found in the NQF 
Measure Evaluation available at http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=68317.
    In its 2013 Pre-Rulemaking Report, (http://www.qualityforum.org/
Publications/2013/02/MAP_Pre-Rulemaking_Report__-February_
2013.aspx), the MAP supported the inclusion of the measure in the 
Hospital OQR Program and noted that the measure addresses a high impact 
condition not adequately addressed in the program measure set. The MAP 
added that this measure, which addresses outcomes, falls under a 
category of measures inadequately represented in the program measure 
set. It also meets the consensus requirement and the requirement that 
it be set forth by a national consensus building entity because it is 
NQF-endorsed. We refer readers to section XIII.H.2. of the proposed 
rule for a detailed discussion of data collection. We invited public 
comment on this proposal.
    Comment: One commenter stated that the measure requires patients to 
complete a pre-operative and a post-operative visual function 
questionnaire. The follow-up survey may occur in intervals of one day, 
two weeks or one month post-op. The pre- and post-surgery surveys are 
conducted in the physician office and they are compared for analysis. 
The commenter noted it takes a third-party administrator to process the 
questionnaire in order to prevent the introduction of bias (such as how 
a physician characterizes a patient's progress) and this administrative 
cost would impose a new burden for HOPDs.
    Response: We note that the pre-operative and post-operative surveys 
can be done in person at the HOPD or physician's office or via phone, 
email, or mail. The two surveys can be analyzed by the physician or the 
HOPD. However, given that this measure collects standard clinical 
follow-up information, we would expect physicians and HOPDs to already 
have standard operating procedures in place in order to conduct these 
visual assessments or for HOPDs to acquire them from patients' 
physicians in order to properly follow up by comparing pre- and post-
operative surveys. Therefore, we do not believe this measure should 
impose undue additional burden.
    Also, while a HOPD may want to utilize a third party administrator 
to process survey information, we do not believe one should be 
necessary. We believe that including this measure in the Hospital OQR 
Program is important because, as the MAP stated and we believe, this 
measure falls under a category of measures inadequately represented in 
the Hospital OQR Program measure set, and the measure exemplifies 
patient reported outcomes in the delivery of care.
    In response to the comments we have received on the burden 
associated with the chart-abstracted measures we are finalizing, we 
have modified our implementation strategy in a manner that we believe 
will significantly minimize collection and reporting burden. We detail 
the data submission procedures for this measure and others in section 
XIII.H.2. of this final rule with comment period.
    After consideration of the public comments we received, we are 
finalizing this measure for the CY 2016 payment determination and 
subsequent years as proposed.
    In summary, we are finalizing four new measures (one CDC/NHSN 
measure and three chart-abstracted measures): (1) Influenza Vaccination 
Coverage among Healthcare Personnel; (2) Endoscopy/Polyp Surveillance: 
Appropriate Follow-Up Interval for Normal Colonoscopy in Average Risk 
Patients; (3) Endoscopy/Polyp Surveillance: Colonoscopy Interval for 
Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use; and (4) Cataracts--Improvement in Patient's Visual 
Function Within 90 Days Following Cataract Surgery for the CY 2016 
payment determination and subsequent years.

[[Page 75104]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.362

    The finalized measure set (a total of 28 measures) for the Hospital 
OQR Program for the CY 2016 payment determination and subsequent years 
is listed in the table below.
BILLING CODE 4120-01-P

[[Page 75105]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.363

[[Page 75106]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.364

BILLING CODE 4120-01-C

F. Possible Hospital OQR Program Measure Topics for Future 
Consideration

    The current measure set for the Hospital OQR Program includes 
measures that assess process of care, imaging efficiency patterns, care 
transitions, ED throughput efficiency, the use of Health Information 
Technology (HIT) care coordination, patient safety, and volume. We 
anticipate that as EHR technology evolves and more infrastructure is 
put into place, we will have the capacity to accept electronic 
reporting of many clinical chart-abstracted measures that are currently 
part of the Hospital OQR Program using certified EHR technology. We are 
working diligently toward this goal. We believe that this progress, at 
a near future date, would significantly reduce the administrative 
burden on hospitals under the Hospital OQR Program to report chart-
abstracted measures. We recognize that considerable work needs to be 
done by measure owners and developers to make this possible with 
respect to the clinical quality measures targeted for electronic 
specifications (e-specifications). This includes completing e-
specifications for measures, pilot testing, reliability and validity 
testing, and implementing such specifications into certified EHR 
technology to capture and calculate the results, and implementing the 
systems.
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the hospital outpatient setting. Therefore, through 
future rulemaking, we intend to propose new measures that help us 
further our goal of achieving better health care and improved health 
for Medicare beneficiaries who receive health care in hospital 
outpatient settings, including partial hospitalization programs (PHPs) 
that are part of HOPDs.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43651), we indicated 
that we are considering the following measure domains for future 
measures: Clinical quality of care; care coordination; patient safety; 
patient and caregiver experience of care; population/community health; 
and efficiency. We believe this approach will promote better care while 
bringing the Hospital OQR Program in line with other established 
quality reporting programs such as the Hospital IQR Program and the 
ASCQR Program, all of which are targeting the same broad measure 
domains for future expansion.
    We invited public comment on this approach and on our suggestions 
and rationale for possible measure topics for future consideration in 
the Hospital OQR Program.
    Comment: Commenters presented the following as possible future 
measure topics:
     A patients' experience of care measure
     A core patient safety measure set or a serious hospital-
acquired infection composite measure that includes Central Line Bundle 
Compliance, Clostridium difficile (C-difficile), catheter-associated 
urinary tract infection (CAUTI), and MRSA Bacteremia (MRSA)
     Clinician-level measures that can be applied appropriately 
in the hospital outpatient setting for conditions such as diabetes, 
coronary artery disease, and COPD
     Patient-Reported Outcomes Measures
    Response: We thank the commenters for the feedback and will take it 
into consideration for future measures.
    In addition, we solicited comments on the following potential 
quality measure topics for partial hospitalization programs (PHPs) that 
are part of HOPDs. Some of these measure topics are currently part of 
the IPFQR Program, and some of them we are currently considering for 
the IPFQR Program: Polyp-therapy with antipsychotic medications; Post-
discharge of continuity of care; Alcohol screening; Alcohol and drug 
use; Tobacco use assessment; and Follow-up after hospitalization for 
mental illness. These measure topics would advance our goal of aligning 
measurement of PHPs in HOPDs with that of the IPFQR Program over time.
    Comment: One commenter recommended that CMS not propose any of the 
measures topics for PHPs in HOPDs for the Hospital OQR Program until 
such measures are specified and tested in the PHP setting, and NQF-
endorsed and reviewed by the MAP. The commenter was concerned about the 
need for more infrastructure support for additional measures.
    Response: We thank the commenter for the suggestions. We will take 
these comments into account when considering whether to propose the 
measures for PHPs in future rulemaking.
    Comment: Some commenters made specific recommendations for new 
measure proposals for PHPs. Commenters believed that with appropriate 
modification, the adoption of some of the IPFQR Program measures for 
PHPs could promote enhanced care coordination between PHPs and IPFs.
    Specifically, the commenters recommended modifying two pairs of 
IPFQR measures for the PHP setting: Hospital-Based Inpatient 
Psychiatric Services (HBIPS) 4 and 5 (multiple antipsychotics); and 
HBIPS 6 and 7 (continuity of care). According to the

[[Page 75107]]

commenters, HBIPS 4 requires the identification of patients who are 
discharged on two or more antipsychotic medications, while HBIPS 5 
reports the number of patients discharged on multiple antipsychotic 
medications with appropriate justification. Antipsychotics are 
important tools in managing behavior, but often have significant side 
effects, especially when multiple antipsychotic medications are used 
concurrently. It is often appropriate to reduce (or ``taper'') the 
number of antipsychotics given to patients, but the tapering of drugs 
cannot always be completed during an inpatient hospitalization. Based 
on the information they presented, commenters contended it would be 
appropriate to measure PHPs on HBIPS 4 and 5 because antipsychotic 
medication tapering can and often does continue in PHPs. Furthermore, 
commenters stated that using setting-appropriate versions of HBIPS 4 
and 5 in both IPFs and PHPs might encourage better coordination of the 
use of antipsychotic medications across these two settings.
    Commenters also noted that similarly, HBIPS 6 measures whether a 
post-discharge continuing care plan is created, while HBIPS 7 measures 
whether the post-discharge continuing care plan is transmitted to the 
next level of care provider. A plan of care provides the next provider 
with a summary of a patient's course of treatment, discharge 
medications and any recommendations for ongoing care. Whenever a 
patient changes care settings, the transmission of a plan of care 
equips the new health care team with important information to shape a 
patient's treatment plan. Based on the commenters' understanding of the 
measures they described, they asserted that assessing both IPFs and 
PHPs on these measures could reinforce the need for ongoing, two-way 
communication across a patient's behavioral health care team.
    Response: We thank the commenters for the detailed recommendations 
for future measures for PHPs. We will take them into consideration when 
we develop measures for PHPs.

G. Payment Reduction for Hospitals That Fail To Meet the Hospital OQR 
Program Requirements for the CY 2014 Payment Update

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 the 
measures selected by the Secretary, in the form and manner, and at a 
time, required 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 payment 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. All other hospitals paid under the OPPS that meet the 
reporting requirements receive the full OPPS payment update without the 
reduction. For a more detailed discussion of how the payment reduction 
for failure to meet the administrative, data collection, and data 
submission requirements of the Hospital OQR Program 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 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 
this final rule with comment period, which is available via the 
Internet on the CMS Web site): ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' 
``S,'' ``T,'' ``V,'' or ``U.'' We note that we proposed to delete 
status indicator ``X'' as described in sections II.A.3. and XI. of the 
proposed rule. We also note that we proposed to develop status 
indicator ``J1'' as part of the proposed comprehensive APC discussed in 
section II.A.2.e. of the proposed rule. Payment for all services 
assigned to these status indicators will be subject to the reduction of 
the national unadjusted payment rates for applicable hospitals, 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.
    We did not receive any public comments on the CY 2014 OPPS status 
indicators to which the payment reduction to OPPS payment rates would 
apply, for hospitals who fail to meet the OQR reporting requirements. 
We note that the ``J1'' status indicator would not apply in the CY 2014 
OPPS, due to the delay in implementation of the comprehensive APC 
policy, which is discussed in section II.A.2.e. of this final rule with 
comment period. We also note that status indicator ``X'' was not 
deleted, because the packaging proposal for ancillary services was not 
finalized for the CY 2014 OPPS, as discussed in section II.A.3. of this 
final rule with comment period. Therefore, the reporting ratio would 
continue to apply to services with status indicator ``X.''
    The OPD fee schedule increase factor is an input into the OPPS 
conversion factor, which is used to calculate OPPS payment rates. To 
implement the requirement 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 weights by the reduced conversion 
factor. To determine the reduced national unadjusted payment rates that 
applied to hospitals that failed to meet their quality reporting 
requirements for the CY 2010 OPPS, we multiplied the final full 
national unadjusted payment rate found in Addendum B of the CY 2010 
OPPS/ASC final rule with comment period by the CY 2010 OPPS final 
reporting ratio of 0.980 (74 FR 60642).
    In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68771 
through 68772), we established a policy that the Medicare beneficiary's 
minimum unadjusted copayment and national unadjusted copayment for a 
service to which a reduced national unadjusted payment rate applies 
would each equal the product of the reporting ratio and the national 
unadjusted copayment or the minimum unadjusted copayment, as 
applicable, for the service. Under this policy, we apply the

[[Page 75108]]

reporting ratio to both the minimum unadjusted copayment and national 
unadjusted copayment for those 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 in those cases 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. We believe that these 
adjustments continue to be equally applicable to payments for hospitals 
that do not meet the Hospital OQR Program requirements. Similarly, OPPS 
outlier payments made for high cost and complex procedures will 
continue to be made when the 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. This policy conforms to current 
practice under the IPPS. We established this policy in the OPPS 
beginning in the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60642). For a complete discussion of the OPPS outlier calculation and 
eligibility criteria, we refer readers to section II.G. of the proposed 
rule.
2. Reporting Ratio Application and Associated Adjustment Policy for CY 
2014
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43652), 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 2014 annual payment update factor. For the CY 2014 
OPPS, the proposed reporting ratio was 0.980, calculated by dividing 
the proposed reduced conversion factor of $71.273 by the proposed full 
conversion factor of $72.728. We proposed to continue to apply the 
reporting ratio to all services calculated using the OPPS conversion 
factor. For the CY 2014 OPPS, we proposed to apply the reporting ratio, 
when applicable, to all HCPCS codes to which we have assigned status 
indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' ``T,'' ``V,'' 
and ``U'' (other than new technology APCs to which we have assigned 
status indicators ``S'' and ``T''). We note that we proposed to delete 
status indicator ``X'' as described in sections II.A.3. and XI. of the 
proposed rule. We also note that we proposed to develop status 
indicator ``J1'' as part of the proposed comprehensive APC discussed in 
section II.A.2.e. of the proposed rule and to apply the reporting ratio 
to the comprehensive APCs. 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.
    We invited public comment on these proposals.
    Comment: One commenter suggested that OPPS outlier payments for 
hospitals that failed to meet the Hospital OQR Program requirements be 
calculated based on the full adjusted payment as if they met the 
requirements. The commenter believed that otherwise, hospitals could 
potentially receive an outlier payment as a result of failing to comply 
with the quality reporting requirements.
    Response: In the CY 2009 OPPS/ASC final rule with comment period 
(78 FR 68772), we described how failure to meet the Hospital OQR 
Program requirements would affect certain OPPS payment adjustments. For 
the OPPS outlier payment calculation, we finalized a policy to 
calculate OPPS outliers using payments with the Hospital OQR Program 
reduction already applied. This application of the quality reporting 
payment reduction in calculating the OPPS outliers is similar to how 
this issue is handled under the IPPS.
    After consideration of the public comment we received, we are 
finalizing our proposal to apply the Hospital OQR Program reduction in 
the manner described above and, therefore, are finalizing our proposal, 
with modification to reflect the CY 2014 OPPS status indicators to 
which the adjustment would apply.
    As a result, for the CY 2014 OPPS, we are applying a reporting 
ratio of 0.980 to the national unadjusted payments, minimum unadjusted 
copayments, and national unadjusted copayments for all applicable 
services for those hospitals failing to meet the Hospital OQR Program 
reporting requirements. This reporting ratio applies to HCPCS codes 
assigned status indicators ``P,'' ``Q1,'' ``Q2,'' ``Q3,'' ``R,'' ``S,'' 
``T,'' ``U,'' ``V,'' or ``X'' excluding services paid under New 
Technology APCs. 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 will continue to apply. We 
continue to calculate OPPS outlier eligibility and outlier payment 
based on the reduced rates for those hospitals that fail to meet the 
reporting requirements.

H. Requirements for Reporting of Hospital OQR Data for the CY 2015 
Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2015 Payment Determination 
and Subsequent Years
    To participate successfully in the Hospital OQR Program, hospitals 
must meet administrative, data collection and submission, and data 
validation requirements (if applicable). Hospitals that do not meet 
Hospital OQR Program requirements, as well as hospitals not 
participating in the program and hospitals that withdraw from the 
program, will not receive the full OPPS payment rate update. Instead, 
in accordance with section 1833(t)(17)(A) of the Act, those hospitals 
will receive a reduction of 2.0 percentage points to their OPD fee 
schedule increase factor for the applicable payment year.
    We established administrative requirements for the payment 
determination requirements for the CY 2013 payment update and 
subsequent years in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74479 through 74487). In the CY 2013 OPPS/

[[Page 75109]]

ASC final rule with comment period (77 FR 68480 through 68481), we 
modified these requirements by extending the deadline for certain 
hospitals to submit a participation form. For the CY 2014 payment 
determination and subsequent years, we modified the deadline for 
hospitals that are not currently participating in the Hospital OQR 
Program and wish to participate, provided they have a Medicare 
acceptance date before January 1 of the year prior to the affected 
annual payment update. For example, 2013 would be the year prior to the 
affected CY 2014 annual payment update, and we are referring to an 
acceptance date before January 1, 2013. The hospitals must submit a 
participation form by July 31 rather than March 31 of the year prior to 
the affected annual payment update in order to participate in the 
Hospital OQR Program for purposes of the CY 2014 payment update. In the 
example, the deadline would be July 31, 2013.
    The Hospital OQR Program procedural requirements are unchanged from 
those adopted in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68480 through 68481). In the CY 2014 OPPS/ASC proposed rule (78 
FR 43653), we proposed to codify these procedural requirements at Sec.  
419.46(a). To participate in the Hospital OQR Program, a hospital--as 
defined in section 1886(d)(1)(B) of the Act and that is reimbursed 
under the OPPS--must:
     Register with QualityNet before beginning to report data.
     Identify and register a QualityNet security administrator 
as part of the registration process located on the QualityNet Web site 
(http://www.QualityNet.org);
     Complete and submit an online participation form available 
at the QualityNet Web site if this form has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CMS Certification Number (CCN). For Hospital OQR Program 
purposes, hospitals that share the same CCN are required to complete a 
single online participation form. Once a hospital has submitted a 
participation form, it is considered to be an active Hospital OQR 
Program participant until such time as it submits a withdrawal form to 
CMS or no longer has an effective Medicare provider agreement.
    Deadlines for submitting the notice of participation form are based 
on the date identified as a hospital's Medicare acceptance date:
     If a hospital has a Medicare acceptance date before 
January 1 of the year prior to the affected annual payment update, the 
hospital must complete and submit to CMS a completed Hospital OQR 
Notice of Participation Form by July 31 of the calendar year prior to 
the affected annual payment update.
     If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit a completed participation form no later than 180 
days from the date identified as its Medicare acceptance date.
    Hospitals may withdraw from participating in the Hospital OQR 
Program and the procedural requirements for this are unchanged from 
those adopted in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 77480). In the CY 2014 OPPS/ASC proposed rule (78 FR 43653), we 
proposed to codify these procedural requirements at Sec.  419.46(b). 
Under these procedures, a participating hospital may withdraw from the 
Hospital OQR Program by submitting to CMS a withdrawal form that can be 
found in the secure portion of the QualityNet Web site. The hospital 
may withdraw any time from January 1 to November 1 of the year prior to 
the affected annual payment update. A withdrawn hospital will not be 
able to later sign up to participate in that payment update, is subject 
to a reduced annual payment update as specified under Sec.  419.43(h), 
and is required to submit a new participation form in order to 
participate in any future year of the Hospital OQR Program.
    We invited public comment on this proposal.
    Comment: One commenter supported codifying administrative 
requirements for the Hospital OQR Program.
    Response: We thank the commenter for this support.
    Comment: One commenter requested clarification regarding whether 
the proposed regulations apply to a hospital provider-based free 
standing emergency department that is not located on the campus of a 
hospital.
    Response: Hospital OQR Program reporting is by CMS Certification 
Number (CCN), not by the physical location of clinical services 
provided. If the hospital has a free standing location that is included 
in a hospital CCN governing its eligibility to bill Medicare claims via 
OPPS, then services provided at that location should be included in the 
Hospital OQR Program reporting, along with all activity reported for 
that CCN. A hospital may refer to the Web site (https://www.qualitynet.org/dcs/ContentServer?c=Page&pagename=QnetPublic%2FPage%2FQnetTier2&cid=1191255879384) for technical and educational support including contact 
information for questions on how to participate in the Hospital OQR 
Program to successfully receive a full APU.
    After consideration of the public comments we received, we are 
finalizing as proposed, our proposal to codify certain Hospital OQR 
Program procedural requirements at Sec.  419.46.
2. Form, Manner, and Timing of Data Submitted for the Hospital OQR 
Program
a. Background
    We refer readers to the following OPPS/ASC final rules with comment 
period for a history of measures adopted for the Hospital OQR Program, 
including lists of: 11 measures finalized for the CY 2011 payment 
determination in the CY 2010 OPPS/ASC final rule with comment period 
(74 FR 60637); 15 measures finalized for the CY 2012 payment 
determination in the CY 2011 OPPS/ASC final rule with comment period 
(75 FR 72083 through 72084); 23 measures finalized for the CY 2013 
payment determination in the CY 2011 OPPS/ASC final rule with comment 
(75 FR 72090); 26 measures finalized for the CY 2014 and CY 2015 
payment determination in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74469 and 74473) and no additional measures finalized for 
the CY 2015 payment determination in the CY 2013 OPPS/ASC final rule 
with comment (77 FR 68476 through 68478). In the CY 2013 OPPS/ASC final 
rule with comment period, we confirmed the removal of one measure for 
the CY 2013 payment determination and subsequent years (77 FR 68473 
through 68474), confirmed the suspension of one measure for the CY 2014 
payment determination (77 FR 68474 through 68476), and finalized the 
deferred data collection for one measure (77 FR 68476).
    In this final rule with comment period, we are finalizing four 
additional new measures. For a full list of current Hospital OQR 
measures, we refer readers to the table in section XIII.H.2.f. of this 
final rule with comment period.
b. Effects of Changes on Data Submission for CY 2015 and CY 2016 
Payment Determinations and Subsequent Years
    In section XIII.C.2.a. of the CY 2014 OPPS/ASC proposed rule (78 FR 
43646 through 43647), we proposed to remove OP-19 for the CY 2016 
payment determination and subsequent years. In section XIII.H.2.b. of 
the CY 2014 OPPS/

[[Page 75110]]

ASC proposed rule (78 FR 43653), however, we referred to the removal of 
OP-19 as being proposed for removal for CY 2015 and subsequent years. 
We intended for the proposal language in these two sections to match; 
specifically, we intended that the removal of OP-19 should begin with 
the CY 2015 payment determination and continue forward into subsequent 
years. Our proposal to remove OP-19 from the Hospital OQR Program 
beginning with the CY 2015 payment determination (this is our earliest 
opportunity to remove the measure from the Hospital OQR Program) would 
not require a participating hospital to take any new action, because we 
previously suspended OP-19 effective with January 1, 2012 encounters, 
and we have not used OP-19 data to meet requirements for any payment 
determination under the Hospital OQR Program or in public reporting.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43646 through 43647) 
in section XIII.C.2.a, we proposed to remove OP-24 from the Hospital 
OQR Program for the CY 2016 payment determination and subsequent years. 
In section XIII.H.2.b. of the CY 2014 OPPS/ASC proposed rule (78 FR 
43653), however, we referred to the removal of OP-24 as being proposed 
for removal for the CY 2015 payment determination and subsequent years. 
We intended for the proposal language in these two sections to match; 
specifically, we intended that the removal of OP-24 should begin with 
the CY 2015 payment determination and continue forward into subsequent 
years. Our proposal to remove OP-24 from the Hospital OQR Program 
beginning with the CY 2015 payment determination (this is our earliest 
opportunity to remove the measure from the Hospital OQR Program) would 
not require a participating hospital to take any new action, because to 
date, we have not required hospitals to submit data for OP-24.
    For the CY 2016 payment determination and subsequent years, in 
section XIII.E. of the proposed rule, we proposed to add five 
additional measures to the program, but we are only finalizing four of 
the five as additional new measures.
    The four finalized, new measures are:
    One measure that requires hospitals to submit data annually via an 
online tool located on the CDC's NHSN Web site:
     OP-27: Influenza Vaccination Coverage among Healthcare 
Personnel.
    Three remaining measures that require hospitals to submit data 
annually via the QualityNet Web site:
     OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up 
interval for normal colonoscopy in average risk patients;
     OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval 
for Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use; and
     OP-31: Cataracts--Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery.
    We refer readers to section XIII.E. for a discussion about these 
new finalized measures, and our decision not to finalize measure OP-28: 
Complications within 30 Days Following Cataract Surgery Requiring 
Additional Surgical Procedures.
    In section XIII.H.2.f below, we discuss proposed and finalized 
requirements for data collection for each of the four new measures by 
mode of data submission.
c. General Requirements
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43654), we did not 
propose to make any changes to the Hospital OQR Program procedural 
requirements that we discussed and adopted in the CY 2012 OPPS/ASC 
final rule with comment period (76 FR 74480 through 74482). We proposed 
to codify the policy that, to be eligible to receive the full OPD fee 
schedule increase factor for any payment determination, hospitals that 
participate in the Hospital OQR Program must submit to CMS data on 
measures selected under section 1833(17)(C) of the Act in a form and 
manner, and at a time specified by CMS. This means that hospitals must 
comply with our submission requirements for chart-abstracted data, 
population and sampling data, claims-based measure data, and Web-based 
quality measure data. In the CY 2014 OPPS/ASC proposed rule (78 FR 
43654), we proposed to codify these general submission requirements at 
Sec.  419.46(c).
    Submission deadlines by measure and data type are posted on the 
QualityNet Web site. In general, deadlines for patient-level data 
submitted directly to CMS would be approximately 4 months after the 
last day of each calendar quarter. For example, the submission deadline 
for data for services furnished during the first quarter of CY 2014 
(January-March 2014) would be on or around August 1, 2014. We proposed 
to codify language at Sec.  419.46(c)(2) stating our practice of 
posting actual submission deadlines by measure and by data type on the 
QualityNet Web site (http://www.QualityNet.org).
    We proposed to codify our policies for initial data collection 
periods and submission deadlines for a hospital that did not 
participate in the previous year's Hospital OQR Program in Sec.  
419.46(c)(3) of our regulations. We refer readers to our previously 
finalized policy in the CY 2013 OPPS/ASC final rule with comment period 
(77 FR 68481) to establish data collection and submission requirements 
for the CY 2014 payment determination and subsequent years. To 
determine when a hospital that did not participate in a previous year's 
payment determination must begin collecting and submitting data to meet 
Hospital OQR Program requirements for a full annual payment update, we 
continue to use the January 1 Medicare acceptance date. If a hospital 
has a Medicare acceptance date before January 1 of the year prior to 
the affected annual payment update, the hospital must collect data 
beginning with encounters occurring during the first calendar quarter 
of the year prior to the affected annual payment update, in addition to 
submitting a completed Hospital OQR Notice of Participation Form. If a 
hospital has a Medicare acceptance date on or after January 1 of the 
year prior to the affected annual payment update, the hospital must 
collect data for encounters beginning with the first full quarter 
following submission of the completed Hospital OQR Notice of 
Participation Form. All hospitals, whether the Medicare acceptance date 
is before or after January 1 of the year prior to an affected annual 
payment update, must follow data submission deadlines as specified on 
the QualityNet Web site.
    We invited public comment on these proposals.
    Comment: One commenter supported codifying procedural requirements 
for the Hospital OQR Program.
    Response: We thank this commenter for support.
    Comment: Commenters expressed concerns regarding the 30 day preview 
period for a hospital to preview data that will be posted on the 
Hospital Compare Web site and made available to the public. Commenters 
question the adequacy of this preview period to correct errors.
    Response: While we appreciate these concerns, because these 
comments are outside the scope of our proposed rule, we will take the 
comments into consideration for future rulemaking.
    After consideration of the public comments we received, we are 
finalizing as proposed our proposal to codify general submission 
requirements at Sec.  419.46(c): (1) our practice of posting actual 
submission deadlines by measure and by data type on the QualityNet Web 
site (http://www.QualityNet.org) at Sec.  419.46(c)(2); and (2) our 
policies for

[[Page 75111]]

initial data collection periods and submission deadlines for a hospital 
that did not participate in the previous year's Hospital OQR Program in 
Sec.  419.46(c)(3) of our regulations.
d. Chart-Abstracted Measure Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    The following chart-abstracted measures in the Hospital OQR Program 
require data submission for the CY 2015 payment determination and 
subsequent years:
     OP-1: Median Time to Fibrinolysis;
     OP-2: Fibrinolytic Therapy Received Within 30 Minutes;
     OP-3: Median Time to Transfer to Another Facility for 
Acute Coronary Intervention;
     OP-4: Aspirin at Arrival;
     OP-5: Median Time to ECG;
     OP-6: Timing of Antibiotic Prophylaxis;
     OP-7: Prophylactic Antibiotic Selection for Surgical 
Patients;
     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;
     OP-21: ED--Median Time to Pain Management for Long Bone 
Fracture;
     OP-22: ED Patient Left Without Being Seen; and
     OP-23: ED--Head CT Scan Results for Acute Ischemic Stroke 
or Hemorrhagic Stroke who Received Head CT Scan Interpretation Within 
45 Minutes of Arrival.
    The form and manner for submission of one of these measures, OP-22: 
ED Patient Left Without Being Seen, is unique, and is detailed in 
section XV.G.2.f. of the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68484). As discussed above, we did not propose any new 
chart-abstracted measures where patient-level data is submitted 
directly to CMS in the proposed rule.
e. Claims-Based Measure Data Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    The table in section XIII.D. of the proposed rule includes measures 
that the Hospital OQR Program collects by accessing electronic Medicare 
claims data submitted by hospitals for reimbursement.
    We did not propose any new claims-based measures in the proposed 
rule. Therefore, the following 6 existing claims-based measures will be 
included for the CY 2015 payment determination and subsequent years:
     OP-8: MRI Lumbar Spine for Low Back Pain;
     OP-9: Mammography Follow-Up Rates;
     OP-10: Abdomen CT--Use of Contrast Material;
     OP-11: Thorax CT--Use of Contrast Material;
     OP-13: Cardiac Imaging for Preoperative Risk Assessment 
for Non-Cardiac Low Risk Surgery; and
     OP-14: Simultaneous Use of Brain Computed Tomography (CT) 
and Sinus Computed Tomography (CT).
    In the CY 2012 OPPS/ASC final rule with comment period, we deferred 
the public reporting of OP-15, a claims-based measure (76 FR 74456). We 
did not propose any changes to this policy. As discussed in the CY 2014 
OPPS/ASC proposed rule (78 FR 43654), public reporting for OP-15 
continues to be deferred, and this deferral has no effect on any 
payment determinations at this time.
    We will continue our policy of calculating the measures using 
hospitals' Medicare claims data as specified in the Hospital OQR 
Specifications Manual; therefore, no additional data submission is 
required for hospitals. In the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74483), we stated that for the CY 2014 payment update, we 
would use paid Medicare FFS claims for services furnished from January 
1, 2011 to December 31, 2011.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68482 
through 68485), for the CY 2015 payment determination, we finalized our 
proposal to use paid Medicare FFS claims for services from a 12 month 
encounter period from July 1, 2012 through June 30, 2013 for the 
calculation of the claims-based measures. This is a departure from the 
previous deadlines used for these measures. Prior to the CY 2013 final 
rule, the time period for encounters for the CY 2014 payment 
determination was January 1, 2011 to December 31, 2011. Under the 
policy finalized in the CY 2013 OPPS/ASC final rule with comment 
period, for the CY 2015 payment determination, we are using the 
encounter period July 1, 2012 to June 30, 2013. As stated in that final 
rule with comment period, we adopted this period in order to align the 
data period for inpatient and outpatient claims based measures reported 
on the Hospital Compare Web site, and also to be able to post more 
recent data for claims-based measures on the Web site. This 
modification brings our claims data six months more current effective 
with the CY 2015 payment determination.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43655), we proposed, 
for the CY 2016 payment determination and subsequent years, to continue 
this approach and to use paid Medicare FFS claims for services from a 
12 month period from July three years before the payment determination 
through June of the following year. For the CY 2016 payment 
determination, this 12 month period for calculation of claims-based 
measures would be from July 1, 2013 through June 30, 2014. We invited 
public comment on this proposal.
    Comment: One commenter believed that the recent changes in the IPPS 
rulemaking regarding the two midnight benchmarks for Medicare Part A 
payment will result in more bills that are ``split'' bills (denied 
Medicare Part A inpatient, but allowed to bill Medicare Part B 
outpatient services). The commenter expressed concern that these 
billing situations would pose a problem for under-submission in the 
Hospital OQR Program and would like to understand how these billing 
types will be handled in the outpatient ``core measures'' program such 
that hospitals do not have to identify up to hundreds of outpatient 
bills that were intended to be inpatient for the purpose of accurately 
meeting the submission requirements. The commenter appeared to be 
concerned that, at the time chart-abstraction happens, the hospital's 
universe of claims may not be complete as it would exclude Part B 
outpatient claims that are created and billed at some future point in 
time pursuant to a Part A inpatient claim denial. The commenter 
believes the chart abstractor might be at risk of ``under-submission'' 
(failing to sample or submit data corresponding to a sufficiently high 
enough number of cases to meet Hospital OQR Program requirements).
    Response: We believe this commenter is referring to our policies 
finalized in the FY 2014 IPPS/LTCH PPS final rule regarding hospital 
Part B billing following reasonable and necessary Part A hospital 
inpatient claim denials (78 FR 50908 through 50938). Specifically, in 
the final rule we provided that if a Medicare Part A claim for 
inpatient hospital services is denied because the inpatient admission 
was not reasonable and necessary, or if a hospital determines under 
Sec.  482.30(d) or Sec.  485.641 (utilization review) after a 
beneficiary is discharged that the beneficiary's inpatient admission 
was not reasonable and necessary, the hospital may bill Medicare for 
the Part B inpatient services (furnished after the time of inpatient 
admission) that would have been reasonable and necessary if the 
beneficiary had been treated as a hospital outpatient rather than 
admitted as an inpatient, provided the beneficiary

[[Page 75112]]

is enrolled in Medicare Part B. These services must be submitted on a 
Part B inpatient claim. We also provided that for beneficiaries treated 
as hospital outpatients prior to an inpatient admission who are 
enrolled in Medicare Part B, hospitals may continue to bill Part B for 
hospital outpatient services that were furnished in the 3-day (1-day 
for non-IPPS hospitals) payment window prior to the inpatient 
admission. These services must be submitted on a Part B outpatient 
claim. When billing Part B following this type of Part A hospital 
inpatient claim denial, hospitals cannot change a beneficiary's patient 
status from inpatient to outpatient. The beneficiary was formally 
admitted as an inpatient and there is no provision to change a 
beneficiary's status after he or she is discharged from the hospital. 
Therefore, the beneficiary is considered an outpatient for services 
billed on the Part B outpatient claim, and is considered an inpatient 
for services billed on the Part B inpatient claim. For Part A claims 
with dates of admission on or after October 1, 2013, timely filing 
applies such that hospitals must submit the Part B claims within 12 
months of the date of service in order to receive payment (78 FR 50922 
through 50924).
    Under the Hospital OQR Program, hospitals are required to submit 
data on quality measures for hospital outpatient services furnished 
within a given timeframe (encounter dates). A hospital's claims data 
supports two types of OQR measures of quality: claims based measures 
and chart-abstracted measures (claims data can be used to identify 
cases eligible for chart-abstraction). With regard to claims-based 
measures, in the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68483), we described that, for the upcoming CY 2015 payment 
determination, we will use paid, FFS claims for services during the 
time period from July 1, 2012 through June 30, 2013. We would like to 
clarify that these paid, FFS claims are Part B outpatient claims. 
Inpatient services are excluded, so all Part B inpatient claims are 
excluded. However, we will include paid Part B outpatient claims for 
services furnished in the 3-day (1-day for non-IPPS hospitals) payment 
window prior to an inpatient admission, along with other paid Part B 
outpatient claims, if they are paid prior to the cut-off date for 
claims inclusion of September 30, 2013. For the CY 2015 payment 
determination, we note that hospitals have a longer timeframe (beyond 
the usual timely filing deadline) to submit certain rebilled Part B 
outpatient claims for services furnished during the Hospital OQR 
reporting period of July 1, 2012 through June 30, 2013 (78 FR 50935 
through 50936). Part B outpatient claims for these dates of service 
that are processed and paid after the claims inclusion cut-off of 
September 30, 2013 will not be included in the Hospital OQR Program CY 
2015 payment determination.
    As it relates to chart-abstracted data, the hospital is responsible 
for submitting complete data that are available at the submission 
deadline for each measure of quality, and we will assess submitted 
data. If a claim is not timely available for the associated medical 
record's inclusion in the chart-abstractor's universe of records, the 
chart-abstractor cannot include data from that record in data submitted 
to CMS.
    After consideration of the public comments we received, we are 
finalizing as proposed our proposal to continue to use paid Medicare 
FFS claims from a 12-month period from July 1st of the 3 years before 
the payment determination through June 30th of the following year.
f. Data Submission Requirements for Measure Data Submitted Via Web-
Based Tool for the CY 2016 Payment Determination and Subsequent Years
    In previous rulemaking, we have referred to measures where data are 
submitted via a Web-based tool on a CMS Web site under our quality data 
reporting programs as structural measures (measures concerned with 
attributes of where care occurs, such as material resources, human 
resources, and organizational structure.\10\ For example, the Hospital 
OQR measure OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into their ONC-Certified EHR 
System as Discrete Searchable Data is a structural measure. However, 
because measures where data is submitted in this manner may or may not 
be structural, for example, the Hospital IQR chart-abstracted, process 
of care measure PC-01: Elective Delivery Prior to 39 Completed Weeks 
Gestation, we have refined our terminology and now refer to the mode of 
data submission as Web-based.
---------------------------------------------------------------------------

    \10\ Maintz, J. Defining and Classifying Clinical Indicators for 
Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-
530).
---------------------------------------------------------------------------

    Thus, the previously finalized Web-based measures where data is 
entered on a CMS Web site that we require for the CY 2015 payment 
determination and subsequent years are listed below:
     OP-12: The Ability for Providers with HIT to Receive 
Laboratory Data Electronically Directly into their Qualified/Certified 
EHR System as Discrete Searchable Data;
     OP-17: Tracking Clinical Results Between Visits;
     OP-22: ED Patient Left Without Being Seen;
     OP 25: Safe Surgery Check List Use; and
     OP 26: Hospital Outpatient Volume on Selected Outpatient 
Surgical Procedures.
    Measure OP-22: ED Patient Left Without Being Seen, is included in 
this list because, while patient-level data for this measure is 
collected via chart-abstraction, HOPDs submit aggregate data using an 
online tool. Thus, the same schedule for encounter periods and data 
submission deadlines applies to OP-22.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68483 
through 68484), we finalized that, for the CY 2014 payment 
determination, hospitals are required to submit data on all Web-based 
measures between July 1, 2013 and November 1, 2013 with respect to the 
time period from January 1, 2012 to December 31, 2012.
    We also finalized in the CY 2013 OPPS/ASC final rule with comment 
period for the CY 2015 payment determination, that hospitals are 
required to submit data on all Web-based measure data between July 1, 
2014 and November 1, 2014 with respect to the time period from January 
1, 2013 to December 31, 2013.
    In the CY 2014 OPPS/ASC proposed rule, we proposed to apply a 
similar schedule for the CY 2016 payment determination and subsequent 
years. We proposed that hospitals would be required to submit data 
between July 1 and November 1 of the year prior to a payment 
determination with respect to the time period of January 1 to December 
31 of two years prior to a payment determination year. Thus, for 
example, for the CY 2016 payment determination, hospitals would be 
required to submit data between July 1, 2015 and November 1, 2015 with 
respect to the time period of January 1, 2014 to December 31, 2014.
    We also proposed to apply the same mode of data collection and 
deadlines to the following proposed chart-abstracted measures.
     OP-28: Complications within 30 days Following Cataract 
Surgery Requiring Additional Surgical Procedures (this measure was not 
finalized and will not be implemented);
     OP-29: Endoscopy/Polyp Surveillance: Appropriate follow-up

[[Page 75113]]

interval for normal colonoscopy in average risk patients;
     OP-30: Endoscopy/Polyp Surveillance: Colonoscopy Interval 
for Patients with a History of Adenomatous Polyps--Avoidance of 
Inappropriate Use; and
     OP-31: Cataracts--Improvement in Patient's Visual Function 
within 90 Days Following Cataract Surgery.
    Specifically, for data collection, we proposed that hospitals 
submit aggregate-level data through the CMS Web-based tool (the 
QualityNet Web site). As with OP-22, a chart-abstracted measure that is 
submitted once annually via the Web-based tool, hospitals would submit 
the data required for these newly proposed measures for a particular 
program year once annually during the data submission window proposed 
for Web-based measures as stated above, and would do so via the 
Outpatient section on the QualityNet secure Web site. While we proposed 
submission deadlines with an annual frequency, the data input forms on 
the QualityNet Web site for such submission will require hospitals to 
submit aggregate data represented by each separate quarter. We proposed 
to use the Web-based collection tool and collect aggregate-level data 
because we believe these options are less burdensome to hospitals than 
patient-level reporting.
    While this proposal applies to the CY 2016 payment determination 
and subsequent years, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43656), we summarized for the proposed and existing chart-abstracted 
measures collected via the Web-based tool, data collection periods and 
deadlines as they apply to just the CY 2016 payment determination.
    We recognize that aggregate-level reporting has the potential to 
result in less accurate measure rates than patient-level reporting. 
However, to reduce burden for hospitals, we believe that an aggregate 
data submission approach is the preferable approach at this time.
    We invited public comment on these proposals.
    In section XIII.E of this final rule with comment period, we 
describe that, in the CY 2014 OPPS/ASC proposed rule (78 FR 43647 
through 43648) we sought public comment on whether we should collect 
patient-level data via certified EHR technology on the four proposed 
chart-abstracted measures (this would not apply to the one HAI measure, 
OP-27: Influenza Vaccination Coverage among Healthcare Personnel), and 
the potential timing for doing so. We refer readers to section XIII.E 
of this final rule with comment period for a discussion of the related 
public comments.
    Comment: Several commenters raised general questions about the two 
colonoscopy measures CMS proposed without making a distinction between 
the two measures. Commenters expressed concern about determining the 
appropriate interval between colonoscopies if a patient had his or her 
last colonoscopy in a different HOPD or other facility. Another 
commenter was concerned about how HOPDs should be collecting the pre-
procedure information necessary to make these determinations, noting 
that it would require significant system changes to achieve accurate 
data collection. The commenter described as an example having to set up 
a system with an NP or RN collecting a sufficient amount of accurate 
colonoscopy history from a patient during the patient's pre-procedure 
visits. The commenter believed that such a system would be necessary to 
determine whether an additional colonoscopy is necessary based on 
recommended frequency guidelines. The commenters also pointed out that 
many colonoscopies are performed at a facility that is not within the 
same entity as the ordering physician's practice, making it difficult 
for the HOPD to acquire medical records that are in the physician's 
possession.
    Response: We appreciate these comments. We expect that, to address 
these measures, HOPDs will need to either ask patients about their 
colonoscopy history and polyp status, or acquire that information from 
such sources as the patient's physician or the facility that performed 
the most recent colonoscopy. This data will be critical for HOPDs 
attempting to determine an appropriate interval between colonoscopies.
    Pre-procedure information can include a patient's history, perhaps 
in the form of a medical record or as obtained through verbal 
communication with the patient. We believe this information, which 
includes how recently patients had their previous colonoscopy and any 
other factors that might affect a HOPD's determination of an 
appropriate interval, is essential to a HOPD's decision about when to 
perform a follow-up colonoscopy. Acquiring this information may mean 
that some HOPDs must gather more information than they may be 
accustomed to.
    We believe that HOPDs that perform certain procedures must manage 
the risk of procedural harm to patients and coordinate care by 
improving the communication between the HOPD, its patients, specialist 
physician offices, ASCs, surgeons performing procedures, and other 
outpatient departments. We expect some providers will need to adopt new 
processes to effectively gather this information in order to manage the 
risk of procedural harm, and to report data for this measure. For 
example, HOPDs may in some cases need to establish some form of pre-
procedure interaction with patients in order to establish their 
procedural history, either by using an NP or RN, as one commenter 
suggested, by using a survey form, or by some other method. There may 
be some concern that, despite HOPDs managing risk of procedural harm to 
the best of their abilities, patients may not always be able to 
accurately represent their polyp history during direct interactions 
with caregivers. In these instances, patients can authorize the release 
of medical information from one provider or practitioner to another.
    Comment: One commenter recommended that CMS require reporting of 
data that is included in validation.
    Response: We believe this commenter would like the Hospital OQR 
Program to restrict data collection to measures that are also subject 
to validation processes. We refer readers to section XIII.E.1. above 
for a discussion of this issue.
    Comment: Many commenters believed that these measures are 
burdensome and the data is not easily attained in the outpatient 
setting. Many commenters argued that CMS' proposed requirement to 
collect aggregate-level data to report through the Web-based tool would 
actually increase the burden on hospitals. These commenters point out 
that the hospital must perform patient-level reviews to report 
aggregate-level data. One commenter believed that the submission of 
aggregate data using the Web-based tool required time spent manually 
entering data into QualityNet and made it more burdensome for a 
hospital to work with a vendor.
    The commenters stated that, unless CMS intends to release full 
specifications, including clear and complete measure numerator, 
denominator, exclusion criteria, and algorithms, hospitals will 
experience burden in having to review and interpret NQF specifications 
for each of the new measures. One commenter stated that there are 
difficulties with CMS' infrastructure, and the commenter believes that 
any additional measures are likely to cause operational difficulties 
with data collection via the QualityNet Web site.
    Response: We understand all new measures impose some burden on 
hospitals to gather and report data. We also appreciate that many 
commenters favor CMS adopting claims-based measures into the Hospital 
OQR

[[Page 75114]]

Program whenever possible, as we discuss in section XIII.E.1 above. 
However, we believe that the measures we are adopting are important 
indicators of the quality of care HOPDs provide and that any effort in 
acquiring data and burden in reporting that data is appropriate based 
on the importance of measuring the quality of care.
    Regarding the burden imposed by Web-based reporting, we would like 
to clarify that the Hospital OQR Program requires entering aggregate 
data via the Web-based tool, not patient-level data or detail. A 
hospital is required to populate one numerator and one denominator 
field for the applicable measures onto QualityNet. However, hospitals 
would still be required to perform a patient-level review of medical 
records to compile aggregate data. Hospitals would abstract data for 
new measures OP-29, OP-30, and OP-31 the same way they have been 
abstracting data for all other previously finalized chart-abstracted 
measures; this process involves identifying their total aggregate sums 
for the numerator and denominator.
    For the new measures (OP-29, OP-30, and OP-31), it should not be 
difficult for a hospital to use the Web-based tool to enter aggregate 
data, making a vendor unnecessary. In fact, we are not aware that any 
hospitals currently use a vendor to submit data for measure OP-22. 
However, if a hospital does choose to use a vendor, we do not see any 
reason why finalizing these new measures would necessarily make working 
with a vendor more difficult. Vendors routinely provide services to 
hospitals, submitting large amounts of detailed, and often complex, 
data to CMS on the hospitals' behalf.
    We believe that reporting the aggregate-level data required by the 
new measures via the Web-based tool is less burdensome to hospitals 
than reporting patient-level data. We believe that the ease with which 
hospitals can submit their aggregate counts using our Web-based tool 
(the QualityNet Web site) reduces the burden of reporting. As we noted 
above, this process is the same process we finalized for OP-22 and 
similar to the process we finalized for a quality measure in the 
Hospital IQR Program in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53537).
    We will provide full, in-depth specifications for OP-29, OP-30, and 
OP-31 in the upcoming December 2013 addendum to the Hospital OQR 
Specifications Manual. We note that numerators, denominators, and 
exclusions have been established and made public as shown on the NQF 
Web site. The Hospital OQR Specifications Manual includes instructions 
for identifying a measure's population (for example, using specific 
data elements), an algorithm for each measure in both diagram and 
narrative form, and sampling methodology for measures as applicable. 
The Hospital OQR Specifications Manual also includes information on the 
rationale for each measure, how each measure is publicly reported, how 
improvement is noted, etc., and it identifies references to Medical or 
other scientific journals that include discussion of a measure's focus. 
We would like to clarify that we are finalizing that a hospital would 
submit aggregate numerators, denominators, exclusion counts, and total 
populations and sample sizes for the new measures (OP-29, OP-30, and 
OP-31) according to the measure specifications.
    However, we are sensitive to commenters' concerns regarding burden, 
and as such, we are addressing it in two ways--applying a sampling 
scheme and a low case threshold exemption. We intend to decrease burden 
and facilitate data reporting for these measures by allowing random 
sampling of cases when volume is high, instead of collecting 
information for all eligible patients. In our December 2013 addendum to 
the Hospital OQR Specifications Manual, we will publish a sampling 
methodology for these new measures that will take into account the 
burden that these new measures may place on hospitals during the CY 
2014 encounter period. Specifically, we will employ the same sampling 
requirements for these measures that are currently used for the ED 
Throughput measure set (that is, measures OP-18/NQF 0496, OP-20/NQF 
0498, and OP-22/NQF 0499). Sampling is a process of selecting a 
representative part of a population in order to estimate the hospital's 
performance, without collecting data for its entire population. In this 
way, using a statistically valid sample, a hospital can measure its 
performance in an effective and efficient manner. We describe how to 
obtain a statistically valid sample and the current sampling 
methodology and requirements for ED Throughput Measure Set within 
``Section 4--Population and Sampling Specifications'' of the Hospital 
OQR Specifications Manual, v7.0 at the QualityNet Web site (https://
www.qualitynet.org). There, the ED Throughput Sampling requirement is 
located in Table 3. A hospital should follow the same methodology for 
new measures OP-29 (NQF 0658), OP-30 (NQF 0659), and OP-31 (NQF 1536). 
In the upcoming release of the addendum to the Hospital OQR 
Specifications Manual (available at the QualityNet Web site https://
www.qualitynet.org), we will include information that the ED Throughput 
Sampling requirements at Table 3 are also applicable to new measures 
OP-29, OP-30, and OP-31.
    We will adjust the sampling requirement based on our experience 
with collecting this data in the first year.
    In addition, we are implementing a low case threshold exemption for 
newly finalized measures OP-29, OP-30, and OP-31. To reduce the burden 
on hospitals that treat a low number of patients, this exemption 
excludes hospitals that perform 20 or fewer relevant procedures per 
measure in any year from having to submit data for that year for 
measures OP-29, OP-30, and OP-31. This low case threshold exemption is 
consistent with our practice for chart-abstracted measures in the 
Hospital IQR Program (73 FR 48617), but annualized to be consistent 
with the Hospital OQR Program's single annual reporting requirement for 
these three measures. Because data for OP-29, OP-30, and OP-31 are to 
be submitted once annually via Web-based tool, we will not require 
hospitals that perform 20 or fewer cases per year per measure to submit 
this data annually.
    We agree our data collection system experiences malfunctions, and 
we work to resolve system issues as quickly as we are able to through 
our contractors. However, the system functionality to report aggregate 
data using the Web based tool is stable at this time and our 
contractors assure us that the system will be able to collect aggregate 
data for OP-29, OP-30, and OP-31 by the first deadline for measure 
submission.
    After consideration of the public comments we received, we are 
finalizing our proposal, for the CY 2016 payment determination and 
subsequent years, that hospitals will be required to submit Web-based 
data between July 1 and November 1 of the year prior to a payment 
determination with respect to the encounter period of January 1 to 
December 31 of two years prior to a payment determination year. For 
example, for the CY 2016 payment determination, the encounter period is 
January 1, 2014 to December 31, 2014 and the data submission window is 
July 1, 2015 through November 1, 2015. The CY 2014 encounter data is 
scheduled to be displayed on Hospital Compare in December 2015.
    We also are finalizing our proposals: (1) To apply a uniform mode 
of data collection and deadlines to the new measures OP-29, OP-30, and 
OP-31; (2) that hospitals submit aggregate-level data through the CMS 
Web-based tool (the outpatient section of the QualityNet Web site); 
and, (3) that hospitals submit

[[Page 75115]]

all aggregate-level data required for a particular program year once 
annually during the data submission window.
    In addition, we are finalizing a sampling scheme and low case 
threshold exemption. We will publish a sampling scheme for newly 
finalized measures in the upcoming December 2013 addendum to the 
Hospital OQR Specifications Manual. For the low case threshold 
exemption, we are finalizing that any hospital that performs 20 or 
fewer procedures annually for a particular new measure, will not be 
required to submit any data for that new measure.
    Set out below are the finalized data collection requirements for 
chart-abstracted measures that are collected annually via the Web-based 
tool illustrating how these policies will apply to just the CY 2016 
payment determination.
[GRAPHIC] [TIFF OMITTED] TR10DE13.365

[[Page 75116]]

g. Data Submission Requirements for a Measure Reported Via NHSN for the 
CY 2016 Payment Determination and Subsequent Years
    As discussed in section XIII.E.1. of this final rule with comment 
period, we are finalizing the addition of OP-27: Influenza Vaccination 
Coverage among Healthcare Personnel to the Hospital OQR Program measure 
set. We proposed to use the data submission and reporting standard 
procedures set forth by the CDC for NHSN participation for submission 
of this measure to NHSN. Hospitals currently submit data to NHSN to 
comply with the requirements of the Hospital IQR Program and those 
requirements will be unchanged for data submission to NHSN for the 
Hospital OQR Program. We refer readers to the CDC's NHSN Web site 
(http://www.cdc.gov/nhsn) for detailed data submission and reporting 
procedures. We believe that these procedures are feasible because they 
are already widely used by over 4,000 hospitals reporting HAI data 
using NHSN. Our proposal seeks to reduce hospital burden by aligning 
our data submission and reporting procedures with NHSN procedures 
currently used by hospitals who participate in the reporting 
requirements for the Hospital IQR Program as well as hospitals in the 
30 States and the District of Columbia that mandate HAI reporting via 
NHSN.
    We proposed to adopt the NHSN HAI measure data collection timeframe 
of October 1 through March 31st, as previously finalized in the 
Hospital IQR Program (76 FR 51631 through 51633), which links data 
collection to the time period in which influenza vaccinations are 
administered during the influenza season. Because data for this measure 
would be collected seasonally, we proposed that hospitals submit their 
data for this measure to NHSN for purposes of the Hospital OQR Program 
by May 15th of the calendar year in which the vaccination season has 
ended. For example, for vaccinations given from October 1, 2014 (or 
when the vaccine becomes available) to March 31, 2015, the submission 
deadline would be May 15, 2015. This data submission deadline 
corresponds to that finalized by the Hospital IQR Program in the FY 
2014 IPPS/LTCH final rule (78 FR 50821).
    We invited public comment on these proposals.
    Comment: One commenter expressed concern regarding whether the NHSN 
system will be overwhelmed if a large number of independent HOPDs began 
to submit data on the influenza measure. The commenter urged that prior 
to implementation of any HOPD measures in the NHSN, CMS and CDC must 
work together to find the necessary resources to sustain and expand the 
reporting capabilities of the NHSN.
    The commenter also stated that hospitals are having difficulty in 
obtaining reports from the NHSN system and when this problem is 
reported to NHSN, hospitals either receive no response or a generic 
response with no expected correction date provided. The commenter 
voiced concerns that this limits hospitals' ability to use NHSN data 
for performance improvement efforts, and that the concerns raised by 
the lack of system reliability must be mitigated through appropriate 
funding and quality control.
    Response: We thank the commenter for the feedback. We believe this 
commenter is referring to the availability of feedback, in report form, 
to indicate whether a hospital has successfully reported HAI data to 
NHSN for purposes of meeting payment determination requirements for the 
Hospital IQR Program. The Hospital OQR Program has not, to date, 
required reporting to the NHSN system. HOPDs will report to the CDC 
using their CCN. Since hospitals have a single CCN, hospitals that 
already report data to the CDC's NHSN Web site for purposes of the 
Hospital IQR Program will not need to reenroll or get a new account, 
because they have already established their CCN identity. Where 
hospitals currently report data for the HCP vaccination rate for the 
inpatient setting, the CDC will add a drop-down option for hospitals to 
distinguish the reporting of data for the outpatient setting. The CDC 
will capture and transmit this outpatient data to CMS using the 
existing infrastructure for capturing and transmitting data for the 
inpatient setting.
    The Hospital IQR Program has experienced problems with HAI feedback 
reports generated from CDC data in the past due to programming issues 
which have been corrected as they are identified. These experiences 
with the Hospital IQR Program report will be leveraged in the CMS 
outpatient feedback report, called the Provider Participation Report. 
The existing Provider Participation Report will be modified to include 
a column to indicate whether a facility has successfully reported the 
HCP influenza vaccination measure data for purposes of the Hospital OQR 
program.
    NHSN has addressed and corrected previous issues with system strain 
and slow data-set generation due to high volume requests for data and 
reports. NHSN continues to closely monitor the Web site for any new 
potential issues and strives to respond immediately. In light of these 
changes, we do not believe that it is likely that the NHSN system will 
be overwhelmed by this proposed reporting. The proposed reporting 
relies on making modest extensions to the existing NHSN infrastructure 
where the reporting is parallel to existing HCP data capture for the 
inpatient setting.
    Comment: Several commenters asked how we will require reporting of 
students and volunteers at the hospital for this measure. One commenter 
would like clarification on how to gather data for personnel who were 
immunized outside of the reporting hospital. Commenters point out that 
it is a strain on resources to collect data on these categories of 
vaccinated personnel.
    Response: We believe that hospitals are well equipped to report 
these categories of vaccinated personnel, since they already report 
these categories for personnel working in hospital inpatient 
departments in the Hospital IQR Program. CMS and CDC believe that only 
small modifications are necessary to report these categories of 
vaccinated personnel for hospital outpatient departments, since many 
hospitals use the same human resource system to collect relevant 
information on both hospital inpatient and outpatient department 
personnel. The CDC will collaborate with CMS on refining and publishing 
specifications for how to attribute workers by setting. CMS will refer 
to the CDC's specifications in the December 2013 addendum to the 
Hospital OQR Specifications Manual that will be available on the 
Quality Net Web site (https://qualitynet.org).
    The numerator of the population of this measure includes personnel 
who received an influenza vaccination administered at the healthcare 
facility, or reported in writing (paper or electronic) or provided 
documentation that influenza vaccination was received elsewhere. The 
numerator also includes those who were determined to have a medical 
contraindication or particular allergy or immune status, who declined 
the influenza vaccination, or who have an unknown vaccination status or 
do not meet other NQF numerator categories (to review the NQF Measure 
Description and Numerator and Denominator Statements, please refer to 
the NQF Web site at http://www.qualityforum.org/Home.aspx). We believe 
the numerator categories will alleviate some of the difficulty a 
hospital may have in tracking down the vaccination status of some 
categories of HCW. We recognize the challenge for hospitals in 
collecting data for students, volunteers, and offsite personnel. We

[[Page 75117]]

nonetheless believe that the benefit of reducing influenza in hospitals 
outweighs any burden incurred by screening all staff, volunteers, 
students, and offsite personnel. We believe that this burden should, by 
and large, amount to gathering information about immunization during 
initial worker orientation and during flu vaccine season for existing 
workers, providing vaccines when appropriate, and keeping track of who 
has been vaccinated.
    After consideration of the public comments we received, we are 
finalizing as proposed our proposal to use the data submission and 
reporting standard procedures set forth by the CDC for NHSN 
participation in general and for submission of data for this measure to 
NHSN. We are also finalizing our proposal to adopt the NHSN HAI measure 
data collection timeframe of October 1st through March 31st for this 
measure. The first deadline for hospitals to submit this data will be 
May 15, 2015 with respect to the October 1, 2015 through March 31, 2015 
encounter period.
h. Population and Sampling Data Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68484), for the CY 2014 payment determination and subsequent years, we 
continued our policy that hospitals may submit voluntarily on a 
quarterly basis, aggregate population and sample size counts for 
Medicare and non-Medicare encounters for the measure populations for 
which chart-abstracted data must be submitted, but they will not be 
required to do so. Where hospitals do choose to submit this data, the 
deadlines for submission are the same as those for reporting data for 
chart-abstracted measures, and hospitals may also choose to submit data 
prior to these deadlines. The deadline schedule is available on the 
QualityNet Web site. We refer readers to the CY 2011 OPPS/ASC final 
rule with comment period (75 FR 72101 through 72103) and the CY 2012 
OPPS/ASC final rule with comment period (76 FR 74482 through 74483) for 
discussions of these policies.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43656), we did not 
propose any changes to this policy.
3. Hospital OQR Program Validation Requirements for Chart-Abstracted 
Measure Data Submitted Directly to CMS for the CY 2015 Payment 
Determination and Subsequent Years
a. Selection of Hospitals for Data Validation of Chart-Abstracted 
Measures for the CY 2015 Payment Determination and Subsequent Years
    We refer readers to the CY 2012 and CY 2013 OPPS/ASC final rules 
with comment period (76 FR 74484 through 74487 and 77 FR 68484 through 
68487) for a discussion of finalized policies regarding our sampling 
methodology, including sample size, eligibility for validation 
selection, and encounter minimums for patient-level data for measures 
where data is obtained from chart abstraction and submitted directly to 
CMS from selected hospitals. In the CY 2014 OPPS/ASC proposed rule (78 
FR 43656 through 43657), we did not propose any changes to this policy.
    However, we proposed to codify at Sec.  419.46(e) of our 
regulations the existing policy that we may validate one or more 
measures selected under section 1833(17)(C) of the Act by reviewing 
documentation of patient encounters submitted by selected participating 
hospitals. Upon written request, a hospital must submit to CMS or its 
contractor supporting medical record documentation that the hospital 
used for purposes of data submission under the program. The specific 
sample that a hospital must submit will be identified in the written 
request. A hospital must submit the supporting medical record 
documentation to CMS or its contractor within 45 days of the date 
identified on the written request, in the form and manner specified in 
the written request. A hospital meets the validation requirement with 
respect to a fiscal year if it achieves at least a 75-percent 
reliability score, as determined by CMS.
    We invited public comment on our proposal to codify these 
requirements.
    Comment: One commenter supported codifying Hospital OQR procedures.
    Response: We appreciate this commenter's support.
    Comment: One commenter was opposed to the Hospital OQR Program 
using any threshold for establishing a passing rate of reliability for 
validation as criteria for a hospital achieving a full annual payment 
update. The commenter stated that, due to the complexity of the 
measures and the fact that there has been no evidence facilities submit 
inaccurate data to give the appearance of higher quality of care on the 
Hospital Compare Web site, the Hospital OQR Program should only look at 
whether a facility submits records when and as requested. The commenter 
believed that successful submission of records should be sufficient to 
assure data integrity.
    Response: We disagree. While we appreciate the commenter's 
perspective that hospitals are not motivated to submit data that 
inaccurately represents their care to appear to have higher quality of 
care on the Hospital Compare Web site, we nevertheless remain committed 
that all hospitals are responsible for submitting accurate data. All 
reporting hospitals are subject to selection for validation each 
payment determination year, which provides an additional incentive to 
maintain data quality. The validation process assesses overall data 
accuracy using data abstracted by CMS from hospital medical record 
copies, as compared to the data that a hospital submits to CMS. This 
process is intended to ensure that hospitals submit high quality and 
accurate data to CMS. We believe the opportunity for a hospital to be 
selected for validation is a motivator for the hospital to maintain 
stringent chart abstraction and data submission standards.
    However, we believe that requiring hospitals to meet a reliability 
score serves a purpose beyond deterring hospitals from manipulating 
their data for display purposes. We believe that requiring a 
reliability score also motivates hospitals: (1) To continuously improve 
their internal operations to accurately capture the high quality care 
they provide; (2) to obtain data that can be measured and compared 
meaningfully across peer hospitals; and, (3) to report data to support 
our movement away from reimbursement for volume of care provided and 
toward reimbursement for quality of care. We appreciate the work 
hospitals do to refine processes to improve the quality of care they 
provide to patients and to report data reliably on measures of quality.
    After consideration of the public comments we received, we are 
finalizing our proposal to codify at Sec.  419.46(e) of our regulations 
our existing policies regarding validation of patient encounters at 
selected participating hospitals.
b. Targeting Criteria for Data Validation Selection for the CY 2015 
Payment Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68485 through 68486) for a discussion of our targeting 
criteria. In the CY 2014 OPPS/ASC proposed rule (78 FR 43657), we did 
not propose any changes to this policy.

[[Page 75118]]

c. Methodology for Encounter Selection for the CY 2015 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68486) for a discussion of our methodology for encounter 
selection. In the CY 2014 OPPS/ASC proposed rule (78 FR 43657), we did 
not propose any changes to this policy.
d. Medical Record Documentation Requests for Validation and Validation 
Score Calculation for the CY 2015 Payment Determination and Subsequent 
Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68486 through 68487) for a discussion of our procedures 
for requesting medical record documentation for validation and 
validation score calculation. In the CY 2014 OPPS/ASC proposed rule (78 
FR 43657), we did not propose any changes to our procedures regarding 
medical record requests.
    However, we proposed to codify these procedures at Sec. Sec.  
419.46(e)(1) and (e)(2) as summarized below:
     CMS may validate one or more measures selected under 
section 1833(17)(C) of the Act by reviewing documentation of patient 
encounters submitted by selected participating hospitals.
     Upon written request by CMS or its contractor, a hospital 
must submit to CMS supporting medical record documentation that the 
hospital used for purposes of data submission under the program. The 
specific sample that a hospital must submit will be identified in the 
written request. A hospital must submit the supporting medical record 
documentation to CMS or its contractor within 45 days of the date 
identified on the written request, in the form and manner specified in 
the written request.
     A hospital meets the validation requirement with respect 
to a fiscal year if it achieves at least a 75-percent reliability 
score, as determined by CMS.
    We invited public comment on our proposal to codify these 
procedures.
    We did not receive any public comment on our proposal to codify 
medical record documentation requests and validation and validation 
score calculation procedures. Therefore, we are finalizing our proposal 
to codify these procedures at Sec. Sec.  419.46(e)(1) and (e)(2).

I. Hospital OQR Reconsideration and Appeals Procedures for the CY 2015 
Payment Determination and Subsequent Years

    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68487) for a discussion of our reconsideration and 
appeals procedures.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43657 through 43658), 
we proposed one change to the reconsideration request procedures to 
ensure our deadline for reconsideration requests will always fall on a 
business day. We also proposed to codify the process, including our 
proposal to change the deadline by which participating hospitals may 
submit requests for reconsideration at Sec.  419.46(f) of our 
regulations.
    A hospital seeking reconsideration would submit to CMS, via the 
QualityNet Web site, a Reconsideration Request form that will be made 
available on the QualityNet Web site. Where we have required that this 
form must be submitted by February 3 of the affected payment year (for 
example, for the CY 2014 payment determination, the request was 
required to be submitted by February 3, 2014), we proposed to modify 
this requirement so that the Reconsideration Request form would be 
required to be submitted on the first business day in February of the 
affected payment year instead. As proposed, the Reconsideration Request 
form for the CY 2014 payment determination would be required on 
February 3, 2014, which is a Monday, because this is the first business 
day in February; however, the form for the CY 2015 payment 
determination would be required on February 2, 2015, which is also a 
Monday, and the first business day in February. We note that while we 
use the CY 2014 and 2015 payment determinations as examples, we 
proposed this policy for the CY 2014 payment determination and 
subsequent years. The other requirements of the form would remain 
unchanged. We requested public comment on this proposal.
    We also proposed to codify this process by which participating 
hospitals may submit requests for reconsideration, including our 
proposal to change the reconsideration request deadline at Sec.  
419.46(f). Under these proposed procedures, the hospital must submit to 
CMS via QualityNet, a reconsideration request via the QualityNet Web 
site, no later than the first business day in the month of February of 
the affected payment year containing the following information:
     The hospital's CMS Certification Number (CCN);
     The name of the hospital;
     The CMS-identified reason for not meeting the requirements 
of the affected payment year's Hospital OQR Program, as provided in any 
CMS notification to the hospital;
     The hospital's basis for requesting reconsideration. The 
hospital must identify its specific reason(s) for believing it should 
not be subject to the reduced annual payment update;
     The hospital-designated personnel contact information, 
including name, email address, telephone number, and mailing address 
(must include physical address, not just a post office box).
     The hospital-designated personnel's signature;
     A copy of all materials that the hospital submitted to 
comply with the requirements of the affected Hospital OQR Program 
payment determination year; and
     If the hospital is requesting reconsideration on the basis 
that CMS has determined it did not meet an affected payment 
determination year's validation requirement, the hospital must provide 
a written justification for each appealed data element classified 
during the validation process as a mismatch. Only data elements that 
affect a hospital's validation score are eligible to be reconsidered.
    We also proposed to codify language at Sec.  419.46(f)(3) stating 
that a hospital that is dissatisfied with a decision made by CMS on its 
reconsideration request may file an appeal with the Provider 
Reimbursement Review Board.
    While we did not propose to codify the following process, we note 
that, after receiving a request for reconsideration, CMS--
     Provides an email acknowledgement, using the contact 
information provided in the reconsideration request, to the designated 
hospital personnel notifying them that the hospital's request has been 
received.
     Provides a formal response to the hospital-designated 
personnel, using the contact information provided in the 
reconsideration request, notifying the hospital of the outcome of the 
reconsideration process.
     Applies policies regarding the scope of our review when a 
hospital requests reconsideration, because it failed our validation 
requirement.
    These policies are as follows:
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more data elements were 
classified as mismatches, we only consider the

[[Page 75119]]

hospital's request if the hospital timely submitted all requested 
medical record documentation to the CMS contractor each quarter under 
the validation process.
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that one or more of the complete 
medical records it submitted during the quarterly validation process 
was classified as an invalid record selection (that is, the CMS 
contractor determined that one or more of the complete medical records 
submitted by the hospital did not match what was requested), thus 
resulting in a zero validation score for the encounter(s), our review 
is initially limited. We will review only to determine whether the 
medical documentation submitted in response to the designated CMS 
contractor's request was the correct and complete documentation. If we 
determine that the hospital did submit correct and complete medical 
documentation, we abstract the data elements and compute a new 
validation score for the encounter. If we conclude that the hospital 
did not submit correct and complete medical record documentation, we do 
not further consider the hospital's request.
     If a hospital requests reconsideration on the basis that 
it disagrees with a determination that it did not submit the requested 
medical record documentation to the CMS contractor within the 45 
calendar day timeframe, our review is initially limited to determining 
whether the CMS contractor received the requested medical record 
documentation within 45 calendar days, and whether the hospital 
received the initial medical record request and reminder notice. If we 
determine that the CMS contractor timely received copies of the 
requested medical record documentation, we abstract data elements from 
the medical record documentation submitted by the hospital and compute 
a validation score for the hospital. If we determine that the hospital 
received two letters requesting medical documentation but did not 
submit the requested documentation within the 45 calendar day period, 
we do not further consider the hospital's request. (We note that in the 
proposed rule (78 FR 43658), we inadvertently referred to 30 calendar 
days, instead of 45 calendar days in this bulleted item. We used the 
correct 45 day timeframe in our discussion of Hospital OQR Program 
validation requirements in section XIII.H.3. of the proposed rule (78 
FR 43656) and in proposed Sec.  419.46(e)(1) (78 FR 43704).
    If a hospital is dissatisfied with the result of a Hospital OQR 
reconsideration decision, the hospital is able to file an appeal under 
42 CFR Part 405, Subpart R (PRRB appeal), as we have provided in our 
codification at Sec.  419.46(f)(3).
    We invited public comment on these proposals.
    Comment: Several commenters supported CMS' proposed change to the 
reconsideration request procedures to ensure our deadline for 
reconsideration requests will always fall on a business day.
    Response: We appreciate these commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to: (1) Change the deadline by which 
participating hospitals may submit requests for reconsideration; and, 
(2) codify this deadline and our procedural requirements for requesting 
a reconsideration at Sec.  419.46(f) of our regulations.

J. Extraordinary Circumstances Extension or Waiver for the CY 2014 
Payment Determination and Subsequent Years

    In our experience, there have been times when facilities have been 
unable to submit information to meet program requirements due to 
extraordinary circumstances that are not within their control. It is 
our goal to not penalize such entities for such circumstances and we do 
not want to unduly increase their burden during these times. We refer 
readers to the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68489) for a complete discussion of our extraordinary circumstances 
extension or waiver process under the Hospital OQR Program.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43658), we proposed 
one change to our process for hospitals to request and for CMS to grant 
extensions or waivers with respect to the reporting of required quality 
data when there are extraordinary circumstances beyond the control of 
the hospital. Specifically, we proposed that we may grant a waiver or 
extension to hospitals if we determine that a systemic problem with one 
of our data collection systems directly or indirectly affected the 
ability of hospitals to submit data. Because we do not anticipate that 
such systemic errors will happen often, we do not anticipate granting a 
waiver or extension on this basis frequently.
    We also proposed to codify language for the general requirements 
for our extension or waiver process including the proposal for systemic 
errors at Sec.  419.46(d) as described below:
    CMS may grant an extension or waiver of one or more data submission 
deadlines and requirements in the event of extraordinary circumstances 
beyond the control of the hospital such as when an act of nature 
affects an entire region or locale or a systemic problem with one of 
CMS' data collection systems directly or indirectly affects data 
submission. CMS may grant an extension or waiver as follows:
     Upon request by the hospital. Specific requirements for 
submission of a request for an extension or waiver are available on the 
QualityNet Web site.
     At the discretion of CMS. CMS may grant waivers or 
extensions to hospitals that have not requested them when CMS 
determines that an extraordinary circumstance has occurred.
    For the hospital to request consideration for an extension or 
waiver of the requirement to submit quality data or medical record 
documentation for one or more quarters, a hospital would follow 
specific requirements for submission of a request available on 
QualityNet. While we did not propose to codify the following process, 
we note that the following information must appear on the request form:
     Hospital CCN;
     Hospital Name;
     CEO or other hospital-designated personnel contact 
information, including name, email address, telephone number, and 
mailing address (must include a physical address, a post office box 
address is not acceptable);
     Hospital's reason for requesting an extension or waiver;
     Evidence of the impact of the extraordinary circumstances, 
including but not limited to photographs, newspaper and other media 
articles; and
     A date when the hospital believes it would again be able 
to submit Hospital OQR data and/or medical record documentation, and a 
justification for the proposed date.
    The request form must be signed by the hospital's designated 
contact, whether or not that individual is the CEO. A request form is 
required to be submitted within 45 days of the date that the 
extraordinary circumstance occurred.
    Following receipt of such a request, CMS would--
    (1) Provide an email acknowledgement using the contact information 
provided in the request notifying the designated contact that the 
hospital's request has been received; and,
    (2) If we make the determination to grant a waiver or extension to 
hospitals that have not requested them, because we determine that an 
extraordinary

[[Page 75120]]

circumstance has occurred in a region or locale, we would communicate 
this decision to hospitals and vendors through routine communication 
channels, including but not limited to emails and notices on the 
QualityNet Web site.
    We invited public comment on these proposals.
    Comment: Several commenters supported CMS' proposal to waive 
requirements where we have systemic errors.
    Response: We appreciate these commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal to include a waiver or extension for CMS' 
systemic errors and to codify language for the general requirements for 
our extension or waiver process, including our systemic errors waiver/
extension policy at Sec.  419.46(d).

XIV. Hospital Value-Based Purchasing (VBP) Program Updates

A. Background

    Section 1886(o) of the Act, as added by section 3001(a)(1) of the 
Affordable Care Act, requires the Secretary to establish a hospital 
value-based purchasing program (the Hospital Value-Based Purchasing 
(VBP) Program) under which value-based incentive payments are made in a 
fiscal year to hospitals that meet performance standards established 
for a performance period for such fiscal year. Both the performance 
standards and the performance period for a fiscal year are to be 
established by the Secretary.

B. Additional CMS Appeals Review Process

1. Statutory Basis
    Section 1886(o)(11)(A) of the Act requires the Secretary to 
establish a process by which hospitals may appeal the calculation of a 
hospital's performance assessment with respect to the performance 
standards (section 1886(o)(3)(A) of the Act) and the hospital's 
performance score (section 1886(o)(5) of the Act).
    Under section 1886(o)(11)(B) of the Act, there is no administrative 
or judicial review under section 1869 of the Act, section 1878 of the 
Act, or otherwise of the following: (1) The methodology used to 
determine the amount of the value-based incentive payment under section 
1886(o)(6) of the Act and the determination of such amount; (2) the 
determination of the amount of funding available for the value-based 
incentive payments under section 1886(o)(7)(A) of the Act and the 
payment reduction under section 1886(o)(7)(B)(i) of the Act; (3) the 
establishment of the performance standards under section 1886(o)(3) of 
the Act and the performance period under section 1886(o)(4) of the Act; 
(4) the measures specified under section 1886(b)(3)(B)(viii) of the Act 
and the measures selected under section 1886(o)(2) of the Act; (5) the 
methodology developed under section 1886(o)(5) of the Act that is used 
to calculate hospital performance scores and the calculation of such 
scores; or (6) the validation methodology specified in section 
1886(b)(3)(B)(XI) of the Act.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53581), we finalized 
an administrative appeals process and codified that process at 42 CFR 
412.167.
2. Independent CMS Review
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43659), for the 
Hospital VBP Program, we proposed to implement an independent CMS 
review that will be an additional appeal process available to 
hospitals, beyond the existing review and corrections process (77 FR 
53578 through 53581 and 76 FR 74544 through 74547) and appeal process 
codified at Sec.  412.167. We proposed that a hospital would be able to 
request this additional independent CMS review only if it first 
completes the appeal process at Sec.  412.167(b) and is dissatisfied 
with the result. We stated our belief that our proposal to require 
hospitals to complete the existing appeal process at Sec.  412.167(b) 
before they can request an additional independent CMS review will 
facilitate the efficient resolution of many disputed issues, thus 
decreasing the number of independent CMS reviews that are requested. We 
stated our intent to provide hospitals with our independent review 
decision within 90 calendar days following the receipt of a hospital's 
independent review request. We also proposed to codify this policy in 
our regulations at Sec.  412.167 by redesignating the existing 
paragraph (c) as paragraph (d), and inserting a new paragraph (c).
    We invited public comments on these proposals.
    Comment: Numerous commenters supported the proposed independent 
review process, including the proposed 90-day limit on independent 
review requests. Some commenters suggested that CMS include the 
proposed 90-day time limit for hospitals to request the independent 
review process in the regulation text. One commenter also urged CMS to 
align the Hospital VBP Program with the Physician Value-Based Payment 
Modifier Program, including the appeals and independent review process.
    Response: We appreciate the commenters' support and note that our 
intention is to provide hospitals with a decision on an independent 
review request as quickly as possible. We also appreciate the 
commenters' suggestion that we include the 90-day timeframe for 
independent CMS reviews in our regulation text. While we will strive to 
complete those reviews within 90 days, we do not believe that it is 
appropriate at this time to incorporate a firm deadline into our 
regulations. We recognize that the number and complexity of these 
reviews will impact the actual completion timeframe. We also strongly 
encourage hospitals to request this additional independent CMS review 
within 30 days after they receive a decision on an appeal submitted 
under the regulations at Sec.  412.167(b).
    With respect to the commenters' suggestion that we align the 
Hospital VBP Program with the Physician Value-Based Payment Modifier 
Program, we are currently examining how we might be able to align 
various quality reporting and pay-for-performance programs.
    After consideration of the public comments we received, we are 
finalizing the independent CMS review process as proposed. We also are 
finalizing our proposal to codify this policy at Sec.  412.167 by 
redesignating existing paragraph (c) as paragraph (d), and inserting a 
new paragraph (c).

C. Performance and Baseline Periods for Certain Outcome Measures for 
the FY 2016 Hospital VBP Program

    As described in the FY 2014 IPPS/LTCH PPS final rule (78 FR 50681 
through 50687), we have adopted the CLABSI, CAUTI, and SSI measures, 
which are reported to CDC's National Healthcare Safety Network (NHSN), 
for the FY 2016 Hospital VBP Program. However, when we proposed to 
adopt these measures in the FY 2014 IPPS/LTCH PPS proposed rule (78 FR 
27610 through 27611), we inadvertently did not make FY 2016 performance 
and baseline period proposals for these proposed measures. In the CY 
2014 OPPS/ASC proposed rule (78 FR 43659), we proposed to adopt FY 2016 
performance and baseline periods for these measures so that we would 
have enough time to consider and respond to public comments before the 
proposed start of the performance periods.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53597 through 
53598), we finalized an 11-month performance period for the CLABSI 
measure for the FY 2015 Hospital VBP Program

[[Page 75121]]

(February 1, 2013 through December 31, 2013), with a corresponding 
baseline period of January 1, 2011 through December 31, 2011. While we 
adopted an 11-month performance period for the CLABSI measure for FY 
2015 based on its posting date on the Hospital Compare Web site, 
beginning with FY 2016, we proposed to align the NHSN measures' 
performance and baseline periods with other domains' performance and 
baseline periods, where possible, and with the calendar year. As we 
have stated with regard to other domains, a 12-month performance period 
provides us more data on which to score hospital performance, which is 
an important goal both for CMS and for stakeholders.
    Therefore, we proposed to adopt CY 2014 (January 1, 2014 through 
December 31, 2014) as the performance period for the CLABSI, CAUTI, and 
SSI measures for the FY 2016 Hospital VBP Program, with CY 2012 
(January 1, 2012 through December 31, 2012) as the baseline period. We 
invited public comments on these proposals.
    Comment: Numerous commenters supported the proposed performance and 
baseline periods, but argued that CMS should not adopt the CAUTI and 
CLABSI measures for the Hospital VBP Program because they have been 
finalized for the HAC Reduction Program. Commenters stated that it is 
inappropriate to penalize hospitals more than once for the same 
measure, and that two programs adopting the same measures may be 
confusing for hospitals and patients, especially because the two 
programs calculate performance differently. Other commenters opposed 
any measures that are not NQF-endorsed or risk-adjusted, and suggested 
that CMS suspend the CLABSI and SSI measures from the Hospital VBP 
Program.
    Response: We appreciate the commenters' input. However, the 
proposals in the CY 2014 OPPS/ASC proposed rule were limited to the FY 
2016 performance and baseline periods for the CAUTI, CLABSI, and SSI 
measures, not the adoption of the measures themselves. We adopted these 
measures for the FY 2016 Hospital VBP Program in the FY 2014 IPPS/LTCH 
PPS final rule (78 FR 50686 through 50687), and responded to public 
comments on the substance of those measures in the same final rule (78 
FR 50683). Accordingly, we view the public comments we received on the 
substance of these measures to be outside the scope of the CY 2014 
OPPS/ASC proposed rule.
    Comment: Some commenters noted that the CAUTI, CLABSI, and SSI 
measures underwent changes between the proposed baseline period of CY 
2012 and the proposed performance period of CY 2014. The commenters 
noted that these changes may be confounding as CMS attempts to assess 
hospital performance on the measures. Commenters also noted that CDC 
may make additional definition changes to the CAUTI measure in CY 2014, 
and urged CMS to consider data instability when comparing data 
collection periods.
    Response: We appreciate the commenters' suggestion. The changes to 
the CAUTI, CLABSI, and SSI measures cited by the commenters were 
changes the CDC made to standardize the process hospitals use to 
identify healthcare-associated infections (HAIs) and reflect 
operational practices already widely used for identifying those 
infections. Specifically, the change to the definition of ``HAI'' that 
applies to each of these measures improves each measure's objectivity 
and promotes greater standardized reporting. The CDC has informed CMS 
that it does not expect those changes to significantly impact the 
measure rates. In addition, our own clinically based qualitative review 
of the measure definition changes indicate that these measure 
definition refinements will not substantially change national and 
hospital performance rates used in our FY 2016 measure rate and score 
calculations using CY 2012 and CY 2014 data. In this clinically based 
review, we assessed the clinical consistency of measure definitions 
across time, hospital adherence to current clinical guidelines, and 
relevant clinical outcomes associated with these infections. Our review 
found that the overall measure definitions for each of these measures 
remained consistent from a clinical perspective, and supported 
consistent and valid measurement of relevant clinical outcomes in CY 
2012 and CY 2014.
    We will continue to closely monitor the impact of the definitional 
changes made to the CAUTI, CLABSI, and SSI measures between CY 2012 and 
CY 2014 as we continue to collect data in these measures.
    As we stated in prior rulemaking, we believe strongly that 
hospitals must be encouraged through the Hospital VBP Program to 
minimize infection events that present significant health risks to 
patients. We also believe that the CAUTI, CLABSI, and SSI measures 
provide information critical to this quality improvement effort by 
tracking infection events.
    Comment: Numerous commenters supported the proposals and stated 
that adopting the calendar year makes more sense than the finalized 11-
month performance period for the CLABSI measure for FY 2015.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing the FY 2016 performance and baseline periods for the CAUTI, 
CLABSI, and SSI measures as proposed.
    The finalized performance and baseline periods for the CAUTI, 
CLABSI, and SSI measures for the FY 2016 Hospital VBP Program appear in 
the following table.
[GRAPHIC] [TIFF OMITTED] TR10DE13.366

[[Page 75122]]

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

A. Background

1. Overview
    We refer readers to section XIII.A.1. of this final rule with 
comment period for a general overview of our quality reporting 
programs.
2. Statutory History of the ASC Quality Reporting (ASCQR) Program
    We refer readers to section XIV.K.1. of the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74492 through 74493) for a detailed 
discussion of the statutory history of the ASCQR Program.
3. Regulatory History of the ASCQR Program
    In the CY 2008 OPPS/ASC final rule with comment period (72 FR 
66875), the CY 2009 OPPS/ASC final rule with comment period (73 FR 
68780), the CY 2010 OPPS/ASC final rule with comment period (74 FR 
60656), and the CY 2011 OPPS/ASC final rule with comment period (75 FR 
72109), we did not implement a quality data reporting program for ASCs. 
We determined that it would be more appropriate to allow ASCs to 
acquire some experience with the revised ASC payment system, which was 
implemented for CY 2008, before implementing new quality reporting 
requirements. However, in these rules, we indicated that we intended to 
implement a quality reporting program for ASCs in the future. In 
preparation for proposing a quality reporting program for ASCs, in the 
CY 2011 OPPS/ASC proposed rule (75 FR 46383), we solicited public 
comment on 10 measures.
    In addition to CMS preparing to propose implementation of a quality 
reporting program for ASCs, HHS developed a plan to implement a value-
based purchasing (VBP) program for payments under title XVIII of the 
Act for ASCs, and submitted a report to Congress entitled ``Medicare 
Ambulatory Surgical Center Value-Based Purchasing Implementation Plan'' 
that details this plan. The plan and the report to Congress were 
required under section 3006(f) of the Affordable Care Act as added by 
section 10301(a) of the Affordable Care Act. The report is found on the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/Downloads/C_ASC_RTC-2011.pdf. Currently, we do not 
have express statutory authority to implement an ASC VBP program.
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 
through 74517), we finalized our proposal to implement the ASCQR 
Program beginning with the CY 2014 payment determination. We adopted 
quality measures for the CY 2014, CY 2015, and CY 2016 payment 
determinations and subsequent years, and finalized some data collection 
and reporting timeframes for these measures. We also adopted policies 
with respect to the maintenance of technical specifications and the 
updating of measures, publication of ASCQR Program data and, for the CY 
2014 payment determination, requirements for the claims-based measures. 
For a discussion of these final policies, we refer readers to the CY 
2012 OPPS/ASC final rule with comment period (76 FR 74492 through 
74517).
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74515), we indicated our intent to issue proposals for administrative 
requirements, data validation and completeness requirements, and 
reconsideration processes in the FY 2013 IPPS/LTCH PPS proposed rule, 
rather than in the CY 2013 OPPS/ASC proposed rule, because the FY 2013 
IPPS/LTCH PPS proposed rule was scheduled to be finalized earlier and 
prior to data collection for the CY 2014 payment determination, which 
was to begin with services furnished on October 1, 2012. In the FY 2013 
IPPS/LTCH PPS final rule (77 FR 53636 through 53644), we issued final 
policies for administrative requirements, data completeness 
requirements, extraordinary circumstances waiver or extension requests, 
and a reconsideration process. For a complete discussion of these 
policies, we refer readers to the FY 2013 IPPS/LTCH PPS final rule.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68492 
through 68500), we issued final policies regarding our approach to 
selecting quality measures, reporting requirements, and payment 
reductions for ASCs that fail to meet the ASCQR Program requirements.

B. ASCQR Program Quality Measures

1. Considerations in the Selection of ASCQR Program Quality Measures
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68493 through 68494) for a detailed discussion of the 
considerations we use for the selection of ASCQR Program quality 
measures.
    Comment: A few commenters recommended that CMS ensure that the 
proposed measures are specified to provide an opportunity for 
stakeholders input.
    Response: We note that all the proposed measures are fully 
specified and we provide the links to the detailed measure 
specifications which were submitted to NQF by the measure stewards. We 
believe that these measure specifications provided the detailed 
information needed for the public to understand the measures being 
proposed and to be able to provide meaningful comments on the proposed 
measures during the rulemaking process. Proposed measures are not 
included in the ASCQR Specifications Manual (Specifications Manual) 
because we generally incorporate specifications for measures to be used 
in the ASCQR Program into the Specifications Manual, along with 
implementation guidance, after publication of the rule, but prior to 
implementation. As mentioned in section XV.B.5. of this final rule with 
comment period, which discusses maintenance of technical 
specifications, our general policy is to provide six months lead time 
between Specifications Manual publication and the start date of 
collection so that ASCs have adequate time to prepare for new reporting 
requirements.
2. ASCQR Program Quality Measures Adopted in Previous Rulemaking
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74492 
through 74517), we finalized our proposal to implement the ASCQR 
Program beginning with the CY 2014 payment determination and adopted 
measures for the CY 2014, CY 2015, and CY 2016 payment determinations. 
In an effort to streamline the rulemaking process, we also finalized 
our policy that, when we adopt measures for the ASCQR Program, these 
measures are automatically adopted for all subsequent years payment 
determinations unless we propose to remove, suspend, or replace the 
measures (76 FR 74494, 74504, 74509, and 74510).
    The quality measures that we have previously adopted are listed 
below.

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[[Page 75124]]

3. Additional ASCQR Program Quality Measures for the CY 2016 Payment 
Determination and Subsequent Years
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43661 through 43664), 
we proposed quality measures for the CY 2016 payment determination and 
subsequent years based on our approach for future measure selection and 
development finalized in the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68493 through 68494), which includes, among other 
considerations, aligning the ASCQR Program measures with our efforts in 
other clinical care settings and taking into account the views of the 
Measures Application Partnership (MAP).
    We stated that we believe that ASCs and HOPDs are similar in their 
delivery of surgical and related nonsurgical services. Therefore, we 
seek to propose quality measures that can be applied to both HOPDs and 
ASCs to the extent possible because many of the same surgical 
procedures are performed in both of these settings. Measure 
harmonization assures that quality of care for similar services is 
measured in a comparable manner across settings. This approach would 
provide meaningful information for Medicare beneficiaries to make 
informed decisions.
    Section 3014 of the Affordable Care Act added section 1890A of the 
Act establishing a pre-rulemaking process, which, among other steps, 
requires the Secretary to take into consideration the input from multi-
stakeholder groups in selecting certain categories of quality and 
efficiency measures described in section 1890(b)(7)(B) of the Act. As 
part of the pre-rulemaking process, the consensus-based entity that CMS 
must contract with under section 1890 of the Act (currently NQF) 
convened the multi-stakeholder groups, referred to as the MAP. The MAP 
is a public-private partnership created for the primary purpose of 
providing input to HHS on the selection of the categories of measures 
in section 1890(b)(7)(B) of the Act, which includes measures for use in 
certain specific Medicare programs, measures for use in reporting 
performance information to the public, and measures for use in health 
care programs other than for use under the Act.
    After we selected quality measures that we might propose for the 
ASCQR Program based on our established policies regarding the approach 
to selecting quality measures in CY 2013 OPPS/ASC final rule with 
comment period (77 FR 68493 through 68494), we included the measures in 
a publicly available document entitled ``List of Measures Under 
Consideration for December 1, 2012'' in compliance with section 
1890A(a)(2) of the Act, and the measures were reviewed by the MAP in 
its ``MAP Pre-Rulemaking Report: 2013 Recommendations on Measures Under 
Consideration by HHS,'' which has been made available on the NQF Web 
site at: http://www.qualityforum.org/Publications/2013/02/MAP_Pre-
Rulemaking_Report__-February_2013.aspx. We considered the input and 
recommendations provided by the MAP in selecting measures to propose 
for the ASCQR Program.
    As part of the MAP's input and recommendations in its 2013 Pre-
Rulemaking Report, the MAP also supports: (1) HHS' efforts to move 
toward greater alignment across the Hospital OQR and ASCQR Programs; 
and (2) the inclusion of ASCs within a broader approach to measuring 
performance and improving care that is aligned across health care 
settings (page 35, MAP Pre-Rulemaking Report: 2013 Recommendations on 
Measures Under Consideration by HHS).
    For the CY 2016 payment determination and subsequent years, we 
proposed to adopt four measures for the ASCQR Program, all of which 
were reviewed by the MAP and three of which are NQF-endorsed for the 
ASC setting (NQF 0564 being the exception): (a) Complications 
within 30 Days following Cataract Surgery Requiring Additional Surgical 
Procedures (NQF 0564); (b) Endoscopy/Polyp Surveillance: 
Appropriate follow-up interval for normal colonoscopy in average risk 
patients (NQF 0658); (c) Endoscopy/Polyp Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous 
Polyps--Avoidance of Inappropriate Use (NQF 0659); and (d) 
Cataracts: Improvement in Patient's Visual Function within 90 Days 
Following Cataract Surgery (NQF 1536).
    For purposes of the ASCQR Program, sections 1833(i)(7)(B) and 
1833(t)(17)(C)(i) of the Act, read together, require the Secretary, 
except as the Secretary may otherwise provide, to develop measures 
appropriate for the measurement of the quality of care (including 
medication errors) furnished by ASCs, that reflect consensus among 
affected parties and, to the extent feasible and practicable, that 
include measures set forth by one or more national consensus building 
entities. As stated in the CY 2012 OPPS/ASC final rule with comment 
period (76 FR 74465 and 74505), we believe that consensus among 
affected parties can be reflected through means other than NQF 
endorsement, including consensus achieved during the measure 
development process; consensus shown through broad acceptance and use 
of measures; and consensus through public comment. The proposed 
measures are described in greater detail below.
    We proposed that data collection for these four measures would 
begin in CY 2014. We referred readers to section XV.D. of the proposed 
rule for detailed discussion of data collection and submission time 
frames. We proposed to collect aggregate data (numerators, 
denominators, and exclusions) on all ASC patients for these four 
proposed chart-abstracted measures via an online Web-based tool that 
would be made available to ASCs via the QualityNet Web site. This 
online Web-based tool is currently in use in the ASCQR Program for ASC-
6 (Safe Surgery Checklist Use) and ASC-7 (ASC Facility Volume Data on 
Selected ASC Surgical Procedures). We invited public comment on these 
proposals. More information regarding this proposed method of 
collection was provided in section XV.D.5.c. of the proposed rule.
    To advance our efforts to collect high quality data on all ASC 
patients for the ASCQR measures while minimizing burden for ASCs, we 
also sought public comment on alternative data collection strategies 
for these four proposed measures. In particular, we sought comment on 
collection of patient-level data through registries or other third 
party data aggregators, and via certified electronic health record 
(EHR) technology, along with the potential timing for doing so.
    Comment: Some commenters believed that CMS should allow ASCs to 
meet the requirements of the ASCQR Program using registry-based 
reporting and urged CMS to propose a registry-based reporting option 
that would allow ASCs to fulfill all program requirements through a 
single mechanism to simplify and streamline the process of data 
submission. Other commenters urged CMS to focus on options to reduce 
reporting burden associated with data submission through multiple 
portals (claims-based, QualityNet, and NHSN), suggesting instead the 
use of registries or electronic health records.
    Response: We thank the commenters for these suggestions. We agree 
that it could reduce burden to have a registry-based mechanism for data 
submission.
    We have not proposed a registry-based reporting option because 
currently, there is not a registry in place that is collecting 
information on the quality measures that we have adopted in this 
program. Should registry-based

[[Page 75125]]

reporting of the ASC quality measures become available in the future, 
we will explore further the viability of incorporating a registry-based 
reporting mechanism in the ASCQR Program.
    Regarding the use of EHR systems for reporting quality data, we 
agree that reporting by this method could reduce reporting burden. 
However, we are not aware of quality measures for ASCs that have been 
specified for electronic reporting. In addition, if such measures do 
exist, we would need to understand the current state of EHR adoption by 
ASCs before proposing them. In a previous environmental scan, which 
included an assessment of the readiness of ASC to electronically report 
quality data, we found low levels of EHR use by ASCs. We are in the 
process of updating the environmental scan of ASCs, which will include 
an analysis of EHR adoption and an assessment of ASCs' abilities to 
report quality data via EHR systems. We believe that ASCs continue to 
be slow to adopt EHRs because many of them are small facilities and 
there has been no incentive program to encourage such adoption, but we 
intend to assess this position based upon the results of our updated 
environmental scan.
    For the proposed rule, we received many general comments that are 
applicable to all four proposed measures. We have organized the 
document by first summarizing and responding to these general comments 
that are applicable to all the four proposed measures, and then 
summarizing and responding to measure-specific comments and describing 
our final policy.
    Comment: Many commenters stated that ASCs only render the facility 
for ophthalmologists to perform cataract surgery and that follow-up 
visits, post-operative visual assessments and tracking of complications 
are performed at the ophthalmologists' offices. Likewise, physicians 
perform colonoscopies at ASCs, but follow-up colonoscopy intervals are 
determined and documented by the physician in medical records kept in 
the physicians' offices. Commenters noted that ASCs do not have long 
term relationships with patients and Federal regulations do not permit 
ASCs to provide postoperative follow-up care; therefore, the patient 
would not visit the ASC, but rather another site, for post-operative 
care and identification of complications. Many commenters perceived the 
four proposed chart-abstracted measures as ``Clinician Office'' setting 
measures designed to measure ophthalmologist and other physician 
performance and not ASC performance. Commenters gave as examples 
ophthalmologists who assess post-operative visual function and patient 
outcomes, and determine whether additional surgical procedures are 
necessary, and physicians who receive pathology reports and determine 
the colonoscopy intervals for their patients. Therefore, commenters 
believed these four measures are better suited as Physician Quality 
Reporting System (PQRS) measures. Commenters considered the measures as 
duplicative of the PQRS measures.
    Some commenters expressed concerns that the measures are neither 
NQF-endorsed nor field tested for the facility setting. Other 
commenters stated that CMS must re-specify, test, and obtain NQF 
endorsement of these measures at the facility level of analysis before 
they can be adopted for the ASCQR Program.
    Some commenters believed that the four proposed measures require 
ASCs to expend resources engaged in quality reporting activities that 
would have no direct impact on facility performance improvement 
efforts.
    Response: As noted above, for purposes of the ASCQR Program, 
sections 1833(i)(7)(B) and 1833(t)(17)(C)(i) of the Act, read together, 
require the Secretary, except as the Secretary may otherwise provide, 
to develop measures appropriate for the measurement of the quality of 
care (including medication errors) furnished by ASCs. As stated in the 
CY 2014 OPPS/ASC proposed rule (78 FR 43661 through 43664), we believe 
these measures are appropriate for measuring the quality of care in the 
ASC setting. Further, the three measures that we are finalizing (as 
discussed below) are NQF-endorsed for the ``Ambulatory Care: Ambulatory 
Surgery Center (ASC)'' setting. Therefore, we respectfully disagree 
with the commenters and continue to believe that these quality measures 
are appropriate for the ASC setting. With respect to the commenters who 
stated that the proposed chart-abstracted measures should be re-
specified and field-tested, we note that all three measures that we are 
finalizing (as discussed below) were specified for the ASC setting and 
field tested at the ASC facility setting level by the measure steward.
    Further, we do not believe these measures are duplicative of PQRS 
measures because even though the measure indicators are the same, the 
level of analysis (facility versus physician) is different. The measure 
indicators for the ASCQR Program will reflect the HCPCS codes for the 
ASC facility level of analysis. As we stated in the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68493), in implementing the ASCQR 
Program, one of our principles is that measures should be aligned 
across Medicare and Medicaid public reporting and incentive payment 
systems to promote coordinated efforts to improve quality. We hope to 
set new milestones in the intrinsic coordination and collaboration of 
hand-off care across outpatient providers and suppliers, as reflected 
in these measures.
    We also do not agree that the four proposed measures would have no 
direct impact on facility performance improvement efforts. Rather, we 
believe that these measures promote accountability for the care 
provided to Medicare beneficiaries, improve the coordination and 
collaboration of services, reduce fragmented care, encourage redesigned 
care processes for high quality and efficient service delivery, and 
incentivize higher value care.
    ASCs provide care without the higher costs associated with 
hospitalization. More and more procedures are done safely and 
effectively in an ambulatory care setting and we expect such trend will 
continue. Hence, we believe that assessing care coordination is a very 
important aspect of evaluating the overall quality of the care 
furnished by ASCs. We stress that real clinical integration is 
evidenced by effective patient coordination of care across health care 
settings, providers, and suppliers and is best shown when there is a 
structure in place that is patient-focused and where clinicians 
collaborate on best practices in an effort to furnish higher quality 
care that they likely would not achieve if working independently.
    As discussed in detail in sections XIII.E.3., 4., and 5. of this 
final rule with comment period and below, we are finalizing the same 
chart-abstracted measures for the Hospital OQR Program as we are for 
the ASCQR Program for the CY 2016 payment determination and subsequent 
years: (1) Endoscopy/Polyp Surveillance: Appropriate Follow-up Interval 
for Normal Colonoscopy in Average Risk Patients; (2) Endoscopy/Polyp 
Surveillance: Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps--Avoidance of Inappropriate Use; and (3) Cataracts--
Improvement in Patient's Visual Function Within 90 Days Following 
Cataract Surgery. The adoption of these measures in the hospital 
outpatient and ASC settings will further align measures across 
outpatient and ambulatory settings which furnish many similar services 
to beneficiaries. The availability of identical outcome measures at 
HOPDs and ASCs enable

[[Page 75126]]

beneficiaries to compare facilities and make informed decisions.
    Comment: Some commenters believed that obtaining patient data from 
the ophthalmologist's or other physician's office is not always 
feasible. Commenters also noted that the initial and subsequent 
surgical cataract and colonoscopy procedures due to complications may 
occur at two different ASCs. In addition, commenters also believed that 
obtaining patient information from the ophthalmologist's or other 
physician's office would be an intrusive violation of patient privacy.
    Response: Our overarching goal for adopting the three proposed 
measures is to encourage the coordination of care across health care 
settings, providers, and suppliers as frequently as possible. We would 
like to see ASCs, ophthalmologists, and other physicians actively and 
routinely engaged in exchanging information to better communicate and 
coordinate the care of patients.
    We note that ASCs have professional and commercial relationships 
with the ophthalmologists or other physicians that perform procedures 
and are paid for services rendered at their facilities. As such, ASCs 
have the ability to develop the means to obtain follow-up information 
that include, but are not limited to, inclusion of contractual 
requirements to supply such information to the ASC. The availability of 
follow-up information from physicians performing procedures at an ASC 
is further discussed in section XVI.D.5.c. of this final rule with 
comment period
    Regarding the issue of patient privacy, we note that ASCs and 
referring physicians are generally subject to the HIPAA Privacy, 
Security, and Breach Notification Rules, and are required to protect 
the privacy and confidentiality of their patients' protected health 
information as required by those rules. We expect that ASCs and 
physicians would adhere to any applicable requirements in providing and 
obtaining this information and would not violate patient privacy.
    We believe that our implementation strategy for these measures will 
minimize collection and reporting burden, as discussed in section 
XV.D.5.c. of this final rule with comment period.
    Comment: Many commenters expressed concern that it is extremely 
burdensome for ASCs, which do not widely use EHRs, to retrieve outcome 
data from ophthalmologist and other physician offices.
    Response: We appreciate commenters' concerns that it could be 
difficult or burdensome for ASCs to retrieve from physician offices the 
data they will need for the chart-abstracted measures. We believe such 
problems are more likely to occur in the early phases of establishing 
these measures, when ASCs and physicians have not yet set up effective 
infrastructures to routinely exchange information. In order to 
accommodate these concerns, we have taken steps that we believe should 
alleviate some of this burden. The Web-based collection strategy we are 
finalizing for the measures and subsequent release of specifications 
and implementation guidance in the ASCQR Specifications Manual will 
address some of the concerns about feasibility of data collection 
raised by the commenters. To further reduce burden, we are finalizing a 
sampling methodology for ASCs. We believe that this should 
significantly reduce burden for the three chart-abstracted measures 
that we are finalizing. We discuss these steps designed to reduce 
burden in more detail in section XV.D.5.c. of this final rule with 
comment period.
    We recognize that EHR technology currently may not be widely used 
in ASCs. However, with the ongoing progress of EHR technology in 
healthcare delivery, we expect more ASCs will have EHR technology at 
their disposal in the future. As mentioned previously, we will be 
conducting an environmental scan to assess EHR implementation in ASCs 
and readiness for electronic reporting in the future. We will take 
these factors into account before including an EHR-based reporting 
mechanism for the ASCQR Program.
    We received specific comments on the individual proposed measures 
and they are discussed below in the sections addressing each of the 
proposed measures.
a. Complications Within 30 Days Following Cataract Surgery Requiring 
Additional Surgical Procedures
    It is uncommon to have complications that may result in a permanent 
loss of vision following cataract surgery. Cataract surgery has become 
safer and more effective due to advances in technology and surgical 
skills over the last 30 years. Based on an analysis of Managed Care 
Organization data, it is estimated that the annual volume for cataract 
surgeries is 2.8 million in the U.S with the rate of cataract surgery 
complications being 1 to 2 percent. However, with an annual volume of 
2.8 million cataract surgeries in the United States, a 2 percent rate 
is significant and translates to over 36,000 surgeries associated with 
complications.\11\
---------------------------------------------------------------------------

    \11\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://qualitymeasures.ahrq.gov/content.aspx?id=27981&search=complications+within+30+days+following+cataract+surgery.
---------------------------------------------------------------------------

    Therefore, for the CY 2016 payment determination and subsequent 
years, we proposed to adopt the Complications within 30 Days Following 
Cataract Surgery Requiring Additional Surgical Procedures measure, 
which assesses the ``[p]ercentage of patients aged 18 years and older 
with a diagnosis of uncomplicated cataract who had cataract surgery and 
had any of a specified list of surgical procedures in the 30 days 
following cataract surgery which would indicate the occurrence of any 
of the following major complications: retained nuclear fragments, 
endophthalmitis, dislocated or wrong power IOL, retinal detachment, or 
wound dehiscence.'' This outcome measure seeks to identify those 
complications from surgery that can reasonably be attributed to the 
surgery. It focuses on patient safety and monitoring for events that, 
while uncommon, can signify important issues in the care being 
provided. The numerator for this measure is the number of ``[p]atients 
who had one or more specified operative procedures for any of the 
following major complications within 30 days following cataract 
surgery: retained nuclear fragments, endophthalmitis, dislocated or 
wrong power IOL, retinal detachment, or wound dehiscence.'' The 
denominator for this measure is the total number of ``[p]atients aged 
18 years and older who had cataract surgery and no significant pre-
operative ocular conditions impacting the surgical complication rate.'' 
This measure excludes patients with certain ``comorbid conditions 
impacting the surgical complication rate.'' The measure specifications 
can be found at: http://www.qualityforum.org/QPS/0564. This measure has 
been endorsed by NQF for the ``Ambulatory Care: Clinic'' setting (NQF 
0564) but, currently, is not NQF-endorsed for the ASC setting.
    We believe this measure meets the statutory requirements discussed 
above. This measure is not NQF-endorsed in the ASC setting and we could 
not find any other comparable measure that is specifically endorsed for 
the ASC setting. However, we believe that this measure is appropriate 
for the measurement of quality of care furnished by ASCs because this 
procedure is commonly performed in ASCs and, as discussed above, can 
signify important issues in the care

[[Page 75127]]

being provided in ASCs. Further, this measure reflects consensus among 
affected parties as it has been endorsed by NQF for the ``Ambulatory 
Care: Clinic'' setting. We believe that this consensus also applies to 
the same surgeries that are performed in other ambulatory settings, 
such as ASCs and HOPDs. Given the high volume of cataract surgeries 
performed in ambulatory care settings and the potential 2 percent 
complication rate, we believe it is important for us to include this 
measure in the ASCQR Program measure set, and that this is an 
appropriate application of NQF 0564 to the ASC setting.
    We note that section 1833(t)(17) of the Act does not require that 
each measure we adopt be endorsed by a national consensus building 
entity. Further, section 1833(i)(7)(B) of the Act states that section 
1833(t)(17) of the Act applies to the ASCQR Program, except as the 
Secretary may otherwise provide. Under this provision, the Secretary 
has further authority to adopt non-endorsed measures. In its 2013 Pre-
Rulemaking Report, the MAP supported inclusion of this measure in the 
ASCQR Program and noted that this measure ``[a]ddresses a high impact 
condition not adequately addressed in the program measure set.'' 
Currently, the NQF endorsement for this measure is time-limited.
    We invited public comment on this proposal.
    Comment: Many commenters believed that this measure is not a good 
measure to include in the ASCQR Program measure set because 
complications from cataract surgery are rare, data collection would be 
very burdensome, and the volume of cataract surgery performed at ASCs 
is huge. Commenters added that this measure requires very detailed 
information about not only specific complications that may have 
occurred, but also data on any additional follow-up surgical procedures 
to accurately report data for this measure. A few commenters stated 
that subsequent surgical procedures due to complications from the 
previous cataract surgery may not occur at the same ASC. ASCs also 
would need to determine if a patient who experienced any of the above-
listed complications then underwent any of a list of 39 specified 
operative procedures (identified by a list of CPT codes) within the 30-
day period following the index surgery.
    Response: As discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 
43661) and in this final rule with comment period, a large number of 
complications from cataract surgery occur even though the percentage of 
complications from cataract surgery is small. Therefore, we believe 
that complications following cataract surgery which would require 
additional surgical procedures are important to measure. However, after 
consideration of the public comments we received, we agree that this 
measure as specified imposes a significant burden on an ASC to collect 
the required data that far exceeds the burden we believe accompanies 
the other chart-abstracted measures that we proposed in the CY 2014 
OPPS/ASC proposed rule. We have emphasized that we believe that care 
coordination between ASCs and practitioners is an essential element of 
appropriate, high quality care, and that the element of coordination 
cannot be measured using a claims-based or other form of measure.
    Nonetheless, this is one instance in which we believe the burden 
involved in collecting the data required for chart-abstraction far 
outweighs the benefits in measuring care coordination. That is because 
an ASC would be required to acquire far more information than the more 
fundamental follow up information that accompanies the other measures 
(such as the patient survey data for ASC-11, which basically involves 
collecting information on a patient's perceptions about visual 
improvement following cataract surgery). In contrast, there is far more 
information necessary for this measure and the nature of that 
information is more detailed, complicated and very likely much more 
difficult for an ASC to acquire. We agree with the commenters that this 
measure requires very detailed information about not only specific 
complications that may have occurred, but also data on specific 
additional follow up surgical procedures to accurately report data for 
this measure.
    Because we continue to believe this is an important area to measure 
quality of care, we plan to explore ways to collect these data, 
including the potential development of a claims-based risk-adjusted 
outcome measure of cataract complications, which would address the same 
quality issues as this measure, but minimize the burden associated with 
measurement to the greatest degree possible. Further, we anticipate 
that the proposed new measure would be applicable to the ASC and HOPD 
settings. For these reasons, we have decided not to finalize this 
particular measure of cataract surgery complications.
    After consideration of the public comments we received, we are not 
finalizing this measure for the ASCQR Program for the CY 2016 payment 
determination and subsequent years.
b. Endoscopy/Polyp Surveillance: Appropriate Follow-Up Interval for 
Normal Colonoscopy in Average Risk Patients (NQF 0658)
    The American Cancer Society's current guidelines recommend 
colonoscopy screening at 10-year intervals \12\ for the average risk 
population (http://www.cancer.org/cancer/colonandrectumcancer/moreinformation/colonandrectumcancerearlydetection/colorectal-cancer-early-detection-acs-recommendations).
---------------------------------------------------------------------------

    \12\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    For the CY 2016 payment determination and subsequent years, we 
proposed to adopt the Endoscopy/Polyp Surveillance: Appropriate follow-
up interval for normal colonoscopy in average risk patients measure, 
which assesses the ``[p]ercentage of patients aged 50 years and older 
receiving a screening colonoscopy without biopsy or polypectomy who had 
a recommended follow-up interval of at least 10 years for repeat 
colonoscopy documented in their colonoscopy report.'' Performing 
colonoscopy too frequently increases a patients' exposure to procedural 
harm. This measure aims to assess whether average risk patients with 
normal colonoscopies receive a recommendation to receive a repeat 
colonoscopy in an interval that is less than the recommended amount of 
10 years. This measure is NQF-endorsed for the ASC setting. The 
numerator for this measure is the number of ``[p]atients who had a 
recommended follow-up interval of at least 10 years for repeat 
colonoscopy documented in their colonoscopy report.'' The denominator 
for this measure is the total number of ``[p]atients aged 50 years and 
older receiving screening colonoscopy without biopsy or polypectomy.'' 
The measure excludes patients whose medical records contain reason(s) 
for recommending a follow up interval of less than 10 years. The 
specifications for this measure can be found at: http://www.qualityforum.org/QPS/0658.
    We believe this measure meets the statutory requirements discussed 
above. This measure is appropriate for the measurement of quality of 
care furnished by ASCs because colonoscopy screening is commonly 
performed in ASCs and this measure was developed

[[Page 75128]]

to specifically measure quality of care furnished by ASCs. We also 
believe it meets the consensus requirement and the requirement that it 
be set forth by a national consensus building entity because it is NQF-
endorsed for the ASC setting.
    In its 2013 Pre-Rulemaking Report, the MAP supported the direction 
of this measure. Currently, the NQF endorsement for this measure is 
time-limited.
    We invited public comment on this proposal.
    Comment: One commenter asserted that the MAP's ``Support 
Direction,'' recommendation means the measure was not, in the MAP's 
opinion, ready for implementation in the ASCQR Program. Commenters 
stated that CMS should only finalize measures fully supported by the 
MAP.
    Response: We take into account all MAP input when deciding on which 
measures to adopt for the program. We note that in addition to MAP 
input, we also consider feedback that we receive from many other 
stakeholders such as suppliers, specialty societies, measure 
developers, patients, and their caregivers during the rulemaking public 
comment period in evaluating whether to finalize measures. We 
continuously review and revise the measures in our programs to ensure 
that only the highest caliber measures are selected. We stress, 
however, that we are only required to consider the input provided by 
the MAP. The ultimate decision on whether to include a measure for the 
program rests solely with the Secretary.
    We believe that this measure addresses a critical area of 
colonoscopies being performed too frequently, which may increase 
patients' exposure to procedural harm. The procedure is performed often 
at ASCs; therefore, we believe the measure is important for the ASCQR 
Program. Further, we believe that the Web-based collection strategy we 
are finalizing for the measures along with the release of 
specifications and implementation guidance in the Specifications Manual 
will address concerns about feasibility of data collection raised by 
the MAP.
    After consideration of the public comments we received, we are 
adopting this measure for the CY 2016 payment determination and 
subsequent years as proposed.
c. Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients With 
a History of Adenomatous Polyps--Avoidance of Inappropriate Use (NQF 
0659)
    According to the American Cancer Society, in patients with 
increased or high risk of colorectal cancer, colonoscopy screening is 
recommended based on risk factors. One such factor is a history of 
adenomatous polyps. The frequency of colonoscopy screening varies 
depending on the size and amount of polyps found; however, the general 
recommendation is a 3 year follow-up (http://www.cancer.org/cancer/colonandrectumcancer/moreinformation/colonandrectumcancerearlydetection/colorectal-cancer-early-detection-acs-recommendations).
    A randomized trial of 699 patients showed that after newly 
diagnosed adenomatous polyps have been removed by colonoscopy, follow-
up colonoscopy at 3 years detects important colonic lesions as 
effectively as follow-up colonoscopy at both 1 and 3 years.\13\
---------------------------------------------------------------------------

    \13\ Davila RE, Rajan E, Baron TH, Adler DG, Egan JV, Faigel DO, 
Gan SI, Hirota WK, Leighton JA, Lichtenstein D, Qureshi WA, Shen B, 
Zuckerman MJ, VanGuilder T, Fanelli RD, Standards of Practice 
Committee, American Society for Gastrointestinal Endoscopy. ASGE 
guideline: colorectal cancer screening and surveillance. 
Gastrointest Endosc 2006 Apr;63(4):546-57. http://www.ncbi.nlm.nih.gov/pubmed/16564851?dopt=Abstract.
---------------------------------------------------------------------------

    For the CY 2016 payment determination and subsequent years, we 
proposed to adopt the Endoscopy/Polyp Surveillance: Colonoscopy 
Interval for Patients with a History of Adenomatous Polyps--Avoidance 
of Inappropriate Use measure, which assesses the ``[p]ercentage of 
patients aged 18 years and older receiving a surveillance colonoscopy, 
with a history of a prior colonic polyp in previous colonoscopy 
findings who had a follow-up interval of 3 or more years since their 
last colonoscopy documented in the colonoscopy report'' This measure is 
NQF-endorsed for the ASC setting. The numerator for this measure is the 
number of ``[p]atients who had an interval of 3 or more years since 
their last colonoscopy.'' The denominator for this measure is the total 
number of ``[p]atients aged 18 years and older receiving a surveillance 
colonoscopy with a history of a prior colonic polyp in a previous 
colonoscopy.'' This measure excludes patients with: (1) Documentation 
of medical reason(s) for an interval of less than 3 years since the 
last colonoscopy (for example, last colonoscopy incomplete, last 
colonoscopy had inadequate prep, piecemeal removal of adenomas, or last 
colonoscopy found greater than 10 adenomas); or (2) documentation of a 
system reason(s) for an interval of less than 3 years since the last 
colonoscopy (for example, unable to locate previous colonoscopy report, 
previous colonoscopy report was incomplete). The specifications for 
this measure can be found at: http://www.qualityforum.org/QPS/0659.
    We believe this measure meets the statutory requirements discussed 
above. This measure is appropriate for the measurement of quality of 
care furnished by ASCs because colonoscopy is commonly performed in 
ASCs and this measure was developed to specifically measure quality of 
care furnished by ASCs. We also believe it meets the consensus 
requirement and the requirement that it be set forth by a national 
consensus building entity because it is NQF-endorsed for the ASC 
setting.
    In its 2013 Pre-Rulemaking Report, the MAP supported the direction 
of this measure. While this measure had been endorsed by the NQF for a 
limited time period, recent communications with NQF have revealed that 
this measure is now fully endorsed; it is expected that this status 
update will be reflected on the NQF Web site in the near future.
    We invited public comment on this proposal.
    Comment: Some commenters asserted that the MAP's ``Support 
Direction'' recommendation means the measure is not, in the MAP's 
opinion, ready for implementation in the ASCQR Program. Commenters 
stated that CMS should only finalize measures fully supported by the 
MAP.
    Response: We refer readers to our response above to the same MAP 
recommendation concerns expressed with respect to the Endoscopy/Polyp 
Surveillance: Appropriate Follow-Up Interval for Normal Colonoscopy in 
Average Risk Patients (NQF 0658) measure. We believe that 
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a 
History of Adenomatous Polyps--Avoidance of Inappropriate Use measure 
addresses a critical area of timely follow-up colonoscopy to detect 
important colonic lesions effectively in reducing subsequent colorectal 
cancer incidence, after newly diagnosed adenomatous polyps have been 
removed by colonoscopy. Because colonoscopies are performed so often at 
ASCs, the measure is important for the ASCQR Program. Further, we 
believe that the Web-based collection strategy we are finalizing for 
the measures and subsequent release of specifications and 
implementation guidance in the Specifications Manual will address 
concerns about feasibility of data collection raised by the MAP.
    After consideration of the public comments we received, we are 
adopting this measure for the CY 2016 payment determination and 
subsequent years as proposed.

[[Page 75129]]

d. Cataracts: Improvement in Patient's Visual Function Within 90 Days 
Following Cataract Surgery (NQF 1536)
    Cataract surgery is performed to improve a patient's vision and 
associated functioning. This outcome is achieved consistently with 
careful attention to the accurate measurement of axial length and 
corneal power and the appropriate selection of an intraocular lens 
(IOL). Failure to achieve improved visual functioning after surgery in 
eyes without comorbid ocular conditions that could impact the success 
of the surgery would reflect care that should be assessed for 
opportunities for improvement. Evidence suggests that visual 
improvement occurs in about 86 to 98 percent of surgeries in eyes 
without comorbid conditions. However, with an annual volume of 2.8 
million cataract surgeries in the U.S., an improvement rate from 86 to 
98 percent could impact a significant number of patients per year.\14\
---------------------------------------------------------------------------

    \14\ National Quality Measures Clearing House. Agency for 
Healthcare Research and Quality. Available at http://www.qualitymeasures.ahrq.gov/content.aspx?id=27982.
---------------------------------------------------------------------------

    For the CY 2016 payment determination and subsequent years, we 
proposed to adopt the Cataracts: Improvement in Patient's Visual 
Function within 90 Days Following Cataract Surgery measure, which 
assesses the ``[p]ercentage of patients aged 18 years and older who had 
cataract surgery and had improvement in visual function achieved within 
90 days following the cataract surgery.'' This measure is NQF-endorsed 
for the ASC setting. The measure numerator is the number of 
``[p]atients 18 years and older in sample who had improvement in visual 
function achieved within 90 days following cataract surgery, based on 
completing a pre-operative and post-operative visual function 
instrument.'' The measure denominator is the total number of 
``[p]atients aged 18 years and older in sample who had cataract 
surgery.'' There are no exclusions. The specifications for this measure 
are available on the Web site at: http://www.qualityforum.org/QPS/1536. 
Additional information for the measure specifications can be found in 
the NQF Measure Evaluation available on the Web site at: http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=68317.
    We believe this measure meets the statutory requirements discussed 
above. This measure is appropriate for the measurement of quality of 
care furnished by ASCs because cataract surgery is commonly performed 
in ASCs and this measure was developed to specifically measure quality 
of care furnished by ASCs.'' It also meets the consensus requirement 
and the requirement that it be set forth by a national consensus 
building entity because it is NQF-endorsed for the ASC setting.
    In its 2013 Pre-Rulemaking Report, the MAP supported the inclusion 
of this measure in the ASCQR Program and noted that this measure 
``[a]ddresses a high-impact condition not adequately addressed in the 
program measure set.''
    We invited public comment on this proposal.
    Comment: One commenter stated that the measure requires patients to 
complete a pre-operative and a post-operative visual function 
questionnaire. The follow-up survey may occur in intervals of one day, 
two weeks or one month post-op. The pre- and post-surgery surveys are 
conducted in the physician office and they are compared for analysis. 
The commenter noted it takes a third-party administrator to process the 
questionnaire in order to prevent the introduction of bias and this 
administrative cost would impose a new burden for ASCs.
    Response: This measure collects standard clinical follow-up 
information. We would expect that physicians responsible for post-
operative cataract surgery care to have standard operating procedures 
in place under which physicians would conduct these visual assessments. 
We do not believe a third party administrator to process survey 
information for ASC interpretation is necessary because we expect that 
ASCs would obtain the outcome information necessary for this measure 
from the physician that performed the surgery (as discussed in section 
XVI.D.5.c. of this final rule with comment period, all physicians 
involved in co-management of a cataract surgery patient should have 
these results). We believe that no bias would be introduced or 
associated administrative cost imposed because outcome interpretation 
would not be done at the ASC. Finally, we believe that including this 
measure in the ASCQR Program is important because, as the MAP stated 
and we believe, this measure falls under a category of measures 
inadequately addressed in the ASCQR Program measure set, and the 
measure serves to drive coordination of care.
    In response to the comments we have received on the burden 
associated with the chart-abstracted measures we are finalizing, we 
have modified our implementation strategy in a manner that we believe 
will significantly minimize collection and reporting burden. We detail 
these procedures for and further discuss the issue of obtaining data 
for this measure in section XV.D.5.c. of this final rule with comment 
period.
    After consideration of the public comments we received, we are 
adopting this measure for CY 2016 payment determination and subsequent 
years as proposed.
    In summary, we are finalizing our proposals for the CY 2016 payment 
determination and subsequent years to adopt three chart-abstracted 
measures: (1) Endoscopy/Polyp Surveillance: Appropriate Follow-Up 
Interval for Normal Colonoscopy in Average Risk Patients; (2) 
Endoscopy/Polyp Surveillance: Colonoscopy Interval for Patients with a 
History of Adenomatous Polyps--Avoidance of Inappropriate Use; and (3) 
Cataracts: Improvement in Patient's Visual Function within 90 Days 
Following Cataract Surgery. We will collect aggregate data (numerators, 
denominators, and exclusions) on all ASC patients for these three 
finalized chart-abstracted measures via an online Web-based tool that 
will be made available to ASCs via the QualityNet Web site. Data 
submission requirements for these three measures are discussed in 
section XV.D.5.c. of this final rule with comment period.

[[Page 75130]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.368

    The finalized measure set (a total of 11 measures) for the ASCQR 
Program for the CY 2016 payment determination and subsequent years is 
listed in the table below.
[GRAPHIC] [TIFF OMITTED] TR10DE13.369

4. ASCQR Program Measure Topics for Future Consideration
    We seek to develop a comprehensive set of quality measures to be 
available for widespread use for informed decision-making and quality 
improvement in the ASC setting. Through future rulemaking, we intend to 
propose new measures that address clinical quality of care, patient 
safety, care coordination, patient experience of care, surgical 
outcomes, surgical complications, complications of anesthesia, and 
patient reported outcomes of care. We invited public comment on these 
measurement topics.
    Comment: Commenters presented the following suggestions for future 
measure topics:
     Equipment Reprocessing;
     Sedation Safety;
     Post-Discharge Emergency Department Visit within 72 Hours 
of ASC Procedure;
     Hospital admission following discharge from an ASC;
     Normothermia;
     Venous Thromboembolism; and
     Surgical Site Infection.

[[Page 75131]]

    Response: We thank the commenters for their feedback and will take 
the suggestions into considerations for future measure topics for the 
ASCQR Program.
5. Technical Specification Updates and Data Publication
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized our proposal to follow the same process for updating the 
ASCQR Program measures that we adopted for the Hospital OQR Program 
measures (76 FR 74513 through 74514), including the subregulatory 
process for making updates to the adopted measures. We believe that a 
measure can be updated through this subregulatory process provided it 
is a nonsubstantive change. We make the determination of what 
constitutes a substantive versus a nonsubstantive change on a case-by-
case basis.
    Examples of nonsubstantive changes to measures might include 
updated diagnosis or procedure codes, medication updates for categories 
of medications, broadening of age ranges, and exclusions for a measure. 
We believe that non-substantive changes may include updates to any 
measure based upon changes to guidelines upon which the measures are 
based. We will revise the Specifications Manual so that it clearly 
identifies the updates and provide links to where additional 
information on the updates can be found. We also will post the updates 
on the QualityNet Web site at: https://www.QualityNet.org. We will 
provide sufficient lead time for ASCs to implement the changes where 
changes to the data collection systems would be necessary. We generally 
release the Specifications Manual every 6 months and release addenda as 
necessary. This release schedule provides at least 3 months of advance 
notice for nonsubstantive changes such as changes to ICD-10, CPT, and 
HCPCS codes, and at least 6 months of advance notice for changes to 
data elements that would require significant systems changes.
    We will continue to use rulemaking to adopt substantive updates. 
Examples of changes that we might generally consider to be substantive 
would be those in which the changes are so significant that the measure 
is no longer the same measure, or when a standard of performance 
assessed by a measure becomes more stringent (for example, changes in 
acceptable timing of medication, procedure/process, or test 
administration). Again, we make the determination of what constitutes a 
substantive versus a nonsubstantive change on a case-by-case basis.
    We believe that this policy adequately balances our need to 
incorporate nonsubstantive updates to ASCQR Program measures in the 
most expeditious manner possible, while preserving the public's ability 
to comment on updates that so fundamentally change a measure that it is 
no longer the same measure that we originally adopted. We also note 
that the NQF endorsement process incorporates an opportunity for public 
comment and engagement in the measure maintenance process. These 
policies regarding what is considered substantive versus nonsubstantive 
apply to all measures in the ASCQR Program.
    As noted above, we finalized our proposal to follow the same 
process for updating the ASCQR Program measures that we adopted for the 
Hospital OQR Program measures in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74513 through 74514). We also provided additional 
clarification regarding the ASCQR Program policy in the context of the 
previously finalized Hospital OQR program policy in the CY 2013 OPPS/
ASC final rule with comment period. We refer readers to the CY 2013 
OPPS/ASC final rule with comment period for a discussion of the process 
for updating the ASCQR Program quality measures (77 FR 68496 through 
68497).
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 
through 74515), we also finalized a policy to make data that an ASC 
submitted for the ASCQR Program publicly available on a CMS Web site 
after providing an ASC an opportunity to review the data to be made 
public. These data will be displayed at the CCN level.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43664), we did not 
propose any changes to these policies.
    Comment: One commenter noted that the conversion of a measure to 
use ICD-10-CM/PCS should be considered as a substantive change that 
follows current proposed rulemaking processes. The commenter requested 
clarification regarding the publication, preview, and comment period 
for ICD-9-CM to ICD-10-CM/PCS mappings for all value sets for diagnoses 
and procedures used by measures specified in this rule.
    Response: None of the current ASCQR measures utilize ICD-9 codes to 
define numerators, denominators, exclusions, and other data elements 
for the measures. To the extent that we adopt any future ASCQR measures 
that utilize ICD-9 codes in measure data elements, we will crosswalk 
those ICD-9 codes to ICD-10 prior to including the measures in the 
ASCQR Specifications Manual to inform data collection. We note that we 
do not consider updating codes from ICD-9 to ICD-10 a substantive 
change to a measure because doing so does not change the intent or 
meaning of the measure.
    Comment: Some commenters stated that ASCs should be allowed to 
review their data. These commenters also believed that ASCs should have 
the ability to correct any errors prior to the data being made publicly 
available because a few errors could cause extreme differences in 
actual versus publicly reported rates.
    Response: We thank the commenters for raising these issues. In the 
CY 2012 OPPS/ASC final rule with comment period (76 FR 74514 through 
74515), we finalized a policy to make data that an ASC submitted for 
the ASCQR Program publicly available on a CMS Web site after providing 
an ASC an opportunity to review the data to be made public. We will 
address processes for public reporting in further detail in future 
rulemaking.

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

1. Statutory Background
    Section 1833(i)(2)(D)(iv) of the Act states that the Secretary may 
implement the revised ASC payment system ``in a manner so as to provide 
for a reduction in any annual update for failure to report on quality 
measures in accordance with paragraph (7).'' Paragraph (7) contains 
subparagraphs (A) and (B). Subparagraph (A) of paragraph (7) states the 
Secretary may provide that an ASC that does not submit ``data required 
to be submitted on measures selected under this paragraph with respect 
to a year'' to the Secretary in accordance with this paragraph will 
incur a 2.0 percentage point reduction to any annual increase provided 
under the revised ASC payment system for such year. It also specifies 
that this reduction applies only with respect to the year involved and 
will not be taken into account in computing any annual increase factor 
for a subsequent year. Subparagraph (B) of paragraph (7) makes many of 
the provisions of the Hospital OQR Program applicable to the ASCQR 
Program ``[e]xcept as the Secretary may otherwise provide.'' Finally, 
section 1833(i)(2)(D)(v) of the Act states that, in implementing the 
revised ASC payment system for 2011 and each subsequent year, ``any 
annual update under such system for the year, after application of 
clause (iv) [regarding the reduction in the annual update for failure 
to report

[[Page 75132]]

on quality measures] shall be reduced by the productivity adjustment 
described in section 1886(b)(3)(B)(xi)(II).'' Section 1833(i)(2)(D)(v) 
of the Act also states that the ``application of the preceding sentence 
may result in such update being less than 0.0 for a year, and may 
result in payment rates under the [revised ASC payment system] for a 
year being less than such payment rates for the preceding year.''
2. Reduction to the ASC Payment Rates for ASCs That Fail To Meet the 
ASCQR Program Requirements for Each Payment Determination Year
    The national unadjusted payment rates for many services paid under 
the ASC payment system equal the product of the ASC conversion factor 
and the scaled relative payment weight for the APC to which the service 
is assigned. Currently, the ASC conversion factor is equal to the 
conversion factor calculated for the previous year updated by the MFP-
adjusted CPI-U update factor, which is the adjustment set forth in 
section 1833(i)(2)(D)(v) of the Act. The MFP-adjusted CPI-U update 
factor is the Consumer Price Index for all urban consumers (CPI-U), 
which currently is the annual update for the ASC payment system, minus 
the MFP adjustment. As discussed in the CY 2011 MPFS final rule with 
comment period (75 FR 73397), if the CPI-U is a negative number, the 
CPI-U would be held to zero. Under the ASCQR Program, any annual update 
would be reduced by 2.0 percentage points for ASCs that fail to meet 
the reporting requirements of the ASCQR Program. This reduction would 
apply beginning with the CY 2014 payment rates. For a complete 
discussion of the calculation of the ASC conversion factor, we refer 
readers to section XII.G. of this final rule with comment period.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68499 
through 68500), in order to implement the requirement to reduce the 
annual update for ASCs that fail to meet the ASCQR Program 
requirements, we finalized our proposal that we would calculate two 
conversion factors: a full update conversion factor and an ASCQR 
Program reduced update conversion factor. We finalized our proposal to 
calculate the reduced national unadjusted payment rates using the ASCQR 
Program reduced update conversion factor that would apply to ASCs that 
fail to meet their quality reporting requirements for that calendar 
year payment determination. We finalized our proposal that application 
of the 2.0 percentage point reduction to the annual update may result 
in the update to the ASC payment system being less than zero prior to 
the application of the MFP adjustment.
    The ASC conversion factor is used to calculate the ASC payment rate 
for services with the following payment indicators (listed in Addenda 
AA and BB to this final rule with comment period, which are available 
via the Internet on the CMS Web site): ``A2,'' ``G2,'' ``P2,'' ``R2,'' 
``Z2,'' as well as the service portion of device-intensive procedures 
identified by ``J8.'' 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.
    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 and radiology services where 
payment is based on the MPFS PE RVU amount and a few other specific 
services that receive cost-based payment. As a result, we also 
finalized our proposal that the ASC payment rates for these services 
would not be reduced for failure to meet the ASCQR Program requirements 
because the payment rates for these services are not calculated using 
the ASC conversion factor and, therefore, not affected by reductions to 
the annual update.
    Office-based surgical procedures (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, as 
discussed in section XII.C.1.b. of this final rule with comment period) 
are paid at the lesser of the MPFS non-facility PE RVU-based amounts 
and the standard ASC ratesetting methodology. We finalized our proposal 
that the standard ASC ratesetting methodology for this 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 
an office-based or radiology procedure is consistent for each HCPCS 
code regardless of whether payment is based on the full update 
conversion factor or the reduced update conversion factor.
    For ASCs that receive the reduced ASC payment for failure to meet 
the ASCQR Program requirements, we believe that it is both equitable 
and appropriate that a reduction in the payment for a service should 
result in proportionately reduced copayment liability for 
beneficiaries. Therefore, we finalized our proposal in the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68500) that the Medicare 
beneficiary's national unadjusted copayment for a service to which a 
reduced national unadjusted payment rate applies would be based on the 
reduced national unadjusted payment rate.
    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. 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. We believe that 
these adjustments continue to be equally applicable to payment for ASCs 
that do not meet the ASCQR Program requirements.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43664 through 43665), 
we did not propose any changes to these policies.

D. Administrative Requirements

1. Requirements Regarding QualityNet Account and Security Administrator
a. Background for the CY 2014 and CY 2015 Payment Determinations
    A QualityNet account is required to submit quality measure data to 
the QualityNet Web site via a Web-based tool and, in accordance with 
CMS policy, a QualityNet security administrator is necessary to set-up 
such an account for the purpose of submitting this information to the 
QualityNet Web site. In previous rulemaking, we referred to this role 
as the QualityNet administrator; we are referring to this role in this 
rulemaking as the QualityNet security administrator, which emphasizes 
the security function of this role and aligns terminology for the ASCQR 
Program with the Hospital IQR and OQR Programs. While the main purpose 
of a QualityNet security administrator is to

[[Page 75133]]

serve as a point of contact for security purposes for quality reporting 
programs, we believe from our experience that a QualityNet security 
administrator typically fulfills a variety of tasks related to quality 
reporting, such as creating, approving, editing, and terminating 
QualityNet user accounts within an organization, and monitoring 
QualityNet usage to maintain proper security and confidentiality 
measures. Therefore, we highly recommend that ASCs have and maintain a 
QualityNet security administrator.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53638 through 
53639), we did not require that ASCs do so for the CY 2014 payment 
determination because ASCs are not required to submit data directly to 
the quality data warehouse for the CY 2014 payment determination (76 FR 
74504) and we do not want to unduly burden ASCs by requiring ASCs to 
have a QualityNet security administrator. We note that a QualityNet 
account is not necessary to access information that is posted to the 
QualityNet Web site, such as the Specifications Manual and educational 
materials.
    As finalized in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74504 through 74509), for the CY 2015 payment determination, we 
required ASCs to submit quality measure data for two quality measures 
(safe surgery checklist use and ASC facility volume data on selected 
ASC surgical procedures) collected from services provided during the 
January 1, 2012 to December 31, 2012 timeframe via an online tool 
located on the QualityNet Web page. As set forth in the FY 2013 IPPS/
LTCH PPS final rule (77 FR 53638 through 53639), to enter these data 
into our data system, we required that ASCs identify and register a 
QualityNet security administrator who followed the registration process 
located on the QualityNet Web site and submitted the information as 
specified on this site. Because submission of these data was not 
required until the July 1, 2013 to August 15, 2013 time period, we 
required that ASCs have a QualityNet security administrator at the time 
ASCs submit Web-based measure data in 2013 for the CY 2015 payment 
determination, which was no later than August 15, 2013. ASCs could have 
had a QualityNet security administrator prior to this date, but it was 
not required.
    We noted that there are necessary mailing and processing procedures 
that must be completed in order to have a QualityNet security 
administrator which are separate from completion of the forms by the 
ASC that can require significant time to complete. We strongly 
cautioned ASCs to not wait until the deadline to apply; instead, we 
recommended allowing a minimum of 2 weeks, and strongly suggested 
allowing additional time prior to the deadline to submit required 
documentation in case of unforeseen issues. We did not require that 
ASCs maintain a QualityNet security administrator after the entry of 
their data via an online tool located on the QualityNet Web site in 
2013 for the CY 2015 payment determination.
    We also noted that QualityNet users must complete a user enrollment 
process, which is part of the registration process, to ensure access to 
the Secure QualityNet Portal beginning July 1, 2013. Portal access will 
be required for ASCs submitting data under the ASCQR Program using an 
online tool located on the QualityNet Web site.
b. Requirements for the CY 2016 Payment Determination and Subsequent 
Years
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43666), for the CY 
2016 payment determination and subsequent years, we proposed that, 
similar to the requirement for the CY 2015 payment determination, ASCs 
would be required to have a QualityNet security administrator for the 
purposes of setting up a QualityNet account for the purpose of entering 
data via an online tool located on the QualityNet Web site if this had 
not been completed previously, or the current user accounts lapsed or 
were discontinued. If an ASC does not already have a QualityNet 
account, the facility would need to identify and register a QualityNet 
security administrator who follows the registration process located on 
the QualityNet Web site and submits the information as specified on 
this site. A QualityNet security administrator is not required for 
submitting data. A QualityNet security administrator is required to set 
up user accounts and for security purposes and a current user account 
is required for submitting data. Therefore, an ASC would need to 
acquire a QualityNet security administrator only if no current 
QualityNet account exists for the ASC. An ASC would be required to have 
an active account by any specified data entry deadline. For example, 
the deadline would be August 15, 2014 for the CY 2016 payment 
determination. Although we highly recommend that ASCs have and maintain 
a QualityNet security administrator, we believe that requiring an ASC 
to maintain a QualityNet administrator throughout the year would 
unnecessarily increase burden on ASCs.
    As noted previously, there are necessary mailing and processing 
procedures for having a QualityNet security administrator assigned by 
CMS separate from completion of the forms by the ASC that can require 
significant time to complete and we strongly caution ASCs to not wait 
until any data entry deadline to apply. While we previously recommended 
allowing a minimum of 2 weeks, based upon recent experience, we 
strongly suggest allowing 4 to 6 weeks prior to any data submission 
deadline to submit required documentation for processing and in case of 
unforeseen issues. Also, QualityNet users must complete a user 
enrollment process, which is part of the registration process, to 
ensure access to the Secure QualityNet Portal. Portal access is 
required for ASCs submitting data under the ASCQR Program to meet CMS 
IT security requirements. The legislative source for this requirement 
originates in the Federal Information Security Management Act of 2002 
which was amended by the Cybersecurity Act of 2012. The Document 
Library on the http://www.idmanagement.gov Web site contains 
documentation related to identity management including the Federal 
Identity, Credential and Access Management (FICAM) Roadmap and 
Implementation Guidance (version 2, 12/08/2011).
    We invited public comment on these proposals.
    We did not receive any public comments regarding our proposals on 
QualityNet account and security administrator requirements under the 
ASCQR Program. Therefore, we are finalizing our proposals that ASCs 
will be required to have a QualityNet security administrator for the 
purposes of setting up a QualityNet account for the purpose of entering 
data via an online tool located on the QualityNet Web site if this had 
not been completed previously or no current user accounts were 
available and that ASCs will be required to have an active account by 
any specified data entry deadline in order to submit required data for 
the CY 2016 payment determination and subsequent years.
2. Requirements Regarding Participation Status
a. Background for the CY 2014 Payment Determination and Subsequent 
Years
    We finalized in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74516) a policy to consider an ASC as participating in the ASCQR 
Program for the CY 2014 payment determination if the ASC includes 
Quality Data Codes

[[Page 75134]]

(QDCs) specified for the ASCQR Program on their CY 2012 claims relating 
to the finalized measures.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53639 through 
53640), we stated that once an ASC submits any quality measure data, it 
would be considered to be participating in the ASCQR Program. Further, 
once an ASC submits any quality measure data and is considered to be 
participating in the ASCQR Program, an ASC would continue to be 
considered participating in the ASCQR Program, regardless of whether 
the ASC continues to submit quality measure data, unless the ASC 
withdraws from the Program by indicating on a participation form that 
it is withdrawing, as discussed below. For example, if an ASC includes 
any QDCs on its claims for the CY 2014 payment determination, it would 
be considered participating in the ASCQR Program for the CY 2014 
payment determination and for each subsequent year's payment 
determination unless the ASC withdraws.
    Likewise, if an ASC did not submit any QDCs for the CY 2014 payment 
determination, but submitted quality measure data for the CY 2015 
payment determination, the ASC would be considered participating in the 
ASCQR Program starting with the CY 2015 payment determination and 
continuing for each subsequent year's payment determination unless the 
ASC withdraws from the ASCQR Program.
    In the FY 2013 IPPS/LTCH PPS rulemaking (77 FR 28103, 53639), we 
considered whether to require that an ASC complete and submit a notice 
of participation form for each year's payment determination to indicate 
that the ASC is participating in the ASCQR Program as we require for 
hospitals, but decided against this approach because we were concerned 
about the burden on ASCs. We believe these requirements will reduce 
burden on ASCs while accomplishing the purpose of notifying us of an 
ASC's participation in the ASCQR Program.
    We stated that any and all quality measure data submitted by the 
ASC while participating in the ASCQR Program could be made publicly 
available. This policy allows us to provide information on the quality 
of care provided to Medicare beneficiaries which promotes transparency.
    Once an ASC submits quality measure data indicating its 
participation in the ASCQR Program, an ASC must complete and submit an 
online form indicating withdrawal in order to withdraw from the ASCQR 
Program. This form is located on the QualityNet Web site. We also 
require that an ASC indicate on the form the initial payment 
determination year to which the withdrawal applies. We established a 
different process for ASCs to withdraw from participation than the 
process we established for an ASC to participate in the ASCQR Program 
because of the payment implications of withdrawal. We stated that, in 
withdrawing from the ASCQR Program, the ASC would incur a 2.0 
percentage point reduction in its annual payment update for that 
payment determination year and any subsequent payment determinations in 
which it is withdrawn.
    We stated that we will not make quality measure data publicly 
available for that payment determination year and any subsequent 
payment determinations for which the ASC is withdrawn from the ASCQR 
Program.
    We established that an ASC would continue to be deemed withdrawn 
unless the ASC starts submitting quality measure data again. Once an 
ASC starts submitting quality measure data, the ASC would be considered 
participating unless the ASC withdraws, as discussed above. We believe 
that these policies reduce the burden on ASCs by not having to notify 
us as to when they are participating.
    We established that an ASC can withdraw from the ASCQR Program at 
any time up to August 31, 2013 for the CY 2014 payment determination. 
We anticipated that this would be the latest date possible to allow an 
ASC to withdraw before payment determinations affecting CY 2014 payment 
are made. We established that an ASC can withdraw from the ASCQR 
Program at any time up to August 31, 2014 for the CY 2015 payment 
determination. We clarified in the CY 2014 OPPS/ASC proposed rule (78 
FR 43667) that these deadlines mean up to and including August 31 in 
each of these respective years.
    We stated that these program requirements would apply to all ASCs 
designated as open in the CASPER system before January 1, 2012 for the 
CY 2014 payment determination. Because ASCs were not required to 
include QDCs on claims until October 2012 for the CY 2014 payment 
determination, an ASC designated as open in the CASPER system before 
January 1, 2012 was operating for at least 10 months before having to 
report any data. We believe this is a sufficient amount of time for 
ASCs to be established to report quality data for the CY 2014 payment 
determination.
    For the CY 2015 payment determination, we established that program 
requirements would apply to all ASCs designated as open in the CASPER 
system for at least 4 months prior to January 1, 2013. We believe that 
this date and length of operations experience would provide new ASCs 
sufficient time before having to meet quality data reporting 
requirements after the ASCQR Program's initial implementation year.
b. Requirements for the CY 2016 Payment Determination and Subsequent 
Years
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43667), for the CY 
2016 payment determination and subsequent years, we proposed that an 
ASC can withdraw from the ASCQR Program at any time up to and including 
August 31 of the year preceding a payment determination. We anticipate 
that this will be the latest date possible to allow an ASC to withdraw 
before payment determinations affecting the next calendar year's 
payment are made. Therefore, for example, for the CY 2016 payment 
determination, an ASC would be able to withdraw from the ASCQR Program 
at any time up to and including August 31, 2015. Once an ASC has 
withdrawn for any payment determination year, it would have a 2.0 
percentage point reduction in their annual payment update and it would 
not be possible to reinstate participation status for that year.
    For the CY 2016 payment determination and subsequent years, we 
proposed that all program requirements would apply to all ASCs 
designated as open in the CASPER system at least 4 months prior to the 
beginning of data collection for a payment determination. Therefore, 
for the CY 2016 payment determination, data collection begins with 
January 1, 2014 services; these program requirements would apply to all 
ASCs designated as open in the CASPER system for at least 4 months 
prior to January 1, 2014 (that is, an open date of September 1, 2013 or 
earlier). We believe that this date and length of operations experience 
would provide any new ASCs sufficient time before having to meet 
quality data reporting requirements.
    We invited public comment on these proposals.
    We did not receive any comments regarding participation status 
under the ASCQR Program and we are finalizing our proposals without 
modification. Specifically, we are finalizing that, for the CY 2016 
payment determination and subsequent years, an ASC can withdraw from 
the ASCQR Program at any time up to and including August 31 of the year 
preceding a payment determination, and all ASCQR Program requirements 
would apply to all ASCs designated as open in

[[Page 75135]]

the CASPER system at least 4 months prior to the beginning of data 
collection for a payment determination.
3. Requirements Regarding Data Processing and Collection Periods for 
Claims-Based Measures for the CY 2014 Payment Determination and 
Subsequent Years
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 
through 74511), we adopted five claims-based measures for the CY 2014, 
CY 2015, and CY 2016 payment determinations and subsequent years. We 
also finalized that, to be eligible for the full CY 2014 ASC annual 
payment update, for the claims-based measures, an ASC must submit 
complete data on individual quality measures through a claims-based 
reporting mechanism by submitting the appropriate QDCs on the ASC's 
Medicare claims (76 FR 74515 through 74516). Further, we finalized the 
data collection period for the CY 2014 payment determination, as the 
Medicare fee-for-service ASC claims submitted for services furnished 
between October 1, 2012 and December 31, 2012. ASCs will add the 
appropriate QDCs on their Medicare Part B claims, using the Form CMS-
1500 or associated electronic data set submitted for payment, to submit 
the applicable quality data. A listing of the QDCs with long and short 
descriptors is available in Transmittal 2425, Change Request 7754 
released March 16, 2012 (http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Transmittals-Items/ASC-CR7754-R2425CP.html). Details on how to use these codes for submitting 
numerator and denominator information are available in the 
Specifications Manual located on the QualityNet Web site (https://www.QualityNet.org).
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53640), we adopted a 
policy that only claims for services furnished between October 1, 2012 
and December 31, 2012 paid by the administrative contractor by April 
30, 2013 would be included in the data used for the CY 2014 payment 
determination. We believe that this claim paid date allowed ASCs 
sufficient time to submit claims while allowing sufficient time for CMS 
to complete required data analysis and processing to make payment 
determinations and to supply this information to administrative 
contractors.
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 68497 
through 68498), we finalized a data collection and processing period 
for the CY 2015 payment determination and subsequent years. For the CY 
2015 payment determination and subsequent years, an ASC must submit 
complete data on individual claims-based quality measures through a 
claims-based reporting mechanism by submitting the appropriate QDCs on 
the ASC's Medicare claims. The data collection period for such claims-
based quality measures is the calendar year 2 years prior to a payment 
determination year. Only claims for services furnished in each calendar 
year paid by the administrative contractor by April 30 of the following 
year of the ending data collection time period would be included in the 
data used for the payment determination year. Therefore, for example, 
only claims for services furnished in CY 2013 (January 1, 2013 through 
December 31, 2013) paid by the administrative contractor by April 30, 
2014 would be included in the data used for the CY 2015 payment 
determination.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43667 through 43668), 
we did not propose any changes to these policies.
4. Minimum Threshold, Minimum Case Volume, and Data Completeness for 
Claims-Based Measures Using QDCs
a. Background for the CY 2014 Payment Determination and Subsequent 
Years
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized our proposal that data completeness for claims-
based measures for the CY 2014 payment determination be determined by 
comparing the number of claims meeting measure specifications that 
contain the appropriate QDCs with the number of claims that would meet 
measure specifications, but did not have the appropriate QDCs on the 
submitted claims.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we finalized 
our policy for the CY 2014 and CY 2015 payment determination years that 
the minimum threshold for successful reporting be that at least 50 
percent of claims meeting measure specifications contain QDCs. We 
believe that 50 percent is a reasonable minimum threshold for the 
initial implementation years of the ASCQR Program because ASCs are not 
familiar with how to report quality data under the ASCQR Program and 
because many ASCs are relatively small and may need more time to set up 
reporting systems. We stated in that final rule that we intend to 
propose to increase this percentage for subsequent years' payment 
determinations as ASCs become more familiar with reporting requirements 
for the ASCQR Program.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641), we stated 
that, because private payers would not have QDCs in their required 
HCPCS data files until January 1, 2013, claims with QDCs received prior 
to January 1, 2013 could be rejected for invalid codes. Because it is 
not possible for ASCs to submit differing codes on primary versus 
secondary payer claims for at least some payers, we specified that only 
claims where Medicare is the primary payer--not the secondary payer--
will be used in the calculation of data completeness for the CY 2014 
payment determination.
    We also finalized our proposal in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68498 through 68499) that data completeness 
for claims-based quality measures for the CY 2015 payment determination 
and subsequent years will be determined by comparing the number of 
Medicare claims (where Medicare is the primary or secondary payer) 
meeting measure specifications that contain the appropriate QDCs with 
the number of Medicare claims (where Medicare is the primary or 
secondary payer) that would meet measure specifications, but did not 
have the appropriate QDCs on the submitted claims for the CY 2015 
payment determination and subsequent years. We made this change based 
on the fact that private payers had QDCs in their required HCPCS data 
files beginning January 1, 2013.
b. Requirements for the CY 2016 Payment Determination and Subsequent 
Years
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43668 through 43669), 
for the CY 2016 payment determination and subsequent years, we proposed 
to continue our policy that the minimum threshold for successful 
reporting be that at least 50 percent of claims meeting measure 
specifications contain QDCs. We believe that 50 percent is a reasonable 
minimum threshold for the initial implementation years of the ASCQR 
Program. Because ASCs cannot re-submit claims for the sole purpose of 
adding QDCs (such claims are rejected by administrative contractors as 
duplicate claims), we believe maintaining this minimum as the program 
matures is reasonable. We intend to propose to increase this percentage 
for future payment determinations as ASCs, administrative contractors, 
and billing clearing houses become more familiar with reporting 
requirements for the ASCQR Program and the program itself becomes more 
established.

[[Page 75136]]

    As finalized in the FY 2013 IPPS/LTCH PPS final rule, data 
completeness for claims-based quality measures will be determined by 
comparing the number of Medicare claims (where Medicare is the primary 
or secondary payer) meeting measure specifications that contain the 
appropriate QDCs with the number of Medicare claims (where Medicare is 
the primary or secondary payer) that would meet measure specifications, 
but did not have the appropriate QDCs on the submitted claims for the 
CY 2015 payment determination and subsequent years.
    In our initial implementation of claims-based measures, we 
determined that some ASCs have relatively small numbers of Medicare 
claims. Therefore, for the CY 2016 payment determination and subsequent 
years, we proposed a minimum case volume of 240 Medicare claims 
(primary plus secondary payer) per year (which is an average of 60 per 
quarter). ASCs that have fewer than 240 Medicare claims per year during 
a reporting period for a payment determination year would not be 
required to participate in the ASCQR Program for the subsequent 
reporting period for that subsequent payment determination year. For 
example, if an ASC had 200 Medicare claims during the calendar year of 
January 1, 2013 to December 31, 2013 (data submitted on claims during 
this year would be applied to CY 2015 payment determinations), the ASC 
would not be required to participate in the ASCQR Program for the CY 
2016 payment determination (which would use data submitted on claims 
during the January 1, 2014 to December 31, 2014 calendar year). We 
proposed a minimum case threshold to exempt smaller facilities where 
program implementation can be overly burdensome. We have selected 240 
Medicare claims per year because 10 percent of ASCs have less than 240 
Medicare claims per year so this policy would exempt only those ASCs 
with the fewest number of Medicare claims. If an ASC exceeds this 240 
Medicare claim threshold in any given calendar year, the ASC would be 
required to participate in the ASCQR Program the subsequent calendar 
year and would be subject to all program requirements.
    We invited public comment on this proposal.
    Comment: Many commenters supported CMS' proposal that ASCs must 
have a minimum of 240 Medicare claims (primary plus secondary payer) or 
otherwise be exempt from ASCQR Program requirements.
    Response: We thank the commenters for their support. We agree that 
a minimum case threshold for program participation to alleviate burden 
on small facilities and for those with few Medicare claims is 
appropriate.
    Comment: Many commenters stated that while they appreciated that a 
claims-based reporting mechanism can lessen the burden of data 
collection and reporting, they were concerned that the current measures 
using the QDC reporting mechanism were not specified, tested, or NQF-
endorsed for claims-based reporting.
    Response: We thank the commenters for their understanding of how 
the use of QDCs can limit burden and that this is an important 
consideration. Regarding the use of QDCs submitted on claims for ASC-1 
through ASC-5, the NQF has endorsed ASC-1 through ASC-5 as appropriate 
for the ASC setting and data collection of case information has been 
tested in this setting. Further, for all of these measures which count 
rare, adverse events, it is expected that the number of cases for any 
ASC would be very small. Therefore, while ASCs would garner the 
information from patient records, the QDC reporting mechanism is the 
way ASCs report the collected data. The measures using the QDCs for 
reporting and the QDCs are specified and contained in the 
Specifications Manual which is available on the QualityNet Web site. 
Based upon our initial data collection for encounters occurring during 
October 1, 2012 to December 31, 2012, the vast majority of ASCs are 
able to successfully submit data for these measures using QDCs. In 
addition, QDCs are successfully used for data collection for other CMS 
quality programs, including the PQRS and e-Prescribing Incentive 
Program. Therefore, we do not see a need to also test the ability of 
ASCs to submit data for these measures via QDCs placed on Medicare 
claims.
    Comment: Several commenters suggested that measure-level exemptions 
for ASC-5, Prophylactic Intravenous (IV) Antibiotic Timing would be 
appropriate. These commenters argued that single-specialty ASCs that 
provide gastrointestinal endoscopies or ophthalmic procedures do not 
administer IV prophylaxis and that not having an exemption method 
created undue burden. Suggested exemption methods included an 
attestation form or the development of a QDC indicating non-use.
    Response: We thank the commenters for these ideas and agree that 
single specialty ASCs would rarely, if at all, use IV prophylaxis. We 
have investigated using administrative claims data as a means to 
exclude ASCs from having to report data for this measure based on 
procedures billed as well as examined QDC-data reported to date. 
Unfortunately, we have not yet been able to identify a method to 
exclude ASCs based on these data and are reluctant to allow a blanket 
exemption from reporting measure data based upon the completion of a 
form or one-time reporting of a QDC without any ability to assess the 
veracity of the basis for exemption. At issue is a means to 
independently verify that an ASC does not ever administer IV 
prophylaxis. We remain open to various means of reducing burden, 
including the potential use of measure-level exemptions if an evidence-
based solution can be developed. However, we note that this particular 
measure does not place any more burden on ASCs compared to any of the 
other finalized measures where data are reported via QDCs because all 
of the current ASCQR Program measures reported using QDCs are expected 
to have low numbers of events.
    Comment: Some commenters agreed with the proposal to have a minimum 
case volume, but indicated that it was not clear how the 240-claim 
threshold correlates to the 10 percent of ASCs submitting the lowest 
volume of Medicare claims. These commenters' review of the CMS Limited 
Data Set file accompanying the CY 2014 OPPS/ASC proposed rule suggested 
the 10 percent target would be reached with a lower claim threshold. 
Some commenters agreed that implementation of a minimum threshold 
policy was important, but expressed concern that some ASCs may ``fall 
in and out'' of being required to participate and encouraged CMS to 
issue annual reminders of this policy. Some commenters also believed 
that any ASC eligible for the exemption that wishes to report for 
reasons other than receiving a payment should be able to do so.
    Response: We thank these commenters for supporting our proposal 
while requesting clarification of the basis for the selected threshold 
value. In selecting the 240-claim threshold, we utilized the October 1, 
2012 to December 31, 2012 claims data submitted for the CY 2014 payment 
determination. Based upon this analysis, approximately 10 percent of 
ASCs fell below the 60 claims per quarter, which we extrapolated to 240 
claims per year threshold. We will continue to monitor these data and, 
if adjustment in the claims volume threshold appears necessary, we will 
make proposals in future rulemaking.
    Regarding ASCs that may have claims volume such that they would be 
required to participate one year and not

[[Page 75137]]

the next, we would encourage ASCs to monitor their claims volume via 
CMS-supplied reports. We agree that annual reminders of the policy 
would be useful and intend to issue such reminders via listserv and 
postings on the QualityNet Web site.
    Regarding the ability of an ASC eligible for the exemption that 
wished to report data, though not being required to do so for ASCQR 
Program purposes, we did not make any proposals that would prohibit 
ASCs from reporting data. Therefore, we clarify here that, if any 
Medicare-certified ASCs wish to report data under the ASCQR Program, 
they may do so, however, they must follow all program requirements for 
submitting data and any data reported could be made publicly available 
unless the ASC withdraws using the process outlined in section 
XV.D.2.a. of this final rule with comment period. We clarify here that 
ASCs that are exempt from all requirements due to low Medicare case 
volume would not be subject to a reduction in their annual payment 
update if they voluntarily report data.
    After consideration of the public comments we received, we are 
finalizing our proposals without modification. Specifically, for the CY 
2016 payment determination and subsequent years, we are finalizing our 
proposal that the minimum threshold for successful reporting be that at 
least 50 percent of claims meeting measure specifications contain QDCs. 
We also are finalizing that an ASC must have a minimum case volume of 
240 Medicare claims (primary plus secondary payer) per year (which is 
an average of 60 per quarter) to be required to participate in the 
ASCQR Program. ASCs that have fewer than 240 Medicare claims per year 
during a reporting period for a payment determination year will not be 
required to participate in the ASCQR Program for the subsequent 
reporting period for that subsequent payment determination year.
5. Requirements for Data Submitted via a CMS Online Data Submission 
Tool
a. Background for the CY 2015 Payment Determination and Subsequent 
Years
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized two measures with data submission required using an online 
measure submission Web page available at http://www.qualitynet.org 
beginning with the CY 2015 payment determination: Safe Surgery 
Checklist Use and ASC Facility Volume Data on Selected ASC Surgical 
Procedures (76 FR 74509). In that final rule with comment period, we 
finalized that, for the CY 2015 payment determination, ASCs would 
report data for these two measures between July 1, 2013 and August 15, 
2013 for services furnished between January 1, 2012 and December 31, 
2012.
b. Requirements for the CY 2016 Payment Determination and Subsequent 
Years for Measures Currently Finalized
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), for the CY 
2016 payment determination and subsequent years, we proposed for the 
Safe Surgery Checklist Use and ASC Facility Volume Data on Selected ASC 
Surgical Procedures for which data will be submitted via a using an 
online data submission tool available on http://www.qualitynet.org, 
that the data collection time periods would be for services furnished 
during the calendar year two years prior to the payment determination 
year and that data would be submitted during the January 1 to August 15 
time period in the year prior to the payment determination. Therefore, 
for the CY 2016 payment determination, the data collection time period 
for these measures would be calendar year 2014 (January 1, 2014 to 
December 31, 2014) and the data submission time period would be January 
1, 2015 to August 15, 2015. We proposed these changes to increase the 
timeframe for allowing data submission for these measures and to align 
the data collection time periods for the claims-based and Web-based 
measures. This alignment has the additional benefit of providing more 
current data for these Web-based measures for a payment determination 
and would prevent the need for retrospective data collection by ASCs, 
which can be burdensome.
    Under this proposal, no data would be collected for calendar year 
2013 (January 1, 2013 to December 31, 2013) for the Safe Surgery 
Checklist Use and ASC Facility Volume Data on Selected ASC Surgical 
Procedures because the CY 2015 payment determination will use data from 
services performed in the January 1, 2012 to December 31, 2012 time 
period and, under our proposal, the CY 2016 payment determination would 
use data from services performed in January 1, 2014 to December 31, 
2014. (In the proposed rule (78 FR 43669), although we stated that data 
collection time periods would be for services furnished during the 
calendar year two years prior to the payment determination year, we 
inadvertently stated that the time period for the CY 2016 payment 
determination was ``January 1, 2014 to December 1, 2014.'')
    We invited public comment on these proposals.
    Comment: Several commenters agreed that moving the data collection 
period ahead one year and expanding the data submission timeframe to 
begin January 1 through August 15 for the CY 2016 payment determination 
and subsequent years rather than July 1 through August 15 as finalized 
previously for the CY 2015 payment determination are appropriate and 
beneficial changes for the Safe Surgery Checklist Use and ASC Facility 
Volume Data on Selected ASC Surgical Procedures measures. Some of these 
commenters cautioned that, while they supported the shifting of the 
data collection time period, they believed the alignment will result in 
a significant amount of confusion and that extensive educational 
outreach would be necessary.
    Response: We thank the commenters for their support of our 
proposals; we agree that aligning data collection periods and data 
submission time frames for these measures across payment determination 
years are appropriate and beneficial changes for the ASCQR Program. We 
appreciate the cautioning of possible confusion with the data 
collection timeframes. We believe that, since there will be a year of 
not having to collect these data, there will be sufficient time to 
provide educational outreach on this matter.
    After consideration of the public comments we received, we are 
finalizing our proposals regarding data collection and submission 
requirements for the Safe Surgery Checklist Use and ASC Facility Volume 
Data on Selected ASC Surgical Procedures measures for the CY 2016 
payment determination and subsequent years. Specifically, for these 
measures for which data will be submitted via an online data submission 
tool available on http://www.qualitynet.org, we are finalizing that the 
data collection time periods would be for services furnished during the 
calendar year two years prior to the payment determination year and 
that data would be submitted during the January 1 to August 15 time 
period in the year prior to the payment determination. These changes 
provide a longer timeframe for allowing data submission for these 
measures compared to the CY 2015 payment determination, align the data 
collection time periods for the claims-based and Web-based measures, 
and result in data not being collected for calendar year 2013 (January 
1, 2013 to December 31, 2013) for the Safe Surgery Checklist Use and 
ASC Facility Volume Data on Selected ASC Surgical Procedures measures. 
No data will be collected for calendar year 2013 (January 1, 2013 to 
December 31, 2013) for the Safe Surgery

[[Page 75138]]

Checklist Use and ASC Facility Volume Data on Selected ASC Surgical 
Procedures measures because the CY 2015 payment determination will use 
data from services performed in the January 1, 2012 to December 31, 
2012 time period and the CY 2016 payment determination will use data 
from services performed in January 1, 2014 to December 31, 2014.
c. Requirements for the CY 2016 Payment Determination and Subsequent 
Years for New Measures With Data Submission via a CMS Web-Based Tool
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), we proposed to 
adopt four additional chart-abstracted measures for the ASCQR Program 
and proposed that aggregate data (numerators, denominators, and 
exclusions) on all ASC patients would be collected via an online Web-
based tool that would be made available to ASCs via the QualityNet Web 
site.
    These measures are: (1) Complications within 30 Days following 
Cataract Surgery Requiring Additional Surgical Procedures; (2) 
Endoscopy/Polyp Surveillance: Appropriate follow-up interval for normal 
colonoscopy in average risk patients; (3) Endoscopy/Polyp Surveillance: 
Colonoscopy Interval for Patients with a History of Adenomatous 
Polyps--Avoidance of Inappropriate Use; and (4) Cataracts: Improvement 
in Patient's Visual Function within 90 Days Following Cataract Surgery. 
We describe our timeframes and process for measure specifications in 
section XV.B.5. of this final rule with comment period.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43669), we wished to 
clarify that, while we have referred to measures where data are 
submitted via a Web-based tool on a CMS Web site under our quality data 
reporting programs by the type of measure, that is, structural measures 
(measures concerned with attributes of where care occurs, such as 
material resources, human resources, and organizational structure),\15\ 
not all quality measures where data are submitted via a Web-based tool 
on a CMS Web site are structural measures. For example, the four 
proposed new measures proposed are not structural measures. Therefore, 
we have refined our terminology and now refer to the mode of data 
submission, Web-based, rather than the type of measure.
---------------------------------------------------------------------------

    \15\ Maintz, J. Defining and Classifying Clinical Indicators for 
Quality Improvement, Inter J Quality Health Care (2003) 15(6), 523-
530.
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    We proposed that data collection and reporting for these measures 
would begin with the CY 2016 payment determination.
    In addition, we proposed for these measures, and any future 
measures for the ASCQR Program where data are submitted via an online 
measure submission Web page available on http://www.qualitynet.org, 
that beginning with the CY 2016 payment determination:
     The data collection time period would be the calendar year 
(January 1 to December 31) 2 years prior to the affected payment 
determination year, and;
     Data collected would be submitted during the time period 
of January 1 to August 15 in the year prior to the affected payment 
determination year.
    Therefore, for the CY 2016 payment determination, the data 
collection time period would be January 1, 2014 to December 31, 2014 
and the data submission time period for the collected data would be 
January 1, 2015 to August 15, 2015. We stated that these proposals are 
in alignment with proposals in section XV.D.5. of the proposed rule 
regarding data collection and submission time frames for measures 
already adopted for the ASCQR Program where data is submitted via an 
online data submission tool available on the Web site at: http://
www.qualitynet.org.
    We invited public comment on these proposals.
    Comment: Many commenters did not support collection of aggregate 
data for the four proposed measures because they did not support the 
addition of these measures to the ASCQR Program.
    Response: We discuss the adoption of three of the four proposed new 
measures for the ASCQR Program in section XV.B.3. of this final rule 
with comment period.
    Comment: Some commenters stated that the collection of follow-up 
data for the proposed measures would be burdensome because ASCs would 
have data related only to the procedures performed at the ASC and not 
for procedures performed off-site. Many commenters asserted that it is 
extremely burdensome to retrieve timely the data from the physician or 
ophthalmologist offices and such data would be difficult to validate. 
Other commenters stated that given the high volume of cataract surgery, 
it would be extremely burdensome to extract data from medical records. 
In addition, commenters noted that the initial and subsequent surgical 
cataract and colonoscopy procedures due to complications may occur at 
more than one facility. Some commenters strongly believed that the huge 
reporting burden from the four proposed chart-abstracted measures could 
be diminished if claims are used as the data source.
    Response: We appreciate the commenters' concerns and acknowledge 
that the adoption of the three new measures we are finalizing will 
result in some additional burden to ASCs. However, we do not believe 
that this will be an undue or insurmountable burden. Regarding the 
ability to obtain follow-up information, we believe that ASCs have 
professional and commercial relationships with the physicians that 
perform surgical procedures and are paid for those services rendered at 
their facilities. The newly adopted measures are concerned only with 
the procedures performed at the ASC.
    For the three measures being adopted in this final rule with 
comment period, the physician performing and billing for the procedure 
would have or is expected to have the information necessary to report 
on the measure. For the Endoscopy/Polyp Surveillance: Appropriate 
Follow-up Interval for Normal Colonscopy in Average Risk Patient 
measure, standard medical practice is that the physician performing the 
procedure would make the determination of whether the results were 
normal and would make the appropriate recommendation that would be 
documented in the patient's medical record. For the Endoscopy/Polyp 
Surveillance: Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps--Avoidance of Inappropriate Use measure, the 
physician performing the procedure would have the information of 
whether a patient had a history of adenomatous polyps and for Medicare 
claims, this is reflected on the claim by including HCPCS code G0105 
which indicates a colonoscopy on an individual at high risk. In the 
case of the Cataracts: Improvement in Patient's Visual Function within 
90 Days Following Cataract Surgery measure, patients undergoing 
cataract surgery are often co-managed with preoperative care, 
intraoperative services, and post-operative care (90 days) stages 
identified by Medicare. Co-management of cataract care requires a 
written transfer agreement between the surgeon and receiving doctor(s) 
with all physicians involved retaining the results of the first post-
operative visit as part of the patient's medical record.
    Although we believe this approach is reasonable and not unduly 
burdensome, after consideration of the many comments we received on 
this issue regarding the burden of collecting this information, in this 
final rule with comment period we are permitting ASCs to collect 
information on a sample of eligible patients, with minimal case

[[Page 75139]]

number requirements, instead of requiring the collection of information 
on all eligible patients. Sampling is a process of selecting a 
representative part of a population in order to estimate the ASC's 
performance, without collecting data for its entire population. In this 
way, using a statistically valid sample, an ASC can measure its 
performance in an effective and efficient manner. Sampling will reduce 
burden significantly for ASCs with high volume because the number of 
cases that must have data reported will be significantly reduced. We 
have provided the option of sampling in other quality reporting 
programs when we have determined that it would be appropriate, 
including the Hospital IQR and OQR Programs. As with our other quality 
reporting programs, sampling specifications for the new ASCQR Program 
quality measures, which describe how to obtain a statistically valid 
sample and the current sampling methodology and requirements for these 
measures, will be included in the ASCQR Specifications Manual, which 
will be made available on the QualityNet Web site in December 2013. We 
believe that the improved clinical patient outcomes that can result 
from these measures outweigh any remaining burden that ASCs may incur 
from data collection associated with them.
    Regarding the use of claims data as the information source for the 
three measures being adopted, we agree that this data collection 
mechanism can be used to reduce burden. However, we are not aware of 
coding for claims payment that could be used to specify the new 
measures being adopted for the ASCQR Program.
    Comment: Several commenters expressed concern about the limited 
amount of time that ASCs would have to respond to and prepare for any 
new measures finalized in the rulemaking process. Because the CY 2014 
OPPS/ASC final rule with comment period will likely be published in 
November 2013, ASCs would have only 2 months to become aware of and 
versed in the new quality measures finalized in the rule, to develop 
and implement the changes in daily processes and operational systems 
needed to collect the required data, and to initiate data collection 
making this timeline inadequate in length. These commenters believed 
that implementing a new measure is more challenging than revising an 
existing measure; as such, a minimum of 6 months of advance notice 
should be extended for any new measures. In addition, these commenters 
suggested that if any of the proposed measures are adopted in this 
rulemaking, the data collection period should be modified to January 1, 
2015 through December 31, 2015 with data submission in 2016, for use 
toward the CY 2017 payment determination.
    Response: We thank the commenters for their well-thought out 
suggestions regarding data collection, submission, and use for new 
measures. However, due to the importance of the new measures being 
finalized in this rulemaking, we believe the proposed timeframes for 
these activities are justifiable and adequate because, although the 
data would be collected for services furnished during the CY 2014 
timeframe, data would not need to be submitted until 2015, providing 
additional time from finalization of this final rule with comment 
period to time when the data would actually have to be submitted.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification for data submission and 
timeframes on three new measures for the ASCQR Program being adopted in 
this final rule with comment period. The new measures we are adopting 
are: (1) Endoscopy/Polyp Surveillance: Appropriate follow-up interval 
for normal colonoscopy in average risk patients; (2) Endoscopy/Polyp 
Surveillance: Colonoscopy Interval for Patients with a History of 
Adenomatous Polyps--Avoidance of Inappropriate Use; and, (3) Cataracts: 
Improvement in Patient's Visual Function within 90 Days Following 
Cataract Surgery. Specifically, we are finalizing that ASCs must submit 
aggregate data (numerators, denominators, and exclusions) for these 
three measures on all ASC patients and that these data will be 
collected via an online Web-based tool that would be made available to 
ASCs via the QualityNet Web site. However, as discussed above, we are 
permitting ASCs to collect information on a sample of eligible 
patients, with minimal case number requirements, instead of requiring 
the collection of information on all eligible patients. The sampling 
specifications for the new ASCQR Program quality measures will be 
included in the ASCQR Specifications Manual, which will be made 
available on the QualityNet Web site in December 2013.
    We are also finalizing, as proposed without modification, that 
beginning with the CY 2016 payment determination (and for all 
subsequent payment determination years), the data collection time 
period will be the calendar year (January 1 to December 31) 2 years 
prior to the affected payment determination year, and the data 
collected will be submitted during the time period of January 1 to 
August 15 in the year prior to the affected payment determination year. 
Therefore, for the CY 2016 payment determination, the data collection 
time period will be January 1, 2014 to December 31, 2014, and the data 
submission time period will be January 1, 2015 to August 15, 2015.
6. Data Submission Requirements for a Measure Reported via the National 
Healthcare Safety Network (NHSN) for the CY 2016 Payment Determination
a. Background for the CY 2016 Payment Determination
    For the CY 2016 payment determination, we finalized the adoption of 
the Influenza Vaccination Coverage among Healthcare Personnel (NQF 
0431), a process of care, healthcare-associated infection 
(HAI) measure, in the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74510). We specified that data collection for the influenza 
vaccination measure would be via the NHSN from October 1, 2014 to March 
31, 2015 and that details for data submission would be made in future 
rulemaking.
b. Requirements for the CY 2016 Payment Determination
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we proposed to 
use the data submission and reporting standard procedures that have 
been set forth by CDC for NHSN participation in general and for 
submission of this measure to NHSN. We refer readers to the CDC's NHSN 
Web site (for detailed procedures for enrollment (http://www.cdc.gov/nhsn/ambulatory-surgery/enroll.html), set-up (http://www.cdc.gov/nhsn/ambulatory-surgery/setup.html), and reporting (https://sdn.cdc.gov 
(data certificate installation is required to access this site)). We 
stated in the proposed rule that we believed that ASCs would know and 
be comfortable with these procedures because these procedures are 
already used by many ASCs to fulfill State-mandated reporting of HAI 
data through the NHSN in at least 17 States. However, based on public 
comments we received, ASCs may not be as familiar with NHSN reporting 
as we previously believed.
    We separately proposed that ASCs would have until August 15, 2015 
to submit their 2014-2015 influenza season data (October 1, 2014 
through March 31, 2015) to NHSN. We proposed an August 15, 2015 
deadline because this date is the latest date possible for data entry 
that will provide sufficient

[[Page 75140]]

time for CMS to make the CY 2016 payment determinations. Further, this 
date aligns the data entry deadline with the deadline for the measures 
entered via the CMS online tool. We believe this data submission 
deadline allows ASCs to have sufficient time to collect and compile the 
necessary data while taking into account ASCQR Program considerations.
    We invited public comment on these proposals.
    Comment: Several commenters protested that ASCs are entirely 
unfamiliar with NHSN. These commenters pointed out that, while a number 
of States have mandated NHSN reporting, many of those State 
requirements do not include ASCs and though some States mandate NHSN 
reporting for ASCs, the surgical procedures being monitored for 
reporting purposes are not often performed in the ASC setting. Thus, 
ASCs generally do not have data to report to NHSN. These commenters 
cautioned that CMS and CDC should plan to make significant investments 
of time, personnel, and other resources to support initial enrollment 
and reporting to ensure successful implementation of NHSN reporting by 
ASCs. These commenters also suggested that revisions in the CDC's NHSN 
site to reduce confusion for ASCs, such as revising documentation to 
include ASCs, replace the term ``hospital'' with ``facility'', 
simplifying set-up instructions, and continuance of the planned 
elimination of the digital certificate requirement for NHSN access 
could facilitate ASC participation.
    Response: We thank the commenters for voicing these concerns and 
providing constructive suggestions. We note that CDC estimates that 
only 285 ASCs are currently enrolled and reporting in the NHSN. We 
agree that resources will be required to ensure successful 
implementation of ASC reporting to the NHSN to meet ASCQR Program 
requirements. CMS and CDC are working together in this endeavor and 
will be considering the comments received that are aimed at improving 
the NHSN site and will be implementing educational efforts for ASCs.
    Because we believe CMS' and CDC's efforts will address many of the 
commenters' concerns, we are finalizing our proposal to use the data 
submission and reporting standard procedures without modification; that 
is, to use those procedures that have been set forth by CDC for NHSN 
participation in general and for submission of this measure to NHSN. We 
believe ASCs have sufficient time to set up NHSN accounts and to become 
familiar with all reporting procedures to be able to successfully 
report data because we intend to propose a 2015 data submission 
deadline.
    Comment: Several commenters supported CMS' proposal of an August 
15, 2015 deadline as alignment of submission deadlines within the ASCQR 
Program was a sensible approach that would limit confusion. Some of 
these commenters noted that an earlier deadline served no useful ASCQR 
Program purpose. Other commenters supported an August 15, 2015 deadline 
for ASCs to submit their 2014-2015 influenza season data because, while 
this date is not consistent with the deadline for other quality 
reporting programs that enter data for this measure via NHSN, the ASCQR 
Program is already quite complex, featuring three different data 
submission methods for the CY 2016 payment determination. Given this 
complexity, a consistent data submission deadline could help minimize 
confusion across the NHSN and QualityNet data entry systems.
    Several commenters disagreed with an August 15, 2015 data 
submission deadline for ASCs as it differed from the May 15th deadline 
proposed for two other CMS quality data reporting programs, the 
Hospital IQR and Hospital OQR Programs. Some of these commenters 
believed that providing ASCs with a later deadline would provide an 
unfair advantage because ASCs would have longer to submit their data. 
Other commenters believed that having a differing date for ASCs than 
other facilities would be confusing to ASCs, thereby, disadvantaging 
ASCs.
    Response: We thank the commenters for their thoughts regarding an 
August 15, 2015 deadline for ASCs to submit their 2014-2015 influenza 
vaccination data (October 1, 2014 through March 31, 2015). We generally 
try, when feasible, to align requirements across quality reporting 
programs, but program requirements are tailored to individual quality 
reporting program needs. Due to issues raised by commenters regarding 
our proposed August 15, 2015 deadline, we are not finalizing a data 
submission deadline for 2014-2015 influenza vaccination and instead 
intend to issue proposals regarding a 2015 data submission deadline for 
this measure in the CY 2015 OPPS/ASC proposed rule.
    After consideration of the public comments received, we are 
finalizing our proposal to use the data submission and reporting 
standard procedures set forth by CDC for NHSN participation for the 
ASCQR Program without modification. As stated above, we are not 
finalizing our proposal regarding an August 15, 2015 data submission 
deadline for ASC-8 due to concerns expressed by commenters. We intend 
to issue proposals regarding a 2015 data submission deadline for this 
measure in the CY 2015 OPPS/ASC proposed rule which is scheduled to be 
finalized in late CY 2014.
7. ASCQR Program Validation of Claims-Based and CMS Web-Based Measures
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53641 through 
53642), consistent with other CMS quality reporting programs, we did 
not require validation of claims-based measures (beyond the usual 
claims validation activities conducted by our administrative 
contractors) or structural (Web-based) measures for the ASCQR Program. 
We also do not require validation of claims-based or Web-based measures 
under the Hospital IQR and OQR Programs.
    We noted that with regard to the current ASCQR Program claims-based 
measures, the number of events expected to be reported is small because 
most of the measures are for adverse or rare events. In this situation, 
any random selection of cases would require a burdensome sample size. 
Further, we expect the accuracy for reported adverse events to be high. 
We stated that, because we do not believe at this time that any results 
that could be obtained justify the burden associated with a data 
validation process which would necessitate an independent validation 
effort, we also are not requiring a data validation process for our 
current claims-based measures, and we continue to believe so.
    We stated that as we gain more experience with the ASCQR Program, 
we will reassess whether a data validation process for claims-based and 
measures where aggregate data is reported via an online tool is needed. 
At this time, we believe that it would be overly burdensome to validate 
the reported data given the inexperience that ASCs have with reporting 
quality data to CMS coupled with the low incidence of cases for the 
claims-based measures.
8. Extraordinary Circumstances Extensions or Waivers for the CY 2014 
Payment Determination and Subsequent Years
a. Background
    In our experience, there have been times when facilities have been 
unable to submit information to meet program requirements due to 
extraordinary circumstances that are not within their

[[Page 75141]]

control. It is our goal to not penalize such entities for such 
circumstances and we do not want to unduly increase their burden during 
these times. Therefore, in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53642 through 53643), we established procedures for extraordinary 
circumstance extension or waiver requests for the submission of 
information required under the ASCQR Program. We refer readers to that 
rule for a complete discussion of the process.
b. Additional Criterion for Extraordinary Circumstance Waivers or 
Extensions for CY 2014 and Subsequent Years
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we proposed 
that, starting in CY 2014, we may grant a waiver or extension to ASCs 
for data submission requirements if we determine that a systematic 
problem with one of our data collection systems directly or indirectly 
affected the ability of ASCs to submit data. Because we do not 
anticipate that such systematic errors will happen often, we do not 
anticipate granting a waiver or extension on this basis frequently. If 
we make the determination to grant a waiver or extension, we proposed 
to communicate this decision through listserv notice and posting via 
our QualityNet Web site (https://www.qualitynet.org) as we have done in 
the past with CMS-issued waivers where a geographic location was 
affected by adverse weather.
    We invited public comment on this proposal.
    Comment: Several commenters supported and expressed their 
appreciation for CMS' proposal to grant waivers or extensions for data 
submission requirements if we determine a systematic problem with any 
data collection system directly or indirectly affected the ability of 
ASCs to submit data.
    Response: We thank the commenters for supporting our proposal.
    After consideration of the public comments we received, we are 
finalizing our proposal without modification to grant waivers or 
extensions to ASCs for data submission requirements if we determine 
that a systematic problem with any part of our data collection system 
directly or indirectly affected the ability of ASCs to submit data. If 
we make the determination to grant a waiver or extension, we will 
communicate this decision through listserv notice and posting via our 
QualityNet Web site (https://www.qualitynet.org).
9. ASCQR Program Reconsideration Procedures for the CY 2014 Payment 
Determination and Subsequent Years
    We have established similar processes by which participating 
hospitals can submit requests for reconsideration of quality reporting 
program payment determinations for the Hospital IQR Program and the 
Hospital OQR Program. We believe these reconsideration processes have 
been effective in the hospital quality reporting programs and such a 
process would be effective for ASC quality reporting. Therefore, in the 
FY 2013 IPPS/LTCH PPS final rule (77 FR 53643 through 56344), we 
adopted an informal reconsideration process for the ASCQR Program for 
the CY 2014 payment determination and subsequent years modeled after 
the reconsideration processes we implemented for the Hospital IQR and 
Hospital OQR Programs. We refer readers to that rule for a complete 
discussion of our procedures.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43670), we did not 
propose any changes to this informal reconsideration process. However, 
we clarified some aspects of the informal reconsideration review 
process that we established in the FY 2013 IPPS/LTCH PPS final rule (77 
FR 53643 to 53644). As we stated in that rule, we intend to complete 
any reconsideration reviews and communicate the results of these 
determinations within 90 days following the deadline for submitting 
requests for reconsideration. For those ASCs that submit a 
reconsideration request, the reconsideration determination would be the 
final ASCQR Program payment determination. For those ASCs that do not 
submit a reconsideration request or do not submit a reconsideration 
request as specified in the FY 2013 IPPS/LTCH PPS final rule (77 FR 
53643 through 53644), for example, the request was not submitted by the 
deadline, the CMS determination would be the final payment 
determination. There would be no appeal of any final ASCQR Program 
payment determination.

XVI. Final Rule: Changes to the Conditions for Coverage (CfCs) for 
Organ Procurement Organizations (OPOs) (42 CFR Part 486, Subpart G)

A. Background

    The Organ Procurement Organization Certification Act of 2000 
(section 701 of Pub. L. 106-505) amended section 371(b)(1) of the 
Public Health Service Act (42 U.S.C. 273(b)(1)) and directed the 
Secretary to establish regulations governing the certification and/or 
recertification of Organ Procurement Organizations (OPOs). Among other 
things, section 371(b)(1)(D)(ii) of the Public Health Service Act 
requires that regulations be established for the certification and/or 
recertification process, which (1) ``rely on outcome and process 
performance measures that are based on empirical evidence obtained 
through reasonable efforts, of organ donor potential and other related 
factors in each service area of qualified organ procurement 
organizations,'' and (2) ``use multiple outcome measures as part of the 
certification process.'' Payment under the Medicare and Medicaid 
programs for organ procurement costs may be made only if, among other 
requirements, the OPO is certified or recertified as meeting the 
standards to be a qualified OPO under section 371(b) of the Public 
Health Service Act and meets the performance-related standards 
prescribed by the Secretary, as provided for in section 1138(b) of the 
Social Security Act.
    The final rules implementing these statutory requirements and 
setting out the Conditions for Coverage (CfCs) for OPOs (OPO CfCs) were 
published in the Federal Register on May 31, 2006 (71 FR 30982). The 
OPO CfCs are codified at 42 CFR Part 486 and set forth the 
certification and recertification processes for OPOs. OPOs are required 
to meet their CfCs, which include both outcome and process performance 
measures.
    In general, with the exception of OPOs operating exclusively in 
noncontiguous States, Commonwealths, Territories, or possessions, the 
three outcome measures are: (1) A donation rate of eligible donors as a 
percentage of eligible deaths; (2) an observed donation rate as 
compared to the expected donation rate; and (3) a yield measure, which 
requires that two of the following three outcome measures be met: (i) 
The number of organs transplanted per standard criteria donor, (ii) the 
number of organs transplanted per expanded criteria donors, and (iii) 
the number of organs used for research per donor. For OPOs that operate 
exclusively in noncontiguous States, Commonwealths, Territories, and 
possessions, the three outcome measures are: (1) A donation rate of 
eligible donors as a percentage of eligible deaths; (2) an observed 
donation rate as compared to the expected donation rate; and (3) a 
yield measure, which requires that two of the following three outcome 
measures be met: (i) the number of kidneys transplanted per standard 
criteria donor; (ii) the number of kidneys transplanted per expanded 
criteria donors; and (iii) the number of organs used for research per 
donor. All of the yield measures include pancreata

[[Page 75142]]

used for islet cell transplantation as required by section 371(c) of 
the Public Health Service Act (42 U.S.C. 273(c)). The first and third 
outcome measures are compared to a national mean. The second outcome 
measure is calculated by the Scientific Registry of Transplant 
Recipients (SRTR).

B. Regulatory Changes

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43534), we proposed to 
modify the regulations so that all of the OPOs must meet two out of the 
three outcome measures to be recertified. We were concerned about the 
requirement to automatically decertify OPOs if they fail to meet all 
three of the outcome measures. We believed that the requirement that 
each OPO meet all three outcome measures as set forth in Sec.  486.318 
was unnecessarily stringent. For that reason, we proposed to modify the 
outcome measure requirement so that OPOs would be required to meet two 
of the three outcome measures. We noted that the majority of OPOs were 
meeting all three of the outcome measures. Based on our experience, we 
observed that many of the OPOs that were failing to meet all three 
outcome measures were meeting two of the three measures and were in 
compliance with all of the other requirements in the OPO CfCs; that is, 
the process performance measures set forth at Sec. Sec.  486.320 
through 486.348. We believe these OPOs were performing satisfactorily 
and should not be decertified based solely on their failure to meet one 
outcome measure. This belief was based not only on our observation and 
monitoring of these OPOs' performance, but also on some concerns with 
the outcome measures, which we discussed in detail in the proposed rule 
(78 FR 43671 through 43672).
    Specifically, we proposed to revise paragraphs (a)(1) and (b) of 
Sec. Sec.  486.316 and the introductory text of paragraphs (a) and (b) 
of Sec.  486.318 of the regulations to require that OPOs meet at least 
two out of the three outcome measures instead of the requirement to 
meet all three outcome measures. We also asked for public comments on 
any other potential empirically based outcome measures for OPOs that 
might be used in the future. Most of the commenters opposed this 
proposal. The commenters indicated that the proposal did not address 
the problems with the current outcome measures and recommended that CMS 
develop a different strategy for the upcoming recertification cycle. 
Some of the commenters expressed concerns about the outcome measures 
and requested additional changes so that an OPO could be recertified 
even if it failed to meet any of the outcome measures. A summary of the 
public comments and our responses follow.
    Comment: Some commenters acknowledged the thought that CMS had put 
into the proposal and the challenges CMS would face in revising the 
outcome measures. Commenters also acknowledged that the proposal would 
have a beneficial effect on some of the OPOs that would otherwise be 
decertified under the current outcome measures requirement.
    Response: We appreciate these comments. We believe that modifying 
the outcome measure requirement so that OPOs must now meet two out of 
the three outcome measures will benefit both the OPOs and the potential 
recipients on the waiting lists by avoiding the decertification of OPOs 
that are performing satisfactorily.
    Comment: Other commenters indicated that the proposed revisions 
were insufficient to address their numerous concerns about problems 
that the commenters believed were inherently related to the existing 
outcome measures.
    Response: As we noted in the proposed rule, we have received 
feedback from various members of the OPO community regarding these 
concerns, which are addressed in more detail below. We acknowledge that 
the provisions set forth in this final rule do not address all of the 
specific concerns raised by commenters. Despite the critical comments 
relating to the current measures, no commenters suggested any 
empirically based outcome measures that could be used in the future, 
except for a few commenters that suggested using the OPTN yield 
measure. However, other commenters were also critical of that measure.
    OPOs perform an important role in the health care system, and we 
understand the challenge OPOs face in developing relationships with 
hospitals and health care professionals, as well as in obtaining 
consent from families to procure organs. However, Congress required the 
Secretary to create outcome and process performance measures to 
encourage OPOs to improve their performance. The OPO CfCs are designed 
to encourage OPOs to be more efficient in procuring organs in order to 
save more lives. We also note that the current outcome measures were 
largely based upon public comments we received to the OPO proposed rule 
(CMS-3064-P), and that many of the concerns relating to the outcome 
measures were not raised during prior rulemaking (71 FR 30999 through 
31005). We believe that the vast majority of the 58 OPOs will be able 
to meet two out of the three outcome measures. We also believe that the 
outcome measures continue to provide a fair basis for comparing OPOs' 
performance.
    Comment: Several commenters suggested that, instead of proposing a 
modification to the outcome measures requirement, CMS take a two-part 
approach concerning the outcome measures and recertification. First, 
the commenters suggested a revision to 42 CFR 486.312(c) to state that 
CMS ``may'' voluntarily not renew an OPO's agreement if it failed to 
meet the performance measures. The commenters suggested that the CfCs 
be modified so that CMS has the discretion to renew the agreement 
despite an OPO's failure to meet all three of the outcome measures, 
essentially changing the regulatory language from ``will not 
voluntarily renew'' the agreement with an OPO to ``may renew'' the 
agreement. Second, the commenters recommended that CMS be allowed to 
work with OPOs that failed to meet the performance measures to develop 
corrective action plans, or a similar improvement process, comparable 
to the process currently used for transplant centers.
    Response: We appreciate the concerns expressed by the commenters. 
However, we believe that the commenters' recommended approach would be 
inconsistent with section 1138(b)(1)(C) of the Act that permits payment 
for organ procurement costs ``only if'' the OPO meets ``performance-
related standards prescribed by the Secretary.'' In addition, we note 
that the Organ Procurement Organization Certification Act of 2000 
required the Secretary to establish through rulemaking multiple outcome 
measures based upon empirical evidence, obtained through reasonable 
efforts, of organ donor potential and other related factors in each 
service area of qualified OPOs and that these measures must be used as 
part of the recertification process. Consistent with the statute, the 
Secretary developed the standards through notice and comment rulemaking 
and the final standards reflect public input. The outcome measures 
constitute an empirically based standard that is applied to all of the 
OPOs and allow a comparison of an OPO's performance to the performance 
of its peers. We believe that changing ``will not'' to ``may'' in the 
regulations would effectively render this empirically based standard a 
nullity and would eliminate any meaningful empirically based standards 
for the recertification process. We believe that the suggested change 
would be contrary to the plain language of the relevant

[[Page 75143]]

statutes; therefore, we are not able to adopt the suggested change. We 
also believe that it would be contrary to Congress' express intent to 
recertify an OPO that failed to meet the outcome and performance 
measures during the past performance period. OPO performance is a 
critical element of the organ transplantation system in the United 
States. An OPO that is efficient in procuring organs and delivering 
them to recipients will save more lives than an ineffective OPO. 
Replacing an OPO that failed to meet the performance measures with an 
alternative organization that has been successful in the past is likely 
to increase the supply of organs available to patients on the organ 
transplant waiting lists.
    Comment: Several commenters expressed concerns about the ``limited 
appeals process'' available to OPOs that are decertified due to the 
outcome measures. The commenters also indicated that ``CMS noted 
repeatedly that no appeal on `substantive' issues may be allowed.''
    Response: The OPO CfCs set forth at 42 CFR 486.314 specifically 
state that ``the OPO may appeal the de-certification on substantive and 
procedural grounds.'' Therefore, the OPO CfCs do not ``limit'' the 
grounds upon which an OPO can appeal a decertification. In addition, we 
will consider exercising our enforcement discretion, including 
consideration of outcome measures, on a case-by-case basis when 
appropriate as part of the review process.
    Comment: Many commenters indicated that the proposed revisions were 
insufficient to address their numerous concerns about problems that the 
commenters believed were inherently related to the existing outcome 
measures. Some commenters asserted that the measures are flawed because 
there were significant problems with how the outcome measures were 
initially developed and the validity of the outcome measures has not 
been established. They also stated that CMS had acknowledged that the 
current outcome measures are flawed or have significant problems.
    Response: We disagree with the comment. The outcomes measures were 
developed through a public process, using notice and comment 
rulemaking. We made significant changes to our proposed standards based 
on the comments and recommendations of the OPOs, including the national 
association that represents all OPOs (71 FR 30999). The first outcome 
measure allows us to assess an OPO's conversion rate of potential 
donors to actual donors so that we can determine how an OPO has 
performed in regard to donor potential in its own designated service 
area as well as how it has performed compared to other OPOs. The second 
outcome measure uses the statistical methodology developed by the SRTR 
for determining an expected donation rate for each OPO, allowing an 
assessment of how an OPO has performed in view of its expected 
performance. Our third measure is comprised of three individual 
measures for organs transplanted per donor and organs used for research 
per donor. This third measure allows us to assess how well an OPO 
fulfills its ultimate mission--recovering viable organs and placing 
them with transplant centers for transplantation--as well as its 
commitment to placing organs for research (71 FR 31000).
    In the preamble to the proposed rule, we acknowledged that we had 
some concerns about the outcome measures due to input we had received 
from the OPO community. We also indicated that we believe that OPOs 
should not be decertified based solely on their failure to meet one 
outcome measure because our experience with the OPOs indicated that the 
OPOs that were failing one of the outcome measures were performing 
satisfactorily. In addition, we noted that the majority of OPOs are 
meeting all three outcome measures and we expect that only a small 
number of OPOs would not be able to meet at least two of the outcome 
measures. If the current outcome measures were fundamentally flawed or 
had significant problems, we would anticipate that the number of OPOs 
that would not successfully meet this requirement would be much higher. 
Therefore, while we acknowledge that there are concerns with the 
current outcome measures, we believe the current measures are a valid 
means of measuring OPO performance in keeping with the statutory 
requirements. Each measure is empirical; that is, based upon 
observation or statistically derived from data.
    Comment: Some commenters believe the existing regulatory standards 
are flawed because the data upon which the outcome measures are based 
are self-reported and are not verified by another source; therefore, 
the accuracy of the data cannot be verified.
    Response: We disagree with the commenters' premise that the 
reported information cannot be verified. All OPOs are required to 
provide specific information to the OPTN, the SRTR, and CMS (42 CFR 
486.328). This information includes, but is not limited to, the number 
of eligible deaths; the number of eligible donors; the number of organs 
transplanted, by organ type; and the results of death record reviews. 
In addition, the data that are to be used for recertification purposes 
must be reported to the OPTN of all deaths in all hospitals and 
critical access hospitals (CAHs) in the OPO's DSA, unless a particular 
hospital or CAH has been granted a waiver and is working with another 
OPO (42 CFR 486.328(c)). We are able to independently audit the 
hospital's records. Moreover, if an OPO determines that any data was 
incorrect, through death record reviews or any other means, it has 30 
days to report the accurate data to the OPTN (42 CFR 486.328(d)). 
Therefore, if any OPOs are not reporting accurate data, they are not 
incompliance with this condition and could be subject to regulatory 
sanctions, up to and including decertification. Thus, we believe that 
there are sufficient tools to verify the reported information.
    Comment: Some commenters suggested that the definitions of 
``eligible death'' and ``donor'' are being interpreted and clinically 
implemented in an inconsistent manner among the OPOs, which could 
negatively impact some of the OPOs' performance on the outcome 
measures.
    Response: We agree that data should be accurately and consistently 
reported, and we established these definitions to standardize the terms 
to the greatest extent possible. We expect that all of the OPOs will 
interpret and implement all of the CfCs, including the definitions, and 
report their data in good faith. We adopted the definition of 
``eligible deaths'' using the OPTN definition of that term in response 
to public comments (71 FR 30985). We note that the commenter does not 
criticize the definitions per se, but instead focuses on how some OPOs 
are applying those definitions. Considering the very divergent 
circumstances present with donors, we acknowledge that there may be 
times that different OPOs would disagree about whether a particular 
individual's death should be classified as an ``eligible death'' and 
subsequently whether the donor is an ``eligible donor.'' While some 
variation is possible, we believe that these cases should be rare. If 
there are questions or concerns about how to interpret and implement 
any of the requirements or report data, those questions or concerns 
should be communicated to CMS or OPTN so they can be addressed.
    We are disturbed by the commenters' suggestion that some OPOs may 
be interpreting certain requirements and reporting their data in a way 
designed to gain an unfair advantage over other OPOs in their 
performance on the outcome measures. Despite these

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comments, we have not been given any specific evidence that the alleged 
practice is actually occurring. We also note that we evaluate OPOs for 
their compliance with the applicable CfCs, including the condition for 
reporting of data at 42 CFR 486.328. An OPO could face decertification 
if it is found in violation of those rules. We will scrutinize the data 
to assess for any unfair actions taken by an OPO.
    Comment: Some commenters suggested that the outcome measures 
provide a disincentive to organ procurement, which is resulting in 
fewer, rather than more, organs being recovered for transplantation. 
One commenter gave the example of a potential donor with multiple 
comorbidities for whom the OPO could only expect to be able to procure 
the liver for transplant. The commenter stated that if an OPO is 
concerned about the third outcome measure, which, among other things, 
measures the organs transplanted per donor (yield measurement), there 
is a disincentive to pursue that donor because they would likely only 
recover a single organ.
    Response: We disagree. While our empirically based outcome measures 
do measure various aspects of the OPOs performance, the measures 
specifically encourage OPOs to fulfill their ultimate mission, which is 
the recovery of transplantable organs and placement with transplant 
centers for transplantation for patients, as well as for research 
purposes.
    Comment: Some commenters suggested that there are conflicts between 
the OPO CfCs and the transplant center (TC) Conditions of Participation 
(CoPs). The commenters stated that the OPO CfCs incentivize OPOs to 
pursue as many donors as possible and procure as many transplantable 
organs as possible. However, the commenter added, the TC CoPs require 
transplant centers to meet specific outcome measures for graft and 
patient survival. For example, the commenter stated that concerns 
related to these outcome measures may cause some transplant surgeons to 
decide not to transplant certain types of organs, such as organs 
procured from Donors after Cardiac Determination of Death (DCDD). The 
commenter believed that this could result in some organs procured by 
OPOs not being transplanted, which would negatively impact the third 
(yield) measure.
    Response: As explained in the proposed rule and in the background 
section above, our regulations with respect to outcomes measures for 
OPOs reflect the specific standards Congress required the Secretary to 
develop for measuring OPO performance under the Organ Procurement 
Organization Certification Act of 2000. Our rules are fully consistent 
with those statutory directives. Transplant centers, in contrast, are 
not required to meet regulatory standards that are based on the OPO 
statute. However, we will examine our standards in an attempt to 
determine if greater synergy is possible in the future.
    Comment: Many commenters noted that they agreed with the DHHS 
Secretary's Advisory Committee on Organ Transplantation's (ACOT) 
Recommendation 55 that was made in August 2012 (http://www.organdonor.gov/legislation/acotrecs55.html accessed on November 18, 
2013), which, among other things, includes a recommendation that the 
DHHS Secretary direct CMS and the Health Resources and Services 
Administration (HRSA) to confer with the OPO community to conduct a 
comprehensive review of the regulatory requirements for OPOs and 
transplant centers and promulgate regulatory and policy changes to OPO 
requirements, including, but not limited to, ``a statistically sound 
method for yield measures for OPOs'' (http://www.organdonor.gov/legislation/acotrecs55.html).
    Response: We are interested in continuing to improve our standards 
and are currently conducting a comprehensive review of the OPO CfCs and 
will consider these public comments in any future rulemaking. However, 
we believe it would be unfair to OPOs to develop new standards at this 
time and to apply those standards retroactively for past periods.
    After consideration of the public comments we received, we are 
finalizing as proposed the revisions to Sec. Sec.  486.316 and 486.318 
of our regulations by modifying the current outcome measures 
requirement to require that OPOs must meet two out of the three outcome 
measures instead of all three outcome measures.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43672), we also 
solicited public comments on any other potential empirically based 
outcome measures for OPOs that might be used in future rulemaking. We 
stated that we would especially appreciate public comments on the new 
yield measure that was produced by the SRTR and is being used by the 
OPTN. The OPTN recently adopted this new yield measure, which 
calculates the expected number of organs transplanted for each donor 
based on multiple donor risk factors. The measure uses more extensive 
risk factors that mitigate the differences in the donor pool of the 
each DSA. This may allow an OPO's performance to be measured in terms 
of the expected outcomes for the DSA based upon the expected outcomes 
for individual donors within the DSA and not against a national 
average. In the proposed rule, we stated that when comparing OPOs 
currently identified to be below expected performance levels by the 
OPTN matrix and the OPOs identified as below expected performance 
levels by the CMS measures, we had noted that the lists are not the 
same. We stated that if the new OPTN measure proves to be a more 
accurate reflection of performance as measured by the organs 
transplanted for each donor in each individual DSA (as it is accepted 
by HRSA and the OPO community), this may provide an alternative outcome 
measure that could be adopted in the future. We referred readers to the 
SRTR Web site at http://www.srtr.org/csr/current/Tech_notes.aspx for 
specific details on the risk adjustment models used for this measure.
    Comment: A few of the commenters noted the the OPTN yield measure 
was an improvement over the current outcome measures and that it should 
be considered by CMS. However, these commenters also noted that there 
were issues with this measure. One commenter noted that the OPTN 
measure was ``too new'' and ``needs some vetting before it can be 
accurately used to define performance.'' Another commenter noted that 
the measure ``requires further revision.''
    Response: We are currently conducting a comprehensive review of the 
OPO CfCs. We will consider these public comments concerning the current 
outcome measures and the new OPTN yield measure if we proceed with 
future rulemaking.

XVII. Final Rule: Revisions of the Quality Improvement Organization 
(QIO) Regulations

A. Legislative History

    The Utilization and Quality Control Peer Review Program was 
originally established by sections 142 and 143 of the Tax Equity and 
Fiscal Responsibility Act (TEFRA) of 1982 (Pub. L. 97-248). The name of 
the individual organizations covered under the program was ``Peer 
Review Organizations.'' In a final rule with comment period published 
in the Federal Register on May 24, 2002 (67 FR 36539), we revised the 
regulatory references to these organizations to ``Quality Improvement 
Organizations'' (QIOs)--without changing the definition or functions of 
the QIOs--to reflect the

[[Page 75145]]

program's shift from a compliance-oriented focus to one emphasizing 
quality improvement. There have been a number of amendments to the QIO 
statute over the years, but they have not resulted in any substantial 
changes in how the program operates. However, in section 261 of the 
recently enacted Trade Adjustment Assistance Extension Act of 2011 
(TAAEA) (Pub. L. 112-40), Congress authorized numerous changes to the 
original legislation that modernize and improve the QIO Program and 
included additional flexibility for the Secretary in the administration 
of the QIO Program. This legislation also updated the nomenclature from 
the Peer Review Organization Program to the QIO Program and included 
amendments to update the terminology of the program (replacing ``peer 
review organization'' and ``utilization and quality control peer review 
organization'' with ``quality improvement organization'' in relevant 
provisions of the Act).
    Specifically, section 261 of the TAAEA increased the flexibility 
available to the Secretary by updating the statutory definition of the 
organizations that can contract with CMS as QIOs (as described in 
section 1152 of the Act), changing certain contract terms and processes 
by which the Secretary contracts with QIOs (as described in section 
1153 of the Act), and broadening the Secretary's authority to delineate 
the scope of work for QIOs (as described in section 1154 of the Act).
    The regulations that implement sections 1152 and 1153 of the Act 
are codified at 42 CFR Part 475; Subpart C of Part 475 includes 
provisions that specifically govern the types of organizations eligible 
to become QIOs. The regulations that implement section 1154 of the Act 
and much of the work performed by QIOs are codified at 42 CFR Part 476. 
Section 1154 of the Act states that much of the work QIOs will perform 
is subject to the terms of their contracts with CMS. We note that, 
consistent with this provision, the contracts and requests for 
proposals (RFPs) used to contract with QIOs include significant detail 
on the work performed by the QIOs. Our proposal did not include changes 
to this approach to the QIO Program and was intended to provide a 
framework to guide the contracting process by establishing minimum 
eligibility criteria, direction for how CMS will determine that the 
minimum criteria are met, and a basic process for how awards are made.

B. Basis for Proposals and Finalized Policies

    Section 261 of the TAAEA eliminated certain limitations specified 
in sections 1152 and 1153 of the Act that appear in several existing 
provisions in Part 475. In order to eliminate these limitations in the 
regulations and fully utilize the flexibility provided as a result of 
the statutory changes, in the CY 2014 OPPS/ASC proposed rule (78 FR 
43672 through 43678 and 43705 through 43706), we proposed regulatory 
changes to implement the statutory amendments. These changes involve, 
among other things, changing the eligibility standards for an entity to 
be awarded a QIO contract and defining specific terms that will be used 
to describe QIOs and their work. We proposed to change the terminology 
related to the geographic area in which a QIO must perform its 
different functions. As amended, the statute authorizes the 
establishment of ``such local, State, regional, national or other 
geographic areas as the Secretary determines appropriate'' for QIO 
contract awards. We also proposed revisions to existing regulation text 
regarding the eligibility of a health care facility association to be a 
QIO and revisions to eliminate provisions at Sec.  475.106 regarding 
the eligibility of payor organizations to be QIOs based on the proposed 
revisions to eliminate obsolete text and to codify the eligibility 
provisions for payor organizations in a different section. The 
statutory amendments also include a change in the contract period for a 
QIO, extending it from 3 to 5 years. Therefore, we proposed to include 
in Sec.  475.107 language to reflect the TAAEA amendment to section 
1153(c) of the Act, which modified the statutory 3-year QIO contract 
term to a 5-year contract term. Although we did not previously update 
this regulation with a prior statutory change in the QIO contract term 
from 2 years to 3 years, we included the 5-year time period in the 
proposed rule as a technical correction in order to make the regulation 
consistent with the amended statute. We believe that these changes 
would be instrumental in improving aspects of the QIO's review 
activities and would enable us to improve the program by ensuring that 
QIOs are better able to meet the needs of Medicare beneficiaries. We 
stated in the preamble to our proposal that the proposed revisions to 
Sec. Sec.  475.101 through 475.107 were intended to allow organizations 
that currently perform QIO work to compete for new QIO contracts, while 
expanding eligibility to additional entities under the new authority 
granted by the TAAEA. We stated that we will focus contract 
determinations on the ability of organizations to perform QIO functions 
as stated in the RFP. In the proposed rule, we solicited public 
comments on whether our proposed regulation text for Subpart C of Part 
475 sufficiently meets this goal as well as our explained goal to 
implement the flexibility provided by Congress in the TAAEA amendments. 
In addition, we proposed in Sec.  475.1 and Sec.  476.1 a technical 
correction to redesignate paragraphs (a) through (d) in the definition 
of ``Five percent or more owner'' as paragraphs (1) through (4). The 
specific proposed changes and corrections are explained in more detail 
in the following sections.
    QIOs work at the grassroots level of American health care delivery 
systems in all 50 States, the District of Columbia, and most U.S. 
Territories in order to improve care for Medicare beneficiaries. QIOs 
originally reviewed Medicare services to determine whether they were 
reasonable and medically necessary, met professionally recognized 
standards of care, and were provided in the appropriate setting. 
However, the QIO contract has evolved over the course of the years as 
the literature supports the concept that defects in the health care 
process are rarely related to the performance of one individual but to 
a system of care with multiple opportunities for failure. Attempts to 
improve quality through inspection methods, that is, by performing one 
chart review at a time, are less likely to yield the systemic 
improvements in care for Medicare beneficiaries that can come from 
analyzing aggregate data in order to identify problems, developing a 
plan of action, monitoring the result through data driven processes, 
and making changes as needed based on those results.
    The qualifications and expertise required to execute these quality 
improvement initiatives have evolved to now include expertise from 
disciplines such as physicians, nurses, other clinicians, health care 
leaders, experts in statistics and health care system reengineering, 
and many other kinds of professionals. As we discussed in the CY 2014 
OPPS/ASC proposed rule (78 FR 43673), we interpret our proposed 
regulation so as not to prohibit the use of professionals in the health 
care industry that are not licensed physicians or certified 
practitioners in connection with quality improvement initiatives or 
other activities that do not, by law, require use of licensed 
physicians or certified practitioners. We anticipate that these other 
professionals may offer valuable insight to QIOs on

[[Page 75146]]

ways to enhance the performance of their QIO functions, as well as 
provide services designed to help QIOs maximize their impact. We 
proposed to adopt this approach to further our goal that the 
regulations under 42 CFR Part 475 reflect a multidisciplinary approach 
to the performance of QIOs. Therefore, we intended that the proposed 
standards would not be a barrier to the inclusion of any other 
nonphysician or nonpractitioner professional that CMS or the QIO deems 
appropriate for the successful performance of QIO functions. Patients 
and their families also play a critical role in the success of quality 
improvement initiatives. Amendments to the Act made by the TAAEA would 
accommodate the evolution of quality improvement and would allow CMS 
the flexibility to expand the types of organizations eligible to 
provide multidisciplinary support in quality improvement. As indicated 
in the CY 2014 OPPS/ASC proposed rule (78 FR 43673), we sought with 
this proposal to ensure that the regulations governing QIO eligibility 
reflect the increased flexibility afforded by the TAAEA. This will help 
us ensure that we can administer the QIO Program in a manner that 
reflects contemporary practices and allows us to include the 
appropriate individuals and entities in working toward improving care 
processes.
    As described in section 1154 of the Act, QIOs perform many specific 
review functions that are necessary to ensure the quality of care 
provided to Medicare beneficiaries. The addition of section 1154(a)(18) 
by the TAAEA explicitly provides the Secretary with the broad authority 
to require that QIOs perform any additional activities the Secretary 
determines may be necessary for the purpose of improving the quality of 
Medicare services. Based on this authority, QIOs will, as a general 
matter, be required to represent CMS as ``change agents'' that work at 
local levels in their individual QIO geographic areas. The TAAEA also 
amended section 1154(a) of the Act to permit QIOs to perform one or 
more QIO functions instead of all QIO functions listed in the statute. 
Different QIOs might now be required to work on one or more different 
tasks within a QIO area; that is, all QIOs might no longer be required 
to handle the complete and broad range of QIO activities within their 
respective geographic areas but to focus on particular tasks of QIO 
work. For example, one QIO might be required to offer to a variety of 
stakeholders the knowledge and resources for improving health quality, 
efficiency, and value designed to improve the care provided to Medicare 
beneficiaries, while another QIO is required to perform case review in 
the same area.
    As under the current program, QIOs will be required to base their 
work on clinical evidence and some may be required to generate reliable 
data about clinical performance. QIOs may also serve as independent, 
objective, and collaborative partners that support CMS' mission to 
improve health care quality in the Medicare program (which, in turn, 
has the potential to greatly benefit the broader health care community) 
by leveraging the best efforts of all health care stakeholders, 
including beneficiaries and their families. While the goal of the QIOs 
is to benefit Medicare beneficiaries, the work of the QIOs may also, as 
a secondary matter, benefit other patients and residents who receive 
medical care. In this context, we are seeking to ensure that the 
regulations governing QIO eligibility reflect contemporary practices 
and permit the inclusion of organizations that can help to improve care 
processes for Medicare beneficiaries. We proposed to do so by removing 
restrictions that are no longer statutorily mandated and including 
requirements that reflect the current goals of the QIO Program.
    One such contemporary practice is the inclusion of patients and 
families in health care quality improvement. As a result, we proposed 
the addition to the QIO requirements of a new focus on patient and 
family engagement and patient and family inclusion in case reviews and 
quality improvement initiatives.
    We believe that the TAAEA legislation allows us a great deal of 
flexibility in how we restructure the work that QIOs perform and the 
types of organizations qualified to perform that work. We intend to 
continually examine methods for providing care to beneficiaries in a 
way that maximizes efficiency, eliminates waste, decreases harm, lowers 
costs through improvement, and engages patients more effectively. One 
way to continue improving the quality, efficacy, and efficiency of care 
in the Medicare program is to reconsider how QIOs provide services to 
determine whether the current longstanding contract structure and 
eligibility requirements best fit the continually evolving science 
related to driving quality improvement. The changes we proposed and are 
adopting as final are intended to ensure that we have the flexibility 
we need to reconsider as necessary certain aspects of the QIO Program 
structure in response to experience and changes in research findings 
and the health care community's approach to quality improvement.
    The regulatory proposals in the CY 2014 OPPS/ASC proposed rule (78 
FR 43672 through 43678) focus on the primary functional 
responsibilities of a QIO as a basis for determining eligibility. These 
responsibilities are case review (which includes the statutory minimum 
standards) and quality improvement initiatives. As stated in the 
proposed rule, we believe that the eligibility and contracting 
standards proposed for QIOs focus on the necessary minimum requirements 
for successful operation of the QIO Program.

C. Changes to the Nomenclature and Regulations Under 42 CFR Parts 475 
and 476

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43673 through 43678), 
we set forth proposals for updating the nomenclature and the definition 
of physician in both 42 CFR Parts 475 and 476 and for the partial 
deletion and revision of the regulations under 42 CFR Part 475. Part 
475 includes definitions and standards governing eligibility and the 
award of contracts to QIOs. We proposed to replace nomenclature that 
has been amended by the TAAEA; revise the existing definition in Part 
475, Subpart A and Part 476, Subpart A of the term ``physician;'' add 
new definitions to Part 475, Subpart A as necessary to support proposed 
new substantive provisions in Part 475, Subpart C; and revise, add, and 
replace some substantive provisions in Part 475, Subpart C.
    We have summarized the public comments we received and our 
responses below, using the regulation sections as headings to guide the 
discussion. In some cases, we have summarized and discussed issues 
raised by commenters in connection with the substantive issue rather 
than the regulation section identified by the commenter in order to 
better discuss each topic. For example, we have addressed comments 
about the need for objectivity and neutrality from all QIOs in 
connection with our discussion below in Sec.  475.101 below, although 
some commenters raised this issue in connection with Sec.  475.105.
    Comment: As a general matter about the proposal, one commenter 
urged CMS to postpone proposed changes to the QIO Program until ``the 
pace of healthcare reform is less frenetic, physician practices are 
more stable,'' and ``CMS has a clearer sense of how the proposed 
changes would impact the quality and costs of patient care.''

[[Page 75147]]

    Response: Although there have been many changes made through health 
care reform since 2010, there have been very few programmatic changes 
made in this particular area of health care quality improvement. The 
science of quality improvement has changed significantly over the last 
few decades and we believe that these proposed regulatory changes, 
which allow flexibility for any number of possible configurations, are 
long overdue. Further, the substantial changes made by the TAAEA are 
generally effective with QIO contracts awarded after January 1, 2012. 
As we approach the conclusion of the current QIO contracts and consider 
awarding QIO contracts after the enactment of the TAAEA, we believe 
that these changes are best accomplished now. As we move forward, we 
hope to capitalize on past successes of the QIO Program as well as 
improve the program by establishing a more flexible, efficient, 
patient-centered and family-centered model.
1. Nomenclature Changes
    In order to align the regulations with the nomenclature changes 
made by section 261 of the TAAEA, we proposed nomenclature changes 
where necessary in 42 CFR Part 475. For example, we proposed to revise 
the heading of Subpart C of Part 475 to read ``Subpart C--Quality 
Improvement Organizations'' and to replace the term ``peer review'' 
with ``quality improvement''. In each proposed provision in Part 475, 
Subpart C, we used the new nomenclature where appropriate.
    In addition, Part 476 is currently entitled ``Utilization and 
Quality Control Review,'' and Subpart C of Part 476 is entitled 
``Review Responsibilities of Utilization and Quality Control Quality 
Improvement Organizations (QIOs),'' both of which reflect the 
terminology used before enactment of the TAAEA. In order to reflect the 
nomenclature changes made by the TAAEA, we proposed to revise the title 
of Part 476 to read: ``Part 476--Quality Improvement Organization 
Review'' and the title of Subpart C of Part 476 to read: ``Subpart C--
Review Responsibilities of Quality Improvement Organizations (QIOs).''
    Comment: One commenter asserted that CMS' proposed change of the 
term ``peer review'' to ``quality improvement'' is vague and its impact 
is unclear.
    Response: We have made changes to the nomenclature throughout Parts 
475 and 476 consistent with the changes made to nomenclature in the 
title and text of the statute at sections 1151, 1152, 1153 and 1154 of 
the Act. As we mention above, similar changes to the regulatory 
references to these organizations have been made in the past. However, 
the prior nomenclature changes were made without changing the 
definition or function of the QIOs. We have made changes in this final 
rule to reflect the program's shift from a compliance-oriented focus to 
one emphasizing quality improvement in addition to completing the 
nomenclature changes made by the TAAEA, modernizing and improving the 
QIO Program, and changing the eligibility requirements for QIOs.
    After consideration of the public comment we received on the 
nomenclature changes, we are finalizing these proposed changes to Parts 
475 and 476 without modification.
2. Addition and Revision of Definitions
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43674), we proposed 
changes to Sec. Sec.  475.101 through 475.107 to reflect new 
eligibility standards for an entity to be awarded a QIO contract and to 
use specific terms that will be used to describe QIOs and their quality 
improvement work. In connection with these changes, we proposed to add 
definitions of ``case review'', and ``QIO area,'' add cross-references 
to definitions in Sec.  476.1 of ``practitioner'' and ``quality 
improvement initiative'', and revise the definition of ``physician'' 
under Sec.  475.1 and Sec.  476.1, as discussed below. Further, we 
proposed a technical revision to the definition of ``Five percent or 
more owner'' in Part 475. In the proposed rule, we solicited public 
comments on our proposed definitions and revisions.
    We proposed to define ``case reviews'' to mean ``the different 
types of reviews that QIOs are authorized to perform. Such reviews 
include, but are not limited to: (1) Beneficiary complaint reviews; (2) 
general quality of care reviews; (3) Emergency Medical Treatment and 
Labor Act (EMTALA) reviews; (4) medical necessity reviews, including 
appeals and DRG validation reviews; and (5) admission and discharge 
reviews.'' We provided this list to illustrate the range and scope of 
case reviews but we noted in the proposed rule that the Act and other 
provisions in Chapter IV of Title 42 of the Code of Federal Regulations 
require additional reviews and that the Secretary, pursuant to section 
1154(a)(18) of the Act, may require additional reviews under the 
contracts awarded to QIOs.
    We did not receive any public comments on the proposed definition 
of ``case review'' and proposed amendments to the definition of ``five 
percent or more owner''. We are finalizing the technical revision to 
the definition of ``five percent or more owner''. We are finalizing the 
proposed definition of ``case review'' with one slight modification to 
eliminate the word ``including'' in paragraph (5) to avoid the 
suggestion that appeals and DRG validation reviews are the only types 
of medical necessity review. As with the proposed definition, the final 
rule provides a nonexhaustive list of types of case reviews.
    We proposed to expand the definition of ``physician'' beyond the 
existing definition under Sec.  475.1 and Sec.  476.1 to reflect the 
definition in section 1861(r) of the Act, as well as to cover several 
additional characteristics that are unique to the QIO Program. We 
proposed the following definition of physician for both Parts 475 and 
476: Physician means ``(1) A doctor of medicine or osteopathy, a doctor 
of dental surgery or dental medicine, a doctor of podiatry, a doctor of 
optometry, or a chiropractor as described in section 1861(r) of the 
Act; (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice as a doctor as described in 
paragraph (1) above; and (3) An individual licensed to practice as a 
doctor as described in paragraph (1) above in any Territory or 
Commonwealth of the United States of America.'' We stated our belief 
that the proposed revisions are necessary to eliminate references in 
paragraphs (1) and (2) of the existing definition to physicians 
licensed in the State in which the QIO is located, in order to reflect 
the fact that a QIO's contract area may no longer be limited to one 
State. In addition, we proposed to amend paragraph (3) of the existing 
definition so that it no longer applies to only American Samoa, the 
Northern Mariana Islands, and the Trust Territory of the Pacific 
Islands. We proposed to enlarge this part of the definition to apply to 
physicians licensed to practice in all U.S. Territories and 
Commonwealths to more closely align with the Secretary's flexibility in 
awarding QIO contracts granted by the TAAEA. In the proposed rule, we 
solicited public comments on whether our proposed definition is 
sufficiently inclusive and appropriate to achieve these goals.
    In addition, we proposed to define the terms ``practitioner'' and 
``quality improvement initiative'' for purposes of Part 475 by cross-
referencing the existing definitions for these terms at Sec.  476.1.
    Comment: A few commenters supported the proposed changes to the 
definition of ``physician'', and one

[[Page 75148]]

commenter supported the expanded definition of ``physician'' which the 
commenter believed better reflected the definition contained in the 
TAAEA. Several other commenters suggested that CMS' proposed change to 
expand the definition of ``physician'' may lead to review of the 
actions of doctors of medicine and osteopathy by other ``limited'' 
licensed practitioners and recommended that physicians should only be 
subject to review by other physicians, preferably practicing physicians 
in the same specialty or a peer level match. Commenters requested that 
CMS clarify that the proposed changes are not intended to replace peer 
review by QIOs with reviews of physicians' decisions by nonphysician 
providers. Another commenter was concerned with the potential impact 
the broad definition of ``physician'' will have with respect to its use 
in Sec.  476.98.
    Response: We appreciate the commenters' responses on this issue. 
While we believe that the requirements in section 1154(d) of the Act 
and the regulations at Sec.  476.98(a) make it clear that QIOs are, 
except in limited circumstances, required to use a peer-to-peer match 
when performing reviews, we understand that the expansion of the 
definition of ``physician'' may mean that the peer conducting the 
review may not always be licensed in the same State where the care took 
place but must be licensed where the physician is working. We note that 
section 1154(d) of the Act provides that no QIO shall use the services 
of an individual who is not a duly licensed doctor of medicine, 
osteopathy, dentistry, optometry, or podiatry to make final 
determinations of denial of services provided by such physicians. In 
addition, we understand the commenters concern that the expanded 
definition of ``physician'' may lead to review of the action of 
physicians by physicians practicing in another specialty. We would like 
to clarify that, despite one commenter's suggestion in support of the 
proposed definition, the TAAEA does not include a definition of 
physician. It remains unclear why some commenters believed that our 
broadening of the definition of ``physician'' would lead to care 
provided by physicians being reviewed by nonphysicians. We reiterate 
that there are safeguards in the statute and regulations to ensure 
that, during case review, there is a peer-to-peer match whenever 
possible and that physician decisions will not be reviewed by 
nonphysician providers. We also note that our subregulatory guidance, 
such as the definition of ``peer reviewer'' in the QIO Manual, 
emphasizes the requirement to use a specialty match whenever possible. 
The QIO Manual can be found on our Web site at: http://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/qio110c05.pdf. The 
QIO Manual stipulates that a peer reviewer is ``a reviewer who is 
either a physician or other practitioner who matches, as closely as 
possible, the variables of licensure, specialty, and practice setting 
of the physician or practitioner under review'' and that only in 
``cases in which there is no peer match available, the QIO can use 
another physician reviewer without the same expertise.''
    After consideration of the public comments we received, we are 
finalizing, without modification, our proposal to revise the definition 
of ``physician'' under Sec.  475.1 and Sec.  476.1.
    In connection with our proposal to revise the requirements that an 
entity must meet to serve as a QIO, we also proposed to define, in 
Sec.  475.1, the terminology related to the geographic area in which a 
QIO must perform its different functions. Before our proposal in the CY 
2014 OPPS/ASC proposed rule, the regulations in Part 475 did not define 
this area but did refer to a QIO's ``review area'' in a number of 
places in existing text at Sec. Sec.  475.102 and 475.103, and ``QIO 
area'' in Sec. Sec.  475.1, 475.105(a), and 475.107(a) and (d). The 
term ``review area'' was used to refer to the geographic area in which 
each QIO performs its review functions under its contract with CMS 
while the term ``QIO area'' was used to refer to the geographic area 
covered by the contract. We proposed to define and use the term ``QIO 
area'' to mean ``the defined geographic area, such as the State(s), 
region(s), or community(ties), in which the CMS contract directs the 
QIO to perform.'' We stated that our proposal to add this definition 
was meant to reflect the flexibility afforded to us by the TAAEA to 
establish a QIO area as the geographic area we believe will be most 
effective in accomplishing the goals of a particular QIO contract. In 
addition, we also stated that the change in terminology from ``QIO 
review area'' to ``QIO area'' is intended to emphasize that the term 
can encompass more than just ``review'' functions. With this proposed 
change, we stated our intent to not only broaden the scope for choosing 
an appropriately sized geographic area, but also to identify capability 
and functionality as the primary way to identify the appropriate 
organization to perform specific QIO contract functions.
    We note that, on May 2, 2013, a Request for Information (RFI) was 
distributed seeking information about the methods we may use to assign 
work to QIO contractors. In the RFI, we stated that ``to accomplish our 
goal of further improving care for Medicare beneficiaries, CMS intends 
to restructure how it administers the Program.'' In addition, we 
solicited ``comments about four potential options the Agency may use to 
divide work among a varying number of QIO contractors across the 
country.'' Many of the commenters who responded to the proposed rule 
appear to have been aware of the RFI and many seem to have been 
addressing the regional proposals in the RFI as part of their comments 
on the proposed rule.
    Under the current QIO Program, although there are State-based 
contract awards, some QIOs share corporate parents and several QIOs 
subcontract to other QIOs for QIO work. The regulatory proposal was not 
to regionalize QIOs but to adopt a definition of ``QIO area'' that 
would apply if the contracts were awarded on a regional basis or a 
State-by-State basis and to implement statutory flexibility that does 
not mandate specific geographic areas for QIO contracts nor prohibit 
regional contracts.
    The RFP process will be the process through which the contract's 
geographic areas are defined. We would like to make clear that it is 
our intent that the regulation as proposed, and as finalized, permits 
flexibility in terms of designing the work and the geographic area for 
each QIO. The contracting process will finalize the details of the 
program's structural changes, if any.
    Comment: One commenter supported CMS' proposed changes in 
terminology from ``QIO review area'' to ``QIO area'' in order to 
emphasize that this term may encompass more than ``review'' functions. 
One commenter supported the expansion of a greater geographic area and 
stated that the proposed definition of ``QIO area'' versus ``QIO review 
area'' emphasizes that the proposed term encompasses more than 
``review'' functions which may provide a broader scope for choosing an 
appropriately sized geographic area and may assist in identifying the 
capability and functionality as a means to identify organizations to 
perform specific QIO contract functions. Some commenters stated that 
this proposed definition allows for more flexibility and will allow for 
the designation of QIOs that are best equipped to provide a specific 
set of services. Other commenters indicated that the rapidly changing 
requirements make it increasingly difficult for every QIO to have the 
requisite expertise and specialization in order to be a subject matter 
expert on all QIO initiatives and activities. These

[[Page 75149]]

commenters stated that a regional QIO approach has great potential to 
ensure every State has the same level of expert support and is 
consistently receiving the same information.
    Response: We appreciate the comments in support of the expanded 
definition of ``QIO area'' and the general approach underpinning our 
proposal that would allow specific QIOs to focus and develop expertise 
in a single area of quality improvement. The QIO Program has expanded 
beyond case reviews and the changes proposed reflect the array of tasks 
that QIOs are currently performing. We agree that the increased 
flexibility is beneficial and plan to, wherever possible, create 
efficiencies of scale to pool expertise in the interests of 
establishing and spreading best practices. We would like to clarify 
that a regional approach to the QIO Program structure is one option 
that we are considering. However, we have a variety of geographic 
options available under the statute and the regulation as finalized in 
this final rule.
    Comment: Several commenters stated that many practicing physicians 
have spent years building relationships with their local QIOs and 
suggested that these State-based QIOs have a degree of credibility with 
local Medicare beneficiaries and providers. In addition, commenters 
stated that the State-based QIOs are better able to identify problems 
in their local communities, design appropriate solutions, and identify 
local physician leaders to initiate projects. The commenters also 
stated that they have had ``long and fruitful collaboration'' with 
their respective State-based QIO and indicated that this relationship 
has resulted in sustained quality improvements for their Medicare 
beneficiaries. These commenters further stated that valuable time and 
resources would be lost as relationships and trust would need to be 
forged again to ensure provider engagement in educational 
opportunities. One commenter stated that, although some function-
specific QIOs may address unmet needs, these QIOs should not be 
established at the expense of State-based QIOs. This commenter 
recommended that a cost effective alternative would be for CMS to give 
high-performing existing QIOs the option to expand their portfolio of 
quality improvement activities during contract renegotiations.
    Response: The proposed rule and this final rule do not require 
regionalization but rather permit the creation of contract areas other 
than on a State-by-State basis. In determining how to best implement 
the flexibility afforded to the Secretary by the statutory changes made 
through the TAAEA, we will consider several factors. For example, under 
the current structure of the QIO Program, there already exists a multi-
State subcontracting structure for the appeal case reviews. There also 
are several multi-State corporate QIO management structures that have 
operated successfully for many scopes of work. These structures have 
been able to capitalize on the strengths and the expertise of 
particular entities.
    In addition, we believe that, for some functions, QIO contracts 
that cross State lines would create economies of scale and 
standardization of processes and eliminate duplicative administrative 
and management overhead. This potential structure would improve 
communication between CMS and the QIOs and decrease the contracting and 
administrative burden currently faced by both entities. Further, to the 
extent that quality improvement initiatives are designed in connection 
with nationwide quality measurements or quality improvement programs, 
QIOs would not be hampered by serving larger QIO areas. We are aware 
that many providers have established strong relationships with local 
QIO staff, and we understand the importance of preserving these ties. 
We expect to maintain in future QIO contracts the type of local ``on 
the ground'' involvement, which is tailored to meet the needs of 
communities and longstanding relationships that have been built between 
providers and QIO staff under the existing structure.
    We believe that the proposed changes to the definition of ``QIO 
area'' will enable flexibility and targeting of program expertise in 
the best interests of beneficiaries and are consistent with our efforts 
to continually strive to make the QIO Program more efficient. In 
addition, we note that in Sec. Sec.  475.102 and 475.103, discussed in 
more detail below, we proposed and are finalizing provisions to take 
into account the geographic location of an organization applying for a 
QIO contract. Those provisions do not list exhaustive factors for 
consideration in awarding QIO contracts and we may include additional 
factors where and when necessary.
    Comment: One commenter supported CMS' proposal to define ``QIO 
area'' and believed that it would be in the best interest of Medicare 
beneficiaries. In addition, the commenter encouraged CMS to take 
advantage of the opportunity for flexibility provided when contracting 
with QIOs. Some commenters supported CMS' proposed QIO Program changes 
by affirming that greater standardization and nationally recognized 
expertise are advantageous for activities such as assistance with 
education and data submission for quality measurement programs, and 
technical advice related to quality measurement specifications. One 
commenter asserted that the proposed QIO Program changes may result in 
reduced spending by approximately $330 million based upon Congressional 
Budget Office estimates by demonstrating more cost effective strategies 
for delivering services. This commenter also supported CMS' proposal to 
expand the definition of a QIO area that would allow a QIO to serve in 
more than one State. The commenter indicated that regional QIOs (formed 
by more than one single-State QIO contract held by a single corporate 
entity) already currently exist and believed that having regional QIOs 
is logical from an economy of scale perspective. One commenter stated 
that it recognizes that economies of scale and efficiencies may occur 
but indicated its concern that a ``dramatic change to mandated multi-
State [QIO] contracts'' would introduce the possibility that some 
States may be left without a local source for quality improvement 
technical assistance.
    Some commenters recognized the efficiencies and effectiveness that 
may be achieved to the QIO Program and recommended that, in situations 
where successful work has been demonstrated through QIOs that cover 
multiple States (formed by more than one single-State QIO contract held 
by a single corporate entity), CMS use these collaborations to test the 
feasibility and effectiveness of the expanded ``QIO area'' definition 
as a first phase in restructuring the QIO contracts and QIO areas.
    However, some commenters asserted that it would be difficult to 
maintain the ``local perspective'' in a regionalized QIO structure, 
that they did not see evidence for ``radical, untested'' changes to the 
State-based nature of the QIO Program and stated that CMS' proposed 
changes seem to have been undertaken with little consultation with 
either the national or local practitioner community of their respective 
States. Some commenters maintained that the proposed changes in the QIO 
Program would cause the current State-based QIO experience and 
expertise to be ``sacrificed.'' One commenter also believed that long-
term care providers may be held responsible to increase their 
administrative duties in order to interact with a separate organization 
for each function. One commenter stated that a single-State QIO may be 
better able to understand and focus on the Medicare beneficiaries and 
providers being served for more densely populated States.

[[Page 75150]]

    Response: We reiterate that the proposed rule and this final rule 
do not require regionalization but rather permit the creation of 
contract areas other than on a State-by-State basis. We appreciate the 
support for these regulatory provisions and agree that standardization 
and better targeting of subject-matter expertise will help increase the 
efficiency of the QIO Program and create better value for Medicare 
beneficiaries. While we did not propose in the proposed rule that we 
would establish a regional structure, we acknowledge that the proposed 
rule, once finalized, would accommodate that structure. We believe that 
having the flexibility to adopt a different QIO contract structure, if 
we choose to establish one, would enable the QIO Program to benefit 
from the lessons already learned through the multi-State corporate 
structure of many QIOs. There are currently 10 corporations that have 
coordinated separate QIO contracts to cover 26 States. In addition to 
the multi-State corporate structure, some QIOs have established 
subcontracting relationships with other QIOs for conflict of interest 
or administrative efficiency purposes that have also generated savings. 
Based on the QIO Program's history with these subcontracting and 
corporate structures that cross State lines, we believe that multi-
State QIO structures have been successfully tested as a model for 
potential QIO structural changes. At the same time, we believe that 
this final rule makes it clear that the local involvement and expertise 
that is so important will be maintained. As an example, the 
requirements in Sec.  475.102(a) of this final rule make it clear that, 
in determining eligibility for performing case review, we will take 
into consideration ``the organization's proposed involvement of and 
access to physicians and practitioners in the QIO area with the 
appropriate expertise and specialization in the areas of health care 
related to case reviews'' and ``the organization's ability to take into 
consideration urban versus rural, local, and regional characteristics 
in the health care setting where care under review is provided.'' 
Furthermore, the RFI issued in May 2013 also generated significant 
comment, in some cases from providers and provider associations, which 
we intend to consider as part of the procurement process. Also, we 
received public comments on our regulatory proposal from practitioners 
and providers, which we considered as part of this rulemaking. In 
addition to these opportunities to comment and present their views, we 
anticipate that providers and practitioners will provide us feedback on 
any changes that we will be implementing in the next QIO procurement 
and contract cycle so that we may continue to improve the QIO Program. 
In addition, Sec. Sec.  475.102(b) and 475.103(b), as finalized, permit 
CMS to consider size and location of an organization as part of 
determining whether the organization has demonstrated the ability to 
perform case review or quality improvement initiatives as a QIO. We 
intend to interpret and apply the provisions in Part 475 as finalized 
in this rule to ensure local experience and expertise are available, 
maintained, and utilized by all QIOs in connection with case reviews 
and where necessary for quality improvement initiatives.
    After consideration of the public comments we received, we are 
finalizing the proposed definition, without modification, of the term 
``QIO area'' to mean ``the defined geographic area, such as the 
State(s), region(s), or community(ties), in which the CMS contract 
directs the QIO to perform.'' This term appears throughout Part 475 and 
is used consistent with this definition.
    We also proposed to add definitions of the terms ``quality 
improvement initiative'' and ``practitioner'' to Part 475 and to define 
them by cross referencing the definitions of the terms in Sec.  476.1.
    Comment: One commenter noted that CMS proposed to cross-reference 
the definition of ``quality improvement initiative'' in Sec.  475.1 to 
Sec.  476.1 and indicated that a definition of ``quality improvement 
initiative'' was not included in the proposed rule nor does the Code of 
Federal Regulations (October 1, 2012 Edition) include a definition of 
it. The commenter suggested that CMS provide a definition of ``quality 
improvement initiative'' that reflects the principles of contemporary 
quality improvement.
    Response: The current definition of ``quality improvement 
initiative'' under Sec.  476.1 was finalized in the CY 2013 OPPS/ASC 
final rule with comment period (77 FR 68559). The regulations as 
amended are accessible through the electronic Code of Federal 
Regulations at www.ecfr.gov.
    We did not receive any public comments on the proposed cross-
reference to the term ``practitioner'' and are finalizing that 
definition for Part 475 without modification. After consideration of 
the public comment we received regarding the term ``quality improvement 
initiative,'' we also are finalizing this definition without 
modification.
3. Scope and Applicability of Subpart C of Part 475
    We believe that the scope and applicability provision for 42 CFR 
Part 475, Subpart C should reflect that the statutory authority for the 
QIO Program was amended by the TAAEA. In the CY 2014 OPPS/ASC proposed 
rule (78 FR 43674 through 43675), we proposed to replace the regulatory 
language in Sec.  475.100 with new language that explicitly 
acknowledges that the regulations in Subpart C implement sections 1152 
and 1153(b) and (c) of the Act as amended by section 261 of the TAAEA.
    We did not receive any public comments on the proposed revisions to 
Sec.  475.100, and we are finalizing these revisions as proposed 
without modification.
4. Eligibility Requirements for QIOs (Sec. Sec.  475.101 Through 
475.106)
    We have interpreted and the regulations in Part 475 implement the 
statutory definition in section 1152 of the Act as setting minimum 
eligibility requirements for an entity to hold a QIO contract. Our 
regulatory proposal in the CY 2014 OPPS/ASC proposed rule (78 FR 43675 
through 43678 and 43705 through 43706) proposed to implement the 
changes in the QIO eligibility standards made by the TAAEA.
    As a general matter, we recognize and appreciate the vital role of 
physicians in the work of the QIOs but also believe that some of the 
functions of the QIOs necessitate a multidisciplinary approach to 
quality improvement, inclusive of expertise from a wide breadth of 
disciplines. With the elimination of the requirement that a QIO be 
sponsored by or have access to physicians in a specific organizational 
structure, we proposed to delete the eligibility requirements in 
Sec. Sec.  475.101 through 476.104 related to the concepts of 
``physician-sponsored organization'' and ``physician-access 
organization.'' In light of the current multidisciplinary approach to 
QIO activities, we believe that expanding the existing eligibility 
requirements beyond ``physician-sponsored organizations'' and 
``physician-access organizations'' will both better reflect the 
flexibility Congress provided in the TAAEA amendments to section 1152 
of the Act and be inclusive of the multidisciplinary approach that 
currently exists in contemporary quality improvement.
    In the proposed rule, we solicited public comments on our focus on 
these primary QIO functions of case review and quality improvement 
initiatives and

[[Page 75151]]

how this functional approach would ensure that QIOs are appropriately 
selected for contract award. We proposed to vacate existing text at 
Sec. Sec.  475.104 and 475.106 and reserve these two section numbers.
    We respond to the public comments we received that are specific to 
each regulation topic below and address how we are finalizing 
Sec. Sec.  475.101 through 475.106. We note that, while some commenters 
specifically identified regulation sections as part of the comment, we 
have grouped the comments by topic.
a. Eligibility To Be Awarded a QIO Contract (Sec.  475.101)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43675 through 43676), 
we proposed that revised Sec.  475.101 would no longer reference 
``physician-sponsored organizations'' and ``physician-access 
organizations,'' would include a requirement that the governing body of 
the QIO include at least one consumer representative, and would include 
new eligibility standards for an organization to be awarded a QIO 
contract based on the TAAEA amendments to section 1152 of the Act. 
First, in paragraph (a), we proposed that a QIO must have a governing 
body that includes at least one representative of health care providers 
and one representative of consumers as required by sections 1152(2) and 
(3) of the Act as amended by the TAAEA. Second, in paragraph (b), we 
proposed to interpret and implement the amended language in section 
1152(1) of the Act that an organization awarded a QIO contract must be 
able, as determined by the Secretary, to perform the functions under 
the Act consistent with the purposes of the QIO Program and the 
Medicare program by requiring that an organization demonstrate the 
ability to meet eligibility requirements and perform the functions of a 
QIO. Our proposal characterized the functions of a QIO as the 
activities that are built into the request for proposals used to award 
QIO contracts and the ability to perform case reviews and/or quality 
improvement initiatives as described in these regulations. We stated 
that, in our view, these broad categories encompass the work QIOs are 
required to perform under section 1154 of the Act. We stated our belief 
that our proposal reflects a different approach to structuring the QIO 
requirements than the current rule: We proposed to focus on the 
functions the organization performs under the QIO contract instead of 
the structure of the organization itself. As discussed in more detail 
below in connection with proposed Sec. Sec.  475.102 and 475.103, this 
function-focused approach also reflects both the important role of 
physicians and a multidisciplinary approach for the two primary 
functions of the QIO contracts, case reviews and quality improvement 
initiatives. These two primary functions are based on the statutory 
requirements for the functions QIOs must perform and our current 
approach of using quality improvement initiatives to improve the 
quality of care provided to Medicare beneficiaries. By referencing the 
contractual requirements set forth in the requests for proposals, we 
proposed to incorporate the flexibility provided in section 1154(a) of 
the Act to require a QIO to perform one or more of the listed QIO 
functions and section 1154(a)(18) of the Act for the inclusion of 
additional activities for QIOs to perform when such additional 
activities are determined necessary to improve the quality of care for 
Medicare beneficiaries.
    Finally, in paragraph (c) of Sec.  475.101, we proposed that a QIO 
must demonstrate the ability to actively engage beneficiaries, 
families, and consumers, as applicable, in case reviews and quality 
improvement initiatives. Although this is not a specifically required 
qualification for a QIO under sections 1152 and 1153 of the Act, we 
proposed this requirement because it reflects the multidisciplinary and 
multi-stakeholder approach to QIO functions that we intend to 
establish. Health care costs have doubled as a share of the economy 
over the past three decades, causing stress on beneficiaries, families, 
employers, and government budgets. We stated our belief that motivating 
beneficiaries to become involved in their own health care may reduce 
waste and ultimately improve the quality and efficiency of health care. 
We noted that one important way to accomplish this is by educating 
beneficiaries, their families, providers, and the public about the 
importance of identifying and pursuing value in health care. Value 
represents the best possible quality of health care at the most 
reasonable cost. A major component of a successful value initiative 
depends on a QIO's understanding of patient and family goals, 
expectations, motivations, and aspirations. Our inclusion of the 
requirement that a QIO have the ability to actively engage 
beneficiaries, families, and consumers in health care decisions 
emphasizes our commitment to patient and family engagement as an 
essential component of the QIO Program.
    In the proposed rule, we solicited public comments on whether our 
proposal sufficiently incorporated the statutory flexibility, 
identified the goals of the QIO eligibility requirements, and provided 
guidance on how organizations will be determined eligible for QIO 
contracts.
    Comment: One commenter suggested that these proposed changes may 
qualify as ``lowering the standards to become a QIO'' and therefore 
stated that providers may not be willing to engage with these entities 
and progress may cease.
    Response: The commenter was not specific about how the proposal 
appeared to lower standards for QIOs. We recognize that our proposal 
would establish, in Sec.  475.101, the ``minimum level of resources and 
skills'' an organization must have in order to demonstrate its 
capability to perform as a QIO. However, we do not intend for these 
factors to be the only criteria we use to evaluate organizations 
requesting QIO contracts. The RFPs will include detailed information 
that will be used in evaluating each offeror. The standards we proposed 
at Sec. Sec.  475.102 and 475.103 are a description of the factors we 
may use and should not be interpreted as an exhaustive list.
    Comment: One commenter stated that the proposed change in the 
definition of eligible organizations to remove from Sec.  475. 105 the 
restriction from contracting with an association of health facilities 
may not ensure that all providers have equal access to quality 
improvement efforts within a given region. The commenter indicated that 
all trade and professional associations do not represent all providers 
within a region and questioned how CMS will assure ``equal access and 
assistance'' will be provided to all providers, regardless of 
membership status in the potential association being responsible for or 
involved in working with providers on quality initiatives. This 
commenter believed that if a trade or professional association were to 
become a QIO, that QIO would show preference to those providers who are 
members of its trade or association.
    Response: Although these comments were made in reference to 
proposed Sec.  475.102 and Sec.  475.103, we believe that all public 
comments concerning eligibility and our proposed changes to make some 
general requirement changes are best discussed together with the 
comments specifically addressing our proposed eligibility changes in 
Sec.  475.101. We also appreciate the concern that, by amending Sec.  
475.105 to expand eligibility to associations of health care 
facilities, some providers may not receive treatment equal to those 
providers affiliated with the professional organization. We note that 
the TAAEA specifically amended the statutory prohibition on 
associations of

[[Page 75152]]

health care facilities serving as QIOs and that our proposal to change 
Sec.  475.105 was designed to reflect the statutory change. In response 
to these concerns, we have added language to the QIO eligibility 
requirements in Sec.  475.101(d) to emphasize that an organization must 
demonstrate its ``ability to perform the functions of a QIO with 
objectivity and impartiality and in a fair and neutral manner.''
    Comment: In the context of the definition of ``QIO area'', some 
commenters stated that QIOs should have experience and a trusted 
relationship with practitioners when engaging in quality improvement 
initiatives, as these characteristics are necessary to ensure that 
patients are protected from errors, and that errors, when they occur, 
are corrected. These commenters also stated that QIOs must be able to 
demonstrate fairness to practitioners as well as a commitment to 
patient-centered care.
    Response: We agree with the commenters who requested that we 
include a requirement that an organization be able to perform QIO 
quality improvement initiative functions in a fair and neutral manner. 
We also believe that this criterion should be applied to all QIO 
functions. We agree that an organization should be free from any 
conflicts of interest and be able to demonstrate fairness and serve as 
an objective party. To address these concerns, we have added final 
language at Sec.  475.101(d), a requirement that QIO organizations be 
able to ``Demonstrate the ability to perform the functions of a QIO 
with objectivity and impartiality and in a fair and neutral manner.''
    Comment: Some commenters were concerned with CMS' proposal in Sec.  
475.101(c) that, in order for organizations to qualify for QIO 
contracts, they must demonstrate the ability to actively engage 
beneficiaries, families and consumers, as applicable, in case reviews 
or quality improvement initiatives. These commenters asked for further 
clarification as to how CMS envisions incorporating patients and 
families into the case review function. Some commenters asserted that 
it is appropriate to consider how patients and families can be of 
assistance in areas such as patient perception of care, patient 
decision-making, patient safety, and quality. In addition, these 
commenters asserted that consumer engagement in health care is a 
relatively new field with a small body of research and evidence and 
believed that CMS may be challenged to assess whether QIO applicants 
are able to demonstrate the ability to actively engage beneficiaries in 
case reviews.
    Response: We recently began a Patient and Family Engagement 
Campaign (PFEC), which has been implemented in 25 States. The purpose 
of this project is to support QIOs who propose fresh and original 
models to develop and implement a local PFEC that supports HHS' and 
CMS' goals of person-centeredness and family engagement. The underlying 
goals of this effort are to involve patients and families in decisions 
regarding health and healthcare in order to ensure consistency with 
patient preferences and priorities and empower them to take action for 
their own health care that could improve quality of life. We believe 
that this 1-year project will provide strategies and results that can 
be available for all QIOs to use. We also believe that the beneficiary 
complaint, and beneficiary appeal processes are excellent opportunities 
to incorporate patient and family engagement into case review 
activities. We expect to learn strategies from the PFEC that can be 
spread and utilized in future case review activities that involve 
direct communication with Medicare beneficiaries.
    Although Patient and Family Engagement is a relatively new field, 
we believe that there is sufficient activity in the health care 
community to require that QIOs incorporate Patient and Family 
Engagement techniques in their contract proposals, strategies, and 
techniques. Because current information regarding evaluation and 
measurement of Patient and Family Engagement is limited, we intend use 
evaluation strategies and benchmarks successfully adopted by the 
Hospital Engagement Networks (HENs) to measure this new QIO activity. 
Outside of those measurement techniques tested by HENs and proposed by 
QIOs, we are not planning to be immediately prescriptive in our 
requirements for measuring QIOs' tasks in this new field. We refer 
readers to the following CMS Web site for more information concerning 
HENs: http://partnershipforpatients.cms.gov/about-the-partnership/hospital-engagement-networks/thehospitalengagementnetworks.html.
    Comment: Some commenters supported the proposed changes to separate 
the two primary functions of the QIO contracts, case reviews and 
quality improvement initiatives, and supported the focus on the 
functions the organization performs rather than the structure of the 
organization itself. One commenter expressed concern regarding the 
extent to which CMS may further delineate or separate work within the 
case review and quality improvement functions and cautioned CMS against 
severe subdivision of work within each of the functions, as they 
believe this would require hospitals to potentially work with many 
different QIO contractors.
    One commenter argued that bifurcating case review and quality 
improvement initiatives would increase administrative burden on 
providers and weaken the collaborative relationship with providers, 
QIOs, and other community stakeholders. This commenter urged CMS to 
retain an integrated approach to QIO work. Other commenters supported 
separating these functions, but requested that CMS not separate the 
case reviews so much so that a provider could be working with multiple 
QIOs for different types of cases, as this could prove confusing, 
burdensome, and expensive.
    One commenter argued that the case review and quality improvement 
functions of QIOs should not be bifurcated because case review provides 
a QIO with the opportunity to identify, test, implement, and measure 
results in areas where providers need quality improvement assistance. 
The commenter also stated that fragmenting the functions would increase 
administrative burdens on providers because they would be required to 
act with multiple entities, and this would impede relationships between 
QIOs and facilities that are essential to quality improvement. Another 
commenter stated that CMS should consider a mechanism for linking 
quality improvement and case review contractors for the purpose of 
information sharing because, without this link, it is difficult to 
determine systemic and isolated issues. Another commenter stated that, 
if the two functions are bifurcated, there should be a plan for how 
these organizations will avoid giving conflicting, competing, or 
fragmented messages.
    Response: We believe that a division of case review from quality 
improvement work would benefit the program by removing the tension and 
potential conflict of interest between performing case review of 
providers' care and then attempting to engage those same providers in 
quality improvement initiatives to improve quality. As we have 
previously done, the QIO Program will continue and possibly expand its 
use of National Coordinating Centers (NCCs) to help with the 
coordination of case review and quality improvement work. Although 
providers may be asked to work with more than one QIO, allowing a 
single QIO to focus on a specific task will be beneficial to that QIO 
in becoming a stronger subject-matter

[[Page 75153]]

expert. The more expertise a QIO achieves, the more likely it will be 
that the QIO will effectively spread best practices in its engagement 
with providers. We believe that the flexibility to combine or separate 
these functions is best made during the contract process. Therefore, 
the regulation we are finalizing explicitly permits but does not 
require the division of these functions.
    Comment: Some commenters supported CMS' proposal to ensure that QIO 
governance includes representatives of consumers and health care 
providers. The commenters believed that including these representatives 
would ensure that the CMS envisioned multidisciplinary and multi-
stakeholder approach to QIO activities is implemented.
    One commenter agreed with the importance of ensuring that essential 
voices have a role in the governance of the QIOs but suggested that CMS 
avoid specifying QIO governance requirements which may be viewed as too 
prescriptive and may result in token rather than meaningful 
representation.
    Response: The requirement to have at least one consumer and one 
provider representative on the QIO's governance board is a statutory 
requirement from section 1152 of the Act. Therefore, we have no 
authority to eliminate this requirement in our regulations. We also 
believe that it is beneficial to the QIO Program to have both provider 
and consumer groups properly involved in QIO governance level decision-
making. However, to ensure that we are not too prescriptive in our 
governance requirements, we did not propose additional requirements or 
details beyond the statutory mandate. For example, we did not require 
that beneficiaries also be represented as members of the board. 
Instead, in Sec.  475.101(c), we chose to require that a QIO 
demonstrate its ability to actively engage these partners in case 
reviews and quality improvement initiatives.
    Comment: One commenter expressed concern that the possible change 
where by regional review agents would no longer need to be local, 
physician-based organizations and could be for-profit entities was 
insulated from public comment in the recent RFI.
    Response: We appreciate the public comments regarding our 
eligibility proposal in the proposed rule. The RFI was issued to 
solicit comments only on potential options for restructuring and 
dividing work among QIOs. Although some commenters believed that the 
RFI provided limited opportunity to comment on the overall changes CMS 
is considering, we knew that the public would have ample opportunity to 
comment on our proposal for revisions to the regulations to implement 
the statutory amendments that were created by the TAAEA through this 
regulation comment process. We understand the commenters' concern that 
QIOs are no longer required to be physician-sponsored or physician-
access organizations. However, as we discussed in the preamble to the 
proposed rule, we believe that contemporary quality improvement should 
involve a multidisciplinary team of practitioners. Although the 
revisions do allow for additional for-profit entities (health care 
associations) to be QIOs, there has never been a requirement that QIO 
organizations be nonprofit organizations.
    Comment: One commenter expressed concern that because quality 
improvement initiatives require complete trust in the participating 
organizations, it may be difficult for providers to separate the 
potential conflict that would exist between a payor organization that 
is both paying for services and providing assistance in improving 
quality and efficiency. The commenter stated that providers would be 
placed in the position of determining whether activities are truly in 
the best interest of the beneficiary or in the best interest of the 
payor organization.
    Some commenters requested that CMS revise the proposed regulatory 
language changes in the final rule to exclude provider and payor 
organizations from QIO eligibility criteria as either a prime 
contractor or as subcontractors, or to revise the proposed changes to 
reflect similar language to that of the State Medicaid agencies that 
are required to demonstrate that they can act with independence and 
objectivity from their own program. These commenters suggested that 
provider and payor organizations are advocates for their paying members 
and believed that there may be an unfair competitive advantage for 
other business opportunities where, for example, a State hospital 
association may be put in the position of reviewing and/or undertaking 
quality initiatives with its own members. In addition, the commenters 
stated that these proposed changes may undermine conflict-of-interest 
safeguards currently in place because these organizations have 
professional and financial relationships that they believe may hinder 
their ability to be independent and neutral.
    Response: We agree with the commenters that impartiality and 
objectivity are keystones to QIO success; these commenters suggested 
that we revise our proposed changes to Sec. Sec.  475.102 and 475.103 
to reflect similar language to that of proposed Sec.  475.102(c), which 
requires that State Medicaid agencies demonstrate that they can act 
with independence and objectivity from their own program. We also 
understand that payor organizations may find themselves in a difficult 
position when working with the providers who receive payments from the 
organization. We appreciate the public comments cautioning us about 
potential conflicts of interest that may arise from our proposal in 
Sec.  475.105 about the eligibility of payor organizations to serve as 
QIOs. We believe that all QIOs should be required to perform quality 
improvement initiatives in a fair and neutral manner and believe that 
this criterion should be applied to all QIO functions. We also agree 
that an organization should be free from any conflicts of interest and 
be able to serve as an objective party.
    To address these concerns, we are finalizing proposed Sec.  475.101 
by adding a new paragraph (d) that requires all QIOs to ``[d]emonstrate 
the ability to perform the functions of a QIO with objectivity and 
impartiality and in a fair and neutral manner.'' In addition, in this 
final rule, we have added language to Sec.  475.105(a)(3) to make payor 
organizations ineligible for QIO contracts unless the payor 
organization ``demonstrates to the satisfaction of CMS that, in 
performing QIO activities, the payor organization will act with 
complete objectivity and independence from its payor program.''
    After consideration of the public comments we received, we are 
adopting as final, with one minor technical modification, the proposed 
revised provisions of Sec.  475.101(a) through (c) that contain the 
requirements that an organization must meet to be eligible for a QIO 
contract. In paragraph (c), we are finalizing a minor technical 
modification to the text to use ``and/or'' instead of ``or'' to be 
consistent with how paragraph (b)(2) treats eligibility standards for 
performing case review and quality improvement initiatives. We are 
finalizing a new paragraph at Sec.  475.101(d) to add an objectivity 
and neutrality requirement as well.
    b. Eligibility Requirements for QIOs to Perform Case Reviews and 
Quality Improvement Initiatives (Sec.  475.102 and Sec.  475.103)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43676), we proposed to 
list the various factors CMS may use to determine that an organization 
has demonstrated its ability to perform case reviews. We stated that we 
do not consider this list to be comprehensive, but an indication of the 
types of factors

[[Page 75154]]

we intend to focus on. The list of factors emphasizes the importance of 
QIOs having access to qualified physicians and practitioners for the 
purpose of performing case reviews.
    Case reviews are concerned with care that was, should be, or should 
have been provided based on the facts of a particular case, concerning 
a particular episode of care or concerning a particular beneficiary, or 
both. By contrast, the vast majority of quality improvement initiatives 
are not initiated in the same manner as case reviews. Rather, quality 
improvement initiatives are based on patterns of care that reveal 
problems that are more systematic in nature, such as those that result 
in inefficiency, waste, or high cost, or that could potentially harm 
beneficiaries. These patterns of care can reflect problems that might 
impact large segments of the population or single episodes of care 
where the impact might affect fewer people, but the QIO is concerned 
about the health and safety of the public due to the severity of the 
quality of care issue. We proposed to revise Sec. Sec.  475.102 and 
475.103 to provide that CMS will determine if an organization is 
capable of performing case reviews and quality improvement initiatives, 
respectively, using an illustrative list of similar factors and 
including the same constraints on Medicaid agencies serving as QIOs 
(with the one additional requirement that these agencies demonstrate 
objectivity and independence from the Medicaid program). Because the 
proposals at Sec. Sec.  475.102 and 475.103 are similar, we discuss 
these proposals, the public comments we received, and the final 
provisions together.
    In Sec.  475.102(a) and Sec.  475.103(a), we proposed illustrative 
lists of the types of factors CMS may use to determine that an 
organization has demonstrated the ability to perform case reviews or 
quality improvement initiatives based on factors related to how the QIO 
work will be performed and the underlying capabilities necessary for 
performing well. We do not consider these lists to be comprehensive, 
but an indication of the kinds of factors on which we intend to focus. 
Under our proposals in Sec.  475.102(a)(1) and (a)(2) and Sec.  
475.103(a)(1) and (a)(2), CMS would consider virtually identical 
factors such as: (1) The organization's proposed processes, 
capabilities, quantitative and/or qualitative performance objectives, 
and methodology for performing case reviews or quality improvement 
initiatives; and (2) the organization's proposed involvement of and 
access to physicians and practitioners in the QIO area with appropriate 
expertise and specialization in the areas of health care related to 
case reviews or quality improvement initiatives.
    Under Sec.  475.102(a)(3) and (a)(4), with respect to performing 
case reviews, we proposed that CMS would consider the organization's 
ability to take into consideration urban versus rural, and regional 
characteristics in the health care setting where the care under review 
was provided; and the organization's ability to take into consideration 
evidence-based national clinical guidelines and professionally 
recognized standards of care. Under Sec.  475.103(a)(3), with respect 
to performing quality improvement initiatives, we proposed that CMS 
would consider the organization's access to professionals with 
appropriate knowledge of quality improvement methodologies and 
practices. Our proposals at Sec.  475.102(a)(5) and Sec.  475.103(a)(3) 
included the use of virtually identical evaluation factors such as the 
organization's access to qualified information technology (IT) 
expertise. In the proposed rule, regarding Sec.  475.102(a) and Sec.  
475.103(a), we solicited comment on whether the regulation text should 
incorporate the standards for QIOs that we proposed to use and the 
factors we intend to consider when determining whether those standards 
have been met. The comments received and our responses are set forth 
below.
    Comment: One commenter suggested that, in determining QIO 
eligibility as a result of the proposed changes, CMS consider how case 
review types, such as beneficiary complaints and general quality of 
care reviews, may be more effective when carried out by a local QIO 
organization rather than a regional model. In addition, as noted above, 
several other commenters raised concerns about using regions rather 
than States as the service area for QIO contracts.
    Response: We discuss above many of the public comments about 
regional QIO contracts in the context of our rule finalizing the 
definition of ``QIO area.'' We also considered whether the success of 
case review types that involve direct contact with beneficiaries would 
suffer under a regional model. We believe that an established 
subcontracting relationship that one QIO currently has with 20 other 
QIOs to perform appeals work for them during the weekends serves as a 
model that has shown that this type of multi-State coordination can be 
done. In fact, this arrangement has been done seamlessly and with 
greater efficiency than the State-based model. This model allows those 
QIOs who have a low volume of appeals during their weekend downtime to 
direct those cases to a single entity. This arrangement has generated 
savings in administrative overhead by redirecting the fragmented volume 
to one QIO for more efficient processing. We believe that the success 
of this existing model could be replicated under regional QIO contracts 
for case review functions. However, as we discuss above, we agree with 
commenters that sensitivity to and knowledge of the local health care 
area and issues are necessary for QIO success. Along these lines, we 
are finalizing Sec.  475.102(a)(3) with the addition of the word 
``local'' to clarify that this is one of the factors to be considered 
in determining whether an organization has demonstrated the ability to 
perform case reviews. In addition, we note that Sec. Sec.  475.102(b) 
and 475.103(b) explicitly permit CMS to consider the geographic 
location of an organization as part of this determination about the 
ability to perform, respectively, case reviews and quality improvement 
initiatives.
    Comment: Although some commenters supported CMS' proposed criteria, 
many commenters suggested additional or revised criteria for 
determining whether an organization has demonstrated the ability to 
perform case reviews. Some commenters indicated that CMS should add to 
its evaluation criteria whether an organization can conduct case 
reviews in a fair and neutral manner. One commenter suggested that CMS 
add: (1) Experience as a QIO; (2) whether the organization has a 
formal, internal quality management system; (3) whether the staff has 
quality credentials (for example, Certified Professional in Healthcare 
Quality, Certified Health Care Quality Management, and Six Sigma); and 
(4) whether the organization is free of actual or perceived 
organizational conflicts of interest and able to serve as an objective 
party. One commenter specifically requested guidance regarding CMS' 
statement that it will not ``limit evidence an organization may present 
to demonstrate its capability to perform case reviews'' when reviewing 
prior experience. Many commenters suggested additional or revised 
criteria for determining whether an organization has demonstrated the 
ability to perform quality improvement activities. These commenters 
suggested that CMS add: (1) Ability to foster a relationship of trust 
and engagement with clinicians and executive leaders; (2) demonstrated 
capability to convene and establish effective working relationship with 
various stakeholders, because QIOs

[[Page 75155]]

should support coordinated care and breaking down silos and building a 
more coordinated infrastructure; (3) demonstrated capacity to collect, 
analyze, and share data with providers that spurs improvement because 
data collection and sharing data are critical in quality improvement; 
(4) ability to complement and not duplicate quality improvement efforts 
already underway through State, regional, and Federal programs; (5) 
ability to access and include others, especially those with performance 
improvement experience; (6) experience with and an approach to change 
management because CMS has on many occasions stated that QIOs will be 
required to represent CMS as ``change agents''; (7) demonstrated 
ability to be a neutral, independent organization and provide objective 
assistance to providers without favoritism or conflict of interest, 
specifically because failing to achieve quality metrics can lead to 
financial penalties; and (8) demonstrated ability to share best 
practices.
    Response: As discussed above in connection with our final rule at 
Sec.  475.101(d), we believe that whether an organization can conduct 
case reviews in a fair and neutral manner is an important consideration 
and that this criterion of neutrality and fairness should be applied to 
all QIO functions. In addition, we agree that this regulation should 
not limit the information and factors used to determine whether an 
organization applying to be a QIO has demonstrated its ability to 
perform case review and/or quality improvement initiatives. Because we 
are finalizing our proposal to expand criteria to qualify for QIO 
contracts beyond physician-sponsored and physician-access organizations 
and we intend to make our qualification criteria fair for all potential 
organizations who qualify, we will interpret and implement Sec. Sec.  
475.102 and 475.103 as providing illustrative and nonexhaustive 
criteria for consideration. We do not plan to unreasonably limit 
evidence an organization may present to demonstrate its capability to 
perform QIO functions to specific QIO experience and agree that 
information such as that identified by the commenters may be relevant. 
We particularly appreciate the recommendation that we require that all 
QIO organizations have a formal internal quality management system and 
a staff with quality credentials, and although the factors listed in 
paragraph (a) are not meant as an exhaustive list, we will take into 
consideration the requirements recommended by these commenters and we 
may include them in our RFPs.
    Comment: Commenters requested more information regarding how CMS 
will evaluate and weigh reasons for and against the award of contracts, 
and noted that CMS proposed nonexhaustive lists of types of factors 
without specifying the weight each would receive or what other factors 
CMS might consider.
    Response: Although we proposed to establish the ``minimum level of 
resources and skills'' an organization must have in order to 
demonstrate its capability to perform as a QIO, we do not intend for 
the factors listed in the regulations to be the only criteria we use in 
our evaluation of organizations requesting QIO contracts. The RFP will 
include detailed information that will be used in evaluating each 
offeror and, if we decide to use a weighted evaluation methodology, the 
weights to be used in the evaluation of proposals.
    Our proposals at Sec.  475.102(b) and Sec.  475.103(b) include the 
following virtually identical evaluation factors. In paragraph (b) of 
these sections, we proposed that CMS may consider characteristics such 
as the geographic location, size, and prior experience, that CMS finds 
relevant, of an organization in order to determine whether the 
organization has the capability to perform case review activities or 
quality improvement initiatives. A summary of the public comments we 
received on paragraph (b) of Sec. Sec.  475.102 and 475.103 and our 
responses are set forth below.
    Comment: Some commenters supported using a regional approach to 
conduct case reviews. However, the commenters urged CMS to make sure 
that contractors have mechanisms in place to ensure that they 
comprehend and consider regional characteristics of providers. Another 
commenter argued that case reviews would be more effective when done 
locally rather than by a centralized or regional organization because 
it is more effective for a local QIO to uncover breakdowns in systems 
and processes of care.
    Response: In addition to the provisions in paragraph (a) of 
Sec. Sec.  475.102 and 475.103 that address involvement and access to 
physicians with appropriate expertise and our addition of local 
characteristics to the list of what a QIO must be able to consider in 
performing case review, our proposal in paragraph (b) for both 
Sec. Sec.  475.102 and 475.103 would permit CMS to consider the 
geographic location and size of organizations applying to be QIOs. As 
noted above, we believe that the current QIO tested subcontracting 
structure for handling appeals review across State lines verifies that 
case review can be performed effectively and efficiently through a more 
regionalized structure. To the extent that the geographic location of 
an organization is a barrier or enhancement to successful performance, 
the regulation as proposed and as finalized would permit CMS to 
consider the location. The final rule provides the flexibility that is 
necessary to consider all relevant facts about the geographic location 
and size of an organization compared to the QIO area that will be 
served. Further, the addition of the term ``local'' to Sec.  475.102(a) 
clarifies that we deem the consideration of local characteristics 
essential.
    Comment: Another commenter stated that the second sentence proposed 
in Sec.  475.103(b) should be revised so that CMS must consider prior 
experience in health care quality improvement and that such prior 
experience must include conducting quality improvement initiatives that 
achieved successful results.
    Response: We agree with the recommendation that CMS should consider 
prior experience in health care quality improvement and whether that 
such prior experience achieved successful results. In response to this 
comment, we are finalizing Sec.  475.103(b) with additional language to 
include the commenter's suggestion that CMS consider relevant quality 
improvement initiative experience and whether it achieved successful 
results.
    Finally, we proposed to include in a revised version of paragraph 
(c) of Sec.  475.102 clarifications to the text that reflect the 
existing regulatory text at Sec.  475.104(d), with some minor 
modifications. Section 475.104(d) currently includes requirements that 
a State government must meet in order to qualify as a QIO. Under our 
proposal, Sec.  475.102 would be revised to apply this additional 
requirement in connection with case reviews. Similarly, as proposed, 
the provision at Sec.  475.103(c) includes the requirements that a 
State government must meet to qualify as a QIO that performs quality 
improvement initiatives. While both Sec. Sec.  475.102(c) and 
475.103(c), with respect to State governments that administer a 
Medicaid program, maintain the substance of the existing rule, each of 
this makes it clear that the scope of the review will be limited to 
case review and quality improvement initiatives, respectively. In order 
to do this, in Sec.  475.102(c), we proposed to replace the term 
``utilization and quality review functions'' with the term ``case 
review'' and in Sec.  475.103(c), we proposed to replace the same term 
with ``quality improvement initiatives.'' We proposed

[[Page 75156]]

to revise the language in Sec.  475.102(c) and Sec.  475.103(c) to 
clarify that the objectivity and independence mentioned in the existing 
regulation relate to objectivity and independence from the Medicaid 
program, as we believe there is an inherent conflict of interest that 
arises from the State's financial interest in the administration of 
that program. We did not receive any public comments on the proposed 
revisions to Sec.  475.102(c) and Sec.  475.103(c), and therefore are 
finalizing them as proposed.
    We also received a number of public comments about Sec. Sec.  
475.102 and 475.103 generally rather than about specific paragraphs of 
those sections. We address those public comments below.
    Comment: Commenters stated that QIOs should be permitted 
flexibility to offer different types of assistance to providers because 
many different approaches may be pursued by providers in a given 
jurisdiction.
    Response: We appreciate this comment and do not plan to use this 
regulation to prohibit QIOs from offering technical assistance or to 
implement quality improvement initiatives through approaches and 
techniques if they are determined to be the best for the population in 
the QIO area.
    Comment: Commenters suggested that CMS allow hospitals to work with 
multiple QIOs because different QIOs may have various types of subject-
matter expertise. However, commenters also noted that managing multiple 
contracts may be difficult for small or resource-strapped hospitals, 
potentially limiting their involvement in quality improvement 
activities.
    Response: We appreciate the support for separating some QIO 
functions to allow for QIO development of specialized expertise and 
will take this comment into consideration when developing the details 
in our RFPs. We also understand that working with multiple QIOs may be 
difficult, and we will include national coordination of QIO tasks 
through NCCs to aid providers in navigating the QIO contract structure.
    Comment: One commenter stated that it is essential to quality 
improvement initiative work to have a local presence and understand 
contextual factors such as pressures and incentives of the community 
and its circumstances. Another commenter stated that the planned 
changes would make QIOs less focused on quality improvement at the 
community level and less able to forge partnerships with providers and 
patients to address challenges.
    Response: We agree with the importance of a local presence as a 
means to forge important partnerships with providers and beneficiaries. 
We intend to spell out these requirements in detail in the RFPs. We 
believe that our intent is made clear in Sec.  475.103 of the 
regulations which states that in determining eligibility for performing 
quality improvement initiatives, we will take into consideration ``the 
organization's proposed involvement of and access to physicians and 
practitioners in the QIO area with the appropriate expertise and 
specialization in the areas of health care concerning the quality 
improvement initiative'' and that paragraph (b) permits us to consider 
the geographic location of a QIO as necessary. Our intent is to put in 
place safeguards to ensure there is local involvement during quality 
improvement initiatives. Although case review concerns care that was 
given at one specific place, quality improvement initiatives may 
address national or regional issues. We would like to reiterate that 
these characteristics are not an exhaustive list and that these factors 
can be considered in each procurement as necessary.
    Commenters on the proposed revisions to Sec.  475.102 and Sec.  
475.103 also raised the topic of objectivity and impartiality of the 
QIO. These public comments are addressed above in connection with the 
general eligibility requirements in Sec.  475.101.
    After consideration of the public comments we received, we are 
adopting proposed Sec. Sec.  475.102 and 475.103 as final, with 
modifications. We are finalizing paragraph (a)(3) of Sec.  475.102 with 
the addition of ``local'' to the list of characteristics that an 
organization must be able to take into consideration. We also are 
making minor revisions to the proposed text in finalizing Sec.  
475.103: (1) to change the wording in Sec.  475.103(a)(2) and (a)(3) in 
order to mirror the language in Sec.  475.102(a)(2) and to avoid any 
inadvertent ambiguity as to whether these provisions will be 
interpreted consistently; (2) to make technical edits to the text of 
Sec.  475.103(a)(2) and (a)(3) to change ``initiative'' to 
``initiatives'' and ``methodologies'' to ``methodology'' to improve 
readability of these paragraphs; (3) to create Sec.  475.103(a)(4) to 
reorganize how we have included access to qualified information 
technology expertise as a factor; and (4) to revise Sec.  475.103(b) to 
specify that CMS may consider whether quality improvement initiative 
experience ``achieved successful results.''
c. Prohibitions on Eligibility as a QIO (Sec. Sec.  475.105 and 
475.106)
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43677), we proposed 
revisions to Sec.  475.105(a)(2) to eliminate the prohibition against 
an association of health care facilities being awarded a QIO contract, 
to reflect a TAAEA amendment deleting this restriction from section 
1153(b)(3) of the Act. We also proposed to move the existing provision 
covering the exclusion of health care facility affiliates in paragraph 
(a)(3) to paragraph (a)(2), and to create a revised paragraph (a)(3) 
that would include payor organizations as excluded entities unless they 
meet certain exception requirements identified in section 1153(b)(2)(B) 
of the Act. Prior to the TAAEA amendment, the statute imposed two 
prohibitions on CMS contracting with a payor organization to perform 
QIO functions: A prohibition applicable before November 15, 1984 and a 
prohibition with exceptions for periods of time after November 15, 
1984. After November 15, 1984, a payor organization could perform as a 
QIO if the Secretary determined that there were no other entities 
available for a QIO area. These restrictions were implemented in the 
existing regulations codified at Sec. Sec.  475.105(b) and 475.106. The 
TAAEA amendments left unchanged the prohibition in effect for the 
period of time before November 15, 1984, but revised section 
1153(b)(2)(B) of the Act to add exceptions to the prohibition 
applicable after November 15, 1984. Section 1153(b)(2)(B) of the Act, 
as amended, permits the award of a QIO contract to a payor organization 
not only when the Secretary determines that there is no other entity 
available for an area, but also when the Secretary determines that 
there is a more qualified entity to perform one or more of the 
functions in section 1154(a) of the Act, if the entity meets all other 
requirements and standards in the QIO statute. We read this provision 
to mean that, when the Secretary determines that a payor organization 
is more qualified than a nonpayor organization in the QIO area to 
perform one or more of the functions in section 1154(a) of the Act, the 
payor entity can qualify as a QIO so long as all other eligibility 
criteria are met. We reflected this interpretation in the proposed rule 
as Sec.  475.105(a)(3). As discussed in section XVII.C.4.a. of this 
final rule with comment period, after consideration of the public 
comments we received, we also are revising the final requirement under 
Sec.  475.101(d) to impose a general objectivity requirement for all 
QIOs. In addition to

[[Page 75157]]

that, under Sec.  475.105(a)(3), we are finalizing specific provisions 
for payor organizations that serve as QIOs which state that any payor 
organization meeting these requirements (now broken out and specified 
in Sec.  475.105(a)(3)(i)) must also demonstrate to CMS' satisfaction 
that ``in performing QIO activities,'' the payor organization will act 
with complete objectivity and independence from its payor program (now 
specified in Sec.  475.105(a)(3)(ii)).
    The existing paragraph (b) of Sec.  475.105 prohibits payor 
organizations from being QIOs prior to November 15, 1984. Since that 
date has long passed, we believe this paragraph should be eliminated. 
We proposed to delete and reserve paragraph (b) of Sec.  475.105 in its 
entirety. Paragraph (c) was proposed to remain largely unchanged except 
for a minor terminology update to clarify in the regulation text that 
the term ``facility'' is meant to refer to a ``health care facility'' 
and to change the term ``conduct any review activities'' to ``perform 
any case review activities'' to indicate our separation of case review 
functions from quality improvement initiatives. We stated that we do 
not believe that these proposed changes affect the underlying substance 
of the prohibitions.
    As noted above, we proposed to delete and reserve all of Sec.  
475.106 in light of our proposed changes to Sec.  475.105. We noted our 
belief that aspects of Sec.  475.106 that we have not proposed to 
incorporate into Sec.  475.105 are obsolete due to the passage of time.
    Comment: Some commenters believed that health care affiliates 
should not conduct case reviews of health care facilities in the QIO 
area but also believed health care facility affiliates may be excellent 
organizations to lead the quality improvement functions of QIOs as 
evidenced through the achievements made through the HEN initiative. 
Therefore, the commenters requested that CMS revise the language of the 
proposed changes in the final rule so that health care facility 
affiliates would be eligible for QIO contracts that focus on quality 
improvement efforts. In addition, the commenters indicated that if CMS 
were not to make this suggested revision, then CMS would preclude some 
of the entities with whom CMS currently partners under the HEN 
initiative from becoming QIO contractors.
    Response: We believe that implementing the additional flexibilities 
granted by the changes in the statute will improve the QIO Program. 
However, based on the authority being adopted with the revisions to 
Sec. Sec.  475.101 through 475.103, we will cautiously make changes 
that have been tested and that have appropriate safeguards to protect 
against any real or perceived conflict of interest among QIOs, 
providers, and beneficiaries. Section 1153(b)(3) of the Act expressly 
prohibits a health care facility or an affiliate of a health care 
facility from serving as a QIO in the area within the area served by 
the facility. The statute also specifies when an organization will not 
be considered to be affiliated with a health care facility in 
connection with this prohibition. We believe that the restriction under 
section 1153(b)(3) of the Act prohibits CMS from entering into QIO 
contracts with health care affiliates, as reflected in this final rule, 
means that some current quality contractors (such as some HENs 
participating in the Partnership for Patients initiative, for example) 
may not qualify as QIOs.
    After consideration of the public comment we received, we are 
adopting, as final, proposed revised Sec.  475.105 with one 
modification: We are adding language under paragraph (a)(3) and, in the 
process, splitting some of the text in paragraph (a)(3) into two 
paragraphs (i) and (ii), to specify that a payor organization will be 
considered ineligible for QIO contracts unless a payor organization is 
a more qualified entity to perform one or more of the functions of a 
QIO described in Sec.  475.101(b), meets all the other requirements and 
standards of the part, and demonstrates to the satisfaction of CMS 
that, ``in performing QIO activities, the payor organization will act 
with complete objectivity and independence from its payor program.''
5. QIO Contract Awards (Sec.  475.107)
    The existing regulations at 42 CFR Part 475 include requirements 
related to the establishment of QIO contracts and the assignment of 
bonus points. We proposed to delete the portions of existing Sec.  
475.107(c) pertaining to the assignment of up to 10 percent of 
available bonus points to physician-sponsored organizations, and the 
assignment of points in connection with the structure of the 
organization as ``physician-sponsored'' or ``physician-access'' because 
these provisions are obsolete in light of the changes to section 
1152(1) of the Act and our proposals relating to the eligibility 
standards for an organization awarded a QIO contract. We also proposed 
to use cross-references in Sec.  475.107(a) and (b) to the revised 
standards we proposed in Sec. Sec.  475.101 through 475.103. We 
proposed to retain the regulatory language that requires CMS to 
identify proposals that meet the requirements of Sec.  475.101 
(proposed Sec.  475.107(a)) and to identify those proposals that set 
forth minimally acceptable plans in accordance with the requirements of 
Sec.  475.102 or Sec.  475.103, or both as applicable (proposed Sec.  
475.107(b)).
    In addition, we proposed to revise the regulatory language 
addressing the length of QIO contracts. The existing Sec.  475.107(d) 
states that the contract for a given QIO area to the selected 
organization cannot exceed 2 years, which is inconsistent with the 
current statutory provision at section 1153(c)(3) of the Act. We 
proposed to redesignate this provision as paragraph (c) and to provide 
for a 5-year contract term as required by section 1153(c)(3) of the 
Act, as amended by section 261 of the TAAEA.
    We received public comments related to these topics and discuss 
them below.
    Comment: Some commenters stated that CMS' proposal that QIO 
contract awards be based on the selection of an organization from all 
proposals that set forth minimally acceptable plans may be construed to 
limit the contract award determination to a ``lowest price technically 
acceptable standard'' (LPTA). In addition, the commenters discouraged 
CMS from applying LPTA evaluation criteria and proposed that CMS 
continue its current policies and make selection based on a 
determination of best value using a ``tradeoff'' evaluation process in 
which technical quality is the primary consideration and all other 
evaluation factors are more important than cost/price.
    One commenter also noted that ensuring the highest quality services 
should be considered the ultimate criterion in selecting a quality 
improvement organization. Another commenter noted the value of LPTA 
procurements, but suggested that, if CMS applies this approach to case 
reviews, it define ``technically acceptable'' to ensure adequate 
quality because ensuring the highest quality services should be 
considered the ultimate criterion in selecting a case review QIO. Some 
commenters further suggested that CMS clarify the proposed changes 
pertaining to past performance because they believed that, in the 
context of lowest price technically acceptable, an offeror whose 
experience is ``unknown'' is considered ``acceptable'' for contract 
award. These commenters asserted that CMS' proposed changes (to use 
lowest price technically acceptable and consider past performance) are 
conflicting and reiterates that, if prior experience/past performance 
is important, lowest price

[[Page 75158]]

technically acceptable bids are not an acceptable evaluation criterion.
    Response: Although these commenters generally identified Sec. Sec.  
475.101, 475.102 and 475.103 as the basis for the comments, we discuss 
these comments here because they also address concerns about the 
process we proposed in Sec.  475.107 for how to conduct the procurement 
for QIO contracts. Part of our proposal was meant to establish the 
``minimum level of resources and skills'' that an organization must 
have in order to demonstrate its capability to perform as a QIO and we 
proposed at Sec.  475.107(a) and (b) that CMS identify the proposals 
that meet the standards described in Sec. Sec.  475.101 through 
475.103. However, we did not intend for the factors listed in those 
sections to be the only criteria in our evaluation of organizations 
requesting QIO contracts or the ultimate decision to award a QIO 
contract. In addition to the minimum requirements listed in Sec.  
475.101, other standards we included in other sections are examples of 
the factors we may use and should not be interpreted as an exhaustive 
list.
    We do not intend to change our evaluation methodology to begin 
using the lowest price technically acceptable standard and did not 
intend our proposal to suggest that. We will continue our current 
practice of making a selection based on a determination of best value 
that takes into consideration both technical quality and price. As the 
contracting process is a public one, with administrative processes for 
questions to be asked and answered, protests to be filed and addressed, 
and subject to oversight, we are confident that organizations applying 
to receive QIO contracts will be adequately informed of the evaluation 
criteria and methods used to award contracts and that it is in the best 
interest of the QIO Program for the regulatory standards to be 
flexible.
    We are finalizing text at Sec.  475.107(a) that we believe more 
clearly communicates that CMS will ensure compliance with the minimum 
standards described in Sec. Sec.  475.101 through 475.105 without 
suggesting that CMS will award contracts to every entity that meets 
those minimum requirements. The text finalized in this final rule at 
Sec.  475.107 makes it clear that CMS will ensure that all QIO awardees 
meet the requirements of Sec. Sec.  475.101 through 475.103, subject to 
the restrictions at Sec.  475.105. In addition, we believe that the 
text as finalized preserves the statutory flexibility provided for the 
contracting process consistent with the intent underlying our proposal. 
The finalized regulation at Sec.  475.107(a) will ensure that QIO 
contract awardees meet the requirements of Sec. Sec.  475.101, 475.102, 
and 475.103, as applicable and subject to the prohibitions in Sec.  
475.105.
    Comment: Many commenters supported CMS' proposed changes of 
extending the contracting period from 3 years to 5 years. Some 
commenters stated that this proposal may allow for an improvement in 
the QIO's review activities through sustained data collection. In 
addition, these commenters indicated that this proposed change would 
provide more time to focus on the assigned tasks rather than the 
demands of the contracting cycle.
    One commenter stated that it would be prudent for CMS in awarding a 
contract to a new QIO organizational type to consider awarding a 2-year 
contract with 3 optional 1-year expansions in order to be certain that 
the new QIO organization is capable of performing the tasks in an 
acceptable manner.
    Response: We appreciate the commenters' support of the change in 
contract term to 5 years. We agree that the 5-year contract cycle will 
allow CMS and the QIOs to have a meaningful portion of the contract 
term to concentrate on program work and the assigned tasks rather than 
preparing for contract transition. We acknowledge the commenter's 
suggestion that a shorter base period with option years may allow for 
us to make contract changes if a new organization is having difficulty 
with the contract requirements. However, section 1153(c)(3) of the Act 
requires that the contract ``shall be for an initial term of five years 
and shall be renewable for terms of five years thereafter.'' Therefore, 
we are finalizing the proposed language that extends the QIO contract 
term to 5 years.
    After consideration of the public comments we received, we are 
adopting, as final, proposed Sec.  475.107 with modifications. We are 
revising Sec.  475.107 to make the language more succinct and to avoid 
any misinterpretation that this section might somehow restrict 
contracting procedures or otherwise limit the Agency's flexibility. 
Further, we are finalizing, at paragraph (b) instead of at paragraph 
(c), the proposed language for the length of QIO contracts.

XVIII. Final Rule: Medicare Fee-for-Service Electronic Health Record 
(EHR) Incentive Program

A. Incentive Payments for Eligible Professionals (EPs) Reassigning 
Benefits to Method II CAHs

    Section 1848(o)(1)(A) of the Act, as amended by section 4101(a) of 
the HITECH Act, establishes the Medicare EHR Incentive Program, which 
provides for incentive payments to eligible professionals (EPs) who are 
meaningful users of certified EHR technology during the relevant EHR 
reporting periods. Section 1848(o)(1)(A)(i) of the Act provides that 
EPs who are meaningful EHR users during the relevant EHR reporting 
period are entitled to an incentive payment amount, subject to an 
annual limit, equal to 75 percent of the Secretary's estimate of the 
Medicare allowed charges for covered professional services furnished by 
the EP during the relevant payment year. Under section 
1848(o)(1)(B)(ii) of the Act, an EP is entitled to an incentive payment 
for up to 5 years. In addition, in accordance with section 
1848(o)(1)(A)(ii) of the Act, there shall be no incentive payments made 
with respect to a year after 2016.
1. Background for Definition of EPs and EHR Incentive Payments to EPs
    In accordance with section 1848(o)(5)(C) of the Act, in the final 
rule for Stage 1 of the EHR Incentive Program (75 FR 44442), we 
established a definition of the term ``eligible professional'' in the 
regulations at 42 CFR 495.100 to mean a physician as defined under 
section 1861(r) of the Act. Section 1861(r) of the Act defines the term 
``physician'' to mean the following five types of professionals, each 
of which must be legally authorized to practice their profession under 
State law: A doctor of medicine or osteopathy; a doctor of dental 
surgery or dental medicine; a doctor of podiatric medicine; a doctor of 
optometry; or a chiropractor. As also discussed in that final rule (75 
FR 44439), in accordance with section 1848(o)(1)(C) of the Act, 
hospital-based EPs are not eligible for an EHR incentive payment. The 
term ``hospital-based EP'' is defined in Sec.  495.4 of the regulations 
as ``Unless it meets the requirements of Sec.  495.5 of this part, a 
hospital-based EP means an EP who furnishes 90 percent or more of his 
or her covered professional services in sites of service identified by 
the codes used in the HIPAA standard transaction as an inpatient 
hospital or emergency room setting in the year preceding the payment 
year, or in the case of a payment adjustment year, in either of the 2 
years before such payment adjustment year.'' Paragraphs (1)(i) and 
(1)(ii) of the definition specify how the percentage of covered 
professional services is calculated for Medicare for purposes of the 
payment years and payment adjustment years, respectively. We note a 
discrepancy between the regulation text for this definition and

[[Page 75159]]

the final policy we established in the preamble of the EHR Incentive 
Program Stage 2 final rule (77 FR 54102). Under the policy we finalized 
in that rule, we determine whether an EP is hospital-based for a 
payment adjustment year using either of the following Federal fiscal 
year's (FY) data: (1) The fiscal year before the year that is 1 year 
prior to the payment adjustment year (for example, FY 2013 data for 
payment adjustment year 2015); or (2) the fiscal year before the year 
that is 2 years prior to the payment adjustment year (for example, FY 
2012 data for payment adjustment year 2015). If the data from either 
year result in a hospital-based determination, the EP would not be 
subject to the payment adjustments for the relevant year. In the 
definition under Sec.  495.4 of the regulations, however, paragraph 
(1)(ii) incorrectly refers to the fiscal year preceding the payment 
adjustment year and the fiscal year 2 years before the payment 
adjustment year. The introductory text of the definition also 
incorrectly references either of the 2 years before such payment 
adjustment year. In the CY 2014 OPPS/ASC proposed rule (78 FR 43678), 
we indicated that we were taking this opportunity to make a technical 
correction to paragraph (1)(ii) and the introductory text of the 
definition of ``hospital-based EP'' at Sec.  495.4 to conform to the 
policy stated in the preamble of the EHR Incentive Program Stage 2 
final rule (77 FR 54102). We proposed to revise paragraph (1)(ii)(A) of 
the definition to read ``The Federal fiscal year 2 years before the 
payment adjustment year; or'' and paragraph (1)(ii)(B) of the 
definition to read ``The Federal fiscal year 3 years before the payment 
adjustment year.'' We also proposed to revise the introductory text of 
the definition to reference, in the case of a payment adjustment year, 
either of the 2 years before the year preceding such payment adjustment 
year.
    We did not receive any public comments on our proposal to make 
these technical corrections to the definition of ``hospital-based EP'' 
in Sec.  495.4 of the regulations. Therefore, we are finalizing these 
technical corrections as proposed. Specifically, (1) paragraph 
(1)(ii)(A) of the definition of ``hospital-based EP'' in Sec.  495.4 is 
revised to read ``The Federal fiscal year 2 years before the payment 
adjustment year; or'' and paragraph (1)(ii)(B) of the definition is 
revised to read ``The Federal fiscal year 3 years before the payment 
adjustment year.''; and (2) the introductory text of the definition is 
revised to reference, in the case of a payment adjustment year, either 
of the 2 years before the year preceding such payment adjustment year.
    Section 1848(o)(5)(A) of the Act defines covered professional 
services as having the same meaning as in section 1848(k)(3) of the 
Act; that is, services furnished by an eligible professional for which 
payment is made under, or is based on, the Medicare Physician Fee 
Schedule (MPFS). In accordance with section 1848(a)(1) of the Act, the 
Medicare allowed charge for covered professional services is the lesser 
of the actual charge or the MPFS amount established in section 1848 the 
Act. As specified under section 1848(o)(1)(A)(i) of the Act, the 
Secretary's estimate of allowed charges for EHR incentive payments is 
based on claims submitted to Medicare no later than 2 months following 
the end of the relevant payment year.
    Section 1848(o)(1)(B)(i) of the Act sets forth the annual limits on 
the EHR incentive payments to EPs. Specifically, section 1848(o)(1)(B) 
of the Act provides that the incentive payment for an EP for a given 
payment year shall not exceed the following amounts:
     For the EP's first payment year, for such professional, 
$15,000 (or $18,000, if the EP's first payment year is 2011 or 2012);
     For the EP's second payment year, $12,000;
     For the EP's third payment year, $8,000;
     For the EP's fourth payment year, $4,000;
     For the EP's fifth payment year, $2,000; and
     For any succeeding year, $0.
    Under section 1848(o)(1)(B)(iv) of the Act, for EPs who 
predominantly furnish services in a geographic HPSA (as designated by 
the Secretary under section 332(a)(1)(A) of the Public Health Service 
Act), the incentive payment limitation amounts for each payment year 
are increased by 10 percent. Section 1848(o)(1)(B)(iii) of the Act also 
provides for a phased reduction in payment limits for EPs who first 
demonstrate meaningful use of certified EHR technology after 2013. 
Section 1848(o)(1)(D)(i) of the Act, as amended by section 4101(a) of 
the HITECH Act, provides that the incentive payments may be disbursed 
as a single consolidated payment or in periodic installments as the 
Secretary may specify. We make a single, consolidated, annual incentive 
payment to EPs. Payments are made on a rolling basis, as soon as we 
ascertain that an EP has demonstrated meaningful use for the applicable 
reporting period (that is, 90 days for the first year or a calendar 
year for subsequent years), and reached the threshold for maximum 
payment.
    Section 1848(o)(1)(A) of the Act provides that ``with respect to 
covered professional services provided by an eligible professional,'' 
the incentive payment ``shall be paid to the eligible professional (or 
to an employer or facility in the cases described in clause (A) of 
section 1842(b)(6)).'' Section 1842(b)(6)(A) of the Act allows for 
reassignment of payments to an employer or entity with which the 
physician has a valid contractual arrangement allowing the entity to 
bill for the physician's services. Therefore, we provided that EPs 
would be allowed to reassign their incentive payments to their employer 
or an entity that they have a valid employment agreement or contract 
providing for such reassignment, consistent with all rules governing 
reassignments (75 FR 44445). Section 495.10(f) of the regulations 
permits EPs to reassign their incentive payments to an employer or to 
an entity with which they have a contractual arrangement, consistent 
with all rules governing reassignments, including 42 CFR Part 424, 
Subpart F. Section 495.10(f) also precludes an EP from reassigning the 
incentive payment to more than one employer or entity. To implement 
this requirement, we use the EP's Medicare enrollment information to 
determine whether an EP belongs to more than one practice (that is, 
whether the EP's National Provider Identifier (NPI) is associated with 
more than one practice). In cases where an EP is associated with more 
than one practice, the EP would select one tax identification number to 
receive any applicable EHR incentive payment.
2. Special Circumstances of EPs Reassigning Benefits to Method II CAHs
    Since we implemented the EHR Incentive Program, we have received 
many requests from CAHs billing under Method II (Method II CAHs), 
members of Congress, and hospital associations requesting that we make 
it possible for EPs who assign their reimbursement and billing to a 
Method II CAH to participate in the program. Under section 1834(g)(2) 
of the Act, a CAH may elect to receive a cost-based payment for the 
facility costs of providing outpatient services, plus 115 percent of 
the fee schedule amount for professional services included within 
outpatient CAH services. CAHs that elect to receive both a facility 
payment and a professional payment for outpatient services are commonly 
referred to as Method II CAHs. The statute also provides that, as a 
condition for applying this provision, the

[[Page 75160]]

Secretary may not require that each physician or other practitioner 
providing professional services in a CAH must assign billing rights for 
such services to the CAH. Physicians and other practitioners who do not 
assign such rights to their Method II CAH continue to receive payment 
for their professional services directly under the appropriate 
professional fee schedule.
    Since the inception of the EHR Incentive Program, we have been 
unable to account for the services furnished by EPs in Method II CAH 
outpatient departments (including emergency departments) due to 
limitations in our information systems. Specifically, our information 
systems have not been capable of receiving and storing line-level 
rendering EP identifying information for these Method II CAH claims for 
services furnished by EPs in outpatient departments. These claims are 
billed by the CAH on behalf of the EPs furnishing the services using 
the institutional claim form UB-04 or its electronic counterpart, the 
X12 837I format. Until a recent information systems change was 
implemented, we were unable to identify the NPI of the EP furnishing 
the service at the service line-level on the claim. While the 
information systems received and stored NPIs from each claim, the NPIs 
were not tied to the specific services furnished on the claim. This 
limitation made it impossible to take into account the services 
furnished by EPs in Method II CAH outpatient settings when we annually 
determined the hospital-based status of each EP for each payment year 
for purposes of the EHR Incentive Program. In addition, for those EPs 
who were determined to be not hospital-based and who successfully 
demonstrated meaningful use, we were unable to take into account such 
services in calculating the amount of an EP's EHR incentive payment for 
a payment year. Because the limitations in our information systems 
prevented us from identifying the NPIs of the EPs who furnished the 
services on the Method II CAH claims, we were unable to include those 
claims for purposes of the hospital-based determinations and EHR 
incentive payment calculations. However, it is important to note that 
these EPs could still participate in the EHR Incentive Program and 
qualify for an incentive payment based on their non-Method II CAH 
claims.
    We began soon after the implementation of the EHR Incentive Program 
to develop the requisite changes so that our information systems would 
be able to receive and store line-level rendering EP identifying 
information for these Method II CAH claims. We were able to implement 
these information systems changes effective for claims submitted on or 
after October 1, 2012 (in other words, on or after the start of FY 
2013). Under the existing regulations at Sec.  495.4, we determine an 
EP's hospital-based status for a payment year based on claims data from 
the fiscal year preceding the payment year. Thus, for purposes of the 
2013 payment year, we determine whether an EP is hospital-based using 
claims data from FY 2012. However, as noted above, we are unable to 
take into account Method II CAH claims prior to the start of FY 2013. 
As a result, under the existing regulations, the hospital-based 
determinations for EPs for the 2013 payment year are based on FY 2012 
claims data that do not include Method II CAH claims. The earliest that 
we would be able to include such claims under the existing regulations 
would be for the hospital-based determinations for the 2014 payment 
year, which are based on FY 2013 claims data.
    As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 
43679), we want to avoid further delay in taking into account the 
services furnished by EPs in Method II CAH outpatient settings. 
Therefore, we proposed to add a provision to the definition of 
``hospital-based EP'' at Sec.  495.4 under new paragraph (3) to provide 
a special methodology for making hospital-based determinations for the 
2013 payment year for EPs with services billed by Method II CAHs. We 
made this proposal solely in order to take into account the special 
circumstances of those EPs as described above. We stated that, under 
this proposal, we would be able to take into account Method II CAH 
claims when making hospital-based determinations for payment year 2013, 
one year before we would be able to do so under the existing 
regulations. Specifically, we proposed that, for payment year 2013 
only, we would use a two-step process to make hospital-based 
determinations for EPs who furnish covered professional services billed 
by Method II CAHs. First, after we have accumulated the Method II CAH 
claims with the line-level furnishing EP identifying information for FY 
2013 (October 1, 2012 through September 30, 2013), we would use that 
data to identify which EPs had Method II CAH service billings during 
that year, and we would make a special hospital-based determination for 
that subset of EPs for payment year 2013. Any EP determined to be 
nonhospital-based on the basis of FY 2013 claims data would be eligible 
to demonstrate meaningful use for the relevant EHR reporting period and 
potentially qualify for an EHR incentive payment for payment year 2013. 
We indicated in the proposed rule that an EP who believes that he or 
she would be determined to be nonhospital-based under this proposed 
provision and wishes to qualify for the EHR incentive payment for 
payment year 2013 should not wait for the determination to implement 
Certified EHR Technology and begin meaningful use for an EHR reporting 
period in 2013. To qualify for an EHR incentive payment for payment 
year 2013, an EP will need to demonstrate meaningful use of Certified 
EHR Technology for an EHR reporting period in 2013. As is the case with 
other EPs that reassign their EHR incentive payments to another entity, 
these EPs may reassign their EHR incentive payments to the Method II 
CAH that bills on their behalf if the CAH is an employer or they have a 
contractual arrangement, consistent with the rules governing 
reassignments. Second, in the case of an EP determined to be hospital-
based on the basis of FY 2013 claims data, we would check the hospital-
based determination we have already for that EP under the existing 
regulation using the FY 2012 file. Any EP found to be nonhospital-based 
on the basis of the FY 2012 claims data (which do not include Method II 
CAH claims) would be held harmless to the determination made on the 
basis of FY 2013 claims data and considered nonhospital-based for 
payment year 2013. We believe that this second step of the proposed 
methodology is important to protect EPs who were initially determined 
nonhospital-based at the beginning of payment year 2013 under the 
existing regulation. We do not believe those EPs who were determined 
nonhospital-based under the existing regulation should have those 
determinations reversed by later (although more complete) FY 2013 
claims data. This hold-harmless provision would preserve the 
prospectivity of nonhospital-based determinations for payment year 2013 
that were made under the existing regulation and maintain the 
eligibility of those EPs to receive EHR incentive payments for payment 
year 2013. At the same time, the first step of our proposal would 
provide an opportunity for EPs who were determined to be hospital-based 
for payment year 2013 on the basis of FY 2012 data, which did not 
include the Method II CAH claims for their services, to establish their 
nonhospital-based status on the basis of the more complete FY 2013 
data. We stated that it was important to note that, due to the systems 
limitations described

[[Page 75161]]

above, we were unable to propose any special method for making EHR 
incentive payments and hospital-based determinations for the payment 
years prior to payment year 2013. We lacked the ability to retrieve 
line-level furnishing EP identifying information for Method II CAH 
claims during the years prior to FY 2013. We invited public comments on 
this proposal.
    Comment: Commenters were uniformly in favor of the proposal. 
Specifically, the commenters stated that they appreciated the agency's 
proposal to allow physicians who provide services in the outpatient 
departments of CAHs and have their services billed by the CAH under 
Method 2 to participate in the EHR incentive program in 2013. While the 
commenters noted that it is unfortunate that CMS' information systems 
have, until now, unfairly prevented these physicians from participating 
in the EHR Incentive Program because they could not use data from the 
UB-04 claims to identify services provided by the physician, they urged 
CMS to adopt both the proposed approach to identifying eligible 
physicians using 2013 claims data submitted on the UB-04 and the 
proposed hold harmless policy for those physicians who are determined 
to be eligible using the 2012 data, but not the new 2013 data. They 
also urged CMS to act as quickly as possible to provide detailed 
guidance on how physicians can take advantage of this policy change.
    Response: We appreciate the commenters' support.
    After consideration of the public comments we received, we are 
finalizing our proposal concerning hospital-based determinations for 
certain EPs for the 2013 payment year. We will move as quickly as 
possible to provide detailed guidance on how EPs can take advantage of 
this policy change and to educate rural providers accordingly.
    We are finalizing our proposal, without modification, to add a 
provision to the definition of ``hospital-based EP'' at Sec.  495.4 
under new paragraph (3) to provide a special methodology for making 
hospital-based determinations for the 2013 payment year for EPs with 
services billed by Method II CAHs. For payment year 2013 only, we will 
use a two-step process to make hospital-based determinations for EPs 
who furnish covered professional services billed by Method II CAHs.
    First, after we have accumulated the Method II CAH claims with the 
line-level furnishing EP identifying information for FY 2013 (October 
1, 2012 through September 30, 2013), we will use that data to identify 
which EPs had Method II CAH service billings during that year, and we 
will make a special hospital-based determination for that subset of EPs 
for payment year 2013. Any EP determined to be nonhospital-based on the 
basis of FY 2013 claims data will be eligible to demonstrate meaningful 
use for the relevant EHR reporting period and potentially qualify for 
an EHR incentive payment for payment year 2013. As we indicated in the 
proposed rule, an EP who believes that he or she would be determined to 
be nonhospital-based under this proposed provision and wishes to 
qualify for the EHR incentive payment for payment year 2013 should not 
wait for the determination to implement Certified EHR Technology and 
begin meaningful use for an EHR reporting period in 2013. To qualify 
for an EHR incentive payment for payment year 2013, an EP will need to 
demonstrate meaningful use of Certified EHR Technology for an EHR 
reporting period in 2013. As is the case with other EPs that reassign 
their EHR incentive payments to another entity, these EPs may reassign 
their EHR incentive payments to the Method II CAH that bills on their 
behalf if the CAH is an employer or they have a contractual 
arrangement, consistent with the rules governing reassignments.
    Second, in the case of an EP determined to be hospital-based on the 
basis of FY 2013 claims data, we will check the hospital-based 
determination we have already for that EP under the existing regulation 
using the FY 2012 file. Any EP found to be nonhospital-based on the 
basis of the FY 2012 claims data (which do not include Method II CAH 
claims) will be held harmless to the determination made on the basis of 
FY 2013 claims data and considered nonhospital-based for payment year 
2013.

B. Cost Reporting Periods for Interim and Final EHR Incentive Payments 
to Eligible Hospitals

1. Background
    In the July 28, 2010 final rule for Stage 1 of the EHR Incentive 
Program, we established the cost report periods from which we would 
draw the requisite data (for example, hospital acute care inpatient 
discharges and Medicare Part A acute care inpatient days) for 
determining interim and final EHR incentive payments to eligible 
hospitals (75 FR 44450). We specified in Sec.  495.104(c)(2) of the 
regulations that we would use discharge and other relevant data from 
the hospital's most recently submitted 12-month cost report in order to 
determine preliminary hospital EHR incentive payments. Similarly, we 
specified in Sec.  495.104(c)(2) that we would make final EHR incentive 
payments to hospitals based on discharge and other relevant data from 
the hospital's first 12-month cost reporting period that begins on or 
after the first day of the payment year. (For purposes of EHR incentive 
payments for eligible hospitals, a payment year is a Federal fiscal 
year.) As we noted in the final rule (75 FR 44450 through 44451), 
section 1886(n)(2)(C) of the Act requires that a ``12-month period 
selected by the Secretary'' be employed for purposes of determining the 
discharge related amount. As we also stated in that final rule (77 FR 
44452), we believe that the requirement for using 12-month cost 
reporting periods for purposes of determining preliminary and final 
payments is important to avoid the use of nonstandard cost reporting 
periods, which are often quite short (for example, 3 months) and 
therefore are ``not likely to be truly representative of a hospital's 
experience, even if methods were to be adopted for extrapolating data 
over a full cost reporting period.''
2. Special Circumstances
    As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 
43680), since the publication of the EHR Incentive Program final rule 
for Stage 1, we have become aware of circumstances in which the only 
cost reporting period for an eligible hospital that begins on or after 
the first day of a payment year is a nonstandard cost reporting period. 
For example, a hospital may be merging with another hospital under an 
arrangement in which its CCN, and therefore its existence as an 
identifiable hospital for Medicare EHR Incentive Program purposes, will 
not survive the merger. In such circumstances, the last cost reporting 
period for the hospital after its final payment year and prior to its 
merger into the surviving hospital may be a short period. In order to 
accommodate these situations, we proposed to revise Sec.  495.104(c)(2) 
of the regulations to provide that, in cases where there is no 12-month 
cost reporting period that begins on or after the beginning of a 
payment year, we will use the most recent 12-month cost reporting 
period available at the time of final settlement in order to determine 
final EHR incentive payments for the hospital. We stated that we 
understood that, under this proposal, the last available cost reporting 
period that we would use for the final determination of EHR incentive 
payments may be the same 12-month cost reporting period that had been 
used for purposes of

[[Page 75162]]

determining the hospital's interim EHR incentive payments. We believe 
that this result is preferable to resorting to a nonstandard cost 
reporting period because a 12-month period is required by the statute 
to determine the discharge related amount and such periods tend, for 
reasons discussed in the EHR Incentive Program Stage 1 final rule, to 
be unrepresentative of the hospital's experience. We invited public 
comments on this proposal.
    Comment: One commenter supported the proposal.
    Response: We appreciate the commenter's support.
    After consideration of the public comment we received, we are 
finalizing, without modification, the proposed revision to Sec.  
495.104(c)(2) of the regulations to provide that, in cases where there 
is no 12-month cost reporting period that begins on or after the 
beginning of a payment year, we will use the most recent 12-month cost 
reporting period available at the time of final settlement in order to 
determine final EHR incentive payments for the hospital.

XIX. Medicare Program: Provider Reimbursement Determinations and 
Appeals: Final Rule

A. Matters Not Subject to Administrative or Judicial Review (Sec.  
405.1804)

1. Background
    Section 1878(a) of the Act addresses appeals of certain Medicare 
payment determinations to the Provider Reimbursement Review Board (the 
``Board''). Below we briefly discuss the prospective payment system 
(PPS) under which payments for certain Medicare inpatient hospital 
services are made.
    The Social Security Amendments of 1983 (Pub. L. 98-21) added 
section 1886(d) to the Act, which changed the method of payment for 
inpatient hospital services under Medicare Part A for short-term acute 
care hospitals. The method of payment for these hospitals was changed 
from a cost-based retrospective reimbursement system to a system based 
on prospectively set payment rates; that is, a PPS. Under Medicare's 
hospital inpatient prospective payment system (the hospital IPPS), 
payment is made at a predetermined rate for each hospital discharge.
    The Social Security Amendments of 1983 also added section 
1886(e)(1) to the Act, which required that, for cost reporting periods 
beginning in FYs 1984 and 1985, the IPPS result in aggregate program 
reimbursement equal to ``what would have been payable'' under the 
reasonable cost-based reimbursement provisions of prior law; that was, 
for FYs 1984 and 1985, the IPPS would be ``budget neutral.'' Section 
1886(e)(1)(A) of the Act required that the projected aggregate payments 
for the hospital-specific portion should equal the comparable share of 
estimated reimbursement under prior law. Section 1886(e)(1)(B) of the 
Act required that projected aggregate reimbursement for the Federal 
portion of the prospective payment rates equal the corresponding share 
of estimated amounts payable prior to the passage of Pub. L. 98-21. In 
the 1983 IPPS interim final rule published in the Federal Register on 
September 1, 1983, we explained how the adjustment of the Federal 
portion of the prospective payment rate was determined, as well as the 
resulting adjustment factors for FY 1984 (48 FR 39887).
    Under section 1878 of the Act and the regulations at Subpart R of 
42 CFR Part 405, the Board has the authority to adjudicate certain 
reimbursement appeals by providers. The Board's decisions are subject 
to review by the Administrator of CMS under section 1878(f)(1) of the 
Act, as implemented by Sec.  405.1875 of the regulations. A final 
decision of the Board, or any reversal, affirmance, or modification of 
a final Board decision by the Administrator, may be subject to review 
by a United States District Court.
2. Technical Conforming Change
    As we discussed in the CY 2014 OPPS/ASC proposed rule (78 FR 43680 
through 43681), certain matters affecting payment to hospitals under 
the IPPS are not subject to administrative or judicial review. For 
example, section 1886(d)(7) of the Act precludes administrative and 
judicial review of the budget neutrality adjustment effected pursuant 
to section 1886(e)(1) of the Act. This preclusion of review is also 
reflected in section 1878(g)(2) of the Act (which states that 
``determinations and other decisions described in section 1886(d)(7) 
shall not be reviewed by the Board or any other court. . . .''). The 
existing regulatory text at Sec.  405.1804(a) provides that there is no 
administrative or judicial review of ``any budget neutrality adjustment 
in the prospective payment rates.''
    The language of Sec.  405.1804(a) was promulgated as part of the 
implementing regulations (48 FR 39785 and 39835) for the hospital IPPS. 
Section 405.1804(a) was codified pursuant to section 1886(d)(7) of the 
Act. At the time of promulgation, section 1886(d)(7) of the Act 
specified only the budget neutrality adjustment in section 1886(e)(1) 
of the Act. Additional budget neutrality adjustments under the IPPS 
were added by law and were not precluded from administrative or 
judicial review. For example, section 4410 of the Balanced Budget Act 
of 1997 (the BBA), Pub. L. 105-33, established the rural floor wage 
index budget neutrality adjustment, and did not preclude administrative 
or judicial review in the statute for this adjustment.
    As we stated in the CY 2014 OPPS/ASC proposed rule, we recognize 
that the language of the regulation at Sec.  405.1804(a) is overly 
broad because it states that there is no administrative or judicial 
review of ``any'' budget neutrality adjustment in the prospective 
payment rates, and its terms are not limited to the budget neutrality 
adjustment specified in section 1886(e)(1) of the Act. We understand 
that the Board has relied on Sec.  405.1804(a) to deny jurisdiction in 
appeals relating to budget neutrality adjustments other than the 
adjustment in section 1886(e)(1) of the Act. To the extent that the 
existing Sec.  405.1804(a) refers to ``any'' budget neutrality 
adjustment, we believe that this regulatory text is not consistent with 
the current statute. Therefore, in the CY 2014 OPPS/ASC proposed rule 
(78 FR 43681), we proposed to make a technical conforming change to 
Sec.  405.1804(a) to conform the regulation to the current statute. 
This technical conforming change clarifies that there is no 
administrative or judicial review with respect to the budget neutrality 
adjustments enumerated in section 1886(e)(1) of the Act, and this 
preclusion of review does not apply to other budget neutrality 
adjustments under the IPPS.
    We did not receive any public comments on this proposed technical 
conforming change. Therefore, for the reasons set out in the proposed 
rule, we are finalizing the proposed revisions to Sec.  405.1804(a) 
without modification.

B. Clarification of Reopening of Predicate Facts in Intermediary 
Determinations of Provider Reimbursement (Sec.  405.1885)

    A provider must submit an annual cost report to a fiscal 
intermediary (currently referred to as a Medicare Administrative 
Contractor (MAC)), as specified in regulations at 42 CFR 413.20(b) and 
413.24(f). Through its review and settlement process, the intermediary 
determines the total amount of reimbursement due to a provider for its 
cost reporting period. This constitutes an ``intermediary 
determination,'' as defined in Sec.  405.1801(a). In accordance with

[[Page 75163]]

Sec.  405.1803, an intermediary determination is set forth in a notice 
of program reimbursement (NPR), which explains the intermediary's final 
determination of the total amount of program reimbursement due to the 
provider for the cost reporting period in question.
    Section 405.1803(b) requires that the NPR explain any differences 
between the intermediary determination and the amount of program 
reimbursement claimed by the provider. Such differences may be 
attributable to specific provisions of the Medicare statute, 
regulations, CMS rulings, or program instructions. In addition, the 
intermediary determination may reflect specific findings of fact by the 
intermediary that differ from the provider's understanding of the 
facts.
    The factual underpinnings of a specific determination of the amount 
of reimbursement due to a provider sometimes first arise in, that is, 
the pertinent facts occur or start during, or are reported by the 
provider and determined by the intermediary for, the same fiscal period 
as the cost reporting period under review. For example, the 
determination of whether a hospital subject to the inpatient 
prospective payment system (IPPS) should receive a payment adjustment 
for serving a significantly disproportionate share of low-income 
patients under section 1886(d)(5)(F) of the Act and Sec.  412.106 of 
the regulations in a given fiscal period depends on the number of the 
hospital's patient days for the same period.
    However, the factual underpinnings of a specific determination of 
the amount of reimbursement due to a provider may first arise in, or be 
determined for, a different fiscal period than the cost reporting 
period under review. We refer to these factual determinations as 
``predicate facts.'' Some of the factual underpinnings of 
determinations of reasonable cost reimbursement under section 1861(v) 
of the Act are subject to review for each cost report in which the 
provider claims the cost under the general principle that ``payment is 
to be made on the basis of current costs of the individual provider, 
rather than costs of a past period'' (42 CFR 413.5(a)). For example, 
reimbursement for a provider's bad debts arising from unpaid Medicare 
deductibles and coinsurance may be denied under 42 CFR 413.89 in the 
first fiscal period it is claimed because the collection effort on the 
account has not ceased and the account cannot yet be deemed worthless. 
However, the same bad debt may be deemed allowable in the following 
fiscal period, when the collection effort has ceased and the account 
has been determined to be worthless. Similarly, interest expense is 
subject to review each fiscal period to determine whether it is 
allowable for each fiscal period during the life of the loan (42 CFR 
413.153).
    Other ``predicate facts'' are determined once, either in the first 
fiscal period in which they arise or are first determined, or in the 
first fiscal period that they are used as part of a formula for 
reimbursement, and then applied as part of that reimbursement formula 
for several fiscal periods thereafter. These facts are not reevaluated 
annually to determine whether they support a determination that a 
particular cost is reasonable because the formula is a proxy for 
reasonable costs. Instead, the formula itself will provide for changes 
in costs through an updating factor or otherwise. For example, the 
determination of an IPPS-exempt hospital's target amount (that is, per-
discharge (case) limitation) or rate-of-increase ceiling under section 
1886(b) of the Act and regulations at Sec.  413.40 depends on: (1) The 
hospital's allowable net inpatient operating costs for a base period of 
at least 12 months before the first cost reporting period subject to 
the rate-of-increase ceiling; or (2) for later cost reporting periods, 
the target amount for the preceding 12-month cost reporting period. The 
hospital's allowable costs for its base period are ``predicate facts'' 
with respect to the first cost reporting period that is subject to the 
target amount because such base period costs figure in the 
determination of the hospital's first target amount. The target amount 
for each cost reporting period after the base period itself is a 
``predicate fact'' for the following cost reporting period. We refer 
readers to section 1886(b)(3)(A) of the Act (for the first period, the 
target amount is calculated using ``allowable operating costs of 
inpatient hospital services for the preceding 12-month cost reporting 
period''; the target amount for later cost reporting periods is 
calculated using the target amount for the preceding 12-month cost 
reporting period, increased by an applicable update factor).
    A provider may challenge an intermediary determination by filing an 
appeal within 180 days of the NPR to the Board (under section 1878(a) 
of the Act and regulations at Sec.  405.1835) or, if the amount in 
controversy is at least $1,000 but less than $10,000, to the 
intermediary hearing officer(s) (under Sec.  405.1811). Alternatively, 
in accordance with Sec.  405.1885, the provider may request that the 
intermediary reopen its NPR. In addition, the intermediary may reopen 
the NPR on its own motion. Under Sec.  405.1885(b), reopening must be 
requested by the provider, or initiated on the intermediary's own 
motion, within 3 years of the NPR, although there is no time limit for 
the reopening of an intermediary determination that was procured by 
fraud or similar fault of a party to such determination.
    Appeal and reopening of an intermediary determination are both 
``issue-specific.'' In order to meet the jurisdictional requirements 
for appeal to the Board or to the intermediary hearing officer(s), the 
provider must establish its dissatisfaction with each specific matter 
in the intermediary determination that is appealed. We refer readers to 
section 1878(a) of the Act and current regulations at Sec. Sec.  
405.1835(a)(1) and (b) (Board appeals) and Sec. Sec.  405.1811(a)(1) 
and (b) (intermediary hearing officer appeals). Similarly, Sec.  
405.1885(a)(1) provides that the intermediary determination may be 
reopened ``for findings on matters at issue in a determination.'' We 
also refer readers to Sec.  405.1887, which provides that a notice of 
reopening and any revised intermediary determination must specify the 
findings on matters at issue to be reopened and the particular findings 
to be revised through reopening, respectively, and Sec.  405.1889(b), 
which provides that a provider's appeal rights after reopening are 
limited to the specific matters altered in the revised intermediary 
determination.
    In many instances, when a factual matter arises in, or is 
determined for, the same fiscal period as the cost reporting period at 
issue, such a factual determination may be appealed or reopened as part 
of that period's intermediary determination. For example, if an IPPS 
hospital challenges the patient day count used to determine its DSH 
payment adjustment for its 2010 cost reporting period, the hospital 
must appeal its DSH patient day count within 180 days of the NPR for 
the 2010 cost reporting period (and meet the other jurisdictional 
requirements for appeal to the Board or to the intermediary hearing 
officer(s), as applicable). Similarly, the hospital would have to 
request, or the intermediary would have to initiate on its own motion, 
the reopening of the hospital's 2010 DSH patient day count within 3 
years of the NPR for the 2010 cost reporting period.
    When the specific matter at issue is a predicate fact that first 
arose in, or was determined for, an earlier fiscal period and that 
factual data then is used differently or applied to determine 
reimbursement in one or more later fiscal periods, our longstanding

[[Page 75164]]

interpretation and practice is that the pertinent provisions of the 
statute and regulations provide for review and potential 
redetermination of such predicate fact only by a timely appeal or 
reopening of: (1) The NPR for the cost reporting period in which the 
predicate fact first arose, or was first determined; or (2) the NPR for 
the period for which such predicate fact was first used or applied by 
the intermediary to determine reimbursement. For example, assuming base 
period costs calculated for the period consisting of the 12 months 
prior to the hospital's 2002 cost reporting period, that is, its 2001 
cost reporting period, if an IPPS-exempt hospital challenges the 
determination of its 2008 cost reporting period target amount, the 
hospital could not appeal the determination of the base period 
predicate facts unless it was within 180 days of the NPR for the 
hospital's 2001 base period or its 2002 period (when the base year 
costs were first used to determine reimbursement). Similarly, the 
hospital would have to request, or the intermediary would have to 
initiate on its own motion, the reopening of the determination of the 
hospital's base period costs within 3 years of the NPR for the base 
year cost reporting period, that is, its 2001 or 2002 cost reporting 
periods. These are the only fiscal periods in which the hospital could 
or seek reopening of its base period costs. Of course, if the 
hospital's base period costs were later redetermined through appeal or 
reopening of its 2001 or 2002 NPRs, then the hospital could appeal or 
request reopening of those determinations. In addition, the hospital 
could appeal the determination of the 2008 cost reporting period target 
amount within 180 days of the NPR for the 2008 cost reporting period. 
The hospital could also request the reopening of the determination of 
its 2008 cost reporting period target amount within 3 years of the NPR 
for its 2008 cost reporting period. However, the hospital could not 
revise the determination of its 2001 base year costs through an appeal 
or reopening of its 2008 target amount.
    Many reimbursement formulas require the use of predicate facts, 
where data or a factual finding is taken from an earlier fiscal period 
and used to determine the amount of provider reimbursement in the 
fiscal period under review. As discussed above, we believe that these 
predicate facts should be subject to change only through a timely 
appeal or reopening for the fiscal period in which the predicate fact 
first arose or was first determined by the intermediary or the fiscal 
period in which such fact was first used or applied to determine 
reimbursement. In some instances, a reimbursement statute may 
necessitate the use of data from a fiscal period that is not found in 
that period's cost report or NPR (such as ``off the cost report,'' or 
underlying documentation). We believe that this kind of determination 
may be reviewed and redetermined through a timely appeal or reopening 
of the NPR for the cost reporting period in which the predicate fact 
was first used (or applied) by the intermediary to determine the 
provider's reimbursement pursuant to that reimbursement statute.
    However, we recognize exceptions when a particular legal provision 
(of the Medicare statute, regulations, or CMS rulings) authorizes, as 
part of a specific reimbursement rule, the review and revision of a 
predicate fact after the expiration of the 3-year reopening period. For 
example, the reaudit regulation in Sec.  413.77(a), promulgated to 
implement section 1886(h)(2) of the Act (which is related to the 
determination of the average per-resident amount used to calculate 
reimbursement for direct graduate medical education (GME) costs), 
authorizes intermediaries to modify base-period costs solely for 
purposes of computing the per resident amount after the hospital's 
base-period cost report is no longer subject to reopening under Sec.  
405.1885. We refer readers to the decision in Regions Hospital v. 
Shalala, 522 U.S. 448 (1998), which sustained the lawfulness of the 
reaudit regulation (then designated as Sec.  413.86(e)).
    As discussed above, we also recognize that not all facts occurring 
in prior fiscal periods are ``predicate facts'' in the same sense, 
because they are not determined once, but may be subject to review on 
an annual basis as part of the determination of a provider's reasonable 
cost reimbursement under section 1861(v) of the Act, such as the facts 
underpinning reimbursement for Medicare bad debts or allowable interest 
expense. Because these facts are subject to review each fiscal period 
by the intermediary, the intermediary's findings should also continue 
to be subject to review, either through an appeal or reopening.
    As we stated in the CY 2014 OPPS/ASC proposed rule (78 FR 43683), 
we believe that the above-described interpretation of our rules 
regarding the appeal and reopening of predicate facts furthers the 
interests of both providers and the agency in maintaining the finality 
of intermediary determinations. The alternative, of allowing appeal and 
reopening of a predicate fact after the expiration of the 3-year 
reopening period, may result in inconsistent intermediary 
determinations on a reimbursement matter recurring in different fiscal 
periods for the same provider. An alternative approach of allowing 
appeal and reopening of a predicate fact beyond the 3-year reopening 
period could also result in intermediary determinations that are 
contrary to Medicare law and policy regarding a specific reimbursement 
matter. As with the target amount example discussed above, 
reimbursement for various items is premised on a base period cost 
determination that could affect reimbursement for a given item for many 
cost reporting periods thereafter. If a provider disputes such a base 
period cost determination, it can appeal or request reopening of the 
NPR for the base period. However, unless such an appeal or reopening 
results in a different finding as to the predicate fact in question, 
reimbursement for a given provider's cost should not be based on one 
finding about a predicate fact in the base period and a different 
finding about the same predicate fact for purposes of determining 
reimbursement in later fiscal periods.
    Under our longstanding interpretation and practice, once the 3-year 
reopening period has expired, neither the provider nor the intermediary 
is allowed to revisit a predicate fact that was not changed through the 
appeal or reopening of the cost report for the fiscal period in which 
such predicate fact first arose or for the fiscal period for which such 
fact was first determined by the intermediary. Further, the use or 
application of such facts is subject to change only through a timely 
appeal or reopening of the cost report for the fiscal period where the 
predicate fact was first used (or applied) by the intermediary to 
determine the reimbursement for the provider's cost in question. 
Accordingly, in the CY 2014 OPPS/ASC proposed rule (78 FR 43682 through 
43683), we proposed to revise Sec.  405.1885 to clarify that, absent a 
specific statute, regulation, or other legal provision permitting 
reauditing, revising, or similar actions changing predicate facts: (1) 
A predicate fact is subject to change only through a timely appeal or 
reopening of the NPR for the fiscal period in which the predicate fact 
first arose or the fiscal period for which such fact was first 
determined by the intermediary; and/or (2) the application of the 
predicate fact is subject to change through a timely appeal or 
reopening of the NPR for the fiscal period in which the fact was first 
used (or applied) by the intermediary to determine the

[[Page 75165]]

provider's reimbursement. As discussed earlier, this ``first 
application'' or ``first use'' of a predicate fact may involve 
underlying documentation that is ``off the cost report.''
    We note that a recent court decision conflicts with our settled 
interpretation of the regulations for provider appeals and cost report 
reopenings. In Kaiser Foundation Hospitals v. Sebelius, 708 F.3d 226 
(D.C. Cir. 2013), the court held that providers could appeal predicate 
facts used to determine their reimbursement in later fiscal periods 
even though such predicate facts were not timely appealed or reopened 
for the periods when they first arose or were determined by the 
intermediary, nor were such predicate facts timely appealed or reopened 
for the fiscal periods in which such facts were first used (or applied) 
by the intermediary to determine the providers' reimbursement. The 
predicate facts at issue in this case were the teaching hospitals' 
full-time equivalent (FTE) resident counts for their 1996 cost 
reporting periods, which, as required by section 1886(h)(4)(F)(i) of 
the Act, were used to calculate the statutory cap on residents for 
direct GME reimbursement for the first time in the hospitals' 1998 cost 
reporting periods. The providers could have challenged their FTE 
resident counts through timely appeals or reopening of their 1996 
fiscal period NPRs, and they could have challenged the calculation of 
their resident caps through timely appeals or reopening of their 1998 
fiscal period NPRs, the first time the caps were applied. Instead, the 
hospitals appealed their resident caps as applied to later cost 
reporting periods. The court held that the definition of ``intermediary 
determination'' under Sec.  405.1801(a)(1), which is incorporated in 
the reopening rules at Sec.  405.1885(a)(1), did not include factual 
findings, standing alone, where the providers made no attempt to 
challenge their direct GME reimbursement for their 1996 or 1998 fiscal 
periods due to the expiration of the 180-day appeal period and the 3-
year period for reopening. Because the providers were not challenging 
the total amount of program reimbursement for their 1996 or 1998 fiscal 
periods, the court concluded that the intermediary determinations for 
those periods were not at issue and thus the 3-year limitation on 
reopening was not applicable.
    We disagree with the court's decision, which we believe is contrary 
to our reopening regulations at Sec.  405.1885(a), and the 
corresponding appeals regulations (discussed above), and which 
necessitates our proposed clarification of the regulations. As noted 
above, we proposed to revise Sec.  405.1885 to clarify that the 
specific ``matters at issue in a determination'' that are subject to 
the reopening rules include factual findings for one fiscal period that 
are predicate facts for later fiscal periods. The general 3-year 
reopening period applies to findings about such predicate facts and the 
reopening period is calculated separately for each finding about a 
predicate fact. We noted that this proposed revision of Sec.  405.1885 
would apply to all Medicare reimbursement determinations, and not only 
to direct GME payment, which was the particular issue in Kaiser 
Foundation Hospitals v. Sebelius. In the CY 2014 OPPS/ASC proposed rule 
(78 FR 43683 through 43684), we stated that, because the proposed 
revision clarifies longstanding agency policy, we were proposing that 
it be effective for any intermediary determination issued on or after 
the effective date of the final rule, and for any appeals or reopenings 
(or requests for reopening) pending on or after the effective date of 
the final rule, even if the intermediary determination (at issue in 
such an appeal or reopening) preceded the effective date of the final 
rule. We stated our view that the proposed revision was not 
impermissibly retroactive in effect because the proposal clarified 
longstanding agency policy and practice, and was procedural in nature. 
We referred readers, for example, to Heimmermann v. First Union 
Mortgage Corp., 305 F.3d 1257, 1260-61 (11th Cir. 2002) (a rule 
clarifying the law, especially in an unsettled or confusing area of the 
law, is not a substantive change in the law, and thus the rule may 
apply to matters that preceded issuance of the rule).
    However, if the proposed revision to Sec.  405.1885 were deemed a 
retroactive application of a substantive change to a regulation, we 
referred readers to section 1871(e)(1)(A) of the Act, which permits 
retroactive application of a substantive change to a regulation if the 
Secretary determines that such retroactive application is necessary to 
comply with statutory requirements or that failure to apply the change 
retroactively would be contrary to the public interest. We have 
determined that retroactive application of the proposed revision to 
Sec.  405.1885 is necessary to ensure compliance with various statutory 
provisions such as the target amount (under section 1886(b) of the Act) 
and the cap on residents for GME reimbursement (under section 
1886(h)(4)(F)(i) of the Act); the 180-day period for filing appeals to 
the Board (under section 1878(a)(3) of the Act); and the 3-year limit 
on reopening (under Sec. Sec.  405.1885(b)(1), (2) of the regulations). 
We have further determined that it would be in the public interest to 
apply the proposed revision to intermediary determinations, appeals, 
and reopenings (including requests for reopening) that are pending on 
or after the effective date of the final rule. Not applying the 
proposed revisions to pending intermediary determinations, appeals, and 
reopenings would undermine the 3-year limit on reopening and the 
interests of both the Medicare program and Medicare providers in the 
finality of reimbursement determinations, and would be inconsistent 
with the statutory scheme.
    Finally, although we proposed revisions only to Sec.  405.1885, in 
order to clarify our regulations in accordance with this proposal, we 
stated that we were considering making similar changes regarding 
predicate facts to the regulations governing intermediary appeals at 
Sec.  405.1811 and appeals to the Board at Sec.  405.1835. We requested 
public comments with respect to amending the language of these 
additional regulations for appeals before the intermediary and the 
Board, but did not receive any timely comments on this point.
    Comment: Two commenters opposed adoption of the proposed revisions 
because including findings of predicate facts in the reopening rule 
would undermine the accuracy of reimbursement determinations when a 
provider or the Medicare program learned of the inaccuracy after the 3-
year period for reopening had expired. Other commenters opposed the 
change because it would prevent teaching hospitals from challenging 
their IME or direct GME resident caps if they have not already done so.
    Response: We disagree with the commenters that the revisions to the 
reopening rules would materially undermine the accuracy of Medicare 
reimbursement because a provider could still seek revisions to a final 
intermediary determination by filing an appeal or requesting reopening 
and the intermediary could still initiate reopening on its own motion, 
and those appeal and reopening procedures are available over a lengthy 
period under the statute and regulations. Even before the appeal and 
reopening periods begin, providers have 5 months after the close of the 
cost reporting period to submit reports, and the intermediary is 
required to make its determination within a reasonable period of time 
thereafter. After a final intermediary determination

[[Page 75166]]

is issued, the Medicare statute authorizes appeal to the Board within 
180 days of the final intermediary determination. The reopening 
regulations allow six times as long--3 years--for reopening of a final 
intermediary determination. Therefore, an NPR may be reopened many 
years after a fact arises during the cost reporting period at issue, 
depending on when the intermediary determination is issued. When a 
reopening results in a revised intermediary determination, the provider 
then may appeal or request reopening of the specific issue in the 
revised intermediary determination, resulting in review of the revised 
intermediary determination at an even more remote time. This reopening 
scheme, which the Supreme Court described as ``generous'' in Your Home 
Visiting Nurse Services, Inc. v. Shalala, 525 U.S. 449, 455 (1999), is 
intended to strike a balance between accurate reimbursement and 
administrative finality, in the interests of both the provider and the 
Medicare program. The proposed revisions merely clarify that a finding 
of predicate fact is also subject to reopening for a 3-year period. 
Moreover, the proposed revisions would not affect the exception to the 
3-year reopening period for fraud or similar fault by a party to the 
final intermediary determination.
    With respect to the IME and direct GME resident caps, we 
established in an August 1997 interim final rule that we would 
determine those caps in the course of settling cost reports starting on 
or after October 1, 1997 (for direct GME) or with discharges on or 
after October 1, 1997 (for IME), thereby putting teaching hospitals on 
notice that their caps would be determined at that time (62 FR 45966, 
46003 through 46005 (August 29, 1997)). This is consistent with the 
resident cap statutory provisions (under section 1886(h)(4)(F) and 
section 1886(d)(5)(b)(v) of the Act), which require the use of the 
number of unweighted FTE residents for the cost reporting period ending 
on or before December 31, 1996, for cost reporting periods (or 
discharges, for IME) starting on or after October 1, 1997. We did not 
read this provision to allow for continuing challenges to this number 
of residents. Before the Kaiser decision, neither providers nor the 
Medicare program were allowed to challenge the 1996 FTE resident cap 
except through a timely appeal or reopening of the NPR for the 1996 
base year or the first fiscal period in which the caps were applied. 
For example, we refer readers to Hillcrest Riverside, Inc. v. Sebelius, 
680 F. Supp. 2d 30 (D.D.C. 2010); and Swedish Am. Hosp. v. Sebelius, 
773 F. Supp. 2d 1 (D.D.C. 2011). Indeed, many teaching hospitals 
challenged their NPRs for the 1996 fiscal period in order to correct 
perceived deficiencies in their caps. For example, we refer readers to 
Henry Ford Health Sys. v. Dep't of Health & Human Servs, 654 F. 3d 660 
(6th Cir. 2011); Univ. of Chicago Med. Ctr. v. Sebelius, 618 F.3d 739 
(7th Cir. 2010); Rhode Island Hosp. v. Leavitt, 548 F.3d 29 (1st Cir. 
2008); and Riverside Methodist Hosp. v. Thompson, No. C2-02-94, 2003 WL 
22658129 (S.D. Ohio July 31, 2003). In our view, teaching hospitals 
have been allowed ample opportunity to correct their resident caps.
    Comment: One commenter stated that it would support the proposed 
revisions if they bound CMS to accept as final a determination of 
predicate fact that had not been timely appealed or reopened, but which 
the provider now recognized had been determined inaccurately. According 
to the commenter, it was classified as a sole community hospital (SCH), 
but later realized that it was not the only like hospital within 25 
miles. The then-applicable regulations for SCH status specified that 
the designation will be revisited if there is ``a change in 
circumstance'' and that ``CMS will cancel the hospital's classification 
as a sole community hospital effective with the date that the hospital 
no longer met the criteria for classification consistent with the 
provisions of Sec.  405.1885'' for the reopening of NPRs (42 CFR 
412.92(b)(3)(iii) (2011)). The commenter asserted that, because it was 
not the only like hospital within 25 miles, it was appropriate to 
cancel its SCH designation, but it was not appropriate to recover 
reimbursement for past cost years because there had been no change in 
circumstances. The commenter asked whether the proposed revisions to 
the reopening rules, which apply to pending appeals, would govern its 
pending Board appeal challenging the recovery of reimbursement for past 
fiscal periods.
    Response: Without passing judgment on the merits of the commenter's 
pending Board appeal, this would appear to present a situation where, 
under the proposed revisions, the determination of a predicate fact 
(the provider's distance from a like hospital) was beyond the 3-year 
reopening period. We note that in the FY 2013 IPPS/LTCH PPS final rule 
(77 FR 53258, 53674), we amended Sec.  412.92(b)(3) to require 
providers to disclose facts to CMS that would be material to initial 
SCH designations and if providers fail to disclose these facts, their 
SCH status will be cancelled.
    Comment: One commenter asked if the proposed revisions would apply 
to determinations of successive predicate facts, such as the 
commenter's Medicare Advantage days, total days, and education costs 
used in the Nursing and Allied Health Education (NAHE) Managed Care 
payment. The commenter also asked whether these predicate facts could 
be challenged by reopening the NPR for the fiscal period in which such 
facts are used to calculate payment, which is usually two fiscal 
periods afterward.
    Response: As discussed in the example of the TEFRA target amount, 
predicate facts may arise in multiple years. The proposed revisions 
would permit reopening of the final determination of a provider's 
Medicare Advantage days, total days, and NAHE payment for purposes of 
computing the NAHE Managed Care payment either in the fiscal period 
such costs and days were first determined, or in the fiscal period they 
were first used to calculate the NAHE Managed Care payment.
    Comment: One commenter, noting that reopening of intermediary 
determinations is completely within the discretion of the intermediary, 
requested that CMS ensure that the intermediaries do not use this 
discretion to impair a provider's ability to correct a predicate fact. 
The commenter suggested that if a provider's request to reopen a 
predicate fact determination is denied, then recognition should be 
given to the timely filed reopening request in an appeal of the 
subsequent cost year, especially in situations where the first 
application of the predicate fact results in a reimbursement impact 
that is less than the jurisdictional amount for appeal to the Board.
    Response: The regulations provide the fiscal intermediaries with 
unreviewable discretion as to whether to reopen specific findings on 
matters at issue in a final intermediary determination, and program 
manual instructions include guidance for the intermediary's exercise of 
its discretionary reopening authority. We refer readers to the Provider 
Reimbursement Manual (CMS Pub. 15-1), Section 2931.2. We believe that 
the intermediary's reopening authority has always encompassed specific 
findings about predicate facts, and we see no basis for limiting the 
intermediary's discretion whether to reopen particular findings of 
predicate fact. As the Supreme Court recognized, reopening is provided 
by the grace of the Secretary (Your Home, 525 U.S. at 455). The Court 
found that the discretionary nature of reopening reflected the 
practical realities of the Medicare program where ``the few dozen 
[intermediaries] often

[[Page 75167]]

need 3 years within which to discover overpayments in the tens of 
thousands of NPRs that they issue, while each of the tens of thousands 
of sophisticated Medicare-provider recipients of these NPRs is 
generally capable of identifying an underpayment in its own NPR within 
the 180-day time period specified in 42 U.S.C. 1395oo(a)(3)'' for 
appeals to the Board (Id. at 455-56). If a provider wants to challenge 
a finding of predicate fact where the reimbursement impact is less than 
the statutory jurisdictional minimum of $10,000 for Board appeals, 
Sec.  405.1811 of the regulations gives the provider a right to appeal 
to the intermediary hearing officers if the amount in controversy is at 
least $1,000 and the other requirements for intermediary hearing 
officer jurisdiction are satisfied. Thus, providers can appeal findings 
of predicate fact to the Board or the intermediary hearing officers 
within 180 days of a final intermediary determination, in addition to 
requesting reopening of a predicate fact within 3 years of such 
determinations.
    Comment: One commenter suggested that application of the proposed 
revisions be limited to findings of fact that had not been appealed, 
instead of applying to issues on which the provider had received an 
adverse finding on the merits. For those issues, the commenter believed 
that it had the right to bring successive challenges to the finding of 
predicate fact after an adverse decision on the merits of a challenge 
to the finding of predicate fact in the first year it arose or was 
determined.
    Response: We do not perceive a basis to limit the application of 
the proposed revisions to findings of predicate facts that have not 
been appealed. We believe that the proposed revisions should also apply 
to issues on which the provider has received an adverse final decision 
on the merits. Indeed, Sec.  405.1803(d) of the regulations requires 
the intermediary to determine the effect of a final decision and issue 
any revised intermediary determination that proves necessary. Moreover, 
settled rules of issue preclusion, including the requirement that the 
issue be litigated on the merits by opposing parties, would apply to a 
final decision on the merits of the disputed predicate facts after 
exhaustion of administrative remedies and judicial review. We note that 
because appeals of an NPR sometime are not resolved finally before NPRs 
are issued for later fiscal periods, providers that wish to preserve 
their rights to administrative and judicial review sometimes will 
challenge predicate facts in successive appeals and actions for 
judicial review until the first appeal is finally resolved. But upon 
final resolution of the first appeal, the parties usually do not 
relitigate the same finding of predicate facts in the appeals for later 
fiscal periods.
    Comment: Several commenters opposed the proposed revisions to the 
reopening rules because the commenters were concerned that the Medicare 
program had reserved the right to create exceptions by regulation or 
Ruling that would benefit the program, but not Medicare providers. The 
commenters were also concerned that the Medicare program would 
interpret reimbursement provisions in the Medicare statute to authorize 
the revision of predicate facts only when it would result in reduced 
reimbursement to providers.
    Response: In discussing the proposed revisions, we stated that the 
3-year limit on reopening of a predicate fact might be countered by a 
statutory provision or a specific regulation on reimbursement of the 
matter at issue. This statement acknowledges that the proposed 
revisions cannot override a contrary statutory provision, and that 
revisions to the generally applicable reopening rules are not intended 
to trump the provisions of a specific reimbursement regulation. 
Instead, the proposed revisions to the reopening rules reflect the 
Medicare program's longstanding policy not to revisit predicate facts 
more than 3 years after the predicate fact arose or was first 
determined in a final intermediary determination. In cases where it has 
been necessary to adjust cost report data for use in later fiscal 
periods as a base year or cap after the 3-year reopening period has 
expired, the Medicare program has relied on statutory authority to make 
such adjustments and used notice and comment rulemaking to alert 
providers to the basis, purpose, and scope of the adjustments. For 
example, we refer readers to Regions Hospital v. Shalala, 522 U.S. 448 
(1998) (sustaining the GME reaudit rule). These procedural protections 
would be reinforced by the proposed revisions to the reopening rules.
    However, in light of the comments we received, we are limiting the 
scope of this final rule to ``predicate facts'' that are determined 
once and then used to determine payments for one or more fiscal periods 
after the fiscal period in which the facts arose or were determined. We 
are not applying these final provisions to facts that are subject to 
annual evaluation as part of the intermediary's final determination of 
reasonable cost reimbursement under section 1861(v) of the Act. We 
believe that narrowing the definition of ``predicate facts'' in this 
fashion will help allay commenters' concerns that the proposed 
revisions will be subject to ad hoc exceptions that only serve to 
disadvantage providers. We note that the annual evaluation of certain 
predicate facts in the determination of reasonable cost reimbursement 
can increase the provider's reimbursement in later fiscal periods. For 
example, if a provider incurs a Medicare bad debt in 2002, but the debt 
is not deemed uncollectable until 2009, the bad debt would be 
reimbursable in 2009 if all the requirements of Sec.  413.89 were 
satisfied.
    Comment: Several commenters took issue with CMS' characterization 
of the proposed revisions as codifying longstanding policy. Instead, 
the commenters pointed to the decisions cited in the D.C. Circuit's 
Kaiser Foundation Hospitals decision as evidence that CMS has not taken 
a consistent position on when predicate facts can be reexamined, but 
instead has taken the position that benefits the program.
    Response: We disagree with the commenters' assertion that the 
proposed revisions do not reflect our longstanding interpretation of 
the reopening regulations. The reopening rules, which were first 
promulgated in 1974, have always been interpreted and applied in an 
even-handed manner such that a given reopening might increase, 
decrease, or leave unchanged the provider's program reimbursement. The 
reimbursement effect of a specific reopening is determined by the 
governing law and the factual circumstances of the matter at issue.
    Moreover, we disagree with the commenters' assertion that in 
certain cases we have reexamined predicate facts beyond the 3-year 
reopening period without authority for doing so. In three of these 
cases, a reimbursement regulation allowed reexamination of predicate 
facts so long as the underlying amount of reimbursement was not changed 
beyond the 3-year reopening period. For example, in proposing the GME 
reaudit rule that the Supreme Court later upheld in Regions Hospital, 
we acknowledged that ``a special exception'' to the general reopening 
rules was required to reexamine cost reports from the inpatient 
prospective payment system base year beyond the 3-year reopening period 
(53 FR 36592, September 21, 1988). In Edgemont Hospital v. Mutual of 
Omaha Insurance Co., PRRB Dec. No. 95-D34, 1995 WL 933971 (Apr. 6, 
1995), adjustments to the amount of operating costs considered in 
establishing the TEFRA target amount or rate-of-increase ceiling were 
authorized by Sec.  413.40(g). If the Medicare program took the view 
that the reopening rules permitted the

[[Page 75168]]

reexamination of predicate facts beyond the 3-year reopening period, as 
the commenters suggested, then there would have been no need for the 
above-referenced regulations on GME reauditing and TEFRA limit 
adjustments to operating costs.
    Contrary to the commenters' assertions, the Medicare program has 
applied its reopening rules to determinations of predicate facts to the 
benefit of providers. For example, when a provider received an adverse 
decision on its target amount for its first year, but the intermediary 
had failed to issue timely notices of reopening for the following 
fiscal periods, we instructed the intermediaries not to attempt to 
adjust those target amounts, which allowed the provider to retain 
reimbursement in excess of the cost ceilings calculated with the 
correct target amounts. Similarly, we have instructed intermediaries 
not to attempt to change incorrectly calculated high direct GME or IME 
resident caps for fiscal periods that were beyond the reopening period.
    The other cases cited by commenters do not concern ``predicate 
facts'' as defined in the proposed revisions. HealthEast Bethesda 
Lutheran Hospital & Rehabilitation Center v. Shalala, 164 F.3d 415 (8th 
Cir. 1998), concerned interest expenses evaluated under Sec.  
413.153(b)(2). As we have discussed above, interest expense, when 
considered on a reasonable cost basis, is subject to reexamination in 
each fiscal period to determine whether the cost at issue qualifies as 
``necessary'' interest expense for that fiscal period. We refer readers 
to Sec.  413.5(a) of the regulations. The facts associated with these 
expenses, like bad debt arising from non-payment of Medicare 
deductibles and coinsurance, are not determined once and applied 
thereafter to determine reimbursement in subsequent fiscal periods. 
They are not within the scope of the proposed revisions, as we have 
revised it in response to the comments.
    The remaining decision referenced by the commenters, Mark Twain St. 
Joseph's Healthcare Corp. v. Leavitt, 154 Fed. Appx. 651 (9th Cir. 
2005), also does not support the commenters' view. In that case, the 
court held that recalculation of the provider's hospital specific rate 
did not violate the finality provisions of Sec. Sec.  412.71 and 
412.72; rather, the intermediary properly reopened the determination to 
correct an administrative error. If anything, the finality provisions 
of Sec. Sec.  412.71(d) and 412.72(b) are consistent with our position 
that once a predicate fact, such as the hospital specific rate, is 
finally determined, it is not subject to continuing requests for review 
or reopening beyond the 3-year reopening period at the instigation of 
either the intermediary or the provider.
    Comment: Several commenters stated that CMS proposed to apply the 
revisions to the reopening rules retroactively, but that CMS had no 
authority to do so. Based on the D.C. Circuit's decision in Kaiser 
Foundation Hospitals and earlier decisions cited therein, the 
commenters stated that the proposed revisions to the reopening rules 
did not reflect longstanding Medicare policy, and thus the revisions 
did not clarify such policy. The commenters also stated that the 
proposed revisions would be contrary to the public interest in ensuring 
the accuracy of reimbursement determinations. One commenter also stated 
that it would be contrary to the public interest to apply the proposed 
revisions to pending appeals when providers have relied on the existing 
regulations.
    Response: As explained in the proposed rule, we disagree with the 
D.C. Circuit's decision in Kaiser Foundation Hospitals, including the 
court's discussion of decisions in a few prior cases. As discussed 
above, we believe that the circumstances presented in those prior cases 
are not similar to those in Kaiser, and we also have narrowed the scope 
of the proposed revisions to address these concerns. In any event, in a 
program the size of the Medicare program, with thousands of providers 
submitting voluminous cost reports annually over the course of nearly 
50 years, we do not believe that the few reimbursement decisions cited 
by the D.C. Circuit provide a reasonable basis for providers to forego 
their statutory right to appeal to the Board, and the regulatory 
process for reopening, by invoking an alleged right to seek revisions 
to predicate facts beyond the 3-year reopening period.
    Nonetheless, we recognize that the D.C. Circuit rejected our 
interpretation of the reopening rules, and the court found that we had 
applied the rules differently in a few earlier cases. By amending the 
reopening rules now, our purpose is to articulate clearly what we had 
intended the regulations to say in the first place, so that the revised 
rules will be applied consistently by confining the reopening of 
predicate facts to the 3-year reopening period.
    We continue to believe that application of the revised rules to 
intermediary determinations issued on or after the effective date of 
this final rule, and to appeals and reopenings (including requests for 
reopening) that are pending on or after the same effective date, is not 
impermissibly retroactive in effect. Any finding of a predicate fact 
inherently has a degree of retroactivity because Congress (or the 
Medicare program) has assigned a future reimbursement consequence to 
provider actions that have already taken place, usually before the 
enactment of the relevant reimbursement statute. For example, when 
Congress enacted the direct GME and IME resident cap statute in 1997, 
and used a base year that ended no later than December 31, 1996, it 
assigned future consequences (the resident cap) to actions that were 
already completed (the provider's employment of residents during the 
1996 cost reporting period).
    We believe that this is a form of ``secondary retroactivity'' 
inasmuch as future consequences are attached to past actions, but such 
secondary retroactivity does not violate due process or, in the case of 
regulations, the Administrative Procedure Act, if the regulation is not 
unreasonable. For example, we refer readers to Bowen v. Georgetown 
Univ. Hosp., 488 U.S. 203, 219-220 (1988) (Scalia, J., concurring); and 
Nat'l Cable & Telecomms. Ass'n v. FCC, 567 F.3d 659, 670-71 (D.C. Cir. 
2009). Applying the proposed revisions to pending intermediary 
determinations, appeals, and reopenings will not affect the amount of 
reimbursement a provider received for the cost reporting period in 
which the predicate fact first arose or was determined. Nor would such 
application of the proposed changes to the reopening rules invalidate 
any revisions to predicate facts that were finalized prior to the 
effective date of this final rule. Instead, the revised reopening rules 
govern only the timing of permissible revisions to predicate facts, as 
of the effective date of this final rule, and thus the revisions to the 
reopening rules are procedural in nature.
    The scope of applicability of the revised reopening rules also does 
not undermine providers' settled expectations. A provider cannot 
reasonably expect to be allowed to revise a predicate fact after the 
180-day filing period for an appeal after the right has expired, when 
the only remaining means of securing such relief is through the 
discretionary reopening process. We refer readers to Bergerco Canada v. 
U.S. Treasury Dept., 129 F.3d 189, 194-95 (D.C. Cir. 1997) (changes to 
discretionary licensing procedure made after plaintiff had filed 
request for license did not impair any rights of the plaintiff). After 
the 3-year period to request reopening has elapsed, a provider has no 
reasonable expectation

[[Page 75169]]

of securing revisions to predicate facts. While one of the commenters 
suggested that the Kaiser decision effectively established the 
governing law, the decision is of such recent vintage that few 
providers could have relied on it as a basis for changing predicate 
facts after expiration of the 3-year reopening period. Moreover, the 
strictures against retroactivity do not apply to procedural rules, 
which the reopening rules plainly are. We refer readers to Combs v. 
Commissioner of Social Security, 459 F.3d 640, 647 (6th Cir. 2006) (en 
banc).
    In any event, if the revisions to the reopening rules were deemed a 
retroactive application of a substantive change to a regulation, we 
continue to believe that section 1871(e)(1)(A) of the Act permits 
retroactive application because it is necessary to ensure compliance 
with various statutory payment provisions such as the TEFRA target 
amount (under section 1886(b) of the Act) and the caps on residents for 
GME and IME reimbursement (under sections 1886(h)(4)(F) and 
1886(d)(5)(B)(v) of the Act); the 180-day filing period for appeals to 
the Board (under section 1878(a)(3) of the Act); and the 3-year period 
for reopening (under Sec. Sec.  405.1885(b)(1), and (b)(2) of the 
regulations). In addition, we continue to believe that retroactive 
application furthers the public interest in safeguarding the 3-year 
limit on reopening and the interests of both Medicare providers and the 
Medicare program in preserving the finality of reimbursement 
determinations. Contrary to the commenter's assertion, the revised 
reopening rules still provide an avenue to correct predicate facts, 
thus promoting accuracy in reimbursement determinations. The revised 
reopening rules also protect the interests of administrative finality 
by ensuring that both Medicare providers and the Medicare program can 
close their books on a cost reporting period without worrying that the 
other party will invoke the Kaiser decision to make changes to 
predicate facts long after the close of the 3-year reopening period, 
when documents and witnesses may no longer be available.
    After consideration of the public comments we received, we are 
adopting the proposed revisions to Sec. Sec.  405.1885(a)(1) and 
(a)(2)(iv) to clarify that the specific ``matters at issue in a 
determination'' that are subject to the reopening rules include factual 
findings for one fiscal period that are predicate facts for later 
fiscal periods with the following modifications: We are adding language 
to paragraph (a)(1)(iii) that defines the ``predicate facts'' that are 
subject to the revisions as factual findings for one cost reporting 
period that once determined are used in one or more subsequent cost 
reporting periods to determine reimbursement. We are adding language to 
paragraph (b)(2)(iv) to clarify that it does not apply to factual 
findings when made as part of a determination of reasonable cost under 
section 1861(v)(1)(A) of the Act. Paragraph (a)(1)(iv) also was 
reworded for clarity. Absent a specific statute, regulation, or other 
legal provision permitting reauditing, revising, or similar actions 
changing predicate facts: (1) A predicate fact is subject to change 
only through a timely appeal or reopening of the NPR for the fiscal 
period in which the predicate fact first arose or the fiscal period for 
which such fact was first determined by the intermediary; and/or (2) 
the application of the predicate fact is subject to change through a 
timely appeal or reopening of the NPR for the fiscal period in which 
the fact was first used (or applied), by the intermediary to determine 
the provider's reimbursement. The general 3-year reopening period 
applies to findings about such predicate facts and the reopening period 
is calculated separately for each finding about each predicate fact. At 
this time, we have decided not to make similar changes regarding 
predicate facts to the regulations governing intermediary appeals at 
Sec.  405.1811 and appeals to the Board at Sec.  405.1835.

XX. Files Available to the Public Via the Internet

    In the CY 2014 OPPS/ASC proposed rule (78 FR 43684), we proposed to 
create new Addendum P--Proposed OPPS Items and Services That Will Be 
Packaged for CY 2014.
    We did not receive any public comments related to the proposed 
creation of new Addendum P and are finalizing our proposal without 
modification.
    The Addenda of the proposed rules and the final rules with comment 
period will be published and available only via the Internet on the CMS 
Web site. To view the Addenda of this final rule with comment period 
pertaining to CY 2014 payments under the OPPS, go to the CMS Web site 
at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-and-Notices.html 
and select ``1601-FC'' from the list of regulations. All Addenda for 
this final rule with comment period are contained in the zipped folder 
entitled ``2014 OPPS 1601-FC Addenda'' at the bottom of the page.
    To view the Addenda of this final rule with comment period 
pertaining to CY 2014 payments under the ASC payment system, go to the 
CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASC-Regulations-and-Notices.html and select ``1601-
FC'' from the list of regulations. All Addenda for this final rule with 
comment period are contained in the zipped folders entitled ``Addendum 
AA, BB, DD1 and DD2,'' and ``Addendum EE'' at the bottom of the page.

XXI. Collection of Information Requirements

A. Legislative Requirements for Solicitation of Comments

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and to solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    In the CY 2014 OPPS/ASC proposed rule (78 FR 43684), we solicited 
public comments on each of the issues outlined above for the 
information collection requirements discussed below.

B. Requirements in Regulation Text

1. Changes to the Outcome Measure Requirement for OPOs
    In section XVI. of this final rule with comment period, we 
discussed our proposal to modify the outcome measures requirement for 
OPOs set forth at Sec.  486.318. Currently, OPOs are required to meet 
all three outcome measures in that section or they are automatically 
decertified. We proposed to modify that requirement so that OPOs will 
meet the outcome measures requirement if they meet two out of the three 
outcome measures.
    Based on our experience with OPOs and historical data concerning 
how many OPOs typically fail to meet one of the outcome measures, we 
believe that there would be about five OPOs that would fail to meet one 
of the outcome

[[Page 75170]]

measures. Our proposal would result in those five OPOs meeting the 
outcome measures requirement and not being automatically de-certified. 
Therefore, these five OPOs would not have to perform the ICRs under 
this section, which would be the time and resources needed to go 
through the appeals process in an attempt to secure a reversal of the 
decertification.
    The ICRs that an OPO would be required to expend would depend upon 
how it chose to handle the decertification. An OPO may choose to not 
engage in the appeals process and merge with another OPO prior to the 
effective date of the decertification. Other OPOs would likely choose 
to take advantage of the appeals process, which would begin with 
reconsideration at the regional administrator level. It is likely that 
an OPO would expend considerable resources during the reconsideration 
and, if that was unsuccessful, a hearing before a CMS hearing officer. 
We believe both would require considerable time and other resources 
from the OPO's senior staff and legal counsel. We also believe that 
those OPOs that went onto a hearing would expend considerably more 
resources than those that received a reversal of their decertification 
at the reconsideration. While we do not have a reliable estimate on how 
much these OPOs would save due to the numerous unknown variables, we 
are confident that these OPOs would sustain a significantly positive 
effect from not being automatically de-certified as is currently 
required under the OPO CfCs. In addition, under 5 CFR 1320.3(c), a 
``collection of information'' does not include requirements imposed on 
fewer than 10 entities. Therefore, the requirements of this section are 
not subject to the PRA.
2. Changes to the Medicare Fee-for-Service EHR Incentive Program
    In section XVIII. of the CY 2014 OPPS/ASC proposed rule, we 
proposed to revise 42 CFR 495.4 to provide a special method for making 
hospital-based determinations for 2013 only in the cases of those EPs 
who reassign their benefits to Method II CAHs. We also proposed a minor 
clarification to the regulations at Sec.  495.104(c)(2) concerning the 
cost reporting period to be used in determining final EHR payments for 
hospitals. We refer readers to the Stage 1 (75 FR 44517 through 44544) 
and Stage 2 (77 FR 54125 through 54135) final rules for the Medicare 
EHR Incentive Program for the discussions of the burden of the 
information collection requirements of the Medicare Fee-for-Service EHR 
Incentive Program. Our proposals in the proposed rule did not modify or 
increase the information collection requirements of the program in any 
way.
    After reviewing the public comments we received on the proposed 
rule, we are finalizing our proposals discussed in section XVIII. of 
this document. These final policies do not modify or increase the 
information collection requirements of the Medicare Fee-for-Service EHR 
Incentive Program in any way.

C. Associated Information Collections Not Specified in Regulatory Text

    In the CY 2014 OPPS/ASC proposed rule, we made reference to 
proposed associated information collection requirements that were not 
discussed in the regulation text contained in the proposed rule. The 
following is a discussion of those requirements, any public comments we 
received, and our responses to those public comments.
1. Hospital OQR Program
    As we stated in section XIV. of the CY 2012 OPPS/ASC final rule 
with comment period, the Hospital OQR Program has been generally 
modeled after the quality data reporting program for the Hospital IQR 
Program. We refer readers to the CY 2011 OPPS/ASC final rule with 
comment period (75 FR 72111 through 72114), the CY 2012 OPPS/ASC final 
rule with comment period (76 FR 74549 through 74554) and the CY 2013 
OPPS/ASC final rule with comment period (77 FR 68527 through 68532) for 
detailed discussions of the Hospital OQR Program information collection 
requirements we have previously finalized.
a. Hospital OQR Program Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    We refer readers to the CY 2013 OPPS/ASC final rule with comment 
period (77 FR 68531) for a discussion on the burden of the information 
collection requirements of the previously adopted Hospital OQR Program 
measures for the CY 2015 payment determination. In the CY 2014 OPPS/ASC 
proposed rule, we did not propose to add any additional measures for 
the CY 2015 payment determination and subsequent years; therefore, 
there will not be an increase in our previous burden estimate.
    We note that we had previously suspended data collection for the 
OP-19 measure and deferred data collection for the OP-24 measure. In 
this final rule with comment period, we are finalizing our proposal to 
remove the OP-19 and OP-24 measures from the Hospital OQR Program for 
the CY 2015 payment determination and subsequent years (78 FR 43646 
through 43647, 78 FR 43653). We refer readers to section XIII.C.2. of 
this final rule with comment period for our discussion of the removal 
of these measures. Because one of the measures was previously suspended 
and the other deferred, removing them will not impact our previous 
burden estimate and it remains unchanged.
    In addition, we are finalizing our proposals to codify existing 
policies related to program participation and withdrawal, data 
submission, extraordinary circumstances extensions or waivers, data 
validation, and the reconsideration process. Because we are only 
codifying existing policies (including finalizing a clarification that 
we may grant extensions or waivers if systemic problems in our data 
collection systems directly or indirectly affect the ability of 
hospitals to submit data), we do not anticipate any additional burden 
to hospitals based on these proposals affecting the CY 2015 payment 
determination or subsequent years.
    The Hospital OQR program has 3 types of measures that utilize 
different methods of data collection/submission--chart-abstracted 
measures that require HOPDs to collected data from chart-abstraction, 
and submit that data directly to CMS, Web-based measures submitted via 
the QualityNet Web site (this includes some chart abstracted measures 
that are also submitted via the QualityNet Web site) and measures 
submitted via the CDC's NHSN Web site. In the CY 2014 OPPS/ASC proposed 
rule, there is only one section heading for all of these measures: 
``Web-based Measures for the CY 2016 Payment Determination and 
Subsequent Years'' (78 FR 43685). We intended to include headings for 
the other two kinds of measures, but these were inadvertently deleted. 
For the new measures, this resulted in burden estimates for three 
chart-abstracted measures submitted directly to CMS via a Web-based 
tool, and one measure submitted via CDC's NHSN all appearing under a 
heading that refers to just one type of measure. In this final rule 
with comment period, we have corrected this error and separated the 
content appropriately using separate section headings for each of the 
different kinds of measures.
    For the CY 2016 payment determination and subsequent years, the 
burden associated with Hospital OQR Program procedures consists of the 
time and effort associated with collecting and submitting data for the 
3 different kinds of measures. Where we have chart-abstracted measures 
that are collected via Web-based tool, they are included below in 
section XXI.C.1.b., where their chart-abstraction burden is estimated,

[[Page 75171]]

and in section XXI.C.1.c., where we estimate their Web submission 
burden.
    We believe there is a burden associated with successful 
participation in the Hospital OQR Program, where successful 
participation results in a full annual payment update (APU) for a 
particular payment determination. This burden would include, but not be 
limited to: maintaining familiarity with the Hospital OQR Program 
requirements (for example, participating in the monthly educational 
webinars, reading information available at the QualityNet Web site 
https://qualitynet.org, checking feedback reports to indicate a 
facility's current status or performance, reaching out to the Hospital 
OQR Program support contractor to make specific inquiries); staying up 
to date with system requirements (for example, updating passwords, 
maintaining a system that is fully functional in the QualityNet 
environment, etc.); and communicating how program requirements must be 
operationalized within the individual facility. For each hospital, we 
estimate burden as follows, for one annual cycle of the program:
     Program requirements (20 hours),
     System requirements (2 hours)
     Managing facility operations (20 hours)
    The burden for one hospital is therefore the sum of these 3 areas 
above and therefore estimated at 42 hours. We calculate the total 
burden for the approximately 3,300 participating hospitals as 138,600 
hours (42 hours multiplied by 3,300 facilities).
b. Chart-Abstracted Measures for the CY 2016 Payment Determination and 
Subsequent Years
    We estimated, based on our past experiences with chart-abstracted 
measures, that there will be approximately 3,300 respondents per year 
and that each participating hospital will spend 35 minutes per case to 
collect and submit the data. As a result, the estimated burden 
associated with one case per hospital would be 1,924 hours (3,300 
hospitals x 0.583 hours per hospital). We estimated the financial 
burden for all hospitals to collect and submit data using our estimate 
of one case per hospital would be $57,717 (3,300 hospitals x $30.00 per 
hour x 0.583 hours). We note that this estimate is based on estimates 
of all of these measures being collected using the same methods of 
chart abstraction, but excludes estimates for data submission for 
measures that HOPDs will report via a Web-based tool.
    Based upon the data submitted for the CY 2012 and CY 2013 payment 
determinations, we estimated there will be a total of 1,679,700 cases 
per year, or approximately 509 cases per year per hospital. However, 
hospitals will vary greatly on the number of cases per HOPD due to 
specialization. Based on those numbers though, the estimated annual 
hourly burden associated with the aforementioned data submission 
requirements for the chart-abstracted data for all hospitals (excluding 
submission burden for measures submitted through the Web-based tool) is 
979,265 hours (1,679,700 cases per year x 0.583 hours per case). This 
estimate is based on data submitted previously and includes burden 
associated with measure OP-22, which is a chart-abstracted measure with 
Web-based submission.
    For the CY 2016 payment determination, the three newly finalized 
measures (OP-29, OP-30, and OP-31) are chart-abstracted measures with 
Web-based submission. These three measures will add to the burden. In 
this rulemaking, we estimate the maximum burden, but in future 
rulemaking, we will update our burden estimate based on actual data we 
receive. To estimate maximum burden, we assume all facilities will have 
adequate volume to sample at the highest number of required cases. If a 
hospital is obligated to chart-abstract the highest number of cases 
from the instructions we provide to indicate appropriate sampling 
methodology based on hospital's volume, this is a basis for us to 
calculate a maximum burden estimate. Using the same sampling 
methodology we have used in the past, which can be found on Table 3 (ED 
Throughput) of ``Section 4-Population, Sampling and Transmission'' in 
the Hospital Outpatient Quality Reporting Specifications Manual, v7.0 
available at https://qualitynet.org, we estimate that each of the 
approximately 3,300 responding hospitals will have volume adequate to 
support quarterly sample sizes of 96 cases, for a total of 384 cases 
(96 cases per quarter x 4 quarters) to be abstracted by each hospital 
annually for one new measure.
    Based on these assumptions for the three new measures, the total 
additional cases for one hospital to sample would be 1,152 (384 cases 
annually per measure x 3 measures). We estimate that the time to chart 
abstract one case is 25 minutes. We estimate 25 minutes per case (or 
0.417 hours per case) based on chart-abstraction time less the time to 
submit Web-based measures in aggregate (0.583 hours - 0.167 hours = 
0.417 hours per measure). For the approximately 3,300 reporting 
hospitals, we therefore estimate the total maximum burden associated is 
1,584,000 hours (3,300 hospitals x 0.417 hours per hospital x 1,152 
cases). We estimate the maximum financial burden for all hospitals to 
collect and submit data via the Web-based tool for the three new 
measures to be $47,520,000 (3,300 hospitals x $30.00 per hour x 
1,584,000 hours).
    For chart-abstracted measures that HOPDs will not submit via a Web-
based tool, HOPDs will incur a financial burden associated with chart 
abstraction and data submission for these non-Web-based measures, which 
requires that HOPDs submit patient-level data directly to CMS. We 
estimated the financial burden associated with these measures for all 
hospitals as $29,377,953 (1,679,700 cases per year x $30.00 per hour x 
0.583 hours per case).
c. Web-Based Measures Submitted Directly to CMS for the CY 2016 Payment 
Determination and Subsequent Years
    For the CY 2016 payment determination and subsequent years, we 
proposed to add five measures to the program. Of these five measures, 
four are chart-abstracted measures requiring that HOPDs submit patient-
level data directly to CMS using a Web-based tool, with data collection 
beginning in CY 2014. Based on public comment we received regarding 
burden, we are not finalizing proposed measure OP-28 as part of the 
Hospital OQR Program measure set. Therefore, we are only finalizing 
three of the four chart-abstracted measures that we proposed. We refer 
readers to section XIII.E.2 of this final rule with comment period for 
a discussion of public comments regarding OP-28. We also refer readers 
to section XIII.G.2.f. of this final rule with comment period for our 
discussion of specific data collection requirements we finalized, which 
serves as the basis of our estimates of burden described.
    For previously finalized Web-based measures (OP-12, OP-17, OP-25, 
and OP-26), our measurement methods are somewhat different from the 
methods we use for one existing measure and the three newly finalized 
Web-based measures (OP-29, OP-30, and OP-31). We estimated the burden 
of chart-abstraction for the subset of the four of these measures that 
are also chart-abstracted (OP-22, OP-29, OP-30, and OP-31). It is 
appropriate to consider this subset of four measures in both the 
section on chart-abstraction burden and in this section estimating Web-
based measure burden because not all Web-based measures are also chart-
abstracted. Our estimate in this section is based on the chart-
abstraction for these four measures being complete by

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the hospital at the time of Web-based entry. Each participating 
hospital would spend 10 minutes per measure per year to collect and 
submit the data. In the case of the subset of four chart-abstracted 
measures, the estimate here is only for the time associated with 
entering aggregate totals into our Web-based tool. The estimated annual 
burden associated with these measures is 4,409 hours (3,300 hospitals x 
0.167 hours per measure x 8 measures per hospital) for the CY 2016 
payment determination. This burden is based on a collection burden for 
OP-12, OP-17, OP-25, and OP-26 and a Web-based submission burden for 
all of the measures that are submitted via a Web-based tool.
    HOPDs will incur a financial burden associated with identifying and 
submitting data for these eight Web-based measures. We estimated that 
the financial burden associated with these measures would be $132,264 
(3,300 hospitals x $30.00 per hour x 0.167 hours per measure x 8 
measures). Of these eight measures, 4 are chart-abstracted. As noted 
above, we include the chart-abstraction burden for the subset of 4 
chart-abstracted measures (1 previously finalized, 3 finalized in this 
rulemaking) submitted via Web-based tool in the section on chart-
abstracted data collection above.
d. NHSN HAI Measure for the CY 2016 Payment Determination and 
Subsequent Years
    For the NHSN HAI measure Influenza Vaccination Coverage among 
Healthcare Personnel (OP-27), the burden involved would be from 
gathering information either from existing reports or by other methods 
such as surveying the healthcare personnel population. In the CY 2014 
OPPS/ASC proposed rule (78 FR 43685), we used an estimate of 10 
vaccinations per outpatient hospital. Since then, we have obtained a 
more accurate estimate for the number of vaccinations per hospital and 
have reflected that in our calculations below. Using data from the 
United States Department of Labor Bureau of Labor Statistics, 
Occupational Employment Statistics Query System, and the total of all 
workers for Outpatient Care Centers Code 621400, the number of 
personnel for all hospitals is 640,360. We estimate 640,360 responses 
for a total burden of 106,940 hours (0.167 hours per response x 640,360 
responses).
    HOPDs will incur a financial burden associated with data submission 
for this measure. Using the total of all Outpatient Care Center workers 
from the Bureau of Labor Statistics, as described above, we estimate 
that the financial burden associated with this measure for all HOPDs 
would be $3,208,203 ($30.00 per hour x 106,940 hours).
    We invited public comment on the burden associated with the 
information collection requirements for the chart-abstracted measures, 
the Web-based measures submitted directly to CMS, and the measure 
submitted via CDC's NHSN. We did not receive any comments on the burden 
associated with information collection requirements. Therefore, we are 
finalizing our burden estimates.
e. Hospital OQR Program Validation Requirements for the CY 2015 Payment 
Determination and Subsequent Years
    We use a sampling methodology, which involves establishing a 
particular sample size, eligibility for validation selection, and 
encounter minimums for patient-level data for measures where data is 
obtained from chart abstraction and submitted directly to CMS from 
selected hospitals. We do not validate measures submitted via Web-based 
tool or submitted to NHSN. The validation burden for a HOPD is the time 
and effort necessary to submit validation data to a CMS contractor. In 
the CY 2014 OPPS/ASC proposed rule, we did not propose any changes to 
our validation procedures. As a result, the burden associated with the 
validation procedures for the CY 2015 payment determination is the same 
as previously finalized for CY 2014 in the CY 2013 OPPS/ASC final rule 
with comment period (77 FR 68531). We estimated that it would take each 
of the 500 sampled hospitals approximately 12 hours to comply with 
these data submission requirements. To comply with the requirements, we 
estimated each hospital would submit up to 48 cases for the affected 
year for review. All selected hospitals must comply with these 
requirements each year, which would result in a total of up to 24,000 
charts being submitted by the sampled hospitals. The estimated annual 
burden associated with the data validation process for the CY 2015 
payment determination is approximately 6,000 hours (500 selected 
hospitals x 12 hours per hospital).
    HOPDs will incur a financial burden associated with the required 
data abstraction and data submission for the validation process. We 
estimated that the financial burden associated with validation would be 
$180,000 ($30.00 per hour x 6,000 hours).
    These requirements were approved under OCN: 0938-1109. This 
approval expired on October 31, 2013.
    We invited public comment on the burden associated with data 
validation information collection procedures. We did not receive any 
public comments. Therefore, we are finalizing our burden estimates as 
proposed.
f. Hospital OQR Program Reconsideration and Appeals Procedures
    In section XIII.I. of the proposed rule and this final rule with 
comment period, for the CY 2015 payment determination and subsequent 
years, we proposed and are finalizing a minor change to the 
reconsideration request process to ensure our deadline for these 
requests will always fall on a business day. We also proposed and are 
finalizing our proposal to codify our reconsideration request process 
at 42 CFR 419.46(h).
    While there is burden associated with filing a reconsideration 
request, 5 CFR 1320.4 of the Paperwork Reduction Act of 1995 
regulations excludes collection activities during the conduct of 
administrative actions such as redeterminations, reconsiderations, or 
appeals or all of these actions.
2. ASCQR Program Requirements
a. Claims-Based Measures for the CY 2014 Payment Determination
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68532), we discussed the information collection requirements for the 
five claims-based measures (four outcome measures and one process 
measure) to be used for the CY 2014 payment determination. The five 
measures are: (1) Patient Burn (NQF  0263); (2) Patient Fall 
(NQF  0266); (3) Wrong Site, Wrong Side, Wrong Patient, Wrong 
Procedure, Wrong Implant (NQF  0267); (4) Hospital Transfer/
Admission (NQF  0265); and (5) Prophylactic Intravenous (IV) 
Antibiotic Timing (NQF  0264). We collected quality measure 
data for the five claims-based measures using QDCs placed on submitted 
claims for services furnished from October 1, 2012 through December 31, 
2012 that were paid by the contractor by April 30, 2013.
    Approximately 71 percent of ASCs participated in Medical Event 
Reporting (the ASC Quality Collaboration's voluntary reporting program) 
(http://www.ascquality.org), which included reporting on the first four 
claims-based measures, which are outcome measures. Between January 1995 
and December 2007, ASCs reported 126 events, an average of 8.4 events 
per year (Florida Medical Quality Assurance, Inc. and Health Services 
Advisory Group: Ambulatory Surgical Center Environmental Scan (July 
2008) (Contract No. GS-10F-0096T)). We

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estimated the burden to report QDCs for these 4 claims-based outcome 
measures to be nominal due to the small number of cases. Based on the 
data above, extrapolating from 71 percent to 100 percent of ASCs 
reporting, there would be an average of 11.8 events per year or less 
than 1 case per month per ASC.
    For the claims-based process measure, Prophylactic IV Antibiotic 
Timing, we also estimated the burden associated with submitting QDCs to 
be nominal because few procedures performed by ASCs will require 
prophylactic antibiotic administration.
    We invited public comment on the burden associated with these 
information collection requirements. We did not receive any public 
comments on our burden discussion in the CY 2014 OPPS/ASC proposed rule 
(78 FR 43686) regarding the five previously finalized claims-based 
measures for the CY 2014 payment determination.
b. Claims-Based and Web-Based Measures for the CY 2015 and CY 2016 
Payment Determinations
    In the CY 2013 OPPS/ASC final rule with comment period (77 FR 
68532), we discussed the information collection requirements for the 
measures to be used for the CY 2015 and CY 2016 payment determinations. 
For the CY 2015 payment determination, we finalized the retention of 
the five measures we adopted for the CY 2014 payment determination, and 
we added two structural, Web-based, measures: Safe Surgery Checklist 
Use and ASC Facility Volume Data on Selected ASC Surgical Procedures 
(76 FR 74504 through 74509). For the CY 2016 payment determination, we 
adopted the seven measures for the CY 2015 payment determination and 
added Influenza Vaccination Coverage among Healthcare Personnel (NQF 
 0431) (76 FR 74509).
    Based on our data for CY 2014 payment determinations above for 
claims-based measures, extrapolating to 100 percent of ASCs reporting, 
there would be an average of 11.8 events per year. Therefore, we 
estimated the burden to report QDCs on this number of claims per year 
for the first four claims-based outcome measures to be nominal due to 
the small number of cases (approximately one case per month per ASC) 
for the CY 2015 and CY 2016 payment determinations. We estimated the 
burden associated with submitting QDCs for the fifth measure to be 
nominal as well, as discussed above.
    For the CY 2015 payment determination, for the Web-based measures, 
ASCs will enter required information using a Web-based collection tool 
between July 1, 2013 and August 15, 2013. For the Safe Surgery 
Checklist Use measure, we estimated that each participating ASC will 
spend 10 minutes per year to collect and submit the required data, 
making the estimated annual burden associated with this measure 878 
hours (5,260 ASCs x 1 measure x 0.167 hours per ASC). For the CY 2015 
payment determination, we estimated that, for the ASC Facility Volume 
Data on Selected ASC Surgical Procedures measure, each participating 
ASC would spend 10 minutes per year to collect and submit the required 
data, making the estimated annual burden associated with this measure 
878 hours (5,260 ASCs x 1 measure x 0.167 hours per ASC).
    For the CY 2016 payment determination, in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43669), we proposed, and are finalizing in this 
final rule with comment period, that ASCs would report data for the 
Safe Surgery Checklist Use measure and the ASC Facility Volume Data on 
Selected ASC Surgical Procedures measure between January 1, 2015 and 
August 15, 2015 for services furnished between January 1, 2014 and 
December 31, 2014. For the Safe Surgery Checklist Use measure for the 
CY 2016 payment determination, we estimated that each participating ASC 
would spend 10 minutes per year to collect and submit the required 
data, making the estimated annual burden associated with this measure 
878 hours (5,260 ASCs x 1 measure x 0.167 hours per ASC). For the CY 
2016 payment determination, for the ASC Facility Volume Data on 
Selected ASC Surgical Procedures measure, we estimated that each 
participating ASC would spend 10 minutes per year to collect and submit 
the required data, making the estimated annual burden associated with 
this measure 878 hours (5,260 ASCs x 1 measure x 0.167 hours per ASC).
    For the CY 2016 payment determination, for the NHSN HAI measure: 
Influenza Vaccination Coverage among Healthcare Personnel, we estimated 
that the total annual burden associated with this measure for ASCs, 
including NHSN registration (5,260 ASCs x 0.083 hour per facility = 437 
hours) and data submission (5,260 ASCs x 0.167 hour per response for 20 
workers per facility = 17,568) would be 18,005 hours. This estimate is 
based upon burden estimates from the CDC (OMB No. 0920-0666) and 
reported numbers for the average number of workers per ASC.
    For the CY 2016 payment determination, in the CY 2014 OPPS/ASC 
proposed rule (78 FR 43686), we proposed to add four measures to the 
program with data collection to begin during CY 2014 and submission to 
be via a Web-based tool. As we discuss in section XV.B.3. of this final 
rule with comment period, we are finalizing the adoption of three of 
these four measures. For the chart-abstracted measures, we estimated 
that each participating ASC would spend 35 minutes per case to collect 
and submit the data, making the total estimated burden for ASCs with a 
single case per ASC of 3,067 hours (5,260 ASCs x 0.583 hours per case 
per ASC). We expect that ASCs would vary greatly as to the number of 
cases per ASC due to ASC specialization.
    In addition, in the proposed rule we stated that ASCs would incur a 
financial burden associated with chart abstraction and data submission 
for these four proposed measures. We estimated that ASCs (in the 
proposed rule (78 FR 43686), we erroneously referred to ``for a chart-
abstracted case, an ASC'') would incur costs of $91,997 (5,260 ASCs x 
$30.00 per hour x 0.583 hours). We solicited public comment on the 
impact of adding these measures and requiring data submission. We also 
invited public comment on the burden associated with these information 
collection requirements.
    For the previously finalized Web-based Safe Surgery Checklist Use 
and ASC Facility Volume Data on Selected ASC Surgical Procedures 
measures for the CY 2016 payment determination, we received public 
comments that increasing the data submission time period was an 
appropriate and beneficial change that did not increase burden. These 
comments are discussed in section XV.D.5.b of this final rule with 
comment period.
    For the claims-based measures, we received public comments that 
data collection via claims was a way to reduce burden. These comments 
are discussed in sections XV.D.4 and XV.D.5. of this final rule with 
comment period.
    We discuss public comments we received on burden associated with 
data collection for the NHSN HAI measure: Influenza Vaccination 
Coverage among Healthcare Personnel in section XV.D.6.b. of this final 
rule with comment period.
    We discuss public comments we received on burden associated with 
the collection of aggregated data via a CMS Web-based tool in sections 
XV.B.3 and XV.D.5.c. of this final rule with comment period.
    After consideration of the public comments received, we are 
finalizing our burden estimates related to claims-

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based and Web-based measures for the CY 2015 and 2016 payment 
determinations as proposed.
c. Program Administrative Requirements and QualityNet Accounts; 
Extraordinary Circumstances Extension or Waiver Requests; 
Reconsideration Requests
    In the CY 2012 OPPS/ASC final rule with comment period (76 FR 
74516), we finalized our proposal to consider an ASC to be 
participating in the ASCQR Program for the CY 2014 payment 
determination if the ASC includes QDCs specified for the program on 
their CY 2012 claims relating to the finalized measures.
    In the FY 2013 IPPS/LTCH PPS final rule, we finalized, for the CY 
2015 payment determination and subsequent years, that once an ASC 
submits any quality measure data, it would be considered to be 
participating in the ASCQR Program. Once an ASC submits quality measure 
data indicating its participation in the ASCQR Program, in order to 
withdraw, an ASC must complete and submit an online form indicating 
that it is withdrawing from the program.
    For the CY 2015 payment determination and subsequent years, if the 
ASC submits quality measure data, there is no additional action 
required by the ASC to indicate participation in the program. The 
burden associated with the requirements to withdraw from the program is 
the time and effort associated with accessing, completing, and 
submitting the online form. Based on the number of hospitals that have 
withdrawn from the Hospital OQR Program over the past 4 years, we 
estimated that 2 ASCs would withdraw per year and that an ASC would 
expend 30 minutes to access and complete the form, for a total burden 
of 1 hour per year.
    In the FY 2013 IPPS/LTCH PPS final rule (77 FR 53638 through 
53639), we finalized for the CY 2015 payment determination the 
requirement that ASCs identify and register a QualityNet administrator 
in order to set up accounts necessary to enter structural measure data. 
We estimated that, based upon previous experience with the Hospital OQR 
Program, it would take an ASC 10 hours to obtain, complete, and submit 
an application for a QualityNet administrator and then set up the 
necessary accounts for structural measure data entry. We estimated the 
total burden to meet these requirements to be 52,600 hours (10 hours x 
5,260 ASCs). The financial burden associated with these requirements is 
estimated to be $1,578,000 ($30.00 per hour x 52,600 hours).
    In the FY 2013 IPPS/LTCH PPS final rule, we adopted a process for 
an extension or waiver for submitting information required under the 
program due to extraordinary circumstances that are not within the 
ASC's control. We are requiring that an ASC would complete a request 
form that would be available on the QualityNet Web site, supply 
requested information, and submit the request. The burden associated 
with these requirements is the time and effort associated with 
gathering required information as well as accessing, completing, and 
submitting the form. Based on the number of ASCs that have submitted a 
request for an extension or waiver from the ASCQR Program over the past 
year, we estimated that 200 ASCs per year would request an extension or 
waiver and that an ASC would expend 2 hours to gather required 
information as well as access, complete, and submit the form, for a 
total burden of 400 hours per year. This estimate takes into account 
continued billing and claims processing issues.
    We also adopted a reconsideration process that would apply to the 
CY 2014 payment determination and subsequent payment determination 
years under the ASCQR Program. While there is burden associated with an 
ASC filing a reconsideration request, the regulations at 5 CFR 1320.4 
for the Paperwork Reduction Act of 1995 exclude data collection 
activities during the conduct of administrative actions.
    We invited public comment on the burden associated with these 
information collection requirements.
    We did not receive any public comments on our burden discussion in 
the proposed rule and are finalizing these burden estimates as 
proposed.
3. Hospital VBP Program Requirements
    In section XIV. of the proposed rule, for the Hospital VBP Program, 
we proposed to allow hospitals to request an independent CMS review 
that would be an additional appeal process beyond the existing review 
and corrections process (77 FR 53578 through 53581 and 76 FR 74544 
through 74547) and appeal process codified at 42 CFR 412.167.
    While there is burden associated with a hospital requesting an 
independent CMS review, the regulations at 5 CFR Sec.  1320.4 for the 
Paperwork Reduction Act of 1995 exclude collection activities during 
the conduct of administrative actions such as redeterminations, 
reconsiderations, or appeals or all of these actions.
    We invited public comment on the burden associated with these 
information collection requirements.
    We did not receive any public comments on our burden discussion in 
the proposed rule.

XXII. Response to Comments

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

XXIII. Economic Analyses

A. Regulatory Impact Analysis

1. Introduction
    We have examined the impacts of the final rule with comment period 
and the final rules in this document as required by Executive Order 
12866 on Regulatory Planning and Review (September 30, 1993), Executive 
Order 13563 on Improving Regulation and Regulatory Review (January 18, 
2011), the Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. 
L. 96-354), section 1102(b) of the Social Security Act, section 202 of 
the Unfunded Mandates Reform Act of 1995 (UMRA) (March 22, 1995, Pub. 
L. 104-4), Executive Order 13132 on Federalism (August 4, 1999), and 
the Contract with America Advancement Act of 1996 (Pub. L. 104-121) (5 
U.S.C. 804(2)). This section of the final rule with comment period 
contains the impact and other economic analyses for the provisions that 
we are finalizing.
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This final rule with comment period has been designated as 
an economically significant rule under section 3(f)(1) of Executive 
Order 12866 and a major rule under the Contract with America 
Advancement Act of 1996 (Pub. L. 104-121). Accordingly, the final rule 
with comment period has been reviewed by

[[Page 75175]]

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 this final rule with comment period. In the CY 2014 
OPPS/ASC proposed rule (78 FR 43687 through 43688), we solicited public 
comments on the regulatory impact analysis provided. We address the 
public comments we received in this section below and in other sections 
of this final rule with comment period as appropriate.
2. Statement of Need
    This final rule with comment period is necessary to update 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 2014. 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, 2012, through and including December 
31, 2012, and updated cost report information.
    For CY 2014, we are continuing the current payment adjustment for 
rural SCHs, including EACHs. In addition, section 10324 of the 
Affordable Care Act, as amended by HCERA, authorizes a wage index of 
1.00 for certain frontier States. Section 1833(t)(17) of the Act 
requires that subsection (d) hospitals that fail to meet quality 
reporting requirements under the Hospital OQR Program incur a reduction 
of 2.0 percentage points to their OPD fee schedule increase factor. In 
this final rule with comment period, we are implementing these payment 
provisions.
    This final rule with comment period is also necessary to update the 
ASC payment rates for CY 2014, enabling CMS to make changes to payment 
policies and payment rates for covered surgical procedures and covered 
ancillary services that are performed in an ASC in CY 2014. Because the 
ASC payment rates are based on the OPPS relative payment weights for 
the majority 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, because the services provided in ASCs are 
identified by HCPCS codes that are reviewed and revised either 
quarterly or annually, depending on the type of code, it is necessary 
to update the ASC payment rates annually to reflect these changes to 
HCPCS codes. 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. Sections 
1833(i)(2)(D)(iv) and 1833(i)(7) of the Act authorize the Secretary to 
implement a quality reporting system for ASCs in a manner so as to 
provide for a reduction of 2.0 percentage points in any annual update 
with respect to the year involved for ASCs that fail to meet the 
quality reporting requirements. For CY 2014, we discuss the impacts 
associated with this payment reduction in section XV.C. of this final 
rule with comment period.
3. Overall Impacts for the OPPS and ASC Payment Provisions
    We estimate that the effects of the final OPPS payment provisions 
will result in expenditures exceeding $100 million in any 1 year. We 
estimate that the total increase from the changes in this final rule 
with comment period in Federal government expenditures under the OPPS 
for CY 2014 compared to CY 2013 will be approximately $600 million. 
Taking into account our estimated changes in enrollment, utilization, 
and case-mix, we estimate that the OPPS expenditures for CY 2014 will 
be approximately $4.372 billion higher relative to expenditures in CY 
2013. Because this final rule with comment period is economically 
significant as measured by the $100 million threshold, we have prepared 
this regulatory impact analysis that, to the best of our ability, 
presents its costs and benefits. Table 55 displays the redistributional 
impact of the CY 2014 changes in OPPS payment to various groups of 
hospitals and for CMHCs.
    We estimate that the update to the conversion factor and other 
adjustments (not including the effects of outlier payments, the pass-
through estimates, and the application of the frontier State wage 
adjustment for CY 2014) will increase total OPPS payments by 1.7 
percent in CY 2014. The changes to the APC weights, the changes to the 
wage indices, the continuation of a payment adjustment for rural SCHs, 
including EACHs, and the payment adjustment for cancer hospitals will 
not increase OPPS payments because these changes to the OPPS are budget 
neutral. However, these updates will change the distribution of 
payments within the budget neutral system. We estimate that the total 
change in payments between CY 2013 and CY 2014, considering all 
payments, including changes in estimated total outlier payments, pass-
through payments, and the application of the frontier State wage 
adjustment outside of budget neutrality, in addition to the application 
of the OPD fee schedule increase factor after all adjustments required 
by sections 1833(t)(3)(F), 1833(t)(3)(G) and 1833(t)(17) of the Act, 
will increase total estimated OPPS payments by 1.8 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 expenditures under the ASC 
payment system for CY 2014 compared to CY 2013 to be approximately $143 
million. Because the provisions for the ASC payment system are part of 
a final rule that is economically significant as measured by the $100 
million threshold, we have prepared a regulatory impact analysis of the 
changes to the ASC payment system that, to the best of our ability, 
presents the costs and benefits of this portion of the final rule with 
comment period. Tables 56 and Table 57 of this final rule with comment 
period display the redistributional impact of the CY 2014 changes on 
ASC payment, grouped by specialty area and then grouped by procedures 
with the greatest ASC expenditures, respectively.
4. Detailed Economic Analyses
a. Estimated Effects of Final OPPS Changes in This Final Rule With 
Comment Period
(1) Limitations of Our Analysis
    The distributional impacts presented here are the projected effects 
of the CY 2014 policy changes on various hospital groups. As we did for 
the proposed rule, we post on the CMS Web site our hospital-specific 
estimated payments for CY 2014 with the other supporting documentation 
for this final rule with comment period. To view the hospital-specific 
estimates, we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/index.html. At the Web site, select ``regulations and notices'' from 
the left side of the page and then select ``CMS-1601-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

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final rule with comment period. We show hospital-specific data only for 
hospitals whose claims were used for modeling the impacts shown in 
Table 55 below. 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 and impact 
purposes.
    We estimate the effects of the individual policy changes by 
estimating payments per service, while holding all other payment 
policies constant. We use the best data available, but do not attempt 
to predict behavioral responses to our policy changes. In addition, we 
do not make adjustments for future changes in variables such as service 
volume, service-mix, or number of encounters. In the CY 2014 OPPS/ASC 
proposed rule (78 FR 43687 through 43688), we solicited public comment 
and information about the anticipated effects of our proposed changes 
on providers and our methodology for estimating them. Any public 
comments that we received are addressed in the applicable sections of 
this final rule with comment period that discuss the specific policies.
    Comment: Numerous comments raised concerns about the lack of 
transparency created by introducing multiple policies into a complex 
payment system that was created by insufficient guidance on how 
proposed payment rates were developed, technical errors, insufficient 
policy details, and a lack of detailed impact analyses for each 
proposal.
    Response: With regard to the lack of detailed impact analyses, we 
believe that our approach of modeling the overall impact of the payment 
system on classes of hospitals is one aspect of fostering transparency. 
However, assessing the impacts of a specific policy also relies on 
clear discussion of proposed changes and rationale, final modeled 
relative weights, summary data files and tables, and public use files. 
Overall impacts can allow a quick assessment of how multiple 
interacting policies combine to impact proposed payments, but can never 
provide the amount of additional detail that an individual commenter 
would desire for their specific product(s) or set of services.
    We make numerous separate summary data files and public use files 
available, along with a discussion of our modeling processes, and we 
believe that this is the best means to foster robust public data-
related comments on specific policies. We continuously examine ways in 
which the data process could be simplified or made clearer, and we also 
welcome and appreciate public comment with regards to potential 
improvements. This year, we again received numerous thoughtful comments 
supported by detailed data analyses suggesting that commenters have 
modeled the data to draw detail on their specific policy interest. 
Finally, individual facilities have more recent internal data on the 
mix of services that they provide than the distribution of services in 
our claims data, and this should allow them to assess the impact on 
their facility along with discussion of the proposed policy in preamble 
text.
(2) Estimated Effects of OPPS Changes on Hospitals
    Table 55 below shows the estimated impact of this final rule with 
comment period on hospitals. Historically, the first line of the impact 
table, which estimates the change in payments to all facilities, has 
always included cancer and children's hospitals, which are held 
harmless to their pre-BBA amount. We also include CMHCs in the first 
line that includes all providers because we include CMHCs in our weight 
scaler estimate. We now include a second line for all hospitals, 
excluding permanently held harmless hospitals and CMHCs.
    We present separate impacts for CMHCs in Table 55 and we discuss 
them separately below, because CMHCs are paid only for partial 
hospitalization services under the OPPS and are a different provider 
type from hospitals. In CY 2014, we are continuing to pay CMHCs under 
APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) and 
APC 0173 (Level II Partial Hospitalization (4 or more services) for 
CMHCs), and we are paying hospitals for partial hospitalization 
services under APC 0175 (Level I Partial Hospitalization (3 services) 
for hospital-based PHPs) and APC 0176 (Level II Partial Hospitalization 
(4 or more services) for hospital-based PHPs). We display separately 
the impact of our updates on CMHCs, and we discuss its impact on 
hospitals as part of our discussion of the hospital impacts.
    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 final IPPS market basket percentage increase for FY 2014 is 2.5 
percent (78 FR 50507). Section 1833(t)(3)(F)(i) of the Act reduces that 
2.5 percent by the multifactor productivity adjustment described in 
section 1886(b)(3)(B)(xi)(II) of the Act, which is 0.5 percentage 
points for FY 2014 (which is also the MFP adjustment for FY 2014 in the 
FY 2014 IPPS/LTCH PPS final rule (78 FR 51003); and sections 
1833(t)(3)(F)(ii) and 1833(t)(3)(G)(ii) of the Act further reduce the 
market basket percentage increase by 0.3 percentage points, resulting 
in the OPD fee schedule increase factor of 1.7 percent, which we are 
using in the calculation of the CY 2014 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 
1.00. The amounts attributable to this frontier State wage index 
adjustment are incorporated in the CY 2014 estimates in Table 55.
    To illustrate the impact of the CY 2014 changes, our analysis 
begins with a baseline simulation model that uses the CY 2013 relative 
payment weights, the FY 2013 final IPPS wage indices that include 
reclassifications, and the final CY 2013 conversion factor. Table 55 
shows the estimated redistribution of the proposed increase in payments 
for CY 2014 over CY 2013 payments to hospitals and CMHCs as a result of 
the following factors: The independent effect of all relative weight 
changes between CY 2014 and CY 2013, resulting from final policies 
other than the packaging of outpatient laboratory services previously 
paid under the clinical laboratory fee schedule (CLFS) into the OPPS 
(Column 2); the marginal impact of the final policy to package clinical 
laboratory services (Column 3); the combined impact of the changes 
between CY 2013 and CY 2014 modeled in Columns 2 and 3 (Column 4: APC 
reconfiguration and recalibration for CY 2014 compared to CY 2013 
payments, the combined effect of Columns 2 and 3); the final wage 
indices and the rural and cancer hospital adjustments (Column 5); the 
combined impact of all the changes described in the preceding columns 
plus the 1.7 percent OPD fee schedule increase factor update to the 
conversion factor (Column 6); the combined impact shown in Column 6 
plus the CY 2014 frontier State wage

[[Page 75177]]

index adjustment (Column 7); and the estimated impact taking into 
account all payments for CY 2014 relative to all payments for CY 2013, 
including the impact of changes in estimated outlier payments and 
changes to the pass-through payment estimate (Column 8).
    We did not model an explicit budget neutrality adjustment for the 
rural adjustment for SCHs because we are not making any changes to the 
policy for CY 2014. 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 2014 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 2013 and CY 2014 by 
various groups of hospitals, which CMS cannot forecast.
    Overall, we estimate that the final OPPS rates for CY 2014 will 
have a positive effect for providers paid under the OPPS, resulting in 
a 1.8 percent estimated increase in Medicare payments. 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 suggest that these changes will result in a 
1.9 percent estimated increase in Medicare payments to all other 
hospitals. Those estimated payments will not significantly impact other 
providers.
Column 1: Total Number of Hospitals
    The first line in Column 1 in Table 55 shows the total number of 
facilities (4,068), including designated cancer and children's 
hospitals and CMHCs, for which we were able to use CY 2012 hospital 
outpatient and CMHC claims data to model CY 2013 and CY 2014 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 2013 or CY 2014 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 disproportionate share (DSH) variable for hospitals not 
participating in 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 (3,905), 
excluding the hold-harmless cancer and children's hospitals and CMHCs, 
on the second line of the table. We excluded cancer and children's 
hospitals because section 1833(t)(7)(D) of the Act permanently holds 
harmless cancer hospitals and children's hospitals to their ``pre-BBA 
amount'' as specified under the terms of the statute, and therefore, we 
removed them from our impact analyses. We show the isolated impact on 
101 CMHCs at the bottom of the impact table and discuss that impact 
separately below.
Column 2: APC Recalibration for Policies Other Than Outpatient 
Laboratory Test Packaging
    Column 2 shows the estimated independent effect of all relative 
weight changes between CY 2013 and CY 2014 resulting from final 
policies other than packaging outpatient laboratory tests previously 
paid under the clinical laboratory fee schedule into the OPPS. These 
final policies include packaging drugs, biologicals, and 
radiopharmaceuticals that function as supplies when used in a 
diagnostic test or procedure (stress agents and Cysview), drugs and 
biologicals that function as supplies when used in a surgical procedure 
(skin substitutes), certain procedures described by add-on codes, and 
device removal procedures; new cost report data for estimating CT and 
MRI relative weights; and revisions to coding and APC structure for 
stereotactic radiosurgery. This column also reflects reclassification 
of services among APC groups due to updated CY 2012 hospital claims 
data and the most recent hospital cost report data available. Changes 
due to APC recalibration are less significant than in the CY 2014 OPPS/
ASC proposed rule impact analysis, as several proposed policies were 
not finalized. Increases for rural hospitals are largely attributable 
to adoption of a single payment for clinic visits. Reductions for low 
volume hospitals, particularly rural hospitals, are attributable to 
reductions for certain mental health services. Under the OPPS, payment 
for mental health services on a single day cannot exceed payment for 
partial hospitalization, and APC recalibration reduces the relative 
weight for partial hospitalization for CY 2014.
Column 3: APC Recalibration Due to Packaging Outpatient Laboratory 
Services
    Column 3 shows the estimated impact of APC recalibration within the 
CY 2014 OPPS resulting from our packaging policy for outpatient 
laboratory services currently paid under the CLFS. This column compares 
the estimated CY 2014 OPPS payments with the addition of packaged 
laboratory services to CY 2014 OPPS payment in Column 2 plus payment 
for laboratory services at CY 2013 CLFS payment rates. Packaging 
laboratory services modestly reduces payment to rural hospitals who no 
longer receive separate payment for common laboratory tests. Relative 
weights for visits, x-rays, and the small set of common services 
furnished by rural hospitals (shown in Column 1) do increase with 
packaging, but this does not fully offset the impact of packaging 
laboratory tests. Packaging laboratory services also results in modest 
reductions to major teaching hospitals.
Column 4: APC Recalibration--All Changes
    Column 4 shows the estimated combined effect of APC recalibration 
related to the policies modeled in Columns 2 and 3. Column 4 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 an 
increase of 0.1 percent, with the impact ranging from an increase of 
0.4 percent to a decrease of 0.3 percent depending on the number of 
beds. Rural hospitals will experience a decrease of 0.4 percent, with 
the impact ranging from an increase of 0.5 percent to a decrease of 1.7 
percent depending on the number of beds. Major teaching hospitals 
experience a decrease of 0.6 percent overall, largely attributable to 
packaging laboratory services. Packaging laboratory services also 
modestly reduces the relative weight for major teaching hospitals, 
while minor teaching hospitals and nonteaching hospitals experience 
modest increases.

[[Page 75178]]

Column 5: New Wage Indices and the Effect of the Rural and Cancer 
Hospital Adjustments
    Column 5 demonstrates the combined budget neutral impact of APC 
recalibration; updating the wage indexes with the final fiscal year 
(FY) 2014 IPPS post-reclassification wage indexes; the rural 
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 
indices for each year, and using a CY 2013 conversion factor that 
included the OPD fee schedule increase and a budget neutrality 
adjustment for differences in wage indices. We also updated the list of 
counties qualifying for the section 505 out-migration adjustment.
    Column 5 reflects the independent effects of the updated wage 
indices, including the application of budget neutrality for the rural 
floor policy on a nationwide basis. This column excludes the effects of 
the frontier State wage index adjustment, which is not budget neutral 
and is included in Column 7. We did not model a budget neutrality 
adjustment for the rural adjustment for SCHs because we are not making 
any changes to the policy for CY 2014. We are continuing the rural 
payment adjustment of 7.1 percent to rural SCHs for CY 2014, as 
described in section II.E. of this final rule with comment period.
    We modeled the independent effect of updating the wage indices by 
varying only the wage indices, holding APC relative payment weights, 
service-mix, and the rural adjustment constant and using the CY 2014 
scaled weights and a CY 2013 conversion factor that included a budget 
neutrality adjustment for the effect of changing the wage indices 
between CY 2013 and CY 2014. Modest redistributions are the result of 
final FY 2014 wage policy.
    The modeled differential between the CY 2013 cancer hospital 
payment adjustment and the CY 2014 cancer hospital payment adjustment 
had a minor effect on budget neutrality. We note that cancer hospitals 
receive about $24 million less under the CY 2014 adjustment, which 
appears as a 0.1 increase for the general hospital population in row 2 
of Column 5, All Hospitals (excluding cancer and children's hospitals, 
and CMHCs).
Column 6: All Budget Neutrality Changes Combined With the Market Basket 
Update
    Column 6 demonstrates the combined impact of all the changes 
previously described and the update to the conversion factor of 1.7 
percent. It shows the estimated cumulative impact of the budget neutral 
adjustments from Columns 4 and 5 and the OPD fee schedule increase 
factor of 1.7 percent. With the exception of small rural hospitals and 
rural hospitals in the Middle Atlantic, we estimate that the addition 
of the 1.7 percent market basket alleviates negative impacts on 
payments for CY 2014 created by budget neutrality made in Columns 4 and 
5 for payments made to most hospitals. Overall, these changes increase 
payments to urban hospitals by 1.9 percent and to rural hospitals by 
1.1 percent. Most classes of hospitals will receive an increase in line 
with the 1.7 percent overall increase after the update is applied to 
the budget neutrality adjustments.
Column 7: All Adjustments With the Frontier State Wage Index Adjustment
    This column shows the impact of all budget neutrality adjustments, 
application of the 1.7 percent OPD fee schedule increase factor, and 
the nonbudget neutral impact of applying the CY 2014 frontier State 
wage adjustment (that is, the frontier State wage index change in 
addition to all changes reflected in Column 6). This column differs 
from Column 6 solely based on application of the nonbudget neutral 
frontier State wage index adjustment. Rural hospitals in West North 
Central and Mountain States experience increases in payment of 3.2 and 
2.3 percent, respectively, as a result of the frontier State wage index 
adjustment, while urban hospitals in those States experience increases 
of 3.6 and 2.1 percent, respectively.
Column 8: All Changes for CY 2014
    Column 8 depicts the full impact of the CY 2014 policies on each 
hospital group by including the effect of all of the changes for CY 
2014 and comparing them to all estimated payments in CY 2013. Column 8 
shows the combined budget neutral effects of Column 4 and 5; the OPD 
fee schedule increase; the impact of the frontier State wage index 
adjustment; 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 XIII. of this final rule with 
comment period); and the difference in total OPPS payments dedicated to 
transitional pass-through payments.
    Of those hospitals that failed to meet the Hospital OQR Program 
reporting requirements for the full CY 2013 update (and assumed, for 
modeling purposes, to be the same number for CY 2014), we included 52 
hospitals in our model because they had both CY 2012 claims data and 
recent cost report data. We estimate that the cumulative effect of all 
changes for CY 2014 will increase payments to all providers by 1.8 
percent for CY 2014. We modeled the independent effect of all changes 
in Column 8 using the final relative payment weights for CY 2013 and 
the final relative payment weights for CY 2014. We used the final 
conversion factor for CY 2013 of $71.313 and the final CY 2014 
conversion factor of $72.672 discussed in section II.B. of this final 
rule with comment period.
    Column 8 contains simulated outlier payments for each year. We used 
the one year charge inflation factor used in the FY 2014 IPPS/LTCH PPS 
final rule (78 FR 50982) of 4.73 percent (1.0473) to increase 
individual costs on the CY 2012 claims, and we used the most recent 
overall CCR in the July 2013 Outpatient Provider-Specific File (OPSF) 
to estimate outlier payments for CY 2013. Using the CY 2012 claims and 
a 4.73 percent charge inflation factor, we currently estimate that 
outlier payments for CY 2013, using a multiple threshold of 1.75 and a 
fixed-dollar threshold of $2,025 will be approximately 1.1 percent of 
total payments. The estimated current outlier payments of 1.1 percent 
are incorporated in the comparison in Column 8. We used the same set of 
claims and a charge inflation factor of 9.69 percent (1.0969) and the 
CCRs in the July 2013 OPSF, with an adjustment of 0.9645, to reflect 
relative changes in cost and charge inflation between CY 2012 and CY 
2014, to model the CY 2014 outliers at 1.0 percent of estimated total 
payments using a multiple threshold of 1.75 and a fixed-dollar 
threshold of $2,900.
    We estimate that the anticipated change in payment between CY 2013 
and CY 2014 for the hospitals failing to meet the Hospital OQR Program 
requirements will be negligible. Overall, we estimate that facilities 
will experience an increase of 1.8 percent under this final rule with 
comment period in CY 2014 relative to total spending in CY 2013. This 
projected increase (shown in Column 8) of Table 55 reflects the 1.7 
percent OPD fee schedule increase factor, with 0.13 percent for the 
change in the pass-through estimate between CY 2013 and CY 2014, less 
0.1 percent for the difference in estimated outlier payments

[[Page 75179]]

between CY 2013 (1.1 percent) and CY 2014 (1.0 percent), less 0.1 
percent due to the frontier adjustment in CY 2013, plus 0.1 percent due 
to the frontier State wage index adjustment in CY 2014. When we exclude 
cancer and children's hospitals (which are held harmless to their pre-
BBA amount) and CMHCs, the estimated update increases is 1.9 percent 
after rounding. We estimate that the combined effect of all changes for 
CY 2014 will increase payments to urban hospitals by 2.0 percent.
    Overall, we estimate that rural hospitals will experience a 1.1 
percent increase as a result of the combined effects of all changes for 
CY 2014. We estimate that rural hospitals that bill less than 5,000 
lines of OPPS services will experience an increase of 2.2 percent and 
rural hospitals that bill 5,000 or more lines of OPPS services will 
experience increases ranging from 0.1 to 5.0 percent.
    Among hospitals by teaching status, we estimate that the impacts 
resulting from the combined effects of all changes will include an 
increase of 1.4 percent for major teaching hospitals and 1.8 percent 
for nonteaching hospitals. Minor teaching hospitals will experience an 
estimated increase of 2.3 percent.
    In our analysis, we also have categorized hospitals by type of 
ownership. Based on this analysis, we estimate that voluntary hospitals 
will experience an increase of 2.0 percent, proprietary hospitals will 
experience an increase of 2.0 percent, and governmental hospitals will 
experience an increase of 1.1 percent.

BILLING CODE 4120-01-P

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BILLING CODE 4120-01-C
(3) Estimated Effects of OPPS Changes on CMHCs
    The last line of Table 55 demonstrates the isolated impact on 
CMHCs, which furnish only partial hospitalization (PHP) services under 
the OPPS. In CY 2013, CMHCs are paid under two APCs for these services: 
APC 0172 (Level I Partial Hospitalization (3 services) for CMHCs) and 
APC 0173 (Level II Partial Hospitalization (4 or more services) for 
CMHCs). In contrast, hospitals are paid for partial hospitalization 
services under APC 0175 (Level I Partial Hospitalization (3 services) 
for hospital-based PHPs) and APC 0176 (Level II Partial Hospitalization 
(4 or more services) for hospital-based PHPs). We use our standard 
ratesetting methodology to derive the payment rates for each APC based 
on the cost data derived from claims and cost reports for the provider 
type to which the APC is specific. For CY 2014, we are continuing the 
provider-specific APC structure that we adopted in CY 2011. We modeled 
the impact of this APC policy assuming that CMHCs will continue to 
provide the same number of days of PHP care, with each day having 
either 3 services or 4 or more services, as seen in the CY 2012 claims 
data used for this final rule with comment period. We excluded days 
with 1 or 2 services because our policy only pays a per diem rate for 
partial hospitalization when 3 or more qualifying services are provided 
to the beneficiary.
    Packaging outpatient laboratory tests results in a 1.8 percent 
payment increase to CMHCs, which is offset by a 1.3 percent decrease in 
payments from APC recalibration for policies other than packaging 
outpatient laboratory tests. Together with the market basket and all 
other changes, we estimate that CMHCs will experience an overall 1.8 
percent increase in payments from CY 2013 (shown in Column 8).
    Column 5 shows that the estimated impact of adopting the final FY 
2014 wage index values will result in a small decrease of 0.4 percent 
to CMHCs. We note that all providers paid under the OPPS, including 
CMHCs, will receive a 1.7 percent OPD fee schedule increase factor. 
Column 6 shows that combining this OPD fee schedule increase factor, 
along with changes in APC policy for CY 2014 and the FY 2014 wage index 
updates, will result in an estimated increase of 1.7 percent. Column 7 
shows that adding the frontier State wage index adjustment will result 
in no change to the cumulative 1.7 percent increase. Column 8 shows 
that adding the changes in outlier and pass-though payments will result 
in an additional 0.1 percent increase in payment for CMHCs, for a total 
increase of 1.8 percent. This reflects all changes to CMHCs for CY 
2014.
(4) 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 share of payment will 
increase for services for which the OPPS payments will rise and will 
decrease for services for which the OPPS payments will fall. For 
further discussion on the calculation of the national unadjusted 
copayments and minimum unadjusted copayments, we refer readers to 
section II.I. of this final rule with comment period. In all cases, the 
statute limits beneficiary liability for copayment for a procedure to 
the hospital inpatient deductible for the applicable year. The CY 2014 
inpatient hospital deductible is $1,216.
    We estimate that the aggregate beneficiary coinsurance percentage 
will be 21.7 percent for all services paid under the OPPS in CY 2014. 
The estimated aggregate beneficiary coinsurance reflects the final 
policy to package laboratory services into the outpatient hospital 
services with which they are billed in addition to general system 
adjustments, including recalibration of the APC relative payment 
weights, change in the portion of OPPS payments dedicated to pass-
through payments, and changes in the cancer hospital payment 
adjustment.
(5) 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 XII. 
of this final rule with comment period. No types of providers or 
suppliers other than hospitals, CMHCs and ASCs will be affected by the 
changes in this final rule with comment period.
(6) Estimated Effects of OPPS Changes on the Medicare and Medicaid 
Programs
    The effect on the Medicare program is expected to be $600 million 
in additional program payments for OPPS services furnished in CY 2014. 
The effect on the Medicaid program is expected to be limited to 
increased copayments that Medicaid may make on behalf of Medicaid 
recipients who are also Medicare beneficiaries. We refer readers to our 
discussion of the impact on beneficiaries in section XXIII.A. of this 
final rule with comment period.
(7) Alternative OPPS Policies Considered
    Alternatives to the OPPS changes we proposed and are making and the 
reasons for our selected alternatives are discussed throughout this 
final rule with comment period. In this section, we discuss some of the 
major issues and the alternatives considered.
 Alternatives Considered for the Establishment of Comprehensive 
APCs
    We proposed in section II.A.2.e. of the OPPS proposed rule to 
create 29 comprehensive APCs for CY 2014 to prospectively pay for 
device-dependent hospital outpatient services associated with 121 HCPCS 
codes. We proposed to define a comprehensive APC as a classification 
for the provision of a primary service and all adjunct services 
provided to support the delivery of the primary service. For services 
that trigger a comprehensive APC payment, the comprehensive APC would 
treat all individually reported codes on the claim as representing 
components of the comprehensive service, resulting in a single 
prospective payment based on the cost of all individually reported 
codes on the claim. For these APCs, we proposed to treat all previously 
individually reported codes as representing components of the 
comprehensive service, making a single payment for the comprehensive 
service based on all charges on the claim, excluding only charges for 
services that cannot be covered by Medicare Part B or that are not 
payable under the OPPS. This would create a single all-inclusive 
payment for the claim that is subject to a single beneficiary 
copayment, up to the cap set at the level of the inpatient hospital 
deductible.
    We proposed this as a step that we believe will further improve the 
accuracy of our payments for these services where there is a 
substantial cost for a device that is large compared to the other costs 
that contribute to the cost of the procedure, and where the cost of the 
procedure is large compared to the adjunctive and supportive services 
delivered along with that procedure. We also believed the proposed 
polices would enhance beneficiary understanding and transparency for 
the beneficiary, for physicians, and for hospitals by creating a common 
reference point with a similar meaning for all three groups by using 
the comprehensive service concept that already identifies these 
services when they are furnished to a hospital inpatient.
    We considered implementing this policy for CY 2014 as proposed, but 
in

[[Page 75185]]

response to public comments we received and because we are providing 
significantly greater detail on the comprehensive APC payment 
calculation methodology, we are delaying implementation of the policy 
for 1 year (we refer readers to section II.A.2.e. of this final rule 
with comment period). Although we are finalizing our comprehensive APC 
policy effective CY 2015, we also are inviting additional public 
comment because there is significant additional information on the 
comprehensive APC policy in the preamble of this final rule with 
comment period. We also believe that additional time to consider 
operational issues over a longer period of time is appropriate for this 
new payment methodology. We have published tables in this final rule 
with comment period to demonstrate how this policy would have been 
implemented in CY 2014, and we will be considering any additional 
public comments we receive when we update the policy for CY 2015 to 
account for changes that may occur in the CY 2013 claims data.
    In our final policy, we have revised some of our APC assignments to 
better align resource requirements in accordance with our usual 2 times 
rule adjustments and also to ensure that the resources required with 
certain complex subsets of procedures are similarly aligned with the 
other services in the APC. We have created a complexity adjustment to 
assign certain other subsets of complex procedures to different APCs 
than the simpler versions of those services. We have reassigned the 
composite cardiac ablation APC to the comprehensive APC for combined 
electrophysiology and cardiac ablation in order to remove an ambiguity 
in our proposed rule, and we have modified our proposal to base the APC 
assignment on the identification of the service with the greatest 
single service cost in the CY 2012 claims data rather than the proposed 
service with the greatest CY 2012 single service payment. Finally, we 
are not finalizing our proposal to include costs from certain inpatient 
room and board cost centers for comprehensive APC ratesetting because 
the outpatient costs associated with services in comprehensive APCs 
should not be reported in these inpatient cost centers. Also, we have 
removed the cost of brachytherapy seeds from comprehensive payment and 
specified that these seeds will be paid through unpackaged dedicated 
APC payments.
    We considered but did not implement a number of other options. We 
considered implementing this policy for CY 2014 as proposed, but did 
not do so because we believe we should provide an opportunity for 
additional public comment as well as a longer time period for 
operational implementation by CMS contractors and other stakeholders. 
We considered but did not implement comprehensive APCs as originally 
proposed. Although we believe that an averaged payment system similar 
to the IPPS with a single payment for a primary or comprehensive 
service is our goal and would be feasible, we agreed with commenters 
that the sudden transition from component payments to comprehensive 
payments could potentially create some economic challenges for some 
hospitals. Although we noted that a single payment for single and 
multiple component procedures, including short stay procedures, has 
worked well in the IPPS for almost 30 years, we determined that a 
complexity adjustment as recommended by commenters could reduce the 
spread of costs and ease the transition as hospitals explore mechanisms 
to increase efficiencies if their mean costs of a specific complex 
procedure exceed the average cost.
    We considered but did not implement recommendations to eliminate 
certain proposed APCs from conversion to comprehensive payments. All of 
the proposals for exclusion were based on multiple component payments 
or on coding changes. We considered excluding the different APCs where 
commenters expressed concerns. However, after analysis of each APC, 
after applying our usual processes of modeling coding changes, and 
after developing and applying a complexity adjustment for high volume 
complex services with a high cost variance from the mean payment, we 
determined that these processes applied equally well to the various 
APCs and no sets of services stood out as inappropriate for conversion 
on the basis of coding changes or the basis of multiple component 
procedures that could not have any potential adverse impact mitigated.
    We considered but did not implement a multiple procedure adjustment 
to the comprehensive APC payment. As an alternative to the complexity 
adjustment, we considered a multiplier to be applied when two or more 
individual procedures were performed during the same comprehensive 
service. However we did not consider that, in our current year 
analyses, a single multiplier reflected the entire range of services 
that could be combined. We also did not believe that a multiple 
procedure adjustment was consistent with the concept of the 
comprehensive service representing a single entire service to a 
beneficiary. However we will continue to explore other options to 
account for multiple components, including multiple surgical procedures 
as well as multiple devices, as we continue to analyze comprehensive 
APCs in the future.
    We considered but did not implement a less comprehensive packaging 
policy for comprehensive APCs. We had considered a less comprehensive 
packaging policy before our proposed rule, but we did not believe that 
was advantageous as we discussed in the proposed rule. We reconsidered 
those options after receiving comments, but noted that the few comments 
suggesting more limited packaging were balanced by the comments 
agreeing with our comprehensive concept. We did not receive any public 
comments on this topic concerning issues that we had not already 
considered, so therefore we did not modify the packaging rules other 
than the exclusion of brachytherapy seeds as noted.
 Alternatives Considered for Payment of Hospital Outpatient 
Visits
    As described in section VII. of this final rule with comment 
period, we are finalizing our proposal to replace the current five 
levels of visit codes for each clinic visit with a new alphanumeric 
Level II HCPCS code representing a single level of payment for clinic 
visits. We also are finalizing our proposal to assign the new 
alphanumeric Level II HCPCS to newly created APC 0634 with CY 2014 OPPS 
payment rates based on the total geometric mean costs of Level 1 
through Level 5 clinic visit codes obtained from CY 2012 OPPS claims 
data. For CY 2014, we are not finalizing our proposal to replace the 
current five levels of visit codes for each Type A ED, and Type B ED 
visits with two new alphanumeric Level II HCPCS codes representing a 
single level of payment for Type A and Type B of ED visits, 
respectively.
    In developing this policy, we considered two alternatives, the 
first of which was to finalize our proposal to replace the current five 
levels of visit codes for each Type A ED, and Type B ED visits with two 
new alphanumeric Level II HCPCS codes representing a single level of 
payment for Type A and Type B of ED visits, respectively, in addition 
to finalizing our proposal to replace the current five levels of visit 
codes for each clinic visit with a new alphanumeric Level II HCPCS code 
representing a single level of payment for clinic visits.
    While we believe this alternative could offer advantages over the 
current CY 2013 OPPS visit payment policy, we

[[Page 75186]]

did not choose this alternative because as we describe is section VII. 
of this final rule with comment period, in light of the thoughtful and 
detailed alternatives put forth by commenters, as well as the comments 
on the potential issues associated with a single level of payment for 
ED visits that both require additional study on our part here at CMS, 
we believe it is best to delay any change in ED visit coding while we 
further consider the most appropriate payment structure for Type A and 
Type B ED visits.
    We also considered replacing the current five levels of visit codes 
for each clinic, Type A ED, and Type B ED visit with six new 
alphanumeric Level II HCPCS codes representing two levels (lower level 
and higher level) of payment for each of the three types of visits. The 
lower-level alphanumeric codes for clinic, Type A ED, and Type B ED 
visits would replace the current Level 1 and Level 2 visit codes, 
respectively, and would be assigned to newly created or reconfigured 
APCs with CY 2014 OPPS payment rates based on the total mean costs of 
Level 1 and 2 visit codes obtained from CY 2012 OPPS claims data for 
each visit type. The higher-level alphanumeric codes for clinic, Type A 
ED, and Type B ED visits would replace the current Level 3 through 
Level 5 visit codes, respectively, and would be assigned to newly 
created or reconfigured APCs with CY 2014 OPPS payment rates based on 
the total mean costs of Level 3 through Level 5 visit codes obtained 
from CY 2012 OPPS claims data for each visit type.
    While we believe that this alternative could also offer advantages 
over the current CY 2013 OPPS visit payment policy, we did not choose 
this alternative because, as we describe in section VII. of this final 
rule with comment period, we believed that a single level of payment 
for each type of clinic visit was the best policy option as this 
proposal would be easily implemented by hospitals; reduces 
administrative burden relative to the existing 5-level visit payment 
structure; and maximizes hospitals' incentives to provide care in the 
most efficient manner as there would be no incentive to provide 
unnecessary care to achieve a higher level visit threshold. A two-level 
visit payment structure would not be as easily implemented by hospitals 
as a single-level visit payment structure, and the need for hospitals 
to develop and implement guidelines to differentiate the levels of 
service would continue to exist. Also, while the two-level visit 
payment structure may provide incentives for hospitals to be efficient, 
the incentives may not be so great as under a single-level visit 
payment structure. For ED visits, we believe it is best to delay any 
change in ED visit coding while we consider further the most 
appropriate payment structure for Type A and Type B ED visits, for the 
reasons stated earlier in this section. Therefore, we are finalizing 
our proposal to create a new alphanumeric Level II HCPCS code to 
describe all levels of clinic visits rather than continue to recognize 
five levels each of clinic visits. We are not finalizing our proposal 
to create two new alphanumeric Level II HCPCS codes to describe all 
levels of Type A and Type B ED visits, respectively, rather than 
continue to recognize five levels each of Type A and Type B ED visits.
b. Estimated Effects of CY 2014 ASC Payment System Final Policies
    ASC payment rates are calculated by multiplying the ASC conversion 
factor by the ASC relative payment weight. As discussed fully in 
section XII. of this final rule with comment period, we are setting the 
CY 2014 ASC relative payment weights by scaling the CY 2014 OPPS 
relative payment weights by the proposed ASC scaler of 0.9235. The 
estimated effects of the updated relative payment weights on payment 
rates are varied and are reflected in the estimated payments displayed 
in Tables 56 and 57 below.
    Beginning in CY 2011, section 3401 of the Affordable Care Act 
requires that the annual update to the ASC payment system (which 
currently is the CPI-U) after application of any quality reporting 
reduction be reduced by a productivity adjustment. The Affordable Care 
Act defines the productivity adjustment to be equal to the 10-year 
moving average of changes in annual economy-wide private nonfarm 
business multifactor productivity (MFP) (as projected by the Secretary 
for the 10-year period ending with the applicable fiscal year, year, 
cost reporting period, or other annual period). For ASCs that fail to 
meet their quality reporting requirements, the CY 2014 payment 
determinations will be based on the application of a 2.0 percentage 
point reduction to the annual update factor, which currently is the 
CPI-U. We calculated the CY 2014 ASC conversion factor by adjusting the 
CY 2013 ASC conversion factor by 1.0009 to account for changes in the 
pre-floor and pre-reclassified hospital wage indices between CY 2013 
and CY 2014 and by applying the CY 2014 MFP-adjusted CPI-U update 
factor of 1.2 percent (projected CPI-U update of 1.7 percent minus a 
projected productivity adjustment of 0.5 percent). The CY 2014 ASC 
conversion factor is $43.471.
(1) Limitations of Our Analysis
    Presented here are the projected effects of the changes for CY 2014 
on Medicare payment to ASCs. A key limitation of our analysis is our 
inability to predict changes in ASC service-mix between CY 2012 and CY 
2014 with precision. We believe that the net effect on Medicare 
expenditures resulting from the CY 2014 changes will be small in the 
aggregate for all ASCs. However, such changes may have differential 
effects across surgical specialty groups as ASCs continue to adjust to 
the payment rates based on the policies of the revised ASC payment 
system. We are unable to accurately project such changes at a 
disaggregated level. Clearly, individual ASCs will experience changes 
in payment that differ from the aggregated estimated impacts presented 
below.
(2) Estimated Effects of CY 2014 ASC Payment System Policies on ASCs
    Some ASCs are multispecialty facilities that perform the gamut of 
surgical procedures from excision of lesions to hernia repair to 
cataract extraction; others focus on a single specialty and perform 
only a limited range of surgical procedures, such as eye, digestive 
system, or orthopedic procedures. The combined effect on an individual 
ASC of the update to the CY 2014 payments will depend on a number of 
factors, including, but not limited to, the mix of services the ASC 
provides, the volume of specific services provided by the ASC, the 
percentage of its patients who are Medicare beneficiaries, and the 
extent to which an ASC provides different services in the coming year. 
The following discussion presents tables that display estimates of the 
impact of the CY 2014 updates to the ASC payment system on Medicare 
payments to ASCs, assuming the same mix of services as reflected in our 
CY 2012 claims data. Table 56 depicts the estimated aggregate percent 
change in payment by surgical specialty or ancillary items and services 
group by comparing estimated CY 2013 payments to estimated CY 2014 
payments, and Table 57 shows a comparison of estimated CY 2013 payments 
to estimated CY 2014 payments for procedures that we estimate will 
receive the most Medicare payment in CY 2013.
    Table 56 shows the estimated effects on aggregate Medicare payments 
under the ASC payment system by surgical specialty or ancillary items 
and services group. We have aggregated the surgical HCPCS codes by 
specialty group,

[[Page 75187]]

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 56.
     Column 1--Surgical Specialty or Ancillary Items and 
Services Group indicates the surgical specialty into which ASC 
procedures are grouped and the ancillary items and services group which 
includes all HCPCS codes for covered ancillary items and services. To 
group surgical procedures by surgical specialty, we used the CPT code 
range definitions and Level II HCPCS codes and Category III CPT codes 
as appropriate, to account for all surgical procedures to which the 
Medicare program payments are attributed.
     Column 2--Estimated CY 2013 ASC Payments were calculated 
using CY 2012 ASC utilization (the most recent full year of ASC 
utilization) and CY 2013 ASC payment rates. The surgical specialty and 
ancillary items and services groups are displayed in descending order 
based on estimated CY 2013 ASC payments.
     Column 3--Estimated CY 2014 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 are attributable to updates to ASC payment rates for CY 2014 
compared to CY 2013.
    As seen in Table 56, we estimate that the update to ASC rates for 
CY 2014 will result in a 1 percent increase in aggregate payment 
amounts for eye and ocular adnexa procedures, a 5 percent increase in 
aggregate payment amounts for digestive system procedures, and a 3 
percent decrease in aggregate payment amounts for nervous system 
procedures.
    Generally, for the surgical specialty groups that account for less 
ASC utilization and spending, we estimate that the payment effects of 
the CY 2014 update are variable. For instance, we estimate that, in the 
aggregate, payment for musculoskeletal system procedures will not 
change, whereas payment for genitourinary system procedures, 
integumentary system procedures and respiratory system procedures will 
increase by 3 to 14 percent under the CY 2014 rates.
    An estimated increase in aggregate payment for the specialty group 
does not mean that all procedures in the group will experience 
increased payment rates. For example, the estimated increase for CY 
2014 for digestive system procedures is likely due to an increase in 
the ASC payment weight for some of the high volume procedures, such as 
CPT code 43239 (Upper GI endoscopy biopsy) where estimated payment will 
increase by 6 percent for CY 2014.
    Also displayed in Table 56 is a separate estimate of Medicare ASC 
payments for the group of separately payable covered ancillary items 
and services. The payment estimates for the covered surgical procedures 
include the costs of packaged ancillary items and services. We estimate 
that aggregate payments for these items and services will decrease by 
11 percent for CY 2014.
[GRAPHIC] [TIFF OMITTED] TR10DE13.374

    Table 57 below shows the estimated impact of the updates to the 
revised ASC payment system on aggregate ASC payments for selected 
surgical procedures during CY 2014. The table displays 30 of the 
procedures receiving

[[Page 75188]]

the greatest estimated CY 2013 aggregate Medicare payments to ASCs. The 
HCPCS codes are sorted in descending order by estimated CY 2013 program 
payment.
     Column 1--CPT/HCPCS code.
     Column 2--Short Descriptor of the HCPCS code.
     Column 3--Estimated CY 2013 ASC Payments were calculated 
using CY 2012 ASC utilization (the most recent full year of ASC 
utilization) and the CY 2013 ASC payment rates. The estimated CY 2013 
payments are expressed in millions of dollars.
     Column 4--Estimated CY 2014 Percent Change reflects the 
percent differences between the estimated ASC payment for CY 2013 and 
the estimated payment for CY 2014 based on the update.
BILLING CODE 4210-01-P

[[Page 75189]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.375

[[Page 75190]]

BILLING CODE 4210-01-C
(3) Estimated Effects of ASC Payment System Policies on Beneficiaries
    We estimate that the CY 2014 update to the ASC payment system will 
be generally positive for beneficiaries with respect to the new 
procedures that we are adding to the ASC list of covered surgical 
procedures and for those that we are designating as office-based for CY 
2014. 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, where the 
beneficiary is responsible for copayments that range from 20 percent to 
40 percent of the procedure payment. Second, in almost all cases, the 
ASC payment rates under the ASC payment system are lower than payment 
rates for the same procedures under the OPPS. Therefore, the 
beneficiary coinsurance amount under the ASC payment system will almost 
always be less than the OPPS copayment amount for the same services. 
(The only exceptions would be if the ASC coinsurance amount exceeds the 
inpatient deductible. The statute requires that copayment amounts under 
the OPPS not exceed the inpatient deductible.) Beneficiary coinsurance 
for services migrating from physicians' offices to ASCs may decrease or 
increase under the revised ASC payment system, depending on the 
particular service and the relative payment amounts for that service in 
the physician's office compared to the ASC. However, for those 
additional procedures that we are designating as office-based in CY 
2014, the beneficiary coinsurance amount will be no greater than the 
beneficiary coinsurance in the physician's office because the 
coinsurance in both settings is 20 percent (except for certain 
preventive services where the coinsurance is waived in both settings).
(4) Alternative ASC Payment Policies Considered
    Alternatives to the minor changes that we are making to the ASC 
payment system and the reasons that we have chosen specific options are 
discussed throughout this final rule with comment period. There are no 
major changes to ASC policies for CY 2014.
c. Accounting Statements and Tables
    As required by OMB Circular A-4 (available on the Office of 
Management and Budget Web site at: http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), we have 
prepared two accounting statements to illustrate the impacts of this 
final rule with comment period. The first accounting statement, Table 
58 (below) illustrates the classification of expenditures for the CY 
2014 estimated hospital OPPS incurred benefit impacts associated with 
the CY 2014 OPD fee schedule increase, based on the 2013 Trustee's 
Report. The second accounting statement, Table 59 (below) illustrates 
the classification of expenditures associated with the 1.2 percent CY 
2014 update to the ASC payment system, based on the provisions of this 
final rule with comment period and the baseline spending estimates for 
ASCs in the 2013 Trustee's Report. The third accounting statement, 
Table 60 (below), illustrates the classification of expenditures 
associated with the revision to the definition of hospital-based EP in 
payment year 2013 for EPs reassigning benefits to Method II CAHs. 
Lastly, the tables classify most estimated impacts as transfers.

[[Page 75191]]

[GRAPHIC] [TIFF OMITTED] TR10DE13.376

d. Effects of Requirements for the Hospital OQR Program
    In section XIII. of this final rule with comment period, we are 
adopting policies affecting the Hospital OQR Program.
    Out of 3,352 hospitals that met eligibility requirements, we 
determined that 94 hospitals did not meet the requirements to receive 
the full OPD fee schedule increase factor for CY 2013. Most of these 
hospitals (90 of the 94) chose not to participate in the Hospital OQR 
Program. We estimate that 88 hospitals may not receive the full OPD fee 
schedule increase factor in CY 2014 and that 90 hospitals may not 
receive the full OPD fee schedule increase factor in CY 2015. We are 
unable at this time to estimate the number of hospitals that may not 
receive the full OPD fee schedule increase factor in CY 2016.
    In section XVI.E.3.a. of the CY 2010 OPPS/ASC final rule with 
comment period (74 FR 60647 through 60650), for the CY 2011 payment 
update, as part of the validation process, we required hospitals to 
submit paper copies of requested medical records to a designated 
contractor within the required timeframe. Failure to submit requested 
documentation could result in a 2.0 percentage point reduction to a 
hospital's CY 2011 OPD fee schedule increase factor, but the failure to 
attain a validation score threshold would not.
    In section XVI.D.3.b of the CY 2011 OPPS/ASC final rule with 
comment period, we finalized our proposal to validate data submitted by 
800 hospitals of the approximately 3,200 participating hospitals for 
purposes of the CY 2012 Hospital OQR Program payment determination. We 
stated our belief that this approach was suitable for the CY 2012 
Hospital OQR Program because it would: Produce a more reliable estimate 
of whether a hospital's submitted data have been abstracted accurately; 
provide more statistically reliable estimates of the quality of care 
delivered in each selected hospital as well as at the national level; 
and reduce overall hospital burden because most hospitals would not be 
selected to undergo validation each year. We adopted a threshold of 75 
percent as the threshold

[[Page 75192]]

for the validation score because we believed this level was reasonable 
for hospitals to achieve while still ensuring accuracy of the data. In 
addition, this level is consistent with what we adopted in the Hospital 
IQR Program (75 FR 50225 through 50229). As a result, we believed that 
the effect of our validation process for CY 2012 would be minimal in 
terms of the number of hospitals that would not meet all program 
requirements.
    In the CY 2012 OPPS/ASC final rule with comment period, we 
finalized our proposal to validate data submitted by up to 500 of the 
approximately 3,200 participating hospitals for purposes of the CY 2013 
Hospital OQR Program payment determination. Under our policy for CY 
2011, CY 2012, and CY 2013, we stated that we would conduct a measure 
level validation by assessing whether the measure data submitted by the 
hospital matches the independently reabstracted measure data.
    In the CY 2013 OPPS/ASC final rule with comment period, for the CY 
2014 payment determination and subsequent years, we made some 
modifications to administrative requirements in extending a deadline to 
submit a Notice of Participation as well as to extraordinary 
circumstance waiver or extension and reconsideration processes to 
broaden the scope of personnel who can sign these requests. However, we 
did not make any modifications to our validation requirements. We 
expect these policies to have minimal impact on the program.
    In this CY 2014 OPPS/ASC final rule with comment period, for CY 
2016 payment determination and subsequent years, we are adding four 
quality measures with data collection to begin in CY 2014. For three of 
these measures, data will be submitted via an online tool located on a 
CMS Web site and one will be submitted via CDC's NHSN. We are removing 
two measures from the Hospital OQR Program.
    As stated above, we are unable to estimate the number of hospitals 
that may not receive the full OPD fee schedule increase factor in CY 
2016. We also are unable to estimate the number of hospitals that would 
fail the validation documentation submission requirement for the CY 
2016 payment update.
    The validation requirements for CY 2014 will result in medical 
record documentation for approximately 6,000 cases per quarter for CY 
2014, being submitted to a designated CMS contractor. We will pay for 
the cost of sending this medical record documentation to the designated 
CMS contractor at the rate of 12 cents per page for copying and 
approximately $1.00 per case for postage. We have found that an 
outpatient medical chart is generally up to 10 pages. Thus, as a result 
of validation requirements effective for CY 2014, we estimate that we 
will have expenditures of approximately $13,200 per quarter for CY 
2014. Because we will pay for the data collection effort, we believe 
that a requirement for medical record documentation for 6,000 total 
cases per quarter for up to 500 hospitals for CY 2014 represents a 
minimal burden to Hospital OQR Program participating hospitals.
e. Effects of CY 2014 Policies for the ASCQR Program
    In section XV. of this final rule with comment period, for the 
ASCQR Program, we are adopting three additional quality measures for 
the CY 2016 payment determination and subsequent years. Data collection 
for these proposed measures will begin in CY 2014. We will collect 
aggregate data (numerators, denominators, and exclusions) on all ASC 
patients for these four proposed chart-abstracted measures via an 
online Web-based tool located on a CMS Web page. We also are adopting 
for the CY 2016 payment determination and subsequent years requirements 
for a QualityNet account and security administrator, facility 
participation, a minimum threshold and minimum volume for claims-based 
measures, and data collection and submission for new measures and for 
certain previously finalized measures.
    We are unable at this time to estimate the number of ASCs that may 
not receive the full ASC annual payment update in CYs 2014, 2015, and 
2016. However, we do expect our new policies to significantly affect 
the number of ASCs that do not receive a full annual payment update in 
CY 2016, although we are not able to estimate the level of this impact 
at this time.
f. Effects of Changes to the CfCs for OPOs Relating to the Outcome 
Measures Requirement for Recertification
    In section XVI. of this final rule with comment period, we 
discussed our proposed and final policies to modify the current outcome 
measures requirement that OPOs meet all three outcome measures set 
forth in Sec.  486.318 to a requirement that they meet two out of the 
three outcome measures. Our revised policy will result in those OPOs 
that fail only one outcome measures avoiding automatic decertification 
based upon the current outcome measures requirement.
    While we are confident that our revised policy will have a 
significantly positive effect on the OPOs that avoided automatic 
decertification, it is very difficult to quantify the impact of this 
policy change. As discussed under section XXI.C. of this final rule 
with comment period relating to the ICR requirements, we anticipate 
that most OPOs that are decertified will engage in the appeals process 
as set forth in Sec.  486.314. However, we have no reliable way of 
estimating how many OPOs will likely obtain reversals of their 
decertifications during reconsideration or how many would continue on 
to a hearing before a CMS hearing officer. Therefore, although we 
believe there would be a considerably large positive effect as a result 
of our policy change to the outcome measures requirement, we are unable 
to provide a specific estimate of that cost savings.
g. Effects of Revisions of the QIO Regulations
    In section XVII. of this final rule with comment period rule, we 
are updating the regulations at 42 CFR 475 and 476 based on the 
recently enacted Trade Adjustment Assistance Extension Act of 2011 
(TAAEA) (Pub. L. 112-40, Section 261) whereby Congress authorized 
numerous changes to the original legislation and included additional 
flexibility for the Secretary in the administration of the QIO program. 
Currently, 42 CFR Part 475 includes definitions and standards governing 
eligibility and the award of contracts to QIOs. In this final rule with 
comment period, we set forth policies for the partial deletion and 
revision of the regulations under 42 CFR Parts 475 and 476, which 
relate to the QIO program, including the following: (1) Replace 
nomenclature that has been amended by the TAAEA; (2) revise the 
existing definition for the term ``physician'' in Parts 475 and 476; 
(3) add new definitions as necessary to support the new substantive 
provisions in Subpart C; and (4) revise, add, and replace some of the 
substantive provisions in Subpart C to fully exercise the Secretary's 
authority for the program and update the contracting requirements to 
align with contemporary quality improvement.
    We estimate the effects of the QIO Program changes to be consistent 
with the Congressional Budget Office's 2011 Cost Estimate of the Trade 
Bill (H.R. 2832) which included a reduction in spending of $330 million 
over the 2012-2021 period. According to the CBO Estimate, the Act and 
subsequently the regulatory changes ``would modify the provisions under 
which CMS contracts

[[Page 75193]]

with independent entities called [``]Quality Improvement Organizations 
[(QIOs)''] in Medicare. QIOs, generally staffed by health care 
professionals, review medical care, help beneficiaries with complaints 
about the quality of care, and implement care improvements. H.R. 2832 
would make several changes to the composition and operation of QIOs, 
and would harmonize QIO contracts with requirements of the Federal 
Acquisition Regulation. Among those changes are a modification to 
expand the geographic scope of QIO contracts and a lengthening of the 
contract period. CBO estimates that those provisions would reduce 
spending by $330 million over the 2012-2021 period.''
h. Effects of Revised Policies Regarding Medicare-Fee-for-Service EHR 
Incentive Program
(1) Incentive Payments for Eligible Professionals (EPs) Reassigning 
Benefits to Method II CAHs
    As discussed in section XVIII.A. of this final rule with comment 
period, we are revising the regulations to provide, during payment year 
2013 alone, a special method for determining the hospital-based status 
of EPs who reassign their benefits to Method II CAHs. It is difficult 
to determine with precision the cost impact of this policy change. We 
lack specific information on key factors affecting this impact, 
including the number of EPs who reassign their benefits to Method II 
CAHs, the proportion of those EPs who will be determined to be 
nonhospital-based for 2013 under our revised policy, the proportion of 
those EPs who will qualify for Medicaid incentive payments and choose 
to accept those payments because they are higher, and the proportion of 
the remaining EPs who will successfully demonstrate meaningful use in 
order to qualify for Medicare incentive payments. Therefore, it is 
necessary to rely on estimates for each of these factors. As much as 
possible, we employ the methods of cost estimation that we used to 
determine the estimated costs of the Medicare incentives for EPs in our 
Stage 1 final rule (75 FR 44549) and Stage 2 final rule (77 FR 54139) 
for the Medicare Electronic Health Record Incentive Program, as well as 
the estimates that we have previously employed for specific factors.
    Of the approximately 1,200 CAHs, about three-quarters, or 900, 
elect under section 1834(g)(2) of the Act to receive a cost-based 
payment for the facility costs of providing outpatient services, plus 
115 percent of the fee schedule amount for professional services 
included within outpatient CAH services. As we have indicated, we lack 
specific information on the numbers of EPs who reassign their benefits 
to these Method II CAHs. While CAHs are relatively small inpatient 
facilities, we understand that many of them have fairly substantial 
outpatient clinics. At the same time, we have also been informed that 
they rely largely on nonphysician practitioners (nurses and nurse 
practitioners) to staff these outpatient clinics. Therefore, we will 
assume that the typical outpatient department in a Method II CAH has a 
relatively small number of physicians, between 5 and 10, on staff and 
billing for professional services that are reassigned to the CAH. We 
also use this estimate of 5 to 10 physicians per Method II CAH to 
establish an upper and lower range to our impact estimate. The number 
of EPs reassigning benefits for outpatient services to Method II CAHs 
is therefore between 4,500 and 9,000.
    In our Stage 2 final rule (77 FR 54139) for the Medicare Electronic 
Health Record Incentive Program, we determined that about 14 percent of 
EPs with Medicare claims were hospital-based, and thus ineligible to 
receive Medicare EHR incentive payments. For purposes of this impact 
statement, we assume that 10 percent of EPs reassigning benefits to 
Method II CAHs are hospital-based. Because CAHs have relatively small 
inpatient hospital facilities, we believe that the physicians 
practicing in these facilities will bill for somewhat fewer inpatient 
services than EPs generally. Using this assumption, the estimate of 
nonhospital-based EPs reassigning benefits to Method II CAHs is 
therefore between 4,050 and 8,100. Of these nonhospital-based EPs 
reassigning benefits to Method II CAHs, some proportion will qualify 
for Medicaid incentive payments and will choose to receive payments 
under that program because the payments are higher. For these purposes 
we employ the same estimate (20 percent) that we have employed for 
developing cost estimate in our Stage 2 final rule (77 FR 54140). Thus, 
we estimate that between 3,240 and 6,480 non-hospital-based EPs 
reassigning benefits to Method II CAHs do not choose to receive 
Medicaid incentive payments.
    As we have discussed in prior rules (77 FR 54140), our estimates 
for the number of EPs that will successfully demonstrate meaningful use 
of CEHRT are uncertain. The percentage of Medicare EPs who will satisfy 
the criteria for demonstrating meaningful use of CEHRT and will qualify 
for incentive payments is a key, but highly uncertain factor in 
developing cost estimates for the EHR incentive program in general and 
for the present purposes in particular. Consistent with the estimates 
that we have employed for EPs generally in developing cost estimates in 
the Stage II final rule, we assume that 37 percent of the nonhospital-
based EPs reassigning benefits to Method II CAHs will satisfy the 
criteria for demonstrating meaningful use of CEHRT and will qualify for 
incentive payments in payment years 2013. Thus, we estimate that 
between 1,199 and 2,398 EPs reassigning benefits to Method II CAHs will 
actually qualify to receive Medicare EHR incentive payments in 2013. As 
we have previously discussed, section 1848(o)(1)(B) of the Act provides 
that the incentive payment for an EP for a given payment year shall not 
exceed the following amounts:
     For the EP's first payment year, for such professional, 
$15,000 (or $18,000, if the EP's first payment year is 2011 or 2012);
     For the EP's second payment year, $12,000;
     For the EP's third payment year, $8,000;
     For the EP's fourth payment year, $4,000;
     For the EP's fifth payment year, $2,000; and
     For any succeeding year, $0.
    We lack any information on how many of the EPs reassigning benefits 
to Method II CAHs will qualify for incentive payments for the first 
time in 2013. However, if we assume, for purposes of setting upper 
limits on our estimates, that all of the 1,199 to 2,398 EPs we have 
estimated will qualify for the first time and receive the maximum 
incentive payment, our revised policy will cost between $17,985,000 and 
$35,970,000 in payments that we have not previously been making in 
2013. Despite the uncertainties of the assumptions that we have 
employed in developing these estimates, we can state with reasonable 
confidence that our revised policy will result in considerably less 
than $50,000,000 in payments over and above the payments we would make 
in the absence of this policy for 2013.
(2) Cost Reporting Periods for Interim and Final EHR Incentive Payments 
to Eligible Hospitals
    As we discussed in section XVIII.B. of this final rule with comment 
period, we are revising the regulations to provide that, in cases where 
there is no 12-month cost reporting period that begins on or after the 
beginning of a payment

[[Page 75194]]

year, we will use the most recent 12-month cost reporting period 
available at the time of final settlement in order to determine final 
EHR incentive payments for the hospital. We are making this policy 
change solely to address situations in which hospitals have been 
receiving interim EHR payments but the contractors have not been able 
to make a determination of final payments because there is no hospital 
cost report that meets the existing requirements of the regulations. 
Therefore, we do not expect this to have any financial impact. This 
policy change will merely allow us to make final settlements in cases 
that the current regulations do not cover.

B. Regulatory Flexibility Act (RFA) Analysis

    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, we estimate that 
most hospitals, ASCs and CMHCs are small entities as that term is used 
in the RFA. For purposes of the RFA, most hospitals are considered 
small businesses according to the Small Business Administration's size 
standards with total revenues of $35.5 million or less in any single 
year. Most ASCs and most CMHCs are considered small businesses with 
total revenues of $10 million or less in any single year. We estimate 
that this final rule with comment period may have a significant impact 
on approximately 2,040 hospitals with voluntary ownership. For details, 
see the Small Business Administration's ``Table of Small Business Size 
Standards'' at http://www.sba.gov/content/table-small-business-size-standards.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 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 may have a significant impact on approximately 
709 small rural hospitals.
    The analysis above, together with the remainder of this preamble, 
provides a regulatory flexibility analysis and a regulatory impact 
analysis.
C. Unfunded Mandates Reform Act Analysis
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. That threshold 
level is currently approximately $141 million. This final rule with 
comment period does not mandate any requirements for State, local, or 
tribal governments, or for the private sector.

D. Conclusion

    The changes we are making in this final rule with comment period 
will affect all classes of hospitals paid under the OPPS and will 
affect both CMHCs and ASCs. We estimate that most classes of hospitals 
paid under the OPPS will experience a modest increase or a minimal 
decrease in payment for services furnished under the OPPS in CY 2013. 
Table 55 demonstrates the estimated distributional impact of the OPPS 
budget neutrality requirements that will result in a 1.8 percent 
increase in payments for all services paid under the OPPS in CY 2014, 
after considering all of the changes to APC reconfiguration and 
recalibration, as well as the OPD fee schedule increase factor, wage 
index changes, including the frontier State wage index adjustment, 
estimated payment for outliers, and changes to the pass-through payment 
estimate. However, some classes of providers that are paid under the 
OPPS will experience more significant gains and others will experience 
modest losses in OPPS payments in CY 2014.
    The updates to the ASC payment system for CY 2014 will affect each 
of the approximately 5,300 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 ASC's patients who are 
Medicare beneficiaries, the degree to which the payments for the 
procedures offered by the ASC are changed under the ASC payment system, 
and the extent to which the ASC provides a different set of procedures 
in the coming year. Table 56 demonstrates the estimated distributional 
impact among ASC surgical specialties of the MFP-adjusted CPI-U update 
factor of 1.2 percent for CY 2014.

XXIIV. 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 55 of this final rule with comment period, we 
estimate that OPPS payments to governmental hospitals (including State 
and local governmental hospitals) will increase by 1.1 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.

XXV. Waiver of 60-Day Delay of Effective Date

    In the absence of an appropriation for FY 2014 or a Continuing 
Resolution, the Federal Government shut down on October 1, 2013. During 
this shutdown, which lasted from October 1, 2013 through October 16, 
2013, only excepted operations continued, which largely excluded work 
on the final rule with comment period and the final rules contained in 
this document. Accordingly, most of the work on these rules was not 
completed in accordance with our usual schedule for final payment 
rules, which aims for an issuance date of November 1, followed by an 
effective date of January 1, to ensure that the policies are effective 
at the start of the calendar year to which they apply.
    We ordinarily provide a 60-day delay in the effective date of final 
rules after the date they are issued. The 60-day delay in effective 
date can be waived, however, if the agency finds, for good cause, that 
the delay is impracticable, unnecessary, or contrary to the public 
interest, and the agency incorporates a statement of the findings and 
its reasons in the rule issued. We believe it would be contrary to the 
public interest to delay the effective date of the OPPS and ASC payment 
systems portions,

[[Page 75195]]

including the Hospital OQR Program and the ASCQR Program parts of the 
final rule with comment period contained in this document. In 
accordance with sections 1833(t) and 1833(i) of the Act, the OPPS and 
the ASC payment systems are calendar year payment systems, and we 
typically issue the OPPS/ASC payment systems final rule with comment 
period by November 1 of each year to both comply with the requirement 
to annually review and update these payment systems and ensure that the 
payment policies for these systems are effective on January 1, the 
first day of the calendar year to which the policies are intended to 
apply. The Hospital OQR Program and the ASCQR Program are intended to 
align with the OPPS and the ASC payment system, respectively.
    We also believe it would be contrary to the public interest to 
delay the effective date of the Hospital VBP Program performance and 
baseline period policies being finalized in this document. These 
policies are being finalized in this document solely because we 
inadvertently neglected to propose and finalize them in the FY 2014 
IPPS/LTCH PPS proposed and final rules. These policies are intended to 
align with the previously finalized performance and baseline periods 
for other measures included in the FY 2016 Hospital VBP Program, with 
January 1, 2014 being the start date of reporting. In addition, a delay 
in effective date would be contrary to the public interest in ensuring 
that payments under the IPPS to hospitals in FY 2016 properly and 
completely reflect their performance on quality measures in 2014.
    We also believe that it would be contrary to the public interest to 
delay the effective date of the revisions to the provider reimbursement 
determinations and appeals reopening rule under 42 CFR 405.1885 in this 
document because, as stated herein, we have determined that applying 
these revisions to currently pending cost reports, appeals, and 
reopenings is in the public interest in finality of payment amounts and 
necessary to comply with the requirements of sections 1878 and 1886 of 
the Act.
    If the effective date of this final rule with comment period and 
final rules mentioned above in this document is delayed by 60 days, the 
OPPS and ASC payment system policies (including the Hospital OQR and 
the ASCQR Program policies), the Hospital VBP Program performance and 
baseline period policies, and the revisions to the provider 
reimbursement determinations and appeals regulations at 42 CFR 
405.1885, adopted in this final rule with comment period and final 
rules, will not be effective as of the beginning of the payment year. 
We note that our waiver of the delayed effective date only applies to 
the OPPS and ASC payment system policies (including the Hospital OQR 
and the ASCQR Program policies), the Hospital VBP Program performance 
and baseline period policies, and the revisions to the provider 
reimbursement determinations and appeals regulations at 42 CFR 
405.1885, that are adopted in this final rule with comment period and 
in the applicable final rules. The delayed effective date for all other 
policies in the final rules in this document is not waived, and these 
policies will be effective on January 27, 2014.

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

    Health facilities, Health professions, Laboratories, Medicare, 
Rural areas, X-rays.

42 CFR Part 412

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

42 CFR Part 419

    Hospitals, Medicare, Reporting and recordkeeping requirements.

42 CFR Part 475

    Grant programs-health, Health care, Health professions, Quality 
Improvement Organization (QIO).

42 CFR Part 476

    Health care, Health professional, Health record, Quality 
Improvement Organization (QIO), Penalties, Privacy, Reporting and 
recordkeeping requirements.

42 CFR Part 486

    Grant programs-health, Health facilities, Medicare, Reporting and 
recordkeeping requirements, X-rays.

42 CFR Part 495

    Computer technology, Electronic health records, Electronic 
transactions, Health, Health care. Health information technology, 
Health insurance, Health records, Hospitals, Laboratories, Medicaid, 
Medicare, Privacy, Reporting and recordkeeping requirements, Public 
health, Security.
    For reasons stated in the preamble of this document, the Centers 
for Medicare & Medicaid Services is amending 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, Subpart R continues to read as 
follows:

    Authority:  Secs. 205, 1102, 1814(b), 1815(a), 1833, 1861(v), 
1871, 1872, 1878, and 1886 of the Social Security Act (42 U.S.C. 
405, 1302, 1395f(b), 1395g(a), 1395l, 1395x(v), 1395hh, 1395ii, 
1395oo, and 1395ww).

0
2. Section 405.1804 is amended by revising paragraph (a) to read as 
follows:

Sec.  405.1804  Matters not subject to administrative and judicial 
review under prospective payment system.

* * * * *
    (a) The determination of the requirement, or the proportional 
amount, of the budget neutrality adjustment in the prospective payment 
rates required under section 1886(e)(1) of the Social Security Act.
* * * * *

0
3. Section 405.1885 is amended by revising paragraph (a)(1) and adding 
paragraph (b)(2)(iv) to read as follows:

Sec.  405.1885  Reopening an intermediary determination or reviewing 
entity decision.

    (a) * * *
    (1) A Secretary determination, an intermediary determination, or a 
decision by a reviewing entity (as described in Sec.  405.1801(a)) may 
be reopened, with respect to specific findings on matters at issue in a 
determination or decision, by CMS (with respect to Secretary 
determinations), by the intermediary (with respect to intermediary 
determinations), or by the reviewing entity that made the decision (as 
described in paragraph (c) of this section).
    (i) A specific finding on a matter at issue may be legal or factual 
in nature or a mixed matter of both law and fact.
    (ii) A specific finding on a matter at issue may include a factual 
matter that arose in or was determined for the same cost reporting 
period as the period at issue in an appeal filed, or a reopening 
requested by a provider or initiated by an intermediary, under this 
subpart.
    (iii) A specific finding on a matter at issue may include a 
predicate fact, which is a finding of fact based on a factual matter 
that first arose in or was first determined for a cost reporting period 
that predates the period at issue (in an appeal filed, or a reopening

[[Page 75196]]

requested by a provider or initiated by an intermediary, under this 
subpart), and once determined, was used to determine an aspect of the 
provider's reimbursement for one or more later cost reporting periods.
    (iv) Except as provided for by this section, Sec.  405.1887, and 
Sec.  405.1889, a specific finding on a matter at issue may not be 
reopened and, if reopened, revised.
* * * * *
    (b) * * *
    (2) * * *
    (iv) The 3-year period described in paragraphs (b)(2)(i) through 
(b)(2)(iii) of this section applies to, and is calculated separately 
for, each specific finding on a matter at issue (as described in 
paragraphs (a)(1)(i) through (a)(1)(iv) of this section, but not to 
such findings when made as part of a determination of reasonable cost 
under section 1861(v)(1)(A) of the Act.
* * * * *

PART 410--SUPPLEMENTARY MEDICAL INSURANCE (SMI) BENEFITS

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

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
5. Section 410.27 is amended by--
0
a. Revising paragraph (a) introductory text.
0
b. Removing the word ``and'' at the end of paragraph (a)(1)(iii).
0
c. Removing the period at the end of paragraph (a)(1)(iv)(E) and adding 
in its place ``; and''.
0
d. Adding paragraph (a)(1)(v).
    The revisions and addition 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) Medicare Part B pays for therapeutic hospital or CAH services 
and supplies furnished incident to a physician's or nonphysician 
practitioner's service, which are defined as all services and supplies 
furnished to hospital or CAH outpatients that are not diagnostic 
services and that aid the physician or nonphysician practitioner in the 
treatment of the patient, including drugs and biologicals which are not 
usually self-administered, if--
    (1) * * *
    (v) In accordance with applicable State law.
* * * * *

PART 412--PROSPECTIVE PAYMENT SYSTEMS FOR INPATIENT HOSPITAL 
SERVICES

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

    Authority:  Secs. 1102, 1862, and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1395y, and 1395hh).

0
7. Section 412.167 is amended by redesignating paragraph (c) as 
paragraph (d) and adding a new paragraph (c) to read as follows:

Sec.  412.167  Appeals under the Hospital Value-Based Purchasing (VBP) 
Program.

* * * * *
    (c) If a hospital is dissatisfied with CMS' decision on an appeal 
request submitted under paragraph (b) of this section, the hospital may 
request an independent CMS review of that decision.
* * * * *

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

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

    Authority: Secs. 1102, 1833(t), and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1395l(t), and 1395hh).

0
9. Section 419.2 is amended by revising paragraphs (b) introductory 
text, (b)(3), and (b)(11) and adding paragraphs (b)(13) through (18) to 
read as follows:

Sec.  419.2  Basis of payment.

* * * * *
    (b) Determination of hospital outpatient prospective payment rates: 
Packaged costs. The prospective payment system establishes a national 
payment rate, standardized for geographic wage differences, that 
includes operating and capital-related costs that are integral, 
ancillary, supportive, dependent, or adjunctive to performing a 
procedure or furnishing a service on an outpatient basis. In general, 
these packaged costs may include, but are not limited to, the following 
items and services, the payment for which are packaged or conditionally 
packaged into the payment for the related procedures or services.
* * * * *
    (3) Observation services;
* * * * *
    (11) Implantable and insertable medical items and devices, 
including, but not limited to, prosthetic devices (other than dental) 
which replace all or part of an internal body organ (including 
colostomy bags and supplies directly related to colostomy care), 
including replacement of these devices;
* * * * *
    (13) Image guidance, processing, supervision, and interpretation 
services;
    (14) Intraoperative items and services;
    (15) 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;
    (16) Drugs and biological 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 biological);
    (17) Certain clinical diagnostic laboratory tests; and
    (18) Certain services described by add-on codes.
* * * * *

0
10. Section 419.22 is amended by revising the introductory text and 
paragraphs (j) and (1) to read as follows:

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

    The following services are not paid for under the hospital 
outpatient prospective payment system (except when packaged as a part 
of a bundled payment):
* * * * *
    (j) Except as provided in Sec.  419.2(b)(11), prosthetic devices, 
prosthetic supplies, and orthotic devices.
* * * * *
    (l) Except as provided in Sec.  419.2(b)(17), clinical diagnostic 
laboratory tests.
* * * * *

0
11. Section 419.32 is amended by adding paragraph (b)(1)(iv)(B)(5) to 
read as follows:

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

* * * * *
    (b) * * *
    (1) * * *
    (iv) * * *
    (B) * * *
    (5) For calendar year 2014, a multifactor productivity adjustment 
(as determined by CMS) and 0.3 percentage point.
* * * * *

0
12. Section 419.46 is added to Subpart D to read as follows:

[[Page 75197]]

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

    (a) Participation in the Hospital OQR Program. To participate in 
the Hospital OQR Program, a hospital as defined in section 
1886(d)(1)(B) of the Act and is paid under the OPPS must--
    (1) Register on the QualityNet Web site before beginning to report 
data;
    (2) Identify and register a QualityNet security administrator as 
part of the registration process under paragraph (a)(1) of this 
section; and
    (3) Complete and submit an online participation form available at 
the QualityNet.org Web site if this form has not been previously 
completed, if a hospital has previously withdrawn, or if the hospital 
acquires a new CMS Certification Number (CCN). For Hospital OQR Program 
purposes, hospitals that share the same CCN are required to complete a 
single online participation form. Once a hospital has submitted a 
participation form, it is considered to be an active Hospital OQR 
Program participant until such time as it submits a withdrawal form to 
CMS or no longer has an effective Medicare provider agreement. 
Deadlines for the participation form are described in paragraphs 
(a)(3)(i) and (ii) of this section, and are based on the date 
identified as a hospital's Medicare acceptance date.
    (i) If a hospital has a Medicare acceptance date before January 1 
of the year prior to the affected annual payment update, the hospital 
must complete and submit to CMS a completed Hospital OQR Notice of 
Participation Form by July 31 of the calendar year prior to the 
affected annual payment update.
    (ii) If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit a completed participation form no later than 180 
days from the date identified as its Medicare acceptance date.
    (b) Withdrawal from the Hospital OQR Program. A participating 
hospital may withdraw from the Hospital OQR Program by submitting to 
CMS a withdrawal form that can be found in the secure portion of the 
QualityNet Web site. The hospital may withdraw any time from January 1 
to November 1 of the year prior to the affected annual payment updates. 
A withdrawn hospital will not be able to later sign up to participate 
in that payment update, is subject to a reduced annual payment update 
as specified under Sec.  419.43(h), and is required to submit a new 
participation form in order to participate in any future year of the 
Hospital OQR Program.
    (c) Submission of Hospital OQR Program data. (1) General rule. 
Except as provided in paragraph (d) of this section, hospitals that 
participate in the Hospital OQR Program must submit to CMS data on 
measures selected under section 1833(17)(C) of the Act in a form and 
manner, and at a time, specified by CMS.
    (2) Submission deadlines. Submission deadlines by measure and by 
data type are posted on the QualityNet Web site.
    (3) Initial submission deadlines for a hospital that did not 
participate in the previous year's Hospital OQR Program. (i) If a 
hospital has a Medicare acceptance date before January 1 of the year 
prior to the affected annual payment update, the hospital must submit 
data beginning with encounters occurring during the first calendar 
quarter of the year prior to the affected annual payment update, in 
addition to submitting a completed Hospital OQR Notice of Participation 
Form under paragraph (a)(3)(i) of this section.
    (ii) If a hospital has a Medicare acceptance date on or after 
January 1 of the year prior to the affected annual payment update, the 
hospital must submit data for encounters beginning with the first full 
quarter following submission of the completed Hospital OQR Notice of 
Participation Form under paragraph (a)(3)(ii) of this section.
    (iii) Hospitals with a Medicare acceptance date before or after 
January 1 of the year prior to an affected annual payment update must 
follow data submission deadlines as specified in paragraph (c)(2) of 
this section.
    (d) Exception. CMS may grant an extension or waiver of one or more 
data submission deadlines and requirements in the event of 
extraordinary circumstances beyond the control of the hospital, such as 
when an act of nature affects an entire region or locale or a systemic 
problem with one of CMS' data collection systems directly or indirectly 
affects data submission. CMS may grant an extension or waiver as 
follows:
    (1) Upon request by the hospital. Specific requirements for 
submission of a request for an extension or waiver are available on the 
QualityNet Web site.
    (2) At the discretion of CMS. CMS may grant waivers or extensions 
to hospitals that have not requested them when CMS determines that an 
extraordinary circumstance has occurred.
    (e) Validation of Hospital OQR Program data. CMS may validate one 
or more measures selected under section 1833(17)(C) of the Act by 
reviewing documentation of patient encounters submitted by selected 
participating hospitals.
    (1) Upon written request by CMS or its contractor, a hospital must 
submit to CMS supporting medical record documentation that the hospital 
used for purposes of data submission under the program. The specific 
sample that a hospital must submit will be identified in the written 
request. A hospital must submit the supporting medical record 
documentation to CMS or its contractor within 45 days of the date 
identified on the written request, in the form and manner specified in 
the written request.
    (2) A hospital meets the validation requirement with respect to a 
fiscal year if it achieves at least a 75-percent reliability score, as 
determined by CMS.
    (f) Reconsiderations and appeals of Hospital OQR Program decisions. 
(1) A hospital may request reconsideration of a decision by CMS that 
the hospital has not met the requirements of the Hospital OQR Program 
for a particular fiscal year. Except as provided in paragraph (d) of 
this section, a hospital must submit a reconsideration request to CMS 
via the QualityNet Web site, no later than the first business day of 
the month of February of the affected payment year.
    (2) A reconsideration request must contain the following 
information:
    (i) The hospital's CMS Certification Number (CCN);
    (ii) The name of the hospital;
    (iii) The CMS-identified reason for not meeting the requirements of 
the affected payment year's Hospital OQR Program as provided in any CMS 
notification to the hospital;
    (iv) The hospital's basis for requesting reconsideration. The 
hospital must identify its specific reason(s) for believing it should 
not be subject to the reduced annual payment update;
    (v) The hospital-designated personnel contact information, 
including name, email address, telephone number, and mailing address 
(must include physical mailing address, not just a post office box);
    (vi) The hospital-designated personnel's signature;
    (vii) A copy of all materials that the hospital submitted to comply 
with the requirements of the affected Hospital OQR Program payment 
determination year; and
    (viii) If the hospital is requesting reconsideration on the basis 
that CMS determined it did not meet the affected payment determination 
year's validation requirement set forth in paragraph (e)(1) of this 
section, the hospital must provide a written justification for each 
appealed data element classified during the validation process as a 
mismatch.

[[Page 75198]]

Only data elements that affect a hospital's validation score are 
eligible to be reconsidered.
    (3) A hospital that is dissatisfied with a decision made by CMS on 
its reconsideration request may file an appeal with the Provider 
Reimbursement Review Board under part 405, subpart R, of this chapter.

0
13. Section 419.66 is amended by revising paragraph (b)(3) to read as 
follows:

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

* * * * *
    (b) * * *
    (3) 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, whether or not it remains with the 
patient when the patient is released from the hospital.
* * * * *

PART 475--QUALITY IMPROVEMENT ORGANIZATIONS

0
14. The authority citation for part 475 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
15. Section 475.1 is amended by--
0
a. Redesignating paragraphs (a) through (d) in the definition of ``Five 
percent or more owner'' as paragraphs (1) though (4).
0
b. Adding, in alphabetical order, the definitions of ``Case reviews'', 
``Practitioner'', ``QIO area'', and ``Quality improvement initiative''.
0
c. Revising the definition of ``Physician.''
    The additions and revision read as follows:

Sec.  475.1  Definitions.

* * * * *
    Case reviews means the different types of reviews that QIOs are 
authorized to perform. Such reviews include, but are not limited to--
    (1) Beneficiary complaint reviews;
    (2) General quality of care reviews;
    (3) Emergency Medical Treatment and Labor Act (EMTALA) reviews;
    (4) Medical necessity reviews, including appeals and DRG validation 
reviews; and
    (5) Admission and discharge reviews.
* * * * *
    Physician means:
    (1) A doctor of medicine or osteopathy, a doctor of dental surgery 
or dental medicine, a doctor of podiatry, a doctor of optometry, or a 
chiropractor as described in section 1861(r) of the Act;
    (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice as a doctor as described in 
paragraph (1) of this definition; and
    (3) An individual licensed to practice as a doctor as described in 
paragraph (1) of this definition in any Territory or Commonwealth of 
the United States of America.
    Practitioner has the same meaning as provided in Sec.  476.1 of 
this chapter.
    QIO area means the defined geographic area, such as the State(s), 
region(s), or community(ies), in which the CMS contract directs the QIO 
to perform.
    Quality improvement initiative has the same meaning as provided in 
Sec.  476.1 of this chapter.

0
16. Subpart C is revised to read as follows:
Subpart C--Quality Improvement Organizations
Sec.
475.100 Scope and applicability.
475.101 Eligibility requirements for QIO contracts.
475.102 Requirements for performing case reviews.
475.103 Requirements for performing quality improvement initiatives.
475.104 [Reserved]
475.105 Prohibition against contracting with health care facilities, 
affiliates, and payor organizations.
475.106 [Reserved]
475.107 QIO contract awards.

Subpart C--Quality Improvement Organizations

Sec.  475.100  Scope and applicability.

    This subpart implements sections 1152 and 1153(b) and (c) of the 
Social Security Act as amended by section 261 of the Trade Adjustment 
Assistance Extension Act of 2011. This subpart defines the types of 
organizations that are eligible to become Quality Improvement 
Organizations (QIOs) and describes certain steps CMS will take in 
selecting QIOs.

Sec.  475.101  Eligibility requirements for QIO contracts.

    In order to be eligible for a QIO contract, an organization must 
meet the following requirements:
    (a) Have a governing body that includes at least one individual who 
is a representative of health care providers and at least one 
individual who is a representative of consumers.
    (b) Demonstrate the ability to perform the functions of a QIO, 
including--
    (1) The ability to meet the eligibility requirements and perform 
activities as set forth in the QIO Request for Proposal; and
    (2) The ability to--
    (i) Perform case reviews as described in Sec.  475.102; and/or
    (ii) Perform quality improvement initiatives as set forth in Sec.  
475.103.
    (c) Demonstrate the ability to actively engage beneficiaries, 
families, and consumers, as applicable, in case reviews as set forth in 
Sec.  475.102, and/or quality improvement initiatives as set forth in 
Sec.  475.103.
    (d) Demonstrate the ability to perform the functions of a QIO with 
objectivity and impartiality and in a fair and neutral manner.

Sec.  475.102  Requirements for performing case reviews.

    (a) In determining whether or not an organization has demonstrated 
the ability to perform case review, CMS will take into consideration 
factors such as:
    (1) The organization's proposed processes, capabilities, 
quantitative, and/or qualitative performance objectives and methodology 
to perform case reviews;
    (2) The organization's proposed involvement of and access to 
physicians and practitioners in the QIO area with the appropriate 
expertise and specialization in the areas of health care related to 
case reviews;
    (3) The organization's ability to take into consideration urban 
versus rural, local, and regional characteristics in the health care 
setting where the care under review was provided;
    (4) The organization's ability to take into consideration evidence-
based national clinical guidelines and professionally recognized 
standards of care; and
    (5) The organization's access to qualified information technology 
(IT) expertise.
    (b) In making determinations under this section, CMS may consider 
characteristics such as the organization's geographic location and 
size. CMS may also consider prior experience in health care quality 
improvement that CMS considers relevant to performing case reviews; 
such prior experience may include prior similar case review experience.
    (c) A State government that administers a Medicaid program will be 
considered incapable of performing case review in an effective manner, 
unless the State demonstrates to the satisfaction of CMS that the State 
agency performing the case review will act with complete objectivity 
and independence from the Medicaid program.

Sec.  475.103  Requirements for performing quality improvement 
initiatives.

    (a) In determining whether or not an organization has demonstrated 
the

[[Page 75199]]

ability to perform quality improvement initiatives, CMS will take into 
consideration factors such as:
    (1) The organization's proposed processes, capabilities, 
quantitative, and/or qualitative performance objectives, and 
methodology to perform quality improvement initiatives;
    (2) The organization's proposed involvement of and access to 
physicians and practitioners in the QIO area with the appropriate 
expertise and specialization in the areas of health care concerning the 
quality improvement initiatives;
    (3) The organization's access to professionals with appropriate 
knowledge of quality improvement methodologies and practices; and
    (4) The organization's access to qualified information technology 
(IT) expertise.
    (b) In making determinations under this section, CMS may consider 
characteristics such as the organization's geographic location and 
size. CMS may also consider prior experience in health care quality 
improvement that CMS considers relevant to performing quality 
improvement initiatives; such prior experience may include prior 
similar quality improvement initiative experience and whether it 
achieved successful results.
    (c) A State government that administers a Medicaid program will be 
considered incapable of performing quality improvement initiative 
functions in an effective manner, unless the State demonstrates to the 
satisfaction of CMS that the State agency performing the quality 
improvement initiatives will act with complete objectivity and 
independence from the Medicaid program.

Sec.  475.104  [Reserved]

Sec.  475.105  Prohibition against contracting with health care 
facilities, affiliates, and payor organizations.

    (a) Basic rule. Except as permitted under paragraph (a)(3) of this 
section, the following are not eligible for QIO contracts:
    (1) A health care facility in the QIO area.
    (2) A health care facility affiliate; that is, an organization in 
which more than 20 percent of the members of the governing body are 
also either a governing body member, officer, partner, five percent or 
more owner, or managing employee in a health care facility in the QIO 
area.
    (3) A payor organization, unless the Secretary determines that--
    (i) There is no other entity available for an area with which the 
Secretary can enter into a contract under this part; or
    (ii) A payor organization is a more qualified entity to perform one 
or more of the functions of a QIO described in Sec.  475.101(b), meets 
all other requirements and standards of this part, and demonstrates to 
the satisfaction of CMS that, in performing QIO activities, the payor 
organization will act with complete objectivity and independence from 
its payor program.
    (b) [Reserved]
    (c) Subcontracting. A QIO must not subcontract with a health care 
facility to perform any case review activities except for the review of 
the quality of care.

Sec.  475.106  [Reserved]

Sec.  475.107  QIO contract awards.

    Subject to the provisions of Sec.  475.105, CMS will--
    (a) Ensure that all awardees meet the requirements of Sec. Sec.  
475.101 through 475.103, as applicable; and
    (b) Award the contract to the selected organization for a specific 
QIO area for a period of 5 years.

PART 476--QUALITY IMPROVEMENT ORGANIZATION REVIEW

0
17. The authority for part 476 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
18. The heading of part 476 is revised to read as set forth above.

0
19. In Sec.  476.1, paragraphs (a) through (d) in the definition of 
``Five percent or more owner'' are redesignated as paragraphs (1) 
though (4) and the definition of ``Physician'' is revised to read as 
follows:

Sec.  476.1  Definitions.

* * * * *
    Physician means:
    (1) A doctor or medicine or osteopathy, a doctor of dental surgery 
or dental medicine, a doctor of podiatry, a doctor of optometry, or a 
chiropractor, as described in section 1861(r) of the Act;
    (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice as a doctor as described in 
paragraph (1) of this definition; and
    (3) An individual licensed to practice as a doctor as described in 
paragraph (1) of this definition in any Territory or Commonwealth of 
the United States of America.
* * * * *

0
20. The heading of Subpart C is revised to read as follows:

Subpart C--Review Responsibilities of Quality Improvement 
Organizations (QIOs)

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

0
21. The authority citation of part 486 continues to read as follows:

    Authority:  Secs. 1102, 1138, and 1871 of the Social Security 
Act (42 U.S.C. 1302, 1302b-8, and 1395hh) and section 371 of the 
Public Health Service Act (42 U.S.C. 273).

0
22. Section 486.316 is amended by revising paragraphs (a)(1) and (b) to 
read as follows:

Sec.  486.316  Re-certification and competition processes.

    (a) * * *
    (1) Meets two out of the three outcome measures requirements at 
Sec.  486.318; and * * *
    (b) De-certification and competition. If an OPO does not meet two 
out of the three outcome measures as described in paragraph (a)(1) of 
this section or the requirements described in paragraph (a)(2) of this 
section, the OPO is de-certified. If the OPO does not appeal or the OPO 
appeals and the reconsideration official and CMS hearing officer uphold 
the de-certification, the OPO's service area is opened for competition 
from other OPOs. The de-certified OPO is not permitted to compete for 
its open area or any other open area. An OPO competing for an open 
service area must submit information and data that describe the 
barriers in its service area, how they affected organ donation, what 
steps the OPO took to overcome them, and the results.
* * * * *

0
23. Section 486.318 is amended by revising paragraph (a) introductory 
text and paragraph (b) introductory text to read as follows:

Sec.  486.318  Condition: Outcome measures.

    (a) With the exception of OPOs operating exclusively in 
noncontiguous States, Commonwealths, Territories, or possessions, an 
OPO must meet two out of the three following outcome measures:
* * * * *
    (b) For OPOs operating exclusively in noncontiguous States, 
Commonwealths, Territories, and possessions, an OPO must meet two out 
of the three following outcome measures:
* * * * *

[[Page 75200]]

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD TECHNOLOGY 
INCENTIVE PROGRAM

0
24. The authority citation for part 495 continues to read as follows:

    Authority:  Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

0
25. Section 495.4 is amended by revising the definition of ``Hospital-
based EP'' to read as follows:

Sec.  495.4  Definitions.

* * * * *
    Hospital-based EP. Unless it meets the requirements of Sec.  495.5, 
a hospital-based EP means an EP who furnishes 90 percent or more of his 
or her covered professional services in sites of service identified by 
the codes used in the HIPAA standard transaction as an inpatient 
hospital or emergency room setting in the year preceding the payment 
year, or in the case of a payment adjustment year, in either of the 2 
years before the year preceding such payment adjustment year.
    (1) For Medicare, this is calculated based on--
    (i) The Federal fiscal year preceding the payment year; and
    (ii) For the payment adjustments, based on--
    (A) The Federal fiscal year 2 years before the payment adjustment 
year; or
    (B) The Federal fiscal year 3 years before the payment adjustment 
year.
    (2) For Medicaid, it is at the State's discretion if the data are 
gathered on the Federal fiscal year or calendar year preceding the 
payment year.
    (3) For the CY 2013 payment year only, an EP who furnishes services 
billed by a CAH receiving payment under Method II (as described in 
Sec.  413.70(b)(3) of this chapter) is considered to be hospital-based 
if 90 percent or more of his or her covered professional services are 
furnished in sites of service identified by the codes used in the HIPAA 
standard transaction as an inpatient hospital or emergency room setting 
in each of the Federal fiscal years 2012 and 2013.
* * * * *

0
26. Section 495.104 is amended by revising paragraph (c)(2) to read as 
follows:

Sec.  495.104  Incentive payments to eligible hospitals.

* * * * *
    (c) * * *
    (2) Interim and final payments. CMS uses data on hospital acute 
care inpatient discharges, Medicare Part A acute care inpatient bed-
days, Medicare Part C acute care inpatient bed-days, and total acute 
care inpatient bed-days from the latest submitted 12-month hospital 
cost report as the basis for making preliminary incentive payments. 
Final payments are determined at the time of settling the first 12-
month hospital cost report for the hospital fiscal year that begins on 
or after the first day of the payment year, and settled on the basis of 
data from that cost reporting period. In cases where there is no 12-
month hospital cost report period beginning on or after the first day 
of the payment year, final payments may be determined and settled on 
the basis of data from the most recently submitted 12-month hospital 
cost report.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; Program No. 93.774, Medicare--
Supplementary Medical Insurance Program; and Program No. 93.778 
(Medical Assistance)

    Dated: November 14, 2013.
Marilyn Tavenner,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: November 20, 2013.
Kathleen Sebelius,
Secretary.
[FR Doc. 2013-28737 Filed 11-27-13; 4:15 pm]
BILLING CODE 4120-01-P
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