Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 45061 

(i) The applicable percent for 2015 is 

98.5 percent. 

(ii) The applicable percent for 2016 

and subsequent years is 98.0 percent. 

(6) The reporting period for a year is 

the calendar year from January 1 

through December 31 that occurs 2 years 

prior to the program year in which the 

payment adjustment is applied. 

PART 486—CONDITIONS FOR 

COVERAGE OF SPECIALIZED 

SERVICES FURNISHED BY 

SUPPLIERS 

32. The authority citation for part 486 

continues to read as follows: 

Authority: Secs. 1102, 1138, and 1871 of 

the Social Security Act (42 U.S.C. 1302, 

1320b–8, and 1395hh) and section 371 of the 

Public Health Service Act (42 U.S.C 273). 

33. Section 486.106 is amended by 

revising the introductory text and 

paragraphs (a) and (b) to read as follows: 

§ 486.106 Condition for coverage: Referral 

for service and preservation of records. 

All portable X-ray services performed 

for Medicare beneficiaries are ordered 

by a physician or a nonphysician 

practitioner as provided in § 410.32(a) of 

this chapter or by a nonphysician 

practitioner as provided in 

§ 410.32(a)(2) and records are properly 

preserved. 

(a) Standard—referral by a physician 

or nonphysician practitioners. Portable 

X-ray examinations are performed only 

on the order of a physician licensed to 

practice in the State or by a 

nonphysician practitioner acting within 

the scope of State law. Such 

nonphysician practitioners may be 

treated the same as physicians treating 

beneficiaries for the purpose of this 

paragraph. The supplier’s records show 

that: 

(1) The portable X-ray test was 

ordered by a licensed physician or a 

nonphysician practitioner acting within 

the State scope of law; and 

(2) Such physician or nonphysician 

practitioner’s written, signed order 

specifies the reason a portable X-ray test 

is required, the area of the body to be 

exposed, the number of radiographs to 

be obtained, and the views needed; it 

also includes a statement concerning the 

condition of the patient which indicates 

why portable X-ray services are 

necessary. 

(b) Standard—records of 

examinations performed. The supplier 

makes for each patient a record of the 

date of the portable X-ray examination, 

the name of the patient, a description of 

the procedures ordered and performed, 

the referring physician or nonphysician 

practitioner, the operator(s) of the 

portable X-ray equipment who 

performed the examination, the 

physician to whom the radiograph was 

sent, and the date it was sent. 

* * * * * 

PART 495—STANDARDS FOR THE 

ELECTRONIC HEALTH RECORD 

TECHNOLOGY INCENTIVE PROGRAM 

34. 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). 

35. Section 495.8 is amended by 

revising paragraph (a)(2)(v) to read as 

follows: 

§ 495.8 Demonstration of meaningful use 

criteria. 

(a) * * * 

(2) * * * 

(v) Exception for Medicare EPs for PY 

2012 and 2013—Participation in the 

Physician Quality Reporting SystemMedicare EHR Incentive Pilot. To satisfy 

the clinical quality measure reporting 

requirements of meaningful use, aside 

from attestation, an EP participating in 

the Physician Quality Reporting System 

may also participate in the Physician 

Quality Reporting System-Medicare 

EHR Incentive Pilot through one of the 

following methods: 

(A) Submission of data extracted from 

the EP’s certified EHR technology 

through a Physician Quality Reporting 

System qualified EHR data submission 

vendor; or 

(B) Submission of data extracted from 

the EP’s certified EHR technology, 

which must also be through a Physician 

Quality Reporting System qualified 

EHR. 

* * * * * 

Authority: (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: June 27, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: June 28, 2012. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2012–16814 Filed 7–6–12; 4:15 pm] 

BILLING CODE 4120–01–P 

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): 


tkelley on DSK3SPTVN1PROD with MISCELLANEOUS
45062 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

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 SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal Government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, 

please call the telephone number (410) 

786–7195 in advance to schedule your 

arrival with one of our staff members. 

Comments mailed to the addresses 

indicated as appropriate for hand or 

courier delivery may be delayed and 

received after the comment period. 

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, (410) 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-Service-Payment/ 

HospitalOutpatientPPS/index.html. The 

Addenda relating to the ASC payment 

system are available at: http:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ASCPayment/ 

index.html. Readers who experience any 

problems accessing any of the Addenda 


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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, Public 

Law 105–33 

BBRA Medicare, Medicaid, and SCHIP 

[State Children’s Health Insurance 

Program] Balanced Budget Refinement Act 

of 1999, Public Law 106–113 

BIPA Medicare, Medicaid, and SCHIP 

Benefits Improvement and Protection Act 

of 2000, Public Law 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, Public 

Law 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, 

Public Law 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, Public Law 

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, Public Law 

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 FacilityPatient 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, 

Public Law 109–432 

MIPPA Medicare Improvements for Patients 

and Providers Act of 2008, Public Law 

110–275 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act of 

2003, Public Law 108–173 

MMEA Medicare and Medicaid Extenders 

Act of 2010, Public Law 111–309 

MMSEA Medicare, Medicaid, and SCHIP 

Extension Act of 2007, Public Law 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, Public Law 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], Public 

Law 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-toCharge 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) 


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(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 NonHighly 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 PassThrough 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 (‘‘ThresholdPackaged 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 


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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 DeviceIntensive 

(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 ChartAbstracted 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 


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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 ClaimsBased 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 


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(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 passthrough 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 paymentto-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, speechlanguage 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 


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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 medianbased 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 


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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 costbased 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 laborrelated 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 passthrough 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 speechlanguage 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 


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with section 1814(b)(3) of the Act; 

CAHs; hospitals located outside of the 

50 States, the District of Columbia, and 

Puerto Rico; and Indian Health Service 

(IHS) hospitals. 

D. Prior Rulemaking 

On April 7, 2000, we published in the 

Federal Register a final rule with 

comment period (65 FR 18434) to 

implement a prospective payment 

system for hospital outpatient services. 

The hospital OPPS was first 

implemented for services furnished on 

or after August 1, 2000. Section 

1833(t)(9) of the Act requires the 

Secretary to review certain components 

of the OPPS, not less often than 

annually, and to revise the groups, 

relative payment weights, and other 

adjustments that take into account 

changes in medical practices, changes in 

technologies, and the addition of new 

services, new cost data, and other 

relevant information and factors. 

Since initially implementing the 

OPPS, we have published final rules in 

the Federal Register annually to 

implement statutory requirements and 

changes arising from our continuing 

experience with this system. These rules 

can be viewed on the CMS Web site at: 

http://www.cms.gov/Medicare/

Medicare-Fee-for-Service-Payment/

HospitalOutpatientPPS/index.html. 

E. Advisory Panel on Hospital 

Outpatient Payment (the HOP Panel or 

the Panel), Formerly Named the 

Advisory Panel on Ambulatory Payment 

Classification Groups (APC Panel) 

1. Authority of the Panel 

Section 1833(t)(9)(A) of the Act, as 

amended by section 201(h) of Public 

Law 106–113, and redesignated by 

section 202(a)(2) of Public Law 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_Advisory_

PanelonAmbulatoryPayment

ClassificationGroups.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 


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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 


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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 


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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 

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 Costto-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 codeto-cost center crosswalk. To calculate 

the APC costs on which the proposed 

CY 2013 APC payment rates are based, 

we calculated hospital-specific overall 

ancillary CCRs and hospital-specific 

departmental CCRs for each hospital for 

which we had CY 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 codeto-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-ServicePayment/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 hospitalspecific 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 


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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/HHSM500-fxsp0;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 

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 


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TABLE 2—PERCENTAGE CHANGE IN APC COST WHEN THE ‘‘IMPLANTABLE DEVICES CHARGED TO PATIENTS’’ COST

CENTER IS USED TO CREATE DISTINCT CCR—Continued 

APC APC descriptor 

Percentage 

change in 

cost 

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 

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 

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-Service-Payment/ 

HospitalOutpatientPPS/index.html) 

provides an accounting of claims used 

in the development of the proposed 

payment rates. That accounting 

provides additional detail regarding the 

number of claims derived at each stage 

of the process. In addition, 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-Feefor-Service-Payment/ 

HospitalOutpatientPPS/index.html, 

includes information about purchasing 

the ‘‘OPPS Limited Data Set,’’ which 

now includes the additional variables 

previously available only in the OPPS 

Identifiable Data Set, including ICD–9– 

CM diagnosis codes and revenue code 

payment amounts. This file is derived 

from the CY 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 medianbased 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 


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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 codeto-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 hospitalspecific overall ancillary CCR to the 

clinic revenue code. The revenue codeto-cost center crosswalk is available for 

inspection and comment on our Web 

site: http://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/ 

HospitalOutpatientPPS/index.html. 

Revenue codes that we do not use in 

establishing relative costs or to model 

impacts are identified with an ‘‘N’’ in 

the revenue code-to-cost center 

crosswalk. 

We applied the CCRs as described 

above to claims with bill type 12X, 13X, 

or 14X, excluding all claims from CAHs 

and hospitals in Maryland, Guam, the 

U.S. Virgin Islands, American Samoa, 

and the Northern Mariana Islands and 

claims from all hospitals for which 

CCRs were flagged as invalid. 

We identified claims with condition 

code 41 as partial hospitalization 

services of hospitals and moved them to 

another file. We note that the separate 

file containing partial hospitalization 

claims is included in the files that are 

available for purchase as discussed 

above. 

We then excluded claims without a 

HCPCS code. We moved to another file 

claims that contained 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 lineitems 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 nonpassthrough 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. 


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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 line-items 

represent services that are invalidly 

reported and, therefore, should not be 

used for ratesetting. We believe that 

removing lines with valid status 

indicators that were edited and not paid 

during claims processing increases the 

accuracy of the data used for ratesetting 

purposes. 

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 compositespecific 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 (‘‘Tpackaged’’) 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’’ (‘‘STVXpackaged’’) or status indicator ‘‘Q2’’ (‘‘Tpackaged’’) 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’’ (‘‘STVXpackaged’’) 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’’ (Tpackaged), 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. NonOPPS 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’’ 


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(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’’ (‘‘Tpackaged’’) 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’’ (‘‘STVXpackaged’’), 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’’ (‘‘STVXpackaged’’); 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 


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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. 


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TABLE 3—PROPOSED CY 2013 PACKAGED REVENUE CODES—Continued 

Revenue code Description 

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. 

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. 

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 postreclassification 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 


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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 medianbased 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 criteriabased 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 devicedependent 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-todevice edits and device-to-procedure 

edits used in ratesetting for devicedependent 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 


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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 devicedependent 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 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. 

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 bloodspecific 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 


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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 hospitalspecific, 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 bloodspecific 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. 


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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 ................ Tib/per 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 noncongenital cardiac catheterizationrelated 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 catheterizationrelated 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. 


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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 & hemodynamic 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 


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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. 


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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 Public 

Law 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 palladium103 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 


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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 


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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 

Intracardiac catheter ablation of arrhythmogenic focus; for treatment of ventricular tachycardia 93652 0086 Q3 


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(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 resourceintensive 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. 


tkelley on DSK3SPTVN1PROD with MISCELLANEOUS
Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 45091 

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. 


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45092 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

TABLE 10—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS—Continued 

* 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. 


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TABLE 10—PROPOSED OPPS IMAGING FAMILIES AND MULTIPLE IMAGING PROCEDURE COMPOSITE APCS—Continued 

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 ..... Mri 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 cardioverterdefibrillator 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 cardioverterdefibrillator 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); 


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45094 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

• 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 cardioverterdefibrillator pulse generator); or 

• 33249 (Insertion or repositioning of 

electrode lead(s) for single or dual 

chamber pacing cardioverterdefibrillator 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 cardioverterdefibrillator pulse generator with 

replacement of pacing cardioverterdefibrillator 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 


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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 


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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 hospitalby-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 


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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 


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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 costbased 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 year-to-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 longterm 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’’ (TPackaged 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 


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with one or more separately paid 

surgical procedures with the status 

indicator of ‘‘T’’ are provided during the 

hospital outpatient encounter. STVXpackaged 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 Tpackaged 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_AdvisoryPanelonAmbulatory

PaymentClassificationGroups.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 


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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 passthrough 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 ‘‘policypackaged’’ 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 ‘‘policypackaged’’ drugs, regardless of their per 


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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 nonpassthrough 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-Service-Payment/ 

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 midlevel 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 


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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-Service-Payment/ 

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 Public Law 111–148 

and as amended by section 10319(g) of 

that law and further amended by section 

1105(e) of Public Law 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 


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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 passthrough 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 passthrough 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 


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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 outmigration 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 outmigration adjustment). As we have done 

in prior years, we are including Table 4J 

as Addendum L to this proposed rule 


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with the addition of non-IPPS hospitals 

that would receive the section 505 outmigration 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 outmigration wage adjustment table 

(Addendum L to this proposed rule, 

which is available via the Internet on 

the CMS Web site), which includes nonIPPS 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 hospitalspecific 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. 


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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 

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 

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 


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Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 45107 

TABLE 12—PROPOSED CY 2013 STATEWIDE AVERAGE CCRS—Continued 

State Urban/rural 

Proposed 

CY 2013 default 

CCR 

Previous default 

CCR (CY 2012 

OPPS final rule) 

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 

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 Public Law 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 Public Law 

108–173, for rural hospitals having 100 

or fewer beds and SCHs located in rural 

areas expired on December 31, 2005. 

Section 5105 of Public Law 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 

Public Law 109–171 also reduced the 

TOPs to rural hospitals from 100 

percent of the difference between the 

provider’s OPPS payments and the preBBA 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 Public Law 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 Public Law 109– 

171. However, we stated they were 

eligible for the adjustment for rural 

SCHs authorized under section 411 of 

Public Law 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 Public Law 

109–171. 


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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 Public Law 109–171. However, 

subsequent to issuance of the CY 2009 

OPPS/ASC proposed rule, section 147 of 

Public Law 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 Public Law 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 Public Law 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 Public Law 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 crossreferences 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 Public 

Law 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 preBBA 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 selfimplementing 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 selfimplementing 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 Public Law 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 Public Law 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 preBBA 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 Public Law 112–78 and 

section 3002 of Public Law 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 Public 

Law 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 Public Law 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, 


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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 Public Law 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 Public Law 

105–33, a hospital can no longer become 

newly classified as an EACH. 

This adjustment for rural SCHs is 

budget neutral and applied before 

calculating outlier payments and 

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 passthrough 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 ‘‘preBBA’’ 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 


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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-Feefor-Service-Payment/ 

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 


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proposed APC recalibration for CY 

2013. 

We calculated the proposed fixeddollar 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 hospitalspecific overall ancillary CCRs available 

in the April 2012 update to the 

Outpatient Provider-Specific File 

(OPSF). The OPSF contains providerspecific 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 


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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 Public Law 98–21. We 

note that the reclassifications of 

hospitals under section 508 of Public 

Law 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 

Public Law 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. 


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X a 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. 


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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. 

July 1, 2012 ....................... Level II HCPCS Codes ..... July 1, 2012 ...................... CY 2013 OPPS/ASC proposed rule.CY 2013 OPPS/ASC final 

rule with comment period. 

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. 


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TABLE 13—COMMENT TIMEFRAME FOR NEW OR REVISED HCPCS CODES—Continued 

OPPS quarterly update CR Type of code Effective date Comments sought When finalized 

January 1, 2013 ................ 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. 

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 (Nonophthalmic 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 

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 


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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’’ (Nonpassthrough 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 concentrate, 1 mg .............................................. K 1414 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) 


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• 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 intra-operative 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 intra-operative 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 intra-operative 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 


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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 rateper-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 


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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-Service-Payment/

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 criteriabased 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. 

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-Service-Payment/ 

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 


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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 


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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 Gcodes 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 NonHighly 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 multifunction 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 nonHEU 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 Tc99m 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 nonHEU 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 nonHEU 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 


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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 nonHEU 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 nonHEU 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 (nonsutured/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, standalone 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 


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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. 


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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 PassThrough 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 passthrough 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 


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(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-Service-Payment/ 

HospitalOutpatientPPS/index.html. The 

dollar amounts are used as the device 

APC offset amounts. In addition, in 

accordance with our established 

practice, the device APC offset amounts 

in a related APC are used in order to 

evaluate whether the cost of a device in 

an application for a new device category 

for pass-through payment is not 

insignificant in relation to the APC 

payment amount for the service related 

to the category of devices, as specified 

in our regulations at § 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 passthrough 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 passthrough 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-bycase 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 


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http://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/ 

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 passthrough 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 


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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/Replacement of Neurostimulator Electrodes ................ 55 28 

0061 .................. Level II Implantation/Revision/Replacement 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 Cardioverter-Defibrillator ........................................................................... 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 

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/Conversion of a Permanent Dual Chamber Pacemaker or 

Pacing Electrode.

73 37 

0680 .................. Insertion of Patient Activated Event Recorders ........................................................... 74 37 


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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. 

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. 

L8690 ....... Aud osseo dev, int/ext comp. 

V. Proposed OPPS Payment Changes for 

Drugs, Biologicals, and 

Radiopharmaceuticals 

A. Proposed OPPS Transitional PassThrough 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 passthrough 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-PartB-Drugs/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 passthrough 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 passthrough payment for drugs and 

biologicals to be $15.5 million. For CY 

2012, we estimated the OPPS passthrough 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-for-Service-Payment/ 

HospitalOutpatientPPS/ 

passthrough_payment.html. 

2. Proposed Drugs and Biologicals With 

Expiring Pass-Through Status in CY 

2012 

We are proposing that the passthrough 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. 


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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 ASPbased 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, non-lyophilized (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 

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 passthrough 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 passthrough 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 passthrough 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 passthrough payment amount for these 

policy-packaged products. 


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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 passthrough status during CY 2013, we are 

proposing to follow the standard ASP 

methodology to determine the passthrough 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 passthrough 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 nonpassthrough 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, passthrough 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 ‘‘policypackaged’’ 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 passthrough status to zero for CY 2013. 

Similarly, we are proposing that the 

associated copayment amount for passthrough 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 passthrough 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 passthrough 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 


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TABLE 23—PROPOSED DRUGS AND BIOLOGICALS WITH PASS-THROUGH STATUS IN CY 2013—Continued 

Proposed 

CY 2013 

HCPCS code 

CY 2013 Long descriptor 

Proposed 

CY 2013 

SI 

Proposed 

CY 2013 

APC 

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 passthrough payment amount for passthrough 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 passthrough 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 nonpassthrough 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 passthrough 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 


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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. 

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 passthrough payment amount for passthrough 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 passthrough 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 ‘‘policypackaged’’ 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 passthrough 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-Service-Payment/ 

HospitalOutpatientPPS/index.html a 

file that contains the APC offset 

amounts that will be used for that year 

for purposes of both evaluating cost 

significance for candidate pass-through 

device categories and drugs and 

biologicals, including contrast agents, 

and establishing any appropriate APC 

offset amounts. Specifically, the file will 

continue to provide the amounts and 

percentages of APC payment associated 

with packaged implantable devices, 

‘‘policy-packaged’’ drugs, and 

‘‘threshold-packaged’’ drugs and 

biologicals for every OPPS clinical APC. 

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 ‘‘policypackaged’’ 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. 


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TABLE 25—PROPOSED APCS TO WHICH A CONTRAST AGENT OFFSET MAY BE APPLICABLE FOR CY 2013—Continued 

Proposed CY 

2013 APC Proposed CY 2013 APC title 

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. 

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/ 


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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 ‘‘thresholdpackaged’’ 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 


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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 codespecific 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 codespecific 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 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), Q0175 (Perphenazine, 

4 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), Q0176 (Perphenazine, 

8 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), Q0177 (Hydroxyzine 

pamoate, 25 mg, oral, FDA approved 

prescription anti-emetic, for use as a 

complete therapeutic substitute for an 

IV anti-emetic at the time of 

chemotherapy treatment, not to exceed 

a 48-hour dosage regimen), and Q0178 

(Hydroxyzine pamoate, 50 mg, oral, 

FDA approved prescription anti-emetic, 

for use as a complete therapeutic 

substitute for an IV anti-emetic at the 

time of chemotherapy treatment, not to 

exceed a 48-hour dosage regimen) 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. 


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45136 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

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 

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 

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 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 

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 chemotherapy treatment, not to exceed a 48-hour 

dosage regimen.

N 

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 


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Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 45137 

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 


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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 lineitem 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 passthrough 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. 


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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 


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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 


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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 nonpassthrough 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 


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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-for-Service-Part-B-Drugs/ 

McrPartBDrugAvgSalesPrice/ 

index.html. 

6. Proposed Payment for NonpassThrough 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 nonpassthrough 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 nonpassthrough 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 passthrough 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, 


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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 


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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 passthrough 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 passthrough 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 


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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 passthrough drugs and nonimplantable 

biologicals, and because we are 

proposing to pay for CY 2013 passthrough 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 passthrough diagnostic 

radiopharmaceuticals and contrast 

agents with pass-through status 

approved prior to CY 2013 would be 

paid at ASP+6 percent like other passthrough 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 ‘‘policypackaged’’ 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 ‘‘policypackaged’’ 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 passthrough estimates for these two groups 

of drugs and nonimplantable biologicals 

would equal the total CY 2013 passthrough spending estimate for drugs and 

nonimplantable biologicals with passthrough 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 passthrough 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 passthrough 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 passthrough 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 passthrough 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 passthrough 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 passthrough payment amount as the 

difference between ASP+6 percent and 

the proposed payment rate for nonpassthrough 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 


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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 passthrough 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 passthrough 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 passthrough 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). 


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TABLE 29—PROPOSED HCPCS CODES USED TO REPORT CLINIC AND EMERGENCY DEPARTMENT VISITS AND CRITICAL

CARE SERVICES—Continued 

CY 2013 

HCPCS code CY 2013 descriptor 

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. 


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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-toface 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-faceto-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 


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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 hospitalbased 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 twotiered payment approach for PHP 

services and used only hospital-based 

PHP data in computing the per diem 

payment rates. We used only hospitalbased 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 


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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 hospitalbased 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 hospitalbased 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 hospitalbased 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 hospitalbased 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 hospitalbased 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 


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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 hospitalbased PHP APC geometric mean per 

diem costs for Level I and Level II 

services using only CY 2011 hospitalbased 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 hospitalbased 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 hospitalbased 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 


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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 mean-based 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 medianbased 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 medianbased 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 meanbased 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 hospitalbased 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 


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TABLE 33—PROPOSED CY 2013 GEOMETRIC MEAN PER DIEM COSTS FOR HOSPITAL-BASED PHP SERVICES—Continued 

APC Group title 

Proposed 

mean 

per diem costs 

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. 


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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 (e.g., high pressure waterjet with/without suction, sharp selective debridement with scissors, scalpel and forceps), open wound, (e.g., 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 (e.g., high pressure waterjet with/without suction, sharp selective debridement with scissors, scalpel and forceps), open wound, (e.g., 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 (e.g., wet-to-moist dressings, enzymatic, abrasion), including topical application(s), wound assessment, and instruction(s) for ongoing care, per session. 


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TABLE 35—‘‘SOMETIMES THERAPY’’ SERVICES THAT ARE PAID UNDER THE OPPS WHEN NOT FURNISHED AS THERAPY

SERVICES—Continued 

HCPCS Code Descriptor 

97605 ................ Negative pressure wound therapy (e.g., 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 (e.g., 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-Service-Payment/ 

HospitalOutpatientPPS/ 

index.html?redirect=/ 

HospitalOutpatientPPS/ 

01_overview.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 


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1CMS 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. 

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 selfadministered drugs provided in an 

outpatient setting are not covered by 

Medicare Part B and hospitals may 

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 shortstay 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 Medicareparticipating 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-Dataand-Systems/Monitoring-Programs/ 

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 


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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 decisionmaking 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-Service-Payment/ 

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-Service-Payment/ 

HospitalOutpatientPPS/index.html. 


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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-Fee-for-ServicePayment/HospitalOutpatientPPS/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 

Public Law 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 


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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 passthrough 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, 


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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, 

1,000 international units (I.U.)); 

• HCPCS code C9290 (Injection, 

bupivacaine liposome, 1 mg); 

• HCPCS code C9291 (Injection, 

aflibercept, 2 mg vial); and 

• HCPCS code C9733 (Nonophthalmic 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-Fee-for-ServicePayment/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 (equine), 1 vial ......................................................................... K2 

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 


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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 


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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 ** 

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 

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. 


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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’’ (Officebased 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 officebased, permanently office-based, or nonoffice-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 officebased. 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. 


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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 

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 deviceintensive procedures, we believe it 

would be clearer to discuss the deviceintensive 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 


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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. 

33229 ................ Remv&replc pm gen mult leads ............................................ J8 0654 74 Yes. 


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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—Continued 

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 

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. 

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. 

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— 

Continued 

CY 2012 

device 

HCPCS 

Code 

CY 2012 short descriptor 

C1764 ...... Event recorder, cardiac. 

C1767 ...... Generator, neurostim, imp. 

C1771 ...... Rep dev, urinary, w/sling. 

C1772 ...... Infusion pump, programmable. 

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— 

Continued 

CY 2012 

device 

HCPCS 

Code 

CY 2012 short descriptor 

C1776 ...... Joint device (implantable). 

C1777 ...... Stent, non-coat/cov w/o del. 

C1778 ...... Lead, neurostimulator. 

C1779 ...... Lead, pmkr, transvenous VDD. 


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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— 

Continued 

CY 2012 

device 

HCPCS 

Code 

CY 2012 short descriptor 

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. 

C2620 ...... Pmkr, single, non rate-resp. 

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— 

Continued 

CY 2012 

device 

HCPCS 

Code 

CY 2012 short descriptor 

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 officebased 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 


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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 device-intensive 

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 RVUbased 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 


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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 Gcode 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 MPFSbased 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 contractorpriced rates (72 FR 42499). Since 

December 31, 2009, ASCs have been 

paid for brachytherapy sources provided 

integral to ASC covered surgical 


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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 

Public Law 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— 

Æ Provide a list of determinations 

made as a result of our review of all new 

NTIOL class requests and public 

comments; and 

Æ 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 


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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: 

Æ Reduced risk of intraoperative or 

postoperative complication or trauma; 

Æ Accelerated postoperative recovery; 

Æ Reduced induced astigmatism; 

Æ Improved postoperative visual 

acuity; 

Æ More stable postoperative vision; or 

Æ 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-Fee-for-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 


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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 deviceintensive or office-based, and the 

corresponding ASC payment 

methodology; and their classification as 

separately payable ancillary services 

including radiology services, 

brachytherapy sources, OPPS passthrough 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 


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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-bystep 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, deviceintensive 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 pre-floor 

and pre-reclassified hospital wage 

indices results in the most appropriate 

adjustment to the labor portion of ASC 

costs. In addition, use of the unadjusted 

hospital wage data avoids further 

reductions in certain rural statewide 

wage index values that result from 

reclassification. We continue to believe 

that the unadjusted hospital wage 

indices, which are updated yearly and 

are used by many other Medicare 

payment systems, appropriately account 

for geographic variation in labor costs 

for ASCs. 

We note that in certain instances there 

might be urban or rural areas for which 

there is no IPPS hospital whose wage 

index data would be used to set the 

wage index for that area. For these areas, 

our policy has been to use the average 

of the wage indices for CBSAs (or 

metropolitan divisions as applicable) 

that are contiguous to the area that has 

no wage index (where ‘‘contiguous’’ is 

defined as sharing a border). We have 

applied a proxy wage index based on 

this methodology to ASCs located in 

CBSA 25980 Hinesville-Fort Stewart, 

GA, 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 


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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 

contractor-priced or paid at reasonable 

cost in ASCs. Any service with a 

predetermined national payment 

amount would be included in the ASC 

budget neutrality comparison, but 

scaling of the ASC relative payment 

weights would not apply to those 

services. The ASC payment weights for 

those services without predetermined 

national payment amounts (that is, 

those services with national payment 

amounts that would be based on OPPS 

relative payment weights) would be 

scaled to eliminate any difference in the 

total payment between the current year 

and the update year. 

For any given year’s ratesetting, we 

typically use the most recent full 

calendar year of claims data to model 

budget neutrality adjustments. We 

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-Feefor-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 prereclassified hospital wage indices and 

the total adjusted payment using the 

proposed CY 2013 pre-floor and prereclassified 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 prereclassified 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, 


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after application of clause (iv), shall be 

reduced by the productivity adjustment 

described in section 

1886(b)(3)(B)(xi)(II)’’ of the Act effective 

with the calendar year beginning 

January 1, 2011. The statute defines the 

productivity adjustment to be equal to 

the 10-year moving average of changes 

in annual economy-wide private 

nonfarm business multifactor 

productivity (MFP) (as projected by the 

Secretary for the 10-year period ending 

with the applicable fiscal year, year, 

cost reporting period, or other annual 

period) (the ‘‘MFP adjustment’’). Clause 

(iv) 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 lower-paying 

procedure when more than one 

procedure is performed in a single 

operative session. Display of the 

comment indicator ‘‘CH’’ in the column 

titled ‘‘Comment Indicator’’ indicates a 

change in payment policy for the item 

or service, including identifying 

discontinued HCPCS codes, designating 

items or services newly payable under 

the ASC payment system, and 

identifying items or services with 

changes in the ASC payment indicator 

for CY 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 


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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 threepart 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 


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patient safety as a high priority area and 

it strongly supports the use of NQFendorsed safety measures. Accordingly, 

we consider the MAP’s 

recommendations in selecting quality 

and efficiency measures http:// 

www.qualityforum.org/

Setting_Priorities/Partnership/Measure_

Applications_Partnership.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 


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45178 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

non-interactive CMS Web sites, affected 

parties will be notified via CMS 

listservs, CMS email 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 NQFendorsed 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) 


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under the option ‘‘Email 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 email 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. 


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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. 

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 chartabstracted 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 especifications. 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. 


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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 


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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 


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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, claimsbased measure data, and structural 

quality measure data, including allpatient 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 claimsbased 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 


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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 ChartAbstracted 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 chartabstracted 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 


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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 


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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: 

Æ Hospital CCN. 

Æ Hospital Name. 

Æ 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. 

Æ 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. 

Æ Designated hospital personnel 

contact information, including name, 

email 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. 

Æ 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. 


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• 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 email 

acknowledgement, using the contact 

information provided in the 

reconsideration request, to the 

designated hospital personnel notifying 

them that the hospital’s request has 

been received. 

• Provides a formal response to the 

hospital-designated personnel, using the 

contact information provided in the 

reconsideration request, notifying the 

hospital of the outcome of the 

reconsideration process. 

• Applies policies 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 of the complete medical records 

submitted by the hospital did not match 

what was requested, thus resulting in a 

zero validation score for the 

encounter(s), our review is initially 

limited 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 60047), 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 hospitaldesignated personnel contact 

information’’ (emphasis added). This 

proposed change would allow the 

hospital to designate an appropriate, 

non-CEO, 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 


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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 

emails 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 to 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 


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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 valuebased 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 multistakeholder organization with a welldocumented 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 


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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 threepart 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 

decisionmaking 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_

Partnership.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 claimsbased 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 


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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. 

ASC PROGRAM MEASUREMENT SET

ADOPTED IN PREVIOUS RULEMAKING—Continued 

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 


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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 CMS– 

1500s 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/ASCTransmittals-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 


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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 office-based 

procedures and radiology services 

where payment is based on the MPFS 

PE RVU amount and a few other specific 

services that receive cost-based 

payment. As a result, we also 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 nonfacility 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 


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2For 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). 

3For 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_ReviewsCMS.aspx). 

4For 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_Measure_Maintenance.aspx. 

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-andcomment 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 notice-andcomment 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 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/IRF-Quality-Reporting/ so 

that it clearly identifies the updates and 

provides links to where additional 

information on the updates can be 

found. In addition, we would refer IRFs 

to the NQF Web site for the most up-todate 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 NQFendorsed 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 


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5The 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.’’ 

6http://www.qualityforum.org/

MeasureDetails.aspx?actid=0&SubmissionId=1121

#k=0138&e=0&st=&sd=&s=n&so=a&

p=1&mt=&cs=&ss=. 

7Centers 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. 

8National Quality Forum (2012), National 

Healthcare Safety Network (NHSN) Central lineassociated Bloodstream Infection (CLABSI) 

Outcome Measure. Retrieved from http:// 

www.qualityforum.org/QPS/0139. 

9Centers for Disease Control and Prevention 

(2012, January), Catheter Associated Urinary Tract 

Infection Event. Retrieved from: http:// 

www.cdc.gov/nhsn/PDFs/pscManual/

7pscCAUTIcurrent.pdf. 

10National Quality Forum (2012), National 

Healthcare Safety Network (NHSN) Catheter 

Associated Urinary Tract Infection (CAUTI) 

Outcome Measure. Retrieved from http:// 

www.qualityforum.org/QPS/0138. 

11The 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. 

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) CatheterAssociated 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 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 catheterassociated 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 


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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 

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 NQFendorsed 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 Public Law 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 


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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 

Public Law 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 


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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 


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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 evidencebased 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 


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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 

timeframe 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 


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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 continue 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 crossreferenced 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 


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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 followup 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 


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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 systemrelated 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 


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45204 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

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 

many 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 email. 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. 


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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 crossreferences 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 crossreferences 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, nonQIO 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 riskbasis 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-for-ServicePayment/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/ASC-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 ‘‘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 


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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 × $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 

× 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 most 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 chartabstracted measures and the 4 claimsbased 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 


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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 chartabstracted 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 

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 

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 claimsbased 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 chartabstracted 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 


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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 chartabstracted 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 × 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 × 0.167 hours per 

measure × 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 × 

0.167 hours per measure × 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 chart-abstracted 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 × 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 × 

0.167 hours per hospital × 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 × 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 


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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 claimsbased measures (four outcome and one 

process) to be used for the CY 2014 

payment determination. We will collect 

quality measure data for the five claimsbased 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 claimsbased 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 × 1 measure × 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 × 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 


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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 notice-and-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 


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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 hospitalspecific 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-Fee-for-ServicePayment/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 hospitalspecific 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 


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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 hospitalbased 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 passthrough 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, allinclusive 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 


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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, servicemix, 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 


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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 non-budget 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 hospitals 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 


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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 passthrough 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 HOSPITAL OUTPATIENT PROSPECTIVE

PAYMENTS SYSTEM

Number of 

hospitals 

APC 

recalibration 

(median) 

Impact of 

basing 

weights 

using 

geometric 

mean 

APC 

recalibration 

(Geo mean) 

New wage 

index and 

provider 

adjustments 

Combine 

(cols 4, 5) 

with market 

basket 

update 

Column 6 

with frontier 

wage index 

adjustment 

All 

changes 

(1) (2) (3) (4) (5) (6) (7) (8) 

ALL FACILITIES * ...................................... 4,070 0.0 0.0 0.0 0.0 2.1 2.2 2.1 

ALL HOSPITALS (excludes hospitals permanently held harmless and CMHCs) .. 3,853 0.0 0.0 0.0 0.0 2.1 2.2 2.1 

URBAN HOSPITALS ................................ 2,907 ¥0.1 0.0 ¥0.1 0.0 2.1 2.2 2.1 

LARGE URBAN (GT 1 MILL.) ........... 1,592 0.0 0.0 0.0 0.2 2.3 2.3 2.2 

OTHER URBAN (LE 1 MILL.) ........... 1,315 ¥0.1 0.0 ¥0.1 ¥0.2 1.9 2.1 1.9 

RURAL HOSPITALS ................................. 946 0.2 0.1 0.3 ¥0.2 2.3 2.5 2.2 

SOLE COMMUNITY .......................... 384 0.3 0.1 0.4 0.0 2.5 3.0 2.5 

OTHER RURAL ................................. 562 0.1 0.2 0.3 ¥0.3 2.1 2.1 2.0 

BEDS (URBAN) 

0–99 BEDS ........................................ 1,000 0.4 0.2 0.6 0.0 2.7 2.8 2.8 

100–199 BEDS .................................. 831 0.1 0.1 0.2 0.1 2.3 2.4 2.3 

200–299 BEDS .................................. 457 ¥0.1 0.0 ¥0.1 0.1 2.0 2.2 2.0 

300–499 BEDS .................................. 415 ¥0.2 0.0 ¥0.2 0.1 2.0 2.1 2.0 

500 + BEDS ....................................... 204 ¥0.1 ¥0.1 ¥0.2 ¥0.1 1.8 1.8 1.8 

BEDS (RURAL) 

0–49 BEDS ........................................ 353 0.5 0.4 0.9 ¥0.2 2.8 3.1 2.8 

50–100 BEDS .................................... 352 0.4 0.1 0.5 ¥0.1 2.5 2.7 2.4 

101–149 BEDS .................................. 138 0.0 0.1 0.1 ¥0.5 1.7 1.9 1.8 

150–199 BEDS .................................. 55 0.1 0.1 0.2 ¥0.3 2.1 2.7 2.2 

200 + BEDS ....................................... 48 ¥0.2 0.0 ¥0.1 0.3 2.2 2.2 2.1 

VOLUME (URBAN) 

LT 5,000 Lines ................................... 573 1.9 2.1 4.0 0.2 6.4 6.5 6.0 

5,000–10,999 Lines ........................... 135 1.2 1.1 2.4 ¥0.3 4.1 4.5 4.2 

11,000–20,999 Lines ......................... 213 0.5 0.3 0.8 0.1 3.0 3.0 3.0 

21,000–42,999 Lines ......................... 474 0.2 0.1 0.3 0.2 2.6 2.7 2.6 

42,999–89,999 Lines ......................... 698 ¥0.1 0.0 0.0 0.1 2.2 2.2 2.1 

GT 89,999 Lines ................................ 814 ¥0.1 0.0 ¥0.2 0.0 2.0 2.1 1.9 

VOLUME (RURAL) 

LT 5,000 Lines ................................... 63 1.4 1.1 2.5 ¥0.3 4.3 7.2 4.2 

5,000–10,999 Lines ........................... 69 0.2 0.7 1.0 ¥0.9 2.2 2.4 2.2 

11,000–20,999 Lines ......................... 157 0.3 0.6 0.9 ¥0.2 2.8 3.1 2.8 

21,000–42,999 Lines ......................... 292 0.4 0.2 0.6 ¥0.3 2.4 2.7 2.4 

GT 42,999 Lines ................................ 365 0.1 0.1 0.2 ¥0.1 2.2 2.4 2.2 

REGION (URBAN) 

NEW ENGLAND ................................ 148 0.2 0.0 0.2 ¥1.2 1.1 1.1 1.1 

MIDDLE ATLANTIC ........................... 345 ¥0.1 ¥0.1 ¥0.2 ¥0.2 1.8 1.8 1.6 

SOUTH ATLANTIC ............................ 450 ¥0.1 ¥0.1 ¥0.1 ¥0.4 1.5 1.5 1.6 

EAST NORTH CENT ......................... 469 ¥0.1 0.0 ¥0.1 0.3 2.3 2.3 2.2 

EAST SOUTH CENT ......................... 173 ¥0.2 ¥0.1 ¥0.3 ¥0.7 1.1 1.1 1.1 

WEST NORTH CENT ........................ 185 0.0 0.0 0.1 0.5 2.7 3.6 2.8 

WEST SOUTH CENT ........................ 494 ¥0.1 0.1 0.0 ¥0.2 1.9 1.9 2.0 


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45216 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

TABLE 45—ESTIMATED IMPACT OF THE PROPOSED CY 2013 CHANGES FOR THE HOSPITAL OUTPATIENT PROSPECTIVE

PAYMENTS SYSTEM—Continued 

Number of 

hospitals 

APC 

recalibration 

(median) 

Impact of 

basing 

weights 

using 

geometric 

mean 

APC 

recalibration 

(Geo mean) 

New wage 

index and 

provider 

adjustments 

Combine 

(cols 4, 5) 

with market 

basket 

update 

Column 6 

with frontier 

wage index 

adjustment 

All 

changes 

(1) (2) (3) (4) (5) (6) (7) (8) 

MOUNTAIN ........................................ 203 0.1 0.0 0.1 ¥0.1 2.1 2.5 2.1 

PACIFIC ............................................. 393 ¥0.2 0.1 0.0 1.6 3.6 3.6 3.5 

PUERTO RICO .................................. 47 0.3 0.1 0.3 0.3 2.7 2.7 2.8 

REGION (RURAL) 

NEW ENGLAND ................................ 25 0.4 0.0 0.4 0.4 2.9 2.9 2.8 

MIDDLE ATLANTIC ........................... 67 0.3 0.0 0.3 0.2 2.6 2.6 2.4 

SOUTH ATLANTIC ............................ 161 0.0 0.1 0.2 ¥0.4 1.9 1.9 1.9 

EAST NORTH CENT ......................... 126 0.2 0.1 0.3 0.3 2.7 2.7 2.5 

EAST SOUTH CENT ......................... 174 ¥0.1 0.1 0.0 ¥0.3 1.7 1.7 1.8 

WEST NORTH CENT ........................ 99 0.4 0.1 0.5 ¥0.3 2.3 3.4 2.3 

WEST SOUTH CENT ........................ 200 0.3 0.4 0.8 ¥0.3 2.6 2.6 2.6 

MOUNTAIN ........................................ 65 0.4 0.0 0.4 0.1 2.6 4.8 2.9 

PACIFIC ............................................. 29 0.4 0.1 0.5 ¥0.9 1.7 1.7 1.6 

TEACHING STATUS 

NON-TEACHING ............................... 2,878 0.0 0.1 0.1 0.0 2.3 2.4 2.3 

MINOR ............................................... 687 ¥0.1 0.0 ¥0.2 ¥0.1 1.9 2.1 1.9 

MAJOR ............................................... 288 0.0 ¥0.1 ¥0.1 0.1 2.1 2.1 2.0 

DSH PATIENT PERCENT 

0 ......................................................... 17 0.9 ¥0.1 0.8 ¥0.1 2.8 2.8 2.9 

GT 0–0.10 .......................................... 365 0.1 ¥0.1 0.0 0.0 2.1 2.2 2.1 

0.10–0.16 ........................................... 375 0.1 0.0 0.0 ¥0.1 2.0 2.1 1.9 

0.16–0.23 ........................................... 742 0.0 0.0 0.0 0.0 2.1 2.3 2.0 

0.23–0.35 ........................................... 1,018 ¥0.1 0.0 ¥0.1 0.0 2.0 2.1 2.0 

GE 0.35 .............................................. 748 ¥0.1 0.1 0.0 0.1 2.2 2.2 2.1 

DSH NOT AVAILABLE ** ................... 588 2.1 4.0 6.1 0.0 8.3 8.3 8.2 

URBAN TEACHING/DSH 

TEACHING & DSH ............................ 886 ¥0.1 ¥0.1 ¥0.1 0.0 1.9 2.0 1.9 

NO TEACHING/DSH ......................... 1,453 0.0 0.0 0.0 0.1 2.2 2.3 2.2 

NO TEACHING/NO DSH ................... 17 0.9 ¥0.1 0.8 ¥0.1 2.8 2.8 2.9 

DSH NOT AVAILABLE ** ................... 551 2.1 3.7 5.9 0.1 8.1 8.1 8.0 

TYPE OF OWNERSHIP 

VOLUNTARY ..................................... 2,042 0.0 0.0 ¥0.1 0.0 2.1 2.2 2.0 

PROPRIETARY ................................. 1,254 0.0 0.2 0.2 0.0 2.3 2.4 2.3 

GOVERNMENT ................................. 557 0.0 0.0 0.1 ¥0.1 2.1 2.1 2.1 

CMHCs ...................................................... 154 0.8 ¥6.9 ¥6.2 ¥0.4 ¥4.4 ¥4.4 ¥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 of median costs in developing relative 

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 comparing estimated CY 2013 payments 

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 of geometric mean costs in developing 

the CY 2013 proposed OPPS relative payment weights, and the proposed recalibration of APC weights based on CY 2011 hospital claims data. 

Column (5) shows the budget neutral impact of updating the wage index by applying the FY 2013 hospital inpatient wage index. The rural adjustment is 7.1 percent 

in both years so its budget neutrality factor is 1. Similarly, the differential in estimated cancer hospital payments for the proposed adjustment is minimal and thus 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 schedule increase factor (3.0 percent reduced by 0.8 percentage points for the proposed productivity adjustment and further reduced by 0.1 percentage point in order to satisfy statutory requirements set 

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 application of the CY 2013 proposed OPD fee 

schedule increase factor. 

Column (8) shows the additional adjustments to the conversion factor resulting from a change in the pass-through estimate and adds estimated outlier payments. 

This column also shows the expiration of section 508 wages on March 30, 2012, and the application of the frontier State wage adjustment for CY 2012 and 2013. 

* 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, and long-term care hospitals. 

(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 hospitalbased 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 


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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 passthrough 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. 


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45218 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

• 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 1847A 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 

Public Law 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 


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factor by 1.0002 to account for changes 

in the proposed pre-floor and prereclassified hospital wage indices 

between CY 2012 and CY 2013 and by 

applying the proposed CY 2013 MFPadjusted 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 

Estimated 

CY 2012 

ASC payments 

(in millions) 

Estimated CY 

2013 percent 

change 

(1) (2) (3) 

Total ......................................................................................................................................................................... $3,430 1 

Eye and ocular adnexa ............................................................................................................................................ 1,448 1 


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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— 

Continued 

Surgical specialty group 

Estimated 

CY 2012 

ASC payments 

(in millions) 

Estimated CY 

2013 percent 

change 

(1) (2) (3) 

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 * Short descriptor 

Estimated 

CY 2012 

ASC payments 

(in millions) 

Estimated 

CY 2013 

percent 

change 

(1) (2) (3) (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 

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. 


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(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 OfficeBased 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 


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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 

× $0.12 = $1,331,712) + (1,776,000 pages 

× $0.12 = $213,120) ¥ (11,097,600 

pages × $0.05 = $554,880) ¥ (1,776,000 

pages × $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 nonPPS 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 × $7 ¥ 

82,000 × $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 


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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 × 350 = 

$336,000) ¥ ($87 × 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/a4.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. 


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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 


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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-smallbusiness-size-standards. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 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 


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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: 


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§ 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 FDAapproved 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’’. 


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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 wellbeing of a program patient or places the 

program patient unnecessarily in highrisk 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 


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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 


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(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 


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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 


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45232 Federal Register / Vol. 77, No. 146 / Monday, July 30, 2012 / Proposed Rules 

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 


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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. 

* * * * * 

(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. 

[FR Doc. 2012–16813 Filed 7–6–12; 4:15 pm] 

BILLING CODE 4120–01–P 


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