DEPARTMENT OF HEALTH AND HUMAN SERVICES 

Centers for Medicare & Medicaid Services 

42 CFR Parts 416, 419, 476, 478, 480, and 495 

[CMS-1589-P] 

RIN 0938-AR10 

Hospital Outpatient Prospective and Ambulatory Surgical 

Center Payment Systems and Quality Reporting Programs; 

Electronic Reporting Pilot; Inpatient Rehabilitation 

Facilities Quality Reporting Program; Quality Improvement 

Organization Regulations

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

ACTION: Proposed rule. 

SUMMARY: This proposed rule would revise the Medicare hospital outpatient 

prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) 

payment system for CY 2013 to implement applicable statutory requirements and 

changes arising from our continuing experience with these systems. In this proposed 

rule, we describe the proposed changes to the amounts and factors used to determine the 

payment rates for Medicare services paid under the OPPS and those paid under the ASC 

payment system. In addition, we are proposing updates and refinements to the 

requirements for the Hospital Outpatient Quality Reporting (OQR) Program, the ASC 

Quality Reporting (ASCQR) Program, and the Inpatient Rehabilitation Facility (IRF) 

Quality Reporting Program. We also are proposing revisions to the electronic reporting 

pilot for the Electronic Health Record (EHR) Incentive Program, and the various 

regulations governing Quality Improvement Organizations (QIOs), including the secure 
transmittal of electronic medical information, beneficiary complaint resolution and 

notification processes, and technical changes. 

DATES: Comment Period: To be assured consideration, comments on all sections of 

this proposed rule must be received at one of the addresses provided in the 

ADDRESSES section no later than 5 p.m. EST on September 4, 2012. 

ADDRESSES: In commenting, please refer to file code CMS-1589-P. 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-1589-P, 

 P.O. Box 8013, 

 Baltimore, MD 21244-1850. 

 Please allow sufficient time for mailed comments to be received before the close 

of the comment period. 

3. By express or overnight mail. You may send written comments via express or 

overnight mail to the following address ONLY: 
Centers for Medicare & Medicaid Services, 

 Department of Health and Human Services, 

Attention: CMS-1589-P, 

 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, S.W., 

 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. 

 Submission of comments on paperwork requirements: You may submit 

comments on this document’s paperwork requirements by following the instructions at 

the end of the “Collection of Information Requirements” section. 

For information on viewing public comments, we refer readers to the beginning of 

the “SUPPLEMENTARY INFORMATION” section. 

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, and new technology APCs. 

 Jennifer Bean, (410) 786-4827, for issues related to the Hospital Outpatient 

Quality Reporting Program. 

 Anita Bhatia, (410) 786-7236, for issues related to the ASCQR Program. 

 Douglas Brown, (410) 786-0028, for issues related to Electronic Health Record 

Incentive Program Electronic Reporting Pilot. 

 Carrie Bullock, (401) 786-0378, for issues related to device-dependent APCs, 

blood products, and no cost/full credit and partial credit devices. 
 Erick Chuang, (410) 786-1816, for issues related to OPPS APC weights, mean 

calculation, copayments, wage index, outlier payments, and rural hospital payments. 

 Caroline Gallaher, (410) 786-8705, for issues related to Inpatient Rehabilitation 

Facilities Quality Reporting Program. 

 Alpha-Banu Huq, (410) 786-8687, for issues related to OPPS drugs, 

radiopharmaceuticals, biologicals, blood clotting factors, and packaged items/services. 

 Twi Jackson, (410) 786-1159, for issues related to hospital outpatient visits, 

extended assessment composite APC, and inpatient-only procedures. 

 Thomas Kessler, (401) 786-1991, for issues related to QIO regulations. 

 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, cardiac resynchronization therapy composite, 

and cardiac electrophysiologic evaluation and ablation composite APC. 

 Jana Lindquist, (410) 786-4533, for issues related to partial hospitalization and 

community mental health center issues. 

 Ann Marshall, (410) 786-3059, for issues related to OPPS supervision, proton 

beam therapy, and the Hospital Outpatient Payment (HOP) Panel. 

 John McInnes, (410) 786-0378, for issues related to new technology intraocular 

lenses (NTIOLs). 

 Char Thompson, (410) 786-2300, for issues related to OPPS CCRs and 

ambulatory surgical center (ASC) payments. 
 Marjorie Baldo, (410) 786-4617, for all other issues related to hospital outpatient 

and ambulatory surgery 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 proposed rule, all of the Addenda will 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 will be 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-ServicePayment/HospitalOutpatientPPS/index.html. The Addenda relating to the ASC payment 

system are available at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/index.html. Readers who experience any problems accessing any 

of the Addenda that are posted on the CMS Web site identified above should contact 

Charles Braver at (410) 786-0378. 

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 

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 

CLFS Clinical Laboratory Fee Schedule 

CMHC Community mental health center 

CMS Centers for Medicare & Medicaid Services 

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 

CY Calendar year 

DFO Designated Federal Official 
DRA Deficit Reduction Act of 2005, Pub. L. 109-171 

DSH Disproportionate share hospital 

EACH Essential access community hospital 

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 Food and Drug Administration 

FFS [Medicare] Fee-for-service 

FY 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 

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 

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 

IRF Inpatient rehabilitation facility 

IRF-PAI Inpatient Rehabilitation Facility-Patient Assessment Instrument 

LDR Low dose rate 

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 

OPPS [Hospital] Outpatient Prospective Payment System 
OPSF Outpatient Provider-Specific File 

OQR [Hospital] Outpatient Quality Reporting 

OT Occupational therapy 

PCR Payment-to-cost ratio 

PE Practice expense 

PHP Partial hospitalization program 

PHS Public Health Service [Act], Pub. L. 96-88 

PPI Producer Price Index 

PPS Prospective payment system 

PPV Pneumococcal pneumonia 

PQRS Physician Quality Reporting System 

PT Physical therapy 

QDC Quality data code 

QIO Quality Improvement Organization 

RAC Recovery Audit Contractor 

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 
TOPs Transitional Outpatient Payments 

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 Proposed Rule 

 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 (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 on the CY 2012 OPPS/ASC Final Rule with 

Comment Period 

II. Proposed Updates Affecting OPPS Payments 
 A. Proposed Recalibration of APC Relative Weights 

1. Database Construction 

a. Database Source and Methodology 

 b. Proposed Use of Single and Multiple Procedure Claims 

 c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs) 

 2. Proposed 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 Advisory Panel on Hospital Outpatient Payment 

Regarding Data Development 

 d. Proposed Calculation of Single Procedure APC Criteria-Based Costs 

 (1) Device-Dependent APCs 

 (2) Blood and Blood Products 

 (3) Endovascular Revascularization of the Lower Extremity (APCs 0083, 0229, 

and 0319) 

(4) Non-Congenital Cardiac Catheterization (APC 0080) 
(5) Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334) 

(6) Brachytherapy Sources 

 e. Proposed 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) 

 f. Proposed Geometric Mean-Based Relative Payment Weights 

 3. Proposed Changes to Packaged Services 

 a. Background 

 b. Proposed Clarification of Regulations at 42 CFR 419.2(b) 

c. Packaging Recommendations of the HOP Panel (“The Panel”) at its February 

2012 Meeting 

 d. Proposed Packaging of Drugs, Biologicals, and Radiopharmaceuticals 

 (1) Existing Packaging Policies 

 (2) Clarification of Packaging Policy for Anesthesia Drugs 

e. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals, 

Contrast Agents, and Implantable Biologicals (“Policy-Packaged” Drugs and Devices) 
f. Summary of Proposals 

 4. Proposed Calculation of OPPS Scaled Payment Weights 

 B. Proposed Conversion Factor Update 

 C. Proposed Wage Index Changes 

 D. Proposed Statewide Average Default CCRs 

 E. Proposed OPPS Payment to Certain Rural and Other Hospitals 

 1. Hold Harmless Transitional Payment Changes 

 2. Proposed Adjustment for Rural SCHs and EACHs under Section 

1833(t)(13)(B) of the Act 

 F. Proposed OPPS Payments to Certain Cancer Hospitals Described by Section 

1886(d)(1)(B)(v) of the Act 

1. Background 

 2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2013 

 G. Proposed Hospital Outpatient Outlier Payments 

 1. Background 

 2. Proposed Outlier Calculation 

 3. Proposed Outlier Reconciliation 

 H. Proposed Calculation of an Adjusted Medicare Payment from the National 

Unadjusted Medicare Payment 

I. Proposed Beneficiary Copayments 

 1. Background 

 2. Proposed OPPS Copayment Policy 

 3. Proposed Calculation of an Adjusted Copayment Amount for an APC Group 
III. Proposed OPPS Ambulatory Payment Classification (APC) Group Policies 

 A. Proposed OPPS Treatment of New CPT and Level II HCPCS Codes 

 1. Proposed Treatment of New CY 2012 Level II HCPCS and CPT Codes 

Effective April 1, 2012 and July 1, 2012 for Which We Are Soliciting Public Comments 

in this CY 2013 Proposed Rule 

 2. Proposed Process for New Level II HCPCS Codes That Will Be Effective 

October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective 

January 1, 2013 for Which We Will Be Soliciting Public Comments in the CY 2013 

OPPS/ASC Final Rule with Comment Period 

 B. Proposed OPPS Changes--Variations within APCs 

1. Background 

 2. Application of the 2 Times Rule 

 3. Proposed Exceptions to the 2 Times Rule 

 C. Proposed New Technology APCs 

1. Background 

2. Proposed Movement of Procedures from New Technology APCs to Clinical 

APCs 

 3. Proposed Payment Adjustment Policy for Radioisotopes Derived from 

Non-Highly Enriched Uranium Sources 

 a. Background 

 b. Proposed Payment Policy 

 D. Proposed OPPS APC-Specific Policies 

1. Placement of Amniotic Membrane (APC 0233) 
2. Proton Beam Therapy (APCs 0664 and 0667) 

3. Intraoperative Radiation Therapy (IORT) (APC 0412) 

a. Background 

b. CY 2013 Proposals for CPT Codes 77424, 77425, and 77469 

IV. Proposed OPPS Payment for Devices 

 A. Proposed Pass-Through Payments for Devices 

 1. Expiration of Transitional Pass-Through Payments for Certain Devices 

 a. Background 

 b. Proposed CY 2013 Policy 

 2. Proposed Provisions for Reducing Transitional Pass-Through Payments to 

Offset Costs Packaged into APC Groups 

 a. Background 

 b. Proposed CY 2013 Policy 

 3. Proposed Clarification of Existing Device Category Criterion 

 a. Background 

 b. Proposed Clarification of CY 2013 Policy 

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

Credit Devices 

 1. Background 

 2. Proposed APCs and Devices Subject to the Adjustment Policy 

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

 A. Proposed OPPS Transitional Pass-Through Payment for Additional Costs of 

Drugs, Biologicals, and Radiopharmaceuticals 
 1. Background 

 2. Proposed Drugs and Biologicals with Expiring Pass-Through Status in 

CY 2012 

 3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or 

Continuing Pass-Through Status in CY 2013 

 4. Proposed Provisions for Reducing Transitional Pass-Through Payments for 

Diagnostic Radiopharmaceuticals and Contrast Agents to Offset Costs Packaged into 

APC Groups 

 a. Background 

 b. Proposed Payment Offset Policy for Diagnostic Radiopharmaceuticals 

 c. Proposed Payment Offset Policy for Contrast Agents 

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

without Pass-Through Status 

 1. Background 

 2. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 

Radiopharmaceuticals 

 a. Background 

 b. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes that 

Describe Certain Drugs, Nonimplantable Biologicals, and Therapeutic 

Radiopharmaceuticals (“Threshold-Packaged Drugs”) 

 c. Proposed Packaging Determination for HCPCS Codes That Describe the Same 

Drug or Biological But Different Dosages 
 3. Proposed Payment for Drugs and Biologicals without Pass-Through Status 

That Are Not Packaged 

 a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and 

Other Separately Payable and Packaged Drugs and Biologicals 

b. Proposed CY 2013 Payment Policy 

 4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals 

 5. Proposed Payment for Blood Clotting Factors 

6. Proposed Payment for Nonpass-Through Drugs, Biologicals, and 

Radiopharmaceuticals with HCPCS Codes, but without OPPS Hospital Claims Data 

VI. Proposed Estimate of OPPS Transitional Pass-Through Spending for Drugs, 

Biologicals, Radiopharmaceuticals, and Devices 

 A. Background 

 B. Proposed Estimate of Pass-Through Spending 

VII. Proposed OPPS Payment for Hospital Outpatient Visits 

 A. Background 

 B. Proposed Policies for Hospital Outpatient Visits 

 C. Transitional Care Management 

VIII. Proposed Payment for Partial Hospitalization Services 

 A. Background 

 B. Proposed PHP APC Update for CY 2013 

 C. Proposed Separate Threshold for Outlier Payments to CMHCs 

IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures 

A. Background 
B. Proposed Changes to the Inpatient List 

X. Proposed Policies for the Supervision of Outpatient Services in Hospitals and CAHs 

 A. Conditions of Payment for Physical Therapy, Speech-Language Pathology, 

and Occupational Therapy Services in Hospitals and CAHs 

B. Enforcement Instruction for the Supervision of Outpatient Therapeutic 

Services in CAHs and Small Rural Hospitals 

XI. Outpatient Status--Solicitation of Public Comments 

XII. Proposed CY 2013 OPPS Payment Status and Comment Indicators 

 A. Proposed CY 2013 OPPS Payment Status Indicator Definitions 

 B. Proposed CY 2013 Comment Indicator Definitions 

XIII. OPPS Policy and Payment Recommendations 

 A. MedPAC Recommendations 

 B. GAO Recommendations 

 C. OIG Recommendations 

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

 A. Background 

1. Legislative Authority, Statutory Authority, and Prior Rulemaking for the ASC 

Payment System 

 2. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC 

Covered Surgical Procedures and Covered Ancillary Services 

 B. Proposed Treatment of New Codes 

 1. Proposed Process for Recognizing New Category I and Category III CPT 

Codes and Level II HCPCS Codes 
 2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT 

Codes Implemented in April and July 2012 for Which We Are Soliciting Public 

Comments in this CY 2013 OPPS/ASC Proposed Rule 

3. Proposed Process for New Level II HCPCS codes and Category I and 

Category III CPT Codes for Which We Will Be Soliciting Public Comments in the 

CY 2013 OPPS/ASC Final Rule with Comment Period 

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

Covered Ancillary Services 

 1. Covered Surgical Procedures 

 a. Proposed Additions to the List of ASC Covered Surgical Procedures 

 b. Proposed Covered Surgical Procedures Designated as Office-Based 

 (1) Background 

 (2) Proposed Changes for CY 2013 to Covered Surgical Procedures Designated 

as Office-Based 

 c. Proposed ASC Covered Surgical Procedures Designated as Device-Intensive 

 (1) Background 

 (2) Proposed Changes to List of Covered Surgical Procedures Designated as 

Device-Intensive for CY 2013 

 d. Proposed Adjustment to ASC Payments for No Cost/Full Credit and Partial 

Credit Devices 

 e. ASC Treatment of Surgical Procedures Proposed for Removal from the OPPS 

Inpatient List for CY 2013 

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

Ancillary Services 

 1. Proposed Payment for Covered Surgical Procedures 

 a. Background 

 b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for 

CY 2013 

 c. Waiver of Coinsurance and Deductible for Certain Preventive Services 

 d. Payment for the Cardiac Resynchronization Therapy Composite 

 e. Proposed Payment for Low Dose Rate (LDR) Prostate Brachytherapy Services 

 2. Proposed Payment for Covered Ancillary Services 

 a. Background 

 b. Proposed Payment for Covered Ancillary Services for CY 2013 

 E. New Technology Intraocular Lenses (NTIOLs) 

 1. NTIOL Cycle and Evaluation Criteria 

2. NTIOL Application Process for Payment Adjustment 

 3. Requests to Establish New NTIOL Classes for CY 2013 and Deadline for 

Public Comments 

 4. Payment Adjustment 

 5. Proposed Revisions to the Major NTIOL Criteria Described in 

42 CFR 416.195 

 6. Request for Public Comments on the “Other Comparable Clinical Advantages” 

Improved Outcome 

 F. Proposed ASC Payment and Comment Indicators 
 1. Background 

 2. Proposed ASC Payment and Comment Indicators 

 G. ASC Policy and Payment Recommendations 

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

Payment Rates 

 1. Background 

 2. Proposed Calculation of the ASC Payment Rates 

 a. Updating the ASC Relative Payment Weights for CY 2013 and Future Years 

 b. Updating the ASC Conversion Factor 

 3. Display of Proposed CY 2013 ASC Payment Rates 

XV. Hospital Outpatient Quality Reporting Program Updates 

 A. Background 

 1. Overview 

 2. Statutory History of 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. Proposed 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. Suspension of One Chart-Abstracted Measure for the CY 2014 and Subsequent 

Years Payment Determinations 

 3. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: Patient 

Referral from an Outpatient Setting for the CY 2014 Payment Determination 

 D. Quality Measures for CY 2015 Payment Determination 

 E. Possible Quality Measures under Consideration for Future Inclusion in the 

Hospital OQR Program 

 F. Proposed Payment Reduction for Hospitals That Fail to Meet the 

Hospital OQR Program Requirements for the CY 2013 Payment Update 

 1. Background 

 2. Proposed Reporting Ratio Application and Associated Adjustment Policy for 

CY 2013 

 G. Proposed Requirements for Reporting of Hospital OQR Data for the CY 2014 

Payment Determination and Subsequent Years 

 1. Administrative Requirements for the CY 2014 Payment Determination and 

Subsequent Years 

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

for the CY 2014 Payment Determination and Subsequent Years 

 a. Background 

 b. General Requirements 
 c. Proposed Chart-Abstracted Measure Requirements for CY 2014 and 

Subsequent Payment Determination Years 

 d. Proposed Claims-Based Measure Data Requirements for the CY 2014 and CY 

2015 Payment Determinations 

e. Proposed Structural Measure Data Requirements for the CY 2014 Payment 

Determination and Subsequent Years 

f. Proposed Data Submission Requirements for OP-22: ED-Patient Left Before 

Being Seen for the CY 2015 Payment Determination 

 g. Proposed Population and Sampling Data Requirements for the CY 2014 

Payment Determination and Subsequent Years 

 3. Proposed Hospital OQR Program Validation Requirements for 

Chart-Abstracted Measure Data Submitted Directly to CMS for the CY 2014 Payment 

Determination and Subsequent Years 

 a. Random Selection of Hospitals for Data Validation of Chart-Abstracted 

Measures for the CY 2014 Payment Determination and Subsequent Years 

 b. Targeting and Proposed Targeting Criteria for Data Validation Selection for 

CY 2014 Payment Determination and for Subsequent Years 

 c. Proposed Methodology for Encounter Selection for the CY 2014 Payment 

Determination and Subsequent Years 

 d. Validation Score Calculation for the CY 2014 Payment Determination and 

Subsequent Years 

 H. Proposed Hospital OQR Reconsideration and Appeals Procedures for the 

CY 2014 Payment Determination and Subsequent Years 
 I. Proposed Extraordinary Circumstances Extension or Waiver for the CY 2013 

Payment Determination and Subsequent Years 

 J. Electronic Health Records (EHRs) 

 K. Proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot 

for Eligible Hospitals and CAHs 

XVI. 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. History of the ASCQR Program 

 B. ASCQR Program Quality Measures 

 1. Proposed Considerations in the Selection of ASCQR Program Quality 

Measures 

 2. ASCQR Program Quality Measures 

 3. ASC Measure Topics for Future Consideration 

 4. Clarification Regarding the Process for Updating ASCQR Program Measures 

 C. Proposed Requirements for Reporting of ASC Quality Data 

 1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 

Payment Determination and Subsequent Payment Determination Years 

 a. Background 

 b. Proposals Regarding Form, Manner, and Timing for Claims-Based Measures 

for CY 2015 and Subsequent Payment Determination Years 
 2. Data Completeness and Minimum Threshold for Claims-Based Measures 

Using QDCs 

 a. Background 

 b. Proposals Regarding Data Completeness Requirements for the CY 2015 

Payment Determination and Subsequent Payment Determination Years 

 D. Proposed Payment Reduction for ASCs That Fail to Meet the ASCQR 

Program Requirements 

 1. Statutory Background 

 2. Proposed Reduction to the ASC Payment Rates for ASCs That Fail to Meet the 

ASCQR Program Requirements Beginning with the CY 2014 Payment Determination 

and Subsequent Payment Determination Years 

XVII. Proposed Inpatient Rehabilitation Facility (IRF) Quality Reporting Program 

Updates 

 A. Overview 

 B. Updates to IRF QRP Measures Which Are Made as a Result of Review by the 

NQF Process 

 C. Proposed Process for Retention of IRF Quality Measures Adopted in Previous 

Rulemaking Cycles 

 D. Adopted Measures for the FY 2014 Payment Determination 

 1. Clarification Regarding Existing IRF Quality Measures That Have Undergone 

Changes during NQF Measure Maintenance Processes 

 2. Proposed Updates to the “Percent of Residents Who Have Pressure Ulcers 

That Are New or Worsened” Measure 
XVIII. Proposed Revisions to the Quality Improvement Organization (QIO) Regulations 

(42 CFR Parts 476, 478, and 480) 

 A. Summary of Proposed Changes 

 B. Quality of Care Review 

 1. Beneficiary Complaint Reviews 

 2. Completion of General Quality of Care Reviews 

 C. Use of Confidential Information That Explicitly or Implicitly Identifies 

Patients 

 D. Secure Transmissions of Electronic Versions of Medical Information 

 E. Active Staff Privileges 

 F. Proposed Technical Corrections 

XIX. Files Available to the Public Via the Internet 

XX. Collection of Information Requirements 

 A. Legislative Requirements for Solicitation of Comments 

 B. Proposed Requirements in Regulation Text 

 C. Proposed Associated Information Collections Not Specified in Regulatory 

Text 

 1. Hospital OQR Program 

 2. Hospital OQR Program Measures for the CY 2013, CY 2014, CY 2015, and 

CY 2016 Payment Determinations 

 3. Proposed Hospital OQR Program Validation Requirements for CY 2014 

 4. Proposed Hospital OQR Program Reconsideration and Appeals Procedures 

 5. ASCQR Program Requirements 
 6. IRF QRP 

XXI. Response to Comments 

XXII. Economic Analyses 

 A. Regulatory Impact Analysis 

 1. Introduction 

 2. Statement of Need 

 3. Overall Impacts for OPPS and ASC Provisions 

 4. Detailed Economic Analyses 

 a. Estimated Effects of Proposed OPPS Changes 

 (1) Limitations of Our Analysis 

 (2) Estimated Effects of Proposed OPPS Changes on Hospitals 

 (3) Estimated Effects of Proposed OPPS Changes on CMHCs 

 (4) Estimated Effect of Proposed OPPS Changes on Beneficiaries 

 (5) Estimated Effects of Proposed OPPS Changes on Other Providers 

 (6) Estimated Effects of Proposed OPPS Changes on the Medicare and Medicaid 

Programs 

 (7) Alternative OPPS Policies Considered 

 b. Estimated Effects of ASC Payment System Proposals 

 (1) Limitations of Our Analysis 

 (2) Estimated Effects of ASC Payment System Proposals on ASCs 

 (3) Estimated Effects of ASC Payment System Proposals on Beneficiaries 

 (4) Alternative ASC Payment Policies Considered 

 c. Effects of the Proposed Revisions to the QIO Regulations 
 d. Accounting Statements and Tables 

 e. Effects of Proposed Requirements for the Hospital OQR Program 

f. Effects of the Proposed EHR Incentive Program Electronic Reporting Pilot 

g. Effects of Proposals for the ASCQR Program 

 h. Effects of Proposed Updates to the IRF QRP 

 B. Regulatory Flexibility Act (RFA) Analysis 

 C. Unfunded Mandates Reform Act Analysis 

 D. Conclusion 

XXIII. Federalism Analysis 

I. Executive Summary and Background 

A. Executive Summary of this Proposed Rule

1. Purpose 

In this proposed rule, we are proposing to update the payment policies and 

payment rates for services furnished to Medicare beneficiaries in hospital outpatient 

departments and ASCs beginning January 1, 2013. Section 1833(t) of the Social Security 

Act (the Act) requires us to annually review and update the relative payment weights and 

conversion factor for services payable under the 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 proposed rule. 

In addition to establishing payment rates for CY 2013, we are proposing updates 

and new requirements under the Hospital OQR Program, the ASCQR Program, and the 

IRF Quality Reporting Program. We also are proposing certain revisions to the electronic 
reporting pilot for the EHR Incentive Program and to the regulations governing the 

Quality Improvement Organizations (QIOs), including the secure transmittal of electronic 

medical information, beneficiary complaint resolution and notification processes, and 

technical corrections. 

2. Summary of the Major Provisions 

● OPPS Update: For CY 2013, we are proposing to increase payment rates 

under the OPPS by an OPD fee schedule increase factor of 2.1 percent. This increase is 

based on the projected hospital inpatient market basket percentage increase of 3.0 percent 

for inpatient services paid under the hospital inpatient prospective payment system 

(IPPS), minus the proposed multifactor productivity (MFP) adjustment of 0.8 percentage 

points, and minus a 0.1 percentage point adjustment required by the Affordable Care Act. 

Under this proposal, we estimate that total payments, including beneficiary cost-sharing 

for CY 2013 to the more than 4,000 facilities paid under the OPPS (including general 

acute care hospitals, children’s hospitals, cancer hospitals, and community mental health 

centers (CMHCs)), would be approximately $48.1 billion, an increase of approximately 

$4.6 billion compared to CY 2012 payments, or $700 million excluding our estimated 

changes in enrollment, utilization, and case-mix. 

We are proposing to continue implementing the statutory 2.0 percentage point 

reduction in payments for hospitals failing to meet the hospital outpatient quality 

reporting requirements, by applying a reporting ratio of 0.980 to the OPPS payments and 

copayments for all applicable services. 

● Geometric Mean-Based Relative Payment Weights: CMS has discretion under 

the statute to set OPPS payments based upon either the estimated mean or median costs 
of services within an Ambulatory Payment Classification (APC) group, the unit of 

payment. To improve our cost estimation, for CY 2013, we are proposing to use the 

geometric mean costs of services within an APC to determine the relative payment 

weights of services, rather than the median costs that we have used since the inception of 

the OPPS. Our analysis shows that the proposed change to means would have a limited 

payment impact on most providers, with a small number experiencing payment gain or 

loss based on their service-mix. 

● Rural Adjustment: We are proposing to continue an adjustment of 7.1 percent 

to the OPPS payments to certain rural sole community hospitals (SCHs), including 

essential access community hospitals (EACHs). This adjustment would 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 2013, we are proposing to 

continue 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 proposed target PCR of 0.91 would be 

used to determine the CY 2013 cancer hospital payment adjustment to be paid at cost 

report settlement. That is, the payment amount associated with the cancer hospital 

payment adjustment would be the additional payment needed to result in a proposed PCR 

equal to 0.91 for each cancer hospital. 
● Payment Adjustment Policy for Radioisotopes Derived from Non-Highly 

Enriched Uranium Sources: The Administration has established an agenda to eliminate 

domestic reliance on reactors outside of the United States that produce highly enriched 

uranium (HEU), and to promote the conversion of all medical isotope production to nonHEU sources. We are proposing to exercise our statutory authority to make payment 

adjustments necessary to ensure equitable payments, to provide an adjustment for 

CY 2013 to cover the marginal cost of hospital conversion to use of non-HEU sources to 

obtain radioisotopes used in medical imaging. The adjustment would cover the marginal 

cost of radioisotopes produced from non-HEU sources over the costs of radioisotopes 

produced by HEU sources. 

● Payment of Drugs, Biologicals, and Radiopharmaceuticals: For CY 2013, we 

are proposing to pay for the acquisition and pharmacy overhead costs of separately 

payable drugs and biologicals that do not have pass-through status at the statutory default 

of average sales price (ASP) plus 6 percent. 

● Supervision of Hospital Outpatient Therapeutic Services: We are clarifying 

the application of the supervision regulations to physical therapy, speech-language 

pathology, and occupational therapy services that are furnished in OPPS hospitals and 

critical access hospitals (CAHs). We are proposing to extend the enforcement instruction 

for CAHs and certain small rural hospitals for one final year through CY 2013. 

● Outpatient Status: We are concerned about recent increases in the length of 

time that Medicare beneficiaries spend as outpatients receiving observation services. In 

addition, hospitals continue to express concern about Medicare Part B rebilling policies 

when a hospital inpatient claim is denied because the admission was not medically 
necessary. We are providing an update on the Part A to Part B Rebilling Demonstration 

that is in effect for CY 2012 through CY 2014, which was designed to assist us in 

evaluating these issues. In addition, we are soliciting public comments on potential 

clarifications or changes to our policies regarding patient status that may be appropriate. 

● Ambulatory Surgical Center Payment Update: For CY 2013, we are proposing 

to increase payment rates under the ASC payment system by an MFP-adjusted CPI-U 

update factor of 1.3 percent. This increase is based on a projected CPI-U update of 2.2 

percent minus a multifactor productivity adjustment required by the Affordable Care Act 

that is projected to be 0.9 percent. Based on this update, we estimate that total ASC 

payments, including beneficiary cost-sharing, for CY 2013 would be approximately 

$4.103 billion, an increase of approximately $211 million compared to estimated 

CY 2012 payments. 

● New Technology Intraocular Lenses: We are proposing significant revisions to 

the regulations governing payments for new technology intraocular lens (NTIOLs), 

specifically § 416.195(a)(2) and § 416.195(a)(4). We are proposing to revise 

§ 416.195(a)(2) to require that the IOL’s FDA-approved labeling contain a claim of a 

specific clinical benefit based on a new lens characteristic in comparison to currently 

available IOLs. We are proposing to revise § 416.195(a)(4) to require that any specific 

clinical benefit referred to in § 416.195(a)(2) must be supported by evidence that 

demonstrates that the IOL results in a measurable, clinically meaningful, improved 

outcome. 

● Ambulatory Surgical Center Quality Reporting (ASCQR) Program: For the 

ASCQR Program, we are seeking public comment on our approach for future measure 
selection and development as well as proposing certain measures for future inclusion in 

the ASCQR Program measure set. For the CY 2015 payment determination and 

subsequent years payment determinations, we are proposing requirements regarding the 

dates for submission, payment, and completeness for claims-based measures. We also 

are proposing how the payment rates would be reduced for ASCs that fail to meet 

program requirements beginning in CY 2014 and are clarifying our policy on updating 

measures. 

● Hospital Outpatient Quality Reporting (OQR) Program: For the Hospital 

OQR Program, we are proposing no new measures for CY 2013. We also are proposing 

no new targeting criteria to select hospitals for validation of medical records. We are 

confirming the suspension of data collection for specific measures. We are proposing 

that the criteria we would consider when determining whether to retire measures for the 

Hospital Inpatient Quality Reporting (IQR) Program are applicable likewise to the 

Hospital OQR Program. We are proposing that measures adopted in future rulemaking 

are automatically adopted for all subsequent year payment determinations unless we 

propose to remove, suspend, or replace them. We are proposing changes to 

administrative forms used in the program. We are proposing to extend the deadline for 

submitting a notice of participation form and to enter structural measures data. 

● Electronic Health Record (EHR) Incentive Program: For the EHR Incentive 

Program, we are proposing to extend the 2012 Medicare EHR Incentive Program 

Electronic Reporting Pilot for Eligible Hospitals and CAHs through 2013, exactly as 

finalized for 2012. Other changes to the Medicare and Medicaid EHR Incentive 
Programs are proposed in a Notice of Proposed Rulemaking published in the Federal 

Register on March 7, 2012. 

● Inpatient Rehabilitation Facility Quality Reporting Program (IRF QRP): We 

are proposing to: (1) adopt updates on a previously adopted measure for the IRF QRP 

that will affect annual prospective payment amounts in FY 2014; (2) adopt a policy that 

would provide that any measure that has been adopted for use in the IRF QRP will 

remain in effect until the measure is actively removed, suspended, or replaced; and 

(3) adopt policies regarding when notice-and-comment rulemaking will be used to update 

existing IRF QRP measures. 

● Revisions to the Quality Improvement Organization (QIO) Regulations: We 

are proposing to revise the QIO program regulations to: (1) give QIOs the authority to 

send and receive secure transmissions of electronic versions of medical information; 

(2) provide more detailed and improved procedures for QIOs when completing Medicare 

beneficiary complaint reviews and general quality of care reviews, including procedures 

related to a new alternative dispute resolution process called “immediate advocacy”; 

(3) increase the information beneficiaries receive in response to QIO review activities; 

(4) convey to Medicare beneficiaries the right to authorize the release of confidential 

information by QIOs; and (5) make other technical changes that are designed to improve 

the regulations. The technical changes to the QIO regulations that we are proposing to 

improve the regulations reflect CMS’ commitment to the general principles of the 

President’s Executive Order on Regulatory Reform, Executive Order 13563 

(January 18, 2011). 

3. Summary of Costs and Benefits 
In sections XXII. and XXIII. of this proposed rule, we set forth a detailed analysis 

of the regulatory and federalism impacts that the proposed changes would have on 

affected entities and beneficiaries. Key estimated impacts include the following: 
a. Impacts of the OPPS Update 

(1) Impacts of All Proposed OPPS Changes 

Table 45 in section XXII. of this proposed rule displays the distributional impact 

to various groups of hospitals and for CMHCs of all the proposed OPPS changes for 

CY 2013 compared to all estimated OPPS payments in CY 2012. We estimate that the 

proposals in this proposed rule would result in a 2.1 percent overall increase in OPPS 

payments to providers. We estimate that the increase in OPPS expenditures, including 

beneficiary cost-sharing, would be approximately $700 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 $4.6 billion in OPPS expenditures, including beneficiary cost-sharing, for 

CY 2013 compared to CY 2012 OPPS expenditures. We estimate that total OPPS 

payments, including beneficiary cost-sharing, would be $48.1 billion for CY 2013. 

 We estimated the isolated impact of our proposed OPPS policies on CMHCs 

because CMHCs furnish only partial hospitalization services. Continuing the 

provider-specific structure that we adopted for CY 2011 and basing payment fully on the 

data for the type of provider furnishing the service, we estimate a 4.4 percent decrease in 

CY 2013 payments to CMHCs relative to their CY 2012 payments. This effect is largely 

attributable to a decline in the relative payment weight for APC 0173 (Level II Partial 

Hospitalization (4 or more services) for CMHCs) using the proposed geometric 

mean-based relative payment weights as opposed to median-based relative payment 

weights. 

(2) Impacts of Basing APC Relative Weights on Geometric Mean Costs 
 We estimate that our proposal to base the APC relative payment weights on the 

geometric mean costs rather than the median costs of services within an APC would not 

significantly impact most providers. Payments to low volume urban hospitals and to 

hospitals for which disproportionate share hospital (DSH) data are not available would 

increase by an estimated 2.1 and 4.0 percent, respectively. The increase to hospitals 

without available DSH data is largely attributable to payment increases for partial 

hospitalization and group psychotherapy services furnished in the hospital. These 

hospitals are largely non-IPPS psychiatric hospitals. In contrast, payments to CMHCs 

would decrease by an estimated 6.9 percent due primarily to lower payments for APC 

0173 (Level II Partial Hospitalization (4 or more services) for CMHCs). 

(3) Impacts of the Updated Wage Indices 

We estimate no significant impacts related to updating the wage indices and 

applying the frontier State wage index. Adjustments to the wage indices other than the 

frontier State wage adjustment would not significantly affect most hospitals. Overall, 

urban hospitals would experience no change from CY 2012 to CY 2013, and rural 

hospitals would experience payment decreases of approximately 0.2 percent. Urban 

hospitals in the New England and Pacific regions would experience the most significant 

payment changes with a decrease of 1.2 percent in New England and an increase of 1.6 

percent in the Pacific region. 

We estimate that all facilities and all hospitals would experience a combined 

increase of 0.1 percent due to the frontier State wage index, which is not budget neutral. 

The frontier State wage index would only affect hospitals in the West North Central and 
Mountain regions, with rural hospitals in those regions experiencing slightly greater 

percentage payment increases than urban hospitals in those regions. 

(4) Impacts of the Rural Adjustment and the Cancer Hospital Payment Adjustment 

There are no significant impacts of our payment proposals for hospitals that are 

eligible for the proposed rural adjustment or for the proposed cancer hospital payment 

adjustment. We are not proposing any change in policies for determining the rural and 

cancer hospital payment adjustments, and the proposed adjustment amounts do not 

significantly impact the budget neutrality adjustments for these policies. 

(5) Impacts of the OPD Fee Schedule Increase Factor 

We estimate that, for most hospitals, the application of the proposed OPD fee 

schedule increase factor of 2.1 percent to the conversion factor would mitigate the small 

negative impacts of the budget neutrality adjustments. Certain low volume hospitals and 

hospitals for which DSH data are not available would experience larger increases ranging 

from 4.1 percent to 8.3 percent. We estimate that rural and urban hospitals would 

experience similar increases of approximately 2 percent as a result of the proposed OPD 

fee schedule increase factor and other budget neutrality adjustments. Classifying 

hospitals by teaching status or type of ownership suggests that these hospitals would 

receive similar increases. 

b. Impacts of the Proposed ASC Payment Update 

For impact purposes, the surgical procedures on the ASC list of covered 

procedures are aggregated into surgical specialty groups using CPT and HCPCS code 

range definitions. The percentage change in estimated total payments by specialty groups 

under the proposed CY 2013 payment rates compared to estimated CY 2012 payment 
rates range between -2 percent for respiratory system procedures, integumentary system 

procedures, and cardiovascular system procedures to 5 percent for nervous system 

procedures. 

c. Impacts of the Hospital OQR Program 

We do not expect our proposals to significantly affect the number of hospitals that 

do not receive a full annual payment update. 

d. Impacts of the EHR Incentive Program Proposal 

 There are no changes from the 2012 OPPS/ASC final rule to the costs or impact 

for the proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 

Hospitals and CAHs. 

e. Impacts of the ASCQR Program 

We do not expect our proposals to significantly affect the number of ASCs that do 

not receive a full annual payment update beginning in CY 2014. 
B. Legislative and Regulatory Authority for the Hospital OPPS

 When Title XVIII of the Act was enacted, Medicare payment for hospital 

outpatient services was based on hospital-specific costs. In an effort to ensure that 

Medicare and its beneficiaries pay appropriately for services and to encourage more 

efficient delivery of care, the Congress mandated replacement of the reasonable 

cost-based payment methodology with a prospective payment system (PPS). The 

Balanced Budget Act of 1997 (BBA) (Pub. L. 105-33) added section 1833(t) to the Act 

authorizing implementation of a PPS for hospital outpatient services. The OPPS was first 

implemented for services furnished on or after August 1, 2000. Implementing regulations 

for the OPPS are located at 42 CFR Parts 410 and 419. 

 The Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act of 1999 

(BBRA) (Pub. L. 106-113) made major changes in the hospital OPPS. The following 

Acts made additional changes to the OPPS: the Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection Act of 2000 (BIPA) (Pub. L. 106-554); the 

Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) 

(Pub. L. 108-173); the Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171), enacted 

on February 8, 2006; the Medicare Improvements and Extension Act under Division B of 

Title I of the Tax Relief and Health Care Act of 2006 (MIEA-TRHCA) (Pub. L. 

109-432), enacted on December 20, 2006; the Medicare, Medicaid, and SCHIP Extension 

Act of 2007 (MMSEA) (Pub. L. 110-173), enacted on December 29, 2007; the Medicare 

Improvements for Patients and Providers Act of 2008 (MIPPA) (Pub. L. 110-275), 

enacted on July 15, 2008; the Patient Protection and Affordable Care Act 

(Pub. L. 111-148), enacted on March 23, 2010, as amended by the Health Care and 
Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 

(These two public laws are collectively known as the Affordable Care Act.); the 

Medicare and Medicaid Extenders Act of 2010 (MMEA, Pub. L. 111-309); the 

Temporary Payroll Tax Cut Continuation Act of 2011 (TPTCCA, Pub. L. 112-78), 

enacted on December 23, 2011; and most recently the Middle Class Tax Relief and Job 

Creation Act of 2012 (MCTRJCA, Pub. L. 112-96), enacted on February 22, 2012. 

 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 proposed rule. Section 1833(t)(1)(B) of the Act provides 

for payment under the OPPS for hospital outpatient services designated by the Secretary 

(which includes partial hospitalization services furnished by CMHCs) and hospital 

services that are furnished to inpatients who are entitled to Part A and have exhausted 

their Part A benefits, or who are not so entitled. 

 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 

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 composite rate; 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. 

 Under § 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-ServicePayment/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 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 representatives of providers (currently employed full-time, not as 

consultants, in their respective areas of expertise) subject to the OPPS, reviews clinical 

data and advises CMS about the clinical integrity of the APC groups and their payment 

weights. 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). Since its initial chartering, the Secretary has renewed the 

Panel’s charter five times: on November 1, 2002; on November 1, 2004; on 

November 21, 2006; on November 2, 2008 and November 12, 2010. 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 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_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp#TopOfPage.

3. Panel Meetings and Organizational Structure 

 The Panel has held multiple meetings, with the last meeting taking place on 

February 27 - 29, 2012. 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 

(previously known as the Packaging Subcommittee). 

 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 APCs to be assigned to 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 that the 

subcommittees continue at the August 2012 Panel meeting. We accepted this 

recommendation. All subcommittee recommendations are discussed and voted upon by 

the full Panel. 

 Discussions of the other recommendations made by the Panel at the February 

2012 Panel meeting are included in the sections of this proposed rule that are specific to 

each recommendation. For discussions of earlier Panel meetings and recommendations, 

we refer readers to previously published hospital 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 on the CY 2012 OPPS/ASC Final Rule with Comment 

Period

 We received approximately 61 timely pieces of correspondence on the CY 2012 

OPPS/ASC final rule with comment period that appeared in the Federal Register on 

November 24, 2011 (76 FR 74122), some of which contained multiple comments on the 

interim APC assignments and/or status indicators of HCPCS codes identified with 

comment indicator “NI” in Addendum B to that final rule with comment period. We will 
present summaries of those public comments on topics open to comment in the CY 2012 

OPPS/ASC final rule with comment period and our responses to them under the 

appropriate headings. 

II. Proposed Updates Affecting OPPS Payments 

A. Proposed Recalibration of APC Relative Weights

1. Database Construction 

a. Database Source and Methodology 

 Section 1833(t)(9)(A) of the Act requires that the Secretary review not less often 

than annually and revise the relative payment weights for APCs. In the April 7, 2000 

OPPS final rule with comment period (65 FR 18482), we explained in detail how we 

calculated the relative payment weights that were implemented on August 1, 2000 for 

each APC group. 

 For the CY 2013 OPPS, we are proposing to recalibrate the APC relative payment 

weights for services furnished on or after January 1, 2013, and before January 1, 2014 

(CY 2013), using the same basic methodology that we described in the CY 2012 

OPPS/ASC final rule with comment period. That is, we are proposing to recalibrate the 

relative payment weights for each APC based on claims and cost report data for hospital 

outpatient department (HOPD) services, using the most recent available data to construct 

a database for calculating APC group weights. Therefore, for the purpose of recalibrating 

the proposed APC relative payment weights for CY 2013, we used approximately 

141 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, 2011, and before January 1, 2012. For exact counts of 
claims used, we refer readers to the claims accounting narrative under supporting 

documentation for this proposed rule on the CMS Web site at: 

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

 Of the approximately 141 million final action claims for services provided in 

hospital outpatient settings used to calculate the proposed CY 2013 OPPS payment rates, 

approximately 113 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 113 million claims, approximately 5 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 108 million claims, we created approximately 

110 million single records, of which approximately 74 million were “pseudo” single or 

“single session” claims (created from approximately 28 million multiple procedure 

claims using the process we discuss later in this section). Approximately 959,000 claims 

were trimmed out on cost or units in excess of +/- 3 standard deviations from the 

geometric mean, yielding approximately 110 million single bills for ratesetting. As 

described in section II.A.2. of this proposed rule, our data development process is 

designed with the goal of using appropriate cost information in setting the APC relative 

weights. The bypass process is described in section II.A.1.b. of this proposed rule. 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. Ultimately, we were able to use for CY 2013 ratesetting some 

portion of approximately 95 percent of the CY 2011 claims containing services payable 

under the OPPS. 

The proposed APC relative weights and payments for CY 2013 in Addenda A 

and B to this proposed rule (which are available via the Internet on the CMS Web site) 

were calculated using claims from CY 2011 that were processed before January 1, 2012. 

While we have historically based the payments on median hospital costs for services in 

the APC groups, we are proposing to establish the cost-based relative payment weights of 

the CY 2013 OPPS using geometric mean costs, as discussed in section II.A.2.f. of this 

proposed rule. Therefore, on the CMS Web site, along with Addenda A and B, we are 

providing a file that presents payment information for the proposed CY 2013 OPPS 

payments based on geometric mean costs compared to those based on median costs. 

Under the proposed 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 2013 payment rates. 

b. Proposed Use of Single and Multiple Procedure Claims 

 For CY 2013, in general, we are proposing to continue to use single procedure 

claims to set the costs on which the APC relative payment weights would be 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 proposing to continue 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 enabled 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 2012 OPPS/ASC final rule with comment period (76 FR 74132 

through 74134). In addition, for CY 2008, we increased packaging and created the first 

composite APCs, and continued those policies through CY 2012. 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 2012, and are 

proposing to continue this policy for CY 2013. We refer readers to section II.A.2.e. of 

this proposed rule for a discussion of the use of claims in modeling the costs for 

composite APCs. 

 We are proposing to continue to apply these processes to enable us to use as much 

claims data as possible for ratesetting for the CY 2013 OPPS. This methodology enabled 

us to create, for this proposed rule, approximately 74 million “pseudo” single procedure 

claims, including multiple imaging composite “single session” bills (we refer readers to 

section II.A.2.e.(5) of this proposed rule for further discussion), to add to the 

approximately 36 million “natural” single procedure claims. For this proposed rule, 

“pseudo” single procedure and “single session” procedure bills represented 

approximately 67 percent of all single procedure bills used for ratesetting purposes. 

 For CY 2013, we are proposing to bypass 480 HCPCS codes that are identified in 

Addendum N to this 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 2013, data available for the February 27, 2012 meeting of the 
Advisory Panel on Hospital Outpatient Payment (the Panel) from CY 2011 claims 

processed through September 30, 2011, and CY 2010 claims data processed through June 

30, 2011, used to model the payment rates for CY 2012) to determine whether it would 

be appropriate to propose to add additional codes to the previous year’s bypass list. For 

CY 2013, we are proposing to continue to bypass all of the HCPCS codes on the 

CY 2012 OPPS bypass list, with the exception of HCPCS codes that we are proposing to 

be deleted for CY 2013, which are listed in Table 1 of this proposed rule. We also are 

proposing 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. We also are proposing to add to the bypass list for CY 2013 HCPCS codes 

not on the CY 2012 bypass list that, using either the CY 2012 final rule data (CY 2010 

claims) or the February 27, 2012 Panel data (first 9 months of CY 2011 claims), met the 

empirical criteria for the bypass list that are summarized below. Finally, to remain 

consistent with the CY 2013 proposal to develop OPPS relative payment weights based 

on geometric mean costs, we are proposing that the median cost of packaging criterion 

instead be based on the geometric mean cost of packaging. The entire list proposed for 

CY 2013 (including the codes that remain on the bypass list from prior years) is open to 

public comment. 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. The proposed 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 we are proposing to establish the CY 2013 OPPS relative payment 

weights based on geometric mean costs. To remain consistent in the metric used for 

identifying cost patterns, we are proposing to use the geometric mean cost of packaging 

to identify potential codes to add to the bypass list. The proposal to develop the CY 2013 

OPPS relative payment weights based on geometric mean costs is discussed in greater 

detail in section II.A.2.f. of this proposed rule. 

In response to comments to 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. 

We are proposing for CY 2013, based on the same rationale described for the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74133), to continue to update the 

packaged cost threshold by the market basket increase. By applying the final CY 2012 

market basket increase of 1.90 percent to the prior non-rounded dollar threshold of 

$52.76 (76 FR 74133), we determined that the threshold remains for CY 2013 at $55 

($53.76 rounded to $55, the nearest $5 increment). Therefore, we are proposing to set the 

geometric mean packaged cost threshold on the CY 2011 claims at $55 for a code to be 

considered for addition to the CY 2013 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 are proposing 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 2013 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 are proposing 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) and the CPT codes for additional 

hours of drug administration to the bypass list (73 FR 68513 and 71 FR 68117 through 

68118). 

 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 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 proposed 

rule 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 
proposed multiple imaging composite APCs are identified by asterisks (*) in Addendum 

N to this proposed rule (which is available via the Internet on the CMS Web site). 

 Addendum N to this proposed rule includes the proposed list of bypass codes for 

CY 2013. The list of bypass codes contains codes that were reported on claims for 

services in CY 2011 and, therefore, includes codes that were in effect in 2011 and used 

for billing but were deleted for CY 2012. We retained these deleted bypass codes on the 

proposed CY 2013 bypass list because these codes existed in CY 2011 and were covered 

OPD services in that period, and CY 2011 claims data are used to calculate CY 2013 

payment rates. Keeping these deleted bypass codes on the bypass list potentially allows 

us to create more “pseudo” single procedure claims for ratesetting purposes. “Overlap 

bypass codes” that were members of the proposed multiple imaging composite APCs are 

identified by asterisks (*) in the third column of Addendum N to this proposed rule. 

HCPCS codes that we are proposing to add for CY 2013 are identified by asterisks (*) in 

the fourth column of Addendum N. 

 Table 1 below contains the list of codes that we are proposing to remove from the 

CY 2013 bypass list because these codes were either deleted from the HCPCS before 

CY 2011 (and therefore were not covered OPD services in CY 2011) or were not 

separately payable codes under the proposed CY 2013 OPPS because these codes are not 

used for ratesetting (and therefore would not need to be bypassed). None of these 

proposed deleted codes are “overlap bypass” codes. 

TABLE 1.—HCPCS CODES PROPOSED TO BE REMOVED FROM THE 

CY 2013 BYPASS LIST 

HCPCS 

Code HCPCS Short Descriptor 
HCPCS 

Code HCPCS Short Descriptor 

76880 Us exam, extremity 

86903 Blood typing, antigen screen 

92135 Ophth dx imaging post seg 

93231 Ecg monitor/record, 24 hrs 

93232 ECG monitor/report, 24 hrs 

93236 ECG monitor/report, 24 hrs 

c. Proposed Calculation and Use of Cost-to-Charge Ratios (CCRs) 

For CY 2013, we are proposing to continue to use the hospital-specific overall 

ancillary and departmental 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 2013 APC payment rates are based, we calculated hospitalspecific overall ancillary CCRs and hospital-specific departmental CCRs for each 

hospital for which we had CY 2011 claims data from the most recent available hospital 

cost reports, in most cases, cost reports beginning in CY 2010. For the CY 2013 OPPS 

proposed rates, we used the set of claims processed during CY 2011. 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 2011 (the year of the claims data we 

used to calculate the proposed CY 2013 OPPS payment rates) and found that the National 
Uniform Billing Committee (NUBC) did not add any new revenue codes to the NUBC 

2011 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 proposed rule 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 for hospitals that filed outpatient claims in CY 2011 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, in most cases, cost reports with cost reporting periods 

beginning in CY 2010. For this proposed rule, we used the most recently submitted cost 

reports to calculate the CCRs to be used to calculate costs for the proposed CY 2013 

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 in this section of this proposed rule for all 

purposes that require use of an overall ancillary CCR. We are proposing to continue this 

longstanding methodology for the calculation of costs for CY 2013. 

 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 

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,” public comments, and our responses, 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 order to develop 

a robust analysis regarding the use of cost data from the “Implantable Devices Charged to 

Patients” cost center, we believe that it is necessary to have a critical mass of cost reports 

filed with data in this cost center. In preparation for the CY 2013 OPPS/ASC proposed 

rule, we assessed the availability of data in the “Implantable Devices Charged to 
Patients” cost center using cost reports in the December 31, 2011 quarter ending update 

of HCRIS, which was the latest upload of the cost report data that we could use for the 

CY 2013 proposed rule. We determined that 2,063 hospitals, out of approximately 3,800 

hospitals, utilized the “Implantable Devices Charged to Patients” cost center, and we 

believe that this is a sufficient amount of data from which to generate a meaningful 

analysis. Therefore, we are proposing to use data from the “Implantable Devices 

Charged to Patients” cost center to create a distinct CCR for use in calculating the OPPS 

relative weights for CY 2013. Table 2 below contains a list of APCs that had either a 

greater than or less than 3.0 percentage point change in cost when the “Implantable 

Devices Charged to Patients” cost center is used to create a distinct CCR compared to a 

CCR created from the combination of the “Medical Supplies Charged to Patients” and the 

“Implantable Devices Charged to Patients” cost centers as was used in the CY 2012 

OPPS/ASC final rule with comment period. 

TABLE 2.--PERCENTAGE CHANGE IN APC COST WHEN THE 

“IMPLANTABLE DEVICES CHARGED TO PATIENTS” COST CENTER IS 

USED TO CREATE DISTINCT CCR 

APC APC Descriptor 

Percentage 

Change in Cost 

0654 Level II Insertion/Replacem of Permanent Pacemaker 6.99% 

0315 Level II Implantation of Neurostimulator Generator 5.71% 

0227 Implantation of Drug Infusion Device 5.65% 

0386 Level II Prosthetic Urological Procedures 4.92% 

0107 Insertion of Cardioverter-Defibrillator Pulse Generat 4.89% 

0089 Insertion/Replace of Perm Pacemaker and Electrodes 4.71% 

0108 Insertion/Replace/Repair of Cardioverter-Defibr Sys 4.42% 

0039 Level I Implantation of Neurostimulator Generator 4.35% 

0655 Insert/Replac/Conv of a Perm Dual Cham Pacemaker 4.20% 

0680 Insertion of Patient Activated Event Recorders 3.77% 

0090 Level I Insertion/Replacem of Permanent Pacemaker 3.68% 

0318 Implanta of Neurostimulator Pulse Gen and Electrode 3.64% 
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 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, MRI, 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 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 

0106 Insert/Replac of Pacemaker Leads and/or Electrodes 3.10% 

0387 Level II Hysteroscopy -3.16% 

0100 Cardiac Stress Tests -3.20% 

0269 Level II Echocardiogram Without Contrast -3.21% 

8002 Level I Extended Assess & Management Composite -3.31% 

0101 Tilt Table Evaluation -3.34% 

0142 Level I Small Intestine Endoscopy -3.49% 

0084 Level I Electrophysiologic Procedures -3.61% 

8000 Cardiac Electrophysiologic Eval and Ablation Compo -3.69% 

0165 Level IV Urinary and Anal Procedures -3.73% 

0270 Level III Echocardiogram Without Contrast -3.73% 

0679 Level II Resuscitation and Cardioversion -3.76% 

0174 Level IV Laparoscopy -3.78% 

0659 Hyperbaric Oxygen -4.01% 

0085 Level II Electrophysiologic Procedures -4.15% 

0111 Blood Product Exchange -4.27% 

0381 Single Allergy Tests -5.10% 

0370 Multiple Allergy Tests -7.46% 

0012 Level I Debridement & Destruction -8.15% 

0251 Level II ENT Procedures -8.46% 
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 are effective 

for cost report periods beginning on or after May 1, 2010, on the revised cost report Form 

CMS-2552-10. However, because cost reports that were filed on the revised cost report 

Form CMS-2552-10 are not currently accessible in the HCRIS, we were unable to 

calculate distinct CCRs for CT scans, MRI, and cardiac catheterization using the new 

standard cost centers for these services. We believe that we will have cost report data 

available for an analysis of creating distinct CCRs for CT scans, MRIs, and cardiac 

catheterization for the CY 2014 OPPS rulemaking. 

We believe that improved cost report software, the incorporation of new standard 

and nonstandard cost centers, and the elimination of outdated requirements will improve 

the accuracy of the cost data contained in the electronic cost report data files and, 

therefore, the accuracy of our cost estimation processes for the OPPS relative weights. 

We will continue our standard practice of examining ways in which we can improve the 

accuracy of our cost estimation processes. 

2. Proposed Data Development Process and Calculation of Costs Used for Ratesetting 

 In this section of this proposed rule, we discuss the use of claims to calculate 

OPPS payment rates for CY 2013. The Hospital OPPS page on our Web site on which 

this proposed rule is posted (http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html) provides an accounting of claims used in 

the development of the proposed payment rates. That accounting provides additional 
detail regarding the number of claims derived at each stage of the process. In addition, 

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. Our Web site, 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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 2011 claims that 

were used to calculate the proposed payment rates for the CY 2013 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 most 

recently 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 this proposed 

rule, we are proposing to use geometric mean costs to calculate the proposed relative 

weights on which the proposed CY 2013 OPPS payment rates are based. While this 

proposal would change the cost metric on which the relative payments are based, the data 

process in general would remain the same, under the methodologies that we use to obtain 

appropriate claims data and accurate cost information in determining estimated service 

cost. 

 We used the methodology described in sections II.A.2.a. through II.A.2.e. of this 

proposed rule to calculate the geometric mean costs we use to establish the proposed 

relative weights used in calculating the proposed OPPS payment rates for CY 2013 

shown in Addenda A and B to this proposed rule (which are available via the Internet on 
the CMS Web site). We note that we are providing a file comparing the CY 2013 

proposed payments under the geometric mean cost-based OPPS, relative to what they 

would be under a CY 2013 median-based OPPS. We are providing this file so that the 

public can provide meaningful comment on our proposal to base the CY 2013 OPPS 

relative payment weights on geometric mean costs. We refer readers to section II.A.4. of 

this proposed rule for a discussion of the conversion of APC geometric mean costs to 

scaled payment weights. 

a. Claims Preparation 

 For this proposed rule, we used the CY 2011 hospital outpatient claims processed 

before January 1, 2012, to calculate the geometric mean costs of APCs that underpin the 

proposed relative weights for CY 2013. To begin the calculation of the proposed relative 

weights for CY 2013, we pulled all claims for outpatient services furnished in CY 2011 

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 services for persons who are neither 

inpatients nor outpatients of the hospital). 

 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 113 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 proposed rule. 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 and comment on 

our Web site: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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 nothing but influenza and pneumococcal pneumonia (PPV) 

vaccines. Influenza and PPV vaccines are paid at reasonable cost and, 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. 

In the past several years, we have developed payment policy for nonpass-through 

separately paid drugs and biologicals based on a redistribution methodology that accounts 

for pharmacy overhead by allocating cost from packaged drugs to separately paid drugs. 

This 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 are 

proposing to pay 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. Therefore, under this proposal, we would not redistribute the packaged cost. 

We refer readers to section V.B.3. of this proposed rule for a complete discussion of our 

proposed policy to pay for separately paid drugs and biologicals in CY 2013. 
 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 proposed to come off the inpatient list for 

CY 2012 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 2013, we are proposing to continue the policy we implemented for 

CY 2012 to exclude line-item data for pass-through drugs and biologicals (status 

indicator “G” for CY 2011) and nonpass-through drugs and biologicals (status indicator 

“K” for CY 2011) 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 2012 OPPS/ASC final rule with comment period (76 FR 74141) of 

line-items with a status indicator of “S,” “T,” “V,” or “X,” we believe that unpaid lineitems 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. 

b. Splitting Claims and Creation of “Pseudo” Single Procedure Claims 

(1) Splitting Claims 

 For the CY 2013 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 follow below.) For CY 2013, we are proposing to 

continue our current policy of defining major procedures as any HCPCS code having a 

status indicator of “S,” “T,” “V,” or “X;” 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 2013, we are proposing to continue assigning 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. We are proposing to treat these codes 

in the same manner for data purposes for CY 2013 as we have treated them since 

CY 2008. Specifically, we are proposing to continue 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.e. of 

this proposed rule. 

 Specifically, we are proposing to divide 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. 

 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 or clinical 

laboratory tests, 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 proposed rule, depending on the specific composite calculation. 

(2) Creation of “Pseudo” Single Procedure Claims 

 To develop “pseudo” single procedure claims for this proposed rule, 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). 

We also are proposing to use the bypass codes listed in Addendum N to this 

proposed rule (which is available via the Internet on our Web site) and discussed in 

section II.A.1.b. of this proposed rule 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 proposed CY 2013 “overlap 

bypass codes” are listed in Addendum N to this proposed rule (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. Where 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 proposed criteria for the multiple 

imaging composite APCs, discussed in section II.A.2.e.(5) of this proposed rule, were 

met. Where 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 proposed CY 2013 OPPS payment would be 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. 

 We also are proposing to examine 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 2012 relative weight, 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 2012 relative weight to create a “pseudo” single procedure claim for that code: 

additional units of the status indicator “Q1” HCPCS code with the highest CY 2012 

relative 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, where 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 2012 relative weight, 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 2012 relative weight to create a “pseudo” single procedure claim for that code: 

additional units of the status indicator “Q2” HCPCS code with the highest CY 2012 

relative weight; other codes with status indicator “Q2”; and other packaged HCPCS 

codes and packaged revenue 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. 

 Where 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 

weight for CY 2012 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 2012 relative 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 favor status indicator 

“Q2” over “Q1” HCPCS codes because “Q2” HCPCS codes have higher CY 2012 

relative weights. If a status indicator “Q1” HCPCS code had a higher CY 2011 relative 

weight, it would become 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 proposed 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, where they meet the 

criteria for single procedure claims. Conditionally packaged codes are identified using 
status indicators “Q1” and “Q2,” and are described in section XII.A.1. of this proposed 

rule. 

 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 are proposing to continue to apply this methodology for the purpose of 

creating pseudo single procedure claims for the CY 2013 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 proposed rule (which is referenced in 

section XIX. of this proposed rule and 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 3 below that appeared on the claim without a HCPCS code into the cost of the 

single major procedure remaining on the claim. 

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, we are proposing to continue to compare the final list of packaged revenue codes 

that we adopt for CY 2013 to the revenue codes that the I/OCE will package for CY 2013 

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 proposed 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 to the CY 2010 proposed list of packaged revenue 

codes. 

 For CY 2013, as we did for CY 2012, we reviewed the changes to revenue codes 

that were effective during CY 2011 for purposes of determining the charges reported with 

revenue codes but without HCPCS codes that we would propose to package for CY 2013. 

We believe that the charges reported under the revenue codes listed in Table 3 below 

continue to reflect ancillary and supportive services for which hospitals report charges 

without HCPCS codes. Therefore, for CY 2013, we are proposing to continue to package 

the costs that we derive from the charges reported without HCPCS code under the 

revenue codes displayed in Table 3 below for purposes of calculating the geometric mean 

costs on which the proposed CY 2013 OPPS/ASC payment rates are based. 
TABLE 3.—PROPOSED CY 2013 PACKAGED REVENUE CODES 

Revenue 

Code Description 

0250 Pharmacy; General Classification 

0251 Pharmacy; Generic Drugs 

0252 Pharmacy; Non-Generic Drugs 

0254 Pharmacy; Drugs Incident to Other Diagnostic Services 

0255 Pharmacy; Drugs Incident to Radiology 

0257 Pharmacy; Non-Prescription 

0258 Pharmacy; IV Solutions 

0259 Pharmacy; Other Pharmacy 

0260 IV Therapy; General Classification 

0261 IV Therapy; Infusion Pump 

0262 IV Therapy; IV Therapy/Pharmacy Svcs 

0263 IV Therapy; IV Therapy/Drug/Supply Delivery 

0264 IV Therapy; IV Therapy/Supplies 

0269 IV Therapy; Other IV Therapy 

0270 Medical/Surgical Supplies and Devices; General Classification 

0271 Medical/Surgical Supplies and Devices; Non-sterile Supply 

0272 Medical/Surgical Supplies and Devices; Sterile Supply 

0275 Medical/Surgical Supplies and Devices; Pacemaker 

0276 Medical/Surgical Supplies and Devices; Intraocular Lens 

0278 Medical/Surgical Supplies and Devices; Other Implants 

0279 Medical/Surgical Supplies and Devices; Other Supplies/Devices 

0280 Oncology; General Classification 

0289 Oncology; Other Oncology 

0343 Nuclear Medicine; Diagnostic Radiopharmaceuticals 

0344 Nuclear Medicine; Therapeutic Radiopharmaceuticals 

0370 Anesthesia; General Classification 

0371 Anesthesia; Anesthesia Incident to Radiology 

0372 Anesthesia; Anesthesia Incident to Other DX Services 

0379 Anesthesia; Other Anesthesia 

0390 

Administration, Processing and Storage for Blood and Blood Components; 

General Classification 

0392 

Administration, Processing and Storage for Blood and Blood Components; 

Processing and Storage 

0399 

Administration, Processing and Storage for Blood and Blood Components; 

Other Blood Handling 
Revenue 

Code Description 

0621 

Medical Surgical Supplies – Extension of 027X; Supplies Incident to 

Radiology 

0622 

Medical Surgical Supplies – Extension of 027X; Supplies Incident to Other 

DX Services 

0623 Medical Supplies – Extension of 027X, Surgical Dressings 

0624 Medical Surgical Supplies – Extension of 027X; FDA Investigational Devices

0630 Pharmacy – Extension of 025X; Reserved 

0631 Pharmacy – Extension of 025X; Single Source Drug 

0632 Pharmacy – Extension of 025X; Multiple Source Drug 

0633 Pharmacy – Extension of 025X; Restrictive Prescription 

0681 Trauma Response; Level I Trauma 

0682 Trauma Response; Level II Trauma 

0683 Trauma Response; Level III Trauma 

0684 Trauma Response; Level IV Trauma 

0689 Trauma Response; Other 

0700 Cast Room; General Classification 

0710 Recovery Room; General Classification 

0720 Labor Room/Delivery; General Classification 

0721 Labor Room/Delivery; Labor 

0732 EKG/ECG (Electrocardiogram); Telemetry 

0762 Specialty services; Observation Hours 

0801 Inpatient Renal Dialysis; Inpatient Hemodialysis 

0802 Inpatient Renal Dialysis; Inpatient Peritoneal Dialysis (Non-CAPD) 

0803 

Inpatient Renal Dialysis; Inpatient Continuous Ambulatory Peritoneal 

Dialysis (CAPD) 

0804 

Inpatient Renal Dialysis; Inpatient Continuous Cycling Peritoneal Dialysis 

(CCPD) 

0809 Inpatient Renal Dialysis; Other Inpatient Dialysis 

0810 Acquisition of Body Components; General Classification 

0819 Inpatient Renal Dialysis; Other Donor 

0821 Hemodialysis-Outpatient or Home; Hemodialysis Composite or Other Rate 

0824 Hemodialysis-Outpatient or Home; Maintenance – 100% 

0825 Hemodialysis-Outpatient or Home; Support Services 
Revenue 

Code Description 

0829 Hemodialysis-Outpatient or Home; Other OP Hemodialysis 

0942 

Other Therapeutic Services (also see 095X, an extension of 094x); 

Education/Training 

0943 

Other Therapeutic Services (also see 095X, an extension of 094X), Cardiac 

Rehabilitation 

0948 

Other Therapeutic Services (also see 095X, an extension of 094X), 

Pulmonary Rehabilitation 

 In accordance with our longstanding policy, we are proposing 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 MAC was required to allocate the sum of charges for services with a 

status indicator equaling “S” or “T” based on the relative 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 are proposing to continue these processes for the CY 2013 

OPPS. 

 For the remaining claims, we are proposing 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 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 are proposing 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 are proposing 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 108 million claims were left. Using these 

approximately 108 million claims, we created approximately 110 million single and 

“pseudo” single procedure claims, of which we used slightly more than 110 million 

single bills (after trimming out approximately 959,000 claims as discussed in section 

II.A.1.a. of this proposed rule) in the CY 2013 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 

are proposing to calculate the APC relative weights using geometric mean costs, and 

therefore the following discussion of the two times rule and relative weight development 

refers to geometric means. For more detail about the CY 2013 OPPS/ASC proposal to 

calculate relative payment weights based on geometric means, we refer readers to section 

II.A.2.f. of this proposed rule. 

We are proposing to use these claims to calculate the proposed CY 2013 

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, as part of the CY 2013 proposal to develop the OPPS relative 

payment weights based on geometric mean costs, we also are proposing to apply the 

2 times rule based on geometric mean costs. For a detailed discussion of the CY 2013 

proposal to develop the APC relative payment weights based on geometric mean costs, 

we refer readers to section II.A.2.f. of this proposed rule. 

We note that, for purposes of identifying significant HCPCS 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 100 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 CY 2013 proposal 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 system. 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 are proposing to pay separately under this proposed rule, and we 

reassigned HCPCS codes to different APCs where it was necessary to ensure clinical and 

resource homogeneity within the APCs. Section III. of this proposed rule includes a 

discussion of many of the HCPCS code assignment changes that resulted from 

examination of the geometric mean costs and for other reasons. 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. 

 As we discuss in sections II.A.2.d. and II.A.2.e. and in section VIII.B. of this 

proposed rule, in some cases, APC geometric mean costs are calculated using variations 

of the process outlined above. Specifically, section II.A.2.d. of this proposed rule 

addresses the calculation of single APC criteria-based geometric mean costs. Section 

II.A.2.e. of this proposed rule discusses the calculation of composite APC criteria-based 

geometric mean costs. Section VIII.B. of this proposed rule addresses the methodology 

for calculating the geometric mean costs for partial hospitalization services. 

(2) Recommendations of the Advisory Panel on Hospital Outpatient Payment Regarding 

Data Development 

 At the February 27–28, 2012 meeting of the Advisory Panel on Hospital 

Outpatient Payment (the Panel), we provided the Data Subcommittee with a list of all 

APCs fluctuating by greater than 10 percent when comparing the CY 2012 OPPS final 

rule median costs based on CY 2010 claims processed through June 30, 2011, to those 

based on CY 2011 OPPS/ASC final rule data (CY 2009 claims processed through 

June 30, 2010). The Data Subcommittee reviewed the fluctuations in the APC median 

costs but did not express particular concerns with the median cost changes. 

 At the February 27-28, 2012 Panel meeting, the Panel made a number of 

recommendations related to the data process. The Panel’s recommendations and our 

responses follow. 

Recommendation 1: The Panel recommends that the work of the Data 

Subcommittee continue. 
CMS Response to Recommendation 1: We are accepting this recommendation. 

Recommendation 2: The Panel recommends that Kari S. Cornicelli, C.P.A., 

FHFMA, serve as acting chairperson for the winter 2012 meeting of the Data 

Subcommittee. 

 CMS Response to Recommendation 2: We are accepting this recommendation. 

d. Proposed Calculation of Single Procedure APC Criteria-Based Costs 

(1) Device-Dependent APCs 

 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. 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). 

For CY 2013, we are proposing to use the standard methodology for calculating 

costs for device-dependent APCs that was finalized in the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74148 through 74151). This methodology utilizes claims 

data that generally represent the full cost of the required device and the most recent cost 

report data. Specifically, we are proposing to calculate the costs for device-dependent 

APCs for CY 2013 using only the subset of single procedure claims from CY 2011 
claims data 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. The procedure-to-device edits require that when a 

particular procedural HCPCS code is billed, the claim must also contain an appropriate 

device code, while the device-to-procedure edits require that a claim that contains one of 

a specified set of device codes also contain an appropriate procedure code. We continue 

to believe the standard methodology for calculating costs for device-dependent APCs 

gives us the most appropriate costs for device-dependent APCs in which the hospital 

incurs the full cost of the device. 

Table 4A below lists the APCs for which we are proposing to use our standard 

device-dependent APC ratesetting methodology for CY 2013. We refer readers to 

Addendum A to this proposed rule (which is available via the Internet on the CMS Web 

site) for the proposed payment rates for these device-dependent APCs for CY 2013. 

TABLE 4A.—PROPOSED CY 2013 DEVICE-DEPENDENT APCs 

Proposed

CY 2013 

APC 

Proposed 

CY 2013 

Status 

Indicator 

Proposed CY 2013 APC Title 

0039 S Level I Implantation of Neurostimulator Generator 

0040 S 

Level I Implantation/Revision/Replacement of 

Neurostimulator Electrodes 

0061 S 

Level II Implantation/Revision/Replacement of 

Neurostimulator Electrodes 

0082 T Coronary or Non-Coronary Atherectomy 

0083 T Coronary Angioplasty, Valvuloplasty, and Level I 
Proposed

CY 2013 

APC 

Proposed 

CY 2013 

Status 

Indicator 

Proposed CY 2013 APC Title 

Endovascular Revascularization of the Lower Extremity 

0084 S Level I Electrophysiologic Procedures 

0085 T Level II Electrophysiologic Procedures 

0086 T Level III Electrophysiologic Procedures 

0089 T 

Insertion/Replacement of Permanent Pacemaker and 

Electrodes 

0090 T Insertion/Replacement of Pacemaker Pulse Generator 

0104 T Transcatheter Placement of Intracoronary Stents 

0106 T 

Insertion/Replacement of Pacemaker Leads and/or 

Electrodes 

0107 T Insertion of Cardioverter-Defibrillator 

0108 T 

Insertion/Replacement/Repair of AICD Leads, Generator, 

and Pacing Electrodes 

0115 T Cannula/Access Device Procedures 

0202 T Level VII Female Reproductive Procedures 

0227 T Implantation of Drug Infusion Device 

0229 T 

Level II Endovascular Revascularization of the Lower 

Extremity 

0259 T Level VII ENT Procedures 

0293 T Level V Anterior Segment Eye Procedures 

0315 S Level II Implantation of Neurostimulator Generator 

0318 S 

Implantation of Cranial Neurostimulator Pulse Generator 

and Electrode 

0319 T 

Level III Endovascular Revascularization of the Lower 

Extremity 

0384 T GI Procedures with Stents 

0385 S Level I Prosthetic Urological Procedures 

0386 S Level II Prosthetic Urological Procedures 

0425 T Level II Arthroplasty or Implantation with Prosthesis 

0427 T Level II Tube or Catheter Changes or Repositioning 

0622 T Level II Vascular Access Procedures 

0623 T Level III Vascular Access Procedures 

0648 T Level IV Breast Surgery 

0652 T Insertion of Intraperitoneal and Pleural Catheters 
Proposed

CY 2013 

APC 

Proposed 

CY 2013 

Status 

Indicator 

Proposed CY 2013 APC Title 

0653 T Vascular Reconstruction/Fistula Repair with Device 

0654 T 

Insertion/Replacement of a Permanent Dual Chamber 

Pacemaker 

0655 T 

Insertion/Replacement/Conversion of a Permanent Dual 

Chamber Pacemaker or Pacing Electrode 

0656 T 

Transcatheter Placement of Intracoronary Drug-Eluting 

Stents 

0674 T Prostate Cryoablation 

0680 S Insertion of Patient Activated Event Recorders 

(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. 

For CY 2013, we are proposing 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 are proposing 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 calculated the costs upon which the proposed CY 2013 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 note that we used geometric mean unit costs for each blood and blood 

product to calculate the proposed payment rates, consistent with the methodology 

proposed for other items and services, discussed in section II.A.2.f. of this proposed rule. 

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 believe that continuing with this 

methodology in CY 2013 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 refer readers to Addendum B to this proposed rule (which is available via the 

Internet on the CMS Web site) for the proposed CY 2013 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) Endovascular Revascularization of the Lower Extremity (APCs 0083, 0229, 

and 0319) 

For the CY 2011 update, the AMA’s CPT Editorial Panel created 16 new CPT 

codes in the Endovascular Revascularization section of the 2011 CPT codebook to 

describe endovascular revascularization procedures of the lower extremity performed for 

occlusive disease. In the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71841 through 71845), we discussed the process and methodology by which we 

assigned the CY 2011 endovascular revascularization CPT codes to APCs that we believe 

are comparable with respect to clinical characteristics and resources required to furnish 

the services. Specifically, we were able to use the existing CY 2009 hospital outpatient 

claims data and the most recent cost report data to create simulated costs for 12 of the 16 

new separately payable codes for CY 2011. Because the endovascular revascularization 

CPT codes were new for CY 2011, we used our CY 2009 single and “pseudo” single 

claims data to simulate the new CY 2011 CPT code definitions. As shown in Table 7 of 
the CY 2011 OPPS/ASC final rule with comment period (75 FR 71844), many of the new 

endovascular revascularization CPT codes were previously reported using a combination 

of CY 2009 CPT codes. In order to simulate costs, we selected claims that we believe 

met the definition for each of the new endovascular revascularization CPT codes. 

Table 7 showed the criteria we applied to select a claim to be used in the calculation of 

the costs for the new codes (shown in Column A). As we stated in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 71842), we developed these criteria 

based on our clinicians’ understanding of services that were reported by the CY 2009 

CPT codes that, in various combinations, reflect the services provided that are described 

by the new CPT codes for CY 2011. 

After determining the simulated costs for the procedures, we assigned each CPT 

code to appropriate APCs based on their clinical homogeneity and resource use. Of the 

16 new codes, we assigned 9 CPT codes to APC 0083 (Coronary or Non-Coronary 

Angioplasty and Percutaneous Valvuloplasty) and 5 CPT codes to APC 0229 

(Transcatheter Placement of Intravascular Shunts), and created new APC 0319 

(Endovascular Revascularization of the Lower Extremity) for 2 CPT codes. Table 8 of 

the CY 2011 OPPS/ASC final rule with comment period (75 FR 71845) displayed their 

final CY 2011 APC assignments and CPT costs. We noted that, because these CPT 

codes were new for CY 2011, they were identified with comment indicator “NI” in 

Addendum B to the CY 2011 OPPS/ASC final rule with comment period to identify them 

as a new interim APC assignment for CY 2011 and subject to public comment. We 

specifically requested public comment on our methodology for simulating the costs for 
these new CY 2011 CPT codes in addition to public comments on the payment rates 

themselves (75 FR 71845). 

As stated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74156), for CY 2012, we continued to use the CY 2011 methodology in 

determining the APC assignments for the CPT codes that describe endovascular 

revascularization of the lower extremity. Because previous endovascular 

revascularization CPT codes were in existence prior to CY 2011 and assigned to 

designated APCs, we continued to use existing hospital outpatient claims and cost report 

data from established codes to simulate estimated costs for the endovascular 

revascularization CPT codes in determining the appropriate APC assignments for 

CY 2012, as we did for CY 2011. In the CY 2012 OPPS/ASC final rule with comment 

period, we also revised the title of APC 0083 from “Coronary or Non-Coronary 

Angioplasty and Percutaneous Valvuloplasty” to “Coronary Angioplasty, Valvuloplasty, 

and Level I Endovascular Revascularization of the Lower Extremity”; the title of 

APC 0229 from “Transcatheter Placement of Intravascular Shunts and Stents” to “Level 

II Endovascular Revascularization of the Lower Extremity”; and the title of APC 0319 

from “Endovascular Revascularization of the Lower Extremity” to “Level III 

Endovascular Revascularization of the Lower Extremity”. 

Because the endovascular revascularization of the lower extremity CPT codes 

were new for CY 2011, CY 2013 is the first year of claims data that are available for 

ratesetting for these specific CPT codes. For CY 2013, review of the procedures with 

significant claims data in APCs 0083, 0229, and 0319 shows no 2 times rule violation in 

these APCs. We believe that the endovascular revascularization CPT codes in APCs 
0083, 0229, and 0319 continue to be appropriately placed based on clinical homogeneity 

and resource costs. Therefore, for CY 2013, we are proposing to continue to assign the 

endovascular revascularization CPT codes to APCs 0083, 0229, and 0319, as listed in 

Table 4B below. 

TABLE 4B.—PROPOSED APCs TO WHICH ENDOVASCULAR 

REVASCULARIZATION OF THE LOWER EXTREMITY CPT CODES WOULD 

BE ASSIGNED FOR CY 2013 

CY 

2012 

CPT 

Code 

CY 2012 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

37220 Iliac revasc T 0083 T 0083 

37221 Iliac revasc w/stent T 0229 T 0229 

37222 Iliac revasc add-on T 0083 T 0083 

37223 Iliac revasc w/stent add-on T 0083 T 0083 

37224 Fem/popl revas w/tla T 0083 T 0083 

37225 Fem/popl revas w/ather T 0229 T 0229 

37226 Fem/popl revasc w/stent T 0229 T 0229 

37227 Fem/popl revasc stnt & ather T 0319 T 0319 

37228 Tib/per revasc w/tla T 0083 T 0083 

37229 Tib/per revasc w/ather T 0229 T 0229 

37230 Tib/per revasc w/stent T 0229 T 0229 

37231 Tib/per revasc stent & ather T 0319 T 0319 

37232 Tib/per revasc add-on T 0083 T 0083 

37233 Tibper revasc w/ather add-on T 0229 T 0229 

37234 Revsc opn/prq tib/pero stent T 0083 T 0083 

37235 Tib/per revasc stnt & ather T 0083 T 0083 

(4) Non-Congenital Cardiac Catheterization (APC 0080) 

For CY 2011, the AMA’s CPT Editorial Panel restructured the Cardiac 

Catheterization section of the CPT codebook so that combinations of services that were 

previously reported using multiple codes are now reported with one CPT code. This 
revision deleted several non-congenital cardiac catheterization-related CPT codes from 

the 93500 series and created new CPT codes in the 93400 series and in the 93500 series. 

We discussed these coding changes in detail in the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 71846 through 71849), along with the process by which we 

assigned the new CPT codes to APCs that we believe are comparable with respect to 

clinical characteristics and resources required to furnish the cardiac catheterization 

services described by the new CPT codes. As discussed in that final rule with comment 

period, we were able to use the existing CY 2009 hospital outpatient claims data and the 

most recent cost report data to create simulated costs for the new separately payable CPT 

codes for CY 2011. Specifically, to estimate the hospital costs associated with the 20 

new non-congenital cardiac catheterization-related CPT codes based on their CY 2011 

descriptors, we used claims and cost report data from CY 2009. Because of the 

substantive coding changes associated with the new non-congenital cardiac 

catheterization-related CPT codes for CY 2011, we used our CY 2009 single and 

“pseudo” single claims data to simulate the new CY 2011 CPT code definitions. We 

stated that many of the new CPT codes were previously reported using multiple CY 2009 

CPT codes, and we provided a crosswalk of the new CY 2011 cardiac catheterization 

CPT codes mapped to the CY 2009 cardiac catheterization CPT codes in Table 11 of the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 71849). Table 11 showed 

the criteria we applied to select a claim to be used in the calculation of the cost for the 

new codes (shown in Column A). As we stated in the CY 2011 OPPS/ASC final rule 

with comment period (75 FR 71847 through 71848), we developed these criteria based on 

our clinicians’ understanding of services that were reported by the CY 2009 CPT codes 
that, in various combinations, reflect the services provided that are described in the new 

CPT codes. We used approximately 175,000 claims for the new non-congenital 

catheterization-related CPT codes, together with the single and “pseudo” single 

procedure claims for the remaining non-congenital catheterization-related CPT codes in 

APC 0080 (Diagnostic Cardiac Catheterization), to calculate CPT level costs and the cost 

for APC 0080 of approximately $2,698. We noted that, because the CPT codes listed in 

Table 11 were new for CY 2011, they were identified with comment indicator “NI” in 

Addendum B to that final rule with comment period to identify them as subject to public 

comment. We specifically requested public comment on our methodology for simulating 

the costs for these new CY 2011 CPT codes, in addition to public comments on the 

payment rates themselves (75 FR 71848). 

For CY 2012, we continued to use the CY 2011 methodology in determining the 

APC assignments for the new cardiac catheterization CPT codes. That is, we continued 

to use the CY 2011 methodology in determining the APC assignments for the 

cardiac catheterization CPT codes by using the existing hospital outpatient claims 

and the cost report data from the predecessor cardiac catheterization CPT codes to 

simulate an estimated cost for the new cardiac catheterization CPT codes in determining 

the appropriate APC assignments. Specifically, we used the CY 2010 hospital outpatient 

claims data and the most recent cost report data to create simulated costs for the new 

separately payable CPT codes for CY 2012 to determine the payment rates for the cardiac 

catheterization CPT codes. For CY 2012, we did not make any changes to the CY 2011 

APC assignments of any of the codes assigned to APC 0080 because the claims data 

supported continuation of these APC assignments. 
Because the cardiac catheterization CPT codes were new for CY 2011, CY 2013 

is the first year of claims data that are available for ratesetting for these specific CPT 

codes. For CY 2013, our analysis of the CY 2011 claims data available for this proposed 

rule shows no violation in the 2 times rule for the cardiac catheterization CPT codes 

because the lowest cost of a CPT code with significant claims data in APC 0080 is 

approximately $1,716 (for CPT code 93451), while the highest cost of a CPT code with 

significant claims data is approximately $3,308 (for CPT code 93461). We believe that 

the cardiac catheterization CPT codes continue to be appropriately placed in APC 0080 

based on clinical homogeneity and resource costs. Therefore, for CY 2013, we are 

proposing to continue to assign the cardiac catheterization CPT codes to APC 0080 as 

listed below in Table 5. 
TABLE 5.—PROPOSED APCs TO WHICH NON-CONGENITAL 

CARDIAC CATHETERIZATION CPT CODES WOULD BE ASSIGNED FOR 

CY 2013 

CY 

2012 

HCPCS 

Code 

CY 2012 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

93451 Right heart cath T 0080 T 0080 

93452 Left hrt cath w/ventrclgrphy T 0080 T 0080 

93453 R&l hrt cath w/ventriclgrphy T 0080 T 0080 

93454 Coronary artery angio s&i T 0080 T 0080 

93455 Coronary art/grft angio s&i T 0080 T 0080 

93456 R hrt coronary artery angio T 0080 T 0080 

93457 R hrt art/grft angio T 0080 T 0080 

93458 L hrt artery/ventricle angio T 0080 T 0080 

93459 L hrt art/grft angio T 0080 T 0080 

93460 R&l hrt art/ventricle angio T 0080 T 0080 

93461 R&l hrt art/ventricle angio T 0080 T 0080 

93462 L hrt cath trnsptl puncture T 0080 T 0080 

93463 

Drug admin & hemodynmic 

meas N NA N NA 

93464 Exercise w/hemodynamic meas N NA N NA 

93565 Inject l ventr/atrial angio N NA N NA 

93566 Inject r ventr/atrial angio N NA N NA 

93567 Inject suprvlv aortography N NA N NA 

93568 Inject pulm art hrt cath N NA N NA 

 

(5) Computed Tomography of Abdomen/Pelvis (APCs 0331 and 0334) 

For CY 2011, the AMA’s CPT Editorial Panel established three new codes to 

describe computed tomography of the abdomen and pelvis. CPT codes 74176 

(Computed tomography, abdomen and pelvis; without contrast material), 74177 

(Computed tomography, abdomen and pelvis; with contrast material(s)), and 74178 

(Computed tomography, abdomen and pelvis; without contrast material in one or both 
body regions, followed by contrast material(s) and further sections in one or both body 

regions) were effective January 1, 2011. As shown in Table 6, for CY 2011, these 

services were paid in one of two methods under the hospital OPPS. They were either 

paid separately through a single APC or through a composite APC. We assigned CPT 

code 74176 to APC 0332 (Computed Tomography Without Contrast), CPT code 74177 

to APC 0283 (Computed Tomography With Contrast), and CPT code 74178 to APC 0333 

(Computed Tomography Without Contrast Followed By Contrast). We also assigned 

CPT code 74176 to composite APC 8005 (CT and CTA Without Contrast Composite), 

and CPT codes 74177 and 74178 to composite 8006 (CT and CTA With Contrast 

Composite). We assigned the codes to status indicator “Q3” to indicate that the codes 

were eligible for composite payment under the multiple imaging composite APC 

methodology when they are furnished with other computed tomography procedures to the 

same patient on the same day. 

Consistent with our longstanding policy for new codes, we assigned these codes 

to interim APCs for CY 2011, with comment indicator “NI” in Addendum B of the 

CY 2011 OPPS/ASC final rule with comment period denoting that the codes were new 

with an interim APC assignment on which comments would be accepted. In accordance 

with our longstanding policy to provide codes to enable payment to be made for new 

services as soon as the code is effective, our interim APC assignments for each code were 

based on our understanding of the resources required to furnish the services and their 

clinical characteristics as defined in the code descriptors. 

TABLE 6.—CY 2011 OPPS APC ASSIGNMENTS FOR THE COMPUTED 

TOMOGRAPHY OF ABDOMEN AND PELVIS CPT CODES 
CY 

2011 

CPT 

Code 

CY 2011 Short Descriptor 

CY 

2011 

SI 

CY 

2011 

Single 

Code 

APC 

CY 2011 

Single 

Code 

APC 

Payment 

Rate 

CY 2011 

Composite 

APC 

CY 2011 

Composite 

APC 

Payment 

Rate 

74176 Ct abd & pelvis Q3 0332 $193.85 8005 $420.85 

74177 Ct abd & pelv w/contrast Q3 0283 $299.81 8006 $628.61 

74178 Ct abd & pelv 1/> regns Q3 0333 $334.24 8006 $628.61 

As we described in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74259), in general, stakeholders who provided comments on the interim 

assignments of these codes for CY 2011 stated that the most appropriate approach to 

establishing payment for these new codes was to assign these procedures to APCs that 

recognize that each of the new codes reflects the reporting under a single code of two 

services that were previously reported under two separate codes and that, therefore, 

payments would be more accurate and better reflective of the services under the OPPS if 

we were to establish payment rates for the codes for CY 2012 using claims data that 

reflect the combined cost of the two predecessor codes. In addition, at the 

February 28-March 1, 2011 Panel meeting, several presenters reported their concern and 

disagreement with our single APC assignments for these new codes. The presenters 

stated that the payment rates for the single APC assignments reflected only half of the 

true costs of these services based on their internal calculated costs. Similar to the public 

commenters, the presenters indicated that, prior to CY 2011, these services were reported 

using a combination of codes, and suggested that CMS revise the methodology to include 

these combinations of codes to determine accurate payment rates for these services. 

Specifically, the presenters indicated that simulating the costs for CPT codes 74176, 
74177, and 74178 using historical claims data from the predecessor codes would result in 

the best estimates of costs for these codes and, therefore, the most accurate payment 

rates. 

After examination of our claims data for the predecessor codes, and after 

considering the various concerns and recommendations that we received on this issue 

(specifically, the views of the stakeholders who met with us to discuss this issue, the 

comments received in response to the CY 2011 OPPS/ASC final rule with public 

comment period, and input from the Panel at its February 28-March 1, 2011 meeting), we 

proposed to revise our payment methodology for CPT codes 74176, 74177, and 74178 

for CY 2012 (76 FR 42235). That is, we proposed to simulate the costs for CPT codes 

74176, 74177, and 74178 using historical claims data from the predecessor codes to 

determine the most accurate payment rates for these codes. This new proposed payment 

methodology necessitated establishing two new APCs, specifically, APC 0331 

(Combined Abdominal and Pelvis CT Without Contrast) to which CPT code 74176 

would be assigned, and APC 0334 (Combined Abdominal and Pelvis CT With Contrast) 

to which CPT codes 74177 and 74178 would be assigned. In addition, we proposed to 

continue to assign CPT code 74176 to composite APC 8005 and CPT codes 74177 and 

74178 to composite APC 8006 for CY 2012. 

Based on the feedback that we received from the Panel at its August 10-11, 2011 

meeting, and the public comments received on the CY 2012 OPPS/ASC proposed rule in 

support of the proposed revised payment methodology for CPT codes 74176, 74177, and 

74178, we finalized our proposals in the CY 2012 OPPS/ASC final rule with comment 

period. Specifically, we reassigned CPT code 74176 from APC 0332 to APC 0331, CPT 
code 74177 from APC 0283 to APC 0334, and CPT code 74178 from APC 0333 to APC 

0334. (We refer readers to the CY 2012 OPPS/ASC final rule with comment period for a 

detailed description of the methodology we used to simulate the costs of these procedures 

using claims data for the predecessor CPT codes (76 FR 74259 through 74262).) We also 

continued with our composite APC assignments for these codes. Specifically, we 

continued to assign CPT code 74176 to composite APC 8005 and CPT codes 74177 and 

74178 to composite APC 8006. Table 7 below shows the payment rates for these codes 

for the CY 2012 update. 

TABLE 7.—CY 2012 OPPS APC ASSIGNMENTS FOR THE COMPUTED 

TOMOGRAPHY OF ABDOMEN AND PELVIS CPT CODES 

CY 

2012 

CPT 

Code 

CY 2012 Short Descriptor

CY 

2012 

SI 

CY 2012 

Single 

Code 

APC 

CY 2012 

Single 

Code 

APC 

Payment 

Rate 

CY 2012 

Composite 

APC 

CY 2012 

Composite 

APC 

Payment 

Rate 

74176 Ct abd & pelvis Q3 0331 $405.17 8005 $431.60 

74177 Ct abd & pelv w/contrast Q3 0334 $580.54 8006 $721.12 

74178 Ct abd & pelv 1/> regns Q3 0334 $580.54 8006 $721.12 

We stated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74262) that we would reassess whether there is a continued need for these APCs 

for the CY 2013 OPPS/ASC update once we have actual charges for these services. 

Because CPT codes 74176, 74177, and 74178 became effective on January 1, 2011, we 

have hospital claims data available for these codes that we can use for ratesetting for the 

first time. Analysis of the latest CY 2011 hospital outpatient claims data for the CY 2013 
OPPS/ASC proposed rulemaking update, which is based on claims processed with dates 

of service from January 1, 2011 through December 31, 2011, reveals a decrease in costs 

for the three procedures, compared to the costs simulated using predecessor CPT codes 

for CY 2012. CPT code 74176 shows a cost of approximately $314 based on 312,493 

single claims (out of 713,662 total claims), while CPT code 74177 reveals a cost of 

approximately $476 based on 367,002 single claims (out of 951,296 total claims). In 

addition, CPT code 74178 shows a cost of approximately $537 based on 184,580 single 

claims (out of 267,401 total claims). Because we used hospital claims data specific to 

CPT codes 74176, 74177, and 74178, we believe these costs accurately reflect the 

resources associated with providing computed tomography of the abdomen and pelvis as 

described by these CPT codes in the HOPD. 

 Furthermore, our analysis of the CY 2011 claims data available for this proposed 

rule shows no 2 times rule violation for either APC 0331 or APC 0334. Therefore, for 

CY 2013, we are proposing to continue to assign CPT code 74176 to APC 0331 and 

CPT codes 74177 and 74178 to APC 0334. (Because we have claims data available for 

these three CPT codes, we will no longer simulate their costs using predecessor codes as 

we did in CY 2012.) In addition, we are proposing to continue to assign these codes to 

their existing composite APCs for CY 2013. Specifically, we are proposing to continue 

to assign CPT code 74176 to composite APC 8005, and to assign CPT codes 74177 and 

74178 to composite APC 8006. Table 8 below lists the computed tomography of the 

abdomen and pelvis CPT codes along with their proposed status indicators, and single 

and composite APC assignments for CY 2013. 
TABLE 8.—PROPOSED APC ASSIGNMENTS FOR THE COMPUTED 

TOMOGRAPHY OF ABDOMEN AND PELVIS CPT CODES FOR CY 2013 

CY 2012 

CPT 

Code 

CY 2012 Short Descriptor 

Proposed 

CY 

2013 

SI 

Proposed 

CY 2013 

Single Code 

APC 

Proposed 

CY 2013 

Composite 

APC 

74176 Ct abd & pelvis Q3 0331 8005 

74177 Ct abd & pelv w/contrast Q3 0334 8006 

74178 Ct abd & pelv 1/> regns Q3 0334 8006 

(6) Brachytherapy Sources 

 Section 1833(t)(2)(H) of the Act, as added by section 621(b)(2)(C) of 

Pub. L. 108-173 (MMA), mandated the creation of additional groups of covered OPD 

services that classify devices of brachytherapy consisting of a seed or seeds (or 

radioactive source) (“brachytherapy sources”) separately from other services or groups of 

services. The additional groups must reflect the number, isotope, and radioactive 

intensity of the brachytherapy sources furnished and include separate groups for 

palladium-103 and iodine-125 sources. For the history of OPPS payment for 

brachytherapy sources, we refer readers to prior OPPS proposed and final rules. As we 

have stated previously (72 FR 66780, 73 FR 41502, 74 FR 60533 through 60534, 

75 FR 71978, and 76 FR 74160), we believe that adopting the general OPPS prospective 

payment methodology for brachytherapy sources is appropriate for a number of reasons. 

The general OPPS payment methodology uses costs based on claims data to set the 

relative payment weights for hospital outpatient services. This payment methodology 

results in more consistent, predictable, and equitable payment amounts per source across 
hospitals by averaging the extremely high and low values, in contrast to payment based 

on hospitals’ charges adjusted to cost. We believe that the OPPS prospective payment 

methodology, as opposed to payment based on hospitals’ charges adjusted to cost, would 

also provide hospitals with incentives for efficiency in the provision of brachytherapy 

services to Medicare beneficiaries. Moreover, this approach is consistent with our 

payment methodology for the vast majority of items and services paid under the OPPS. 

 Therefore, for CY 2013, we are proposing to use the costs from CY 2011 claims 

data for setting the proposed CY 2013 payment rates for brachytherapy sources, as we are 

proposing for most other items and services that would be paid under the CY 2013 OPPS. 

We based the proposed rates for brachytherapy sources using geometric mean unit costs 

for each source, consistent with the methodology proposed for other items and services, 

discussed in section II.A.2.f. of this proposed rule. We are proposing to continue the 

other payment policies for brachytherapy sources we finalized and first implemented in 

the CY 2010 OPPS/ASC final rule with comment period (74 FR 60537). We are 

proposing to pay for the stranded and non-stranded NOS codes, HCPCS codes C2698 and 

C2699, at a rate equal to the lowest stranded or non-stranded prospective payment rate 

for such sources, respectively, on a per source basis (as opposed, for example, to a per 

mCi), which is based on the policy we established in the CY 2008 OPPS/ASC final rule 

with comment period (72 FR 66785). We also are proposing to continue the policy we 

first implemented in the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60537) regarding payment for new brachytherapy sources for which we have no 

claims data, based on the same reasons we discussed in the CY 2008 OPPS/ASC final 

rule with comment period (72 FR 66786; which was superseded for a period of time by 
section 142 of Pub. L. 110-275). That policy is intended to enable us to assign new 

HCPCS codes for new brachytherapy sources to their own APCs, with prospective 

payment rates set based on our consideration of external data and other relevant 

information regarding the expected costs of the sources to hospitals. 

 Consistent with our policy regarding APC payments made on a prospective basis, 

as we did for CY 2011 and CY 2012, we are proposing to subject brachytherapy sources 

to outlier payments under section 1833(t)(5) of the Act, and also to subject brachytherapy 

source payment weights to scaling for purposes of budget neutrality. Hospitals can 

receive outlier payments for brachytherapy sources if the costs of furnishing 

brachytherapy sources meet the criteria for outlier payment specified at 

42 CFR 419.43(d). In addition, implementation of prospective payment for 

brachytherapy sources provides opportunities for eligible hospitals to receive additional 

payments in CY 2013 under certain circumstances through the 7.1 percent rural 

adjustment, as described in section II.E. of this proposed rule. 

We refer readers to Addendum B to this proposed rule (which is available via the Internet 

on the CMS Web site) for the proposed CY 2013 payment rates for brachytherapy 

sources, identified with status indicator “U”. We are inviting public comment on this 

proposed policy and also requesting recommendations for new HCPCS codes to describe 

new brachytherapy sources consisting of a radioactive isotope, including a detailed 

rationale to support recommended new sources. Such recommendations should be 

directed to the Division of Outpatient Care, Mail Stop C4-05-17, Centers for Medicare 

and Medicaid Services, 7500 Security Boulevard, Baltimore, MD 21244. We will 
continue to add new brachytherapy source codes and descriptors to our systems for 

payment on a quarterly basis. 

e. Proposed Calculation of Composite APC Criteria-Based Costs 

 As discussed in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66613), we believe it is important that the OPPS enhance incentives for hospitals 

to provide only necessary, high quality care and to provide that 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. 
For CY 2013, we are proposing to continue our composite policies for extended 

assessment and management services, LDR prostate brachytherapy, cardiac 

electrophysiologic evaluation and ablation services, mental health services, multiple 

imaging services, and cardiac resynchronization therapy services, as discussed in sections 

II.A.2.e.(1), II.A.2.e.(2), II.A.2.e.(3), II.A.2.e.(4), II.A.2.e.(5), and II.A.2.e.(6), 

respectively, of this proposed rule. 

(1) Extended Assessment and Management Composite APCs (APCs 8002 and 8003) 

 We are proposing to continue to include composite APC 8002 (Level I Extended 

Assessment and Management Composite) and composite APC 8003 (Level II Extended 

Assessment and Management Composite) in the OPPS for CY 2013. Beginning in 

CY 2008, we created these two composite APCs to provide payment to hospitals in 

certain circumstances when extended assessment and management of a patient occur (an 

extended visit). In most circumstances, observation services are supportive and ancillary 

to the other services provided to a patient. In the circumstances when observation care is 

provided in conjunction with a high level visit 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, we are proposing to continue the extended assessment and 

management composite APC payment methodology and criteria for APCs 8002 and 8003 

that we finalized for CYs 2009 through 2012. We continue to believe that the composite 

APCs 8002 and 8003 and related policies provide the most appropriate means of paying 
for these services. We also are proposing to calculate the costs for APCs 8002 and 8003 

using the same methodology that we used to calculate the costs for composite APCs 8002 

and 8003 for the CY 2008 OPPS (72 FR 66649). That is, we are proposing to use all 

single and “pseudo” single procedure claims from CY 2011 that met the criteria for 

payment of each composite APC and apply the standard packaging and trimming rules to 

the claims before calculating the proposed CY 2013 costs. The proposed CY 2013 cost 

resulting from this methodology for composite APC 8002 is approximately $446, which 

was calculated from 17,072 single and “pseudo” single bills that met the required criteria. 

The proposed CY 2013 cost for composite APC 8003 is approximately $813, which was 

calculated from 255,231 single and “pseudo” single bills that met the required criteria. 

 At its February 2012 meeting, the Advisory Panel on Hospital Outpatient 

Payment (the Panel) recommended that CMS continue to report clinic/emergency 

department visit and observation claims data and, if CMS identifies changes in patterns of 

utilization or cost, that CMS bring those issues to the Visits and Observation 

Subcommittee. Additionally, the Panel recommended that CMS examine data for 

discharge status, point of entry, age, primary and secondary diagnoses, and type of 

hospital (teaching, nonteaching, rural, urban) for patients receiving greater than 48 hours 

of observation services, if available, and report the findings to the Visits and Observation 

Subcommittee. The Panel recommended that the Visits and Observation Subcommittee 

review claims data for HCPCS code G0379 (Direct referral of patient for hospital 

observation care), and consider the appropriate APC group for the code. The Panel also 

recommended that the results of CMS’ study on unconditionally packaged HCPCS code 

G0378 (Hospital observation service, per hour) be presented to the Visits and 
Observation Subcommittee. The Panel recommended that the work of the Visits and 

Observation Subcommittee continue. We are accepting these recommendations and will 

provide the requested data to the Panel at a future meeting. 

(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 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 and a detailed 

description of how we developed the LDR prostate brachytherapy composite APC. 

For CY 2013, we are proposing to continue to pay for LDR prostate 

brachytherapy services using the composite APC methodology proposed and 

implemented for CY 2008 through CY 2012. That is, we are proposing to use CY 2011 

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 2012 practice, we are proposing not to use the claims that meet these criteria 

in the calculation of the costs for APCs 0163 (Level IV Cystourethroscopy and Other 

Genitourinary Procedures) and 0651 (Complex Interstitial Radiation Source Application), 

the APCs to which CPT codes 55875 and 77778 are assigned, respectively. We are 

proposing that the costs for APCs 0163 and 0651 continue to be calculated using single 

and “pseudo” single procedure claims. 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 cost upon which to base the composite APC 

payment rate. 

Using a partial year of CY 2011 claims data available for this CY 2013 proposed 

rule, we were able to use 650 claims that contained both CPT codes 55875 and 77778 to 

calculate the cost upon which the proposed CY 2013 payment for composite APC 8001 is 
based. The proposed cost for composite APC 8001 for CY 2013 is approximately 

$3,362. 

(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 costs for these services, and advanced our stated 

goal of promoting hospital efficiency through larger payment bundles. In order to 

calculate the 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 code in Group B for the same beneficiary, payments are made under 

the appropriate single procedure APCs and the composite APC does not apply. 

For CY 2013, we are proposing to continue to pay for cardiac electrophysiologic 

evaluation and ablation services using the composite APC methodology proposed and 

implemented for CY 2008 through CY 2012. We continue to believe that the cost for 

these services calculated from a high volume of correctly coded multiple procedure 

claims would result in an accurate and appropriate proposed payment for cardiac 

electrophysiologic evaluation and ablation services when at least one evaluation service 

is furnished during the same clinical encounter as at least one ablation service. 

Consistent with our CY 2008 through CY 2012 practice, we are proposing not to use the 

claims that meet the composite payment criteria in the calculation of the costs for APCs 

0085 and 0086, to which the CPT codes in both Groups A and B for composite APC 

8000 are otherwise assigned. The costs for APCs 0085 and 0086 would continue to be 

calculated using single procedure claims. 

For CY 2013, using a partial year of CY 2011 claims data available for this 

proposed rule, we were able to use 11,358 claims containing a combination of Group A 

and Group B codes to calculate a proposed cost of approximately $11,458 for composite 

APC 8000. 
Table 9 below lists the proposed groups of procedures upon which we would base 

composite APC 8000 for CY 2013. 

TABLE 9.—PROPOSED GROUPS OF CARDIAC 

ELECTROPHYSIOLOGIC EVALUATION AND ABLATION PROCEDURES 

UPON WHICH COMPOSITE APC 8000 IS BASED 

Codes Used in Combinations: At Least 

One in Group A and One in Group B 

CY 2012 

CPT Code 

Proposed 

Single Code 

CY 2013 

APC 

Proposed 

CY 2013 SI 

(Composite) 

Group A

Comprehensive electrophysiologic 

evaluation with right atrial pacing and 

recording, right ventricular pacing and 

recording, His bundle recording, including 

insertion and repositioning of multiple 

electrode catheters, without induction or 

attempted induction of arrhythmia 93619 0085 Q3 

Comprehensive electrophysiologic 

evaluation including insertion and 

repositioning of multiple electrode catheters 

with induction or attempted induction of 

arrhythmia; with right atrial pacing and 

recording, right ventricular pacing and 

recording, His bundle recording 93620 0085 Q3 

Group B

Intracardiac catheter ablation of 

atrioventricular node function, 

atrioventricular conduction for creation of 

complete heart block, with or without 

temporary pacemaker placement 93650 0085 Q3 

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 93651 0086 Q3 
Codes Used in Combinations: At Least 

One in Group A and One in Group B 

CY 2012 

CPT Code 

Proposed 

Single Code 

CY 2013 

APC 

Proposed 

CY 2013 SI 

(Composite) 

Intracardiac catheter ablation of 

arrhythmogenic focus; for treatment of 

ventricular tachycardia 93652 0086 Q3 

(4) Mental Health Services Composite APC (APC 0034) 

For CY 2013, we are proposing 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, which we 

consider to be the most resource-intensive of all outpatient mental health treatments for 

CY 2013. We refer readers to the April 7, 2000 OPPS final rule with comment period 

(65 FR 18452 to 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. 

Specifically, we are proposing 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 partial hospitalization payment, those specified mental 

health services would be assigned to APC 0034 (Mental Health Services Composite). 

We are proposing to continue to set the payment rate for APC 0034 at the same rate as we 

are proposing to pay for APC 0176 (Level II Partial Hospitalization (4 or more services) 

for Hospital-Based PHPs), which is the maximum partial hospitalization per diem 

payment, and that the hospital would continue to be paid one unit of APC 0034. Under 
this proposal, the I/OCE would continue to determine whether to pay for these specified 

mental health services individually or make a single payment at the same rate as the APC 

0176 per diem rate for partial hospitalization for all of the specified mental health 

services furnished by the hospital on that single date of service. We continue to believe 

that the costs associated with administering a partial hospitalization program represent 

the most resource-intensive of all outpatient mental health treatments. Therefore, we do 

not believe that we should pay more for services under the OPPS than the partial 

hospitalization per diem rate. 

(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 8 of the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74171 through 74175). 

While there are three imaging families, there are five multiple imaging composite 

APCs due to the statutory requirement at 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). 

For CY 2013, we are proposing 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 payment methodology. We continue to believe that this 

policy would continue to reflect and promote the efficiencies hospitals can achieve when 
performing multiple imaging procedures during a single session. The proposed CY 2013 

payment rates for the five multiple imaging composite APCs (APC 8004, APC 8005, 

APC 8006, APC 8007, and APC 8008) are based on costs calculated from a partial year 

of CY 2011 claims available for this CY 2013 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 

costs, we used the same methodology that we used to calculate the final CY 2012 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 that we removed from the 

bypass list for purposes of calculating the proposed multiple imaging composite APC 

costs, pursuant to our established methodology (76 FR 74169), appear in Table 11 of this 

proposed rule. 

 We were able to identify approximately 1.0 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 2013 costs for the 

multiple imaging composite APCs. 

Table 10 below lists the proposed HCPCS codes that would be subject to the 

multiple imaging composite policy and their respective families and approximate 

proposed composite APC costs for CY 2013. Table 11 below lists the OPPS imaging 

family services that overlap with HCPCS codes on the proposed CY 2013 bypass list. 
TABLE 10.—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE 

IMAGING PROCEDURE COMPOSITE APCs 

Family 1 – Ultrasound 

Proposed CY 2013 APC 8004 (Ultrasound 

Composite) 

Proposed CY 2013 Approximate APC 

Cost = $201 

76604 Us exam, chest 

76700 Us exam, abdom, complete 

76705 Echo exam of abdomen 

76770 Us exam abdo back wall, comp 

76775 Us exam abdo back wall, lim 

76776 Us exam k transpl w/Doppler 

76831 Echo exam, uterus 

76856 Us exam, pelvic, complete 

76870 Us exam, scrotum 

76857 Us exam, pelvic, limited 

Family 2 - CT and CTA with and without Contrast 

Proposed CY 2013 APC 8005 (CT and CTA 

without Contrast Composite)* 

Proposed CY 2013 Approximate APC 

Cost = $412 

70450 Ct head/brain w/o dye 

70480 Ct orbit/ear/fossa w/o dye 

70486 Ct maxillofacial w/o dye 

70490 Ct soft tissue neck w/o dye 

71250 Ct thorax w/o dye 

72125 Ct neck spine w/o dye 

72128 Ct chest spine w/o dye 

72131 Ct lumbar spine w/o dye 

72192 Ct pelvis w/o dye 

73200 Ct upper extremity w/o dye 

73700 Ct lower extremity w/o dye 

74150 Ct abdomen w/o dye 

74261 Ct colonography, w/o dye 

74176 Ct angio abd & pelvis 

Proposed CY 2013 APC 8006 (CT and CTA 

with Contrast Composite) 

Proposed CY 2013 Approximate APC 

Cost = $700 

70487 Ct maxillofacial w/dye 
70460 Ct head/brain w/dye 

70470 Ct head/brain w/o & w/dye 

70481 Ct orbit/ear/fossa w/dye 

70482 Ct orbit/ear/fossa w/o&w/dye 

70488 Ct maxillofacial w/o & w/dye 

70491 Ct soft tissue neck w/dye 

70492 Ct sft tsue nck w/o & w/dye 

70496 Ct angiography, head 

70498 Ct angiography, neck 

71260 Ct thorax w/dye 

71270 Ct thorax w/o & w/dye 

71275 Ct angiography, chest 

72126 Ct neck spine w/dye 

72127 Ct neck spine w/o & w/dye 

72129 Ct chest spine w/dye 

72130 Ct chest spine w/o & w/dye 

72132 Ct lumbar spine w/dye 

72133 Ct lumbar spine w/o & w/dye 

72191 Ct angiograph pelv w/o&w/dye 

72193 Ct pelvis w/dye 

72194 Ct pelvis w/o & w/dye 

73201 Ct upper extremity w/dye 

73202 Ct uppr extremity w/o&w/dye 

73206 Ct angio upr extrm w/o&w/dye 

73701 Ct lower extremity w/dye 

73702 Ct lwr extremity w/o&w/dye 

73706 Ct angio lwr extr w/o&w/dye 

74160 Ct abdomen w/dye 

74170 Ct abdomen w/o & w/dye 

74175 Ct angio abdom w/o & w/dye 

74262 Ct colonography, w/dye 

75635 Ct angio abdominal arteries 

74177 Ct angio abd&pelv w/contrast 

74178 Ct angio abd & pelv 1+ regns 

* If a “without contrast” CT or CTA procedure is performed during the same session as a 

“with contrast” CT or CTA procedure, the I/OCE will assign APC 8006 rather than 

APC 8005. 
Family 3 - MRI and MRA with and without Contrast 

Proposed CY 2013 APC 8007 (MRI and 

MRA without Contrast Composite)* 

Proposed CY 2013 Approximate 

APC Cost = $725 

70336 Magnetic image, jaw joint 

70540 Mri orbit/face/neck w/o dye 

70544 Mr angiography head w/o dye 

70547 Mr angiography neck w/o dye 

70551 Mri brain w/o dye 

70554 Fmri brain by tech 

71550 Mri chest w/o dye 

72141 Mri neck spine w/o dye 

72146 Mri chest spine w/o dye 

72148 Mri lumbar spine w/o dye 

72195 Mri pelvis w/o dye 

73218 Mri upper extremity w/o dye 

73221 Mri joint upr extrem w/o dye 

73718 Mri lower extremity w/o dye 

73721 Mri jnt of lwr extre w/o dye 

74181 Mri abdomen w/o dye 

75557 Cardiac mri for morph 

75559 Cardiac mri w/stress img 

C8901 MRA w/o cont, abd 

C8904 MRI w/o cont, breast, uni 

C8907 MRI w/o cont, breast, bi 

C8910 MRA w/o cont, chest 

C8913 MRA w/o cont, lwr ext 

C8919 MRA w/o cont, pelvis 

C8932 MRA, w/o dye, spinal canal 

C8935 MRA, w/o dye, upper extr 

Proposed CY 2013 APC 8008 (MRI and 

MRA with Contrast Composite) 

Proposed CY 2013 Approximate 

APC Cost = $1,066 

70549 Mr angiograph neck w/o&w/dye 

70542 Mri orbit/face/neck w/dye 

70543 Mri orbt/fac/nck w/o & w/dye 

70545 Mr angiography head w/dye 

70546 Mr angiograph head w/o&w/dye 

70548 Mr angiography neck w/dye 
70552 Mri brain w/dye 

70553 Mri brain w/o & w/dye 

71551 Mri chest w/dye 

71552 Mri chest w/o & w/dye 

72142 Mri neck spine w/dye 

72147 Mri chest spine w/dye 

72149 Mri lumbar spine w/dye 

72156 Mri neck spine w/o & w/dye 

72157 Mri chest spine w/o & w/dye 

72158 Mri lumbar spine w/o & w/dye 

72196 Mri pelvis w/dye 

72197 Mri pelvis w/o & w/dye 

73219 Mri upper extremity w/dye 

73220 Mri uppr extremity w/o&w/dye 

73222 Mri joint upr extrem w/dye 

73223 Mri joint upr extr w/o&w/dye 

73719 Mri lower extremity w/dye 

73720 Mri lwr extremity w/o&w/dye 

73722 Mri joint of lwr extr w/dye 

73723 Mri joint lwr extr w/o&w/dye 

74182 Mri abdomen w/dye 

74183 Mri abdomen w/o & w/dye 

75561 Cardiac mri for morph w/dye 

75563 Card mri w/stress img & dye 

C8900 MRA w/cont, abd 

C8902 MRA w/o fol w/cont, abd 

C8903 MRI w/cont, breast, uni 

C8905 MRI w/o fol w/cont, brst, un 

C8906 MRI w/cont, breast, bi 

C8908 MRI w/o fol w/cont, breast, 

C8909 MRA w/cont, chest 

C8911 MRA w/o fol w/cont, chest 

C8912 MRA w/cont, lwr ext 

C8914 MRA w/o fol w/cont, lwr ext 

C8918 MRA w/cont, pelvis 

C8920 MRA w/o fol w/cont, pelvis 

C8931 MRA, w/dye, spinal canal 

C8933 MRA, w/o&w/dye, spinal canal 
C8934 MRA, w/dye, upper extremity 

C8936 MRA, w/o&w/dye, upper extr 

* If a “without contrast” MRI or MRA procedure is performed during the same session as a 

“with contrast” MRI or MRA procedure, the I/OCE will assign APC 8008 rather than APC 

8007. 

TABLE 11.-PROPOSED OPPS IMAGING FAMILY SERVICES OVERLAPPING 

WITH HCPCS CODES ON THE CY 2013 BYPASS LIST 

Family 1 – Ultrasound 

76700 Us exam, abdom, complete 

76705 Echo exam of abdomen 

76770 Us exam abdo back wall, comp 

76775 Us exam abdo back wall, lim 

76776 Us exam k transpl w/Doppler 

76856 Us exam, pelvic, complete 

76870 Us exam, scrotum 

76857 Us exam, pelvic, limited 

Family 2 - CT and CTA with and without Contrast 

70450 Ct head/brain w/o dye 

70480 Ct orbit/ear/fossa w/o dye 

70486 Ct maxillofacial w/o dye 

70490 Ct soft tissue neck w/o dye 

71250 Ct thorax w/o dye 

72125 Ct neck spine w/o dye 

72128 Ct chest spine w/o dye 

72131 Ct lumbar spine w/o dye 

72192 Ct pelvis w/o dye 

73200 Ct upper extremity w/o dye 

73700 Ct lower extremity w/o dye 

74150 Ct abdomen w/o dye 

Family 3 - MRI and MRA with and without Contrast 

70336 Magnetic image, jaw joint 

70544 Mr angiography head w/o dye 

70551 Mri brain w/o dye 

71550 Mri chest w/o dye 

72141 Mri neck spine w/o dye 
72146 Mri chest spine w/o dye 

72148 Mri lumbar spine w/o dye 

73218 Mri upper extremity w/o dye 

73221 Mri joint upr extrem w/o dye 

73718 Mri lower extremity w/o dye 

73721 Mri jnt of lwr extre w/o dye 

(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 

service described by CPT code 33225, the service described by CPT code 33249 is also 

assigned to APC 0108. When not performed on the same day as the service described by 

CPT code 33249, the service described by CPT code 33225 is assigned to APC 0655. 

 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. 

In order to ensure that hospitals correctly code for CRT services in the future, 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). 

For CY 2013, we are proposing to continue to recognize CRT-D as a single, 

composite service as described above and finalized in the CY 2012 OPPS/ASC final rule 

with comment period. 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 and, therefore, to address the inherent ratesetting challenges 

associated with CPT code 33225. We also note that this policy is consistent with the 

principles of a prospective payment system, specifically to place similar services that 

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. In calculating the costs upon which the payment rate for APC 0108 is 

based for CY 2013, for this proposed rule, 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 9,790 single bills from the 

CY 2013 proposed rule claims data to calculate a proposed cost of approximately 

$31,491 for APC 0108. Because CPT codes 33225 and 33249 may be treated as a 

composite service for payment purposes, we are proposing to continue to assign them 

status indicator “Q3” (Codes that may be paid through a composite APC) in Addendum B 

to this proposed rule. The assignment of CPT codes 33225 and 33249 to APC 0108 
when treated as a composite service is also reflected in Addendum M to this proposed 

rule (which is available via the Internet on the CMS Web site). 

 We note that we have revised the claims processing edits in place for CPT code 

33225 due to revised guidance from the AMA in the CPT code book 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 code book 

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. 

f. Proposed Geometric Mean-Based Relative Payment Weights 

When the Medicare program was first implemented, payment for hospital services 

(inpatient and outpatient) was based on hospital-specific reasonable costs attributable to 

furnishing services to Medicare beneficiaries. Although payment for most Medicare 
hospital inpatient services became subject to a PPS under section 1886(d) of the Act in 

1983, Medicare hospital outpatient services continued to be paid based on 

hospital-specific costs. This methodology for payment provided little incentive for 

hospitals to furnish such outpatient services efficiently and in a cost effective manner. At 

the same time, advances in medical technology and changes in practice patterns were 

bringing about a shift in the site of medical care from the inpatient setting to the 

outpatient setting. 

In the Omnibus Budget Reconciliation Act of 1986 (OBRA 1986) (Pub. L. 

99-509), the Congress paved the way for development of a PPS for hospital outpatient 

services. Section 9343(g) of OBRA 1986 mandated that fiscal intermediaries require 

hospitals to report claims for services under the Healthcare Common Procedure Coding 

System (HCPCS). Section 9343(c) of OBRA 1986 extended the prohibition against 

unbundling of hospital services under section 1862(a)(14) of the Act to include outpatient 

services as well as inpatient services. The codes under the HCPCS enabled us to 

determine which specific procedures and services were billed, while the extension of the 

prohibition against unbundling ensured that all nonphysician services provided to hospital 

outpatients were reported on hospital bills and captured in the hospital outpatient data 

that were used to develop an outpatient PPS. 

 The brisk increase in hospital outpatient services further led to an interest in 

creating payment incentives to promote more efficient delivery of hospital outpatient 

services through a Medicare outpatient PPS. Section 9343(f) of OBRA 1986 and section 

4151(b)(2) of the Omnibus Budget Reconciliation Act of 1990 (OBRA 1990) (Pub. L. 

101-508), required that we develop a proposal to replace the hospital outpatient payment 
system with a PPS and submit a report to the Congress on the proposed system. The 

statutory framework for the OPPS was established by the Balanced Budget Act (BBA) of 

1997 (Pub. L. 105-33) with section 4523 amending section 1833 of the Act by adding 

subsection (t), which provides for a PPS for hospital outpatient department services and 

the BBRA of 1999 (Pub. L. 106-113), with section 201 further amending section 1833(t) 

of the Act. The implementing regulations for these statutory authorities were codified at 

42 CFR Part 419, effective for services furnished on or after August 1, 2000. 

 Section 1833 of the Act set forth the methodological requirements for developing 

the PPS for hospital outpatient services (the OPPS). At the onset of the OPPS, there was 

significant concern over observed increases in the volume of outpatient services, and 

corresponding rapidly growing beneficiary coinsurance. Accordingly, much of the focus 

was on finding ways to address those issues. The OPPS statute, section 1833(t)(2)(C) of 

the Act, initially provided that relative payment weights for covered outpatient 

department services be established based on median costs under section 4523(a) of the 

BBA of 1997. Later, section 201(f) of the BBRA of 1999 amended section 1833(t)(2)(C) 

of the Act to allow the Secretary the discretion to base the establishment of relative 

payment weights on either median or mean hospital costs. Since the OPPS was initially 

implemented, we have established relative payment weights based on the median hospital 

costs for both statistical reasons and timely implementation concerns. The proposed rule 

for the OPPS was published prior to the passage of the BBRA of 1999, which amended 

the Act to permit the use of mean costs. At that time, we noted that making payment for 

hospital outpatient services based on the median cost of each APC was a way of 

discouraging upcoding that occurs when individual services that are similar have 
disparate median costs, as well as associating services for which there are low claims 

volume into the appropriate classifications based on clinical patterns and their resource 

consumption (63 FR 47562). 

As discussed in the CY 2000 OPPS final rule with comment period (65 FR 18482 

through 18483), initial implementation of the payment system for hospital outpatient 

services was delayed due to multiple extensions of the proposed rule comment period, 

Year 2000 (Y2K) system concerns, and other systems challenges in developing the 

OPPS. Even though the BBRA of 1999 passed during that period of time, and provided 

the Secretary with the discretion to establish relative payment weights under the OPPS 

based on mean hospital costs, we determined that reconstructing the database to evaluate 

the impact of using mean costs would have postponed implementation of the OPPS 

further. There were important challenges at the time, including being responsive to 

stakeholder comments regarding the initial OPPS and addressing implementation issues 

so that the payment and claims processing systems would work correctly. To do so in a 

timely manner was critical; therefore, median costs were selected as an appropriate 

metric on which to base payment relativity, both based on the statistical reasons noted 

above, and practical implementation concerns. 

In addition to the reasons discussed above, developing relative payment weights 

based on median costs was a way of attenuating the impact of cost outlier cases. In an 

environment where facility coding practices were still in their infancy, median costs 

served to minimize the impact of any coding errors. Using median costs to establish 

service cost relativity served the same function as any measure of central tendency 
(including means), ensuring that the payment weights used in the OPPS would, in 

general, account for the variety of costs associated with providing a service. 

 Since the beginning of the OPPS and throughout its development, we have striven 

to find ways to improve our methods for estimating the costs associated with providing 

services. The dialogue with the public regarding these issues, the meaningful information 

and recommendations that the Panel (previously the APC Panel) has provided, and the 

policies we have established to better derive the costs on which OPPS payment is 

calculated have contributed to improving cost estimation. However, challenges remain in 

our continuing effort to better estimate the costs associated with providing services. 

These challenges include our limited ability to obtain more meaningful information from 

the claims and cost report data available and ensuring that the approach used to calculate 

the payments for services accurately captures the relative costs associated with providing 

them. Over the years, we have implemented many changes to the OPPS cost modeling 

process to help address these challenges. 

 To obtain more information from the claims data we have available, we first 

began bypassing codes from the standard process to develop “pseudo” single claims in 

CY 2003 (67 FR 66746). In CY 2006, this concept later evolved into the bypass list (and 

its corresponding criteria for addition) which allows us to extract more cost information 

from claims that would otherwise be unusable for modeling service cost (70 FR 68525). 

In CY 2008, we examined clinical areas where packaging of services was appropriate, 

which allows us to use more claims in modeling the payments for primary procedures and 

encourage providers to make cost efficient choices where possible (72 FR 66610 through 

66649). In the CY 2008 OPPS/ASC final rule with comment period (72 FR 66590), we 
noted that this packaging approach increased the number of “natural” single bills, while 

simultaneously reducing the universe of codes requiring single bills for ratesetting. 

Beginning in CY 2008, we also established composite APCs for services that are 

typically provided together in the same encounter, allowing us to use even more 

previously unusable claims (due to containing multiple separately payable major codes) 

for modeling service cost, as well as develop APCs that reflect the combined encounter 

(72 FR 66650 through 66658). We have implemented many steps to obtain more 

information from the claims and cost report data available to us, and continue to examine 

ways in which we can derive more meaningful information on service costs for use in 

ratesetting. 

 In our experience in working with the OPPS, we also have implemented many 

processes to ensure that the cost information we derive from cost reports and claims data 

is accurate. In the beginning of the OPPS, we implemented a cost trim of three standard 

deviations outside the geometric mean cost, similar to the cost data trim in the IPPS, 

because it would ensure that the most aberrant data were removed from ratesetting 

(65 FR 18484). We also have implemented similar trims to the hospital departmental 

CCR and claims based unit data related to the services (71 FR 67985 through 67987). 

 During the CY 2008 rulemaking cycle, we contracted with Research Triangle 

Institute, International (RTI) to examine possible improvements to the OPPS cost 

estimation process after they had investigated similar issues in the IPPS setting 

(72 FR 66659 through 66602). There was significant concern that charge compression, 

which results from the hospital practice of attaching a higher mark-up to charges for low 

cost supplies and a lower mark-up to charges for higher cost supplies, was influencing the 
cost estimates on which the OPPS relative payment weights are based. Based on RTI’s 

recommendations, in CY 2009, we finalized modifications to the Medicare cost report 

form to create an “Implantable Medical Devices Charged to Patients” cost center to 

address public commenter concerns related to charge compression in the “Medical 

Supplies Charged to Patients” cost center (73 FR 48458 through 48467). These 

modifications helped to address potential issues related to hospital markup practices and 

how they are reflected in the CCRs in the Medicare cost reporting form. 

 In CY 2010, we incorporated a line item trim into our data process that removed 

lines that were eligible for OPPS payment in the claim year but received no payment, 

presumably because of a line item rejection or denial due to claims processing edits 

(74 FR 60359). This line item trim was developed with the goal of using additional lines 

to model prospective payment. 

 In addition to these process changes that were designed to include more accurate 

cost data in ratesetting, we have developed a number of nonstandard modeling processes 

to support service or APC specific changes. For example, in the device dependent APCs, 

we have incorporated edits into the cost estimation process to ensure that the full cost of 

the device is incorporated into the primary procedure. 

 While we have already implemented numerous changes to the data process in 

order to obtain accurate resource cost estimates associated with providing a procedure, 

we continue to examine possible areas of improvement. In the past, commenters have 

expressed concern over the degree to which payment rates reflect the costs associated 

with providing a service, believing that, in some cases, high cost items or services that 

might be packaged are not accordingly reflected in the payment weights (72 FR 66629 
through 66630 and 66767). As mentioned above, in the CY 2008 OPPS/ASC final rule 

with comment period, we developed a packaging policy that identified a number of 

clinical areas where services would be commonly performed in a manner that was 

typically ancillary and supportive to other primary procedures. Packaging for appropriate 

clinical areas provides an incentive for efficient and cost-effective delivery of services. 

In that final rule with comment period, we recognized that there were strengths and 

weaknesses associated with using median costs as the metric for developing the OPPS 

payment weights (72 FR 66615). Medians are generally more stable than means because 

they are less sensitive to extreme observations, but they also do not reflect subtle changes 

in cost distributions. As a result, the use of medians rather than means under the OPPS 

usually results in relative weight estimates being less sensitive to packaging decisions, as 

well as changes in the cost model due to factors such as the additional claims processed 

between the proposed rule and the final rule. 

The OPPS, like other prospective payment systems, relies on the concept of 

averaging, where the payment may be more or less than the estimated costs of providing 

a service or package of services for a particular patient (73 FR 68570). Establishing the 

cost-based relative payment weights based on a measure of central tendency, such as 

means or medians, ensures that the payments for the package of services should generally 

account for the variety of costs associated with providing those services. Prospective 

payments are ultimately adjusted for budget neutrality and updated by an OPD update 

factor, which affects the calculated payments, but the accuracy of the cost-based weights 

is critical in ensuring that the relative payment weights are adjusted appropriately. 
 We recognize that median costs have historically served and may continue to 

serve as an appropriate measure on which to establish relative payments weights. 

However, as discussed above, the metric’s resistance to outlier observations is balanced 

by its limited ability to be reflective of changes to the dataset used to model cost or 

changes beyond the center of the dataset. While there was significant concern in the 

initial years of the OPPS regarding outlier cost values and the possible introduction of 

potentially aberrant values in the cost modeling, hospital experience in coding under the 

system, the data modeling improvements we have made to obtain more accurate cost 

information while removing erroneous data, and other changes in our experience with the 

system have all lessened the potential impact of error values (rather than actual, accurate 

cost outliers). As noted above, over the history of the OPPS, we have made multiple 

refinements to the data process to better capture service costs, respond to commenter 

concerns regarding the degree to which OPPS relative payment weights accurately reflect 

service cost and APC payment volatility from year to year, and better capture the variety 

of resource cost associated with providing a service as provided under section 

1833(t)(2)(C) of the Act. For CY 2013, we are proposing to shift the basis for the 

CY 2013 APC relative payment weights that underpin the OPPS from median costs to 

geometric means based costs. 

 Geometric means better encompass the variation in costs that occur when 

providing a service because, in addition to the individual cost values that are reflected by 

medians, geometric means reflect the magnitude of the cost measurements, and are thus 

more sensitive to changes in the data. We believe developing the OPPS relative payment 

weights based on geometric mean costs would better capture the range of costs associated 
with providing services, including those cases involving high cost packaged items or 

services, and those cases where very efficient hospitals have provided services at much 

lower costs. The use of geometric mean costs also would allow us to detect changes in 

the cost of services earlier, because changes in cost often diffuse into the industry over 

time as opposed to impacting all hospitals equally at the same time. Medians and 

geometric means both capture the impact of uniform changes, that is, those changes that 

influence all providers, but only geometric means capture cost changes that are 

introduced slowly into the system on a case-by-case or hospital-by-hospital basis. 

An additional benefit of this proposal relates to the two times rule, described in 

section III.B. of this proposed rule, which is our primary tool for identifying clinically 

similar services that have begun to deviate in terms of their financial resource 

requirements. Basing HCPCS projections on geometric mean costs would increase the 

sensitivity of this tool as we configure the APC mappings because it would allow us to 

detect differences when higher costs occur in a subset of services even if the number of 

services does not change. This information would allow us to better ensure that the 

practice patterns associated with all the component codes appropriately belong in the 

same APC. 

In addition to better incorporating those cost values that surround the median and, 

therefore, describing a broader range of clinical practice patterns, basing the relative 

payment weights on geometric mean costs may also promote better stability in the 

payment system. In the short term, geometric mean-based relative payment weights 

would make the relative payment weights more reflective of the service costs. Making 

this change also may promote more payment stability in the long term by including a 
broader range of observations in the relative payment weights, making them less 

susceptible to gaps in estimated cost near the median observation and also making 

changes in the relative payment weight a better function of changes in estimated service 

costs. 

 We note that this proposed change would bring the OPPS in line with the IPPS, 

which utilizes hospital costs derived from claims and cost report data to calculate 

prospective payments, and specifically, mean costs rather than median costs to form the 

basis of the relative payment weights associated with each of the payment classification 

groups. We stated in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74181) our intent to explore methods to ensure our payment systems do not 

provide inappropriate payment incentives to provide services in one setting of care as 

opposed to another setting of care based on financial considerations rather than clinical 

needs. By adopting a means cost based approach to calculating relative payment weights 

under the OPPS, we expect to achieve greater consistency between the methodologies 

used to calculate payment rates under the IPPS and the OPPS, which would put us in a 

better position from an analytic perspective to make cross-system comparisons and 

examine issues of payment parity. 

For the reasons described above, we are proposing to establish the CY 2013 OPPS 

relative payment weights based on geometric mean costs. While this would involve a 

change to the metric used to develop the relative payment weights, the use of claims 

would not be affected. We are proposing to continue subsetting claims using the data 

processes for modeling the standard APCs and the criteria-based APCs described in 

section II.A.2. of this proposed rule, where appropriate. The reasoning behind 
implementing modeling edits or changes in the criteria-based APCs would not be affected 

because the process of developing the relative payment weights based on a measure of 

central tendency is the last step of the modeling process, and occurs only once the set of 

claims used in ratesetting has been established. 

One important step that occurs after the development of relative payment weights 

is the assignment of individual HCPCS codes (services) to APCs. In our analysis of the 

impacts of a process conversion to geometric means, we determined that the change to 

means would not significantly influence the application of the 2 times rule. Very few 

services would need to be shifted to new APCs because of 2 times rule violations as the 

use of geometric means would resolve some violations that would exist under medians 

even as it creates others due to new cost projections. The net impact of the proposed 

change results in seven more violations of the 2 times rule created by the entire rebasing 

process than would exist if median-based values were used. 

During the development of this proposal, we also determined that the cumulative 

effect of data shifts over the 12 years of OPPS introduced a number of inconsistencies in 

the APC groupings based on clinical and resource homogeneity. We believe that a shift 

to payments derived from geometric means would improve our ability to identify 

resource distinctions between previously homogenous services, and we intend to use this 

information over the next year to reexamine our APC structure and assignments to 

consider further ways of increasing the stability of payments for individual services over 

time. 

We note that this proposal to establish all OPPS relative payment weights using 

geometric mean costs would apply to all APCs that would have previously been paid 
based on median costs. In addition, we are proposing that the relative payment weights 

for line item based payments such as brachytherapy sources, which are discussed in 

section II.A.2.d.(6) of this proposed rule, as well as blood and blood products, which are 

discussed in II.A.2.d.(2) of this proposed rule, be calculated based on their geometric 

mean costs for the CY 2013 OPPS. 

The CY 2013 proposal to base relative payment weights on geometric mean costs 

would specifically include the CMHC and hospital-based partial hospitalization program 

APCs, which were previously based on median per diem costs. Their estimated 

payments would continue to be included in the budget neutral weight scaling process, and 

their treatment is similar to other nonstandard APCs discussed in section II.A. of this 

proposed rule. The process for developing a set of claims that is appropriate for 

modeling these APCs would continue to be the same as in recent years, with the only 

proposed difference being that a geometric mean per diem cost would be calculated 

rather than a median per diem cost. The proposed CY 2013 partial hospitalization 

payment policies are described in section VIII. of this proposed rule. 

We believe it is important to make the transition from medians to means across all 

APCs in order to capture the complete range of costs associated with all services, and to 

ensure that the relative payment weights of the various APCs are properly aligned. If 

some OPPS payments calculated using relative payment weights are based on means 

while others are based on medians, the ratio of the two payments will not accurately 

reflect the ratio of the relative costs reported by the hospitals. This is of particular 

significance in the process of establishing the budget neutral weight scaler, discussed in 

section II.A.4. of this proposed rule. 
We note that the few proposed exceptions to the applications of the geometric 

mean-based relative payment weights would be the same exceptions that exist when 

median-based weights are applied, including codes paid under different payment systems 

or not paid under the OPPS, items and services not paid by Medicare, items or services 

paid at reasonable cost or charges reduced to cost, among others. For more information 

about the various proposed payment status indicators for CY 2013, we refer readers to 

Addendum D1 to this proposed rule (which are available via the Internet on the CMS 

Web site). 

We are proposing for CY 2013 that payment for nonpass-through separately 

payable drugs and biologicals will continue to be developed through its own separate 

process. Payments for drugs and biologicals are included in the budget neutrality 

adjustments, under the requirements in section 1833(t)(9)(B) of the Act, but the budget 

neutral weight scaler is not applied to their payments because they are developed through 

a separate methodology, outside the relative payment weight based process. We note 

that, for CY 2013, we are proposing to pay for nonpass-through 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. Also, as is our standard 

methodology, for CY 2013, we are proposing to use payment rates based on the ASP data 

from the fourth quarter of CY 2011 for budget neutrality estimates, packaging 

determinations, and the impact analyses. For items that did not have an ASP-based 

payment rate, such as some therapeutic radiopharmaceuticals, we are proposing to use 

their mean unit cost derived from the CY 2011 hospital claims data to determine their per 
day cost. The proposed nonpass-through separately payable drug and biological payment 

policy for CY 2013 is described in greater detail in section V.B. of this proposed rule. 

 Under the revised ASC payment system that was effective January 1, 2008, we 

established a standard ASC ratesetting methodology that bases payment for most ASC 

covered surgical procedures and some covered ancillary services on the OPPS relative 

payment weights (72 FR 42491 through 42493). Therefore, because we are proposing to 

calculate CY 2013 OPPS relative payment weights using geometric mean costs, we also 

are proposing that CY 2013 ASC payment rates under the standard ASC ratesetting 

methodology would be calculated using the OPPS relative payment weights that are 

based on geometric mean costs. We note that proposing to base the relative payment 

weights on geometric mean costs rather than median costs affects the proposed CY 2013 

payment rates. Differences in the proposed payment rates, as with any changes from year 

to year, affect other parts of the OPPS, including the proposed copayments described in 

section II.I. of this proposed rule as well as the proposed fixed-dollar outlier threshold 

described in section II.G. of this proposed rule. 

 Under this CY 2013 proposal to base the relative payment weights on geometric 

means, we also are proposing to revise the related regulations that currently reflect a 

median cost-based OPPS to instead reflect a geometric mean cost-based OPPS. 

Specifically, we are proposing to revise 42 CFR 419.31, which describes the 2 times rule 

discussed in section III.B. of this proposed rule and the development of weights based on 

the cost metrics discussed in section II.A.4 of this proposed rule. 

 In the Addenda to this proposed rule (which are available via Internet on the CMS 

Web site), we are including a comparison file that identifies differences in the proposed 
payments between a geometric means-based OPPS and a median-based OPPS. In section 

XXII. of this proposed rule, which discusses the regulatory impact analysis, we are 

providing an additional column in the impact tables for the OPPS that identifies the 

estimated impact due to APC recalibration of a geometric means-based OPPS as well as a 

column that estimates the impact of recalibration based on CY 2011 claims and historical 

cost report data. We are including in the Addenda to this proposed rule (which is 

available via the Internet on the CMS Web site) data that compare the budget neutral 

OPPS payments based on geometric means to the budget neutral OPPS payments based 

on medians. As depicted in the impact tables, many provider categories would 

experience limited impacts under the proposal to base the OPPS relative payment weights 

on geometric means. We note that the impact tables only estimate the OPPS payment 

impact based on the most current available claims and cost report data, and that 

providers’ actual payments may vary, depending on the mix of services provided in the 

actual claims year. Also, the budget neutral payment adjustments ensure that, under 

either a geometric mean-based system or a median cost-based system, aggregate OPPS 

payments would remain the same. 

Section XXII. of this proposed rule contains an OPPS provider impact table that 

estimates the effect of proposed policy changes and budget neutrality adjustments on 

provider payment under the CY 2013 OPPS. Column 3 of the impact table shows the 

estimated impact by provider category of calculating the CY 2013 OPPS payments based 

on geometric mean costs rather than median cost. While the proposal to shift the basis 

for relative payment weights to geometric mean costs may involve some changes to the 

relative weights on which OPPS payments are based, providers generally experience 
limited impacts to payment as a result of the CY 2013 proposal. Those provider 

categories that improve significantly as a result of the proposal to base the CY 2013 

relative payment weights on geometric mean costs generally included non-IPPS hospitals 

that provided psychiatric, hospital-based partial hospitalization, and other services whose 

relative payment weights improved based on geometric mean costs. As noted above, we 

recognize that there may be fluctuations in the relative payment weights based on this 

CY 2013 proposal, but we believe that this proposal represents an improvement that more 

accurately estimates the costs associated with providing services. 

 In our experience developing the OPPS, we have implemented many changes to 

obtain more cost information from the claims and cost report data available to us, in an 

effort to arrive at more accurate estimates of service cost. Many of those changes are 

described above and in prior OPPS final rules. Despite the challenges created by the 

complexity of the data and the diversity of facility accounting systems, we continue to 

examine possible process and data changes that may further improve precision, validity, 

and utility. Commenters have historically expressed concerns about the degree to which 

OPPS relative payment weights are reflective of the service costs associated with 

providing them, APC payment rate volatility from year to year, and other cost modeling 

related issues. We recognize that some of those issues will continue because they are 

related to naturally occurring changes in the economic environment, clinical practice, and 

the nature of payment systems, among other reasons. However, we believe that basing 

the OPPS relative payment weights on geometric means would better capture the range of 

costs associated with providing services, improve payment accuracy while limiting yearto-year volatility, and allow reconfigurations in the APC environment using a metric that 
provides greater computational depth. For these reasons, and those discussed above, we 

are proposing to base the CY 2013 OPPS/ASC relative payment weights on geometric 

mean costs. 

3. Proposed Changes to Packaged Services 

a. Background 

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. However, with the 

exception of outlier cases, overall payment is adequate to ensure access to appropriate 

care. The OPPS packages payment for multiple interrelated services into a single 

payment to create incentives for providers to furnish services in the most efficient way by 

enabling hospitals to manage their resources with maximum flexibility, thereby 

encouraging long-term cost containment. For example, where there are a variety of 

supplies that could be used to furnish a service, some of which are more expensive than 

others, packaging encourages hospitals to use the least expensive item that meets the 

patient’s needs, rather than to routinely use a more expensive item, which could result if 

separate payment is provided for the items. Packaging also encourages hospitals to 

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. 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 also may reduce the importance of 

refining service-specific payment because packaged payments include costs associated 

with higher cost cases requiring many ancillary services and lower cost cases requiring 

fewer ancillary services. For these reasons, packaging payment for items and services 

that are typically ancillary and supportive to a primary service has been a fundamental 

part of the OPPS since its implementation in August 2000. 

We use the term “dependent service” to refer to the HCPCS codes that represent 

services that are typically ancillary and supportive to a primary diagnostic or therapeutic 

modality. We use the term “independent service” to refer to the HCPCS codes that 

represent the primary therapeutic or diagnostic modality into which we package payment 

for the dependent service. In future years, as we consider the development of larger 

payment groups that more broadly reflect services provided in an encounter or episode of 

care, it is possible that we might propose to bundle payment for a service that we now 

refer to as “independent.” 

We assign status indicator “N” to those HCPCS codes of dependent services that 

we believe are always integral to the performance of the primary modality; therefore, we 

always package their costs into the costs of the separately paid primary services with 

which they are billed. Services assigned to status indicator “N” are unconditionally 

packaged. 

We assign status indicator “Q1” (STVX-Packaged Codes), “Q2” (T-Packaged 

Codes), or “Q3” (Codes that may be paid through a composite APC) to each 

conditionally packaged HCPCS code. An STVX-packaged code describes a HCPCS 

code whose payment is packaged with one or more separately paid primary services with 
the status indicator of “S,” “T,” “V,” or “X” furnished in the hospital outpatient 

encounter. A T-packaged code describes a code whose payment is only packaged with 

one or more separately paid surgical procedures with the status indicator of “T” are 

provided during the hospital outpatient encounter. STVX-packaged codes and 

T-packaged codes are paid separately in those uncommon cases when they do not meet 

their respective criteria for packaged payment. STVX-packaged codes and T-packaged 

codes are conditionally packaged. We refer readers to section XII.A.1. of this proposed 

rule and Addendum D1, which is available via the Internet on the CMS Web site with 

other Addenda, for a complete listing of status indicators and the meaning of each status 

indicator. 

 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. We encourage hospitals to report all HCPCS codes that describe 

packaged services provided, unless the CPT Editorial Panel or CMS provides other 

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. 

Packaging under the OPPS also includes composite APCs, which are described in section 

II.A.2.e. of this proposed rule. 

b. Proposed Clarification of the Regulations at 42 CFR 419.2(b) 

 We are proposing to clarify the regulatory language at 42 CFR 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. This proposed clarification is consistent with our interpretation and application 

of § 419.2(b) since the inception of the OPPS. We invite public comments on this 

proposed clarification. 

c. Packaging Recommendations of the HOP Panel (“The Panel”) at its February 2012 

Meeting 

 During its February 2012 meeting, the Panel made five recommendations related 

to packaging and to the function of the subcommittee. One additional recommendation 

that originated from the APC Groups and Status Indicator (SI) Assignment Subcommittee 

about observation services is discussed in section II.A.2.e. of this proposed rule. The 

report of the February 2012 meeting of the Panel may be found on the CMS Web site at: 
http://www.cms.gov/FACA/05_AdvisoryPanelonAmbulatoryPaymentClassificationGrou

ps.asp. 

Below we present each of the Panel’s five packaging recommendations and our 

responses to those recommendations. 

 Panel Recommendation: CMS should delete HCPCS code G0259 (Injection 

procedure for sacroiliac joint; arthrography) and HCPCS code G0260 (Injection 

procedure for sacroiliac joint; provision of anesthetic, steroid and/or other therapeutic 

agent, with or without arthrography), and instead use CPT code 27096 (Injection 

procedure for sacroiliac joint, anesthetic/steroid, with image guidance (fluoroscopy or 

CT) including arthrography, when performed) with a status indicator of “T,” and assign 

CPT code 27096 to APC 0207 (Level III Nerve Injections). 

CMS Response: For CY 2012, we assigned CPT code 27096 to status indicator 

“B,” meaning that this code is not payable under the OPPS. In order to receive payment 

for procedures performed on the sacroiliac joint with or without arthrography or with 

image guidance under the OPPS, hospitals must use either HCPCS code G0259, which is 

assigned to status indicator “N” for CY 2012, or HCPCS code G0260, which is assigned 

to status indicator “T” for CY 2012, as appropriate. CMS created HCPCS codes G0259 

and G0260 to separate and distinguish the image guidance procedure from the therapeutic 

injection procedure for the sacroiliac joint. As stated above, guidance procedures are 

packaged under the OPPS because we believe that they are typically ancillary and 

supportive to a primary diagnostic or therapeutic modality and are an integral part of the 

primary service they support. 
We believe that the existence of HCPCS codes G0259 and G0260 is necessary to 

assign appropriate packaged payment for the image guidance procedure, according to our 

established packaging policy, and separate payment for the therapeutic injection 

procedure. Therefore, we are not accepting the Panel’s recommendation and are 

proposing to follow previously established policy and to continue to assign HCPCS code 

G0259 to status indicator “N,” HCPCS code G0260 to status indicator “T,” and CPT code 

27096 to status indicator “B” for CY 2013. 

Panel Recommendation: CMS provide data to the APC Groups and SI 

Subcommittee on the following arthrography services, so that the Subcommittee can 

consider whether the SI for these services should be changed from “N” to “S”: 

● HCPCS code 21116 (Injection procedure for temporomandibular joint 

arthrography); 

● HCPCS code 23350 (Injection procedure for shoulder arthrography or 

enhanced CT/MRI shoulder arthrography); 

● HCPCS code 24220 (Injection procedure for elbow arthrography); 

● HCPCS code 25246 (Injection procedure for wrist arthrography); 

● HCPCS code 27093 (Injection procedure for hip arthrography; without 

anesthesia); 

● HCPCS code 27095 (Injection procedure for hip arthrography; with 

anesthesia); 

● HCPSC code 27096 (Injection procedure for sacroiliac joint, anesthetic/steroid 

with image guidance (fluoroscopy or CT) including arthrography when performed); 

● HCPCS code 27370 (Injection procedure for knee arthrography); and 
● HCPCS code 27648 (Injection procedure for ankle arthrography). 

CMS Response: We are accepting the Panel’s recommendation that CMS provide 

data to the APC Groups and SI Assignment Subcommittee on HCPCS codes 21116, 

23350, 24220, 25246, 27093, 27095, 27096, 27370, and 27648 at a future Panel meeting. 

Panel Recommendation: CMS change the status indicator for HCPCS code 

19290 (Preoperative placement of needle localization wire, breast) from “N” to “Q1” and 

continue to monitor the frequency of the code when used in isolation. 

CMS Response: We agree with the Panel that proposing a status indicator of 

“Q1” is appropriate for HCPCS code 19290. This status indicator would allow for 

separate payment when this procedure is performed alone or packaged payment when this 

procedure is performed with an associated surgical procedure. Therefore, we are 

accepting the Panel’s recommendation and are proposing to assign HCPCS code 19290 to 

APC 0340 (Minor Ancillary Procedures) and status indicator “Q1” for the CY 2013 

OPPS. APC 0340 has a proposed cost of approximately $50.19 for CY 2013. 

Panel Recommendation: Judith Kelly, R.H.I.T., R.H.I.A., C.C.S., remain the chair 

of the APC Groups and SI Subcommittee. 

CMS Response: We are accepting the Panel’s recommendation that Judith Kelly, 

R.H.I.T., R.H.I.A., C.C.S., continue to chair the APC Groups and SI Assignment 

Subcommittee. 

Panel Recommendation: The work of the APC Groups and SI Assignment 

Subcommittee continue. 

CMS Response: We are accepting the Panel’s recommendation that the work of 

the APC Groups and SI Assignment Subcommittee continue. 
d. Proposed Packaging of Drugs, Biologicals, and Radiopharmaceuticals 

(1) Existing Packaging Policies 

 In the OPPS, we currently package five categories of drugs, biologicals, and 

radiopharmaceuticals (unless temporary pass-through status applies): (1) those with per 

day costs at or below the packaging threshold; (2) diagnostic radiopharmaceuticals; 

(3) contrast agents; (4) anesthesia drugs; and (5) drugs treated as surgical supplies. 

Anesthesia drugs are discussed further in section II.A.3.c.(2) of this proposed rule. For 

detailed discussions of the established packaging policies for diagnostic 

radiopharmaceuticals and contrast agents, we refer readers to the CY 2008 OPPS/ASC 

final rule with comment period (72 FR 66765 through 66768). For further details on 

drugs treated as surgical supplies, we refer readers to the CY 2003 OPPS final rule 

(67 FR 66767) and Chapter 15, Section 50.2 of the Medicare Benefit Policy Manual. 

(2) Clarification of Packaging Policy for Anesthesia Drugs 

 It has been longstanding OPPS policy to package “anesthesia” and “supplies and 

equipment for administering and monitoring anesthesia or sedation,” as described in 

42 CFR 419.2(b)(4) and (b)(5). As described above, items and services paid under the 

OPPS that are typically ancillary and supportive to a primary diagnostic or therapeutic 

modality and, in those cases, are considered dependent items and services are packaged 

into the payment of their accompanying independent primary service. In accordance with 

our current policy on packaging items and services, drugs that are used to produce 

anesthesia in all forms are ancillary and supportive to a primary diagnostic or therapeutic 

modality, and are included in our definition of “anesthesia” as described in § 419.2(b)(4) 

and (b)(5). However, we recognize that some anesthesia drugs may qualify for 
transitional pass-through status under section 1833(t)(6) of the Act. Therefore, in this 

proposed rule, we are clarifying that our general policy is to package drugs used to 

produce anesthesia, and that those anesthesia drugs with pass-through status will be 

packaged upon the expiration of pass-through status. We are inviting public comment on 

our clarification of the existing packaging policies for anesthesia drugs under 

§ 419.2(b)(4) and (b)(5). 

e. Proposed Packaging of Payment for Diagnostic Radiopharmaceuticals, Contrast 

Agents, and Implantable Biologicals (“Policy-Packaged” Drugs and Devices) 

Prior to CY 2008, the methodology of calculating a product’s estimated per day 

cost and comparing it to the annual OPPS drug packaging threshold was used to 

determine the packaging status of drugs, biologicals, and radiopharmaceuticals under the 

OPPS (except for the CYs 2005 through 2009 exemption for 5-HT3 antiemetics). 

However, as established in the CY 2008 OPPS/ASC final rule with comment period 

(72 FR 66766 through 66768), we began packaging payment for all diagnostic 

radiopharmaceuticals and contrast agents into the payment for the associated procedure, 

regardless of their per day costs. In addition, in CY 2009, we adopted a policy that 

packaged the payment for nonpass-through implantable biologicals into payment for the 

associated surgical procedure on the claim, regardless of their per day cost (73 FR 68633 

through 68636). We refer to diagnostic radiopharmaceuticals and contrast agents 

collectively as “policy-packaged” drugs. We refer to implantable biologicals as 

“devices” because, in CY 2010, we finalized a policy to treat implantable biologicals as 

devices for OPPS payment purposes (74 FR 60471 through 60477). 
As set forth at § 419.2(b), as a prospective payment system, the OPPS establishes 

a national payment rate, standardized for geographical wage differences, that includes 

operating and capital-related costs that are directly related and integral to performing a 

procedure or furnishing a service on an outpatient basis, and in general, these costs 

include, but are not limited to, implantable prosthetics, implantable durable medical 

equipment, and medical and surgical supplies. Packaging costs into a single aggregate 

payment for a service, encounter, 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 efficiency and also enables hospitals to 

manage their resources with maximum flexibility. 

Prior to CY 2008, we noted that the proportion of drugs, biologicals, and 

radiopharmaceuticals that were separately paid under the OPPS had increased in recent 

years, a pattern that we also observed for procedural services under the OPPS. Our final 

CY 2008 policy that packaged payment for all nonpass-through diagnostic 

radiopharmaceuticals and contrast agents, regardless of their per day costs, contributed 

significantly to expanding the size of the OPPS payment bundles and is consistent with 

the principles of a prospective payment system. 

As discussed in more detail in the CY 2009 OPPS/ASC final rule with comment 

period (73 FR 68645 through 68649), we presented several reasons supporting our initial 

policy to package payment of diagnostic radiopharmaceuticals and contrast agents into 

their associated procedures on a claim. Specifically, we stated that we believed 

packaging was appropriate because: (1) the statutorily required OPPS drug packaging 
threshold had expired; (2) diagnostic radiopharmaceuticals and contrast agents function 

effectively as supplies that enable the provision of an independent service, rather than 

serving themselves as a therapeutic modality; and (3) section 1833 (t)(14)(A)(iii) of the 

Act required that payment for specified covered outpatient drugs (SCODs) be set 

prospectively based on a measure of average hospital acquisition cost (76 FR 74307). 

Therefore, we believe it is appropriate to propose to continue to treat diagnostic 

radiopharmaceuticals and contrast agents differently from specified covered outpatient 

drugs (SCODs) for CY 2013. Therefore, we are proposing to continue packaging 

payment for all contrast agents and diagnostic radiopharmaceuticals, collectively referred 

to as “policy-packaged” drugs, regardless of their per day costs, for CY 2013. We also 

are proposing to continue to package the payment for diagnostic radiopharmaceuticals 

into the payment for the associated nuclear medicine procedure and to package the 

payment for contrast agents into the payment for the associated echocardiography 

imaging procedure, regardless of whether the agent met the OPPS drug packaging 

threshold. We refer readers to the CY 2010 OPPS/ASC final rule with comment period 

for a detailed discussion of nuclear medicine and echocardiography services 

(74 FR 35269 through 35277). 

For CY 2013, we are proposing to make an additional payment of $10 for 

diagnostic radiopharmaceuticals that utilize the Tc-99m radioisotope produced by 

non-HEU methods. We are proposing to base this payment on the best available 

estimations of the marginal costs associated with non-HEU radioisotope production, 

pursuant to our authority described in section 1833(t)(2)(E) of the Act which allows us to 

establish “other adjustments as determined to be necessary to ensure equitable payments” 
under the OPPS. We describe this proposed policy in further detail in section III.C.3. of 

this proposed rule. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68634), we 

began packaging the payment for all nonpass-through implantable biologicals into 

payment for the associated surgical procedure because we consider these products to 

always be ancillary and supportive to independent services, similar to implantable 

nonbiological devices that are always packaged. We continued to follow this policy in 

CY 2012 (76 FR 74306 through 74310). Specifically, we continue to package payment 

for nonpass-through implantable biologicals, also known as devices that are surgically 

inserted or implanted (through a surgical incision or a natural orifice) into the body. For 

CY 2013, we are proposing to continue to apply the policies finalized in CY 2012, to 

package payment for nonpass-through implantable biologicals (“devices”) that are 

surgically inserted or implanted (through a surgical incision or a natural orifice) into the 

body. 

Although our final CY 2009 policy (which we are proposing to continue for 

CY 2013 as discussed below) packaged payment for all diagnostic radiopharmaceuticals 

and contrast agents into the payment for their associated procedures, we are proposing to 

continue to provide payment for these items in CY 2013 based on a proxy for average 

acquisition cost, as we did in CY 2009. We continue to believe that the line-item 

estimated cost for a diagnostic radiopharmaceutical or contrast agent in our claims data is 

a reasonable approximation of average acquisition and preparation and handling costs for 

diagnostic radiopharmaceuticals and contrast agents, respectively. As we discussed in 

the CY 2009 OPPS/ASC final rule with comment period (73 FR 68645), we believe that 
hospitals have adapted to the CY 2006 coding changes for radiopharmaceuticals and 

responded to our instructions to include charges for radiopharmaceutical handling in their 

charged for the radiopharmaceutical products. Further, because the standard OPPS 

packaging methodology packaged the total estimated cost of each diagnostic 

radiopharmaceutical and contrast agent on each claim (including the full range of costs 

observed on the claims) with the costs of associated procedures for ratesetting, this 

packaging approach is consistent with considering the average cost for diagnostic 

radiopharmaceuticals and contrast agents. In addition, as we noted in the CY 2009 

OPPS/ASC final rule with comment period (72 FR 68646), these drugs, biologicals, or 

radiopharmaceuticals for which we have not established a separate APC and, therefore, 

for which payment would be packaged rather than separately provided under the OPPS, 

are considered to not be SCODs. Similarly, drugs and biologicals with per day costs of 

less than $80 in CY 2013, which is the proposed packaging threshold for CY 2013, that 

are packaged and for which a separate APC has not been established also are not SCODs. 

This reading is consistent with our proposed payment policy whereby we package 

payment for diagnostic radiopharmaceuticals and contrast agents and provide payment 

for these products through payment for their associated procedures. 

f. Summary of Proposals 

The HCPCS codes that we are proposing for unconditionally packaged (for which 

we are proposing to continue to assign status indicator “N”), or conditionally packaged 

(for which we are proposing continue to assign status indicators “Q1,” “Q2,” or “Q3”), 

are displayed in Addendum B of this proposed rule (which is available via the Internet on 

the CMS Web site). The supporting documents for this CY 2013 OPPS/ASC proposed 
rule, including, but not limited to, Addendum B, are available on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. To view the proposed status indicators by 

HCPCS code in Addendum B, select “CMS 1589-P” and then select the folder labeled 

“2013 OPPS Proposed Rule Addenda” from the list of supporting files. Open the zipped 

file and select Addendum B, which is available as both an Excel file and a text file. 

4. Proposed Calculation of OPPS Scaled Payment Weights 

 For CY 2013, we are proposing to calculate the relative payment weights for each 

APC for CY 2013 shown in Addenda A and B to this 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 this proposed rule. 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 CY 2013, we are proposing to base the relative payment weights on which 

OPPS payments will be made by using geometric mean costs, as described in section 

II.A.2.f. of this proposed rule. However, in an effort to maintain consistency in 
calculating unscaled weights that represent the cost of some of the most frequently 

provided services, we are proposing to continue to use the cost of the mid-level clinic 

visit APC (APC 0606) in calculating unscaled weights. Following our general 

methodology for establishing relative payment weights derived from APC costs, but 

using the proposed CY 2013 geometric mean cost for APC 0606, for CY 2013, we are 

proposing to assign APC 0606 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 0606 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 2013 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, we are proposing to compare the estimated aggregate 

weight using the CY 2012 scaled relative payment weights to the estimated aggregate 

weight using the proposed CY 2013 unscaled relative payment weights. For CY 2012, 

we multiplied the CY 2012 scaled APC relative weight applicable to a service paid under 

the OPPS by the volume of that service from CY 2011 claims to calculate the total weight 

for each service. We then added together the total weight for each of these services in 

order to calculate an estimated aggregate weight for the year. For CY 2013, we are 
proposing to perform the same process using the proposed CY 2013 unscaled weights 

rather than scaled weights. We then calculate the proposed weight scaler by dividing the 

CY 2012 estimated aggregate weight by the proposed CY 2013 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. 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-ServicePayment/HospitalOutpatientPPS/index.html. We are proposing to include estimated 

payments to CMHCs in our comparison of estimated unscaled weights in CY 2013 to 

estimated total weights in CY 2012 using CY 2011 claims data, holding all other 

components of the payment system constant to isolate changes in total weight. Based on 

this comparison, we adjusted the proposed unscaled relative payment weights for 

purposes of budget neutrality. The proposed CY 2013 unscaled relative payment weights 

were adjusted by multiplying them by a proposed weight scaler of 1.3504 to ensure that 

the proposed CY 2013 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 proposed rule) was included in the proposed budget neutrality 

calculations for the CY 2013 OPPS. 
 We note that we are providing additional information, in association with this 

proposed rule, so that the public can provide meaningful comment on our proposal to 

base the CY 2013 OPPS relative payment weights on geometric mean costs. We will 

make available online a file that compares the calculated CY 2013 proposed OPPS 

payments using geometric mean costs to those that would be calculated based on median 

costs. The proposed scaled relative payment weights listed in Addenda A and B to this 

proposed rule (which are available via the Internet on the CMS Web site) incorporate the 

proposed recalibration adjustments discussed in sections II.A.1. and II.A.2. of this 

proposed rule. 

B. Proposed Conversion Factor Update

Section 1833(t)(3)(C)(ii) of the Act requires us to update the conversion factor 

used to determine 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 2013 IPPS/LTCH PPS 

proposed rule (77 FR 27975), consistent with current law, based on IHS Global Insight, 

Inc.’s first quarter 2012 forecast of the FY 2013 market basket increase, the proposed 

FY 2013 IPPS market basket update is 3.0 percent. However, sections 1833(t)(3)(F) and 

1833(t)(3)(G)(ii) of the Act, as added by section 3401(i) of Pub. L. 111-148 and as 

amended by section 10319(g) of that law and further amended by section 1105(e) of 

Pub. L. 111-152, provide adjustments to the OPD fee schedule increase factor for 

CY 2013. 
Specifically, section 1833(t)(3)(F) requires that the OPD fee schedule increase 

factor under subparagraph (C)(iv) be reduced by the adjustments described in that 

section. 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 2013 IPPS/LTCH PPS proposed rule 

(77 FR 27975 through 27976), we discuss the calculation of the proposed MFP 

adjustment for FY 2013, which is 0.8 percentage point. 

We are proposing that if more recent data are subsequently available after the 

publication of this 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 2013 market basket update and the MFP adjustment, components in 

calculating the OPD fee schedule increase factor under sections 1833(t)(3)(C)(iv) and (F) 

of the Act, in the CY 2013 OPPS/ASC final rule with comment period. 

In addition, section 1833(t)(3)(F)(ii) of the Act requires that for, each of 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 2013, section 1833(t)(3)(G)(ii) of the Act provides a 0.1 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)(ii) of the Act, 

we are proposing to apply a 0.1 percentage point reduction to the OPD fee schedule 

increase factor for CY 2013. 

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, we are proposing to apply an OPD fee 

schedule increase factor of 2.1 percent for the CY 2013 OPPS (3.0 percent, which is the 

proposed estimate of the hospital inpatient market basket percentage increase, less the 

proposed 0.8 percentage point MFP adjustment, less the 0.1 percentage point additional 

adjustment). 

We note that hospitals that fail to meet the Hospital OQR Program reporting 

requirements would to be subject to an additional reduction of 2.0 percentage points from 

the OPD fee schedule increase factor adjustment to the conversion factor that would be 

used to calculate the OPPS payment rates made for their services, as required by section 

1833(t)(17) of the Act. As a result, those hospitals failing to meet the Hospital OQR 

Program reporting requirements would receive an OPD fee schedule increase factor of 

0.1 (3.0 percent, which is the proposed estimate of the hospital inpatient market basket 

percentage increase, less the proposed 0.8 percentage point MFP adjustment, less the 0.1 

percentage point additional adjustment, less 2.0 percentage point for the Hospital OQR 
Program reduction). For further discussion of the Hospital OQR Program, we refer 

readers to section XV.F. of this proposed rule. 

In this proposed rule, we are proposing to amend 42 CFR 419.32(b)(1)(iv)(B) by 

adding a new paragraph (4) to reflect the requirement in section 1833(t)(3)(F)(i) of the 

Act that, for CY 2013, we reduce the OPD fee schedule increase factor by the multifactor 

productivity adjustment as determined by CMS, and to reflect the requirement in section 

1833(t)(3)(G)(ii) 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 0.1 percentage point for 

CY 2013. 

 To set the OPPS conversion factor for CY 2013, we are proposing to increase the 

CY 2012 conversion factor of $70.016 by 2.1 percent. In accordance with section 

1833(t)(9)(B) of the Act, we are proposing to further adjust the conversion factor for 

CY 2013 to ensure that any revisions we make to the updates for a revised wage index 

and rural adjustment are made on a budget neutral basis. We calculated an overall 

proposed budget neutrality factor of 1.0003 for wage index changes by comparing 

proposed total estimated payments from our simulation model using the proposed 

FY 2013 IPPS wage indices to those payments using the current (FY 2012) IPPS wage 

indices, as adopted on a calendar year basis for the OPPS (77 FR 27946 through 27955). 

 For CY 2013, we are not proposing to make a change to our rural adjustment 

policy, as discussed in section II.E. of this proposed rule. Therefore, the proposed budget 

neutrality factor for the rural adjustment is 1.0000. 

 For CY 2013, we are proposing to continue previously established policies for 

implementing the cancer hospital payment adjustment described in section 1833(t)(18) of 
the Act, as discussed in section II.F. of this proposed rule. We are proposing to calculate 

a CY 2013 budget neutrality adjustment factor for the cancer hospital payment 

adjustment by comparing the estimated total CY 2013 payments under section 1833(t) of 

the Act including the proposed CY 2013 cancer hospital payment adjustment to the 

estimated CY 2013 total payments using the CY 2012 final cancer hospital payment 

adjustment under sections 1833(t)(18)(B) and 1833(t)(2)(E) of the Act. The difference in 

the CY 2013 estimated payments due to applying the proposed CY 2013 cancer hospital 

payment adjustment relative to the CY 2012 final cancer hospital payment adjustment 

does not have a significant impact on the budget neutrality calculation. Therefore, we are 

proposing to apply a proposed budget neutrality adjustment factor of 1.0000 to the 

conversion factor to ensure that the cancer hospital payment adjustment is budget neutral. 

For this proposed rule, we estimate that pass-through spending for both drugs and 

biologicals and devices for CY 2013 would equal approximately $84 million, which 

represents 0.18 percent of total projected CY 2013 OPPS spending. Therefore, the 

proposed conversion factor would also be adjusted by the difference between the 

0.22 percent estimate of pass-through spending for CY 2012 and the 0.18 percent 

estimate of CY 2013 pass-through spending, resulting in a proposed adjustment for 

CY 2013 of 0.04 percent. Finally, estimated payments for outliers would remain at 

1.0 percent of total OPPS payments for CY 2013. 

 The proposed OPD fee schedule increase factor of 2.1 percent for CY 2013 (that 

is, the estimate of the hospital inpatient market basket percentage increase of 3.0 percent 

less the proposed 0.8 percentage point MFP adjustment and less the 0.1 percentage point 

required under section 1833(t)(3)(F) of the Act), the required proposed wage index 
budget neutrality adjustment of approximately 1.0003, the proposed cancer hospital 

payment adjustment of 1.000, and the proposed adjustment of 0.04 percent of projected 

OPPS spending for the difference in the pass-through spending result in a proposed 

conversion factor for CY 2013 of $71.537. 

Hospitals that fail to meet the reporting requirements of the Hospital OQR 

Program would continue to be subject to a further reduction of 2.0 percentage points to 

the OPD fee schedule increase factor 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 XV.F. of this proposed rule. To calculate the proposed 

CY 2013 reduced market basket conversion factor for those hospitals that fail to meet the 

requirements of the Hospital OQR Program for the full CY 2013 payment update, we are 

proposing to make all other adjustments discussed above, but using a proposed reduced 

OPD fee schedule update factor of 0.1 percent (that is, the proposed OPD fee schedule 

increase factor of 2.1 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 proposed reduced conversion factor for CY 2013 of 

$70.106 for those hospitals that fail to meet the Hospital OQR requirements (a difference 

of -$1.431 in the conversion factor relative to those hospitals that met the Hospital OQR 

requirements).

 In summary, for CY 2013, we are proposing to use a conversion factor of $71.537 

in the calculation of the national unadjusted payment rates for those items and services 
for which payment rates are calculated using geometric mean costs. For further 

discussion on the proposal to base the CY 2013 OPPS relative payment weights using 

geometric mean costs, we refer readers to section II.A.2.f. of this proposed rule. We are 

proposing to amend § 419.32(b)(1)(iv)(B) by adding a new paragraph (4) to reflect the 

reductions to the OPD fee schedule increase factor that are required for CY 2013 in order 

to satisfy the statutory requirements of sections 1833(t)(3)(F) and (t)(3)(G)(ii) of the Act. 

We are proposing to use a reduced conversion factor of $70.106 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. Proposed Wage Index Changes

 Section 1833(t)(2)(D) of the Act requires the Secretary to determine a wage 

adjustment factor to account for geographic wage differences in a portion of the OPPS 

payment rate, which includes the copayment standardized amount and is attributable to 

labor and labor-related costs. This portion of the OPPS payment rate is called the OPPS 

labor-related share. This adjustment must be made in a budget neutral manner and 

budget neutrality is discussed in section II.B. of this proposed rule. 

The OPPS labor-related share is 60 percent of the national OPPS payment. This 

labor-related share is based on a regression analysis that determined that, for all hospitals, 

approximately 60 percent of the costs of services paid under the OPPS were attributable 

to wage costs. We confirmed that this labor-related share for outpatient services is 

appropriate during our regression analysis for the payment adjustment for rural hospitals 

in the CY 2006 OPPS final rule with comment period (70 FR 68553). Therefore, we are 
not proposing to revise this policy for the CY 2013 OPPS. We refer readers to 

section II.H. of this proposed rule 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 proposed rule, for estimating APC costs, 

we standardize 60 percent of estimated claims costs for geographic area wage variation 

using the same FY 2013 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. 

 As published in the original OPPS April 7, 2000 final rule with comment period 

(65 FR 18545), the OPPS has consistently 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 

(77 FR 74191). As discussed in that final rule with comment period, section 10324 of the 

Affordable Care Act requires a “frontier State” wage index floor of 1.00 in certain cases. 
For the CY 2013 OPPS, we are proposing to implement this provision in the same 

manner as we did for CY 2012. That is, frontier State hospitals would receive a wage 

index of 1.00 if the otherwise applicable wage index (including reclassification, rural 

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 would 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 would also apply for the affiliated 

HOPD. We refer readers to the FY 2011 and FY 2012 IPPS/LTCH PPS final rules 

(75 FR 50160 through 50161 and 76 FR 51586, respectively) and the FY 2013 

IPPS/LTCH PPS proposed rule (77 FR 27951) for a detailed discussion 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. 

In addition to the changes required by the Affordable Care Act, we note that the 

proposed FY 2013 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 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 2013 IPPS/LTCH 

PPS proposed rule (77 FR 27946 through 27955) for a detailed discussion of all proposed 

changes to the FY 2013 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. 

Section 102 of the Medicare and Medicaid Extender Act, extended through 

FY 2011, section 508 reclassifications as well as certain special exceptions. The most 

recent extension of these special wage indices was included in section 302 of the 

Temporary Payroll Tax Cut Continuation Act of 2011 (Pub. L. 112-78), as amended by 

section 3001 of the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. 

112-96). These legislative provisions extended certain section 508 reclassifications and 

special exception wage indices for a 6-month period during FY 2012, from 

October 1, 2011 through March 31, 2012. We implemented this latest extension in a 

notice (CMS-1442-N) published in the Federal Register on April 20, 2012 

(77 FR 23722). Therefore, the extension is no longer applicable, effective with FY 2013. 

As we did for CY 2010, we revised wage index values for certain special exception 

hospitals from January 1, 2012 through June 30, 2012, under the OPPS, in order to give 

these hospitals the special exception wage indices under the OPPS for the same time 

period as under the IPPS. In addition, because the OPPS pays on a calendar year basis, 

the end date under the OPPS for certain nonsection 508 and nonspecial exception 

providers to receive special wage indices was June 30, 2012, instead of March 31, 2012, 

so that these providers also received a full 6 months of payment under the revised wage 

index comparable to the IPPS. 

 For purposes of the OPPS, we are proposing to continue our policy in CY 2013 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)). 

We note that, because non-IPPS hospitals cannot reclassify, they are eligible for the 

out-migration wage adjustment. Table 4J listed in the FY 2013 IPPS/LTCH PPS 

proposed rule (and made available via the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/AcuteInpatientPPS/index.html) identifies counties eligible for the out-migration 

adjustment and hospitals that would receive the adjustment for FY 2013. We note 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 2013 IPPS/LTCH PPS proposed rule (77 FR 27952) 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 as Addendum L to this proposed rule with the 

addition of non-IPPS hospitals that would receive the section 505 out-migration 

adjustment under the CY 2013 OPPS. Addendum L is available via the Internet on the 

CMS Web site. 

In response to concerns frequently expressed by providers and other relevant 

parties that the current wage index system does not effectively reflect the true variation in 

labor costs for a large cross-section of hospitals, two studies were undertaken by the 

Department. First, section 3137(b) of the Affordable Care Act required the Secretary to 

submit to Congress a report that includes a plan to comprehensively reform the Medicare 
wage index applied under section 1886(d) of the Act. In developing the plan, the 

Secretary was directed to take into consideration the goals for reforming the wage index 

that were set forth by the Medicare Payment Advisory Commission (MedPAC) in its 

June 2007 report entitled “Report to Congress: Promoting Greater Efficiency in 

Medicare” and to “consult with relevant affected parties.” Second, the Secretary 

commissioned the Institute of Medicine (IOM) to “evaluate hospital and physician 

geographic payment adjustments, the validity of the adjustment factors, measures and 

methodologies used in those factors, and sources of data used in those factors.” Reports 

on both of these studies for geographic adjustment to hospital payments recently have 

been released. For summaries of the studies, their findings, and recommendations on 

reforming the wage index system, we refer readers to section IX.B. of the preamble of the 

FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28116 through 28119). 

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 are proposing to use the final FY 2013 IPPS wage indices for calculating OPPS 

payments in CY 2013. With the exception of the proposed out-migration wage 

adjustment table (Addendum L to this proposed rule, 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 proposed FY 2013 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 

proposed FY 2013 IPPS wage index tables. 

D. Proposed 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 this proposed rule, we are proposing 

to update the default ratios for CY 2013 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 2013, we are proposing 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 2013 OPPS 

relative weights. Table 12 below lists the proposed CY 2013 default urban and rural 

CCRs by State and compares them to last year’s default CCRs. These proposed CCRs 

represent 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 are proposing 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 weight each hospital’s 

CCR by the volume of separately paid line-items on hospital claims that correspond 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. 

 For this CY 2013 OPPS/ASC proposed rule, approximately 62 percent of the 

submitted cost reports utilized in the default ratio calculations represented data for cost 

reporting periods ending in CY 2010, and approximately 38 percent were for cost 

reporting periods ending in CY 2009. 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 2012 and CY 2013 

are modest and the few significant changes are associated with areas that have a small 

number of hospitals. 

Table 12 below lists the proposed statewide average default CCRs for OPPS 

services furnished on or after January 1, 2013. 

TABLE 12.–PROPOSED CY 2013 STATEWIDE AVERAGE CCRs 

State Urban/Rural 

Proposed 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

ALASKA RURAL 0.489 0.487

ALASKA URBAN 0.303 0.305

ALABAMA RURAL 0.208 0.210

ALABAMA URBAN 0.193 0.194

ARKANSAS RURAL 0.219 0.221

ARKANSAS URBAN 0.233 0.245

ARIZONA RURAL 0.238 0.237

ARIZONA URBAN 0.191 0.190

CALIFORNIA RURAL 0.192 0.193

CALIFORNIA URBAN 0.203 0.201

COLORADO RURAL 0.331 0.342

COLORADO URBAN 0.227 0.226

CONNECTICUT RURAL 0.364 0.365

CONNECTICUT URBAN 0.287 0.288

DISTRICT OF 

COLUMBIA URBAN 0.300 0.302
State Urban/Rural 

Proposed 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

DELAWARE RURAL 0.280 0.280

DELAWARE URBAN 0.349 0.347

FLORIDA RURAL 0.182 0.182

FLORIDA URBAN 0.166 0.164

GEORGIA RURAL 0.237 0.238

GEORGIA URBAN 0.213 0.214

HAWAII RURAL 0.323 0.321

HAWAII URBAN 0.306 0.306

IOWA RURAL 0.297 0.296

IOWA URBAN 0.267 0.269

IDAHO RURAL 0.417 0.417

IDAHO URBAN 0.357 0.353

ILLINOIS RURAL 0.239 0.238

ILLINOIS URBAN 0.230 0.230

INDIANA RURAL 0.285 0.292

INDIANA URBAN 0.256 0.262

KANSAS RURAL 0.276 0.279

KANSAS URBAN 0.211 0.208

KENTUCKY RURAL 0.215 0.217

KENTUCKY URBAN 0.241 0.239

LOUISIANA RURAL 0.242 0.247

LOUISIANA URBAN 0.225 0.224

MARYLAND RURAL 0.275 0.276

MARYLAND URBAN 0.246 0.246

MASSACHUSETTS RURAL 0.427 0.427

MASSACHUSETTS URBAN 0.322 0.322

MAINE RURAL 0.445 0.438

MAINE URBAN 0.449 0.453

MICHIGAN RURAL 0.303 0.305

MICHIGAN URBAN 0.302 0.305

MINNESOTA RURAL 0.470 0.482

MINNESOTA URBAN 0.321 0.320

MISSOURI RURAL 0.242 0.243

MISSOURI URBAN 0.263 0.260

MISSISSIPPI RURAL 0.226 0.224
State Urban/Rural 

Proposed 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

MISSISSIPPI URBAN 0.183 0.189

MONTANA RURAL 0.431 0.434

MONTANA URBAN 0.384 0.386

NORTH CAROLINA RURAL 0.253 0.251

NORTH CAROLINA URBAN 0.254 0.257

NORTH DAKOTA RURAL 0.322 0.322

NORTH DAKOTA URBAN 0.414 0.421

NEBRASKA RURAL 0.318 0.318

NEBRASKA URBAN 0.254 0.252

NEW HAMPSHIRE RURAL 0.317 0.323

NEW HAMPSHIRE URBAN 0.292 0.291

NEW JERSEY URBAN 0.207 0.212

NEW MEXICO RURAL 0.256 0.264

NEW MEXICO URBAN 0.278 0.288

NEVADA RURAL 0.234 0.233

NEVADA URBAN 0.162 0.167

NEW YORK RURAL 0.420 0.419

NEW YORK URBAN 0.367 0.356

OHIO RURAL 0.321 0.320

OHIO URBAN 0.237 0.234

OKLAHOMA RURAL 0.239 0.239

OKLAHOMA URBAN 0.213 0.217

OREGON RURAL 0.314 0.311

OREGON URBAN 0.335 0.328

PENNSYLVANIA RURAL 0.266 0.270

PENNSYLVANIA URBAN 0.200 0.199

PUERTO RICO URBAN 0.504 0.492

RHODE ISLAND URBAN 0.264 0.270

SOUTH CAROLINA RURAL 0.210 0.211

SOUTH CAROLINA URBAN 0.215 0.214

SOUTH DAKOTA RURAL 0.307 0.307

SOUTH DAKOTA URBAN 0.252 0.252

TENNESSEE RURAL 0.210 0.211

TENNESSEE URBAN 0.195 0.199

TEXAS RURAL 0.235 0.236
State Urban/Rural 

Proposed 

CY 2013 Default 

CCR 

Previous Default 

CCR (CY 2012 

OPPS Final Rule)

TEXAS URBAN 0.205 0.196

UTAH RURAL 0.373 0.379

UTAH URBAN 0.359 0.359

VIRGINIA RURAL 0.227 0.226

VIRGINIA URBAN 0.237 0.239

VERMONT RURAL 0.408 0.407

VERMONT URBAN 0.384 0.384

WASHINGTON RURAL 0.366 0.368

WASHINGTON URBAN 0.301 0.298

WISCONSIN RURAL 0.352 0.351

WISCONSIN URBAN 0.310 0.311

WEST VIRGINIA RURAL 0.281 0.280

WEST VIRGINIA URBAN 0.341 0.337

WYOMING RURAL 0.379 0.386

WYOMING URBAN 0.301 0.302

E. Proposed OPPS Payments to Certain Rural and Other Hospitals

1. Hold Harmless Transitional Payment Changes 

 When the OPPS was implemented, every provider was eligible to receive an 

additional payment adjustment (called either transitional corridor payments or transitional 

outpatient payments (TOPs)) if the payments it received for covered OPD services under 

the OPPS were less than the payments it would have received for the same services under 

the prior reasonable cost-based system (referred to as the pre-BBA amount). Section 

1833(t)(7) of the Act provides that the TOPs were temporary payments for most 

providers and intended to ease their transition from the prior reasonable cost-based 

payment system to the OPPS system. There are two types of hospitals excepted from the 

policy described above, cancer hospitals and children’s hospitals. Specifically, such a 
hospital could receive TOPs to the extent its PPS amount was less than its pre-BBA 

amount in the applicable year. Section 1833(t)(7)(D)(i) of the Act originally provided for 

TOPs to rural hospitals with 100 or fewer beds for covered OPD services furnished 

before January 1, 2004. However, section 411 of Pub. L. 108-173 (the Medicare 

Prescription Drug, Improvement, and Modernization Act of 2003) amended 

section 1833(t)(7)(D)(i) of the Act to extend these payments through December 31, 2005, 

for rural hospitals with 100 or fewer beds. Section 411 also extended the TOPs to sole 

community hospitals (SCHs) located in rural areas for services furnished during the 

period that began with the provider’s first cost reporting period beginning on or after 

January 1, 2004, and ending on December 31, 2005. Accordingly, the authority for 

making TOPs under section 1833(t)(7)(D)(i) of the Act, as amended by section 411 of 

Pub. L. 108-173, for rural hospitals having 100 or fewer beds and SCHs located in rural 

areas expired on December 31, 2005. 

 Section 5105 of Pub. L. 109-171 (the Deficit Reduction Act of 2005) extended the 

TOPs for covered OPD services furnished on or after January 1, 2006, and before 

January 1, 2009, for rural hospitals having 100 or fewer beds that are not SCHs. Section 

5105 of Pub. L. 109-171 also reduced the TOPs to rural hospitals from 100 percent of the 

difference between the provider’s OPPS payments and the pre-BBA amount. This 

provision provided that, in cases in which the OPPS payment was less than the provider’s 

pre-BBA amount, the amount of payment would be increased by 95 percent of the 

amount of the difference between the two amounts for CY 2006, by 90 percent of the 

amount of that difference for CY 2007, and by 85 percent of the amount of that 

difference for CY 2008. 
 For CY 2006, we implemented section 5105 of Pub. L. 109-171 through 

Transmittal 877, issued on February 24, 2006. In the Transmittal, we did not specifically 

address whether TOPs applied to essential access community hospitals (EACHs), which 

are considered to be SCHs under section 1886(d)(5)(D)(iii)(III) of the Act. Accordingly, 

by law, EACHs are treated as SCHs. In the CY 2007 OPPS/ASC final rule with 

comment period (71 FR 68010), we stated that EACHs were not eligible for TOPs under 

Pub. L. 109-171. However, we stated they were eligible for the adjustment for rural 

SCHs authorized under section 411 of Pub. L. 108-173. In the CY 2007 OPPS/ASC final 

rule with comment period (71 FR 68010 and 68228), we updated § 419.70(d) of our 

regulations to reflect the requirements of Pub. L. 109-171. 

 In the CY 2009 OPPS/ASC proposed rule (73 FR 41461), we stated that, effective 

for services provided on or after January 1, 2009, rural hospitals with 100 or fewer beds 

that are not SCHs would no longer be eligible for TOPs, in accordance with section 5105 

of Pub. L. 109-171. However, subsequent to issuance of the CY 2009 OPPS/ASC 

proposed rule, section 147 of Pub. L. 110-275 (the Medicare Improvements for Patients 

and Providers Act of 2008) amended section 1833(t)(7)(D)(i) of the Act by extending the 

period of TOPs to rural hospitals with 100 beds or fewer for 1 year, for services provided 

before January 1, 2010. Section 147 of Pub. L. 110-275 also extended TOPs to SCHs 

(including EACHs) with 100 or fewer beds for covered OPD services provided on or 

after January 1, 2009, and before January 1, 2010. In accordance with section 147 of 

Pub. L. 110-275, when the OPPS payment is less than the provider’s pre-BBA amount, 

the amount of payment is increased by 85 percent of the amount of the difference 

between the two payment amounts for CY 2009. 
For CY 2009, we revised our regulations at §§ 419.70(d)(2) and (d)(4) and added 

a paragraph (d)(5) to incorporate the provisions of section 147 of Pub. L. 110-275. In 

addition, we made other technical changes to § 419.70(d)(2) to more precisely capture 

our existing policy and to correct an inaccurate cross-reference. We also made technical 

corrections to the cross-references in paragraphs (e), (g), and (i) of § 419.70. 

For CY 2010, we made a technical correction to the heading of § 419.70(d)(5) to 

correctly identify the policy as described in the subsequent regulation text. The 

paragraph heading now indicates that the adjustment applies to small SCHs, rather than to 

rural SCHs. 

 In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60425), we 

stated that, effective for services provided on or after January 1, 2010, rural hospitals and 

SCHs (including EACHs) having 100 or fewer beds would no longer be eligible for 

TOPs, in accordance with section 147 of Pub. L. 110-275. However, subsequent to 

issuance of the CY 2010 OPPS/ASC final rule with comment period, section 3121(a) of 

the Affordable Care Act (Pub. L. 111-148) amended section 1833(t)(7)(D)(i)(III) of the 

Act by extending the period of TOPs to rural hospitals that are not SCHs with 100 beds 

or fewer for 1 year, for services provided before January 1, 2011. Section 3121(a) of the 

Affordable Care Act amended section 1833(t)(7)(D)(i)(III) of the Act and extended the 

period of TOPs to SCHs (including EACHs) for 1 year, for services provided before 

January 1, 2011, and section 3121(b) of the Affordable Care Act removed the 100-bed 

limitation applicable to such SCHs for covered OPD services furnished on and after 

January 1, 2010, and before January 1, 2011. In accordance with section 3121 of the 

Affordable Care Act, when the OPPS payment is less than the provider’s pre-BBA 
amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payment amounts for CY 2010. Accordingly, in the CY 2011 

OPPS/ASC final rule with comment period (75 FR 71882), we updated § 419.70(d) of the 

regulations to reflect the self-implementing TOPs extensions and amendments described 

in section 3121 of the Affordable Care Act. 

 Section 108 of the Medicare and Medicaid Extenders Act of 2010 (MMEA) 

(Pub. L. 111-309) extended for 1 year the hold harmless provision for a rural hospital 

with 100 or fewer beds that is not an SCH (as defined in section 1886(d)(5)(D)(iii) of the 

Act). Therefore, for such a hospital, for services furnished before January 1, 2012, when 

the PPS amount is less than the provider’s pre-BBA amount, the amount of payment to 

the hospital is increased by 85 percent of the amount of the difference between the two 

payments. In addition, section 108 of the MMEA also extended for 1 year the hold 

harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act 

(including EACHs) and removed the 100-bed limit applicable to such SCHs for covered 

OPD services furnished on or after January 1, 2010, and before January 1, 2012. 

Therefore, for such hospitals, for services furnished before January 1, 2012, when the 

PPS amount is less than the provider’s pre-BBA amount, the amount of payment to the 

hospital is increased by 85 percent of the amount of the difference between the two 

payments. Effective for services provided on or after January 1, 2012, a rural hospital 

with 100 or fewer beds that is not an SCH and an SCH (including EACHs) are no longer 

be eligible for TOPs, in accordance with section 108 of the MMEA. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74199), we revised our regulations at 
§ 419.70(d) to conform the regulation text to the self-implementing provisions of section 

108 of the MMEA described above. 

 Subsequent to issuance of the CY 2012 OPPS/ASC final rule with comment 

period, section 308 of the Temporary Payroll Tax Cut Continuation Act of CY 2011 

(Pub. L. 112-78), as amended by section 3002 of the Middle Class Tax Relief and Jobs 

Creation Act (Pub. L. 112-96), extended through December 31, 2012, the hold harmless 

provision for a rural hospital with 100 or fewer beds that is not an SCH (as defined in 

section 1886(d)(5)(D)(iii) of the Act). Therefore, for such a hospital, for services 

furnished before January 1, 2013, when the PPS amount is less than the provider’s 

pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payments. 

 Section 308 of Pub. L. 112-78 also extended through February 29, 2012 the 

hold harmless provision for an SCH (as defined in section 1886(d)(5)(D)(iii) of the Act), 

including an EACH, without the bed size limitation. Therefore, for such hospitals, for 

services furnished before March 1, 2012, when the PPS amount is less than the provider’s 

pre-BBA amount, the amount of payment is increased by 85 percent of the amount of the 

difference between the two payments. However, section 3002 of Pub. L. 112-96 

extended through December 31, 2012, the hold harmless provision for an SCH (as 

defined in section 1886(d)(5)(D)(iii) of the Act), including an EACH, that has no more 

than 100 beds. Therefore, for such hospitals, for services furnished before 

January 1, 2013, when the PPS amount is less than the provider’s pre-BBA amount, the 

amount of payment is increased by 85 percent of the amount of the difference between 

the two payments. Accordingly, we are proposing to revise § 419.70(d) of the 
regulations to reflect the TOPs extensions and amendments described in section 308 of 

Pub. L. 112-78 and section 3002 of Pub. L. 112-96. 

 Effective for services provided on or after March 1, 2012, SCHs (including 

EACHs) with greater than 100 beds are no longer eligible for TOPs, in accordance with 

section 308 of Pub. L. 112-78. Effective for services provided on or after 

January 1, 2013, a rural hospital with 100 or fewer beds that is not an SCH and an SCH 

(including an EACH) are no longer eligible for TOPs, in accordance with section 3002 of 

Pub. L. 112-96. 

2. Proposed 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 Pub. L. 108-173. Section 411 gave the Secretary the 

authority to make an adjustment to OPPS payments for rural hospitals, effective 

January 1, 2006, if justified by a study of the difference in costs by APC between 

hospitals in rural areas and hospitals in urban areas. Our analysis showed a difference in 

costs for rural SCHs. Therefore, for the CY 2006 OPPS, we finalized a payment 

adjustment for rural SCHs of 7.1 percent for all services and procedures paid under the 

OPPS, excluding separately payable drugs and biologicals, brachytherapy sources, and 

devices paid under the pass-through payment policy, in accordance with section 

1833(t)(13)(B) of the Act. 
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 § 419.43(g) to clarify 

that EACHs are also 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 Pub. L. 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 copayment. As we stated in the CY 2006 OPPS final rule with 

comment period (70 FR 68560), 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 2012. Further, in the CY 2009 OPPS/ASC 

final rule with comment period (73 FR 68590), we updated the regulations at 

§ 419.43(g)(4) to specify, in general terms, that items paid at charges adjusted to costs by 

application of a hospital-specific CCR are excluded from the 7.1 percent payment 

adjustment. 

 For the CY 2013 OPPS, we are proposing to continue our policy of a budget 

neutral 7.1 percent payment adjustment for rural SCHs, including EACHs, for all services 

and procedures paid under the OPPS, excluding separately payable drugs and biologicals, 

devices paid under the pass-through payment policy, and items paid at charges reduced to 
costs (76 FR 46232). We intend to reassess the 7.1 percent adjustment in the future by 

examining differences between urban hospitals’ costs and rural hospitals’ costs using 

updated claims data, cost reports, and provider information. 

F. Proposed OPPS Payments 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), Medicare has paid cancer hospitals identified in section 

1886(d)(1)(B)(v) of the Act (cancer hospitals) 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. These 11 cancer hospitals are exempted from 

payment under the IPPS. With the Medicare, Medicaid and SCHIP Balanced Budget 

Refinement Act of 1999, Congress created section 1833(t)(7) of the Act, “Transitional 

Adjustment to Limit Decline in Payment,” to serve as a permanent payment floor by 

limiting cancer hospitals’ potential losses under the OPPS. Through 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 TOPs 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” payment 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. 

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 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 3138 of the Affordable Care 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 3138 of the 

Affordable Care Act provides that if the Secretary determines that cancer hospitals’ costs 

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 3138, we determined in 2012 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 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 CY 2012, the target PCR for 

purposes of the cancer hospital payment adjustment is 0.91. 

2. Proposed Payment Adjustment for Certain Cancer Hospitals for CY 2013 

For CY 2013, we are proposing 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 are available at the time of this proposed 

rule. To calculate the proposed CY 2013 target PCR, we used the same extract of cost 

report data from HCRIS, as discussed in section II.A of this proposed rule, used to 
estimate costs for the CY 2013 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 2011 claims data that we used to model the impact of the proposed CY 2013 

APC relative weights (3,975 hospitals) because it is appropriate to use the same set of 

hospitals that we are using to calibrate the modeled CY 2013 OPPS. The cost report data 

for the hospitals in this dataset were from cost report periods with fiscal year ends 

ranging from 2010 to 2011. 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 177 hospitals 

with cost report data that were not complete (missing aggregate OPPS payments, missing 

aggregate cost data, or missing both), so that all cost reports in the study would have both 

the payment and cost data necessary to calculate a PCR for each hospital, leading to a 

proposed analytic file of 3,750 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 

91 percent of reasonable cost (weighted average PCR of 0.91). Based on these data, we 

are proposing a target PCR of 0.91 that would be used to determine the CY 2013 cancer 

hospital payment adjustment that would be paid at cost report settlement. Therefore, we 

are proposing 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 0.91 for each cancer hospital. 
G. Proposed Hospital Outpatient Outlier Payments

1. Background 

Currently, the OPPS provides outlier payments on a service-by-service basis. In 

CY 2011, 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 2011 OPPS payment, using available CY 2011 claims and the revised OPPS 

expenditure estimate for the 2012 Trustee’s Report, is approximately 1.06 percent of the 

total aggregated OPPS payments. Therefore, for CY 2011, we estimate that we paid 0.06 
percent above the CY 2011 outlier target of 1.0 percent of total aggregated OPPS 

payments. 

As explained in the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 71887 through 71889), we set our projected target for aggregate outlier payments 

at 1.0 percent of the estimated aggregate total payments under the OPPS for CY 2011. 

The outlier thresholds were set so that estimated CY 2011 aggregate outlier payments 

would equal 1.0 percent of the total estimated aggregate payments under the OPPS. 

Using CY 2011 claims data and CY 2012 payment rates, we currently estimate that the 

aggregate outlier payments for CY 2012 will be approximately 1.03 percent of the total 

CY 2012 OPPS payments. The difference between 1.0 percent and 1.03 percent is 

reflected in the regulatory impact analysis in section XXII. of this proposed rule. We 

note that we provide proposed estimated CY 2013 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-ServicePayment/HospitalOutpatientPPS/index.html. 

2. Proposed Outlier Calculation 

For CY 2013, we are proposing 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 are proposing that a portion of that 1.0 percent, an amount equal to 

0.12 percent of outlier payments (or 0.0012 percent of total OPPS payments) would be 

allocated to CMHCs for PHP outlier payments. This is the amount of estimated outlier 

payments that would result from the proposed CMHC outlier threshold as a proportion of 
total estimated OPPS outlier payments. As discussed in section VIII.C. of this proposed 

rule, for CMHCs, we are proposing 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 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.C. of this proposed rule. 

To ensure that the estimated CY 2013 aggregate outlier payments would equal 

1.0 percent of estimated aggregate total payments under the OPPS, we are proposing 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 $2,400 fixed-dollar threshold. 

This proposed threshold reflects the methodology discussed below in this section, as well 

as the proposed APC recalibration for CY 2013. 

We calculated the proposed fixed-dollar threshold for this proposed rule using 

largely the same methodology as we did in CYs 2011 and 2012 (75 FR 71887 through 

71889 and 76 FR 74207 through 74209). For purposes of estimating outlier payments for 

this proposed rule, we used the hospital-specific overall ancillary CCRs available in the 

April 2012 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. For this proposed rule, we used CY 2011 
claims to model the CY 2013 OPPS. In order to estimate the proposed CY 2013 hospital 

outlier payments for this proposed rule, we inflated the charges on the CY 2011 claims 

using the same inflation factor of 1.1406 that we used to estimate the IPPS fixed-dollar 

outlier threshold for the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). We 

used an inflation factor of 1.0680 to estimate CY 2012 charges from the CY 2011 charges 

reported on CY 2011 claims. The methodology for determining this charge inflation 

factor is discussed in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28142). 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, for this CY 2013 OPPS/ASC proposed rule, we are proposing to apply the 

same CCR inflation adjustment factor that we are proposing to apply for the proposed 

FY 2013 IPPS outlier calculation to the CCRs used to simulate the proposed CY 2013 

OPPS outlier payments that determine the fixed-dollar threshold. Specifically, for 

CY 2013, we are proposing to apply an adjustment factor of 0.9790 to the CCRs that 

were in the April 2012 OPSF to trend them forward from CY 2012 to CY 2013. The 

methodology for calculating this proposed adjustment was discussed in the FY 2013 

IPPS/LTCH PPS proposed rule (77 FR 28142 through 28144). We note that due to the 
issue described in the IPPS proposed rule correction notice published on June 11, 2012, 

the operating and capital CCR inflation factors were reversed (77 FR 34326). In 

estimating the proposed CY 2013 OPPS fixed-dollar outlier threshold, we have applied 

the corrected CCR inflation factor. 

Therefore, to model hospital outlier payments for this CY 2013 OPPS/ASC 

proposed rule, we applied the overall CCRs from the April 2012 OPSF file after 

adjustment (using the proposed CCR inflation adjustment factor of 0.9644 to approximate 

CY 2013 CCRs) to charges on CY 2011 claims that were adjusted (using the proposed 

charge inflation factor of 1.1406 to approximate CY 2013 charges). We simulated 

aggregated CY 2013 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 2013 

OPPS payments. We estimated that a proposed fixed-dollar threshold of $2,400, 

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 

are proposing 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 

$2,400 are met. For CMHCs, we are proposing that, if a CMHC’s cost for partial 

hospitalization services, paid under either APC 0172 or APC 0173, exceeds 3.40 times 
the payment 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 are proposing to continue our policy that we 

implemented in CY 2010 that the hospitals' costs would be compared to the reduced 

payments for purposes of outlier eligibility and payment calculation. For more 

information on the Hospital OQR Program, we refer readers to section XV. of this 

proposed rule. 

3. Proposed Outlier Reconciliation 

 In the CY 2009 OPPS/ASC final rule with comment period (73 CFR 68599), we 

adopted as final policy a process to reconcile hospital or CMHC outlier payments at cost 

report settlement for services furnished during cost reporting periods beginning in 

CY 2009. OPPS outlier reconciliation more fully ensures accurate outlier payments for 

those facilities that have CCRs that fluctuate significantly relative to the CCRs of other 

facilities, and that receive a significant amount of outlier payments (73 FR 68598). As 
under the IPPS, we do not adjust the fixed-dollar threshold or the amount of total OPPS 

payments set aside for outlier payments for reconciliation activity because such action 

would be contrary to the prospective nature of the system. Our outlier threshold 

calculation assumes that overall ancillary CCRs accurately estimate hospital costs based 

on the information available to us at the time we set the prospective fixed-dollar outlier 

threshold. For these reasons, and as we have previously discussed in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68596), we are proposing for 

CY 2013, to not incorporate any assumptions about the effects of reconciliation into our 

calculation of the OPPS fixed-dollar outlier threshold. 

H. Proposed Calculation of an Adjusted Medicare Payment from the National 

Unadjusted Medicare Payment

 The basic methodology for determining prospective payment rates for HOPD 

services under the OPPS is set forth in existing regulations at 42 CFR Part 419, subparts 

C and D. For this proposed rule, the payment rate for most services and procedures for 

which payment is made under the OPPS is the product of the conversion factor calculated 

in accordance with section II.B. of this proposed rule and the relative weight determined 

under section II.A. of this proposed rule. Therefore, the proposed national unadjusted 

payment rate for most APCs contained in Addendum A to this proposed rule (which is 

available via the Internet on the CMS Web site) and for most HCPCS codes to which 

separate payment under the OPPS has been assigned in Addendum B to this proposed 

rule (which is available via the Internet on the CMS Web site) was calculated by 

multiplying the proposed CY 2013 scaled weight for the APC by the proposed CY 2013 

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 XV. of this proposed rule. 

 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 proposed rule), in a circumstance in which the multiple procedure discount does not 

apply, the procedure is not bilateral, and conditionally packaged services (status indicator 

of “Q1” and “Q2”) qualify for separate payment. We note that, although blood and blood 

products with status indicator “R” and brachytherapy sources with status indicator “U” 

are not subject to wage adjustment, they are subject to reduced payments when a hospital 

fails to meet the Hospital OQR Program requirements. 
Individual providers interested in calculating the payment amount that they would 

receive for a specific service from the national unadjusted payment rates presented in 

Addenda A and B to this proposed rule (which are available via the Internet on the CMS 

Web site) should follow the formulas presented in the following steps. For purposes of 

the payment calculations below, we refer to the proposed 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 2013 OPPS fee schedule increase 

factor of 2.1 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. We confirmed that 

this labor-related share for hospital 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). 
 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 2013 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 § 412.103 of the regulations, and hospitals 

designated as urban under section 601(g) of Pub. L. 98-21. We note that the 

reclassifications of hospitals under section 508 of Pub. L. 108-173, as extended by 

sections 3137 and 10317 of the Affordable Care Act, expired on September 30, 2010. 

Section 102 of the Medicare and Medicaid Extenders Act of 2010 extended section 508 

and certain additional special exception hospital reclassifications from October 1, 2010 

through September 30, 2011. Section 302 of the Temporary Payroll Tax Cut 

Continuation Act of 2011 (Pub. L. 112-78) as amended by section 3001 of the Middle 

Class Tax Relief and Job Creation Act of 2012 (Pub. L. 112-96) extended section 508 

and certain additional special exception hospital reclassifications from October 1, 2011 

through March 31, 2012. Therefore, these reclassifications will not apply to the CY 2013 

OPPS. (For further discussion of the proposed changes to the FY 2013 IPPS wage 

indices, as applied to the CY 2013 OPPS, we refer readers to section II.C. of this 
proposed rule). We are proposing to continue to apply a wage index floor of 1.00 to 

frontier States, in accordance with section 10324 of the Affordable Care Act. 

 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 proposed rule (which is available via the 

Internet on the CMS Web site) contains the qualifying counties and the associated 

proposed wage index increase developed for the FY 2013 IPPS and listed as Table 4J in 

the FY 2013 IPPS/LTCH PPS proposed rule and available via the Internet on the CMS 

Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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 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 § 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 § 412.64(b), or is treated as being located in 

a rural area under § 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 

proposed 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 use 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 
proposed CY 2013 full national unadjusted payment rate for APC 0019 is $337.48. The 

proposed reduced national unadjusted payment rate for a hospital that fails to meet the 

Hospital OQR Program requirements is $330.73. This proposed reduced rate is 

calculated by multiplying the reporting ratio of 0.980 by the full unadjusted payment rate 

for APC 0019. 

 The proposed FY 2013 wage index for a provider located in CBSA 35644 in New 

York is 1.2991. The proposed labor-related portion of the full national unadjusted 

payment is $263.05 (.60 * $337.48 * 1.2991). The labor-related portion of the proposed 

reduced national unadjusted payment is $257.79 (.60 * $330.73 * 1.2991). The nonlaborrelated portion of the full national unadjusted payment is $134.99 (.40 * $337.48). The 

nonlabor-related portion of the proposed reduced national unadjusted payment is $132.29 

(.40 * $330.73). The sum of the labor-related and nonlabor-related portions of the 

proposed full national adjusted payment is $398.04 ($263.05 + $134.99). The sum of the 

reduced national adjusted payment is $390.08 ($257.79 + $132.29). 

I. Proposed Beneficiary Copayments

1. Background 

 Section 1833(t)(3)(B) of the Act requires the Secretary to set rules for determining 

the unadjusted copayment amounts to be paid by beneficiaries for covered OPD services. 

Section 1833(t)(8)(C)(ii) of the Act specifies that the Secretary must reduce the national 

unadjusted copayment amount for a covered OPD service (or group of such services) 

furnished in a year in a manner so that the effective copayment rate (determined on a 

national unadjusted basis) for that service in the year does not exceed a specified 

percentage. As specified in section 1833(t)(8)(C)(ii)(V) of the Act, the effective 
copayment rate for a covered OPD service paid under the OPPS in CY 2006, and in 

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 to the amount of the inpatient deductible. 

 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 colonscopies, and waived 

the Part B deductible for screening colonoscopies that become diagnostic during the 

procedure. Our discussion of the changes made by the Affordable Care Act with regard 

to copayments for preventive services furnished on and after January 1, 2011 may be 

found in section XII.B. of the CY 2011 OPPS/ASC final rule with comment period 

(75 FR 72013). 

2. Proposed OPPS Copayment Policy 

 For CY 2013, we are proposing 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 are proposing 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, 2013, are shown in Addenda A and B to this 

proposed rule (which are available via the Internet on the CMS Web site). As discussed 

in section XV. of this proposed rule, for CY 2013, 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 note that APC 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. The CY 2013 proposal to base 

APC relative weights on geometric mean costs also affects proposed APC payment rates 

and, through them, the corresponding beneficiary copayments. 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). For a more detailed discussion of 

the proposal to base the APC relative payment weights on geometric mean costs, we refer 

readers to section II.A.2.f. of this proposed rule. 

3. Proposed Calculation of an Adjusted Copayment Amount for an APC Group 

 Individuals interested in calculating the national copayment liability for a 

Medicare beneficiary for a given service provided by a hospital that met or failed to meet 
its Hospital OQR Program requirements should follow the formulas presented in the 

following steps. 

 Step 1. Calculate the beneficiary payment percentage for the APC by dividing the 

APC’s national unadjusted copayment by its payment rate. For example, using 

APC 0019, $67.50 is 20 percent of the full national unadjusted payment rate of $337.48. 

For APCs with only a minimum unadjusted copayment in Addenda A and B of this 

proposed rule (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 

national copayment as a percentage of national payment for a given service. 

B is the beneficiary payment percentage. 

B = National unadjusted copayment for APC/national unadjusted payment rate for APC 

 Step 2. Calculate the appropriate wage-adjusted payment rate for the APC for the 

provider in question, as indicated in Steps 2 through 4 under section II.H. of this 

proposed rule. Calculate the rural adjustment for eligible providers as indicated in Step 6 

under section II.H. of this proposed rule. 

 Step 3. Multiply the percentage calculated in Step 1 by the payment rate 

calculated in Step 2. The result is the wage-adjusted copayment amount for the APC. 

The formula below is a mathematical representation of Step 3 and applies the 

beneficiary percentage to the adjusted payment rate for a service calculated under 

section II.H. of this proposed rule, with and without the rural adjustment, to calculate the 

adjusted beneficiary copayment for a given service. 
 Wage-adjusted copayment amount for the APC = Adjusted Medicare 

Payment * B 

 Wage-adjusted copayment amount for the APC (SCH or EACH) = (Adjusted 

Medicare Payment * 1.071) * B

 Step 4. For a hospital that failed to meet its Hospital OQR Program requirements, 

multiply the copayment calculated in Step 3 by the reporting ratio of 0.980. 

 The proposed unadjusted copayments for services payable under the OPPS that 

would be effective January 1, 2013, are shown in Addenda A and B to this proposed rule 

(which are available via the Internet on the CMS Web site). We note that the proposed 

national unadjusted payment rates and copayment rates shown in Addenda A and B to 

this proposed rule reflect the proposed full CY 2013 OPD fee schedule increase factor 

discussed in section II.B. of this proposed rule. 

 Also, as noted above, section 1833(t)(8)(C)(i) of the Act limits the amount of 

beneficiary copayment that may be collected to the amount of the inpatient deductible. 

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

A. Proposed 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 medical services and procedures; 

● 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. In Table 13 below, we summarize our proposed process 

for updating codes through our OPPS quarterly update CRs, seeking public comments, 

and finalizing their treatment under the OPPS. Because the payment rates associated 

with codes effective July 1 are not available to us in time for incorporation into the 

Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT 

codes implemented through the July 2012 OPPS quarterly update CR could not be 

included in Addendum B to this proposed rule. Nevertheless, we are requesting public 

comments on the codes included in the July 2012 OPPS quarterly update and including 

these codes in the preamble to this proposed rule. 
TABLE 13.—COMMENT TIMEFRAME FOR NEW OR REVISED 

HCPCS CODES 

OPPS 

Quarterly 

Update CR 

Type of Code Effective Date Comments 

Sought When Finalized 

April l, 2012 Level II HCPCS 

Codes April 1, 2012 

CY 2013 

OPPS/ASC 

proposed rule 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

Level II HCPCS 

Codes July 1, 2012 

CY 2013 

OPPS/ASC 

proposed rule 

CY 2013 

OPPS/ASC final 

rule with 

comment period July 1, 2012 Category I 

(certain vaccine 

codes) and III 

CPT codes 

July 1, 2012 

CY 2013 

OPPS/ASC 

proposed rule 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

October 1, 2012 Level II HCPCS 

Codes October 1, 2012

CY 2013 

OPPS/ASC final 

rule with 

comment period 

CY 2014 

OPPS/ASC final 

rule with 

comment period 

Level II HCPCS 

Codes January 1, 2013 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

CY 2014 

OPPS/ASC final 

rule with 

comment period January 1, 2013 

Category I and 

III CPT Codes January 1, 2013 

CY 2013 

OPPS/ASC final 

rule with 

comment period 

CY 2014 

OPPS/ASC final 

rule with 

comment period 

This process is discussed in detail below. We have separated our discussion into 

two sections based on whether we solicited public comments in this CY 2013 OPPS/ASC 

proposed rule or whether we will be soliciting public comments in the CY 2013 

OPPS/ASC final rule with comment period. We note that we sought public comments in 

the CY 2012 OPPS/ASC final rule with comment period on the new CPT and Level II 
HCPCS codes that were effective January 1, 2012. We also sought public comments in 

the CY 2012 OPPS/ASC final rule with comment period on the new Level II HCPCS 

codes effective October 1, 2011. These new codes, with an effective date of 

October 1, 2011, or January 1, 2012, 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 2012 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 2012 OPPS/ASC final rule with comment period. We will respond 

to public comments and finalize our interim OPPS treatment of these codes in the 

CY 2013 OPPS/ASC final rule with comment period. 

1. Proposed Treatment of New CY 2012 Level II HCPCS and CPT Codes Effective 

April 1, 2012 and July 1, 2012 for Which We Are Soliciting Public Comments in this 

CY 2013 Proposed Rule 

Through the April 2012 OPPS quarterly update CR (Transmittal 2418, Change 

Request 7748, dated March 2, 2012) and the July 2012 OPPS quarterly update CR 

(Transmittal 2483, Change Request 7847, dated June 8, 2012), we recognized several 

new HCPCS codes for separate payment under the OPPS. Effective April 1 and July 1 of 

CY 2012, we made effective 13 new Level II HCPCS codes and 7 Category III CPT 

codes. Specifically, 5 new Level II HCPCS codes were effective for the April 2012 

update and another 8 new Level II HCPCS codes were effective for the July 2012 update 

for a total of 13. Seven new Category III CPT codes were effective for the July 2012 

update. Of the 13 new Level II HCPCS codes, we recognized for separate payment 11 of 
these codes, and of the 7 new Category III CPT codes, we recognized for separate 

payment all 7 new Category III CPT codes, for a total of 18 new Level II HCPCS and 

Category III CPT codes that are recognized for separate payment for CY 2013. 

Through the April 2012 OPPS quarterly update CR, we allowed separate payment 

for each of the five new Level II HCPCS codes. Specifically, as displayed in Table 14 

below, we provided separate payment for the following HCPCS codes: 

● HCPCS code C9288 (Injection, centruroides (scorpion) immune f(ab)2 

(equine), 1 vial) 

● HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 1,000 

international units (I.U.)) 

● HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg) 

● HCPCS code C9291 (Injection, aflibercept, 2 mg vial) 

● HCPCS code C9733 (Non-ophthalmic fluorescent vascular angiography) 

In this proposed rule, we are proposing to assign the Level II HCPCS codes listed 

in Table 14 to the specific proposed APCs and status indicators for CY 2013. 

TABLE 14.—LEVEL II HCPCS CODES WITH A CHANGE IN OPPS 

STATUS INDICATOR OR NEWLY IMPLEMENTED IN APRIL 2012 

CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed 

CY 2013 

Status 

Indicator 

Proposed

CY 2013 

APC 

C9288 

Injection, centruroides (scorpion) immune f(ab)2 

(equine), 1 vial G 9288 

C9289 

Injection, asparaginase Erwinia chrysanthemi, 

1,000 international units (I.U.) G 9289 
CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed 

CY 2013 

Status 

Indicator 

Proposed

CY 2013 

APC 

C9290 Injection, bupivacaine liposome, 1 mg G 9290 

C9291* Injection, aflibercept, 2 mg vial G 9291 

C9733 

Non-ophthalmic fluorescent vascular 

angiography Q2 0397 

*Level II HCPCS code C9291 (Injection, aflibercept, 2 mg vial) was deleted June 30, 2012, and replaced 

with HCPCS code Q2046 effective July 1, 2012. 

Through the July 2012 OPPS quarterly update CR, which included HCPCS codes 

that were made effective July 1, 2012, we allowed separate payment for six of the eight 

new Level II HCPCS codes. Specifically, as displayed in Table 15 of this proposed rule, 

we provided separate payment for the following HCPCS codes: 

● HCPCS code C9368 (Grafix core, per square centimeter) 

● HCPCS code C9369 (Grafix prime, per square centimeter) 

● HCPCS code Q2045 (Injection, human fibrinogen concentrate, 1 mg) 

● HCPCS code Q2046 (Injection, aflibercept, 1 mg) 

● HCPCS code Q2048 (Injection, doxorubicin hydrochloride, liposomal, doxil, 

10 mg) 

● HCPCS code Q2049 (Injection, doxorubicin hydrochloride, liposomal, 

imported lipodox, 10 mg) 

We note that three of the Level II HCPCS Q-codes that were made effective 

July 1, 2012, were previously described by HCPCS J-codes or C-codes that were 

separately payable under the hospital OPPS. First, HCPCS code Q2045 replaced HCPCS 

code J1680 (Injection, human fibrinogen concentrate, 100 mg), beginning July 1, 2012. 
HCPCS code J1680 was assigned to status indicator “K” (Nonpass-through drugs and 

nonimplantable biologicals, including therapeutic radiopharmaceuticals; paid under 

OPPS; separate APC payment) on January 1, 2012. However, because HCPCS code 

J1680 is replaced by HCPCS code Q2045 effective July 1, 2012, we changed its status 

indicator to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code 

Q2045 describes the same drug as HCPCS code J1680, we continued its separate 

payment status and assigned it to status indicator “K” effective July 1, 2012. However, 

because the dosage descriptor for HCPCS code Q2045 is not the same as HCPCS code 

J1680, we assigned HCPCS code Q2045 to a new APC to maintain data consistency for 

future rulemaking. Specifically, HCPCS code Q2045 is assigned to APC 1414 (Human 

fibrinogen conc inj) effective July 1, 2012. 

Second, HCPCS code Q2046 replaced HCPCS code C9291 (Injection, aflibercept, 

2 mg vial) effective July 1, 2012. HCPCS code C9291 was assigned pass-through status 

when it was made effective April 1, 2012. Because HCPCS code Q2046 describes the 

same product as HCPCS code C9291, we continued its pass-through status and assigned 

HCPCS code Q2046 to status indicator “G” as well as assigned it to the same APC, 

specifically APC 9291 (Injection, aflibercept), effective July 1, 2012. HCPCS code 

C9291 is deleted effective June 30, 2012. 

Third, the HCPCS Workgroup replaced HCPCS code J9001 (Injection, 

doxorubicin hydrochloride, all lipid formulations, 10 mg) with new HCPCS code Q2048, 

effective July 1, 2012. Consequently, the status indicator for HCPCS code J9001 is 

changed to “E” (Not Payable by Medicare) effective July 1, 2012. Because HCPCS code 

Q2048 describes the same drug as HCPCS code J9001, we continued its separate 
payment status and assigned HCPCS code Q2048 to status indicator “K” effective 

July 1, 2012. In addition, because, HCPCS code Q2049 is similar to HCPCS code 

Q2048, we assigned HCPCS code Q2049 to status indicator “K” effective July 1, 2012. 

Of the 15 HCPCS codes that were made effective July 1, 2012, we did not 

recognize for separate payment two HCPCS codes because they are both paid under a 

payment system other than OPPS. Specifically, HCPCS code Q2047 (Injection, 

peginesatide, 0.1 mg (for ESRD on dialysis)) is assigned to status indicator “A” (Not paid 

under OPPS; paid by fiscal intermediaries/MACs under a fee schedule or payment system 

other than OPPS), and HCPCS code Q2034 (Influenza virus vaccine, split virus, for 

intramuscular use (Agriflu)) is assigned to status indicator “L” (Not paid under OPPS; 

paid at reasonable cost). 

Table 15 below includes a complete list of the Level II HCPCS codes that were 

made effective July 1, 2012, with their proposed status indicators, proposed APC 

assignments, and proposed payment rates for CY 2013. 

TABLE 15.—NEW LEVEL II HCPCS CODES IMPLEMENTED 

 IN JULY 2012 

CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed

CY 2013 

Status 

Indicator

Proposed 

CY 2013 

APC 

Proposed 

CY 2013 

Payment 

Rate 

C9368 Grafix core, per square centimeter G 9368 $7.96 

C9369 Grafix prime, per square centimeter G 9369 $0.61

Q2034 

Influenza virus vaccine, split virus, for 

intramuscular use (Agriflu) L N/A N/A

Q2045* Injection, human fibrinogen K 1414 
CY 2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed

CY 2013 

Status 

Indicator

Proposed 

CY 2013 

APC 

Proposed 

CY 2013 

Payment 

Rate 

concentrate, 1 mg $0.73

Q2046** Injection, aflibercept, 1 mg G 1420 $980.50 

Q2047 

Injection, peginesatide, 0.1 mg (for 

ESRD on dialysis) A N/A N/A

Q2048*** 

Injection, doxorubicin hydrochloride, 

liposomal, doxil, 10 mg K 7046 $537.21

Q2049†

Injection, doxorubicin hydrochloride, 

liposomal, imported lipodox, 10 mg K 1421 $498.26

*HCPCS code Q2045 replaced HCPCS code J1680 effective July 1, 2012. The status indicator for HCPCS 

code J1680 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. The proposed payment 

rate for HCPCS code Q2045 is based on ASP+6 percent. 

**HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012. 

***HCPCS code Q2048 replaced HCPCS code J9001 effective July 1, 2012. The status indicator for 

HCPCS code J9001 was changed to “E” (Not Payable by Medicare) effective July 1, 2012. The proposed 

payment rate for HCPCS code Q2048 is based on ASP+6 percent. 

†The proposed payment rate for HCPCS code Q2049 is based on ASP+6 percent. 

For CY 2013, we are proposing 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 2012 update, there were 

no new Category I CPT vaccine codes. Through the July 2012 OPPS quarterly update 

CR (Transmittal 2483, Change Request 7847, dated June 8, 2012), we allowed separate 

payment for all seven new Category III CPT codes effective July 1, 2012. Specifically, 
as displayed in Table 16 of this proposed rule, we allowed separate payment for the 

following Category III CPT codes: 

● CPT code 0302T (Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging supervision and interpretation when 

performed and intra-operative interrogation and programming when performed; complete 

system (includes device and electrode)) 

● CPT code 0303T (Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging supervision and interpretation when 

performed and intra-operative interrogation and programming when performed; electrode 

only) 

● CPT code 0304T (Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging supervision and interpretation when 

performed and intra-operative interrogation and programming when performed; device 

only) 

● CPT code 0305T (Programming device evaluation (in person) of intracardiac 

ischemia monitoring system with iterative adjustment of programmed values, with 

analysis, review, and report) 

● CPT code 0306T (Interrogation device evaluation (in person) of intracardiac 

ischemia monitoring system with analysis, review, and report) 

● CPT code 0307T (Removal of intracardiac ischemia monitoring device) 

● CPT code 0308T (Insertion of ocular telescope prosthesis including removal of 

crystalline lens) 
Table 16 below lists the Category III CPT codes that were implemented in 

July 2012, along with their proposed status indicators, proposed APC assignments, where 

applicable, and proposed payment rates for CY 2013. 

TABLE 16.—NEW CATEGORY III CPT CODES IMPLEMENTED 

IN JULY 2012 
CY 2012 

CPT 

Code

CY 2012 Long Descriptor

Proposed 

CY 2013 

Status 

Indicator

Proposed 

CY 2013 

APC

Proposed 

CY 2013 

Payment 

Rate 

0302T 

Insertion or removal and replacement of 

intracardiac ischemia monitoring system 

including imaging supervision and 

interpretation when performed and intraoperative interrogation and programming when 

performed; complete system (includes device 

and electrode) 

T 0089 

$8,275.79 

0303T 

Insertion or removal and replacement of 

intracardiac ischemia monitoring system 

including imaging supervision and 

interpretation when performed and intraoperative interrogation and programming when 

performed; electrode only 

T 0106 

$3,780.92 

0304T 

Insertion or removal and replacement of 

intracardiac ischemia monitoring system 

including imaging supervision and 

interpretation when performed and intraoperative interrogation and programming when 

performed; device only 

T 0090 $6,663.83 

0305T 

Programming device evaluation (in person) of 

intracardiac ischemia monitoring system with 

iterative adjustment of programmed values, 

with analysis, review, and report 

S 0690 $33.92 

0306T 

Interrogation device evaluation (in person) of 

intracardiac ischemia monitoring system with 

analysis, review, and report 

S 0690 $33.92 

0307T Removal of intracardiac ischemia monitoring 

device T 0105 $1,718.55 

0308T Insertion of ocular telescope prosthesis 

including removal of crystalline lens T 0234 $1,669.74 
We are soliciting public comments on the CY 2013 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, 2012, and July 1, 2012, through the 

respective OPPS quarterly update CRs. These codes are listed in Tables 14, 15, and 16 of 

this proposed rule. We are proposing to finalize their status indicators and their APC 

assignments and payment rates, if applicable, in the CY 2013 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 this 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 to the proposed rule but not in the Addenda to 

the proposed rule. These codes are listed in Tables 15 and 16, respectively. We are 

proposing to incorporate these codes into Addendum B to the CY 2013 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 2012 OPPS update 

CR and displayed in Table 14 are included in Addendum B to this proposed rule (which 

is available via the Internet on the CMS Web site), where their proposed CY 2013 

payment rates are also shown. 
2. Proposed Process for New Level II HCPCS Codes That Will Be Effective 

October 1, 2012 and New CPT and Level II HCPCS Codes That Will Be Effective 

January 1, 2013 for Which We Will Be Soliciting Public Comments in the CY 2013 

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 (for Level II HCPCS codes) and AMA 

Web sites (for CPT codes), and also through the January OPPS quarterly update CRs. In 

the past, we also have released new Level II 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 2013, these codes will be flagged with comment indicator “NI” in 

Addendum B 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. In 

addition, the CPT and Level II HCPCS codes that will be effective January 1, 2013, will 

be flagged with comment indicator “NI” in Addendum B to the OPPS/ASC 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 OPPS/ASC final rule with comment period for the next calendar year’s 

OPPS/ASC update. We are proposing to continue this process for CY 2013. 

Specifically, for CY 2013, we are proposing to include in Addendum B to the CY 2013 
OPPS/ASC final rule with comment period the new Category I and III CPT codes 

effective January 1, 2013 (including the Category III CPT codes that are released by the 

AMA in July 2012) that would be incorporated in the January 2013 OPPS quarterly 

update CR and the new Level II HCPCS codes, effective October 1, 2012, or 

January 1, 2013, that would be released by CMS in its October 2012 and January 2013 

OPPS quarterly update CRs. The October 1, 2012 and January 1, 2013 codes would be 

flagged with comment indicator “NI” in Addendum B to the CY 2013 OPPS/ASC final 

rule with comment period to indicate that we have assigned them an interim OPPS 

payment status for CY 2013. We are proposing that their status indicators and their APC 

assignments and payment rates, if applicable, would be open to public comment and 

would be finalized in the CY 2014 OPPS/ASC final rule with comment period. 

B. Proposed OPPS Changes--Variations within APCs

1. Background 

 Section 1833(t)(2)(A) of the Act requires the Secretary to develop a classification 

system for covered hospital outpatient department services. Section 1833(t)(2)(B) of the 

Act provides that the Secretary may establish groups of covered OPD services within this 

classification system, so that services classified within each group are comparable 

clinically and with respect to the use of resources. In accordance with these provisions, 

we developed a grouping classification system, referred to as Ambulatory Payment 

Classifications (APCs), as set forth in § 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 have also 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 services. 

Therefore, we do not make separate payment for these packaged items or services. For 

example, packaged items and services include: 

 (a) Use of an operating, treatment, or procedure room; 

 (b) Use of a recovery room; 

 (c) Observation services; 

 (d) Anesthesia; 

 (e) Medical/surgical supplies; 

 (f) Pharmaceuticals (other than those for which separate payment may be allowed 

under the provisions discussed in section V. of this proposed rule); 

 (g) Incidental services such as venipuncture; 

 (h) Guidance services, image processing services, intraoperative services, 

imaging, supervision and interpretation services, diagnostic radiopharmaceuticals, and 

contrast media. 

 Further discussion of packaged services is included in section II.A.3. of this 

proposed rule. 

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 CY 2012 OPPS policy, we provide composite APC payment for certain extended 

assessment and management services, low dose rate (LDR) prostate brachytherapy, 

cardiac electrophysiologic evaluation and ablation, mental health services, multiple 

imaging services, and cardiac resynchronization therapy services. Further discussion of 

composite APCs is included in section II.A.2.e. of this proposed rule. 

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 weight represents the hospital cost of the 

services included in that APC, relative to the hospital cost of the services included in 

APC 0606 (Level 3 Hospital Clinic Visits). The APC weights are scaled to APC 0606 

because it is the middle level hospital clinic visit APC (the Level 3 hospital clinic visit 

CPT code out of five levels), and because middle level hospital clinic visits are among 

the most frequently furnished services in the hospital outpatient setting. 

 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 
recommendations for specific services for the CY 2013 OPPS and our responses to them 

are discussed in the relevant specific sections throughout this proposed rule). 

 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”). For CY 2013, we are proposing to use the cost 

of the item or service in implementing this provision, as discussed in section II.A.2.f. of 

this proposed 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 § 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 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 cost to be significant (75 FR 71832). 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 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 this proposed rule, we are proposing 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 2013. 

We have identified APCs with 2 times violations for which we are proposing 

changes to their HCPCS codes’ APC assignments in Addendum B (available via the 

Internet on the CMS Web site) to this proposed rule. In these cases, to eliminate a 

2 times violation or to improve clinical and resource homogeneity, we are proposing to 

reassign the codes to APCs that contain services that are similar with regard to both their 

clinical and resource characteristics. In many cases, the proposed HCPCS code 

reassignments and associated APC reconfigurations for CY 2013 included in the 

proposed rule are related to changes in costs of services that were observed in the 

CY 2011 claims data newly available for CY 2013 ratesetting. We also are proposing 

changes to the status indicators for some codes that are not specifically and separately 

discussed in this proposed rule. In these cases, we are proposing to change the status 

indicators for some 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 are proposing for CY 2013. In addition, we are proposing to rename existing 

APCs or create new clinical APCs to complement proposed HCPCS code reassignments. 
Addendum B to this CY 2013 OPPS/ASC proposed rule identifies with a comment 

indicator “CH” those HCPCS codes for which we are proposing a change to the APC 

assignment or status indicator, or both, that were initially assigned in the April 2012 

Addendum B Update (available via the Internet on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. 

3. Proposed 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 are proposing for CY 2013, 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). 

Table 17 of this proposed rule lists 21 APCs that we are proposing to exempt 

from the 2 times rule for CY 2013 based on the criteria cited above and based on claims 

data processed from January 1, 2011, through December 31, 2011. For the final rule with 
comment period, we plan to use claims data for dates of service between January 1, 2011, 

and December 31, 2011, that were processed on or before June 30, 2012, and updated 

CCRs, if available. Based on the CY 2011 claims data, we found 21 APCs with 2 times 

rule violations. We applied the criteria as described earlier to identify the APCs that we 

are proposing as exceptions to the 2 times rule for CY 2013, and identified 21 APCs that 

meet the criteria for exception to the 2 times rule for this proposed rule. We have not 

included in this count those APCs where a 2 times violation is not a relevant concept, 

such as APC 0375 (Ancillary Outpatient Services when Patient Expires), with an APC 

cost set based on multiple procedure claims. Therefore, we have identified only APCs, 

including those with criteria-based costs, such as device-dependent APCs, with 2 times 

rule violations. These proposed APC exceptions are listed in Table 17 below. 

TABLE 17.—PROPOSED APC EXCEPTIONS TO THE 2 TIMES RULE 

FOR CY 2013 

Proposed 

CY 2013 

APC Proposed CY 2013 APC Title 

0006 Level I Incision & Drainage 

0012 Level I Debridement & Destruction 

0045 Bone/Joint Manipulation Under Anesthesia 

0057 Bunion Procedures 

0060 Manipulation Therapy 

0105 Repair/Revision/Removal of Pacemakers, AICDs, or Vascular Devices 

0128 Echocardiogram with Contrast 

0152 Level I Percutaneous Abdominal and Biliary Procedures 

0173 Level II Partial Hospitalization (4 or more services) for CMHCs 

0230 Level I Eye Tests & Treatments 

0272 Fluoroscopy 

0325 Group Psychotherapy 

0330 Dental Procedures 

0340 Minor Ancillary Procedures 
Proposed 

CY 2013 

APC Proposed CY 2013 APC Title 

0369 Level III Pulmonary Tests 

0403 Level I Nervous System Imaging 

0409 Red Blood Cell Tests 

0604 Level 1 Hospital Clinic Visits 

0655 

Insertion/Replacement/Conversion of a Permanent Dual Chamber 

Pacemaker or Pacing 

0688 Revision/Removal of Neurostimulator Pulse Generator Receiver 

0690 Level I Electronic Analysis of Devices 

The proposed costs for hospital outpatient services for these and all other APCs 

that were used in the development of this proposed rule can be found on the CMS Web 

site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. 

C. Proposed New Technology APCs

1. Background 

In the November 30, 2001 final rule (66 FR 59903), we finalized changes to the 

time period a service was eligible for payment under a New Technology APC. 

Beginning in CY 2002, we retain services within New Technology APC groups until we 

gather sufficient claims data to enable us to assign the service to an appropriate clinical 

APC. This policy allows us to move a service from a New Technology APC in less than 

2 years if sufficient data are available. It also allows us to retain a service in a 

New Technology APC for more than 2 years if sufficient data upon which to base a 

decision for reassignment have not been collected. 

We note that the cost bands for New Technology APCs range from $0 to $50 in 

increments of $10, from $50 to $100 in increments of $50, from $100 to $2,000 in 
increments of $100, and from $2,000 to $10,000 in increments of $500. These cost bands 

identify the APCs to which new technology procedures and services with estimated 

service costs that fall within those cost bands are assigned under the OPPS. Payment for 

each APC is made at the mid-point of the APC’s assigned cost band. For example, 

payment for New Technology APC 1507 (New Technology – Level VII ($500 - $600)) is 

made at $550. Currently, there are 82 New Technology APCs, ranging from the lowest 

cost band assigned to APC 1491 (New Technology – Level IA ($0 - $10)) through the 

highest cost band assigned to APC 1574 (New Technology – Level XXXVII ($9,500 - 

$10,000). In CY 2004 (68 FR 63416), we last restructured the New Technology APCs to 

make the cost intervals more consistent across payment levels and refined the cost bands 

for these APCs to retain two parallel sets of New Technology APCs, one set with a status 

indicator of “S” (Paid under OPPS; separate APC payment) and the other set with a status 

indicator of “T” (Paid under OPPS; separate APC payment). These current New 

Technology APC configurations allow us to price new technology services more 

appropriately and consistently. 

Every year we receive many requests for higher payment amounts under our New 

Technology APCs for specific procedures under the OPPS because they require the use 

of expensive equipment. We are taking this opportunity to reiterate our response in 

general to the issue of hospitals’ capital expenditures as they relate to the OPPS and 

Medicare. 

Under the OPPS, one of our goals is to make payments that are appropriate for the 

services that are necessary for the treatment of Medicare beneficiaries. The OPPS, like 

other Medicare payment systems, is budget neutral and increases are limited to the annual 
hospital inpatient market basket increase. We believe that our payment rates generally 

reflect the costs that are associated with providing care to Medicare beneficiaries in 

cost-efficient settings, and we believe that our rates are adequate to ensure access to 

services. 

For many emerging technologies, there is a transitional period during which 

utilization may be low, often because providers are first learning about the techniques and 

their clinical utility. Quite often, parties request that Medicare make higher payment 

amounts under our New Technology APCs for new procedures in that transitional phase. 

These requests, and their accompanying estimates for expected total patient utilization, 

often reflect very low rates of patient use of expensive equipment, resulting in high per 

use costs for which requesters believe Medicare should make full payment. Medicare 

does not, and we believe should not, assume responsibility for more than its share of the 

costs of procedures based on projected utilization for Medicare beneficiaries and does not 

set its payment rates based on initial projections of low utilization for services that 

require expensive capital equipment. For the OPPS, we rely on hospitals to make 

informed business decisions regarding the acquisition of high cost capital equipment, 

taking into consideration their knowledge about their entire patient base (Medicare 

beneficiaries included) and an understanding of Medicare’s and other payers’ payment 

policies. 

We note that, in a budget neutral environment, payments may not fully cover 

hospitals’ costs in a particular circumstance, including those for the purchase and 

maintenance of capital equipment. We rely on hospitals to make their decisions 

regarding the acquisition of high cost equipment with the understanding that the 
Medicare program must be careful to establish its initial payment rates, including those 

made through New Technology APCs, for new services that lack hospital claims data 

based on realistic utilization projections for all such services delivered in cost-efficient 

hospital outpatient settings. As the OPPS acquires claims data regarding hospital costs 

associated with new procedures, we regularly examine the claims data and any available 

new information regarding the clinical aspects of new procedures to confirm that our 

OPPS payments remain appropriate for procedures as they transition into mainstream 

medical practice. 

2. Proposed Movement of Procedures from New Technology APCs to Clinical APCs 

As we explained in the November 30, 2001 final rule (66 FR 59902), we 

generally keep a procedure in the New Technology APC to which it is initially assigned 

until we have collected sufficient data to enable us to move the procedure to a clinically 

appropriate APC. However, in cases where we find that our original New Technology 

APC assignment was based on inaccurate or inadequate information (although it was the 

best information available at the time), or where the New Technology APCs are 

restructured, we may, based on more recent resource utilization information (including 

claims data) or the availability of refined New Technology APC cost bands, reassign the 

procedure or service to a different New Technology APC that most appropriately reflects 

its cost. 

Consistent with our current policy, for CY 2013, we are proposing to retain 

services within New Technology APC groups until we gather sufficient claims data to 

enable us to assign the service to a clinically appropriate APC. The flexibility associated 

with this policy allows us to move a service from a New Technology APC in less than 
2 years if sufficient claims data are available. It also allows us to retain a service in a 

New Technology APC for more than 2 years if sufficient claims data upon which to base 

a decision for reassignment have not been collected. 

Currently, in CY 2012, there are three procedures described by HCPCS G-codes 

receiving payment through a New Technology APC. Specifically, HCPCS code G0417 

(Surgical pathology, gross and microscopic examination for prostate needle saturation 

biopsy sampling, 21-40 specimens) is assigned to New Technology APC 1505 (New 

Technology - Level V ($300 - $400)); HCPCS code G0418 (Surgical pathology, gross 

and microscopic examination for prostate needle saturation biopsy sampling, 41-60 

specimens) is assigned to New Technology APC 1506 (New Technology - Level VI 

($400 - $500)); and HCPCS code G0419 (Surgical pathology, gross and microscopic 

examination for prostate needle saturation biopsy sampling, greater than 60 specimens) is 

assigned to New Technology APC 1508 (New Technology - Level VIII ($600 - $700)). 

These HCPCS codes have been assigned to New Technology APCs since CY 2009. 

Analysis of the hospital outpatient data for claims submitted for CY 2011 

indicates that prostate saturation biopsy procedures are rarely performed on Medicare 

beneficiaries. For OPPS claims submitted from CY 2010 through CY 2011, our claims 

data show no single claim submitted for HCPCS code G0417 in CY 2010 or in CY 2011. 

Similarly, our claims data did not show any hospital outpatient claims for HCPCS codes 

G0418 and G0419 from either CY 2010 or CY 2011. Given the continued lack of cost 

data for these HCPCS codes, we are proposing to reassign these procedures to an APC 

that is appropriate from a clinical standpoint. Specifically, we are proposing to reassign 

HCPCS G-codes G0417, G0418, and G0419 to clinical APC 0661 (Level V Pathology), 
which has a proposed APC cost of approximately $160 for CY 2013. We believe that all 

three procedures, as described by HCPCS codes G0417, G0418, and G0419, are 

comparable clinically to other pathology services currently assigned to APC 0661 and 

likely require similar resources. 

Table 18 below lists the HCPCS G-codes and associated status indicators that we 

are proposing to reassign from New Technology APCs 1505, 1506, and 1508 to APC 

0661 for CY 2013. 

TABLE 18.—PROPOSED REASSIGNMENT OF PROCEDURES ASSIGNED TO 

NEW TECHNOLOGY APCs FOR CY 2013 

CY 

2012 

HCPCS 

Code 

CY 2012 Short Descriptor 

CY 

2012 

SI 

CY 2012 

APC 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

G0417 Sat biopsy prostate 21-40 S 1505 X 0661 

G0418 Sat biopsy prostate 41-60 S 1506 X 0661 

G0419 Sat biopsy prostate: >60 S 1508 X 0661 

3. Proposed Payment Adjustment Policy for Radioisotopes Derived From Non-Highly 

Enriched Uranium Sources 

a. Background 

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. 

Full Cost Recovery, which is routinely considered in CMS reimbursement, is the 

accounting practice used by producers and suppliers to describe the recovery of all 

contributing costs. Unlike legacy sources that often benefit from government subsidized 

multi-function facilities, the cost of these alternative methods will be increased over the 

cost of medical radioisotopes produced using HEU because hospitals’ payments to 

producers and suppliers will have to cover capital expense (such as, for example, the cost 

of building new reactors, particle accelerators, or other very long term investments), as 

well as all other new industry-specific ancillary costs (such as, for example, the cost of 

long-term storage of radioactive waste). Hospitals that use medical radioisotopes that are 

produced from non-HEU sources can expect producers and suppliers to pass on to them 

the full impact of these costs. 

 In the short term, some hospitals will be able to depend on low cost legacy 

producers using aging subsidized reactors while other hospitals will be forced to absorb 

the full cost of non-HEU alternative sources. Over several years, we believe that these 

cost differentials will promote increased regional shortages and create larger cost 

differentials and greater cost variations between hospitals. As a result, we believe this 
change in supply source will create a significant payment inequity among hospitals 

resulting from factors that are outside of normal market forces. 

b. Proposed Payment Policy 

 We are proposing to exercise our authority to establish “other adjustments as 

determined to be necessary to ensure equitable payments” under the OPPS in accordance 

with section 1833(t)(2)(E) of the Act. We do not believe that we can ensure equitable 

payments to hospitals over the next 4 to 5 years in the absence of an adjustment to 

account for the significant payment inequities created by factors that will likely arise due 

to the change in supply source for the radioisotope used commonly in modern medical 

imaging procedures. We are proposing to provide an adjustment for the marginal cost for 

radioisotopes produced from non-HEU sources over the costs for radioisotopes produced 

by HEU sources. We believe such an adjustment would ensure equitable payments in 

light of the Administration’s HEU agenda, market influences, cost differentials, and cost 

variations that will create significant payment inequities among hospitals. 

For CY 2013, we are proposing to make an additional payment of $10, which is 

an amount based on the best available estimations of the marginal costs associated with 

non-HEU Tc-99m production as calculated using Full Cost Recovery. We are proposing 

to establish a new HCPCS code, QXXXX (Tc-99m from non-HEU source, full cost 

recovery add-on, per dose) to describe the Tc-99m radioisotope produced by non-HEU 

methods and used in a diagnostic procedure. Hospitals would be able to report this code 

once per dose along with any diagnostic scan or scans using Tc-99m as long as the 

Tc-99m doses used can be certified by the hospital as coming from non-HEU sources and 
have been priced using a Full Cost Recovery accounting methodology. The code would 

pay hospitals for the additional (marginal) cost of using Tc-99m from a non-HEU source. 

Hospitals would not be required to make a separate certification of the non-HEU 

source on the claim; the inclusion of the proposed new HCPCS QXXXX code on the 

claim would indicate that the hospital has met the conditions of the service definition as it 

does for any billed service. However, in the event of an audit, hospitals would be 

expected to be able to produce documentation that the individual dose delivered to the 

patient was completely produced from a non-HEU source. We are proposing three ways 

in which hospitals could accomplish this. 

First, the hospital could produce documentation such as invoices or patient dose 

labels or tracking sheets that indicated that the patient’s dose was completely produced 

from non-HEU sources and priced based on Full Cost Recovery. In this first case, the 

supplier would be expected to be able to trace a specific dose to a completely non-HEU 

batch. Current pharmacy recordkeeping is generally able to trace all components of 

radiopharmaceuticals back to their source production batches. A hospital would not be 

compliant with the code definition if the documentation indicated the supplier had 

produced a mixed batch and labeled a fraction of the doses equal to the non-HEU fraction 

in the batch. 

Second, a hospital could produce documentation that the entire batch of Tc-99m 

doses derives from non-HEU sources for a specified period of time, for example, the time 

that a single non-HEU based generator is in use. This approach would obviate the need 

for specific dose tracking from a claims audit perspective, although that information is 

typically required for other purposes. An attestation from the generator supplier would 
be sufficient evidence for the hospital, as would invoices that showed that all Tc-99m 

during a specified period came from inherently non-HEU alternative sources. 

Third, if the industry should implement labeling of generators and/or doses with 

labels attesting to 100 percent non-HEU sources priced at Full Cost Recovery, 

documentation of labeled isotope usage using either the specific dose approach or the 100 

percent hospital usage approach could provide evidence of hospital compliance. The 

hospital would be required to retain appropriate documentation within the hospital 

(including pharmacy) records but would not need to keep any specific documentation 

within the individual medical record. Also, we would consider a dose to be priced for 

Full Cost Recovery when the supplier could attest that the supply chain adheres to usual 

industry practices to account for Full Cost Recovery, specifically including the capital 

cost of sustainable production and the environmental cost of waste management. 

 To reduce the administrative overhead for hospitals, we are proposing not to 

require hospitals to separately track additional costs for the non-HEU Tc-99m, but to 

include the cost of the radioisotope in the cost of the diagnostic radiopharmaceutical as 

usual, reporting only a token $1 charge for the HCPCS QXXXX code line. We would 

continue to calculate the total costs of radionuclide scans using claims data, and would 

periodically recalculate the estimated marginal cost of non-HEU Full Cost Recovery 

sources using models relying on the best available industry reports and projections, and 

would adjust the payment for HCPCS QXXXX code accordingly, reducing the payment 

for the scans by the amount of cost paid through HCPCS QXXXX code payment. We 

believe this proposal would allow us to continuously compensate for unanticipated 

changes in Tc-99m cost attributable to new non-HEU supply sources. 
D. Proposed OPPS APC-Specific Policies

1. Placement of Amniotic Membrane (APC 0233) 

In CY 2011, the AMA CPT Editorial Panel revised the long descriptor for CPT 

code 65780 (Ocular surface reconstruction; amniotic membrane transplantation, multiple 

layers) to include the words “multiple layers” to further clarify the code descriptor. In 

addition, the AMA CPT Editorial Panel created two new CPT codes that describe the 

placement of amniotic membrane on the ocular surface without reconstruction: one 

describing the placement of a self-retaining (non-sutured/non-glued) device on the 

surface of the eye; and the other describing a single layer of amniotic membrane sutured 

to the surface of the eye. Specifically, the AMA CPT Editorial Panel established CPT 

codes 65778 (Placement of amniotic membrane on the ocular surface for wound healing; 

self-retaining) and 65779 (Placement of amniotic membrane on the ocular surface for 

wound healing; single layer, sutured), effective January 1, 2011. 

As has been our practice since the implementation of the OPPS in 2000, we 

review all new procedures before assigning them to an APC. In determining the APC 

assignments for CPT codes 65778 and 65779, we took into consideration the clinical and 

resource characteristics involved with placement of amniotic membrane products on the 

eye for wound healing via a self-retaining device and a sutured, single-layer technique. 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72402), we assigned 

CPT code 65778 to APC 0239 (Level II Repair and Plastic Eye Procedures), which had a 

payment rate of approximately $559, and CPT code 65779 to APC 0255 (Level II 

Anterior Segment Eye Procedures), which had a payment rate of approximately $519. 
In addition, consistent with our longstanding policy for new codes, we assigned 

these two new CPT codes to interim APCs for CY 2011. Specifically, we assigned CPT 

codes 65778 and 65779 to comment indicator “NI” in Addendum B of the CY 2011 

OPPS/ASC final rule with comment period to indicate that the codes were new with an 

interim APC assignment that were subject to public comment. In accordance with our 

longstanding policy, our interim APC assignments for each code was based on our 

understanding of the resources required to furnish the service as defined in the code 

descriptor and on input from our physicians. 

At the Panel’s February 28-March 1, 2011 meeting, a presenter requested the 

reassignment of CPT codes 65778 and 65779 to APC 0244 (Corneal and Amniotic 

Membrane Transplant), which is the same APC to which CPT code 65780 is assigned. 

The presenter indicated that prior to CY 2011, the procedures described by CPT codes 

65578 and 65779 were previously reported under the original version of CPT code 

65780, which did not specify “multiple layers,” and as such these new codes should 

continue to be assigned to APC 0244. Further, the presenter stated that the costs of the 

procedures described by CPT codes 65778 and 65779 are very similar to the procedure 

described by CPT code 65780. 

The Panel recommended that CMS reassign the APC assignments for both CPT 

codes 65778 and 65779. Specifically, the Panel recommended the reassignment of CPT 

code 65778 from APC 0239 to APC 0233(Level III Anterior Segment Eye Procedures), 

and the reassignment of CPT code 65779 from APC 0255 to APC 0233. In addition, the 

Panel recommended that CMS furnish data when data become available for these two 

codes. We noted at that time that because these codes were effective January 1, 2011, the 
first available claims data for these codes would be for the CY 2013 OPPS rulemaking 

cycle. 

We accepted the Panel’s recommendations. However, in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74247), we indicated that, while we 

agreed with the Panel's recommendation to reassign CPT codes 65778 and 65779 to APC 

0233, we believed that CPT code 65778 should be assigned to a conditionally packaged 

status indicator of “Q2” to indicate that the procedure would be packaged when it is 

reported with another procedure that is also assigned to status indicator “T”; but in all 

other circumstances, the code would be paid separately. Because the procedure described 

by CPT code 65778 would rarely be provided as a separate, stand-alone service in the 

HOPD, and because the procedure would almost exclusively be provided in addition to 

and following another procedure or service, we proposed to reassign CPT code 65778 to 

a conditionally packaged status indicator of “Q2.” In addition, our medical advisors 

indicated that the procedure described by CPT code 65778 is not significantly different 

than placing a bandage contact lens on the surface of the eye to cover a corneal epithelial 

defect. CPT code 65778 describes the simple placement of a special type of bandage (a 

self-retaining amniotic membrane device) on the surface of the eye, which would most 

commonly be used in the HOPD to cover the surface of the eye after a procedure that 

results in a corneal epithelial defect. 

At the August 10-11, 2011 Panel Meeting, a presenter urged the Panel to 

recommend to CMS not to conditionally package CPT code 65778 for CY 2012, and 

instead, assign it to status indicator “T.” Based on information presented at the meeting, 

and after further discussion on the issue, the Panel recommended that CMS reassign the 
status indicator for CPT code 65778 from conditionally packaged “Q2” to status indicator 

“T.” Several commenters also urged CMS not to finalize its proposal to conditionally 

package CPT code 65778 by assigning it a status indicator “Q2” and instead adopt the 

Panel’s recommendation to assign status indicator “T.” 

After consideration of the Panel’s August 2011 recommendation and the public 

comments that we received to the CY 2012 OPPS/ASC proposed rule, we finalized our 

proposal and reassigned the status indicator for CPT code 65778 from “T” to “Q2” 

effective January 1, 2012 (76 FR 74246). Given the clinical characteristics of this 

procedure, we believed that conditionally packaging CPT code 65778 was appropriate 

under the OPPS. 

For the CY 2013 OPPS update, we are proposing to continue to assign CPT code 

65778 to its conditionally packaged status of “Q2.” Similarly, we believe that we should 

assign CPT code 65779 to a conditionally packaged status of “Q2.” Therefore, for 

CY 2013, we are proposing to revise the status indicator for CPT code 65779 from status 

indicator “T” to “Q2” to indicate that the procedure would be packaged when it is 

reported with another procedure that is also assigned to status indicator “T,” but in all 

other circumstances, the code would be paid separately. This reassignment would enable 

hospitals to perform either procedures (CPT code 65778 or 65779) when appropriate, and 

would not differentiate one procedure from the other because of the status indicator 

assignment under the OPPS. 

As indicated at the February 28-March 1, 2011 Panel meeting, because CPT codes 

65778 and 65779 were effective January 1, 2011, the first available claims data for these 

codes would be in CY 2012 for the CY 2013 OPPS rulemaking. We now have claims 
data for CPT codes 65778 and 65779, and our data show that both procedures are 

performed in the HOPD setting. Analysis of the CY 2011 claims data available for this 

proposed rule, which is based on claims processed from January 1 through 

December 31, 2011, reveals that the estimated cost for CPT code 65778 is approximately 

$1,025 based on 33 single claims (out of 130 total claims), and the estimated cost for 

CPT code 65779 is approximately $2,303 based on 35 single claims (out of 260 total 

claims). Based on the clinical similarity to other procedures currently assigned to APC 

0233, and because there is no violation with the 2 times rule, we believe that we should 

continue to assign both CPT codes 65778 and 65779 to APC 0233, which has a proposed 

cost of approximately $1,150. Review of the procedures assigned to APC 0233 shows 

that the range of the CPT cost for the procedures with significant claims data is between 

approximately $859 (for CPT code 65400 (Removal of eye lesion)) and approximately 

$1,397 (for CPT code 66840 (Removal of lens material)). 

In summary, for CY 2013, we are proposing to continue to assign CPT code 

65778 to its conditionally packaged status of “Q2” and to reassign the status indicator for 

CPT code 65779 from “T” to “Q2,” similar to CPT code 65778. In addition, we are 

proposing to continue to assign both CPT codes 65778 and 65779 to APC 0233, which 

has a proposed cost of approximately $1,150. Both procedures and their CY 2013 

proposed APC assignments are displayed in Table 19 below. 
TABLE 19.--PROPOSED APC ASSIGNMENTS FOR CPT CODES 65778 AND 

65779 FOR CY 2013 

CY 

2012 

HCPCS 

Code 

CY 2012 Short Descriptor 

CY 

2012

SI 

CY 2012 

APC 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

65778 Cover eye w/membrane Q2 0233 Q2 0233 

65779 Cover eye w/membrane suture T 0233 Q2 0233 

2. 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) with an 

estimated cost of approximately $331 (based on 185 single claims of 185 total claims 

submitted for CY 2011); and CPT code 77522 (Proton treatment delivery; simple, with 

compensation) with an estimated cost of approximately $1,191 (based on 14,279 single 

claims of 15,405 total claims submitted for CY 2011). APC 0667 (Level II Proton Beam 

Radiation Therapy) also includes two procedures, CPT code 77523 (Proton treatment 

delivery, intermediate) with an estimated cost of approximately $920 (based on 3,009 

single claims of 3,202 total claims submitted for CY 2011), and CPT code 77525 (Proton 

treatment delivery, complex) with an estimated cost of approximately $483 (based on 

1,400 single claims of 1,591 total claims submitted for CY 2011). Based on these 

CY 2011 claims data, the estimated cost of APC 0664 is approximately $1,171, and the 

estimated cost of APC 0667 is approximately $750. 

 Because only three providers bill Medicare for these services, their payment rates, 

which are set annually based on claims data according to the standard OPPS ratesetting 

methodology, may fluctuate significantly from year to year. For CY 2013, the estimated 
cost of APC 0664 is approximately the same as its CY 2012 payment rate of $1,184. 

However, the estimated cost of APC 0667 has decreased substantially, which is largely 

attributable to cost changes for CPT code 77523. For CY 2013, we are proposing to 

improve the resource homogeneity within the proton beam APCs by including the 

services requiring fewer resources in APC 0664 (Level I) and the services requiring 

greater resources in APC 0667 (Level II). Specifically, we are proposing to reassign CPT 

code 77522 to APC 0667 and to reassign CPT code 77525 to APC 0664. Under the 

proposed reassignment, the estimated cost of APC 0664 is $462 and the estimated cost of 

APC 0667 is $1,138. We are inviting public comments on this proposal. 

3. Intraoperative Radiation Therapy (IORT) (APC 0412) 

a. Background 

The AMA CPT Editorial Panel created three new Category I CPT codes for 

intraoperative radiation therapy (IORT), effective January 1, 2012: CPT codes 77424 

(Intraoperative radiation treatment delivery, x-ray, single treatment session); 77425 

(Intraoperative radiation treatment delivery, electrons, single treatment session); and 

77469 (Intraoperative radiation treatment management). As with all new CPT codes for 

CY 2012, these three codes were included in Addendum B to the CY 2012 OPPS/ASC 

final rule with comment period (available via the CMS Web site), effective on 

January 1, 2012. In accordance with our standard practice each year, our clinicians 

review the many CPT code changes that will be effective in the forthcoming year and 

make decisions regarding status indicators and/or APC assignments based on their 

understanding of the nature of the services. We are unable to include proposed status 

indicators and/or APC assignments in the proposed rule for codes that are not announced 
by the AMA CPT Editorial Panel prior to the issuance of the proposed rule. Therefore, in 

accordance with our longstanding policy, we include, in the final rule with comment 

period, interim status indicators and/or APC assignments for all new CPT codes that are 

announced by the AMA CPT Editorial Panel subsequent to the issuance of the 

OPPS/ASC proposed rule to enable payment for new services as soon as the codes are 

effective. 

We identified the new codes for IORT for CY 2012 in Addendum B to the 

CY 2012 OPPS/ASC final rule with comment period as being open to public comment by 

showing a comment indicator of “NI” and made interim status indicator assignments for 

each of these new IORT codes, based on our understanding of the clinical nature of the 

services they describe. Specifically, for CY 2012, we packaged these IORT service 

codes with the surgical procedures with which they are billed, assigning them interim 

status indicators of “N” (Items and Services Packaged into APC Rates). We did so based 

on a policy that was adopted in the CY 2008 OPPS final rule with comment period 

(72 FR 66610 through 66659) to package services that are typically ancillary and 

supportive of a principal diagnostic or therapeutic procedure, which would generally 

include intraoperative services. Because IORT are intraoperative services furnished as a 

single dose during the time of the related surgical session, we packaged them into the 

payment for the principal surgical procedures with which they are performed based on 

claims data used for the CY 2012 OPPS/ASC final rule with comment period. 

Subsequent to issuance of the CY 2012 OPPS/ASC final rule with comment 

period, stakeholders provided comments on the interim status of these IORT service 

codes for CY 2012, asserting that these services are not ancillary to the surgical 
procedures, urging us to unpackage these codes, and requesting that we assign them to an 

APC reflective of the resources used to provide the IORT services. The stakeholders 

argued that IORT services described by CPT codes 77424 and 77425 are separate, 

distinct, and independent radiation treatment services from the surgical services to 

remove a malignant growth. According to the commenters, IORT is performed 

separately by a radiation oncologist and a medical physicist when there is concern for 

residual unresected cancer because of narrow margins related to the surgical resection. 

b. CY 2013 Proposals for CPT Codes 77424, 77425, and 77469 

 Based on the comments and information received on the proposed IORT policies 

contained in the CY 2012 OPPS/ASC final rule with comment period, and after further 

review and consideration of those comments and the clinical nature of the IORT 

procedures, we agree that IORT services are not the typical intraoperative services that 

we package, as they are not integral to or dependent upon the surgical procedure to 

remove a malignancy that precedes IORT. Therefore, for CY 2013, we are proposing to 

unpackage CPT codes 77424 and 77425, and assign them to APC 0412, currently entitled 

“IMRT Treatment Delivery.” IORT treatment services are clinically similar to other 

radiation treatment forms, such as IMRT treatment, which are assigned to APC 0412. 

Furthermore, we are proposing to change the title of APC 0412 to “Level III Radiation 

Therapy” to encompass a greater number of clinically similar radiation treatment 

modalities. The proposed rule cost of APC 0412 based on CY 2011 claims data is 

approximately $496. As is our normal procedure for new CPT codes, we will monitor 

hospitals’ costs for furnishing the services described by CPT codes 77424 and 77425. 
 We believe that CPT code 77469 should receive equal treatment to other radiation 

management codes, such as CPT code 77431 (Radiation therapy management with 

complete course of therapy consisting of 1 or 2 fractions only) and CPT code 77432 

(Stereotactic radiation treatment management of cranial lesion(s) (complete course of 

treatment consisting of 1 session)), which are assigned status indicator “B” (Codes that 

are not recognized by OPPS when submitted on an outpatient hospital Part B bill type 

(12x and 13x)) and are not paid under the OPPS. Therefore, we are proposing that the 

appropriate status indicator code assignment for CPT code 77469 be “B” for nonpayable 

status under the OPPS for CY 2013, a change from its current CY 2012 status indicator 

assignment of “N” for packaged payment status. 

IV. Proposed OPPS Payment for Devices 

A. Proposed 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 four device categories eligible for pass-through payment. 

These device categories are described by HCPCS code C1749 (Endoscope, retrograde 

imaging/illumination colonoscope device (implantable)), which we made effective for 

pass-through payment October 1, 2010; HCPCS codes C1830 (Powered bone marrow 

biopsy needle) and C1840 (Lens, intraocular (telescopic)), which we made effective for 

pass-through payment October 1, 2011; and HCPCS code C1886 (Catheter, extravascular 

tissue ablation, any modality (insertable)), which we made effective for pass-through 

payment January 1, 2012. In the CY 2012 OPPS/ASC final rule with comment period, 

we finalized the expiration of pass-through payment for C1749, which will expire after 

December 31, 2012 (76 FR 74278). Therefore, after December 31, 2012, we will 

package the C1749 device costs into the costs of the procedures with which the devices 

are reported in the hospital claims data used in OPPS ratesetting. 

b. Proposed CY 2013 Policy 

 As stated above, 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. Device pass-through categories C1830 and C1840 were 
established for pass-through payments on October 1, 2011, and will have been eligible 

for pass-through payments for more than 2 years but less than 3 years as of the end of 

CY 2013. Also, device pass-through category C1886 was established for pass-through 

payments on January 1, 2012, and will have been eligible for pass-through payments for 

at least 2 years but less than 3 years as of the end of CY 2013. Therefore, we are 

proposing a pass-through payment expiration date for device categories C1830, C1840, 

and C1886 of December 31, 2013. Under our proposal, beginning January 1, 2014, 

device categories C1830, C1840, and C1886 will no longer be eligible for pass-through 

payments, and their respective device costs would be packaged into the costs of the 

procedures with which the devices are reported in the claims data. 

2. Proposed 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 (cost of device) exceeds the portion of the otherwise applicable 

Medicare outpatient department fee schedule amount (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 the device. 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 employed 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. 

We currently have published a list of all procedural APCs with the CY 2012 

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-ServicePayment/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 § 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. Proposed CY 2013 Policy 

For CY 2013, we are proposing to continue our 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. We are proposing to 

continue our policy, for CY 2013, that the pass-through evaluation process and 

pass-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 are proposing 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 are proposing 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 

are proposing 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 (§ 419.66(d)). 

For CY 2013, we also are proposing to continue our policy established in 

CY 2010 to include implantable biologicals in our calculation of the device APC offset 

amounts. In addition, we are proposing to continue to calculate and set any device APC 

offset amount for a new device pass-through category that includes a newly eligible 

implantable biological beginning in CY 2013 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. 

In addition, we are proposing to update, on the CMS Web site at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html, the list of all procedural APCs with the final 

CY 2013 portions (once available at the time of final rulemaking) 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 2013 device pass-through 

payment applications and by CMS in reviewing those applications. 

3. Proposed Clarification of Existing Device Category Criterion 

a. Background 

 Section 1833(t)(6)(B)(ii)(IV) of the Act directs the Secretary to establish a new 

device category for pass-through payment for which none of the pass-through categories 

in effect (or that were previously in effect) is appropriate. Commenters who responded to 

our various proposed rules, as well as applicants for new device categories, had expressed 
concern that some of our existing and previously in effect device category descriptors 

were overly broad, and that the device category descriptors as they are currently written 

may preclude some new technologies from qualifying for establishment of a new device 

category for pass-through payment (70 FR 68630 through 68631). As a result of these 

comments, we finalized a policy, effective January 1, 2006, to create an additional 

category for devices that meet all of the criteria required to establish a new category for 

pass-through payment in instances where we believe that an existing or previously in 

effect category descriptor does not appropriately describe the new device. Accordingly, 

effective January 1, 2006, we revised § 419.66(c)(1) of the regulations to reflect this 

policy change. In order to determine if a new device is appropriately described by any 

existing or previously in effect category of devices, we apply two tests based upon our 

evaluation of information provided to us in the device category application. First, an 

applicant for a new device category must show that its device is not similar to devices 

(including related predicate devices) whose costs are reflected in the currently available 

OPPS claims data in the most recent OPPS update. Second, an applicant must 

demonstrate that utilization of its device provides a substantial clinical improvement for 

Medicare beneficiaries compared with currently available treatments, including 

procedures utilizing devices in any existing or previously in effect device categories. We 

consider a new device that meets both of these tests not to be appropriately described by 

any existing or previously in effect pass-through device categories (70 FR 68630 through 

68631). 

b. Proposed Clarification of CY 2013 Policy 
For CY 2013, we are proposing to clarify the test that requires an applicant for a 

new device category to show that its device is not similar to devices (including related 

predicate devices) whose costs are reflected in the currently available OPPS claims data 

in the most recent OPPS update. We are clarifying that this test includes showing that a 

new device is not similar to predicate devices that once belonged in any existing or 

previously in effect pass-through device categories. Under this test, a candidate device 

may not be considered to be appropriately described by any existing or previously in 

effect pass-through device categories if the applicant adequately demonstrates that the 

candidate device is not similar to devices (including related predicate devices) that belong 

or once belonged to an existing or any previously in effect device category, and that the 

candidate device is not similar to devices whose costs are reflected in the OPPS claims 

data in the most recent OPPS update. The substantial clinical improvement criterion, 

which also must be satisfied in every case, as indicated in § 419.66(c)(2) of our 

regulations, is separate from the criterion that a candidate device not be similar to devices 

in any existing or previously in effect pass-through categories. We are inviting public 

comments regarding this proposed clarification.

B. Proposed 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 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. Proposed APCs and Devices Subject to the Adjustment Policy 

For CY 2013, we are proposing to continue the existing policy of reducing OPPS 

payment for specified APCs 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. (We refer readers to section II.A.2.d.(1) of 
this proposed rule for a description of our standard ratesetting methodology for devicedependent APCs.) 

For CY 2013, we also are proposing to continue using the three criteria 

established in the CY 2007 OPPS/ASC final rule with comment period for determining 

the APCs to which this 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 are proposing 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 continue to believe these criteria are appropriate because free 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. 

We examined the offset amounts calculated from the CY 2013 proposed rule data 

and the clinical characteristics of APCs to determine whether the APCs to which the no 
cost/full credit and partial credit device adjustment policy applied in CY 2012 continue to 

meet the criteria for CY 2013, and to determine whether other APCs to which the policy 

did not apply in CY 2012 would meet the criteria for CY 2013. Based on the CY 2011 

claims data available for this proposed rule, we are not proposing any changes to the 

APCs and devices to which this policy applies. 

Table 20 below lists the proposed APCs to which the payment adjustment policy 

for no cost/full credit and partial credit devices would apply in CY 2013 and displays the 

proposed payment adjustment percentages for both no cost/full credit and partial credit 

circumstances. We are proposing that the no cost/full credit adjustment for each APC to 

which this policy would continue to apply would be the device offset percentage for the 

APC (the estimated percentage of the APC cost that is attributable to the device costs that 

are already packaged into the APC). We also are proposing that the partial credit device 

adjustment for each APC would continue to be 50 percent of the no cost/full credit 

adjustment for the APC. 

Table 21 below lists the proposed devices to which the payment adjustment policy 

for no cost/full credit and partial credit devices would apply in CY 2013. We will update 

the lists of APCs and devices to which the no cost/full credit and partial credit device 

adjustment policy would apply for CY 2013, consistent with the three criteria discussed 

earlier in this section, based on the final CY 2011 claims data available for the CY 2013 

OPPS/ASC final rule with comment period. 

We are proposing, for CY 2013, that OPPS payments for implantation procedures 

to which the “FB” modifier is appended are reduced by 100 percent of the device offset 

for no cost/full credit cases when both a device code listed in Table 21 below is present 
on the claim, and the procedure code maps to an APC listed in Table 20 below. We also 

are proposing that OPPS payments for implantation procedures to which the “FC” 

modifier is appended are reduced by 50 percent of the device offset when both a device 

code listed in Table 21 is present on the claim and the procedure code maps to an APC 

listed in Table 20. Beneficiary copayment is based on the reduced amount when either 

the “FB” modifier or the “FC” modifier is billed and the procedure and device codes 

appear on the lists of procedures and devices to which this policy applies. 
TABLE 20.—PROPOSED APCs TO WHICH THE NO COST/FULL CREDIT 

AND PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY IN 

CY 2013 

Proposed 

CY 2013 

APC 

Proposed CY 2013 APC 

Title 

Proposed 

CY 2013 

Device Offset 

Percentage for 

No Cost/ 

Full Credit 

Case 

Proposed 

CY 2013 

Device Offset 

Percentage 

for Partial 

Credit Case 

0039 

Level I Implantation of 

Neurostimulator Generator 86% 43%

0040 

Level I 

Implantation/Revision/Replac

ement of Neurostimulator 

Electrodes 55% 28%

0061 

Level II 

Implantation/Revision/Replac

ement of Neurostimulator 

Electrodes 66% 33%

0089 

Insertion/Replacement of 

Permanent Pacemaker and 

Electrodes 70% 35%

0090 

Insertion/Replacement of 

Pacemaker Pulse Generator 71% 35%

0106 

Insertion/Replacement of 

Pacemaker Leads and/or 

Electrodes 48% 24%

0107 

Insertion of CardioverterDefibrillator 83% 42%

0108 

Insertion/Replacement/Repair 

of AICD Leads, Generator, 

and Pacing Electrodes 84% 42%

0227 

Implantation of Drug Infusion 

Device 82% 41%

0259 Level VII ENT Procedures 84% 42%

0315 

Level II Implantation of 

Neurostimulator Generator 88% 44%
Proposed 

CY 2013 

APC 

Proposed CY 2013 APC 

Title 

Proposed 

CY 2013 

Device Offset 

Percentage for 

No Cost/ 

Full Credit 

Case 

Proposed 

CY 2013 

Device Offset 

Percentage 

for Partial 

Credit Case 

0318 

Implantation of Cranial 

Neurostimulator Pulse 

Generator and Electrode 87% 44%

0385 

Level I Prosthetic Urological 

Procedures 63% 31%

0386 

Level II Prosthetic Urological 

Procedures 70% 35%

0425 

Level II Arthroplasty or 

Implantation with Prosthesis 58% 29%

0648 Level IV Breast Surgery 50% 25%

0654 

Insertion/Replacement of a 

permanent dual chamber 

pacemaker 74% 37%

0655 

Insertion/Replacement/Conve

rsion of a Permanent Dual 

Chamber Pacemaker or 

Pacing Electrode 73% 37%

0680 

Insertion of Patient Activated 

Event Recorders 74% 37%

TABLE 21.—PROPOSED DEVICES TO WHICH THE NO COST/FULL CREDIT 

AND PARTIAL CREDIT DEVICE ADJUSTMENT POLICY WOULD APPLY IN 

CY 2013 

Proposed 

CY 2013 Device 

HCPCS Code 

Proposed CY 2013 Short 

Descriptor 

C1721 AICD, dual chamber 

C1722 AICD, single chamber 

C1728 Cath, brachytx seed adm 

C1764 Event recorder, cardiac 
Proposed 

CY 2013 Device 

HCPCS Code 

Proposed CY 2013 Short 

Descriptor 

C1767 Generator, neurostim, imp 

C1771 Rep dev, urinary, w/sling 

C1772 Infusion pump, programmable 

C1776 Joint device (implantable) 

C1777 Lead, AICD, endo single coil 

C1778 Lead, neurostimulator 

C1779 Lead, pmkr, transvenous VDD 

C1785 Pmkr, dual, rate-resp 

C1786 Pmkr, single, rate-resp 

C1789 Prosthesis, breast, imp 

C1813 Prosthesis, penile, inflatab 

C1815 Pros, urinary sph, imp 

C1820 Generator, neuro rechg bat sys 

C1881 Dialysis access system 

C1882 AICD, other than sing/dual 

C1891 Infusion pump, non-prog, perm 

C1895 Lead, AICD, endo dual coil 

C1896 Lead, AICD, non sing/dual 

C1897 Lead, neurostim, test kit 

C1898 Lead, pmkr, other than trans 

C1899 Lead, pmkr/AICD combination 

C1900 Lead coronary venous 

C2619 Pmkr, dual, non rate-resp 

C2620 Pmkr, single, non rate-resp 

C2621 Pmkr, other than sing/dual 

C2622 Prosthesis, penile, non-inf 

C2626 Infusion pump, non-prog, temp 

C2631 Rep dev, urinary, w/o sling 

L8600 Implant breast silicone/eq 

L8614 Cochlear device/system 

L8680 Implt neurostim elctr each 

L8685 Implt nrostm pls gen sng rec 

L8686 Implt nrostm pls gen sng non 

L8687 Implt nrostm pls gen dua rec 

L8688 Implt nrostm pls gen dua non 
Proposed 

CY 2013 Device 

HCPCS Code 

Proposed CY 2013 Short 

Descriptor 

L8690 Aud osseo dev, int/ext comp 

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

Radiopharmaceuticals 

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

Biologicals, and Radiopharmaceuticals

1. Background 

 Section 1833(t)(6) of the Act provides for temporary additional payments or 

“transitional pass-through payments” for certain drugs and biologicals (also referred to as 

biologics). As enacted by the Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act (BBRA) of 1999 (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 for the treatment of cancer; and 

current radiopharmaceutical drugs and biologicals. For those drugs and biologicals 

referred to as “current,” the transitional pass-through payment began 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.” Under the 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 

product’s first payment as a hospital outpatient service under Medicare Part B. Proposed 

CY 2013 pass-through drugs and biologicals and their designated APCs are assigned 

status indicator “G” in Addenda A and B to this proposed rule, which are available via 

the Internet on the CMS 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 CAP program has been postponed since CY 2009, and such a program is not 

proposed to be reinstated for CY 2013. 

 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 proposed rule, the term “ASP methodology” and “ASP-based” are inclusive of all 

data sources and methodologies described therein. Additional information on the ASP 

methodology can be found on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-BDrugs/McrPartBDrugAvgSalesPrice/index.html. 

For CYs 2005, 2006, and 2007, we estimated the OPPS pass-through payment 

amount for drugs and biologicals to be zero based on our interpretation that the 

“otherwise applicable Medicare OPD fee schedule” amount was equivalent to the amount 

to be paid for pass-through drugs and biologicals under section 1842(o) of the Act (or 

section 1847B of the Act. We concluded for those years that the resulting difference 

between these two rates would be zero. For CYs 2008 and 2009, we estimated the OPPS 

pass-through payment amount for drugs and biologicals to be $6.6 million and 

$23.3 million, respectively. For CY 2010, we estimated the OPPS pass-through payment 

estimate for drugs and biologicals to be $35.5 million. For CY 2011, we estimated the 

OPPS pass-through payment for drugs and biologicals to be $15.5 million. For CY 2012, 

we estimated the OPPS pass-through payment for drugs and biologicals to be $19 

million. Our proposed OPPS pass-through payment estimate for drugs and biologicals in 

CY 2013 is $32 million, which is discussed in section VI.B. of this proposed rule. 
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-forService-Payment/HospitalOutpatientPPS/passthrough_payment.html. 

2. Proposed Drugs and Biologicals with Expiring Pass-Through Status in CY 2012

We are proposing that the pass-through status of 23 drugs and biologicals would 

expire on December 31, 2012, as listed in Table 22 below. 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, 2012. These drugs and biologicals were approved 

for pass-through status on or before January 1, 2011. 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 and contrast agents, 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 

proposed at $80), as discussed further in section V.B.2. of this proposed rule. If the 

drug’s or biological’s estimated per day cost 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 proposed at ASP+6 percent for CY 2013, as discussed further in section V.B.3. 

of this proposed rule). Section II.A.3.d. of this proposed rule discusses the packaging of 

all nonpass-through contrast agents and diagnostic radiopharmaceuticals. 
TABLE 22.—PROPOSED DRUGS AND BIOLOGICALS FOR WHICH 

PASS-THROUGH STATUS WILL EXPIRE DECEMBER 31, 2012 

Proposed 

CY 2013 

HCPCS 

Code 

Proposed CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

C9275 Injection, hexaminolevulinate 

hydrochloride, 100 mg, per study dose N N/A 

C9279 Injection, ibuprofen, 100 mg N N/A 

C9367 Skin substitute, Endoform Dermal 

Template, per square centimeter K 9367 

J0221 Injection, alglucosidase alfa, 

(lumizyme), 10 mg K 1413 

J0588 Injection, incobotulinumtoxin A, 1 unit K 9278 

J0597 Injection, C-1 esterase inhibitor 

(human), Berinert, 10 units K 9269 

J0775 Injection, collagenase clostridium 

histolyticum, 0.01 mg K 1340 

J0840 Injection, crotalidae polyvalent immune 

fab (ovine), up to 1 gram K 9274 

J0897 Injection, denosumab, 1 mg K 9272 

J1290 Injection, ecallantide, 1 mg K 9263 

J1557 

Injection, immune globulin 

(Gammaplex), intravenous, nonlyophilized (e.g. liquid), 500 mg K 9270 

J3095 Injection, telavancin, 10 mg K 9258 

J3262 Injection, tocilizumab, 1 mg K 9264 

J3357 Injection, ustekinumab, 1 mg K 9261 

J3385 Injection, velaglucerase alfa, 100 units K 9271 

J7183 

Injection, von Willebrand factor 

complex (human), Wilate, per 100 IU 

VWF: RCO 

N N/A 

J7335 Capsaicin 8% patch,per 10 square 

centimeters K 9268 

J8562 Fludarabine phosphate, oral, 10 mg K 

J9043 Injection, cabazitaxel, 1 mg K 1339 
Proposed 

CY 2013 

HCPCS 

Code 

Proposed CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

J9302 Injection, ofatumumab, 10 mg K 9260 

J9307 Injection, pralatrexate, 1 mg K 9259 

J9315 Injection, romidepsin, 1 mg K 9265 

Q2043 

Sipuleucel-t, minimum of 50 million 

autologous cd54+ cells activated with 

pap-gm-csf, including leukapheresis and 

all other preparatory procedures, per 

infusion 

K 9273 

3. Proposed Drugs, Biologicals, and Radiopharmaceuticals with New or Continuing 

Pass-Through Status in CY 2013 

We are proposing to continue pass-through status in CY 2013 for 21 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, 2012. These 

drugs and biologicals, which were approved for pass-through status between 

April 1, 2011 and July 1, 2012, are listed in Table 23 below. The APCs and HCPCS 

codes for these drugs and biologicals approved for pass-through status through 

April 1, 2012 are assigned status indicator “G” in Addenda A and B of this proposed rule 

and 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 

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 2013, 

the amount that drugs and biologicals receive under section 1842(o) of the Act. 

Thus, for CY 2013, we are proposing 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 2013. We are proposing that a $0.00 

pass-through payment amount would be paid for most pass-through drugs and biologicals 

under the CY 2013 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 pass-through contrast agents and diagnostic radiopharmaceuticals, 

their pass-through payment amount would be equal to ASP+6 percent because, if not on 

pass-through status, payment for these products would be packaged into the associated 

procedure. Therefore, we are proposing that the difference between ASP+6 percent and 

the “policy-packaged” drug APC offset amount for the associated clinical APC in which 

the drug or biological is utilized would be the CY 2013 pass-through payment amount for 

these policy-packaged products. 

In addition, we are proposing to continue to update pass-through payment rates on 

a quarterly basis on the CMS Web site during CY 2013 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 2013, as is consistent with our CY 2012 policy for diagnostic and 

therapeutic radiopharmaceuticals, we are proposing 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 2013, we are 

proposing 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 are proposing 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 are proposing to 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.d. of this proposed rule, over the last 

5 years, we implemented a policy whereby payment for all nonpass-through diagnostic 

radiopharmaceuticals and contrast agents, is packaged into payment for the associated 

procedure. We are proposing to continue the packaging of these items, regardless of their 

per day cost, in CY 2013. 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 either a diagnostic 
radiopharmaceutical or a contrast agent (identified as a “policy-packaged” drug, first 

described in the CY 2009 OPPS/ASC final rule with comment period (73 FR 68639)) 

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 proposed rule. 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 2012, we are proposing to continue to set the associated copayment amount for 

pass-through diagnostic radiopharmaceuticals and contrast agents that would otherwise 

be packaged if the item did not have pass-through status to zero for CY 2013. Similarly, 

we are proposing that the associated copayment amount for pass-through anesthesia 

drugs that would otherwise be packaged if the item did not have pass-through status 

would be zero for CY 2013. As discussed in further detail in section II.3.c.2. of this 

proposed rule, we are clarifying that our general policy is to package drugs used for 
anesthesia, and that those anesthesia drugs with pass-through status will be packaged 

upon the expiration of pass-through status. 

The separate OPPS payment to a hospital for the pass-through diagnostic 

radiopharmaceutical, contrast agent, or anesthesia drug is not subject to a copayment 

according to the statute. Therefore, we are proposing to not publish a copayment amount 

for these items in Addenda A and B to this proposed rule (which are available via the 

Internet on the CMS Web site). 

The 21 drugs and biologicals that we are proposing to continue on pass-through 

status for CY 2013 or that have been granted pass-through status as of July 2012 are 

displayed in Table 23. 
TABLE 23.—PROPOSED DRUGS AND BIOLOGICALS WITH 

PASS-THROUGH STATUS IN CY 2013 

Proposed 

CY 2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

A9584 Iodine I-123 ioflupane, diagnostic, per study 

dose, up to 5 millicuries G 9406 

C9285 Lidocaine 70 mg/tetracaine 70 mg, per patch G 9285 

C9286 Injection, belatacept, 1 mg G 9286 

C9287 Injection, brentuximab vedotin, 1 mg G 9287 

C9288 Injection, centruroides (scorpion) immune 

f(ab)2 (equine), 1 vial G 9288 

C9289 Injection, asparaginase Erwinia chrysanthemi, 

1,000 international units (I.U.) G 9289 

C9290 Injection, bupivicaine liposome, 1 mg G 9290 

C9366 EpiFix, per square centimeter G 9366 

C9368** Grafix core, per square centimeter G 9368 

C9369** Grafix prime, per square centimeter G 9369 

J0131 Injection, acetaminophen, 10 mg G 9283 

J0490 Injection, belimumab, 10 mg G 1353 

J0638 Injection, canakinumab, 1mg G 1311 

J0712 Injection, ceftaroline fosamil, 10 mg G 9282 

J1572 

Injection, immune globulin, 

(flebogamma/flebogamma dif), intravenous, 

non-lyophilized (e.g. liquid), 500 mg 

G 0947 

J2507 Injection, pegloticase, 1 mg G 9281 

J7180 Injection, factor xiii (antihemophilic factor, 

human), 1 i.u G 1416 

J9179 Injection, eribulin mesylate, 0.1 mg G 1426 

J9228 Injection, ipilimumab, 10 mg G 9284 

Q2046* Injection, aflibercept, 1 mg G 1420 

Q4124 Oasis Ultra Tri-Layer matrix, per square 

centimeter G 9365 

*HCPCS code Q2046 replaced HCPCS code C9291 effective July 1, 2012. Because the payment rate 

associated with this code effective July 1, 2012 is not available to us in time for incorporation into the 

Addenda of this proposed rule, the Level II HCPCS codes and the Category III CPT codes implemented 
through the July 2012 OPPS quarterly update CR could not be included in Addendum B to this proposed 

rule. 

**Because the payment rates associated with these codes effective July 1, 2012 are not available to us in 

time for incorporation into the Addenda of this proposed rule, the Level II HCPCS codes and the Category 

III CPT codes implemented through the July 2012 OPPS quarterly update CR could not be included in 

Addendum B to this proposed rule. 

4. Proposed Provisions for Reducing Transitional Pass-Through Payments for Diagnostic 

Radiopharmaceuticals and Contrast Agents 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 2013, we are proposing to continue to package 

payment for all nonpass-through diagnostic radiopharmaceuticals and contrast agents, as 

discussed in section II.A.3.d. of this proposed rule. 

b. Proposed 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 is currently one 

radiopharmaceutical with pass-through status under the OPPS, HCPCS code A9584 

(Iodine I-123 ioflupane, diagnostic, per study dose, up to 5 millicuries). This product, 

which is presently referred to using HCPCS code A9584, was granted pass-through status 

using HCPCS code C9406 beginning July 1, 2011, and we are proposing that it continue 

receiving pass-through status in CY 2013. We currently apply the established 

radiopharmaceutical payment offset policy to pass-through payment for this product. As 

described earlier in section V.A.3. of this proposed rule, we are proposing that new 

pass-through diagnostic radiopharmaceuticals would be paid at ASP+6 percent, while 

those 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 

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, 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. 

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 when the 

diagnostic radiopharmaceutical is received at no cost/full credit. These instructions are 

contained within the I/OCE CMS specifications on the CMS Web site at 

http://www.cms.gov/Medicare/Coding/OutpatientCodeEdit/index.html. 
For CY 2013 and future years, we are proposing to continue to require hospitals 

to append modifier “FB” to specified nuclear medicine procedures when the diagnostic 

radiopharmaceutical is received at no cost/full credit. In addition, we are proposing to 

continue to require that when a hospital bills with an “FB” modifier with the nuclear 

medicine scan, the payment amount for procedures in the APCs listed in Table 24 of this 

proposed rule would be reduced by the full “policy-packaged” offset amount appropriate 

for diagnostic radiopharmaceuticals. Finally, we also are proposing to continue to require 

hospitals to report a token charge of less than $1.01 in cases in which the diagnostic 

radiopharmaceutical is furnished without cost or with full credit. 

For CY 2012, we finalized a policy to apply the diagnostic radiopharmaceutical 

offset policy to payment for pass-through diagnostic radiopharmaceuticals, as described 

above. For CY 2013, we are proposing to continue to apply the diagnostic 

radiopharmaceutical offset policy to payment for pass-through diagnostic 

radiopharmaceuticals. 

Table 24 below displays the proposed APCs to which nuclear medicine 

procedures would be assigned in CY 2013 and for which we expect that an APC offset 

could be applicable in the case of diagnostic radiopharmaceuticals with pass-through 

status. 

TABLE 24.—PROPOSED APCs TO WHICH NUCLEAR MEDICINE 

PROCEDURES WOULD BE ASSIGNED FOR CY 2013 

Proposed 

CY 2013 

APC 

Proposed CY 2013 APC Title 

0308 Positron Emission Tomography (PET) Imaging 

0377 Level II Cardiac Imaging. 
Proposed 

CY 2013 

APC 

Proposed CY 2013 APC Title 

0378 Level II Pulmonary Imaging. 

0389 Level I Non-imaging Nuclear Medicine. 

0390 Level I Endocrine Imaging. 

0391 Level II Endocrine Imaging. 

0392 Level II Non-imaging Nuclear Medicine. 

0393 Hematologic Processing & Studies. 

0394 Hepatobiliary Imaging. 

0395 GI Tract Imaging. 

0396 Bone Imaging. 

0397 Vascular Imaging. 

0398 Level I Cardiac Imaging. 

0400 Hematopoietic Imaging. 

0401 Level I Pulmonary Imaging. 

0402 Level II Nervous System Imaging. 

0403 Level I Nervous System Imaging. 

0404 Renal and Genitourinary Studies. 

0406 Level I Tumor/Infection Imaging. 

0408 Level III Tumor/Infection Imaging. 

0414 Level II Tumor/Infection Imaging. 

c. Proposed 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. There currently are no contrast agents with pass-through status under 

the OPPS. As described in section V.A.3. of this proposed rule, new pass-through 

contrast agents would be paid at ASP+6 percent, while those 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. 
Although there are 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 2013, in order to provide an appropriate transitional 

pass-through payment for them because all of these items are packaged when they do not 

have pass-through status. In accordance with our standard offset methodology, we are 

proposing for CY 2013 to deduct from the payment for new pass-through contrast agents 

that are approved for pass-through status as a drug or biological during CY 2013, an 

amount that reflects the portion of the APC payment associated with predecessor contrast 

agents, in order to ensure 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 2013, as we did in CY 2012, we are proposing to continue to apply this same 

policy to contrast agents. Specifically, we are proposing to utilize the “policy-packaged” 

drug offset fraction for clinical APCs calculated as 1 minus (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 CY 2010, we finalized a policy 

to redefine “policy-packaged” drugs as only nonpass-through diagnostic 

radiopharmaceuticals and contrast agents (74 FR 60495 through 60499). To determine 

the actual APC offset amount for pass-through contrast agents that takes into 

consideration the otherwise applicable OPPS payment amount, we are proposing 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 are 

proposing to continue to apply this methodology for CY 2013 to recognize that when a 

contrast agent with pass-through status is billed with any procedural APC listed in 

Table 25 of this proposed rule, a specific offset based on the procedural APC would be 

applied to payments for the contrast agent to ensure that duplicate payment is not made 

for the contrast agent. 

We are proposing to continue to post annually on the CMS Web site at 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/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. 

Proposed procedural APCs for which we expect a contrast offset could be 

applicable in the case of a pass-through contrast agent have been identified as any 

procedural APC with a “policy-packaged” drug amount greater than $20 that is not a 

nuclear medicine APC identified in Table 24 above and these APCs are displayed in 

Table 25 below. The methodology used to determine a proposed 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 2013, 

we are proposing to continue to recognize that when a contrast agent with pass-through 
status is billed with any procedural APC listed in Table 25, 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. 

TABLE 25.—PROPOSED APCs TO WHICH A CONTRAST AGENT OFFSET 

MAY BE APPLICABLE FOR CY 2013 

Proposed 

CY 2013 

APC 

Proposed CY 2013 APC Title 

0080 Diagnostic Cardiac Catheterization. 

0082 Coronary or Non-Coronary Atherectomy. 

0083 

Coronary Angioplasty, Valvuloplasty, and Level I Endovascular 

Revascularization 

0093 Vascular Reconstruction/Fistula Repair without Device. 

0104 Transcathether Placement of Intracoronary Stents. 

0128 Echocardiogram with Contrast. 

0152 Level I Percutaneous Abdominal and Biliary Procedures. 

0229 Level II Endovascular Revascularization of the Lower Extremity 

0278 Diagnostic Urography. 

0279 Level II Angiography and Venography. 

0280 Level III Angiography and Venography. 

0283 Computed Tomography with Contrast. 

0284 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography with Contrast. 

0333 Computed Tomography without Contrast followed by Contrast. 

0334 Combined Abdomen and Pelvis CT with Contrast 

0337 

Magnetic Resonance Imaging and Magnetic Resonance 

Angiography without Contrast followed by Contrast. 

0375 Ancillary Outpatient Services When Patient Expires. 

0383 Cardiac Computed Tomographic Imaging. 

0388 Discography. 

0442 Dosimetric Drug Administration. 

0653 Vascular Reconstruction/Fistula Repair with Device. 

0656 Transcatheter Placement of Intracoronary Drug-Eluting Stents. 

0662 CT Angiography. 

0668 Level I Angiography and Venography. 
Proposed 

CY 2013 

APC 

Proposed CY 2013 APC Title 

8006 CT and CTA with Contrast Composite. 

8008 MRI and MRA with Contrast Composite. 

B. Proposed OPPS Payment for Drugs, Biologicals, and Radiopharmaceuticals without 

Pass-Through Status

1. Background 

 Under the CY 2012 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. Proposed Criteria for Packaging Payment for Drugs, Biologicals, and 

Radiopharmaceuticals 

a. Background 

As indicated in section V.B.1. of this proposed rule, 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; and for CY 2012, we set the 

packaging threshold at $75. 

Following the CY 2007 methodology, for this CY 2013 proposed rule, we used 

the most recently available four quarter moving average PPI levels to trend the $50 

threshold forward from the third quarter of CY 2005 to the third quarter of CY 2013 and 

rounded the resulting dollar amount ($81.59) to the nearest $5 increment, which yielded a 
figure of $80. 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 note that we are not proposing a change to the PPI that is used to 

calculate the threshold for CY 2013; rather, this change in terminology reflects a change 

to the BLS naming convention for this series.) We refer below to this series generally as 

the PPI for Prescription Drugs. 

We chose this PPI 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 comment period) and have been incorporated into our calculation. Based on the 

calculations described above, we are proposing a packaging threshold for CY 2013 of 

$80. (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. Proposed Cost Threshold for Packaging of Payment for HCPCS Codes That Describe 

Certain Drugs, Nonimplantable Biologicals, and Therapeutic Radiopharmaceuticals 

(“Threshold-Packaged Drugs”) 

 To determine the proposed CY 2013 packaging status for all nonpass-through 

drugs and biologicals that are not policy packaged for this proposed rule, we calculated 

on a HCPCS code-specific basis the per day cost of all drugs, nonimplantable biologicals, 

and therapeutic radiopharmaceuticals (collectively called “threshold-packaged” drugs) 

that had a HCPCS code in CY 2011 and were paid (via packaged or separate payment) 

under the OPPS. We used data from CY 2011 claims processed before January 1, 2012 

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 this proposed rule or for diagnostic radiopharmaceuticals, contrast 

agents, and implantable biologicals that we are proposing to continue to package in 

CY 2013, as discussed in section V.B.2.d. of this proposed rule. 

 In order to calculate the per day costs for drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals to determine their proposed packaging status in 

CY 2013, 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 

nonimplantable biological HCPCS code, we used an estimated payment rate of ASP+6 

percent (which is the payment rate we are proposing for separately payable drugs and 

nonimplantable biologicals for CY 2013, as discussed in more detail in section V.B.3.b. 

of this proposed rule) to calculate the CY 2013 proposed rule per day costs. We used the 
manufacturer submitted ASP data from the fourth quarter of CY 2011 (data that were 

used for payment purposes in the physician’s office setting, effective April 1, 2012) to 

determine the proposed rule per day cost. 

 As is our standard methodology, for CY 2013 we are proposing to use payment 

rates based on the ASP data from the fourth quarter of CY 2011 for budget neutrality 

estimates, packaging determinations, impact analyses, and completion of Addenda A and 

B to this proposed rule (which are available via the Internet on the CMS Web site) 

because these are the most recent data available for use at the time of development of this 

proposed rule. These data were also the bases for drug payments in the physician’s office 

setting, effective April 1, 2012. 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 2011 hospital claims data to determine their per day cost. 

We are proposing to package items with a per day cost less than or equal to $80, 

and identify items with a per day cost greater than $80 as separately payable. Consistent 

with our past practice, we crosswalked historical OPPS claims data from the CY 2011 

HCPCS codes that were reported to the CY 2012 HCPCS codes that we display in 

Addendum B of this proposed rule (which is available via the Internet on the CMS Web 

site) for payment in CY 2013. 

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, nonimplantable 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 will be subject 

to quarterly updates. For our calculation of per day costs of HCPCS codes for drugs and 

nonimplantable biologicals in the CY 2013 OPPS/ASC final rule with comment period, 

we are proposing to use ASP data from the first quarter of CY 2012, 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, 2012, along with updated hospital claims 

data from CY 2011. We note that we also are proposing to use these data for budget 

neutrality estimates and impact analyses for the CY 2013 OPPS/ASC final rule with 

comment period. 

Payment rates for HCPCS codes for separately payable drugs and nonimplantable 

biologicals included in Addenda A and B to the final rule with comment period will be 

based on ASP data from the second quarter of CY 2012. These data will be the basis for 

calculating payment rates for drugs and biologicals in the physician’s office setting using 

the ASP methodology, effective October 1, 2012. These physician’s office payment rates 

would then be updated in the January 2013 OPPS update, based on the most recent ASP 

data to be used for physician’s office and OPPS payment as of January 1, 2013. For 

items that do not currently have an ASP-based payment rate, we are proposing to 

recalculate their mean unit cost from all of the CY 2011 claims data and updated cost 

report information available for the CY 2013 final rule with comment period to determine 

their final per day cost. 

 Consequently, the packaging status of some HCPCS codes for drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals in this CY 2013 
OPPS/ASC proposed rule may be different from the same drug HCPCS code’s packaging 

status determined based on the data used for the final rule with comment period. Under 

such circumstances, we are proposing 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 2013 OPPS drug 

packaging threshold and the drug’s payment status (packaged or separately payable) in 

CY 2012. Specifically, for CY 2013, consistent with our historical practice, we are 

proposing to apply the following policies to these HCPCS codes for drugs, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals whose relationship to 

the proposed $80 drug packaging threshold changes based on the updated drug packaging 

threshold and on the final updated data: 

● HCPCS codes for drugs and nonimplantable biologicals that were paid 

separately in CY 2012 and that are proposed for separate payment in CY 2013, and that 

then have per day costs equal to or less than $80, based on the updated ASPs and hospital 

claims data used for this CY 2013 proposed rule, would continue to receive separate 

payment in CY 2013. 

● HCPCS codes for drugs and nonimplantable biologicals that were packaged in 

CY 2012 and that are proposed for separate payment in CY 2013, and that then have per 

day costs equal to or less than $80, based on the updated ASPs and hospital claims data 

used for this CY 2013 proposed rule, would remain packaged in CY 2013. 

● HCPCS codes for drugs and nonimplantable biologicals for which we are 

proposing packaged payment in CY 2013 but then have per day costs greater than $80, 
based on the updated ASPs and hospital claims data used for this CY 2013 proposed rule, 

would receive separate payment in CY 2013. 

c. Proposed 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 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 2013, 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, we are proposing 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 2013. 

For CY 2013, 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 2011 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. HCPCS codes 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 antiemetic, 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) did not have pricing information 

available for the ASP methodology 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 2011 claims data to make the packaging determinations for these drugs. For 

all other drugs and biologicals that have HCPCS codes describing different dosages, 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 $80 (whereupon 

all HCPCS codes for the same drug or biological would be packaged) or greater than $80 

(whereupon all HCPCS codes for the same drug or biological would be separately 

payable). The proposed packaging status of each drug and biological HCPCS code to 

which this methodology would apply is displayed in Table 26 below. 

TABLE 26.—PROPOSED HCPCS CODES TO WHICH THE CY 2013 

DRUG-SPECIFIC PACKAGING DETERMINATION METHODOLOGY 

WOULD APPLY 

Proposed 

CY 2013 

HCPCS 

Code 

Proposed CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

C9257 Injection, bevacizumab, 0.25 mg K 

J9035 Injection, bevacizumab, 10 mg K 

J1020 Injection, methylprednisolone acetate, 20 mg N 
Proposed 

CY 2013 

HCPCS 

Code 

Proposed CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

J1030 Injection, methylprednisolone acetate, 40 mg N 

J1040 Injection, methylprednisolone acetate, 80 mg N 

J1070 Injection, testosterone cypionate, up to 100 mg N 

J1080 Injection, testosterone cypionate, 1 cc, 200 mg N 

J1440 Injection, filgrastim (g-csf), 300 mcg K 

J1441 Injection, filgrastim (g-csf), 480 mcg K 

J1460 Injection, gamma globulin, intramuscular, 1 cc N 

J1560 Injection, gamma globulin, intramuscular over 10 cc N 

J1642 

Injection, heparin sodium, (heparin lock flush), per 10 

units N 

J1644 Injection, heparin sodium, per 1000 units N 

J1850 Injection, kanamycin sulfate, up to 75 mg N 

J1840 Injection, kanamycin sulfate, up to 500 mg N 

J2270 Injection, morphine sulfate, up to 10 mg N 

J2271 Injection, morphine sulfate, 100mg N 

J2788 

Injection, rho d immune globulin, human, minidose, 50 

micrograms (250 i.u.) K 

J2790 

Injection, rho d immune globulin, human, full dose, 300 

micrograms (1500 i.u.) K 

J2920 

Injection, methylprednisolone sodium succinate, up to 40 

mg N 

J2930 

Injection, methylprednisolone sodium succinate, up to 

125 mg N 

J3120 Injection, testosterone enanthate, up to 100 mg N 

J3130 Injection, testosterone enanthate, up to 200 mg N 

J3471 

Injection, hyaluronidase, ovine, preservative free, per 1 

usp unit (up to 999 usp units) N 

J3472 

Injection, hyaluronidase, ovine, preservative free, per 

1000 usp units N 

J7050 Infusion, normal saline solution , 250 cc N 

J7040 Infusion, normal saline solution, sterile (500 ml=1 unit) N 

J7030 Infusion, normal saline solution , 1000 cc N 

J7515 Cyclosporine, oral, 25 mg N 

J7502 Cyclosporine, oral, 100 mg N 
Proposed 

CY 2013 

HCPCS 

Code 

Proposed CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

J8520 Capecitabine, oral, 150 mg K 

J8521 Capecitabine, oral, 500 mg K 

J9250 Methotrexate sodium, 5 mg N 

J9260 Methotrexate sodium, 50 mg N 

Q0164 

Prochlorperazine maleate, 5 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 N 

Q0165 

Prochlorperazine maleate, 10 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 N 

Q0167 

Dronabinol, 2.5 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 N 

Q0168 

Dronabinol, 5 mg, oral, FDA approved prescription antiemetic, 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 N 

Q0169 

Promethazine hydrochloride, 12.5 mg, oral, FDA 

approved prescription anti-emetic, 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 N 

Q0170 

Promethazine hydrochloride, 25 mg, oral, FDA approved 

prescription anti-emetic, 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 N 

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 N 
Proposed 

CY 2013 

HCPCS 

Code 

Proposed CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

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 N 

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 N 

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 N 

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 N 

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 N 

3. Proposed Payment for Drugs and Biologicals without Pass-Through Status That Are 

Not Packaged 

a. Proposed Payment for Specified Covered Outpatient Drugs (SCODs) and Other 

Separately Payable 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” 

is 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 “specified covered 

outpatient drugs,” known as 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) of the Act provides for an adjustment in OPPS payment 

rates for 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 treat all separately payable drugs and 

biologicals, which includes SCODs, and drugs and biological that are not SCODs, the 

same. Therefore, we apply the payment methodology in section 1833(t)(14)(A)(iii)(I) 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 choice rather than a statutory 

requirement. Later in the discussion of our proposed policy for CY 2013, we are 

proposing to apply section 1833(t)(14)(A)(iii)(II) of the Act to all separately payable 

drugs and biologicals. Although we do not distinguish SCODs in that discussion, we 

note that we are required to apply section 1833(t)(14)(A)(iii)(II) of the Act to SCODs, but 

we are choosing to apply it to other separately payable drugs and biologicals, consistent 

with our history of using the same payment methodology for all separately payable drugs 

and biologicals. 
 In the CY 2006 OPPS proposed rule (70 FR 42728 through 42731), we discussed 

the June 2005 report by MedPAC regarding pharmacy overhead costs in HOPDs and 

summarized the findings of that study. In response to the MedPAC findings, in the 

CY 2006 OPPS proposed rule (70 FR 42729), we discussed our belief that, because of the 

varied handling resources required to prepare different forms of drugs, it would be 

impossible to exclusively and appropriately assign a drug to a certain overhead category 

that would apply to all hospital outpatient uses of the drug. Therefore, our CY 2006 

OPPS proposal included a proposal to establish three distinct Level II HCPCS C-codes 

and three corresponding APCs for drug handling categories to differentiate overhead 

costs for drugs and biologicals (70 FR 42730). We also proposed: (1) to combine 

several overhead categories recommended by MedPAC; (2) to establish three drug 

handling categories, as we believed that larger groups would minimize the number of 

drugs that may fit into more than one category and would lessen any undesirable payment 

policy incentives to utilize particular forms of drugs or specific preparation methods; 

(3) to collect hospital charges for these HCPCS C-codes for 2 years; and (4) to ultimately 

base payment for the corresponding drug handling APCs on CY 2006 claims data 

available for the CY 2008 OPPS. 

In the CY 2006 OPPS final rule with comment period (70 FR 68659 through 

68665), we discussed the public comments we received on our proposal regarding 

pharmacy overhead. The overwhelming majority of commenters did not support our 

proposal regarding pharmacy overhead and urged us not to finalize this policy, as it 

would be administratively burdensome for hospitals to establish charges for HCPCS 

codes for pharmacy overhead and to report them. Therefore, we did not finalize this 
proposal for CY 2006. Instead, we established payment for separately payable drugs and 

biologicals at ASP+6 percent, which we 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). Hereinafter, we refer to this 

methodology as our standard drug payment methodology. We concluded that payment 

for drugs and biologicals and pharmacy overhead at a combined ASP+6 percent rate 

would serve as an acceptable proxy for the combined acquisition and overhead costs of 

each of these products. 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68091), we 

finalized our proposed policy to provide a single payment of ASP+6 percent for the 

hospital’s acquisition cost for the drug or biological and all associated pharmacy 

overhead and handling costs. The ASP+6 percent rate that we finalized was higher than 

the equivalent average ASP-based amount calculated from claims of ASP+4 percent 

according to our standard drug payment methodology, but we adopted payment at ASP+6 

percent for stability while we continued to examine the issue of the costs of pharmacy 

overhead in the HOPD and awaited the accumulation of CY 2006 data as discussed in the 

prior year’s rule. 

 In the CY 2008 OPPS/ASC proposed rule (72 FR 42735), in response to ongoing 

discussions with interested parties, we proposed to continue our methodology of 

providing a combined payment rate for drug and biological acquisition and pharmacy 

overhead costs while continuing our efforts to improve the available data. We also 

proposed to instruct hospitals to remove the pharmacy overhead charge for both packaged 
and separately payable drugs and biologicals from the charge for the drug or biological 

and report the pharmacy overhead charge on an uncoded revenue code line on the claim. 

We believed that this would provide us with an avenue for collecting pharmacy handling 

cost data specific to drugs in order to package the overhead costs of these items into the 

associated procedures, most likely drug administration services. Similar to the public 

response to our CY 2006 pharmacy overhead proposal, the overwhelming majority of 

commenters did not support our CY 2008 proposal and urged us to not finalize this policy 

(72 FR 66761). At its September 2007 meeting, the APC Panel recommended that 

hospitals not be required to separately report charges for pharmacy overhead and 

handling and that payment for overhead be included as part of drug payment. The APC 

Panel also recommended that CMS continue to evaluate alternative methods to 

standardize the capture of pharmacy overhead costs in a manner that is simple to 

implement at the organizational level (72 FR 66761). Because of concerns expressed by 

the APC Panel and public commenters, we did not finalize the proposal to instruct 

hospitals to separately report pharmacy overhead charges for CY 2008. Instead, in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66763), we finalized a 

policy of providing payment for separately payable drugs and biologicals and their 

pharmacy overhead at ASP+5 percent as a transition from their CY 2007 payment of 

ASP+6 percent to payment based on the equivalent average ASP-based payment rate 

calculated from hospital claims according to our standard drug payment methodology, 

which was ASP+3 percent for the CY 2008 OPPS/ASC final rule with comment period. 

Hospitals continued to include charges for pharmacy overhead costs in the line-item 

charges for the associated drugs reported on claims. 
 For CY 2009, we proposed to pay separately payable drugs and biologicals at 

ASP+4 percent, including both SCODs and other drugs without CY 2009 OPPS 

pass-through status, based on our standard drug payment methodology. We also 

continued to explore mechanisms to improve the available data. We proposed to split the 

“Drugs Charged to Patients” cost center into two cost centers: one for drugs with high 

pharmacy overhead costs and one for drugs with low pharmacy overhead costs 

(73 FR 41492). We noted that we expected that CCRs from the proposed new cost 

centers would be available in 2 to 3 years to refine OPPS drug cost estimates by 

accounting for differential hospital markup practices for drugs with high and low 

overhead costs. After consideration of the public comments received and the APC Panel 

recommendations, we finalized a CY 2009 policy (73 FR 68659) to provide payment for 

separately payable nonpass-through drugs and biologicals based on costs calculated from 

hospital claims at a 1-year transitional rate of ASP+4 percent, in the context of an 

equivalent average ASP-based payment rate of ASP+2 percent calculated according to 

our standard drug payment methodology from the final rule claims data and cost report 

data. We did not finalize our proposal to split the single standard “Drugs Charged to 

Patients” cost center into two cost centers largely due to concerns raised by hospitals 

about the associated administrative burden. Instead, we indicated in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68659) that we would continue to 

explore other potential approaches to improve our drug cost estimation methodology, 

thereby increasing payment accuracy for separately payable drugs and biologicals. 

 In response to the CMS proposals for the CY 2008 and CY 2009 OPPS, a group 

of pharmacy stakeholders (hereinafter referred to as the pharmacy stakeholders), 
including some cancer hospitals, some pharmaceutical manufacturers, and some hospital 

and professional associations, commented that CMS should pay an acquisition cost of 

ASP+6 percent for separately payable drugs, should substitute ASP+6 percent for the 

packaged cost of all packaged drugs and biologicals on procedure claims, and should 

redistribute the difference between the aggregate estimated packaged drug cost in claims 

and payment for all drugs, including packaged drugs at ASP+6 percent, as separate 

pharmacy overhead payments for separately payable drugs. They indicated that this 

approach would preserve the aggregate drug cost observed in the claims data, while 

significantly increasing payment accuracy for individual drugs and procedures by 

redistributing drug cost from packaged drugs. Their suggested approach would provide a 

separate overhead payment for each separately payable drug or biological at one of three 

different levels, depending on the pharmacy stakeholders’ assessment of the complexity 

of pharmacy handling associated with each specific drug or biological (73 FR 68651 

through 68652). Each separately payable drug or biological HCPCS code would be 

assigned to one of the three overhead categories, and the separate pharmacy overhead 

payment applicable to the category would be made when each of the separately payable 

drugs or biologicals was paid. 

In the CY 2010 OPPS/ASC proposed rule (74 FR 35332), we acknowledged the 

limitations of our data and our availability to find a method to improve that data in a way 

that did not impose unacceptable administrative burdens on providers. Accepting that 

charge compression was a reasonable but unverifiable supposition, we proposed to 

redistribute between one-third and one-half of the estimated overhead cost associated 

with coded packaged drugs and biologicals with an ASP, which resulted in our proposal 
to pay for the acquisition and pharmacy overhead costs of separately payable drugs and 

biologicals that did not have pass-through payment status at ASP+4 percent. We 

calculated estimated overhead cost for coded packaged drugs and biologicals by 

determining the difference between the aggregate claims cost for coded packaged drugs 

and biologicals with an ASP and the ASP dollars (ASP multiplied by the drug’s or 

biological’s units in the claims data) for those same coded drugs and biologicals; this 

difference was our estimated overhead cost for coded packaged drugs and biologicals. In 

our rationale described in the CY 2010 OPPS/ASC proposed rule (74 FR 35326 through 

35333), we stated that we believed that approximately $150 million of the estimated 

$395 million total in pharmacy overhead cost, specifically between one-third and 

one-half of that cost, included in our claims data for coded packaged drugs and 

biologicals with reported ASP data should be attributed to separately payable drugs and 

biologicals and that the $150 million serves as the adjustment for the pharmacy overhead 

costs of separately payable drugs and biologicals. As a result, we also proposed to reduce 

the costs of coded drugs and biologicals that are packaged into payment for procedural 

APCs to offset the $150 million adjustment to payment for separately payable drugs and 

biologicals. In addition, we proposed that any redistribution of pharmacy overhead cost 

that may arise from the CY 2010 final rule data would occur only from some drugs and 

biologicals to other drugs and biologicals, thereby maintaining the estimated total cost of 

drugs and biologicals that we calculate based on the charges and costs reported by 

hospitals on claims and cost reports. As a result of this approach, no redistribution of 

cost would occur from other services to drugs and biologicals or vice versa. 
While we had no way of assessing whether this current distribution of overhead 

cost to coded packaged drugs and biologicals with an ASP was appropriate, we 

acknowledged that the established method of converting billed charges to costs had the 

potential to “compress” the calculated costs to some degree. Further, we recognized that 

the attribution of pharmacy overhead costs to packaged or separately payable drugs and 

biologicals through our standard drug payment methodology of a combined payment for 

acquisition and pharmacy overhead costs depends, in part, on the treatment of all drugs 

and biologicals each year under our annual drug packaging threshold. Changes to the 

packaging threshold may result in changes to payment for the overhead cost of drugs and 

biologicals that do not reflect actual changes in hospital pharmacy overhead cost for 

those products. For these reasons, we stated that we believed some portion, but not all, of 

the total overhead cost that is associated with coded packaged drugs and biologicals (the 

difference between aggregate cost for those drugs and biologicals on the claims and ASP 

dollars for the same drugs and biologicals), based on our standard drug payment 

methodology, should, at least for CY 2010, be attributed to separately payable drugs and 

biologicals. 

We acknowledged that the observed combined payment for acquisition and 

pharmacy overhead costs of ASP-2 percent for separately payable drugs and biologicals 

may be too low and ASP+247 percent for coded packaged drugs and biologicals with 

reported ASP data in the CY 2010 claims data may be too high (74 FR 35327 and 

35328). Therefore, we stated that a middle ground would represent the most accurate 

redistribution of pharmacy overhead cost. Our assumption was that approximately 

one-third to one-half of the total pharmacy overhead cost currently associated with coded 
packaged drugs and biologicals in the CY 2008 claims data offered a more appropriate 

allocation of drug and biological cost to separately payable drugs and biologicals 

(74 FR 35328). One third of the $395 million of pharmacy overhead cost associated with 

packaged drugs and biologicals was $132 million, whereas one-half was $198 million. 

Within the one-third to one-half parameters, we proposed reallocating 

$150 million in drug and biological cost observed in the claims data from coded 

packaged drugs and biologicals with an ASP to separately payable drugs and biologicals 

for CY 2010 for their pharmacy overhead costs. Based on this redistribution, we 

proposed a CY 2010 payment rate for separately payable drugs and biologicals of ASP+4 

percent. 

In the CY 2010 OPPS final rule with comment period, we adopted a transitional 

payment rate of ASP+4 percent based on a pharmacy overhead adjustment methodology 

for CY 2010 that redistributed $200 million from packaged drug and biological cost to 

separately payable drug cost (74 FR 60499 through 60518). This $200 million included 

the proposed $150 million redistribution from the pharmacy overhead cost of coded 

packaged drugs and biologicals for which an ASP is reported and an additional $50 

million dollars from the total uncoded drug and biological cost to separately payable 

drugs and biologicals as a conservative estimate of the pharmacy overhead cost of 

uncoded packaged drugs and biologicals that should be appropriately associated with the 

cost of separately payable drugs and biologicals (74 FR 60517). We stated that this was 

an intentionally conservative estimate as we could not identify definitive evidence that 

uncoded packaged drug and biological cost included a pharmacy overhead amount 

comparable to that of coded packaged drugs and biologicals with an ASP. We stated that 
we could not know the amount of overhead associated with these drugs without making 

significant assumptions about the amount of pharmacy overhead cost associated with the 

drugs and biologicals captured by these uncoded packaged drug costs (74 FR 60511 

through 60513). In addition, as in prior years, we reiterated our commitment to continue 

in our efforts to refine our analyses. 

For CY 2011, we continued the CY 2010 pharmacy overhead adjustment 

methodology (74 FR 60500 through 60512). Consistent with our supposition that the 

combined payment for average acquisition and pharmacy overhead costs under our 

standard methodology may understate the cost of separately payable drugs and 

biologicals and related pharmacy overhead for those drugs and biologicals, we 

redistributed $150 million from the pharmacy overhead cost of coded packaged drugs and 

biologicals with an ASP and redistributed $50 million from the cost of uncoded packaged 

drugs and biologicals, for a total redistribution of $200 million from costs for coded and 

uncoded packaged drugs to separately payable drugs and biologicals, with the result that 

we pay separately paid drugs and biologicals at ASP+5 percent for CY 2011. The 

redistribution amount of $150 million in overhead cost from coded packaged drugs and 

biologicals with an ASP and $50 million in costs from uncoded packaged drugs and 

biologicals without an ASP were within the parameters established in the CY 2010 

OPPS/ASC final rule. In addition, as in prior years, we described some of our work to 

improve our analyses during the preceding year, including an analysis of uncoded 

packaged drug and biological cost and our evaluation of the services with which uncoded 

packaged drug cost appears in the claims data. We conducted this analysis in an effort to 

assess how much uncoded drugs resemble coded packaged drugs (75 FR 71966). We 
stated that, in light of this information, we were not confident that the drugs captured by 

uncoded drug cost are the same drugs captured by coded packaged drug cost, and 

therefore, we did not believe we could assume that they are the same drugs, with 

comparable overhead and handling costs. Without being able to calculate the ASP for 

these uncoded packaged drugs and biologicals and without being able to gauge the 

magnitude of overhead complexity associated with these drugs and biologicals, we did 

not believe that we should have assumed that the same amount of proportional overhead 

should be redistributed between coded and uncoded packaged drugs, and therefore, we 

redistributed $50 million from uncoded packaged drugs and $150 million from coded 

packaged drugs (75 FR 71966). We reiterated our commitment to continue to refine our 

drug pricing methodology and noted that we would continue to pursue the most 

appropriate methodology for establishing payment for drugs and biologicals under the 

OPPS and continue to evaluate the appropriateness of this methodology when we 

establish each year’s payment for drugs and biologicals under the OPPS (75 FR 71967). 

For CY 2012, we continued our overhead adjustment methodology of 

redistributing 1/3 to 1/2 of allocated overhead for coded packaged drugs or $150 million 

plus an additional $50 million in allocated overhead for uncoded packaged drugs. 

Additionally, we finalized a policy to update these amounts by the PPI for 

pharmaceuticals and redistributed $161 million in allocated overhead from coded 

packaged drugs and $54 million from uncoded packaged drugs. We further finalized a 

policy to hold the redistributed proportion of packaged drugs constant between the 

proposed and the final rule, which increased the final redistribution amount in the 

CY 2012 final rule to $240.3 million ($169 million from coded packaged drugs and 
$71.3 million from uncoded packaged drugs). This approach resulted in a final payment 

rate of ASP+4 percent for separately payable drugs. 

b. Proposed CY 2013 Payment Policy 

In reexamining our current drug payment methodology for this CY 2013 

OPPS/ASC proposed rule, we reviewed our past efforts to determine an appropriate 

payment methodology for drugs and biologicals, as described above. Since the inception 

of the OPPS, we have remained committed to establishing a drug payment methodology 

that is predictable, accurate, and appropriate. Pharmacy stakeholders and the hospital 

community have also, throughout the years, continually emphasized the importance of 

both predictable and accurate payment rates for drugs, noting that a payment 

methodology that emphasizes predictability and accuracy leads to appropriate payment 

rates that reflect the cost of drugs and biologicals (including overhead) in HOPDs. 

Pertinent stakeholders also have noted that predictable and accurate payment rates 

minimize the effect of anomalies in the claims data that may incorrectly influence the 

future payment for services. We understand that, with predictable payment rates, 

hospitals are better able to plan for the future. 

As discussed above, 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). As we 

previously stated, we refer 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 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 

keep the redistribution ratio constant between the proposed rule and the final rule. 

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 believe 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 are concerned 

that the continued use of our current 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. 

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. Considering stakeholder and provider feedback, continued limitations of the 

hospital claims and cost data on drugs and biologicals, and Panel recommendations, we 

are proposing 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, hereinafter referred to as the 

statutory default. 

As noted above, 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, physician Part 

B drugs are paid at ASP+6 percent. We believe that proposing the statutory default of 

ASP+6 percent is appropriate at this time as it yields increased predictability in payment 

for separately payable drugs and biologicals under the OPPS. We believe that ASP+6 
percent is an appropriate payment amount because it is consistent with payment amounts 

yielded by our drug payment methodologies over the past 7 years. We are proposing 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 for CY 2013. 

Our goals continue to be to develop a method that accurately and predictably 

estimates acquisition and overhead costs for separately payable drugs and biologicals in 

order to pay for them appropriately. If a better payment methodology is developed in the 

future, then the proposed policy to pay ASP+6 according to the statutory default would 

be an interim step in the development of this payment policy. We recognize the 

challenges in doing so given current data sources and the objective of maintaining the 

smallest administrative burden possible. 

We are proposing 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. 

At the February 2012 Panel meeting, the Panel made four recommendations on 

drugs and biologicals paid under the OPPS. First, the Panel recommended that CMS 

require hospitals to bill all drugs that are described by Healthcare Common Procedure 

Coding System (HCPCS) codes under revenue code 0636. While we agree that drugs 

and biologicals may be reported under revenue code 0636, we believe that drugs and 

biologicals may also 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. Additionally, 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. 

Therefore, we are not accepting the Panel’s recommendation to require hospitals to bill 

all drugs that are described by HCPCS codes under revenue code 0636. However, we 

continue to believe that OPPS ratesetting is most accurate when hospitals report charges 

for all items and services that have HCPCS codes using those HCPCS codes, regardless 

of whether payment for the items and services is packaged. It is our standard ratesetting 

methodology to rely on hospital cost report and charge information as it is reported to us 

through the claims data. We continue to believe that more complete data from hospitals 

identifying the specific drugs that were provided during an episode of care may improve 

payment accuracy for drugs in the future. Therefore, we continue to encourage hospitals 

to change their reporting practices if they are not already reporting HCPCS codes for all 

drugs and biologicals furnished, whether specific HCPCS codes are available for those 

drugs and biologicals. 

Second, the Panel recommended that CMS exclude data from hospitals that 

participate in the 340B program from its ratesetting calculations for drugs. Under the 

proposed statutory default payment rate of ASP+6 percent, hospitals’ 340B status does 

not affect the drug payment rate. 
Third, the Panel recommended that CMS freeze the packaging threshold at $75 

until the drug payment issue is more equitably addressed. The OPPS is based on the 

concept of payment for groups of services that share clinical and resource characteristics. 

We believe that the packaging threshold is reasonable based on the initial establishment 

in law of a $50 threshold for the CY 2005 OPPS, that updating the $50 threshold 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, we are not 

accepting the Panel’s recommendation to freeze the packaging threshold at $75 until the 

drug payment issue is more equitably addressed. Instead, as discussed in section V.B.2. 

of this proposed rule, we are proposing an OPPS drug packaging threshold for CY 2013 

of $80. However, we do believe that we have addressed the drug payment issue by 

proposing to pay for separately paid drugs and biologicals at ASP+6 percent for CY 2013 

based upon the statutory default. 

Finally, the Panel recommended that CMS pay hospitals for separately payable 

drugs at a rate of average sales price (ASP) + 6 percent. This Panel recommendation is 

consistent with our CY 2013 proposed payment rate based upon the statutory default 

under section 1833 (t)(14)(A)(iii)(II) of the Act, which authorizes us to pay for drugs and 

biologicals under the OPPS at ASP+6 percent, when hospital acquisition cost data are not 

available. 

4. Proposed Payment Policy for Therapeutic Radiopharmaceuticals 

Beginning in CY 2010 and continuing for CY 2012, we established a policy to 

pay for separately paid therapeutic radiopharmaceuticals under the ASP methodology 

adopted for separately payable drugs and biologicals. We allow manufacturers to submit 
the ASP data in a patient-specific dose or patient-ready form in order to properly 

calculate the ASP amount for a given HCPCS code. If ASP information is unavailable 

for a therapeutic radiopharmaceutical, then 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 2013. Therefore, we are 

proposing for CY 2013 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. We are proposing to continue to set payment 

rates for therapeutic radiopharmaceuticals based on ASP information, if available, for a 

“patient ready” dose and updated on a quarterly basis for products for which 

manufacturers report ASP data. For a full discussion of how a “patient ready” dose is 

defined, we refer readers to the CY 2010 OPPS/ASC final rule with comment period 

(74 FR 60520 through 60521). We also are proposing to rely on CY 2011 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). 

The proposed CY 2013 payment rates for nonpass-through separately payable 

therapeutic radiopharmaceuticals are included in Addenda A and B to this proposed rule 

(which are available via the Internet on the CMS Web site). 

5. Proposed Payment for Blood Clotting Factors 

For CY 2012, 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 2012, we 

provided payment for blood clotting factors under the OPPS at ASP+4 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 2012 updated furnishing fee is 

$0.181 per unit. 

For CY 2013, we are proposing 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 is based on the percentage increase in the Consumer Price Index (CPI) for medical 
care for the 12-month period ending with June of the previous year. Because the Bureau 

of Labor Statistics releases the applicable CPI data after the MPFS and OPPS/ASC 

proposed rules are published, we are not able to include the actual updated furnishing fee 

in the proposed rules. Therefore, in accordance with our policy, as finalized in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66765), we are proposing 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-forService-Part-B-Drugs/McrPartBDrugAvgSalesPrice/index.html. 

6. Proposed 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 after 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 is 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 nonimplantable 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 

nonimplantable 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 the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 71970 through 71973), 

paying for new drugs, nonimplantable biologicals, and radiopharmaceuticals that do not 

crosswalk to CY 2010 HCPCS codes, do not have pass-through status, and are without 

OPPS hospital claims data at ASP+5 percent and the CY 2012 OPPS/ASC final rule with 

comment period at ASP+4 percent (76 FR 74330 through 74332). 

 For CY 2013, we are proposing to provide payment for new CY 2013 drugs 

(excluding contrast agents and diagnostic radiopharmaceuticals), nonimplantable 

biologicals, and therapeutic radiopharmaceuticals, at ASP+6 percent, consistent with the 

proposed CY 2013 payment methodology for other separately payable nonpass-through 

drugs, nonimplantable 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, nonimplantable biologicals and therapeutic 

radiopharmaceuticals would be treated like other drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals under the OPPS. 

 We also are proposing to continue to package payment for all new 

nonpass-through diagnostic radiopharmaceuticals and contrast agents with HCPCS codes 

but without claims data (those new CY 2013 diagnostic radiopharmaceuticals, contrast 

agents, and implantable biological HCPCS codes that do not crosswalk to predecessor 

HCPCS codes). This is consistent with the proposed policy packaging all existing 

nonpass-through diagnostic radiopharmaceuticals and contrast agents, as discussed in 

more detail in section II.A.3.d. of this proposed rule. 

 In accordance with the OPPS ASP methodology, in the absence of ASP data, for 

CY 2013, we are proposing to continue the policy we implemented beginning in 
CY 2005 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 and are not diagnostic radiopharmaceuticals and contrast agents. 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 are proposing to assign status indicator “K” 

(for separately paid nonpass-through drugs and nonimplantable biologicals, including 

therapeutic radiopharmaceuticals) to HCPCS codes for new drugs and nonimplantable 

biologicals without OPPS claims data and for which we have not granted pass-through 

status. With respect to new, nonpass-through drugs, nonimplantable biologicals, and 

therapeutic radiopharmaceuticals for which we do not have ASP data, we are proposing 

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 2013 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, 

nonimplantable biologicals, and therapeutic radiopharmaceuticals would be treated like 

other drugs, nonimplantable biologicals, and therapeutic radiopharmaceuticals under the 

OPPS, unless they are granted pass-through status. 

Similarly, we are proposing 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 are proposing 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 are proposing with new 

drugs and biologicals, we are proposing 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, for CY 2013 we are proposing to 

announce any changes to the payment amounts for new drugs and biologicals in the 

CY 2013 OPPS/ASC final rule with comment period and also on a quarterly basis on the 

CMS Web site during CY 2013 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 would also be 

changed accordingly based on later quarter ASP submissions. We note that the new 

CY 2013 HCPCS codes for drugs, biologicals and therapeutic radiopharmaceuticals are 

not available at the time of development of this proposed rule. However, these agents 

will be included in Addendum B to the CY 2013 OPPS/ASC final rule with comment 

period (which will be available via the Internet on the CMS Web site), where they will be 

assigned comment indicator “NI.” This comment indicator reflects that their interim final 

OPPS treatment is open to public comment in the CY 2013 OPPS/ASC final rule with 

comment period. 
There are several nonpass-through drugs and biologicals that were payable in 

CY 2011 and/or CY 2012 for which we did not have CY 2011 hospital claims data 

available for this 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. We note that there are currently no therapeutic 

radiopharmaceuticals in this category. In order to determine the packaging status of these 

products for CY 2013, we calculated 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. This rationale was first adopted 

in the CY 2006 OPPS/ASC final rule with comment period (70 FR 68666 and 68667). 

We are proposing to package items for which we estimated the per day 

administration cost to be less than or equal to $80, which is the general packaging 

threshold that we are proposing for drugs, nonimplantable biologicals, and therapeutic 

radiopharmaceuticals in CY 2013. We are proposing to pay separately for items with an 

estimated per day cost greater than $80 (with the exception of diagnostic 

radiopharmaceuticals and contrast agents, which we are proposing to continue to package 

regardless of cost as discussed in more detail in section II.A.3.d. of this proposed rule) in 

CY 2013. We are proposing that the CY 2013 payment for separately payable items 

without CY 2011 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 are proposing to use the WAC for the product to establish the 

initial payment rate. However, we note that if the WAC is also unavailable, we would 

make payment at 95 percent of the most recent AWP available. 

The proposed estimated units per day and status indicators for these items are 

displayed in Table 27 below. 

TABLE 27.—DRUGS AND BIOLOGICALS WITHOUT CY 2011 CLAIMS DATA 

CY 

2013 

HCPCS 

Code 

CY 2013 Long Descriptor 

Estimated 

Average 

Number 

of Units 

Per Day 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

C9367 

Skin substitute, Endoform Dermal Template, 

per square centimeter 55 K 9367 

J0630 Injection, calcitonin salmon, up to 400 units 1.5 K 1433 

J2793 Injection, Rilonacept 320 K 1291 

J7196 Injection, antithrombin recombinant, 50 IU 268 K 1332 

J8562 Fludarabine phosphate, oral, 10 mg 1 K 1339 

J9065 Injection, cladribine, per 1 mg 10 K 0858 

J9151 

Injection, daunorubicin citrate, liposomal 

formulation, 10 mg 5 K 0821 

J0205 Injection, alglucerase, per 10 units 420 K 0900 

J2724 

Injection, protein c concentrate, intravenous, 

human, 10 iu 1540 K 1139 

Q0515 Injection, sermorelin acetate, 1 microgram 70 K 3050 

J2513 Injection, pentastarch, 10% solution, 100 ml 4 N N/A 

J3355 Injection, urofollitropin, 75 IU 2 K 1741 

90581 

Anthrax vaccine, for subcutaneous or 

intramuscular use 1 K 1422 

J2265 Injection, minocycline hydrochloride, 1 mg 300 K 1423 

J8650 Nabilone, oral, 1 mg 4 K 1424 

 Finally, there were 19 drugs and biologicals, shown in Table 28 below, that were 

payable in CY 2011, but for which we lacked CY 2011 claims data and any other pricing 
information for the ASP methodology for this CY 2013 OPPS/ASC proposed rule. In 

CY 2009, for similar items without CY 2007 claims data and without pricing information 

for the ASP methodology, we stated that we were unable to determine their per day cost 

and we packaged these items for the year, assigning these items status indicator “N.” 

For CY 2010, we finalized a policy to change the status indicator for drugs and 

biologicals previously assigned a payable status indicator to 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. 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 in CY 2010 for the ASP methodology. If pricing information became available, 

we would assign the products status indicator “K” and pay for them separately for the 

remainder of CY 2010. We continued this policy for CY 2011 and CY 2012 

(75 FR 71973 and 76 FR 74334). 

For CY 2013, we are proposing to continue to assign status indicator “E” to drugs 

and biologicals that lack CY 2011 claims data and pricing information for the ASP 

methodology. All drugs and biologicals without CY 2011 hospital claims data and data 

based on the ASP methodology that are assigned status indicator “E” on this basis at the 

time of this proposed rule for CY 2013 are displayed in Table 28 below. If pricing 

information becomes available, we are proposing to assign the products status indicator 

“K” and pay for them separately for the remainder of CY 2013. 
TABLE 28.—DRUGS AND BIOLOGICALS WITHOUT CY 2011 CLAIMS DATA 

AND WITHOUT PRICING INFORMATION FOR THE ASP METHODOLOGY 

CY 2013 

HCPCS Code CY 2013 Long Descriptor 

Proposed 

CY 2013 

SI 

90296 Diphtheria antitoxin, equine, any route E 

90393 Vaccina immune globulin, human, for intramuscular use E 

J3305 Injection, trimetrexate glucuronate, per 25 mg E 

90706 Rubella virus vaccine, live, for subcutaneous use E 

90725 Cholera vaccine for injectable use E 

90727 Plague vaccine, for intramuscular use E 

J0190 Injection, biperiden lactate, per 5 mg E 

J1452 Injection, fomivirsen sodium, intraocular, 1.65 mg E 

J1835 Injection, itraconazole, 50 mg E 

J2670 Injection, tolazonline hcl, up to 25 mg E 

J2940 Injection, somatrem, 1 mg E 

J3305 Injection, trimetrexate glucuronate, per 25 mg E 

J3320 Injection, spectinomycin dihydrochloride, up to 2 gm E 

J9165 Injection, diethylstilbestrol diphosphate, 250 mg E 

J9212 

Injection, interferon alfacon-1, recombinant, 1 

microgram E 

Q4117 Hyalomatrix, per square centimeter E 

Q4120 Matristem Burn matrix, per square centimeter E 

Q4126 Memoderm, per square centimeter E 

Q4127 Talymed, per square centimeter E 
VI. Proposed 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 

hospital 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 make an estimate of pass-through spending to determine 

not only whether payments exceed the applicable percentage, but also to determine the 

appropriate pro rata reduction to the conversion factor for the projected level of 

pass-through spending in the following year in order 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 2013 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 2013. 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 contains items 

that we know are newly eligible, or project may be newly eligible, for device 

pass-through payment in the remaining quarters of CY 2012 or beginning in CY 2013. 

The sum of the CY 2013 pass-through estimates for these two groups of device categories 

would equal the total CY 2013 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 2012 OPPS/ASC final rule 

with comment period (76 FR 74335 through 74336). 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 nonimplantable 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 is not proposed to be reinstated for CY 2013. Because we 

are proposing to pay for most nonpass-through separately payable drugs and 

nonimplantable biologicals under the CY 2013 OPPS at ASP+6 percent, which represents 

the otherwise applicable fee schedule amount associated with most pass-through drugs 

and nonimplantable biologicals, and because we are proposing to pay for CY 2013 

pass-through drugs and nonimplantable biologicals at ASP+6 percent, our estimate of 

drug and nonimplantable biological pass-through payment for CY 2013 for this group of 

items would be zero, 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 because these 

products will never be separately paid. However, all pass-through diagnostic 

radiopharmaceuticals and contrast agents with pass-through status approved prior to 

CY 2013 would be paid at ASP+6 percent like other pass-through drugs and 

nonimplantable biologicals. Therefore, our estimate of pass-through payment for all 

diagnostic radiopharmaceuticals and contrast agents with pass-through status approved 

prior to CY 2013 is not zero. In section V.A.4. of this proposed rule, we discuss our 

proposed policy to determine if the cost of certain “policy-packaged” drugs, including 

diagnostic radiopharmaceuticals and contrast agents, are already packaged into the 

existing APC structure. If we determine that a “policy-packaged” drug approved for 

pass-through payment resembles predecessor diagnostic radiopharmaceuticals or contrast 
agents already included in the costs of the APCs that would be associated with the drug 

receiving pass-through payment, we are proposing to offset the amount of pass-through 

payment for diagnostic radiopharmaceuticals or contrast agents. For these drugs, the 

APC offset amount would be the portion of the APC payment for the specific procedure 

performed with the pass-through radiopharmaceuticals or contrast agents, which we refer 

to as the “policy-packaged” drug APC offset amount. If we determine that an offset is 

appropriate for a specific diagnostic radiopharmaceutical or contrast agent receiving 

pass-through payment, we are proposing to reduce our estimate of pass-through payment 

for these drugs by this amount. 

Similar to pass-through estimates for devices, the first group of drugs and 

nonimplantable biologicals requiring a pass-through payment estimate consists of those 

products that were recently made eligible for pass-through payment for CY 2012 and that 

will continue to be eligible for pass-through payment in CY 2013. The second group 

contains drugs and nonimplantable biologicals that we know are newly eligible, or 

project will be newly eligible, in the remaining quarters of CY 2012 or beginning in 

CY 2013. The sum of the CY 2013 pass-through estimates for these two groups of drugs 

and nonimplantable biologicals would equal the total CY 2013 pass-through spending 

estimate for drugs and nonimplantable biologicals with pass-through status. 
B. Proposed Estimate of Pass-Through Spending

 We are proposing to set the applicable pass-through payment percentage limit at 

2.0 percent of the total projected OPPS payments for CY 2013, consistent with section 

1833(t)(6)(E)(ii)(II) of the Act, and our OPPS policy from CY 2004 through CY 2012 

(76 FR 74336). 

For the first group of devices for pass-through payment estimation purposes, there 

currently are three device categories eligible for pass-through payment for CY 2013: 

C1830 (Powered bone marrow biopsy needle); C1840 (Lens, intraocular (telescopic)); 

and C1886 (Catheter, extravascular tissue ablation, any modality (insertable). We 

estimate that CY 2013 pass-through expenditures related to these three eligible device 

categories will be approximately $42 million. In estimating our proposed CY 2013 

pass-through spending for device categories in the second group we include: device 

categories that we know at the time of the development of this proposed rule would be 

newly eligible for pass-through payment in CY 2013 (of which there are none); 

additional device categories that we estimate could be approved for pass-through status 

subsequent to the development of this proposed rule and before January 1, 2013; and 

contingent projections for new device categories established in the second through fourth 

quarters of CY 2013. We are proposing to use the general methodology described in the 

CY 2008 OPPS/ASC final rule with comment period (72 FR 66778), while also taking 

into account recent OPPS experience in approving new pass-through device categories. 

For this proposed rule, the estimate of CY 2013 pass-through spending for this second 

group of device categories is $10 million. Using our established methodology, we are 

proposing that the total estimated pass-through spending for device categories for 
CY 2013 (spending for the first group of device categories ($42 million) plus spending 

for the second group of device categories ($10 million)) be $52 million. 

To estimate proposed CY 2013 pass-through spending for drugs and 

nonimplantable biologicals in the first group, specifically those drugs (including 

radiopharmaceuticals and contrast agents) and nonimplantable biologicals recently made 

eligible for pass-through payment and continuing on pass-through status for CY 2013, we 

are proposing to utilize 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 nonimplantable biologicals, to project the CY 2013 OPPS 

utilization of the products. 

For the known drugs and nonimplantable biologicals (excluding diagnostic 

radiopharmaceuticals and contrast agents) that would be continuing on pass-through 

status in CY 2013, we estimate the proposed pass-through payment amount as the 

difference between ASP+6 percent and the proposed payment rate for nonpass-through 

drugs and nonimplantable biologicals that would be separately paid at ASP+6 percent, 

which is zero for this group of drugs. Because payment for a diagnostic 

radiopharmaceutical or contrast agent would be packaged if the product were not paid 

separately due to its pass-through status, we are proposing to include in the proposed 

CY 2013 pass-through estimate the difference between payment for the 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 

have determined that the diagnostic radiopharmaceutical or contrast agent approved for 
pass-through payment resembles predecessor diagnostic radiopharmaceuticals or contrast 

agents already included in the costs of the APCs that would be associated with the drug 

receiving pass-through payment. For this CY 2013 proposed rule, we are proposing to 

continue to use the above described methodology to calculate a proposed spending 

estimate for this first group of drugs and nonimplantable biologicals to be approximately 

$13 million. 

To estimate proposed CY 2013 pass-through spending for drugs and 

nonimplantable biologicals in the second group (that is, drugs and nonimplantable 

biologicals that we know at the time of development of this proposed rule would be 

newly eligible for pass-through payment in CY 2013, additional drugs and 

nonimplantable biologicals that we estimate could be approved for pass-through status 

subsequent to the development of this proposed rule and before January 1, 2013, and 

projections for new drugs and nonimplantable biologicals that could be initially eligible 

for pass-through payment in the second through fourth quarters of CY 2013), we are 

proposing to use utilization estimates from pass-through applicants, pharmaceutical 

industry data, clinical information, recent trends in the per unit ASPs of hospital 

outpatient drugs, and projected annual changes in service volume and intensity as our 

basis for making the proposed CY 2013 pass-through payment estimate. We also are 

considering the most recent OPPS experience in approving new pass-through drugs and 

nonimplantable biologicals. Using our proposed methodology for estimating CY 2013 

pass-through payments for this second group of drugs, we calculated a proposed spending 

estimate for this second group of drugs and nonimplantable biologicals to be 

approximately $19 million. 
As discussed in section V.A. of this proposed rule, radiopharmaceuticals are 

considered drugs for pass-through purposes. Therefore, we include radiopharmaceuticals 

in our proposed CY 2013 pass-through spending estimate for drugs and nonimplantable 

biologicals. Our proposed CY 2013 estimate for total pass-through spending for drugs 

and nonimplantable biologicals (spending for the first group of drugs and nonimplantable 

biologicals ($13 million) plus spending for the second group of drugs and nonimplantable 

biologicals ($19 million)) equals $32 million. 

 In summary, in accordance with the methodology described above in this section, 

for this proposed rule, we estimate that total pass-through spending for the device 

categories and the drugs and nonimplantable biologicals that are continuing to receive 

pass-through payment in CY 2013 and those device categories, drugs, and biologicals 

that first become eligible for pass-through payment during CY 2013 would be 

approximately $84 million (approximately $52 million for device categories and 

approximately $32 million for drugs and nonimplantable biologicals), which represents 

0.18 percent of total projected OPPS payments for CY 2013. We estimate that 

pass-through spending in CY 2013 would not amount to 2.0 percent of total projected 

OPPS CY 2013 program spending. 

VII. Proposed 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 visits, and critical care services, including 

trauma team activation. For CY 2013, we are proposing to continue to recognize these 

CPT and HCPCS codes describing clinic visits, Type A and Type B emergency 
department visits, and critical care services, which are listed below in Table 29, for 

CY 2013. 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 longstanding policy on OPPS 

payment for hospital outpatient visits. 

TABLE 29.—PROPOSED HCPCS CODES USED TO REPORT CLINIC AND 

EMERGENCY DEPARTMENT VISITS AND CRITICAL CARE SERVICES 

CY 2013 

HCPCS 

Code 

CY 2013 Descriptor 

Clinic Visit HCPCS Codes

99201 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 1) 

99202 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 2) 

99203 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 3) 

99204 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 4) 

99205 

Office or other outpatient visit for the evaluation and management of a 

new patient (Level 5) 

99211 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 1) 

99212 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 2) 

99213 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 3) 

99214 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 4) 

99215 

Office or other outpatient visit for the evaluation and management of 

an established patient (Level 5) 

Emergency Department Visit HCPCS Codes 

99281 

Emergency department visit for the evaluation and management of a 

patient 

(Level 1) 
99282 

Emergency department visit for the evaluation and management of a 

patient 

(Level 2) 

99283 

Emergency department visit for the evaluation and management of a 

patient 

(Level 3) 

99284 

Emergency department visit for the evaluation and management of a 

patient 

(Level 4) 

99285 

Emergency department visit for the evaluation and management of a 

patient 

(Level 5) 

G0380 Type B emergency department visit (Level 1) 

G0381 Type B emergency department visit (Level 2) 

G0382 Type B emergency department visit (Level 3) 

G0383 Type B emergency department visit (Level 4) 

G0384 Type B emergency department visit (Level 5) 

Critical Care Services HCPCS Codes 

99291 

Critical care, evaluation and management of the critically ill or 

critically injured patient; first 30-74 minutes 

99292 

Critical care, evaluation and management of the critically ill or 

critically injured patient; each additional 30 minutes 

G0390 Trauma response associated with hospital critical care service 

B. Proposed Policies for Hospital Outpatient Visits

For CY 2013, we are proposing to continue our longstanding policies related to 

hospital outpatient visits, which includes clinic visits, emergency department visits, and 

critical care services. Specifically, we are proposing to continue to recognize the 

definitions of a new patient and an established patient, which are based on whether the 

patient has been registered as an inpatient or outpatient of the hospital within the 3 years 

prior to a visit. We also are proposing to continue to apply our policy of calculating costs 

for clinic visits under the OPPS using historical hospital claims data through five levels 

of clinic visit APCs (APCs 0604 through 0608). In addition, we are proposing to 
continue to recognize Type A emergency departments and Type B emergency 

departments for payment purposes under the OPPS, and to pay for Type A emergency 

department visits based on their costs through the five levels of Type A emergency 

department APCs (APCs 0609 and 0613 through 0616) and to pay for Type B emergency 

department visits based on their costs through the five levels of Type B emergency 

department APCs (APCs 0626 through 0630). We refer readers to Addendum B to this 

proposed rule (which is available via the Internet on the CMS Web site) for the proposed 

APC assignments and payment rates for these hospital outpatient visits. Finally, we are 

continuing to instruct hospitals to report facility resources for clinic and emergency 

department hospital outpatient visits using the CPT E/M codes and to develop internal 

hospital guidelines for reporting the appropriate visit level. We note that our continued 

expectation is that hospitals’ internal guidelines will comport with the principles listed in 

the CY 2008 OPPS/ASC final rule with comment period (72 FR 66805). We encourage 

hospitals with specific questions related to the creation of internal guidelines to contact 

their servicing fiscal intermediary or MAC. We refer readers to the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 74338 through 74346) for a full historical 

discussion of these longstanding policies. 

We also are proposing 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 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 reflect 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 discussed in section II.A.2.f. of this proposed rule, we are proposing to 

establish the CY 2013 relative payment weights upon which OPPS payment is based 

using geometric mean costs. The CY 2011 hospital claims data on which the proposed 

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. Because our 

proposal to establish relative payment weights based on geometric mean cost data for 

CY 2013 represents a change from our historical practice to base payment rates on 

median costs and because we now have 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 this proposed rule and determined that the data show increases in both 

the mean and median line item costs as well as the mean and median line item charges for 

CPT code 99291, when compared to CY 2010 hospital claims data. Specifically, the 

mean and median line item costs increased 13 percent and 16 percent, respectively, and 

the 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 show no substantial change in the ancillary services that are present on the same 

claims as critical care services, and also show continued low volumes of many ancillary 

services. 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. 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 suggests 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 continue 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 are proposing to continue 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 are proposing 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. 

C. Transitional Care Management

In the CY 2013 MPFS proposed rule, we discuss a multiple year strategy 

exploring the best means to encourage the provision of primary care and care 

coordination services to Medicare beneficiaries. As part of the strategy discussed in that 
proposed rule, we are proposing to address the non-face-to-face work involved in hospital 

or SNF discharge care coordination by creating a HCPCS G-code for care management 

involving the transition of a beneficiary from care furnished by a treating physician 

during a hospital stay (inpatient, outpatient observation services, or outpatient partial 

hospitalization), SNF stay, or CMHC partial hospitalization program to care furnished by 

the beneficiary’s physician or qualified nonphysician practitioner in the community. As 

discussed in the CY 2013 MPFS proposed rule, care management involving the transition 

of a beneficiary from care furnished by a treating physician during a hospital or a SNF 

stay to the beneficiary’s primary physician or qualified nonphysician practitioner in the 

community could avoid adverse events such as readmissions or subsequent illnesses, 

improve beneficiary outcomes, and avoid a financial burden on the health care system. 

Successful efforts to improve hospital discharge care coordination and care transitions 

could improve the quality of care while simultaneously decreasing costs. 

The proposed HCPCS G-code included in the CY 2013 MPFS proposed rule, 

GXXX1, specifically describes post-discharge transitional care management services, 

which include all non-face-to-face services related to the transitional care management, 

furnished by the community physician or nonphysician practitioner within 30 calendar 

days following the date of discharge from an inpatient acute care hospital, psychiatric 

hospital, LTCH, SNF, and IRF; discharge from hospital outpatient observation or partial 

hospitalization services; or discharge from a PHP at a CMHC, to the community-based 

care. The post-discharge transitional care management services include non-face-to-face 

care management services provided by clinical staff member(s) or office-based case 
manager(s) under the supervision of the community physician or qualified nonphysician 

practitioner. 

Transitional care management services include: 

1. Assuming responsibility for the beneficiary’s care without a gap. 

2. Establishing or adjusting a plan of care to reflect required and indicated 

elements, particularly in light of the services furnished during the stay at the specified 

facility and to reflect the result of communication with beneficiary. 

3. Communication (direct contact, telephone, electronic) with the beneficiary 

and/or caregiver, including education of the patient and/or caregiver within 2 business 

days of discharge based on a review of the discharge summary and other available 

information such as diagnostic test results. 

 While we do not pay for physician or nonpractitioner professional services under 

the OPPS (42 CFR 419.22), we recognize that certain elements of the transitional care 

coordination services described by proposed HCPCS code GXXX1 could be provided to 

a hospital outpatient as an ancillary or supportive service in conjunction with a primary 

diagnostic or therapeutic service that would be payable under the OPPS, such as a clinic 

visit. As described in section II.A.3. of this proposed rule, we package payment for 

services that are typically ancillary and supportive to a primary service. While we do not 

make separate payment for such services, their costs are included in the costs of other 

services furnished by the hospital to the beneficiary on the same day. Because we believe 

that transitional care management services may be ancillary and supportive to a primary 

service provided to a hospital outpatient, for purposes of OPPS payment, we are 

proposing to assign HCPCS code (GXXX1), a status indicator of “N” (Items and 
Services Packaged into APC Rates) signifying that its payment is packaged. We refer 

readers to the CY 2013 MPFS proposed rule for a full discussion of post-discharge 

transitional care management services in particular and, more broadly, the multiple year 

strategy exploring the best means to encourage primary care and care coordination 

services. 

VIII. Proposed 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 plan 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 community 

mental health center. 

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, at 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 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 in the CY 2008 update (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 at 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 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 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 at section 1861(ff)(3)(B) of the Act. We 

discussed our finalized policies for these two provisions of HCERA 2010 under 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). In the CY 2011 OPPS/ASC proposed rule, we proposed that CMHC APC 

medians would be based only on CMHC data and hospital-based PHP APC medians 

would be based only on hospital-based PHP data (75 FR 46300). 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 CY 2009 

policies. 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. 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 PHP programs at a lower rate than their cost structure reflects 

could lead to hospital-based PHP program closures and possible access problems for 

Medicare beneficiaries, given that hospital-based programs offer the widest access to 

PHP services because they are located across the country. 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 APC Level I and Level II per diem costs were calculated 

by taking 50 percent of the difference between the CY 2010 final hospital-based medians 

and the CY 2011 final CMHC medians and then adding that number to the CY 2011 final 

CMHC medians. 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 may, based on these analyses, 

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 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 APCs, as set forth in § 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 

PHP services were based on a combination of hospital and CMHC data. Similarly, we 

established new APCs for PHP services based exclusively on hospital data. For 

CY 2009, 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.” 

However, we used 1996 data (plus 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.” 

B. Proposed PHP APC Update for CY 2013

As discussed in section II.A.2.g. of this proposed rule, for CY 2013, we are 

proposing to develop the relative payment weights that underpin the OPPS using 

geometric means rather than the current median-based methodology. This proposal to 

base the relative payment weights on geometric means would also apply to the per diem 

costs used to determine the relative payment weights for the four PHP APCs. For PHP 

APCs, as with all other OPPS APCs, the proposal to base the relative payment weights on 

geometric means rather than medians would not affect the general process to establish 

appropriate claims for modeling. As with the current median-based methodology, the 

PHP APC payment rates would continue to be calculated by computing a separate per 

diem cost for each day of PHP. When there are multiple days of PHP services entered on 

a claim, a unique cost would continue to be computed for each day of care. However, a 

geometric mean would be used to calculate the per diem costs rather than a median. The 

process would still be repeated separately for CMHCs and hospital-based PHPs using that 

provider’s claims data for the two categories of days with 3 services and days with 4 or 

more services. The four PHP APC per diem costs would continue to be included in the 

scaling of all APCs in OPPS to the mid-level office visit (APC 0606). Again, for a 

detailed discussion of the proposed CY 2013 OPPS weight scaler, we refer readers to 

section II.A.4. of this proposed rule. 

For CY 2013, using CY 2011 claims data, 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) services using only CY 2011 CMHC claims data, and proposed 

hospital-based PHP APC geometric mean per diem costs for Level I and Level II services 

using only CY 2011 hospital-based PHP claims data. These proposed geometric mean 

per diem costs are shown in Table 30 below. 

TABLE 30.--PROPOSED CY 2013 GEOMETRIC MEAN PER DIEM 

COSTS FOR CMHC AND HOSPITAL-BASED PHP SERVICES, BASED ON 

CY 2011 CLAIMS DATA 

APC Group Title Proposed 

Geometric Mean 

Per Diem Costs 

0172 Level I Partial Hospitalization (3 services) for 

CMHCs 

$87.76

0173 Level II Partial Hospitalization (4 or more 

services) for CMHCs 

$111.89

0175 Level I Partial Hospitalization (3 services) for 

hospital-based PHPs 

$182.66

0176 Level II Partial Hospitalization (4 or more 

services) for hospital-based PHPs 

$232.74

Under the CY 2013 proposal to base the OPPS relative payment weights on 

geometric mean costs, the proposed geometric mean per diem costs for CMHCs would 

continue to be substantially lower than the proposed geometric mean per diem costs for 

hospital-based PHPs for the same units of service. For CY 2013, the proposed geometric 

mean per diem costs for days with 3 services (Level I) is approximately $88 for CMHCs 

and approximately $183 for hospital-based PHPs. The proposed geometric mean per 

diem costs for days with 4 or more services (Level II) is approximately $112 for CMHCs 

and approximately $233 for hospital-based PHPs. This analysis indicates that there 
continues to be fundamental differences between the cost structures of CMHCs and 

hospital-based PHPs. 

The CY 2013 proposed geometric mean per diems costs for CMHCs calculated 

under the proposed CY 2013 methodology using CY 2011 claims data also have 

decreased compared to the CY 2012 final median per diem costs for CMHCs established 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74352), with per diem 

costs for Level I services decreasing from approximately $98 to approximately $88, and 

costs for Level II services decreasing from approximately $114 to approximately $112. 

In contrast, the CY 2013 proposed geometric mean per diem costs for hospital-based 

PHPs calculated under the proposed CY 2013 methodology using CY 2011 claims data 

have increased compared to the CY 2012 final median per diem costs for hospital-based 

PHPs, with per diem costs for Level I services increasing from approximately $161 to 

approximately $183, and per diem costs for Level II services increasing from 

approximately $191 to approximately $233. 

To provide a comparison, we also calculated PHP median per diem costs for 

CY 2013 using CY 2011 claims data. We computed median per diem costs for each 

provider type using that provider’s claims data for Level I services and for Level II 

services. These comparative median per diem costs are shown in Table 31 below. 
TABLE 31.—COMPARATIVE PHP MEDIAN PER DIEM COSTS FOR CMHC 

AND HOSPITAL-BASED PHP SERVICES, BASED ON CY 2011 CLAIMS DATA 

APC Group Title Comparative 

Median Per Diem 

Costs 

0172 Level I Partial Hospitalization (3 services) for 

CMHCs 

$87.52

0173 Level II Partial Hospitalization (4 or more 

services) for CMHCs 

$121.27

0175 Level I Partial Hospitalization (3 services) for 

hospital-based PHPs 

$163.86

0176 Level II Partial Hospitalization (4 or more 

services) for hospital-based PHPs 

$224.57

 The proposed geometric mean per diem costs for hospital-based PHPs for Level I 

and Level II services calculated under the proposed CY 2013 methodology using CY 

2011 claims data would be higher than the median per diem costs calculated under the 

current median-based methodology, using CY 2011 claims data. For hospital-based 

PHPs, the per diem costs would increase from approximately $164 under the current 

median -based methodology to approximately $183 under the proposed geometric meanbased methodology for Level I services, and from approximately $225 to approximately 

$233 for Level II services. 

The proposed geometric mean per diem costs for CMHCs for Level I services 

calculated under the proposed CY 2013 methodology using CY 2011 claims data would 

be approximately the same as the median per diem costs calculated under the current 

median-based methodology, using CY 2011 claims data. The proposed geometric mean 

per diem costs for CMHCs for Level II services calculated under the proposed CY 2013 

methodology using CY 2011 claims data would be slightly lower than the median per 
diem costs calculated under the current median-based methodology, using CY 2011 

claims data. For CMHCs, the per diem costs would be approximately $88 under both the 

current median-based methodology and the proposed geometric mean-based 

methodology for CMHC Level I services, and would decrease from approximately $121 

under the current median–based methodology to approximately $112 under the proposed 

geometric mean-based methodology for CMHC Level II services. 

The data analysis also shows that the median per diem costs for CMHCs continue 

to be substantially lower than the median per diem costs for hospital-based PHPs for the 

same units of service provided. The median per diem costs for Level I services is 

approximately $88 for CMHCs and approximately $164 for hospital-based PHPs. The 

median per diem costs for Level II services is approximately $121 for CMHCs and 

approximately $225 for hospital-based PHPs. The significant difference in per diem 

costs between CMHCs and hospital-based PHPs emphasizes the distinct cost structures 

between the two provider types. 

Finally, the data analysis indicates that CMHC median per diem costs for Level I 

services would have decreased from CY 2012 final median per diem costs (using 

CY 2010 claims data) (established in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74352)) to CY 2013 (using CY 2011 claims data) from approximately $98 

to approximately $88, using only CMHC claims data. The CMHC median per diem costs 

for Level II services would have slightly increased from CY 2012 final median per diem 

costs (using CY 2010 claims data) to CY 2013 (using CY 2011 claims data) from 

approximately $114 to approximately $121, using only CMHC claims data. 

Hospital-based PHP median per diem costs for Level I and Level II services would have 
increased from the CY 2012 final median per diem costs (using CY 2010 claims data) to 

CY 2013 (using CY 2011 claims data) from approximately $161 to approximately $164 

for Level I services and from approximately $191 to approximately $225 for Level II 

services, using only hospital claims data. 

In summary, while we have historically based the OPPS payments on median 

costs for services in the APC groups, for CY 2013, we are proposing to calculate the 

relative payment weights for the OPPS APCs using geometric means, including the four 

PHP APCs, as discussed in section II.A.2.g. of this proposed rule. The proposed 

CY 2013 geometric mean per diem costs for the PHP APCs are shown in Tables 32 and 

33 below. We invite public comments on these proposals. We will continue our efforts 

to explore payment reforms that will support quality and result in greater payment 

accuracy and reduction of fraud and abuse within the partial hospitalization program. 

TABLE 32.--PROPOSED CY 2013 GEOMETRIC MEAN PER DIEM 

COSTS FOR CMHC PHP SERVICES 

APC Group Title Proposed Mean 

Per Diem Costs 

0172 Level I Partial Hospitalization (3 services) for 

CMHCs 

$87.76

0173 Level II Partial Hospitalization (4 or more 

services) for CMHCs 

$111.89
TABLE 33.--PROPOSED CY 2013 GEOMETRIC MEAN PER DIEM 

COSTS FOR HOSPITAL-BASED PHP SERVICES 

APC Group Title Proposed Mean 

Per Diem Costs 

0175 Level I Partial Hospitalization (3 services) for 

hospital-based PHPs 

$182.66

0176 Level II Partial Hospitalization (4 or more 

services) for hospital-based PHPs 

$232.74

C. Proposed Separate Threshold for Outlier Payments to CMHCs

 In the CY 2004 OPPS final rule with comment period (68 FR 63469 through 

63470), we indicated that, given the difference in charges for PHP services provided 

between hospitals and CMHCs, we did not believe it was appropriate to make outlier 

payments to CMHCs using the outlier percentage target amount and threshold established 

for hospitals. Prior to that time, there was a significant difference in the amount of outlier 

payments made to hospitals and CMHCs for PHP services. Therefore, 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. In addition, further analysis indicated that using the same 

OPPS outlier threshold for both hospitals and CMHCs did not limit outlier payments to 

high-cost cases and resulted in excessive outlier payments to CMHCs. Therefore, 

beginning in CY 2004, we established a separate outlier threshold for CMHCs. The 

separate outlier threshold for CMHCs has resulted in more commensurate outlier 

payments. 

 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 believe 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. 

 We are proposing to continue our policy of identifying 1.0 percent of the 

aggregate total payments under the OPPS for outlier payments for CY 2013. We are 

proposing that a portion of that 1.0 percent, an amount equal to 0.12 percent of outlier 

payments (or 0.0012 percent of total OPPS payments) would be allocated to CMHCs for 

PHP outlier payments. In section II.G. of this proposed rule, for hospital outpatient 

outlier payments policy, we are proposing 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 are not proposing to set a dollar threshold for 

CMHC outlier payments. We are proposing to set the outlier threshold for CMHCs for 

CY 2013 at 3.40 times the APC payment amount and the CY 2013 outlier payment 

percentage applicable to costs in excess of the threshold at 50 percent. Specifically, we 

are proposing 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 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 invite public comments on these 

proposals. 
IX. Proposed Procedures That Would Be Paid Only as Inpatient Procedures

A. Background

 We refer readers to the CY 2012 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. Proposed Changes to the Inpatient List

For the CY 2013 OPPS, we are proposing 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 are being 

performed a significant amount of the time on an outpatient basis, and appropriately 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 identified two procedures that potentially could be 

removed from the inpatient list for CY 2013: CPT code 22856 (Total disc arthroplasty 

(artificial disc), anterior approach, including discectomy with end plate preparation 

(includes osteophytectomy for nerve root or spinal cord decompression and 

microdissection), single interspace, cervical); and CPT code 27447 (Arthroplasty, knee, 

condyle and plateau; medical and lateral compartments with or without patella 

resurfacing (total knee arthroplasty)). We then reviewed the clinical characteristics and 

related evidence for these two potential procedures for possible removal from the 

inpatient list and found them to be appropriate candidates for removal from the inpatient 

list. For CY 2013, we are proposing to remove the procedures described by CPT codes 

22856 and 27447 from the inpatient list because we believe that the procedures may be 

appropriately provided as hospital outpatient procedures for some Medicare beneficiaries, 

based upon the evaluation criteria mentioned above and should thus be paid under the 

OPPS. 

The two procedures we are proposing to remove from the inpatient only list for 

CY 2013 and their CPT codes, long descriptors, proposed APC assignments, and 

proposed status indictors are displayed in Table 34 below. 

TABLE 34.—PROCEDURES PROPOSED TO BE REMOVED FROM THE 

INPATIENT ONLY LIST AND THEIR PROPOSED APC ASSIGNMENTS FOR 

CY 2013 
HCPCS 

Code 

Long Descriptor Proposed 

CY 2013 

APC 

Assignment 

Proposed 

CY 2013 

Status 

Indicator 

22856 

Total disc arthroplasty (artificial disc), anterior 

approach, including discectomy with end plate 

preparation (includes osteophytectomy for nerve 

root or spinal cord decompression and 

microdissection), single interspace, cervical 

0208 T 

27447 

Arthroplasty, knee, condyle and plateau; medical 

and lateral compartments with or without patella 

resurfacing (total knee arthroplasty) 

0425 T 

 The complete list of codes that we are proposing to be paid by Medicare in 

CY 2013 only as inpatient procedures is included as Addendum E to this proposed rule 

(which is available via the Internet on the CMS Web site). 

X. Proposed Policies for the Supervision of Outpatient Services in Hospitals and 

CAHs 

A. Conditions of Payment for Physical Therapy, Speech-Language Pathology, and 

Occupational Therapy Services in Hospitals and CAHs

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74360 through 

74371), we clarified that hospital outpatient therapeutic services and supplies, including 

those described by benefit categories other than the hospital outpatient “incident to” 

category under section 1861(s)(2)(B) of the Act, are subject to the conditions of payment 

in 42 CFR 410.27 when they are paid under the OPPS or paid to CAHs under section 

1834(g) of the Act. We issued this clarification in response to inquiries regarding the 

application of these conditions of payment to radiation therapy services that are described 
under section 1861(s)(4) of the Act when these services are furnished to hospital 

outpatients. 

In the CY 2012 OPPS/ASC final rule with comment period, in our response to 

public comments (76 FR 74369), we indicated that the supervision and other 

requirements of § 410.27 do not apply to professional services or to services that are paid 

under other fee schedules such as the Clinical Laboratory Fee Schedule (CLFS). After 

the publication of the final rule with comment period, we continued to receive questions 

about the applicability of the regulations to physical therapy (PT), speech-language 

pathology (SLP), and occupational therapy (OT) services furnished in CAHs. Several 

stakeholders expressed concern that the rules could be applied differently in CAHs than 

in OPPS hospitals. The stakeholders were concerned that OPPS hospitals, which are paid 

for outpatient therapy services at the applicable amount based on the Medicare Physician 

Fee Schedule (MPFS), would not be subject to the regulations, but that CAHs, which are 

paid for outpatient therapy services on a reasonable cost basis, would be subject to them. 

In this proposed rule, we are clarifying that it was not our intent in the CY 2012 

OPPS/ASC final rule with comment period to establish different requirements for CAHs 

and for OPPS hospitals for the same services. The supervision and other requirements of 

§ 410.27 apply to facility services that are paid to hospitals under the OPPS and to these 

same services when they are furnished in CAHs and paid on a reasonable cost basis. In 

OPPS hospitals, these requirements do not apply to professional services that are 

separately billed under the MPFS or to PT, SLP, and OT services that are billed by the 

hospital as therapy services and are paid at the applicable amount based on the MPFS. 
The payment rules under § 410.27 also do not apply to these same services when they are 

furnished in CAHs. 

In OPPS hospitals, a small subset of “sometimes therapy” PT, SLP, or OT 

services are paid under the OPPS when they are not furnished as therapy, meaning not 

under a certified therapy plan of care. Because the supervision and other conditions of 

payment under § 410.27 apply to this subset of “sometimes therapy” services when they 

are furnished in OPPS hospitals as nontherapy services (because they are paid under the 

OPPS and not based on the MPFS), those conditions of payment also apply to this subset 

of “sometimes therapy” services when they are furnished as nontherapy in CAHs. When 

OPPS hospitals and CAHs furnish these services as therapy services (under a therapy 

plan of care by a qualified therapist), the conditions of payment under § 410.27 do not 

apply because OPPS hospitals are paid for these services based on the MPFS and not 

under the OPPS. We are providing a list of the “sometimes therapy” services that may be 

paid under the OPPS in Table 35 below. 
TABLE 35.--“SOMETIMES THERAPY” SERVICES THAT ARE PAID UNDER 

THE OPPS WHEN NOT FURNISHED AS THERAPY SERVICES 

HCPCS 

Code 

Descriptor 

97597 Debridement (eg, high pressure waterjet with/without suction, sharp 

selective debridement with scissors, scalpel and forceps), open wound, 

(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris, biofilm), 

including topical application(s), wound assessment, use of a whirlpool, 

when performed and instruction(s) for ongoing care, per session, total 

wound(s) surface area; first 20 sq cm or less

97598 Debridement (eg, high pressure waterjet with/without suction, sharp 

selective debridement with scissors, scalpel and forceps), open wound, 

(eg, fibrin, devitalized epidermis and/or dermis, exudate, debris, biofilm), 

including topical application(s), wound assessment, use of a whirlpool, 

when performed and instruction(s) for ongoing care, per session, total 

wound(s) surface area; each additional 20 sq cm, or part thereof (list 

separately in addition to code for primary procedure) 

97602 Removal of devitalized tissue from wound(s), non-selective debridement, 

without anesthesia (eg, wet-to-moist dressings, enzymatic, abrasion), 

including topical application(s), wound assessment, and instruction(s) for 

ongoing care, per session 

97605 Negative pressure wound therapy (eg, vacuum assisted drainage 

collection), including topical application(s), wound assessment, and 

instruction(s) for ongoing care, per session; total wound(s) surface area 

less than or equal to 50 square centimeters 

97606 Negative pressure wound therapy (eg, vacuum assisted drainage 

collection), including topical application(s), wound assessment, and 

instruction(s) for ongoing care, per session; total wound(s) surface area 

greater than 50 square centimeters 

0183T Low frequency, non-contact, non-thermal ultrasound, including topical 

application(s), when performed, wound assessment, and instruction(s) for 

ongoing care, per day 

B. Enforcement Instruction for the Supervision of Outpatient Therapeutic Services in 

CAHs and Small Rural Hospitals

In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74371), we extended 

through CY 2012 the notice of nonenforcement of the requirement for direct supervision 

of outpatient therapeutic services furnished in CAHs and small rural hospitals having 100 
or fewer beds (available on the CMS Web Site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html?redirect=/HospitalOutpatientPPS/01_overvi

ew.asp). We extended this enforcement instruction to our contractors for another year, 

through CY 2012, to allow time for the initiation of supervision reviews by the Advisory 

Panel on Hospital Outpatient Payment (the Panel), which began in early 2012 and are 

continuing in accordance with the provisions of the CY 2012 OPPS/ASC final rule with 

comment period. The Panel will meet again this summer to consider requests that are 

referred by CMS for a change in the minimum required supervision level for individual 

hospital outpatient therapeutic services for the CY 2013 payment year. In this proposed 

rule, we are requesting that CAHs and small rural hospitals submit to CMS for potential 

evaluation by the Panel at the summer meeting any services for which they anticipate 

difficulty complying with the direct supervision standard in CY 2013. In developing 

evaluation requests, hospitals should refer to the evaluation criteria that we finalized in 

the CY 2012 OPPS/ASC final rule with comment period. We recognize that hospitals 

have had little experience in submitting evaluation requests to CMS for consideration by 

the Panel. In order to give hospitals additional opportunity this year to become familiar 

with the submission and review process at the summer Panel meeting, and to allow 

hospitals time to meet the required supervision levels for services that may be considered 

for CY 2013, we anticipate extending the nonenforcement instruction one additional year 

through CY 2013. We expect that this will be the final year for the instruction, regardless 

of the services reviewed by the Panel during its summer meeting. 

XI. Outpatient Status: Solicitation of Public Comments 
Under section 402(a)(1)(A) of the Social Security Amendments of 1967 (Pub. L. 

90-248), the Secretary is permitted to engage in demonstration projects to determine 

whether changes in methods of payment for health care and services under the Medicare 

program would increase the efficiency and economy of those services through the 

creation of incentives to those ends without adversely affecting the quality of such 

services. Under this statutory authority, CMS has implemented the Medicare Part A to 

Part B Rebilling (AB Rebilling) Demonstration, which allows participating hospitals to 

receive 90 percent of the allowable Part B payment for Part A short-stay claims that are 

denied on the basis that the inpatient admission was not reasonable and necessary. 

Participating hospitals can rebill these denied Part A claims under Part B and be paid for 

additional Part B services than would usually be payable when an inpatient admission is 

deemed not reasonable and necessary. This demonstration is slated to last for 3 years, 

from CY 2012 through CY 2014. In this proposed rule, we are providing an update of 

the status of the demonstration. In addition, we are soliciting public comments on a 

related issue: potential policy changes we could make to improve clarity and consensus 

among providers, Medicare, and other stakeholders regarding the relationship between 

admission decisions and appropriate Medicare payment, such as when a Medicare 

beneficiary is appropriately admitted to the hospital as an inpatient and the cost to 

hospitals associated with making this decision. 

When a Medicare beneficiary presents to a hospital in need of medical or surgical 

care, the physician or other qualified practitioner must decide whether to admit the 

beneficiary for inpatient care or treat him or her as an outpatient. In some cases, when 

the physician admits the beneficiary and the hospital provides inpatient care, a Medicare 
claims review contractor, such as the Medicare Administrative Contractor (MAC), the 

Recovery Audit Contractor (RAC), or the Comprehensive Error Rate Testing (CERT) 

Contractor, determines that inpatient care was not reasonable and necessary under section 

1862(a)(1)(A) of the Act and denies the hospital inpatient claim for payment. In these 

cases, under Medicare’s longstanding policy, hospitals may rebill a separate inpatient 

claim for only a limited set of Part B services, referred to as “Inpatient Part B” or “Part B 

Only” services (Section 10, Chapter 6 of the Medicare Benefit Policy Manual (Pub. 

100-02)). The hospital also may bill Medicare Part B for any outpatient services that 

were provided in the 3-day payment window prior to the admission (Section 10.12, 

Chapter 4 of the Medicare Claims Processing Manual (Pub. 100-04)). These claims are 

subject to the timely filing restrictions. 

Once a Medicare beneficiary is discharged from the hospital, the hospital cannot 

change the beneficiary’s patient status to outpatient and submit an outpatient claim 

because of the potentially significant impact on beneficiary liability. As we discuss 

below, hospital inpatients have significantly different Medicare benefits and liabilities 

than hospital outpatients, notably coverage of self-administered drugs and, for patients 

who are admitted to the hospital for 3 or more consecutive calendar days, coverage of 

postacute SNF care (to the extent all other SNF coverage requirements are met). To 

enable beneficiaries to make informed financial and other decisions, Medicare allows the 

hospital to change a beneficiary’s inpatient status to outpatient (using condition code 44 

on an outpatient claim) and bill all medically necessary services that it provided to Part B 

as outpatient services, but only if the change in patient status is made prior to discharge, 

the hospital has not submitted a Medicare claim for the admission, and both the 
practitioner responsible for the care of the patient and the utilization review committee 

concur in the decision (Section 50.3, Chapter 1 of the Medicare Claims Processing 

Manual (Pub. 100-04); MLN Matters article SE0622, “Clarification of Medicare Payment 

Policy When Inpatient Admission Is Determined Not To Be Medically Necessary, 

Including the Use of Condition Code 44: ‘Inpatient Admission Changed to Outpatient,”’ 

September 2004). Medicare beneficiaries are provided with similar protections that are 

outlined in the Hospital Conditions of Participation. For example, in accordance with 42 

CFR 482.13(b), Medicare beneficiaries have the right to participate in the development 

and implementation of their plan of care and treatment, to make informed decisions, and 

to accept or refuse treatment. Informed discharge planning between the patient and 

physician is important for patient autonomy and for achieving efficient outcomes. 

While the limited scope of allowed rebilling for “Part B Only” services protects 

Medicare beneficiaries and provides disincentives for hospitals to admit patients 

inappropriately, hospitals have expressed concern that this policy provides inadequate 

payment for resources that they have expended to take care of the beneficiary in need of 

medically necessary hospital care, although not necessarily at the level of inpatient care. 

A significant proportion of the Medicare CERT error rate consists of short (1- or 2-day) 

stays where the beneficiary received medically necessary services that the CERT 

contractor determined should have been provided as outpatient services and not as 

inpatient services. Hospitals have indicated that often they do not have the necessary 

staff (for example, utilization review staff or case managers) on hand after normal 

business hours to confirm the physician’s decision to admit the beneficiary. Thus, for a 

short stay, the hospital may be unable to review and change a beneficiary’s patient status 
from inpatient to outpatient prior to discharge in accordance with the condition code 44 

requirements. 

We have heard from various stakeholders that hospitals appear to be responding 

to the financial risk of admitting Medicare beneficiaries for inpatient stays that may later 

be denied upon contractor review, by electing to treat beneficiaries as outpatients 

receiving observation services, often for longer periods of time, rather than admit them. 

In recent years, the number of cases of Medicare beneficiaries receiving observation 

services for more than 48 hours, while still small, has increased from approximately 3 

percent in 2006 to approximately 7.5 percent in 2010. This trend is concerning because 

of its effect on Medicare beneficiaries. There could be significant financial implications 

for Medicare beneficiaries of being treated as outpatients rather than being admitted as 

inpatients, of which CMS has informed beneficiaries.1

 For instance, if a beneficiary is 

admitted as an inpatient, the beneficiary pays a one-time deductible for all hospital 

services provided during the first 60 days in the hospital. As a hospital inpatient, the 

beneficiary would not pay for self-administered drugs or have any copayments for the 

first 60 days; whereas if the beneficiary is treated as an outpatient, the beneficiary has a 

copayment for each individual outpatient hospital service. While the Medicare 

copayment for a single outpatient hospital service cannot be more than the inpatient 

hospital deductible, the beneficiary’s total copayment for all outpatient services may be 

more than the inpatient hospital deductible. In addition, usually self-administered drugs 

provided in an outpatient setting are not covered by Medicare Part B and hospitals may 

 

1

 CMS Pamphlets: “Are You a Hospital Inpatient or Outpatient? If You Have Medicare - Ask!”, CMS 

Product No. 11435, Revised, February 2011; “How Medicare Covers Self-Administered Drugs Given in 

Hospital Outpatient Settings,” CMS Product No. 11333, Revised, February 2011. 
charge the beneficiary for them. Also, the time spent in the hospital as an outpatient is 

not counted towards the 3-day qualifying inpatient stay that the law requires for Medicare 

Part A coverage of postacute care in a SNF (section 1861(i) of the Act). 

As a result of these concerns related to the impact of extended time as an 

outpatient on Medicare beneficiaries, the CERT error rate, and the impact on hospitals of 

a later inpatient denial, CMS initiated the 3-year AB Rebilling Demonstration for 

voluntary hospital participants. This demonstration allows the participants to rebill 

outside of the usual timely filing requirements for services relating to all inpatient 

short-stay claims that are denied for lack of medical necessity because, despite the 

provision of reasonable and necessary hospital care, the inpatient admission itself was 

denied as not medically necessary. Under the demonstration, hospitals may receive 90 

percent of the allowable payment for all Part B services that would have been medically 

necessary had the beneficiaries originally been treated as outpatients and not admitted as 

inpatients. (We note that hospitals cannot rebill for observation services, which, by 

definition, must be ordered prospectively to determine whether an inpatient admission is 

necessary). Hospitals that participate in the AB Rebilling Demonstration will waive any 

appeal rights associated with the denied inpatient claims eligible for rebilling. Under the 

demonstration, Medicare beneficiaries are protected from any adverse impacts of 

expanded rebilling. For example, hospitals cannot bill them for self-administered drugs 

or additional cost-sharing. The demonstration will provide information on the impact 

that expanded rebilling may have on the Medicare Trust Funds, beneficiaries, hospitals, 

and the CERT error rate should CMS change its policy regarding the services that can be 

rebilled to Medicare Part B. The demonstration is designed to evaluate potential impacts 
of expanded rebilling on admission and utilization patterns, including whether expanded 

rebilling would reduce hospitals’ incentive to make appropriate initial admission 

decisions. 

Hospitals expressed significant interest in the AB Rebilling Demonstration which 

began on January 1, 2012. The demonstration was approved to accept up to 380 

participants. In order to participate in the demonstration, a facility must not be receiving 

periodic interim payments from CMS, and must be a Medicare-participating hospital as 

defined by section 1886(d) of the Act, a category that includes all hospitals paid under the 

Medicare IPPS, but excludes hospitals paid under the Inpatient Psychiatric Facilities 

(IPF) PPS, the IRF PPS, and the LTCH PPS, cancer hospitals, CAHs, and children’s 

hospitals. 

The hospitals that volunteered to participate and were accepted in the 

demonstration began rebilling in the early spring of 2012. We are currently accepting 

applications to participate in the ongoing AB Rebilling Demonstration, and more 

information about the demonstration is available on the CMS Web site at: 

http://www.cms.gov/Research-Statistics-Data-and-Systems/MonitoringPrograms/CERT/Part_A_to_Part_B_Rebilling_Demonstration.html. We plan to conduct 

an evaluation of the demonstration during and after its completion. While we are 

monitoring progress and evaluating the demonstration, we also are soliciting public 

comments on other actions we could potentially undertake to address concerns about this 

issue. For example, we have heard from some stakeholders who have suggested a need 

for us to clarify our current instruction regarding the circumstances under which 

Medicare will pay for an admission in order to improve hospitals’ ability to make 
appropriate admission decisions. We have issued instructions that the need for admission 

is a complex medical judgment that depends upon multiple factors, including an 

expectation that the beneficiary will require an overnight stay in the hospital (Section 10, 

Chapter 1 of the Medicare Benefit Policy Manual (Pub. 100-02)). We are interested in 

receiving public comments and suggestions regarding whether and how we might 

improve our current instructions and clarify the application of Medicare payment policies 

for both hospitals and physicians, keeping in mind the challenges of implementing 

national standards that are broad enough to contemplate the range of clinical scenarios 

but prescriptive enough to provide greater clarity. 

Some stakeholders also have suggested that CMS has authority to define whether 

a patient is an inpatient or an outpatient. They believe that it may be permissible and 

appropriate for us to redefine “inpatient” using parameters in addition to medical 

necessity and a physician order that we currently use, such as length of stay or other 

variables. For example, currently a beneficiary’s anticipated length of stay at the hospital 

may be a factor in determining whether a beneficiary should be admitted to the hospital, 

but is not the only factor. We have issued instructions that state that, typically, the 

decision to admit should be made within 24 to 48 hours, and that expectation of an 

overnight stay may be a factor in the admission decision (Section 20.6, Chapter 6 and 

Section 10, Chapter 1 of the Medicare Benefit Policy Manual (Pub. 100-02)). However, 

we are interested in hearing from stakeholders regarding whether it may be appropriate 

and useful to establish a point in time after which the encounter becomes an inpatient stay 

if the beneficiary is still receiving medically necessary care to treat or evaluate his or her 

condition. Such a policy could potentially limit the amount of time that a beneficiary is 
treated as an outpatient receiving observation services before the hospital encounter 

becomes inpatient, provided the additional time in the hospital is medically necessary. 

Currently, we do not specify a limit on the time a beneficiary may be an outpatient 

receiving observation services, although, in the past, we have limited payment of 

observation services to a specific timeframe, such as 24 or 48 hours. Some in the hospital 

community have indicated that it may be helpful for the agency to establish more specific 

criteria for patient status in terms of how many hours the beneficiary is in the hospital, or 

to provide a limit on how long a beneficiary receives observation services as an 

outpatient. We are inviting public comments regarding whether there would be more 

clarity regarding patient status under such alternative approaches to defining inpatient 

status. We also note that it is important for CMS to maintain its ability to audit and 

otherwise carry out its statutory obligation to ensure that the Medicare program pays only 

for reasonable and necessary care. We are asking that commenters consider opportunities 

for inappropriately taking advantage of the Medicare system that time-based and other 

changes in criteria for patient status may create. 

Another option stakeholders have suggested is the establishment of more specific 

clinical criteria for admission and payment, such as adopting specific clinical measures or 

requiring prior authorization for payment of an admission. We are inviting public 

comments on this approach. In addition, we are asking commenters to consider how 

aligning payment rates more closely with the resources expended by a hospital when 

providing outpatient care versus inpatient care of short duration might reduce payment 

disparities and influence financial incentives and disincentives to admit. Finally, we are 

asking commenters to consider the responsibility of hospitals to utilize all of the tools 
necessary to make appropriate initial admission decisions. We believe this is important 

because some hospitals have indicated that simply having case management and 

utilization review staff available to assist in decision-making outside of regular business 

hours may improve the accuracy of admission decisions. 

 In summary, there may be several ways of approaching the multifaceted issues 

that have been raised in recent months around a beneficiary’s patient status and Medicare 

hospital payment. Given the complexity of this topic, we are providing an update on the 

rebilling demonstration and are seeking public perspectives on potential options the 

agency might adopt to provide more clarity and consensus regarding patient status for 

purposes of Medicare payment. We are inviting commenters to draw on their knowledge 

of these issues to offer any suggestions that they believe would be most helpful to them in 

addressing the current challenges, while keeping in mind the various impacts in terms of 

recently observed increases in the length of time for which patients receive observation 

services, beneficiary liability, Medicare spending, and the feasibility of implementation 

of any suggested changes for both the Medicare program and hospitals. 

XII. Proposed CY 2013 OPPS Payment Status and Comment Indicators 

A. Proposed CY 2013 OPPS Payment Status Indicator Definitions

 Payment status indicators (SIs) that we assign to HCPCS codes and APCs play 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 

proposed CY 2013 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-ServicePayment/HospitalOutpatientPPS/index.html. We note that, in the past, a majority of the 

Addenda referred to throughout the preamble of our OPPS/ASC proposed and final rules 

appeared in the printed version of the Federal Register as part of the annual 

rulemakings. However, beginning with the CY 2012 proposed rule, the Addenda will no 

longer appear in the printed version of the OPPS/ASC rules that are found in the Federal 

Register. Instead, these Addenda will be published and available only via the Internet on 

the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. 

For CY 2013, we are not proposing to make any changes to the definitions of 

status indicators that were listed in Addendum D1 of the CY 2012 OPPS/ASC final rule 

with comment period. We continue to believe that these definitions of the OPPS status 

indicators continue to be appropriate for our CY 2013 proposal. 

The complete list of the proposed CY 2013 status indicators and their definitions 

is displayed in Addendum D1 on the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/HospitalOutpatientPPS/index.html. 

B. Proposed CY 2013 Comment Indicator Definitions

For the CY 2013 OPPS, we are proposing to use the same two comment 

indicators that are in effect for the CY 2012 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 are proposing to use the “CH” comment indicator in this CY 2013 OPPS/ASC 

proposed rule to indicate HCPCS codes for which the status indicator or APC 

assignment, or both, are proposed for change in CY 2013 compared to their assignment 

as of June 30, 2012. We believe that using the “CH” indicator in this CY 2013 

OPPS/ASC proposed rule will facilitate the public’s review of the changes that we are 

proposing for CY 2013. The use of the comment indicator “CH” in association with a 

composite APC indicates that the configuration of the composite APC is proposed to be 

changed in this CY 2013 OPPS/ASC proposed rule. 

We are proposing to use the “CH” comment indicator in the CY 2013 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 2013 compared to their assignment as of 

December 31, 2012. 

In addition, any existing HCPCS code numbers with substantial revisions to the 

code descriptors for CY 2013 compared to the CY 2012 descriptors are labeled with 

comment indicator “NI” in Addendum B to this CY 2013 OPPS/ASC proposed rule. 

However, in order to receive the comment indicator “NI,” the CY 2013 revision to the 

code descriptor (compared to the CY 2012 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 are 
open to comment as part of this CY 2013 OPPS/ASC proposed rule. Like all codes 

labeled with comment indicator “NI,” we will respond to public comments and finalize 

their OPPS treatment in the CY 2014 OPPS/ASC final rule with comment period. 

In accordance with our usual practice, CPT and Level II HCPCS code numbers 

that are new for CY 2013 are also labeled with comment indicator “NI” in Addendum B 

to this CY 2013 OPPS/ASC proposed rule. 

Only HCPCS codes with comment indicator “NI” in this CY 2013 OPPS/ASC 

proposed rule are subject to comment. HCPCS codes that do not appear with comment 

indicator “NI” in this CY 2013 OPPS/ASC proposed rule are not open to public 

comment, unless we specifically request additional comments elsewhere in this proposed 

rule. The CY 2013 treatment of HCPCS codes that appear in this CY 2013 OPPS/ASC 

proposed rule to which comment indicator “NI” is not appended will be open for public 

comment during the comment period for the proposed rule, and we will respond to those 

comments in the CY 2013 OPPS/ASC final rule with comment period. 

We believe that the CY 2012 definitions of the OPPS status indicators continue to be 

appropriate for CY 2013, and therefore, we are proposing to continue to use those 

definitions without modification for CY 2013. Their proposed definitions are listed in 

Addendum D2 on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatient PPS/index.html. 

XIII. OPPS Policy and Payment Recommendations 

A. MedPAC Recommendations

MedPAC was established under section 1805 of the Act to advise the Congress on 

issues affecting the Medicare program. As required under the statute, MedPAC submits 
reports to Congress no later than March and June of each year that contain its Medicare 

payment policy recommendations. In this section of our proposed rule, we note several 

recommendations regarding the Hospital outpatient prospective payment system in the 

March 2012 report (“Report to the Congress: Medicare Payment Policy,” available on 

MedPAC’s Web site at: http://www.medpac.gov/documents/Mar12_EntireReport.pdf). 

MedPAC recommended that Congress increase payment rates for the outpatient 

prospective payment system in 2013 by 1.0 percent. We discuss our proposal to follow 

the statutory requirements for the CY 2013 OPD fee schedule increase factor in section 

II.B of this proposed rule. 

In addition, MedPAC recommended that Congress enact legislation to reduce 

payment rates for evaluation and management office visits provided in hospital outpatient 

departments to the rates paid for these services in physician offices. MedPAC 

recommended that the change be phased in over 3 years. During the phase-in, MedPAC 

stated that the associated payment reductions to hospitals with a disproportionate share 

patient percentage at or above the median should be limited to 2 percent of overall 

Medicare payments. MedPAC also recommended that the Secretary of Health and 

Human Services conduct a study by January 2015 to examine whether this policy change 

would reduce access by low-income patients to ambulatory physician and other services. 

Congress has yet to accept this recommendation and enact such legislation. 

B. GAO Recommendations

Congress established the U.S. Government Accountability Office (GAO) under 

the Budget and Accounting Act of 1921 (Pub. L. 67-13) as an independent agency that 

advises Congress and the heads of Executive agencies regarding Federal program 
expenditures. The GAO conducts audits and other analyses to ensure that Federal funds 

are being spent efficiently and effectively. Since the issuance of the CY 2012 

OPPS/ASC final rule with comment period, the GAO has not released any reports 

regarding the Hospital OPPS. 
C. OIG Recommendations

 The mission of the Office of the Inspector General (OIG) as mandated by 

Pub. L. 95–452 (as amended) is to protect the integrity of the Department of Health and 

Human Services programs and the health and welfare of program beneficiaries. The OIG 

conducts independent audits, inspections, and investigations to improve the efficiency of 

these programs and to identify and prevent fraud, waste and abuse. Since the issuance of 

the CY 2012 OPPS/ASC final rule with comment period, the OIG has not made any 

recommendations regarding the Hospital OPPS. 

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

A. Background

1. Legislative History, Statutory Authority, and Prior Rulemaking for the ASC Payment 

System 

 For a detailed discussion of the legislative history and statutory authority related 

to 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). 

2. Policies Governing Changes to the Lists of Codes and Payment Rates for ASC 

Covered Surgical Procedures and Covered Ancillary Services 

Under § 416.2 and § 416.166 of the regulations, subject to certain exclusions, 

covered surgical procedures 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 for 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 § 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 conjunction with the annual proposed and final rulemaking 
process to update the OPPS and the ASC payment system (§ 416.173; 72 FR 42535). In 

addition, as discussed in detail in section XIV.B. of this proposed rule, 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, the 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 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. 

B. Proposed Treatment of New Codes

1. Proposed Process for Recognizing New Category I and Category III CPT Codes and 

Level II HCPCS Codes 

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; 

(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 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 

are proposing to solicit public comments in this CY 2013 OPPS/ASC proposed rule (and 

respond to those comments in the CY 2013 OPPS/ASC final rule with comment period) 

or whether we will be soliciting public comments in the CY 2013 OPPS/ASC final rule 

with comment period (and responding to those comments in the CY 2014 OPPS/ASC 

final rule with comment period). 

We note that we sought public comment in the CY 2012 OPPS/ASC final rule 

with comment period on the new CPT and Level II HCPCS codes that were effective 

January 1, 2012. We also sought public comments in the CY 2012 OPPS/ASC final rule 

with comment period on the new Level II HCPCS codes effective October 1, 2011. 

These new codes, with an effective date of October 1, 2011, or January 1, 2012, were 

flagged with comment indicator “NI” in Addenda AA and BB to the CY 2012 

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 2012 OPPS/ASC final rule with comment 

period. We will respond to public comments and finalize the ASC treatment of these 

codes in the CY 2013 OPPS/ASC final rule with comment period. 

2. Proposed Treatment of New Level II HCPCS Codes and Category III CPT Codes 

Implemented in April and July 2012 for Which We Are Soliciting Public Comments in 

this CY 2013 OPPS/ASC Proposed Rule 

In the April and July CRs, we made effective for April 1, 2012 or July 1, 2012, 

respectively, a total of 12 new Level II HCPCS codes and 5 new Category III CPT codes 
that were not addressed in the CY 2012 OPPS/ASC final rule with comment period. The 

12 new Level II HCPCS codes describe covered ancillary services. 

In the April 2012 ASC quarterly update (Transmittal 2425, CR 7754, dated 

March 16, 2012), we added one new radiology Level II HCPCS code and four new drug 

and biological Level II HCPCS codes to the list of covered ancillary services. 

Specifically, as displayed in Table 36 below, we added the following codes to the list of 

covered ancillary services: 

● HCPCS code C9288 (Injection, centruroides (scorpion) immune f(ab)2 

(equine), 1 vial); 

● HCPCS code C9289 (Injection, asparaginase Erwinia chrysanthemi, 

1,000international units (I.U.)); 

● HCPCS code C9290 (Injection, bupivacaine liposome, 1 mg); 

● HCPCS code C9291 (Injection, aflibercept, 2 mg vial); and 

● HCPCS code C9733 (Non-ophthalmic fluorescent vascular angiography). 

In the July 2012 quarterly update (Transmittal 2479, Change Request 7854, dated 

May 25, 2012), we added seven new drug and biological Level II HCPCS codes to the 

list of covered ancillary services. Specifically, as displayed in Table 37 below, we added 

the following codes to the list of covered ancillary services: 

● HCPCS code C9368 (Grafix core, per square centimeter); 

● HCPCS code C9369 (Grafix prime, per square centimeter); 

● HCPCS code Q2034 (Influenza virus vaccine, split virus, for intramuscular use 

(Agriflu)); 

● HCPCS code Q2045 (Injection, human fibrinogen concentrate, 1 mg); 
● HCPCS code Q2046 (Injection, aflibercept, 1 mg); 

● HCPCS code Q2048 (Injection, doxorubicin hydrochloride, liposomal, doxil, 

10 mg); and 

● HCPCS code Q2049 (Injection, doxorubicin hydrochloride, liposomal, 

imported lipodox, 10 mg). 

We note that HCPCS code Q2045 replaced code J1680, HCPCS code Q2046 

replaced code C9291, and HCPCS code Q2048 replaced code J9001 beginning 

July 1, 2012. 

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 10 new 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) or payment indicator “N1” (Packaged 

service/item; no separate payment made) to the two new Level II HCPCS codes that are 

packaged when provided in ASCs. We are soliciting public comment on the proposed 

CY 2012 ASC payment indicators and payment rates for the covered ancillary services 

listed in Tables 36 and 37 below. Those HCPCS codes became payable in ASCs, 

beginning in April or July 2012, 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-Feefor-Service-Payment/ASCPayment/11_Addenda_Updates.html. 

 The HCPCS codes listed in Table 36 are included in Addendum BB to this 

proposed rule (which is 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 for 

July 2012 (listed in Table 37) are not available to us in time for incorporation into the 

Addenda to this 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 will be included in the appropriate Addendum to the CY 2013 

OPPS/ASC final rule with comment period. Thus, the codes implemented by the 

July 2012 ASC quarterly update CR and their proposed CY 2013 payment rates (based on 

July 2012 ASP data) that are displayed in Table 37 are not included in Addendum BB to 

this proposed rule (which is available via the Internet on the CMS Web site). The final 

list of covered ancillary services and the associated payment weights and payment 

indicators will be included in Addendum BB to the CY 2013 OPPS/ASC final rule with 

comment period, consistent with our annual update policy. We are soliciting 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 ancillary 

services in April and July 2012 through the quarterly update CRs, as listed in Tables 36 

and 37 below. We are proposing to finalize their payment indicators and their payment 

rates in the CY 2013 OPPS/ASC final rule with comment period. 

TABLE 36.—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY 

SERVICES IMPLEMENTED IN APRIL 2012 

CY 2012 

HCPCS 

Code CY 2012 Long Descriptor 

Proposed 

CY 2013 

Payment 

Indicator 

C9288 Injection, centruroides (scorpion) immune f(ab)2 K2 
CY 2012 

HCPCS 

Code CY 2012 Long Descriptor 

Proposed 

CY 2013 

Payment 

Indicator 

(equine), 1 vial 

C9289 Injection, asparaginase Erwinia chrysanthemi, 

1,000 international units (I.U.) K2 

C9290 Injection, bupivacaine liposome, 1 mg K2 

C9291 Injection, aflibercept, 2 mg vial K2 

C9733 Non-ophthalmic fluorescent vascular 

angiography N1 

TABLE 37.—NEW LEVEL II HCPCS CODES FOR COVERED ANCILLARY 

SERVICES IMPLEMENTED IN JULY 2012 

CY 2012 

HCPCS 

Code CY 2012 Long Descriptor 

Proposed 

CY 2013 

Payment 

Indicator 

Proposed 

CY 2013 

Payment 

Rate 

C9368 Grafix core, per square centimeter K2 $7.96

C9369 Grafix prime, per square centimeter K2 $0.61

Q2034 

Influenza virus vaccine, split virus, for 

intramuscular use (Agriflu) L1 N/A

Q2045 

Injection, human fibrinogen concentrate, 1 

mg* K2 $0.73

Q2046 Injection, aflibercept, 1 mg* K2 $980.50

Q2048 

Injection, doxorubicin hydrochloride, 

liposomal, doxil, 10 mg* K2 $537.21

Q2049 

Injection, doxorubicin hydrochloride, 

liposomal, imported lipodox, 10 mg K2 $498.26

 *HCPCS code Q2045 replaced code J1680, HCPCS code Q2046 replaced code C9291, and HCPCS 

code Q2048 replaced code J9001 beginning July 1, 2012. 

Through the July 2012 quarterly update CR, we also implemented ASC payment 

for five new Category III CPT codes as ASC covered surgical procedures, effective 
July 1, 2012. These codes are listed in Table 38 below, along with their proposed 

payment indicators and proposed payment rates for CY 2013. Because the payment rates 

associated with the new Category III CPT codes that became effective for July are not 

available to us in time for incorporation into the Addenda to this 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 38 and their final payment indicators and rates 

will be included in Addendum AA to the CY 2013 OPPS/ASC final rule with comment 

period. 

We are proposing to assign payment indicator “G2” (Non-office-based surgical 

procedure added in CY 2008 or later; payment based on OPPS relative payment weight) 

to three of the five new Category III CPT codes implemented in July 2012 and to assign 

payment indicator “J8” (Device-intensive procedure added to ASC list in CY 2008 or 

later; paid at adjusted rate) to the remaining two new Category III CPT codes 

implemented in July 2012. We believe that these procedures would not be expected to 

pose a significant safety risk to Medicare beneficiaries or would not be expected to 

require an overnight stay if performed in ASCs. We are soliciting public comment on 

these proposed payment indicators and the payment rates for the new Category III CPT 

codes that were newly recognized as ASC covered surgical procedures in July 2012 

through the quarterly update CR, as listed in Table 38 below. We are proposing to 

finalize their payment indicators and their payment rates in the CY 2013 OPPS/ASC final 

rule with comment period. 
TABLE 38.—NEW CATEGORY III CPT CODES IMPLEMENTED IN 

JULY 2012 AS ASC COVERED SURGICAL PROCEDURES 

CY 2012 

CPT 

Code CY 2012 Long Descriptor 

Proposed 

CY 2013 

Payment 

Indicator 

Proposed 

CY 2013 

Payment 

Rate 

0302T 

Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging 

supervision and interpretation when performed and 

intra-operative interrogation and programming when 

performed; complete system (includes device and 

electrode) 

J8 $7,181.95

0303T 

Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging 

supervision and interpretation when performed and 

intra-operative interrogation and programming when 

performed; electrode only 

G2 $2,129.99

0304T 

Insertion or removal and replacement of intracardiac 

ischemia monitoring system including imaging 

supervision and interpretation when performed and 

intra-operative interrogation and programming when 

performed; device only 

J8 $5,816.80

0307T Removal of intracardiac ischemia monitoring device G2 $968.15

0308T Insertion of ocular telescope prosthesis including 

removal of crystalline lens* G2 $940.65

* CPT code 0308T replaced HCPCS code C9732 beginning July 1, 2012. 

3. Proposed Process for New Level II HCPCS Codes and Category I and III CPT Codes 

for Which We Will Be Soliciting Public Comments in the CY 2013 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. 

We are proposing to continue this process for CY 2013. Specifically, for 

CY 2013, we are proposing to include in Addenda AA and BB to the CY 2013 

OPPS/ASC final rule with comment period the new Category I and III CPT codes 

effective January 1, 2013, that would be incorporated in the January 2013 ASC quarterly 

update CR and the new Level II HCPCS codes, effective October 1, 2012 or 

January 1, 2013, that would be released by CMS in its October 2012 and January 2013 

ASC quarterly update CRs. These codes would be 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 have assigned them an interim payment status. Their payment indicators 

and payment rates, if applicable, would be open to public comment in the CY 2013 
OPPS/ASC final rule with comment period and would be finalized in the CY 2014 

OPPS/ASC final rule with comment period. 

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

Ancillary Services

1. Covered Surgical Procedures 

a. Proposed Additions to the List of ASC Covered Surgical Procedures 

 We conducted a review of all HCPCS codes that currently are paid under the 

OPPS, but not included on the ASC list of covered surgical procedures, to determine if 

changes in technology and/or medical practice changed the clinical appropriateness of 

these procedures for the ASC setting. We are proposing to update the list of ASC 

covered surgical procedures by adding 16 procedures to the list. We determined that 

these 16 procedures would not be expected to pose a significant safety risk to Medicare 

beneficiaries and would not be expected to require an overnight stay if performed in 

ASCs. 

 The 16 procedures that we are proposing to add to the ASC list of covered 

surgical procedures, including their HCPCS code long descriptors and proposed CY 2013 

payment indicators, are displayed in Table 39 below. We invite public comment on this 

proposal. 

TABLE 39.—PROPOSED NEW ASC COVERED SURGICAL PROCEDURES 

FOR CY 2013

CY 

2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed 

CY 2013 

ASC 

Payment 

Indicator**
CY 

2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed 

CY 2013 

ASC 

Payment 

Indicator**

37205 

Transcatheter placement of an intravascular stent(s) (except 

coronary, carotid, vertebral, iliac, and lower extremity arteries), 

percutaneous; initial vessel 

G2 

37206 

Transcatheter placement of an intravascular stent(s) (except 

coronary, carotid, vertebral, iliac, and lower extremity arteries), 

percutaneous; each additional vessel (list separately in addition 

to code for primary procedure) 

G2

37224 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with transluminal 

angioplasty 

G2

37225 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with atherectomy, 

includes angioplasty within the same vessel, when performed 

G2

37226 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with transluminal stent 

placement(s), includes angioplasty within the same vessel, when 

performed 

G2

37227 

Revascularization, endovascular, open or percutaneous, 

femoral, popliteal artery(s), unilateral; with transluminal stent 

placement(s) and atherectomy, includes angioplasty within the 

same vessel, when performed 

J8

37228 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with transluminal 

angioplasty 

G2

37229 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with atherectomy, 

includes angioplasty within the same vessel, when performed 

G2

37230 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with transluminal stent 

placement(s), includes angioplasty within the same vessel, when 

performed 

G2

37231 

Revascularization, endovascular, open or percutaneous, tibial, 

peroneal artery, unilateral, initial vessel; with transluminal stent 

placement(s) and atherectomy, includes angioplasty within the 

same vessel, when performed 

J8
CY 

2012 

HCPCS 

Code 

CY 2012 Long Descriptor 

Proposed 

CY 2013 

ASC 

Payment 

Indicator**

37232 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

transluminal angioplasty (list separately in addition to code for 

primary procedure) 

G2

37233 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

atherectomy, includes angioplasty within the same vessel, when 

performed (list separately in addition to code for primary 

procedure) 

G2

37234 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

transluminal stent placement(s), includes angioplasty within the 

same vessel, when performed (list separately in addition to code 

for primary procedure) 

G2

37235 

Revascularization, endovascular, open or percutaneous, tibial/ 

peroneal artery, unilateral, each additional vessel; with 

transluminal stent placement(s) and atherectomy, includes 

angioplasty within the same vessel, when performed (list 

separately in addition to code for primary procedure) 

G2

0299T 

Extracorporeal shock wave for integumentary wound healing, 

high energy, including topical application and dressing care; 

initial wound 

R2* 

0300T Extracorporeal shock wave for integumentary wound healing, 

high energy, including topical application and dressing care R2* 

*If designation is temporary. 

**Proposed payment indicators are based on a comparison of the proposed rates according to the ASC 

standard ratesetting methodology and the MPFS proposed rates. At the time this proposed rule is being 

developed for publication, current law authorizes a negative update to the MPFS payment rates for 

CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS proposed rule. 
b. Proposed 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) Proposed Changes for CY 2013 to Covered Surgical Procedures Designated as 

Office-Based 

 In developing this 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 2011 volume and utilization data and the 

clinical characteristics for all surgical procedures that are assigned payment indicator 

“G2” in CY 2012, as well as for those procedures assigned one of the temporary 

office-based payment indicators, specifically “P2*,” “P3*,” or “R2*” in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74400 through 74408). 

Our review of the CY 2011 volume and utilization data resulted in our 

identification of six covered surgical procedures that we believe meet the criteria for 

designation as office-based. The data indicate that the 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 six CPT codes we are proposing to permanently 

designate as office-based are listed in Table 40 below. We invite public comment on this 

proposal. 
TABLE 40.—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR 

PERMANENT OFFICE-BASED DESIGNATION FOR CY 2013 

CY 

2012 

CPT 

Code 

CY 2012 Long Descriptor 

CY 2012 

ASC 

Payment 

Indicator 

Proposed 

CY 2013 

ASC 

Payment 

Indicator* 

31295 

Nasal/sinus endoscopy, surgical; with dilation of 

maxillary sinus ostium (eg, balloon dilation), 

transnasal or via canine fossa 

G2 P2 

31296 Nasal/sinus endoscopy, surgical; with dilation of 

frontal sinus ostium (eg, balloon dilation) G2 P2 

31297 Nasal/sinus endoscopy, surgical; with dilation of 

sphenoid sinus ostium (eg, balloon dilation) G2 P2 

53860 

Transurethral radiofrequency micro-remodeling of 

the female bladder neck and proximal urethra for 

stress urinary incontinence 

G2 P2 

64566 

Posterior tibial neurostimulation, percutaneous 

needle electrode, single treatment, includes 

programming 

G2 P3 

G0365 

Vessel mapping of vessels for hemodialysis access 

(services for preoperative vessel mapping prior to 

creation of hemodialysis access using an autogenous 

hemodialysis conduit, including arterial inflow and 

venous outflow) 

G2 P2 

*Proposed payment indicators are based on a comparison of the proposed rates according to the ASC 

standard ratesetting methodology and the MPFS proposed rates. At the time this proposed rule is being 

developed for publication, current law authorizes a negative update to the MPFS payment rates for 

CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS proposed rule. 

We also reviewed CY 2011 volume and utilization data and other information for 

the eight procedures finalized for temporary office-based status in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74404 through 74408). Among these 

eight procedures, there were very few claims data for six 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 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 0227T (Anoscopy, high 

resolution (HRA) (with magnification and chemical agent enhancement); with 

biopsy(ies)); 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 (eg, retinopathy of prematurity), photocoagulation or 

cryotherapy). Consequently, we are proposing to maintain their temporary office-based 

designations for CY 2013. 

The volume and utilization data for the remaining two procedures that have 

temporary office-based designations for CY 2012 are sufficient to indicate that these 

procedures are not performed predominantly in physicians’ offices and, therefore, should 

not be assigned an office-based payment indicator in CY 2013. Consequently, we are 

proposing to assign payment indicator “G2” to the following two covered surgical 

procedure codes in CY 2013: 

● CPT code 37761 (Ligation of perforator vein(s), subfascial, open, including 

ultrasound guidance, when performed, 1 leg); and 

● CPT code 0232T (Injection(s), platelet rich plasma, any tissue, including image 

guidance, harvesting and preparation when performed). 
The proposed CY 2013 payment indicator designations for the eight procedures 

that were temporarily designated as office-based in CY 2012 are displayed in Table 41 

below. The procedures for which the proposed office-based designations for CY 2013 

are temporary also are indicated by asterisks in Addendum AA to this proposed rule 

(which is available via the Internet on the CMS Web site). We invite public comment on 

this proposal. 
TABLE 41.—PROPOSED CY 2013 PAYMENT INDICATORS FOR ASC 

COVERED SURGICAL PROCEDURES DESIGNATED AS TEMPORARILY 

OFFICE-BASED IN THE CY 2012 OPPS/ASC FINAL RULE WITH COMMENT 

PERIOD 

CY 

2012 

CPT 

Code CY 2012 Long Descriptor 

CY 2012 

ASC 

Payment 

Indicator 

Proposed 

CY 2013 

ASC 

Payment 

Indicator**

37761 

Ligation of perforator vein(s), subfascial, open, 

including ultrasound guidance, when performed, 

1 leg 

R2* G2 

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 (eg, retinopathy of 

prematurity), photocoagulation or cryotherapy 

R2* R2* 

0099T Implantation of intrastromal corneal ring 

segments 

R2* R2* 

0124T 

Conjunctival incision with posterior extrascleral 

placement of pharmacological agent (does not 

include supply of medication) 

R2* R2* 

0226T 

Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); 

diagnostic, including collection of specimen(s) by 

brushing or washing when performed 

R2* R2* 

0227T 

Anoscopy, high resolution (HRA) (with 

magnification and chemical agent enhancement); 

with biopsy(ies) 

R2* R2* 

0232T 

Injection(s), platelet rich plasma, any tissue, 

including image guidance, harvesting and 

preparation when performed 

R2* G2 
CY 

2012 

CPT 

Code CY 2012 Long Descriptor 

CY 2012 

ASC 

Payment 

Indicator 

Proposed 

CY 2013 

ASC 

Payment 

Indicator**

C9800 

Dermal injection procedure(s) for facial 

lipodystrophy syndrome (LDS) and provision of 

Radiesse or Sculptra dermal filler, including all 

items and supplies 

R2* R2* 

* If designation is temporary. 

** Proposed payment indicators are based on a comparison of the proposed rates according to the ASC 

standard ratesetting methodology and the MPFS proposed rates. At the time this proposed rule is being 

developed for publication, current law authorizes a negative update to the MPFS payment rates for 

CY 2013. For a discussion of those rates, we refer readers to the CY 2013 MPFS proposed rule. 

 

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) Proposed Changes to List of Covered Surgical Procedures Designated as 

Device-Intensive for CY 2013 

 For CY 2013, we are proposing to update the ASC list of covered surgical 

procedures that are eligible for payment according to our device-intensive procedure 

payment methodology, consistent with the proposed OPPS device-dependent APC 

update, reflecting the proposed APC assignments of procedures, designation of APCs as 
device-dependent, and APC device offset percentages based on the CY 2011 OPPS 

claims and cost report data available for the proposed rule. The OPPS device-dependent 

APCs are discussed further in section II.A.2.d.(1) of this proposed rule. 

The ASC covered surgical procedures that we are proposing to designate as 

device-intensive and that would be subject to the device-intensive procedure payment 

methodology for CY 2013 are listed in Table 42 below. The CPT code, the CPT code 

short descriptor, the proposed CY 2013 ASC payment indicator (PI), the proposed 

CY 2013 OPPS APC assignment, the proposed CY 2013 OPPS APC device offset 

percentage, and an indication if the full credit/partial credit (FB/FC) device adjustment 

policy would apply are also listed in Table 42 below. A review of the FB/FC device 

adjustment policy is also found below. All of these procedures are included in 

Addendum AA to this proposed rule (which is available via the Internet on the CMS Web 

site). We invite public comment on this proposal. 

d. Proposed Adjustment to ASC Payments for No Cost/Full Credit and Partial Credit 

Devices 

We generally discuss the no cost/full credit and partial credit devices under the 

heading entitled “Proposed ASC Payment for Covered Surgical Procedure.” However, 

because the no cost/full credit and partial credit device policy applies to a subset of 

device-intensive procedures, we believe it would be clearer to discuss the 

device-intensive procedure policy and the no cost/full credit and partial credit device 

policy consecutively and to consolidate the tables that we usually publish separately. 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 § 416.179 is consistent with the OPPS policy. The 
proposed CY 2013 OPPS APCs and devices subject to the adjustment policy are 

discussed in section IV.B.2. of this proposed rule. The established ASC policy adopts the 

OPPS policy and reduces payment to ASCs when a specified 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 68745). 

Consistent with the OPPS, we are proposing to update the list of ASC covered 

device-intensive procedures and devices that would be subject to the no cost/full credit 

and partial credit device adjustment policy for CY 2013. Table 42 below displays the 

ASC covered device-intensive procedures that we are proposing would be subject to the 

no cost/full credit or partial credit device adjustment policy for CY 2013. Specifically, 

when a procedure that is listed in Table 42 is subject to the no cost/full credit or partial 

credit device adjustment policy and is performed to implant a device that is listed in 

Table 43 below, where that device 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 would 

provide the same amount of payment reduction based on the device offset amount in 

ASCs that would apply under the OPPS under the same circumstances. 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 are proposing to reduce the payment for implantation 

procedures listed in Table 42 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 42 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 listed in Table 43 below. 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 invite public comments on these proposals. 

TABLE 42.—ASC COVERED SURGICAL PROCEDURES PROPOSED FOR 

DEVICE-INTENSIVE DESIGNATION FOR CY 2013, INCLUDING ASC 

COVERED SURGICAL PROCEDURES FOR WHICH WE PROPOSE THAT 
THE NO COST/FULL CREDIT OR PARTIAL CREDIT DEVICE ADJUSTMENT 

POLICY WOULD APPLY 

CPT 

Code Short Descriptor 

Proposed 

CY 2013 

ASC PI 

Proposed 

CY 2013 

OPPS 

APC 

Proposed 

CY 2013 

DeviceDependent 

APC 

Offset 

Percent 

Proposing 

that the 

FB/FC 

Policy 

Would 

Apply 

0282T Periph field stimul trial J8 0040 55% Yes 

0283T Periph field stimul perm J8 0318 87% Yes

0302T Icar ischm mntrng sys compl J8 0089 70% Yes 

0304T Icar isch mntrng sys device J8 0090 71% Yes 

19296 Place po breast cath for rad J8 0648 50% Yes

19297 Place breast cath for rad J8 0648 50% Yes

19298 Place breast rad tube/caths J8 0648 50% Yes

19325 Enlarge breast with implant J8 0648 50% Yes

19342 Delayed breast prosthesis J8 0648 50% Yes

19357 Breast reconstruction J8 0648 50% Yes

24361 Reconstruct elbow joint J8 0425 58% Yes

24363 Replace elbow joint J8 0425 58% Yes

24366 Reconstruct head of radius J8 0425 58% Yes

25441 Reconstruct wrist joint J8 0425 58% Yes

25442 Reconstruct wrist joint J8 0425 58% Yes

25446 Wrist replacement J8 0425 58% Yes

27446 Revision of knee joint J8 0425 58% Yes

33206 Insertion of heart pacemaker J8 0089 70% Yes

33207 Insertion of heart pacemaker J8 0089 70% Yes

33208 Insertion of heart pacemaker J8 0655 73% Yes

33212 Insertion of pulse generator J8 0090 71% Yes

33213 Insertion of pulse generator J8 0654 74% Yes

33214 Upgrade of pacemaker system J8 0655 73% Yes

33221 Insert pulse gen mult leads J8 0654 74% Yes

33224 Insert pacing lead & connect J8 0655 73% Yes

33225 Lventric pacing lead add-on J8 0655 73% Yes

33227 Remove&replace pm gen singl J8 0090 71% Yes

33228 Remv&replc pm gen dual lead J8 0654 74% Yes
CPT 

Code Short Descriptor 

Proposed 

CY 2013 

ASC PI 

Proposed 

CY 2013 

OPPS 

APC 

Proposed 

CY 2013 

DeviceDependent 

APC 

Offset 

Percent 

Proposing 

that the 

FB/FC 

Policy 

Would 

Apply 

33229 Remv&replc pm gen mult leads J8 0654 74% Yes

33230 Insrt pulse gen w/dual leads J8 0107 83% Yes

33231 Insrt pulse gen w/dual leads J8 0107 83% Yes

33240 Insert pulse generator J8 0107 83% Yes

33249 Eltrd/insert pace-defib J8 0108 84% Yes

33262 Remv&replc cvd gen sing lead J8 0107 83% Yes

33263 Remv&replc cvd gen dual lead J8 0107 83% Yes

33264 Remv&replc cvd gen mult lead J8 0107 83% Yes

33282 Implant pat-active ht record J8 0680 74% Yes

37227 Fem/popl revasc stnt & ather J8 0319 53% No 

37231 Tib/per revasc stent & ather J8 0319 53% No 

53440 Male sling procedure J8 0385 63% Yes

53444 Insert tandem cuff J8 0385 63% Yes

53445 Insert uro/ves nck sphincter J8 0386 70% Yes

53447 Remove/replace ur sphincter J8 0386 70% Yes

54400 Insert semi-rigid prosthesis J8 0385 63% Yes

54401 Insert self-contd prosthesis J8 0386 70% Yes

54405 Insert multi-comp penis pros J8 0386 70% Yes

54410 Remove/replace penis prosth J8 0386 70% Yes

54416 Remv/repl penis contain pros J8 0386 70% Yes

55873 Cryoablate prostate J8 0674 54% No

61885 Insrt/redo neurostim 1 array J8 0039 86% Yes

61886 Implant neurostim arrays J8 0315 88% Yes

62361 Implant spine infusion pump J8 0227 82% Yes

62362 Implant spine infusion pump J8 0227 82% Yes

63650 Implant neuroelectrodes J8 0040 55% Yes

63655 Implant neuro-electrodes J8 0061 66% Yes

63663 Revise spine eltrd perq aray J8 0040 55% Yes

63664 Revise spine eltrd plate J8 0040 55% Yes

63685 Insrt/redo spine n generator J8 0039 86% Yes

64553 Implant neuro-electrodes J8 0040 55% Yes
CPT 

Code Short Descriptor 

Proposed 

CY 2013 

ASC PI 

Proposed 

CY 2013 

OPPS 

APC 

Proposed 

CY 2013 

DeviceDependent 

APC 

Offset 

Percent 

Proposing 

that the 

FB/FC 

Policy 

Would 

Apply 

64555 Implant neuro-electrodes J8 0040 55% Yes

64561 Implant neuro-electrodes J8 0040 55% Yes

64565 Implant neuro-electrodes J8 0040 55% Yes

64568 Implant neuro-electrodes J8 0318 87% Yes

64575 Implant neuro-electrodes J8 0061 66% Yes

64580 Implant neuro-electrodes J8 0061 66% Yes

64581 Implant neuro-electrodes J8 0061 66% Yes

64590 Insrt/redo pn/gastr stimul J8 0039 86% Yes

65770 Revise cornea with implant J8 0293 65% No

69714 Implant temple bone w/stimul J8 0425 60% Yes

69715 Temple bne implnt w/stimulat J8 0425 60% Yes

69717 Temple bone implant revision J8 0425 60% Yes

69718 Revise temple bone implant J8 0425 60% Yes

69930 Implant cochlear device J8 0259 84% Yes

G0448 Place perm pacing cardiovert J8 0108 84% Yes
TABLE 43.—PROPOSED DEVICES FOR WHICH THE “FB” OR “FC” 

MODIFIER MUST BE REPORTED WITH THE PROCEDURE CODE IN 

CY 2013 WHEN FURNISHED AT NO COST OR WITH FULL OR PARTIAL 

CREDIT 

CY 2012 

Device HCPCS 

Code CY 2012 Short Descriptor 

C1721 AICD, dual chamber 

C1722 AICD, single chamber 

C1728 Cath, brachytx seed adm 

C1762 Conn tiss, human(inc fascia) 

C1763 Conn tiss, non-human 

C1764 Event recorder, cardiac 

C1767 Generator, neurostim, imp 

C1771 Rep dev, urinary, w/sling 

C1772 Infusion pump, programmable 

C1776 Joint device (implantable) 

C1777 Stent, non-coat/cov w/o del 

C1778 Lead, neurostimulator 

C1779 Lead, pmkr, transvenous VDD 

C1781 Mesh (implantable) 

C1785 Pmkr, dual, rate-resp 

C1786 Pmkr, single, rate-resp 

C1789 Prosthesis, breast, imp 

C1813 Prosthesis, penile, inflatab 

C1815 Pros, urinary sph, imp 

C1820 Generator, neuro rechg bat sys 

C1881 Dialysis access system 

C1882 AICD, other than sing/dual 

C1891 Infusion pump, non-prog, perm 

C1895 Lead, AICD, endo dual coil 

C1897 Lead, neurostim, test kit 

C1898 Lead, pmkr, other than trans 

C1900 Lead coronary venous 

C2618 Probe, cryoablation 

C2619 Pmkr, dual, non rate-resp 
CY 2012 

Device HCPCS 

Code CY 2012 Short Descriptor 

C2620 Pmkr, single, non rate-resp 

C2621 Pmkr, other than sing/dual 

C2622 Prosthesis, penile, non-inf 

C2626 Infusion pump, non-prog, temp 

C2631 Rep dev, urinary, w/o sling 

L8600 Implant breast silicone/eq 

L8614 Cochlear device/system 

L8680 Implt neurostim elctr each 

L8685 Implt nrostm pls gen sng rec 

L8686 Implt nrostm pls gen sng non 

L8687 Implt nrostm pls gen dua rec 

L8688 Implt nrostm pls gen dua non 

L8690 Aud osseo dev, int/ext comp 

e. ASC Treatment of Surgical Procedures Proposed for Removal from the OPPS 

Inpatient List for CY 2013 

 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. We evaluated each of the two procedures we are proposing to 

remove from the OPPS inpatient list for CY 2013 according to the criteria for exclusion 

from the list of covered ASC surgical procedures. We believe that these two procedures 

should continue to be excluded from the ASC list of covered surgical procedures for 

CY 2013 because they would be expected to pose a significant risk to beneficiary safety 
or to require an overnight stay in ASCs. The CPT codes for these two procedures and 

their long descriptors are listed in Table 44 below. 

TABLE 44.—PROCEDURES PROPOSED FOR EXCLUSION FROM THE 

ASC LIST OF COVERED PROCEDURES FOR CY 2013 THAT ARE 

PROPOSED FOR REMOVAL FROM THE CY 2013 OPPS INPATIENT LIST 

CPT Code Long Descriptor 

22856 

Total disc arthroplasty (artificial disc), anterior approach, 

including discectomy with end plate preparation (includes 

osteophytectomy for nerve root or spinal cord decompression 

and microdissection), single interspace, cervical 

27447 

Arthroplasty, knee, condyle and plateau; medical and lateral 

compartments with or without patella resurfacing (total knee 

arthroplasty) 

 We invite public comments on this proposal. 

2. Covered Ancillary Services 

Consistent with the established ASC payment system policy, we are proposing to 

update the ASC list of covered ancillary services to reflect the proposed payment status 

for the services under the CY 2013 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 2013. 

For example, a covered ancillary service that was separately paid under the revised ASC 

payment system in CY 2012 may be proposed for packaged status under the CY 2013 

OPPS and, therefore, also under the ASC payment system for CY 2013. Comment 

indicator “CH,” discussed in section XII.B. of this proposed rule, is used in Addendum 

BB to this proposed rule (which is available via the Internet on the CMS Web site) to 

indicate covered ancillary services for which we are proposing a change in the ASC 
payment indicator to reflect a proposed change in the OPPS treatment of the service for 

CY 2013. 

Except for the Level II HCPCS codes listed in Table 37 of this proposed rule, all 

ASC covered ancillary services and their proposed payment indicators for CY 2013 are 

included in Addendum BB to this proposed rule. 

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

Services

1. Proposed 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 2012 OPPS/ASC final rule with comment period 

(76 FR 74377 through 74451), we updated the CY 2011 ASC payment rates for ASC 

covered surgical procedures with payment indicators of “A2,” “G2,” and “J8” using 

CY 2010 data, consistent with the CY 2012 OPPS update. Payment rates for 

device-intensive procedures also were updated to incorporate the CY 2012 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 2013 MPFS proposed rule) or the amount calculated using the ASC standard 

ratesetting methodology for the procedure. In the CY 2012 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 2012 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 2012 payment rate for the procedure according to the final policy of the 

revised ASC payment system (§ 416.171(d)). 

b. Proposed Update to ASC Covered Surgical Procedure Payment Rates for CY 2013 

 We are proposing to update ASC payment rates for CY 2013 using the established 

rate calculation methodologies under § 416.171. We note that, as discussed in section 
II.A.2.f. of this proposed rule, because we are proposing to base the OPPS relative 

payment weights on geometric mean costs for CY 2013, the ASC system would shift to 

the use of geometric means to determine relative payment weights under the ASC 

standard ratesetting methodology. We are proposing to continue to use the amount 

calculated under the ASC standard ratesetting methodology for procedures assigned 

payment indicators “A2” and “G2.” 

We are proposing 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 deviceintensive procedure methodology as appropriate. Thus, we are proposing to update the 

payment amounts for device-intensive procedures based on the CY 2013 OPPS proposal 

that reflects updated proposed OPPS device offset percentages, and to make payment for 

office-based procedures at the lesser of the proposed CY 2013 MPFS nonfacility 

PE RVU-based amount or the proposed CY 2013 ASC payment amount calculated 

according to the standard ratesetting methodology. 

We invite public comment on these proposals. 

c. Waiver of Coinsurance and Deductible for Certain Preventive Services 

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 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 

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 

identified services, we refer readers to the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72047 through 72049). We are not proposing any changes to our policies 

or the list of services. We identify these services with a double asterisk in Addenda AA 

and BB to this proposed rule. 

d. Payment for the Cardiac Resynchronization Therapy Composite 

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 and 33249 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). We are not proposing any 

changes to our current policy regarding ASC payment for CRT-D services for CY 2013. 

e. Proposed 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 our 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 services to the Medicare beneficiary being treated with LDR brachytherapy 

for prostate cancer. 

 As detailed in section II.A.2.e.(2) of this proposed rule, beginning in CY 2008 

under the OPPS, 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 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 implemented this policy in the 

OPPS because reliance on single procedure claims to set payment rates for these services 

resulted in the use of mainly incorrectly coded claims for LDR prostate brachytherapy 
because a correctly coded claim should include, for the same date of service, CPT codes 

for both needle/catheter placement and application of radiation sources, as well as 

separately coded imaging and radiation therapy planning services (72 FR 66652 through 

66655). 

 Currently under the ASC payment system, ASCs receive separate payment for the 

component services that comprise the LDR Prostate Brachytherapy Composite when the 

two services are provided on the same date of service. Specifically, ASCs that report 

CPT codes 55875 and 77778 on the same date of service receive a payment for CPT code 

55875 where the payment rate is based on the OPPS relative payment weight for single 

procedure claims, and a separate payment for CPT code 77778 where payment is the 

lower of the rate based on the OPPS relative payment weight for single procedure claims 

or the MPFS non-facility PE-RVU based amount. 

 A commenter to the CY 2012 OPPS/ASC proposed rule (76 FR 74429 through 

74430) requested that CMS pay for LDR prostate brachytherapy services under the ASC 

payment system based on the composite OPPS payment rate rather than making two 

separate payments for the service reported by CPT codes 55875 and 77778. The 

commenter asserted that basing ASC payments for the services on the composite APC 

methodology in which one payment is made for the combination of the two services 

would result in a more accurate payment than is currently being made to ASCs because 

ASC payment is based on costs from single-service claims that CMS has acknowledged 

are mostly incorrectly coded claims. We responded that we would take the commenter’s 

request into consideration in future rulemaking, recognizing the lead time that is 

necessary for the creation of the associated G-code that would be used to identify when 
the procedures in the LDR prostate brachytherapy composite are performed on the same 

date of service in an ASC. 

 Because we agree that data from OPPS claims reporting both services required for 

LDR prostate brachytherapy provide the most accurate relative payment weight upon 

which to base ASC payment for the component services, we are proposing to establish an 

ASC payment rate that is 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. We also are proposing to create a HCPCS Level II G-code so that ASCs can 

properly report when the procedures described by CPT codes 55875 and 77778 are 

performed on the same date of service to receive the appropriate LDR Prostate 

Brachytherapy Composite payment. The payment rate associated with the LDR Prostate 

Brachytherapy Composite will be temporarily identified by G-code “GXXX1” in 

Addendum AA of this proposed rule. The permanent G-code that will identify the LDR 

Prostate Brahytherapy Composite for ASCs will appear in the CY 2013 OPPS/ASC final 

rule with comment period. 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. We invite public comment on this proposal. 

2. Proposed 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. We want to further clarify 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, we established a final 

policy to align 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, while 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. 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. 

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; § 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 C1749 (Endoscope, retrograde imaging/illumination 

colonoscope device (Implantable)), HCPCS code C1830 (Powered bone marrow biopsy 

needle), HCPCS code C1840 (Lens, intraocular (telescopic)), and HCPCS code C1886 

(Catheter, extravascular tissue ablation, any modality (insertable)). Payment amounts for 

HCPCS codes C1749, C1830, C1840, and C1886 under the ASC payment system are 

contractor priced. In the CY 2012 OPPS/ASC final rule with comment period, we 

finalized the expiration of pass-through payment for HCPCS code C1749, which will 

expire after December 31, 2012 (76 FR 74278). Therefore, after December 31, 2012, the 

HCPCS code C1749 device costs 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 will be used to establish ASC payment rates for 

CY 2013. 
b. Proposed Payment for Covered Ancillary Services for CY 2013 

For CY 2013, we are proposing 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 2013 OPPS and ASC payment rates. The proposed 

CY 2013 OPPS payment methodologies for brachytherapy sources and separately 

payable drugs and biologicals are discussed in section II.A. and section V.B. of this 

proposed rule, respectively, and we are proposing to set the CY 2013 ASC payment rates 

for those services equal to the proposed CY 2013 OPPS rates. 

Consistent with established ASC payment policy (72 FR 42497), the proposed 

CY 2013 payment for separately payable covered radiology services is based on a 

comparison of the CY 2013 proposed MPFS nonfacility PE RVU-based amounts (we 

refer readers to the CY 2013 MPFS proposed rule) and the proposed CY 2013 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 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 this proposed rule 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 are proposing to pay based on the 
ASC standard ratesetting methodology are 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 are 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 is made based on the OPPS relative payment weights rather than 

the MPFS nonfacility PE RVU-based amount, regardless of which is lower. We are 

proposing to continue this modification to the payment methodology and, therefore, set 

the payment indicator to “Z2” for these nuclear medicine procedures in CY 2013. As 

finalized in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74429 

through 74430), we are proposing that payment indicators for radiology services that use 

contrast agents will be set to “Z2” in CY 2013 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. 

 Most covered ancillary services and their proposed payment indicators are listed 

in Addendum BB to this proposed rule (which is available via the Internet on the CMS 

Web site). We invite public comment on these proposals. 
E. New Technology Intraocular Lenses (NTIOLs)

1. NTIOL Cycle and Evaluation Criteria 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68176), we 

finalized our current process for reviewing applications to establish new classes of new 

technology intraocular lenses (NTIOLs) and for recognizing new candidate intraocular 

lenses (IOLs) inserted during or subsequent to cataract extraction as belonging to an 

NTIOL class that is qualified for a payment adjustment. Specifically, we established the 

following process: 

● 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 § 416.185(b), the deadline for receipt of public comments is 30 days following 

publication of the list of requests in the proposed rule. 

● In the final rule updating the ASC and OPPS payment rates for the following 

calendar year, we— 

○ Provide a list of determinations made as a result of our review of all new 

NTIOL class requests and public comments; and 

○ Announce the deadline for submitting requests for review of an application for 

a new NTIOL class for the following calendar year. 

In the CY 2007 OPPS/ASC final rule with comment period (71 FR 68227), we 

finalized our proposal to base our determinations on consideration of the following major 

criteria set out at 42 CFR 416.195: 
● 42 CFR 416.195(a)(1): The IOL is approved by the FDA; 

● 42 CFR 416.195(a)(2): Claims of specific clinical benefits and/or lens 

characteristics with established clinical relevance in comparison with currently available 

IOLs are approved by the FDA for use in labeling and advertising; 

● 42 CFR 416.195(a)(3): The IOL is not described by an active or expired 

NTIOL class; that is, it does not share the predominant, class-defining characteristic 

associated with the improved clinical outcome with designated members of an active or 

expired NTIOL class; and 

● 42 CFR 416.195(a)(4): Evidence demonstrates that use of the IOL results in 

measurable, clinically meaningful, improved outcomes in comparison with use of 

currently available IOLs. The statute requires us to consider the following improved 

outcomes: 

○ Reduced risk of intraoperative or postoperative complication or trauma; 

○ Accelerated postoperative recovery; 

○ Reduced induced astigmatism; 

○ Improved postoperative visual acuity; 

○ More stable postoperative vision; or 

○ Other comparable clinical advantages. 

 Since implementation of the process for adjustment of payment amounts for 

NTIOLs that was established in the June 16, 1999 Federal Register, we have approved 

three classes of NTIOLs, as shown in the table with the associated qualifying IOL 

models, at the link entitled “NTOL Application Determination Reference document 

Updated 01/06/2012,” posted on the CMS Web site at: 
http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/NTIOLs.html. 

2. NTIOL Application Process for Payment Adjustment 

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 Lens 

(NTIOL)” posted on the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ASCPayment/NTIOLs.html. For each completed request for a new 

class that is received by the established deadline, a determination is announced annually 

in the final rule updating the ASC and OPPS payment rates for the next calendar year. 

We also summarize briefly in the final rule the evidence that we reviewed, the 

public comments we received timely, and the basis for our determinations in 

consideration of applications for establishment of a new NTIOL class. 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. 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. 
3. Requests to Establish New NTIOL Classes for CY 2013 and Deadline for Public 

Comments 

 We received no requests for review to establish a new NTIOL class for CY 2013 

by the March 2, 2012 due date (76 FR 74443).

4. Payment Adjustment 

 The current payment adjustment for a 5-year period from the implementation date 

of a new NTIOL class is $50 per lens. Since implementation of the process for 

adjustment of payment amounts for NTIOLs in 1999, we have not revised the payment 

adjustment amount, and we are not proposing to revise the payment adjustment amount 

for CY 2013. 

5. Proposed Revisions to the Major NTIOL Criteria Described in 42 CFR 416.195 

The last significant revisions to the regulations containing the substantive NTIOL 

evaluation criteria under 42 CFR 416.195 occurred in 2007. We are proposing 

significant revisions to § 416.195(a)(2) and § 416.195(a)(4). We believe that revising 

§ 416.195 is necessary in order to improve the quality of the NTIOL applications. In 

recent years, we have received low quality NTIOL applications that may have been due 

in part to overly-broad evaluation criteria. 

 We are proposing to revise § 416.195(a)(2) to require that the IOL’s 

FDA-approved labeling contains a claim of a specific clinical benefit imparted by a new 

lens characteristic. The IOL shall have a new lens characteristic in comparison to 

currently available IOLs. We also are proposing to revise § 416.195(a)(4) to require that 

any specific clinical benefit referred to in § 416.195(a)(2) must be supported by evidence 

that demonstrates that the IOL results in a measurable, clinically meaningful, improved 
outcome. Improved outcomes include: (i) reduced risk of intraoperative or postoperative 

complication or trauma; (ii) accelerated postoperative recovery; (iii) reduced induced 

astigmatism; (iv) improved postoperative visual acuity; (v) more stable postoperative 

vision; and (vi) other comparable clinical advantages. 

The proposed revision to § 416.195(a)(2) is necessary because recent NTIOL 

applications have not included FDA labeling claims of clinical benefit. Instead, the 

candidate IOLs have, in most cases, had some characteristic for which the applicant has 

tried to prove clinical relevance through various kinds of evidence that have not been 

evaluated by the FDA because the evidence is not associated with a labeling claim. The 

result has been the submission of low quality evidence that has been insufficient for 

NTIOL status. We believe that the quality of the evidence would improve if applicants 

were required to obtain a labeling claim for the NTIOL benefit and therefore have the 

evidence for such benefit evaluated by FDA. We believe that this proposed approach 

would better serve CMS, FDA, and the applicants because any ultimate grant of NTIOL 

status would be supported by a labeling claim. The manufacturer could then advertise the 

NTIOL benefit without running afoul of FDA advertising limitations. We would have 

the benefit of an FDA review of the relevant evidence, which would be particularly 

valuable because the FDA has a dedicated team of scientists, physicians, and engineers 

who are experts in evaluating IOLs. 

The proposed revision to § 416.195(a)(4) is necessary to insure that the claim is 

clinically relevant and represents an improved outcome for Medicare beneficiaries. We 

request public comments on these proposed revisions to the NTIOL regulations. 
6. Request for Public Comment on the “Other Comparable Clinical Advantages” 

Improved Outcome 

 Section 416.195(a)(4)), discussed above, lists the following improved outcomes: 

(i) reduced risk of intraoperative or postoperative complication or trauma; (ii) accelerated 

postoperative recovery; (iii) reduced induced astigmatism; (iv) improved postoperative 

visual acuity; (v) more stable postoperative vision; and (vi) other comparable clinical 

advantages. 

 This list is from the original 1994 NTIOL statutory provision. Because this 

provision is almost 20 years old, outcomes (i) through (v) have only limited relevance to 

modern cataract surgery. For example, regarding outcome (i), it is unclear what, if any, 

type of IOL could reduce the risk of complication or trauma associated with cataract 

surgery, or what, if any, contemporary cataract surgery complication could be affected by 

a new type of IOL. As for outcome (ii), postoperative recovery is already rapid in 

uncomplicated cataract surgery; therefore, it is difficult to see how it could be 

significantly accelerated. Also, regarding outcome (iii), clinically significant induced 

astigmatism would be reflective of poor surgical technique and would not depend upon 

IOL design. Regarding outcome (iv), currently available IOLs provide such high quality 

postoperative visual acuity that it would be difficult to measure clinically significant 

improved postoperative visual acuity due to a new type of IOL. Finally, for outcome (v), 

postoperative vision is typically stable after uncomplicated cataract surgery, so again it 

would be difficult to improve upon this outcome. 

 The last of the listed improved outcomes is the nonspecific category described as 

“other comparable clinical advantages.” Given that present-day cataract surgery is such a 
successful procedure that results in significantly improved vision for almost all patients 

who undergo the procedure and who are appropriate candidates for cataract surgery, we 

are soliciting comments on what potential benefits associated with a new IOL could be 

considered to be a “comparable clinical advantage” as compared to the list of the five 

improved outcomes from the statute and regulation described above. 

F. Proposed ASC Payment and Comment Indicators

1. Background 

In addition to the payment indicators that we introduced in the August 2, 2007 

final rule, we 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 the CY 2013 OPPS/ASC 

final rule with comment period, we will 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 2012 OPPS/ASC final rule with comment period. These addenda can 

be found in a file labeled “January 2012 ASC Approved HCPCS Code and Payment 

Rates” in the ASC Addenda Update section of the CMS Web site. 

The “CH” comment indicator is used in Addenda AA and BB to this CY 2013 

OPPS/ASC proposed rule (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; 

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. Proposed ASC Payment and Comment Indicators 

We are not proposing any changes to the definitions of the ASC payment and 

comment indicators for CY 2013. We refer readers to Addenda DD1 and DD2 to this 
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 2013 update. 

G. ASC Policy and Payment Recommendations

MedPAC was established under section 1805 of the Act to advise Congress on 

issues affecting the Medicare program. Subparagraphs (C) and (D) of section 1805(b)(1) 

of the Act require MedPAC to submit reports to Congress not later than March 15 and 

June 15 of each year that present its Medicare payment policy reviews and 

recommendations and its examination of issues affecting the Medicare program, 

respectively. The March 2012 MedPAC “Report to the Congress: Medicare Payment 

Policy” included the following recommendations relating specifically to the ASC 

payment system for CY 2013: 

Recommendation 5-1: “The Congress should update the payment rates for 

ambulatory surgical centers by 0.5 percent for calendar year 2013. The Congress should 

also require ambulatory surgical centers to submit cost data.” 

Regarding the ASC payment update for CY 2013, MedPAC further stated that: 

“On the basis of our payment adequacy indicators, the lack of ASC cost data, and our 

concerns about the potential effect of ASC growth on overall program spending, we 

believe a moderate update of 0.5 percent is warranted for CY 2013.” With regard to the 

collection of cost data, MedPAC indicated that cost data are needed to fully assess ASC 

payment adequacy under the revised ASC payment system and to examine whether an 

alternative input price index would be an appropriate proxy for ASC costs or whether an 

ASC-specific market basket should be developed to annually update ASC payment rates. 
CMS Response: We note that MedPAC’s recommendation is for the Congress to 

increase ASC payment rates by 0.5 percent in CY 2013 and require ASCs to submit cost 

data. Congress has not acted on these recommendations. We are proposing to continue 

our current policy to update the ASC conversion factor using the CPI-U, and we are not 

proposing to require ASC to submit cost data in this proposed rule. However, as 

discussed in section XIV.H.2.b. of this proposed rule, the CPI-U may not be the best 

measure of inflation for the goods and services provided by ASCs and, therefore, we are 

seeking public comment on the type of cost information that would be feasible to collect 

from ASCs that would assist us in determining possible alternatives to using the CPI-U to 

update ASC payment rates for inflation. 

H. Calculation of the Proposed ASC Conversion Factor and the Proposed 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). 

 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 XIV.D.2.b. of this proposed rule) the established 

policy is to set the payment rate at the lower of the MPFS unadjusted non-facility 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 § 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. 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 prefloor 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, and CBSA 22 Rural Massachusetts. 

In CY 2011, we identified another area, specifically, CBSA 11340 Anderson, SC

for which there is no IPPS hospital whose wage index data would be used to set the wage 

index for that area. Generally, we would use the methodology described above; however, 

in this situation, all of the areas contiguous to CBSA 11340 Anderson, SC are rural. 

Therefore, in the CY 2011 OPPS/ASC final rule with comment period (75 FR 72058 

through 72059), we finalized our proposal to set the ASC wage index by calculating the 

average of all wage indices for urban areas in the State when all contiguous areas to a 

CBSA are rural and there is no IPPS hospital whose wage index data could be used to set 

the wage index for that area. 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. 
2. Proposed Calculation of the ASC Payment Rates 

a. Updating the ASC Relative Payment Weights for CY 2013 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). We note that, as discussed 

in section II.A.2.f. of this proposed rule, because we are proposing to base the OPPS 

relative payment weights on geometric mean costs for CY 2013, the ASC system would 

shift to the use of geometric means to determine relative payment weights under the ASC 

standard ratesetting methodology. Consistent with our established policy, we are 

proposing to scale the CY 2013 relative payment weights for ASCs according to the 

following method. Holding ASC utilization and the mix of services constant from 

CY 2011, we are proposing to compare the total payment using the CY 2012 ASC 

relative payment weights with the total payment using the CY 2013 relative payment 

weights to take into account the changes in the OPPS relative payment weights between 

CY 2012 and CY 2013. We would use the ratio of CY 2012 to CY 2013 total payment 

(the weight scaler) to scale the ASC relative payment weights for CY 2013. The 

proposed CY 2013 ASC scaler is 0.9331 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 contractorpriced or paid at reasonable cost in ASCs. Any service with a predetermined national 

payment amount would be included in the ASC budget neutrality comparison, but scaling 

of the ASC relative payment weights would not apply to those services. The ASC 

payment weights for those services without predetermined national payment amounts 

(that is, those services with national payment amounts that would be based on OPPS 

relative payment weights) would be scaled to eliminate any difference in the total 

payment between the current year and the update year. 

For any given year’s ratesetting, we typically use the most recent full calendar 

year of claims data to model budget neutrality adjustments. We currently have available 

98 percent of CY 2011 ASC claims data. 

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 2011 ASC claims by ASC and by HCPCS code. We used the National Provider 

Identifier for the purpose of identifying unique ASCs within the CY 2011 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/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASCRegulations-and-Notices.html. 

b. Updating the ASC Conversion Factor 

 Under the OPPS, we typically apply a budget neutrality adjustment for provider 

level changes, most notably a change in the wage index values for the upcoming year, to 
the conversion factor. Consistent with our final ASC payment policy, for the CY 2013 

ASC payment system, we are proposing 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 2013, we calculated this 

proposed adjustment for the ASC payment system by using the most recent CY 2011 

claims data available and estimating the difference in total payment that would be created 

by introducing the proposed CY 2013 pre-floor and pre-reclassified hospital wage 

indices. Specifically, holding CY 2011 ASC utilization and service-mix and the 

proposed CY 2013 national payment rates after application of the weight scaler constant, 

we calculated the total adjusted payment using the CY 2012 pre-floor and pre-reclassified 

hospital wage indices and the total adjusted payment using the proposed CY 2013 prefloor 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 2012 pre-floor and pre-reclassified hospital wage indices 

to the total adjusted payment calculated with the proposed CY 2013 pre-floor and prereclassified hospital wage indices and applied the resulting ratio of 1.0002 (the proposed 

CY 2013 ASC wage index budget neutrality adjustment) to the CY 2012 ASC conversion 

factor to calculate the proposed CY 2013 ASC conversion factor. 

Section 1833(i)(2)(C)(i) of the Act requires that, “if the Secretary has not updated 

amounts established” under the revised ASC payment system in a calendar year, the 

payment amounts “shall be increased by the percentage increase in the Consumer Price 

Index for all urban consumers (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). 

ASC stakeholders, as well as MedPAC, have commented throughout the years 

that the CPI-U may not adequately measure inflation for the goods and services provided 

by ASCs (see, for example, 76 FR 74444, 74448 through 74450; 73 FR 68757; and 

72 FR 66859). While we believe the CPI-U is appropriate to apply to update the ASC 

payment system, the CPI-U is highly weighted for housing and transportation and may 

not best reflect inflation in the cost of providing ASC services. In developing this 

proposed rule, we considered possible alternatives to using the CPI-U to update ASC 

payment rates for inflation. 

ASC stakeholders have urged us to adopt the hospital market basket to update 

ASC payment rates for inflation when commenting on each proposed rule since the 

beginning of the revised ASC payment system (72 FR 66859; 73 FR 68757; 74 FR 60628 

through 60629; 75 FR 72063; 76 FR 74449). We considered the hospital market basket 

as an alternative to the CPI-U and, while the items included in the hospital market basket 

seem reflective of the kinds of costs incurred by ASCs, as stated in the CY 2012 

OPPS/ASC final rule with comment period, we believe that the hospital market basket 

does not align with the cost structures of ASCs. A much wider range of services, such as 
room and board and emergency services, are provided by hospitals but are not costs 

associated with providing services in ASCs (76 FR 74450). As other possible 

alternatives to the CPI-U update, we considered using the physician’s practice expense 

(PE) component of the Medicare Economic Index (MEI) update, as well as using an 

average of the hospital market basket update and the PE component of the MEI update. 

However, until we have more information regarding the cost inputs of ASCs, we are not 

confident that any of these alternatives are a better proxy for ASC costs than the CPI-U. 

Therefore, we are proposing a continuation of the established policy of basing the ASC 

update on the CPI-U. In addition, we are seeking public comment on the type of cost 

information that would be feasible to collect from ASCs in the future in order to 

determine if one of these alternative updates or an ASC-specific market basket would be 

a better proxy for ASC cost inflation than the CPI-U. 

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 economywide 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) authorizes 

the Secretary to provide for a reduction in any annual update for failure to report on 

quality measures. Clause (v) 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. Section XVI.D. of this proposed rule provides a discussion of the proposed 

payment reduction to the annual update for ASCs that fail to meet the ASCQR Program 

requirements. In summary, we are proposing 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. The reduced rates 

would apply beginning in CY 2014. We are proposing that 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 are proposing changes to 

§§ 416.160(a)(1) and 416.171 to reflect this proposal. 

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 number. 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 

payment determination 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 may reduce this percentage change below zero. 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). 

For this proposed rule, for the 12-month period ending with the midpoint of 

CY 2013, the CPI-U update is projected to be 2.2 percent. Because the ASCQR Program 

does not affect payment rates until CY 2014, there would be no quality reporting 

reduction to the CPI-U for CY 2013. The MFP adjustment for the period ending with the 

midpoint of CY 2013 is projected to be 0.9 percent based on the methodology for 

calculating the MFP adjustment 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). We are proposing to reduce the CPI-U 

update of 2.2 percent by the MFP adjustment of 0.9 percent, resulting in an MFP-adjusted 

CPI-U update factor of 1.3 percent. Therefore, we are proposing to apply a 1.3 percent 

MFP-adjusted CPI-U update factor to the CY 2012 ASC conversion factor. 
For CY 2013, we also are proposing to adjust the CY 2012 ASC conversion factor 

($42.627) by the wage adjustment for budget neutrality of 1.0002 in addition to the 

MFP-adjusted update factor of 1.3 percent discussed above, which results in a proposed 

CY 2013 ASC conversion factor of $43.190. 

We invite public comment on these proposals. 

3. Display of Proposed CY 2013 ASC Payment Rates 

Addenda AA and BB to this proposed rule (which are available via the Internet on 

the CMS Web site) display the proposed updated ASC payment rates for CY 2013 for 

covered surgical procedures and covered ancillary services, respectively. These addenda 

contain several types of information related to the proposed CY 2013 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 lowerpaying 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 2012. 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 on the final rule with comment period. 

The values displayed in the column titled “CY 2013 Payment Weight” are the 

proposed relative payment weights for each of the listed services for CY 2013. 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 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 proposed CY 2013 payment rate displayed in the “CY 2013 

Payment” column, each ASC payment weight in the “CY 2013 Payment Weight” column 

was multiplied by the proposed CY 2013 conversion factor of $43.190. 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 XV.H.2.b. of this proposed rule). 

In Addendum BB, there are no relative payment weights displayed in the “CY 2013 

Payment Weight” column for items and services with predetermined national payment 

amounts, such as separately payable drugs and biologicals. The “CY 2013 Payment” 

column displays the proposed CY 2013 national unadjusted ASC payment rates for all 

items and services. The proposed CY 2013 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 April 2012. 

XV. 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 reporting programs for long term care 

hospitals, inpatient rehabilitation hospitals, the hospice program, ambulatory surgical 

centers (the Ambulatory Surgical Center Quality Reporting (ASCQR) Program), as well 

as a program for physicians and other eligible professionals, known as the Physician 

Quality Reporting System (PQRS) (formerly known as the Physician Quality Reporting 

Initiative (PQRI)). CMS has recently proposed to implement quality reporting programs 

for inpatient psychiatric facilities and PPS-exempt cancer hospitals. 
Finally, CMS has implemented a Hospital Value-Based Purchasing Program and 

an end-stage renal disease (ESRD) Quality Incentive Program (76 FR 628 through 646) 

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. 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 those authorized by the Health Information Technology for Economic and 

Clinical Health (HITECH) 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 electronic health records (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 generally applied 

the same principles for the development and the use of measures, with some differences: 
● Our overarching goal is to support the National Quality Strategy’s three-part 

aim of better health care for individuals, better health for populations, and lower costs for 

health care. The Hospital OQR Program will help achieve the three- part aim by creating 

transparency around the quality of care at hospital outpatient departments to support 

patient decision-making and quality improvement. Given the availability of 

well-validated measures and the need to balance breadth with minimizing burden, 

measures should take into account and address, as fully as possible, the six domains of 

measurement that arise from the six priorities of the National Quality Strategy: Clinical 

care; Person- and caregiver-centered experience and outcomes; Safety; Efficiency and 

cost reduction; Care coordination; and Community/population health. More information 

regarding the National Quality Strategy can be found at: 

http://www.hhs.gov/secretary/about/priorities/priorities.html and

http://www.ahrq.gov/workingforquality/. HHS engaged a wide range of stakeholders to 

develop the National Quality Strategy, as required by the Affordable Care Act. 

● Pay-for-reporting and public reporting should rely on a mix of standards, 

processes, outcomes, efficiency, and patient experience of care measures, including 

measures of care transitions and changes in patient functional status. 

● To the extent possible and recognizing differences in payment system maturity 

and statutory authorities, measures should be aligned across Medicare and Medicaid 

public reporting and incentive payment systems to promote coordinated efforts to 

improve quality. The measure sets should evolve so that they include a focused set of 

measures appropriate to the specific provider category that reflects the level of care and 

the most important areas of service and measures for that provider category. 
● We weigh the relevance and the utility of measures compared to the burden on 

hospitals in submitting data under the Hospital OQR Program. The collection of 

information burden on providers should be minimized to the extent possible. To this end, 

we are working toward the eventual adoption of electronically-specified measures so that 

data can be calculated and submitted via certified EHR technology with minimal burden. 

We also seek to use measures based on alternative sources of data that do not require 

chart abstraction or that utilize data already being reported by many hospitals, such as 

data that hospitals report to clinical data registries, or all-payer claims databases. In 

recent years we have adopted measures that do not require chart abstraction, including 

structural measures and claims-based measures that we can calculate using other data 

sources. 

● To the extent practicable and feasible, and recognizing differences in statutory 

authorities, measures used by CMS should be endorsed by a national, multi-stakeholder 

organization. We take into account the views of the Measure Application Partnership 

(MAP). The MAP is a public-private partnership convened by the NQF for the primary 

purpose of providing input to HHS on selecting performance measures for quality 

reporting programs and pay for reporting programs. The MAP views patient safety as a 

high priority area and it strongly supports the use of NQF-endorsed safety measures. 

Accordingly, we consider the MAP’s recommendations in selecting quality and 

efficiency measures 

http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partn

ership.aspx
● Measures should be developed with the input of providers, purchasers/payers, 

consumers, and other stakeholders. Measures should be aligned with best practices 

among other payers and the needs of the end users of the measures. We take into account 

widely accepted criteria established in medical literature. 

● HHS Strategic Plan and Initiatives. HHS is the U.S. government’s principal 

agency for protecting the health of all Americans. HHS accomplishes its mission through 

programs and initiatives. Every 4 years HHS updates its Strategic Plan and measures its 

progress in addressing specific national problems, needs, or mission-related challenges. 

The goals of the HHS Strategic Plan for Fiscal Years 2010 through 2015 are to: 

Transform Health Care; Advance Scientific Knowledge and Innovation; Advance the 

Health, Safety, and Well-Being of the American People; Increase Efficiency, 

Transparency, and Accountability of HHS Programs; and Strengthen the Nation’s Health 

and Human Services Infrastructure and Workforce 

(http://www.hhs.gov/about/FY2012budget/strategicplandetail.pdf). HHS prioritizes 

policy and program interventions to address the leading causes of death and disability in 

the United States, including heart disease, cancer, stroke, chronic lower respiratory 

diseases, unintentional injuries and preventable behaviors. Initiatives such as the HHS 

Action Plan to Reduce HAIs in clinical settings and the Partnership for Patients 

exemplify these programs. 

● CMS Strategic Plan. We strive to ensure that measures for different Medicare 

and Medicaid programs are aligned with priority quality goals, that measure 

specifications are aligned across settings, that outcome measures are used whenever 

possible, and that quality measures are collected from EHRs as appropriate. 
 In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 through 

74452), we responded to public comment on many of these principles. In this proposed 

rulemaking, we generally applied the same principals for our considerations for future 

measures, with some differences. 

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. 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. This process is necessary so 

that the Hospital OQR measures are calculated based on the most up-to-date scientific 
and consensus standards. Under this process, when a national consensus building entity 

updates the specifications for a measure that we have adopted for the Hospital OQR 

Program, we update our specifications for that measure accordingly. For measures that 

are not endorsed by a national consensus building entity, the subregulatory process is 

based on scientific advances as determined necessary by CMS, in part, through our 

measure maintenance process involving Technical Expert Panels (73 FR 68767). We 

provide notice of the updates via the QualityNet Web site, http://www.QualityNet.org, 

and in the Hospital OQR Specifications Manual. 

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 non-substantive changes such as changes to ICD-9, CPT, NUBC, and 

HCPCS codes, and at least 6 months of advance notice for changes to data elements that 

would require significant systems changes. 

b. Publication of Hospital OQR Program Data 

 Section 1833(t)(17)(E) of the Act requires that the Secretary establish procedures 

to make data collected under the Hospital OQR Program available to the public. It also 

states that such procedures must ensure that a hospital has the opportunity to review the 

data that are to be made public, with respect to the hospital prior to such data being made 

public. To meet these requirements, data that a hospital has submitted for the Hospital 

OQR Program are typically provided to hospitals for a preview period via QualityNet, 

and then displayed on CMS Web sites such as the Hospital Compare Web site, 

http://www.hospitalcompare.hhs.gov following the preview period. The Hospital 

Compare Web site is an interactive Web tool that assists beneficiaries by providing 
information on hospital quality of care. This information motivates beneficiaries to work 

with their doctors and hospitals to discuss the quality of care hospitals provide to patients, 

thus providing additional incentives to hospitals to improve the quality of care that they 

furnish. 

 Under our current policy, we publish quality data by the corresponding hospital 

CCN, and indicate instances where data from two or more hospitals are combined to form 

the publicly reported measures on the Hospital Compare Web site. Consistent with our 

current policy, we make Hospital IQR and Hospital OQR data publicly available whether 

or not the data have been validated for payment purposes. The Hospital Compare Web 

site currently displays information covering process of care, structural, ED throughput 

timing, health IT, and imaging efficiency measure data under the Hospital OQR Program. 

In general, we strive to display hospital quality measures on the Hospital 

Compare Web site as soon as possible, after they have been adopted and have been 

reported to CMS. However, if there are unresolved display issues or pending design 

considerations, we may make the data available on other, non-interactive, CMS Web sites 

such as http://www.cms.hhs.gov/HospitalQualityInits/. Publicly reporting the 

information in this manner, though not on the interactive Hospital Compare Web site, 

allows us to meet the requirement under section 1833(t)(17)(E) of the Act for establishing 

procedures to make quality data submitted available to the public following a preview 

period. When we display hospital quality information on non-interactive CMS Web sites, 

affected parties will be notified via CMS listservs, CMS e-mail blasts, memorandums, 

Hospital Open Door Forums, national provider calls, and QualityNet announcements 
regarding the release of preview reports followed by the posting of data on a Web site 

other than Hospital Compare. 

We also require hospitals to complete and submit a registration form 

(“participation form”) in order to participate in the Hospital OQR Program. With 

submission of this participation form, participating hospitals agree that they will allow 

CMS to publicly report the quality measure data submitted under the Hospital OQR 

Program, including measures that we calculate using Medicare claims. 

B. Proposed Process for Retention of Hospital OQR Program Measures Adopted in 

Previous Payment Determinations

In past rulemakings, we have proposed to retain previously adopted measures for 

each payment determination on a year-by-year basis and invited public comments on the 

proposal to retain such measures for all future payment determinations unless otherwise 

specified. For the purpose of streamlining the rulemaking process, beginning with this 

rulemaking, we are proposing that when we adopt measures for the Hospital OQR 

Program beginning with a payment determination and subsequent years, these measures 

are automatically adopted for all subsequent year payment determinations unless we 

propose to remove, suspend, or replace the measures. We invite public comment on this 

proposal. 

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 of Hospital IQR Program measures based on evidence that the 
continued use of the measure as specified raises 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). At this time, we have not proposed to retire any measures from the 

Hospital OQR Program. 

In previous Hospital IQR Program rulemakings, we have referred to the removal 

of measures from the Hospital IQR Program as “retirement.” We have used this term to 

indicate that Hospital IQR Program measures are no longer included in the Hospital IQR 

Program measure set for one or more indicated reasons. However, we note that this term 

may imply that other payers/purchasers/programs should cease using these measures that 

are no longer required for the Hospital IQR Program. In order to clarify that this is not 

our intent, we stated in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28034) that 

we will use the term “remove” rather than “retire” to refer to the action of no longer 

including a measure in the Hospital IQR Program. We are proposing to adopt the same 

terminology of “removal” in the Hospital OQR Program to indicate future action of 

discontinuing a measure in the Hospital OQR Program. 

In the future, we are proposing to apply the same Hospital IQR Program measure 

removal criteria that we finalized, based on comments suggested during rulemaking, in 

the FY 2011 IPPS/LTCH PPS final rule (75 FR 50185), when determining whether to 

remove Hospital OQR 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) availability of 

alternative measures with a stronger relationship to 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 

agreed that these criteria are also applicable in evaluating Hospital OQR Program quality 

measures for removal. We are proposing to adopt these measure retirement criteria for 

the Hospital OQR Program as well, and we invite public comments on these proposals.

In addition, in the evaluation of measure removal, we take into account the views 

of the Measure Application Partnership (MAP). The MAP is a public-private partnership 

convened by the NQF for the primary purpose of providing input to HHS on selecting 

performance measures for certain quality reporting programs and pay for performance 

programs. The MAP views patient safety as a high priority area and it strongly supports 

the use of NQF-endorsed measures. Furthermore, for efficiency and streamlining 

purposes, we strive to eliminate redundancy of similar measures. 

2. Suspension of One Chart-Abstracted Measure for the CY 2014 and Subsequent Years 

Payment Determinations 

In the 2012 IPPS/LTCH PPS final rule (76 FR 51611), we adopted a policy to 

immediately suspend collection of a measure when there is a reason to believe that 

continued collection of the measure raises patient safety concerns. 
For CY 2014 and subsequent year payment determination, we are confirming that 

we have suspended the collection of OP-19: Transition Record with Specified Elements 

Received by Discharged Patients measure. We adopted measure OP-19 for the Hospital 

OQR Program for the CY 2013 payment determination with data collection beginning 

with January 1, 2012 encounters. Since data collection for this measure began, concerns 

have been raised about the current measure specifications, including potential privacy 

concerns which may lead to potential patient harm in the form of family violence. 

After consideration of these issues and internal review of the measure 

specifications, we decided to suspend data collection for OP-19 effective with 

January 1, 2012 encounters until further notice. On April 2, 2012 we released a 

Memorandum “Temporary Suspension of Hospital Outpatient Quality Reporting Measure 

OP-19: Transition Record with Specified Elements Received by Discharged Patients.” 

This memo notified the Hospital OQR Program stakeholder community that we had 

suspended data collection for the OP-19 measure effective with January 1, 2012 

encounters and until further notice. 

On April 12, 2012, we released a Memorandum, “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 

in validation. 

The updated memorandum is available for review at the QualityNet Web site 

(http://www.qualitynet.org) under the option “E-mail Notifications” within the 

“Hospitals – Outpatient” drop down menu found at the top of the page. 
When NQF completes its maintenance review on this measure, and we have 

incorporated the necessary changes to the measure specifications in our measure manual, 

we anticipate being able to resume data collection, and will notify hospitals of changes in 

the suspension status of the measure for Hospital OQR via e-mail blast. 

Because CMS system constraints prevent immediate cessation of data collection, 

hospitals must continue to submit information for this measure during this temporary 

suspension. The data collection system currently requires a populated value for OP-19. 

During the period of time that the measure is suspended, hospitals may choose to 

populate their OP-19 submission field with a value that is not meaningful. Hospitals 

should not submit a null value because the lack of data for OP-19 will cause the 

submitted case to be rejected entirely from the data warehouse. In other words, failure to 

populate the OP-19 field could compromise reporting data for other measures for that 

same case because more than one measure can be reported within a single case. 

Some vendors may have the capability to provide a default value for this measure 

to reduce data abstraction. Hospitals are encouraged to work with their vendors to 

determine options to reduce abstraction burden. 

If a case is rejected from the data warehouse on the basis of a system error due to 

the current system’s inability to accept a case without OP-19 data populated, in the event 

that the rejected case would have also fulfilled reporting requirements for one or more 

other measures, this rejection would create an unwanted consequence for a hospital 

participating in the Hospital OQR Program. Data rejection due to a system constraint 

could impact a hospital’s ability to meet Hospital OQR Program requirements for 

receiving a full outpatient hospital annual payment update. 
Therefore, we recommend continuing to submit a value for OP-19, although we 

will not use data submitted on OP-19 for payment determinations, will not publicly report 

these data, and will not validate these data until all concerns are resolved and measure 

specifications refined as necessary. 

Because the developer is working to revise the measure specifications to address 

the concerns raised by affected parties, and the measure is undergoing NQF maintenance 

review this year, we are not proposing to remove the measure from the program at this 

time. After completion of the NQF maintenance process, we anticipate that normal 

program operations for this measure could resume once we have updated the Hospital 

OQR Specifications Manual and made any necessary changes to our data collection 

infrastructure. However, should we determine that these concerns cannot be addressed, 

we would propose to remove this measure in a future OPPS/ASC rule. We invite public 

comment on the suspension of OP-19 until further notice. We also invite public 

comment on whether the measure should be removed from the program at this time. 

3. Deferred Data Collection of OP-24: Cardiac Rehabilitation Measure: Patient Referral 

from an Outpatient Setting for the CY 2014 Payment Determination 

 In the CY 2012 OPPS/ASC final rule with comment period, we finalized OP-24: 

Cardiac Rehabilitation Measure: Patient Referral from an Outpatient Setting for CY 2014 

payment determination and indicated that the applicable quarters for data collection for 

this measure would be 1st quarter CY 2013 and 2nd quarter CY 2013 (76 FR 74464, 

74481). In order for us to adhere to this data collection schedule, we would need to 

publish the measure specifications in the July 2012 release of the Hospital OQR 

Specifications Manual. While there are NQF-endorsed specifications for this measure, in 
order to implement standardized data collection on a national scale, we must include 

detailed abstraction instructions for chart-based measures in our Specifications Manual. 

These instructions will not be completed and tested in time to include in the July 2012 

release of the Specifications Manual, which includes collection instructions for measures 

beginning January 1, 2013. This is an unanticipated delay in implementation that we do 

not expect to be a regularly occurring issue for the Hospital OQR program. 

Therefore, we are proposing to defer the data collection for this measure to 

January 1, 2014 encounters. We are also proposing that the measure would no longer be 

used for the CY 2014 payment determination, and that its first application would be for 

the CY 2015 payment determination. The data collection deferral for this measure is 

detailed in the “Form, Manner, and Timing” section of this proposed rule. We invite 

public comments on these proposals. 

D. Quality Measures for CY 2015 Payment Determination

We previously finalized 26 measures for the CY 2015 Hospital OQR Program 

measure set in the 2012 OPPS/ASC rulemaking (76 FR 74472 through 74474). 

Taking into consideration the time and effort for CMS to develop, align, and 

implement the infrastructure necessary to collect data on the Hospital OQR Program 

measures and make payment determinations, as well as the time and effort on the part of 

hospital outpatient departments to plan and prepare for reporting additional measures, we 

are not proposing any additional quality measures for CY 2015 and subsequent years 

payment determination in this rulemaking. As discussed above, we have suspended 

measure OP-19 and deferred data collection for OP-24 until the measure specifications 

can be further refined. We also are clarifying that the public reporting of the claims-
based imaging efficiency measure OP-15 has been deferred until July 2013 at the earliest, 

as discussed in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74456). 

 In summary, we are proposing no additional measures for the CY 2015 payment 

determination, and we are proposing to retain the 25 measures previously adopted for the 

CY 2014 payment determination for CY 2015 and subsequent year payment 

determinations. We are confirming the suspension of data collection for the OP-19 

measure, and consequently its use in the Hospital OQR Program, until further notice. We 

also are proposing to defer data collection on OP-24, and to first apply this measure 

toward the CY 2015 payment determination rather than to the CY 2014 payment 

determination as originally finalized. Set out below are the previously adopted measures 

which we are proposing to retain for the CY 2014, CY 2015, and subsequent years 

payment determinations under the Hospital OQR Program. 

Hospital OQR Program Measures Adopted for the CY 2014, CY 2015 and Subsequent 

Year Payment Determinations 

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-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-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically Directly 

into their Qualified/Certified EHR System as Discrete Searchable Data 
Hospital OQR Program Measures Adopted for the CY 2014, CY 2015 and Subsequent 

Year Payment Determinations 

OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk Surgery 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed 

Tomography (CT) 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for Atraumatic 

Headache* 

OP-16: Troponin Results for Emergency Department acute myocardial infarction (AMI) patients 

or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 minutes of 

Arrival 

OP-17: Tracking Clinical Results between Visits 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients 

OP-19: Transition Record with Specified Elements Received by 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 

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 

OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting *** 

OP-25: Safe Surgery Checklist Use 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, C9724, 

C9725, 0170T 

Eye 65000 through 68999, 0186, 0124T, 0099T, 0017T, 0016T, 

0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 0191T, 0192T, 

76510, 0099T 

Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 0215T, 

0216T, 0217T, 0218T, 0062T 

Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, 0201T 

Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, C9726, 

C9727 

Genitourinary 50000 through 58999, 0193T, 58805 

Cardiovascular 33000 through 37999 

Respiratory 30000 through 32999 
*Information for OP-15 will not be reported in Hospital Compare in 2012. Public Reporting for this 

measure would occur in July 2013 at the earliest. 

**Data collection for OP-19 was suspended effective with January 1, 2012 encounters until further notice. 

***Data collection for OP-24 would be postponed from January 1, 2013 to January 1 2014, and its first 

application toward a payment determination would be for CY 2015 rather than CY 2014. 

We invite public comments on these proposals. 

E. Possible Quality Measures Under Consideration for Future Inclusion in the Hospital 

OQR Program

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 HIT care coordination, patient safety, and volume. We anticipate 

that as EHR technology evolves, and more infrastructure are put in 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 

work diligently toward this goal. We believe that this future progress at a future date, 

such as FY 2015, 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 e-specifications. This 

includes completing electronic 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. In 

addition, we are considering initiating a call for input to assess the following measure 

domains: 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 and pay for performance programs such as the 

Hospital IQR and ASCQR Programs. 

We invite public comment on this approach and suggestions and rationale for 

possible quality measures for future inclusion in the Hospital OQR Program. 

F. Proposed Payment Reduction for Hospitals That Fail to Meet the Hospital OQR 

Program Requirements for the CY 2013 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 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. 

In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68769 through 

68772), we discussed how the payment reduction for failure to meet the administrative, 
data collection, and data submission requirements of the Hospital OQR Program affected 

the CY 2009 payment update applicable to OPPS payments for HOPD services furnished 

by the hospitals defined under section 1886(d)(1)(B) of the Act to which the program 

applies. The application of a reduced OPD fee schedule increase factor results in reduced 

national unadjusted payment rates that apply to certain outpatient items and services 

provided by hospitals that are required to report outpatient quality data and that fail to 

meet the Hospital OQR Program requirements. All other hospitals paid under the OPPS 

that meet the reporting requirement receive the full OPPS payment update without the 

reduction. 

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 

proposed rule, which is available via the Internet on the CMS Web site): “P,” “Q1,” 

“Q2,” “Q3,” “R,” “S,” “T,” “V,” “U,” or “X.” In the CY 2009 OPPS/ASC final rule 

with comment period (73 FR 68770), we adopted a policy that payment for all services 

assigned these status indicators would 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,” and brachytherapy 

sources with assigned status indicator “U,” which were paid at charges adjusted to cost in 

CY 2009. We excluded services assigned to New Technology APCs from the list of 
services subject to the reduced national unadjusted payment rates because the OPD fee 

schedule increase factor is not used to update the payment rates for these APCs. 

In addition, section 1833(t)(16)(C) of the Act, as amended by section 142 of the 

Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) 

(Pub. L. 110-275), specifically required that brachytherapy sources be paid during 

CY 2009 on the basis of charges adjusted to cost, rather than under the standard OPPS 

methodology. Therefore, the reduced conversion factor also was not applicable to 

CY 2009 payment for brachytherapy sources because payment would not be based on the 

OPPS conversion factor and, consequently, the payment rates for these services were not 

updated by the OPD fee schedule increase factor. However, in accordance with section 

1833(t)(16)(C) of the Act, as amended by section 142 of the MIPPA, payment for 

brachytherapy sources at charges adjusted to cost expired on January 1, 2010. Therefore, 

in the CY 2010 OPPS/ASC final rule with comment period (74 FR 60641), we finalized 

our CY 2010 proposal, without modification, to apply the reduction to payment for 

brachytherapy sources to hospitals that fail to meet the quality data reporting 

requirements of the Hospital OQR Program for brachytherapy services furnished on and 

after January 1, 2010. 

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 multiply the final full 

national unadjusted payment rate in Addendum B to 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 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 §419.41 of our regulations, 

prior to any adjustment for a hospital’s failure to meet the quality reporting standards 

according to §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, outlier payments 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 continued this policy in the CY 2010 OPPS/ASC 

final rule with comment period (74 FR 60642), in the CY 2011 OPPS/ASC final rule with 

comment period (75 FR 72099), and in the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74478). For a complete discussion of the OPPS outlier calculation and 

eligibility criteria, we refer readers to section II.G. of this proposed rule. 

2. Proposed Reporting Ratio Application and Associated Adjustment Policy for CY 2013 

We are proposing 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 2013 

annual payment update factor. For the CY 2013 OPPS, the proposed reporting ratio is 
0.980, calculated by dividing the proposed reduced conversion factor of $70.106 by the 

proposed full conversion factor of $71.537. We are proposing to continue to apply the 

reporting ratio to all services calculated using the OPPS conversion factor. For the 

CY 2013 OPPS, we are proposing 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,” “U,” and “X” (other than new technology APCs to which we have 

assigned status indicators “S” and “T”). We are proposing to continue to exclude 

services paid under New Technology APCs. We are proposing 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 are proposing 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 are proposing 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 invite public comments on these proposals. 

G. Proposed Requirements for Reporting of Hospital OQR Data for the CY 2014

Payment Determination and Subsequent Years

1. Administrative Requirements for the CY 2014 Payment Determination and 

Subsequent Years 

 In order to participate 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 and subsequent years’ payment updates in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74479 through 74487). 

With respect to the payment determinations for CY 2014 and subsequent years, 

we are proposing one modification to these requirements. Under current requirements, 

CMS deadlines for hospitals to submit notice of participation forms are based on the date 

identified as a hospital’s Medicare acceptance date on the CMS Certification and Survey 

Provider Enhanced Reporting (CASPER) system. Deadlines are based on whether a 

hospital’s Medicare acceptance date falls before January 1 of the year prior to the annual 

payment update, or on or after January 1 of the year prior to the annual payment update 

(for example, 2013 would be the year prior to the affected CY 2014 annual payment 

update). Currently, for a hospital whose Medicare acceptance date is before January 1 of 

the year prior to the affected payment update affected, the notice of participation form is 

due by March 31 of the year prior to the affected annual payment update (76 FR 74479 

through 74480). We are proposing to extend this deadline for hospitals, as described 

below. 

Hospitals with Medicare acceptance dates before January 1 of the year prior 

to the affected annual payment update: For the CY 2014 and subsequent years 
payment update, we are proposing that any hospital that has 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) that is not 

currently participating in Hospital OQR and wishes to participate in the Hospital OQR 

Program must submit a participation form by July 31, rather than March 31, of the year 

prior to the affected annual payment update. We are proposing a deadline of July 31 to 

give hospitals the maximum amount of time to decide whether they wish to participate in 

the Hospital OQR Program, as well as put into place the necessary staff and resources to 

timely report chart-abstracted data for first quarter of the year’s services which are due 

August 1. 

 We invite public comment on this proposed modification to Hospital OQR 

Program administrative requirements for the CY 2014 and subsequent years’ payment 

determinations. 

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

CY 2014 Payment Determination and Subsequent Years 

a. Background 

We are not proposing any additional measures for the CY 2014 payment 

determination year. We refer readers to the following OPPS/ASC final rules with 

comment periods for a history of measures adopted for the Hospital OQR Program, 

including lists of: 11 measures finalized for the CY 2011 payment determination 

(74 FR 60637); 15 measures finalized for the CY 2012 payment determination (75 FR 

72083 through 72084); 23 measures finalized for the CY 2013 payment determination 
(75 FR 72090); and 26 measures finalized for the CY 2014 and CY 2015 payment 

determinations (76 FR 74469 and 74473). 

We refer readers to section XV.D. of this proposed rule for a discussion of the 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache measure. Because of the clarification that public reporting is not 

planned until July 2013 at the earliest, we confirm this measure will not be used in the 

CY 2014 payment determination. We will confirm our intent to include or exclude this 

measure in the CY 2015 payment determination in future rulemaking. 

We refer readers to section XV.C.2. of this proposed rule for a discussion of the 

OP-19: Transition Record with Specified Elements Received by Discharged ED 

Patients measure. Because the data collection for this measure is currently suspended, 

this measure will not be used in the CY 2014 payment determination. We will indicate 

whether data collection for this measure will resume in time for the CY 2015 payment 

determination in future rulemaking. 

We refer readers to section XV.C.3. of this proposed rule for a discussion of the 

OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting measure. We 

are proposing not to use this measure in the CY 2014 payment determination and to use 

this measure in the CY 2015 payment determination. 

b. General Requirements 

 We are proposing to continue the policy that, to be eligible to receive the full 

OPD fee schedule increase factor for any payment determination, hospitals must comply 

with our submission requirements for chart-abstracted data, population and sampling 

data, claims-based measure data, and structural quality measure data, including all-patient 
volume data. We refer readers to the CY 2012 OPPS/ASC final rule with comment 

period (76 FR 74480 through 74482) for a discussion of these requirements. 

c. Proposed Chart-Abstracted Measure Requirements for CY 2014 and Subsequent 

Payment Determination Years 

The table in section XV.D. of this proposed rule includes measures that are 

collected by abstracting the information from the patient chart. The full list of these chart 

abstracted measures is set out below: 

● 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-16: Troponin Results for Emergency Department acute myocardial 

infarction (AMI) patients or chest pain patients (with Probable Cardiac Chest pain) 

Received Within 30 minutes of Arrival 

● OP-18: Median Time from ED Arrival to ED Departure for Discharged ED 

Patients 

● OP-19: Transition Record with Specified Elements Received by Discharged 

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 

● 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 

● OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting 

 We have suspended OP-19 from the CY 2014 payment determination and are 

proposing to defer data collection for OP-24 for the CY 2014 payment year. We invite 

public comment on our proposal to collect data for only those measures that are finalized 

to be included in the CY 2014 payment determination. 

 Of those measures for which we are proposing to collect data for in CY 2014, the 

form and manner for submission of one of these measures, OP-22: ED Patient Left 

Without Being Seen, is unique, and the form and manner for this measure is detailed in 

section XV.G.2.f. of this proposed rule. 

 For the remaining chart-abstracted measures for which we are proposing to collect 

data for the CY 2014 payment determination, we are proposing that the applicable 

quarters for data collection would be as follows: 3rd quarter CY 2012, 4th quarter 

CY 2012, 1st quarter CY 2013, and 2nd quarter CY 2013 for hospitals that are continuing 

participants; newly participating hospitals would follow reporting requirements as 

outlined in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74480) and 

in section XV.G.1. of this proposed rule. 

 Submission deadlines would be, in general, approximately 4 months after the last 

day of each calendar quarter. Thus, for example, the proposed submission deadline for 
data for services furnished during the first quarter of CY 2013 (January - March, 2013) 

would be on or around August 1, 2013. The actual submission deadlines would be posted 

on the http://www.QualityNet.org Web site. 

 Hospitals that did not participate in the CY 2013 Hospital OQR Program, but 

would like to participate in the CY 2014 Hospital OQR Program, and that have a 

Medicare acceptance date on the CASPER system before January 1, 2013, would begin 

data submission with respect to 1st quarter CY 2013 encounters using this CY 2013 

measure set that was finalized in the CY 2012 OPPS/ASC final rule with comment 

period. For those hospitals with Medicare acceptance dates on or after January 1, 2013, 

data submission must begin with the first full quarter following the submission of a 

completed online participation form. 

 For the CY 2015 payment determination, we are proposing that the applicable 

quarters for previously finalized chart-abstracted measures would be as follows: 3rd

quarter CY 2013, 4th quarter CY 2013, 1st quarter CY 2014, and 2nd quarter CY 2014. 

Hospitals that did not participate in the CY 2014 Hospital OQR Program, but 

would like to participate in the CY 2015 Hospital OQR Program, and that have a 

Medicare acceptance date on the CASPER system before January 1, 2014, would begin 

data submission with respect to 1st quarter CY 2014 encounters using the CY 2015 

measure set that we finalized in the CY 2012 OPPS/ASC final rule with comment period. 

For those hospitals with Medicare acceptance dates on or after January 1, 2014, data 

submission must begin with the first full quarter following the submission of a completed 

online participation form. We invite public comments on these proposals. 
d. Proposed Claims-Based Measure Data Requirements for the CY 2014 and CY 2015 

Payment Determinations 

 The table in section XV.D. of this proposed rule includes measures that the 

Hospital OQR Program collects by accessing electronic claims data submitted by 

hospitals for reimbursement. The full list of these claims-based measures is set out 

below: 

● 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 

● OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus 

Computed Tomography (CT) 

● OP-15: Use of Brain Computed Tomography (CT) in the Emergency 

Department for Atraumatic Headache 

 OP-15 has not been implemented for public reporting through rulemaking, and it 

is not required for the CY 2014 payment determination. 

 Therefore, for the CY 2014 payment determination, the 6 remaining claims-based 

measures (OP-8 to OP-11, OP-13 and OP-14) from the list above will be used (76 FR 

74469). 

 We will continue our policy of calculating the measures using the hospital’s 

Medicare claims data as specified in the Hospital OQR Specifications Manual; 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 2013 and CY 2014 

payment updates, we will use paid Medicare FFS claims for services furnished from 

January 1, 2010 to December 31, 2010 and January 1, 2011 to December 31, 2011, 

respectively. 

 For the CY 2015 Hospital OQR payment determination, we are proposing to use 

Medicare FFS claims for services from a 12-month period from July 1, 2012 through 

June 30, 2013 for the calculation of the claims-based measures. While this would be a 

departure from the traditional 12 month calendar year period we have used for these 

measures, we are proposing 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 the outpatient imaging efficiency on the Web site. 

We invite public comment on this proposal. 

e. Proposed Structural Measure Data Requirements for the CY 2014 Payment 

Determination and Subsequent Years 

 A summary of the previously finalized structural measures that we require for the 

CY 2014 and subsequent years payment determinations is set out 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 25 – Safe Surgical Check List Use 
● OP 26 – Hospital Outpatient Volume for Selected Outpatient Surgical 

Procedures 

We previously finalized that for the CY 2014 payment determination, hospitals 

will be required to submit data on all structural measures between July 1, 2013 and 

August 15, 2013 with respect to the time period from January 1, 2012 to 

December 31, 2012. We are proposing to extend this submission deadline. Under this 

proposed change, for the CY 2014 payment determination, hospitals would be required to 

submit data on all structural measures between July 1, 2013 and November 1, 2013 with 

respect to the time period from January 1, 2012 to December 31, 2012. In section 

XV.G.2.f. of this proposed rule, we describe how this proposal would likewise extend the 

deadline to submit data for OP-22: ED Patient Left without Being Seen. We are 

proposing to continue this schedule so that, for the FY 2015 payment determination, 

hospitals would be required to submit data on all structural measures between 

July 1, 2014 and November 1, 2014 with respect to the time period from January 1, 2013 

to December 31, 2013. We invite public comments on these proposals. 

f. Proposed Data Submission Requirements for OP-22: ED-Patient Left Without Being 

Seen for the CY 2015 Payment Determination 

 OP-22: ED-Patient Left Without Being Seen is a chart-abstracted measure for 

which aggregate data is collected via a Web-based tool, as previously finalized. In other 

words, for purposes of data collection, this measure is treated like a structural measure. 

For this reason, it is collected on the same schedule as the structural measures described 

above, and we are proposing to extend the submission window for all structural 

measures, including OP-22. In the CY 2012 OPPS/ASC final rule with comment period 
(76 FR 74485), with respect to OP-22, we stated that hospitals would be required to 

submit data once for the CY 2014 payment determinations via a Web-based tool located 

on the QualityNet Web site. For the CY 2014 payment determination, we are proposing 

that hospitals would be required to submit data, including numerator and denominator 

counts, between July 1, 2013 and November 1, 2013 (comparable to the submission 

window that we are proposing for the structural measures data collection in the section 

above) with respect to the time period of January 1, 2012 to December 31, 2012. 

 For the CY 2015 payment determination, we are proposing to continue this 

policy. Hospitals would be required to submit data between July 1, 2014 and 

November 1, 2014 with respect to the time period of January 1, 2013 to 

December 31, 2013. We invite public comment on these proposals. 

g. Proposed Population and Sampling Data Requirements for the CY 2014 Payment 

Determination and Subsequent Years 

For the CY 2014 payment determination and subsequent years, we are proposing 

to continue 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. We invite public comments on these proposals. 

3. Proposed Hospital OQR Program Validation Requirements for Chart-Abstracted 

Measure Data Submitted Directly to CMS for the CY 2014 Payment Determination and 

Subsequent Years 

a. Random Selection of Hospitals for Data Validation of Chart-Abstracted Measures for 

the CY 2014 Payment Determination and Subsequent Years 

 In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74484 through 

74485), similar to our approach for the CY 2012 payment determination (75 FR 72103 

through 72106), we adopted a policy to validate chart-abstracted patient-level data 

submitted directly to CMS from randomly selected hospitals for the CY 2013 payment 

determination. 

 For the CY 2013 payment determination, we reduced the number of randomly 

selected hospitals from 800 to 450. 

 We are proposing to continue this policy for the CY 2014 payment determination 

and for subsequent years. We refer readers to the CY 2012 OPPS/ASC final rule with 

comment period (FR 76 74484) for a discussion of sample size, eligibility for validation 

selection, and encounter minimums for chart abstracted data submitted directly to CMS 

from randomly selected hospitals. We invite public comment on this proposal. 

b. Targeting and Proposed Targeting Criteria for Data Validation Selection for the 

CY 2014 Payment Determination and Subsequent Years 

In the CY 2011 OPPS/ASC proposed rule (75 FR 46380) we discussed applying, 

to CY 2013 and subsequent year’s data submission, criteria to determine whether a 
hospital would be included in our validation selection based on abnormal data patterns or 

a specific situation. At that time we provided, for public comment, specific examples of 

what we thought could be appropriate criteria. 

In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72106) we 

stated our belief that the targeting criteria we shared for comment were reasonable. We 

considered one commenter’s concern that we should use targeting criteria to ensure we 

do not over-select a hospital for validation. We reiterated our intent to propose the 

specific targeting criteria in the upcoming CY 2012 OPPS/ASC proposed rule 

(76 FR 42332), in order to finalize and apply it to 2012 encounter data collected for the 

CY 2013 validation process year. We did so, and finalized our proposal without 

modification in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74485). 

In summary, we finalized our intent to select a random sample of hospitals for 

validation purposes, and to select an additional 50 hospitals selected based on specific 

criteria designed to measure whether the data these hospitals have reported raises a 

concern regarding data accuracy. 

For the CY 2014 payment determination and subsequent years, we are proposing 

to continue these policies and to continue to use the targeting criteria finalized previously. 

Specifically, a hospital will be preliminarily selected for validation based on targeting 

criteria if it: 

● Fails the validation requirement that applies to the CY 2012 payment 

determination; or 

● Has an outlier value for a measure based on the data it submits. 
In the CY 2012 OPPS/ASC proposed rule (76 FR 42333) and CY 2012 

OPPS/ASC final rule with comment period (76 FR 74486) we describe additional data 

validation conditions under consideration for the CY 2014 payment determination and 

subsequent years. We thank those who commented on the CY 2012 proposed additional 

data validation targeting conditions and will take their views under consideration as we 

develop any future proposals on these issues. At this time, we are not proposing any 

additional targeting criteria to use in selecting the additional 50 hospitals we include in 

the validation process for CY 2014 payment determination or in subsequent years. We 

invite public comment on this proposal. 

c. Proposed Methodology for Encounter Selection for the CY 2014 Payment 

Determination and Subsequent Years 

 For each selected hospital (random or targeted), we are proposing to continue the 

approach we adopted in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74485 through 74486) for the CY 2014 payment determination and subsequent 

years. For the CY 2014 payment determination, for each selected hospital (random or 

targeted), we would continue to validate up to 48 randomly selected patient encounters 

(12 per quarter; 48 per year) from the total number of encounters that the hospital 

successfully submitted to the OPPS Clinical Warehouse. If a selected hospital has 

submitted less than 12 encounters in one or more quarters, only those encounters 

available would be validated. For each selected encounter, a designated CMS contractor 

would request that the hospital submit the complete supporting medical record 

documentation that corresponds to the encounter. We refer readers to 42 CFR 482.24(c) 

for a definition of what is expected in a medical record submitted for validation. The 
validation process requires full supporting medical documentation, including ECG tapes 

and/or other pieces of a medical record that may not be stored in a single location. The 

hospital must ensure a full medical record goes to the contractor for accurate validation. 

 We continue to believe that validating a larger number of encounters per hospital 

for fewer hospitals at the measure level has several benefits. We believe that this 

approach is suitable for the Hospital OQR Program because it will: (1) produce a more 

reliable estimate of whether a hospital’s submitted data have been abstracted accurately; 

(2) provide more statistically reliable estimates of the quality of care delivered in each 

measured hospital as well as at a national level; and (3) reduce overall burden, for 

example, in submitting validation documentation, because hospitals most likely will not 

be selected to undergo validation each year, and a smaller number of hospitals per year 

will be selected. 

 For all selected hospitals, we would not be selecting cases stratified by measure or 

topic; our interest is whether the data submitted by hospitals accurately reflects the care 

delivered and documented in the medical record, not what the accuracy is by measure or 

whether there are differences by measure or topic. We would be validating data from 

April 1 to March 31 of the year preceding the payment determination year. This provides 

validation results data in time to use to make the payment determination. For example, 

encounter data from April 1, 2012 to March 31, 2013 provides a full year of the most 

recent data possible to validate in time to make the CY 2014 payment determination. We 

invite public comment on our proposal to continue to use our established methodology 

for encounter selection and our proposed annual schedule for encounters to be validated 

and used in payment determinations. 
d. Validation Score Calculation for the CY 2014 Payment Determination and Subsequent 

Years 

 We are proposing to retain the medical record return policy that we finalized in 

the CY 2011 OPPS/ASC final rule with comment period (75 FR 72104) for the CY 2014 

payment determination and subsequent years. For the CY 2014 payment determination, 

we are proposing to continue the validation score policies we adopted in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74486), for the CY 2013 payment 

determination. We are proposing to use the validation calculation approach finalized for 

the CY 2012 and CY 2013 payment determinations with validation being done for each 

selected hospital. Specifically, we are proposing to conduct a measures level validation 

by calculating each measure within a submitted record using the independently abstracted 

data and then comparing this to the measure reported by the hospital; a percent agreement 

would then be calculated. We would also compare the measure category for quality 

measures with continuous units of measurement, such as time, so that for these measures, 

both the category and the measure would need to match. 

 For the CY 2014 payment determination and subsequent years, we are proposing 

to use the medical record validation procedure we finalized in the CY 2011 OPPS/ASC 

final rule with comment period (75 FR 72105). A designated CMS contractor would, for 

each quarter that applies to the validation, ask each of the selected hospitals to submit 

medical documentation for up to 12 randomly selected cases submitted to and accepted 

by the OPPS Clinical Warehouse. The CMS contractor would request paper copies of 

medical documentation corresponding to selected cases from each hospital via certified 

mail or another trackable method that requires a hospital representative to sign for the 
request letter. A trackable method would be used so that we would be assured that the 

hospital received the request. The hospital would have 45 calendar days from the date of 

the request as documented in the request letter to submit the requested documentation and 

have the documentation received by the CMS contractor. If the hospital does not comply 

within 30 calendar days of receipt of the initial medical documentation request, the CMS 

contractor would send a second letter by certified mail or other trackable method to the 

hospital, reminding the hospital that paper copies of the requested documentation must be 

submitted and received within 45 calendar days following the date of the initial CMS 

contractor request. If the hospital does not submit the requested documentation and the 

documentation is not received by the CMS contractor within the 45 calendar days, then 

the CMS contractor would assign a “zero” score to each data element for each selected 

case and the case would fail for all measures in the same topic (for example, OP–6 and 

OP–7 measures for a Surgical Care case). 

 We are proposing that the letter from the designated CMS contractor would be 

addressed to the hospital’s medical record staff identified by the hospital for the 

submission of records under the Hospital IQR Program (that is, the hospital’s medical 

records staff identified by the hospital to its State QIO). If CMS has evidence that the 

hospital received both letters requesting medical records, the hospital would be deemed 

responsible for not returning the requested medical record documentation and the hospital 

would not be allowed to submit such medical documentation as part of its reconsideration 

request so that information not utilized in making a payment determination is not 

included in any reconsideration request. 
 Once the CMS contractor receives the requested medical documentation, the 

contractor would independently reabstract the same quality measure data elements that 

the hospital previously abstracted and submitted, and the CMS contractor would then 

compare the two sets of data to determine whether the two sets of data match. 

Specifically, the CMS contractor would conduct a measures level validation by 

calculating each measure within a submitted case using the independently reabstracted 

data and then comparing this to the measure reported by the hospital; a percent agreement 

would then be calculated. The validation score for a hospital would equal the total 

number of measure matches divided by the total number of measures multiplied by 100 

percent. 

 We invite public comment on our proposals regarding the medical record request 

policy for CY 2014 payment determination and subsequent payment determination years. 

 To receive the full OPPS OPD fee schedule increase factor for CY 2014, we are 

proposing that hospitals must attain at least a 75 percent reliability score, based upon the 

proposed validation process. We are proposing to use the upper bound of a two-tailed 95 

percent confidence interval to estimate the validation score. If the calculated upper limit 

is above the required 75 percent reliability threshold, we would consider a hospital’s data 

to be “validated” for payment purposes. Because we are more interested in whether the 

measure has been accurately reported, we would continue to focus on whether the 

measure data reported by the hospital matches the data documented in the medical record 

as determined by our reabstraction. 

We are proposing to calculate the validation score using the same methodology 

we finalized for the CY 2012 and CY 2013 payment determinations (75 FR 72105 and 
76 FR 74486). We also are proposing to use the same medical record documentation 

submission procedures that we also finalized for the CY 2012 and CY 2013 payment 

determinations (75 FR 72104 and 76 FR 74486). We invite public comments on these 

proposals. 

H. Proposed Hospital OQR Reconsideration and Appeals Procedures for the CY 2014

Payment Determination and Subsequent Years

 When the Hospital IQR Program was initially implemented, it did not include a 

reconsideration process for hospitals. Subsequently, we received many requests for 

reconsideration of those payment decisions and, as a result, established a process by 

which participating hospitals would submit requests for reconsideration. We anticipated 

similar concerns with the Hospital OQR Program and, therefore, in the CY 2008 

OPPS/ASC final rule with comment period (72 FR 66875), we stated our intent to 

implement for the Hospital OQR Program a reconsideration process modeled after the 

reconsideration process we implemented for the Hospital IQR Program. In the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68779), we adopted a reconsideration 

process that applied to the CY 2010 payment decisions. In the CY 2010 OPPS/ASC final 

rule with comment period (74 FR 60654 through 60655), we continued this process for 

the CY 2011 payment update. This process required that a hospital’s CEO sign any 

request for a reconsideration. 

 In the CY 2011 and CY 2012 OPPS/ASC final rules with comment periods 

(75 FR 72106 through 72108 and 76 FR 74486 through 75587), we continued this 

process for the CY 2012 and CY 2013 payment updates with some modification. In the 
CY 2011 OPPS/ASC final rule with comment period (75 FR 72107), we finalized that the 

CEO was not required to sign the reconsideration request form. 

 We are proposing to continue this process, with additional modifications, for the 

CY 2014 payment determination and subsequent years payment determinations. We 

have now realized that, in eliminating the requirement that a CEO sign a request form, we 

did not include any requirement for a signature on the reconsideration request form. To 

increase accountability, we are proposing for the CY 2014 payment determination and 

subsequent years payment determinations, that the hospital designate a contact on its 

reconsideration request form, who may or may not be the CEO. We would communicate 

with this designee. We also are proposing the hospital’s designee must sign its 

reconsideration request form. This process is consistent with our recent proposals for 

reconsideration requests under the ASCQR Program (77 FR 28105). 

 Under this process, a hospital seeking reconsideration must-- 

● Submit to CMS, via QualityNet, a Reconsideration Request form that will be 

made available on the QualityNet Web site; this form must be submitted by February 3 of 

the affected payment year (for example, for the CY 2014 payment determination, the 

request must be submitted by February 3, 2014) and must contain the following 

information: 

○ Hospital CCN. 

○ Hospital Name. 

○ 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. 
○ Hospital basis for requesting reconsideration. This must identify the 

hospital’s specific reason(s) for believing it met the affected year’s Hospital OQR 

Program requirements and should receive the full OPD fee schedule increase factor. 

○ Designated hospital personnel contact information, including name, e-mail 

address, telephone number, and mailing address (must include physical address, not just a 

post office box). We are proposing that the designee, who may or may not be the 

hospital’s CEO, must sign the form submitted to request reconsideration. 

○ A copy of all materials that the hospital submitted to comply with the 

requirements of the affected year’s Hospital OQR Program. Such material might include, 

but does not need to be limited to, the applicable Notice of Participation form or 

completed online registration form, and measure data that the hospital submitted via 

QualityNet. 

● Paper copies of all the medical record documentation that it submitted for the 

initial validation (if applicable). Hospitals submit this documentation to a designated 

CMS contractor which has authority to review patient level information. We post the 

address where hospitals are to send this documentation on the QualityNet Web site. 

● To the extent that the hospital is requesting reconsideration on the basis that 

CMS has determined it did not meet an affected 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 would be eligible to be reconsidered. We review the data elements that 

were labeled as mismatched as well as the written justifications provided by the hospital, 

and make a decision on the reconsideration request. 
 We are proposing these requirements for the CY 2014 payment determination 

year program and for subsequent years. We invite public comment on these proposed 

changes. 

 Following receipt of a request for reconsideration, CMS -- 

● Provides an e-mail 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 that we finalized for the CY 2012 and CY 2013 payment 

determinations 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 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 medical of the complete 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 to determining 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 the 

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 

the 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 proposed 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 paper 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. 

 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). 
 We invite public comment on the modifications we have proposed to the Hospital 

OQR Program reconsideration and appeals procedures. 

I. Proposed Extraordinary Circumstances Extension or Waiver for the CY 2013 Payment 

Determination and Subsequent Years

 In our experience, there have been times when hospitals have been unable to 

submit required quality data due to extraordinary circumstances that are not within their 

control. It is our goal to not penalize hospitals for such circumstances and we do not 

want to unduly increase their burden during these times. Therefore, in the CY 2010 

OPPS/ASC final rule with comment period (74 FR 60046 through 600647), we adopted a 

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. In the CY 2011 OPPS/ASC final rule with comment 

period (75 FR 72103), we retained these procedures with a modification to eliminate 

redundancy in the information a hospital must provide in the request. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74478 through 74479), for CY 2012 

and subsequent years, we retained these procedures with one modification. The CY 2012 

modification allowed that the original procedures for requesting an extension or waiver of 

quality data submission would thereafter also extend to include medical record 

documentation submission for purposes of complying with our validation requirement for 

the Hospital OQR Program. We are proposing to retain these procedures with a 

modification for CY 2013 and subsequent years. 

 We are proposing to modify one element of the information required on the CMS 

request form. Under the procedures set out in the CY 2012 OPPS/ASC final rule with 
comment period (76 FR 74479), hospitals were required to submit “CEO and any other 

designated personnel contact information” (emphasis added), the CEO was required to 

sign the form, and CMS was required to respond to the CEO and additional designated 

hospital personnel. The information required in CY 2013 and subsequent years would 

include “CEO or other hospital-designated personnel contact information” (emphasis 

added). This proposed change would allow the hospital to designate an appropriate, nonCEO, contact at its discretion, This individual would be responsible for the submission, 

and would be the one signing the form. Therefore, the hospital’s designated-contact may 

or may not hold the title of CEO. We invite public comment on this proposed 

modification to the process for granting extraordinary circumstances extensions or 

waivers for the Hospital OQR Program. 

 Thus, we are proposing that, in the event of extraordinary circumstances, such as 

a natural disaster, not within the control of the hospital, for the hospital to receive 

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 submit to CMS 

a request form that would be made available on the QualityNet Web site. The following 

information should be noted on the 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 would again be able to submit Hospital OQR data 

and/or medical record documentation, and a justification for the proposed date. 

 The request form would be signed by the hospital’s designated contact, whether 

or not that individual is the CEO. A request form would be 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 a written acknowledgement using the contact information provided in 

the request notifying the designated contact that the hospital’s request has been received; 

 (2) Provide a formal response to the hospital’s designated contact using the 

contact information provided in the request notifying them of our decision; and 

 (3) Complete our review of any CY 2013 request and communicate our response 

within 90 days following our receipt of such a request. 

We note that we might also decide to grant waivers or extensions to hospitals that 

have not requested them when we determine that an extraordinary circumstance, such as 

an act of nature (for example, hurricane) affects an entire region or locale. If we make 

the determination to grant a waiver or extension to hospitals in a region or locale, we 

would communicate this decision to hospitals and vendors through routine 

communication channels, including but not limited to e-mails and notices on the 

QualityNet Web site. We invite public comments on these proposals. 
J. Electronic Health Records (EHRs)

 Starting with the FY 2006 IPPS final rule, we have encouraged hospitals to take 

steps toward the adoption of EHRs (also referred to in previous rulemaking documents as 

electronic medical records) that will allow for reporting of clinical quality data from 

EHRs to a CMS data repository (70 FR 47420 through 47421). We sought to prepare for 

future EHR submission of quality measures by sponsoring the creation of electronic 

specifications for quality measures under consideration for the Hospital IQR Program. 

Through the Medicare and Medicaid EHR Incentive Programs, we expect that the 

submission of quality data through EHRs will provide a foundation for establishing the 

capacity of hospitals to send, and for CMS, in the future, to receive, quality measures via 

hospital EHRs for Hospital IQR Program and Hospital OQR Program measures. We 

expect the Hospital IQR and Hospital OQR Programs to transition to the use of certified 

EHR technology, for measures that otherwise require information from the clinical 

record. This would allow us to collect data for measures without the need for manual 

chart abstraction. 

 In the FY 2012 IPPS/LTCH PPS proposed rule (75 FR 25894), we identified 

FY 2015 as a potential transition date to move to EHR-based submission and phase out 

manual chart abstraction for the Hospital IQR Program. We also anticipate such a 

transition for hospital outpatient measures, although likely somewhat after the transition 

for hospital inpatient measures. This is because we hope to first align the clinical quality 

measures in the Medicare EHR Incentive Program with the Hospital IQR Program 

measures. Our goals are to align the hospital quality reporting programs, to seek to avoid 
redundant and duplicative reporting of quality measures for hospitals, and to rely largely 

on EHR submission for many measures based on clinical record data. 

As noted below, the Stage 2 Medicare EHR Incentive Program proposed rule 

would require electronic reporting of clinical quality measures beginning in 2014 for 

eligible hospitals and CAHs that are beyond the first year of Stage 1 of meaningful use. 

Under our timeline for EHR-based submission under the Hospital OQR Program, some 

eligible hospitals would be in their second year of Stage 2 reporting and these eligible 

hospitals could be using two methods to report similar information for the Medicare and 

Medicaid EHR Incentive Programs and the Hospital OQR Program. We considered 

allowing, but not requiring, EHR-based submission at the earliest possible date, so as to 

reduce the burden of hospitals. We are not proposing this approach because we believe 

that it would not be consistent with our goal that measure results that must be publicly 

reported should be based on consistent, comparable results among reporting hospitals and 

because our first priority is the align EHR-based submissions under the Hospital IQR 

Program. We invite public comment on this issue. 

K. Proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 

Eligible Hospitals and CAHs

In the 2012 OPPS/ASC final rule with comment period we finalized the voluntary 

2012 Electronic Reporting Pilot for eligible hospitals and CAHs participating in the 

Medicare EHR Incentive Program for the 2012 payment year and also revised our 

regulations at §495.8(b)(2) accordingly. We refer readers to the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 74489 through 74492) for detailed discussion of 

the Electronic Reporting Pilot. 
We are proposing to continue the Electronic Reporting Pilot for the 2013 payment 

year as finalized for the 2012 payment year. We are proposing to revise our regulations 

at § 495.8(b)(2)(vi) to reflect the continuation of the Electronic Reporting Pilot for 2013, 

and also to remove the reference to § 495.6(f)(9) in order to conform with the proposed 

changes to § 495.6(f) that were included in the EHR Incentive Program - Stage 2 

proposed rule (77 FR 13817). We invite public comments on these proposals. 

We note that we finalized reporting clinical quality measures for the Medicare EHR 

Incentive Program by attestation of clinical quality measure results in the CY 2012 

OPPS/ASC final rule with comment period for 2012 and subsequent years, such as 2013 

(76 FR 74489). Thus, eligible hospitals and CAHs may continue to report clinical quality 

measure results as calculated by certified EHR technology by attestation for 2013, as they 

did for 2011 and 2012. We also note the intent of CMS to move to electronic reporting. 

In the Stage 2 Medicare EHR Incentive Program proposed rule, we proposed that the 

Medicare EHR Incentive Program would require electronic reporting of clinical quality 

measures beginning in 2014 for eligible hospitals and CAHs that are beyond the first year 

of Stage 1 of meaningful use (77 FR 13764). 

XVI. Requirements for the Ambulatory Surgical Center Quality Reporting 

(ASCQR) Program 

A. Background

1. Overview 

 We refer readers to section XV.A.1. of this proposed rule 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. 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 comments on 

10 measures. In addition to 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 as required by section 

3006(f) of the Affordable Care Act, as added by section 10301(a) of the Affordable Care 

Act. We also submitted a report to Congress, as required by section 3006(f)(4) of the 

Affordable Care Act, entitled “Medicare Ambulatory Surgical Center Value-Based 

Purchasing Implementation Plan” that details this plan. This report is found on the CMS 
Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/ASCPayment/Downloads/C_ASC_RTC-2011.pdf. Currently, we do not have 

express statutory authority to implement an ASC VBP program. If and when legislation 

is enacted that authorizes CMS to implement an ASC VBP program, we will develop the 

program and propose it through 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. We adopted quality measures for the CY 2014, CY 

2015, and CY 2016 payment determination 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 updating of measures, publication of ASCQR 

Program data, and, for the CY 2014 payment determination, data collection and 

submission 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 and appeals 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 is scheduled to be 

finalized earlier and prior to data collection for the CY 2014 payment determination, 

which is to begin with services furnished on October 1, 2012. In the FY 2013 

IPPS/LTCH PPS proposed rule (77 FR 28101 through 28105), we issued proposals for 
administrative requirements, data completeness requirements, extraordinary 

circumstances waiver or extension requests, and a reconsideration process. For a 

complete discussion of these proposals, we refer readers to the FY 2013 IPPS/LTCH PPS 

proposed rule (77 FR 28101 through 28105). 

Because we have included proposals in the FY 2013 IPPS/LTCH PPS proposed 

rule for the ASCQR Program, we are limiting the number of proposals in this proposed 

rule. In addition, in an effort to prevent confusion regarding what we are proposing in 

this proposed rule and what we have proposed in the FY 2013 IPPS/LTCH PPS proposed 

rule, in this proposed rule, we are limiting our discussion of the proposals contained in 

the FY 2013 IPPS/LTCH PPS proposed rule primarily to background related to the 

proposals being made in this proposed rule. 

B. ASCQR Program Quality Measures

1. Proposed Considerations in the Selection of ASCQR Program Quality Measures 

Section 1833(i)(7)(B) of the Act states that section 1833(t)(17)(C) of the Act shall 

apply with respect to ASC services in a similar manner in which they apply to hospitals 

for the Hospital OQR Program, “except as the Secretary may otherwise provide.” The 

requirements under section 1833(t)(17)(C)(i) of the Act state that measures developed 

shall “be appropriate for the measurement of quality of care (including medication errors) 

furnished by hospitals in outpatient settings and that reflect consensus among affected 

parties and, to the extent feasible and practicable, shall include measures set forth by one 

or more national consensus building entities.” 

In addition to following the statutory requirements, in selecting measures for the 

ASCQR Program and other quality reporting programs, we have focused on measures 
that have a high impact on and support HHS and CMS priorities for improved health care 

outcomes, quality, safety, efficiency, and satisfaction for patients. Our goal for the future 

is to expand any measure set adopted for the ASCQR Program to address these priorities 

more fully and to align ASC quality measure requirements with those of other reporting 

programs as appropriate, including the Hospital OQR Program, so that the burden for 

reporting will be reduced. 

In general, we prefer to adopt measures that have been endorsed by the NQF 

because it is a national multi-stakeholder organization with a well-documented and 

rigorous approach to consensus development. However, as discussed above, the Hospital 

OQR Program statute only requires that we adopt measures that are appropriate for the 

measurement of the quality of care furnished by hospitals in outpatient settings, reflect 

consensus among affected parties, and, to the extent feasible and practicable, include 

measures set forth by one or more national consensus building entities. Therefore, 

measures are not required to be endorsed by the NQF or any other national consensus 

building entity and, as we have noted in a previous rulemaking for the Hospital OQR 

Program (75 FR 72065), the requirement that measures reflect consensus among affected 

parties can be achieved in other ways, including through the measure development 

process, through broad acceptance and use of the measure(s), and through public 

comment. Further, the Secretary has broader authority under the ASCQR Program 

statute, as discussed above, to adopt nonendorsed measures or measures that do not 

reflect consensus for the ASCQR Program because, under the ASCQR Program statute, 

these Hospital OQR Program provisions apply “except as the Secretary may otherwise 

provide.” 
In developing the ASCQR Program, we applied the principles set forth in the 

CY 2011 OPPS/ASC proposed rule and final rule with comment period (76 FR 42337 

through 42338 and 74494 through 74495, respectively). Although we are not proposing 

any new measures for the ASCQR Program in this proposed rule as discussed below, we 

plan to apply the following principles in future measure selection and development for 

the ASCQR Program. These principles were applied in developing other quality 

reporting programs and many are the same principles applied in developing the ASCQR 

Program last year. 

● Our overarching goal is to support the National Quality Strategy’s three-part 

aim of better health care for individuals, better health for populations, and lower costs for 

health care. The ASCQR Program will help achieve this three-part aim by creating 

transparency around the quality of care at ASCs to support patient decision-making and 

quality improvement. More information regarding the National Quality Strategy can be 

found at: http://www.hhs.gov/secretary/about/priorities/priorities.html and

http://www.ahrq.gov/workingforquality/. HHS engaged a wide range of stakeholders to 

develop the National Quality Strategy, as required by the Affordable Care Act. 

● Pay-for-reporting and public reporting programs should rely on a mix of 

standards, process, outcomes, and patient experience of care measures. Across all 

programs, we seek to move as quickly as possible to the use of primarily outcome and 

patient experience measures. To the extent practicable and appropriate, outcome and 

patient experience measures should be adjusted for risk or other appropriate patient 

population or provider/supplier characteristics. 
● To the extent possible and recognizing differences in payment system maturity 

and statutory authorities, measures should be aligned across public reporting and payment 

systems under Medicare and Medicaid. The measure sets should evolve so that they 

include a focused core set of measures appropriate to the specific provider/supplier 

category that reflects the level of care and the most important areas of service and 

measures for that provider/supplier. 

● We weigh the relevance and the utility of measures compared to the burden on 

ASCs in submitting data under the ASCQR Program. The collection of information 

burden on providers and suppliers should be minimized to the extent possible. To this 

end, we continuously seek to adopt electronic-specified measures so that data can be 

calculated and submitted via certified EHR technology with minimal burden. We also 

seek to use measures based on alternative sources of data that do not require chart 

abstraction or that use data already being reported by ASCs. 

● We take into account the views of the Measure Application Partnership (MAP). 

The MAP is a public-private partnership convened by the NQF for the primary purpose 

of providing input to HHS on selecting performance measures for quality reporting 

programs and pay-for-reporting programs. The MAP views patient safety as a high 

priority area and it strongly supports the use of NQF-endorsed safety measures. 

Accordingly, we consider the MAP’s recommendations in selecting quality and 

efficiency measures (we refer readers to the Web sites at: 

http://www.qualityforum.org/Setting_Priorities/Partnership/Measure_Applications_Partn

ership.aspx, and 

http://www.qualityforum.org/WorkArea/linkit.aspx?LinkIdentifier=id&ItemID=69885). 
● Measures should be developed with the input of providers/suppliers, 

purchasers/payers and other stakeholders. Measures should be aligned with best practices 

among other payers and the needs of the end users of the measures. We take into account 

widely accepted criteria established in medical literature. 

● HHS Strategic Plan and Initiatives. HHS is the U.S. government’s principal

agency for protecting the health of all Americans. HHS accomplishes its mission through 

programs and initiatives. Every 4 years HHS updates its Strategic Plan and measures its 

progress in addressing specific national problems, needs, or mission-related challenges. 

The current goals of the HHS Strategic Plan can be located at 

http://www.hhs.gov/about/FY2012budget/strategicplandetail.pdf. 

● CMS Strategic Plan. We strive to ensure that measures for different Medicare 

and Medicaid programs are aligned with priority quality goals, that measure 

specifications are aligned across settings, that outcome measures are used whenever 

possible, and that quality measures are collected from EHRs as appropriate. 

 We believe that ASCs are similar to HOPDs, insofar as the delivery of surgical 

and related nonsurgical services. Similar standards and guidelines can be applied 

between HOPDs and ASCs with respect to surgical care improvement, because many of 

the same surgical procedures are provided in both settings. Measure harmonization 

assures that comparable care in these settings can be evaluated in similar ways, which 

further assures that quality measurement can focus more on the needs of a patient with a 

particular condition rather than on the specific program or policy attributes of the setting 

in which the care is provided. 
 We invite public comment on this approach in future measure selection and 

development for the ASCQR Program. 

2. ASCQR Program Quality Measures 

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. We also finalized our policy to retain measures from 

one calendar year payment determination to the next so that measures adopted for a 

previous payment determination year would be retained for subsequent payment 

determination years (76 FR 74504, 74509, and 74510). 

We adopted the following five claims-based measures for the CY 2014 payment 

determination for services furnished between October 1, 2012 and December 31, 2012: 

(1) Patient Burns (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). 

For the CY 2015 payment determination, we retained the five claims-based 

measures we adopted for the CY 2014 payment determination and adopted the following 

two structural measures: (1) Safe Surgery Checklist Use; and (2) ASC Facility Volume 

Data on Selected ASC Surgical Procedures. We specified that reporting for the structural 

measures would be between July 1, 2013 and August 15, 2013, for services furnished 

between January 1, 2012 and December 31, 2012, using an online measure submission 

Web page available at: https://www.QualityNet.org. We did not specify the data 
collection period for the five claims-based measures for the CY 2015 payment 

determination. 

For the CY 2016 payment determination, we finalized the retention of the seven 

measures from the CY 2015 payment determination (five claims-based measures and two 

structural measures) and adopted Influenza Vaccination Coverage Among Healthcare 

Personnel (NQF #0431), a process of care, healthcare-associated infection measure. We 

specified that data collection for the influenza vaccination measure would be via the 

National Healthcare Safety Network from October 1, 2014 through March 31, 2015. We 

did not specify the data collection period for the claims-based or structural measures. 

We stated that, to the extent we finalize some or all of the measures for future 

payment determination years, we would not be precluded from adopting additional 

measures or changing the list of measures for future payment determination years through 

annual rulemaking cycles so that we may address changes in program needs arising from 

new legislation or from changes in HHS and CMS priorities. 

Considering the time and effort required for us to develop, align, and implement 

the infrastructure necessary to collect data on the ASCQR Program measures and make 

payment determinations, and likewise the time and effort required on the part of ASCs to 

plan and prepare for quality reporting, at this time we are not proposing to delete or add 

any quality measures for the ASCQR Program for the CY 2014, CY 2015, and CY 2016 

payment determination years or to adopt quality measures for subsequent payment 

determination years. For readers’ reference, the following table lists the ASCQR 

Program quality measures we previously finalized in the CY 2012 OPPS/ASC final rule 

with comment period (76 FR 74504 through 74511). 
ASC Program Measurement Set Adopted in Previous Rulemaking 

ASC-1: Patient Burn* 

ASC-2: Patient Fall* 

ASC-3: Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong 

Implant* 

ASC-4: Hospital Transfer/Admission* 

ASC-5: Prophylactic Intravenous (IV) Antibiotic Timing* 

ASC-6: Safe Surgery Checklist Use** 

ASC-7: ASC Facility Volume Data on Selected ASC Surgical Procedures** 

Procedure Category Corresponding HCPCS Codes 

Gastrointestinal 40000 through 49999, G0104, G0105,G0121,C9716, 

C9724, C9725, and 0170T 

Eye 65000 through 68999, G0186, 0124T, 0099T, 0017T, 

0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 

0191T, 0192T, 76510, and 0099T 

Nervous System 61000 through 64999, G0260, 0027T, 0213T, 0214T, 

0215T, 0216T, 0217T, 0218T, and 0062T 

Musculoskeletal 20000 through 29999, 0101T, 0102T, 0062T, 0200T, and 

0201T 

Skin 10000 through 19999, G0247, 0046T, 0268T, G0127, 

C9726, and C9727 

Genitourinary 50000 through 58999, 0193T, and 58805 

ASC- 8: Influenza Vaccination Coverage among Healthcare Personnel *** 

*New measure for the CY 2014 payment determination. 

** New measure for the CY 2015 payment determination. 

***New measure for the CY 2016 payment determination. 

3. ASC 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. Therefore, through future rulemaking, we intend to propose new measures 

consistent with the principles discussed in section XVI.B.1. of this proposed rule, in order 

to select measures that address clinical quality of care, patient safety, and patient and 
caregiver experience of care. We invite public comment specifically on the inclusion of 

procedure-specific measures for cataract surgery, colonoscopy, endoscopy, and for 

anesthesia-related complications in the ASCQR Program measure set. 

4. Clarification Regarding the Process for Updating ASCQR Program Quality Measures 

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). This 

process includes the same subregulatory process for the ASCQR Program as used for the 

Hospital OQR Program for updating measures, including issuing regular manual releases 

at 6-month intervals, providing addenda as necessary, and providing at least 3 months of 

advance notice for nonsubstantive changes such as changes to ICD-9-CM, CPT, NUBC, 

and HCPCS codes, and at least 6 months’ notice for substantive changes to data elements 

that would require significant systems changes. We provided a citation to the CY 2009 

OPPS/ASC final rule with comment period where the final Hospital OQR Program 

policies are discussed (73 FR 68766 through 68767). 

In examining last year’s finalized policy for the ASCQR Program, we recognize 

that we may need to provide additional clarification of the ASCQR Program policy in the 

context of the previously finalized Hospital OQR Program policy in the CY 2009 

OPPS/ASC final rule with comment period (73 FR 68766 through 68767). Therefore, in 

this proposed rule, we seek to more clearly articulate the policy that we adopted for the 

ASCQR Program, which is the same policy that has been adopted for the Hospital OQR 

Program. 
In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766 through 

68767), we established a subregulatory process for making updates to the measures we 

have adopted for the Hospital OQR Program. This process is necessary so that the 

Hospital OQR measures are calculated based on the most up-to-date scientific evidence 

and consensus standards. Under this process, when a national consensus building entity 

updates the specifications for a measure that we have adopted for the Hospital OQR 

Program, we update our specifications for that measure accordingly and provide notice as 

described above and in the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74514). An example of such an entity is the NQF. For measures that are not 

endorsed by a national consensus building entity, the subregulatory process is based on 

scientific advances as determined necessary by CMS, in part, through our measure 

maintenance process involving Technical Expert Panels (73 FR 68767). We invite public 

comment on this clarification of the finalized ASCQR Program policy of using a 

subregulatory process to update measures. 

C. Proposed Requirements for Reporting of ASC Quality Data

1. Form, Manner, and Timing for Claims-Based Measures for the CY 2014 Payment 

Determination and Subsequent Payment Determination Years 

a. Background 

 In the CY 2012 OPPS/ASC final rule with comment period, we adopted 

claims-based measures for the CY 2014, CY 2015, and CY 2016 payment determination 

years (76 FR 74504 through 74511). We also finalized that, to be eligible for the full 

CY 2014 ASC annual payment update, 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). As 

stated in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74516), ASCs 

will add the appropriate QDCs on their Medicare Part B claims forms, the Form CMS1500s 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-ServicePayment/ASCPayment/ASC-Transmittals-Items/ASC-CR7754-R2425CP.html). Details 

on how to use these codes for submitting numerators and denominator information are 

available in the ASCQR Program Specifications Manual located on the QualityNet Web 

site (https://www.QualityNet.org). We also 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. We did not 

finalize a date by which claims would be processed to be considered for the CY 2014 

payment determination. 

In the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28104), we proposed that 

claims for services furnished between October 1, 2012 and December 31, 2012, would 

have to be paid by the administrative contractor by April 30, 2013 to be included in the 

data used for the CY 2014 payment determination. We believe that this claim paid date 

would allow 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. We did not finalize a data 

collection and processing period for the CY 2015 payment determination, but stated our 

intention to do so in this proposed rule (77 FR 28104). 
b. Proposals Regarding Form, Manner, and Timing for Claims-Based Measures for the 

CY 2015 Payment Determination and Subsequent Payment Determination Years 

We are proposing that, for the CY 2015 payment determination and subsequent 

payment determination years, an ASC must submit complete data on individual quality 

claims-based measures through a claims-based reporting mechanism by submitting the 

appropriate QDCs on the ASC’s Medicare claims. We are proposing that the data 

collection period for such claims-based measures will be for the calendar year 2 years 

prior to a payment determination. We also are proposing that the claims for services 

furnished in each calendar year would have to be paid by the administrative contractor by 

April 30 of the following year of the ending data collection time period to be included in 

the data used for the payment determination. Thus, for example, for the CY 2015 

payment determination, we are proposing the data collection period to be claims for 

services furnished in CY 2013 (January 1, 2013 through December 31, 2013) which are 

paid by the administrative contractor by April 30, 2014. We believe that this claim paid 

date would allow 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. We invite 

public comment on these proposals. 

2. Data Completeness and Minimum Threshold for Claims-Based Measures Using QDCs 

a. Background 

 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 proposed rule (77 FR 28104), we 

proposed, 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 50 percent is a reasonable minimum threshold 

based upon the considerations discussed above for the initial implementation years of the 

ASCQR Program. We stated in the proposed rule that we intend to propose to increase 

this percentage for subsequent payment determination years as ASCs become more 

familiar with reporting requirements for this quality data reporting program. 

b. Proposed Data Completeness Requirements for the CY 2015 Payment Determination 

and Subsequent Payment Determination Years 

 After publication of the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 28101 

through 28105), we realized that we did not propose a methodology for determining data 

completeness for the CY 2015 payment determination and subsequent payment 

determination years. Therefore, we are proposing that data completeness for 

claims-based measures for the CY 2015 payment determination and subsequent payment 

determination years 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 payment determination years. This is the same method for determining data 
completeness for claims-based measures that was finalized in the CY 2012 OPPS/ASC 

final rule with comment period (76 FR 74516) for the CY 2014 payment determination. 

We note that the claims we use include claims where Medicare is either the primary or 

secondary payor. We invite public comment on this proposal. 

D. Proposed 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 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. Proposed Reduction to the ASC Payment Rates for ASCs That Fail to Meet the 

ASCQR Program Requirements for the CY 2014 Payment Determination and Subsequent 

Payment Determination Years 

 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 XIV.H. of this proposed rule. 
To implement the requirement to reduce the annual update for ASCs that fail to 

meet the ASCQR Program requirements, we are proposing that we would calculate two 

conversion factors: a full update conversion factor and an ASCQR Program reduced 

update conversion factor. We are proposing 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 are proposing 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 proposed 

rule, 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 are proposing 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 officebased 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 are proposing 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 XIV.D.2.b. of this proposed rule) are paid at the 

lesser of the MPFS non-facility PE RVU-based amounts and the standard ASC ratesetting 

methodology. We are proposing 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 are proposing 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 are proposing 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. 

 We invite public comment on these proposals. 

XVII. Proposed Inpatient Rehabilitation Facility (IRF) Quality Reporting Program 

Updates 

A. Overview

 In accordance with section 1886(j)(7) of the Act, as added by section 3004 of the 

Affordable Care Act, the Secretary established a quality reporting program (QRP) for 

Inpatient Rehabilitation Facilities (IRFs). The IRF Quality Reporting Program 

(IRF QRP) was implemented in the FY 2012 IRF PPS final rule (76 FR 47836). We refer 

readers to the FY 2012 IRF PPS final rule (76 FR 47873 through 47883) for a detailed 

discussion on the background and statutory authority for the IRF QRP. 

 In this proposed rule, we are proposing to: (1) adopt updates on a previously 

adopted measure for the IRF QRP that will affect annual prospective payment amounts in 

FY 2014; (2) adopt a policy that would provide that any measure that has been adopted 

for use in the IRF QRP will remain in effect until the measure is actively removed, 
suspended, or replaced; and (3) adopt policies regarding when notice-and-comment 

rulemaking will be used to update existing IRF QRP measures. 

 While we generally would expect to publish IRF QRP proposals in the annual IRF 

Prospective Payment System (PPS) rule, there are no proposals for substantive changes to 

the IRF PPS this year, so we are only publishing an update notice. Because full noticeand-comment rulemaking is required for what we are proposing for the IRF QRP, we 

needed to identify an appropriate rulemaking process in which we could insert our IRF 

QRP proposals. As this proposed rule was already scheduled to include additional 

pay-for-reporting proposals for the Hospital OQR Program and quality reporting 

requirements for the ASCQR Program, it offered an opportunity to allow the public to 

review all three quality programs’ proposals in concert with one another in a timeframe 

that would be appropriate for implementing these IRF QRP proposals in time for the FY 

2014 IRF PPS payment cycle. Therefore, we elected to include the IRF QRP proposals 

in this CY 2013 OPPS/ASC proposed rule. 
B. Updates to IRF QRP Measures Which Are Made as a Result of Review by the NQF 

Process

 Section 1886(j)(7) of the Act generally requires the Secretary to adopt measures 

that have been endorsed by the entity with a contract under section 1890(a) of the Act. 

This contract is currently held by the NQF. The NQF is a voluntary consensus 

standard-setting organization with a diverse representation of consumer, purchaser, 

provider, academic, clinical, and other health care stakeholder organizations. The NQF 

was established to standardize health care quality measurement and reporting through its 

consensus development process.2

The NQF undertakes to: (1) review new quality measures and national consensus 

standards for measuring and publicly reporting on performance; (2) provide for annual 

measure maintenance updates to be submitted by the measure steward for endorsed 

quality measures; (3) provide for measure maintenance endorsement on a 3-year 

cycle;(4) conduct a required follow-up review of measures with time limited endorsement 

for consideration of full endorsement; and (5) conduct ad hoc review of endorsed quality 

measures, practices, consensus standards, or events when there is adequate justification 

for a review.3

 In the normal course of measure maintenance, the NQF solicits 

information from measure stewards for annual reviews and in order to review measures 

for continued endorsement in a specific 3-year cycle. In this measure maintenance 

 

2

For more information about the NQF Consensus Development Process, we refer readers to the Web site at: 

http://www.qualityforum.org/Measuring_Performance/Maintenance_of_NQFEndorsed%C2%AE_Performance_Measures.aspx). 

3

 For more information about the NFQ Ad Hoc Review process, we refer readers to the Web site at: 

http://www.qualityforum.org/Projects/ab/Ad_Hoc_Reviews/CMS/Ad_Hoc_Reviews-CMS.aspx).
process, the measure steward is responsible for updating and maintaining the currency 

and relevance of the measure and for confirming existing specifications to the NQF on an 

annual basis.4 As part of the ad hoc review process, the ad hoc review requester and the 

measure steward are responsible for submitting evidence for review by a NQF Technical 

Expert panel which, in turn, provides input to the Consensus Standards Approval 

Committee which then makes a decision on endorsement status and/or specification 

changes for the measure, practice, or event. 

Through the NQF’s measure maintenance process, the NQF-endorsed measures 

are sometimes updated to incorporate changes that we believe do not substantially change 

the nature of the measure. Examples of such changes could be updated diagnosis or 

procedure codes, changes to exclusions to the patient population, definitions, or extension 

of the measure endorsement to apply to other settings. We believe these types of 

maintenance changes are distinct from more substantive changes to measures that result 

in what can be considered new or different measures, and that they do not trigger the 

same agency obligations under the Administrative Procedure Act. 

We are proposing that, if the NQF updates an endorsed measure that we have 

adopted for the IRF QRP in a manner that we consider to not substantially change the 

nature of the measure, we would use a subregulatory process to incorporate those updates 

to the measure specifications that apply to the program. Specifically, we would revise the 

information that is posted on the CMS IRF QRP Web site at: http://www.cms.gov/IRFQuality-Reporting/ so that it clearly identifies the updates and provides links to where 

 

4

For more information about the NQF Measure Maintenance process, we refer readers to the NQF Web site 

at: 

http://www.qualityforum.org/Measuring_Performance/Improving_NQF_Process/Process_Assessment__M

easure_Maintenance.aspx.
additional information on the updates can be found. In addition, we would refer IRFs to 

the NQF Web site for the most up-to-date information about the quality measures 

(http://www.qualityforum.org/). We would provide sufficient lead time for IRFs to 

implement the changes where changes to the data collection systems would be necessary. 

We would continue to use the rulemaking process to adopt changes to measures 

that we consider to substantially change the nature of the measure. We believe that our 

proposal adequately balances our need to incorporate NQF updates to NQF-endorsed IRF 

QRP measures in the most expeditious manner possible, while preserving the public's 

ability to comment on updates to measures that so fundamentally change an endorsed 

measure that it is no longer the same measure that we originally adopted. We note that, 

in the FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27870), we proposed a similar 

policy for the Hospital IQR Program, the PPS Cancer Exempt Hospital (PCH) Quality 

Reporting Program; the Long-Term Care Hospital Quality Reporting (LTCHQR) 

Program, and the Inpatient Psychiatric Facility (IPF) Quality Reporting Program. 

C. Proposed Process for Retention of IRF Quality Measures Adopted in Previous Fiscal 

Year Rulemaking Cycles

We expect that the measures that we adopt for purposes of the IRF QRP will 

remain current and useful for a number of years after their initial adoption. While we 

could elect to adopt measures for each fiscal year’s payment determinations, we believe 

that it would be easier for all concerned if we adopt the measures in perpetuity with an 

expectation that we will propose to remove, suspend or replace them through future 

rulemaking if necessary. Therefore, for the purpose of streamlining the rulemaking 

process, we are proposing that when we initially adopt a measure for the IRF QRP for a 
payment determination, this measure will be automatically adopted for all subsequent 

fiscal year payment determinations or until such time as we might propose and finalize its 

removal, suspension, or replacement. 

Quality measures may be considered for removal by CMS if: (1) measure 

performance among IRFs is so high and unvarying that meaningful distinctions in 

improvements in performance can no longer be made; (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) a more broadly applicable measure (across 

settings, populations, or conditions) for the particular topic is available; (5) a measure 

that is more proximal in time to desired patient outcomes for the particular topic is 

available; (6) if a measure that is more strongly associated with desired patient outcomes 

for the particular topic becomes available; or (7) collection or public reporting of a 

measure leads to negative unintended consequences. 

For any such removal, the public will generally be given an opportunity to 

comment through the annual rulemaking process. However, if there is reason to believe 

continued data collection of a measure raises potential safety concerns, we will take 

immediate action to remove the measure from IRF QRP and not wait for the annual 

rulemaking cycle. Such measures will be promptly removed with IRFs and the public 

being immediately notified of such a decision through the usual IRF QRP communication 

channels, including listening session, memos, email notification, and Web postings. In 

such instances, the removal of a measure will also be formally announced in the next 

annual rulemaking cycle. We are inviting public comment on our proposal that once a 
quality measure is adopted, it is retained for use in the subsequent fiscal year payment 

determinations unless otherwise stated. 
We are proposing to apply this principle to the two measures that were selected 

for use in the IRF QRP beginning on October 1, 2012. These adopted measures are: 

(1) Catheter-Associated Urinary Tract Infection (CAUTI) Outcome Measure 

(NQF #0138)5, and (2) Percent of Residents with Pressure Ulcers that Are New or 

Worsened (NQF #0678). 

We invite public comment on our proposal to apply the principle of retention of 

the two above-stated quality measures that were adopted for use in the IRF QRP in the 

FY 2012 IRF PPS final rule (76 FR 47874 through 47878). Likewise, we invite public 

comment on our proposed use of the process, as stated above, for retention of future IRF 

QRP quality measures after adoption into the IRF QRP. 

D. Adopted Measures for the FY 2014 Payment Determination

We have previously identified the measurement of pressure ulcers and the 

prevalence of urinary tract infections (UTI) as two critical areas for quality measurement 

under the IRF QRP. While section 1886(j)(7) of the Act generally requires the adoption 

of endorsed measures, there were no NQF-endorsed measures for the two desired areas in 

the IRF context at the time CMS was conducting its rulemaking. As section 

1886(j)(7)(D)(ii) of the Act authorizes the use of measures that are not endorsed when 

there are no feasible and practicable endorsed options, in the FY 2012 IRF PPS final rule 

(76 FR 47874 through 47876), we adopted applications of an NQF-endorsed pressure 

 

5

 The CAUTI measure that was adopted in the FY 2012 IRF PPS final rule dated August 5, 2011 was titled 

“Urinary Catheter-Associated Urinary Tract Infection [CAUTI] Rate Per 1,000 Urinary Catheter Days for 

ICU patients.” However, this measure was submitted by the CDC (measure steward) to the NQF for a 

measure maintenance review. As part of their NQF submission, the CDC asked for changes to the 

measure, including expansion of the scope of the measure to non-ICU settings, including IRFs. The NQF 

approved the CDC’s request on January 12, 2012. Due to the changes that were made to the measure, the 

CDC believed that it was appropriate that the measure title be changed. This measure is now titled 

“National Health Safety Network (NHSN) Catheter Associated Urinary Tract Infection (CAUTI) Outcome 

Measure.” 
ulcer measure that had been endorsed for use in skilled nursing facilities (NQF #678) and 

a CDC measure, the CDC’s Urinary Catheter Associated Urinary Tract Infection 

[CAUTI] rate per 1, 000 urinary catheter days, for Intensive Care Unit [ICU] Patients 

(NQF #0138), that had NQF endorsement for use in intensive care settings of hospitals. 

1. Clarification Regarding Existing IRF Quality Measures That Have Undergone 

Changes during NQF Measure Maintenance Processes 

In the FY 2012 IRF PPS final rule (76 FR 47874 through 47876), we used the 

endorsement exception authority under section 1886(j)(7)(D)(ii) of the Act. This 

authority permitted us to adopt the Urinary Catheter-Associated Urinary Tract Infection 

[CAUTI] rate per 1, 000 urinary catheter days, for Intensive Care Unit [ICU] Patients 

measure (NQF #0138). We chose to adopt this measure because there was no 

NQF-endorsed CAUTI measure available to assess the prevalence of urinary 

catheter-associated urinary tract infection [CAUTI] rates in the IRF setting. 

As stated in section XVII.C. of this proposed rule, the CAUTI measure steward, 

the CDC, submitted the CAUTI Measure to NQF for a scheduled measure maintenance 

review in late 2011. At that time the CDC also filed a request to expand the CAUTI 

measure to non-ICU settings, including IRFs. The NQF granted the CDC’s request for an 

expansion of the scope of endorsement of the CAUTI measure to additional non-ICU 

care settings, including “rehabilitation hospitals.” The NQF defined the term 

“rehabilitation hospitals” as including both freestanding IRFs as well as IRF units that are 

located within an acute care facility. Despite the expansion in the scope of endorsement 

of the CAUTI measure, the original NQF endorsement number was retained. However, 
the measure was re-titled “National Health Safety Network (NHSN) Catheter Associated 

Urinary Tract Infection (CAUTI) Outcome Measure.”6

As amended, the expanded CAUTI measure also uses a different data calculation 

method, which is referred to as the standardized infection ratio (SIR). 7,8,9,10 The change 

in the data calculation method does not, however, change the way in which IRFs will 

submit CAUTI data to the CDC. IRFs will still be required to submit their CAUTI data 

to the CDC via the National Healthcare Safety Network (NHSN) online system. 

Under the originally endorsed version of the CAUTI measure the CDC calculated 

an infection rate per 1,000 urinary catheter days. Under the new method, CDC will use a 

SIR calculation method, which is comprised of the actual rate of infection over the 

expected rate of infection.11 We believe that the SIR calculation method is a more 

accurate way to calculate the CAUTI measure results for comparative purposes because it 

takes into account an IRF’s case mix. In addition, use of the SIR calculation does not 

require any change to the type of data required to be submitted by IRFs or method of data 

 

6

http://www.qualityforum.org/MeasureDetails.aspx?actid=0&SubmissionId=1121#k=0138&e=0&st=&sd=

&s=n&so=a&p=1&mt=&cs=&ss=

6

Centers for Disease Control and Prevention (2012, January), Central Line-Associated Bloodstream 

Infection (CLABSI) Event. Retrieved from 

http://www.cdc.gov/nhsn/PDFs/pscManual/4PSC_CLABScurrent.pdf. 8

 National Quality Forum (2012), National Healthcare Safety Network (NHSN) Central line-associated 

Bloodstream Infection (CLABSI) Outcome Measure. Retrieved from 

http://www.qualityforum.org/QPS/0139. 9

 Centers for Disease Control and Prevention (2012, January), Catheter Associated Urinary Tract Infection 

Event. Retrieved from: http://www.cdc.gov/nhsn/PDFs/pscManual/7pscCAUTIcurrent.pdf. 10 National Quality Forum (2012), National Healthcare Safety Network (NHSN) Catheter Associated 

Urinary Tract Infection (CAUTI) Outcome Measure. Retrieved from 

http://www.qualityforum.org/QPS/0138. 11 The SIR calculation requires the establishment of “expected” rates of infection. We understand that 

CDC will need to collect the CAUTI data that will be submitted under the IRF QRP for a period of time (at 

least 12 months) in order to establish an “expected” rate for each IRF location type prior to being able to 

calculate a SIR. As required by Section 3004 of the Affordable Care Act, we will, at a later date, establish 

public reporting policies in a separate rulemaking. However, we do not intend to publicly report IRF QRP 

CAUTI measure data until sometime after CDC has established the expected rate and is capable of 

generating SIR values. 
submission that IRFs must use in order to comply with the CAUTI measure reporting 

requirements. 

We are making the following proposals in regards to the CAUTI measure: (1) we 

are proposing to adopt changes made to the NQF #0138 CAUTI measure which will 

apply to the FY 2014 annual payment update determination; (2) we are proposing to 

adopt the CAUTI measure, as revised by the NQF on January 12, 2012, for the FY 2015 

payment determination and all subsequent fiscal year payment determinations; and (3) we 

are proposing to incorporate, for use in the IRF QRP, any future changes to the CAUTI 

measure to the extent these changes are consistent with our proposal in section XVII.B. 

of this proposed rule to update measures. We welcome comments on these proposals. 

2. Proposed Updates to the “Percent of Residents Who Have Pressure Ulcers That Are 

New or Worsened” Measure 

 In the FY 2012 IRF PPS final rule (76 FR 47876 through 47878), we again used 

the endorsement exception authority under section 1886(j)(7)(D)(ii) of the Act to adopt 

an application of the “Percent of Residents with Pressure Ulcers that Are New or 

Worsened” measure (NQF #0678). We selected this measure because there was no other 

NQF-endorsed measure available to assess the percentage of patients with pressure ulcers 

that are new or worsened in the IRF setting at that time. We recognized that the NQF 

endorsement of this measure was, at that time, limited to short-stay nursing home 

patients, but we noted our belief that this measure was highly relevant to patients in any 

setting who are at risk of pressure ulcer development and a high priority quality issue in 

the care of IRF patients. Therefore, in the FY 2012 IRF PPS final rule, we finalized the 

adoption of an application of the NQF-endorsed #0678 pressure ulcer measure. We also 
said that we would request that the NQF extend its endorsement of this short-stay nursing 

home pressure ulcer measure to the IRF setting (76 FR 47876 through 47878). 

In April 2012, CMS filed an ad hoc request for review of the NQF #0678 

short-stay pressure ulcer measure with the NQF. In addition, we also requested an 

expansion of this measure to other care settings. As noted in the FY 2012 IRF PPS final 

rule discussion of our adoption of an application of this measure in the IRF context, we 

believe this measure is highly applicable to all post acute care settings, including IRFs 

(76 FR 47876). If the pressure ulcer measure is revised by the NQF, we anticipate that it 

will be re-titled “Percent of Patients or Residents with Pressure Ulcers That Are New Or 

Worsened” (NQF #0678) so as to reflect the expansion in the scope of the applicable 

patient population. 

As of the publication of this proposed rule, the NQF review process for the 

NQF #0678 pressure ulcer measure expansion request is still in progress. If the NQF 

expands the scope of endorsement for this measure to the IRF setting, without any 

substantive changes, we are proposing to adopt and use the revised pressure ulcer 

measure in the IRF QRP, in accordance with the policy set forth above in XVII.B. of this 

proposed rule. We believe that, in this anticipated scenario, the pressure ulcer measure, 

as revised, will be substantively the same measure, although broader in scope, as the 

current NQF-endorsed #0678 pressure ulcer measure. We invite public comments on our 

proposed use of this policy. 

 In the meantime, we are proposing to proceed with our plan, as finalized in the 

FY 2012 IRF PPS final rule, to use an application of the Percent of Residents With 
Pressure Ulcers that Are New or Worsened (NQF #0678) measure for the FY 2014 

payment determination and all subsequent fiscal year payment determinations. 

XVIII. Proposed Revisions to the Quality Improvement Organization (QIO) 

Regulations (42 CFR Parts 476, 478, and 480) 

A. Summary of Proposed Changes

 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 previously changed from “Peer Review Organizations” to 

“Quality Improvement Organizations” through rulemaking (67 FR 36539). We have 

identified several changes that we are proposing because they are essential to remedying 

longstanding problematic aspects of the QIOs’ review activities. These proposed changes 

would enable us to improve the QIO program by ensuring that QIOs are better able to 

meet the needs of Medicare beneficiaries. 

Several of the proposed changes are specific to the QIOs’ processing of quality of 

care reviews, which includes beneficiary complaint reviews. Although references are 

made to QIO sanction activities, the proposed changes do not impact QIO sanction 

activities or the regulations located in 42 CFR Part 1004. 

 In addition, as part of our review of our regulations in light of the President’s 

Executive Order on Regulatory Reform, Executive Order 13563 (January 18, 2011), we 

have identified several technical corrections that would improve the readability and use 

of the QIO regulations. 
 Below, in this proposed rule, we are setting forth our proposals for revising our 

regulations under 42 CFR Parts 476, 478, and 480 relating to the QIO Program. 

B. Quality of Care Reviews

 Section 9353(c) of Pub. L. 99-509 amended section 1154(a) of the Act (adding a 

new paragraph (14)) to require QIOs (then PROs), effective August 1, 1987, to conduct 

an appropriate review of all written complaints from beneficiaries or their representatives 

about the quality of services (for which payment may otherwise be made under 

Medicare) not meeting professionally recognized standards of health care. This authority 

was in addition to the QIOs’ already existing authority under section 1154(a)(1)(B) of the 

Act to perform quality of care reviews. In order to provide more clarity regarding the 

QIOs’ roles, in this proposed rule, we are proposing to add a definition of “quality of care 

review” under § 476.1 to make clear that this review type refers to both beneficiary 

complaint reviews (written or oral) and general quality of care reviews. We also are 

proposing to add under § 476.1 definitions for “beneficiary complaint” to mean a 

complaint by a beneficiary or a beneficiary’s representative alleging that the quality of 

services received by the beneficiary did not meet professionally recognized standards of 

care and may consist of one or more quality of care concerns; “beneficiary complaint 

review” to mean a review conducted by a QIO in response to the receipt of a written 

beneficiary complaint to determine whether the quality of Medicare covered services 

provided to beneficiaries was consistent with professionally recognized standards of 

health care; and “general quality of care review” to mean a review conducted by a QIO to 

determine whether the quality of services provided to a beneficiary(s) was consistent with 

professionally recognized standards of health care. We are proposing that a general 
quality of care review may be carried out as a result of a referral to the QIO or a QIO’s 

identification of a potential concern during the course of another review activity or 

through the analysis of data. In addition, we are proposing to revise the language under 

§ 476.71(a)(2) to make clear that the scope of a QIO’s review includes the right to 

conduct quality of care reviews, including beneficiary complaint reviews and general 

quality of care reviews, as well as a new review process that QIOs can offer Medicare 

beneficiaries called “immediate advocacy,” which is described more fully in section 

XVIII.B.1. of this proposed rule. 

 We are proposing additional changes to the QIO regulations related to the 

following issues: 

1. Beneficiary Complaint Reviews 

 At the time QIOs assumed the authority under section 9353(c) of Pub. L. 99-509 

to conduct reviews of written beneficiary complaints, we made a decision to rely upon 

the existing regulations for certain requirements (for example, the timeframes for 

requesting medical records and the practitioner’s right to consent to the release of specific 

findings to beneficiaries), and to subsequently establish other remaining procedural 

requirements through manual instructions. While this approach has provided QIOs with 

a basic framework for completing the reviews, we have become aware of other issues that 

need to be addressed through the promulgation of new regulations as well as revisions to 

existing regulations. In 2003, the United States Court of Appeals for the District of 

Columbia Circuit issued a decision in the case of Public Citizen, Inc. v. U.S. Department 

of Health and Human Services (332 F.3d 654, June 20, 2003) (referred to below as Public 

Citizen) in which the court determined that QIOs must, at a minimum, notify a 
complainant of the results of its review. We recently completed a comprehensive 

revision to the manual instructions governing both beneficiary complaints and quality of 

care reviews, which, in part, was designed to ensure compliance with this court decision 

(Transmittal 17, April 6, 2012, CMS Manual System, Pub. 100-10 Medicare Quality 

Improvement Organizations, Chapter 5, Quality of Care Review) (available at 

http://www.cms.gov/Regulations-andGuidance/Guidance/Transmittals/Downloads/R17QIO.pdf). These new instructions were 

effective May 7, 2012. While these manual revisions were necessary, we believe that 

additional regulatory changes are needed in order to improve QIO operations. In order to 

subject these additional changes to the processing of beneficiary complaint reviews and 

general quality of care reviews to notice-and-comment rulemaking, in this proposed rule, 

we are proposing to add new §§ 476.110, 476.120, 476.130, 476.140, 476.150, 476.160, 

and 476.170 as described below in this section. We also are proposing to add new 

definitions of “authorized representative”, “appointed representative; “beneficiary 

representative” and “quality improvement initiative,” and revise the definition of 

“preadmission certification” in § 476.1. In addition, to ensure consistency with the 

proposed revisions to or additional sections under Part 476, we are proposing to revise 

§§ 480.107, 480.132, and 480.133, as discussed more fully below. 

 The proposed revisions to the regulations under Part 476 include several changes 

that would improve the beneficiary’s experience when contacting a QIO about the quality 

of health care he or she has received and also shorten key timeframes so that beneficiaries 

can achieve resolution of their health care concerns in less time. We are proposing 

regulations under new proposed § 476.110 regarding a new alternative dispute resolution 
process called “immediate advocacy.” We are proposing to add a definition of 

“immediate advocacy” under § 476.1, and to make clear that this process is specific to 

oral complaints. We are proposing to define “immediate advocacy” as an informal 

alternative dispute resolution process used to quickly resolve an oral complaint that a 

beneficiary or his or her representative has regarding the quality of health care received, 

and that this process involves a QIO representative’s direct contact with the provider 

and/or practitioner. Historically, the only option available to beneficiaries, regardless of 

the severity or type of issue, is the right to file a written complaint. Once a written 

complaint is received, the QIO is then obligated to conduct a formal peer review of the 

complaint, which includes a review of the beneficiary’s medical information. Although 

this peer review process is effective, it can be quite lengthy and burdensome on providers 

and practitioners, given the various steps that must be completed by the QIO prior to the 

QIO rendering its final decision, with providers and practitioners cooperating with the 

QIO throughout this process. These steps include the time needed by the QIO to follow 

up with beneficiaries to ensure receipt of the complaint in writing, request and receive the 

medical information from the provider and/or practitioner, discuss the QIO’s interim 

decision with the practitioner and/or provider, respond to a practitioner’s and/or 

provider’s request that a QIO conduct a re-review of the initial peer reviewer’s decision, 

and obtain the practitioner’s consent to the release of specific findings in the final letter to 

the beneficiary. By regulation, QIOs must disclose to patients or their representatives 

information they have requested within 30 calendar days (42 CFR 480.132); it is possible 

that obtaining a practitioner’s consent alone could take 30 calendar days. Even if there 
are no delays at any point in the current peer review process, it can take over 150 

calendar days for a QIO to complete its review of a beneficiary’s written complaint. 

 At times, the length of the current peer review process can render the 

beneficiary’s original concern moot, particularly where the beneficiary’s concern relates 

to a communication issue between his or her providers and/or practitioners, the 

prescribing of medications, or the failure to receive a necessary medical item, such as a 

wheelchair. For these types of concerns, we believe that requiring a beneficiary to submit 

the complaint in writing and waiting more than 150 calendar days so that the QIO can 

complete its review does not provide prompt and customer friendly service to Medicare 

beneficiaries. Moreover, at times, certain issues raised by a Medicare beneficiary in a 

complaint may not even be documented in the beneficiary’s medical information. This is 

particularly true for complaints related to communication or coordination issues 

surrounding the beneficiary’s care. Thus, a QIO may actually know at the outset of a 

review that the peer review process will not divulge any information related to the 

beneficiary’s complaint. 

 We believe that, by proposing to establish an informal process such as 

“immediate advocacy,” the QIO would be able to offer an alternative to a Medicare 

beneficiary in those situations where a resolution is needed more quickly than the current 

traditional peer review process. We believe that this proposed new informal process 

would also be beneficial in those instances where information relevant to a complaint 

would most likely not be contained in the medical information or where the Medicare 

beneficiary may simply be put off by the formality of the traditional peer review process. 

In proposing this new informal process, we are specifying in proposed § 476.110(a) that 
the process is available for oral complaints so that there is a clear distinction from the 

process requiring a written complaint under section 1154(a)(14) of the Act. Again, the 

proposed definition of “immediate advocacy” under § 476.1 also would make this clear. 

 We also are proposing that the use of “immediate advocacy” would not be 

available if the QIO makes a preliminary determination that the complaint includes 

concerns that could be deemed significant, substantial, or gross and flagrant violations of 

the standard of care to which a beneficiary is entitled (proposed § 476.110(a)(2)(ii)). In 

addition, we are proposing to add definitions of “quality of care concern” and “significant 

quality of care concern” under § 476.1, and to incorporate the definitions of “gross and 

flagrant violation” and “substantial violation in a substantial number of cases” as these 

two terms are used in 42 CFR 1004.1. We are proposing to define “quality of care 

concern” to mean a concern that care provided did not meet a professionally recognized 

standard of health care, and that a general quality of care review or a beneficiary 

complaint review may cover a single concern or multiple concerns. “Significant quality 

of care concern” would mean a determination by the QIO that the quality of care 

provided to a beneficiary(s) did not meet the standard of care and while not a gross and 

flagrant or substantial violation of the standard, represents a noticeable departure from 

the standard that could reasonably be expected to have a negative impact on the health of 

a beneficiary. “Gross and flagrant violation” would mean that a violation of an 

obligation specified in section 1156(a) of the Act has occurred in one or more instances 

which presents an imminent danger to the health, safety, or well-being of a program 

patient or places the program patient unnecessarily in high-risk situations (as specified in 

42 CFR 1004.1). “Substantial violation in a substantial number of cases” would mean a 
pattern of providing care that is inappropriate, unnecessary, or does not meet recognized 

professional standards of care, or is not supported by the necessary documentation of care 

as required by the QIO (as specified in 42 CFR 1004.1). We believe that the proposed 

definitions would give improved clarity to the distinctions made among concerns that do 

not meet the standard of care and demonstrate that QIOs are responsible for identifying 

all instances where care could have been improved and not just the most significant or 

flagrant failures to meet a standard of care. With regard to “immediate advocacy,” we 

believe that this informal process is not appropriate for those situations where a QIO 

preliminarily determines that a complaint could involve a “gross and flagrant” or 

“substantial” concern. In these circumstances, the QIO would not offer the immediate 

advocacy process, but instead would inform the beneficiary of the right to file a written 

complaint. Moreover, while we are proposing to exclude the use of the immediate 

advocacy process for those instances where “significant quality of care concerns” might 

be present, we are requesting public comments regarding whether the immediate 

advocacy process should be made available for these concerns as well. In addition, while 

we are proposing to restrict the use of the immediate advocacy process to a period of 6 

months after a beneficiary has received the care at issue (proposed § 476.110(a)(1)), we 

also are requesting public comments on whether this time period should be extended 

beyond 6 months, whether based on the proposed structure or in order to accommodate 

the potential broadening of its use for “significant quality of care concerns.” 

 In proposed § 476.110(a)(2), we are specifying that the immediate advocacy 

process can be used for issues that are not directly related to the clinical quality of health 

care itself or that accompany or are incidental to the medical care received. This 
includes, but is not limited to, issues such as delays in obtaining much needed medical 

items (for example, wheelchairs). In addition, in § 476.110(a)(3), we are proposing that 

the Medicare beneficiary must agree to the disclosure of his or her name in order for the 

immediate advocacy process to be used. We believe that it is important for the Medicare 

beneficiary to disclose his or her name because the immediate advocacy process is based 

on the need for open discussions to quickly resolve a beneficiary’s concerns. Moreover, 

we also are proposing that all parties orally consent to the use of immediate advocacy 

(proposed § 476.110(a)(4)). Because our goal is to work with the providers and 

practitioners to resolve a beneficiary’s concerns, we believe that consent is necessary. 

The use of oral consent, and not written consent, is in keeping with the cost-saving 

attributes of alternative dispute resolution processes. 

 Although we believe that the immediate advocacy process will be of great value 

to Medicare beneficiaries, providers, practitioners, and the QIOs, we recognize that, for 

some, the process may not provide the desired resolution. In addition, there could be 

situations where a QIO determines, after the immediate advocacy process has begun, that 

more serious concerns are evident. Therefore, we are proposing under § 476.110(b) that 

the QIO and either party can discontinue participation in immediate advocacy at any time 

and the steps a QIO will take when this occurs. This includes informing the beneficiary 

of his or her right to submit a written complaint. 

 In proposed § 476.110(c), we are conveying the need to maintain the 

confidentiality of the immediate advocacy proceedings by specifically referencing the 

redisclosure restrictions under § 480.107. We are proposing to make a corresponding 

change to § 480.107 by adding new paragraph (l), which will specify that the redisclosure 
of confidential information related to immediate advocacy proceedings can occur when 

there is consent of all parties. In proposed § 476.110(d), we are proposing to include 

procedures that QIOs would follow in those instances where a party fails to participate or 

otherwise comply with the immediate advocacy procedures. This includes making a 

beneficiary aware of his or her right to submit a written complaint. 

 We believe that the use of the immediate advocacy process will greatly reduce the 

burden on practitioners and providers by avoiding the formality of the traditional peer 

review process in appropriate situations and quickly identifying resolutions and 

improvements in the provision of health care. In fact, the immediate advocacy process 

has already been introduced through the recently completed manual instructions, and 

preliminary feedback indicates that it is being received positively by providers, 

practitioners, and Medicare beneficiaries. Medicare beneficiaries have indicated their 

appreciation of the quicker and more appropriate resolution of their concerns. Many 

times, Medicare beneficiaries would wait months for the resolution of a formal written 

complaint, only to be disappointed in what the QIO actually found or frustrated that the 

concern initially raised was rendered obsolete by more recent events. Under the 

immediate advocacy process, the QIO has a mechanism to resolve beneficiaries’ 

concerns, sometimes the same day the beneficiary calls. Moreover, providers and 

practitioners have responded positively to being given the opportunity to immediately 

address beneficiary’s concerns and improve care, particularly where communication is 

one of the beneficiary’s primary concerns. In addition, the provider’s or practitioner’s 

ability to avoid receiving and processing a formal complaint letter from the QIO and the 

related time and costs related to forwarding of medical records and engaging in the 
lengthy review process also have been positively received. The decreased burden on 

Medicare beneficiaries, providers, and practitioners and the time and cost savings are 

cornerstones of alternative dispute resolution processes. We are confident the positive 

responses to this new option will continue. 

 While we believe that the immediate advocacy process represents a significant 

step forward in ensuring the timely, appropriate, and cost-efficient resolution of Medicare 

beneficiaries’ concerns, we recognize that additional changes are needed to improve the 

QIOs’ review process in general. Therefore, we are proposing regulations governing 

written beneficiary complaint reviews as well as general quality of care reviews. We are 

proposing to add a new § 476.120 that would govern a Medicare beneficiary’s 

submission of a written complaint, and are proposing under proposed § 476.120(a), 

language limiting the time period for submitting a written complaint to 3 years from the 

date on which the care giving rise to the complaint occurred. We believe this is 

necessary because the ability of a QIO to thoroughly review a complaint becomes more 

problematic the longer the period of time is between the circumstances giving rise to a 

complaint and the actual filing of the complaint. An individual’s memory can fade, and 

we are aware of some instances where Medicare beneficiaries have submitted complaints 

about issues that have occurred decades ago. In these situations, the QIOs’ ability to 

obtain the necessary information, let alone render a valid decision, has been severely 

compromised. As such, we believe that a 3-year look back period should be sufficient to 

ensure that a QIO can effectively complete its review. 

 We are specifying in proposed § 476.120(a)(1) that a complaint submitted 

electronically to the QIO meets the requirement for the submission of a written 
complaint. We are specifying in proposed § 476.120(a)(2) that if a beneficiary contacts a 

QIO about a potential complaint but decides not to submit it in writing (and the QIO did 

not offer immediate advocacy), the QIO may use its authority under section 

1154(a)(1)(B) of the Act to complete a general quality of care review in accordance with 

new proposed procedures at proposed § 476.160. We note that, in these situations, the 

beneficiary would not receive any results of the QIO’s review. We also are proposing to 

limit the QIO’s authority to conduct a general quality of care review in response to an 

oral complaint to those situations where the QIO makes a preliminary determination that 

the complaint contains a potential gross and flagrant, substantial, or significant quality of 

care concern. 

 In proposed § 476.120(b), we are proposing instructions for QIOs when a 

beneficiary submits additional concerns after the initial submission of a written 

complaint. We believe that the focus on an episode of care, which we are proposing in 

§ 476.130(a)(1), gives the QIO adequate flexibility to consider all related concerns 

surrounding a complaint, but for those rare instances where a beneficiary does convey a 

new concern, the QIO would now have specific instructions regarding the right to 

consider the additional concerns either during the same complaint review or as a separate 

complaint. 

 In proposed § 476.130(a), we are proposing to convey the QIO’s obligation to 

consider any information submitted by the beneficiary or his/her representative and by 

the provider and/or practitioner, along with the QIO’s obligation to maintain the 

information received as confidential information, if that information falls within the 

definition of “confidential information” under existing § 480.101. Moreover, proposed 
§ 476.130(a)(1) also would convey that the focus of the QIO’s review will be on the 

episode of care from which the complaint arose and that in completing its review, the 

QIO will respond to the specific concerns raised by the beneficiary along with any 

additional concerns the QIO identifies while processing the complaint. We believe that 

the focus on the episode of care will significantly reduce the burden on providers and 

practitioners and reduce timeframes for completing reviews. Historically, QIOs would 

closely track the complaint as originally conveyed by a Medicare beneficiary. Often, 

however, Medicare beneficiaries would become dissatisfied with the focus and/or results 

of the QIO’s review, and the QIO would be forced to reexamine the complaint in light of 

these new issues. On occasion, this could even require the submission of an entirely new 

complaint for issues that were related to, but not reviewed in, the original complaint. 

These situations also added to the burden on providers and practitioners because they 

would be required to participate in the review of the additional concerns and even provide 

additional medical documentation that may not have originally been requested. 

 In addition, proposed § 476.130(a)(1) would specify the details of the QIO’s 

authority to separate a beneficiary’s concerns into separate complaints if the QIO 

determines that the concerns relate to different episodes of care. We believe that 

focusing on the episode of care will put QIOs in a better position to identify all potential 

concerns at the onset and help alleviate any potential back and forth based on the specter 

of new or different concerns arising after the review has begun. 

 Proposed § 476.130(a)(2) would set forth the QIO’s use of evidence-based 

standards of care to the maximum extent practicable, and specify the method that the QIO 

must use to establish standards if no standard exists. Moreover, this paragraph (a)(2) also 
conveys the finality of a QIO’s determination regarding the standard to be used for a 

particular concern, in that the QIO’s determination regarding the standard used is not 

subject to appeal. We believe that the focus on evidence-based standards of care is vital 

to the improvement of health care nationally. 

 In proposed § 476.130(b), we are proposing to specify the timeframes that 

practitioners and providers must follow when a QIO requests medical information in 

response to a written beneficiary complaint. We are proposing a 10 calendar day 

timeframe for responding to these requests. While this timeframe is significantly shorter 

than the 21 and 30 calendar day timeframes specified in existing § 476.78, we believe 

that it is warranted in light of the need to give Medicare beneficiaries a more timely 

resolution to their complaints. We believe providers and practitioners would also benefit 

from the faster resolution of complaints and would shift the focus from being available 

during the lengthy review process to moving forward with improvements to the health 

care given to Medicare beneficiaries. In addition, where, for other review activities, a 

QIO may be requesting multiple medical records, most often a single medical record will 

be requested in response to a written beneficiary complaint. Thus, the ability to respond 

within the shorter 10 calendar day timeframe should be much easier and less burdensome. 

Moreover, we also considered that an increasing number of providers and practitioners 

are using vendors to respond to requests for medical information, and this timeframe is 

comparable to models typically used by these vendors in responding to requests. In fact, 

even shorter timeframes can exist for larger providers and/or practitioner groups. In 

addition, QIOs have historically employed a different, shorter timeframe for reviews 

where a Medicare beneficiary is still receiving care (concurrent review), compared to 
those situations where a Medicare beneficiary has already been discharged (retrospective 

review). For concurrent reviews, QIOs request that medical information be received 

within 1 calendar day, and typically this timeframe has been adhered to by providers and 

practitioners. Although we are not proposing the continued use of the concurrent and 

retrospective review framework for responding to written complaints, we recognize that 

there could be circumstances in which an even shorter timeframe for receiving medical 

information is warranted, and we are proposing to include language detailing a QIO’s 

right to earlier receipt of medical information. We are proposing that this right to earlier 

receipt of medical information be related to potential gross and flagrant or substantial 

quality of care concerns. However, we are requesting public comments on whether there 

are other circumstances, involving less serious kinds of concerns, for which this authority 

to employ a shorter timeframe should be used. In addition, in the FY 2013 IPPS/LTCH 

PPS proposed rule (77 FR 28119 through 28120), we included proposed changes to 

§ 476.78 to add references to “practitioners” in parts of this section, which currently refer 

only to “providers,” in order to equalize the 30-day and 21-day timeframes for submitting 

records. We also proposed changes to § 476.90 to equalize the ramifications for not 

submitting records on time because we see no reason to differentiate between a 

provider’s and a practitioner’s records. While these proposed changes in the FY 2013 

IPPS/LTCH PPS proposed rule have not been finalized, in this proposed rule, we are 

requesting public comment on whether changes similar to those we are proposing for 

beneficiary complaints, including shortening of the 30-day and 21-day timeframes, 

should be incorporated into § 476.78(b) for requests for medical information in general, 

for any kind of QIO reviews, including nonquality related reviews. We are proposing to 
apply a shorter time frame for all of a QIO’s requests for records, without limiting this 

application to quality reviews in just one instance: where secure transmissions of 

electronic versions of medical information are available. Our proposal regarding secure 

transmissions of electronic versions of medical information is discussed more fully later 

in this section. 

 In proposed § 476.130(c), we are proposing to include a requirement for 

beneficiary complaints that the QIO issue its interim initial determination within 7 

calendar days after receiving all medical information. We believe that this timeframe is 

sufficient to evaluate a complaint and identify the key aspects of the care provided. 

Proposed § 476.130(c)(1) would specify the provider’s and/or practitioner’s right to 

discuss the QIO’s determination before it is finalized, and would specify that the QIO’s 

initial notification will be made by telephone. We are proposing a 7-calendar day 

timeframe for completion of the discussion. In addition, we are proposing that the QIO’s 

interim initial determination would become the QIO’s final determination if the 

discussion is not completed timely because the provider and/or practitioner has failed to 

respond (proposed § 476.130(c)(2)). Again, our focus is on obtaining resolutions to 

complaints within reasonable timeframes, and the completion of the discussion is an area 

where improved instructions may benefit the timeliness of complaint processing because 

we have experienced significant delays in completing this particular step. The term “final 

initial determination” should not be confused with the term used in 42 CFR Part 405, 

because Part 405 relates to whether a beneficiary is entitled to services or the amount of 

those services, while this regulation covers only the quality of services as specified in the 

QIO statute. At the same time, we are proposing under proposed § 476.130(c)(3) the 
provider’s or practitioner’s right to submit a written statement in lieu of a discussion, 

with the requirement that the written statement be received within the same 7-calendar 

day timeframe from the date of the initial offer. We believe that allowing the submission 

of a written statement would benefit practitioners or providers that may have trouble 

being available at a specific time within the 7-calendar day timeframe. Moreover, in 

proposed § 476.130(c)(4), we have included the QIO’s right to extend the timeframe for 

holding the discussion or submission of a written statement in lieu of a discussion in 

those rare instances where a practitioner or provider is unavailable, whether because of 

military tours of duty, travel or other unforeseen circumstances. 

 In addition, we are considering restricting a provider’s or practitioner’s right to 

submit new or additional medical evidence in the form of test results, x-rays, and other 

evidence, as part of this discussion. We believe that doing so would emphasize the need 

for providers and practitioners to supply all relevant evidence when first requested by the 

QIO and also would maintain the focus on the discussion a physician or provider is due 

in accordance with section 1154(a)(14) of the Act. Allowing the submission of additional 

or new evidence could also substantially raise the possibility that the discussion will 

become, in effect, an entirely new review by the QIO. Moreover, providers and 

practitioners will still be able to submit information as part of a request for a 

reconsideration review. We are requesting public comments on whether providers and/or 

practitioners should be prohibited from submitting new or additional medical evidence in 

response to the offer of a discussion. 

 In proposed § 476.130(d), we are specifying the QIO’s obligation to issue a 

written final initial determination, regardless of whether care did or did not meet 
standards for all concerns, and that this determination must be issued within 72 hours 

after completion of the QIO’s review or, in cases where the standard was not met, the 

QIO’s discussion or receipt of the provider’s and/or practitioner’s written statement. In 

addition, proposed § 476.130(d)(1) would specify that the notice of the final initial 

determination will be forwarded to all parties, and paragraph (d)(2) lists the actual 

content of the notice. We are specifying that the QIO would not forward the notice if 

either party requests a reconsideration of the final initial determination. 

 These proposed changes represent significant departures from the process QIOs 

have historically used when resolving beneficiary complaints and are necessary to 

improve the fairness of the review process and increase the transparency of the QIO 

review process. When the process was originally established, CMS determined that 

physicians, providers, or Medicare beneficiaries would not be afforded the right to 

request a reconsideration of these determinations under section 1155 of the Act. 

However, providers and practitioners were afforded an administratively created option, 

referred to as a “re-review,” if the provider or practitioner disagreed with the QIO’s 

initial decision. Medicare beneficiaries were not provided this re-review opportunity and, 

in fact, were not given any response until after completion of the re-review. Moreover, 

the actual information a beneficiary received in response to the submission of a complaint 

was further limited by certain other provisions in the existing regulations. Section 

480.132 covers the general requirements that a QIO must meet in disclosing information 

to a beneficiary when that beneficiary has requested information about him or herself. 

Section 480.132(a)(1)(iii) states that this information cannot include any 

practitioner-specific information. We have read this provision in conjunction with 
§ 480.133(a)(2)(iii), which authorizes a QIO to disclose practitioner-specific information 

when the practitioner has consented to the disclosure. In the past, we have interpreted 

these provisions as applying in the context of beneficiary complaints. This limitation 

greatly reduced a beneficiary’s access to information related to the QIO’s specific 

findings. In fact, § 480.132 also gave attending practitioners the authority to direct that a 

QIO not provide results directly to a Medicare beneficiary should that practitioner 

determine that the released information could “harm the patient.” This same provision 

gave QIOs a full 30 calendar days before they had to respond to a beneficiary’s request 

for information, which would apply even in the context of a complaint. Thus, the QIO 

was required to obtain a practitioner’s consent to disclose information within this 

30-calendar day timeframe before the QIO could disclose the specific results of its 

complaint review to the beneficiary. 

 As a result of the current provisions in the regulation, the QIO was often delayed 

in its ability to respond to the beneficiary, and was sometimes forced to identify a 

representative and then give the results to the representative even if the Medicare 

beneficiary believed he or she was able to represent himself or herself and legally had not 

been deemed otherwise. Clearly, this scenario has frustrated Medicare beneficiaries over 

time and placed QIOs in difficult situations. Furthermore, if a practitioner did not 

consent to any disclosures or to limited disclosures of information that would identify the 

practitioner, a QIO’s decision typically contained a conclusory statement about the results 

of the QIO’s review but no information about the standards of care the QIO used, the 

evidence the QIO considered, or the rationale for how the QIO arrived at its conclusion. 

The limitations on what information Medicare beneficiaries received and broad authority 
given to attending practitioners have been particularly troubling in those instances in 

which the beneficiary’s complaint relates to care that an attending physician provided. In 

fact, the lack of information given to Medicare beneficiaries in response to a complaint 

was the precise issue addressed in the Public Citizen decision. 

 We believe that the proposed changes to § 476.130(d), including paragraphs 

(d)(1) and (d)(2), are necessary to ensure beneficiaries are given the same information 

and rights as practitioners and providers. The proposed changes make clear that the 

timeframe given to QIOs for issuing the final initial determination in response to a 

complaint is separate and distinct from the timeframe given to QIOs when responding to 

a beneficiary’s request for information. Any requests for information, including requests 

for information pertaining to beneficiary complaint reviews that are unrelated to a QIO’s 

issuance of its final initial determination, would continued to be governed by § 480.132. 

Moreover, while the proposed 72-hour timeframe in § 476.130 appears short in 

comparison to the 30-calendar day timeframe in § 480.132 that has historically been 

used, we believe that the 72-hour timeframe represents a more appropriate and reasonable 

period of time in which to issue these decisions. In most cases, the QIO’s final initial 

determination may not change significantly from the interim initial determination. Thus, 

QIOs would be able to rely heavily upon the interim initial determination in most 

instances, with only minor adjustments being made in light of information received in 

response to the opportunity for discussion. In addition, paragraph (d)(2) proposes the 

content of the written decision to be given to the beneficiary, provider, and/or 

practitioner. We are proposing that the content include a statement for each concern that 

the care did or did not meet the standard of care, the standard identified by the QIO for 
each of the concerns, and a summary of the specific facts that the QIO determines are 

pertinent to its findings. This list makes clear that § 480.132 will no longer govern what 

information a QIO may provide to a beneficiary in resolving a complaint. We believe 

this approach more fully supports the Court’s decision in the Public Citizen case. 

 In addition, we believe that the language under section 1155 of the Act supports 

the decision to give all parties the right to request that the QIO reconsider its initial 

decision, and we are proposing to offer providers, practitioners, and beneficiaries the 

right to request a reconsideration in proposed § 476.140(a) for complaints filed after 

July 31, 2014. This includes proposed specific requirements regarding the manner in 

which these requests are to be submitted and the obligations of beneficiaries, providers, 

and practitioners to participate in the reconsideration process in proposed § 476.140(a)(1) 

through (a)(3). We are delaying implementation of this new proposed right to ensure all 

processing requirements are fully developed for QIOs to follow in reviewing these 

reconsideration requests. 

 In addition to proposing the specific content of the notice at proposed 

§ 476.130(d)(2) when a final initial determination is issued and under proposed 

§ 476.140(b) when a reconsideration final decision is issued, we are proposing to make 

corresponding changes to existing §§ 480.132(a) and (b) and 480.133(a) (proposed new 

paragraph (a)(2)(iv)). In order to make clear that § 480.132 relates solely to a 

beneficiary’s request for information, but not to a beneficiary’s receipt of information 

from a QIO in resolution of a complaint review, we are proposing the inclusion of a 

cross-reference to §§ 476.130(d) and 476.140(b) in paragraph (a). Similarly, we are 

proposing to include language in § 480.132 (a)(1)(iii) to denote that the removal of all 
other patient and practitioner identifiers does not apply to disclosures described in 

§ 480.132 (b). We also are proposing clarifications to § 480.132(b) to improve the link 

between paragraph (b) and the provisions of § 478.24, which are cross-referenced in 

paragraph (b). We note that § 478.24 does not require seeking the advice or consent of 

the practitioner that treated the patient, nor does it prohibit the QIO from disclosing 

practitioner identifiers. We have made this clear by proposing the deletion of paragraph 

(b)(1)(i) and added language to the end of current paragraph (b)(1)(ii) to indicate that the 

information provided under § 478.24 includes relevant practitioner identifiers. With the 

deletion of paragraph (b)(1)(i), there is no longer a need for multiple paragraphs in (b)(1). 

Therefore, we are proposing to eliminate the current designation for paragraph (b)(1)(ii), 

with the provision being included as part of paragraph (b)(1). We also are proposing a 

corresponding change to § 480.133(a)(2)(iv) that makes clear a practitioner’s or 

provider’s consent is not required prior to releasing information to a beneficiary in 

connection with an initial denial determination or in providing a beneficiary with the 

results of the QIO’s findings related to a beneficiary complaint review as described in 

§§ 476.130(d) and 476.140(b). 

 We also are proposing to remove from existing § 480.132(a)(2) and (c)(1) the 

right of an attending practitioner to direct a QIO to withhold information based on a 

“harm” determination. This includes the proposed removal of the requirement from 

existing § 480.132(c)(2) that a QIO release results to a beneficiary’s representative if a 

“harm” determination has been made by the attending practitioner. This also includes our 

proposed decrease in the timeframe that QIOs must follow in responding to a 

beneficiary’s request for information (in any situation, as well as in the context of a 
beneficiary complaint) in § 480.132(a)(2) from 30 calendar days to 14 calendar days. 

This timeframe is strictly related to those situations where a beneficiary is making a 

request for information and will no longer be associated with obtaining responses to 

beneficiary complaints, which are detailed in proposed §§ 476.130(d) and 476.140(b). 

We believe the decrease from 30 calendar days to 14 calendar days is warranted in light 

of the improved ability to maintain data, including in electronic formats, so that less time 

is needed when responding to requests. The proposed changes would ensure that 

Medicare beneficiaries have more control over the designation of their representatives 

and also give a QIO more appropriate steps to follow in identifying a representative when 

one is actually needed. As an example, the existing regulations at § 480.132(c)(3) direct 

a QIO to “first” look to the medical record to identify a representative but then direct the 

QIO to “rely on the attending practitioner” if no information is contained in the medical 

record. The changes we are proposing to § 480.132(c) place more emphasis on the 

obligation of the QIO to follow the requirements under State law regarding the 

designation of health care representatives or agents, rather than focusing on “where” the 

information might be contained. 

 Lastly, at proposed § 476.140(b), we are specifying that the QIO must notify the 

beneficiary and the practitioner and/or provider of its final, reconsidered, decision within 

72 hours after receipt of the request for a reconsideration or, if later, 72 hours after receipt 

of any medical or other records needed for such a reconsideration. The QIO may do so 

orally, by telephone, in order to meet this timeframe. Proposed § 476.140(b)(1) also 

would specify that a written notice must be mailed by noon of the next calendar day and 

specifies the content of the notice. In addition, proposed § 476.140(b)(2) describes the 
QIO’s authority to provide information in its final decision to beneficiaries, providers 

and/or practitioners regarding improvement opportunities. The information QIOs provide 

regarding potential improvements could include specific opportunities related to the 

practitioner’s or the provider’s delivery of care and/or even broader improvements 

focusing on the community served by the practitioners and/or the providers. Some QIOs 

have, in fact, been providing this information to beneficiaries since it can offer the 

beneficiaries assurance that their complaints and any underlying problems are being 

addressed. 

 We are proposing to include under proposed new § 476.150 specific requirements 

for QIOs to follow in response to abandoned complaints. We believe that these 

instructions are necessary in light of a QIO’s experience when handling complaints where 

a Medicare beneficiary initially submits a complaint but then all attempts by the QIO to 

contact the beneficiary are unsuccessful. Historically, QIOs have been responsible for 

continual follow-up with beneficiaries, even if months later the beneficiary still had not 

responded. We believe that giving QIOs the discretion to close these cases will eliminate 

this unnecessary follow-up and reduce costs. Moreover, it will alleviate provider’s and/or 

practitioner’s concern in those situations where the QIO may have already reached out to 

them about a potential complaint. We also are proposing to add under proposed 

§ 476.150(b) instructions for QIOs to follow in those situations, which we believe will be 

rare, where a QIO must reopen a beneficiary complaint review. We would have QIOs 

apply the same procedures that appear in the already existing regulations at § 476.96 for 

the reopening of cases involving initial denial determinations and changes as a result of 
DRG validation, simply using those same procedures for a different purpose. We are 

proposing to do this by placing a reference in § 476.150(b) to the procedures in § 476.96. 

2. Completion of General Quality of Care Reviews 

 Although the QIO’s responsibility for completing quality of care reviews is 

already set forth in the QIO program regulations at existing § 476.71(a)(2), the 

procedures that QIOs use in completing these reviews are not. Again, the precise steps 

that QIOs use in completing these reviews were established through manual instructions. 

However, we believe that the proposed changes discussed below are necessary to the 

processing of these reviews in light of the knowledge we have gained since the program 

began. We believe that these proposed changes can bring about necessary improvements 

as quickly as possible and also support our efforts to thoroughly evaluate how the 

program should be structured moving forward. 

 First, in proposed new § 476.160(a)(1), we are proposing to specify those 

circumstances in which a QIO may conduct a general quality of care review. These 

circumstances would include those situations where a potential quality of care issue is 

referred to the QIO by another source, such as by another CMS contractor, an individual 

submitting a request anonymously, or another Federal or State entity. In addition, we 

recognize that more frequently the QIOs are working to use the substantial data available 

to them to identify potential areas where improvements in the quality of health care could 

be attained, and we believe these instances should be accounted for as we move forward. 

We also are aware that QIOs frequently identify potential quality of care issues when 

conducting other case review activities, including medical necessity reviews, expedited 
discharge appeals, among others; therefore, we have included this as an instance where a 

general quality of care review can be initiated. 

 In proposed new § 476.160(a)(2), we are specifying that the QIO’s review will 

focus on all concerns raised by the source of a referral or report and/or identified by the 

QIO. While the episode of care should still be considered, it may be less significant for 

these reviews than those in response to a complaint submitted by a beneficiary, because 

the main goal of complaint reviews is to address a beneficiary’s particular experiences 

with receiving certain services at a particular time. However, we again are proposing 

under proposed § 476.160(a)(3) that the QIO will use evidence-based standards of care to 

the maximum extent practicable in completing these reviews, and that the QIO’s 

determination regarding the standard used in completing the review is not subject to 

appeal. 

 In proposed new § 476.160(b), we are proposing to specify the responsibility of 

providers and practitioners to supply requested medical information. This language is 

identical to the language in proposed new § 476.130(b) applicable to written beneficiary 

complaints, including the same 10-calendar day timeframe for practitioners and providers 

to respond to requests for medical information and the QIO’s right to request even earlier 

receipt when the QIO preliminarily determines that a concern may be serious enough to 

qualify as a gross and flagrant or substantial quality of care concern. Although the 

decreased timeframe is not related to the goal of providing beneficiaries with more timely 

resolution of their complaints (because beneficiaries will not be getting results of these 

reviews), we still believe there is ample justification to warrant the reduced timeframe. 

Providers and practitioners will benefit from the faster resolution of these reviews and the 
increased focus on identifying and resolving impediments to improved health care 

(particularly in cases involving potential serious concerns). These improvements will 

ultimately benefit patients. Additionally, as with written beneficiary complaints, the 

timeframes are comparable to models typically used by vendors. We also considered 

that, as with written beneficiary complaints, the QIOs currently use shorter timeframes 

where the beneficiaries impacted by the general quality of care review are still receiving 

care (concurrent review), compared to those situations where a beneficiary has already 

been discharged (retrospective review). Again, while we are not proposing the continued 

use of the concurrent and retrospective designations, we recognize that there are 

circumstances, even with general quality of care reviews, where decreased timeframes 

are necessary, including the 10- calendar day, or even shorter, timeframe. 

 As mentioned previously, in the FY 2013 IPPS/LTCH PPS proposed rule 

(77 FR 28119 through 28120), we included proposed changes to § 476.78 to add 

references to “practitioners” in parts of this section, which currently refer only to 

“providers,” in order to equalize the 30-day and 21-day timeframes for submitting 

records. We also proposed changes to § 476.90 to equalize the ramifications for not 

submitting records on time because we see no reason to differentiate between a 

provider’s and a practitioner’s records. While these proposed changes in the FY 2013 

IPPS/LTCH PPS proposed rule have not been finalized, we are proposing here to modify 

the current general 30-day and 21-day timeframes in § 476.78(b) to reflect the new 

timeframes in §§ 476.130(b) and 476.160(b), which apply only to records submitted for 

purposes of beneficiary complaint and general quality reviews. We also are requesting 

public comment on whether changes similar to those we are proposing for beneficiary 
complaints and general quality of care reviews, including shortening of the 30-day and 

21-day timeframes, should be incorporated more broadly into § 476.78(b) for requests for 

medical information in general, for any kind of QIO reviews, including nonquality related 

reviews. We are proposing to apply a shorter timeframe for all of a QIO’s requests for 

records, without limiting this application to beneficiary complaints or general quality 

reviews in just one instance: where secure transmissions of electronic versions of medical 

information are available. Our proposal regarding secure transmissions of electronic 

versions of medical information is discussed more fully later in this section. 

 We also are proposing new § 476.160(c), which would specify that the QIO peer 

reviewer will render the initial determination within 7 calendar days of the receipt of all 

medical information; this paragraph is substantially different from the proposed 

beneficiary complaint review procedures in proposed new § 476.130 in two areas. First, 

beneficiaries would not be provided any information regarding these reviews. Although 

we recognize that, at times, potential quality concerns a QIO identifies could impact a 

specific beneficiary, we believe that this type of review does not warrant any 

communication directly to the beneficiary. In fact, we believe that giving feedback of 

potentially poor care to an unknowing beneficiary could cause more anxiety than is 

warranted by the circumstances, and that is not our goal. We also recognize that, in many 

situations, the reviews could relate to or involve numerous beneficiaries. However, those 

beneficiaries may only be a sample of the beneficiaries potentially impacted. This is 

particularly true in those circumstances where the QIO is reviewing system-related 

aspects of care, and it will be incumbent upon the QIO to determine what medical 
information--and by extension the sample of beneficiaries receiving care--to be analyzed 

in completing these reviews. 

 Second, we are proposing that practitioners and providers not be given an 

opportunity to discuss the QIO’s initial determination before it becomes final. The QIO’s 

obligation to provide an opportunity for discussion is specific to the QIO’s responsibility 

to review beneficiary complaints under section 1154(a)(14) of the Act. This same 

obligation is not dictated by section 1154(a)(1)(B) of the Act on which the QIO’s 

authority to conduct general quality of care reviews is based. We believe that giving such 

an opportunity is not necessary, particularly because these discussions frequently 

become, in effect, an entirely new review by the QIO and not merely a discussion, and 

because we are already proposing at proposed new § 476.170(a) that the practitioner 

and/or provider be given the right to request a reconsideration of the QIO’s initial 

determination. As with beneficiary complaint reviews, we are proposing that this right 

not be available until after July 31, 2014, to give us time to fully establish the process 

requirements and ensure that this right is meaningful for providers and practitioners. 

 In addition, under proposed new § 476.170(a)(1) through (a)(3), we are proposing 

requirements similar to those in § 476.140 regarding the timeframe for submitting a 

request for a reconsideration, the obligation of a practitioner and/or provider to be 

available to answer questions or supply information, as well as the QIO’s obligation to 

offer the provider the opportunity to provide information as part of the reconsideration 

request. We also proposed provisions under proposed new § 476.170(b) concerning the 

QIO’s issuance of its final decision. This includes the requirement that the QIO’s 

decision be issued within 72 hours after receipt of the request for a reconsideration, or, if 
later, 72 hours after receiving any medical information or other records needed for such a 

reconsideration, the specific content of the final decision, and the right of the QIO to 

provide information to the provider or practitioner regarding opportunities for improving 

care given to beneficiaries based on the specific findings of its review. The information 

QIOs provide regarding potential improvements could include specific opportunities 

related to the practitioner’s or provider’s delivery of care and/or even broader 

improvements focusing on the community served by the practitioners and/or providers. 

C. Use of Confidential Information That Explicitly or Implicitly Identifies Patients

 The QIO regulations at § 480.101(b) define any information that explicitly or 

implicitly identifies an individual patient as confidential information. Although 

provisions are included in 42 CFR Part 480 governing a practitioner’s and/or provider’s 

right to allow a QIO to use or disclose confidential information about the named 

practitioner or provider (§§ 480.105(b), 480.133(a)(2)(iii), and 480.140(d)), a similar 

right is not conveyed for beneficiaries. Thus, QIOs are prohibited from obtaining a 

beneficiary’s authorization to use or disclose the beneficiary’s confidential information, 

even in situations where a use or disclosure could be helpful to the beneficiary and his or 

her health care or even where the beneficiary specifically asks the QIO to disclose the 

information. 

 One of the key challenges for the QIOs is identifying improvements in health care 

delivery systems. In fact, the “patient-centeredness” aim of the QIO’s current scope of 

work requires more patient involvement, and the goal of many patient and family 

engagement efforts is to incorporate “real-world person’s” experiences to demonstrate the 

compelling and urgent need for healthcare delivery reform. Additionally, beneficiaries 
have asked to participate in the QIO’s work in a meaningful way. Unfortunately, we are 

often unable to accommodate these requests in light of the current regulatory restriction. 

We believe that this restriction, which was developed may years ago, is outdated, and that 

beneficiaries should be given the right to make choices regarding the use and disclosure 

of their confidential information. 

 As such, we are proposing new § 480.145 that will govern a beneficiary’s right to 

authorize a QIO’s use or disclosure of the beneficiary’s confidential information. Under 

proposed § 480.145(a), we are proposing that a QIO may not use or disclose a 

beneficiary’s confidential information without an authorization from the beneficiary and 

that the QIO’s use or disclosure must be consistent with the authorization. In proposed 

§ 480.145(b)(1) through (b)(6), we have listed those aspects of an authorization necessary 

to make the authorization valid. This includes the requirements that a specific and 

meaningful description of the confidential information be included, the name(s) of the 

QIO and QIO point of contact making the request to use or disclose the information, the 

name or other specific identification of the person, or class of persons to whom the QIO 

may make the requested use or disclosure, a description of the purpose(s) of the use or 

disclosure, the date or event upon which the authorization will expire, and the signature 

and date of the beneficiary authorizing the use and/or disclosure of the information. We 

also are proposing in § 480.145(c)(1) and (c)(2) that the authorization must contain a 

statement that the beneficiary maintains the right to revoke his or her authorization in 

writing and that the QIO must specify any exceptions to the right to revoke, as well as the 

process a beneficiary must use to revoke the authorization. In addition, at 

§ 480.145(c)(3), we are proposing the requirement that the QIO convey to the beneficiary 
its inability to condition the review or other activities it is responsible for (such as 

beneficiary complaint reviews, medical necessity of a beneficiary’s services, or discharge 

appeals) on the beneficiary’s authorization. We also are proposing under § 480.145(c)(4) 

to make clear the consequences of authorizing the use or disclosure of information, and 

the fact that the QIO may be unable to protect the information from redisclosure. In 

§ 480.145(d), we are proposing that an authorization must be written in plain language, 

and in § 480.145(e) that a QIO must provide the beneficiary with a copy of the signed 

authorization. Lastly, although we make reference to a beneficiary’s right to revoke 

authorization in proposed § 480.145(c)(1), in paragraph (f) we are proposing a specific 

provision that will make clear that a beneficiary may revoke, in writing, an authorization 

at any time, except when the QIO has taken action in reliance upon the authorization. 

 We believe that these proposed changes appropriately relax some of the historical 

restraints on the QIO’s use of a beneficiary’s confidential information, enable QIOs to 

better meet the needs of Medicare beneficiaries, and give beneficiaries the opportunity to 

participate in efforts to improve the quality of their health care. 

D. Secure Transmissions of Electronic Versions of Medical Information

 When the QIO program regulations were first written in 1985, computers, along 

with digitally or electronically stored information, were still in their infancy. Thus, the 

QIO program regulations were written based on the perspective that most information 

sharing would be through the exchange of paper copies of medical records and other 

information. Since that time, we have seen great advances in the ability to electronically 

share data, whether through the use of mass storage devices (flash drives), the sending 

and receipt of electronic facsimiles, and even the use of e-mail. At the same time, several 
laws, including HIPAA and the Federal Information Security and Management Act 

(FISMA), have been established to protect sensitive information. However, because the 

QIO program regulations have not undergone significant modification since they were 

originally adopted, the regulations do not account for electronic sharing of information 

and the QIOs’ work is carried out within the context of exchanging paper copies of 

documents and information. At times, this creates additional work and costs because 

those providers and practitioners who have the ability to securely share electronic 

versions of medical records must actually print out the records and pay to have the paper 

copies mailed to the QIOs. To address these issues, we are proposing to revise existing 

§ 476.78(b)(2) to add a new paragraph (iii) to make clear the QIOs’ right to exchange 

secure transmissions of electronic versions of medical information, subject to a QIO’s 

ability to support the exchange of the electronic version. We believe that this proposal 

would enable QIOs to receive and send medical information in a variety of formats, 

including through secure electronic faxes, and would reduce costs for providers and 

practitioners because they would no longer have to print and mail paper copies. In 

addition, to fully take advantage of the ability to receive and send electronic versions of 

medical information, we believe that a reduced timeframe is warranted for those 

instances where electronic versions are to be forwarded in response to requests from a 

QIO. Therefore, we are proposing under proposed § 476.78 (b)(2)(iii) to require 

providers and practitioners to deliver electronic versions of medical information within 

10 calendar days of the request from the QIO. As we noted previously, changes to 

existing § 476.78(b) have already been proposed in the FY 2013 IPPS/LTCH PPS 

proposed rule (77 FR 28119). As discussed earlier in this preamble, we are now 
proposing in this CY 2013 OPPS/ASC proposed rule additional changes to § 476.78 to 

take into account the different, more expedited timeframes we are proposing for medical 

records related to beneficiary complaint and general quality of care reviews. We also are 

requesting public comments in this proposed rule on whether additional changes should 

be made to § 476.78(b) to expand the different timeframes to cover medical records for 

all kinds of reviews. We also are requesting public comments on whether any 

modifications should be made to the reimbursement methodologies for paper copies 

described in § 476.78(c). We note that we are carrying forth in this proposed rule the 

proposed change to the section heading for § 476.78 that was included in the FY 2013 

IPPS/LTCH PPS proposed rule, that is, the proposed change from “Responsibilities of 

health care facilities” to “Responsibilities of providers and practitioners”. 
E. Active Staff Privileges

 In our efforts to ensure the QIO program is able to meet the needs of Medicare 

beneficiaries and improve the quality of health care moving forward, we have identified 

an aspect of the QIO program regulations that has become increasingly problematic for 

the QIOs. Under existing § 476.98(a)(1), QIOs are required to use an individual with 

“active staff privileges in one or more hospitals” in making initial denial determinations. 

However, there is an accelerating trend toward generalist (family physicians/internists) 

physicians who provide care solely in the inpatient or outpatient care settings and a 

corresponding decline in the number of family practice physicians who provide any care 

in hospitals. In fact, many of these individuals do not provide any inpatient care and 

either have no hospital privileges or only “courtesy” privileges, which do not meet the 

definition in existing § 476.1 of “active staff privileges.” While we believe that the 

continued use of peer reviewers is necessary and vital to the success of the QIO program, 

the need to use physicians with “active staff privileges” is not. We believe that proposing 

to remove this requirement would increase the number of peer reviewers available for use 

by the QIOs, which, at times, has become particularly problematic for the QIOs. 

Therefore, in this proposed rule, we are proposing to remove the definition of “active 

staff privileges under § 476.1 and to remove the phrase referring to using individuals 

“with active staff privileges in one or more hospitals in the QIO area” in making initial 

denial determinations under § 476.98(a)(1). 
F. Proposed Technical Corrections

 In addition to the proposed changes discussed above, we are proposing to make 

the following technical corrections to the QIO regulations: 

● In 1989, several sections in 42 CFR Part 405 were redesignated to 

42 CFR Part 411 (54 FR 41746), but the cross-references to these sections in the QIO 

regulations was never made. Therefore, we are proposing to make the following 

reference changes: 

 +- Changing the reference “§ 405.330(b)” in existing § 476.71(b) to 

“§ 411.400(b)”; 

 +- Changing the reference “§ 405.332” in § 476.74 to “§ 411.402”; 

 + Changing the references “§ 405.310(g) or § 405.310(k)” in § 476.86 to 

“§ 411.15(g) or § 411.15(k)”. 

● In 1999, 42 CFR Parts 466, 473, and 476 were redesignated as 42 CFR Parts 

476, 478, and 480, respectively (64 FR 66236). Therefore, we are proposing to make 

changes to correct several cross-references to sections in these Parts: 

 + Changing the reference “§ 466.73(b)(3)” in § 476.73 to “§ 476.78(b)(3)”. 

 + Changing the reference “part 473” in § 476.78(f) to “part 478”. 

 + Changing the reference “part 473” in § 476.94(c)(3) to “part 478”. 

 + Changing the reference “§ 473.24” in §§ 480.132 and 480.133 to “§ 478.24”. 

 + Changing the reference “§ 466.98” in § 478.28 to “§ 476.98”. 

 + Changing the reference to “Part 478” in §§ 478.15, 478.16, 478.20, 478.38, 

478.42, and 478.48 to “Part 473”. 

 + Changing the reference “§ 473.24” in § 480.132 to “§ 478.24”. 
 + Changing the references “Part 466” and “§ 473.24” in § 480.133(b) to “Part 

476” and “§ 478.24”, respectively. 

● We are proposing the deletion of several provisions in Part 476 regarding 

risk-basis contracts because risk-basis contracts previously under section 1876 of the Act 

no longer exist. As such, these provisions are obsolete and no longer used under the QIO 

program. Specifically, we are deleting the following sentence from § 476.70(a): 

“Section 1154(a)(4) of the Act requires QIOs, or, in certain circumstances, non-QIO 

entities, to perform quality of care reviews of services furnished under risk-basis 

contracts by health maintenance organizations (HMOs) and competitive medical plans 

(CMPs) that are covered under subpart C of part 417 of this chapter.” We are proposing 

to delete the following sentence from § 476.70(b): “Section 466.72 of this part also 

applies, for purposes of quality of care review under section 1154(a)(4) of the Act, to 

non-QIO entities that enter into contracts to perform reviews of services furnished under 

risk basis contracts by HMOs and CMPs under subpart C of part 417 of this chapter.” 

We are proposing to delete § 476.72 - Review of the quality of care of risk-basis health 

maintenance organizations and competitive medical plans, in its entirety for the same 

reason. 

● In § 476.70(a), we are proposing to change the word “basis” to “bases” to 

match the title of this section and to correctly denote that there is more than one statutory 

basis described in paragraph (a). 

● We are proposing technical corrections to sections in Part 476 and 480 to 

accurately reflect the transition to Medicare administrative contractors (MACs) to process 

Medicare claims and conduct other actions. This transition is ongoing, and fiscal 
intermediaries and carriers still exist. However, we believe that the presence of MACs 

should be accounted for to accurately reflect current contractual relationships. As such, 

we are proposing to incorporate references to “Medicare administrator contractors” in the 

following sections, where appropriate: 

 + § 476.1, in the definition of “Preadmission Certification”; 

 + § 476.71(c)(1); 

 + § 476.73(a); 

 + § 476.74(b) and (c)(1); 

 + § 476.80 section heading, and §§ 476.80(a), (a)(1), (a)(2), (b)(1), (c), (c)(3)(ii), 

(d)(1), (d)(2), (e) paragraph heading, (e)(1), and (e)(2); 

 + § 476.86(a)(2), (c) introductory text, (c)(1), and (d); 

 + § 476.94(a)(1)(iv) and (d); 

 + § 476.104(a); and 

 + § 480.105(a). 

● We are proposing a technical correction to § 480.139 by adding a paragraph 

“(a)” in front of “(1)” to the beginning of the text of the section to correct an inadvertent 

coding error. 

● We are proposing to correct the statutory citation in § 480.132(b) by changing 

“section 1154(a)(3)” to “section 1154(a)(2)”. 

XIX. Files Available to the Public via the Internet 

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 proposed rule pertaining to the proposed CY 2013 payments under the 
OPPS, go to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/HospitalOutpatientPPS/Hospital-Outpatient-Regulations-andNotices.html and select “1589-P” from the list of regulations. All Addenda for this 

proposed rule are contained in the zipped folder entitled “2013 OPPS 1589-P Addenda” 

at the bottom of the page. 

To view the Addenda of this proposed rule pertaining to the proposed CY 2013 

payments under the ASC payment system, go to the CMS Web site at: 

http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ASCPayment/ASCRegulations-and-Notices.html and select “1589-P” from the list of regulations. All 

Addenda for this proposed rule are contained in the zipped folder entitled “Addenda AA, 

BB, DD1 and DD2”, and “Addendum EE” at the bottom of the page. 

XX. Collection of Information Requirements 

A. Legislative Requirements for Solicitation of Comments

 Under the Paperwork Reduction Act of 1995, we are required to provide 60-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 this proposed rule, we are soliciting public comments on each of the issues 

outlined above as discussed below that contained information collection requirements. 

B. Proposed Requirements in Regulation Text

1. Proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 

Hospitals and CAHs (§ 495.8) 

Under 42 CFR 495.6(f)(9), we require eligible hospitals and CAHs participating 

in the Medicare EHR Incentive Program (which would include those participating in the 

proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot) to 

successfully report hospital clinical quality measures (CQMs) to CMS in the manner 

specified by CMS. As discussed in section XV.K. of this proposed rule, although we are 

proposing that eligible hospitals and CAHs may continue to attest CQMs in 2013, they 

may also choose to participate in the proposed 2013 Medicare EHR Incentive Program 

Electronic Reporting Pilot for Hospitals and CAHs. We are proposing that eligible 

hospitals and CAHs participating in the 2013 Medicare EHR Incentive Program 

Electronic Reporting Pilot must submit CQM data on all 15 CQMs (listed in Table 10 of 

the final rule (75 FR 44418 through 44420) for the Medicare and Medicaid EHR 

Incentive Program) to CMS, via a secure transmission based on data obtained from the 

eligible hospital or CAH’s certified EHR technology.

Eligible hospitals and CAHs are required to report on core and menu set criteria 

for Stage 1 meaningful use. The reporting of clinical quality measures is part of the core 

set. We estimate that it would take an eligible hospital or CAH 0.5 hour to submit the 
required CQM information via the proposed 2013 Medicare EHR Incentive Program 

Electronic Reporting Pilot. Therefore, the estimated total burden for all 4,922 Medicare 

eligible hospitals and CAHs participating in the reporting Pilot (3,620 acute care 

hospitals and 1,302 CAHs) is 2,461 hours. 

 We believe that an eligible hospital or CAH might assign a computer and 

information systems manager to submit the CQM information on its behalf. We estimate 

the cost burden for an eligible hospital or CAH to submit to the CQMs and hospital 

quality requirements is $30.21 (0.5 hour x $60.41 (mean hourly rate for a computer and 

information systems manager based on the 2011 Bureau of Labor Statistics) and the total 

estimated annual cost burden for all eligible hospitals and CAHs to submit the required 

CQMs is $148,694 ($30.21 x 4,922 hospitals and CAHs). We are soliciting public 

comments on the estimated numbers of eligible hospitals and CAHs that may register for 

the Medicare EHR Incentive Program Electronic Reporting Pilot that would submit the 

CQM information via the proposed Electronic Reporting Pilot in FY 2013. We also are 

inviting comments on the type of personnel or staff that would mostly likely submit on 

behalf of eligible hospitals and CAHs. 

C. Proposed Associated Information Collections Not Specified in Regulatory Text

In this proposed rule, we make reference to proposed associated information 

collection requirements that are not discussed in the regulation text contained in this 

proposed rule. The following is a discussion of those requirements. 

1. Hospital OQR Program 

 As previously 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 72064 through 72110 and 72111 

through 72114) and the CY 2012 OPPS/ASC final rule with comment period 

(76 FR 74549 through 74554) for detailed discussions of the Hospital OQR Program 

information collection requirements we have previously finalized. 

2. Hospital OQR Program Measures for the CY 2012, CY 2013, CY 2014, and CY 2015 

Payment Determinations 

a. Previously Adopted Hospital OQR Program Measures for the CY 2012, CY 2013, and 

CY 2014 Payment Determinations 

 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68766), we 

retained the 7 chart-abstracted measures we used in CY 2009 and adopted 4 new 

claims-based imaging measures for the CY 2010 payment determination, bringing the 

total number of quality measures for which hospitals had to submit data to 11 measures. 

In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60637), we required 

hospitals to continue to submit data on the same 11 measures for the CY 2011 payment 

determination. The burden associated with the aforementioned data submission 

requirements is currently approved under OCN: 0938-1109. This approval expires on 

October 31, 2013. 

 In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 

72094), we adopted measures for the CY 2012, CY 2013, and CY 2014 payment 

determinations. 

 For the CY 2012 payment determination, we retained the 7 chart-abstracted 

measures and the 4 claims-based imaging measures we used for the CY 2011 payment 
determination. We also adopted 1 structural HIT measure that tracks HOPDs’ ability to 

receive laboratory results electronically, and 3 claims-based imaging efficiency measures. 

These actions bring the total number of measures for the CY 2012 payment determination 

for which hospitals must submit data to 15 measures. In the CY 2011 OPPS/ASC final 

rule with comment period (75 FR 72112 through 72113), we discussed the burden 

associated with these information collection requirements. 

 For the CY 2013 payment determination, we required that hospitals continue to 

submit data for all of the quality measures that we adopted for the CY 2012 payment 

determination. We also adopted 1 structural HIT measure assessing the ability to track 

clinical results between visits, 6 new chart-abstracted measures on the topics of HOPD 

care transitions and ED efficiency, as well as 1 chart-abstracted ED-AMI measure that we 

proposed for the CY 2012 payment determination but which we decided to finalize for 

the CY 2013 payment determination. These actions bring the total number of quality 

measures for the CY 2013 payment determination for which hospitals must submit data 

to 23 measures. 

 In the CY 2011 OPPS/ASC final rule with comment period (75 FR 72071 through 

72094), for the CY 2014 payment determination, we retained the CY 2013 payment 

determination measures, but did not adopt any additional measures. In the CY 2011 

OPPS/ASC final rule with comment period (75 FR 72112 through 72113), we discussed 

the burden associated with these information collection requirements. 

b. Hospital OQR Program Measures for the CY 2014 Payment Determination 

 In the CY 2011 OPPS/ASC final rule with comment period, we did not adopt any 

new measures for the CY 2014 payment determination. In the CY 2012 OPPS/ASC final 
rule with comment period, we added, for the CY 2014 payment determination, 

1 chart-abstracted measure and 2 structural measures (including hospital outpatient 

volume data for selected outpatient surgical procedures). However, as discussed at 

76 FR 74456, we did not implement public reporting of the claims-based OP: 15 Use of 

Brain Computed Tomography (CT) in the ED for Atraumatic Headache. Because this is 

a claims-based measure, hospitals continue to submit relevant claims to be paid, but these 

administrative data and any measure calculations from them are not being made publicly 

available as specified for required hospital outpatient hospital quality of care measure 

data under section 1833(t)(17)(E) of the Act. In addition, in section XV.C. of this 

proposed rule, we are confirming that, using a subregulatory process, we have suspended 

indefinitely data collection for one measure, OP-19: Transition Record with Specified 

Elements Received by Discharged Patients, and we are proposing to defer data collection 

for another, OP-24: Cardiac Rehabilitation Patient Referral From an Outpatient Setting. 

Thus, if this proposal is finalized, for the CY 2014 and subsequent years payment 

determinations, there would be a total of 26 measures, with hospitals reporting data on 

only 23 of them. The complete measure set for the CY 2014 and subsequent years 

payment determinations would include the measures shown below; all measures were 

previously adopted. 

Measures Required for Hospital OQR Program 

 CY 2014 and Subsequent Years Payment Determinations 

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 
Measures Required for Hospital OQR Program 

 CY 2014 and Subsequent Years Payment Determinations 

OP-6: Timing of Antibiotic Prophylaxis 

OP-7: Prophylactic Antibiotic Selection for Surgical Patients 

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-12: The Ability for Providers with HIT to Receive Laboratory Data Electronically 

Directly into their Qualified/Certified EHR System as Discrete Searchable Data 

OP-13: Cardiac Imaging for Preoperative Risk Assessment for Non Cardiac Low Risk 

Surgery 

OP-14: Simultaneous Use of Brain Computed Tomography (CT) and Sinus Computed 

Tomography (CT) 

OP-15: Use of Brain Computed Tomography (CT) in the Emergency Department for 

Atraumatic Headache* 

OP-16: Troponin Results for Emergency Department acute myocardial infarction (AMI) 

patients or chest pain patients (with Probable Cardiac Chest Pain) Received Within 60 

minutes of Arrival 

OP-17: Tracking Clinical Results between Visits 

OP-18: Median Time from ED Arrival to ED Departure for Discharged ED Patients 

OP-19: Transition Record with Specified Elements Received by 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 

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 

OP-24: Cardiac Rehabilitation Patient Referral from an Outpatient Setting*** 

OP-25: Safety Surgery Checklist 

OP-26: Hospital Outpatient Volume Data on Selected Outpatient Surgical Procedures 

Procedure Category Corresponding HCPCS Codes

Gastrointestinal 

40000 through 49999, G0104, G0105, G0121, C9716, 

C9724, C9725, and 0170T 

Eye 

65000 through 68999, G0186, 0124T, 0099T, 0017T, 

0016T, 0123T, 0100T, 0176T, 0177T, 0186T, 0190T, 

0191T, 0192T, 76510, and 0099T 

Nervous System 

61000 through 64999, G0260, 0027T, 0213T, 0214T, 

0215T, 0216T, 0217T, 0218T, and 0062T 
Measures Required for Hospital OQR Program 

 CY 2014 and Subsequent Years Payment Determinations 

Musculoskeletal 

20000 through 29999, 0101T, 0102T, 0062T, 0200T, 

and 0201T 

Skin 

10000 through 19999, G0247, 0046T, 0268T, G0127, 

C9726, and C9727 

Genitourinary 50000 through 58999, 0193T, and 58805 

Cardiovascular 33000 through 37999 

Respiratory 30000 through 32999 

*Information for OP-15 will not be reported in Hospital Compare in 2012. Public reporting for this 

measure would occur in July 2013 at the earliest. 

**Data collection for OP-19 was suspended effective with January 1, 2012 encounters until further notice. 

***Data collection for OP-24 would be deferred from January 1, 2013 to January 1, 2014, and its first 

application toward a payment determination would be for CY 2015 rather than CY 2014. 

 We will calculate the seven claims-based measures using Medicare FFS claims 

data and do not require additional hospital data submissions. With the exception of 

OP-22, we are using the same data submission requirements related to the 

chart-abstracted quality measures that are submitted directly to CMS that we used for the 

CY 2011 and CY 2012 payment determinations. For the four structural measures, 

including the collection of data for all-patient volume for selected outpatient procedures, 

hospitals will enter data into a Web-based collection tool during a specified collection 

period once annually. Under the Hospital OQR Program requirements, hospitals must 

complete and submit a notice of participation form for the Hospital OQR Program if they 

have not already done so or have withdrawn from participation. By submitting this 

document, hospitals agree that they will allow CMS to publicly report the measures for 

which they have submitted data under the Hospital OQR Program. 

 For the CY 2014 payment determination, the burden associated with these 

requirements is the time and effort associated with completing the notice of participation 

form, and collecting and submitting the data on the 23 measures. For the 12 
chart-abstracted measures (including those measures for which data are submitted 

directly to CMS, as well as the OP-22 measure for which data will be submitted via a 

Web-based tool rather than via an electronic file), we estimate that there will be 

approximately 3,200 respondents per year. For hospitals to collect and submit the 

information on the chart-abstracted measures we estimate it will take 35 minutes per 

sampled case. Based upon the data submitted for the CY 2011 and CY 2012 payment 

determinations, we estimate there will be a total of 1,628,800 cases per year, 

approximately 509 cases per year per respondent. The estimated annual burden 

associated with the submission requirements for these chart-abstracted measures is 

949,590 hours (1,628,800 cases per year x 0.583 hours per case). 

 For the chart-abstracted OP-22 measure plus the structural measures, excluding 

the all-patient volume for selected surgical procedures measure, we estimate that each 

participating hospital will spend 10 minutes per year to collect and submit the required 

data, making the estimated annual burden associated with these measures 1,603 hours 

(3,200 hospitals x 0.167 hours per measure x 3 measures per hospital). 

 For the collection of all-patient volume for selected outpatient surgical 

procedures, because hospitals must determine their populations for data reporting 

purposes and most hospitals are voluntarily reporting population and sampling data for 

Hospital OQR Program purposes, we believe the only additional burden associated with 

this requirement is the reporting of the data using the Web-based tool. We estimate that 

each participating hospital will spend 10 minutes per year to collect and submit the data, 

making the estimated annual burden associated with this measure 53 hours (3,200 

hospitals x 0.167 hours per measure x 1 all-patient volume measure per hospital). 
c. Hospital OQR Program Measures for CY 2015 

 In the CY 2012 OPPS/ASC final rule with comment period, for the CY 2015 

payment determination, we retained the requirement that hospitals must complete and 

submit a notice of participation form in order to participate in the Hospital OQR 

Program. For the CY 2015 payment determination, we also retained the measures used 

for CY 2014 payment determination (including the measures adopted in the CY 2012 

final rule with comment period) and did not add any additional measures. 

 For the CY 2015 payment determination, the burden associated with these 

requirements is the time and effort associated with completing the notice of participation 

form, collecting and submitting the data on the measures, and collecting and submitting 

all-patient volume data for selected outpatient surgical procedures. For the 

chart-abstracted measures, we estimate that there will be approximately 3,200 

respondents per year. For hospitals to collect and submit the information on the chartabstracted measures where data is submitted directly to CMS, we estimate it will take 35 

minutes per sampled case. Based upon the data submitted for the CY 2011 and CY 2012 

payment determinations, we estimate there will be a total of 1,628,800 cases per year, 

approximately 509 cases per year per respondent. The estimated annual burden 

associated with the aforementioned submission requirements for the chart-abstracted data 

is 949,590 hours (1,628,800 cases per year x 0.583 hours per case). For the structural 

measures, we estimate that each participating hospital will spend 10 minutes per year to 

collect and submit the data, making the estimated annual burden associated with these 

measures 1,603 hours (3,200 hospitals x 0.167 hours per hospital x 3 structural measures 

per hospital). 
 For the collection of all-patient volume data for selected outpatient surgical 

procedures, because hospitals must determine their populations for data reporting 

purposes and most hospitals are voluntarily reporting population and sampling data for 

Hospital OQR purposes, we believe the only additional burden associated with this 

requirement will be the reporting of the data using the Web-based tool. We estimate that 

each participating hospital will spend 10 minutes per year to collect and submit the data, 

making the estimated annual burden associated with this measure 53 hours (3,200 

hospitals x 0.167 hours per hospital). 

 We invite public comment on the burden associated with the information 

collection requirements. 

3. Proposed Hospital OQR Program Validation Requirements for CY 2014 

 In this proposed rule, we are proposing to retain the requirements related to data 

validation for CY 2014 that we adopted in the CY 2011 OPPS/ASC final rule with 

comment period (76 FR 74486) for CY 2013, and that we revised in the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74553). While these requirements are 

subject to the PRA, they are currently approved under OCN: 0938-1109. This approval 

expires on October 31, 2013. 

 Similar to our approach for the CY 2013 Hospital OQR Program payment 

determination (76 FR 74484 through 74485), we are proposing to continue to validate 

data from randomly selected hospitals for the CY 2014 payment determination, selecting 

450 hospitals. We note that, because hospitals would be selected randomly, every 

hospital participating in the Hospital OQR Program would be eligible each year for 

validation selection. 
 In the CY 2011 OPPS/ASC proposed rule and final rule with comment period 

(75 FR 46381 and 75 FR 72106, respectively), we discussed additional data validation 

conditions under consideration for CY 2013 and subsequent years. In the CY 2012 

OPPS/ASC final rule with comment period (76 FR 74485 and 76 FR 74553), we 

finalized a policy under which we will select for validation up to 50 additional hospitals 

based upon targeting criteria. 

 For each selected hospital (random or targeted), generally we will randomly select 

up to 48 patient encounters per year (12 per quarter) for validation purposes from the 

total number of cases that the hospital successfully submitted to the OPPS Clinical 

Warehouse during the applicable time period. However, if a selected hospital submitted 

less than 12 cases in one or more quarters, only those cases available would be validated. 

 The burden associated with the CY 2014 requirement is the time and effort 

necessary to submit validation data to a CMS contractor. We estimate that it would take 

each of the sampled hospitals approximately 12 hours to comply with these data 

submission requirements. To comply with the requirements, we estimate each hospital 

must 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 CY 2014 is approximately 6,000 hours. 

We are proposing to maintain the deadline of 45 days for hospitals to submit 

requested medical record documentation to a CMS contractor to support our validation 

process. 
 We invite public comment on the burden associated with these information 

collection requirements. 

4. Proposed Hospital OQR Program Reconsideration and Appeals Procedures 

 In the CY 2009 OPPS/ASC final rule with comment period (73 FR 68779), we 

adopted a mandatory reconsideration process that applied to the CY 2010 payment 

decisions. In the CY 2010 OPPS/ASC final rule with comment period (74 FR 60654 

through 60655), we continued this process for the CY 2011 payment update. In the 

CY 2011 OPPS/ASC final rule with comment period (75 FR 72106 through 72108), we 

continued this process for the CY 2012 payment update with some modifications. We 

eliminated the requirement that the reconsideration request form be signed by the hospital 

CEO to facilitate electronic submission of the form and reduce hospital burden. In the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74487 and 74488 and 

76 FR 74553 and 74554), we specified that we were continuing this process for the 

CY 2013 and subsequent years’ payment determinations. In this CY 2013 OPPS/ASC 

proposed rule, we are proposing to make one change to this process--to add a requirement 

that the CEO or designated personnel must sign the reconsideration request. 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, and/or 

appeals. 
5. ASCQR Program Requirements 

a. Claims-Based Outcome Measures for the CY 2014 Payment Determination 

 In the CY 2012 OPPS/ASC final rule with comment period (76 FR 74496 through 

74504), we adopted five claims-based measures (four outcome and one process) to be 

used for the CY 2014 payment determination. We will collect quality measure data for 

the five claims-based measures by using QDCs placed on submitted claims beginning 

with services furnished from October 1, 2012 through December 31, 2012. The five 

outcome measures are: 

● Patient Burns (NQF #0263) 

● Patient Falls (NQF #0266) 

● Wrong Site, Wrong Side, Wrong Patient, Wrong Procedure, Wrong Implant 

(NQF #0267) 

● Hospital Transfer/Admission (NQF #0265) 

● Prophylactic Intravenous (IV) Antibiotic Timing (NQF #0264) 

 The first four measures listed above are outcome measures and the fifth measure 

is a process measure. 

 Approximately 71 percent of ASCs participate in Medical Event Reporting, which 

includes reporting on the first four claims-based measures listed above. 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 Surgery Center Environmental Scan (July 2008) (Contract 

No. GS-10F-0096T)). Thus, we estimate the burden to report QDCs on this number of 
claims per year for the first four claims-based measures to be nominal due to the small 

number of cases (less than 1 case per month per ASC, or about 11.8 events per year). 

 For the remaining claims-based measure, Prophylactic IV Antibiotic Timing, we 

estimate the burden associated with submitting QDCs to be nominal, as few procedures 

performed by ASCs will require prophylactic antibiotic administration. 

b. Claims-Based Process, Structural, and Volume Measures 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 measures: Safe Surgery Checklist Use and ASC Facility Volume Data on 

Selected ASC Surgical Procedures (76 FR 74504 through 74509). For the CY 2015 

payment determination, we are proposing that the data collection period for claims-based 

measures would be for services furnished from January 1, 2013, through 

December 31, 2013, that are paid by the administrative contractor by April 30, 2014. 

 For the CY 2016 payment determination, we finalized the retention of the seven 

measures for the CY 2015 payment determination and added Influenza Vaccination 

Coverage among Healthcare Personnel (NQF #0431) (76 FR 74509). For the CY 2016 

payment determination, we are proposing that the data collection period for claims-based 

measures would be for services furnished from January 1, 2014, through 

December 31, 2014, that are paid by the administrative contractor by April 30, 2015. 

 Based on our data for CY 2014 payment determinations above, extrapolating to 

100 percent of ASCs reporting, there would be an average of 11.8 events per year. Thus, 

we estimate the burden to report QDCs on this number of claims per year for the first 
four claims-based measures to be nominal due to the small number of cases 

(approximately one case per month per ASC) for the CYs 2015 and CY 2016 payment 

determinations. We estimate 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 structural 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 structural measure, we estimate 

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 864 

hours (5,175 ASCs x 1 measure x 0.167 hours per ASC). 

 For the ASC Facility Volume Data on Selected ASC Surgical Procedures 

structural measure, we estimate 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, 864 hours (5,175 ASCs x 1 measure 0.167 hours per ASC). 

6. IRF QRP 

 In the FY 2012 IRF PPS final rule (76 FR 47873 through 47883), we finalized the 

initial reporting requirements of the IRF QRP, including two quality measures for 

CY 2012 reporting. These two quality measures are: (1) Percent of Residents with 

Pressure Ulcers that are New or Worsened (NQF #0678); and (2) Urinary Catheter 

Associated Urinary Tract Infection (CAUTI) rate per 1,000 urinary catheter days, for 

Intensive Care Unit (ICU) Patients (NQF#0138). 

 We also established reporting mechanisms for these two measures in the FY 2012 

IRF PPS final rule. IRFs were instructed to use the Inpatient Rehabilitation Facility-
Patient Assessment Instrument (IRF-PAI) (approved under OCN: 0938-0842) to collect 

pressure ulcer measure data on Medicare Part A, Part B, and Medicare Advantage 

beneficiaries, and they were to collect CAUTI measure data on all patients and report that 

data to CDC’s National Healthcare Safety Network (NHSN). The burden associated with 

this collection of information for IRFs was included in the FY 2012 IRF PPS final rule 

(76 FR 47884 through 47885). 

Section XVII. of this proposed rule includes three proposals for the IRF QRP, 

which are: (1) a proposal to implement updates made by the NQF to the CAUTI measure 

which will affect the annual payment update in FY 2014; (2) a proposal that any measure 

selected for use in the IRF QRP would remain in effect until actively removed, 

suspended, or replaced; and (3) a proposal to implement policies regarding when noticeand-comment rulemaking will be used to update existing IRF QRP measures. 

The first proposal, if finalized, would allow us to incorporate recent updates that 

were made to the CAUTI measure (NQF#0138) by the NQF. However, these changes 

will not affect the type or amount of data that IRFs will be required to collect and submit. 

The second proposal involves the implementation of a policy that IRF quality 

measures will remain in effect until a measure is actively removed, suspended, or 

replaced. This policy, if implemented, would not add any additional information 

collection requirements for CY 2013 and beyond as discussed below. 

The third proposal involves implementing a policy regarding when 

notice-and-comment rulemaking would be used to update existing IRF QRP measures 

that have been updated by the NQF. This proposal would likewise not cause any 

increased information collection requirements to IRFs. 
a. Pressure Ulcer Measure 

 In this proposed rule, we are not proposing to make any changes in the way the 

pressure ulcer data are to be collected and submitted to CMS using the current version of 

the IRF-PAI. Therefore, the information collection burden that IRFs will incur for 

the reporting of pressure ulcer data will not differ from that which was stated in 

the FY 2012 IRF PPS final rule (76 FR 47884 through 47885). Likewise, the 

information collection burden will not differ from the burden estimate that is 

currently approved for the IRF-PAI under OCN: 0938-0842. It is important to 

note that, while the FY 2012 IRF PPS final rule mainly discusses the reporting 

requirement that will be incurred by IRFs for the FY 2014 payment determination, 

we do not anticipate that our proposals will cause an increase in the information 

collection requirements for subsequent fiscal years. 

b. CAUTI Measure 

 As discussed above, the FY 2012 IRF PPS final rule adopted the “Urinary 

Catheter Associated Urinary Tract Infection (CAUTI) rate per 1,000 urinary catheter 

days, for Intensive Care Unit (ICU) Patients” (NQF#0138) measure for the IRF QRP. 

However, subsequent to the publication of the FY 2012 IRF PPS final rule, this measure 

was expanded to several non-ICU settings, including IRFs. The CDC also changed 

the way the CAUTI measure is calculated from an infection rate per 1,000 days 

to a standardized infection ratio (“SIR”). The SIR calculation is comprised of the 

actual rate of infection over the expected rate of infection. 

 These changes will not impact the type or amount of data that IRFs will be 

required to collect and submit. Therefore, the information collection estimates 
that are stated in the FY 2012 IRF PPS final rule (76 FR 47884 through 47885) 

for reporting CAUTI data remain unchanged for the FY 2014 payment 

determination as well as for subsequent years payment determinations.

XXI. Response to Comments 

 Because of the large number of public comments we normally receive on Federal 

Register documents, we are not able to acknowledge or respond to them individually. 

We will consider all comments we receive by the date and time specified in the DATES

section of this proposed rule, and, when we proceed with a subsequent document(s), we 

will respond to those comments in the preamble to that document. 

XXII. Economic Analyses 

A. Regulatory Impact Analysis

1. Introduction 

We have examined the impacts of this proposed rule as required by Executive 

Order 12866 on Regulatory Planning and Review (September 30, 1993), Executive Order 

13563 on Improving Regulation and Regulatory Review (January 18, 2011), the 

Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 1102(b) 

of the Social Security Act, section 202 of the Unfunded Mandates Reform Act of 1995 

(UMRA) (March 22, 1995, Pub. L. 104-4), Executive Order 13132 on Federalism 

(August 4, 1999), and the Contract with America Advancement Act of 1996 

(Pub. L. 104-121) (5 U.S.C. 804(2)). 

 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 rule 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 rule has been reviewed by the Office of 

Management and Budget. We have prepared a regulatory impact analysis that, to the best 

of our ability, presents the costs and benefits of this proposed rule. In this proposed rule, 

we are soliciting public comments on the regulatory impact analysis provided. 

2. Statement of Need 

 This proposed rule is necessary to update the Medicare hospital outpatient 

prospective payment rates and the ASC payment rates for CY 2013. The proposed rule is 

necessary to propose changes to payment policies and rates for outpatient services 

furnished by hospitals and CMHCs for CY 2013. We are required under section 

1833(t)(3)(C)(ii) of the Act to update annually the OPPS conversion factor used to 

determine the APC payment rates. 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 proposing to revise the relative APC payment weights 

using claims data for services furnished on and after January 1, 2011, through and 

including December 31, 2011, and updated cost report information. 
We are proposing to continue 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 proposed rule, we are implementing 

these payment provisions. Also, we list the 23 drugs and biologicals in Table 22 of this 

proposed rule that we are proposing to remove from pass-through payment status for 

CY 2013. 

 This proposed rule is also necessary to update the ASC payment rates for 

CY 2013, enabling CMS to propose changes to payment policies and payment rates for 

covered surgical procedures and covered ancillary services that are performed in an ASC 

for CY 2013. 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 2013, 

there are no impacts associated with this payment reduction because it will not be applied 

until CY 2014. 

3. Overall Impacts for OPPS and ASC Provisions 

We estimate that the effects of the proposed OPPS payment provisions will result 

in expenditures exceeding $100 million in any 1 year. We estimate that the total increase 

from the proposed changes in this proposed rule in expenditures under the OPPS for 

CY 2013 compared to CY 2012 would be approximately $700 million. Taking into 

account our estimated changes in enrollment, utilization, and case-mix, we estimate that 

the OPPS expenditures for CY 2013 would be approximately $4.571 billion relative to 

CY 2012. Because this proposed rule for the OPPS 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 the costs and benefits of this proposed rulemaking. 

Table 45 of this proposed rule displays the redistributional impact of the proposed 

CY 2013 changes in OPPS payment to various groups of hospitals and for CMHCs. 

We estimate that the proposed update change to the conversion factor and other 

proposed adjustments (but not including the effects of outlier payments, the pass-through 

estimates, and the application of the frontier State wage adjustment for CY 2013) would 

increase total OPPS payments by 2.1 percent in CY 2013. The proposed changes to the 

APC weights, the proposed changes to the wage indices, the proposed continuation of a 

payment adjustment for rural SCHs, including EACHs, and the proposed payment 

adjustment for cancer hospitals would not increase OPPS payments because these 

changes to the OPPS would be budget neutral. However, these proposed updates would 
change the distribution of payments within the budget neutral system. We estimate that 

the total proposed change in payments between CY 2012 and CY 2013, 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, would 

increase total estimated OPPS payments by 2.1 percent. 

We estimate that the effects of the proposed ASC provisions in this proposed rule 

for the ASC payment system would result in expenditures exceeding $100 million in any 

1 year. We estimate the total increase (from proposed changes in this proposed rule as 

well as enrollment, utilization, and case-mix changes) in expenditures under the ASC 

payment system for CY 2013 compared to CY 2012 to be approximately $211 million. 

Because this proposed rule for the ASC payment system is “economically significant” as 

measured by the $100 million threshold, we have prepared a regulatory impact analysis 

of the proposed changes to the ASC payment system that, to the best of our ability, 

presents the costs and benefits of this proposed rulemaking. Tables 46 and Table 47 of 

this proposed rule display the redistributional impact of the proposed CY 2013 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 Proposed OPPS Changes 

(1) Limitations of Our Analysis 

The distributional impacts presented here are the projected effects of the proposed 

CY 2013 policy changes on various hospital groups. We post on the CMS Web site our 

proposed hospital-specific estimated payments for CY 2013 with the other supporting 

documentation for this proposed rule. To view the proposed hospital-specific estimates, 

we refer readers to the CMS Web site at: http://www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/HospitalOutpatientPPS/index.html. At the Web site, select 

“regulations and notices” from the left side of the page and then select “CMS-1589-P” 

from the list of regulations and notices. The hospital-specific file layout and the 

hospital-specific file are listed with the other supporting documentation for this proposed 

rule. We show hospital-specific data only for hospitals whose claims were used for 

modeling the impacts shown in Table 45 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 proposed rule for a discussion of the hospitals whose claims we do not use 

for ratesetting and impact purposes. 

 We estimate the effects of the individual proposed 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 this proposed rule, as we have done in 

previous proposed rules, we are soliciting 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 receive will be addressed in the 

applicable sections of the final rule with comment period that discuss the specific 

policies. 

(2) Estimated Effects of Proposed OPPS Changes on Hospitals 

Table 45 below shows the estimated impact of this proposed rule on hospitals. 

Historically, the first line of the impact table, which estimates the proposed 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 scalar 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 45 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 2012, we are paying 

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). For CY 2013, we are 

proposing to continue this APC payment structure and are basing payment fully on the 

geometric mean costs calculated using data for the type of provider for which rates are 

being set, that is, hospital or CMHC. We display separately the impact of this proposed 
policy on CMHCs, and we discuss its impact on hospitals as part of our discussion of the 

hospital impacts. 

The estimated increase in the proposed total payments made under the OPPS is 

determined largely by the increase to the conversion factor under the statutory 

methodology. The distributional impacts presented do not include assumptions about 

changes in volume and service-mix. The conversion factor is updated annually by the 

OPD fee schedule increase factor as discussed in detail in section II.B of this proposed 

rule. Section 1833(t)(3)(C)(iv) of the Act provides that the OPD fee schedule increase 

factor is equal to the market basket percentage increase applicable under section 

1886(b)(3)(B)(iii) of the Act, which we refer to as the IPPS market basket percentage 

increase. The estimated IPPS market basket increase for FY 2013 is 3.0 percent 

(77 FR 27870). Section 1833(t)(3)(F)(i) of the Act reduces that 3.0 percent by the 

productivity adjustment described in section 1886(b)(3)(B)(xi)(II) of the Act, which is 

0.8 percentage points (which is also the proposed MFP adjustment for FY 2013 in the 

FY 2013 IPPS/LTCH PPS proposed rule (77 FR 27870); and sections 1833(t)(3)(F)(ii) 

and 1833(t)(3)(G)(ii) of the Act further reduce the market basket percentage increase by 

0.1 percentage point, resulting in the OPD fee schedule increase factor of 2.1 percent, 

which we are using in the calculation of the proposed CY 2013 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 of 1.00. The amounts attributable to this frontier State wage 

index adjustment are incorporated in the proposed CY 2013 estimates in Table 45. 
To illustrate the impact of the proposed CY 2013 changes, our analysis begins 

with a baseline simulation model that uses the CY 2012 relative payment weights, the 

FY 2012 final IPPS wage indices that include reclassifications, and the final CY 2012 

conversion factor. Table 45 shows the estimated redistribution of the increase in 

payments for CY 2013 over CY 2012 payments to hospitals and CMHCs as a result of 

the following factors: APC reconfiguration and recalibration based on our historical 

methodology using median costs (Column 2); the marginal impact of basing the APC 

relative payment weights on geometric mean costs over basing them on median costs 

(Column 3); APC recalibration based on geometric mean costs (Column 4, the combined 

effect of Columns 2 and 3); the wage indices and the rural adjustment (Column 5); the 

combined impact of APC recalibration based on geometric mean costs, the wage indices 

and rural adjustment, and the OPD fee schedule increase factor update to the conversion 

factor (Column 6); the combined impact of APC recalibration based on geometric mean 

costs, the wage indices and rural adjustment, the conversion factor update, and the 

frontier State wage index adjustment (Column 7); and the estimated redistribution taking 

into account all payments for CY 2013 relative to all payments for CY 2012 (Column 8), 

including the impact of proposed changes in estimated outlier payments and proposed 

changes to the pass-through payment estimate. 

We did not model an explicit budget neutrality adjustment for the rural adjustment 

for SCHs because we are not proposing to make any changes to the policy for CY 2013. 

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 2012 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 would change), and the impact of the wage 

index changes on the hospital. However, total payments made under this system and the 

extent to which this proposed rule would redistribute money during implementation also 

would depend on changes in volume, practice patterns, and the mix of services billed 

between CY 2012 and CY 2013 by various groups of hospitals, which CMS cannot 

forecast. 

Overall, we estimate that the proposed OPPS rates for CY 2013 would have a 

positive effect for providers paid under the OPPS, resulting in a 2.1 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 proposed changes would still 

result in a 2.1 percent estimated increase in Medicare payments to all other hospitals. 

Those estimated payments would not significantly impact other providers. 

Column 1: Total Number of Hospitals

 The first line in Column 1 in Table 45 shows the total number of facilities (4,070), 

including designated cancer and children’s hospitals and CMHCs, for which we were 

able to use CY 2011 hospital outpatient and CMHC claims data to model CY 2012 and 

proposed CY 2013 payments, by classes of hospitals, for CMHCs and for dedicated 

cancer hospitals. We excluded all hospitals and CMHCs for which we could not 

accurately estimate CY 2012 or proposed CY 2013 payment and entities that are not paid 

under the OPPS. The latter entities include CAHs, all-inclusive hospitals, and hospitals 
located in Guam, the U.S. Virgin Islands, Northern Mariana Islands, American Samoa, 

and the State of Maryland. This process is discussed in greater detail in section II.A. of 

this proposed rule. At this time, we are unable to calculate a 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 (3,853) of OPPS hospitals, 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 154 CMHCs at the bottom of the impact table 

and discuss that impact separately below. 

Columns 2, 3, and 4: APC Recalibration

These columns show the combined effects of the proposed reconfiguration, 

recalibration, and other policies (such as setting payment for separately payable drugs 

and biologicals at ASP+6 under our CY 2013 proposal to apply the statutory default). 

Column 2 shows the reclassification effects if we were to base the relative payment 

weights on the median costs of services. Column 3 shows the marginal effects of using 

the geometric mean costs compared to the effects if we were to base the relative payment 

weights on the median costs of services, in other words the effects of our proposed policy 

change from medians to geometric means. Column 4 shows the combined effect of 

Columns 2 and 3, in other words the effect of our proposal to base the relative payment 
weights on geometric mean costs. It reflects the impacts of the proposed reclassification 

of services among APC groups and the proposed recalibration of APC relative payment 

weights, based on 12 months of CY 2011 OPPS hospital claims data and the most recent 

cost report data, and determining relative payment weights using the geometric mean 

costs of services. We modeled the effect of the proposed APC recalibration changes by 

varying only the relative payment weights (the final CY 2012 relative weights versus the 

proposed CY 2013 relative weights calculated using the service-mix and volume in the 

CY 2011 claims used for this proposed rule) and calculating the percent difference in the 

relative weight. Column 4 also reflects any proposed changes in multiple procedure 

discount patterns or conditional packaging that occur as a result of the changes in the 

relative magnitude of payment weights. 

 Overall, we estimate that proposed changes in APC reassignment and 

recalibration across all services paid under the OPPS would slightly decrease payments to 

urban hospitals by 0.1 percent. However, the smallest urban hospitals would receive 

slight payment increases of 0.6 percent (hospitals with 0-99 beds), attributable to 

increased payments for partial hospitalization, group psychotherapy and cardiac 

rehabilitation monitoring services furnished in the hospital. Due to recalibration, we 

estimate that low volume urban hospitals billing fewer than 21,000 lines for OPPS 

services would experience increases ranging from 0.8 percent to 4.0 percent. The 

increase of 4.0 percent for urban hospitals billing fewer than 5,000 lines per year is 

similarly attributable to an increase in payment for partial hospitalization and group 

psychotherapy services furnished in the hospital. 
 Overall, we estimate that rural hospitals would experience a small increase of 0.3 

percent as a result of proposed changes to the APC structure, with the largest increases 

going to the smallest hospitals both by number of beds (0.9 percent to those with less 

than 50 beds) and volume (2.5 percent to those with fewer than 5,000 lines). As a result 

of the recalibration, we estimate that rural hospitals that report 5,000 or more lines for 

OPPS services would experience payment increases ranging from 0.2 percent to 1.0 

percent. 

 Classifying hospitals according to teaching status, we estimate that the APC 

recalibration would lead to small payment decreases of 0.1 to 0.2 percent for major and 

minor teaching hospitals, respectively. We estimate that nonteaching hospitals would 

experience an increase of 0.1 percent. Classifying hospitals by type of ownership 

suggests that voluntary, proprietary, and governmental hospitals would experience 

changes ranging from a decrease of 0.1 percent to an increase of 0.2 percent as a result of 

the proposed APC recalibration. 

For most hospitals, we estimate insignificant impacts of our proposal to use 

geometric mean-based relative payment weights. Most providers would receive small 

increases in payments of up to 2.5 percent. We estimate that hospitals for which DSH 

payments are not available (mostly urban hospitals) would experience an increase of 6.1 

percent. Hospitals for which DSH data are not available (non-IPPS hospitals) furnish a 

large number of psychiatric services and we believe that the estimated increase in 

payment is due to increased payment for partial hospitalization and group psychotherapy 

services, as well as for hemodialysis services furnished in the hospital. 
Column 5: Proposed New Wage Indices and the Effect of the Proposed Rural and Cancer 

Hospital Adjustments

 Column 5 demonstrates the combined budget neutral impact of APC recalibration 

using geometric means; the wage index update; the rural adjustment; and the cancer 

hospital 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 2012 conversion factor that 

included the OPD fee schedule increase and a budget neutrality adjustment for 

differences in wage indices. 

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 proposing to make any 

changes to the policy for CY 2013. Similarly, the differential impact between the 

CY 2012 cancer hospital payment adjustment and the proposed CY 2013 cancer hospital 

payment adjustment had no effect on the budget neutral adjustment to the conversion 

factor. 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 proposed CY 2013 scaled weights and a CY 2012 

conversion factor that included a budget neutrality adjustment for the effect of changing 

the wage indices between CY 2012 and CY 2013. This column estimates the impact of 

applying the proposed FY 2013 IPPS wage indices for the CY 2013 OPPS without the 
influence of the frontier State wage index adjustment, which is not budget neutral. The 

frontier State wage index adjustment is reflected in the combined impact shown in 

Column 7. We are proposing to continue the rural payment adjustment of 7.1 percent to 

rural SCHs for CY 2013, as described in section II.E.2. of this proposed rule. We 

estimate that the combination of updated wage data and nationwide application of rural 

floor budget neutrality would redistribute payment among regions. We also updated the 

list of counties qualifying for the section 505 out-migration adjustments. 

Overall, we estimate that as a result of the proposed updated wage indices and the 

rural adjustment, urban hospitals would experience no change from CY 2012 to 

CY 2013, although urban hospitals would experience small changes ranging from 

increases of 0.2 percent (for large urban hospitals) to decreases of 0.2 percent (for other 

urban hospitals). Sole community hospitals would not be affected, but other rural 

hospitals would experience decreases of 0.3 percent. Urban hospitals in the New 

England and Pacific regions would experience the most significant payment changes with 

a decrease of 1.2 percent in New England and an increase of 1.6 percent in the Pacific 

region. Overall, we estimate that rural hospitals would experience a decrease of 0.2 

percent as a result of changes to the proposed wage index for CY 2013. Regionally, the 

changes would range from a decrease of 0.9 in rural Pacific States to an increase of 0.4 in 

rural New England States. 

Column 6: All Proposed Budget Neutrality Changes Combined with the Proposed OPD 

Fee Schedule Increase

Column 6 demonstrates the cumulative impact of the budget neutral adjustments 

from Column 5 and the proposed OPD fee schedule increase factor of 2.1 percent. We 
estimate that for most hospitals, the addition of the proposed OPD fee schedule increase 

factor of 2.1 percent would mitigate the negative impacts created by the budget neutrality 

adjustments made in Column 5. 

While most classes of hospitals would receive an increase that is more in line with 

the 2.1 percent overall increase after the proposed update is applied to the budget 

neutrality adjustments, urban hospitals that bill fewer than 11,000 lines, rural hospitals 

that bill fewer than 5,000 lines, and hospitals for which DSH information is not available 

would experience larger increases ranging from 4.1 percent to 8.3 percent. In particular, 

urban hospitals that report fewer than 5,000 lines would experience a cumulative 

increase, after application of the proposed OPD fee schedule increase factor and the 

budget neutrality adjustments, of 6.4 percent, largely as a result of proposed increases in 

payments to partial hospitalization and group psychotherapy services furnished in the 

hospital. Similarly, urban hospitals for which DSH data are not available would 

experience an increase of 8.1 percent, also largely as a result of proposed increases in 

payment for partial hospitalization, group psychotherapy and hemodialysis services 

furnished in hospitals. 

 Overall, we estimate that these proposed changes would increase payments to 

urban hospitals by 2.1 percent. We estimate that large urban hospitals and “other” urban 

hospitals would also experience increases of 2.3 and 1.9 percent, respectively. Urban 

hospitals in the Pacific region would experience an increase of 3.6 percent, largely as a 

result of the proposed change in wage index shown under column 3 and discussed above. 

We estimate that rural hospitals would experience a 2.3 percent increase as a result of the 

proposed OPD fee schedule increase factor and other budget neutrality adjustments. 
 Classifying hospitals by teaching status suggests that the proposed OPD fee 

schedule increase factor and the proposed budget neutrality adjustments would result in 

an increase of 2.1 percent for major teaching hospitals, 1.9 percent for minor teaching 

hospitals and 2.3 percent for nonteaching hospitals. 

 Classifying hospitals by type of ownership suggests that proprietary hospitals 

would experience an estimated increase of 2.3 percent, while voluntary hospitals would 

experience an estimated increase of 2.1 percent and government hospitals would 

experience an estimated increase of 2.1 percent. 

Column 7: All Proposed Adjustments with the Proposed Frontier State Wage Index 

Adjustment

 This column shows the impact of all proposed budget neutrality adjustments, 

application of the proposed 2.1 percent OPD fee schedule increase factor, and the 

nonbudget neutral impact of applying the proposed frontier State wage adjustment (that 

is, the proposed frontier State wage index change in addition to all proposed changes 

reflected in Column 6). This column differs from Column 6 solely based on application 

of the non-budget neutral frontier State wage index adjustment. 

In general, we estimate that all facilities and all hospitals would experience a 

combined increase of 0.1 percent due to the frontier wage index. The index would only 

affect hospitals in the West North Central and Mountain regions. Urban hospital in those 

regions would experience increases of 0.9 percent (West North Central) and 0.4 percent 

(Mountain) that are attributable to the frontier wage index, and rural hospitals would 

experience increases of 1.1 percent (West North Central) and 2.2 percent (Mountain) that 

are attributable to the frontier State wage index. 
Column 8: All Proposed Changes for CY 2013

 Column 8 depicts the full impact of the proposed CY 2013 policies on each 

hospital group by including the effect of all the proposed changes for CY 2013 and 

comparing them to all estimated payments in CY 2012. Column 8 shows the combined 

budget neutral effects of Columns 2 through 5; the proposed OPD fee schedule increase; 

the impact of the frontier State wage index adjustment; the proposed change in the 

fixed-dollar outlier threshold from $2,025 to $2,400 as discussed in section II.G. of this 

proposed rule; the proposed 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 XV. of this proposed rule); and the impact of 

increasing the estimate of the percentage of total OPPS payments dedicated to transitional 

pass-through payments. Of the 101 hospitals that failed to meet the Hospital OQR 

Program reporting requirements for the full CY 2012 update (and assumed, for modeling 

purposes, to be the same number for CY 2013), we included 9 hospitals in our model 

because they had both CY 2011 claims data and recent cost report data. We estimate that 

the cumulative effect of all proposed changes for CY 2013 would increase payments to 

all providers by 2.1 percent for CY 2013. We modeled the independent effect of all 

proposed changes in Column 8 using the final relative payment weights for CY 2012 and 

the proposed relative payment weights for CY 2013. We used the final conversion factor 

for CY 2012 of $70.016 and the proposed CY 2013 conversion factor of $71.537 

discussed in section II.B. of this proposed rule in this model. 

 Column 8 contains simulated outlier payments for each year. We used the one 

year charge inflation factor used in the FY 2013 IPPS/LTCH PPS proposed rule of 
6.80 percent (1.0680) to increase individual costs on the CY 2011 claims, and we used 

the most recent overall CCR in the April 2012 Outpatient Provider-Specific File (OPSF) 

to estimate outlier payments for CY 2012. Using the CY 2011 claims and a 6.80 percent 

charge inflation factor, we currently estimate that outlier payments for CY 2012, using a 

multiple threshold of 1.75 and a proposed fixed-dollar threshold of $2,025 should be 

approximately 1.03 percent of total payments. The estimated current outlier payments of 

1.03 percent are incorporated in the CY 2013 comparison in Column 8. We used the 

same set of claims and a charge inflation factor of 14.06 percent (1.1406) and the CCRs 

in the April 2012 OPSF, with an adjustment of 0.9790, to reflect relative changes in cost 

and charge inflation between CY 2011 and CY 2013, to model the proposed CY 2013 

outliers at 1.0 percent of estimated total payments using a multiple threshold of 1.75 and 

a proposed fixed-dollar threshold of $2,400. 

We estimate that the anticipated change in payment between CY 2012 and 

CY 2013 for the hospitals failing to meet the Hospital OQR Program requirements would 

be negligible. Overall, we estimate that facilities would experience an increase of 

2.1 percent under this proposed rule in CY 2013 relative to total spending in CY 2012. 

This projected increase (shown in Column 8) of Table 45 reflects the proposed 

2.1 percent OPD fee schedule increase factor, with proposed 0.04 percent for the change 

in the pass-through estimate between CY 2012 and CY 2013, less 0.03 percent for the 

difference in estimated outlier payments between CY 2012 (1.03 percent) and CY 2013 

(1.0 percent), less 0.04 percent due to the section 508 wage adjustment, less 0.1 percent 

due to the frontier adjustment in CY 2012, plus 0.1 percent due to the proposed frontier 

State wage index adjustment. When we exclude cancer and children’s hospitals (which 
are held harmless to their pre-BBA amount) and CMHCs, the estimated increase 

continues to be 2.1 percent after rounding. We estimate that the combined effect of all 

proposed changes for CY 2013 would increase payments to urban hospitals by 2.1 

percent, with large urban hospitals experiencing an estimated 2.2 percent increase and 

“other” urban hospitals experiencing an estimated 1.9 percent increase. We estimate that 

urban hospitals that bill less than 5,000 lines of OPPS services would experience an 

increase of 6.0 percent, largely attributable to the proposed increase in payment for 

partial hospitalization and group psychotherapy services furnished in the hospital. We 

estimate that urban hospitals that bill 11,000 or more lines of OPPS services would 

experience increases between 1.9 percent and 3.0 percent, while urban hospitals that 

report between 5,000 and 10,999 lines would experience an increase of 4.2 percent. 

 Overall, we estimate that rural hospitals would experience a 2.2 percent increase 

as a result of the combined effects of all proposed changes for CY 2013. We estimate 

that rural hospitals that bill less than 5,000 lines of OPPS services would experience an 

increase of 4.2 percent and that rural hospitals that bill 5,000 or more lines of OPPS 

services would experience increases ranging from 2.2 to 2.8 percent. 

 Among teaching hospitals, we estimate that the impacts resulting from the 

combined effects of all proposed changes would include an increase of 2.0 percent for 

major teaching hospitals and 2.3 percent for nonteaching hospitals. Minor teaching 

hospitals would experience an increase of 1.9 percent. 

 In our analysis, we also have stratified hospitals by type of ownership. Based on 

this analysis, we estimate that voluntary hospitals would experience an increase of 2.0 
percent, proprietary hospitals would experience an increase of 2.3 percent, and 

governmental hospitals would experience an increase of 2.1 percent. 
TABLE 45.—ESTIMATED IMPACT OF THE PROPOSED CY 2013 CHANGES FOR THE HOSPITA

PROSPECTIVE PAYMENTS SYSTEM

(1) (2) (3) (4) (5) (6) 

Number 

of 

Hospitals

APC 

Recalibration 

(Median) 

Impact of 

Basing 

Weights 

Using 

Geometric 

Mean 

APC 

Recalibration 

(Geo Mean) 

New Wage 

Index and 

Provider 

Adjustments 

Comb 

(cols 4, 5) 

with 

Market 

Basket 

Update 

ALL FACILITIES * 4,070 0.0 0.0 0.0 0.0 2.1 ALL HOSPITALS 3,853 0.0 0.0 0.0 0.0 2.1 (excludes hospitals permanently held harmless and CMHCs) URBAN HOSPITALS 2,907 -0.1 0.0 -0.1 0.0 2.1 

LARGE URBAN 1,592 0.0 0.0 0.0 0.2 2.3 (GT 1 MILL.) OTHER URBAN 1,315 -0.1 0.0 -0.1 -0.2 1.9 

 (LE 1 MILL.) RURAL HOSPITALS 946 0.2 0.1 0.3 -0.2 2.3 

SOLE COMMUNITY 384 0.3 0.1 0.4 0.0 2.5 

 OTHER RURAL 562 0.1 0.2 0.3 -0.3 2.1 
(1) (2) (3) (4) (5) (6) 

Number 

of 

Hospitals

APC 

Recalibration 

(Median) 

Impact of 

Basing 

Weights 

Using 

Geometric 

Mean 

APC 

Recalibration 

(Geo Mean) 

New Wage 

Index and 

Provider 

Adjustments 

Comb 

(cols 4, 5) 

with 

Market 

Basket 

Update 

BEDS (URBAN)  0 - 99 BEDS 1,000 0.4 0.2 0.6 0.0 2.7  100-199 BEDS 831 0.1 0.1 0.2 0.1 2.3  200-299 BEDS 457 -0.1 0.0 -0.1 0.1 2.0 

300-499 BEDS 415 -0.2 0.0 -0.2 0.1 2.0 

 500 + BEDS 204 -0.1 -0.1 -0.2 -0.1 1.8 BEDS (RURAL)  0 - 49 BEDS 353 0.5 0.4 0.9 -0.2 2.8  50- 100 BEDS 352 0.4 0.1 0.5 -0.1 2.5  101- 149 BEDS 138 0.0 0.1 0.1 -0.5 1.7 

150- 199 BEDS 55 0.1 0.1 0.2 -0.3 2.1 

 200 + BEDS 48 -0.2 0.0 -0.1 0.3 2.2 VOLUME (URBAN) 

LT 5,000 Lines 573 1.9 2.1 4.0 0.2 6.4 5,000 - 10,999 Lines 135 1.2 1.1 2.4 -0.3 4.1 
(1) (2) (3) (4) (5) (6) 

Number 

of 

Hospitals

APC 

Recalibration 

(Median) 

Impact of 

Basing 

Weights 

Using 

Geometric 

Mean 

APC 

Recalibration 

(Geo Mean) 

New Wage 

Index and 

Provider 

Adjustments 

Comb 

(cols 4, 5) 

with 

Market 

Basket 

Update 

11,000 - 20,999 Lines 213 0.5 0.3 0.8 0.1 3.0 

21,000 - 42,999 Lines 474 0.2 0.1 0.3 0.2 2.6 

42,999 - 89,999 Lines 698 -0.1 0.0 0.0 0.1 2.2 GT 89,999 Lines 814 -0.1 0.0 -0.2 0.0 2.0 

VOLUME (RURAL) 

LT 5,000 Lines 63 1.4 1.1 2.5 -0.3 4.3 5,000 - 10,999 Lines 69 0.2 0.7 1.0 -0.9 2.2 11,000 - 20,999 Lines 157 0.3 0.6 0.9 -0.2 2.8 

21,000 - 42,999 Lines 292 0.4 0.2 0.6 -0.3 2.4 

GT 42,999 Lines 365 0.1 0.1 0.2 -0.1 2.2 

REGION (URBAN) 
(1) (2) (3) (4) (5) (6) 

Number 

of 

Hospitals

APC 

Recalibration 

(Median) 

Impact of 

Basing 

Weights 

Using 

Geometric 

Mean 

APC 

Recalibration 

(Geo Mean) 

New Wage 

Index and 

Provider 

Adjustments 

Comb 

(cols 4, 5) 

with 

Market 

Basket 

Update 

 NEW ENGLAND 148 0.2 0.0 0.2 -1.2 1.1  MIDDLE ATLANTIC 345 -0.1 -0.1 -0.2 -0.2 1.8  SOUTH ATLANTIC 450 -0.1 -0.1 -0.1 -0.4 1.5  EAST NORTH CENT. 469 -0.1 0.0 -0.1 0.3 2.3  EAST SOUTH CENT. 173 -0.2 -0.1 -0.3 -0.7 1.1  WEST NORTH CENT. 185 0.0 0.0 0.1 0.5 2.7  WEST SOUTH CENT. 494 -0.1 0.1 0.0 -0.2 1.9  MOUNTAIN 203 0.1 0.0 0.1 -0.1 2.1 

PACIFIC 393 -0.2 0.1 0.0 1.6 3.6 

 PUERTO RICO 47 0.3 0.1 0.3 0.3 2.7 REGION (RURAL)  NEW ENGLAND 25 0.4 0.0 0.4 0.4 2.9  MIDDLE ATLANTIC 67 0.3 0.0 0.3 0.2 2.6  SOUTH ATLANTIC 161 0.0 0.1 0.2 -0.4 1.9  EAST NORTH CENT. 126 0.2 0.1 0.3 0.3 2.7  EAST SOUTH CENT. 174 -0.1 0.1 0.0 -0.3 1.7  WEST NORTH CENT. 99 0.4 0.1 0.5 -0.3 2.3 
(1) (2) (3) (4) (5) (6) 

Number 

of 

Hospitals

APC 

Recalibration 

(Median) 

Impact of 

Basing 

Weights 

Using 

Geometric 

Mean 

APC 

Recalibration 

(Geo Mean) 

New Wage 

Index and 

Provider 

Adjustments 

Comb 

(cols 4, 5) 

with 

Market 

Basket 

Update 

 WEST SOUTH CENT. 200 0.3 0.4 0.8 -0.3 2.6 

MOUNTAIN 65 0.4 0.0 0.4 0.1 2.6 

 PACIFIC 29 0.4 0.1 0.5 -0.9 1.7 TEACHING STATUS  NON-TEACHING 2,878 0.0 0.1 0.1 0.0 2.3 

MINOR 687 -0.1 0.0 -0.2 -0.1 1.9 

 MAJOR 288 0.0 -0.1 -0.1 0.1 2.1 DSH PATIENT PERCENT  0 17 0.9 -0.1 0.8 -0.1 2.8  GT 0 - 0.10 365 0.1 -0.1 0.0 0.0 2.1  0.10 - 0.16 375 0.1 0.0 0.0 -0.1 2.0  0.16 - 0.23 742 0.0 0.0 0.0 0.0 2.1  0.23 - 0.35 1,018 -0.1 0.0 -0.1 0.0 2.0 

GE 0.35 748 -0.1 0.1 0.0 0.1 2.2 DSH NOT AVAILABLE ** 588 2.1 4.0 6.1 0.0 8.3 
(1) (2) (3) (4) (5) (6) 

Number 

of 

Hospitals

APC 

Recalibration 

(Median) 

Impact of 

Basing 

Weights 

Using 

Geometric 

Mean 

APC 

Recalibration 

(Geo Mean) 

New Wage 

Index and 

Provider 

Adjustments 

Comb 

(cols 4, 5) 

with 

Market 

Basket 

Update 

URBAN TEACHING/DSH  TEACHING & DSH 886 -0.1 -0.1 -0.1 0.0 1.9  NO TEACHING/DSH 1,453 0.0 0.0 0.0 0.1 2.2 

NO TEACHING/NO DSH 17 0.9 -0.1 0.8 -0.1 2.8 DSH NOT AVAILABLE** 551 2.1 3.7 5.9 0.1 8.1 

TYPE OF OWNERSHIP  VOLUNTARY 2,042 0.0 0.0 -0.1 0.0 2.1 

PROPRIETARY 1,254 0.0 0.2 0.2 0.0 2.3 

 GOVERNMENT 557 0.0 0.0 0.1 -0.1 2.1 CMHCs 154 0.8 -6.9 -6.2 -0.4 -4.4 
Column (1) shows total hospitals and/or CMHCs. 

Column (2) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use o

payment weights, and the proposed recalibration of APC weights based on CY 2011 hospital claims data. 

Column (3) shows the estimated impact of basing the CY 2013 OPPS proposed payments on geometric mean costs, by co

under the proposal for a geometric mean cost based system to those under a median based OPPS. 

Column (4) shows the impact of changes resulting from the reclassification of HCPCS codes among APC groups, the use o

the CY 2013 proposed OPPS relative payment weights, and the proposed recalibration of APC weights based on CY 2011 

Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2013 hospital inpatient wage in

in both years so its budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the prop

results in a budget neutrality factor of 1. 

Column (6) shows the impact of all budget neutrality adjustments and the proposed addition of the 2.1 percent OPD fee sc

reduced by 0.8 percentage points for the proposed productivity adjustment and further reduced by 0.1 percentage point in o

forth in the Affordable Care Act). 

Column (7) shows the non-budget neutral impact of applying the frontier State wage adjustment in CY 2013, after applicatio

schedule increase factor. 

Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate This column also shows the expiration of section 508 wages on March 30, 2012, and the application of the frontier State wa*These 4,070 providers include children and cancer hospitals, which are held harmless to pre-BBA amounts, and CMHCs. ** Complete DSH numbers are not available for providers that are not paid under IPPS, including rehabilitation, psychiatric, 
(3) Estimated Effects of Proposed OPPS Changes on CMHCs 

 The last line of Table 45 demonstrates the isolated impact on CMHCs, which 

furnish only partial hospitalization services under the OPPS. In CY 2012, 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 first implemented these four APCs for CY 2011. We adopted 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 and provided a transition to CMHC rates based solely 

on CMHC data for the two CMHC PHP per diem rates. For CY 2013, we are proposing 

to continue the provider-specific APC structure that we adopted for CY 2011 and to base 

payment fully on the data for the type of provider furnishing the service. 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 2011 claims data used for this proposed rule. We excluded 

days with 1 or 2 services because our policy only pays a per diem rate for partial 

hospitalization when 3 or more qualifying services are provided to the beneficiary. 

Because the relative payment weights for APC 0173 (Level II Partial Hospitalization (4 

or more services) for CMHCs) decline in CY 2013 using geometric mean-based relative 

payment weights as opposed to median-based relative payment weights, we estimate that 
there would be a 4.4 percent decrease in payments to CMHCs (shown in Columns 3 and 

4). 

 Column 5 shows that the estimated impact of adopting the proposed CY 2013 

wage index values would result in a small decrease of 0.4 percent to CMHCs. We note 

that all providers paid under the OPPS, including CMHCs, would receive a proposed 2.1 

percent OPD fee schedule increase factor. Column 6 shows that combining this proposed 

OPD fee schedule increase factor, along with proposed changes in APC policy for 

CY 2013 and the proposed CY 2013 wage index updates, results in an estimated decrease 

of 4.4 percent. Column 7 shows that adding the proposed frontier State wage adjustment 

would result in no change to the cumulative 4.4 percent decrease. Column 8 shows that 

adding the proposed changes in outlier and pass-though payments would result in no 

change to the 4.4 percent decrease in payment for CMHCs. This reflects all proposed 

changes to CMHCs for CY 2013. 

(4) Estimated Effect of Proposed 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 would increase for services for which the 

OPPS payments would rise and would decrease for services for which the OPPS 

payments would fall. For example, for a service assigned to Level IV Needle 

Biopsy/Aspiration Except Bone Marrow (APC 0037) in the CY 2012 OPPS, the national 

unadjusted copayment is $227.35, and the minimum unadjusted copayment is $215.00, 

20 percent of the national unadjusted payment rate of $1,074.99. For CY 2013, the 

proposed national unadjusted copayment for APC 0037 is $227.35, the same amount as 

the national unadjusted copayment in effect for CY 2012. The proposed minimum 
unadjusted copayment for APC 0037 is $224.34 or 20 percent of the proposed CY 2013 

national unadjusted payment rate for APC 0037 of $1,121.70. The minimum unadjusted 

copayment would increase for CY 2013 compared to CY 2012 because the payment rate 

for APC 0037 would increase for CY 2013. For further discussion on the calculation of 

the national unadjusted copayments and minimum unadjusted copayments, we refer 

readers to section II.H. of this proposed rule. In all cases, the statute limits beneficiary 

liability for copayment for a procedure to the hospital inpatient deductible for the 

applicable year. The CY 2012 hospital inpatient deductible is $1,156. The amount of the 

CY 2013 hospital inpatient deductible is not available at the time of publication of this 

proposed rule. 

 In order to better understand the impact of proposed changes in copayment on 

beneficiaries, we modeled the percent change in total copayment liability using CY 2011 

claims. We estimate, using the claims of the 4,070 hospitals and CMHCs on which our 

modeling is based, that total beneficiary liability for copayments would decrease as an 

overall percentage of total payments, from 22.1 percent in CY 2012 to 21.6 percent in 

CY 2013 due largely to changes in service-mix. 

(5) Estimated Effects of Proposed 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 XIV. of this proposed rule. No 

types of providers or suppliers other than hospitals, CMHCs and ASCs would be affected 

by the proposed changes in this proposed rule. 
(6) Estimated Effects of Proposed OPPS Changes on the Medicare and Medicaid 

Programs 

 The effect on the Medicare program is expected to be $700 million in additional 

program payments for OPPS services furnished in CY 2013. 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 XXII.A. of this proposed rule. 

(7) Alternative OPPS Policies Considered 

 Alternatives to the OPPS changes we are proposing to make and the reasons for 

our selected alternatives are discussed throughout this proposed rule. In this section, we 

discuss some of the major issues and the alternatives considered. 

● Alternatives Considered for Our Proposal to Base the APC Relative Payment 

Weights on Geometric Mean Costs Rather than Median Costs 

As described in section II.A.2.f. of this proposed rule, we are proposing to base 

the CY 2013 relative payment weights on which OPPS payments are calculated using 

geometric mean costs rather than median costs. We are proposing to establish this policy 

based on public stakeholder comments, the improvements we have made to the data 

process to obtain more data and additional accuracy in estimating cost, and the other 

reasons described in the geometric mean based relative payment weights section. 

 In developing this proposal, we considered another alternative, which was to 

continue basing the relative payment weights based on median costs. As discussed in the 

geometric mean based weights section, medians have historically served as a good 

measure of central tendency and continue to do so. In the initial establishment of the 
OPPS, we selected medians as the measure of central tendency on which to base the 

weights for a number of reasons. Those included statistical bases such as medians' 

resistance to outlier observations and their impact as well as reasons surrounding the 

practical implementation of the OPPS as a new payment system. While some of those 

reasons for selecting medians continue to apply, others are now less relevant because of 

changes we have made in our data process, or no longer apply because of factors such as 

actual development of a working payment system. We have made a number of changes 

to the OPPS to address some of the challenges in arriving at better estimates of service 

cost, including trims, more specific application of cost to charge ratios in estimating cost, 

modeling changes to better simulate payment mechanisms, and methods of obtaining 

additional claims data through what is already available such as the bypass list. 

 We believe that those changes have helped to improve the relative costs on which 

the payment system is based. We also believe that geometric mean costs would better 

incorporate the range of costs associated with providing a service, and thus would 

represent one such additional improvement. Therefore, in order to improve the accuracy 

at which we arrive at service costs used to set relative payment weights, to be responsive 

to stakeholder concerns regarding the degree to which OPPS payment appropriately 

reflects service cost, and the other reasons described in section II.A.2.f of this proposed 

rule, we are proposing to establish the CY 2013 OPPS relative payment weights based on 

geometric means rather than continuing our historical practice of modeling costs using 

median costs. 
● Alternatives Considered for Payment of Drugs and Biologicals That Do Not 

Have Pass-Through Status 

 We are proposing to pay for separately payable drugs and biologicals at ASP+6 

percent, based on section 1833 (t)(14)(A)(iii)(II) of the Act, also referred to as the 

statutory default. As detailed in greater depth in section V.B.3 of this proposed rule, this 

payment will represent the combined payment for both the acquisition and pharmacy 

overhead costs of separately payable drugs and biologicals. 

We considered three alternatives for payment for drugs and biologicals that do not 

have pass-through status for CY 2013 (separately payable drugs and biologicals). The 

first alternative we considered was to use the standard methodology, as described in the 

CY 2006 OPPS/ASC final rule with comment period (70 FR 68642). We compared 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, to calculate the estimated percent of ASP 

that would serve as the best proxy for the combined acquisition and pharmacy overhead 

costs of separately payable drugs and biologicals, but without redistribution of estimated 

pharmacy overhead costs. Under this methodology, without a redistribution of overhead 

costs from packaged drugs to separately payable drugs, using April 2012 ASP 

information and costs derived from CY 2011 OPPS claims data, we estimated the 

combined acquisition and overhead costs of separately payable drugs and biologicals to 

be ASP+0 percent. As discussed in section V.B.3. of this proposed rule, we also 

determined that the combined acquisition and overhead costs of packaged drugs are 

311 percent of ASP. 
We did not choose this alternative because we believe that this analysis indicates 

that hospital charging practices reflected in our standard drug payment methodology have 

the potential to “compress” the calculated costs of separately payable drugs and 

biologicals to some degree when there is no redistribution of estimated pharmacy 

overhead costs. Further, we recognize that the attribution of pharmacy overhead costs to 

packaged or separately payable drugs and biologicals through our standard drug payment 

methodology of a combined payment for acquisition and pharmacy overhead costs 

depends, in part, on the treatment of all drugs and biologicals each year under our annual 

drug packaging threshold. Changes to the packaging threshold may result in changes to 

payment for the overhead cost of drugs and biologicals that do not reflect actual changes 

in hospital pharmacy overhead cost for those products. 

 The second alternative we considered was to propose to continue our overhead 

adjustment methodology for CY 2013 and redistribute $270 million in overhead costs 

from packaged coded and uncoded drugs and biologicals to separately payable drugs and 

biologicals. Using this approach, we adjusted the CY 2011 pharmacy overhead 

redistribution amount of $200 million using the PPI for Pharmaceuticals for Human Use, 

resulting in a redistribution amount of $270 million and a payment rate for separately 

payable drugs of ASP+6 percent. We did not choose this alternative because of the 

reasons discussed below and in further detail in section V.B.3 of this proposed rule. 

The third option that we considered, and the one that we are proposing for 

CY 2013, is to pay for separately payable drugs and biologicals administered in the 

hospital outpatient department, at ASP+6 percent based on the statutory default described 

in section 1833(t)(14)(A)(iii)(II) of the Act, which 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. We are proposing that this ASP+6 percent payment amount for separately 

payable drugs and biologicals represents the combined acquisition and pharmacy 

overhead payment for drugs and biologicals for CY 2013. 

As described in further detail in section V.B.3 of this proposed rule, we chose this 

alternative because we are uncertain about the full cost of pharmacy overhead and 

acquisition cost, due to the limitations of the submitted hospital charge and claims data 

for drugs. We believe that the continued use of our current drug payment methodologies 

may not appropriately account for average acquisition and pharmacy overhead cost and 

therefore could result in future payment rates that are not appropriate. 

Therefore, we are proposing to pay for separately payable drugs and biologicals 

based on the statutory default at the physician’s office Part B payment rates, as 

established in 1842 (o) and 1847 A of the Act, at ASP+6 percent. We believe that paying 

for separately payable drugs and biologicals at ASP+6 percent based on the statutory 

default is appropriate at this time as it yields increased predictability in payment for drugs 

and biologicals under the OPPS while appropriately paying for drugs at a level consistent 

with payment amounts yielded by our methodology of the past 7 years. 

b. Estimated Effects of ASC Payment System Proposals 

On August 2, 2007, we published in the Federal Register the final rule for the 

revised ASC payment system, effective January 1, 2008 (72 FR 42470). In that final 
rule, we adopted the methodologies to set payment rates for covered ASC services to 

implement the revised payment system so that it would be designed to result in budget 

neutrality as required by section 626 of Pub. L. 108-173; established that the OPPS 

relative payment weights would be the basis for payment and that we would update the 

system annually as part of the OPPS rulemaking cycle; and provided that the revised 

ASC payment rates would be phased in over 4 years. 

ASC payment rates are calculated by multiplying the ASC conversion factor by 

the ASC relative payment weight. As discussed fully in section XIV. of this proposed 

rule, we set the proposed CY 2013 ASC relative payment weights by scaling the 

proposed CY 2013 OPPS relative payment weights by the proposed ASC scaler of 

0.9331. The estimated effects of the proposed updated relative payment weights on 

payment rates are varied and are reflected in the estimated payments displayed in Tables 

46 and 47 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). 

Because the ASCQR Program would not affect payment rates until CY 2014, there would 

be no reduction to the CPI-U for failure to meet the requirements of the ASCQR Program 

for CY 2013. We calculated the proposed CY 2013 ASC conversion factor by adjusting 
the CY 2012 ASC conversion factor by 1.0002 to account for changes in the proposed 

pre-floor and pre-reclassified hospital wage indices between CY 2012 and CY 2013 and 

by applying the proposed CY 2013 MFP-adjusted CPI-U update factor of 1.3 percent 

(projected CPI-U update of 2.2 percent minus a projected productivity adjustment of 0.9 

percent). The proposed CY 2013 ASC conversion factor is $43.190. 

(1) Limitations of Our Analysis 

Presented here are the projected effects of the proposed changes for CY 2013 on 

Medicare payment to ASCs. A key limitation of our analysis is our inability to predict 

changes in ASC service-mix between CY 2011 and CY 2013 with precision. We believe 

that the net effect on Medicare expenditures resulting from the proposed CY 2013 

changes would be small in the aggregate for all ASCs. However, such changes may have 

differential effects across surgical specialty groups as ASCs continue to adjust to the 

payment rates based on the policies of the revised ASC payment system. We are unable 

to accurately project such changes at a disaggregated level. Clearly, individual ASCs 

would experience changes in payment that differ from the aggregated estimated impacts 

presented below. 

(2) Estimated Effects of ASC Payment System Proposals 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 proposed update to the CY 2013 payments would depend on a number of factors, 

including, but not limited to, the mix of services the ASC provides, the volume of 
specific services provided by the ASC, the percentage of its patients who are Medicare 

beneficiaries, and the extent to which an ASC provides different services in the coming 

year. The following discussion presents tables that display estimates of the impact of the 

proposed CY 2013 updates to the ASC payment system on Medicare payments to ASCs, 

assuming the same mix of services as reflected in our CY 2011 claims data. Table 46 

depicts the estimated aggregate percent change in payment by surgical specialty or 

ancillary items and services group by comparing estimated CY 2012 payments to 

estimated CY 2013 payments, and Table 47 shows a comparison of estimated CY 2012 

payments to estimated CY 2013 payments for procedures that we estimate would receive 

the most Medicare payment in CY 2012. 

Table 46 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, 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 46. 

● 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 2012 ASC Payments were calculated using 

CY 2011 ASC utilization (the most recent full year of ASC utilization) and CY 2012 

ASC payment rates. The surgical specialty and ancillary items and services groups are 

displayed in descending order based on estimated CY 2012 ASC payments. 

● Column 3—Estimated CY 2013 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 would be attributable to proposed updates to 

ASC payment rates for CY 2013 compared to CY 2012. 

As seen in Table 46, we estimate that the proposed update to ASC rates for 

CY 2013 would result in a 1 percent increase in aggregate payment amounts for eye and 

ocular adnexa procedures, a 3 percent increase in aggregate payment amounts for 

digestive system procedures, and a 5 percent increase 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 proposed CY 2013 update are 

variable. For instance, we estimate that, in the aggregate, payment for integumentary 

system procedures, respiratory system procedures, and cardiovascular systems procedures 

would decrease by 2 percent, whereas auditory system procedures would increase by 1 

percent under the proposed CY 2013 rates. 

An estimated increase in aggregate payment for the specialty group does not mean 

that all procedures in the group would experience increased payment rates. For example, 
the proposed estimated increase for CY 2013 for nervous system procedures is likely due 

to an increase in the proposed ASC payment weight for some of the high volume 

procedures, such as CPT code 63685 (Insrt/redo spine n generator) where estimated 

payment would increase by 10 percent for CY 2013. 

 Also displayed in Table 46 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 

would remain unchanged for CY 2013. 

TABLE 46.—ESTIMATED IMPACT OF THE PROPOSED CY 2013 UPDATE TO 

THE ASC PAYMENT SYSTEM ON AGGREGATE CY 2013 MEDICARE 

PROGRAM PAYMENTS BY SURGICAL SPECIALTY OR ANCILLARY ITEMS 

AND SERVICES GROUP 

Surgical Specialty Group 

(1) 

Estimated 

CY 2012 

ASC 

Payments 

(in Millions) 

 (2) 

Estimated 

CY 2013 

Percent 

Change 

(3) 

Total $3,430 1% 

Eye and ocular adnexa $1,448 1% 

Digestive system $715 3% 

Nervous system $436 5% 

Musculoskeletal system $430 -1% 

Genitourinary system $159 0% 

Integumentary system $129 -2% 

Respiratory system $45 -2% 

Cardiovascular system $31 -2% 

Ancillary items and services $21 0% 

Auditory system $11 1% 

Hematologic & lymphatic systems $5 0% 
Table 47 below shows the estimated impact of the proposed updates to the revised 

ASC payment system on aggregate ASC payments for selected surgical procedures 

during CY 2013. The table displays 30 of the procedures receiving the greatest estimated 

CY 2012 aggregate Medicare payments to ASCs. The HCPCS codes are sorted in 

descending order by estimated CY 2012 program payment. 

● Column 1–CPT/HCPCS code. 

● Column 2–Short Descriptor of the HCPCS code. 

● Column 3–Estimated CY 2012 ASC Payments were calculated using CY 2011 

ASC utilization (the most recent full year of ASC utilization) and the CY 2012 ASC 

payment rates. The estimated CY 2012 payments are expressed in millions of dollars. 

● Column 4–Estimated CY 2013 Percent Change reflects the percent differences 

between the estimated ASC payment for CY 2012 and the estimated payment for 

CY 2013 based on the proposed update. 

TABLE 47.--ESTIMATED IMPACT OF THE PROPOSED CY 2013 UPDATE TO 

THE ASC PAYMENT SYSTEM ON AGGREGATE PAYMENTS FOR 

SELECTED PROCEDURES 

CPT/HCPCS 

Code* 

(1)

Short Descriptor 

(2)

Estimated 

CY 2012 

ASC 

Payments 

(in millions) 

 (3)

Estimated 

CY 2013 

Percent 

Change 

(4)

66984 Cataract surg w/iol, 1 stage $1,076 1%

43239 Upper GI endoscopy, biopsy $156 3%

45380 Colonoscopy and biopsy $144 3%

45385 Lesion removal colonoscopy $92 3%

45378 Diagnostic colonoscopy $89 3%
CPT/HCPCS 

Code* 

(1)

Short Descriptor 

(2)

Estimated 

CY 2012 

ASC 

Payments 

(in millions) 

 (3)

Estimated 

CY 2013 

Percent 

Change 

(4)

66982 Cataract surgery, complex $83 1%

64483 Inj foramen epidural l/s $72 6%

62311 Inject spine l/s (cd) $68 6%

66821 After cataract laser surgery $55 6%

63650 Implant neuroelectrodes $39 -1%

15823 Revision of upper eyelid $39 -1%

G0105 Colorectal scrn; hi risk ind $38 3%

64493 Inj paravert f jnt l/s 1 lev $35 6%

29827 Arthroscop rotator cuff repr $32 -6%

64721 Carpal tunnel surgery $31 0%

G0121 Colon ca scrn not hi rsk ind $30 3%

29881 Knee arthroscopy/surgery $30 0%

63685 Insrt/redo spine n generator $28 10%

64590 Insrt/redo pn/gastr stimul $25 10%

29880 Knee arthroscopy/surgery $24 0%

45384 Lesion remove colonoscopy $23 3%

43235 Uppr gi endoscopy diagnosis $23 3%

52000 Cystoscopy $19 6%

28285 Repair of hammertoe $19 0%

62310 Inject spine c/t $18 6%

26055 Incise finger tendon sheath $17 -4%

29826 Shoulder arthroscopy/surgery $17 0%

67042 Vit for macular hole $17 -1%

67904 Repair eyelid defect $17 -3%

50590 Fragmenting of kidney stone $17 -4%

 *Note that HCPCS codes we are proposing to delete for CY 2013 are not 

displayed in this table. 

(3) Estimated Effects of ASC Payment System Proposals on Beneficiaries 

 We estimate that the proposed CY 2013 update to the ASC payment system 

would be generally positive for beneficiaries with respect to the new procedures that we 
are proposing to add to the ASC list of covered surgical procedures and for those that we 

are proposing to designate as office-based for CY 2013. 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.) Furthermore, the additions to the ASC list of covered surgical procedures 

will provide beneficiaries access to more surgical procedures in ASCs. 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 proposing to designate as 

office-based in CY 2013, the beneficiary coinsurance amount would 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 changes we are proposing to make to the ASC payment system 

and the reasons that we have chosen specific options are discussed throughout this 

proposed rule. Some of the major ASC issues discussed in this proposed rule and the 

options considered are discussed below. 

● Alternatives Considered for the Annual Update to ASC Payments for Inflation 

 Section 1833(i)(2)(C)(i) of the Act requires that, “if the Secretary has not updated 

amounts established” under the revised ASC payment system in a calendar year, the 

payment amounts “shall be increased by the percentage increase in the Consumer Price 

Index for all urban consumers (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 under the revised payment 

system, we are not compelled to increase the ASC payment amounts by the CPI-U. 

Nonetheless, we adopted a policy, which we codified at §416.171(a)(2)(ii), to update the 

ASC conversion factor using the CPI-U for CY 2010 and subsequent calendar years. 

While we believe the CPI-U is appropriate to apply to update the ASC payment system, 

the CPI-U is highly weighted for housing and transportation and may not best reflect 

inflation in the cost of providing ASC services. Therefore, as alternatives to using the 

CPI-U to update ASC payment rates for inflation, in developing this proposed rule, we 

considered using: (1) the hospital market basket, which is used to update OPPS rates for 

inflation; (2) the PE component of the MEI update, which is used to update the MPFS 
payment rates for inflation; or (3) the average of the hospital market basket update and 

the PE component of the MEI update. 

 We did not select the use of any of the above alternatives to using the CPI-U to 

update ASC payments for inflation because, until we have more information regarding 

the cost inputs of ASCs, we are not confident that any of the alternatives are a better 

proxy for ASC cost inputs than the CPI-U. 

● Alternatives Considered for Office-Based Procedures 

According to our existing policy for the ASC payment system, we designate as 

office-based those procedures that are added to the ASC list of covered surgical 

procedures in CY 2008 or later years and that we determine are predominantly performed 

in physicians’ offices based on consideration of the most recent available volume and 

utilization data for each individual procedure HCPCS code and/or, if appropriate, the 

clinical characteristics, utilization, and volume of related HCPCS codes. We establish 

payment for procedures designated as office-based at the lesser of the MPFS nonfacility 

practice expense payment amount or the ASC rate developed according to the standard 

methodology of the ASC payment system. 

In developing this proposed rule, we reviewed CY 2011 utilization data for all 

surgical procedures added to the ASC list of covered surgical procedures in CY 2008 or 

later years and for those procedures for which the office-based designation is temporary 

in the CY 2012 OPPS/ASC final rule with comment period (76 FR 74406 through 

74408). Based on that review and as discussed in section XIV.C.1.b. of this proposed 

rule, we are proposing to newly designate 6 surgical procedures as permanently 

office-based, to make temporary office-based designations for 6 procedures in CY 2013 
that were designated as temporarily office-based for CY 2012, and to make temporary 

office-based designations for 2 procedures that are proposed as new ASC covered 

surgical procedures for CY 2013. We considered two alternatives in developing this 

policy. 

The first alternative we considered was to make no change to the procedure 

payment designations. This would mean that we would pay for the 6 procedures we 

proposed to designate as permanently office-based and the 8 procedures we proposed to 

designate as temporarily office-based at an ASC payment rate calculated according to the 

standard ratesetting methodology of the ASC payment system. We did not select this 

alternative because our analysis of the data and our clinical review indicated that all 6 

procedures we proposed to designate as permanently office-based, as well as the 8 

procedures that we proposed to designate temporarily as office-based, are considered to 

be predominantly performed in physicians’ offices. Consistent with our final policy 

adopted in the August 2, 2007 final rule (72 FR 42509 through 42513), we were 

concerned that making payments at the standard ASC payment rate for the 6 procedures 

we proposed to designate as permanently office-based and the 8 procedures we proposed 

to designate as temporarily office-based could create financial incentives for the 

procedures to shift from physicians’ offices to ASCs for reasons unrelated to clinical 

decisions regarding the most appropriate setting for surgical care. Further, consistent 

with our policy, we believe that when adequate data become available to make permanent 

determinations about procedures with temporary office-based designations, maintaining 

the temporary designation is no longer appropriate. 
 The second alternative we considered and the one we are proposing for CY 2013 

is to designate 6 additional procedures as permanently office-based for CY 2013 and to 

designate 8 procedures as temporarily office-based in CY 2013. We chose this 

alternative because our claims data and clinical review indicate that these procedures 

would be considered to be predominantly performed in physicians’ offices. We believe 

that designating these procedures as office-based, which results in the CY 2013 ASC 

payment rate for these procedures potentially being capped at the CY 2013 physicians’ 

office rate (that is, the MPFS nonfacility practice expense payment amount), if 

applicable, is an appropriate step to ensure that Medicare payment policy does not create 

financial incentives for such procedures to shift unnecessarily from physicians’ offices to 

ASCs, consistent with our final policy adopted in the August 2, 2007 final rule. 

c. Effects of the Proposed Revisions to the QIO Regulations 

 In section XVIII. of this proposed rule, we discuss our proposed changes to the 

QIO program regulations, including: adding provisions for processing beneficiary 

complaints that will give beneficiaries more information about the QIO’s review process, 

which includes a new alternative dispute resolution option (immediate advocacy); giving 

QIOs the authority to send and receive secure transmissions of electronic versions of 

health information; conveying beneficiaries the right to authorize the QIOs’ use and 

disclosure of confidential information; and removing outdated regulatory provisions that 

will enable QIOs to give more information regarding the results of reviews. We believe 

the proposed changes will improve the QIO program, give beneficiaries better 

information regarding review activities and reduce burden for both providers and 

practitioners. 
 The QIO program requests approximately 62,400 medical records each year for 

the Hospital IQR and Hospital OQR Programs combined (38,400 for inpatient and 24,000 

for outpatient). For the Hospital IQR Program, the average number of pages per medical 

record is 289 pages, and for the Hospital OQR Program, the average number of pages is 

74. Reimbursement is made at a rate of $0.12 per page for PPS hospitals, which includes 

the costs of toner, paper, and labor associated with the copying of paper medical records. 

We also note that the labor associated with copying the medical records can be 

considerable. In fact, many providers and practitioners store health information 

electronically, and these same providers and practitioners are forced to print hard copies 

of the information for shipment to the QIOs. Sometimes this may entail using the “print 

screen” function to create the record to be shipped. On average, the cost of shipping the 

records is approximately $32.35 per shipment, with approximately 5,200 shipments being 

made. The shipping amount takes into consideration that, for some QIO review 

activities, multiple records are shipped at one time, which can involve the use of several 

boxes. 

 Under our proposal, by example, assuming all hospitals operate under a PPS, 

should all hospitals transfer health information on a digital versatile device (DVD), the 

costs associated with the toner and paper would be replaced by the costs of a DVD. In 

fact, numerous medical records could be copied to a single DVD. Moreover, the labor in 

copying the records would be substantially reduced because, for example, rather than 

copying the average 289 pages related to a Hospital IQR Program review, the file could 

be electronically transferred to a DVD for shipping. We estimate that the $0.12 per page 

rate could be reduced by as much as $0.07 per page. Based on the overall average 
number of pages for the Hospital IQR Program and Hospital OQR Program, respectively, 

reducing the per page rate to $0.05 per page would save $901,152 ((11,097,600 pages x 

$0.12 = $1,331,712) + (1,776,000 pages x $0.12 = $213,120) – (11,097,600 pages x 

$0.05 = $554,880) – (1,776,000 pages x $0.05 = $88,800)). 

 The proposed changes also would reduce the costs associated with mailing the 

records. For the Hospital IQR Program, hospitals sometimes need to ship as many as 

four or five large boxes of medical records. By comparison, a single DVD can house 

multiple medical records and even if multiple DVDs were required, all the DVDs could 

be mailed in a single envelope at a significantly lower costs. Potentially, the per 

envelope mailing cost could be as low as $5 compared to the per shipment average cost 

of $32.35. Thus, if all records were shipped on DVDs, the program would save $142,220 

($168,220 – $26,000). 

 The proposed changes allowing the sending and receiving of electronic versions 

of health information also would reduce costs for other QIO review activities. QIOs 

request approximately 100,000 medical records in completing other review activities, 

including but not limited to requests related to the processing of general quality of care 

reviews, written beneficiary complaint reviews, medical necessity reviews, and expedited 

discharge appeal reviews. The average number of pages associated with each of these 

reviews varies greatly, and we have estimated an overall average of approximately 175 

pages per request. The reimbursement rate for requests associated with these activities is 

$0.12 per page for PPS providers and $0.15 per page for practitioners and non-PPS 

providers. Assuming an overall average number of 175 pages for each record, we 

estimate that the total number of pages requested is approximately 17,500,000. 
Assuming that approximately 75 percent (13,125,000) of the pages are from practitioners 

and non-PPS providers, with the remaining 25 percent (4,375,000) from PPS providers, 

based on the $0.12 or $0.15 per page reimbursement rate, we estimate that the total costs 

would be approximately $1,968,750 and $525,000, respectively. If all these requests 

were fulfilled using a DVD or other electronic means, we estimate that the cost per page 

could be reduced to approximately $0.05 per page for PPS providers and $0.06 per page 

for practitioners and non-PPS providers. Thus, the estimated savings related to PPS 

providers would be approximately $306,250 ($525,000 - $218,750) and the estimated 

savings related to practitioners and non-PPS providers would be approximately 

$1,181,250 ($1,968,750 – $787,500). 

 With regard to mailing, we also believe the proposed changes would significantly 

reduce the costs for other QIO review activities. Moreover, unlike the Hospital IQR and 

Hospital OQR Programs, the number of medical records requested for these other QIO 

review activities more closely mirrors the actual number of shipments made. For 

example, on average, the QIOs request 100,000 medical records related to these other 

activities, and we estimate that this equates to approximately 82,000 shipments. We 

estimate that there is a corresponding decrease in the cost per shipment ($7 per shipment 

compared to $32.35 per shipment for the Hospital IQR and OQR Programs). If DVDs 

were used instead of paper copies of the medical records, we estimate saving of $164,000 

(82,000 x $7 – 82,000 x $5). 

 Beginning with the QIOs’ most recent scope of work, which began 

August 1, 2011, QIOs began offering immediate advocacy to Medicare beneficiaries for 

the resolution of certain types of oral complaints. We believe that cost savings will be 
realized as a result. In developing this new proposed process, we had several goals. One 

of these goals was to create a way for Medicare beneficiaries to obtain resolutions of 

complaints much faster than the traditional peer review process, which usually take over 

158 days to complete because, inevitably, various timeframes throughout the review 

process are not met (for example, providers and practitioners sometimes take more time 

that allowed to respond to medical record requests or the opportunity for discussion). By 

comparison, we believe that immediate advocacy normally can be completed within 

2 calendar days. However, this proposed process could result in reductions of more than 

merely a reduction in days. Because immediate advocacy is completed without 

reviewing a beneficiary’s medical record, QIOs would save the costs associated with 

requesting the records, which includes the labor, supplies (toner and paper), and mailing 

of the records. Moreover, although there may be some variation among QIOs, immediate 

advocacy would typically be carried out by a nurse or social worker, and, thus, the QIO 

can avoid the more expensive costs associated with the use of a physician reviewer. 

 In addition, for a traditional complaint review, the QIO’s peer reviewer completes 

three separate and distinct reviews (the interim initial determination, the final initial 

determination, and the reconsideration determination), each time reviewing the medical 

information and providing his/her conclusion about the quality of care provided. 

Moreover, the provider and/or practitioner who is the subject of the complaint will be 

brought into the complaint process each time to respond to the conclusions. With 

immediate advocacy, the nurse or social work would be involved once, early in the 

process, with the primary role being to listen to the beneficiary’s concerns and then 

coordinate a resolution with the provider or practitioner, instead of merely reviewing 
information contained in the beneficiary’s medical information. Not only would this 

process enable beneficiaries to obtain resolution of complaints quicker, but it would 

decrease the amount of time and energy practitioners and providers would devote to 

responding to the complaints. This is especially true for certain types of complaints 

where the issues involved are not even documented in the medical information the 

physician reviewers would review in the traditional complaint process. Typically, we 

have estimated a total cost per case of $960 for each case processed using the traditional 

peer review process. We estimate that, for those instances where immediate advocacy is 

used, the average cost per case would be approximately $87. On average, QIOs complete 

approximately 3,500 complaint reviews each year, and we estimate that approximately 10 

percent of these reviews (350) would be resolved using immediate advocacy instead of 

the traditional peer review process. This would result in savings of $305,550 each year 

(($960 x 350 = $336,000) – ($87 x 350 = $30,450)). 

The technical changes to the QIO regulations under section XVIII.F. of this 

proposed rule that we are proposing to improve the regulations reflect CMS’ commitment 

to the general principles of the President’s Executive Order on Regulatory Reform, 

Executive Order 13563 (January 18, 2011). 

 Below is a table summarizing the savings associated with both of these 

provisions. 

Provision Savings per Year 

Authority to transmit information 

electronically 

$2,388,622 total per year 
Quality Reporting Information 

(Copying) 

$901,152 

Quality Reporting Information 

(Mailing)

$142,220 

Other QIO Activities (Copying) $1,181,250 

Other QIO Activities (Mailing) $164,000 

Immediate Advocacy $305,550 total per year 

Total Savings $2,694,172 per year 

d. 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 three accounting statements to illustrate the impacts of this proposed 

rule. The first accounting statement, Table 48 below, illustrates the classification of 

expenditures for the CY 2013 estimated hospital OPPS incurred benefit impacts 

associated with the proposed CY 2013 OPD fee schedule increase, based on the FY 2013 

President’s Budget. The second accounting statement, Table 49 below, illustrates the 

classification of expenditures associated with the proposed 1.3 percent CY 2013 update 

to the ASC payment system, based on the provisions of this proposed rule and the 

baseline spending estimates for ASCs in the FY 2013 President’s Budget. The third 

accounting statement, Table 50 below, illustrates the estimated impact based on the 

proposed provisions allowing QIOs to securely send and receive electronic versions of 

health information as well as the use of alternative dispute resolution process called 

immediate advocacy. Lastly, the three tables classify all estimated impacts as transfers. 
TABLE 48.--ACCOUNTING STATEMENT: CY 2013 ESTIMATED HOSPITAL 

OPPS TRANSFERS FROM CY 2012 TO CY 2013 ASSOCIATED WITH THE 

PROPOSED CY 2013 HOSPITAL OUTPATIENT OPD FEE SCHEDULE 

INCREASE 

Category Transfers 

Annualized Monetized Transfers $700 million 

From Whom to Whom Federal Government to outpatient hospitals and 

other providers who received payment under 

the hospital OPPS 

Total $700 million 

TABLE 49.--ACCOUNTING STATEMENT: CLASSIFICATION OF 

ESTIMATED TRANSFERS FROM CY 2012 TO CY 2013 AS A RESULT OF THE 

PROPOSED CY 2013 UPDATE TO THE REVISED ASC PAYMENT SYSTEM 

Category Transfers 

Annualized Monetized Transfers $40 million 

From Whom to Whom 

Federal Government to Medicare Providers 

and Suppliers 

Total $40 million 

TABLE 50.--ACCOUNTING STATEMENT: CY 2013 ESTIMATED SAVINGS 

TO MEDICARE FROM THE PROPOSED REVISIONS OF THE QIO 

REGULATIONS 

Category Transfers 

Annualized Monetized Transfers -$2.7 million 

From whom to Whom Federal Government to Medicare Providers 

Total -$2.7 million 

e. Effects of Proposed Requirements for the Hospital OQR Program 

 In section XVI. of the CY 2009 OPPS/ASC final rule with comment period 

(73 FR 68758 through 68781), section XVI. of the CY 2010 OPPS/ASC final rule with 

comment period (74 FR 60629 through 60655), section XVI. of the CY 2011 OPPS/ASC 
final rule with comment period (75 FR 72064 through 72110), and section XVI. of the 

CY 2012 OPPS/ASC final rule with comment period (76 FR 74451 through 74492), we 

discussed the requirements for subsection (d) hospitals to report quality data under the 

Hospital OQR Program in order to receive the full OPD fee schedule increase factor for 

CY 2010, CY 2011, and CYs 2012 through 2014, respectively. In section XV. of this 

proposed rule, we are proposing to adopt additional policies affecting the Hospital OQR 

Program. 

 We determined that 114 hospitals did not meet the requirements to receive the full 

OPD fee schedule increase factor for CY 2012. Most of these hospitals (106 of the 114) 

received little or no OPPS payment on an annual basis and did not participate in the 

Hospital OQR Program. We estimate that 106 hospitals may not receive the full OPD fee 

schedule increase factor in CY 2014. 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 2015. 

 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 for the validation score because we believed this level was 

reasonable for hospitals to achieve while still ensuring accuracy of the data. 

Additionally, this level is consistent with what we adopted in the Hospital Inpatient 

Quality Reporting (IQR) Program (formerly referred to as the Reporting Hospital Quality 

Data for Annual Payment Update (RHQDAPU) 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 this proposed rule, for CY 2014 and subsequent years payment determinations, 

we are proposing 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 are not proposing any modifications to our 

validation requirements. We expect these proposals to have minimal impact on the 

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 2015. We also are unable to 

estimate the number of hospitals that would fail the validation documentation submission 

requirement for the proposed CY 2015 payment update. 

 The validation requirements for CY 2014 would 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 7,300 total cases for up 

to 500 hospitals for CY 2014 represents a minimal burden to Hospital OQR Program 

participating hospitals. 

 We are proposing to maintain a 45-day timeframe for hospitals to submit 

requested medical record documentation to meet our validation requirement. The total 

burden would be a maximum of 12 charts for each of the four quarters that must be 

copied and mailed within a 45-day period after the end of each quarter. 
f. Effects of the Proposed EHR Electronic Reporting Pilot 

Under section XV.K. of this proposed rule, we are proposing to allow eligible 

hospitals and CAHs that are participating in the EHR Incentive Program to meet the 

CQM reporting requirement of the program for payment year 2013 by participating in the 

Medicare EHR Incentive Program Electronic Reporting Pilot. This proposal would 

facilitate the use of an electronic infrastructure that supports the use of EHRs by hospitals 

and CAHs to meet the requirements in various CMS programs and reduce reporting 

burden simultaneously. Through this pilot, we have encouraged hospitals and CAHs to 

take steps toward the adoption of EHRs that will allow for reporting of clinical quality 

data from EHRs to a CMS data repository. We expect that the submission of quality data 

through EHRs will provide a foundation for establishing the capacity of hospitals to send, 

and for CMS, in the future, to receive, quality measures via hospital EHRs for the 

Hospital IQR Program’s measures. Hospitals that choose to participate in the EHR 

Incentive Program by means of this pilot for the purpose of meeting the CQM reporting 

requirement of Meaningful Use will be taking those first steps toward reporting clinical 

quality data in such a way. 

 There are no changes to the costs or impact in the 2012 OPPS/ASC final rule for 

the proposed 2013 Medicare EHR Incentive Program Electronic Reporting Pilot for 

Hospitals and CAHs. 

g. Effects of Proposals for the ASCQR Program 

 In section XVI. of this proposed rule, for the ASCQR Program, we are seeking 

public comment on our approach for future measures selection and development as well 

as proposing certain measures for future inclusion in the ASCQR Program measure set. 
For the CY 2015 payment determination and subsequent year payment determinations, 

we are proposing requirements regarding the dates for submission, payment, and 

completeness for claims-based measures. We also are proposing how the payment rates 

would be reduced for ASCs that fail to meet program requirements beginning in CY 2014 

and are clarifying our policy on updating 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 not 

expect our proposals to significantly affect the number of facilities that do not receive a 

full annual payment update. 

h. Effects of Proposed Updates to the IRF QRP 

 In section XVII. of this proposed rule, we discuss our proposals to retain the 

measures that were finalized for the IRF QRP for the previous annual payment 

determination year, for all subsequent annual payment determination years, unless we 

propose otherwise. Specifically, we are proposing to apply this policy to the two quality 

measures that were previously finalized in the FY 2012 IRF PPS final rule. We are 

proposing to use the CAUTI measure that was previously finalized in the FY 2012 IRF 

PPS final rule with revisions which were made by the NQF after publication of the 

FY 2012 IRF PPS final rule. We are proposing to apply the revised CAUTI measure to 

the 2012 reporting period and each subsequent reporting period thereafter. 

 These proposed changes would not impose any additional burden on IRFs, nor 

would they result in any increase in costs. 
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 $34.5 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. For details, see the Small Business Administration’s “Table of Small 

Business Size Standards” at http://www.sba.gov/content/table-small-business-sizestandards. 

In addition, section 1102(b) of the Act requires us to prepare a regulatory impact 

analysis if a rule may have a significant impact on the operations of a substantial number 

of small rural hospitals. This analysis must conform to the provisions of section 603 of 

the RFA. For purposes of section 1102(b) of the Act, we define a small rural hospital as 

a hospital that is located outside of a metropolitan statistical area and has 100 or fewer 

beds. We estimate that this proposed rule may have a significant impact on 

approximately 705 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 $139 million. This 

proposed rule does not mandate any requirements for State, local, or tribal governments, 

nor will it affect private sector costs. 

D. Conclusion

 The changes we are proposing 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 45 demonstrates the estimated 

distributional impact of the OPPS budget neutrality requirements that would result in a 

2.1 percent increase in payments for all services paid under the OPPS in CY 2013, after 

considering all proposed changes to APC reconfiguration and recalibration, as well as the 

proposed OPD fee schedule increase factor, proposed wage index changes, including the 

proposed frontier State wage index adjustment, estimated payment for outliers, and 

proposed changes to the pass-through payment estimate. However, some classes of 

providers that are paid under the OPPS would experience more significant gains and 

others would experience modest losses in OPPS payments in CY 2013. We estimate that 

hospitals for whom DSH data are not available (non-IPPS, largely urban hospitals) would 

experience an increase of 8.2 percent due to increased payments for partial 

hospitalization, group psychotherapy and hemodialysis services. CMHCs would see an 

overall decrease in payment of 4.4 percent as a result of a decrease in their estimated 

costs. 
The proposed updates to the ASC payment system for CY 2013 would affect each 

of the approximately 5,300 ASCs currently approved for participation in the Medicare 

program. The effect on an individual ASC would depend on its mix of patients, the 

proportion of the ASC’s patients who are Medicare beneficiaries, the degree to which the 

payments for the procedures offered by the ASC are changed under the ASC payment 

system, and the extent to which the ASC provides a different set of procedures in the 

coming year. Table 46 demonstrates the estimated distributional impact among ASC 

surgical specialties of the MFP-adjusted CPI-U update factor of 1.3 percent for CY 2013. 

XXIII. Federalism Analysis 

Executive Order 13132 establishes certain requirements that an agency must meet 

when it promulgates a proposed rule (and subsequent final rule) that imposes substantial 

direct costs on State and local governments, preempts State law, or otherwise has 

Federalism implications. 

We have examined the OPPS and ASC provisions included in this proposed rule 

in accordance with Executive Order 13132, Federalism, and have determined that they 

will not have a substantial direct effect on State, local or tribal governments, preempt 

State law, or otherwise have a Federalism implication. As reflected in Table 45 of this 

proposed rule, we estimate that OPPS payments to governmental hospitals (including 

State and local governmental hospitals) would increase by 2.1 percent under this 

proposed rule. While we do not know the number of ASCs or CMHCs with government 

ownership, we anticipate that it is small. The analyses we have provided in this section 

of this proposed rule, in conjunction with the remainder of this document, demonstrate 

that this proposed rule is consistent with the regulatory philosophy and principles 
identified in Executive Order 12866, the RFA, and section 1102(b) of the Act. 

This proposed rule would affect payments to a substantial number of small rural hospitals 

and a small number of rural ASCs, as well as other classes of hospitals, CMHCs, and 

ASCs, and some effects may be significant. 
List of Subjects 

42 CFR Part 416 

 Health facilities, Health professions, Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 419

 Hospitals, Medicare, Reporting and recordkeeping requirements. 

42 CFR Part 476 

 Health care, Health professional, Health record, Peer Review Organization 

(PRO), Penalties, Privacy, Reporting and recordkeeping requirements. 

42 CFR Part 478 

 Administrative practice and procedure, Health care, Health professions, Peer 

Review Organizations (PRO), Reporting and recordkeeping requirements. 

42 CFR Part 480 

 Health care, Health professions, Health records, Peer Review Organizations 

(PRO), Privacy, Reporting and recordkeeping requirements. 

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 proposing to amend 42 CFR Chapter IV as set forth below: 
PART 416—AMBULATORY SURGICAL SERVICES 

1. The authority citation for Part 416 continues to read as follows: 

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

and1395hh). 

2. Section 416.160 is amended by revising paragraph (a)(1) to read as follows: 

§ 416.160 Basis and scope.

 (a) * * * 

 (1) Section 1833(i)(2)(D) of the Act requires the Secretary to implement a 

revised payment system for payment of surgical services furnished in ASCs. The statute 

requires that, in the year such system is implemented, the system shall be designed to 

result in the same amount of aggregate expenditures for such services as would be made 

if there was no requirement for a revised payment system. The revised payment system 

shall be implemented no earlier than January 1, 2006, and no later than January 1, 2008. 

The statute provides that the Secretary may implement a reduction in any annual update 

for failure to report on quality measures as specified by the Secretary. The statute also 

requires that, for CY 2011 and each subsequent year, any annual update to the ASC 

payment system, after application of any reduction in the annual update for failure to 

report on quality measures as specified by the Secretary, be reduced by a productivity 

adjustment. There shall be no administrative or judicial review under section 1869 of the 

Act, section 1878 of the Act, or otherwise of the classification system, the relative 

weights, payment amounts, and the geographic adjustment factor, if any, of the revised 

payment system.

* * * * * 
3. Section 416.171 is amended by-- 

a. Redesignating paragraph (a)(2)(iii) as paragraph (a)(2)(iv) and revising the 

redesignated paragraph (a)(2)(iv). 

b. Adding paragraph (a)(2)(iii). 

The revision and addition read as follows: 

§ 416.171 Determination of payment rates for ASC services.

 (a) * * * 

(2) * * * 

(iii) For CY 2014 and subsequent calendar years, the Consumer Price Index for 

All Urban Consumers update determined under paragraph (a)(2)(ii) of this section is 

reduced by 2.0 percentage points for an ASC that fails to meet the standards for reporting 

of ASC quality measures as established by the Secretary for the corresponding calendar 

year. 

(iv) Productivity adjustment. (A) For calendar year 2011 and subsequent years, 

the Consumer Price Index for All Urban Consumers determined under paragraph 

(a)(2)(ii) of this section, after application of any reduction under paragraph (a)(2)(iii) of 

this section, is reduced by the productivity adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. 

(B) The application of the provisions of paragraph (a)(2)(iv)(A) of this section 

may result in the update being less than zero percent for a year, and may result in 

payment rates for a year being less than the payment rates for the preceding year. 

* * * * * 
 4. Section 416.195 is amended by revising paragraphs (a)(2) and (a)(4) 

introductory text, to read as follows: 

§ 416.195 Determination of membership in new classes of new technology IOLs. 

 (a) * * * 

 (2) The IOL shall have a new lens characteristic in comparison to currently 

available IOLs. The FDA-approved labeling shall contain a claim of a specific clinical 

benefit imparted by the new lens characteristic. 

* * * * * 

 (4) Any specific clinical benefit referred to in paragraph (a)(2) of this section 

must be supported by evidence that demonstrates that the IOL results in a measurable, 

clinically meaningful, improved outcome. Improved outcomes include: 

* * * * * 

PART 419—PROSPECTIVE PAYMENT SYSTEM FOR HOSPITAL 

OUTPATIENT DEPARTMENT SERVICES 

 5. 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, 1395(t), and 1395hh). 

6. Section 419.2 is amended by revising paragraph (b) heading and introductory 

text to read as follows: 

§ 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 

directly related and integral to performing a procedure or furnishing a service on an 

outpatient basis. In general, these packaged costs include, but are not limited to, the 

following items and services, the payments for which are packaged into the payments for 

the related procedures or services. 

* * * * * 

7. Section 419.31 is amended by revising paragraphs (a)(1), (b), and (c)(2) to 

read as follows: 

§ 419.31 Ambulatory payment classification (APC) system and payment weights.

 (a) * * * 

 (1) CMS classifies outpatient services and procedures that are comparable 

clinically and in terms of resource use into APC groups. Except as specified in paragraph 

(a)(2) of this section, items and services within a group are not comparable with respect 

to the use of resources if the highest geometric mean cost for an item or service within 

the group is more than 2 times greater than the lowest geometric mean cost for an item or 

service within the group. 

* * * * * 

 (b) APC weighting factors. (1) Using hospital outpatient claims data from 

calendar year 1996 and data from the most recent available hospital cost reports, CMS 

determines the geometric mean costs for the services and procedures within each APC 

group. 
 (2) CMS assigns to each APC group an appropriate weighting factor to reflect the 

relative geometric mean costs for the services within the APC group compared to the 

geometric mean costs for the services in all APC groups. 

 (c) * * *

 (2) CMS standardizes the geometric mean costs determined in paragraph (b)(1) 

of this section by adjusting for variations in hospital labor costs across geographic areas. 

8. Section 419.32 is amended by: 

a. Revising paragraph (b)(1)(iv)(A). 

b. Removing “and” from the end of paragraph (b)(1)(iv)(B)(2). 

c. Removing the period from the end of paragraph (b)(1)(iv)(B)(3) and adding “; 

and” in its place. 

d. Adding paragraph (b)(1)(iv)(B)(4). 

The revision and addition read as follows: 

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

* * * * * 

 (b) * * * 

 (1) * * * 

 (iv)(A) For calendar year 2003 and subsequent years, by the OPD fee schedule 

increase factor, which, subject to the adjustments specified in paragraph (b)(1)(iv)(B) of 

this section and §§ 419.43(h)(1) and (h)(2), if applicable, is the hospital inpatient market 

basket percentage increase applicable under section 1886(b)(3)(B)(iii) of the Act. 

 (B) * * * 
 (4) For calendar year 2013, a multifactor productivity adjustment (as determined 

by CMS) and 0.1 percentage point. 

* * * * * 

9. Section 419.70 is amended by-- 

a. Revising paragraph (d)(2) introductory text. 

b. Adding paragraph (d)(7). 

The revision and addition read as follows: 

§ 419.70 Transitional adjustments to limit decline in payments. 

* * * * * 

 (d) * * * 

 (2) Temporary treatment for small rural hospitals on or after January 1, 2006. 

For covered hospital outpatient services furnished in a calendar year from 

January 1, 2006 through December 31, 2012, for which the prospective payment system 

amount is less than the pre-BBA amount, the amount of payment under this part is 

increased by 95 percent of that difference for services furnished during CY 2006, 

90 percent of that difference for services furnished during CY 2007, and 85 percent of 

that difference for services furnished during CYs 2008, 2009, 2010, 2011, and 2012 if the 

hospital-- 

* * * * * 

 (7) Temporary treatment of sole community hospitals on or after January 1, 2012 

through December 31, 2012. (i) For covered hospital outpatient services furnished on or 

after January 1, 2012 through December 31, 2012, for which the prospective payment 
system amount is less than the pre-BBA amount, the amount of payment under this part is 

increased by 85 percent of that difference if the hospital-- 

 (A) Is a sole community hospital as defined in § 412.92 of this chapter or is an 

essential access community hospital as described under § 412.109 of this chapter; and 

 (B) Has 100 or fewer beds as defined in § 412.105(b) of this chapter, except as 

provided in paragraph (d)(7)(ii) of this section. 

 (ii) For covered hospital outpatient services furnished on or after January 1, 2012 

through February 29, 2012, the bed size limitation under paragraph (d)(7)(i)(B) of this 

section does not apply. 

* * * * * 

PART 476--UTILIZATION AND QUALITY CONTROL REVIEW 

 10. The authority citation 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). 

11. Section 476.1 is amended by-- 

a. Removing the definition of “Active staff privileges”. 

b. Adding definitions of “Appointed representative”, “Authorized 

representative”, “Beneficiary complaint”, “Beneficiary complaint review”, “Beneficiary 

representative”, “General quality of care review”, “Gross and flagrant violation”, 

“Immediate advocacy”, “Quality improvement initiative”, “Quality of care concern”, 

“Quality of care review”, “Significant quality of care concern”, and “Substantial violation 

in a substantial number of cases”. 

c. Revising the definition of “Preadmission certification”. 
The additions and revisions read as follows: 

§ 476.1 Definitions. 

* * * * * 

Appointed representative means an individual appointed by a Medicare 

beneficiary to represent the beneficiary in the beneficiary complaint review process. 

Authorized representative means an individual authorized, under State or other 

applicable law, to act on behalf of a Medicare beneficiary. An authorized representative 

has all of the rights and responsibilities of a Medicare beneficiary throughout the 

processing of a beneficiary complaint. 

 Beneficiary complaint means a complaint by a Medicare beneficiary or a 

Medicare beneficiary’s representative alleging that the quality of Medicare covered 

services received by the beneficiary did not meet professionally recognized standards of 

care. A complaint may consist of one or more quality of care concerns. 

 Beneficiary complaint review means a review conducted by a QIO in response to 

the receipt of a written beneficiary complaint to determine whether the quality of 

Medicare covered services provided to the beneficiary was consistent with professionally 

recognized standards of health care. 

 Beneficiary representative means an individual identified as an authorized or 

appointed representative of a Medicare beneficiary. 

* * * * * 

 General quality of care review means a review conducted by a QIO to determine 

whether the quality of Medicare covered services provided to a Medicare beneficiary was 

consistent with professionally recognized standards of health care. A general quality of 
care review may be carried out as a result of a referral to the QIO or a QIO’s 

identification of a potential concern during the course of another review activity or 

through the analysis of data. 

 Gross and flagrant violation means a violation of an obligation resulting from 

inappropriate or unnecessary services, services that do not meet recognized professional 

standards of care, or services that are not supported by evidence of medical necessity or 

quality as required by the QIO. The violation must have occurred in one or more 

instances that present an imminent danger to the health, safety, or well-being of a 

program patient or places the program patient unnecessarily in high-risk situations. 

* * * * * 

 Immediate advocacy means an informal alternative dispute resolution process 

used to quickly resolve an oral complaint a Medicare beneficiary or his or her 

representation has regarding the quality of Medicare covered health care received. This 

process involves a QIO representative’s direct contact with the provider and/or 

practitioner. 

* * * * * 

 Preadmission certification means a favorable determination, transmitted to the 

hospital and the fiscal intermediary or the Medicare administrative contractor, approving 

the patient’s admission for payment purposes. 

* * * * * 

 Quality improvement initiative means any formal activity designed to serve as a 

catalyst and support for quality improvement that uses proven methodologies to achieve 
these improvements. The improvements may relate to safety, health care, health and 

value and involve providers, practitioners, beneficiaries, and/or communities. 

 Quality of care concern means a concern that care provided did not meet a 

professionally recognized standard of health care. A general quality of care review or a 

beneficiary complaint review may cover a single or multiple concerns. 

 Quality of care review means a review conducted by a QIO to determine whether 

the quality of Medicare covered services provided to beneficiaries was consistent with 

professionally recognized standards of health care. A quality of care review can either be 

a beneficiary complaint review or a general quality of care review. 

* * * * * 

 Significant quality of care concern means a determination by the QIO that the 

quality of care provided to a Medicare beneficiary did not meet the standard of care and, 

while not a gross and flagrant or substantial violation of the standard, represents a 

noticeable departure from the standard that could reasonably be expected to have a 

negative impact on the health of a beneficiary. 

 Substantial violation in a substantial number of cases means a pattern of providing 

care that is inappropriate, unnecessary, or does not meet recognized professional 

standards of care, or is not supported by the necessary documentation of care as required 

by the QIO. 

* * * * * 

 12. Section 476.70 is revised to read as follows: 

§ 476.70 Statutory bases and applicability. 
 (a) Statutory bases. Sections 1154, 1866(a)(1)(F), and 1886(f)(2) of the Act 

require that a QIO review those services furnished by physicians, other health care 

professionals, providers and suppliers as specified in its contract with the Secretary. 

 (b) Applicability. The regulations in this subpart apply to review conducted by a 

QIO and its subcontractors. 

 13. Section 476.71 is amended by-- 

 a. Revising paragraph (a)(2). 

 b. In paragraph (b) , removing the reference “§ 405.330(b)” and adding in its 

place the reference “§ 411.400(b) of this chapter”. 

 c. Revising paragraph (c)(1). 

 The revisions read as follows: 

§ 476.71 QIO review requirements. 

 (a) * * * 

 (2) Whether the quality of the services meets professionally recognized standards 

of health care, as determined through the resolution of oral beneficiary complaints as 

specified in § 476.110, written beneficiary complaints as specified in § 476.120, or the 

completion of general quality of care reviews as specified in § 476.160. 

* * * * * 

 (c) * * * 

 (1) The QIO must review at least a random sample of hospital discharges each 

quarter and submit new diagnostic and procedural information to the Medicare 

administrative contractor, fiscal intermediary, or carrier if it determines that the 

information submitted by the hospital was incorrect. 
* * * * * 

§ 476.72 [Removed] 

 14. Section 476.72 is removed. 

§ 476.73 [Amended] 

 15. In § 476.73-- 

 a. In paragraph (a), the phrase “and Medicare fiscal intermediaries and carriers.” 

is removed and the phrase “, Medicare administrative contractors, fiscal intermediaries, 

and carriers.” is added in its place. 

 b. In paragraph (b)(1), the reference “§ 466.78(b)(3) of this part” is removed and 

the reference “§ 476.78(b)(3)” is added in its place. 

§ 476.74 [Amended] 

 16. In § 476.74-- 

 a. In paragraph (b), the phrase “appropriate Medicare fiscal intermediary or 

carrier” is removed and the phrase “appropriate Medicare administrative contractor, fiscal 

intermediary, or carrier” is added in its place. 

 b. In paragraph (c)(1), the phrase “Medicare fiscal intermediaries and carriers” is 

removed, and the phrase “Medicare administrative contractors, fiscal intermediaries, and 

carriers” is added in its place. 

 c. In paragraph (e), the reference “§ 405.332” is removed and the reference 

“§ 411.402” is added in its place. 

 17. Section 476.78 is amended by— 

 a. Revising the section heading. 

 b. Revising paragraphs (b)(2)(i) and (b)(2)(ii). 
 c. Adding paragraph (b)(2)(iii). 

 The revisions and addition read as follows: 

§ 476.78 Responsibilities of providers and practitioners. 

* * * * * 

 (b) * * * 

 (2) * * * 

 (i) Except as provided under §§ 476.130(b) and 476.160(b), relating to 

beneficiary complaint reviews and general quality of care reviews, photocopy and deliver 

to the QIO all required information within 30 calendar days of a request. 

 (ii) Except as provided under §§ 476.130(b) and 476.160(b), relating to 

beneficiary complaint reviews and general quality of care reviews, deliver all required 

medical information to the QIO within 21 calendar days from the date of the request in 

those situations where a potential “serious reportable event” has been identified or where 

other circumstances as deemed by the QIO warrant earlier receipt of all required medical 

information. For purposes of this paragraph (b)(2)(iii), a “serious reportable event” is 

defined as a preventable, serious and unambiguous adverse event that should never occur. 

 (iii) Secure transmission of an electronic version of medical information, subject 

to the QIO’s ability to support receipt and transmission of the electronic version. 

Providers and practitioners must deliver electronic versions of medical information 

within 10 calendar days of the request. 

* * * * * 

 18. In § 476.80-- 
 a. The section heading is revised to read as set forth below. 

 b. In paragraphs (b)(1) introductory text and (c)(1) (two places), the phrase 

“Medicare fiscal intermediaries and carriers” is removed and the phrase “Medicare 

administrative contractors, fiscal intermediaries, and carriers” is added in its place. 

 c. In paragraph (a) introductory text, the phrase “Medicare fiscal intermediary or 

carrier” is removed and the phrase “Medicare administrative contractor, fiscal 

intermediary, or carrier” is added in its place. 

 d. In paragraphs (a)(1), (a)(2) introductory text (two places), (c)(3)(ii), (d)(1), and 

(d)(2), the phrase “fiscal intermediary or carrier” is removed and the phrase “Medicare 

administrative contractor, fiscal intermediary, or carrier” is added in its place. 

 e. In paragraph (e), in the paragraph heading and in paragraphs (e)(1) and (e)(2), 

the phrase “fiscal intermediary” is removed and the phrase “Medicare administrative 

contractor or fiscal intermediary” is added in its place. 

The revision reads as follows: 

§ 476.80 Coordination with Medicare administrative contractors, fiscal 

intermediaries, and carriers. 

* * * * * 

§ 476.86 [Amended] 

 19. In § 476.86-- 

 a. In paragraph (a)(1)(iii), the reference “§ 405.310(g) or § 405.310(k)” is 

removed and the reference “§ 411.15(g) or § 411.15(k)” is added in its place. 
 b. In paragraph (a)(2), the phrase “Medicare fiscal intermediaries or carriers” is 

removed and the phrase “Medicare administrative contractors, fiscal intermediaries, or 

carriers” is added in its place. 

 c. In paragraph (c) introductory text, the phrase “Medicare fiscal intermediary or 

carrier” is removed and the phrase “Medicare administrative contractor, fiscal 

intermediary, or carrier” is added in its place. 

 d. In paragraph (c)(1), the phrase “fiscal intermediary or carrier” is removed and 

the phrase “Medicare administrative contractor, fiscal intermediary, or carrier” is added 

in its place. 

 e. In paragraph (d), the phrase “Medicare fiscal intermediaries and carriers” is 

removed and the phrase “Medicare administrative contractors, fiscal intermediaries, and 

carriers” is added in its place. 

 f. In paragraph (e), the phrase “intermediaries and carriers” is removed and the 

phrase “Medicare administrative contractors, fiscal intermediaries, and carriers” is added 

in its place. 

 g. In paragraph (f), the reference “part 473” is removed and the reference “part 

478” is added in its place. 

§ 476.94 [Amended] 

 20. In § 476.94-- 

 a. In paragraph (a)(1)(iv), the phrase “fiscal intermediary or carrier” is removed 

and the phrase “Medicare administrative contractor, fiscal intermediary, or carrier” is 

added in its place. 
 b. In paragraph (d), the phrase “Medicare fiscal intermediary or carrier” is 

removed and the phrase “Medicare administrative contractor, fiscal intermediary, or 

carrier” is added in its place. 

 c. In paragraph (c)(3) introductory text, the reference “part 473” is removed and 

the reference “part 478” is added in its place. 

§ 476.98 [Amended] 

 21. In § 476.98, in paragraph (a)(1), the phrase “with active staff privileges in 

one or more hospitals in the QIO area” is removed. 

 22. Section 476.104 is amended by revising paragraph (a) to read as follows: 

§ 476.104 Coordination of activities. 

* * * * * 

 (a) Medicare administrative contractors, fiscal intermediaries, and carriers. 

* * * * * 

 23. New §§ 476.110, 476.120, 476.130, 476.140, 476.150, 476.160, 476.170 are 

added to subpart C to read as follows: 

Subpart C--Review Responsibilities of Utilization and Quality Control Quality 

Improvement Organizations (QIOs) 

Sec. 

* * * * * 

476.110 Use of immediate advocacy to resolve oral beneficiary complaints. 

476.120 Submission of written beneficiary complaints. 

476.130 Beneficiary complaint review procedures. 

476.140 Beneficiary complaint reconsideration procedures. 
476.150 Abandoned complaints and reopening rights. 

476.160 General quality of care review procedures. 

 476.170 General quality of care reconsideration procedures. 

* * * * * 

§ 476.110 Use of immediate advocacy to resolve oral beneficiary complaints. 

 (a) Immediate advocacy. A QIO may offer the option of resolving an oral 

complaint through the use of immediate advocacy if: 

 (1) The complaint is received not later than 6 months from the date on which the 

care giving rise to the complaint occurred. 

 (2) After initial screening of the complaint, the QIO makes a preliminary 

determination that-- 

 (i) The complaint is unrelated to the clinical quality of health care itself but 

relates to items or services that accompany or are incidental to the medical care and are 

provided by a practitioner and/or provider; or 

 (ii) The complaint, while related to the clinical quality of health care received by 

the beneficiary, does not rise to the level of being a gross and flagrant, substantial, or 

significant quality of care concern. 

 (3) The beneficiary agrees to the disclosure of his or her name to the involved 

provider and/or practitioner. 

 (4) All parties orally consent to the use of immediate advocacy. 

 (5) All parties agree to the limitations on redisclosure set forth in § 480.107 of 

this subchapter. 
 (b) Discontinuation of immediate advocacy. The QIO or either party may 

discontinue participation in immediate advocacy at any time. 

 (1) The QIO must inform the parties that immediate advocacy will be 

discontinued; and 

 (2) The beneficiary must be informed of his or her right to submit a written 

complaint in accordance with the procedures in § 476.120. 

 (c) Confidentiality requirements. All communications, written and oral, 

exchanged during the immediate advocacy process must not be redisclosed without the 

written consent of all parties. 

 (d) Abandoned complaints. If any party fails to participate or otherwise comply 

with the requirements of the immediate advocacy process, the QIO may determine that 

the complaint has been abandoned and-- 

 (1) Inform the parties that immediate advocacy will be discontinued; and 

 (2) Inform the Medicare beneficiary of his or her right to submit a written 

complaint in accordance with the procedures in § 476.120. 

§ 476.120 Submission of written beneficiary complaints. 

 (a) Timeframe for submission of written complaints. A QIO shall be responsible 

for conducting a review of any written complaint received from a Medicare beneficiary 

or a Medicare beneficiary’s representative about the quality of health care if the 

complaint is received not later than 3 years from the date on which the care giving rise to 

the complaint occurred. 

 (1) A written complaint includes a complaint submitted electronically to the QIO. 
 (2) In those instances where a Medicare beneficiary contacts the QIO regarding a 

complaint but declines to submit the complaint in writing and immediate advocacy has 

not been offered, the QIO may complete a general quality of care review in accordance 

with § 476.160 if the QIO makes a preliminary determination that the complaint involves 

a potential gross and flagrant, substantial or significant quality of care concern. 

 (b) New concerns raised by a Medicare beneficiary. If a Medicare beneficiary 

raises new concerns relating to the same complaint after the completion of the interim 

initial determination in § 476.130(c), the concerns will be processed as a new complaint. 

The QIO may process new concerns raised after the receipt of the written complaint as 

part of the same complaint, provided they are received prior to the completion of the 

interim initial determination. Even if a concern is received before the interim initial 

determination, the QIO can address it as a separate complaint if the QIO determines that 

this is warranted by the circumstances. 

§ 476.130 Beneficiary complaint review procedures. 

 (a) Scope of the QIO review. In completing its review, the QIO shall consider 

any information and materials submitted by the Medicare beneficiary or his or her 

representative and any information submitted by the provider and/or practitioner. All 

information obtained by the QIO that fits within the definition of “confidential 

information” under § 480.101 of this chapter, will be held by the QIO as confidential. 

 (1) The QIO’s review will focus on the episode of care from which the complaint 

arose and address the specific concerns identified by the beneficiary and any additional 

concerns identified by the QIO. The QIO may separate concerns into different 

complaints if the QIO determine that the concerns relate to different episodes of care. 
 (2) The QIO will use evidence-based standards of care to the maximum extent 

practicable. If no standard of care exists, the QIO will use available norms, best practices 

and established guidelines to establish the standard that will be used in completing the 

review. The QIO’s determination regarding the standard used is not subject to appeal. 

 (b) Medical information requests. Upon request by the QIO, a provider or 

practitioner must deliver all medical information requested in response to a Medicare 

beneficiary complaint within 10 calendar days of the request. A QIO is authorized to 

require the receipt of the medical information sooner if the QIO make a preliminary 

determination that the complaint involves a potential gross and flagrant or substantial 

quality of care concern as specified in 42 CFR Part 1004 and circumstances warrant 

earlier receipt of the medical information. A practitioner’s or provider’s failure to 

comply with the request for medical information within the established timeframe may 

result in the QIO taking action in accordance with § 476.90. 

 (c) Interim initial determination. The QIO peer reviewer will complete the 

review and notify the practitioner and/or provider of its interim initial determination 

within 7 calendar days of the receipt of all medical information. 

 (1) A practitioner and provider will be notified by telephone of the opportunity to 

discuss the QIO’s interim initial determination with the QIO in those situations where the 

peer reviewer determines that the quality of services does not meet professionally 

recognized standards of care for any concern in the complaint. The discussion must be 

held no later than 7 calendar days from the date of the initial offer. 
 (2) The interim initial determination becomes the final initial determination if the 

discussion is not completed timely as a result of the practitioner’s and/or provider’s 

failure to respond. 

 (3) Written statements in lieu of a discussion must be received no later than 7 

calendar days from the date of the initial offer. 

 (4) In rare circumstances, the QIO may grant additional time to complete the 

discussion or submission of a written statement in lieu of a discussion. 

 (d) Final initial determination. The QIO must issue notification of its final initial 

determination in those cases in which the QIO has determined that care met 

professionally recognized standards, as well as in those cases in which the QIO 

determined that standards were not met and the opportunity for discussion has been 

completed. No later than 72 hours after completion of its review, or for cases in which 

the standard was not met, no later than 72 hours after the discussion or receipt of the 

provider’s and/or practitioner’s written statement, the QIO will notify (by telephone) the 

beneficiary and the provider/practitioner of its final initial determination and of the right 

to request a reconsideration of the QIO’s final initial determination. 

 (1) Written notice of the QIO’s final initial determination will be forwarded to all 

parties, unless either party requests a reconsideration of the final initial determination. If 

a reconsideration request is submitted, the QIO will notify the parties that a written 

decision will be issued once the reconsideration review is completed in accordance with 

§ 476.140(b). 
 (2) If a reconsideration request is not received, the written decision will be issued 

within 72 hours after the QIO has contacted the parties, as described in paragraph (d) of 

this section, and must include: 

 (i) A statement for each concern that care did or did not meet the standard of 

care; 

 (ii) The standard identified by the QIO for each of the concerns; and 

 (iii) A summary of the specific facts that the QIO determines are pertinent to its 

findings, including references to medical information and, if held, the discussion with the 

involved practitioner and/or provider. 

§ 476.140 Beneficiary complaint reconsideration procedures. 

 (a) Right to request a reconsideration. Beginning with complaints filed after 

July 31, 2014, a Medicare beneficiary, a provider, or a practitioner who is dissatisfied 

with a QIO’s final initial determination may request a reconsideration by the QIO. 

 (1) The reconsideration request must be received by the QIO, in writing or by 

telephone, no later than noon of the calendar day following initial notification (whether 

by telephone or in writing) of the QIO’s determination. In rare circumstances, the QIO 

may grant an additional calendar day. If the QIO is unable to accept a request, the 

request must be submitted by noon of the next day the QIO is available to accept a 

request. 

 (2) The Medicare beneficiary, or his or her representative, and the practitioner 

and/or provider must be available to answer any questions or supply any information that 

the QIO requests in order to conduct its reconsideration. 
 (3) The QIO must offer the Medicare beneficiary and the practitioner and/or 

provider an opportunity to provide further information. A Medicare beneficiary, a 

practitioner, and a provider may, but are not required to, submit evidence to be 

considered by the QIO in making its reconsideration decision. 

 (b) Issuance of the QIO’s final decision. No later than 72 hours after receipt of 

the request for a reconsideration, or, if later, 72 hours after receiving any medical or other 

records needed for such reconsideration, the QIO must complete the review and notify 

the beneficiary and the practitioner/provider of its decision. 

 (1) The QIO's initial notification may be done by telephone, followed by the 

mailing of a written notice by noon of the next calendar day that includes-- 

 (i) A statement for each concern that care did or did not meet the standard of 

care; 

 (ii) The standard identified by the QIO for each of the concerns; 

 (iii) A summary of the specific facts that the QIO determines are pertinent to its 

findings; and 

 (iv) A statement that the letter represents the QIO’s final determination and that 

there is no right to further appeal. 

 (2) The QIO may provide information to the beneficiary, practitioner, and 

provider regarding opportunities for improving the care given to patients based on the 

specific findings of its review and the development of quality improvement initiatives. 

§ 476.150 Abandoned complaints and reopening rights. 

 (a) Abandoned complaints. If a Medicare beneficiary fails to participate or 

otherwise comply with the requirements of the beneficiary complaint review process and 
the QIO does not have sufficient information to complete its review, the QIO may 

determine that the complaint has been abandoned and-- 

 (1) Inform the parties that its complaint review will be discontinued; and 

 (2) Inform the beneficiary of his or her right to resubmit a written complaint in 

accordance with the procedures in § 476.120. 

 (b) Reopening complaint reviews. A QIO may reopen a Medicare beneficiary 

complaint review using the same procedures that the QIO would use for reopening initial 

denial determinations and changes as a result of DRG validation, as described in 

§ 476.96. 

§ 476.160 General quality of care review procedures. 

 (a) Scope of the QIO review. A QIO may conduct a general quality of care 

review in accordance with section 1154(a)(1)(B) of the Act. 

 (1) A QIO may conduct general quality of care reviews based on-- 

 (i) Concerns identified during the course of other QIO review activities; 

 (ii) Referrals from other sources, including but not limited to individuals, 

contractors, other Federal or State agencies; or 

 (iii) Analysis of data. 

 (2) The QIO’s review will focus on all concerns identified by the QIO and/or 

identified by those who have referred or reported the concerns, with consideration being 

given to the episode of care related to the concerns. 

 (3) The QIO will use evidence-based standards of care to the maximum extent 

practicable. If no standard of care exists, the QIO must use available norms, best 

practices, and established guidelines to establish the standard that will be used in 
completing the review. The QIO’s determination regarding the standard used is not 

subject to appeal. 

 (b) Medical information requests. Upon request by the QIO, a provider or 

practitioner must deliver all medical information requested within 10 calendar days of the 

request. A QIO is authorized to require the receipt of the medical information sooner if 

the QIO makes a preliminary determination that the review involves a potential gross and 

flagrant or substantial quality of care concern and circumstances warrant earlier receipt of 

the medical information. A practitioner’s or provider’s failure to comply with the request 

for medical information within the established time frame may result in the QIO taking 

action pursuant to § 476.90. 

 (c) Initial determination. The QIO peer reviewer will complete the review and 

notify the practitioner and/or provider within 7 calendar days of the receipt of all medical 

information. 

§ 476.170 General quality of care reconsideration procedures. 

 (a) Right to request a reconsideration. Beginning with reviews initiated after 

July 31, 2014, a provider or practitioner who is dissatisfied with a QIO’s initial 

determination may request a reconsideration by the QIO. 

 (1) The reconsideration request must be received by the QIO, in writing or by 

telephone, by no later than noon of the calendar day following initial notification 

(whether by telephone or in writing) of the QIO’s determination. In rare circumstances, 

the QIO may grant an additional calendar day. If the QIO is unable to accept the request, 

the request must be submitted by noon of the next day the QIO is available to accept a 

request. 
 (2) The practitioner or provider must be available to answer any questions or 

supply any information that the QIO requests in order to conduct its reconsideration. 

 (3) The QIO must offer the practitioner or provider an opportunity to provide 

further information. A practitioner or provider may, but is not required to, submit 

evidence to be considered by the QIO in making its reconsideration decision. 

 (b) Issuance of the QIO’s final decision. No later than 72 hours after receipt of 

the request for a reconsideration, or, if later, 72 hours after receiving any medical or other 

records needed for such reconsideration, the QIO must complete the review and notify 

the practitioner or provider of its decision. 

 (1) The QIO’s initial notification may be done by telephone, followed by the 

mailing of a written notice by noon the next calendar day that includes: 

 (i) A statement for each concern that care did or did not meet the standard of 

care; 

 (ii) The standard identified by the QIO for each of the concerns; 

 (iii) A summary of the specific facts that the QIO determines are pertinent to its 

findings; and 

 (iv) A statement that the letter represents the QIO’s final determination and that 

there is no right to further appeal. 

 (2) The QIO may provide information regarding opportunities for improving the 

care given to patients based on the specific findings of its review. 
 PART 478--RECONSIDERATIONS AND APPEALS 

 24. The authority citation for Part 478 continues to read as follows: 

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

1395hh). 

§ 478.15 [Amended] 

25. In § 478.15(b), the reference “§§ 473.18 through 473.36, and 473.48(a) and 

(c)” is removed and the reference “§§ 478.18 through 478.36 and § 478.48(a) and (c)” is 

added in its place. 

§ 478.16 [Amended] 

 26. In § 478.16, the reference “§ 473.14(a)” is removed and the reference 

“§ 478.14” is added in its place. 

§ 478.20 [Amended] 

 27. In § 478.20— 

 a. In paragraph (a)(1), the reference “§ 473.22” is removed and the reference 

“§ 478.22” is added in its place. 

 b. In paragraph (b), the reference “§ 473.22” is removed and the reference 

“§ 478.22” is added in its place. 

 c. In paragraph (c), the reference “§ 473.18(c)” is removed and the reference 

“§ 478.18(c)” is added in its place. 

§ 478.28 [Amended] 

 28. In § 478.28 (a), the reference “§ 466.98” is removed and the reference 

“§ 476.98” is added in its place. 

§ 478.38 [Amended] 
 29. In § 478.38-- 

 a. In paragraph (a), the reference “§ 473.40” is removed and the reference 

“§ 478.40” is added in its place. 

 b. In paragraph (b), the reference “§ 473.48” is removed and the reference 

“§ 478.48” is added in its place. 

§ 478.42 [Amended] 

 30. In § 478.42-- 

 a. In paragraph (a) introductory text, the reference “§ 473.40” is removed and the 

reference “§ 478.40” is added in its place. 

 b. In paragraph (b), the reference “§ 473.22” is removed and the reference 

“§ 478.22” is added in its place. 

§ 478.48 [Amended] 

 31. In § 478.48-- 

 a. In paragraph (a)(1), the reference “§ 473.15” is removed and the reference 

“§ 478.15” is added in its place. 

 b. In paragraph (a)(2) introductory text, the reference “§ 473.15” is removed and 

the reference “§ 478.15” is added in its place. 

PART 480--ACQUISITION, PROTECTION, AND DISCLOSURE QUALITY 

IMPROVEMENT ORGANIZATION REVIEW INFORMATION 

 32. The authority citation for Part 480 continues to read as follows: 

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

1395hh). 

§ 480.105 [Amended] 
 33. In § 480.105(a), the phrase “Medicare fiscal intermediaries” is removed and 

the phrase “Medicare administrative contractors or fiscal intermediaries” is added in its 

place. 

 34. Section 480.107 is amended by adding a new paragraph (l) to read as follows: 

§ 480.107 Limitations on redisclosure. 

* * * * * 

 (l) Redisclosures of information that is confidential because it identifies the 

parties involved in immediate advocacy may occur if all parties have consented to the 

redisclosure, as provided for under § 476.110(c) of this chapter. 

 35. Section 480.132 is amended by— 

 a. Revising paragraph (a) introductory text, paragraph (a)(1)(iii), and paragraph 

(a)(2). 

 b. Revising paragraph (b)(1). 

 c. Revising paragraph (c). 

 d. Removing the undesignated text following paragraph (c)(3). 

 The revisions read as follows. 

§ 480.132 Disclosure of information about patients. 

 (a) General requirements for disclosure. Except as specified in §§ 476.130(d) 

and 476.140(b) of this chapter and paragraph (b) of this section, a QIO must— 

 (1) * * * 

 (iii) Except as provided under paragraph (b) of this section, all other patient and 

practitioner identifiers have been removed. 
 (2) Make disclosure to the patient or the patient’s representative within 14 

calendar days of receipt of the request. 

 (b) * * * 

 (1) If a request for information is in connection with an initial denial 

determination under section 1154(a)(2) of the Act, the QIO must provide only the 

information used to support that determination in accordance with the procedures for 

disclosure of information related to determinations under § 478.24, including relevant 

practitioner identifiers. 

* * * * * 

 (c) Manner of disclosure. (1) The QIO must disclose the patient information 

directly to the patient or the patient’s representative when the representative has been 

authorized or appointed to receive that information. 

 (2) In identifying a representative, the QIO must follow pertinent State law 

requirements regarding the designation of health care representatives and agents. If the 

patient is unable to designate a representative and the identity of the representative is not 

already dictated by State law, the QIO must disclose the information to a person whom 

the QIO determines is responsible for the patient. 

 36. Section 480.133 is amended by-- 

 a. Adding a new paragraph (a)(2)(iv). 

 b. In paragraph (b)(1), removing the reference to “Part 466” and adding the 

reference “Part 476” in its place; and removing the reference “§ 473.24” and adding the 

reference “§ 478.24 of this subchapter” is its place. 

 The addition reads as follows: 
§ 480.133 Disclosure of information about practitioners, reviewers, and institutions. 

 (a) * * * 

 (2) * * * 

 (iv) A QIO is not required to obtain the consent of a practitioner or provider prior 

to the release of information to a beneficiary in connection with an initial denial 

determination or in providing a beneficiary with the QIO’s findings in response to a 

beneficiary complaint. Information that must be specified in a QIO’s final decision in a 

complaint review is specified in §§ 476.130(d) and 476.140(b) of this subchapter. 

* * * * * 

§ 480.139 [Amended] 

 37. Section 480.139 is amended by redesignating the existing paragraph (1) as 

paragraph (a)(1). 

 38. A new § 480.145 is added to read as follows: 

§ 480.145 Beneficiary authorization of use of confidential information. 

 (a) Except as otherwise provided under this part, a QIO may not use or disclose a 

beneficiary’s confidential information without an authorization from the beneficiary. The 

QIO’s use or disclosure must be consistent with the authorization. 

 (b) A valid authorization is a document that contains the following: 

 (1) A description of the information to be used or disclosed that identifies the 

information in a specific and meaningful fashion. 

 (2) The name or other specific identification of the QIO(s) and QIO point(s) of 

contact making the request to use or disclose the information. 
 (3) The name or other specific identification of the person(s), or class of persons, 

to whom the QIO(s) may disclose the information or allow the requested use. 

 (4) A description of each purpose of the requested use or disclosure. The 

statement “at the request of the individual” is a sufficient description of the purpose when 

an individual initiates the authorization and does not, or elects not to, provide a statement 

of purpose. 

 (5) An expiration date or an expiration event that relates to the beneficiary or the 

purpose of the use or disclosure. The statement “end of the QIO research study,” “none,” 

or similar language is sufficient if the authorization is for a use or disclosure of 

confidential information for QIO research, including for the creation and maintenance of 

a research database or research repository. 

 (6) Signature of the individual and date. If the authorization is signed by a 

beneficiary’s representative, a description of such representative's authority to act for the 

beneficiary must also be provided. 

 (c) In addition to those items contained in paragraph (b) of this section, the 

authorization must contain statements adequate to place the individual on notice of all of 

the following: 

 (1) The individual’s right to revoke the authorization in writing; and 

 (2) Any exceptions to the right to revoke and a description of how the individual 

may revoke the authorization; 

 (3) The ability or inability of the QIO to condition its review activities on the 

authorization, by stating either: 
 (i) That the QIO may not condition the review of complaints, appeals, or payment 

determinations, or any other QIO reviews or other tasks within the QIO’s responsibility 

on whether the individual signs the authorization; 

 (ii) The consequences to the individual of a refusal to sign the authorization when 

the refusal will render the QIO unable to carry out an activity. 

 (4) The potential for information disclosed pursuant to the authorization to be 

subject to either appropriate or inappropriate redisclosure by a recipient, after which the 

information would no longer be protected by this subpart. 

 (d) The authorization must be written in plain language. 

 (e) If a QIO seeks an authorization from a beneficiary for a use or disclosure of 

confidential information, the QIO must provide the beneficiary with a copy of the signed 

authorization. 

 (f) A beneficiary may revoke an authorization provided under this section at any 

time, provided the revocation is in writing, except to the extent that the QIO has taken 

action in reliance upon the authorization. 

PART 495--STANDARDS FOR THE ELECTRONIC HEALTH RECORD 

TECHNOLOGY INCENTIVE PROGRAM 

 39. 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). 

 40. Section 495.8 is amended by revising paragraph (b)(2)(vi) to read as follows: 

§ 495.8 Demonstration of meaningful use criteria. 

* * * * * 
(b) * * * 

(2) * * * 

(vi) Exception for Medicare eligible hospitals and CAHs for FY 2012 and 

2013—Participation in the Medicare EHR Incentive Program Electronic Reporting Pilot. 

In order to satisfy the clinical quality measure reporting requirements of meaningful use, 

aside from attestation, a Medicare eligible hospital or CAH may participate in the 

Medicare EHR Incentive Program Electronic Reporting Pilot. 

* * * * *
CMS-1589-P 

(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: June 28, 2012

 _____________________________ 

 Marilyn Tavenner, 

 Acting Administrator,

 Centers for Medicare & Medicaid 

 Services. 

Dated: June 29, 2012

 ___________________________ 

 Kathleen Sebelius, 

 Secretary. 

BILLING CODE 4120-01-P 
[FR Doc. 2012-16813 Filed 07/06/2012 at 4:15 pm; Publication Date: 07/30/2012]